Washington, D.C. 20549
of the Securities Exchange Act of 1934 (Amendment No. )
NBT Bancorp Inc.
NBT Bancorp Inc.
NBT Bancorp Inc. ("NBT"(“NBT”) will hold an annual meeting of shareholders at the DoubleTree by Hilton Hotel, 225 Water Street, Binghamton, New York 13901 on May 5, 20153, 2016 at 10:00 a.m. local time for the following purposes:
NBT Bancorp Inc.
/s/ Daryl R. Forsythe
Daryl R. Forsythe
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED OR VOTE VIA THE TOLL-FREE TELEPHONE NUMBER OR VIA THE INTERNET ADDRESS LISTED ON THE PROXY CARD. YOU MAY REVOKE ANY PROXY GIVEN IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE VOTE AT THE ANNUAL MEETING.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 5, 2015:3, 2016: This Proxy Statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 20142015 and our 20142015 Annual Report are available free of charge on our website at www.nbtbancorp.com/bncp/proxy.html .
NBT Bancorp Inc.
This proxy statement and accompanying proxy card are being sent to the shareholders of NBT Bancorp Inc. ("NBT"(“NBT” or the "Company"“Company”) in connection with the solicitation of proxies on behalf of the Board of Directors to be used at the 20152016 annual meeting of shareholders. This proxy statement, together with the enclosed proxy card, is being mailed to shareholders on or about March 27, 2015.31, 2016.
We will hold our annual meeting of shareholders at the DoubleTree by Hilton Hotel, 225 Water Street, Binghamton, New York 13901 on May 5, 20153, 2016 at 10:00 a.m. local time.
At our annual meeting, our shareholders will be asked to consider and vote upon the following proposals:
We are unaware of other matters to be voted on at our annual meeting. If other matters do properly come before our annual meeting, including consideration of a motion to adjourn the annual meeting to another time and/or place for the purpose of soliciting additional proxies, we intend that the persons named in this proxy will vote the shares represented by the proxies on such matters as determined by a majority of our Board.
The presence, in person or by proxy, of at least a majority of the total number of issued and outstanding shares of common stock entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting. Assuming the presence of a quorum at the annual meeting, a plurality of the shares of our common stock represented at the annual meeting, either in person or by proxy, and entitled to vote thereon will elect directors (Proposal 1). This means that the threeten nominees who receive the most votes will be elected.
The affirmative vote of a majority of the shares of common stock represented at our annual meeting, either in person or by proxy, and entitled to vote thereon is required to ratify the appointment of our independent registered public accounting firm (Proposal 3)2).
Our Board urges our shareholders to complete, date and sign the accompanying proxy card and return it promptly in the enclosed postage-paid envelope or vote via the Internet or by telephone. BrokerAbstentions and broker non-votes will not be counted as a vote cast or entitled to vote on any matter presented at the annual meeting except that broker non-votes will have the effect of a vote cast “against” Proposal 2. Abstentions will be counted in determining the number of shares represented and entitled to vote and will have the effect of a vote cast “against” Proposals 2 and 3.meeting.
In order to have a quorum, a majority of the total voting power of our outstanding shares of common stock entitled to vote at our annual meeting must be represented at the annual meeting either in person or by proxy. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum for the transaction of business.
Our Board is soliciting proxies from our shareholders. This will give you an opportunity to vote at our annual meeting without having to attend. When you deliver a valid proxy, the shares represented by that proxy will be voted by a named agent in accordance with your instructions.
If you are a shareholder and vote by proxy but make no specification on your proxy card that you have otherwise properly executed, the named agentpersons will vote the shares represented by your proxy:
If you are a shareholder whose shares are registered in your name, you may vote your shares by using one of the following four methods:
If your shares are registered in the name of a bank or brokerage firm you will receive instructions from your holder of record that must be followed in order for the record holder to vote the shares per your instructions. Many banks and brokerage firms have a process for their beneficial holders to provide instructions over the telephone or via the Internet. If you hold shares through a bank or brokerage firm and wish to be able to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspector of elections with your ballot.
