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, 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 September 30, 1996 there were 162,208 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>
September 30, December 31,
1996 1995
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $17,772 $16,858
Federal funds sold 4,000 6,600
Securities:
Held to Maturity -
U.S. Government 30,125 31,955
State & municipal obligations 30,004 27,160
Other securities 9,289 10,955
_______ _______
69,418 70,070
Available-for-sale 301 444
_______ _______
Total securities 69,719 70,514
_______ _______
Loans:
Commercial, financial & agricultural 29,742 28,326
Residential mortgage 97,855 86,641
Commercial mortgage 60,277 62,038
Consumer 48,490 24,269
Other loans 9,843 7,815
Loans held for sale 1,068 955
_______ _______
Total loans 247,275 210,044
Less: Allowance for loan losses -2,547 -2,258
_______ _______
Loans - Net 244,728 207,786
_______ _______
Premises and equipment - Net 9,027 8,559
Accrued interest receivable 2,225 2,046
FHLB and Federal Reserve stock 1,558 1,406
Other assets 3,959 3,440
_______ _______
TOTAL ASSETS $352,988 $317,209
======= =======
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 58,372 $ 49,779
Interest bearing 253,095 227,272
_______ _______
Total Deposits 311,467 277,051
Borrowing from FHLB 996 1,013
Accrued interest payable and
other liabilities 1,900 1,748
_______ _______
TOTAL LIABILITIES 314,363 279,812
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued & Outstanding: 162,208
shares in 1996 & 161,155 in 1995 8,110 8,058
Capital Surplus 8,489 8,203
Retained Earnings 21,963 21,083
Net unrealized holding gains on
available-for-sale securities 63 53
_______ _______
TOTAL STOCKHOLDERS' EQUITY 38,625 37,397
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $352,988 $317,209
======= =======
Market Value of Securities $71,109 $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 Nine months ended
September 30-1 September 30-1
(unaudited) (unaudited)
__________________ _________________
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $5,417 $4,991 $15,337 $14,958
Federal funds sold 61 189 346 512
Investment securities 1,006 1,071 3,072 3,104
_______ _______ _______ _______
Total Interest Income 6,484 6,251 18,755 18,574
Interest Expense - Deposits 2,214 2,239 6,416 6,577
_______ _______ _______ _______
Net interest income 4,270 4,012 12,339 11,997
Provision for loan losses 530 146 1,092 900
_______ _______ _______ _______
Net interest income after
provision for loan losses 3,740 3,866 11,247 11,097
_______ _______ _______ _______
Other Income:
Service charges on
deposit accounts 421 401 1,221 1,184
Trust Department income 340 246 990 770
Gains on sale of
Investment securities -24 -10 -24 -10
Other operating income 439 354 1,173 950
_______ _______ _______ _______
Total other income 1,176 991 3,360 2,894
_______ _______ _______ _______
Other Expenses:
Salaries & employee benefits 2,260 1,801 6,043 5,126
Occupancy 554 514 1,700 1,446
Stationery, supplies & postage 159 150 452 420
FDIC expense 0 -97 1 212
Other operating expenses 961 773 3,160 2,313
_______ _______ _______ _______
Total other expenses 3,934 3,141 11,356 9,517
_______ _______ _______ _______
Income before income taxes 982 1,716 3,251 4,474
Provisions for income taxes 289 594 956 1,417
_______ _______ _______ _______
NET INCOME $ 693 $1,122 $2,295 $3,057
_______ _______ _______ _______
Per Share:
NET INCOME $4.29 $6.96 $14.21 $18.99
_______ _______ _______ _______
DIVIDENDS DECLARED $4.50 $3.50 $8.75 $7.00
_______ _______ _______ _______
<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>
1996 1995
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 2,295 $ 3,057
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 884 852
Provision for loan losses 1,092 900
Increase (decrease) in taxes payable (275) 253
(Increase) decrease in interest receivable (179) (122)
Increase (decrease) in interest payable 14 115
(Increase) decrease in other assets (418) (349)
Increase (decrease) in other liabilities 413 133
Accretion/amortization securities (137) 114
_______ _______
Total Adjustments 1,394 1,896
_______ _______
Net cash from operating activities 3,689 4,953
_______ _______
Cash flows from investing activities:
Proceeds from sales of Investments 0 0
Proceeds from maturities of Investments 29,945 25,551
Investment purchases (29,148) (27,553)
New loans-net of principle payments (38,034) 2,225
Fixed asset purchases, net (1,352) (1,201)
(Increase) decrease in other real estate (108) (1,713)
_______ _______
Net cash provided (used)
by investing activities (38,697) (2,691)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 19,269 (8,173)
Proceeds from the sale of common stock 338 40
Proceeds from issuance of certificates of
deposit net of matured certificates 15,147 16,402
Other borrowings (17) 1,019
Dividends paid (1,415) (1,128)
_______ _______
Net cash used by financing activities 33,322 8,160
Net increase (decrease) in cash &
cash equivalents (1,686) 10,422
Cash & cash equivalents - beginning of
period 23,458 17,627
_______ _______
Cash & cash equivalents-end of period $ 21,772 $ 28,049
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $6,402 $6,455
Income Taxes $1,527 $1,132
<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, 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 nine month period
ended September 30, 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
September 30, 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 nine months ended September 30, 1996, net cash from
Operating activities was $3,689,000 as compared to $4,953,000 for
the same period in 1995. The decrease of $1,264,000 was caused by a
decrease in net income of $762,000 and an increase in other liabilities of
$280,000 and a change in acretion and amortization of $251,000.
