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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 0-14703
NBT BANCORP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 16-1268674
(State of Incorporation)(IRS Employer Identification No.)
52 SOUTH BROAD STREET, NORWICH, NEW YORK 13815
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: 607-337-2265
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
Share Purchase Rights pursuant to Stockholder Rights Plan
(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, 2000, there were 17,971,462 shares outstanding of the
Registrant's common stock, par value $0.01 per share, of which 16,898,688 common
shares having a market value of $209,205,757 were held by nonaffiliates of the
Registrant. There were no shares of the Registrant's preferred stock, par value
$0.01, outstanding at that date. Rights to purchase shares of the Registrant's
preferred stock Series R are attached to the shares of the Registrant's common
stock. The Registrant's common and preferred stock, no par, stated value of
$1.00 per share was changed to par value of $0.01 per share on February 17,
2000.
Documents Incorporated by Reference
Portions of the Proxy Statement of NBT BANCORP INC. for the Annual Meeting of
Stockholders to be held on April 25, 2000 are incorporated by reference into
Part III of this FORM 10-K as detailed therein.
An index to exhibits follows the signature page of this Form 10-K.
CROSS REFERENCE INDEX
Part I. Item 1 Business
Description of Business 3-5
Average Balance Sheets 9
Net Interest Income Analysis - Taxable Equivalent Basis 9
Net Interest Income and Volume/Rate Variance - Taxable
Equivalent Basis 10
Securities Portfolio 13
Debt Securities - Maturity/Yield Schedule 32
Loans 13
Maturities and Sensitivities of Loans to Changes in
Interest Rates 14
Nonperforming Assets and Risk Elements 14
Allowance for Loan Losses 11
Maturity Distribution of Time Deposits 15
Return on Equity and Assets 16
Short-Term Borrowings 34,35
Item 2 Properties 19
Item 3 Legal Proceedings
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.
Item 4 Submission of Matters to a Vote of Security Holders
There has been no submission of matters to a vote of
stockholders during the quarter ended December 31, 1999.
Part II. Item 5 Market for the Registrant's Common Stock and Related
Shareholder Matters 16,37
Item 6 Selected Financial Data 6
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 6 thru 18
Item 7A Quantitative and Qualitative Disclosure About Market Risk 16 thru 18
Item 8 Financial Statements and Supplementary Data
Consolidated Balance Sheets at December 31, 1999 and 1998 22
Consolidated Statements of Income for each of the years in
three-year period ended December 31, 1999 23
Consolidated Statements of Stockholders' Equity for each of
the years in the three-year period ended December 31, 1999 24
Consolidated Statements of Cash Flows for each of the years
in the three-year period ended December 31, 1999 25
Consolidated Statements of Comprehensive Income for each of
the years in the three-year period ended December 31, 1999 26
Notes to Consolidated Financial Statements 27 thru 44
Independent Auditors' Report 21
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There have been no changes in or disagreements with
accountants on accounting and financial disclosures.
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 8-K
(a)(1) Financial Statements (See Item 8 for Reference).
(2) Financial Statement Schedules normally required
on Form 10-K are omitted since they are not
applicable.
(3) Exhibits have been filed separately with the
Commission and are available upon written request.
(b) Reports on Form 8-K. 45
(c) Refer to item 14(a)(3) above.
(d) Refer to item 14(a)(2) above.
* Information called for by Part III (Items 10 through 13) is incorporated by
reference to the Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission.
DESCRIPTION OF BUSINESS
REGISTRANT
NBT Bancorp Inc. ("Registrant") is a registered bank holding company
headquartered in Norwich, New York. The Registrant is the parent holding company
of NBT Bank, N.A. ("Bank"), a national bank. The principal asset of the
Registrant is all of the outstanding shares of common stock of the Bank and its
principal source of revenue is dividends it receives from the Bank. The Bank has
two subsidiaries, NBT Capital Corp. and NBT Financial Services, Inc. NBT Capital
Corp., formed in July of 1998, is a venture capital corporation formed to assist
young businesses develop and grow in the markets we serve.
The Bank is a full service commercial bank providing a broad range of
financial products to individuals, corporations and municipalities. The Bank has
thirty-six branch locations and forty-seven automated teller machines serving a
nine county area in central and northern New York. As of December 31, 1999, the
Bank had 445 full-time and 76 part-time employees. The Bank is not a party to
any collective bargaining agreements, and employee relations are considered to
be good.
On February 17, 2000, the shareholders of NBT Bancorp Inc. and Lake Ariel
Bancorp, Inc. approved a merger of the two companies. On this date, Lake Ariel
Bancorp, Inc. was merged with and into NBT Bancorp Inc. with each issued and
outstanding share of Lake Ariel receiving 0.9961 shares of NBT Bancorp Inc.
common stock. LA Bank, N.A., a former subsidiary of Lake Ariel Bancorp, Inc., is
a commercial bank headquartered in northeast Pennsylvania. LA Bank, N.A., with
approximately $570 million in assets at December 31, 1999, has twenty-two branch
offices in five counties. The combined company, NBT Bancorp Inc., has combined
assets over $1.9 billion and fifty-eight branch locations.
On December 8, 1999, NBT Bancorp Inc. and Pioneer American Holding Company
Corp., the parent company of Pioneer American Bank, N.A., announced they entered
into a definitive agreement of merger. The merger is subject to the approval of
each company's shareholders and of banking regulators, and is expected to close
in the second quarter of 2000. Pioneer American Bank, N.A. is a full service
commercial bank with total assets of approximately $420 million at December 31,
1999. Pioneer American Bank, N.A. has eighteen branches in five counties in
northeast Pennsylvania. Pioneer American Bank, N.A. will ultimately be merged
together with LA Bank, N.A. to form the largest community bank headquartered in
northeast Pennsylvania.
COMPETITION
The banking business is extremely competitive and the Bank encounters intense
competition from other financial institutions located within its market area.
The Bank competes not only with other commercial banks but also with other
financial institutions such as thrifts, credit unions, money market and mutual
funds, insurance companies, brokerage firms, and a variety of other companies
offering financial services.
SUPERVISION AND REGULATION
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 services 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
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.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), 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 categories for
financial institutions: well capitalized, adequately capitalized,
undercapitalized, 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 ratio of
total capital to risk-weighted assets of 10.0% or greater, a Tier I capital to
risk-weighted assets ratio of 6.0% or greater, and a Tier 1 capital to total
assets 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, 1999, the Registrant and the Bank were well
capitalized based on the ratios and guidelines noted above.
3
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. The Act allows adequately capitalized and adequately
managed bank holding companies to acquire control of banks in any state subject
to certain limitations. An interstate acquisition may not be approved 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. Likewise, an interstate acquisition
may not be approved if it would violate a deposit ceiling established by laws of
the state of the institution to be acquired or if an acquirer controls or upon
consummation of the acquisition would control more than 10% of the total
deposits of insured depository institutions in the United States. Laws of the
state of the institution to be acquired which limit institutions eligible for
interstate acquisition to those in existence for a minimum period of time (not
to exceed five years) will also bar approval of an interstate acquisition if
nondiscriminatory.
The BHC Act prohibits, with certain exceptions, the Registrant from
acquiring direct or indirect control of more than 5% of the voting shares of any
company that is not a bank or bank holding company and from engaging directly or
indirectly in any activity other than those of banking, managing or controlling
banks or other subsidiaries authorized under the BHC Act, or furnishing services
to or performing services for its subsidiaries. Among the permitted activities
is the ownership of shares of any company the activities of which the Board of
Governors determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Effective March 11, 2000, pursuant to authority granted under the
Gramm-Leach-Bliley Act, a bank holding company may elect to become a financial
holding company and thereby to engage in a broader range of financial and other
activities than are permissible for traditional bank holding companies. In order
to qualify for the election, all of the depository institution subsidiaries of
the bank holding company must be well capitalized and well managed, as defined
by regulation, and all of its insured depository institution subsidiaries must
have achieved a rating of "satisfactory" or better with respect to meeting
community credit needs. Pursuant to the Gramm-Leach-Bliley Act, financial
holding companies will be permitted to engage in activities that are "financial
in nature" or incidental or complementary hereto, as determined by the Federal
Reserve Board. The Gramm-Leach-Bliley Act identifies several activities as
"financial in nature" including, among others, insurance underwriting and
agency, investment advisory services, merchant banking and underwriting, dealing
or making a market in securities. The Registrant has not, at this time, made any
decision with respect to whether it will elect to become a financial holding
company under the Gramm-Leach-Bliley Act.
