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, 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, $5.00
par value was 1,365,801 shares as of March 31, 2000, of which 37,953
are classified as Treasury Stock.
<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 - 12
<PAGE>
PART I, FINANCIAL INFORMATION
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
MARCH 31, 2000 AND DECEMBER 31, 1999 (Unaudited)
March 31, December 31,
2000 1999
ASSETS
Cash and due from banks $ 11,119,300 $ 10,281,500
Interest Bearing Deposits
in other banks -0- 5,099,000
Available-For-Sale Securities 76,917,400 77,433,800
Fed Funds Sold 4,275,000 4,075,000
Loans, Gross 193,209,600 190,119,300
Less: Allowance for loan loss 1,778,200 1,747,500
Premises and equipment-Net 5,029,700 5,006,100
Interest Receivable 2,230,600 2,011,000
Other Assets 3,453,900 3,017,000
TOTAL ASSETS $294,457,300 $295,295,200
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 36,097,400 $ 33,969,000
Savings 42,321,700 41,923,200
NOW accounts 33,548,500 36,712,200
Money market deposit accounts 11,441,400 10,672,000
Time deposits (in denominations
of $100,000 or more) 25,675,600 20,219,200
Other time accounts 76,655,300 75,576,600
TOTAL DEPOSITS 225,739,900 219,072,200
Borrowings Federal Home Loan Bank 25,000,000 30,000,000
Repurchase Agreements 11,493,700 12,572,900
Other liabilities 2,788,200 4,503,000
TOTAL LIABILITIES $265,021,800 $266,148,100
STOCKHOLDERS' EQUITY:
Preferred stock:
$10 par value, 300,000 shares
authorized - -
Common stock:
$5 par value, 1,500,000 shares
authorized; issued and outstanding
12/98 - 1,365,801 shares,
3/99 - 1,365,801 shares 6,829,000 6,829,000
Surplus 1,494,700 1,494,700
Undivided profits 23,545,800 23,080,500
Unrealized gain/loss - Investments (942,900) (766,000)
Treasury Stock <F1> (1,491,100) (1,491,100)
TOTAL STOCKHOLDERS' EQUITY 29,435,500 29,147,100
TOTAL EQUITY AND LIABILITIES $294,457,300 $295,295,200
[FN]
<F1> 37,953 shares recorded at cost as of 3/00, 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 ENDED MARCH 31, 2000 AND 1999 (Unaudited)
Three Months Ended
March 31,
2000 1999
INTEREST INCOME:
Interest and fees on loans $4,036,400 $3,974,100
Interest on federal funds sold 41,300 6,500
Interest on investment securities:
US Treasury and Gov. Agencies 95,800 524,700
Municipal obligations 483,900 437,700
Taxable Municipals 6,300 6,300
Mortgage backed securities 444,300 249,900
Interest Bearing due from 71,800 3,700
Trust Preferred 61,400 -0-
Other 56,000 22,100
Total Investment Income 1,260,800 1,250,900
Total Interest & Fees Income 5,297,200 5,225,000
INTEREST EXPENSE:
Interest on Deposits 1,711,800 1,720,800
Repurchase Agreement 145,200 406,300
Interest on short-term borrowings 426,300 104,000
Total Interest Expense 2,283,300 2,231,100
Net Interest Income 3,013,900 2,993,900
Provision for loan losses (recoveries) 322,000 115,000
Net interest income after provision
for loan losses 2,691,900 2,878,900
OTHER OPERATING INCOME:
Service charges 267,900 235,000
Trust department fees 13,700 14,200
Investment gains (losses) 0 -0-
Other 263,300 163,300
Total other operating income 544,900 412,500
OTHER OPERATING EXPENSES:
Salaries and employee benefits 1,304,300 1,184,200
Occupancy 239,800 219,100
Depreciation 133,400 130,500
Other operating expenses 567,500 539,300
Total other operating expenses 2,245,000 2,073,100
INCOME BEFORE INCOME TAXES 991,800 1,218,300
INCOME TAXES 127,600 339,000
NET INCOME $ 864,200 $ 879,300
EARNINGS PER COMMON SHARE $.65 $ .66
DIVIDENDS DECLARED PER COMMON SHARE $.30 $ .30
<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, 2000
and 1999, respectively, with respect to each major category of
interest-earning assets and interest-bearing liabilities:
Three Months Ended March 31, 2000
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 5,023 $ 72 5.73%
Taxable Securities 38,050 664 6.98%
Non-Taxable Securities 40,597 736 7.25%
Federal Funds Sold 2,947 41 5.57%
Loans 191,267 4,067 8.51%
Total Interest-Earning
Assets $277,884 $5,580 8.03%
Liabilities
NOW's & Money Market Accts. $ 50,467 $ 204 1.62%
Savings Deposits 42,109 265 2.52%
Time Deposits 98,644 1,243 5.04%
Total Interest-Bearing
Deposits $191,220 $1,712 3.58%
Federal Home Loan Borrowings 29,945 426 5.69%
Repurchase Agreements 11,408 144 5.05%
Federal Funds Purchased 59 1 6.77%
Total Interest-Bearing
