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, 1997
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, 1997 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>
Mar 31, December 31,
1997 1996
_________ _________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $17,801 $19,173
Securities:
Held to Maturity -
U.S. Government 29,864 30,671
State & municipal obligations 31,258 30,320
Other securities 8,682 8,691
_______ _______
69,804 69,682
Available-for-sale 325 325
_______ _______
Total securities 70,129 70,007
_______ _______
Loans:
Commercial, financial & agricultural 26,282 27,503
Residential mortgage 102,869 101,349
Commercial mortgage 66,014 62,513
Consumer 60,531 54,709
Other loans 11,614 10,766
Loans held for sale 713 671
_______ _______
Total loans 268,023 257,511
Less: Allowance for loan losses -2,815 -2,675
_______ _______
Loans - Net 265,208 254,836
_______ _______
Premises and equipment - Net 9,454 9,214
Accrued interest receivable 2,380 2,003
FHLB and Federal Reserve stock 2,756 1,764
Other assets 4,289 3,626
_______ _______
TOTAL ASSETS $372,572 $360,623
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 55,102 $ 57,287
Interest bearing 257,345 250,679
_______ _______
Total Deposits 312,447 307,966
Borrowing from FHLB 18,552 11,590
Accrued interest payable and
other liabilities 2,355 1,948
_______ _______
TOTAL LIABILITIES 333,354 321,504
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued: 162,208 shares in 1997
and 162,208 in 1996 8,110 8,110
Capital Surplus 8,489 8,489
Retained Earnings 22,871 22,616
Treasury Stock at cost (550 shares) (330) (174)
Net unrealized holding gains on
available-for-sale securities 78 78
_______ _______
TOTAL STOCKHOLDERS' EQUITY 39,218 39,119
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $372,572 $317,209
======= =======
Fair Value of Securities $69,596 $69,770
<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)
_________________
1997 1996
______ ______
<S> <C> <C>
Interest Income:
Loans, including fees $ 6,100 $ 5,029
Federal funds sold and others 4 177
Investment securities 999 1,034
_______ _______
Total Interest Income 7,103 6,240
Interest Expense - Deposits 2,464 2,123
_______ _______
Net interest income 4,639 4,117
Provision for loan losses 333 235
_______ _______
Net interest income after
provision for loan losses 4,306 3,882
_______ _______
Other Income:
Service charges on
deposit accounts 399 387
Trust Department income 382 346
Gains on sale of
Investment securities 0 0
Other operating income 313 321
_______ _______
Total other income 1,094 1,054
_______ _______
Other Expenses:
Salaries & employee benefits 2,278 2,004
Occupancy 547 498
Stationery, supplies & postage 167 114
Other fees 52 166
Other operating expenses 763 749
_______ _______
Total other expenses 3,807 3,531
_______ _______
Income before income taxes 1,593 1,405
Provisions for income taxes 570 436
_______ _______
NET INCOME $1,023 $ 969
_______ _______
Per Share:
NET INCOME $ 6.33 $ 6.01
_______ _______
DIVIDENDS DECLARED $4.75 $4.25
_______ _______
<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>
1997 1996
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 1,023 $ 969
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 348 279
Provision for loan losses 333 235
Increase (decrease) in taxes payable 205 (54)
(Increase) decrease in interest receivable (377) (242)
Increase (decrease) in interest payable - (85)
(Increase) decrease in other assets (438) (281)
Increase (decrease) in other liabilities (46) 145
Accretion/amortization (27) (46)
_______ _______
Total Adjustments ( 2) (49)
_______ _______
Net cash from operating activities 1,021 920
_______ _______
Cash flows from investing activities:
Proceeds from maturities of Investments 9,442 9,396
Investment purchases (9,514) (10,328)
New loans-net of principle payments (10,705) (2,719)
Fixed asset purchases, net (588) (333)
(Increase) decrease in other real estate - (39)
Purchase of FRB & FHLB Stock (992)
Investment in subisidiary (555)
_______ _______
Net cash provided (used)
by investing activities (12,912) (4,023)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 4,702 17,215
Proceeds from issuance of certificates of
deposit net of matured certificates (221) (4,455)
Dividends paid (768) (685)
Borrowing from FHLB 6,962 (5)
Purchase of Treasury Stock 156
_______ _______
Net cash used by financing activities 10,519 12,070
Net increase (decrease) in cash &
cash equivalents (1,372) 8,967
Cash & cash equivalents - beginning of
period 19,173 23,458
_______ _______
Cash & cash equivalents-end of period $ 17,801 $ 32,425
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $2,464 $2,038
Income Taxes $ 365 $ 345
<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, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1997. 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, 1996.
