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, 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 September 30, 1997 there were 161,009 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,
1997 1996
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $26,167 $19,173
Securities:
Held to Maturity -
U.S. Government 31,574 30,671
State & municipal obligations 31,813 30,320
Other securities 6,702 8,691
_______ _______
70,089 69,682
Available-for-sale 383 325
_______ _______
Total securities 70,472 70,007
_______ _______
Loans:
Commercial, financial & agricultural 33,139 27,503
Residential mortgage 95,077 101,349
Commercial mortgage 71,215 62,513
Consumer 79,662 54,709
Other loans 11,626 10,766
Loans held for sale 1,507 671
_______ _______
Total loans 292,226 257,511
Less: Allowance for loan losses -3,040 -2,675
_______ _______
Loans - Net 289,186 254,836
_______ _______
Premises and equipment - Net 10,610 9,214
Accrued interest receivable 2,059 2,003
FHLB and Federal Reserve stock 2,756 1,764
Other assets 7,048 3,626
_______ _______
TOTAL ASSETS $408,298 $360,623
======= =======
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 65,717 $ 57,287
Interest bearing 266,956 250,679
_______ _______
Total Deposits 332,673 307,966
Borrowing from FHLB 32,982 11,590
Accrued interest payable and
other liabilities 2,071 1,948
_______ _______
TOTAL LIABILITIES 367,726 321,504
_______ _______
Stockholders' Equity:
Common Stock-par value $50
Authorized, 240,000 shares
Issued: 162,208 shares in 1997
& 162,208 in 1996 8,110 8,110
Capital Surplus 8,487 8,489
Retained Earnings 24,350 22,616
Treasury stock at cost (1199 shares) -488 -174
Net unrealized holding gains on
available-for-sale securities 113 78
_______ _______
TOTAL STOCKHOLDERS' EQUITY 40,572 39,119
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $408,298 $360,623
======= =======
Market Value of Securities $73,521 $74,749
<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 September 30
(unaudited) (unaudited)
__________________ _________________
1997 1996 1997 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $6,459 $5,417 $18,733 $15,337
Federal funds sold/other 12 61 13 346
Investment securities 913 1,006 2,932 3,072
_______ _______ _______ _______
Total Interest Income 7,384 6,484 21,678 18,755
_______ _______ _______ _______
Interest Expense -Deposits 2,387 2,214 7,124 6,416
Borrowings 448 - 919 -
_______ _______ _______ _______
Total Interest expense 2,835 2,214 8,043 6,416
_______ _______ _______ _______
Net interest income 4,549 4,270 13,635 12,339
Provision for loan losses 260 530 725 1,092
_______ _______ _______ _______
Net interest income after
provision for loan losses 4,289 3,740 12,910 11,247
_______ _______ _______ _______
Other Income:
Service charges on
deposit accounts 547 421 1,354 1,221
Trust Department income 404 340 1,236 990
Loss on call of securities -24 -24
Other operating income 301 439 992 1,173
_______ _______ _______ _______
Total other income 1,252 1,176 3,582 3,360
_______ _______ _______ _______
Other Expenses:
Salaries & employee benefits 2,346 2,260 6,694 6,043
Occupancy 649 554 1,769 1,700
Stationery, supplies & postage 131 159 432 452
Other operating expenses 1,188 961 3,235 3,161
_______ _______ _______ _______
Total other expenses 4,314 3,934 12,130 11,356
_______ _______ _______ _______
Income before income taxes 1,227 982 4,362 3,251
Provisions for income taxes 160 289 1,017 956
_______ _______ _______ _______
NET INCOME $1,067 $ 693 $3,345 $2,295
_______ _______ _______ _______
Per Share:
NET INCOME $6.62 $4.29 $20.77 $14.21
_______ _______ _______ _______
DIVIDENDS DECLARED $4.75 $4.50 $5.25 $8.75
_______ _______ _______ _______
<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>
1997 1996
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 3,345 $ 2,295
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 1,147 884
Provision for loan losses 729 1,092
Increase (decrease) in taxes payable 46 (275)
(Increase) decrease in interest receivable (56) (179)
Increase (decrease) in interest payable (35) 14
(Increase) decrease in other assets (1,287) (418)
Increase (decrease) in other liabilities 4 413
Accretion/amortization (104) (137)
_______ _______
Total Adjustments 442 1,394
_______ _______
Net cash from operating activities 3,787 3,689
_______ _______
Cash flows from investing activities:
Purchase of FHLB and FRB stock (1,074)
Proceeds from maturities of Investments 29,955 29,945
Investment purchases (30,126) (29,148)
New loans-net of principle payments (35,079) (38,034)
Investment in subsidiary (678)
Fixed asset purchases, net (2,543) (1,352)
(Increase) decrease in other real estate (1,420) (108)
_______ _______
Net cash provided (used)
by investing activities (40,965) (38,697)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 24,584 19,269
Proceeds from the sale of common stock - 338
Proceeds from issuance of certificates of
deposit net of matured certificates 123 15,147
Dividends paid (1,611) (1,415)
Borrowing from FHLB 21,392 (17)
Purchase of treasury stock (316)
_______ _______
Net cash used by financing activities 44,172 33,322
Net increase (decrease) in cash &
cash equivalents 6,994 (1,686)
Cash & cash equivalents - beginning of
period 19,173 23,458
_______ _______
Cash & cash equivalents-end of period $ 26,167 $ 21,772
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $8,078 $6,402
Income Taxes $ 581 $1,527
<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, 1997
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, 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.
