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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ____________
Commission File Number 2-94863
CANANDAIGUA NATIONAL CORPORATION
----------------------------------
(Exact name of Registrant as specified in its charter)
New York 16-1234823
--------- ----------
(State of Incorporation) (IRS Employer Identification No.)
72 South Main Street, Canandaigua, NY 14424
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 394-4260
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
240,000 shares $50 par common
---------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) 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) been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
Of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 2000.
Common Stock, $50.00 par value - described on page 8 of 1999 Annual
Report and Common Stock Data disclosed on page 31 of the Annual Report are
incorporated herein by reference.
Number of shares outstanding of the Registrant's shares of common stock
as of January 31, 2000. 158,483 shares, common stock, $50.00 par value
The Company's stock is not actively traded nor is it traded in the
over-the- counter market. In addition, it is not listed with a national
securities exchange.
Due to the limited number of transactions, the weighted average sale price
disclosed on page 31 of the Annual Report may not be indicative of the
actual market value of the Company's stock.
Page 1
Documents Incorporated by Reference
---------------------------------------------------
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1999 are incorporated by reference into Parts I and II.
Portions of the Registrant's Definitive Proxy Statement relating to the Annual
Meeting of Shareholders held on March 15, 2000 are incorporated by reference
into Part III.
SAFE HARBOR STATEMENT
- -----------------------
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: This report contains certain "forward-looking statements" intended to
qualify for the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. When used or incorporated by reference in the Company's
disclosure documents, the words "anticipate," "estimate," "expect," "project,"
"target," "goal" and similar expressions, as well as discussion regarding the
"Year 2000 issue," are intended to identify forward-looking statements within
the meaning of Section 27A of the Securities Act. Such forward-looking
statements are subject to certain risks, uncertainties and assumptions,
including, but not limited to (1) economic conditions, (2) real estate market,
and (3) interest rates. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, expected or projected.
These forward looking statements speak only as of the date of the document. The
Company expressly disclaims any obligation or undertaking to publicly release
any updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectation with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
Page 2
CANANDAIGUA NATIONAL CORPORATION
FORM 10-K
INDEX
Page No.
PART I.
Item 1. Business 4
Item 2. Properties 18
Item 3. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of
Security Holders 20
PART II.
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters 20
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 24
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 29
PART III.
Item 10. Directors and Executive Officers of
the Registrant 29
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain
Beneficial Owners and Management 30
Item 13. Certain Relationships and Related Transactions 31
PART IV.
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K 31
Signatures 33
Page 3
PART I
Item 1. Business
Canandaigua National Corporation
The Canandaigua National Corporation, referred to as The Corporation, is a
one-bank holding company which builds lasting customer relationships by
providing comprehensive financial solutions to individuals, be they building
families or businesses. It was organized on October 31, 1984, and registered
under the Bank Holding Company Act of 1956, for the purpose of becoming a
one-bank holding company. The formation of the bank holding company was
consummated on May 31, 1985, through the exchange of 80,000 shares of
Canandaigua National Corporation $50 par value common stock for all of the
outstanding shares of The Canandaigua National Bank and Trust Company. The
one-bank holding company serves as a means of increasing the scope of banking
and financial services in the market area served by The Canandaigua National
Bank and Trust Company. The Corporation acquired 100% of Home Town Funding, Inc.
(HTF) during 1997. HTF offers mortgage products that the bank is not licensed
to offer, therefore offering the Corporation's customers a larger range of
products. HTF is engaged in underwriting and funding mortgages in western New
York State. HTF typically resells residential mortgages to unaffiliated
entities, which service the loans. On January 1, 1999 the Corporation merged
the mortgage banking operations of HTF and Greater Funding of New York, Inc
(GFNYI), a mortgage banking company acquired in 1996. The Bank will remain the
principal source of the Corporation's operating revenue and net income.
The Canandaigua National Bank and Trust Company
The Canandaigua National Bank and Trust Company ("Bank") was incorporated
under the laws of The United States of America as a national bank in 1887.
Since that time, the Bank has operated as a national banking association doing
business at its main office at 72 South Main Street, Canandaigua, New York and
several locations in Ontario County and Monroe County, New York.
As of December 31, 1999, Bank had total assets of $518,369,000; total
capital of $37,018,000; and total deposits of $456,015,000. Its deposits are
insured through the Bank Insurance Fund by the Federal Deposit Insurance
Corporation.
The Bank provides a full range of financial services to its retail,
commercial and municipal customers through a variety of deposit, lending, trust,
investment and insurance products. These products are delivered by employees
through a "life-stage" marketing concept, whereby customers' needs are
anticipated and evaluated based upon their life stage (e.g. growing family,
retirement, college student, etc.). New products are developed around this
concept. These services are delivered through the Bank's network of sixteen
community banking offices, which include drive-up facilities and automatic
teller machines, its customer call center, the internet and other remote
cash-dispensing machines. The locations and staffing of the Bank's full service
offices are described in more detail in Item 2 and on page 34 of the Annual
Report.
The Bank's deposit services include accepting time, demand and savings
deposits, NOW accounts, regular savings accounts, money market deposits, fixed
rate certificates of deposit and club accounts. The Bank also provides its
retail customers safe-keeping services through the renting of safe deposit
facilities.
The Bank's lending services include making secured and unsecured commercial
and consumer loans, financing commercial transactions either directly or through
regional industrial development corporations, making construction and mortgage
loans. Other services include making residential mortgage loans, revolving
credit loans with overdraft checking protection, small business loans, and
student loans. The Bank's business loans include seasonal, credit, collateral,
and term loans.
Page 4
Item 1. Business
The Canandaigua National Bank and Trust Company (continued)
Trust and investment services provided by the Bank include services as
executor and trustee under wills and deeds, as guardian and custodian and as
trustee and agent for pension, profit sharing, individual retirement account and
other employee benefit trusts as well as various investment, pension and estate
planning services. Trust services also include service as transfer agent and
registrar of Canandaigua National Corporation stock and as paying agent for
various bond issues and as escrow agent.
Since the formation of its insurance subsidiary in 1995 and upon its
successful lawsuit against the New York State Superintendent of Insurance, the
Bank has been offering a full line of auto, home and life insurance products to
its customers through its wholly owned subsidiary, CNB Agency.
The Bank also administers the assets of the Canandaigua Equity Fund and
the Canandaigua Bond Fund. [Shares of these funds are not bank deposits or
obligations of, or guaranteed or endorsed by, any bank, and are not insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or and
other agency. Shares of these funds may go down in value.]
The Bank has a relatively stable deposit base and no material amount of
deposits
are obtained from a single depositor. Historically, approximately 15% of
average deposits are placed by local governments in the Bank's business region.
The Bank has not experienced any significant seasonal fluctuations in the amount
of its deposits nor does the Bank rely on foreign sources of funds or income.
Territory Served
The Company's physical market area generally covers western Ontario County
and Monroe County in New York State. Customers generally initiate their
relationship with the Bank from this area. However, the Bank conducts business
through the internet and by telephone and with payment services such as credit
cards and debit cards, the Bank's customer are served world-wide. Since the mid
1990's, the Bank expanded into Monroe County by opening community banking
offices in Pittsford (1995), Webster/Penfield (1998), Greece (1999), Chili
(1999), Honeoye Falls (1999), Perinton (2000), and Irondequoit (2000). Under
renovation and scheduled for opening in 2000 are locations in the City of
Rochester and Bushnell's Basin.
Competition
The Company considers its business to be highly competitive in its service
areas. The Company competes with respect to its lending services, as well as in
attracting deposits, with commercial banks, savings banks, savings and loan
associations, insurance companies, regulated small loan companies, non-bank
banks, credit unions and investment managers. The Company also competes with
insurance companies, investment counseling firms, mutual funds and other
business firms and individuals in corporate trust and investment management
services.
The Company is generally competitive with all financial institutions in its
service area with respect to interest rates paid on time and savings deposits
and interest rates charged on loans and service charges on deposit accounts.
One measure of competitive strength is the percentage of deposits held by
an institution in a geographic location. Based upon the most recent data
available from the FDIC as of June 30, 1999, the Company's share of deposits for
all banks was 36% in Ontario County compared to 35% in 1998. In Monroe County
the Bank's share doubled to .6% ($54,228,000) in 1999 from .3% ($25,780,000) in
1998.
Employees
At December 31, 1999, the Company had 323 employees of whom 69 worked on a
part-time basis. None of the employees are covered by a collective bargaining
agreement. The Company considers its relations with its employees to be good.
Page 5
Item 1. Business (continued)
Supervision and Regulation
Canandaigua National Corporation is incorporated under the laws of the
State
of New York. As a bank holding company, the Company is subject to the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), and is required to file
annual reports and such additional information as may be required by the Federal
Reserve Board (the "FRB") pursuant to the BHC Act. The FRB has the authority to
examine the Company and its subsidiaries.
