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 March 31, 1996
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 March 31, 1996 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 BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<CAPTION>
March 31, December 31,
1996 1995
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $23,625 $16,858
Federal funds sold 8,800 6,600
Securities:
Held to Maturity -
U.S. Government 31,883 31,955
State & municipal obligations 28,710 27,160
Other securities 10,436 10,955
_______ _______
71,029 70,070
Available-for-sale 461 444
_______ _______
Total securities 73,490 71,514
_______ _______
Loans:
Commercial, financial & agricultural 28,126 28,326
Residential mortgage 87,507 86,641
Commercial mortgage 61,908 62,038
Consumer 25,147 24,269
Other loans 7,793 7,815
Loans held for sale 2,062 955
_______ _______
Total loans 212,543 210,044
Less: Allowance for loan losses -2,273 -2,258
_______ _______
Loans - Net 210,270 207,786
_______ _______
Premises and equipment - Net 8,613 8,559
Accrued interest receivable 2,288 2,046
FHLB and Federal Reserve stock 1,425 1,406
Other assets 3,753 3,440
_______ _______
TOTAL ASSETS $330,264 $317,209
======= =======
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 48,013 $ 49,779
Interest bearing 241,943 227,272
_______ _______
Total Deposits 289,956 277,051
_______ _______
Borrowing from FHLB 1,008 1,013
Accrued interest payable and
other liabilities 1,754 1,748
_______ _______
TOTAL LIABILITIES 292,718 279,812
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued & Outstanding: 161,155
shares in 1996 & 161,155 in 1995 8,058 8,058
Capital Surplus 8,203 8,203
Retained Earnings 21,367 21,083
Net unrealized holding gains on
available-for-sale securities 63 53
_______ _______
TOTAL STOCKHOLDERS' EQUITY 37,691 37,397
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $330,264 $317,209
======= =======
Market Value of Securities $71,815 $70,728
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
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
March 31
(unaudited)
_________________
1996 1995
______ ______
<S> <C> <C>
Interest Income:
Loans, including fees $ 5,029 $ 4,951
Federal funds sold 177 140
Investment securities 1,034 986
_______ ______
Total Interest Income 6,240 6,077
Interest Expense - Deposits 2,123 2,064
_______ ______
Net interest income 4,117 4,013
Provision for loan losses 235 396
_______ ______
Net interest income after
provision for loan losses 3,882 3,617
_______ ______
Other Income:
Service charges on
deposit accounts 387 375
Trust Department income 346 264
Other operating income 321 267
_______ _______
Total other income 1,054 906
_______ _______
Other Expenses:
Salaries & employee benefits 2,004 1,766
Occupancy 498 442
Stationery, supplies & postage 114 150
FDIC expense 1 154
Other fees 166 135
Other operating expenses 748 641
_______ _______
Total other expenses 3,531 3,288
_______ _______
Income before income taxes 1,405 1,235
Provisions for income taxes 436 368
_______ _______
NET INCOME $ 969 $ 867
======= =======
Per Share:
NET INCOME $ 6.01 $ 5.39
DIVIDENDS DECLARED $ 4.25 $ 3.50
<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 THREE MONTHS ENDED MARCH 31
(Dollars in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 969 $ 867
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 279 274
Provision for loan losses 235 396
Increase (decrease) in taxes payable (54) 294
(Increase) decrease in interest receivable (242) (85)
Increase (decrease) in interest payable (85) 43
(Increase) decrease in other assets (281) (823)
Increase (decrease) in other liabilities 145 65
Accretion/amortization securities (46) (4)
_______ _______
Total Adjustments (49) 160
_______ _______
Net cash from operating activities 920 1,027
_______ _______
Cash flows from investing activities:
Proceeds from maturities of Investments 9,396 7,502
Investment purchases (10,328) (7,200)
New loans-net of principle payments (2,719) (100)
Fixed asset purchases, net (333) (289)
(Increase) decrease in other real estate (39) (189)
_______ _______
Net cash provided (used)
by investing activities (4,023) (276)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 17,215 (11,289)
Proceeds from issuance of certificates of
deposit net of matured certificates (4,455) 22,237
Dividends paid (685) (563)
Borrowing from FHLB (5) -
_______ _______
Net cash used by financing activities 12,070 10,385
Net increase (decrease) in cash &
cash equivalents 8,967 11,136
Cash & cash equivalents - beginning of
period 23,458 17,627
_______ _______
Cash & cash equivalents-end of period $ 32,425 $ 28,763
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $2,038 $2,021
Income Taxes $ 345 $ 188
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
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 March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1996. 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, 1995.
