UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
T ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2008
OR
£ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
TRANSITION PERIOD FROM ______ TO ______
COMMISSION
FILE NUMBER: 0-14703
NBT
BANCORP INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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16-1268674
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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52 SOUTH
BROAD STREET
NORWICH,
NEW YORK 13815
(Address
of principal executive office) (Zip Code)
(607)
337-2265 (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: Common Stock ($0. 01 par value
per share)
Stock
Purchase Rights Pursuant to Stockholders Rights Plan
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes T No
£
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 (d) of the Act. Yes £ No
T
Indicate by check
mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during
the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements
for the past 90 days. Yes T No £
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant’s knowledge, in
definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer T
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Accelerated
filer £
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Non-accelerated
filer £
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Smaller
reporting company £
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). £
Yes T
No
Based on
the closing price of the registrant’s common stock as of June 30, 2008, the
aggregate market value of the voting stock, common stock, par value, $0.01 per
share, held by non-affiliates of the registrant is $655,866,020.
The
number of shares of Common Stock outstanding as of February 15, 2009, was
32,648,164.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of
the registrant’s definitive Proxy Statement for its Annual Meeting of
Stockholders to be held on May 5, 2009 are incorporated by reference
into Part III, Items 10, 11, 12, 13 and 14 of this Form 10-K.
1
NBT BANCORP INC.
FORM 10-K – Year Ended
December 31, 2008
TABLE
OF CONTENTS
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PART
I
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ITEM
1
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ITEM
1A
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ITEM
1B
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ITEM
2
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ITEM
3
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ITEM
4
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PART
II
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ITEM
5
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ITEM
6
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ITEM
7
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ITEM
7A
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ITEM
8
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ITEM
9
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2
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ITEM
9A
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ITEM
9B
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PART
III
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ITEM
10
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ITEM
11
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ITEM
12
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ITEM
13
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ITEM
14
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PART
IV
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ITEM
15
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(a)
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(1)
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Consolidated
Financial Statements (See Item 8 for Reference).
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(2)
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Financial
Statement Schedules normally required on Form 10-K are omitted since they
are not applicable.
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(3)
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Exhibits.
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(b)
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Refer
to item 15(a)(3)above.
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(c)
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Refer
to item 15(a)(2) above.
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*
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Information
called for by Part III (Items 10 through 14) is incorporated by reference
to the Registrant’s Proxy Statement for the 2009 Annual Meeting of
Stockholders.
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PART
I
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ITEM
1. BUSINESS
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NBT
Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial
holding company incorporated in the state of Delaware in 1986, with its
principal headquarters located in Norwich, New York. The Company, on a
consolidated basis, at December 31, 2008 had assets of $5.3 billion and
stockholders’ equity of $431.8 million. The Registrant is the parent holding
company of NBT Bank, N.A. (the “Bank”), NBT Financial Services, Inc. (“NBT
Financial”), NBT Holdings, Inc. (“NBT Holdings”), Hathaway Agency, Inc., CNBF
Capital Trust I, NBT Statutory Trust I and NBT Statutory Trust II (the
“Trusts”). Through the Bank and NBT Financial, the Company is focused
on community banking operations. Through NBT Holdings, the Company
operates Mang Insurance Agency, LLC, a full-service insurance
agency. The Trusts were organized to raise additional regulatory
capital and to provide funding for certain acquisitions. The Registrant’s
primary business consists of providing commercial banking and financial services
to its customers in its market area. The principal assets of the Registrant are
all of the outstanding shares of common stock of its direct subsidiaries, and
its principal sources of revenue are the management fees and dividends it
receives from the Bank, NBT Financial, and NBT Holdings.
The Bank
is a full service commercial bank formed in 1856, which provides a broad range
of financial products to individuals, corporations and municipalities throughout
the central and upstate New York and northeastern Pennsylvania market areas. The
Bank conducts business through two geographic operating divisions, NBT Bank and
Pennstar Bank.
At year
end 2008, the NBT Bank division had 84 divisional offices and 114 automated
teller machines (ATMs), located primarily in central and upstate New York. At
December 31, 2008, the NBT Bank division had total loans and leases of $2.9
billion and total deposits of $3.1 billion.
At year
end 2008, the Pennstar Bank division had 38 divisional offices and 57 ATMs,
located primarily in northeastern Pennsylvania. At December 31, 2008, the
Pennstar Bank division had total loans and leases of $761.0 million and total
deposits of $827.2 million.
The Bank
has six operating subsidiaries, NBT Capital Corp., Pennstar Bank Services
Company, Broad Street Property Associates, Inc., NBT Services, Inc., Pennstar
Realty Trust, and CNB Realty Trust. NBT Capital Corp., formed in 1998, is a
venture capital corporation formed to assist young businesses to develop and
grow primarily in the markets they serve. Broad Street Property Associates,
Inc., formed in 2004, is a property management company. NBT Services,
Inc., formed in 2004, has a 44% ownership interest in Land Record Services,
LLC. Land Record Services, LLC, a title insurance agency, offers
mortgagee and owner’s title insurance coverage to both retail and commercial
customers. Pennstar Realty Trust, formed in 2000, and CNB Realty
Trust, formed in 1998, are real estate investment trusts. Pennstar Bank Services
Company, formed in 2002, provides administrative and support services to the
Pennstar Bank division of the Bank.
CNBF
Capital Trust I (Trust I) and NBT Statutory Trust I are Delaware statutory
business trusts formed in 1999 and 2005, respectively, for the purpose of
issuing trust preferred securities and lending the proceeds to the Company. In
connection with the acquisition of CNB Bancorp, Inc. mentioned below, the
Company formed NBT Statutory Trust II (Trust II) in February 2006 to fund the
cash portion of the acquisition as well as to provide regulatory capital. The
Company raised $51.5 million through Trust II in February 2006. The Company
guarantees, on a limited basis, payments of distributions on the trust preferred
securities and payments on redemption of the trust preferred securities. The
Trusts are variable interest entities (VIEs) for which the Company is not the
primary beneficiary, as defined in Financial Accounting Standards Board
Interpretation (“FIN”) No. 46 “Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51 (Revised December 2003)
(FIN 46R).” In accordance with FIN 46R, the accounts of the Trusts are not
included in the Company’s consolidated financial statements. See the Company’s
accounting policy related to consolidation in Note 1 — Summary of Significant
Accounting Policies in the notes to consolidated financial statements included
in Item 8 Financial Statements and Supplementary Data of this
report. For more information relating to the Trusts, see Note 13 to
the consolidated financial statements.
On
September 1, 2008, the Company completed the acquisition of Mang Insurance
Agency, LLC (“Mang”), headquartered in Binghamton, New York. As part
of the acquisition, the Company acquired approximately $15.3 million of
intangible assets and $11.8 million of goodwill, which has been allocated to NBT
Holdings for reporting purposes. The results of operations are
included in the consolidated financial statements from the date of acquisition,
September 1, 2008.
On
February 10, 2006, the Company acquired CNB Bancorp, Inc. (“CNB”), a bank
holding company headquartered in Gloversville, New York. The acquisition was
accomplished by merging CNB with and into the Company. By virtue of this
acquisition, CNB’s banking subsidiary, City National Bank and Trust Company, was
merged with and into NBT Bank. City National Bank and Trust Company
operated 9 full-service community banking offices – located in Fulton, Hamilton,
Montgomery and Saratoga counties, with approximately $400 million in
assets. In connection with the merger with CNB, the Company issued an
aggregate of 2.1 million shares of Company common stock and $39 million in cash
to the former holders of CNB common stock. Based on the $22.42 per
share closing price of the Company’s common stock on February 10, 2006, the
transaction was valued at approximately $88 million.
CNB
nonqualified stock options, entitling holders to purchase CNB common stock
outstanding, were cancelled on the closing date and such option holders received
an option payment subject to the terms of the merger agreement. The total number
of CNB nonqualified stock options that were canceled was 103,545, which resulted
in a cash payment to option holders before any applicable federal or state
withholding tax, of approximately $1.3 million. In accordance with the terms of
the merger agreement, all outstanding CNB incentive stock options as of the
effective date were assumed by the Company. At that time, there were
144,686 CNB incentive stock options that were exchanged for 237,278 replacement
incentive stock options of the Company. All CNB incentive stock
options were converted to nonqualified stock options.
COMPETITION
The
banking and financial services industry in New York and Pennsylvania generally,
and in the Company’s market areas specifically, is highly competitive. The
increasingly competitive environment is the result of changes in regulation,
changes in technology and product delivery systems, additional financial service
providers, and the accelerating pace of consolidation among financial services
providers. The Company competes for loans and leases, deposits, and customers
with other commercial banks, savings and loan associations, securities and
brokerage companies, mortgage companies, insurance companies, finance companies,
money market funds, credit unions, and other nonbank financial service
providers. Many of these competitors are much larger in total assets and
capitalization, have greater access to capital markets and offer a broader range
of financial services than the Company. In order to compete with other financial
services providers, the Company stresses the community nature of its banking
operations and principally relies upon local promotional activities, personal
relationships established by officers, directors, and employees with their
customers, and specialized services tailored to meet the needs of the
communities served.
SUPERVISION
AND REGULATION
As a bank
holding company, the Company is subject to extensive regulation, supervision,
and examination by the Board of Governors of the Federal Reserve System (“FRS”)
as its primary federal regulator. The Company also has qualified for and elected
to be registered with the FRS as a financial holding company. The Bank, as a
nationally chartered bank, is subject to extensive regulation, supervision and
examination by the Office of the Comptroller of the Currency (“OCC”) as its
primary federal regulator and, as to certain matters, by the FRS and the Federal
Deposit Insurance Corporation (“FDIC”).
The
Company is subject to capital adequacy guidelines of the FRS. The guidelines
apply on a consolidated basis and require bank holding companies to maintain a
minimum ratio of Tier 1 capital to total average assets (or “leverage ratio”) of
4%. For the most highly rated bank holding companies, the minimum ratio is 3%.
The FRS capital adequacy guidelines also require bank holding companies to
maintain a minimum ratio of Tier 1 capital to risk-weighted assets of 4% and a
minimum ratio of qualifying total capital to risk-weighted assets of 8%. As of
December 31, 2008, the Company’s leverage ratio was 7.17%, its ratio of Tier 1
capital to risk-weighted assets was 9.75%, and its ratio of qualifying total
capital to risk-weighted assets was 11.00%. The FRS may set higher minimum
capital requirements for bank holding companies whose circumstances warrant it,
such as companies anticipating significant growth or facing unusual risks. The
FRS has not advised the Company of any special capital requirement applicable to
it.
Any
holding company whose capital does not meet the minimum capital adequacy
guidelines is considered to be undercapitalized and is required to submit an
acceptable plan to the FRS for achieving capital adequacy. Such a company’s
ability to pay dividends to its shareholders and expand its lines of business
through the acquisition of new banking or nonbanking subsidiaries also could be
restricted.
The Bank
is subject to leverage and risk-based capital requirements and minimum capital
guidelines of the OCC that are similar to those applicable to the Company. As of
December 31, 2008, the Bank was in compliance with all minimum capital
requirements. The Bank’s leverage ratio was 6.93%, its ratio of Tier 1 capital
to risk-weighted assets was 9.38%, and its ratio of qualifying total capital to
risk-weighted assets was 10.64%.
Under
FDIC regulations, no FDIC-insured bank can accept brokered deposits unless it is
well capitalized, or is adequately capitalized and receives a waiver from the
FDIC. In addition, these regulations prohibit any bank that is not well
capitalized from paying an interest rate on brokered deposits in excess of
three-quarters of one percentage point over certain prevailing market rates. As
of December 31, 2008, the Bank’s total brokered deposits were $269.8
million.
The Bank
also is subject to substantial regulatory restrictions on its ability to pay
dividends to the Company. Under OCC regulations, the Bank may not pay a
dividend, without prior OCC approval, if the total amount of all dividends
declared during the calendar year, including the proposed dividend, exceed the
sum of its retained net income to date during the calendar year and its retained
net income over the preceding two years. As of December 31, 2008, approximately
$46.6 million was available for the payment of dividends without prior OCC
approval. The Bank’s ability to pay dividends is also subject to the Bank being
in compliance with regulatory capital requirements. As indicated above, the Bank
is currently in compliance with these requirements.
The OCC
generally prohibits a depository institution from making any capital
distributions (including payment of a dividend) or paying any management fee to
its parent holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized institutions are subject to growth
limitations and are required to submit a capital restoration plan. If a
depository institution fails to submit an acceptable capital restoration plan,
it is treated as if it is “significantly undercapitalized.” Significantly
undercapitalized depository institutions may be subject to a number of
requirements and restrictions, including orders to sell sufficient voting stock
to become “adequately capitalized,” requirements to reduce total assets, and
cessation of receipt of deposits from correspondent banks. “Critically
undercapitalized” institutions are subject to the appointment of a receiver or
conservator.
The
deposits of the Bank are insured up to regulatory limits by the FDIC. The
Federal Deposit Insurance Reform Act of 2005 gave the FDIC increased flexibility
in assessing premiums on banks and savings associations, including the Bank, to
pay for deposit insurance and in managing its deposit insurance reserves. The
FDIC has adopted regulations to implement its new authority. Under
these regulations, all insured depository institutions are placed into one of
four risk categories. The Bank is in Risk Category I, the most
favorable category. As of January 1, 2009, all insured institutions
within this category will pay a base rate assessment of $0.12 to $0.50 per $100
of deposits for the first quarter of 2009 of assessable deposits based on the
risk of loss to the Depository Insurance Fund (“DIF”) posed by the particular
institution. Institutions, such as the Bank, in risk Category I will
be assessed within a range of $0.12 to $0.14 per $100 of deposits for the first
quarter of 2009. This is a substantial increase from the base rate
assessment of $0.02 to $0.04 per $100 of assessable deposits that was in effect
during 2008. The increase in the base rate assessment from 2008 to
2009 is due to the financial crises affecting the banking system and financial
markets. For institutions such as the Bank, which do not have a
long-term public debt rating, the individual risk assessment is based on its
supervisory ratings and certain financial ratios and other measurements of its
financial condition. For institutions that have a long-term public
debt rating, the individual risk assessment is based on its supervisory ratings
and its debt rating. On February 27, 2009, the FDIC issued new rules to take
effect April 1, 2009 to change the way the FDIC differentiates risk and
appropriate assessment rates. Base assessment rates set to take effect on
April 1, 2009 will range from 12 to 45 basis points, but giving effect to
certain risk adjustments in the rule issued by the FDIC on February 27, 2009,
assessments may range from 7 to 77.5 basis points. For institutions such as
the Bank, in Risk Category I, risk-adjusted assessments will range from 7 to 24
basis points. In addition, the FDIC also issued an interim rule on February 27,
2009 that will impose an emergency special assessment of 20 basis points in
addition to its risk-based assessment. This assessment will be imposed on June
30, 2009 and collected on September 30, 2009. The reform legislation also
provided a credit to all insured depository institutions, based on the amount of
their insured deposits at year-end 1996, that may be used as an offset to the
premiums that are assessed. The Bank’s credit was fully utilized in
2008 to offset its 2008 deposit insurance assessment. Due to the full
utilization of the Bank’s credit, the systemic increase in deposit insurance
assessments and the emergency special assessment, the Bank will be subject to
increased deposit premium expenses in future periods.
On
October 14, 2008, the FDIC announced a new program, the Temporary Liquidity
Guarantee Program (“TLGP”), that provides unlimited deposit insurance on funds
invested in noninterest-bearing transaction deposit accounts in excess of the
existing deposit insurance limit of $250,000. Participating
institutions will be assessed a $0.10 surcharge per $100 of deposits above the
existing deposit insurance limit. The TLGP also provides that the FDIC, for an
additional fee, will guarantee qualifying senior unsecured debt issued prior to
October 2009 by participating banks and certain qualifying holding
companies. The Bank and the Company have elected to opt in to both
portions of the TLGP.
The
Federal Deposit Insurance Act provides for additional assessments to be imposed
on insured depository institutions to pay for the cost of Financing Corporation
(“FICO”) funding. The FICO assessments are adjusted quarterly to reflect changes
in the assessment base of the DIF and do not vary depending upon a depository
institution’s capitalization or supervisory evaluation. During 2008, FDIC
assessments for purposes of funding FICO bond obligations ranged from an
annualized $0.0114 per $100 of deposits for the first quarter of 2008 to $0.0110
per $100 of deposits for the fourth quarter of 2008. The Bank paid $1.8 million
of FICO assessments in 2008. For the first quarter of 2009, the FICO assessment
rate is $0.0114 per $100 of deposits.
Transactions
between the Bank and any of its affiliates, including the Company, are governed
by sections 23A and 23B of the Federal Reserve Act and FRS regulations
thereunder. An “affiliate” of a bank is any company or entity that controls, is
controlled by, or is under common control with the bank. A subsidiary of a bank
that is not also a depository institution is not treated as an affiliate of the
bank for purposes of sections 23A and 23B, unless the subsidiary is also
controlled through a non-bank chain of ownership by affiliates or controlling
shareholders of the bank, the subsidiary is a financial subsidiary that operates
under the expanded authority granted to national banks under the
Gramm-Leach-Bliley Act (“GLB Act”), or the subsidiary engages in other
activities that are not permissible for a bank to engage in directly (except
insurance agency subsidiaries). Generally, sections 23A and 23B are intended to
protect insured depository institutions from suffering losses arising from
transactions with non-insured affiliates, by placing quantitative and
qualitative limitations on covered transactions between a bank and with any one
affiliate as well as all affiliates of the bank in the aggregate, and requiring
that such transactions be on terms that are consistent with safe and sound
banking practices.
In 2007,
the Federal Reserve and Securities and Exchange Commission (“SEC”) issued a
final joint rulemaking (Regulation R) to clarify that traditional banking
activities involving some elements of securities brokerage activitities, such as
most trust and fiduciary activities, may continue to be performed by banks
rather than being “pushed-out” to affiliates supervised by the
SEC. These rules take effect for the Bank beginning January 1,
2009.
Under the
GLB Act, a financial holding company may engage in certain financial activities
that a bank holding company may not otherwise engage in under the Bank Holding
Company Act (“BHC Act”). In addition to engaging in banking and activities
closely related to banking as determined by the FRS by regulation or order prior
to November 11, 1999, a financial holding company may engage in activities that
are financial in nature or incidental to financial activities, or activities
that are complementary to a financial activity and do not pose a substantial
risk to the safety and soundness of depository institutions or the financial
system generally.
The GLB
Act requires all financial institutions, including the Company and the Bank, to
adopt privacy policies, restrict the sharing of nonpublic customer data with
nonaffiliated parties at the customer’s request, and establish procedures and
practices to protect customer data from unauthorized access. In addition, the
Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”) includes many
provisions concerning national credit reporting standards, and permits
consumers, including customers of the Company, to opt out of information sharing
among affiliated companies for marketing purposes. The FACT Act also requires
banks and other financial institutions to notify their customers if they report
negative information about them to a credit bureau or if they are granted credit
on terms less favorable than those generally available. The FRS and the Federal
Trade Commission (“FTC”) have extensive rulemaking authority under the FACT Act,
and the Company and the Bank are subject to the rules that have been promulgated
by the FRS and FTC, including recent rules regarding limitaions of affiliate
marketing and implementation of programs to identify, detect and mitigate
certain identity theft red flags. The Company has developed policies and
procedures for itself and its subsidiaries, including the Bank, and believes it
is in compliance with all privacy, information sharing, and notification
provisions of the GLB Act and the FACT Act.
Periodic
disclosures by companies in various industries of the loss or theft of
computer-based nonpublic customer information have led several members of
Congress to call for the adoption of national standards for the safeguarding of
such information and the disclosure of security breaches. Several committees of
both houses of Congress have conducted and have proposed legislation regarding
these issues.
Under
Title III of the USA PATRIOT Act, also known as the International Money
Laundering Abatement and Anti-Terrorism Financing Act of 2001, all financial
institutions, including the Company and the Bank, are required in general to
identify their customers, adopt formal and comprehensive anti-money laundering
programs, scrutinize or prohibit altogether certain transactions of special
concern, and be prepared to respond to inquiries from U.S. law enforcement
agencies concerning their customers and their transactions. The USA PATRIOT Act
also encourages information-sharing among financial institutions, regulators,
and law enforcement authorities by providing an exemption from the privacy
provisions of the GLB Act for financial institutions that comply with this
provision. The effectiveness of a financial institution in combating money
laundering activities is a factor to be considered in any application submitted
by the financial institution under the Bank Merger Act, which applies to the
Bank, or the BHC Act, which applies to the Company. Failure of a financial
institution to maintain and implement adequate programs to combat money
laundering and terrorist financing, or to comply with all of the relevant laws
or regulations, could have serious legal, financial and reputational
consequences for the institution. As of December 31, 2008, the Company and the
Bank believe they are in compliance with the USA PATRIOT Act and regulations
thereunder.
The
Sarbanes-Oxley Act (“SOA”) implemented a broad range of measures to increase
corporate responsibility, enhance penalties for accounting and auditing
improprieties at publicly traded companies, and protect investors by improving
the accuracy and reliability of corporate disclosures pursuant to federal
securities laws. The SOA applies generally to companies that have securities
registered under the Exchange Act, including publicly-held bank holding
companies such as the Company. It includes very specific additional disclosure
requirements and has adopted corporate governance rules, and requires the SEC
and securities exchanges to adopt extensive additional disclosure, corporate
governance and other related rules pursuant to its mandates. The SOA represents
significant federal involvement in matters traditionally left to state
regulatory systems, such as the regulation of the accounting profession, and to
state corporate law, such as the relationship between a board of directors and
management and between a board of directors and its committees. In addition, the
federal banking regulators have adopted generally similar requirements
concerning the certification of financial statements by bank
officials.
Home
mortgage lenders, including banks, are required under the Home Mortgage
Disclosure Act (“HMDA”) to make available to the public expanded information
regarding the pricing of home mortgage loans, including the “rate spread”
between the interest rate on loans and certain Treasury securities and other
benchmarks. The availability of this information has led to increased scrutiny
of higher-priced loans at all financial institutions to detect illegal
discriminatory practices and to the initiation of a limited number of
investigations by federal banking agencies and the U.S. Department of Justice.
The Company has no information that it or its affiliates is the subject of any
HMDA investigation.
In the
past two years, declining housing values have resulted in deteriorating economic
conditions across the U.S., resulting in significant writedowns in the values of
mortgage-backed securities and derivative securities by financial institutions,
government sponsored entities, and major commercial and investment banks. This
has led to decreased confidence in financial markets among borrowers, lenders,
and depositors as well as extreme volatility in the capital and credit markets
and the failure of some entities in the financial sector The Company is
fortunate that the markets it serves have been impacted to a lesser extent than
many areas around the country.
In
response to the financial crises affecting the banking system and financial
markets, there have been several recent announcements of Federal programs
designed to purchase assets from, provide equity capital to, and guarantee the
liquidity of, the industry.
On
October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the “EESA”)
was signed into law. The EESA authorizes the U.S. Treasury to, among
other things, purchase up to $700 billion of mortgages, mortgage-backed
securities, and certain other financial instruments from financial institutions
for the purpose of stabilizing and providing liquidity to the U.S. financial
markets. The Company did not originate or invest in sub-prime assets
and, therefore, does not expect to participate in the sale of any of our assets
into these programs. EESA also increased the FDIC deposit insurance
limit for most accounts from $100,000 to $250,000 through December 31,
2009.
On
October 14, 2008, the U.S. Treasury announced that it will purchase equity
stakes in a wide variety of banks and thrifts. Under this program,
known as the Troubled Asset Relief Program Capital Purchase Program (the “TARP
Capital Purchase Program”), the U.S. Treasury will make $250 billion of capital
available (from the $700 billion authorized by the EESA) to U.S. financial
institutions in the form of preferred stock. In conjunction with the
purchase of preferred stock, the U.S. Treasury will receive warrants to purchase
common stock with an aggregate market price equal to 15% of the preferred
investment. Participating financial institutions will be required to
adopt the U.S. Treasury’s standards for executive compensation and corporate
governance for the period during which the Treasury holds equity issued under
the TARP Capital Purchase Program, as well as the more stringent executive
compensation limits enacted as part of the American Recovery and Reinvestment
Act of 2009 (the “ARRA” or “Stimulus Bill”), which was signed into law on
February 17, 2009. The Company was approved but chose not to
participate in the TARP Capital Purchase Program.
EMPLOYEES
At
December 31, 2008, the Company had 1,411 full-time equivalent employees. The
Company’s employees are not presently represented by any collective bargaining
group. The Company considers its employee relations to be
good.
AVAILABLE
INFORMATION
The
Company’s website is http://www.nbtbancorp.com.
The Company makes available free of charge through its website, its annual
reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form
8-K; and any amendments to those reports as soon as reasonably practicable after
such material is electronically filed or furnished with the SEC pursuant to
Section 13(a) or 15(d) of the Exchange Act. We also make available through our
website other reports filed with or furnished to the SEC under the Exchange Act,
including our proxy statements and reports filed by officers and directors under
Section 16(a) of that Act, as well as our Code of Business Ethics and other
codes/committee charters. The references to our website do not constitute
incorporation by reference of the information contained in the
website and such information should not be considered part of this
document.
Any
materials we file with the SEC may be read and copied at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, DC, 20549. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
ITEM
1A. RISK FACTORS
There are risks inherent to the
Company’s business. The material risks and uncertainties that management
believes affect the Company are described below. The risks and uncertainties
described below are not the only ones facing the Company. Additional risks and
uncertainties that management is not aware of or focused on or that management
currently deems immaterial may also present risk to the Company’s business operations. This
report is qualified in its entirety by these risk factors. If any of the
following risks actually occur, the Company’s financial condition and results of
operations could be materially and adversely affected.
The
Company’s Profitability Depends Significantly on Local and National Economic
Conditions
The Company’s success depends primarily
on the general economic conditions of upstate New York and northeastern Pennsylvania and the specific local markets in which
the Company operates. Unlike larger national or other regional banks that are
more geographically diversified, the Company provides banking and financial
services to customers primarily in the upstate New York areas of Norwich,
Oneonta, Amsterdam-Gloversville, Albany, Binghamton, Utica-Rome, Plattsburg, and
Ogdensburg-Massena and the
northeastern Pennsylvania
areas of Scranton, Wilkes-Barre and East Stroudsburg. The local economic
conditions in these areas have a significant impact on the demand for the
Company’s products and services as well as the ability of the Company’s
customers to repay loans, the value of the collateral securing loans and the
stability of the Company’s deposit funding sources. A significant decline in
general economic conditions, caused by inflation, recession, acts of terrorism,
outbreak of hostilities or other international or domestic occurrences,
unemployment, changes in securities markets or other factors could impact these
local economic conditions and, in turn, have a material adverse effect on the
Company’s financial condition and results of operations.
2008 was highlighted by significant
disruption and volatility in the financial and capital
marketplaces. This turbulence has been attributable to a variety of
factors, including the fallout associated with the subprime mortgage
market. One aspect of this fallout has been significant deterioration
in the activity of the secondary market. The disruptions have been
exacerbated by the continued decline of the real estate and housing market along
with significant mortgage loan related losses incurred by many lending
institutions. The turmoil in the mortgage market has impacted the
global markets as well as the domestic markets and led to a significant credit
and liquidity crisis in many domestic markets during 2008. As a
lender, we may be adversely affected by general economic weaknesses, and, in
particular, a sharp downturn in the housing industry in the states of
New York and Pennsylvania. No assurance can be given
that these conditions will improve or will not worsen or that such conditions
will not result in an increase in delinquencies, causing a decrease in our
interest income, or continue to have an adverse impact on our loan loss
experience, causing an increase in our allowance for loan
losses.
The
Company is Subject to Interest Rate Risk
The Company’s earnings and cash flows
are largely dependent upon its net interest income. Net interest income is the
difference between interest income earned on interest-earning assets such as
loans and securities and interest expense paid on interest-bearing liabilities
such as deposits and borrowed funds. Interest rates are highly sensitive to many
factors that are beyond the Company’s control, including general economic
conditions and policies of various governmental and regulatory agencies and, in
particular, the Board of Governors of the Federal Reserve System. Changes in
monetary policy, including changes in interest rates, could influence not only
the interest the Company receives on loans and securities and the amount of
interest it pays on deposits and borrowings, but such changes could also affect
(i) the Company’s ability to originate loans and obtain deposits, (ii) the fair
value of the Company’s financial assets and liabilities, and (iii) the average
duration of the Company’s mortgage-backed securities portfolio. If the interest
rates paid on deposits and other borrowings increase at a faster rate than the
interest rates received on loans and other investments, the Company’s net
interest income, and therefore earnings, could be adversely affected. Earnings
could also be adversely affected if the interest rates received on loans and
other investments fall more quickly than the interest rates paid on deposits and
other borrowings.
Although management believes it has
implemented effective asset and liability management strategies to reduce the
potential effects of changes in interest rates on the Company’s results of
operations, any substantial, unexpected, or prolonged change in market interest
rates could have a material adverse effect on the Company’s financial condition
and results of operations. See the section captioned “Net Interest Income” in
Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations and Item 7A. Quantitative and Qualitative Disclosure About Market
Risk located elsewhere in this report for further discussion related to the
Company’s management of interest rate risk.
The
Company is Subject to Lending Risk
There are inherent risks associated with
the Company’s lending activities. These risks include, among other things, the
impact of changes in interest rates and changes in the economic conditions in
the markets where the Company operates as well as those across the States of New
York and Pennsylvania, and the entire United States. Increases in interest rates and/or
weakening economic conditions could adversely impact the ability of borrowers to
repay outstanding loans or the value of the collateral securing these loans. The
Company is also subject to various laws and regulations that affect its lending
activities. Failure to comply with applicable laws and regulations could subject
the Company to regulatory enforcement action that could result in the assessment
of significant civil money penalties against the Company.
As of December 31, 2008, approximately 39% of the Company’s loan and lease portfolio consisted of
commercial, agricultural,
construction and commercial
real estate loans. These types of loans are generally viewed as having more risk
of default than residential real estate loans or consumer loans. These types of
loans are also typically larger than residential real estate loans and consumer
loans. Because the Company’s loan portfolio contains a significant number of
commercial and industrial, construction and commercial real estate loans with
relatively large balances, the deterioration of one or a few of these loans
could cause a significant increase in nonperforming loans. An increase in
nonperforming loans could result in a net loss of earnings from these loans, an
increase in the provision for loan losses and/or an increase in loan charge-offs, all of
which could have a material adverse effect on the Company’s financial condition
and results of operations. See the section captioned “Loans and Leases and
Corresponding Interest and Fees on Loans” in Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations located elsewhere in
this report for further discussion related to commercial and industrial,
construction and commercial real estate loans.
The
Company’s Allowance For Loan and Lease Losses May Be Insufficient
The Company maintains an allowance for
loan and lease losses, which is an allowance established through a provision for
loan and lease losses charged to expense, that represents management’s best
estimate of probable losses that could be incurred within the existing portfolio
of loans and leases. The allowance, in the judgment of management, is necessary
to reserve for estimated loan and lease losses and risks inherent in the loan
and lease portfolio. The level of the allowance reflects management’s continuing
evaluation of industry concentrations; specific credit risks; loan loss
experience; current loan and lease portfolio quality; present economic,
political and regulatory conditions and unidentified losses inherent in the
current loan portfolio. The determination of the appropriate level of the
allowance for loan and lease losses inherently involves a high degree of
subjectivity and requires the Company to make significant estimates of current
credit risks and future trends, all of which may undergo material changes.
Changes in economic conditions affecting borrowers, new information regarding
existing loans, identification of additional problem loans and other factors,
both within and outside of the Company’s control, may require an increase in the
allowance for loan losses. In addition, bank regulatory agencies periodically
review the Company’s allowance for loan losses and may require an increase in
the provision for loan losses or the recognition of further loan charge-offs,
based on judgments different than those of management. In addition, if
charge-offs in future periods exceed the allowance for loan and lease losses,
the Company will need additional provisions to increase the allowance for loan
and lease losses. These increases in the allowance for loan and lease losses
will result in a decrease in net income and, possibly, capital, and may have a
material adverse effect on the Company’s financial condition and results of
operations. See the section captioned “Risk Management – Credit Risk” in Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations located elsewhere in this report for further discussion related to
the Company’s process for determining the appropriate level of the allowance for
loan and losses.
The
Company Operates In a Highly Competitive Industry and Market Area
The Company faces substantial
competition in all areas of its operations from a variety of different
competitors, many of which are larger and may have more financial resources.
Such competitors primarily include national, regional, and community banks
within the various markets the Company operates. Additionally, various
out-of-state banks continue to enter or have announced plans to enter the market
areas in which the Company currently operates. The Company also faces
competition from many other types of financial institutions, including, without
limitation, savings and loans, credit unions, finance companies, brokerage
firms, insurance companies, and other financial intermediaries. The
financial services industry could become even more competitive as a result of
legislative, regulatory and technological changes and continued consolidation.
Banks, securities firms and insurance companies can merge under the umbrella of
a financial holding company, which can offer virtually any type of financial
service, including banking, securities underwriting, insurance (both agency and
underwriting) and merchant banking. Also, technology has lowered barriers to
entry and made it possible for non-banks to offer products and services
traditionally provided by banks, such as automatic transfer and automatic
payment systems. Many of the Company’s competitors have fewer regulatory
constraints and may have lower cost structures. Additionally, due to their size,
many competitors may be able to achieve economies of scale and, as a result, may
offer a broader range of products and services as well as better pricing for
those products and services than the Company can. The Company’s ability to
compete successfully depends on a number of factors, including, among other
things:
• The ability to develop, maintain and
build upon long-term customer relationships based on top quality service, high
ethical standards and safe, sound assets.
• The ability to expand the Company’s
market position.
• The scope, relevance and pricing of
products and services offered to meet customer needs and
demands.
• The rate at which the Company
introduces new products and services relative to its
competitors.
• Customer satisfaction with the
Company’s level of service.
• Industry and general economic
trends.
Failure to perform in any of these areas
could significantly weaken the Company’s competitive position, which could
adversely affect the Company’s growth and profitability, which, in turn, could
have a material adverse effect on the Company’s financial condition and results
of operations.
There
Can Be No Assurance That Recent Government Action Will Help Stabilize the U.S.
Financial System and Will Not Have Unintended Adverse Consequences.
In recent
periods, the U.S. government and various federal agencies and bank regulators
have taken steps to stabilize and stimulate the financial services industry.
Changes also have been made in tax policy for financial
institutions. The Emergency Economic Stabilization Act of 2008 (the
“EESA”) was an initial legislative response to the financial crises affecting
the banking system and financial markets and going concern threats to financial
institutions. Pursuant to the EESA, the U.S. Treasury will have the authority
to, among other things, purchase up to $700 billion of mortgages,
mortgage-backed securities and certain other financial instruments from
financial institutions for the purpose of stabilizing and providing liquidity to
the U.S. financial markets. As an initial program, the U.S. Treasury is
exercising its authority to purchase an aggregate of $250 billion of capital
instruments from financial entities throughout the United
States. Other government action, such as the recently announced
Homeowner Affordability and Stability Plan are intended to prevent mortgage
defaults and foreclosures, which may provide benefits to the economy as a whole,
but may reduce the value of certain mortgage loans or related mortgage-related
securities investors such as the Company may hold. There can be no
assurance as to the actual impact that these or other government actions will
have on the financial markets, including the extreme levels of volatility and
limited credit availability currently being experienced. The failure of the EESA
and other measures to help stabilize the financial markets and a continuation or
worsening of current financial market conditions could materially and adversely
affect the Company’s business, financial condition, results of operations,
access to credit or the trading price of its common stock.
The
Company Is Subject To Extensive Government Regulation and
Supervision
The Company, primarily through
the Bank and certain non-bank subsidiaries,
is subject to extensive federal regulation and supervision. Banking regulations
are primarily intended to protect depositors’ funds, federal deposit insurance
funds and the banking system as a whole, not shareholders. These regulations
affect the Company’s lending practices, capital structure, investment practices,
dividend policy and growth, among other things. Congress and federal regulatory
agencies continually review banking laws, regulations and policies for possible
changes. Changes to statutes, regulations or regulatory policies, including
changes in interpretation or implementation of statutes, regulations or
policies, could affect the Company in substantial and unpredictable ways. Such
changes could subject the Company to additional costs, limit the types of
financial services and products the Company may offer and/or increase the
ability of non-banks to offer competing financial services and products, among
other things. Failure to comply with laws, regulations or policies could result
in sanctions by regulatory agencies, civil money penalties and/or reputation
damage, which could have a material adverse effect on the Company’s business,
financial condition and results of operations. While the Company has policies
and procedures designed to prevent any such violations, there can be no
assurance that such violations will not occur. See the section captioned
“Supervision and Regulation” in Item 1. Business, which is located elsewhere in this
report.
The
Company’s Controls and Procedures May Fail or Be Circumvented
Management regularly reviews and updates
the Company’s internal controls, disclosure controls and procedures, and
corporate governance policies and procedures. Any system of controls, however
well designed and operated, is based in part on certain assumptions and can
provide only reasonable, not absolute, assurances that the objectives of the
system are met. Any failure or circumvention of the Company’s controls and
procedures or failure to comply with regulations related to controls and
procedures could have a material adverse effect on the Company’s business,
results of operations and financial condition.
New
Lines of Business or New Products and Services May Subject The Company to
Additional Risks
From time to time, the Company may
implement new lines of business or offer new products and services within
existing lines of business. There are substantial risks and uncertainties
associated with these efforts, particularly in instances where the markets are
not fully developed. In developing and marketing new lines of business and/or
new products and services the Company may invest significant time and resources.
Initial timetables for the introduction and development of new lines of business
and/or new products or services may not be achieved and price and profitability
targets may not prove feasible. External factors, such as compliance with
regulations, competitive alternatives, and shifting market preferences, may also
impact the successful implementation of a new line of business or a new product
or service. Furthermore, any new line of business and/or new product or service
could have a significant impact on the effectiveness of the Company’s system of
internal controls. Failure to successfully manage these risks in the development
and implementation of new lines of business or new products or services could
have a material adverse effect on the Company’s business, results of operations
and financial condition.
The
Company Relies on Dividends From Its Subsidiaries For Most Of Its
Revenue
The Company is a separate and distinct legal entity
from its subsidiaries. It receives substantially all of its revenue from
dividends from its subsidiaries. These dividends are the principal source of
funds to pay dividends on the Company’s common stock and interest and principal
on the Company’s debt. Various federal and/or state laws and regulations limit
the amount of dividends that the Bank may pay to the Company. Also, the Company’s right to participate in a distribution
of assets upon a subsidiary’s liquidation or reorganization is subject to the
prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to
the Company, the Company may not be able to service debt, pay
obligations or pay dividends on the Company’s common stock.
The inability to receive dividends from
the Bank could have a material adverse effect
on the Company’s business, financial condition and results of operations. See
the section captioned “Supervision and Regulation” in Item 1. Business and Note
16 — Stockholders’ Equity in the notes to
consolidated financial statements included in Item 8. Financial Statements and
Supplementary Data, which are located elsewhere in this
report.
The
Company May Not Be Able To Attract and Retain Skilled People
The Company’s success depends, in large
part, on its ability to attract and retain key people. Competition for the best
people in most activities engaged in by the Company can be intense and the
Company may not be able to hire people or to retain them. The unexpected loss of
services of one or more of the Company’s key personnel could have a material
adverse impact on the Company’s business because of their skills, knowledge of
the Company’s market, years of industry experience and the difficulty of
promptly finding qualified replacement personnel.
The
Company’s Information Systems May Experience An Interruption Or Breach In
Security
The Company relies heavily on
communications and information systems to conduct its business. Any failure,
interruption or breach in security of these systems could result in failures or
disruptions in the Company’s customer relationship management, general ledger,
deposit, loan and other systems. While the Company has policies and procedures
designed to prevent or limit the effect of the failure, interruption or security
breach of its information systems, there can be no assurance that any such
failures, interruptions or security breaches will not occur or, if they do
occur, that they will be adequately addressed. The occurrence of any failures,
interruptions or security breaches of the Company’s information systems could
damage the Company’s reputation, result in a loss of customer business, subject
the Company to additional regulatory scrutiny, or expose the Company to civil
litigation and possible financial liability, any of which could have a material
adverse effect on the Company’s financial condition and results of
operations.
The
Company Continually Encounters Technological Change
The financial services industry is
continually undergoing rapid technological change with frequent introductions of
new technology-driven products and services. The effective use of technology
increases efficiency and enables financial institutions to better serve
customers and to reduce costs. The Company’s future success depends, in part,
upon its ability to address the needs of its customers by using technology to
provide products and services that will satisfy customer demands, as well as to
create additional efficiencies in the Company’s operations. Many of the
Company’s competitors have substantially greater resources to invest in
technological improvements. The Company may not be able to effectively implement
new technology-driven products and services or be successful in marketing these
products and services to its customers. Failure to successfully keep pace with
technological changes affecting the financial services
industry could have a material adverse impact on the Company’s business and, in
turn, the Company’s financial condition and results of
operations.
Severe
Weather, Natural Disasters, Acts Of War Or Terrorism and Other External Events
Could Significantly Impact The Company’s Business
Severe weather, natural disasters, acts
of war or terrorism and other adverse external events could have a significant
impact on the Company’s ability to conduct business. Such events could affect
the stability of the Company’s deposit base, impair the ability of borrowers to
repay outstanding loans, impair the value of collateral securing loans, cause
significant property damage, result in loss of revenue and/or cause the Company
to incur additional expenses. Although management has established disaster
recovery policies and procedures, the occurrence of any such event could have a
material adverse effect on the Company’s business, which, in turn, could have a
material adverse effect on the Company’s financial condition and results of
operations.
The
Company’s Articles Of Incorporation, By-Laws and Stockholder Rights Plan As Well
As Certain Banking Laws May Have An Anti-Takeover Effect
Provisions of the Company’s articles of
incorporation and by-laws, federal banking laws, including regulatory approval
requirements, and the Company’s stock purchase rights plan could make it more
difficult for a third party to acquire the Company, even if doing so would be
perceived to be beneficial to the Company’s stockholders. The combination of
these provisions effectively inhibits a non-negotiated merger or other business
combination, which, in turn, could adversely affect the market price of the
Company’s common stock.
Difficult
Market Conditions Have Adversely Affected Our Industry.
Dramatic
declines in the housing market over the past year, with falling home prices and
increasing foreclosures, unemployment and under-employment, have negatively
impacted the credit performance of mortgage loans and resulted in significant
write-downs of asset values by financial institutions, including
government-sponsored entities as well as major commercial and investment banks.
These write-downs, initially of mortgage-backed securities but spreading to
credit default swaps and other derivative and cash securities, in turn, have
caused many financial institutions to seek additional capital, to merge with
larger and stronger institutions and, in some cases, to fail. Reflecting concern
about the stability of the financial markets generally and the strength of
counterparties, many lenders and institutional investors have reduced or ceased
providing funding to borrowers, including to other financial institutions. This
market turmoil and tightening of credit have led to an increased level of
commercial and consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity generally. The
resulting economic pressure on consumers and lack of confidence in the financial
markets has adversely affected our business, financial condition and results of
operations. We do not expect that the difficult conditions in the financial
markets are likely to improve in the near future. A worsening of these
conditions would likely exacerbate the adverse effects of these difficult market
conditions on us and others in the financial institution industry. In
particular, we may face the following risks in connection with these
events:
|
|
•
|
We
expect to face increased regulation of our industry. Compliance with such
regulation may increase our costs and limit our ability to pursue business
opportunities.
|
|
|
•
|
Market
developments may affect customer confidence levels and may cause increases
in delinquencies and default rates, which we expect could impact our
charge-offs and provision for loan
losses.
|
|
|
•
|
Our
ability to borrow from other financial institutions or to access the debt
or equity capital markets on favorable terms or at all could be adversely
affected by further disruptions in the capital markets or other events,
including actions by rating agencies and deteriorating investor
expectations.
|
|
|
•
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Competition
in our industry could intensify as a result of the increasing
consolidation of financial services companies in connection with current
market conditions.
|
|
|
•
|
We
will be required to pay significantly higher FDIC premiums because market
developments have significantly depleted the insurance fund of the FDIC
and reduced the ratio of reserves to insured
deposits.
|
Current
Levels Of Market Volatility Are Unprecedented.
The
capital and credit markets have been experiencing volatility and disruption for
more than 12 months. Recently, the volatility and disruption has reached
unprecedented levels. In most cases, the markets have produced downward pressure
on stock prices and credit availability for certain issuers without regard to
those issuers’ underlying financial strength. If current levels of market
disruption and volatility continue or worsen, there can be no assurance that we
will not experience an adverse effect, which may be material, on our ability to
access capital and on our business, financial condition and results of
operations.
The Company is Subject to
Other-than-temporary Impairment Risk
The
Company recognizes an impairment charge when the decline in the fair value of
equity, debt securities and cost-method investments below their cost basis are
judged to be other-than-temporary. Significant judgment is used to identify
events or circumstances that would likely have a significant adverse effect on
the future use of the investment. The Company considers various factors in
determining whether an impairment is other-than-temporary, including the
severity and duration of the impairment, forecasted recovery, the financial
condition and near-term prospects of the investee, and our ability and intent to
hold the investment for a period of time sufficient to allow for any anticipated
recovery in market value. Information about unrealized gains and losses is
subject to changing conditions. The values of securities with unrealized gains
and losses will fluctuate, as will the values of securities that we identify as
potentially distressed. Our current evaluation of other-than-temporary
impairments reflects our intent to hold securities for a reasonable period of
time sufficient for a forecasted recovery of fair value. However, our intent to
hold certain of these securities may change in future periods as a result of
facts and circumstances impacting a specific security. If our intent to hold a
security with an unrealized loss changes, and we do not expect the security to
fully recover prior to the expected time of disposition, we will write down the
security to its fair value in the period that our intent to hold the security
changes.
The
process of evaluating the potential impairment of goodwill and other intangibles
is highly subjective and requires significant judgment. The Company estimates
expected future cash flows of its various businesses and determines the carrying
value of these businesses. The Company exercises judgment in
assigning and allocating certain assets and liabilities to these businesses. The
Company then compares the carrying value, including goodwill and other
intangibles, to the discounted future cash flows. If the total of future cash
flows is less than the carrying amount of the assets, an impairment loss is
recognized based on the excess of the carrying amount over the fair value of the
assets. Estimates of the future cash flows associated with the assets are
critical to these assessments. Changes in these estimates based on changed
economic conditions or business strategies could result in material impairment
charges in future periods.
The Company May Be Adversely Affected by
the Soundness of Other Financial Institutions
The
Company owns common stock of Federal Home Loan Bank of New York
("FHLBNY") in order to qualify for membership in the FHLB system, which enables
it to borrow funds under the FHLBNY advance program. The carrying
value of our FHLBNY common stock was $39.0 million as of December 31,
2008.
There are
12 branches of the FHLB, including New York. Several members have
warned that they have either breached risk-based capital requirements or that
they are close to breaching those requirements. To conserve capital,
some FHLB branches are suspending dividends, cutting dividend payments, and not
buying back excess FHLB stock that members hold. FHLBNY has stated
that they expect to be able to continue to pay dividends, redeem excess capital
stock, and provide competively priced advances in the future. The
most severe problems in FHLB have been at some of the other FHLB
branches. Nonetheless, the 12 FHLB branches are jointly liable for
the consolidated obligations of the FHLB system. To the extent that
one FHLB branch cannot meet its obligations to pay its share of the system’s
debt, other FHLB branches can be called upon to make the
payment.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM
2. PROPERTIES
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The
Company’s headquarters are located at 52 South Broad Street, Norwich, New York
13815. The Company operated the following number of community banking
branches and ATMs as of December 31, 2008:
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County
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Branches
|
ATMs
|
County
|
Branches
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ATMs
|
|
|
NBT
Bank Division
|
Pennstar
Bank Division
|
|||||
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New
York
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Pennsylvania
|
|||||
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Albany
County
|
4
|
6
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Lackawanna
County
|
16
|
24
|
|
|
Broome
County
|
8
|
13
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Luzerne
County
|
4
|
8
|
|
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Chenango
County
|
11
|
13
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Monroe
County
|
6
|
8
|
|
|
Clinton
County
|
3
|
2
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Pike
County
|
3
|
4
|
|
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Delaware
County
|
5
|
5
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Susquehanna
County
|
6
|
8
|
|
|
Essex
County
|
3
|
6
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Wayne
County
|
3
|
5
|
|
|
Franklin
County
|
1
|
1
|
||||
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Fulton
County
|
7
|
12
|
||||
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Hamilton
County
|
1
|
1
|
||||
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Herkimer
County
|
2
|
1
|
||||
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Montgomery
County
|
6
|
5
|
||||
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Oneida
County
|
6
|
13
|
||||
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Otsego
County
|
9
|
16
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||||
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Rensselaer
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1
|
1
|
||||
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Saratoga
County
|
5
|
7
|
||||
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Schenectady
County
|
1
|
1
|
||||
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Schoharie
County
|
4
|
3
|
||||
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St.
Lawrence County
|
5
|
6
|
||||
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Tioga
County
|
1
|
1
|
||||
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Ulster
County
|
-
|
1
|
||||
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Warren
County
|
1
|
-
|
The
Company leases 45 of the above listed branches from third
parties. The Company owns all other banking premises. The Company
believes that its offices are sufficient for its present
operations. All of the above ATMs are owned by the
Company.
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ITEM 3. LEGAL
PROCEEDINGS
|
There are
no material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Company or any of its subsidiaries is a
party or of which their property is the subject.
|
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
None.
PART II
|
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
The
common stock of NBT Bancorp Inc. (“Common Stock”) is quoted on the Nasdaq Global
Select Market under the symbol “NBTB.” The following table sets forth the market
prices and dividends declared for the Common Stock for the periods
indicated:
|
High
|
Low
|
Dividend
|
||||||||||
|
2007
|
||||||||||||
|
1st
quarter
|
$ | 25.81 | $ | 21.73 | $ | 0.20 | ||||||
|
2nd
quarter
|
23.45 | 21.80 | 0.20 | |||||||||
|
3rd
quarter
|
23.80 | 17.10 | 0.20 | |||||||||
|
4th
quarter
|
25.00 | 20.58 | 0.20 | |||||||||
|
2008
|
||||||||||||
|
1st
quarter
|
$ | 23.65 | $ | 17.95 | $ | 0.20 | ||||||
|
2nd
quarter
|
25.00 | 20.33 | 0.20 | |||||||||
|
3rd
quarter
|
36.47 | 19.05 | 0.20 | |||||||||
|
4th
quarter
|
30.83 | 21.71 | 0.20 | |||||||||
The
closing price of the Common Stock on February 15, 2009 was $21.70.
As of
February 15, 2009, there were 6,887 shareholders of record of Company common
stock.
|
Equity
Compensation Plan Information
|
As of
December 31, 2008, the following table summarizes the Company’s equity
compensation plans:
|
Plan Category
|
A. Number of securities to be issued upon exercise
of outstanding options
|
B. Weighted-average exercise price of outstanding
options
|
Number of securities remaining available for
future issuance under equity compensation plans (excluding securities
reflected in column A.)
|
|||||||||
|
Equity
compensation plans approved by stockholders
|
1,640,237 | (1) | $ | 21.26 | 4,255,768 | |||||||
|
Equity
compensation plans not approved by stockholders
|
None
|
None
|
None
|
|||||||||
|
(1)
|
Includes
30,700 shares issuable pursuant to restricted stock units granted pursuant
to the Company's equity compensation plan. These awards are for
the distribution of shares to the grant recipient upon the completion of
time-based holding periods and do not have an associated exercise
price. Accordingly, these awards are not reflected in the
weighted-average exercise price dislosed in Column
B.
|
Performance
Graph
The
following graph compares the cumulative total stockholder return (i.e., price
change, reinvestment of cash dividends and stock dividends received) on our
common stock against the cumulative total return of the NASDAQ Stock Market
(U.S. Companies) Index and the Index for NASDAQ Financial Stocks. The
stock performance graph assumes that $100 was invested on December 31,
2003. The graph further assumes the reinvestment of dividends into
additional shares of the same class of equity securities at the frequency with
which dividends are paid on such securities during the relevant fiscal
year. The yearly points marked on the horizontal axis correspond to
December 31 of that year. We calculate each of the referenced indices
in the same manner. All are market-capitalization-weighted indices,
so companies judged by the market to be more important (i.e., more valuable)
count for more in all indices.
Five Year
Cumulative Total Return
|
Period
Ending
|
||||||||||||||||||||||||
|
Index
|
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
12/31/07
|
12/31/08
|
||||||||||||||||||
|
NBT
Bancorp
|
$ | 100.00 | $ | 123.79 | $ | 107.43 | $ | 131.04 | $ | 121.37 | $ | 153.61 | ||||||||||||
|
NASDAQ
Financial Stocks
|
$ | 100.00 | $ | 115.23 | $ | 117.94 | $ | 134.76 | $ | 125.03 | $ | 88.63 | ||||||||||||
|
NASDAQ
Composite Index
|
$ | 100.00 | $ | 109.14 | $ | 111.46 | $ | 123.02 | $ | 136.12 | $ | 81.73 | ||||||||||||
Source: Bloomberg,
L.P.
Dividends
We depend
primarily upon dividends from our subsidiaries for a substantial part of our
revenue. Accordingly, our ability to pay dividends depends primarily
upon the receipt of dividends or other capital distributions from our
subsidiaries. Payment of dividends to the Company from the Bank is
subject to certain regulatory and other restrictions. Under OCC
regulations, the Bank may pay dividends to the Company without prior regulatory
approval so long as it meets its applicable regulatory capital requirements
before and after payment of such dividends and its total dividends do not exceed
its net income to date over the calendar year plus retained net income over the
preceding two years. At December 31, 2008, the Bank was in compliance
with all applicable minimum capital requirements and had the ability to pay
dividends of $46.6 million to the Company without the prior approval of the
OCC.
If the
capital of the Company is diminished by depreciation in the value of its
property or by losses, or otherwise, to an amount less than the aggregate amount
of the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets, no dividends may be paid
out of net profits until the deficiency in the amount of capital represented by
the issued and outstanding stock of all classes having a preference upon the
distribution of assets has been repaired. See the section captioned
“Supervision and Regulation” in Item 1. Business and Note 15 – Stockholders’
Equity in the notes to consolidated financial statements in included in Item 8.
Financial Statements and Supplementary Data, which are located elsewhere in this
report.
|
ITEM 6. SELECTED FINANCIAL DATA
|
The
following summary of financial and other information about the Company is
derived from the Company’s audited consolidated financial statements for each of
the last five fiscal years ended December 31 and should be read in conjunction
with Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations and the Company’s consolidated financial statements and
accompanying notes, included elsewhere in this report:
|
Year ended
December 31,
|
||||||||||||||||||||
|
(In
thousands, except per share data)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
|
Interest,
fee and dividend income
|
$ | 294,414 | $ | 306,117 | $ | 288,842 | $ | 236,367 | $ | 210,179 | ||||||||||
|
Interest
expense
|
108,368 | 141,090 | 125,009 | 78,256 | 59,692 | |||||||||||||||
|
Net
interest income
|
186,046 | 165,027 | 163,833 | 158,111 | 150,487 | |||||||||||||||
|
Provision
for loan and lease losses
|
27,181 | 30,094 | 9,395 | 9,464 | 9,615 | |||||||||||||||
|
Noninterest
income excluding securities gains (losses)
|
70,171 | 57,586 | 49,504 | 43,785 | 40,673 | |||||||||||||||
|
Securities
gains (losses) , net
|
1,535 | 2,113 | (875 | ) | (1,236 | ) | 216 | |||||||||||||
|
Noninterest
expense
|
146,813 | 122,517 | 122,966 | 115,305 | 109,777 | |||||||||||||||
|
Income
before income taxes
|
83,758 | 72,115 | 80,101 | 75,891 | 71,984 | |||||||||||||||
|
Net
income
|
58,353 | 50,328 | 55,947 | 52,438 | 50,047 | |||||||||||||||
|
Per
common share
|
||||||||||||||||||||
|
Basic
earnings
|
$ | 1.81 | $ | 1.52 | $ | 1.65 | $ | 1.62 | $ | 1.53 | ||||||||||
|
Diluted
earnings
|
1.80 | 1.51 | 1.64 | 1.60 | 1.51 | |||||||||||||||
|
Cash
dividends paid
|
0.80 | 0.79 | 0.76 | 0.76 | 0.74 | |||||||||||||||
|
Book
value at year-end
|
13.24 | 12.29 | 11.79 | 10.34 | 10.11 | |||||||||||||||
|
Tangible
book value at year-end
|
9.01 | 8.78 | 8.42 | 8.75 | 8.66 | |||||||||||||||
|
Average
diluted common shares outstanding
|
32,427 | 33,421 | 34,206 | 32,710 | 33,087 | |||||||||||||||
|
At
December 31,
|
||||||||||||||||||||
|
Securities
available for sale, at fair value
|
$ | 1,119,665 | $ | 1,140,114 | $ | 1,106,322 | $ | 954,474 | $ | 952,542 | ||||||||||
|
Securities
held to maturity, at amortized cost
|
140,209 | 149,111 | 136,314 | 93,709 | 81,782 | |||||||||||||||
|
Loans
and leases
|
3,651,911 | 3,455,851 | 3,412,654 | 3,022,657 | 2,869,921 | |||||||||||||||
|
Allowance
for loan and lease losses
|
58,564 | 54,183 | 50,587 | 47,455 | 44,932 | |||||||||||||||
|
Assets
|
5,336,088 | 5,201,776 | 5,087,572 | 4,426,773 | 4,212,304 | |||||||||||||||
|
Deposits
|
3,923,258 | 3,872,093 | 3,796,238 | 3,160,196 | 3,073,838 | |||||||||||||||
|
Borrowings
|
914,123 | 868,776 | 838,558 | 883,182 | 752,066 | |||||||||||||||
|
Stockholders’
equity
|
431,845 | 397,300 | 403,817 | 333,943 | 332,233 | |||||||||||||||
|
Key
ratios
|
||||||||||||||||||||
|
Return
on average assets
|
1.11 | % | 0.98 | % | 1.14 | % | 1.21 | % | 1.21 | % | ||||||||||
|
Return
on average equity
|
14.16 | 12.60 | 14.47 | 15.86 | 15.69 | |||||||||||||||
|
Average
equity to average assets
|
7.83 | 7.81 | 7.85 | 7.64 | 7.74 | |||||||||||||||
|
Net
interest margin
|
3.95 | 3.61 | 3.70 | 4.01 | 4.03 | |||||||||||||||
|
Dividend
payout ratio
|
44.44 | 52.32 | 46.34 | 47.50 | 49.01 | |||||||||||||||
|
Tier
1 leverage
|
7.17 | 7.14 | 7.57 | 7.16 | 7.13 | |||||||||||||||
|
Tier
1 risk-based capital
|
9.75 | 9.79 | 10.42 | 9.80 | 9.78 | |||||||||||||||
|
Total
risk-based capital
|
11.00 | 11.05 | 11.67 | 11.05 | 11.04 | |||||||||||||||
|
Selected Quarterly Financial
Data
|
||||||||||||||||||||||||||||||||
|
2008
|
2007
|
|||||||||||||||||||||||||||||||
|
(Dollars in thousands, except per share
data)
|
First
|
Second
|
Third
|
Fourth
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||||||||||||||
|
Interest,
fee and dividend income
|
$ | 74,652 | $ | 72,854 | $ | 73,621 | $ | 73,287 | $ | 75,459 | $ | 76,495 | $ | 77,181 | $ | 76,982 | ||||||||||||||||
|
Interest
expense
|
30,587 | 26,849 | 26,578 | 24,354 | 34,830 | 35,137 | 35,994 | 35,129 | ||||||||||||||||||||||||
|
Net
interest income
|
44,065 | 46,005 | 47,043 | 48,933 | 40,629 | 41,358 | 41,187 | 41,853 | ||||||||||||||||||||||||
|
Provision
for loan and lease losses
|
6,478 | 5,803 | 7,179 | 7,721 | 2,096 | 9,770 | 4,788 | 13,440 | ||||||||||||||||||||||||
|
Noninterest
income excluding net securities gains (losses)
|
16,080 | 16,401 | 17,452 | 20,238 | 12,695 | 13,971 | 15,043 | 15,877 | ||||||||||||||||||||||||
|
Net
securities gains (losses)
|
15 | 18 | 1,510 | (8 | ) | (5 | ) | 21 | 1,484 | 613 | ||||||||||||||||||||||
|
Noninterest
expense
|
34,034 | 35,423 | 37,058 | 40,298 | 30,872 | 28,014 | 31,227 | 32,404 | ||||||||||||||||||||||||
|
Net
income
|
13,716 | 14,657 | 15,083 | 14,897 | 14,132 | 12,064 | 15,147 | 8,985 | ||||||||||||||||||||||||
|
Basic
earnings per share
|
$ | 0.43 | $ | 0.46 | $ | 0.47 | $ | 0.46 | $ | 0.41 | $ | 0.36 | $ | 0.46 | $ | 0.28 | ||||||||||||||||
|
Diluted
earnings per share
|
$ | 0.43 | $ | 0.45 | $ | 0.46 | $ | 0.45 | $ | 0.41 | $ | 0.36 | $ | 0.46 | $ | 0.28 | ||||||||||||||||
|
Net
interest margin
|
3.84 | % | 3.94 | % | 3.94 | % | 4.06 | % | 3.63 | % | 3.63 | % | 3.56 | % | 3.61 | % | ||||||||||||||||
|
Return
on average assets
|
1.07 | % | 1.12 | % | 1.13 | % | 1.11 | % | 1.13 | % | 0.95 | % | 1.17 | % | 0.69 | % | ||||||||||||||||
|
Return
on average equity
|
13.68 | % | 14.49 | % | 14.58 | % | 13.88 | % | 14.06 | % | 11.90 | % | 15.41 | % | 9.06 | % | ||||||||||||||||
|
Average
diluted common shares outstanding
|
32,252 | 32,242 | 32,453 | 32,758 | 34,457 | 33,936 | 32,921 | 32,398 | ||||||||||||||||||||||||
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|
GENERAL
The
financial review which follows focuses on the factors affecting the consolidated
financial condition and results of operations of NBT Bancorp Inc. (the
“Registrant”) and its wholly owned subsidiaries, the Bank, NBT Financial and NBT
Holdings during 2008 and, in summary form, the preceding two years.
Collectively, the Registrant and its subsidiaries are referred to herein as “the
Company.” Net interest margin is presented in this discussion on a fully taxable
equivalent (FTE) basis. Average balances discussed are daily averages unless
otherwise described. The audited consolidated financial statements and related
notes as of December 31, 2008 and 2007 and for each of the years in the
three-year period ended December 31, 2008 should be read in conjunction with
this review. Amounts in prior period consolidated financial statements are
reclassified whenever necessary to conform to the 2008
presentation.
The
preparation of the consolidated financial statements requires management to make
estimates and assumptions, in the application of certain accounting policies,
about the effect of matters that are inherently uncertain. Those estimates and
assumptions affect the reported amounts of certain assets, liabilities, revenues
and expenses. Different amounts could be reported under different conditions, or
if different assumptions were used in the application of these accounting
policies.
The
business of the Company is providing commercial banking and financial services
through its subsidiaries. The Company’s primary market area is central and
upstate New York and northeastern Pennsylvania. The Company has been, and
intends to continue to be, a community-oriented financial institution offering a
variety of financial services. The Company’s principal business is attracting
deposits from customers within its market area and investing
those funds
primarily in loans and leases within
its market
area, and, to a lesser extent, in marketable
securities. The financial condition and operating results of the
Company are dependent on its net interest income which is the difference between
the interest and dividend income earned on its earning assets and the interest
expense paid on its interest bearing liabilities, primarily consisting of
deposits and borrowings. Net income is also affected by provisions for loan and
lease losses and noninterest income, such as service charges on deposit
accounts, broker/dealer fees, trust fees, insurance commissions, and
gains/losses on securities sales; it is also impacted by noninterest expense,
such as salaries and employee benefits, data processing, communications,
occupancy, and equipment expenses.
The
Company’s results of operations are significantly affected by general economic
and competitive conditions (particularly changes in market interest rates),
government policies, changes in accounting standards, and actions of regulatory
agencies. Future changes in applicable laws, regulations, or government policies
may have a material impact on the Company. Lending activities are substantially
influenced by the demand for and supply of housing, competition among lenders,
the level of interest rates, the state of the local and regional economy, and
the availability of funds. The ability to gather deposits and the cost of funds
are influenced by prevailing market interest rates, fees and terms on deposit
products, as well as the availability of alternative investments including
mutual funds and stocks.
CRITICAL
ACCOUNTING POLICIES
The
Company has identified several policies as being critical because they require
management to make particularly difficult, subjective and/or complex judgments
about matters that are inherently uncertain and because of the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions. These policies relate to the allowance for loan
losses and pension accounting.
Management
of the Company considers the accounting policy relating to the allowance for
loan and lease losses to be a critical accounting policy given the uncertainty
in evaluating the level of the allowance required to cover credit losses
inherent in the loan and lease portfolio and the material effect that such
judgments can have on the results of operations. While management’s current
evaluation of the allowance for loan and lease losses indicates that the
allowance is adequate, under adversely different conditions or assumptions, the
allowance may need to be increased. For example, if historical loan and lease
loss experience significantly worsened or if current economic conditions
significantly deteriorated, additional provision for loan and lease losses would
be required to increase the allowance. In addition, the assumptions and
estimates used in the internal reviews of the Company’s nonperforming loans and
potential problem loans have a significant impact on the overall analysis of the
adequacy of the allowance for loan and lease losses. While management has
concluded that the current evaluation of collateral values is reasonable under
the circumstances, if collateral values were significantly lowered, the
Company’s allowance for loan and lease policy would also require additional
provision for loan and lease losses.
Management
is required to make various assumptions in valuing its pension assets and
liabilities. These assumptions include the expected rate of return on plan
assets, the discount rate, and the rate of increase in future compensation
levels. Changes to these assumptions could impact earnings in future periods.
The Company takes into account the plan asset mix, funding obligations, and
expert opinions in determining the various rates used to estimate pension
expense. The Company also considers the Citigroup Liability Index and market
interest rates in setting the appropriate discount rate. In addition, the
Company reviews expected inflationary and merit increases to compensation in
determining the rate of increase in future compensation levels. In
2006, the Pension Protection Act of 2006 was enacted, which established certain
criteria to ensure that pension plan assets are sufficient to satisfy future
obligations. The law identifies at risk plans and applies stricter
funding requirements to help stabilize at risk plans. The Company has
determined that the law does not materially affect the Company’s funding
obligations with respect to its benefit plans.
The
Company’s policy on the allowance for loan and lease losses and pension
accounting is disclosed in Note 1 to the consolidated financial statements. A
more detailed description of the allowance for loan and lease losses is included
in the “Risk Management” section of this Form 10-K. All significant
pension accounting assumptions and detail is disclosed in Note 17 to the
consolidated financial statements. All accounting policies are important, and as
such, the Company encourages the reader to review each of the policies included
in Note 1 to obtain a better understanding on how the Company’s financial
performance is reported.
FORWARD
LOOKING STATEMENTS
Certain
statements in this filing and future filings by the Company with the Securities
and Exchange Commission, in the Company’s press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, contain forward-looking statements, as defined in
the Private Securities Litigation Reform Act. These statements may be identified
by the use of phrases such as “anticipate,” “believe,” “expect,”
“forecasts,” “projects,” “will,” “can,”
“would,” “should,” “could,” “may,” or other similar terms. There are a number of
factors, many of which are beyond the Company’s control that could cause actual
results to differ materially from those contemplated by the forward looking
statements. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities:
• Local, regional, national and
international economic conditions and the impact they may have on the Company
and its customers and the Company’s assessment of that
impact.
• Changes in the level of
non-performing assets and charge-offs.
• Changes in estimates of future reserve
requirements based upon the periodic review thereof under relevant regulatory
and accounting requirements.
• The effects of and changes in trade
and monetary and fiscal policies and laws, including the interest rate policies
of the Federal Reserve Board.
• Inflation, interest rate, securities
market and monetary fluctuations.
• Political
instability.
• Acts of war or
terrorism.
• The timely development and acceptance
of new products and services and perceived overall value of these products and
services by users.
• Changes in consumer spending,
borrowings and savings habits.
• Changes in the financial performance
and/or condition of the Company’s borrowers.
• Technological
changes.
• Acquisitions and integration of
acquired businesses.
• The ability to increase market share
and control expenses.
• Changes in the competitive environment
among financial holding companies.
• The effect of changes in laws and
regulations (including laws and regulations concerning taxes, banking,
securities and insurance) with which the Company and its subsidiaries must
comply.
• The effect of changes in accounting
policies and practices, as may be adopted by the regulatory agencies, as well as
the Public Company Accounting Oversight Board, the Financial Accounting
Standards Board and other accounting standard setters.
• Changes in the Company’s organization,
compensation and benefit plans.
• The costs and effects of legal and
regulatory developments including the resolution of legal proceedings or
regulatory or other governmental inquiries and the results of regulatory
examinations or reviews.
• Greater than expected costs or
difficulties related to the integration of new products and lines of
business.
• The Company’s success at managing the
risks involved in the foregoing items.
The
Company cautions readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors, including but not limited to those described above, could
affect the Company’s financial performance and could cause the Company’s actual
results or circumstances for future periods to differ materially from those
anticipated or projected.
Except as
required by law, the Company does not undertake, and specifically disclaims any
obligations to, publicly release any revisions that may be made to any
forward-looking statements to reflect statements to the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.
OVERVIEW
The
Company had net income of $58.4 million or $1.80 per diluted share for 2008, up
15.9% from net income of $50.3 million or $1.51 per diluted share for
2007. Net interest income increased $21.0 million or 12.7% in 2008
compared to 2007. The increase in net interest income resulted from
decreases in rates paid on interest bearing deposits and liabilities in 2008 as
compared with 2007. In addition, average earning assets increased
$132.7 million, or 2.8%, in 2008 over 2007. The provision for loan
and lease losses totaled $27.2 million for the year ended December 31, 2008,
down $2.9 million, or 9.7%, from $30.1 million for the year ended December 31,
2007. Noninterest income increased $12.0 million or 20.1% compared to
2007. The increase in noninterest income was driven primarily by an
increase in service charges on deposit accounts and ATM and debit card fees,
which collectively increased $6.0 million due to various initiatives in
2008. Also included in noninterest income for 2008 were net
securities gains totaling $1.5 million compared to net securities gains of $2.1
million in 2007. Excluding net security gains and losses, total noninterest
income increased 21.9% in 2008 compared with 2007. Noninterest
expense increased $24.3 million, or 19.8%, in 2008 compared with
2007. The increase in noninterest expense was due to several factors
including increases in salaries and employee benefits, occupancy, equipment and
data processing and communications expenses, professional fees and outside
services, loan collection and other real estate owned expenses, and other
operating expenses. Please refer to “NONINTEREST EXPENSE” on
page 42 for additional information.
The
Company had net income of $50.3 million or $1.51 per diluted share for 2007,
down 10.0% from net income of $55.9 million or $1.64 per diluted share for
2006. The provision for loan and lease losses totaled $30.1 million
for the year ended December 31, 2007, up $20.7, or 220.3%, from $9.4 million for
the year ended December 31, 2006. This increase was due in large part
to increases in nonperforming loans and charge-offs in 2007. The
increase in the provision for loan and lease losses was offset by several
factors. Net interest income increased $1.2 million or 0.7% in 2007
compared to 2006. The increase in net interest income resulted mainly
from an increase in average earning assets of $171.4 million, or 3.7% to $4.7
billion in 2007, driven by a 3.7% increase in average loans and leases for the
period. Noninterest income increased $11.1 million or 22.8% compared to 2006.
The increase in noninterest income was driven primarily by an increase in
service charges on deposit accounts from fee initiatives during the
year. Also included in noninterest income for 2007 were net
securities gains totaling $2.1 million compared to net securities losses of $0.9
million in 2006. Excluding net security gains and losses, total noninterest
income increased 16.3% in 2007 compared with 2006. Noninterest expense remained
relatively stable from $123.0 million in 2006 to $122.5 million in
2007.
