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 September 30, 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)-337-6000
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 October 31, 1995, there were 8,049,618 shares outstanding,
including 152,353 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 September 30, 1995
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 1995, December
31, 1994, and September 30, 1994
Consolidated Statements of Income for the three month and nine
month periods ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements at September 30,
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
INDEX TO EXHIBITS
-2-
NBT BANCORP INC. and Subsidiary September 30, December 31, September 30,
CONSOLIDATED BALANCE SHEETS 1995 1994 1994
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(dollars in thousands) (Unaudited) (See Notes) (Unaudited)
ASSETS
Cash and due from banks $ 38,179 $ 42,110 $ 38,336
Loans available for sale 6,671 10,921 10,027
Securities available for sale 126,932 109,777 115,884
Securities held to maturity (market
value-$271,161, $261,913 and $255,645) 269,889 272,466 262,387
Loans:
Commercial and agricultural 243,584 215,380 211,481
Real estate mortgage 124,196 129,275 129,782
Consumer 218,634 230,063 228,438
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Total loans 586,414 574,718 569,701
Less allowance for loan losses 9,354 9,026 8,849
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Net loans 577,060 565,692 560,852
Premises and equipment, net 15,831 15,383 15,333
Goodwill and other intangibles, net 8,919 9,862 10,267
Other assets 15,071 18,346 16,829
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TOTAL ASSETS $1,058,552 $1,044,557 $1,029,915
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $ 732,234 $ 669,007 $ 701,099
Non-interest bearing 132,070 122,436 129,899
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Total deposits 864,304 791,443 830,998
Short-term borrowings 82,442 140,587 82,817
Long-term debt 3,014 8,734 13,736
Other liabilities 5,751 5,486 4,031
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Total liabilities 955,511 946,250 931,582
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00;
2,000,000 in 1994 - - -
Common stock, no par, stated value $1.00;
shares authorized-12,500,000 in 1995,
12,000,000 in 1994; issued 8,049,618,
8,049,618 and 8,053,187 8,050 8,050 7,670
Capital surplus 69,159 69,669 64,197
Retained earnings 29,346 25,446 30,414
Unrealized (loss) on securities
available for sale, net of income tax
effect (1,022) (4,273) (3,085)
Common stock in treasury at cost, 154,401,
36,130, and 53,164 shares (2,492) (585) (863)
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Total stockholders' equity 103,041 98,307 98,333
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,058,552 $1,044,557 $1,029,915
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See notes to consolidated financial statements.
-3-
Three months ended Nine monthsended
NBT BANCORP INC. and Subsidiary September 30, September 30,
CONSOLIDATED STATEMENTS OF INCOME 1995 1994 1995 1994
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(dollars in thousands, except per share amounts) (Unaudited)
Interest and fee income:
Loans $13,792 $12,410 $39,250 $36,182
Securities held to maturity-
taxable 3,649 3,558 10,718 8,304
Securities held to maturity-
tax-exempt 307 302 1,043 840
Assets available for sale 2,222 2,010 6,026 6,691
Other 13 3 31 15
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Total interest and fee income 19,983 18,283 57,068 52,032
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Interest expense:
Deposits 7,514 5,355 21,342 15,649
Short-term borrowings 1,329 1,115 3,769 2,107
Long-term debt 99 238 378 711
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Total interest expense 8,942 6,708 25,489 18,467
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Net interest income 11,041 11,575 31,579 33,565
Provision for loan losses 340 872 1,178 2,624
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Net interest income after provision
for loan losses 10,701 10,703 30,401 30,941
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Trust income 558 661 1,863 2,260
Service charges on deposit accounts 757 797 2,235 2,229
Securities gains 82 - 93 555
Other income 389 350 1,116 1,084
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Total noninterest income 1,786 1,808 5,307 6,128
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Noninterest expense:
Salaries and employee benefits 4,248 4,112 12,222 12,366
Net occupancy expense 562 571 1,751 1,707
Equipment expense 457 472 1,292 1,574
FDIC insurance (43) 457 860 1,371
Amortization of goodwill and other
intangibles 313 881 942 2,816
Restructuring expense - 1,367 - 1,367
Other operating expense 2,578 3,107 7,696 8,417
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Total noninterest expense 8,115 10,967 24,763 29,618
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Income before income taxes 4,372 1,544 10,945 7,451
Income taxes 1,735 542 4,180 2,832
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Net income $ 2,637 $ 1,002 $ 6,765 $ 4,619
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Net income per common share $0.34 $0.13 $0.85 $0.57
Cash dividends per common share $0.120 $0.110 $0.360 $0.329
Average common shares outstanding 7,939,668 8,072,327 8,003,935 8,121,950
- ----------------------------------------------------------------------------------------
See notes to consolidated financial statements.
-4-
NBT BANCORP INC. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1995 1994
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(dollars in thousands) (Unaudited)
Operating activities:
Net income $ 6,765 $ 4,619
Adjustments to reconcile net income to the
cash provided by operating activities:
Provision for loan losses 1,178 2,624
Depreciation and amortization 1,106 1,268
Amortization of premiums and accretion
of discounts on securities (116) 420
Amortization of goodwill and other intangibles 942 2,816
Provision for restructuring charges - 1,367
Proceeds from sales of loans originated for sale 12,990 11,009
Loans originated for sale (8,745) (11,033)
Realized gains on sales of securities (93) (555)
(Increase) decrease in interest receivable 497 (1,538)
Increase in interest payable 434 63
Payments of restructuring liabilities (958) (210)
Other, net 1,331 (1,611)
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Net cash provided by operating activities 15,331 9,239
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Investing activities:
Securities available for sale:
Proceeds from maturities 30,833 16,783
Proceeds from sales 2,329 70,258
Purchases (45,808) (1,001)
Securities held to maturity:
Proceeds from maturities 40,070 25,962
Purchases (37,224) (180,185)
(Increase) decrease in loans (12,546) (12,268)
Purchase of premises and equipment, net (1,554) (1,621)
Other investing activities - -
- -----------------------------------------------------------------------------
Net cash used in investing activities (23,900) (82,072)
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Financing activities:
Net increase in deposits 72,861 23,770
Net increase (decrease) in short-term borrowings
with original maturities of three months or less (58,145) 56,116
Repayments of long-term debt (5,720) (720)
Common stock issued, including treasury shares reissued 3,844 2,519
Purchase of treasury stock (6,262) (3,423)
Cash dividends and payment for fractional shares (2,865) (2,636)
- -----------------------------------------------------------------------------
Net cash provided by financing activities 3,713 75,626
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Net increase (decrease) in cash and cash equivalents (4,856) 2,793
Cash and cash equivalents at beginning of year 43,410 36,118
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Cash and cash equivalents at end of period $38,554 $ 38,911
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 25,055 $18,530
Income taxes 3,392 1,750
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See notes to consolidated financial statements.
-5-
NBT BANCORP INC. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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, NBT Bank, National Association (Bank),
formerly The National Bank and Trust Company. 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 nine month period ended September 30, 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
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.
-6-
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 September 30, 1995, in thousands of
dollars:
Contractual or
Notional Value
at September 30, 1995
Financial instruments with off-balance
sheet credit risk:
Commitments to extend credit $91,298,000
Standby letters of credit 2,420,000
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 $2.6 million ($0.34 per share) was realized in the third
quarter of 1995, representing a 163% increase from third quarter 1994
net income of $1.0 million ($0.13 per share). The major contributing
factors for the increase in net income were decreased provision for
loan losses, as net charge-offs declined in 1995, and decreased
noninterest expenses. The decrease in noninterest expense is a result
of the restructuring that the Company undertook in 1994, the costs of
which were recorded in the third and fourth quarters of 1994, ongoing
expense control efforts, decreased intangible amortization and reduced
FDIC insurance premiums. Offsetting these positive trends was a decline
in net interest income as liability cost increases exceeded higher
earnings on assets in the rising interest rate environment.
Net income of $6.8 million ($0.85 per share) was realized for the nine
month period ended September 30, 1995, a 47% increase from 1994 nine
month net income of $4.6 million ($0.57 per share). Decreased
provisions for loan losses and noninterest expenses were partially
offset by decreased realized security gains and trust income and a
decline in net interest income resulting from rising interest rates and
a one-time write off of accrued interest on loans placed on nonaccrual
or previously written off loans.
The table PERFORMANCE MEASUREMENTS depicts several measurements of
performance on an annualized basis. Return on average assets and equity
measures how effectively an entity utilizes its total resources and
capital, respectively. Both the return on average assets and the return
on average equity ratios increased for the quarter and nine month
periods compared to the same periods a year previous and compared to
the prior quarters of 1995.
Net interest margin, net federal taxable equivalent (FTE) interest
income divided by average interest-earning assets, is a measure of an
entity's ability to utilize its earning assets in relation to the
interest cost of funding. Taxable equivalency adjusts income by
increasing tax exempt income to a level that is comparable to taxable
income before taxes are applied.
PERFORMANCE MEASUREMENTS
First Second Third Nine Fourth Twelve
Quarter Quarter Quarter Months Quarter Months
- ---------------------------------------------------------------------------------------
1995
Return on average assets 0.76% 0.87% 1.00% 0.88%
Return on average common equity 7.83% 8.79% 10.28% 8.98%
Net interest margin 4.30% 4.49% 4.54% 4.45%
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1994
Return on average assets 0.76% 0.72% 0.38% 0.62% 0.73% 0.64%
Return on average common equity 7.24% 7.31% 4.00% 6.17% 7.59% 6.53%
Net interest margin 4.99% 4.85% 4.82% 4.88% 4.64% 4.81%
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-8-
FINANCIAL CONDITION
The table AVERAGE BALANCES 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 ended Nine months ended
September 30, September 30,
(dollars in thousands) 1995 1994 1995 1994
- --------------------------------------------------------------------------------
Securities available for sale $ 130,172 $ 121,703 $ 118,130 $ 141,200
Securities held to maturity 262,924 266,699 267,113 218,200
- ---------------------------------------------------------------------------------
Total securities 393,096 388,402 385,243 359,400
Loans available for sale 6,386 9,427 7,470 10,036
Loans 579,519 569,728 571,639 563,573
Deposits 842,445 820,540 831,839 815,835
Short-term borrowings 90,594 98,355 85,909 66,415
Long-term debt 3,714 14,444 6,236 14,451
Stockholders' equity 101,782 99,453 100,668 100,051
Assets 1,045,437 1,037,838 1,030,717 1,002,445
Earning assets 980,228 966,473 967,403 932,478
Interest-bearing liabilities $ 809,986 $ 811,989 $ 802,300 $ 780,751
- ---------------------------------------------------------------------------------
Loans: Average loans for the third quarter of 1995 increased $10
million, or 2%, from the comparable period of the previous year. A
similar volume increase was experienced for the nine month period as
average loans increased $8 million or 1%, from the comparable period
of the previous year. The increase in the portfolio volume occurred
primarily in commercial loans. Real estate loans decreased as the
volume of mortgage refinancing has diminished and new mortgage loan
origination has been weak. Commercial, consumer and real estate loans
comprised 39%, 39%, and 22% of the average portfolio for the nine
months ended September 30, 1995. Comparable measures for a year
previous were 38%, 39%, and 23%.
