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 March 31, 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
incorporation or organization) No.)
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 March 31, 1997.<PAGE>
<PAGE>
TABLE OF CONTENTS
Page No
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 on Form 8-K 8
PART III. MANAGEMENT'S DISCUSSION AND ANALYSIS 9 - 11 <PAGE>
<PAGE>
PART I, FINANCIAL INFORMATION
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
MARCH 31, 1997 AND DECEMBER 31, 1996 (Unaudited)
March 31, December 31,
1997 1996
ASSETS
Cash and due from banks $ 8,424,700 $ 9,859,200
Interest Bearing Deposits
in other banks 2,564,000 2,956,500
Securities Held-to-Maturity
approx. market value 3/97 20,000,000 20,000,000
$19,971,200, 12/97 $20,329,400
Available-For-Sale 70,750,300 71,128,900
Total Investments 90,750,300 91,128,900
Federal Funds Sold 925,000 0
Loans, Gross 157,754,000 158,241,300
Less: Allowance for loan loss 1,650,000 1,650,000
Premises and equipment-Net 5,049,600 5,060,700
Interest Receivable 2,102,700 2,389,100
Other Assets 844,200 1,251,900
TOTAL ASSETS $266,764,500 $269,237,600
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 31,445,200 $ 29,137,000
Savings 43,780,700 43,491,400
NOW accounts 32,485,500 31,556,500
Money market deposit accounts 10,042,700 10,467,400
Time deposits (in denominations
of $100,000 or more) 25,469,500 27,563,200
Other time accounts 68,672,300 66,257,300
TOTAL DEPOSITS 211,895,900 208,472,800
FHLB Borrowings 1,000,000 2,000,000
Federal Funds Purchased 0 3,825,000
Repurchase Agreements 21,158,500 21,928,900
Other liabilities 1,987,900 2,648,300
TOTAL LIABILITIES $236,042,300 $238,875,000
STOCKHOLDERS' EQUITY:
Preferred stock:
$10 par value, 300,000 shares
authorized - -
Common stock:
$5 par value, 1,500,000 shares
authorized; issued and outstanding
12/96 - 1,365,801 shares,
3/97 - 1,365,801 shares 6,829,000 6,829,000
Surplus 1,494,800 1,494,800
Undivided profits 22,533,800 21,980,200
Unrealized gain/loss - Investments (135,400) 58,600
TOTAL STOCKHOLDERS' EQUITY 30,722,200 30,362,600
TOTAL EQUITY AND LIABILITIES $266,764,500 $269,237,600
See notes to condensed unaudited consolidated financial statements. <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (Unaudited)
Three Months Ended
March 31,
1997 1996
INTEREST INCOME:
Interest and fees on loans $3,413,100 $3,272,900
Interest on federal funds sold 44,400 34,800
Interest on investment securities:
US Treasury and Gov. Agencies 627,000 261,500
Municipal obligations 413,400 342,500
Taxable Municipals 39,000 49,200
Mortgage backed securities 363,600 312,200
Interest Bearing due from 38,700 52,900
Other 16,200 14,200
Total Interest Income 4,955,400 4,340,200
INTEREST EXPENSE:
Interest on Deposits 1,795,200 1,676,500
Repurchase Agreement 337,900 24,300
Interest on short-term borrowings 21,700 52,400
Total Interest Expense 2,154,800 1,753,200
Net Interest Income 2,800,600 2,587,000
Provision for loan losses (recoveries) 129,100 (5,000)
Net interest income after provision
for loan losses 2,671,500 2,592,000
OTHER OPERATING INCOME:
Service charges 193,300 161,800
Trust department fees 11,800 12,200
Investment gains (losses) 0 900
Other 106,600 133,900
Total other operating income 311,700 308,800
OTHER OPERATING EXPENSES:
Salaries and employee benefits 1,092,400 973,900
Occupancy 156,400 165,100
Depreciation 97,000 97,800
Other operating expenses 468,500 464,400
Total other operating expenses 1,814,300 1,701,200
INCOME BEFORE INCOME TAXES 1,168,900 1,199,600
INCOME TAXES 342,300 372,000
NET INCOME $ 826,600 $ 827,600
EARNINGS PER COMMON SHARE <F2> .61 $ .61
DIVIDENDS DECLARED PER COMMON SHARE .20 $ .20
<F1> All per share data has been restated to reflect a two-for-one
stock split on April 24, 1996. <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 three months ended March 31, 1997
and 1996, respectively, with respect to each major category of
interest-earning assets and interest-bearing liabilities:
Three Months Ended March 31, 1997
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 2,755 $ 39 5.67%
Taxable Securities 59,434 1,047 7.05%
Non-Taxable Securities 31,363 576 7.35%
Federal Funds Sold 3,504 44 5.03%
Loans 157,817 3,465 8.79%
Total Interest-Earning
Assets $254,873 $5,171 8.12%
Liabilities
NOW's & Money Market Accts. $ 45,963 $ 230 2.00%
Savings Deposits 43,851 297 2.71%
Time Deposits 95,953 1,268 5.29%
Total Interest-Bearing
Deposits $185,767 $1,795 3.87%
Repurchase Agreements 21,704 338 6.23%
Federal Funds Purchased 481 7 5.84%
Federal Home Loan Bank
Borrowings 1,133 15 5.30%
Total Interest-Bearing
Liabilities $209,085 $2,155 4.13%
Net Interest Income 3,016 4.74%
Less Tax-Equivalent Adjustment 215
Net Interest Income $2,801
<PAGE>
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST-EARNINGS, Continued
Three Months Ended March 31, 1996
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 3,518 $ 53 6.03%
