<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______ .
Commission file number 0-14703
NBT BANCORP INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1268674
(State of Incorporation)(I.R.S.Employer Identification No.)
52 South Broad Street
Norwich, New York 13815
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: 607-337-6000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par, $1.00 Stated Value
Preferred Stock, No Par, $1.00 Stated Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this FORM 10-K or any amendment to this FORM 10-K. _X_.
There are no delinquent filers to the Registrant's knowledge.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter 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 February 29, 1996, there were 8,442,314 shares outstanding,
including 178,447 shares held in the treasury, of the Registrant's
common stock, No Par, Stated Value $1.00; of which 8,014,474 common
shares having a market value of $128,231,584 were held by nonaffiliates
of the Registrant. There were no shares of the Registrant's preferred
stock, No Par, Stated Value $1.00, outstanding at that date.
Documents Incorporated by Reference:
- Portions of the NBT BANCORP INC. 1995 Annual Report are
incorporated by reference into Parts I and II of this FORM 10-K
as detailed therein.
- Portions of the Proxy Statement of NBT BANCORP INC. dated March
18, 1996 for the Annual Meeting of Stockholders to be held on
April 20, 1996 are incorporated by reference into Part III of
this FORM 10-K as detailed therein.
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NBT BANCORP INC.
FORM 10-K Table of Contents
PART I
Item 1. Business
Description of Business
Statistical Disclosure by Bank Holding Companies
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on FORM 8-K
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PART I
Item 1 -- Description of Business
NBT BANCORP INC. (Registrant) is a bank holding company formed in May
1986, under the laws of the State of Delaware. Its only subsidiary is
NBT Bank, National Association (Bank), formerly The National Bank and
Trust Company. The Bank serves an eight county area in central and
northern New York State through thirty-six community banking offices.
A full-service commercial bank, it provides a broad range of financial
products, including demand and time deposits, mortgage, consumer,
commercial and agricultural loans, and trust services. The Bank also
operates free standing automated banking units.
Eleven of the Bank's full-service community banking offices, including
the main office, are located in Chenango County, six in Delaware
County, five in Oneida County, four in Broome County, three each in
Fulton, Essex, and Clinton Counties and one in Tioga County. Within
these counties, the Bank encounters intense competition in its banking
business from several other financial institutions offering comparable
products. These competitors include other commercial banks (both
locally-based independent banks and local offices of major New York
State metropolitan-based banks), as well as mutual and stock savings
banks, savings and loan associations and credit unions. The Bank also
experiences competition in marketing many of its services from
nonbanking institutions such as insurance companies, brokerage firms
and pension plans, as well as money market fund groups, governmental
lending agencies, finance companies, mortgage companies, and others.
In addition, commercial banks face competition in acquiring quality
assets due to the increase in commercial paper and long-term debt
issued by industrial companies and the increased lending powers granted
to and employed by thrift institutions and credit unions. Commercial
banks also face competition in attracting deposits at reasonable prices
due to the activities of money market funds, increased activities of
non-bank deposit takers such as brokerage firms, and increased
availability of demand deposit type accounts at thrift institutions and
credit unions. Unlike the Bank, many of these competitors are not
subject to regulation as extensive as that of the Bank; or are not
subject to corporate taxation, in particular credit unions; and as a
result may have a competitive advantage in some respects.
In establishing competitive prices and levels of service, the Bank
monitors competitive conditions which have their origins in the New
York City money center banks. Many of these financial institutions
market services within the service area of the Bank or otherwise
influence the level of competition in the eight county service area.
There have been significant changes in the banking industry in recent
years which have increased competition. Much of the change has been
brought about by federal legislation intended to deregulate the
industry; significant changes in the industry may continue. Bills are
now pending or expected to be introduced in the United States Congress
that contain proposals for altering the structure, regulation, and
competitive relationships of the nation's financial institutions. If
enacted, these bills could increase or decrease the cost of doing
business, limit or expand permissible activities, including activities
in the insurance and securities fields, or affect the competitive
balance among financial institutions. Some of these bills would broaden
the powers of bank holding companies, regulate banks' sales of
investment products such as mutual fund shares, and realign the
structure and jurisdiction of various financial institution regulatory
agencies. In addition, other types of financial institutions, including
mutual funds, securities brokerage firms, insurance companies and
investment banking firms have been given, and may continue to be given,
powers to engage in activities which generally have been engaged in
only by banks. Such changes would tend to place the Bank in more direct
competition with other banks and financial institutions.
The Registrant, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended (Act), and is subject to the
supervision of the Board of Governors of the Federal Reserve System
(FRB). Generally, the Act limits the business of bank holding companies
to banking, or managing or controlling banks, performing certain
servicing for subsidiaries, and engaging in such other activities as
the FRB may determine to be so closely related to banking as to be a
proper incident thereto. The Registrant is a legal entity separate and
distinct from the Bank. The principal source of the Registrant's income
is the Bank's earnings, and the principal source of its cash flow is
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dividends from the Bank. Federal laws impose limitations on the ability
of the Bank to pay dividends as discussed in the Notes to Consolidated
Financial Statements. FRB policy requires bank holding companies to
serve as a source of financial strength to their subsidiary banks by
standing ready to use available resources to provide adequate capital
funds to subsidiary banks during periods of financial stress or
adversity.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) substantially revised the depository institution regulatory
and funding provisions of the Federal Deposit Insurance Act and made
revisions to several other federal banking statutes. Among other
things, federal banking regulators are required to take prompt
corrective action in respect of depository institutions that do not
meet minimum capital requirements. FDICIA identifies the following
capital tiers for financial institutions: well capitalized, adequately
capitalized, significantly undercapitalized and critically
undercapitalized.
Rules adopted by the federal banking agencies under FDICIA provide that
an institution is deemed to be: well capitalized if the institution has
a total risk-based capital ratio of 10.0% or greater, a Tier I risk-
based ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater
and the institution is not subject to an order, written agreement,
capital directive, or prompt corrective action directive to meet and
maintain a specific level for any capital measure. FDICIA imposes
progressively more restrictive constraints on operations, management
and capital distributions, depending on the capital category in which
an institution is classified. At December 31, 1995, the Registrant and
the Bank fell into the well capitalized category based on the ratios
and guidelines noted above.
The appropriate Federal banking agency may, under certain
circumstances, reclassify a well capitalized insured depository
institution as adequately capitalized. The appropriate agency is also
permitted to require an adequately capitalized or undercapitalized
institution to comply with the supervisory provisions as if the
institution were in the next lower category, but not treat a
significantly undercapitalized institution as critically
undercapitalized, based on supervisory information other than the
capital levels of the institution. The statute provides that an
institution may be reclassified if the appropriate Federal banking
agency determines, after notice and opportunity for hearing, that the
institution is in an unsafe or unsound condition or deems the
institution to be engaging in an unsafe or unsound practice.
Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository
institution may make with insured funds, are from time to time
introduced in Congress. During 1995, the federal banking agencies and
Congress have focused attention on matters that include risk management
and internal controls related to derivative activity; measurement of
exposure to interest rate risk; lifeline banking; sales of mutual fund
shares and other nondeposit, uninsured products; the scope of
insurance-agency activities that should be allowed to be conducted by
banks; merger of the Bank and Savings Association Insurance Funds;
elimination or revision of the features of the specialized savings
association charter; Federal Home Loan Bank system reform; reform of
the Community Reinvestment Act and fair lending law enforcement.
Whether and in what form any such legislative and regulatory
initiatives might be adopted cannot be predicted; therefore the
Registrant cannot determine the ultimate effect that any potential
legislation or regulatory changes, if enacted, would have upon its
financial condition or operations.
The Act requires prior approval of the FRB of the acquisition by the
Registrant of more than 5 percent of the voting shares of any bank or
any other bank holding company. Subject to certain limits, the Act
allows adequately capitalized and adequately managed bank holding
companies to acquire control of banks in any state. An interstate
acquisition may not be approved, however, if immediately before the
acquisition the acquirer controls an FDIC-insured institution or branch
in the state of the institution to be acquired, and if immediately
following the acquisition the acquirer would control 30 percent or more
of the total FDIC-insured deposits in that state; but a state may waive
the 30-percent limitation by statute, regulation, or order, or by
certain nondiscriminatory administrative approvals.
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Beginning on June 1, 1997, and earlier if expressly permitted by a
nondiscriminatory state law, an adequately capitalized and adequately
managed bank may apply for permission to merge with an out-of-state
bank and convert all branches of both parties into branches of a single
bank. States retain the authority to prohibit such mergers if between
September 29, 1994 and June 1, 1997 they enact a statute expressly
prohibiting them and that statute applies equally to all out-of-state
banks. Banks are also permitted to open newly established branches in
any state that expressly permits all out-of-state banks to open newly
established branches, if the law applies equally to all banks.
The Bank is subject to primary supervision, regulation, and examination
by the Office of the Comptroller of the Currency (OCC), whose
regulations are intended primarily for the protection of the Bank's
depositors and customers rather than holders of the Registrant's
securities. The Bank is subject to extensive federal statutes and
regulations that significantly affect its business and activities. The
Bank must file reports with its regulators concerning its activities
and financial condition and obtain regulatory approval to enter into
certain transactions. The Bank is also subject to periodic examinations
by the OCC to ascertain compliance with various regulatory
requirements. Other applicable statutes and regulations relate to
insurance of deposits, allowable investments, loans, acceptance of
deposits, trust activities, mergers, consolidations, payment of
dividends, capital requirements, reserves against deposits,
establishment of branches and certain other facilities, limitations on
loans to one borrower and loans to affiliated persons, and other
aspects of the business of banks. Recent federal legislation has
instructed federal agencies to adopt standards or guidelines governing
banks' internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation and benefits, asset quality, earnings and stock
valuation, and other matters. Legislation adopted in 1994 gives the
federal banking agencies greater flexibility in implementing standards
on asset quality, earnings, and stock valuation. Regulatory authorities
have broad authority to initiate proceedings designed to prohibit banks
from engaging in unsafe and unsound banking practices.
The deposits of the Bank are insured, up to applicable limits, by the
Federal Deposit Insurance Corporation, (FDIC); the Bank is therefore
subject to the regulations of the FDIC. Congress adopted legislation
in 1991 to permit the FDIC to increase deposit insurance assessment
rates for insured banks and to levy emergency special assessments
against insured institutions. In response, the FDIC adopted a premium
schedule under which the actual assessment rate for a particular
institution depends in part upon the risk classification the FDIC
assigns to that institution. The FDIC may raise an institution's
insurance premiums or terminate insurance altogether upon a finding
that the institution has engaged in unsafe and unsound practices. The
United States Congress may consider further measures to strengthen the
Savings Association Insurance Fund administered by the FDIC which
generally insures the deposits of savings associations, or to merge the
Savings Association Insurance Fund with the Bank Insurance Fund which
generally insures the deposits of banks, or to defray the costs of FDIC
operations, or for other purposes. Implementation of such measures may
change assessment rates, give rise to one-time assessments against
savings associations, or modify the extent or nature of insurance
coverage.
At March 1, 1996 the Registrant had 457 full-time and 123 part-time
employees.
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PART I (continued)
Statistical Disclosure by Bank Holding Companies
I. Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential
Information required by this section of Securities Act Industry
Guide 3, or Exchange Act Industry Guide 3, (Guide 3) is presented
in the Registrant's 1995 Annual Report in Management's Discussion
and Analysis of Financial Condition and Results of Operations on
pages 38 and 39 in the table of Average Balances, Net Interest
Income, Yields and Rates and on page 28 in the table of Changes
in Taxable Equivalent Net Interest Income - Rate/Volume Analysis
which portions are incorporated herein by reference.
II. Securities Portfolio
A. Book Value of Securities
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Notes to Consolidated
Financial Statements on page 17 in the Tables of the amortized
costs and estimated fair market values of the components of the
securities held to maturity and securities available for sale
portfolios at December 31, 1995 and 1994, which portions are
incorporated herein by reference.
Presented below are the amortized costs and estimated fair market
values of the components of the securities held to maturity and
securities available for sale portfolios at December 31, 1993.
<TABLE>
<CAPTION>
Securities
Available for Sale Held to Maturity
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Amortized Market Amortized Market
December 31, 1993 Cost Value Cost Value
- ---------------------------------------------------------------------------------
(in thousands)
U.S. Treasury $ 66,226 $ 67,648 $ 66,458 $ 69,354
States and Political
Subdivisions 1,030 1,024 25,770 25,770
Mortgage-backed 138,330 138,120 9,937 10,014
Other Securities 2,780 2,895 5,912 5,911
- ---------------------------------------------------------------------------------
Total $208,366 $209,687 $108,077 $111,049
- ---------------------------------------------------------------------------------
</TABLE>
B. Maturity Distribution of Investment Securities
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Notes to Consolidated
Financial Statements on page 17 in the Table of Remaining
maturities of securities at December 31, 1995, which portions are
herein incorporated by reference.
C. Investment Concentrations and Risk Characteristics
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Management's Discussion
and Analysis on page 34, in the discussion related to Securities,
which portions are incorporated herein by reference.
III. Loan Portfolio
A. Composition of Loan Portfolio
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Management's Discussion
and Analysis on page 33 in the table of Composition of Loan
Portfolio, which portions are incorporated herein by reference.
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Loan Collateralization: Real estate loans may be issued for up
to ninety-five percent of the appraised value of the collateral
property; loans issued for more than eighty percent of the
appraised value require private mortgage insurance. Home equity
loans may be issued for up to seventy-five percent of the
appraised value of the collateral property. Commercial loans
collateralized by inventory and accounts receivable or equipment
may be issued for up to seventy-five or one hundred percent of
the value of the collateral depending on the nature of the
collateral, financial strength of the borrower, other guarantees
and the term of the loan. Consumer loans may be issued for up to
ninety-five or one hundred percent of the collateral value
depending on its type.
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Management's Discussion
and Analysis on page 34 in the table of Maturities and
Sensitivities of Loans to Changes in Interest Rates, which
portions are incorporated herein by reference.
C.1.Risk Elements
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on page 31 in the tables of Nonperforming Assets and
Risk Elements and Non-accrual and Impaired Loans Interest Income,
which portions are incorporated herein by reference.
C.2.Potential Problem Loans
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on page 30, in the discussion related to Asset Quality,
which portions are incorporated herein by reference.
C.3.Foreign Outstandings
The Bank customarily does not make loans to foreign companies
and, at December 31, 1995, 1994 and 1993, there were no foreign
loans outstanding.
C.4.Loan Concentrations
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on page 30, in the discussion related to Asset Quality,
which portions are incorporated herein by reference.
IV. Summary of Loan Loss Experience
A. Analysis of the Allowance for Loan Losses
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on page 29 in the table of Allowance for Loan Losses and
in the discussion related to the Allowance and Provision for Loan
Losses as well as on page 30, in the discussion related to Asset
Quality, which portions are incorporated herein by reference.
B. Allocation of the Allowance for Loan Losses
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on page 30 in the table of Allocation of the Allowance
for Loan Losses, which portions are incorporated herein by
reference.
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V. Deposits
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report Management's Discussion and
Analysis on pages 38 and 39 in the table of Average Balances, Net
Interest Income, Yields and Rates and on page 19 in the table
setting forth the maturity distribution of time certificates of
deposits of $100,000 or more, which portions are incorporated
herein by reference.
VI. Return on Equity and Assets
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report on page 26 in the table, Five
Year Summary of Selected Financial Data, which portions are
incorporated herein by reference.
VII. Short-Term Borrowings
Information required by this section of Guide 3 is presented in
the Registrant's 1995 Annual Report in Notes to Consolidated
Financial Statements, on page 19 in the table of details of
short-term borrowings, which portions are incorporated herein by
reference.
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PART I (continued)
Item 2 -- Properties
<TABLE>
The Bank operates the following community banking offices:
<CAPTION>
<S> <C> <C> <C> <C>
Date Square
Name of Office Location County Established Footage
Home Office 52 S. Broad St., Norwich, NY Chenango 07-15-1856 77,000
Afton Main St., Afton, NY Chenango 09-01-1962 2,779
Bainbridge 9 N. Main St., Bainbridge, NY Chenango 12-07-1938 4,897
Deposit 105 Front St., Deposit, NY Broome 02-12-1971 3,550
Earlville 2 S. Main St., Earlville, NY Chenango 08-07-1937 1,222
Grand Gorge Rts. 23 & 30, Grand Gorge, NY Delaware 11-01-1957 3,000
Margaretville Main St., Margaretville, NY Delaware 09-03-1963 3,152
New Berlin 2 S. Main St., New Berlin, NY Chenango 12-21-1946 2,195
Sherburne 30 N. Main St., Sherburne, NY Chenango 08-07-1937 3,393
Otselic Valley Rt. 26, DeRuyter Rd.,S. Otselic, NY Chenango 10-01-1945 1,326
North Plaza Rts. 12 & 320, Norwich, NY Chenango 10-15-1986 1,849
South Plaza Rt. 12 S., Norwich, NY Chenango 08-20-1986 1,200
Newark Valley 2 N. Main St., Newark Valley, NY Tioga 10-01-1973 3,893
Maine 67 Main St., Maine NY Broome 10-01-1973 1,458
Hobart Maple Ave., Hobart, NY Delaware 06-28-1974 2,308
Sidney 13 Division St., Sidney, NY Delaware 12-31-1978 3,500
Oxford State St., Oxford, NY Chenango 08-01-1984 3,559
Greene 80 S. Chenango St., Greene, NY Chenango 12-15-1986 3,200
Hancock 1 E. Main St., Hancock, NY Delaware 10-01-1989 7,500
Hamden Rt. 10 Box 144, Hamden, NY Delaware 10-01-1989 1,250
Arterial Plaza Second Ave. Ext., Gloversville, NY Fulton 10-01-1989 4,263
Northville N. Main St., Northville, NY Fulton 10-01-1989 3,000
Vail Mills Rt. 30, Vail Mills, NY Fulton 10-01-1989 1,000
Clinton West Park Row, Clinton, NY Oneida 10-01-1989 7,960
Sangertown 8549 Seneca Turnpike, New Hartford, NY Oneida 12-16-1995 4,179
Rome Westgate Plaza, Rome, NY Oneida 10-01-1989 1,950
Lake Placid 81 Main St., Lake Placid, NY Essex 10-01-1989 8,500
Cold Brook Plaza Cold Brook Plaza, Lake Placid, NY Essex 10-01-1989 1,300
Saranac Lake Lake Flower Ave., Saranac Lake, NY Essex 10-01-1989 2,400
Binghamton 1250 Front St., Binghamton, NY Broome 03-29-1993 1,900
Plattsburgh 30 Brinkerhoff St., Plattsburgh, NY Clinton 05-28-1993 4,396
Plattsburgh North Rt. 9, Plattsburgh, NY Clinton 08-28-1993 3,000
Ellenburg Depot Rt.11, Main St., Ellenburg Depot, NY Clinton 08-28-1993 2,346
Vestal 450 Plaza Drive, Vestal, NY Broome 02-01-1994 1,250
Utica Business Pk 555 French Road, New Hartford, NY Oneida 10-01-1994 3,396
Utica Downtown 162 Genesee St., Utica, NY Oneida 12-16-1995 4,350
<FN>
The Vestal office was closed January 31, 1996. The Otselic Valley, Binghamton, Vestal, Vail Mills,
Plattsburgh North, Rome, Utica Business Park and Utica Offices are leased. All other banking
premises are owned by the Bank. The Bank also has free-standing automated banking units.
</FN>
</TABLE>
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PART I (continued)
Item 3 -- Legal Proceedings
The Registrant and its principal subsidiary, NBT Bank, National
Association (collectively NBT), initiated a suit in the Supreme Court
of the State of New York, Chenango County, on October 28, 1988 against
Fleet/Norstar Financial Group, Inc., Fleet/Norstar New York, Inc., and
Norstar Bank of Upstate N.Y. (collectively NORSTAR) for tortious
interference with NBT's contract rights and prospective business
relationship with Central National Bank, Canajoharie, New York. NBT is
seeking damages from NORSTAR for lost profits and special and punitive
damages. On June 20, 1989, the Court dismissed all three counts of the
complaint for failure to state a cause for action. On March 29, 1990
the Appellate Division of the Supreme Court of New York reversed the
trial court's dismissal of NBT's third cause of action for tortious
interference with prospective business relations and affirmed the
dismissal of NBT's first two causes of action. The New York Court of
Appeals denied NBT's petition for review of the dismissal of the first
two causes of action on the ground that the order appealed from did not
finally determine the action. NBT's motion for reargument of its
petition for review was also denied and NBT's third cause of action was
remanded to the trial court. On March 9, 1994, NBT filed with the trial
court a Note of Issue indicating the amount demanded as $74,212,288.
On July 27, 1994, the trial court granted NORSTAR's motion for summary
judgment as to the third cause of action, and on May 25, 1995 the
Appellate Division affirmed the order of the Supreme Court. NBT's
motion for permission to appeal to the New York Court of Appeals was
granted on September 26, 1995.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted since no matters were submitted for security
holder vote during the fourth quarter of 1995.
PART II
Item 5 -- Market for Registrant's Common Stock and Related Stockholder
Matters
Incorporated by reference is the table of Quarterly Common Stock and
Dividend Information on page 35, the Stock Information on the inside
of the front cover flap, and the discussion related to Stockholders
Equity on page 22 of the Notes to Consolidated Financial Statements of
the Registrant's 1995 Annual Report.
Item 6 -- Selected Financial Data
Incorporated by reference is the Registrant's 1995 Annual Report table
of Five Year Summary of Selected Financial Data, Page 26.
Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations
Incorporated by reference is the Registrant's 1995 Annual Report
Management's Discussion and Analysis of Financial Condition and Results
of Operations, Pages 27-40.
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PART II (continued)
Item 8 -- Financial Statements and Supplementary Data
Incorporated by reference are the following sections of the
Registrant's 1995 Annual Report:
Independent Auditors' Report, Page 10.
Consolidated Balance Sheets as of December 31, 1995 and 1994, Page
11.
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993, Page 12.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993, Page 13.
Consolidated Statements of Cash Flows for the years ended December
31, 1995, 1994 and 1993, Page 14.
Notes to Consolidated Financial Statements at December 31, 1995 and
for the three years then ended, Pages 15-25.
Supplementary data is incorporated by reference from the Registrant's
1995 Annual Report page 40, Selected Quarterly Financial Data
(Unaudited).
Item 9 -- Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
This item is omitted since it is not applicable.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
Incorporated by reference are the following sections of the
Registrant's 1996 Proxy Statement Proposal Number 1:
Election of Directors
Executive Officers of NBT BANCORP INC. Other than Directors who are
Officers
Board Meetings and Committees of the Board
PART III (continued)
Item 11 -- Executive Compensation
Incorporated by reference are the following sections of the
Registrant's 1996 Proxy Statement Proposal Number 1:
Compensation of Directors and Officers
Board of Directors Fees
Executive Compensation
Option Grants Information
Aggregate Option Exercises In Last Fiscal Year and Fiscal Year End
Option Values
Retirement Plan
Employment Contracts and Termination of Employment
Change-In-Control Agreements
Supplemental Retirements Benefits
Daryl R. Forsythe Employment
Compensation Committee Interlocks and Insider Participation
Related Party Transactions
Employees' Stock Ownership Plan
401(k) Plan
Stock Option Plan
Executive Incentive Compensation Plan
Personal Benefits
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PART III (continued)
Item 12 -- Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference are the following sections of the
Registrant's 1996 Proxy Statement:
Principal Beneficial Owners Of Common Stock
PROPOSAL NUMBER 1:
Election Of Directors
Executive Officers of NBT BANCORP INC. other than Directors who are
Officers
Item 13 -- Certain Relationships and Related Transactions
Incorporated by reference is the section of the Registrant's 1996 Proxy
Statement:
PROPOSAL NUMBER 1:
Related Party Transactions
Reference is also made to the Registrant's 1995 Annual Report Notes to
Consolidated Financial Statements, page 18 -- Related Party
Transactions, incorporated by reference into Part II, Item 8 of this
FORM 10-K.
PART IV
Item 14 -- Exhibits, Financial Statement Schedules and Reports on FORM
8-K
Item 14(a)(1)
The consolidated financial statements of NBT BANCORP INC. and
Subsidiary at December 31, 1995 and for each of years in the three year
period ended are incorporated by reference into Part II, Item 8 of this
FORM 10-K.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December
31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements at December 31, 1995 and
for the three years then ended.
Item 14(a)(2)
Financial statement schedules are omitted from this FORM 10-K since the
required information is not applicable.
Item 14(a)(3) -- Exhibit Index
An exhibits index follows the signature page to this FORM 10-K.
Item 14(b) -- Reports on FORM 8-K
The Registrant filed one report on FORM 8-K during the quarter
ended December 31, 1995.
-12-
<PAGE>
PART IV (continued)
FORM 8-K dated November 22, 1995, filed with the Commission on November
22, 1995, describes the Registrant's cash and stock dividend payable
on December 15, 1995 to Stockholders of record on December 1, 1995 and
the Board of Directors authorization of the repurchase of up to 500,000
shares, approximately 6% of the Registrant's common stock.
The repurchased shares may be reissued in the future in connection with
the Registrant's Dividend Reinvestment Plan, Employee Stock Ownership
Plan, 401(k) Plan, to satisfy the exercise of outstanding stock
options, for other corporate purposes, or held indefinitely in the
treasury or retired. Based on current market conditions, the stock
repurchase program is expected to be completed within the next twelve
months. The repurchases of common stock will be made from time-to-time
in the open market in accordance with market conditions.
Item 14(c) -- Exhibits
Refer to Item 14(a)(3) above.
Item 14(d) -- Financial Statement Schedules
Refer to Item 14(a)(2) above.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on
FORM 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this twelfth day of March, 1996.
NBT BANCORP INC.
(Registrant)
By:
/s/ DARYL R. FORSYTHE
---------------------
Daryl R. Forsythe, President
and Chief Executive Officer
/s/ Joe C. Minor
----------------
Joe C. Minor, Vice President
Treasurer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant in the capacities and on the date indicated.
/s/ DARYL R. FORSYTHE March 12, 1996
- ----------------------------- --------------
Daryl R. Forsythe, Director DATE
/s/ EVERETT A. GILMOUR March 12, 1996
- ----------------------------- --------------
Everett A. Gilmour, Director DATE
/s/ PETER B. GREGORY March 12, 1996
- ----------------------------- --------------
Peter B. Gregory, Director DATE
/s/ANDREW S. KOWALCZYK March 12, 1996
- ----------------------------- --------------
Andrew S. Kowalczyk, Director DATE
/s/JOHN C. MITCHELL March 12, 1996
- ----------------------------- --------------
John C. Mitchell, Director DATE
March 12, 1996
- ----------------------------- --------------
Paul O. Stillman, Director DATE
-14-
<PAGE>
EXHIBIT INDEX
The following documents are attached as Exhibits to this FORM 10-K or,
if annotated by the symbol *, are incorporated by reference as Exhibits
as indicated by the page number or exhibit cross-reference to the prior
filings of the Registrant with the Commission.
<TABLE>
<CAPTION>
<S> <C> <C>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
3.1 Certificate of Incorporation of NBT BANCORP INC., as *
Amended through April 22, 1995.
FORM 10-Q for the quarterly period ended June 30,
1995, filed August 14, 1995 -- Exhibit 3.1.
3.2 By-laws of NBT BANCORP INC., as amended and restated *
through November 15, 1995.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 3.3.
10.1 NBT BANCORP INC. Employee Stock Ownership Plan Amended *
and restated as of January 1, 1989, including amendments
adopted through December 31, 1994.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.1.
10.2 NBT BANCORP INC. Employee Stock Ownership Plan Herein
Amendment #1 dated November 13, 1995.
Document is attached as 10.2.
10.3 NBT BANCORP INC. Defined Benefit Pension Plan Amended and *
restated as of October 1, 1989, including Amendments
adopted through December 31, 1994.
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.2.
10.4 Amendment #1 dated February 21, 1995 to NBT BANCORP INC. *
Defined Benefit Pension Plan Amended and restated as of
October 1, 1989, including Amendments adopted through
December 31, 1994.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 7, 1995 -- Exhibit 10.1.
10.5 Amendment #2 dated May 23, 1995 to NBT BANCORP INC. *
Defined Benefit Pension Plan Amended and restated as of
October 1, 1989, including Amendments adopted through
December 31, 1994.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.2.
10.6 NBT BANCORP INC. Defined Benefit Pension Plan Amendment Herein
#3 dated November 13, 1995.
Document is attached as Exhibit 10.6.
10.7 NBT BANCORP INC. Defined Benefit Pension Plan Amendment Herein
#4 dated January 22, 1996.
Document is attached as Exhibit 10.7.
10.8 NBT Bancorp 401(k) Retirement Plan Adoption Agreement. *
FORM 10-Q for the quarterly period ended September 30,
1994 -- Exhibit 10.2.
</TABLE>
-15-
<PAGE>
<TABLE>
EXHIBIT INDEX (continued)
<CAPTION>
<S> <C> <C>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
10.9 Amendment dated November 11, 1994 to the Scudder prototype *
401(k) Plan adopted as the NBT Bancorp Inc. 401(k)
Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.3.
10.10 Amendment dated November 15, 1994 to the 401(k) Plan *
Adoption Agreement for the NBT Bancorp Inc. 401(k)
Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.4.
10.11 Amendment #1 dated February 21, 1995 to the NBT Bancorp *
Inc. 401(k) Retirement Plan.
FORM 10-Q for the quarterly period ended June 30, 1995,
filed August 14, 1995 -- Exhibit 10.5.
10.12 NBT BANCORP INC. 401(k) Plan Adoption Agreement Herein
Amendment dated November 13, 1995.
Document is attached as 10.12.
10.13 NBT BANCORP INC. Stock Option Plan dated November 26, *
1986, as amended through February 16, 1993.
FORM 10-K for the year ended December 31, 1992, filed
March 31, 1993 -- Exhibit 10.17.
10.14 Amendment dated April 24, 1993 to the NBT BANCORP INC. *
Stock Option Plan dated November 26, 1986, as amended
through February 16, 1993.
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A NBT BANCORP INC. 1993 Stock Option
Plan, Paragraph 22.
10.15 NBT BANCORP INC. 1993 Stock Option Plan. *
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A.
10.16 NBT BANCORP INC. 1996 Executive Incentive Compensation Herein
Plan.
Document is attached as Exhibit 10.16.
10.17 Lease of Binghamton Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.21.
10.18 Lease of Vestal Office. *
FORM 10-Q for the quarterly period ended June 30, 1994,
filed August 12, 1994 -- Exhibit 10.22.
10.19 Lease Extension of Vestal Office.
FORM 10-Q for the quarterly period ended March 31, 1995,
filed May 15, 1995 -- Exhibit 10.3.
10.20 Lease and Lease Extension of Vail Mills Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.23.
10.21 Lease extension of Vail Mills Office. Herein
Document is attached as Exhibit 10.21.
</TABLE>
-16-
<PAGE>
<TABLE>
EXHIBIT INDEX (continued)
<CAPTION>
<S> <C> <C>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
10.22 Lease of Plattsburgh North Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.24.
10.23 Lease of Rome Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.25.
10.24 Lease and Lease Extensions of South Otselic Office. *
FORM 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.26.
10.25 Lease of Utica Business Park Office. *
FORM 10-Q for the quarterly period ended September 30,
1994, filed November 14, 1994 -- Exhibit 10.01.
10.26 Lease of Utica Downtown Office. Herein
Document is attached as 10.26.