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
and activities, reserves against deposits, establishment of branches and certain
other facilities, limitations on loans to one borrower and loans to affiliates
and insiders, and other aspects of the business of banks. Pursuant to recent
federal legislation the federal banking agencies have adopted 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 and earnings as well as
other operational and managerial standards deemed appropriate by the agencies.
Regulatory authorities have broad authority to initiate proceedings designed to
prohibit banks from engaging in violations of law and regulation and unsafe and
unsound banking practices.
The Gramm-Leach-Bliley Act does not significantly alter the regulatory
regimes under which the Registrant and the Bank currently operate, as described
above. While certain business combinations not currently permissible will be
possible after March 11, 2000, we cannot predict at this time resulting changes
in the competitive environment or the financial condition of the Registrant or
the Bank. Using the financial holding company structure, insurance companies and
securities firms may acquire bank holding companies, such as the registrant, and
may compete more directly with banks or bank holding companies.
Various legislation, including proposals to substantially change the
financial institution regulatory system and to expand or contract the powers of
banking institutions and bank holding companies, is from time to time introduced
in Congress. This legislation may change banking statutes and the operating
environment of the combined company and its subsidiaries in substantial and
unpredictable ways. If enacted, such legislation could increase or decrease the
cost of doing business, limit or expand permissible activities or affect the
competitive balance among banks, savings associations, credit unions, and other
financial institutions. The Registrant cannot accurately predict whether any of
this potential legislation will ultimately be enacted, and, if enacted, the
ultimate effect that it, or implementing regulations, would have upon the
financial condition or results of operations of itself or any of its
subsidiaries.
4
DEPOSIT INSURANCE AND OTHER ASSESSMENTS
To the extent allowable by law, the deposits of the Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC").
During 1999, 1998 and 1997, BIF-assessable deposits were subject to an
assessment schedule providing for an assessment range of 0% to .27%, with banks
in the lowest risk category paying no assessments. The Bank was in the lowest
risk category and paid no FDIC insurance assessments during 1999, 1998 and 1997.
BIF assessment rates are subject to semi-annual adjustment by the FDIC Board of
Directors. The FDIC Board of Directors has retained the 1999, 1998 and 1997 BIF
assessment schedule through June 30, 2000.
In 1996, Congress enacted the Deposit Insurance Funds Act which establishes
a schedule to merge with BIF and Savings Association Insurance Fund ("SAIF").
The act also provides for funding Financing Corp ("FICO") bonds, issued to
provide funding for the Federal Savings and Loan Insurance Corporation prior to
1991. Effective for assessments paid for the period starting January 1, 2000,
BIF-assessable deposits are subject to assessment for payment on the FICO bond
obligation equal to the rate of SAIF-assessable deposits. The FICO assessment is
adjusted quarterly based on call report submissions to reflect changes in the
assessment bases of the respective funds. During 1999, BIF insured banks paid a
rate of .012% for purposes of funding FICO bond obligations, resulting in an
assessment of $134,514 for the Bank. The assessment rate for BIF member
institutions has been set at 2.12 basis points, annually, for the first quarter
of 2000.
5
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
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(in thousands, except per share data) 1999 1998 1997 1996 1995
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YEAR ENDED DECEMBER 31,
Interest and fee income $ 101,959 $ 101,080 $ 96,181 $ 84,387 $ 77,400
Interest expense 41,377 43,677 42,522 36,365 34,840
Net interest income 60,582 57,403 53,659 48,022 42,560
Provision for loan losses 3,900 4,599 3,505 3,175 1,553
Noninterest income excluding
securities gains (losses) 10,290 9,355 8,403 7,683 6,957
Securities gains (losses) 1,507 624 (337) 1,179 145
Noninterest expense 38,507 39,128 35,170 34,422 33,024
Income before income taxes 29,972 23,655 23,050 19,287 15,085
Net income 18,370 19,102 14,749 12,179 9,329
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PER COMMON SHARE*
Basic earnings $ 1.41 $ 1.45 $ 1.12 $ 0.93 $ 0.69
Diluted earnings $ 1.40 $ 1.42 $ 1.11 $ 0.93 $ 0.69
Cash dividends paid $ 0.656 $ 0.587 $ 0.421 $ 0.338 $ 0.292
Stock dividends distributed 5% 5% 5% 5% 5%
Book value at year-end $ 9.66 $ 10.02 $ 9.30 $ 8.24 $ 8.07
Tangible book value at year-end $ 9.16 $ 9.44 $ 8.66 $ 7.47 $ 7.20
Average diluted common
shares outstanding 13,163 13,474 13,335 13,140 13,582
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AT DECEMBER 31,
Assets available for sale $ 345,207 $ 358,645 $ 443,918 $ 373,337 $ 399,625
Securities held to maturity 42,446 35,095 36,139 42,239 40,311
Loans 923,031 821,505 735,482 654,593 588,385
Allowance for loan losses 13,855 12,962 11,582 10,473 9,120
Assets 1,393,617 1,290,009 1,280,585 1,138,986 1,106,266
Deposits 1,108,073 1,044,205 1,014,183 916,319 873,032
Short-term borrowings 115,299 96,589 134,527 88,244 115,945
Long-term debt 35,157 10,171 183 20,195 3,012
Stockholders' equity 126,536 130,632 123,343 106,264 108,044
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KEY RATIOS
Return on average assets 1.38% 1.48% 1.20% 1.10% 0.90%
Return on average equity 14.27% 14.93% 12.97% 11.80% 9.18%
Average equity to average assets 9.66% 9.93% 9.25% 9.29% 9.75%
Net interest margin 4.85% 4.76% 4.67% 4.69% 4.43%
Efficiency 53.86% 57.92% 56.09% 60.74% 65.92%
Cash dividend per share payout 46.86% 41.34% 37.91% 36.50% 42.61%
Tier 1 leverage
(Regulatory guideline 3%) 9.50% 9.33% 8.91% 8.70% 8.80%
Tier 1 risk-based capital
(Regulatory guideline 4%) 14.30% 14.69% 14.88% 14.06% 15.21%
Total risk-based capital
(Regulatory guideline 8%) 15.55% 15.94% 16.13% 15.31% 16.46%
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*All share and per share data has been restated to give retroactive effect to
stock dividends and splits.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The purpose of this discussion and analysis is to provide the reader with a
concise description of the financial condition and results of operations of NBT
Bancorp Inc. ("Bancorp") and its wholly owned subsidiary, NBT Bank, N.A.
("Bank") collectively referred to herein as the Company. This discussion will
focus on results of operations, financial position, capital resources, and
asset/liability management.
OVERVIEW
Net income of $18.4 million ($1.40 diluted earnings per share) for 1999 compares
to $19.1 million ($1.42 diluted earnings per share) for 1998. While net income
was down slightly, income before taxes of $30.0 million improved $6.3 million
(26.7%) over 1998. Results for 1999 included merger related expenses of $0.5
million after taxes, while 1998 results included a $3.8 million net tax benefit
resulting from a corporate realignment.
The increase in pretax income for 1999 can be attributed to improvements in
net interest income and noninterest income. The improved net interest income was
a result of continued loan growth. The higher noninterest income was a result of
increased fee income from the continued expansion of our ATM network, increased
service charges from demand deposit account growth and increased securities
gains on the sales of securities available for sale. Additionally, the Company
maintained stable noninterest expense during this period of net interest and
noninterest income growth.