Allowance and provision for loan losses: The allowance for loan losses
is a valuation allowance offset against total loans which 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.
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, the amount of
loans written off as uncollectible less recoveries of loans previously
written off. 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 the prior year's
comparable periods and the full year 1994 measure both as a dollar
amount and as a percentage of average loan balances. The provision for
-9-
loan losses decreased by $0.5 million, 51%, for the third quarter of
1995 from the comparable period a year ago; the provision for the nine
month period of 1995 reflects a similar decrease, $1.4 million, 55%,
from the comparable period a year ago.
Nonperforming is a term used to describe assets on which revenue
recognition has been discontinued or is restricted. The improvement in
asset quality depicted in the table NONPERFORMING ASSETS AND PAST DUE
LOANS 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. Annualized net loan charge-offs compared to
average total loans have fallen for the third quarter and first nine
months of 1995 when compared to the same periods of the prior year and
the year ended December 31, 1994.
The allowance for loan losses has been allocated based on identified
problem credits or categorical trends. After allocation, the
unallocated portion at September 30, 1995, was approximately $2
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 Nine months ended
September 30, September 30,
(dollars in thousands) 1995 1994 1995 1994
- --------------------------------------------------------------------------------
Balance, beginning of period $9,280 $ 8,799 $ 9,026 $ 8,652
Recoveries 199 220 594 716
Charge-offs (465) (1,042) (1,444) (3,143)
- --------------------------------------------------------------------------------
Net charge-offs (266) (822) (850) (2,427)
Provision for loan losses 340 872 1,178 2,624
- --------------------------------------------------------------------------------
Balance, end of period $9,354 $ 8,849 $ 9,354 $ 8,849
- --------------------------------------------------------------------------------
COMPOSITION OF NET CHARGE-OFFS
- -------------------------------------------------------------------------------------
Commercial and agricultural $ (136) 51% $ (418) 51% $ (331) 39% $(1,074) 44%
Real estate (7) 3% (82) 10% (59) 7% (129) 5%
Consumer and other (123) 46% (322) 39% (460) 54% (1,224) 51%
- -------------------------------------------------------------------------------------
Net (charge-offs) recoveries $ (266) 100% $ (822) 100% $ (850) 100% $(2,427) 100%
- -------------------------------------------------------------------------------------
Annualized net charge-offs
to average loans 0.18% 0.57% 0.20% 0.58%
- -------------------------------------------------------------------------------------
Annualized net charge-offs to average loans for the year ended
December 31, 1994 0.48%
- -------------------------------------------------------------------------------------
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
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 $26.6 million, $26.3 million, and $23.7 million, 4.5%,
4.6%, and 4.2% of outstanding loans, at September 30, 1995, December
31, 1994 and September 30, 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
-10-
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.
As depicted in the table, NONPERFORMING ASSETS AND PAST DUE LOANS, the
increase in nonperforming assets (NPA) was attributable to increased
Other Real Estate Owned (OREO) related to both commercial and
residential real estate foreclosures. The Registrant did not hold any
restructured loans, loans whose repayment criteria was renegotiated to
less than the original agreement terms because of the borrower's
financial difficulties, which were not in compliance with the modified
terms at September 30, 1995, December 31, 1994, and September 30, 1994.
Loans 90 days past due and not included in nonperforming loans have
increased in the real estate category for which collateral value
supports continued interest accrual.
NONPERFORMING ASSETS AND PAST DUE LOANS
September 30, December 31, September 30,
(dollars in thousands) 1995 1994 1994
- --------------------------------------------------------------------------------
Nonaccrual loans:
Commercial and agricultural $1,169 28% $1,415 31% $1,513 34%
Real estate 2,627 64% 2,950 63% 2,699 60%
Consumer and other 346 8% 274 6% 251 6%
- --------------------------------------------------------------------------------
Total 4,142 100% 4,639 100% 4,463 100%
- --------------------------------------------------------------------------------
Other real estate owned and
in-substance foreclosures 1,619 840 821
- --------------------------------------------------------------------------------
Total nonperforming assets 5,761 5,479 5,284
- --------------------------------------------------------------------------------
Restructured loans in compliance with modified terms:
Commercial and agricultural 145 - -
- --------------------------------------------------------------------------------
Loans past due 90 days or more and still accruing:
Commercial and agricultural 371 22% - - 359 33%
Real estate 1,135 66% 523 60% 383 35%
Consumer and other 213 12% 348 40% 343 32%
- --------------------------------------------------------------------------------
Total $1,719 100% $ 871 100% $1,085 100%
- --------------------------------------------------------------------------------
Nonperforming loans to total loans 0.71% 0.81% 0.78%
Nonperforming assets to total assets 0.54% 0.52% 0.51%
Allowance for loan losses to
nonperforming loans 226% 195% 198%
Allowance as a percentage of
period end loans 1.60% 1.57% 1.55%
- --------------------------------------------------------------------------------
-11-
Charge-offs flowing through the allowance for loan losses depicted in
the table CHANGES IN NONACCRUAL LOANS represent gross charge-offs taken
against nonaccrual loans; excluded are charge-offs taken against
accruing loans and interest reversals. When real estate collateralizing
a loan is foreclosed, the difference between the fair value of the
collateral property, reflected as additions in the table CHANGES IN
OREO, and the book value of the loan, if any, is charged-off through
the allowance for loan losses. Any subsequent write-downs or write-offs
due to a decline in the fair value of the OREO property after
foreclosure is reflected in noninterest expense.
CHANGES IN NONACCRUAL LOANS
Three months ended Nine months ended
(in thousands) September 30, September 30,
------------------------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------
Balance at beginning of period $4,402 $4,604 $ 4,639 $ 4,170
Loans placed on nonaccrual 883 1,221 2,262 3,673
Charge-offs (231) (639) (623) (1,515)
Payments (620) (263) (1,461) (909)
Transfers to OREO (292) (164) (675) (660)
Loans returned to accrual - (296) - (296)
- ------------------------------------------------------------------------------
Balance at end of period $4,142 $4,463 $ 4,142 $ 4,463
- ------------------------------------------------------------------------------
CHANGES IN OREO
Three months ended Nine months ended
(in thousands) September 30, September 30,
------------------------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------
Balance at beginning of period $1,095 $ 744 $ 840 $ 430
Additions 712 199 1,095 715
Sales (150) (6) (241) (105)
Charge-offs and write-downs (38) (116) (75) (219)
- ------------------------------------------------------------------------------
Balance at end of period $1,619 $ 821 $1,619 $ 821
- ------------------------------------------------------------------------------
Securities: The total average balance of securities available for sale
and held to maturity for the three month period ending September 30,
1995 increased $5 million, or 1%, from the comparable period a year
ago. This total average increased $26 million, or 7%, for the nine
month period ending September 30, 1995 from the comparable period a
year ago. These increases 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 Asset Liability Management Committee
(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.
The Registrant classifies securities as available for sale or held to
maturity at the time of purchase. The Registrant holds no trading
securities, securities bought for the purpose of sale in the near term.
Classification is determined by potential responses to changes in
interest rates, prepayment risk, and liquidity needs for an indefinite
period of time, and the intent, supported by the ability, to hold the
security to its maturity. Generally accepted accounting principles
limit the reclassification of securities after the initial
determination, particularly from a held to maturity classification to
available for sale. The FASB will be releasing additional guidance
relating to the classification of securities in the fourth quarter of
1995. After the release, reclassification, which is to be completed by
the end of 1995, will be permitted. The Registrant may reclassify
securities in its portfolio in accordance with this guidance.
The unrealized loss on securities available for sale at September 30,
1995, has decreased from December 31, 1994, due to recent declining
interest rates. At September 30, 1995, the amortized cost of securities
available for sale, $129 million, exceeded fair market value by $2
million of market depreciation while at December 31, 1994, the
amortized cost of $117 million exceeded fair market value by $7
-12-
million. At September 30, 1994, the amortized cost of securities
available for sale, $121 million, exceeded fair market value by $5
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 $30 million, or 8% of the securities
portfolio, for the nine month periods ended September 30, 1995 and
1994. 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 as 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 September 30,
1995, increased $22 million, or 3%, from the comparable period in 1994.
Average total deposits for the nine months ended September 30, 1995,
increased $16 million, or 2%, from the comparable period in 1994.
For both the three and nine month periods of 1995 compared to 1994,
similar trends in the deposit portfolio shifting were experienced. 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 $61 million, or 96%
for the first nine months 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.
These 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 $23 million, or 14%, for the
first nine months of 1995 compared to the similar period of 1994 while
average demand deposits increased $6 million, or 5%, for the comparable
periods. Approximately 43% of the portfolio for the nine months ending
September 30, 1995, consisted of time deposits, 19% savings deposits,
13% money market demand deposits, 10% interest-bearing NOW checking
deposits, and 15% non-interest bearing demand deposits. Comparable 1994
portfolio percentages were 34%, 22%, 19%, 11%, and 14%.
Borrowed funds: Short-term borrowings include federal funds purchased,
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 $85 million at September 30, 1995. The decrease occurred as
deposits, specifically municipal and negotiated term certificates of
deposit, increased in the first nine months of 1995. The increased
deposits have been utilized to supplant borrowed funds.
Borrowed funds averaged $94 million for the three month period ending
September 30, 1995, down $18 million, or 16%, from the comparable
period of 1994 due to the additional funding provided by increased
deposits in 1995. Borrowed funds averaged $92 million for the nine
month period ending September 30, 1995, up $11 million, or 14%, from
the comparable period of 1994.
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
-13-
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 $48 million, $300 million for repurchase
agreements, and the capacity for additional FHLB advances of $89
million, at September 30, 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 an analysis performed as of September
30, 1995, given the scenario of 200 basis points increase or decline
in interest rates occurring over an extended time horizon, the
Registrant estimated that there would be less than a 3% impact on net
interest income relative to a flat rate environment over the next
twelve month period.
CAPITAL RESOURCES AND DIVIDENDS
Stockholders' equity of $103 million represents 9.7% of total assets
at September 30, 1995, compared with $98 million, or 9.6%, a year
previous, and $98 million, or 9.4%, at December 31, 1994. The improved
dollar amounts and percentage relationships since December 31, 1994 are
due to the improved pricing reflected in the mark to market effect of
the securities available for sale portfolio and earnings retention,
partially offset by additional shares held in the treasury. 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 throughout 1994, 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, stockholders' equity (less
intangible assets) divided by the number of common shares outstanding,
depicted in the table below have been affected by the aforementioned
1994 decline and 1995 improvement in the current market value of the
securities available for sale portfolio. Tangible book value changes
in the declining market value timeframe are mitigated by the
offsetting decrease in intangible assets through amortization.
