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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994. Commission file number 0-15366
CORTLAND FIRST FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
State of incorporation: New York
I.R.S. Employer Identification No.: 16-1276885
Address of principal executive offices: 65 Main Street, Cortland, NY 13045
Registrant's telephone number including area code: (607) 756-2831
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$5.00 par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x Yes No
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on February 12, 1995 was 35,276,025.
The number of shares outstanding of the Registrant's common stock on December
31, 1994: Common Stock, $5.00 Par Value --- 672,000 shares.
Documents Incorporated by Reference
Portions of the proxy statement for the annual shareholders' meeting to be held
March 27, 1994, are incorporated by reference in Part III.
Form 10-K
PART I
Item 1 -- Business
Cortland First Financial Corporation is a Bank Holding Company and commenced
business on October 1, 1986. First National Bank of Cortland is a wholly owned
subsidiary of Cortland First Financial Corporation and its only operating
entity.
Government Regulation and Supervision
As a holding company, Cortland First Financial Corporation is subject to
supervision by the Federal Reserve system and is required to file an annual
report with the Federal Reserve Board, and is subject to examination by that
Board as well. Its subsidiary bank, First National Bank of Cortland, is
subject to supervision by the Office of the Comptroller of the Currency as
well as the Federal Deposit Insurance Corporation (FDIC). The administrative
office of Cortland First Financial Corporation is located at 65 Main Street,
Cortland, New York, in Cortland County.
Service Area and Competition
The company conducts its banking operation primarily in Cortland County and the
surrounding areas. First National Bank of Cortland currently employs 123
people in its six banking offices located in Cortland, Cortlandville, Marathon,
McGraw, Cincinnatus, and Tully. A seventh banking facility was added in early
1994 in Whitney Point, which expanded our service area into neighboring Broome
County and added greater convenience to those customers in the southern portion
of our current market.
First National Bank of Cortland is an independent commercial bank committed to
serving the financial needs of customers in the local communities. The bank is
in competition with other financial institutions in the area, many of which are
branches of large institutions such as Marine Midland, Fleet, and Key Bank.
Other organizations compete for deposits and loans as well, and include
insurance companies, money market funds, federal credit unions, and other local
independent banking operations.
Services Offered
In addition to providing the traditional loan and deposit service to its
customers, the Bank also provides several specialized customer services
including 24-hour automated teller machines in four locations: Main Office, 65
Main Street, Cortland; Groton Avenue Office, 1125 Groton Avenue, Cortlandville;
Tully Office, Route 80 at I-81, Tully and our Whitney Point office on Route 11
in Whitney Point; as well as a 24-hour cash dispensing machine in our Marathon
Office located at 14 East Main Street, Marathon. A full range of trust
services including financial planning, estate planning, and custodial services
are handled by the Bank. Other banking services include annuities, safe
deposit boxes, travelers checks, money orders, wire transfers, collections, and
foreign exchange. Traditional deposit products include checking accounts,
Negotiable order of withdrawal (NOW) and savings accounts, time deposits, and
individual retirement accounts. Lending services include residential, farm,
business loans, Small Business Administration loans, installment loans, credit
card loans, home equity loans, biweekly mortgages, auto, and student loans.
First National Bank of Cortland has no foreign assets except for a nominal
amount of Canadian currency.
Management is not aware of any exposure to potential environmental liability
under the Superfund. Management is also not aware of any known trends, events,
or uncertainties that will have, or that are reasonably likely to have, a
material effect on the liquidity, capital resources, or operations of the
Corporation or its subsidiary.
The following pages display the statistical disclosure by bank holding
companies required by the Securities Act Industry Guide 3.
MESSAGE TO SHAREHOLDERS
Established in 1986, Cortland First Financial Corporation is a relatively new
company. However, its only operating subsidiary, First National Bank of
Cortland, has been a community cornerstone since 1869. Celebrating 125 years
of stability, integrity, and service in 1994, we took a look back at our
history and found that behind every challenge lies the opportunity for
continued growth. Rooted in the philosophy that got us here, the challenge
today is to look for sustainable growth in a future that is far from
predictable.
I am pleased to report that, while in many ways 1994 was a very challenging
year, once again your bank has succeeded in achieving solid growth - growth
that can be measured financially as well as growth that has been visible in our
branch development, computer utilization and customer service initiatives.
First National Bank of Cortland remains an independent community bank. In
today's economic climate, growth is hard fought. Market share will be won by
prudent yet progressive management and dedicated employees who recognize that
service quality is the only real differentiator in the highly competitive world
of financial services.
First the numbers: In 1994, we were able to achieve yet another growth year in
which total assets reached an all-time high closing at $198,800,000, an
increase of more than $10,000,000. This increase represents a 5.3% growth over
1993 assets of $188,700,000. The Board of Directors also approved record cash
dividends to shareholders in 1994. Total dividends paid to shareholders in
1994 amounted to $840,000 or $1.25 per share. The combination of gain in the
market value of a share of stock purchased January 1, 1994, plus the cash
dividends, produced a handsome total return of 47.9% for shareholders in 1994.
Earnings continued to be very strong in 1994. Net income of $2,700,000
produced a return on average assets of 1.37%, significantly above the national
average of 1.18% reported by the FDIC, as of the end of the third quarter. On
a per-share basis, net income in 1994 was $4.00 versus $4.06 in 1993. Planned
expenditures for computer-related equipment and new branch construction held
earnings slightly below the previous year's record earnings.
Total shareholder equity increased by 1.8% to $20,400,000, providing a very
strong capital-to-assets ratio of 10.89%. Total shareholder equity and book
value were impacted by Statement of Financial Accounting Standards Board (FASB)
No. 115 which requires recognition of unrealized gains or losses in investment
securities. The significant rise in interest rates over the past year produced
an unrealized loss in those securities classified as available-for-sale which,
after tax considerations, had the effect of reducing equity by $875,320. It is
not anticipated that this loss will ever be realized since the bank
historically does not sell its investment securities. Banking regulators have
chosen not to include the unrealized losses or gains for purposes of
calculating regulatory capital. (Please refer to the Management's Discussion
and Analysis section for further information.)
Once again, we are proud that the bank rating firms continued to award their
highest ratings to our bank in 1994. Bauer Financial Reports, Inc. recognized
the bank with its Five-Star rating; Veribanc, Inc. bestowed its Blue Ribbon
rating; and, The Sheshunoff Company, Inc. awarded an "A+" rating.
Technologically speaking, 1994 provided an opportunity to consolidate the
enhancements and conveniences achieved when we installed our new Unisys
computer system in 1993. This system forms the basis which will keep First
National in the forefront of technology for years to come.
In April, we opened our seventh banking office, located in the northern Broome
County community of Whitney Point. The office, located approximately fourteen
miles north of the city of Binghamton, is capably managed by Roberta Bush and
her staff, and is off to an excellent beginning.
In November, we commenced a major renovation of the Main Office's adjacent
building at 73 Main Street, acquired in 1990, which will house our expanded
Trust and Investment Department on the ground floor and the loan department on
the second floor, with the third floor available for future expansion. A new
credit department supporting the bank's lending activities will occupy space on
the second floor of our present building, adjacent to the loan department. The
two buildings will be joined at the second floor level and serviced by the
existing elevator. The building has been beautifully remodeled inside and out
in keeping with the historic nature of the downtown location.
We are excited about the expansion of our Trust and Investment division. We are
planning an expansion of our Trust Department in 1995 and expect significant
growth in this area. With the Mutual Partners asset allocation program
introduced in 1994, we expect that mutual fund investment opportunities for our
customers will be an important factor in the long-term prospects for this area.
This department offers a full range of personal trust, investment and custodial
services as well as employee benefit programs.
In 1994, we welcomed two new members to the Board of Directors, Mary Alice
Bellardini, Mayor of the Village of Homer, and John Buck, President of Buck
Environmental Laboratories, Inc. Each of these individuals brings a wealth of
talent and abilities to our bank.
Finally, a much-deserved salute to all of our dedicated staff, employees and
Board of Directors, without whom we would have no reason for celebrating a
century and a quarter of service to our community. Indeed it is a proud
tradition that brings the bank to where it is today. More than pride in the
past, however, we take pride in the talent and attitude of our people today,
enabling us to build on the legacy we have inherited.
We encourage our staff's involvement in activities and organizations which help
make our communities better places, and many of our staff members are so
involved. Last year, we were especially proud of Sharon Yaple, Vice President
for Marketing and Retail Customer Services. In addition to her very active
involvement in our 125th anniversary celebration and new branch opening, she
chaired the 1995 United Way campaign which exceeded its prior year's record
fund-raising effort. Also, Bob Derksen, Vice President and CFO, was the
recipient of the St. George Medal awarded by the NYS Division of the American
Cancer Society. The St. George Award is the most significant division award
bestowed at the national level and awarded to division volunteers for
outstanding service. Denise Connor, who works in our Finance and Accounting
Department, was recognized by the Cortland Rotary Club with its first annual
"Pride of Workmanship Award," an award given to employees who demonstrate the
ability to "Do it once - Do it well - Build a Better America."
