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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, 2000.
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) 337-2265
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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, 2000, there were 23,692,625 shares outstanding of the
Registrant's common stock, $0.01 par value.
There were no shares of the Registrant's preferred stock, par value $0.01,
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, 2000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 2000, December 31,
1999 (Audited), and September 30, 1999
Consolidated Statements of Income for the three month and nine
month periods ended September 30, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the nine month
periods ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 2000 and 1999
Consolidated Statements of Comprehensive Income for the three month
and nine month periods ended September 30, 2000 and 1999
Notes to Unaudited Interim Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Information called for by Item 3 is contained in the Liquidity and
Interest Rate Sensitivity Management section of the Management
Discussion and Analysis.
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 SUBSIDIARIES SEPTEMBER 30, December 31, September 30,
CONSOLIDATED BALANCE SHEETS 2000 1999 1999
- -------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data) (UNAUDITED) (Unaudited)
ASSETS
Cash and cash equivalents $ 76,325 $ 79,629 $ 73,585
Securities available for sale, at fair value 590,895 606,727 628,962
Securities held to maturity (fair value-$104,742,
$109,147 and $110,473) 107,320 113,318 113,521
Loans 1,667,633 1,466,867 1,424,073
Less allowance for loan losses (22,682) (19,711) (19,101)
- -------------------------------------------------------------------------------------------------------------------
Net loans 1,644,951 1,447,156 1,404,972
Premises and equipment, net 44,308 47,097 46,744
Other assets 95,265 86,280 85,246
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,559,064 $2,380,207 $2,353,030
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (noninterest bearing) $ 284,600 $ 267,895 $ 264,537
Savings, NOW, and money market 632,809 605,334 599,221
Time 1,019,074 903,862 875,855
- -------------------------------------------------------------------------------------------------------------------
Total deposits 1,936,483 1,777,091 1,739,613
Short-term borrowings 154,162 142,267 147,304
Long-term debt 236,418 251,970 253,774
Other liabilities 25,018 17,407 17,746
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 2,352,081 2,188,735 2,158,437
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $0.01 par value at September 30, 2000,
no par, stated value $1.00 at December 31, 1999 and
September 30, 1999; shares authorized - 2,500,000 - - -
Common stock, $0.01 par value and 30,000,000 authorized
at September 30, 2000, no par, stated value $1.00 and 15,000,000
authorized at December 31, 1999 and September 30, 1999;
issued 24,213,882, 23,786,450, and 23,156,087 at September 30, 2000,
December 31, 1999 and September 30, 1999, respectively 242 23,786 23,156
Additional paid-in-capital 184,915 156,112 145,233
Retained earnings 48,030 44,949 54,167
Accumulated other comprehensive loss (14,921) (21,710) (15,182)
Common stock in treasury at cost, 521,257, 538,936,
and 590,489 shares at September 30, 2000, December 31, 1999
and September 30, 1999, respectively (11,283) (11,665) (12,781)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 206,983 191,472 194,593
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,559,064 $2,380,207 $2,353,030
- -------------------------------------------------------------------------------------------------------------------
See notes to unaudited interim consolidated financial statements.
-3-
Three months ended Nine months ended
NBT BANCORP INC. AND SUBSIDIARIES September 30, September 30,
CONSOLIDATED STATEMENTS OF INCOME 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) (Unaudited)
Interest and dividend income:
Loans $36,472 $29,780 $103,059 $85,451
Securities - available for sale 10,137 10,608 31,006 29,615
Securities - held to maturity 1,524 1,555 4,657 4,597
Other 768 576 1,864 1,835
- -------------------------------------------------------------------------------------------------------------------
Total interest and fee income 48,901 42,519 140,586 121,498
- -------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 19,038 14,097 52,830 41,480
Short-term borrowings 2,441 1,879 6,771 4,329
Long-term debt 3,352 3,478 10,133 9,384
- -------------------------------------------------------------------------------------------------------------------
Total interest expense 24,831 19,454 69,734 55,193
- -------------------------------------------------------------------------------------------------------------------
Net interest income 24,070 23,065 70,852 66,305
Provision for loan losses 1,619 1,325 5,418 3,860
- -------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 22,451 21,740 65,434 62,445
- -------------------------------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 2,208 2,048 6,365 5,786
Broker/dealer fees 1,009 - 1,573 -
Trust 784 835 2,455 2,505
Net securities gains 137 838 143 1,802
Other 1,485 1,491 4,325 4,640
- -------------------------------------------------------------------------------------------------------------------
Total noninterest income 5,623 5,212 14,861 14,733
- -------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 9,034 7,756 25,605 22,409
Office supplies and postage 660 643 2,062 2,171
Occupancy 1,342 1,279 4,172 3,858
Equipment 1,374 1,329 4,217 3,900
Professional fees and outside services 1,455 872 3,536 2,697
Data processing and communications 1,167 1,225 3,638 3,546
Amortization of intangible assets 445 329 1,159 1,003
Merger and acquisition costs 2,687 250 6,583 269
Other operating 1,974 2,335 6,568 5,859
- -------------------------------------------------------------------------------------------------------------------
Total noninterest expense 20,138 16,018 57,540 45,712
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes 7,936 10,934 22,755 31,466
Income taxes 2,781 3,915 8,251 11,029
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 5,155 $ 7,019 $14,504 $20,437
- -------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 0.22 $ 0.30 $ 0.62 $ 0.88
Diluted $ 0.22 $ 0.30 $ 0.62 $ 0.87
- -------------------------------------------------------------------------------------------------------------------
All per share data has been restated to give retroactive effect to stock
dividends and splits.
See notes to unaudited interim consolidated financial statements.
-4-
NBT BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other
Common Paid-in- Retained Comprehensive Treasury
Stock Capital Earnings Income (Loss) Stock Total
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
BALANCE AT DECEMBER 31, 1998 $23,188 $146,823 $43,253 $ 3,736 $(12,962) $204,038
Net income 20,437 20,437
Cash dividends - $0.486 per share (9,507) (9,507)
Payment in lieu of fractional shares (16) (16)
Purchase of 341,763 treasury shares (6,373) (6,373)
Issuance of 317,973 shares to
employee benefit and other
stock plans 96 12 4,824 4,932
Retirement of 128,263 treasury shares (128) (1,602) 1,730
Other comprehensive loss (18,918) (18,918)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999 $23,156 $145,233 $54,167 $(15,182) $(12,781) $194,593
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 $23,786 $156,112 $44,949 $(21,710) $(11,665) $191,472
Net income 14,504 14,504
Cash dividends - $0.510 per share (11,400) (11,400)
Payment in lieu of fractional shares (23) (23)
Issuance of 24,122 shares to employee
benefit and other stock plans 6 (146) 382 242
Change of $1.00 stated value per
share to $0.01 value per share (23,554) 23,554
Issuance of 420,989 shares to
purchase M. Griffith, Inc. 4 4,792 4,796
Tax benefit from stock options 603 603
Other comprehensive income 6,789 6,789
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000 $ 242 $184,915 $48,030 $(14,921) $(11,283) $206,983
- ---------------------------------------------------------------------------------------------------------------------
See notes to unaudited interim consolidated financial statements.
Note:
Dividend per share data represents historical dividends per share of NBT Bancorp
Inc. stand-alone and have been adjusted for stock dividends.
-5-
NBT BANCORP INC. AND SUBSIDIARIES Nine Months Ended September 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS 2000 1999
- -------------------------------------------------------------------------------------------------------------
(in thousands) (Unaudited)
OPERATING ACTIVITIES:
Net income $ 14,504 $ 20,437
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 5,418 3,860
Depreciation of premises and equipment 3,727 3,575
Net accretion on securities (188) (766)
Amortization of intangible assets 1,159 1,003
Proceeds from sales of loans originated for sale 10,947 25,823
Origination and purchases of loans held for sale (8,169) (22,553)
Net gain on sales of loans (82) (336)
Net loss on disposal of premises and equipment 39 -
Net loss (gain) on sale of other real estate owned 99 (415)
Writedown of other real estate owned 235 157
Net realized gains on sales of securities (143) (1,802)
Increase in other assets (6,778) (672)
Increase in other liabilities 7,794 76
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 28,562 28,387
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Net cash provided by acquisitions 33,170 -
Securities available for sale:
Proceeds from maturities 30,911 79,071
Proceeds from sales 10,270 107,473
Purchases (12,148) (248,919)
Securities held to maturity:
Proceeds from maturities 25,416 28,223
Purchases (21,316) (32,342)
Net increase in loans (207,013) (154,517)
Purchase of premises and equipment, net (499) (5,652)
Proceeds from sales of other real estate owned 1,463 2,519
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (139,746) (224,144)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase in deposits 122,718 75,306
Net increase in short-term borrowings 11,895 47,432
Proceeds from issuance of long-term debt 5,000 75,000
Repayments of long-term debt (20,552) (5,194)
Proceeds from issuance of common stock to stock plan 242 4,932
Purchase of treasury stock - (6,373)
Cash dividends and payment for fractional shares (11,423) (9,523)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 107,880 181,580
- -------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,304) (14,177)
Cash and cash equivalents at beginning of period 79,629 87,762
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 76,325 $ 73,585
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period
for:
Interest $ 60,970 $ 54,613
Income taxes 8,276 10,895
- -------------------------------------------------------------------------------------------------------------
See notes to interim consolidated financial statements.
-6-
NBT BANCORP INC, AND SUBSIDIARIES Nine Months Ended September 30,
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: 2000 1999
- --------------------------------------------------------------------------------------------------------------------------
(in thousands) (Unaudited)
Loans transferred to other real estate owned $ 1,104 $ 1,761
Fair value of assets acquired 1,068 -
Fair value of liabilities assumed 37,094 -
COMMON STOCK ISSUED FOR ACQUISITIONS 4,796 -
- --------------------------------------------------------------------------------------------------------------------------
See notes to interim consolidated financial statements.
-7-
Three months ended Nine months ended
NBT BANCORP INC. AND SUBSIDIARIES September 30, September 30,
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
(in thousands) (Unaudited)
Net Income $ 5,155 $ 7,019 $14,504 $ 20,437
- -----------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax
Unrealized holding gains (losses) arising during
period [pre-tax amounts of $8,572,
$(6,097), $11,115 and $(28,696)] 5,345 (3,769) 6,874 (17,831)
Less: Reclassification adjustment for net gains
included in net income [pre-tax amounts of
$(137), $(838), $(143) and $(1,802)] (81) (497) (85) (1,087)
- -----------------------------------------------------------------------------------------------------------------------
Total other comprehensive income (loss) 5,264 (4,266) 6,789 (18,918)
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income $10,419 $ 2,753 $21,293 $ 1,519
- -----------------------------------------------------------------------------------------------------------------------
See notes to unaudited interim consolidated financial statements.
-8-
NBT BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements include the
accounts of NBT Bancorp Inc. (the Registrant) and its wholly-owned subsidiaries,
NBT Bank, N.A. (NBT), LA Bank, N.A. (LA), Pioneer American Bank, N.A. (Pioneer
American) and NBT Financial Services, Inc. All intercompany transactions have
been eliminated in consolidation. Amounts in the prior period financial
statements are reclassified whenever necessary to conform to current period
presentation.
The consolidated balance sheet at December 31, 1999 has been derived from
the audited supplemental consolidated balance sheet at that date, which appears
in the Current Report on Form 8-K filed on August 1, 2000. The accompanying
unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to FORM 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. 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, 1999 and the supplemental
consolidated financial statements and notes thereto referred to above. The
September 30, 1999 unaudited interim consolidated financial statements have been
restated to give effect to the mergers with Lake Ariel Bancorp, Inc. and Pioneer
American Holding Company Corp., which closed on February 17, 2000 and July 1,
2000, respectively, and were accounted for as poolings-of-interest.