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 1997
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, 1997, net cash from
Operating activities was $1,021,000 as compared to $920,000 for
the same period in 1996. The increase of $101,000 was caused by an
increases in Other assets, Net income and taxes payable of $157,000,
$54,000 and $259,000, respectively.
Cash flows from investing activities was ($12,912,000) versus
($4,023,000) for the three months ended March 31, 1997 and 1996,
respectively. The loan portfolio increased by $10,705,000 for the first
three months of 1997 as compared to an increase of $2,719,000 for the same
period in 1996. The investment portfolio had a net increase of
$72,000 for the first three months of 1997 as compared to a net
increase of $932,000 for the first three months of 1996.
Cash flows from financial activities was $10,519,000 in 1997
versus $12,070,000) in 1996. Major components contributing to this
change are a net increase of $4,702,000 in demand deposits, savings and
short-term borrowings and increase borrowing from FHLB of $6,962,000. 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 March 31, 1997, our three month gap was ($114,223,000) or .50.
While the monetary amount has grown by $13 million, the gap percentage of
.50 is unchanged. Interest earning assets in the first three months grew
to $104 million from $99.5 million, while interest bearing liabilities rose
to $218 million from $201 million. The primary liability change was in
FHLB borrowings, which continue to increase as our indirect portfolio loans
grow.
The 4-12 month gap is $4.9 million, or .84, a slight decrease from
February. In this bucket, assets grew $2 million, while liabilities fell
$1 million. The overall 1 year gap is $119,174 million, or .52. The
dollar gap continues to grow with our loan commitments. We will have to
consider longer term funding plans for the indirect portfolio if the gap
continues to widen.
Forecast:
Interest rates have moved slightly upward since our last review.
While inflation has not emerged as a major concern, advances in GDP have
raised some concern. The recent tightening by the Fed increased both our
short term asset and liability rates, and we continue to monitor our spread
for signs of weakness. These recent increases have been managed so that
our spreads continue to be strong. As in our last report, we will continue
to actively seek longer term liabilities to mor properly balance our
position.
<PAGE>
Interest Rate Sensitivity Gaps
As of March 31, 1997
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 97,004 2,416 123,616 52,440
Investment portfolio 7,078 23,286 32,008 10,383
_______ ______ _______ ______
Interest-earning assets 104,082 25,702 155,624 62,823
_______ ______ _______ ______
Certificate of deposits 52,725 30,653 27,083
Savings 63,401
Royal blue money market 21,026
Now & Super Now 36,294
Money Market 27,259
Borrowing from FHLB 17,600
_______ ______ ______ ______
Interest-bearing liabilities 218,305 30,653 27,083 0
_______ ______ ______ ______
Interest sensitivity gap (114,223) (4,951) 128,541 62,823
_______ ______ ______ ______
RSA/RSL 0.48 .84 5.75
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at March 31, 1997, under current requirements:
March 31, 1997
(dollars in thousands)
Tier 1 Capital $ 38,865
Tier 2 Capital $ 2,815
Total Qualifying Capital $ 41,680
Total Risk Adjusted Total Assets $261,432
Tier 1 Risk Based Capital Ratio 14.87%
Total Risk Based Capital Ratio 15.94%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 10.44%
The Corporation's continued positive earnings trends are
evidenced by its very strong capital position.
IV. DIVIDENDS
The semi-annual dividend payable February 1, 1997 was $4.75
versus $4.25 for the same period in 1996.
V. Results of Operations
As of March 31, 1997, total assets of the Corporation
were $372.6 million, up from $360.6 million at year end 1996.