Historically, the local economy lags the national economic cycle by six to
twelve months; however, during the current recovery in the national economy,
our local economy has been slower to recover, due principally to a net loss of
jobs in the manufacturing sector over the past year. With interest rates
continuing to rise as the Fed attempts to limit inflationary concerns, we
expect 1995 to present its share of unique challenges. With our strong
capitalization, well-trained and competent staff and dedicated Board of
Directors, I am confident that the Bank will once again rise to meet these new
challenges and opportunities.
Sincerely,
David R. Alvord
President and Chief Executive Officer
Item 2 -- Properties
The Registrant operates the following branches:
Name of Office Location County Date Established
Home Office 65 Main Street Cortland March 1, 1869
Cortland, NY
Cincinnatus Main Street Cortland January 1, 1943
Cincinnatus, NY
Groton Avenue 1125 Groton Avenue Cortland June 22, 1987
Cortland, NY
Marathon 14 E. Main Street Cortland August 15, 1957
Marathon, NY
McGraw 30 Main Street Cortland May 1, 1967
McGraw, NY
Tully Route 80 at I-81 Onondaga January 26, 1989
Tully, NY
Whitney Point 2950 NYS Route 11 Broome April 7, 1994
Whitney Point, NY
The Tully and Whitney Point offices are leased. The other banking premises are
owned.
Item 3 -- Legal Proceedings
There are no pending legal proceedings, other than routine litigation
incidental to the business of the Bank, to which the Registrant or the Bank is
a party or of which any of their property is the subject. In management's
opinion, no pending action, if adversely decided, would materially affect the
Bank's or the Registrant's financial condition.
Item 4 -- Submission of Matters to a Vote of Security Holders
No matters were submitted for security holder vote during the fourth quarter of
1994.
PART II
Item 5 -- Market for Registrant's Common Stock and Related Shareholders Matters
At the Year End: 1994 1993
Total Assets $198,759,128 $188,683,125
Total Loans (net) 108,682,989 104,619,149
Total Deposits 176,967,403 167,302,184
Shareholders'
Equity 20,423,557 20,062,563
Trust Assets
(book value) 49,872,335 50,129,768
Allowance for Possible
Loan Losses 1,225,737 1,079,689
For the Year:
Net Interest Inc $ 10,098,411 $ 9,799,967
(fully tax equivalent basis)
Net Income 2,689,861 2,729,403
Per Share (adjusted for stock split):
Net Income $ 4.00 $ 4.06
Book Value 30.39 29.86
Cash Dividends 1.25 1.20
Ratios:
Return on Average
Assets 1.37% 1.43%
Return on Average
Capital 13.25 14.70
Tier II Capital-to-Assets 10.89 10.88
Regulatory Ratios:
Total Risk-Based Capital 20.32%
Tier I Risk-Based Capital 19.22
Leverage 10.76
The minimum risk-based capital per regulatory requirements for the "well
capitalized" category is 10%.
Common Stock Data:
The common stock of Cortland First Financial Corporation is inactively traded
in the over-the-counter market. Market makers for the stock are Ryan,
Beck & Company (800-342-2325), Monroe Securities, Inc. (716-546-5560), and
First Albany Corporation (800-336-3245). There were 526 shareholders of record
as of December 31, 1994. Prices & dividends are adjusted for the stock split
declared August 16, 1993. Stock prices below are based on low "offer" prices
and high "bid" prices for the quarter.
1994 High Low Dividend Paid
1st Quarter $ 50.00 $ 42.25 $ .30
2nd Quarter 51.50 48.75 .15
3rd Quarter 54.00 49.75 .15
4th Quarter 54.25 52.75 .65
1993 High Low Dividend Paid
1st Quarter $ 25.25 $ 24.25 $ .25
2nd Quarter 25.50 24.75 .15
3rd Quarter 30.00 26.00 .15
4th Quarter 36.50 34.25 .65
Item 6 -- Selected Financial Data
Five Year Comparative Summary (In thousands of dollars)
Assets and Deposits 1994 1993 1992 1991 1990
Loans $108,683 $104,619 $101,669 $102,902 $103,272
Securities 70,380 67,587 65,523 53,889 46,625
Deposits 176,967 167,302 167,261 156,825 145,738
Total Assets 198,759 188,683 186,090 173,727 161,285
Trust Dept Assets 49,872 50,130 47,128 49,474 46,616
(not included in
Total Assets)
Shareholders' Equity 20,424 20,063 17,526 16,007 14,514
(Capital, Surplus
& Shareholders Equity)
Operating Income & Expenses
Total Interest Income 14,314 14,292 14,706 15,383 14,725
Total Interest Exp 4,725 5,013 6,058 7,822 7,978
Net Interest Income 9,589 9,279 8,648 7,561 6,747
Provision for Possible
Loan Losses 300 300 305 240 240
Net Interest Income
after Provision for
Possible Loan Losses 9,289 8,979 8,343 7,321 6,507
Other Operating Inc 1,370 1,303 1,241 1,205 1,187
Total Operating Inc 10,659 10,282 9,584 8,526 7,694
Salaries & Benefits 3,596 3,343 3,163 3,161 2,896
Occupancy & Equipment
Expense 1,099 1,005 891 799 765
Other Operating Exp 2,096 2,042 1,884 1,623 1,446
Total Operating Exp 6,791 6,390 5,938 5,583 5,107
Income Before Taxes 3,868 3,892 3,646 2,943 2,587
Provision for Taxes 1,178 1,163 1,118 829 695
Income Before
Acct. Change 2,690 2,729 2,528 2,114 1,892
Cumulative Effect of Adopting
Accrual Basis
Accounting for Postretirement
Benefits ---- ---- 320 ---- ----
Net Income $ 2,690 $ 2,729 $ 2,208 $ 2,114 $ 1,892
Per-Share Statistics
(adjusted for stock split)
Net Income $ 4.00 $ 4.06 $ 3.29 $ 3.15 $ 2.82
Year End Book Value 30.39 29.86 26.08 23.82 21.60
Cash Dividends Paid 1.25 1.20 1.025 .925 .85
Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
Cortland First Financial Corporation is a one-bank holding company that was
formed in 1986. Its only subsidiary and operating entity is First National
Bank of Cortland, chartered in 1869. First National Bank of Cortland is an
independent commercial bank delivering financial services from five (5) offices
in Cortland County (Cortland, Cortlandville, Marathon, McGraw, and
Cincinnatus), one (1) office in southern Onondaga County (Tully), and our
newest office in northern Broome County (Whitney Point) which was opened in
April of 1994. The primary regulator of Cortland First Financial Corporation
is the Federal Reserve Bank of New York in New York City, while its subsidiary,
First National Bank of Cortland, is regulated by the Office of the Comptroller
of the Currency in Washington, D.C.
CONSOLIDATED BALANCE SHEETS:
Total resources of $198,759,128 on December 31, 1994, compared to $188,683,125
at year-end 1993, an increase of $10,076,003 or 5.3%. Daily average
outstandings for 1994 amounted to $195,819,527, compared to $191,445,749 for
1993, an increase of $4,373,778 or 2.3%.
Loans - Total loans at year-end 1994 were $109,908,726, less the Allowance for
Loan and Lease Losses (ALLL) of $1,225,737, leaving a net balance of
$108,682,989, compared to $104,619,149 in 1993, an increase of $4,063,840 or
3.9%. At year-end 1994, loans secured by real estate amounted to $63,127,003,
compared to $62,074,873 on December 31, 1993, which represents 55.7% and 57.2%
of total loans, respectively. The majority of these outstandings are in
short-term, fixed-rate biweekly mortgages and variable-rate home equity loans.
Our commercial and agricultural loans at year-end 1994 amounted to $21,805,908,
compared to $21,467,717 last year, a very small increase of $338,191 or 1.6%,
indicating a flat commercial loan demand in 1994. We did see an increased
demand in our installment loans. Outstandings of $18,556,764 at year-end 1993
rose to $23,305,713 on December 31, 1994, an increase of $4,748,949 or 25.6%.
All loans granted were to entities within Cortland County and those immediately
adjoining counties which are in our local service areas.
