UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
Commission file Number 2-94863
CANANDAIGUA NATIONAL CORPORATION
(Exact name of registrant as specified in its charter.)
NEW YORK 16-1234823
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
72 South Main Street, Canandaigua, New York 14424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 394-4260
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
(or 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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
On September 30, 1995 there were 161,155 shares of the
registrant's common stock outstanding.
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
__________________ _________________
1995 1994 1995 1994
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $4,991 $4,500 $14,958 $12,849
Federal funds sold 189 137 512 427
Investment securities 1,071 955 3,104 2,773
_______ _______ _______ _______
Total Interest Income 6,251 5,592 18,574 16,049
Interest Expense - Deposits 2,239 1,761 6,577 5,215
_______ _______ _______ _______
Net interest income 4,012 3,831 11,997 10,834
Provision for loan losses 146 285 900 600
_______ _______ _______ _______
Net interest income after
provision for loan losses 3,866 3,546 11,097 10,234
_______ _______ _______ _______
Other Income:
Service charges on
deposit accounts 401 382 1,184 1,150
Trust Department income 246 221 770 656
Gains on sale of
Investment securities -10 1 -10 2
Other operating income 354 260 950 971
_______ _______ _______ _______
Total other income 991 864 2,894 2,779
_______ _______ _______ _______
Other Expenses:
Salaries & employee benefits 1,801 1,634 5,126 4,726
Occupancy 514 472 1,446 1,419
Stationery, supplies & postage 150 133 420 408
FDIC expense -97 157 212 473
Other operating expenses 773 675 2,313 2,144
_______ _______ _______ _______
Total other expenses 3,141 3,071 9,517 9,170
_______ _______ _______ _______
Income before income taxes 1,716 1,339 4,474 3,843
Provisions for income taxes 594 373 1,417 1,159
_______ _______ _______ _______
NET INCOME $1,122 $966 $3,057 $2,684
_______ _______ _______ _______
Per Share:
NET INCOME $6.96 $6.00 $18.99 $16.67
_______ _______ _______ _______
DIVIDENDS DECLARED $3.50 $3.00 $7.00 $6.00
_______ _______ _______ _______
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<CAPTION>
September 30, 1995 December 31, 1994
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $13,749 $14,227
Federal funds sold 14,300 3,400
Investment securities:
Held to Maturity -
U.S. Government 33,257 28,255
State & municipal obligations 28,729 30,825
Other securities 10,654 11,687
_______ _______
72,640 70,767
Equity securities available-for-sale 468 409
_______ _______
Total investment securities 73,108 71,176
_______ _______
FHLB Stock 926 938
Federal Reserve Board stock 480 480
Loans:
Commercial, financial & agricultural 32,172 32,442
Residential mortgage 85,767 83,018
Commercial mortgage 57,205 60,278
Consumer 23,891 26,890
Other loans 7,399 6,411
Loans held for sale 1,206 1,710
_______ _______
Total loans 207,640 210,749
Less: Allowance for loan losses -2,218 -2,202
_______ _______
Loans - Net 205,422 208,547
_______ _______
Premises and equipment - Net 8,456 8,107
Accrued interest receivable 2,292 2,170
Other assets 3,545 1,496
_______ _______
TOTAL ASSETS $322,278 $310,541
</TABLE>
<PAGE>
<TABLE>
<CAPTION> LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 47,135 $ 45,782
Interest bearing 235,931 229,055
_______ _______
Total Deposits 283,066 274,837
_______ _______
Other borrowed money 1,019 0
Accrued interest payable and
other liabilities 1,667 1,166
_______ _______
TOTAL LIABILITIES 285,752 276,003
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued & Outstanding: 161,155 shares
in 1995 & 160,980 in 1994 8,058 8,049
Capital Surplus 8,203 8,172
Retained Earnings 20,223 18,294
Net unrealized holding gains on
available-for-sale securities 42 23
_______ _______
TOTAL STOCKHOLDERS' EQUITY 36,526 34,538
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $322,278 $310,541
_______ _______
Market Value of Investment Securities $74,842 $69,016
_______ _______
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED NINE MONTHS ENDED SEPTEMBER 30
(Dollars in thousands)
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 3,057 $ 2,684
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 852 778
Provision for loan losses 900 600
Increase (decrease) in taxes payable 253 (97)
(Increase) decrease in interest
receivable (122) (95)
Increase (decrease) in interest
payable 115 113
(Increase) decrease in other areas (349) (456)
Increase (decrease) in other liabilities 133 79
Accretion/amortization
securities 114 32
_______ _______
Total Adjustments 1,896 954
_______ _______
Net cash from operating activities 4,953 3,638
_______ _______
Cash flows from investing activities:
Proceeds from sales of Investments 0 2
Proceeds from maturities of Investments 25,551 26,431
Investment purchases (27,553) (24,952)
New loans-net of principle payments 2,225 (10,118)
Fixed asset purchases, net (1,201) (782)
(Increase) decrease in other real estate (1,713) 211
_______ _______
Net cash provided (used)
by investing activities (2,691) (9,208)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits (8,173) (1,304)
Proceeds from sale of common stock 40 33
Proceeds from issuance of certificates of
deposit net of matured certificates 16,402 (508)
Other borrowings 1,019
Dividends paid (1,128) (965)
_______ _______
Net cash used by financing activities 8,160 (2,744)
Net increase (decrease) in cash &
cash equivalents 10,422 (8,314)
Cash & cash equivalents - beginning of
period 17,627 32,222
_______ _______
Cash & cash equivalents-end of period $28,049 $23,908
_______ _______
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $6,455 $5,102
_______ _______
Income Taxes $1,132 $1,256
_______ _______
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month period
ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
December 31, 1994.
