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 September 30, 2000
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 September 30, 2000, of which 61,944 are
classified as Treasury Stock.
<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 8
of Security Holders
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports Form 8-K 8
PART III. MANAGEMENT'S DISCUSSION AND ANALYSIS 9 - 11
<PAGE>
PART I. FINANCIAL INFORMATION
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATION STATEMENTS OF CONDITION
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
September 30, December 31,
2000 1999
ASSETS
Cash and due from banks $ 11,520,200 10,281,500
Interest Bearing Deposits
other banks -0- 5,099,000
Securities <F1> 74,063,900 77,433,800
Federal Funds Sold -0- 4,075,000
Loans (Gross) 193,160,000 190,119,300
LESS: Allowance for loan losses 1,800,700 1,747,500
Premises and equipment-Net 4,807,500 5,006,100
Interest Receivable 2,377,200 2,011,000
Other Assets 3,215,200 3,017,000
TOTAL ASSETS $287,343,300 $295,295,200
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 36,668,700 $ 33,969,000
Savings 41,639,500 41,923,200
NOW Accounts 34,116,500 36,712,200
Money Market deposit accounts 10,303,600 10,672,000
Time deposits (in denominations of
100,000 or more) 12,776,600 20,219,200
Other time accounts 80,637,400 75,576,600
TOTAL DEPOSITS $216,142,300 $219,072,200
Federal Funds Purchased 275,000 -0-
Borrowings Federal Home Loan Bank 25,000,000 30,000,000
Repurchase Agreements 15,649,200 12,572,900
Other liabilities 2,534,000 4,503,000
TOTAL LIABILITIES $259,600,500 $266,148,100
STOCK HOLDERS' EQUITY:
Preferred Stock:
$10 par value; 300,000 shares
authorized, - -
Common Stock:
$5 par value; 1,500,000 shares
authorized; issued and outstanding:
9/00 - 1,365,801; 12/99 - 1,365,801 6,829,000 6,829,000
Surplus 1,494,700 1,494,700
Undivided profits 22,408,900 23,080,500
Unrealized gain/(loss) - Investments (444,900) (766,000)
Treasury Stock <F2> (2,544,900) (1,491,100)
TOTAL STOCKHOLDER'S EQUITY $ 27,742,800 $ 29,147,100
TOTAL EQUITY AND LIABILITIES $287,343,300 $295,295,200
[FN]
<F1> 12/99 balance includes equity securities reclassed from other assets.
<F2> 61,944 shares recorded at cost as of 9/00, 37,953 shares as of 12/99
See notes to condensed unaudited consolidated financial statements.
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
INTEREST INCOME:
Interest and fees on loans $4,258,400 $4,156,100 $12,353,700 $12,165,500
Int. on federal funds sold 55,800 47,200 142,800 70,200
Int. on investment securit:
US Treasury & Govern. Agency 93,700 154,300 270,600 1,173,700
Municipal Obligations 461,700 477,800 1,418,300 1,351,400
Taxable Municipal 6,300 6,300 18,900 18,900
Mortgaged Backed Securities 444,700 402,300 1,334,800 897,900
Interest Bearing due from -0- 1,900 74,700 7,800
Trust Preferred 61,600 44,400 184,200 44,400
Other 55,300 20,300 170,600 66,600
Total Investment Income 1,123,300 1,154,500 3,472,100 3,630,900
Total Interest Income 5,437,500 5,310,600 15,968,600 15,796,400
INTEREST EXPENSE:
Interest Deposits 1,813,600 1,720,800 5,294,100 5,174,700
Int. on short term borrow. 360,700 287,900 1,169,100 495,300
Interest on repurchase agree 179,000 144,400 474,300 959,200
Total Interest Expense 2,353,300 2,153,100 6,937,500 6,629,200
NET INTEREST INCOME 3,084,200 3,157,500 9,031,100 9,167,200
Prov. loan loss (recovery) 84,900 210,000 3,459,300 445,000
Net Int. Income After
Provision for Loan Losses 2,999,300 2,947,500 5,571,800 8,722,200
OTHER OPERATING INCOME:
Service charges 296,600 247,600 845,600 723,000
Trust department fees 16,500 22,000 35,600 41,500
Other 289,700 263,500 763,200 660,300
Total other operating income 602,800 533,100 1,644,400 1,424,800
OTHER OPERATING EXPENSES:
Salaries & emp benefits 1,268,600 1,198,700 3,787,800 3,570,100
Net occupancy expense of
premises 205,100 238,000 645,900 684,700
Depreciation 129,900 134,900 396,300 405,700
Other 598,400 510,800 1,795,700 1,607,500
Total other oper. expenses 2,202,000 2,082,400 6,625,700 6,268,000
INCOME BEFORE INCOME TAXES 1,400,100 1,398,200 590,500 3,879,000
INCOME TAXES (benefit) 155,700 377,300 73,500 1,072,000
NET INCOME $1,244,400 $1,020,900 $ 517,000 $2,807,000
EARNINGS PER COMMON SHARE .94 .76 .39 2.11
DIVIDENDS DECLARED PER .30 .30 .90 .90
COMMON SHARE
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST EARNING
The following is a presentation of an analysis of the net interest earnings
