UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-15366
CORTLAND FIRST FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
New York 16-1276885
(State or other jurisdiction of (IRS Employer I.D. #)
incorporation or organization)
65 Main Street, Cortland, New York 13045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (607) 756-2831
Indicate by check mark whether the Registrant (1) has filed all reports 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
The number of shares outstanding of the registrant's common stock on September
30, 1998: Common Stock, $1.6667 Par Value -- 1,969,776 shares.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CORTLAND FIRST FINANCIAL CORPORATION
Condensed Consolidated Balance Sheets
(000's Omitted)
September 30, 1998 December 31, 1997
(Unaudited) (Note A)
ASSETS
Cash and Due From Banks $ 9,322 $ 10,139
Federal Funds Sold 3,700 1,100
Total Cash and Cash Equivalents 13,022 11,239
Investment Securities
Held to Maturity 3,154 2,435
Available for Sale 86,697 85,821
Total Investment Securities
(Fair Value 89,909 & 88,301, 89,851 88,256
respectively)
Loans (Net of Unearned Discount of
(2,441 & 3,072) 119,104 113,173
Allowance for Possible Loan Losses (1,286) (1,240)
Net Loans 117,818 111,933
Bank Premises, Furniture, and Equipment 3,268 3,516
Other Real Estate 315 275
Other Assets 4,151 4,150
TOTAL ASSETS $228,425 $219,369
LIABILITIES
Non-Interest Bearing Deposits $ 26,385 24,509
Interest Bearing Deposits 173,331 167,701
Total Deposits 199,716 192,210
Accrued Int, Taxes, & Other Liabilities 1,638 1,271
Accrued Post-Retirement Benefits 947 882
TOTAL LIABILITIES 202,301 194,363
SHAREHOLDERS' EQUITY
Common Stock (par value $1.6667)
2,016,000 shares issued;
1,969,776 shares outstanding 3,360 3,360
Surplus 3,360 3,360
Undivided Profits 19,647 18,812
Accumulated other comprehensive income 823 540
Treasury Stock, at cost; 46,224 shares (1,066) (1,066)
TOTAL SHAREHOLDERS' EQUITY 26,124 25,006
TOTAL LIABILITIES & SHAREHOLDERS' $228,425 $219,369
EQUITY
The accompanying notes are an integral part of the financial statements.
CORTLAND FIRST FINANCIAL CORPORATION
Condensed Consolidated Statements of Income
(000's Omitted)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Interest Income:
Interest & fees on loans $2,624 $2,639 $ 7,772 $ 7,758
Interest on investment securities 1,222 1,353 3,719 4,040
Interest on Federal Funds sold 123 55 314 237
TOTAL INTEREST INCOME $3,969 $4,047 $11,805 $12,035
Interest Expense:
Interest on deposits 1,606 1,627 4,841 4,886
NET INTEREST INCOME $2,363 $2,420 $ 6,964 $ 7,149
Provision for loan losses 35 105 160 285
INTEREST INCOME AFTER PROV
FOR LOSSES $2,328 $2,315 $ 6,804 $ 6,864
Gain on Sale of Securities 35 115 35 115
Other Income 491 425 1,361 1,189
TOTAL OPERATING INCOME $2,854 $2,855 $ 8,200 $ 8,168
Non-interest expenses 2,118 1,904 5,975 5,477
INCOME BEFORE INC TAXES $ 736 $ 951 $ 2,225 $ 2,691
Income Taxes 197 252 563 717
NET INCOME $ 539 $ 699 $ 1,662 $ 1,974
Net Income per Common Share - Basic $.27 $.35 $.84 $.99
Weighted average shares
outstanding 1,969,776 1,977,353 1,969,776 2,002,976
The accompanying notes are an integral part of the financial statements.<PAGE>
CORTLAND FIRST FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
(000's Omitted)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Net Income $ 539 $ 699 $1,662 $1,974
Other Comprehensive Income
net of taxes: Unrealized net
gain (loss) on securities 377 243 283 72
Comprehensive Income $ 916 $ 942 $1,945 $2,046
The accompanying notes are an integral part of the financial statements.<PAGE>
CORTLAND FIRST FINANCIAL CORPORATION
Consolidated Statements of Changes in Stockholders' Equity
(000's Omitted)
(Unaudited)
Accumulated
Other Comp-