Note B - Stockholders Equity and Earnings per Share (EPS)
The Financial Accounting Standards Board issued Statement 114
Accounting by Creditors for Impairment of a Loan as amended by
Statement 118, Accounting by Creditors for Impairment of a Loan -
Income and Disclosure. These statements prescribe recognition
criteria for loan impairment, generally related to commercial
type loans, and measurement methods for certain impaired loans
and all loans whose terms are modified in troubled debt
restructuring subsequent to the adoption of these statements. A
loan is considered impaired when it is probable that the borrower
will be unable to repay the loan according to the original
contractual terms of the loan agreement.
As of January 1, 1995, the Company has adopted the provisions of
SFAS No. 114 and SFAS No. 118 and has provided the required
disclosures. The effect of adoption was not material to the
consolidated financial statements.
As a result of the adoption of SFAS No. 114, the allowance for
possible loan losses related to impaired loans that are
identified for evaluation in accordance with SFAS No. 114 is
based on the present value of expected cash flows discounted at
the loan's initial effective interest rate, except that as a
practical expedient, impairment may be measured at the loan's
observable market price, or the fair value of the collateral for
certain loans where repayment of the loan is expected to be
provided solely by the underlying collateral (collateral
dependent loans). The Company's impaired loans are generally
collateral dependent. The Company considers estimated costs to
sell, on a discounted basis, when determining the fair value of
collateral in the measure of impairment of those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans. Prior to the adoption of SFAS No. 114 and
118, the allowance for possible loan losses related to these
loans was based on estimated undiscounted cash flows or the fair
value of the collateral, less estimated costs to sell for
collateral dependent loans.
Other real estate owned included both formally foreclosed and in-
substance foreclosed real properties. In accordance with SFAS
No. 114, a loan is classified as in-substance foreclosure when
the Company has taken possession of the collateral regardless of
whether formal foreclosure proceedings have taken place. Prior
to the adoption of SFAS No. 114 and SFAS No. 118, in-substance
foreclosed properties included those properties where the
borrower had little or no remaining equity in the property
considering its fair value remaining equity; where repayment was
only expected to come from the operation or sale of the property;
and where the borrower had effectively abandoned control of the
property or it was doubtful that the borrower would be able to
rebuild equity in the property.
At September 30, 1995, the recorded investment in loans that are
considered to be impaired under SFAS No. 114 is immaterial.
Impaired loans are included in non-performing loans, generally as
non-accrual loans. Commercial type loans past due greater than
90 days and still accruing are generally not considered to be
impaired as the Company expects to collect all amounts due,
including interest accrued at the contractual interest rate for
the delinquent period.
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
September 30, 1995
I. Liquidity
Liquidity is defined as the ability to generate adequate
amounts of cash to meet the demand for cash from depositors who
wish to withdraw funds, borrowers who require funds, and capital
expansion. Liquidity is produced by cash flows from operating,
investing, and financing activities of the Corporation
For the nine months ended September 30, 1995, net cash from
Operating activities increased to $4,953,000 from $3,638,000 for
the same period in 1994. The increase was primarily caused by an
increase of $300,000 in the provision for loan loss, along with
an increase in net income of $373,000 and an increase in taxes
payable of $350,000.
Cash flows from investing activities was ($2,691,000) versus
($9,208,000) for the nine months ended September 30, 1994. The
loan portfolio increased by $2,225,000 for the first nine months
of 1995 as compared to a decrease of $10,118,000 for the same
period in 1994. The investment portfolio had a net increase of
$2,002,000 for the first nine months of 1995 as compared to a net
decrease of $1,479,000 for the first nine months of 1994. The
other item contributing to cash flows was an increase in other
real estate of $1,713,000.