10.27 Change in control agreement with Daryl R. Forsythe. *
FORM 10-K for the year ended December 31, 1994, filed
March 31, 1995 -- Exhibit 10.21.
10.28 Supplemental Retirement Agreement between NBT Bancorp *
Inc., NBT Bank, National Association and Daryl R.
Forsythe made as of January 1, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.1.
10.29 Death Benefits Agreement between NBT Bancorp Inc., NBT *
Bank, National Association and Daryl R. Forsythe made
August 22, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.2.
10.30 Wage Continuation Plan between NBT Bancorp Inc., NBT Bank, *
National Association and Daryl R. Forsythe made as of
August 1, 1995.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.4.
10.31 NBT Bancorp Inc. and Subsidiaries Master Deferred *
Compensation Plan of Directors, adopted February 11,
1992.
FORM 10-Q for the quarterly period ended September 30,
1995, filed November 13, 1995 -- Exhibit 10.3.
12 A computation of the Ratio of Earnings to Fixed Charges is Herein
attached as Exhibit 12.
13.1 All portions of the inside front cover and pages 10-40 of Herein
NBT BANCORP INC. 1995 Annual Report that are incorporated
herein by reference.
Document is attached as Exhibit 13.1.
21 A list of the subsidiaries of the registrant is attached Herein
as Exhibit 21.
23 Consent of KPMG Peat Marwick LLP. Herein
Document is attached as Exhibit 23.
</TABLE>
-17-
<PAGE>
<TABLE>
EXHIBIT INDEX (continued)
<CAPTION>
<S> <C> <C>
FORM
10-K Exhibit
Exhibit Cross
Number Reference
27 Financial Data Schedule. Herein
Document is attached as Exhibit 27.
-18-
<PAGE>
<PAGE>
EXHIBIT 10.2
NBT BANCORP INC. Employee Stock Ownership Plan Amendment #1
<PAGE>
AMENDMENT #1
NBT BANCORP INC.
EMPLOYEE STOCK OWNERSHIP PLAN
This sets forth Amendment #1 to the NBT Bancorp Inc. Employee Stock
Ownership Plan, as amended and restated through December 31, 1994 ("Plan").
Effective November 1, 1995, the Plan shall be amended as follows:
1. Section 3.01(c) of the Plan shall be amended to provide
that an employee who transfers to employment with NBT Bank, National
Association pursuant to the September 11, 1995 Purchase and Assumption
Agreement between NBT Bank, National Association and Community Bank,
National Association shall receive credit for eligibility service under
the Plan to the extent the employee is credited with eligibility
service under the qualified retirement plans of Community Bank,
National Association as of the date of transfer. Section 3.01(c), as
amended, shall provide in its entirety as follows:
c. In applying the above service requirement, (i) an
Employee's service with any Affiliated Employer shall be taken
into account, and (ii) an Employee who transfers to employment
with the Employer pursuant to the September 11, 1995 Purchase
and Assumption Agreement between Community Bank, National
Association and the Employer shall receive credit for eligibility
service to the extent the Employee is credited with eligibility
service under the qualified retirement plans of Community Bank,
National Association as of the date the Employee transfers to
employment with the Employer.
2. A new Section 7.01(c)(v) shall be added to the Plan to
provide that an employee who transfers to employment with NBT Bank,
National Association pursuant to the September 11, 1995 Purchase and
Assumption Agreement between Community Bank, National Association and
NBT Bank, National Association shall receive credit for vesting service
<PAGE>
under the Plan to the extent the employee is credited with vesting
service under the qualified retirement plans of Community Bank,
National Association as of the date of transfer. New Section
7.01(c)(v) shall provide in its entirety as follows:
v. An Employee who transfers to employment with the
Employer pursuant to the September 11, 1995 Purchase and
Assumption Agreement between Community Bank, National
Association and the Employer shall receive credit for Years of
Service to the extent the Employee is credited with vesting
service under the qualified retirement plans of Community Bank,
National Association as of the date the Employee transfers to
employment with the Employer.
Executed this 13th day of November, 1995.
NBT BANCORP INC.
By:/s/John D. Roberts
------------------
-2-
<PAGE>
EXHIBIT 10.6
NBT BANCORP INC. Defined Benefit Pension Plan Amendment #3
<PAGE>
AMENDMENT #3
NBT BANCORP INC.
DEFINED BENEFIT PENSION PLAN
This sets forth Amendment #3 to the NBT Bancorp Inc. Defined
Benefit Pension Plan, as amended and restated through December 31, 1994
("Plan").
Effective November 1, 1995, the Plan shall be amended as follows:
1. Section 3.01(c) of the Plan shall be amended to provide
that an employee who transfers to employment with NBT Bank, National
Association pursuant to the September 11, 1995 Purchase and Assumption
Agreement between NBT Bank, National Association and Community Bank,
National Association shall receive credit for eligibility service under
the Plan to the extent the employee is credited with eligibility
service under the qualified retirement plans of Community Bank,
National Association as of the date of transfer. Section 3.01(c), as
amended, shall provide in its entirety as follows:
c. In applying the above service requirement, (I)
an Employee's service with any Affiliated Employer shall
be taken into account, and (ii) an Employee who transfers
to employment with the Employer pursuant to the September
11, 1995 Purchase and Assumption Agreement between
Community Bank, National Association and the Employer
shall receive credit for eligibility service to the extent
the Employee is credited with eligibility service under
the qualified retirement plans of Community Bank, National
Association as of the date the Employee transfers to
employment with the Employer.
2. A new Section 4.02(c) shall be added to the Plan to provide
that an employee who transfers to employment with NBT Bank, National
Association pursuant to the September 11, 1995 Purchase and Assumption
Agreement between Community Bank, National Association and NBT Bank,
National Association shall receive credit for vesting service under the
<PAGE>
Plan to the Extent the employee is credited with vesting service under
the qualified retirement plans of Community Bank, National Association
as of the date of transfer. New Section 4.02(c) shall provide in its
entirety as follows:
c. An Employee who transfers to employment with the
Employer pursuant to the September 11, 1995 Purchase and
Assumption Agreement between Community Bank, National
Association and the Employer shall receive credit for Years of
Vesting Service to the extent the Employee is credited with
vesting service under the qualified retirement plans of
Community Bank, National Association as of the date the Employee
transfers to employment with the Employer.
Executed this 13th day of November, 1995.
NBT BANCORP INC.
By:/s/John D. Roberts
------------------
- 2 -
<PAGE>
EXHIBIT 10.7
NBT BANCORP INC. Defined Benefit Pension Plan Amendment #4
<PAGE>
AMENDMENT #4
NBT BANCORP INC.
DEFINED BENEFIT PENSION PLAN
This sets forth Amendment #4 to the NBT Bancorp Inc. Defined
Benefit Pension Plan, as amended and restated through December 31, 1994
("Plan").
Effective as of October 1, 1989, the Plan shall be amended to
incorporate a minimum benefit based upon a participant's years of
service and compensation earned through December 31, 1994. The minimum
benefit shall be reflected in a new Section 7.01(d) that shall be added
to the Plan and that shall provide in its entirety as follows:
d. Notwithstanding Section 7.01(a), the annual normal
retirement benefit of a Participant who is actively employed and
performs at least on Hour of Service after September 30, 1989
shall not be less than the excess of the amount described in (I)
below, over the amount described in (ii) below.
I. The sum of (A) 1.60 percent of the
Participant's Final Average compensation
determined as of December 31, 1994 for each
year of Benefit Service earned through December
31, 1994 (up to a maximum of 40 years), plus
(B) .65 percent of the Participant's Final
Average Compensation determined as of December
31, 1994 that is in excess of covered
Compensation for each Year of Benefit Service
earned through December 31, 1994 (up to a
maximum of 35 years).
II. The annual normal retirement benefit payable
to the Participant from the Retirement Plan of
Irving Bank Corporation and Affiliated
Companies, or any successor plan, as a result
of the Participant's employment with National
Bank of Hancock, Hayes National Bank, Fulton
County National Bank and Trust, and/or Bank of
Lake Placid through September 29, 1989.
Executed this 22nd day of January, 1996.
NBT BANCORP INC.
By:/s/Daryl R. Forsythe
--------------------
Pres & CEO
<PAGE>
EXHIBIT 10.12
NBT BANCORP INC. 401(k) Plan Adopted Agreement Amendment
<PAGE>
NBT BANCORP INC.
401(K) PLAN ADOPTION AGREEMENT
WHEREAS, on April 1, 1994, an Adoption Agreement was made and executed by
and between the NBT Bank, National Association (formerly The National Bank
and Trust Company) having its principal place of business in the City of
Norwich, County of Chenango, State of New York ("Corporation") and Scudder
Trust Company.
WHEREAS, the Corporation wishes to amend said instrument pursuant to Article
XX of the 401(k) Plan.
WHEREAS, it is the intention of the above parties to make the following
amendment to the 401(k) Plan Agreement effective January 1, 1996.
Now, therefore, the following resolutions are made:
1. Effective January 1, 1996, the Employer Matching Contribution
made on behalf of each Participant shall be equal to the sum of 75% of the
Participant's contributions which are not in excess of 4% of the
Participant's Compensation, plus 0% of such contributions which are in
excess of 4% of compensation, but not in excess of 15% of the Participant's
Compensation.
2. That the Corporation's Senior Vice President of Human Resources
be, and the Senior Vice President hereby is, authorized and directed to
execute and deliver for an on behalf of the Corporation all such other
agreements, documents, and certifications and to do and to perform all such
other acts and things as the Senior Vice President shall determine to be
necessary, appropriate or advisable to carry out the intents and purposes
of the foregoing resolutions, including the preparation and execution of a
Plan amendment, ensuring that the amendment does not adversely impact the
Plan's tax-qualified status, submitting the amendment to the Internal
Revenue Service for approval, and preparing and distributing a Summary of
Material Modification.
Executed this 13th day of November, 1995.
NBT BANCORP INC.
By:/s/John D. Roberts
__________________
<PAGE>
EXHIBIT 10.16
NBT BANCORP INC. 1996 Executive Incentive Compensation Plan
<PAGE>
January 23, 1996
NBT BANCORP INC.
Norwich, New York
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE>
NBT BANCORP INC.
Norwich, New York
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
------------------------------------------
Table of Contents
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
Introduction 1-2
Incentive Plan
- --------------
Section I - Definitions 3
Section II - Participation 4
Section III - Activating the Plan 4
Section IV - Calculation of Awards 4
Section V - President's Special Recommendations 4
Section VI - Distribution of Awards 5
Section VII - Plan Administration 6
Section VIII - Amendment, Modification, Suspension or Termination 6
Section IX - Effective Date 6
Section X - Employer Relations with Participants 6
Section XI - Governing Law 6
Incentive Plan Participants Appendix A
Distribution of Awards Appendix B
</TABLE>
<PAGE>
NBT BANCORP INC.
Norwich, New York
Introduction
------------
It is important to examine the benefits which accrue to the
organization through the operation of the Executive Incentive
Compensation Plan. The Plan impacts directly on senior and middle
management - those critical to the organization's success - and its
purpose can be summarized as follows:
* PROVIDES MOTIVATION: The opportunity for incentive awards
provides executives with the impetus to "stretch" for challenging, yet
attainable, goals.
* PROVIDES RETENTION: by enhancing the organization's competitive
compensation posture.
* PROVIDES MANAGEMENT TEAM BUILDING: by making the incentive award
dependent on the attainment of organization goals, a "team orientation"
is fostered among the participant group.
* PROVIDES INDIVIDUAL MOTIVATION: by making a portion of the
incentive award dependent on the attainment of individual goals, a
participant is encouraged to make significant personal contribution to
the corporate effort.
* PROVIDES COMPETITIVE COMPENSATION STRATEGY: The implementation
of incentive arrangements is competitive with current practice in the
banking industry.
-1-
<PAGE>
Highlights of the 1996 Executive Incentive Compensation Plan included
in the following pages are as follows:
1. The Plan is competitive compared with similar sized banking
organizations and the banking industry in general.
2. The Compensation Committee of the Board of Directors controls all
aspects of the Plan.
3. Management employees are eligible for participation.
4. The financial criteria necessary for Plan operation consist of
Return on Average Assets (25% Weight) and Return of Equity (50% Weight)
and Profit Improvement (25% Weight).
5. Incentive distributions will be made during the first quarter of
the year following the Plan Year.
6. Incentive awards will be based on attainment of corporate goals.
Total Incentive Awards contain both Corporate and Individual
components; the corporate component awarded by virtue of corporate
performance related to corporate goals and the individual component
awarded by virtue of individual performance related to individual
goals. Component percentages are shown in Appendix B.
7. Incentive distributions will be based on matrix in Appendix B.
-2-
<PAGE>
NBT BANCORP INC.
Norwich, New York
The Board of Director of NBT Bancorp Inc. has established this 1996
Executive Incentive Compensation Plan. The purpose of the Plan is to
meet and exceed financial goals and to promote a superior level of
performance relative to the bank's competition in its market area.
Through payment of incentive compensation beyond base salaries, the
Plan provides reward for meeting and exceeding the bank's financial
goals.
SECTION I - DEFINITIONS
-----------
Various terms used in the Plan are defined as follows:
BASE SALARY: the base salary at the end of the Plan year, excluding
any bonuses, contributions to employee benefit programs, or other
compensation not designated as salary.
BOARD OF DIRECTORS: The Board of Directors of NBT Bancorp Inc.
PRESIDENT & CEO: President and CEO of NBT Bancorp Inc.
CORPORATE GOALS: Those pre-set objectives and goals which are required
to activate distribution of awards under the Plan.
INDIVIDUAL GOALS: Five key objectives mutually agreed upon between
participants and superior, and approved by the CEO.
COMPENSATION COMMITTEE: The Compensation Committee of the Board of
Directors of the Bank.
PLAN PARTICIPANT: An eligible employee of the bank designated by
the President & CEO and approved by the Compensation Committee for
participation for the Plan Year.
PLAN YEAR: The 1996 calendar year.
-3-
<PAGE>
SECTION II - ELIGIBILITY TO PARTICIPATE
--------------------------
To be eligible for an award under the Plan, a Plan participant must be
an officer in the full-time service of the bank at the start and close
of the calendar year and at the time of the award unless the CEO by
special exception recommends to the Compensation Committee a special
arrangement for a newly hired executive who may be designated by the
CEO and approved by the Compensation Committee as eligible for an award
as determined in the employment agreement. A Plan participant must be
in the same or equivalent position, at year end as they were when named
a participant or have been promoted during the course of the year, to
be eligible for an award. If a Plan participant voluntarily leaves
the employ of the bank prior to the payment of the award, he/she is not
eligible to receive an award. However, if the active full-time service
of a participant in the Plan is terminated by death, disability,
retirement, or if the participant is on an approved leave of absence,
the President should recommend an award to such a participant based on
the proportion of the Plan year that he/she was in active service with
the bank.
SECTION III - ACTIVATING THE PLAN
-------------------
The operation of the Plan is predicated on attaining and exceeding
management performance goals. The goals will consist of return on
average assets, return on shareholder's equity and profit improvement.
The Corporation must achieve a minimum net income set forth in Appendix
B to trigger an award pursuant to the terms of this plan.
SECTION IV - CALCULATION OF AWARDS
---------------------
The Compensation Committee designates the incentive formula as shown
in Appendix B. The actual rate of distribution is based upon bank
performance. The Compensation Committee will make final decisions with
respect to all incentive awards and will have final approval over all
incentive awards. The individual participant data regarding maximum
award and formulas used in calculation has been customized and appears
as Appendex A.
SECTION V - PRESIDENT'S SPECIAL RECOMMENDATIONS
-----------------------------------
The President & CEO will recommend to the Compensation Committee the
amounts to be awarded to individual participants in the incentive Plan.
The President & CEO may recommend a change beyond the formula to a
bonus award (increase or decrease) to an individual participant by a
specified percentage based on assessment of special individual
performance beyond the individual goals. The Compensation Committee
may amend the President & CEO's bonus award. The amount of the
adjustment is from 0%-20% of the actual award. No award will be
granted to an officer whose performance is unacceptable.
-4-
<PAGE>
SECTION VI - DISTRIBUTION OF AWARDS
----------------------
Unless a participant elects the deferred option outlined in the
following paragraph, distribution of awards will be made during the
first quarter of the year following the Plan year. Distribution of the
bonus award must be approved by the Compensation Committee.
A participant may elect by written notice to the Committee at any time
during the month of December of the Plan Year preceding the year to
which the award relates to have all or a portion of his award deferred
(Deferred Award). Any such election shall be irrevocable except
unforeseeable financial emergency.
Any portion of participant's award that is deferred shall bear interest
commencing on the Award Date based on the lowest balance in the
participant's account during the month, as if invested at an annual
rate equal to the highest annual rate offered at NBT on any customer
deposit account in effect on the last day of the preceding calendar
year. Interest shall be computed monthly, and credited to the
participant's account as of the last day of each calendar month.
The Deferred Award shall be paid in five (5) annual installments upon
the participant's ceasing to be actively employed by the Company for
any reason. Payment shall begin on the 31st day of January following
the year in which the participant ceases to be actively employed with
the Company. However, a participant with the consent of the Committee,
prior to termination of employment, may elect in writing to have the
aggregate amount in his or her Deferred Award Account paid to him or
her in a lump sum on a designated date.
Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be constructed to create a
trust of any kind, or a fiduciary relationship between NBT and the
participant, his or her designated beneficiary or any other person, nor
shall the participant or any designated beneficiary have any preferred
claim on, any title to, or any beneficial interest in, the assets of
NBT or the payments deferred hereunder prior to the time such payments
are actually paid to the participant pursuant to the terms herein. To
the extent that the participant, his or her designated beneficiary or
any person acquires a right to receive payments from NBT under this
Plan, such right shall be no greater than the right of any unsecured
general creditor of NBT.
The intent of this Section of the Plan is to create a voluntary, non-
qualified, unfunded, deferred executive incentive compensation Plan
which will defer the deduction of such incentive compensation for tax
purposes by NBT and which will correspondingly defer the recognition
of such compensation by the participant until such compensation is
actually paid. It is therefore intended, and this Plan shall be
construed and where necessary modified, so that the participants shall
not be deemed to have constructively received such deferred
compensation.
In the event of death, any approved award earned under the provisions
of this plan will become payable to the beneficiary designated under
this Plan; or if no such designation, to the designated beneficiary of
the participant as recorded under the bank's group life insurance
program; or in the absence of a valid designation, to the participant's
estate.
-5-
<PAGE>
SECTION VII - PLAN ADMINISTRATION
-------------------
The Compensation Committee shall, with respect to the Plan have full
power and authority to construe, interpret and manage, control and
administer this Plan, and to pass and decide upon cases in conformity
with the objectives of the Plan under such rules as the Board of
Directors of the bank may establish.
Any decision made or action taken by the Bank, the Board of Directors,
or the Compensation Committee arising out of, or in connection with,
the administration, interpretation, and effect of the Plan shall be at
their absolute discretion and will be conclusive and binding on all
parties. No member of the Board of Directors, Compensation Committee,
or employee of the bank shall be liable for any act or action
hereunder, whether of omission or commission, by a Plan participant or
employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated in accordance with the
provision of the Plan.
SECTION VIII - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
--------------------------------------------------
The bank reserves the right, by and through its Board of Directors to
amend, modify, suspend, reinstate or terminate all or part of the Plan
at any time. The Compensation Committee will give prompt written
notice to each participant of any amendment, suspension or termination
or any material modification of the Plan. In the event of a merger or
acquisition, the Plan and related financial formulas will be reviewed
and, if necessary, revised to take into account the financial status
of any merged institution.
SECTION IX - EFFECTIVE DATE OF THE PLAN
--------------------------
The effective date of the Plan shall be January 1, 1996.
SECTION X - EMPLOYER RELATION WITH PARTICIPANTS
-----------------------------------
Neither establishment nor the maintenance of the Plan shall be
construed as conferring any legal rights upon any participant or any
person for a continuation of employment, nor shall it interfere with
the right of an employer to discharge any participant or otherwise deal
with him/her without regard to the existence of the Plan.
SECTION XI - GOVERNING LAW
-------------
Except to the extent pre-empted under federal law, the provisions of
the Plan shall be construed, administered and enforced in accordance
with the domestic internal law of the State of New York. In the event
of relevant changes in the Internal Revenue Code, related rulings and
regulations, changes imposed by other regulatory agencies affecting the
continued appropriateness of the Plan and awards made thereunder, the
Board may, at its sole discretion, accelerate or change the manner of
payments of any unpaid awards or amend the provisions of the Plan.
-6-
<PAGE>
DEFERRED COMPENSATION PLAN
--------------------------
FOR OFFICERS OF NBT BANCORP & SUBSIDIARIES
------------------------------------------
ELECTION AGREEMENT
------------------
I, ____________________, hereby elect [ ] to [ ] not to participate in
the Deferred Compensation Plan for officers of NBT with respect to
Executive Incentive Compensation (EICP) awards which I may receive
for the calendar year of __________. I hereby elect to defer the
payment of __________ (__________%) of the EICP award which I would
otherwise be entitled to receive.
[ ] Please defer payment of the percentage of my EICP
award specified above until the earlier of the
following dates:
[ ] Until ____________________ (Specify date which may
not be later than the date on which I will
retire).
[ ] Until the date of my death
[ ] Begin annual payments of deferred balance on
____________________ in the amount of 1/5th the
balance each year until the balance has been paid
in full (5 year payout).
[ ] Because terms of the plan have changed since my
election to defer EICP awards, please discontinue
my deferral election and:
[ ] Roll my deferred account proceeds into the
following account at the institution indicated:
___________________________________________
___________________________________________
[ ] Please pay me out in cash, the balance of my
account, at this time.
[ ] I hereby designate the following person or persons
as beneficiary hereunder in the event of my death:
Primary Beneficiary ____________________________________
Secondary Beneficiary __________________________________
I hereby revoke any prior election that may be inconsistent with the
above.
I acknowledge that I have reviewed the plan and understand that my
participation will be subject to the terms and conditions contained
in the plan. Words and phrases used in this Election Agreement shall
have the meanings assigned by the plan.
Dated this _____ day of _____, 199_.
___________________________________
<PAGE>
Appendix B.1
1996 CHIEF EXECUTIVE OFFICER LEVEL OF INCENTIVE COMPENSATION PLAN
-----------------------------------------------------------------
CHIEF EXECUTIVE OFFICER LEVER
- -----------------------------
To incorporate the 1995 Senior Executive Incentive
Compensation Plan (SEICP) into the 1996 Executive Incentive
Compensation Plan (EICP), the provisions of the SEICP are hereby
included as Appendix B.1.
PARTICIPANTS
- ------------
The participants included in the Plan at the CEO Level is CEO
and President Daryl R. Forsythe.
SHAREHOLDER RETURN THRESHOLD
- ----------------------------
Before any awards are made under the terms of this Plan, a
minimum net income and return to shareholders shall be achieved.
This threshold shall be determined annually by the Committee.
EXECUTIVE STOCK OWNERSHIP
- -------------------------
The following resolution of the Board of Directors is
incorporated herein and made a part of this plan.
RESOLVED, that the Board of Directors, being cognizant that
major U.S. corporations have developed guidelines that require or
strongly urge top management to invest in company stock, hereby
declares that it believes that the interests of Bancorp will be
enhanced if Bancorp adopts targets whereby Bancorp's executive
management will invest in the stock of Bancorp.
RESOLVED, that the Board of Directors in furtherance of its
desire expressed above hereby adopts the following with respect to
Bancorp's executive management:
(a) The Chief Executive Officer, Mr. Forsythe, will acquire
through the Dividend Reinvestment Plan, participation in the
Employee Stock Purchase Plan, and/or, by direct purchase during a
window period beginning on the third business day and ending on the
twelfth business day following release to the public of Bancorp's
quarterly earnings, and/or through the exercise of stock options,
and will retain such stock so that within a five-year period
beginning on January 1, 1995, he will own such number of shares of
Bancorp stock as will equal two times then current base salary.
(b) To the extent that Mr. Forsythe purchases Bancorp stock
pursuant to the stock purchase provisions of this Plan, such
executive will retain the shares so purchased for a period of five
years from the date of purchase, except as otherwise provided in
this Plan.
RESOLVED, that the Board of Directors hereby authorizes and
directs the proper officers of Bancorp to utilize Bancorp funds to
pay the Chief Executive Officer of Bancorp that amount of federal
and state taxes due on that portion of the bonus paid under the EICP
which was utilized by such officer to purchase shares of Bancorp
stock, provided that such officer utilized at least 50% of his bonus
awarded in a particular year for the purchase of Bancorp stock and
provided further that such officer agreed to own and retain such
shares of Bancorp stock for a period of five years from the date of
acquisition.
<PAGE>
RESOLVED, that the President and the other appropriate
officers are hereby authorized, on behalf of Bancorp, to take all
further actions, incur such expenses, and do all things necessary to
effectuate the Plan as amended.
Net income achieved shall be the determining factor for the
award range. With respect to the Committee determining the bonus
award within the range, the Committee shall consider such factors as
the ROA and ROE actually achieved and shall also consider the
achievement of the goals set forth below:
FINAL DETERMINATION
- -------------------
The Committee shall, after determination of the award
percentage earned, determine the overall performance and
contribution of the individual participant to the results achieved
and may make such discretionary adjustments either up or down as the
Committee deems appropriate to reward the individual participant.
<PAGE>
COMPUTATION
- -----------
Upon the Committee's determination of the individual award
earned, the bonus shall be computed by multiplying the bonus
percentage awarded by the participant's base compensation for the
year as included in his or her's W-2 earnings statement for such
year.
<PAGE>
EXHIBIT 10.21
Lease extension of Vail Mills Office
<PAGE>
THE NATIONAL BANK AND TRUST COMPANY
52 South Broad Street
Norwich, New York 13815
607/335-6000
November 15, 1994
Mr. Fred Showers
Mrs. Reta L. Showers
48 West main Street
Broadalbin, New York 12025
Re: Land Lease located at Route 10, Mayfield, New York
Dear Mr. & Mrs. Showers:
The existing lease between yourselves and NBT is due to expire on June 30, 1995.
This letter is expressing our interest in a one year renewal commencing July
1, 1995 through June 30, 1996 with an option of continued annual renewals
thereafter. The current annual rental of $6,300 payable in monthly payments
of $525 would remain unchanged.
If the terms and conditions in this letter meet with your approval, please
sign one copy and return it for my file. Should you have any questions, feel
free to give me a call at 607-337-6115.
Sincerely,
/s/Donna L. Deuel
Donna L. Deuel
Assistant Vice President
Administrative Services
Jan. 4, 1995 /s/Fred Showers
- ------------ ---------------
Date Fred Showers
/s/Reta L. Showers
------------------
Reta L. Showers
cc: E. Tomeck
J. Minor
<PAGE>
EXHIBIT 10.26
Lease of Utica Downtown Office
<PAGE>
This LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is
made this 15 day of December, 1995, by and between COMMUNITY BANK,
NATIONAL ASSOCIATION, a national banking association having a principal
place of business at 5790 Widewaters Parkway, Dewitt, New York 13214
(hereinafter "Assignor"), and NBT BANK, NATIONAL ASSOCIATION, a
national banking association having a principal place of business at
52 South Broad Street, Norwich, New York 13813 (hereinafter
"Assignee").
WITNESSETH:
WHEREAS, pursuant to the terms of a Purchase and Assumption
Agreement dated September 11, 1995 between Assignor and Assignee (the
"Purchase Agreement"), Assignor agreed to assign to Assignee, and
Assignee agreed to take an assignment of, all of Assignor's right,
title and interest as tenant under the least dated May 31, 1974 between
Gen-Fay, Inc., as Landlord, and Citibank (Central), N.A., as Tenant,
which was amended by Landlord and Tenant pursuant to an Agreement dated
August 26, 1983, and further amended pursuant to an Agreement dated
December 11, 1986 between Felix LaBella, successor in interest to
Landlord and Felix LaBella, Jr. and Louis A. LaBella, Sr., successors
in interest to Felix LaBella and Citibank (New York State), N.A.,
successor in interest to Citibank (Central), N.A. ("Citibank") (the
"Lease"), and assigned to Chase Lincoln First Bank, N.A., (later The
Chase Manhattan Bank, N.A., as successor in interest by merger)
pursuant to an Assignment and Assumption of Leases dated September 21,
1990, a memorandum of which was recorded in the Oneida County Clerk's
Office on August 8, 1995, at Book 2714, Page 494, and further assigned
to Community Bank, National Association pursuant to a Lease Assignment
and Assumption Agreement dated July 7, 1995, which was recorded in the
Oneida County Clerk's Office on August 8, 1995, at Liber 2714, Page
491, and Assignor desires to so assign its right, title and interest
in the Lease, all upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration paid and received to
their mutual satisfaction, the parties hereto hereby agree as follows:
1. As of the Effective Date as hereinafter defined, Assignor
does hereby assign all of its right, title and interest as tenant,
including all of the Assignor's Interest In the buildings and
improvements, if any, under the Lease to Assignee, to have to hold unto
the Assignee, its successors and assigns, to it and their own proper
use.
2. As of the Effective Date, Assignor represents that the
Lease is in full force and effect without default by Assignor or
Landlord thereunder, and that the Lease has not been amended, modified,
assigned or sublet except as set forth above.
3. On and after the Effective Date, Assignee hereby assumes
and agrees to faithfully abide by, perform and discharge each and
every obligation, covenant and agreement of the Lease to be performed
by the Tenant at the sole cost and expense of Assignee.
4. Assignee does hereby agree to indemnify and to hold the
Assignor harmless of and from any and all liability, loss or damage
under the Lease arising after the Effective Date and of and from any
<PAGE>
and all claims and demands whatsoever which may be asserted against the
Assignor by reason of any alleged obligations on its part arising after
the Effective Date to perform or discharge any of the terms, covenants
or agreements contained in the Lease, provided that Assignee shall have
received notice of any such claim or demand from Assignor. Should the
Assignor incur any such liability, loss or damage under the Lease, or
in the defense of any such claims or demands, the amount thereof,
including costs, expenses and reasonable attorney's fees, shall be
secured hereby, and Assignee shall reimburse the Assignor therefor
immediately upon written demand.
5. Assignor does hereby agree to indemnify and to hold the
Assignee harmless of and from any and all liability, loss or damage
under the Lease arising before the Effective Date and of and from any
and all claims and demands whatsoever which may be asserted against
the Assignee by reason of any alleged obligations on its part arising
after the Effective Date to perform or discharge any of the terms,
covenants or agreements contained in the Lease, provided that Assignor
shall have received notice of any such claim or demand from Assignee.
Should the Assignee incur any such liability, loss or damage under the
Lease, or in the defense or any such claims or demands, the amount
thereof, including costs, expenses and reasonable attorney's fees, shall
be secured hereby, and Assignor shall reimburse the Assignee therefor
immediately upon written demand.
6. Notwithstanding any provision to the contrary contained
herein, Assignor and Assignee hereby expressly acknowledge and agree
that the effectiveness of this Agreement, and the obligations of the
parties hereunder, are solely contingent upon the full consummation in
all respects of the transaction described in the Purchase Agreement,
and this Agreement shelf only be deemed effective upon and as of the
date of such consummation (the "Effective Date").
7. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto, their respective successors and
assigns.
8.*
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed the day and date first mentioned above.
ASSIGNOR: ASSIGNEE:
COMMUNITY BANK, NATIONAL NBT BANK, NATIONAL
ASSOCIATION ASSOCIATION
By:/s/Sanford A. Belden By:/s/Joe C. Minor
Name: Name:
Title: President/CEO Title: SVP/CFO
*8. This Agreement may be executed in two or more counterparts each
of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument
and to become effective when one or more counterparts have been signed
by each of the parties hereto. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account
for the other counterpart.
