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 June 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 June 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>
June 30, December 31,
1996 1995
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $15,455 $16,858
Federal funds sold 600 6,600
Securities:
Held to Maturity -
U.S. Government 32,209 31,955
State & municipal obligations 32,375 27,160
Other securities 9,968 10,955
_______ _______
74,552 70,070
Available-for-sale 301 444
_______ _______
Total securities 74,853 71,514
_______ _______
Loans:
Commercial, financial & agricultural 29,931 28,326
Residential mortgage 90,547 86,641
Commercial mortgage 61,292 62,038
Consumer 35,557 24,269
Other loans 9,386 7,815
Loans held for sale 1,288 955
_______ _______
Total loans 228,001 210,044
Less: Allowance for loan losses -2,352 -2,258
_______ _______
Loans - Net 225,649 207,786
_______ _______
Premises and equipment - Net 8,894 8,559
Accrued interest receivable 2,138 2,046
FHLB and Federal Reserve stock 1,558 1,406
Other assets 4,737 3,440
_______ _______
TOTAL ASSETS $333,884 $317,209
======= =======
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 51,949 $ 49,779
Interest bearing 240,090 227,272
_______ _______
Total Deposits 292,039 277,051
Borrowing from FHLB 1,002 1,013
Accrued interest payable and
other liabilities 2,180 1,748
_______ _______
TOTAL LIABILITIES 295,221 279,812
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued & Outstanding: 161,155
shares in 1996 & 161,155 in 1995 8,110 8,058
Capital Surplus 8,489 8,203
Retained Earnings 22,001 21,083
Net unrealized holding gains on
available-for-sale securities 63 53
_______ _______
TOTAL STOCKHOLDERS' EQUITY 38,663 37,397
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $333,884 $317,209
======= =======
Market Value of Securities $74,749 $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 Six months ended
June 30 June 30
(unaudited) (unaudited)
__________________ _________________
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $4,891 $5,016 $ 9,920 $ 9,967
Federal funds sold 108 183 285 323
Investment securities 1,032 1,047 2,066 2,033
_______ _______ _______ _______
Total Interest Income 6,031 6,246 12,271 12,323
Interest Expense - Deposits 2,079 2,274 4,202 4,338
_______ _______ _______ _______
Net interest income 3,952 3,972 8,069 7,985
Provision for loan losses 327 358 562 754
_______ _______ _______ _______
Net interest income after
provision for loan losses 3,625 3,614 7,507 7,231
_______ _______ _______ _______
Other Income:
Service charges on
deposit accounts 413 408 800 783
Trust Department income 304 260 650 524
Gains on sale of
Investment securities 0 0 0 0
Other operating income 413 329 734 596
_______ _______ _______ _______
Total other income 1,130 997 2,184 1,903
_______ _______ _______ _______
Other Expenses:
Salaries & employee benefits 1,779 1,559 3,783 3,325
Occupancy 648 490 1,146 932
Stationery, supplies & postage 179 120 293 270
FDIC expense 0 155 1 309
Other operating expenses 1,285 764 2,199 1,540
_______ _______ _______ _______
Total other expenses 3,891 3,088 7,422 6,376
_______ _______ _______ _______
Income before income taxes 864 1,523 2,269 2,758
Provisions for income taxes 231 455 667 823
_______ _______ _______ _______
NET INCOME $ 633 $1,068 $1,602 $1,935
_______ _______ _______ _______
Per Share:
NET INCOME $3.92 $6.63 $ 9.92 $12.03
_______ _______ _______ _______
DIVIDENDS DECLARED $0.00 $0.00 $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 SIX MONTHS ENDED JUNE 30
(Dollars in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 1,602 $ 1,935
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 573 543
Provision for loan losses 562 754
Increase (decrease) in taxes payable (275) 48
(Increase) decrease in interest receivable (92) 154
Increase (decrease) in interest payable (68) 106
(Increase) decrease in other assets (1,266) (456)
Increase (decrease) in other liabilities 775 104
Accretion/amortization securities (88) (53)
_______ _______
Total Adjustments 121 1,200
_______ _______
Net cash from operating activities 1,723 3,135
_______ _______
Cash flows from investing activities:
Proceeds from maturities of Investments 15,659 21,049
Investment purchases (20,045) (22,534)
New loans-net of principle payments (18,425) 2,076
Fixed asset purchases, net (908) (591)
(Increase) decrease in other real estate (38) (1,392)
_______ _______
Net cash provided (used)
by investing activities (23,757) (1,392)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 9,195 (12,988)
Proceeds from the sale of common stock 339 40
Proceeds from issuance of certificates of
deposit net of matured certificates 5,793 19,420
Dividends paid (685) (553)
Borrowing from FHLB (11) -
_______ _______
Net cash used by financing activities 14,631 5,919
Net increase (decrease) in cash &
cash equivalents (7,403) 7,662
Cash & cash equivalents - beginning of
period 23,458 17,627
_______ _______
Cash & cash equivalents-end of period $ 16,055 $ 25,289
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $4,270 $4,232
Income Taxes $ 942 $ 798
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 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 three month period
ended June 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
June 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 six months ended June 30, 1996, net cash from
Operating activities was $1,723,000 as compared to $3,135,000 for
the same period in 1995. The decrease of $1,412,000 was caused by an
increases in Other assets of $810,000 and a decrease in Net income of
$333,000 and an increase in Other liabilities of $671,000.
