SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995.
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)
DELAWARE 16-1268674
(State of Incorporation) (I.R.S. Employer Identification No.)
52 SOUTH BROAD STREET NORWICH, NEW YORK 13815
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (607)-335-6000
Indicate by check mark whether the registrant (1) has filed all reports
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of April 30, 1995, there were 8,049,618 shares outstanding,
including 18,943 shares held in the treasury, of the Registrant's
common stock, No Par, Stated Value $1.00. There were no shares of the
Registrant's preferred stock, No Par, Stated Value $1.00, outstanding
at that date.
An index to exhibits follows the signature page of this Form 10-Q.
NBT BANCORP INC.
Form 10-Q -- Quarter Ended March 31, 1995
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 1995, December 31,
1994, and March 31, 1994
Consolidated Statements of Income for the three month periods
ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the three month
periods ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements at March 31, 1995
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote
of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES
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CONSOLIDATED BALANCE SHEETS March 31, December 31, March 31,
NBT BANCORP INC. and Subsidiary 1995 1994 1994
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(dollars in thousands) (Unaudited) (Note) (Unaudited)
ASSETS
Cash and due from banks $ 58,498 $ 42,110 $ 32,773
Federal funds sold - - -
Loans available for sale 7,788 10,921 10,325
Securities available for sale 106,278 109,777 127,947
Securities held to maturity (market
value-$264,184, $261,913 and $201,178) 268,974 272,466 202,408
Loans:
Commercial and agricultural 215,718 215,380 209,836
Real estate mortgage 128,481 129,275 133,801
Consumer 219,134 230,063 215,524
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Total loans 563,333 574,718 559,161
Less allowance for loan losses 9,038 9,026 8,652
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Net loans 554,295 565,692 550,509
Premises and equipment, net 15,458 15,383 15,778
Goodwill and other intangibles, net 9,546 9,862 12,041
Other assets 15,563 18,346 17,061
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TOTAL ASSETS $1,036,400 $1,044,557 $968,842
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $ 757,387 $ 669,007 $712,433
Non-interest bearing 121,634 122,436 113,830
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Total deposits 879,021 791,443 826,263
Short-term borrowings 43,179 140,587 22,275
Long-term debt 8,734 8,734 14,455
Other liabilities 5,036 5,486 5,563
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Total liabilities 935,970 946,250 868,556
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00;
authorized 2,000,000 shares - - -
Common stock, no par, stated value $1.00;
authorized 10,000,000 shares; issued
8,049,618, 8,049,618 and 8,053,187 8,050 8,050 7,670
Capital surplus 69,218 69,669 64,495
Retained earnings 26,391 25,446 29,354
Unrealized (loss) on securities
available for sale, net of income tax
effect (2,428) (4,273) (1,233)
Common stock in treasury at cost, 48,943
and 36,130 shares (801) (585) -
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Total stockholders' equity 100,430 98,307 100,286
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,036,400 $1,044,557 $968,842
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME Three months ended March 31,
------------------------------
NBT BANCORP INC. and Subsidiary 1995 1994
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(dollars in thousands, except per share amounts) (Unaudited)
Interest and fee income:
Loans $12,210 $11,850
Securities held to maturity-
taxable 3,544 1,778
Securities held to maturity-
tax exempt 390 232
Assets available for sale 1,789 2,575
Other 9 10
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Total interest and fee income 17,942 16,445
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Interest expense:
Deposits 6,611 5,100
Short-term borrowings 1,219 281
Long-term debt 151 236
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Total interest expense 7,981 5,617
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Net interest income 9,961 10,828
Provision for loan losses 330 810
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Net interest income after provision
for loan losses 9,631 10,018
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Noninterest income:
Trust income 662 799
Service charges on deposit accounts 731 654
Securities gains - 555
Other income 374 428
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Total noninterest income 1,767 2,436
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Noninterest expense:
Salaries and employee benefits 4,024 4,084
Net occupancy expense 603 630
Equipment expense 411 542
FDIC insurance 451 457
Amortization of goodwill and other
intangibles 315 1,042
Other operating expense 2,609 2,740
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Total noninterest expense 8,413 9,495
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Income before income taxes 2,985 2,959
Income taxes 1,078 1,156
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Net income $ 1,907 $ 1,803
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Net income per common share $0.24 $0.22
Cash dividends per common share 0.120 0.109
Average common shares outstanding 8,051,537 8,162,256
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NBT BANCORP INC. and Subsidiary
Three Months Ended March 31, 1995 1994
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(dollars in thousands) (Unaudited)
Operating activities:
Net income $ 1,907 $ 1,803
Adjustments to reconcile net income to the
cash provided by operating activities:
Provision for loan losses 330 810
Depreciation and amortization 372 440
Amortization of premiums and accretion
of discounts on securities (16) 321
Amortization of goodwill and other intangibles 315 1,042
Proceeds from sales of loans originated for sale 6,891 4,622
Loans originated for sale (3,305) (4,922)
Realized gains on sales of securities - (555)
(Increase) decrease in interest receivable 1,333 (440)
Increase in interest payable 161 162
Payments of restructuring liabilities (923) -
Other, net 36 (103)
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Net cash provided by operating activities 7,101 3,180
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Investing activities:
Securities available for sale:
Proceeds from maturities 13,745 11,552
Proceeds from sales - 67,974
Purchases (4,953) -
Securities held to maturity:
Proceeds from maturities 13,704 3,679
Purchases (10,121) (97,945)
(Increase) decrease in loans 11,067 (699)
Purchase of premises and equipment, net (445) (531)
Other investing activities - (2,241)
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Net cash used in investing activities 22,997 (18,211)
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Financing activities:
Net increase in deposits 87,578 19,035
Net decrease in short-term borrowings
with original maturities of three months or less (97,408) (4,426)
Common stock issued, including treasury shares reissued 2,403 532
Purchase of treasury stock (3,070) (275)
Cash dividends and payment for fractional shares (963) (880)
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Net cash provided by financing activities (11,460) 13,986
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Net increase (decrease) in cash and cash equivalents 18,638 (1,045)
Cash and cash equivalents at beginning of year 43,410 36,118
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Cash and cash equivalents at end of period $ 62,048 $35,073
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,820 $ 5,779
Income taxes 65 166
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See notes to consolidated financial statements.
-5-
NBT BANCORP INC. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of NBT BANCORP INC. (the Registrant or NBT) and its
wholly-owned subsidiary, The National Bank and Trust Company (the
Bank). All intercompany transactions have been eliminated in
consolidation. Certain amounts previously reported in the financial
statements have been reclassified to conform with the current
presentation.
The determination of the allowance for loan losses is a material
estimate that is particularly susceptible to significant change in the
near term. In connection with the determination of the allowance for
loan losses management obtains independent appraisals for significant
properties.
Net income per common share is computed based on the weighted average
number of common shares and common share equivalents outstanding during
each period after giving retroactive effect to stock dividends. Cash
dividends per common share are computed based on declared rates
adjusted retroactively for stock dividends.
The balance sheet at December 31, 1994 has been derived from audited
financial statements at that date. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the three month period ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's
annual report on Form 10-K for the year ended December 31, 1994.
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114 (SFAS 114),
"Accounting by Creditors for Impairment of a Loan". SFAS 114 requires
the creation of a valuation allowance for impaired loans based on the
present value of expected future cash flows discounted at the loan's
effective interest rate, or based on the loan's observable market price
or fair value of the collateral, if the loan is collateral-dependent.
For purposes of SFAS 114, a loan is impaired when, based on current
information and events, it is probable that a creditor will be unable
to collect all contractual interest and principal payments according
to the terms of the loan agreement. Additionally, the FASB issued SFAS
118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures", which amends SFAS 114 to indicate that
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guidance is not provided concerning how a creditor should recognize,
measure or display interest income on an impaired loan.
The Registrant adopted SFAS 114 and 118 January 1, 1995, on a
prospective basis. The adoption resulted in the allocation of a portion
of the existing allowance for loan losses to impaired loans with no
resulting impact at that date on net income, stockholders' equity or
total assets.
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, various commitments and contingent
liabilities arise, including commitments to extend credit and standby
letters of credit. Also, off-balance sheet financial instruments such
as interest rate swaps, forward contracts, futures, options on
financial futures, and interest rate caps, collars and floors bear risk
based on financial market conditions. The following table summarizes
the Registrant's exposure to these off-balance sheet commitments and
contingent liabilities as of March 31, 1995, in thousands of dollars:
Contractual or
Notional Value
at March 31, 1995
Financial instruments with off-balance
sheet credit risk:
Commitments to extend credit $80,888,000
Standby letters of credit 2,259,000
Financial instruments with off-balance
sheet market risk None
-7-
NBT BANCORP INC. AND SUBSIDIARY
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The purpose of this discussion is to focus on material information
about the Registrant's financial condition and results of operations.
