NBT 2nd Quarter 10Q
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 June 30, 2005.
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 [ ]
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2).
Yes
[X]
No [ ]
As
of
July 29, 2005, there were 32,521,095 shares outstanding of the Registrant's
common stock, $0.01 par value.
NBT
BANCORP INC.
FORM
10-Q--Quarter
Ended June 30, 2005
TABLE
OF CONTENTS
PART I |
FINANCIAL
INFORMATION |
|
|
Item 1 |
Interim Financial Statements
(Unaudited) |
|
|
|
Consolidated Balance Sheets at June
30,
2005, December 31, 2004 and June 30, 2004 |
|
|
|
Consolidated
Statements of Income for the three and six-month periods ended June
30,
2005 and
2004 |
|
|
|
Consolidated Statements of
Stockholders’ Equity for the six-month periods ended June 30, 2005 and
2004 |
|
|
|
Consolidated Statements of Cash Flows
for the six-month periods ended June 30, 2005 and 2004 |
|
|
|
Consolidated Statements of
Comprehensive Income for the three and six-month periods ended June
30,
2005 and 2004 |
|
|
|
Notes to Unaudited Interim Consolidated
Financial Statements |
|
|
Item 2 |
Management's Discussion and Analysis
of
Financial Condition and Results of Operations |
|
|
Item 3 |
Quantitative and Qualitative
Disclosures about Market Risk |
|
|
Item 4 |
Controls and Procedures |
|
|
PART II |
OTHER
INFORMATION |
|
|
Item 1 |
Legal Proceedings |
Item 2 |
Unregistered Sales of Equity Securities
and Use of Proceeds |
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 |
NBT
Bancorp Inc. and Subsidiaries
Consolidated
Balance Sheets (unaudited)
|
|
|
June
30,
2005
|
|
|
December
31,
2004
|
|
|
June
30, 2004
|
|
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
118,358
|
|
$
|
98,437
|
|
$
|
102,705
|
|
Short-term
interest bearing accounts
|
|
|
6,078
|
|
|
8,286
|
|
|
7,240
|
|
Securities
available for sale, at fair value
|
|
|
961,944
|
|
|
952,542
|
|
|
980,097
|
|
Securities
held to maturity (fair value - $89,465, $82,712 and
$80,390)
|
|
|
88,771
|
|
|
81,782
|
|
|
79,766
|
|
Federal
Reserve and Federal Home Loan Bank stock
|
|
|
39,442
|
|
|
36,842
|
|
|
35,994
|
|
Loans
and leases
|
|
|
2,995,964
|
|
|
2,869,921
|
|
|
2,753,625
|
|
Less
allowance for loan and lease losses
|
|
|
46,411
|
|
|
44,932
|
|
|
43,482
|
|
Net
loans
|
|
|
2,949,553
|
|
|
2,824,989
|
|
|
2,710,143
|
|
Premises
and equipment, net
|
|
|
64,133
|
|
|
63,743
|
|
|
62,008
|
|
Goodwill
|
|
|
47,544
|
|
|
45,570
|
|
|
47,521
|
|
Intangible
assets, net
|
|
|
4,092
|
|
|
2,013
|
|
|
2,189
|
|
Bank
owned life insurance
|
|
|
32,968
|
|
|
32,302
|
|
|
31,609
|
|
Other
assets
|
|
|
68,481
|
|
|
65,798
|
|
|
66,102
|
|
TOTAL
ASSETS
|
|
$
|
4,381,364
|
|
$
|
4,212,304
|
|
$
|
4,125,374
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
Demand
(noninterest bearing)
|
|
$
|
569,046
|
|
$
|
520,218
|
|
$
|
490,573
|
|
Savings,
NOW, and money market
|
|
|
1,386,720
|
|
|
1,435,561
|
|
|
1,494,278
|
|
Time
|
|
|
1,222,293
|
|
|
1,118,059
|
|
|
1,055,758
|
|
Total
deposits
|
|
|
3,178,059
|
|
|
3,073,838
|
|
|
3,040,609
|
|
Short-term
borrowings
|
|
|
384,171
|
|
|
338,823
|
|
|
349,144
|
|
Trust
preferred debentures
|
|
|
18,720
|
|
|
18,720
|
|
|
18,720
|
|
Long-term
debt
|
|
|
419,377
|
|
|
394,523
|
|
|
369,567
|
|
Other
liabilities
|
|
|
50,288
|
|
|
54,167
|
|
|
39,659
|
|
Total
liabilities
|
|
|
4,050,615
|
|
|
3,880,071
|
|
|
3,817,699
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.01 par value; shares authorized- 50,000,000;
|
|
|
|
|
|
|
|
|
|
|
Shares
issffued 34,400,961, 34,401,008 and 34,401,041at June 30, 2005, December
31, 2004 and June
30, 2004, respectively
|
|
|
344
|
|
|
344
|
|
|
344
|
|
Additional
paid-in-capital
|
|
|
209,471
|
|
|
209,523
|
|
|
209,396
|
|
Retained
earnings
|
|
|
159,378
|
|
|
145,812
|
|
|
133,146
|
|
Unvested
stock awards
|
|
|
(747
|
)
|
|
(296
|
)
|
|
(413
|
)
|
Accumulated
other comprehensive income (loss)
|
|
|
2,240
|
|
|
4,989
|
|
|
(2,641
|
)
|
Treasury
stock at cost 2,030,509, 1,544,247, and
1,786,211 shares at June 30, 2005, December 31, 2004
and June 30, 2004, respectively
|
|
|
(39,937
|
)
|
|
(28,139
|
)
|
|
(32,157
|
)
|
Total
stockholders’ equity
|
|
|
330,749
|
|
|
332,233
|
|
|
307,675
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
4,381,364
|
|
$
|
4,212,304
|
|
$
|
4,125,374
|
|
See
notes
to unaudited interim consolidated financial statements.
NBT
Bancorp Inc. and Subsidiaries
|
|
Three
months ended June 30,
|
Six
months ended June 30,
|
Consolidated
Statements of Income (unaudited)
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
(in
thousands, except per share data)
|
|
|
|
Interest,
fee and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans and leases
|
|
$
|
46,260
|
|
$
|
39,635
|
|
$
|
90,204
|
|
$
|
79,529
|
|
Securities
available for sale
|
|
|
10,226
|
|
|
10,313
|
|
|
20,473
|
|
|
21,082
|
|
Securities
held to maturity
|
|
|
831
|
|
|
755
|
|
|
1,634
|
|
|
1,552
|
|
Other
|
|
|
549
|
|
|
235
|
|
|
1,016
|
|
|
502
|
|
Total
interest, fee and dividend income
|
|
|
57,866
|
|
|
50,938
|
|
|
113,327
|
|
|
102,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
12,018
|
|
|
9,674
|
|
|
22,738
|
|
|
19,719
|
|
Short-term
borrowings
|
|
|
2,207
|
|
|
794
|
|
|
4,068
|
|
|
1,587
|
|
Long-term
debt
|
|
|
4,032
|
|
|
3,627
|
|
|
7,840
|
|
|
7,242
|
|
Trust
preferred debentures
|
|
|
285
|
|
|
163
|
|
|
543
|
|
|
343
|
|
Total
interest expense
|
|
|
18,542
|
|
|
14,258
|
|
|
35,189
|
|
|
28,891
|
|
Net
interest income
|
|
|
39,324
|
|
|
36,680
|
|
|
78,138
|
|
|
73,774
|
|
Provision
for loan and lease losses
|
|
|
2,320
|
|
|
2,428
|
|
|
4,116
|
|
|
4,552
|
|
Net
interest income after provision for loan and lease losses
|
|
|
37,004
|
|
|
34,252
|
|
|
74,022
|
|
|
69,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
|
|
|
1,251
|
|
|
1,142
|
|
|
2,503
|
|
|
2,249
|
|
Service
charges on deposit accounts
|
|
|
4,311
|
|
|
4,090
|
|
|
8,240
|
|
|
8,127
|
|
ATM
and debit card fees
|
|
|
1,544
|
|
|
1,396
|
|
|
2,944
|
|
|
2,654
|
|
Broker/dealer
and insurance fees
|
|
|
736
|
|
|
1,783
|
|
|
2,088
|
|
|
3,514
|
|
Net
securities gains
|
|
|
51
|
|
|
29
|
|
|
47
|
|
|
38
|
|
Bank
owned life insurance income
|
|
|
333
|
|
|
409
|
|
|
666
|
|
|
794
|
|
Retirement
plan administration fees
|
|
|
1,156
|
|
|
-
|
|
|
2,019
|
|
|
-
|
|
Other |
|
|
1,673
|
|
|
1,140
|
|
|
3,259
|
|
|
3,056
|
|
Total
noninterest income
|
|
|
11,055
|
|
|
9,989
|
|
|
21,766
|
|
|
20,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
14,848
|
|
|
12,542
|
|
|
30,071
|
|
|
26,655
|
|
Office
supplies and postage
|
|
|
1,121
|
|
|
1,143
|
|
|
2,271
|
|
|
2,174
|
|
Occupancy
|
|
|
2,550
|
|
|
2,446
|
|
|
5,338
|
|
|
5,044
|
|
Equipment
|
|
|
1,931
|
|
|
1,781
|
|
|
4,027
|
|
|
3,634
|
|
Professional
fees and outside services
|
|
|
1,381
|
|
|
1,424
|
|
|
3,056
|
|
|
3,056
|
|
Data
processing and communications
|
|
|
2,530
|
|
|
2,852
|
|
|
5,188
|
|
|
5,544
|
|
Amortization
of intangible assets
|
|
|
142
|
|
|
71
|
|
|
260
|
|
|
142
|
|
Loan
collection and other real estate owned
|
|
|
208
|
|
|
99
|
|
|
609
|
|
|
471
|
|
Other
operating
|
|
|
3,985
|
|
|
3,505
|
|
|
6,757
|
|
|
6,345
|
|
Total
noninterest expenses
|
|
|
28,696
|
|
|
25,863
|
|
|
57,577
|
|
|
53,065
|
|
Income
before income tax expense
|
|
|
19,363
|
|
|
18,378
|
|
|
38,211
|
|
|
36,589
|
|
Income
tax expense
|
|
|
6,235
|
|
|
5,810
|
|
|
12,294
|
|
|
11,650
|
|
Net
income
|
|
$
|
13,128
|
|
$
|
12,568
|
|
$
|
25,917
|
|
$
|
24,939
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
$
|
0.38
|
|
$
|
0.80
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
0.40
|
|
$
|
0.38
|
|
$
|
0.79
|
|
$
|
0.75
|
|
See
notes
to unaudited interim consolidated financial statements.
NBT
Bancorp Inc. and Subsidiaries
|
Consolidated
Statements of Stockholders’ Equity (Unaudited)
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-in-
Capital
|
|
|
Retained
Earnings
|
|
|
Unvested
Stock
Awards
|
|
|
Accumulated
Other
Comprehensive
(Loss)/Income
|
|
|
Treasury
Stock
|
|
|
Total
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2003
|
|
$
|
344
|
|
$
|
209,267
|
|
$
|
120,016
|
|
$
|
(197
|
)
|
$
|
7,933
|
|
$
|
(27,329
|
)
|
$
|
310,034
|
|
Net
income
|
|
|
|
|
|
|
|
|
24,939
|
|
|
|
|
|
|
|
|
|
|
|
24,939
|
|
Cash
dividends - $0.36 per share
|
|
|
|
|
|
|
|
|
(11,809
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,809
|
)
|
Purchase
of 351,331 treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,558
|
)
|
|
(7,558
|
)
|
Issuance
of 134,147 shares to employee
benefit plans and other
stock plans,
including tax
benefit
|
|
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
2,494
|
|
|
2,564
|
|
Grant
of 24,371 shares of restricted stock
awards
|
|
|
|
|
|
59
|
|
|
|
|
|
(312
|
)
|
|
|
|
|
253
|
|
|
-
|
|
Forfeited
963 shares of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
(17
|
)
|
|
-
|
|
Amortization
of restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
79
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,574
|
)
|
|
|
|
|
(10,574
|
)
|
Balance
at June 30, 2004
|
|
$
|
344
|
|
$
|
209,396
|
|
$
|
133,146
|
|
$
|
(413
|
)
|
$
|
(2,641
|
)
|
$
|
(32,157
|
)
|
$
|
307,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2004
|
|
$
|
344
|
|
$
|
209,523
|
|
$
|
145,812
|
|
$
|
(296
|
)
|
$
|
4,989
|
|
$
|
(28,139
|
)
|
$
|
332,233
|
|
Net
income
|
|
|
|
|
|
|
|
|
25,917
|
|
|
|
|
|
|
|
|
|
|
|
25,917
|
|
Cash
dividends - $0.38 per share
|
|
|
|
|
|
|
|
|
(12,351
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,351
|
)
|
Purchase
of 671,543 treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,339
|
)
|
|
(15,339
|
)
|
Issuance
of 160,606 shares to employee
benefit plans and other stock
plans, including tax benefit
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
2,875
|
|
|
2,858
|
|
Grant
of 24,675 shares of restricted stock
awards
|
|
|
|
|
|
(35
|
) |
|
|
|
|
(631
|
)
|
|
|
|
|
666
|
|
|
-
|
|
Amortization
of restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
|
|
|
|
|
|
|
180
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,749
|
)
|
|
|
|
|
(2,749
|
)
|
Balance
at June 30, 2005
|
|
$
|
344
|
|
$
|
209,471
|
|
$
|
159,378
|
|
$
|
(747
|
)
|
$
|
2,240
|
|
$
|
(39,937
|
)
|
$
|
330,749
|
|
See
notes
to unaudited interim consolidated financial statements.