Our ALLL represents 1.12% of our net loans outstanding as of year-end 1994,
compared to 1.02% as of year-end 1993. Our 1994 net charge-offs of $153,952
compared favorably to $245,796 in the previous year, a decrease of $91,846 or
37.4%. The adequacy of our ALLL is evaluated as of the end of each quarter,
and is judged to be more than adequate to absorb the inherent loss in the
portfolio as of year-end. The overall excellent quality of our loan portfolio
is indicated by the amount of non-performing loans as a percentage of gross
loans at 0.18% on September 30, 1994, compared to 0.71% reported by our
national peer group (all insured commercial banks having assets between $100
million and $300 million, with three or more banking offices, located in a
non-metropolitan area), on average.
Securities - Investment securities at year-end 1994 amounted to $70,380,051,
compared to $67,587,439 in 1993. As required by FASB No. 115 "Accounting for
Certain Investments in Debt and Equity Securities," we classified our
investment securities as held-to-maturity or available-for-sale.
Held-to-maturity securities are reported at cost, while the available-for-sale
securities are reported at fair value. The available-for-sale portfolio at
year-end 1994 amounted to $47,082,664 (cost $48,562,493 less net unrealized
loss of $1,479,829), compared to $49,991,061 at year-end 1993 (cost $48,959,887
plus net unrealized gain of $1,031,174).
Due to a general rise in market interest rates between 1993 and year-end 1994,
the market value of securities available for sale declined by $2,511,003. Keep
in mind, however, that the unrealized loss of $1,479,829 at year-end 1994 would
only be realized upon sale or liquidation of the available-for-sale portfolio.
The Bank does not have a trading portfolio and does not expect to have one in
the future.
Deposits - On a daily average basis deposit growth in 1994 was relatively flat
with an increase of 1.3%. However, deposits did increase from $167,302,184 at
December 31, 1993 to $176,967,403 at December 31, 1994, an increase of
$9,665,219 or 5.8%. The lack of growth on a daily average basis is attributed
to the very modest level of economic growth occurring within the region.
Shareholders' Equity - Shareholders' equity increased from $20,062,562 at
December 31, 1993, to $20,423,557 in 1994, an increase of 1.8% in spite of the
accounting treatment required by FASB No. 115 for recognition of market value
in the investment securities portfolio. In recent years, shareholders' equity
has grown at an average rate of almost 10% per annum and, without the effect of
FASB No. 115, would have increased by 9.5% in 1994. In fact, banking
regulators do not require market value adjustments when calculating capital.
Capital for regulatory purposes at year-end was $21,298,877 in 1994 and
$19,449,016 at year-end 1993. The Bank has the ability and intent to hold its
securities to maturity, thereby not incurring actual losses in the securities
accounts. Book value per share increased to $30.39 in 1994, up from $29.86 in
1993, also an increase of 1.8%. The same principles just described also impact
book values. Book value per share based on regulatory capital would have been
$31.69 in 1994, up from $28.94 in 1993 and $26.08 in 1992. The degree of
regulatory action, the availability of funding through brokered deposits, and
the level of FDIC risk-based premiums are all dictated by capital ratios.
Cortland First Financial Corporation's risk-based capital ratios far exceed the
minimum requirements even for the highest capital level (well capitalized).
Liquidity - Liquidity management involves the ability to meet the cash-flow
requirements of customers who may be either depositors wanting to withdraw
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs. Securities available-for-sale amounted to $47,082,664
as of December 31, 1994, compared to $49,991,061 at year-end 1993. This,
coupled with being a substantial net seller of federal funds in the amount of
$8,278,000 on a daily average basis in 1994, compared to $6,485,000 in 1993,
indicates a highly liquid position.
Trust Department - At year-end 1994, the book value of the assets held in this
department amounted to $49,872,335, compared to $50,129,768 in 1993. Trust
Department assets are not part of the consolidated balance sheets.
Interest Rate Risk - IRR exposure arises when a change in interest rates
results in a change in the value of a financial instrument. The Asset/Liability
Committee of the Bank monitors its interest risk exposure on a regular basis.
The interest rate shock report as of December 31, 1994, showed net interest
income for the Bank would decrease by $309,600 (after tax) if interest rates
increase by 200 basis points in 1995, and it would increase by $355,800 (after
tax) if interest rates decline by 200 basis points, suggesting that the Bank
has an acceptable rate risk exposure.
CONSOLIDATED STATEMENTS OF INCOME:
Cortland First Financial Corporation reported net income of $2,689,861 for
1994, compared to $2,729,403 in 1993 and $2,208,076 in 1992. Return on average
assets (ROA) of 1.37% at year-end compared to 1.43% in 1993 and 1.40% (before
FASB No. 106 accounting change) in 1992. Our return on average shareholders'
equity (ROE) of 13.25% in 1994 compared to 14.70% in 1993 and 12.99% (after
FASB No. 106 accounting change) in 1992. For 1994, we were able to maintain a
high net interest margin of 5.51%, compared to 5.50% in 1993 and 5.45% in 1992.
Our budgeted net interest margin for 1995 is 5.35%, as we do not expect to
maintain our 1994 levels due to increased pressure on the cost of interest-
bearing liabilities. We expect that this negative impact on earnings may be
offset by higher loan volume and increased deposits in 1995 as funds begin to
flow back to CDs from competing investment vehicles. As a well-capitalized and
financially sound institution, we continue to pay the lowest possible FDIC
premium, which amounted to $384,282 in 1994, compared to $377,957 in 1993 and
$356,985 in 1992. All indications are that the FDIC will reduce this premium by
the end of 1995, which would give us a reduction in premium for 1995 or 1996.
Salaries, wages, and employee benefits amounted to $3,595,566 in 1994, compared
to $3,342,654 in 1993 and $3,229,601 in 1992. Occupancy expense of bank
premises of $505,396 in 1994 increased $54,280 or 12.0% from $451,116 in 1993,
compared to $430,806 in 1992. Most of the $54,280 increase in occupancy
expense in 1994 was due to the opening of our Whitney Point branch in April of
that year and heavy snow removal expenses for the winter of 1994. Computer and
equipment expenses amounted to $593,697 in 1994, compared to $553,747 in 1993
and $460,015 in 1992. The purchase of new hardware and software in April 1993
accounts for an additional increase of three-month depreciation in 1994.
We continue to monitor our expenditures very closely in a commitment to cost
control, and we expect, in spite of additional expenses in 1995 due to a major
expansion into the Cullen building next door, to continue to have excellent
income potential for 1995.
