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, 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 June 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>
June 30, December 31,
1997 1996
______________ _____________
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks $18,764 $19,173
Securities:
Held to Maturity -
U.S. Government 31,164 30,671
State & municipal obligations 31,547 30,320
Other securities 8,423 8,691
_______ _______
71,134 69,682
Available-for-sale 383 325
_______ _______
Total securities 71,517 70,007
_______ _______
Loans:
Commercial, financial & agricultural 30,093 27,503
Residential mortgage 103,951 101,349
Commercial mortgage 63,782 62,513
Consumer 71,241 54,709
Other loans 12,573 10,766
Loans held for sale 2,019 671
_______ _______
Total loans 283,659 257,511
Less: Allowance for loan losses -2,950 -2,675
_______ _______
Loans - Net 280,709 254,836
_______ _______
Premises and equipment - Net 9,931 9,214
Accrued interest receivable 2,281 2,003
FHLB and Federal Reserve stock 2,756 1,764
Other assets 7,328 3,626
_______ _______
TOTAL ASSETS $393,286 $360,623
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non-interest bearing $ 65,417 $ 57,287
Interest bearing 250,694 250,679
_______ _______
Total Deposits 316,111 307,966
Borrowing from FHLB 34,378 11,590
Accrued interest payable and
other liabilities 2,343 1,948
_______ _______
TOTAL LIABILITIES 352,832 321,504
_______ _______
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 8,489 8,489
Retained Earnings 24,126 22,616
Treasury stock at cost (1199 shares) -384 -174
Net unrealized holding gains on
available-for-sale securities 113 78
_______ _______
TOTAL STOCKHOLDERS' EQUITY 40,454 39,119
_______ _______
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $393,454 $360,623
======= =======
Market Value of Securities $74,320 $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 Six months ended
June 30 June 30
(unaudited) (unaudited)
__________________ _________________
1997 1996 1997 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $6,174 $4,891 $12,274 $ 9,920
Federal funds sold 1 108 1 285
Investment securities 1,016 1,032 2,019 2,066
_______ _______ _______ _______
Total Interest Income 7,191 6,031 14,294 12,271
_______ _______ _______ _______
Interest Expense -Deposits 2,455 2,079 4,737 4,202
Borrowings 289 - 471 -
_______ _______ _______ _______
Total Interest expense 2,744 2,079 5,208 4,202
_______ _______ _______ _______
Net interest income 4,447 3,952 9,086 8,069
Provision for loan losses 132 327 465 562
_______ _______ _______ _______
Net interest income after
provision for loan losses 4,315 3,625 8,621 7,507
_______ _______ _______ _______
Other Income:
Service charges on
deposit accounts 408 413 807 800
Trust Department income 450 304 832 650
Other operating income 378 413 691 734
_______ _______ _______ _______
Total other income 1,236 1,130 2,330 2,184
_______ _______ _______ _______
Other Expenses:
Salaries & employee benefits 2,070 1,779 4,348 3,783
Occupancy 573 648 1,120 1,146
Stationery, supplies & postage 134 179 301 293
Other operating expenses 1,232 1,285 2,047 2,200
_______ _______ _______ _______
Total other expenses 4,009 3,891 7,816 7,422
_______ _______ _______ _______
Income before income taxes 1,542 864 3,135 2,269
Provisions for income taxes 287 231 857 667
_______ _______ _______ _______
NET INCOME $1,255 $ 633 $2,278 $1,602
_______ _______ _______ _______
Per Share:
NET INCOME $7.78 $3.92 $14.12 $9.92
_______ _______ _______ _______
DIVIDENDS DECLARED $0.00 $0.00 $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 SIX MONTHS ENDED JUNE 30
(Dollars in thousands)
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 2,278 $ 1,602
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 704 573
Provision for loan losses 469 562
Increase (decrease) in taxes payable 384 (275)
(Increase) decrease in interest receivable (278) (92)
Increase (decrease) in interest payable 21 (68)
(Increase) decrease in other assets (1,221) (1,266)
Increase (decrease) in other liabilities (10) 775
Accretion/amortization (70) (88)
_______ _______
Total Adjustments 1 121
_______ _______
Net cash from operating activities 2,277 1,723
_______ _______
Cash flows from investing activities:
Purchase of FHLB and FRB stock (1,198)
Proceeds from maturities of Investments 17,982 15,659
Investment purchases (18,887) (20,045)
New loans-net of principle payments (26,342) (18,425)
Investment in subsidiary (555)
Fixed asset purchases, net (1,421) (908)
(Increase) decrease in other real estate (2,220) (38)
_______ _______
Net cash provided (used)
by investing activities (32,641) (23,757)
_______ _______
Cash flows from financing activities:
Net increase (decrease) in demand, savings
and short term deposits 13,679 9,195
Proceeds from the sale of common stock - 339
Proceeds from issuance of certificates of
deposit net of matured certificates (5,534) 5,793
Dividends paid (768) (685)
Borrowing from FHLB 22,788 (11)
Purchase of treasury stock (210)
_______ _______
Net cash used by financing activities 29,955 14,631
Net increase (decrease) in cash &
cash equivalents 409 (7,403)
Cash & cash equivalents - beginning of
period 19,173 23,458
_______ _______
Cash & cash equivalents-end of period $ 18,764 $ 16,055
======= =======
Supplement of disclosures of cash flow information:
Cash paid during the period for:
Interest $5,229 $4,232
Income Taxes $ 581 $ 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, 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 three month period
ended June 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
June 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 six months ended June 30, 1997, net cash from
Operating activities was $2,277,000 as compared to $1,723,000 for
the same period in 1996. The increase of $554,000 was due to the increase
in net income.
