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, 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 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, 2000, of which 37,953 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
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 - 12
<PAGE>
<PAGE>
PART I, FINANCIAL INFORMATION
BATH NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30, 2000 AND DECEMBER 31, 1999
June 30, December 31,
ASSETS 2000 1999
Cash and due from banks $ 11,921,100 $ 10,281,500
Interest Bearing Dep.
in other banks -0- 5,099,000
Securities<F1> 72,915,100 77,433,800
Federal Funds Sold 7,345,000 4,075,000
Loans Gross 191,837,200 190,119,300
LESS: Allowance for loan losses 1,800,000 1,747,500
Premises and equipment-Net 4,919,100 5,006,100
Interest Receivable 2,003,100 2,011,000
Other Assets 3,231,000 3,017,000
TOTAL ASSETS $292,371,600 $295,295,200
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand 35,960,900 33,969,000
Savings 42,988,400 41,923,200
NOW Accounts 36,229,800 36,712,200
Money Market deposit accounts 10,681,400 10,672,000
Time deposits (in denominations of
100,000 or more) 22,564,900 20,219,200
Other time accounts 76,177,300 75,576,600
TOTAL DEPOSITS $224,602,700 $219,072,200
Borrowings Federal Home Loan Bank 25,000,000 30,000,000
Repurchase Agreements 12,822,500 12,572,900
Other Liabilities 2,378,000 4,503,000
TOTAL LIABILITIES $264,803,200 $266,148,100
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:
6/00 - 1,365,801,12/99 - 1,365,801 6,829,000 6,829,000
Surplus 1,494,700 1,494,700
Undivided profits 21,556,000 23,080,500
Unrealized gain/loss - Investments (820,200) (766,000)
Treasury Stock <F2> (1,491,100) (1,491,100)
TOTAL STOCKHOLDER'S EQUITY $ 27,568,400 $ 29,147,100
TOTAL EQUITY AND LIABILITIES $292,371,600 $295,295,200
[FN]
<F1> 12/99 balance includes equity securities reclassed from other assets.
<F2> 37,953 shares recorded at cost as of 6/00, 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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
INTEREST INCOME:
Int. and fees on loans $ 4,058,900 $4,035,300 $ 8,095,300 $ 8,009,400
Int. on fed. funds sold 45,700 16,500 87,000 23,000
Int. on Inv. Securities:
US Treas. & Gov. Agency 81,100 494,700 176,900 1,019,400
Municipal Obligations 472,700 435,900 956,600 873,600
Taxable Municipal 6,300 6,300 12,600 12,600
Mort. Backed Securities 445,800 245,700 890,100 495,600
Trust Preferreds 61,200 -0- 122,600 -0-
Int. Bearing Due From 2,900 2,200 74,700 5,900
Other 59,300 24,200 115,300 46,300
Total Investment Income 1,175,000 1,225,500 2,435,800 2,476,400
Total Interest Income 5,233,900 5,260,800 10,531,100 10,485,800
INTEREST EXPENSE:
Interest on Deposits 1,768,700 1,733,100 3,480,500 3,453,900
Int. on short term bor. 382,100 103,400 808,400 207,400
Int. on repur. agreem. 150,100 408,500 295,300 814,800
Total Interest Expense 2,300,900 2,245,000 4,584,200 4,476,100
NET INTEREST INCOME: 2,933,000 3,015,800 5,946,900 6,009,700
Prov. loan loss (recov.) 3,052,400 120,000 3,374,400 235,000
Net int. income after
Prov. for loan losses (119,400) 2,895,800 2,572,500 5,774,700
OTHER OPERATING INCOME:
Service charges 281,100 240,400 549,000 475,400
Trust department fees 5,400 5,300 19,100 19,500
Other 210,200 233,500 473,500 396,800
Total other operat inc. 496,700 479,200 1,041,600 891,700
OTHER OPERATING EXPENSES:
Salaries & emp benefit 1,214,900 1,187,200 2,519,200 2,371,400
Net occupancy expense
of premises 201,000 227,600 440,800 446,700
Depreciation 133,000 140,300 266,400 270,800
Other 629,800 557,400 1,197,300 1,096,700
Total other oper. exp. 2,178,700 2,112,500 4,423,700 4,185,600
INCOME BEFORE INCOME TAXES(1,801,400) 1,262,500 (809,600) 2,480,800
INCOME TAXES (benefit) (209,800) 355,700 (82,200) 694,700
NET INCOME $(1,591,600) $ 906,800 $ (727,400)$ 1,786,100
EARNINGS PER COMMON SHARE (1.20) .69 (.55) 1.35
DIVIDENDS DECLARED PER
COMMON SHARE .30 .30 .60 .60
<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, 1999 and 1998, respectively,
with respect to each major category of interest-earning assets and interest-
bearing liabilities:
Six Months Ended June 30, 2000
