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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or Section 15(D) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File Number 2-94863
CANANDAIGUA NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
New York 16-1234823
(State of Incorporation) (IRS Employer Identification No.)
72 South Main Street, Canandaigua, NY 14424
(Address of principal executive offices) (Zip Code)
(716) 394-4260
(Registrant's telephone number, including area code)
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
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 [ ]
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(#229.405) is contained in registrant's definitive proxy statement incorporated
herein by reference in Part III of this Form 10-K.
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 1998.
Common Stock, $50.00 par value - described on page 9 of 1997 Annual
Report and incorporated herein by reference.
Number of shares outstanding of the Registrant's shares of common stock
as of January 31, 1998. 160,566 shares, common stock, $50.00 par value
Page 1
Certain portions of the documents listed below have been incorporated by
reference into the indicated Part of this Form 10-K.
(1) Portions of the Annual Report to Stockholders
for the year ended December 31, 1997 Part I, Item 2
(2) Notice of Annual Meeting of Stockholders Part II, Items 5 & 8
and Proxy Statement dated February 25, 1998 Part III, Items 10-13
(3) Index of Exhibits Part II, Item 5
Page 31
Page 2
CANANDAIGUA NATIONAL CORPORATION
FORM 10-K
INDEX
Page No.
PART I.
Item 1. Business 4-17
Item 2. Properties 18
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
PART II.
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters 19
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation 20-26
Item 7A. Management of Market Risk 20-26
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in Disagreements with Accountants on Accounting
and Financial Disclosure 26
PART III.
Item 10. Directors and Executive Officers of
the Registrant 27
Item 11. Executive Compensation 28-30
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 32
Signatures 32-33
Page 3
PART I
Item 1. Business
Canandaigua National Corporation
The Canandaigua National Corporation, referred to as The Corporation, 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 Greater
Funding of New York, Inc. (GFNYI) d/b/a Greater Funding, the Mortgage Company
during 1996 by purchasing its remaining 66.3% shares not owned by the Company.
GFNYI offers mortgage products that the bank is not licensed to offer,
therefore offering their customer base a larger range of products. GFNYI is
engaged in underwriting and funding mortgages in western New York State. GFNYI
typically resells residential mortgages to entities, which service the loans.
The Corporation acquired 100% of Home Town Funding, Inc. (HTF) during 1997.
HTF functions are the same as GFNYI above. 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, Bank has operated as a national banking association doing
business at several locations in Ontario County and at its branch locations in
the town of Mendon and Village of Pittsford in Monroe County, New York.
As of December 31, 1997, Bank had total assets of approximately
$418,942,000; total stockholders' equity of approximately $40,932,000; and
total
deposits of approximately $324,761,000. Its deposits are insured through the
Bank Insurance Fund by the Federal Deposit Insurance Corporation.
Bank engages in a full service commercial and consumer banking and trust
business. Bank, with its main office at 72 South Main Street, Canandaigua, New
York, provides services to its customers through its network of ten branches
which include drive-in facilities and customer Bank communication terminals as
well as limited banking transaction through the internet. Bank's full service
offices are located in Ontario County and in the town of Mendon and Village of
Pittsford in Monroe County, New York.
Bank's services include accepting time, demand and savings deposits, NOW
accounts, regular savings accounts, money market certificates, investment
certificates, fixed rate certificates of deposit and club accounts. Its
services also 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
and the renting of safe deposit facilities. Additional services include
making residential mortgage loans, revolving credit loans with overdraft
checking protection, small business loans, and student loans. Bank's
business loans include seasonal, credit, collateral, and term loans. Trust
services provided by Bank include services as executor and trustee under
Page 4
Item 1. Business
The Canandaigua National Bank and Trust Company - continued
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. In 1995 the Bank formed a subsidiary (CNB Operating Subsidiary
No.1, Inc.). The primary business of this company is to sell life insurance to
individuals. This company is an agency only. During 1996 the Bank purchased
the Burlingham Agency, Inc. The primary business of this company is to sell
life insurance to individuals. This company is an agency only. The Bank
purchased Burlingham Agency to gain access to an already established business
with a customer base. By this purchase the Bank can offer a full line of
products.
Bank has a relatively stable deposit base and no material amount of
deposits
are obtained from a single depositor or group of depositors (including federal,
state and local governments). Bank has not experienced any significant
seasonal
fluctuations in the amount of its deposits nor does Bank rely on foreign
sources
of funds or income.
Territory Served and Competition
All phases of Bank's business are highly competitive. Bank's market area
is
generally Ontario County, with concentration in the Canandaigua, New York area.
Bank competes with local commercial banks as well as other commercial banks
with
branches in Bank's market area as well as federal savings and loan associations
and non-bank banks and credit unions. Bank considers its competition to be
Chase Bank, N.A., Key Bank, National Bank of Geneva, Community Bank,
N.A., and WCTA Federal Credit Union located in Canandaigua, New York and Sears
Financial Network Center and Fleet Bank, M & T Bank located in Rochester, New
York.
Bank, along with other commercial banks, competes with respect to its
lending
activities as well as in attracting demand deposits, with savings banks,
savings
and loan associations, insurance companies, regulated small loan companies,
non-bank banks and credit unions. Bank also competes with insurance
companies,
investment counseling firms, mutual funds and other business firms and
individuals in corporate trust and investment management services.
Bank 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.
Bank employed 248 people as of December 31, 1997.
Page 5
Supervision and Regulation
Canandaigua National Corporation is incorporated under the laws of the
State
of New York and is directly supervised by the Federal Reserve Bank under the
laws governing one-bank holding companies. In addition, the Corporation
reports
to the Securities and Exchange Commission under the laws governing corporations
with registered securities.