Item 8 -- Financial Statements and Supplementary Data
The consolidated financial statements, footnotes, and suplementary data follow:
CONSOLIDATED BALANCE SHEETS
ASSETS Dec. 31, 1994 Dec. 31, 1993
Cash and due from banks $ 8,345,594 $ 6,286,977
Federal funds sold 3,900,000 4,500,000
Total cash and cash equivalents 12,245,594 10,786,977
Held to maturity securities 23,297,387 17,596,378
Available for sale securities 47,082,664 49,991,061
Total securities 70,380,051 67,587,439
(fair value - $70,181,689 for 1994 and $68,382,322 for 1993)
Commercial and agricultural loans 21,805,908 21,467,717
Real estate loans 63,127,003 62,074,873
Installment loans 23,305,713 18,556,764
Other loans 5,014,330 6,389,154
Total loans 113,252,954 108,488,508
Less: Unearned income 3,344,228 2,789,670
Less: Allowance for possible
loan losses 1,225,737 1,079,689
Net Loans 108,682,989 104,619,149
Bank premises, furniture
and equipment 3,203,018 3,200,594
Accrued interest receivable 1,711,236 1,473,755
Other assets 2,536,240 1,015,211
Total Assets $198,759,128 $188,683,125
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $ 23,851,213 $ 23,853,790
Interest bearing deposits 153,116,190 143,448,394
Total Deposits 176,967,403 167,302,184
Securities sold under agreements
to repurchase ---- 211,743
Accrued interest, taxes and
other liabilities 661,870 478,170
Accrued postretirement benefits 706,298 628,465
Total Liabilities 178,335,571 168,620,562
Shareholders' equity: Common stock - par value $5.00 a share;
1,000,000 shares authorized;
672,000 shares issued and outstanding 3,360,000 3,360,000
Surplus 3,360,000 3,360,000
Undivided profits 14,578,877 12,729,016
Unrealized net gain/(loss) on
investment securities (875,320) 613,547
Total Shareholders' Equity 20,423,557 20,062,563
Total Liabilities and
Shareholders' Equity $198,759,128 $188,683,125
CONSOLIDATED STATEMENTS OF INCOME:
INTEREST INCOME Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
Interest and fees on loans $ 9,965,487 $ 9,758,484 $10,132,211
Interest on bank deposits ---- 288 ----
Interest on investment securities:
U.S. Treasury 1,873,295 1,905,601 1,718,676
U.S. Government Agencies 1,194,953 1,543,138 1,749,750
State and political
subdivisions 934,710 885,212 837,992
Other 9,236 7,923 7,623
Interest on federal
funds sold 336,684 191,151 259,484
Total Interest Income 14,314,365 14,291,797 14,705,736
INTEREST EXPENSE
Interest on deposits 4,724,891 5,011,735 6,056,570
Interest on short-
term borrowings 315 903 1,391
Total Interest Expense 4,725,206 5,012,638 6,057,961
Net Interest Income 9,589,159 9,279,159 8,647,775
Provision for possible
loan losses 300,000 300,000 305,000
Net Interest Income After
Provision For Loan Losses 9,289,159 8,979,159 8,342,775
OTHER INCOME
Trust department services 326,279 341,064 338,822
Deposit accounts
service charges 586,947 552,502 545,252
Investment securities
gains/(losses) ----- 25,811 -----
Other operating income 456,045 383,572 356,754
Total Other Income 1,369,271 1,302,949 1,240,828
Total Operating Inc 10,658,430 10,282,108 9,583,603
OTHER EXPENSES
Salaries, wages and
employee benefits 3,595,566 3,342,654 3,229,601
Supplies, advertising and
communications expense 569,601 559,293 562,558
Occupancy exp of premises 505,396 451,116 430,806
Computer & equipment expense 593,697 553,747 460,015
Legal, audit and other
outside services 804,283 795,425 676,902
Other operating expense 722,176 687,670 577,850
Total Other Expenses 6,790,719 6,389,905 5,937,732
Income Before Income Taxes
and Cumulative Effect of
Accounting Change 3,867,711 3,892,203 3,645,871
Provision for income taxes 1,177,850 1,162,800 1,117,918
Income Before
Accounting Change 2,689,861 2,729,403 2,527,953
Cumulative effect of adopting
accrual basis accounting for
postretirement benefits ---- ---- 319,877
Net Income $ 2,689,861 $ 2,729,403 $ 2,208,076
Income per common share before
accounting change $4.00 $4.06 $3.76
Net income per common share $4.00 $4.06 $3.29
CONSOLIDATED STATEMENT OF CASH FLOWS:
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES Year ended Dec. 31, 1994 1993 1992
Net income $ 2,689,861 $ 2,729,403 $ 2,208,076
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 300,000 300,000 305,000
Provision for depreciation 423,797 383,241 314,800
Provision for deferred
income taxes (135,768) 34,509 (255,055)
Amortization of investment
security premiums
(discounts), net 511,526 520,030 363,233
Realized investment security
(gains) losses ---- (25,810) ----
Loss (gain) on disposal of
bank equipment ---- (7,414) (800)
Loss on disposition of other
real estate ---- ---- 1,640
(Increase) decrease in
interest receivable (237,481) 142,632 (65,798)
(Increase) decrease in
other assets (365,249) (158,611) 149,032
Increase (decrease) in
interest payable 10,876 (19,360) (101,634)
Increase (decrease) in other
liabilities 252,782 (378,107) 573,738
Net Cash Provided by
Operating Activities $ 3,450,344 $ 3,520,513 $ 3,492,232
INVESTING ACTIVITIES
Proceeds from maturities of
investment securities $ 16,868,871 $ 20,576,971 $ 15,736,239
Proceeds from sales of
investment securities ---- 1,767,655 ----
Purchase of investment
securities (22,684,013) (23,871,915) (27,734,033)
Net (increase) decrease in credit
card receivables and other
short-term loans 96,822 113,916 88,234
Longer-term loans sold 791,272 686,291 513,070
Net longer-term
loans originated (5,251,934) (8,013,755) (770,897)
Purchases of premises and
equipment net (426,221) (249,521) (721,159)
Proceeds from disposition of
other real estate ---- 85,882 ----
Net Cash Used by Investing
Activities $(10,605,203) $ (8,904,476) $(12,888,546)
FINANCING ACTIVITIES
Net increase (decrease) in
demand deposits, NOW accounts
and savings accounts $ 4,789,101 $ 1,917,968 $ 21,386,701
Net increase (decrease) in
certificates of deposit 4,876,118 (1,876,743) (10,950,906)
Net increase (decrease) in
short-term borrowings (211,743) (39,282) (64,173)
Cash dividends (840,000) (806,400) (688,800)
Net Cash Provided (used)
by Financing Activities $ 8,613,476 $ (804,457) $ 9,682,822
Increase (Decrease) in Cash
and Cash Equivalents 1,458,617 (6,188,420) 286,508
Cash and cash equivalents at
beginning of year 10,786,977 16,975,397 16,688,889
Cash and Cash Equivalents
at End of Year $ 12,245,594 $ 10,786,977 $ 16,975,397
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the year for:
Interest on deposits and
short-term borrowings $ 4,714,328 $ 5,031,998 $ 6,159,595
Income taxes 1,245,567 1,204,010 981,050
Non-cash investing activity:
Unrealized gain/(losses) on
investment securities (1,479,831) 1,031,173 ----
Included in 1994 proceeds from maturities of investment securities are
$5,074,752 and $11,794,119 relating to held-to-maturity securities and
available-for-sale securities, respectively. Purchases of investment
securities for 1994 include $11,779,528 and $10,904,485 relating to
held-to-maturity securities and available-for-sale securities, respectively.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY:
Unrealized
Investment
For the years ended Common Undivided Securities
Dec. 31, 1994, 1993, 1992 Stock Surplus Profits Gains/Losses Total
Balance at January 1, 1992 $1,680,000 $1,680,000 $12,646,737 $16,006,737
Net income for the year 2,208,076 2,208,076
Cash dividends, $1.025 per share (688,800) (688,800)
Balance at December 31, 1992 1,680,000 1,680,000 14,166,013 17,526,013
Two-for-one stock split 1,680,000 1,680,000 (3,360,000)
Net income for the year 2,729,403 2,729,403
Unrealized net gain on
investment securities $ 613,547 613,547
Cash dividends, $1.20 per share (806,400) (806,400)
Balance at December 31, 1993 3,360,000 3,360,000 12,729,016 613,547 20,062,563
Net income for the year 2,689,861 2,689,861
Change in unrealized net
gain/(loss) on investment
securities (1,488,867) (1,488,867)
Cash dividends, $1.25 per share (840,000) (840,000)
Balance at December 31, 1994 $ 3,360,000 $ 3,360,000 $14,578,877 $ (875,320) $20,423,557
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended Dec. 31, 1994, 1993, 1992
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying financial statements include
the accounts of Cortland First Financial Corporation (the Company) and its
wholly owned subsidiary, First National Bank of Cortland (the Bank).
Intercompany transactions have been eliminated in consolidation.
Cash Flows: Cash equivalents include amounts due from banks and federal funds
sold. Generally, federal funds are purchased and sold for one-day periods.
Accounting For Postretirement Benefits: The Bank provides postretirement
medical and life insurance plans that cover substantially all of its employees.
The plans are non-contributory; however, retiree contributions may be required
if certain age and length of service criteria are not met.
In December of 1992, the Bank adopted Statement of Financial Accounting
Standard No. 106, "Employers Accounting for Postretirement Benefits Other Than
Pensions," which requires accrual basis accounting.
The Bank elected to recognize, as of January 1, 1992, the entire accumulated
postretirement benefit obligation of $540,615. The cumulative effect on prior
years of $319,877 (after reduction for income tax benefit) of this change in
accounting principle is included in net income for 1992. The effect of the
change in 1992 was to decrease income before the cumulative effect adjustment
by approximately $14,000 or $.02 per share (adjusted for 1993 stock split).
The following sets forth the plan's funded status reconciled with the amounts
reported in the company's statement of financial position at December 31, for
the combined medical and life insurance plans:
Accumulated postretirement benefit
obligation (APBO): 1994 1993
Retirees $ 343,379 $ 309,501
Fully eligible active plan
participants 120,169 106,172
Other active plan participants 391,885 314,556
Total APBO 855,433 730,229
Plan assets at fair value ---- ----
Unrecognized net loss (149,135) (101,764)
Accrued postretirement benefit
obligation $ 706,298 $ 628,465
Net periodic postretirement
Benefit cost included the
following components: 1994 1993 1992
Service cost $ 30,568 $ 28,981 $ 22,970
Interest cost 62,234 69,834 43,249
Net periodic postretirement
benefit cost $ 92,802 $ 98,815 $ 66,219
A 12% annual rate of increase in the per capita costs of covered health care
benefits was assumed for 1994, gradually decreasing to 6% by the year 2032.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1994, by $90,359 and increase the aggregate of the service cost
and interest cost components of net periodic postretirement benefit cost for
1994 by $15,127. A discount rate of 7.5% was used to determine the accumulated
postretirement benefit obligation.