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 2,512 $ 75 5.97%
Taxable Securities 37,122 1,318 7.10%
Non-Taxable Securities 40,149 1,455 7.25%
Federal Funds Sold 2,906 87 5.99%
Loans 192,090 8,158 8.49%
Total Int-Earning Assets $274,779 $ 11,093 8.07%
Liabilities
NOW's & Money Market Accts. $ 47,747 $ 407 1.71%
Savings Deposits 42,311 534 2.52%
Time Deposits 98,448 2,540 5.16%
Total Int-Bearing Deposits $188,506 $ 3,481 3.69%
Repurchase Agreements $ 11,183 $ 295 5.28%
Federal Funds Purchased 284 7 4.93%
Federal Home Loan Bank
Borrowings 27,473 801 5.83%
Total Int-Bearing Liabilities $227,446 $ 4,584 4.03%
Net Interest Income FTE $ 6,509 4.74%
Less Tax-Equivalent Adjustment $ 562
Net Interest Income $ 5,947
<PAGE>
PART I, Continued
ANALYSIS OF NET INTEREST-EARNINGS, Continued
Six Months Ended June 30, 1999
(dollars in thousands)
Interest
Average Earned Average
Assets Amount or Paid Yield or Rate
Interest Bearing Due
From Banks $ 175 $ 6 6.86%
Taxable Securities 46,358 1,574 6.79%
Non-Taxable Securities 36,912 1,329 7.20%
Federal Funds Sold 880 23 5.23%
Loans 190,512 8,064 8.47%
Total Int-Earning Assets $274,837 $10,996 8.01%
Liabilities
NOW's & Money Market Accts. $ 47,190 $ 408 1.73%
Savings Deposits 43,774 549 2.51%
Time Deposits 101,583 2,497 4.92%
Total Int-Bearing Deposits $192,547 $ 3,454 3.59%
Repurchase Agreements $ 27,910 $ 815 5.84%
Federal Funds Purchased 1,780 54 6.07%
Federal Home Loan Bank
Borrowings 5,000 153 6.12%
Total Int-Bearing Liabilities $227,237 $ 4,476 3.94%
Net Interest Income FTE $ 6,520 4.75%
Less Tax-Equivalent Adjustment $ 510
Net Interest Income $ 6,010
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
June 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/Loss (727,400) 1,786,100
ADJUSTMENT TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 266,400 270,800
Provision for loan losses 3,374,400 235,000
FASB 115 effect & Deferred tax (114,700) 1,100
Loan origination costs deferred 60,700 11,600
Bond premium amortized and (discount accrued) 56,800 76,400
(Increase) or Decrease in interest receivable 7,900 500
Increase or (Decrease) in other liabilities (1,973,400) (1,906,200)
(Increase) or Decrease in other assets (214,000) 137,200
Adjustment to Loan Reserve 52,500 -0-
Net cash provided by operating activities $ 789,200 $ 612,500
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing securities 4,991,500 4,934,700
Proceeds from sales of securities -0- 395,000
Purchases of securities (620,000) (145,000)
(Increase) or decrease in federal funds sold (3,270,000) (2,350,000)
Increase or (decrease) in federal funds purchased -0- (2,150,000)
Increase of (decrease) in repurch. agreements 249,600 (807,200)
Net (increase) or decrease in interest bearing
deposits in other banks 5,099,000 297,200
Principal collected on loans 22,074,500 34,170,400
Loans made to customers (27,227,500) (41,219,300)
Capital expenditures (179,400) (55,300)
Net cash used or provided in investing
activities 1,117,700 (6,929,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase or (decrease) in demand deposits
NOW, MMDA and savings accounts 2,584,100 651,300
Proceeds from sale of
certificates of deposit 23,882,400 22,595,400
Payments for maturing
certificates of deposit (20,936,000) (18,957,700)
Dividends paid (797,800) (798,000)
Borrowings from FHLB (5,000,000) -0-
Net cash provided by financing activities (267,300) 3,491,000
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,639,600 (2,826,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,281,500 12,009,200
CASH AND CASH EQUIVALENTS AT END OF SIX MONTHS $11,921,100 $ 9,183,200
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 2000. (Unaudited)
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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 six month period ended 6/30/00 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 $ 4,837,000 $ 4,619,400 $ 800 $ 218,400 $(217,600)
Corporate Bonds 195,000 184,300 - 10,700 (10,700)
Municipal
Obligations 38,723,100 38,605,200 199,800 317,700 (117,900)
Trust Preferreds 3,067,600 2,617,200 - 450,400 (450,400)
Mortgaged
Backed Sec. 24,818,500 24,242,400 133,300 709,400 (576,100)
Equity Secur. 2,646,600 2,646,600 - - -