The Gramm-Leach-Bliley Act (the Act) of 1999 was signed into law by
President Clinton on November 12, 1999. The Act represents the most sweeping
reform of financial services regulation in over sixty years. The Act permits
the creation of new financial products under a strong regulatory regime based on
the principle of functional regulation. The legislation eliminates legal
barriers to affiliation among banks and securities firms, insurance companies,
and other financial services companies. The Act provides financial
organizations with flexibility in structuring these new financial affiliations
through a holding company structure or a financial subsidiary, with appropriate
safeguards.
The Act preserves the role of the Federal Reserve Board as the umbrella
supervisor for holding companies while at the same time incorporating a system
of functional regulation designed to utilize the strengths of the various
federal and state regulators. It also sets up a mechanism for coordination
between the Federal Reserve Board and the Secretary of the Treasury regarding
the approval of new financial activities for both holding companies and national
bank financial subsidiaries.
The Act also establishes, for the first time, a minimum federal standard
for privacy. Financial institutions are required to have written privacy
policies that must be disclosed to customers. The disclosure of a financial
institution's privacy policy must take place at the time a customer relationship
is established and not less than annually during the continuation of the
relationship.
The Act also provides for functional regulation of bank securities
activities. The Act repeals Bank's blanket exemption from the definition of a
"broker" and replaces it with a set of limited exemptions that allow the
continuation of some traditional activities performed by banks (trust-related
activities). The Act amends the Exchange Act to include banks within the
general definition of dealer. The bank exclusion from the definition of
investment adviser is also eliminated.
The Act opens the possibility for complex new products to be developed with
both banking and securities elements. The Act provides a procedure for handling
new hybrid products sold by banks that have securities elements. The statute
provides for a rule-making and resolution process between the Securities and
Exchange Commission (SEC) and the Federal Reserve Board regarding new hybrid
products, with a federal appeal court as final arbiter.
As discussed above, the Company already conducts business directly, through
affiliates or through other contractual arrangements in many of the activities
allowed under the Act. Management and the Board of Directors review the
Company's strategic plan at least annually. However, the implications of the
Act on the Company have not yet been assessed.
The Federal Reserve Act imposes restrictions on extensions of credit by
subsidiary banks of a bank holding company to the bank holding company or any of
its subsidiaries, or investments in the stock or other securities of the holding
company, and on the use of such stock or securities as collateral for loans to
any borrower. Further, under the FRB's regulations, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property, or
furnishing of services.
Page 6
Item 1. Business
Supervision and Regulation (continued)
From time to time the FRB may adopt further regulations pursuant to the
Act. The Company cannot predict whether any further regulations will be adopted
or how such regulations will affect the consolidated operating results or
business of the Company.
In addition, the Corporation reports to the Securities and Exchange
Commission under the laws governing corporations with registered securities.
The primary supervisory authority of the Bank is the Office of the
Comptroller of the Currency (the " OCC"), which regularly examines aspects of
the Bank's operations such as capital adequacy, reserves, loans, investments,
management practices, etc. In addition to these regular examinations, the Bank
must furnish quarterly and annual reports to the OCC. The OCC has the authority
to issue cease-and-desist orders to prevent a bank from engaging in an unsafe or
an unsound practice or violating the law in conducting its business.
The Bank is also a member of the Federal Reserve System, and as such, is
subject to certain laws and regulations administered by the FRB. As a member
of the Federal Reserve System, the Bank is required to maintain non-interest
bearing reserves against certain accounts. The amount of reserves required to
be maintained is established by regulations of the FRB and is subject to
adjustment from time to time.
The Bank's deposits are insured by the Bank Insurance Fund (BIF) of the
FDIC up to a maximum of $100,000 per insured deposit account, subject to the
rules and regulations of the FDIC. For this protection, the Bank pays a
quarterly statutory assessment.
Government Monetary Policies and Economic Controls
The earnings of the Company and the Bank are affected by the policies of
regulatory authorities including the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation. An important function of the Federal Reserve System is to regulate
the money supply and interest rates. Among the instruments used to implement
these objectives are open market operations in U.S. Government securities,
changes in reserve requirements against member bank deposits, and changes in the
federal discount rate. These instruments are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or paid
for deposits.
The policies and regulations of the Federal Reserve Board have had, and
will probably continue to have, a significant effect on the Bank's deposits,
loans and investment growth, as well as the rate of interest earned and paid,
and are expected to affect the Bank's operations in the future. The effect of
such policies and regulations, if any, upon the future business and earnings of
the Bank cannot be predicted.
The United States Congress has periodically considered and adopted
legislation that has resulted in deregulation of banks and other financial
institutions. Such legislative changes have placed the Bank in more direct
competition with other financial institutions including mutual funds, securities
brokerage firms, insurance companies, and investment banking firms. The effect
of any such legislation on the business of the Bank cannot be predicted.
Consolidated Financial and Statistical Data
A review of the business activities of the Corporation and Bank is
presented in the following pages.
Page 7
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest Differential
A. and B. Average Balance Sheets and Analysis of Net Interest Margin
The following table reflects the net interest margin and interest rate
spread for the years shown. Average amounts are based upon the average daily
balances. No tax equivalent adjustments have been made.
Average Balance Sheets and Analysis of Net Interest Margin
For the Years December 31, 1999, 1999 and 1997
(Dollars in thousands)
1999 Average Average
--------- --------
Balance Interest Rate
- ------------------------------------ ---------- ---------
Assets
Interest earning assets:
Interest bearing deposits with
Others $ 182 $ 6 3.30%
Federal funds sold 4,700 226 4.81
Securities (1):
Taxable 36,647 2,015 5.50
Tax-exempt 40,853 1,741 4.26
Loans, net (2) 339,351 28,865 8.51
---------- --------- --------
Total interest earning assets 421,733 32,853 7.79
--------- ========
Non-interest earning assets 47,893
----------
Total assets $ 469,626
==========
Liabilities and Stockholders'
Equity
Interest bearing liabilities:
Savings, interest checking and
Money market $ 188,333 4,676 2.48%
Certificates of deposit 156,618 8,049 5.14
FHLB Advances 9,917 527 5.31
---------- --------- --------
Total interest bearing
liabilities 354,868 13,252 3.73
--------- ========
Non-interest bearing liabilities 73,225
Stockholders' equity 41,533
----------
Total liabilities and
stockholder's equity $ 469,626
==========
Interest rate spread 4.06%
==========
Net interest margin $ 19,601 4.65%
========== =========
(1) Securities available-for sale are stated at fair value and includes the
Company's required investments in Federal Reserve Bank Stock and Federal Home
Loan Bank Stock.
(2) Average balance includes non-accrual loans and interest includes fees of
$ 463,000
Page 8
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
1998 Average Average
--------- --------
Balance Interest Rate
- ------------------------------------ ---------- ---------
Assets
Interest earning assets:
Interest bearing deposits with
others $ 368 $ 19 5.16%
Federal funds sold 630 33 5.24
Securities (1):
Taxable 41,131 2,400 5.84
Tax-exempt 34,511 1,567 4.54
Loans, net (2) 303,940 26,834 8.83
---------- --------- --------
Total interest earning assets 380,580 30,853 8.11%
--------- ========
Non-interest earning assets 36,421
----------
Total assets $ 417,001
==========
Liabilities and Stockholders'
Equity
Interest bearing liabilities:
Savings, interest checking and
money market $ 152,018 3,675 2.42%
Certificates of deposit 128,942 7,071 5.48
FHLB Advances 29,926 1,687 5.64
---------- --------- --------
Total interest bearing
liabilities 310,886 12,433 4.00%
--------- ========
Non-interest bearing liabilities 65,758
Stockholders' equity 40,357
----------
Total liabilities and
stockholder's equity $ 417,001
==========
Interest rate spread 4.11%
==========
Net interest margin $ 18,420 4.84%
========== =========
(1) Securities available-for sale are stated at fair value and includes the
Company's required investments in Federal Reserve Bank Stock and Federal Home
Loan Bank Stock.