Any NBT shareholder of record giving a proxy may revoke the proxy at any time before the vote at the annual meeting in one or more of the following ways:
Attendance at the annual meeting will not by itself constitute a revocation of a proxy; to revoke your proxy, you must complete and submit a ballot at the annual meeting or submit a later-dated proxy.
You should send any written notice of revocation or subsequent proxy to NBT Bancorp Inc., 52 South Broad Street, Norwich, New York 13815, Attention: F. Sheldon Prentice, Esq., Executive Vice President, General Counsel and Corporate Secretary, or hand deliver the notice of revocation or subsequent proxy to the Corporate Secretary at or before the taking of the vote at the annual meeting. You may also revoke your proxy by telephone or via the Internet by giving a new proxy over the telephone or the Internet prior to 11:59 p.m. on May 4, 2015.2, 2016.
If you hold shares through a bank or brokerage firm, you must contact that firm to revoke any prior voting instructions. You may also vote in person at the annual meeting if you obtain a legal proxy as described above.
We will bear our own costs of soliciting of proxies. We have engaged D.F. King & Co., Inc. as the proxy solicitor for the 2015 annual meeting for an approximate fee of $7,500, plus reasonable out-of-pocket expenses. We will reimburse brokerage houses, fiduciaries, nominees and others for their out-of-pocket expenses in forwarding proxy materials to owners of shares of our common stock held in their names. In addition to the solicitation of proxies by use of the mail, we may solicit proxies from our shareholders by directors, officers and employees acting on our behalf in person or by telephone, facsimile or other appropriate means of communications. We will not pay any additional compensation, except for reimbursement of reasonable out-of-pocket expenses, to our directors, officers and employees in connection with the solicitation. You may direct any questions or requests for assistance regarding this proxy statement to F. Sheldon Prentice, Corporate Secretary, by telephone at (607) 337-6530 or by email at sprentice@nbtbci.com.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE BY TELEPHONE OR VIA THE INTERNET USING THE TELEPHONE NUMBER OR THE INTERNET ADDRESS ON YOUR PROXY CARD.
Messrs. Dietrich, Mitchell and Murphy were elected to serve for one-year terms. Messrs. Dietrich, Mitchell, Murphy, Wadsworth, Webb and Ms. Civil, whose terms will expire at the 20152016 annual meeting, have been nominated to stand for re-electionelection at this year’s meeting to serve until the annual meeting in 2017. Messrs. Delaney, Douglas, Santangelo and Seifter are currently serving terms that will expire in 2017, but have voluntarily agreed to stand for election in 2016 for a one-year term. Therefore, all ten directors are standing for election at the 20152016 annual meeting for terms expiring in 2016, unless the amendments described in Proposal 2 are not approved, in which case their terms would expire in 2018.meeting.
The persons named in the enclosed proxy intend to vote the shares of our common stock represented by each proxy properly executed and returned to us FOR the election of the aforementioned nominees as directors, but if the nominees should be unable to serve, they will vote such proxies for those substitute nominees as our Board shall designate to replace those nominees who are unable to serve. Our Board currently believes that each nominee will stand for election and will serve if elected as a director. Assuming the presence of a quorum at the annual meeting, the threeten director nominees will be elected by a plurality of the votes cast by the shares of common stock entitled to vote at the annual meeting and present in person or represented by proxy. This means that the threeten nominees who receive the most votes will be elected. There are no cumulative voting rights in the election of directors.
Information regarding the nominees and the directors continuing in office is provided below. Each biography contains information regarding each person’s business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experience, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board of Directors to determine that such person should serve as a director at the time of filing of this proxy statement. Unless otherwise stated, each individual has held his or her current occupation for the last five years. The age indicated in each director’s biography is as of December 31, 2014.2015. There are no family relationships among the directors or executives.
