SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000. OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________. COMMISSION FILE NUMBER 0-14703 NBT BANCORP INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 16-1268674 (State of Incorporation) (I.R.S. Employer Identification No.) 52 SOUTH BROAD STREET, NORWICH, NEW YORK 13815 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (607) 337-2265 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of April 30, 2000, there were 18,101,302 shares outstanding of the Registrant's common stock, $0.01 par value. There were no shares of the Registrant's preferred stock, par value $0.01, outstanding at that date. An index to exhibits follows the signature page of this FORM 10-Q. -1-
NBT BANCORP INC. FORM 10-Q--Quarter Ended March 31, 2000 TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1 Interim Financial Statements (Unaudited) Consolidated Balance Sheets at March 31, 2000, December 31, 1999 (Audited), and March 31, 1999 Consolidated Statements of Income for the three month periods ended March 31, 2000 and 1999 Consolidated Statements of Stockholders' Equity for the three month periods ended March 31, 2000 and 1999 Consolidated Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999 Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2000 and 1999 Notes to Interim Consolidated Financial Statements at March 31, 2000 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3 Quantitative and Qualitative Disclosures about Market Risk Information called for by Item 3 is contained in the Liquidity and Interest Rate Sensitivity Management section of the Management Discussion and Analysis. PART II OTHER INFORMATION Item 1 Legal Proceedings Item 2 Changes in Securities Item 3 Defaults Upon Senior Securities Item 4 Submission of Matters to a Vote of Security Holders Item 5 Other Information Item 6 Exhibits and Reports on FORM 8-K SIGNATURES INDEX TO EXHIBITS -2-
<TABLE> <CAPTION> NBT BANCORP INC. AND SUBSIDIARY MARCH 31, December 31, March 31, CONSOLIDATED BALANCE SHEETS 2000 1999 1999 - ----------------------------------------------------------------------------------------------------------------------- (in thousands, except share and per share data) (UNAUDITED) (Unaudited) <S> <C> <C> <C> ASSETS Cash $ 60,823 $ 64,431 $ 60,234 Securities available for sale, at fair value 497,528 500,423 491,502 Securities held to maturity (fair value - $75,808, $73,648 and $70,094) 78,772 76,706 70,386 Loans 1,295,651 1,222,654 1,081,971 Less allowance for loan losses 17,543 16,654 15,608 - ----------------------------------------------------------------------------------------------------------------------- Net loans 1,278,108 1,206,000 1,066,363 Premises and equipment, net 40,292 40,830 38,667 Other assets 73,583 73,042 60,356 - ----------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $2,029,106 $1,961,432 $1,787,508 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand (noninterest bearing) $ 210,579 $ 223,143 $ 189,659 Savings, NOW, and money market 490,328 487,746 464,058 Time 822,842 766,729 680,428 - ----------------------------------------------------------------------------------------------------------------------- Total deposits 1,523,749 1,477,618 1,334,145 Short-term borrowings 165,445 137,567 119,648 Long-term debt 161,793 172,575 149,887 Other liabilities 15,587 13,195 13,868 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities 1,866,574 1,800,955 1,617,548 - ----------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock, $0.01 par value at March 31, 2000, no par, stated value $1.00 at December 31, 1999 and March 31, 1999; shares authorized-2,500,000 - - - Common stock, $0.01 par value and 30,000,000 authorized at March 31, 2000, no par, stated value $1.00 and 15,000,000 authorized at December 31, 1999 and March 31, 1999; issued 18,623,435, 18,616,992, and 17,963,950 at March 31, 2000, December 31, 1999 and March 31, 1999, respectively 186 18,617 17,964 Additional paid-in-capital 167,047 148,717 138,146 Retained earnings 24,225 23,060 26,296 Accumulated other comprehensive (loss) income (17,615) (18,252) 598 Common stock in treasury at cost 522,567, 538,936, and 600,953 shares at March 31, 2000, December 31, 1999 and March 31, 1999, respectively (11,311) (11,665) (13,044) - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 162,532 160,477 169,960 - ----------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,029,106 $1,961,432 $1,787,508 - ----------------------------------------------------------------------------------------------------------------------- </TABLE> See notes to interim consolidated financial statements. -3-
<TABLE> <CAPTION> NBT BANCORP INC. AND SUBSIDIARY Three months ended March 31, CONSOLIDATED STATEMENTS OF INCOME 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) (Unaudited) <S> <C> <C> Interest and fee income: Loans $27,189 $22,679 Securities - available for sale 8,872 7,625 Securities - held to maturity 993 840 Other 402 458 - ----------------------------------------------------------------------------------------------------------------------- Total interest and fee income 37,456 31,602 - ----------------------------------------------------------------------------------------------------------------------- Interest expense: Deposits 13,446 11,006 Short-term borrowings 2,054 1,139 Long-term debt 2,346 1,739 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 17,846 13,884 - ----------------------------------------------------------------------------------------------------------------------- Net interest income 19,610 17,718 Provision for loan losses 1,334 1,120 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 18,276 16,598 - ----------------------------------------------------------------------------------------------------------------------- Noninterest income: Trust 860 835 Service charges on deposit accounts 1,620 1,408 Securities gains - 668 Other 1,135 1,365 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 3,615 4,276 - ----------------------------------------------------------------------------------------------------------------------- Noninterest expense: Salaries and employee benefits 7,081 5,970 Office supplies and postage 592 637 Occupancy 1,232 1,024 Equipment 1,137 947 Professional fees and outside services 756 697 Data processing and communications 1,132 972 Amortization of intangible assets 312 329 Merger and acquisition costs 1,122 - Other operating 1,619 1,240 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 14,983 11,816 - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes 6,908 9,058 Income taxes 2,667 3,282 - ----------------------------------------------------------------------------------------------------------------------- NET INCOME $ 4,241 $ 5,776 - ----------------------------------------------------------------------------------------------------------------------- Earnings per share: Basic $ 0.24 $ 0.32 Diluted $ 0.23 $ 0.32 - ----------------------------------------------------------------------------------------------------------------------- </TABLE> See notes to interim consolidated financial statements. -4-