(2) Average balance includes non-accrual loans and interest includes fees
of $ 227,000
Page 9
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
1997 Average Average
Balance Interest Rate
--------- ---------- -------
Assets
Interest earning assets:
Interest bearing deposits with
others $ 264 $ 16 6.06%
Federal funds sold 19 1 5.26
Securities(1):
Taxable 43,240 2,587 5.98
Tax-exempt 31,037 1,440 4.64
Loans, net (2) 282,894 25,389 8.97
---------- --------- --------
Total interest earning assets 357,454 29,433 8.23%
--------- ========
Non-interest earning assets 28,313
----------
Total assets $ 385,767
==========
Liabilities and Stockholders'
Equity
Interest bearing liabilities:
Savings, interest checking and
money market $ 145,418 3,521 2.42%
Certificates of deposit 112,661 6,212 5.51
FHLB Advances 26,942 1,506 5.59
---------- --------- --------
Total interest bearing
liabilities 285,021 11,239 3.94%
--------- ========
Non-interest bearing liabilities 61,363
Stockholders' equity 39,383
----------
Total liabilities and
stockholder's equity $ 385,767
==========
Interest rate spread 4.29%
==========
Net interest margin $ 18,194 5.09%
========== =========
(1) Securities available-for sale are stated at fair value and includes the
Company's required investments in Federal Reserve Bank Stock and Federal Home
Loan Bank Stock.
(2) Average balance includes non-accrual loans and interest includes fees
of $ 402,000
C. Rate/Volume Analysis
The following table sets forth the dollar and volume of changes in interest
income and interest expense resulting from changes in the volume of earning
assets and interest bearing liabilities, and from changes in rates. Volume
changes are computed by multiplying the volume difference by the prior year's
rate. Rate changes are computed by multiplying the rate difference by the prior
year's balance. The change in interest due to both rate and volume has been
allocated to rate and volume changes in proportion to the dollar amounts of the
change in each.
Page 10
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
C. Rate/Volume Analysis (continued)
Rate/Volume Analysis
For the Years December 31, 1999 and 1998
(Dollars in thousands)
1999 vs. 1998
Increase/(decrease) due
to change in
Volume Rate Total
-------- -------- --------
Assets
Interest bearing deposits with
Others $ (8) $ (5) $ (13)
Federal funds sold 196 (3) 193
Securities 96 (307) (211)
Loans, net 3,039 (1,008) 2,031
-------- -------- --------
Total 3,323 (1,323) 2,000
======== ======== ========
Liabilities
Savings, interest checking and
Money market 899 102 1,001
Certificates of deposit 1,444 (466) 978
FHLB Advances (1,068) (92) (1,160)
-------- -------- --------
Total 1,275 (456) 819
======== ======== ========
Net change $ 2,048 $ (867) $ 1,181
======== ======== ========
1998 vs. 1997
Increase/(decrease) due
to change in
Volume Rate Total
------- ------ -------
Assets
Interest bearing deposits with
others $ 3 $ -- $ 3
Federal funds sold 32 -- 32
Securities 73 (133) (60)
Loans, net 1,864 (419) 1,445
------- ------ -------
Total 1,972 (552) 1,420
======= ====== =======
Liabilities
Savings, interest checking and
money market 160 (6) 154
Certificates of deposit 893 (34) 859
FHLB Advances 168 13 181
------- ------ -------
Total 1,221 (27) 1,194
======= ====== =======
Net change $ 751 $(525) $ 226
======= ====== =======
Page 11
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
II. Securities Portfolio
A. Securities Portfolio
The following table summarizes the Company's carrying value of securities
available for sale and held to maturity. Other securities includes the Company's
required investments in Federal Reserve Bank stock and Federal Home Loan Bank
stock
Securities
As of December 31, 1999, 1998 and 1997
(Dollars in thousands)
1999 1997 1997
------- ------- ------
US Treasury and other U.S.
Government agencies' obligations $26,865 $29,936 31,413
Obligations of states and political
Subdivisions 46,061 39,253 34,273
Other securities 6,486 7,275 8,813
------- ------- ------
Total $79,412 $76,464 74,499
======= ======= ======
B. Maturity and Yields of Securities Portfolio
The following table summarizes the maturities and weighted average yields of the
Company's securities available for sale and held to maturity at year end. Yields on
"Obligations of States and Political Subdivisions" are not reflected on a tax equivalent
basis. Other securities includes the Company's required investments in Federal Reserve
Bank Stock and Federal Home Loan Bank Stock. Mortgage backed securities, included in
other securities, are reported at their final contractual maturity, notwithstanding that
principal is prepaid regularly, reducing their effective maturity.
Maturities and Weighted Average Yields of Securities
As of December 31, 1999
(Dollars in thousands)
After After
One Five
One through through After
Year or Five Ten Ten
Less Years Years Years
-------- -------- ------- -------
Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------- -------- ----- ------- ----- ------- -----
US Treasury and other
US Government agen-
cies' obligations $ 16,373 5.37 $ 10,492 5.48 $ -- -- $ -- --
Obligations of states
And political
Subdivisions(1) 11,536 4.24 29,196 4.32 5,157 4.55 172 5.52
Other securities 1,487 6.72 492 6.53 34 8.00 4,473 6.52
-------- ------- -------- ----- ------- ----- ------- -----
Total $ 29,396 4.99 $ 40,180 4.65 $ 5,191 4.57 $ 4,645 6.48
======== ======= ======== ===== ======= ===== ======= =====
(1) Yields are not reflected on a tax equivalent basis.
Page 12
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
III. Loan Portfolio
The loan portfolio is comprised solely of domestic loans with their
concentrations set forth in the schedule of loan classifications below. Other
than general economic risks, management is not aware of any material
concentrations of credit risk to any industry or individual borrower. The
following summary shows the classifications of loans by category.
A. Types of Loans
Composition of Loan Portfolio
As of December 31,
(Dollars in thousands)
1999 1998 1997 1996 1995
--------- --------- -------- -------- --------
Commercial, financial and
Agricultural $ 62,491 $ 43,260 37,610 27,503 28,326
Commercial mortgage 141,255 83,771 74,228 62,513 62,038
Residential mortgage 69,862 76,130 94,593 101,349 86,641
Consumer
Auto - indirect 103,605 84,370 73,211 45,747 15,339
Other 18,561 17,753 15,245 9,925 9,146
Other 2,589 6,485 14,257 11,437 8,770
--------- --------- -------- -------- --------
398,363 311,769 309,144 258,474 210,260
Less: Allowance for loan losses (4,136) (3,283) (3,153) (2,675) (2,258)
--------- --------- -------- -------- --------
Loans, net $394,227 $308,486 305,991 255,799 208,002
========= ========= ======== ======== ========
B. Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table sets forth the maturities and sensitivity to changes in
interest rates of the loan portfolio exclusive of real estate mortgage, consumer
and other loans.
Maturity and Sensitivity of Loans
As of December 31, 1999
(Dollars in thousands)
After
One
One through After
Year or Five Five
Less Years Years Total
-------- ------- ------ ------
Commercial, financial and
Agricultural $ 18,880 16,195 27,416 62,491
Loans maturing after one year:
With a predetermined interest rate 1,536 7,244
With a floating or adjustable rate 14,659 20,172
The maturities set forth above are based upon contractual maturities.
Demand loans, overdrafts and certain time loans, the principal of which will be
renewed in whole or in part, are included in the " One Year or Less"
classification. The Company's loan policy encourages a repayment schedule to be
established whenever possible.
The policy provides that a demand loan should not be renewed more than
once, with renewals at the then prevailing interest rates and with the assurance
the borrower demonstrates the ability to repay on maturity of the loan.
Page 13
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
III. Loan Portfolio (continued)
The Company provides standby letters of credit commitments which also
provide for availability of funds over a period of generally one year. All such
commitments have fixed expiration dates and may require the payment of a fee.
The Company extends lines of credit under which a customer may borrow for
various purposes such as letters of credit. The extension of these commitments
and lines of credit have been in the normal course of business. In the opinion
of management, at December 31, 1999, there are no material commitments to extend
credit which represent unusual risks.
C. Risk Elements
(1) Non-accrual, Past Due and Restructured Loans
The following table summarizes the Company's non-performing assets as of
December 31 for each of the last five years.