As a national bank and member of the Federal Reserve System, the Bank is
subject to regulations of the Comptroller of the Currency and the Board of
Governors of the Federal Reserve System. As an insured bank under the Federal
Deposit Insurance Act, Bank is also regulated by the Federal Deposit Insurance
Corporation. Representatives of the Comptroller of the Currency regularly
conduct examinations of Bank's affairs and records, and Bank must furnish
quarterly reports to the Comptroller.
Government Monetary Policies and Economic Controls
The earnings of 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 Bank's deposits, loans and
investment growth, as well as the rate of interest earned and paid, and are
expected to affect Bank's operations in the future. The effect of such
policies
and regulations, if any, upon the future business and earnings of Bank cannot
accurately be predicted.
Consolidated Financial and Statistical Data
A detailed review of the business activities of the Corporation and Bank
is
presented in the following pages.
Page 6
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
A. Average Balance Sheet (In Thousands)
Average Assets 1997 1996 1995
Cash & Due from Banks $ 15,567 $ 15,059 $ 13,392
Securities:
U.S. Government Securities 31,273 32,180 32,479
Obligations of States and
Political Subdivisions: Tax Exempt 31,037 28,370 28,349
Taxable 953 912 1,131
Other 11,014 11,386 12,706
Federal Funds Sold 19 7,184 12,023
Loans 281,476 227,781 209,280
Allowance for Loan Losses (2,936) (2,388) (2,213)
Premises & Equipment - net 11,554 8,764 8,269
Other Assets 5,810 5,411 5,354
________ ________ _______
Total $385,767 $334,659 320,770
Average Liabilities & Stockholders' Equity
Deposits:
Interest Bearing Demand $ 34,464 $ 33,695 $ 32,989
Non-interest Bearing Demand 59,920 50,801 46,967
Savings 110,954 112,494 118,300
Other Time 112,661 96,965 84,746
_______ _______ _______
Total 317,999 293,955 283,002
Borrowing from FHLB 26,942 1,652 1,304
Other Liabilities 1,443 1,218 477
_______ _______ _______
Total Liabilities 346,384 296,825 284,783
Stockholders' Equity 39,383 37,834 35,987
________ ________ ________
Total $385,767 $334,659 $320,770
Page 7
B. Average Rates and Yields (Dollars In Thousands)
1997 1996
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INT. RATE BALANCE INT. RATE
Interest Earning Assets:
U.S. Gov't. Securities 31,273 1,846 5.90% $ 32,180 $ 1,968 6.12%
Obligations of States
& Political
Subdivisions-Tax Exempt 31,037 1,440 4.64% 28,370 1,332 4.70%
Taxable 953 66 6.93% 912 58 6.36%
Federal Funds Sold 19 1 5.26% 7,184 389 5.42%
Loans (1)(2) 281,476 25,799 9.17% 227,781 21,046 9.24%
Other Securities 11,014 691 6.27% 11,386 712 6.25%
_______ ______ _______ ______
Total Interest
Earning Assets $355,772 $29,843 8.39% $307,813 $25,505 8.29%
_______ ______ ____ _______ ______ ____
Interest Bearing Liabilities:
Demand Deposits 34,464 $ 493 1.43% $ 33,695 $ 457 1.36%
Savings 110,954 3,028 2.73% 112,494 3,075 2.73%
Other Time 112,661 6,212 5.51% 96,965 5,203 5.37%
Advances from FHLB 26,942 1,506 5.59% 1,652 62 3.75%
_______ ______ ____ _______ _____
Total Interest
Bearing Liabilities $285,021 $11,239 3.94% $244,806 $8,797 3.59%
_______ ______ ____ _______ ______ ____
Net Interest Income $18,604 $16,708
______ ______
Net Spread 4.45% 4.70%
____ ____
Net Interest Income
to Earning Assets 5.23% 5.43%
____ ____
Page 8
Average Rates and Yields-continued (Dollars in Thousands)
1995
AVERAGE
AVERAGE
YIELD/
BALANCE INT. RATE
Interest Earning Assets:
U.S. Gov't. Securities $ 32,479 $ 1,865 5.74%
Obligations of States
& Political
Subdivisions-Tax Exempt 28,349 1,395 4.92%
Taxable 1,131 64 5.66%
Federal Funds Sold 12,023 697 5.80%
Loans (1)(2) 209,280 19,998 9.56%
Other Securities 12,706 812 6.39%
_______ ______
Total Interest
Earning Assets $295,968 $24,831 8.39%
_______ ______ ____
Interest Bearing Liabilities:
Demand Deposits $ 32,989 $ 601 1.82%
Savings 118,300 3,570 3.02%
Other Time 84,746 4,614 5.44%
Short-term Borrowings and
Securities Sold Under
Agreements to
Repurchase 0 0 0%
Borrowing from FHLB 477 11 2.31%
_______ ______
Total Interest Bearing Liabilities $236,512 $ 8,796 3.72%
_______ ______ ____
Net Interest Income $16,035
______
Net Yield 4.67%
____
Net Interest Income to Earning Assets 5.42%
____
(1) Non-accrual loans are included in the average loan balance.
(2) Loan interest includes fees on loans of $811,885, $753,171, and $610,946
in 1997, 1996, and 1995 respectively.
(3) Yields for securities were calculated based on amortized cost of
securities.