<TABLE> <CAPTION> NBT BANCORP INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------- Additional Accumulated Paid-in- Other Common Capital Retained Comprehensive Treasury Stock Surplus Earning (Loss)/Income Stock Total - ----------------------------------------------------------------------------------------------------------------------- (in thousands, except share and per share data) (Unaudited) <S> <C> <C> <C> <C> <C> <C> BALANCE AT DECEMBER 31, 1998 $17,946 $137,997 $23,132 $ 3,062 $(12,962) $169,175 Net income 5,776 5,776 Cash dividends - $0.162 per share (2,596) (2,596) Payment in lieu of fractional shares (16) (16) Issuance of 18,164 shares to stock plan 18 172 190 Purchase of 77,500 treasury shares (1,728) (1,728) Sale of 76,054 treasury shares to employee benefit plans and other stock plans (23) 1,646 1,623 Unrealized loss on securities available for sale, net of reclassification adjustment, and deferred taxes of $1,615 (2,464) (2,464) - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1999 $17,964 $138,146 $26,296 $ 598 $(13,044) $169,960 - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 $18,617 $148,717 $23,060 $(18,252) $(11,665) $160,477 Net income 4,241 4,241 Cash dividends - $0.170 per share (3,076) (3,076) Issuance of 6,468 shares to stock plan 6 63 69 Sale of 4,937 treasury shares to employee benefit plans and other stock plans (29) 107 78 Change $1.00 stated value per share to $0.01 par value per share (18,437) 18,437 - Stock option exercise (141) 247 106 Unrealized loss on securities available for sale, net of reclassification adjustment, and deferred taxes of $458 637 637 - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2000 $ 186 $167,047 $24,225 $(17,615) $(11,311) $162,532 - ----------------------------------------------------------------------------------------------------------------------- </TABLE> See notes to interim consolidated financial statements. -5-
<TABLE> <CAPTION> NBT BANCORP INC. AND SUBSIDIARY Three Months Ended March 31, CONSOLIDATED STATEMENTS OF CASH FLOWS 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- (in thousands) (Unaudited) <S> <C> <C> OPERATING ACTIVITIES: Net income $ 4,241 $ 5,776 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,334 1,120 Depreciation of premises and equipment 1,007 1,017 Net accretion on securities (516) (182) Amortization of intangible assets 312 329 Proceeds from sale of loans held for sale 1,943 5,140 Origination and purchases of loans held for sale (1,073) (10,000) Net gains on sales of loans 122 (69) Net gain on sale of other real estate owned (28) (188) Net realized gains on sales of securities - (668) Net (increase) decrease in other assets (1,518) 1,876 Net increase in other liabilities 2,392 1,096 - ----------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 8,216 5,247 - ----------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Securities available for sale: Proceeds from maturities 7,324 31,233 Proceeds from sales 200 99,510 Purchases (3,027) (125,162) Securities held to maturity: Proceeds from maturities 6,885 4,961 Purchases (8,942) (11,986) Net increase in loans (74,339) (27,070) Purchase of premises and equipment, net (469) (1,928) Proceeds from sales of other real estate owned 140 540 - ----------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (72,228) (29,902) - ----------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net increase (decrease) in deposits 46,131 (22,802) Net increase in short-term borrowings 27,878 19,776 Proceeds from issuance of long-term debt 5,000 25,000 Repayments of long-term debt (15,782) (743) Proceeds from issuance of common stock to stock plan 69 190 Exercise of stock options 106 - Proceeds from issuance of treasury shares to employee benefit plans and other stock plans 78 1,623 Purchase of treasury stock - (1,728) Cash dividends and payment for fractional shares (3,076) (2,612) - ----------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 60,404 18,704 - ----------------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (3,608) (5,951) Cash and cash equivalents at beginning of period 64,431 66,185 - ----------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 60,823 $ 60,234 - ----------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 17,443 $ 14,186 Income taxes 320 388 - ----------------------------------------------------------------------------------------------------------------------- </TABLE> See notes to interim consolidated financial statements. -6-
<TABLE> <CAPTION> NBT BANCORP INC. AND SUBSIDIARY Three Months Ended March 31, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2000 1999 - --------------------------------------------------------------------------------------------------- (in thousands) (Unaudited) <S> <C> <C> Net Income $ 4,241 $ 5,776 - --------------------------------------------------------------------------------------------------- Other comprehensive income, net of tax Unrealized holding gains (losses) arising during period [pre-tax amounts of $1,095 and $(3,411)] 637 (2,047) Less: Reclassification adjustment for net gains included in net income [pre-tax amounts of $- and $(668)] - (417) - --------------------------------------------------------------------------------------------------- Total other comprehensive income (loss) 637 (2,464) - --------------------------------------------------------------------------------------------------- Comprehensive income $ 4,878 $ 3,312 - --------------------------------------------------------------------------------------------------- </TABLE> See notes to interim consolidated financial statements. -7-
NBT BANCORP INC. AND SUBSIDIARY NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements include the accounts of NBT Bancorp Inc. (the Registrant) and its wholly-owned subsidiaries, NBT Bank, N.A. (NBT) and LA Bank, N.A. (LA). All intercompany transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation. The consolidated balance sheet at December 31, 1999 has been derived from the audited supplemental consolidated financial statements at that date, which appear in the Current Report on Form 8-K filed on March 31, 2000. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to FORM 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's annual report on FORM 10-K for the year ended December 31, 1999 and the supplemental consolidated financial statements referred to above. The March 31, 1999 interim consolidated financial statements have been restated to give effect to the merger with Lake Ariel Bancorp, Inc., which closed on February 17, 2000 and was accounted for as a pooling-of-interests. EARNINGS PER SHARE Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. All share and per share data has been adjusted retroactively for stock dividends and splits. The following is a reconciliation of basic and diluted earnings per share for the periods presented in the income statement. <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------- Three months ended March 31, 2000 1999 - ---------------------------------------------------------------------------------------------------- (in thousands, except per share data) <S> <C> <C> Basic EPS: Weighted average common shares outstanding 18,028 17,860 Net income available to common shareholders $ 4,241 $ 5,776 - ---------------------------------------------------------------------------------------------------- Basic EPS $ 0.24 $ 0.32 - ---------------------------------------------------------------------------------------------------- Diluted EPS: Weighted average common shares outstanding 18,028 17,860 Dilutive common stock options 106 244 - ---------------------------------------------------------------------------------------------------- Weighted average common shares and common share equivalents 18,134 18,104 Net income available to common shareholders $ 4,241 $ 5,776 - ---------------------------------------------------------------------------------------------------- Diluted EPS $ 0.23 $ 0.32 - ---------------------------------------------------------------------------------------------------- </TABLE> MERGERS AND ACQUISITIONS On February 17, 2000, the stockholders of NBT Bancorp Inc. and Lake Ariel Bancorp, Inc. (Lake Ariel) approved a merger whereby Lake Ariel 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 5.0 million shares of NBT Bancorp Inc. common stock, bringing the Company's outstanding shares to 18.1 million after the merger. The merger results in NBT Bancorp Inc. being the surviving holding company for NBT Bank, N.A. and LA Bank, N.A., a former subsidiary of Lake Ariel. The merger is being accounted for as a pooling-of-interests and qualifies as a tax-free exchange for Lake Ariel shareholders. -8-
LA Bank, N.A. is a commercial bank headquartered in northeast Pennsylvania with twenty-two branch offices in five counties and approximately $587 million in assets at March 31, 2000. The combined company, NBT Bancorp Inc., has combined assets over $2.0 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 $415 million at March 31, 2000 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. On March 28, 2000, NBT Bancorp Inc. and M. Griffith, Inc. jointly announced that a definitive agreement has been signed for NBT Bancorp Inc. to acquire all of the stock of M. Griffith, Inc. M. Griffith, Inc. is a Utica, New York based securities firm offering investment, financial advisor and asset-management services, primarily in the Mohawk Valley region. M. Griffith, Inc., a full-service broker/dealer and a Registered Investment Advisor, will become a wholly-owned subsidiary of NBT Financial Services, Inc. NBT Financial Services, Inc. was created in September of 1999 to concentrate on expanding NBT Bancorp Inc.'s menu of financial services beyond traditional bank product offerings. On April 20, 2000, NBT Bancorp Inc. and BSB Bancorp, Inc., the parent company of BSB Bank and Trust Company, announced the signing of a definitive agreement to merge. The merger is subject to the approval of each company's shareholders and of banking regulators. The merger is expected to close in the fourth quarter of 2000 and is intended to be accounted for as a pooling-of- interests and qualify as a tax-free exchange for BSB Bancorp, Inc. shareholders. Shareholders of BSB Bancorp, Inc. will receive a fixed ratio of 2.0 shares of NBT Bancorp Inc. common stock for each share exchanged. BSB Bank and Trust Company is a full service commercial bank with total assets of approximately $2.2 billion at March 31, 2000 and twenty-two branches in six counties in central New York and the Southern Tier. As a result of the merger, NBT Bank, N.A. and BSB Bank and Trust Company will be combined to create one of the largest independent community banks in upstate New York. This strategic alliance will create a bank holding company with assets of $4.7 billion and proforma market capitalization of approximately $539 million. The holding company will adopt a new name before the merger occurs. The combined company will have three direct operating subsidiaries including two community banks and a financial services company. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities". This statement establishes comprehensive accounting and reporting requirements for derivative instruments and hedging activities. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. The accounting for gains or losses resulting from changes in the values of those derivatives would be dependent on the use of the derivative and the type of risk being hedged. During the second quarter of 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133". FASB No. 137 defers the effective date of FASB No. 133 by one year from fiscal quarters of fiscal years beginning after June 15, 1999 to fiscal quarters of fiscal years beginning after June 15, 2000. At the present time, the Company has not fully analyzed the effect or timing of the adoption of SFAS No. 133 on the Company's consolidated financial statements. -9-
NBT BANCORP INC. AND SUBSIDIARY Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this discussion and analysis is to provide the reader with a concise description of the financial condition and results of operations of NBT Bancorp Inc. (Bancorp) and its wholly owned subsidiaries, NBT Bank, N.A. (NBT) and LA Bank N.A. (LA) collectively referred to herein as the Company. This discussion will focus on Results of Operations, Financial Position, Capital Resources and Asset/Liability Management. Reference should be made to the Company's consolidated financial statements and footnotes thereto included in this FORM 10-Q as well as to the Company's 1999 FORM 10-K for an understanding of the following discussion and analysis. In December 1999, the Company distributed a 5% stock dividend, the fortieth consecutive year a stock dividend has been declared. Throughout this discussion and analysis, amounts per common share and common shares outstanding have been adjusted retroactively for stock dividends and splits. On April 24, 2000, NBT Bancorp Inc. announced the declaration of a regular quarterly cash dividend of $0.17 per share. The cash dividend will be paid on June 15, 2000 to stockholders of record as of June 1, 2000. 