Reference should be made to the Registrant's consolidated financial
statements and footnotes thereto included in this Form 10-Q as well as
to the Registrant's 1994 Form 10-K for an understanding of the
following discussion and analysis. The Registrant has a long history
of distributing stock dividends; in December, 1994 a 5% stock dividend
was distributed for the thirty-fifth consecutive year. Throughout this
discussion and analysis, amounts per common share have been adjusted
retroactively for stock dividends and splits for purposes of
comparability.
HIGHLIGHTS OF THE REGISTRANT'S 1995 PERFORMANCE
Net income of $1.9 million ($0.24 per share) was realized in the first
quarter of 1995, representing a 6% increase from first quarter 1994 net
income of $1.8 million ($0.22 per share). The major contributing
factors for the increase in net income were decreased provision for
loan losses, as loan losses declined in 1995 and decreased noninterest
expenses. The decrease in noninterest expense is a result of the
restructuring that the Company undertook in 1994 and the decline in
intangible amortization. Offsetting these positive trends was a
decline in net interest income resulting from rising interest rates and
a one-time write off of accrued interest on loans put on nonaccrual or
previously written off loans.
The following table depicts several measurements of performance on an
annualized basis. Return on average assets and equity measure how
effectively an entity utilizes its total resources and capital,
respectively. Net interest margin is a measure of an entity's ability
to utilize its earning assets in relation to the interest cost of
funding. The Registrant manages its exposure to economic loss from
fluctuations in interest rates (interest rate risk) through an active
program of asset-liability management within guidelines established by
its Asset-Liability Management Committee (ALCO).
First Second Third Fourth Twelve First
Quarter Quarter Quarter Quarter Months Quarter
1994 1994 1994 1994 1994 1995
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Return on average assets 0.76% 0.72% 0.38% 0.73% 0.64% 0.76%
Return on average common equity 7.23% 7.31% 4.00% 7.59% 6.53% 7.83%
Net interest margin 4.99% 4.85% 4.82% 4.64% 4.81% 4.30%
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FINANCIAL CONDITION
The following table highlights the changes in the balance sheet. Since
period end balances can be distorted by one-day fluctuations, the
discussion and analysis concentrates on average balances when
appropriate to give a better indication of balance sheet trends.
AVERAGE BALANCES
Three months
(dollars in thousands) 1995 1994
- --------------------------------------------------------------------
Securities available for sale $ 105,078 $177,302
Securities held to maturity 272,587 148,003
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Total Securities 377,665 325,305
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Loans available for sale 8,788 9,874
Loans 568,241 557,282
Deposits 822,754 806,256
Short-term borrowings 86,076 31,650
Long-term debt 8,734 14,455
Stockholders' equity 98,790 101,053
Assets 1,021,798 960,360
Earning assets 960,231 891,805
Interest-bearing liabilities $ 799,258 $740,432
- --------------------------------------------------------------------
Loans: Average loans for the first quarter of 1995 increased $11
million, or 2%, from the comparable period of the previous year. The
increase in the portfolio volume occurred in commercial and consumer
loans, whose dollar volume increased and percentage of the total loan
portfolio either increased or remained consistent. Real estate loans
decreased as the volume of mortgage refinancing has diminished and new
mortgage loan origination has been very weak. Commercial, consumer and
real estate loans comprised 38%, 39%, and 23% of the average portfolio
for the three months ended March 31, 1995. Comparable measures for a
year previous were 37%, 39%, and 24%.
Allowance and provision for loan losses: The allowance for loan losses
has been established to provide for the estimated possible losses
related to the collection of the Bank's loan portfolio. The allowance
is maintained at a level considered adequate to provide for loan loss
exposure based on management's estimate of potential future losses
considering an evaluation of portfolio risk, prevailing and anticipated
economic factors, and past loss experience. Management determines the
provision and allowance for loan losses based on a number of factors
including a comprehensive in-house loan review program conducted
throughout the year. The loan portfolio is continually evaluated in
order to identify potential problem loans, credit concentration, and
other risk factors such as current and projected economic conditions
locally and nationally. The levels of risk for which allowances are
established are based on estimates of losses on larger specifically
identified loans, and on loan categories analyzed in total where, based
on past experience, risk factors can be assessed. General economic
trends can greatly affect loan losses and there are no assurances that
further changes to the allowance for loan losses may not be significant
in relation to the amount provided during a particular period.
Management does, however, consider the allowance for loan losses to be
adequate for the reporting periods based on evaluation and analysis of
the loan portfolio.
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The table entitled ALLOWANCE FOR LOAN LOSSES portrays activity for the
periods presented. The allowance is increased by provisions for losses
charged to operations and is reduced by net charge-offs. Charge-offs
are made when the collectiblity of loan principal within a reasonable
time is unlikely. Any recoveries of previously charged-off loans are
credited directly to the allowance for loan losses. Net charge-offs
have decreased from both the prior year's comparable period and the
full year 1994 measure both as a dollar amount and as a percentage of
average loan balances. The provision for loan losses decreased by $0.4
million, 41%, for the first quarter of 1995 from the comparable period
a year ago. The improvement in asset quality depicted in the table
NONPERFORMING ASSETS is the driving force underlying the reduced
provision for loan losses. Nonperforming loans have decreased and the
percentage relationship of the allowance for loan losses to both
nonperforming and total loans has improved.
The allowance has been allocated based on identified problem credits
or categorical trends. After allocation, the unallocated portion at
March 31, 1995, was approximately $1 million. The unallocated portion
is available for further unforeseen or unexpected losses or
unidentified problem credits. Management will continue to target and
maintain a minimum allowance equal to the allocated requirement plus
an unallocated portion, as appropriate.
ALLOWANCE FOR LOAN LOSSES
Three months ended March 31,
(dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------
Balance, beginning of period $9,026 $8,652
Recoveries 206 227
Charge-offs (524) (1,037)
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Net charge-offs (318) (810)
Provision for loan losses 330 810
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Balance, end of period $9,038 $8,652
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COMPOSITION OF NET CHARGE-OFFS
- ---------------------------------------------------------------------------------
Commercial and agricultural $ (111) 35% $ (270) 33%
Real estate (3) 1% (15) 2%
Consumer and other (204) 64% (525) 65%
- ---------------------------------------------------------------------------------
Net (charge-offs) recoveries $ (318) 100% $ (810) 100%
- ---------------------------------------------------------------------------------
Annualized net charge-offs
to average loans 0.23% 0.59%
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Annualized net charge offs to
average loans for the year
ended December 31, 1994 0.48%
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Asset Quality: NBT has maintained its focus on sound credit quality in
the loan portfolio, reflecting conservative lending practices and
policies. The measurement of asset quality is the responsibility of the
Registrant's loan review function which also determines the adequacy
of the allowance for loan losses. Loan review utilizes a loan rating
system to rate substantially all of its loans based on risks which
include internal loan classifications, historical analysis of prior
period charge-offs, and evaluation of expected losses on internally
classified credits. Loan ratings are continually reviewed to determine
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their propriety. Reporting separately from the loan review function,
the banking and credit function is responsible for lending credit
policy, systems and procedures, collections, recovery and workout
policies and systems.
Classified and special mention loans, excluding those on non-accrual
status, totalled $26.8 million, $26.3 million, and $22.0 million, 4.8%,
4.6%, and 3.9% of outstanding loans, at March 31, 1995, December 31,
1994 and March 31, 1994, respectively. A significant portion of the
outstanding balances are secured with various forms of collateral. In
this regard, management has determined that there are no material
adverse trends or material potential losses not already considered in
the allowance calculation, nor indications of trends or events that
would have a material effect on the Registrant's operations, capital
or liquidity. The Registrant does not have any material loans
classified as doubtful or loss and the loan portfolio does not contain
any highly leveraged or foreign loans. A substantial portion of the
Registrant's loans are secured by real estate located in central and
northern New York State. Accordingly, the ultimate collectibility of
a substantial portion of the Registrant's portfolio is susceptible to
changes in real estate market conditions in those areas.
The Bank's classification of a loan as a non-accruing loan is based in
part on bank regulatory guidelines. Non-accrual classification does not
mean that the loan principal will not be collected; rather, that timely
collection of interest is doubtful. When, in the opinion of management
the collection of principal appears unlikely, the loan balance is
charged-off in total or in part. Loans are transferred to a
non-accruing basis generally when principal or interest payments become
ninety days delinquent, or when management concludes circumstances
indicate that collection of interest is doubtful. When a loan is
transferred to a non-accrual status, any unpaid accrued interest is
reversed and charged against income. Interest income on non-accruing
loans is recognized on a cash basis, only when cash payments are
received which are not applied to principal. Non-accruing loans are
restored to an accrual status when, in the opinion of management, the
financial condition of the borrower has improved significantly so that
the collectibility of both interest and principal appears assured and
the loan is brought current.