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.
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 1996
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 three months ended March 31, 1996, net cash from
Operating activities was $920,000 as compared to $1,027,000 for
the same period in 1995. The decrease of $107,000 was caused by an
increases in Other assets and Net income of $542,000 and $102,000,
respectively offset by decreases in Taxes payable, Interest receivable,
Provision for loan loss, and Interest payable of $348,000, $157,000,
$161,000, and $128,000, respectively.
Cash flows from investing activities was ($4,023,000) versus
($276,000) for the Three months ended March 31, 1995. The
loan portfolio increased by $2,719,000 for the first three months
of 1996 as compared to a slight increase of $100,000 for the same
period in 1995. The investment portfolio had a net increase of
$932,000 for the first three months of 1996 as compared to a net
decrease of $302,000 for the first three months of 1995.
Cash flows from financial activities increased to $12,070,000
versus $10,385,000) in 1995. Major components contributing to this
change are a net decrease of issuance of certificates over maturities
of $26,692,000 and a net increase in demand deposits, savings and short-
term borrowings of $28,504,000. Municipalities receiving their state aid
on the last day of the quarter caused the increase in demand and savings
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
GAP ANALYSIS
Comment:
March 31,1996 gaps in the 0-3 month range is at ($78,742.000), with a
RSA/RSL of .58. This large increase in gap is due to increases of
$5,000,000 in Money Market Accounts, $4,000,000 in NOW's and $10,000,000 in
Royal Blue Accounts. At the same time, loans declined from $102,000,000 to
$95,000,000. Consequently, we show a 0-3 month gap somewhat higher than
normal. (Last year's 0-3 month gap was .67, SO our March gap is generally
larger.)
The 4-12 month gap is 1.03, also slightly higher than we are used to
seeing. Again, loans fell about $5 million while deposits in the same
bucket declined only about $1 million since December.
The overall one year gap is .63, with the bank repricing $78 million
more deposits than loans in one year. At this time last year, the one year
gap was .74
One to five year gap is positive at $84 million and 3.70, as both
assets and liabilities were relatively unchanged from December.
Forecast:
The "inflation" word has begun to be mentioned for the first time in
years. The mere thought of inflation drove interest rates upward over the
past 3 months. Now we all wait to see if higher wholesale commodity prices
are translated into upward moving prices.
Unfortunately, we are gapped a bit too negatively if interest rates
do continue upward. Last quarter we mentioned the situation of our low
liability rates. We have begun to address this concern selectively, and
will continue to move rates upward as necessary to properly fund the bank.
More importantly, we hope that in the short term, any additional
assets booked are tied to rate indices that have a rapid response to
interest rate changes. We will continue to attempt to move our deposit
customers out the yield curve to lessen the impact of changing rates in our
short term earnings.
<PAGE>
Interest Rate Sensitivity Gaps
As of March 31, 1996
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 94,727 2,625 77,270 27,337
Investment portfolio 5,389 21,160 38,239 7,782
Federal funds sold 8,800
_______ ______ _______ ______
Interest-earning assets 108,916 23,785 115,509 35,119
_______ ______ _______ ______
Certificate of deposits 31,628 22,997 31,186
Savings 64,523
Royal blue money market 25,058
Now & Super Now 36,048
Money Market 30,401
_______ ______ ______ ______
Interest-bearing liabilities 187,658 22,997 31,186 0
_______ ______ ______ ______
Interest sensitivity gap (78,742) 788 84,323 35,119
_______ ______ ______ ______
Interest-earning assets 108,916 23,785 115,509 35,119
Interest-bearing liabilities 187,658 22,997 31,186 0
_______ ______ _______ ______
Interest sensitivity gap $(78,742) 788 84,323 35,119
_______ ______ _______ ______
RSA/RSL 0.58 1.03 3.70
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at March 31, 1996, under current requirements:
March 31, 1996
(dollars in thousands)
Tier 1 Capital $ 37,628
Tier 2 Capital $ 2,273
Total Qualifying Capital $ 39,901
Total Risk Adjusted Total Assets $219,328
Tier 1 Risk Based Capital Ratio 17.16%
Total Risk Based Capital Ratio 18.19%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 11.39%
The Corporation's continued positive earnings trends are
evidenced by its very strong capital position.
IV. DIVIDENDS
The semi-annual dividend payable February 1, 1996 was $4.25
versus $3.50 for the same period in 1995.
V. Results of Operations
As of March 31, 1996, total assets of the Corporation
were $330.3 million, up from $317.2 million at year end 1995.