Liabilities $232,632 $2,283 3.93%
Net Interest Income $3,297 4.75%
Less Tax-Equivalent Adjustment $ 283
Net Interest Income $3,014
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST-EARNINGS, Continued
Three Months Ended March 31, 1999
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 252 $ 4 6.35%
Taxable Securities 47,464 803 6.77%
Non-Taxable Securities 37,157 665 7.16%
Federal Funds Sold 447 5 4.48%
Loans 188,603 4,006 8.50%
Total Interest-Earning
Assets $273,923 $5,483 8.01%
Liabilities
NOW's & Money Market Accts. $ 48,936 $ 210 1.72%
Savings Deposits 43,158 268 2.49%
Time Deposits 100,115 1,242 4.97%
Total Interest-Bearing
Deposits $192,209 $1,720 3.58%
Federal Home Loan Borrowings 5,000 75 6.00%
Repurchase Agreements 28,120 408 5.81%
Federal Funds Purchased 2,122 28 5.28%
Total Interest-Bearing
Liabilities $227,451 $2,231 3.93%
Net Interest Income 3,252 4.75%
Less Tax-Equivalent Adjustment 258
Net Interest Income $2,994
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Unaudited)
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 864,200 $ 879,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 133,400 130,500
Provision for loan losses 322,000 115,000
FAS-115 Effect -0- 700
Loan origination costs deferred 12,300 19,000
Bond premium amortized and (discount accrued) 29,900 38,700
(Increase) or Decrease in interest
receivable (219,600) 173,300
Increase or (Decrease) in other
liabilities (1,596,900) (2,250,500)
(Increase) or Decrease in other assets (436,900) 240,800
Adjustment to Loan Reserve 30,700 -0-
Net cash provided by operating activities (860,900) (653,200)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing investment securities 191,700 1,259,400
(Increase) or decrease in federal funds sold (200,000) -0-
Increase or (decrease) in federal funds pur. -0- 1,000,000
Increase or (decrease) in Repurchase Agmts. (1,079,200) (127,800)
Net in interest bearing deposits
in other banks 5,099,000 297,100
Principal collected on loans 9,173,200 16,706,300
Loans made to customers (12,597,800) (20,124,200)
Capital expenditures (157,000) (29,700)
Net cash (used) or provided in
investing activities 429,900 (1,018,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW
MMDA, & savings accounts 132,600 (1,206,700)
Proceeds from sales of certificates of dep. 13,552,400 12,091,100
Payments for maturing certificates
of deposit (7,017,300) (9,691,700)
Dividends paid (398,900) (399,000)
Federal Home Loan Bank Borrowings (5,000,000) -0-
Net cash provided by financing activities 1,268,800 793,700
NET INCREASE OR (DECREASE) IN CASH AND
CASH EQUIVALENTS 837,800 (878,400)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 10,281,500 12,009,200
CASH AND CASH EQUIVALENTS AT
END OF THREE MONTHS $11,119,300 $11,130,800
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999. (Unaudited)
1. GENERAL
The accounting and reporting policies followed by Bath National
Corporation, a bank holding company, and its subsidiaries, Bath
National Bank and BNC Financial Services, 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
3/31/00 are not necessarily inductive of the results to be
expected for the full year.
2. INVESTMENT SECURITIES
All investment securities are classified as available-for-sale
and 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 6,580,800 6,360,000 1,200 222,000 (220,800)
Municipals 40,871,100 40,645,100 170,700 396,700 (226,000)
Mortgaged
Backed Sec. 25,133,300 24,269,500 500 864,300 (863,800)
Govt. Trust
Preferred 3,067,700 2,812,700 - 255,000 (255,000)
Corporate Bonds 195,000 183,500 - 11,500 (11,500)
Equity Secur. 2,646,600 2,646,600 - - -
TOTAL 78,494,500 76,917,400 172,400 1,749,500(1,577,100)
<PAGE>
PART I, continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
MARCH 31, 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 60,500
Commercial 245,500
Credit Cards 15,000
Real Estate 6,000 327,000
Recoveries:
Installments 16,500
Commercial 16,200
Credit Cards 3,000 35,700
Provision loan loss 322,000
Balance - March 31, 2000 $1,778,200
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>
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>
PART III
Discussions and Analysis of Financial Condition and Result of
Operations
(Interim) (Unaudited)
The Bath National Corporation has two subsidiaries (Bath National
Bank)and BNC Financial Services, a financial service subsidiary.