In December 1999, the Company distributed a 5% stock dividend, the fortieth
consecutive year a stock dividend has been declared. Throughout this report,
amounts per common share and common shares outstanding have been retroactively
adjusted to reflect stock dividends and splits.
Certain statements in this release and other public releases by the Company
contain forward-looking information, as defined in the Private Securities
Litigation Reform Act. These statements may be identified by the use of phrases
such as "anticipate," "believe," "expect," "forecasts," "projects," or other
similar terms. Actual results may differ materially from these statements since
such statements involve significant known and unknown rules and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) an increase in competitive pressures in the banking
industry; (2) changes in the interest rate environment; (3) changes in the
regulatory environment; (4) general economic environment conditions, either
nationally or regionally, which may be less favorable than expected, resulting
in, among other things, a deterioration in credit quality; and (5) changes which
may incur in business conditions and inflation.
MERGERS AND ACQUISITIONS
On February 17, 2000, the shareholders of NBT Bancorp Inc. and Lake Ariel
Bancorp, Inc. approved a merger whereby Lake Ariel Bancorp, Inc. was merged with
and into NBT Bancorp Inc. with each issued and outstanding share of Lake Ariel
exchanged for 0.9961 shares of NBT Bancorp Inc. common stock. The transaction
resulted in the issuance of 4.9 million shares of NBT Bancorp Inc. common stock,
bringing the Company's outstanding shares to 17.9 million after the merger. The
merger results in NBT Bancorp Inc. being the surviving holding company for NBT
Bank, N.A. and LA Bank, N.A., a former subsidiary of Lake Ariel Bancorp, Inc.
The merger is being accounted for as a pooling-of-interests and qualifies as a
tax-free exchange for Lake Ariel shareholders.
LA Bank, N.A. is a commercial bank headquartered in northeast Pennsylvania
with twenty-two branch offices in five counties and approximately $570 million
in assets at December 31, 1999. On a pro forma basis, the combined company, NBT
Bancorp Inc., has combined assets over $1.9 billion and fifty-eight branch
locations.
On December 8, 1999, NBT Bancorp Inc. and Pioneer American Holding Company
Corp., the parent company of Pioneer American Bank, N.A., announced they entered
into a definitive agreement of merger. The merger is subject to the approval of
each company's shareholders and of banking regulators. The merger is expected to
close in the second quarter of 2000 and is intended to be accounted for as a
pooling-of-interests and qualify as a tax-free exchange for Pioneer American
shareholders. Shareholders of Pioneer American will receive a fixed ratio of
1.805 shares of NBT Bancorp Inc. common stock for each share exchanged. NBT
Bancorp Inc. will issue approximately 5.2 million shares and share equivalents
in exchange for all of the Pioneer American common stock and share equivalents
outstanding.
Pioneer American Bank, N.A. is a full service commercial bank with total
assets of approximately $420 million at December 31, 1999 and eighteen branches
in five counties in northeast Pennsylvania. Pioneer American Bank, N.A. will
ultimately be merged together with LA Bank, N.A. to form the largest community
bank headquartered in northeast Pennsylvania.
7
YEAR 2000
The Company has not experienced any system failure or miscalculation of
financial data as a result of the Year 2000 issue. The Company will continue to
monitor all systems to ensure they are properly functioning as the year
progresses.
NET INTEREST INCOME
Net interest income is the difference between interest and fees earned on assets
and the interest paid on deposits and borrowings. Net interest income is one of
the major determining factors in a financial institution's performance as it is
the principal source of earnings. Table 1 presents average balance sheets and a
net interest income analysis on a taxable equivalent basis for each of the years
in the three-year period ended December 31, 1999.
As reflected in Table 1, federal taxable equivalent (FTE) net interest
income of $61.7 million in 1999 increased $3.5 million or 6.0% compared to 1998.
This increase can be attributed to an increase in average earning assets and a
reduction in the cost of interest bearing liabilities.
Average earning assets in 1999 increased $46.9 million or 3.8% compared to
1998. Average loans increased $94.6 million or 12.2% during 1999, while average
investment securities decreased $48.3 million or 11.0%. The increase in average
earning assets was partially offset by a 22 basis point decline in the yield on
earning assets, primarily the result of a 39 basis point decline in the yield on
loans. The decline in the yield earned on loans can be attributed to the
declining interest rate environment experienced during late 1998 and early 1999.
Average interest bearing liabilities during 1999 increased $23.3 million
compared to 1998, the result of increased interest bearing deposits and
borrowings of $9.9 million and $13.4 million, respectively. The increase of
interest bearing liabilities was offset by a 31 basis point reduction in cost,
resulting in a $2.3 million decline in interest expense during 1999 compared to
1998. The reduced cost of interest bearing liabilities during 1999 can be
attributed to all categories and is a result of the previously mentioned
declining interest rate environment during late 1998 and early 1999.
In comparing 1998 to 1997, FTE net interest income increased $3.7 million
or 6.8% from $54.5 million in 1997 to $58.2 million in 1998. Yields on earning
assets and the cost of interest bearing liabilities were stable between 1997 and
1998. In 1998, average earning assets increased $56.2 million or 4.8% compared
to 1997, resulting in a $4.8 million increase in interest income. Average loans
increased $79.1 million or 11.4% during 1998, while average investment
securities decreased $22.0 million or 4.8%. During 1998, average interest
bearing liabilities increased $30.2 million, primarily in the time deposit
category.
An important performance measurement of net interest income is the net
interest margin. Net interest margin, net FTE interest income divided by average
interest-earning assets, is a measure of an entity's ability to utilize its
earning assets in relation to the interest cost of funding. Taxable equivalency
adjusts income by increasing tax exempt income to a level that is comparable to
taxable income before taxes are applied. The net interest margin increased to
4.85% for 1999, up from 4.76% during 1998. The increase in the net interest
margin is primarily a result of the increased interest rate spread, as the
reduction in the cost of interest bearing liabilities exceeded the decline in
yield on earning assets. Also contributing to the improved net interest margin
is increased funding of earning assets from noninterest bearing sources, as the
Company has experienced an increase in demand deposit accounts.
8
TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME
The following table includes the condensed consolidated average balance sheet,
an analysis of interest income/expense and average yield/rate for each major
category of earning assets and interest bearing liabilities on a taxable
equivalent basis. Interest income for tax-exempt securities and loans has been
adjusted to a taxable-equivalent basis using the statutory Federal income tax
rate of 35%.