<PAGE>
LANDLORD'S ESTOPPEL CERTIFICATE
TO: NBT Bank, National Association
52 Broad Street
Norwich, New York 13815
RE: 162 Genesee Street
Utica, New York
Gentlemen:
The undersigned, successor in interest to Landlord under a
certain Lease (the "Lease") made as of May 31, 1974 between Gen-Fay,
Inc. and Citibank (Central), N.A. ("Citibank"), as Tenant, respecting
property located at 162 Genesee Street, Utica, New York (the "Premises"),
which Lease was assigned to Chase Lincoln First Bank, N.A. (now The Chase
Manhattan Bank, N.A., successor in interest by merger) pursuant to an
Assignment and Assumption of Leases dated as of September 21, 1990, and
further assigned to Community Bank, National Association pursuant to a
Lease Assignment and Assumption Agreement dated July 7, 1995, hereby
certify:
1. The Landlord owns the fee simple estate in and to the Premises.
2. The initial term of the Lease is for ten (10) years commencing
on August 15, 1974 and expiring on August 31, 1984, with the Tenant
having the right to renew the Lease for two (2) periods of five (5)
years each by giving notice to the Landlord not less than 90 days prior
to the expiration of the initial term of any renewal term.
3. Pursuant to an Agreement dated August 26, 1983 between Landlord
and Tenant, the term of the Lease was extended to August 31, 1989
pursuant to Tenant's exercise of its first renewal option.
4. Pursuant to an Agreement dated December 11, 1986 between Landlord
and Tenant, the term of the Lease was extended to July 31, 1999 and
the Premises were increased by 1,350 square feet to 4,350 square feet.
5. Pursuant to an Agreement dated July 13, 1995 between the Landlord
and Tenant, Tenant agreed to pay Landlord as additional rent an amount
equal to forty percent (40%) of the Real Property Taxes paid by
Landlord beginning with the 1993 County Tax.
6. The Lease, as amended by the foregoing agreements and
assignments, is in full force and effect in accordance with its terms,
and attached to this Estoppel Certificate is an exact copy of the
Lease, as amended and assigned, containing the complete agreement
between the Landlord and the Tenant concerning the leasing of the
Premises.
<PAGE>
7. To the best of Landlord's knowledge, without inquiry, the
occupancy and use of the Premises by the Tenant complies with the terms
of the Lease.
8. The Landlord knows of no default under the Lease by the Tenant,
including any payment of rent, additional rent or other sums required
to be paid by the Tenant, nor is there any claim by the Landlord
against the Tenant under the terms of the Lease, except for an unbilled
claim for additional rent equal to forty percent (40%) of the 1995
County tax, 1995-96 City Tax and 1995-96 School tax.
9. To the best of Landlord's knowledge, without inquiry, the Lease
has not been assigned or sublet, in whole or part, except as provided
herein.
10. There are no actions, voluntary or otherwise, pending against the
Landlord under the Bankruptcy Laws of the United States or any State
thereof.
11. Upon the expiration of the Lease term, all buildings, additions,
improvements and alterations to the Premises made by the Tenant under
the Lease shall remain on the Premises and vest in the Landlord.
This Estoppel Certificate has been executed on December 14, 1995 as
follows:
LANDLORD
/s/Felix V. LaBella, Jr.
---------------------
Felix V. LaBella, Jr.
/s/Louis LaBella
-------------
Louis LaBella
<PAGE>
COMMUNITY BANK, N.A.
5790 Widewaters Parkway, DeWitt, New York 13214 (315)445-2282
November 8, 1995
Merritt & LaBella
318 Rutger Street
Utica, New York 13501
Attn: Felix V. LaBalla, Jr.
Re: Proposed Assignment (the "Assignment") by and between
Community Bank, National Association, as assignor
("Assignor") and NBT Bank, National Association
("Assignee").
Premises: approximately 3,000 square feet of space (and
basement area thereunder) at 162 Genesee Street, Utica, New
York.
Dear Sir:
Reference is made to that certain lease dated May 31, 1974, as
same may have been amended and supplemented (hereinafter collectively
referred to as the "Lease") between Felix V. LaBella, Jr. and Louis
LaBella (successors in interest to Gen-Fay, Inc.) (hereinafter referred
to collectively as "Landlord"), and Assignor and its various predecessors
in interest as tenant, which Lease, as amended, covers approximately 3,000
square feet, (and the basement under) in the building located at 162 Genesee
Street, Utica, New York (hereinafter referred to as the "Assigned Premises")
and was assigned to Community Bank, National Association by The Chase
Manhattan Bank, N.A. pursuant to a Lease Assignment and Assumption Agreement
dated July 7, 1995.
Community Bank, National Association hereby requests Landlord's
consent to the Assignment. The Landlord hereby consents to the
Assignment of the Assigned Premises by Assignor to Assignee subject to
and upon the following conditions:
1. Landlord's granting of the within consent shall not be
deemed a waiver of Landlord's rights under the Lease to pass upon (i)
any further assignment of the Lease or (ii) any subletting of the
Assigned Premises.
2. Nothing herein contained shall be deemed to constitute a
release or Assignor from any of its obligations as tenant under the
Lease, and Assignor shall remain fully liable for the performance of
all of the obligations of tenant under the Lease and shall be fully
responsible and liable to the Landlord for all acts or omissions of
anyone claiming under or through Assignor that shall be violation of
any of the obligations of tenant under the Lease.
<PAGE>
3. Nothing herein contained or contained in the Assignment shall
be deemed to (a) increase, amend, notify or extend any of Landlord's
obligations under the Lease in any way whatsoever, and/or (b) diminish,
restrict, limit, forfeit or waive any of Landlord's rights under the Lease
in any way whatsoever, and/or (c) constitute a consent to any further
assigning of the Assigned Premises, or any portions thereof.
4. The Assignment shall be subject and subordinate at all
times to all of the convenience, agreements, terms, provisions and
conditions of the Lease.
5. Except as hereafter set forth, the assigned premises shall be
used only for executive and general offices, and for no other purpose.
6. Although a copy of the Assignment has been delivered to the
Landlord for its information and is annexed hereto, the Landlord is not
a party thereto and is not bound by its provisions. Except as
otherwise provided herein, nothing contained herein shall be construed
as a consent to, or approval or ratification by the Landlord of, any
of the particular provisions of the Assignment or as a representation
or warranty by the Landlord.
7. No alterations, improvements or additions to the Assigned
Premises, or any portions thereof, shall be made except in accordance
with the provisions of the Lease.
Please acknowledge your agreement to the foregoing by signing
this letter in the space provided below.
Very truly yours,
Assignor:
COMMUNITY BANK, NATIONAL ASSOCIATION
By:/s/Sanford A. Belden
-----------------------
Sanford A. Belden, President
ACKNOWLEDGED AND AGREED:
Landlord:
/s/ Felix B. LaBella, Jr.
---------------------
Felix B. LaBella, Jr.
/s/Louis LaBella
-------------
Louis LaBella
Assignee:
NBT BANK, NATIONAL ASSOCIATION
By: _______________________
Name:
Title:
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT made as of September 21, 1990, by and between
citibank (New York State), a state banking association, having an
office at 99 Garnsey Road, Pittsford, New York 14534 ("Assignor"),
and Chase Lincoln First Bank, N.A., a national banking association,
having an office at 1 Lincoln First Square, Rochester, New York
14643 ("Assignee").
R E C I T A L S:
- - - - - - - -
WHEREAS, Assignor is the holder of tenant's interest in
certain leases of some of the Banking Offices (as defined in the
Purchase Agreement) between Assignor and various owners (each a
"Landlord"), true copies of which are attached hereto as Exhibit A
and made a part hereof ("the Leases"); and
WHEREAS, Assignor desires to assign its interest in the Leases
to Assignee; and
WHEREAS, to induce Assignee to accept said assignment Assignor
desires to make certain certifications to Assignee.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
ASSIGNOR DOES HEREBY CERTIFY TO
ASSIGNEE AS FOLLOWS:
1. The Leases, true copies of which are annexed hereto as
Exhibit "A" and made a part hereof, are in full force and effect and
have not been modified.
2. Assignor is the current holder of the leasehold interests
created by the Leases, and Assignor has not previously assigned the Leases
nor currently subleases all or part of the premises demised thereunder
("Premises") nor currently grants to anyone the right to use or occupy
the Premises by license or otherwise.
3. Assignor has received no notice of, and does not have
<PAGE>
knowledge of, any violation of any Federal, state, or local laws,
ordinances, codes or regulations applicable to the Premises or the
operation thereof.
4. All rent and other charges required to be paid by
Assignor under the Leases to the date hereof have been paid.
5. Assignor has performed and complied with all terms,
conditions and provisions of the Leases on the part of Assignor to
be performed.
6. No Landlord is in default in any way under the Leases,
nor to the knowledge of Assignor has any event occurred, which, with
the passage of time, would constitute a default under the Leases.
7. Landlord has issued or will issue any consents to this
Assignment and Assumption which may be required under the Leases.
FURTHER, THE PARTIES HERETO
AGREE AS FOLLOWS:
1. As of the date of this Agreement, Assignor hereby
assigns to Assignee all its right, title and interest in and to the
Leases to have and to hold the same unto Assignee, its successors
and assigns forever.
2. As of the date of this Agreement, Assignee, in reliance
upon Assignor's certifications above, hereby accepts such assignment
and hereby assumes all of the obligations and responsibilities of
Assignor under the Leases to the extent the same arise from and
after the date of this Agreement.
3. Assignor hereby agrees to indemnity Assignee against,
and hold Assignee harmless from, any and all claims, suits, causes
of action, liabilities, losses, damages, costs and expenses
including reasonable attorneys fees and disbursements, arising and
accruing with respect to (a) the Leases prior to the date of this
Agreement and (b) the failure of any Landlord to consent to the
assignment and assumption of the Leases.
4. Assignee hereby agrees to indemnify Assignor against,
and hold Assignor harmless from, any and all claims, suits, causes
of action, liabilities, losses, damages, costs and expenses
including reasonable attorneys fees and disbursements, arising or
<PAGE>
accruing with respect to the leases from and after the date of this
Agreement.
5. Assignee agrees to remain liable to Assignor for any
default defined by the Leases, which default is not corrected within
the time period specified in the Leases. In the event that Assignee
fails to correct such default, then Assignor shall be entitled to
any or all of the remedies available to Landlord described in the
Leases.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed
this Assignment and Assumption Agreement as of the day and year
first above written.
CHASE LINCOLN FIRST BANK, N.A. CITIBANK (NEW YORK STATE)
/s/Mark F. Tremont /s/ Timothy P. McElduff
- ------------------ -----------------------
by: Mark F. Tremont by: Timothy P. McElduff
Title: Senior vice President Title: President
<PAGE>
CONSENT TO ASSIGNMENT
- ---------------------
Felix V. LaBella, Jr. & Louis LaBella, The Landlord named in a lease
with CITIBANK (New York State) ("Tenant/Assignor") and which expires
on July 31, 1999, DO HEREBY CONSENT that the said Tenant may assign
the premises comprised in said Lease to Chase Lincoln First Bank,
N.A.("Assignee") in Accordance with the terms and conditions of a
purchase and sale agreement between Assignee and Assignor. Landlord
further represents that Tenant's Lease is in full force and effect
and that Tenant has not been and is not currently in default under
the Lease. This consent shall not be construed to authorize any
further assignment or the granting or possessing of the demised
premises in whole or in part to any other person or persons, nor is
this consent to be construed to affect or alter any of the
covenants, conditions or provisions contained in the Lease except as
herein expressly provided.
The Landlord's consent is conditioned up the following
representations made by Citibank (New York State):
(1) Chase Lincoln First Bank, N.A. is not a "Successor" to
Citibank (New York State) within the meaning of the
Lease Agreement between Gen-Fay, Inc. and Citibank
(Central) N.A. dated May 31, 1974, as the same has
been amended, modified and extended; and
(2) Citibank (New York State) is not selling and has not
sold all or substantially all of its assets to Chase
Lincoln First Bank, N.A.
BY /s/Felix V. LaBella, Jr.
------------------------
Felix V. LaBella, Jr.
---------------------
/s/Louis LaBella
----------------
Louis LaBella
-------------
TITLE: Owners
DATED Sept 28, 1990
In The Presence of:
/s/Felix V. LaBella Sr.
<PAGE>
LEASE AMENDMENT NO. 3
THIS LEASE AMENDMENT NO. 3 is made this 13 day of July, 1995
by, between and among THE CHASE MANHATTAN BANK, N.A., successor by
merger to Chase Lincoln Bank, N.A., a national association having an
office and place of business at One Chase Square, Rochester, New York
14643 (hereinafter referred to as the "Tenant")and FELIX V. LaBELLA,
JR. and LOUIS W. LaBELLA, having an office and place of business at
318 Rutger Street, Utica, New York 13502 (hereinafter referred to as
the Landlord).
W I T N E S S E T H:
WHEREAS, pursuant to an agreement (the "Original Lease") dated
May 31, 1974 between Citibank (Central), N.A., as tenant, and Gen-
Fay, Inc., as landlord, Citibank (Central), N.A. leased certain
premises situate at 162-168 Genesee Street, Utica, New York from
Gen-Fay, Inc., for a term of ten (10) years; and
WHEREAS, subsequent to the execution of the Original Lease and
prior to August 26, 1983, Felix V. LaBella, became the successor-in-
interest to Gen-Fay, Inc.; and
WHEREAS, pursuant to an agreement ("Lease Amendment No. 1")
dated August 26, 1983 between Felix V. LaBella and Citibank
(Central), N.A., the Original Lease was extended for an additional
term of five (5) years; and
WHEREAS, subsequent to the execution of lease Amendment No. 1
and prior to December 11, 1986, Felix B. LaBella, Jr. and Louis W.
LaBella (a/k/a Louis A. LaBella, Sr.) became the successors-in-
interest to Felix LaBella, and Citibank (Central), N.A. changed its
<PAGE>
name to Citibank (New York State) N.A.; and
WHEREAS, pursuant to an agreement ("Lease Amendment No. 2")
dated December 11, 1986 between Felix V. LaBella, Felix V. LaBella,
Jr., Louis W. LaBella and Citibank (New York State), N.A. the
Original Lease, as extended by Lease Amendment No. 1, was amended
and modified; and
WHEREAS, the Original Lease, as extended by Lease Amendment
No. 1, and amended and modified by Lease Amendment No. 2 (the
Original Lease, Lease Amendment No. 1 and Lease Amendment No. 2 are
hereinafter collectively referred to as the "Lease Agreement") were
assigned by Citibank (New York State), N.A. to Tenant and Tenant
assumed the same pursuant to an Assignment and Assumption of Leases
dated as of September 21, 1990; and
WHEREAS, the parties hereto desire to further amend and modify
the Lease Agreement.
NOW, THEREFORE, in consideration of the sum of Thirteen
Thousand Six Hundred Sixty-One and 98/100 Dollars ($13,661.98) paid
by the Tenant to the Landlord, the receipt of which is hereby
acknowledged, and other good and valuable consideration, the parties
hereto agree as follows:
1. The term "Real Property" is hereby defined to mean
the real property (including the building) owned by landlord
situate at 162-168 Genesee Street, Utica, New York, which real
property is identified on the Tax Maps of the City of Utica as
Book 3, Map 16, Block 8, Lot 1; and
2. The term "Leased Premises" is hereby defined to
mean the space leased by the Tenant from the landlord at the
<PAGE>
Real Property, which space consists of 4,350 sq. ft. together
with the cellar space thereunder; and
3. The term "Real Property Taxes" is hereby defined
to mean all real property taxes or real estate taxes,
assessments (including, but not limited to, assessments for
public improvements), water and sewer rents, rates and charges
for public utilities, excises, levies and all other kinds of
governmental impositions and charges, whether ordinary or
extraordinary, general or special, foreseen or unforeseen and
every installment thereof which, during the term of the Lease
Agreement are assessed, levied, confirmed, or imposed upon,
become due and payable out of or in respect of, or become a
lien on, the Real Property of which the Leased Premises form a
part.
4. The Landlord shall be responsible for the prompt
payment of all Real Property Taxes to the appropriate taxing
authorities.
5. During the remaining term of the Lease Agreement,
the Tenant shall pay the Landlord as additional rent an amount
equal to forty percent (40%) of the Real Property Taxes paid
by the landlord beginning with the 1993 County tax.
6. To obtain payment hereunder, the Landlord shall
submit a statement to the Tenant itemizing all Real Property
Taxes which Landlord has paid together with official receipts
of the appropriate taxing authorities or other proof
satisfactory to the Tenant evidencing, the payment thereof.
<PAGE>
Within thirty (30) days after the receipt of each such statement and
accompanying proof of payment, the Tenant shall pay the Landlord
an amount equal to forty (40%) of the total amount of the Real
Property Taxes itemized on such statement.
7. Nothing contained herein shall require the Tenant
to pay any franchise, corporate, estate, inheritance,
succession, capital levy or transfer tax of the Landlord, any
income, profits, or revenue tax, or any other tax, assessment,
charge or levy upon the additional rent payable by Tenant
hereunder.
8. If there are any inconsistencies between the terms
of this Lease Amendment No. 3 and the Lease Agreement, the
terms of this Lease Amendment No. 3 shall control.
9. The Landlord hereby releases the Tenant from any
and all claims that Landlord may have against the Tenant for
any real estate taxes due and owing from Tenant to Landlord
under the Lease Agreement prior to, but not including, the
1993 County tax.
IN WITNESS WHEREOF, the parties have caused this Lease
Amendment NO. 3 to be executed as of the day and year first above
written.
THE CHASE MANHATTAN BANK, N.A.
successor-by-merger to Chase
Lincoln Bank, N.A.
By:/s/Steven M. Laba
-----------------
Steven M. Laba
Vice President
/s/Felix V. LaBella, Jr.
------------------------
Felix V. LaBella, Jr.
<PAGE>
AGREEMENT
---------
THIS AGREEMENT made this 11th day of December, 1986 by FELIX
LaBELLA of 168 Genesee Street, Utica, New York, successor in
interest to Gen-Fay, Inc., by deed dated March 1, 1977 and recorded
in the Office of the Clerk of Oneida County on March 2, 1977, and
FELIX LaBELLA, JR. and LOUIS A. LaBELLA, SR., successors in interest
to Felix LaBella by deed dated April 11, 1984, and recorded in the
Office of the Clerk of Oneida County on April 11, 1984 (hereinafter
referred to as landlord) and CITIBANK (NEW YORK STATE), N.A., having
an office now at 300 South State Street, Syracuse, New York
(hereinafter referred to as tenant).
WHEREAS, the parties have entered into a Lease Agreement dated
May 31, 1974 for premises commonly known as 162-168 Genesee Street,
Utica, New York (hereinafter referred to as the main lease), and
WHEREAS, said main lease was extended between landlord and
tenant by agreement dated August 26, 1983, and
WHEREAS, the tenant is desirous of leasing additional space
consisting of approximately 1,350 feet so that the total square area
leased by tenant from landlord shall consist of 4,350 square feet
together with cellar space thereunder and,
WHEREAS, tenant and landlord desire to modify the main lease
and amendment thereto,
NOW, THEREFORE, in consideration of the mutual agreements and
promises herein contained, the parties hereto covenant and agree
with each other as follows:
1. Premises. The landlord shall lease to tenant 4,350 square
feet consisting of 3,000 existing leased square feet and additional
1,350 square feet.
2. The landlord shall deliver the additional 1,350 square feet
as outlined in Exhibit "A" attached and made a part hereof, on
February 1, 1987, and the rent as defined herein shall commence
<PAGE>
on March 1, 1987 or no later than 30 days after possession of the additional
space is delivered.
3. Rent
A. The tenant shall continue to pay $1,310.00 to the
landlord as set forth in the agreement dated August 26, 1983 until
March 1, 1987 or one month after delivery of possession by the
landlord to tenant of additional space.
B. On March 1, 1987 or one month after possession of the
additional space, the tenant shall pay the annual rent of $26,550.00
payable $2,215.50 per month until August 1, 1989.
C. From August 1, 1989 to July 31, 1994 the tenant shall
pay landlord the annual rent of $29,340.00 payable $2,445.00 per
month.
D. The landlord and tenant agree to an additional firm
term from August 1, 1994 to July 31, 1999 at an annual rent of $31,407.00,
payable $2,617.25 per month.
E. The figure 33-1/3% stated in paragraph 4 of the main
lease shall be amended to 40% as of October 1, 1987.
F. The figure 33-1/3% as stated in paragraph 9 of the main
lease shall be amended to 40% as of October 1, 1987.
4. All the other terms and conditions of said main lease dated
July 31, 1974 by and between the parties shall remain full force and
effect.
5. This agreement shall be binding upon the heirs, executors,
successors and assigns of the landlord and tenant and constitutes
the understandings by and between the landlord and tenant.
6. This main lease and this agreement thereto constitute the
entire agreement between landlord and tenant and any further changes,
waivers or modification must be in writing and signed by
-2-
<PAGE>
the party against whom such change, waiver, modification, discharge,
termination or abandonment is sought to be enforced.
/s/Felix V. LaBella CITIBANK (NEW YORK STATE), N.A.
----------------
Felix V. LaBella
By: /s/Larry N. Williams
/s/Felix V. LaBella, Jr. --------------------
---------------------
Felix LaBella, Jr.
/s/Louis A. LaBella
---------------------
Louis A. LaBella, Sr.
-3-
<PAGE>
AGREEMENT
---------
This agreement made this 26 day of August, 1983, by FELIX V.
LaBELLA, of 168 Genesee Street, Utica, New York, successor in
interest to GEN-FAY INC., by deed dated March 1, 1977 and recorded
in the Clerk Office of Oneida County on March 2, 1977 (hereinafter
referred to as Landlord) and CITIBANK (CENTRAL) N.A., having an
office at 329 South Warren Street, City of Syracuse, County of
Onondaga, New York (hereinafter referred to as Tenant).
WHEREAS, the parties have entered into a lease agreement, dated
May 31, 1974, for premises commonly known as 162-168 Genesee Street,
Utica, New York, and the firm term of said lease shall expire on
August 31, 1984, and
WHEREAS, the parties, pursuant to paragraph 31 of said lease,
desire to extend the term of said lease five years, in accordance
with said paragraph, and
WHEREAS, the parties have agreed on the rental for the first
renewal term,
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto do hereby covenant and agree
with each other as follows:
1. The firm term of the lease is extended from September 1,
1984 to August 31, 1989.
2. The rental for said extension shall be fifteen thousand,
seven hundred fifty & 00/100 dollars ($15,750.00) per year, paid
monthly in the sum of one thousand, three hundred twelve & 50/100
dollars ($1,312.50) commencing September 1, 1984.
<PAGE>
3. All other terms and conditions of said lease and addendum
thereto, dated the 31st day of May, 1974, by and between the
parties Shall remain in full force and effect.
GEN-FAY INC.
By:/s/Felix LaBella
----------------
Landlord
CITIBANK(CENTRAL)N.A.
By:/s/George Laudle
----------------
Tenant
-2-
<PAGE>
THIS AGREEMENT made this 31st day of May 1974, between GEN-FAY,
INC., a New York Corporation, having a principal office at 424 Columbia
Street in the City of Utica, County of Oneida, State of New York
(hereinafter referred two as "LANDLORD") and CITIBANK (CENTRAL) N.A.,
having an Office for the conduct of business at 329 South Warren Street,
City of Syracuse, County of Onondaga, State of New York (hereinafter
referred to as "TENANT").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the
parties hereto do hereby covenant and agree with each other as
follows:
1. PREMISES.
--------
Landlord hereby leases to the Tenant and Tenant hereby
hires from the Landlord the first floor space consisting of
approximately three thousand (3,000) square feet (and the basement
area thereunder) as shown outlined in red on the plans annexed
hereto and made a part hereof and commonly known as street number
162-168 Genesee Street, City of Utica, County of Oneida, State of
New York.
TO HAVE AND TO HOLD said demised premises unto Tenant,
subject to the agreements, terms and conditions herein contained.
2. TERM.
----
The term of this lease shall commence on the l5th
day of August 1974 or on the first day of the calendar month
succeeding the date Landlord completes the work described in the
annexed Schedule "A" and delivers possession of the demised
premises to Tenant in a broom clean condition, whichever shall
<PAGE>
last occur and shall terminate on the 31st day of August, 1984,
unless sooner terminated or unless extended as hereinafter provided.
Notwithstanding, if Tenant shall conduct business at the demised
premises prior to the last to occur of the events mentioned in the
preceding sentence, the term of this lease shall commence on the
date Tenant first conducts such business.
3. RENT.
----
Tenant shall pay to Landlord, at its address above
set forth, or at such other place as Landlord may from time to time
designate by notice given to Tenant in the manner provided in this
lease, a rental at the rate of FIFTEEN THOUSAND ($15,000) DOLLARS
per annum in equal monthly installments in advance on the first day
of each and every month during the initial term.
4. TAXES.
-----
A. Except as hereinafter provided, it shall be the
responsibility of the Landlord to pay all taxes of whatsoever nature
and kind assessed, levy charged or otherwise imposed upon the real
property of which the demised premises are part, including, without
limitation, real property taxes. In the event that there shall be an
increase in real property taxes over the base year due to an
increase in the rate of taxes, then and in that event, Tenant shall
be responsible for forty percent of the increase in taxes over the base
year and Tenant shall pay its portion of the tax increase within thirty
(30) days of presentment by the Landlord to the Tenant of evidence of
such increase. "Base year" for the purpose of this paragraph "4 A" shall
be defined as the first twelve month period of occupancy by the Tenant of
the demised premises.
B. In the event that there shall be an increase in real
property taxes over the base year for the real property of which the
demised premises are part as a result of Landlord's work as
hereinafter mentioned in paragraph "7", or as a result of any
improvements, alterations or additions made by Tenant to the demised
premises, Tenant shall pay the entire amount of such increase within
thirty (30) days of presentment by the Landlord to the Tenant of
evidence of such increase. "Base year" for the purposes of this
paragraph "4 B" shall be the year 1974.
C. If timely requested by Tenant, Landlord may contest
-2-
<PAGE>
through available legal remedies the validity of the amount of the
assessed valuation of the real property or the taxes levied thereon.
In the event Landlord shall decline so to contest, it shall promptly
notify Tenant of its decision and Tenant is authorized on behalf of
Landlord, at Tenant's expense, to contest the validity or the amount
of any such assessed valuation or taxes levied on the real property
and Landlord shall cooperate with Tenant and, if necessary join with
Tenant in such contest or proceedings and shall supply to Tenant,
upon request, such information and supporting documents as may be
reasonably requested by Tenant. Any dispute under this Article shall
be submitted to arbitration as hereinafter provided.
D. For the purposes of determining the total amount of
real estate taxes payable during the "base year" as referred to in
either paragraph "4A" or "4B" above, such real estate taxes shall
be based upon the real estate tax assessment of the real property of
which the demised premises are part during such "base year" as
finally determined after any pending or future certiorari
proceeding.
-2A-
<PAGE>
5. USE AND EXCLUSIVITY.
-------------------
Tenant shall use and occupy the demised premises for
the purpose of carrying on, either by it or by controlled
corporations, or by any successors by consolidation, merger or other
corporate action, a commercial banking, depository, trust,
guarantee, savings, safe deposit, personal loan, investment,
securities, credit card, factoring and the issuance and sale of
traveler's checks, foreign drafts, letters of credit, foreign ex-
change, foreign money orders and/or the receipt of money for
transmission, and any other similar business, or any combination of
the foregoing, or any business in conjunction with any of the
foregoing and for no other use or purpose whatsoever. Such use
shall include, but solely as an incident thereto, the right of
Tenant to sell in the demised premises to its employees employed in
the demised premises or in the administration thereof, by vending
machines, or otherwise, food, beverages, cigarettes and tobacco, and
to maintain in the demised premises an employees' lunch room and
kitchenette for the purpose of preparing and serving foods and
beverages to Tenant's employees for on-premises consumption only,
but not to operate the same as a public restaurant. Landlord
-3-
<PAGE>
warrants that at the date of execution of this lease, the zoning
regulations covering the demised premises will permit the foregoing
use and occupancy. In the event that at the date the Tenant occupies
the demised premises and the premises are not zoned properly to allow
the use and occupancy of the demised premises by the Tenant for the
foregoing uses and purposes, then and in that event, Tenant shall
have the option in its sole and exclusive discretion to cancel this
lease and declare the same null and void without further liability.
However, the burden of obtaining all permits required for the
operation of its business shall be upon Tenant:
6. ASSIGNMENT AND SUBLETTING.
-------------------------
A. Tenant may without Landlord's consent, sell,
assign and transfer this lease and/or sublease all or any part of
the demised premise to any parent, subsidiary, affiliate or
controlled corporation or corporations of Tenant or to any successor
by consolidation, merger or other corporate action or to a
-4-
<PAGE>
corporation or other business entity to which Tenant may sell all or
substantially all of its assets. Except as aforesaid, Tenant will
not sell, assign, transfer or mortgage this lease or sublease all or
any part of the demised premises without the Landlord's written
consent, which the Landlord agrees it will not unreasonably
withhold.
B. Each assignee or successor to Tenant shall assume
and be deemed to have assumed this lease and shall be and remain
liable jointly and severally with Tenant for the payment of rent and
additional rent and for the due performance of all the terms,
covenants, conditions and agreements herein contained on Tenant's
part to be performed, except that upon assignment of this lease to a
successor, as above provided, or, to a purchaser of all or
substantially all of the assets of Tenant. Tenant shall be released
and discharged of all further obligations under this lease from and
after the effective date of such assignment.
C. No assignment shall be binding upon Landlord, nor
shall Tenant be released from its obligations under this lease as
above provided, unless and until there shall be delivered to
Landlord an instrument of assignment in recordable form which shall
also contain a covenant of assumption by the assignee of all of the
obligations of Tenant under this lease.
7. LANDLORD'S WORK - TENANT'S INSTALLATIONS -
----------------------------------------
ALTERATIONS.
-----------
Promptly upon execution of this lease Landlord shall
give notice to quit to the tenant presently occupying the demised
premises so as to insure that the present tenant shall vacate the
premises hereinbefore mentioned on/or before the 30th day of June,
1974. Landlord at its expense shall remove from the demised
premises any existing electric meters, gas meters and any and all
other meters for other stores or tenants in the building, all excess
pipes and sinks and all furnishings, trade fixtures and other
-5-
<PAGE>
personal property of previous tenants and occupants. If there should
be any violations of record affecting the demised premises at the
time of the commencement of the term of this lease and if such
violations are not corrected by the alterations and improvements to
be made by Landlord, Landlord agrees it shall cure such violations
at any time at its sole cost and expense. Landlord shall make all
improvements to the demised premises in accordance with Schedule "A"
which is attached hereto and made a part hereof, and shall substantially
complete such improvements by July 31, 1974.
B. Tenant at its expense upon the commencement of the
term and from time to time during the term of this lease may make
such alterations, changes and improvements to the demised premises
including structural changes as Tenant may consider necessary and
desirable for its business. However, prior to the making of any such
changes, alterations and improvements, Tenant shall submit plans and
specifications to the Landlord for Landlord's approval and Landlord
agrees that such approval shall not be unreasonably withheld.
Tenant shall make no alterations, additions, improvements or changes
to the exterior of the demised premises without Landlord's prior
written consent which Landlord agrees not to withhold unreasonably.