Page 9
C. Rate/Volume Analysis (Dollars In Thousands)
1997 vs. 1996 1996 vs. 1995
Increase (Decrease) Average Average Average Average Average Average
Due to Change In: Volume Rate Total Volume Rate Total
Interest Income:
Loans $4,978 $ (298) $ 4,680 $1,725 (677) 1,048
Federal Funds Sold (377) 0 (377) (265) (43)
(308)
Investment Securities:
U.S. Gov't Securities (55) (67) (122) (17) 120 103
Obligations of State
and Political
Subdivision-Exempt 125 (17) 108 1 (64)
(63)
-Taxable 3 5 8 (13) 7
(6)
Other (32) 73 41 (42) (58)
(100)
______ _______ _______ _____ ____ ____
Total Interest
Income 4,642 (304) 4,338 1,389 (715) 674
Interest Expense:
Deposits:
Interest Bearing
Demand 9 27 36 13 (157)
(144)
Savings (42) (5) (47) (170) (325)
(495)
Other Time 862 147 1,009 657 (68) 589
Borrowing from FHLB 1,400 44 1,444 50 1 51
_____ ____ _____ ____ ____ ____
Total Interest
Expense 2,229 213 2,442 550 (549) 1
_____ _____ _____ ___ ___ ___
Net Interest Income $2,413 $ (517) $1,896 $ 839 $(166) $ 673
Note: 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 relationship of the absolute dollar amounts of the
change in each.
Page 10
I. Securities Portfolio
A. Securities Portfolio, (at carrying value) including FHLB and FRB stock
(Dollars In Thousands)
------December 31--------
1997 1996
1995
U.S. Government Obligations and Agencies $31,413 $30,671
$31,955
Mortgage backed Securities 334 325
310
Obligations of States and Political
Subdivisions: Exempt 33,320 29,365
26,321
Taxable 953 955
839
Other Securities 8,479 10,455
12,495
_______ _______
_______
Total $74,499 $71,771
$71,920
Securities Portfolio, including FHLB and FRB stock by Maturity with Weighted
Average Yield (Dollars In Thousands)
December 31, 1997
Within One Through Six Through Over
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
U.S. Treasury
Obligations $16,179 5.78% $14,234 5.98% 0 0.00% 0
0.00%
Mortgage backed
Securities 9 8.44% 34 8.37% 42 8.19% 249 8.0%
US Gov't Agencies 1,000 5.37% 0 0.0% 0 0.0% 0 0.0%
Obligations of State
and Political
Subdivisions
Taxable: 266 5.60% 687 6.49% 0 0.00% 0 0.0%
Exempt: 6,946 4.06% 16,577 4.42% 9,490 4.57% 307
5.77%
Other Securities 1,499 5.92% 3,468 6.68% 0 0.00% 3,512
6.36%
_______ _______ ______ ______
Total $25,899 $35,000 $9,532 $4,068
Note: (a) Securities with no stated maturity are included in the "Over Ten
Years" category.
(b) Yield on "States and Political Subdivisions" (non-taxable
investments) are not reflected on a tax equivalent basis.
Page 11
III. Loan Portfolio
The loan portfolio is comprised solely of domestic loans which are widely
diversified with no concentrations in an industry group or with borrowers
engaged in similar activities. The following summary shows the
classifications of loans by category.
A. Types of Loans
December 31,
1997 1996 1995 1994 1993
(Dollars In Thousands)
Commercial, financial
and agricultural $ 37,610 27,503 28,326 32,442 30,367
Consumer
Auto 71,317 44,784 15,123 12,379 10,796
Other 15,245 9,925 9,146 14,511 12,501
Residential mortgage 94,593 101,349 86,641 83,018 78,315
Commercial mortgage 74,228 62,513 62,038 60,278 59,036
Other 14,257 11,437 8,770 8,121 7,288
________ ________ ________ ________ ________
Total 307,250 257,511 210,044 210,749 198,303
Less: Allowance for
loan losses 3,153 2,675 2,258 2,202 2,277
________ _______ _______ _______ _______
Loans, Net $304,097 254,836 207,786 208,547 196,026
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 and
installment loans as of December 31, 1997.
Remaining Maturity
Within One Through Over
One Year Five Years Five Years Total
(Dollars In Thousands)
Commercial, financial
and agricultural $11,091 $ 16,793 $9,725 $37,610
Loans maturing after one year:
With a predetermined interest
rate $14,957
With a floating or adjustable rate $11,561
The maturities set forth above are based upon contracted maturities. Demand
loans, overdrafts and certain time loans, the principal of which will be
renewed in whole or in part, are included in the "Within One Year"
classification. The Company's loan policy encourages a repayment schedule to
be established whenever possible.
Page 12
B. Maturities and Sensitivities of Loans to Changes
In Interest Rates - continued
Bank 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.
The Bank 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 Bank 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, 1997, there are no material
commitments to extend credit which represent unusual risks.
C. Risk Elements
(1) Non-accrual, Past Due and Restructured Loans
The risk elements in the loan portfolio are disclosed in the following
schedule.
December 31,
Non-Performing Assets 1997 1996 1995 1994 1993
(Dollars In Thousands)
Commercial, financial &
agricultural $ 1,210 $ 2,285 $1,640 $2,350 $1,151
Real-estate 1,811 8,919 9,307 8,912 4,866
Consumer loans 53 75 0 0 0
______ ______ _____ _____ _____
Total non-performing loans 3,074 11,279 10,947 11,262 6,017
Other real estate owned 2,512 1,141 2,158 723 721
_______ _______ ______ ______ ______
Total non-performing assets $ 5,586 $12,420 $13,105 $11,985 $6,738
Non-performing loans to year
end loans 1.00% 4.38% 5.21% 5.35% 3.03%
Non-performing assets to year end
loans & other real estate owned 1.82% 4.82% 6.24% 5.68% 3.40%
Page 13
Item III. C. (continued)
Past Due 90 Days or More
and accruing 1997 1996 1995 1994 1993
.
Commercial, financial &
agricultural $ 347 $ 0 $ 12 $ 4 $ 381
Real estate 1,118 48 101 254 889
Consumer 501 28 55 44 69
____ ____ ______ ______ ______
Total past due 90 days
or more and accruing $1,966 $ 76 $ 168 $ 302 $1,339
1997 1996 1995 1994 1993
Restructured Loans $0 $0 $0 $0 $393
The accrual of interest on commercial and real estate loans is generally
discontinued 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 non-accrual loans does not resume until management
considers principal and interest collectible. Installment loans are generally
charged off upon becoming 120 days past due.