-9-
EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. All share and per
share data has been adjusted retroactively for stock dividends and splits.
The following is a reconciliation of basic and diluted earnings per share
for the periods presented in the consolidated income statements.
- ----------------------------------------------------------------------------------------------------------
Three months ended September 30, 2000 1999
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding 23,692 23,076
Net income available to common shareholders $ 5,155 $ 7,019
- ----------------------------------------------------------------------------------------------------------
Basic EPS $ 0.22 $ 0.30
- ----------------------------------------------------------------------------------------------------------
Diluted EPS:
Weighted average common shares outstanding 23,692 23,076
Dilutive common stock options 17 300
- ----------------------------------------------------------------------------------------------------------
Weighted average common shares and common
share equivalents 23,709 23,376
Net income available to common shareholders $ 5,155 $ 7,019
- ----------------------------------------------------------------------------------------------------------
Diluted EPS $ 0.22 $ 0.30
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2000 1999
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Basic EPS:
Weighted average common shares outstanding 23,476 23,104
Net income available to common shareholders $14,504 $20,437
- ----------------------------------------------------------------------------------------------------------
Basic EPS $ 0.62 $ 0.88
- ----------------------------------------------------------------------------------------------------------
Diluted EPS:
Weighted average common shares outstanding 23,476 23,104
Dilutive common stock options 71 323
- ----------------------------------------------------------------------------------------------------------
Weighted average common shares and common
share equivalents 23,547 23,427
Net income available to common shareholders $14,504 $20,437
- ----------------------------------------------------------------------------------------------------------
Diluted EPS $ 0.62 $ 0.87
- ----------------------------------------------------------------------------------------------------------
There were 944,690 stock options for the quarter ended September 30, 2000
and 219,672 stock options for the quarter ended September 30, 1999 that were not
considered in the calculation of diluted earnings per share since the stock
options' exercise price was greater than the average market price during these
periods. There were 791,174 stock options for the nine month period ended
September 30, 2000 and 217,572 stock options for the nine month period ended
September 30, 1999 that were not considered in the calculation of diluted
earnings per share since the stock options' exercise price was greater than the
average market price during these periods.
MERGERS AND ACQUISITIONS
On February 17, 2000, Lake Ariel Bancorp, Inc. (Lake Ariel), the parent company
of LA Bank, N.A., merged with and into NBT Bancorp Inc. with each issued and
-10-
outstanding share of Lake Ariel exchanged for 0.9961 shares of NBT Bancorp
Inc. common stock. The transaction resulted in the issuance of 5.0 million
shares of NBT Bancorp Inc. common stock, bringing the Company's outstanding
shares to 18.1 million after the merger. The merger results in NBT Bancorp Inc.
being the surviving holding company for NBT Bank, N.A. and LA Bank, N.A., and
NBT Financial Services, Inc. The merger is being accounted for as a
pooling-of-interests and qualifies as a tax-free exchange for Lake Ariel
shareholders. LA Bank, N.A. is a commercial bank headquartered in northeast
Pennsylvania with twenty-two branch offices in five counties and approximately
$570 million in assets at December 31, 1999.
On July 1, 2000, Pioneer American Holding Company Corp., the parent company
of Pioneer American Bank, N.A., merged with and into NBT Bancorp Inc. The merger
is being accounted for as a pooling-of-interests and qualifies as a tax-free
exchange for Pioneer American shareholders. Shareholders of Pioneer American
received 1.805 shares of NBT Bancorp Inc., resulting in the issuance of 5.2
million shares of NBT Bancorp Inc. common stock bringing the Company's
outstanding shares to 23.7 million after the merger. The merger results in NBT
Bancorp Inc. being the surviving holding company for NBT Bank, N.A., LA Bank,
N.A., Pioneer American Bank, N.A., and NBT Financial Services, Inc. Pioneer
American Bank, N.A. is a full service commercial bank with total assets of
approximately $418 million at June 30, 2000 and seventeen branches in northeast
Pennsylvania. Pioneer American Bank, N.A. will ultimately be merged together
with LA Bank, N.A. to form the largest community bank headquartered in northeast
Pennsylvania.
On May 5, 2000, NBT Bancorp Inc. completed the purchase of M. Griffith,
Inc., a Utica, New York based securities firm offering investment advisor and
asset-management services, primarily in the Mohawk Valley region. In the
transaction, $3.3 million was recognized as goodwill. M. Griffith, Inc., a
full-service broker/dealer and a Registered Investment Advisor, is a
wholly-owned subsidiary of NBT Financial Services, Inc. NBT Financial Services,
Inc. was created in September of 1999 to concentrate on expanding NBT Bancorp
Inc.'s menu of financial services.
On June 2, 2000, NBT Bancorp Inc.'s subsidiary (LA Bank, N.A.) purchased
two branches from Mellon Bank, recognizing the $4.3 million deposit premium as
an intangible asset.
On April 20, 2000, NBT Bancorp Inc. and BSB Bancorp, Inc. announced the
signing of a definitive agreement to merge, whereby shareholders of BSB Bancorp,
Inc. would receive a fixed ratio of 2.0 shares of NBT Bancorp Inc. common stock
for each share of BSB Bancorp, Inc. common stock. The merger was expected to
close in the fourth quarter of 2000, subject to shareholder and regulatory
approval. However, on October 4, 2000, NBT terminated its definitive agreement
to merge with BSB Bancorp, Inc.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes comprehensive
accounting and reporting requirements for derivative instruments and hedging
activities. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. The accounting for gains
or losses resulting from changes in the values of those derivatives would be
dependent on the use of the derivative and the type of risk being hedged. During
the second quarter of 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB No. 133". FASB No. 137 defers the effective date of FASB No. 133 by one
year from fiscal quarters of fiscal years beginning after June 15, 1999 to
fiscal quarters of fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued SFAS No. 138 "Accounting for Derivative Instruments and Hedging
Activities, and amendment to the FASB Statement No. 133". This statement amends
the accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and certain hedging activities. Based upon the preliminary
evaluations management has estimated that if NBT had adopted SFAS No. 133 on
September 30, 2000, the initial adoption would not have had a material effect on
NBT's financial statements. However, the effect of adoption on January 1, 2001
cannot be estimated with certainty at this time, as it is subject to unknown
variables at that date such as (1) actual derivatives and related hedge
positions, if any, (2) market values of derivatives and related hedged items, if
any, and (3) further ongoing interpretation of SFAS No. 133 by the FASB.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation". FASB Interpretation No.
44 clarifies the application of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" for certain issues. The adoption of
this Interpretation did not have a material effect on the Company's financial
position or results of operations.
-11-
NBT BANCORP INC. AND SUBSIDIARY
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to provide the reader with a
description of the financial condition and results of operations of NBT Bancorp
Inc. (Bancorp) and its wholly owned subsidiaries, NBT Bank, N.A. (NBT), LA Bank
N.A. (LA), Pioneer American Bank N.A. (Pioneer American) and NBT Financial
Services, Inc. collectively referred to herein as the Company. This discussion
will focus on Results of Operations, Financial Position, Capital Resources and
Asset/Liability Management. Reference should be made to the Company's interim
consolidated financial statements and footnotes thereto included in this FORM
10-Q. Reference should also be made to the Company's 1999 FORM 10-K and Current
Report on Form 8-K filed August 1, 2000, for an understanding of the following
discussion and analysis. Throughout this discussion and analysis, amounts per
common share and common shares outstanding have been adjusted retroactively for
stock dividends, splits and poolings of interest.
On October 23, 2000, NBT Bancorp Inc. announced the declaration of a
regular quarterly cash dividend of $0.17 per share. The cash dividend will be
paid on December 15, 2000 to stockholders of record as of December 1, 2000.
FORWARD-LOOKING STATEMENTS
This document and other documents filed by the Company with the Securities and
Exchange Commission (SEC) contain forward-looking statements. In addition, the
Company's senior management may make forward-looking statements orally to
analysts, investors, the media, and others. Forward-looking statements might
include one or more of the following: (a) projections of revenues, income,
earnings per share, capital expenditures, dividends, capital structure or other
financial items; (b) descriptions of plans or objectives of management for
future operations, products or services, including pending merger and
acquisition transactions; (c) forecasts of future economic performance; and (d)
descriptions of assumptions underlying or relating to any of the foregoing.
Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. They often include words such as
"anticipate," "believe," "expect," "forecast," "project," "intend," "plan,"
"estimate," or words of similar meaning, or future or conditional verbs such as
"will," "would," "should," "could" or "may."
These forward-looking statements involve risks and uncertainties and are
based on the beliefs and assumptions of the management of the Company and on the
information available to management at the time that these statements were made.
There are a number of factors, many of which are beyond the Company's control,
that could cause actual conditions, events or results to differ significantly
from those described in the forward-looking statements. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(1) competitive pressures among depository and other financial institutions may
increase significantly; (2) revenues may be lower than expected; (3) changes in
the interest rate environment may reduce interest margins; (4) general economic
conditions, either nationally or regionally, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality
and/or a reduced demand for credit; (5) legislative or regulatory changes,
including changes in accounting standards, may adversely affect the businesses
in which the Company is engaged; (6) costs or difficulties related to the
integration of the businesses of the Company and its merger partners may be
greater than expected; (7) expected cost savings associated with recent or
pending mergers and acquisitions may not be fully realized or realized within
the expected time frames; (8) deposit attrition, customer loss, or revenue loss
following pending mergers and acquisition may be greater than expected; (9)
competitors may have greater financial resources and develop products that
enable such competitors to compete more successfully than the Company; and (10)
adverse changes may occur in the securities markets or with respect to
inflation.
Forward-looking statements speak only as of the date they are made. The
Company does not undertake to update forward-looking statements to reflect
subsequent circumstances or events.
YEAR 2000
Concerns over the arrival of the Year 2000 ("Y2K") and its impact on the
embedded computer technologies used by financial institutions, among others, led
bank regulatory authorities to require substantial advance testing and
preparations by all banking organizations, including the Company. As of the date
of this filing, the Company has experienced no material problems in connection
with the arrival of Y2K, either in connection with the services and products it
-12-
provides to its customers or in connection with the services and products it
receives from third party vendors or suppliers. However, while no such
occurrence has developed, Y2K issues may arise that may not become immediately
apparent. Therefore, the Company will continue to monitor and work to remedy any
issues that arise. Although the Company expects that its business will not be
materially impacted, such future events cannot be known with certainty.
OVERVIEW
Net income of $5.2 million ($0.22 per diluted share) was recognized in the third
quarter of 2000, compared to third quarter 1999 net income of $7.0 million
($0.30 per diluted share). The third quarter of 2000 results include $2.2
million in after-tax merger and acquisition expenses. Also contributing to the
decline in net income was a decrease in pre-tax securities gains between
reporting periods from $0.8 million in the third quarter of 1999 to $0.1 million
during the same period of 2000.
Net income of $14.5 million ($0.62 per diluted share) was recognized for
the nine month period ended September 30, 2000, compared to net income of $20.4
million ($0.87 per diluted share) for the first nine months of 1999. The nine
month period ended September 30, 2000 include $5.4 million in after-tax merger
and acquisition expenses. Also contributing to the decline in net income for the
nine month period ended September 30, 2000 was $1.8 million in net gains on the
sales of securities during the first nine months of 1999 versus $0.1 million
during the same period of 2000.