2009
OUTLOOK
While the
Company reported record earnings for 2008, it anticipates that current global
economic conditions and challenges in the financial services industry may
negatively impact earnings in 2009. In particular, the Company currently expects
that in 2009:
•
premiums paid to the Federal Deposit Insurance Corporation will increase
significantly;
• pension
and postretirement expenses will increase significantly;
• revenue
from Federal Home Loan Bank dividends may decrease significantly;
•
payments representing interest and principal on currently outstanding loans and
investments will most likely be reinvested at rates that are lower than the
rates on currently outstanding loans and investments; and
• the
economy may have an adverse affect on asset quality indicators and the provision
for loan and lease losses, and therefore credit costs, which have trended higher
in recent years, are not expected to decline until economic indicators
improve.
Due to
current uncertainty in economic conditions and the financial services industry
in general, it is particularly difficult to estimate certain revenues, expenses
and other related matters. There may be factors in addition to those
identified above that impact 2009 results. For a discussion of risks
and uncertainties that could impact the Company’s future results, see ITEM 1A.
RISK FACTORS.
ASSET/LIABILITY
MANAGEMENT
The
Company attempts to maximize net interest income, and net income, while actively
managing its liquidity and interest rate sensitivity through the mix of various
core deposit products and other sources of funds, which in turn fund an
appropriate mix of earning assets. The changes in the Company’s asset mix and
sources of funds, and the resultant impact on net interest income, on a fully
tax equivalent basis, are discussed below. The following table
includes the condensed consolidated average balance sheet, an analysis of
interest income/expense and average yield/rate for each major category of
earning assets and interest bearing liabilities on a taxable equivalent basis.
Interest income for tax-exempt securities and loans and leases has been adjusted
to a taxable-equivalent basis using the statutory Federal income tax rate of
35%.
|
Table 1. Average Balances and Net Interest
Income
|
||||||||||||||||||||||||||||||||||||
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
|
Average
|
Yield/
|
Average
|
Yield/
|
Average
|
Yield/
|
|||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
|||||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||||||
|
Short-term
interest bearing accounts
|
$ | 9,190 | $ | 186 | 2.03 | % | $ | 8,395 | $ | 419 | 4.99 | % | $ | 8,116 | $ | 395 | 4.87 | % | ||||||||||||||||||
|
Securities
available for sale 1
|
1,113,810 | 56,841 | 5.10 | 1,134,837 | 57,290 | 5.05 | 1,110,405 | 53,992 | 4.86 | |||||||||||||||||||||||||||
|
Securities
held to maturity 1
|
149,775 | 8,430 | 5.63 | 144,518 | 8,901 | 6.16 | 115,636 | 7,071 | 6.11 | |||||||||||||||||||||||||||
|
Investment
in FRB and FHLB Banks
|
39,735 | 2,437 | 6.13 | 34,022 | 2,457 | 7.22 | 39,437 | 2,076 | 5.26 | |||||||||||||||||||||||||||
|
Loans
and leases 2
|
3,567,299 | 233,016 | 6.53 | 3,425,318 | 243,317 | 7.10 | 3,302,080 | 230,800 | 6.99 | |||||||||||||||||||||||||||
|
Total
earning assets
|
4,879,809 | 300,910 | 6.17 | 4,747,090 | 312,384 | 6.58 | 4,575,674 | 294,334 | 6.43 | |||||||||||||||||||||||||||
|
Other
non-interest earning assets
|
384,846 | 362,497 | 349,396 | |||||||||||||||||||||||||||||||||
|
Total
assets
|
$ | 5,264,655 | $ | 5,109,587 | $ | 4,925,070 | ||||||||||||||||||||||||||||||
|
Liabilities
and stockholders’ equity
|
||||||||||||||||||||||||||||||||||||
|
Money
market deposit accounts
|
$ | 778,477 | 14,373 | 1.85 | % | $ | 663,532 | 22,402 | 3.38 | % | $ | 543,323 | 18,050 | 3.32 | % | |||||||||||||||||||||
|
NOW
deposit accounts
|
485,014 | 4,133 | 0.85 | 449,122 | 3,785 | 0.84 | 443,339 | 3,297 | 0.74 | |||||||||||||||||||||||||||
|
Savings
deposits
|
467,572 | 2,161 | 0.46 | 485,562 | 4,299 | 0.89 | 532,788 | 4,597 | 0.86 | |||||||||||||||||||||||||||
|
Time
deposits
|
1,507,966 | 55,465 | 3.68 | 1,675,116 | 76,088 | 4.54 | 1,534,556 | 61,854 | 4.03 | |||||||||||||||||||||||||||
|
Total
interest-bearing deposits
|
3,239,029 | 76,132 | 2.35 | 3,273,332 | 106,574 | 3.26 | 3,054,006 | 87,798 | 2.87 | |||||||||||||||||||||||||||
|
Short-term
borrowings
|
223,830 | 4,847 | 2.17 | 280,162 | 12,943 | 4.62 | 331,255 | 15,448 | 4.66 | |||||||||||||||||||||||||||
|
Trust
preferred debentures
|
75,422 | 4,747 | 6.29 | 75,422 | 5,087 | 6.74 | 70,055 | 4,700 | 6.71 | |||||||||||||||||||||||||||
|
Long-term
debt
|
563,460 | 22,642 | 4.02 | 384,017 | 16,486 | 4.29 | 414,976 | 17,063 | 4.11 | |||||||||||||||||||||||||||
|
Total
interest-bearing liabilities
|
4,101,741 | 108,368 | 2.64 | 4,012,933 | 141,090 | 3.52 | 3,870,292 | 125,009 | 3.23 | |||||||||||||||||||||||||||
|
Demand
deposits
|
682,656 | 639,423 | 614,055 | |||||||||||||||||||||||||||||||||
|
Other
non-interest-bearing liabilities
|
68,156 | 57,932 | 54,170 | |||||||||||||||||||||||||||||||||
|
Stockholders’
equity
|
412,102 | 399,299 | 386,553 | |||||||||||||||||||||||||||||||||
|
Total
liabilities and stockholders’ equity
|
$ | 5,264,655 | $ | 5,109,587 | $ | 4,925,070 | ||||||||||||||||||||||||||||||
|
Interest
rate spread
|
3.53 | % | 3.06 | % | 3.20 | % | ||||||||||||||||||||||||||||||
|
Net
interest income-FTE
|
192,542 | 171,294 | 169,325 | |||||||||||||||||||||||||||||||||
|
Net
interest margin
|
3.95 | % | 3.61 | % | 3.70 | % | ||||||||||||||||||||||||||||||
|
Taxable
equivalent adjustment
|
6,496 | 6,267 | 5,492 | |||||||||||||||||||||||||||||||||
|
Net
interest income
|
$ | 186,046 | $ | 165,027 | $ | 163,833 | ||||||||||||||||||||||||||||||
1.
Securities are shown at average amortized cost.
2. For
purposes of these computations, nonaccrual loans are included in the average
loan balances outstanding. The interest collected thereon is included in
interest income based upon the characteristics of the related
loans.
NET
INTEREST INCOME
On a tax
equivalent basis, the Company’s net interest income for 2008 was $192.5 million,
up from $171.3 million for 2007. The Company’s net interest margin increased to
3.95% for 2008 from 3.61% for 2007. The increase in the net interest margin
resulted primarily from interest-bearing liabilities repricing down faster than
earning assets. Earning assets, particularly those tied to a fixed
rate, reprice at a slower rate than interest-bearing liabilities, and have not
fully realized the effect of the lower interest rate environment. The
yield on earning assets decreased 41 basis points (bp), from 6.58% for 2007 to
6.17% for 2008. Meanwhile, the rate paid on interest bearing liabilities
decreased 88 bp, from 3.52% for 2007 to 2.64% for 2008. Average
earning assets increased $132.7 million, or 2.8%, from 2007 to
2008. This increase was driven primarily by a $142.0 million increase
in average loans and leases, which was driven primarily by a 23.4% increase in
consumer indirect installment loans. The following table presents
changes in interest income, on a FTE basis, and interest expense attributable to
changes in volume (change in average balance multiplied by prior year
rate), changes in rate (change in rate multiplied by prior year volume), and the
net change in net interest income. The net change
attributable to the combined impact of volume and rate has been allocated to
each in proportion to the absolute dollar amounts of change.
|
Table 2. Analysis of Changes in Taxable Equivalent
Net Interest Income
|
||||||||||||||||||||||||
|
Increase
(Decrease)
|
Increase
(Decrease)
|
|||||||||||||||||||||||
|
2008 over 2007
|
2007 over 2006
|
|||||||||||||||||||||||
|
(In thousands)
|
Volume
|
Rate
|
Total
|
Volume
|
Rate
|
Total
|
||||||||||||||||||
|
Short-term
interest-bearing accounts
|
$ | 44 | $ | (276 | ) | $ | (232 | ) | $ | 14 | $ | 10 | $ | 24 | ||||||||||
|
Securities
available for sale
|
(1,021 | ) | 222 | (799 | ) | 1,205 | 2,093 | 3,298 | ||||||||||||||||
|
Securities
held to maturity
|
228 | (538 | ) | (310 | ) | 1,779 | 51 | 1,830 | ||||||||||||||||
|
Investment
in FRB and FHLB Banks
|
380 | (400 | ) | (20 | ) | (314 | ) | 695 | 381 | |||||||||||||||
|
Loans
and leases
|
10,908 | (21,250 | ) | (10,342 | ) | 8,711 | 3,806 | 12,517 | ||||||||||||||||
|
Total
interest income
|
10,539 | (22,242 | ) | (11,703 | ) | 11,184 | 6,866 | 18,050 | ||||||||||||||||
|
Money
market deposit accounts
|
4,969 | (12,998 | ) | (8,029 | ) | 4,054 | 298 | 4,352 | ||||||||||||||||
|
NOW
deposit accounts
|
305 | 43 | 348 | 44 | 444 | 488 | ||||||||||||||||||
|
Savings
deposits
|
(154 | ) | (1,984 | ) | (2,138 | ) | (416 | ) | 118 | (298 | ) | |||||||||||||
|
Time
deposits
|
(7,095 | ) | (13,528 | ) | (20,623 | ) | 5,967 | 8,267 | 14,234 | |||||||||||||||
|
Short-term
borrowings
|
(2,223 | ) | (5,873 | ) | (8,096 | ) | (2,362 | ) | (143 | ) | (2,505 | ) | ||||||||||||
|
Trust
preferred debentures
|
- | (340 | ) | (340 | ) | 362 | 25 | 387 | ||||||||||||||||
|
Long-term
debt
|
7,133 | (977 | ) | 6,156 | (1,308 | ) | 731 | (577 | ) | |||||||||||||||
|
Total
interest expense
|
2,935 | (35,657 | ) | (32,722 | ) | 4,727 | 11,354 | 16,081 | ||||||||||||||||
|
Change
in FTE net interest income
|
$ | 7,604 | $ | 13,415 | $ | 21,019 | $ | 6,457 | $ | (4,488 | ) | $ | 1,969 | |||||||||||
LOANS
AND LEASES AND CORRESPONDING INTEREST AND FEES ON LOANS
The
average balance of loans and leases increased 4.1%, totaling $3.6 billion in
2008 compared to $3.4 billion in 2007. The yield on average loans and leases
decreased from 7.10% in 2007 to 6.53% in 2008, as loan rates, particularly for
loans indexed to the Prime Rate and other short-term variable rate indices,
declined due to the declining rate environment in 2008. Interest
income from loans and leases on a FTE basis decreased 4.2%, from $243.3 million
in 2007 to $233.0 million in 2008. The decrease in interest income
from loans and leases was due to the decrease in yield on loans and leases in
2008 compared to 2007 noted above.
Total
loans and leases increased 5.7% at December 31, 2008, totaling $3.7 billion from
$3.5 billion at December 31, 2007. The increase in loans and leases was driven
by strong growth in consumer loans and home equity loans. Consumer
loans increased $139.7 million or 21.3%, from $655.4 million at December 31,
2007 to $795.1 million at December 31, 2008. The increase in consumer
loans was driven primarily by an increase in indirect installment loans of
$155.0 million, from $520.7 million in 2007 to $675.7 million in
2008. Home equity loans increased $44.9 million or 7.7% from $582.7
million at December 31, 2007 to $627.6 million at December 31,
2008. The increase in home equity loans was due to strong product
demand and successful marketing of home equity products. Commercial
and commercial real estate increased $26.9 million at December 31, 2008 when
compared to December 31, 2007. These increases were partially offset
by a decrease in real estate construction and development loans, which decreased
$13.5 million, or 16.6% at December 31, 2008 as compared to December 31,
2007.
The following table reflects the loan and lease portfolio by
major
categories as of December 31 for the years indicated:
|
Table 3. Composition of Loan and Lease
Portfolio
|
||||||||||||||||||||
|
December 31,
|
||||||||||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
|
Residential
real estate mortgages
|
$ | 722,723 | $ | 719,182 | $ | 739,607 | $ | 701,734 | $ | 721,615 | ||||||||||
|
Commercial
and commercial real estate
|
1,241,779 | 1,214,897 | 1,240,383 | 1,127,705 | 1,069,451 | |||||||||||||||
|
Real
estate construction and development
|
67,859 | 81,350 | 94,494 | 69,135 | 86,031 | |||||||||||||||
|
Agricultural
and agricultural real estate
|
113,566 | 116,190 | 118,278 | 114,043 | 108,181 | |||||||||||||||
|
Consumer
|
795,123 | 655,375 | 586,922 | 463,955 | 412,139 | |||||||||||||||
|
Home
equity
|
627,603 | 582,731 | 546,719 | 463,848 | 391,807 | |||||||||||||||
|
Lease
financing
|
83,258 | 86,126 | 86,251 | 82,237 | 80,697 | |||||||||||||||
|
Total
loans and leases
|
$ | 3,651,911 | $ | 3,455,851 | $ | 3,412,654 | $ | 3,022,657 | $ | 2,869,921 | ||||||||||
Residential
real estate mortgages consist primarily of loans secured by first or second
deeds of trust on primary residences. Loans in the commercial and agricultural
categories, including commercial and agricultural real estate mortgages, consist
primarily of short-term and/or floating rate loans made to small to medium-sized
entities. Consumer loans consist primarily of installment credit to
individuals secured by automobiles and other personal property including
manufactured housing. Indirect installment loans represent $675.7
million of total consumer loans. Real estate construction and
development loans include commercial construction and development and
residential construction loans. Commercial construction loans are for small and
medium sized office buildings and other commercial properties and residential
construction loans are primarily for projects located in upstate New York and
northeastern Pennsylvania.
Lease
financing receivables primarily represent automobile financing to customers
through direct financing leases and are carried at the aggregate of the lease
payments receivable and the estimated residual values, net of unearned income
and net deferred lease origination fees and costs. Net deferred lease
origination fees and costs are amortized under the effective interest method
over the estimated lives of the leases.
One of
the most significant risks associated with leasing operations is the recovery of
the residual value of the leased vehicles at the termination of the
lease. At termination, the lessor has the option to purchase the
vehicle or may turn the vehicle over to the Company. The residual values
included in lease financing receivables totaled $58.6 million and $58.4 million
at December 31, 2008 and 2007, respectively. The estimated residual
value related to the total lease portfolio is reviewed quarterly. If
it is determined that there has been a decline in the estimated fair value of
the residual that is judged by management to be other-than-temporary, including
consideration of residual value insurance, a loss is
recognized. Adjustments related to such other-than-temporary declines
in estimated fair value are recorded within noninterest expenses in the
consolidated statements of income. The Company recorded an
other-than-temporary impairment charge on lease residual assets totaling $2.0
million during the third quarter of 2008 as a result of a decline in the fair
value of lease residual assets associated with certain leased
vehicles.
The
following table, Maturities and Sensitivities of Certain Loans to Changes in
Interest Rates, summarizes the maturities of the commercial and agricultural and
real estate construction and development loan portfolios and the sensitivity of
those loans to interest rate fluctuations at December 31,
2008. Scheduled repayments are reported in the maturity category in
which the contractual payment is due.
|
Table 4. Maturities and Sensitivities of Certain
Loans to Changes in Interest Rates
|
||||||||||||||||
|
Remaining maturity at December 31,
2008
|
||||||||||||||||
|
(In thousands)
|
Within One Year
|
After
One Year But Within Five Years
|
After Five Years
|
Total
|
||||||||||||
|
Floating/adjustable
rate
|
||||||||||||||||
|
Commercial,
commercial real estate, agricultural,and agricultural real
estate
|
$ | 318,868 | $ | 100,704 | $ | 3,614 | $ | 423,186 | ||||||||
|
Real
estate construction and development
|
36,671 | 1,181 | - | 37,852 | ||||||||||||
|
Total
floating rate loans
|
355,539 | 101,885 | 3,614 | 461,038 | ||||||||||||
|
Fixed
rate
|
||||||||||||||||
|
Commercial,
commercial real estate, agricultural,and agricultural real
estate
|
384,238 | 379,122 | 168,797 | 932,157 | ||||||||||||
|
Real
estate construction and development
|
15,289 | 3,950 | 10,770 | 30,009 | ||||||||||||
|
Total
fixed rate loans
|
399,527 | 383,072 | 179,567 | 962,166 | ||||||||||||
|
Total
|
$ | 755,066 | $ | 484,957 | $ | 183,181 | $ | 1,423,204 | ||||||||
SECURITIES
AND CORRESPONDING INTEREST AND DIVIDEND INCOME
The
average balance of the amortized cost for securities available for sale
decreased $21.0 million, or 1.9%, from $1.1 billion in 2007. The yield on
average securities available for sale was 5.10% for 2008 compared to 5.05% in
2007.
The
average balance of securities held to maturity increased from $144.5 million in
2007 to $149.8 million in 2008. At December 31, 2008, securities held to
maturity were comprised primarily of tax-exempt municipal securities. The yield
on securities held to maturity decreased from 6.16% in 2007 to 5.63% in 2008 due
to reinvestments during 2008 in lower yielding securities resulting from
interest rate cuts by the FRB during 2008.
The
average balance of FRB and Federal Home Loan Bank (FHLB) stock increased to
$39.7 million in 2008 from $34.0 million in 2007. This increase was
driven primarily by increases in average borrowings from 2007 to 2008, which
directly impacts FHLB holdings. The yield from investments in FRB and
FHLB Banks decreased from 7.22% in 2007 to 6.13% in 2008 due to decreases in
dividend rates from FHLB during 2008.
The
Company classifies its securities at date of purchase as either available for
sale, held to maturity or trading. Held to maturity debt securities
are those that the Company has the ability and intent to hold until
maturity. Available for sale securities are recorded at fair value.
Unrealized holding gains and losses, net of the related tax effect, on available
for sale securities are excluded from earnings and are reported in stockholders’
equity as a component of accumulated other comprehensive income or loss. Held to
maturity securities are recorded at amortized cost. Trading securities are
recorded at fair value, with net unrealized gains and losses recognized in
income. Transfers of securities between categories are recorded at
fair value at the date of transfer. A decline in the fair value of any available
for sale or held to maturity security below cost that is deemed
other-than-temporary is charged to earnings resulting in the establishment of a
new cost basis for the security. Securities with an other than
temporary impairment are generally placed on non-accrual status.
Non-marketable
equity securities are carried at cost, with the exception of small business
investment company (SBIC) investments, which are carried at fair value in
accordance with SBIC rules.
Premiums
and discounts are amortized or accreted over the life of the related security as
an adjustment to yield using the interest method. Dividend and interest income
are recognized when earned. Realized gains and losses on
securities sold are derived using the specific identification method
for
determining the cost of securities sold.
|
Table 5. Securities
Portfolio
|
||||||||||||||||||||||||
|
As of December 31,
|
||||||||||||||||||||||||
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Amortized
|
Fair
|
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||||||||
|
(In
thousands)
|
Cost
|
Value
|
Cost
|
Value
|
Cost
|
Value
|
||||||||||||||||||
|
Securities
available for sale
|
||||||||||||||||||||||||
|
U.S.
Treasury
|
$ | 59 | $ | 67 | $ | 10,042 | $ | 10,077 | $ | 10,516 | $ | 10,487 | ||||||||||||
|
Federal
Agency and mortgage-backed
|
565,970 | 579,796 | 704,308 | 705,354 | 744,078 | 731,754 | ||||||||||||||||||
|
State
& Municipal, collateralized mortgage obligations and other
securities
|
532,918 | 539,802 | 418,654 | 424,683 | 361,854 | 364,081 | ||||||||||||||||||
|
Total
securities available for sale
|
$ | 1,098,947 | $ | 1,119,665 | $ | 1,133,004 | $ | 1,140,114 | $ | 1,116,448 | $ | 1,106,322 | ||||||||||||
|
Securities
held to maturity
|
||||||||||||||||||||||||
|
Federal
Agency and mortgage-backed
|
$ | 2,372 | $ | 2,467 | $ | 2,810 | $ | 2,909 | $ | 3,434 | $ | 3,497 | ||||||||||||
|
State
& Municipal
|
136,259 | 137,263 | 145,458 | 145,767 | 132,213 | 132,123 | ||||||||||||||||||
|
Other
securities
|
1,578 | 1,578 | 843 | 843 | 667 | 667 | ||||||||||||||||||
|
Total
securities held to maturity
|
$ | 140,209 | $ | 141,308 | $ | 149,111 | $ | 149,519 | $ | 136,314 | $ | 136,287 | ||||||||||||
In the
available for sale category at December 31, 2008, federal agency securities were
comprised of Government-Sponsored Enterprise (“GSE”) securities;
Mortgaged-backed securities were comprised of GSEs with an amortized cost of
$313.7 million and a fair value of $321.0 million and US Government Agency
securities with an amortized cost of $38.2 million and a fair value of $39.7
million; Collateralized mortgage obligations were comprised of GSEs with an
amortized cost of $204.1 million and a fair value of $205.6 million and US
Government Agency securities with an amortized cost of $172.0 million and a fair
value of $174.6 million. At December 31, 2008, all of the mortgaged-backed
securities held to maturity were comprised of US Government Agency
securities.
The
following tables set forth information with regard to contractual maturities of
debt securities at December 31, 2008:
|
(In thousands)
|
Amortized cost
|
Estimated fair value
|
Weighted Average Yield
|
|||||||||
|
Debt
securities classified as available for sale
|
||||||||||||
|
Within
one year
|
$ | 27,075 | $ | 27,447 | 4.36 | % | ||||||
|
From
one to five years
|
175,125 | 178,107 | 4.18 | % | ||||||||
|
From
five to ten years
|
388,180 | 399,259 | 4.76 | % | ||||||||
|
After
ten years
|
498,092 | 504,085 | 4.75 | % | ||||||||
| $ | 1,088,472 | $ | 1,108,898 | |||||||||
|
Debt
securities classified as held to maturity
|
||||||||||||
|
Within
one year
|
$ | 75,141 | $ | 75,192 | 2.98 | % | ||||||
|
From
one to five years
|
34,547 | 34,929 | 3.89 | % | ||||||||
|
From
five to ten years
|
22,530 | 23,075 | 4.02 | % | ||||||||
|
After
ten years
|
7,991 | 8,112 | 5.11 | % | ||||||||
| $ | 140,209 | $ | 141,308 | |||||||||
FUNDING
SOURCES AND CORRESPONDING INTEREST EXPENSE
The
Company utilizes traditional deposit products such as time, savings, NOW, money
market, and demand deposits as its primary source for funding. Other sources,
such as short-term FHLB advances, federal funds purchased, securities sold under
agreements to repurchase, brokered time deposits, and long-term FHLB borrowings
are utilized as necessary to support the Company’s growth in assets and to
achieve interest rate sensitivity objectives. The average balance of
interest-bearing liabilities increased $88.8 million, totaling $4.1 billion in
2008 from $4.0 billion in 2007. The rate paid on interest-bearing
liabilities decreased from 3.52% in 2007 to 2.64% in 2008. This decrease caused
a decrease in interest expense of $32.7 million, or 23.2%, from $141.1 million
in 2007 to $108.4 million in 2008.
DEPOSITS
Average
interest bearing deposits decreased $34.3 million, or 1.0%, during 2008 compared
to 2007. The decrease resulted primarily from a decrease in time deposits,
partially offset by increases in money market deposits and NOW account
deposits. Average time deposits decreased $167.2 million or 10.0%
during 2008 as compared to 2007. The decrease in average time deposits resulted
primarily from decreases in municipal and negotiated rate time
deposits. Average money market deposits increased $114.9 million or
17.3% during 2008 when compared to 2007. The increase in average
money market deposits resulted primarily from an increase in personal money
market deposits. Average NOW accounts increased $35.9 million or 8.0%
during 2008 as compared to 2007. This increase was due primarily to
increases in municipal NOW accounts. The average balance of savings
accounts decreased $18.0 million or 3.7% during 2008 when compared to
2007. The average balance of demand deposits increased $43.2 million,
or 6.8%, from $639.4 million in 2007 to $682.6 million in 2008. This
growth in demand deposits was driven principally by increases in accounts from
retail customers.
The rate
paid on average interest-bearing deposits decreased from 3.26% during 2007 to
2.35% in 2008. The decrease in the rate on interest-bearing deposits was driven
primarily by pricing decreases from money market accounts and time deposits,
which are sensitive to interest rate changes. The pricing decreases for these
products resulted from decreases in short-term rates by the FRB during 2008
combined with an overall decrease in market rates. The rates paid for
money market deposit accounts decreased from 3.38% during 2007 to 1.85% during
2008. The rate paid for savings deposits decreased from 0.89% in 2007
to 0.46% in 2008 and the rate paid on time deposits decreased from 4.54% during
2007 to 3.68% during 2008.
The
following table presents the maturity distribution of time deposits of $100,000
or more at December 31, 2008 and December 31, 2007:
|
Table 6. Maturity Distribution of Time Deposits of
$100,000 or More
|
||||||||
|
December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Within
three months
|
$ | 240,788 | $ | 446,347 | ||||
|
After
three but within twelve months
|
134,097 | 214,368 | ||||||
|
After
one but within three years
|
35,735 | 28,468 | ||||||
|
Over
three years
|
18,130 | 5,082 | ||||||
|
Total
|
$ | 428,750 | $ | 694,265 | ||||
BORROWINGS
Average
short-term borrowings decreased $56.3 million to $223.8 million in
2008. The average rate paid on short-term borrowings decreased from
4.62% in 2007 to 2.17% in 2008, which was primarily driven by the FRB decreasing
the Fed Funds target rate (which directly impacts short-term borrowing rates)
400 bp in 2008. Average long-term debt increased from $384.0 million
in 2007 to $563.5 million in 2008, which was primarily due to the Company’s
strategy of mitigating interest rate risk exposure by securing long term
borrowings in the relatively low rate environment.
The
average balance of trust preferred debentures remained at $75.4 million in 2008
compared to 2007. The average rate paid for trust preferred
debentures in 2008 was 6.29%, down from 6.74% in 2007. The decrease in rate on
the trust preferred debentures is due primarily to the previously mentioned
decrease in short-term rates during 2008.
Short-term
borrowings consist of Federal funds purchased and securities sold under
repurchase agreements, which generally represent overnight borrowing
transactions, and other short-term borrowings, primarily FHLB advances, with
original maturities of one year or less. The Company has unused lines of credit
and access to brokered deposits available for short-term financing of
approximately $771 million and $804 million at
December 31, 2008 and 2007, respectively. Securities collateralizing
repurchase agreements are held in safekeeping by non-affiliated financial
institutions and are under the Company’s
control. Long-term debt, which is comprised
primarily of FHLB advances, are collateralized by the FHLB
stock owned by the Company, certain of its mortgage-backed securities and a
blanket lien on its residential real estate mortgage loans.
RISK
MANAGEMENT-CREDIT RISK
Credit
risk is managed through a network of loan officers, credit committees, loan
policies, and oversight from the senior credit officers and Board of Directors.
Management follows a policy of continually identifying, analyzing, and grading
credit risk inherent in each loan portfolio. An ongoing independent review,
subsequent to management’s review, of individual credits in the commercial loan
portfolio is performed by the independent loan review function. These components
of the Company’s underwriting and monitoring functions are critical to the
timely identification, classification, and resolution of problem
credits.
NONPERFORMING
ASSETS
|
Table 7. Nonperforming
Assets
|
||||||||||||||||||||
|
As of December 31,
|
||||||||||||||||||||
|
(Dollars in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
|
Nonaccrual
loans
|
||||||||||||||||||||
|
Commercial
and agricultural loans and real estate
|
$ | 15,891 | $ | 20,491 | $ | 9,346 | $ | 9,373 | $ | 10,550 | ||||||||||
|
Real
estate mortgages
|
3,803 | 1,372 | 2,338 | 2,009 | 2,553 | |||||||||||||||
|
Consumer
|
3,468 | 2,934 | 1,981 | 2,037 | 1,888 | |||||||||||||||
|
Troubled
debt restructured loans
|
1,029 | 4,900 | - | - | - | |||||||||||||||
|
Total
nonaccrual loans
|
24,191 | 29,697 | 13,665 | 13,419 | 14,991 | |||||||||||||||
|
Loans
90 days or more past due and still accruing
|
||||||||||||||||||||
|
Commercial
and agricultural loans and real estate
|
12 | 51 | 138 | - | - | |||||||||||||||
|
Real
estate mortgages
|
770 | 295 | 682 | 465 | 737 | |||||||||||||||
|
Consumer
|
1,523 | 536 | 822 | 413 | 449 | |||||||||||||||
|
Total
loans 90 days or more past due and still accruing
|
2,305 | 882 | 1,642 | 878 | 1,186 | |||||||||||||||
|
Total
nonperforming loans
|
26,496 | 30,579 | 15,307 | 14,297 | 16,177 | |||||||||||||||
|
Other
real estate owned
|
665 | 560 | 389 | 265 | 428 | |||||||||||||||
|
Total
nonperforming loans and other real estate owned
|
27,161 | 31,139 | 15,696 | 14,562 | 16,605 | |||||||||||||||
|
Total
nonperforming loans to loans and leases
|
0.73 | % | 0.88 | % | 0.45 | % | 0.47 | % | 0.56 | % | ||||||||||
|
Total
nonperforming loans and other real estate owned to total
assets
|
0.51 | % | 0.60 | % | 0.31 | % | 0.33 | % | 0.39 | % | ||||||||||
|
Total
allowance for loan and lease losses to nonperforming loans
|
221.03 | % | 177.19 | % | 330.48 | % | 331.92 | % | 277.75 | % | ||||||||||
The allowance for loan
and lease losses is maintained at a level estimated by
management to provide adequately for
risk of probable losses inherent in the
current loan and lease portfolio.
The adequacy of the allowance for loan and lease losses is continuously
monitored. It is assessed for adequacy using a methodology designed
to ensure the level of the allowance reasonably reflects the loan and lease
portfolio’s risk profile. It is evaluated to ensure that it is sufficient to
absorb all reasonably estimable credit losses inherent in the current loan and
lease portfolio.
Management
considers the accounting policy relating to the allowance for loan and lease
losses to be a critical accounting policy given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that such judgments can have on the
consolidated results of operations.
For
purposes of evaluating the adequacy of the allowance, the Company considers a
number of significant factors that affect the collectibility of the
portfolio. For individually analyzed loans, these include estimates
of loss exposure, which reflect the facts and circumstances that affect the
likelihood of repayment of such loans as of the evaluation date. For homogeneous
pools of loans and leases, estimates of the Company’s exposure to credit loss
reflect a current assessment of a number of factors, which could affect
collectibility. These factors include: past loss
experience; size, trend, composition, and nature of
loans; changes in lending policies and procedures, including
underwriting standards and
collection, charge-offs and recoveries; trends
experienced in nonperforming and delinquent loans; current economic conditions
in the Company’s market; portfolio concentrations that may affect
loss experienced across one or more components of the portfolio; the effect of
external factors such as competition, legal and regulatory requirements; and the
experience, ability, and depth of lending management and staff. In
addition, various regulatory agencies, as an integral component of their
examination process, periodically review the Company’s allowance for loan and
lease losses. Such agencies may require the Company to recognize
additions to the allowance based on their examination.
After a
thorough consideration of the factors discussed above, any required additions to
the allowance for loan and lease losses are made periodically by charges to the
provision for loan and lease losses. These charges are necessary to maintain the
allowance at a level which management believes is reasonably reflective of
overall inherent risk of probable loss in the portfolio. While management uses
available information to recognize losses on loans and leases, additions to the
allowance may fluctuate from one reporting period to another. These
fluctuations are reflective of changes in risk associated with portfolio content
and/or changes in management’s assessment of any or all of the determining
factors discussed above.
Total
nonperforming assets were $27.2 million at December 31, 2008, compared to $31.1
million at December 31, 2007. Nonperforming loans totaled $26.5
million at December 31, 2008, down from $30.6 million outstanding at December
31, 2007. The decrease in 2008 was primarily due to net charge-offs
during the 12 month period ending December 31, 2008 related to two large
commercial loans, both of which had been previously identified and reserved for
in 2007. The Company recorded a provision for loan and lease losses
of $27.2 million during 2008 compared with $30.1 million for
2007. This decrease was due primarily to the provision in the fourth
quarter of 2007 related to one of the aforementioned loans and the overall
decrease in nonperforming loans. Nonperforming loans as a percentage
of total loans and leases decreased to 0.73% for December 31, 2008 from 0.88% at
December 31, 2007. The allowance for loan and lease losses was
221.03% of non-performing loans at December 31, 2008 as compared to 177.19% at
December 31, 2007.
Impaired
loans, which primarily consist of nonaccruing commercial, commercial real
estate, agricultural, and agricultural real estate loans decreased to $11.3
million at December 31, 2008 as compared to $21.5 million at December 31, 2007.
At December 31, 2008, $1.7 million of the total impaired loans had a specific
reserve allocation of $0.6 million compared to $12.8 million of impaired loans
at December 31, 2007 which had a specific reserve allocation of $5.1
million.
Total net
charge-offs for 2008 were $22.8 million as compared with $26.5 million for
2007. The decrease in net charge-offs for the 12 months ended
December 31, 2008 was due primarily to higher charge-offs in 2007 related to one
of the aforementioned loans. The ratio of net charge-offs to average
loans and leases was 0.64% for 2008 compared to 0.77% for 2007. Gross
charge-offs decreased $4.6 million, totaling $26.7 million for 2008 compared to
$31.2 million for 2007. Recoveries declined slightly from $4.7
million for the 12 months ended December 31, 2007 to $4.2 million for the 12
month period ending December 31, 2008. The allowance for loan and
lease losses as a percentage of total loans and leases was 1.60% at December 31,
2008 and 1.57% at December 31, 2007.
|
Table 8. Allowance for Loan and Lease
Losses
|
||||||||||||||||||||
|
(Dollars in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
|
Balance
at January 1
|
$ | 54,183 | $ | 50,587 | $ | 47,455 | $ | 44,932 | $ | 42,651 | ||||||||||
|
Loans
and leases charged-off
|
||||||||||||||||||||
|
Commercial
and agricultural
|
14,464 | 20,349 | 6,132 | 3,403 | 4,595 | |||||||||||||||
|
Real
estate mortgages
|
543 | 1,032 | 542 | 741 | 772 | |||||||||||||||
|
Consumer*
|
11,985 | 9,862 | 6,698 | 6,875 | 6,239 | |||||||||||||||
|
Total
loans and leases charged-off
|
26,992 | 31,243 | 13,372 | 11,019 | 11,606 | |||||||||||||||
|
Recoveries
|
||||||||||||||||||||
|
Commercial
and agricultural
|
1,411 | 1,816 | 1,939 | 1,695 | 2,547 | |||||||||||||||
|
Real
estate mortgages
|
68 | 125 | 239 | 438 | 215 | |||||||||||||||
|
Consumer*
|
2,713 | 2,804 | 2,521 | 1,945 | 1,510 | |||||||||||||||
|
Total
recoveries
|
4,192 | 4,745 | 4,699 | 4,078 | 4,272 | |||||||||||||||
|
Net
loans and leases charged-off
|
22,800 | 26,498 | 8,673 | 6,941 | 7,334 | |||||||||||||||
|
Allowance
related to purchase acquisitions
|
- | - | 2,410 | - | - | |||||||||||||||
|
Provision
for loan and lease losses
|
27,181 | 30,094 | 9,395 | 9,464 | 9,615 | |||||||||||||||
|
Balance
at December 31
|
$ | 58,564 | $ | 54,183 | $ | 50,587 | $ | 47,455 | $ | 44,932 | ||||||||||
|
Allowance
for loan and lease losses to loans and leases outstanding at end of
year
|
1.60 | % | 1.57 | % | 1.48 | % | 1.57 | % | 1.57 | % | ||||||||||
|
Net
charge-offs to average loans and leases outstanding
|
0.64 | % | 0.77 | % | 0.26 | % | 0.23 | % | 0.27 | % | ||||||||||
*
Consumer charge-offs and recoveries include consumer, home equity, and lease
financing.
Total
nonperforming assets were $31.1 million at December 31, 2007, compared to $15.7
million at December 31, 2006. Nonperforming loans totaled $30.6
million at December 31, 2007, up from the $15.3 million outstanding at December
31, 2006. The increase in 2007 was primarily due to one
owner-occupied commercial real estate relationship and several dairy credits
becoming nonperforming during the second quarter, as well as one large
commercial loan becoming nonperforming during the fourth quarter. The
Company recorded a provision for loan and lease losses of $30.1 million during
2007 compared with $9.4 million for 2006. This increase was due to an
increase in nonperforming loans and charge-offs during the
period. Nonperforming loans as a percentage of total loans and leases
increased to 0.88% for December 31, 2007 from 0.45% at December 31, 2006. The
total allowance for loan and lease losses was 177.19% of non-performing loans at
December 31, 2007 as compared to 330.48% at December 31, 2006.
Total net
charge-offs for 2007 totaled $26.5 million as compared to $8.7 million for 2006.
The ratio of net charge-offs to average loans and leases was 0.77% for 2007
compared to 0.26% for 2006. Gross charge-offs increased $17.8 million, totaling
$31.2 million for 2007 compared to $13.4 million for 2006. Recoveries remained
consistent at $4.7 million for 2006 and 2007. The provision for loan and lease
losses increased to $30.1 million in 2007 from $9.4 million in 2006. The
allowance for loan and lease losses as a percentage of total loans and leases
was 1.57% at December 31, 2007 and 1.48% at December 31, 2006.
In
addition to the nonperforming loans discussed above, the Company has also
identified approximately $95.4 million in potential problem loans at December
31, 2008 as compared to $73.3 million at December 31, 2007. Potential problem
loans are loans that are currently performing, but where known information about
possible credit problems of the related borrowers causes management to have
concerns as to the ability of such borrowers to comply with the present loan
repayment terms and which may result in disclosure of such loans as
nonperforming at some time in the future. At the Company, potential problem
loans are typically loans that are performing but are classified by the
Company’s loan rating system as “substandard.” At December 31, 2008 and 2007,
potential problem loans primarily consisted of commercial and agricultural
loans. At December 31, 2008, there were 21 potential problem loans
that exceeded $1.0 million, totaling $41.2 million in aggregate compared to 13
potential problem loans exceeding $1.0 million, totaling $28.5 million at
December 31, 2007. Management cannot predict the extent to which economic
conditions may worsen or other factors which may impact borrowers and the
potential problem loans. Accordingly, there can be no assurance that
other loans will not become 90 days or more past due, be placed on nonaccrual,
become restructured, or require increased allowance coverage and provision for
loan losses.
The
following table sets forth the allocation of the allowance for loan losses by
category, as well as the percentage of loans and leases in each category to
total loans and leases, as prepared by the Company. This allocation is based on
management’s assessment of the risk characteristics of each of the component
parts of the total loan portfolio as of a given point in time and is subject to
changes as and when the risk factors of each such component part
change. The allocation is not indicative of either the specific
amounts of the loan categories in which future charge-offs may be taken, nor
should it be taken as an indicator of future loss trends. The allocation of the
allowance to each category does not restrict the use of the allowance to absorb
losses in any category. The following table sets forth the allocation
of the allowance for loan losses by loan category:
|
Table 9. Allocation of the Allowance for Loan and
Lease Losses
|
||||||||||||||||||||||||||||||||||||||||
|
December 31,
|
||||||||||||||||||||||||||||||||||||||||
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
Allowance
|
Category
Percent of Loans
|
Allowance
|
Category
Percent of Loans
|
Allowance
|
Category
Percent of Loans
|
Allowance
|
Category
Percent of Loans
|
Allowance
|
Category
Percent of of Loans
|
||||||||||||||||||||||||||||||
|
Commercial
and agricultural
|
$ | 33,231 | 39 | % | $ | 32,811 | 41 | % | $ | 28,149 | 43 | % | $ | 30,257 | 43 | % | $ | 28,158 | 44 | % | ||||||||||||||||||||
|
Real
estate mortgages
|
3,143 | 20 | % | 3,277 | 21 | % | 3,377 | 22 | % | 3,148 | 23 | % | 4,029 | 25 | % | |||||||||||||||||||||||||
|
Consumer
|
21,908 | 41 | % | 17,362 | 38 | % | 17,327 | 35 | % | 12,402 | 34 | % | 10,887 | 31 | % | |||||||||||||||||||||||||
|
Unallocated
|
282 | 0 | % | 733 | 0 | % | 1,734 | 0 | % | 1,648 | 0 | % | 1,858 | 0 | % | |||||||||||||||||||||||||
|
Total
|
$ | 58,564 | 100 | % | $ | 54,183 | 100 | % | $ | 50,587 | 100 | % | $ | 47,455 | 100 | % | $ | 44,932 | 100 | % | ||||||||||||||||||||
For 2008,
the reserve allocation for commercial and agricultural loans increased slightly
to $33.2 million from $32.8 million in 2007. The reserve allocation
for real estate mortgages decreased slightly from $3.3 million in 2007 to $3.1
million in 2008. The reserve allocation for consumer loans increased
from $17.4 million in 2007 to $21.9 million in 2008. This 26.2%
increase was due in large part to the 13.7% increase in consumer loans from 2007
to 2008.
At
December 31, 2008, approximately 59.8% of the Company’s loans are secured by
real estate located in central and northern New York and northeastern
Pennsylvania. Accordingly, the ultimate collectibility of a
substantial portion of the Company’s portfolio is susceptible to changes in
market conditions of those areas. Management is not aware of any material
concentrations of credit to any industry or individual borrowers.
Subprime
mortgage lending, which has been the riskiest sector of the residential housing
market, is not a market that the Company has ever actively
pursued. The market does not apply a uniform definition of what
constitutes “subprime” lending. Our reference to subprime lending
relies upon the “Statement on Subprime Mortgage Lending” issued by the OTS and
the other federal bank regulatory agencies, or the Agencies, on June 29, 2007,
which further referenced the “Expanded Guidance for Subprime Lending Programs,”
or the Expanded Guidance, issued by the Agencies by press release dated January
31, 2001. In the Expanded Guidance, the Agencies indicated that
subprime lending does not refer to individual subprime loans originated and
managed, in the ordinary course of business, as exceptions to prime risk
selection standards. The Agencies recognize that many prime loan
portfolios will contain such accounts. The Agencies also excluded
prime loans that develop credit problems after acquisition and community
development loans from the subprime arena. According to the Expanded
Guidance, subprime loans are other loans to borrowers which display one or more
characteristics of reduced payment capacity. Five specific criteria,
which are not intended to be exhaustive and are not meant to define specific
parameters for all subprime borrowers and may not match all markets or
institutions’ specific subprime definitions, are set forth, including having a
FICO score of 660 or below. Based upon the definition and exclusions
described above, the Company is a prime lender. Within the loan
portfolio, there are loans that, at the time of origination, had FICO scores of
660 or below. However, since the Company is a portfolio lender, it
reviews all data contained in borrower credit reports and does not base
underwriting decisions solely on FICO scores. We believe the
aforementioned loans, when made, were amply collateralized and otherwise
conformed to our prime lending standards.
LIQUIDITY
Liquidity
involves the ability to meet the cash flow requirements of customers who may be
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. The Asset
Liability Committee (ALCO) is responsible for liquidity management and has
developed guidelines which cover all assets and liabilities, as well as off
balance sheet items that are potential sources or uses of liquidity. Liquidity
policies must also provide the flexibility to implement appropriate strategies
and tactical actions. Requirements change as loans and leases grow, deposits and
securities mature, and payments on borrowings are made. Liquidity management
includes a focus on interest rate sensitivity management with a goal of avoiding
widely fluctuating net interest margins through periods of changing economic
conditions.
The
primary liquidity measurement the Company utilizes is called Basic Surplus which
captures the adequacy of its access to reliable sources of cash relative to the
stability of its funding mix of average liabilities. This approach recognizes
the importance of balancing levels of cash flow liquidity from short and
long-term securities with the availability of dependable borrowing sources which
can be accessed when necessary. At December 31, 2008, the Company’s Basic
Surplus measurement was 6.6% of total assets or $352 million, which was above
the Company’s minimum of 5% (calculated at $267 million of period end total
assets at December 31, 2008) set forth in its liquidity policies.
This
Basic Surplus approach enables the Company to adequately manage liquidity from
both operational and contingency perspectives. By tempering the need for cash
flow liquidity with reliable borrowing facilities, the Company is able to
operate with a more fully invested and, therefore, higher interest income
generating, securities portfolio. The makeup and term structure of the
securities portfolio is, in part, impacted by the overall interest rate
sensitivity of the balance sheet. Investment decisions and deposit
pricing strategies are impacted by the liquidity position. At
December 31, 2008, the Company considered its Basic Surplus position to be
adequate. However, certain events may adversely impact the Company’s
liquidity position in 2009. Improvement in the economy may increase
demand for equity related products or increase competitive pressure on deposit
pricing, which in turn, could result in a decrease in the Company’s deposit base
or increase funding costs. Additionally, liquidity will come under additional
pressure if loan growth exceeds deposit growth in 2009. These
scenarios could lead to a decrease in the Company’s basic surplus measure below
the minimum policy level of 5%. To manage this risk, the Company has
the ability to purchase brokered time deposits, borrow against established
borrowing facilities with other banks (Federal funds), and enter into repurchase
agreements with investment companies. The additional liquidity that could be
provided by these measures was $771 million at December 31, 2008.
At
December 31, 2008, a portion of the Company’s loans and securities were pledged
as collateral on borrowings. Therefore, future growth of earning
assets will depend upon the Company’s ability to obtain additional funding,
through growth of core deposits and collateral management, and may require
further use of brokered time deposits, or other higher cost borrowing
arrangements.
Net cash
flows provided by operating activities totaled $87.4 million in 2008 and $85.8
million in 2007. The critical elements of net operating cash flows include net
income, after adding back provision for loan and lease losses, and depreciation
and amortization.
Net cash
used in investing activities totaled $216.6 million in 2008 and $97.6 million in
2007. Critical elements of investing activities are loan and investment
securities transactions. The increase in cash used in investing activities in
2008 was primarily due to loan growth in 2008 as compared with
2007. The net increase in loans was $220.7 million in 2008 as
compared to $70.1 million in 2007.
Net cash
flows provided by financing activities totaled $76.6 million in 2008 and $36.0
million in 2007. The critical elements of financing activities are proceeds from
deposits, borrowings, and stock issuances. In addition, financing
activities are impacted by dividends and treasury stock
transactions. In 2008, the Company had a net decrease in short term
borrowings of approximately $162.0 million as compared with a net increase in
short-term borrowings of $23.1 million in 2007. This decrease in
short-term borrowings in 2008 was offset by an increase from proceeds from
long-term debt in 2008 over 2007. Proceeds from the issuance of
long-term debt totaled $340.0 million in 2008 and $150.0 million in
2007. In addition, the Company purchased 272,840 shares of its common
stock for approximately $5.9 million during 2008 as compared with the purchase
of 2,261,267 shares of its common stock for approximately $49.0 million in
2007.
In
connection with its financing and operating activities, the Company has entered
into certain contractual obligations. The Company’s future minimum cash
payments, excluding interest, associated with its contractual obligations
pursuant to its borrowing agreements and operating leases at December 31, 2008
are as follows:
Contractual
Obligations
(In
thousands)
|
Payments Due by Period
|
||||||||||||||||||||||||||||
|
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
Total
|
||||||||||||||||||||||
|
Long-term
debt obligations
|
$ | 40,000 | $ | 79,000 | $ | 89,444 | $ | 25,025 | $ | 150,000 | $ | 248,740 | $ | 632,209 | ||||||||||||||
|
Trust
preferred debentures
|
- | - | - | - | - | 75,422 | 75,422 | |||||||||||||||||||||
|
Operating
lease obligations
|
4,226 | 3,677 | 3,440 | 3,025 | 2,343 | 19,555 | 36,266 | |||||||||||||||||||||
|
Retirement
plan obligations
|
4,566 | 4,619 | 4,637 | 4,728 | 4,864 | 37,000 | 60,414 | |||||||||||||||||||||
|
Data
processing commitments
|
10,294 | 9,569 | 1,037 | 259 | - | - | 21,159 | |||||||||||||||||||||
|
Total
contractual obligations
|
$ | 59,086 | $ | 96,865 | $ | 98,558 | $ | 33,037 | $ | 157,207 | $ | 380,717 | $ | 825,470 | ||||||||||||||
OFF-BALANCE
SHEET RISK COMMITMENTS TO EXTEND CREDIT
The
Company makes contractual commitments to extend credit, which include unused
lines of credit, which are subject to the Company’s credit approval and
monitoring procedures. At December 31, 2008 and 2007, commitments to
extend credit in the form of loans, including unused lines of credit, amounted
to $537.6 million and $546.8 million, respectively. In the opinion of
management, there are no material commitments to extend credit, including unused
lines of credit, that represent unusual risks. All commitments to extend credit
in the form of loans, including unused lines of credit, expire within one
year.
STAND-BY LETTERS OF CREDIT
The
Company does not issue any guarantees that would require liability-recognition
or disclosure, other than its stand-by letters of credit. The Company
guarantees the obligations or performance of customers by issuing stand-by
letters of credit to third parties. These stand-by letters of credit are
frequently issued in support of third party debt, such as corporate debt
issuances, industrial revenue bonds, and municipal securities. The risk involved
in issuing stand-by letters of credit is essentially the same as the credit risk
involved in extending loan facilities to customers, and they are subject to the
same credit origination, portfolio maintenance and management procedures in
effect to monitor other credit and off-balance sheet
products. Typically, these instruments have terms of five years or
less and expire unused; therefore, the total amounts do not necessarily
represent future cash requirements. At December 31, 2008 and 2007,
outstanding stand-by letters of credit were approximately $27.6 million and
$27.5 million, respectively. The fair value of the Company’s stand-by letters of
credit at December 31, 2008 and 2007 was not
significant. The following table sets forth the
commitment
expiration period for stand-by letters of credit at December 31, 2008:
|
Commitment Expiration of Stand-by Letters of
Credit
|
||||
|
Within
one year
|
$ | 11,601 | ||
|
After
one but within three years
|
14,795 | |||
|
After
three but within five years
|
1,235 | |||
|
After
five years
|
- | |||
|
Total
|
$ | 27,631 | ||
LOANS
SERVICED FOR OTHERS AND LOANS SOLD WITH RECOURSE
The total
amount of loans serviced by the Company for unrelated third parties was
approximately $141.4 million and $125.5 million at December 31, 2008 and 2007,
respectively. At December 31, 2008 and 2007, the Company serviced
$11.2 million and $8.9 million, respectively, of loans sold with recourse. Due
to collateral on these loans, no reserve is considered necessary at December 31,
2008 and 2007.
CAPITAL
RESOURCES
Consistent
with its goal to operate a sound and profitable financial institution, the
Company actively seeks to maintain a “well-capitalized” institution in
accordance with regulatory standards. The principal source of capital to the
Company is earnings retention. The Company’s capital measurements are in excess
of both regulatory minimum guidelines and meet the requirements to be considered
well-capitalized.
The
Company’s principal source of funds to pay interest on trust preferred
debentures and pay cash dividends to its shareholders is dividends from its
subsidiaries. Various laws and regulations restrict the ability of
banks to pay dividends to their shareholders. Generally, the payment
of dividends by the Company in the future as well as the payment of interest on
the capital securities will require the generation of sufficient future earnings
by its subsidiaries.
The Bank
also is subject to substantial regulatory restrictions on its ability to pay
dividends to the Company. Under OCC regulations, the Bank may not pay a
dividend, without prior OCC approval, if the total amount of all dividends
declared during the calendar year, including the proposed dividend, exceeds the
sum of its retained net income to date during the calendar year and its retained
net income over the preceding two years. At December 31, 2008, approximately
$46.6 million of the total stockholders’ equity of the Bank was available for
payment of dividends to the Company without approval by the OCC. The Bank’s
ability to pay dividends also is subject to the Bank being in compliance with
regulatory capital requirements. The Bank is currently in compliance with these
requirements.
STOCK
REPURCHASE PLAN
Under
previously disclosed stock repurchase plans, the Company purchased 272,840
shares of its common stock during the year ended December 31, 2008, for a total
of $5.9 million at an average price of $21.77 per share. There were
no shares purchased during the three month period ended December 31,
2008. At December 31, 2008, there were 1,203,040 shares available for
repurchase under previously announced plans.
NONINTEREST
INCOME
Noninterest
income is a significant source of revenue for the Company and an important
factor in the Company’s results of operations. The following table sets forth
information by category of noninterest income for the years
indicated:
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Service
charges on deposit accounts
|
$ | 28,143 | $ | 22,742 | $ | 17,590 | ||||||
|
Broker/dealer
and insurance revenue
|
8,726 | 4,255 | 3,936 | |||||||||
|
Trust
|
7,278 | 6,514 | 5,629 | |||||||||
|
Bank
owned life insurance income
|
2,416 | 1,831 | 1,629 | |||||||||
|
ATM
fees
|
8,832 | 8,185 | 7,086 | |||||||||
|
Retirement
plan administration fees
|
6,308 | 6,336 | 5,536 | |||||||||
|
Other
|
8,468 | 7,723 | 8,098 | |||||||||
|
Total
before net securities gains (losses)
|
70,171 | 57,586 | 49,504 | |||||||||
|
Net
securities gains (losses)
|
1,535 | 2,113 | (875 | ) | ||||||||
|
Total
|
$ | 71,706 | $ | 59,699 | $ | 48,629 | ||||||
Noninterest
income for the year ended December 31, 2008 was $71.7 million, up $12.0 million
or 20.1% from $59.7 million for the same period in 2007. The increase
in noninterest income was due primarily to an increase in service charges on
deposit accounts and ATM and debit card fees, which collectively increased $6.0
million due to various initiatives in 2008. In addition, trust
administration income increased $0.8 million for the year ended December 31,
2008, compared with the same period in 2007. This increase stems
primarily from an increase in customer accounts resulting from successful
business development. Broker/dealer and insurance revenue increased
approximately $4.5 million for the year ended December 31, 2008, primarily due
to the acquisition of Mang Insurance Agency, LLC during the third quarter of
2008. Other noninterest income increased $0.7 million for the year
ended December 31, 2008, compared with the same period in 2007. This
increase was due primarily to a death benefit realized during the fourth quarter
of 2008 from a life insurance policy. Net securities gains for the
year ending December 31, 2008 were $1.5 million, compared with $2.1 million for
the year ending December 31, 2007. Excluding the effects of these
securities transactions, noninterest income increased $12.6 million, or 21.9%,
for the years ended December 31, 2008, compared with 2007.
NONINTEREST EXPENSE
Noninterest
expenses are also an important factor in the Company’s results of
operations. The following table sets forth the major components of
noninterest expense for the years indicated:
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Salaries
and employee benefits
|
$ | 71,159 | $ | 59,516 | $ | 62,877 | ||||||
|
Occupancy
|
13,781 | 11,630 | 11,518 | |||||||||
|
Equipment
|
7,539 | 7,422 | 8,332 | |||||||||
|
Data
processing and communications
|
12,694 | 11,400 | 10,454 | |||||||||
|
Professional
fees and outside services
|
10,476 | 9,135 | 7,761 | |||||||||
|
Office
supplies and postage
|
5,346 | 5,120 | 5,330 | |||||||||
|
Amortization
of intangible assets
|
2,105 | 1,645 | 1,649 | |||||||||
|
Loan
collection and other real estate owned
|
2,494 | 1,633 | 1,351 | |||||||||
|
Impairment
on lease residual assets
|
2,000 | - | - | |||||||||
|
Other
|
19,219 | 15,016 | 13,694 | |||||||||
|
Total
noninterest expense
|
$ | 146,813 | $ | 122,517 | $ | 122,966 | ||||||
Noninterest
expense for the year ended December 31, 2008 was $146.8 million, up from $122.5
million for the same period in 2007. Salaries and employee benefits
increased $11.6 million, or 19.6%, for the year ended December 31, 2008,
compared with the same period in 2007. This increase was due
primarily to increases in full time equivalent employees during 2008 and reduced
levels of incentive compensation in 2007 compared with 2008. The
increase in full time equivalent employees was largely due to new branch
activity and the aforementioned acquisition. Occupancy, equipment and
data processing and communications expenses were $34.0 million for the year
ended December 31, 2008, up $3.5 million, or 11.7%, from $30.5 million for the
year ended December 31, 2007. This increase was due primarily to an
increase in expenses related to new branch activity during the past
year. Professional fees and outside services increased $1.3 million
for the year ended December 31, 2008, compared with the same period in 2007, due
primarily to increases in legal and audit fees incurred in 2008, as well as
increases in fees related to the aforementioned noninterest income
initiatives. Loan collection and other real estate owned expenses
were $2.5 million for the year ended December 31, 2008, up from $1.6 million for
same period in 2007. The Company recorded an other than temporary
impairment charge on lease residual assets totaling $2.0 million during the
third quarter of 2008 as a result of declines in the fair value of lease
residual assets associated with certain leased vehicles. Other
operating expenses were $19.2 million for the year ended December 31, 2008, up
$4.2 million from $15.0 million for the year ended December 31,
2007. This increase resulted primarily from losses incurred from
sales of certain returned lease vehicles totaling approximately $1.4 million
during the period due to reduced values of those vehicles. In
addition, Federal Deposit Insurance Corporation (“FDIC”) insurance premiums
increased approximately $1.4 million for the year ended December 31, 2008,
compared with the same period in 2007.
INCOME
TAXES
Income
tax expense for the year ended December 31, 2008 was $25.4 million, up from
$21.8 million for the same period in 2007. The effective rates were
30.3% and 30.2% for the years ended December 31, 2008 and 2007,
respectively.
We calculate our current and deferred
tax provision based on estimates and assumptions that could differ from the
actual results reflected in income tax returns filed during the subsequent year.
Adjustments based on filed returns are recorded when identified, which is
generally in the third quarter of the subsequent year for U.S. federal and state
provisions.
The amount of income taxes the Company pays is subject at times to ongoing audits
by federal and state tax authorities, which often result in proposed
assessments. The Company’s
estimate for the potential
outcome for any uncertain tax issue is highly judgmental. The Company believes that it has
adequately provided for any
reasonably foreseeable outcome related to these matters. However, future results
may include favorable or unfavorable adjustments to the estimated tax liabilities in the period
the assessments are proposed or resolved or when statutes of limitation on
potential assessments expire. As a result, the Company’s effective tax rate may fluctuate
significantly on a quarterly or annual basis.
2007
OPERATING RESULTS AS COMPARED TO 2006 OPERATING RESULTS
NET
INTEREST INCOME
On a tax
equivalent basis, the Company’s net interest income for 2007 was $171.3 million,
up from $169.3 million for 2006. The Company’s net interest margin declined to
3.61% for 2007 from 3.70% for 2006. The decline in the net interest margin
resulted primarily from interest-bearing liabilities repricing up faster than
earning assets, offset somewhat by the increase in average demand deposits,
which increased $25.4 million or 4.1% during the period. Earning
assets, particularly those tied to a fixed rate, have not fully realized the
benefit of the higher interest rate environment, since rates for earning assets
with terms three years or longer have remained relatively flat during this
period due to the flat/inverted yield curve. The yield on earning
assets increased 15 basis points (bp), from 6.43% for 2006 to 6.58% for 2007.
Meanwhile, the rate paid on interest bearing liabilities increased 29 bp, from
3.23% for 2006 to 3.52% for 2007. Additionally, offsetting the decline in net
interest margin was an increase in average earning assets of $171.4 million or
3.7%, driven primarily by a $123.2 million increase in average loans and leases.
The increase in average loans and leases was due to in large part to a 17.1%
increase in consumer installment loans.
LOANS
AND LEASES AND CORRESPONDING INTEREST AND FEES ON LOANS
The
average balance of loans and leases increased 3.7%, totaling $3.4 billion in
2007 compared to $3.3 billion in 2006. The yield on average loans and leases
increased from 6.99% in 2006 to 7.10% in 2007, as loans, particularly loans
indexed to the Prime Rate and other short-term variable rate indices, benefited
from the rising rate environment in 2007. Interest income from loans and leases
on a FTE basis increased 5.4%, from $230.8 million in 2006 to $243.3 million in
2007. The increase in interest income from loans and leases was due
to the increase in the average balance of loans and leases as well as the
increase in yield on loans and leases in 2007 compared to 2006 noted
above.
Total
loans and leases increased 1.3% at December 31, 2007, totaling $3.5 billion from
$3.4 billion at December 31, 2006. The increase in loans and leases was driven
by strong growth in consumer loans and home equity loans. Residential
real estate mortgages decreased $20.4 million or 2.8% at December 31, 2007
compared to December 31, 2006. Commercial and commercial real estate
decreased $25.5 million at December 31, 2007 when compared to December 31,
2006. Real estate construction and development loans decreased $13.1
million, or 13.9%, from $94.5 million at December 31, 2006 to $81.4 million at
December 31, 2007. Consumer loans increased $68.5 million or 11.7%,
from $586.9 million at December 31, 2006 to $655.4 million at December 31, 2007.
The increase in consumer loans was driven primarily by an increase in indirect
loans of $63.3 million, from $457.4 million in 2006 to $520.7 million in
2007. Home equity loans increased $36.0 million or 6.6% from $546.7
million at December 31, 2006 to $582.7 million at December 31, 2007. The
increase in home equity loans was due to strong product demand and successful
marketing of home equity products.
SECURITIES
AND CORRESPONDING INTEREST AND DIVIDEND INCOME
The
average balance of the amortized cost for securities available for sale
increased $24.4 million, or 2.2%, from $1.1 billion in 2006. The yield on
average securities available for sale was 5.05% for 2007 compared to 4.86% in
2006. The increase in yield on securities available for sale resulted from the
increasing rate environment.
The
average balance of securities held to maturity increased from $115.6 million in
2006 to $144.5 million in 2007. At December 31, 2007, securities held to
maturity were comprised primarily of tax-exempt municipal securities. The yield
on securities held to maturity increased from 6.11% in 2006 to 6.16% in 2007
from higher yields for tax-exempt securities purchased during 2007. Investments
in FRB and FHLB stock decreased to $34.0 million in 2007 from $39.4 million in
2006. This decrease was driven primarily by a decrease in the
investment in FHLB resulting from a decrease in the Company’s borrowing capacity
at FHLB. The yield from investments in FRB and FHLB Banks increased from 5.26%
in 2006 to 7.22% in 2007.
DEPOSITS
Average
interest bearing deposits increased $219.3 million during 2007 compared to 2006.
The increase resulted primarily from increases in time deposits and money market
deposits, partially offset by a decrease in savings deposits. Average
time deposits increased $140.6 million or 9.2% during 2007 when compared to
2006. The increase in average time deposits resulted primarily from increases in
municipal and negotiated rate time deposits. Average money market
deposits increased $120.2 million or 22.1% during 2007 when compared to 2006.
The increase in average money market deposits resulted primarily from an
increase in personal money market deposits. While the average balance
of NOW accounts remained relatively stable, the average balance of savings
accounts decreased $47.2 million or 8.9% during 2007 when compared to 2006. The
decrease in savings accounts was driven primarily from municipal customers
shifting their funds into higher paying money market and time deposits in
2007. The average balance of demand deposits increased $25.4 million,
or 4.1%, from $614.1 million in 2006 to $639.4 million in 2007. Solid growth in
demand deposits was driven principally by increases in accounts from retail
customers.
The rate
paid on average interest-bearing deposits increased from 2.87% during 2006 to
3.26% in 2007. The increase in rate on interest-bearing deposits was driven
primarily by pricing increases from money market accounts and time deposits.
These deposit products are more sensitive to interest rate changes. The pricing
increases for these products resulted from increases in short-term rates by the
FRB during 2006 combined with competitive pricing from market competitors. The
increases by the FRB in 2006 were partially offset by several rate decreases
toward the end of 2007. The rates paid for NOW accounts increased
from 0.74% in 2006 to 0.84% in 2007, while rates paid for savings deposits
increased from 0.86% in 2006 to 0.89% in 2007.
BORROWINGS
Average
short-term borrowings decreased $51.1 million to $280.2 million in
2007. The average rate paid on short-term borrowings decreased from
4.66% in 2006 to 4.62% in 2007, which was primarily driven by the Federal
Reserve Bank decreasing the Fed Funds target rate (which directly impacts
short-term borrowing rates) 100 bp in 2007. Average long-term debt
decreased from $415.0 million in 2006 to $384.0 million in 2007.
NONINTEREST
INCOME
Noninterest
income for the year ended December 31, 2007 was $59.7 million, up $11.1 million
or 22.8% from $48.6 million for the same period in 2006. Fees from
service charges on deposit accounts and ATM and debit cards collectively
increased $6.3 million as the Company focused on enhancing fee income through
various initiatives. Retirement plan administration fees for the year
ended December 31, 2007 increased $0.8 million, compared with the same period in
2006, as a result of our growing client base. Trust administration
income increased $0.9 million for the year ended December 31, 2007, compared
with the same period in 2006. This increase stems from market
appreciation of existing accounts and an increase in customer accounts resulting
from successful business. Net securities gains for the year ended
December 31, 2007 were $2.1 million, compared with net securities losses of $0.9
million for the year ended December 31, 2006. Excluding the effect of
these securities transactions, noninterest income increased $8.1 million, or
16.3%, for the year ended December 31, 2007, compared with the same period in
2006.
NONINTEREST EXPENSE
Noninterest
expense for the year ended December 31, 2007 was $122.5 million, down slightly
from $123.0 million for the same period in 2006. Office expenses, such as
supplies and postage, occupancy, equipment and data processing and
communications charges remained consistent at approximately $35.6 million for
the years ended December 31, 2007 and December 31, 2006. Salaries and
employee benefits decreased $3.4 million, or 5.3%, for the year ended December
31, 2007 compared with the same period in 2006. This decrease was due
primarily to a reduction in the amount of incentive compensation paid, number of
employees, and pension expenses incurred in 2007. Professional fees
and outside services increased $1.4 million for the year ended December 31,
2007, compared with the same period in 2006, due primarily to fees and costs
related to the aforementioned noninterest income initiatives. Other
operating expense for the year ended December 31, 2007 increased $1.3 million
compared with the same period in 2006, primarily due to flood-related insurance
recoveries in 2006.
|
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
|
Interest
rate risk is the most significant market risk affecting the
Company. Other types of market risk, such as foreign currency
exchange rate risk and commodity price risk, do not arise in the normal course
of the Company’s business activities or are immaterial to the results of
operations.
Interest
rate risk is defined as an exposure to a movement in interest rates that could
have an adverse effect on the Company’s net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than earning
assets. When interest-bearing liabilities mature or reprice more
quickly than earning assets in a given period, a significant increase in market
rates of interest could adversely affect net interest income. Similarly, when
earning assets mature or reprice more quickly than interest-bearing liabilities,
falling interest rates could result in a decrease in net interest
income.
In an
attempt to manage the Company’s exposure to changes in interest rates,
management monitors the Company’s interest rate risk. Management’s
asset/liability committee (ALCO) meets monthly to review the Company’s interest
rate risk position and profitability, and to recommend strategies for
consideration by the Board of Directors. Management also reviews loan
and deposit pricing, and the Company’s securities portfolio, formulates
investment and funding strategies, and oversees the timing and implementation of
transactions to assure attainment of the Board’s objectives in the most
effective manner. Notwithstanding the Company’s interest rate risk
management activities, the potential for changing interest rates is an
uncertainty that can have an adverse effect on net income.
In
adjusting the Company’s asset/liability position, the Board and management
attempt to manage the Company’s interest rate risk while minimizing the net
interest margin compression. At times, depending on the level of general
interest rates, the relationship between long and short-term interest rates,
market conditions and competitive factors, the Board and management may
determine to increase the Company’s interest rate risk position somewhat in
order to increase its net interest margin. The Company’s results of operations
and net portfolio values remain vulnerable to changes in interest rates and
fluctuations in the difference between long and short-term interest
rates.
The
primary tool utilized by ALCO to manage interest rate risk is a balance
sheet/income statement simulation model (interest rate sensitivity analysis).
Information such as principal balance, interest rate, maturity date, cash flows,
next repricing date (if needed), and current rates is uploaded into the model to
create an ending balance sheet. In
addition, ALCO makes certain assumptions regarding prepayment speeds for loans
and leases and mortgage related investment securities along with any optionality
within the deposits and borrowings. The model is first run under an assumption
of a flat rate scenario (i.e. no change in current interest rates) with a static
balance sheet over a 12-month period. Two additional models are run in which a
gradual increase of 200 bp and a gradual decrease of 100 bp takes place over a
12 month period with a static balance sheet. Under these scenarios,
assets subject to prepayments are adjusted to account for faster or slower
prepayment assumptions. Any investment securities or borrowings that have
callable options embedded into them are handled accordingly based on the
interest rate scenario. The resultant changes in net interest income are then
measured against the flat rate scenario.
In the
declining rate scenario, net interest income is projected to decrease slightly
when compared to the forecasted net interest income in the flat rate scenario
through the simulation period. The decrease in net interest income is a result
of earning assets repricing downward, given potential higher prepayments and
lower reinvestment rates, slightly faster than the interest bearing liabilities
that are at or near their floors. In the rising rate scenarios, net
interest income is projected to experience a decline from the flat rate
scenario. The potential impact on earnings is dependent on the ability to lag
deposit repricing. Net interest income for the next twelve months in the
+200/-100 bp scenarios, as described above, is within the internal policy risk
limits of not more than a 7.5% change in net interest income. The following
table
summarizes the percentage change in net interest income
in the rising and declining rate scenarios over a 12-month period from the
forecasted net interest
income in the flat rate scenario using
the December 31, 2008 balance sheet position:
|
Table 10. Interest Rate Sensitivity
Analysis
|
||||
|
Change
in interest rates
|
Percent
change
|
|||
|
(In basis points)
|
in net interest income
|
|||
|
+200
|
(1.20 | %) | ||
|
-100
|
(0.78 | %) | ||
Under the
flat rate scenario with a static balance sheet, net interest income is
anticipated to remain roughly the same as total net interest income for
2008. The Company anticipates that under the current low rate
environment, on a monthly basis, interest income is expected to decrease at a
faster rate than interest expense given the potential higher prepayments and
reinvestment into lower rates as deposit rates are at or near their respective
floors. In order to protect net interest income from anticipated net
interest margin compression, the Company will continue to focus on increasing
earning assets through loan growth and leverage
opportunities. However, if the Company cannot maintain the level of
earning assets at December 31, 2008, the Company would expect net interest
income to decline in 2009.
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
|
Report of Independent Registered Public Accounting
Firm
The Board
of Directors and Stockholders
NBT
Bancorp Inc.:
We have
audited the accompanying consolidated balance sheets of NBT Bancorp Inc. and
subsidiaries (the Company) as of December 31, 2008 and 2007, and the related
consolidated statements of income, changes in stockholders’ equity, cash flows
and comprehensive income for each of the years in the three-year period ended
December 31, 2008. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of NBT Bancorp Inc. and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2008, in conformity with U.S. generally accepted accounting
principles.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, and our report dated February 27, 2009 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting.