Securities increased $2.0 million to $73.5 million, net
loans increased $2.6 million to $210.3 million, other assets
rose $.3 million to $3.8 million, and cash and due from banks
increased $6.8 million to $23.6 million. Federal Funds Sold of $8.8
million increased by $2.2 million from $6.6 million. Cash and due
from banks was the main factor contributing to asset growth.
Total deposits for this period were up $12.9 million while other
liabilities stayed the same at $1.7 million.
For the first three months ending March 31, 1996, the
Corporation had $299.0 million average interest earning assets,
up $2.7 million from December 31, 1995. Average interest bearing
liabilities at March 31, 1996 were $237.6 million, up $1.2 million
from the December 31, 1995 amount of $236.4 million. Net
interest income for the first three months of 1996 was $3.9
million, up from $3.6 million for the same period in 1995.
Interest income was $6.2 million, up $.1 million from the year
earlier $6.1 million. Annualized interest income on average
earning assets was 8.35% for the first three months of 1996,
versus 8.24% for the first three months of 1995. Annualized
interest expense for the first nine months of 1996 was 3.57%,
versus 3.47% for the first three months of 1995. Therefore, net
interest spread for the first nine months of 1996 was 4.78%,
versus 4.77% for the same period in 1995. Management is pleased
that spreads have marginally increased.
Total other income increased to $1.1 million for the first
three months ending March 31, 1996, up $.2 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 three months
of 1996 was $1.4 million, up 13.8% from the year earlier figure
of $1.2 million. Annualized return on average assets for the
first three months of 1996 was 1.19%,up from the year
earlier 1.09%.
Management is quite pleased with the results of the
Corporation given the current economic climate. It will continue
to strive for cost containment, while expanding its market area towards
Rochester, New York, 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 nine parcels of property;
four residences for $344,000 and five commercial properties for
$1,819,000. 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 3/31/96 as compared to loans aggregating
$138,000 for the period 3/31/95. There were residential real
estate loans 90 days or more past due with a value of $-0- for
the 3/31/96 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
in thousands
3/31/96 3/31/95
_______ _______
Commercial, Financial & Agricultural $ 1,602 $ 2,130
Real Estate-Commercial 6,992 5,453
Real Estate-Residential 1,980 2,094
Consumer 0 0
Total Non-Performing Loans 10,574 9,677
_______ _______
Other Real Estate Owned-
Commercial 1,819 206
Residential 344 681
_______ _______
Total Other Real Estate Owned 2,163 887
_______ _______
Total Non-Performing Assets $12,737 $10,564
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 38 1,445
Real Estate-Commercial 0 1,400
Real Estate-Residential 68 57
Consumer 15 23
______ _____
Total Past Due - 90 Days or More $ 121 2,925
______ _____
RESTRUCTURED LOANS $ 0 $ 0
______ _____
<PAGE>
INDEX
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets-March 31, 1996 and
December 31, 1995.
Condensed consolidated statements of income-nine months
ended March 31, 1996 and 1995.
Condensed consolidated statements of cash flows-nine
months ended March 31, 1996, and 1995.
Notes to condensed consolidated financial statements-
March 31, 1996.
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 13, 1996
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> 3-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Mar-31-1995
<CASH> 23,538
<INT-BEARING-DEPOSITS> 87
<FED-FUNDS-SOLD> 8,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,886
<INVESTMENTS-CARRYING> 71,029
<INVESTMENTS-MARKET> 71,815
<LOANS> 212,543
<ALLOWANCE> 2,273
<TOTAL-ASSETS> 330,264
<DEPOSITS> 289,956
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,754
<LONG-TERM> 1,008
<COMMON> 8,058
0
0
<OTHER-SE> 29,633
<TOTAL-LIABILITIES-AND-EQUITY> 330,264
<INTEREST-LOAN> 5,029
<INTEREST-INVEST> 1,034
<INTEREST-OTHER> 177
<INTEREST-TOTAL> 6,240
<INTEREST-DEPOSIT> 2,123
<INTEREST-EXPENSE> 2,123
<INTEREST-INCOME-NET> 4,117
<LOAN-LOSSES> 235
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,531
<INCOME-PRETAX> 1,405
<INCOME-PRE-EXTRAORDINARY> 969
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 969
<EPS-PRIMARY> 6.01
<EPS-DILUTED> 6.01
<YIELD-ACTUAL> 8.35
<LOANS-NON> 12,737
<LOANS-PAST> 121
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,258
<CHARGE-OFFS> 298
<RECOVERIES> 78
<ALLOWANCE-CLOSE> 2,273
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