Non-Performing Assets
(Dollars in thousands)
1999 1998 1997 1996 1995
-------- -------- ------ ------- -------
Loans past due 90 days or more and
Accruing:
Commercial, financial &
Agricultural $ -- $ 14 347 -- 12
Real estate-commercial 11 102 610 -- --
Real estate-residential 13 157 508 48 101
Consumer 91 108 501 28 55
-------- -------- ------ ------- -------
Total past due 90 days or more
And accruing 115 381 1,966 76 168
-------- -------- ------ ------- -------
Loans in non-accrual status:
Commercial, financial &
Agricultural 509 1,498 1,210 2,285 1,640
Real estate-commercial 980 225 1,327 7,565 7,280
Real estate-residential 151 390 586 1,364 2,027
Consumer -- -- 53 75 --
-------- -------- ------ ------- -------
Total non-accrual loans 1,640 2,113 3,176 11,289 10,947
-------- -------- ------ ------- -------
Total non-performing loans 1,755 2,494 5,142 11,365 11,115
-------- -------- ------ ------- -------
Other real estate owned:
Commercial 1,651 1,642 2,494 1,012 1,856
Residential -- -- 18 129 302
-------- -------- ------ ------- -------
Total other real estate owned 1,651 1,642 2,512 1,141 2,158
-------- -------- ------ ------- -------
Total non-performing assets $ 3,406 $ 4,136 7,654 12,506 13,273
======== ======== ====== ======= =======
Non-performing loans to total
period end loans 0.44% 0.80% 1.66% 4.40% 5.29%
======== ======== ====== ======= =======
Non-performing assets to total
period end loans and other real
estate .85% 1.33% 2.48% 4.84% 6.30%
======== ======== ====== ======= =======
Allowance to non-performing loans 235.67% 131.64% 61.32% 23.54% 20.31%
======== ======== ====== ======= =======
Restructured loans $ -- $ -- -- -- --
======== ======== ====== ======= =======
Page 14
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
III. Loan Portfolio (continued)
The accrual of interest on commercial and real estate loans is discontinued
and previously accrued interest is reversed when the loans become 90 days
delinquent or when, in management's judgment, the collection of principal and
interest is uncertain. Recognition of interest income on nonaccrual loans does
not resume until management considers principal and interest collectible.
Consumer loans are generally charged off upon becoming 120 days past due.
The Company earned interest on a cash basis of $77,000 in 1999, $281,000 in
1998 and $259,000 in 1997 on non-performing loans. Additional interest income
of $ 138,000, $ 239,000 and $636,000 would have been recognized during 1999,
1998 and 1997, respectively, if the loans reported above as non-accrual had been
current in accordance with the original terms.
(2) Potential Problem Loans
Management is unaware of any potential problem loans at December 31, 1999
which are not already disclosed in the table above.
IV. Summary of Loan Loss Experience
A. Analysis of Loss Experience
The determination of the allowance for loan losses is based on an analysis
of the loan portfolio and reflects an amount which, in management's judgment, is
adequate to provide for loan losses inherent in the portfolio. This analysis is
based on management's periodic evaluation, which considers factors such as past
loss experience, identification of adverse conditions that may affect a
borrower's ability to repay, an assessment of current and expected economic
conditions and the estimated value of any underlying collateral.
Page 15
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
IV. Summary of Loan Loss Experience (continued)
The following table summarizes the changes in the allowance for loan losses for
each of the last five years.
Summary of Loan Loss Allowance
(Dollars in thousands)
1999 1998 1997 1996 1995
------- -------- ------ ------- -------
Balance at beginning of year $3,283 $ 3,153 2,675 2,258 2,202
Provision charge to operations 1,239 641 851 1,490 1,031
Charge-offs:
Commercial, financial &
Agricultural (3) (274) (257) (1,356) (810)
Real estate-commercial -- -- -- (44) --
Real estate-residential (29) (19) (40) (16) (151)
Consumer (843) (760) (498) (221) (268)
------- -------- ------ ------- -------
(875) (1,053) (795) (1,637) (1,229)
------- -------- ------ ------- -------
Recoveries:
Commercial, financial &
Agricultural 20 25 190 216 90
Real estate-commercial -- -- -- 71 --
Real estate-residential 3 102 19 1 20
Consumer 466 415 213 276 144
------- -------- ------ ------- -------
489 542 422 564 254
------- -------- ------ ------- -------
Net charge-offs: (386) (511) (373) (1,073) (975)
------- -------- ------ ------- -------
Balance at end of year $4,136 $ 3,283 3,153 2,675 2,258
======= ======== ====== ======= =======
Net charge-offs to average loans 0.11% 0.17% 0.13% 0.47% 0.47%
======= ======== ====== ======= =======
Allowance to total loans 1.04% 1.05% 1.02% 1.03% 1.07%
======= ======== ====== ======= =======
B. Allocation of Allowance for Loan Losses
The following table presents an allocation of the allowance for loan losses
and the percentage of loans in each category to total loans at December 31 of
each of the last five years. In addition to an allocation for specific problem
loans, each category includes a portion of the non-specific allowance for loan
losses based upon loans outstanding, credit risk and historical charge-offs.
Notwithstanding the following allocation, the entire allowance for loan losses
is available to absorb charge-offs in any category of loans.
Page 16
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
IV. Summary of Loan Loss Experience (continued)
Allocation of Allowance for Loan Losses
(Dollars in thousands)
1999 1998 1997
Allowance % (1) Allowance % (1) Allowance % (1)
------- ---------- ------- ---------- ------- ------
Commercial, financial &
Agricultural (2) $1,783 51.1% $1,484 40.7% $1,974 36.2%
Real estate-residential 50 17.5% 54 24.4% 111 30.6%
Consumer 2,303 31.4% 1,745 34.8% 1,068 33.2%
------- ---------- ------- ---------- ------- ------
$4,136 100.0% $3,283 100.0% $3,153 100.0%
======= ---------- ======= ---------- ======= ------
1996 1995
Allowance % (1) Allowance % (1)
------- ------- -------- ------
Commercial, financial &
Agricultural (2) $1,982 34.8% $1,927 43.0%
Real estate-residential 122 39.2% 86 41.2%
Consumer 571 26.0% 245 15.8%
------- ---------- ------- ------
$2,675 100.0% $2,258 100.0%
======= ---------- ======= ------
(1)Percentage of loans in each category to total loans.
(2)Includes commercial real estate.
V. Deposits
The following tables summarize the average deposits and average rates paid
during the years presented.
Average Deposits and Rates Paid
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
1999 1998 1997
Amount Rate Amount Rate Amount Rate
--------- ------- ------- -------- ------- ------
Non-interest bearing demand $ 66,769 --% $ 62,944 --% $ 59,920 --%
Interest-bearing demand 47,851 1.33% 42,099 1.50% 34,464 1.43%
Savings and money market 140,480 2.88% 109,919 2.77% 110,954 2.73%
Time 156,618 5.14% 128,942 5.48% 112,661 5.51%
-------- ------- -------- ------- -------- -----
$411,718 3.09% $343,904 3.12% $317,999 3.06%
======== ======= ======== ======= ======== =====
The following table sets forth the time certificate of deposits of $100,000
or greater, classified by the time remaining until maturity, which were on
deposit as of December 31, 1999.
Maturity Distribution of Time Deposits of $100,000 or More
As of December 31, 1999
(Dollars in thousands)
3 months or less $64,639
3 through 6 months 1,774
6 through 12 months 5,793
Over 12 months 9,450
-------
$81,656
=======
Page 17
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES (continued)
VI. Return on Equity and Assets
The following table sets forth certain ratios used in evaluating the
Company's financial position and results of operations.
Financial Ratios
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------ ------ ------
Return on average assets 0.50% 0.86% 0.97%
Return on average equity 5.68% 8.89% 9.49%
Dividend payout ratio 77.81% 49.15% 43.07%
Average equity to average assets 8.84% 9.68% 10.21%
------ ------ ------
VII. Short-term Borrowings
The following table sets forth the Company's short terms borrowings at the
dates indicated. The Company considers short-term borrowings to be those with
an original maturity date of three months or less.
Short-term Borrowings
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
1999 1998 1997
------- ------- -------
Amount outstanding at December 31, 18,900 2,300 44,800
Weighted average rate 5.72% 4.84% 5.85%
Maximum outstanding at any month end 26,300 48,200 44,800
Average amount outstanding during the year 3,948 24,753 24,970
Weighted average rate 5.36% 5.66% 5.71%
Item 2. Properties
Canandaigua National Corporation occupies space at the main office of the
Bank. The Company owns a building in Pittsford that is occupied by Home Town
Funding, Inc. and is sublet to them and other unrelated businesses. The Bank
owns and leases real property in Ontario County and Monroe County for its
Community Bank Offices and to support its operations.