/S/ KPMG
LLP
Albany, New York
February
27, 2009
|
Consolidated Balance
Sheets
|
||||||||
|
As of December 31,
|
||||||||
|
(In
thousands, except share and per share data)
|
2008
|
2007
|
||||||
|
Assets
|
||||||||
|
Cash
and due from banks
|
$ | 107,409 | $ | 155,495 | ||||
|
Short-term
interest bearing accounts
|
2,987 | 7,451 | ||||||
|
Securities
available for sale, at fair value
|
1,119,665 | 1,132,230 | ||||||
|
Securities
held to maturity (fair value $141,308 and $149,519)
|
140,209 | 149,111 | ||||||
|
Federal
Reserve and Federal Home Loan Bank stock
|
39,045 | 38,102 | ||||||
|
Loans
and leases
|
3,651,911 | 3,455,851 | ||||||
|
Less
allowance for loan and lease losses
|
58,564 | 54,183 | ||||||
|
Net
loans and leases
|
3,593,347 | 3,401,668 | ||||||
|
Premises
and equipment, net
|
65,241 | 64,042 | ||||||
|
Goodwill
|
114,838 | 103,398 | ||||||
|
Intangible
assets, net
|
23,367 | 10,173 | ||||||
|
Bank
owned life insurance
|
46,030 | 43,614 | ||||||
|
Other
assets
|
83,950 | 96,492 | ||||||
|
Total
assets
|
$ | 5,336,088 | $ | 5,201,776 | ||||
|
Liabilities
|
||||||||
|
Demand
(noninterest bearing)
|
$ | 685,495 | $ | 666,698 | ||||
|
Savings,
NOW, and money market
|
1,885,551 | 1,614,289 | ||||||
|
Time
|
1,352,212 | 1,591,106 | ||||||
|
Total
deposits
|
3,923,258 | 3,872,093 | ||||||
|
Short-term
borrowings
|
206,492 | 368,467 | ||||||
|
Long-term
debt
|
632,209 | 424,887 | ||||||
|
Trust
preferred debentures
|
75,422 | 75,422 | ||||||
|
Other
liabilities
|
66,862 | 63,607 | ||||||
|
Total
liabilities
|
4,904,243 | 4,804,476 | ||||||
|
Stockholders’
equity
|
||||||||
|
Preferred
stock, $0.01 par value; authorized 2,500,000 shares at December 31, 2008
and 2007
|
- | - | ||||||
|
Common
stock, $0.01 par value. Authorized 50,000,000 shares at December 31, 2008
and 2007; issued 36,459,344 and 36,459,421 at December 31, 2008 and 2007,
respectively
|
365 | 365 | ||||||
|
Additional
paid-in-capital
|
276,418 | 273,275 | ||||||
|
Retained
earnings
|
245,340 | 215,031 | ||||||
|
Accumulated
other comprehensive loss
|
(8,204 | ) | (3,575 | ) | ||||
|
Common
stock in treasury, at cost, 3,853,548 and 4,133,328 shares at December 31,
2008 and 2007, respectively
|
(82,074 | ) | (87,796 | ) | ||||
|
Total
stockholders’ equity
|
431,845 | 397,300 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 5,336,088 | $ | 5,201,776 | ||||
See
accompanying notes to consolidated financial statements.
|
Consolidated Statements of Income
|
||||||||||||
|
Years ended
December 31,
|
||||||||||||
|
(In thousands, except per share
data)
|
2008
|
2007
|
2006
|
|||||||||
|
Interest,
fee, and dividend income
|
||||||||||||
|
Interest
and fees on loans and leases
|
$ | 232,155 | $ | 242,497 | $ | 230,042 | ||||||
|
Securities
available for sale
|
54,048 | 54,847 | 51,599 | |||||||||
|
Securities
held to maturity
|
5,588 | 5,898 | 4,730 | |||||||||
|
Other
|
2,623 | 2,875 | 2,471 | |||||||||
|
Total
interest, fee, and dividend income
|
294,414 | 306,117 | 288,842 | |||||||||
|
Interest
expense
|
||||||||||||
|
Deposits
|
76,132 | 106,574 | 87,798 | |||||||||
|
Short-term
borrowings
|
4,847 | 12,943 | 15,448 | |||||||||
|
Long-term
debt
|
22,642 | 16,486 | 17,063 | |||||||||
|
Trust
preferred debentures
|
4,747 | 5,087 | 4,700 | |||||||||
|
Total
interest expense
|
108,368 | 141,090 | 125,009 | |||||||||
|
Net
interest income
|
186,046 | 165,027 | 163,833 | |||||||||
|
Provision
for loan and lease losses
|
27,181 | 30,094 | 9,395 | |||||||||
|
Net
interest income after provision for loan and lease losses
|
158,865 | 134,933 | 154,438 | |||||||||
|
Noninterest
income
|
||||||||||||
|
Service
charges on deposit accounts
|
28,143 | 22,742 | 17,590 | |||||||||
|
Broker/dealer
and insurance revenue
|
8,726 | 4,255 | 3,936 | |||||||||
|
Trust
|
7,278 | 6,514 | 5,629 | |||||||||
|
Net
securities gains (losses)
|
1,535 | 2,113 | (875 | ) | ||||||||
|
Bank
owned life insurance
|
2,416 | 1,831 | 1,629 | |||||||||
|
ATM
and debit card fees
|
8,832 | 8,185 | 7,086 | |||||||||
|
Retirement
plan administration fees
|
6,308 | 6,336 | 5,536 | |||||||||
|
Other
|
8,468 | 7,723 | 8,098 | |||||||||
|
Total
noninterest income
|
71,706 | 59,699 | 48,629 | |||||||||
|
Noninterest
expense
|
||||||||||||
|
Salaries
and employee benefits
|
71,159 | 59,516 | 62,877 | |||||||||
|
Occupancy
|
13,781 | 11,630 | 11,518 | |||||||||
|
Equipment
|
7,539 | 7,422 | 8,332 | |||||||||
|
Data
processing and communications
|
12,694 | 11,400 | 10,454 | |||||||||
|
Professional
fees and outside services
|
10,476 | 9,135 | 7,761 | |||||||||
|
Office
supplies and postage
|
5,346 | 5,120 | 5,330 | |||||||||
|
Amortization
of intangible assets
|
2,105 | 1,645 | 1,649 | |||||||||
|
Loan
collection and other real estate owned
|
2,494 | 1,633 | 1,351 | |||||||||
|
Impairment
on lease residual assets
|
2,000 | - | - | |||||||||
|
Other
|
19,219 | 15,016 | 13,694 | |||||||||
|
Total
noninterest expense
|
146,813 | 122,517 | 122,966 | |||||||||
|
Income
before income tax expense
|
83,758 | 72,115 | 80,101 | |||||||||
|
Income
tax expense
|
25,405 | 21,787 | 24,154 | |||||||||
|
Net
income
|
$ | 58,353 | $ | 50,328 | $ | 55,947 | ||||||
|
Earnings
per share
|
||||||||||||
|
Basic
|
$ | 1.81 | $ | 1.52 | $ | 1.65 | ||||||
|
Diluted
|
1.80 | 1.51 | 1.64 | |||||||||
See
accompanying notes to consolidated financial statements.
|
Consolidated Statements of Changes in
Stockholders’ Equity
|
||||||||||||||||||||||||||||
|
Years
ended December 31,
2008,
2007, and 2006
(In thousands except share and per share
data)
|
Common
stock
|
Additional
paid-in- capital
|
Retained
earnings
|
Unvested
restricted Stock
|
Accumulated
other comprehensive loss
|
Common
stock in treasury
|
Total
|
|||||||||||||||||||||
|
Balance
at December 31, 2005
|
$ | 344 | $ | 219,157 | $ | 163,989 | $ | (457 | ) | $ | (6,477 | ) | $ | (42,613 | ) | $ | 333,943 | |||||||||||
|
Net
income
|
- | - | 55,947 | - | - | - | 55,947 | |||||||||||||||||||||
|
Cash
dividends- $0.76 per share
|
- | - | (26,018 | ) | - | - | - | (26,018 | ) | |||||||||||||||||||
|
Purchase
of 766,004 treasury shares
|
- | - | - | - | - | (17,111 | ) | (17,111 | ) | |||||||||||||||||||
|
Issuance
of 2,058,661 shares of common stock in connection with purchase business
combination
|
21 | 48,604 | - | - | - | - | 48,625 | |||||||||||||||||||||
|
Issuance
of 237,278 incentive stock options in purchase transaction
|
- | 1,955 | - | - | - | - | 1,955 | |||||||||||||||||||||
|
Acquisition
of 2,500 shares of company stock in purchase transaction
|
- | - | - | - | - | (55 | ) | (55 | ) | |||||||||||||||||||
|
Net
issuance of 595,447 shares to employee benefit plans and other stock
plans, including excess tax benefit
|
- | 1,244 | (2,148 | ) | - | - | 12,508 | 11,604 | ||||||||||||||||||||
|
Reclassification
adjustment from the adoption of FAS123R
|
- | (457 | ) | - | 457 | - | - | - | ||||||||||||||||||||
|
Stock-based
compensation expense
|
- | 2,509 | - | - | - | - | 2,509 | |||||||||||||||||||||
|
Net
issuance of 73,515 shares of restricted stock awards
|
- | (1,499 | ) | - | - | - | 1,499 | - | ||||||||||||||||||||
|
Forfeiture
of 2,625 shares of restricted stock
|
- | 15 | - | - | - | (60 | ) | (45 | ) | |||||||||||||||||||
|
Other
comprehensive income
|
- | - | - | - | 84 | - | 84 | |||||||||||||||||||||
|
Adjustment to initially apply SFAS No. 158, net of
tax
|
- | - | - | - | (7,621 | ) | - | (7,621 | ) | |||||||||||||||||||
|
Balance at December 31,
2006
|
$ | 365 | $ | 271,528 | $ | 191,770 | $ | - | $ | (14,014 | ) | $ | (45,832 | ) | $ | 403,817 | ||||||||||||
|
Net
income
|
- | - | 50,328 | - | - | - | 50,328 | |||||||||||||||||||||
|
Cash
dividends - $0.79 per share
|
- | - | (26,226 | ) | - | - | - | (26,226 | ) | |||||||||||||||||||
|
Purchase
of 2,261,267 treasury shares
|
- | - | - | - | - | (48,957 | ) | (48,957 | ) | |||||||||||||||||||
|
Net issuance of
254,929 shares to employee benefit
|
||||||||||||||||||||||||||||
|
plans
and other stock plans, including excess tax benefit
|
- | 383 | (841 | ) | - | - | 5,526 | 5,068 | ||||||||||||||||||||
|
Stock-based
compensation
|
- | 2,831 | - | - | - | - | 2,831 | |||||||||||||||||||||
|
Net
issuance of 76,559 shares of restricted stock awards
|
- | (1,467 | ) | - | - | - | 1,467 | - | ||||||||||||||||||||
|
Other comprehensive income
|
- | - | - | - | 10,439 | - | 10,439 | |||||||||||||||||||||
|
Balance at December 31,
2007
|
$ | 365 | $ | 273,275 | $ | 215,031 | $ | - | $ | (3,575 | ) | $ | (87,796 | ) | $ | 397,300 | ||||||||||||
|
Cumulative
effect adjustment to record liability
for split-dollar life insurance
policies
|
- | - | (1,518 | ) | - | - | - | (1,518 | ) | |||||||||||||||||||
|
Net
income
|
- | - | 58,353 | - | - | - | 58,353 | |||||||||||||||||||||
|
Cash
dividends - $0.80 per share
|
- | - | (25,830 | ) | - | - | - | (25,830 | ) | |||||||||||||||||||
|
Purchase
of 272,840 treasury shares
|
- | - | - | - | - | (5,939 | ) | (5,939 | ) | |||||||||||||||||||
|
Net issuance of
536,487 shares to employee benefit
|
||||||||||||||||||||||||||||
|
plans
and other stock plans, including excess tax benefit
|
- | 1,406 | (696 | ) | - | - | 11,249 | 11,959 | ||||||||||||||||||||
|
Stock-based
compensation
|
- | 2,213 | - | - | - | - | 2,213 | |||||||||||||||||||||
|
Net
issuance of 25,200 shares of restricted stock awards
|
- | (566 | ) | - | - | - | 566 | - | ||||||||||||||||||||
|
Forfeiture
of 9,067 shares of restricted stock
|
- | 90 | - | - | - | (154 | ) | (64 | ) | |||||||||||||||||||
|
Other comprehensive loss
|
- | - | - | - | (4,629 | ) | - | (4,629 | ) | |||||||||||||||||||
|
Balance at December 31,
2008
|
$ | 365 | $ | 276,418 | $ | 245,340 | $ | - | $ | (8,204 | ) | $ | (82,074 | ) | $ | 431,845 | ||||||||||||
See
accompanying notes to consolidated financial statements.
|
Consolidated Statements of Cash
Flows
|
||||||||||||
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Operating
activities
|
||||||||||||
|
Net
income
|
$ | 58,353 | $ | 50,328 | $ | 55,947 | ||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||||||
|
Provision
for loan and lease losses
|
27,181 | 30,094 | 9,395 | |||||||||
|
Depreciation
and amortization of premises and equipment
|
5,220 | 5,295 | 6,074 | |||||||||
|
Net
accretion on securities
|
423 | 105 | 178 | |||||||||
|
Amortization
of intangible assets
|
2,105 | 1,645 | 1,649 | |||||||||
|
Stock
based compensation
|
2,213 | 2,831 | 2,509 | |||||||||
|
Bank
owned life insurance income
|
(2,416 | ) | (1,831 | ) | (1,629 | ) | ||||||
|
Deferred
income tax expense
|
4,778 | 2,244 | 9,767 | |||||||||
|
Proceeds
from sale of loans held for sale
|
26,745 | 30,427 | 36,407 | |||||||||
|
Originations
and purchases of loans held for sale
|
(27,760 | ) | (31,086 | ) | (33,601 | ) | ||||||
|
Net
gains on sales of loans held for sale
|
(170 | ) | (112 | ) | (85 | ) | ||||||
|
Net
security (gains) losses
|
(1,535 | ) | (2,113 | ) | 875 | |||||||
|
Net
gains on sales of other real estate owned
|
(230 | ) | (442 | ) | (374 | ) | ||||||
|
Impairment
on lease residual assets
|
2,000 | - | - | |||||||||
|
Net
gain on sale of branch
|
- | - | (470 | ) | ||||||||
|
Net
decrease (increase) in other assets
|
194 | (8,393 | ) | (18,800 | ) | |||||||
|
Net
(decrease) increase in other liabilities
|
(9,775 | ) | 6,848 | (2,325 | ) | |||||||
|
Net
cash provided by operating activities
|
87,326 | 85,840 | 65,517 | |||||||||
|
Investing
activities
|
||||||||||||
|
Net
cash paid for sale of branch
|
- | - | (2,307 | ) | ||||||||
|
Net
cash used in CNB Bancorp, Inc. merger
|
- | - | (21,223 | ) | ||||||||
|
Net
cash used in Mang Insurance Agency, LLC acquisition
|
(26,233 | ) | - | - | ||||||||
|
Securities
available for sale:
|
||||||||||||
|
Proceeds
from maturities, calls, and principal paydowns
|
413,560 | 233,312 | 217,232 | |||||||||
|
Proceeds
from sales
|
6,800 | 55,758 | 42,292 | |||||||||
|
Purchases
|
(392,957 | ) | (303,465 | ) | (265,052 | ) | ||||||
|
Securities
held to maturity:
|
||||||||||||
|
Proceeds
from maturities, calls, and principal paydowns
|
91,309 | 70,234 | 45,990 | |||||||||
|
Purchases
|
(82,525 | ) | (83,186 | ) | (80,485 | ) | ||||||
|
Net
increase in loans
|
(220,700 | ) | (70,061 | ) | (211,280 | ) | ||||||
|
Net
(increase) decrease in Federal Reserve and FHLB stock
|
(943 | ) | 710 | 1,447 | ||||||||
|
Purchases
of premises and equipment, net
|
(6,039 | ) | (2,355 | ) | (4,176 | ) | ||||||
|
Proceeds
from sales of other real estate owned
|
1,150 | 1,408 | 1,028 | |||||||||
|
Net
cash used in investing activities
|
(216,578 | ) | (97,645 | ) | (276,534 | ) | ||||||
|
Financing
activities
|
||||||||||||
|
Net
increase in deposits
|
51,165 | 75,855 | 307,033 | |||||||||
|
Net
(decrease) increase in short-term borrowings
|
(161,975 | ) | 23,059 | (99,569 | ) | |||||||
|
Proceeds
from issuance of long-term debt
|
340,027 | 150,000 | 95,000 | |||||||||
|
Repayments
of long-term debt
|
(132,705 | ) | (142,841 | ) | (114,157 | ) | ||||||
|
Proceeds
from the issuance of trust preferred debentures
|
- | - | 51,547 | |||||||||
|
Excess
tax benefit from exercise of stock options
|
1,406 | 715 | 466 | |||||||||
|
Proceeds
from the issuance of shares to employee benefit plans and other stock
plans
|
10,553 | 4,353 | 10,131 | |||||||||
|
Purchases
of treasury stock
|
(5,939 | ) | (48,957 | ) | (17,111 | ) | ||||||
|
Cash
dividends and payments for fractional shares
|
(25,830 | ) | (26,226 | ) | (26,018 | ) | ||||||
|
Net
cash provided by financing activities
|
76,702 | 35,958 | 207,322 | |||||||||
|
Net
(decrease) increase in cash and cash equivalents
|
(52,550 | ) | 24,153 | (3,695 | ) | |||||||
|
Cash
and cash equivalents at beginning of year
|
162,946 | 138,793 | 142,488 | |||||||||
|
Cash
and cash equivalents at end of year
|
$ | 110,396 | $ | 162,946 | $ | 138,793 | ||||||
|
Supplemental
disclosure of cash flow information
|
||||||||||||
|
Cash paid during the year
for:
|
2008
|
2007
|
2006
|
|||||||||
|
Interest
|
$ | 113,597 | $ | 138,791 | $ | 121,447 | ||||||
|
Income
taxes
|
17,081 | 18,007 | 19,914 | |||||||||
|
Noncash
investing activities:
|
||||||||||||
|
Loans
transferred to other real estate owned
|
$ | 1,025 | $ | 1,137 | $ | 778 | ||||||
|
Dispositions:
|
||||||||||||
|
Fair
value of assets sold
|
$ | - | $ | - | $ | 3,453 | ||||||
|
Fair
value of liabilities transferred
|
- | - | 5,760 | |||||||||
|
Acquisitions:
|
||||||||||||
|
Fair
value of assets acquired
|
$ | 30,062 | $ | - | $ | 422,097 | ||||||
|
Goodwill
and identifiable intangible assets recognized in purchase
combination
|
27,107 | - | 65,637 | |||||||||
|
Fair
value of liabilities assumed
|
3,829 | - | 360,648 | |||||||||
|
Fair
value of equity issued in purchase combination
|
- | - | 50,525 | |||||||||
See
accompanying notes to consolidated financial statements.
|
Consolidated Statements of Comprehensive Income
|
||||||||||||
|
As of December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Net
income
|
$ | 58,353 | $ | 50,328 | $ | 55,947 | ||||||
|
Other
comprehensive (loss) income, net of tax
|
||||||||||||
|
Unrealized
net holding gains (losses) arising during the year (pre-tax amounts of
$15,143, $19,347, and $(737)
|
9,138 | 11,618 | (442 | ) | ||||||||
|
Reclassification
adjustment for net (gains) losses related to
securities available for sale included in net income (pre-tax
amounts of $(1,535), $(2,113), and $875)
|
(921 | ) | (1,270 | ) | 526 | |||||||
|
Pension
and other benefits:
|
||||||||||||
|
Amortization
of prior service cost and actuarial gains (pre-tax amounts of $378, $481
and $0)
|
227 | 288 | - | |||||||||
|
Decrease
in unrecognized actuarial amounts (pre-tax amounts of $(21,087), $(326)
and $0)
|
(13,073 | ) | (197 | ) | - | |||||||
|
Total
other comprehensive (loss) income
|
(4,629 | ) | 10,439 | 84 | ||||||||
|
Comprehensive
income
|
$ | 53,724 | $ | 60,767 | $ | 56,031 | ||||||
See
accompanying notes to consolidated financial statements.
NBT
BANCORP INC. AND SUBSIDIARIES:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
|
(1) SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
The
accounting and reporting policies of NBT Bancorp Inc. (Bancorp) and its
subsidiaries, NBT Bank, N.A. (NBT Bank), NBT Holdings, Inc., and NBT Financial
Services, Inc., conform, in all material respects, to accounting principles
generally accepted in the United States of America (GAAP) and to general
practices within the banking industry. Collectively, Bancorp and its
subsidiaries are referred to herein as “the Company.”
The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Estimates
associated with the allowance for loan losses, other real estate owned (“OREO”),
income taxes, pension expense, fair values of lease residual assets, fair values
of financial instruments and status of contingencies, and other-than-temporary
impairment on investments are particularly susceptible to material change in the
near term. In connection with the determination of the allowance for
loan and lease losses and the valuation of other real estate owned, management
obtains appraisals for properties.
The
following is a description of significant policies and practices:
CONSOLIDATION
The
accompanying consolidated financial statements include the accounts of Bancorp
and its wholly owned subsidiaries mentioned above. All material
intercompany transactions have been eliminated in consolidation. Amounts
previously reported in the consolidated financial statements are reclassified
whenever necessary to conform to the current year’s presentation. In the “Parent
Company Financial Information,” the investment in subsidiaries is carried under
the equity method of accounting.
The
Company determines whether it has a controlling financial interest in an entity
by first evaluating whether the entity is a voting interest entity or a variable
interest entity under GAAP. Voting interest entities are entities in which the
total equity investment at risk is sufficient to enable the entity to finance
itself independently and provides the equity holders with the obligation to
absorb losses, the right to receive residual returns and the right to make
decisions about the entity’s activities. The Company consolidates voting
interest entities in which it has all, or at least a majority of, the voting
interest. As defined in applicable accounting standards, variable interest
entities (VIEs) are entities that lack one or more of the characteristics of a
voting interest entity. A controlling financial interest in an entity is present
when an enterprise has a variable interest, or a combination of variable
interests, that will absorb a majority of the entity’s expected losses, receive
a majority of the entity’s expected residual returns, or both. The enterprise
with a controlling financial interest, known as the primary beneficiary,
consolidates the VIE. The Company’s wholly owned subsidiaries CNBF Capital Trust
I, NBT Statutory Trust I and NBT Statutory Trust II are VIEs for which the
Company is not the primary beneficiary. Accordingly, the accounts of these
entities are not included in the Company’s consolidated financial
statements.
SEGMENT
REPORTING
The
Company’s operations are primarily in the community banking industry and include
the provision of traditional banking services. The Company operates solely in
the geographical regions of central and northern New York and northeastern
Pennsylvania. The Company has identified separate operating segments;
however, these segments did not meet the quantitative thresholds for separate
disclosure.
CASH
EQUIVALENTS
The
Company considers amounts due from correspondent banks, cash items in process of
collection, and institutional money market mutual funds to be cash equivalents
for purposes of the consolidated statements of cash flows.
SECURITIES
The
Company classifies its securities at date of purchase as either available for
sale, held to maturity, or trading. Held to maturity debt securities are those
that the Company has the ability and intent to hold until
maturity. Held to maturity securities are stated at amortized
cost. Securities bought and held for the purpose of selling in the
near term are classified as trading. Trading securities are recorded
at fair value, with net unrealized gains and losses recognized currently in
income. Securities not classified as held to maturity or trading are
classified as available for sale. Available for sale securities are
recorded at fair value. Unrealized holding gains and losses, net of the related
tax effect, on available for sale securities are excluded from earnings and are
reported in stockholders’ equity as a component of accumulated other
comprehensive income or loss. Transfers of securities between
categories are recorded at fair value at the date of transfer. A decline in the
fair value of any available for sale or held to maturity security below cost
that is deemed other-than-temporary is charged to earnings resulting in the
establishment of a new cost basis for the security. Securities with
other-than-temporary impairment are generally placed on non-accrual
status.
Nonmarketable
equity securities are carried at cost, with the exception of investments owned
by NBT Bank’s small business investment company (SBIC) subsidiary, which are
carried at fair value in accordance with SBIC rules.
Premiums
and discounts are amortized or accreted over the life of the related security as
an adjustment to yield using the interest method. Dividend and interest income
are recognized when earned. Realized gains and losses on securities sold are
derived using the specific identification method for determining the cost of
securities sold.
Investments
in Federal Reserve and Federal Home Loan Bank stock are required for membership
in those organizations and are carried at cost since there is no market value
available.
LOANS
AND LEASES
Loans are
recorded at their current unpaid principal balance, net of unearned income and
unamortized loan fees and expenses, which are amortized under the effective
interest method over the estimated lives of the loans. Interest income on loans
is accrued based on the principal amount outstanding.
Lease
receivables primarily represent automobile financing to customers through direct
financing leases and are carried at the aggregate of the lease payments
receivable and the estimated residual values, net of unearned income and net
deferred lease origination fees and costs. Net deferred lease
origination fees and costs are amortized under the effective interest method
over the estimated lives of the leases. The estimated residual value related to
the total lease portfolio is reviewed quarterly, and if there has been a decline
in the estimated fair value of the total residual value that is judged by
management to be other-than-temporary, a loss is recognized. Adjustments related
to such other-than-temporary declines in estimated fair value are recorded in
noninterest expense in the consolidated statements of income.
Loans and
leases are placed on nonaccrual status when timely collection of principal and
interest in accordance with contractual terms is doubtful. Loans and leases are
transferred to nonaccrual status generally when principal or interest payments
become ninety days delinquent, unless the loan is well secured and in the
process of collection, or sooner when management concludes circumstances
indicate that borrowers may be unable to meet contractual principal or interest
payments. When a loan or lease is transferred to a nonaccrual status,
all interest previously accrued in the current period but not collected is
reversed against interest income in that period. Interest accrued in a prior
period and not collected is charged-off against the allowance for loan and lease
losses.
If
ultimate repayment of a nonaccrual loan is expected, any payments received are
applied in accordance with contractual terms. If ultimate repayment of principal
is not expected, any payment received on a nonaccrual loan is applied to
principal until ultimate repayment becomes expected. Nonaccrual loans are
returned to accrual status when they become current as to principal and interest
and demonstrate a period of performance under the contractual terms and, in the
opinion of management, are fully collectible as to principal and
interest. When in the opinion of management the collection of
principal appears unlikely, the loan balance is charged-off in total or in
part.
Commercial
type loans are considered impaired when it is probable that the borrower will
not repay the loan according to the original contractual terms of the loan
agreement, and all loan types are considered impaired if the loan is
restructured in a troubled debt restructuring.
A loan is
considered to be a trouble debt restructured loan (TDR) when the Company grants
a concession to the borrower because of the borrower’s financial condition that
it would not otherwise consider. Such concessions include the reduction of
interest rates, forgiveness of principal or interest, or other modifications at
interest rates that are less than the current market rate for new obligations
with similar risk. TDR loans that are in compliance with their modified terms
and that yield a market rate may be removed from the TDR status after a period
of performance.
ALLOWANCE
FOR LOAN AND LEASE LOSSES
The
allowance for loan and lease losses is the amount which, in the opinion of
management, is necessary to absorb probable losses inherent in the loan and
lease portfolio. The allowance is determined based upon numerous considerations,
including local economic conditions, the growth and composition of the loan
portfolio with respect to the mix between the various
types of loans and their related risk characteristics, a review of the value of
collateral supporting the loans, comprehensive reviews of the loan portfolio by
the independent loan review staff and management, as well as consideration of
volume and trends of delinquencies, nonperforming loans, and loan charge-offs.
As a result of the test of adequacy, required additions to the allowance for
loan and lease losses are made periodically by charges to the provision for loan
and lease losses.
The
allowance for loan and lease losses related to impaired loans is based on
discounted cash flows using the loan’s initial effective interest rate or the
fair value of the collateral for certain loans where repayment of the loan is
expected to be provided solely by the underlying collateral (collateral
dependent loans). The Company’s impaired loans are generally collateral
dependent. The Company considers the estimated cost to sell, on a discounted
basis, when determining the fair value of collateral in the measurement of
impairment if those costs are expected to reduce the cash flows available to
repay or otherwise satisfy the loans.
Management
believes that the allowance for loan and lease losses is
adequate. While management uses available information to recognize
loan and lease losses, future additions to the allowance for loan and lease
losses may be necessary based on changes in economic conditions or changes in
the values of properties securing loans in the process of foreclosure. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Company’s allowance for loan and lease losses.
Such agencies may require the Company to recognize additions to the allowance
for loan and lease losses based on their judgments about information available
to them at the time of their examination which may not be currently available to
management.
PREMISES
AND EQUIPMENT
Premises
and equipment are stated at cost, less accumulated
depreciation. Depreciation of premises and equipment is determined
using the straight-line method over the estimated useful lives of the respective
assets. Expenditures for maintenance, repairs, and minor replacements are
charged to expense as incurred.
OTHER
REAL ESTATE OWNED
Other
real estate owned (OREO) consists of properties acquired through foreclosure or
by acceptance of a deed in lieu of foreclosure. These assets are recorded at the
lower of fair value of the asset acquired less estimated costs to sell or “cost”
(defined as the fair value at initial foreclosure). At the time of foreclosure,
or when foreclosure occurs in-substance, the excess, if any, of the loan over
the fair market value of the assets received, less estimated selling costs, is
charged to the allowance for loan and lease losses and any subsequent valuation
write-downs are charged to other expense. Operating costs associated with the
properties are charged to expense as incurred. Gains on the sale of OREO are
included in income when title has passed and the sale has met the minimum down
payment requirements prescribed by GAAP.
GOODWILL
AND OTHER INTANGIBLE ASSETS
Goodwill
and intangible assets that have indefinite useful lives are not amortized, but
are tested at least annually for impairment. Intangible assets that have finite
useful lives continue to be amortized over their useful lives. Core
deposit intangibles at the Company are generally amortized over 7 to 25 years
using the straight-line methods for all periods presented. Covenants
not to compete are amortized on a straight-line basis. Customer lists
are amortized using an accelerated method.
When
facts and circumstances indicate potential impairment of amortizable intangible
assets, the Company evaluates the recoverability of the asset carrying value,
using estimates of undiscounted future cash flows over the remaining asset life.
Any impairment loss is measured by the excess of carrying value over fair value.
Goodwill impairment tests are performed on an annual basis or when events or
circumstances dictate. In these tests, the fair values of each reporting unit,
or segment, is compared to the carrying amount of that reporting unit in order
to determine if impairment is indicated. If so, the implied fair value of the
reporting unit’s goodwill is compared to its carrying amount and the impairment
loss is measured by the excess of the carrying value over fair
value.
TREASURY
STOCK
Treasury
stock acquisitions are recorded at cost. Subsequent sales of treasury stock are
recorded on an average cost basis. Gains on the sale of treasury stock are
credited to additional paid-in-capital. Losses on the sale of treasury stock are
charged to additional paid-in-capital to the extent of previous gains, otherwise
charged to retained earnings.
INCOME
TAXES
Income
taxes are accounted for under the asset and liability method. The Company files
a consolidated tax return on the accrual basis. Deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company
recognizes interest accrued and penalties related to unrecognized tax benefits
in income tax expense.
STOCK-BASED
COMPENSATION
The fair
value of stock-based awards is determined on the date of grant, and is
recognized as compensation expense over the vesting period of the
awards.
STANDBY
LETTERS OF CREDIT
Standby
letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. Under the standby letters of
credit, the Company is required to make payments to the beneficiary of the
letters of credit upon request by the beneficiary contingent upon the customer's
failure to perform under the terms of the underlying contract with the
beneficiary. Standby letters of credit typically have one year
expirations with an option to renew upon annual review. The Company
typically receives a fee for these transactions. The fair value of
stand-by letters of credit is recorded upon inception.
LOAN
SALES AND LOAN SERVICING
The
Company originates and services residential mortgage loans for consumers and
sells 15-year, 20-year and 30-year residential real estate mortgages in the
secondary market, while retaining servicing rights on the sold
loans. Loan sales are recorded when the sales are
funded. Mortgage servicing rights are recorded at fair value upon
sale of the loan.
REPURCHASE
AGREEMENTS
Repurchase
agreements are accounted for as secured financing transactions since the Company
maintains effective control over the transferred securities and the transfer
meets the other criteria for such accounting. Obligations to
repurchase securities sold are reflected as a liability in the Consolidated
Balance Sheets. The securities underlying the agreements are
delivered to a custodial account for the benefit of the dealer or bank with whom
each transaction is executed. The dealers or banks, who may sell,
loan or otherwise dispose of such securities to other parties in the normal
course of their operations, agree to resell to the Company the same securities
at the maturities of the agreements.
EARNINGS
PER SHARE
Basic
earnings per share (EPS) excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity (such as the Company’s
dilutive stock options and restricted stock).
OTHER
FINANCIAL INSTRUMENTS
The
Company is a party to certain other financial instruments with off-balance-sheet
risk such as commitments to extend credit, unused lines of credit, as well as
certain mortgage loans sold to investors with recourse. The Company’s policy is
to record such instruments when funded.
COMPREHENSIVE
INCOME
At the
Company, comprehensive income represents net income plus other comprehensive
income (loss), which consists primarily of the net change in unrealized gains or
losses on securities available for sale for the period and changes in the funded
status of employee benefit plans. Accumulated other comprehensive (loss) income
represents the net unrealized gains or losses on securities available for sale
and the previously unrecognized portion of the funded status of employee benefit
plans, net of income taxes, as of the consolidated balance sheet
dates.
PENSION
COSTS
The
Company maintains a noncontributory, defined benefit pension plan covering
substantially all employees, as well as supplemental employee retirement plans
covering certain executives and a defined benefit postretirement healthcare plan
that covers certain employees. Costs associated with these plans,
based on actuarial computations of current and future benefits for employees,
are charged to current operating expenses.
TRUST
Assets
held by the Company in a fiduciary or agency capacity for its customers are not
included in the accompanying consolidated balance sheets, since such assets are
not assets of the Company. Trust income is recognized on the accrual
method based on contractual rates applied to the balances of trust
accounts.
FAIR
VALUE MEASUREMENTS
The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements” (“SFAS No. 157”), effective January 1,
2008. SFAS No. 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants.
Under SFAS No. 157, fair value measurements are not adjusted for transaction
costs. SFAS No. 157 establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). The three levels of the fair value
hierarchy under SFAS No. 157 are described below:
Level 1 -
Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities;
Level 2
- - Quoted prices for similar assets or liabilities in active markets,
quoted prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substantially the full term of the asset or
liability;
Level 3 -
Prices or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (i.e., supported by little or no
market activity).
A
financial instrument’s level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement.
The types
of instruments valued based on quoted market prices in active markets include
most U.S. government and agency securities, many other sovereign government
obligations, liquid mortgage products, active listed equities and most money
market securities. Such instruments are generally classified within level 1 or
level 2 of the fair value hierarchy. As required by SFAS No. 157, the
Company does not adjust the quoted price for such instruments.
The types
of instruments valued based on quoted prices in markets that are not active,
broker or dealer quotations, or alternative pricing sources with reasonable
levels of price transparency include most investment-grade and high-yield
corporate bonds, less liquid mortgage products, less liquid agency securities,
less liquid listed equities, state, municipal and provincial obligations, and
certain physical commodities. Such instruments are generally classified within
level 2 of the fair value hierarchy.
Level 3
is for positions that are not traded in active markets or are subject to
transfer restrictions, valuations are adjusted to reflect illiquidity and/or
non-transferability, and such adjustments are generally based on available
market evidence. In the absence of such evidence, management’s best estimate
will be used. Management’s best estimate consists of both internal and external
support on certain Level 3 investments. Subsequent to inception, management only
changes level 3 inputs and assumptions when corroborated by evidence such as
transactions in similar instruments, completed or pending third-party
transactions in the underlying investment or comparable entities, subsequent
rounds of financing, recapitalizations and other transactions across the capital
structure, offerings in the equity or debt markets, and changes in financial
ratios or cash flows.
In
accordance with FASB Staff Position No. 157-2, Effective Date of FASB Statement No.
157, the Company has delayed the application of SFAS No. 157 for
nonfinancial assets, such as goodwill and real property held for sale, and
nonfinancial liabilities until January 1, 2009.
In
October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not
Active. The FSP is effective October 10, 2008, and for prior
periods for which financial statements have not been issued. Adoption
did not have a material impact on the Company’s financial position or results of
operations.
RECENT
ACCOUNTING PRONOUNCEMENTS
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued revised
SFAS No. 141, "Business Combinations," (“SFAS No. 141”) or SFAS No.
141(R). SFAS No. 141(R) retains the fundamental requirements of SFAS
No. 141 that the acquisition method of accounting (formerly the purchase method)
be used for all business combinations; that an acquirer be identified for each
business combination; and that intangible assets be identified and recognized
separately from goodwill. SFAS No. 141(R) requires the acquiring
entity in a business combination to recognize the assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. Additionally, SFAS No. 141(R) changes the requirements
for recognizing assets acquired and liabilities assumed arising from
contingencies and recognizing and measuring contingent
consideration. SFAS No. 141(R) also enhances the disclosure
requirements for business combinations. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008 and may not be applied before that date.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51," or SFAS No. 160.
SFAS No. 160 amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements" to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Among other things, SFAS No. 160 clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements and requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the
noncontrolling interest. SFAS No. 160 also amends SFAS No. 128,
"Earnings per Share," so that earnings per share calculations in consolidated
financial statements will continue to be based on amounts attributable to the
parent. SFAS No. 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008 and
is applied prospectively as of the beginning of the fiscal year in which it is
initially applied, except for the presentation and disclosure requirements which
are to be applied retrospectively for all periods presented. SFAS No. 160 is not
expected to have a material impact on our financial condition or results of
operations.
In
February 2008, the FASB issued FASB Staff Position FAS 140-3, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
(“FSP FAS 140-3”). FSP FAS 140-3 was issued to provide guidance on accounting
for a transfer of a financial asset and repurchase financing. FSP FAS 140-3
presumes that an initial transfer of a financial asset and repurchase financing
are considered part of the same arrangement (“linked transaction”) under SFAS
No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. However, if certain criteria are met, the
initial transfer and repurchase financing should not be evaluated as a linked
transaction and should be evaluated separately under SFAS No. 140. FSP FAS 140-3
is effective for financial statements issued for fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. Earlier
application is not permitted. FSP FAS 140-3 should be applied prospectively to
initial transfers and repurchase financings for which the initial transfer is
executed on or after the beginning of the fiscal year for which FSP FAS 140-3 is
effective. The adoption did not have a material impact on the
Company’s financial position or results of operations.
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (“SFAS No. 161”). The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under SFAS
133, Accounting for Derivative Instruments and Hedging Activities; and how
derivative instruments and related hedged items affect its financial position,
financial performance, and cash flows. SFAS No. 161 achieves these
improvements by requiring disclosure of the fair values of derivative
instruments and their gains and losses in a tabular format. It also provides
more information about an entity’s liquidity by requiring disclosure of
derivative features that are credit risk–related. Finally, it requires
cross-referencing within footnotes to enable financial statement users to locate
important information about derivative instruments. It is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. SFAS No.
161 did not have a material impact on our financial condition or results of
operations.
In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS No. 162”). The new standard is intended
to improve financial reporting by identifying a consistent framework, or
hierarchy, for selecting accounting principles to be used in preparing financial
statements that are presented in conformity with GAAP for nongovernmental
entities. The hierarchy under SFAS 162 is as follows: A)
FASB Statements of Financial Accounting Standards and Interpretations, FASB
Statement 133 Implementation Issues, FASB Staff Positions, and American
Institute of Certified Public Accountants (“AICPA”) Accounting Research
Bulletins and Accounting Principles Board Opinions that are not superseded by
actions of the FASB; B) FASB Technical Bulletins and, if cleared by the FASB,
AICPA Industry Audit and Accounting Guides and Statements of Position; C) AICPA
Accounting Standards Executive Committee Practice Bulletins that have been
cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force
(“EITF”), and the Topics discussed in Appendix D of EITF Abstracts (EITF
D-Topics); and D) Implementation guides (Q&As) published by the FASB staff,
AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and
Statements of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the industry. The
Statement was effective November 15, 2008. SFAS No. 162 did not have
a material impact on the Company’s financial condition or results of
operations.
In June
2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating
Securities (“FSP EITF 03-6-1”), which addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting
and, therefore, need to be included in the earnings allocation in computing
earnings per share under the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. FSP EITF
03-6-1 is not expected to have a material impact on the Company’s financial
condition or results of operations.
|
(2) MERGER
AND ACQUISITION ACTIVITY
|
On
September 1, 2008, the Company completed the acquisition of Mang Insurance
Agency, LLC (“Mang”), headquartered in Binghamton, New York. As part
of the acquisition, the Company acquired approximately $15.3 million of
intangible assets and $11.8 million of goodwill, which has been allocated to NBT
Holdings, Inc. for reporting purposes. The results of operations are
included in the consolidated financial statements from the date of acquisition,
September 1, 2008.
|
(3)
EARNINGS PER SHARE
|
The
following is a reconciliation of basic and diluted earnings per share for the
years presented in the consolidated statements of income:
|
Years ended
December 31,
|
||||||||||||||||||||||||||||||||||||
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
|
(In thousands, except per share
data)
|
Net
income
|
Weighted
average shares
|
Per
share amount
|
Net
income
|
Weighted
average shares
|
Per
share amount
|
Net
income
|
Weighted
average shares
|
Per
share amount
|
|||||||||||||||||||||||||||
|
Basic
earnings per share
|
$ | 58,353 | 32,152 | $ | 1.81 | $ | 50,328 | 33,165 | $ | 1.52 | $ | 55,947 | 33,886 | $ | 1.65 | |||||||||||||||||||||
|
Effect
of dilutive securities
|
||||||||||||||||||||||||||||||||||||
|
Stock
based compensation
|
275 | 256 | 320 | |||||||||||||||||||||||||||||||||
|
Diluted
earnings per share
|
$ | 58,353 | 32,427 | $ | 1.80 | $ | 50,328 | 33,421 | $ | 1.51 | $ | 55,947 | 34,206 | $ | 1.64 | |||||||||||||||||||||
There
were approximately 328,000, 628,000, and 356,000 weighted average stock options
for the years ended December 31, 2008, 2007, and 2006, respectively, that were
not considered in the calculation of diluted earnings per share since the stock
options’ exercise prices were greater than the average market price
during these periods.
(4) FEDERAL
RESERVE BANK REQUIREMENT
The
Company is required to maintain reserve balances with the Federal Reserve Bank.
The required average total reserve for NBT Bank for the 14-day maintenance
period ending December 31, 2008 was $26.9 million.
|
(5)
SECURITIES
|
The
amortized cost, estimated fair value, and unrealized gains and losses of
securities available for sale are as follows:
|
(In thousands)
|
Amortized cost
|
Unrealized gains
|
Unrealized losses
|
Estimated fair value
|
||||||||||||
|
December
31, 2008
|
||||||||||||||||
|
U.S.
Treasury
|
$ | 59 | $ | 8 | $ | - | $ | 67 | ||||||||
|
Federal
Agency
|
213,997 | 5,211 | 41 | 219,167 | ||||||||||||
|
State
& municipal
|
126,369 | 2,374 | 770 | 127,973 | ||||||||||||
|
Mortgage-backed
|
351,973 | 8,755 | 99 | 360,629 | ||||||||||||
|
Collateralized
mortgage obligations
|
376,058 | 5,656 | 1,437 | 380,277 | ||||||||||||
|
Corporate
|
20,016 | 769 | - | 20,785 | ||||||||||||
|
Other
securities
|
10,475 | 1,279 | 987 | 10,767 | ||||||||||||
|
Total
securities available for sale
|
$ | 1,098,947 | $ | 24,052 | $ | 3,334 | $ | 1,119,665 | ||||||||
|
December
31, 2007
|
||||||||||||||||
|
U.S.
Treasury
|
$ | 10,042 | $ | 35 | $ | - | $ | 10,077 | ||||||||
|
Federal
Agency
|
322,723 | 4,352 | 28 | 327,047 | ||||||||||||
|
State
& municipal
|
112,647 | 2,122 | 108 | 114,661 | ||||||||||||
|
Mortgage-backed
|
381,585 | 1,195 | 4,473 | 378,307 | ||||||||||||
|
Collateralized
mortgage obligations
|
288,222 | 2,496 | 1,103 | 289,615 | ||||||||||||
|
Corporate
|
1,186 | 27 | - | 1,213 | ||||||||||||
|
Other
securities
|
8,715 | 2,746 | 151 | 11,310 | ||||||||||||
|
Total
securities available for sale
|
$ | 1,125,120 | $ | 12,973 | $ | 5,863 | $ | 1,132,230 | ||||||||
In the
available for sale category at December 31, 2008, federal agency securities were
comprised of Government-Sponsored Enterprise (“GSE”) securities;
mortgaged-backed securities were comprised of GSEs with an amortized cost of
$313.7 million and a fair value of $321.0 million and US Government Agency
securities with an amortized cost of $38.2 million and a fair value of $39.7
million; collateralized mortgage obligations were comprised of GSEs with an
amortized cost of $204.1 million and a fair value of $205.6 million and US
Government Agency securities with an amortized cost of $172.0 million and a fair
value of $174.6 million.
In the
available for sale category at December 31, 2007, federal agency securities were
comprised of GSE securities; mortgaged-backed securities were comprised of GSEs
with an amortized cost of $342.0 million and a fair value of $338.5 million and
US Government Agency securities with an amortized cost of $39.5 million and a
fair value of $39.8 million; collateralized mortgage obligations were comprised
of GSEs with an amortized cost of $179.1 million and a fair value of $180.1
million and US Government Agency securities with an amortized cost of $109.1
million and a fair value of $109.5 million.
Others
securities primarily represent marketable equity securities.
The
following table sets forth information with regard to sales transactions of
securities available for sale:
|
Years ended
December 31
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Proceeds
from sales
|
$ | 6,800 | $ | 55,758 | $ | 42,292 | ||||||
|
Gross
realized gains
|
$ | 1,780 | $ | 2,248 | $ | 618 | ||||||
|
Gross
realized losses
|
(245 | ) | (135 | ) | (1,493 | ) | ||||||
|
Net
securities gains (losses)
|
$ | 1,535 | $ | 2,113 | $ | (875 | ) | |||||
At
December 31, 2008 and 2007, securities available for sale with amortized costs
totaling $891.6 million and $962.9 million, respectively, were pledged to secure
public deposits and for other purposes required or permitted by
law. Additionally, at December 31, 2008, securities available for
sale with an amortized cost of $165.7 million were pledged as collateral for
securities sold under the repurchase agreements.
The
amortized cost, estimated fair value, and unrealized gains and losses of
securities held to maturity are as follows:
|
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
|
(In thousands)
|
cost
|
gains
|
losses
|
fair value
|
||||||||||||
|
December
31, 2008
|
||||||||||||||||
|
Mortgage-backed
|
$ | 2,372 | $ | 95 | $ | - | $ | 2,467 | ||||||||
|
State
& municipal
|
136,259 | 1,048 | 44 | 137,263 | ||||||||||||
|
Other
securities
|
1,578 | - | - | 1,578 | ||||||||||||
|
Total
securities held to maturity
|
$ | 140,209 | $ | 1,143 | $ | 44 | $ | 141,308 | ||||||||
|
December
31, 2007
|
||||||||||||||||
|
Mortgage-backed
|
$ | 2,810 | $ | 99 | $ | - | $ | 2,909 | ||||||||
|
State
& municipal
|
145,458 | 439 | 130 | 145,767 | ||||||||||||
|
Other
securities
|
843 | - | - | 843 | ||||||||||||
|
Total
securities held to maturity
|
$ | 149,111 | $ | 538 | $ | 130 | $ | 149,519 | ||||||||
At
December 31, 2008, all of the mortgaged-backed securities held to maturity were
comprised of US Government Agency securities.
The
following table sets forth information with regard to investment securities with
unrealized losses at December 31, 2008 and 2007, segregated according to the
length of time the securities had been in a continuous unrealized loss
position:
|
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||
|
Security
Type:
|
Fair Value
|
Unrealized losses
|
Fair Value
|
Unrealized losses
|
Fair Value
|
Unrealized losses
|
||||||||||||||||||
|
December
31, 2008
|
||||||||||||||||||||||||
|
U.S.
Treasury
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
|
Federal
agency
|
9,959 | (41 | ) | - | - | 9,959 | (41 | ) | ||||||||||||||||
|
State
& municipal
|
17,024 | (412 | ) | 15,112 | (402 | ) | 32,136 | (814 | ) | |||||||||||||||
|
Mortgage-backed
|
2,105 | (28 | ) | 7,336 | (71 | ) | 9,441 | (99 | ) | |||||||||||||||
|
Collateralized
mortgage obligations
|
46,865 | (1,301 | ) | 15,682 | (136 | ) | 62,547 | (1,437 | ) | |||||||||||||||
|
Other
securities
|
5,276 | (947 | ) | 704 | (40 | ) | 5,980 | (987 | ) | |||||||||||||||
|
Total
securities with unrealized losses
|
$ | 81,229 | $ | (2,729 | ) | $ | 38,834 | $ | (649 | ) | $ | 120,063 | $ | (3,378 | ) | |||||||||
|
December
31, 2007
|
||||||||||||||||||||||||
|
U.S.
Treasury
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
|
Federal
agency
|
- | - | 29,971 | (28 | ) | 29,971 | (28 | ) | ||||||||||||||||
|
State
& municipal
|
5,284 | (31 | ) | 28,141 | (207 | ) | 33,425 | (238 | ) | |||||||||||||||
|
Mortgage-backed
|
666 | (1 | ) | 268,751 | (4,472 | ) | 269,417 | (4,473 | ) | |||||||||||||||
|
Collateralized
mortgage obligations
|
525 | (22 | ) | 65,212 | (1,081 | ) | 65,737 | (1,103 | ) | |||||||||||||||
|
Other
securities
|
613 | (20 | ) | 423 | (131 | ) | 1,036 | (151 | ) | |||||||||||||||
|
Total
securities with unrealized losses
|
$ | 7,088 | $ | (74 | ) | $ | 392,498 | $ | (5,919 | ) | $ | 399,586 | $ | (5,993 | ) | |||||||||
Declines
in the fair value of held-to-maturity and available-for-sale securities below
their cost that are deemed to be other than temporary are reflected in earnings
as realized losses. In estimating other-than-temporary impairment losses,
management considers, among other things, (i) the length of time and the extent
to which the fair value has been less than cost, (ii) the financial condition
and near-term prospects of the issuer, and (iii) the intent and ability of the
Company to retain its investment in the issuer for a period of time sufficient
to allow for any anticipated recovery in fair value.
Management
has the ability and intent to hold the securities classified as held to maturity
until they mature, at which time it is believed the Company will receive full
value for the securities. Furthermore, as of December 31, 2008, management also
had the ability and intent to hold the securities classified as available for
sale for a period of time sufficient for a recovery of cost, which may be until
maturity. The unrealized losses are due to increases in market interest rates
over the yields available at the time the underlying securities were purchased.
The fair value is expected to recover as the bonds approach their maturity date
or repricing date or if market yields for such investments
decline. As of December 31, 2008, management believes the impairments
detailed in the table above are temporary and minimal impairment losses have
been realized in the Company’s consolidated statements of income.
The
following tables set forth information with regard to contractual maturities of
debt securities at December 31, 2008:
|
(In thousands)
|
Amortized cost
|
Estimated fair value
|
||||||
|
Debt
securities classified as available for sale
|
||||||||
|
Within
one year
|
$ | 27,075 | $ | 27,447 | ||||
|
From
one to five years
|
175,125 | 178,107 | ||||||
|
From
five to ten years
|
388,180 | 399,259 | ||||||
|
After
ten years
|
498,092 | 504,085 | ||||||
| $ | 1,088,472 | $ | 1,108,898 | |||||
|
Debt
securities classified as held to maturity
|
||||||||
|
Within
one year
|
$ | 75,141 | $ | 75,192 | ||||
|
From
one to five years
|
34,547 | 34,929 | ||||||
|
From
five to ten years
|
22,530 | 23,075 | ||||||
|
After
ten years
|
7,991 | 8,112 | ||||||
| $ | 140,209 | $ | 141,308 | |||||
Maturities
of mortgage-backed, collateralized mortgage obligations and asset-backed
securities are stated based on their estimated average lives. Actual
maturities may differ from estimated average lives or contractual maturities
because, in certain cases, borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
Except
for U.S. Government securities, there were no holdings, when taken in the
aggregate, of any single issuer that exceeded 10% of consolidated stockholders’
equity at December 31, 2008 and 2007.
(6) LOANS
AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES
A summary
of loans and leases, net of deferred fees and origination costs, by category is
as follows:
|
At December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Residential
real estate mortgages
|
$ | 722,723 | $ | 719,182 | ||||
|
Commercial
|
572,059 | 593,077 | ||||||
|
Commercial
real estate
|
669,720 | 621,820 | ||||||
|
Real
estate construction and development
|
67,859 | 81,350 | ||||||
|
Agricultural
and agricultural real estate mortgages
|
113,566 | 116,190 | ||||||
|
Consumer
|
795,123 | 655,375 | ||||||
|
Home
equity
|
627,603 | 582,731 | ||||||
|
Lease
financing
|
83,258 | 86,126 | ||||||
|
Total
loans and leases
|
$ | 3,651,911 | $ | 3,455,851 | ||||
Included
in the above loans and leases are net deferred loan origination costs totaling
$4.2 million and $3.3 million at December 31, 2008 and December 31, 2007,
respectively. Also included is unearned income of $7.3 million and
$7.4 million at December 31, 2008 and 2007, respectively. Loans held
for sale were $2.2 million and $1.2 million at December 31, 2008 and 2007,
respectively and are included in residential real estate mortgages.
FHLB
advances are collateralized by a blanket lien on the Company’s residential real
estate mortgages.
Changes
in the allowance for loan and lease losses for the three years ended December
31, 2008, are summarized as follows:
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Balance
at January 1
|
$ | 54,183 | $ | 50,587 | $ | 47,455 | ||||||
|
Allowance
from purchase transaction
|
- | - | 2,410 | |||||||||
|
Provision
|
27,181 | 30,094 | 9,395 | |||||||||
|
Recoveries
|
4,192 | 4,745 | 4,699 | |||||||||
|
Charge-offs
|
(26,992 | ) | (31,243 | ) | (13,372 | ) | ||||||
|
Balance
at December 31
|
$ | 58,564 | $ | 54,183 | $ | 50,587 | ||||||
The
following table sets forth information with regard to nonperforming
loans:
|
At December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Loans
in nonaccrual status
|
$ | 24,191 | $ | 29,697 | $ | 13,665 | ||||||
|
Loans
contractually past due 90 days or more and still accruing
interest
|
2,305 | 882 | 1,642 | |||||||||
|
Total
nonperforming loans
|
$ | 26,496 | $ | 30,579 | $ | 15,307 | ||||||
There
were no material commitments to extend further credit to borrowers with
nonperforming loans. Within nonaccrual loans, there are approximately $1.0
million of troubled debt restructured loans at December 31, 2008.
Accumulated
interest on the above nonaccrual loans of approximately $1.2 million, $0.8
million, and $0.7 million would have been recognized as income in 2008, 2007,
and 2006, respectively, had these loans been in accrual
status. Approximately $1.4 million, $1.0 million, and $0.8 million of
interest on the above nonaccrual loans was collected in 2008, 2007, and 2006,
respectively.
Impaired
loans consist primarily of large, nonaccrual commercial, commercial real estate,
agricultural, and agricultural real estate loans. Impaired loans
totaled $11.3 million at December 31, 2008 and $21.5 million at December 31,
2007. At December 31, 2008, $1.7 million of the impaired loans
reviewed in accordance with SFAS No. 114, “Accounting by Creditors for
Impairment of a Loan--an amendment of FASB Statements No. 5 and 15” (“SFAS No.
114”) had a specific reserve allocation of $0.6 million and $9.6 million of the
impaired loans reviewed had no specific reserve allocation. At
December 31, 2007, $12.8 million of the impaired loans reviewed had a specific
reserve allocation of $5.1 million and $8.7 million of the impaired loans
reviewed had no specific reserve allocation.
The
following provides additional information on impaired loans for the periods
presented:
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Average
recorded investment on impaired loans
|
$ | 14,438 | $ | 20,984 | $ | 9,644 | ||||||
|
Interest
income recognized on impaired loans
|
360 | 559 | 384 | |||||||||
|
Cash
basis interest income recognized on impaired loans
|
360 | 559 | 384 | |||||||||
There was
significant disruption and volatility in the financial and capital markets
during the second half of 2008. Turmoil in the mortgage market
adversely impacted both domestic and global markets, and led to a significant
credit and liquidity crisis in many domestic markets. These market
conditions were attributable to a variety of factors, in particular the fallout
associated with subprime mortgage loans (a type of lending we have never
actively pursued). The disruption has been exacerbated by the
continued decline of the real estate and housing market. While we
continue to adhere to prudent underwriting standards, as a lender we may be
adversely impacted by general economic weaknesses and, in particular, a sharp
downturn in the housing market nationally. Decreases in real estate
values could adversely affect the value of property used as collateral for our
loans. Adverse changes in the economy may have a negative effect on
the ability of our borrowers to make timely loan payments, which would have an
adverse impact on our earnings. A further increase in loan
delinquencies would decrease our net interest income and adversely impact our
loan loss experience, causing increases in our provision and allowance for loan
and lease losses.
The
Company recorded an other-than-temporary impairment charge on lease residual
assets totaling $2.0 million during the third quarter of 2008 as a result of a
decline in the fair value of lease residual assets associated with certain
leased vehicles.
(7)
RELATED PARTY TRANSACTIONS
In the
ordinary course of business, the Company has made loans at prevailing rates and
terms to directors, officers, and other related parties. Such loans, in
management’s opinion, do not present more than the normal risk of collectibility
or incorporate other unfavorable features. The aggregate amount of loans
outstanding to qualifying related parties and changes during the years are
summarized as follows:
|
(In thousands)
|
2008
|
2007
|
||||||
|
Balance
at January 1
|
$ | 10,950 | $ | 9,949 | ||||
|
New
loans
|
335 | 2,686 | ||||||
|
Adjustment
due to change in composition of related parties
|
344 | 130 | ||||||
|
Repayments
|
(6,196 | ) | (1,815 | ) | ||||
|
Balance
at December 31
|
$ | 5,433 | $ | 10,950 | ||||
|
(8)
PREMISES AND EQUIPMENT, NET
|
A summary
of premises and equipment follows:
|
December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Land,
buildings, and improvements
|
$ | 88,567 | $ | 85,363 | ||||
|
Equipment
|
68,450 | 65,925 | ||||||
|
Construction
in progress
|
113 | 115 | ||||||
|
Premises
and equipment before accumulated depreciation
|
157,130 | 151,403 | ||||||
|
Accumulated
depreciation
|
91,889 | 87,361 | ||||||
|
Total
premises and equipment
|
$ | 65,241 | $ | 64,042 | ||||
Land,
buildings, and improvements with a carrying value of approximately $3.2 million
and $3.3 million at December 31, 2008 and 2007, respectively, are pledged to
secure long-term borrowings. Buildings and improvements are
depreciated based on useful lives of 15 to 40 years. Equipment is
depreciated based on useful lives of 3 to 10 years.
Rental
expense included in occupancy expense amounted to $4.5 million in 2008, $3.5
million in 2007, and $3.2 million in 2006. The future minimum rental payments
related to noncancelable operating leases with original terms of one year or
more are as follows at December 31, 2008 (in thousands):
|
Future
Minimum Rental Payments
|
||||
|
2009
|
$ | 4,226 | ||
|
2010
|
3,677 | |||
|
2011
|
3,440 | |||
|
2012
|
3,025 | |||
|
2013
|
2,343 | |||
|
Thereafter
|
19,555 | |||
|
Total
|
$ | 36,266 | ||
|
(9)
GOODWILL AND OTHER INTANGIBLE
ASSETS
|
A summary
of goodwill is as follows:
|
(In thousands)
|
||||
|
January
1, 2008
|
103,398 | |||
|
Goodwill
Acquired
|
11,808 | |||
|
Goodwill Adjustments
|
(368 | ) | ||
|
December 31, 2008
|
$ | 114,838 | ||
|
January
1, 2007
|
$ | 103,356 | ||
|
Goodwill Adjustments
|
42 | |||
|
December 31, 2007
|
103,398 | |||
In
September 2008, the Company acquired Mang Insurance Agency, LLC. The
acquisition resulted in increases to goodwill of $11.8 million and other
intangibles of $15.3 million.
The
Company has intangible assets with definite useful lives capitalized on its
consolidated balance sheet in the form of core deposit and other identified
intangible assets. These intangible assets are amortized over their
estimated useful lives, which range primarily from one to twelve
years.
A summary
of core deposit and other intangible assets follows:
|
December 31,
|
||||||||
|
(In
thousands)
|
2008
|
2007
|
||||||
|
Core
deposit intangibles
|
||||||||
|
Gross
carrying amount
|
$ | 10,631 | $ | 12,663 | ||||
|
Less:
accumulated amortization
|
3,469 | 4,387 | ||||||
|
Net
carrying amount
|
7,162 | 8,276 | ||||||
|
Identified
intangible assets
|
||||||||
|
Gross
carrying amount
|
18,194 | 2,895 | ||||||
|
Less:
accumulated amortization
|
1,989 | 998 | ||||||
|
Net
carrying amount
|
16,205 | 1,897 | ||||||
|
Total
intangibles
|
||||||||
|
Gross
carrying amount
|
28,825 | 15,558 | ||||||
|
Less:
accumulated amortization
|
5,458 | 5,385 | ||||||
|
Net
carrying amount
|
$ | 23,367 | $ | 10,173 | ||||
Amortization
expense on intangible assets with definite useful lives totaled $2.1 million for
2008, $1.6 million for 2007 and $1.6 million for 2006. Amortization
expense on intangible assets with definite useful lives is expected to total
$3.2 million for 2009, $3.0 million for 2010, $2.8 million for 2011, $2.6
million for 2012, $2.5 million for 2013 and $7.5 million
thereafter. The Company also has $1.8 million in intangible assets
that will not amortize.
|
(10) DEPOSITS
|
The
following table sets forth the maturity distribution of time deposits at
December 31, 2008 (in thousands):
|
Time deposits
|
||||
|
Within
one year
|
$ | 971,490 | ||
|
After
one but within two years
|
236,742 | |||
|
After
two but within three years
|
59,711 | |||
|
After
three but within four years
|
62,687 | |||
|
After
four but within five years
|
16,872 | |||
|
After
five years
|
4,710 | |||
|
Total
|
$ | 1,352,212 | ||
Time
deposits of $100,000 or more aggregated $428.8 million and $694.3 million at
year end 2008 and 2007, respectively.
|
(11)
SHORT-TERM BORROWINGS
|
Short-term
borrowings totaled $206.5 million and $368.5 million at December 31,
2008 and 2007, respectively, and consist of
Federal funds purchased and securities sold under repurchase agreements, which
generally represent overnight borrowing transactions, and other short-term
borrowings, primarily Federal Home Loan Bank (FHLB)
advances, with original maturities of one year or less. The Company has unused
lines of credit with the FHLB available for short-term financing of
approximately $245 million and $238 million at December 31, 2008 and 2007,
respectively.
Included
in the information provided above, the Company has two lines of credit available
with the FHLB, which are automatically renewed on July 30th of each
year. The first is an overnight line of credit for approximately
$100.0 million with interest based on existing market conditions. The
second is a one-month overnight repricing line of credit for approximately
$100.0 million with interest based on existing market conditions. As of December
31, 2008, there was $10.0 million (included in federal funds purchased)
outstanding on these lines of credit. Borrowings on these lines are
secured by FHLB stock, certain securities and one-to-four family first lien
mortgage
loans. Securities collateralizing repurchase agreements are held
in safekeeping by
nonaffiliated financial institutions and are under the Company’s
control.
Information
related to short-term borrowings is summarized as follows:
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Federal
funds purchased
|
||||||||||||
|
Balance
at year-end
|
$ | 85,000 | $ | 149,250 | $ | 100,000 | ||||||
|
Average
during the year
|
70,445 | 98,872 | 76,550 | |||||||||
|
Maximum
month end balance
|
124,000 | 149,250 | 122,000 | |||||||||
|
Weighted
average rate during the year
|
2.34 | % | 5.14 | % | 5.10 | % | ||||||
|
Weighted
average rate at December 31
|
0.27 | % | 4.38 | % | 5.36 | % | ||||||
|
Securities
sold under repurchase agreements
|
||||||||||||
|
Balance
at year-end
|
$ | 121,242 | $ | 93,967 | $ | 95,158 | ||||||
|
Average
during the year
|
109,692 | 104,876 | 89,934 | |||||||||
|
Maximum
month end balance
|
138,527 | 117,337 | 103,921 | |||||||||
|
Weighted
average rate during the year
|
1.74 | % | 3.62 | % | 3.32 | % | ||||||
|
Weighted
average rate at December 31
|
0.42 | % | 3.56 | % | 3.53 | % | ||||||
|
Other
short-term borrowings
|
||||||||||||
|
Balance
at year-end
|
$ | 250 | $ | 125,250 | $ | 150,250 | ||||||
|
Average
during the year
|
43,693 | 76,414 | 164,771 | |||||||||
|
Maximum
month end balance
|
200,250 | 125,250 | 225,250 | |||||||||
|
Weighted
average rate during the year
|
2.94 | % | 5.32 | % | 5.19 | % | ||||||
|
Weighted
average rate at December 31
|
0.00 | % | 4.54 | % | 5.44 | % | ||||||
See Note
5 for additional information regarding securities pledged as collateral for
securities sold under the repurchase agreements.
|
(12)
LONG-TERM DEBT
|
Long-term
debt consists of obligations having an original maturity at issuance of more
than one year. A majority of the Company’s long-term debt is comprised of FHLB
advances collateralized by the FHLB stock owned by the Company, certain of its
mortgage-backed securities and a blanket lien on its residential real estate
mortgage loans. A summary as of December 31, 2008 and 2007 is as
follows:
|
As of December 31,
2008
|
As of December 31,
2007
|
|||||||||||||||||||||||||||||||
|
Maturity
|
Amount
|
Weighted Average Rate
|
Callable Amount
|
Weighted Average Rate
|
Amount
|
Weighted Average Rate
|
Callable Amount
|
Weighted Average Rate
|
||||||||||||||||||||||||
|
2008
|
- | - | - | - | 130,079 | 4.05 | % | 25,000 | 5.38 | % | ||||||||||||||||||||||
|
2009
|
40,000 | 5.47 | % | 40,000 | 5.47 | % | 40,000 | 5.47 | % | 40,000 | 5.47 | % | ||||||||||||||||||||
|
2010
|
79,000 | 4.07 | % | 29,000 | 3.35 | % | 54,000 | 4.20 | % | 29,000 | 3.35 | % | ||||||||||||||||||||
|
2011
|
89,444 | 3.64 | % | 2,000 | 4.72 | % | 1,921 | 4.92 | % | 1,921 | 4.72 | % | ||||||||||||||||||||
|
2012
|
25,025 | 4.01 | % | - | - | 32 | 0.00 | % | - | - | ||||||||||||||||||||||
|
2013
|
150,000 | 3.79 | % | 125,000 | 3.61 | % | 25,000 | 3.21 | % | 25,000 | 3.21 | % | ||||||||||||||||||||
|
2016
|
70,000 | 4.17 | % | 70,000 | 4.17 | % | 70,000 | 4.17 | % | 70,000 | 4.17 | % | ||||||||||||||||||||
|
2017
|
100,000 | 3.89 | % | 100,000 | 3.89 | % | 100,000 | 3.89 | % | 100,000 | 3.89 | % | ||||||||||||||||||||
|
2018
|
75,000 | 3.61 | % | 75,000 | 3.61 | % | - | - | - | - | ||||||||||||||||||||||
|
2025
|
3,740 | 2.75 | % | - | - | 3,855 | 2.75 | % | - | - | ||||||||||||||||||||||
| $ | 632,209 | $ | 441,000 | $ | 424,887 | $ | 290,921 | |||||||||||||||||||||||||
|
(13) TRUST PREFERRED
DEBENTURES
|
The
Company has issued a total of $75.4 million of junior subordinated deferrable
interest debentures to three wholly owned Delaware statutory business trusts,
CNBF Capital Trust I (“CNBF Trust I”), NBT Statutory Trust I (“NBT Trust I”) and
NBT Statutory Trust II (“NBT Trust II”) collectively referred to as the
(“Trusts”). The Trusts are considered variable interest entities for which the
Company is not the primary beneficiary. Accordingly, the accounts of the Trusts
are not included in the Company’s consolidated financial statements. See Note 1
— Summary of Significant Accounting Policies for additional information about
the Company’s consolidation policy. Details of the Company’s transactions with
these trusts are presented below.
CNBF Trust I
In June 1999, CNBF Trust I issued
$18.0 million of floating rate (three-month
LIBOR plus 275 basis points) trust preferred securities, which represent
beneficial interests in the assets of the trust. The trust preferred securities
will mature on August 31,
2029 and are redeemable
with the approval of the Federal Reserve Board in whole or in part at the option
of the Company at any time after September 1, 2009 and in whole at any time upon the
occurrence of certain events affecting their tax or regulatory capital
treatment. Distributions on the trust preferred securities are payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year.
CNBF Trust I also issued $0.7 million of common equity securities to the
Company. The proceeds of the offering of the trust preferred securities and
common equity securities were used to purchase $18.7 million of floating rate (three-month LIBOR plus
275 basis points) junior subordinated deferrable interest debentures
issued by the Company, which have terms substantially similar to the trust
preferred securities.
NBT
Trust I
In
November 2005, NBT Trust I issued $5.0 million of fixed rate (at 6.30%) trust
preferred securities, which represent beneficial interests in the assets of the
trust. After 5 years, the rate converts to a floating rate (three-month LIBOR plus 140 basis points). The trust preferred
securities will mature on December 1, 2035 and are redeemable with the approval
of the Federal Reserve Board in whole or in part at the option of the
Corporation at any time after December 1, 2010 and in whole at any time upon the
occurrence of certain events affecting their tax or regulatory capital
treatment. Distributions on the trust preferred securities are payable quarterly
in arrears on March 15, June 15, September 15 and December 15 of each year. NBT
Trust I also issued $0.2 million of common equity securities to the Company. The
proceeds of the offering of the trust preferred securities and common equity
securities were used to purchase $5.2 million of fixed rate (at 6.30%) junior
subordinated deferrable interest debentures issued by the Corporation, which
have terms substantially similar to the trust preferred securities.
NBT
Trust II
In
connection with acquisition of CNB, the Company formed NBT Trust II in February
2006 to fund the cash portion of the acquisition as well as to provide
regulatory capital. NBT Trust II issued $50.0 million of fixed rate (at 6.195%)
trust preferred securities, which represent beneficial interests in the assets
of the trust. After 5 years, the rate converts to a floating rate
(three-month LIBOR plus
140 basis points). The trust preferred
securities will mature on March 15, 2036 and are redeemable with the approval of
the Federal Reserve Board in whole or in part at the option of the Corporation
at any time after March 15, 2011 and in whole at any time upon the occurrence of
certain events affecting their tax or regulatory capital treatment.
Distributions on the trust preferred securities are payable quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year. NBT Trust II
also issued $1.5 million of common equity securities to the Company. The
proceeds of the offering of the trust preferred securities and common equity
securities were used to purchase $51.5 million of fixed rate (at 6.195%) junior
subordinated deferrable interest debentures issued by the Corporation, which
have terms substantially similar to the trust preferred securities.
With respect to the Trusts,
the Company has the right
to defer payments of interest on the debentures at any time or from time to time
for a period of up to ten consecutive semi-annual periods with respect to each
deferral period in the case of the debentures issued to the Trusts. Under the
terms of the debentures, in the event that under certain circumstances there is
an event of default under the debentures or the Company has elected to defer
interest on the debentures, the Company may not, with certain exceptions,
declare or pay any dividends or distributions on its capital stock or purchase
or acquire any of its capital stock.
Payments of distributions on the trust
preferred securities and payments on redemption of the trust preferred
securities are guaranteed by the Company on a limited basis. The Company also
entered into an agreement as to expenses and liabilities with the Trusts
pursuant to which it agreed, on a subordinated basis, to pay any costs, expenses
or liabilities of each trust other than those arising under the trust preferred
securities. The obligations of the Company under the junior subordinated
debentures, the related indentures, the trust agreements establishing the
trusts, the guarantees and the agreements as to expenses and liabilities, in the
aggregate, constitute a full and unconditional guarantee by the Company of each
Trust’s obligations under the trust
preferred securities.