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.
The Registrant's wholly-owned subsidiary pays cash dividends to the
Registrant which are used to fund dividend payments to its
stockholders. Certain restrictions exist regarding the ability of the
Bank to transfer funds to the Registrant in the form of cash dividends.
The approval of the Comptroller of the Currency is required for the
Bank to pay dividends in excess of its earnings retained in the current
year plus retained net profits for the preceding two years or when the
Bank fails to meet certain minimum regulatory capital standards. At
September 30, 1995, the Bank has the ability to pay $9.0 million to the
Registrant without obtaining prior regulatory approval. Under the State
of Delaware Business Corporation Law, the Registrant may declare and
pay dividends either out of accumulated net retained earnings or
capital surplus.
-14-
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 1995,
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 in the table CAPITAL MEASUREMENTS 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 credit equivalent 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 compares capital, as defined for regulatory
purposes, to quarterly 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%.
CAPITAL MEASUREMENTS
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------
1995
Tier 1 leverage ratio 9.19% 9.21% 9.17%
Tier 1 capital ratio 16.13% 16.03% 15.71%
Total risk-based capital ratio 17.39% 17.28% 16.97%
Cash dividends as a percentage
of net income 50.50% 43.57% 35.91%
Per common share:
Book value $12.55 $12.85 $13.05
Tangible book value $11.36 $11.68 $11.92
- ----------------------------------------------------------------------
1994
Tier 1 leverage ratio 9.44% 8.99% 8.85% 9.05%
Tier 1 capital ratio 15.82% 15.34% 15.95% 16.09%
Total risk-based capital ratio 17.07% 16.59% 17.21% 17.35%
Cash dividends as a percentage
of net income 48.81% 48.46% 87.53% 50.77%
Per common share:
Book value $12.45 $12.35 $12.30 $12.27
Tangible book value $10.96 $10.95 $11.01 $11.04
- ----------------------------------------------------------------------
-15-
The common shares of NBT BANCORP INC. are traded in the NASDAQ National
Market System under the symbol NBTB. 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 September 30, 1995 the total market capitalization of
NBT's common stock was approximately $130 million, compared with $126
million a year ago and $132 million at December 31, 1994. The change
in market capitalization is due to an increase in the number of shares
outstanding as a result of the December 1994 stock dividend, partially
offset by an increased number of shares held as treasury stock, and
changes in the market price.
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
Cash
Dividends
Quarter Ending High Low Close Declared
- -------------------------------------------------------------------------
1994
- -------------------------------------------------------------------------
March 31 $17.62 $16.67 $16.67 $0.109
June 30 17.02 14.52 15.71 0.110
September 30 15.71 14.29 15.24 0.110
December 31 17.00 15.00 16.50 0.120
- -------------------------------------------------------------------------
1995
March 31 $17.00 $16.00 $16.00 $0.120
June 30 16.50 15.75 16.25 0.120
September 30 16.75 15.75 16.50 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 deposits and borrowings, combined with interest rate
spread, produces the changes in the net interest income between
periods. Interest rate spread is the difference between FTE yield on
average earning assets and cost on average interest bearing
liabilities. The tables, COMPARATIVE ANALYSIS OF FEDERAL TAXABLE
EQUIVALENT NET INTEREST INCOME, present 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 both the third quarter and first nine
months of 1995 compared to the same periods of 1994 due to a
combination of favorable rate and volume variances. The volume of
average earning assets increased from $966 million for the third
quarter of 1994 to $980 million for the same period of 1995 and from
$932 million for the first nine months of 1994 to $967 million for the
same period of 1995. Reducing the increased yield for the first nine
months 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 for both the third quarter and
first nine months of 1995 can be attributed to increased rates for
interest bearing liabilities as interest rates in general increased.
The magnitude of rate increase was greater for interest bearing
liabilities than for interest earning assets and interest rate spread
declined. While lower costing interest-bearing deposit products,
savings, NOW and MMDA accounts, experienced a decrease in average
volume, certificates of deposit volume increased as customers moved
funds into this more costly deposit product. However, the average
volume of interest-bearing liabilities decreased to $810 million for
-16-
the third quarter of 1995, compared to $812 million during the same
period a year ago, as average balances in non-interest bearing demand
deposit accounts increased by $5 million to $127 million for the third
quarter of 1995. For the first nine months of 1995 average interest
bearing liabilities increased to $802 million, compared to $781 million
during the same period a year ago, and average balances in non-interest
bearing demand deposit accounts increased by $6 million to $122 million
for the first nine months of 1995. The increase in these interest cost
free funds helped mitigate the increase in the overall cost of funds.
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 nine month periods of 1994 and 1995 increased due to this leveraged
transaction.
Net interest margin has declined throughout 1994 and 1995 as portrayed
in the above tables and in the table of PERFORMANCE MEASUREMENTS. The
effects of soft loan demand and competitive pricing are reflected in
the compressed net interest margin. A strong net interest margin is
critical to the ability to cover noninterest expenses and produce an
acceptable level of net income. Net interest margin for the first
quarter and nine months of 1995 was 4.50% and 4.51%, respectively,
excluding the effect of the previously mentioned accrued interest
receivable write-off which occurred in the first quarter of 1995.
-17-
COMPARATIVE ANALYSES OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME
Three months ended September 30,
Annualized
Yield/Rate Amounts Variance
-----------------------
1995 1994 (dollars in thousands) 1995 1994 Total Volume Rate
- ---- ---- ---- ---- ----- ------ ----
4.18% 4.72% Interest bearing deposits $ 5 $ 2 $ 3 $ 3 $ -
5.95% 1.52% Federal funds sold 8 1 7 2 5
5.21% 4.60% Other short term investments 9 17 (8) (10) 2
6.31% 5.89% Securities available for sale 2,091 1,841 250 115 135
10.06% 7.12% Loans available for sale 124 153 (29) (79) 50
Securities held to maturity
6.07% 6.01% Taxable 3,649 3,558 91 54 37
7.68% 5.78% Tax-exempt 473 462 11 (120) 131
9.45% 8.66% Loans 13,802 12,421 1,381 223 1,158
-------------------------------------------------------------------------
8.16% 7.55% Total interest income 20,161 18,455 1,706 188 1,518
3.04% 2.56% MMDA's 810 950 (140) (301) 161
1.88% 1.55% Now accounts 395 346 49 (22) 71
2.95% 2.65% Savings accounts 1,134 1,214 (80) (205) 125
5.49% 4.03% Certificates of deposit 5,175 2,860 2,315 1,099 1,216
5.82% 4.44% Other borrowed funds 1,329 1,100 229 (92) 321
10.58% 6.54% Long term debt 99 238 (139) (237) 98
-------------------------------------------------------------------------
4.38% 3.28% Total interest expense 8,942 6,708 2,234 242 1,992
-------------------------------------------------------------------------
Net interest income $11,219 $11,747 $ (528) $ (54) $ (474)
=========================================================================
3.78% 4.27% Interest rate spread
===== ===== ====================
4.54% 4.80% Net interest margin
===== ===== ===================
FTE adjustment $ 178 $ 172
============== ======= =======
Nine months ended September 30,
Annualized
Yield/Rate Amounts Variance
-----------------------
1995 1994 (dollars in thousands) 1995 1994 Total Volume Rate
- ---- ---- ---- ---- ----- ------ ----
4.23% 4.89% Interest bearing deposits $ 15 $ 3 $ 12 $ 12 $ -
5.84% 2.90% Federal funds sold 16 12 4 (5) 9
5.85% 3.55% Other short term investments 81 80 1 (38) 39
6.15% 5.78% Securities available for sale 5,516 6,067 (551) (913) 362
9.16% 7.86% Loans available for sale 432 549 (117) (198) 81
Securities held to maturity
6.05% 5.89% Taxable 10,718 8,303 2,415 2,187 228
7.10% 5.79% Tax-exempt 1,605 1,289 316 20 296
9.19% 8.60% Loans 39,280 36,217 3,063 533 2,530
-------------------------------------------------------------------------
7.97% 7.51% Total interest income 57,663 52,520 5,143 1,598 3,545
2.88% 2.57% MMDA's 2,386 2,950 (564) (884) 320
1.72% 1.59% Now accounts 1,060 1,045 15 (63) 78
2.95% 2.65% Savings accounts 3,428 3,574 (146) (525) 379
5.35% 3.88% Certificates of deposit 14,468 8,095 6,373 2,805 3,568
5.87% 4.21% Other borrowed funds 3,769 2,092 1,677 717 960
8.10% 6.58% Long term debt 378 711 (333) (471) 138
-------------------------------------------------------------------------
4.25% 3.16% Total interest expense 25,489 18,467 7,022 1,579 5,443
-------------------------------------------------------------------------
Net interest income $32,174 $34,053 $(1,879) $ 19 $(1,898)
=========================================================================
3.72% 4.35% Interest rate spread
===== ===== ====================
4.45% 4.88% Net interest margin
===== ===== ===================
FTE adjustment $ 595 $ 488
============== ======= =======
-18-
Noninterest Income: The tables entitled NONINTEREST INCOME present
quarterly and period to date amounts of noninterest income. Third
quarter 1995 noninterest income fell from the comparable period of 1994
predominately due to a decline in trust income. The decreases in
quarterly trust income are related to a decline in fees from estates
and personal agency accounts. Trust income is anticipated to remain at
the lower levels attained in 1995 for the remainder of the year.