Taxable Securities 40,176 637 6.34%
Non-Taxable Securities 24,572 466 7.60%
Federal Funds Sold 2,801 35 5.00%
Loans 150,054 3,328 8.88%
Total Interest-Earning
Assets $221,121 $4,519 8.20%
Liabilities
NOW's & Money Market Accts. $ 47,235 $ 250 2.12%
Savings Deposits 46,265 339 2.93%
Time Deposits 80,282 1,088 5.43%
Total Interest-Bearing
Deposits $173,782 $1,677 3.86%
Repurchase Agreements 1,969 24 4.88%
Federal Funds Purchased 403 6 5.96%
Federal Home Loan Bank
Borrowings 3,000 46 6.16%
Total Interest-Bearing
Liabilities $179,154 $1,753 3.92%
Net Interest Income 2,766 5.00%
Less Tax-Equivalent Adjustment 179
Net Interest Income $2,587 <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (Unaudited)
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 826,600 $ 827,600
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 97,000 97,800
Provision for loan losses 129,100 (5,000)
Provision for deferred taxes 0 (231,700)
Loan origination costs deferred (193,900) 4,500
Bond premium amortized and (discount accrued) 42,400 47,100
(Increase) or Decrease in interest
receivable 286,400 68,500
Increase or (Decrease) in other
liabilities (660,400) (778,900)
(Increase) or Decrease in other assets 407,700 32,800
Net cash provided by operating activities 934,900 62,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing investment securities 1,527,700 3,142,000
Proceeds from sales of investment securities 0 0
Purchases of investment securities (1,191,500) (6,736,400)
(Increase) or decrease in federal funds sold (925,000) (3,350,000)
Increase or (decrease) in federal funds purch.(3,825,000) (2,150,000)
Increase or (decrease) in Repurchase Agmts. (770,400) 1,180,700
Net in interest bearing deposits
in other banks 392,500 94,600
Principal collected on loans 9,538,900 11,018,300
Loans made to customers (9,180,700)(10,706,000)
Capital expenditures (85,900) (113,800)
Net cash (used) or provided in
investing activities (4,519,400) (7,620,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW
MMDA, & savings accounts 3,101,800 4,578,600
Proceeds from sales of certificates of dep. 14,919,000 8,096,200
Payments for maturing certificates
of deposit (14,597,700) (3,688,400)
Dividends paid (273,100) (275,000)
Repayment of FHLB borrowings (1,000,000) 0
Net cash provided by financing activities 2,150,000 8,711,400
NET INCREASE OR (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,434,500) 1,153,500
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 9,859,200 10,218,600
CASH AND CASH EQUIVALENTS AT
END OF THREE MONTHS $ 8,424,700 $11,372,100 <PAGE>
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 three month period ended
3-31-97 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 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 19,971,200 0 (28,800) (28,800)
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 14,848,800 14,658,800 5,600 (195,600) (190,000)
States and
Political
Subdivisions 33,924,100 34,209,700 417,900 (132,300) 285,600
Mortgaged
Backed Sec. 21,137,500 20,812,800 52,200 (376,900) (324,700)
Equity Secur. 1,069,000 1,069,000 - - -
TOTAL 70,979,400 70,750,300 475,700 (704,800) (229,100) <PAGE>
<PAGE>
PART I, continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 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 loan losses
charged against the allowance.
Balance - January 1, 1997 $1,650,000
Charge offs (152,200)
Recoveries 23,100
Provision charged to income 129,100
Balance - March 31, 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, accretion of discounts on investment securities
and provisions for loan losses.
5. PER SHARE DATA
The per share of common stock information is based upon the
weighted average number of shares outstanding during each period. <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
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
There were no reports filed on Form 8-K. <PAGE>
<PAGE>
PART III
Discussions and Analysis of Financial Condition and Result of
Operations
(Interim) (Unaudited)
The 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 its 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 Corporation's
primary sources of liquidity. The Company's other primary sources of
liquidity are federal funds sold and purchased. Other sources of
liquidity include repayment of loans and sale of loans. 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 March 31, 1997 loans with an aggregate balance of $11.4 million
and securities of $5.0 million were due to mature in one year or
less. Additional funds flow from payments on installment and
revolving credit loans and from a historically high level of net
operating earnings. Bath National's liquidity also continues to be
enhanced by a relatively stable deposit base. On March 31, 1997, the
loan to deposit ratio was 74% 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 federal funds. During 1997,
the bank has had a net average daily federal funds sold of $3.0
million.