Additional gross income of $636,000, $841,000, and $739,000 would have
been reported during 1997, 1996, and 1995, respectively, if the loans reported
above as non-accrual and restructured loans had been current in accordance with
the original terms.
(2) Potential Problem Loans
Loans which are not disclosed pursuant to Item III C. (1), but where known
information about credit problems of borrowers causes Management to have
serious doubts as to the ability of such borrowers to comply with present
loan repayment terms which may result in disclosure in Item III C. (1) above.
There were no potential problem loans as of December 31, 1997 and 1996.
Page 14
IV. Summary of Loan Loss Experience
An analysis of the Allowance for Loan Losses and statistics
relating to the relationship of the Allowance and Charge-offs to Loans is
presented in the following summary.
Year Ended
December 31,
1997 1996 1995 1994 1993
(Dollars In Thousands)
Total loans outstanding
at end of year (1) $307,250 $257,511 $210,044 $210,749 $198,303
Average loans outstanding
during year (1) $281,476 $227,781 $209,280 $202,622 $197,168
Allowance for loan losses:
Balance at beginning
of year $ 2,675 $ 2,258 $ 2,202 $ 2,277 $ 2,152
Charge-offs
Commercial, financial
and agricultural 257 1,356 810 712 481
Installment 430 126 191 145 245
Real Estate Mortgage (2) 40 60 151 65 100
Credit Cards 68 95 77 89 69
_____ _____ ___ ___ ___
Total 795 1,637 1,229 1,011 895
Recoveries: (2)
Commercial, financial and
agricultural 190 216 90 82 218
Installment 189 253 118 143 132
Real Estate Mortgage 19 72 20 0 53
Credit Cards 24 23 26 12 17
____ ____ ____ ____ ____
Total 422 564 254 237 420
____ ____ ____ ____ ____
Net charge-offs ( 373) (1,073) (975) (774) (475)
Provision charged
to expense 851 1,490 1,031 699 600
______ ______ ______ ______ ______
Balance at end of year $3,153 $2,675 $2,258 $2,202 $2,277
Ratio of net charge-offs
to average loans
outstanding .13% .47% .47% .38% .24%
(1) Loans are shown net of unearned discount.
(2)Includes Residential and Commercial Mortgages.
Page 15
IV. Summary of loan loss experience - continued
Allocation of allowance for loan losses
December 31
(Dollars in Thousands)
1997 1996 1995
% of % of % of
Loans to Loans to Loans to
Total Total Total
Amount Loans Amount Loans Amount Loans
Commercial, financial
and agricultural (1) $1,594 36% $1,873 35% $1,809 43%
Real Estate Mortgage 90 31% 115 40% 81 41%
Consumer 862 28% 540 21% 230 12%
Other 0 0% 0 0% 0 4%
Unallocated 607 5% 147 4% 138 N/A
_____ ___ _____ ___ _____ ___
Total $3,153 100% $2,675 100% $2,258 100%
December 31
(Dollars in Thousands)
1994 1993
% of % of
Loans to Loans to
Total Total
Amount Loans Amount Loans
Commercial, financial
and agricultural (1) $1,534 44% $1,560 45%
Real Estate Mortgage 160 40% 125 40%
Consumer 360 13% 421 12%
Other 0 3% 0 3%
Unallocated 148 N/A 171 N/A
_____ ___ _____ ___
Total $2,202 100% $2,277 100%
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. 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. The allowance for loan losses is
applicable for any loan losses despite the allocation provided above. In
addition, future allocations may change due to circumstances inherent in the
loan portfolio
(1)Includes Commercial Mortgages.
Page 16
V. Deposits
The following summary sets forth the average amounts of the various types of
deposits for December 31, 1997, 1996 and 1995, and the average rate paid on
each.
1997 1996 1995
Amount Rate Amount Rate Amount Rate
(Dollars In Thousands)
Non-interest bearing
demand $ 59,920 -- $ 50,801 -- $ 46,967 --
Interest bearing demand 34,464 1.43% 33,695 1.36% 32,989 1.82%
Savings 110,954 2.73% 112,494 2.73% 118,300 3.02%
Other time 112,661 5.51% 96,965 5.37% 84,746 5.45%
________ ________ ________
Total $317,999 3.06% $293,955 2.97% $283,002 3.11%
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, 1997.
1997
(In Thousands)
Three months or less $32,952
Over three through six months 1,124
Over six through twelve months 914
Over twelve months 1,433
_______
Total $36,423
VI. Return on Equity and Assets
The following table sets forth certain ratios used in evaluating financial
position and results of operations.
December 31,
1997 1996 1995
Return on average total assets .97% .88% 1.22%
Return on average equity 9.49% 7.79% 10.88%
Dividend payout ratio 43.06% 47.98% 28.78%
Average equity to total
average assets 10.21% 11.31% 11.22%
Page 17
Item 2. Properties
Canandaigua National Corporation occupies space at the main office of the Bank.
The Corporation owns a building in Pittsford and is occupied by Home Town
Funding, Inc and several other unrelated businesses. The Corporation leases
real property in Farmington, Mendon, Manchester, Victor (Eastview Mall),
Pittsford, under long-term renewable leases. The premises are sublet to the
Bank for its Farmington Branch Office.
The Bank's operations are conducted from nine offices located in Ontario
County, New York and two offices located in Monroe County, New York. 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. The Bank owns
branch offices which are located on the main street in Victor, New York;
Bloomfield, New York; and Honeoye, New York. The Bank subleases space for
branch offices in Farmington, New York, at Wade's Supermarket located on Route
96; in Canandaigua, New York at 709 South Main Street; in Shortsville-
Manchester in the Bliss Shurfine Foodmart; in the Town of Mendon, Monroe
County, New York in the Hitching Post Plaza in the Big-M Food Market; in
Victor, New York in the Eastview Mall and in Pittsford, New York at State
Street. There are drive-in facilities located at all offices except for the
Eastview Mall and Pittsford offices.