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NONPERFORMING ASSETS AND PAST DUE LOANS
March 31, December 31, March 31,
(dollars in thousands) 1995 1994 1994
- ------------------------------------------------------------------------------------------
Nonaccrual loans:
Commercial and agricultural $1,637 37% $1,415 31% $2,498 52%
Real estate 2,528 56% 2,950 63% 1,974 41%
Consumer and other 330 7% 274 6% 318 7%
- ------------------------------------------------------------------------------------------
Total 4,495 100% 4,639 100% 4,790 100%
- ------------------------------------------------------------------------------------------
Other real estate owned and
in-substance foreclosures 1,189 840 686
- ------------------------------------------------------------------------------------------
Total nonperforming assets 5,684 5,479 5,476
- ------------------------------------------------------------------------------------------
Loans past due 90 days or more and
still accruing:
Commercial and agricultural 66 8% - - 574 31%
Real estate 539 64% 523 60% 477 26%
Consumer and other 234 28% 348 40% 796 43%
- ------------------------------------------------------------------------------------------
Total $839 100% $871 100% $1,847 100%
- ------------------------------------------------------------------------------------------
Nonperforming loans to total loans 0.80% 0.81% 0.86%
Nonperforming assets to total assets 0.55% 0.52% 0.57%
Allowance for loan losses to
nonperforming loans 201% 195% 181%
Allowance as a percentage of
period end loans 1.60% 1.57% 1.55%
- ------------------------------------------------------------------------------------------
The increase in nonperforming assets (NPA) was attributable to
increased OREO related to real estate foreclosures. The Registrant did
not hold any restructured loans (loans which because of the borrower's
financial difficulties, repayment criteria was renegotiated to less
than the original agreement terms) at March 31, 1995, December 31,
1994, and March 31, 1994. Loans 90 days past due and not included in
nonperforming loans have decreased due to increased collection efforts
which keep loans to slow paying borrowers out of this category.
Securities: The total average balance of securities available for sale
and held to maturity for the three month period ending March 31, 1995
increased $52 million, or 16%, from the comparable period a year ago.
This increase occurred for two reasons: the lack of high loan demand
required the liquidity of the Bank to be invested in the security
portfolios, and the ALCO strategy in the second quarter of 1994 whereby
$60 million of lower cost funds were borrowed and invested in
securities yielding a higher rate to improve net interest income.
Average securities held to maturity increased for the first quarter of
1995 compared to the comparable period of 1994 due to the
aforementioned purchase. Average securities available for sale for the
first quarter of 1995 decreased from the comparable period a year ago
as securities matured and new purchases were classified as held to
maturity.
The unrealized loss on securities available for sale at March 31, 1995,
has decreased from December 31, 1994, due to a decline in interest
rates. At March 31, 1995, the amortized cost of securities available
for sale, $110 million, exceeded their fair market value by $4 million
of market depreciation while at December 31, 1994 the amortized cost
of $117 million exceeded their fair market value by $7 million. At
March 31, 1994 the amortized cost of securities available for sale,
-12-
$130 million, exceeded their fair market value by $2 million of market
depreciation. Throughout most of 1994, most financial institutions
experienced similar patterns of declining market value of securities
due to a general increase in interest rates.
Tax-exempt securities averaged $36 million for the three month period
ended March 31, 1995, increased $10 million or 38% from the comparable
period of 1994. Tax-exempt securities comprised 9% and 8% of the
securities portfolio for the three month periods ended March 31, 1995
and 1994, respectively. Obligations of the State of New York and its
political subdivisions constitute 100% of the Bank's tax-exempt
securities portfolio; the portfolio did not include any direct
obligations of the State of New York. The entire tax-exempt securities
portfolio was comprised of non-rated investments in the local
communities within the twenty county market area served by the Bank's
Municipal Banking Department. It remains the Registrant's practice to
invest, subject to availability, in qualified and designated local
municipal issues which receive favorable federal income tax treatment.
The Registrant highly values its business relationships with a variety
of municipalities within its local service area and meeting their
funding needs through investment in their security issues is a
meaningful way to develop such business relationships.
Deposits: Average total deposits for the quarter ended March 31, 1995,
increased $16 million or 2% from the comparable period in 1994. The
increase occurred in the demand and certificate of deposit components
of the portfolio while NOW, MMDA, and savings account balances
decreased as funds in these lower yielding products were moved to
higher yielding certificates as rates have risen. Average municipal and
negotiated term certificates of deposit increased $64 million, or 120%
for the first quarter of 1995 compared to the similar period of 1994.
Municipal deposits tend to flow into the Bank as taxes are collected
and flow out as the municipalities make payments over time. Their
deposits can be utilized to augment short-term borrowings when interest
rates and security pledging requirements render this temporary
substitution beneficial.
Average retail certificates increased $8 million, or 5%, for the first
quarter of 1995 compared to the similar period of 1994 while average
demand deposits increased $6 million, or 6%, for the comparable
periods. Approximately 42% of the portfolio for the three months ending
March 31, 1995 consisted of time deposits, 19% savings deposits, 15%
money market demand deposits, 10% interest-bearing NOW checking
deposits, and 14% non-interest bearing demand deposits. Comparable 1994
portfolio percentages were 34%, 22%, 19%, 11%, and 14%.
Borrowed funds: Short-term borrowings include federal funds sold,
securities sold under agreements to repurchase, and other short-term
borrowings, which consist primarily of FHLB advances with an original
maturity of one year or less. Total borrowed funds, including long-term
debt, have decreased from a high of $149 million at December 31, 1994
to $52 million at March 31, 1995. The decrease occurred as deposits
increased in the first quarter.
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LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
Liquidity management requires the ability to raise cash quickly at a
reasonable cost without principal loss to meet the cash flow
requirements of depositors desiring to withdraw funds or borrowers
requiring funds to meet their credit needs. The Asset-Liability Management
Committee of the Registrant is responsible for liquidity management. This
committee of the Registrant's senior staff has developed liquidity guidelines
which cover all assets and liabilities, as well as off-balance sheet items
that are potential sources or uses of liquidity. The Registrant's funding
needs are evaluated continually, measuring the adequacy of reliable sources
of cash relative to the stability of deposits and borrowing capacity. The
liquidity position is managed by maintaining adequate levels of liquid
assets. Additional liquidity is available through the Bank's access to
borrowed funds. The Bank has unused lines of credit available for
short-term financing of $68 million and $300 million for repurchase
agreements, as well as the capacity for additional FHLB advances of $161
million, at March 31, 1995.
Interest rate risk is determined by the relative sensitivities of
earning asset yields and interest-bearing liability rates to changes
in interest rates. The Registrant utilizes a funding matrix to identify
repricing opportunities, the ability to adjust loan and deposit product
rates as well as cash flow from maturities and repayments, along a time
line for both assets and liabilities. The funding matrix indicates that
the Registrant is asset sensitive and, in management's opinion, is
positioned to benefit over time from a rising interest rate environment;
however, the nature and timing of the benefit will be initially
impacted by the extent to which core deposit rates are increased as
rates rise. Based on the most recent analysis performed as of February
28, 1995, given the scenario of 200 basis point increase or decline in
interest rates occurring over an extended time horizon, the Registrant
estimated that there would be less than a 6% impact on net interest
income relative to a flat rate environment over the next twelve month
period.
CAPITAL RESOURCES AND DIVIDENDS
Stockholders' equity of $100 million represented 9.7% of total assets
at March 31, 1995 compared with $100 million, or 10.4%, a year
previous, and $98 million, or 9.4%, at December 31, 1994. The static
or decreased dollar amounts and percentage relationships since March
31, 1994 are due to additional shares held in the treasury, increased
total assets and the mark to market effect of the securities available
for sale portfolio in an increasing interest rate environment. Similar
to the effects experienced by many other financial institutions, the
decline in the current market value of the Bank's securities available
for sale portfolio, whose unrealized loss is reflected net of taxes in
stockholders' equity, has impacted the equity balances and ratios. The
unrealized loss would only be recognized in income if securities
available for sale were, in fact, actually sold. It is highly unlikely
that the Registrant would require such a sale to meet its liquidity
needs. Both book and tangible book value depicted in the table below
have been affected by the aforementioned decline in the current market
value of the securities available for sale portfolio; however tangible
book value has increased due to the offsetting decrease in intangible
assets through amortization.