On June 28, 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125 Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. This statement provides accounting and reporting standards for
transfers and servicing of financial assets an extinguishment of
liabilities based on consistent application of a finincial-componets
approach that focuses on control. The Company adopted SFAS No. 125 on
January 1, 1997 and there was no material impact on the Company's financial
statements.
<PAGE>
The FASB issued SFAS No. 128 Earnings per Share in February 1997 effective
for periods ending after December 15, 1997, SFAS No. 128 was issued to
simplify the computation of Earnings Per Share (EPS) and to make the U.S.
standard more compatible with the EPS standards of other countries. Prior
period EPS will be restated after the effective date of this statement.
The adoption of SFAS No. 128 should have no effect on earnings per share as
the Company does not have a complex capital structure.
In June 1997, the FASB issued SFAS No. 129, Disclosure of Information about
Capital Structure. SFAS No. 129 establishes standards for disclosing
information about an entity's capital structure and is effective for
financial statements for periods ending after December 15, 1997. Adoption
of SFAS No. 129 is not expected to have an impact on the financial
condition or results of operations of the Company.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 131 establishes standards for reporting and displaying of
comprehensive income and its components in a full set of general purpose
financial statements. Comprhensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The impact of adopting
SFAS No. 130, which is effective for the Company in 1998, has not been
determined.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 requires publicly-held
companies to report financial and other related information about key
revenue-producing segments of the entity for which such information is
available and is utilized by the chief operation decision maker. Specific
information to be reported for individual segments includes profit or loss,
certain revenue and expense items and total assets. A reconciliation of
segment financial information to amounts reported in the financial
statements would be provided. SFAS No. 131 is effective for the Company in
1998 and the impact of adoption has not been determined.
<PAGE>
CANANDAIGUA NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
September 30, 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 nine months ended September 30, 1997, net cash from
Operating activities was $3,787,000 as compared to $3,689,000 for
the same period in 1996. The increase of $98,000 was caused by an
increases in Other assets of $869,000 and a increase in Net income of
$1,050,000 and an decrease in Other liabilities of $409,000.
Cash flows from investing activities was ($40,965,000) versus
($38,697,000) for the nine months ended September 30, 1996. The
loan portfolio increased by $35,079,000 for the first nine months
of 1997 as compared to $38,697,000 for the same period in 1996. The
investment portfolio had a net increase of $1,457,000 for the first nine
months of 1997 as compared to a decrease of $797,000 for the first nine
months of 1996.
Cash flows from financial activities increased to $44,172,000
versus $33,322,000 in 1996. Major components contributing to this
change are a net increase of deposits of $24,584,000 and short-
term borrowings of $21,392,000. 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 September 30, 1997, our 3 month gap was ($155,323,000) or .35.
This gap has increased from June 30 by $35 million, as loans decreased $10
milion, the investment portfolio decreased $5 million, and liabilities rose
$20 million. We are now repricing almost three times as many liabilities as
assets in the three-month range.
Four to twelve month gap is ($12,649,000) or .64 down $5 million from
June. Interest earning assets in this bucket rose $2.5 million, while
interest-bearing liabilities fell $7 million. The overall one-year gap is
($168,000,000) or .39 up from ($137,558,000) in June. We continue to market
long-term CD's and we are reviewing the sale of our CD's into the national
market. On the positive side, short-term interest rates appear to be
stable, and indications are that they will trend downward toward year-end.
<PAGE>
Interest Rate Sensitivity Gaps
As of September 30, 1997
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 78,752 3,726 143,404 61,899
Investment portfolio 6,417 18,556 34,831 10,285
_______ ______ _______ ______
Interest-earning assets 85,169 22,282 178,235 72,184
_______ ______ _______ ______
Certificate of deposits 52,879 34,931 24,099
Savings 68,631
Royal blue money market 26,681
Now & Super Now 34,373
Money Market 25,928
Borrowing from FHLB 32,000
_______ ______ ______ ______
Interest-bearing liabilities 240,492 34,931 24,099 0
_______ ______ ______ ______
Interest sensitivity gap (155,323)(12,649) 154,136 72,184
_______ ______ ______ ______
RSA/RSL 0.35 0.64 7.40
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at September 30, 1997, under current requirements:
September 30, 1997
(dollars in thousands)
Tier 1 Capital $ 40,213
Tier 2 Capital $ 3,040
Total Qualifying Capital $ 43,253
Total Risk Adjusted Total Assets $290,512
Tier 1 Risk Based Capital Ratio 13.84%
Total Risk Based Capital Ratio 14.89%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 9.85%
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
and August 1, 1996 was $5.25 versus $4.25 and $4.50 for the same period in
1996, respectively..