1999 1998 1997
AVERAGE YIELD/ Average Yield/ Average Yield/
(DOLLARS IN THOUSANDS) BALANCE INTEREST RATES Balance Interest Rates Balance Interest Rates
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ASSETS
Interest bearing deposits $ 202 $ 9 4.35% $ 123 $ 5 4.68% $ 127 $ 5 4.48%
Federal funds sold and securities
purchased under agreements to resell 41 2 4.63 793 31 3.91 3,749 194 5.17
Other short-term investments 6,073 296 4.88 5,156 269 5.21 2,536 135 5.31
Securities available for sale 354,202 23,957 6.76 403,574 27,942 6.92 423,512 29,063 6.86
Loans held for sale 3,368 231 6.85 3,080 254 8.25 3,620 298 8.24
Securities held to maturity:
Taxable 13,463 842 6.25 13,139 890 6.78 13,061 914 7.00
Tax exempt 23,898 1,569 6.57 23,130 1,581 6.83 25,303 1,721 6.80
---------- ------ ---------- ------ ---------- ------
Total securities held to maturity 37,361 2,411 6.45 36,269 2,471 6.81 38,364 2,635 6.87
Loans:
Commercial and agricultural 419,778 37,701 8.98 354,023 33,388 9.43 307,101 29,662 9.66
Real estate mortgage 169,330 12,762 7.54 147,128 11,927 8.11 125,263 10,668 8.52
Consumer 280,150 25,681 9.17 273,489 25,587 9.36 263,188 24,376 9.26
---------- ------ ---------- ------ ---------- ------
Total loans 869,258 76,144 8.76 774,640 70,902 9.15 695,552 64,706 9.30
---------- ------ ---------- ------ ---------- ------
Total earning assets 1,270,505 103,050 8.11 1,223,635 101,874 8.33 1,167,460 97,036 8.31
------- ------- ------
Cash and due from banks 36,002 32,593 30,918
Securities available for sale
valuation allowance (5,097) 5,335 (1,828)
Allowance for loan losses (13,548) (12,388) (11,138)
Premises and equipment 20,594 20,028 17,269
Other assets 24,218 19,131 25,962
---------- ---------- ----------
TOTAL ASSETS $1,332,674 $1,288,334 $1,228,643
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Money market deposit accounts $ 81,931 2,266 2.77 $ 85,011 2,440 2.87 $ 90,732 2,648 2.92
NOW deposit accounts 139,265 1,802 1.29 129,734 2,122 1.64 118,761 1,904 1.60
Savings deposits 165,308 4,514 2.73 155,109 4,310 2.78 154,771 4,376 2.83
Time deposits 519,949 26,006 5.00 526,701 28,329 5.38 493,551 26,306 5.33
---------- ------ ---------- ------ ---------- ------
Total interest bearing deposits 906,453 34,588 3.82 896,555 37,201 4.15 857,815 35,234 4.11
Short-term borrowings 106,961 5,252 4.91 114,241 6,014 5.26 119,259 6,581 5.52
Long-term debt 29,411 1,537 5.22 8,698 462 5.31 12,189 707 5.80
---------- ------ ---------- ------ ---------- ------
Total interest bearing
liabilities 1,042,825 41,377 3.97% 1,019,494 43,677 4.28% 989,263 42,522 4.30%
------- ------- ------
Demand deposits 150,856 133,262 115,826
Other liabilities 10,264 7,641 9,863
Stockholders' equity 128,729 127,937 113,691
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,332,674 $1,288,334 $1,228,643
---------- ---------- ----------
NET INTEREST INCOME $ 61,673 $ 58,197 $ 54,514
---------- -------- --------
NET INTEREST MARGIN 4.85% 4.76% 4.67%
---- ---- ----
Taxable Equivalent Adjustment $ 1,091 $ 794 $ 855
---------- -------- --------
(1) For purposes of these computations, nonaccrual loans are included in the
average loan balances outstanding.
(2) Securities are shown at average amortized cost.
9
TABLE 2
ANALYSIS OF CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME
The following table presents changes in interest income and interest expense
attributable to changes in volume (change in average balance multiplied by prior
year rate), changes in rate (change in rate multiplied by prior year volume),
and the net change in net interest income. The net change attributable to the
combined impact of volume and rate has been allocated to each in proportion to
the absolute dollar amounts of change.
- -----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) Increase (Decrease)
1999 OVER 1998 1998 over 1997
- -----------------------------------------------------------------------------------------------------------------
(in thousands) VOLUME RATE TOTAL Volume Rate Total
- -----------------------------------------------------------------------------------------------------------------
Interest bearing deposits $ 4 $ -- $ 4 $ -- $ -- $ --
Federal funds sold and securities
purchased under agreements to resell (35) 6 (29) (124) (39) (163)
Other short-term investments 45 (18) 27 136 (2) 134
Securities available for sale (3,352) (633) (3,985) (1,379) 258 (1,121)
Loans held for sale 22 (45) (23) (45) 1 (44)
Securities held to maturity:
Taxable 22 (70) (48) 5 (29) (24)
Tax exempt 52 (64) (12) (148) 8 (140)
Loans 8,385 (3,143) 5,242 7,254 (1,058) 6,196
- -----------------------------------------------------------------------------------------------------------------
Total interest income 3,842 (2,666) 1,176 4,677 161 4,838
- -----------------------------------------------------------------------------------------------------------------
Money market deposit accounts (87) (87) (174) (165) (43) (208)
NOW deposit accounts 147 (467) (320) 179 39 218
Savings deposits 280 (76) 204 10 (76) (66)
Time deposits (359) (1,964) (2,323) 1,781 242 2,023
Short-term borrowings (371) (391) (762) (271) (296) (567)
Long-term debt 1,083 (8) 1,075 (189) (56) (245)
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 982 (3,282) (2,300) 1,296 (141) 1,155
- -----------------------------------------------------------------------------------------------------------------
CHANGE IN FTE NET INTEREST INCOME $ 2,860 $ 616 $ 3,476 $ 3,381 $ 302 $ 3,683
- -----------------------------------------------------------------------------------------------------------------
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses decreased to $3.9 million in 1999 from $4.6
million in 1998, the result of lower charge-offs and improved asset quality. The
provision is based upon management's judgement as to the adequacy of the
allowance to absorb losses inherent in the current loan portfolio. In assessing
the adequacy of the allowance for loan losses, consideration is given to
historical loan loss experience, value and adequacy of collateral, level of
nonperforming loans, loan concentrations, the growth and composition of the
portfolio, and the results of a comprehensive in-house loan review program
conducted throughout the year. Consideration is given to the results of
examinations and evaluations of the overall portfolio by senior credit
personnel, internal and external auditors, and regulatory examiners.
Accompanying tables reflect the five year history of net charge-offs and
the allocation of the allowance by loan category. Net charge-offs, both as
dollar amounts and as percentages of average loans outstanding, decreased
between 1999 and 1998 as the Company has experienced an improvement in asset
quality. The decrease in net charge-offs in 1999 can be attributed to the real
estate and consumer loan categories. The allowance has been allocated based on
identified problem credits or categorical trends. Although the provision
decreased, the allowance for loan loss increased to $13.9 million at December
31, 1999 from $13.0 million the previous year-end. However, given the growth in
the loan portfolio at December 31, 1999, the allowance for loan losses to loans
outstanding was 1.50%, compared to 1.58% at year-end 1998. Management considers
the allowance to be adequate at December 31, 1999.
10
TABLE 3
ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
Balance at January 1 $12,962 $11,582 $10,473 $ 9,120 $9,026
Loans charged off:
Commercial and agricultural 1,906 1,941 1,193 1,274 967
Real estate mortgages 106 234 55 204 112
Consumer 1,883 1,977 2,040 1,300 1,182
- ---------------------------------------------------------------------------------------------------------------
Total loans charged off 3,895 4,152 3,288 2,778 2,261
- ---------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial and agricultural 227 258 197 274 193
Real estate mortgages 71 35 16 20 --
Consumer 590 640 679 662 609
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 888 933 892 956 802
- ---------------------------------------------------------------------------------------------------------------
Net loans charged off 3,007 3,219 2,396 1,822 1,459
Provision for loan losses 3,900 4,599 3,505 3,175 1,553
- ---------------------------------------------------------------------------------------------------------------
Balance at December 31 $13,855 $12,962 $11,582 $10,473 $9,120
- ---------------------------------------------------------------------------------------------------------------
Allowance for loan losses to loans
outstanding at end of year 1.50% 1.58% 1.57% 1.60% 1.55%
Allowance for loan losses to
nonaccrual loans 328% 361% 220% 315% 189%
Nonaccrual loans to total loans 0.46% 0.44% 0.71% 0.51% 0.82%
Nonperforming assets to total assets 0.32% 0.37% 0.45% 0.40% 0.62%
Net charge-offs to average loans
outstanding 0.35% 0.42% 0.34% 0.29% 0.25%
- ---------------------------------------------------------------------------------------------------------------
TABLE 4
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
CATEGORY Category Category Category Category
PERCENT Percent Percent Percent Percent
(dollars in thousands) ALLOWANCE OF LOANS Allowance of Loans Allowance of Loans Allowance of Loans Allowance of Loans
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial
and agricultural $ 7,579 49.0% $ 7,039 47.3% $ 5,448 44.4% $ 4,341 43.1% $4,250 42.0%
Real estate
mortgages 394 19.2% 400 19.5% 244 18.4% 360 18.3% 412 20.6%
Consumer 3,339 31.8% 3,999 33.2% 2,365 37.2% 2,335 38.6% 2,048 37.4%
Unallocated 2,543 -- 1,524 -- 3,525 -- 3,437 -- 2,410 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total $13,855 100.0% $12,962 100.0% $11,582 100.0% $10,473 100.0% $9,120 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest income consists primarily of trust and custodian fees, service
charges on deposit accounts, gains and losses on the sales of investment
securities, and fees and service charges for other banking services. Total
noninterest income for 1999 of $11.8 million increased $1.8 million or 18.2%
compared to 1998. Excluding securities gains and losses, noninterest income
increased $0.9 million or 10.0% in 1999 compared to 1998. Excluding securities
gains and losses, total noninterest income for 1998 increased $1.0 million over
1997.