The Bank provides 24-hour banking services to Bank customers through automatic
teller facilities located at each office and through remote Automatic Teller
Machines located at the Finger Lakes Community College on Lincoln Hill in the
Town of Hopewell, New York, and at F.F. Thompson Hospital located on North
Parrish Street, Canandaigua, New York.
The carrying value of the properties as of December 31, 1997, 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 29 of the 1997 Annual Report to Stockholders and is incorporated herein
by reference.
Item 3. Legal Proceedings
The Company and its subsidiaries are not involved in any pending legal
proceeding other than routine legal proceedings undertaken in the ordinary
course of business. In the opinion of the 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
NONE
Page 18
PART II
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters
The information required to be included herein, pursuant to Item 201 of
Regulation S-K, is incorporated herein by reference from the pages of the 1997
Annual Report to Stockholders and proxy statement set forth below:
Required Information Annual Report Caption
Market information "Common Stock Data"
Dividends "Common Stock Data"
"Stockholders' Equity"
Holdings: (At December 31, 1997, the Corporation had approximately 756
shareholders.) 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 table represents a summary of selected components of the Corporation's
consolidated financial statements for the five years ended December 31, 1997.
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)
1997 1996 1995 1994 1993
Net Interest Income $ 18,604 16,708 16,035 14,760 14,018
Provision for Loan Losses $ 851 1,490 1,031 699 600
Non-Interest Income $ 4,317 3,914 3,393 3,268 3,469
Non-Interest Expense $ 16,657 15,147 12,684 12,022 12,195
Applicable Income Taxes $ 1,676 1,038 1,797 1,604 1,265
Net Income $ 3,737 2,947 3,916 3,703 3,427
Per Share Data:
Net Income $ 23.22 18.20 24.31 23.01 21.32
Cash Dividends $ 10.00 8.75 7.00 6.00 5.50
Balance Sheet Data:
Total Assets $418,942 360,623 $317,209 $310,541 $314,640
Total Equity $ 40,932 39,119 37,397 34,538 31,744
Average Assets $385,767 334,659 320,770 315,312 321,546
Average Equity $ 39,383 37,834 35,987 33,035 30,464
Page 19
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.
Liquidity and Interest Rate Sensitivity Management
Liquidity is defined as the ability to generate adequate amounts of cash to
meet the demand for cash from depositors who wish to withdraw funds, borrowers
who require funds to meet their credit needs, and the need for operating funds
and capital expansion.
Asset liquidity is found in cash, federal funds sold, deposits with other
financial institutions, short term security holdings, and loan repayments. On
average for 1997, federal funds sold, cash and due from banks, and interest
bearing deposits with other banks totaled $15.6 million. The securities
portfolio is also an important source of liquidity. As of December 31, 1997,
approximately $25.9 million amortized cost of the portfolio will be mature in
one year or less. Combining these two major sources of liquidity, the
Corporation had $41.5 million of readily available assets, which is 10.8% of
average assets for 1997. Management believes that liquidity needs are
adequately addressed, but also has short term and long term borrowings
available from the Federal Reserve Bank and the Federal Home Loan Bank.
An objective of the Company's asset/liability management policy is to maximize
current and future net interest income within acceptable levels of interest
rate risk while satisfying liquidity and capital requirements. The
Asset/Liability management Committee is responsible for managing interest rate
risk.
The Company uses a variety of methods to manage its interest rate risk and does
not rely solely on one method. One such method used to manage interest rate
risk involves the measurement of interest rate gap. Interest rate gap is the
amount by which a bank's rate sensitive assets differ from its rate sensitive
liabilities. A positive gap exists when rate sensitive assets exceed rate
sensitive liabilities, indicating that a greater volume of assets than
liabilities will reprice during a given period. Theoretically, this mismatch
will enhance earnings in a rising rate environment and inhibit earnings when
rates decline. Conversely, when rate sensitive liabilities exceed rate
sensitive assets, the gap is negative, indicating that greater volume of
liabilities than assets will reprice during the period. Theoretically, in this
case, a rising rate environment will inhibit earnings and declining rates will
enhance earnings. The Rate Sensitivity Schedule that follows illustrates the
measurement of interest rate gap at December 31, 1997.
Page 20
The following chart indicates rate sensitivity at December 31, 1997:
INTEREST RATE SENSITIVITY GAPS
As of December 31, 1997
(In Thousands)
MATURITIES
0 - 3 4 - 12 1 - 5 Over 5
MONTHS MONTHS YEARS YEARS
Loans $ 81,570 4,193 152,620 62,538
Securities 10,460 15,439 35,000 13,405
________ ______ _______ ______
Interest-earning
assets $ 92,030 19,632 187,620 75,493
________ ______ _______ ______
Certificate of Deposits 57,578 26,566 29,444 0
Savings 60,468
Royal Blue Money Market 16,914
Now & Super Now 25,642
Money Market 23,264
Advances from FHLB 45,824 4,020 823
_______ ______ ______ ______
Interest-bearing
liabilities 229,690 26,566 33,464 823
_______ ______ ______ ______
Interest sensitivity
gap $(137,660) (6,934) 154,156 74,670
Rate Sensitive Assets
divided by Rate Sensitive
Liabilities 0.40 .74 5.61 91.73
Cummulative gap as a % of
Total assets (32.86)% (1.66)% 36.80% 17.82%
Page 21
The chart indicates that the Corporation was repricing $137.7 million more of
interest earning liabilities than interest bearing assets in the 0-3 month
range. This gap is not considered to be a problem, as a good portion of the
savings balances are not considered sensitive to rate change. However, the
Corporation will be challenged in a rising interest rate environment to
maintain its interest margins. For the 4-12 month period, the Corporation is
modestly liability sensitive, as $6.9 million more of interest bearing
liabilities are being repriced than interest earning assets. For the entire
one year range, the Corporation is repricing $144.6 million more interest
bearing liabilities than assets, or 43.6% of earning assets. This liability
sensitivity has increased $35 million and 10.9% of earning assets over last
year. The imbalance was due to the increase in advances from FHLB to fund
loans with a longer maturity. The Corporation is asset sensitive at $154.2
million for the one to five year range, as interest earning assets increased
$39.5 million from last year's amounts, along with an interest bearing
liabilities increase of $2.7 million.
