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, 1997
Commission file number 0-20142
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, 1997.<PAGE>
<PAGE>
TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION 1 - 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 2. Changes in Securities 8
ITEM 3. Defaults upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote
of Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports Form 8-K 8
PART III. MANAGEMENTS DISCUSSION AND ANALYSIS 9 - 11<PAGE>
<PAGE>
PART I, FINANCIAL INFORMATION
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30, 1997 AND DECEMBER 31, 1996
June 30, December 31,
ASSETS 1997 1996
Cash and due from banks $ 8,988,400 $ 9,859,200
Interest Bearing Dep. in other banks 2,464,700 2,956,500
Securities Held-to-Maturity approx.
market value 6/97 $20,443,400 20,000,000 20,000,000
Available-For-Sale 73,821,800 71,128,900
Total Investments 93,821,800 91,128,900
Loans Gross 160,486,300 158,241,300
LESS: Allowance for loan losses 1,650,000 1,650,000
Premises and equipment-Net 5,096,200 5,060,700
Interest Receivable 2,396,400 2,389,100
Other Assets 744,600 1,251,900
TOTAL ASSETS $272,348,400 $269,237,600
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand 29,538,400 29,137,000
Savings 43,379,200 43,491,400
NOW Accounts 34,825,100 31,556,500
Money Market deposit accounts 11,515,700 10,467,400
Time deposits (in denominations of
100,000 or more) 26,466,300 27,563,200
Other time accounts 69,749,100 66,257,300
TOTAL DEPOSITS $215,473,800 $208,472,800
FHLB Borrowings 1,000,000 2,000,000
Federal Funds Purchased 1,525,000 3,825,000
Repurchase Agreements 20,547,600 21,928,900
Other Liabilities 2,352,100 2,648,300
TOTAL LIABILITIES $240,898,500 $238,875,000
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
1997 - 1,365,801, December
1996 - 1,365,801 6,829,000 6,829,000
Surplus 1,494,800 1,494,800
Undivided profits 23,185,700 21,980,200
Treasury Stock (10,964 shares at
$38.50 as of June 1997) (422,100) -
Unrealized gain/loss - Investments 362,500 58,600
TOTAL STOCKHOLDER'S EQUITY $ 31,449,900 $ 30,362,600
TOTAL EQUITY AND LIABILITIES $272,348,400 $269,237,600
See notes to condensed unaudited consolidated financial statements.
1 <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996.
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
INTEREST INCOME:
Int. and fees on loans $3,640,900 $3,396,400 $ 7,160,200 $6,749,000
Int. on fed. funds sold 40,800 16,400 85,200 51,200
Int. on Inv. Securities:
US Treas. & Gov. Agency 624,600 301,500 1,251,600 563,000
Municipal Obligations 403,000 360,600 782,700 703,100
Taxable Municipal 39,300 44,000 78,300 93,200
Mort. Backed Securities 374,300 390,000 737,900 702,200
Int. Bearing Due From 36,400 47,500 75,100 100,400
Other 16,100 14,300 32,300 28,500
Total Interest Income $5,175,400 $4,570,700 $10,203,300 $8,990,600
INTEREST EXPENSE:
Interest on Deposits $1,858,700 $1,679,800 $ 3,653,900 $3,356,300
Int. on short term bor. 8,900 87,200 37,600 139,600
Int. on repur. agreem. 333,500 26,600 671,500 50,900
Total Interest Expense $2,201,100 $1,793,600 $ 4,363,000 $3,546,800
NET INTEREST INCOME: $2,974,300 $2,777,100 $ 5,840,300 $5,443,800
Prov. loan loss (recov.) 37,500 69,700 166,600 64,700
Net int. income after
Prov. for loan losses 2,936,800 2,707,400 5,673,700 5,379,100
OTHER OPERATING INCOME:
Service charges $ 198,400 $ 192,400 $ 391,700 $ 354,200
Trust department fees 5,300 4,900 17,100 17,100
Invest. gains (losses) (25,200) 9,900 (25,200) 10,800
Other 43,200 36,200 77,300 90,400
Total other operat inc. $ 221,700 $ 243,400 $ 460,900 $ 472,500
OTHER OPERATING EXPENSES:
Salaries & emp benefit $1,062,700 $ 930,300 $ 2,155,100 $1,904,200
Net occupancy expense
of premises 159,400 170,800 315,800 335,900
Depreciation 100,000 96,400 197,000 194,200
Other 495,500 564,400 956,900 1,028,800
Total other oper. exp. $1,817,600 $1,761,900 $ 3,624,800 $3,463,100
INCOME BEFORE INCOME TAXES 1,340,900 1,188,900 2,509,800 2,388,500
INCOME TAXES (benefit) 418,300 371,000 760,600 743,000
NET INCOME $ 922,600 $ 817,900 $ 1,749,200 $1,645,500
EARNINGS PER COMMON SHARE .67 .60 1.28 1.21
DIVIDENDS DECLARED PER
COMMON SHARE .20 .20 .40 .40 <PAGE>
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST EARNINGS
The following is a presentation of an analysis of the net interest earnings
of the company for the six months ended June 30, 1997 and 1996,
respectively, with respect to each major category of interest-earning
assets and interest-bearing liabilities:
Six Months Ended June 30, 1997
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 2,648 $ 75 5.68%
Taxable Securities 61,573 2,100 6.82%
Non-Taxable Securities 32,347 1,291 8.00%
Federal Funds Sold 3,260 85 5.22%
Loans 158,668 7,128 9.00%
Total Int-Earning Assets $258,496 $10,679 8.26%
Liabilities
NOW's & Money Market Accts. $ 46,172 $ 464 2.02%
Savings Deposits 44,136 603 2.74%
Time Deposits 96,982 2,586 5.34%
Total Int-Bearing Deposits $187,290 $ 3,653 3.90%
Repurchase Agreements $ 21,175 $ 672 6.36%
Federal Funds Purchased 368 11 5.98%
Federal Home Loan Bank
Borrowings 1,066 26 4.88%
Total Int-Bearing Liabilities $209,899 $ 4,362 4.15%
Interest Rate Spread (tax
equivalent basis) 4.11%
Net Interest Income FTE $ 6,317
Net Interest Margin (tax
equivalent basis) 4.89%
Less Tax-Equivalent Adjustment $ 477
Net Interest Income $ 5,840 <PAGE>
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST-EARNINGS, Continued
Six Months Ended June 30, 1996
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 3,450 $ 101 5.86%
Taxable Securities 42,503 1,387 6.54%
Non-Taxable Securities 25,433 1,069 8.42%
Federal Funds Sold 2,021 51 5.06%
Loans 151,163 6,789 8.98%
Total Interest-Earning
Assets $224,570 $9,397 8.38%
Liabilities
NOW's & Money Market Accts. $ 46,599 $ 491 2.12%
Savings Deposits 46,776 669 2.86%
Time Deposits 82,210 2,196 5.36%
Total Interest-Bearing
Deposits $175,585 $3,356 3.84%
Repurchase Agreements $ 2,078 $ 51 4.92%
Federal Funds Purchased 1,412 48 6.80%
Federal Home Loan Bank
Borrowings 3,000 92 6.14%
Total Interest-Bearing
Liabilities $182,075 $3,547 3.90%
Interest Rate Spread (tax
equivalent basis) 4.48%
Net Interest Income FTE $5,850
Net Interest Margin (tax
equivalent basis) 5.21%
Less Tax-Equivalent Adjustment $ 406
Net Interest Income $5,444 <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited)
June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,749,200 $ 1,645,500
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 196,900 194,200
Provision for loan losses 166,600 64,700
Loan origination costs deferred (37,800) (26,900)
Bond premium amortized and (discount accrued) 79,500 95,200
(Increase) or Decrease in interest receivable (7,300) 28,300
Increase or (Decrease) in other liabilities (486,200) (925,200)
(Increase) or Decrease in other assets 507,300 (391,100)
Increase or (Decrease) in provision for
deferred tax 190,000 (642,300)
Net cash provided by operating activities $ 2,358,200 $ 42,400
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing securities 2,374,100 3,341,300
Proceeds from sales of securities 1,118,100 500,000
Purchases of securities (6,264,600)(10,907,300)
(Increase) or decrease in federal funds sold 0 0
Increase or (decrease) in federal funds purchased (2,300,000) (1,450,000)