of the company for the nine months ended September 30, 2000 and 1999,
respectively, with respect to each major category of interest-earning
assets and interest-bearing liabilities:
Nine Months Ended September 30, 2000
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 1,668 $ 75 5.98%
Taxable Securities 39,964 1,980 7.12%
Non-Taxable Securities 39,537 2,155 7.25%
Federal Funds Sold 3,066 143 6.20%
Loans 192,109 12,488 8.65%
Total Int-Earning Assets $273,344 $16,841 8.19%
Liabilities
NOW's & Money Market Accts. 47,180 621 1.75%
Savings Deposits 42,448 809 2.53%
Time Deposits 97,455 3,864 5.27%
Total Int-Bearing Deposits $187,083 $ 5,294 3.76%
Repurchase Agreements 11,545 474 5.46%
Federal Funds Purchase 215 9 5.57%
Federal Home Loan Bank
Borrowings 26,642 1,160 5.80%
Total Int-Bearing Liabilities $225,485 $ 6,937 4.10%
Net Interest Income FTE $ 9,904 4.82%
Less Tax-Equivalent Adjustment $ 873
Net Interest Income $ 9,031
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST-BEARINGS, Continued
Nine Months Ended September 30, 1999
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 150 $ 8 7.09%
Taxable Securities 43,846 2,202 6.68%
Non-Taxable Securities 37,884 2,053 7.21%
Federal Funds Sold 1,847 70 5.04%
Loans 192,242 12,250 8.48%
Total Int-Earning Assets $275,969 $16,583 7.99%
Liabilities
NOW's & Money Market Accts. $ 46,608 $ 607 1.73%
Savings Deposits 44,180 840 2.53%
Time Deposits 101,651 3,728 4.88%
Total Int-Bearing Deposits $192,439 $ 5,175 3.58%
Repurchase Agreements 22,583 959 5.65%
Federal Funds Purchased 1,196 55 6.11%
Federal Home Loan Bank
Borrowings 10,201 440 5.74%
Total Int-Bearing Liabilities $226,419 $ 6,629 3.89%
Net Interest Income FTE $ 9,954 4.80%
Less Tax-Equivalent Adjustment $ (787)
Net Interest Income $ 9,167
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
September 30,
2000 1999
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 517,000 $ 2,807,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 396,300 405,700
Provision for loan losses 3,459,300 445,000
FAS-115 effect (114,900) 2,700
Loan origination costs deferred 79,400 13,600
Bond premium amortized and (discount accrued) 82,800 107,500
(Increase) or Decrease in interest receivable (366,200) 226,500
Increase or (Decrease) in other liabilities (2,067,700) (1,622,600)
(Increase) or Decrease in other assets (198,200) (189,300)
Adjustment to loan reserve 53,200 0
Net cash provided by operating activities 1,841,000 2,196,100
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing securities 5,942,500 4,482,100
Proceeds from sales of investment securities 0 23,250,000
Purchases of investment securities (2,120,000) (21,070,800)
(Increase) or decrease in federal funds sold 4,075,000 0
Increase or (decrease) in federal funds purchased 275,000 (1,750,000)
Increase or (decrease) in repurchase agreements 3,076,300 (16,208,400)
Net decrease in interest bearing
deposits in other banks 5,099,000 297,300
Principal collected on loans 32,423,900 46,597,900
Loans made to customers (39,003,300) (55,750,600)
Capital expenditures (197,700) (58,400)
Net cash used or provided in investing
activities 9,570,700 (20,210,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) or increase in demand
deposits, NOW, MMDA & savings accounts (548,100) (699,300)
Proceeds from sale of
certificates of deposit 30,361,700 33,681,400
Payments for maturing
certificates of deposit (32,743,500) (34,293,400)
Dividends paid (1,189,300) (1,196,500)
Purchase of Treasury Stock (1,053,800) 0
Borrowings from FHLB (5,000,000) 20,000,000
Net cash provided by financing activities (10,173,000) 17,492,200
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,238,700 (522,600)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,281,500 12,009,200
CASH AND CASH EQUIVALENTS AT END OF NINE MONTHS $11,520,200 $ 11,486,600
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999. (Unaudited)
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1. GENERAL
The accounting and reporting policies followed by Bath National
Corporation (BNC), a bank holding company, and its subsidiares, Bath
National Bank (BNB)and BNC Financial Services (BNCFS) 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 nine month period ended 9-30-00 are not
necessarily inductive of the results to be expected for the full year.
2. INVESTMENT SECURITIES
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
Book Market Unreal. Unreal.