Fair Value of Financial Instruments: Statement of Financial Accounting Standard
No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or
not recognized in the balance sheet, for which it is practicable to estimate
that value. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumption used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating its
fair value disclosures for financial instruments:
Cash and Cash equivalents: The carrying amounts reported in the balance sheet
for cash and short-term instruments approximate those assets' fair value.
Investment securities: Fair values for investment securities are based on
quoted market prices or dealer quotes.
Loans: Fair values for loans are estimated using discounted cash flow analysis,
based on interest rates approximating those currently being offered for loans
with similar terms and credit quality. The fair value of accrued interest
approximates carrying value.
Deposits: The fair values disclosed for non-interest bearing accounts and
accounts with no stated maturity are, by definition, equal to the amount
payable on demand at the reporting date. The fair value of time deposits was
estimated by discounting expected monthly maturities at interest rates
approximating thosecurrently being offered on time deposits of similar terms.
The fair value of accrued interest approximates carrying value.
Short-term borrowings: These funds reprice daily and, therefore, current book
value was used as an estimate of fair value.
Off-balance sheet instruments: Off-balance sheet financial instruments consist
of standby letters of credit, with fair value based on fees currently charged
to enter into agreements with similar terms and credit quality.
The net carrying amounts and fair values of financial instruments as of
December 31, 1994 are as follows:
Dec. 31, 1994 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1993
Financial Assets: Carrying Amount Fair Value Carrying Amount Fair Value
Cash and cash equivalent $ 12,245,594 $ 12,245,594 $ 10,786,977 $ 10,786,977
Investment securities 70,380,051 70,181,689 67,587,439 68,382,322
Loans 109,908,726 ---- 105,698,838 ----
Allowances for loan losses (1,225,737) ---- (1,079,689) ----
Net Loans 108,682,989 106,585,989 104,619,149 105,280,000
Total financial assets $191,308,634 $189,013,272 $182,993,565 $184,449,299
Financial Liabilities:
Deposits $176,967,403 $175,855,715 $167,302,184 $167,464,000
Short-term borrowing ---- ---- 211,743 211,743
Total financial liabilities $176,967,403 $175,855,715 $167,513,927 $167,675,743
The fair value of off-balance sheet financial instruments, principally standby
letters of credit, is not significant.
Trust Assets: Property (other than cash deposits) held by the Bank in fiduciary
or agency capacities for its customers is not included in the accompanying
balance sheets, since such items are not assets of the Bank.
Investment Securities: Effective December 31, 1993 the Bank has adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." As required by this pronouncement,
the Bank has classified its investments in debt securities as held-to-maturity
or available-for-sale. Held-to-maturity securities are those for which the
Bank has the positive intent and ability to hold to maturity, and are reported
at cost, adjusted for amortization of premiums and accretion of discounts.
Debt securities not classified as held-to-maturity are classified as
available-for-sale and reported at fair value, with net unrealized gains and
losses reflected as a separate component of shareholders' equity, net of the
applicable income tax effect. None of the Bank's investment securities have
been classified as trading securities.
Purchases and sales of investment securities are recorded as of settlement
date; gains and losses are based on identification of specific securities.
Fees on Loans: Loan origination fees and certain direct loan origination costs
are deferred and the net amount is amortized as a yield adjustment. The Bank
is generally amortizing these amounts over the contractual life of the related
loans. However, for fixed-rate mort-gage loans that are generally made for a
20-year term, the Bank has anticipated prepayments and used an estimated life
of 7.5 years.
Allowance for Possible Loan Losses: The allowance for possible loan losses is
maintained at a level considered adequate to provide for potential loan losses.
The allowance is increased by provisions charged to operating expenses and
reduced by net charge-offs. The level of the allowance is based on
management's evaluation of potential losses in the loan portfolio, as well as
prevailing economic conditions.
Effective January 1, 1995, the Bank is required to adopt Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan." This pronouncement requires certain impaired loans to be measured based
on discounted cash flows or, if collateral dependent, on the fair value of
collateral. Adoption of this pronouncement is not expected to have a
significant effect on the Bank's financial statements for 1995.
Bank Premises, Furniture and Equipment: Bank premises, furniture and equipment
are stated at cost less accumulated depreciation. Annual provisions for
depreciation are computed by the straight-line or declining balance methods
over the estimated useful lives of the assets. Repairs and maintenance are
charged to expenses as incurred, whereas capital additions and betterments are
capitalized.
Other Real Estate: Other real estate is carried at cost or fair value, less
estimated disposal costs, whichever is lower.
Income Taxes: Effective January 1, 1993, the Bank adopted FASB Statement
No. 109 "Accounting for Income Taxes" which requires an asset and liability
approach to recognizing the tax effects of temporary differences between tax
and financial reporting. In prior years, the Bank accounted for the tax effects
of timing differences between tax and financial reporting using Accounting
Principles Board opinion No. 11. This change had no significant effect on the
1993 financial statements.
Retirement Benefits: The Bank has a defined contribution pension plan,
administered by its Trust Department, for all eligible employees.
Contributions to the plan are determined based upon percentages of compensation
for eligible employees and are funded as accrued. Pension expense for 1994,
1993, and 1992 was $97,101, $112,906 and $110,576, respectively. The Bank
also has a defined contribution 401(k) savings plan, administered by its Trust
Department, for all eligible employees. Contributions to the plan are
determined by the Board of Directors, at its discretion, and are funded as
accrued. Up to certain limitations, employees may also contribute to this
plan. Expense under this plan was $81,523 in 1994, $72,155 in 1993, and
$76,569 in 1992.
The Bank maintains a supplemental retirement plan for its President and Chief
Executive Officer. The Bank has transferred funds to its Trust Department to
fund the estimated benefit liability upon retirement. Plan expense of $58,005,
$21,443 and $9,844 was recognized for the years ended December 31, 1994, 1993,
and 1992, respectively.
Stock Split: During August 1993, the Company effected a two-for-one stock split
through the issuance of one additional share of $5 par value common stock for
every share then outstanding.
Per-Share Amounts: Earnings per share are computed on the basis of weighted
average shares outstanding, retroactively adjusted for the stock split (672,000
for 1994, 1993, and 1992). Cash dividends per share are based on declared
rates, retroactively adjusted for the stock split.
INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment securities at
December 31, 1994 and 1993 are as follows:
Held-to-Maturity Portfolio - 1994
Amortized Gross Unreal- Gross Unreal- Estimated
Cost ized Gains ized Losses Fair Value
U.S. Treasury securities and
obligations of U.S. government
corporation and agencies $ 4,257,135 $ 10,453 $ 87,160 $ 4,180,428
Obligations of states and
political subdivisions 16,111,747 104,696 232,914 15,983,529
Other debt securities 433,485 1,681 5,565 429,601
Mortgage-backed securities 2,495,020 20,350 9,903 2,505,467
Totals $23,297,387 $ 137,180 $ 335,542 $23,099,025
Available-for-Sale Portfolio - 1994
U.S. Treasury securities and
obligations of U.S. government
corporation and agencies $39,037,358 $ 45,382 $1,110,512 $37,972,228
Obligations of states and
political subdivisions 6,303,105 ---- 339,891 5,963,214
Other debt securities 207,875 ---- ---- 207,875
Mortgage-backed securities 3,014,155 455 75,263 2,939,347
Totals $48,562,493 $ 45,837 $1,525,666 $47,082,664
Grand total $71,859,880 $ 183,017 $1,861,208 $70,181,689
Held-to-Maturity Portfolio - 1993
U.S. Treasury securities and
obligations of U.S. government
corporation and agencies $ 3,950,090 $ 150,915 $ 113 $ 4,100,892
Obligations of states and
political subdivisions 10,980,645 502,679 15,428 11,467,896
Other debt securities 646,127 26,931 ---- 673,058
Mortgage-backed securities 2,019,516 129,899 ---- 2,149,415
Totals $17,596,378 $ 810,424 $ 15,541 $18,391,261
Available-for-Sale Portfolio - 1993
U.S. Treasury securities and
obligations of U.S. government
corporation and agencies $39,156,158 $ 935,777 $ 42,376 $40,049,559
Obligations of states and
political subdivisions 6,282,469 145,843 20,807 6,407,505
Other debt securities ---- ---- ---- ----
Mortgage-backed securities 3,521,260 37,996 25,259 3,533,997
Totals $48,959,887 $1,119,616 $ 88,442 $49,991,061
Grand total $66,556,265 $1,930,040 $ 103,983 $68,382,322
At December 31, 1994 securities having a book value of $43,756,344 were pledged
to collateralize public fund deposits as required by law.