Despite
the fact that the accounts of CNBF Trust I, NBT Trust I, and NBT Trust II are
not included in the Company’s consolidated financial statements, the $74 million
of the $75 million in trust preferred securities issued by these subsidiary
trusts are included in the Tier 1 capital of the Company for regulatory capital
purposes as allowed by the Federal Reserve Board (NBT Bank, NA owns $1.0 million of CNBF Trust I
securities).
|
(14)
INCOME TAXES
|
The
significant components of income tax expense attributable to operations
are:
|
Years ended
December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Current
|
||||||||||||
|
Federal
|
$ | 19,156 | $ | 19,020 | $ | 13,655 | ||||||
|
State
|
1,471 | 523 | 732 | |||||||||
| 20,627 | 19,543 | 14,387 | ||||||||||
|
Deferred
|
||||||||||||
|
Federal
|
3,915 | 1,530 | 7,754 | |||||||||
|
State
|
863 | 714 | 2,013 | |||||||||
| 4,778 | 2,244 | 9,767 | ||||||||||
|
Total
income tax expense
|
$ | 25,405 | $ | 21,787 | $ | 24,154 | ||||||
Not
included in the above table are changes in deferred tax assets and liabilities
that were recorded to stockholders’ equity of approximately ($3.9 million), $6.1
million, and ($6.5 million) for 2008, 2007, and 2006, respectively, relating to
unrealized gain (loss) on available for sale securities, tax benefits recognized
with respect to stock options exercised, and tax benefit related to pension
funding.
The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are as follows:
|
December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Deferred
tax assets
|
||||||||
|
Allowance
for loan and lease losses
|
$ | 22,059 | $ | 20,372 | ||||
|
Deferred
compensation
|
4,196 | 4,606 | ||||||
|
Postretirement
benefit obligation
|
1,170 | 1,187 | ||||||
|
Writedowns
on corporate debt securities
|
177 | 465 | ||||||
|
Accrued
liabilities
|
1,186 | 1,534 | ||||||
|
New
York State tax credit and net operating loss carryforward
|
- | 196 | ||||||
|
Stock-based
compensation expense
|
1,962 | 1,377 | ||||||
|
Other
|
943 | 893 | ||||||
|
Total
deferred tax assets
|
31,693 | 30,630 | ||||||
|
Deferred
tax liabilities
|
||||||||
|
Pension
|
16,744 | 14,454 | ||||||
|
Premises
and equipment, primarily due to accelerated depreciation
|
1,803 | 1,817 | ||||||
|
Equipment
leasing
|
26,354 | 23,483 | ||||||
|
Deferred
loan costs
|
1,687 | 1,315 | ||||||
|
Intangible
amortization
|
8,715 | 7,997 | ||||||
|
Other
|
452 | 848 | ||||||
|
Total
deferred tax liabilities
|
55,755 | 49,914 | ||||||
|
Net
deferred tax liability at year-end
|
(24,062 | ) | (19,284 | ) | ||||
|
Net
deferred tax liability at beginning of year
|
(19,284 | ) | (17,040 | ) | ||||
|
Deferred
tax expense
|
$ | 4,778 | $ | 2,244 | ||||
The above
table does not include the recorded deferred tax liability of $8.2 million as of
December 31, 2008 and the deferred tax liability of $2.8 million as of December
31, 2007 related to the net unrealized holding gain/loss in the
available-for-sale securities portfolio. The table also excludes
deferred tax assets of $13.6 million and $5.2 million related to pension and
postretirement benefit funding as of December 31, 2008 and December 31, 2007,
respectively. The changes in these deferred assets are recorded
directly in stockholders’ equity.
Realization
of deferred tax assets is dependent upon the generation of future taxable income
or the existence of sufficient taxable income within the available carryback
period. A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax asset will not be
realized. Based on available evidence, gross deferred tax assets will
ultimately be realized and a valuation allowance was not deemed necessary at
December 31, 2008 and 2007.
The
Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” on January 1, 2007 with no
material impact to the financial statements.
A
reconciliation of the beginning and ending balance of gross unrecognized tax
benefits is as follows:
|
December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Balance
at January 1
|
$ | 2,515 | $ | 2,563 | ||||
|
Additions
based on tax positions related to the current year
|
- | 86 | ||||||
|
Additions
for tax positions of prior years
|
65 | 258 | ||||||
|
Reduction
for tax positions of prior years
|
(368 | ) | (392 | ) | ||||
|
Balance
at December 31
|
$ | 2,212 | $ | 2,515 | ||||
Approximately
$1.8 million of the total amount of unrecognized tax benefits at December 31,
2008 and 2007 would impact the annual effective tax rate, if
recognized. The Company is currently under examination by New York
State for tax years 2000 through 2004. It is likely that the
examination phase of some of these audits will conclude in 2009, and it is
reasonably possible a reduction in the unrecognized tax benefits may occur;
however, quantification of an estimated range cannot be made at this
time. The Company is no longer subject to U.S. Federal examination by
tax authorities for years prior to 2007.
The
Company recognizes interest accrued and penalties related to unrecognized tax
benefits in income tax expense. The total amount of accrued interest
at December 31, 2008 and December 31, 2007 was approximately $0.6 million and
$0.4 million (less the associated tax benefit), respectively. Net
interest impacting the Company’s 2008 and 2007 tax expense was $0.2 million and
$0.1 million, respectively.
The
following is a reconciliation of the provision for income taxes to the amount
computed by applying the applicable Federal statutory rate of 35% to income
before taxes:
|
Years ended
December 31
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Federal
income tax at statutory rate
|
$ | 29,315 | $ | 25,229 | $ | 28,035 | ||||||
|
Tax
exempt income
|
(3,847 | ) | (3,596 | ) | (3,164 | ) | ||||||
|
Net
increase in CSV of life insurance
|
(1,473 | ) | (915 | ) | (869 | ) | ||||||
|
State
taxes, net of federal tax benefit
|
1,517 | 804 | 1,785 | |||||||||
|
Other,
net
|
(107 | ) | 265 | (1,633 | ) | |||||||
|
Income
tax expense
|
$ | 25,405 | $ | 21,787 | $ | 24,154 | ||||||
|
(15) STOCKHOLDERS’
EQUITY
|
Certain
restrictions exist regarding the ability of the subsidiary bank to transfer
funds to the Company in the form of cash dividends. The approval of the Office
of Comptroller of the Currency (OCC) is required to pay dividends when a bank
fails to meet certain minimum regulatory capital standards or when such
dividends are in excess of a subsidiary bank’s earnings retained in the current
year plus retained net profits for the preceding two years (as defined in the
regulations). At December 31, 2008, approximately $46.6 million of
the total stockholders’ equity of the Bank was available for payment of
dividends to the Company without approval by the OCC. The Bank’s ability to pay
dividends also is subject to the Bank being in compliance with regulatory
capital requirements. The Bank is currently in compliance with these
requirements. Under the State of Delaware Business Corporation Law, the Company
may declare and pay dividends either out of accumulated net retained earnings or
capital surplus.
In
October 2004, the Company adopted a Stockholder Rights Plan (Plan) designed to
ensure that any potential acquirer of the Company negotiate with the board of
directors and that all Company stockholders are treated equitably in the event
of a takeover attempt. At that time, the Company paid a dividend of one
Preferred Share Purchase Right (Right) for each outstanding share of common
stock of the Company. Similar rights are attached to each share of the Company’s
common stock issued after November 16, 2004. Under the Plan, the Rights will not
be exercisable until a person or group acquires beneficial ownership of 15% or
more of the Company’s outstanding common stock or begins a tender or exchange
offer for 15% or more of the Company’s outstanding common stock. Additionally,
until the occurrence of such an event, the Rights are not severable from the
Company’s common stock and, therefore, the Rights will be transferred upon the
transfer of shares of the Company’s common stock. Upon the occurrence of such
events, each Right entitles the holder to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock, no par value, and $0.01 stated
value per share of the Company at a price of $70.
The Plan
also provides that upon the occurrence of certain specified events, the holders
of Rights will be entitled to acquire additional equity interests, in the
Company or in the acquiring entity, such interests having a market value of two
times the Right’s exercise price of $70. The Rights, which expire October 24,
2014, are redeemable in whole, but not in part, at the Company’s option prior to
the time they are exercisable, for a price of $0.001 per Right.
Components
of accumulated other comprehensive loss are:
|
As
of December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Unrecognized
prior service cost and net actuarial loss on pension plans
|
$ | (20,692 | ) | $ | (7,846 | ) | ||
|
Unrealized net holding gains on available for sale
securities
|
12,488 | 4,271 | ||||||
|
Accumulated other comprehensive
loss
|
$ | (8,204 | ) | $ | (3,575 | ) | ||
|
(16) REGULATORY
CAPITAL REQUIREMENTS
|
Bancorp
and NBT Bank are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, NBT Bank
must meet specific capital guidelines that involve quantitative measures of NBT
Bank’s assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The capital amounts and classifications
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative
measures established by regulation to ensure capital adequacy require the
Company and NBT Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 Capital to risk-weighted assets, and of Tier 1
capital to average assets. As of December 31, 2008 and 2007, the Company and NBT
Bank meet all capital adequacy requirements to which they were
subject.
Under
their prompt corrective action regulations, regulatory authorities are required
to take certain supervisory actions (and may take additional discretionary
actions) with respect to an undercapitalized institution. Such actions could
have a direct material effect on an institution’s financial
statements. The regulations establish a framework for the
classification of banks into five categories: well capitalized,
adequately capitalized, under capitalized, significantly under capitalized, and
critically under capitalized. As of December 31, 2008, the most
recent notification from NBT Bank’s regulators categorized NBT Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized NBT Bank must maintain
minimum total risk-based, Tier 1 risk-based, and Tier 1 capital to average asset
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed NBT Bank’s
category.
The
Company and NBT Bank’s actual capital amounts and ratios are presented as
follows:
|
Actual
|
Regulatory ratio
requirements
|
|||||||||||||||
|
(Dollars in thousands)
|
Amount
|
Ratio
|
Minimum
capital adequacy
|
For
classification as well
capitalized
|
||||||||||||
|
As
of December 31, 2008
|
||||||||||||||||
|
Total
capital (to risk weighted assets):
|
||||||||||||||||
|
Company
combined
|
$ | 421,829 | 11.00 | % | 8.00 | % | 10.00 | % | ||||||||
|
NBT
Bank
|
408,069 | 10.64 | % | 8.00 | % | 10.00 | % | |||||||||
|
Tier
I Capital (to risk weighted assets)
|
||||||||||||||||
|
Company
combined
|
373,783 | 9.75 | % | 4.00 | % | 6.00 | % | |||||||||
|
NBT
Bank
|
359,984 | 9.38 | % | 4.00 | % | 6.00 | % | |||||||||
|
Tier
I Capital (to average assets)
|
||||||||||||||||
|
Company
combined
|
373,783 | 7.17 | % | 4.00 | % | 5.00 | % | |||||||||
|
NBT
Bank
|
359,984 | 6.93 | % | 4.00 | % | 5.00 | % | |||||||||
|
As
of December 31, 2007
|
||||||||||||||||
|
Total
capital (to risk weighted assets):
|
||||||||||||||||
|
Company
combined
|
$ | 405,194 | 11.05 | % | 8.00 | % | 10.00 | % | ||||||||
|
NBT
Bank
|
387,690 | 10.66 | % | 8.00 | % | 10.00 | % | |||||||||
|
Tier
I Capital (to risk weighted assets)
|
||||||||||||||||
|
Company
combined
|
359,241 | 9.79 | % | 4.00 | % | 6.00 | % | |||||||||
|
NBT
Bank
|
342,102 | 9.40 | % | 4.00 | % | 6.00 | % | |||||||||
|
Tier
I Capital (to average assets)
|
||||||||||||||||
|
Company
combined
|
359,241 | 7.14 | % | 4.00 | % | 5.00 | % | |||||||||
|
NBT
Bank
|
342,102 | 6.82 | % | 4.00 | % | 5.00 | % | |||||||||
|
(17)
EMPLOYEE BENEFIT PLANS
|
DEFINED
BENEFIT POSTRETIREMENT PLANS
The
Company has a qualified, noncontributory, defined benefit pension plan covering
substantially all of its employees at December 31, 2008. Benefits paid from the
plan are based on age, years of service, compensation, social security benefits,
and are determined in accordance with defined formulas. The Company’s policy is
to fund the pension plan in accordance with ERISA standards. Assets of the plan
are invested in publicly traded stocks and bonds. Prior to January 1, 2000, the
Company’s plan was a traditional defined benefit plan based on final average
compensation. On January 1, 2000, the plan was converted to a cash
balance plan with grandfathering provisions for existing
participants. In 2006, the Pension Protection Act of 2006 was
enacted, which established certain criteria to ensure that pension plan assets
are sufficient to satisfy future obligations. The law identifies at
risk plans and applies stricter funding requirements to help stabilize at risk
plans. The Company has determined that the law does not materially
affect the Company’s funding obligations with respect to its benefit
plans.
In
addition to the pension plan, the Company also provides supplemental employee
retirement plans to certain current and former executives. These
supplemental employee retirement plans and the defined benefit pension plan are
collectively referred to herein as “Pension Benefits”.
Also, the
Company provides certain health care benefits for retired
employees. Benefits are accrued over the employees’ active service
period. Only employees that were employed by NBT Bank on or before January 1,
2000 are eligible to receive postretirement health care benefits. The
plan is contributory for participating retirees, requiring participants to
absorb certain deductibles and coinsurance amounts with contributions adjusted
annually to reflect cost sharing provisions and benefit limitations called for
in the plan. Employees become eligible for these benefits if they reach normal
retirement age while working for the Company. The Company funds the
cost of postretirement health care as benefits are paid. The Company elected to
recognize the transition obligation on a delayed basis over twenty
years. These postretirement benefits are referred to herein as “Other
Benefits”.
As
discussed in Note 1, the Company adopted SFAS No. 158 effective December 31,
2006. SFAS No. 158 requires an employer to: (1) recognize the
overfunded or underfunded status of defined benefit postretirement plans, which
is measured as the difference between plan assets at fair value and the benefit
obligation, as an asset or liability in its balance sheet; (2) recognize changes
in that funded status in the year in which the changes occur through
comprehensive income, except in year of adoption; and (3) measure the defined
benefit plan assets and obligations as of the date of its year-end balance
sheet. SFAS No. 158 does not change how an employer measures plan
assets and benefit obligations as of the date of its balance sheet or how it
determines the amount of net periodic benefit cost. The adjustment to
accumulated other comprehensive loss for the adoption of SFAS No. 158 was $7.6
million at December 31, 2006.
The
components of accumulated other comprehensive loss, which have not yet been
recognized as components of net periodic benefit cost, related to pensions and
other postretirement benefits, net of tax, at December 31, 2008 are summarized
below. The Company expects that $2.6 million in net actuarial loss
and $0.1 million in prior service cost will be recognized as components of net
periodic benefit cost in 2009.
|
Pension
Benefits
|
Other
Benefits
|
|||||||||||||||
|
(In thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
Transition
asset
|
$ | (23 | ) | $ | (215 | ) | $ | - | $ | - | ||||||
|
Net
actuarial loss
|
31,416 | 11,585 | 2,182 | 2,578 | ||||||||||||
|
Prior service cost (credit)
|
2,208 | 1,329 | (1,480 | ) | (1,683 | ) | ||||||||||
|
Total amounts recognized in accumulated other
comprehensive loss (pre-tax)
|
$ | 33,601 | $ | 12,699 | $ | 702 | $ | 895 | ||||||||
A
December 31 measurement date is used for the pension, supplemental pension and
postretirement benefit plans. The following table sets forth changes
in benefit obligation, changes in plan assets, and the funded status of the
pension plans and other postretirement benefits:
|
Pension
Benefits
|
Other
Benefits
|
|||||||||||||||
|
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
Change
in benefit obligation
|
||||||||||||||||
|
Benefit
obligation at beginning of year
|
$ | 53,325 | $ | 52,903 | $ | 3,978 | $ | 3,839 | ||||||||
|
Service
cost
|
2,193 | 2,100 | 22 | 19 | ||||||||||||
|
Interest
cost
|
3,253 | 2,979 | 218 | 233 | ||||||||||||
|
Plan
participants' contributions
|
- | - | 287 | 303 | ||||||||||||
|
Actuarial
loss (gain)
|
420 | 49 | (240 | ) | 301 | |||||||||||
|
Amendments
|
1,098 | - | - | - | ||||||||||||
|
Benefits
paid
|
(3,523 | ) | (4,617 | ) | (617 | ) | (717 | ) | ||||||||
|
Prior
service cost
|
- | (89 | ) | - | - | |||||||||||
|
Projected
benefit obligation at end of year
|
56,766 | 53,325 | 3,648 | 3,978 | ||||||||||||
|
Change
in plan assets
|
||||||||||||||||
|
Fair
value of plan assets at beginning of year
|
72,714 | 65,544 | - | - | ||||||||||||
|
Actual
(loss) return on plan assets
|
(13,781 | ) | 5,365 | - | - | |||||||||||
|
Employer
contributions
|
5,490 | 6,422 | 330 | 414 | ||||||||||||
|
Plan
participants' contributions
|
- | - | 287 | 303 | ||||||||||||
|
Benefits
paid
|
(3,523 | ) | (4,617 | ) | (617 | ) | (717 | ) | ||||||||
|
Fair
value of plan assets at end of year
|
60,900 | 72,714 | - | - | ||||||||||||
|
Funded
status at year end
|
$ | 4,134 | $ | 19,389 | $ | (3,648 | ) | $ | (3,978 | ) | ||||||
The
funded status of the pension and other postretirement benefit plans has been
recognized as follows in the consolidated balance sheets at December 31, 2008
and December 31, 2007. An asset is recognized for an overfunded plan
and a liability is recognized for an underfunded plan. The
accumulated benefit obligation for pension benefits was $55.9 million and $52.7
million for the years ended 2008 and 2007, respectively. The
accumulated benefit obligation for other postretirement benefits was $3.6
million and $4.0 million for the years ended 2008 and 2007,
respectively.
|
Pension
Benefits
|
Other
Benefits
|
|||||||||||||||
|
(In thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
Other
assets
|
$ | 9,844 | $ | 24,872 | $ | - | $ | - | ||||||||
|
Other liabilities
|
(5,710 | ) | (5,483 | ) | (3,648 | ) | (3,978 | ) | ||||||||
|
Funded status
|
$ | 4,134 | $ | 19,389 | $ | (3,648 | ) | $ | (3,978 | ) | ||||||
The
following assumptions were used to determine the benefit obligation and the net
periodic pension cost for the years indicated:
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Weighted
average assumptions:
|
||||||||||||
|
The
following assumptions were used to determine the benefit
obligation:
|
||||||||||||
|
Discount
rate
|
6.30 | % | 6.30 | % | 5.80 | % | ||||||
|
Expected
long-term return on plan assets
|
8.00 | % | 8.50 | % | 8.50 | % | ||||||
|
Rate
of compensation increase
|
3.00 | % | 3.00 | % | 3.09 | % | ||||||
|
The
following assumptions were used to determine net periodic pension
cost:
|
||||||||||||
|
Discount
rate
|
6.30 | % | 5.80 | % | 5.50 | % | ||||||
|
Expected
long-term return on plan assets
|
8.50 | % | 8.50 | % | 8.50 | % | ||||||
|
Rate
of compensation increase
|
3.00 | % | 3.00 | % | 3.75 | % | ||||||
Net
periodic benefit cost and other amounts recognized in other comprehensive income
for the years ended December 31 included the following components:
|
Pension Benefits
|
Other Benefits
|
|||||||||||||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||
|
Components
of net periodic benefit cost
|
||||||||||||||||||||||||
|
Service
cost
|
$ | 2,193 | $ | 2,100 | $ | 2,019 | $ | 22 | $ | 19 | $ | 3 | ||||||||||||
|
Interest
cost
|
3,253 | 2,979 | 2,776 | 218 | 233 | 185 | ||||||||||||||||||
|
Expected
return on plan assets
|
(6,028 | ) | (5,430 | ) | (3,952 | ) | - | - | - | |||||||||||||||
|
Amortization
of initial unrecognized asset
|
(192 | ) | (192 | ) | (192 | ) | - | - | - | |||||||||||||||
|
Amortization
of prior service cost
|
218 | 283 | 236 | (202 | ) | (202 | ) | (266 | ) | |||||||||||||||
|
Amortization
of unrecognized net gain
|
398 | 422 | 838 | 156 | 170 | 160 | ||||||||||||||||||
|
Net
periodic pension (income) cost
|
$ | (158 | ) | $ | 162 | $ | 1,725 | $ | 194 | $ | 220 | $ | 82 | |||||||||||
|
Other
changes in plan assets and benefit obligations recognized in other
comprehensive income (pre-tax)
|
||||||||||||||||||||||||
|
Net
loss (gain)
|
$ | 20,229 | $ | 114 | $ | - | $ | (240 | ) | $ | 302 | $ | - | |||||||||||
|
Prior
service cost
|
1,098 | (90 | ) | - | - | - | - | |||||||||||||||||
|
Amortization
of initial unrecognized asset
|
192 | 192 | - | - | - | - | ||||||||||||||||||
|
Amortization
of prior service cost
|
(218 | ) | (283 | ) | - | 202 | 202 | - | ||||||||||||||||
|
Amortization
of unrecognized net gain
|
(398 | ) | (422 | ) | - | (156 | ) | (170 | ) | - | ||||||||||||||
|
Total
recognized in other comprehensive income (loss)
|
20,903 | (489 | ) | - | (194 | ) | 334 | - | ||||||||||||||||
|
Total
recognized in net periodic benefit cost and other comprehensive
income (pre-tax)
|
$ | 20,745 | $ | (327 | ) | $ | 1,725 | $ | - | $ | 554 | $ | 82 | |||||||||||
The
following table sets forth estimated future benefit payments for the pension
plans and other postretirement benefit plans:
|
Pension Benefits
|
Other Benefits
|
|||||||
|
2009
|
4,320 | 246 | ||||||
|
2010
|
4,376 | 243 | ||||||
|
2011
|
4,402 | 235 | ||||||
|
2012
|
4,481 | 247 | ||||||
|
2013
|
4,604 | 260 | ||||||
|
2014
- 2018
|
26,044 | 1,443 | ||||||
The
Company is not required to make contributions to the plan in 2009.
PLAN
INVESTMENT POLICY AS OF DECEMBER 31, 2008:
The
Company’s key investment objectives in managing its defined benefit plan assets
are to ensure that present and future benefit obligations to all participants
and beneficiaries are met as they become due; to provide a total return that,
over the long-term, maximizes the ratio of the plan assets to liabilities, while
minimizing the present value of required Company contributions, at the
appropriate levels of risk; to meet statutory requirements and regulatory
agencies’ requirements; and to satisfy applicable accounting
standards. The Company periodically evaluates the asset allocations,
funded status, rate of return assumption and contribution strategy for
satisfaction of our investment objectives. Generally, the investment
manager allocates investments as follows: 20-40% of the total portfolio in fixed
income, 40-80% in equities, and 0-20% in cash. Only high-quality bonds should be
included in the portfolio. All issues that are rated lower than A by
Standard and Poor’s should be excluded. Equity securities at December
31, 2008 and 2007 do not include any NBT Bancorp Inc. common stock.
The
following is a summary of the plan’s weighted average asset allocation at
December 31, 2008:
|
(In thousands)
|
Actual Allocation
|
Percentage Allocation
|
||||||
|
Cash
and Cash Equivalents
|
$ | 9,742 | 16.00 | % | ||||
|
Foreign
Equity Mutual Funds
|
$ | 4,228 | 6.95 | % | ||||
|
Equity
Mutual Funds
|
$ | 6,292 | 10.33 | % | ||||
|
US
Government Bonds
|
18,328 | 30.09 | % | |||||
|
Corporate
Bonds
|
3,955 | 6.49 | % | |||||
|
Common
Stock
|
14,881 | 24.44 | % | |||||
|
Preferred
Stock
|
179 | 0.29 | % | |||||
|
Foreign
Equity
|
3,295 | 5.41 | % | |||||
|
Total
|
$ | 60,900 | 100.00 | % | ||||
DETERMINATION
OF ASSUMED RATE OF RETURN
The
expected long-term rate-of-return on assets is 8.5%. This assumption
represents the rate of return on plan assets reflecting the average rate of
earnings expected on the funds invested or to be invested to provide for the
benefits included in the projected benefit obligation. The assumption
has been determined by reflecting expectations regarding future rates of return
for the portfolio considering the asset distribution and related historical
rates of return. The appropriateness of the assumption is reviewed
annually. The portfolio allocation as of December 31, 2008 is as
follows:
|
Percentage Allocation
|
||||
|
Money
Market & Equivalents
|
16.00 | % | ||
|
Taxable
Bonds
|
36.58 | % | ||
|
International
Equities
|
12.36 | % | ||
|
US
Equities
|
35.06 | % | ||
|
Total
|
100.00 | % | ||
For
measurement purposes, the annual rates of increase in the per capita cost of
covered medical and prescription drug benefits for fiscal year 2008 were assumed
to be 8.0 and 11.0 percent, respectively. The rates were assumed to decrease
gradually to 5.0 percent for fiscal year 2014 and remain at that level
thereafter. The rates were assumed to decrease gradually to 5.0
percent for fiscal year 2016 for post-65 medical costs and prescription drug
benefits. The rates were assumed to decrease gradually to 5.0 percent
for fiscal year 2017 for pre-65 medical costs and prescription drug
benefits. Assumed health care cost trend rates have a significant
effect on amounts reported for health care plans. A one-percentage point change
in the health care trend rates would have the following effects as of and for
the year ended December 31, 2008:
|
(In thousands)
|
1-Percentage point increase
|
1-Percentage point decrease
|
||||||
|
Increase
(decrease) on total service and interest cost components
|
$ | 27 | $ | (25 | ) | |||
|
Increase
(decrease) on postretirement accumulated benefit
obligation
|
399 | (366 | ) | |||||
EMPLOYEE
401(K) AND EMPLOYEE STOCK OWNERSHIP PLANS
At
December 31, 2008, the Company maintains a 401(k) and employee stock ownership
plan (the “401k Plan”). The Company contributes to the 401k Plan
based on employees’ contributions out of their annual salary. In
addition, the Company may also make discretionary contributions to the 401k Plan
based on profitability. Participation in the 401k Plan is contingent
upon certain age and service requirements. The recorded expenses
associated with the 401k Plan were $2.7 million in 2008, $1.4 million in 2007,
and $1.4 million in 2006.
OMNIBUS
INCENTIVE PLAN
In April
2008, the Company adopted the NBT Bancorp Inc. 2008 Omnibus Incentive Plan (the
“Plan”). Under the terms of the Plan, options and other stock-based awards are
granted to directors and key employees to increase their direct proprietary
interest in the operations and success of the Company. The Plan
assumes all prior incentive plans and any new stock-based awards are granted
under the terms of the Plan. Under terms of the Plan, stock options
are granted to purchase shares of the Company’s common stock at a price equal to
the fair market value of the common stock on the date of the grant. Options
granted have a vesting period of four years and terminate eight or ten years
from the date of the grant. Shares issued as a result of stock option
exercises are funded from the Company’s treasury stock.
The per
share weighted average fair value of stock options granted during
2008, 2007, and 2006 was $4.41, $6.37, and $5.26,
respectively. The fair value of each award is estimated on the grant date using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in the years ended December
31. Historical information was the primary basis for the selection of
the expected volatility, expected dividend yield and the expected lives of the
options. The risk-free interest rate was selected based upon yields of the U.S.
treasury issues with a term equal to the expected life of the option being
valued:
|
Years ended
December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Dividend
yield
|
2.72%–4.17 | % | 2.98%–4.35 | % | 3.08%–3.52 | % | ||||||
|
Expected
volatility
|
27.73%–29.38 | % | 25.08%–28.01 | % | 28.26%–28.62 | % | ||||||
|
Risk-free
interest rates
|
2.96%–3.62 | % | 3.64%–4.96 | % | 4.36%–5.04 | % | ||||||
|
Expected
life
|
7
years
|
7
years
|
7
years
|
|||||||||
The
following table summarizes information concerning stock options outstanding at
December 31, 2008:
|
Number of Shares
|
Weighted average exercise
price
|
Weighted Average Remaining Contractual Term (in
yrs)
|
Aggregate Intrinsic Value
|
|||||||||||||
|
Outstanding
at December 31, 2007
|
1,878,352 | $ | 20.89 | |||||||||||||
|
Granted
|
316,400 | 21.24 | ||||||||||||||
|
Exercised
|
(547,895 | ) | 19.88 | |||||||||||||
|
Forfeited
|
(37,320 | ) | 22.34 | |||||||||||||
|
Outstanding at December 31,
2008
|
1,609,537 | $ | 21.26 | 6.42 | $ | 10,828,575 | ||||||||||
|
Exercisable at December 31,
2008
|
961,657 | $ | 20.39 | 5.18 | $ | 7,284,331 | ||||||||||
|
Expected to Vest
|
613,598 | $ | 22.54 | 8.21 | $ | 3,544,245 | ||||||||||
The
weighted-average fair market value of stock options granted for the twelve
months ended December 31, 2008, was $4.41 per share. Total stock-based
compensation expense for stock option awards totaled $1.4 million for the year
ended December 31, 2008. The tax benefit recognized on stock-based compensation
expense for stock option awards during 2008 totaled $1.4
million. Cash proceeds, tax benefits and intrinsic value related to
total stock options exercised is as follows:
|
Year
ended
|
||||||||
|
(dollars
in thousands)
|
December 31, 2008
|
December 31, 2007
|
||||||
|
Proceeds
from stock options exercised
|
$ | 10,553 | $ | 4,353 | ||||
|
Tax
benefits related to stock options exercised
|
1,406 | 715 | ||||||
|
Intrinsic
value of stock options exercised
|
3,591 | 1,800 | ||||||
The
Company has outstanding restricted and deferred stock awards granted from
various plans at December 31, 2008. The Company recognized $0.8 million in
stock-based compensation expense related to these stock awards for the year
ended December 31, 2008 and $1.0 million for the year ended December 31,
2007. The tax benefit recognized on restricted and deferred
stock-based compensation expense during 2008 totaled $0.6 million and $0.7
million during 2007. Unrecognized compensation cost related to
restricted stock awards totaled $3.1 million at December 31, 2008 and will be
recognized over 2.9 years on a weighted average basis. Shares issued
are funded from the Company’s treasury stock. The following table
summarizes information for unvested restricted stock awards outstanding as of
December 31, 2008:
|
Number
|
Weighted-Average
|
|||||||
|
of
|
Grant
Date Fair
|
|||||||
|
Shares
|
Value
|
|||||||
|
Unvested Restricted Stock
Awards
|
||||||||
|
Unvested at January 1, 2008
|
144,800 | $ | 22.35 | |||||
|
Forfeited
|
(9,067 | ) | $ | 22.60 | ||||
|
Vested
|
(30,239 | ) | $ | 23.83 | ||||
|
Granted
|
31,648 | $ | 22.38 | |||||
|
Unvested at December 31,
2008
|
137,142 | $ | 24.07 | |||||
The
following table summarizes information for unvested restricted stock units
outstanding as of December 31, 2008:
|
Number
of Shares
|
Weighted-Average
Grant Date Fair Value
|
|||||||
|
Unvested Restricted Stock
Units
|
||||||||
|
Unvested at January 1, 2008
|
- | $ | - | |||||
|
Forfeited
|
- | $ | - | |||||
|
Vested
|
- | $ | - | |||||
|
Granted
|
30,700 | $ | 24.52 | |||||
|
Unvested at December 31,
2008
|
30,700 | $ | 24.52 | |||||
The
Company has 4.3 million securities remaining available to be granted as part of
the Plan at December 31, 2008.
|
(18)
COMMITMENTS AND CONTINGENT
LIABILITIES
|
The
Company’s concentrations of credit risk are reflected in the consolidated
balance sheets. The concentrations of credit risk with standby
letters of credit, unused lines of credit, commitments to originate new loans
and loans sold with recourse generally follow the loan
classifications.
At
December 31, 2008, approximately 60% of the Company’s loans are secured by real
estate located in central and northern New York and northeastern
Pennsylvania. Accordingly, the ultimate collectibility of a
substantial portion of the Company’s portfolio is susceptible to changes in
market conditions of those areas. Management is not aware of any material
concentrations of credit to any industry or individual borrowers.
The
Company is a party to certain financial instruments with off balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, unused lines of credit, standby letters of credit, and as certain
mortgage loans sold to investors with recourse. The Company’s exposure to credit
loss in the event of nonperformance by the other party to the commitments to
extend credit, unused lines of credit, standby letters of credit, and loans sold
with recourse is represented by the contractual amount of those instruments. The
Company uses the same credit standards in making commitments and conditional
obligations as it does for on balance sheet instruments.
The total
amount of loans serviced by the Company for unrelated third parties was
approximately $141.4 million and $125.5 million at December 31, 2008 and 2007,
respectively.
In the
normal course of business there are various outstanding legal proceedings. In
the opinion of management, the aggregate amount involved in such proceedings is
not material to the consolidated balance sheets or results of operations of the
Company.
|
At December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Unused
lines of credit
|
$ | 146,942 | $ | 151,945 | ||||
|
Commitments
to extend credits, primarily variable rate
|
390,678 | 394,842 | ||||||
|
Standby
letters of credit
|
27,631 | 27,545 | ||||||
|
Loans sold with
recourse
|
11,233 | 8,876 | ||||||
The
Company does not issue any guarantees that would require liability-recognition
or disclosure, other than its standby letters of credit.
The
Company guarantees the obligations or performance of customers by issuing
stand-by letters of credit to third parties. These stand-by letters of credit
are frequently issued in support of third party debt, such as corporate debt
issuances, industrial revenue bonds, and municipal securities. The risk involved
in issuing stand-by letters of credit is essentially the same as the credit risk
involved in extending loan facilities to customers, and they are subject to the
same credit origination, portfolio maintenance and management procedures in
effect to monitor other credit and off-balance sheet
products. Typically, these instruments have terms of five years or
less and expire unused; therefore, the total amounts do not necessarily
represent future cash requirements. The fair value of the Company’s
stand-by letters of credit at December 31, 2008 and 2007 was not
significant.
|
(19) PARENT
COMPANY FINANCIAL INFORMATION
|
|
December 31,
|
||||||||
|
(In thousands)
|
2008
|
2007
|
||||||
|
Assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 10,846 | $ | 4,004 | ||||
|
Securities
available for sale, at estimated fair value
|
9,779 | 10,737 | ||||||
|
Investment
in subsidiaries, on equity basis
|
517,541 | 463,470 | ||||||
|
Other
assets
|
40,531 | 27,545 | ||||||
|
Total
assets
|
$ | 578,697 | $ | 505,756 | ||||
|
Liabilities
and Stockholders’ Equity
|
||||||||
|
Total
liabilities
|
$ | 146,852 | $ | 108,456 | ||||
|
Stockholders’
equity
|
431,845 | 397,300 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 578,697 | $ | 505,756 | ||||
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Dividends
from subsidiaries
|
$ | 42,900 | $ | 61,500 | $ | 26,000 | ||||||
|
Management
fee from subsidiaries
|
59,102 | 57,135 | 59,933 | |||||||||
|
Securities
gains
|
1,514 | 67 | - | |||||||||
|
Interest
and other dividend income
|
1,026 | 917 | 951 | |||||||||
|
Total
revenue
|
104,542 | 119,619 | 86,884 | |||||||||
|
Operating
expense
|
65,180 | 57,846 | 60,180 | |||||||||
|
Income
before income tax (benefit) expense and equity in undistributed income of
subsidiaries (excess distributions by subsidiaries over
income)
|
39,362 | 61,773 | 26,704 | |||||||||
|
Income
tax benefit (expense)
|
1,016 | (392 | ) | 301 | ||||||||
|
Equity
in undistributed income of subsidiaries (excess distributions by
subsidiaries over income)
|
17,975 | (11,053 | ) | 28,942 | ||||||||
|
Net
income
|
$ | 58,353 | $ | 50,328 | $ | 55,947 | ||||||
|
Years ended
December 31,
|
||||||||||||
|
(In thousands)
|
2008
|
2007
|
2006
|
|||||||||
|
Operating
activities
|
||||||||||||
|
Net
income
|
$ | 58,353 | $ | 50,328 | $ | 55,947 | ||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||||||
|
Impairment
of available-for-sale securities
|
162 | - | - | |||||||||
|
Stock-based
compensation
|
2,213 | 2,831 | 2,509 | |||||||||
|
(Gain)
loss on sales of available-for-sale securities
|
(1,514 | ) | (68 | ) | 40 | |||||||
|
(Equity
in undistributed income of subsidiaries) excess distributions by
subsidiaries over income
|
(17,975 | ) | 11,053 | (28,942 | ) | |||||||
|
Net
change in other liabilities
|
24,494 | (2,215 | ) | 4,026 | ||||||||
|
Net
change in other assets
|
(24,450 | ) | (2,845 | ) | (13,091 | ) | ||||||
|
Net
cash provided by operating activities
|
41,283 | 59,084 | 20,489 | |||||||||
|
Investing
activities
|
||||||||||||
|
Cash
used in CNB Bancorp, Inc. merger
|
- | - | (39,037 | ) | ||||||||
|
Cash
used in Mang Insurance Agency, LLC acquisition
|
(26,233 | ) | - | - | ||||||||
|
Purchases
of available-for-sale securities
|
(5,934 | ) | (1,500 | ) | (96 | ) | ||||||
|
Sales
and maturities of available-for-sale securities
|
5,660 | 1,159 | 350 | |||||||||
|
(Purchases)
disposals of premises and equipment
|
(445 | ) | 433 | 1,262 | ||||||||
|
Net
cash (provided by) used in investing activities
|
(26,952 | ) | 92 | (37,521 | ) | |||||||
|
Financing
activities
|
||||||||||||
|
Proceeds
from the issuance of shares to employee benefit plans and other stock
plans
|
10,489 | 4,353 | 13,077 | |||||||||
|
Payments
on long-term debt
|
(1,365 | ) | (111 | ) | (104 | ) | ||||||
|
Proceeds
from the issuance of long-term debt
|
13,750 | - | - | |||||||||
|
Proceeds
from the issuance of trust preferred debentures
|
- | - | 51,547 | |||||||||
|
Purchases
of treasury shares
|
(5,939 | ) | (48,957 | ) | (17,111 | ) | ||||||
|
Cash
dividends and payments for fractional shares
|
(25,830 | ) | (26,226 | ) | (26,018 | ) | ||||||
|
Excess
tax benefit from exercise of stock options
|
1,406 | 715 | 466 | |||||||||
|
Net
cash (used in) provided by financing activities
|
(7,489 | ) | (70,226 | ) | 21,857 | |||||||
|
Net
increase (decrease) in cash and cash equivalents
|
6,842 | (11,050 | ) | 4,825 | ||||||||
|
Cash
and cash equivalents at beginning of year
|
4,004 | 15,054 | 10,229 | |||||||||
|
Cash
and cash equivalents at end of year
|
$ | 10,846 | $ | 4,004 | $ | 15,054 | ||||||
A
statement of changes in stockholders’ equity has not been presented since it is
the same as the consolidated statement of changes in stockholders’ equity
previously presented.
|
(20)
FAIR VALUES OF FINANCIAL
INSTRUMENTS
|
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments.
SHORT
TERM INSTRUMENTS
For
short-term instruments, such as cash and cash equivalents, accrued interest
receivable, accrued interest payable, and short term borrowings, carrying value
approximates fair value.
SECURITIES
Fair
values for securities are based on quoted market prices or dealer quotes, where
available. Where quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments. When
necessary, the Company utilizes matrix pricing from third party pricing vendor
to determine fair value pricing. Matrix prices are based on quoted
prices for securities with similar coupons, ratings, and maturities, rather than
on specific bids and offers for the designated security.
LOANS
For
variable rate loans that reprice frequently and have no significant credit risk,
fair values are based on carrying values. The fair values for fixed rate
loans are estimated through discounted cash flow analysis
using interest rates
currently being offered for loans with similar terms and
credit quality. Nonperforming loans are valued based upon recent loss
history for similar loans.
DEPOSITS
The fair
values disclosed for savings, money market, and noninterest bearing accounts
are, by definition, equal to their carrying values at the reporting
date. The fair value of fixed maturity time deposits is estimated
using a discounted cash flow analysis that applies interest rates currently
offered to a schedule of aggregated expected monthly maturities on time
deposits.
LONG-TERM
DEBT
The fair
value of long-term debt has been estimated using discounted cash flow analysis
that applies interest rates currently offered for notes with similar
terms.
COMMITMENTS
TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair
value of commitments to extend credit and standby letters of credit are
estimated using fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present credit
worthiness of the counterparties. Carrying amounts, which are comprised of the
unamortized fee income, are not significant.
TRUST
PREFERRED DEBENTURES
The fair
value of trust preferred debentures has been estimated using a discounted cash
flow analysis.
Estimated
fair values of financial instruments at December 31 are as follows:
|
2008
|
2007
|
|||||||||||||||
|
(In thousands)
|
Carrying amount
|
Estimated fair value
|
Carrying amount
|
Estimated fair value
|
||||||||||||
|
Financial
assets
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 110,396 | $ | 110,396 | $ | 162,946 | $ | 162,946 | ||||||||
|
Securities
available for sale
|
1,119,665 | 1,119,665 | 1,140,114 | 1,140,114 | ||||||||||||
|
Securities
held to maturity
|
140,209 | 141,308 | 149,111 | 149,519 | ||||||||||||
|
Loans
(1)
|
3,651,911 | 3,650,428 | 3,455,851 | 3,376,001 | ||||||||||||
|
Less
allowance for loan losses
|
58,564 | - | 54,183 | - | ||||||||||||
|
Net
loans
|
3,593,347 | 3,650,428 | 3,401,668 | 3,376,001 | ||||||||||||
|
Accrued
interest receivable
|
22,746 | 22,746 | 24,672 | 24,672 | ||||||||||||
|
Financial
liabilities
|
||||||||||||||||
|
Savings,
NOW, and money market
|
$ | 1,885,551 | $ | 1,885,551 | $ | 1,614,289 | $ | 1,614,289 | ||||||||
|
Time
deposits
|
1,352,212 | 1,367,425 | 1,591,106 | 1,590,158 | ||||||||||||
|
Noninterest
bearing
|
685,495 | 685,495 | 666,698 | 666,698 | ||||||||||||
|
Short-term
borrowings
|
206,492 | 206,492 | 368,467 | 368,467 | ||||||||||||
|
Long-term
debt
|
632,209 | 660,246 | 424,887 | 427,847 | ||||||||||||
|
Accrued
interest payable
|
8,709 | 8,709 | 13,938 | 13,938 | ||||||||||||
|
Trust
preferred debentures
|
75,422 | 79,411 | 75,422 | 74,848 | ||||||||||||
1. Lease
receivables, although excluded from the scope of SFAS No. 107, are included in
the estimated fair value amounts at their carrying amounts.
Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company’s entire holdings of a particular financial instrument.
Because no market exists for a significant portion of the Company’s financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair
value estimates are based on existing on and off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has a substantial trust and
investment management operation that contributes net fee income annually. The
trust and investment management operation is not considered a financial
instrument, and its value has not been incorporated into the fair value
estimates. Other significant assets and liabilities include the benefits
resulting from the low-cost funding of deposit liabilities as compared to the
cost of borrowing funds in the market, and premises and equipment. In addition,
the tax ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not been
considered in the estimate of fair value.
The
following table sets forth the Company’s financial assets and liabilities
measured on a recurring basis that were accounted for at fair
value. Assets and liabilities are classified in their entirety based
on the lowest level of input that is significant to the fair value measurement
(in thousands):
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
Significant
Other Observable Inputs (Level
2)
|
Significant
Unobservable Inputs (Level
3)
|
Balance
as of December 31,
2008
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Securities
Available for Sale
|
$ | 8,846 | $ | 1,110,819 | $ | - | $ | 1,119,665 | ||||||||
|
Total
|
$ | 8,846 | $ | 1,110,819 | $ | - | $ | 1,119,665 | ||||||||
Fair
values for securities are based on quoted market prices or dealer quotes, where
available. Where quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments. When
necessary, the Company utilizes matrix pricing from a third party pricing vendor
to determine fair value pricing. Matrix prices are based on quoted
prices for securities with similar coupons, ratings, and maturities, rather than
on specific bids and offers for the designated security.
SFAS No.
157 requires disclosure of assets and liabilities measured and recorded at fair
value on a nonrecurring basis. In accordance with the provisions of
SFAS No. 114, the Company had collateral dependent impaired loans with a
carrying value of approximately $6.2 million which had specific reserves
included in the allowance for loan and lease losses of $0.6 million at December
31, 2008. During the year ended December 31, 2008, the Company
established specific reserves of approximately $1.3 million, which were included
in the provision for loan and lease losses. The Company uses the fair
value of underlying collateral to estimate the specific reserves for collateral
dependent impaired loans. Based on the valuation techniques used, the
fair value measurements for collateral dependent impaired loans are classified
as Level 3.
Simultaneously with the adoption of
SFAS No. 157, the Company adopted SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”), effective January
1, 2008. SFAS No. 159 gives entities the option to measure eligible
financial assets, financial liabilities and Company commitments at fair value
(i.e., the fair value option), on an instrument-by-instrument basis, that are
otherwise not permitted to be accounted for at fair value under other accounting
standards. The election to use the fair value option is available
when an entity first recognizes a financial asset or financial liability or upon
entering into a Company commitment. Subsequent changes in fair value
must be recorded in earnings. Additionally, SFAS No. 159 allows for a
one-time election for existing positions upon adoption, with the transition
adjustment recorded to beginning retained earnings. SFAS No. 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. SFAS No. 159 does not affect
any existing accounting literature that requires certain assets and liabilities
to be carried at fair value and does not eliminate disclosure requirements
included in other accounting standards. As of December 31, 2008, the
Company has not elected the fair value option for any eligible
items.
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL
DISCLOSURE
|
None.
|
ITEM 9A. CONTROLS AND
PROCEDURES
|
As of the end of the period covered by
this Annual Report on Form 10-K, an evaluation was carried out by the Company’s
management, with the participation of its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of the end of the period covered by this report. No changes were
made to the Company’s internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) during the last fiscal
quarter that materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
Management Report on Internal Controls
Over Financial Reporting
The management of NBT Bancorp, Inc. (the
“Company”) is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control over financial
reporting is a process designed under the supervision of the Company’s Chief
Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the
Company’s consolidated financial statements for external purposes in accordance
with generally accepted accounting principles.
As of December 31, 2008, management assessed the effectiveness
of the Company’s internal control over financial reporting based on the criteria
for effective internal control over financial reporting established in “Internal
Control — Integrated Framework,” issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. Based on
the assessment, management determined that the Company maintained effective
internal control over financial reporting as of December 31, 2008, based on those
criteria.
KPMG LLP, the independent registered
public accounting firm that audited the consolidated financial statements of the
Company included in this Annual Report on Form 10-K, has issued a report on the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2008. The report, which expresses
an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2008, is included in this Item under the
heading “Report of Independent Registered Public Accounting
Firm.”
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and
Stockholders of NBT Bancorp Inc.:
We have audited NBT Bancorp, Inc. and subsidiaries’ (the
Company) internal control over financial reporting as of December 31, 2008, based on criteria established in
Internal Control —
Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is
responsible for maintaining effective internal control over financial
reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying
Management’s report
on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2008, based on the criteria established in
Internal Control —
Integrated Framework issued
by COSO.
We have also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of NBT Bancorp Inc. and subsidiaries as of
December 31,
2008 and 2007 and the related consolidated statements
of income, changes in stockholders’ equity, cash flows, and comprehensive income
for each of the years in the three-year period ended December 31, 2008, and our report dated February 27, 2009 expressed an unqualified opinion on
those financial statements.
/s/ KPMG LLP
Albany, NY
February 27, 2009
|
ITEM 9B. OTHER
INFORMATION
|
None.
PART
III
|
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
The
information required by this item is incorporated herein by reference to the
Company’s definitive Proxy Statement for its annual meeting of
shareholders to be held on May 5, 2009 (the “Proxy Statement”), which will be
filed with the Securities and Exchange Commission within 120 days of the
Company’s 2008 fiscal year end.
|
ITEM
11. EXECUTIVE
COMPENSATION
|
The
information required by this item is incorporated herein by reference to the
Proxy Statement which will be filed with the Securities and
Exchange Commission within 120 days of the
Company’s 2008 fiscal year end.
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
The
information required by this item is incorporated herein by reference to the
Proxy Statement which will be filed with the Securities and
Exchange Commission within 120 days of the
Company’s 2008 fiscal year end.
|
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
|
The
information required by this item is incorporated herein by reference to the
Proxy Statement which will be filed with the Securities and
Exchange Commission within 120 days of the
Company’s 2008 fiscal year end.
|
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
|
The
information required by this item is incorporated herein by reference to the
Proxy Statement which will be filed with the Securities and
Exchange Commission within 120 days of the
Company’s 2008 fiscal year end.
PART IV
|
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
|
(a)(1) The
following Consolidated Financial Statements are included in Part II, Item 8
hereof:
Report of
Independent Registered Public Accounting Firm.
Consolidated
Balance Sheets as of December 31, 2008 and 2007.
Consolidated
Statements of Income for each of the three years ended December 31, 2008, 2007
and 2006.
Consolidated
Statements of Changes in Stockholders’ Equity for each of the three years ended
December 31, 2008, 2007 and 2006.
Consolidated
Statements of Cash Flows for each of the three years ended December 31, 2008,
2007 and 2006.
Consolidated
Statements of Comprehensive Income for each of the three years ended December
31, 2008, 2007 and 2006.
Notes to
the Consolidated Financial Statements.
(a)(2) There
are no financial statement schedules that are required to be filed as part of
this form since they are not applicable or the information is included in the
consolidated financial statements.
(a)(3) See
below for all exhibits filed herewith and the Exhibit Index.
|
Certificate
of Incorporation of NBT Bancorp Inc. as amended through July 23,
2001.
|
|
By-laws
of NBT Bancorp Inc. as amended and restated through July 23,
2001.
|
|
3.3
|
Rights
Agreement, dated as of November 15, 2004, between NBT Bancorp Inc. and
Registrar and Transfer Company, as Rights Agent (filed as Exhibit 4.1 to
Registrant's Form 8-K, file number 0-14703, filed on November 18, 2004,
and incorporated by reference
herein).
|
|
3.4
|
Certificate
of Designation of the Series A Junior Participating Preferred
Stock (filed as Exhibit A to Exhibit 4.1 of the Registration’s Form 8-K,
file Number 0-14703, filed on November 18, 2004, and incorporated herein
by reference).
|
|
4.1
|
Specimen
common stock certificate for NBT’s common stock (filed as exhibit 4.1 to
the Registrant’s Amendment No. 1 to Registration Statement on Form S-4
filed on December 27, 2005 and incorporated herein by
reference).
|
|
10.1
|
NBT
Bancorp Inc. 1993 Stock Option Plan (filed as Exhibit 99.1 to Registrant's
Form S-8 Registration Statement, file number 333-71830 filed on October
18, 2001 and incorporated by reference
herein).
|
|
10.2
|
NBT
Bancorp Inc. Non-Employee Director, Divisional Director and Subsidiary
Director Stock Option Plan (filed as Exhibit 99.1 to Registrant's Form S-8
Registration Statement, file number 333-73038 filed on November 9, 2001
and incorporated by reference
herein).
|
|
CNB
Bancorp, Inc. Stock Option Plan.
|
|
NBT
Bancorp Inc. Employee Stock Purchase
Plan.
|
|
NBT
Bancorp Inc. Non-employee Directors Restricted and Deferred Stock
Plan.
|
|
NBT
Bancorp Inc. Performance Share
Plan.
|
|
NBT
Bancorp Inc. 2009 Executive Incentive Compensation
Plan.
|
|
CNB
Bancorp, Inc. Long-Term Incentive Compensation
Plan.
|
|
10.9
|
2006
Non-Executive Restricted Stock Plan (filed as Exhibit 99.1 to Registrant’s
Form S-8 Registration Statement, file number 333-139956, filed on January
12, 2007, and incorporated herein by
reference).
|
|
10.10
|
Supplemental
Retirement Agreement between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe as amended and restated Effective
January 1, 2005. (filed as Exhibit 10.11 to Registrant’s Form
10-K for the year ended December 31, 2005, filed on March 15, 2006 and
incorporated herein by
reference).
|
|
10.11
|
Death
Benefits Agreement between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe made August 22, 1995 (filed as Exhibit
10.12 to Registrant’s Form 10-K for the year ended December 31, 2005,
filed on March 15, 2006 and incorporated herein by
reference).
|
|
Amendment
dated January 28, 2002 to Death Benefits Agreement between NBT Bancorp
Inc., NBT Bank, National Association and Daryl R. Forsythe made August 22,
1995.
|
|
10.13
|
Form
of Employment Agreement between NBT Bancorp Inc. and Martin A. Dietrich as
amended and restated January 1, 2006 (filed as Exhibit 10.1 to
Registrant’s Form 10-Q for the quarterly period ended March 31, 2006,
filed on May 9, 2006 and incorporated herein by
reference).
|
|
10.14
|
Supplemental
Executive Retirement Agreement between NBT Bancorp Inc. and Martin A.
Dietrich as amended and restated January 20, 2006 (filed as
Exhibit 10.16 to Registrant’s Form 10-K for the year ended December 31,
2005, filed on March 15, 2006 and incorporated herein by
reference).
|
|
10.15
|
First
Amendment to Supplemental Executive Retirement Agreement between NBT
Bancorp Inc. and Martin A. Dietrich effective January 1,
2006 (filed as Exhibit 10.2 to Registrant’s Form 10-Q for the
quarterly period ended March 31, 2006, filed on May 9, 2006 and
incorporated herein by
reference).
|
|
Change
in control agreement with Martin A. Dietrich as amended and restated July
23, 2001.
|
|
10.17
|
Form
of Employment Agreement between NBT Bancorp Inc. and Michael J. Chewens as
amended and restated January 1, 2005 (filed as Exhibit 10.18 to
Registrant’s Form 10-K for the year ended December 31, 2005, filed on
March 15, 2006 and incorporated herein by
reference).
|
|
Supplemental
Executive Retirement Agreement between NBT Bancorp Inc. and Michael J.
Chewens made as of July 23, 2001.
|
|
Change
in control agreement with Michael J. Chewens as amended and restated July
23, 2001.
|
|
10.20
|
Form
of Employment Agreement between NBT Bancorp Inc. and David E. Raven as
amended and restated January 1, 2005 (filed as Exhibit 10.21 to
Registrant’s Form 10-K for the year ended December 31, 2005, filed on
March 15, 2006 and incorporated herein by
reference).
|
|
Change
in control agreement with David E. Raven as amended and restated July 23,
2001.
|
|
10.22
|
Supplemental
Executive Retirement Agreement between NBT Bancorp Inc. and David E. Raven
made as of January 1, 2004 (filed as Exhibit 10.35 to Registrant's Form
10-K for the year ended December 31, 2003, filed on March 15, 2004 and
incorporated herein by reference).
|
|
10.23
|
Form
of Employment Agreement between NBT Bancorp Inc. and Jeff Levy made as of
April 23, 2007 (filed as Exhibit 10.27 to Registrant’s Form 10-K for the
year ended December 31, 2007, filed on February 29, 2008 and incorporated
herein by reference).
|
|
10.24
|
Change
in control agreement with Jeff Levy dated April 23, 2007 (filed as Exhibit
10.28 to Registrant’s Form 10-K for the year ended December 31, 2007,
filed on February 29, 2008 and incorporated herein by
reference).
|
|
First
Amendment to the Supplemental Executive Retirement Agreement between NBT
Bancorp Inc. and Michael J. Chewens effective January 1,
2005.
|
|
Second Amendment
to the Supplemental Executive Retirement Agreement between NBT Bancorp
Inc. and Martin A. Dietrich effective January 1,
2005.
|
|
First
Amendment to the Supplemental Executive Retirement Agreement between NBT
Bancorp Inc. and David E. Raven effective January 1,
2005.
|
|
Amendment
dated November 13, 2008 to Form of Employment Agreement as amended between
NBT Bancorp Inc. and Michael J. Chewens restated January 1, 2005 (filed as
Exhibit 10.18 to Registrant’s Form 10-K for the year ended December 31,
2005, filed on March 15, 2006 and incorporated herein by reference) and
Change in Control Agreement with Michael J. Chewens as amended and
restated July 23, 2001 (filed as Exhibit 10.1 to Registrant's Form 10-Q
for the quarterly period ended September 30, 2001, filed on November 14,
2001 and incorporated herein by
reference).
|
|
Amendment
dated November 13, 2008 to Form of Employment Agreement as amended between
NBT Bancorp Inc. and Martin A. Dietrich restated January 1, 2006 (filed as
Exhibit 10.1 to Registrant’s Form 10-Q for the quarterly period ended
March 31, 2006, filed on May 9, 2006 and incorporated herein by reference)
and Change in Control Agreement with Martin A. Dietrich as amended and
restated July 23, 2001 (filed as Exhibit 10.3 to Registrant's Form 10-Q
for the quarterly period ended September 30, 2001, filed on November 14,
2001 and incorporated herein by
reference).
|
|
Amendment
dated November 13, 2008 to Form of Employment Agreement as amended between
NBT Bancorp Inc. and David E. Raven restated January 1, 2005 (filed as
Exhibit 10.21 to Registrant’s Form 10-K for the year ended December 31,
2005, filed on March 15, 2006 and incorporated herein by reference) and
Change in Control Agreement with David E. Raven as amended and restated
July 23, 2001 (filed as Exhibit 10.7 to Registrant's Form 10-Q for the
quarterly period ended September 30, 2001, filed on November 14, 2001 and
incorporated herein by reference).
|
|
10.31
|
Split-Dollar
Agreement between NBT Bancorp Inc., NBT Bank, National Association and
Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.1 to
Registrant’s Form 10-Q for the quarterly period ended September 30, 2008,
filed on November 10, 2008 and incorporated herein by
reference).
|
|
10.32
|
NBT
Bancorp Inc. 2008 Omnibus Incentive Plan (filed as Appendix A of
Registrant's Definitive Proxy Statement on Form 14A filed on March 31,
2008, and incorporated herein by
reference).
|
|
Description
of Arrangement for Directors Fees.
|
|
Consent
of KPMG LLP.
|
|
Certification by the Chief Executive Officer
pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange
Act of 1934.
|
|
Certification by the Chief Financial Officer
pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange
Act of 1934.
|
|
Certification by
the Chief Executive Officer pursuant to 18 U.S.C
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
Certification of
the Chief Financial Officer pursuant to 18 U.S.C
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
(b) Exhibits
to this Form 10-K are attached or incorporated herein by reference as noted
above.
(c) Not
applicable
SIGNATURES
Pursuant to
the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, NBT Bancorp Inc. has duly caused
this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NBT
BANCORP INC. (Registrant)
March 2,
2009
|
/s/
Martin A. Dietrich
|
Martin A.
Dietrich
Chief
Executive 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.
|
/s/
Daryl R. Forsythe
|
Daryl R.
Forsythe
Chairman
and Director
|
Date:
|
March
2, 2009
|
|
/s/
Martin A. Dietrich
|
Martin A.
Dietrich
NBT
Bancorp Inc. President, CEO, and Director (Principal Executive
Officer)
|
Date:
|
March
2, 2009
|
|
/s/
John C. Mitchell
|
John C.
Mitchell, Director
|
Date:
|
March
2, 2009
|
|
/s/
Joseph G. Nasser
|
Joseph G. Nasser,
Director
|
Date:
|
March
2, 2009
|
|
/s/
William C. Gumble
|
William
C. Gumble, Director
|
Date:
|
March
2, 2009
|
|
/s/
Richard Chojnowski
|
Richard
Chojnowski, Director
|
Date:
|
March
2, 2009
|
|
/s/
Michael M. Murphy
|
Michael
M. Murphy, Director
|
Date:
|
March
2, 2009
|
|
/s/
Michael J. Chewens
|
Michael
J. Chewens
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
Date:
|
March
2, 2009
|
|
/s/
William L. Owens
|
William
L. Owens, Director
|
Date:
|
March
2, 2009
|
|
/s/
Joseph A. Santengelo
|
Joseph A.
Santangelo, Director
|
Date:
|
March
2, 2009
|
|
/s/
Robert A. Wadsworth
|
Robert A.
Wadsworth, Director
|
Date:
|
March
2, 2009
|
|
/s/
Patricia T. Civil
|
Patricia
T. Civil, Director
|
Date:
|
March
2, 2009
|
99
Exhibit
3.1
|
STATE
OF DELAWARE
|
|
|
SECRETARY
OF STATE
|
|
|
DIVISION
OF CORPORATIONS
|
|
|
FILED
09:00 AM 07/26/2001
|
|
|
010362912
- 2080266
|
RESTATED
CERTIFICATE
OF INCORPORATION
OF
NBT
BANCORP INC.
Pursuant
to Section 245 of
the
General Corporation Law of the State of Delaware
NBT
Bancorp Inc. (the "Corporation"), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the "GCL"),
in order to restate its Certificate of Incorporation pursuant to Section 245 of
the GCL, certifies as follows:
1.
The name of the Corporation is NBT Bancorp Inc.
2. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on January 3,1986, under the current
name of the Corporation.
3. The
restatement of the Certificate of Incorporation of the Corporation, in the
manner set forth in Item 6, was duly approved and adopted by a majority of the
directors at a regular meeting of the directors duly held on July 23,
2001.
4. The
Restated Certificate of Incorporation only restates and integrates and does not
further amend the provisions of the Certificate of Incorporation of the
Corporation as originally filed and as amended from time to time from its
original filing date to the date of the filing of this Restated Certificate of
Incorporation; and there is no discrepancy between those provisions and the
provisions of this Restated Certificate.
5. This
Restated Certificate of Incorporation was duly adopted in accordance with
Section 245 of the GCL.
6. The
text of the Certificate of Incorporation of the Corporation, as originally filed
and as amended from time to time from its original filing date to the date of
the filing of this Restated Certificate of Incorporation, is hereby restated in
full so as to read in its entirety as follows:
FIRST:
The name of the corporation (hereinafter called the Corporation) is
NBT
BANCORP INC.
SECOND:
The address of the registered office of the Corporation in the State
of Delaware is 2711 Centerville Road Suite 400, Wilmington, New Castle County,
Delaware, 19808; and the name of the registered agent of the Corporation in the
State of Delaware at such address is The Prentice-Hall Corporation System,
Inc.
THIRD: The
nature of the business and the purpose to be conducted and promoted by the
Corporation shall be to conduct any lawful business, to promote any lawful
purpose, and to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The
total number of shares of all classes of capital stock which the Corporation
shall have the authority to issue is Fifty-Two Million Five Hundred Thousand
(52,500,000) shares consisting of Fifty Million (50,000,000) shares of Common
Stock, par value $.01 per share and Two Million Five Hundred Thousand
(2,500,000) shares of Preferred Stock, par value $.01 per share.
FIFTH: The Board of Directors is
authorized, subject to limitations prescribed by law and the provisions of the
Article FOURTH, to provide for the issuance of the shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The
authority of the Board with respect to each series shall include, but not to be
limited to, determination of the following:
(a) The
number of shares constituting that series and the distinctive designation of
that series;
(b) The
dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether
that series shall have voting rights, in addition to the voting rights provided
by law, and, if so, the terms of such voting rights;
(d)
Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provisions for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(e) Whether
or not the shares of that series shall be redeemable, and, if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
2
(f) Whether
that series shall have a sinking fund for the redemption or purchase of shares
of that series, and, if so, the terms and amount of such sinking
fund;
(g) The
right of the shares of that series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of that series;
(h)
Any other relative rights, preferences and limitations of that
series.
Dividends
on outstanding shares of Preferred Stock shall be paid or declared and set apart
for payment, before any dividends shall be paid or declared and set apart for
payment on the Common Stock with respect to the same dividend
period.
If upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the assets available for distribution to holders of shares of
Preferred Stock of all series shall be insufficient to pay such holders the full
preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
SIXTH: The
Corporation is to have perpetual existence.
SEVENTH:
The name and the mailing address of the incorporator are as
follows:
|
NAME
|
MAILING ADDRESS
|
|
Everett
A. Gilmour
|
52
South Broad Street
|
|
Norwich,
New York 13815
|
EIGHTH: For
the management of the business and for the conduct of the affairs of the
Corporation, and in further definition, limitation and regulation of the powers
of the Corporation and of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided:
(a) The
management of the business and the conduct of the affairs of the Corporation
shall be vested in its Board of Directors. The number of directors shall be
fixed by, or in the manner provided in, the By-Laws. Directors need not be
elected by written ballot, unless so required by the By-Laws of the
Corporation.
(b) After
the original or other By-Laws of the Corporation have been adopted, amended, or
repealed, as the case may be, in accordance with the provisions of Section 109
of the General Corporation Law of the State of Delaware, and after the
Corporation has received any payment for any of its stock, the power to adopt,
amend, or repeal the By-Laws of the Corporation may be exercised by the Board of
Directors of the Corporation.
3
NINTH: Meetings
of stockholders may be held within or without the State of Delaware, as the
By-Laws may provide. The books of the Corporation may be kept (subject to any
provision contained in the statute) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
TENTH:
From time to time, any of the
provisions of this Certificate of Incorporation may be amended, altered or
repealed, and other provisions authorized by the laws of the State of Delaware
at the time in force may be added or inserted, all in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights and
powers at any time conferred upon the stockholders and the directors of the
Corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article TENTH. The provisions set forth in Article ELEVENTH
may not be repealed or amended in any respect, unless such action is approved by
the affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of Voting Stock (as defined in Article ELEVENTH) of the
Corporation; provided, however, if there is a Major Stockholder as defined in
Article ELEVENTH, such eighty percent (80%) vote must include the affirmative
vote of at least eighty percent (80%) of the outstanding shares of voting stock
held by shareholders other than the Major Stockholder.
ELEVENTH
(a)
The affirmative vote of the holders of not less than
eighty percent (80%) of the total voting power of all outstanding shares
entitled to vote in the election of any particular Class of Directors (as
defined in Section (e) of this Article ELEVENTH) and held by disinterested
shareholders (as defined below) shall be required for the approval or
authorization of any "Business Combination," as defined and set forth
below:
(1) Any
merger, consolidation or other business reorganization or combination of the
Corporation or any of its subsidiaries with any other corporation that is a
Major Stockholder of the Corporation;
(2) Any
sale, lease or exchange by the Corporation of all or a substantial part of its
assets to or with a Major Stockholder;
(3) Any
issue of any stock or other security of the Corporation or any of its
subsidiaries for cash, assets or securities of a Major Stockholder;
(4)
Any reverse stock split of, or exchange of securities,
cash or other properties or assets for any outstanding securities of the
Corporation or any of its subsidiaries or liquidation or dissolution of the
Corporation or any of its subsidiaries in any such case in which a Major
Stockholder receives any securities, cash or other assets whether or not
different from those received or retained by any holder of securities of the
same class as held by such Major Shareholder.
4
The
affirmative vote required by this Article ELEVENTH shall be in addition to the
vote of the holders of any class or series of stock of the Corporation otherwise
required by law, by any other Article of this Certificate of Incorporation or as
this Certificate of Incorporation may be amended, by any resolution of the Board
of Directors providing for the issuance of a class or series of stock, or by any
agreement between the Corporation and any national securities
exchange.
(b)
For the purpose of this Article
ELEVENTH:
(1) The
term "Major Stockholder" shall mean and include any person, corporation,
partnership, or other person or entity which, together with its "Affiliates" and
"Associates" (as defined at Rule 12b-2 under the Securities Exchange Act of
1934), "beneficially owns" (as hereinafter defined) in the aggregate five
percent (5%) or more of the outstanding shares of Voting Stock, and any
Affiliates or Associates of any such person, corporation, partnership, or other
person or entity.
(2) The
term "Substantial Part" shall mean more than twenty-five percent (25%) of the
fair market value of the total consolidated assets of the Corporation in
question or more than twenty-five percent (25%) of the aggregate par value of
authorized and issued Voting Stock of the Corporation in question, as of the end
of its most recent fiscal quarter ending prior to the time the determination is
being made.
(3) The
term "Voting Stock" shall mean the stock of Corporation entitled to vote in the
election of directors.
(4) The
term "Beneficial Owner" shall mean any person and certain related parties,
directly or indirectly, who own shares or have the right to acquire or vote
shares of the company.
(5) The
term "Disinterested Shareholder" shall mean any holder of voting securities of
the company other then (i) a Major Stockholder if it or any of them has a
financial interest in the transaction being voted on (except for a financial
interest attributable solely to such person's interest as a stockholder of the
company which is identical to the interests of all stockholders of the same
class) and (ii) in the context of a transaction described in (a) (4) above, any
Major Stockholder (whether or not having a financial interest described in
clause (i) of this sentence) if it or any of them has directly or indirectly
proposed the transaction, solicited proxies to vote in favor of the transaction,
financed any such solicitation of proxies or entered into any contract,
arrangement, or understanding with any person for the voting of securities of
the company in favor of the transaction.
5
(c) The
provisions of this Article shall not apply to a Business Combination which is
approved by sixty-six and two-thirds percent (66-2/3%) of those members of the
Board of Directors who were directors prior to the time when the Major
Stockholder became a Major Stockholder. The provisions of this Article shall not
apply to a Business Combination which (i) does not change any stockholder's
percentage ownership in the shares of stock entitled to vote in the election of
directors of any successor of the Corporation from the percentage of the shares
of Voting Stock owned by such stockholder; (ii) provides for the provisions of
this Article without any amendment, change, alteration, or deletion, to apply to
any successor to the Corporation; and (iii) does not transfer all or a
Substantial Part of the Corporation's assets or Voting Stock other than to a
wholly-owned subsidiary of the Corporation.
(d) Nothing
contained in the Article shall be construed to relieve a Major Stockholder from
any fiduciary obligation imposed by law. In addition, nothing contained in this
Article shall prevent any stockholders of the Corporation from objecting to any
Business Combination and from demanding any appraisal rights which may be
available to such stockholder.
(e) The
Board of Directors of the Corporation shall be divided into three classes: Class
1, Class 2 and Class 3, which shall be as nearly equal as possible. Each
Director shall serve for a term ending on the date of the third Annual Meeting
of Shareowners following the Annual Meeting at which such Director was elected;
provided, however, that each initial Director in Class 1 shall hold office until
the Annual Meeting of Shareowners in 1987; each initial Director in Class 2
shall hold office until the Annual Meeting of Shareowners in 1988; and each
initial Director in Class 3 shall hold office until the Annual Meeting of
Shareowners in 1989. Such initial Directors for each of the three Classes of
Directors shall be as follows: Class 1 - John M. Kolbas and Paul O. Stillman;
Class 2 - Donald E. Stone, Darryl R. Gregson and Paul R. Enggaard; Class 3 -
Everett A. Gilmour, J. K. Weinman and Thomas J. Mirabito. In the event of any
increase or decrease in the authorized number of Directors, (1) each Director
then serving as such nevertheless continue as a Director of the Class of which
he is a member until the expiration of his current term, or his earlier
resignation, removal from office or death, and (2) the newly created or
eliminated directorships resulting from such increase or decrease shall be
appointed by the Board of Directors among the three Classes of Directors so as
to maintain such Classes as nearly equal as possible. Notwithstanding any of the
foregoing provisions of this Article Eleventh, each Director shall serve until
his successor is elected and qualified or until his earlier resignation, removal
from office or death.
TWELFTH:
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation of its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, as the same exists or hereafter may be amended, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware General Corporation Law. Any repeal or modification of this paragraph
by the stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or
modification.
6
IN
WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed on its behalf by its duly authorized officer this
twenty-third day of July, 2001.
|
NBT
BANCORP INC.
|
|
|
By:
|
/s/
Michael J. Chewens
|
|
Michael
J. Chewens
|
|
|
Chief
Financial Officer and
Secretary
|
|
7
Exhibit
3.2
BY-LAWS
OF
NBT
BANCORP INC.