Nine Months Ended Common Undivided rehensive Treasury
Sept. 30, 1998 and 1997 Stock Surplus Profits Income Stock Total
Balance at Dec.31,1996 $3,360 $3,360 $18,283 $ 375 - $25,378
Net Income 1,974 1,974
Cash Dividend Declared (839) (839)
Stock Repurchase $(1,119) (1,119)
Net Unrealized Gains on
Securities 72 72
Balance at Sept.30,1997 $3,360 $3,360 $19,418 $ 447 $(1,119) $25,466
Balance at Dec.31,1997 $3,360 $3,360 $18,812 $ 540 $(1,066) $25,006
Net Income 1,662 1,662
Cash Dividend Declared (827) (827)
Net Unrealized Gains on
Securities 283 283
Balance at Sept.30,1998 $3,360 $3,360 $19,647 $ 823 $(1,066) $26,124
The accompanying notes are an integral part of the financial statements.
<PAGE>
CORTLAND FIRST FINANCIAL CORPORATION
Consolidated Statements of Cash Flow
(000's OMITTED)
(Unaudited)
Nine Months Ended September 30,
OPERATING ACTIVITIES 1998 1997
Net Income $ 1,662 $ 1,974
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 160 285
Provision for depreciation 323 338
Provision (Benefit) for deferred income taxes (189) (64)
Amortization of investment security premiums, 212 208
net
Decrease in interest receivable (213) (132)
Decrease (Increase) in other assets 172 (632)
(Decrease) Increase in interest payable (7) 2
Increase in other liabilities 439 328
Loss on disposal of fixed assets 9
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,559 2,316
INVESTING ACTIVITIES
Proceeds from maturities of investment 21,090 13,930
securities
Proceeds from the sales of investments 1,977 13,278
secuities
Purchase of investment securities (24,402) (32,824)
Net increase in loans (6,045) (2,447)
Purchase of premises and equipment, net (75) (531)
NET CASH USED BY INVESTING ACTIVITIES (7,455) (8,594)
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW & savings 7,827 (3,014)
Net (decrease) increase of certificates of (321) 5,098
deposits
Cash dividends (827) (839)
Treasury Stock Purchases - (1,119)
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,679 126
INCREASE (DECREASE) IN CASH AND CASH 1,783 (6,152)
EQUIVALENTS
Cash and cash equivalents at beginning of 11,239 15,400
year
CASH AND CASH EQUIVALENTS AT END OF $13,022 $ 9,248
PERIOD
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and short term $ 4,848 $ 4,883
borrowings
Income taxes 495 724
Non Cash Investing Activities:
Change in net unrealized gain (losses)
on investment securities 472 (120)
The accompanying notes are an integral part of the financial statements.<PAGE>
CORTLAND FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The foregoing financial statements are unaudited; however, in the opinion
of Management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. A summary of the Corporation's significant accounting policies
is set forth in Note 1 to the Consolidated Financial Statements in the
Corporation's Annual Report to Shareholders on Form 10-K, for the year
ended December 31, 1997. The balance sheet at December 31, 1997, has been
derived from the audited financial statements at that date.
B. On July 13, 1998 the Company announced that they had agreed to merge with
Oneida Valley Bancshares, Inc. to create an independent bank holding
company named Alliance Financial Corporation to serve the community banking
market of Central New York State. The Bank and Oneida Valley National Bank
will also merge, taking the name Alliance Bank, N.A. The merger is
expected to close in the fourth quarter of 1998, subject to the approval of
the shareholders of both companies, as well as regulatory approvals. The
combined market will cover the Central New York region and will allow the
new company to offer its customers enhanced products and services through
its 16 branches located in Cortland, Broome, Madison, Onondaga, and Oneida
Counties.