The amortized cost and estimated market value of investment securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
Held-to-Maturity Portfolio Available-for-Sale Portfolio
Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value
Due in one year $ 5,600,591 $ 5,602,690 $10,437,939 $10,421,962
Due after one year
through five years 10,329,041 10,256,528 31,286,427 30,094,128
Due after five years
through ten years 5,974,453 5,867,006 6,052,405 5,778,707
Due after ten years 1,393,302 1,372,801 785,722 787,867
Total $23,297,387 $23,099,025 $48,562,493 $47,082,664
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the loan loss allowance during the years ended December 31, 1994,
1993 and 1992 are summarized as follows:
1994 1993 1992
Balance at January 1 $ 1,079,689 $ 1,025,485 $ 935,352
Provision for the year 300,000 300,000 305,000
Recoveries on loans 91,113 60,734 64,179
Subtotal 1,470,802 1,386,219 1,304,531
Less: Loans charged off 245,065 306,530 279,046
Balance at December 31 $ 1,225,737 $ 1,079,689 $ 1,025,485
Substantially all of the Bank's borrowers are concentrated within Cortland
and adjacent counties.
BANK PREMISES, FURNITURE AND EQUIPMENT
Bank premises, furniture and equipment are comprised of the following:
1994 1993 1992
Land $ 506,975 $ 506,975 $ 506,975
Bank premises 2,870,249 2,638,263 2,552,592
Furniture and equipment 2,540,712 2,349,940 2,522,566
Subtotal 5,917,936 5,495,178 5,582,133
Less: Accumulated depreciation 2,714,918 2,294,584 2,255,232
Total $ 3,203,018 $ 3,200,594 $ 3,326,901
COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments consist primarily of commitments to extend credit and
letters of credit which involve, to varying degrees, elements of credit risk in
excess of amounts recognized in the consolidated balance sheet. The contract
amount of those commitments and letters of credit reflects the extent of
involvement the Bank has in those particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit and
letters of credit is represented by the contractual amount of the instruments.
The Bank uses the same credit policies in making commitments and letters of
credit as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit risk:
Contract Amount
1994 1993
Commitments to extend credit $13,913,176 $12,101,983
Standby letters of credit $ 1,513,562 $ 1,777,357
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitment amounts are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
Standby letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including bond financing and similar transactions.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers. Since the letters
of credit are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
For both commitments to extend credit and letters of credit, the amount of
collateral obtained, if deemed necessary by the Bank upon the extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies, but includes residential and commercial real estate.
The Bank's current risk-based capital ratio, which included the aforementioned
commitments, is more than twice the minimum of 8.00% required by the regulators.
Principal operating leases are for bank premises. At December 31, 1994,
aggregate future minimum lease payments under non-cancelable operating leases
with initial or remaining terms equal to or exceeding one year consist of the
following: 1995 - $51,620; 1996 - $51,620; 1997 - $51,620; 1998 - $51,620; and
1999 - $51,620 and $551,480 thereafter. Total rental expense amounted to
$53,575 in 1994, $41,799 in 1993, and $56,299 in 1992.
The Bank is subject to legal limitation on the amount of dividends that can be
paid to the Company. Dividends are limited to retained net profits, as
defined. At December 31, 1994, approximately $5,400,000 was available for the
declaration of dividends by the Bank.
INCOME TAXES
The income tax provision for 1994, 1993, and 1992 is summarized as follows:
1994 1993 1992
Currently payable $1,313,618 $1,260,627 $1,152,235
Deferred (credit) (135,768) (97,827) (34,317)
Total $1,177,850 $1,162,800 $1,117,918
The provision for income taxes includes the following:
1994 1993 1992
Federal income tax $ 877,000 $ 881,500 $ 807,100
New York State
franchise tax 300,850 281,300 310,818
Total $1,177,850 $1,162,800 $1,117,918
The components of deferred income taxes at December 31, 1994 and 1993 are as
follows:
1994 1993
Assets:
Allowance for possible loan losses $ 242,155 $ 183,745
Postretirement benefits 286,934 256,602
Deferred compensation 106,756 48,484
Other 40,189 48,777
Investment Securities 601,181 ----
Total Assets $1,277,215 $ 537,608
Liabilities:
Investment securities $ ---- $ 421,028
Accretion 17,199 14,541
Total Liabilities $ 17,199 $ 435,569
For 1992, deferred income taxes resulting from timing differences in the
recognition of income and expense for tax and financial reporting purposes
related principally to provision for loan losses, loan fees and compensation
expense.
A reconciliation between the statutory federal income tax rate and the effective
income tax rate for 1994, 1993, 1992 is as follows:
1994 1993 1992
Statutory federal income tax rate 34.0% 34.0% 34.0%
State franchise tax, net of
federal tax benefit 5.1 4.8 5.6
Tax exempt income (9.0) (9.0) (9.0)
Other, net .3 .1 .1
Total 30.4% 29.9% 30.7%
A deferred tax benefit of $220,738 was recognized in 1992 in connection with
the cumulative effect of accounting for postretirement benefits.
RELATED PARTY TRANSACTIONS
Directors and executive officers of the Bank and their affiliated companies
were customers of, and had other transactions with, the Bank in the ordinary
course of business during 1994. It is the Bank's policy that all loans and
commitments included in such transactions are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more
than the normal risk of collectibility or present other unfavorable features.
Loan transactions with related parties are summarized as follows:
Balance at December 31, 1993 $2,992,026
New loans and advances 2,635,674
Loan payments 1,227,570
Balance at December 31, 1994 $4,400,130
LINES OF CREDIT
At December 31, 1994, the Bank had available lines of credit totaling
$3,000,000 which were unused.
PARENT COMPANY FINANCIAL INFORMATION
Condensed financial statement information of Cortland First Financial
Corporation is as follows:
Balance Sheet
Assets Dec. 31, 1994 Dec. 31, 1993
Investment in subsidiary bank $20,419,584 $20,057,782
Cash and other assets 3,973 4,781
Total Assets $20,423,557 $20,062,563
Shareholders' Equity
Common Stock $ 3,360,000 $ 3,360,000
Surplus 3,360,000 3,360,000
Undivided profits 14,578,877 12,729,016
Unrealized net gains/(losses)
on investment securities (875,320) 613,547
Total Shareholders' Equity $ 20,423,557 $20,062,563
Statement of Income Year ended
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
Dividend income from
subsidiary bank $ 865,000 $ 821,400 $ 698,800
Operating expenses (25,808) (21,811) (14,204)
839,192 799,589 684,596
Equity in undistributed
income of subsidiary 1,850,669 1,929,814 1,523,480
Net Income $2,689,861 $2,729,403 $2,208,076
Statement of Cash Flows
Year Ended Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
Operating Activities
Net Income $2,689,861 $2,729,403 $2,208,076
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in undistributed net
income of subsidiary (1,850,669) (1,929,814) (1,523,480)
Provision for
amortization ---- ---- ----
Net Cash Provided by
Operating Activities 839,192 799,589 684,596
Financing Activities
Cash dividends paid (840,000) (806,400) (688,800)
Net Cash Used by
Financing Activities (840,000) (806,400) (688,800)
Increase (Decrease) in Cash
and Cash Equivalents (808) (6,811) (4,204)
Cash and Cash Equivalents at
beginning of year 4,781 11,592 15,796
Cash and Cash Equivalents at
End of Year $ 3,973 $ 4,781 $ 11,592
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Cortland First Financial Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Cortland First
Financial Corporation and Subsidiary as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cortland First
Financial Corporation and Subsidiary at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As further discussed in the notes to financial statements, the Company adopted
SFAS No. 109 (Accounting for Income Taxes) and SFAS No. 115 (Accounting for
Investments in Certain Debt and Equity Securities) in 1993 and SFAS No. 106
(Accounting for Postretirement Benefits Other Than Pensions) in 1992.
COOPERS & LYBRAND L.L.P.
Syracuse, New York
January 13, 1995
Distribution of Assets, Liabilities, and Shareholders' Equity:
The following table sets forth the amounts of the Corporation's daily average
assets, liabilities, and shareholders' equity for the period indicated, the
amounts of the interest earned and interest paid thereon, the average interest
rate earned for each type of earning asset, and the average rate paid for each
type of interest bearing liability. Interest earned on non-accruing loans is
included in the interest earned on loans only when collected. The average
balances of non-accruing loans are included in the average balances of loans.
Taxable equivalent adjustments have been made based on applicable marginal
Federal and State tax rates.