(herein
called the "Corporation")
ARTICLE
I. OFFICES
Section
1. Principal Office. The principal office of the Corporation shall be
at:
52 South
Broad Street
Norwich,
New York 13815
or such
other place as the Board of Directors may designate.
Section
2. Other
Offices. In addition to its principal office, the Corporation may have
offices at such other places, within or without the State of Delaware, as the
Board of Directors may from time to time appoint or as the business of the
Corporation may require.
ARTICLE
II. STOCKHOLDERS
Section
1. Annual
Meetings. The annual meeting of the stockholders of the Corporation, for
the purpose of electing directors for the ensuing year and for the transaction
of such other business as may properly come before the meeting, shall be held at
such time as may be specified by the Board of Directors.
Section
2. Special
Meetings. A special meeting of the stockholders may be called at any time
by the Board of Directors or by the Chairman of the Board of Directors, or, if
there is none, by the President, or by the holders of not less than one-half of
all the shares entitled to vote at such meeting.
Section
3. Place of
Meetings. Each annual meeting of the stockholders shall be held at the
principal office of the Corporation, or at such other place, within or without
the State of Delaware, as the Board of Directors may designate in calling such
meeting.
Section
4. Notice of
Meetings. Written notice of each annual and each special meeting of the
stockholders shall be given by or at the direction of the officer or other
person calling the meeting. Such notice shall state the purpose or purposes for
which the meeting is called, the time when and the place where it is to be held,
and such other information as may be required by law. Except as otherwise
required by law, a copy thereof shall be delivered personally, mailed in a
postage prepaid envelope or transmitted electronically or by telegraph, cable or
wireless, not less than ten (10) days nor more than sixty (60) days before such
meeting to each stockholder of record entitled to vote at such meeting; and if
mailed, it shall be directed to such stockholder at his address as it appears on
the stock transfer books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to the address designated in such request. Notwithstanding the foregoing,
a waiver of any notice herein or by law required, if in writing and signed by
the person entitled to such notice, whether before or after the time of the
event for which notice was required to be given, shall be the equivalent of the
giving of such notice. A stockholder who attends shall be deemed to have had
timely and proper notice of the meeting, unless he attends for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Notice of any adjourned or recessed meeting
need not be given if the time and place thereof are announced at the meeting at
which the adjournment or recess is taken, unless the adjournment or recess is
for more than 30 days, or if after the adjournment or recess a new record date
is fixed for the adjourned or recessed meeting.
Section
5. Quorum.
Except as otherwise provided by law, at any meeting of the stockholders of the
Corporation, the presence in person or by proxy of the holders of a majority of
the total number of issued and outstanding shares of Common Stock of the
Corporation shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority in voting power of the stockholders present in
person or represented by proxy and entitled to vote may adjourn the meeting from
time to time and from place to place until a quorum is obtained. At any such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally
called.
Section
6. Organization. At
every meeting of the stockholders, the Chairman of the Board, or failing him the
President, or, in the absence of the Chairman of the Board and the President, a
person chosen by a majority vote of the stockholders present in person or by
proxy and entitled to vote, shall act as Chairman of the meeting. The Secretary,
or an Assistant Secretary, or, in the discretion of the Chairman, any person
designated by him, shall act as a secretary of the meeting.
Section
7. Inspections.
The directors, in advance of any meeting, shall appoint one or more inspectors
of election to act at the meeting or any adjournment thereof. In case any person
who may be appointed as an inspector fails to appear or act, the vacancy may be
filled by appointment made by the directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspector or inspectors shall determine the number
of shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive and count votes, ballots or consents and hear and
determine all challenges and questions arising in connection with the right to
vote. The inspectors shall certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots, and shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
Section
8. Business and Order
of Business. At each meeting of the stockholders such business may be
transacted as may properly be brought before such meeting, whether or not such
business is stated in the notice of meeting or in a waiver of notice thereof,
except as expressly provided otherwise by law or by these By-Laws. The order of
business at all meetings of stockholders shall be as follows:
1. Call
to order.
2.
Selection of secretary of the meeting.
3.
Determination of quorum.
4.
Appointment of voting inspectors.
5. If the
meeting of stockholders is for the election of directors, the nomination and
election of directors.
6. Other
business.
For other
business to be properly brought before an annual meeting of stockholders, the
stockholder seeking to bring such other business before the meeting must have
given timely notice thereof in writing to the President of the Corporation, and
such business must be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to or mailed, postage prepaid, and
received by the President at the principal executive offices of the Corporation
at least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the 90th
day prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made by
the Corporation. Such stockholder's notice shall set forth (a) a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made, and (b) as to the stockholder giving notice and the
beneficial owner, if any, on whose behalf the proposal is made, (I) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner, and (II) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
Notwithstanding
the foregoing provisions of this Section 8, a stockholder seeking to bring such
other business before the meeting shall also comply with all applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder with respect to the matters set forth in this Section 8.
Nothing in this Section 8 shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934.
Section
9. Voting.
Except as otherwise provided by law or by the Certificate of Incorporation,
holders of Common Stock of the Corporation shall be entitled to vote upon
matters to be voted upon by the stockholders. At each meeting of stockholders
held for any purpose, each stockholder of record of stock entitled to vote
thereat shall be entitled to vote the shares of such stock standing in his name
on the books of the Corporation on the date determined in accordance with
Section 11 of this Article II, each such share entitling him to one
vote. At all meetings of stockholders for the election of directors,
if a quorum is present, a plurality of the votes of the shares present in person
or represented by proxy at the meeting and entitled to vote on the election of
directors shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by law, the Certificate of Incorporation or these
By-Laws, or unless a separate vote by a class or series or classes or series is
required, be decided by the affirmative vote of a majority in voting power of
the shares of stock which are present in person or represented by proxy at the
meeting and entitled to vote on the subject matter. The voting shall
be by voice or by ballot as the Chairman may decide, except that upon demand for
a vote by ballot on any question or election, made by any stockholder or his
proxy present and entitled to vote on such question or election, such vote by
ballot shall immediately be taken.
Section
10. Voting
List. The Secretary of the Corporation shall make, at least ten (10) days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at any such meeting or any adjournment thereof, with the
address of and the number of shares registered in the name of each stockholder.
Such list shall be opened to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, (i) on a reasonably accessible electronic
network, provided that the information required to gain access to such list is
provided with the notice of the meeting, or (ii) during ordinary business hours,
at the principal place of business of the Corporation. Such list shall also be
produced and kept at the time and place of the meeting during the whole time of
the meeting and shall be subject to inspection by any stockholder who is
present. The original stock transfer books shall be prima facie evidence as to
who are the stockholders entitled to examine such list or transfer books or to
vote at any meeting of stockholders.
If the
requirements of this Section 10 have not been substantially complied with, the
meeting shall, on the demand of any stockholder in person or by proxy, be
adjourned until the requirements are complied with.
Section
11. Record
Dates. (a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action other than stockholder action by written consent, the Board
of Directors may fix a record date, which shall not precede the date such record
date is fixed and shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any such other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given and
the record date for any purpose other than stockholder action by written consent
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
(b) In
order that the Corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within 10 days after the date on which such a
request is received, adopt a resolution fixing the record date. If no record
date has been fixed by the Board of Directors within 10 days after the date on
which such a request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
any officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution taking such
prior action.
Section
12. Adjournment. Any
meeting of stockholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place, and notice need not be given of any
such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section
13. Action by
Stockholders Without a Meeting. Any action required or permitted to be
taken at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or to an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of any action by written consent shall be given to
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take the action were delivered to the
Corporation as provided herein.
Section
14. Proxies. At
any meeting of the stockholders, each stockholder entitled to vote thereat may
vote either in person or by proxy executed in writing or granted or authorized
in such other manner as is permitted under the General Corporation Law of the
State of Delaware. Such proxy shall be filed with the Secretary at or before the
meeting; provided, however, that no proxy shall be voted or acted upon after
eleven months from its date, unless said proxy provides for a longer period. A
proxy need not be sealed, witnessed or acknowledged.
ARTICLE
III. DIRECTORS
Section
1. General
Powers. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, and all corporate powers shall
be exercised by or under the direction of the Board of Directors, except as
otherwise expressly required by these By-Laws, by the Certificate of
Incorporation or by law.
Section
2. Qualification,
Number, Classification and Term of Office. Every director must be a
citizen of the United States and have resided in the State of New York, or
within two hundred miles of the location of the principal office of the
Corporation, for at least one year immediately preceding his election, and must
own $1,000.00 aggregate book value of Corporate Stock. The number of directors
shall be not less than five nor more than twenty-five. A Board of Directors
shall be elected in the manner provided in these By-Laws. Each director shall
have one vote at any directors' meeting.
The Board
of Directors shall be divided into three classes: Class 1, Class 2 and Class 3,
which shall be as nearly equal in number as possible. Each director shall serve
for a term ending on the date of the third Annual Meeting of Shareowners
following the Annual Meeting at which such director was elected; provided,
however, that each initial director in Class 1 shall hold office until the
Annual Meeting of Shareowners in 1987; each initial director in Class 2 shall
hold office until the Annual Meeting of Shareowners in 1988; and each initial
director in Class 3 shall hold office until the Annual Meeting of Shareowners in
1989.
In the
event of any increase or decrease in the authorized number of directors, (1)
each director then serving as such shall nevertheless continue as a director of
the class of which he is a member until the expiration of his current term, or
his earlier resignation, removal from office or death, and (2) the newly created
or eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so as
to maintain such classes as nearly equal as possible.
Notwithstanding
any of the foregoing provisions of this Section 2, each director shall serve
until his successor is elected and qualified or until his earlier resignation,
removal from office or death.
This
Article III, Section 2, shall not be altered, amended or repealed except by an
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
total number of shareowners.
Section
3. Election of
Directors. At each meeting of the stockholders for the election of
directors, a quorum being present, as defined in Section 5 of Article II, the
election shall proceed as provided in these By-Laws and under applicable
Delaware law. No election need be by written ballot.
If the
election of directors shall not be held on the day designated for any annual
meeting or at any adjournment of such meeting, the Board of Directors shall
cause the election to be held at a special meeting of the stockholders as soon
thereafter as may be convenient.
Nominations
of candidates for election as directors of the Corporation must be made in
writing and delivered to or received by the President of the Corporation within
ten days following the day on which public disclosure of the date of any
shareholders' meeting called for the election of directors is first given. Such
notification shall contain the name and address of the proposed nominee, the
principal occupation of the proposed nominee, the number of shares of Common
Stock that will be voted for the proposed nominee by the notifying shareowner,
including shares to be voted by proxy, the name and residence of the notifying
shareowner and the number of shares of Common Stock beneficially owned by the
notifying shareowner.
No person
shall be eligible for election or re-election as a director if he or she shall
have attained the age of 70 years.
Nominations
not made in accordance herewith may be disregarded by the Chairman of the
meeting.
Section
4. Removal of
Directors. Any director may be removed at any time, but only for cause,
by the affirmative vote of a majority in voting power of the stockholders of
record entitled to elect a successor, and present in person or by proxy at a
special meeting of such stockholders for which express notice of the intention
to transact such business was given and at which a quorum shall be
present.
Section
5. Organization. The
Board of Directors, by majority vote, may from time to time appoint a Chairman
of the Board who shall preside over its meetings. The period and terms of the
appointment shall be determined by the Board of Directors. The Secretary of the
Corporation, or an Assistant Secretary, or, in the discretion of the Chairman,
any person appointed by him, shall act as secretary of the meeting.
Section
6. Place of Meeting,
etc. The Board of Directors may hold its meetings at such place or places
within or without the State of Delaware as the Board of Directors may from time
to time, by resolution determine, or (unless contrary to resolution of the Board
of Directors), at such place as shall be specified in the respective notices or
waivers of notice thereof. Unless otherwise restricted by law or by the
Certificate of Incorporation, members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors such committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 6 shall constitute presence
at such meeting. The Chairman or any person appointed by him shall act as
secretary of the meeting.
Section
7. Annual
Meeting. The Board of Directors may meet, without notice of such meeting,
for the purpose of organization, the election of officers and the transaction of
other business, on the same day as, at the place at which, and as soon as
practicable after each annual meeting of stockholders is held. Such annual
meeting of directors may be held at any other time or place specified in a
notice given as hereinafter provided for special meetings of the Board of
Directors, or in a waiver of notice thereof.
Section
8. Regular
Meetings. Regular meetings of the Board of Directors may be held at such
times and places as may be fixed from time to time by action of the Board of
Directors. Unless required by resolution of the Board of Directors, notice of
any such meeting need not be given.
Section
9. Special
Meetings. Special meetings of the Board of Directors shall be held
whenever called by the Chief Executive Officer, or by any three or more
directors, or, at the direction of any of the foregoing, by the Secretary.
Notice of each such meeting shall be mailed to each director, addressed to him
at his residence or usual place of business, not less than three (3) days before
the date on which the meeting is to be held; or such notice shall be sent to
each director at such place by telegraph, cable, telefax, telephone or wireless,
or by electronic mail to an address previously provided by the director to the
Corporation for delivery of such notices, in each such case not less than
twenty-four (24) hours before the time at which the meeting is to be held. Every
such notice shall state the time and place of the meeting. Notice of any
adjourned or recessed meeting of the directors need not be given.
Section
10. Waivers of Notice
of Meetings. Anything in these By-Laws or in any resolution adopted by
the Board of Directors to the contrary notwithstanding, proper notice of any
meeting of the Board of Directors shall be deemed to have been given to any
director if such notice shall be waived by him in writing (including telegraph,
cable, telefax, wireless, or electronic mail) before or after the meeting. A
director who attends a meeting shall be deemed to have had timely and proper
notice thereof, unless he attends for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully
called.
Section
11. Quorum and Manner
of Acting. A majority of the directors shall constitute a quorum for the
transaction of business. Except as may otherwise be expressly provided by these
By-Laws, the act of a majority of the directors present at any meeting at which
a quorum is present, shall be the act of the Board of Directors. In the absence
of a quorum, a majority of the directors present may adjourn the meeting from
time to time until a quorum be had. The directors shall act only as a Board and
the individual directors shall have no power as such.
Section
12. Resignations. Any
director of the Corporation may resign at any time, in writing, by notifying the
Chief Executive Officer, or the President or the Secretary of the Corporation.
Such resignation shall take effect at the time therein specified; and, unless
otherwise specified, the acceptance of such resignation shall not be necessary
to make it effective.
Section
13. Manner of Fixing
the Number of Directors; Vacancies. The number of directors authorized to
serve until the next annual meeting of stockholders of the Corporation shall be
the number designated, at the annual meeting and prior to the election of
directors, by the stockholders entitled to vote for the election of directors at
that meeting. Between annual meetings of the stockholders of the Corporation,
the Board of Directors shall have the power to increase, by not more than three
(3), the number of directors of the Corporation.
Any
vacancy in the Board of Directors, caused by death, resignation, removal,
disqualification, increase in the number of directors, or any other cause (other
than an increase by more than three (3) in the number of directors), may be
filled by the majority vote of the remaining directors then in office, though
less than a quorum, at any regular meeting of the Board of Directors. If, at the
time of the next election of directors by the stockholders, the term of office
of any vacancy filled by the remaining directors has not expired, then the
stockholders shall fill such vacancy for the remainder of the unexpired term.
Any vacancy, including one caused by an increase in the number of directors, may
be filled at a meeting called for such purpose, by vote of the
stockholders.
Section
14. Committees.
The Board of Directors may designate one or more Committees, each Committee to
consist of one or more of the Directors of the Corporation, which to the extent
provided in said resolution or resolutions, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Corporation to the fullest extent permitted by law and shall have power
to authorize the seal of the Corporation to be affixed to all papers which may
require it. Such Committee or Committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors.
In the
absence or disqualification of any member of any Committee appointed by the
Board, the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board to act at a meeting in the place of any such
absent or disqualified member, subject, however, to the right of the Board of
Directors to designate one or more alternate members of such Committee, which
alternate members all have power to serve, subject to such conditions as the
Board may prescribe, as a member or members of said Committee during the absence
or inability to act of any one or more members of said Committee. The Board of
Directors shall have the power at any time to change the membership of any
Committee, to fill vacancies in it, or to dissolve it. A Committee may make
rules for the conduct of its business and shall act in accordance therewith,
except as otherwise provided herein or required by law. A majority of the
members of the Committee shall constitute a quorum. A Committee shall keep
regular minutes of its proceedings and report the same to the Board when
required.
The Chief
Executive Officer, if he is a director, shall be a voting member of all
Committees of the Board of Directors, except the Risk Management Committee and
the Compensation and Benefits Committee.
Section
15. Directors' Action
Without a Meeting. Unless otherwise provided by the Certificate of
Incorporation, any action required to be taken at a meeting of the directors, or
any action which may be taken at a meeting of the directors or of a committee,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed before such action by all the directors, or all the
members of the committee, as the case may be. Such consent shall have the same
force and effect as a unanimous vote.
Section
16. Compensation.
Directors, as such, may receive compensation as fixed by resolution of the Board
of Directors, including annual fees for services as directors, and a fixed fee
and expenses of attendance, if any, for attendance at each meeting of the Board.
The compensation may be in the form of cash, stock of the Corporation, options
to purchase stock of the Corporation, or a combination of the foregoing, as the
Board in its discretion shall determine. Nothing in this section shall be
construed to preclude a Director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE
IV. OFFICERS
Section
1. Officers.
The officers of the Corporation shall be a Chairman of the Board of Directors,
one or more Vice Chairmen of the Board of Directors, a President, a Chief
Financial Officer and a Secretary, and where elected, one or more
Vice-Presidents, and the holders of such other offices as may be established in
accordance with the provisions of Section 3 of this Article. Any two or more
offices may be held by the same person; provided only, that the same person
shall not hold the offices of Chairman and Secretary.
Section
2. Election, Term of
Office and Qualifications. The officers shall be elected annually by the
Board of Directors, as soon as practicable after the annual election of
directors in each year. Each officer shall hold office until his successor shall
have been duly chosen and shall qualify, or until his death, resignation or
removal in the manner hereinafter provided.
Section
3. Subordinate Officers. The Board of Directors may from time to time establish
offices in addition to those designated in Section 1 of this Article IV with
such duties as are provided in these By-Laws, or as they may from time to time
determine.
Section
4. Removal. Any officer
may be removed, either with or without cause, by resolution declaring such
removal to be in the best interests of the Corporation and adopted at any
regular or special meeting of the Board of Directors by a majority of the
directors then in office. Any such removal shall be without prejudice to the
recovery of damages for breach of contract rights, if any, of the person
removed. Election of appointment of an officer or agent shall not of itself,
however, create contract rights.
Section
5. Resignations. Any
officer may resign at any time by giving written notice to the Board of
Directors or the Chairman of the Board of Directors, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the date
of receipt of such notice or at any later time therein specified; and, unless
otherwise specified, the acceptance of such resignation shall not be necessary
to make it effective. However, no resignation hereunder, or the acceptance
thereof by the Board of Directors, shall prejudice the contract or other rights,
if any, of the Corporation with respect to the person
resigning.
Section
6. Vacancies. A
vacancy in any office because of death, resignation, removal, disqualification
or any other cause shall be filled for the unexpired portion of the term by the
Board of Directors.
Section
7. Compensation.
Salaries or other compensation of the officers may be fixed from time to time by
the Board of Directors or in such manner as it shall determine. No officer shall
be prevented from receiving his salary by reason of the fact that he is also a
director of the Corporation.
Section
8. Chairman of the
Board of Directors. Where there is a Chairman of the Board of Directors
he shall be an officer and a director; and he may be the Chief Executive Officer
of the Corporation and as such may have general supervision of the business of
the Corporation, subject, however, to the control of the Board of Directors and
of any duly authorized committee of directors. The Chief Executive Officer shall
have full power and authority to cast any votes which the Corporation is
entitled to cast as a shareholder of another corporation. Where there is no
Chairman of the Board, or he is unable to discharge his duties, the powers of
the Chairman shall be vested in the President. The Chairman of the Board shall
preside at all meetings of stockholders and of the Board of Directors at which
he is present.
Section
9. Vice Chairman of
the Board of Directors. The Vice Chairman shall be a director of the
Corporation. In general, he shall perform all duties incident to the office of
Vice Chairman and such other duties as may from time to time be designated to
him by the Board of Directors or by any duly authorized committee of directors,
and shall have such other powers and authorities as are conferred upon him
elsewhere in these By-Laws.
Section
10. President.
The President shall be a director and may be the Chief Executive Officer or the
Chief Operating Officer of the Corporation. In general, he shall perform all
duties incident to the office of the President and such other duties as may from
time to time be designated to him by the Board of Directors or by any duly
authorized committee of directors, and shall have such other powers and
authorities as are conferred upon him elsewhere in these By-Laws.
Section
11. The Vice
Presidents. The Vice Presidents shall perform such duties as from time to
time may be assigned to them by the Board of Directors, or by any duly
authorized committee of directors or by the President, and shall have such other
powers and authorities as are conferred upon them elsewhere in these
By-Laws.
Section
12. Chief Financial
Officer. Except as may otherwise be specifically provided by the Board of
Directors or any duly authorized committee thereof, the Chief Financial Officer
shall have the custody of, and be responsible for, all funds and securities of
the Corporation; receive and receipt for money paid to the Corporation from any
source whatsoever; deposit all such monies in the name of the Corporation in
such banks, trust companies, or other depositories as shall be selected in
accordance with the provisions of these By-Laws; against proper vouchers, cause
such funds to be disbursed by check or draft on the authorized depositories of
the Corporation signed in such manner as shall be determined in accordance with
the provisions of these By-Laws; regularly enter or cause to be entered in books
to be kept by him or under his direction, full and adequate accounts of all
money received and paid by him for account of the Corporation; in general,
perform all duties incident to the office of Chief Financial Officer and such
additional duties as are assigned by the General Corporation Law of the State of
Delaware to the treasurer of a corporation organized under the laws of the State
of Delaware and such other duties as from time to time may be assigned to him by
the Board of Directors, or by any duly authorized committee of directors, or by
the Chief Executive Officer, and have such other powers and authorities as are
conferred upon him elsewhere in these By-Laws.
Section
13. Secretary.
The Secretary shall act as Secretary of all meetings of the stockholders and of
the Board of Directors of the Corporation; shall keep the minutes thereof in the
proper books to be provided for that purpose; shall see that all notices
required to be given by the Corporation are duly given and served; shall be the
custodian of the seal of the Corporation and may affix the seal or cause it to
be affixed to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized in accordance with the provisions of these
By-Laws; shall have charge of the books, records and papers of the Corporation
relating to its organization and management as a corporation, and shall see that
any reports or statements relating thereto, required by law or otherwise, are
properly kept and filed; shall, in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Board of Directors, or by any duly authorized committee
of directors or by the Chief Executive Officer, and shall have such other powers
and authorities as are conferred upon him elsewhere in these
By-Laws.
Section
14. Assistant
Financial Officers and Assistant Secretaries. The Assistant Financial
Officers and Assistant Secretaries shall perform such duties as shall be
assigned to them by the Chief Financial Officer and by the Secretary,
respectively, or by the Board of Directors, or by any duly authorized committee
of directors, or by the Chief Executive Officer, and shall have such other
powers and authorities as are conferred upon them elsewhere in these
By-Laws.
ARTICLE
V. SHARES OF STOCK
Section
1. Regulation.
Subject to the terms of any contract of the Corporation, the Board of Directors
may make such rules and regulations as it may deem expedient concerning the
issue, transfer, and registration of certificates for shares of the stock of the
Corporation, including the issue of new certificates for lost, stolen or
destroyed certificates and including the appointment of transfer agents and
registrars.
Section
2. Stock
Certificates. Certificates for shares of the stock of the Corporation
shall be respectively numbered serially for each class of shares, or series
thereof and, as they are issued, shall be impressed with the corporate seal or a
facsimile thereof, and shall be signed by the Chairman of the Board, the Vice
Chairman, the President or any Vice President and by the Secretary or any
Assistant Secretary, or any two officers of the Corporation designated by the
Board of Directors, provided that such signatures may be facsimiles on any
certificate countersigned by a transfer agent other than the Corporation or its
employee or by a registrar other than the Corporation or its employee. Each
certificate shall exhibit the name of the Corporation, the class (or series of
any class) and number of shares represented thereby and the name of the holder.
Each certificate shall be otherwise in such form as may be prescribed by the
Board of Directors.
ARTICLE
VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section
1. Each person who was or is made a party or is threatened to be made a party to
or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a director
of another corporation or of a partnership, joint venture, trust or other
enterprise, or as a plan fiduciary with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a Director, officer, or plan fiduciary or in
any other capacity while serving as a Director, officer or plan fiduciary, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter by amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section 3
of this Article VI with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
Section
2. The right to indemnification conferred in Section 1 of this Article VI shall
include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Section 1 and 2 of this Article VI
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a Director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
Section
3. If a claim under Sections 1 or 2 of this Article VI is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article VI or otherwise shall be on the
Corporation.
Section
4. The rights to indemnification and to the advancement of expenses conferred in
this Article VI shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, the Corporation's Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
Section
5. The Corporation may maintain insurance, at its expense, to protect itself and
any Director, officer, employee or agent of the Corporation or of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section
6. The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation, or any person serving at the
request of the Corporation as an officer, employee or agent of another entity,
to the fullest extent of the provisions of this Section with respect to the
indemnification and advancement of expenses of Directors and officers of the
Corporation.
ARTICLE
VII. MISCELLANEOUS
Section
1. Seal. The
corporate seal of the Corporation shall contain the name of the Corporation, the
year of its creation, and the words "Corporate Seal, Delaware," and shall be in
such form as may be approved by the Board of Directors.
Section
2. Fiscal Year.
The fiscal year of the Corporation shall be as set by the Board of
Directors.
Section
3. Loans. Any
officer or officers or agent or agents of the Corporation thereunto authorized
by the Board of Directors or by any duly authorized committee of directors may
effect loans or advances at any time for the Corporation, in the ordinary course
of the Corporation's business, from any bank, trust company or other institution
or from any firm, corporation or individual, and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and when authorized to do so may
pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority conferred
by the Board of Directors or any duly authorized committee of directors may be
general or confined to specific instances.
Section 4. Checks,
Drafts, Withdrawal of Securities, Safe Deposit Boxes, etc. All checks, drafts and other orders
for payment of money out of the funds of the Corporation shall be signed on
behalf of the Corporation in such manner as shall from time to time be
determined by resolution of the Board of Directors or of any duly authorized
committee of directors. The Corporation shall furnish to each depository, bank,
custodian and entity providing safe deposit boxes, a certified copy of its
resolution regarding the authorization of disbursements and the entry to safe
deposit boxes or withdrawal of securities from safekeeping.
Section
5. Deposits.
The funds of the Corporation, not otherwise employed, shall be deposited from
time to time to the order of the Corporation in such banks, trust companies or
other depositories as the Board of Directors or any duly authorized committee of
directors may from time to time select, or as may be selected by an officer or
officers, or agent or agents, of the Corporation to whom such power may from
time to time be delegated by the Board of Directors or any duly authorized
committee of directors.
Section
6. Contracts, etc.,
How Executed. The Chief Executive Officer, and those officers who are
designated by resolution of the Board, shall be authorized to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be delegated, in specific instances to such
other officers, employees or agents as such authorized officers may
designate.
Section
7. Voting of Stock or
Other Securities Held. Unless otherwise provided by resolution of the
Board of Directors, the Chief Executive Officer may from time to time appoint an
attorney or attorneys or agent or agents of this Corporation, in the name and on
behalf of this Corporation to cast the votes which this Corporation may be
entitled to cast as a stockholder or otherwise in any other corporation, any of
whose stock or securities may be held by this Corporation, at meetings of the
holders of the stock or other securities of such other corporations, or to
consent in writing to any action by any such other corporation, and may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed on behalf of this
Corporation and under its corporate seal, or otherwise, such written proxies,
consents, waivers or other instruments that he or they may deem necessary or
proper in the premises; or the Chief Executive Officer may attend any meeting of
the holders of stock or other securities of any such other corporation and
thereat vote or exercise any or all other powers of this Corporation as the
holder of such stock or other securities of such other
corporation.
Section
8. Waivers of
Notice. Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation, or of these By-Laws, a
waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE
VIII. AMENDMENTS
Section
1. By the
Directors. The Board of Directors by a majority vote thereof shall have
the power to make, alter, amend or repeal the By-Laws of the Corporation at any
regular or special meeting of the Board of Directors. This power shall not be
exercised by any committee of the Board of Directors.
Section
2. By the
Stockholders. Except as otherwise provided in these By-Laws, all By-Laws
shall be subject to amendment, alteration or repeal by the vote of a majority of
the total number of issued and outstanding shares of Common Stock of the
Corporation entitled to vote at any annual or special meeting. The stockholders,
at any annual or special meeting, may provide that certain By-Laws by them
adopted, approved or designated may not be amended, altered or repealed except
by a certain specified percentage in interest of the stockholders or by a
certain specified percentage in interest of a particular class of
stockholders.
Exhibit 10.3
CNB
BANCORP, INC. STOCK OPTION PLAN
1.
PURPOSE. The purpose of this CNB Bancorp, Inc. Stock Option Plan ("the Plan") is
to provide a method whereby those key employees of CNB Bancorp, Inc. and its
affiliates (collectively, "the Company"), who are primarily responsible for the
management and growth of the Company's business and who are presently making and
are expected to make substantial contributions to the Company's future
management and growth, may be offered incentives in addition to those presently
available, and may be stimulated by increased personal involvement in the
success of the Company to continue in its service, thereby advancing the
interests of the Company and its shareholders. The word "affiliate," as used in
the Plan, means any corporation in any unbroken chain of corporations beginning
or ending with the Company, if at the time of the granting of an option, each
corporation other than the last in that chain owns stock possessing fifty
percent (50%)or more of the total combined voting power of all classes of stock
in one of the other corporations in the chain.
2.
ADMINISTRATION. The following provisions shall govern the administration
of the Plan:
(a)
Board or Committee Administration. The Plan shall be administered by the
Board of Directors which may delegate its administrative powers and authority
under the Plan to the Compensation Committee of the Company's Board of Directors
(the "Compensation Committee"). (References in this Plan to the "Committee"
shall be deemed to refer to the Compensation Committee or the Board of
Directors, as the case may be.) The Board of Directors may from time to time
remove members from or add members to the Compensation Committee. Vacancies on
the Compensation Committee, however caused, shall be filled by the Board of
Directors. The Board of Directors may designate a Chairman and Vice-Chairman of
the Compensation Committee from among the committee members. Acts of the
Compensation Committee (i) at a meeting, held at a time and place and in
accordance with rules adopted by the committee at which a quorum of the
committee is present and acting, or (ii) reduced to and approved in writing by
all members of the committee, shall be the valid acts of the
committee.
(b)
Special Rule for Officers. The grant of options to employees who are officers of
the Company may be made by and all discretion with respect to the material terms
of the options may be exercised by either (i) the Board of Directors, or (ii)
the Compensation Committee composed solely of two or more nonemployee directors
having full authority to act in the matter.
(c)
Committee Powers. The Committee shall effect the grant of options under
the Plan by execution of instruments in writing in a form approved by the
Committee. Subject to the express terms and conditions of the Plan, the
Committee shall have full power to construe the Plan and the terms of any option
granted under the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan or options and to make all other determinations necessary
or advisable for the Plan's administration, including, without limitation, the
power to:
(i)
determine which persons meet the requirements of Section 3 hereof for selection
as participants in the Plan;
(ii)
determine to whom of the eligible persons, if any, options shall be granted
under the Plan;
(iii)
establish the terms and conditions required or permitted to be included in every
option agreement or any amendments thereto, including whether options to be
granted thereunder shall be "incentive stock options," as defined in section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified
stock options not described in sections 422 or 423 of the Code;
(iv)
specify the number of shares to be covered by each option;
(v) determine
the fair market value of shares of the Company's common stock for any purpose
under the Plan;
(vi)
take appropriate action to amend any option hereunder, provided that no such
action may be taken without the written consent of the affected
optionee;
(vii)
cancel outstanding options and issue replacement options therefor with the
consent of the affected optionee; and
(viii)
make all other determinations deemed necessary or advisable for administering
the Plan.
The
Committee's determination on the foregoing matters shall be
conclusive.
3.
ELIGIBILITY. The persons who shall be eligible to receive the discretionary
grant of options under the Plan shall be those key employees and officers of the
Company selected for participation by the Committee ("Eligible Persons").
Notwithstanding any other provision of the Plan, no Eligible Person shall be
granted options to purchase more than an aggregate of 100,000 shares of the
Company's common stock under the Plan, as adjusted pursuant to Section
8.
4.
THE SHARES. The shares of stock subject to options authorized to be granted
under the Plan shall consist of 160,000 shares of the Company's Common Stock
(the "Shares"), or the number and kind of shares of stock or other securities
which shall be substituted for the Shares or to which the Shares shall be
adjusted as provided in Section 8 hereof. Upon the expiration or termination for
any reason of an outstanding option under the Plan which has not been exercised
in full, all unissued Shares thereunder shall again become available for the
grant of options under the Plan. Shares of the Company's common stock which are
(i) delivered by an optionee in payment of the exercise price of an option, or
(ii) delivered by an optionee, or withheld by the Company from the shares
otherwise due upon exercise of an option, in satisfaction of applicable
withholding taxes, shall again become available for the grant of options under
the Plan.
5.
INCENTIVE STOCK OPTION TERMS AND CONDITIONS. Options granted to employees
under the terms and conditions of this Section 5 are intended to be incentive
stock options (ISOS) under section 422 of the Code. Each incentive stock option
granted under the Plan shall be authorized by action of the Committee and shall
be evidenced by a written agreement in such form as the Committee shall from
time to time approve, which agreement shall comply with and be subject to the
following terms and conditions:
(a)
Exercise Price. The exercise price of each incentive stock option shall be
one hundred percent (100%) of the fair market value of a Share of common stock
of the Company on the date the option is granted; provided, however, that the
exercise price of an incentive stock option granted to an individual who owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, as determined under the stock ownership
rules specified in Subsection 5(c), shall be one hundred ten percent (110%) of
the fair market value of a Share of common stock of the Company on the date the
option is granted.
(b)
Duration of Options. No incentive stock option shall be exercisable after
the expiration of ten (10) years from the date on which that option is granted;
provided, however, that no incentive stock option granted to an individual who
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, as determined under the stock
ownership rules specified in Subsection 5(c), shall be exercisable after the
expiration of five (5) years from the date on which that option is
granted.
(c)
Determination of Stock Ownership. For purposes of determining in
Subsections 5(a) and 5(b) whether an employee owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, an employee shall be considered as owning the stock owned, directly
or indirectly, by or for his or her brothers and sisters (whether by the whole
or half blood), spouse, ancestors, and lineal descendants. Stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or trust shall be
considered as being owned proportionately by or for its shareholders, partners,
or beneficiaries. Stock with respect to which the employee holds an option shall
not be counted.
(d)
Right to Exercise. Each incentive stock option shall become exercisable and vest
according to the terms and conditions established by the Committee and reflected
in the written agreement evidencing the option, provided, however, that no
option shall vest at a rate of less than twenty-five percent (25%) per year
during the four (4) year period following the date of grant of the option.
Notwithstanding the preceding sentence, all options shall become immediately
exercisable in the event of (1) the employee's attainment of age 65, (2) the
closing of the sale of all or substantially all of the assets of the Company,
(3) the merger or consolidation of the Company into or with another corporation
in a transaction where the Company is not the surviving corporation, (4) if any
person (other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or its affiliate is or becomes the
beneficial owner of 25% or more of the common stock of the Company, or (5) if,
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company (each an "Incumbent
Board Member") cease for any reason to constitute at least a majority thereof,
provided, however, that any person becoming a director of the Company after the
beginning of such period whose election is approved by a vote of at least
three-quarters of the Incumbent Board Members shall be considered to be an
incumbent Board Member. In addition, the Board of Directors shall have the
authority to accelerate the exercisability of any options granted to an
employee. Each incentive stock option shall be subject to termination before its
date of expiration as provided in Subsection 5(e).
(e)
Terminations of Options. If an optionee ceases to be an employee of the
Company, his or her rights to exercise an incentive stock option then held shall
be only as follows:
DEATH: If
an optionee dies while he or she is employed by the Company, the optionee's
estate shall have the right for a period of twelve (12) months after the date of
death to exercise the option to the extent the optionee was entitled to exercise
the option on that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is not exercised
within this period, the option will terminate. An optionee's "estate" shall mean
the optionee's legal representative or any person who acquires the right to
exercise an option by reason of the optionee's death.
DISABILITY:
If an optionee's employment with the Company ends because the optionee becomes
disabled, the optionee or his or her qualified representative (in the event of
the optionee's mental disability) shall have the right for a period of twelve
(12) months after the date on which the optionee's employment ends to exercise
the option to the extent the optionee was entitled to exercise -the option on
that date, provided the date of exercise is in no event after the expiration of
the term of the option. To the extent the option is not exercised within this
period, the option will terminate.
RESIGNATION:
If an optionee voluntarily resigns from the Company, the optionee shall have the
right for a period of three (3) months after the date of resignation to exercise
the option to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the expiration of
the term of the option. To the extent the option is not exercised within this
period, the option will terminate.
TERMINATION
FOR REASONS OTHER THAN CAUSE: If an optionee's employment is terminated by the
Company for reasons other than "Cause," the optionee shall have the right for a
period of three (3) months after the date of termination to exercise the option
to the extent the optionee was entitled to exercise the option on that date,
provided the date of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this period, the
option will terminate. Notwithstanding the above, an employee shall have five
(5) years from the date of his/her retirement from the Company to exercise
incentive stock options, provided, however, that at the expiration of the three
(3) month period following retirement, such option shall no longer be treated as
incentive stock options, but shall be treated as non-qualified stock options
pursuant to Section 6 below.
For the
purpose of this clause, "Cause" shall mean that: the optionee is determined by
the Committee to have committed an act of embezzlement, fraud, dishonesty, or
breach of fiduciary duty to the Company, or to have deliberately disregarded the
rules of the Company which resulted in loss, damage, or injury to the Company,
or because the optionee has made any unauthorized disclosure of any of the
secrets or confidential information of the Company, has induced any client or
customer of the Company to break any contract with the Company, has induced any
principal for whom the Company acts as agent to terminate the agency
relationship, or has engaged in any conduct that constitutes unfair competition
with the Company.
OTHER
REASONS: If an optionee's employment with the Company ends for any reason not
mentioned above in this Subsection 5(e), all rights of the optionee in an
incentive stock option, to the extent that it has not been exercised, shall
terminate on the date the optionee's employment ends.
(f)
Notice of Sale. If an optionee sells or otherwise disposes of any Shares
acquired upon exercise of an incentive stock option, and the sale or disposition
occurs within two (2) years after the grant of the option or within one (1) year
after the exercise of the option, the optionee shall give the Company notice of
the sale or disposition within fifteen (15) days thereafter.
(g)
Limit on Exercise of Incentive Stock Options. To the extent
that the aggregate fair market value (determined as of the time the option is
granted) of the Stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year (under
all plans of the Company and its parent and subsidiary corporations) exceeds One
Hundred Thousand Dollars ($100,000), the options shall be treated as options
that are not incentive stock options.
6.
NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS. The options granted under the
terms and conditions of this Section 6 are nonqualified stock options and are
not intended to qualify as either a qualified stock option or an incentive stock
option as those tenons are defined by applicable provisions of the Code. Each
nonqualified stock option granted under the Plan shall be authorized by action
of the Committee and shall be evidenced by a written agreement in such form as
the Committee shall from time to time approve, which agreement shall comply with
and be subject to the following terms and conditions:
(a)
Exercise Price. The exercise price of each nonqualified stock option shall not
be less than one hundred percent (100%) of the fair market value of a Share of
the Company on the date the option is granted.
(b)
Duration of Options. Each nonqualified stock option shall be for a term
determined by the Committee; provided, however, that the term of any option may
not exceed ten (10) years.
(c)
Right to Exercise. Each nonqualified stock option shall become exercisable and
vest according to the terms and conditions established by the Committee and
reflected in the written agreement evidencing the option, provided, however,
that no option shall vest at a rate of less than fifty percent (50%) per year
during the two (2) year period following the date of grant of the option.
Notwithstanding the preceding sentence, all options shall become immediately
exercisable in the event of (1) the employee's attainment of age 65, (2) the
closing of the sale of all or substantially all of the assets of the Company,
(3) the merger or consolidation of the Company into or with another corporation
in a transaction where the Company is not the surviving corporation, (4) if any
person (other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or its affiliate is or becomes the
beneficial owner of 25% or more of the common stock of the Company, or (5) if,
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company (each an "Incumbent
Board Member") cease for any reason to constitute at least a majority thereof,
provided, however, that any person becoming a director of the Company after the
beginning of such period whose election is approved by a vote of at least
three-quarters of the Incumbent Board Members shall be considered to be an
incumbent Board Member. In addition, the Board of Directors shall have the
authority to accelerate the exercisability of any options granted to an
employee. Each nonqualified stock option shall be subject to termination before
its date of expiration as provided in Subsection 6(d).
(d)
Terminations of Options. If an optionee ceases to be an employee of the Company,
his or her rights to exercise a nonqualified stock option then held shall be
only as follows:
DEATH: If
an optionee dies while he or she is employed by the Company, the optionee's
estate shall have the right for a period of twelve (12) months after the date of
death to exercise the option to the extent the optionee was entitled to exercise
the option on that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is not exercised
within this period, the option will terminate. An optionee's "estate" shall mean
the optionee's legal representative or any person who acquires the right to
exercise an option by reason of the optionee's death.
DISABILITY:
If an optionee's employment with the Company ends because the optionee becomes
disabled, the optionee or his or her qualified representative (in the event of
the optionee's mental disability) shall have the right for a period of twelve
(12) months after the date on which the optionee's employment ends to exercise
the option to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the expiration of
the term of the option. To the extent the option is not exercised within this
period, the option will terminate.
RESIGNATION:
If an optionee voluntarily resigns from the Company, the optionee shall have the
right for a period of three (3) months after the date of resignation to exercise
the option to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the expiration of
the term of the option. To the extent the option is not exercised within this
period, the option will terminate.
TERMINATION
FOR REASONS OTHER THAN CAUSE: If an optionee's employment is terminated by the
Company for reasons other than "Cause," the optionee shall have the right for a
period of three (3) months after the date of termination to exercise the option
to the extent the optionee was entitled to exercise the option on that date,
provided the date of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this period, the
option will terminate. Notwithstanding the above, an employee shall have five
(5) years from the date of his/her retirement from the Company to exercise
non-qualified options.
For the
purpose of this clause, "Cause" shall mean that: the optionee is determined by
the Committee to have committed an act of embezzlement, fraud, dishonesty, or
breach of fiduciary duty to the Company, or to have deliberately disregarded the
rules of the Company which resulted in loss, damage, or injury to the Company,
or because the optionee has made any unauthorized disclosure of any of the
secrets or confidential information of the Company, has induced any client or
customer of the Company to break any contract with the Company, has induced any
principal for whom the Company acts as agent to terminate the agency
relationship, or has engaged in any conduct that constitutes unfair competition
with the Company.
OTHER
REASONS: If an optionee's employment with the Company ends for any reason not
mentioned above in this Subsection 6(d), all rights of the optionee in a
nonqualified stock option, to the extent that it has not been exercised, shall
terminate on the date the optionee's employment ends.
7.
ADDITIONAL TERMS AND CONDITIONS OF ALL OPTIONS. The following terms and
conditions shall apply to all options granted pursuant to the Plan:
(a)
Exercise of Options. To the extent the right to purchase Shares has vested under
an optionee's stock option agreement, options may be exercised from time to time
by:
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(1)
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delivering
payment therefor in cash, certified check, official bank check, or the
equivalent thereof acceptable to the Company, together with written notice
to the Company at the address specified in the written agreement
evidencing the option. The written notice must identify the option or part
thereof being exercised and specify the number of Shares for which payment
is being tendered.
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(2)
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the
delivery and surrender of Shares which (i) have been owned by the optionee
for at least twelve (12) months or for such other period as the Committee
may require; and (ii) have an aggregate fair market value on the date of
surrender equal to the exercise
price.
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(3)
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delivering
to the Company (i) an exercise notice instructing the Company to deliver
the certificates for the Shares purchased to a designated brokerage firm;
and (ii) a copy of irrevocable instructions delivered to the brokerage
firm to sell the Shares acquired upon exercise of the option and to
deliver to the Company from the sale proceeds sufficient cash to pay the
exercise price and applicable withholding taxes arising as a result of the
exercise.
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The
Company shall deliver to the optionee, without transfer or issue tax to the
optionee (or other person entitled to exercise the option), at the principal
office of the Company, or such other place as shall be mutually acceptable, a
certificate or certificates for the Shares acquired under the option dated the
date the option was validly exercised; provided, however, that the time of
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any requirements of
law.
(b)
Transferability of Options and Shares. Each option shall be transferable only by
will or the laws of descent and distribution and shall be exercisable during the
optionee's lifetime only by the optionee, or in the event of disability, the
optionee's qualified representative. In addition, in order for Shares acquired
upon exercise of incentive stock options to receive the tax treatment afforded
such Shares, the-Shares may not be disposed of within two years from the date of
the option grant nor within one year after the date of transfer of such Shares
to the optionee.
(c)
Withholding. The Company shall have the right to condition the issuance of
Shares upon exercise of an option upon payment by the optionee of any applicable
taxes required to be withheld under federal, state or local tax laws or
regulations in connection with the exercise. To the extent permitted in an
optionee's stock option agreement, an optionee may elect to pay such tax by (i)
requesting the Company to withhold a sufficient number of Shares from the total
number of Shares issuable upon exercise of the option or (ii) delivering a
sufficient number of Shares which have been held by the optionee for at least
twelve (12) months to the Company. This election is subject to approval or
disapproval by the Committee. The value of Shares withheld or delivered shall be
the fair market value of the Shares on the date the exercise becomes taxable as
determined by the Committee.
(d)
Fair Market Value of Shares. For any purposes under the Plan, fair market value
per Share shall mean, where there is a public market for the Shares, the mean of
the bid and asked prices (or the closing price if listed on a stock exchange or
the NASDAQ National Market) of the Shares for the date of grant, as reported in
the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ Stock Market or the National Quotation Bureau). If this fair market value
information is not available for the date of grant, then such information for
the last preceding date for which it is available shall be considered as the
fair market value.
(e)
Other Terms and Conditions. Options may also contain such other
provisions, which shall not be inconsistent with any of the foregoing terms, as
the Committee shall deem appropriate. No option, however, nor anything contained
in the Plan, shall confer upon any optionee any right to continue in the employ
or in the status as a director of the Company, nor limit in any way the right of
the Company to terminate an optionee's employment at any time.
8.
ADJUSTMENT OF, AND CHANGES IN, THE SHARES.
(a)
Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of Shares covered by each outstanding option, and the
number of Shares which have been authorized for issuance under the Plan but as
to which no options have yet been granted, as well as the price per Share
covered by each outstanding option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, recapitalization,
combination or reclassification of the Shares, or any other increase or decrease
in the number of issued Shares effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding, and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an option.
(b)
Dissolution, Liquidation, Sale, or Merger. In the event of a proposed
dissolution or liquidation of the Company, options outstanding under the Plan
shall terminate immediately before the consummation of such proposed action. The
Committee will, in such circumstances, provide written notice to the optionees
of the expected dates of termination of outstanding options and consummation of
the proposed dissolution or liquidation.
In the
event of a proposed sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into another
corporation in a transaction in which the Company is not the surviving
corporation, outstanding options may be assumed or equivalent options may be
substituted by the successor corporation (or a parent or subsidiary of the
successor corporation), unless the successor corporation does not agree to
assume the options or to substitute equivalent options. If outstanding options
are not assumed or substituted by equivalent options, the Committee shall have
the power to cause the termination of all outstanding options (subject to the
actual consummation of the sale or merger) and the Company shall provide written
notice to the optionees of the expected dates of termination of the options and
consummation of the transaction. If the transaction is not consummated,
unexercised options shall continue in accordance with their original
terms.
(c)
Notice of Adjustments, Fractional Shares. To the extent the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Committee, whose determination in that respect shall be final,
binding, and conclusive. No right to purchase fractional shares shall result
from any adjustment in options pursuant to this Section 8. In case of any such
adjustment, the shares subject to the option shall be rounded up to the nearest
whole share. Notice of any adjustment shall be given by the Company to each
holder of an option which was in fact so adjusted and the adjustment (whether or
not notice is given) shall be effective and binding for all purposes of the
Plan.
No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance, except as provided in this Section
8.
Any issue
by the Company of shares of stock of any class, or securities convertible into
shares of any class, shall not affect the number or price of Shares subject to
the option, and no adjustment by reason thereof shall be made. The grant of an
option pursuant to the Plan shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
9.
AMENDMENT AND TERMINATION OF THE PLAN. The Board shall have complete power and
authority to terminate or amend the Plan; provided, however, that the Board
shall not, without the approval of the shareholders of the Company, amend the
Plan in a manner that requires shareholder approval for continued compliance
with section 422 of the Code, any successor rules, or other regulatory
authority. Except as provided in Section 8, no termination, modification or
amendment of the Plan may, without the consent of optionees to whom options were
previously granted under the Plan, adversely effect the rights of those
optionees. Any consent required by the preceding sentence may be obtained in any
manner deemed appropriate by the Committee.
The Plan,
unless sooner terminated, shall terminate on ten (10) years from the date the
Plan was originally adopted by the Board. An option may not be granted under the
Plan after the Plan is terminated.
10.
EFFECTIVENESS OF THE PLAN. The Plan will become effective upon approval by the
Company's shareholders within twelve months of the date the Plan is adopted by
the Company's Board of Directors.
11.
INFORMATION TO OPTIONEES. The Company shall provide to each optionee during the
period for which he or she has one or more outstanding options, copies of all
annual reports and all other information which is provided to shareholders of
the Company. The Company shall not be required to provide such information to
key employees whose duties in connection with the Company assure their access to
equivalent information.
12.
PRIVILEGES OF STOCK OWNERSHIP, SECURITIES LAW COMPLIANCE. No optionee shall be
entitled to the privileges of stock ownership as to any Shares not actually
issued and delivered to the optionee. The exercise of any option under the Plan
shall be conditioned upon the registration of the Shares with the SEC and
qualification of the options and underlying Shares under applicable state
securities laws, unless in the opinion of counsel to the Company registration or
qualification is not necessary. The Company shall diligently endeavor to comply
with all applicable securities laws before any options are granted under the
Plan and before any Shares are issued pursuant to the exercise of such
options.
13.
INDEMNIFICATION. To the extent permitted by applicable law in effect from time
to time, no member of the Board or the Committee shall be liable for any action
or omission of any other member of the Board or Committee nor for any act or
omission on the member's own part, excepting only the member's own willful
misconduct or gross negligence. The Company shall pay expenses incurred by, and
satisfy a judgment or fine rendered or levied against, a present or former
director or member of the Committee in any action against such person (whether
or not the Company is joined as a party defendant) to impose liability or a
penalty on such person for an act alleged to have been committed by such person
while a director or member of the Committee arising with respect to the Plan or
administration thereof or out of membership on the Committee or by the Company,
or all or any combination of the preceding; provided the director or Committee
member was acting in good faith, within what such director or Committee member
reasonably believed to have been within the scope of his or her employment or
authority and for a purpose which he or she reasonably believed to be in the
best interests of the Company or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This section does not apply to any action instituted or
maintained in the right of the Company by a shareholder or holder of a voting
trust certificate representing shares of the Company. The provisions of this
section shall apply to the estate, executor, administrator, heirs, legatees or
devisees of a director or Committee member, and the term "person" as used in
this section shall include the estate, executor, administrator, heirs, legatees
or devisees of such person.
Exhibit 10.4
NBT
Bancorp Inc. Employee Stock Purchase Plan
NBT
BANCORP INC.
EMPLOYEE
STOCK PURCHASE PLAN
ARTICLE
I-PURPOSE
The NBT
Bancorp Inc. Employee Stock Purchase Plan (the "Plan") is intended to provide to
employees of NBT Bancorp Inc. (the "Corporation") and its subsidiaries the
opportunity to acquire ownership interests in the Corporation through a regular
investment program. The Corporation believes that ownership of its Common Stock
will motivate employees to improve their job performance, and enhance the
financial results of the Corporation. The Plan is intended to qualify as an
"employee stock purchase plan" under section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and shall be construed so as to extend and limit
participation in a manner consistent with the requirements thereof.
ARTICLE
II-DEFINITIONS
2.01.
BASE PAY
"Base
Pay" shall mean an Employee's basic hourly wage or salary, excluding any
bonuses, overtime, or other extra or incentive pay. With respect to any Employee
compensated on a commission basis, the Committee shall make a good faith
estimate of the Employee's expected "Base Pay" by taking into account prior-year
compensation, excluding any bonuses, overtime, or other extra or incentive pay,
and any changes in circumstances for the current year.
2.02. BOARD
"Board"
shall mean the Board of Directors of the Corporation.
2.03. CODE
"Code"
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
2.04. COMMENCEMENT
DATE
"Commencement
Date" shall mean March 31, 2000 and each January 1 thereafter during which the
Plan is in effect.
2.05. COMMITTEE
"Committee"
shall mean the individuals described in Article IX.
2.06. COMMON
STOCK
"Common
Stock" shall mean the Common Stock, par value $.01 per share, of the
Corporation.
2.07. CORPORATION
"Corporation"
shall mean NBT Bancorp Inc., a Delaware corporation.
2.08. EMPLOYEE
"Employee"
shall mean any person employed by the Corporation or a Subsidiary Corporation
(as defined in Sec. 2.10).
2.09. OFFERING
"Offering"
shall mean an annual offering of Common Stock pursuant to Sec.
4.01.
2.10. SUBSIDIARY
CORPORATION
"Subsidiary
Corporation" shall mean any present or future corporation which would be a
"subsidiary corporation" of the Corporation as that term is defined in section
424 of the Code.
2.11. TERMINATION
DATE
"Termination
Date" shall mean the December 31 immediately following the Commencement Date of
an Offering.
ARTICLE
III-ELIGIBILITY AND PARTICIPATION
3.01. INITIAL
ELIGIBILITY
Except as
otherwise provided in Sec.Sec. 3.02 and 9.01, each Employee shall be eligible to
participate in Offerings that commence on or after the date he or she becomes an
Employee.
3.02. RESTRICTIONS
ON PARTICIPATION
No
Employee shall participate in an Offering:
(a)
if, immediately after the Commencement Date, such Employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of the
total combined voting power or value of all classes of stock of the Corporation
(for purposes of this paragraph, the rules of section 424(d) of the Code shall
apply in determining stock ownership of any Employee); or
(b)
to the extent that his or her rights to purchase stock under all employee stock
purchase plans of the Corporation accrue at a rate which exceeds $25,000 in fair
market value of the stock (determined at the time such options are granted) for
each calendar year in which such options are outstanding.
3.03. COMMENCEMENT
OF PARTICIPATION
An
Employee may participate in Offerings by completing an authorization for regular
payroll deductions on the form provided by the Corporation and filing it with
the Corporation on or before the date set therefor by the Committee, which date
shall be prior to the Commencement Date for an Offering. Payroll deductions for
an Employee shall commence on the applicable Commencement Date. Once enrolled,
an Employee shall continue to participate in this Plan for each succeeding
Offering until the Employee terminates his or her participation as provided in
Article VII or ceases to be an Employee. An Employee who desires to change his
or her rate of contribution may do so effective as of the beginning of the next
Commencement Date for an Offering by completing an authorization and filing it
with the Corporation prior to that Commencement Date.
ARTICLE
IV-GRANTING OF OPTIONS
4.01. ANNUAL
OFFERINGS
The Plan
shall be implemented by annual offerings of Common Stock beginning on March 31,
2000 and on the 1st day of January in each subsequent year, each Offering
terminating on the December 31 immediately following the Commencement Date (the
Termination Date).
4.02. NUMBER
OF OPTION SHARES
On the
Commencement Date of each Offering, a participating Employee shall be deemed to
have been granted an option to purchase a number of shares of Common Stock equal
to (i) the aggregate amount of payroll deductions during the Offering elected by
the Employee, divided by (ii) the option price determined under Sec.
4.03(i).
4.03. OPTION
PRICE
The
option price of Common Stock purchased in an Offering shall be the lower
of:
(i)
85% of the fair market value of Common Stock on the Commencement
Date,
or
(ii)
85% of the fair market value of Common Stock on the Termination
Date.
Fair
market value as of any date shall mean:
(a)
if the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly reported
for the Common Stock, the average of the closing or last prices of the Common
Stock on the Composite Tape or other comparable reporting system for the 10
consecutive trading days immediately preceding such date;
(b)
if the Common Stock is traded on the over-the-counter market, but sales
prices are not regularly reported for the Common Stock for the 10 days referred
to in (a) above, and if bid and asked prices for the Common Stock are regularly
reported, the average of the mean between the bid and the asked price for the
Common Stock at the close of trading in the over-the-counter market for such 10
days; and
(c)
if the Common Stock is neither listed on a national securities exchange
nor traded on the over-the counter market, such value as the Committee, in good
faith, shall determine.
4.04. MAXIMUM
SHARES
The
maximum number of shares which shall be issued under the Plan, subject to
adjustment upon changes in capitalization of the Corporation as provided in Sec.
11.02, shall be 500,000 shares. If the total number of shares for which options
are exercised on any Offering Termination Date, together with the aggregate
number of shares as to which options were exercised on all previous Offering
Termination Dates, exceeds the foregoing maximum number of shares, the
Corporation shall make a pro rata allocation of the shares available for
purchase in as nearly a uniform manner as shall be practicable and as it shall
determine to be equitable, and the balance credited to the account of each
Employee under Sec. 5.02 not used to purchase Common Stock shall be returned to
him or her as promptly as possible. Common Stock issued pursuant to the Plan
may be
either authorized but unissued shares or shares held in the treasury of the
Corporation.
4.05. EMPLOYEE'S
INTEREST IN OPTION STOCK
The
Employee shall have no interest in Common Stock covered by his or her option
until such option has been exercised in accordance with the provisions of
Article VI.
ARTICLE
V-PAYROLL DEDUCTIONS
5.01. AMOUNT
OF DEDUCTION
An
Employee's authorization for payroll deduction shall elect deductions of at
least 1% of Base Pay, but not more than 10% of Base Pay, in effect on the
Commencement Date of each Offering. No change in the amount of payroll
deductions shall be made during a year if the Employee's rate of Base Pay
changes during the year.
5.02. EMPLOYEE'S
ACCOUNT
All
payroll deductions made for an Employee shall be credited to his or her account
under the Plan. An Employee may not make any separate cash payment into such
account except when on leave of absence, and then only as provided in Sec.
5.04.
5.03. CHANGES
IN PAYROLL DEDUCTIONS
An
Employee may discontinue his or her payroll deductions under the Plan as
provided in Article VII, but may make no other change during an Offering and,
specifically, may not alter the amount of his or her payroll deductions for that
Offering.
5.04. LEAVE
OF ABSENCE
An
Employee on a leave of absence without pay shall have the right to (i)
discontinue contributions to the Plan, or (ii) make a cash payment to the
Corporation at the end of each payroll period in the amount of the Employee's
authorized Plan deductions.
ARTICLE
VI-EXERCISE OF OPTIONS
6.01. AUTOMATIC
EXERCISE
Unless an
Employee gives written notice to the Corporation as hereinafter provided, his or
her option with respect to any Offering shall be exercised automatically on the
Termination Date applicable to such Offering, for the number of full and
fractional shares of Common Stock subject to his or her option, as determined
under Sec. 4.02. Any amount in his or her account not used to purchase Common
Stock shall be returned to the Employee within a reasonable time after the
Termination Date of the Offering.
6.02. BOOK
ENTRY ACCOUNTS; DELIVERY OF STOCK
The
Corporation shall maintain a book entry account, in the name of each Employee
who purchased shares of Common Stock under Sec. 6.01, to record book entries of
the number of full and fractional shares (to 1/1,000 of a share) of Common Stock
purchased by an Employee. Statements of shares held in each Employee's book
entry account shall be delivered to each Employee within a reasonable time after
the Termination Date of each Offering. Shares credited to an Employee's book
entry account will be held in uncertificated form for a period of one year from
the date of purchase, except as provided in Sec.Sec. 6.04 and 7.03. Thereafter,
Employees may obtain stock certificates for those shares that have been held for
one year in their respective book entry accounts upon submitting a written
request to the Committee.
6.03. REGISTRATION
OF STOCK
Common
Stock to be delivered to an Employee under the Plan shall be registered in the
name of the Employee, or, if the Employee so directs by written notice to the
Corporation prior to the Offering Termination Date applicable thereto, in the
names of the Employee and one such other person as may be designated by the
Employee, as joint tenants with rights of survivorship or as tenants by the
entirety, to the extent permitted by applicable law.
6.04. TRANSFERABILITY
OF STOCK
Common
Stock issued pursuant to the Plan shall not be transferable, other than to the
Employee's estate or by bequest or inheritance, incident to the Employee's
divorce, or due to the Employee's immediate and heavy financial need, for one
year after the date of purchase.
Stock
certificates representing those shares that have been held in an Employee's book
entry account for less than one year from the date of purchase will be issued to
an Employee due to an immediate and heavy financial need of the Employee if the
Employee has incurred (or is about to incur) any of the following financial
obligations:
(i)
Expenses incurred or necessary for medical care described in
Code section 213(d) for the Employee, his or her spouse,
children or other dependents;
(ii)
Costs directly related to the purchase of the principal residence for the
Employee (excluding mortgage payments);
(iii)
Payment of tuition, related educational fees, and room and board expenses, for
the next twelve (12) months of post-secondary education for the Employee, his or
her spouse, children or other dependents; or
(iv)
Payments necessary to prevent the eviction of the Employee from his or her
principal residence or foreclosure on the mortgage of his or her principal
residence.
A
financial hardship request for stock certificates must be submitted to the
Committee in writing. The Employee making the application shall have the burden
of presenting to the Committee evidence that he or she has an immediate and
heavy financial need and that the issuance of stock certificates and subsequent
sale of those shares of Common Stock is necessary to satisfy that financial
need. Action upon any such application shall be taken by the Committee in its
absolute discretion.
6.05. WITHHOLDING
The
Corporation shall have the right to withhold from an Employee's compensation
amounts sufficient to satisfy all federal, state and local tax withholding
requirements, and shall have the right to require the Employee to remit to the
Corporation such additional amounts as may be necessary to satisfy such
requirements.
ARTICLE
VII-WITHDRAWAL
7.01. IN
GENERAL
An
Employee may withdraw the full amount credited to his or her account under the
Plan at any time by giving written notice to the Corporation. The balance
credited to the Employee's account shall be paid to him or her promptly after
receipt of the notice of withdrawal, and no further deductions shall be made
from his or her pay during such Offering.
7.02. EFFECT
ON SUBSEQUENT PARTICIPATION
An
Employee's withdrawal from any Offering shall not have any effect upon his or
her eligibility to participate in any succeeding Offering by filing with the
Corporation a new authorization for payroll deduction.
7.03. TERMINATION
OF EMPLOYMENT
Upon
termination of an Employee's employment for any reason, including retirement
(but excluding death while in the employ of the Corporation), the amount
credited to his or her account shall be returned to him or her or, in the case
of death subsequent to the termination of his or her employment, to the person
or persons entitled thereto under Sec. 11.08. Certificates for the number of
full shares of Common Stock allocated to a terminated Employee's book entry
account shall be issued to him or her as promptly as practicable after his or
her termination date, with any fractional shares paid in cash.
7.04. TERMINATION
OF EMPLOYMENT DUE TO DEATH
Upon
termination of an Employee's employment because of his or her death, his or her
beneficiary (as defined in Sec. 11.08) shall have the right to elect, by written
notice given to the Corporation prior to the Offering Termination Date,
either:
(i)
to withdraw the amount credited to the Employee's account under the Plan,
or
(ii) to
exercise his or her option on the Termination Date next following the date of
the Employee's death for the number of full and fractional shares of Common
Stock which the Employee's payroll deductions prior to death will purchase at
the applicable option price, but not more than the number of shares subject to
the Employee's option determined under Sec. 4.02, with any amount in such
account not used to purchase Common Stock returned to the
beneficiary.
In the
event that no such timely written notice of election shall be received by the
Corporation, the beneficiary shall automatically be deemed to have elected,
pursuant to paragraph (ii), to exercise the Employee's option.
ARTICLE
VIII-INTEREST
8.01. PAYMENT
OF INTEREST
No
interest shall be paid or allowed on any money paid into the Plan or credited to
the account of any Employee; provided, however, that interest shall be paid on
any and all money which is distributed to an Employee or his or her beneficiary
pursuant to the provisions of Sec.Sec. 7.01, 7.03 and 7.04. Such distributions
shall bear simple interest during the period from the date of withholding to the
date of return at the regular passbook savings account rate per annum in effect
at NBT Bank, N.A., Norwich, New York. Where the amount returned represents an
excess amount in an Employee's account after such account has been applied to
the purchase of Common Stock under Sec. 6.01, the Employee's withholding account
shall be deemed to have been applied first toward purchase of Common Stock under
the Plan, so that interest shall be paid on the last withholdings during the
period which results in the excess amount.
ARTICLE
IX-ADMINISTRATION
9.01. APPOINTMENT
OF COMMITTEE
The Board
shall appoint the Compensation and Benefits Committee to administer the Plan,
which shall consist of no fewer than two members of the Board. No members of the
Committee shall be eligible to purchase Common Stock under the Plan. If at any
time no Committee is in existence, the Board shall have the authority and
responsibility to carry out the duties of the Committee under the
Plan.
9.02. AUTHORITY
OF COMMITTEE
Subject
to the express provisions of the Plan, the Committee shall have plenary
authority in its discretion to interpret and construe any and all provisions of
the Plan, to adopt rules and regulations for administering the Plan, to make all
other determinations deemed necessary or advisable for administering the Plan.
The Committee's determination on the foregoing matters shall be
conclusive.
9.03. RULES
GOVERNING THE COMMITTEE
The Board
may from time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however caused,
in the Committee. The Committee may select one of its members as its Chairman
and shall hold its meetings at such times and places as it shall deem advisable,
and may hold telephonic meetings. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. The Committee may correct any defect or omission or reconcile any
inconsistency in the Plan, in the manner and to the extent it shall deem
desirable. Any decision or determination reduced to writing and signed by a
majority of the members of the Committee shall be as fully effective as if it
had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
ARTICLE
X-INDEMNIFICATION OF COMMITTEE
10.01. INDEMNIFICATION
OF COMMITTEE
In
addition to such other rights of indemnification as they may have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged
in such action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or proceeding,
a Committee member shall in writing offer the Corporation the opportunity, at
its own expense, to handle and defend the same.
ARTICLE
XI-MISCELLANEOUS
11.01. TRANSFERABILITY
Neither
payroll deductions credited to an Employee's account nor any rights with regard
to the exercise of an option or to receive Common Stock or a return of payroll
deductions under the Plan may be assigned, transferred, pledged, or otherwise
disposed of in any way other than by the laws of descent and distribution, nor
shall be subject to execution, attachment or similar process. Any such attempted
voluntary or involuntary disposition shall be without effect, except that the
Corporation may treat such act as an election to withdraw funds in accordance
with Sec. 7.01. During an Employee's lifetime, options granted to the Employee
shall be exercisable only by the Employee.
11.02. ADJUSTMENT
UPON CHANGES IN CAPITALIZATION
If, while
any options under the Plan are outstanding, the outstanding shares of Common
Stock have increased, decreased, changed into, or been exchanged for a different
number or kind of shares or securities of the Corporation, or of another
corporation, through reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, stock dividend (either in shares of the Corporation's
Common Stock or of another class of the Corporation's stock),stock split, or
similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding options and in the exercise price applicable to such
outstanding options. In addition, in any such event, the number and/or kind of
shares which may be offered in the Offerings shall also be proportionately
adjusted.
11.03. AMENDMENT
AND TERMINATION
The Board
shall have complete power and authority to terminate or amend the Plan;
provided, however, that the Board shall not, without the approval of the
stockholders of the Corporation, (i) increase the maximum number of shares which
may be issued under the Plan (except pursuant to Sec. 11.02); or (ii) amend the
requirements as to the class of Employees eligible to purchase Common Stock
under the Plan or permit the members of the Committee or non-employee directors
to purchase Common Stock under the Plan. No termination, modification, or
amendment of the Plan may, without the consent of an Employee then having an
option under the Plan to purchase Common Stock, adversely affect the rights of
such Employee under the option as to payroll deductions previously credited to
the Employee's account. The Plan shall not be amended more than once every 6
months, other than to comport with changes in the Code or the rules
thereunder.
11.04. USE
OF FUNDS
All
payroll deductions received or held by the Corporation under this Plan may be
used by the Corporation for any corporate purpose and the Corporation shall not
be obligated to segregate such payroll deductions.
11.05. EFFECTIVE
DATE
The Plan
shall become effective as of March 31, 2000, subject to approvalby the holders
of a majority of the Common Stock present and represented at a special or annual
meeting of the shareholders held within 12 months after the Plan is adopted by
the Board. If the Plan is not so approved, the Plan shall not become effective,
and all account balances under the Plan shall be distributed promptly to the
contributing Employees.
11.06. NO
EMPLOYMENT RIGHTS
The Plan
does not, directly or indirectly, create in any Employee or class of Employees
any right with respect to continuation of employment by the Corporation, and it
shall not be deemed to interfere in any way with the Corporation's right to
terminate, or otherwise modify, an Employee's employment at any
time.
11.07. GOVERNING
LAW
The laws
of the State of Delaware, without regard to conflicts of laws principles, shall
govern all matters relating to this Plan except to the extent they are
superseded by federal law.
11.08. DESIGNATION
OF BENEFICIARY
An
Employee may file a written designation of a beneficiary who is to receive any
Common Stock and/or cash credited to the Employee under this Plan in the event
of such Employee's death prior to the delivery to him or her of such Common
Stock and/or cash. Such designation of beneficiary may be changed by the
Employee at any time by written notice to the Treasurer of the Corporation. Upon
the death of an Employee and upon receipt of the Corporation of proof of
identity and existence at the Employee's death of a beneficiary validly
designated by him or her under the Plan, the Corporation shall deliver such
Common Stock and/or cash to such beneficiary. In the event of the death of an
Employee and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such Employee's death, the Corporation shall
deliver such Common Stock and/or cash to the executor or administrator of the
estate of the Employee, or if no such executor or administrator has been
appointed (to the knowledge of the Corporation), the Corporation, in its sole
discretion, may deliver such Common Stock and/or cash to the spouse or to any
one or more dependents or relatives of the Employee, or if no spouse, dependent,
or relative is known to the Corporation, then to such other person as the
Corporation may designate. No designated beneficiary shall, prior to the death
of the Employee by whom he or she has been designated, acquire any interest in
the Common Stock or cash credited to the Employee under this
Plan.
Exhibit
10.5
NBT
BANCORP INC. NON-EMPLOYEE DIRECTORS' RESTRICTED AND DEFERRED STOCK
PLAN
NBT
Bancorp Inc. sets forth herein the terms of this Non-Employee Directors'
Restricted and Deferred Stock Plan as follows:
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PURPOSE
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The Plan
is intended to advance the interests of the Company by providing an additional
incentive to attract, retain and motivate qualified and competent persons who
are not employees of the Company to serve on the Board of the Company. To this
end, the Plan provides for the grant of restricted and deferred stock all as set
out herein.
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DEFINITIONS
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For
purposes of interpreting the Plan and related documents (including Restricted
Stock and Deferred Stock Agreements), the following definitions shall
apply:
2.1 "Affiliate"
means any company or other trade or business that is controlled by or under
common control with the Company (determined in accordance with the principles of
Section 414(b) and 414(c) of the Code and the regulations thereunder) or is an
affiliate of such entity within the meaning of Rule 405 of Regulation C under
the 1933 Act.
2.2 "Agreement"
means a written agreement between the Company and the recipient individual that
sets out the terms and conditions of the grant of a Restricted or Deferred Stock
Award.
2.3 "Board"
means the Board of Directors of the Company.