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 risks 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, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality; and (5) changes may incur in business conditions and inflation. YEAR 2000 Concerns over the arrival of the Year 2000 ("Y2K") and its impact on the embedded computer technologies used by financial institutions, among others, led bank regulatory authorities to require substantial advance testing and preparations by all banking organizations, including the Company. As of the date of this filing, the Company has experienced no material problems in connection with the arrival of Y2K, either in connection with the services and products it provides to its customers or in connection with the services and products it receives from third party vendors or suppliers. However, while no such occurrence has developed, Y2K issues may arise that may not become immediately apparent. Therefore, the Company will continue to monitor and work to remedy any issues that arise. Although the Company expects that its business will not be materially impacted, such future events cannot be known with certainty. OVERVIEW Net income of $4.2 million ($0.23 per diluted share) was recognized in the first quarter of 2000, down from first quarter 1999 net income of $5.8 million ($0.32 per diluted share). The decline in net income can be attributed to the $1.1 million in merger related expenses recognized during the first quarter of 2000. Also contributing to the decline in net income as compared to the first quarter of 1999 is the $0.7 million in securities gains recognized during the first quarter of 1999. After taking these items into consideration, the Company's core earnings remained at the strong level experienced in the first quarter of 1999. Table 1 depicts several measurements of performance on an annualized basis. Returns on average assets and equity measure how effectively an entity utilizes its total resources and capital, respectively. Both the return on average assets and the return on average equity ratios declined for the quarter compared to the same period a year previous. Net interest margin, net federal taxable equivalent (FTE) interest income divided by average interest-earning assets, is a measure of an entity's ability to utilize its earning assets in relation to the cost of funding. Interest income for tax-exempt securities and loans is adjusted to a taxable equivalent basis using the statutory Federal income tax rate of 35%. -10-
<TABLE> <CAPTION> TABLE 1 PERFORMANCE MEASUREMENTS - ----------------------------------------------------------------------------------------- FIRST First QUARTER Quarter 2000 1999 - ----------------------------------------------------------------------------------------- <S> <C> <C> Return on average assets 0.86% 1.35% Return on average equity 10.59% 13.84% Net interest margin (FTE) 4.32% 4.52% - ----------------------------------------------------------------------------------------- </TABLE> NET INTEREST INCOME Net interest income is the difference between interest income on earning assets, primarily loans and securities, and interest expense on interest-bearing liabilities, primarily deposits and borrowings. Net interest income is affected by the interest rate spread, the difference between the yield on earning assets and cost of interest-bearing liabilities, as well as the volumes of such assets and liabilities. Net interest income is one of the major determining factors in a financial institution's performance as it is the principal source of earnings. Table 2 represents an analysis of net interest income on a federal taxable equivalent basis. Federal taxable equivalent (FTE) net interest income increased $2.1 million during the first quarter of 2000 compared to the same period of 1999. This increase can be attributed to a $258.4 million increase in average earning assets, primarily the result of continued loan growth. Total FTE interest income increased $6.1 million compared to first quarter 1999, a result of the previously mentioned increase in average earning assets as well as a 15 basis point increase in the yield earned on those earning assets. The increase in the yield on earning assets can be primarily attributed to a 16 basis point increase in the yield on the securities available for sale portfolio. During the same time period, total interest expense increased $4.0 million, primarily the result of a $229.4 million increase in average interest bearing liabilities between reporting periods. Also contributing to the increased interest expense was a 38 basis point increase in the cost of interest bearing liabilities, the result of the rising interest rate environment during late 1999 and the first quarter of 2000. Driving this increase in the cost of funds was a 35 basis point increase in the cost of time deposits and an 86 basis point increase in the cost of short-term borrowings. This increase in the cost of funds resulted in a 23 basis point decline in the interest rate spread, as the Company's liabilities repriced faster than the earning assets during the rising rate environment. Another important performance measurement of net interest income is the net interest margin. This is computed by dividing annualized FTE net interest income by average earning assets for the period. Net interest margin decreased to 4.32% for first quarter 2000, down from 4.52% for the comparable period in 1999. The decrease in the net interest margin can be attributed to the previously mentioned decrease in the interest rate spread as the interest bearing liabilities repriced faster than the earning assets during the recent rising interest rate environment. -11-
<TABLE> <CAPTION> TABLE 2 COMPARATIVE ANALYSIS OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME Three months ended March 31, ANNUALIZED YIELD/RATE AMOUNTS VARIANCE 2000 1999 (dollars in thousands) 2000 1999 TOTAL VOLUME RATE ---- ---- ---- ---- ----- ------ ---- <S> <C> <C> <C> <C> <C> <C> <C> 5.12% 4.07% Interest bearing deposits $ 6 $ 4 $ 2 $ - $ 2 5.48% 4.62% Federal funds sold 42 131 (89) (119) 30 6.61% 6.77% Other 354 322 32 40 (8) 6.88% 6.72% Securities available for sale 9,043 7,734 1,309 1,111 198 Securities held to maturity: 6.13% 6.12% Taxable 357 371 (14) (14) - 7.11% 6.60% Tax exempt 977 722 255 193 62 8.75% 8.68% LOANS 27,387 22,791 4,596 4,506 90 ------------------------------------------------------------------------------------- 8.12% 7.97% Total interest income 38,166 32,075 6,091 5,717 374 3.23% 2.85% Money market deposit accounts 903 793 110 - 110 1.38% 1.47% NOW deposit accounts 562 581 (19) - (19) 2.97% 2.99% Savings deposits 1,561 1,477 84 38 46 5.27% 4.92% Time deposits 10,420 8,155 2,265 178 2,087 5.58% 4.72% Short-term borrowings 2,054 1,139 915 884 31 5.62% 5.56% LONG-TERM DEBT 2,346 1,739 607 605 2 ------------------------------------------------------------------------------------ 4.49% 4.11% TOTAL INTEREST EXPENSE 17,846 13,884 3,962 1,705 2,257 ------------------------------------------------------------------------------------- Net interest income $20,320 $18,191 $ 2,129 $4,012 $( 1,883) ====================================================================================== 3.63% 3.86% Interest rate spread 4.32% 4.52% Net interest margin FTE adjustment $ 710 $ 473 ============== ======= ======= </TABLE> For purposes of the above yield computations, nonaccrual loans are included in the average loan balances outstanding and average securities are at amortized cost. Average balances used to calculate the yields are daily averages. PROVISION AND ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is a valuation allowance established to provide for the inherent risk of loss in the