Cash flows from financial activities showed a substantial
increase to $8,160,000 versus ($2,744,000) in 1994. Major
components contributing to this change are a net increase of
issuance of certificates over maturities of $16,910,000 and a net
decrease in demand deposits, savings and short term borrowings of
$6,869,000. The movement of money from short-term deposits to
long-term deposits was caused by a rate increase in long term
deposits. The corporation has been actively pricing some of its
liabilities in an attempt to grow deposit levels in certain
asset/liability buckets.
<PAGE>
II. Interest Rate Sensitivity (Interest Rate Sensitivity Chart)
Asset / Liability Management Review
November 8, 1995
GAP ANALYSIS
Comment:
As of September 30, 1995, the 0-3 month gap rose to
($57,497,000) from June's ($48,191,000). There was a decline of
interest earning assets of $7,000,000, while interest bearing
liabilities also fell $2,000,000. The 0-3 month ratio of .68 is
within historic measures.
The 4-12 month bucket also rose to ($8,097,000) from
($2,037,000), as interest bearing assets declined to $18,508,000
from $24,151,000 and interest bearing liabilities remained almost
the same. Therefore, the overall 1 year gap is ($65,594,000), or
.68, down from .75 in June. The one year gap increase is
primarily attributed to loans, which dropped to $95.8 million
from $113 million in June, without a similar drop in liabilities.
The one to five year gap remains in its usual range at 3.50
or $81,309,000.
Forecast:
While our margins look fairly strong for the rest of 1995,
net loan growth in the 3rd quarter was non-existent. We will
continue to stress asset growth, as both our capital and
liability position will support a larger asset portfolio.
Short term gap will also be affected by school tax deposits.
This is the annual period for heavy inflow from school districts.
We will attempt to hold those deposits for which we can generate
a positive spread, and will bid less than aggressively on the
remaining deposits.
<PAGE>
Interest Rate Sensitivity Gaps
As of September 30, 1995
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 93,070 2,790 74,531 25,179
Investment portfolio 12,028 15,718 39,310 7,071
Federal funds sold 14,300
_______ ______ _______ ______
Interest-earning assets 119,398 18,508 113,841 32,250
_______ ______ _______ ______
Certificate of deposits 24,987 26, 605 32,532
Savings 67,952
Royal blue money market 20,666
Now & Super Now 32,058
Money Market 31,232
_______ ______ ______ ______
Interest-bearing liabilities 176,895 26,605 32,532 0
_______ ______ ______ ______
Interest sensitivity gap (57,497) (8,097) 81,309 32,250
_______ ______ ______ ______
Interest-earning assets 119,398 18,508 113,841 32,250
Interest-bearing liabilities 176,895 26,605 32,532 0
_______ ______ _______ ______
Interest sensitivity gap $(57,497) (8,097) 81,309 32,250
_______ ______ _______ ______
RSA/RSL 0.68 0.70 3.5
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at September 30, 1995, under current requirements:
September 30, 1995
(dollars in thousands)
Tier 1 Capital $ 36,484
Tier 2 Capital $ 2,218
Total Qualifying Capital $ 38,702
Total Risk Adjusted Total Assets $217,332
Tier 1 Risk Based Capital Ratio 16.79%
Total Risk Based Capital Ratio 17.81%
Leverage Ratio (Tier 1 capital divided 11.28%
by Total Assets less Goodwill)
The Corporation's continued positive earnings trends are
evidenced by its very strong capital position.
IV. DIVIDENDS
The semi-annual dividend payable February 1, 1995 was $3.50
versus $3.00 for the same period in 1994. The semi-annual
dividend payable August 1, 1995 was $3.50 versus $3.00 for the
same period in 1994.
V. Results of Operations
As of September 30, 1995, total assets of the Corporation
were $322.2 million, up from $310.5 million at year end 1994.
Investment Securities increased $1.9 million to $73.1 million,
net loans decreased $2.1 million to $205.4 million, other assets
rose $2.0 million to $3.5 million, and cash and due from banks
fell $.5 million to $13.7 million. Federal Funds Sold of $14.3
million increased by $10.0 million from $3.4 million. Federal
Funds Sold was the main factor contributing to asset growth as
funds were being held for possible loan demand. Total deposits
for this period were up $8.2 million while other liabilities
increased $1.5 million.
For the first nine months ending September 30, 1995, the
Corporation had $296.3 million average interest earning assets,
up $2.8 million from December 31, 1994. Average interest bearing
liabilities at September 30, 1995 were $237.7 million, down $2.5
million from the December 31, 1994 amount of $241.2 million. Net
interest income for the first nine months of 1995 was $11.1
million, up from $10.2 million for the same period in 1994.