As of December 31, 1999 The Bank's operations were conducted from eight
offices (including the main office) located in Ontario County, New York and six
offices located in Monroe County, New York. In January 2000, two more offices
were opened in Monroe County. The main office of the Bank is a three-story
structure located at 72 South Main Street, Canandaigua, New York. The
administrative, operational and electronic data processing offices of the Bank
are located in this facility. There are drive-up facilities located at all
permanent offices except for the Eastview Mall and Pittsford offices. Some of
the leases also provide for contingent rent to be paid annually based upon
increases the cost of living. Properties providing customer service are as
follows:
Location Use Ownership Expiration (1)
- --------------- ---------------------- ------------- --------------
Canandaigua, NY Main office space Owned --
Bloomfield, NY Bloomfield bank office Owned --
Canandaigua, NY Customer call center Leased office 6/30/2002
Page 18
Item 2. Properties (continued)
Location Use Ownership Expiration (1)
- ----------------- ----------------------------------- ------------------ ---------------
Victor, NY Eastview Mall bank office Leased office 10/31/2004
Farmington, NY Farmington bank office Owned, leased land 6/30/2002
Honeoye, NY Honeoye bank office Owned --
Canandaigua, NY Lakeshore bank office Leased office 12/31/2001
Shortsville, NY Manchester-Shortsville bank office Leased office Month to month
Mendon, NY Mendon bank office Leased office 12/31/2004
Pittsford, NY Pittsford bank office Leased office 12/31/2001
Victor, NY Victor bank office Owned --
Penfield, NY Webster bank office Leased office 8/31/2008
Greece, NY Greece bank office Leased office 10/31/2003
Chili, NY Chili bank office Leased office 6/1/2010
Honeoye Falls, NY Honeoye Falls bank office (2) Leased office 11/30/2000
Honeoye Falls, NY Permanent bank office site Owned --
Irondequoit, NY Irondequoit bank office (3) Owned --
Perinton, NY Perinton bank office (3) Leased office 3/15/2004
Pittsford, NY Home Town Funding Owned --
Canandaigua, NY Home Town Funding branch office Leased office 4/30/2001
Bloomfield, NY CNB Agency office Leased office 4/30/2001
(1) If applicable
(2) Temporary
(3) Opened January 2000
During 2000 the Bank will continue to increase its number of Monroe County
offices. It has entered into lease agreements for an office in the City of
Rochester, New York and the hamlet of Bushnell's Basin, New York.
The Bank also provides, free to its customers, 24-hour banking services
through automatic teller facilities located at each office and through remote
automatic teller machines and cash dispenser machines at the following
locations:
Finger Lakes Community College Hopewell, New York
F.F. Thompson Hospital Canandaigua, New York
Finger Lakes Performing Arts Center Hopewell, New York
Bristol Mountain Bristol, New York
Case's Convenient Canandaigua, New York
Roseland Bowl Canandaigua, New York
The Greater Rochester International Airport Rochester, New York
The Company Store Cheshire, New York
The Strong Museum Rochester, New York
J-Mart Canandaigua, New York
Canandaigua Medical Group Canandaigua, New York
Rank's IGA Canandaigua, New York
Webster Community Sports Center Webster, New York
Midtown Tennis Club Rochester, New York
Hemlock General Store Hemlock, New York
The Bank anticipates that in order to expand its service to its Monroe and
Ontario County customers it will increase the number of remote cash-dispenser
machines in operation.
The carrying value of the Company's properties as of December 31, 1999,
which is required to be included herein pursuant to Item 102 of Regulation S-K,
is included under the caption "Notes to Consolidated Financial Statements" set
forth on pages 12 through 30 of the 1999 Annual Report to Stockholders and is
incorporated herein by reference.
Page 19
Item 3. Legal Proceedings
The Company and its subsidiaries are not involved in any pending legal
proceedings other than routine legal proceedings undertaken in the ordinary
course of business. In the opinion of management, after consultation with
counsel, the aggregate amount involved in such proceedings is not material to
the consolidated financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders (in the fourth
quarter of 1999)
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The market and dividend information required to be included herein,
pursuant to Item 201 of Regulation S-K, is incorporated herein by reference from
page 31 of the 1999 Annual Report to Stockholders and the Proxy Statement.
While there can be no assurance that the amount and timing of dividends
paid in recent years will continue, management has no knowledge of current
activities that would restrict the payment of dividends in an amount at least
equal to recent years and at the same times.
At December 31, 1999, the Corporation had approximately 801 shareholders
of record. Information regarding beneficial ownership of the Corporation's stock
is set forth in the Corporation's Proxy Statement and incorporated herein by
reference.
Item 6. Selected Financial Data
This following table represents a summary of selected components of the
Corporation's consolidated financial statements for the five years ended
December 31, 1999. All information concerning the Corporation should be read in
conjunction with the consolidated financial statements and related notes.
Selected Financial Data
(Dollars in Thousands except per share data)
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
Income Statement Information:
Net interest income $ 19,601 18,420 18,194 16,343 16,035
Provision for loan losses 1,239 641 851 1,490 1,031
Non-interest income 7,274 5,924 3,788 3,401 3,393
Non-interest expense 22,383 18,430 15,632 14,163 12,684
Income taxes 896 1,686 1,762 1,144 1,797
Net income 2,357 3,587 3,737 2,947 3,916
Balance Sheet Data:
Total investments $ 79,412 76,464 74,499 71,771 71,920
Total loans, net 394,227 308,486 305,991 255,799 208,002
Total assets 522,135 428,047 418,942 360,623 317,209
Total deposits 454,290 376,507 324,761 307,966 277,051
Total borrowings 22,218 7,142 50,667 11,590 1,013
Total equity 42,477 42,478 40,932 39,119 37,397
Average assets 469,626 417,001 385,767 334,659 320,770
Average equity 41,533 40,357 39,383 37,834 35,987
Per Share Data:
Net income, basic $ 14.82 22.38 23.22 18.20 24.31
Net income, diluted $ 14.78 22.38 23.22 18.20 24.31
Cash dividends 11.50 11.00 10.00 8.75 7.00
Page 20
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The purpose of this discussion is to focus on information about Canandaigua
National Corporation's financial condition and results of operations which is
not otherwise apparent from the consolidated financial statements in the annual
report. Reference should be made to those statements and the selected financial
data presented elsewhere in this report for an understanding of the following
discussion and analysis.
Overview
- --------
1999 will be remembered as a year of strong balance sheet growth and heavy
long-term investment. As noted in 1998's report, the Company accelerated its
expansion in the Rochester metropolitan area. During 1999 the Company opened
banking offices in Greece, Chili, and Honeoye Falls and in the first three weeks
of 2000 opened offices in Irondequoit and Perinton. Two more offices are
scheduled to be opened in 2000 in the City of Rochester and the hamlet of
Bushnell's Basin. The 1999 result of this expansion was remarkable for the
Company: 22.0% growth in assets, 27.8% growth in loans, 20.7% growth in
deposits, and $3.0 million investment in premises and equipment for these new
branches. But this investment and rapid and planned growth expectedly impacted
1999's financial results with diluted earnings per share of $14.78 versus $22.38
in 1998.
At December 31, 1999 the Company's assets reached $522.1 million. Total
assets increased $94.1 million or 22.0% for the year. Net loans increased $85.7
million or 27.8% while securities increased $2.9 million or 4.0%. Deposits
increased $ 77.8 million or 20.7% and borrowings (from the FHLB) increased $15.1
million or 212.7%. Funds generated through deposit inflows and borrowings were
used for loan originations and other asset growth.
Net income for the year ended December 31, 1999 was $2.4 million, down $1.2
million or 33.3% from 1998. Basic earnings per share decreased by $7.60 or
34.0% over the same period. The decrease in net income for 1999 was a result of
expenses related to the aforementioned increase in banking offices.
The quality of the Company's assets continued to improve throughout 1999
with non-performing loans at December 31, 1999 at less than 1.0% of total loans.
The allowance for loan losses stood at 235.7% of non-performing loans at
year-end 1999 versus 131.6% at December 31, 1998. However, even with the
improvement in non-performing loans, the provision for loan loss doubled from
1998 to $1.2 million to account for the Company's loan growth. Other real
estate owned was unchanged from 1998 at $1.6 million.
Financial Condition
- --------------------
As of December 31, 1999, total assets of the Company were $522.1 million,
up from $428.0 million at year end 1998. Cash and equivalents increased $2.6
million to $26.8 million in connection with the growth in customer deposits and
a buildup of cash reserves for the year 2000 date changeover, most of which
remained undrawn into 2000.
Securities showed an increase of $2.9 million to $75.9 million. The
Company's securities, with the exception of a minor amount of equity securities,
are held to maturity. The portfolio is comprised mainly of US Treasuries and
Agencies and tax-exempt obligations of state and local subdivisions. Nearly all
of the portfolio is pledged to federal agencies and for municipal deposits.
These deposits, in turn, are used to purchase securities of local
municipalities. Other securities consist mainly of high-grade corporate bonds.
As these bonds matured in 1999, they were replaced with tax-exempt municipal
obligations.
Net loans increased $85.7 million to $394.2 million. The growth in loans
came mostly in the last three quarters of the year, corresponding with the
Company's Monroe County expansion. Nearly 90% of 1999's loan growth came from
commercial loans, which was consistent with projected results. All other assets
rose $2.8 million, most of which was in premises and equipment for expansion.
Page 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Total non-performing loans decreased over the twelve month period ended
December 31, 1999 by $0.7 million to $1.8 million at year-end 1999 as compared
to $2.5 million at year-end 1998. Commercial loans and residential real estate
loans showed a decrease, while one $0.8 million commercial mortgage accounted
for the increase in commercial real estate. Management attributes the overall
decrease to a combination of strict underwriting procedures, strong collection
efforts and a relatively stable economic cycle in the Company's market.