For the entire portfolio range, the Corporation is asset sensitive at $84.2
million versus asset sensitivity of $66.9 million last year. With interest
rate forecasts continuing to suggest declines, our earnings should be favorably
impacted if we can continue to cut liability rates at the same pace as earning
assets. We will have some difficulty, however, as short term liability rates
are at or near historic lows. Continued declines could lead to deposit
outflows, as investors seek higher returns in other available products. We may
have to limit our liability rate decreases in order to continue to fund the
bank, and that may have a slightly negative impact on historic spreads.
Hopefully increasing lending will offset some of the decline.
During 1997, increased consumer lending which was not supported by deposit
growth but by short-term borrowings. This led to a decline in the Rate
Sensitive Assets/Rate Sensitive Liabilities equation. The Corporation believes
this mismatch will continue for sometime and is aware of its challenge to
interest rate risk.
On a quarterly basis, sensitivity to change in interest rates is also measured
using simulation model. The model estimates changes in net interest income and
net income under a variety of possible interest rate scenarios. By performing
these simulations and comparing them to established policy limits, management
has an opportunity to plan for changes in the asset/liability mix or to take
other steps that may be necessary to lessen interest rate risk. Based on
management's assumptions built into the simulation model and the current mix of
the Company's assets and liabilities, management's assessment is that its
negative gap position will not have a material adverse effect on its operating
results or liquidity in the event of reasonably foreseeable changes in interest
rates during 1998. These simulations are based on numerous assumptions
regarding the timing and the extent of repricing characteristics. Actual
results may differ significantly.
Page 22
The following table shows the Company's estimated earnings sensitivity profile
as of December 31, 1997.
Changes in Interest Rates Percent Change in Net Income
(basis points) 12 Months 24 Months
+200 over one year -73.65% 6.63 %
+100 over one year -36.83 3.32
-100 over one year 36.83 -3.32
+200 over one year 73.65 -6.63
Capital Resources
Total Stockholders' equity at December 31, 1997, was $40,932,000,
representing an increase of $1,813,000 (or 4.6%) over 1996. Primary capital,
defined as shareholders equity plus loan loss reserve, was $44,085,000 at
December 31, 1997, or 11.43% of average assets versus $41,794,000 or 12.49% of
average assets at December 31, 1996.
The Federal Reserve Board standards require banks and bank holding
companies to maintain capital based on "risk adjusted" assets so that
categories of assets with potentially higher credit risk will require more
capital backing than assets with lower risk. In addition, banks and bank
holding companies are required to maintain capital to support, on a risk-
adjusted basis, certain off balance sheet activities such as loan commitments
and interest rate swaps. Capital is classified into two tiers. Tier 1 capital
consists of common shareholders' equity, non-cumulative and cumulative
perpetual preferred stock, and minority interests less goodwill and less net
unrealized gain on securities available for sale. Tier 2 capital consists of
allowances for loan and lease losses, hybrid capital instruments, term
subordinated debt, and intermediate-term preferred stock. All banks are
required to meet a minimum ratio of 8% of qualifying total capital to risk
adjusted total assets with at least 4% Tier 1 capital.
Page 23
The table below illustrates the Corporation's regulatory capital ratio
at December 31, 1997 and December 31, 1996:
1997 1996
(dollars in thousands)
Tier 1 Capital $ 40,567 $ 39,119
Tier 2 Capital $ 3,153 $ 2,675
Total Qualifying Capital $43,720 $ 41,794
Risk Adjusted Total Assets $303,110 $247,846
Tier 1 Risk Based Capital Ratio 13.38% 15.78%
Total Risk Based Capital Ratio 14.42% 16.86%
Leverage Ratio 9.69% 11.11%
As shown in the table, the Corporation's Tier 1 Risk Based Capital has
grown 3.7%, and Total Risk Based Capital has increased 4.6% from year end 1996
levels.
The leverage ratio (Tier 1 Capital divided by total assets less goodwill)
must be at least 3%. The Corporation's leverage ratio was 9.69% as of December
31, 1997.
The capital ratios of the Corporation are strongly in excess of minimum
regulatory requirements, indicating an ability to meet customer demand and
market competition, while providing sufficient earnings to strengthen the
capital base annually. The Corporation believes that its strong capital base
will allow it to continue a reasonable dividend payment.
Dividends
Payments 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 is required for the declaration
of dividends in any year which dividends exceed the total of net income for
that year plus retained income for the preceding two years. At December 31,
1997, approximately $5,444,000 was available for payment of dividends to the
Company.
Cash dividends for 1997 amounted to $1,609,000, an increase of $195,000 or
13.79% over the $1,414,000 paid in 1996. Dividends paid were 43.1% and 48.0%
of 1997 and 1996 earnings respectively.
Results of Operations
Net interest income is the difference between interest received from
earning assets and interest paid on interest bearing liabilities. It is
affected by both the volume and rates applied to both earnings assets and
liabilities, and therefore, is an effective measurement of how well management
has balanced and reacted to the Corporation's interest rate sensitive assets
and liabilities.
Page 24
For the year ended December 31, 1997, the Corporation had $355.6 million
average earning assets, up $47.8 million or 15.5% from the year earlier.