Trust income rose during 1999 as managed assets have continued to increase.
At December 31, 1999, the Trust Department managed $891 million in assets
(market value), up from $865 million at year-end 1998, resulting in a $0.2
million increase in trust income.
Service charges on deposit accounts increased $0.5 million in 1999 compared
to 1998. This improvement can be attributed to an increase in service fee and
overdraft income resulting from growth in demand deposits.
Other income increased $0.2 million in 1999 compared to 1998 as a result of
greater ATM fee income. This can be attributed to an increase in the use of
customer debit cards and the installation of additional machines throughout our
market areas. The Company had 47 ATM machines in use at December 31, 1999, up
from 35 at year-end 1998.
11
NONINTEREST EXPENSE AND OPERATING EFFICIENCY
Salaries and employee benefits increased $0.4 million between 1999 and 1998,
primarily the result of increased salaries and performance based incentives.
Salaries and employee benefits increased $1.3 million between 1998 and 1997,
also the result of increases in salaries and performance based incentives.
Equipment expense during 1999 increased $0.3 million compared to 1998 as a
result of the replacement of computers for Year 2000 compliance, as well as the
installation of additional computers throughout the branch network. Equipment
expense increased $0.7 million between 1998 and 1997. This increase can be
attributed primarily to a rise in computer depreciation expense related to the
automation of the branch network computer system completed in the fourth quarter
of 1997.
Professional fees and outside service expense increased $0.6 million during
1998 compared to 1997, primarily a result of professional fees associated with
the corporate realignment.
Data processing and communications expense for 1998 experienced a $0.8
million increase compared to 1997. Contributing to this was increased data
processing fees, a result of the outsourcing of the Company's items processing
function during 1997.
Other operating expense for 1999 experienced a $1.4 million decline
compared to 1998. In addition to a decline in recurring other operating expenses
during 1999, the Company recognized a nonrecurring gain of $0.8 million on the
sale of other real estate owned.
Two important operating efficiency measures that the Company closely
monitors are the efficiency and expense ratios. The efficiency ratio is computed
as total noninterest expense (excluding merger and acquisition expenses, gains
and losses on the sales of OREO and other nonrecurring expenses) divided by net
interest income plus noninterest income (excluding net security gains and losses
and nonrecurring income). The efficiency ratio improved to 53.86% in 1999 from
57.92% for 1998. This improvement was a result of the increases in net interest
and noninterest income between the reporting periods. The expense ratio is
computed as total noninterest expense (excluding nonrecurring charges, such as
merger expenses) less noninterest income (excluding net security gains and
losses and nonrecurring income) divided by average assets. The expense ratio
improved to 2.14% during 1999 from 2.31% in 1998. The improvement in the expense
ratio can be attributed to the increases in noninterest income and average
assets, while at the same time maintaining stable recurring noninterest expense.
INCOME TAXES
The effective income tax rate was 38.7% in 1999, 19.2% in 1998, and 36.0% in
1997. The decrease in rate for 1998 resulted from a tax benefit recognized
during a corporate realignment. Additional information on income taxes is
provided in the notes to the consolidated financial statements.
SECURITIES
The securities portfolio constituted 30.8% and 35.9% of average earning assets
during 1999 and 1998, respectively. The decrease in average securities as a
percentage of average earning assets between 1999 and 1998 can be attributed to
the growth in earning assets resulting from the strong loan growth the Company
has experienced. At December 31, 1999, the securities portfolio consists of 90%
U.S. Government agencies guaranteed securities. All purchases of U.S.
Governmental agencies guaranteed securities are classified as available for
sale. Held to maturity securities are obligations of the State of New York
political subdivisions and do not include any direct obligations of the State of
New York.
12
TABLE 5
SECURITIES PORTFOLIO
As of December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
AMORTIZED FAIR Amortized Fair Amortized Fair
(in thousands) COST VALUE Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------
Securities Available for Sale:
U.S. Treasury $ 10,400 $ 8,535 $ 10,406 $ 10,481 $ 2,395 $ 2,406
Federal Agency and mortgage-backed 339,405 322,564 335,189 340,383 431,259 435,167
State & Municipal and other securities 10,493 10,487 4,554 4,894 2,967 3,059
- ---------------------------------------------------------------------------------------------------------------------
Total securities $360,298 $341,586 $350,149 $355,758 $436,621 $440,632
- ---------------------------------------------------------------------------------------------------------------------
Securities Held to Maturity:
State & Municipal 30,000 30,000 22,649 22,649 23,692 23,692
Other securities 12,446 12,446 12,446 12,446 12,447 12,447
- ---------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 42,446 $ 42,446 $ 35,095 $ 35,095 $ 36,139 $ 36,139
- ---------------------------------------------------------------------------------------------------------------------
LOANS
The following Table 6 sets forth the loan portfolio by major categories as of
December 31 for the years indicated.
TABLE 6
COMPOSITION OF LOAN PORTFOLIO
-------------------------------------------------------------------------------------------------------------
December 31, 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
(in thousands)
Real estate mortgages $162,734 $149,647 $128,873 $110,288 $107,611
Commercial real estate mortgages 197,629 178,778 151,129 135,061 108,902
Real estate construction and
development 14,077 10,378 6,602 9,582 13,361
Commercial and agricultural 254,852 209,731 175,362 146,930 138,391
Consumer 189,981 188,549 203,016 204,641 185,276
Home equity 103,758 84,422 70,500 48,091 34,817
Lease financing -- -- -- -- 27
-------------------------------------------------------------------------------------------------------------
Total loans $923,031 $821,505 $735,482 $654,593 $588,385
-------------------------------------------------------------------------------------------------------------
The loan portfolio is the largest component of earning assets and accounts for
the greatest portion of total interest income. At December 31, 1999, total loans
were $923.0 million, a 12.4% increase from December 31, 1998. In general, loans
are internally generated and lending activity is confined to New York State,
principally the nine county area served by the Company. The Company does not
engage in highly leveraged transactions or foreign lending activities. There
were no concentration of loans exceeding 10% of total loans other than the
concentration with borrowers in New York State, discussed in note 6 to the
consolidated financial statements, and those categories reflected in Table 6.
Real estate mortgages consist primarily of loans secured by first or second
deeds of trust on primary residencies. The Company sold $0.9 million in mortgage
loans during both 1999 and 1998. There were no gains or losses recognized
related to sales of mortgages originated in 1999 or 1998. At December 31, 1999
and 1998, loans classified as held for sale consist of higher education and
residential mortgage loans with estimated fair market values equal to cost.
Loans in the commercial and agricultural category, as well as commercial
real estate mortgages, consist primarily of short-term and/or floating rate
commercial loans made to small to medium-sized companies. Agricultural loans
totalled $51.5 million at December 31, 1999, and there are no other substantial
loan concentrations to any one industry or to any one borrower.