-14-
On a per share basis, cash dividends declared have been increased twice
since the second quarter of 1994 as the Registrant declared a 5% stock
dividend in November 1994 followed by a 10% increase in the cash
dividend to $0.12 per share. Cash dividend per share amounts and total
cash dividends paid as a percentage of net income, dividend payout
ratio, are set forth in the following tables. The Board of Directors
considers the Registrant's earnings position and earnings potential
when making dividend decisions.
Capital is an important factor in ensuring the safety of depositors'
accounts. The Registrant remains well capitalized with capital ratios
that are significantly in excess of regulatory guidelines. During 1994,
the Registrant's wholly owned banking subsidiary earned the highest
possible national safety and soundness rating from two national bank-
rating services. Bauer Financial Services and Veribanc, Inc. base their
ratings on capital levels, loan portfolio quality, and security
portfolio strength.
The Tier 1 Risk-Based Capital Ratio and Total Risk-Based Capital Ratio
presented below measure the amount of capital in relation to the degree
of risk perceived in assets and off-balance sheet exposure. This
concept recognizes that certain higher risk assets require more capital
to support them than lower risk assets. Both ratios were well in excess
of the minimum Regulatory guidelines of 4% and 8%, respectively. Both
capital and the degree of risk used to weight assets and off-balance
sheet items are defined by bank holding company regulatory agencies.
As defined, capital may exclude most intangible assets as well as a
portion of the allowance for loan losses in excess of delineated
percentages of loan balances; unrealized gains and losses on securities
classified as available for sale, net of the tax effect, for financial
reporting purposes are excluded from capital for the computation of
capital adequacy ratios. There are limitations for the amount of the
allowance for loan losses that can be considered for capital ratios and
for the amount of deferred tax assets that can be used to meet capital
requirements. For all periods presented the Registrant was permitted
to include all of its deferred tax assets in its capital ratio
computations. Risk factors used to weight assets and off-balance sheet
items range from 0% for cash, amounts due from the Federal Reserve and
securities issued by the U.S. Treasury to 100% for certain types of
loans and securities. Regulations promulgated by bank and bank holding
company regulatory agencies are intended primarily for the protection
of the Bank's depositors and customers rather than the holders of the
Registrant's securities.
The Tier 1 Leverage Ratio depicted below compares capital, as defined
for regulatory purposes, to average assets without regard to risk
weights and certain intangible assets. This ratio measures the
utilization of capital to support the balance sheet and is well in
excess of the minimum Regulatory guideline of 4%.
-15-
First Second Third Fourth First
Quarter Quarter Quarter Quarter Quarter
1994 1994 1994 1994 1995
- ----------------------------------------------------------------------------------------
Tier 1 leverage ratio 9.44% 8.99% 8.85% 9.05% 9.19%
Tier 1 capital ratio 15.82% 15.34% 15.95% 16.09% 16.13%
Total risk-based capital ratio 17.07% 16.59% 17.21% 17.35% 17.39%
Cash dividends as a percentage
of net income 48.81% 48.46% 87.53% 50.77% 50.50%
Per common share:
Book value $12.45 $12.35 $12.30 $12.27 $12.55
Tangible book value $10.96 $10.95 $11.01 $11.04 $11.36
- ----------------------------------------------------------------------------------------
The common shares of NBT BANCORP INC. are traded in the NASDAQ National
Market System under the symbol NBTC. High, low, and closing stock
prices, and cash dividends declared by quarter, restated to give
retroactive effect to stock dividends, are depicted in the table
following. At March 31, 1995 the total market capitalization of NBT's
common stock was approximately $128 million, compared with $138 million
a year ago and $132 million at December 31, 1994. The change in market
capitalization is due to a decrease in the number of shares outstanding
and changes in the market price.
Cash
Dividends
Quarter Ending High Low Close Declared
- ----------------------------------------------------------------------------------
1994
- ----------------------------------------------------------------------------------
Mar 31 $17.62 $16.67 $16.67 $0.109
Jun 30 17.02 14.52 $15.71 0.110
Sept 30 15.71 14.29 $15.24 0.110
Dec 31 17.00 15.00 $16.50 0.120
- ----------------------------------------------------------------------------------
1995
- ----------------------------------------------------------------------------------
Mar 31 $17.00 $16.00 $16.00 $0.120
- ----------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin: The most significant
impact on the Registrant's net income between periods is derived from
the interaction of changes in the volume of and rates earned on
interest earning assets and paid on interest bearing liabilities. The
volume of earning securities and loans, compared to the volume of
interest bearing liabilities represented by deposits and borrowings,
combined with interest rate spread, produces the changes in the net
interest income between periods. The table Comparative Analysis of
Federal Taxable Equivalent Net Interest Income presents the relative
contribution of changes in average interest rates and average volume
of interest earning assets and interest bearing liabilities on FTE net
interest income between periods. Changes in interest income and expense
arising from the combination of rate and volume variances, which cannot
be segregated, are allocated proportionally to rate and volume based
on their relative absolute magnitudes.
FTE interest income increased for the first quarter of 1995 compared
to the same period of 1994 due to a combination of favorable rate and
volume variances. The volume of average earning assets increased from
$892 million for the first three months of 1994 to $960 million for the
-16-
same period of 1995. Reducing the increased yield for the first quarter
of 1995 was a non-recurring write-off of $0.5 million of accrued
interest receivable on loans previously charged-off or on nonaccrual
status. The decline in FTE net interest income can be attributed to
increased rates for interest bearing liabilities as interest rates in
general increased, but the rate of increase was greater for interest
bearing liabilities than for interest earning assets. While lower
costing deposit products experienced a decrease in average volume,
certificates of deposit volume increased as customers moved funds into
this more costly deposit product. Additionally, the average volume of
interest bearing liabilities increased to $799 million for the first
three months of 1995, compared to $740 million during the same period
a year ago.
Net interest margin was 4.99% for the first quarter of 1994, declined
throughout 1994 to 4.64% for the fourth quarter of 1994, resulting in
a net interest margin of 4.81% for 1994 on an annual basis and
continued to decline in the first quarter of 1995 to 4.30% for the
quarter. Net interest margin for the first quarter of 1995 was 4.50%
excluding the effect of the previously mentioned accrued interest
receivable write-off. The effects of soft loan demand and competitive
pricing are reflected in the compressed net interest margin.
During the second quarter of 1994 the Registrant's asset-liability
management committee undertook several steps to improve net interest
income which, because of the rate environment and portfolio maturities
of higher yielding funds purchased previously, would not necessarily
improve net interest margin. Remaining well within its established
liquidity guidelines, the Registrant utilized $60 million of its access
to lower cost funds to purchase securities to be held to maturity
yielding a higher rate than its incremental borrowing rate and
improving net interest income. This leveraging of the balance sheet has
had a continuing positive impact on net interest income throughout 1994
and 1995. Average earning assets and interest bearing liabilities for
the period increased due to this leveraged transaction.
-17-
COMPARATIVE ANALYSES OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME
THREE MONTHS ENDED MARCH 31,
ANNUALIZED
YIELD/RATE AMOUNTS VARIANCE
--------------------------
1995 1994 (dollars in thousands) 1995 1994 TOTAL VOLUME RATE
---- ---- ---- ---- ----- ------ ----
4.31% 9.43% INTEREST BEARING DEPOSITS $ 5 $ 1 $ 4 $ 5 $ (1)
5.71% 3.07% FEDERAL FUNDS SOLD 5 9 (4) (9) 5
5.92% 3.21% OTHER SHORT TERM INVESTMENTS 22 45 (23) (46) 23
5.97% 5.64% SECURITIES AVAILABLE FOR SALE 1,612 2,371 (759) (891) 132
8.01% 8.85% LOANS AVAILABLE FOR SALE 157 205 (48) (30) (18)
SECURITIES HELD TO MATURITY
6.60% 5.92% TAXABLE 3,543 1,733 1,810 1,712 98
6.83% 5.92% TAX-EXEMPT 600 357 243 153 90
8.73% 8.64% LOANS 12,220 11,862 358 235 123
----------------------------------------------------------------------------------
7.67% 7.54% TOTAL INTEREST INCOME 18,164 16,583 1,581 1,129 452
- ----- -----
2.72% 2.61% MONEY MARKET DEPOSIT ACCOUNTS 803 999 (196) (237) 41
1.62% 1.63% NOW ACCOUNTS 330 353 (23) (20) (3)
2.96% 2.70% SAVINGS ACCOUNTS 1,167 1,188 (21) (129) 108
5.12% 3.87% CERTIFICATES OF DEPOSIT 4,311 2,560 1,751 745 1,006
5.74% 3.60% OTHER BORROWED FUNDS 1,219 281 938 697 241
7.01% 6.62% LONG TERM DEBT 151 236 (85) (98) 13
----------------------------------------------------------------------------------
4.05% 3.08% TOTAL INTEREST EXPENSE 7,981 5,617 2,364 958 1,406
- ----- ----- ----------------------------------------------------------------------------------
NET INTEREST INCOME $10,183 $10,966 $ (783) $ 171 $ (954)
==================================================================================
3.62% 4.62% INTEREST RATE SPREAD
===== ===== ====================
4.30% 4.99% NET INTEREST MARGIN
===== ===== ===================
FTE ADJUSTMENT $ 222 $ 138
============== ======= =======
-18-
Noninterest Income: The table below presents quarterly and period to
date amounts of noninterest income. First quarter 1995 noninterest
income fell from the comparable period of 1994 predominately due to the
1994 sale of securities available for sale having an amortized cost of
$70 million at a gain of $0.6 million. There were no similar
transactions during the comparable period of 1995. Trust income
decreased in the first quarter of 1995 as compared to the comparable
period of 1994 due to lower fees on estates and personal agency
accounts; the decrease in third and fourth quarter 1994 trust income
is related to these same components of trust income. Reflected in other
income for the fourth quarter of 1994 is a $0.5 million charge to
record real estate loans available for sale at their then current
market value.