Value Value Gain Loss Net
U.S. Treasury &
Agencies 5,839,600 5,685,000 2,200 (156,800) (154,600)
Corporates 195,000 188,400 - (6,600) (6,600)
Municipals 38,625,800 38,805,100 333,500 (154,200) 179,300
Mortgage Back 24,436,300 24,002,100 33,100 (467,300) (434,200)
Securities
Trust Preferred 3,067,500 2,736,700 - (330,800) (330,800)
Equity Securities 2,646,600 2,646,600 - - -
Total 74,810,800 74,063,900 368,800 (1,115,700) (746,900)
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 2000 AND 1999. (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, 2000 1,747,500
Charge offs:
Installments 185,900
Commercial 3,279,600
Credit Cards 37,900
Real Estate 6,000
3,509,400
Recoveries
Installments 73,600
Commercial 18,300
Credit Cards 11,400
103,300
Provision Loan Loss 3,459,300
Balance - September 30, 2000 $1,800,700
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 investments held as available-for-sale, and
provisions for loan losses.
<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
There were no reports filed on Form 8-K
ITEM 6. Exhibits and Reports on Form 8-K
N/A
<PAGE>
PART III. MANAGEMENT'S DISCUSSION AND ANALYSIS
Discussions and Analysis of Financial Condition and Result of Operations
(Interim) (Unaudited)
Bath National Corporation has two subsidiaries Bath National Bank
and BNC Financial Services, a financial service subsidiary. Bath National
Bank has one subsidiary, Bath United Home, Inc., a REIT Corporation.
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 and advances from the Federal Home Loan Bank (FHLB). As of
September 30, 2000, FHLB advances total $25.0 million. Based on the Bank's
collateral position no further advances are permitted from this financial
institution.
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. High quality securities are readily marketable and provide a
steady flow of funds. At September 30, 2000 loans with an aggregate balance
of $32.1 million and securities of $12.2 million were due to mature in one
year or less. Additional funds flow from payments on installment and
revolving credit loans. Bath National Bank's liquidity also continues to be
enhanced by a relatively stable deposit base. On September 30, 2000, the
loan to deposit ratio was 89% and the ratio of loans to core deposits
(excluding certificates of deposit of $100,000 or more) was 95%.
In addition to the sources of liquidity referred to above, Bath National
Bank may borrow from the Federal Reserve Bank in the event of a short term
liquidity deficiency. The Bank has established lines of credit available
with Manufacturer s & Traders Bank and Key Bank in the amount of $4.0 million
and $5.0 million respectively. The funds are priced at the overnight federal
funds rate. The Bank had an average net daily federal funds sold of $2.85
million during 2000.
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.
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 8.00%. Bath National Corporation has
primary capital at September 30, 2000 and September 30, 1999 as follows:
Components of Capital 9-30-00 9-30-99
Equity Capital $28,187,700 $31,285,000
Less Goodwill (226,900) (251,200)
Tier 1 Capital 27,960,800 31,033,800
Tier 2 Capital 1,800,700 1,859,900
Total Capital $29,761,500 $32,893,700
<PAGE>
PART III, Continued
The company's capital to asset ratios for the third quarter of 2000 and
1999 are as follows:
TIER I LEVERAGE RATIO RISK BASED
Required Required
Minimum Actual Minimum Actual
September 30, 1999 4.00% 10.52% 8.00% 18.29%
September 30, 2000 4.00% 9.73% 8.00% 16.03%
Net Interest Income
Net interest income declined by $73,000 for the third quarter or 2%
from the corresponding quarter of 1999. Although interest income increased
by $126,900, interest expense increased by $200,200 for the third quarter.
Increased interest rates on certificates of deposit account for the
increase in costs.
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.
Net charged off loans declined from $210,000 for the third quarter of
1999 to $84,900 for the third quarter of 2000. No increases in the
provision are anticipated for the fourth quarter of 2000.
<PAGE>
PART III, Continued
Non-Performing Assets
The Bank's policy is to discontinue the accrual of interest on loans
(other than installment loans) for which principal and 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 collectability. When a loan is placed on a
non-accrual basis, any unpaid interest accrued is reversed against current
income.
On September 30, 2000, total non-accruing assets were $2,922,200.
Collateral supporting the loans totals $3,804,600.
Non-Performing Loans
Non-performing loans are summarized as follows:
Other Real Estate $ 40,000
Non-accrual loans $2,922,200
Past due 90 days or more and still accruing $ 240,000
Total $3,202,200
Other Operating Income
Other operating income increased by 13% over the third quarter of
1999. Service fee income increased by 19% due to an increase in service
fees charged.
Other Operating Expense
Consulting fees related to a review of the Bank's service fee
structure account for $43,000 of the Bank's total increase in other
operating expenses for the corresponding quarter of 1999 and 2000. The
consulting fees are being amortized during the year 2000 and will be fully
expensed by the end of 2000.
<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 _________________ ___________________________________
Douglas L. McCabe
President
DATE
Edward C. Galpin
Vice President and Treasurer