Consumer loans consist primarily of installment credit to individuals
secured by automobiles and other personal property. Management believes consumer
loan underwriting guidelines to be conservative. The guidelines are based
primarily on satisfactory credit history, down payment, and sufficient income to
service monthly payments.
13
Shown in Table 7, 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, 1999. Scheduled repayments
are reported in the maturity category in which the contractual payment is due.
TABLE 7
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
---------------------------------------------------------------------------------------------------
AFTER ONE
YEAR BUT
WITHIN AFTER
REMAINING MATURITY AT WITHIN FIVE FIVE
DECEMBER 31, 1999 ONE YEAR YEARS YEARS TOTAL
---------------------------------------------------------------------------------------------------
(in thousands)
Floating/adjustable rate:
Commercial and agricultural $115,802 $ 66,661 $ 23,756 $206,219
Real estate mortgages 3,914 14,108 27,544 45,566
Consumer 23,165 8,242 38,901 70,308
---------------------------------------------------------------------------------------------------
Total floating rate loans 142,881 89,011 90,201 322,093
---------------------------------------------------------------------------------------------------
Fixed Rate:
Commercial and agricultural 47,757 115,683 82,822 246,262
Real estate mortgages 8,495 32,582 90,168 131,245
Consumer 66,811 129,518 27,102 223,431
---------------------------------------------------------------------------------------------------
Total fixed rate loans 123,063 277,783 200,092 600,938
---------------------------------------------------------------------------------------------------
Total loans $265,944 $366,794 $290,293 $923,031
---------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets and past due loans are reflected in Table 8 below for the
years indicated.
TABLE 8
NONPERFORMING ASSETS AND RISK ELEMENTS
- ---------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Commercial and agricultural $3,216 $2,394 $3,856 $2,441 $3,945
Real estate mortgages 319 437 692 251 332
Consumer 693 762 708 628 540
- ---------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 4,228 3,593 5,256 3,320 4,817
- ---------------------------------------------------------------------------------------------------------------------
Other real estate owned 166 1,164 530 1,242 2,000
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets 4,394 4,757 5,786 4,562 6,817
- ---------------------------------------------------------------------------------------------------------------------
Loans 90 days or more past due and still accruing:
Commercial and agricultural 125 291 176 418 559
Real estate mortgages 247 341 244 344 448
Consumer 135 526 325 289 325
- ---------------------------------------------------------------------------------------------------------------------
Total 507 1,158 745 1,051 1,332
- ---------------------------------------------------------------------------------------------------------------------
Restructured loans, in compliance with modified terms: -- -- -- -- 142
- ---------------------------------------------------------------------------------------------------------------------
Total assets containing risk elements $4,901 $5,915 $6,531 $5,613 $8,291
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets to loans 0.48% 0.58% 0.79% 0.70% 1.16%
Total assets containing risk elements to loans 0.53% 0.72% 0.89% 0.86% 1.41%
Total nonperforming assets to assets 0.32% 0.37% 0.45% 0.40% 0.62%
Total assets containing risk elements to assets 0.35% 0.46% 0.51% 0.49% 0.75%
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets decreased $0.4 million or 7.6% at year-end 1999
compared to 1998, the result of the sales of other real estate owned during
1999. Total assets containing risk elements decreased $1.0 million or 17.1%
during the same period, the result of the sale of other real estate owned and a
reduction in loans ninety days or more past due and still accruing. The effect
of nonaccrual and impaired loans on interest income is presented in the
following Table 9.
14
TABLE 9
NONACCRUAL AND IMPAIRED LOANS INTEREST INCOME
---------------------------------------------------------------------------------------------------------
December 31, 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------
(in thousands)
Income that would have been accrued at original
contract rates $500 $278 $559 $1,125 $765
Amount recognized as income 220 170 148 593 344
---------------------------------------------------------------------------------------------------------
Interest income not accrued $280 $108 $411 $ 532 $421
---------------------------------------------------------------------------------------------------------
DEPOSITS
Deposits are the largest component of the Company's liabilities and account for
the greatest portion of interest expense. At December 31, 1999, total deposits
were $1,108.1 million, an increase of 6.1% from December 31, 1998. Average
deposits during 1999 of $1,057.3 million were 2.7% higher than the 1998 average.
The increase in average deposits can be attributed to increases in the demand
and savings categories with increases of $17.6 million and $16.7 million,
respectively, partially offset by a $6.8 million decline in average time
deposits. The increase in demand and savings deposits has contributed to the
Company's improved net interest margin. The preceding Table 1 presents average
deposits with accompanying average rates paid.
TABLE 10
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
-------------------------------------------------------------
December 31, 1999
-------------------------------------------------------------
(in thousands)
Within three months $235,647
After three but within six months 34,629
After six but within twelve months 17,550
After twelve months 5,378
-------------------------------------------------------------
Total $293,204
-------------------------------------------------------------
BORROWED FUNDS
Short-term borrowings include federal funds purchased, securities sold under
agreement to repurchase, and other short-term borrowings which consist primarily
of FHLB advances with original maturities of one day up to one year. Long-term
debt consists of fixed rate FHLB advances with an original maturity greater than
one year. At December 31, 1999, total borrowings of $150.5 million were up 40.9%
compared to the previous year-end total of $106.8 million. Average borrowings
during 1999 of $136.4 million represent a $13.4 million increase over 1998. For
additional information on borrowed funds see notes 10 and 11 to consolidated
financial statements.
CAPITAL AND DIVIDENDS
Capital is an important factor in ensuring the safety of depositors' accounts.
During both 1999 and 1998, the Company 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.
Capital adequacy is an important indicator of financial stability and
performance. The principal source of capital to the Company is earnings
retention. The Company remains well capitalized as the capital ratios indicate.
Capital measurements are significantly in excess of both regulatory minimum
guidelines and meet the requirements to be considered well capitalized.
On a per share basis, cash dividends declared have been increased in both
1999 and 1998. Cash dividends as a percentage of net income for 1999 of 46.44%
increased from the 40.37% paid during 1998. 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, 1999 was the fortieth consecutive year that the Company declared a
stock dividend.
The accompanying Table 11 sets forth the quarterly high, low and closing
sales price for the common stock as reported on the NASDAQ Stock Market, and
cash dividends declared per share of common stock. At December 31, 1999, the
total market capitalization of the Company's common stock was approximately
$203.0 million compared with $290.3 million at December 31, 1998. The Company's
price to book value ratio was 1.60, 2.22, and 1.97 at December 31, 1999, 1998
and 1997, respectively. The Company's price was 11, 16, and 17 times diluted
earnings per share at December 31, 1999, 1998 and 1997, respectively.
15
TABLE 11
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
- ----------------------------------------------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------
(restated to give retroactive effect to stock dividends and splits)
CASH Cash
DIVIDENDS Dividends
QUARTER ENDING HIGH LOW CLOSE DECLARED High Low Close Declared
- ----------------------------------------------------------------------------------------------------------------
March 31 $23.33 $19.89 $19.89 $0.162 $19.05 $15.99 $19.05 $0.117
June 30 21.19 19.05 19.52 0.162 23.48 18.37 23.02 0.154
September 30 20.90 16.43 16.49 0.162 23.81 17.58 20.86 0.154
December 31 17.98 14.63 15.50 0.170 24.29 19.72 22.27 0.162
- ----------------------------------------------------------------------------------------------------------------
For the year $23.33 $14.63 $15.50 $0.656 $24.29 $15.99 $22.27 $0.587
- ----------------------------------------------------------------------------------------------------------------
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objectives of asset and liability management are to provide for the
safety of depositor and investor funds, assure adequate liquidity, and maintain
an appropriate balance between interest sensitive earning assets and interest
bearing liabilities. Liquidity management involves the ability to meet the cash
flow requirements of customers who may be depositors wanting to withdraw funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. The Asset/Liability Management Committee ("ALCO") is
responsible for liquidity management and has developed guidelines which cover
all assets and liabilities, as well as off balance sheet items that are
potential sources or uses of liquidity. Liquidity must also provide the
flexibility to implement appropriate strategies and tactical actions.