NBT
Bancorp Inc. and Subsidiaries
|
|
Six
Months Ended June 30,
|
Consolidated
Statements of Cash Flows (unaudited)
|
|
|
2005
|
|
|
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
25,917
|
|
$
|
24,939
|
|
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
4,116
|
|
|
4,552
|
|
Depreciation
of premises and equipment
|
|
|
3,169
|
|
|
3,028
|
|
Net
amortization on securities
|
|
|
731
|
|
|
1,459
|
|
Amortization
of intangible assets
|
|
|
260
|
|
|
142
|
|
Amortization
of restricted stock awards
|
|
|
180
|
|
|
79
|
|
Proceeds
from sale of loans held for sale
|
|
|
3,338
|
|
|
23,398
|
|
Origination
of loans held for sale
|
|
|
(3,694
|
)
|
|
(1,025
|
)
|
Net
gains on sale of loans
|
|
|
(9
|
)
|
|
(108
|
)
|
Net
gain on sale of other real estate owned
|
|
|
(160
|
)
|
|
(652
|
)
|
Net
security gains
|
|
|
(47
|
)
|
|
(38
|
)
|
Net
(increase) decrease in other assets
|
|
|
(1,198
|
)
|
|
6,198
|
|
Net
decrease in other liabilities
|
|
|
(3,776
|
)
|
|
(6,210
|
)
|
Net
cash provided by operating activities
|
|
|
28,827
|
|
|
55,762
|
|
Investing
activities:
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
Proceeds
from maturities
|
|
|
87,872
|
|
|
155,276
|
|
Proceeds
from sales
|
|
|
27,868
|
|
|
12,794
|
|
Purchases
|
|
|
(130,357
|
)
|
|
(185,197
|
)
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
Proceeds
from maturities
|
|
|
25,724
|
|
|
33,999
|
|
Purchases
|
|
|
(32,755
|
)
|
|
(16,572
|
)
|
Net
purchases of FRB and FHLB stock
|
|
|
(2,600
|
)
|
|
(1,951
|
)
|
Cash
paid for the acquisition of EPIC Advisor’s, Inc.
|
|
|
(6,130
|
)
|
|
-
|
|
Cash
received for the sale of M. Griffith Inc.
|
|
|
1,014
|
|
|
-
|
|
Net
increase in loans
|
|
|
(128,450
|
)
|
|
(140,095
|
)
|
Purchase
of premises and equipment, net
|
|
|
(3,368
|
)
|
|
(2,593
|
)
|
Proceeds
from sales of other real estate owned
|
|
|
477
|
|
|
1,899
|
|
Net
cash used in investing activities
|
|
|
(160,705
|
)
|
|
(142,440
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
104,221
|
|
|
39,253
|
|
Net
increase in short-term borrowings
|
|
|
45,348
|
|
|
46,214
|
|
Proceeds
from issuance of long term debt
|
|
|
24,854
|
|
|
30,000
|
|
Repayments
of long-term debt
|
|
|
-
|
|
|
(30,133
|
)
|
Proceeds
from issuance of treasury shares to employee benefit plans
and other stock plans, including tax benefit
|
|
|
2,858
|
|
|
2,564
|
|
Purchase
of treasury stock
|
|
|
(15,339
|
)
|
|
(7,558
|
)
|
Cash
dividends
|
|
|
(12,351
|
)
|
|
(11,809
|
)
|
Net
cash provided by financing activities
|
|
|
149,591
|
|
|
68,531
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
17,713
|
|
|
(18,147
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
106,723
|
|
|
128,092
|
|
Cash
and cash equivalents at end of period
|
|
$
|
124,436
|
|
$
|
109,945
|
|
Consolidated
Statements of Cash Flows, Continued
|
|
Six
Months Ended June 30,
|
Supplemental
disclosure of cash flow information:
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
34,785
|
|
$
|
29,705
|
|
Income
taxes
|
|
|
13,262
|
|
|
7,335
|
|
|
|
|
|
|
|
|
|
Transfers:
|
|
|
|
|
|
|
|
Loans
transferred to OREO
|
|
$
|
135
|
|
$
|
460
|
|
|
|
|
|
|
|
|
|
Dispositions:
|
|
|
|
|
|
|
|
Assets
sold
|
|
$
|
2,064
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
Fair
value of assets acquired
|
|
$
|
6,565
|
|
|
-
|
|
Fair
value of liabilities assumed
|
|
|
435
|
|
|
-
|
|
See
notes
to unaudited interim consolidated financial statements.
|
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
Consolidated
Statements of Comprehensive Income (unaudited)
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
(in
thousands)
|
|
|
|
Net
income
|
|
$
|
13,128
|
|
$
|
12,568
|
|
$
|
25,917
|
|
$
|
24,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains (losses) arising during period [pre-tax amounts
of $10,301, $(24,792), $(4,526) and $(17,548)]
|
|
|
6,194
|
|
|
(15,124
|
)
|
|
(2,721
|
)
|
|
(10,551
|
)
|
Less:
Reclassification adjustment for net gainsincluded
in net income [pre-tax amounts of $(51), $(29), $(47) and $(38)]
|
|
|
(31
|
)
|
|
(17
|
)
|
|
(28
|
)
|
|
(23
|
)
|
Total
other comprehensive income (loss)
|
|
|
6,163
|
|
|
(15,141
|
)
|
|
(2,749
|
)
|
|
(10,574
|
)
|
Comprehensive
income (loss)
|
|
$
|
19,291
|
|
$
|
(2,573
|
)
|
$
|
23,168
|
|
$
|
14,365
|
|
See
notes
to unaudited interim consolidated financial statements.
NBT
BANCORP INC. and Subsidiary
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June
30,
2005
Note
1. Description
of Business
NBT
Bancorp Inc. (the Company or the Registrant) is a registered financial holding
company incorporated in the state of Delaware in 1986, with its principal
headquarters located in Norwich, New York. The Company is the parent holding
company of NBT Bank, N.A. (the Bank), NBT Financial Services, Inc. (NBT
Financial) and CNBF Capital Trust I. Through these subsidiaries, the Company
operates as one segment focused on community banking operations. The Company’s
primary business consists of providing commercial banking and financial services
to its customers in its market area. The principal assets of the Company are
all
of the outstanding shares of common stock of its direct subsidiaries, and its
principal sources of revenue are the management fees and dividends it receives
from the Bank and NBT Financial.
The
Bank
is a full service commercial bank formed in 1856, which provides a broad range
of financial products to individuals, corporations and municipalities throughout
the central and upstate New York and northeastern Pennsylvania market area.
The
Bank conducts business through two operating divisions, NBT Bank and Pennstar
Bank.
Note
2. Basis
of Presentation
The
accompanying unaudited interim consolidated financial statements include the
accounts of NBT Bancorp Inc. and its wholly owned subsidiaries, NBT Bank, N.A.
and NBT Financial Services, Inc. Collectively, the Registrant and its
subsidiaries are referred to herein as “the Company”. 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.
CNBF
Capital Trust I (“Trust I”) is a Delaware statutory business trust formed in
1999, for the purpose of issuing $18 million in trust preferred securities
and
lending the proceeds to the Company. The Company guarantees, on a limited basis,
payments of distributions on the trust preferred securities and payments on
redemption of the trust preferred securities. Trust I is a variable interest
entity (VIEs) for which the Company is not the primary beneficiary, as defined
in Financial Accounting Standards Board Interpretation (“FIN”) No. 46
“Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51 (Revised December 2003 (FIN 46R)).” In accordance with
FIN 46R, which was implemented in the first quarter of 2004, the accounts of
Trust I are not included in the Company’s consolidated financial
statements.
Note
3. New
Accounting Pronouncements
During
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement
No. 123R, “Share-Based Payment”(“SFAS
123R”), which requires companies to measure and recognize compensation expense
for all stock-based payments at fair value. Stock-based payments include stock
option grants. The Company grants options to purchase common stock to some
of
its employees and directors under various plans at prices equal to the market
value of the stock on the dates the options were granted. SFAS 123R is effective
for the next fiscal year that begins after June 15, 2005. The Company is
continuing to evaluate the expected impact that the adoption of SFAS 123R will
have on its consolidated financial position, results of operations and cash
flows.
Emerging
Issues Task Force (EITF) Issue 03-1, “The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.”EITF
03-1
provides guidance for determining when an investment is considered impaired,
whether impairment is other-than-temporary, and measurement of an impairment
loss. An investment is considered impaired if the fair value of the investment
is less than its cost. Generally, an impairment is considered
other-than-temporary unless: (i) the investor has the ability and intent to
hold
an investment for a reasonable period of time sufficient for an anticipated
recovery of fair value up to (or beyond) the cost of the investment; and (ii)
evidence indicating that the cost of the investment is recoverable within a
reasonable period of time outweighs evidence to the contrary. If impairment
is
determined to be other-than-temporary, then an impairment loss should be
recognized equal to the difference between the investment’s cost and its fair
value. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and
the
Company began presenting the new disclosure requirements in its consolidated
financial statements for the year ended December 31, 2003. The recognition
and
measurement provisions were initially effective for other-than-temporary
impairment evaluations in reporting periods beginning after June 15, 2004.
However, in September 2004, the effective date of these provisions was delayed
until the finalization of a FASB Staff Position (FSP) to provide additional
implementation guidance.
In
June,
the FASB decided not to provide additional guidance on the meaning of
other-than-temporary impairment, but directed its staff to issue proposed FSP
EITF 03-1-a, “Implementation Guidance for the Application of Paragraph 16 of
EITF Issue No. 03-1,” as final. The final FSP will supersede EITF Issue No.
03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments,” and EITF Topic No. D-44, “Recognition of
Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost
Exceeds Fair Value.” The final FSP (retitled FSP FAS 115-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments”)
will replace the guidance set forth in paragraphs 10-18 of Issue 03-1 with
references to existing other-than-temporary impairment guidance, such as FASB
Statement No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”, SEC Staff Accounting Bulletin No. 59, “Accounting for Noncurrent
Marketable Equity Securities”, and APB Opinion No. 18, “The Equity Method of
Accounting for Investments in Common Stock.” FSP FAS 115-1 will codify the
guidance set forth in EITF Topic D-44 and clarify that an investor should
recognize an impairment loss no later than when the impairment is deemed other
than temporary, even if a decision to sell has not been made. The FASB decided
that FSP FAS 115-1 would be effective for other-than-temporary impairment
analysis conducted in periods beginning after September 15, 2005. The finalized
FSP FAS 115-1 should be issued during the third quarter of 2005. The Company
does not expect the impact of FSP FAS 115-1 will be material to its consolidated
financial position, results of operations and cash flows.
In
May
2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
154,
“Accounting Changes and Error Corrections, a replacement of APB Opinion No.
20
and FASB Statement No. 3.” SFAS 154 requires retrospective application to prior
periods’ financial statements for changes in accounting principle, unless it is
impracticable to determine either the period−specific effects or the cumulative
effect of the change. SFAS 154 also requires that retrospective application
of a
change in accounting principle be limited to the direct effects of the change.
Indirect effects of a change in accounting principle, such as a change in
non−discretionary profit−sharing payments resulting from an accounting change,
should be recognized in the period of the accounting change. SFAS 154 also
requires that a change in depreciation, amortization, or depletion method for
long−lived, non−financial assets be accounted for as a change in accounting
estimate effected by a change in accounting principle. SFAS 154 is effective
for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. Early adoption is permitted for accounting changes
and
corrections of errors made in fiscal years beginning after the date this
Statement is issued. The Company is required to adopt the provisions of SFAS
154, as applicable, beginning in fiscal 2006. Adoption of this statement could
have an impact if there are future voluntary accounting changes and correction
of errors.
Note
4. Use
of Estimates
Preparing
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilites at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period, as well as the disclosures provided. Actual results could differ from
those estimates. Estimates associated with the allowance for loan losses,
pension expense, fair values of financial instruments and status of
contingencies are particularly susceptible to material change in the near
term.
The
allowance for loan and lease losses is the amount which, in the opinion of
management, is necessary to absorb probable losses inherent in the loan and
lease portfolio. The allowance is determined based upon numerous considerations,
including local economic conditions, the growth and composition of the loan
portfolio with respect to the mix between the various types of loans and their
related risk characteristics, a review of the value of collateral supporting
the
loans, comprehensive reviews of the loan portfolio by the independent loan
review staff and management, as well as consideration of volume and trends
of
delinquencies, nonperforming loans, and loan charge-offs. As a result of the
test of adequacy, required additions to the allowance for loan and lease losses
are made periodically by charges to the provision for loan and lease
losses.
The
allowance for loan and lease losses related to impaired loans is based on
discounted cash flows using the loan’s initial effective interest rate or the
fair value of the collateral for certain loans where repayment of the loan
is
expected to be provided solely by the underlying collateral (collateral
dependent loans). The Company’s impaired loans are generally collateral
dependent. The Company considers the estimated cost to sell, on a discounted
basis, when determining the fair value of collateral in the measurement of
impairment if those costs are expected to reduce the cash flows available to
repay or otherwise satisfy the loans.
Management
believes that the allowance for loan and lease losses is adequate. While
management uses available information to recognize loan and lease losses, future
additions to the allowance for loan and lease losses may be necessary based
on
changes in economic conditions or changes in the values of properties securing
loans in the process of foreclosure. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the
Company’s allowance for loan and lease losses. Such agencies may require the
Company to recognize additions to the allowance for loan and lease losses based
on their judgments about information available to them at the time of their
examination which may not be currently available to management.