NONINTEREST INCOME
First Second Third Fourth Twelve First
Quarter Quarter Quarter Quarter Months Quarter
(dollars in thousands) 1994 1994 1994 1994 1994 1995
- --------------------------------------------------------------------------------------
Trust income $ 799 $ 800 $ 661 $251 $2,511 $ 662
Service charges on
deposit accounts 654 778 797 803 3,032 731
Securities gains 555 - - - 555 -
Other income 428 306 350 (143) 941 374
- --------------------------------------------------------------------------------------
Total noninterest
income $2,436 $1,884 $1,808 $911 $7,039 $1,767
- --------------------------------------------------------------------------------------
-19-
NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS
First Second Third Fourth Twelve First
Quarter Quarter Quarter Quarter Months Quarter
(dollars in thousands) 1994 1994 1994 1994 1994 1995
- ----------------------------------------------------------------------------------------
Salaries and Employee
benefits $4,084 $4,170 $ 4,112 $3,791 $16,157 $4,024
Net occupancy expense 630 506 571 588 2,295 603
Equipment expense 542 560 472 459 2,033 411
FDIC insurance 457 457 457 458 1,829 451
Legal, Audit, and
outside services 963 965 1,196 941 4,065 941
Loan Collection and
other loan related
expenses 408 436 498 299 1,641 345
Amortization of
goodwill and other
intangibles 1,042 893 881 406 3,222 315
Other operating
expense 1,369 1,169 1,413 1,217 5,168 1,323
Restructuring expense - - 1,367 897 2,264 -
- ----------------------------------------------------------------------------------------
Total noninterest
expense $9,495 $9,156 $10,967 $9,056 $38,674 $8,413
- ----------------------------------------------------------------------------------------
Efficiency ratio 73.91% 69.23% 70.82% 66.73% 70.22% 70.40%
Overhead ratio 69.43% 64.13% 77.97% 64.07% 63.51% 65.27%
Expense ratio 3.22% 2.89% 2.98% 2.79% 2.96% 2.64%
Average full-time
equivalent employees 613 589 562 540 576 535
Average assets per
average full-time
equivalent employee
(millions) $1.6 $1.7 $1.8 $1.9 $1.8 $1.9
- ----------------------------------------------------------------------------------------
Noninterest expense: The table preceding presents noninterest expense
for the periods indicated. Noninterest expense for the first quarter
of 1995 has decreased significantly from the comparable period a year
previous, the decrease was spread through all components of noninterest
expense. Decreased intangible amortization was the primary reason for
the significant change; during 1994, some components of intangibles
incurred as a result of the acquisition of four commercial banks in
1989 reached the point at which they were fully amortized. There are
no further dramatic changes in such amortization anticipated in the
future, the amortization of the remaining components lapses off
gradually over time.
Full time equivalent employees have fallen throughout 1994 and 1995;
the March, 1995 closing level of full time equivalent employees was
532, the lowest level since 1989. During 1994, the Registrant
implemented a restructuring plan that included a reduction in the work
force and the closing of three offices. Charges of $1.2 million related
to the termination benefits of 35 employees and exit costs related to
the closure of three offices and professional fees related to the
terminations totalling $1.1 million, including $0.7 million for the
impairment of long-lived assets, were recognized. Of the activities
considered in the exit plan all the employees have been terminated and
offices have been closed or converted to a different level of service.
-20-
One office remains to be disposed of, the Registrant is seeking a
purchaser as expediently as possible.
Through March 31, 1995, termination benefits of $1.1 million and exit
costs totalling $0.3 million have been paid and charged to the
liability under the restructuring plan. Long-lived assets were disposed
of at a loss of $0.2 million which was charged to the valuation
allowance related to the restructuring. No adjustments have been made
to either the restructuring liability or the valuation allowance
related to the impairment of long lived assets due to the
restructuring.
Provision for Income Taxes: The effective tax rate for the first
quarter of 1995 was 36% compared to 39% for the first quarter of 1994.
Increased tax exempt income was the primary reason for both the
decrease in the effective tax rate and the actual provision amount.
-21-
- -------------------------------------------------------------------------------------------------
SELECTED FIVE YEAR DATA 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
Net income $ 7,540 $ 7,179 $ 8,043 $ 8,505 $ 6,508
Return on average assets 0.91% 0.85% 0.94% 0.93% 0.64%
Return on average equity 9.42% 8.45% 8.89% 8.79% 6.53%
Net interest margin 5.71% 5.64% 5.52% 5.26% 4.81%
Efficiency Ratio 68.84% 68.52% 69.48% 71.05% 70.22%
Expense Ratio 3.24% 3.23% 3.19% 3.21% 2.96%
Overhead Ratio 63.53% 63.18% 63.18% 65.77% 65.96%
Tier 1 leverage ratio 6.70% 7.92% 9.01% 9.24% 9.05%
Tier 1 capital ratio 12.66% 14.12% 15.30% 15.40% 16.09%
Total risk-based capital ratio 12.66% 14.12% 16.61% 16.66% 17.35%
Cash dividends as a percentage
of net income 34.77% 38.58% 36.94% 38.82% 55.22%
Per Common Share:
Net income $ 0.97 $ 0.92 $ 1.02 $ 1.05 $ 0.80
Cash dividends $ 0.338 $ 0.355 $ 0.376 $ 0.413 0.449
Book value $10.62 $11.18 $11.82 $12.58 $12.27
Tangible book value $ 7.26 $ 8.43 $ 9.64 $10.95 $11.04
Stock dividends distributed 5.00% 5.00% 5.00% 5.00% 5.00%
Stock splits distributed 3 for 2 none none none none
Market price:
High $15.22 $12.95 $14.51 $18.50 $17.62
Low $11.88 $ 9.93 $ 9.98 $12.62 $14.29
End of year $12.34 $ 9.93 $13.15 $17.38 $16.50
Price/earnings multiple 20.63x 16.55x 12.89x 10.79x 12.72x
Price/book value multiple 1.16x 0.89x 1.11x 1.38x 1.34x
- -------------------------------------------------------------------------------------------------
-22-
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
There have been no material legal proceedings initiated or settled
during the quarter ended March 31, 1995. The Registrant and its
principal subsidiary, The National Bank and Trust Company (collectively
NBT), initiated a suit in the Supreme Court of the State of New York,
Chenango County, on October 28, 1988, against Fleet/Norstar Financial
Group, Inc., Fleet/Norstar New York, Inc., and Norstar Bank of Upstate
N.Y. (collectively NORSTAR) for tortious interference with NBT's
contract rights and prospective business relationship with Central
National Bank, Canajoharie, New York. NBT is seeking damages from
NORSTAR for lost profits and special and punitive damages. On June 20,
1989, the Court dismissed all three counts of the complaint for failure
to state a cause for action. On March 29, 1990 the Appellate Division
of the Supreme Court of New York reversed the trial court's dismissal
of NBT's third cause of action for tortious interference with
prospective business relations and affirmed the dismissal of NBT's
first two causes of action. The New York Court of Appeals denied NBT's
petition for review of the dismissal of the first two causes of action
on the ground that the order appealed from did not finally determine
the action. NBT's motion for reargument of its petition for review was
also denied and NBT's third cause of action was remanded to the trial
court. On March 9, 1994, NBT filed with the trial court a Note of Issue
indicating the amount demanded as $74,212,288. On July 27, 1994, the
trial court granted Norstar's motion for summary judgement as to the
third cause of action. NBT has appealed this order to the Appellate
Division and oral argument was held in that appeal on March 29, 1995.