Average interest bearing liabilities were $285.0 million for 1997, up $40.2
million or 16.4% from 1996. The increase in earning assets reflects the
expansion of our indirect loan product into the Rochester, NY area. Liability
growth has begun, due to the Company borrowing from the Federal Home Loan Bank
to fund the asset growth. While being mindful of the Corporation's customers'
needs, management was able to increase net interest income for 1997 to $18.6
million, up from $16.7 million for 1996, reflecting an increase of 11.35% for
1997.
The yield on interest earning assets was 8.39% in 1997, up from 8.29% in
1996. Cost of funds increased to 3.94% from 3.59% in 1996. Management
continued to stress the cost and size control of liabilities during 1997, and
therefore the net spread decreased to 4.45% from 4.70% in 1996. Net interest
income as a percentage of earning assets (net interest rate margin) decreased
to 5.23%, as the $1,896,000 increase in net interest income was derived from
successfully managing the changing interest rate environment during the year,
in conjunction with the previously mentioned increase in total earning assets.
Management believes these results are an indication that its interest rate
sensitivity planning is functioning well.
The provision for loan losses in 1997 was $851,000, down $639,000 from
1996. The allowance for loan loss as of December 31, 1997 was $3.2 million, or
1.03% of loans outstanding at year end 1997. This ratio is slightly lower than
that of 1996 (1.04%).
The Corporation's investment portfolio book value increased to $71.4
million at December 31, 1997 from $70.0 million at December 31, 1996,
reflecting an increase of 2%.
Other income for 1997 increased to $4.3 million from $3.9 million,
reflecting an increase of $403,000 or 10.3%. Service charges on deposit
accounts were down $127,000 to $1,534,000. Other operating income for 1997
rose to $1,031,000 from $940,000 reflecting an increase of $91,000. Strong
demand for our trust services in our traditional markets as well as in our new
Pittsford location led to an increase of Trust Income to $1,723,000 up from
$1,337,000 in 1996.
Page 25
Operating expenses totaled $16.7 million, up 10.0% from $15.1 million in
1996. Salaries and employee benefits rose $1.3 million as the Corporation
expanded several product areas and purchased two non-traditional financial
service providers.
The rate of return on average assets (ROA) and the rate of return on
average equity are a good measure of the Corporation's results. For the year
1997, return on average assets increased to .98% from .84%. Return on average
equity was 9.6% in 1997 compared to 7.9% in 1996. Management believes the
Corporation remains quite healthy.
Accounting Standards
In June 1996, the Financial Accounting Standards Board issued Statement of
Accounting Standards (SFAS) No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. SFAS No. 125 is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. This Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach that focuses
on control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Management of the Company does not
expect the adoption of SFAS No. 125 will have a material impact on the
Company's financial position, results of operations, or liquidity.
In June 1997, FASB issued Statement No. 130 entitled "Reporting Comprehensive
Income". Comprehensive Income is defined as "the change in equity(net assets)
of a business enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity during
a period except those resulting from investments by owners and distributions to
owners." The Statement is effective for fiscal years beginning after December
15, 1997 and requires that items that meet the definition of components of
comprehensive income be reported in a financial statement that is displayed as
prominently as other financial statements. While this Statement will increase
the Company's financial disclosures, it will have no impact on operating
results.
FASB Statement No. 131 entitled "Disclosures about Segments of an Enterprise
and Related Information" was also issiued in June 1997. This Statement is
effective for fiscal years beginning after December 15, 1997. This Statement
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about disclosures but will have
no impact on operating results.
Item 8. Financial Statements and Supplementary Data
(Supplementary data has been omitted because it is not applicable)
Financial statements, together with a report thereon of KPMG Peat Marwick LLP
dated January 30, 1998 appearing on Page 7-29 of the 1997 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.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
NONE
Page 26
PART III
Item 10. Directors and Executive Officers
(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 25, 1998, 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 name, age and position of the executive officer of the Corporation as
of December 31, 1997, is set forth on page 6 of the Proxy Statement dated
February 25, 1998 under the caption "Principal Officers" and is incorporated
herein by reference. Officers are generally elected annually by the Board of
Directors at the meeting of directors immediately following the annual meeting
of stockholders. The disclosure of family relationships between the executive
officer and directors of the Corporation is set forth on page 4 of the Proxy
Statement dated February 25, 1998 and is incorporated herein by reference.
There are no arrangements or understandings between the executive officer and
any other person pursuant to which the executive officer was 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 officer of the Corporation has been an officer of the Bank
for five years or more.
Directors and the executive officer as a group beneficially owned 14,956
shares or 9.31% of the shares outstanding. Shares owned directly total 13,243
and shares held by directors, executive officer, or their spouses in a
fiduciary capacity or by their spouses individually total 1,713.
(c) Significant Employees
Not applicable
(d) Family Relationship
Disclosed in Item 10 (a) - Directors
(e) Business Experience
Disclosed in Item 10 (a) and 10 (b)
(f) None
(g) None
Page 27
Item 11. Executive Compensation
(a) Cash 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" in registrants definitive proxy statement on page 6 and is
incorporated herein by reference.
During the year ended December 31, 1997, officers of the Corporation did not
receive any compensation from the Corporation for services rendered in such
capacity. All of the above compensation was paid by the Bank for services
rendered in the course of their employment with the bank.
(b) Compensation Pursuant to Plans
The Bank has a non-contributory, profit sharing plan covering substantially all
full-time employees who have completed one year of service, subject to a
minimum number of hours of service with the Bank. Contributions to the profit
sharing plan by the Bank are allocated among eligible participants in the
proportion that each participant's "points" for the calendar year bear to the
total "points" awarded for the calendar year. Participants are awarded one
point for each full calendar year of employment and one point for each $100 of
compensation paid such participant during that year. Voluntary contributions
may be made and invested in a separate "Voluntary Account" in which the
participant is always fully vested. Participants become fully-vested with non-
contributory allocations upon: reaching the age of 65, disability, death, or
7 years of service as defined by the plan. If employment is otherwise
terminated, partial vesting will be accorded depending upon the participant's
years of service. Retirement and death benefits may be distributed in a cash
lump sum or a series of equal installments, payable at least annually, over a
period selected by the Profit Sharing Plan Committee. The amounts contributed
to the profit sharing plan by the Bank in 1997, 1996, and 1995 were $763,000,
$658,000, and $639,000, respectively.