Table 1 depicts several measurements of performance on an annualized
basis. Returns on average assets and equity measure how effectively an entity
utilizes its total resources and capital, respectively. Both the return on
average assets and the return on average equity ratios declined for the three
and nine month periods ended September 30, 2000 compared to the same periods a
year previous. The decline in these ratios can be attributed to the reduction in
net income for both periods as described above.
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 cost of funding. Interest
income for tax-exempt securities and loans is adjusted to a taxable equivalent
basis using the statutory Federal income tax rate of 35%.
TABLE 1
PERFORMANCE MEASUREMENTS
- ---------------------------------------------------------------------------------------
First Second THIRD NINE
Quarter Quarter QUARTER MONTHS
- ---------------------------------------------------------------------------------------
2000
Return on average assets 0.88% 0.66% 0.81% 0.78%
Return on average equity 10.95% 8.42% 10.14% 9.83%
Net interest margin 4.24% 4.15% 4.11% 4.17%
- ---------------------------------------------------------------------------------------
1999
Return on average assets 1.25% 1.21% 1.20% 1.22%
Return on average equity 13.16% 13.32% 14.25% 13.57%
Net interest margin 4.38% 4.34% 4.31% 4.34%
- ---------------------------------------------------------------------------------------
NET INTEREST INCOME
Net interest income is the difference between interest income on earning assets,
primarily loans and securities, and interest expense on interest-bearing
liabilities, primarily deposits and borrowings. Net interest income is affected
by the interest rate spread, the difference between the yield on earning assets
and cost of interest-bearing liabilities, as well as the volumes of such assets
and liabilities. Net interest income is one of the major determining factors in
a financial institution's performance as it is the principal source of earnings.
Net federal taxable equivalent (FTE) interest income increased $1.0 million
for the third quarter of 2000 compared to the same period of 1999. This increase
was primarily a result of the $214.5 million increase in average earning assets,
primarily the result of continued loan growth.
Total FTE interest income for the quarter ended September 30, 2000
increased $6.4 million compared to third quarter 1999, a result of the
previously mentioned increase in average earning assets as well as a 38 basis
point increase in the yield earned on those earning assets. The increase in the
yield on earning assets can be primarily attributed to a 38 basis point increase
-13-
in the yield on the loan portfolio. The increase in the yield earned on earning
assets can be attributed to the rising interest rate environment during late
1999 and the first half of 2000. During the same time period, total interest
expense increased $5.4 million, primarily the result of a $184.6 million
increase in average interest bearing liabilities between reporting periods. Also
contributing to the increased interest expense was a 68 basis point increase in
the cost of interest bearing liabilities, also the result of the rising interest
rate environment during late 1999 and early 2000. Driving this increase in the
cost of funds was a 95 basis point increase in the cost of time deposits and a
125 basis point increase in the cost of short-term borrowings. This increase in
the cost of funds resulted in a 30 basis point decline in the interest rate
spread, as the Company's liabilities repriced faster than the earning assets
during the rising rate environment.
Net federal taxable equivalent (FTE) interest income increased $5.0 million
for the first nine months of 2000 compared to the same period of 1999. This
increase was primarily a result of the $246.4 million increase in average
earning assets, primarily the result of continued loan growth.
Total FTE interest income for the nine months ended September 30, 2000
increased $19.5 million compared to same period of 1999, also a result of the
increase in average earning assets as well as a 28 basis point increase in the
yield earned on those earning assets. The increase in the yield on earning
assets can be primarily attributed to an 24 basis point increase in the yield on
the loan portfolio. During the same time period, total interest expense
increased $14.5 million, primarily the result of a $215.3 million increase in
average interest bearing liabilities between reporting periods. Also
contributing to the increased interest expense was a 52 basis point increase in
the cost of interest bearing liabilities, the result of the rising interest rate
environment during late 1999 and the first half of 2000. Driving this increase
in the cost of funds was a 66 basis point increase in the cost of time deposits
and a 112 basis point increase in the cost of short-term borrowings. This
increase in the cost of funds resulted in a 24 basis point decline in the
interest rate spread, as the Company's liabilities repriced faster than the
earning assets during the rising rate environment.
Another important performance measurement of net interest income is the net
interest margin. The net interest margin decreased to 4.11% for the third
quarter of 2000, down from 4.31% during the same period in 1999. The net
interest margin decreased to 4.17% for first nine months of 2000, down from
4.34% for the comparable period in 1999. The decrease in the net interest margin
during 2000 as compared to 1999 can be attributed to the previously mentioned
decrease in the interest rate spread as the interest bearing liabilities
repriced faster than the earning assets during the recent rising interest rate
environment.
Table 2 represents an analysis of net interest income on a federal
taxable equivalent basis. Interest income for tax-exempt securities and loans
has been adjusted to a taxable-equivalent basis using the Federal income tax
rate of 35%.
-14-
TABLE 2
COMPARATIVE ANALYSIS OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME
- -------------------------------------------------------------------------------------------------------------
Three months ended September 30,
Annualized
Yield/Rate Amounts Variance
- -------------------------------------------------------------------------------------------------------------
2000 1999 (dollars in thousands) 2000 1999 TOTAL VOLUME RATE
---- ---- ---- ---- ----- ------ ----
6.02% 3.28% Interest bearing deposits $ 29 $ 4 $ 25 $ 20 $ 5
6.44% 5.16% Federal funds sold 140 121 19 (7) 26
8.53% 6.64% Other 598 448 150 20 130
6.68% 6.64% Securities available for sale 10,395 10,864 (469) (540) 71
6.90% 6.80% Securities held to maturity 1,907 1,918 (11) (68) 57
8.88% 8.50% LOANS 36,692 29,982 6,710 5,346 1,364
------------------------------------------------------------------------------------
8.21% 7.83% Total interest income 49,761 43,337 6,424 4,771 1,653
3.74% 3.03% Money Market Deposit Accounts 1,324 1,000 324 79 245
1.84% 1.56% NOW accounts 974 758 216 71 145
2.78% 2.71% Savings accounts 1,946 1,877 69 21 48
5.86% 4.91% Time deposits 14,793 10,462 4,331 2,143 2,188
6.23% 4.98% Short-term borrowings 2,442 1,879 563 80 483
5.62% 5.54% LONG-TERM DEBT 3,352 3,478 (126) (178) 52
------------------------------------------------------------------------------------
4.87% 4.19% TOTAL INTEREST EXPENSE 24,831 19,454 5,377 2,216 3,161
------------------------------------------------------------------------------------
Net interest income $24,930 $23,883 $1,047 $ 2,555 $ (1,508)
=====================================================================================
3.34% 3.64% Interest rate spread
===== ===== ====================
4.11% 4.31% Net interest margin
===== ===== ===================
FTE adjustment $ 860 $ 818
============== ======= =======
Nine Months Ended September 30,
Annualized
Yield/Rate Amounts Variance
- -------------------------------------------------------------------------------------------------------------
2000 1999 (dollars in thousands) 2000 1999 TOTAL VOLUME RATE
---- ---- ---- ---- ----- ------ ----
5.67% 3.56% Interest bearing deposits $ 54 $ 15 $ 39 $ 26 $ 13
6.20% 4.77% Federal funds sold 293 541 (248) (510) 262
7.29% 6.58% Other 1,517 1,278 239 94 145
6.76% 6.58% Securities available for sale 31,797 30,249 1,548 726 822
6.83% 7.04% Securities held to maturity 5,818 5,623 195 358 (163)
8.79% 8.55% LOANS 103,708 85,950 17,758 15,239 2,519
-------------------------------------------------------------------------------------
8.13% 7.85% Total interest income 143,187 123,656 19,531 15,933 3,598
3.43% 2.94% Money Market Deposit Accounts 3,466 2,871 595 96 499
1.79% 1.70% NOW accounts 2,747 2,480 267 180 87
2.77% 2.74% Savings accounts 5,646 5,459 187 (391) 578
5.58% 4.92% Time deposits 40,971 30,670 10,301 5,863 4,438
5.94% 4.82% Short-term borrowings 6,771 4,329 2,442 1,305 1,137
5.61% 5.57% LONG-TERM DEBT 10,133 9,384 749 674 75
-------------------------------------------------------------------------------------
4.69% 4.17% TOTAL INTEREST EXPENSE 69,734 55,193 14,541 7,727 6,814
-------------------------------------------------------------------------------------
Net interest income $73,453 $68,463 $4,990 $ 8,206 $ (3,216)
======================================================================================
3.44% 3.68% Interest rate spread
===== ===== ====================
4.17% 4.34% Net interest margin
===== ===== ===================
FTE adjustment $ 2,601 $ 2,158
============== ======= =======
-15-
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a valuation allowance established to provide
for the inherent risk of loss in the Company's loan portfolio. The allowance is
maintained at a level considered adequate to provide for loan loss exposure
based on management's estimate of probable losses in the portfolio considering
an evaluation of risk, economic factors, and past loss experience. Management
determines the provision and allowance for loan losses based on a number of
factors including a comprehensive independent loan review program conducted
throughout the year. The loan portfolio is continually evaluated in order to
identify problem loans, credit concentration, and other risk factors such as
economic conditions and trends. The allowance for loan losses to outstanding
loans at September 30, 2000 is 1.36%, compared to 1.34% at September 30, 1999.
Management considers the allowance for loan losses to be adequate based on
evaluation and analysis of the loan portfolio.
Table 3 reflects changes to the allowance for loan losses for the periods
presented. Net charge-offs for the quarter ended September 30, 2000 increased
$31 thousand, or 3.4% compared to the same period of 1999. Annualized net
charge-offs to average loans declined to 0.23% for the third quarter of 2000,
down from 0.26% for the comparable period of 1999. Net charge-offs for nine
month period ended September 30, 2000 declined $543 thousand, or 18.16% compared
to the same period of 1999. Annualized net charge-offs to average loans declined
to 0.21% for the first nine months of 2000, compared to 0.30% for the comparable
period of 1999. The provision for loan losses of $1.6 million for the quarter
ended September 30, 2000 increased over the comparable period of 1999 provision
of $1.3 million. The provision for loan losses of $5.4 million for the nine
month period ended September 30, 2000 increased over the comparable period of
1999 provision of $3.9 million. The provision for loan losses was increased as a
result of continued significant loan growth, the changing mix of the Company's
loan portfolio and increased nonperforming loans, offset in part by a decline in
net charge-offs.
TABLE 3
ALLOWANCE FOR LOAN LOSSES
- -----------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands) 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------
Balance, beginning of period $22,005 $18,687 $19,711 $18,231
Recoveries 418 312 918 773
Charge-offs (1,360) (1,223) (3,365) (3,763)
- -----------------------------------------------------------------------------------------------------------
Net charge-offs (942) (911) (2,447) (2,990)
Provision for loan losses 1,619 1,325 5,418 3,860
- -----------------------------------------------------------------------------------------------------------
Balance, end of period $22,682 $19,101 $22,682 $19,101
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET CHARGE-OFFS
- -----------------------------------------------------------------------------------------------------------
Commercial and agricultural $ (363) 39% $ (565) 62% $ (982) 40% $(1,623) 54%
Real estate mortgage (160) 17% (54) 6% (432) 18% (241) 8%
Consumer (419) 44% (292) 32% (1,033) 42% (1,126) 38%
- -----------------------------------------------------------------------------------------------------------
Net charge-offs $ (942) 100% $ (911) 100% $(2,447) 100% $(2,990) 100%
- -----------------------------------------------------------------------------------------------------------
Annualized net charge-offs
to average loans 0.23% 0.26% 0.21% 0.30%
- -----------------------------------------------------------------------------------------------------------
Net charge-offs to average loans for the year ended
December 31, 1999 0.29%
- -----------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest income for the third quarter of 2000, excluding security gains,
increased $1.1 million or 25.4% when compared to third quarter of 1999. Service
charges on deposit accounts increased $0.2 million in the third quarter of 2000
compared to the same period of 1999. This improvement can be primarily
attributed to an increase in service fee and overdraft income resulting from
growth in demand deposit accounts. Broker/dealer fees increased $1.0 million in
the third quarter of 2000 compared to the same period of 1999. The increase in
other income can be attributed to revenue generated from the previously
mentioned addition of M. Griffith, Inc. in May of 2000.