TOTAL $74,287,800 $72,915,100 $ 333,900 $1,706,600 $(1,372,700)
<PAGE>
PART I, Continued
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 AND 2000. (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, 2000 $1,747,500
Charge offs:
Installments 121,500
Commercial 3,242,000
Credit Cards 32,200
Real Estate 6,000
3,401,700
Recoveries:
Installments 53,700
Commercial 17,900
Credit Cards 8,200
79,800
Provision Loan Loss 3,374,400
Balance - June 30, 2000 $1,800,000
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>
PA RT II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
No ne
ITEM 3. Defaults Upon Senior Securities
No ne
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of Bath National
Corporation was held April 26, 2000. The following directors
were elected:
NAME TERM VOTES FOR VOTES AGAINST ABSTAIN
Edward C. Galpin 3 years 1,076,324 -0- -0-
Lisle E. Hopkins 3 years 1,076,324 -0- -0-
Lawrence C. Howell 3 years 1,070,276 6,048 -0-
Freeman H. Smith,III 3 years 1,070,224 100 -0-
Appointment of Urbach,
Kahn & Werlin as
Certified Public
Accountants 1,076,324
ITEM 5. Other Information
There were no reports filed on Form 8-K
ITEM 6. Exhibits and Reports on Form 8-K
N/A
PART III. MANAGEMENTS 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 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 and advances from the Federal Home Loan Bank (FHLB). As
of June 30, 2000 FHLB advances total $25.0 million. Based on the Bank's
collateral position no further advances are permitted from FHLB.
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
level of liquidity. Maturities in the loan portfolio also provide a
steady flow of funds. At June 30, 2000 loans with an aggregate balance of
$36.1 million and securities of $10.2 million were due to mature in one
year or less. Additional funds flow from payments on instalment 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 June 30, 2000, the loan to deposit
ratio was 85% and the ratio of loans to core deposits (excluding
certificates of deposit of $100,000 or more) was 95%.
The bank has established lines of credit with the Manufacturer s and
Traders Bank in the amount of $4.0 million and Key Bank for $5.0 million,
at the overnight federal funds rate. The bank had an average net daily
federal funds sold of $2.6 million during 2000.
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.
<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 requirements
of community banks. This minimum is presently 8%. Bath National
Corporation had primary capital at June 30, 2000 and June 30, 1999 as
follows:
Components of Capital 6-30-00 6-30-99
Equity Capital $28,388,600 $30,661,000
Less: Goodwill 233,000 257,200
Tier 1 Capital 28,155,600 30,403,800
Tier 2 Capital 1,800,000 1,708,500
Total Primary Capital $29,955,600 $32,112,300
The company's capital to asset ratios as of June 30, 1999 and 2000 are as
follows:
TIER I LEVERAGE RATIO RISK BASED
Required Required
Minimum Actual Minimum Actual
June 30, 1999 4.00% 10.31% 8.00% 18.08%
June 30, 2000 4.00% 9.57% 8.00% 16.10%
<PAGE>
PART III, Continued
Other Operating Income
Service fee income increased by $40,700 for the three months ended
June 30, 2000 as compared to June 30, 1999. Fee increases implemented
during the second quarter on most deposit products account for the
increase.
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.
During the second quarter of 2000, significant loan charge-offs
occurred in the amount of $3,050,000. The bulk of the amount charged off
pertains to one loan in the amount of $2,750,000. Although written off,
a plan for collection between the borrower and the Bank is in place and
management is optimistic that some recoveries on this loan will be
realized.
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, 2000, total non-accruing assets were $2,868,600.
Collateral supporting the loans totals $3,755,700.
<PAGE>
PART III, Continued
NON PERFORMING LOANS
Non-performing loans are summarized as follows:
Other Real Estate $ 40,000
Non-accrual loans $2,868,600
Past due 90 days or more and still accruing $ 706,700
Total $3,615,300
<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