Requirements change as loans grow, deposits and securities mature, and payments
on borrowings are made. Interest rate sensitivity management seeks to avoid
widely fluctuating net interest margins and to ensure consistent net interest
income through periods of changing economic conditions.
Given the above, liquidity to the Company is defined as the ability to
raise cash quickly at a reasonable cost without principal loss. The primary
liquidity measurement the Company 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, the Company 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 Company to adequately manage
liquidity from both tactical and contingency perspectives. By tempering the need
for cash flow liquidity with reliable borrowing facilities, the Company is able
to operate with a more fully invested and, therefore, higher interest income
generating, securities portfolio. The makeup and term structure of the
securities portfolio is, in part, impacted by the overall interest rate
sensitivity of the balance sheet. Investment decisions and deposit pricing
strategies are impacted by the liquidity position.
At December 31, 1999 and 1998, the Company's Basic Surplus ratios (net
access to cash and secured borrowings as a percentage of total assets) were
approximately 4% and 9%, respectively. The Company had unused lines of credit
available totalling $229 million to meet its short-term liquidity needs at
December 31, 1999 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
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 Company 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 Company 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).
16
Generally, the lower the amount of this gap, the less sensitive are
earnings to interest rate changes. The matrix indicates that the Company is
liability sensitive in the short term and would be negatively impacted by a
rising rate environment. The Asset/Liability Management Committee will continue
to monitor the Company's gap position and implement appropriate strategies to
minimize the potential interest rate risk of a rising interest rate environment.
TABLE 12
SUMMARY STATIC GAP FUNDING MATRIX
- ------------------------------------------------------------------------------------------------------------------------------------
(ASSETS) OVER 60 37-60 25-36 13-24 7-12 4-6
-USES- MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MAR 00 FEB 00 JAN 00 ONE DAY TOTALS
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
-SOURCES- TOTALS 416 196 123 141 108 57 20 19 253 61 1,394
- ------------------------------------------------------------------------------------------------------------------------------------
OVER 60 575 416 159 Long Liabilities 575
MONTHS Short Assets
37-60 26 26 26
MONTHS
25-36 26 11 15 26
MONTHS
13-24 129 108 21 129
MONTHS
7-12 115 115 115
MONTHS
4-6 89 5 84 89
MONTHS
MAR 00 62 24 38 62
FEB 00 73 19 20 19 15 73
JAN 00 231 Long Assets 231 231
Short Liabilities
ONE DAY 68 7 61 68
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS 1,394 416 196 123 141 108 57 20 19 253 61 1,394
- --------------------------------------------------------------------------------------------------------------------------------
While the static gap evaluation of interest rate sensitivity is useful, it is
not indicative of the impact of fluctuating interest rates on net interest
income. Once the Company determines the extent of gap sensitivity, the next step
is to quantify the potential impact of the interest sensitivity on net interest
income. The Company measures interest rate risk based on the potential change in
net interest income under various rate environments. The Company utilizes an
interest rate risk model that simulates net interest income under various
interest rate environments. The model groups assets and liabilities into
components with similar interest rate repricing characteristics and applies
certain assumptions to these products. These assumptions include, but are not
limited to prepayment estimates under different rate environments, potential
call options of the investment portfolio and forecasted volumes of the various
balance sheet items. The following table presents the impact on net interest
income of a gradual twelve-month increase or decrease in interest rates compared
to a stable interest rate environment. The simulation projects net interest
income over the next year using the December 31, 1999 balance sheet position.
17
TABLE 13
INTEREST RATE SENSITIVITY ANALYSIS
--------------------------------------------------------
Change in interest rates Percent change in
(in basis points) net interest income
--------------------------------------------------------
+200 (4.41%)
+100 (2.53%)
-100 1.62%
-200 2.25%
--------------------------------------------------------
FOURTH QUARTER RESULTS
Selected quarterly results are presented in Table 14, Selected Quarterly
Financial Data.
TABLE 14
SELECTED QUARTERLY FINANCIAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) FIRST SECOND THIRD FOURTH First Second Third Fourth
Interest and fee income $24,009 $24,931 $26,429 $26,590 $25,256 $25,276 $25,448 $25,100
Interest expense 9,514 9,978 10,832 11,053 11,221 11,168 10,885 10,403
Net interest income 14,495 14,953 15,597 15,537 14,035 14,108 14,563 14,697
Provision for loan losses 975 975 975 975 1,100 1,150 1,300 1,049
Noninterest income excluding
securities gains 2,588 2,504 2,607 2,591 2,350 2,312 2,353 2,340
Securities gains 471 199 837 -- 218 227 168 11
Noninterest expense 8,780 9,074 10,086 10,567 9,402 9,539 9,707 10,480
Net income $ 4,811 $ 4,732 $ 4,813 $ 4,014 $ 5,072 $ 4,710 $ 4,731 $ 4,589
Basic earnings per share $ 0.37 $ 0.36 $ 0.37 $ 0.31 $ 0.38 $ 0.36 $ 0.36 $ 0.35
Diluted earnings per share $ 0.36 $ 0.36 $ 0.37 $ 0.31 $ 0.38 $ 0.35 $ 0.35 $ 0.34
Net interest margin 4.96% 4.87% 4.82% 4.78% 4.75% 4.68% 4.79% 4.80%
Return on average assets 1.54% 1.44% 1.40% 1.16% 1.60% 1.47% 1.46% 1.40%
Return on average equity 14.87% 14.59% 15.17% 12.46% 16.49% 14.92% 14.54% 13.87%
Average diluted common
shares outstanding 13,206 13,153 13,137 13,156 13,499 13,541 13,488 13,369
- -----------------------------------------------------------------------------------------------------------------------------
18
PROPERTIES
The Company operates the following community banking offices:
Date Square
Name of Office Location County Established Footage
Norwich 52 S. Broad St., Norwich, NY Chenango 07-15-1856 77,000
Afton 182 Main St., Afton, NY Chenango 09-01-1962 2,779
Bainbridge 9 N. Main St., Bainbridge, NY Chenango 12-07-1938 5,100
Earlville 2 S. Main St., Earlville, NY Chenango 08-07-1937 1,650
Grand Gorge Rt. 23 & 30, Grand Gorge, NY Delaware 11-01-1957 3,000
Margaretville Main St., Margaretville, NY Delaware 09-03-1963 3,200
New Berlin 2 S. Main St., New Berlin, NY Chenango 12-21-1946 2,500
Sherburne 30 N. Main St., Sherburne, NY Chenango 08-07-1937 3,400
South Otselic Gladding St., S. Otselic, NY Chenango 10-01-1945 1,326
North Plaza Rt. 12 & 320, Norwich, NY Chenango 10-15-1986 1,874
South Plaza Rt. 12 S., Norwich, NY Chenango 08-20-1986 1,150
Deposit 105 Front St., Deposit, NY Broome 02-12-1971 4,500
Newark Valley 2 N. Main St., Newark Valley, NY Tioga 10-01-1973 3,822
Maine 2647 Main St., Maine, NY Broome 10-01-1973 1,350
Hobart Maple Ave., Hobart, NY Delaware 06-28-1974 2,400
Sidney 13 Division St., Sidney, NY Delaware 12-31-1978 5,800
Oxford 10 North Canal St., Oxford, NY Chenango 03-16-1998 2,000
Greene 80 S. Chenango St., Greene, NY Chenango 12-15-1986 3,100
Binghamton 1256 Front St., Binghamton, NY Broome 03-29-1993 1,900
Hancock 1 E. Main St., Hancock, NY Delaware 10-01-1989 6,000
Oneonta 733 State Highway 28, Oneonta, NY Otsego 01-14-1998 4,600
Oneonta-East 5582 State Highway Rt. 7, Oneonta, NY Otsego 05-24-1999 2,656
Clinton 1 Kirkland Ave., Clinton, NY Oneida 10-01-1989 10,300
Rome Westgate Westgate Plaza, 1148 Erie Blvd. W., Rome, NY Oneida 10-01-1989 1,950
Utica Business Park 555 French Road, New Hartford, NY Oneida 10-01-1994 3,396
New Hartford 8549 Seneca Turnpike, New Hartford, NY Oneida 12-16-1995 4,200
Rome Black River 853 Black River Blvd., Rome, NY Oneida 10-01-1997 3,000
Gloversville 199 Second Ave. Ext., Gloversville, NY Fulton 10-01-1989 4,263
Northville 192 N. Main St., Northville, NY Fulton 10-01-1989 3,000
Vail Mills Rt. 30, Broadalbin, NY Fulton 10-01-1989 2,000
Lake Placid 81 Main St., Lake Placid, NY Essex 10-01-1989 8,500
Cold Brook Plaza Saranac Ave., Lake Placid, NY Essex 10-01-1989 1,300
Saranac Lake 2 Lake Flower Ave., Saranac Lake, NY Essex 10-01-1989 2,400
Plattsburgh Rt. 3 482 Rt. 3, Plattsburgh, NY Clinton 05-04-1998 6,800
Plattsburgh Margaret St 83 Margaret St., Plattsburgh, NY Clinton 05-18-1998 1,822
Ellenburg Depot 5084 Rt. 11, Ellenburg Depot, NY Clinton 08-28-1993 2,346
The Oxford, South Otselic, Binghamton, Oneonta, Vail Mills, Rome Westgate, Utica
Business Park and Rome Black River Offices are leased. The Company owns all
other banking premises. The Company also has 47 ATM's, all of which are owned.