In addition to the foregoing, Tenant, at its expense, may install on
the outside walls of the demised premises at such place as Tenant
may designate a night depository of design and manufacture selected
by Tenant with illuminated sign thereon and a shute through the
building wall to a safe within the demised premises and a mail drop
and shute through the building wall to a receptacle within the
demised premises all of which shall be maintained as to operation
and repair by the Tenant and Landlord shall have no responsibility
-6-
<PAGE>
therefor, except that in the performance of any work of the outside
walls of the building Landlord and its agents shall use reasonable
care so as not to damage or injure or interfere with the operation
and security of such depository and mail drop.
C. Where furnished by or at the expense of Tenant,
all furniture, furnishings and trade fixtures, including without
limitation, murals, carpets, rugs, business machines and equipment,
apparatus, vault door and vault door frame and vault lining, safe
deposit equipment, counter screens, grillwork, cages, partitions,
railings, closets, paneling, lighting fixtures and equipment,
elevators, escalators and any other movable property, and all
alterations, installations, additions and improvements installed by
Tenant shall remain the property of Tenant who may, at its option,
but need not, remove all or any part at or at any time prior to the
expiration of the term of this lease, in which case Tenant shall
restore the demised premises to good order and condition (normal
wear and tear and damage by fire or other casualty excepted). Any
property not so removed shall be deemed abandoned.
D. In the event that Tenant is unable to secure the
approval of the comptroller of the currency and Landlord is required
to expend sums to complete the improvements contemplated in Schedule
"A" hereof, then and in that event, Tenant shall indemnify and pay
over to the Landlord an amount equal to the sum expended by the
Landlord and Tenant's liability shall be limited to the payment of
said sum only.
-7-
<PAGE>
8. REPAIRS.
-------
Landlord shall make as and when needed all repairs to
the interior and exterior of the demised premises and to the
sidewalks and curbs, except repairs that may be occasioned by the
lawful or negligent acts of the Tenant, its agents, servants, or
employees. All such repairs shall be at the sole cost and expense of
the Landlord. Tenant shall give Landlord notice of repairs and
Landlord, within ten (10) days of the receipt of said notice of
repair, shall promptly proceed to complete said repairs without
interruption. Tenant shall, at its sole cost and expense make all
repairs occasioned by its unlawful or negligent acts or those of its
agents, servants or employees.
9. UTILITIES - SERVICES.
--------------------
Tenant agrees to pay for all services including heat,
gas and electric services to the demised premises. Tenant's cost of
heat, so long as there is not a separate heating system for the
demised premises, shall be 40% of the total heating bills received
by Landlord for the building of which the demised premises are part.
10. GLASS.
-----
Tenant covenants and agrees that it will, throughout
the term of this lease and at its own cost and expense, repair and
replace any and all damaged or broken window, door or other glass,
together with the frames and supports thereof on the inside and
outside of the demised premises, unless the same is damaged or
broken as a result of Landlord's negligence or a casualty covered
under Landlord's fire insurance policy with usual extended coverage
endorsement.
11. COMPLIANCE WITH LAWS.
--------------------
A. Tenant, at its expense, shall comply with all laws,
orders, ordinances, rules and regulations of federal, state, county
and municipal authorities and with any direction made pursuant to
law by any public officer or officers which, with respect to the use
of the demised premises or to any abatement of nuisance, order or
-8-
<PAGE>
duty upon Landlord or Tenant regarding the demised premises or the
use or occupation thereof arising from Tenant's use of the demised
premises or from conditions which have been created by or at the
instance of Tenant or required by reason of a breach of any of Tenants
covenants or agreements hereunder.
B. If Tenant should desire to contest the validity of
any such law, order, ordinance, rule or regulation which Tenant by
the provisions hereof is obligated to comply with then, provided
that and so long as any contest does not adversely affect the
building and/or other tenants therein and does not subject Landlord
to the possibility of criminal prosecution, Tenant's at its expense,
may carry on such contest, and non-compliance by it during such
contest shall not be deemed a breach of this covenant provided that
it shall indemnify and hold Landlord harmless against the cost
thereof and against all liability for any damages, interest,
penalties and expenses (including attorneys' fees) resulting from or
incurred in connection with such contest or non-compliance.
12. COMPLIANCE (CERTIFICATE OF OCCUPANCY -
--------------------------------------
FIRE INSURANCE).
---------------
A. Tenant shall not do or permit to be done any act
or thing upon the demised premises which will invalidate or be in
conflict with any Certificate of Occupancy or the terms of the New
York State standard form of fire insurance policies covering the
building and the fixtures and property therein. Tenant, at its own
expense, shall comply with all rules, orders regulations or
requirements of the New York Board of Fire Underwriters or any other
similar body having jurisdiction, and shall not knowingly do or
permit to be done in or upon the demised premises or bring or keep
anything therein or use the same in a manner which increased the
-9-
<PAGE>
rate of fire insurance upon the building or on any property or equipment
of Landlord located therein over the rate in effect at the commencement
date of this lease for use as a banking institution unless Tenant pays
Landlord any resulting increase in premium on the first day of the month
following receipt of notice from Landlord of such increase. However
nothing herein contained shall limit or restrict Tenant's proper use of
the demised premises for the purposes stated herein, or subject Tenant to
any liability, other than payment of the increase in premium as above
provided, by reason of its proper use of the demised premises for such
purposes.
B. In any dispute, action or proceeding wherein
Landlord and Tenant are parties, a schedule or "make up" of rate for
the building or the demised premises issued by the New York Fire
Insurance Rating Organization, or other similar body making rates
for fire insurance and extended coverage for the building or the
demised premises, shall be presumptive evidence of the facts therein
stated and of the several items and charges in the fire insurance
rate then applicable to said premises.
C. If any law, rule, order, regulation or requirement
of any federal, state, county or municipal authority, or of the New
York Board of Fire Underwriters, New York Fire Insurance Rating
Organization, or any other body having similar functions and
exercising jurisdiction over the demised premises, shall require
Tenant to perform any work or meet any condition which Tenant may
deem unfair, unreasonable, improper or otherwise burdensome,
Tenant, at its expense, may contest the validity thereof, and, if
non-compliance therewith shall not subject Landlord to prosecution
for a criminal offense and does not adversely affect the building
and/or other tenants, such non-compliance by the Tenant during such
contest shall not be deemed a burden of the covenants herein,
-10-
<PAGE>
provided Tenant shall indemnify and hold harmless Landlord against
the cost and expense thereof, and in addition thereto all liability
for any damages, interest, penalties and expenses (including, but not
limited to, reasonable attorney fees of landlord) resulting from or
incurred in connection with such contest or non-compliance. Landlord, at
its expense, may join in such contest, provided, however, that the
conduct of any such proceeding shall be under the control and direction
of Tenant.
13. HEAVY EQUIPMENT.
---------------
Should Tenant move any safe, heavy machinery, heavy
equipment, freight, bulky matter or heavy fixtures in or out of the
building, Tenant shall do said work in full compliance with the
Administrative Code of the City of Utica and other municipal
requirements.
14. FIRE DAMAGE - FIRE INSURANCE.
----------------------------
(A) If the building or the demised premises shall be
partially or totally damaged or destroyed by fire or other casualty,
then, whether or not the damage or destruction shall have resulted
from the fault or neglect of Tenant, or its servants, employees,
agents, visitors or licensees (and if this lease shall not have been
cancelled as in this Article hereinafter provided). Landlord will
repair the damage, and restore, replace, and rebuild the demised
premises at its expense, with reasonable dispatch and continuity
after notice to it of the damage or destruction; provided, however,
that Landlord shall not be required to repair or replace any
installations made by Tenant not covered by the insurance maintained
by Landlord pursuant to paragraph F of this Article. If the demised
premises shall be partially damaged or partially destroyed, the rent
and additional rent payable hereunder shall be abated to the extent
-11-
<PAGE>
that the demised premises shall have been rendered untenantable or
unfit for Tenant's use for the period from the date of such damage
or destruction to the date that the damage shall be repaired or
restored. If the demised premises or a major part thereof shall be
total, or substantially totally, damaged or destroyed or rendered
completely, or substantially completely, untenantable on account of
fire or other casualty, the rent and additional rent shall
completely abate as of the date of the damage or destruction and
until Landlord shall repair, restore, replace and rebuild the
demised premises; provided, however, that should Tenant reoccupy a
portion of the demised premises for the purpose of conducting
business with the public during the period the restoration work is
taking place and prior to the date that the same is made completely
tenantable in proportion to the part of the demised premises
occupied by it. Nevertheless, in case of any damage or destruction
mentioned in this Article, Tenant, in addition to and without waiver
of any other rights or remedies available to it, may cancel this
lease by written notice to Landlord, if Landlord has not completed
the making of the required repairs and restored, replaced and
rebuilt the demised premises within six (6) months from the date of
such damage or destruction. The period herein fixed for the
completion of the required repairs and restoration work shall be
extended by the number of days lost (not to exceed, however, six (6)
months) in the event such loss results from labor strikes, acts of
God, or any other similar causes beyond the reasonable control of
Landlord.
(B) In the case the building or the demised premises
shall be substantially damaged or destroyed by fire or other
casualty at any time during the last year of the initial term or of
any renewal term of this lease, and Tenant (if it has not previously
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done so) does not, within thirty (30) days after such event, exercise
its option of renewal as elsewhere in this lease provided, then either
Landlord or Tenant may cancel this lease upon written notice to the other
party hereto given within sixty (60) days after such damage or destruction.
(C) In addition if the building shall be totally or
substantially totally damaged or destroyed by fire or other casualty
at any time during the initial or any renewal term of this lease,
Landlord shall within sixty (60) days after such damage or destruction
give Tenant a notice in writing specifying whether Landlord intends in
good faith to demolish or restore the building and if Landlord intends
in good faith to demolish the building Landlord may cancel this lease upon
written notice to the Tenant given within one hundred twenty (120) days
after such damage or destruction.
(D) In the event of the termination of this lease
pursuant to the provisions of this Article, this lease shall expire
as fully and completely on the date fixed in such notice of
termination as if that were the date definitely fixed for the
expiration of this lease, and the rent and additional rent shall be
paid up to such termination date subject to abatement or
apportionment as provided in paragraph A of this Article.
(E) No damages, compensation or claim shall be
payable by Landlord for inconvenience, loss of business or annoyance
arising from any damage or destruction to, or repair or restoration
of any portion of the demised premises or of the building. Landlord
shall use its best efforts to effect such repair or restoration
promptly and in such manner as not unreasonably to interfere with
Tenant's occupancy.
(F) Landlord, shall, throughout the term of this
lease and any renewal thereof, at its expense, keep the building,
other than Tenant's furniture, furnishings, trade fixtures or
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<PAGE>
property removable by Tenant under the provisions hereof, insured
against all loss or damage by fire, with extended coverage, in an
amount equal to at least eighty percent (80%) of the full insurable
value thereof (90% if fully sprinklered), exclusive of foundations,
by policies containing the usual co-insurance clause.
(G) In the event that the Landlord is required to
rebuild pursuant to the terms and conditions of this Article by the
Tenant, and such destruction or substantial destruction shall occur
within the last year of the term of this lease, Landlord shall not be
required to rebuild unless Tenant agrees to extend the term of this
lease so that there would be remaining a minimum term of five (5) years.
Such extended term to be on the same terms and conditions as herein
contained and the rental then in effect.
15. SUBROGATION.
-----------
(A) Landlord agrees to use its best efforts to
include in its fire insurance policies on the building appropriate
clauses pursuant to which the insurance companies (i) waive all
right of subrogation against Tenant with respect to losses payable
under such policies and/or (ii) agree that such policies shall not
be invalidated should the insured waive in writing prior to a loss
any or all right of recovery against any party for losses covered by
such policies. If Landlord at any time is unable to obtain in said
policies either of the clauses described in the preceding sentence,
Landlord shall, if possible, have Tenant named in such policies as
one of the assureds, but should any additional premium be exacted for
any such clause or clauses or naming, Landlord shall be released
from the obligation hereby imposed unless Tenant shall agree to pay
such additional premium. If Tenant shall be named as one of the
assures in accordance with the foregoing, Tenant agrees to endorse
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<PAGE>
promptly to the order of Landlord, without recourse, any check,
draft or order for the payment of money representing the proceeds of
any such policy or representing any other payment growing out of or
connected with said policies, and Tenant does hereby irrevocably
waive any and all rights in and to such proceeds and payments.
(B) Tenant agrees to use its best efforts to include
in its fire insurance policy or policies on its furniture,
furnishings, fixtures and other property removable by Tenant under
the provisions of this lease appropriate clauses pursuant to which
the insurance company or companies (i) waive the right of
subrogation against Landlord with respect to losses payable under
such policy or policies and/or (ii) agree that such policy or
policies shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery against any
party for losses covered by such policy or policies. If Tenant is
unable to obtain in such policy or policies either of the clauses
described in the preceding sentence, Tenant shall if possible have
Landlord named in such policy or policies as one of the assureds,
but should any additional premium be exacted for any such clause or
clauses or naming, Tenant shall be released from the obligation
hereby imposed unless Landlord shall agree to pay such additional
premium. If Landlord shall be named as one of the assureds in
accordance with the foregoing, Landlord agrees to endorse promptly to
the order of Tenant, without recourse, any check, draft, or order for
the payment of money representing the proceeds of any such policy or
representing any other payment growing out of or connected with said
policies, and Landlord does hereby irrevocably waive any and all
rights in and to such proceeds and payments.
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<PAGE>
(C) Provided that Landlord's right of full recovery
under its policy or policies aforesaid is not adversely affected or
prejudiced thereby, Landlord hereby waives any and all rights of
recovery which it might otherwise have against Tenant, its servants,
agents and employees, for loss or damage occurring to the building
to the extent of insurance proceeds collected by Landlord from
Landlord's insurance, notwithstanding that such loss or damage may
result from the negligence or fault of Tenant, its servants, agents
or employees. Provided that Tenant's right at full recovery under
its aforesaid policy or policies is not adversely affected or prejudiced
thereby, Tenant hereby waives any and all right of recovery which it
might otherwise have against Landlord, its servants, agents and employees,
for loss or damage to Tenant's furniture, furnishings, fixtures and
other property removable by Tenant under the provisions hereof to the
extent that same is covered by Tenant's insurance, notwithstanding that
such loss or damage may result from the negligence or fault of Landlord,
its servants, agents or employees.
(D) Landlord and Tenant each agree to advise the
other promptly as to the language of the clauses included in their
respective insurance policies pursuant to paragraphs A and B above
and if such clauses cannot be obtained to furnish the other with
certificate copies of such policies showing the naming of the other
as one of the assureds. Landlord and Tenant each also agree to
notify the other promptly of any cancellation or change of the terms
of any such policy which would affect such clauses or naming. All
such policies shall, to the extent available, contain agreements by
the insurers that such policies shall not be cancelled without at
least ten (10) days' notice to both Landlord and Tenant. All such
policies which name both Landlord and Tenant as assureds shall, to
the extent available, contain agreements by the insurers to the
effect that no act or omission of any named assureds will invalidate
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the policy as to the other named assureds.
16. ENTRY.
-----
After the commencement of the term of this lease,
with the consent of Tenant which Tenant agrees it will not
unreasonably delay or withhold, Landlord, at its sole expense, may
erect, use and maintain pipes and conduits in and through the
demised premises, provided that same are installed and concealed
behind the walls and ceilings of the demised premises (to the extent
that they are now concealed or are subsequently concealed by
Tenant's alterations) and are installed at such times and by such
methods as will not materially interfere with or impair Tenant's use
of the demised premises or damage the appearance thereof. Landlord
shall have the right to enter the demised premises during banking
hours to make emergency repairs as in the Landlord's opinion are
necessary, and outside of banking hours for such other repairs or
alterations as Landlord deems desirable for the proper operation of
the building. Landlord shall be allowed to take all material into
and upon the demised premises that may be required for such repairs
or alterations (but only as or when needed for immediate use)
without the same constituting an eviction of Tenant in whole or in
part, and the rent reserved shall in no wise abate except as
otherwise provided in this lease while such repairs or alterations
are being made, by reason of loss or interruption of the operations
of Tenant, provided Landlord proceeds with diligence and continuity
to complete the same. During banking hours, Landlord shall also have
the right to enter the demised premises (other than vaults or other
enclosures for the deposit of money, securities or other valuable
papers) for the purpose of inspecting them or exhibiting them to
purchasers or lessees of the entire building or to prospective
mortgagees of the fee or of Landlord's interest in the property of
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which the demised premises are a part or to prospective assignees of
any such mortgages or to the holder of any mortgage on the
Landlord's interest in the property, its agents or designees. Except
as otherwise expressly provided in this lease, neither the right and
authority hereby reserved, nor the exercise thereof, shall impose
nor does Landlord assume by reason thereof, any responsibility or
liability for the care or supervision of the demised premises; nor
shall such right of access be considered as exercising control of
the demised premises; nor shall same obligate Landlord to make
repairs or improvements not otherwise required under this lease.
During the three (3) months prior to the expiration of
the term of this lease, Landlord may exhibit the demised premises
(other than vaults or other enclosures for the deposit of money,
securities or other valuable papers) to prospective tenants, but no
notices of "To Let" or "For Sale" or the like shall be placed in or
about the demised premises at any time.
Tenant reserves the right to require that Landlord, or
any representative, agent or employee of Landlord, shall be
accompanied while examining the demised premises or doing work
therein by a representative, agent or employee of Tenant and Tenant
agrees promptly to furnish such agent, representative or employee
upon request.
17. RESTRICTION OF ENTRY.
--------------------
Notwithstanding anything to the contrary in this
lease contained, Landlord and adjoining owner or municipality or any
of their agents, servants, employees or contractors shall not be
permitted to enter into any cage or other part of the demised
premises where money, securities or valuables are kept, at any time
for any purpose, unless accompanied by a representative of Tenant
who shall be designated by proper authority of Tenant, and
Tenant agrees to furnish such representatives promptly upon request.
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18. BANKRUPTCY.
----------
(A) If at any time hereafter there shall be filed by
or against the Tenant then in possession in any Court, pursuant to
any statute either of the United States or of any state a petition
in bankruptcy or insolvency, or for reorganization, or for the
appointment of a receiver or trustee of all or a portion of such
Tenant's property, or it the Tenant in possession makes an
assignment for the benefit of creditors or petitions for or enters
into an arrangement with creditors, this lease, at the option of
Landlord exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and
terminated by notice by Landlord, and in such event neither the
Tenant in possession nor any person claiming through or under such
Tenant by virtue of any statute or of an order of any court shall be
entitled to possession or to remain in possession of the demised
premises but shall forthwith quit and surrender the demised
premises.
(B) In the event that there shall be instituted
against Tenant an involuntary proceeding for insolvency, bankruptcy
or reorganization, or any other relief described in paragraph A of
this Article, and a decree granting such relief shall be entered in
a court having jurisdiction, Tenant shall have ninety (90) days in
which to vacate or stay the same before Landlord shall have any
right to terminate this lease.
(C) In the event of the termination of this lease
pursuant to paragraph A of this Article, Landlord shall forthwith
notwithstanding any other provisions of this lease to the contrary,
be entitled to recovery from Tenant as and for liquidated damages an
amount equal to the difference between the rent reserved hereunder
for the unexpired portion of the term of this lease and the rental
value of the demised premises, if lower than the rent reserved at
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the time of termination, for the unexpired portion of the term of
this lease, both discounted at the rate of four percent (4%) per
annum to present worth. Nothing herein contained shall limit or
prejudice the right of Landlord to prove for and obtain as
liquidated damages by reason of such termination an amount equal to
the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, such damages are
to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above. In
determining rental of value of the demised premises, the rent
realized by any re-letting, if such reletting be accomplished by
Landlord within a reasonable time after termination of this lease,
shall be deemed prima facie to be the rental value.
19. DEFAULTS.
--------
(A) If Tenant shall default in fulfilling any of the
covenants of this lease other than the covenants for the payment of
rent or additional rent and the same shall continue for a period of
sixty (60) days after written notice thereof from Landlord
specifying such default, and hereafter shall continue beyond such
period as may be reasonably necessary to do the work required to
correct such default and Tenant is not diligently occupied in
correcting the same, or, if the demised premises shall become vacant
for more than ninety (90) days or deserted, or if any execution or
attachment shall be issued against Tenant or any of its property
whereupon the demised promises shall be taken or occupied by someond
other than Tenant, and the same shall not be bonded and/or dismissed
or discharged as promptly as may be under the circumstances,
Landlord way give thirty (30) days' notice of intention to end the
term of this lease, and thereupon at the expiration of said thirty
(30) days the term of this lease shall expire as fully and completely
as if that day were the day herein definitely fixed for the
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<PAGE>
expiration of said term, and Tenant shall then quit and surrender the
demised premises, but shall remain liable as hereinafter provided.
(B) If the notice provided for in paragraph A of this
article shall have been given and the term hereof shall expire as
aforesaid, or if Tenant shall continue in default in the payment of
the rent reserved herein or any item of additional rent herein
mentioned or any part of either after thirty (30) days after notice
thereof by Landlord, or in making any other payment herein provided
after thirty (30) days after notice thereof by Landlord, then and in
any such events, Landlord may without notice re-enter the demised
premises, either by force or otherwise, and dispossess Tenant and
the legal representative of Tenant or other occupant of the demised
premises by summary proceedings or otherwise and remove their
effects and hold the demised premises as if this lease had not been
made; and Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end. If Tenant
shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this lease, and Tenant
shall fail to cure such default within the time provided therefor
and Landlord shall thereby become entitled to and shall terminate
this lease or re-enter and dispossess Tenant, then Landlord may
cancel and terminate such renewal or extension by written notice.
(c) In case of any such default, termination re-
entry, expiration and/or dispossess by summary proceedings or
otherwise: (1) the rent shall become due thereupon and be paid up
to the time of such re-entry, dispossess and/or expiration, together
with such expenses as Landlord may incur for reasonable legal
expenses and attorneys' fees, brokerage and/or putting the demised
premises in good order or for preparing the same for re-rental; (2)
Landlord may re-let the demised premises or any part or parts
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thereof, either in its own name or otherwise, for a term or terms
which may, at its option, be shorter or longer than the period which
would otherwise have constituted the remainder of the term of this
lease and may grant concessions or free rent, only to such extent as
Landlord, in Landlord's reasonable judgment, considers advisable and
necessary to re-let the same; and (3) Tenant or its successors shall
also pay to Landlord as liquidated damages for the failure of Tenant
to observe and perform its covenants herein contained any deficiency
between the rent hereby reserved and the net amount, if any, of the
rents collected on account of the lease or leases of the demised
premises for each month of the period which would otherwise have
constituted the remainder of the term of this lease. In computing
such liquidated damages, there shall be added to said deficiency
such reasonable expenses as Landlord may incur in connection with
re-letting, such as reasonable legal expenses and attorneys' fees,
brokerage, and for keeping the demised premises in good order, or
for preparing the same for re-letting. Any such liquidated damages
shall be paid in monthly installments on the rent day specified in
this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights
of Landlord to collect the deficiency for any subsequent month by a
similar proceeding. Landlord, at its option, may make such
alterations, repairs, replacements and decorations in the demised
premises as Landlord in its reasonable judgment considers advisable
and necessary for the purpose of re-letting the demised premises,
and the making of such alterations and decorations shall not operate
or be construed to release Tenant from liability hereunder.
Landlord shall in no event be liable in any way whatsoever for
failure to re-let the demised premises, or, in the event that the
demised premises sublet, for reasonable failure to collect the rent
thereof under such re-letting. In the event of a breach or
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threatened breach by Tenant of any of the covenants or provisions of
this lease, Landlord shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-
entry, summary proceedings and other remedies were not herein
provided for. Mention in this lease of any particular remedy shall
not preclude Landlord from any other remedy in law or in equity.
Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event
of Landlord obtaining possession of the demised premises by reason
of the violation by Tenant of any of the covenants and conditions of
this lease, or otherwise.
20. SIGNS.
-----
Tenant may erect, display and maintain in the demised
premises and on the exterior walls of the demised premises and
windows and doors of the demised premises, and substitution from time
to time such signs, displays, lettering and plaques, illuminated or
otherwise, as are customarily used in the conduct of its banking
business in its other branches located in building of similar
character. Tenant, if the law permits, may also erect display and
maintain, and substitute from time to time, a sign extending at
right angles from the building. Tenant shall comply with all
governmental laws and ordinances in the erection, display and
maintenance of said signs, and shall obtain any necessary licenses
or permits at its expense. Said signs, however, shall not extend
above the first floor level without securing the prior written
consent of the Landlord.
21. SUBORDINATION - NON - DISTURBANCE.
---------------------------------
(A) This lease is subject and subordinate to any and
all ground, overriding and/or underlying leases and to the lien of
any and all mortgages on the fee and/or on the ground, overriding
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and/or underlying leases, now or hereafter affecting the land and/or
building, and to any and all renewals, modifications, consolidations,
replacements and extensions of such ground, overriding, underlying leases
and/or mortgages. The term "mortgage" shall include trust indentures.
(B) The foregoing subordination provision with
respect to ground, overriding and/or underlying leases, is subject
to the express conditions that so long as Tenant is not in default
in the payment of rent or additional rent or any other covenant or
condition of this lease for longer than respective periods herein
provided, (i) its rights as Tenant hereunder shall not be affected
or terminated, (ii) its possession of the demised premises shall not
be disturbed, (iii) no action or proceeding shall be commenced to
remove or evict Tenant, and (iv) this lease shall at all times
continue in full force and effect notwithstanding the termination or
expiration of any ground, overriding and/or underlying lease prior
to the expiration or termination of this lease.
(C) The foregoing provision with respect to mortgages
is subject to the express condition that so long as Tenant is not in
default in the payment of rent or additional rent or any of the
other covenants and conditions of this lease for longer than the
respective periods provided herein, its rights as Tenant hereunder
shall not be terminated and the possession of Tenant shall not be
disturbed by any mortgagee or by any proceedings on the debt which
any such mortgage secures or by virtue of a right or power contained
in any such mortgage or the bond or note secured thereby and that
any sale or foreclosure will be subject to this lease.
(D) The provisions of this article shall be self
operative and no further instrument of subordination shall be
required by the holders of any interest to which this lease is
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subordinate. Each party agrees, however, whenever requested so to do
upon reasonable notice to it by the other, to execute such
instruments confirmatory of the provisions of this article as the
party requesting the same may require.
(E) Landlord represents that there is no ground,
overriding or underlying lease now in effect with respect to the
property of which the demised premises are a part and Landlord
agrees to use its best efforts to obtain from the holder or holders
of any and all mortgages now affecting said premises a
non-disturbance agreement for the benefit of Tenant containing
substantially the language contained in paragraph C of this article.
22. ARBITRATION.
-----------
In each case specified in this lease in which it
shall become necessary to resort to arbitration, such arbitration
shall be determined as provided in this article. The party desiring
such arbitration shall give written notice to that effect to the
other party, specifying in said notice the name and address of the
person designated to act as arbitrator on its behalf. Within fifteen
(15) days after the service of such notice, the other party shall
give written notice to the first party, specifying the name and
address of the person designated to act as arbitrator on its behalf.
The arbitrators so chosen shall meet within ten (10) days after the
second arbitrator is appointed and if, within thirty (30) days after
the second arbitrator is appointed, the said arbitrators shall not
agree upon the question in dispute, they shall themselves appoint a
third arbitrator who shall be a competent and impartial person; and
in the event of their being unable to agree upon such appointment
within ten (10) days after the time aforesaid, the third arbitrator
shall be selected by the parties themselves if they can agree
thereon within a further period of fifteen (15) days. If the parties
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do not so agree, then either party, on notice to the other may
request such appointment by the American Arbitration Association.
The decision of the arbitrators so chosen shall be given within a
period of thirty (30) days after the appointment of such this
arbitrator. The decision in which any two arbitrators so appointed
and acting hereunder concur shall in all cases be binding and
conclusive upon the parties. If the party receiving a notice of
arbitration from the other party, as hereinbefore provided, shall
fail to timely and duly choose its arbitrator, then the decision on
the issue shall be made by the arbitrator chosen by the party
initiating the arbitration, and his determination shall be binding
and conclusive upon the parties. Each party shall pay the fees and
expenses of the one of the two original arbitrators appointed by
such party; and the fees and expense of the third arbitrator, if
any, shall be borne equally by both parties. If the issue should be
determined by a single arbitrator, as above provided, his fees and
expenses shall be born equally by both parties.
23. SURRENDER.
---------
Tenant covenants on the last day of the term hereby
demised, or of any renewal thereof, or of any sooner termination
thereof, as in this lease provided, peaceably and quietly to
surrender and yield up to Landlord the entire demised premises
including all improvements thereon, except as otherwise expressly
provided in this lease, the interior of said premises to be in good
order and condition, reasonable wear and tear and damage by fire or
other casualty excepted. Tenant shall nevertheless repair any damage
or injury to the demised premises, its fixtures, appurtenances or
equipment caused by Tenant moving its property out of the building
or by the removal of its trade fixtures, removable partitions,
furniture or equipment.
24. LANDLORD'S REMEDIES.
-------------------
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<PAGE>
Whenever in this lease any sum, item or charge shall
be designated or considered as additional rent, Landlord shall have
the same rights and remedies for the nonpayment there of as Landlord
would have for the nonpayment of the fixed rent herein stipulated
and provided for to be paid by Tenant. It is expressly covenanted
that the various rights and remedies given to Landlord in this lease
are distinct, separate and cumulative remedies, and that no one of them,
whether or not exercised by Landlord, shall be deemed to be in exclusion
of any of the others or of such other right, remedies, powers, options or
elections as are now, or may hereafter be conferred upon Landlord by law
or under this lease.
25. NO WAIVER.
---------
One or more waivers of any covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach
of the same or any other covenant or condition, and the consent or
approval by Landlord to or of any act by Tenant requiring Landlord's
consent or approval shall not be construed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent
similar act by Tenant. The receipt of Landlord of rent with
knowledge of the breach of any covenant of this lease shall not be
deemed a waiver of such breach. No provision of this lease shall be
deemed to have been waived by Landlord. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly rent or the
additional rent herein provided for shall be deemed to be other than
on account of the earliest stipulated rent or additional rent, nor
shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or
additional rent or pursue any other remedy in this lease provided.
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<PAGE>
26. QUIET ENJOYMENT.
---------------
Landlord covenants and agrees that upon Tenant's
paying the rent and additional rent and performing and observing the
covenants and provisions of this lease on its part to be performed
and observed, Tenant shall peaceably and quietly enjoy the demised
premises, subject, nevertheless, to the terns and conditions of this
lease. This covenant shall not be deemed to be a personal covenant
by Landlord, except as to Landlord's interest in the demised
premises and so long as such interest continues, and thereafter it
shall be deemed to be a covenant binding upon subsequent owners of
the demised premises and/or successors in the interest of landlord
to the extent of their interest as and when they shall acquire the
same, and so long as they may remain such owners and/or successors
in interest.
27. JURY WAIVER.
-----------
It is mutually agreed by and between Landlord and
Tenant that, to the extent permitted by law, the respective parties
hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either party against the other
on any matters whatsoever arising out of or in any way connected
with this lease, the relationship of Landlord and Tenant, and
Tenant's use or occupancy of the demised premises
28. NOTICES.
-------
Except as otherwise in this lease specifically
provided, a notice of communication which either party is required
to give to the other shall be in writing by registered or certified
mail, return receipt requested, addressed to the other at the
address below set forth or to such other address as either party may
from time to time direct by written notice given in the manner
herein prescribed, and the time of mailing such notice or
communication shall be deemed to be the time when such notice is
given:
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TO THE LANDLORD: GEN-FAY, INC.