The allowance for loan losses stood at $4.1 million at December 31, 1999,
up $0.8 million from December 31, 1998. 1999's year end balance represents
1.04% of total loans versus 1.05% for 1998. The increase in the allowance
balance for 1999 mirrored the overall increase in the loan portfolio. Net
charge-offs for the year remained favorable at 0.11% of average loans versus
0.17% in 1998.
Other real estate owned consists of three parcels, all commercial, for $1.6
million. While the balance in the account remained the same, this compares
favorably to seven parcels in 1998. The Company has been successful in
liquidating its foreclosed properties.
In 1999 the Company added approximately $4.0 million in fixed assets with
approximately $3.0 million coming for the new bank offices and the remainder
being other building improvements, furniture, equipment and software. With the
planned opening of at least two banking offices in 2000, more fixed assets
additions can be anticipated, which the Company expects to fund from current
operations.
Total deposits at December 31, 1999 were $454.3 million and were up $77.8
million from December 31, 1998. For the same period borrowings from the FHLB
were up $15.1 million to $22.2 million. Other liabilities increased by $1.2
million to $3.2 million. Deposit growth since December 31, 1998 came mainly in
interest-bearing accounts: savings and money market up $46.8 million and time
deposits up $31.1 million. Demand deposit accounts remained unchanged in total,
but there was some shift from interest bearing to non-interest bearing accounts.
Overall, the deposit growth is attributable to expansion in Monroe County. The
Company's Ontario County retail deposits grew approximately 3.6%, while Monroe
County deposits grew 178.9% from 1998. The increase in borrowings is a direct
result of loan demand outpacing deposit growth. The Company anticipates both
loan and deposit growth to continue into 2000, but at a rate less than 1999's.
Results of Operations
- -----------------------
With a $41.1 million or 10.8% growth in earning assets for 1999 and a
corresponding $44.0 million or 14.2% growth in interest bearing liabilities, net
interest income increased $1.2 million or 6.5% and is reflective of the decline
in yields on the assets due to a lower interest rate environment than in 1998.
The Company's cost of funds decreased 17 basis points to 3.73% for the year
ended December 31, 1999 as compared to 1998. However, the yield on assets
decreased 32 basis points, resulting in a spread reduction of 5 basis points.
As noted in last year's report, management anticipated a lowering of the
interest rate spread and interest margin (which declined 19 basis points from
1998) due to the competitive Monroe County market. This trend will likely
continue through 2000 as most of the Company's new loans are originated in the
Monroe County area. Refer to Interest Rate Sensitivity and Asset / Liability
Management Review section for a further discussion.
Other income for the year ended December 31, 1999 increased $1.4 million or
23.7% over 1998. The increase was reflected in all major sources of
non-interest revenue. Service charges on accounts rose 40.8% attributed to
increased transaction volume, changes in account fee structures, and an increase
in April of ATM convenience fee for non-Canandaigua National Bank and Trust
Company customers to offset the increased cost of operating these machines.
Trust income grew 27.3% year on year due to the growth in assets under
management. The book value of assets under management increased 38.5% to $586.8
million at year end 1999. The Company continues to see strong demand for
locally managed trust services in its market area.
Page 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
In recent years most of the Company's Trust competitors, large regional and
national banks, have reduced the local control and decision making authority and
raised minimum account balances for personally managed accounts. This trend is
allowing the Company, with its focus on the personal service, to see double
digit growth. Other operating income was up due to strong mortgage banking
returns in the first half of the year. However, revenue growth in this area
slowed considerably towards the end of the year, following the Federal Reserve
Board's interest rate increases. The Company anticipates 2000 to be a lower
year in revenue and profitability for mortgage banking given current interest
rate forecasts.
Operating expenses increased $4.0 million or 21.7% for the year ended
December 31, 1999. Increases came in all major expense categories and were
attributed to growth in the Company's operations and expansion in Monroe County.
Based upon the projected growth in banking offices in 2000, operating expenses
are expected to increase. Management continues to estimate that the Company's
new banking offices will break even in 24 to 36 months.
Liquidity
- ---------
The Board of Directors has set general liquidity standards for the Bank to
meet which can be summarized as: the ability to generate adequate amounts of
cash to meet the demand 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 Company. For the
year ended December 31, 1999 the Company generated $2.6 million in net cash and
equivalents increases versus $4.6 million for the year ended December 31, 1998.
Net cash from operating activities was $8.6 million in 1999, roughly double
that of 1998. Both the largest source and use of operating cash in 1999 and
1998 were mortgage banking activity. However, activity in 1999 was slightly
less than 1998's.
Cash used by investing activities increased substantially in 1999 to $96.5
million from $6.0 million in 1998. The increase in investing activities was
primarily attributed to loan growth.
Cash provided by financing activities was $90.5 million in 1999 versus of
$6.2 million in 1998.
The Company has two primary sources of non-customer (wholesale) liquidity:
the Federal Home Loan Bank of New York (FHLB) and the Federal Reserve Bank of
New York. At December 31, 1999 residential mortgage loans with a carrying value
of approximately $24,440,000 were pledged as collateral for the Bank's advances
from the Federal Home Loan Bank, and an additional $10,321,000 was available for
pledging. Indirect automobile loans with a carrying value of approximately
$94,880,000 were pledged as collateral for a $75,900,000 line of credit from the
Federal Reserve Bank of New York.
Secondarily, in 1998, the Company opened a liquidity source through the
sale of its CD's in the national brokered market. This source will be used from
time to time to manage both liquidity and interest rate risk as conditions may
require.
For 2000, cash for growth is expected to come from both customer and
wholesale sources. Customer deposit growth is mainly expected to come from
Monroe County sources.
Page 23
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Interest Rate Sensitivity and Asset / Liability Management Review
- -------------------------------------------------------------------------
(Item 7a Quantitative and Qualitative Disclosures about Market Risk)
The Company realizes income principally from the differential or spread
between the interest earned on loans, investments and other interest-earnings
assets and the interest paid on deposits and borrowings. Loan volumes and
yields, as well as the volume of and rates on investments, deposits and
borrowings, are affected by market interest rates. Additionally, because of the
terms and conditions of many of the Company's loan documents and deposit
accounts, a change in interest rates could also affect the projected maturities
of the loan portfolio and/or the deposit base, which could alter the Company's
sensitivity to future changes in interest rates. Accordingly, management
considers interest rate risk to be the Company's most significant market risk.
Interest rate risk management focuses on maintaining consistent growth in
net interest income within Board approved policy limits while taking into
consideration, among other factors, the Company's overall credit, operating
income, operating cost, and capital profile. The Company's Asset/Liability
Committee (ALCO), which includes senior management and reports to the Board of
Directors, monitors and manages interest rate risk to maintain an acceptable
level of change to net interest income as a result of changes in interest rates.
Management of the Company's interest rate risk, requires the selection of
appropriate techniques and instruments to be utilized after considering the
benefits, costs and risk associated with available alternatives. Since the
Company does not utilize derivative instruments, management's techniques usually
consider one or more of the following: (1) interest rates offered on products,
(2) maturity terms offered on products, (3) types of products offered, and (4)
products available to the Company in the wholesale market such as advances from
the FHLB and brokered CD's.
The Company uses an interest margin simulation model as one method to
identify and manage its interest rate risk profile. The model is based on
expected cash flows and repricing characteristics for all financial instruments
and incorporates market-based assumptions regarding the impact of changing
interest rates on these financial instruments over a twelve month period.
Assumptions based on the historical behavior of deposit rates and balances in
relation to changes in interest rates are also incorporated into the model.
These assumptions are inherently uncertain and, as a result, the model cannot
precisely measure net interest income or precisely predict the impact of
fluctuations in interest rates on net interest income. Actual results will
differ from simulated results due to timing, magnitude, and frequency of
interest rate changes as well as changes in market conditions and management
strategies.
Using the aforementioned simulation model, net interest earnings
projections reflect a decline when applying the rising interest rate environment
as of December 31, 1999 ("Base Case"). The table below, which shows the
Company's estimated net interest earnings sensitivity profile as of December 31,
1999, assumes no changes in the operating environment, but assumes interest
rates increase/decrease immediately (rate shock) and remain unchanged
thereafter. The table indicates the estimated impact on net interest income
under the various interest rate scenarios as a percentage of Base Case earnings
projections.