7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of February 27, 201526, 2016 with respect to the beneficial ownership of the Company’s Common Stock by: (1) each director and nominee; (2) each executive officer named in the Summary Compensation Table; and (3) all executive officers and directors as a group. Except as otherwise indicated, each of the stockholders named below effectively exercises sole, or shared with spouse, voting and investment power with respect to the outstanding shares of Common Stock beneficially owned.
Directors, Nominees for Director and Named Executive Officers | | Number of Shares Owned | | | Options Exercisable Within 60 Days (1) | | | Total Beneficial Ownership of NBT Bancorp Common Stock | | | Percent of Shares Outstanding | | | Number of Shares Owned | | Options Exercisable Within 60 Days (1) | | Total Beneficial Ownership of NBT Bancorp Common Stock | | Percent of Shares Outstanding | |
Richard Chojnowski | | | 277,570 | | | | - | | | | 277,570 | | | | * | | |
Patricia T. Civil | | | 19,068 | | | | 4,750 | | | | 23,818 | | | | * | | | | 20,426 | | | 4,750 | | | 25,176 | | | * | |
Timothy E. Delaney | | | 51,102 | | | | 1,667 | | | | 52,769 | | | | * | | | | 52,070 | | | - | | | 52,070 | | | * | |
James H. Douglas | | | 4,280 | | | | - | | | | 4,280 | | | | * | | | | 5,263 | | | - | | | 5,263 | | | * | |
Daryl R. Forsythe | | | 116,353 | | | | - | | | | 116,353 | | | | * | | |
John C. Mitchell (2) | | | 35,283 | | | | - | | | | 35,283 | | | | * | | |
Daryl R. Forsythe (2) | | | | 119,082 | | | - | | | 119,082 | | | * | |
John C. Mitchell (3) | | | | 36,165 | | | - | | | 36,165 | | | * | |
Michael M. Murphy | | | 34,068 | | | | 900 | | | | 34,968 | | | | * | | | | 37,300 | | | 900 | | | 38,200 | | | * | |
Joseph A. Santangelo (3) | | | 81,120 | | | | 6,000 | | | | 87,120 | | | | * | | |
Joseph A. Santangelo (4) | | | | 84,827 | | | 3,000 | | | 87,827 | | | * | |
Lowell A. Seifter | | | 37,992 | | | | - | | | | 37,992 | | | | * | | | | 40,911 | | | - | | | 40,911 | | | * | |
Paul M. Solomon | | | 65,053 | | | | - | | | | 65,053 | | | | * | | |
Robert A. Wadsworth (4) | | | 174,569 | | | | 4,210 | | | | 178,779 | | | | * | | |
Robert A. Wadsworth (5) | | | | 175,927 | | | 4,000 | | | 179,927 | | | * | |
Jack H. Webb | | | 108,693 | | | | - | | | | 108,693 | | | | * | | | | 80,068 | | | - | | | 80,068 | | | * | |
Martin A. Dietrich | | | 214,708 | | | | 182,111 | | | | 396,819 | | | | * | | | | 176,417 | | | 103,000 | | | 279,417 | | | * | |
Michael J. Chewens | | | 59,306 | | | | 38,000 | | | | 97,306 | | | | * | | | | 64,938 | | | - | | | 64,938 | | | * | |
David E. Raven | | | 58,151 | | | | 72,000 | | | | 130,151 | | | | * | | |
David E. Raven (6) | | | | 53,389 | | | 36,000 | | | 89,389 | | | * | |
Jeffrey M. Levy | | | 47,884 | | | | 52,500 | | | | 100,384 | | | | * | | | | 49,914 | | | 31,000 | | | 80,914 | | | * | |
Timothy L. Brenner | | | 28,232 | | | | - | | | | 28,232 | | | | * | | | | 35,673 | | | - | | | 35,673 | | | * | |
As of February 27, 2015,26, 2016, all directors and executive officers listed above as a group (17(15 persons) beneficially owned 1,775,5731,215,020 , or 4.04%2.83%, of total shares outstanding, including shares owned by spouses, certain relatives and trusts, as to which beneficial ownership may be disclaimed, and options exercisable within 60 days of February 27, 2015.26, 2016.