Item 2 -- Changes in Securities
Following are listed changes in the Registrant's Common Stock
outstanding during the quarter ended March 31, 1995 as well as certain
actions which have been taken which may affect the number of shares of
Common Stock (shares) outstanding in the future are presented below.
There was no Preferred Stock outstanding during the quarter ended March
31, 1995.
The Registrant has Stock Option Plans. Outstanding at March 31, 1995
are non-qualified stock options covering 270,382 shares at exercise
prices ranging between $9.46 and $16.90 with expiration dates between
January 12, 1996, and February 22, 2005. There are 605,596 shares of
authorized common stock designated for possible issuance under the
Plans, including the aforementioned shares. The number of shares
designated for the Plans, the number of shares under existing options
and the option price per share may be adjusted upon certain changes in
capitalization, such as stock dividends, stock splits and other
occurrences as enumerated in the Plans. (Forms S-8, Registration
Statement Nos. 33-18976 and 33-77410, filed with the Commission on
December 9, 1987 and April 6, 1994, respectively.)
The Registrant has agreed to grant its former Chairman stock options
in connection with the discharge of severance obligations of the
Registrant and the Bank under the employment agreement with its former
Chairman. The agreement calls for the issuance of options covering
-23-
123,798 and 25,935 shares with exercise prices $16.188 and $16.90,
respectively and an expiration date of January 31, 1997. The number
of shares under option and the option price per share may be adjusted
upon certain changes in capitalization, such as stock dividends, stock
splits and other occurrences. The Registrant wile file a registration
statement relating to these option shares which would be issued, upon
payment of the exercise price, from authorized, but unissued common
stock, or shares held in the treasury. These stock options do not serve
to reduce the number available under the previously mentioned Stock
Option Plans.
The Registrant has a Dividend Reinvestment Plan. There are 134,003
additional shares of authorized but unissued common stock designated
for possible issuance under the Plan. (Form S-3, Registration Statement
No. 33-12247, filed with the Commission on February 26, 1987).
The Registrant's Board of Directors has authorized the purchase on the
open market by the Registrant of additional shares of treasury stock.
These treasury shares are to be used for a variety of corporate
purposes, primarily to meet the needs of the Registrant's Employee
Stock Ownership Plan, Dividend Reinvestment and Stock Purchase Plan,
and Stock Option Plans. Purchases and sales during 1995 totalled
188,652 and 175,839, respectively, with 48,943 of treasury shares at
March 31, 1995. Purchases were made at the prevailing market price in
effect at the dates of the transactions. Subsequent sales to both the
Registrant's Employee Stock Ownership Plan and Dividend Reinvestment
and Stock Purchase Plan, if any, were made at the five day average of
the highest and lowest quoted selling price of the Registrant's common
stock on the National Market System of NASDAQ. Sales under the
Registrant's Stock Option Plans were made at the option price. The
price per common share ranged between $13.43 and $16.50; any difference
between cost and sales price was recorded in capital surplus.
As approved at the April 22, 1995 annual meeting, the Registrant
currently is authorized to issue 2.5 million shares of preferred stock,
no par value, $1.00 stated value. The Board of Directors is authorized
to fix the particular designations, preferences, rights,
qualifications, and restrictions for each series of preferred stock
issued. The Registrant has a Stockholder Rights Plan (Plan) designed
to ensure that any potential acquiror of the Registrant negotiate with
the Board of Directors and that all Registrant stockholders are treated
equitably in the event of a takeover attempt. When the Plan was
adopted, the Registrant paid a dividend of one Preferred Share Purchase
Right (Right) for each outstanding share of common stock of the
Registrant. Similar Rights are attached to each share of the
Registrant's common stock issued after November 15, 1994, the date of
adoption subject to adjustment. Under the Plan, the Rights will not
be exercisable until a person or group acquires beneficial ownership
of 20 percent or more of the Registrant's outstanding common stock,
begins a tender or exchange offer for 25 percent or more of the
Registrant's outstanding common stock, or an adverse person, as
declared by the Board of Directors, acquires 10 percent or more of the
Registrant's outstanding common stock. Additionally, until the
occurrence of such an event, the Rights are not severable from the
Registrant's common stock and therefore, the Rights will be transferred
upon the transfer of shares of the Registrant's common stock. Upon the
occurrence of such events, each Right entitles the holder to purchase
-24-
one one-hundredth of a share of Series R Preferred Stock, no par value,
and $1.00 stated value per share of the Company at a price of $100.
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 $100. The Rights, which expire November 14, 2004, are
redeemable in whole, but not in part, at the Company's option prior to
the time they are exercisable, for a price of $0.01 per Right.
Item 3 -- Defaults Upon Senior Securities
This item is omitted because there were no defaults upon the
Registrant' senior securities during the quarter ended March 31, 1995.
Item 4 -- Submission of Matters to a Vote of Security Holders
The Registrant's Annual Meeting of Stockholders was held on April 22,
1995. Four directors were elected and three proposals were voted upon
by the stockholders, as described below. A copy of the Notice of
Annual Stockholders' Meeting and Proxy Statement is incorporated by
Reference to this Form 10-Q as Exhibit No. 99.1. A complete description
of each proposal is included in the Proxy Statement.
a. Daryl R. Forsythe and Everett A. Gilmour were elected as
directors at the Annual Meeting with terms of office to
expire at the 1998 Annual Meeting of Stockholders. Andrew
S. Kowalczyk, Jr. and John C. Mitchell were elected as
directors at the Annual Meeting with terms of office to
expire at the 1997 Annual Meeting of Stockholders. There
are two other directors whose terms of office continued
after the Annual Meeting. The terms of Peter B. Gregory and
Paul O. Stillman will expire at the 1996 Annual Meeting.
The directors were elected with the following results:
FOR WITHHELD
Daryl R. Forsythe 5,971,716 230,441
Everett A. Gilmour 5,928,232 273,923
Andrew S. Kowalczyk, Jr. 5,958,433 243,723
John C. Mitchell 5,971,271 230,886
b. A resolution to increase the number of authorized shares of
common stock to 12,500,000 and authorized shares of
preferred stock to 2,500,000.
The proposal was approved, with 5,375,400 votes FOR,
623,683 votes AGAINST, and 62,607 votes ABSTAINING, and
294,954 broker non-votes.
-25-
c. Proposal to Ratify the Board of Directors Action in
Selection of KPMG Peat Marwick as Auditor for the
Registrant.
The proposal was approved, with 6,155,329 votes FOR,
156,087 votes AGAINST, and 45,228 votes ABSTAINING.
d. A shareholder proposal requiring the Board of Directors to
take the necessary steps to institute a salary and
compensation ceiling for the CEO of the Registrant.
The proposal was rejected, with 1,442,871 votes FOR,
4,239,215 votes AGAINST, and 287,409 votes ABSTAINING and
387,148 broker non-votes.
Item 5 -- Other Information
At its Annual Meeting held on April 22, 1995, the Registrant announced
that its wholly-owned subsidiary would change its name to NBT BANK,
N.A. from The National Bank and Trust Company, formerly The National
Bank and Trust Company of Norwich.
Item 6 -- Exhibits and Reports on Form 8-K
An exhibits index follows the signature page of this Form 10-Q.
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 1995.
-26-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q to be signed
on its behalf by the undersigned thereunto duly authorized, this 12th
day of May, 1995.
NBT BANCORP INC.
/s/ DARYL R. FORSYTHE
By: ----------------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
/s/ RICHARD I. LINHART
By: ----------------------------------------
Richard I. Linhart
Vice President, Chief Finanical
Officer, and Treasurer
/s/ JOE C. MINOR
By: ----------------------------------------
Joe C. Minor
Assistant Treasurer
Chief Accounting Officer
-27-
EXHIBIT INDEX
The following documents are attached as Exhibits to this Form 10-K or, if
annotated by the symbol *, are incorporated by reference as Exhibits as
indicated by the page Number or exhibit cross-reference to the prior
filings of the Registrant with the Commission.
Form 10-Q Sequential
Exhibit Page
Number Number
3.1 Certificate of Incorporation of NBT BANCORP INC. as Herein
amended through April 22, 1995
10.1 NBT BANCORP INC. 1995 Executive Incentive Compensation Herein
Plan
10.2 NBT BANCORP INC. 1995 Senior Executive Incentive Herein
Compensation Plan
10.3 Lease Extension of Vestal Office Herein
27. Financial Data Schedule Herein
99.1 NBT BANCORP INC. Notice of Annual Stockholders Meeting *
and Proxy Statement dated March 15, 1995.
Filed on March 16, 1995 pursuant to Section 14 of the
Exchange Act, File No. 0-14703.