-16-
For the nine month period ended September 30, 2000, excluding security
gains, noninterest income increased $1.8 million or 13.8% compared to the same
period during 1999. Service charges on deposit accounts increased $0.6 million
during this period. This improvement can be attributed to an increase in service
fee and overdraft income resulting from growth in demand deposit accounts.
Broker/dealer fees increased $1.6 million for the nine month period ended
September 30, 2000 compared to the same period of 1999. This increase is
primarily attributed to the addition of M. Griffith, Inc.
NONINTEREST EXPENSE AND OPERATING EFFICIENCY
Total noninterest expense for the quarter ended September 30, 2000 increased
$4.1 million compared to the same time period of 1999. Noninterest expense for
the nine month period ended September 30, 2000 increased $11.8 million compared
to the same time period of 1999. Contributing to the increase in noninterest
expense for the quarter and nine month period ended September 30, 2000 is $2.7
million and $6.6 million, respectively in pre-tax merger and acquisition related
expenses associated with the previously mentioned mergers and terminated merger.
It is anticipated that the Company will incur approximately $8.2 million in
additional merger and acquisition expenses related to the Lake Ariel and Pioneer
American mergers during 2000. In connection with the terminated merger with BSB
Bancorp, Inc., certain arrangements made prior to the merger termination are
currently being reviewed and could result in additional costs to NBT.
Salaries and employee benefits for the quarter and nine month period ended
September 30, 2000 increased $1.3 million and $3.2 million, respectively
compared to the same periods of 1999. Contributing to the increase in salaries
and employee benefits during 2000 was the addition of M. Griffith, Inc. in May
of 2000.
Occupancy expense for the nine month period ended September 30, 2000
experienced a $0.3 million increase compared to the same period in 1999.
Contributing to this increase in occupancy expense was a rise in security
expense resulting from a third party contract to enhance the maintenance of the
Company's security equipment.
Equipment expense for the nine month period ended September 30, 2000
experienced a $0.3 million increase compared to the same period in 1999,
primarily attributable to increased equipment depreciation and maintenance.
Professional fees and outside service expense for the three and nine month
periods ended September 30, 2000 increased $0.6 million and $0.8 million,
respectively compared to the same periods in 1999. These costs relate primarily
to the implementation of various strategic planning initiatives.
Other operating expense for the nine month period ended September 30, 2000
increased $0.7 million compared to the same periods of 1999. Included in other
operating expense were net gains on the sale of other real estate owned of $0.1
million for the nine month period ended September 30, 2000 compared to $0.5
million for the same period of 1999.
One important operating efficiency measure that the Company closely
monitors is the efficiency ratio. The efficiency ratio is computed as total
noninterest expense (excluding nonrecurring charges) divided by FTE net interest
income plus noninterest income (excluding net security gains and losses, OREO
gains and losses, and nonrecurring income). The efficiency ratio increased to
57.80% for the quarter ended September 30, 2000 from 55.70% in the same period
of 1999. The efficiency ratio increased to 57.65% for the nine month period
ended September 30, 2000 from 56.40% in the same period of 1999. The increase in
the efficiency ratio during 2000 can be attributed to the increase in
noninterest expense between reporting periods.
INCOME TAXES
Income tax expense was $2.8 million for the quarter ended September 30, 2000
compared with $3.9 million for the same period of 1999. For the first nine
months of 2000, income tax expense amounted to $8.3 million compared with $11.0
million in 1999. The decrease in income taxes during the quarter and nine month
period ended September 30, 2000 as compared to the same periods of 1999 can be
primarily attributed to the decreased income before income taxes between
reporting periods. The effective tax rate was 35.0% for the quarter ended
September 30, 2000 and 35.8% for the same period of 1999. The effective tax rate
was 36.3% for the nine month period ended September 30, 2000 and 35.1% for the
same period of 1999.
-17-
BALANCE SHEET
The following table highlights the changes in the balance sheet. Since period
end balances can be distorted by one day fluctuations, the discussion and
analysis concentrates on average balances when appropriate to give a better
indication of balance sheet trends.
TABLE 4
AVERAGE BALANCES
- -------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands) 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 77,225 $ 71,734 $ 72,139 $ 74,755
Securities available for
sale, at fair value 590,107 628,519 595,887 608,658
Securities held to maturity 110,006 111,926 113,840 106,851
Loans 1,643,462 1,398,952 1,575,799 1,344,374
Deposits 1,916,324 1,707,852 1,859,796 1,671,891
Short-term borrowings 155,863 149,646 152,210 120,090
Long-term debt 237,399 248,984 241,226 225,370
Stockholders' equity 202,287 195,392 197,057 201,364
Assets 2,538,817 2,320,438 2,473,584 2,237,266
Earning assets 2,410,854 2,196,432 2,353,684 2,107,284
Interest bearing liabilities $2,027,162 $1,842,590 $1,985,830 $1,770,522
- -------------------------------------------------------------------------------------------------
SECURITIES
Average total securities were $40.3 million less for the quarter ended September
30, 2000 than for the same period of 1999. Average total securities were $5.8
million less for the nine month period ended September 30, 2000 than for the
same period of 1999. During the quarter ended September 30, 2000, the securities
portfolio represented 29.0% of average earning assets compared to 33.7% for the
same period of 1999. Total securities at September 30, 2000 were $21.8 million
less than securities at December 31, 1999. The reduction in securities during
2000 is a result of the Company using the paydowns from its mortgage-backed
securities to fund loan growth. At September 30, 2000, the securities portfolio
was comprised of 85% available for sale and 15% held to maturity securities.
LOANS
Average loan volume for the quarter ended September 30, 2000 increased $244.5
million, or 17.5% over third quarter 1999. Average loan volume for the nine
month period ended September 30, 2000 increased $231.4 million, or 17.2% over
the same period of 1999. Total loans at September 30, 2000 were $200.8 million
greater than loans at December 31, 1999, primarily attributed to commercial
loans. The Company has continued to experience an increase in the demand for
commercial loans, primarily in the business and real estate categories. The
Company does not engage in highly leveraged transactions or foreign lending
activities.
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due
and still accruing, troubled debt restructurings (TDR's), and other real estate
owned (OREO). Total nonperforming assets were $13.0 million at September 30,
2000 compared to $11.2 million at September 30, 1999. An increase of $4.4
million in nonaccrual commercial and agricultural loans was partially offset by
a decrease in nonaccrual real estate mortgages and other real estate owned of
$1.6 million and $1.7 million, respectively. The changes in nonperforming assets
are presented in Table 5 below.
At September 30, 2000, the recorded investment in impaired loans was $7.8
million. Included in this amount is $4.4 million of impaired loans for which the
specifically allocated allowance for loan loss is $1.3 million. In addition,
included in impaired loans is $3.1 million of impaired loans that, as a result
of the adequacy of collateral values or anticipated cash flows do not have a
specific reserve. At December 31, 1999, the recorded investment in impaired
loans was $6.3 million, of which $1.7 million had a specific allowance
allocation of $0.7 million and $4.6 million for which there was no specific
reserve. At September 30, 1999, the recorded investment in impaired loans was
$4.9 million, of which $2.1 million had a specific allowance allocation of $1.0
-18-
million and $2.8 million of which there was no specific reserve. The Company
classifies all commercial and small business nonaccrual loans as impaired loans.
TABLE 5
NONPERFORMING ASSETS
- -----------------------------------------------------------------------------------------------------------
SEPTEMBER 30, December 31, September 30,
(in thousands) 2000 1999 1999
- -----------------------------------------------------------------------------------------------------------
Commercial and agricultural $ 7,810 84.37% $ 6,141 80.85% $3,370 56.72%
Real estate mortgage 491 5.30% 618 8.13% 2,047 34.46%
Consumer 956 10.33% 837 11.02% 524 8.82%
- -----------------------------------------------------------------------------------------------------------
Total nonaccrual loans 9,257 100% 7,596 100% 5,941 100%
- -----------------------------------------------------------------------------------------------------------
Loans 90 days or more past due and still accruing:
Commercial and agricultural 314 14.12% 1,201 59.28% 55 3.06%
Real estate mortgage 1,595 71.72% 641 31.64% 1,158 64.33%
Consumer 315 14.16% 184 9.08% 587 32.61%
- -----------------------------------------------------------------------------------------------------------
Total 2,224 100% 2,026 100% 1,800 100%
- -----------------------------------------------------------------------------------------------------------
Troubled debt restructured loans 747 1,014 1,017
Total nonperforming loans 12,228 10,636 8,758
Other real estate owned 745 1,438 2,471
Total nonperforming assets $12,973 $12,074 $11,229
- -----------------------------------------------------------------------------------------------------------
Nonperforming loans to loans 0.73% 0.73% 0.61%
Nonperforming assets to assets 0.51% 0.51% 0.48%
Allowance to nonperforming loans 185.49% 185.32% 218.10%
- -----------------------------------------------------------------------------------------------------------
DEPOSITS
Customer deposits represent the greatest source of funding assets. Average total
deposits for the quarter ended September 30, 2000 increased $208.5 million
compared to same period of 1999. This deposit growth was experienced in all
categories, with increases in demand, savings and time of $18.5 million, $30.5
million and $159.5 million, respectively. Average total deposits for the nine
month period ended September 30, 2000 increased $187.9 million compared to the
same period of 1999. This growth has also been present in all deposit
categories, with increases in demand, savings and time of $20.6 million, $19.8
million and $147.5 million, respectively. As previously mentioned, the increase
in demand deposits has led to an increase in service charge fee income.
BORROWED FUNDS
The Company's borrowed funds consist of short-term borrowings and long-term
debt. Average borrowings for the quarter ended September 30, 2000 were $393.3
million compared to $398.6 million for the same period of 1999. Average
borrowings for the nine month period ended September 30, 2000 were $393.4
million compared to $345.5 million for the same period of 1999. The increase in
borrowed funds for the nine month period ended September 30, 2000 can be
attributed to the need for funding the strong loan growth.
CAPITAL AND DIVIDENDS
Stockholders' equity of $207.0 million represents 8.1% of total assets at
September 30, 2000, compared with $191.5 million, or 8.0% at December 31, 1999
and $194.6 million, or 8.3% a year previous.
In September of 2000, the Company distributed a $0.17 per share cash
dividend. The Company does not have a target dividend payout ratio, rather the
Board of Directors considers the Company's earnings position and earnings
potential when making dividend decisions. The cash dividends as a percentage of
net income were 78.6% and 46.5% for the nine month periods ending September 30,
2000 and September 30, 1999, respectively.