V. Results of Operations
As of September 30, 1997, total assets of the Corporation
were $408.3 million, up from $360.6 million at year end 1996.
Securities increased slightly by $.4 million to $70.5 million, net
loans increased $34.4 million to $289.2 million, other assets
rose $3.4 million to $7.0 million, and cash and due from banks
increased $7.0 million to $26.1 million. Loans were the contributing
factor to the asset growth as the Company has concentrated its efforts to
increase the indirect portfolio throughout the Rochester, NY market.
Total deposits for this period were up $24.7 million and borrowings
from FHLB were up $21.4 million as we look for alternative ways to fund our
loan portfolio. Other liabilities remained constant during this period at
$2.0 million.
For the first nine months ending September 30, 1997, the
Corporation had $345.7 million average interest earning assets,
up $37.6 million from December 31, 1996. Average interest bearing
liabilities at September 30, 1997 were $280.0 million, up $35.2 million
from the December 31, 1996 amount of $244.8 million. Net
interest income for the first nine months of 1997 was $13.6
million, up from $12.3 million for the same period in 1996.
Interest income was $21.7 million 1997 and $18.8 million for the same
period in 1996.
Annualized interest income on average earning assets was 8.36% for the
first nine months of 1997, versus 7.79% for the first nine months of 1996.
Annualized interest expense for the first nine months of 1997 was 3.80%,
versus 3.44% for the first nine months of 1996. Therefore, net
interest spread for the first nine months of 1997 was 4.56%,
versus 4.53% for the same period in 1996.
Total other income increased to $3.6 million for the first
nine months ending September 30, 1997, up $.2 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 1997 was $4.3
million, up 34.2% from the year earlier figure of $2.3 million. Annualized
return on average assets for the first nine months of 1997 was 1.18%, up
from the year earlier .89%.
VI. Non-Performing & Past Due Loans
Other real estate owned consists of seven parcels of property;
All seven are commercial properties for total of $2,560,000. 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 $1,477,000 for
the period ending 9/30/97 as compared to loans aggregating
$188,000 for the period 9/30/96. There were residential real
estate loans 90 days or more past due with a value of $384,000 for
the 9/30/97 period as compared to loans for $-0- for the same
period last year. Consumer loans totaling $202,000 for 9/30/97 and $24,000
for 9/30/96 were past due more than 90 days.
NON-PERFORMING ASSETS
in thousands
9/30/97 9/30/96
_______ _______
Commercial, Financial & Agricultural $ 1,333 $ 2,469
Real Estate-Commercial 2,302 7,939
Real Estate-Residential 725 1,719
Consumer 85 75
_______ _______
Total Non-Performing Loans 4,445 12,202
_______ _______
Other Real Estate Owned-
Commercial 2,560 909
Residential 320
_______ _______
Total Other Real Estate Owned 2,560 1,229
_______ _______
Total Non-Performing Assets $ 7,005 $13,431
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 264 135
Real Estate-Commercial 627 0
Real Estate-Residential 384 29
Consumer 202 24
______ _____
Total Past Due - 90 Days or More $1,477 188
______ _____
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, 1997 and
December 31, 1996.
Condensed consolidated statements of income-nine months
ended September 30, 1997 and 1996.
Condensed consolidated statements of cash flows-nine
months ended September 30, 1997, and 1996.
Notes to condensed consolidated financial statements-
September 30, 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)
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> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 26,167
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,139
<INVESTMENTS-CARRYING> 70,089
<INVESTMENTS-MARKET> 73,521
<LOANS> 292,226
<ALLOWANCE> 3,040
<TOTAL-ASSETS> 408,298
<DEPOSITS> 332,673
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,071
<LONG-TERM> 32,982
<COMMON> 8,110
0
0
<OTHER-SE> 32,462
<TOTAL-LIABILITIES-AND-EQUITY> 408,298
<INTEREST-LOAN> 18,733
<INTEREST-INVEST> 2,932
<INTEREST-OTHER> 13
<INTEREST-TOTAL> 21,678
<INTEREST-DEPOSIT> 7,124
<INTEREST-EXPENSE> 8,043
<INTEREST-INCOME-NET> 13,635
<LOAN-LOSSES> 725
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,130
<INCOME-PRETAX> 4,362
<INCOME-PRE-EXTRAORDINARY> 4,362
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,345
<EPS-PRIMARY> 20.77
<EPS-DILUTED> 20.77
<YIELD-ACTUAL> 8.36
<LOANS-NON> 7,005
<LOANS-PAST> 1,477
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,675
<CHARGE-OFFS> 605
<RECOVERIES> 245
<ALLOWANCE-CLOSE> 3,040
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