On October 1, 1999 Bath United Home, Inc. (BUH) was incorporated.
BUH is a Real Estate Investment Trust (REIT). The REIT is a
subsidiary of Bath National Bank (BNB), it purchases mortgages
originated by BNB. BNB owns 100% of the common stock of the REIT and
a majority of the preferred stock.
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.
High quality securities are readily marketable and provide a level of
liquidity. Maturities in the loan portfolio also provide a steady
flow of funds. At March 31, 2000 loans with an aggregate balance of
$37.32 million and securities of $11.06 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, 2000, the
loan to deposit ratio was 86% and the ratio of loans to core deposits
(excluding certificates of deposit of $100,000 or more) was 97%.
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 has established lines of credit available with the Federal
Home Loan Bank and Manufacturers and Traders Bank in the amount of
$17.8 million and $4.0 million, respectively, at the overnight
federal funds rate. The bank had an average net daily federal funds
sold of $2.89 million during 2000.
<PAGE>
PART III, Continued
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 8.0%.
Bath National Corporation had primary capital at March 31, 2000
and March 31, 1999 as follows:
Components of Capital 3-31-00 3-31-99
Equity Capital $30,378,400 $30,152,900
Less: Goodwill 239,100 263,200
Total Tier 1 Capital 30,139,300 29,889,700
Tier 2 Capital 1,778,200 1,651,600
TOTAL PRIMARY CAPITAL $31,917,500 $31,541,300
The Company's capital to asset ratios for the first quarter of 2000
and 1999 are as follows:
Leverage Risk Based
Required Required
Minimum Actual Minimum Actual
March 31, 2000 4.00% 10.23% 8.00% 16.85%
March 31, 1999 4.00% 10.49% 8.00% 18.17%
Other Operating Income
Total other operating income increased from $412,500 for the quarter
ended March 31, 1999 to $544,900 for the quarter ended March 31,
2000. Servicing fee income from the sale and servicing of mortgage
loans began accruing in the first quarter of 2000 amounting to
$80,000. Service fee income increased from $255,000 to $267,900 due
primarily to a review of, and adjustment to, our service charge
rates.
Other Operating Expense
Salary and benefit expense increased from $1,184,000 for the first
quarter of 1999 to $1,304,000 for the first quarter of 2000. Normal
increases and additional costs of post retirement benefits (health
insurance) account for the increase. Other operating expenses were
stable.
<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.
The Bank recorded net loan charge offs totaling $291,300 for the
quarter ended March 31, 2000 verses net loan charge offs
$113,400 for the comparable quarter of 1999. The reserve for loan
loss totals $1,778,200. The Board of Directors has determined that
$1,778,200 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, 2000, total non-accruing assets were $435,000.
Collateral supporting the loans totals approximately $705,000.
Non-Performing Loans
Non-performing loans are summarized as follows:
Other Real Estate $ 40,000
Non-accrual loans $ 435,000
Past due 90 days or more and still accruing $3,811,000
Total $4,286,000
<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
Douglas L. McCabe
President
_____________________________________ DATE
Edward C. Galpin
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,119,300
<SECURITIES> 76,917,400
<RECEIVABLES> 0
<ALLOWANCES> 1,778,200
<INVENTORY> 0
<CURRENT-ASSETS> 2,230,600
<PP&E> 5,029,700
<DEPRECIATION> 133,400
<TOTAL-ASSETS> 294,457,300
<CURRENT-LIABILITIES> 11,493,700
<BONDS> 0
0
0
<COMMON> 6,829,000
<OTHER-SE> 25,040,500
<TOTAL-LIABILITY-AND-EQUITY> 294,457,300
<SALES> 0
<TOTAL-REVENUES> 4,036,400
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,245,000
<LOSS-PROVISION> 322,000
<INTEREST-EXPENSE> 2,283,300
<INCOME-PRETAX> 991,800
<INCOME-TAX> 127,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 864,200
<EPS-BASIC> .65
<EPS-DILUTED> .65
</TABLE>