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 Nine Fourth Twelve
(dollars in thousands) Quarter Quarter Quarter Months Quarter Months
- -----------------------------------------------------------------------------
1995
Trust income $ 662 $ 643 $ 558 $1,863
Service charges on
deposit accounts 731 747 757 2,235
Securities gains - 11 82 93
Other income 374 353 389 1,116
- -----------------------------------------------------------------------------
Total noninterest
income $1,767 $1,754 $1,786 $5,307
- -----------------------------------------------------------------------------
1994
Trust income $ 799 $ 800 $ 661 $2,260 $251 $2,511
Service charges on
deposit accounts 654 778 797 2,229 803 3,032
Securities gains 555 - - 555 - 555
Other income 428 306 350 1,084 (143) 941
- -----------------------------------------------------------------------------
Total noninterest
income $2,436 $1,884 $1,808 $6,128 $911 $7,039
- -----------------------------------------------------------------------------
-19-
NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS
First Second Third Nine Fourth Twelve
(dollars in thousands) Quarter Quarter Quarter Months Quarter Months
- ------------------------------------------------------------------------------
1995
Salaries and wages $2,966 $3,047 $ 3,358 $ 9,371
Employee benefits 1,058 903 890 2,851
Net occupancy expense 603 586 562 1,751
Equipment expense 411 424 457 1,292
FDIC insurance 451 452 (43) 860
Legal, audit, and
outside services 941 908 921 2,770
Loan collection and
other loan related
expenses 345 352 290 987
Amortization of
goodwill and other
intangibles 315 314 313 942
Other operating
expense 1,323 1,249 1,367 3,939
- ------------------------------------------------------------------------------
Total noninterest
expense $8,413 $8,235 $8,115 $24,763
- ------------------------------------------------------------------------------
Efficiency ratio 70.40% 65.79% 62.80% 66.23%
Expense ratio 2.64% 2.54% 2.43% 2.54%
Average full-time
equivalent employees 535 542 551 543
Average assets per
average full-time
equivalent employee
(millions) $ 1.9 $ 1.9 $ 1.9 $ 1.9
- ------------------------------------------------------------------------------
1994
Salaries and wages $3,293 $3,149 $ 3,103 $ 9,545 $3,041 $12,586
Employee benefits 791 1,021 1,009 2,821 750 3,571
Net occupancy expense 630 506 571 1,707 588 2,295
Equipment expense 542 560 472 1,574 459 2,033
FDIC insurance 457 457 457 1,371 458 1,829
Legal, audit, and
outside services 963 965 1,196 3,124 941 4,065
Loan collection and
other loan related
expenses 408 436 498 1,342 299 1,641
Amortization of
goodwill and other
intangibles 1,042 893 881 2,816 406 3,222
Other operating
expense 1,369 1,169 1,413 3,951 1,217 5,168
Restructuring expense - - 1,367 1,367 897 2,264
- ------------------------------------------------------------------------------
Total noninterest
expense $9,495 $9,156 $10,967 $29,618 $9,056 $38,674
- ------------------------------------------------------------------------------
Efficiency ratio 73.91% 69.23% 70.82% 71.30% 66.73% 70.22%
Expense ratio 3.22% 2.89% 2.98% 3.02% 2.79% 2.96%
Average full-time
equivalent employees 613 589 562 588 540 576
Average assets per
average full-time
equivalent employee
(millions) $ 1.6 $ 1.7 $ 1.8 $ 1.7 $ 1.9 $ 1.8
- ------------------------------------------------------------------------------
-20-
Noninterest expense: The tables entitled NONINTEREST EXPENSE AND
PRODUCTIVITY MEASUREMENTS present components of noninterest expense for
the periods indicated. Noninterest expense for both the third quarter
and first nine months of 1995 has decreased significantly from the
comparable periods a year previous. The decrease was spread throughout
the components of noninterest expense and are the result of several
factors, including ongoing expense control efforts.
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 gradually
over time.
During 1995 the FDIC Bank Insurance Fund attained congressionally
mandated reserve goals, established during the deposit crisis that
began in the prior decade. In the third quarter of 1995, the Bank
received a refund of premiums it had paid in excess of the lower rates
that became effective June 1995, resulting in the FDIC benefit shown
in the table. The Bank is well capitalized and will benefit from the
overall lower rates as well as the spread in the lower premium rates
between well, adequately and under capitalized institutions. Premiums
vary based upon deposit levels and composition; with the Bank's current
position premiums are anticipated to be approximately $0.1 million for
the fourth quarter of 1995.
Salary, wages and benefits expense are the second largest expense after
interest expense. Salary expense for the nine months ended September
30, 1995 is approximately $0.2 million below the 1994 level, primarily
a benefit of the 1994 restructure. Third quarter 1995 salary expense
reflects an increase in full-time equivalent employees and certain
termination benefits.
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. The Registrant consummated
the sale of the remaining office in October, 1995, at approximately the
amount anticipated as part of the exit costs.
Through September 30, 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 provision for income taxes has
increased for both the third quarter and first nine months of 1995 as
income subject to taxes has increased. The effective tax rate for the
first nine months of 1995 and 1994 was 38%. For the third quarter of
1995 the effective tax rate was 40%, compared to 35% for the comparable
period of 1994; increased taxable income was the primary reason for the
increase in the effective tax rate.
-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%
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 declared $ 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
Total assets $849,942 $838,884 $868,616 $953,907 $1,044,557
Total stockholders' equity $ 82,405 $ 87,826 $ 94,012 $101,108 $ 98,307
Average common shares
outstanding (thousands) 7,786 7,804 7,920 8,070 8,108
- ----------------------------------------------------------------------------------------
Item 1 -- Legal Proceedings
There have been no material legal proceedings initiated or settled
during the quarter ended September 30, 1995. The Registrant and its
principal subsidiary, NBT Bank, National Association (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, and on May 25, 1995 the Appellate Division
affirmed the order of the Supreme Court. NBT's motion for permission
to appeal to the New York Court of Appeals was granted on September 26,
1995.
Item 2 -- Changes in Securities
Following are listed changes in the Registrant's Common Stock
outstanding during the quarter ended September 30, 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. There was
no Preferred Stock outstanding during the quarter ended September 30,
1995.
The Registrant has Stock Option Plans. Outstanding at September 30,
1995 are non-qualified stock options covering 248,653 shares at
exercise prices ranging between $9.46 and $16.90 with expiration dates
between January 12, 1996, and January 24, 2005. There are 586,868
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
123,798 and 25,935 shares with exercise prices of $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 will 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).
-23-
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, Automatic Dividend Reinvestment and Stock
Purchase Plan, Stock Option Plans and Bank Trust Department directed
IRA and HR-10 accounts. Purchases and sales during 1995 totalled
386,732 and 268,461, respectively, with 154,401 shares in treasury at
September 30, 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 $12.98 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 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 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's senior securities during the quarter ended September 30,
1995.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted as no matters were submitted for security holder
action during the quarter ended September 30, 1994.
Item 5 -- Other Information
On September 26, 1995, NBT Bank, N.A., the wholly owned subsidiary of
the Registrant, and Community Bank, N.A. announced that they have
signed a definitive agreement under which NBT Bank will purchase
branches of Community Bank located in New Hartford, Norwich, and Utica,
New York. The purchase transaction has been approved by federal
-24-
regulatory authorities. The three bank branches that NBT Bank will
acquire were part of fifteen bank offices in upstate New York acquired
in July 1995 by Community Bank from The Chase Manhattan Bank, N.A..
The three offices are located in communities in NBT Bank's core service
areas and are an excellent fit with its branch organization.
Acquisition of these branches will complement current business and
advance the Bank's commitment to its core markets. When the transaction
is effective, NBT Bank's existing New Hartford branch will be
consolidated into the New Hartford office to be acquired from Community
Bank. NBT Bank expects to consolidate the Norwich office to be acquired
into its main office which is located two blocks away in downtown
Norwich. No changes are planned that would affect the downtown Utica
office to be acquired.
Item 6 -- Exhibits and Reports on Form 8-K
An index to exhibits follows the signature page of this Form 10-Q.
During the quarter ended September 30, 1995, the Registrant filed one
Form 8-K, date of report September 15, 1995, describing changes in its
executive management and that of the Bank. The new organizational
structure is a result of the departure of Richard I. Linhart (Executive
Vice President and Chief Financial Officer), and Frederick H. Weismann
(Executive Vice President and Chief Banking and Credit Officer), who
are leaving the Bank to pursue other interests.
-25-
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 10th
day of November, 1995.
NBT BANCORP INC.
By: /s/ JOE C. MINOR
---------------------------------------
Joe C. Minor
Vice-President
Chief Financial Officer and Treasurer
-26-
INDEX TO EXHIBITS
The following documents are attached as Exhibits to this Form 10-Q 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
Exhibit Exhibit
Number Cross-Reference
10.1 Supplemental Retirement Agreement between NBT Herein
Bancorp Inc., NBT Bank, National Association and
Daryl R. Forsythe made as of January 1, 1995
10.2 Death Benefits Agreement between NBT Bancorp Inc., NBT Herein
Bank, National Association and Daryl R. Forsythe
made August 22, 1995
10.3 NBT Bancorp Inc. and Subsidiaries Master Deferred Herein
Compensation Plan for Directors, adopted February
11, 1992
10.4 Wage Continuation Plan between NBT Bancorp Inc., NBT Herein
Bank, National Association and Daryl R. Forsythe made
as of August 1, 1995
27. Financial Data Schedule Herein
-27-
EXHIBIT 10.1
Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank,
National Association and Daryl R. Forsythe made as of January 1, 1995
SUPPLEMENTAL RETIREMENT AGREEMENT
---------------------------------
This sets forth the terms of an agreement for the payment of
supplemental retirement income ("Agreement") made as of January 1, 1995
between (i) NBT BANCORP INC., a Delaware corporation and registered bank
holding company, and NBT BANK, NATIONAL ASSOCIATION, a national banking
association chartered under the laws of the United States, both having
offices located at Norwich, New York (collectively, the "Bank"), and
(ii) Daryl R. Forsythe, an individual residing at 13 Concord Street,
Sidney, New York 13838 ("Forsythe").
1. Purpose of the Agreement.
------------------------- The purpose of this Agreement is to
provide Forsythe a supplemental retirement benefit in accordance with
the terms of this Agreement.
2. Amount of Supplemental Retirement Benefit.
------------------------------------------
(a) (i) If Forsythe shall remain employed by the Bank until
reaching his 65th birthday, serving full-time (defined as not less than
1,000 hours per calendar year) until such date, and subject to the other
terms and conditions of this Agreement, the Bank shall pay Forsythe an
annual "Supplemental Retirement Benefit" equal to the excess of (A) 50
percent of Forsythe's "Final Average Compensation," over (B) Forsythe's
"Other Retirement Benefits," determined as of the "Determination Date"
and calculated in accordance with this paragraph 2.
-1-
(ii) If Forsythe shall remain employed by the Bank until
reaching his 56th birthday, serving full-time until such date and he
continues to serve full-time until the date of his retirement, and he
retires then or thereafter but before reaching his 60th birthday, and
subject to the other terms and conditions of this Agreement, the Bank
shall pay Forsythe on his 60th birthday pursuant to subparagraph 3(b)
or to his spouse or estate pursuant and subject to subparagraph 5(c) if
he has died before his 60th birthday a reduced early Supplemental
Retirement Benefit calculated in accordance with subparagraph 2(d) and
the following schedule:
(A) if the date of Forsythe's retirement shall be on or after his
56th birthday but before his 57th birthday, the Bank shall pay Forsythe
20% of the reduced early Supplemental Retirement Benefit so caculated;
(B) if the date of Forsythe's retirement shall be on or after his
57th birthday but before his 58th birthday, the Bank shall pay Forsythe
40% of the reduced early Supplemental Retirement Benefit so calculated;
(C) if the date of Forsythe's retirement shall be on or after his
58th birthday but before his 59th birthday, the Bank shall pay Forsythe
60% of the reduced early Supplemental Retirement Benefit so calculated; and
-2-
(D) if the date of Forsythe's retirement shall be on or after his
59th birthday but before his 60th birthday, the Bank shall pay Forsythe
80% of the reduced early Supplemental Retirement Benefit so calculated.