Cash flows from investing activities was ($32,641,000) versus
($23,757,000) for the six months ended June 30, 1996. The
loan portfolio increased by $26,342,000 for the first six months
of 1997 as compared to $18,425,000 for the same period in 1996. The
investment portfolio had a net increase of $2,103,000 for the first six
months of 1997 as compared to an increase of $4,386,000 for the first six
months of 1996.
Cash flows from financial activities increased to $29,955,000
versus $14,631,000 in 1996. Major components contributing to this
change are a net increase in demand deposits of $4,484,000 and increase
borrowing from FHLB of $22,788,000 to fund the Company's growing loan
porfolio. 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, 1997, our 3 month gap was ($120,246,000) or .46. This
gap has increased from March 31 by $6 million, while the ratio is down to
.46 from .48. Interest earning assets declined by $4 million, while
interest-bearing liabilities rose $2 million. Our FHLB borrowings grew to
$33 million from $17 million as $15 million of various deposit products
were removed from the 0-3 month bracket.
Four to twelve month gap is .53 down from .84 in march or in monthly
terms, the gap moved from($4,950,000) in march to ($17,312,000) in June.
Interest earning assets in this bucket rose $6 million, while interest-
bearing liabilities rose $7 million. The overall one-year gap is
($137,558,000) or .47. We will begin to review the process of engaging
longer-term borrowing to fund our indirect portfolio. We will continue to
market and advertise longer-term Certificate of Deposit products. We will
closely monitor short-term interest rate changes.
Forecast:
Interest rates have dropped again as most second quarter financing was
done again in the equity markets. Combined with strong economic data and
relatively mild and positive comments from Chairman Greenspan, the fixed
income markets continue to rise. The lack of quality paper has begun to
bring borrowers to the marketplace. We will investigate again the cost of
longer-term debt or Certificate of Deposit funding from various sources
outside our natural marketplace.
<PAGE>
Interest Rate Sensitivity Gaps
As of June 30, 1997
(Dollars in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years
______ ______ ______ ______
Loans $ 88,892 2,450 138,627 53,689
Investment portfolio 11,610 17,386 32,887 12,195
_______ ______ _______ ______
Interest-earning assets 100,502 19,836 171,514 65,884
_______ ______ _______ ______
Certificate of deposits 43,345 37,148 25,653
Savings 65,558
Royal blue money market 19,106
Now & Super Now 35,044
Money Market 24,295
Borrowing from FHLB 33,400
_______ ______ ______ ______
Interest-bearing liabilities 220,748 37,148 25,653 0
_______ ______ ______ ______
Interest sensitivity gap (120,246)(17,312) 145,861 65,884
_______ ______ ______ ______
RSA/RSL 0.46 0.53 6.69
_______ ______ _______
<PAGE>
III. Capital Resources
The table below illustrates the Corporation's regulatory
capital ratio at June 30, 1997, under current requirements:
June 30, 1997
(dollars in thousands)
Tier 1 Capital $ 40,077
Tier 2 Capital $ 2,950
Total Qualifying Capital $ 43,027
Total Risk Adjusted Total Assets $280,994
Tier 1 Risk Based Capital Ratio 14.26%
Total Risk Based Capital Ratio 15.11%
Leverage Ratio (Tier 1 capital divided
by Total Assets less Goodwill) 10.67%
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 June 30, 1997, total assets of the Corporation
were $393.3 million, up from $360.6 million at year end 1996.