As the capital ratios in Table 6 indicate, the Company remains well
capitalized. Capital measurements are significantly in excess of regulatory
minimum guidelines and meet the requirements to be considered well capitalized
for all periods presented. Tier 1 leverage, Tier 1 capital and Risk-based
capital ratios have regulatory minimum guidelines of 3%, 4% and 8% respectively,
with requirements to be considered well capitalized of 5%, 6% and 10%,
respectively.
-19-
TABLE 6
CAPITAL MEASUREMENTS
- -----------------------------------------------------------------------------------------
First Second THIRD
Quarter Quarter QUARTER
- -----------------------------------------------------------------------------------------
2000
Tier 1 leverage ratio 8.59% 8.20% 8.11%
Tier 1 capital ratio 13.24% 12.61% 12.54%
Total risk-based capital ratio 14.40% 13.80% 13.75%
Per common share:
Book value $ 8.36 $ 8.47 $ 8.74
Tangible book value $ 7.99 $ 7.79 $ 8.08
- -----------------------------------------------------------------------------------------
1999
Tier 1 leverage ratio 9.03% 8.85% 8.64%
Tier 1 capital ratio 14.68% 14.32% 13.95%
Total risk-based capital ratio 15.87% 15.49% 15.11%
Per common share:
Book value $ 8.81 $ 8.45 $ 8.42
Tangible book value $ 8.38 $ 8.03 $ 8.01
- -----------------------------------------------------------------------------------------
The accompanying Table 7 presents the high, low and closing sales price for the
common stock as reported on the NASDAQ Stock Market, and cash dividends declared
per share of common stock. The Company's price to book value ratio was 1.37 at
September 30, 2000 and 1.96 a year ago. The per share market price was 14 times
annualized earnings at September 30, 2000 and 1999.
TABLE 7
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
- --------------------------------------------------------------------------------------
Cash
Dividends
Quarter Ending High Low Close Declared
- --------------------------------------------------------------------------------------
1999
March 31 $23.33 $19.89 $19.89 $0.162
June 30 21.19 19.05 19.52 0.162
September 30 20.90 16.43 16.49 0.162
December 31 17.98 14.63 15.50 0.170
- --------------------------------------------------------------------------------------
2000
MARCH 31 $16.50 $11.38 $14.50 $0.170
JUNE 30 14.50 9.38 10.69 0.170
SEPTEMBER 30 12.50 9.75 12.00 0.170
- --------------------------------------------------------------------------------------
-20-
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objectives of asset and liability management are to provide for the
safety of depositor and investor funds, assure adequate liquidity, and maintain
an appropriate balance between interest sensitive earning assets and interest
bearing liabilities. Liquidity management involves the ability to meet the cash
flow requirements of customers who may be depositors wanting to withdraw funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. The Asset/Liability Management Committee (ALCO) is
responsible for liquidity management and has developed guidelines which cover
all assets and liabilities, as well as off balance sheet items that are
potential sources or uses of liquidity. Liquidity must also provide the
flexibility to implement appropriate strategies and tactical actions.
Requirements change as loans grow, deposits and securities mature, and payments
on borrowings are made. Interest rate sensitivity management seeks to avoid
widely fluctuating net interest margins and to ensure consistent net interest
income through periods of changing economic conditions.
The Company's primary measure of liquidity is called the basic surplus,
which compares the adequacy of cash sources to the amounts of volatile funding
sources. This approach recognizes the importance of balancing levels of cash
flow liquidity from short and long-term securities with the availability of
dependable borrowing sources. Accordingly, the Company has established borrowing
agreements with other banks (Federal Funds), the Federal Home Loan Bank (short
and long-term borrowings which are denoted as advances), and repurchase
agreements with investment companies. The Asset/Liability Management Committee
has determined that liquidity is adequate to meet the cash flow requirements of
the Company.
Interest rate risk is determined by the relative sensitivities of earning
asset yields and interest bearing liability costs to changes in interest rates.
The method by which banks evaluate interest rate risk is to look at the interest
sensitivity gap, the difference between interest sensitive assets and interest
sensitive liabilities repricing during the same period, measured at a specific
point in time. Through analysis of the interest sensitivity gap, the Company
attempts to position its assets and liabilities to maximize net interest income
in several different interest rate scenarios.
While the static gap evaluation of interest rate sensitivity is useful, it
is not indicative of the impact of fluctuating interest rates on net interest
income. Once the Company determines the extent of gap sensitivity, the next step
is to quantify the potential impact of the interest sensitivity on net interest
income. The Company measures interest rate risk based on the potential change in
net interest income under various rate environments. The Company utilizes an
interest rate risk model that simulates net interest income under various
interest rate environments. The model groups assets and liabilities into
components with similar interest rate repricing characteristics and applies
certain assumptions to these products. These assumptions include, but are not
limited to prepayment estimates under different rate environments, potential
call options of the investment portfolio and forecasted volumes of the various
balance sheet items.
The Company believes there have been no material changes in the interest
rate risk position since December 31, 1999. Other types of market risk, such as
foreign exchange rate risk and commodity price risk, do not arise in the normal
course of the Company's business activities.
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PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
This item is omitted, as there have been no material legal proceedings initiated
or settled during the quarter ended September 30, 2000.
Item 2 -- Changes in Securities
Not Applicable
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, 2000.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted as there is no disclosure required for the quarter ended
September 30, 2000.
Item 5 -- Other Information
Not Applicable
Item 6 -- Exhibits and Reports on FORM 8-K
(a) An index to exhibits follows the signature page of this FORM 10-Q.
(b) During the quarter ended September 30, 2000, the Company filed the following
Current Reports on Form 8-K:
Current report on Form 8K filed with the Securities and Exchange
Commission on July 14, 2000
Current report on Form 8K/A filed with the Securities and Exchange
Commission on July 25, 2000
Current report on Form 8K filed with the Securities and Exchange
Commission on August 1, 2000
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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 14th day of November, 2000.
NBT BANCORP INC.
By: /S/ DARYL R. FORSYTHE
----------------------
Daryl R. Forsythe
President and
Chief Executive Officer
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 Form of Employment Agreement between NBT Bancorp Inc. and
Michael J. Chewens made as of June 1, 2000 Herein
10.2 Supplemental Retirement Agreement between NBT Bancorp Inc., NBT
Bank, National Association and Michael J. Chewens made as of June 1, 2000 Herein
27.1 Financial Data Schedule for the nine months ended September 30, 2000 Herein
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EXHIBIT 10.1
Form of Employment Agreement between NBT Bancorp Inc. and
Michael J. Chewens made as of June 1, 2000
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of
the first day of June, 2000, by and between MICHAEL J. CHEWENS ("Executive") and
NBT BANCORP INC., a Delaware corporation having its principal office in Norwich,
New York ("NBTB")
W I T N E S S E T H T H A T :
WHEREAS, Executive is an executive vice president and the chief
financial officer of NBTB and NBT Bank, National Association, a national banking
association which is a wholly-owned subsidiary of NBTB ("NBT Bank");
WHEREAS, NBTB desires to secure the continued employment of Executive,
subject to the provisions of this Agreement; and
WHEREAS, Executive is desirous of entering into the Agreement for such
periods and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, intending to be legally bound, the parties
agree as follows:
1. EMPLOYMENT; RESPONSIBILITIES AND DUTIES.
(a) NBTB hereby agrees to employ Executive and to cause NBT
Bank and any successor organization to NBT Bank to employ Executive, and
Executive hereby agrees to serve as an executive vice president and the chief
financial officer of NBTB and NBT Bank, and of any successor organization to
NBTB or NBT Bank, as applicable, during the Term of Employment. Executive shall
have such executive duties, responsibilities, and authority as shall be set
forth in the bylaws of NBTB and NBT Bank or as may otherwise be determined by
NBTB. During the Term of Employment, Executive shall report directly to the
chief executive officer of NBTB.
(b) Executive shall devote his full working time and best efforts to the
performance of his responsibilities and duties hereunder. During the Term of
Employment, Executive shall not, without the prior written consent of the Board
of Directors of NBTB, render services as an employee, independent contractor, or
otherwise, whether or not compensated, to any person or entity other than NBTB
or its affiliates; provided that Executive may, where involvement in such
activities does not individually or in the aggregate significantly interfere
with the performance by Executive of his duties or violate the provisions of
section 4 hereof, (i) render services to charitable organizations, (ii) manage
his personal investments, and (iii) with the prior permission of the Board of
Directors of NBTB or the president and chief executive officer of NBTB, hold
such other directorships or part-time academic appointments or have such other
business affiliations as would otherwise be prohibited under this section 1.
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2. TERM OF EMPLOYMENT.
(a) The term of this Agreement ("Term of Employment") shall be
the period commencing on the date of this Agreement (the "Commencement Date")
and continuing until the Termination Date, which shall mean the earliest to
occur of:
(i) January 1, 2003, provided, however, that on
January 1, 2002, and on each January 1 thereafter, the Term of Employment shall
automatically extend itself by one additional year;
(ii) the death of Executive;
(iii) Executive's inability to perform his duties
hereunder, as a result of physical or mental disability as reasonably determined
by the personal physician of Executive, for a period of at least 180 consecutive
days or for at least 180 days during any period of twelve consecutive months
during the Term of Employment; or
(iv) the discharge of Executive by NBTB "for
cause," which shall mean one or more of the following:
(A) any willful or gross misconduct by
Executive with respect to the business and affairs of NBTB or NBT Bank, or with
respect to any of its affiliates for which Executive is assigned material
responsibilities or duties;
(B) the conviction of Executive of a
felony (after the earlier of the expiration of any applicable appeal period
without perfection of an appeal by Executive or the denial of any appeal as to
which no further appeal or review is available to Executive) whether or not
committed in the course of his employment by NBTB;
(C) Executive's willful neglect,
failure, or refusal to carry out his duties hereunder in a reasonable manner
(other than any such failure resulting from disability or death or from
termination by Executive for Good Reason, as hereinafter defined) after a
written demand for substantial performance is delivered to Executive that
specifically identifies the manner in which NBTB believes that Executive has not
substantially performed his duties and Executive has not resumed substantial
performance of his duties on a continuous basis within thirty days of receiving
such demand; or
(D) the breach by Executive of any
representation or warranty in section 6(a) hereof or of any agreement contained
in section 1, 4, 5, or 6(b) hereof, which breach is material and adverse to NBTB
or any of its affiliates for which Executive is assigned material
responsibilities or duties; or
(v) Executive's resignation from his position as
executive vice president and chief financial officer of NBTB or NBT Bank other
than for "Good Reason," as hereinafter defined; or
-2-
(vi) the termination of Executive's employment by
NBTB "without cause," which shall be for any reason other than those set forth
in subsections (i), (ii), (iii), (iv), or (v) of this section 2(a), at any time,
upon the thirtieth day following notice to Executive; or
(vii) Executive's resignation for "Good Reason."
"Good Reason" shall mean, without Executive's express written consent,
reassignment of Executive to a position other than executive vice president and
chief financial officer of NBTB or NBT Bank other than for "Cause," or a
decrease in the amount or level of Executive's salary or benefits from the
amount or level established in section 3 hereof.