Cash flows from investing activities was ($23,757,000) versus
($1,392,000) for the six months ended June 30, 1995. The
loan portfolio increased by $18,425,000 for the first six months
of 1996 as compared to a slight decrease of $2,076,000 for the same
period in 1995. The investment portfolio had a net increase of
$4,386,000 for the first six months of 1996 as compared to an increase
of $1,485,000 for the first six months of 1995.
Cash flows from financial activities increased to $14,631,000
versus $5,919,000 in 1995. Major components contributing to this
change are a net increase of issuance of certificates over maturities
of $5,793,000 and a net increase in demand deposits, savings and short-
term borrowings of $9,195,000. 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 June 30, 1996, our 3 month gap was ($71,296,000) or .61, down
from March 31, 1996 figure ($78,742,000) and .58. The gap shrunk as short
term interest bearing liabilities declined by $7,000,000. Within short
term liabilities, certificates of deposit rose $5 million and savings
account rose $2.5 million, both being funded by $9 million from Royal Blue,
$1,5 million from N.O.W., and $4 million from money markets.
The one year gap is ($79,327,000) or .62, almost unchanged from March.
The 4 - 12 month gap is ($8,031,000) or .73, a bit higher than our
historic trend.
All short term gaps are a bit higher than our long term trends due to
segment changes. In June 1995, we were repricing $200 million of
liabilities, while in June 1996 we are repricing $211 million. In June
1995 we repriced $161 million of short term loans, while in June 1996 we
repriced $132 million. Borrowers have financed to longer periods during
the interest rate drops, while investors have held their money short. This
is one of the natural elements with which we must deal.
One to five year gap is positive at $97,133,000 or 4.ss as $12million
of loans moved into these buckets.
Forecast:
Our challenge will be to continue to attempt to move our depositors out
of the yield curve to help balance both short term and long term gaps.
Interest rate movement should remain minimal in the next quarter.
Economics indicators and most forecasts point toward a continued healthy
economy, perhaps slowing in growth just a bit. Cost of funds increase
should be limited to the cost of moving out the yield curve.
<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 $ 97,568 2,626 89,369 38,438
Investment portfolio 10,974 18,821 37,938 8,678
Federal funds sold 600
_______ ______ _______ ______
Interest-earning assets 109,142 21,447 127,307 47,116
_______ ______ _______ ______
Certificate of deposits 36,407 29,478 30,174
Savings 67,062
Royal blue money market 16,276
Now & Super Now 34,363
Money Market 26,330
_______ ______ ______ ______
Interest-bearing liabilities 180,438 29,478 30,174 0
_______ ______ ______ ______
Interest sensitivity gap (71,296) (8,031) 97,133 47,116
_______ ______ ______ ______
Interest-earning assets 109,142 21,447 127,307 47,116
Interest-bearing liabilities 180,438 29,478 30,174 0
_______ ______ _______ ______
Interest sensitivity gap $(71,296) (8,031) 97,133 47,116
_______ ______ _______ ______
RSA/RSL 0.61 0.73 4.22
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at June 30, 1996, under current requirements:
June 30, 1996
(dollars in thousands)
Tier 1 Capital $ 38,257
Tier 2 Capital $ 2,352
Total Qualifying Capital $ 40,609
Total Risk Adjusted Total Assets $304,117
Tier 1 Risk Based Capital Ratio 17.15%
Total Risk Based Capital Ratio 18.39%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 11.53%
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 June 30, 1996, total assets of the Corporation
were $333.9 million, up from $317.2 million at year end 1995.