Other
real estate owned (OREO) consists of properties acquired through foreclosure
or
by acceptance of a deed in lieu of foreclosure. These assets are recorded at
the
lower of fair value of the asset acquired less estimated costs to sell or “cost”
(defined as the fair value at initial foreclosure). At the time of foreclosure,
or when foreclosure occurs in-substance, the excess, if any of the loan over
the
fair value of the assets received, less estimated selling costs, is charged
to
the allowance for loan and lease losses and any subsequent valuation write-downs
are charged to other expense. Operating costs associated with the properties
are
charged to expense as incurred. Gains on the sale of OREO are included in income
when title has passed and the sale has met the minimum down payment requirements
prescribed by GAAP.
Income
taxes are accounted for under the asset and liability method. The Company files
consolidated tax returns on the accrual basis. Deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Realization of deferred tax assets is dependent upon the generation of future
taxable income or the existence of sufficient taxable income within the
available carryback period. A valuation allowance is provided when it is more
likely than not that some portion of the deferred tax asset will not be
realized. Based on available evidence, gross deferred tax assets will ultimately
be realized and a valuation allowance was not deemed necessary at June 30,
2005
and 2004. The effect on deferred taxes of a change in tax rates is recognized
in
income in the period that includes the enactment date.
Note
5. Commitments
and Contingencies
The
Company is a party to financial instruments in the normal course of business
to
meet financing needs of its customers and to reduce its own exposure to
fluctuating interest rates. These financial instruments include commitments
to
extend credit, unused lines of credit, and standby letters of credit. Exposure
to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to make loans and standby letters of credit
is represented by the contractual amount of those instruments. The Company
uses
the same credit policy to make such commitments as it uses for on-balance-sheet
items. At June 30, 2005, and December 31, 2004, commitments to extend credit
and
unused lines of credit totaled $505.6 million and $507.4 million. Since
commitments to extend credit and unused lines of credit may expire without
being
fully drawn upon, this amount does not necessarily represent future cash
commitments. Collateral obtained upon exercise of the commitment is determined
using management’s credit evaluation of the borrower and may include accounts
receivable, inventory, property, land and other items.
The
Company guarantees the obligations or performance of customers by issuing
stand-by letters of credit to third parties. These stand-by letters of credit
are frequently issued in support of third party debt, such as corporate debt
issuances, industrial revenue bonds, and municipal securities. The risk involved
in issuing stand-by letters of credit is essentially the same as the credit
risk
involved in extending loan facilities to customers, and they are subject to
the
same credit origination, portfolio maintenance and management procedures in
effect to monitor other credit and off-balance sheet products. Typically, these
instruments have terms of five years or less and expire unused; therefore,
the
total amounts do not necessarily represent future cash requirements. Standby
letters of credit totaled $42.7 million at June 30, 2005 and $31.6 million
at
December 31, 2004. As of June 30, 2005, the fair value of standby letters of
credit was not material to the Company’s consolidated financial
statements.
Note
6. Earnings
per share
Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders 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 (such as the
Company’s dilutive stock options).
The
following is a reconciliation of basic and diluted earnings per share for
the
periods presented in the consolidated statements of income.
Three
months ended June 30,
|
|
|
2005
|
|
|
2004
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
32,323
|
|
|
32,758
|
|
Net
income available to common shareholders
|
|
$
|
13,128
|
|
$
|
12,568
|
|
Basic
EPS
|
|
$
|
0.41
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
32,323
|
|
|
32,758
|
|
Dilutive
potential common stock
|
|
|
261
|
|
|
326
|
|
Weighted
average common shares and common share
equivalents
|
|
|
32,584
|
|
|
33,084
|
|
Net
income available to common shareholders
|
|
$
|
13,128
|
|
$
|
12,568
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.40
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
Six
months ended June 30,
|
|
|
2005
|
|
|
2004
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
32,497
|
|
|
32,777
|
|
Net
income available to common shareholders
|
|
$
|
25,917
|
|
$
|
24,939
|
|
Basic
EPS
|
|
$
|
0.80
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
32,497
|
|
|
32,777
|
|
Dilutive
potential common stock
|
|
|
282
|
|
|
352
|
|
Weighted
average common shares and common share
equivalents
|
|
|
32,779
|
|
|
33,129
|
|
Net
income available to common shareholders
|
|
$
|
25,917
|
|
$
|
24,939
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.79
|
|
$
|
0.75
|
|
There
were 382,197 stock options for the quarter ended June 30, 2005 and 337,393
stock
options for the quarter ended June 30, 2004 that were not considered in the
calculation of diluted earnings per share since the stock options’ exercise
price was greater than the average market price during these periods. There
were
357,132 stock options for the six months ended June 30, 2005 and 337,393 stock
options for the six months ended June 30, 2004 that were not considered in
the
calculation of diluted earnings per share since the stock options’ exercise
price was greater than the average market price during these
periods.
Note
7. Stock-Based
Compensation
In
December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
Compensation - Transition and Disclosure” which provides guidance on how to
transition from the intrinsic value method of accounting for stock-based
employee compensation under Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees” to SFAS No. 123 “Accounting
for Stock-Based Compensation,” which accounts for stock-based compensation using
the fair value method of accounting, if a company so elects. The Company
currently accounts for stock-based employee compensation under APB No. 25.
As
such, compensation expense would be recorded only if the market price of the
underlying stock on the date of grant exceeded the exercise price. Because
the
fair value on the date of grant of the underlying stock of all stock options
granted by the Company is equal to the exercise price of the options granted,
no
compensation cost has been recognized for stock options in the accompanying
consolidated statements of income. Compensation expense for restricted stock
awards is based on the market price of the stock on the date of grant and is
recognized ratably over the vesting period of the award.
Had
the
Company determined compensation cost based on the fair value at the date of
grant for its stock options and employee stock purchase plan under SFAS No.
123,
the Company’s net income and net income per share would have been reduced to the
pro forma amounts indicated below:
|
|
Three
months ended
June
30,
|
|
Six
months ended
June
30,
|
|
(in
thousands, except per share data)
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Net
income, as reported
|
|
$
|
13,128
|
|
$
|
12,568
|
|
$
|
25,917
|
|
$
|
24,939
|
|
Add:
Stock-based compensation expense
included in reported net income,
net of related tax effects
|
|
|
98
|
|
|
26
|
|
|
164
|
|
|
49
|
|
Less:
Stock-based compensation expense
determined under fair value
method for all awards, net of
related tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(389
|
)
|
|
(289
|
)
|
|
(633
|
)
|
|
(571
|
)
|
Pro
forma net income
|
|
$
|
12,837
|
|
$
|
12,305
|
|
$
|
25,448
|
|
$
|
24,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
- as reported
|
|
$
|
0.41
|
|
$
|
0.38
|
|
$
|
0.80
|
|
$
|
0.76
|
|
Basic
- Pro forma
|
|
$
|
0.40
|
|
$
|
0.38
|
|
$
|
0.78
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
- as reported
|
|
$
|
0.40
|
|
$
|
0.38
|
|
$
|
0.79
|
|
$
|
0.75
|
|
Diluted
- Pro forma
|
|
$
|
0.39
|
|
$
|
0.37
|
|
$
|
0.77
|
|
$
|
0.74
|
|
The
Company granted 379,333 stock options for the six months ended June 30, 2005
with a weighted average exercise price of $23.11 per share compared to 343,552
stock options granted for the six months ended June 30, 2004 with a weighted
average exercise price of $22.15 per share. The per share weighted average
fair
value of the stock options granted for the six months ended June 30, 2005 and
2004 was $5.86 and $5.81. The assumptions used for the grants noted above were
as follows:
|
Six
months ended
June
30, 2005
|
Six
months ended
June
30, 2004
|
Dividend
Yield
|
3.17%
- 3.70%
|
3.01%
- 3.14%
|
Expected
Volatility
|
29.16%
- 30.00%
|
31.48%
- 31.51%
|
Risk-free
interest rate
|
3.85%
- 4.03%
|
3.56%
- 3.90%
|
Expected
life
|
7
years
|
7
years
|
The
fair
value of stock options granted was estimated at the date of grant using the
Black-Scholes option-pricing model. This model was developed for use in
estimating fair value of publicly traded options that have no vesting
restrictions and are fully transferable. Additionally, the model requires the
input of highly subjective assumptions. Because the Company’s employee and
director stock options have characteristics significantly different from those
of publicly traded stock options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s
opinion, the Black-Scholes option-pricing model does not provide a single
measure of the fair value of the Company’s employee and director stock
options.
Note
8. Goodwill
and Intangible Assets
A
summary
of goodwill by operating subsidiaries follows:
(in
thousands)
|
|
|
January
1,
2004
|
|
|
Goodwill
Acquired
|
|
|
Goodwill
Disposed
|
|
|
June
30,
2004
|
|
NBT
Bank, N.A.
|
|
$
|
44,520
|
|
|
-
|
|
|
-
|
|
$
|
44,520
|
|
NBT
Financial Services, Inc.
|
|
|
3,001
|
|
|
-
|
|
|
-
|
|
|
3,001
|
|
Total
|
|
$
|
47,521
|
|
$
|
-
|
|
$
|
-
|
|
$
|
47,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
January
1,
2005
|
|
|
Goodwill
Acquired
|
|
|
Goodwill
Disposed
|
|
|
June
30,
2005
|
|
NBT
Bank, N.A.
|
|
$
|
44,520
|
|
|
-
|
|
|
-
|
|
$
|
44,520
|
|
NBT
Financial Services, Inc.
|
|
|
1,050
|
|
|
3,024
|
|
|
1,050
|
|
|
3,024
|
|
Total
|
|
$
|
45,570
|
|
$
|
3,024
|
|
$
|
1,050
|
|
$
|
47,544
|
|
In
January 2005, the Company acquired EPIC Advisors, Inc., a 401(k) record keeping
firm located in Rochester, NY. In that transaction, the Company recorded
customer relationship intangible assets of $2.1 million and non-compete
provision intangible assets of $0.2 million, which have amortization periods
of
13 years and 5 years, respectively. Also in connection with the acquisition,
the
Company recorded $3.0 million in goodwill.
In
March
2005, the Company sold its broker/dealer subsidiary, M. Griffith Inc. In
connection with the sale of M. Griffith Inc., goodwill was reduced by $1.1
million and was allocated against the sales price. In the fourth quarter of
2004, the Company recorded a $2.0 million goodwill impairment charge in
connection with the above mentioned sale. A definitive agreement was signed
by
the Company and the acquirer in the fourth quarter of 2004. The negotiation
and
resolution of sale terms for M. Griffith Inc. during the fourth quarter of
2004
resulted in the goodwill impairment charge.
The
Company has finite-lived intangible assets capitalized on its consolidated
balance sheet in the form of core deposit and other intangible assets. These
intangible assets continue to be amortized over their estimated useful lives,
which range from one to twenty-five years.
A
summary
of core deposit and other intangible assets follows:
|
|
June
30,
|
|
|
|
2005
|
|
|
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Core
deposit intangibles:
|
|
|
|
|
|
|
|
Gross
carrying amount
|
|
$
|
2,186
|
|
$
|
2,186
|
|
Less:
accumulated amortization
|
|
|
1,446
|
|
|
1,214
|
|
Net
Carrying amount
|
|
|
740
|
|
|
972
|
|
|
|
|
|
|
|
|
|
Other
intangibles:
|
|
|
|
|
|
|
|
Gross
carrying amount
|
|
|
3,197
|
|
|
857
|
|
Less:
accumulated amortization
|
|
|
362
|
|
|
191
|
|
Net
Carrying amount
|
|
|
2,835
|
|
|
666
|
|
|
|
|
|
|
|
|
|
Other
intangibles not subject to amortization:
Pension asset
|
|
|
517
|
|
|
551
|
|
|
|
|
|
|
|
|
|
Total
intangibles with definite useful
lives:
|
|
|
|
|
|
|
|
Gross
carrying amount
|
|
|
5,900
|
|
|
3,594
|
|
Less:
accumulated amortization
|
|
|
1,808
|
|
|
1,405
|
|
Net
Carrying amount
|
|
$
|
4,092
|
|
$
|
2,189
|
|
Amortization
expense on finite-lived intangible assets is expected to total $0.4 million
for
the remainder of 2005, $0.5 million for each of 2006 and 2007, $0.4
million
for 2008 and $0.3 million for 2009 and $2.0 million thereafter.
Note
9. Defined
Benefit Pension Plan and Postretirement Health Plan
The
Company maintains a qualified, noncontributory, defined benefit pension plan
covering substantially all employees. Benefits paid from the plan are based
on
age, years of service, compensation, social security benefits, and are
determined in accordance with defined formulas. The Company’s policy is to fund
the pension plan in accordance with ERISA standards. In addition, the Company
provides certain health care benefits for retired employees. Benefits are
accrued over the employees’ active service period. Only employees that were
employed by NBT Bank, N.A. on or before January 1, 2000 are eligible to receive
postretirement health care benefits. The Company funds the cost of the
postretirement health plan as benefits are paid.
The
Components of pension expense and postretirement expense are set forth below
(in
thousands):
|
|
Three
months ended June 30,
|
Six
months ended June 30,
|
Pension
plan:
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
Service
cost
|
|
$
|
469
|
|
$
|
427
|
|
$
|
938
|
|
$
|
854
|
|
Interest
cost
|
|
|
561
|
|
|
533
|
|
|
1,122
|
|
|
1,066
|
|
Expected
return on plan assets
|
|
|
(947
|
)
|
|
(934
|
)
|
|
(1,894
|
)
|
|
(1,868
|
)
|
Net
amortization
|
|
|
374
|
|
|
64
|
|
|
748
|
|
|
128
|
|
Total
|
|
$
|
457
|
|
$
|
90
|
|
$
|
914
|
|
$
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
Health Plan:
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
Service
cost
|
|
$
|
9
|
|
$
|
9
|
|
$
|
18
|
|
$
|
18
|
|
Interest
cost
|
|
|
67
|
|
|
68
|
|
|
134
|
|
|
136
|
|
Net
amortization
|
|
|
(15
|
)
|
|
(10
|
)
|
|
(30
|
)
|
|
(20
|
)
|
Total
|
|
$
|
61
|
|
$
|
67
|
|
$
|
122
|
|
$
|
134
|
|
Note
10. Business
Combination
On
June
14, 2005, NBT announced that it had agreed to acquire CNB Bancorp, Inc. (CNB),
with total assets at March 31, 2005, of approximately $420 million, which is
headquartered in Gloversville, NY. The
consideration to be paid in the merger will be 45% cash and 55% stock.