Changes in Interest Estimated
Rates Percentage Change in
(basis points) Future Net Interest Income
- -------------------- --------------------------
12 Months
-----------
Base Case --
+200 (7)%
+100 (4)
- -100 4
- -200 7
Page 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
A second method used to identify and manage the Company's interest rate
risk profile is the static gap analysis. Interest sensitivity gap ("gap")
analysis measures the difference between the assets and liabilities repricing or
maturing within specific time periods. An asset-sensitive position indicates
that there are more rate-sensitive assets than rate-sensitive liabilities
repricing or maturing within specific time horizons, which would generally imply
a favorable impact on net interest income in periods of rising interest rates
and a negative impact in periods of falling rates. A liability-sensitive
position would generally imply a negative impact on net interest income in
periods of rising rates and a positive impact in periods of falling rates.
The following table presents an analysis of the Company's interest rate-sensitivity
gap position at December 31, 1999. All interest-earning assets and interest-bearing
liabilities are shown based on the earlier of their contractual maturity or repricing
date with no adjustment for estimated prepayment and decay rates. It should be noted that
the interest rate sensitivity levels shown in the table could be changed by external
factors such as loan prepayments and liability decay (withdrawal) rates or by factors
controllable by the Company such as asset sales.
Canandaigua National Corporation
Interest Rate Sensitivity Gap
December 31, 1999
(Dollars in thousands)
Maturity/Repricing Period
---------------------------
Within 3 4 to 12 1 to 5 Over 5
Months Months Years Years
--------- --------- --------- --------
Interest-earning assets:
Interest-bearing deposits
and federal funds sold $ 33 -- -- --
Securities 5,312 24,090 33,735 16,275
Loans 82,974 6,205 236,631 72,553
--------- --------- -------- -------
Total interest-earnings
assets 88,319 30,295 270,366 88,828
--------- --------- -------- -------
Interest-bearing liabilities:
NOW accounts 46,552 -- -- --
Money market 53,011 -- -- --
Savings 102,837 -- -- --
Time deposits 87,921 52,510 36,631 --
Borrowings 18,906 1,327 1,244 741
--------- --------- -------- -------
Total interest-bearing
liabilities 309,227 53,837 37,875 741
--------- --------- -------- -------
Interest rate sensitivity gap $(220,908) (23,542) 232,491 88,087
========= ========= ======== =======
Cumulative gap $(220,908) (244,450) (11,959) 76,158
========= ========= ======== =======
Cumulative gap ratio(1) 28.6% 32.7% 97.0% 119.0%
========= ========= ======== =======
Cumulative gap as percent of
Total assets (42.3%) (46.8%) (2.3%) 14.6%
========= ========= ======== =======
(1)Cumulative total interest-earning assets divided by cumulative total interest-bearing
liabilities.
Page 25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The chart indicates that the Corporation was repricing $220.9 million more
of interest bearing liabilities than interest earning assets in the 0-3 month
range. The Company considers this gap manageable, as a good portion of the
savings balances are not considered sensitive to rate changes. However, the
Company will be challenged to maintain its interest margins in the current
rising interest rate environment. For the 4-12 month period, the Corporation is
modestly liability sensitive, as $23.5 million more of interest bearing
liabilities are being repriced than interest earning assets. For the entire one
year range, the Corporation is repricing $244.5 million more interest bearing
liabilities than assets, or 32.7% of earning assets versus 37.7% at December 31,
1998. The Corporation is asset sensitive at $232.5 million for the one to five
year range and $88.1 million over five years.
For the entire portfolio range, the Corporation is asset sensitive at $76.1
million versus asset sensitivity of $69.3 million last year reflecting a modest
growth in non-interest bearing demand accounts. The Company's product mix is
such that nearly all assets and liabilities reprice or mature within five years
of origination, with most at three years. With such a balance sheet profile,
the Company faces interest rate risk over the short-term, but the value of its
equity (assets less liabilities) remains relatively stable.
Interest rates for 2000 are forecasted to continue to rise throughout the
year as the Federal Reserve balances continued economic expansion against
inflation fears.
Capital Resources
The Company and Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Company's and Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Bank must meet specific capital guidelines that involve
quantitative measures of the Company's and Bank's assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices. The Company's and Bank's capital amounts and classifications are also
subject to qualitative judgments by regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Bank to maintain minimum amounts and ratios. As
disclosed in the note 15 to the Consolidated Financial Statements, as of
December 31, 1999 all capital adequacy requirements were met.
As of December 31, 1999, the most recent notification from the Office of
the Comptroller of the Currency categorized the Bank as well-capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the Bank must maintain a minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the aforementioned
footnote. However, the Bank's asset growth in 2000 is anticipated to exceed its
capital formation, which will result in declining capital ratios. Management
will monitor capital levels at the Bank.
Dividends
Payment of dividends by the Bank to the Company is limited or restricted in
certain circumstances. According to federal banking law, the approval of the
Office of the Comptroller of the Currency (OCC) is required for the declaration
of dividends in any year in which dividends exceed the total of net income for
that year plus retained income for the preceding two years. At December 31,
1999, dividends were unavailable for payment to the Company without the approval
of the OCC. The Company's February 2000 dividend was paid entirely from its own
operating cash of $1.3 million.
Page 26
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash dividends for 1999 were $1.8 million or $11.50 per outstanding share
versus $1.8 million or $11.00 per outstanding share in 1998.
1998 versus 1997
At December 31, 1998 the Company's assets reached $428.0 million. Total
assets increased $9.1 million or 2.2% for the year. Net loans increased $2.5
million or .8% while securities increased $1.5 million or 2.2%. More
significantly, deposits increased $51.7 million or 15.9% and borrowings (from
the FHLB) decreased $43.5 million or 85.9%. Funds generated through deposit
inflows were used for loan originations, security purchases and FHLB borrowing
repayments.
Net income for the year ended December 31, 1998 was $3.6 million, down $.1
million or 4.0% from 1997. Basic earnings per share decreased by $.84 or 3.6%
over the same period. The decrease in net income for 1998 was a result of a
significant legal expense reimbursement in 1997 relating one large credit and
one-time charges taken in the first half of 1998 related to the completion of
the Company's core banking system conversion. Also a portion of the increased
operating expenses was derived from one of the Company's mortgage banking
subsidiaries, which was not acquired until late 1997. For 1998 net interest
income increased only $.2 million or 1.2% due to a lower interest rate
environment than in 1997.
The quality of the Company's assets continued to improve throughout 1998
with non-performing loans at December 31, 1998 at less than 1% of total loans;
the first time in over 5 years. The allowance for loan losses stood at 131.6%
of non-performing loans at year-end 1998 versus 61.3% at December 31, 1997. As a
result of these trends the provision for loan loss declined to $.6 million
versus $.9 million for the years then ended. Other real estate owned also
declined in 1998 as the Company liquidated approximately $1.2 million during the
year.
Financial Condition
- --------------------
As of December 31, 1998, total assets of the Company were $428.0 million,
up from $418.9 million at year end 1997. Cash and equivalents increased $4.6
million to $23.9 million in connection with the growth in customer deposits.
Securities showed an increase of $1.5 million to $72.9 million.
Net loans increased $2.5 million to $308.5 million. The growth in loans
came mostly in the second and third quarters of 1998, following a $10.0 million
decline in the first quarter. There was little net new loan volume in the
fourth quarter. All other assets rose $.5 million to $22.4 million.
Total non-performing loans decreased over the twelve month period ended
December 31, 1998 by $2.6 million to $2.5 million at year-end 1998 as compared
to $5.1 million at year-end 1997. The decrease came across all loan types -
commercial, residential real estate and consumer loans with the largest decrease
coming from commercial real estate.
The allowance for loan losses stood at $3.2 million at December 31, 1998,
up $.1 million from December 31, 1997. 1998's year end balance represented
1.05% of total loans versus 1.02% for 1997. The increase in the allowance
balance for 1998 was relatively modest and was a reflection of little net new
loan volume. Net charge-offs for the year remained favorable at .17% of average
loans versus .13% in 1997.
Other real estate owned consisted of six parcels of property, all
commercial, for $1.6 million. The decline in other real estate owned from the
same period in 1997 was a result of the Company's foreclosure on $ 2.1 million
in real estate assets in May 1997 offset by the liquidation of portions of this
and other properties.
Page 27
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
In 1998 the Company added approximately $2 million in fixed assets with
approximately half coming from the new Webster office and computer hardware,
software and peripherals.
Total deposits at December 31, 1998 were $376.5 million and were up $51.7
million from December 31, 1997. For the same period borrowings from FHLB were
down $43.5 million to $7.1 million. Other liabilities increased by $.07 million
to $1.9 million. The decline in borrowings was a direct result of deposit
growth. Deposit growth from December 31, 1997 came in all interest-bearing
types: interest-bearing demand up $19.6 million, savings and money market up
$8.7 million and certificates of deposit up $32.4 million. Deposit growth came
from a number of sources, including the introduction of our Generations Gold
suite of accounts, our Business Choice Sweep account, the opening of the Webster
office, and our "CD Specials". Also, to open a secondary source of liquidity in
addition to FHLB advances and reduce the short-term gap, the Company sold $10
million in nationally market CD's with an average maturity of 30 months.