424 Columbia Street
Utica, New York
TO THE TENANT: CITIBANK (CENTRAL) N.A.
329 South Warren Street
Syracuse, New York 13202
29. ADJOINING STORES - OPTION TO LEASE.
----------------------------------
Landlord agrees that in the event any of the stores
and basements, if any, thereunder immediately adjoining the demised
premises (each such store and basement being hereinafter called the
"adjoining store"), shall become available for leasing during the
initial term or any renewal term (if exercised) of this lease,
Landlord shall promptly notify Tenant of the availability of such
store and Tenant shall have thirty (30) days after Landlord's notice
within which to notify Landlord that it elects to lease such
adjoining store for the balance of the initial term or renewal term,
as the case may be, of this lease at a rental to be agreed upon or,
if the parties cannot agree, at the then fair market rental value to
be determined by arbitration pursuant to Article 22 hereof. In the
event that Tenant exercises its option, Landlord and Tenant shall
promptly enter into a lease of the adjoining store at the rental and
for the initial term as aforesaid and otherwise upon the same terms
and conditions as contained in this lease including, but not limited
to the provisions of Article 31 hereof with respect to renewal
options and the provisions of Article 4 hereof with respect to tax
participation, except that the base year for tax participation shall
be the fiscal tax year in which the term of said lease commences and
Tenant's share of tax increases or decreases shall be a percentage,
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based upon total space occupied by the tenant as to total space of
the first and second floor of the building, and except that said
lease of the adjoining store shall not contain any further option to
lease. Said lease of the adjoining store shall also give Tenant the
right, at its expense, to combine the adjoining store and the
premises demised under this lease into a single store by installing
connecting doors or arches in the dividing wall or by removing the
dividing wall to the extent possible without impairing the
structural strength of the building. The initial term and the rental
under said lease of the adjoining store to be entered into between
Landlord and Tenant shall not commence until the date Landlord
delivers possession thereof to tenant free and clear of all
occupancies and tenancies and in a broom clean condition with the
fixtures and installations of the prior occupant removed. The
provisions of this article shall apply to each of said adjoining
stores as the same shall become available for leasing, whether or
not Tenant has exercised its option hereunder with respect to any
such store which earlier became available and shall apply to each
such store whenever and so often as it shall become available for
leasing even though Tenant has previously failed to exercise its
option hereunder with respect to such store. However, if Tenant
fails to exercise its option hereunder with respect to an adjoining
store within the thirty (30) day period above mentioned, Landlord
shall be free to lease said store to another tenant upon such terms
and for such period as Landlord shall see fit. Landlord agrees not
to renew the present tenant's leases of said stores, except pursuant
to renewal options, if any, now contained in said leases, without
first offering the stores to Tenant pursuant to this article.
30. TENANT'S RIGHT TO CANCEL.
------------------------
Tenant represents and warrants that it has made
-30-
<PAGE>
application to the Comptroller of the Currency of the United States
of America (herein called "Comptroller") for approval of the
establishment and operation of a branch office for banking purposes
in the demised premises. Landlord agrees that Tenant may cancel this
lease by written notice given to Landlord on or before August 15,
1974, provided Tenant has used its best efforts to obtain the above
mentioned approval of the Comptroller and such approval has been
denied or has not been obtained and Tenant in good faith believes
that further efforts to obtain such approval will be useless. If
such approval of the Comptroller has not been obtained within the
aforementioned period, and if Tenant application therefor is still
pending, Landlord agrees upon Tenant's request to grant an extension
for the period of an additional two (2) months of Tenant's right to
cancel pursuant to the foregoing provisions of this article.
31. RENEWAL OPTIONS.
---------------
Landlord hereby gives and grants and demises to Tenant
options for the renewal and renewals of this lease as in this article set
forth.
(A) If immediately prior to the expiration of the
initial term, this lease shall be in full force and effect and
provided Tenant, not less than ninety (90) days prior to the
expiration of said initial term, shall have given to Landlord a
written notice of the election of Tenant to accept a first renewal
of this lease, then, upon the expiration of said initial term,
Landlord shall grant to Tenant and Tenant shall accept a first
renewal of this lease. Said first renewal shall be for a further
term (herein referred to as the "First Renewal Term") of five (5)
years from the date of expiration of the initial term and shall be
on like covenants, agreements, terms and provisions, except that the
annual rent for the First Renewal Term shall be fixed by agreement
-31-
<PAGE>
not later than thirty (30) days prior to the date on which the first
monthly installment of such annual rent shall first become payable,
or, if Landlord and Tenant cannot agree by that time, then by
arbitration pursuant to the provisions of Article 22 of this lease
at the than fair market rental value of the demised premises for the
renewal term exclusive of fixtures, equipment and improvements
installed or erected by Tenant. Such provisions of this lease as are
pertinent only to the initial term of this lease shall not be
carried over into any renewal.
(B) If immediately prior to the expiration of the
First Renewal Term, this lease shall be in full force and effect, and
provided Tenant, not less than ninety (90) days prior to the
expiration of the First Renewal Term, shall have given to Landlord a
written notice of the election of Tenant to accept a second renewal
of this lease, then, upon the expiration of the First Renewal Term
Landlord shall grant to Tenant and Tenant shall accept a second
renewal of this lease. Said second renewal shall be for a further
term (hereinafter referred to as the "Second Renewal Term") of five
(5) years from and after the expiration of the First Renewal Term
and shall be on like covenants, agreements, terms, provisions and
conditions, as those upon which the First Renewal Term was effected,
excepting that the annual rent for the Second Renewal Term shall be
fixed by agreement not later than thirty (30) days prior to the date
on which the first installment of such annual rent shall first
become payable, or, if Landlord and Tenant cannot agree by that
time, then by arbitration pursuant to the provisions of this lease
at the then fair market rental value of the demised premises for the
renewal term exclusive of fixtures, equipment and improvements
installed or erected by Tenant.
(C) If the annual fixed rent for the First Renewal
-32-
<PAGE>
Term or the Second Renewal Term shall not have been fixed on or
prior to the date the same shall first become payable, Tenant shall
pay an interim fixed rental at the rental rate last in effect until
the arbitration shall have been completed, after which Landlord and
Tenant shall make appropriate adjustment of such interim rent, such
adjustment to be as of the commencement date of the respective
renewal term.
32. ENTIRE AGREEMENT.
----------------
This lease sets forth all of the promises, agreements,
conditions and understandings between Landlord and Tenant relative
to the demised premises, and there are no promises, agreements,
conditions and understandings, between Landlord and Tenant relative
to the demised premises, and there are no promises, agreements,
conditions, understandings, warranties or representations, oral or
written, expressed or implied, between them other than as herein set
forth. Any executory agreement hereafter made shall be ineffective
to change, waive, modify, discharge, terminate or effect an
abandonment of this lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom such
change, waiver, modification, discharge, termination or abandonment
is sought to be enforced.
33. SUCCESSORS AND ASSIGNS.
----------------------
The covenants and agreements herein contained shall be
binding upon and inure to the benefit of Landlord and Tenant and
except as otherwise provided in Article 6 hereof their respective
successors and assigns.
-33-
<PAGE>
34. ADDITIONAL RENT.
---------------
In the event Tenant shall default in making any
payment or performing any act required of it under this lease,
landlord shall have the right, but not the obligation, to make such
payment or perform such act and, upon making such payment or paying
the cost of such act and the Landlord giving the Tenant notice of
such payment, the amount thereof shall be deemed additional rent due
and payable on the first day of the month following Tenant's
receiving such notice.
IN WITNESS WHEREOF, the parties hereto have duly executed this
lease as of the day and year first above written.
GEN-FAY, INC.
BY: Philip Rosen
------------
(landlord)
CITIBANK (CENTRAL) N.A.
BY: Michael R. Kellans
------------------
(tenant)
-34-
<PAGE>
ADDENDUM TO A LEASE AGREEMENT DATED
-----------------------------------
THE 31ST DAY OF MAY, 1974, BETWEEN
----------------------------------
GEN-FAY, INC. AND CITIBANK (CENTRAL)
------------------------------------
N.A.
----
WHEREAS, GEN-FAY, INC., as Landlord and CITIBANK (CENTRAL)
N.A., as Tenant have entered into a Lease Agreement dated the 31st
day of May, 1974, and
WHEREAS, the parties desire to make certain changes,
additions and amendments to said Lease Agreement and
NOW for and in consideration of the sum of ONE DOLLAR
($1.00), payment of which is hereby waived by both parties,
IT IS HEREBY AGREED AS FOLLOWS:
PARAGRAPH MARKED AND NUMBERED "9" of the Lease is hereby
--------------------------------------------------------
amended by adding to the end thereof the following:
- ---------------------------------------------------
Landlord agrees that It shall reasonably keep the sidewalks
abutting the demised premises clean and free from ice and snow.
PARAGRAPH MARKED AND NUMBERED "10" of the Lease is hereby
---------------------------------------------------------
amended by adding to the end thereof the following:
- ---------------------------------------------------
In which event Landlord shall pay for the cost of such repair
and/or replacement.
SAID LEASE SHALL BE AMENDED BY ADDING A NEW AND SEPARATE
--------------------------------------------------------
PARAGRAPH THEREOF WHICH SHALL BE AS FOLLOWS:
- --------------------------------------------
Tenant shall during the entire term thereof keep in full
force and effect a policy of public liability and property damage
insurance with respect to the leased premises and the business
operated by Tenant in which the limits of public liability
shall be not less than $100,000 per person and $300,000 per accident
and in which the property damage liability shall be not less than
$50,000.
GEN-FAY, INC.
By: Philip Rosen
------------
(Landlord)
CITIBANK (CENTRAL) N.A.
By: Michael R. Kellans
------------------
(Tenant)
<PAGE>
EXHIBIT 12
Ratio of Earnings to Fixed Charges
<PAGE>
<TABLE>
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------
(In thousands of dollars)
Fixed Charges
Amortization of Debt Expense $ 4 $ 4 $ 4 $ 4 $ 4
Interest Expense on Long-Term Debt 457 908 853 595 576
- ------------------------------------------------------------------------------------------------
Total Fixed Charges for Ratio
excluding Interest Charges on
Deposits and Short-Term
Borrowings 461 912 857 599 580
Interest Charges on Deposits and
Short-Term Borrowings 34,383 24,834 22,347 26,600 37,718
- ------------------------------------------------------------------------------------------------
Total Fixed Charges for Ratio
including Interest Charges on
Deposits and Short-Term
Borrowings 34,844 25,746 23,204 27,199 38,298
- ------------------------------------------------------------------------------------------------
Earnings
Income from Continuing Operations
before Provision for Income Taxes 15,085 9,990 13,859 13,562 10,307
Fixed Charges excluding Interest
Charges on Deposits and Short-Term
Borrowings 461 912 857 599 580
- ------------------------------------------------------------------------------------------------
Total Earnings for Ratio excluding
Interest Charges on Deposits and
Short-Term Borrowings 15,546 10,902 14,716 14,161 10,887
Interest Charges on Deposits and
Short-Term Borrowings 34,383 24,834 22,347 26,600 37,718
- ------------------------------------------------------------------------------------------------
Total Earnings for Ratio including
Interest Charges on Deposits and
Short-Term Borrowings $49,929 $35,736 $37,063 $40,761 $48,605
- ------------------------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges
Excluding Interest Charges on Deposits
and Short-Term Borrowings 108.3x 39.2x 43.2x 68.0x 83.8x
- ------------------------------------------------------------------------------------------------
Including Interest Charges on Deposits
and Short-Term Borrowings 1.5x 1.4x 1.6x 1.5x 1.3x
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
NBT Bancorp Inc.
52 South Broad Street
Norwich, NY 13815
607 337-6000
DESCRIPTION OF BUSINESS
NBT Bancorp Inc. is a bank holding company formed in May 1986 under
the laws of the State of Delaware. Its principal subsidiary is NBT
Bank, N. A., which serves an eight-county area in central and
northern New York from 39 community banking locations. The bank is a
full-service financial institution which provides a broad range of
financial products, including demand and time deposits, mortgage,
consumer, commercial, and agricultural loans. NBT Bank also offers a
full complement of business and personal trust services.
STOCK INFORMATION
NBT Bancorp Inc. shares are traded on the NASDAQ National Market
System under the symbol NBTB. Several member firms of the New York
Stock Exchange and market makers in various listed securities act as
principals of NBT Bancorp Inc. stock. Principal market makers
include: Advest; Cowen & Co.; Dean, Witter, Reynolds; First Albany
Corp.; Guilford Securities; Herzog, Heine, Geduld, Inc.; Huntleigh
Securities, Inc.; McConnell, Budd & Downes, Inc.; Moors & Cabot,
Inc.; Ryan Beck & Co., Inc.; and M.A. Schapiro & Co. Inc.
As of December 31, 1995, NBT Bancorp Inc. had 3,768
stockholders of record.
Requests for Financial Information, including our Form 10-K
filed each year with the Securities and Exchange Commission, should
be directed to the addressee below. Copies of exhibits to documents
filed with the Securities and Exchange Commission are available upon
payment of reproduction costs.
Joe C. Minor
Vice President, Chief Financial Officer and Treasurer
52 South Broad Street
Norwich, NY 13815
For stockholders who receive more than one copy of reports and
communications from the Company, and who wish to help us control our
mailing costs, we encourage you to contact us with changes.
STOCK REGISTRAR AND TRANSFER AGENT
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
ANNUAL MEETING
The Annual Meeting of stockholders will be held at 11 a.m. Saturday,
April 20, 1996 at Norwich High School, Midland Drive, Norwich, NY
13815. Stockholders are invited and encouraged to actively
participate in the meeting, either in person, or by proxy.
[unnumbered, located inside of the front cover flap]
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Responsibility for the integrity, objectivity, consistency, and
fair presentation of the financial information presented in this
Annual Report rests with NBT Bancorp Inc. management. The
accompanying financial statements and related information have been
prepared in conformity with generally accepted accounting principles
consistently applied and include, where required, amounts based on
informed judgments and management's best estimates.
Management maintains a system of internal controls and
accounting policies and procedures to provide reasonable assurance
of the accountability and safeguarding of Company assets and of the
accuracy of financial information. These procedures include
management evaluations of asset quality and the impact of economic
events, organizational arrangements that provide an appropriate
segregation of responsibilities and a program of internal audits to
evaluate independently the adequacy and application of financial and
operating controls and compliance with Company policies and
procedures.
The Board of Directors has appointed an Audit Committee
composed entirely of directors who are not employees of the Company.
The Audit Committee is responsible for recommending to the Board the
independent auditors to be retained for the coming year, subject to
stockholder ratification. The Audit Committee meets periodically,
both jointly and privately, with the independent auditors, with our
internal auditors, as well as with representatives of management, to
review accounting, auditing, internal control structure and
financial reporting matters. The Committee reports to the Board on
its activities and findings.
Daryl R. Forsythe
President and Chief Executive Officer
Joe C. Minor
Vice President,
Chief Financial Officer and Treasurer
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
NBT Bancorp Inc.:
We have audited the accompanying consolidated balance sheets of
NBT Bancorp Inc. and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three year period
ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of NBT Bancorp Inc. and subsidiary as of December 31, 1995
and 1994, and the results of their operations and their cash flows
for each of the years in the three year period ended December 31,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Syracuse, New York
January 12, 1996
10
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- -----------------------------------------------------------------------------------------
(in thousands, except per share amounts)
ASSETS
Cash and due from banks $ 44,379 $ 43,410
Loans available for sale 6,089 10,921
Securities available for sale 393,536 108,477
Securities held to maturity
(market value-$40,306 and $261,913) 40,311 272,466
Loans:
Commercial and agricultural 247,320 215,380
Real estate mortgage 120,972 129,275
Consumer 220,093 230,063
- -----------------------------------------------------------------------------------------
Total loans 588,385 574,718
Less allowance for loan losses 9,120 9,026
- -----------------------------------------------------------------------------------------
Net loans 579,265 565,692
Premises and equipment, net 16,467 15,383
Intangible assets, net 11,551 9,862
Other assets 14,668 18,346
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $1,106,266 $1,044,557
- -----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $ 741,805 $ 669,007
Noninterest bearing 131,227 122,436
- -----------------------------------------------------------------------------------------
Total deposits 873,032 791,443
Short-term borrowings 115,945 140,587
Long-term debt 3,012 8,734
Other liabilities 6,233 5,486
- -----------------------------------------------------------------------------------------
Total liabilities 998,222 946,250
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00;
shares authorized-2,500,000 in 1995,
2,000,000 in 1994 - -
Common stock, no par, stated value $1.00;
shares authorized-12,500,000 in 1995,
10,000,000 in 1994; issued 8,442,314
and 8,452,099 8,442 8,050
Capital surplus 75,464 69,669
Retained earnings 24,076 25,446
Unrealized gain (loss) on securities available
for sale, net of income tax effect 2,822 (4,273)
Common stock in treasury, at cost
(170,275 and 36,130 shares) (2,760) (585)
- -----------------------------------------------------------------------------------------
Total stockholders' equity 108,044 98,307
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,106,266 $1,044,557
- -----------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
11
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Interest and fee income:
Loans $53,057 $48,815 $50,043
Securities held to maturity--taxable 13,154 11,878 10,223
Securities held to maturity--tax exempt 1,366 1,160 1,070
Assets available for sale 9,768 8,564 5,300
Other 55 21 321
- -------------------------------------------------------------------------------------------------------
Total interest and fee income 77,400 70,438 66,957
- -------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 29,683 21,483 21,738
Short-term borrowings 4,700 3,351 609
Long-term debt 457 908 853
- -------------------------------------------------------------------------------------------------------
Total interest expense 34,840 25,742 23,200
- -------------------------------------------------------------------------------------------------------
Net interest income 42,560 44,696 43,757
Provision for loan losses 1,553 3,071 2,281
- -------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 41,007 41,625 41,476
Noninterest income:
Trust income 2,439 2,511 2,983
Service charges on deposit accounts 2,995 3,032 2,998
Securities gains 145 555 1,573
Other income 1,523 941 2,127
- -------------------------------------------------------------------------------------------------------
Total noninterest income 7,102 7,039 9,681
- -------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 16,309 16,157 16,202
Net occupancy expense 2,361 2,295 2,102
Equipment expense 1,694 2,033 2,528
FDIC insurance 941 1,829 1,706
Amortization of intangible assets 1,271 3,222 4,243
Restructuring expense - 2,264 -
Other operating expense 10,448 10,874 10,517
- -------------------------------------------------------------------------------------------------------
Total noninterest expense 33,024 38,674 37,298
- -------------------------------------------------------------------------------------------------------
Income before income taxes 15,085 9,990 13,859
Income taxes 5,756 3,482 5,354
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 9,329 $ 6,508 $ 8,505
- -------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 1.11 $ 0.76 $ 1.00
- -------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 8,381 8,513 8,473
- -------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
12
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Unrealized
Gain(Loss)
On Securities
Common Capital Retained Available Treasury
Stock Surplus Earnings For Sale Stock Total
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
BALANCE AT DECEMBER 31, 1992 $7,213 $57,203 $29,596 $ - $ - $ 94,012
Net income 8,505 8,505
5% stock dividend 363 5,993 (6,356) -
Cash dividends - $0.394 per share (3,302) (3,302)
Payment in lieu of fractional shares (12) (12)
Common stock issued for stock
options exercised 56 771 827
Common stock issued to dividend
reinvestment and other stock plans 36 546 582
Purchase of 73,182 treasury shares (1,259) (1,259)
Sale of 57,507 treasury shares to
dividend reinvestment and other
stock plans 5 981 986
Unrealized gain on securities
available for sale, net of tax
effect of $552 769 769
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 7,668 64,518 28,431 769 (278) 101,108
Net income 6,508 6,508
5% stock dividend 380 5,508 (5,888) -
Cash dividends - $0.427 per share (3,594) (3,594)
Payment in lieu of fractional shares (11) (11)
Common stock issued to dividend
reinvestment and other stock plans 2 29 31
Purchase of 210,911 treasury shares (3,555) (3,555)
Sale of 190,456 treasury shares to
dividend reinvestment and other
stock plans (386) 3,248 2,862
Change in unrealized (loss) on
securities available for sale,
net of tax effect of $3,503 (5,042) (5,042)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 8,050 69,669 25,446 (4,273) (585) 98,307
Net income 9,329 9,329
5% stock dividend 392 6,333 (6,725) -
Cash dividends - $0.473 per share (3,962) (3,962)
Payment in lieu of fractional shares (12) (12)
Purchase of 436,293 treasury shares (7,075) (7,075)
Sale of 302,147 treasury shares to
dividend reinvestment and other
stock plans (538) 4,900 4,362
Change in unrealized gain on
securities available for sale,
net of tax effect of $4,900 7,095 7,095
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $8,442 $75,464 $24,076 $ 2,822 $(2,760) $108,044
- -------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
13
<PAGE>
<TABLE>
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
(in thousands)
OPERATING ACTIVITIES:
Net income $ 9,329 $ 6,508 $ 8,505
Adjustments to reconcile net income to the cash
provided by operating activities:
Provision for loan losses 1,553 3,071 2,281
Depreciation and amortization 1,478 1,636 1,730
Amortization of premiums and accretion of
discounts on securities (153) 402 1,768
Amortization of intangible assets 1,271 3,222 4,243
Deferred income taxes (benefit) (288) (194) (691)
Provision for restructuring charges - 2,264 -
Proceeds from sale of loans originated for sale 14,704 12,358 19,535
Loans originated for sale (11,872) (13,921) (26,695)
Realized gains on sales of securities (145) (555) (1,573)
(Increase) decrease in interest receivable 450 (2,137) 147
Increase (decrease) in interest payable 676 175 (240)
Payments of restructuring liabilities (1,513) (613) -
Other, net 1,827 (25) (4,735)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 17,317 12,191 4,275
- --------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities 40,206 21,504 32,730
Proceeds from sales 2,808 70,258 57,080
Purchases (99,030) (1,001) (147,950)
Securities held to maturity:
Proceeds from maturities 59,918 30,468 31,512
Purchases (44,682) (194,650) (37,625)
Net increase in loans (15,126) (17,555) (20,577)
Purchase of premises and equipment, net (2,020) (2,034) (1,784)
Acquisition of branches, net of cash acquired (2,960) - -
Other investing activities - - 119
- --------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities (60,886) (93,010) (86,495)
- --------------------------------------------------------------------------------------------------------------
<PAGE>
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 81,589 (15,785) 66,479
Net increase (decrease) in short-term borrowings
with original maturities of three months or less (24,642) 128,886 (4,717)
Proceeds from issuance of other short-term borrowings - - 15,000
Repayments of other short-term borrowings - (15,000) -
Proceeds from issuance of long-term debt - - 5,171
Repayments of long-term debt (5,722) (5,723) (1,034)
Common stock issued, including treasury shares reissued 4,362 2,893 2,395
Purchase of treasury stock (7,075) (3,555) (1,259)
Cash dividends and payment for fractional shares (3,974) (3,605) (3,314)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 44,538 88,111 78,721
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 969 7,292 (3,499)
Cash and cash equivalents at beginning of year 43,410 36,118 39,617
- --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 44,379 $ 43,410 $ 36,118
- -------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 34,164 $ 25,567 $ 23,440
Income taxes 5,791 3,941 7,385
Noncash investing activity:
Transfer of securities held to maturity
to securities available for sale 220,681 - 112,635
- --------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
14
<PAGE>
NBT BANCORP INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NBT Bancorp Inc. (Company) is a financial services company primarily
in the business of consumer, commercial, and agricultural banking
providing a wide range of banking, fiduciary, and financial services
to corporate, institutional, municipal, and individual customers.
The accounting policies of the Company conform with generally
accepted accounting principles and with general practices in the
banking industry.
BASIS OF PRESENTATION The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, NBT
Bank, National Association (Bank). All significant intercompany
transactions have been eliminated in consolidation. Certain amounts
previously reported in the financial statements have been
reclassified to conform with the current presentation.
BUSINESS The Bank provides loan and deposit services to its
customers, primarily in its eight county service area. Its only
business segment is domestic commercial banking and the Bank is
subject to competition from other financial institutions. The Bank
and the Company are subject to the regulations of certain federal
agencies and undergo periodic examinations by those regulatory
agencies.
TRUST Assets held by the Bank in a fiduciary or agency capacity for
its customers are not included in the accompanying consolidated
balance sheets, since such assets are not assets of the Bank. Trust
income is recognized on the accrual method based on contractual
rates applied to the balances of trust accounts.
CASH AND CASH EQUIVALENTS The Company considers cash on hand,
amounts due from correspondent banks, cash items in process of
collection, and federal funds sold, as well as federal mutual funds,
to be cash and cash equivalents.
SECURITIES The Company adopted Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 115
entitled, "Accounting for Certain Investments in Debt and Equity
Securities," on December 31, 1993. SFAS 115 establishes
classifications of investments into three categories: held to
maturity, trading, and available for sale. Debt securities that a
company has the positive intent and ability to hold to maturity are
to be classified as held to maturity securities and reported at
amortized cost. Debt and equity securities, if any, that are bought
and held principally for the purpose of sale in the near term are to
be classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings. Debt and equity
securities not classified as either held to maturity securities or
trading securities are to be classified as available for sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component
of stockholders' equity, net of related taxes. Securities available
for sale are carried at fair value. The Company does not hold any
securities considered to be trading. Securities held to maturity are
carried at cost adjusted for amortization of premiums and accretion
of discounts computed using the level yield method, adjusted for
estimated prepayments. Gains and losses on sales of securities are
computed using the specific identification method.
LOANS AND LOANS AVAILABLE FOR SALE Loans are recorded at their
current unpaid principal balance, net of unearned income. Loans
classified as available for sale, primarily fixed rate real estate
mortgages and higher education loans, are carried at the lower of
aggregate cost or estimated fair value.
Interest income on loans is primarily accrued based on the
principal amount outstanding. Fees related to lending activities and
direct costs associated with originating the loans are deferred and
recognized using the level yield method. Accrual of interest is
discontinued if the loan is placed on non-accrual status.
The Bank's classification of a loan as a non-accrual loan is
based in part on bank regulatory guidelines. Non-accrual
classification does not mean that the loan principal will not be
collected; rather, that timely collection of interest is doubtful.
When in the opinion of management the collection of principal
appears unlikely, the loan balance is charged-off in total or in
part. Loans are transferred to a non-accrual basis generally when
principal or interest payments become ninety days delinquent, unless
the loan is well secured and in the process of collection or when
management concludes circumstances indicate that borrowers may be
unable to meet contractual principal or interest payments. When a
loan is transferred to a non-accrual status, any unpaid accrued
interest is reversed and charged against income.
The Company adopted the provisions of SFAS 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures," on January 1, 1995. Management, considering
current information and events regarding the borrowers' ability to
repay the obligations, considers a loan to be impaired when it is
probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan agreement. When a
loan is considered to be impaired, the amount of the impairment is
15
<PAGE>
measured based on the present value of expected future cash flows
discounted at the loans effective interest rate or, as a practical
expedient, at the loans observable market price or the fair value of
collateral if the loan is collateral dependent. Impairment losses
are included in the allowance for loan losses through a charge to
the provision for loan losses. Adoption of these statements did not
have a material impact on the Company's financial condition or
results of operations.
Payments received on non-accrual and impaired loans are first
applied to principal. Depending on management's assessment of the
ultimate collectiblity of the loan, interest income may be
recognized on a cash basis. Non-accrual loans are returned to
accrual status when management determines that the financial
condition of the borrower has improved significantly to the extent
that there has been a sustained period of repayment performance so
that the loan is brought current and the collectibility of both
principal and interest appears assured.
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is the
amount which, in the opinion of management, is necessary to absorb
potential losses in the loan portfolio when taken as a whole. The
allowance is determined by reference to the market area the Bank
serves, local economic conditions, the growth and composition of its
loan portfolio with respect to the mix between the various types of
loans and their related risk characteristics, a review of the value
of collateral supporting the loans, and the result of comprehensive
reviews of the loan portfolio by the Loan Review staff and
management.
BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated
at cost, less accumulated depreciation. Depreciation of premises and
equipment is determined using the straight line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance, repairs, and minor replacements are charged to expense
as incurred. Gains and losses on the disposal of bank premises and
equipment are included in the results of current operations.
OTHER REAL ESTATE OWNED Other real estate owned (OREO) consists of
properties acquired through foreclosure or by acceptance of a deed
in lieu of foreclosure. These assets are recorded at the lower of
cost or appraised fair value, less costs of disposal. Loan losses
arising from the acquisition of such assets are charged to the
allowance for loan losses and any subsequent valuation write-downs
are charged to other expense.
INTANGIBLE ASSETS Certain identified intangible assets, including a
covenant not to compete and core deposit intangible assets are
carried at appraised fair values, net of accumulated amortization,
and are being amortized by the straight line method in amounts
sufficient to write-off those fair values over their estimated
useful lives; such fair values and useful lives are reviewed
annually for events or changes in circumstances that may indicate
that the carrying amount of the assets are not recoverable.
Goodwill, the excess of cost over the fair value of the net assets
acquired, is being amortized over twenty-five years on the straight
line method.
TREASURY STOCK Treasury stock acquisitions are recorded at cost.
Subsequent sales of treasury stock are recorded on an average cost
basis with the difference between proceeds and cost recognized as an
adjustment of capital surplus.
POSTRETIREMENT BENEFITS As specified by FASB Statement of Financial
Accounting Standards No.106 (SFAS 106), "Employers Accounting for
Postretirement Benefits Other Than Pensions," the Company uses
actuarial based accrual accounting for its postretirement health
care plans, electing to recognize the transition obligation in the
statements of financial position and income on a delayed basis over
the plan participants' future service periods, estimated to be
twenty years.
STOCK-BASED COMPENSATION The Company maintains a stock option plan
which provides for the granting of stock options to officers and key
employees. Options are granted at a purchase price not less than the
fair market value of the common stock on the date of grant.
INCOME TAXES The Company and its subsidiary file a consolidated tax
return on the accrual basis. FASB SFAS 109 entitled, "Accounting for
Income Taxes," requires the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the
enactment date.
PER SHARE AMOUNTS Net income per common share is computed on the
basis of the weighted average number of common shares and common
share equivalents outstanding during each period after giving
retroactive effect to stock dividends and stock splits.
16
<PAGE>
FEDERAL RESERVE BOARD REQUIREMENT
The Bank is required to maintain a reserve balance with the Federal
Reserve Bank of New York. The required average total reserve for the
14 day maintenance period ending December 27, 1995, was $17.5
million of which $9.5 million was required to be on deposit with the
Federal Reserve Bank and the remaining $8.0 million was represented
by cash on hand.
SECURITIES
The amortized cost, estimated fair market value and unrealized gains and
losses of securities available for sale are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
AMORTIZED UNREALIZED MARKET
(in thousands) COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------
DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------
U.S. Treasury $169,801 $2,212 $ 105 $171,908
Federal Agency 63,246 1,176 - 64,422
State & Municipal 986 - 13 973
Mortgage-backed 154,409 2,397 923 155,883
Other securities 322 28 - 350
- ----------------------------------------------------------------------------------------
Total $388,764 $5,813 $ 1,041 $393,536
- ----------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
December 31, 1994
- ---------------------------------------------------------------------------------------
U.S. Treasury $ 33,085 $ 36 $ 207 $ 32,914
State & Municipal 991 - 79 912
Mortgage-backed 80,695 - 7,119 73,576
Other securities 930 145 - 1,075
- ---------------------------------------------------------------------------------------
Total $115,701 $ 181 $ 7,405 $108,477
- ---------------------------------------------------------------------------------------
</TABLE>
Gross realized gains and gross proceeds on the sale of
securities available for sale were $0.1 million and $2.8 million,
respectively, in 1995, $0.6 million and $70.3 million in 1994, and
$1.6 million and $57.1 million in 1993.