C. Effective January 1, 1998, the Bank adopted Statement of Financial
Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income." This
pronouncement requires the Bank to report the effects of unrealized
investment holding gains or losses on comprehensive income.
D. Investment Securities
September 30, 1998
(000's Omitted)
Available for Sale Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $32,033 $ 1,000
Obligations of State & Political
subdivisions 29,877 2,154
Other debt securities 4,024 0
Mortgage backed securities 20,763 0
TOTAL INVESTMENT SECURITIES $86,697 $ 3,154
<PAGE>
December 31, 1997
(000's Omitted)
Available for Sale Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $35,750 $ 999
Obligations of State & Political
subdivisions 28,274 1,436
Other debt securities 865 0
Mortgage backed securities 20,932 0
TOTAL INVESTMENT SECURITIES $85,821 $ 2,435
E. Allowance for Possible Loan Loss
September 30, 1998 September 30, 1997
(000's Omitted)
Balance at January 1 $ 1,240 $ 1,271
Provision for the period 160 285
Recoveries on loans 50 50
Sub Total 1,450 1,606
Less loans charged off (164) (365)
Balance at June 30, $ 1,286 $ 1,241
The appropriateness of the allowance for loan losses is determined by
quarterly detailed review of the loan portfolio.
<PAGE>
PART 1.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amount in thousands of dollars unless otherwise indicated)
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amount in thousands of dollars unless otherwise indicated)
The purpose of this discussion is to provide the reader with information
designed to understand the financial statements of Cortland First Financial
Corporation included herewith and to provide information as to material
events or changes which affected the financial condition or results of
operations since the last reporting period. Cortland First Financial
Corporation (the "Company") is a bankholding company, with First National Bank
of Cortland (the "Bank") being its sole subsidiary.
The financial condition and operating results of the Company are
largely dependent on the Bank, its primary investment. First National Bank of
Cortland is an independent community bank with offices in Cortland, southern
Onondaga, and northern Broome counties.
The primary regulator of Cortland First Financial Corporation is the Federal
Reserve Bank of New York in New York City, while its subsidiary, First National
Bank of Cortland, is regulated by the Office of the Comptroller of the Currency
in Washington, DC.
In June of 1998, the Financial Accounting Standards Account Board (FASB) issued
FAS No. 133. This statement requires an entity to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 30, 1999. Since the Company does not have any
derivative instruments or hedges, management believes there will be no effect on
the Company.
On July 13, 1998 Cortland First Financial Corporation announced that they had
agreed to merge with Oneida Valley Bancshares, Inc. to create an independent
bank holding company named Alliance Financial Corporation to serve the community
banking market of Central New York State. First National Bank of Cortland and
Oneida Valley National Bank will also merge,taking the name Alliance Bank, N.A.
The merger is expected to close in the fourth quarter of 1998, subject to the
approval of the shareholders of both companies. The Companies have received
approval of the Holding Company merger from the Federal Reserve Bank and The
Office of the Comptroller of the Currency has approved the merger of the two
Banks. The combined market will cover the Central New York region and will allow
the new company to offer its customers enhanced products and services through
16 branches located in Cortland,Broome,Madison,Onondaga and Oneida
Counties.
Recent Developments
In late October and early November 1998, CNY Financial Corporation, the
holding company for Cortland Savings Bank,approached Cortland First Financial
Corporation and Oneida Valley Bancshares, Inc., expressing a contingent
interest in aquiring one or both institutions. CNY Financial Corporation's
expressions of interest were contingent upon, among other things,the parties'
willingness to abandon the pending merger described above. After careful
review, with the assistance of their respective financial and legal advisors,
Cortland First Financial Corporation and Oneida Valley Bancshares, Inc.
Boards of Directors each separately determined that the pending merger is in
the best long term interests of their respective shareholders, and decided to
continue with the merger process and to reject CNY Financial Corporation's
expressions of interest.