Increase of (decrease) in repurch. agreements (1,381,300) 1,209,100
Net (increase) or decrease in interest bearing
deposits in other banks 491,800 188,900
Principal collected on loans 18,745,500 23,500,600
Loans made to customers (20,838,300)(26,343,300)
Capital expenditures (232,400) (251,800)
Loss (gains) on sale of investments 25,200 10,800
Net cash used or provided in investing
activities (8,261,900)(10,201,700)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase or (decrease) in demand deposits
NOW, MMDA and savings accounts 4,606,100 (2,419,800)
Proceeds from sale of
certificates of deposit 22,389,000 19,978,600
Payments for maturing
certificates of deposit (19,994,100) (9,864,300)
Dividends paid (546,000) (550,000)
Purchase of Treasury Stock (422,100) -
Repayment of FHLB borrowings (1,000,000) -
Net cash provided by financing activities 5,032,900 7,144,500
NET INCREASE IN CASH AND CASH EQUIVALENTS (870,800) (3,014,800)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,859,200 10,218,600
CASH AND CASH EQUIVALENTS AT END OF SIX MONTHS $ 8,988,400 $ 7,203,800
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997. (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 6/30/97 are
not necessarily inductive of the results to be expected for the full
year.
2. INVESTMENT SECURITIES
Investment securities held-to-maturity are stated at cost plus discount
accrued and less premium amortized.
The carrying value and market value of those securities classified
as held-to maturity are as follows:
Fair Gross
Book Market Unrealized
Value Value Gain Loss Net
Agencies $20,000,000 $20,443,400 $443,400 $0 $443,400
Investment securities classified as available-for-sale are stated at
fair market value. The carrying value, fair market value, and
unrealized gain/loss for those securities are as follows:
Fair Gross
Book Market Unrealized
Value Value Gain Loss Net
U.S. Treasury
and other US
agencies $14,581,400 $14,472,700 $ 40,400 $(149,100) $(108,700)
Municipal
Obligations 36,664,500 37,434,600 801,000 (30,900) 770,100
Mortgaged
Backed Sec. 20,906,200 20,845,700 179,800 (240,300) (60,500)
Equity Secur. 1,068,800 1,068,800 - - -
TOTAL $73,220,900 $73,821,800 $1,021,200 $(420,300) $ 600,900 <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996 AND 1997. (Unaudited)
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, 1997 $1,650,000
Charge offs (221,400)
Recoveries 54,800
Provision charged to income 166,600
Balance - June 30, 1997 $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>
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 16, 1997. The following directors
were elected:
NAME TERM VOTES FOR VOTES AGAINST ABSTAIN
Edward C. Galpin 3 years 1,015,596 -0- -0-
Lawrence C. Howell 3 years 1,015,596 -0- -0-
Lisle E. Hopkins 3 years 1,015,596 -0- -0-
Freeman H. Smith 3 years 1,013,133 2,463 -0-
Appointment of Urbach,
Kahn & Werlin as
Certified Public
Accountants 1,015,596 -0- -0-
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>
PART III. MANAGEMENTS DISCUSSION AND ANALYSIS
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
primarily 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 $1.6 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, 1997 loans with an aggregate balance of $4.2
million and securities of $13.1 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, 1997, 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 85%.
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 1997, the bank had an average net daily federal funds
sold of $2.8 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, 1997, the bank has borrowed
$1.0 million against this line of credit.