At December 31, 1995 and 1994, securities with amortized costs
totalling $246.4 million and $222.9 million, respectively, were
pledged to secure public deposits and for other purposes required or
permitted by law.
<PAGE>
The amortized cost, estimated fair market value, and unrealized gains and
losses of securities held to maturity are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
AMORTIZED UNREALIZED MARKET
(in thousands) COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------
DECEMBER 31, 1995
- --------------------------------------------------------------------------------------
State & Municipal $ 28,521 $ - $ 4 $ 28,517
Other securities 11,790 - 1 11,789
- --------------------------------------------------------------------------------------
Total $ 40,311 $ - $ 5 $ 40,306
- --------------------------------------------------------------------------------------
<CAPTION>
<C> <C> <C> <C>
- --------------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------------
U.S. Treasury $170,757 $ 33 $ 7,871 $162,919
Federal Agency 9,984 - 858 9,126
State & Municipal 37,292 - 51 37,241
Mortgage-backed 43,632 - 1,805 41,827
Other securities 10,801 - 1 10,800
- --------------------------------------------------------------------------------------
Total $272,466 $ 33 $10,586 $261,913
- --------------------------------------------------------------------------------------
</TABLE>
In November, 1995 the FASB published "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" (Guide). Concurrent with the initial adoption of the Guide but
no later than December 31, 1995, the Company was permitted to reassess the
appropriateness of the classifications of all securities held at that time
and implement reclassification without calling into question the intent of
the Company to hold other debt securities to maturity in the future.
Effective December 1, 1995 the Company transferred U.S. Treasury, Federal
Agency, and Mortgage-backed securities with amortized costs totalling $217.2
million, having market values of $220.7 million, from the held to maturity
portfolio to the available for sale portfolio. The gross unrealized gains
and losses were $3.7 million and $0.2 million, respectively. The transferred
securities are reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders'
equity, net of related taxes. As required by the Guide, financial
statements prior to adoption were not restated.
No such transfers were made in 1994. During 1993 securities with
amortized costs of $112.6 million and estimated fair market value of $115.9
million were transferred to securities available for sale pursuant to the
Company's adoption of FASB 115.
In the tables setting forth the maturity distribution and
weighted average taxable equivalent yield of securities at December
31, 1995, yields on amortized cost have been calculated based on
effective yields weighted for the scheduled maturity of each
security using the marginal federal tax rate of 35%. Approximately
$29.4 million of mortgage-backed debt securities have adjustable
interest rate provisions and have been included in the tables based
upon the period that relates to their adjustable characteristics.
<PAGE>
<TABLE>
REMAINING MATURITIES OF SECURITIES AT DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
AFTER ONE YEAR AFTER FIVE YEARS
WITHIN BUT WITHIN BUT WITHIN AFTER TEN TOTAL
ONE YEAR FIVE YEARS TEN YEARS YEARS PORTFOLIO
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands) AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
- -----------------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury $49,817 5.71% $40,044 5.50% $ 79,940 6.03% $ - -% $169,801 5.81%
Federal Agency 37,283 7.21 20,963 7.29 5,000 6.10 - - 63,246 7.15
State & Municipal - - 986 5.22 - - - - 986 5.22
Mortgage-backed - - 6,046 6.67 43,888 6.24 104,475 6.66 154,409 6.55
Other securities - - - - - - 322 1.31 322 1.31
- -----------------------------------------------------------------------------------------------------------------------------
Amortized cost $87,100 6.35% $68,039 6.18% $128,828 6.10% $104,797 6.65% $388,764 6.30%
- -----------------------------------------------------------------------------------------------------------------------------
Market value $87,727 $68,873 $130,445 $106,491 $393,536
- -----------------------------------------------------------------------------------------------------------------------------
SECURITIES HELD TO MATURITY:
State & Municipal $23,331 6.88% $ 4,114 7.71% $ 386 9.87% $ 690 8.87% $ 28,521 7.09%
Other securities - - - - 10 5.50 11,780 6.74 11,790 6.73
- -----------------------------------------------------------------------------------------------------------------------------
Amortized cost $23,331 6.88% $ 4,114 7.71% $ 396 9.76% $ 12,470 6.86% $ 40,311 6.99%
- -----------------------------------------------------------------------------------------------------------------------------
Market value $23,331 $ 4,110 $ 395 $ 12,470 $ 40,306
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
LOANS AVAILABLE FOR SALE
The Company carries loans available for sale at the lower of
aggregate book or estimated fair market value. At December 31, 1995,
the aggregate book value and estimated fair market value of loans
available for sale were $6.1 million, while at December 31, 1994
aggregate book and estimated market value were $11.4 million and
$10.9 million, respectively. The Company generally sells all fixed
rate residential real estate mortgages it originates.
During 1995, $9.6 million in mortgage loans were sold with
servicing retained, realizing a $0.4 million loss on sales. At
December 31, 1995, the Company serviced $31.2 million of real estate
mortgages on behalf or other financial intermediaries; such loans
are not reflected in the Company's balance sheet. It is the
Company's practice to sell its higher education loans to the Student
Loan Marketing Association at the Company's cost after the student
leaves school. During 1995, $4.1 million of such loans were sold.
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three years ended December
31, 1995, are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Balance at January 1 $ 9,026 $ 8,652 $ 9,245
Provision 1,553 3,071 2,281
Recoveries on loans 802 1,025 786
- -------------------------------------------------------------------------
11,381 12,748 12,312
Loans charged off 2,261 3,722 3,660
- -------------------------------------------------------------------------
Balance at December 31 $ 9,120 $ 9,026 $ 8,652
- -------------------------------------------------------------------------
</TABLE>
NONPERFORMING ASSETS
The Bank's concentrations of credit risk are reflected in the
balance sheet. The concentrations of credit risk with standby
letters of credit, committed lines of credit and commitments to
originate new loans generally follow the loan classifications. A
substantial portion of the Bank's loans are secured by real estate
located in central and northern New York. Accordingly, the ultimate
collectiblity of a substantial portion of the Bank's portfolio is
susceptible to changes in market conditions of those areas.
Management is not aware of any other material concentrations of
credit to any industry or individual borrowers.
The effect of nonaccrual loans on interest income for the
years ended December 31, 1995, 1994, and 1993 was not material. The
Bank is not committed to advance additional funds to these
borrowers. At December 31, 1995 the Company held $0.1 million of
restructured loans performing in compliance with their modified
terms. There were no such loans at December 31, 1994.
Included in impaired loans at December 31, 1995 is $1.4
million of impaired loans for which the specifically allocated
allowance for loan losses is $0.2 million. There are no impaired
loans that do not have a specifically allocated allowance for loan
losses as they have been written down to estimated fair value or as
a result of interest payments applied to reduce principal. The
average investment in impaired loans for the year ended December 31,
1995 was $1.5 million. During the year ended December 31, 1995 the
Company recognized $0.3 million of interest income on impaired
loans, all of which was recognized using the cash basis of income
recognition.
RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has made loans at
prevailing rates and terms to directors, officers, and other related
parties. Such loans in management's opinion, did not present more
than the normal risk of collectiblity or incorporate other
unfavorable features. The aggregate amount of loans outstanding to
qualifying related parties at January 1, 1995, was $3.3 million.
During 1995, $1.5 million of new loans were made and repayments
totaled $0.9 million, resulting in an aggregate balance of loans
outstanding to related parties at December 31, 1995, of $3.9
million.
<PAGE>
PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------
DECEMBER 31, 1995 1994
- --------------------------------------------------------------
(in thousands)
Bank premises $18,998 $18,176
Equipment 16,474 15,099
Construction in progress 145 -
- --------------------------------------------------------------
35,617 33,275
Accumulated depreciation
and valuation allowance 19,150 17,892
- --------------------------------------------------------------
Total premises and equipment $16,467 $15,383
- --------------------------------------------------------------
</TABLE>
Depreciation and amortization of premises and equipment
totaled $1.5 million, $1.6 million and $1.7 million in 1995, 1994,
and 1993, respectively.
Rental expense included in operating expense amounted to $0.3
million in 1995, $0.3 million in 1994, and $0.4 million in 1993. The
18
<PAGE>
future minimum rental commitments as of December 31, 1995, for
noncancellable operating leases were as follows: 1996--$0.4 million;
1997--$0.2 million; 1998--$0.2 million; 1999--$0.1 million; 2000 and
beyond--$0.0 million.
INTANGIBLE ASSETS
NBT Bank, National Association, in a cash transaction, acquired all
the deposits, totalling $42.6 million, and selected loans, totalling
$1.1 million, of three branches from Community Bank Systems Inc.
effective December 16, 1995. Also included were related accrued
interest payable and receivable and premises, the amounts of which
were not material. All assets and liabilities acquired were adjusted
to and recorded at their appraised fair values at that date,
creating additional core deposit intangible assets and goodwill.
<PAGE>
The table below presents significant balances, amortization
and the respective periods of amortization:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------
(in thousands)
Goodwill (25 yrs.):
Beginning balance $ 6,544 $ 6,875 $ 7,206
Branch acquisition 105 - -
Amortization (331) (331) (331)
- -----------------------------------------------------------------------------------------------
Ending balance 6,318 6,544 6,875
- -----------------------------------------------------------------------------------------------
Covenant not to compete (5 yrs.):
Beginning balance - 1,335 3,115
Amortization - (1,335) (1,780)
- -----------------------------------------------------------------------------------------------
Ending balance - - 1,335
- -----------------------------------------------------------------------------------------------
Core deposit intangible assets (3-12 yrs.):
Beginning balance 3,318 4,874 7,006
Branch acquisition 2,855 - -
Amortization (940) (1,556) (2,132)
- -----------------------------------------------------------------------------------------------
Ending balance 5,233 3,318 4,874
- -----------------------------------------------------------------------------------------------
Total intangible assets $11,551 $ 9,862 $13,084
- -----------------------------------------------------------------------------------------------
</TABLE>
DEPOSITS
Time deposits of $100,000 or more aggregated $126.1 million at
December 31, 1995 and $100.9 million at December 31, 1994. Interest
expense on such deposits was approximately $8.6 million, $3.5
million, and $1.9 million for 1995, 1994, and 1993, respectively.
The following table sets forth the maturity distribution of
time certificates of deposit of $100,000 or more:
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------
December 31, 1995 1994
- ----------------------------------------------------------------------
(in thousands)
Within three months $100,430 $ 79,778
After three but within six months 10,162 6,594
After six but within twelve months 6,949 5,546
After twelve months 8,552 9,058
- ----------------------------------------------------------------------
Total $126,093 $100,976
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
SHORT-TERM BORROWINGS
Short-term borrowings consist of Federal funds purchased and
securities sold under repurchase agreements, which generally
represent overnight borrowing transactions, and other short-term
borrowings, primarily Federal Home Loan Bank (FHLB) advances, with
original maturities of one year or less. The Bank has unused lines
of credit available for short-term financing of $20 million and $300
million for Federal funds purchased and repurchase agreements,
respectively, as well as the capacity for additional FHLB advances
of $63 million at December 31, 1995.
The details of short-term borrowings are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
(dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
FEDERAL FUNDS PURCHASED
Balance at year end $78,000 $80,000 $ -
Average during the year 30,682 30,158 7,337
Maximum month end balance 78,000 87,000 35,000
Weighted average rate during the year 5.99% 4.94% 3.37%
Weighted average rate at December 31 5.73% 5.64% -
- -----------------------------------------------------------------------------------------------
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at year end $17,945 $10,587 $11,701
Average during the year 16,516 24,418 10,088
Maximum month end balance 20,225 61,370 14,489
Weighted average rate during the year 5.23% 4.19% 3.11%
Weighted average rate at December 31 4.84% 4.83% 2.17%
- -----------------------------------------------------------------------------------------------
OTHER SHORT-TERM BORROWINGS
Balance at year end $20,000 $50,000 $15,000
Average during the year 33,398 18,507 1,274
Maximum month end balance 50,000 50,000 15,000
Weighted average rate during the year 5.98% 4.53% 3.84%
Weighted average rate at December 31 5.88% 6.13% 3.84%
- -----------------------------------------------------------------------------------------------
</TABLE>
LONG-TERM DEBT
Long-term debt consists of obligations having an original maturity
at issuance of more than one year. A summary of long-term debt
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Maturity Interest Year end outstanding
(dollars in thousands) Date Rate 1995 1994
- ----------------------------------------------------------------------------------------
<S>
Company: <C> <C> <C> <C>
Promissory notes 1993-1999 10.89% $2,857 $3,571
Bank:
FHLB advance 1993-2008 5.33 155 163
FHLB advance 1995 4.20 - 5,000
- ----------------------------------------------------------------------------------------
Total $3,012 $8,734
- ----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
The promissory notes require annual principal repayments of
$0.714 million. The FHLB advances are collateralized by the FHLB
stock owned by the Bank and certain of its real estate mortgage
loans.
INCOME TAXES
Pursuant to the provisions of SFAS 109, deferred income taxes are
recognized for temporary differences between the financial statement
carrying amount and tax basis of assets and liabilities.
<TABLE>
Total income taxes were allocated as follows:
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------
(in thousands)
Income before income taxes $ 5,756 $ 3,482 $5,354
Capital surplus, stock options exercised (388) (147) (101)
Stockholders' equity, change in unrealized
gain (loss) on securities 4,900 (3,503) 552
- ----------------------------------------------------------------------------------------------
Total $10,268 $ (168) $5,805
- ----------------------------------------------------------------------------------------------
The components of income taxes are:
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(in thousands)
Current:
Federal $4,718 $2,926 $4,841
State 1,326 750 1,204
- --------------------------------------------------------------------------
6,044 3,676 6,045
Deferred:
Federal (237) (171) (571)
State (51) (23) (120)
- --------------------------------------------------------------------------
(288) (194) (691)
- --------------------------------------------------------------------------
Total $5,756 $3,482 $5,354
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- --------------------------------------------------------------------------------------
(in thousands)
Deferred tax assets:
Allowance for loan losses $3,557 $3,528
Unrealized depreciation of securities available
for sale - 2,951
Deferred compensation 336 310
Postretirement benefit obligation 380 224
Other 191 214
- --------------------------------------------------------------------------------------
Total gross deferred tax assets 4,464 7,227
- --------------------------------------------------------------------------------------
Deferred tax liabilities:
Premises and equipment, primarily due to accelerated
depreciation and valuation allowances 496 313
Differences in assigned values and tax bases of
assets recognized in acquisitions 247 385
Unrealized appreciation of securities available
for sale 1,949 -
Securities discount accretion 495 265
Other - 375
- --------------------------------------------------------------------------------------
Total gross deferred tax liabilities 3,187 1,338
- --------------------------------------------------------------------------------------
Net deferred tax assets $1,277 $5,889
- --------------------------------------------------------------------------------------
</TABLE>
Realization of deferred tax assets is dependent upon the
generation of future taxable income or the existence of sufficient
taxable income within the carry back period. A valuation allowance
is provided when it is more likely than not that some portion of the
deferred tax asset will not be realized. Based on available
evidence, gross deferred tax assets will ultimately be realized and
a valuation allowance was not deemed necessary.
<PAGE>
The following is a reconciliation of the provision for income
taxes to the amount computed by applying the applicable Federal statutory
rate of 35% to income before taxes:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------
(in thousands)
Federal income tax at
statutory rate $5,280 $3,497 $4,851
Benefit of federal tax rates
below statutory rate (100) (100) (100)
Tax exempt income (496) (428) (370)
Non-deductible expenses 241 212 186
State taxes, net of
federal tax benefit 829 468 705
Other, net 2 (167) 82
- -------------------------------------------------------------------------------
Income taxes $5,756 $3,482 $5,354
- -------------------------------------------------------------------------------
</TABLE>
NONINTEREST EXPENSE
Included in the other operating expense category are supplies,
communication and promotional expense of $2.7 million, $2.6 million,
and $2.9 million; and professional fees of $2.4 million, $3.0
million, and $3.0 million, in years 1995, 1994, and 1993,
respectively.
In 1993 the Company outsourced its data processing functions
and entered into a five year contract for data processing services
which includes a minimum base dollar amount and a variable portion
determined by the number of transactions in excess of a specified
level. Included in the other operating expense category are data
processing fees of $1.3 million, $1.1 million, and $0.2 million in
years 1995, 1994, and 1993, respectively. The future minimum annual
commitments as of December 31, 1995 were as follows: 1996--$1.5
million, 1997--$1.3 million, 1998--$0.8 million, and 1999 and
beyond--$0.0 million. The Company will require similar data
processing services after the existing contract expires in August,
1998.
RESTRUCTURING EXPENSE
During 1994, the Company implemented a restructuring plan that
included a reduction in work force and the closing of three offices.
Charges of $1.2 million related to the termination benefits of 35
employees and exit costs relating to the closure of three offices
and professional fees related to the terminations totalling $1.1
million, including $0.7 million for the impairment of long lived
assets, were recognized. Of the activities considered in the exit
20
<PAGE>
plan, all the employees were terminated in 1994. Termination
benefits of $1.2 million and exit costs totalling $0.3 million were
paid and charged to the liability for the restructuring plan. Long
lived assets were disposed of at a loss of $0.7 million which was
charged to the valuation allowance related to the restructuring. An
adjustment reversing the remaining $0.1 million restructuring
liability for exit costs was made in 1995 as a reduction in other
expense.
COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is a party to financial instruments with off balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. The Bank's exposure to
credit loss in the event of nonperformance by the other party to the
commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The Bank
uses the same credit standards in making commitments and conditional
obligations as it does for on balance sheet instruments. At December
31, 1995, off balance sheet commitments to extend credit amounted to
$94.3 million secured by $54.2 million in collateral value. The
amount of standby letters of credit at December 31, 1995, amounted
to $2.2 million secured by $0.2 million in cash.
At December 31, 1995 and 1994, the Company holds no off
balance sheet derivative financial instruments such as interest rate
swaps, forward contracts, futures, options on financial futures, or
interest rate caps and floors, and was not subject to the market
risk associated with such derivative financial instruments.
In the normal course of business there are various outstanding
legal proceedings. In the opinion of management, the aggregate
amount involved in such proceedings is not material to the financial
condition or results of operations of the Company.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from these estimates.
STOCKHOLDERS' EQUITY
The Company has a Dividend Reinvestment Plan for stockholders under
which no shares of common stock were issued in 1995 and 1,704 were
issued in 1994. There were 134,003 shares of common stock reserved
for future issuance under the plan at December 31, 1995.
Certain restrictions exist regarding the ability of the Bank
to transfer funds to the Company in the form of cash dividends. The
approval of the Comptroller of the Currency is required to pay
dividends in excess of the Bank's earnings retained in the current
year plus retained net profits for the preceding two years or when
the Bank fails to meet certain minimum regulatory capital standards.
At December 31, 1995, the Bank has the ability to pay $10.1 million
in dividends to the Company without obtaining prior regulatory
approval. Under the State of Delaware Business Corporation Law, the
Company may declare and pay dividends either out of accumulated net
retained earnings or capital surplus.
Under various regulatory guidelines, the Bank and the Company
are required to maintain certain minimum regulatory capital ratios
referred to as Tier 1 Capital Ratio, Total Risk-Based Capital Ratio,
and Tier 1 Leverage Ratio. The minimum Tier 1 Capital Ratio and
Total Risk-Based Capital Ratio regulatory guidelines required at
December 31, 1995 are 4% and 8%, respectively. The Tier 1 Leverage
Ratio regulatory guideline is 4%. The Bank and the Company are
substantially in excess of these guidelines at December 31, 1995.
The Company currently is authorized to issue 2.5 million
shares of preferred stock, no par value, $1.00 stated value. The
Board of Directors is authorized to fix the particular designations,
preferences, rights, qualifications, and restrictions for each
series of preferred stock issued. In November 1994, the Company
adopted a Stockholder Rights Plan (Plan) designed to ensure that any
potential acquiror of the Company negotiate with the Board of
Directors and that all Company stockholders are treated equitably in
the event of a takeover attempt. At that time, the Company paid a
dividend of one Preferred Share Purchase Right (Right) for each
outstanding share of common stock of the Company. Similar Rights are
attached to each share of the Company's common stock issued after
November 15, 1994, subject to adjustment. Under the Plan, the Rights
will not be exercisable until a person or group acquires beneficial
ownership of 20 percent or more of the Company's outstanding common
stock, begins a tender or exchange offer for 25 percent or more of
the Company's outstanding common stock, or an adverse person, as
21
<PAGE>
declared by the Board of Directors, acquires 10 percent or more of
the Company's outstanding common stock. Additionally, until the
occurrence of such an event, the Rights are not severable from the
Company's common stock and, therefore, the Rights will be
transferred upon the transfer of shares of the Company's common
stock. Upon the occurrence of such events, each Right entitles the
holder to purchase one one-hundredth of a share of Series R
Preferred Stock, no par value, and $1.00 stated value per share of
the Company at a price of $100.
The Plan also provides that, upon the occurrence of certain
specified events, the holders of Rights will be entitled to acquire
additional equity interests in the Company or in the acquiring
entity, such interests having a market value of two times the
Right's exercise price of $100. The Rights, which expire November
14, 2004, are redeemable in whole, but not in part, at the Company's
option prior to the time they are exercisable, for a price of $0.01
per Right.
EMPLOYEE BENEFIT PLANS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS FASB SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pension's," requires the accrual of nonpension benefits over the
employees' active service period, defined as the date of employment
up to the date of the employees' eligibility for such benefits. The
Company provides certain health care benefits for retired employees.
The health care plans are contributory for participating retirees
and also requires them to absorb deductibles and coinsurance with
contributions adjusted annually to reflect cost sharing provisions
and benefit limitations. Substantially all of the employees may
become eligible for these benefits if they reach normal retirement
age while working for the Company or its subsidiaries. The benefits
are provided by the participants choice of health maintenance
organizations with community rated premiums or self-insured plans
administered by insurance companies, whose premiums are based on the
claims paid during the year. The Company funds the cost of post
retirement health care as benefits are paid. As permitted by SFAS
106, the Company elected to recognize the transition obligation in
the statements of financial position and income on a delayed basis
over the plan participant's future service periods, estimated to be
twenty years.
The Company will use a health care trend rate in calculating
its postretirement benefit obligation of 10.0% for 1996, grading
down uniformly to 5.5% for 2005 and thereafter.
Based on the 1995 beginning of the year weighted average
discount rate of 8.75%, the effect of a one-percentage-point
increase in the assumed health care cost trend rates for each future
year on the aggregate of the service and interest cost components of
net periodic postretirement health care benefit cost and the
accumulated postretirement benefit obligation for health care
benefits would increase this amount for 1995 by 8%, to $0.4 million,
and by 10%, to $2.3 million, respectively.
<PAGE>
The net postretirement health benefits expense and funded
status are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------------
(in thousands)
Service cost $ 90 $ 102 $ 55
Interest cost 183 178 179
Actual return on plan assets - - -
Net amortization and deferral 102 105 105
Net, other - - (79)
- ---------------------------------------------------------------------------------
Net postretirement benefit cost $375 $ 385 $ 260
- ---------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- ---------------------------------------------------------------------------------
(in thousands)
Fair value of plan assets $ - $ -
- ---------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retired participants 1,185 1,090
Fully eligible participants 345 213
Other active participants 1,220 840
- ---------------------------------------------------------------------------------
Projected postretirement benefit obligation 2,750 2,143
- ---------------------------------------------------------------------------------
Deficit of plan assets to projected
postretirement benefit obligation (2,750) (2,143)
Unrecognized net actuarial (gain) loss 147 (297)
Unrecognized prior service cost - -
Unrecognized transition obligation 1,787 1,893
- ---------------------------------------------------------------------------------
Accrued post retirement benefit cost
included in other liabilities $ (816) $ (547)
- ---------------------------------------------------------------------------------
Weighted average discount rate 7.50% 8.75%
- ---------------------------------------------------------------------------------
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN The Company has a qualified Employee
Stock Ownership Plan for employees who meet certain age and service
requirements under which contributions are made by the Bank to a
separate trust for the benefit of participating employees.
Provisions for contributions to the Plan amounted to $0.5 million in
1995, $0.5 million in 1994, and $0.6 million in 1993.
PENSION PLAN The Company has a qualified, noncontributory pension
plan covering substantially all employees. Benefits paid from the
plan are based on age, years of service, compensation prior to
retirement, social security benefits, and are determined in
accordance with defined formulas. The Company's policy is to fund
the pension plan in accordance with ERISA standards.
22
<PAGE>
The net pension expense and the funded status of the plan are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------
(in thousands)
Service cost $ 384 $ 609 $ 496
Interest cost 843 736 732
Actual (return) loss on plan assets (3,380) 25 (763)
Net amortization and deferral 2,230 (1,189) (350)
- -----------------------------------------------------------------------------------------
Net pension cost $ 77 $ 181 $ 115
- -----------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- -----------------------------------------------------------------------------------------
(in thousands)
Plan assets, fair value of
primarily listed stocks and
fixed income securities $14,879 $12,139
- -----------------------------------------------------------------------------------------
Actuarial present value of benefits for
services rendered to date:
Accumulated benefit obligation,
including vested benefits of $10,837
in 1995 and $8,435 in 1994 10,898 8,532
Additional benefits based on estimated
future salary levels 1,386 833
- -----------------------------------------------------------------------------------------
Projected benefit obligation 12,284 9,365
- -----------------------------------------------------------------------------------------
Excess of plan assets over
projected benefit obligation 2,595 2,774
Unrecognized net actuarial gain (2,078) (1,886)
Unamortized prior service cost 1,151 1,053
Unamortized transition asset (1,522) (1,631)
- -----------------------------------------------------------------------------------------
Prepaid (accrued) pension cost included
in other assets (liabilities) $ 146 $ 310
- -----------------------------------------------------------------------------------------
Weighted average discount rate 7.50% 8.75%
Assumed increase in future salary 4.00% 4.00%
Expected rate of return on plan assets 9.00% 9.00%
- -----------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLANS The Company has two stock option plans (Plans).
At December 31, 1995, there are 593,942 shares of the Company's
common stock reserved for issuance under the plans. The 1993 Stock
Option Plan amended the prior Stock Option Plan, so that no further
options or stock appreciation rights (SARs) could be granted under
the earlier plan. Additionally, the amendment provided for the
dissolution of the in-tandem feature of previously granted options
and SARs, the cancellation of previously granted SARs, and granting
of replacement options in a ratio of seven-tenths of an option for
each SAR surrendered. During 1993 all of the in-tandem SARs
outstanding were exchanged for options on 93,773 shares. There was
no accrued SARs compensation expense for any period presented.
Under the terms of the Stock Option Plans, options were
granted to key employees to purchase shares of the Company's common
stock at a price equal to the fair market value of the common stock
on the date of the grant. Under the plans, options may be designated
as Incentive Stock Options or as Nonqualified Stock Options. Options
granted terminate eight or ten years from the date of the grant.
<PAGE>
<TABLE>
Changes in options and shares under options related to the
Plans are:
<CAPTION>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NO. OF NO. OF PRICE
SHARES SARS PER SHARE
- -----------------------------------------------------------------------------------------
Shares under option at:
DECEMBER 31, 1995 181,105 - $ 9.01-$16.10
December 31, 1994 373,450 - $ 9.01-$16.10
December 31, 1993 415,239 - $ 9.01-$14.80
Options granted and SARs exchanged:
1995 103,530 - $15.54-$15.61
1994 83,459 - $14.23-$16.10
1993 190,483 (147,763) $ 9.01-$14.80
Options and SARs exercised:
1995 203,005 - $ 9.01-$12.44
1994 93,799 - $ 9.01-$12.44
1993 70,777 8,312 $ 9.01-$12.44
Options and SARs lapsed:
1995 92,870 - $ 9.01-$16.10
1994 31,449 - $ 9.46-$16.10
1993 12,594 - $ 9.46-$12.44
- -----------------------------------------------------------------------------------------
</TABLE>
The Company has agreed to grant its former Chairman stock
options in connection with the discharge of severance obligations of
the Company and the Bank under the employment agreement with its
former Chairman. The agreement calls for the issuance of options
covering 129,988 and 27,232 shares with exercise prices of $15.42
and $16.10, respectively, and an expiration date of January 31,
1997. The number of shares under option and the option price per
share may be adjusted upon certain changes in capitalization, such
as stock dividends, stock splits and other occurrences. The Company
will file a registration statement relating to these option shares
which would be issued, upon payment of the exercise price, from
authorized, but unissued common stock, or shares held in the
treasury. These stock options do not serve to reduce the number
available under the previously mentioned Plans and are not included
in the table.
23
<PAGE>
<TABLE>
PARENT COMPANY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------
DECEMBER 31, (in thousands) 1995 1994
- ------------------------------------------------------------------------------------
ASSETS
Cash $ 699 $ 1,324
Due from subsidiary bank 99 67
Securities available for sale 4,354 7,041
Loans 20 54
Investment in subsidiary bank 105,766 93,434
Other assets 96 119
- ------------------------------------------------------------------------------------
TOTAL ASSETS $111,034 $102,039
- ------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 133 $ 161
Long-term debt 2,857 3,571
- ------------------------------------------------------------------------------------
Total liabilities 2,990 3,732
Stockholders' equity 108,044 98,307
- ------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $111,034 $102,039
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S>
CONDENSED STATEMENTS OF INCOME <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, (in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
Interest and dividend income $ 343 $ 291 $ 349
Gains on sale of securities available for sale 145 - 185
Current year income from subsidiary bank:
Distributed 4,250 5,000 5,000
Undistributed 5,198 1,975 3,674
- -------------------------------------------------------------------------------------------------------
9,936 7,266 9,208
Interest expense 369 447 527
Operating expense 304 617 270
- -------------------------------------------------------------------------------------------------------
Income before income taxes 9,263 6,202 8,411
Credit for income taxes (66) (306) (94)
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 9,329 $ 6,508 $ 8,505
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, (in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 9,329 $ 6,508 $ 8,505
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of premiums and accretion of
discounts on securities (27) 13 11
Realized gains on sale of securities
available for sale (145) - (185)
(Increase) decrease in other assets 23 (6) (13)
Decrease in other liabilities (28) (8) (2)
Undistributed net income of subsidiary bank (5,198) (1,975) (3,674)
Other 25 1 (43)
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,979 4,533 4,599
INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities - 1,000 1,000
Proceeds from sales of securities 7,953 - 4,896
Purchases (5,158) (1,001) (9,775)
Other, net 34 (49) -
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 2,829 (50) (3,879)
FINANCING ACTIVITIES:
Repayment of long-term debt (714) (714) (714)
Common stock issued, including treasury shares
reissued 4,362 2,893 2,395
Purchase of treasury stock (7,075) (3,555) (1,259)
Cash dividends and payment for fractional shares (3,974) (3,605) (3,314)
- ------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,401) (4,981) (2,892)
- ------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (593) (498) (2,172)
Cash and cash equivalents at beginning of year 1,391 1,889 4,061
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 798 $ 1,391 $ 1,889
- ------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
FAIR VALUES OF FINANCIAL INSTRUMENTS
A financial instrument is defined as cash, evidence of an ownership
interest in an entity, or a contract that imposes the obligation to
deliver, receive, or exchange cash or other financial instruments
between willing entities on potentially favorable or unfavorable
terms. There are no off balance sheet derivative financial
instruments at December 31, 1995 and 1994. The following methods and
assumptions were used to estimate the fair value of each class of
financial instruments.