(*) | Less than one percent. |
(1) | Shares under option from the NBT 2001 Non-Employee Director, Divisional Director and Subsidiary Director Stock Option Plan, NBT 1993 Stock Option Plan and/or the 2008 Omnibus Incentive Plan, which are exercisable within 60 days of February 27, 2015.26, 2016. |
(2) | Daryl R. Forsythe will retire as a director upon the expiration of his term at the 2016 annual meeting. |
(3) | Includes 1,800 shares held by a trust for which Mr. Mitchell has investment discretion, but not voting discretion. Does not include 2,000 shares owned by The Adelbert L. Button Charitable Foundation, for which Mr. Mitchell serves as a trustee, but for which all investment and disposition discretion over the shares has been granted to NBT Bank, N.A., as trustee. |
(3)(4) | Includes 65,81367,999 shares held by Arkell Hall Foundation Inc. of which Mr. Santangelo is President and CEO and shares investment and voting powers with that foundation’s Board of Trustees. |
(4)(5) | Includes 164,041 shares held by Preferred Mutual Insurance Company of which Mr. Wadsworth is Chairman of the Board. |
(6) | David E. Raven resigned effective February 5, 2016 and shares are as of January 19, 2016. |
BENEFICIAL OWNERSHIP OF PRINCIPAL HOLDERS OF VOTING SECURITIES OF NBT
The following table sets forth information as of February 27, 2015,26, 2016, except as indicated below, with respect to the beneficial ownership of common stock by any person or group as defined in Section 13(d)(3) of the Exchange Act who is known to the Company to be the beneficial owner of more than five percent of the common stock. As of February 27, 2015,26, 2016, the Company had 43,980,79642,869,689 outstanding shares of common stock.
Name and Addresses of Beneficial Owners | | Number of Shares; Nature of Beneficial Ownership (1) | | | Percent of Common Stock Owned | | | Number of Shares; Nature of Beneficial Ownership (1) | | | | Percent of Common Stock Owned | |
BlackRock, Inc. | | | 3,892,568 | (2) | | | 8.85 | % | | | 4,590,894 | | (2) | | | 10.57 | % |
40 East 52nd Street | | | | | | | | | | | | | | | | | |
New York, NY 10022 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
The Vanguard Group, Inc. | | | 2,873,203 | (3) | | | 6.53 | % | | | 3,211,592 | | (3) | ) | | 7.39 | % |
100 Vanguard Blvd. | | | | | | | | | | | | | | | | | |
Malvern, PA 19355 | | | | | | | | | | | | | | | | | |
(1) | Based on information in the most recent Schedule 13D or 13G filed with the Securities and Exchange Commission pursuant to the Exchange Act with respect to holdings of the Company’s common stock as of December 31, 2014.2015. In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to be the beneficial owner, for purposes of this table, of any shares of Company common stock if such person has or shares voting power and/or investment power with respect to the security, or has the right to acquire beneficial ownership at any time within 60 days from February 27, 2015.26, 2016. As used herein, "voting power"“voting power” includes the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. |
(2) | BlackRock, Inc. reported that it has sole dispositive power over 4,590,894 shares (10.57% of outstanding shares) and sole voting power over 3,892,5684,483,811 shares (10.32% of outstanding shares) of Company common stock as of December 31, 2014, or 8.9% of Company shares outstanding as of such date.2015. |
(3) | The Vanguard Group, Inc. reported that it has sole dispositive and voting power over 2,819,3313,156,720 shares and shared dispositive and voting power over 53,87254,872 shares of NBT common stock as of December 31, 2014,2015, or an aggregate of 6.57%7.39% of Company shares outstanding as of such date. |
CORPORATE GOVERNANCE
The business and affairs of the Company are managed under the direction of the Board of Directors. Members of the Board are kept informed of the Company’s business through discussions with the Company’s executive officers, by reviewing materials provided to them and by participating in meetings and strategic planning sessions of the Board and its committees. The Board has adopted corporate governance practices and policies which the Board and senior management believe promote sound and effective corporate governance.