Shareholders of CNB will be able to elect to receive either $38.00 in cash
or
1.64 shares of Company common stock, for each share of CNB common stock, subject
to customary proration and allocation procedures. The merger is expected
to close in the fourth quarter of 2005 pending regulatory and CNB shareholder
approval.
NBT
BANCORP INC. and Subsidiaries
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
NBT
Financial Services, Inc. (collectively referred to herein as the Company).
This
discussion will focus on Results of Operations, Financial Position, Capital
Resources and Asset/Liability Management. Reference should be made to the
Company's consolidated financial statements and footnotes thereto included
in
this Form 10-Q as well as to the Company's 2004 Form 10-K for an understanding
of the following discussion and analysis.
FORWARD
LOOKING STATEMENTS
Certain
statements in this filing and future filings by the Company with the Securities
and Exchange Commission, in the Company’s press releases or other public or
shareholder communications, contain forward-looking statements, 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.
There are a number of factors, many of which are beyond the Company’s control
that could cause actual results to differ materially from those contemplated
by
the forward looking statements. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: (1) competitive pressures among
depository and other financial institutions may increase significantly; (2)
revenues may be lower than expected; (3) changes in the interest rate
environment may effect interest margins; (4) general economic conditions, either
nationally or regionally, may be less favorable than expected, resulting in,
among other things, a deterioration in credit quality and/or a reduced demand
for credit; (5) legislative or regulatory changes, including changes in
accounting standards or tax laws, may adversely affect the businesses in which
the Company is engaged; (6) competitors may have greater financial resources
and
develop products that enable such competitors to compete more successfully
than
the Company; (7) adverse changes may occur in the securities markets or with
respect to inflation; (8) acts of war or terrorism; (9) the costs and effects
of
litigation and of unexpected or adverse outcomes in such litigation; (10)
internal control failures; (11) the costs that will be incurred from the CNB
acquisition and the risk of not obtaining regulatory or CNB shareholder
approval; and (12) the Company’s success in managing the risks involved in the
foregoing.
The
Company wishes to caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including those described above, could affect
the
Company’s financial performance and could cause the Company’s actual results or
circumstances for future periods to differ materially from those anticipated
or
projected.
Unless
required by law, the Company does not undertake, and specifically disclaims
any
obligations to publicly release the result of any revisions that may be made
to
any forward-looking statements to reflect statements to the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.
Critical
Accounting Policies
Management
of the Company considers the accounting policy relating to the allowance for
loan and lease losses to be a critical accounting policy given the uncertainty
in evaluating the level of the allowance required to cover credit losses
inherent in the loan and lease portfolio and the material effect that such
judgments can have on the results of operations. While management’s current
evaluation of the allowance for loan and lease losses indicates that the
allowance is adequate, under adversely different conditions or assumptions,
the
allowance would need to be increased. For example, if historical loan and lease
loss experience significantly worsened or if current economic conditions
significantly deteriorated, additional provisions for loan and lease losses
would be required to increase the allowance. In addition, the assumptions and
estimates used in the internal reviews of the Company’s non-performing loans and
potential problem loans has a significant impact on the overall analysis of
the
adequacy of the allowance for loan and lease losses. While management has
concluded that the current evaluation of collateral values is reasonable under
the circumstances, if collateral evaluations were significantly lowered, the
Company’s allowance for loan and lease policy would also require additional
provisions for loan and lease losses.
Management
of the Company considers the accounting policy relating to pension accounting
to
be a critical accounting policy.
Management is required to make various assumptions in valuing its pension assets
and liabilities. These assumptions include the expected rate of return on plan
assets, the discount rate, and the rate of increase in future compensation
levels. Changes to these assumptions could impact earnings in future periods.
The Company takes into account the plan asset mix, funding obligations, and
expert opinions in determining the various rates used to estimate pension
expense. The Company also considers the Moody’s AA corporate bond yields and
other market interest rates in setting the appropriate discount rate. In
addition, the Company reviews expected inflationary and merit increases to
compensation in determining the rate of increase in future compensation levels.
While differences in these rate assumptions could alter pension expense, given
not only past history, it is not expected that such estimates could adversely
impact pension expense.
Overview
The
Company earned net income of $13.1 million ($0.40 diluted earnings per share)
for the three months ended June 30, 2005 compared to net income of $12.6 million
($0.38 diluted earnings per share) for the three months ended June 30, 2004.
The
quarter to quarter increase in net income from 2005 to 2004 was primarily the
result of increases in net interest income of $2.6 million and noninterest
income of $1.1 million offset by increases in total noninterest expense of
$2.8
million and income tax expense of $0.4 million. The increase in net interest
income resulted primarily from 9% growth in average loans during the three
months ended June 30, 2005 compared to the same period in 2004. The increase
in
noninterest income was due mainly to $1.2 million in retirement plan
administration fees associated with the acquisition of EPIC Advisors, Inc.,
in
January 2005, as well as increases in service charges on deposit accounts,
ATM
and debit card fees and other income offset by a decrease in broker/dealer
and
insurance revenue of $1.0 million from the sale of M. Griffith Inc. in March
2005. The increase in total noninterest expense was due primarily to increases
in salaries and employee benefits of $2.3 million and other expense of $0.5
million. The increase in income tax expense resulted primarily from an increase
in income before taxes of $1.0 million period over period.
The
Company earned net income of $25.9 million ($0.79 diluted earnings per share)
for the six months ended June 30, 2005 compared to net income of $24.9 million
($0.75 diluted earnings per share) for the six months ended June 30, 2004.
The
increase in net income from 2005 to 2004 was primarily the result of increases
in net interest income of $4.4 million and noninterest income of $1.3 million
offset by increases in total noninterest expense of $4.5 million and income
tax
expense of $0.6 million. The increase in net interest income resulted primarily
from 9% growth in average loans during the six months ended June 30, 2005
compared to the same period in 2004. The increase in noninterest income was
due
mainly to $2.0 million in retirement plan administration fees associated with
the previously mentioned acquisition of EPIC Advisors, Inc., as well as
increases in trust fees, service charges on deposit accounts, ATM and debit
card
fees and other income offset by a decrease in broker/dealer and insurance
revenue of $1.4 million from the previously mentioned sale of M. Griffith Inc.
The increase in total noninterest expense was due primarily to increases in
salaries and employee benefits of $3.4 million, occupancy of $0.3 million,
equipment expense of $0.4 million and other expense of $0.4 million. The
increase in income tax expense resulted mainly from an increase in income before
taxes of $1.6 million period over period.
Table
1
depicts several annualized measurements of performance using GAAP net income.
Returns on average assets and equity measure how effectively an entity utilizes
its total resources and capital, respectively. Net interest margin, which is
the
net federal taxable equivalent (FTE) interest income divided by average earning
assets, is a measure of an entity's ability to utilize its earning assets in
relation to the cost of funding. Interest income for tax-exempt securities
and
loans is adjusted to a taxable equivalent basis using the statutory Federal
income tax rate of 35%.
Table
1
Performance
Measurements
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Six
Months
|
|
Return
on average assets (ROAA)
|
|
|
1.23
|
%
|
|
1.22
|
%
|
|
1.23
|
%
|
Return
on average equity (ROE)
|
|
|
15.74
|
%
|
|
16.21
|
%
|
|
15.99
|
%
|
Net
interest margin (Federal taxable equivalent)
|
|
|
4.09
|
%
|
|
4.02
|
%
|
|
4.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets (ROAA)
|
|
|
1.23
|
%
|
|
1.24
|
%
|
|
1.24
|
%
|
Return
on average equity (ROE)
|
|
|
15.73
|
%
|
|
16.05
|
%
|
|
15.89
|
%
|
Net
interest margin (Federal taxable equivalent)
|
|
|
4.10
|
%
|
|
3.99
|
%
|
|
4.04
|
%
|
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 $2.6 million during
the
three months ended June 30, 2005 compared to the same period of 2004. The
increase in FTE net interest income resulted primarily from 6% growth in average
earning assets. The Company’s interest rate spread declined 4 bp during the
three months ended June 30, 2005 compared to the same period in 2004. The yield
on earning assets for the period increased 36 bp to 5.86% for the three months
ended June 30, 2005 from 5.50% for the same period in 2004. Meanwhile, the
rate
paid on interest-bearing liabilities increased 40 bp, to 2.18% for the three
months ended June 30, 2005 from 1.78% for the same period in 2004.
Total
FTE
interest income for the three months ended June 30, 2005 increased $6.9 million
compared to the same period in 2004, a result of the previously mentioned
increase in average earning assets as well as the increase in yield on earning
assets of 36 bp. The growth in earning assets during the period was driven
primarily by growth in average loans and leases of 9%. The growth in average
loans and leases resulted primarily from growth in commercial and consumer
loans. The increase in the yield on earning assets can be primarily attributed
to variable rate earning assets that are tied to the Prime lending rate, which
has increased 200 bp since July 1, 2004.
During
the same time period, total interest expense increased $4.3 million, primarily
the result of the 200 bp increase in the Federal Funds rate since July 1, 2004,
which impacts the Company’s short-term borrowing and short-term time deposit
rates. Additionally, average interest-bearing liabilities increased $180.2
million for the three months ended June 30, 2005 when compared to the same
period in 2004. Total average interest-bearing deposits increased $101.6 million
for the three months ended June 30, 2005 when compared to the same period in
2004. The rate paid on average interest-bearing deposits increased 29 bp from
1.52% for the three months ended June 30, 2004 to 1.81% for the same period
in
2005. The increase interest-bearing deposits resulted primarily from increase
in
time deposits, which were up $179.7 million for the three months ended June
30,
2005 as compared to the same period in 2004. The increase in time deposits
was
driven mainly by an increase in municipal time deposits. Total borrowings
increased $78.6 million for the three months ended June 30, 2005 compared to
the
same period in 2004, primarily from loan growth exceeding deposit
growth.
Another
important performance measurement of net interest income is the net interest
margin. Net interest margin increased slightly to 4.02% for the three months
ended June 30, 2005, from 3.99% for the comparable period in 2004. The margin
remained stable for the three months ended June 30, 2005, despite recent
increases in the discount rate from 1.25% to 3.25% charged by the Federal
Reserve Bank which drives short-term interest rates. The Company thus far has
been successful in lagging deposit pricing increases and offsetting the impact
of increased short-term borrowing costs from increases in prime-based earning
assets and investing cash flow from loan and securities repayments at relatively
similar or higher rates. Additionally, average demand deposits are up 8% for
the
three months ended June 30, 2005, compared to the same period in 2004, as this
deposit source provides a positive benefit towards the Company’s net interest
margin.
Federal
taxable equivalent (FTE) net interest income increased $4.3 million during
the
six months ended June 30, 2005 compared to the same period of 2004. The increase
in FTE net interest income resulted primarily from 9% growth in average loans.
The Company’s interest rate spread declined 3 bp to 3.74% for the six months
ended June 30, 2005 compared to 3.77% for the same period in 2004. However,
the
Company’s net interest margin increased 2 bp during this same period, to 4.06%
for the six months ended June 30, 2005 from 4.04% for the same period a year
ago. The increase in the Company’s net interest margin is primarily attributable
to an 8% increase in average demand deposits. The yield on earning assets
increased 26 bp to 5.84% for the six months ended June 30, 2005 from 5.58%
for
the same period in 2004. Meanwhile, the rate paid on interest-bearing
liabilities increased 29 bp, to 2.10% for the six months ended June 30, 2005
from 1.81% for the same period in 2004.