Company's loan portfolio. The allowance is maintained at a level considered adequate to provide for loan loss exposure based on management's estimate of probable losses in the portfolio considering an evaluation of risk, economic factors, and past loss experience. Management determines the provision and allowance for loan losses based on a number of factors including a comprehensive loan review program conducted throughout the year. The loan portfolio is continually evaluated in order to identify problem loans, credit concentration, and other risk factors such as economic conditions and trends. The allowance for loan losses to outstanding loans at March 31, 2000 was 1.35%, compared to 1.44% at March 31, 1999. Management considers the allowance for loan losses to be adequate based on evaluation and analysis of the loan portfolio. Table 3 reflects changes to the allowance for loan losses for the periods presented. The allowance is increased by provisions for losses charged to operations and is reduced by net charge-offs. Charge-offs are made when the collectability of loan principal within a reasonable time is unlikely. Any recoveries of previously charged-off loans are credited directly to the allowance for loan losses. Net charge-offs for the first quarter of 2000 were $0.4 million, or 0.14% of average loans, compared to $0.8 million, or 0.32% of average loans for the same period of 1999. -12-
<TABLE> <CAPTION> TABLE 3 ALLOWANCE FOR LOAN LOSSES - ------------------------------------------------------------------------------------------------------------- Three months ended March 31, (dollars in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> Balance, beginning of period $16,654 $15,322 Recoveries 248 221 Charge-offs (693) (1,055) - ------------------------------------------------------------------------------------------------------------- Net (charge-offs) (445) (834) Provision for loan losses 1,334 1,120 - ------------------------------------------------------------------------------------------------------------- Balance, end of period $17,543 $15,608 - ------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET CHARGE-OFFS Commercial and agricultural $ (97) 22% $ (376) 45% Real estate mortgage (86) 18% (28) 3% Consumer (262) 60% (430) 52% - ------------------------------------------------------------------------------------------------------------- Net charge-offs $ (445) 100% $ (834) 100% - ------------------------------------------------------------------------------------------------------------- Annualized net charge-offs to average loans 0.14% 0.32% - ------------------------------------------------------------------------------------------------------------- Net charge-offs to average loans for the year ended December 31, 1999 0.33% - ------------------------------------------------------------------------------------------------------------- </TABLE> NONINTEREST INCOME Table 4 below presents noninterest income for the first quarter of 2000 and 1999. Total noninterest income for the first quarter of 2000, excluding security gains, was stable when compared to first quarter 1999. Service charges on deposit accounts increased $0.2 million in the first quarter of 2000 compared to the same period of 1999. This improvement can be attributed to an increase in service fee and overdraft income resulting from growth in demand deposit accounts. Other income decreased $0.2 million in the first quarter of 2000 compared to the same period of 1999. This decrease can be attributed to a mark to market adjustment as a result of a decline in the market value of the Company's mortgage loans held for sale portfolio. Security gains decreased $0.7 million for the first quarter 2000 as compared to first quarter 1999. <TABLE> <CAPTION> TABLE 4 NONINTEREST INCOME - --------------------------------------------------------------------------------------------------------------- FIRST First QUARTER Quarter (dollars in thousands) 2000 1999 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> Trust income $ 860 $ 835 Service charges on deposit accounts 1,620 1,408 Securities gains - 668 Other income 1,135 1,365 - --------------------------------------------------------------------------------------------------------------- Total noninterest income $3,615 $4,276 - --------------------------------------------------------------------------------------------------------------- </TABLE> NONINTEREST EXPENSE AND OPERATING EFFICIENCY Table 5 presents components of noninterest expense as well as selected operating efficiency ratios. Total noninterest expense increased $3.2 million between the quarter ended March 31, 2000 and the same period for 1999. Contributing to this increase in the first quarter of 2000 was $1.1 million in merger and acquisition related expenses associated with the previously mentioned mergers. It is anticipated that the Company will incur approximately $11.2 million in additional merger and acquisition expenses related to the Lake Ariel and Pioneer American mergers during 2000. In addition, during 2000 and 2001 the Company anticipates incurring approximately $16.5 million of pre-tax merger and acquisition expenses related to the BSB Bancorp, Inc. merger. Salaries and employee benefits for the first quarter of 2000 increased $1.1 million compared to the same period of 1999, primarily the result of increased salaries and performance based incentives. Occupancy expense for the first quarter of 2000 experienced a $0.2 million increase compared to the same period in 1999. This increase can be attributed to an increase in security expense from a third party contract to enhance the maintenance of the Company's security equipment. Also contributing to the -13-
increase in occupancy expense was an increase in rental expense associated with the addition of branch and ATM locations through out our market areas. Equipment expense for the quarter ended March 31, 2000 experienced a $0.2 million increase compared to the same period in 1999, primarily attributable to increased equipment depreciation and maintenance. Other operating expense for the first quarter of 2000 experienced a $0.4 million increase compared to the first quarter of 1999. Included in the first quarter 1999 other operating expense was a nonrecurring gain of $0.2 million on the sale of other real estate owned. One important operating efficiency measure that the Company closely monitors is the efficiency ratio. The efficiency ratio is computed as total noninterest expense (excluding nonrecurring charges) divided by net interest income plus noninterest income (excluding net security gains and losses and nonrecurring income). The efficiency ratio increased to 57.24% in the first quarter of 2000 from 55.16% in the same period of 1999. This increase was a result of the increase in noninterest expense between reporting periods. <TABLE> <CAPTION> TABLE 5 NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS - --------------------------------------------------------------------------------------------- FIRST