Securities increased $4.3 million to $74.9 million, net
loans increased $17.8 million to $225.6 million, other assets
rose $1.3 million to $4.7 million, and cash and due from banks
decreased $1.4 million to $15.4 million. Federal Funds Sold of $.6
million decreased by $6.0 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 $15.0 million while other
liabilities increased slightly to $2.2 million.
For the first six months ending June 30, 1996, the
Corporation had $298.7 million average interest earning assets,
up $2.4 million from December 31, 1995. Average interest bearing
liabilities at June 30, 1996 were $236.9 million, up $.5 million
from the December 31, 1995 amount of $236.4 million. Net
interest income for the first six months of 1996 was $7.5
million, up from $7.2 million for the same period in 1995.
Interest income was $12.3 million, the same as the year earlier.
Annualized interest income on average earning assets was 8.24% for the
first six months of 1996, versus 8.33% for the first six months of 1995.
Annualized interest expense for the first six months of 1996 was 3.55%,
versus 3.64% for the first six months of 1995. Therefore, net
interest spread for the first six months of 1996 was 4.69%,
versus 4.69% for the same period in 1995.
Total other income increased to $2.2 million for the first
six months ending June 30, 1996, up $.3 million from the
year earlier period. There were no substantial or significant
changes in any categories.
Net income before taxes for the first six months of 1996 was $2.2
million, down 17.7% from the year earlier figure of $2.8 million.
Annualized return on average assets for the first six months of 1996 was
.98%, down from the year earlier 1.21%.
VI. Non-Performing & Past Due Loans
Other real estate owned consists of ten parcels of property;
five residences for $483,000 and five commercial properties for
$1,679,000. 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
6/30/96 6/30/95
_______ _______
Commercial, Financial & Agricultural $ 1,413 $ 4,353
Real Estate-Commercial 7,818 5,382
Real Estate-Residential 1,433 3,099
Consumer 0 0
_______ _______
Total Non-Performing Loans 10,664 12,844
_______ _______
Other Real Estate Owned-
Commercial 1,679 515
Residential 483 804
_______ _______
Total Other Real Estate Owned 2,162 1,319
_______ _______
Total Non-Performing Assets $12,826 $14,163
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 0 16
Real Estate-Commercial 0 0
Real Estate-Residential 0 0
Consumer 22 9
______ _____
Total Past Due - 90 Days or More $ 22 25
______ _____
RESTRUCTURED LOANS $ 0 $ 0
______ _____
<PAGE>
INDEX
CANANDAIGUA NATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets-June 30, 1996 and
December 31, 1995.
Condensed consolidated statements of income-six months
ended June 30, 1996 and 1995.
Condensed consolidated statements of cash flows-six
months ended June 30, 1996, and 1995.
Notes to condensed consolidated financial statements-
June 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)
August 14, 1996 George W. Hamlin, IV
Date George W. Hamlin, IV
President
August 14, 1996 Gregory S. MacKay
Date Gregory S. MacKay
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 15,455
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,886
<INVESTMENTS-CARRYING> 74,552
<INVESTMENTS-MARKET> 74,749
<LOANS> 228,001
<ALLOWANCE> 2,352
<TOTAL-ASSETS> 333,884
<DEPOSITS> 292,039
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,180
<LONG-TERM> 1,002
<COMMON> 8,110
0
0
<OTHER-SE> 30,553
<TOTAL-LIABILITIES-AND-EQUITY> 333,884
<INTEREST-LOAN> 9,920
<INTEREST-INVEST> 2,066
<INTEREST-OTHER> 285
<INTEREST-TOTAL> 12,271
<INTEREST-DEPOSIT> 4,202
<INTEREST-EXPENSE> 4,202
<INTEREST-INCOME-NET> 8,069
<LOAN-LOSSES> 562
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,422
<INCOME-PRETAX> 2,269
<INCOME-PRE-EXTRAORDINARY> 1,602
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,602
<EPS-PRIMARY> 9.92
<EPS-DILUTED> 9.92
<YIELD-ACTUAL> 8.24
<LOANS-NON> 12,826
<LOANS-PAST> 22
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,258
<CHARGE-OFFS> 620
<RECOVERIES> 152
<ALLOWANCE-CLOSE> 2,352
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