(b) In the event that the Term of Employment shall be
terminated for any reason other than that set forth in section 2(a)(vi) or
2(a)(vii) hereof, Executive shall be entitled to receive, upon the occurrence of
any such event:
(i) any salary (as hereinafter defined) payable
pursuant to section 3(a)(i) hereof which shall have accrued as of the
Termination Date; and
(ii) such rights as Executive shall have accrued
as of the Termination Date under the terms of any plans or arrangements in which
he participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(g)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof,
and
(c) In the event that the Term of Employment shall be
terminated for the reason set forth in section 2(a)(vi) or 2(a)(vii) hereof,
Executive shall be entitled to receive:
(i) any salary payable pursuant to section 3(a)
(i) hereof which shall have accrued as of the Termination Date, and, for the
period commencing on the date immediately following the Termination Date and
ending upon and including the latest of the third anniversary of the
Commencement Date, the date to which the Term of Employment shall (as of the
Termination Date) have automatically extended itself under section 2(a)(i)
hereof, or the first anniversary of the Termination Date, salary payable at the
rate established pursuant to section 3(a)(i) hereof, in a manner consistent with
the normal payroll practices of NBTB with respect to executive personnel as
presently in effect or as they may be modified by NBTB from time to time;
(ii) such rights as Executive may have accrued as
of the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(g)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof;
and
(iii) if, within eighteen (18) months following
the Termination Date, Executive should sell his principal residence in the
Binghamton Ranally Metropolitan Area as determined by Rand McNally & Company
(the "Binghamton RMA") and relocate to a place outside of the Binghamton RMA,
(A) reimbursement for any shortfall between the net proceeds on the sale of his
-3-
principal residence and the purchase price, including direct, necessary and
reasonable transaction costs incurred in connection with such purchase, as
determined by the controller's division of NBT Bank, for such residence, and
including direct, necessary and reasonable expenses, as determined by the
controller's division of NBT Bank, incurred to prepare the residence for sale,
(B) reimbursement for direct, necessary and reasonable expenses, as determined
by the controller's division of NBT Bank, incurred in connection with the sale
of such residence not already included as part of the reimbursement under (A)
above, and (C) an amount necessary to pay all federal, state and local income
taxes resulting from any reimbursement made pursuant to (A) and (B) (including
any additional federal, state and local income taxes resulting from the payment
hereunder of such taxes), the intent being that Executive shall be paid an
additional amount (the "Gross-Up") such that the net amount retained by the
Executive, after deduction of such federal, state and local income taxes
resulting from the reimbursement under (A) and (B) shall be equal to the amount
of the reimbursement under (A) and (B) before payment of such taxes; for
purposes of determining the amount of the Gross-Up, Executive shall be deemed to
pay federal, state and local income taxes at the highest marginal rate of
taxation in effect in the calendar year in which the reimbursement is made.
Amounts due under this subsection shall be paid as soon as administratively
practicable, but in no event later than ninety (90) days after the date of the
sale of Executive's principal residence.
Notwithstanding the foregoing, in the event the Executive is
reimbursed, entitled to reimbursement, or is paid any amounts by an entity or
entities other than NBTB or NBT Bank of any affiliate or successor thereof (the
"Third Party"), for any amounts for which Executive has received, or is entitled
to receive, reimbursement under (A) or (B) above with respect to the sale of his
principal residence or any Gross-Up under (C) above, the Executive agrees:
(1) with regard to amounts already paid by NBTB or NBT Bank or any
affiliate or successor thereof (hereinafter referred to collectively as
the "Company"), the Executive shall notify the Company of all amounts
received or due from the Third Party, and shall reimburse the Company
in an amount equal to the amount so received or due from the Third
Party up to the amount the Company paid to the Executive under (A),
(B), and (C) above; and
(2) with regard to amounts due but not yet paid by the Company to the
Executive, the Executive shall notify the Company of any amounts
received or due from the Third Party, and the Executive agrees that the
Company shall reduce the amount due under (A), (B), and (C) above by
the amount the Executive has been paid or is entitled to be paid by the
Third Party up to the amount due the Executive from the Company.
(d) Any provision of this section 2 to the contrary
notwithstanding, in the event that the employment of Executive with NBTB is
terminated in any situation described in section 3 of the change-in-control
letter agreement dated January 1, 2000 between NBTB and Executive (the
"Change-in-Control Agreement") so as to entitle Executive to a severance payment
and other benefits described in section 3 of the Change-in-Control Agreement,
then Executive shall be entitled to receive the following, and no more, under
this section 2:
(i) any salary payable pursuant to section 3(a)
(i) hereof which shall have accrued as of the Termination Date;
-4-
(ii) such rights as Executive shall have accrued
as of the Termination Date under the terms of any plans or arrangements in which
he participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(g)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof;
(iii) the severance payment and other benefits
provided in the Change- in-Control Agreement; and
(iv) if, within eighteen (18) months following
the Termination Date, Executive should sell his principal residence in the
Binghamton RMA and relocate to a place outside of the Binghamton RMA, (A)
reimbursement for any shortfall between the net proceeds on the sale of his
principal residence and the purchase price, including direct, necessary and
reasonable transaction costs incurred in connection with such purchase, as
determined by the controller's division of NBT Bank, for such residence, and
including direct, necessary and reasonable expenses, as determined by the
controller's division of NBT Bank, incurred to prepare the residence for sale,
(B) reimbursement for direct, necessary and reasonable expenses, as determined
by the controller's division of NBT Bank, incurred in connection with the sale
of such residence not already included as part of the reimbursement under (A)
above, and (C) the Gross-Up, the intent being that the net amount retained by
the Executive, after deduction of such federal, state and local income taxes
resulting from the reimbursement under (A) and (B) shall be equal to the amount
of the reimbursement under (A) and (B) before payment of such taxes; for
purposes of determining the amount of the Gross-Up, Executive shall be deemed to
pay federal, state and local income taxes at the highest marginal rate of
taxation in effect in the calendar year in which the reimbursement is made.
Amounts due under this subsection shall be paid as soon as administratively
practicable, but in no event later than ninety (90) days after the date of the
sale of Executive's principal residence.
Notwithstanding the foregoing, in the event the Executive is
reimbursed, entitled to reimbursement, or is paid any amounts by a Third Party,
for any amounts for which Executive has received, or is entitled to receive,
reimbursement under (A) or (B) above with respect to the sale of his principal
residence or any Gross-Up under (C) above, the Executive agrees:
(1) with regard to amounts already paid by the Company, the Executive shall
notify the Company of all amounts received or due from the Third Party,
and shall reimburse the Company in an amount equal to the amount so
received or due from the Third Party up to the amount the Company paid
to the Executive under (A), (B), and (C) above; and
(2) with regard to amounts due but not yet paid by the Company to the
Executive, the Executive shall notify the Company of any amounts
received or due from the Third Party, and the Executive agrees that the
Company shall reduce the amount due under (A), (B), and (C) above by
the amount the Executive has been paid or is entitled to be paid by the
Third Party up to the amount due the Executive from the Company.
3. COMPENSATION. For the services to be performed by Executive
for NBTB and its affiliates under this Agreement, Executive shall be compensated
in the following manner:
-5-
(a) SALARY. During the Term of Employment:
(i) NBTB shall pay Executive a salary which, on
an annual basis, shall not be less than $190,000 during the Term of Employment,
assuming Executive performs competently. Salary shall be payable in accordance
with the normal payroll practices of NBTB with respect to executive personnel as
presently in effect or as they may be modified by NBTB from time to time.
(ii) Executive shall be entitled to annual salary
increases of 8 percent during the Term of Employment, beginning in January 2001,
and shall be eligible to be considered for further salary increases, upon
review, in accordance with the compensation policies of NBTB with respect to
executive personnel as presently in effect or as they may be modified by NBTB
from time to time.
(iii) Executive shall be eligible to be considered
for performance bonuses of up to 50 percent of salary, in accordance with the
compensation policies of NBTB with respect to executive personnel as presently
in effect or as they may be modified by NBTB from time to time.
(b) EMPLOYEE BENEFIT PLANS OR ARRANGEMENTS. During the Term of
Employment, Executive shall be entitled to participate in all employee benefit
plans of NBTB, as presently in effect or as they may be modified by NBTB from
time to time, under such terms as may be applicable to officers of Executive's
rank employed by NBTB or its affiliates, including, without limitation, plans
providing retirement benefits, stock options, medical insurance, life insurance,
disability insurance, and accidental death or dismemberment insurance, provided
that there be no duplication of such benefits as are provided under any other
provision of this Agreement.
(c) STOCK OPTIONS. Each January or February annually during
the Term of Employment, NBTB will cause Executive to be granted a non-statutory
("non-qualified") stock option (each an "Option") to purchase the number of
shares of the common stock of NBTB, $0.01 par value (the "NBTB Common Stock"),
pursuant to the NBT Bancorp Inc. 1993 Stock Option Plan, as amended, or any
appropriate successor plan (the "Stock Option Plan"), computed by dividing 200
percent of the annualized salary of Executive on the date of grant of the Option
by the "Fair Market Value" of NBTB Common Stock (as defined in the Stock Option
Plan). The option exercise price per share of the shares subject to each Option
shall be such Fair Market Value, and the terms, conditions of exercise, and
vesting schedule of such Option shall be as set forth in section 8 of the Stock
Option Plan.
(d) VACATION AND SICK LEAVE. During the Term of Employment,
Executive shall be entitled to paid annual vacation periods and sick leave in
accordance with the policies of NBTB as in effect as of the Commencement Date or
as may be modified by NBTB from time to time as may be applicable to officers of
Executive's rank employed by NBTB or its affiliates, but in no event less than
four weeks of paid vacation per year.
-6-
(e) COUNTRY CLUB DUES. During the Term of Employment,
Executive shall be reimbursed for dues and assessments incurred in relation to
Executive's membership at [ ].
(f) WITHHOLDING. All compensation to be paid to
Executive hereunder shall be subject to required withholding and other taxes.
(g) EXPENSES. During the Term of Employment, Executive shall
be reimbursed for reasonable travel and other expenses incurred or paid by
Executive in connection with the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as may from time to time be requested, in accordance with
such policies of NBTB as are in effect as of the Commencement Date and as may be
modified by NBTB from time to time, under such terms as may be applicable to
officers of Executive's rank employed by NBTB or its affiliates.
4. CONFIDENTIAL BUSINESS INFORMATION; NON-COMPETITION.
(a) Executive acknowledges that certain business methods,
creative techniques, and technical data of NBTB and its affiliates and the like
are deemed by NBTB to be and are in fact confidential business information of
NBTB or its affiliates or are entrusted to third parties. Such confidential
information includes but is not limited to procedures, methods, sales
relationships developed while in the service of NBTB or its affiliates,
knowledge of customers and their requirements, marketing plans, marketing
information, studies, forecasts, and surveys, competitive analyses, mailing and
marketing lists, new business proposals, lists of vendors, consultants, and
other persons who render service or provide material to NBTB or NBT Bank or
their affiliates, and compositions, ideas, plans, and methods belonging to or
related to the affairs of NBTB or NBT Bank or their affiliates. In this regard,
NBTB asserts proprietary rights in all of its business information and that of
its affiliates except for such information as is clearly in the public domain.
Notwithstanding the foregoing, information that would be generally known or
available to persons skilled in Executive's fields shall be considered to be
"clearly in the public domain" for the purposes of the preceding sentence.
Executive agrees that he will not disclose or divulge to any third party, except
as may be required by his duties hereunder, by law, regulation, or order of a
court or government authority, or as directed by NBTB, nor shall he use to the
detriment of NBTB or its affiliates or use in any business or on behalf of any
business competitive with or substantially similar to any business of NBTB or
NBT Bank or their affiliates, any confidential business information obtained
during the course of his employment by NBTB. The foregoing shall not be
construed as restricting Executive from disclosing such information to the
employees of NBTB or NBT Bank or their affiliates. On or before the Termination
Date, Executive shall promptly deliver to NBTB any and all tangible,
confidential information in his possession.