First QUARTER Quarter (dollars in thousands) 2000 1999 - --------------------------------------------------------------------------------------------- <S> <C> <C> Salaries and employee benefits 7,081 5,970 Office supplies and postage 592 637 Occupancy 1,232 1,024 Equipment 1,137 947 Professional fees and outside services 756 697 Data processing and communications 1,132 972 Amortization of intangible assets 312 329 Merger and acquisition costs 1,122 - Other operating 1,619 1,240 - --------------------------------------------------------------------------------------------- Total noninterest expense $14,983 $11,816 - --------------------------------------------------------------------------------------------- Efficiency ratio 57.24% 55.16% Average full-time equivalent employees 656 661 Average assets per average full-time equivalent employee (millions) $ 3.0 $ 2.6 - --------------------------------------------------------------------------------------------- </TABLE> INCOME TAXES Income tax expense was $2.7 million for the first quarter of 2000 compared to $3.3 million for the first quarter of 1999. The decrease in income taxes during the first quarter of 2000 can be attributed to the decreased income before income taxes between reporting periods. The effective tax rate was 38.6% for the first quarter of 2000 and 36.2% for the same period of 1999. The increase in the effective tax rate can be attributed to non-deductible merger and acquisition costs. BALANCE SHEET The following table highlights the changes in the balance sheet. Since period end balances can be distorted by one day fluctuations, the discussion and analysis concentrates on average balances when appropriate to give a better indication of balance sheet trends. -14-
<TABLE> <CAPTION> TABLE 6 AVERAGE BALANCES - ---------------------------------------------------------------------------------------------------- Three months ended March 31, (dollars in thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------- <S> <C> <C> Cash and cash equivalents $ 53,078 $ 55,533 Securities available for sale, at fair value 496,279 471,104 Securities held to maturity 78,691 68,977 Loans 1,258,144 1,065,313 Deposits 1,493,278 1,334,062 Short-term borrowings 148,120 97,876 Long-term debt 168,004 126,812 Stockholders' equity 161,042 169,273 Assets 1,983,649 1,741,376 Earning assets 1,890,843 1,632,450 Interest bearing liabilities $1,599,924 $1,370,544 - ---------------------------------------------------------------------------------------------------- </TABLE> SECURITIES Average total securities were $34.9 million greater for the first quarter of 2000 than for the same period of 1999. The majority of this increase was in the available for sale portfolio. During the first quarter of 2000, the securities portfolio represented 32.1% of average earning assets compared to 32.8% for the first quarter of 1999. At March 31, 2000, the securities portfolio was comprised of 86% available for sale and 14% held to maturity securities. LOANS The Company has continued to experience strong growth in the loan portfolio. Average loan volume for the first quarter of 2000 was $192.8 million, or 18.1% greater than the first quarter 1999 average. This growth has been present in all loan categories, with increases in the average commercial, consumer and mortgage portfolios of $125.1 million, $53.5 million and $14.2 million, respectively. The Company has continued to experience an increase in the demand for commercial loans, primarily in the business and real estate categories. The Company does not engage in highly leveraged transactions or foreign lending activities. NONPERFORMING ASSETS AND PAST DUE LOANS Nonperforming assets consist of nonaccrual loans and other real estate owned (OREO). Loans are generally placed on nonaccrual when principal or interest payments become ninety days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair market value, less any estimated disposal costs. Total nonperforming assets were $8.5 million at March 31, 2000 compared to $7.9 million at March 31, 1999. An increase of $2.0 million in nonaccrual commercial and agricultural loans was partially offset by a decrease in other real estate owned of $1.1 million. A significant portion of the increase in nonaccrual commercial loans can be attributed to two customers. Total assets containing risk elements were $9.2 million, or 0.45% of assets at March 31, 2000 compared to $8.8 million, or 0.49% of assets at March 31, 1999. The reduction in assets containing risk elements to assets indicates an improvement in asset quality. At March 31, 2000, the recorded investment in impaired loans was $6.4 million. Included in this amount is $3.2 million of impaired loans for which the specifically allocated allowance for loan loss is $1.0 million. In addition, included in impaired loans is $3.1 million of impaired loans that, as a result of the adequacy of collateral values and cash flow analysis, do not have a specific reserve. At December 31, 1999, the recorded investment in impaired loans was $4.7 million, of which $0.9 million had a specific allowance allocation of $0.5 million and $3.8 million for which there was no specific reserve. At March 31, 1999, the recorded investment in impaired loans was $4.4 million, of which $1.5 million had a specific allowance allocation of $0.5 million and $2.8 million of which there was no specific reserve. The Company classifies all commercial and small business nonaccrual loans as impaired loans. -15-
<TABLE> <CAPTION> TABLE 7 NONPERFORMING ASSETS AND RISK ELEMENTS - -------------------------------------------------------------------------------------------------------------- MARCH 31, March 31, (dollars in thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Commercial and agricultural $6,363 82% $4,385 73% Real estate mortgage 531 7% 691 11% Consumer 846 11% 953 16% - -------------------------------------------------------------------------------------------------------------- Total nonaccrual loans 7,740 100% 6,029 100% - -------------------------------------------------------------------------------------------------------------- Other real estate owned 789 1,896 - -------------------------------------------------------------------------------------------------------------- Total nonperforming assets 8,529 7,925 - -------------------------------------------------------------------------------------------------------------- Loans 90 days or more past due and still accruing: Commercial and agricultural 64 10% 21 3% Real estate mortgage 423 67% 515 61% Consumer 143 23% 299 36% - -------------------------------------------------------------------------------------------------------------- Total 630 100% 835 100% - -------------------------------------------------------------------------------------------------------------- Total assets containing risk elements $9,159 $8,760 - -------------------------------------------------------------------------------------------------------------- Total