2.4 "Change
in Control" of the Company means
(A) A
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be deemed to have
occurred at such time as any Person hereafter becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more of the combined voting power of the Company's Voting Securities;
or
(B) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(C) There
shall be consummated (x) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
Voting Securities would be converted into cash, securities, or other property,
other than a merger of the Company in which the holders of Voting Securities
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all of the assets of the Company,
provided that any such consolidation, merger, sale, lease, exchange or other
transfer consummated at the insistence of an appropriate banking regulatory
agency shall not constitute a change in control of the Company; or
(D) Approval
by the stockholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company.
2.5 "Code"
means the Internal Revenue Code of 1986, as now in effect or as hereafter
amended.
2.6 "Committee"
means the committee appointed by the Board pursuant to Section 3.2 of the
Plan.
2.7 "Company"
means NBT Bancorp Inc., a Delaware corporation.
2.8 "Deferred
Stock" shall mean Stock which will not be distributed nor which a Holder may
sell, transfer, assign, pledge or otherwise encumber or dispose of until the
Holder ceases to be a Director. Deferred stock shall otherwise be granted
without any vesting requirements or any Restriction Period except as provided in
this definition.
2.9 "Deferred
Stock Agreement" means the written agreement evidencing the grant of Deferred
Stock hereunder.
2.10 "Director"
means a member of the Board or a Director of a Subsidiary or one denominated as
a Director of a division of a Subsidiary.
2.11 "Effective
Date" means the date of adoption of the Plan by the Board, subject to approval
by the stockholders of the Company.
2.12 "Exchange
Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter
amended.
2.13 "Fair
Market Value" means the value of each Share subject to the Plan determined as
follows: if on the Grant Date or other determination date the shares of Stock
are listed on an established national or regional stock exchange, are admitted
to quotation on the National Association of Securities Dealers Automated
Quotation System, or are publicly traded on an established securities market,
the Fair Market Value of the shares shall be the average price between the high
and the low sale price of the shares on such exchange or in such market on the
trading day immediately preceding the Grant Date or, if no sale of the shares is
reported for such trading day, on the next preceding day on which any sale shall
have been reported. If the shares are not listed on such an exchange, quoted on
such System or traded on such a market, Fair Market Value shall be determined by
the Board in good faith.
2.14 "Grant
Date" means the later of (i) the date as of which the Board approves the grant
and (ii) the date as of which the Holder and the Company or Affiliate enter the
relationship resulting in the Holder being eligible for grants.
2.15 "Holder"
means a person who is eligible to receive Restricted or Deferred Stock under the
Plan.
2.16 "Plan"
means the NBT Bancorp Inc. Non-Employees Directors' Restricted and Deferred
Stock Plan.
2.17 "Restricted
Stock" means Stock which is subject to a risk of forfeiture.
2.18 "Restricted
Stock Agreement" means the written agreement evidencing the grant of Restricted
Stock hereunder.
2.19 "Restricted
Stock Award" means an award of Restricted Stock granted pursuant to Section 7 of
this Plan.
2.20 "1933
Act" means the Securities Act of 1933, as now in effect or as hereafter
amended.
2.21 "Stock"
means the Common Stock, par value $0.01 per share, of the Company.
2.22 "Subsidiary"
means any "subsidiary corporation" of the Company within the meaning of Section
424(f) of the Code.
2.23 "Voting
Securities" means securities of the Company having the right to vote at
elections of members of the Board of Directors.
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3
|
ADMINISTRATION
|
3.1 Board.
The Plan shall be administered by the Board, which shall have the full power and
authority to take all actions and to make all determinations required or
provided for under the Plan or any Restricted or Deferred Stock Agreement
entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Restricted or Deferred Stock Agreement entered into hereunder. The
interpretation and construction by the Board of any provision of the Plan or of
any Restricted or Deferred Stock Agreement entered into hereunder shall be final
and conclusive.
3.2 Committee.
The Board may from time to time appoint a Committee, and the Board, in its sole
discretion, may provide that the role of the Committee shall be limited to
making recommendations to the Board concerning any determinations to be made and
actions to be taken by the Board pursuant to or with respect to the Plan, or the
Board may delegate to the Committee such powers and authorities related to the
administration of the Plan, as set forth in Section 3.1 hereof, as the Board
shall determine, consistent with the Certificate of Incorporation and Bylaws of
the Company and applicable law. In the event that the Plan or any Restricted or
Deferred Stock Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section 3.2. Unless otherwise expressly determined by the Board, any such action
or determination by the Committee shall be final and conclusive.
3.3 No
Liability. No member of the Board or of the Committee shall be liable for any
action or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Restricted or
Deferred Stock Agreement entered into hereunder.
|
4
|
STOCK
|
The Stock
that may be issued pursuant to Restricted or Deferred Stock Awards may be
treasury shares or authorized but unissued shares. The number of shares of Stock
that may be issued pursuant to Restricted or Deferred Stock Awards under the
Plan shall not exceed, in the aggregate, 200,000 shares. If any Restricted Stock
Award expires, terminates, or is terminated or canceled for any reason prior to
vesting in full, the shares that were subject to the forfeited or terminated
portion of such Restricted Stock Award shall be available immediately for future
grants of Restricted Stock Awards under the Plan.
|
5
|
ELIGIBILITY
|
5.1 Designated
Recipients. Restricted Stock and Deferred Stock Awards may be granted under the
Plan to any non-employee director of the Company or any Subsidiary or any
division of a Subsidiary, as the Board shall determine and designate from time
to time.
5.2 Successive
Grants. An individual may hold more than one Restricted or Deferred Stock Award,
subject to such restrictions as are provided herein.
|
6
|
EFFECTIVE
DATE AND TERM OF THE PLAN
|
6.1 Effective
Date. The Plan shall be effective as of the date of adoption by the Board,
subject to approval by the stockholders of the Company.
6.2 Term.
The Plan shall continue until there are no shares available for grant pursuant
to Section 4, or unless earlier terminated in accordance with Section 11
hereof.
|
7
|
GRANT
OF RESTRICTED AND DEFERRED STOCK
|
|
7.1
|
Restricted
Stock Awards.
|
(a) The
Board may from time to time, and subject to the provisions of the Plan and such
other terms and conditions as the Board may determine, grant Restricted Stock
under the Plan. Each Restricted Stock Award shall be evidenced by a written
instrument which shall state the number of shares covered by the award and the
terms and conditions which the Board shall have determined with respect to such
award, including the number of shares that the Holder shall be entitled to
receive, and the vesting terms. In accordance with Section 7.3, a certificate
representing the shares covered by the award shall be registered in the name of
the Holder and shall be delivered to the Holder within 30 days after the vesting
of any shares to which the Holder shall be entitled. The Holder shall generally
have the rights and privileges of a stockholder of the Company with respect to
such shares, including the right to vote and to receive dividends, subject to
the restrictions specified in paragraphs (b) and (c).
(b) The
Board shall determine a period of time ("Restriction Period") which shall apply
to the shares transferred to a Holder with respect to each Restricted Stock
Award. Except as otherwise determined by the Board, during the Restriction
Period applicable with respect to each Restricted Stock Award, the Holder may
not sell, transfer, assign, pledge or otherwise encumber or dispose of the
shares covered by such Restricted Stock Award. The Board in its discretion may
prescribe conditions for the incremental lapse of the preceding restrictions
during the Restriction Period, and for the lapse or termination of such
restrictions upon the occurrence of certain events before the expiration of the
Restriction Period. The Board in its discretion also may shorten or terminate
the Restriction Period or waive any conditions for the lapse or termination of
the restrictions with respect to all or any portion of the shares covered by the
Restricted Stock Award.
(c) If
the Holder terminates board membership with the Company (or any Subsidiary or
any division, including advisory boards), due to death, disability, retirement
after the age of 70, or failure to be re-elected or re-appointed, the Restricted
Stock granted, to the extent not already vested, shall vest in full as of the
date of such termination. Voluntary resignation or removal for cause will result
in forfeiture of the non-vested grants. The Holder may designate a beneficiary
to receive the stock certificate representing that portion of the Restricted
Stock award automatically vested upon death. The Holder has the right to change
such beneficiary designation at will.
7.2 Restricted
Stock and Deferred Stock Agreements. All Restricted and Deferred Stock Awards
granted pursuant to the Plan shall be evidenced by Restricted and Deferred Stock
Agreements, to be executed by the Company and by the Holder, in such form or
forms as the Board shall from time to time determine. Restricted Stock and
Deferred Stock Agreements covering Restricted Stock granted from time to time or
at the same time need not contain similar provisions; provided, however, that
all such Restricted and Deferred Stock Agreements shall comply with all terms of
the Plan.
7.3 Certificates
for Restricted Stock and Deferred Stock. The Board may cause a legend to be
placed on such certificates that complies with the applicable securities laws
and regulations and makes appropriate reference to the restrictions to which the
shares are subject. Upon attainment of the specified objectives and requirements
(or, to the extent specified in the grant, upon the partial attainment of the
objectives and requirements), a certificate for the number of shares with
respect to which restrictions have lapsed shall be delivered to the Holder free
of restrictions.
7.4 Deferred
Stock Awards. The Board may from time to time, and subject to the provisions of
the Plan and such other terms and conditions as the Board may determine, grant
Deferred Stock under the Plan. Each Deferred Stock Award shall be evidenced by a
written instrument which shall state the number of shares covered by the award
and the terms and conditions with respect to such award. Subject to Section 7.3,
a certificate representing the shares covered by the award shall be registered
in the name of the Holder and shall be delivered to the Holder within 30 days
after the Holder ceases to be a Director. The Holder shall generally have the
rights and privileges of a stockholder of the Company, including the right to
vote and receive dividends, with respect to such shares. The Holder may
designate a beneficiary to receive the stock certificate representing the
Deferred Stock award should the Holder die while still a Director. The Holder
has the right to change such beneficiary designation at will.
|
8
|
REQUIREMENTS
OF LAW
|
The
Company shall not be required to issue any shares of Stock under the Plan if the
issuance of such shares would constitute a violation by the Holder or by the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares of Stock subject to the
Plan upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the issuance of shares of Stock
hereunder, the Restricted Stock shall remain subject to a risk of forfeiture in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Specifically in connection with the 1933 Act (as now
in effect or as hereafter amended), unless a registration statement under such
Act is in effect with respect to the shares of Stock covered by the Plan, the
Company shall not be required to issue such shares unless the Company has
received evidence satisfactory to it that the Holder may acquire such shares
pursuant to an exemption from registration under such Act. Any determination in
this connection by the Company shall be final, binding, and conclusive. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the 1933 Act (as now in effect or as hereafter
amended). The Company shall not be obligated to take any affirmative action in
order to cause the issuance of shares of Stock pursuant thereto to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that the Restricted Stock or Deferred Stock
shall remain subject to a risk of forfeiture unless and until the shares of
Stock covered by the Plan are registered or are subject to an available
exemption from registration, the termination of the risk of forfeiture as to the
Restricted Stock (under circumstances in which the laws of such jurisdiction
apply) shall be deemed conditioned upon the effectiveness of such registration
or the availability of such an exemption.
|
9
|
TRANSFERABILITY
OF RESTRICTED STOCK; RESTRICTIONS ON
STOCK
|
No
Restricted Stock shall be assignable or transferable, other than by will or the
laws of descent and distribution, before the later of (i) the end of the
Restriction Period and (ii) satisfaction of any other applicable performance and
service requirements with respect to such shares, as set forth in the applicable
Restricted Stock Agreement. Deferred Stock is subject to the limitations
contained in the definition thereof and in Section 7.4.
|
10
|
PARACHUTE
LIMITATIONS
|
Notwithstanding
any other provision of this Plan or of any other agreement, contract, or
understanding heretofore or hereafter entered into by the Holder with the
Company, except an agreement, contract, or understanding hereafter entered into
that expressly modifies or excludes application of this paragraph (an "Other
Agreement"), and notwithstanding any formal or informal plan or other
arrangement for the direct or indirect provision of compensation to the Holder
(including groups or classes of participants or beneficiaries of which the
Holder is a member), whether or not such compensation is deferred, is in cash,
or is in the form of a benefit to or for the Holder (a "Benefit Arrangement"),
if the Holder is a "disqualified individual," as defined in Section 280G(c) of
the Code, any Restricted Stock or Deferred Stock held by that Holder and any
right to receive any payment or other benefit under this Plan shall not become
vested (i) to the extent that such right to vesting, payment, or benefit, taking
into account all other rights, payments, or benefits to or for the Holder under
this Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Holder under this Plan to be considered a "Parachute
Payment" within the meaning of Section 280G(b)(2) of the Code as then in effect
(a "Parachute Payment") and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Holder from the Company
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by him or her
without causing any such payment or bene fit to be considered a Parachute
Payment. In the event that the receipt of any such right to vesting, payment, or
benefit under this Plan, in conjunction with all other rights, payments, or
benefits to or for the Holder under any Other Agreement or any Benefit
Arrangement would cause the Holder to be considered to have received a Parachute
Payment under this Plan that would have the effect of decreasing the after-tax
amount received by the Holder as described in clause (ii) of the preceding
sentence, then the Holder shall have the right, in the Holder's sole discretion,
to designate those rights, payments, or benefits under this Plan, any Other
Agreements, and any Benefit Arrangements that should be reduced or eliminated so
as to avoid having the payment or benefit to the Holder under this Plan be
deemed to be a Parachute Payment.
|
11
|
AMENDMENT
AND TERMINATION OF THE PLAN
|
The Board
may, at any time and from time to time, amend, suspend, or terminate the Plan as
to any shares as to which Restricted or Deferred Stock Awards have not been
granted. Except as permitted under this Section 11 or Section 13 hereof, no
amendment, suspension, or termination of the Plan shall, without the consent of
the Holder of the Restricted or Deferred Stock, alter or impair rights or
obligations under any Restricted or Deferred Stock theretofore granted under the
Plan.
|
12
|
EXCHANGE
ACT: RULE 16B-3
|
12.1 General.
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") under the Exchange
Act. Any provision inconsistent with Rule 16b-3 shall, to the extent permitted
by law and determined to be advisable by the Board, be inoperative and
void.
12.2 Additional
Restriction on Transfer of Stock. No director, officer or other "insider" of the
Corporation subject to Section 16 of the Exchange Act shall be permitted to sell
shares (which such "insider" had received as Restricted Stock) during the six
months immediately following the grant of such Restricted Stock
Award.
|
13
|
EFFECT
OF CHANGES IN CAPITALIZATION
|
13.1 Changes
in Stock. If the number of outstanding shares of Stock is increased or decreased
or the shares are changed into or exchanged for a different number or kind of
shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company, occurring after the Effective Date, the number and kinds of shares
for the issuance of which Restricted or Deferred Stock Awards may be granted
shall be adjusted proportionately and accordingly by the Company.
13.2 Change
of Control. Upon a Change of Control of the Company, unvested Restricted Stock
Awards shall cease being subject to a risk of forfeiture, any Limitation Period
shall expire, and all Restricted Stock Awards will be fully vested.
13.3 Adjustments.
Adjustments under this Section 13 related to shares of Stock or securities of
the Company shall be made by the Board, whose determination in that respect
shall be final, binding, and conclusive. No fractional shares or units of other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
13.4 No
Limitations on Company. The grant of Restricted or Deferred Stock Awards
pursuant to the Plan shall not affect or limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or
assets.
|
14
|
DISCLAIMER
OF RIGHTS
|
No
provision in the Plan or in any Restricted or Deferred Stock Award granted or
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of the Company, any
Subsidiary or any Affiliate, or to interfere in any way with any contractual or
other right or authority of the Company, any Subsidiary or any Affiliate either
to increase or decrease the compensation or other payments to any individual at
any time, or to terminate any other relationship between any individual and the
Company, a Subsidiary or an Affiliate. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any participant or beneficiary
under the terms of the Plan.
|
15
|
NONEXCLUSIVITY
OF THE PLAN
|
The
adoption of the Plan shall not be construed as creating any limitations upon the
right and authority of the Board to adopt such other incentive compensation
arrangements (which arrangements may be applicable either generally to a class
or classes of individuals or specifically to a particular individual or
particular individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of Restricted or Deferred Stock
otherwise than under the Plan.
|
16
|
CAPTIONS
|
The use
of captions in this Plan or any Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such
Agreement.
|
17
|
OTHER
PROVISIONS
|
Each
Restricted or Deferred Stock Award granted under the Plan may contain such other
terms and conditions not inconsistent with the Plan as may be determined by the
Board, in its sole discretion.
|
18
|
NUMBER
AND GENDER
|
With
respect to words used in this Plan, the singular form shall include the plural
form, the masculine gender shall include the feminine gender, etc., as the
context requires.
|
19
|
SEVERABILITY
|
If any
provision of the Plan or any Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions
hereof and thereof shall be severable and enforceable in accordance with their
terms, and all provisions shall remain enforceable in any other
jurisdiction.
|
20
|
GOVERNING
LAW
|
The
validity and construction of this Plan and the instruments evidencing the
Restricted Stock Awards granted hereunder shall be governed by the laws of the
State of New York, without regard to any applicable conflicts of laws
rules.
The Plan
was duly adopted and approved by the Board of Directors of the Company on the __
day of __ , 2003.
| /s/ | |
|
Secretary
of the Company
|
The Plan
was duly adopted and approved by the stockholders of the Company on the
day __ of
__ , 2003.
| /s/ | |
|
Secretary
of the Company
|
Exhibit
10.6
NBT
BANCORP INC. PERFORMANCE SHARE PLAN EFFECTIVE MAY 1, 2003
TABLE OF
CONTENTS
|
I
GENERAL
|
B2
|
|
1.1
Purpose
|
B2
|
|
1.2
Effective Date
|
B2
|
|
II
DEFINITIONS
|
B2
|
|
III
ELIGIBILITY AND PARTICIPATION
|
B4
|
|
3.1
Eligibility
|
B4
|
|
3.2
Participation in Performance Share Awards
|
B4
|
|
IV
PLAN DESIGN
|
B4
|
|
4.1
Eligibility Period
|
B4
|
|
4.2
Performance Period
|
B4
|
|
4.3
Performance Share Awards
|
B4
|
|
4.4
Performance Goals
|
B4
|
|
4.5
Available Common Stock
|
B5
|
|
4.6
Adjustment to Shares
|
B5
|
|
4.7
Maximum Award
|
B5
|
|
4.8
Committee Discretion to Adjust Awards
|
B5
|
|
V
PAYMENT
|
B5
|
|
5.1
Committee Determination of Common Stock Payable
|
B5
|
|
5.2
Timing and Form of Payment
|
B5
|
|
5.3
Distribution upon Termination of Employment
|
B6
|
|
5.4
Beneficiary Designation
|
B7
|
|
VI
ADMINISTRATION
|
B7
|
|
6.1
Committee
|
B7
|
|
6.2
General Rights, Powers, and Duties of Committee
|
B7
|
|
6.3
Information to be Furnished to Committee
|
B7
|
|
6.4
Responsibility and Indemnification
|
B7
|
|
VII
AMENDMENT AND TERMINATION
|
B8
|
|
7.1
Amendment
|
B8
|
|
7.2
Company's Right to Terminate
|
B8
|
|
VIII
MISCELLANEOUS
|
B8
|
|
8.1
No Implied Rights; Rights on Termination of Service
|
B8
|
|
8.2
No Right to Company Assets
|
B8
|
|
8.3
No Employment Rights
|
B8
|
|
8.4
Other Benefits
|
B8
|
|
8.5
Offset
|
B8
|
|
8.6
Non-assignability
|
B8
|
|
8.7
Notice
|
B8
|
|
8.8
Governing Laws
|
B8
|
|
8.9
Gender and Number
|
B9
|
|
8.10
Severability
|
B9
|
|
I
|
GENERAL
|
1.1 Purpose.
The purposes of the Plan are to retain officers and other key employees, to
support the achievement of the Company's strategic business objectives, and to
encourage increased ownership of Company stock by officers and other key
employees by providing to such persons competitive long-term incentive
opportunities that are linked to the profitability of the Company's business and
increases in stockholder value. The Plan is to be maintained primarily for a
select group of management and highly compensated employees.
1.2 Effective
Date. The Plan shall become effective as of May 1, 2003, subject to its approval
by the Company's stockholders.
|
II
|
DEFINITIONS
|
2.1 "Beneficiary"
means the person or persons so designated by a Participant pursuant to Section
5.4.
2.2 "Board
of Directors" means the Board of Directors of the Company.
2.3 "Cause"
shall mean the commission of an act of fraud, embezzlement, or theft
constituting a felony or an act intentionally against the interests of the
Company which causes the Company material injury.
2.4 "Change
in Control" of the Company means
(i) A
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be deemed to have
occurred at such time as any Person hereafter becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more of the combined voting power of the Company's Voting Securities;
or
(ii) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(iii) There
shall be consummated (x) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
Voting Securities would be converted into cash, securities, or other property,
other than a merger of the Company in which the holders of Voting Securities
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all of the assets of the Company,
provided that any such consolidation, merger, sale, lease, exchange or other
transfer consummated at the insistence of an appropriate banking regulatory
agency shall not constitute a change in control of the Company; or
(iv) Approval
by the stockholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company.
2.5 "Code"
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.
2.6 "Committee"
means the committee referred to in Section 6.1.
2.7 "Common
Stock" means common stock, par value $0.01 per share, of the
Company.
2.8 "Company"
means NBT Bancorp Inc.
2.9 "Covered
Employee" means any Participant who is or may be a "Covered Employee," within
the meaning of Section 162(m)(3) of the Code, in the year in which the payment
of any shares of Common Stock in satisfaction of a Performance Share award will
be taxable to such Participant.
2.10 "Disability"
shall have the same meaning as under the Company-sponsored long-term disability
plan under which the applicable Participant is then eligible to participate or,
if the Participant is not then eligible to participate in such plan, the
Participant shall be considered to be disabled if he or she is eligible for
disability benefits from the Social Security Administration.
2.11 "Eligibility
Period" means a period, as determined by the Committee pursuant to Section
4.1.
2.12 "Fair
Market Value" means the value of each Share subject to the Plan determined as
follows: if on the Grant Date or other determination date the shares of Stock
are listed on an established national or regional stock exchange, are admitted
to quotation on the National Association of Securities Dealers Automated
Quotation System, or are publicly traded on an established securities market,
the Fair Market Value of the shares shall be the average price between the high
and the low sale price of the shares on such exchange or in such market on the
trading day immediately preceding the Grant Date or, if no sale of the shares is
reported for such trading day, on the next preceding day on which any sale shall
have been reported. If the shares are not listed on such an exchange, quoted on
such System or traded on such a market, Fair Market Value shall be determined by
the Board in good faith.
2.13 "Good
Reason" means the termination by the Participant of employment for "Good Reason"
based on any of the following:
(i) A
change in the Participant's position(s) with the Company, other than for Cause
is in effect immediately prior to the Change in Control, without the consent of
the Participant.
(ii) A
decrease by the Company in the Participant's salary or benefits as in effect
immediately prior to the Change in Control.
2.14 "Non-Employee
Director" means a member of the Board of Directors who qualifies as (i) a
"non-employee director," as defined in Rule 16b-3, as promulgated by the
Securities Exchange Commission under the Securities Exchange Act of 1934, or any
successor definition adopted by the Securities Exchange Commission, and as (ii)
an "outside director," as defined in Section 1.162-27(e)(3) of the Treasury
Regulations issued under Section 162(m) of the Code, or any successor definition
adopted by the Department of the Treasury.
2.15 "Normal
Retirement" means termination of employment after attainment of age 65 or such
earlier age as is provided or has been provided in a Supplemental Executive
Retirement Plan with respect to a person participating in the Plan which was in
effect at any time during the Performance Period. However, the Committee, within
its discretion, may determine that a Participant who terminates employment prior
to age 65 has terminated by virtue of Normal Retirement.
2.16 "Participant"
means a person who is designated, pursuant to Article III, to be eligible to
receive benefits under the Plan.
2.17 "Performance
Goals" means the performance standards established by the Committee pursuant to
Section 4.4.
2.18 "Performance
Period" means a period of service, as determined pursuant to Section 4.2, over
which the extent of achievement of established Performance Goals will be
measured. For purposes of applying to Covered Employees the various rules of the
performance-based compensation exemption under Section 162(m)(4)(C) of the Code
and the Treasury Regulations issued thereunder, the Performance Period shall be
the "period of service to which the Performance Goals relate" (as defined in
Treasury Regulation Section 1.162-27(e) (2)).
2.19 "Performance
Share" means an award, designated in terms of a share of Common Stock, granted
pursuant to the Plan.
2.20 "Person"
means and includes any individual, corporation, partnership, group, association,
or other "person," as such term is used in section 14(d) of the Exchange Act,
other than the Company or any employee benefit plan(s) sponsored by the
Company.
2.21 "Plan"
means this NBT Bancorp Inc. Performance Share Plan, as amended from time to
time.
2.22 "Pro-rated"
or "Pro-rata" means, for purposes of determining the amount of Common Stock
payable to a Participant whose eligibility to participate in the Plan with
respect to an Eligibility Period ceases prior to the end of such Eligibility
Period for any of the reasons described in subsection (a) (b) (c) (d) or (e) of
Section 5.3, the percentage to be applied to the Common Stock that would have
been payable at the end of the Performance Period to such Participant if he had
been eligible to participate for the entire Eligibility Period. Such percentage
shall equal the number of months (rounded to the nearest whole month) of the
Eligibility Period during which the Participant was designated by the Committee
as eligible to participate in the Plan divided by the number of months (rounded
to the nearest whole month) in such Eligibility Period. A Participant who,
pursuant to Section 3.2 but subject to the limitations of Section 4.3, is
designated as eligible to participate in the Plan after the applicable
Eligibility Period has commenced, shall, for purposes of this Section 2.21, be
deemed to have been eligible as of the beginning of such Eligibility Period;
provided, however, that the Committee shall, in accordance with its authority
under Section 4.8, have the discretion to reduce the Pro-rated Common Stock
award that is otherwise payable to such Participant to account for such late
commencement of participation.
2.23 "Voting
Securities" means securities of the Company having the right to vote at
elections of members of the Board of Directors.
|
III
|
ELIGIBILITY
AND PARTICIPATION
|
3.1 Eligibility.
Participation in the Plan shall be limited to officers and other key employees
of the Company or any of its subsidiaries or other affiliates who are designated
to be eligible by the Committee.
3.2 Participation
in Performance Share Awards. The Committee will determine the persons who will
participate for each Eligibility Period under the Plan. Subject to Section 4.3,
after an Eligibility Period has commenced, persons may be designated as eligible
to participate in the Plan with respect to such Eligibility Period. The award of
Performance Shares with respect to a Performance Period contained in any
Eligibility Period does not guarantee participation in subsequent Eligibility
Periods.
|
IV
|
PLAN
DESIGN
|
4.1 Eligibility
Period. An Eligibility Period is a certain period of time, as determined by the
Committee, over which eligibility to receive benefits under the Plan shall be
measured. Eligibility Periods under the Plans shall commence and terminate as
determined by the Committee in its sole discretion. The Committee may establish
a separate Eligibility Period for persons determined to be eligible for
participation after the commencement of any Eligibility Period.
4.2 Performance
Period. Each Eligibility Period under the Plan shall include a Performance
Period which shall be a specified period of service over which the achievement
of applicable Performance Goals will be measured. Performance Periods shall
commence and terminate as determined by the Committee, provided that each such
Performance Period shall commence coincident with or after the commencement of
the corresponding Eligibility Period and shall terminate coincident with or
prior to the termination of the corresponding Eligibility Period.
Notwithstanding the foregoing, in the event of a Change of Control, the
Performance Period shall terminate.
The
Committee may also establish a separate Performance Period for persons
determined to be eligible for participation after the commencement of any
Performance Period.
4.3 Performance
Share Awards. On or about the commencement of each Eligibility Period under the
Plan, the Committee shall establish the minimum and maximum Performance Shares
that may be awarded to each Participant in the Plan for such Eligibility Period
and the basis for such awards. The Committee may also award Performance Shares
to persons determined to be eligible for participation after the commencement of
any Eligibility Period. Performance Shares must be awarded to Covered Employees
at a time when the outcome of the Performance Goals established or to be
established for the applicable Performance Period is substantially uncertain.
The Performance Shares awarded to any Covered Employee and the terms and
conditions applicable to such Performance Shares must be finalized in writing by
the Committee as soon as is practicable. Each award of Performance Shares under
the Plan shall be evidenced by a written "Notice of Award," which shall be
signed by an authorized officer of the Company and by the Participant and shall
contain such terms and conditions as are approved by the Committee. Such terms
and conditions need not be the same in all cases.
4.4 Performance
Goals.
(a) Performance
Goals with respect to each Performance Period shall be established by the
Committee. The Committee may in its discretion adjust the terms of such
Performance Goals; provided that Performance Goals applied to Covered Employees
("Covered Employees' Performance Goals") shall not be adjusted. No Covered
Employees' Performance Goals shall be adjusted at a time when the outcome of
such Performance Goals is no longer substantially uncertain. Covered Employees'
Performance Goals must be finalized in writing by the Committee on or prior to
the applicable adjustment deadline described in the preceding
sentences.
(b) The
Performance Goals set by the Committee shall be based on specified criteria as
determined by the Committee, which shall specify the manner in which such
Performance Goals shall be calculated. Covered Employees' Performance Goals
shall be based on objective business criteria, which shall include but not be
limited to one or more of the following: earnings per share, total shareholder
return, operating earnings, growth in assets, return on equity, return on
capital, market share, stock price, net income, cash flow, and retained
earnings. Performance Goals also may be based upon the attainment of specified
levels of performance of the Company under one or more of the measures described
above relative to the performance of other corporations.
(c) All
of the provisions of this Section 4.4 are subject to the requirement that all
Covered Employees' Performance Goals shall be objective performance goals
satisfying the requirement for "performance-based compensation" within the
meaning of Section 162(m)(4) of the Code and the Treasury Regulations issued
thereunder.
4.5 Available
Common Stock. The maximum number of shares of Common Stock which shall be
available for distribution in satisfaction of awards under the Plan shall not
exceed 300,000, subject to adjustment as provided in Section 4.6. The shares of
Common Stock available for issuance under the Plan may be authorized and
unissued shares or treasury shares or may be purchased in the open
market.
4.6 Adjustment
to Shares. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to Common Stock or other change in corporate structure affecting such
Common Stock, the Committee may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan or in
the number and kind of shares subject to outstanding Performance Share awards
under the Plan. The Committee shall make such substitutions or adjustments as in
its discretion it determines to be appropriate and equitable to prevent dilution
or enlargement of rights hereunder; provided, however, that the number of shares
of Common Stock subject to any Performance Share award shall always be a whole
number.
4.7 Maximum
Award. The maximum number of shares of Common Stock that may be issued to any
Covered Employee with respect to any Eligibility Period pursuant to any
Performance Share award is 50,000, subject to adjustment as provided in Section
4.6. This limit includes any portion or amount of Common Stock that is withheld
for taxes (as described in Section 5.2).
4.8 Committee
Discretion to Adjust Awards. At any time prior to the time the Committee
determines, pursuant to Section 5.1, the amount of shares of Common Stock that
are to be paid to any Participant in satisfaction of a Performance Share award
hereunder, the Committee shall have the authority to modify, amend, or adjust
the terms and conditions of such Performance Share award, the terms and
conditions of the corresponding Performance Goals, and/or the amount of Common
Stock payable, provided, however, such authority to modify, amend or adjust the
terms and conditions of such Performance Share award shall be exercised to
reduce an award only in unusual circumstances not anticipated in the original
design of the Plan including, but not limited to non-recurring events or changes
in the tax law or accounting rules. However, the Committee shall have no
authority to increase directly or indirectly or to otherwise adjust upwards the
amount of Common Stock payable to a Covered Employee with respect to a
particular Performance Share award or to take any other action to the extent
that such action or the Committee's ability to take such action would cause any
payment under the Plan to any Covered Employee to fail to qualify as
“performance-based compensation" within the meaning of Code Section 162(m)(4)
and the Treasury Regulations issued thereunder.
|
V
|
PAYMENT
|
5.1 Committee
Determination of Common Stock Payable. After a Performance Period has ended,
each Participant who has been awarded Performance Shares and satisfied the
Performance Goals with respect to such Performance Period shall be entitled to
receive a specified number of shares of Common Stock as determined by the
Committee which shall meet within thirty days after the end of the Performance
Period in order to make such determination. The Committee shall determine the
extent to which the Performance Goals set pursuant to Section 4.4 have been met
(as Pro-rated in accordance with Section 5.3, if applicable). With respect to
Performance Shares awarded to Covered Employees, no payment of Common Stock
shall be made hereunder prior to written certification by the Committee that the
applicable Performance Goal or Goals have been satisfied to a particular extent
for the Performance Period, and no Common Stock shall be payable unless a
preestablished minimum level of achievement of the Performance Goals has been
met. The date on which the Committee determines the number of shares of Common
Stock payable to a Participant shall be the date on which such Participant will
become the owner of such shares, regardless of when the underlying stock
certificate or certificates are actually delivered to such Participant, and such
Participant will enjoy all rights of ownership of such shares of Common Stock as
of that date including the right to vote and receive dividends (the "Ownership
Date").
5.2 Timing and Form of
Payment.
(a) Shares
of Common Stock payable to Participants pursuant to Section 5.1 shall be
distributed two years (or such other period as has been specified by the
Committee at the time the Performance Goals were determined with respect to such
Shares) following the end of the Performance Period, provided the Participant is
then in the employ of the Company and on such date the Participant will become
the owner of such shares, regardless of when the underlying stock certificate or
certificates are actually delivered to such Participant; if the Participant is
not then in the employ of the Company, such shares will be forfeited and be
available immediately for future awards of Performance Shares.
(b)
The Company shall have the right to deduct first from distributions hereunder
any federal, state, or local taxes required by law to be withheld with respect
to such distributions, and such additional amounts of withholding as are
reasonably requested by the Participant from sources available to the Company.
If such sources are insufficient to satisfy the withholding obligations, the
Company shall have the right to deduct amounts from the Common Stock
distributable to satisfy such withholding obligations.
5.3 Distribution upon Termination of
Employment.
(a) Death.
If a Participant in the Plan dies while in the employ of the Company before the
end of an Eligibility Period for which Performance Shares have been granted to
him, such Participant's Beneficiary will be eligible for a Prorated portion of
the Performance Shares that would have otherwise been payable to the Participant
after the end of the applicable Performance Period without regard to subsection
5.2(a), but otherwise this distribution, if any is payable, will be made to the
Beneficiary in the same form as all other Participants under the Plan receive
their distributions with respect to that Performance Period. Additionally,
shares of Common Stock that were otherwise distributable except that the
two-year period described in subsection 5.2(a) had not been completed, shall be
distributed to the Beneficiary as soon as is practicable.
(b) Disability.
If a Participant in the Plan, upon becoming Disabled, terminates employment with
the Company before the end of an Eligibility Period for which Performance Shares
have been granted to him, the Participant will be eligible for a Pro-rated
portion of the Performance Shares that would have otherwise been payable to him
after the end of the applicable Performance Period without regard to subsection
5.2(a), but otherwise this distribution, if any is payable, will be made to the
Participant in the same form as all other Participants under the Plan receive
their distributions with respect to that Performance Period. Additionally,
shares of Common Stock that were otherwise distributable except that the
two-year period described in subsection 5.2(a) had not been completed, shall be
distributed to the Participant as soon as is practicable.
(c) Normal
Retirement. If a Participant in the Plan terminates employment upon attaining
Normal Retirement before the end of an Eligibility Period for which Performance
Shares have been granted to him, the Participant will be eligible for a
Pro-rated portion of the Performance Shares that would have otherwise been
payable to him after the end of the applicable Performance Period without regard
to subsection 5.2(a), but otherwise this distribution, if any is payable, will
be made to the Participant in the same form as all other Participants under the
Plan receive their distributions with respect to that Performance Period.
Additionally, shares of Common Stock that were otherwise distributable except
that the two-year period described in subsection 5.2(a) had not been completed,
shall be distributed to the Participant as soon as is practicable.
(d) Termination
of Employment Without Cause. If (i) the Company terminates a Participant's
employment other than for Cause, for any reason after a Change in Control or
(ii) the Participant terminates the Participant's employment at the request of
the Company, before the end of an Eligibility Period for which Performance
Shares have been granted to him, the Participant will be eligible for a
Pro-rated portion of the Performance Shares that would have otherwise been
payable to him after the end of the applicable Performance Period without regard
to subsection 5.2(a); provided, however, that calculations will be based on
performance figures that are no less than those contained in the budget of the
Company as of the date of such termination of employment, if such calculations
will result in a greater distribution to such Participant. This distribution, if
any is payable, will be made to the Participant in the same form as all other
Participants under the Plan receive their distributions with respect to that
Performance Period. Additionally, shares of Common Stock that were otherwise
distributable except that the two-year period described in subsection 5.2(a) had
not been completed, shall be distributed to the Participant as soon as is
practicable.
(e) Termination
of Employment for Good Reason. If the Participant terminates the Participant's
employment for Good Reason, before the end of an Eligibility Period for which
Performance Shares have been granted to him, the Participant will be eligible
for a Pro-rated portion of the Performance Shares that would have otherwise been
payable to him after the end of the applicable Performance Period without regard
to subsection 5.2(a); provided, however, that calculations will be based on
performance figures that are no less than those contained in the budget of the
Company as of the date of such termination of employment, if such calculations
will result in a greater distribution to such Participant. This distribution, if
any is payable, will be made to the Participant in the same form as all other
Participants under the Plan receive their distributions with respect to that
Performance Period. Additionally, shares of Common Stock that were otherwise
distributable except that the two-year period described in subsection 5.2(a) had
not been completed, shall be distributed to the Participant as soon as is
practicable.
(f) Other
Termination of Employment. If, before the end of an Eligibility Period for which
Performance Shares have been granted to him, a Participant in the Plan incurs a
termination of employment for any reason other than those specified in
subsections (a)-(e) of this Section 5.3, whether voluntary or involuntary and a
Change of Control has not occurred, he shall forfeit all rights to receive any
distribution of Performance Shares with respect to such Eligibility
Period.
5.4 Beneficiary
Designation. A Participant may designate a Beneficiary who is to receive, upon
his death, the distributions that otherwise would have been paid to him. All
designations shall be in writing and shall be effective only if and when
delivered to the Executive Vice President of Human Resources of the Company
during the lifetime of the Participant. If a Participant designates a
Beneficiary without providing in the designation that the Beneficiary must be
living at the time of each distribution, the designation shall vest in all of
the distribution whether payable before or after the Beneficiary's death, and
any distributions remaining upon the Beneficiary's death shall be made to the
Beneficiary's estate.
A
Participant may from time to time during his lifetime change his Beneficiary by
a written instrument delivered to the Executive Vice President of Human
Resources of the Company. In the event a Participant shall not designate a
Beneficiary as aforesaid, or if for any reasons such designation shall be
ineffective, in whole or in part, the distribution that otherwise would have
been paid to such Participant shall be paid to his estate, and in such event the
term "Beneficiary"shall include his estate.
|
VI
|
ADMINISTRATION
|
6.1 Committee.
The Plan shall be administered by the Board of Directors, or such other
Committee of the Board of Directors, composed exclusively of not less than two
Non-Employee Directors, each of whom shall be appointed by and serve at the
pleasure of the Board of Directors. The Committee may designate person(s) who
are Company employees to oversee the day to day administration of the
Plan.
6.2 General
Rights, Powers, and Duties of Committee. The Committee shall be responsible for
the management, operation, and administration of the Plan. Subject to the
limitations contained in Section 4.8 and to the remaining terms of the Plan, the
Committee shall, in addition to those provided elsewhere in the Plan, have the
following powers, rights, and duties:
(a) To
maintain records concerning the Plan sufficient to prepare reports, returns and
other information required by thePlan or by law;
(b) To
direct the payment of benefits under the Plan, and to give such other directions
and instructions as may be necessary for the proper administration of the Plan;
and
(c) To
be responsible for the preparation, filing and disclosure on behalf of the Plan
of such documents and reports as are required by any applicable federal or state
law.
The
Committee shall also have the authority to adopt, alter, and repeal such
administrative rules, guidelines, and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any Notice of Award or other
agreement relating thereto), and to otherwise supervise the administration of
the Plan.
Any
determination made by the Committee pursuant to the provisions of the Plan with
respect to any grants, payments, or other transactions under the Plan shall be
made in the sole discretion of the Committee at the time of the grant, payment,
or other transaction or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all persons, including
the Company and Plan Participants.
6.3 Information
to be Furnished to Committee. Participants and their Beneficiaries shall furnish
to the Committee such evidence, data, or information and execute such documents
as the Committee requests.
6.4 Responsibility
and Indemnification. No member of the Committee or of the Board of Directors or
any person who is designated to oversee the day to day administration of the
Plan (as provided in Section 6.1) shall be liable to any person for any action
taken or omitted in connection with the administration of this Plan unless
attributable to his own fraud or willful misconduct; nor shall the Company be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of a director, officer, or employee of the Company within
the scope of his Company duties. Each member of the Committee shall be
indemnified and held harmless by the Company for any liability arising out of
the administration of the Plan, to the maximum extent permitted by
law.
|
VII
|
AMENDMENT
AND TERMINATION
|
7.1 Amendment.
The Plan may be amended in whole or in part by the Company, by action of the
Board of Directors, at any time. The Committee reserves the unilateral right to
change any rule under the Plan if it deems such a change necessary to avoid the
application of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to the Plan. No amendment shall be made without the approval of the
Company's stockholders to the extent such approval is required by law or by
agreement.
7.2 Company's
Right to Terminate. The Company reserves the sole right to terminate the Plan,
by action of the Board of Directors, at any time.
|
VIII
|
MISCELLANEOUS
|
8.1 To
Implied Rights; Rights on Termination of Service. Neither the establishment of
the Plan nor any amendment thereof shall be construed as giving any Participant,
Beneficiary, or any other person any legal or equitable right unless such right
shall be specifically provided for in the Plan or conferred by specific action
of the Committee in accordance with the terms and provisions of the Plan. Except
as expressly provided in this Plan, the Company shall not be required or be
liable to make any payment under the Plan.
8.2 No
Right to Company Assets. Neither the Participant nor any other person shall
acquire, by reason of the Plan, any right in or title to any assets, funds or
property of the Company whatsoever including, without limiting the generality of
the foregoing, any specific funds, assets, or other property which the Company,
in its sole discretion, may set aside in anticipation of a liability hereunder.
Any benefits which become payable hereunder shall be paid from the general
assets of the Company. The Participant shall have only a contractual right to
the amounts, if any, payable hereunder unsecured by any asset of the Company.
Nothing contained in the Plan constitutes a guarantee by the Company that the
assets of the Company shall be sufficient to pay any benefit to any
person.
8.3 No
Employment Rights. Nothing herein shall constitute a contract of employment or
of continuing service or in any manner obligate the Company to continue the
services of the Participant, shall obligate the Participant to continue in the
service of the Company, or shall serve as a limitation of the right of the
Company to discharge any of its employees, with or without cause. Nothing herein
shall be construed as fixing or regulating the compensation payable to the
Participant.
8.4 Other
Benefits. No Common Stock paid under the Plan shall be considered compensation
for purposes of computing benefits under any "employee benefit plan" (as defined
in Section 3(3) of ERISA) of the Company nor affect any benefits or compensation
under any other benefit or compensation plan of the Company now or subsequently
in effect (except as provided to the contrary in such Company
plan).
8.5 Offset.
If, at the time payments are to be made hereunder, the Participant or the
Beneficiary or both are indebted or obligated to the Company, then the payments
under the Plan remaining to be made to the Participant or the Beneficiary or
both may, at the discretion of the Company, be reduced by the amount of such
indebtedness or obligation, provided, however, that an election by the Company
not to reduce any such payment or payments shall not constitute a waiver of its
claim for such indebtedness or obligation.
8.6 Non-assignability.
Neither the Participant nor any other person shall have any voluntary or
involuntary right to commute, sell, assign, pledge, anticipate, mortgage, or
otherwise encumber, transfer, hypothecate, or convey in advance of actual
receipt the amounts, if any payable hereunder or any part thereof, which are
expressly declared to be unassignable and non-transferable. Except as otherwise
provided in Section 8.5, no part of the amounts payable prior to actual payment
shall be subject to seizure or sequestration for the payment of any debts,
judgments, alimony, or separate maintenance owed by the Participant or any other
person, or be transferable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
8.7 Notice.
Any notice required or permitted to be given under the Plan shall be sufficient
if in writing and hand delivered, sent by registered or certified mail, or sent
by facsimile to the Company at its principal office, directed to the attention
of the Committee c/o the Chief Financial Officer of the Company. Such notice
shall be deemed given as of the date of delivery or, if delivery is made by mail
or facsimile, as of the date shown on the postmark, facsimile, or the receipt
for registration or certification.
8.8 Governing
Laws. The Plan and all awards made and actions taken under the Plan shall be
governed and construed according to the laws of the State of New York, without
regard to any applicable conflicts of laws.
8.9 Gender
and Number. Where appropriate, references in this Plan to the masculine shall
include the feminine, and references to the singular shall include the
plural.
8.10 Severability.
In the event any provision of the Plan shall be held legally invalid for any
reasons, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
Exhibit
10.7
January
2009
NBT
BANCORP INC. AND SUBSIDIARIES
2009
EXECUTIVE INCENTIVE COMPENSATION PLAN
NBT
BANCORP INC. AND SUBSIDIARIES
2009
EXECUTIVE INCENTIVE COMPENSATION PLAN
Table
of Contents
|
Page
|
|
|
Appendix
A
|
3
|
|
Introduction
|
4
|
|
Plan
Highlights
|
5
|
|
Incentive
Plan
|
|
|
Section
I - Definitions
|
6-7
|
|
Section
II - Participation
|
7
|
|
Section
III - Activating the Plan
|
7-8
|
|
Section
IV - Calculation of Awards
|
8
|
|
Section
V - President's Special Recommendations
|
8
|
|
Section
VI - Distribution of Awards
|
9
|
|
Section
VII - Plan Administration
|
9
|
|
Section
VIII - Amendment, Modification, Suspension or
Termination 9
|
|
|
Section
IX - Exclusivity
|
9
|
|
Section
IX - Effective Date
|
10
|
|
Section
X - Employer Relations with Participants
|
10
|
|
Section
XI - Governing Law
|
10
|
2009
Executive Incentive Compensation Plan Pay-out Detail
|
Corporate Performance/Personal Goals %
Split
|
||||
|
Level
|
Executive
|
Corporate
|
Personal
|
Total
|
|
Level
A
|
Dietrich
|
100%
|
0%
|
100%
|
|
Level
B-1
|
Chewens
|
66%
|
34%
|
100%
|
|
Level
B-1
|
Raven
|
66%
|
34%
|
100%
|
|
Level
B-2
|
Levy
|
50%
|
50%
|
100%
|
|
Level
C
|
Scarlett
|
50%
|
50%
|
100%
|
|
Level
C
|
Stagliano
|
50%
|
50%
|
100%
|
|
Total
Level A*
|
||
|
Incentive
Threshold Payout
|
37.5%
|
|
|
Base
Line
|
75.0%
|
|
|
Level
3
|
85.0%
|
|
|
Level
4
|
90.0%
|
|
|
Level
5
|
95.0%
|
|
|
Maximum
Incentive Payout
|
100.0%
|
|
Corp.
Payout Level B-1
|
Pers.
Payout Level B-1
|
Total
Level B-1*
|
Corp.
Payout Level B-2
|
Pers.
Payout Level B-2
|
Total
Level B-2*
|
||
|
Incentive
Threshold Payout
|
15.5%
|
8.0%
|
23.5%
|
11.8%
|
11.8%
|
23.5%
|
|
|
Base
Line
|
31.0%
|
16.0%
|
47.0%
|
23.5%
|
23.5%
|
47.0%
|
|
|
Level
3
|
38.8%
|
20.0%
|
58.8%
|
29.4%
|
29.4%
|
58.8%
|
|
|
Level
4
|
46.5%
|
24.0%
|
70.5%
|
35.3%
|
35.3%
|
70.5%
|
|
|
Level
5
|
54.3%
|
28.0%
|
82.3%
|
41.1%
|
41.1%
|
82.3%
|
|
|
Maximum
Incentive Payout
|
62.0%
|
32.0%
|
94.0%
|
47.0%
|
47.0%
|
94.0%
|
|
Corp.
Payout Level C
|
Pers.
Payout Level C
|
Total
Level C*
|
||
|
Incentive
Threshold Payout
|
7.8%
|
7.8%
|
15.5%
|
|
|
Base
Line
|
15.5%
|
15.5%
|
31.0%
|
|
|
Level
3
|
19.4%
|
19.4%
|
38.8%
|
|
|
Level
4
|
23.3%
|
23.2%
|
46.5%
|
|
|
Level
5
|
27.1%
|
27.2%
|
54.3%
|
|
|
Maximum
Incentive Payout
|
31.0%
|
31.0%
|
62.0%
|
|
|
*
% of base salary at appropriate level
|
NBT
BANCORP INC. AND SUBSIDIARIES
Introduction
It is
important to examine the benefits that accrue to the organization through the
operation of the Executive Incentive Compensation Plan (EICP). The
Plan impacts directly on the success of the organization and its purpose can be
summarized as follows:
* Provides
Motivation: The opportunity for incentive awards provides
Executives with the impetus to "stretch" for challenging, yet attainable,
goals.
* Provides
Retention: By enhancing the organization's competitive
compensation posture.
* Provides Management Team Building: By
making the incentive award dependent on the attainment of organization goals, a
"team orientation" is fostered among the participant group.
* Provides Individual
Motivation: By encouraging the participant to make significant
personal contribution to the corporate effort.
* Provides Competitive
Compensation Strategy: The implementation of incentive
arrangements is competitive with current practice in the banking
industry.
Highlights
of the 2009 Executive Incentive Compensation Plan (EICP) are listed
below:
|
1.
|
The
Plan is competitive compared with similar sized banking organizations and
the banking industry in general.
|
|
2.
|
The
Compensation Committee of the Board of Directors controls all aspects of
the Plan.
|
|
3.
|
All
active Executives are eligible for
participation.
|
|
4.
|
The
financial criteria necessary for Plan operation consist of achieving
certain levels of Earnings Per Share (EPS) for the Company and its
Subsidiaries as applicable. The
Committee may provide in any such Award that any evaluation of performance
may include or exclude any of the following events that occur during a
Performance Period: (a) the effect of changes in tax laws, accounting
principles, or other laws or provisions affecting reported results; (b)
any reorganization and restructuring programs; and (c) acquisitions or
divestitures and related expenses. To the extent such inclusions or
exclusions affect Awards to Covered Employees; they shall be prescribed in
a form that meets the requirements of Code Section 162(m) for
deductibility.
|
|
5.
|
Incentive
distributions will be made on or before March 15 of the year following the
Plan Year and will be based on the matrix in Appendix
A.
|
|
6.
|
Incentive
awards will be based on attainment of corporate goals. Total
incentive awards may contain Corporate, Subsidiary, Divisional and
Individual components. The Corporate, Subsidiary and Divisional
components are awarded by virtue of performance related to pre-established
goals and the Individual component is awarded by virtue of individual
performance related to individual goals. No bonus will be paid
unless the Corporation achieves the threshold EPS goal set forth in
Appendix A.
|
NBT
BANCORP INC. AND SUBSIDIARIES
The Board
of Directors has established this 2009 Executive Incentive Compensation
Plan. The 2009 Executive Incentive Compensation Plan is implemented
pursuant to the provisions of the 2008 Omnibus Incentive Plan for purposes of
paying performance-based compensation within the meaning of Section 162(m) of
the Code. The purpose of the Plan is to meet and exceed financial
goals and to promote a superior level of performance relative to the competition
in our market areas. Through payment of incentive compensation beyond
base salaries, the Plan provides reward for meeting and exceeding financial
goals.
SECTION
I – DEFINITIONS
Various
terms used in the Plan are defined as follows:
Award: An award
granted under this Plan.
Base Salary: The base salary
at the end of the Plan Year, excluding any bonuses, contributions to Executive
benefit programs, or other compensation not designated as salary.
Board of
Directors: The Board of Directors of NBT Bancorp
Inc.
CEO: The CEO of NBT Bancorp
Inc.
Code: The Internal
Revenue Code of 1986, as now in effect or as hereafter amended.
Corporate, Subsidiary and Divisional
Goals: Those pre-established objectives and goals of NBT
Bancorp Inc. or its Subsidiaries and Divisions which are required to activate
distribution of awards under the Plan.
Covered Employee: A
Participant who is a Covered Employee within the meaning of Section 162(m)(3) of
the Code.
Individual
Goals: Refers to the performance standards
established by the plan participant and agreed to by the
supervisor. The participant shall stray from using standards tied to
day to day responsibilities and shall strive to achieve such goals that shall be
considered value-added and, where possible, support the strategic objectives of
the Company.
Compensation
Committee: The Compensation and Benefits Committee of the NBT
Bancorp Inc. Board of Directors.
Plan
Participant: An eligible Executive as recommended by the CEO
and approved by the Compensation Committee for participation for the Plan
Year.
Plan Year: The 2009
calendar year.
SECTION
II - ELIGIBILITY TO PARTICIPATE
To be
eligible for an award under the Plan, a Plan participant must be an Executive in
full-time service at the start and close of the calendar year and at the time of
the award unless mutually agreed upon prior to the Executive leaving the
company. Newly hired employees may be recommended by the CEO and
approved by the Compensation Committee as eligible for an award as determined by
their date of hire or any relevant employment agreement. A Plan
participant must be in the same or equivalent position, at year-end as they were
when named a participant or have been promoted during the course of the year, to
be eligible for an award. If a Plan participant voluntarily leaves
the company prior to the payment of the award, he/she is not eligible to receive
an award unless mutually agreed upon prior to the Executive leaving the
company. However, if the active full-time service of a participant in
the Plan is terminated by death, disability, retirement, or if the participant
is on an approved leave of absence, an award may be recommended for such a
participant based on the proportion of the Plan Year that he/she was in active
service.
SECTION
III - ACTIVATING THE PLAN
If and to
the extent that the Committee determines that a bonus to be granted under the
Plan to a Plan participant who is designated by the Compensation Committee as
likely to be a Covered Employee should qualify as “performance-based
compensation” for purposes of Code Section 162(m), the bonus as to that Plan
participants shall be determined consistently with the terms of the NBT Bancorp
Inc. 2008 Omnibus Incentive Plan.
The
operation of the Plan is predicated on attaining and exceeding management
performance goals. The goals will consist of the attainment of
certain Earnings Per Share (EPS) levels as applicable. Non-recurring
events, as previously detailed, may be excluded from the financial results
at the discretion of the CEO and upon approval of the Compensation Committee;
subject to the terms of the NBT Bancorp Inc. 2008 Omnibus Incentive Plan as
applied to any Covered Employee whose bonus is intended to qualify for purposes
of Code Section 162(m).
EPS goals
shall be established not later than 90 days after the beginning of any
performance period applicable to the bonus, or at such other date as may be
required or permitted for “performance-based compensation” under Code Section
162(m). In addition, the maximum value of a bonus awarded under the
Plan to a single Covered Employee may not exceed $2,000,000 per Plan
Year.
Prior to
payment of any bonus amount under the Plan to a Covered Employee whose bonus is
intended to qualify for purposes of Code Section 162(m), the Compensation
Committee shall certify in writing that the EPS goal(s) and all other material
terms stated herein have been attained. For this purpose, the
approved minutes of a Compensation Committee meeting in which a certification is
made shall be treated as a written certification.
The
Corporation must achieve a threshold EPS goal set forth in Appendix A to trigger
an award pursuant to the terms of this Plan. The bonus awards can
range from 0 to 200% of the target award for Plan participants.
SECTION
IV - CALCULATION OF AWARDS
The
Compensation Committee designates the incentive formula as shown in Appendix
A. The Compensation Committee will make final decisions with respect
to all incentive awards and will have final approval over all incentive
awards. If the threshold EPS goal is met but below the baseline
budget threshold established by the Company, the CEO may provide the
Compensation Committee with a qualitative analysis of the Company’s earnings and
its performance which the Compensation Committee shall consider in its exercise
of discretion under the plan. Prior to payment of any bonus amount
under the Plan to a Covered Employee whose bonus is intended to qualify for
purposes of Code Section 162(m), the Compensation Committee shall certify in
writing that the EPS goal(s) and all other material terms stated herein have
been attained. For this purpose, the approved minutes of a
Compensation Committee meeting in which a certification is made shall be treated
as a written certification. The individual participant data regarding maximum
award and formulas used in calculation has been customized and appears as
Appendix A.
SECTION
V - SPECIAL RECOMMENDATIONS
As long
as the threshold EPS goal is met, the CEO has the authority to recommend to the
Compensation Committee the amounts to be awarded to individual participants in
the incentive Plan. The CEO may recommend a change outside the
formula to a bonus award (increase or decrease) to an individual participant by
a specified percentage based on assessment of special individual performance
outside the individual goals or based on special circumstances that may
have occurred during the plan year; provided, however that as to a Covered
Employee whose bonus is intended to qualify for purposes of Code Section 162(m),
only the Compensation Committee has the authority to make a change outside the
formula to a bonus award and it may exercise its discretion only to reduce the
bonus award.
SECTION
VI - DISTRIBUTION OF AWARDS
Distribution
of the EICP will be made during the first quarter of the year following the
plan. Distribution of the award must be approved by the Compensation
Committee.
In the
event of death, any approved award earned under the provisions of this plan will
become payable to the designated beneficiary of the participant as recorded
under the Company’s group life insurance program; or in the absence of a valid
designation, to the participant's estate.
SECTION
VII - PLAN ADMINISTRATION
The
Compensation Committee shall, with respect to the Plan have full power and
authority to construe, interpret, manage, control and administer this Plan. The
Committee shall decide upon cases in conformity with the objectives of the Plan
under such rules as the Board of Directors may establish.
Any
decision made or action taken by NBT Bancorp Inc., the Board of Directors, or
the Compensation Committee arising out of, or in connection with, the
administration, interpretation, and effect of the Plan shall be at their
absolute discretion and will be conclusive and binding on all
parties. No member of the Board of Directors, Compensation Committee,
or employee shall be liable for any act or action hereunder, whether of omission
or commission, by a Plan participant or employee or by any agent to whom duties
in connection with the administration of the Plan have been delegated in
accordance with the provision of the Plan.
SECTION
VIII - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
NBT
Bancorp Inc. reserves the right, by and through its Board of Directors to amend,
modify, suspend, reinstate or terminate all or part of the Plan at any
time. The Compensation Committee will give prompt written notice to
each participant of any amendment, suspension or termination or any material
modification of the Plan. In the event of a merger or acquisition,
the Plan and related financial formulas may be reviewed and adjusted to take
into account the effect of such activities.
SECTION
IX – NONEXCLUSIVITY
NBT
Bancorp Inc. reserves the right, by and through its Board of Directors and
Compensation Committee to award bonus and other forms of incentive compensation
outside the terms of this Plan.
SECTION
X - EFFECTIVE DATE OF THE PLAN
The
effective date of the Plan shall be January 1, 2009.
SECTION
XI - EMPLOYER RELATION WITH PARTICIPANTS
Neither
establishment nor the maintenance of the Plan shall be construed as conferring
any legal rights upon any participant or any person for a continuation of
employment, nor shall it interfere with the right of an employer to discharge
any participant or otherwise deal with him/her without regard to the existence
of the Plan.
SECTION
XII - GOVERNING LAW
Except to
the extent pre-empted under federal law, the provisions of the Plan shall be
construed, administered and enforced in accordance with the domestic internal
law of the State of New York. In the event of relevant changes in the
Internal Revenue Code, related rulings and regulations, changes imposed by other
regulatory agencies affecting the continued appropriateness of the Plan and
awards made thereunder, the Board may, at its sole discretion, accelerate or
change the manner of payments of any unpaid awards or amend the provisions
of the Plan.
Exhibit 10.8
CNB
Bancorp, Inc.
Long-Term
Incentive Compensation Plan
Section
I
Purpose
1.1 Purpose.
The purpose of the CNB Bancorp, Inc. Long-Term Incentive Compensation Plan (the
"Plan") is to provide competitive long-term incentive compensation to
Participants that aligns their interests with shareholder interests through
share ownership and investment in CNB Bancorp, Inc. ("CNB"), and to encourage
long-term growth in shareholder value through the achievement of specified
financial objectives.
1.2 Rule
16b-3 Plan. With respect to persons subject to Section 16 of the Act ("Section
16 Persons"), transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors promulgated under the Act.
To the extent any provision of the Plan or action by the Board fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board.
Moreover,
in the event the Plan does not include a provision required by Rule 16b-3 to be
stated therein, such provision (other than one relating to eligibility
requirements, or the price and amount of Awards) shall be deemed automatically
to be incorporated by reference into the Plan insofar as Participants who are
Section 16 Persons are concerned, to the extent permitted by law and deemed
advisable by the Board.
1.3
Effectiveness of the Plan. The Plan will be effective upon adoption of it by
shareholders of CNB as provided in Section 505 of the Business Corporation Law
of New York. The Plan will remain in effect until the earlier of the termination
date set forth in Section 12.2 hereof or such time as it is amended or
terminated by the Board in accordance with the terms of Section 12.2 hereof,
except that no Incentive Stock Option may be granted under the Plan on or after
ten years from the Effective Date of the Plan.
Section
II
Definitions
Unless
the context indicates otherwise, the following terms have the meanings set forth
below:
|
2.1
|
"Act"
means the Securities and Exchange Act of 1934, as
amended.
|
|
2.2
|
"Award"
means Options, Restricted Stock or Stock Awards granted pursuant to the
Plan.
|
|
2.3
|
"Bank"
means City National Bank and Trust
Company.
|
|
2.4
|
"Board"
means the Board of Directors of
CNB.
|
|
2.5
|
"Cause"
means, with respect to any certain
Participant:
|
|
|
(a)
|
the
willful and continued failure by such Participant to substantially perform
his or her duties with respect to CNB or any Subsidiary (other than any
such failure resulting from his or her incapacity due to physical or
mental illness), or
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|
|
(b)
|
the
conviction of the Participant of a felony involving moral turpitude,
or
|
|
|
(c)
|
the
willful engaging by such Participant in conduct which is demonstrably and
materially injurious to CNB or a Subsidiary, monetarily or otherwise. For
purposes of this Section 2.5, no act or failure to act shall be deemed
"willful" if done by the Participant either in good faith and in the
reasonable belief that such act or omission was in the best interest of
CNB, or before the Board provides the Participant with a written notice
and reasonable opportunity to cure the actions or omissions that the Board
considers to be grounds for a finding of Cause for purposes of this
Plan.
|
|
2.6
|
"Change
in Control" means the occurrence of any of the following
events:
|
|
|
(a)
|
Any
person or group (as such terms are used in connection with Sections 13(d)
and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 and 13d-5 under the Act), directly or indirectly, of securities
of CNB representing 50% or more of the combined voting power of CNB's then
outstanding securities provided that notwithstanding anything in this
definition of beneficial owner to the contrary, no person shall be deemed
to be the beneficial owner of, or to beneficially own, any security
beneficially owned by another person solely by reason of revocable proxy
given in response to a public proxy or consent solicitation or any
agreement, arrangement or understanding with such other person relating to
the solicitation of revocable proxies made pursuant to, and in accordance
with, the applicable provisions of the General Rules and Regulations under
the Exchange Act, provided that such other person retains the right at any
time to withdraw from, revoke or terminate any such agreement, arrangement
or understanding and further provided that such persons would not
otherwise be deemed to be a group under Section 13(d) of the Exchange Act
or otherwise be deemed to be acting in concert;
or
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|
|
(b)
|
CNB
is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of
the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter;
or
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|
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(c)
|
During
any period of 24 consecutive months, individuals who at the beginning of
such period constitute the Board (including for this purpose any new
director whose election or nomination for election by CNB's stockholders
was approved by a vote of at least one-half of the directors then still in
office who were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board.;
or
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|
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(d)
|
CNB
is party to a merger, consolidation or reorganization with any other
corporation in which the shareholders of CNB immediately prior to the
merger, consolidation or reorganization do not immediately thereafter
directly or indirectly own more than fifty percent (50%) of the combined
voting power of the voting securities entitled to vote in the selection of
directors of the merged, consolidated or reorganized
entity.
|
Notwithstanding
the foregoing, no trust department or designated fiduciary or other trustee of
such trust department of CNB or a Subsidiary of CNB or other similar fiduciary
capacity of CNB with direct voting control of the stock shall be treated as a
person or group within the meaning of subsection (a) hereof. Further, no
profit-sharing, employee stock ownership, employee stock purchase and savings,
employee pension, or other employee benefit plan of CNB or any of its
Subsidiaries, and no Trustee of any such plan in its capacity as such Trustee,
shall be treated as a person or group within the meaning of subsection (a)
hereof.
|
2.7
|
"CNB"
means CNB Bancorp, Inc., a New York
corporation.
|
|
2.8
|
"Code"
means the Internal Revenue Code of 1986, as
amended.
|
|
2.9
|
"Committee"
means the members of the Compensation Committee as appointed and
maintained by the Board who are outside directors within the meaning of
Section 162(m) of the Code.
|
|
2.10
|
"Common
Shares" means the common shares, $2.50 par value per share, of CNB, which
CNB may authorize and issue from time to
time.
|
|
2.11
|
"Director"
means a member of the Board or the board of directors of any
Subsidiary.
|
|
2.12
|
"Disability"
means permanent and total disability as defined under Section 22(e)(3) of
the Code.
|
|
2.13
|
"Effective
Date" means the date the Plan becomes
effective.
|
|
2.14
|
"Fair
Market Value" means that if the Common Shares are listed on a national
securities exchange (including the NASDAQ National Market System) on the
date in question, then the Fair Market Value per Common Share shall be the
average of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Fair Market Value
on such date shall be the mean between the bid and asked price on such
date. If the Common Shares are traded otherwise than on a national
securities exchange on the date in question, then the Fair Market Value
per Common Share shall be the mean between the bid and asked price on such
date, or, if there is no bid and asked price on such date, then on the
next prior business day on which there was a bid and asked price. If no
such bid and asked price is available, then the Fair Market Value per
Common Share shall be the fair market value as determined by the Board, in
its sole and absolute discretion. In making such determination, the Board
may use any of the reasonable valuation methods defined in Treasury
Regulation Section
1.421-7(e)(2).
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|
2.15
|
"Grant
Date" as used with respect to Options, means the date as of which such
Options are granted by the Committee, pursuant to the
Plan.
|
|
2.16
|
"Immediate
Family" has the meaning set forth in Section 6.7
hereof.
|
|
2.17
|
"Incentive
Stock Option" or "ISO" means an Option conforming to the requirements of
Section 422 of the Code.
|
|
2.18
|
"Nonqualified
Stock Option" or "NQO" means an Option granted pursuant to the Plan other
than an Incentive Stock Option.
|
|
2.19
|
"Option"
means an option to purchase Common Shares granted by the Board or the
Committee pursuant to the Plan, which may be designated as either an
"Incentive Stock Option" or a "Nonqualified Stock
Option."
|
|
2.20
|
"Option
Agreement" has the meaning set forth in Section 6.2
hereof.
|
|
2.21
|
"Option
Price" has the meaning set forth in Section 6.3
hereof.
|
|
2.22
|
"Participant"
means a person described in Section V
hereof.
|
|
2.23
|
"Permissible
Transferees" and "Permissible Transferee" have the meanings set forth in
Section 6.7 hereof.
|
|
2.24
|
"Plan"
means the CNB Bancorp, Inc. Long-Term Incentive Compensation Plan as set
forth herein and as may be amended from time to time, subject to Section
12.1 hereof.
|
|
2.25
|
"Restricted
Stock Award" or "Restricted Stock" means an award of Common Shares with
restrictions placed on the sale, transfer or pledging of the shares, and a
risk of forfeiture during the restriction
period.
|
|
2.26
|
"Retirement"
means a Participant's voluntarily leaving the employment of CNB or a
Subsidiary on or after attainment of the minimum age of sixty-two
(62).
|
|
2.27
|
"Section
16 Persons" has the meaning set forth in Section 1.2
hereof.
|
|
2.28
|
"Stock
Award" means an award of the Common
Shares.
|
|
2.29
|
"Subsidiary"
means a corporation at least 50% of the total combined voting power of all
classes of stock of which is owned by CNB, either directly or through one
or more other Subsidiaries.
|
Section
III
Administration
of the Plan
3.1
The Committee. The Plan shall be administered by the Committee which shall act
only by the vote or written consent of at least a majority of its members. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of the Board. It is the intent of the Committee to
administer the Plan in a manner that qualifies Awards, to the extent possible,
as excludable from the deduction limit set forth under Section 162(m) of the
Code.
3.2.
Authority of the Committee. Subject to the terms and conditions of the Plan, the
Committee shall have all powers and discretion necessary or appropriate to
administer the Plan and to control its operation, including, but not limited to,
the power (a) to determine which employees shall be granted Awards, (b) to
prescribe the terms, conditions and vesting schedule, if any, of such Awards,
(c) to determine the amount and form of Awards granted to Participants, (d) to
interpret the Plan and the Awards, (e) to adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith, and (f)
to interpret, amend or revoke any such rules subject to Section 12.1
hereof.
The
Committee, in their sole discretion and on such terms and conditions as they may
provide, may delegate their duties in order to provide for the day-to-day
administration of the Plan. The Committee shall control the general
administration of the Plan with all powers necessary to enable it to carry out
its duties in that respect; provided, however, that the Committee may not
delegate its authority and powers (a) with respect to Section 16 Persons, or (b)
in any way which is impermissible under Code Section 162(m) or the rules and
regulations promulgated thereunder.
3.3
Decisions Binding. All determinations and decisions made by the Committee shall
be final, conclusive, and binding on all parties, and shall be given the maximum
deference permitted by law.
Section
IV
Shares
Subject to the Plan
4.1
Shares Subject to Plan. CNB shall reserve 225,000 Common Shares for issuance
under this Plan, subject to adjustment pursuant to Section 4.2 hereof. Common
Shares may be now or hereafter (1) authorized, (2) issued and owned, and (3)
shares held in a grantor trust. If and to the extent that any rights with
respect to Common Shares shall not be exercised by any Participant for any
reason or if such rights shall terminate as provided herein, Common Shares that
have not been allocated to such Participant under the Plan shall again become
available for allocation to Participants as provided herein.
4.2
Change in Capitalization. In the event of a change in the capitalization of CNB
due to a share split, share dividend, recapitalization, merger, consolidation,
combination, or similar event or as may otherwise be equitably required as
determined by the aggregate number of Common Shares, the terms of any existing
Awards shall be automatically adjusted in proportion to the change in
capitalization.
Section
V
Eligibility
The
Committee shall have the discretion to select directors, officers, executives,
managers, consultants, and other key employees of CNB and its Subsidiaries for
participation in the Plan. The discretion of the Committee to select such
Participants shall be absolute and no person otherwise eligible for
participation shall have any right to participate. Only persons so selected
shall be deemed "Participants" for purposes hereof.
Section
VI
Stock
Options
6.1
Grant of Options. Options may be granted to Participants, subject to the
provisions of the Plan, at any time and from time to time, as determined in the
sole discretion of the Committee. The Committee shall in its sole discretion,
determine the number of Options granted to each Participant; provided, however,
that in any one calendar year, no one Participant shall be granted Options to
purchase a number of Common Shares in excess of 50,000, adjusted for any stock
dividends, stock splits, reverse stock splits, recapitalization, mergers or
consolidations. Options granted may be ISOs to employees, NQOs to employees or
non-employee Directors, consultants, or a combination thereof.
6.2
Option Agreement. Each Option shall be evidenced by a written option agreement
(an "Option Agreement") that shall specify the Option Price, the expiration date
of the Option, the number of shares to which the Option pertains, any conditions
to exercise of the Option, and such other terms and conditions as the Committee,
in its discretion, shall determine. The Option Agreement also shall specify
whether the Option is intended to be an ISO or an NQO.