(iii) If Forsythe shall remain employed by the Bank until
reaching his 60th birthday, serving full-time until such date and he
continues to serve full-time until the date of his retirement, and he
retires then or thereafter but before reaching his 65th birthday, and
subject to the other terms and conditions of this Agreement, the Bank
shall pay Forsythe a reduced early Supplemental Retirement Benefit
calculated in accordance with subparagraph 2(d).
(b) For purposes of this Agreement, "Final Average Compensation"
shall have the same meaning the term "Final Average Compensation" has
under the NBT Bancorp Inc. Defined Benefit Pension Plan (the "Qualified Plan").
(c) For purposes of this Agreement, "Other Retirement Benefits"
shall mean the sum of:
(i) the annual benefit payable to Forsythe from the
Qualified Plan, plus
(ii) the annual benefit that could be provided by (A) Bank
contributions (other than elective deferrals) made on Forsythe's behalf
under the NBT Bancorp Inc. Employee Stock Ownership Plan and the NBT
-3-
Bancorp 401(k) Retirement Plan, and (B) actual earnings on contributions
described in (A), if such contributions and earnings were converted to
a benefit payable at age 65 in the same form as the benefit paid under
this Agreement, using the same actuarial assumptions that are used under
the Qualified Plan to determine "Actuarial Equivalent" benefits under
that plan plus
(iii) the estimated annual benefit payable to Forsythe
commencing the age at which he becomes eligible to receive unreduced
social security benefits under Title II of the Social Security Act, and
amendments thereto, plus
(iv) the annual benefit payable to Forsythe at age 65
pursuant to any other pension, profit sharing, or similar plan
maintained by any prior employer in which was a participant prior to his
employment with the Bank (converted, if necessary, to a benefit payable
in the same form as the benefit paid under this Agreement).
The amount of Other Retirement Benefits shall be determined by an
actuary selected by the Bank, with such determination to be made without
reduction for payment of benefits prior to any stated "normal retirement
date" and without regard to whether Forsythe is receiving payment of
such benefits on the Determination Date. To the extent Forsythe
receives a payment of Other Retirement Beneifts decribed in subparagraph
(c)(ii) prior to the date the Supplemental Retirement Benefit is determined
pursuant to this Agreement, the total of such Other Retirement Benefits
shall be determined by including amounts received and assuming that such
amounts earned interest at a variable rate equal to the one-year Treasury
bill rate as reported in the New York edition of THE WALL STREET JOURNAL on
-4-
on the Determination Date from the date received to the date Other
Retirement Benefits are calculated for purposes of this Agreement. Forsythe
shall provide such financial and other information as the Bank may
reasonably require to determine Other Retirement Benefits.
(d) If the Bank commences payment of a reduced early
Supplemental Retirement Benefit before Forsythe reaches age 65, the
amount paid shall equal the product of (i) the Supplemental Retirement
Benefit, times (ii) a fraction, the numerator of which shall be the
number of complete months of Forsythe's employment with the Bank after
January 1, 1995, and the denominator of which is 164 (the number of
complete months of employment Forsythe would have had after January 1,
1995 if he remained employed by the Bank until the first day of the
month following his 65th birthday).
(e) For purposes of this Agreement, "Determination Date" shall
mean the earlier of the date of termination of Forsythe's employment
with the Bank or the first day of the month following Forsythe's 65th
birthday.
3. Time of Payment.
----------------
(a) Except as provided in subparagraph 3(b) (early retirement)
and paragraph 5 (payment on death), the Bank shall pay the Supplemental
Retirement Benefit commencing on the first day of month following
Forsythe's attainment of age 65.
(b) Notwithstanding subparagraph 3(a), the Bank shall commence
payment of a reduced early Supplemental Retirement Benefit on the first
day of the month following Forsythe's Determination Date in connection
-5-
with early retirement after reaching age 60 and prior to the date of his
65th birthday; provided that, if Forsythe shall retire prior to his 60th
birthday as permitted in this Agreement, the Bank shall commence payment
of the reduced early Supplemental Retirement Benefit on the first day
of the month following Forsythe's 60th birthday.
4. Form of Payment.
----------------
(a) The Supplemental Retirement Benefit described in paragraph
2 of this Agreement shall be paid as a straight life annuity, payable
in monthly installments, for Forsythe's life; provided, however, that
if Forsythe shall die before having received 60 monthly payments, such
monthly payments shall be continued to his beneficiary until the total
number of monthly payments to Forsythe and his beneficiary equals 60,
upon which all payment shall cease and the Bank's obligation under this
Agreement shall be deemed to have been fully discharged. If Forsythe
and his beneficiary shall die before having received a total of 60
monthly payments, the actuarial equivalent value of the balance of such
monthly payments shall be paid in a single sum to the estate of the
survivor of Forsythe and his beneficiary. If Supplemental Retirement Benefits
are payable in the form described in this subparagraph 4(a), Forsythe shall
designate in writing, any person or persons, primarily, contingently or
successively, to whom the Bank shall pay benefits following Forsythe's death
if Forsythe's death occurs before 60 monthly payments have been made.
(b) Notwithstanding the form of payment described in
subparagraph 4(a), if Forsythe is married on the date payment of the
Supplemental Retirement Benefit commences, the benefit shall be paid as
a 50% joint and survivor annuity with Forsythe's spouse as the
-6-
beneficiary. The 50% joint and survivor annuity shall be the actuarial
equivalent of the benefit described in subparagraph 4(a). If the
Supplemental Retirement Benefit is payable pursuant to this subparagraph
4(b), but Forsythe's spouse fails to survive him, no payments will be
made pursuant to this Agreement following Forsythe's death.
(c) Notwithstanding the foregoing of this paragraph 4, the
Bank in its sole discretion may accelerate the payment of all or any
portion of the Supplemental Retirement Benefit or the reduced early
Supplemental Retirement Benefit at any time. Any payment accelerated in
accordance with this subparagraph 4(c) shall be the actuarial equivalent
of the payment being accelerated, as such actuarial equivalent shall be
determined by an actuary selected by the Bank.
(d) If payment of a reduced early Supplemental Retirement
Benefit commences pursuant to subparagraph 3(b), and payments are
accelerated pursuant to subparagraph 4(c), the reduction described in
subparagraph 2(d) shall be applied before any actuarial equivalent is
determined under this paragraph 4.
5. Payments upon Forsythe's Death
------------------------------
(a) Except as provided in subparagraphs 5(b) and (c), if
Forsythe shall die before his 65th birthday, no payment shall be due his
estate under this Agreement.
(b) If Forsythe's death shall occur on or after his 60th
birthday, after he has retired but before payment of any Supplemental
Retirement Benefit has commenced, Forsythe's surviving spouse shall be
paid as a straight life annuity 50 percent of the Supplemental
Retirement Benefit for her life commencing within 30 days following
-7-
Forsythe's death, calculated in accordance with subparagraph 2(d). Such
payments shall be made in increments on a monthly basis, except if the
payment has been accelerated.
(c) If Forsythe elects early retirement pursuant to
subparagraph 2(a)(ii) and he dies before payment of any Supplemental
Retirement Benefit has commenced, Forsythe's surviving spouse shall be
paid as a straight life annuity 50 percent of such Supplemental
Retirement Benefit for her life commencing within 30 days following
Forsythe's death; provided that, however, if Forsythe's spouse fails to
survive him, the Bank shall pay 50 percent of such Supplemental
Retirement Benefit to his estate. Such payments shall be made in
increments on a monthly basis, except if the payment has been
accelerated.
(d) Except as otherwise provided in subparagraph 5(c), no payments
shall be made under this Agreement if Forsythe dies before payment of any
Supplemental Retirement Benefit begins and his spouse fails to survive him.
(e) If Forsythe's death shall occur after payment of a
Supplemental Retirement Benefit has commenced, Forsythe's surviving
spouse or other beneficiaries shall receive payments under this
Agreement to the extent provided in paragraph 4.
6. Actuarial Assumptions.
---------------------- To the extent interest rate and
mortality assumptions are needed to determine an actuarial equivalent
amount to be paid under this Agreement, the interest rate and mortality
assumptions used to determine "Actuarial Equivalent" benefits under the
Qualified Plan (as of the date the amount is to be paid) shall be used
to determine the amount to be paid under this Agreement.
-8-
7. Forfeiture.
-----------
(a) Notwithstanding any other provision of this Agreement, if
Forsythe's employment with the Bank is terminated "for cause," Forsythe
and his beneficiaries shall forfeit all rights to any payment under this
Agreement.
(b) For purposes of this Agreement, termination "for cause"
shall mean (i) conviction of robbery, bribery, extortion, embezzlement,
fraud, grand larceny, burglary, perjury, income tax evasion,
misapplication of bank funds, false statements in violation of 18 U.S.C.
section 1001, and any other felony that is punishable by a term of
imprisonment of more than one year or (ii) any breach of the officer's duty
of loyalty to the Bank, any acts or omissions in the performance of his
Bank duties by the officer not in good faith or which involve intentional
misconduct or a knowing violation of law, or any transaction in the
performance of his Bank duties from which the officer derived an improper
personal benefit.
8. Powers.
------- The Bank shall have such powers as may be necessary
to discharge its duties under this Agreement, including the power to
interpret and construe this Agreement and to determine all questions
regarding employment, disability status, service, earnings, income and
such factual matters as birth and marital status. The Bank's
determinations hereunder, shall be conclusive and binding upon the
parties hereto and all other persons having or claiming an interest
under this Agreement. The Bank shall have no power to add to, subtract
from, or modify any of the terms of this Agreement. The Bank's
determinations hereunder shall be entitled to deference upon review by
any court, agency or other entity empowered to review its decisions, and
shall not be overturned or set aside by any court, agency or other
-9-
entity unless found to be arbitrary, capricious or contrary to law.
9. Claims Procedure.
-----------------
(a) Any claim for benefits by Forsythe or his beneficiaries
shall be made in writing to the Bank. In this paragraph, Forsythe and
his beneficiaries are referred to herein as "claimants."
(b) If the Bank denies a claim in whole or in part, it shall send
the claimant a written notice of the denial within 90 days after the date
it receives a claim, unless it needs additional time to make its decision.
In that case, the Bank may authorize an extension of an additional 90 days
if it notifies the claimant of the extension within the initial 90-day
period. The extension notice shall state the reasons for the extension
and the expected decision date.