Table
2
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%.
|
|
Three
months ended June 30,
|
|
|
2005
|
2004
|
(dollars
in thousands)
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/Rates
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/Rates
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
interest bearing accounts
|
|
$
|
6,411
|
|
$
|
45
|
|
|
2.81
|
%
|
$
|
7,282
|
|
$
|
58
|
|
|
3.20
|
%
|
Securities
available for sale (2)
|
|
|
955,166
|
|
|
10,724
|
|
|
4.50
|
%
|
|
974,046
|
|
|
10,922
|
|
|
4.51
|
%
|
Securities
held to maturity (2)
|
|
|
88,401
|
|
|
1,227
|
|
|
5.57
|
%
|
|
87,802
|
|
|
1,082
|
|
|
4.95
|
%
|
Investment
in FRB and FHLB Banks
|
|
|
36,617
|
|
|
504
|
|
|
5.52
|
%
|
|
33,301
|
|
|
178
|
|
|
2.15
|
%
|
Loans
(1)
|
|
|
2,943,631
|
|
|
46,401
|
|
|
6.32
|
%
|
|
2,698,654
|
|
|
39,762
|
|
|
5.92
|
%
|
Total
earning assets
|
|
|
4,030,226
|
|
|
58,901
|
|
|
5.86
|
%
|
|
3,801,085
|
|
|
52,002
|
|
|
5.50
|
%
|
Other
assets
|
|
|
276,778
|
|
|
|
|
|
|
|
|
272,059
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
4,307,004
|
|
|
|
|
|
|
|
$
|
4,073,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market deposit accounts
|
|
$
|
400,083
|
|
$
|
1,633
|
|
|
1.64
|
%
|
$
|
455,579
|
|
$
|
1,335
|
|
|
1.18
|
%
|
NOW
deposit accounts
|
|
|
444,284
|
|
|
527
|
|
|
0.48
|
%
|
|
457,314
|
|
|
538
|
|
|
0.47
|
%
|
Savings
deposits
|
|
|
572,070
|
|
|
1,007
|
|
|
0.71
|
%
|
|
581,589
|
|
|
926
|
|
|
0.64
|
%
|
Time
deposits
|
|
|
1,240,760
|
|
|
8,851
|
|
|
2.86
|
%
|
|
1,061,108
|
|
|
6,875
|
|
|
2.60
|
%
|
Total
interest bearing deposits
|
|
|
2,657,197
|
|
|
12,018
|
|
|
1.81
|
%
|
|
2,555,590
|
|
|
9,674
|
|
|
1.52
|
%
|
Short-term
borrowings
|
|
|
320,151
|
|
|
2,207
|
|
|
2.76
|
%
|
|
283,701
|
|
|
794
|
|
|
1.13
|
%
|
Trust
preferred debentures
|
|
|
18,720
|
|
|
285
|
|
|
6.10
|
%
|
|
18,720
|
|
|
163
|
|
|
3.50
|
%
|
Long-term
debt
|
|
|
411,732
|
|
|
4,032
|
|
|
3.93
|
%
|
|
369,611
|
|
|
3,627
|
|
|
3.94
|
%
|
Total
interest bearing liabilities
|
|
|
3,407,800
|
|
|
18,542
|
|
|
2.18
|
%
|
|
3,227,622
|
|
|
14,258
|
|
|
1.78
|
%
|
Demand
deposits
|
|
|
521,348
|
|
|
|
|
|
|
|
|
483,650
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
53,055
|
|
|
|
|
|
|
|
|
46,892
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
324,801
|
|
|
|
|
|
|
|
|
314,980
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
|
4,307,004
|
|
|
|
|
|
|
|
|
4,073,144
|
|
|
|
|
|
|
|
Net
interest income (FTE basis)
|
|
|
|
|
|
40,359
|
|
|
|
|
|
|
|
|
37,744
|
|
|
|
|
Interest
rate spread
|
|
|
|
|
|
|
|
|
3.68
|
%
|
|
|
|
|
|
|
|
3.72
|
%
|
Net
interest margin
|
|
|
|
|
|
|
|
|
4.02
|
%
|
|
|
|
|
|
|
|
3.99
|
%
|
Taxable
equivalent adjustment
|
|
|
|
|
|
1,035
|
|
|
|
|
|
|
|
|
1,064
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
39,324
|
|
|
|
|
|
|
|
$
|
36,680
|
|
|
|
|
(1)
For
purposes of these computations, nonaccrual loans are included in the average
loan balances
outstanding.
(2)
Securities are shown at average amortized cost.
|
|
Six
months ended June 30,
|
|
|
2005
|
2004
|
(dollars
in thousands)
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/Rates
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/Rates
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
interest bearing accounts
|
|
$
|
6,569
|
|
$
|
84
|
|
|
2.58
|
%
|
$
|
7,761
|
|
$
|
149
|
|
|
3.86
|
%
|
Securities
available for sale (2)
|
|
|
954,013
|
|
|
21,498
|
|
|
4.55
|
%
|
|
969,347
|
|
|
22,309
|
|
|
4.63
|
%
|
Securities
held to maturity (2)
|
|
|
86,602
|
|
|
2,403
|
|
|
5.61
|
%
|
|
91,878
|
|
|
2,227
|
|
|
4.87
|
%
|
Investment
in FRB and FHLB Banks
|
|
|
36,576
|
|
|
932
|
|
|
5.15
|
%
|
|
33,648
|
|
|
354
|
|
|
2.11
|
%
|
Loans
(1)
|
|
|
2,910,426
|
|
|
90,477
|
|
|
6.28
|
%
|
|
2,672,384
|
|
|
79,789
|
|
|
6.00
|
%
|
Total
earning assets
|
|
|
3,994,186
|
|
|
115,394
|
|
|
5.84
|
%
|
|
3,775,018
|
|
|
104,828
|
|
|
5.58
|
%
|
Other
assets
|
|
|
278,321
|
|
|
|
|
|
|
|
|
277,696
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
4,272,507
|
|
|
|
|
|
|
|
$
|
4,052,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market deposit accounts
|
|
$
|
408,382
|
|
$
|
3,084
|
|
|
1.53
|
%
|
$
|
438,225
|
|
$
|
2,536
|
|
|
1.16
|
%
|
NOW
deposit accounts
|
|
|
447,849
|
|
|
1,039
|
|
|
0.47
|
%
|
|
454,414
|
|
|
1,119
|
|
|
0.49
|
%
|
Savings
deposits
|
|
|
572,272
|
|
|
1,983
|
|
|
0.70
|
%
|
|
568,101
|
|
|
1,930
|
|
|
0.68
|
%
|
Time
deposits
|
|
|
1,202,462
|
|
|
16,632
|
|
|
2.79
|
%
|
|
1,077,779
|
|
|
14,134
|
|
|
2.64
|
%
|
Total
interest bearing deposits
|
|
|
2,630,965
|
|
|
22,738
|
|
|
1.75
|
%
|
|
2,538,519
|
|
|
19,719
|
|
|
1.56
|
%
|
Short-term
borrowings
|
|
|
324,912
|
|
|
4,068
|
|
|
2.53
|
%
|
|
286,658
|
|
|
1,587
|
|
|
1.11
|
%
|
Trust
preferred debentures
|
|
|
18,720
|
|
|
543
|
|
|
5.86
|
%
|
|
17,869
|
|
|
357
|
|
|
4.02
|
%
|
Long-term
debt
|
|
|
403,170
|
|
|
7,840
|
|
|
3.93
|
%
|
|
369,650
|
|
|
7,241
|
|
|
3.94
|
%
|
Total
interest bearing liabilities
|
|
|
3,377,767
|
|
|
35,189
|
|
|
2.10
|
%
|
|
3,212,696
|
|
|
28,904
|
|
|
1.81
|
%
|
Demand
deposits
|
|
|
513,447
|
|
|
|
|
|
|
|
|
476,186
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
53,933
|
|
|
|
|
|
|
|
|
48,310
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
327,360
|
|
|
|
|
|
|
|
|
315,522
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
4,272,507
|
|
|
|
|
|
|
|
|
4,052,714
|
|
|
|
|
|
|
|
Net
interest income (FTE basis)
|
|
|
|
|
|
80,205
|
|
|
|
|
|
|
|
|
75,924
|
|
|
|
|
Interest
rate spread
|
|
|
|
|
|
|
|
|
3.74
|
%
|
|
|
|
|
|
|
|
3.77
|
%
|
Net
interest margin
|
|
|
|
|
|
|
|
|
4.06
|
%
|
|
|
|
|
|
|
|
4.04
|
%
|
Taxable
equivalent adjustment
|
|
|
|
|
|
2,067
|
|
|
|
|
|
|
|
|
2,150
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
78,138
|
|
|
|
|
|
|
|
$
|
73,774
|
|
|
|
|
(1)
For
purposes of these computations, nonaccrual loans are included in the average
loan balances
outstanding.
(2)
Securities are shown at average amortized cost.
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.
Table
3
Analysis
of Changes in Taxable Equivalent Net Interest Income
Three
months ended June 30,
|
|
|
Increase
(Decrease)
2005
over 2004
|
(in
thousands)
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
interest bearing accounts
|
|
$
|
(7
|
)
|
$
|
(6
|
)
|
$
|
(13
|
)
|
Securities
available for sale
|
|
|
(212
|
)
|
|
14
|
|
|
(198
|
)
|
Securities
held to maturity
|
|
|
7
|
|
|
138
|
|
|
145
|
|
Investment
in FRB and FHLB Banks
|
|
|
19
|
|
|
307
|
|
|
326
|
|
Loans
|
|
|
3,752
|
|
|
2,887
|
|
|
6,639
|
|
Total
(FTE) interest income
|
|
|
3,235
|
|
|
3,664
|
|
|
6,899
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market deposit accounts
|
|
|
(178
|
)
|
|
476
|
|
|
298
|
|
NOW
deposit accounts
|
|
|
(15
|
)
|
|
4
|
|
|
(11
|
)
|
Savings
deposits
|
|
|
(15
|
)
|
|
96
|
|
|
81
|
|
Time
deposits
|
|
|
1,238
|
|
|
738
|
|
|
1,976
|
|
Short-term
borrowings
|
|
|
114
|
|
|
1,299
|
|
|
1,413
|
|
Trust
preferred debentures
|
|
|
-
|
|
|
122
|
|
|
122
|
|
Long-term
debt
|
|
|
412
|
|
|
(7
|
)
|
|
405
|
|
Total
interest expense
|
|
|
832
|
|
|
3,452
|
|
|
4,284
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in FTE net interest income
|
|
$
|
2,403
|
|
$
|
212
|
|
$
|
2,615
|
|
Six
months ended June 30,
|
|
Increase
(Decrease)
2005
over 2004
|
(in
thousands)
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
interest bearing accounts
|
|
$
|
(20
|
)
|
$
|
(45
|
)
|
$
|
(65
|
)
|
Securities
available for sale
|
|
|
(350
|
)
|
|
(461
|
)
|
|
(811
|
)
|
Securities
held to maturity
|
|
|
(133
|
)
|
|
309
|
|
|
176
|
|
Investment
in FRB and FHLB Banks
|
|
|
33
|
|
|
545
|
|
|
578
|
|
Loans
|
|
|
7,307
|
|
|
3,381
|
|
|
10,688
|
|
Total
(FTE) interest income
|
|
|
6,231
|
|
|
4,335
|
|
|
10,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market deposit accounts
|
|
|
(182
|
)
|
|
730
|
|
|
548
|
|
NOW
deposit accounts
|
|
|
(16
|
)
|
|
(64
|
)
|
|
(80
|
)
|
Savings
deposits
|
|
|
14
|
|
|
39
|
|
|
53
|
|
Time
deposits
|
|
|
1,696
|
|
|
802
|
|
|
2,498
|
|
Short-term
borrowings
|
|
|
237
|
|
|
2,244
|
|
|
2,481
|
|
Trust
preferred debentures
|
|
|
18
|
|
|
168
|
|
|
186
|
|
Long-term
debt
|
|
|
652
|
|
|
(53
|
)
|
|
599
|
|
Total
interest expense
|
|
|
1,543
|
|
|
4,742
|
|
|
6,285
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in FTE net interest income
|
|
$
|
4,688
|
|
$
|
(407
|
)
|
$
|
4,281
|
|
Noninterest
Income
Noninterest
income is a significant source of revenue for the Company and an important
factor in the Company’s results of operations. The following table sets forth
information by category of noninterest income for the years
indicated:
|
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
|
$
|
4,311
|
|
$
|
4,090
|
|
$
|
8,240
|
|
$
|
8,127
|
|
ATM
and debit card fees
|
|
|
1,544
|
|
|
1,396
|
|
|
2,944
|
|
|
2,654
|
|
Broker/dealer
and insurance fees
|
|
|
736
|
|
|
1,783
|
|
|
2,088
|
|
|
3,514
|
|
Trust
|
|
|
1,251
|
|
|
1,142
|
|
|
2,503
|
|
|
2,249
|
|
Net
securities (losses) gains
|
|
|
51
|
|
|
29
|
|
|
47
|
|
|
38
|
|
Retirement
plan administration fees
|
|
|
1,156
|
|
|
-
|
|
|
2,019
|
|
|
-
|
|
Bank
owned life insurance income
|
|
|
333
|
|
|
409
|
|
|
666
|
|
|
794
|
|
Other
|
|
|
1,673
|
|
|
1,140
|
|
|
3,259
|
|
|
3,056
|
|
Total
|
|
$
|
11,055
|
|
$
|
9,989
|
|
$
|
21,766
|
|
$
|
20,432
|
|
Noninterest
income for the quarter ended June 30, 2005 was $11.1 million, up $1.1 million
or
11% from $10.0 million for the same period in 2004. Retirement plan
administration fees were $1.2 million. This is a new service from our
acquisition of EPIC Advisors, Inc. in January 2005. Other income increased
$0.5
million from increases in consumer and commercial banking fees and title search
revenue. Offsetting these increases was a $1.0 million decrease in broker/dealer
and insurance revenue from the sale of the Company’s broker/dealer subsidiary M.
Griffith Inc. in March 2005.
Noninterest
income for the six months ended June 30, 2005 was $21.8 million, up $1.3 million
or 7% from $20.4 million for the same period in 2004. Retirement plan
administration fees totaled $2.0 million from the previously mentioned
acquisition of EPIC Advisors, Inc. in January 2005. ATM and debit card fees
increased $0.3 million compared with the same period a year ago, due to growth
from transaction deposit accounts, which has led to an increase in the Company’s
debit card base. Offsetting these increases was a $1.4 million decrease in
broker/dealer and insurance revenue from the previously mentioned sale of the
Company’s broker/dealer subsidiary M. Griffith Inc. in March 2005.
Noninterest
Expense
Noninterest
expenses are also an important factor in the Company’s results of operations.