1/94-12/94 1/93-12/93
(In Thousands) In Thousands)
Average Interest Yield/ Average Interest Yield/
Balance Rate Balance Rate
Interest Earning Assets $ 0 $ 0 0 $ 8 $ 0 3.75%
Deposits with Banks
Investment Securities
Taxable $ 50,678 $ 3,152 6.22% $ 53,275 $ 3,494 6.55%
Tax Exempt 17,328 1,270 7.35% 16,475 1,259 7.64%
Total Investment Securities $ 68,007 $ 4,422 6.51% $ 69,750 $ 4,753 6.81%
Federal Funds Sold $ 8,288 $ 337 4.06% $ 6,485 $ 192 2.95%
Loans
Real Estate Mortgages $ 61,513 $ 5,597 9.10% $ 58,350 $ 5,486 9.40%
Commercial & Agricultural 23,827 2,218 9.31% 24,190 2,089 8.64%
Consumer 18,268 1,947 10.66% 15,983 1,944 12.16%
Municipal 3,100 302 9.77% 3,610 353 9.78%
Total Loans $106,708 $10,064 9.43% $102,133 $ 9,872 9.67%
Total Interest Earning Assets $183,003 $14,823 8.10% $178,376 $14,817 8.31%
Non Interest Earning Assets
Non Earning Assets $ 13,954 $ 14,121
Allowance for Loan Losses ( 1,137) (1,051)
Total Assets $195,820 $191,446
Interest Bearing Liabilities
Savings Rate Deposits $ 54,034 $ 1,599 2.96% $ 58,196 1,930 3.32%
Market Rate Deposits 96,574 3,126 3.24% 90,413 3,082 3.41%
Total Deposits $150,608 $ 4,725 3.14% $148,609 $ 5,012 3.37%
Borrowed Funds 18,788 0 1.68% 190 1 0.53%
Total Int Bearing Liab. $150,626 $ 4,725 3.14% $148,799 $5,013 3.37%
Non Interest Bearing Liab. $ 24,896 $ 24,079
Shareholders' Equity 20,298 18,568
$ 45,194 $ 42,647
Total Liabilities and
Shareholders' Equity $195,820 $191,446
Net Interest Income $10,098 $9,804
Net Yield on Interest Earning Assets 5.51% 5.50%
Interest Rates and Interest Differential:
The following table sets forth for the periods indicated a survey
of the changes in interest earned and interest paid resulting from
changes in volume and changes in rates. Interest earned on non-
accruing loans is included in the interest earned on loans only
when collected, i.e., on the cash basis, but the average balances
of such loans are included in the average balances of loans. The
change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
1994 Compared to 1993 1993 Compared to 1992
Increase (Decrease) Due to Increase (Decrease) Due to
Rate Volume Net Rate Volume Net
(in thousands of dollars) (in thousands of dollars)
Interest on Earning Assets:
Interest bearing deposit
with banks $ 0 0 0 $ 0 1 1
Investment Securities:
Taxable (179) (163) (342) (445) 439 (6)
Tax-exempt (74) 85 11 (83) 144 61
Total Investments (253) (78) (331) (528) 583 55
Federal Funds Sold 87 58 145 (37) (30) (67)
Loans:
Real Estate (179) 290 111 (501) 615 114
Commercial and Agricultural 162 (33) 129 (42) (105) (147)
Consumer (257) 260 3 (92) (255) (347)
Municipal 0 (51) (51) (55) 64 9
Total Loans (274) 466 192 (690) 319 (371)
Total Interest Income: $(440) 446 6 $(1,255) 872 (383)
Interest Paid on Liabilities:
Deposits:
Savings rate $(205) (126) (331) $ (482) 434 (48)
Market rate (157) 201 44 (835) (162) (997)
Total Deposits (362) 75 (287) (1,317) 272 (1,045)
Borrowed Funds: 0 (1) (1) (1) 1 0
Total Int Exp: $(362) 74 (288) $(1,318) 273 (1,045)
Net Change in Net
Interest Income: $ (78) 372 294 $ 63 599 662
INVESTMENT PORTFOLIO - MATURITY SCHEDULE
The following schedule sets forth the maturities of both available-for-sale and
held-to-maturity securities at December 31, 1994. Amounts and weighted average
yields of such securities are based on amortized cost for all securities.
Yield of tax exempt securities have been computed on a tax equivalent basis
using a marginal Federal and State income tax rate. (Excludes Federal Reserve
Bank and other stock of $207,000.)
Remaining Maturities December 31, 1994
Within After 1 Year After 5 Years
1 Year to 5 Years to 10 Years After 10 Years Total
Held to Maturity Portfolio-------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
US Treasury Securities $ 250 4.09% $ 1,702 6.19% $ 0 0.00% $ 0 0.00% $ 1,951 5.92%
US Government Corporation and
Agency Securities 3 9.70% 2,381 7.29% 1,673 8.28% 743 9.06% $4,801 7.91%
Obligations of States and
Political Subdivisions 5,172 6.59% 5,984 9.81% 4,301 6.58% 654 6.78% $16,112 7.79%
Other Securities 176 8.39% 258 6.35% 0 0.00% 4 5.00% $437 7.16%
------- ------- ----- ------ -------
Total Held-To-Maturity $5,601 6.54% $10,325 8.55% $5,974 7.05% $1,401 7.98% $23,301 7.65%
Available for Sale Portfolio
US Treasury Securities $9,346 6.68% $20,626 6.04% $ 0 0.00% $ 0 0.00% $29,972 6.24%
US Government Corporation and
Agency Securities 1,092 8.45% 8,046 5.65% 2,364 6.14% 578 5.79% $12,080 6.00%
Obligations of States and
Political Subdivisions 0 0.00% 2,614 6.26% 3,689 6.79% 0 0.00% 6,303 6.57%
------- ------ ------- ------- -------
Total Available-for-Sale $10,438 6.86% $31,286 5.96% $6,052 6.54% $578 5.79% $48,355 6.23%
Grand Total $16,039 6.75% $41,611 6.60%$12,027 6.79% $1,979 7.34% $71,656 6.69%
======= ======= ======= ======= ========
Maturity distribution 22% 58% 17% 3% 100%
At December 31, 1994, 78% of the state and municipal securities portfolio,
based upon par value was rated "A" or higher, and 77% "AA" or higher.
Obligations of the State of New York and its political subdivisions constituted
$17,765,998 par value or 25% of the portfolio at that date, with a market value
of $17,800,655.
There were no securities of a single issuer which constituted more than 10% of
shareholders equity as of December 31, 1994.
BALANCE SHEET GAP ANALYSIS
DECEMBER 31, 1994
(in thousands)
Assets: 3 Months 3-12 Months 1-5 Years >5 Years Total
Cash & Due From Banks $ 8,342 $ 0 $ 0 $ 0 $ 8,342
Total Securities 3,228 10,397 46,484 10,271 70,380
Short-Term Investments 3,900 0 0 0 3,900
Total Loans 35,322 9,836 37,978 26,773 109,909
Loan Reserve 0 0 0 (1,226) (1,226)
Net Loans 35,322 9,836 37,978 25,547 108,683
Total Fixed & Other Assets 0 0 0 7,454 7,454
Total Assets $50,792 $ 20,233 $ 84,462 $43,272 $198,759
Liabilities & Capital:
Non-Interest Bearing Deposits $ 3,804 $ 11,408 $ 10,140 $ 0 $ 25,352
NOW & Savings Accounts 15,691 8,545 51,025 994 76,255
Money Market Deposits 5,403 16,206 14,406 0 36,015
Total Core Deposits $24,898 $ 36,159 $ 75,571 $ 994 $137,622
Certificates of Deposit 8,292 16,720 14,333 0 39,345
Total Deposits $33,190 $ 52,879 $ 89,904 $ 994 $176,967
Short-Term Borrowings 0 0 0 0 0
Other Liabilities 0 0 0 1,369 1,369
Total Liabilities $33,190 $ 52,879 $ 89,904 $ 2,363 $178,336
Common Stock 0 0 0 6,720 6,720
Retained Earnings 0 0 0 13,703 13,703
Total Equity 0 0 0 20,423 20,423
Total Liabilities & Equity $33,190 $ 52,879 $ 89,904 $22,786 $198,759
GAP $17,602 $(32,646) $ (5,442) $20,486 $ 0
Cumulative Gap $17,602 $(15,044) $(20,486) $ 0 $ 0
Gap analysis indicates the sensitivity to fluctuations in interest rates by
providing information regarding maturity repricing and cash flows for both
assets and liabilities. Cash and Federal funds sold are assigned to immediate
repricing since they represent overnight sales. Investment securities are
scheduled according to the final maturity date in the case of fixed rate issues
and by next repricing date for variable rate securities. Loans are assigned by
final maturity for fixed rate loans with no scheduled amortizing payments,
while loans with amortizing payments are scheduled according to amortized
paybacksince this would represent a repricing opportunity on funds received as
payments. Variable rate loans are assigned to the next repricing date. Demand
loans are categorized as immediately repriceable. Non-interest bearing
deposits repricing within three months are at least equal to the amount of cash
and due from banks. The remaining interest bearing, savings, and money market
accounts which represent core deposits are spread across the Gap buckets to
yield a 3 1/2 year average maturity. Fixed rate certificates of deposit are
assigned by final maturity date, while variable rate are assigned as of the
next repricing date. Fixed assets, other assets, other liabilities, and equity
are assigned to the over five year category since they represent stable,
non-repricing components.