Cash flows from investing activities was ($38,697,000) versus
($2,691,000) for the nine months ended September 30, 1995. The
loan portfolio increased by $38,225,000 for the first nine months
of 1996 as compared to a slight decrease of $2,225,000 for the same
period in 1995. The investment portfolio had a net decrease of
$797,000 for the first nine months of 1996 as compared to an increase
of $2,002,000 for the first nine months of 1995.
Cash flows from financial activities increased to $33,322,000
versus $8,160,000 in 1995. The major component contributing to this
change was a net increase in demand savings and short 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
GAP ANALYSIS
Comment:
As of September 30, 1996, our 3 month gap was ($100,511,000) or .48, up
from June's .61 and ($71,296,000). Interest earning assets fell $16
million in the 3 month bucket, as short term loans declined $14 million,
the investment portfolio fell $6 million, while Fed Funds sold rose $4
million. At the same time, interest bearing liabilities in the 3 month
bucket rose $13 million as short term Certificates of Deposit rose $8
million, Royal Blue accounts rose $5 million, Money Markets increased $4
million and Savings and Now dropped $4 million.
Four to twelve month gap is ($2,819,000) or .91. Thereafter the one
year gap is ($103,330,000) or .54. Efforts must be made on both the asset
and liability sides of the bank to direct our positions back to more normal
ranges.
Forecast:
We remain optimistic that no large interest rate movements are in the
near future. We believe the Federal Reserve is sufficiently pleased with
the current state of the economy and does not believe any changes are
necessary. We feel the current weakness is due to consumer credit problems
and will be offset by stronger export growth. The political climate will
remain balanced as before, and we foresee no extreme government programming
that could affect the markets. It is likely that the current economic
expansion will continue through most of 1997, albeit at a slightly lower
pace than that of 1996.
<PAGE>
Interest Rate Sensitivity Gaps
As of September 30, 1996
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 83,787 3,894 103,586 43,806
Investment portfolio 5,353 23,358 34,536 7,845
Federal funds sold 4,000
_______ ______ _______ ______
Interest-earning assets 93,140 27,252 138,122 51,651
_______ ______ _______ ______
Certificate of deposits 44,358 30,071 30,984
Savings 64,745
Royal blue money market 21,788
Now & Super Now 32,673
Money Market 30,087
_______ ______ ______ ______
Interest-bearing liabilities 193,651 30,071 30,984 0
_______ ______ _______ ______
Interest sensitivity gap (100,511) (2,819) 107,138 51,651
_______ ______ _______ ______
Interest-earning assets 93,140 27,252 138,122 51,651
Interest-bearing liabilities 193,651 30,071 30,984 0
_______ ______ _______ ______
Interest sensitivity gap $(100,511) (2,819) 107,138 51,651
_______ ______ _______ ______
RSA/RSL 0.48 0.91 4.46
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at September 30, 1996, under current requirements:
September 30, 1996
(dollars in thousands)
Tier 1 Capital $ 38,209
Tier 2 Capital $ 2,547
Total Qualifying Capital $ 40,756
Total Risk Adjusted Total Assets $322,833
Tier 1 Risk Based Capital Ratio 11.84%
Total Risk Based Capital Ratio 12.62%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 10.94%
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 and
August 1, 1996 was $4.50 versus $3.50 and $3.50 for the same periods in
1995, respectively.
V. Results of Operations
As of September 30, 1996, total assets of the Corporation
were $353.0 million, up from $317.2 million at year end 1995.