Comparison of the Results of Operations
Net income was $539,000 or $.27 per share for the third quarter of 1998,compared
with $699,000 or $.35 per share for the same period in 1997. The decrease in net
income is due primarily to costs directly related to the merger, which to date
total $200,000. Net interest income decreased by $57,000 when compared to the
third quarter of 1997, but was offset by a decrease in the provision for loan
losses of $70,000 when compared to the same quarter a year ago. Other operating
income increased by $66,000 but was offset by an increase in other operating
expenses of $214,000 compared to the third quarter of 1997. The increase is due
primarily to the costs associated with the merger.
Net interest income is affected by the difference between the yield earned on
interest earning assets and rates paid on interest bearing deposits and
borrowings. The relative amounts of earning assets, interest bearing deposits
and borrowings also impact net interest income levels.
Net interest income decreased by $57,000 for the three months ended Sept. 30,
1998 compared with the same period in 1997. For the first nine months of 1998,
net interest income was $7.0 million compared to $7.1 million for the first nine
months of 1997. The decrease is due primarily to lower yields being earned on
all loan products and investments in 1998 compared to 1997 and decreases in
outstanding consumer loans as a result of weak loan demand. The yield on earning
assets was 7.83% for the first nine months of 1998 compared to 8.01% for the
same period in 1997.
The average costs of interest bearing liabilities for the first nine months of
1998 were 3.72% and were comparable to the first nine months of 1997 of 3.76%.
The net interest margin for the first nine months of 1998 was 4.77%, down
slightly from 4.89% for the same period in 1997. During the third quarter of
1998, the net interest margin averaged 4.77% for the three months.
OTHER OPERATING INCOME and EXPENSES
Total other operating income was $526,000 in the third quarter of 1998, a slight
decrease of $14,000 or 2.6% from the third quarter of 1997. Gains on the sales
of securities were $35,000 for the third quarter of 1998 compared to $115,000
for the same time in 1997. Without gains on the sale of securities, core other
income increased by $66,000 or 15.5% for the third quarter of 1998 compared to
the same period in 1997. Other operating income for the first nine months of
1998 was $1.4 million up $92,000 or 7.1% from the year ago period. The increase
is due primarily to increased service fees collected on demand and savings
accounts which increased by $131,000 and increased ATM fees of $57,000. This was
partially offset by loss of credit card interest income due to the sale of the
credit card portfolio in the first quarter of 1998. Other operating expenses
were $2.1 million for the three months ended September 30, 1998 compared to $1.9
million for the same period in 1997. This is an increase of $214,000 or 11.2%.
For the first nine months of 1998 other operating expenses were $6 million
compared to $5.5 million for the same period a year ago. Expenses relating to
the merger have amounted to approximately $250,000 so far in 1998. These
expenses were primarily for consulting and legal expenses for the merger. Total
expenses for the merger are expected to be $750,000 by the time the merger is
completed. Salary and benefits increased by $261,000 for the first nine months
of 1998 when compared to 1997. This is due primarily to staffing changes and
normal merit increases to our employees along with higher than expected
insurance claims on the Bank's self insured medical program. Also
contributing to the increase are higher than expected expenses for the Bank's
post-retirement program which increased by $28,000 compared to the same period
a year ago. Loan origination and collection expense increased by $45,000 for
the first nine months of 1998 compared to the same period in 1997. The increase
is due primarily to increased mortgage originations and collection costs.
Changes in Financial Condition from December 31, 1997 to September 30, 1998
Consolidated assets of the Company were $228.4 million at September 30, 1998, a
$9 million or 4.1% increase from December 31, 1997.
Net loans receivable were $117.8 million at September 30, 1998, an increase of
$5.9 million or 5.3% from December 31, 1997. Mortgage loans and commercial loans
outstanding increased by $6.9 million and $3.2 million, respectively since
December 31, 1997. This was partially offset by a decrease in consumer loans of
$3.9 million. The Bank is experiencing an increase in mortgage volume due
primarily to low market rates available to homeowners. Consumer loan
originations remain low due primarily to weak market demand and a delay in the
implementation of an indirect auto loan program that the Bank was expecting to
start in the third quarter of 1998. The rollout of the program will be delayed
until after the merger.