CASH AND DUE FROM BANKS AND FEDERAL FUNDS SOLD For these short term
instruments, carrying value approximates fair value.
SECURITIES Fair values for securities are based on quoted market
prices or dealer quotes, where available. Where quoted market prices
are not available, fair values are based on quoted market prices of
comparable instruments.
LOANS For variable rate loans that reprice frequently and have no
significant credit risk, fair values are based on carrying values.
The fair values for fixed rate loans are estimated through
discounted cash flow analyses using interest rates currently being
offered for loans with similar terms and credit quality. The fair
value of loans available for sale on an aggregate basis, are based
on quoted market prices. Nonperforming loans are valued based upon
recent loss history for similar loans.
ACCRUED INTEREST RECEIVABLE AND PAYABLE For these short-term
instruments, carrying value approximates fair value.
DEPOSITS The fair values disclosed for savings, money market, and
noninterest bearing accounts are, by definition, equal to their
carrying values at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated using a discounted
cash flow analysis that applies interest rates currently offered on
certificates to a schedule of aggregated expected monthly maturities
on time deposits.
SHORT-TERM BORROWINGS For short-term borrowings, carrying value
approximates fair value.
LONG-TERM DEBT The fair value of long-term debt has been estimated
using discounted cash flow analyses that apply interest rates
currently being offered for notes with similar terms.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair
value of commitments to extend credit and standby letters of credit
are estimated using fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the counterparts.
Carrying amounts which are comprised of the unamortized fee income
are immaterial.
<PAGE>
<TABLE>
ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
(in thousands) AMOUNT VALUE Amount Value
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and due from banks $ 44,379 $ 44,379 $ 43,410 $ 43,410
Loans available for sale 6,089 6,089 10,921 10,921
Securities available for sale 393,536 393,536 108,477 108,477
Securities held to maturity 40,311 40,306 272,466 261,913
Loans
Commercial, financial and agricultural 247,320 247,136 215,380 208,650
Real estate mortgage 120,972 121,257 129,275 126,588
Consumer 220,093 221,884 230,063 227,933
- ---------------------------------------------------------------------------------------------------------------
Total loans 588,385 590,277 574,718 563,171
Less: allowance for loan losses 9,120 - 9,026 -
- ---------------------------------------------------------------------------------------------------------------
Net loans 579,265 590,277 565,692 563,171
Accrued interest receivable 8,967 8,967 9,417 9,417
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL LIABILITIES
Deposits
Interest bearing:
Savings and money market 352,221 352,221 369,456 369,456
Certificates of deposit 389,584 397,845 299,551 298,054
Noninterest bearing 131,227 131,227 122,436 122,436
- ---------------------------------------------------------------------------------------------------------------
Total deposits 873,032 881,293 791,443 789,946
Short-term borrowings 115,945 115,945 140,587 140,587
Long-term debt 3,012 3,325 8,734 8,841
Accrued interest payable $ 2,430 $ 2,430 $ 1,754 $ 1,754
- ---------------------------------------------------------------------------------------------------------------
<FN>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
</FN>
</TABLE>
25
<PAGE>
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(in thousands,except per share data) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
Interest and fee income $ 77,400 $ 70,438 $ 66,957 $ 69,208 $ 78,628
Interest expense 34,840 25,742 23,200 27,194 38,294
Net interest income 42,560 44,696 43,757 42,014 40,334
Provision for loan losses 1,553 3,071 2,281 2,362 3,282
Noninterest income excluding
securities gains 6,957 6,484 8,108 8,895 7,311
Securities gains 145 555 1,573 1,108 475
Noninterest expense 33,024 38,674 37,298 36,093 34,531
Income before income taxes 15,085 9,990 13,859 13,562 10,307
Net income 9,329 6,508 8,505 8,043 7,179
- -----------------------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net income $ 1.11 $ 0.76 $ 1.00 $ 0.97 $ 0.88
Cash dividends declared $ 0.473 $ 0.427 $ 0.394 $ 0.358 $ 0.339
Stock dividends distributed 5% 5% 5% 5% 5%
Book value at year end $ 13.06 $ 11.68 $ 11.98 $ 11.26 $ 10.65
Tangible book value $ 11.66 $ 10.51 $ 10.43 $ 9.18 $ 8.03
Average common shares
outstanding 8,381 8,513 8,474 8,316 8,195
- -----------------------------------------------------------------------------------------------------------
AT DECEMBER 31
Assets available for sale $ 399,625 $ 119,398 $219,690 $ 39,590 $ -
Securities held to maturity 40,311 272,466 108,077 215,515 207,991
Loans 588,385 574,718 559,860 539,283 527,755
Allowance for loan losses 9,120 9,026 8,652 9,245 9,845
Total assets 1,106,266 1,044,557 953,907 868,616 838,884
Deposits 873,032 791,443 807,228 740,749 722,820
Short-term borrowings 115,945 140,587 26,701 16,418 16,350
Long-term debt 3,012 8,734 14,457 10,320 5,350
Total stockholders' equity 108,044 98,307 101,108 94,012 87,826
- -----------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 0.90% 0.64% 0.93% 0.94% 0.85%
Return on average equity 9.18% 6.53% 8.79% 8.89% 8.45%
Average equity to average assets 9.75% 9.88% 10.63% 10.62% 10.07%
Net interest margin 4.43% 4.81% 5.26% 5.52% 5.64%
Cash dividend per share payout 42.61% 56.13% 39.10% 36.61% 38.58%
Tier 1 leverage ratio
(Regulatory guideline 4%) 8.80% 9.05% 9.24% 9.01% 7.92%
Tier 1 risk-based capital ratio
(Regulatory guideline 4%) 15.21% 16.09% 15.40% 15.30% 14.12%
Total risk-based capital ratio
(Regulatory guideline 8%) 16.46% 17.35% 16.66% 16.61% 14.12%
- -----------------------------------------------------------------------------------------------------------
<FN>
*ALL PER SHARE DATA HAS BEEN RESTATED TO GIVE RETROACTIVE EFFECT TO STOCK DIVIDENDS AND
SPLITS.
</FN>
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PERFORMANCE OVERVIEW
In December 1995, NBT distributed a 5% stock dividend for the
thirty-sixth consecutive year. Throughout this discussion, amounts
per common share and common shares outstanding have been
retroactively adjusted to reflect the stock dividends.
NBT achieved record earnings for the year ended December 31,
1995. The major contributing factor was the improvement in operating
expenses. Major contributing factors were the reduction in FDIC
insurance and the decline in the amortization of intangibles. The
Company also achieved savings through its cost containment efforts
over the past two years. A decline in net interest income partially
offset these savings.
As depicted in the table, Five Year Summary of Selected
Financial Data, return on average assets and equity increased for
the year ended December 31, 1995, as compared to the year ended
December 31, 1994, as a result of the improvement in net income.
Return on average assets and equity for the year ended December 31,
1994 were depressed due to reduced net income. Return on average
assets for the year ended December 31, 1995, was less than that for
the year ended December 31, 1993, as increased average assets for
1995 offset the improvement in net income. Return on average equity
for the year ended December 31, 1995, exceeded that for the year
ended December 31, 1993, due to the improvement in net income.
On December 16, 1995, NBT Bank, National Association acquired
three branches from Community Bank Systems Inc. (CBSI). The three
branches strengthened the Bank's presence in two key markets,
Norwich and Utica/New Hartford. The Bank's New Hartford branch was
consolidated into the Sangertown branch acquired from CBSI, while
the CBSI Norwich branch was consolidated into the Bank's main office
located two blocks away in downtown Norwich. The downtown Utica
office acquired from CBSI continues to operate unaffected, thereby
adding a location to the branch system. The branches will strive to
follow the Bank's strong community reinvestment focus and follow the
practice of reinvesting funds, generated by the communities they
serve, within these same communities.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income is the difference between interest and fees
earned on loans, securities and federal funds sold, and the interest
paid on deposits and borrowed funds. In the following discussion,
interest income is presented on a fully taxable equivalent (FTE)
basis applying the statutory Federal income tax rate of 35% for 1995
through 1993, and 34% for 1992 and 1991. The most significant impact
on the Company's net interest income between periods is derived from
the interaction of changes in the volume of and rates earned on
interest earning assets and paid on interest bearing liabilities.
The volume of earning assets, securities and loans, compared to the
volume of interest bearing liabilities represented by deposits and
borrowings, combined with interest rate spread, produces the changes
in the net interest income between periods. Also effecting net
interest income is the repricing, due to maturities, repayments and
contractual repricing terms, of earning assets and interest bearing
liabilities and asset quality.
FTE net interest income and net interest margin, FTE net
interest income as a percentage of average earnings assets,
decreased for 1995 as depicted in the table, Average Balances, Net
Interest Income, Yields and Rates. A strong net interest margin is
critical to the ability to cover operating expenses and produce an
acceptable return on assets. The table, Changes in Taxable
Equivalent Net Interest Income -Rate/Volume Analysis, presents the
relative contribution of changes in average interest rates and
average volume of interest earning assets and interest bearing
liabilities on FTE net interest income for 1995 compared with 1994,
and 1994 compared with 1993. Changes in interest income and expense
arising from the combination of rate and volume variances, which
cannot be segregated, are allocated proportionally to rate and
volume based on their relative absolute magnitudes.
For the comparative period 1995 to 1994, the decline in FTE
net interest income and net interest margin can be attributed to
increased rates paid on interest bearing liabilities. The rate of
increase in the cost of funds exceeded the rate of increase in the
yield on funds further compressing net interest margin. The change
in net interest margin reflects the sustained lower interest rate
environment the U.S. economy has experienced starting in 1991. The
increase in rates in 1994 and 1995 has not offset this decline as
during this extended declining and lower interest rate period,
various assets matured or repriced. Loans and security purchases
made at lower rates have not fully matured or repriced. The
Company's sensitivity to asset maturity or repricing is depicted in
the tables, Remaining maturities of securities at December 31, 1995
and Maturities and Sensitivities of Loans to Changes in Interest
Rates. Additionally, increased competitiveness in the financial
services industry affected the pricing of loans.
27
<PAGE>
[FOLLOWING IS A TABULAR PRESENTATION OF DATA POINTS FOR THE TWO PIE
CHARTS WHICH APPEAR HERE IN THE PAPER COPY]
<TABLE>
1995 AVERAGE EARNING ASSETS MIX
<CAPTION>
<S> <C>
Category Percent of Total
- ------------------------------------------------------------
Loans 59.5%
Securities available for sale 15.3%
Securities held to maturity 25.2%
1995 FUNDING MIX OF AVERAGE ASSETS
<CAPTION>
<S> <C>
Category Percent of Total
- ------------------------------------------------------------
Interest bearing deposits 77.5%
Noninterest bearing deposits 13.3%
Borrowings 9.2%
</TABLE>
The Company manages its exposure to economic loss from
fluctuations in interest rates (interest rate risk) through an
active program of asset-liability management within guidelines
established by its Asset-Liability Management Committee (ALCO). The
ALCO has the responsibility for approving the asset-liability
strategy of the Company, approving changes in the balance sheet that
would result from strategic decisions, approving strategies to
improve balance sheet positioning and earnings, and reviewing the
interest rate sensitivity position of the Company. Through its
asset-liability management process, the ALCO monitors the rate
sensitivity of the balance sheet closely during the year.
FTE net interest income achieved a record level for 1994 which
can be attributed to the growth in the volume of earning assets. In
1994 it was determined that the balance sheet had excess asset
sensitivity which would have a negative effect on the net interest
margin as rates declined. During 1994, the ALCO undertook several
strategic actions to improve net interest income, and reduce the
level of sensitivity, employing strategies which, because of the
rate environment and portfolio maturities of higher yielding funds
purchased previously, would not necessarily improve net interest
margin. Remaining well within its established liquidity guidelines,
the Bank utilized $60 million of its access to lower cost funds to
purchase securities to be held to maturity yielding a higher rate
than its incremental borrowing rate and improving net interest
income. This leveraging of the balance sheet had a positive impact
on net interest income.
To reduce the effects of declining interest rates on FTE net
interest income and net interest margin for 1993 through 1991
several strategic transactions were carried out. During 1992 and
1993, shorter term U.S. Treasury securities were sold and reinvested
in longer term government agency mortgage-backed securities at then
current lower yields. This strategy was implemented to sustain the
continued yield stream at levels anticipated to be greater than
those in effect when the sold securities would have matured.
Interest rates paid on deposits from 1993 through 1991 were adjusted
downward commensurate with the general overall interest rate
environment to better match the cost of funds with their potential
reinvestment rates. The combination of adjusting deposit rates and
changing the composition and extending the maturity in the
investment portfolio allowed the Company to maintain a net interest
margin of approximately 5.26% for 1993, compared to 5.52% for 1992
and 5.64% for 1991.
<PAGE>
<TABLE>
CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME - RATE/VOLUME ANALYSIS
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) Increase (Decrease)
1995 OVER 1994 1994 over 1993
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
(in thousands) VOLUME RATE TOTAL Volume Rate Total
- ----------------------------------------------------------------------------------------------------------
Interest bearing deposits $ 13 $ - $ 13 $ 2 $ 4 $ 6
Federal funds sold 7 14 21 (12) - (12)
Short-term securities
available for sale (39) 41 2 (259) 54 (205)
Securities available for sale 760 568 1,328 2,629 222 2,851
Loans available for sale (274) 148 (126) 190 139 329
Securities held to maturity:
Taxable 1,007 269 1,276 2,389 (734) 1,655
Tax exempt (43) 364 321 270 (135) 135
Loans 871 3,374 4,245 1,312 (2,546) (1,234)
- ----------------------------------------------------------------------------------------------------------
Total interest income 2,302 4,778 7,080 6,521 (2,996) 3,525
- ----------------------------------------------------------------------------------------------------------
Money market deposit accounts (1,104) 459 (645) (276) (436) (712)
NOW accounts (54) 229 175 91 (254) (163)
Savings accounts (646) 493 (153) 256 (513) (257)
Certificates of deposit 4,220 4,603 8,823 1,235 (358) 877
Short-term borrowings 370 979 1,349 2,405 337 2,742
Long-term debt (659) 208 (451) 187 (132) 55
- ----------------------------------------------------------------------------------------------------------
Total interest expense 2,127 6,971 9,098 3,898 (1,356) 2,542
- ----------------------------------------------------------------------------------------------------------
CHANGE IN FTE NET
INTEREST INCOME $ 175 $(2,193) $(2,018) $2,623 $(1,640) $ 983
- ----------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses (allowance) has been established to
provide for the estimated potential loss related to the collection
of the Bank's loan portfolio. The allowance is increased by the
provision for loan losses (provision) charged to operations and is
reduced by net charge-offs, the amount of loans written off as
uncollectible less recoveries of loans previously written off.
Charge-offs are made when the collectiblity of loan principal within
a reasonable time is unlikely. Any recoveries of previously charged
off loans are credited directly to the allowance.
The allowance is maintained at a level considered adequate to
provide for loss exposure based on management's estimate of
potential future losses considering an evaluation of portfolio risk,
prevailing and anticipated economic factors, and past loss
experience. Management determines the provision and allowance based
on a number of factors including a comprehensive in-house loan
review program conducted throughout the year. The loan portfolio is
continually evaluated in order to identify potential problem loans,
credit concentration, and other risk factors such as current and
projected economic conditions locally and nationally. The levels of
risk for which allowances are established are based on estimates of
probable losses on larger specifically identified loans, and on loan
categories analyzed in total where, based on past experience, risk
factors can be assessed. Generally economic trends can greatly
affect loan losses and there are no assurances that further changes
to the allowance may not be significant in relation to the amount
provided during a particular period. Management does, however,
consider the allowance to be adequate for the reporting periods
based on evaluation and analysis of the loan portfolio.
Accompanying tables reflect the five years history of net
charge-offs and the allocation of the allowance by loan category.
Net charge-offs, both as dollar amount and as a percentage of
average loans outstanding, have decreased due to stable asset
quality. This stability has enabled management, while increasing the
dollar level of the allowance, to lower the percentage relationship
of the allowance to various asset categories as depicted in the
tables. The allowance has been allocated based on identified problem
credits or categorical trends. The unallocated portion is available
for further unforeseen or unexpected losses or unidentified problem
credits. Management will continue to target and maintain a minimum
allowance equal to the allocated requirement plus an unallocated
portion.
<PAGE>
<TABLE>
ALLOWANCE FOR LOAN LOSSES
<CAPTION>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
Balance at January 1 $9,026 $8,652 $9,245 $9,845 $10,483
Loans charged off:
Real estate mortgages 112 154 43 34 170
Commercial
and agricultural 967 1,409 1,222 1,742 1,968
Consumer 1,182 2,159 2,395 2,107 2,307
- --------------------------------------------------------------------------------------------------
Total loans charged off 2,261 3,722 3,660 3,883 4,445
Recoveries:
Real estate mortgages - - 2 5 26
Commercial
and agricultural 193 291 267 355 81
Consumer 609 734 517 561 418
- --------------------------------------------------------------------------------------------------
Total recoveries 802 1,025 786 921 525
- --------------------------------------------------------------------------------------------------
Net loans charged off 1,459 2,697 2,874 2,962 3,920
Provision for loan losses 1,553 3,071 2,281 2,362 3,282
- --------------------------------------------------------------------------------------------------
Balance at December 31 $9,120 $9,026 $8,652 $9,245 $ 9,845
- --------------------------------------------------------------------------------------------------
Allowance for loan losses to
loans outstanding at end of year 1.55% 1.57% 1.55% 1.71% 1.87%
Allowance for loan losses to
nonperforming loans 189% 195% 207% 243% 282%
Nonperforming loans to total loans 0.82% 0.81% 0.74% 0.71% 0.66%
Nonperforming assets to total assets 0.62% 0.52% 0.48% 0.53% 0.52%
Net charge-offs to average loans
outstanding 0.25% 0.48% 0.52% 0.55% 0.74%
- --------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CATEGORY Category Category Category Category
PERCENT Percent Percent Percent Percent
(in thousands) ALLOWANCE OF LOANS Allowance of Loans Allowance of Loans Allowance of Loans Allowance of Loans
- ---------------------------------------------------------------------------------------------------------------------------------
Real estate
mortgages $ 412 20.6% $ 630 22.5% $ 206 24.3% $ 394 29.2% $ 365 16.7%
Commercial
and agricultural 4,250 42.0% 3,726 37.5% 3,699 36.9% 2,788 30.9% 3,416 48.5%
Consumer 2,048 37.4% 3,538 40.0% 3,767 38.8% 3,887 39.9% 3,829 34.8%
Unallocated 2,410 - 1,132 - 980 - 2,176 - 2,235 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total $9,120 100.0% $9,026 100.0% $8,652 100.0% $9,245 100.0% $9,845 100.0%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET QUALITY
NBT has maintained its focus on sound credit quality in the loan
portfolio, reflecting conservative lending practices and policies.
The measurement of asset quality is the responsibility of the
Company's loan review function which also determines the adequacy of
the allowance. A seven category loan rating system is used to rate
substantially all loans based on risks which include internal loan
classifications, historical analysis of prior period charge-offs,
and evaluation of expected losses on internally classified credits.
Loan ratings are continually reviewed to determine their propriety.
The banking and credit function is responsible for lending credit
policy, systems and procedures, collections, recovery, and workout
policies and systems.
The seven rating grade classifications segregate the portfolio
assets into three major components: pass, special mention, and
classified. The pass category represents a level of credit quality
which contains no well defined deficiency or weakness and includes
three grades: superior, satisfactory, and watch. The special mention
category, as well as grade, does not contain current exposure to a
sufficient degree of risk to warrant an adverse classification, but
does possess a correctable deficiency or potential weakness
deserving management's close attention. The classified category
includes three grades: substandard, doubtful, and loss. Substandard
assets have a well defined weakness and the potential for some loss
if the weakness is not corrected. Doubtful assets have the added
characteristic that collection in full is highly questionable. The
loss grade represents assets which are considered uncollectible and
of such little value that continuance as an asset, without the
establishment of a specific allowance, is not warranted. Classified
and special mention loans, not on non-accrual status, totalled $27.6
million, $26.3 million, $23.3 million, and $21.1 million, 4.7%,
4.6%, 4.2% and 3.9% of outstanding loans, at December 31, 1995,
1994, 1993 and 1992, respectively.
A significant portion of the outstanding balances are secured
with various forms of collateral. In this regard, management has
determined that there are no material adverse trends or material
potential losses not already considered in the allowance
calculation, nor indications of trends or events that would have a
material effect on the Company's operations, capital or liquidity.
The Company does not have any material loans classified as doubtful
or loss and the loan portfolio does not contain any highly leveraged
or foreign loans. As of December 31, 1995, there were no
concentrations of risks in the Bank's portfolio by type or industry.
Commercial loans to farmers constituted approximately 7% of total
loans outstanding at that date; this portion of the portfolio
continues to perform well. A substantial portion of the Company's
loans are secured by real estate located in central and northern New
York State. Accordingly, the ultimate collectibility of a
substantial portion of the Company's portfolio is susceptible to
changes in real estate market conditions in those areas.
Nonperforming is a term used to describe assets on which
revenue recognition has been discontinued or is restricted. Non-
accrual, impaired and restructured loans not in compliance with
their modified terms, as well as other real estate owned, are
considered nonperforming assets. Restructured loans occur when a
borrower experiences financial difficulties and the loan is
renegotiated with terms significantly less favorable to the Bank
than the original loan agreement. Upon restructuring, the loan would
be placed on non-accrual status until the collectiblity of both
interest and principal appears assured. As presented in the table,
Nonperforming Assets and Risk Elements, increased OREO for both
commercial and residential real estate foreclosures, which is
carried at the lower of cost or fair value, was the primary reason
for increased amounts of nonperforming assets at December 31, 1995.
The level of non-accrual loans increased during the periods
presented due to the sustained period of sluggish economic
conditions in central New York. Increased collection efforts have
led to the decline over the periods presented in loans 90 days or
more past due and still accruing. The collateral value of real
estate loans carried in this category supports continued interest
accrual.
30
<PAGE>
<TABLE>
NONPERFORMING ASSETS AND RISK ELEMENTS
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------
(in thousands)
Impaired commercial and
agricultural loans $1,367 $ - $ - $ - $ -
- ---------------------------------------------------------------------------------------------
Other non-accrual loans:
Real estate mortgages 2,910 2,950 365 1,774 2,561
Commercial
and agricultural - 1,415 3,693 1,578 716
Consumer 540 274 112 450 214
- ---------------------------------------------------------------------------------------------
Total non-accrual loans 3,450 4,639 4,170 3,802 3,491
- ---------------------------------------------------------------------------------------------
Other real estate owned 2,000 840 430 804 826
- ---------------------------------------------------------------------------------------------
Total nonperforming
assets 6,817 5,479 4,600 4,606 4,317
- ---------------------------------------------------------------------------------------------
Loans 90 days or more past
due and still accruing:
Real estate mortgages 910 523 1,085 1,881 1,430
Commercial
and agricultural 126 - 410 - 397
Consumer 296 348 1,690 1,074 958
- ---------------------------------------------------------------------------------------------
Total 1,332 871 3,185 2,955 2,785
- ---------------------------------------------------------------------------------------------
Restructured loans, in compliance
with modified terms: 142 - - - -
- ---------------------------------------------------------------------------------------------
Total assets containing
risk elements $8,291 $6,350 $7,785 $7,561 $7,102
- ---------------------------------------------------------------------------------------------
</TABLE>
Interest income not recognized on non-accrual and impaired
loans during each period does not include the effect of loans
charged off during the period.
<TABLE>
NON-ACCRUAL AND IMPAIRED LOANS INTEREST INCOME
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------
(in thousands)
Income that would have been accrued
at original contract rates $765 $465 $284 $276 $326
Amount recognized as income 344 216 105 96 33
- ------------------------------------------------------------------------------------
Interest income not accrued $421 $249 $179 $180 $293
- ------------------------------------------------------------------------------------
</TABLE>
Charge-offs flowing through the allowance for loan losses depicted
in the table, Changes in Non-accrual and Impaired Loans, represent
gross charge-offs taken against non-accrual loans; excluded are
charge-offs taken against accruing loans and interest reversals.
When real estate collateralizing a loan is foreclosed, the
difference between the fair value of the collateral property,
reflected as additions in the table, Changes in OREO, and the book
value of the loan, if any, is charged off through the allowance for
loan losses. Any subsequent write-downs or write-offs due to a
decline in the fair value of the OREO property after foreclosure is
reflected in noninterest expense.
<PAGE>
<TABLE>
CHANGES IN NON-ACCRUAL AND IMPAIRED LOANS
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------
Balance at January 1 $ 4,639 $ 4,170
Loans placed on non-accrual 4,313 4,368
Charge-offs (1,175) (1,738)
Payments (1,864) (1,059)
Transfers to OREO (1,096) (804)
Loans returned to accrual - (298)
- ----------------------------------------------------------------
Balance at December 31 $ 4,817 $ 4,639
- ----------------------------------------------------------------
</TABLE>
<TABLE>
CHANGES IN OREO
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------
(in thousands) 1995 1994
- -------------------------------------------------------------
Balance at January 1 $ 840 $ 430
Additions 1,622 920
Sales (339) (288)
Charge-offs and write-downs (123) (222)
- -------------------------------------------------------------
Balance at December 31 $2,000 $ 840
- -------------------------------------------------------------
</TABLE>
NONINTEREST INCOME
Noninterest income increased modestly in 1995 compared to 1994
primarily due to increased other income partially offset by reduced
securities gains. Reflected in 1994 other income is a $0.5 million
charge, reducing the amount, to record real estate loans available
for sale at their then current market value; this loss was realized
in 1995. For all periods presented trust income fell due to a
decline in fees from estates and personal agency accounts.
Additionally, securities gains realized declined as values and
security market conditions fluctuated with changing interest rates.
All sales of securities were made from the available for sale
category.
Noninterest income decreased in 1994 compared to 1993 due to
several factors. As credit card processing agents were changed with
a different fee structure, merchant credit receipt processing fees
included in other income decreased $0.5 million in 1994; however,
expenses included in other operating expense related to the
processing declined as well by $0.4 million, resulting in a net
decrease in merchant credit receipt processing income of $0.1
million. Also affecting the change in other income is the previously
discussed $0.5 million charge for real estate loans available for
sale.
31
<PAGE>
NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS
<TABLE>
NONINTEREST EXPENSE
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------
(in thousands)
Salaries and wages $12,428 $12,586 $12,838
Employee benefits 3,881 3,571 3,364
Net occupancy expense 2,361 2,295 2,102
Equipment expense 1,694 2,033 2,528
FDIC insurance 941 1,829 1,706
Legal, audit, and outside services 3,638 4,065 3,179
Loan collection and other loan related expenses 1,471 1,641 2,029
Amortization of intangible assets 1,271 3,222 4,243
Other operating expense 5,339 5,168 5,309
Restructuring expense - 2,264 -
- --------------------------------------------------------------------------------------------------
Total noninterest expense $33,024 $38,674 $37,298
- --------------------------------------------------------------------------------------------------
</TABLE>
Noninterest expense declined for 1995 compared to 1994 primarily due
to reduced FDIC insurance and amortization of intangible assets, as
well as the nonrecurrance of the restructuring recognized in 1994
expense. Intangible amortization expense declined throughout 1995
and 1994, as some components of intangibles arising from the
acquisition of four commercial banks in 1989 reached the point at
which they were fully amortized. A comparison of the intangible
amortization expense can be seen in the Notes to Consolidated
Financial Statements, such amortization expense is anticipated to
increase for 1996 due to the branch acquisition indicated therein.
During 1995 the FDIC Bank Insurance Fund (BIF) attained
congressionally mandated reserve goals, established during the
deposit crisis that began in the prior decade. In 1995 the Bank
received a refund of premiums it had paid in excess of the lower
rates, from $0.23 to $0.04 per $100 of insured deposits, that became
effective June 1995, resulting in the reduced FDIC expense for 1995.
Recent announcements by the FDIC indicate the BIF has exceeded its
statutory capitalization requirement and the FDIC has voted to
further drop its premium for well capitalized banks to the legal
minimum of $2,000 per annum for the first six months of 1996. This
flat rate will apply to the Bank as it is considered a well
capitalized institution.
Most remaining categories of expenses have declined in 1995
compared to 1994 due to restructuring implemented mid-year 1994 and
ongoing expense control efforts. Other operating expense increased
as advertising expense increased $0.3 million as a result of ad
campaigns while occupancy expense increased as facilities were
renovated and depreciation increased. Employee benefit expense
increased as performance plans reflect the effect of the Company's
improved 1995 performance.
Noninterest expense increased for 1994 compared to 1993
primarily due to restructuring charges contributing to increased
expense. The restructuring favorably impacted several expense
categories. Salaries and wages decreased due to the restructuring.
Full-time equivalent employees declined throughout 1994, and the
December 1994, closing level of full-time equivalent employees was
541, the lowest level since 1989. Employee benefits expense
increased due to increased medical plan costs.
Occupancy expense increased for 1994, compared to 1993, due to
increased costs for utilities, property taxes and depreciation
related to the finishing of available space and its placement in
service during the year at the Norwich headquarters location. These
increases affecting occupancy expense were partially offset by
reduced depreciation expense on branch facilities being restructured
as they were written down to fair market value upon managements'
commitment to the restructuring plan. Equipment expense fell for
1994, compared to 1993, as data processing functions were outsourced
mid-year, equipment was disposed of and depreciation ceased; and by
reduced depreciation expense on equipment at branch locations being
restructured as they were written down to fair market value. As a
result of the outsourcing of data processing outside service costs
increased. The 1994 outsourcing of trust tax return preparation, and
increased legal fees generated by non-recoverable trust legal costs
also contributed to the increase in outside service costs. Partially
offsetting these increased costs was decreased merchant credit card
processing costs as discussed previously. FDIC insurance expense
increased in 1994, as deposits acquired in the later portion of 1993
were insured for the full year in 1994.
<PAGE>
<TABLE>
EXPENSE PRODUCTIVITY MEASUREMENTS
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------
Expense ratio 2.51% 2.96% 3.21%
Efficiency ratio 65.92% 70.22% 71.05%
Average full-time equivalent employees 542 576 605
Period end full-time equivalent employees 545 541 616
Average assets per average full-time
equivalent employee (millions) $ 1.9 $ 1.8 $ 1.5
- --------------------------------------------------------------------------------------------
</TABLE>
The expense ratio is computed as total noninterest expense
(excluding nonrecurring charges) less noninterest income (excluding
net securities gains and losses and nonrecurring income) divided by
total average assets. This ratio indicates the cost of supporting
the asset base and a decrease indicates improvement as expense
changes are less than proportional to the asset base. The efficiency
ratio is computed as total noninterest expense (excluding
nonrecurring charges) divided by FTE net interest income plus
noninterest income (excluding net securities gains and losses and
32
<PAGE>
nonrecurring income). The efficiency ratio indicates the cost of
income production, a decrease indicates improvement as expense
changes are less than proportional to income changes. Average assets
per average full-time equivalent employee measures the staffing
level to support the asset base; therefore, an increased ratio
reflects improvement indicating increased assets managed by each
employee. Since salaries, wages, and benefits, are the second
largest expense after interest expense, it is critical to monitor
this measurement of productivity. As can be seen in the tables,
Noninterest Expense and Productivity Measurements, expense
productivity measurements have improved for all periods presented as
a result of asset growth and increased net interest income or
reduced noninterest expenses.