6.3
Option Price. The price for each Common Share deliverable upon the exercise of
an Option (the "Option Price") shall be determined at the discretion of the
Committee; provided, however, that with respect to ISOs, the Option Price shall
not be less than the Fair Market Value at the date of grant. If at the time that
an ISO is granted, the Participant owns shares possessing more than 10% of the
total combined voting power of all classes of CNB's or any of its Subsidiaries'
capital shares, the Option Price of an ISO shall not be less than one hundred
and ten percent (110%) of the Fair Market Value of a share on the date that the
ISO is granted and any ISO so granted must be exercised not later than five (5)
years from the date it is granted.
6.4
Exercise of Options. Options granted under the Plan shall be exercisable at such
times, and subject to such restrictions and conditions, as the Committee shall
determine in its sole discretion, except that any outstanding Options at the
time of a Change in Control, or a Participant's death, or Disability will be
immediately exercisable without regard to any vesting restrictions attached to
such Options. A Participant electing to exercise an Option shall give written
notice of such election to CNB in such form as the Committee may
require.
6.5
Expiration of Options. Each Option belonging to a Participant shall terminate
upon the first to occur of the events listed in this section.
|
|
(a)
|
For
Employees
|
|
|
(i)
|
The
date for termination of such Option set forth in the Option Agreement
applicable to such Option.
|
|
|
(ii)
|
The
expiration of ten (10) years from the date such Option was granted, except
as outlined in 6.3.
|
|
|
(iii)
|
The
expiration of one year from the date of the Participant's termination of
employment for reason other than Retirement or termination for Cause, it
being understood that the exercise of an Incentive Stock Option at any
time after ninety (90) days from the date of termination of employment for
reasons other than death or Disability shall convert the Option to a
Nonqualified Stock Option.
|
|
|
(iv)
|
The
expiration of one year from the later of the Participant's Retirement or
termination of service as a Director for a reason other than for
Cause.
|
|
|
(v)
|
Termination
of employment for Cause.
|
|
|
(b)
|
For
Non-employee Directors
|
|
|
(i)
|
The
date for termination of such Option set forth in the Option Agreement
applicable to such Option.
|
|
|
(ii)
|
The
expiration of ten (10) years from the date such Option was
granted.
|
|
|
(iii)
|
The
expiration of one year following the non-employee Director's termination
of service as a Director for a reason other than for
Cause.
|
|
|
(iv)
|
Termination
of a non-employee Director's service as a Director for
Cause.
|
|
|
(v)
|
One
year following a Change in Control.
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6.6
Payment. The Option Price upon exercise of any Option shall be payable to CNB in
full in cash. The Committee also may, in its sole discretion, permit exercise
(a) by tendering previously acquired Common Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price (provided
that the Common Shares which are tendered must have been held by the Participant
or his or her Permissible Transferees (as defined in 6.7) for at least six (6)
months prior to their tender to satisfy the Option Price), or (b) by any other
means which the Committee determines, in its sole discretion, to both provide
legal consideration equal to the total Option Price for the Common Shares
acquired through exercise of the Option and to be consistent with the purposes
of the Plan.
As soon
as practicable after receipt of a written notification of exercise and full
payment for the Common Shares purchased, CNB shall deliver to the Participant,
or his or her Permissible Transferee, the certificates (in the Participant's or
such Permissible Transferee's name) representing such Common
Shares.
6.7
Nontransferability of Options. No Option granted under the Plan shall be
assignable or transferable by the Participant other than by will or the laws of
descent and distribution. During the lifetime of a Participant, the Option shall
be exercisable only by such Participant, except: (a) in the event of the
Disability of the Participant resulting in the appointment, by a court of
competent jurisdiction, of a legal guardian or personal representative with
appropriate authority, then by such person in the name of Participant; or (b) in
the name of the Participant pursuant to a power of attorney, acceptable in form
and substance to CNB.
Notwithstanding
the above, a Participant may, with respect to any Nonqualified Stock Option: (a)
designate in writing a beneficiary to exercise his or her Option after the
Participant's death; (b) transfer an Option to a revocable inter vivos trust as
to which the Optionee is the settlor; and (c) transfer an Option for no
consideration to any of the following permissible transferees (each a
"Permissible Transferee"):
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(i)
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any
member of the Immediate Family of the Participant to whom such Option was
granted, (ii) any trust solely for the benefit of members of the
Participant's Immediate Family, or (iii) any partnership whose only
partners are members of the Participant's Immediate Family; and further
provided that: (1) the transferee shall remain subject to all of the terms
and conditions applicable to such Options prior to and after such
transfer; and (2) any such transfer shall be subject to and in accordance
with the rules and regulations prescribed by the Committee. Any such
transfer to a Permissible Transferee shall consist of one or more options
covering a minimum of one hundred (100) Common Shares. An Option may not
be retransferred by a Permissible Transferee except by will or the laws of
descent and distribution and then only to another Permissible Transferee.
In the case of (b) and (c) set forth in the immediately preceding
sentence, the Option shall only be exercisable by the trustee or
Permissible Transferee, as applicable. For the purposes hereof, "Immediate
Family" means, with respect to a particular Participant, such
Participant's child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
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6.8 Certain Additional
Provisions for Incentive Stock Options.
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(a)
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The
aggregate Fair Market Value (determined at the time the Option is granted)
of the Common Shares with respect to which ISOs are exercisable for the
first time by any Participant during any calendar year shall not exceed
$100,000.
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(b)
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ISOs
may be granted only to persons who are employees of CNB or a Subsidiary at
the time of grant.
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(c)
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No
ISO may be exercised after the expiration of ten years from the date such
ISO was granted; provided, however, that if the ISO is granted to a
Participant who, together with Persons whose Common Share ownership is
attributed to the Participant pursuant to Section 424(d) of the Code, owns
shares possessing more than 10% of the total combined voting power of all
classes of CNB's or any of its Subsidiaries' capital shares, the ISO may
not be exercised after the expiration of five years from the date that it
was granted.
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Section
VII
Restricted
Stock Award
7.1 Award
of Restricted Stock. Restricted Stock may be granted to Participants, subject to
the provisions of the Plan, at any time and from time to time, as determined in
the sole discretion of the Committee. The Committee shall in its sole
discretion, determine the number of shares of Restricted Stock granted to each
Participant and the terms and conditions of such grant.
Each
Restricted Stock Award under the Plan shall be evidenced by a stock certificate
of CNB, registered in the name of the Participant, accompanied by an agreement
in such form as the Committee shall prescribe from time to time. The Restricted
Stock Awards shall comply with such other terms and conditions not inconsistent
with the terms of this Plan as the Committee, in its discretion, shall
establish.
7.2
Stock Legends; Prohibition on Disposition. Certificates for shares of Restricted
Stock shall bear an appropriate legend referring to the restrictions to which
they are subject, and any attempt to dispose of any such shares of stock in
contravention of such restrictions shall be null and void and without effect.
The certificates representing shares of Restricted Stock shall be held by CNB
until the restrictions are satisfied.
7.3
Termination of Service. The Committee shall determine the extent to which the
restrictions on any Restricted Stock Award shall lapse upon the termination of
the Participant's service to CNB and its Subsidiaries, due to death, Disability,
or for any other reason. If the restrictions on all or any portion of a
Restricted Stock Award shall not lapse, the Participant, or in the event of his
or her death, his or her personal representative, shall deliver to the Secretary
of CNB such instruments of transfer, if any, as may reasonably be required to
transfer the shares back to CNB.
7.4
Change in Control. Upon the occurrence of a Change in Control of the Company, as
determined in Section 2.6 of this Plan, all restrictions then outstanding with
respect to shares of Restricted Stock shall automatically expire and be of no
further force and effect and all certificates representing such shares of
Restricted Stock shall be delivered to the Participant.
7.5
Effect of Attempted Transfer. No benefit payable or interest in any Restricted
Stock Award shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and no such interest in any Restricted Stock Award shall be
in any manner liable for or subject to debts, contracts, liabilities,
engagements or torts of any Participant or his or her beneficiary.
7.6
Dividends. Dividends paid on Restricted Stock shall be paid either at the
dividend payment date in cash or in shares of unrestricted stock having a Fair
Market Value equal to the amount of such dividends, or he payment of such
dividends shall be deferred and/or the amount or value thereof automatically
reinvested in additional Restricted Stock or other investment vehicles, as the
Committee shall determine or permit the Participant to elect. Stock distributed
in connection with a stock split or stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which such
stock or other property has been distributed, unless otherwise determined by the
Committee.
7.7
Rights as a Stockholder. A Participant shall have the right to receive
dividends, as described in Section 7.6, on Common Shares subject to the
Restricted Stock Award during the applicable restricted period, to vote the
Common Shares subject to the Award, except that the Participant shall not be
entitled to enjoy any other stockholder rights and shall not be entitled to
delivery of the stock certificate until the applicable restricted period shall
have lapsed (if at all).
Section
VIII
Stock
Awards
8.1
Stock Awards. The Committee may, at any time and from time to time, designate an
Award of Common Shares to any Participant, which is subject to one or more
conditions established by the Committee, in its sole discretion. If the Award is
subject to the achievement of certain performance objectives (as that term is
used for purposes of Code Section 162(m)), then the performance objectives shall
be determined by the Committee at their full discretion.
8.2
Effect of Change in Control. The effect of a Change in Control upon an Award of
Common Shares subject to this Section VIII shall be determined by the Committee
at such time as the Committee establishes the terms and conditions that will
apply to an Award of Common Shares.
Section
IX
Payment
of Stock or Stock Options in Lieu of Cash Compensation
The
Committee may, at any time and from time to time, at the request of a
participant, designate that a portion of a Participant's compensation otherwise
payable in cash be payable in Common Shares or as Stock Options; provided that a
Participant shall under no circumstance be permitted to defer compensation that
has already been earned through the performance of services. The Committee shall
have the sole discretion to determine the terms and conditions under which such
Common Shares or Stock Options shall be issued to Participants.
Section
X
No Right
to Continued Employment
Participation
in the Plan shall confer no rights to continued employment with CNB or any
Subsidiary, nor shall it restrict the rights of CNB or any Subsidiary to
terminate a Participant's employment relationship at any time for Cause or
without Cause.
Section
XI
Withholding
Taxes
As a
condition of delivery of cash or Common Shares upon exercise of an Option, or
the issuance of Common Shares, CNB shall be entitled to require that the
Participant and/or his or her transferees (without regard to whether the
Participant has transferred the Award in accordance with the Plan) satisfy
federal, state and local tax withholding requirements as follows:
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(a)
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Cash
Remittance. Whenever Common Shares are to be issued upon the exercise of
an Option or payment of Award, the Company shall have the right to require
the Participant and/or his or her transferees to remit to the Company in
cash an amount sufficient to satisfy federal, state and local withholding
tax requirements, if any, attributable to such exercise or payment, prior
to the delivery of any certificate or certificates for such shares. In
addition, CNB shall have the right to withhold from any cash payment
required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax
requirements.
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(b)
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Share
Withholding or Remittance. In lieu of the remittance required by Section
X(a) hereof, a Participant who is granted an Award may, to the extent
approved by the Committee, irrevocably elect by written notice to CNB at
the office of CNB designated for that purpose, to (i) have CNB withhold
Common Shares from any Award hereunder, or (ii) deliver other previously
owned Common Shares, the Fair Market Value of which as of the date on
which any such tax is determined shall be equal to the amount of the
required tax withholding amount, if any, rounded down to the nearest whole
share attributable to such exercise, occurrence or grant; provided,
however, that no election to have Common Shares withheld from any Award
shall be in excess of the minimum statutory withholding tax or shall be
effective with respect to an Award which was transferred by such
Participant to a Permitted Transferee or
otherwise.
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Section
XII
Amendment
or Termination of the Plan
12.1
Amendment. The Board or Committee may alter, amend or suspend the Plan at any
time or alter and amend Awards granted hereunder; provided, however, that no
such amendment or alteration may, without the consent of any Participant to whom
an Option shall theretofore have been granted or to whom a Stock Award or
Restricted Stock Award shall theretofore have been issued, adversely affect the
right of such Participant under such Award.
12.2
Termination. The Plan shall terminate on December 31, 2011; provided, however,
that the Plan shall be subject to termination prior to such date on the date set
forth in a resolution of the Board terminating the Plan. No termination of the
Plan shall materially alter or impair the right of any Participant with respect
to Awards previously granted hereunder without such Participant's consent. In
the event of a termination of the Plan, all Awards granted hereunder shall
continue to be valid and binding obligations of CNB going forward on the same
terms and conditions as set forth herein and in the applicable Award
agreements.
12.3
Change in Control. In the event of any merger, consolidation or other
reorganization in which CNB is not the surviving or continuing corporation or in
which a Change in Control is to occur, all of CNB's obligations regarding
Awards, if applicable, that were granted hereunder and that are outstanding on
the date of such event shall, on such terms as may be approved by the Board or
the Committee prior to such event, be assumed by the surviving or continuing
corporation or canceled in exchange for property (including cash) in amounts
determined by the Board or the Committee in a manner that is equitable to
Participants.
Exhibit
10.12
Amendment
dated January 28, 2002 to Death Benefits Agreement between NBT Bancorp Inc., NBT
Bank, National Association and Daryl R. Forsythe made August 22,
1995.
AMENDMENT
TO DEATH BENEFITS AGREEMENT
THIS AGREEMENT
(this "Agreement") is made and entered into effective as of
the 28 day of January, 2002, by and among NBT BANCORP
INC., a Delaware corporation, and NBT Bank, N.A., a national banking
association organized under
the laws of the United States (hereinafter
referred to collectively as the "Bank"), Daryl R. Forsythe
(the "Employee").
WHEREAS,
the Bank and the Employee have entered to that certain
Death Benefits Agreement dated as of
August 22, 1995 (the "1995 Agreement");
WHEREAS,
the 1995 Agreement may be amended by a written instrument signed by the Bank and
the Employee; and
WHEREAS,
the Bank and the Employee desire to amend the 1995 Agreement as set out in this
Agreement.
NOW,
THEREFORE, the parties agree as follows:
1. Section
1 of Article IX of the 1995 Agreement is amended to read in its entirety as
follows:
THIS
AGREEMENT MAY BE TERMINATED AT ANY TIME WHILE THE EMPLOYEE IS
LIVING BY A WRITTEN INSTRUMENT SIGNED BY THE
BANK AND THE EMPLOYEE, PROVIDED, THAT THE BANK MAY TERMINATE THIS
AGREEMENT BY WRITTEN NOTICE TO THE EMPLOYEE AT ANY TIME AFTER THE EMPLOYEE HAS
CEASED TO BE THE CHAIRMAN OF THE BANK OTHER THAN
BECAUSE OF HIS DEATH; AND, IN
ANY EVENT, THIS AGREEMENT WILL TERMINATE UPON TERMINATION OF THE EMPLOYEE'S
EMPLOYMENT WITH THE BANK FOR ANY REASON OTHER THAN
HIS DEATH.
2. The
following new sentence is added to the end of Article X of the 1995
Agreement:
WITHOUT
LIMITING THE FOREGOING, FOLLOWING TERMINATION OF THIS AGREEMENT, TO
THE EXTENT PERMITTED BY THE POLICY, THE BANK MAY DESIGNATE ANY
OFFICER OR OTHER
EMPLOYEE OF THE BANK AS THE INSURED
UNDER THE POLICY AND MAY CONTINUE THIS
AGREEMENT WITH SUCH OFFICER OR EMPLOYEE.
3. The
foregoing amendments shall be effective upon the date of this
Agreement.
4. In
other respects, the 1995 Agreement shall continue in full force and effect. The
parties hereby execute this Agreement as follows:
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NBT
BANCORP INC.
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By:
/s/ Andrew Kowalczyk Jr.
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Date: 1/28/02
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Its: Chairman
Compensation Committee
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NBT
BANK, NATIONAL ASSOCIATION
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By:
/s/ Michael J. Chewens
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Date: 1/28/02
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Its: Secretary
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Date: 1/28/02
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/s/ Daryl R. Forsythe
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DARYL
R. FORSYTHE
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Exhibit
10.16
July 23,
2001
Mr.
Martin A. Dietrich
155
Serenity Drive
Norwich,
New York 13815
Dear Mr.
Dietrich:
NBT
Bancorp Inc. (which, together with its wholly-owned subsidiary, NBT Bank,
National Association, is referred to as the "Company") considers the stability
of its key management group to be essential to the best interests of the Company
and its shareholders. The Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a change in
control may arise and that the attendant uncertainty may result in the departure
or distraction of key management personnel to the detriment of the Company and
its shareholders.
Accordingly,
the Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to encourage members of the Company's key
management group to continue as employees notwithstanding the possibility of a
change in control of the Company.
The Board
also believes it important that, in the event of a proposal for transfer of
control of the Company, you be able to assess the proposal and advise the Board
without being influenced by the uncertainties of your own
situation.
In order
to induce you to remain in the employ of the Company, we entered an agreement,
approved by the Board, dated February 21, 1995, and revised by Board action most
recently on July 23, 2001, providing for severance compensation that the Board
agreed would be provided to you in the event your employment with the Company
terminated subsequent to a change in control of the Company
("Agreement"). We have agreed upon various changes to the Agreement,
agreed to by the Board, and have agreed to amend and restate the Agreement in
its entirety as follows:
1.
Agreement to Provide
Services; Right to Terminate.
(a) Termination Prior to Certain
Offers. Except as otherwise provided in paragraph (b) below,
or in any written employment agreement between you and the Company, the Company
or you may terminate your employment at any time. If, and only if,
such termination occurs after a "change in control of the Company" (as defined
in section 6), the provisions of this Agreement regarding the payment of
severance compensation and benefits shall apply.
(b) Termination Subsequent to
Certain Offers. In the event a tender offer or exchange offer
is made by a "person" (as defined in section 6) for more than 30 percent of the
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors ("Voting Securities"), including
shares of common stock, no par value, of the Company (the "Company Shares"), you
agree that you will not leave the employ of the Company (other than as a result
of Disability as such term is defined in section 6) and will render
services to the Company in the capacity in which you then serve until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company has occurred as a result of such tender offer or exchange
offer. If, during the period you are obligated to continue in the
employ of the Company pursuant to this section 1(b), the Company reduces your
compensation, terminates your employment without Cause, or you provide written
notice of your decision to terminate your employment for Good Reason, your
obligations under this section 1(b) shall thereupon terminate and you will be
entitled to payments provided under Section 3(b).
2.
Term of
Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until December 31, 2003; provided, however, that
commencing December 31, 2001 and each December 31 thereafter, the remaining term
of this Agreement shall automatically be extended for one additional
year (to a total of three years) unless at least 90 days prior to such
anniversary, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a
change in control of the Company shall occur while this Agreement is in
effect, this Agreement shall automatically be extended for 24
months from the date the change in control of the Company
occurs. This Agreement shall terminate if you or the Company
terminates your employment prior to a change in control of the Company
but without prejudice to any remedy the Company may have for breach of your
obligations, if any, under section 1(b).
3.
Severance Payment and
Benefits If Termination Occurs Following Change in Control for Disability,
Without Cause, With Good Reason or Without Good Reason within 12 Months of the
Change. If, (I) within 24 months from the date of occurrence
of any event constituting a change in control of the Company (it being
recognized that more than one such event may occur in which case the 24-month
period shall run from the date of occurrence of each such event), your
employment with the Company is terminated (i) by the Company for Disability,
(ii) by the Company without Cause, or (iii) by you with Good Reason (as defined
in section 6), or (II) within 12 months from the date of occurrence of any event
constituting a change in control of the Company (it being recognized that more
than one such event may occur in which case the 12-month period shall run from
the date of occurrence of each such event) you terminate your employment either
with or without Good Reason, you shall be entitled to a severance payment
and other benefits as follows:
2
(a) Disability. If
your employment with the Company is terminated for Disability, your benefits
shall thereafter be determined in accordance with the Company's long-term
disability income insurance plan. If the Company's long-term
disability income insurance plan is modified or terminated following a change in
control, the Company shall substitute such a plan with benefits applicable to
you substantially similar to those provided by such plan prior to its
modification or termination. During any period that you fail to
perform your duties hereunder as a result of incapacity due to physical or
mental illness, you shall continue to receive your full base salary at the rate
then in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or
With Good Reason or Within 12 Months of Change in Control. If
your employment with the Company is terminated without Cause by the Company or
with Good Reason by you, or by you within 12 months of a change in control of
the Company without Good Reason, then the Company shall pay to you, upon demand,
the following amounts (net of applicable payroll taxes):
(i)
Your full base salary through the Date of
Termination at the rate in effect on the date the change in control of the
Company occurs plus year-to-date accrued vacation.
(ii) As
severance pay, an amount equal to the product of 2.99 multiplied by the greater
of (A) the sum of your annualized salary for the calendar year in which the
change in control of the Company occurs, the maximum target bonus that could
have been paid to you for such year if all applicable targets and objectives had
been achieved, or if no formal bonus program is in effect, the largest bonus
amount paid to you during any one of the three preceding calendar years, your
income from the exercise of nonqualified options during such year, your
compensation income from any disqualifying disposition during such year of stock
acquired pursuant to the exercise of incentive stock options and other
annualized amounts that constitute taxable income to you from the Company for
such year, without reduction for salary reduction amounts excludible from income
under Section 402(e)(3) or 125 of the Internal Revenue Code of 1986, as amended
(the "Code"), or (B) your average "Compensation" (as defined below) for the
three calendar years preceding the calendar year in which the change in control
of the Company occurs. As used in this subsection 3(b)(ii) your
"Compensation" shall mean your base salary, bonus, income from the exercise of
nonqualified options, compensation income from any disqualifying disposition of
stock acquired pursuant to the exercise of incentive stock options and any other
amounts that constitute taxable income to you from the Company, without
reduction for salary reduction amounts excludible from income under Section
402(e)(3) or 125 of the Code.
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(c) Related
Benefits. Unless you die or your employment is terminated by
the Company for Cause or Disability, or by you other than for Good Reason and
not within 12 months after a change in control of the Company, (i) the Company
shall maintain in full force and effect, for your continued benefit and, if
applicable, for the continued benefit of your spouse and family, for three years
after the Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, all noncash employee benefit plans, programs,
or arrangements (including, without limitation, pension and retirement plans and
arrangements, stock option plans, life insurance and health and accident plans
and arrangements, medical insurance plans, disability plans, and vacation
plans) in which you were entitled to participate immediately prior to the Date
of Termination, as in effect at the Date of Termination, or, if more favorable
to you and, if applicable, your spouse and family, as in effect generally at any
time thereafter with respect to executive employees of the Company or any
successor; provided that your continued participation is possible after
Termination under the general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to participate in a
benefit plan, program, or arrangement of another employer which confers
substantially similar benefits upon you, you shall cease to receive benefits
under this subsection in respect of such plan, program, or arrangement, and
(ii) your benefit under any supplemental retirement agreement or supplemental
retirement plan maintained by the Company in which you are a participant shall
be fully vested upon such termination of your employment, and your benefit under
such agreement or plan shall be determined as if you had continued to be
employed by the Company for three additional years (or the period after which
the maximum benefit payable is attained, if less) and if your annual
compensation for purposes of such agreement or plan during such period of
additional employment had been equal to the amount specified in Section
3(b)(ii)(A) or (B), whichever is higher. In the event that your
participation in any such plan, program, or arrangement is not possible after
Termination under the general terms and provisions of such plans, programs, and
arrangements, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive under such
plans, programs and arrangements or alternatively, pay an amount equal to the
reasonable value of such substantially similar benefits. If, after
termination of employment following a change in control of the Company, you
elect or, if applicable, your spouse or family elects, COBRA continuation
coverage, the Company will pay the applicable COBRA premium for the maximum
period during which such coverage is available. If termination
follows a change in control of the Company specified in Section 6(b)(iii), then
you and, if applicable, your spouse and family may elect in lieu of COBRA
continuation coverage to have the acquiring entity obtain an individual or group
health insurance coverage and the acquiring entity will pay premiums thereunder
for the maximum period during which you and, if applicable, your spouse and
family could have elected to receive COBRA continuation
coverage.
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(d) Establishment of
Trust. Within five days following conclusion of a change in
control of the Company, the Company shall establish a trust that conforms in all
regards with the model trust published in Revenue Procedure 92-64 and deposit an
amount sufficient to satisfy all liabilities of the Company under Section 3(b)
of this Agreement.
(e) Automatic
Extension. Notwithstanding the prior provisions of this
Section, if an individual is elected to the Board of Directors who has not been
nominated by the Board of Directors as constituted prior to his election, then
the term of this Agreement will automatically be extended until two years from
the date on which such individual was elected if such extended termination date
is later than the normal termination date of this Agreement, otherwise, the
termination date of this Agreement will be as provided above. This
extension will take effect only upon the first instance of an individual being
elected to the Board of Directors without having been nominated by the original
Board.
(f) Alternative to Lump Sum
Payout. The amount described in this subsection will be paid
to you in a single lump-sum unless, at least 30 days before the conclusion of a
change in control of the Company, you elect in writing to receive the severance
pay in 3 equal annual payments with the first payment to be made within 30 days
of demand and the subsequent payments to be made by January 31st of each year
subsequent to the year in which the first payment is made, provided that under
no circumstances will two payments be made during a single tax year of the
recipient.
4.
Payment If Termination
Occurs Following Change in Control, Because of Death, For Cause, or Without Good
Reason and not within 12 Months of the Change in Control. If
your employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the Company for
Cause, or by you other than for Good Reason and not within 12 months after a
change in control of the Company, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect on the date the
change in control of the Company occurs plus year-to-date accrued
vacation. The Company shall have no further obligations to you under
this Agreement.
5.
No
Mitigation. You shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor, except as expressly set forth herein, shall the amount of
any payment provided for in this Agreement be reduced by any compensation earned
by you as the result of employment by another employer after the Date of
Termination, or otherwise.
6.
Definitions of Certain
Terms. For the purpose of this Agreement, the terms defined in
this section 6 shall have the meanings assigned to them herein.
(a) Cause. Termination
of your employment by the Company for "Cause" shall mean termination because,
and only because, you committed an act of fraud, embezzlement, or theft
constituting a felony or an act intentionally against the interests of the
Company which causes the Company material injury. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
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(b) Change in Control of the
Company. A "change in control of the Company" shall
mean:
(i) A
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be deemed to have
occurred at such time as any Person hereafter becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30
percent or more of the combined voting power of the Company's Voting
Securities; or
(ii) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(iii) There
shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which Voting Securities would be converted into cash, securities, or
other property, other than a merger of the Company in which the holders of
Voting Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all of the assets of the Company, provided that any
such consolidation, merger, sale, lease, exchange or other transfer consummated
at the insistence of an appropriate banking regulatory agency shall not
constitute a change in control of the Company; or
(iv) Approval
by the shareholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company.
(c) Date of
Termination. "Date of Termination" shall mean (i) if your
employment is terminated by the Company for Disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period), and
(ii) if your employment is terminated for any other reason, the date on which a
Notice of Termination is given; provided that if within 30 days after any Notice
of Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties or by a final judgment, order,
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected). The term of
this Agreement shall be extended until the Date of Termination.
6
(d) Disability. Termination
of your employment by the Company for "Disability" shall mean termination
because of your absence from your duties with the Company on a full-time basis
for 180 consecutive days as a result of your incapacity due to physical or
mental illness and your failure to return to the performance of your duties on a
full-time basis during the 30-day period after Notice of Termination is
given.
(e) Good
Reason. Termination by you of your employment for "Good
Reason" shall mean termination based on any of the following:
(i) A
change in your status or position(s) with the Company, which in your reasonable
judgment, does not represent a promotion from your status or position(s) as in
effect immediately prior to the change in control of the Company, or a change in
your duties or responsibilities which, in your reasonable judgment, is
inconsistent with such status or position(s), or any removal of you from,
or any failure to reappoint or reelect you to, such position(s), except in
connection with the termination of your employment for Cause or Disability or as
a result of your death or by you other than for Good Reason.
(ii) A
reduction by the Company in your base salary as in effect immediately prior to
the change in control of the Company.
(iii) The
failure by the Company to continue in effect any Plan (as hereinafter defined)
in which you are participating at the time of the change in control of the
Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in control of
the Company, or the taking of any action, or the failure to act, by the Company
which would adversely affect your continued participation in any of such Plans
on at least as favorable a basis to you as is the case on the date of the change
in control of the Company or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit enjoyed by
you at the time of the change in control of the Company.
(iv) The
failure by the Company to provide and credit you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy as in effect immediately prior to the change in control
of the Company.
7
(v) The
Company's requiring you to be based anywhere other than where your office is
located immediately prior to the change in control of the Company except for
required travel on the Company's business to an extent substantially consistent
with the business travel obligations which you undertook on behalf of the
Company prior to the change in control of the Company.
(vi) The
failure by the Company to obtain from any successor the assent to this Agreement
contemplated by section 8 hereof.
(vii) Any
purported termination by the Company of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of this
Agreement; and for purposes of this Agreement, no such purported
termination shall be effective.
(viii) Any
refusal by the Company to continue to allow you to attend to matters or engage
in activities not directly related to the business of the Company which, prior
to the change in control of the Company, you were permitted by the Board to
attend to or engage in.
For
purposes of this subsection, "Plan" shall mean any compensation plan such as an
incentive or stock option plan or any employee benefit plan such as a thrift,
pension, profit sharing, medical, disability, accident, life insurance plan, or
a relocation plan or policy or any other plan, program, or policy of the Company
intended to benefit employees.
(f) Notice of
Termination. A "Notice of Termination" of your employment
given by the Company shall mean a written notice given to you of the termination
of your employment which shall indicate the specific termination provision in
this Agreement relied upon, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The
term "Person" shall mean and include any individual, corporation, partnership,
group, association, or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Company or any employee benefit plan(s)
sponsored by the Company.
7. Notice. For
the purposes of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
8
8.
Successors; Binding
Agreement.
(a) This
Agreement shall inure to the benefit of, and be binding upon, any corporate or
other successor or assignee of the Company which shall acquire, directly or
indirectly, by merger, consolidation or purchase, or otherwise, all or
substantially all of the business or assets of the Company. The
Company shall require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
(b) This
Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee, or other designee or,
if there is no such designee, to your estate.
9.
Increased Severance Payments
Upon Application of Excise Tax.
(a) Adjustment of
Payment. In the event any payments or benefits you become
entitled to pursuant to the Agreement or any other payments or benefits received
or to be received by you in connection with a change in control or your
termination of employment (whether pursuant to the terms of any other agreement,
plan, or arrangement, or otherwise, with the Company, any person whose actions
result in a change in control or any person affiliated with the Company or
such person) (collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay you an additional amount
(the "Gross-Up Payment") so that the net amount retained by you, after deduction
of the Excise Tax (but before deduction for any federal, state or local income
tax) on the Severance Payments and after deduction for the aggregate of any
federal, state, or local income tax and Excise Tax upon the Gross-Up Payment,
shall be equal to the Severance Payments. For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) the entire amount of the Severance Payments shall
be treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code and as subject to the Excise Tax, unless and to the extent, in the
written opinion of outside tax counsel selected by the Company's independent
accountants and reasonably acceptable to you, such payments (in whole or in
part) are not subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part of the
Severance Payments) shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income taxes at the highest marginal rate of
the federal income taxation applicable to individuals (without taking into
account surtaxes or loss or reduction of deductions) for the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of your residence
on the date of Termination. In the event that the amount of Excise
Tax you are required to pay is subsequently determined to be less than the
amount taken into account hereunder, you shall repay to the Company promptly
after the time that the amount of such reduction in Excise Tax is finally
determined the amount of the reduction, together with interest on the amount of
such reduction at the rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel selected by the
Company's independent accountants and reasonably acceptable to you, such payment
(or a portion thereof) was not taxable income to you when reported or is
deductible by you for federal income tax purposes, the net federal income tax
benefit you actually realize as a result of making such payment pursuant to this
sentence. In the event that the amount of Excise Tax you are required
to pay is subsequently determined to exceed the amount taken into account
hereunder, the Company shall make an additional Gross-Up Payment in the manner
set forth above in respect of such excess (plus any interest, additions to tax,
or penalties payable by you with respect to such excess) promptly after the time
that the amount can be reasonably determined.
9
(b) Time of Payment: Estimated
Payment. The payments provided for in subsection (a) above,
shall be made not later than the fifth business day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments, and shall pay the remainder of such payments (together
with interest at the rate of 6 percent per annum) as soon as the amount thereof
can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the rate of 6 percent per
annum).
10. Miscellaneous. No
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in a writing signed by you and
the Chief Executive Officer or President of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by laws of the State of New York without giving effect to the
principles of conflict of laws thereof.
10
11. Legal Fees and
Expenses. The Company shall pay or reimburse any reasonable
legal fees and expenses you may incur in connection with any legal action to
enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and
expenses on a regular, periodic basis upon presentation by you of a statement or
statements prepared by your counsel in accordance with its usual
practices.
12. Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
13. Payments During
Controversy. Notwithstanding the pendency of any dispute or
controversy, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance plans in which
you were participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with section
7(c). Amounts paid under this section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement. You shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
14. Illegality. Anything
in this Agreement to the contrary notwithstanding, this Agreement is not
intended and shall not be construed to require any payment to you which would
violate any federal or state statute or regulation, including without limitation
the "golden parachute payment regulations" of the Federal Deposit Insurance
Corporation codified to Part 359 of title 12, Code of Federal
Regulations.
11
If this
letter correctly sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
|
Very
truly yours,
|
|||
|
NBT
BANCORP INC.
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|||
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By:
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/s/ Daryl Forsythe | ||
|
AGREED
TO:
|
|||
| /s/ Martin A. Dietrich | |||
|
Martin
A.
Dietrich
|
|||
12
Exhibit
10.18
NBT
BANCORP INC.
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
(Effective
as of July 23, 2001)
TABLE OF
CONTENTS
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Page
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Preamble
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1
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Article
1 - Definitions
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1
|
|
Article
2 - Eligibility and Participation
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6
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Article
3 - Retirement Date
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7
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Article
4 - Retirement Income Benefit
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7
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Article
5 - Supplemental 401(k)/ESOP Benefit and Deferral Credit
Accounts
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8
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Article
6 - Supplemental Retirement Benefit
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9
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Article
7 - Modes of Benefit Payment and Vesting of Benefits
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10
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Article
8 - Death Benefits
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12
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Article
9 - Unfunded Plan
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14
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Article
10 - Administration
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15
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Article
11 - Amendment or Termination
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17
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Article
12 - General Provisions
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17
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i
SUPPLEMENTAL
RETIREMENT AGREEMENT
EFFECTIVE
JULY 23, 2001
The
attached document (NBT Bancorp
Inc. Supplemental Executive Retirement Plan, effective as of July 23,
2001) sets forth the terms of an agreement for the payment of supplemental
retirement income made as of July 23, 2001 between NBT Bancorp Inc., a Delaware
corporation and a registered financial holding company headquartered at 52 S.
Broad Street, Norwich, New York 13815, and Michael J. Chewens, an
individual residing at 2613 Pine Bluff Drive, Vestal, New
York 13815. The parties hereby execute this agreement as
follows:
NBT
BANCORP INC.
|
By: /s/ Daryl R.
Forsythe
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Date: July 23,
2001
|
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Daryl
R. Forsythe
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|
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Chairman,
President and
|
|
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Chief
Executive Officer
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|
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/s/ Micheal J. Chewens
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Date: July 23,
2001
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Michael
J. Chewens
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PREAMBLE
This NBT
Bancorp Inc. Supplemental Executive Retirement Plan (the “Plan”) is effective as
of July 23, 2001. The purpose of the Plan is to permit certain
employees of NBT Bancorp Inc. (the “Company”), its subsidiary, NBT Bank,
National Association (the “Bank”) and adopting affiliated employers to receive
supplemental retirement income when such amounts would be due under the benefit
and contribution formulas in the tax-qualified NBT Bancorp Inc. Defined Benefit
Pension Plan and NBT Bancorp Inc. 401(k) and Employee Stock Ownership Plan but
cannot be paid thereunder due to the reductions and other limitations imposed by
Sections 401(a)(17), 401(k)(3), 401(m) and 415 of the Internal Revenue Code of
1986, as amended and to provide such employees’ with an aggregate retirement
benefit (taking into consideration amounts paid under such Plans and social
security benefits) commencing following retirement at or after age 62 of not
less than 50% of such employees’ final average compensation, subject to the
terms of the Plan. Capitalized terms are defined in Article 1
below.
The Plan
is intended to be an unfunded, non-qualified deferred compensation
plan. Neither the Employer, the Committee, nor the individual members
of the Committee shall segregate or otherwise identify specific assets to be
applied to the purposes of the Plan, nor shall any of them be deemed to be a
trustee of any amounts to be paid under the Plan. Any liability of
the Employer to any person with respect to benefits payable under the Plan shall
be based solely upon such contractual obligations, if any, as shall be created
by the Plan, and shall give rise only to a claim against the general assets of
the Employer. No such liability shall be deemed to be secured by any
pledge or any other encumbrance on any specific property of the
Employer.
ARTICLE
1
DEFINITIONS
The
following words and phrases shall have the meanings hereafter ascribed to
them. Those words and phrases which have limited application are
defined in the respective Articles in which such terms appear.
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1.1
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“Actuarial
Equivalent” shall have the same meaning the term “Actuarial Equivalent”
has under Section 2.03 of Appendix A to the Basic Retirement Plan using
the following actuarial
assumptions:
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Mortality: “Applicable
Mortality Rate” as such term is defined in Section 2.03c of Appendix A to the
Basic Retirement Plan.
Interest
Rate: “Applicable Interest Rate” as such term is defined in
Section 2.09b of Appendix A to the Basic Retirement Plan.
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1.2
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“Bank”
means NBT Bank, National Association or any successor thereto by merger,
consolidation or otherwise by operation of
law.
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1
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1.3
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“Basic
401(k)/ESOP” means the NBT Bancorp Inc. 401(k) and Employee Stock
Ownership Plan, as amended from time to
time.
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1.4
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“Basic
401(k)/ESOP Benefit” means the benefit paid to a Participant under the
Basic 401(k)/ESOP and includes benefits payable upon Normal Retirement,
Early Retirement, Postponed Retirement, death or termination of
service.
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1.5
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“Basic
401(k)/ESOP Surviving Spouse Benefit” means the benefit payable to a
Participant’s surviving spouse under the Basic 401(k)/ESOP upon the
Participant’s death before a distribution of the Participant’s entire
Basic 401(k)/ESOP account balance.
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1.6
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“Basic
Retirement Plan” means the NBT Bancorp Inc. Defined Benefit Pension Plan,
as amended from time to time.
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1.7
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“Basic
Retirement Plan Benefit” means the benefit payable to a Participant under
the Basic Retirement Plan and includes benefits payable upon Normal
Retirement, Early Retirement, Postponed Retirement, death or termination
of service.
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1.8
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“Basic
Retirement Plan Surviving Spouse Benefit” means the benefit payable to a
Participant’s surviving spouse or eligible children under the Basic
Retirement Plan upon the Participant’s death, if
any.
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1.9
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“Beneficiary”
means such living person or living persons designated by the Participant
in accordance with Section 7.5(a) to receive the Supplemental Retirement
Benefit after his or her death, or his or her personal or legal
representative, all as herein described and provided. If no
Beneficiary is designated by the Participant or if no Beneficiary survives
the Participant, the Beneficiary shall be the Participant’s
estate.
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1.10
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“Board”
means the Board of Directors of the Company, as duly constituted from time
to time.
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1.11
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“Cause”
means the Participant’s (a) conviction of robbery, bribery, extortion,
embezzlement, fraud, grand larceny, burglary, perjury, income tax evasion,
misapplication of Employer funds, false statements in violation of 18
U.S.C. § 1001, or any other felony that is punishable by a term of
imprisonment of more than one year; (b) material breach of his or her duty
of loyalty to the Employer; (c) acts or omissions in the performance of
his or her duties having a material adverse effect on the Employer that
were not done or omitted to be done in good faith or which involved
intentional misconduct or a knowing violation of law; or (d) any
transaction in the performance of his or her duties with the Employer from
which he or she derived a material improper personal
benefit.
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|
1.12
|
“Change
in Control” means:
|
(i) A
change in control with respect to the Company or the Bank of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the Securities
Exchange Act of 1934 (the “Exchange Act”); provided that, without limitation,
such a change in control shall be deemed to have occurred at such time as any
person (including an individual, corporation, partnership, trust, association,
joint venture, pool, syndicate, unincorporated organization, joint-stock company
or similar organization or group acting in concert) hereafter becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 30 percent or more of the combined voting power of the common
stock and other voting securities of the Company; or
2
(ii)
During any period of two consecutive years, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
the shareholders of the Company, of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of the period; or
(iii) There
shall be consummated (x) any consolidation or merger of the Company in
which it is not the continuing or surviving corporation or pursuant to which
voting securities of the Company would be converted into cash, securities, or
other property, other than a merger of the Company in which the holders of its
common stock and other voting securities immediately before the merger have
substantially the same proportionate ownership of common stock and other
voting securities, respectively, of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all of the assets of the Company or the Bank, provided
that any such consolidation, merger, sale, lease, exchange or other transfer
consummated at the insistence of an appropriate banking regulatory agency shall
not constitute a change in control; or
(iv)
Approval by the shareholders of the Company of any plan or proposal for
its liquidation or dissolution.
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1.13
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“Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
|
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1.14
|
“Committee”
means the Plan’s administrative committee, as appointed by the Board to
administer the Plan, as described in Article
10.
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1.15
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“Company”
means NBT Bancorp, Inc. or any successor thereto by merger, consolidation
or otherwise by operation of law.
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1.16
|
“Confidential
Information” means business methods, creative techniques and technical
data of the Company, the Bank and their affiliates that are deemed by the
Company, the Bank or any such affiliate to be and are in fact confidential
business information of the Company, the Bank or its affiliates or are
entrusted to the Company, the Bank or its affiliates by third parties, and
includes, but is not limited to, procedures, methods, sales relationships
developed while the Participant is in the service of the Company, the Bank
or their affiliates, knowledge of customers and their requirements,
marketing plans, marketing information, studies, forecasts and surveys,
competitive analyses, mailing and marketing lists, new business proposals,
lists of vendors, consultants, and other persons who render service or
provide material to the Company, the Bank or their affiliates, and
compositions, ideas, plans, and methods belonging to or related to the
affairs of the Company, the Bank or their affiliates, except for such
information as is clearly in the public domain, provided, that
information that would be generally known or available to persons skilled
in the Participant’s fields shall be considered to be “clearly in the
public domain” for this
purpose.
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3
|
1.17
|
“Deferral
Credit Account” means the bookkeeping account maintained in the name of
the Employer, on behalf of each Participant, pursuant to Article
5.
|
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1.18
|
“Determination
Date” means the earlier of (i) the date of termination of the
Participant’s employment with the Employer or (ii) the first day of the
month following the Participant’s 65th
birthday.
|
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1.19
|
“Effective
Date” means July 23, 2001.
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1.20
|
“Employee”
means a person who is an employee of the
Employer.
|
|
1.21
|
“Employer”
means the Company, the Bank and any subsidiary or affiliated corporation
of either of them which, with the approval of the Board and subject to
such conditions as the Board may impose, adopts the Plan, and any
successor or successors of any of
them.
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1.22
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“Final
Average Compensation” shall have the same meaning as the term “Final
Average Compensation” has under Section 2.27 of Appendix A to the Basic
Retirement Plan, except that in determining the amount of Compensation (as
defined in Section 2.14 of Appendix A to the Basic Retirement Plan) to be
used in calculating Final Average Compensation under Section 2.27 of
Appendix A to the Basic Retirement Plan, Compensation shall not be subject
to the compensation limitation of section 401(a)(17) of the
Code.
|
|
1.23
|
“401(k)/ESOP
Benefit” means the deferred compensation 401(k)/ESOP Benefit provided to
Participants and their beneficiaries in accordance with the applicable
provisions of the Plan.
|
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1.24
|
“Full-Time
Employee” shall mean an Employee who works not less than 1,000 hours in a
calendar year.
|
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1.25
|
“Other
Retirement Benefits” means the sum
of:
|
|
|
(a)
|
The
annual benefit payable to the Participant from the Basic Retirement Plan;
plus
|
|
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(b)
|
The
annual Retirement Income Benefit payable to the Participant hereunder;
plus
|
|
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(c)
|
The
annual amount of any supplemental retirement benefit payable to the
Participant by the Employer or any other Employer pursuant to any
Supplemental Retirement Agreement with the Participant (other than amounts
attributable to elective deferrals of such Participant’s compensation);
plus
|
4
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(d)
|
The
annual benefit that could be provided by (A) Employer contributions (other
than elective deferrals) made on the Participant’s behalf under the Basic
401(k)/ESOP, and (B) actual earnings on contributions in (A), if such
contributions and earnings were converted to a benefit payable at age 62
in the same form as the Supplemental Retirement Benefit, using the same
actuarial assumptions as are provided under Section 1.1;
plus
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|
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(e)
|
The
annual benefit that could be provided by the Participant’s Deferral Credit
Account, if such Deferral Credit Account were converted to a benefit
payable at age 62 in the same form as the Supplemental Retirement Benefit,
using the same actuarial assumptions as are provided under Section
1.1.
|
The
amount of Other Retirement Benefits shall be determined by an actuary selected
by the Company, with such determination to be made without regard to whether the
Participant is receiving payment of such benefits on the Determination
Date. To the extent the Participant receives a payment of Other
Retirement Benefits described in 1.25(d) or (e) prior to the date the
Supplemental Retirement Benefit is determined pursuant to this Plan, the total
of such Other Retirement Benefits shall be determined by including and assuming
that such amounts earned interest at a variable rate equal to the one-year
United States Treasury bill rate as reported in the New York edition of The Wall Street Journal on
the Determination Date from the date received to the date Other Retirement
Benefits are calculated for purposes of this Plan.
|
1.26
|
“Participant”
means an Employee who has been designated by the Employer as eligible to
participate in the Plan and who becomes a Participant pursuant to the
provisions of Article 2.
|
|
1.27
|
“Plan”
means the NBT Bancorp Inc. Supplemental Executive Retirement Plan, as
herein set forth, and as it may hereafter be amended from time to
time.
|
|
1.28
|
“Plan
Limitation Provisions” means provisions of the Basic 401(k)/ESOP and the
Basic Retirement Plan that reduce or restrict an Employee’s
employer-provided benefits under the Basic Retirement Plan and employer
matching contributions to the Basic 401(k)/ESOP (including Article IX and
the last sentence of Section 1.12 of the Basic Retirement Plan and the
next to last paragraph of Section 1.14, the third paragraph of Section
1.33 and Sections 4.5, 4.7 and 4.9 of the Basic 401(k)/ESOP, or the
corresponding provisions of any amendment to such Plans) in order to
satisfy the limitations imposed by one or more of the
following: (i) Section 401(a)(17) of the Code, (ii) Section
401(k)(3) of the Code, (iii) Section 401(m) of the Code, or (iv) Section
415 of the Code.
|
|
1.29
|
“Plan
Year” means the period from the Effective Date through December 31, 2001
and each calendar year thereafter within which the Plan is in
effect.
|
|
1.30
|
“Present
Value” means the present value of a benefit determined on the basis of the
actuarial assumptions specified in Section
1.1
|
5
|
1.31
|
“Social
Security Benefit” means the Participant’s actual social security benefit
at his or her Social Security Retirement
Age.
|
|
1.32
|
“Social
Security Retirement Age” shall have the same meaning the term “Social
Security Retirement Age” has under Section 2.58 of Appendix A to the Basic
Retirement Plan.
|
|
1.33
|
“Retirement
Income Benefit” means the deferred compensation retirement income benefit
determined pursuant to Article 4.
|
|
1.34
|
“Supplemental
Retirement Benefit” means the deferred compensation retirement benefit
determined pursuant to Article 6.
|
|
1.35
|
“Supplemental
Surviving Spouse Benefit” means the survivor death benefit payable to a
Participant’s surviving spouse, pursuant to the provisions of Sections 8.1
through 8.3.
|
|
1.36
|
“Year
of Service” means a calendar year in which the Participant completes not
less than 1,000 Hours of Service (as defined in Section 1.25 of the Basic
Retirement Plan) with an Employer.
|
Words
importing males shall be construed to include females and the singular shall be
construed to include the plural, and vice versa, wherever
appropriate.
ARTICLE
2
ELIGIBILITY AND
PARTICIPATION
|
2.1
|
Plan
eligibility is limited to a select group of management or highly
compensated Employees, as designated in writing by the Board, who
participate in the Basic Retirement Plan, the Basic 401(k)/ESOP or both
such plans.
|
From time
to time, the Company may designate one or more Employees who participate in the
Basic Retirement Plan, the Basic 401(k)/ESOP or both such plans as participants
in the Plan, from the class of Employees participating in the Basic Retirement
Plan, the Basic 401(k)/ESOP or both such plans who are members of a select group
of management Employees or are highly compensated Employees. Newly
eligible Employees shall participate as of the date specified by the
Board.
|
2.2
|
The
Company may, from time to time, remove any Participant from participation
in the Plan; provided, however,
that, subject to Section 12.4, such removal will not reduce the amount of
Retirement Income Benefit and 401(k)/ESOP Benefit credited to the
Participant under the Plan, as determined as of the date of such
Participant’s removal. A Participant so removed shall remain a
Participant until all benefits are distributed in accordance with the
provisions of the Plan.
|
|
2.3
|
The
Committee may provide each eligible Employee with appropriate forms in
connection with participation in the
Plan.
|
6
ARTICLE
3
RETIREMENT
DATE
|
3.1
|
A
Participant’s Retirement Date shall be his or her date of actual
retirement, which may be his or her Normal, Early, Disability or Postponed
Retirement Date, whichever is applicable pursuant to the following
sections of this Article 3.
|
|
3.2
|
A
Participant’s Normal Retirement Age shall be the 65th anniversary of his
or her birth. Such Participant’s Normal Retirement Date shall
be the date coinciding with Normal Retirement Date under the Basic
Retirement Plan.
|
|
3.3
|
A
Participant may retire on an Early Retirement Date, which shall be the
date coinciding with the initial distribution of an early retirement
benefit under the Basic Retirement
Plan.
|
|
3.4
|
A
Participant may retire on a Disability Retirement Date, which shall be the
date coinciding with the initial distribution of a disability retirement
benefit under the Basic Retirement
Plan.
|
|
3.5
|
If
a Participant continues in the employment of the Employer beyond Normal
Retirement Date, the date coinciding with postponed retirement under the
Basic Retirement Plan shall be the Participant’s Postponed Retirement
Date.
|
ARTICLE
4
RETIREMENT INCOME
BENEFIT
|
4.1
|
The
Retirement Income Benefit payable to an eligible Participant in the form
of a life annuity with five years certain commencing on his or her Normal,
Early, Disability or Postponed Retirement Date, as the case may be, shall
be equal to the excess, if any, of the amount specified in (a) over the
amount specified in (b), as stated
below:
|
|
|
(a)
|
the
monthly amount of Basic Retirement Plan retirement income payable upon
Normal, Early or Postponed Retirement Date, as the case may be, to which
the Participant would have been entitled under the Basic Retirement Plan,
if such benefit were calculated under the Basic Retirement Plan without
giving effect to the limitations and restrictions imposed by the
application of Plan Limitation Provisions and any other provisions of the
Basic Retirement Plan that are necessary to comply with Code Sections
401(a)(17) and 415, or any successor provisions
thereto;
|
|
|
(b)
|
the
sum of (i) the monthly amount of Basic Retirement Plan retirement income
payable upon Normal, Early or Postponed Retirement Date, as the case may
be, actually payable to the Participant under the Basic Retirement Plan,
after the limitations and restrictions imposed by the application of the
Plan Limitation Provisions and any other provisions of the Basic
Retirement Plan that are necessary to comply with Code Sections 401(a)(17)
and 415, or any successor provisions thereto, plus (ii) the monthly amount
of retirement income that is the actuarial equivalent (determined in
accordance with the Basic Retirement Plan) of any supplemental retirement
benefit payable to the Participant by any Employer upon Normal, Early or
Postponed Retirement Date, as the case may be, pursuant to any
Supplemental Retirement Agreement with the
Participant.
|
7
|
4.2
|
With
respect to eligible Participants who terminate their employment other than
on a Retirement Date specified in Article 3, the vested Retirement Income
Benefit payable in the form of a life annuity with five years certain,
commencing on the date the Participant is eligible for a vested retirement
benefit under the Basic Retirement Plan, shall be equal to the excess, if
any, of the amount specified in (a) over the amount specified in (b), as
stated below:
|
|
|
(a)
|
the
monthly amount of Basic Retirement Plan vested retirement income payable
upon termination of service to which the Participant would have been
entitled under the Basic Retirement Plan, if such benefit were calculated
under the Basic Retirement Plan without giving effect to the limitations
and restrictions imposed by the application of the Plan Limitation
Provisions and any other provisions of the Basic Retirement Plan that are
necessary to comply with Code Sections 401(a)(17) and 415, or any
successor provisions thereto;
|
|
|
(b)
|
the
sum of (i) the monthly amount of Basic Retirement Plan vested retirement
income payable upon termination of service actually payable to the
Participant under the Basic Retirement Plan, after the limitations and
restrictions imposed by the application of the Plan Limitation Provisions
and any other provisions of the Basic Retirement Plan that are necessary
to comply with Code Sections 401(a)(17) and 415, or any successor
provisions thereto, plus (ii) the monthly amount of retirement income that
is the actuarial equivalent (determined in accordance with the Basic
Retirement Plan) of any supplemental retirement benefit payable to the
Participant by any Employer following such termination of service pursuant
to any Supplemental Retirement Agreement with the
Participant.
|
ARTICLE
5
SUPPLEMENTAL
401(k)/ESOP
BENEFIT AND DEFERRAL CREDIT
ACCOUNTS
|
5.1
|
The
401(k)/ESOP Benefit under the Plan shall equal the discretionary and
matching contributions or other Employer-provided benefit to the extent
provided for under the Basic 401(k)/ESOP (disregarding the limitations and
restrictions imposed by the application of the Plan Limitation Provisions
and any other provisions of the Basic 401(k)/ESOP that are necessary to
comply with Code Sections 401(a)(17), 401(k)(3), 401(m), and 415, or any
successor provisions thereto) for plan years of the Basic 401(k)/ESOP
ending after the Effective Date, less any such amount actually contributed
by the Employer to the Basic 401(k)/ESOP for such plan years (to the
extent permitted by the terms thereof, taking into account the limitations
and restrictions imposed by the application of the Plan Limitation
Provisions and any other provisions of the Basic 401(k)/ESOP that are
necessary to comply with Code Sections 401(a)(17), 401(k)(3), 401(m), and
415, or any successor provisions thereto), adjusted for income, gains and
losses based on deemed investments, pursuant to Section 5.4
below. For purposes of this Section 5.1, it shall be assumed
that the Participant has made Basic 401(k)/ESOP contributions, on a
before-tax or after-tax basis, as are necessary to qualify for the maximum
Employer provided benefit available under the Basic 401(k)/ESOP to
similarly situated Basic 401(k)/ESOP Participants who are not affected by
such restrictions and
limitations.
|
8
|
5.2
|
The
401(k)/ESOP Benefit under the Plan shall be accounted for by the Employer
under a Deferral Credit Account, maintained in the name of the Employer,
on behalf of each Participant.
|
|
5.3
|
Each
Deferral Credit Account maintained by the Employer shall be credited with
units on behalf of each Participant, as appropriate in accordance with the
401(k)/ESOP Benefit, as soon as administratively practicable, but in no
event later than March 15 of the Plan Year following the Plan Year in
which Basic 401(k)/ESOP contributions on behalf of the Participant were
limited or restricted.
|
|
5.4
|
The
401(k)/ESOP Benefit credited annually to each Participant’s Deferral
Credit Account under the Plan shall be deemed to be invested on a time
weighted basis, based upon the crediting of the Deferral Credit Account
under Section 5.3 above, as if such amounts had been invested in the same
manner as the investment of the corresponding amounts pursuant to the
Basic 401(k)/ESOP, and such Account shall be credited with income and
gains, and charged with losses, as if such investments had actually been
made.
|
ARTICLE
6
SUPPLEMENTAL RETIREMENT
BENEFIT
|
6.1
|
If
an eligible Participant shall remain employed by the Employer until
reaching his or her 62nd birthday, serving as a Full-Time Employee until
such date, and subject to the other terms and conditions of this Plan, the
Company shall pay such Participant an annual “Supplemental Retirement
Benefit” determined as follows:
|
|
|
(a)
|
the
Participant shall be entitled to a Supplemental Retirement Benefit on and
after his or her 62nd birthday but before his or her Social Security
Retirement Age in an amount equal to the excess, if any, of (1) 50 percent
of the Participant’s Final Average Compensation, over (2) the
Participant’s Other Retirement Benefits, determined as of the
Determination Date.
|
9
|
|
(b)
|
the
Participant shall be entitled to a Supplemental Retirement Benefit on and
after his or her Social Security Retirement Age in an amount equal to the
excess, if any, of (1) 50 percent of the Participant’s Final Average
Compensation, over (2) the sum of (aa) the Participant’s Other Retirement
Benefits, determined as of the Determination Date, plus (bb) the
Participant’s Social Security
Benefit.
|
|
6.2
|
If
an eligible Participant shall remain employed by the Employer until
reaching his or her 60th birthday, serving as a Full-Time Employee until
such date and he or she continues to serve as a Full-Time Employee until
the date of his or her retirement, and he or she retires then or
thereafter but before reaching his or her 62nd birthday, and subject to
the other terms and conditions of this Plan, the Company shall pay such
Participant after the date of his or her retirement, pursuant to Section
7.4(b), or to his or her spouse or other Beneficiary, pursuant and subject
to Section 8.6(c) if he or she has died before his or her 62nd birthday, a
reduced early Supplemental Retirement Benefit calculated in accordance
with the following schedule:
|
|
|
(a)
|
if
the date of the Participant’s retirement shall be on or after his or her
60th birthday but before his or her 61st birthday, the Company shall pay
such Participant 60% of the Supplemental Retirement Benefit calculated in
accordance with Section 6.1; and
|
|
|
(b)
|
if
the date of the Participant’s retirement shall be on or after his or her
61st birthday but before his or her 62nd birthday, the Company shall pay
such Participant 70% of the Supplemental Retirement Benefit so
calculated.
|
ARTICLE
7
MODES OF BENEFIT PAYMENT
AND
VESTING OF
BENEFITS
|
7.1
|
Except
as otherwise provided in the following paragraph, any Retirement Income
Benefit and 401(k)/ESOP Benefit payable under the Plan to a Participant,
beneficiary, joint or contingent annuitant or eligible child, shall be
payable in the modes provided by, and subject to the provisions of, the
Basic Retirement Plan and Basic 401(k)/ESOP, respectively, as the case may
be. Any Retirement Income Benefit paid from the Plan in a form
other than a life annuity shall be the actuarial equivalent of a life
annuity, utilizing the actuarial equivalent factors set forth in the Basic
Retirement Plan and applied to obtain the optional mode of payment
thereunder.
|
The
Committee, in its sole discretion and consistent with the best interests of the
Employer may distribute any Retirement Income Benefit and 401(k)/ESOP Benefit
payable under the Plan to a Participant, beneficiary, joint or contingent
annuitant, or eligible child, as a single lump sum benefit, using, in the case
of a Retirement Income Benefit, the actuarial equivalent factors set forth in
the Basic Retirement Plan for lump-sum cashouts. In exercising its
discretion hereunder, the Committee shall not be bound by any request by a
Participant, beneficiary, joint or contingent annuitant, or eligible child, to
receive any Retirement Income Benefit and 401(k)/ESOP Benefit payable under the
Plan as a single lump-sum benefit.
10
|
7.2
|
Except
with respect to receipt of a lump sum benefit under Section 7.1, any
elections for an optional mode of benefit payment made by a Participant
under the Basic Retirement Plan and the Basic 401(k)/ESOP, shall also be
effective with respect to any Retirement Income Benefit and 401(k)/ESOP
Benefit, as the case may be, payable under the Plan to a Participant,
beneficiary, joint or contingent annuitant, or eligible
child.
|
|
7.3
|
Except
with respect to receipt of a lump sum benefit under Section 7.1, payment
of any Retirement Income Benefit and 401(k)/ESOP Benefit under the Plan
shall commence on the same date as payment of a Basic Retirement Plan and
401(k)/ESOP Plan distribution payable to a Participant or beneficiary, and
shall terminate on the date of last payment of Basic Retirement Plan and
401(k)/ESOP Plan distribution, as the case may
be.
|
|
7.4
|
The
Supplemental Retirement Benefit shall be
paid:
|
|
|
(a)
|
except
as provided in Section 7.4(b) (early retirement) and Section 8.6 (death),
commencing on the first day of the month following the later of the
Participant’s retirement or his or her attainment of age 62;
or
|
|
|
(b)
|
commencing
on the first day of the month following the Participant’s Determination
Date in connection with early retirement after reaching age 60 and prior
to the date of his or her 62nd
birthday.
|
|
7.5
|
The
Supplemental Retirement Benefit shall be paid in the form specified
below:
|
|
|
(a)
|
The
Supplemental Retirement Benefit shall be paid as a straight life annuity,
payable in monthly installments, for the Participant’s life; provided, however, that
if the Participant has no surviving spouse and dies before having received
60 monthly payments, such monthly payments shall be continued to his or
her Beneficiary until the total number of monthly payments to the
Participant and his or her Beneficiary equal 60, whereupon all payments
shall cease and the Company’s obligation to pay the Supplemental
Retirement Benefit under shall be deemed to have been fully
discharged. If the Participant and his or her Beneficiary shall
die before having received a total of 60 monthly payments, an amount equal
to the Actuarial Equivalent of the balance of such monthly payments shall
be paid in a single sum to the estate of the survivor of the Participant
and his or her Beneficiary. If Supplemental Retirement Benefits
are payable in the form described in this Section 7.5(a), the Participant
shall designate in writing, as his or her Beneficiary, any person or
persons, primarily, contingently or successively, to whom the Company
shall pay benefits following the Participant’s death if the Participant’s
death occurs before 60 monthly payments have been
made.
|
11
|
|
(b)
|
Notwithstanding
the form of payment described in Section 7.5(a), if the Participant is
married on the date payment of the Supplemental Retirement Benefit
commences, the benefit shall be paid as a 50% joint and survivor annuity
with the Participant’s spouse as the Beneficiary. The 50% joint
and survivor annuity shall be the Actuarial Equivalent of the benefit
described in Section 7.5(a). If the Supplemental Retirement
Benefit is payable pursuant to this Section 7.5(a), but the Participant’s
spouse fails to survive him or her, no payments of the Supplement
Retirement Benefit will be made following the Participant’s
death.
|
|
|
(c)
|
Notwithstanding
the foregoing provisions of this Section 7.5, the Company, in its sole
discretion, may accelerate the payment of all or any portion of the
Supplemental Retirement Benefit or the reduced early Supplemental
Retirement Benefit at any time. Any payment accelerated in
accordance with this Section 7.5(c) shall be the Actuarial Equivalent of
the payment being accelerated.
|
|
7.6
|
Subject
to Section 12.4, each Participant shall have a 100 percent vested and
non-forfeitable right to benefits under the
Plan.
|
ARTICLE
8
DEATH
BENEFITS
|
8.1
|
Upon
the death of: (i) a Participant who has not terminated from
employment before Retirement Date as defined in Section 3.1, or (ii) a
Participant who retires on a Retirement Date as defined in Section 3.1 and
dies before the complete distribution of Basic Retirement Plan Benefit and
Basic 401(k)/ESOP Benefit, as the case may be, benefits shall be payable
as set forth in Sections 8.2, 8.3 and
8.4.
|
|
8.2
|
With
respect to any Retirement Income Benefit, if a Basic Retirement Plan
pre-retirement survivor annuity or post retirement survivor annuity, as
the case may be, is payable to a Participant’s surviving spouse or
eligible children, if applicable, a supplemental pre-retirement survivor
annuity or post retirement survivor annuity, as the case may be, shall be
payable to the surviving spouse or eligible children, if applicable, under
the Plan. The monthly amount of the Supplemental Surviving
Spouse Benefit pre-retirement survivor annuity or post retirement survivor
annuity, as the case may be, payable to a surviving spouse or eligible
children, if applicable, shall be equal to the excess, if any, of the
amount specified in (a) over the amount specified in (b), as stated
below:
|
|
|
(a)
|
the
monthly amount of Basic Retirement Plan pre-retirement survivor annuity or
post retirement survivor annuity, as the case may be, to which the
surviving spouse or eligible children, if applicable, would have been
entitled under the Basic Retirement Plan, if such benefit were calculated
under the Basic Retirement Plan without giving effect to the limitations
and restrictions imposed by the Plan Limitation Provisions and any other
provisions of the Basic Retirement Plan that are necessary to comply with
Code Sections 401(a)(17) and 415, or any successor provisions
thereto;
|
12
|
|
(b)
|
(i) the
monthly amount of Basic Retirement Plan pre-retirement survivor annuity or
post retirement survivor annuity, as the case may be, actually payable to
the surviving spouse or eligible children, if applicable, under the Basic
Retirement Plan, after the limitations imposed by the application of Plan
Limitation Provisions and any other provisions of the Basic Retirement
Plan that are necessary to comply with Code Sections 401(a)(17) and 415,
or any successor provisions thereto plus (ii) the monthly amount that is
the actuarial equivalent (determined in accordance with the Basic
Retirement Plan) of any supplemental retirement benefit payable to the
surviving spouse or eligible children, if applicable, by any Employer
following the Participant’s death pursuant to any Supplemental Retirement
Agreement with the Participant.
|
|
8.3
|
The
Retirement Income Benefit supplemental pre-retirement survivor annuity or
post retirement survivor annuity shall be payable over the lifetime of the
surviving spouse, or to eligible children to the extent provided in the
Basic Retirement Plan, in monthly installments commencing on the same date
as payment of the Basic Retirement Plan pre-retirement survivor annuity or
post retirement survivor annuity, as the case may be, and shall terminate
on the date of the last payment of the Basic Retirement Plan
pre-retirement survivor annuity or post retirement survivor annuity, as
the case may be.
|
|
8.4
|
With
respect to any 401(k)/ESOP Benefit, all amounts credited to the
Participant’s Deferral Credit Account shall be payable in a single lump
sum to the Participant’s surviving spouse, if any, as a Supplemental
Surviving Spouse Benefit, unless an optional mode has been elected
pursuant to Article 7.
|
|
8.5
|
Upon
the death of a Participant under the circumstances set forth in clauses
(i) and (ii) of Section 8.1, if no Basic Retirement Plan Surviving Spouse
Benefit, or Basic 401(k)/ESOP Surviving Spouse Benefit, as the case may
be, is payable, (a) no further Retirement Income Benefit shall be payable,
unless an optional mode has been elected pursuant to Article 7, and (b)
all amounts credited to the Participant’s Deferral Credit Account shall be
payable to the Participant’s designated beneficiary in a single lump sum,
unless an optional mode has been elected pursuant to Article
7.
|
|
8.6
|
The
following provisions shall apply with respect to payment of the
Supplemental Retirement Benefit after the death of a
Participant:
|
|
|
(a)
|
Except
as provided in Section 8.6(b), if a Participant shall die before his or
her 62nd birthday, no Supplemental Retirement Benefit shall be
payable.
|
|
|
(b)
|
If
a Participant shall die on or after his or her 60th birthday, after he or
she has retired but before payment of any Supplemental Retirement Benefit
has commenced, the Participant’s surviving spouse, if any, shall be paid
as a straight life annuity 50 percent of the Supplemental Retirement
Benefit for her life commencing within 30 days following the Participant’s
death. Such payments shall be made in monthly installments,
subject to the right of the Company to accelerate payment at any time in
accordance with Section 7.5(c). However, if such Participant is
not married at the time of his or her death, the Company shall pay to the
Participant’s Beneficiary a lump sum benefit equal to 50 percent of the
Present Value of the Participant’s Supplemental Retirement
Benefit.
|
13
|
|
(c)
|
Except
as provided in Section 8.6(b), no Supplemental Retirement Benefit shall be
payable if the Participant dies before payment of any Supplement
Retirement Benefit has begun without having a spouse who survives him or
her.
|
|
|
(d)
|
If
a Participant dies after payment of a Supplemental Retirement Benefit has
commenced, the amount, if any, of the Supplemental Retirement Benefit
payable to the Participant’s surviving spouse or other Beneficiary shall
be determined pursuant to the applicable provisions of Section
7.5.
|
ARTICLE
9
UNFUNDED
PLAN
|
9.1
|
The
Plan shall be administered as an unfunded plan and is not intended to meet
the qualification requirements of Sections 401(a) and 401(k) of the
Code. No Participant or beneficiary shall be entitled to
receive any payment or benefits under the Plan from the qualified trust
maintained in connection with the Basic Retirement Plan and Basic
401(k)/ESOP.
|
|
9.2
|
The
Employer shall have the right to establish a reserve, establish a grantor
trust or make any investment for the purposes of satisfying its obligation
hereunder for payment of benefits, including, but not limited to,
investments in one or more registered investment companies under the
Investment Company Act of 1940, as amended, to the extent permitted by
applicable banking or other law; provided, however, that
no Participant or beneficiary shall have any interest in such investment,
trust, or reserve.
|
|
9.3
|
To
the extent that any Participant or beneficiary acquires a right to receive
benefits under the Plan, such rights shall be no greater than those rights
which guarantee to the Participant or beneficiary the strongest claim to
such benefits, without resulting in the Participant’s or beneficiary’s
constructive receipt of such
benefits.
|
|
9.4
|
With
respect to any 401(k)/ESOP Benefit, 100% of the Participant’s Deferral
Credit Account shall be deemed to be invested as provided in Section 5.4
above. A Participant’s Deferral Credit Account may not be
encumbered or assigned by a Participant or any
beneficiary.
|
|
9.5
|
A
Participant or beneficiary with a Retirement Income Benefit, the
401(k)/ESOP Benefit or both such Benefits under the Plan shall be an
unsecured creditor of the Employer as to any benefit payable under the
Plan.
|
14
|
9.6
|
Not
later than the closing of any transaction that would constitute a Change
of Control, the Employer shall transfer to an independent corporate
trustee of a grantor trust within the meaning of section 671 of the Code
that satisfies the applicable requirements of Revenue Procedure 92-64 or
any successor thereto an amount sufficient to cover all potential
liabilities under this Plan.
|
ARTICLE
10
ADMINISTRATION
|
10.1
|
Except
for the functions reserved to the Company or the Board, the administration
of the Plan shall be the responsibility of the Committee. The
Committee shall consist of three or more persons designated by the
Company. Members of the Committee shall serve for such terms as
the Company shall determine and until their successors are designated and
qualified. Any member of the Committee may resign upon at least
60 days written notice to the Company, or may be removed from office by
the Company at any time, with or without
notice.
|
|
10.2
|
The
Committee shall hold meetings upon notice at such times and places as it
may determine. Notice shall not be required if waived in
writing. Any action of the Committee shall be taken pursuant to
a majority vote at a meeting, or pursuant to the written consent of a
majority of its members without a meeting, and such action shall
constitute the action of the Committee and shall be binding in the same
manner as if all members of the Committee had joined therein. A
majority of the members of the Committee shall constitute a
quorum. No member of the Committee shall note or be counted for
quorum purposes on any matter relating solely to himself or herself or his
or her rights under the Plan. The Committee shall record
minutes of any actions taken at its meetings or of any other official
action of the Committee. Any person dealing with the Committee
shall be fully protected in relying upon any written notice, instruction,
direction or other communication signed by the Secretary of the Committee
or by any of the members of the Committee or by a representative of the
Committee authorized by the Committee to sign the same in its
behalf.