The reserve for loan losses was $1,286,000 at September 30, 1998. Loan loss
provisions of $160,000 in the first nine months of 1998 were offset by net
charge-offs totaling $114,000. This compares to loan loss provisions of
$285,000 for the same period of 1997 being offset by net charge-offs of $315,000
for the first nine months of 1997. The lower provision in 1998 is a result of
the Bank's improved underwriting standards resulting in a lower loss experience
factor. In management's opinion, the allowance for loan losses is adequate as
of September 30, 1998. Nonperforming assets (nonaccrual loans and real estate
owned) totaled $427,000 or .35% of total gross loans at September 30, 1998.
This is down from $581,000 or .50% of total gross loans as of year-end 1997.
Total deposit liabilities were $199.7 million at September 30, 1998, an increase
of $7.5 million or $3.9% from December 31, 1997 which totaled $192.2 million.
Demand deposits increased by $2.1 million and MMDA accounts increased by $9.6
million since December 31, 1997. Offsetting these increases were a $1.7
million decrease in Savings accounts and a $2.9 million decrease in NOW
accounts. Time accounts remain virtually unchanged from year-end 1997.
Capital adequacy remained strong at the end of the third quarter. Stockholder's
equity at September 30, 1998 was $26.1 million, or $13.26 per share, compared to
$25 million, or $12.69 per share at December 31, 1997. The Company's capital
leverage ratio was 11.08% which compared to 11.21% for the year ended December
31, 1997. Tier 1 and Total Risk-based capital ratios were 22.15% and 23.60%,
respectively. All of the Bank's capital ratios are well above regulatory
minimums to qualify as "well capitalized".
LIQUIDITY
Liquidity describes the ability of the Bank to meet financial obligations that
arise out of the ordinary course of business. Liquidity is primarily needed to
meet the borrowing and deposit withdrawal requirements of the Bank's customers
and to fund current and planned expenditures. The Bank derives liquidity from
increased customer deposits, the maturity distribution of the investment
portfolio, loan repayments, and income from earning assets. The Bank also
maintains a line of credit with the Federal Home Loan Bank which provides
additional liquidity. Additionally, the Bank's securities classified as
available-for-sale, which totaled $86.7 million, were available for the
management of liquidity and interest rate risk. At September 30, 1998, the ratio
of net liquid assets to net deposits amounted to 32.69% indicating a high level
of liquidity. Management is not aware of any trends, demands, commitments, or
uncertainties that are reasonably likely to result in material changes in
liquidity.
RISK ASSESSMENT
Risk is the potential that unexpected and unanticipated events may have an
adverse impact on the Bank's capital or earnings. The Office of the Comptroller
of the Currency has defined several categories of risk for supervisory purposes.
The Asset and Liability Committee of the Bank is responsible for assessing these
risks. Management of the composition and maturity configurations of the earning
assets and funding sources contributes to maintaining an appropriate balance
between the maturity and repricing characteristics of assets and liabilities
that is consistent with liquidity, growth, and capital adequacy goals. A forward
looking assessment regarding the impact of interest rate movement may have on
net interest income is performed on a monthly basis. Based on current analysis,
the Bank believes that it is well positioned with minimal impact on income when
subjected to a 200 basis point (2.00%) shock, the equivalent of an immediate
increase or decrease of 2% in all interest rates on both assets and
liabilities. Management believes its exposure in each of the risk categories is
low.
YEAR 2000
The State of Readiness. First National Bank of Cortland has been evaluating its
Year 2000 readiness since August 1997. The process is overseen by a management
committee chaired by the bank's Vice President of Operations, which reports
monthly progress to the Board of Directors.
The Bank has identified 188 systems that may have a potential Year 2000 impact.