-28-
EXHIBIT 3.1
Certificate of Incorporation of NBT BANCORP INC.
CERTIFICATE OF INCORPORATION
OF
NBT BANCORP INC.
AS AMENDED THROUGH
APRIL 22, 1995
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 229 South State Street, City of Dover, County of
Kent; 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.
(A) FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have the authority to issue is Fifteen
Million (15,000,000) shares, consisting of Twelve Million Five Hundred
Thousand (12,500,000) shares of Common Stock having no par value, stated
value $1.00 per share and Two Million Five Hundred Thousand (2,500,000)
shares of Preferred Stock having no par value, stated value $1.00 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
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;
(A) AS LAST AMENDED APRIL 22, 1995
1
(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;
(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.
2
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.
(B) 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 (c) 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 of 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.
(B) AS AMENDED FEBRUARY 21, 1986
3
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.
(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.
4
(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.
(C) (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 Stockholders
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 Stockholders in 1987; each initial
Director in Class 2 shall hold office until the Annual Meeting of
Stockholders in 1988; and each initial Director in Class 3 shall hold
office until the Annual Meeting of Stockholders 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.
(D) 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 director except for liability (i) for any
breach of the director's duty of loyalty to the Corporation of its
stockholders, (ii) for acts of 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.
(C) PARAGRAPH (e) ADDED BY AMENDMENT FEBRUARY 21, 1986.
(D) ARTICLE TWELFTH ADDED BY AMENDMENT FEBRUARY 28, 1987.
5
EXHIBIT 10.1
NBT BANCORP INC. 1995 Executive Incentive Compensation Plan
February 21, 1995
NBT BANCORP INC.
Norwich, New York
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
NBT BANCORP INC.
Norwich, New York
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
Table of Contents
Page
Introduction 1-2
Incentive Plan
Section I - Definitions 3
Section II - Participation 4
Section III - Activating the Plan 4
Section IV - Calculation of Awards 4
Section V - President's Special Recommendations 4
Section VI - Distribution of Awards 5
Section VII - Plan Administration 6
Section VIII - Amendment, Modification, Suspension or Termination 6
Section IX - Effective Date 6
Section X - Employer Relations with Participants 6
Section XI - Governing Law 6
Incentive Plan Participants Appendix A
Distribution of Awards Appendix B
NBT BANCORP INC.
Norwich, New York
Introduction
It is important to examine the benefits which accrue to the organization
through the operation of the Executive Incentive Compensation Plan. The
Plan impacts directly on senior and middle management - those critical to
the organization's success - 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 making a portion of the
incentive award dependent on the attainment of individual
goals, a participant is encouraged 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.
-1-
Highlights of the 1995 Executive Incentive Compensation Plan included in the
following pages are as follows:
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. Management employees are eligible for participation.
4. The financial criteria necessary for Plan operation consist of
Return on Average Assets (40% Weight) and Return of Equity
(40% Weight) and Profit Improvement (20% Weight).
5. Incentive distributions will be made during the first quarter of
the year following the Plan Year.
6. Incentive awards will be based on attainment of corporate goals.
Total Incentive Awards contain both Corporate and Individual
components; the corporate component awarded by virtue of
corporate performance related to corporate goals and the
individual component awarded by virtue of individual
performance related to individual goals. Component percentages
are shown in Appendix B.
7. Incentive distributions will be based on matrix in Appendix B.
-2-
NBT BANCORP INC.
Norwich, New York
The Board of Director of NBT Bancorp Inc. has established this 1995 Executive
Incentive Compensation Plan. The purpose of the Plan is to meet and exceed
financial goals and to promote a superior level of performance relative to
the bank's competition in its market area. Through payment of incentive
compensation beyond base salaries, the Plan provides reward for meeting and
exceeding the bank's financial goals.
SECTION I - DEFINITIONS
Various terms used in the Plan are defined as follows:
Base Salary: the base salary at the end of the Plan year, excluding
any bonuses, contributions to employee benefit programs, or other
compensation not designated as salary.
Board of Directors: The Board of Directors of NBT Bancorp Inc.
President & CEO: President and CEO of NBT Bancorp Inc.
Corporate Goals: Those pre-set objectives and goals which are required to
activate distribution of awards under the Plan.
Individual Goals: Five key objectives mutually agreed upon between
participants and superior, and approved by the CEO.
Compensation Committee: The Compensation Committee of the Board of
Directors of the Bank.
Plan Participant: An eligible employee of the bank designated by the
President & CEO and approved by the Compensation Committee for
participation for the Plan Year.
Plan Year: The 1995 calendar year.
-3-
SECTION II - ELIGIBILITY TO PARTICIPATE
To be eligible for an award under the Plan, a Plan participant must be an
officer in the full-time service of the bank at the start and close of the
calendar year and at the time of the award unless the CEO by special
exception recommends to the Compensation Committee a special arrangement for
a newly hired executive who may be designated by the CEO and approved by the
Compensation Committee as eligible for an award as determined in the
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 employ of the bank prior to the
payment of the award, he/she is not eligible to receive an award. 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, the President should recommend an award to such a participant
based on the proportion of the Plan year that he/she was in active service
with the bank.
SECTION III - ACTIVATING THE PLAN
The operation of the Plan is predicated on attaining and exceeding management
performance goals. The goals will consist of return on average assets,
return on shareholder's equity and profit improvement. The Corporation must
achieve a minimum net income set forth in Appendix B to trigger an award
pursuant to the terms of this plan.
SECTION IV - CALCULATION OF AWARDS
The Compensation Committee designates the incentive formula as shown in
Appendix B. The actual rate of distribution is based upon bank performance.
The Compensation Committee will make final decisions with respect to all
incentive awards and will have final approval over all incentive awards. The
individual participant data regarding maximum award and formulas used in
calculation has been customiszed and appears as Appendex A.
SECTION V - PRESIDENT'S SPECIAL RECOMMENDATIONS
The President & CEO will recommend to the Compensation Committee the amounts
to be awarded to individual participants in the incentive Plan. The
President & CEO may recommend a change beyond the formula to a bonus award
(increase or decrease) to an individual participant by a specified percentage
based on assessment of special individual performance beyond the individual
goals. The Compensation Committee may amend the President & CEO's bonus
award. The amount of the adjustment is from 0%-20% of the actual award. No
award will be granted to an officer whose performance is unacceptable.
-4-
SECTION VI - DISTRIBUTION OF AWARDS
Unless a participant elects the deferred option outlined in the following
paragraph, distribution of awards will be made during the first quarter of
the year following the Plan year. Distribution of the bonus award must be
approved by the Compensation Committee.
A participant may elect by written notice to the Committee at any time during
the month of December of the Plan Year preceding the year to which the award
relates to have all or a portion of his award deferred (Deferred Award). Any
such election shall be irrevocable except unforeseeable financial emergency.
Any portion of participant's award that is deferred shall bear interest
commencing on the Award Date based on the lowest balance in the participant's
account during the month, as if invested at an annual rate equal to the
highest annual rate offered at NBT on any customer deposit account in effect
on the last day of the preceding calendar year. Interest shall be computed
monthly, and credited to the participant's account as of the last day of each
calendar month.
The Deferred Award shall be paid in five (5) annual installments upon the
participant's ceasing to be actively employed by the Company for any reason.
Payment shall begin on the 31st day of January following the year in which
the participant ceases to be actively employed with the Company. However, a
participant with the consent of the Committee, prior to termination of
employment, may elect in writing to have the aggregate amount in his or her
Deferred Award Account paid to him or her in a lump sum on a designated date.
Nothing contained in this Plan and no action taken pursuant to the provisions
of this Plan shall create or be constructed to create a trust of any kind, or
a fiduciary relationship between NBT and the participant, his or her
designated beneficiary or any other person, nor shall the participant or any
designated beneficiary have any preferred claim on, any title to, or any
beneficial interest in, the assets of NBT or the payments deferred hereunder
prior to the time such payments are actually paid to the participant pursuant
to the terms herein. To the extent that the participant, his or her
designated beneficiary or any person acquires a right to receive payments
from NBT under this Plan, such right shall be no greater than the right of
any unsecured general creditor of NBT.
The intent of this Section of the Plan is to create a voluntary, non-
qualified, unfunded, deferred executive incentive compensation Plan which
will defer the deduction of such incentive compensation for tax purposes by
NBT and which will correspondingly defer the recognition of such compensation
by the participant until such compensation is actually paid. It is therefore
intended, and this Plan shall be construed and where necessary modified, so
that the participants shall not be deemed to have constructively received
such deferred compensation.
In the event of death, any approved award earned under the provisions of this
plan will become payable to the beneficiary designated under this Plan; or if
no such designation, to the designated beneficiary of the participant as
recorded under the bank's group life insurance program; or in the absence of
a valid designation, to the participant's estate.