The following table sets forth the major components of noninterest expense
for
the periods indicated:
|
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
$
|
14,848
|
|
$
|
12,542
|
|
$
|
30,071
|
|
$
|
26,655
|
|
Occupancy
|
|
|
2,550
|
|
|
2,446
|
|
|
5,338
|
|
|
5,044
|
|
Equipment
|
|
|
1,931
|
|
|
1,781
|
|
|
4,027
|
|
|
3,634
|
|
Data
processing and communications
|
|
|
2,530
|
|
|
2,852
|
|
|
5,188
|
|
|
5,544
|
|
Professional
fees and outside services
|
|
|
1,381
|
|
|
1,424
|
|
|
3,056
|
|
|
3,056
|
|
Office
supplies and postage
|
|
|
1,121
|
|
|
1,143
|
|
|
2,271
|
|
|
2,174
|
|
Amortization
of intangible assets
|
|
|
142
|
|
|
71
|
|
|
260
|
|
|
142
|
|
Loan
collection and other real estate owned
|
|
|
208
|
|
|
99
|
|
|
609
|
|
|
471
|
|
Other
|
|
|
3,985
|
|
|
3,505
|
|
|
6,757
|
|
|
6,345
|
|
Total
noninterest expense
|
|
$
|
28,696
|
|
$
|
25,863
|
|
$
|
57,577
|
|
$
|
53,065
|
|
Noninterest
expense for the quarter ended June 30, 2005 was $28.7 million, up from $25.9
million for the same period in 2004. Salaries and employee benefits for the
quarter ended June 30, 2005, increased $2.3 million over the same period in
2004, mainly from higher salaries from merit increases and higher incentive
compensation costs. Other operating expense for the quarter ended June 30,
2005,
increased $0.5 million compared with the same period in 2004, primarily from
increases in insurance costs and consumer banking expenses.
Noninterest
expense for the six months ended June 30, 2005 was $57.6 million, up $4.5
million from $53.1 million for the same period in 2004. The increase in
noninterest expense was driven by increases in salaries and employee benefits,
occupancy and equipment expense. Salaries and employee benefits increased $3.4
million, mainly from increases in salary expense and employee benefit expense,
reflecting merit increases as well as higher pension and incentive compensation
costs. Occupancy expense increased $0.3 million from branch expansion in the
Albany, Binghamton and northeastern Pennsylvania markets. Equipment expense
increased $0.4 million, principally from ATM and technology
upgrades.
Income
Taxes
Income
tax expense was $6.2 million for the three months ended June 30, 2005 compared
to $5.8 million for the same period in 2004. The effective tax rate was 32.2%
for the three months ended June 30, 2005 and 31.6% for the same period in 2004.
Income tax expense was $12.3 million for the six months ended June 30, 2005
compared to $11.7 million for the same period in 2004. The effective tax rate
was 32.2% for the six months ended June 30, 2005 and 31.8% for the same period
in 2004.
ANALYSIS
OF FINANCIAL CONDITION
Loans
and Leases
A
summary
of loans and leases, net of deferred fees and origination costs, by category
for
the periods indicated follows:
|
|
|
June
30,
2005
|
|
|
December
31,
2004
|
|
|
June
30,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate mortgages
|
|
$
|
706,244
|
|
$
|
721,615
|
|
$
|
688,631
|
|
Commercial
and commercial real estate mortgages
|
|
|
1,066,280
|
|
|
1,018,548
|
|
|
1,006,727
|
|
Real
estate construction and development
|
|
|
146,389
|
|
|
136,934
|
|
|
104,516
|
|
Agricultural
and agricultural real estate mortgages
|
|
|
110,382
|
|
|
108,181
|
|
|
106,215
|
|
Consumer
|
|
|
450,942
|
|
|
412,139
|
|
|
411,117
|
|
Home
equity
|
|
|
434,509
|
|
|
391,807
|
|
|
366,720
|
|
Lease
financing
|
|
|
81,218
|
|
|
80,697
|
|
|
69,699
|
|
Total
loans and leases
|
|
$
|
2,995,964
|
|
$
|
2,869,921
|
|
$
|
2,753,625
|
|
Total
loans and leases were $3.0 billion, or 68.3% of assets, at June 30, 2005, and
$2.9 billion at December 31, 2004, and $2.8 billion, or 66.7%, at June 30,
2004.
Total loans and leases increased $242.3 million or 9% at June 30, 2005 over
June
30, 2004. The solid year over year loan growth was driven mainly by increases
in
home equity loans of $67.8 million or 18%, primarily from market expansion
and
continued success in marketing this product throughout the Company’s branch
network. Commercial loans and commercial mortgages increased $59.6 million
or 6%
year over year, as the Company has been successful in generating new business
in
the Albany, Binghamton, and Northeastern Pennsylvania markets. This market
expansion has also helped drive the increase in real estate construction and
development loans of $41.9 million. Consumer loans increased $39.8 million,
mainly from increases in indirect automobile loans. Leases increased $11.5
million or 17% from an expanded presence in the Northeastern Pennsylvania
market. Lastly, residential real estate mortgages, increased $17.6 million
or 3%
when compared to June 30, 2004. The modest growth in the residential mortgage
portfolio resulted mainly from limiting the Company’s exposure to long-term
interest rate risk by pricing 30-year mortgages above market rates. Furthermore,
the Company began selling 20-year and 30-year residential mortgages from its
pipeline in the second quarter 2005. At June 30, 2005, commercial loans,
including commercial mortgages, represented approximately 44% of the loan and
lease portfolio, while consumer loans and leases and residential mortgages
represented 32% and 24%, respectively.
Securities
The
Company classifies its securities at date of purchase as available for sale,
held to maturity or trading. Held to maturity debt securities are those that
the
Company has the ability and intent to hold until maturity. Available for sale
securities are recorded at fair value. Unrealized holding gains and losses,
net
of the related tax effect, on available for sale securities are excluded from
earnings and are reported in stockholders’ equity as a component of accumulated
other comprehensive income or loss. Held to maturity securities are recorded
at
amortized cost. Trading securities are recorded at fair value, with net
unrealized gains and losses recognized currently in income. Transfers of
securities between categories are recorded at fair value at the date of
transfer. A decline in the fair value of any available for sale or held to
maturity security below cost that is deemed other-than-temporary is charged
to
earnings resulting in the establishment of a new cost basis for the security.
Securities with an other-than-temporary impairment are generally placed on
nonaccrual status.
Average
total earning securities decreased $15.0 million for the three months ended
June
30, 2005 when compared to the same period in 2004. The average balance of
securities available for sale decreased $18.9 million for the three months
ended
June 30, 2005 when compared to the same period in 2004. The average balance
of
securities held to maturity remained relatively unchanged for the three months
ended June 30, 2005, compared to the same period in 2004. The average total
securities portfolio represents 27% of total average earning assets for the
three months ended June 30, 2005 down from 29% for the same period in 2004.
The
decrease in the securities portfolio for the period was primarily due to the
Company’s efforts to limit exposure to rising interest rates.
The
following details the composition of securities available for sale, securities
held to maturity and regulatory investments for the periods
indicated:
|
At
June 30,
|
|
2005
|
2004
|
|
|
|
Mortgage-backed
securities:
|
|
|
With
maturities 15 years or less
|
42%
|
51%
|
With
maturities greater than 15 years
|
6%
|
9%
|
Collateral
mortgage obligations
|
15%
|
9%
|
Municipal
securities
|
15%
|
14%
|
US
agency notes
|
18%
|
12%
|
Other
|
4%
|
5%
|
Total
|
100%
|
100%
|
Allowance
for Loan and Lease Losses, Provision for Loan and Lease Losses, and
Nonperforming Assets
The
allowance for loan and lease losses is maintained at a level estimated by
management to provide adequately for risk of probable losses inherent in the
current loan and lease portfolio. The adequacy of the allowance for loan and
lease losses is continuously monitored. It is assessed for adequacy using a
methodology designed to ensure the level of the allowance reasonably reflects
the loan portfolio’s risk profile. It is evaluated to ensure that it is
sufficient to absorb all reasonably estimable credit losses inherent in the
current loan and lease portfolio.
Management
considers the accounting policy relating to the allowance for loan and lease
losses to be a critical accounting policy given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that such judgements can have on the
consolidated results of operations.
For
purposes of evaluating the adequacy of the allowance, the Company considers
a
number of significant factors that affect the collectibility of the portfolio.
For individually analyzed loans, these include estimates of loss exposure,
which
reflect the facts and circumstances that affect the likelihood of repayment
of
such loans as of the evaluation date. For homogeneous pools of loans and
leases,
estimates of the Company’s exposure to credit loss reflect a thorough current
assessment of a number of factors, which could affect collectibility. These
factors include: past loss experience; the size, trend, composition, and
nature
of the loans and leases; changes in lending policies and procedures, including
underwriting standards and collection, charge-off and recovery practices;
trends
experienced in nonperforming and delinquent loans and leases; current economic
conditions in the Company’s market; portfolio concentrations that may affect
loss experienced across one or more components of the portfolio; the effect
of
external factors such as competition, legal and regulatory requirements;
and the
experience, ability, and depth of lending management and staff. In addition,
various regulatory agencies, as an integral component of their examination
process, periodically review the Company’s allowance for loan and lease losses.
Such agencies may require the Company to recognize additions to the allowance
based on their judgment about information available to them at the time of
their
examination, which may not be currently available to
management.
After
a
thorough consideration and validation of the factors discussed above, required
additions to the allowance for loan and lease losses are made periodically
by
charges to the provision for loan and lease losses. These charges are necessary
to maintain the allowance at a level which management believes is reasonably
reflective of overall inherent risk of probable loss in the portfolio. While
management uses available information to recognize losses on loans and leases,
additions to the allowance may fluctuate from one reporting period to another.
These fluctuations are reflective of changes in risk associated with portfolio
content and/or changes in management’s assessment of any or all of the
determining factors discussed above. The allowance for loan and lease losses
to
outstanding loans and leases at June 30, 2005 was 1.55% compared to 1.57% at
December 31, 2004 and 1.58% at June 30, 2004. Management considers the allowance
for loan losses to be adequate based on evaluation and analysis of the loan
portfolio.
Table
4
reflects changes to the allowance for loan and lease 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 and lease losses.
Table
4
Allowance
for Loan Losses
|
|
|
|
|
Three
months ended June 30,
|
(dollars
in thousands)
|
|
|
2005
|
|
|
|
|
|
2004
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
45,389
|
|
|
|
|
$
|
43,303
|
|
|
|
|
Recoveries
|
|
|
1,333
|
|
|
|
|
|
722
|
|
|
|
|
Charge-offs
|
|
|
(2,631
|
)
|
|
|
|
|
(2,971
|
)
|
|
|
|
Net
charge-offs
|
|
|
(1,298
|
)
|
|
|
|
|
(2,249
|
)
|
|
|
|
Provision
for loan losses
|
|
|
2,320
|
|
|
|
|
|
2,428
|
|
|
|
|
Balance,
end of period
|
|
$
|
46,411
|
|
|
|
|
$
|
43,482
|
|
|
|
|
Composition
of Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and agricultural
|
|
$
|
(389
|
)
|
|
30
|
%
|
$
|
(1,190
|
)
|
|
53
|
%
|
Real
estate mortgage
|
|
|
149
|
|
|
(12
|
)%
|
|
(50
|
)
|
|
2
|
%
|
Consumer
|
|
|
(1,058
|
)
|
|
82
|
%
|
|
(1,009
|
)
|
|
45
|
%
|
Net
charge-offs
|
|
$
|
(1,298
|
)
|
|
100
|
%
|
$
|
(2,249
|
)
|
|
100
|
%
|
Annualized
net charge-offs to average loans
|
|
|
0.18
|
%
|
|
|
|
|
0.34
|
%
|
|
|
|
|
|
Six
months ended June 30,
|
(dollars
in thousands)
|
|
|
2005
|
|
|
|
|
|
2004
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
44,932
|
|
|
|
|
$
|
42,651
|
|
|
|
|
Recoveries
|
|
|
2,412
|
|
|
|
|
|
1,551
|
|
|
|
|
Charge-offs
|
|
|
(5,049
|
)
|
|
|
|
|
(5,272
|
)
|
|
|
|
Net
charge-offs
|
|
|
(2,637
|
)
|
|
|
|
|
(3,721
|
)
|
|
|
|
Provision
for loan losses
|
|
|
4,116
|
|
|
|
|
|
4,552
|
|
|
|
|
Balance,
end of period
|
|
$
|
46,411
|
|
|
|
|
$
|
43,482
|
|
|
|
|
Composition
of Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and agricultural
|
|
$
|
(494
|
)
|
|
19
|
%
|
$
|
(1,314
|
)
|
|
35
|
%
|
Real
estate mortgage
|
|
|
(177
|
)
|
|
7
|
%
|
|
(69
|
)
|
|
2
|
%
|
Consumer
|
|
|
(1,966
|
)
|
|
74
|
%
|
|
(2,338
|
)
|
|
63
|
%
|
Net
charge-offs
|
|
$
|
(2,637
|
)
|
|
100
|
%
|
$
|
(3,721
|
)
|
|
100
|
%
|
Annualized
net charge-offs to average loans
|
|
|
0.18
|
%
|
|
|
|
|
0.28
|
%
|
|
|
|
Nonperforming
assets consist of nonaccrual loans, loans 90 days or more past due, restructured
loans, other real estate owned (OREO), and nonperforming securities. 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.
Nonperforming securities include securities which management believes are
other-than-temporarily impaired, carried at their estimated fair value and
are
not accruing interest.
Total
nonperforming assets were $13.9 million at June 30, 2005, and $16.6 million
at
December 31, 2004, and $14.2 million at June 30, 2004. The decrease in
nonperforming assets when compared to December 31, 2004 resulted primarily
from
the sale of approximately $5 million in nonperforming loans during the quarter
ended June 30, 2005. Nonaccrual loans decreased from $15.0 million at December
31, 2004 to $13.0 million at June 30, 2005, primarily from the previously
mention sale of nonperforming loans. OREO has remained at relatively low levels
throughout 2005 and 2004, as the Company’s nonperfoming loans have remained
relatively stable and credit quality remains solid.