nonperforming loans to loans 0.60% 0.56% Total loans containing risk elements to loans 0.65% 0.63% Total nonperforming assets to assets 0.42% 0.44% Total assets containing risk elements to assets 0.45% 0.49% - -------------------------------------------------------------------------------------------------------------- </TABLE> DEPOSITS Customer deposits represent the greatest source of funding assets. Average total deposits for the quarter ended March 31, 2000 were $1.5 billion compared to $1.3 billion at March 31, 1999. This growth has been present in all deposit categories, with increases in the average demand, savings and time deposits of $21.3 million, $14.4 million and $123.6 million, respectively. As previously mentioned, the increase in demand deposits has led to an increase in service charge fee income. BORROWED FUNDS The Company's borrowed funds consist of short-term borrowings and long-term debt. Average short-term borrowings for the first quarter of 2000 were $148.1 million compared to $97.9 million for the same period of 1999. Average long-term debt for the first quarter of 2000 was $168.0 million compared to $126.8 million for the same period of 1999. The increase in borrowed funds between reporting periods can be attributed to the need for funding the strong loan growth. CAPITAL AND DIVIDENDS Stockholders' equity of $162.5 million represents 8.0% of total assets at March 31, 2000, compared with $170.0 million, or 9.5% a year previous, and $160.5 million, or 8.2% at December 31, 1999. In December 1999, the Company distributed a 5% stock dividend, the fortieth consecutive year a stock dividend has been declared. 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. 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. As the capital ratios in Table 8 indicate, the Company remains well capitalized. Capital measurements are significantly in excess of regulatory minimum guidelines and meet the requirements to be considered well capitalized for all periods presented. Tier 1 leverage, Tier 1 capital and Risk-based capital ratios have regulatory minimum guidelines of 3%, 4% and 8% respectively, with requirements to be considered well capitalized of 5%, 6% and 10%, respectively. -16-
<TABLE> <CAPTION> TABLE 8 CAPITAL MEASUREMENTS - ------------------------------------------------------------------------------------------------------------- FIRST First QUARTER Quarter 2000 1999 - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Tier 1 leverage ratio 8.61% 9.24% Tier 1 capital ratio 12.93% 14.73% Total risk-based capital ratio 14.08% 15.90% Cash dividends as a percentage of net income 72.53% 44.94% Per common share: Book value $ 8.98 $ 9.45 Tangible book value $ 8.53 $ 8.92 - ------------------------------------------------------------------------------------------------------------- </TABLE> The accompanying Table 9 presents the high, low and closing sales price for the common stock as reported on the NASDAQ Stock Market, and cash dividends declared per share of common stock. At March 31, 2000, total market capitalization of the Company's common stock was approximately $262 million compared with $358 million at March 31, 1999. The Company's price to book value ratio was 1.61 at March 31, 2000 and 2.10 a year ago. The Company's price was 16 times annualized earnings at March 31, 2000, compared to 15 times a year previous. <TABLE> <CAPTION> TABLE 9 QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION* - ---------------------------------------------------------------------------------------------------------- Cash Dividends Quarter Ending High Low Close Declared - ---------------------------------------------------------------------------------------------------------- 1999 - ---------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> March 31 $23.33 $19.89 $19.89 $0.162 June 30 21.19 19.05 19.52 0.162 September 30 20.90 16.43 16.49 0.162 December 31 17.98 14.63 15.50 0.170 - ---------------------------------------------------------------------------------------------------------- 2000 - ---------------------------------------------------------------------------------------------------------- MARCH 31 $16.50 $11.38 $14.50 $0.170 - ---------------------------------------------------------------------------------------------------------- </TABLE> [FN] *historical NBT Bancorp Inc. only </FN> LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT The primary objectives of asset and liability management are to provide for the safety of depositor and investor funds, assure adequate liquidity, and maintain an appropriate balance between interest sensitive earning assets and interest bearing liabilities. Liquidity management involves the ability to meet the cash flow requirements of customers who may be depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. The Asset/Liability Management Committee (ALCO) is responsible for liquidity management and has developed guidelines which cover all assets and liabilities, as well as off balance sheet items that are potential sources or uses of liquidity. Liquidity must also provide the flexibility to implement appropriate strategies and tactical actions. Requirements change as loans grow, deposits and securities mature, and payments on borrowings are made. Interest rate sensitivity management seeks to avoid widely fluctuating net interest margins and to ensure consistent net interest income through periods of changing economic conditions. The Company's primary measure of liquidity is called the basic surplus, which compares the adequacy of cash sources to the amounts of volatile funding sources. This approach recognizes the importance of balancing levels of cash flow liquidity from short and long-term securities with the availability of dependable borrowing sources. Accordingly, the Company has established borrowing agreements with other banks (Federal Funds), the Federal Home Loan Bank (short and long-term borrowings which are denoted as advances), and repurchase agreements with investment companies. The Asset/Liability Management Committee has determined that liquidity is adequate to meet the cash flow requirements of the Company. Interest rate risk is determined by the relative sensitivities of earning asset yields and interest bearing liability costs to changes in interest rates. The method by which banks evaluate interest rate risk is to look at the interest sensitivity gap, the difference between interest sensitive assets and interest sensitive liabilities repricing during the same period, measured at a specific point in time. Through analysis of the interest sensitivity gap, the Company -17-