Results of Operations
- -----------------------
Despite a $23.1 million or 6.5% growth in earning assets for 1998 and a
corresponding growth in interest bearing liabilities, net interest income
increased only $.2 million or 1.2% and was reflective of the decline in yields
on the assets due to a lower interest rate environment than in 1997. The
Company's cost of funds increased 6 basis points to 4.00% for the year ended
December 31, 1998 as compared to 1997. The increase was mostly due to higher
FHLB advances in early 1998, which were replaced during the year with lower cost
retail deposits.
Other income for the year ended December 31, 1998 increased $2.1 million or
56.4% over 1997. The increase was reflected in all sources of non-interest
revenue. Service charges on accounts rose 18% attributed to increased
transaction volume, changes in account fee structures, and the implementation in
April of an ATM convenience fee for non-Canandaigua National Bank and Trust
Company customers. Trust income grew 31% year on year due to the growth in
assets under management. The book value of assets under management increased
18.4% to $423.6 million at year end 1998. Net gains on loan sales and other
income are both up due to mortgage banking.
Operating expenses increased $2.8 million or 17.9% for the year ended
December 31, 1998. Increases came in all major expense categories and were
attributed to (1) growth in the Company's operations, (2) the acquisition of
Home Town Funding in late 1997, and (3) additional expenses for the core banking
conversion.
New Accounting Pronouncements
- -------------------------------
In June 1999 the Financial Accounting Standards Board deferred for one year
the effective date of FASB Statement No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities." Statement No. 133 establishes
comprehensive accounting and reporting requirements for derivative instruments
and hedging activities. The statement requires companies to recognize all
derivatives as either assets or liabilities, with the instruments measured at
fair value. The accounting for gains and losses resulting from changes in fair
value of the derivative instrument depends on the intended use of the derivative
and the type of risk being hedged. The statement is now effective for the
Company for fiscal quarters beginning January 1, 2001. Earlier adoption is
permitted. The Company holds no free-standing derivative instruments at year
end, and management does not anticipate that adoption of the new standard will
have a material effect on the Company's financial statements.
Page 28
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Year 2000
The Company's 1998 Form 10-K and 1999 Form 10-Q's detailed the nature and
extent of the Company's efforts to prepare for the year 2000 (Y2K) date
changeover. By any measure, the efforts were a success. There were no major
Y2K incidents that affected the Company. The Company will continue to monitor
its internal and external resources for possible disruptions related to Y2K, but
anticipates none.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company, together with a
report thereon of KPMG LLP dated February 4, 2000 appearing on pages 7 to 30 of
the 1999 Annual Report to Stockholders are incorporated herein by reference. A
reference index to the consolidated financial statements and accompanying notes
presented in the Annual Report to Stockholders is shown in Item 14 of this
filing.
Supplementary data has been omitted because it is not applicable
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors
The information with respect to the directors of the Corporation, which is
required to be included herein pursuant to Item 401 of Regulation S-K, is
included under the caption "Election of Directors" on the Proxy Statement, dated
February 28, 2000, and is incorporated herein from the Proxy Statement by
reference. There are no arrangements or understandings between any director and
any other person pursuant to which the director was selected.
(b) Executive Officers
The names, ages and positions of the executive officers of the Corporation
as of December 31, 1999, are included under the caption "Principal Officers" on
the Proxy Statement, dated February 28, 2000, and is incorporated herein from
the Proxy Statement by reference. Officers are generally elected annually by
the Board of Directors at the meeting of directors immediately following the
annual meeting of stockholders. There are no arrangements or understandings
between the executive officers and any other person pursuant to which the
executive officers were selected.
No Director or executive officer of the Corporation has received any
remuneration from the Bank or the Corporation in his capacity as a director or
executive officer of the Corporation.
The executive officers of the Corporation have been officers of the Bank
for five years or more.
Directors and the executive officers as a group beneficially owned 13,159
shares or 8.30% of the shares outstanding. Shares owned directly total 11,983
and shares held by directors, executive officers, or their spouses in a
fiduciary capacity or by their spouses individually total 1,176.
Page 29
(c) Significant Employees
Not applicable
(d) Family Relationship
The disclosure of family relationships between executive officers and
directors of the Corporation is included under the caption "Information on
Directors and Nominees " on the Proxy Statement, dated February 28, 2000, and is
incorporated herein from the Proxy Statement by reference.
(e) Business Experience
Disclosed in Items 10 (a) and 10 (b)
(f) Involvement in Certain Legal Proceedings
Not applicable
(g) Promoters and Controlled Persons
Not applicable
Item 11. Executive Compensation
The information required to be included herein regarding executive
compensation pursuant to Item 402 of Regulation S-K is included under the
caption "Executive Compensation" on the Proxy Statement, dated February 20,
2000, and is incorporated herein from the Proxy Statement by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required to be included herein regarding security ownership
and certain beneficial owners and management pursuant to Items 403 (a) and (b)
of Regulation S-K is included under the caption "Principal Beneficial Owners of
Common Stock" in the Proxy Statement, dated February 20, 2000, and is
incorporated herein from the Proxy Statement by reference.
(c) Changes in Control
None
Page 30
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
None
(b) Certain Business Relationships
None
(c) Indebtedness of Management
Certain directors and executive officers of the Corporation and the Bank
and their associates were customers of and had transactions with the Bank in the
ordinary course of the Bank's business during 1999. All outstanding loans and
commitments included in such transactions were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others, and in the opinion of the Bank and
Company, did not involve more than a normal risk of collectibility or present
other unfavorable features.
(d) Transactions with Promoters
Not applicable
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements are contained in the Company's 1999
Annual Report to Shareholders which, as indicated below, is included as Exhibit
13 of this report.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Income for the Years Ended December 31, 1999,
1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Schedules
Schedules are omitted because of the absence of conditions under which they
are required or because the required information is provided in the consolidated
financial statements or notes thereto.
Page 31
(3.a) Exhibits
Exhibit Incorporation by Reference or page in
sequential numbering where exhibit
may be found:
(3.i.) Certificate of Incorporation, of the Exhibit A on Form 10-K
Registrant, as amended for the year ended
December 31, 1994
(3.ii.) By-laws of the Registrant, Exhibits B on Form 10-K
as amended for the year ended
December 31, 1994
(13) Annual Report to Shareholders for
the year ended December 31, 1999 Page 35
(20) Definitive Proxy Statement to
Shareholders dated February 28, 2000 Page 71
(21) Subsidiaries Page 84
(27) Financial Data Schedule Page 85
(b) Reports on Form 8-K:
None
Page 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
March 29, 2000 By: /s/ George W. Hamlin, IV
George W. Hamlin, IV, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Signature Title Date
- --------------------------- ------------------ --------------
/s/ George W. Hamlin, IV President/Director March 29, 2000
- ---------------------------
(George W. Hamlin, IV)
/s/ Robert G. Sheridan Secretary/Director March 29, 2000
- ---------------------------
(Robert G. Sheridan)
/s/ Gregory S. MacKay Treasurer March 29, 2000
- ---------------------------
(Gregory S. MacKay)
/s/ Patricia A. Boland Director March 29, 2000
- ---------------------------
Patricia A. Boland
/s/ James S. Fralick Director March 29, 2000
- ---------------------------
James S. Fralick
/s/ Daniel P. Fuller Director March 29, 2000
- ---------------------------
Daniel P. Fuller
/s/ David Hamlin, Jr. Director March 29, 2000
- ---------------------------
David Hamlin, Jr.
/s/ Frank H. Hamlin, Director March 29, 2000
- ---------------------------
Frank H. Hamlin
/s/ Stephen D. Hamlin Director March 29, 2000
- ---------------------------
Stephen D. Hamlin
/s/ Richard P. Miller, Jr. Director March 29, 2000
- ---------------------------
Richard P. Miller, Jr.
/s/ Caroline C. Shipley Director March 29, 2000
- ---------------------------
Caroline C. Shipley
/s/ Alan J. Stone Director March 29, 2000
- ---------------------------
Alan J. Stone
Page 33
INDEX OF EXHIBITS
Exhibit
(3.i.) Certificate of Incorporation, of the Exhibit A on Form 10-K
Registrant, as amended for the year ended
December 31, 1994
(3.ii.) By-laws of the Registrant, Exhibits B on Form 10-K
as amended for the year ended
December 31, 1994
(13) Annual Report to Shareholders for
the year ended December 31, 1999
(20) Definitive Proxy Statement to
Shareholders dated February 28, 2000
(21) Subsidiaries
(27) Financial Data Schedule
Page 34