INCOME TAXES
The effective tax rate, income taxes as a percentage of income
before taxes, was 38.2%, 34.9%, and 38.6% for 1995, 1994, and 1993,
respectively. The 1995 provision for income taxes increased from
1994 primarily due to increased net income before taxes. The 1994
provision for income taxes decreased from 1993 primarily due to
decreased net income before taxes. During the first quarter of 1993,
the Company adopted the provisions of SFAS 109; the adoption of this
standard did not have a material effect on the Company's financial
condition or results of operations.
LOANS AND LOANS AVAILABLE FOR SALE
Modest loan growth continued into 1995 with year end volume
reflecting an increase of $14 million, 2%, over the December 31,
1994 balance. This follows $15 million, 3%, loan growth in 1994.
The Northeast U.S. economy remains stagnant, and the soft loan
demand in the Company's rural New York market mirrors the region.
The 1993 entry into two new major markets, Binghamton, NY and
Plattsburgh, NY and increased emphasis in Utica, NY, contributed to
commercial loan growth in both 1995 and 1994. Dealer generated
consumer loans in 1994 expanded that portion of the portfolio.
Real estate loans have decreased during 1995 as the volume of
new mortgage origination and mortgage refinancing diminished in
response to interest rate increases. The historically low interest
rate environment during most of 1994 provided an obstacle to
increasing real estate loan balances because of the Bank's practice
of originating for portfolio only adjustable rate loans. Fixed rate
loans originated were sold in order to minimize interest rate risk,
and fixed rate loans are typically more popular to borrowers during
periods of low interest rates. In 1993, the Company increased
activities in originating fixed rate mortgage loans for sale in the
secondary market. In response to the decreased market demand for
mortgage loans in 1994, the Company reduced the level of its
activities in this product.
During 1995 and 1994, $10 million and $9 million in mortgage
loans were sold with servicing retained. There was no gain or loss
recognized related to sales of mortgages originated in 1995. A $0.4
million loss was realized upon sales of mortgage loans in 1995, this
loss was recognized by the Company in 1994 as discussed previously.
At December 31, 1995, loans available for sale of $6 million include
$1 million in real estate mortgage loans and $5 million in higher
education loans. The Company's cost of loans available for sale
matches their aggregate estimated fair market value at December 31,
1995.
<PAGE>
<TABLE>
COMPOSITION OF LOAN PORTFOLIO
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------
(in thousands)
Real estate mortgages $107,611 $125,385 $132,941 $156,457 $146,726
Commercial real estate
mortgages 108,902 71,631 88,487 82,509 78,632
Real estate construction
and development 13,361 3,890 3,162 7,067 7,015
Commercial and
agricultural 138,391 143,632 118,143 87,103 87,690
Consumer loans 185,276 201,359 187,179 175,214 183,482
Home equity loans 34,817 28,704 29,741 30,636 23,823
Lease financing 27 117 207 297 387
- ----------------------------------------------------------------------------------------------
Total loans $588,385 $574,718 $559,860 $539,283 $527,755
- ----------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
Shown in the table, Maturities and Sensitivities of Loans to
Changes in Interest Rates, are the maturities of the loan portfolio
and the sensitivity of loans to interest rate fluctuations at
December 31, 1995. Maturities are based on the earlier of
contractual maturities or rate repricing.
<TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
AFTER ONE
YEAR BUT
WITHIN AFTER
REMAINING MATURITY AT WITHIN FIVE FIVE
DECEMBER 31, 1995 ONE YEAR YEARS YEARS TOTAL
- ---------------------------------------------------------------------------------------
(in thousands)
Floating/adjustable rate:
Commercial and agricultural $215,159 $ 765 $ - $215,924
Lease financing 27 - - 27
Real estate mortgages 99,286 2,599 - 101,885
Consumer 32,932 - - 32,932
- ---------------------------------------------------------------------------------------
Total floating rate loans 347,404 3,364 - 350,768
Fixed Rate:
Commercial and agricultural 7,101 12,693 11,575 31,369
Real estate mortgages 2,144 5,973 10,970 19,087
Consumer 63,207 115,334 8,620 187,161
- ---------------------------------------------------------------------------------------
Total fixed rate loans 72,452 134,000 31,165 237,617
- ---------------------------------------------------------------------------------------
Total loans $419,856 $137,364 $31,165 $588,385
- ---------------------------------------------------------------------------------------
</TABLE>
SECURITIES
The total balance of securities available for sale and held to
maturity for 1995, $434 million, increased $53 million, or 14%, from
$381 million at December 31, 1994; this follows a 20% increase for
1994 from 1993. These increases occurred for two reasons; for both
years the lack of high loan demand required the liquidity of the
Company be invested in the securities portfolios. Additionally, in
1995 cash generated by the branch acquisition was invested in
securities. In 1994 the ALCO strategy employed $60 million of the
Company's access to lower cost funds to purchase securities to be
held to maturity yielding a higher rate than its incremental
borrowing rate, thus improving net interest income.
As disclosed in the notes to the consolidated financial
statements, the Company reclassified a substantial portion of the
securities portfolio from held to maturity to available for sale.
Additionally, the majority of subsequent purchases have been
classified as available for sale. Securities available for sale are
part of the Company's interest rate risk management strategy and may
be sold in response to changes in interest rates, changes in
prepayment risk, liquidity management, and other factors. The market
value of securities available for sale fluctuates primarily in
response to changes in interest rates and risk. These fluctuations
lead to the changes in the unrealized gain or loss on securities
available for sale presented in both the Company's consolidated
balance sheets and statements of stockholders' equity.
Average tax-exempt securities are portrayed in the table,
Average balances, Net Interest Income, Yields and Rates; the average
balance has remained relatively stable in recent years. It remains
the Bank's practice to invest, subject to availability, in qualified
and designated local municipal issues which receive favorable
federal income tax treatment. The Bank highly values its business
relationships with a variety of municipalities within its local
service area and meeting their funding needs through investment in
their security issues is a meaningful way to develop such business
relationships.
At December 31, 1995 there were no securities held by the
Company of any single non U.S. Government issuer aggregating more
than ten percent of stockholders' equity. However as of that date,
obligations of the State of New York and its political subdivisions
constituted 100% of its state and municipal portfolio. The entire
portfolio was comprised of non-rated investments in the local
communities within the twenty county market area served by the
Bank's municipal banking department and did not include any direct
obligations of the State of New York.
DEPOSITS
Total deposits for 1995 increased both on an average and absolute
basis. As disclosed in the notes to the consolidated financial
statements, the December 16, 1995 branch acquisition increased
deposits on an absolute basis $42.6 million. Additionally, the
Company increased municipal time deposits $29.9 million at December
31, 1995 compared to December 31, 1994. As indicated in the table,
Average balances, Net Interest Income, Yields and Rates, depositors
have moved funds during the year from savings, NOW, and MMDA
accounts to certificates of deposit as rates increased.
BORROWED FUNDS
Short-term borrowings include federal funds purchased, securities
34
<PAGE>
sold under agreements to repurchase, and other short-term
borrowings, which consist primarily of FHLB advances with an
original maturity of greater than one day up to one year. Total
borrowed funds, including long-term debt, have decreased in 1995 as
funds provided by increased deposits have been utilized to supplant
borrowed funds. The increase in 1994 was due to borrowings
originated in the form of short-term borrowings due to favorable
borrowing and potential reinvestment rates. The increase from 1992
to 1993 was due to borrowings originated in the fourth quarter of
1993 in the form of short-term borrowings and long-term debt from
the FHLB for similar reasons. The Company continues to remain well
within acceptable liquidity guidelines.
CAPITAL AND DIVIDENDS
<TABLE>
CAPITAL MEASUREMENTS
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------
December 31, 1995 1994
- ------------------------------------------------------------------------------
Tier 1 leverage ratio 8.80% 9.05%
Tier 1 capital ratio 15.21% 16.09%
Total risk-based capital ratio 16.46% 17.35%
Cash dividends as a percentage of net income 42.47% 55.22%
Per common share:
Book value $13.06 $11.68
Tangible book value $11.66 $10.51
- ------------------------------------------------------------------------------
</TABLE>
Stockholders' equity increased both in dollar amount and as a
percentage of total assets at
<PAGE>
<TABLE>
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------
(restated to give retroactive effect to stock dividends)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH CASH
DIVIDENDS DIVIDENDS
QUARTER ENDING HIGH LOW CLOSE DECLARED HIGH LOW CLOSE DECLARED
- ------------------------------------------------------------------------------------------------------
March 31 $16.19 $15.24 $15.24 $0.114 $16.78 $15.87 $15.87 $0.104
June 30 15.71 15.00 15.48 0.114 16.21 13.83 14.97 0.104
September 30 15.95 15.00 15.71 0.115 14.97 13.61 14.51 0.104
December 31 18.00 15.24 17.50 0.130 16.19 14.29 15.71 0.115
- ------------------------------------------------------------------------------------------------------
For the year $18.00 $15.00 $17.50 $0.473 $16.78 $13.61 $15.71 $0.427
- ------------------------------------------------------------------------------------------------------
</TABLE>
December 31, 1995, compared to December 31, 1994. The increase is
due to net income retained after payment of cash dividends and
improved mark to market effect of the securities available for sale
portfolio, offset by increased holdings of treasury stock. Both book
and tangible book value have increased accordingly.
On a per share basis, cash dividends declared have been
increased both in 1995 and 1994. These dividend increases reflect
the Company's earnings and capital strength. 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. Additionally, 1995 was the thirty-
sixth consecutive year that the Company declared a stock dividend.
The accompanying table, Quarterly Common Stock and Dividend
Information, sets forth the high, low and closing sales price for
the common stock as reported on the NASDAQ National Market System,
and cash dividends declared per share of common stock. At December
31, 1995, the total market capitalization of NBT's common stock was
approximately $143 million compared with $132 million at December
31, 1994. The change in market capitalization is due to increased
numbers of shares held in the treasury and changes in the market
price, adjusted for stock dividends, of the Company's common stock.
NBT's price to book value ratio was 1.34, 1.34, and 1.38 at December
31, 1995, 1994 and 1993, respectively. NBT's price was 16, 20, and
16 times earnings at December 31, 1995, 1994 and 1993, respectively.
Capital is an important factor in ensuring the safety of
depositors' accounts. During both 1995 and 1994, the Bank earned the
highest possible national safety and soundness rating from two
national bank rating services, Bauer Financial Services and
Veribanc, Inc. Their ratings are based on capital levels, loan
portfolio quality, and security portfolio strength.
The Company remains well capitalized as depicted by the
capital ratios in the table. Capital measurements are significantly
in excess of both regulatory minimum guidelines and meet the
requirements to be considered well capitalized for all periods
presented. Tier 1 and Total Risk-Based Capital Ratios have
regulatory minimum guidelines of 4% and 8%, respectively, with
requirements to be considered well capitalized of 6% and 10%,
respectively. The Tier 1 Risk-Based Capital Ratio and Total Risk-
Based Capital Ratio measure the amount of capital in relation to the
degree of risk perceived in assets and off balance sheet exposure.
This concept recognizes that certain higher risk assets require more
capital to support them as compared with lower risk assets. Both
capital and the degree of risk used to weight assets and off balance
sheet items are defined by bank holding company regulatory agencies.
As defined, capital may exclude for the computation of capital
35
<PAGE>
adequacy ratios most intangible assets as well as a portion of the
allowance for loan losses in excess of delineated percentages of
loan balances and unrealized gains and losses on securities
available for sale included in stockholders' equity, net of the tax
effect. There are limitations for the amount of the allowance for
loan losses that can be considered for capital ratios and there are
limitations for the amount of deferred tax assets that can be used
to meet capital requirements. For all years presented, the Company
was permitted to include all of its deferred tax assets in its
capital ratio computations. Risk factors used to weight assets and
off balance sheet items range from 0% for cash, amounts due from the
Federal Reserve, and securities issued by the U.S. Treasury, to 100%
for certain types of loans and securities.
The Tier 1 Leverage Ratio compares capital, as defined for
regulatory purposes, to average assets without regard to risk
weights and certain intangible assets. This ratio measures the
utilization of capital to support the balance sheet. The Tier 1
Leverage Ratio has regulatory minimum guideline of 4%, with the
requirements to be considered well capitalized of 5%. Regulations
promulgated by bank and bank holding company regulatory agencies are
intended primarily for the protection of the Bank's depositors and
customers rather than the holders of the Company's securities.
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 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.
Given the above, liquidity to NBT is defined as the ability to
raise cash quickly at a reasonable cost without principal loss. The
primary liquidity measurement NBT utilizes is called the Basic
Surplus which captures the adequacy of its access to reliable
sources of cash relative to the stability of its funding mix of
average liabilities. This approach recognizes the importance of
balancing levels of cash flow liquidity from short and long-term
securities with the availability of dependable borrowing sources
which can be accessed when necessary. Accordingly, NBT has
established borrowing facilities with other banks (federal funds),
the Federal Home Loan Bank of New York (short and long-term
borrowings which are denoted as advances), and repurchase agreements
with investment companies.
This Basic Surplus approach enables the Bank to adequately
manage liquidity from both tactical and contingency perspectives. By
tempering the need for cash flow liquidity with reliable borrowing
facilities, NBT is able to operate with a more fully invested and,
therefore, higher interest income generating, securities portfolio.
The makeup and term structure of the securities portfolio is, in
part, impacted by the overall interest rate sensitivity of the
balance sheet. Investment decisions and deposit pricing strategies
are impacted by the liquidity position.
At December 31, 1995 and 1994, NBT's Basic Surplus ratios (net
access to cash and secured borrowings as a percentage of total
assets) were approximately 17% and 4%, respectively, compared to the
present internal minimum guideline range of 5% to 7%. The December
31, 1995 Basic Surplus ratio was in excess of the guidelines. During
1994, NBT took steps to absorb its substantial capacity to support
income yielding assets, utilizing, and therefore reducing, its
Basic Surplus ratio. The December 31, 1994 Basic Surplus ratio fell
below the minimum guideline as the Company drew upon short-term
borrowing lines in December to replace seasonal outflows of
municipal deposits during the fourth quarter. Such deposits began to
grow once again subsequent to December 31, 1994. The Bank had unused
lines of credit available totalling $330 million to meet its short-
term liquidity needs at December 31, 1994 and considered the Basic
Surplus adequate to meet liquidity needs.
Interest rate risk is determined by the relative sensitivities
of earning asset yields and interest bearing liability costs to
changes in interest rates. Overnight federal funds on which rates
change daily and loans which are tied to the prime rate differ
considerably from long-term investment securities and fixed rate
loans. Similarly, time deposits over $100,000 and money market
deposit accounts are much more interest sensitive than NOW and
savings accounts.
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. The funding matrix depicted in the accompanying table is
utilized as a primary tool in managing interest rate risk. The
matrix arrays repricing opportunities along a time line for both
assets and liabilities. The time line for sources of funds,
liabilities and equity, is depicted on the left hand side of the
matrix. The longest term, most fixed rate sources, are presented in
the upper left hand corner while the shorter term, most variable
36
<PAGE>
rate items, are at the lower left. Similarly, uses of funds, assets,
are arranged across the top moving from left to right.
The body of the matrix is derived by allocating the longest
fixed rate funding sources to the longest fixed rate assets (upper
left corner) and shorter term variable sources to shorter term
variable uses (lower right corner). The result is a graphical
depiction of the time periods over which the Bank is expected to
experience exposure to rising or falling rates. Since the scales of
the liability (left) and asset (top) sides are identical, all
numbers in the matrix would fall within the diagonal lines if the
Bank was perfectly matched across all repricing time frames. Numbers
outside the diagonal lines represent two general types of
mismatches: i) liability sensitive, where rate sensitive liabilities
exceed the amount of rate sensitive assets repricing within
applicable time frames (items to the left of/below the diagonal
lines) and ii) asset sensitive, where rate sensitive assets exceed
the amount of rate sensitive liabilities repricing within applicable
time frames (items to the right of/above the diagonal lines).
Generally, the lower the amount of this gap, the less
sensitive are earnings to interest rate changes. The matrix
indicates that NBT is structurally asset sensitive and supports
management's contention that the Company is positioned to benefit
from a higher interest rate environment. The nature and timing of
the benefit will be initially impacted by the extent to which core
deposit and borrowing rates are increased as rates rise.
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.
NBT runs various earnings simulation scenarios used to evaluate the
effect on net interest income in a rising or declining rate
environment over an extended time horizon. At December 31, 1995, a
100 basis point gradual increase or decline in interest rates was
estimated to have less than a 2.5% impact on net interest income
relative to a flat rate environment over the next twelve month
period.
<PAGE>
[MATRIX GRAPH INSERTED HERE (The diagonals run from the upper left
corner to the lower right corner encompassing all amounts with the
same top and left axis captions. A shaded box encompasses the upper
left amounts for the twenty-five through over 60 month horizontal
axis captions and thirteen to over 60 month vertical axis captions.
The terms long liabilities, short assets and long assets, short
liabilities appear in the upper right and lower left of the matrix,
respectively.)]
<TABLE>
SUMMARY STATIC GAP FUNDING MATRIX
(MILLIONS OF DOLLARS)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
(ASSETS) OVER 60 37-60 25-36 13-24 7-12 4-6
-USES- MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MAR 96 FEB 96 JAN 96 ONE DAY TOTALS
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
-SOURCES- TOTALS 195 128 96 134 123 76 26 28 299 1 1,106
- --------------------------------------------------------------------------------------------------------------------------
OVER 60 482 195 128 96 63 482
MONTHS
37-60 18 18 18
MONTHS
25-36 22 22 22
MONTHS
13-24 45 31 14 45
MONTHS
7-12 80 80 80
MONTHS
4-6 65 29 36 65
MONTHS
MAR 96 131 40 26 28 37 131
FEB 96 36 36 36
JAN 96 129 129 129
ONE DAY 98 97 1 98
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 1,106 195 128 96 134 123 76 26 28 299 1 1,106
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." SFAS 122 requires the Company to recognize as
separate assets rights to service mortgage loans for others, however
those servicing rights are acquired and also requires the Company to
assess its capitalized mortgage servicing rights for impairment
based on the fair value of those rights. SFAS 122 must be adopted on
January 1, 1996 on a prospective basis. Management does not believe
the adoption of SFAS 122 will have a material impact on the
Company's financial condition or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which encourages, but does not require,
companies to use a fair value based method of determining
compensation cost for grants of stock options under stock-based
employee compensation plans. Under Accounting Principals Board
Opinion No. 25 (APB 25), currently utilized by the Company,
compensation cost is the excess, if any, of the quoted market price
of the stock at the date of grant over the amount employees must pay
to acquire it. Companies electing to continue accounting for these
plans under the provisions of APB 25 will be required to present pro
forma disclosures of net income and net income per share, as if a
fair value based method had been applied. The Company is required to
implement SFAS 123 on January 1, 1996, and will continue to account
for the plans under APB 25 with pro forma footnote disclosure.
37
<PAGE>
<TABLE>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS AND RATES
<CAPTION>
(dollars in thousands) 1995
------------------------------
<S> <C> <C> <C>
AVERAGE YIELD/
BALANCE INTEREST RATES
------- -------- ------
ASSETS
Interest bearing deposits $ 472 $ 21 4.45%
Federal funds sold 589 34 5.77
Short-term investments available for sale 1,564 91 5.82
Securities available for sale, taxable 147,073 9,137 6.21
Loans available for sale 6,099 545 8.94
Securities held to maturity:
Taxable 217,201 13,154 6.06
Tax exempt 29,392 2,102 7.15
------- ------
Total securities held to maturity 246,593 15,256 6.19
Loans:
Commercial 229,481 22,862 9.96
Real estate mortgage 126,280 10,358 8.20
Consumer 219,587 19,886 9.06
------- ------
Total Loans 575,348 53,106 9.23
------- ------
Total earning assets 977,738 78,190 8.00
------
Cash and due from banks 35,022
Securities available for sale
valuation allowance (2,736)
Allowance for loan losses (9,330)
Premises and equipment 15,671
Other assets 25,833
------
TOTAL ASSETS $1,042,198
----------
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Money market deposit accounts $108,928 3,173 2.91
NOW accounts 83,807 1,582 1.89
Savings deposits 154,091 4,554 2.96
Certificates of deposit 376,852 20,374 5.41
------- ------
Total interest bearing deposits 723,678 29,683 4.10
Short-term borrowings 80,596 4,700 5.83
Long-term debt 5,424 457 8.43
------ ------
Total interest bearing liabilities 809,698 34,840 4.30%
------
Demand deposits 124,611
Other liabilities 6,259
Stockholders' equity 101,630
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,042,198
----------
NET INTEREST INCOME $43,350
-------
NET INTEREST MARGIN 4.43%
-----
Taxable equivalent adjustment $ 790
-------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- ------
$ 171 $ 8 4.68% $ 97 $ 2 2.06%
414 13 3.14 810 25 3.09
2,441 89 3.65 9,831 294 2.99
134,488 7,809 5.81 89,069 4,958 5.57
9,457 671 7.10 6,458 342 5.30
200,501 11,878 5.92 160,805 10,223 6.36
30,101 1,781 5.92 25,655 1,646 6.42
------- ------ ------- ------
230,602 13,659 5.92 186,460 11,869 6.37
212,007 18,528 8.74 178,503 14,680 8.22
131,615 9,555 7.26 156,967 12,366 7.88
221,794 20,778 9.37 215,272 23,049 10.71
------- ------ ------- ------
565,416 48,861 8.64 550,742 50,095 9.10
------- ------ ------- ------
942,989 71,110 7.54 843,467 67,585 8.01
------ ------
35,076 34,013
(3,018) -
(8,863) (9,205)
15,807 15,911
27,581 25,570
------- -------
$1,009,572 $909,756
- ---------- --------
<PAGE>
$ 148,341 3,818 2.57 $158,365 4,530 2.86
87,041 1,407 1.62 82,084 1,570 1.91
177,015 4,707 2.66 168,041 4,964 2.95
286,818 11,551 4.03 256,370 10,674 4.16
------- ------ ------- ------
699,215 21,483 3.07 664,860 21,738 3.27
73,083 3,351 4.59 18,699 609 3.26
13,846 908 6.56 11,161 853 7.64
------- ------ ------- ------
786,144 25,742 3.27% 694,720 23,200 3.34%
------ ------
118,186 111,193
5,532 7,121
99,710 96,722
------- -------
$1,009,572 $909,756
- ---------- --------
$45,368 $44,385
------- -------
4.81% 5.26%
----- -----
$ 672 $ 628
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992 1991
- --------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- ------
$ - $ - -% $ 1,065 $ 89 8.36%
896 31 3.46 1,213 49 4.04
19,449 789 4.06 35,436 2,069 5.84
- - - - - -
- - - - - -
200,525 13,443 6.70 119,828 9,594 8.01
30,503 2,888 9.46 79,954 7,721 9.66
------- ------ ------- ------
231,028 16,331 7.07 199,782 17,315 8.67
168,589 14,417 8.55 158,444 16,735 10.56
150,034 14,274 9.51 147,152 15,588 10.59
209,944 24,402 11.62 221,445 29,534 13.34
------- ------ ------- ------
528,567 53,093 10.04 527,041 61,857 11.74
------- ------ ------- ------
779,940 70,244 9.01 764,537 81,379 10.64
------ ------
35,189 36,018
- -
(9,659) (10,272)
16,335 17,048
30,396 36,259
------- -------
$852,201 $843,590
- -------- --------
<PAGE>
$159,589 5,614 3.52 $143,183 7,237 5.05
73,802 2,033 2.75 63,480 2,745 4.32
140,202 5,018 3.58 106,795 5,111 4.79
250,324 13,270 5.30 324,209 22,253 6.86
------- ------ ------- ------
623,917 25,935 4.16 637,667 37,346 5.86
18,158 665 3.66 6,199 373 6.02
5,755 594 10.32 5,362 575 10.72
------- ------ ------- ------
647,830 27,194 4.20% 649,228 38,294 5.90%
------ ------
106,789 102,012
7,107 7,426
90,475 84,924
------ -------
$852,201 $843,590
- -------- --------
$43,050 $43,085
------- -------
5.52% 5.64%
----- -----
$ 1,036 $ 2,751
------- -------
39
<PAGE>
<FN>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS AND RATES
Since period end balances presented in the balance sheet can be
distorted by one day fluctuations, average balances are presented
when appropriate to give a better indication of balance sheet
trends. The table, Average Balances, Net Interest Income, Yields and
Rates, depicts daily average balances for the major distribution of
assets, liabilities, and stockholders' equity. Amounts are
calculated on an FTE basis, are before reserve requirements, and are
based on amortized cost. Interest earned on non-accrual loans is
included in the interest earned on loans only when collected,
however, the average balances of such loans are included in the
average balances of loans.
</FN>
</TABLE>
FOURTH QUARTER RESULTS
Selected quarterly results are presented in the table, Selected
Quarterly Financial Data. Quarterly net income for the fourth
quarter of 1995 achieved the second highest level in the Company's
history, exceeded only by the prior quarters results. Interest and
fee income increased from the combined result of increased levels of
average earning assets and yields on those assets; similarly
interest expense increased from the combined result of increased
levels of average interest bearing liabilities and costs associated
with those sources of funds. The increase in the cost of funds
exceeded the increase in the yield on funds as portrayed in the
decreased net interest margin.
Annualized return on average assets for the fourth quarter of
1995, reflects the effect of the increase in net income partially
offset by the increased asset base of the Company. Annualized return
on average equity for the fourth quarter of 1995 reflects the effect
of the increase in net income partially offset by the increased
average equity of the Company as the valuation of securities
available for sale improved during the period.
The lower level of the provision for loan losses
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the two years ended December 31, 1995 is summarized as
follows:
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands,
except per share data) FIRST SECOND THIRD FOURTH First Second Third Fourth
- ---------------------------------------------------------------------------------------------------------------------------
Interest and fee income $17,942 $19,143 $19,983 $20,332 $16,445 $17,304 $18,283 $18,406
Interest expense 7,981 8,566 8,942 9,351 5,617 6,142 6,708 7,275
Net interest income 9,961 10,577 11,041 10,981 10,828 11,162 11,575 11,131
Provision for loan losses 330 508 340 375 810 942 872 447
Noninterest income excluding
securities gains 1,767 1,743 1,704 1,743 1,881 1,884 1,808 911
Securities gains - 11 82 52 555 - - -
Noninterest expense 8,413 8,235 8,115 8,261 9,495 9,156 10,967 9,056
Net income 1,907 2,221 2,637 2,564 1,803 1,814 1,002 1,889
Net income per common share $ 0.22 $ 0.26 $ 0.32 $ 0.31 $ 0.21 $ 0.21 $ 0.12 $ 0.22
Net interest margin 4.30% 4.49% 4.54% 4.40% 4.99% 4.85% 4.82% 4.64%
Return on average assets 0.76% 0.87% 1.00% 0.95% 0.76% 0.72% 0.38% 0.73%
Return on average equity 7.83% 8.79% 10.28% 9.74% 7.24% 7.31% 4.00% 7.59%
Average common
shares outstanding 8,454 8,423 8,337 8,311 8,570 8,539 8,476 8,469
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
reflects improved asset quality. Noninterest income excluding
securities gains has remained stable, at lower levels, throughout
the quarterly periods of 1995. Noninterest expense also has remained
stable, at lower levels, throughout the quarterly periods of 1995
due to the restructuring undertaken in 1994. Reduced costs are
reflected in most categories of noninterest expense, however
advertising expense increased as a result of ad campaigns. Measures
of expense productivity showed improvement for the fourth quarter of
1995. The efficiency and expense ratios were 65.0% and 2.5%,
respectively, for the fourth quarter of 1995 compared to 66.7% and
2.8%, respectively, for the comparable quarter of 1994. Full-time
equivalent employees increased to 545 at December 31, 1995, due to
the branch acquisitions. Average assets per full-time equivalent
employee increased to $1.9 million from $1.8 million. The Company
has maintained its commitment to improve earnings prospects through
the control of staffing levels and expenses, these yielded positive
results throughout the year. This commitment continues through
careful evaluation of operations, combining and realigning functions
as deemed appropriate, utilizing normal attrition to the highest
extent possible to achieve this objective.
IMPACT OF INFLATION AND CHANGES IN MARKET VALUE
Since most of the assets and liabilities of a financial institution
are monetary in nature, changes in interest rates have a more
significant impact on the Company's performance and the market or
fair value of its assets and liabilities than the effects of general
levels of inflation. Interest rates do not necessarily move in the
same direction or of the same magnitude as the prices of goods and
services. Accordingly, management will continue to emphasize its
efforts to manage the Company's net interest margin, liquidity, and
the rate sensitivity of its assets and liabilities in order to
maintain and improve profitability.
Many of the tables shown elsewhere in this Annual Report
present information related to how the Company is positioned to
react to changing interest rates. In particular, the summary of net
interest income, the maturity distributions, the composition of the
loan and securities portfolios, and the interest rate sensitivity
tables address the significant aspects of the Company's financial
position when analyzed for a changing interest rate environment.
40
<PAGE>
EXHIBIT 21
List of Subsidiaries of the Registrant
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
NBT BANCORP INC. has one subsidiary, which is wholly owned:
NBT Bank, National Association
52 South Broad Street
Norwich, New York 13815
Telephone: (607) 337-6000
E.I.N. 15-0395735
<PAGE>
EXHIBIT 23
Consent of KPMG Peat Marwick LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
NBT Bancorp Inc.:
We consent to incorporation by reference in the registration statements
on Form S-3 (File No. 33-12247) and Form S-8 (File Nos. 33-18976 and
33-77410) of NBT Bancorp Inc. of our report dated January 12, 1996,
relating to the consolidated balance sheets of NBT Bancorp Inc. and
subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995,
which report has been incorporated by reference in the December 31,
1995 annual report on Form 10-K of NBT Bancorp Inc.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Syracuse, New York
March 19, 1996
<PAGE>
EXHIBIT 27
Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NBT BANCORP
INC.'S 1995 ANNUAL REPORT, PAGES 10-40, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 44,379
<INT-BEARING-DEPOSITS> 619
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 393,536
<INVESTMENTS-CARRYING> 40,311
<INVESTMENTS-MARKET> 40,306
<LOANS> 588,385
<ALLOWANCE> 9,120
<TOTAL-ASSETS> 1,106,266
<DEPOSITS> 873,032
<SHORT-TERM> 115,945
<LIABILITIES-OTHER> 6,233
<LONG-TERM> 3,012
0
0
<COMMON> 8,442
<OTHER-SE> 99,602
<TOTAL-LIABILITIES-AND-EQUITY> 1,106,266
<INTEREST-LOAN> 53,057
<INTEREST-INVEST> 14,520
<INTEREST-OTHER> 9,823
<INTEREST-TOTAL> 77,400
<INTEREST-DEPOSIT> 29,683
<INTEREST-EXPENSE> 34,840
<INTEREST-INCOME-NET> 42,560
<LOAN-LOSSES> 1,553
<SECURITIES-GAINS> 145
<EXPENSE-OTHER> 33,024
<INCOME-PRETAX> 15,085
<INCOME-PRE-EXTRAORDINARY> 9,329
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,329
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.43
<LOANS-NON> 4,817
<LOANS-PAST> 1,332
<LOANS-TROUBLED> 142
<LOANS-PROBLEM> 27,628
<ALLOWANCE-OPEN> 9,026
<CHARGE-OFFS> 2,261
<RECOVERIES> 802
<ALLOWANCE-CLOSE> 9,120
<ALLOWANCE-DOMESTIC> 6,710
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,410
</TABLE>