In
addition to the nonperforming loans discussed above, the Company has also
identified approximately $66.5 million in potential problem loans at June 30,
2005 as compared to $48.0 million at December 31, 2004. The increase in
potential problem loans resulted mainly from the downgrade of one large
commercial loan relationship totaling $15 million to substandard during the
three months ended March 31, 2005. Potential problem loans are loans that are
currently performing, but where known information about possible credit problems
of the related borrowers causes management to have serious doubts as to the
ability of such borrowers to comply with the present loan repayment terms and
which may result in disclosure of such loans as nonperforming at some time
in
the future. At the Company, potential problem loans are typically loans that
are
performing but are classified by the Company’s loan rating system as
“substandard.” At June 30, 2005, potential problem loans primarily consisted of
commercial real estate and commercial and agricultural loans. Management cannot
predict the extent to which economic conditions may worsen or other factors
which may impact borrowers and the potential problem loans. Accordingly, there
can be no assurance that other loans will not become 90 days or more past due,
be placed on non-accrual, become restructured, or require increased allowance
coverage and provision for loan losses.
Net
charge-offs totaled $1.3 million for the three months ended June 30, 2005,
down
$0.9 million from the $2.2 million charged-off during the same period in 2004.
The decrease in net charge-offs resulted primarily from larger recoveries during
the three months ended June 30, 2005 in commercial and residential mortgage
loans. The provision for loan and lease losses totaled $2.3 million for the
three months ended June 30, 2005, down slightly from the $2.4 million provided
during the same period in 2004.
Net
charge-offs totaled $2.6 million for the six months ended June 30, 2005, down
$1.1 million from the $3.7 million charged-off during the same period in 2004.
The decrease in net charge-offs resulted primarily from larger commercial
recoveries during the six months ended June 30, 2005. The provision for loan
and
lease losses totaled $4.1 million for the six months ended June 30, 2005, down
from the $4.6 million provided during the same period in 2004. The decrease
in
the provision for loan and lease losses for the six months ended June 30, 2005
compared to the same period a year ago resulted mainly from lower net
charge-offs and an improvement in credit quality ratios.
Table
5
Nonperforming
Assets
|
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
|
|
June
30,
2005
|
|
|
December
31,
2004
|
|
|
June
30,
2004
|
|
Commercial
and agricultural
|
|
$
|
8,971
|
|
$
|
10,550
|
|
$
|
8,282
|
|
Real
estate mortgage
|
|
|
2,229
|
|
|
2,553
|
|
|
2,353
|
|
Consumer
|
|
|
1,841
|
|
|
1,888
|
|
|
2,605
|
|
Total
nonaccrual loans
|
|
|
13,041
|
|
|
14,991
|
|
|
13,240
|
|
Loans
90 days or more past due and still accruing:
|
|
|
|
|
|
|
|
|
|
|
Commercial
and agricultural
|
|
|
3
|
|
|
-
|
|
|
92
|
|
Real
estate mortgage
|
|
|
-
|
|
|
737
|
|
|
185
|
|
Consumer
|
|
|
447
|
|
|
449
|
|
|
264
|
|
Total
loans 90 days or more past due and still accruing
|
|
|
450
|
|
|
1,186
|
|
|
541
|
|
Total
nonperforming loans
|
|
|
13,491
|
|
|
16,177
|
|
|
13,781
|
|
Other
real estate owned (OREO)
|
|
|
395
|
|
|
428
|
|
|
365
|
|
Total
nonperforming loans and OREO
|
|
|
13,886
|
|
|
16,605
|
|
|
14,146
|
|
Nonperforming
securities
|
|
|
-
|
|
|
-
|
|
|
52
|
|
Total
nonperforming assets
|
|
$
|
13,886
|
|
$
|
16,605
|
|
$
|
14,198
|
|
Total
nonperforming loans to loans and leases
|
|
|
0.45
|
%
|
|
0.56
|
%
|
|
0.50
|
%
|
Total
nonperforming assets to assets
|
|
|
0.32
|
%
|
|
0.39
|
%
|
|
0.34
|
%
|
Total
allowance for loan and lease losses to
nonperforming loans
|
|
|
344.01
|
%
|
|
277.75
|
%
|
|
315.52
|
%
|
Deposits
Total
deposits were $3.2 billion at June 30, 2005, up $104.2 million from year-end
2004, and an increase of $137.5 million, or 5%, from the same period in the
prior year. Total average deposits for the three months ended June 30, 2005
increased $139.3 million, or 5%, from the same period in 2004. The Company
experienced an increase in time deposits, as average time deposits increased
$179.7 million or 17%, for the three months ended June 30, 2005 compared to
the
same period in 2004, primarily from an increase in municipal time deposits.
Meanwhile, average core deposits decreased $40.3 million or 2%, for the three
months ended June 30, 2005 compared to the same period in 2004, mainly from
a
$55.5 million decrease in money market deposit accounts (primarily municipal
money market accounts which migrated to time deposits). At June 30, 2005, total
checking, savings and money market accounts represented 61.5% of total deposits
compared to 65.3% at June 30, 2004.
Borrowed
Funds
The
Company's borrowed funds consist of short-term borrowings and long-term debt.
Short-term borrowings totaled $384.2 million at June 30, 2005 compared to $338.8
million and $349.1 million at December 31, and June 30, 2004, respectively.
Long-term debt was $419.4 million at June 30, 2005, and was $394.5 million
and
$369.6 million at December 31, and June 30, 2004. For more information about
the
Company’s borrowing capacity and liquidity position, see the section with the
title caption of “Liquidity Risk” on page 35-36 in this discussion.
Capital
Resources
Stockholders'
equity of $330.7 million represents 7.5% of total assets at June 30, 2005,
compared with $307.7 million, or 7.5% in the comparable period of the prior
year, and $332.2 million, or 7.9% at December 31, 2004. The decline in tier
1
and total risked-based capital ratios resulted primarily from the repurchase
of
671,543 shares of the Company’s common stock resulting in a $15.3 million
reduction in stockholders’ equity during the six months ended June 30, 2005. 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.
As
the
capital ratios in Table 6 indicate, the Company remains “well capitalized”.
Capital measurements are significantly in excess of regulatory minimum
guidelines and meet the requirements to be considered well capitalized for
all
periods presented. Tier 1 leverage, Tier 1 capital and Risk-based capital ratios
have regulatory minimum guidelines of 3%, 4% and 8% respectively, with
requirements to be considered well capitalized of 5%, 6% and 10%,
respectively.
Table
6
|
|
Capital
Measurements
2005
|
March
31,
2005
|
June
30,
2005
|
Tier
1 leverage ratio
|
6.89%
|
6.91%
|
Tier
1 capital ratio
|
9.41%
|
9.23%
|
Total
risk-based capital ratio
|
10.67%
|
10.48%
|
Cash
dividends as a percentage of
net income
|
48.57%
|
47.67%
|
Per
common share:
|
|
|
Book
value
|
$
9.85
|
$
10.22
|
Tangible
book value
|
$
8.25
|
$
8.62
|
2004
|
|
|
Tier
1 leverage ratio
|
6.96%
|
6.90%
|
Tier
1 capital ratio
|
10.12%
|
9.74%
|
Total
risk-based capital ratio
|
11.37%
|
11.00%
|
Cash
dividends as a percentage of
net income
|
45.20%
|
49.50%
|
Per
common share:
|
|
|
Book
value
|
$
9.80
|
$
9.43
|
Tangible
book value
|
$
8.29
|
$7.91
|
The
accompanying Table 7 presents the high, low and closing sales price for the
common stock as reported on the NASDAQ Stock Market, and cash dividends declared
per share of common stock. The Company's price to book value ratio was 2.31
at
June 30, 2005 and 2.37 in the comparable period of the prior year. The Company's
price was 15.3 times trailing twelve months earnings at June 30, 2005, compared
to 15.2 times for the same period last year.
Table
7
Quarterly
Common Stock and Dividend Information
|
Quarter
Ending
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Cash
Dividends
Declared
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
$
|
23.00
|
|
$
|
21.21
|
|
$
|
22.50
|
|
$
|
0.170
|
|
June
30
|
|
|
23.18
|
|
|
19.92
|
|
|
22.34
|
|
|
0.190
|
|
September
30
|
|
|
24.34
|
|
|
21.02
|
|
|
23.43
|
|
|
0.190
|
|
December
31
|
|
|
26.84
|
|
|
21.94
|
|
|
25.72
|
|
|
0.190
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
$
|
25.66
|
|
$
|
21.48
|
|
$
|
22.41
|
|
$
|
0.190
|
|
June
30
|
|
$
|
24.15
|
|
$
|
20.10
|
|
$
|
23.64
|
|
$
|
0.190
|
|
Liquidity
and Interest Rate Sensitivity Management
Market
Risk
Interest
rate risk is among the most significant market risk affecting the Company.
Other
types of market risk, such as foreign currency exchange rate risk and commodity
price risk, do not arise in the normal course of the Company’s business
activities. Interest rate risk is defined as an exposure to a movement in
interest rates that could have an adverse effect on the Company’s net interest
income. Net interest income is susceptible to interest rate risk to the degree
that interest-bearing liabilities mature or reprice on a different basis than
earning assets. When interest-bearing liabilities mature or reprice more quickly
than earning assets in a given period, a significant increase in market rates
of
interest could adversely affect net interest income. Similarly, when earning
assets mature or reprice more quickly than interest-bearing liabilities, falling
interest rates could result in a decrease in net interest income.
In
an
attempt to manage the Company's exposure to changes in interest rates,
management monitors the Company’s interest rate risk. Management’s Asset
Liability Committee (ALCO) meets monthly to review the Company’s interest rate
risk position and profitability, and to recommend strategies for consideration
by the Board of Directors. Management also reviews loan and deposit pricing,
and
the Company’s securities portfolio, formulates investment and funding
strategies, and oversees the timing and implementation of transactions to assure
attainment of the Board’s objectives in the most effective manner.
Notwithstanding the Company’s interest rate risk management activities, the
potential for changing interest rates is an uncertainty that can have an adverse
effect on net income.
In
adjusting the Company’s asset/liability position, the Board and management
attempt to manage the Company’s interest rate risk while minimizing net interest
margin compression. At times, depending on the level of general interest rates,
the relationship between long- and short-term interest rates, market conditions
and competitive factors, the Board and management may determine to increase
the
Company’s interest rate risk position somewhat in order to increase its net
interest margin. The Company’s results of operations and net portfolio values
remain vulnerable to changes in interest rates and fluctuations in the
difference between long- and short-term interest rates.
The
primary tool utilized by ALCO to manage interest rate risk is a balance
sheet/income statement simulation model (interest rate sensitivity analysis).
Information such as principal balance, interest rate, maturity date, cash flows,
next repricing date (if needed), and current rates is uploaded into the model
to
create an ending balance sheet. In addition, ALCO makes certain assumptions
regarding prepayment speeds for loans and leases and mortgage related investment
securities along with any optionality within the deposits and
borrowings.
The
model
is first run under an assumption of a flat rate scenario (i.e. no change in
current interest rates) with a static balance sheet over a 12-month period.
Three additional models are run with static balance sheets; (1) a gradual
increase of 200 bp, (2) a gradual increase of 400 bp and (3) a gradual decrease
of 200 bp takes place over a 12 month period with a static balance sheet. Under
these scenarios, assets subject to prepayments are adjusted to account for
faster or slower prepayment assumptions. Any investment securities or borrowings
that have callable options embedded into them are handled accordingly based
on
the interest rate scenario. The resultant changes in net interest income are
then measured against the flat rate scenario.
In
the
declining rate scenario, net interest income is projected to decrease when
compared to the forecasted net interest income in the flat rate scenario through
the simulation period. The decrease in net interest income is a result of
earning assets repricing downward at a faster rate than interest bearing
liabilities. The inability to effectively lower deposit rates will likely reduce
or eliminate the benefit of lower interest rates. In the rising rate scenarios,
net interest income is projected to experience a decline from the flat rate
scenario. Net interest income is projected to remain at lower levels than in
a
flat rate scenario through the simulation period primarily due to a lag in
assets repricing while funding costs increase. The potential impact on earnings
is dependent on the ability to lag deposit repricing. If short-term rates
continue to increase, the Company expects competitive pressures will likely
result in core deposit pricing increases, which should lead to compression
of
net interest margin.
Net
interest income for the next twelve months in the + 200/+ 400/- 200 bp
scenarios, as described above, is within the internal policy risk limits of
not
more than a 7.5% change in net interest income. The following table summarizes
the percentage change in net interest income in the rising and declining rate
scenarios over a 12-month period from the forecasted net interest income in
the
flat rate scenario using the June 30, 2005 balance sheet position:
Table
8
Interest
Rate Sensitivity Analysis
|
|
Change
in interest rates (in
basis points)
|
Percent
change in net
interest income
|
+400
|
(4.46%)
|
+200
|
(1.26%)
|
-200
|
(2.07%)
|
Under
the
flat rate scenario with a static balance sheet, net interest income is
anticipated to remain relatively unchanged from annualized net interest income
for the three months ended June 30, 2005. The growth in earning assets over
the
past several periods should offset the impact of net interest margin
compression. If the Company cannot maintain the level of earning assets at
June
30, 2005, the Company expects net interest income to decline for the remainder
of the year.
The
Company has taken several measures to mitigate net interest margin compression.
The Company began originating 20-year and 30-year residential real estate
mortgages with the intent to sell at the end of the second quarter of 2005.
The
Company’s anticipates a significant increase in residential real estate mortgage
sales from its pipeline in the third quarter of 2005. The Company has also
shortened the average life of its investment securities portfolio by limiting
purchases of mortgage-backed securities and redirecting proceeds into
short-duration CMOs and US Agency notes and bonds. Lastly, the Company has
increased its long-term debt in the second quarter of 2005 to offset exposure
to
long-term earning assets.