The Corporation has an Employee Stock Ownership Plan (ESOP) for employees of
its wholly-owned subsidiary, and executive officers are members of the plan.
Contributions to the ESOP are allocated among eligible participants in the
proportion that each participant's gross compensation bears to total
compensation of all participants. Contributions to the plan for 1997, 1996,
and 1995 were $52,000, $52,000, and $46,000 respectively.
Page 28
The Corporation has an incentive stock plan for senior management of the
Corporation. Annual contributions are made based on performance factors
established by the board of directors. The Corporation has accrued a liability
of $909,000 as of December 31, 1997 representing its obligation under the plan.
Expenses of the plan amounted to $110,000, $371,000, and $155,000 for the
years ended December 31, 1997, 1996 and 1995 and were paid by the Bank.
The following table sets forth the amount of profit sharing benefits set aside
or accrued by the Bank, directly or indirectly, under the Profit Sharing Plan
for the year ended December 31, 1997 for all executive officers of the Bank.
Amount Set Aside
or Accrued for Cumulative
Name of the Year Ended Accrued
Individual December 31, 1997 Benefit
- ------------------------------------------------------------------------
George W. Hamlin, IV $21,532 $0000000
Robert G. Sheridan $13,385
The following table sets forth the amount of ESOP benefits set aside or accrued
by the Bank, directly or indirectly, under the ESOP for the year ended December
31, 1997 for all executive officers of the Bank.
Amount Set Aside
or Accrued for Cumulative
Name of the Year Ended Accrued
Individual December 31, 1997 Benefit
- --------------------------------------------------------------------------
George W. Hamlin, IV $ 1,606 $ 16,921
Robert G. Sheridan $ 984
(c) Other Compensation - Option/SAR Grants Table
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" in registrants definitive proxy statement on page 7 and is
incorporated herein by reference.
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value
Table
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" in registrants definitive proxy statement on page 6 and is
incorporated herein by reference.
(e) Long-Term Incentive Plan Awards Table
NONE
(f) Defined Benefit or Actuarial Plan Disclosure
NONE
Page 29
(g) Compensation of Directors
For the years 1997, and 1996, no compensation was paid to members of the Board
of Directors of Canandaigua National Corporation. For the years of 1996
members of the Board of Directors of The Canandaigua National Bank and Trust
Company were compensated at the rate of $300 per meeting. For the year 1997,
the Chairman of the Board of Directors was compensated at the rate of $450 per
meeting attended and the remaining members were compensated at the rate of $425
per meeting attended.
(h) Employment Contracts and Termination of Employment and Change-In-
Control Arrangements
NONE
(i) Report on Repricing of Options/SARS
NONE
(j) Compensation Committee Interlocks
NONE
(k) Board Compensation Committee Report on Executive Compensation
The information required to be set forth for this item is set forth in
Registrant's definitive proxy statement at page 7 and incorporated herein by
reference.
(l) Performance Graph
The information required to be set forth for this item is set forth in
Registrant's definitive proxy statement at page 8 and incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a), (b) The information required by Item 403 (a) and (b) of Regulation S-K is
included with the information given on pages 1 through 3 of the Proxy
Statement and is incorporated herein 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 1997. 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, did
not involve more than a normal risk of collectibility or present other
unfavorable features.
(d) Transactions with Promoters
Not applicable
Page 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Canandaigua National
Corporation and subsidiary have been incorporated by reference in Item 8 on
Page 26: Pages*
Independent Auditors' Report 7
Consolidated Balance Sheets As of December 31, 1997 and 1996 8
Consolidated Statements of Income For Each of the Years in the 3-Year
Period ended December 31, 1997 9
Consolidated Statements of Changes In Stockholders' Equity for Each
of the Years in the 3-Year Period ended December 31, 1997 10
Consolidated Statements of Cash Flows For Each of the Years in the
3-Year Period ended December 31, 1997 ...........................11
Notes to Consolidated Financial Statements......................... 12-29
* 1997 Annual Report to Stockholders
(a) 2. Financial Statement Schedules
Schedules are omitted since the required information is either not applicable,
not deemed material, or is shown elsewhere in the financial statements or notes
thereto.
(a) 3. Exhibits Table
(11) The information required by Item 601(a)(3)(11) of Regulation S-K is set
forth on page 7 and 13 of the 1997 Annual Report to the Stockholders and is
incorporated herein by reference.
(13) A copy of the 1997 Annual Report to Stockholders is attached hereto as
Exhibit A.
(19) A copy of the definitive proxy statement mailed to Stockholders is
attached hereto as Exhibit B.
(22)The Canandaigua National Bank and Trust Company is wholly owned by the
Registrant. The Bank is incorporated under the laws of The United States of
America. Registrant also owns all outstanding stock in Greater Funding of New
York, Inc. a New York State licensed mortgage company.
Page 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CANANDAIGUA NATIONAL CORPORATION
By:
George W. Hamlin, IV
President
Date: 3/30/98
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
President/Director
George W. Hamlin, IV
Secretary/Director
Robert G. Sheridan
Treasurer
Gregory S. MacKay
Director
Patricia Boland
Director
Frank H. Hamlin
Director
Stephen D. Hamlin
Director
Paul R. Kellogg
Director
Eldred M. Sale
Director
Caroline C. Shipley
Director
Alan J. Stone
Director
David Hamlin, Jr.
Director
Daniel P. Fuller
Page 33