Securities had a minute increased of $.1 million to $69.8 million. Net
loans increased $10.4 million to $265.2 million, other assets
rose $.7 million to $4.3 million, and cash and due from banks
decreased $1.4 million to $17.8 million. Loans to consumers through
our indirect portfolio was the main factor contributing to asset growth.
Total deposits for this period were up $4.5 million and borrowings
from FHLB were up $7.0 million to $18.6 million. Other liabilities grew
by $4.1 million to $2.4 million.
For the first three months ending March 31, 1997, the
Corporation had $334.9 million average interest earning assets,
up $26.8 million from December 31, 1996. Average interest bearing
liabilities at March 31, 1997 were $268.2 million, up $23.4 million
from the December 31, 1996 amount of $244.8 million. Net
interest income for the first three months of 1997 was $4.3
million, up from $3.9 million for the same period in 1996.
Interest income was $7.1 million, up $.9 million from the year
earlier $6.2 million. Annualized interest income on average
earning assets was 8.48% for the first three months of 1997,
versus 8.35% for the first three months of 1996. Annualized
interest expense for the first three months of 1997 was 3.67%,
versus 3.57% for the first three months of 1996. Therefore, net
interest spread for the first three months of 1997 was 4.81%,
versus 4.78% for the same period in 1996. Management is pleased
that spreads have marginally increased.
Total other income remained the same at $1.1 million for the
First three months ending March 31, 1997. 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 1997 was $1.6 million, up 14.3% from the year earlier figure
of $1.4 million. Annualized return on average assets for the
first three months of 1997 was 1.14%, down slightly from the year
earlier 1.19%.
Management is quite pleased with the results of the
Corporation. 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.
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
3/31/97 3/31/96
_______ _______
Commercial, Financial & Agricultural $ 1,579 $ 1,602
Real Estate-Commercial 4,812 6,992
Real Estate-Residential 988 1,980
Consumer 74 0
Total Non-Performing Loans 7,453 10,574
_______ _______
Other Real Estate Owned-
Commercial 852 1,819
Residential 275 344
_______ _______
Total Other Real Estate Owned 1,127 2,163
_______ _______
Total Non-Performing Assets $ 8,580 $12,737
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 0 38
Real Estate-Commercial 0 0
Real Estate-Residential 0 68
Consumer 10 15
______ _____
Total Past Due - 90 Days or More $ 10 121
______ _____
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, 1997 and
December 31, 1996.
Condensed consolidated statements of income-three months
ended March 31, 1997 and 1996.
Condensed consolidated statements of cash flows-three
months ended March 31, 1997, and 1996.
Notes to condensed consolidated financial statements-
March 31, 1997.
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 12, 1997
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)
May 14, 1997 George W. Hamlin, IV
Date George W. Hamlin, IV
President
May 14, 1997 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-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 17,523
<INT-BEARING-DEPOSITS> 278
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,081
<INVESTMENTS-CARRYING> 69,804
<INVESTMENTS-MARKET> 72,437
<LOANS> 268,023
<ALLOWANCE> 2,815
<TOTAL-ASSETS> 372,572
<DEPOSITS> 312,447
<SHORT-TERM> 992
<LIABILITIES-OTHER> 2,355
<LONG-TERM> 17,560
<COMMON> 8,110
0
0
<OTHER-SE> 31,108
<TOTAL-LIABILITIES-AND-EQUITY> 372,572
<INTEREST-LOAN> 6,100
<INTEREST-INVEST> 999
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 7,103
<INTEREST-DEPOSIT> 2,464
<INTEREST-EXPENSE> 2,464
<INTEREST-INCOME-NET> 4,639
<LOAN-LOSSES> 333
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,807
<INCOME-PRETAX> 1,593
<INCOME-PRE-EXTRAORDINARY> 570
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 570
<EPS-PRIMARY> 6.33
<EPS-DILUTED> 6.33
<YIELD-ACTUAL> 8.48
<LOANS-NON> 7,453
<LOANS-PAST> 10
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,675
<CHARGE-OFFS> 266
<RECOVERIES> 73
<ALLOWANCE-CLOSE> 2,815
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