During the second quarter of 1997, the Board of Directors approved
a treasury stock repurchase program for up to 100,000 shares of Bath
National Corporation Stock. The amount to be paid per share is the
market price as provided by the corporation's market makers. Total
shares purchased during the second quarter total 10,964 with a cost of
$422,100. Repurchase of common stock are accounted for under the cost
method, whereby shares repurchased are recorded in a contra-equity
account.<PAGE>
<PAGE>
PART III, Continued
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, 1997 as
follows:
Components of Capital 6-30-97 6-30-96
Common Equity $31,449,900 $28,943,600
Allowance for loan losses 1,650,000 1,650,000
Subtotal 33,099,900 30,593,600
Less: Goodwill 305,600 341,800
Less: Treasury Stock 422,100 -
TOTAL PRIMARY CAPITAL $32,372,200 $30,251,800
The company's capital to asset ratios as of June 30, 1996 and 1997 are
as follows:
TIER I LEVERAGE RATIO RISK BASED
Required Required
Minimum Actual Minimum Actual
June 30, 1996 4.00% 12.50% 8.00% 19.13%
June 30, 1997 4.00% 11.89% 8.00% 22.63%
Net Interest Income
Net interest income increased from $2.7 million for the three
months ended June 30, 1996 to $2.9 million for the same period of 1997,
an increase of $200,000. Likewise, six months period ended June 30,
1997 increased from $5.4 million in 1996 to $5.8 million. The increase
in net interest income is due primarily to the repurchase agreement
transaction which occurred in July 1996. This $20 million dollar
transaction increased net interest income by $121,000 for the six months
of 1997 as compared to 1996.
Average yield on earnings assets declined from 8.38% in 1996 to
8.28% in 1997 while average costs of liabilities increased from 3.90% in
1996 to 4.15% in 1997. While net interest income increased due to the
repurchase transaction, average yields and costs in total were
negatively impacted.
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
$166,600 for the six months ended June 30, 1997 versus a net charge off
of $64,700 for the comparable six 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<PAGE>
problem loans.
<PAGE>
PART III, Continued
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, 1997, total non-accruing assets were $413,600.
Collateral supporting the loans totals $409,000.
NON PERFORMING LOANS
Non-performing loans are summarized as follows:
Other Real Estate $ 27,200
Non-accrual loans $ 413,600
Past due 90 days or more and still accruing $ 309,000
Total $ 749,800
Other Operating Expenses
Salary expense increased by 14% from the 1996 second quarter total
of $930,300 to $1,062,700 for 1997. Additional personnel employed to
staff a new branch in Penn Yan, New York account for the bulk of the
increase. Normal salary increases account for the balance.
Expenses relating to other real estate owned through foreclosure
declined from $157,700 for the six months ended June 30, 1996 to $14,000
for comparable 1997 six months, resulting in a decline in the
subcategory "Other" operating expenses.
Other Operating Income
Other operating income declined modestly from $472,500 in 1996 to
$460,900 for the corresponding period in 1997. Investment losses taken
during 1997 account for the decline. In order to more accurately reflect
the return on loans, the discount revenue was reclassified from the
subcategory "Other" and moved to interest and fees on loans. The
discount revenue amount as of June 1997 and June 1996 was $184,900 and
$185,400 respectively. <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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,988,400
<SECURITIES> 93,821,800
<RECEIVABLES> 0
<ALLOWANCES> 1,650,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,396,400
<PP&E> 5,096,200
<DEPRECIATION> 197,000
<TOTAL-ASSETS> 272,348,400
<CURRENT-LIABILITIES> 3,352,100
<BONDS> 0
0
0
<COMMON> 6,829,000
<OTHER-SE> 24,680,500
<TOTAL-LIABILITY-AND-EQUITY> 272,348,400
<SALES> 0
<TOTAL-REVENUES> 10,203,300
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,624,800
<LOSS-PROVISION> 166,600
<INTEREST-EXPENSE> 4,363,000
<INCOME-PRETAX> 2,509,800
<INCOME-TAX> 760,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,749,200
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