19
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 consolidated 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, Compliance and Loan Review
Committee composed entirely of directors who are not employees of the Company.
The Audit, Compliance and Loan Review Committee is responsible for recommending
to the Board the independent auditors to be retained for the coming year,
subject to stockholder ratification. The Audit, Compliance and Loan Review
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 Audit, Compliance and Loan Review Committee
reports to the Board on its activities and findings.
Daryl R. Forsythe
President and Chief Executive Officer
Michael J. Chewens, CPA
Executive Vice President
Chief Financial Officer and Treasurer
20
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, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, cash flows and
comprehensive income for each of the years in the three year period ended
December 31, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Syracuse, New York
January 21, 2000
21
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
ASSETS
Cash and cash equivalents $ 46,033 $ 47,181
Loans held for sale 3,621 2,887
Securities available for sale, at fair value 341,586 355,758
Securities held to maturity (fair value-$42,446 and $35,095) 42,446 35,095
Loans 923,031 821,505
Less allowance for loan losses 13,855 12,962
- ---------------------------------------------------------------------------------------------------------------------
Net loans 909,176 808,543
Premises and equipment, net 21,663 20,241
Intangible assets, net 6,592 7,572
Other assets 22,500 12,732
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,393,617 $ 1,290,009
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (noninterest bearing) $ 164,476 $ 154,146
Savings, NOW, and money market 392,193 391,614
Time 551,404 498,445
- ---------------------------------------------------------------------------------------------------------------------
Total deposits 1,108,073 1,044,205
Short-term borrowings 115,299 96,589
Long-term debt 35,157 10,171
Other liabilities 8,552 8,412
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 1,267,081 1,159,377
- ---------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00; shares
authorized-2,500,000 -- --
Common stock, no par, stated value $1.00; shares
authorized-15,000,000; shares issued 13,636,932 and 13,015,789 13,637 13,016
Capital surplus 121,913 111,749
Retained earnings 13,719 15,512
Accumulated other comprehensive (loss) income (11,068) 3,317
Common stock in treasury at cost, 538,936 and 599,507 shares (11,665) (12,962)
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 126,536 130,632
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,393,617 $ 1,290,009
- ---------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
22
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Interest and fee income:
Loans and loans held for sale $ 75,862 $ 70,947 $64,781
Securities available for sale 23,928 27,910 29,031
Securities held to maturity 1,862 1,918 2,035
Other 307 305 334
- -----------------------------------------------------------------------------------------------------------
Total interest and fee income 101,959 101,080 96,181
- -----------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 34,588 37,201 35,234
Short-term borrowings 5,252 6,014 6,581
Long-term debt 1,537 462 707
- -----------------------------------------------------------------------------------------------------------
Total interest expense 41,377 43,677 42,522
- -----------------------------------------------------------------------------------------------------------
Net interest income 60,582 57,403 53,659
Provision for loan losses 3,900 4,599 3,505
- -----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 56,682 52,804 50,154
- -----------------------------------------------------------------------------------------------------------
Noninterest income:
Trust 3,305 3,115 2,675
Service charges on deposit accounts 4,272 3,749 3,695
Securities gains (losses) 1,507 624 (337)
Other 2,713 2,491 2,033
- -----------------------------------------------------------------------------------------------------------
Total noninterest income 11,797 9,979 8,066
- -----------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 19,575 19,202 17,905
Office supplies and postage 1,833 1,912 1,801
Occupancy 2,865 2,843 2,598
Equipment 2,722 2,375 1,700
Professional fees and outside services 2,784 2,836 2,201
Data processing and communications 3,832 3,577 2,789
Amortization of intangible assets 980 1,070 1,351
Other operating 3,916 5,313 4,825
- -----------------------------------------------------------------------------------------------------------
Total noninterest expense 38,507 39,128 35,170
- -----------------------------------------------------------------------------------------------------------
Income before income taxes 29,972 23,655 23,050
Income taxes 11,602 4,553 8,301
- -----------------------------------------------------------------------------------------------------------
Net income $ 18,370 $ 19,102 $14,749
- -----------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 1.41 $ 1.45 $ 1.12
Diluted $ 1.40 $ 1.42 $ 1.11
- -----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
All per share data has been restated to give retroactive effect to stock
dividends and splits.
23
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Common Capital Retained Comprehensive Treasury
Stock Surplus Earnings (Loss) Income Stock Total
- ----------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
BALANCE AT DECEMBER 31, 1996 8,838 82,731 24,208 (1,529) (7,984) 106,264
Net income 14,749 14,749
Issuance of 427,496 shares for
5% stock dividend 428 10,717 (11,145) -
Cash dividends - $0.421 per share (5,544) (5,544)
Payment in lieu of fractional shares (19) (19)
Issuance of 164,030 shares to stock plan 164 2,476 2,640
Purchase of 131,900 treasury shares (2,568) (2,568)
Sale of 197,478 treasury shares to
employee benefit plans and other
stock plans 570 3,349 3,919
Unrealized net gain on securities
available for sale, net of deferred
taxes of $2,695 3,902 3,902
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 9,430 96,494 22,249 2,373 (7,203) 123,343
Net income 19,102 19,102
Issuance of 3,585,826 shares for
5% stock dividend and stock split 3,586 14,531 (18,117) -
Cash dividends - $0.587 per share (7,711) (7,711)
Payment in lieu of fractional shares (11) (11)
Purchase of 353,000 treasury shares (9,094) (9,094)
Sale of 169,364 treasury shares to
employee benefit plans and other
stock plans 724 3,335 4,059
Unrealized net gain on securities
available for sale, net of deferred
taxes of $654 944 944
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 13,016 111,749 15,512 3,317 (12,962) 130,632
Net income 18,370 18,370
Issuance of 621,143 shares for
5% stock dividend 621 10,994 (11,615) -
Cash dividends - $0.656 per share (8,532) (8,532)
Payment in lieu of fractional shares (16) (16)
Purchase of 213,500 treasury shares (4,643) (4,643)
Sale of 274,071 treasury shares to
employee benefit plans and other
stock plans (830) 5,940 5,110
Unrealized net loss on securities
available for sale, net of deferred
taxes of $9,936 (14,385) (14,385)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 $13,637 $121,913 $13,719 $(11,068) $(11,665) $126,536
- ----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
24
NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------