Liquidity
Risk
Liquidity
involves the ability to meet the cash flow requirements of customers who may
be
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. The ALCO is
responsible for liquidity management and has developed guidelines which cover
all assets and liabilities, as well as off balance sheet items that are
potential sources or uses of liquidity. Liquidity policies must also provide
the
flexibility to implement appropriate strategies and tactical actions.
Requirements change as loans and leases grow, deposits and securities mature,
and payments on borrowings are made. Liquidity management includes a focus
on
interest rate sensitivity management with a goal of avoiding widely fluctuating
net interest margins through periods of changing economic
conditions.
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. At June 30 2005, the Company’s Basic
Surplus measurement was 5.1% of total assets or $224 million, which was above
the Company’s minimum of 5% or $219 million set forth in its liquidity policies.
This
Basic Surplus approach enables the Company to adequately manage liquidity from
both operational 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 June 30, 2005, the Company
Basic Surplus is tightening, as the Basic Surplus has decreased from 8.3% at
June 30, 2004. If the Company’s Basic Surplus continues to tighten, the Company
will likely utilize brokered time deposits or price retail time deposits or
money market accounts in selected markets more competitively to fund loan and
lease growth in the near term. These sources of funds are typically more costly
than FHLB borrowings and may have an adverse effect on the Company’s net
interest margin.
The
Company’s primary source of funds is from its subsidiary, NBT Bank. Certain
restrictions exist regarding the ability of the Company’s subsidiary bank to
transfer funds to the Company in the form of cash dividends. The approval of
the
Office of Comptroller of the Currency (OCC) is required to pay dividends when
a
bank fails to meet certain minimum regulatory capital standards or when such
dividends are in excess of a subsidiary bank’s earnings retained in the current
year plus retained net profits for the preceding two years (as defined in the
regulations). At June 30, 2005, approximately $45.2 million of the total
stockholders’ equity of NBT Bank was available for payment of dividends to the
Company without approval by the OCC. NBT Bank’s ability to pay dividends also is
subject to the Bank being in compliance with regulatory capital requirements.
NBT Bank is currently in compliance with these requirements. Under the State
of
Delaware Business Corporation Law, the Company may declare and pay dividends
either out of accumulated net retained earnings or capital surplus.
Item
3. Quantitative and Qualitative Disclosure 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.
Item
4. Controls and Procedures
The
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer evaluated the effectiveness of the design and operation of
the
Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
and
15(d)-15(e) under the Securities Exchange Act of 1934, as amended) as of June
30, 2005. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in timely alerting them to
any
material information relating to the Company and its subsidiaries required
to be
included in the Company's periodic SEC filings.
There
were no changes made in the Company's internal controls over financial reporting
that occurred during the Company's most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect the Company's
internal controls over financial reporting.
Although
as stated above we have not made any significant changes in our internal
controls over financial reporting in the most recent fiscal quarter, based
on
our documentation and testing to date, we have made improvements in the
documentation, design or effectiveness of internal controls over financial
reporting. However, given the risks inherent in the design and operation of
internal controls over financial reporting, we can provide no assurance as
to
our, or our independent auditor’s conclusions at December 31, 2005 with respect
to the effectiveness of our internal controls over financial reporting.
PART
II. OTHER INFORMATION
Item
1 --
Legal Proceedings
There
are
no material legal proceedings, other than ordinary routine litigation incidental
to business to which the Company is a party or of which any of its property
is
subject.
Item
2 --
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securitries
(c) |
The
table below sets forth the information with respect to purchases
made by
the Company (as defined in Rule 10b-18(a)(3) under the Securities
Exchange
Act of 1934), of our common stock during the quarter ended June 30,
2005:
|
Period
|
Total
Number of Shares
Purchased
|
Average
Price Paid
Per Share
|
Total
Number of Shares
Purchased As
Part of Publicly
Announced
Plans
|
Maximum
Number
of Shares That
May Yet Be Purchased
Under The
Plans (1)
|
4/1/05
- 4/30/05
|
67,075
|
$21.64
|
27,675
|
929,507
|
5/1/05
- 5/31/05
|
89,785
|
$22.17
|
89,785
|
839,722
|
6/1/05
- 6/30/05
|
-
|
-
|
-
|
839,722
|
Total
|
156,860
|
$21.94
|
156,860
|
839,722
|
(1)
On
January 24, 2005, NBT announced that the NBT Board of Directors approved a
new
repurchase program whereby NBT is authorized to repurchase up to an additional
1,500,000 shares (approximately 5%) of its outstanding common stock from time
to
time as market conditions warrant in open market and privately negotiated
transactions. At that time, there were 719,800 shares remaining under a previous
authorization that was be superseded by the new repurchase program. During
the
period January 1, 2005 and January 24, 2005, the Company purchased 11,265 shares
of its common stock under the superseded plan.
Item
3 --
Defaults Upon Senior Securities
None
Item
4 --
Submission of Matters to a Vote of Security Holders
The
Company's Annual Meeting of Stockholders was held on May 3, 2005. At the Annual
Meeting, stockholders approved the following:
1) |
A
proposal to fix the number of directors to sixteen. There were
25,580,722
votes cast for the proposal, 515,615 votes cast against the proposal,
and
263,038 abstentions.
|
2) |
The
following directors were elected with terms expiring at the 2008
annual
meeting of stockholders: Richard Chojnowski: 23,900,676 votes for
election; 458,698 votes withheld.
Dr.
Peter B. Gregory: 23,733,593 votes for election; 625,781 votes
withheld.
Joseph
A. Santangelo: 23,729,347 votes for election; 629,567 votes
withheld
Janet
H. Ingraham: 23,819,347 votes for election; 540,028 votes
withheld.
Paul
D. Horger: 20,759,467 votes for election; 3,599,907 votes
withheld.
The
following director was elected with a term expiring at the 2006
annual
meeting of stockholders
Martin
A. Dietrich: 23,554,788 votes for election; 804,587 votes
withheld.
Continuing
directors with terms expiring in 2007: Daryl R. Forsythe, William
C.
Gumble, William L Owens, Van Ness D. Robinson, and Patricia T.
Civil.
Continuing
directors with terms expiring in 2006 Andrew S. Kowalczyk, Jr.
John C.
Mitchell, Joseph G. Nasser, Michael H. Hutcherson, and Michael
M.
Murphy
|
Item
5 --
Other Information
On
April
25, 2005, NBT Bancorp Inc. announced the declaration of a regular quarterly
cash
dividend of $0.19 per share. The cash dividend will be paid on June 15, 2005
to
stockholders of record as of June 1, 2005.
On
June
14, 2005, NBT announced that it had agreed to acquire CNB Bancorp, Inc. (CNB),
with total assets of approximately $420 million, which is headquartered in
Gloversville, NY. The merger is expected to close in the fourth quarter of
2005
pending regulatory and CNB shareholder approval.
Item
6 --
Exhibits and Reports on Form 8-K
2.1 |
Agreement
and Plan of Merger by and between NBT Bancorp Inc., and CNB Bancorp,
Inc.,
dated as of June 13, 2005 (Filed as Exhibit 2.1 to Registrant's Form
8-K,
filed on June 14, 2005 and incorporated herein by
reference). |
3.1 |
Certificate
of Incorporation of NBT Bancorp Inc. (filed as Exhibit 3.1 to the Form
10-K of NBT Bancorp, Inc., filed on March 29, 2002 and incorporated
herein
by reference). |
3.2 |
By-laws
of NBT Bancorp Inc. (filed as Exhibit 3.2 to the Form 10-K of NBT Bancorp
Inc., filed on March 29, 2002 and incorporated herein by
reference). |
4.1 |
Speciman
common stock certificate for NBT's common stock (filed as Exhibit 4.3
to
the Form S-4 of NBT Bancorp Inc. filed on August 2, 2005 and incorporated
herein by reference). |
4.2 |
Rights
Agreement, dated as of November 15, 2004, between NBT Bancorp Inc.
and
Registrar and Transfer Company, as Rights Agent (filed as Exhibit 4.1
to
Registrant's Form 8-K, filed on Noember 18, 2004 and incorporated herein
by reference). |
31.1 |
Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
31.2 |
Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
32.1 |
Written
Statement of the Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
32.2 |
Written
Statement of the Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
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 8th day of August 2005.
NBT
BANCORP INC.
By:
/s/
MICHAEL J. CHEWENS
Michael
J. Chewens, CPA
Senior
Executive Vice President
Chief
Financial Officer and Corporate Secretary
EXHIBIT
INDEX
2.1 |
Agreement
and Plan of Merger by and between NBT Bancorp Inc., and CNB Bancorp,
Inc.,
dated as of June 13, 2005 (Filed as Exhibit 2.1 to Registrant's Form
8-K,
filed on June 14, 2005 and incorporated herein by
reference). |
3.1 |
Certificate
of Incorporation of NBT Bancorp Inc. (filed as Exhibit 3.1 to the
Form
10-K of NBT Bancorp, Inc., filed on March 29, 2002 and incorporated
herein
by reference). |
3.2 |
By-laws
of NBT Bancorp Inc. (filed as Exhibit 3.2 to the Form 10-K of NBT
Bancorp
Inc., filed on March 29, 2002 and incorporated herein by
reference). |
4.1 |
Speciman
common stock certificate for NBT's common stock (filed as Exhibit
4.3 to
the Form S-4 of NBT Bancorp Inc. filed on August 2, 2005 and incorporated
herein by reference). |
4.2 |
Rights
Agreement, dated as of November 15, 2004, between NBT Bancorp Inc.
and
Registrar and Transfer Company, as Rights Agent (filed as Exhibit
4.1 to
Registrant's Form 8-K, filed on Noember 18, 2004 and incorporated
herein
by reference). |
31.1 |
Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
31.2 |
Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
32.1 |
Written
Statement of the Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
32.2 |
Written
Statement of the Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
EXHIBIT
31.1
CERTIFICATIONS
I,
Daryl
R. Forsythe, certify that:
1.
I have
reviewed this quarterly report on Form 10-Q of NBT Bancorp Inc.
2.
Based
on my knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this quarterly
were
made, not misleading with respect to the period covered by this quarterly
report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant
as of, and for, the periods presented in this quarterly report;
4.
The
registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for
the
registrant and we have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b)
Designed such internal control over financial reporting, or caused
such internal
control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures
and presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control
over
financial reporting that occurred during the registrant's most recent
fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting;
5.
The
registrant's other certifying officers and I have disclosed, based on
our
most
recent evaluation of internal control over financial reporting, to the
registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a)
All
significant deficiencies and material weaknesses in the design or operations
of internal controls which are reasonably likely to adversely affect
the
registrant's ability to record, process, summarize and report financial
information;
and
b)
Any
fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls over
financial
reporting.
Date:
August 8, 2005
By:
/s/
Daryl R. Forsythe
------------------------------
Chairman
and Chief Executive
Officer
EXHIBIT
31.2
CERTIFICATIONS
I,
Michael J. Chewens, certify that:
1.
I have
reviewed this quarterly report on Form 10-Q of NBT Bancorp Inc.
2.
Based
on my knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this quarterly
report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant
as of, and for, the periods presented in this quarterly report;
4.
The
registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for
the
registrant and we have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b)
Designed such internal control over financial reporting, or caused
such internal
control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures
and presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control
over
financial reporting that occurred during the registrant's most recent
fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting;
5.
The
registrant's other certifying officers and I have disclosed, based on
our
most
recent evaluation of internal control over financial reporting, to the
registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a)
All
significant deficiencies and material weaknesses in the design or operations
of internal controls which are reasonably likely to adversely affect
the
registrant's ability to record, process, summarize and report financial
information;
and
b)
Any
fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls over
financial
reporting.
Date:
August 8, 2005
By:
/s/
Michael J. Chewens
--------------------------------
Senior
Executive Vice President,
Chief
Financial Officer and
Corporate
Secretary
EXHIBIT
32.1
Written
Statement of the Chief Executive Officer Pursuant to Section 906 of
the
----------
Sarbanes-Oxley
Act of 2002
-----------------------------
The
undersigned, the Chief Executive Officer of NBT Bancorp Inc. (the "Company"),
hereby certifies that to his knowledge on the date hereof:
(a) |
the
Form 10-Q of the Company for the Quarterly Period Ended June 30,
2005,
filed on the date hereof with the Securities and Exchange Commission
(the "Report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
(b) |
information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company. |
/s/
Daryl
R. Forsythe
------------------------
Daryl
R.
Forsythe
Chairman
and Chief Executive Officer
August
8,
2005
A
signed
original of this written statement required by Section 906, or other
document
authenticating, acknowledging, or otherwise adopting the signature that
appears
in typed form within the electronic version of this written statement
required
by Section 906, has been provided to NBT Bancorp Inc. and will be retained
by NBT Bancorp Inc. and furnished to the Securities and Exchange Commission
or its staff upon request.
EXHIBIT
32.2
Written
Statement of the Chief Financial Officer Pursuant to Section 906 of
the
----------
Sarbanes-Oxley
Act of 2002
-----------------------------
The
undersigned, the Chief Financial Officer of NBT Bancorp Inc. (the "Company"),
hereby certifies that to his knowledge on the date hereof:
(a) |
the
Form 10-Q of the Company for the Quarterly Period Ended June 30,
2005,
filed on the date hereof with the Securities and Exchange Commission
(the "Report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
(b) |
information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company. |
/s/
Michael J. Chewens
-------------------------
Michael
J. Chewens
Senior
Executive Vice President Chief
Financial
Officer and Corporate Secretary
August
8,
2005
A
signed
original of this written statement required by Section 906, or other
document
authenticating, acknowledging, or otherwise adopting the signature that
appears
in typed form within the electronic version of this written statement
required
by Section 906, has been provided to NBT Bancorp Inc. and will be retained
by NBT Bancorp Inc. and furnished to the Securities and Exchange Commission
or its staff upon request.