Securities increased $1.5 million to $71.5 million, net
loans increased $25.9 million to $280.7 million, other assets
rose $3.7 million to $7.3 million, and cash and due from banks
decreased $.4 million to $18.8 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 $8.1 million while other
liabilities increased slightly to $2.3 million. Borrowings from FHLB were
$34.4 as of June 30, 1997, an increase of $22.8 million. The borrowings
were used to fund the loan portfolio.
For the first six months ending June 30, 1997, the
Corporation had $340.4 million average interest earning assets,
up $32.3 million from December 31, 1996. Average interest bearing
liabilities at June 30, 1997 were $275.1 million, up $30.3 million
from the December 31, 1996 amount of $244.8 million. Net
interest income for the first six months of 1997 was $8.6
million, up from $7.5 million for the same period in 1996.
Interest income was $14.3 million, up from $12.3 million.
Annualized interest income on average earning assets was 8.40% for the
first six months of 1997, versus 8.24% for the first six months of 1996.
Annualized interest expense for the first six months of 1997 was 3.79%,
versus 3.55% for the first six months of 1996. Therefore, net
interest spread for the first six months of 1997 was 4.61%,
versus 4.69% for the same period in 1996.
Total other income increased to $2.3 million for the first
six months ending June 30, 1997, up $.1 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 1997 was $3.1
million, up 38.2% from the year earlier figure of $2.3 million. Annualized
return on average assets for the first six months of 1997 was 1.24%, down
from the year earlier .98%.
VI. Non-Performing & Past Due Loans
Other real estate owned consists of ten parcels of property;
two residences for $202,000 and eight commercial properties for
$2,913,000. All properties have been recently reappraised at
values higher than the loan balances.
Consumer loans totaling $48,000 were past due 90 days for June 30, 1997
and $22,000 for June 30, 1996.
NON-PERFORMING ASSETS
in thousands
6/30/97 6/30/96
_______ _______
Commercial, Financial & Agricultural $ 1,672 $ 1,413
Real Estate-Commercial 2,645 7,818
Real Estate-Residential 574 1,433
Consumer 73 0
_______ _______
Total Non-Performing Loans 4,964 10,664
_______ _______
Other Real Estate Owned-
Commercial 2,913 1,679
Residential 202 483
_______ _______
Total Other Real Estate Owned 3,115 2,162
_______ _______
Total Non-Performing Assets $ 8,079 $12,826
PAST DUE 90 DAYS OR MORE
Commercial, Financial & Agricultural $ 0 0
Real Estate-Commercial 0 0
Real Estate-Residential 0 0
Consumer 48 22
______ _____
Total Past Due - 90 Days or More $ 48 22
______ _____
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, 1997 and
December 31, 1996.
Condensed consolidated statements of income-six months
ended June 30, 1997 and 1996.
Condensed consolidated statements of cash flows-six
months ended June 30, 1997, and 1996.
Notes to condensed consolidated financial statements-
June 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, 1997 George W. Hamlin, IV
Date George W. Hamlin, IV
President
August 14, 1997 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-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 18,764
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,139
<INVESTMENTS-CARRYING> 74,273
<INVESTMENTS-MARKET> 74,320
<LOANS> 283,659
<ALLOWANCE> 2,950
<TOTAL-ASSETS> 393,286
<DEPOSITS> 316,111
<SHORT-TERM> 33,400
<LIABILITIES-OTHER> 2,343
<LONG-TERM> 978
<COMMON> 8,110
0
0
<OTHER-SE> 32,344
<TOTAL-LIABILITIES-AND-EQUITY> 393,286
<INTEREST-LOAN> 12,274
<INTEREST-INVEST> 2,019
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 14,294
<INTEREST-DEPOSIT> 4,737
<INTEREST-EXPENSE> 5,208
<INTEREST-INCOME-NET> 9,086
<LOAN-LOSSES> 465
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,816
<INCOME-PRETAX> 3,135
<INCOME-PRE-EXTRAORDINARY> 2,278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,278
<EPS-PRIMARY> 14.12
<EPS-DILUTED> 14.12
<YIELD-ACTUAL> 8.61
<LOANS-NON> 8,079
<LOANS-PAST> 48
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,675
<CHARGE-OFFS> 374
<RECOVERIES> 184
<ALLOWANCE-CLOSE> 2,950
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