A risk assessment has been assigned to each system denoting a high, moderate or
low risk. Seven systems have been identified as critical to the operation of the
Bank: Premier II, a data processing software system from Information Technology,
Inc.; Unisys Computer Systems hardware for the Bank's mainframe computer system
and item processing system; TNET, a trust networking system; a switching system
for the Bank's Money Access Services, Inc. ("MAC") automated teller machines;
hardware for the Bank's automated teller machines from Diebold, Inc.; the Bank's
CFI Laser-Pro Loan Software; and Fedline software used by the Bank for
inter-bank transactions.
The Bank's Year 2000 plan is a five-step approach. In the Awareness phase, the
Bank educated itself regarding the nature and magnitude of the Year 2000
problem. In the Assessment phase, the Bank identified all equipment, software,
and related vendors that could have a potential adverse effect on the Bank's
service or operations, risks were measured as described above, and an action
plan was formalized. In the Renovation phase, changes to affected systems were
made and vendors were managed according to the action plan. In the Validation
phase,testing of affected systems is being completed and the results analyzed.
Finally,in the Implementation phase, compliant systems are being put into active
use. The Bank is currently in the Validation and Implementation phases. Full
implementation is expected to be complete by December 31, 1998.
In addition to the Bank's assessment of its own Year 2000 state of readiness,the
Bank also reviewed each of its commercial loan customers with $500,000 or
more in outstanding credit to determine the Year 2000 risk associated with each
customer. Based upon this review, the Bank believes its risk associated with
these customers' Year 2000 issues to be low.
Year 2000 Costs. The Bank has budgeted $86,000 for renovation of its existing
systems to achieve Year 2000 compliance. In the event that specific systems
cannot be renovated, replacement may be required; as of September 30, 1998,
actual dollar expenditures in connection with replacement of such systems were
$5,825.87. The Bank expects the total costs of completing its Year 2000 plan to
have no material effect on its financial condition and results of operations,
although actual results may differ pending completion of the Validation and
Implementation phases.
Risk Assessment and Contingency Plans. As of November 10, 1998, the Bank
believes that the progress that it has made to date, along with the expected
completion of its Year 2000 action plan by year end, will result in the Bank
being well prepared to meet the Year 2000 challenge. The reliance on third-party
information, however, which may be inaccurate and unverifiable, will require
contingency planning. The Bank has established contingency plans for its seven
mission critical systems, and will evaluate the need for implementation of such
plans as the need arises.
<PAGE>
INTEREST MARGIN REPORT
(000's Omitted)
1/98 - 9/98 1/97 - 9/97
AVERAGE AVERAGE
EARNINGS ASSET YIELDS: FTE INC BALANCE YIELD FTE INC BALANCE YIELD
GOVT & AGY SEC $ 1,640 $ 35,349 6.20 $ 2,138 $ 44,831 6.37
TAX EXEMPT SEC 1,503 28,648 6.99 1,370 25,775 7.09
MORTG BACKED SEC 908 19,819 6.12 840 16,554 6.78
OTHER SECURITIES 260 5,256 6.59 138 2,987 6.17
TOTAL SECURITIES $ 4,311 $ 89,072 6.46 $ 4,486 $ 90,147 6.64
FED FUNDS SOLD $ 314 $ 7,578 5.43 $ 237 $ 5,875 5.30