(b) Executive hereby agrees that from the Commencement Date
until the first anniversary of the Termination Date, Executive will not (i)
interfere with the relationship of NBTB or NBT Bank or their affiliates with any
of their employees, suppliers, agents, or representatives (including, without
limitation, causing or helping another business to hire any employee of NBTB or
NBT Bank or their affiliates), or (ii) directly or indirectly divert or attempt
-7-
to divert from NBTB, NBT Bank or their affiliates any business in which any of
them has been actively engaged during the Term of Employment, nor interfere with
the relationship of NBTB, NBT Bank or their affiliates with any of their
customers or prospective customers. This paragraph 4(b) shall not, in and of
itself, prohibit Executive from engaging in the banking, trust, or financial
services business in any capacity, including that of an owner or employee.
(c) Executive acknowledges and agrees that irreparable injury
will result to NBTB in the event of a breach of any of the provisions of this
section 4 (the "Designated Provisions") and that NBTB will have no adequate
remedy at law with respect thereto. Accordingly, in the event of a material
breach of any Designated Provision, and in addition to any other legal or
equitable remedy NBTB may have, NBTB shall be entitled to the entry of a
preliminary and permanent injunction (including, without limitation, specific
performance) by a court of competent jurisdiction in Chenango County, New York,
or elsewhere, to restrain the violation or breach thereof by Executive, and
Executive submits to the jurisdiction of such court in any such action.
(d) It is the desire and intent of the parties that the
provisions of this section 4 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this section
4 shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, should any court determine that the provisions of this section 4 shall
be unenforceable with respect to scope, duration, or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to NBTB, to the fullest extent
permitted by applicable law, the benefits intended by this section 4.
5. LIFE INSURANCE. In light of the unusual abilities and experience of
Executive, NBTB in its discretion may apply for and procure as owner and for its
own benefit insurance on the life of Executive, in such amount and in such form
as NBTB may choose. NBTB shall make all payments for such insurance and shall
receive all benefits from it. Executive shall have no interest whatsoever in any
such policy or policies but, at the request of NBTB, shall submit to medical
examinations and supply such information and execute such documents as may
reasonably be required by the insurance company or companies to which NBTB has
applied for insurance.
6. REPRESENTATIONS AND WARRANTIES.
(a) Executive represents and warrants to NBTB that his
execution, delivery, and performance of this Agreement will not result in or
constitute a breach of or conflict with any term, covenant, condition, or
provision of any commitment, contract, or other agreement or instrument,
including, without limitation, any other employment agreement, to which
Executive is or has been a party.
-8-
(b) Executive shall indemnify, defend, and hold harmless NBTB
for, from, and against any and all losses, claims, suits, damages, expenses, or
liabilities, including court costs and counsel fees, which NBTB has incurred or
to which NBTB may become subject, insofar as such losses, claims, suits,
damages, expenses, liabilities, costs, or fees arise out of or are based upon
any failure of any representation or warranty of Executive in section 6(a)
hereof to be true and correct when made.
7. NOTICES. All notices, consents, waivers, or other communications
which are required or permitted hereunder shall be in writing and deemed to have
been duly given if delivered personally or by messenger, transmitted by telex or
telegram, by express courier, or sent by registered or certified mail, return
receipt requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
If to NBTB:
NBT Bancorp Inc.
52 South Broad Street
Norwich, New York 13815
Attention: Mr. Daryl R. Forsythe
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
If to Executive:
Mr. Michael J. Chewens
124 Cassie Drive
Norwich, New York 13815
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
8. ASSIGNMENT. Neither party may assign this Agreement or any
rights or obligations hereunder without the consent of the other party.
9. GOVERNING LAW. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of law thereof. The parties hereby
designate Chenango County, New York to be the proper jurisdiction and venue for
any suit or action arising out of this Agreement. Each of the parties consents
to personal jurisdiction in such venue for such a proceeding and agrees that it
-9-
may be served with process in any action with respect to this Agreement or the
transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of New York. Each of the parties irrevocably and unconditionally waives
and agrees, to the fullest extent permitted by law, not to plead any objection
that it may now or hereafter have to the laying of venue or the convenience of
the forum of any action or claim with respect to this Agreement or the
transactions contemplated thereby brought in the courts aforesaid.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding among NBTB and Executive relating to the subject matter hereof.
Any previous agreements or understandings between the parties hereto or between
Executive and NBT Bank or any of its affiliates regarding the subject matter
hereof, including without limitation the terms and conditions of employment,
compensation, benefits, retirement, competition following employment, and the
like, are merged into and superseded by this Agreement. Neither this Agreement
nor any provisions hereof can be modified, changed, discharged, or terminated
except by an instrument in writing signed by the party against whom any waiver,
change, discharge, or termination is sought.
11. ILLEGALITY; SEVERABILITY.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement is not intended and shall not be construed to
require any payment to Executive which would violate any federal or state
statute or regulation, including without limitation the "golden parachute
payment regulations" of the Federal Deposit Insurance Corporation codified to
Part 359 of title 12, Code of Federal Regulations.
(b) If any provision or provisions of this Agreement
shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever:
(i) the validity, legality, and enforceability
of the remaining provisions of this Agreement (including, without limitation,
each portion of any section of this Agreement containing any such provision held
to be invalid, illegal, or unenforceable) shall not in any way be affected or
impaired thereby; and
(ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
section of this Agreement containing any such provisions held to be invalid,
illegal, or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal, or unenforceable.
12. ARBITRATION. Subject to the right of each party to seek specific
performance (which right shall not be subject to arbitration), if a dispute
arises out of or related to this Agreement, or the breach thereof, such dispute
shall be referred to arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). A dispute subject to the
provisions of this section will exist if either party notifies the other party
in writing that a dispute subject to arbitration exists and states, with
reasonable specificity, the issue subject to arbitration (the "Arbitration
Notice"). The parties agree that, after the issuance of the Arbitration Notice,
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the parties will try in good faith to resolve the dispute by mediation in
accordance with the Commercial Rules of Arbitration of AAA between the date of
the issuance of the Arbitration Notice and the date the dispute is set for
arbitration. If the dispute is not settled by the date set for arbitration, then
any controversy or claim arising out of this Agreement or the breach hereof
shall be resolved by binding arbitration and judgment upon any award rendered by
arbitrator(s) may be entered in a court having jurisdiction. Any person serving
as a mediator or arbitrator must have at least ten years' experience in
resolving commercial disputes through arbitration. In the event any claim or
dispute involves an amount in excess of $100,000, either party may request that
the matter be heard by a panel of three arbitrators; otherwise all matters
subject to arbitration shall be heard and resolved by a single arbitrator. The
arbitrator shall have the same power to compel the attendance of witnesses and
to order the production of documents or other materials and to enforce discovery
as could be exercised by a United States District Court judge sitting in the
Northern District of New York. In the event of any arbitration, each party shall
have a reasonable right to conduct discovery to the same extent permitted by the
Federal Rules of Civil Procedure, provided that such discovery shall be
concluded within ninety days after the date the matter is set for arbitration.
In the event of any arbitration, the arbitrator or arbitrators shall have the
power to award reasonable attorney's fees to the prevailing party. Any provision
in this Agreement to the contrary notwithstanding, this section shall be
governed by the Federal Arbitration Act and the parties have entered into this
Agreement pursuant to such Act.
13. COSTS OF LITIGATION. In the event litigation is commenced to
enforce any of the provisions hereof, or to obtain declaratory relief in
connection with any of the provisions hereof, the prevailing party shall be
entitled to recover reasonable attorney's fees. In the event this Agreement is
asserted in any litigation as a defense to any liability, claim, demand, action,
cause of action, or right asserted in such litigation, the party prevailing on
the issue of that defense shall be entitled to recovery of reasonable attorney's
fees.
14. AFFILIATION. A company will be deemed to be "affiliated" with
NBTB or NBT Bank according to the definition of "Affiliate" set forth in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
15. HEADINGS. The section and subsection headings herein have
been inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
NBT BANCORP INC.
By: /S/ DARYL R. FORSYTHE
Daryl R. Forsythe
President and Chief Executive Officer
MICHAEL J. CHEWENS
/S/ MICHAEL J. CHEWENS
EXHIBIT 10.2
Supplemental Retirement Agreement between NBT Bancorp Inc., NBT
Bank, National Association and Michael J. Chewens made as of June 1, 2000
SUPPLEMENTAL RETIREMENT AGREEMENT
This sets forth the terms of an agreement for the payment of
supplemental retirement income ("Agreement") made as of June 1, 2000 between (i)
NBT BANCORP INC., a Delaware corporation and a 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) MICHAEL J. CHEWENS, an individual
residing at 124 Cassie Drive, Norwich, New York 13815, and who is a member of a
select group of management or highly compensated employees within the meaning of
section 201(2) of the Employee Retirement Income Security Act of 1974, as
amended ("Chewens").
1. PURPOSE OF THE AGREEMENT. The purpose of this Agreement is
to provide Chewens a supplemental retirement benefit in accordance with the
terms of this Agreement.
2. DEFINITIONS. For purposes of this Agreement, the following
words shall have the meaning indicated:
(a) ACTUARIAL EQUIVALENT. "Actuarial Equivalent"
shall have the same meaning the term "Actuarial Equivalent" has under Section
2.03 of the Qualified Plan using the following actuarial assumptions:
MORTALITY: "Applicable Mortality Rate"
as such term is defined in
Section 2.03c of the
Qualified Plan.
INTEREST RATE: "Applicable Interest Rate"
as such term is defined
in Section 2.09b of the
Qualified Plan.
(b) BENEFICIARY. "Beneficiary" shall mean such living person
or living persons designated by Chewens in accordance with subparagraph
5(a) to receive benefits under this Agreement after his death, or his
personal or legal representative, all as herein described and provided.
If no Beneficiary is designated by Chewens or if no Beneficiary
survives Chewens, the Beneficiary shall be Chewens's estate.
(c) CAUSE. "Cause" shall mean Chewens's:
(i) willful or gross misconduct with respect to the
business and affairs of the Bank, or with respect to any of
its affiliates for which Chewens is assigned material
responsibilities or duties;
(ii) conviction of a felony (after the earlier of the
expiration of any applicable appeal period without perfection
of an appeal by Chewens or the denial of any appeal as to
which no further appeal or review is available to Chewens)
whether or not committed in the course of his employment by
the Bank;
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(iii) willful neglect, failure, or refusal to carry
out his duties under the Employment Agreement between NBT
Bancorp Inc. and Chewens dated as of June 1, 2000 (the
"Employment Agreement") in a reasonable manner (other than any
such failure resulting from disability or death or from
termination by Chewens for Good Reason, as defined in the
Employment Agreement) after a written demand for substantial
performance is delivered to Chewens that specifically
identifies the manner in which the Bank believes that Chewens
has not substantially performed his duties and he has not
resumed substantial performance of his duties on a continuous
basis within thirty days of receiving such demand; or
(iv) breach of any representation or warranty in
section 6(a) of the Employment Agreement or of any agreement
contained in section 1, 4, 5, or 6(b) of the Employment
Agreement, which breach is material and adverse to the Bank or
any of its affiliates for which Chewens is assigned material
responsibilities or duties.
(d) CHANGE OF CONTROL. "Change of Control" shall mean a
Change in Control as such term is defined in the
Change in Control Agreement between Chewens and the
Bank dated January 1, 2000.
(e) CODE. "Code" shall mean the Internal Revenue Code of
1986, as amended.
(f) DETERMINATION DATE. "Determination Date" shall
mean the earlier of (i) the date of termination of Chewens's employment
with the Bank or (ii) the first day of the month following Chewens's
65th birthday.