The bank is also a member of, and has a line of credit with the
Federal Home Loan Bank of New York, and based upon the current level
of stock ownership, the bank is authorized to borrow up to $9.7
million under this line of credit. The bank has borrowed an average
of $1.13 million during 1997 against the line of credit.
The adequacy of the Bank's capital is reviewed on an ongoing basis
with reference to the size, composition and quality of the Bank's
resources. An adequate capital base is important for continued
growth, expansion and added protection against unexpected losses. <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 8.0%.
Bath National Corporation had primary capital at March 31, 1997 as
follows:
Components of Capital 3-31-97 3-31-96
Common Equity $30,722,200 $28,847,600
Allowance for loan losses 1,650,000 1,650,000
Subtotal 32,372,200 30,497,600
Less: Goodwill (311,600) (335,800)
TOTAL PRIMARY CAPITAL $32,060,600 $30,161,800
The Company's capital to asset ratios for the first quarter of 1997
and 1996 are as follows:
Leverage Risk Based
Required Required
Minimum Actual Minimum Actual
March 31, 1997 4.00% 12.02% 8.00% 22.93%
March 31, 1996 4.00% 12.43% 8.00% 21.34%
OTHER OPERATING INCOME
Service charge income increased from $161,800 to $193,300 for the
corresponding quarters. An increase in the club fee from $5 to $6
and an increase in the number of accounts provide the basis for the
increase. Other operating income declined due to an accounting
adjustment which will be corrected in the second quarter 1997.
OTHER OPERATING EXPENSE
Salaries and employee benefits increased $118,000 for the first
quarter of 1997 as compared to first quarter 1996. Approximately
$30,000 of this increase is due to an accrual error as of December
31, 1996, which had the effect of shifting a portion of the bank
salary expense to the first quarter of 1997. The balance of increase
in salaries and employee benefits consists of normal salary increases
and an increase in the cost of health benefits.
Net Interest Income
Net interest income on a tax equivalent basis increased sharply from
$2,766,000 as of March 31, 1996 to $3,016,000 for the three months
ended March 31, 1997. Interest and fees on loans increased by
approximately $140,000 for the corresponding quarter due principally
to the increase in average loans outstanding. Investment securities
income on a tax equivalent basis increased to $1,623,000 from
$1,103,000 in the corresponding quarter ended 1996. Of this
increase, a US Government Agency totalling $20,000,000, which was
purchased and subsequently sold in a repurchase agreement
transaction, accounts for $384,000 in increased investment income.
Likewise, a corresponding increase in repurchase agreement interest
expense totalling $313,000 was incurred. Interest expense on deposit
accounts also increased from $1,676,000 to $1,795,000 due principally
to an increase in outstanding balances. <PAGE>
<PAGE>
PART III, Continued
Provision for Loan Losses
The Company's management is cognizant of 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 recorded net loan charge offs totaling $129,100
for the quarter ended March 31, 1997 verses net loan recoveries of
$5,000 for the comparable quarter 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) 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 BNB. This classification does
not, however, necessarily indicate that the principal of the loan is
uncollectible, but does warrant a review of the collectibility. When
a loan is placed on a non-accrual basis, any unpaid interest accrued
is reversed against current income.
On March 31, 1997, total non-accruing assets were $540,400.
Collateral supporting the loans totals approximately $569,000.
Non-Performing Loans
Non-performing loans are summarized as follows:
Other Real Estate $ 45,400
Non-accrual loans $540,400
Past due 90 days or more and still accruing $165,000
Total $750,800 <PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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
President
_____________________________________ DATE
Edward C. Galpin
Vice President and Treasurer <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,424,700
<SECURITIES> 90,750,300
<RECEIVABLES> 0
<ALLOWANCES> 1,650,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,102,700
<PP&E> 5,049,600
<DEPRECIATION> 97,000
<TOTAL-ASSETS> 266,764,500
<CURRENT-LIABILITIES> 2,987,900
<BONDS> 0
0
0
<COMMON> 6,829,000
<OTHER-SE> 23,893,200
<TOTAL-LIABILITY-AND-EQUITY> 266,764,500
<SALES> 0
<TOTAL-REVENUES> 4,955,400
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,814,300
<LOSS-PROVISION> 129,100
<INTEREST-EXPENSE> 2,154,800
<INCOME-PRETAX> 1,168,900
<INCOME-TAX> 342,300
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 826,600
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