COMMERCIAL LOANS $ 1,720 $ 24,027 9.57 $ 1,762 $ 23,709 9.94
OVERDRAFTS 0 96 0.00 0 115 0.00
OTHER LOANS 57 976 7.80 12 194 8.46
MORTGAGE LOANS 3,666 57,577 8.51 3,539 55,156 8.58
INSTALLMENT LOANS 1,352 18,815 9.61 1,576 21,963 9.59
CONSUMER LOANS 663 8,705 10.18 716 9,277 10.31
TAX FREE LOANS 304 4,399 9.22 227 2,982 10.14
TOTAL LOANS $ 7,762 $114,595 9.06 $ 7,832 $113,396 9.23
OTAL EARNING ASSETS $12,387 $211,245 7.83 $12,555 $209,418 8.01
TOTAL INTEREST INCOME
COST/FUNDS RATES: EXP BALANCE RATE EXP BALANCE RATE
NOW & SAVINGS $ 1,345 $ 78,052 2.31 $ 1,437 $ 77,369 2.49
MONEY MARKET DEP 1,326 37,945 4.67 1,236 37,240 4.44
MONEY MARKET CDS 217 6,272 4.62 226 6,514 4.64
CDS OVER $100M 376 11,118 4.52 485 13,831 4.69
OTHER CDS 1,553 39,552 5.26 1,476 37,454 5.27
TIME DEPOSITS 23 1,160 2.61 24 1,180 2.71
TOTAL CDS & TIME $ 2,169 $ 58,102 4.99 $ 2,211 $ 58,979 5.01
S-T BORROWINGS 0 0 0.00 $ 3 $ 71 4.75
TOTAL INT BEARING $ 4,840 $174,099 3.72 $ 4,887 $173,659 3.76
LIABILITIES
TOTAL INTEREST EXPENSE
NET INTEREST SPREAD 4.11 4.25
NET INTEREST MARGIN $ 7,547 $211,245 4.77 $ 7,668 $209,418 4.89
<PAGE>
INTEREST INCOME
CHANGE DUE TO:
TOTAL TOTAL
EARNINGS ASSET YIELDS: VOLUME RATE CHANGE
GOVT & AGY SEC (439) (58) (497)
TAX EXEMPT SEC 90 (5) 85
MORTG BACKED SEC 104 (37) 67
OTHER SECURITIES 111 14 125
TOTAL SECURITIES (134) (86) (220)
FED FUNDS SOLD 70 6 76
COMMERCIAL LOANS 23 (66) (43)
OVERDRAFTS 0 0 0
OTHER LOANS 46 (1) 45
MORTGAGE LOANS 154 (27) 127
INSTALLMENT LOANS (194) (29) (223)
CONSUMER LOANS (44) (9) (53)
TAX FREE LOANS 82 (22) 60
TOTAL LOANS 67 (154) (87)
TOTAL EARNING ASSETS
TOTAL INTEREST INCOME 4 (234) (230)
INTEREST EXPENSE
COST/FUNDS RATES: CHANGE DUE TO:
NOW & SAVINGS 8 (100) (92)
MONEY MARKET DEP 24 67 91
MONEY MARKET CDS (8) (1) (9)
CDS OVER $100M (93) (17) (110)
OTHER CDS 82 (4) 78
TIME DEPOSITS 0 (1) (1)
TOTAL CDS & TIME (19) (23) (42)
S-T BORROWINGS (1) (1) (2)
TOTAL INT BEARING LIAB
TOTAL INTEREST EXPENSE 12 (57) (45)
NET INTEREST SPREAD
NET INTEREST MARGIN (8) (177) (185)
PART 2.
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K:
(21) Subsidiaries of the registrant
- First National Bank of Cortland, State of New York
(27) Financial Data Schedule
b) Reports on Form 8-K
A Form 8-K was filed on July 22, 1998 with the Securities and
Exchange Commission to announce that, on July 10, 1998, Cortland
First Financial Corporation had entered into an Agreement and
Plan of Reorganization (collectively, the "Merger Agreement")
with Oneida Valley Bancshares, Inc. The Merger Agreement
provides that Cortland First Financial Corporation and Oneida
Valley Bancshares, Inc. will merge to create an independent bank
holding company named Alliance Financial Corporation to serve
the community banking market of Central New York State. First
National Bank of Cortland and Oneida Valley National Bank will
also merge, taking the name of Alliance Bank, N.A. The merger
is expected to close in the fourth quarter of 1998, subject to
the approval of the shareholders of both companies. Details of
the merger are outlined in the Registration Statement on Form
S-4 (No. 333-62623) that was filed with the Securities and
Exchange Commission on August 31, 1998.
<PAGE>
SIGNATURES
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.
CORTLAND FIRST FINANCIAL CORPORATION
DATE November 16, 1998 /s/ David R. Alvord
David R. Alvord, President & CEO
DATE November 16, 1998 /s/ Bob Derksen
Bob Derksen, Treasurer
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