attempts to position its assets and liabilities to maximize net interest income in several different interest rate scenarios. While the static gap evaluation of interest rate sensitivity is useful, it is not indicative of the impact of fluctuating interest rates on net interest income. Once the Company determines the extent of gap sensitivity, the next step is to quantify the potential impact of the interest sensitivity on net interest income. The Company measures interest rate risk based on the potential change in net interest income under various rate environments. The Company utilizes an interest rate risk model that simulates net interest income under various interest rate environments. The model groups assets and liabilities into components with similar interest rate repricing characteristics and applies certain assumptions to these products. These assumptions include, but are not limited to prepayment estimates under different rate environments, potential call options of the investment portfolio and forecasted volumes of the various balance sheet items. The 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 March 31, 2000 balance sheet position. <TABLE> <CAPTION> TABLE 10 INTEREST RATE SENSITIVITY ANALYSIS - -------------------------------------------------------------------------------- Change in interest rates Percent change in (in basis points) net interest income - -------------------------------------------------------------------------------- <S> <C> +200 (3.12%) +100 (1.80%) - -100 0.97% - -200 1.13% - -------------------------------------------------------------------------------- </TABLE> -18-
PART II. OTHER INFORMATION Item 1 -- 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 2 -- Changes in Securities Following are listed changes in the Company's Common Stock outstanding during the quarter ended March 31, 2000 as well as certain actions which have been taken which may affect the number of shares of Common Stock (shares) outstanding in the future. There was no Preferred Stock outstanding during the quarter ended March 31, 2000. At a Special Meeting of Stockholders held on February 17, 2000, the stockholders of NBT Bancorp Inc. approved two amendments to the Company's Certificate of Incorporation. The first amendment changed the Company's common and preferred stock from no par value, $1.00 stated value per share to shares having a par value of $.01 per share. The second amendment increased the number of authorized shares of NBT Bancorp Inc. common stock from 15 million to 30 million. Item 3 -- Defaults Upon Senior Securities This item is omitted because there were no defaults upon the Company's senior securities during the quarter ended March 31, 2000. Item 4 -- Submission of Matters to a Vote of Security Holders The Company held a Special Meeting of Stockholders on February 17, 2000. Stockholders approved the following proposals: a. Proposal to approve the amendment to Article Fourth of NBT's Certificate of Incorporation to change NBT's authorized common stock and preferred stock from no par value, stated value $1.00 per share to a par value of $.01 per share. The proposal was approved, with 10,177,577 votes FOR, 489,762 votes AGAINST, and 363,007 votes ABSTAINING. b. Proposal to approve the amendment to Article Fourth of NBT's Certificate of Incorporation to increase the number of authorized shares of common stock from 15 million to 30 million. The proposal was approved, with 10,255,583 votes FOR, 556,831 votes AGAINST, and 217,895 votes ABSTAINING. c. To approve a proposal to ratify a change to Article III, Section 2 of the NBT Bancorp Inc. Bylaws, relating to the number, classification and qualification of directors, previously approved by the NBT Bancorp Inc. Board of Directors. The proposal was approved, with 9,087,635 votes FOR, 929,423 votes AGAINST, and 242,839 votes ABSTAINING. d. To approve the Agreement and Plan of Merger, dated as of August 16, 1999, and amended as of December 13, 1999 and further amended as of December 27, 1999, by and between NBT Bancorp Inc. and Lake Ariel Bancorp, Inc. which, among other things, Lake Ariel will merge with and into NBT Bancorp Inc., with NBT Bancorp Inc. being the surviving corporation and NBT Bancorp Inc. will issue approximately 4.8 million shares of common stock to the Lake Ariel stockholders upon completion of the merger. -19-
The proposal was approved, with 9,588,479 votes FOR, 518,735 votes AGAINST, and 152,681 votes ABSTAINING. Item 5 -- Other Information Not Applicable Item 6 -- Exhibits and Reports on FORM 8-K (a) An index to exhibits follows the signature page of this FORM 10-Q. (b) During the first quarter ended March 31, 2000, the Company filed the following Current Reports on Form 8-K: Current report on Form 8K filed with the Securities and Exchange Commission on February 22, 2000 Current report on Form 8K filed with the Securities and Exchange Commission on March 3, 2000 Current report on Form 8K filed with the Securities and Exchange Commission on March 31, 2000 -20-
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on FORM 10-Q to be signed on its behalf by the undersigned thereunto duly authorized, this 15th day of May, 2000. NBT BANCORP INC. By: /S/ MICHAEL J. CHEWENS ------------------------------- Michael J. Chewens, CPA Executive Vice President Chief Financial Officer and Treasurer -21-
INDEX TO EXHIBITS The following documents are attached as Exhibits to this FORM 10-Q or, if annotated by the symbol *, are incorporated by reference as Exhibits as indicated by the page number or exhibit cross-reference to the prior filings of the Registrant with the Commission. <TABLE> <CAPTION> FORM 10-Q Exhibit Exhibit NUMBER CROSS-REFERENCE - ------ --------------- <S> <C> <C> 3.1 Certificate of Incorporation of NBT Bancorp Inc., as amended through February 17, 2000 Herein 10.1 NBT Bancorp Inc. 1993 Stock Option Plan as amended through January 24, 2000 Herein 10.2 Form of Employment Agreement between NBT Bancorp Inc. and Daryl R. Forsythe made as of January 1, 2000 Herein 10.3 Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank, National Association and Daryl R. Forsythe made as of January 1, 1995 and as revised on April 28, 1998, and on January 1, 2000 Herein 10.4 Form of Employment Agreement between NBT Bancorp Inc. and Martin A. Dietrich made as of January 1, 2000 Herein 10.5 Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank, National Association and Martin A. Dietrich made as of January 1, 2000 Herein 10.6 Form of Employment Agreement between NBT Bancorp Inc. and Joe C. Minor made as of January 1, 2000 Herein 10.7 Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank, National Association and Joe C. Minor made as of January 1, 2000 Herein 10.8 Form of Employment Agreement between NBT Bancorp Inc. and John G. Martines made as of February 17, 2000 Herein 10.9 Form of Change-In-Control Agreement between NBT Bancorp Inc. and the following officers of NBT Bancorp Inc. or one or more of its subsidiaries: John R. Bradley, Michael J. Chewens, Rita K. DeMarko, Martin A. Dietrich, Joseph J. Earyes, Daryl R. Forsythe, John G. Martines, Joe C. Minor, Jane Neal, David E. Raven, Kenneth C. Reilly, and John D. Roberts Herein 10.10 NBT Bancorp Inc. 2000 Executive Incentive Compensation Plan Herein 27.1 Financial Data Schedule for period ending March 31, 2000 Herein 27.2 Financial Data Schedule for period ending March 31, 1999 Herein </TABLE> -22-