Securities decreased $.8 million to $69.7 million, net
loans increased $36.9 million to $244.7 million with the biggest
gain of $24.4 million in the consumer category, other assets
rose $.5 million to $3.9 million, and cash and due from banks
increased $.9 million to $17.8 million. Federal Funds Sold of $4.0
million decreased by $2.6 million from $6.6 million. Loans were the
contributing factor to the asset growth as the Company has concentrated its
efforts to increase the indirect portfolio through the Rochester, NY
market.
Total deposits for this period were up $34.4 million while other
liabilities increased slightly to $1.9 million.
For the first nine months ending September 30, 1996, the
Corporation had $313.7 million average interest earning assets,
up $17.3 million from December 31, 1995. Average interest bearing
liabilities at September 30, 1996 were $248.8 million, up $12.4 million
from the December 31, 1995 amount of $236.4 million. Net
interest income for the first nine months of 1996 was $12.3
million, up from $12.0 million for the same period in 1995.
Interest income was $18.8 million, up slightly over the same period last
year. Annualized interest income on average earning assets was 7.97% for
the first nine months of 1996, versus 8.36% for the first nine months of
1995. Annualized interest expense for the first nine months of 1996 was
3.44%, versus 3.69% for the first nine months of 1995. Therefore, net
interest spread for the first nine months of 1996 was 4.53%,
versus 4.67% for the same period in 1995.
Total other income increased to $3.4 million for the first
nine months ending September 30, 1996, up $.5 million from the
year earlier period. There were no substantial or significant
changes in any categories.
Net income before taxes for the first nine months of 1996 was $3.2
million, down 27.3% from the year earlier figure of $4.5 million.
Annualized return on average assets for the first nine months of 1996 was
.89%, down from the year earlier 1.28%.
VI. Non-Performing & Past Due Loans
Other real estate owned consists of seven parcels of property;
three residences for $320,000 and four commercial properties for
$909,000. 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 $135,000 for
the period ending 9/30/96 as compared to loans aggregating
$6,000 for the period 9/30/95. There were residential real
estate loans 90 days or more past due with a value of $29,000 for
the 9/30/96 period as compared to loans of $141,000 for the same
period last year. Consumer loans totaling $24,000 were past due
90 days for 1996 and $43,000 for 1995.
NON-PERFORMING ASSETS
in thousands
9/30/96 9/30/95
_______ _______
Commercial, Financial & Agricultural $ 2,469 $ 4,049
Real Estate-Commercial 7,939 5,439
Real Estate-Residential 1,719 2,568
Consumer 75 0
_______ _______
Total Non-Performing Loans 12,202 12,056
_______ _______
Other Real Estate Owned-
Commercial 909 1,865
Residential 320 571
_______ _______
Total Other Real Estate Owned 1,229 2,436
_______ _______
Total Non-Performing Assets $13,431 $14,492
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 135 6
Real Estate-Commercial 0 0
Real Estate-Residential 29 141
Consumer 24 43
______ _____
Total Past Due - 90 Days or More $ 188 190
______ _____
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, 1996 and
December 31, 1995.
Condensed consolidated statements of income-nine months
ended September 30, 1996 and 1995.
Condensed consolidated statements of cash flows-nine
months ended September 30, 1996, and 1995.
Notes to condensed consolidated financial statements-
September 30, 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 14, 1996 George W. Hamlin, IV
Date s/George W. Hamlin, IV
President
November 14, 1996 Gregory S. MacKay
Date s/Gregory S. MacKay
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 17,772
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,859
<INVESTMENTS-CARRYING> 69,418
<INVESTMENTS-MARKET> 71,109
<LOANS> 247,275
<ALLOWANCE> 2,547
<TOTAL-ASSETS> 352,988
<DEPOSITS> 311,467
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,900
<LONG-TERM> 996
<COMMON> 8,110
0
0
<OTHER-SE> 30,515
<TOTAL-LIABILITIES-AND-EQUITY> 352,988
<INTEREST-LOAN> 15,337
<INTEREST-INVEST> 3,072
<INTEREST-OTHER> 346
<INTEREST-TOTAL> 18,755
<INTEREST-DEPOSIT> 6,416
<INTEREST-EXPENSE> 6,416
<INTEREST-INCOME-NET> 12,339
<LOAN-LOSSES> 1,092
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,356
<INCOME-PRETAX> 3,251
<INCOME-PRE-EXTRAORDINARY> 2,295
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,295
<EPS-PRIMARY> 14.21
<EPS-DILUTED> 14.21
<YIELD-ACTUAL> 7.97
<LOANS-NON> 13,431
<LOANS-PAST> 188
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,258
<CHARGE-OFFS> 1,264
<RECOVERIES> 461
<ALLOWANCE-CLOSE> 2,547
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