(c) A denial notice shall contain:
(i) the specific reason or reasons for the denial of the
claim;
(ii) specific reference to pertinent Agreement provisions
upon which the denial is based;
(iii) a description of any additional material or
information necessary to perfect the claim, with an explanation of why
the material or information is necessary; and
(iv) an explanation of the review procedures provided
below.
(d) Within 60 days after the claimant receives a denial
notice, he or she may file a request for review with the Bank. Any such
request must be made in writing.
(e) A claimant who timely requests review shall have the right
-10-
to review pertinent documents, to submit additional information or
written comments, and to be represented.
(f) The Bank shall send the claimant a written decision on any
request for review within 60 days after the date it receives a request
for review, unless an extension of time is needed, due to special
circumstances. In that case, the Bank may authorize an extension of an
additional 60 days, provided it notifies the claimant of the extension
within the initial 60-day period.
(g) The review decision shall contain:
(i) the specific reason or reasons for the decision; and
(ii) specific reference to the pertinent Agreement
provisions upon which the decision is based.
(h) If the Bank does not send the claimant a review decision
within the applicable time period, the claim shall be deemed denied on
review.
(i) The denial notice or, in the case of a timely review,
the review decision (including a deemed denial under subparagraph 9(h))
shall be the Bank's final decision.
10. Assignment.
----------- Neither Forsythe nor his beneficiaries may
transfer his or her right to payments to which he or she is entitled
under this Agreement. Except insofar as may otherwise be required by
law, any Supplemental Retirement Benefit payable under this Agreement
shall not be subject in any manner to alienation by anticipation, sale,
transfer, assignment, pledge or encumbrance, nor subject to the debts,
contracts, or liabilities of Forsythe or his beneficiaries.
-11-
11. Continued Employment.
--------------------- This Agreement shall not be construed
as conferring on Forsythe a right to continued employment with the Bank.
12. Funding.
--------
(a) The Supplemental Retirement Benefit at all times shall
be entirely unfunded, and no provision shall at any time be made with
respect to segregating any assets of the Bank for payments of any
benefits hereunder.
(b) Neither Forsythe nor his beneficiaries shall have any
interest in any particular assets of the Bank by reason of the right to
receive a benefit under this Agreement. Forsythe and his beneficiaries
shall have only the rights of general unsecured creditors of the Bank
with respect to any rights under this Agreement.
(c) Nothing contained in this Agreement shall constitute a
guarantee by the Bank or any entity or person that the assets of the
Bank will be sufficient to pay any benefit hereunder.
13. Withholding.
------------ Any payment made pursuant to this Agreement
shall be reduced by federal and state income, FICA or other employee
payroll, withholding or other similar taxes the Bank may be required to
withhold. In addition, as the Supplemental Retirement Benefit accrues
during Forsythe's employment with the Bank, the Bank may withhold from
Forsythe's regular compensation from the Bank any FICA or other employee
payroll, withholding or other similar taxes the Bank may be required to
withhold.
-12-
14. Successors and Assigns.
----------------------- This Agreement shall be binding
upon, and shall inure to the benefit of, the successors and assigns of
the Bank.
15. Applicable Law.
--------------- This Agreement shall be construed and
administered in accordance with the laws of the State of New York.
16. Amendment.
---------- This Agreement may not be amended, modified or
otherwise altered except by written instrument executed by both parties.
17. Entire Agreement.
----------------- This Agreement constitutes the entire
agreement and understanding of the parties, and supersedes all prior
agreements or understandings (whether oral or written) between the
parties, relating to deferred compensation and/or supplemental
retirement income.
-13-
The parties hereby execute this Agreement as follows:
NBT BANCORP INC.
By: /s/Everett A. Gilmour
--------------------------------
Date: Aug 22, 1995 Its: Chairman of Board
------------ --------------------------------
NBT BANK, NATIONAL ASSOCIATION
By: /s/Paul O. Stillman
--------------------------------
Date: 8/22/95 Its: Compensation Committee Chairman
------------ -------------------------------
Date: 8/22/95 /s/Daryl R. Forsythe
------------ -------------------------------
Daryl R. Forsythe
-14-
EXHIBIT 10.2
Death Benefits Agreement between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe made August 22, 1995
DEATH BENEFITS AGREEMENT
THIS AGREEMENT, made and entered into this 22nd day of August, 1995,
by and among NBT Bancorp Inc., a Delaware corporation and registered bank
holding company, and NBT Bank, National Association, a national banking
association organized under the laws of the United States (hereinafter
referred to collectively as the "Bank") and Daryl R. Forsythe, an individual
residing at 13 Concord Street, Sidney, New York, NY 13838 (hereinafter
referred to as the "Employee").
WHEREAS, the Bank has retained the Employee as its president and
chief executive officer; and
WHEREAS, the Bank is desirous of retaining the services of the
Employee; and
WHEREAS, the Bank is desirous of assisting the Employee in
carrying life insurance on his life; and
WHEREAS, the Bank has determined that its interests can best be
served under a "split-dollar" arrangement; and
WHEREAS, the Bank and the Employee have applied for Insurance
Policy No. 8876212 (the "Policy") issued by the New England Mutual Life
Insurance Company ("The New England") in the face amount of $800,000 on
the Employee's life; and
WHEREAS, the Bank and the Employee agree to make said insurance
policy subject to this split-dollar agreement; and
WHEREAS, it is now understood and agreed that this split-dollar
agreement is to be effective as of the date on which the Policy was
issued by The New England.
NOW, THEREFORE, for value received and in consideration of the
mutual covenants contained herein, the parties agree as follows:
ARTICLE I - DEFINITIONS
-----------------------
For purposes of this Agreement, the following terms will have the
meanings set forth below:
1. "Cash Surrender Value of the Policy" will mean the Cash Value
of the Policy, plus the cash value of any paid-up additions, plus any
dividend accumulations and unpaid dividends, and less any Policy Loan
Balance.
2. "Cash Value of the Policy" will mean the cash value as
illustrated in the table of values shown in the Policy.
3. "Bank's Interest in the Policy" will be defined in Article VII.
-1-
4. "Current Loan Value of the Policy" will mean the Loan Value of
the Policy reduced by any outstanding Policy Loan Balance.
5. "Loan Value of the Policy" will mean the amount which together
with loan interest will equal the Cash Value of the Policy and of any
paid-up additions on the next loan interest due date or on the next
premium due date, whichever is the smaller amount.
6. "Policy Loan Balance" at any time will mean policy loans
outstanding plus interest accrued to date.
ARTICLE II - ALLOCATION OF PREMIUMS
-----------------------------------
The Bank will pay all premiums on the Policy when due.
ARTICLE III - WAIVER OF PREMIUMS RIDER
--------------------------------------
The Bank has added a rider to the Policy providing for the waiver
of premiums in the event of the Employee's disability. Any additional
premium attributable to such rider will be payable by the Bank.
ARTICLE IV - OTHER RIDERS AND SUPPLEMENTAL AGREEMENTS
-----------------------------------------------------
Should the parties to this Agreement deem it desirable, the Bank
will add to the Policy one or more of such other riders and supplemental
agreements which may be available from The New England from time to
time. Any additional premium attributable to any such rider or
supplemental agreement will be payable by the Bank. Notwithstanding the
provisions of Article VIII, any additional death benefits provided by
such rider or supplemental agreement will be paid to the Bank, unless
otherwise agreed to by the parties at the time of the adoption of the
particular rider or supplemental agreement.
ARTICLE V - PAYMENT OF PREMIUMS
-------------------------------
Any premium or portion thereof which is payable by the Employee
under any Article of this Agreement may at the election of the Employee
be deducted from the cash compensation otherwise payable to him, and the
Bank agrees to transmit that premium or portion, along with any premium
or portion thereof payable by it, to The New England on or before the
premium due date.
ARTICLE VI - APPLICATION OF POLICY DIVIDENDS
--------------------------------------------
All dividends attributable to the Policy will be to provide paid-up
additional insurance.
-2-
ARTICLE VII - RIGHTS IN THE POLICY
----------------------------------
The Employee will have the sole right to designate the beneficiary
of the death proceeds of the Policy in excess of the Bank's Interest in
the Policy. The Bank will have and may exercise, except as limited
hereinafter, all ownership rights in the Policy. The Bank will not
surrender the policy for cancellation except upon expiration of the
thirty (30) day period described in Article X. The Bank will not
without the written consent of the Employee assign its rights in the
Policy, other than for the purposes of obtaining a loan against the
Policy, to anyone other than the Employee. The Bank will not take any
action dealing with The New England that would impair any right or
interest of the Employee in the Policy. The Bank will have the right
to borrow from The New England and to secure that loan by the Policy,
an amount which, together with the unpaid interest accrued thereon, will
at no time exceed the lesser of (a) the Bank's Interest in the Policy
or (b) the Loan Value of the Policy. "Bank's Interest in the Policy"
will mean, at any time at which the value of such interest is to be
determined under this Agreement, the Cash Surrender Value of the Policy
at such time.
ARTICLE VIII - RIGHTS TO THE PROCEEDS AT DEATH
----------------------------------------------
In the event of the Employee's death while this Agreement is in
force, the beneficiary designated by the Employee will receive $600,000
from the Policy proceeds. The Bank will receive the remainder of the
Policy proceeds.
ARTICLE IX - TERMINATION OF AGREEMENT
-------------------------------------
1. This Agreement may be terminated at any time while the Employee
is living by written notice thereof by either the Bank or the Employee
to the other; and, in any event, this Agreement will terminate upon
termination of the Employee's employment.
2. In the event of the Employee's total disability, as defined in the
rider, which begins while the Employee is employed, while the rider is
in force, and which continues for at least six months, the benefits
provided under this Agreement will continue until midnight before the
Employee's 65th birthday. If at any time following the initial six
month period of disability as defined in the rider The New England stops
waiving premiums, then Section 1 of this Article will again be
applicable.
ARTICLE X - EMPLOYEE RIGHTS UPON TERMINATION
--------------------------------------------
Upon termination of the Agreement, the Employee will transfer all
of his right, title and interest in the Policy to the Bank, by executing
such documents as are necessary to transfer such right, title and
interest as of the date of termination. The Bank will thereafter be able to
deal with the Policy in any way it may see fit.
-3-
ARTICLE XI - PLAN MANAGEMENT
----------------------------
For purposes of the Employee Retirement Income Security Act of
1974 ("ERISA"), the Bank will be the "Named Fiduciary" and "Plan
Administrator" of the split dollar life insurance plan (the "Plan") for
which this Agreement is hereby designated the written plan instrument.
The Bank's board of directors may authorize a person or group of persons
to fulfill the responsibilities of the Bank as Plan Administrator. The
Named Fiduciary or the Plan Administrator may employ others to render
advice with regard to its responsibilities under this Plan. The Named
Fiduciary may also allocate fiduciary responsibilities to others and may
exercise any other powers necessary for the discharge of its duties to
the extent not in conflict with ERISA.