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10.3
|
The
Committee shall have the power and the duty to take all actions and to
make all decisions necessary or proper to carry out the
Plan. The determination of the Committee as to any question
involving the Plan shall be final, conclusive and binding. Any
discretionary actions to be taken under the Plan by the Committee shall be
uniform in their nature and applicable to all persons similarly
situated. Without limiting the generality of the foregoing, the
Committee shall have the following powers and
duties:
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|
(a)
|
the
duty to furnish to all Participants, upon request, copies of the
Plan;
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|
|
(b)
|
the
power to require any person to furnish such information as it may request
for the purpose of the proper administration of the Plan as a condition to
receiving any benefits under the
Plan;
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15
|
|
(c)
|
the
power to make and enforce such rules and regulations and prescribe the use
of such forms as it shall deem necessary for the efficient administration
of the Plan;
|
|
|
(d)
|
the
power to interpret the Plan, and to resolve ambiguities, inconsistencies
and omissions, which findings shall be binding, final and
conclusive;
|
|
|
(e)
|
the
power to decide on questions concerning the Plan in accordance with the
provisions of the Plan;
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|
|
(f)
|
the
power to determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan and to provide a full
and fair review to any Participant whose claim for benefits has been
denied in whole or in part;
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|
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(g)
|
the
power to designate a person who may or may not be a member of the
Committee as Plan “Administrator” for purposes of the Employee Retirement
Income Security Act of 1974 (ERISA); if the Committee does not so
designate an Administrator, the Committee shall be the Plan
Administrator;
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(h)
|
the
power to allocate any such powers and duties to or among individual
members of the Committee; and
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|
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(i)
|
the
power to designate persons other than Committee members to carry out any
duty or power which would otherwise be a responsibility of the Committee
or Administrator, under the terms of the
Plan.
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10.4
|
To
the extent permitted by law, the Committee and any person to whom it may
delegate any duty or power in connection with administering the Plan, the
Company, any Employer, and the officers and directors thereof, shall be
entitled to rely conclusively upon, and shall be fully protected in any
action taken or suffered by them in good faith in the reliance upon, any
actuary, counsel, accountant, other specialist, or other person selected
by the Committee, or in reliance upon any tables, valuations,
certificates, opinions or reports which shall be furnished by any of
them. Further, to the extent permitted by law, no member of the
Committee, nor the Company, any Employer, nor the officers or directors
thereof, shall be liable for any neglect, omission or wrongdoing of any
other members of the Committee, agent, officer or employee of the Company
or any Employer. Any person claiming benefits under the Plan
shall look solely to the Employer for
redress.
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10.5
|
All
expenses incurred before the termination of the Plan that shall arise in
connection with the administration of the Plan (including, but not limited
to administrative expenses, proper charges and disbursements, compensation
and other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Committee in
connection with the administration of the Plan), shall be paid by the
Employer.
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16
ARTICLE
11
AMENDMENT OR
TERMINATION
|
11.1
|
The
Board shall have the power to suspend or terminate the Plan in whole or in
part at any time, and from time to time to extend, modify, amend or revise
the Plan in such respects as the Board, by resolution, may deem advisable;
provided,
however, that no such extension, modification, amendment, revision, or
termination shall deprive a Participant or any beneficiary of any benefit
accrued under the Plan.
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11.2
|
In
the event of a termination or partial termination of the Plan, the rights
of all affected parties, if any, to benefits accrued to the date of such
termination or partial termination, shall become nonforfeitable to the
same extent that such rights would be nonforfeitable if such benefits were
provided under the Basic Retirement Plan or the Basic 401(k)/ESOP and such
plans were terminated on such date.
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11.3
|
No
amendment of the Plan shall reduce the vested and accrued benefits, if
any, of a Participant under this Plan, except to the extent that such a
reduction would be permitted if such benefits were provided under the
Basic Retirement Plan or the Basic
401(k)/ESOP.
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11.4
|
In
the event of the termination or partial termination of the
Plan: (a) the Company shall pay in one lump sum to affected
Participants or their beneficiaries the 401(k)/ESOP Benefit, if any, to
which they are entitled, as if such Participants’ termination of service
had occurred on the date the Plan is terminated, and (b) the Retirement
Income Benefit and Supplemental Retirement Benefit, if any, to which they
are entitled shall continue to be
payable.
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ARTICLE
12
GENERAL
PROVISIONS
|
12.1
|
The
Plan shall not be deemed to constitute an employment contract between the
Employer and any Employee or other person, whether or not in the employ of
the Employer, nor shall anything herein contained be deemed to give any
Employee or other person, whether or not in the employ of the Employer,
any right to be retained in the employ of the Employer, or to interfere
with the right of the Employer to discharge any Employee at any time and
to treat such Employee without any regard to the effect which such
treatment might have upon such Employee as a Participant of the
Plan.
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12.2
|
Except
as provided in Section 12.4, or as may otherwise be required by law, no
distribution or payment under the Plan to any Participant or beneficiary
shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void; nor shall any
such distribution or payment be in any way liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person entitled
to such distribution or payment. If any Participant or
beneficiary is adjudicated bankrupt or purports to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any such distribution
or payment, voluntarily or involuntarily, the Committee, in its sole
discretion, may cancel such distribution or payment or may hold or cause
to be held or applied such distribution or payment, or any part thereof,
to or for the benefit of such Participant or beneficiary, in such manner
as the Committee shall direct.
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17
|
12.3
|
If
the Employer determines that any person entitled to payments under the
Plan is incompetent by reason of physical or mental disability, it may
cause all payments thereafter becoming due to such person to be made to
any other person for his or her benefit, without responsibility to follow
application of amounts so paid. Payments made pursuant to this
provision shall completely discharge the Plan, the Employer and the
Committee.
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12.4
|
Notwithstanding
any other provision of this Plan:
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|
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(a)
|
if
the Employer determines that Cause exists for the termination of the
Participant’s employment, the Participant and his or her spouse and
beneficiaries shall forfeit all rights to any payments under this
Plan;
|
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|
(b)
|
if
a Participant separates from service before having completed five Years of
Service with any Employer, no Supplemental Retirement Benefit shall be
payable hereunder;
|
|
|
(c)
|
no
amounts shall be payable hereunder to the Participant and his or her
spouse and beneficiaries:
|
(i)
following any breach by the Participant of any provision of any
employment or other written agreement with the Company, the Bank or any other
Employer with respect to confidentiality, non-competition, non-interference
with, or non-solicitation of, employees, customers, suppliers or agents or
similar matters, provided that no Change in
Control shall have occurred before such breach;
(ii)
if, without the prior written consent of the Company, the Participant
discloses or divulges to any third party, except as may be required by his or
her duties, by law, regulation, or order of a court or government authority, or
as directed by the Company, or uses to the detriment of the Company or its
affiliates or in any business or on behalf of any business competitive with or
substantially similar to any business of the Company or the Bank or their
affiliates, any Confidential Information obtained during the course of his or
her employment by the Company, the Bank or any affiliate of any of either of
them, provided that
this Section 12.4(c)(ii) shall not be construed as restricting the Participant
from disclosing such information to the employees of the Company or the Bank or
their affiliates;
18
(iii)
if while the Participant is employed by the Company, the Bank, any
Employer or any affiliate of any of them or within two years after any
termination of such employment other than in anticipation of or following a
Change in Control, the Participant (A) interferes with the relationship of the
Company, the Bank or their affiliates with any of their employees, suppliers,
agents, or representatives (including, without limitation, causing or helping
another business to hire any employee of the Company, the Bank or their
affiliates), or (B) directly or indirectly diverts or attempts to divert from
the Company, the Bank or their affiliates any business in which any of them has
been actively engaged during the period of such employment, or interferes with
the relationship of the Company, the Bank or their affiliates with any of their
customers or prospective customers, provided, that this Section
12.4(c)(iii) shall not, in and of itself, prohibit the Participant from engaging
in the banking, trust, or financial services business in any capacity, including
that of an owner or employee; and
|
|
(d)
|
if
any particular provision of this section 12.4 shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
from the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in
the particular jurisdiction in which such adjudication is
made. In addition, should any court determine that the
provisions of this section 12.4 shall be unenforceable with respect to
scope, duration, or geographic area, such court shall be empowered to
substitute, to the extent enforceable, provisions similar hereto or other
provisions so as to provide to the Company, the Bank and their affiliates,
to the fullest extent permitted by applicable law, the benefits intended
by this section 12.4.
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12.5
|
The
Employer shall be the sole source of benefits under the Plan, and each
Employee, Participant, beneficiary, or any other person who shall claim
the right to any payment or benefit under the Plan shall be entitled to
look solely to the Employer for payment of
benefits.
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|
12.6
|
If
the Employer is unable to make payment to any Participant, beneficiary, or
any other person to whom a payment is due under the Plan, because it
cannot ascertain the identity or whereabouts of such Participant,
beneficiary, or other person after reasonable efforts have been made to
identify or locate such person (including a notice of the payment so due
mailed to the last known address of such Participant, beneficiary, or
other person shown on the records of the Employer), such payment and all
subsequent payments otherwise due to such Participant, beneficiary or
other person shall be forfeited 24 months alter the date such payment
first became due; provided, however, that
such payment and any subsequent payments shall be reinstated,
retroactively, no later than 60 days after the date on which the
Participant, beneficiary, or other person shall make application
therefor. Neither the Company, the Committee nor any other
person shall have any duty or obligation under the Plan to make any effort
to locate or identify any person entitled to benefits under the Plan,
other than to mail a notice to such person’s last known mailing
address.
|
19
|
12.7
|
If
upon the payment of any benefits under the Plan, the Employer shall be
required to withhold any amounts with respect to such payment by reason of
any federal, state or local tax laws, rules or regulations, then the
Employer shall be entitled to deduct and withhold such amounts from any
such payments. In any event, such person shall make available
to the Employer, promptly when requested by the Employer, sufficient funds
or other property to meet the requirements of such
withholding. Furthermore, at any time the Employer shall be
obligated to withhold taxes, the Employer shall be entitled to take and
authorize such steps as it may deem advisable in order to have the amounts
required to be withheld made available to the Employer out of any funds or
property due to become due to such person, whether under the Plan or
otherwise.
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12.8
|
The
Committee, in its discretion, may increase or decrease the amount of any
benefit payable hereunder if and to the extent that it determines, in good
faith, that an increase is necessary in order to avoid the omission of a
benefit intended to be payable under this Plan or that a decrease is
necessary in order to avoid a duplication of the benefits intended to be
payable under this Plan.
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|
12.9
|
The
provisions of the Plan shall be construed, administered and governed under
applicable federal laws and the laws of the State of New
York. In applying the laws of the State of New York, no effect
shall be given to conflict of laws principles that would cause the laws of
another jurisdiction to apply.
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20
Exhibit
10.19
July 23,
2001
Mr.
Michael J. Chewens
2613
Pinebluff Drive
Vestal,
NY 13850
Dear Mr.
Chewens:
NBT
Bancorp Inc. (which, together with its wholly-owned subsidiary, NBT Bank,
National Association, is referred to as the "Company") considers the stability
of its key management group to be essential to the best interests of the Company
and its shareholders. The Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a change in
control may arise and that the attendant uncertainty may result in the departure
or distraction of key management personnel to the detriment of the Company and
its shareholders.
Accordingly,
the Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to encourage members of the Company's key
management group to continue as employees notwithstanding the possibility of a
change in control of the Company.
The Board
also believes it important that, in the event of a proposal for transfer of
control of the Company, you be able to assess the proposal and advise the Board
without being influenced by the uncertainties of your own
situation.
In order
to induce you to remain in the employ of the Company, we entered an agreement,
approved by the Board, dated January 1, 1998, and revised by Board action most
recently on July 23, 2001, providing for severance compensation that the Board
agreed would be provided to you in the event your employment with the Company
terminated subsequent to a change in control of the Company
("Agreement"). We have agreed upon various changes to the Agreement,
agreed to by the Board, and have agreed to amend and restate the Agreement in
its entirety as follows:
|
|
1.
|
Agreement to Provide
Services; Right to
Terminate.
|
(a) Termination Prior to Certain
Offers. Except as otherwise provided in paragraph (b) below,
or in any written employment agreement between you and the Company, the Company
or you may terminate your employment at any time. If, and only if,
such termination occurs after a "change in control of the Company" (as defined
in section 6), the provisions of this Agreement regarding the payment of
severance compensation and benefits shall apply.
(b) Termination Subsequent to
Certain Offers. In the event a tender offer or exchange offer
is made by a "person" (as defined in section 6) for more than 30 percent of the
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors ("Voting Securities"), including
shares of common stock, no par value, of the Company (the "Company Shares"), you
agree that you will not leave the employ of the Company (other than as a result
of Disability as such term is defined in section 6) and will render
services to the Company in the capacity in which you then serve until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company has occurred as a result of such tender offer or exchange
offer. If, during the period you are obligated to continue in the
employ of the Company pursuant to this section 1(b), the Company reduces your
compensation, terminates your employment without Cause, or you provide written
notice of your decision to terminate your employment for Good Reason, your
obligations under this section 1(b) shall thereupon terminate and you will be
entitled to payments provided under Section 3(b).
2. Term of
Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until December 31, 2003; provided, however, that
commencing December 31, 2001 and each December 31 thereafter, the remaining term
of this Agreement shall automatically be extended for one additional
year (to a total of three years) unless at least 90 days prior to such
anniversary, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a
change in control of the Company shall occur while this Agreement is in
effect, this Agreement shall automatically be extended for 24
months from the date the change in control of the Company
occurs. This Agreement shall terminate if you or the Company
terminates your employment prior to a change in control of the Company
but without prejudice to any remedy the Company may have for breach of your
obligations, if any, under section 1(b).
3. Severance Payment and
Benefits If Termination Occurs Following Change in Control for Disability,
Without Cause, With Good Reason or Without Good Reason within 12 Months of the
Change. If, (I) within 24 months from the date of occurrence
of any event constituting a change in control of the Company (it being
recognized that more than one such event may occur in which case the 24-month
period shall run from the date of occurrence of each such event), your
employment with the Company is terminated (i) by the Company for Disability,
(ii) by the Company without Cause, or (iii) by you with Good Reason (as defined
in section 6), or (II) within 12 months from the date of occurrence of any event
constituting a change in control of the Company (it being recognized that more
than one such event may occur in which case the 12-month period shall run from
the date of occurrence of each such event) you terminate your employment either
with or without Good Reason, you shall be entitled to a severance payment
and other benefits as follows:
July
23, 2001
2
(a) Disability. If
your employment with the Company is terminated for Disability, your benefits
shall thereafter be determined in accordance with the Company's long-term
disability income insurance plan. If the Company's long-term
disability income insurance plan is modified or terminated following a change in
control, the Company shall substitute such a plan with benefits applicable to
you substantially similar to those provided by such plan prior to its
modification or termination. During any period that you fail to
perform your duties hereunder as a result of incapacity due to physical or
mental illness, you shall continue to receive your full base salary at the rate
then in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or
With Good Reason or Within 12 Months of Change in Control. If
your employment with the Company is terminated without Cause by the Company or
with Good Reason by you, or by you within 12 months of a change in control of
the Company without Good Reason, then the Company shall pay to you, upon demand,
the following amounts (net of applicable payroll taxes):
(i)
Your full base salary through
the Date of Termination at the rate in effect on the date the change in control
of the Company occurs plus year-to-date accrued vacation.
(ii) As
severance pay, an amount equal to the product of 2.99 multiplied by the greater
of (A) the sum of your annualized salary for the calendar year in which the
change in control of the Company occurs, the maximum target bonus that could
have been paid to you for such year if all applicable targets and objectives had
been achieved, or if no formal bonus program is in effect, the largest bonus
amount paid to you during any one of the three preceding calendar years, your
income from the exercise of nonqualified options during such year, your
compensation income from any disqualifying disposition during such year of stock
acquired pursuant to the exercise of incentive stock options and other
annualized amounts that constitute taxable income to you from the Company for
such year, without reduction for salary reduction amounts excludible from income
under Section 402(e)(3) or 125 of the Internal Revenue Code of 1986, as amended
(the "Code"), or (B) your average "Compensation" (as defined below) for the
three calendar years preceding the calendar year in which the change in control
of the Company occurs. As used in this subsection 3(b)(ii) your
"Compensation" shall mean your base salary, bonus, income from the exercise of
nonqualified options, compensation income from any disqualifying disposition of
stock acquired pursuant to the exercise of incentive stock options and any other
amounts that constitute taxable income to you from the Company, without
reduction for salary reduction amounts excludible from income under Section
402(e)(3) or 125 of the Code.
July
23, 2001
3
(c) Related
Benefits. Unless you die or your employment is terminated by
the Company for Cause or Disability, or by you other than for Good Reason and
not within 12 months after a change in control of the Company, (i) the Company
shall maintain in full force and effect, for your continued benefit and, if
applicable, for the continued benefit of your spouse and family, for three years
after the Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, all noncash employee benefit plans, programs,
or arrangements (including, without limitation, pension and retirement plans and
arrangements, stock option plans, life insurance and health and accident plans
and arrangements, medical insurance plans, disability plans, and vacation
plans) in which you were entitled to participate immediately prior to the Date
of Termination, as in effect at the Date of Termination, or, if more favorable
to you and, if applicable, your spouse and family, as in effect generally at any
time thereafter with respect to executive employees of the Company or any
successor; provided that your continued participation is possible after
Termination under the general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to participate in a
benefit plan, program, or arrangement of another employer which confers
substantially similar benefits upon you, you shall cease to receive benefits
under this subsection in respect of such plan, program, or arrangement, and
(ii) your benefit under any supplemental retirement agreement or supplemental
retirement plan maintained by the Company in which you are a participant shall
be fully vested upon such termination of your employment, and your benefit under
such agreement or plan shall be determined as if you had continued to be
employed by the Company for three additional years (or the period after which
the maximum benefit payable is attained, if less) and if your annual
compensation for purposes of such agreement or plan during such period of
additional employment had been equal to the amount specified in Section
3(b)(ii)(A) or (B), whichever is higher. In the event that your
participation in any such plan, program, or arrangement is not possible after
Termination under the general terms and provisions of such plans, programs, and
arrangements, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive under such
plans, programs and arrangements or alternatively, pay an amount equal to the
reasonable value of such substantially similar benefits. If, after
termination of employment following a change in control of the Company, you
elect or, if applicable, your spouse or family elects, COBRA continuation
coverage, the Company will pay the applicable COBRA premium for the maximum
period during which such coverage is available. If termination
follows a change in control of the Company specified in Section 6(b)(iii), then
you and, if applicable, your spouse and family may elect in lieu of COBRA
continuation coverage to have the acquiring entity obtain an individual or group
health insurance coverage and the acquiring entity will pay premiums thereunder
for the maximum period during which you and, if applicable, your spouse and
family could have elected to receive COBRA continuation coverage.
(d) Establishment of
Trust. Within five days following conclusion of a change in
control of the Company, the Company shall establish a trust that conforms in all
regards with the model trust published in Revenue Procedure 92-64 and deposit an
amount sufficient to satisfy all liabilities of the Company under Section 3(b)
of this Agreement.
July
23, 2001
4
(e) Automatic
Extension. Notwithstanding the prior provisions of this
Section, if an individual is elected to the Board of Directors who has not been
nominated by the Board of Directors as constituted prior to his election, then
the term of this Agreement will automatically be extended until two years from
the date on which such individual was elected if such extended termination date
is later than the normal termination date of this Agreement, otherwise, the
termination date of this Agreement will be as provided above. This
extension will take effect only upon the first instance of an individual being
elected to the Board of Directors without having been nominated by the original
Board.
(f) Alternative to Lump Sum
Payout. The amount described in this subsection will be paid
to you in a single lump-sum unless, at least 30 days before the conclusion of a
change in control of the Company, you elect in writing to receive the severance
pay in 3 equal annual payments with the first payment to be made within 30 days
of demand and the subsequent payments to be made by January 31st of each year
subsequent to the year in which the first payment is made, provided that under
no circumstances will two payments be made during a single tax year of the
recipient.
4. Payment If Termination
Occurs Following Change in Control, Because of Death, For Cause, or Without Good
Reason and not within 12 Months of the Change in Control. If
your employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the Company for
Cause, or by you other than for Good Reason and not within 12 months after a
change in control of the Company, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect on the date the
change in control of the Company occurs plus year-to-date accrued
vacation. The Company shall have no further obligations to you under
this Agreement.
5. No
Mitigation. You shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor, except as expressly set forth herein, shall the amount of
any payment provided for in this Agreement be reduced by any compensation earned
by you as the result of employment by another employer after the Date of
Termination, or otherwise.
6. Definitions of Certain
Terms. For the purpose of this Agreement, the terms defined in
this section 6 shall have the meanings assigned to them herein.
July
23, 2001
5
(a) Cause. Termination
of your employment by the Company for "Cause" shall mean termination because,
and only because, you committed an act of fraud, embezzlement, or theft
constituting a felony or an act intentionally against the interests of the
Company which causes the Company material injury. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
(b) Change in Control of the
Company. A "change in control of the Company" shall
mean:
(i)
A change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation,
such a change in control shall be deemed to have occurred at such time as any
Person hereafter becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30 percent or more of the combined
voting power of the Company's Voting Securities; or
(ii) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(iii) There
shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which Voting Securities would be converted into cash, securities, or
other property, other than a merger of the Company in which the holders of
Voting Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all of the assets of the Company, provided that any
such consolidation, merger, sale, lease, exchange or other transfer consummated
at the insistence of an appropriate banking regulatory agency shall not
constitute a change in control of the Company; or
(iv) Approval
by the shareholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company.
July
23, 2001
6
(c) Date of
Termination. "Date of Termination" shall mean (i) if your
employment is terminated by the Company for Disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period), and
(ii) if your employment is terminated for any other reason, the date on which a
Notice of Termination is given; provided that if within 30 days after any Notice
of Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties or by a final judgment, order,
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected). The term of
this Agreement shall be extended until the Date of Termination.
(d) Disability. Termination
of your employment by the Company for "Disability" shall mean termination
because of your absence from your duties with the Company on a full-time basis
for 180 consecutive days as a result of your incapacity due to physical or
mental illness and your failure to return to the performance of your duties on a
full-time basis during the 30-day period after Notice of Termination is
given.
(e) Good
Reason. Termination by you of your employment for "Good
Reason" shall mean termination based on any of the following:
(i)
A change in your status or position(s) with
the Company, which in your reasonable judgment, does not represent a promotion
from your status or position(s) as in effect immediately prior to the change in
control of the Company, or a change in your duties or responsibilities
which, in your reasonable judgment, is inconsistent with such status or
position(s), or any removal of you from, or any failure to reappoint or reelect
you to, such position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death or by you other
than for Good Reason.
(ii) A
reduction by the Company in your base salary as in effect immediately prior to
the change in control of the Company.
(iii) The
failure by the Company to continue in effect any Plan (as hereinafter defined)
in which you are participating at the time of the change in control of the
Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in control of
the Company, or the taking of any action, or the failure to act, by the Company
which would adversely affect your continued participation in any of such Plans
on at least as favorable a basis to you as is the case on the date of the change
in control of the Company or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit enjoyed by
you at the time of the change in control of the Company.
(iv) The
failure by the Company to provide and credit you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy as in effect immediately prior to the change in control
of the Company.
July
23, 2001
7
(v) The
Company's requiring you to be based anywhere other than where your office is
located immediately prior to the change in control of the Company except for
required travel on the Company's business to an extent substantially consistent
with the business travel obligations which you undertook on behalf of the
Company prior to the change in control of the Company.
(vi) The
failure by the Company to obtain from any successor the assent to this Agreement
contemplated by section 8 hereof.
(vii) Any
purported termination by the Company of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of this
Agreement; and for purposes of this Agreement, no such purported
termination shall be effective.
(viii) Any
refusal by the Company to continue to allow you to attend to matters or engage
in activities not directly related to the business of the Company which, prior
to the change in control of the Company, you were permitted by the Board to
attend to or engage in.
For
purposes of this subsection, "Plan" shall mean any compensation plan such as an
incentive or stock option plan or any employee benefit plan such as a thrift,
pension, profit sharing, medical, disability, accident, life insurance plan, or
a relocation plan or policy or any other plan, program, or policy of the Company
intended to benefit employees.
(f) Notice of
Termination. A "Notice of Termination" of your employment
given by the Company shall mean a written notice given to you of the termination
of your employment which shall indicate the specific termination provision in
this Agreement relied upon, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The
term "Person" shall mean and include any individual, corporation, partnership,
group, association, or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Company or any employee benefit plan(s)
sponsored by the Company.
7. Notice. For
the purposes of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
July
23, 2001
8
8. Successors; Binding
Agreement.
(a) This
Agreement shall inure to the benefit of, and be binding upon, any corporate or
other successor or assignee of the Company which shall acquire, directly or
indirectly, by merger, consolidation or purchase, or otherwise, all or
substantially all of the business or assets of the Company. The
Company shall require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
(b) This
Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee, or other designee or,
if there is no such designee, to your estate.
9. Increased Severance Payments
Upon Application of Excise Tax.
(a) Adjustment of
Payment. In the event any payments or benefits you become
entitled to pursuant to the Agreement or any other payments or benefits received
or to be received by you in connection with a change in control or your
termination of employment (whether pursuant to the terms of any other agreement,
plan, or arrangement, or otherwise, with the Company, any person whose actions
result in a change in control or any person affiliated with the Company or
such person) (collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay you an additional amount
(the "Gross-Up Payment") so that the net amount retained by you, after deduction
of the Excise Tax (but before deduction for any federal, state or local income
tax) on the Severance Payments and after deduction for the aggregate of any
federal, state, or local income tax and Excise Tax upon the Gross-Up Payment,
shall be equal to the Severance Payments. For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) the entire amount of the Severance Payments shall
be treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code and as subject to the Excise Tax, unless and to the extent, in the
written opinion of outside tax counsel selected by the Company's independent
accountants and reasonably acceptable to you, such payments (in whole or in
part) are not subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part of the
Severance Payments) shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income taxes at the highest marginal rate of
the federal income taxation applicable to individuals (without taking into
account surtaxes or loss or reduction of deductions) for the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of your residence
on the date of Termination. In the event that the amount of Excise
Tax you are required to pay is subsequently determined to be less than the
amount taken into account hereunder, you shall repay to the Company promptly
after the time that the amount of such reduction in Excise Tax is finally
determined the amount of the reduction, together with interest on the amount of
such reduction at the rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel selected by the
Company's independent accountants and reasonably acceptable to you, such payment
(or a portion thereof) was not taxable income to you when reported or is
deductible by you for federal income tax purposes, the net federal income tax
benefit you actually realize as a result of making such payment pursuant to this
sentence. In the event that the amount of Excise Tax you are required
to pay is subsequently determined to exceed the amount taken into account
hereunder, the Company shall make an additional Gross-Up Payment in the manner
set forth above in respect of such excess (plus any interest, additions to tax,
or penalties payable by you with respect to such excess) promptly after the time
that the amount can be reasonably determined.
July
23, 2001
9
(b) Time of Payment: Estimated
Payment. The payments provided for in subsection (a) above,
shall be made not later than the fifth business day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments, and shall pay the remainder of such payments (together
with interest at the rate of 6 percent per annum) as soon as the amount thereof
can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the rate of 6 percent per
annum).
10. Miscellaneous. No
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in a writing signed by you and
the Chief Executive Officer or President of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by laws of the State of New York without giving effect to the
principles of conflict of laws thereof.
11. Legal Fees and
Expenses. The Company shall pay or reimburse any reasonable
legal fees and expenses you may incur in connection with any legal action to
enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and
expenses on a regular, periodic basis upon presentation by you of a statement or
statements prepared by your counsel in accordance with its usual
practices.
12. Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
July
23, 2001
10
13. Payments During
Controversy. Notwithstanding the pendency of any dispute or
controversy, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance plans in which
you were participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with section
7(c). Amounts paid under this section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement. You shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
14. Illegality. Anything
in this Agreement to the contrary notwithstanding, this Agreement is not
intended and shall not be construed to require any payment to you which would
violate any federal or state statute or regulation, including without limitation
the "golden parachute payment regulations" of the Federal Deposit Insurance
Corporation codified to Part 359 of title 12, Code of Federal
Regulations.
If this
letter correctly sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
|
Very
truly yours,
|
||
|
NBT
BANCORP INC.
|
||
|
By:
|
/s/ Daryl Forsythe | |
|
AGREED
TO:
|
||
| /s/ Michael J. Chewens | ||
|
Michael
J. Chewens
|
||
July 23, 2001
11
Exhibit
10.21
July 23,
2001
Mr. David
E. Raven
913
Parkview Road
Moscow,
PA 18444
Dear Mr.
Raven:
NBT
Bancorp Inc. (which, together with its wholly-owned subsidiary, NBT Bank,
National Association, is referred to as the "Company") considers the stability
of its key management group to be essential to the best interests of the Company
and its shareholders. The Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a change in
control may arise and that the attendant uncertainty may result in the departure
or distraction of key management personnel to the detriment of the Company and
its shareholders.
Accordingly,
the Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to encourage members of the Company's key
management group to continue as employees notwithstanding the possibility of a
change in control of the Company.
The Board
also believes it important that, in the event of a proposal for transfer of
control of the Company, you be able to assess the proposal and advise the Board
without being influenced by the uncertainties of your own
situation.
In order
to induce you to remain in the employ of the Company, we entered an agreement,
approved by the Board, dated January 1, 1998 and revised by Board action on July
23, 2001, providing for severance compensation that the Board agreed would be
provided to you in the event your employment with the Company terminated
subsequent to a change in control of the Company ("Agreement"). We
have agreed upon various changes to the Agreement, agreed to by the Board, and
have agreed to amend and restate the Agreement in its entirety as
follows:
1.
Agreement to Provide
Services; Right to Terminate.
(a) Termination Prior to Certain
Offers. Except as otherwise provided in paragraph (b) below,
or in any written employment agreement between you and the Company, the Company
or you may terminate your employment at any time. If, and only if,
such termination occurs after a "change in control of the Company" (as defined
in section 6), the provisions of this Agreement regarding the payment of
severance compensation and benefits shall apply.
(b) Termination Subsequent to
Certain Offers. In the event a tender offer or exchange offer
is made by a "person" (as defined in section 6) for more than 30 percent of the
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors ("Voting Securities"), including
shares of common stock, no par value, of the Company (the "Company Shares"), you
agree that you will not leave the employ of the Company (other than as a result
of Disability as such term is defined in section 6) and will render
services to the Company in the capacity in which you then serve until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company has occurred as a result of such tender offer or exchange
offer. If, during the period you are obligated to continue in the
employ of the Company pursuant to this section 1(b), the Company reduces your
compensation, terminates your employment without Cause, or you provide written
notice of your decision to terminate your employment for Good Reason, your
obligations under this section 1(b) shall thereupon terminate and you will be
entitled to payments provided under Section 3(b).
2.
Term
of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until December 31, 2003; provided, however, that
commencing December 31, 2001 and each December 31 thereafter, the remaining term
of this Agreement shall automatically be extended for one additional
year (to a total of three years) unless at least 90 days prior to such
anniversary, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a
change in control of the Company shall occur while this Agreement is in
effect, this Agreement shall automatically be extended for 24
months from the date the change in control of the Company
occurs. This Agreement shall terminate if you or the Company
terminates your employment prior to a change in control of the Company
but without prejudice to any remedy the Company may have for breach of your
obligations, if any, under section 1(b).
3.
Severance Payment and
Benefits If Termination Occurs Following Change in Control for Disability,
Without Cause, With Good Reason or Without Good Reason within 12 Months of the
Change. If, (I) within 24 months from the date of occurrence
of any event constituting a change in control of the Company (it being
recognized that more than one such event may occur in which case the 24-month
period shall run from the date of occurrence of each such event), your
employment with the Company is terminated (i) by the Company for Disability,
(ii) by the Company without Cause, or (iii) by you with Good Reason (as defined
in section 6), or (II) within 12 months from the date of occurrence of any event
constituting a change in control of the Company (it being recognized that more
than one such event may occur in which case the 12-month period shall run from
the date of occurrence of each such event) you terminate your employment either
with or without Good Reason, you shall be entitled to a severance payment
and other benefits as follows:
(a) Disability. If
your employment with the Company is terminated for Disability, your benefits
shall thereafter be determined in accordance with the Company's long-term
disability income insurance plan. If the Company's long-term
disability income insurance plan is modified or terminated following a change in
control, the Company shall substitute such a plan with benefits applicable to
you substantially similar to those provided by such plan prior to its
modification or termination. During any period that you fail to
perform your duties hereunder as a result of incapacity due to physical or
mental illness, you shall continue to receive your full base salary at the rate
then in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or
With Good Reason or Within 12 Months of Change in Control. If
your employment with the Company is terminated without Cause by the Company or
with Good Reason by you, or by you within 12 months of a change in control of
the Company without Good Reason, then the Company shall pay to you, upon demand,
the following amounts (net of applicable payroll taxes):
(i)
Your full base salary through the Date of Termination at the rate in
effect on the date the change in control of the Company occurs plus year-to-date
accrued vacation.
(ii) As
severance pay, an amount equal to the product of 2.99 multiplied by the greater
of (A) the sum of your annualized salary for the calendar year in which the
change in control of the Company occurs, the maximum target bonus that could
have been paid to you for such year if all applicable targets and objectives had
been achieved, or if no formal bonus program is in effect, the largest bonus
amount paid to you during any one of the three preceding calendar years, your
income from the exercise of nonqualified options during such year, your
compensation income from any disqualifying disposition during such year of stock
acquired pursuant to the exercise of incentive stock options and other
annualized amounts that constitute taxable income to you from the Company for
such year, without reduction for salary reduction amounts excludible from income
under Section 402(e)(3) or 125 of the Internal Revenue Code of 1986, as amended
(the "Code"), or (B) your average "Compensation" (as defined below) for the
three calendar years preceding the calendar year in which the change in control
of the Company occurs. As used in this subsection 3(b)(ii) your
"Compensation" shall mean your base salary, bonus, income from the exercise of
nonqualified options, compensation income from any disqualifying disposition of
stock acquired pursuant to the exercise of incentive stock options and any other
amounts that constitute taxable income to you from the Company, without
reduction for salary reduction amounts excludible from income under Section
402(e)(3) or 125 of the Code.
(c) Related
Benefits. Unless you die or your employment is terminated by
the Company for Cause or Disability, or by you other than for Good Reason and
not within 12 months after a change in control of the Company, the Company shall
maintain in full force and effect, for your continued benefit and, if
applicable, for the continued benefit of your spouse and family, for three years
after the Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, all noncash employee benefit plans, programs,
or arrangements (including, without limitation, pension and retirement plans and
arrangements, stock option plans, life insurance and health and accident plans
and arrangements, medical insurance plans, disability plans, and vacation
plans) in which you were entitled to participate immediately prior to the Date
of Termination, as in effect at the Date of Termination, or, if more favorable
to you and, if applicable, your spouse and family, as in effect generally at any
time thereafter with respect to executive employees of the Company or any
successor; provided that your continued participation is possible after
Termination under the general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to participate in a
benefit plan, program, or arrangement of another employer which confers
substantially similar benefits upon you, you shall cease to receive benefits
under this subsection in respect of such plan, program, or
arrangement. In the event that your participation in any such
plan, program, or arrangement is not possible after Termination under the
general terms and provisions of such plans, programs, and arrangements, the
Company shall arrange to provide you with benefits substantially similar to
those which you are entitled to receive under such plans, programs and
arrangements or alternatively, pay an amount equal to the reasonable value of
such substantially similar benefits. If, after termination of
employment following a change in control of the Company, you elect or, if
applicable, your spouse or family elects, COBRA continuation coverage, the
Company will pay the applicable COBRA premium for the maximum period during
which such coverage is available. If termination follows a change in
control of the Company specified in Section 6(b)(iii), then you and, if
applicable, your spouse and family may elect in lieu of COBRA continuation
coverage to have the acquiring entity obtain an individual or group health
insurance coverage and the acquiring entity will pay premiums thereunder for the
maximum period during which you and, if applicable, your spouse and family could
have elected to receive COBRA continuation coverage.
(d) Establishment of
Trust. Within five days following conclusion of a change in
control of the Company, the Company shall establish a trust that conforms in all
regards with the model trust published in Revenue Procedure 92-64 and deposit an
amount sufficient to satisfy all liabilities of the Company under Section 3(b)
of this Agreement.
(e) Automatic
Extension. Notwithstanding the prior provisions of this
Section, if an individual is elected to the Board of Directors who has not been
nominated by the Board of Directors as constituted prior to his election, then
the term of this Agreement will automatically be extended until two years from
the date on which such individual was elected if such extended termination date
is later than the normal termination date of this Agreement, otherwise, the
termination date of this Agreement will be as provided above. This
extension will take effect only upon the first instance of an individual being
elected to the Board of Directors without having been nominated by the original
Board.
(f) Alternative to Lump Sum
Payout. The amount described in this subsection will be paid
to you in a single lump-sum unless, at least 30 days before the conclusion of a
change in control of the Company, you elect in writing to receive the severance
pay in 3 equal annual payments with the first payment to be made within 30 days
of demand and the subsequent payments to be made by January 31st of each year
subsequent to the year in which the first payment is made, provided that under
no circumstances will two payments be made during a single tax year of the
recipient.
4.
Payment If Termination
Occurs Following Change in Control, Because of Death, For Cause, or Without Good
Reason and not within 12 Months of the Change in Control. If
your employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the Company for
Cause, or by you other than for Good Reason and not within 12 months after a
change in control of the Company, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect on the date the
change in control of the Company occurs plus year-to-date accrued
vacation. The Company shall have no further obligations to you under
this Agreement.
5.
No
Mitigation. You shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor, except as expressly set forth herein, shall the amount of
any payment provided for in this Agreement be reduced by any compensation earned
by you as the result of employment by another employer after the Date of
Termination, or otherwise.
6.
Definitions of Certain
Terms. For the purpose of this Agreement, the terms defined in
this section 6 shall have the meanings assigned to them herein.
(a) Cause. Termination
of your employment by the Company for "Cause" shall mean termination because,
and only because, you committed an act of fraud, embezzlement, or theft
constituting a felony or an act intentionally against the interests of the
Company which causes the Company material injury. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
(b) Change in Control of the
Company. A "change in control of the Company" shall
mean:
(i)
A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in
effect on the date hereof pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred at such time as any Person hereafter becomes
the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30 percent or more of the combined voting power of
the Company's Voting Securities; or
(ii) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(iii) There
shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which Voting Securities would be converted into cash, securities, or
other property, other than a merger of the Company in which the holders of
Voting Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all of the assets of the Company, provided that any
such consolidation, merger, sale, lease, exchange or other transfer consummated
at the insistence of an appropriate banking regulatory agency shall not
constitute a change in control of the Company; or
(iv) Approval
by the shareholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company.
(c) Date of
Termination. "Date of Termination" shall mean (i) if your
employment is terminated by the Company for Disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period), and
(ii) if your employment is terminated for any other reason, the date on which a
Notice of Termination is given; provided that if within 30 days after any Notice
of Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties or by a final judgment, order,
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected). The term of
this Agreement shall be extended until the Date of Termination.
(d) Disability. Termination
of your employment by the Company for "Disability" shall mean termination
because of your absence from your duties with the Company on a full-time basis
for 180 consecutive days as a result of your incapacity due to physical or
mental illness and your failure to return to the performance of your duties on a
full-time basis during the 30-day period after Notice of Termination is
given.
(e) Good
Reason. Termination by you of your employment for "Good
Reason" shall mean termination based on any of the following:
(i)
A change in your status or position(s) with
the Company, which in your reasonable judgment, does not represent a promotion
from your status or position(s) as in effect immediately prior to the change in
control of the Company, or a change in your duties or responsibilities
which, in your reasonable judgment, is inconsistent with such status or
position(s), or any removal of you from, or any failure to reappoint or reelect
you to, such position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death or by you other
than for Good Reason.
(ii) A
reduction by the Company in your base salary as in effect immediately prior to
the change in control of the Company.
(iii) The
failure by the Company to continue in effect any Plan (as hereinafter defined)
in which you are participating at the time of the change in control of the
Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in control of
the Company, or the taking of any action, or the failure to act, by the Company
which would adversely affect your continued participation in any of such Plans
on at least as favorable a basis to you as is the case on the date of the change
in control of the Company or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit enjoyed by
you at the time of the change in control of the Company.
(iv) The
failure by the Company to provide and credit you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy as in effect immediately prior to the change in control
of the Company.
(v) The
Company's requiring you to be based anywhere other than where your office is
located immediately prior to the change in control of the Company except for
required travel on the Company's business to an extent substantially consistent
with the business travel obligations which you undertook on behalf of the
Company prior to the change in control of the Company.
(vi) The
failure by the Company to obtain from any successor the assent to this Agreement
contemplated by section 8 hereof.
(vii) Any
purported termination by the Company of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of this
Agreement; and for purposes of this Agreement, no such purported
termination shall be effective.
(viii)
Any refusal by the Company to continue to allow you to attend
to matters or engage in activities not directly related to the business of the
Company which, prior to the change in control of the Company, you were permitted
by the Board to attend to or engage in.
For
purposes of this subsection, "Plan" shall mean any compensation plan such as an
incentive or stock option plan or any employee benefit plan such as a thrift,
pension, profit sharing, medical, disability, accident, life insurance plan, or
a relocation plan or policy or any other plan, program, or policy of the Company
intended to benefit employees.
(f)
Notice of
Termination. A "Notice of Termination" of your employment
given by the Company shall mean a written notice given to you of the termination
of your employment which shall indicate the specific termination provision in
this Agreement relied upon, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The
term "Person" shall mean and include any individual, corporation, partnership,
group, association, or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Company or any employee benefit plan(s)
sponsored by the Company.
7.
Notice. For
the purposes of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
8.
Successors; Binding
Agreement.
(a) This
Agreement shall inure to the benefit of, and be binding upon, any corporate or
other successor or assignee of the Company which shall acquire, directly or
indirectly, by merger, consolidation or purchase, or otherwise, all or
substantially all of the business or assets of the Company. The
Company shall require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
(b) This
Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee, or other designee or,
if there is no such designee, to your estate.
9.
Increased Severance Payments
Upon Application of Excise Tax.
(a) Adjustment of
Payment. In the event any payments or benefits you become
entitled to pursuant to the Agreement or any other payments or benefits received
or to be received by you in connection with a change in control or your
termination of employment (whether pursuant to the terms of any other agreement,
plan, or arrangement, or otherwise, with the Company, any person whose actions
result in a change in control or any person affiliated with the Company or
such person) (collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay you an additional amount
(the "Gross-Up Payment") so that the net amount retained by you, after deduction
of the Excise Tax (but before deduction for any federal, state or local income
tax) on the Severance Payments and after deduction for the aggregate of any
federal, state, or local income tax and Excise Tax upon the Gross-Up Payment,
shall be equal to the Severance Payments. For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) the entire amount of the Severance Payments shall
be treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code and as subject to the Excise Tax, unless and to the extent, in the
written opinion of outside tax counsel selected by the Company's independent
accountants and reasonably acceptable to you, such payments (in whole or in
part) are not subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part of the
Severance Payments) shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income taxes at the highest marginal rate of
the federal income taxation applicable to individuals (without taking into
account surtaxes or loss or reduction of deductions) for the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of your residence
on the date of Termination. In the event that the amount of Excise
Tax you are required to pay is subsequently determined to be less than the
amount taken into account hereunder, you shall repay to the Company promptly
after the time that the amount of such reduction in Excise Tax is finally
determined the amount of the reduction, together with interest on the amount of
such reduction at the rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel selected by the
Company's independent accountants and reasonably acceptable to you, such payment
(or a portion thereof) was not taxable income to you when reported or is
deductible by you for federal income tax purposes, the net federal income tax
benefit you actually realize as a result of making such payment pursuant to this
sentence. In the event that the amount of Excise Tax you are required
to pay is subsequently determined to exceed the amount taken into account
hereunder, the Company shall make an additional Gross-Up Payment in the manner
set forth above in respect of such excess (plus any interest, additions to tax,
or penalties payable by you with respect to such excess) promptly after the time
that the amount can be reasonably determined.
(b) Time of Payment: Estimated
Payment. The payments provided for in subsection (a) above,
shall be made not later than the fifth business day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments, and shall pay the remainder of such payments (together
with interest at the rate of 6 percent per annum) as soon as the amount thereof
can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the rate of 6 percent per
annum).
10. Miscellaneous. No
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in a writing signed by you and
the Chief Executive Officer or President of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by laws of the State of New York without giving effect to the
principles of conflict of laws thereof.
11. Legal Fees and
Expenses. The Company shall pay or reimburse any reasonable
legal fees and expenses you may incur in connection with any legal action to
enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and
expenses on a regular, periodic basis upon presentation by you of a statement or
statements prepared by your counsel in accordance with its usual
practices.
12. Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
13. Payments During
Controversy. Notwithstanding the pendency of any dispute or
controversy, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance plans in which
you were participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with section
7(c). Amounts paid under this section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement. You shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
14. Illegality. Anything
in this Agreement to the contrary notwithstanding, this Agreement is not
intended and shall not be construed to require any payment to you which would
violate any federal or state statute or regulation, including without limitation
the "golden parachute payment regulations" of the Federal Deposit Insurance
Corporation codified to Part 359 of title 12, Code of Federal
Regulations.
If this
letter correctly sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
|
Very
truly yours,
|
|||
|
NBT
BANCORP INC.
|
|||
|
By:
|
/s/ Daryl
Forsythe
|
||
|
AGREED
TO:
|
|||
| /s/ David E. Raven | |||
|
David
E. Raven
|
|||
12
Exhibit 10.25
FIRST
AMENDMENT TO
THE
SUPPLEMENTAL EXECTIVE RETIREMENT AGREEMENT
EFFECTIVE
JULY 23, 2001
WHEREAS,
this is the first amendment (the “First Amendment”) to the NBT Bancorp Inc.
Supplemental Executive Retirement Plan, effective as of July 23, 2001 (the
“SERP”);
WHEREAS,
the SERP, as amended, is between NBT Bancorp Inc., a Delaware
corporation and a registered financial holding company headquartered at 52 S.
Broad Street, Norwich, New York 13815, and Michael J. Chewens, an
individual residing at 30 Pine Meadow Road, Vestal, New York,
13850;
NOW,
THEREFORE, the SERP is amended, effective as of January 1, 2005, as
follows:
1.
Section 7.1 of the SERP shall be amended by deleting the second paragraph
therein in its entirety.
2.
Section 7.2 of the SERP shall be amended by deleting the phrase “Except with
respect to receipt of a lump sum benefit under Section 7.1,” in the section’s
first sentence. The first sentence in Section 7.2 of the SERP shall
now begin with the words “Any election for an optional mode …”
3.
Section 7.3 of the SERP shall be amended by deleting this section in its
entirety and replacing it with the following:
“Payment
of any Retirement Income Benefit and 401(k)/ESOP Benefit under the Plan shall
not commence on a date before the first day of the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
4.
Section 7.4 of the SERP shall be amended by deleting the period at the end of
subsection (b) therein and replacing it with a comma, followed by the word
“and”; and by adding a new subsection (c) to read as follows:
“(c) notwithstanding
anything herein to the contrary, no Supplemental Retirement Benefit shall
commence under this Plan before the date which is the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
5.
Section 7.5(c) of the SERP shall be amended by deleting this
subsection in its entirety.
6.
In all other respects the Plan shall remain in full force and
effect.
NBT
BANCORP INC.
|
By:
|
/s/ Martin A.
Dietrich
|
Date:
November 13, 2008
|
|
Martin
A. Dietrich
|
||
|
President
|
||
|
and
Chief Executive Officer
|
||
|
By:
|
/s/ Michael J.
Chewens
|
Date:
November 13, 2008
|
|
Michael
J. Chewens
|
Exhibit
10.26
SECOND
AMENDMENT TO
THE
SUPPLEMENTAL EXECTIVE RETIREMENT AGREEMENT
EFFECTIVE
JULY 23, 2001
WHEREAS,
this is the second amendment (the “Second Amendment”) to the NBT Bancorp Inc.
Supplemental Executive Retirement Plan, effective as of July 23, 2001, and as
amended on January 20, 2006 (the “SERP”);
WHEREAS,
the SERP, as amended, is between NBT Bancorp Inc., a Delaware
corporation and a registered financial holding company headquartered at 52 S.
Broad Street, Norwich, New York 13815, and Martin A. Dietrich, an
individual residing at 122 Serenity Drive, Norwich, New York,
13815;
NOW,
THEREFORE, the SERP is amended, effective as of January 1, 2005, as
follows:
1.
Section 7.1 of the SERP shall be amended by deleting the
second paragraph therein in its entirety.
2.
Section 7.2 of the SERP shall be
amended by deleting the phrase “Except with respect to receipt of a lump sum
benefit under Section 7.1,” in the section’s first sentence. The
first sentence in Section 7.2 of the SERP shall now begin with the words “Any
election for an optional mode …”
3.
Section 7.3 of the SERP shall be amended by
deleting this section in its entirety and replacing it with the
following:
“Payment
of any Retirement Income Benefit and 401(k)/ESOP Benefit under the Plan shall
not commence on a date before the first day of the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
4.
Section 7.4 of the SERP shall be amended by deleting the
period at the end of subsection (b) therein and replacing it with a comma,
followed by the word “and”; and by adding a new subsection (c) to read as
follows:
“(c) notwithstanding
anything herein to the contrary, no Supplemental Retirement Benefit shall
commence under this Plan before the date which is the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
1
5.
Section 7.5(c) of the SERP shall be amended by
deleting this subsection in its entirety.
6.
In all other respects the Plan shall remain in
full force and effect.
|
NBT
BANCORP INC.
|
|||
|
By:
|
/s/ Michael J. Chewens
|
|
Date:
November 13, 2008
|
|
Michael
J. Chewens
|
|||
|
Senior
Executive Vice President
|
|||
|
and
Chief Financial Officer
|
|||
|
By:
|
/s/ Martin A. Dietrich
|
|
Date:
November 13, 2008
|
|
Martin
A. Dietrich
|
|||
2
Exhibit
10.27
FIRST
AMENDMENT TO
THE
SUPPLEMENTAL EXECTIVE RETIREMENT AGREEMENT
EFFECTIVE
JULY 23, 2001
WHEREAS,
this is the first amendment (the “First Amendment”) to the NBT Bancorp Inc.
Supplemental Executive Retirement Plan, effective as of July 23, 2001 (the
“SERP”);
WHEREAS,
the SERP, as amended, is between NBT Bancorp Inc., a Delaware
corporation and a registered financial holding company headquartered at 52 S.
Broad Street, Norwich, New York 13815, and David E. Raven, an individual
residing at 808 Parkview Road, Moscow, Pennsylvania 18444;
NOW,
THEREFORE, the SERP is amended, effective as of January 1, 2005, as
follows:
1.
Section 7.1 of the SERP shall be amended by deleting the
second paragraph therein in its entirety.
2.
Section 7.2 of the SERP shall be amended by
deleting the phrase “Except with respect to receipt of a lump sum benefit under
Section 7.1,” in the section’s first sentence. The first sentence in
Section 7.2 of the SERP shall now begin with the words “Any election for an
optional mode …”
3.
Section 7.3 of the SERP shall be amended by
deleting this section in its entirety and replacing it with the
following:
“Payment
of any Retirement Income Benefit and 401(k)/ESOP Benefit under the Plan shall
not commence on a date before the first day of the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
4.
Section 7.4 of the SERP shall be amended by deleting the period at the end
of subsection (b) therein and replacing it with a comma, followed by the word
“and”; and by adding a new subsection (c) to read as follows:
“(c) notwithstanding
anything herein to the contrary, no Supplemental Retirement Benefit shall
commence under this Plan before the date which is the seventh (7th) month
following the Participant’s “separation from service” with the Company as that
phrase is defined for purposes of section 409A of the Code.”
1
5.
Section 7.5(c) of the SERP shall be amended by deleting this
subsection in its entirety.
6.
In all other respects the Plan shall remain in
full force and effect.
|
NBT
BANCORP INC.
|
||||
|
By:
|
/s/ Martin A. Dietrich
|
|
Date:
November 13, 2008
|
|
|
Martin
A. Dietrich
|
||||
|
President
and
|
||||
|
Chief
Executive Officer
|
||||
|
By:
|
/s/ David E. Raven
|
|
Date:
November 13, 2008
|
|
|
David
E. Raven
|
||||
2
Exhibit
10.28
November
13, 2008
Michael
J. Chewens
30 Pine
Meadow Road
Vestal,
New York 13850
Re:
Employment Agreement and Change in Control -- Severance Agreement
Amendment
Dear
Michael:
As you
are aware, in 2004 a new Section 409A was added to the Internal Revenue Code by
the American Jobs Creation Act of 2004 (the “Act”). The Act made
significant changes in the tax law as it is applies to executive compensation.
In late September of 2005 the Internal Revenue Service published proposed
regulations relating to compliance with the Act. One change involves
delaying distributions to “key employees” (as defined below) by a minimum of six
months. Therefore, severance payments payable under your current
employment contract with NBT Bancorp, Inc. (“NBTB”), dated January 1, 2005,
(“Employment Agreement”) must be made in compliance with the Act or a
substantial excise tax (payable by you) would be imposed.
For this
purpose, a “key employee” is generally one who is an officer of NBTB with annual
compensation greater than $130,000. See Section 416(i) of the
Internal Revenue Code and the regulations promulgated there under for a complete
definition of a “key employee”.
Your
Employment Agreement provides that you would be entitled to certain severance
payments if your employment with NBTB was involuntarily terminated (other than
“for cause”) or you resigned for Good Reason, as those terms are defined in the
Employment Agreement. Pursuant to the Employment Agreement, severance payments
would begin on the date immediately following the Termination Date (as defined
in the Employment Agreement) and continue for the term set forth in the
Employment Agreement.
Your
Change in Control -- Severance Agreement, dated July 23, 2001, (“Severance
Agreement”) provides that you are entitled to severance payments if, within 24
months following a Change in Control of NBTB, your employment with NBTB was
involuntarily terminated (other than for “Cause”) or you resigned for Good
Reason (or without Good Reason within 12 months following a Change in Control of
NBTB), as those terms are defined in the Severance
Agreement. Pursuant to the Severance Agreement, severance payments
would begin not later than the fifth business day following your Date of
Termination (as defined in the Severance Agreement) and continue for the term
set forth in the Severance Agreement.
If you
become entitled to the severance payments provided for in the Employment
Agreement or the Severance Agreement, and if you are in fact a key employee at
the time payment is owed to you, the Act provides that these payments will be
subject to a 20% excise tax.
Under the
Act, one of the ways to avoid application of the excise tax to severance due a
“key employee” under the terms of an employment agreement such as yours is to
defer payment for six (6) months after separation from employment. Accordingly,
the Compensation and Benefits Committee of NBTB has determined that in the event
you become entitled to severance payments under the Employment Agreement and/or
Severance Agreement, and if at this time you are in fact a “key employee” with
NBTB, it will defer commencement of your severance payments until six (6) months
after your employment with NBTB ends. In all other respects, both
your Employment Agreement and your Severance Agreement shall remain in full
force and effect.
In
accordance with section 10 of the Employment Agreement and section 10 of the
Severance Agreement, please sign the acknowledgement to this amendment below and
return one original to me. The other original is for your
files.
|
|
Very
truly yours,
|
|||
|
|
NBT
BANCORP INC.
|
|||
|
By:
|
/s/
Martin A. Dietrich
|
|||
|
Martin
A. Dietrich
|
||||
|
President
and
|
||||
|
Chief
Executive Officer
|
||||
|
Acknowledged
and Agreed to:
|
||||
|
/s/
Michael J. Chewens
|
||||
|
Michael
J. Chewens
|
||||
|
Senior
Executive Vice President and
|
||||
|
Chief
Financial Officer
|
||||
2
Exhibit
10.29
November
13, 2008
Martin A.
Dietrich
122
Serenity Drive
Norwich,
New York 13815
Re:
Employment Agreement and Change in Control -- Severance Agreement
Amendment
Dear
Martin:
As you
are aware, in 2004 a new Section 409A was added to the Internal Revenue Code by
the American Jobs Creation Act of 2004 (the “Act”). The Act made
significant changes in the tax law as it is applies to executive compensation.
In late September of 2005 the Internal Revenue Service published proposed
regulations relating to compliance with the Act. One change involves
delaying distributions to “key employees” (as defined below) by a minimum of six
months. Therefore, severance payments payable under your current
employment contract with NBT Bancorp, Inc. (“NBTB”), dated January 1, 2005,
(“Employment Agreement”) must be made in compliance with the Act or a
substantial excise tax (payable by you) would be imposed.
For this
purpose, a “key employee” is generally one who is an officer of NBTB with annual
compensation greater than $130,000. See Section 416(i) of the
Internal Revenue Code and the regulations promulgated thereunder for a complete
definition of a “key employee”.
Your
Employment Agreement provides that you would be entitled to certain severance
payments if your employment with NBTB was involuntarily terminated (other than
“for cause”) or you resigned for Good Reason, as those terms are defined in the
Employment Agreement. Pursuant to the Employment Agreement, severance payments
would begin on the date immediately following the Termination Date (as defined
in the Employment Agreement) and continue for the term set forth in the
Employment Agreement.
Your
Change in Control -- Severance Agreement, dated July 23, 2001, (“Severance
Agreement”) provides that you are entitled to severance payments if, within 24
months following a Change in Control of NBTB, your employment with NBTB was
involuntarily terminated (other than for “Cause”) or you resigned for Good
Reason (or without Good Reason within 12 months following a Change in Control of
NBTB), as those terms are defined in the Severance
Agreement. Pursuant to the Severance Agreement, severance payments
would begin not later than the fifth business day following your Date of
Termination (as defined in the Severance Agreement) and continue for the term
set forth in the Severance Agreement.
If you
become entitled to the severance payments provided for in the Employment
Agreement or the Severance Agreement, and if you are in fact a key employee at
the time payment is owed to you, the Act provides that these payments will be
subject to a 20% excise tax.
Under the
Act, one of the ways to avoid application of the excise tax to severance due a
“key employee” under the terms of an employment agreement such as yours is to
defer payment for six (6) months after separation from employment. Accordingly,
the Compensation and Benefits Committee of NBTB has determined that in the event
you become entitled to severance payments under the Employment Agreement and/or
Severance Agreement, and if at this time you are in fact a “key employee” with
NBTB, it will defer commencement of your severance payments until six (6) months
after your employment with NBTB ends. In all other respects, both
your Employment Agreement and your Severance Agreement shall remain in full
force and effect.
In
accordance with section 10 of the Employment Agreement and section 10 of the
Severance Agreement, please sign the acknowledgement to this amendment below and
return one original to me. The other original is for your
files.
|
Very
truly yours,
|
||
|
NBT
BANCORP INC.
|
||
|
By
|
/s/ Michael J.
Chewens
|
|
|
Michael
J. Chewens
|
||
|
Senior
Executive Vice President
|
||
|
and
Chief Financial Officer
|
||
|
Acknowledged
and Agreed to:
|
||
|
/s/ Martin A.
Dietrich
|
||
|
Martin
A. Dietrich
|
||
|
President
and
|
||
|
Chief
Executive Officer
|
||
2
Exhibit
10.30
November
13, 2008
David E.
Raven
808
Parkview Road
Moscow,
PA 18444
Re:
Employment Agreement and Change in Control -- Severance Agreement
Amendment
Dear
David:
As you
are aware, in 2004 a new Section 409A was added to the Internal Revenue Code by
the American Jobs Creation Act of 2004 (the “Act”). The Act made
significant changes in the tax law as it is applies to executive compensation.
In late September of 2005 the Internal Revenue Service published proposed
regulations relating to compliance with the Act. One change involves
delaying distributions to “key employees” (as defined below) by a minimum of six
months. Therefore, severance payments payable under your current
employment contract with NBT Bancorp, Inc. (“NBTB”), dated January 1, 2005,
(“Employment Agreement”) must be made in compliance with the Act or a
substantial excise tax (payable by you) would be imposed.
For this
purpose, a “key employee” is generally one who is an officer of NBTB with annual
compensation greater than $130,000. See Section 416(i) of the
Internal Revenue Code and the regulations promulgated thereunder for a complete
definition of a “key employee”.
Your
Employment Agreement provides that you would be entitled to certain severance
payments if your employment with NBTB was involuntarily terminated (other than
“for cause”) or you resigned for Good Reason, as those terms are defined in the
Employment Agreement. Pursuant to the Employment Agreement, severance payments
would begin on the date immediately following the Termination Date (as defined
in the Employment Agreement) and continue for the term set forth in the
Employment Agreement.
Your
Change in Control -- Severance Agreement, dated July 23, 2001, (“Severance
Agreement”) provides that you are entitled to severance payments if, within 24
months following a Change in Control of NBTB, your employment with NBTB was
involuntarily terminated (other than for “Cause”) or you resigned for Good
Reason (or without Good Reason within 12 months following a Change in Control of
NBTB), as those terms are defined in the Severance
Agreement. Pursuant to the Severance Agreement, severance payments
would begin not later than the fifth business day following your Date of
Termination (as defined in the Severance Agreement) and continue for the term
set forth in the Severance Agreement.
If you
become entitled to the severance payments provided for in the Employment
Agreement or the Severance Agreement, and if you are in fact a key employee at
the time payment is owed to you, the Act provides that these payments will be
subject to a 20% excise tax.
Under the
Act, one of the ways to avoid application of the excise tax to severance due a
“key employee” under the terms of an employment agreement such as yours is to
defer payment for six (6) months after separation from employment. Accordingly,
the Compensation and Benefits Committee of NBTB has determined that in the event
you become entitled to severance payments under the Employment Agreement and/or
Severance Agreement, and if at this time you are in fact a “key employee” with
NBTB, it will defer commencement of your severance payments until six (6) months
after your employment with NBTB ends. In all other respects, both
your Employment Agreement and your Severance Agreement shall remain in full
force and effect.
In
accordance with section 10 of the Employment Agreement and section 10 of the
Severance Agreement, please sign the acknowledgement to this amendment below and
return one original to me. The other original is for your
files.
|
Very
truly yours,
|
||
|
NBT
BANCORP INC.
|
||
|
By:
|
/s/ Martin A.
Dietrich
|
|
|
Martin
A. Dietrich
|
||
|
President
and
|
||
|
Chief
Executive Officer
|
||
|
Acknowledged
and Agreed to:
|
||
|
/s/ David E.
Raven
|
||
|
David
E. Raven
|
||
|
Executive
Vice President
|
||
2
Exhibit
10.33
Description
of Arrangement for Directors Fees
Except as set forth below, the following
sets forth the amount of fees payable to outside directors of NBT Bancorp for
their services as Directors in fiscal year 2009:
|
Event
|
Fee
|
|
|
Annual
retainer
|
Cash (Member) -
$5,000
Restricted Stock (Member) -
$10,000
Restricted Stock (Chairman) -
$50,000
Deferred common stock (Member) –
400 shares
Deferred common stock (Chairman) –
600 shares
|
|
|
Board meeting
attended
|
Cash (Member) - $900 per
meeting
Cash (Chairman) - $1,000 per
meeting
|
|
|
Telephonic board
meeting
|
Cash (Member) - $900 per
meeting
Cash (Chairman) - $1,000 per
meeting
|
|
|
Committee meeting
attended
|
Cash (Member) - $600 per
meeting
Cash (Chairman) - $900 per
meeting
|
|
|
Telephonic committee
meeting
|
Cash (Member) - $600 per
meeting
Cash (Chairman) - $900 per
meeting
|
|
|
Common stock
options
|
Member - 1,000 shares multiplied
by the number of board meetings attended in the prior year and divided by
the number of meetings held in the prior year.
|
|
|
Chairman - 5,000 shares multiplied
by the number of board meetings attended in the prior year and divided by
the number of meetings held in the prior year.
|
||
|
Special meeting held with
committee member representative at the request of management for the
purpose of discussing board related matters.
|
$900 per
meeting
|
The Chairman of the Board receives
$1,000 for each board and committee meeting attended except for Compensation
& Benefits Committee, Risk Management Committee and the Nominating,
Organization & Board Affairs Committee for which the Chairman currently
fails to meet “Director Independence” requirements identified under applicable
sections of NASDAQ Corporate Governance Rules.
Exhibit 10.34
RESOLUTION
OF THE
COMPENSATION
COMMITTEE
OF
NBT
BANCORP INC.
September
22, 2008
After
discussion, and upon a motion duly made and seconded, it was
RESOLVED, that the Martin A. Dietrich
Supplemental Executive Retirement Plan (SERP) dated July 23, 2001, as amended on
January 20, 2006, shall be further amended to update certain provisions
associated with the January 20, 2006 amendment that were not updated at the time
of said amendment with respect to normal and early retirement ages. Therefore,
Sections 7.4 and 8.6 shall be restated in their entirety as
follows:
7.4 The
Supplemental Retirement Benefit shall be paid:
|
|
(a)
|
except
as provided in Section 7.4(b) (early retirement) and Section 8.6 (death),
commencing on the first day of the month following the later of the
Participant's retirement or his or her attainment of age 60;
or
|
|
|
(b)
|
commencing
on the first day of the month following the Participant's Determination
Date in connection with early retirement after reaching age 58 and prior
to the date of his or her 60th
birthday.
|
|
8.6
|
The
following provisions shall apply with respect to payment of the
Supplemental Retirement Benefit after the death of a
Participant:
|
|
|
(a)
|
Except
as provided in Section 8.6(b), if a Participant shall die before his or
her 58th birthday, no Supplemental Retirement Benefit shall be
payable.
|
|
|
(b)
|
If
a Participant shall die on or after his or her 58th birthday, after he or
she has retired but before payment of any Supplemental Retirement Benefit
has commenced, the Participant's surviving spouse, if any, shall be paid
as a straight life annuity 50 percent of the Supplemental Retirement
Benefit for her life commencing within 30 days following the Participant's
death. Such payments shall be made in monthly installments, subject to the
right of the Company to accelerate payment at any time in accordance with
Section 7.5(c). However, if such Participant is not married at the time of
his or her death, the Company shall pay to the Participant's Beneficiary a
lump sum benefit equal to 50 percent of the Present Value of the
Participant's Supplemental Retirement
Benefit.
|
|
|
(c)
|
Except
as provided in Section 8.6(b), no Supplemental Retirement Benefit shall be
payable if the Participant dies before payment of any Supplemental
Retirement Benefit has begun without having a spouse who survives him or
her.
|
|
|
(d)
|
If
a Participant dies after payment of a Supplemental Retirement Benefit has
commenced, the amount, if any, of the Supplemental Retirement Benefit
payable to the Participant's surviving spouse or other Beneficiary shall
be determined pursuant to the applicable provisions of Section
7.5.
|
Furthermore,
NBT Bancorp Inc. Management is hereby authorized to take all actions (including,
without limitation, execution and filing of documents and payment of expenses)
and to make all determinations necessary to effect this amendment.
|
/s/ Michael J. Chewens
|
|
|
Michael
J. Chewens
|
|
|
Secretary
|
EXHIBIT
21
List
of Subsidiaries of the Registrant
|
Jurisdiction
of Incorporation
|
Names
Under Which Subsidiary does Business
|
|||
|
NBT
Bancorp Inc. Subsidiaries:
|
||||
|
NBT
Bank, National Association
|
New
York
|
NBT
Bank
|
||
|
NBT
Financial Services, Inc.
|
Delaware
|
NBT
Financial Services
|
||
|
Hathaway
Agency, Inc.
|
New
York
|
Hathaway
Agency
|
||
|
CNBF
Capital Trust I
|
Delaware
|
CNBF
Capital Trust I
|
||
|
NBT
Statutory Trust I
|
Delaware
|
NBT
Statutory Trust I
|
||
|
NBT
Statutory Trust II
|
Delaware
|
NBT
Statutory Trust II
|
||
|
NBT
Holdings, Inc.
|
New
York
|
NBT
Holdings
|
||
|
NBT
Bank, National Association Subsidiaries:
|
||||
|
NBT
Capital Corp.
|
New
York
|
NBT
Capital Corp.
|
||
|
LA
Lease, Inc.
|
Pennsylvania
|
LA
Lease
|
||
|
Colonial
Financial Services, Inc.
|
New
York
|
Colonial
Financial Services
|
||
|
NBT
Services, Inc.
|
Delaware
|
NBT
Services
|
||
|
Broad
Street Property Associates, Inc.
|
New
York
|
Broad
Street Property Associates
|
||
|
Pennstar
Bank Services Company
|
Delaware
|
Pennstar
Bank Services
|
||
|
FNB
Financial Services, Inc.
|
Delaware
|
FNB
Financial Services
|
||
|
CNB
Realty Trust
|
Maryland
|
CNB
Realty Trust
|
||
|
Pennstar
Realty Trust
|
Maryland
|
Pennstar
Realty Trust
|
||
|
CNB
REIT Corp.
|
New
York
|
CNB
REIT
|
||
|
NBT
Financial Services, Inc. Subsidiaries:
|
||||
|
Pennstar
Financial Services, Inc.
|
Pennsylvania
|
Pennstar
Financial Services
|
||
|
EPIC
Advisors, Inc.
|
New
York
|
EPIC
Advisors
|
||
|
NBT
Holdings, Inc. Subsidiaries:
|
||||
|
Mang
Insurance Agency, LLC
|
New
York
|
Mang
Insurance
Agency
|
EXHIBIT
23
|
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
The Board
of Directors
NBT
Bancorp Inc.:
We
consent to incorporation by reference in the Registration Statements on Form S-3
(File No. 33-12247) and Forms S-8 (File Nos. 333-71830, 333-73038, 333-66472,
333-97995, 333-107479, 333-107480, 333-127098, 333-139956 and 333-150956) of NBT
Bancorp Inc. of our reports dated February 27, 2009, with respect to the
consolidated balance sheets of NBT Bancorp Inc. and subsidiaries as of December
31, 2008 and 2007, and the related consolidated statements of income, changes in
stockholders' equity, cash flows and comprehensive income for each of the years
in the three-year period ended December 31, 2008, and the effectiveness of
internal control over financial reporting as of December 31, 2008, which reports
appear in the December 31, 2008 annual report on Form 10-K of NBT Bancorp
Inc.
/s/ KPMG
LLP
Albany,
New York
February
27, 2009
|
EXHIBIT
31.1
|
CERTIFICATION
– Rule 13a-14(a) Certification of Chief Executive Officer
I, Martin
A. Dietrich, certify that:
|
1.
|
I
have reviewed this annual report on Form 10-K of NBT Bancorp
Inc.
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls or procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation;
and
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth quarter in the case of an annual
report) that has materially affected, or is reasonably likely to affect,
the registrant’s internal control over financial reporting;
and
|
|
5.
|
The
registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operations of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls;
and
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls.
|
|
Date: March
2, 2009
|
|
/s/
Martin A.
Dietrich
|
Martin A.
Dietrich
Chief
Executive Officer
|
EXHIBIT
31.2
|
CERTIFICATION
- - Rule 13a-14(a) Certification of Chief Financial Officer
I,
Michael J. Chewens, certify that:
|
1.
|
I
have reviewed this annual report on Form 10-K of NBT Bancorp
Inc.
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls or procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation;
and
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth quarter in the case of an annual
report) that has materially affected, or is reasonably likely to affect,
the registrant’s internal control over financial reporting;
and
|
|
5.
|
The
registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operations of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls;
and
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls.
|
|
Date: March
2, 2009
|
|
/s/
Michael J.
Chewens
|
Michael
J. Chewens
Senior
Executive Vice President, Chief Financial Officer and Corporate
Secretary
|
EXHIBIT
32.1
|
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906
OF THE SARBANES-OXLEY ACT OF 2002
The
undersigned, the Chief Executive Officer of NBT Bancorp Inc. (the “Company”),
hereby certifies that to his knowledge on the date hereof:
|
(a)
|
the
Form 10-K of the Company for the Annual Period Ended December 31, 2008,
filed on the date hereof with the Securities and Exchange Commission (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
|
(b)
|
information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the
Company.
|
/s/
Martin A. Dietrich
Martin A.
Dietrich
Chief
Executive Officer
March 2,
2009
The
forgoing certification is being furnished solely pursuant to Subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code in accordance
with Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that section, and shall not be deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934.
|
EXHIBIT
32.2
|
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906
OF THE SARBANES-OXLEY ACT OF 2002
The
undersigned, the Chief Financial Officer of NBT Bancorp Inc. (the “Company”),
hereby certifies that to his knowledge on the date hereof:
|
(a)
|
the
Form 10-K of the Company for the Annual Period Ended December 31, 2008,
filed on the date hereof with the Securities and Exchange Commission (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
|
(b)
|
information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the
Company.
|
/s/
Michael J. Chewens
Michael
J. Chewens
Senior
Executive Vice President,
Chief
Financial Officer and Corporate Secretary
March 2,
2009
The
forgoing certification is being furnished solely pursuant to Subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code in accordance
with Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that section, and shall not be deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934.