Interest income was $18.6 million, up $2.5 million from the year
earlier $16.1 million. Annualized interest income on average
earning assets was 8.36% for the first nine months of 1995,
versus 7.36% for the first nine months of 1994. Annualized
interest expense for the first nine months of 1995 was 3.69%,
versus 2.91% for the first nine months of 1994. Therefore, net
interest spread for the first nine months of 1995 was 4.67%,
versus 4.45% for the same period in 1994. Management is pleased
that spreads have marginally increased during a period of slow
loan demand.
Total other income increased to $2.9 million for the first
nine months ending September 30, 1995, up $.12 million from the
year earlier period. There were no substantial or significant
changes in any categories.
Due to good spread management, management is pleased to
announce that net income before taxes for the first nine months
of 1995 was $4.8 million, up 14.1% from the year earlier figure
of $3.8 million. Annualized return on average assets for the
first nine months of 1995 was 1.28%,up solidly from the year
earlier 1.08%.
Management is quite pleased with the results of the
Corporation given the current economic climate. It will continue
to strive for cost containment and solid interest margins as a
means to strong results in a period of slow economic growth.
VI. Non-Performing & Past Due Loans
Other real estate owned consists of ten parcels of property;
five residences for $571,000 and five commercial properties for
$865,000. All properties have been recently reappraised at
values higher than the loan balances.
There were commercial, agricultural and commercial real
estate loans past due 90 days or more with a value of $16,000 for
the period ending 6/30/95 as compared to loans aggregating
$138,000 for the period 6/30/94. There were residential real
estate loans 90 days or more past due with a value of $-0- for
the 6/30/95 period as compared to loans for $49,000 for the same
period last year. Consumer loans totaling $9,000 were past due
90 days or more for both periods.
NON-PERFORMING ASSETS
9/30/95 9/30/94
_______ _______
Commercial, Financial & Agricultural $ 4,049 $ 2,254
Real Estate-Commercial 5,439 6,034
Real Estate-Residential 2,568 1,988
Consumer 0 0
Total Non-Performing Loans 12,056 10,276
_______ _______
Other Real Estate Owned-
Commercial 1,865 167
Residential 571 343
_______ _______
Total Other Real Estate Owned 2,436 510
_______ _______
Total Non-Performing Assets $14,492 $10,786
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 6 $ 111
Real Estate-Commercial 0 0
Real Estate-Residential 141 2
Consumer 43 54
______ _____
Total Past Due - 90 Days or More $ 191 $ 167
______ _____
RESTRUCTURED LOANS $ 0 $ 0
______ _____
<PAGE>
INDEX
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets-September 30, 1995 and
December 31, 1994.
Condensed consolidated statements of income-nine months
ended September 30, 1995 and 1994.
Condensed consolidated statements of cash flows-nine
months ended September 30, 1995, and 1994.
Notes to condensed consolidated financial statements-
September 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CANANADIAGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal proceedings - None
Item 2. Changes in securities
Item 3. Defaults upon senior securities - None
Item 4. Submission of matters to a vote of security holders
(a) The annual meeting of stockholders of Registrant
was held on March 8, 1995
Item 5. Other information - None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CANANDAIGUA NATIONAL CORPORATION
(Registrant)
November 13, 1995 George W. Hamlin, IV
Date George W. Hamlin, IV
President
November 13, 1995 Gregory S. MacKay
Date Gregory S. MacKay
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Sep-30-1995
<CASH> 13,749
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,874
<INVESTMENTS-CARRYING> 72,640
<INVESTMENTS-MARKET> 74,842
<LOANS> 207,640
<ALLOWANCE> 2,218
<TOTAL-ASSETS> 322,278
<DEPOSITS> 283,066
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,667
<LONG-TERM> 1,019
<COMMON> 8,058
0
0
<OTHER-SE> 28,468
<TOTAL-LIABILITIES-AND-EQUITY> 322,278
<INTEREST-LOAN> 14,958
<INTEREST-INVEST> 3,104
<INTEREST-OTHER> 512
<INTEREST-TOTAL> 18,574
<INTEREST-DEPOSIT> 6,577
<INTEREST-EXPENSE> 6,577
<INTEREST-INCOME-NET> 11,997
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,517
<INCOME-PRETAX> 4,474
<INCOME-PRE-EXTRAORDINARY> 3,057
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,057
<EPS-PRIMARY> 18.99
<EPS-DILUTED> 18.99
<YIELD-ACTUAL> 8.36
<LOANS-NON> 12,056
<LOANS-PAST> 191
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,202
<CHARGE-OFFS> 1,055
<RECOVERIES> 171
<ALLOWANCE-CLOSE> 2,218
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