ARTICLE XII - CLAIMS PROCEDURE
------------------------------
1. Filing Claims: Any insured, beneficiary or other individual
(hereinafter "Claimant") entitled to benefits under the Plan or under
the Policy will file a claim request with the Plan Administrator with
respect to benefits under the Plan with The New England with respect to
benefits under the Policy. The Plan Administrator will, upon written
request of the Claimant, make available copies of any claim forms or
instructions provided by The New England or advise the Claimant where
such forms or instructions may be obtained.
2. Notification to Claimant: If a claim is wholly or partially
denied, the Plan Administrator will furnish to the Claimant a notice of
the decision within ninety (90) days in writing and in a manner
calculated to be understood by the Claimant, which notice will contain
the following information:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions upon
which the denial is based;
(c) A description of any additional material or
information necessary for the Claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(d) An explanation of the Plan's claims review procedure
describing the steps to be taken by a Claimant who
wishes to submit his claim for review.
In the case of benefits which are provided under the Policy, the initial
decision on the claims will be make by The New England.
3. Review Procedure: A Claimant or his authorized representative may
with respect to any denied claim:
(a) Request a review upon written application filed within
sixty (60) days after receipt by the Claimant of
written notice of the denial of his claim;
-4-
(b) Review pertinent documents; and
(c) Submit issues and comments in writing.
Any request or submission will be in writing and will be directed to the
Named Fiduciary (or its designee). The Named Fiduciary (or its
designee) will have the sole responsibility for the review of any denied
claim and will take all steps appropriate in the light of its findings.
4. Decision on Review: The Named Fiduciary (or its designee). The
Named Fiduciary (or its designee) will render a decision upon review.
If special circumstances (such as the need to hold a hearing or any
matter pertaining to the denied claim) warrant additional time, the
decision will be rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the request for review.
Written notice of any such extension will be furnished to the Claimant
prior to the commencement of the extension. The decision on review will
be in writing and will include specific reasons for the decision,
written in a manner calculated to be understood by the Claimant, as well
as specific references to the pertinent provisions of the Plan on which
the decision is based. If the decision on review is not furnished to
the Claimant with the time limits prescribed above, the claim will be
deemed denied on review.
ARTICLE XIII - SATISFACTION OF CLAIM
------------------------------------
The Employee agrees that his rights and interests, and the rights
and interests of any persons taking under or through him, will be
completely satisfied upon compliance by the Bank with the provisions of
this Agreement.
ARTICLE XIV - AMENDMENT AND ASSIGNMENT
--------------------------------------
This Agreement may be altered, amended or modified, including the
addition of any extra policy provisions, by a written instrument signed
by the Bank and the Employee. Either party may, subject to the
limitations of Article VII, assign its interests and obligations under
this Agreement, provided, however, that any assignment will be subject
to the terms of this Agreement.
ARTICLE XV - POSSESSION OF POLICY
---------------------------------
The Bank will keep possession of the Policy. The Bank agrees from
time to time to make the Policy available to the Employee or to The New
England for the purpose of endorsing or filing any change of beneficiary
on the Policy for that portion of the death proceeds in excess of the
Bank's Interest in the Policy as provided in Article VII, but the Policy
will promptly be returned to the Bank.
ARTICLE XVI - GOVERNING LAW
---------------------------
This Agreement sets forth the entire agreement of the parties hereto,
and any and all prior agreements, to the extent inconsistent herewith, are
hereby superseded.
-5-
This Agreement will be governed by the laws of the State of New York.
ARTICLE XVII - INTERPRETATION
-----------------------------
Where appropriate in this Agreement, words used in the singular
will include the plural and words used in the masculine will include the
feminine.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals,
the Bank by its duly authorized officer, on the day and year first
written above.
EMPLOYEE
/s/Daryl R. Forsythe
------------------------------(L.S.)
Daryl R. Forsythe
NBT Bancorp Inc.
/s/Everett A. Gilmour
------------------------------(L.S.)
By
Its Chairman of Board
NBT Bank, National Association
/s/Paul O. Stillman
------------------------------(L.S.)
By
Its Compensation Committee Chairman
-6-
EXHIBIT 10.3
NBT Bancorp & Subsidiaries Master Deferred Compensation
Plan for Directors, adopted February 11, 1992
NBT BANCORP & SUPSIDIARIES
--------------------------
1992 DEFERRED COMPENSATION PLAN FOR DIRECTORS
---------------------------------------------
NBT Bancorp Inc. and Subsidiaries ("NBT") Deferred Compensation Plan
for Directors ("Plan") is an unfunded deferred compensation plan developed to
provide Directors of NBT with the opportunity to defer payment of their
director, advisory board, and committee fees in accordance with the provisions
of the Plan.
ARTICLE I
---------
Director's Election
-------------------
Each NBT director may elect on or before December 31st of any year to
defer receipt of all or a specified part of the Director's fees earned as a
director of NBT for succeeding calendar years. Any person elected to the
Board of Directors of NBT, and who was not a Director on the preceding
December 31st, may elect, within 30 days of such election, to defer all or a
specified part of the fees for the balance of the calendar year (remaining
after such election to defer) in which such election occurred and for
succeeding calendar years.
The election of a Director must be in writing and submitted to the
Secretary or Treasurer of NBT within the time specified above, and such
election to defer fees will continue from year to year unless the Director
terminates it by written notice to the Secretary or Treasurer of NBT. The
notice of termination of an election will not affect previously deferred fees,
and such fees shall be paid out only in accordance with the provisions of the
Plan. The election of a Director is automatically terminated at the close of
the calendar year in which such Director attains age 72.
ARTICLE II
----------
Maintenance of Accounts
-----------------------
NBT will maintain a separate memorandum account ("Account") of the
fees deferred by each Director and will credit such Account with interest as
provided in Article III hereof. NBT will provide each participating Director
with a year-end statement of such Director's Account within 45 days after the
end of each calendar year.
This memorandum account shall not be deemed to give the Director any
right, title or interest to such account and all deferred fees shall be
subject to the provisions of Article VIII.
ARTICLE III
-----------
Interest on Accounts
--------------------
Interest shall be computed monthly, based on the lowest balance in
each Director's Account during the month, as if invested at an annual rate
equal to the highest annual rate offered by NBT on any customer deposit
account in effect on the last day of the preceding calendar year. Such
interest shall be credited to the Director's Account as of the last day of
each calendar month.
ARTICLE IV
----------
Distribution of the Accounts
----------------------------
NBT will distribute the balance in the Account over five (5) annual
installments to the Director upon the Director ceasing to be a director of
NBT, or, upon the Director's death, to the Beneficiary or Beneficiaries (as
designated in Article V hereof) beginning on each January 31st of the first
calendar year beginning after the Director terminates his or her directorship,
or attains age 72; or if a Director dies before payments have begun under the
Plan, NBT shall pay the first installment to the Director's Bendficiary or
Beneficiaries on the first January 31st following the date of the Directors
death. NBT shall pay each annual installment due thereafter on January 31st
of each subsequent year.
If a Director becomes a proprietor, director, officer, partner,
employee, or otherwise becomes affiliated with any business that is in direct
competition with NBT, or with any of its affiliates or subsidiaries, as
determined by the Board of Directors in its sole discretion, without the
written consent of the Board of Directors, the Board of Directors may direct
the payment of the entire balance in the Account to such Director in a lump
sum.
The Board of Directors may, in its sole discretion, accelerate
payment of all or any portion of a Director's remaining Account under the
Plan, if the Board of Directors determines that the Director is in serious
financial need or has had encountered some other hardship or disaster
providing good and justifiable cause for accelerating such payments.
The director shall have the option to defer payment of his or her
Account distribution for a period of up to five (5) years after termination
as a member of the Board of Directors by an election made in writing no
later than December 31st of the calendar year prior to termination. Such
election may be made only with the written consent to the Board of directors
of NBT, which consent shall not be unreasonably withheld. During this
additional deferred period, interest shall accrue in accordance with Article
III of the Plan.
ARTICLE V
---------
Designation of Beneficiary
--------------------------
The director may designate a Beneficiary or Beneficiaries by
delivering a notice of such designation in writing to the Secretary or
Treasurer of NBT, which designation may be changed from time to time by
written notice to the Secretary or Treasurer. Upon the death of any
Director, the remaining balance of the Director's Account shall be paid to
the Beneficiary or Beneficiaries in accordance with the provisions of Article
IV hereof. If the designated Beneficiary or Beneficiaries fail to survive
the Director, or if a Director fails to designate a Beneficiary, NBT shall
pay the balance in the Account to the estate of such Director in a lump sum.
ARTICLE VI
----------
Inalienability of Benefits
--------------------------
The right of any Director to receive payment from the Account under
the provisions of this Plan shall not be subject to alienation or assignment,
and if a Director shall attempt to assign, transfer, or dispose of such
right, or should such right be subject to attachment, execution, garnishment,
sequestration, or other legal, equitable, or other process, it shall pass and
be transferred to one or more of such Director's Beneficiaries, spouse, blood
relatives, or dependents in such proportions as the Board of Directors may
choose; provided, however, that notwithstanding the foregoing, the Board of
Directors may revoke or amend its choice of the persons, or the proportions
received by such persons, previously chosen by the Board of Directors under
this Article VI.
ARTICLE VII
-----------
Amendment or Termination of Plan
--------------------------------
The Board of Directors may at any time amend or terminate this Plan,
but no such amendment or termination shall have the effect of reducing the
amount in the Account at the time such amendment or termination that any
Director is entitled to receive.
ARTICLE VIII
------------
Unsecured Creditor
------------------
Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of
any kind, or a fiduciary relationship between NBT and the Director, his or
her designated beneficiary or any other person, no shall the Director 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 Director pursuant to
the terms herein. to the extent that the Director, 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.
ARTICLE IX
----------
Intent
------
The intent of this Plan is to create a nonqualified, unfunded,
deferred compensation plan which will defer the deduction of such
compensation for tax purposes by NBT and which will correspondingly defer
the recognition of such compensation by the Director until such fees are
actually paid. It is therefore intended, and this Plan shall be construed
and where necessary modified, so that the Director shall not be deemed to
have constructively received such deferred compensation.
ARTICLE X
---------
Other
-----
This Plan shall be binding upon and inure to the benefit of NBT and
any successor of NBT, including any person, firm, corporation, or other
business entity which at any time, by merger, consolidation, purchase or
otherwise, acquires all or substantially all of the stock, assets or business
of NBT, and shall be binding upon the participants, the participant's heirs,
executors, administrators, successors and assigns.
Any action to be taken by the Board of Directors under this Plan may
be taken by such Board Executive Committee.
EXHIBIT 10.4
Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, National
Association and Daryl R. Forsythe made as of August 1, 1995
NBT Bancorp Inc.