NON-PERFORMING ASSETS
Year Ended December 31
1994 1993
(In Thousands)
Non-accruing loans:
Real estate mortgages $ 64 $436
Commercial & Agricultural 52 22
Consumer 4 2
Municipal 0 0
Total non-accruing loans $120 $460
Loans past due 90 days or more
and still accruing:
Real estate mortgages $124 $ 0
Commercial & agricultural 3 0
Consumer 31 24
Municipal 0 0
Total past-due loans 90 days or more $158 $ 24
Restructured loans $ 0 $ 0
Other real estate owned 0 0
Total restructured and OREO $ 0 $ 0
Total non-performing assets $278 $484
Percent of total net loans .26% .46%
Income that would have been accrued at original
Contract rates on non-accruing loans $ 8 $ 44
Amount recognized as income 4 0
Interest income not accrued $ 4 $ 44
Non-accruing Loans
The Company does not accrue interest on certain non-performing loans. Non-
accrual status is normally reserved for loans 90 days or more past due unless
both well secured and in the process of collection.
Potential Problem Loans
At December 31, 1994, the Company had $7,457,000 in commercial and consumer
loans for which payments are presently current, but the borrowers are currently
experiencing financial difficulties. Those loans are subject to constant
management attention and are reviewed weekly. The Registrant had no
restructured loans as defined by SFAS 15 in the portfolio. Loans which are
current for which collection is doubtful are not normally placed in non-accrual
status. Such loans are on a watch list to allow monitoring by management.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that are not included above, do not represent or result from
trends or uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, nor do they
represent material credits about which management is aware of information which
causes management to have serious doubts as to the ability of such borrowers to
comply with the loan repayment terms.
Loan Concentration
There are no concentrations of loans which amount to more than 10% of total
loans other than those which have been separately disclosed, i.e., rental
estate, consumer, commercial, agricultural, and municipal. All loans granted
are to entities within Cortland County and those immediately adjoining counties
which are in our local service area. We have no outside area loans in our
portfolio.
Allocations of the Allowance for Loan Losses
Year Ended December 31,
1994 1993
% of Loans % of Loans
Amount to Total Amount to Total
(In thousands of dollars)
Real Estate Mortgage $ 341 58% $ 270 59%
Commercial, Municipal
& Agricultural 467 24% 292 23%
Consumer 418 18% 518 18%
Total Allocation $ 1,226 100% $1,080 100%
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses. The allowance is increased by
provisions charged to operating expenses and reduced by net charge-offs. The
adequacy of the allowance is based on management evaluation of the last three
years historical loss experience, specific allocations for losses detailed in
the loan loss review, and an additional allocation based on the total
outstandings in the loan portfolio. Additional factors considered in the
evaluation include the levels and trends in delinquencies and non-accruals,
underwriting guidelines and collection procedures, the experience and ability
of the lending staff, and current economic conditions within our lending area.
The Company has a diverse customer base with no known significant
concentrations of credit that would affect the allowance.
Summary of Loan Loss Experience
The following table summarizes the Company's loan loss experience for the two
years ended December 31, 1994.
Year Ended December 31,
1994 1993
(In thousands of dollars)
Loans, Net of unearned income
at end of period $109,909 $105,699
Average amount of net loans $106,708 $102,133
Balance of allowance for possible
loan losses at beginning of period $ 1,080 $ 1,025
Additions:
Provisions for losses 300 300
Deductions:
Charge offs:
Real estate mortgages 0 25
Commercial and agricultural 126 75
Consumer loans 119 205
Municipal loans 0 0
Total charge offs $ 245 $ 305
Recoveries:
Real estate mortgages 0 0
Commercial and agricultural 10 19
Consumer loans 81 41
Municipal loans 0 0
Total recoveries $ 91 $ 60
Net charge offs $ 154 $ 245
Allowance for possible loan losses-
end of period $ 1,226 $ 1,080
Ratio of net charge offs to
average loans .14% .24%
Ratio of reserve for loan losses to
loans outstanding at end of period 1.12% 1.02%
Ratio of provisions for losses
to net charge offs 194.80% 121.95%
Deposits
The exhibit below presents daily average amounts and rates of deposits by type
for the years ended December 31, 1994 and December 31, 1993.
1994 1993
Amount Rate Amount Rate
(In thousands) (In thousands)
Savings Deposits $ 52,880 2.97% $ 57,032 3.33%
Money Market Savings 28,257 3.61% 19,028 3.08%
Time Open 1,153 2.60% 1,164 2.85%
Interest Bearing Checking 32,324 1.87% 35,066 2.74%
Time Deposits 35,994 4.17% 36,319 4.23%
Total Interest Bearing $150,608 3.14% $148,609 3.37%
Demand Deposits 23,584 23,145
Total Deposits $174,192 $171,754
Maturities of time certificates of deposit of $100,000 or more outstanding at
December 31, 1994, are summarized as follows:
Amount
(in thousands of dollars)
3 months or less $2,554
Over 3 through 6 months 918
Over 6 through 12 months 1,648
Over 12 months 907
Total $6,027
Non-interest bearing deposits disclosed represent all demand deposits which
are non-interest bearing. These deposits are held by individuals,
partnerships, corporations, and municipalities. There are no significant
deposits from trust activities.
Return on Equity and Assets
The following table shows operating and capital ratios for the last two years.
Year Ended December 31,
1994 1993
Return on Assets
Net Income/Average Total Assets 1.37% 1.43%
Return on Equity
Net Income/Average Shareholder Equity 13.25% 14.70%
Dividend Payout Ratio
Cash Dividends Declared/Net Income 31.23% 29.55%
Capital Ratio
Average Shareholder Equity/
Average Total Assets 10.37% 9.70%
Item 9 -- Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
Directors are listed in the Annual Proxy Statement, dated February 28, 1995,
pages 2 through 4, incorporated herein by reference.
Item 11 -- Executive Compensation
Annual Proxy Statement, dated February 28, 1995, pages 6 through 10,
incorporated herein by reference.
Item 12 -- Security Ownership of Certain Beneficial Owners and Management
Annual Proxy Statement, dated February 28, 1995, pages 2 through 4, incorporated
herein by reference.
Item 13 -- Certain Relationships and Related Transactions
Annual Proxy Statement, dated February 28, 1995, pages 4 and 10, incorporated
herein by reference.
PART IV
Item 14 -- Exhibits, Financial Statement Schedules, and Reports on 8-K
(a) Documents filed as part of this report:
(2) Financial statement schedules are omitted from this Form 10-K
since the required information is not applicable to the
Registrant.
(3) Listing of Exhibits:
The following documents are attached as Exhibits to this
Form 10-K as indicated by the page number or exhibit or
are incorporated by reference to the prior filings of the
Registrant with the Commission.
Form 10-K
Exhibit Number Exhibit Page
3.1 Certificate of Incorporation of
Cortland First Financial Corporation *
3.2 Bylaws of the Company *
4 Specimen Stock Certificates *
22 List of Registrant's Subsidiary E-1
* Exhibit is incorporated herein by reference to the identically
numbered exhibit to the Form S-4 Registration Statement filed
by the Company with the Securities an Exchange Commission on
August 18, 1986.
Item 14 (b)
There were no reports filed on Form 8-K during the fourth
quarter of 1994.
Item 14 (c)
See Item 14 (a) (3) above.
Item 14 (d)
See Item 14 (a) (2) above.
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.
CORTLAND FIRST FINANCIAL CORPORATION
(Registrant)
Date March 27, 1995 By \s\ David R. Alvord
David R. Alvord, President and
Chief Executive Officer
Date March 27, 1995 By \s\ Bob Derksen
Bob Derksen, Vice President and
Chief Financial Officer
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, and in the capacities and on the dates
indicated.
David R. Alvord, President, CEO and Director Date March 27, 1995
Donald S. Ames, Director Date March 27, 1995
Mary Alice Bellardini, Director Date March 27, 1995
John S. Buck, Director Date March 27, 1995
Robert M. Lovell, Director Date March 27, 1995
Harry D. Newcomb, Director Date March 27, 1995
Richard J. Shay, Director Date March 27, 1995
Charles H. Spaulding, Director Date March 27, 1995
David J. Taylor, Director Date March 27, 1995
Esther F. Twentyman, Director Date March 27, 1995
Stuart Young, Director Date March 27, 1995
Exhibit 22 -- Subsidiaries
Subsidiary of the Registrant
First National Bank of Cortland is a wholly owned subsidiary of
Cortland First Financial Corporation.