(g) FINAL AVERAGE COMPENSATION. "Final Average Compensation"
shall have the same meaning the term "Final Average Compensation" has
under Section 2.27 of the Qualified Plan, except that in determining
the amount of Compensation (as defined in Section 2.14 of the Qualified
Plan) to be used in calculating Final Average Compensation under
Section 2.27 of the Qualified Plan, Compensation shall not be subject
to the compensation limitation of section 401(a)(17) of the Code.
(h) FULL-TIME EMPLOYEE. "Full-Time Employee" shall mean
an employee who works not less than 1,000 hours in a calendar year.
(i) OTHER RETIREMENT BENEFITS. "Other Retirement
Benefits" shall mean the sum of:
(i) The annual benefit payable to Chewens from
the Qualified Plan, plus
(ii) The annual benefit that could be provided by (A)
Bank contributions (other than elective deferrals) made on
Chewens's behalf under the NBT Bancorp Inc. 401(k) and
Employee Stock Ownership Plan, and (B) actual earnings on
contributions in (A), if such contributions and earnings were
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converted to a benefit payable on the Determination Date in
the same form as the benefit paid under this Agreement, using
the same actuarial assumptions as are provided under
subparagraph 2(a).
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 Chewens is receiving
payment of such benefits on the Determination Date. To the extent
Chewens receives a payment of Other Retirement Benefits described in
subparagraph 2(i)(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 and assuming
that such amounts earned interest at a variable rate equal to the
one-year United States Treasury bill rate as reported in the New York
edition of The Wall Street Journal on the Determination Date from the
date received to the date Other Retirement Benefits are calculated for
purposes of this Agreement.
(j) PRESENT VALUE. "Present Value" shall mean the
present value of a benefit determined on the basis of the following
actuarial assumptions:
MORTALITY: "Applicable Mortality Rate"
as such term is defined
in Section 2.03c of the
Qualified Plan.
INTEREST RATE: "Applicable Interest Rate"
as such term is defined
in Section 2.09b of the
Qualified Plan.
(k) QUALIFIED PLAN. "Qualified Plan" shall mean the NBT
Bancorp Inc. Defined Benefit Pension Plan.
(l) SOCIAL SECURITY BENEFIT. "Social Security Benefit"
shall mean Chewens's actual social security benefit at his Social
Security Retirement Age.
(m) SOCIAL SECURITY RETIREMENT AGE. "Social Security
Retirement Age" shall have the same meaning the term "Social Security
Retirement Age" has under Section 2.58 of the Qualified Plan.
(n) YEAR OF SERVICE. "Year of Service" shall mean a
calendar year in which Chewens completes not less than 1,000 hours
of service.
3. AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT.
(a) AMOUNT PAYABLE ON AND AFTER AGE 62. If Chewens shall
remain employed by the Bank until reaching his 62nd birthday, serving
as a Full-Time Employee until such date, and subject to the other terms
and conditions of this Agreement, the Bank shall pay Chewens an annual
"Supplemental Retirement Benefit" determined as follows:
(i) ON AND AFTER AGE 62 BUT BEFORE SOCIAL SECURITY
RETIREMENT AGE. Chewens shall be entitled to a Supplemental
Retirement Benefit on and after his 62nd birthday but before
his Social Security Retirement Age in an amount equal to the
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excess of (1) 50 percent of Chewens's Final Average
Compensation, over (2) Chewens's Other Retirement Benefits,
determined as of the Determination Date and calculated in
accordance with paragraph 2(i).
(ii) ON AND AFTER SOCIAL SECURITY RETIREMENT AGE.
Chewens shall be entitled to a Supplemental Retirement Benefit
on and after his Social Security Retirement Age in an amount
equal to the excess of (1) 50 percent of Chewens's Final
Average Compensation, over (2) the sum of (aa) Chewens's Other
Retirement Benefits, determined as of the Determination Date
and calculated in accordance with paragraph 2(i), plus (bb)
Chewens's Social Security Benefit.
(b) AMOUNT PAYABLE ON AND AFTER AGE 60 BUT BEFORE AGE 62. If
Chewens shall remain employed by the Bank until reaching his 60th
birthday, serving as a Full-Time Employee until such date and he
continues to serve as a Full-Time Employee until the date of his
retirement, and he retires then or thereafter but before reaching his
62nd birthday, and subject to the other terms and conditions of this
Agreement, the Bank shall pay Chewens on the date of his retirement,
pursuant to subparagraph 4(b), or to his spouse or other Beneficiary,
pursuant and subject to subparagraph 6(c) if he has died before his
62nd birthday, a reduced early Supplemental Retirement Benefit
calculated in accordance with the following schedule:
(i) If the date of Chewens's retirement shall be on
or after his 60th birthday but before his 61st birthday, the
Bank shall pay Chewens 60% of the Supplemental Retirement
Benefit calculated in accordance with subparagraph 3(a)(i);
and
(ii) If the date of Chewens's retirement shall be on
or after his 61st birthday but before his 62nd birthday, the
Bank shall pay Chewens 70% of the Supplemental Retirement
Benefit so calculated.
4. TIME OF PAYMENT.
(a) Except as provided in subparagraph 4(b) (early retirement)
and paragraph 6 (payment on death), the Bank shall pay the Supplemental
Retirement Benefit commencing on the first day of the month following
Chewens's attainment of age 62.
(b) Notwithstanding subparagraph 4(a), the Bank shall commence
payment of an early Supplemental Retirement Benefit, in the amount
determined under subparagraph 3(b), on the first day of the month
following Chewens's Determination Date in connection with early
retirement after reaching age 60 and prior to the date of his 62nd
birthday.
5. FORM OF PAYMENT.
(a) The Supplemental Retirement Benefit described in paragraph
3 of this Agreement shall be paid as a straight life annuity, payable
in monthly installments, for Chewens's life; provided, however, that if
Chewens has no surviving spouse and dies before having received 60
monthly payments, such monthly payments shall be continued to his
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Beneficiary until the total number of monthly payments to Chewens and
his Beneficiary equal 60, whereupon all payments shall cease and the
Bank's obligation under this Agreement shall be deemed to have been
fully discharged. If Chewens and his Beneficiary shall die before
having received a total of 60 monthly payments, an amount equal to the
Actuarial Equivalent of the balance of such monthly payments shall be
paid in a single sum to the estate of the survivor of Chewens and his
Beneficiary. If Supplemental Retirement Benefits are payable in the
form described in this subparagraph 5(a), Chewens shall designate in
writing, as his Beneficiary, any person or persons, primarily,
contingently or successively, to whom the Bank shall pay benefits
following Chewens's death if Chewens's death occurs before 60 monthly
payments have been made.
(b) Notwithstanding the form of payment described in
subparagraph 5(a), if Chewens 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 Chewens's spouse as the
Beneficiary. The 50% joint and survivor annuity shall be the Actuarial
Equivalent of the benefit described in subparagraph 5(a). If the
Supplemental Retirement Benefit is payable pursuant to this
subparagraph 5(b), but Chewens's spouse fails to survive him, no
payments will be made pursuant to this Agreement following Chewens's
death.
(c) Notwithstanding the foregoing provisions of this paragraph
5, 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 5(c) shall be the
Actuarial Equivalent of the payment being accelerated.
6. PAYMENTS UPON CHEWENS'S DEATH.
(a) Except as provided in subparagraphs 6(b) and (c), if
Chewens shall die before his 62nd birthday, no payment shall be due his
estate under this Agreement.
(b) If Chewens's death shall occur on or after his 60th
birthday, after he has retired but before payment of any Supplemental
Retirement Benefit has commenced, Chewens'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
Chewens's death. Such payments shall be made in monthly installments,
subject to the right of the Bank to accelerate payment at any time in
accordance with subparagraph 5(c).
(c) If Chewens elects early retirement pursuant to
subparagraph 3(b) and he dies before payment of any Supplemental
Retirement Benefit has commenced, Chewens's surviving spouse shall be
paid, in monthly installments, as a straight life annuity, 50 percent
of such Supplemental Retirement Benefit for her life commencing within
30 days following Chewens's death, subject to the right of the Bank to
accelerate such payments as provided in subparagraph 5(c). However, if
Chewens's spouse fails to survive him, the Bank shall pay to Chewens's
estate a lump sum benefit equal to 50 percent of the Present Value of
Chewens's Supplemental Retirement Benefit.
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(d) Except as otherwise provided in subparagraph 6(c), no
payments shall be made under this Agreement if Chewens dies before
payment of any Supplemental Retirement Benefit begins and his spouse
fails to survive him.
(e) If Chewens's death shall occur after payment of a
Supplemental Retirement Benefit has commenced, Chewens surviving spouse
or other Beneficiaries shall receive payments under this Agreement to
the extent provided in paragraph 5.
7. FORFEITURE FOR CAUSE. Notwithstanding any other provision
of this Agreement, if Chewens's employment with the Bank is terminated for
Cause, Chewens and his spouse or other Beneficiaries shall forfeit all rights to
any payment under this Agreement.
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 entity unless found to be arbitrary,
capricious or contrary to law.
9. CLAIMS PROCEDURE.
(a) Any claim for benefits by Chewens, his spouse or other
Beneficiaries shall be made in writing to the Bank. In this paragraph,
Chewens and his Beneficiaries are referred to 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.
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(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
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 Chewens nor his spouse or other Beneficiaries
may transfer his, her or their right to payments to which he, she or they are
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 Chewens or his spouse or other Beneficiaries.
11. CONTINUED EMPLOYMENT. This Agreement shall not be construed
as conferring on Chewens 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, except that in the event of a Change of Control,
the Bank, within five (5) days of such Change of Control, shall fund a
grantor trust within the meaning of section 671 of the Code with an
amount sufficient to cover all potential liabilities under this
Agreement.
(b) Neither Chewens nor his spouse or other Beneficiaries
shall have any interest in any particular assets of the Bank by reason
of the right to receive a benefit under this Agreement. Chewens and his
spouse or other Beneficiaries shall have only the rights of general
unsecured creditors of the Bank with respect to any rights under this
Agreement.
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(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 Chewens's employment with the
Bank, the Bank may withhold from Chewens's regular compensation from the Bank
any FICA or other employee payroll, withholding or other similar taxes the Bank
may be required to withhold.
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, except to the
extent preempted by federal law.
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 understanding (whether oral or written) between the parties, relating to
deferred compensation and/or supplemental retirement income.
The parties hereby execute this Agreement as follows:
NBT BANCORP INC.
By /S/ DARYL R. FORSYTHE
Date: 6/1/00 Its President & CEO
NBT BANK, NATIONAL ASSOCIATION
By /S/ DARYL R. FORSYTHE
Date: 6/1/00 Its Chairman
Date: 6/1/00 /S/ MICHAEL J. CHEWENS
MICHAEL J. CHEWENS
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EXHIBIT 27.1
FINANCIAL DATA SCHEDULE FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
9 1,000 U.S. DOLLARS 9-MOS DEC-31-2000 JAN-1-2000 SEP-30-2000 1 62,964 1,896 11,465 0 590,895 107,320 104,742 1,667,633 22,682 2,559,064 1,936,483 154,162 25,018 236,418 0 0 242 206,741 2,559,064 103,059 35,663 1,864 140,586 52,830 69,734 70,852 5,418 143 57,540 22,755 14,504 0 0 14,504 .62 .62 4.17 9,257 2,224 747 27,808 19,711 3,365 918 22,682 22,682 0 3,811