NBT Bank, National Association
52 South Broad Street
Norwich, NY 13815
Date: August 1, 1995
To Daryl R. Forsythe
RE: WAGE CONTINUATION PLAN
In consideration of your valuable services, the Board of Directors NBT
Bancorp Inc. and NBT Bank, National Association (hereinafter
collectively referred to as the "Bank") have approved a Wage
Continuation Plan for you in the event that you are disabled as a
result of sickness or injury.
Your Qualified Wage Continuation Plan provides that:
1. During the first three months of disability you will receive 100%
of your regular wages, reduced by any benefits you receive from
Social Security, Workers Compensation, State Disability Plan, or
similar governmental plan or any other program, e.g. group
insurance coverage, paid for by the Bank.
2. In addition, in the event that your disability continues beyond
three months, your benefit payments shall be $7,000 from policy
#191D263410 issued by the New England Mutual Life Insurance
Company, which is enclosed with this letter for your safekeeping.
3. 100% of the premium for the policy will be paid by the Bank while
you are employed by it and while the Plan is in effect.
4. With regard to the operation and management of the Plan and its
assets, the Bank will be responsible and have full discretion;
except that the insurance company shall have responsibility with
regard to those aspects of the Plan which are governed by the
terms of the insurance contract. In accepting the foregoing
responsibility, the Bank will serve as the Plan fiduciary and
administrator under the terms of the Employee Retirement Income
Security Act ("ERISA"), as amended.
5. If a request for benefits is denied, the insurance company will
provide you with written notice stating the reasons for denial
and an explanation of the procedure by which such may be
reviewed. Upon request for such review, you or your
representative will be permitted to review pertinent Plan
documents and submit issues and comments in writing.
-1-
6. If a request for benefits under the insurance contract is denied,
you or your representative must contact the insurance company for
details and review of such denial.
7. This Plan may be amended or terminated by the Board of Directors
of the Bank at any time; any such amendment or termination will
be effective as determined by the Board of Directors.
Sincerely,
/s/Everett A. Gilmour
-2-
NBT BANCORP INC.
NBT BANK, NATIONAL ASSOCIATION
WAGE CONTINUATION PLAN FOR EMPLOYEES
ENROLLMENT AGREEMENT
--------------------
Name Daryl R. Forsythe
Social Security Number ###-##-####
I have read and understand the Summary Plan Description of the NBT
Bancorp Inc. and NBT Bank, National Association Wage Continuation Plan
(the "Plan"), and agree to be bound by the Plan terms and hereby elect
to become a Participant with respect to benefits for which I am
eligible thereunder.
I hereby elect (check one)
X The maximum insured benefits available to me from the insurer up
- ---- to the limit specified under the Plan.
- ---- No insured benefits under the Plan.
I understand that if I have elected not to participate in the insured
benefits, the Employer will have no responsibility for the payment of
disability insurance premiums on my behalf or to provide equivalent
benefits in an other form; but I shall have the right to change this
election after one year from the date of my election not to participate
and as of the next annual plan entry date, provided that the Plan
remains in force and I meet all of the eligibility requirements at that
time.
I understand that it is my responsibility to apply for any disability
insurance to which I am entitled and to fulfill any additional
requirements of the insurer relative to the issuance thereof. I agree
that, apart from the obligations of the NBT Bancorp Inc. and NBT Bank,
National Association to make premium payments pursuant to the terms of
the Plan, neither NBT Bancorp Inc. and NBT Bank, National Association
nor any of their shareholders, directors, officers, or employees will
have any responsibility with respect to the issuance of my insurance
or the payment of any benefits provided by such insurance. I agree
that, to the extent that I am responsible for any portion of the
premiums for my insurance, such amounts may be withheld from my cash
compensation and transmitted directly to the insurer by the NBT Bancorp
inc. and NBT Bank, National Association.
Date 8-22-95 Signature /s/Daryl R. Forsythe
------- ---------------------
-1-
NBT BANCORP INC.
By:/s/Everett A. Gilmour
--------------------------------
Its:Chairman of Board
-------------------------------
NBT BANK, NATIONAL ASSOCIATION
By:/s/Paul O. Stillman
--------------------------------
Its:Compensation Committee Chairman
-------------------------------
-2-
SUMMARY PLAN DESCRIPTION
NBT BANCORP INC.
NBT BANK, NATIONAL ASSOCIATION
WAGE CONTINUATION PLAN
----------------------
Name of Plan
- ------------
The plan will be known as the Wage Continuation Plan.
Plan Year
- ---------
The Plan Year will be January 1 through December 31, and the records
of the Plan are kept on a calendar year basis.
Administrator
- -------------
The Plan Administrator is NBT Bancorp Inc. and NBT Bank, National
Association, whose address is 52 South Broad Street, Norwich, NY 13815.
Employer Contributions
- ----------------------
The Employer will contribute on behalf of each Participant an amount
necessary to purchase a policy providing the benefits to which he/she
is entitled. The Employer will pay its share of premiums while the
Plan is in effect and while the Employee continues as a Participant in
the Plan; the Employer will have no obligation to pay any premiums
after a Participant ceases active full-time employment with the Bank.
Definitions
- -----------
1. The effective date of the Plan is August 1, 1995.
2. "Waiting Period" is the later of six months following the date
of full-time employment or the Effective Date.
3. The "Entry Date" is the date following the Waiting Period upon
which a Policy is issued for a plan Participant. If an Employee elects
not to participate in the Plan, he/she must wait one full year after
the date of his/her election not to participate before being eligible
to participate in the Plan.
4. The "Employer" is NBT Bancorp Inc. or NBT Bank, National
Association, or any successor thereto and any other corporation,
business association, or proprietorship which shall assume in writing
the obligations of the Plan.
-1-
5. "Employee" is a person regularly employed by the Employer,
excluding such persons who are customarily employed for not more than
twenty (20) hours in any one week or for not more than five (5) months
in any calendar year.
6. "Participant" means an Employee who has a Policy issued and in
force on his/her life by the Insurer under the terms of the Plan.
7. "Compensation" means as of his/her Entry Date in the Plan the
Employee's annual base rate of salary or wage, plus any bonuses,
commissions, and overtime payments.
8. "Insurer" means the New England Mutual Life Insurance Company or
any other company which shall issue a Policy as defined in the Plan.
9. "Policy" means an individual Guaranteed Renewable or Non-
Cancelable Disability Income contract issued by the Insurer.
10. "Commencement Date" is the day when benefits begin during a
continuous period of disability.
11. "Qualification Period" is the number of days that Total
Disability, as defined in the Policy, must continue before Residual
Partial Disability Benefits, as defined in the Policy, can be payable.
12. "Maximum Benefit Period" is the longest period of time for which
the New England Mutual Life Insurance Company will pay benefits during
any period of continuous disability as defined in the Policy.
13. "Disability" has the meanings contained in the Policy.
14. "Full-time Employment" has the same definition as used for the
Employer's qualified pension plan.
Benefits
- --------
The Commencement Date, Qualification Period, Maximum Benefit Period,
Total Disability Benefit and Residual Disability Benefit are described
in detail on the definitions page of the Policy or Policies delivered
as part of this Plan. For exact details of these and other provisions,
refer to your Policy(ies).
Satisfactory Health Requirements
- --------------------------------
Participation in this Plan requires evidence of insurability as
determined by the Insurer. Employees who do not satisfy all
requirements of the Insurer may be issued limited coverage, if
-2-
available, in lieu of complete exclusion from the Plan. An otherwise
eligible Employee who does not meet the Insurer's requirements for a
Policy will not be a Participant in this Plan.
The Employer will pay its share of premiums while the Plan is in effect
and while the Employee continues as a Participant in the Plan; the
Employer will have no obligation to pay any premiums after a
Participant ceases active full-time employment with the Bank.
Ownership of Policies
- ---------------------
Each Participant will be the applicant, owner and holder of his/her
Policy. As the insured-owner, he/she is responsible for submitting any
claims directly to the Insurer and will receive claim payments directly
from the Insurer. The Employer is in no way responsible for the
processing of claims or the payment thereof, and the determination of
claim payments rests solely and wholly with the Insurer. The insured-
owner may request the Employer to withhold income tax from sick pay
payments. Should such a request be made, the Insurer is required to
deduct and withhold the appropriate amount from claim payments. The
Employer will furnish the insured-owner with the necessary forms for
income tax purposes.
Policy Continuation
- -------------------
When a Participant ceases active full-time employment with the Bank,
he/she has the right as policy-owner to assume premium payments for
his/her Policy and maintain it in force subject to the terms of the
Policy.
Termination of Employment and/or Plan
- -------------------------------------
In the event of termination of employment of a Participant, the
Employer will reduce the total premium for the Plan by the amount of
the terminated Participant's premium and inform the Insurer of such
termination.
The Employer may terminate this Wage Continuation Plan by an express
declaration in writing and by notifying the Insurer and each
Participant of such action. At termination each Participant may assume
payment of premiums for his/her Policy.
Miscellaneous
- -------------
The terms of the Plan anticipate addition of new Participants and
changes in coverage for existing Participants from time to time.
However, the Employer is in no way obligated to provide benefits for
any Employee or for which an Employee may have become eligible but for
which no Policy has been issued.
The Employer's liability for wage continuation payments is discharged
by the payment of premiums for each Individual Policy. Failure of the
Insurer to approve or otherwise honor claim for payment will in no way
obligate the Employer.
-3-
How To Make Inquiries, Transactions, and Claims for Benefits Under Plan
- -----------------------------------------------------------------------
Any inquiry, transaction, or claim for benefits under the Plan must be
made by addressing in writing the Plan Administrator who will also
serve as Agent for Service of Process.
If a claim for benefits by any Participant is denied in whole or in
part, then the New England Mutual Life Insurance Company of Boston,
Massachusetts, will set forth in writing the specific reasons for such
denial.
Further Information
- -------------------
This is a brief summary of benefits available. Complete terms and
conditions governing the Plan are set forth in the Policies
underwritten by the New England Mutual Life Insurance Company of
Boston, Massachusetts.
In the event of conflict between this summary and the Policies, the
Policies are the controlling documents.
If you have any questions, you may write to the Plan Administrator
named above, at the above address.
-4-
EXHIBIT 27
Financial Data Schedule
9
1,000
9-MOS
DEC-31-1995
SEP-30-1995
37,502
677
0
0
126,932
269,889
271,161
586,414
9,354
1,058,552
864,304
82,442
5,751
3,014
8,050
0
0
94,991
1,058,552
39,250
11,761
6,057
57,068
21,342
4,147
31,579
1,178
93
24,763
10,945
6,765
0
0
6,765
0.85
0.85
0.045
4,142
1,619
145
26,581
9,026
1,444
594
9,354
6,953
0
2,401