-5-
SECTION VII - PLAN ADMINISTRATION
The Compensation Committee shall, with respect to the Plan have full power
and authority to construe, interpret and manage, control and administer this
Plan, and to pass and decide upon cases in conformity with the objectives of
the Plan under such rules as the Board of Directors of the bank may establish.
Any decision made or action taken by the Bank, 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 of the
bank 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
The bank 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 will be reviewed and, if necessary, revised to take into
account the financial status of any merged institution.
SECTION IX - EFFECTIVE DATE OF THE PLAN
The effective date of the Plan shall be January 1, 1995.
SECTION X - 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 XI - 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.
-6-
EXHIBIT 10.2
NBT BANCORP INC. 1995 Senior Executive Incentive Compensation Plan
1995 SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN (SEICP)
BASIS FOR THIS PLAN
In keeping with the philosophy of incentive pay to reward senior
executives for performance, the Board of NBT Bancorp Inc. hereby adopts the
following Senior Executive Incentive Plan.
PARTICIPANTS
The participants included in the Plan will be determined annually,
prior to the start of each fiscal year, by the Compensation Committee of the
Board of Directors (hereinafter referred to as the "Committee") upon
recommendation by the Chief Executive Officer. For 1995 the Committee has
determined the participants to be Messrs. Forsythe, Linhart, and Weismann.
SHAREHOLDER RETURN THRESHOLD
Before any awards are made under the terms of this Plan, a minimum net
income and return to shareholders shall be achieved. This threshold shall be
determined annually by the Committee.
The minimum threshold for award under this Plan for 1995 are either:
Net Income for 1995 $8,400,000
Return on Average Assets .81%
EXECUTIVE STOCK OWNERSHIP
The following resolution of the Board of Directors is incorporated
herein and made a part of this plan.
RESOLVED, that the Board of Directors, being cognizant that major U.S.
corporations have developed guidelines that require or strongly urge top
management to invest in company stock, hereby declares that it believes that
the interests of Bancorp will be enhanced if Bancorp adopts targets whereby
Bancorp's executive management will invest in the stock of Bancorp.
RESOLVED, that the Board of Directors in furtherance of its
desire expressed above hereby adopts the following with respect to Bancorp's
executive management:
(a) The Chief Executive Officer, Mr. Forsythe, and the two Executive
Vice Presidents of NBT, Messrs. Linhart and Weismann, (hereinafter, the
aforementioned individuals will be referred to collectively as the "Three
Executives") will acquire through the Dividend Reinvestment Plan,
participation in the Employee Stock Purchase Plan, and/or, by direct purchase
during a window period beginning on the third business day and ending on the
twelfth business day following release to the public of Bancorp's quarterly
earnings, and/or through the exercise of stock options, and will retain such
stock so that within a five-year period beginning on January 1, 1995, they
will own such number of shares of Bancorp stock as will equal two times then
current base salary with respect to the Chief Executive Officer and will
equal then current base salary with respect to each of the Executive Vice
Presidents.in accordance with (b) below.
(b) To the extent that any of the Three Executives purchases Bancorp
stock pursuant to the stock purchase provisions of this Plan, such
executive(s) will retain the shares so purchased for a period of five years
from the date of purchase, except as otherwise provided in this Plan.
RESOLVED, that the Board of Directors hereby authorizes and directs
the proper officers of Bancorp to utilize Bancorp funds to pay senior
executive officers (as defined in the SEICP) of Bancorp that amount of
federal and state taxes due on that portion of the bonus paid under the SEICP
which was utilized by such officer(s) to purchase shares of Bancorp stock,
provided that such officer utilized at least 50% of his bonus awarded in a
particular year for the purchase of Bancorp stock and provided further that
such officer agreed to own and retain such shares of Bancorp stock for a
period of five years from the date of acquisition.
RESOLVED, that the President and the other appropriate officers are
hereby authorized, on behalf of Bancorp, to take all further actions, incur
such expenses, and do all things necessary to effectuate the SEICP as amended.
AWARD FOR 1995
1995 Approx. Resulting Bonus
Net Income ROA ROE Range ROA ROE
Targets (% of Base Salary) without intangibles
_______________________________________________________________________
$8,400 .81% 8.35% 0 - 10% .90% 10.17%
8,600 .82% 8.54% 5 - 15% .92% 10.37%
8,800 .84% 8.73% 10 - 30% .94% 10.58%
9,000 .86% 8.92% 20 - 40% .96% 10.79%
9,300 .89% 9.21% 30 - 50% .99% 11.10%
9,800 .94% 9.68% 40 - 60% 1.03% 11.61%
10,500 1.01% 10.33% 50 - 70% 1.10% 12.32%
Net income achieved shall be the determining factor for the award
range. With respect to the Committee determining the bonus award within the
range, the Committee shall consider such factors as the ROA and ROE actually
achieved and shall also consider the achievement of the goals set forth below:
Other Considerations
--------------------------------------
Actual 1995 1995
1994 Target Actual
------ ------ ------
Net noninterest expense
to total assets 2.93% <2.70%(1) ______
Nonperforming assets
to total assets .51% <1.00%(2) ______
Stock price earnings
multiple 15-17x 14-15x ______
OCC Rating (3) 2 2 ______
____________________________________________________________________
(1) Federal Reserve Bank Peer Group ratio at March 31 was 2.41%
(2) Federal Reserve Bank Peer Group ratio at March 31 was 1.29%
(3) Should NBT fail to maintain its numerical rating by the
Office of the Comptroller of the Currency at or above its current level the
Committee may adjust or eliminate any bonus under this plan depending upon
its evaluation of the reason(s) for the lowered rating
FINAL DETERMINATION
The Committee shall, after determination of the award percentage
earned, determine the overall performance and contribution of the individual
participant to the results achieved and may make such discretionary
adjustments either up or down as the Committee deems appropriate to reward
the individual participant.
COMPUTATION
Upon the Committee's determination of the individual award earned, the
bonus shall be computed by multiplying the bonus percentage awarded by the
participant's base compensation for the year as included in his or her's W-2
earnings statement for such year.
The participants included in the SEICP Plan shall not be eligible for
inclusion in any other bonus plan of the Company for that year.
----------------- --------------------------
(Participant) (Compensation Committee)
EXHIBIT 10.3
Lease Extension of Vestal Office
LAW OFFICES
LEVENE, GOULDIN & THOMPSON
P.O. Box F-1706
BINGHAMTON, N.Y. 13902-0106
JANUARY 25, 1995
National Bank & Trust Company
52 South Broad Street
Norwich, New York 13815
Attn.: Mr. Ronald Goodwin
Re: LG&T Realty
Dear Ron:
As you know, on or about February 1, 1994, Levene, Gouldin &
Thompson, as landlord ("Landlord"), entered into a written lease ("Lease")
with National Bank & Trust Company, as tenant ("Tenant"), wherein the
Landlord leased to the Tenant and the Tenant leased from the Landlord
approximately 1,250 square feet of office space ("Leased Premises") situate
on the lower floor of the building known as 450 Plaza Drive in the Town of
Vestal, New York.
The term of the lease was for one year to commence from the 1st day
of February, 1994 and terminating on the 31st day of January, 1995.
This is to confirm the agreement between the Landlord and the Tenant
as follows:
1. The Lease be and the same is hereby extended for a term
of one year commencing from February 1, 1995 and terminating on January
31, 1996 at the same rental and upon the same terms and conditions as set
forth in the Lease.
2. Except as provided in paragraph numbered "1"
National Bank & Trust Company
January 25, 1995
Page 2
above, all of the terms and conditions of the Lease shall remain in full
force and effect.
Would you kindly confirm the above by signing under the word
"CONFIRMED" at the bottom of this letter.
Very truly yours,
LEVENE, GOULDIN & THOMPSON
By: /s/ Samuel K. Levene
--------------------
Samuel K. Levene
SKL/cmj
CONFIRMED:
NATIONAL BANK & TRUST COMPANY
By: /s/ Donna L. Deuel
----------------------------
Donna L. Deuel
Assistant Vice President
EXHIBIT 27
Financial Data Schedule
9
1,000
3-MOS
DEC-31-1995
MAR-31-1995
57,903
595
0
0
106,278
268,974
264,184
563,333
9,038
1,036,400
879,021
43,179
5,036
8,734
8,050
0
0
92,380
1,036,400
12,210
3,934
1,798
17,942
6,611
1,370
9,961
330
0
8,413
2,985
1,907
0
0
1,907
0.24
0.24
0.043
4,495
839
0
26,823
9,026
524
206
9,038
7,625
0
1,413