Director Independence
Based on a review of the responses of the directors to questions regarding employment and compensation history, affiliations and family and other relationships and on individual discussions with directors, the full Board has determined that all directors, excluding Messrs. Dietrich and Webb, meet the standards of independence set forth by the NASDAQ Stock Market. In making this determination, the Board considered transactions and relationships between each director or his or her immediate family and the Company and its subsidiaries, including those reported under "Compensation“Compensation Committee Interlocks and Insider Participation"Participation” and "Certain“Certain Relationships and Related Party Transactions"Transactions” found on page 47.45. Mr. Dietrich is not independent because he is the President and Chief Executive Officer of the Company. Mr. Webb is not independent because he iswas formerly the Executive Vice President of Strategic Support for the Company.Company until his retirement in 2015.
The independent members of the Board meet at least twice annually in an executive session where non-independent directors and management are excused. Lead independent director John Mitchell, who serves as chairman of the Compensation and Benefits Committee, currently chairs these executive sessions.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all employees, as well as each member of the Company’s Board of Directors. The Code of Business Conduct and Ethics is available at the Company’s website at www.nbtbancorp. com/bncp/corporategov.html .
Board Policy Regarding Communications with the Board
The Board of Directors maintains a process for shareholders to communicate with the Board of Directors. Shareholders wishing to communicate with the Board of Directors should send any communication to Corporate Secretary, NBT Bancorp Inc., 52 South Broad Street, Norwich, New York 13815. Any such communication must state the name of the shareholder and the number of shares beneficially owned by the shareholder making the communication. The Corporate Secretary will forward such communication to the full Board of Directors or to any individual director or directors to whom the communication is directed unless the communication is unduly hostile, threatening, illegal or similarly inappropriate. At each Board meeting, a member of management presents a summary of all communications received since the last meeting that were not forwarded and makes those communications available on request.
The Board’s Role in Risk Oversight
The Board of Directors, together with the Audit and Risk Management Committee, the Nominating and Corporate Governance Committee, and the Compensation and Benefits Committee coordinate with each other to provide enterprise-wide oversight of our management and handling of risk. These committees report regularly to the full Board of Directors on risk-related matters and provide the Board of Directors with insight about our management of strategic, credit, interest rate, liquidity, compliance, operational and reputational risks. In addition, at meetings of the Board of Directors and its committees, directors receive regular updates and reports from management regarding risk management practices, including credit quality, financial reporting, technology, internal controls, compliance, legal matters, and asset liability and liquidity management, among others. Furthermore, current risk management issues are discussed regularly with the Board of Directors and its committees.
Board Leadership Structure
The Board of Directors does not have a policy on whether the same person may serve as both the chief executive officer and chairman of the board or, if the roles are separate, whether the chairman should be selected from the non-employee directors. The Board believes that it should have the flexibility to make these determinations at any given point in time in the way that it believes best to provide appropriate leadership for the Company at that time. Currently, Mr. Dietrich serves as the Chief Executive Officer of the Company, while Mr. Forsythe, who is independent, serves as the Chairman of the Board of Directors. The Board of Directors believes that this leadership structure best serves the Company at this time because it allows Mr. Dietrich to focus on the Company’s operations and strategy, while Mr. Forsythe, among other things, can provide independent leadership for the Board of Directors, set the agenda for meetings, and enable other directors to raise issues and concerns for Board consideration without immediately involving the Chief Executive Officer or other management. The Board of Directors believes it currently benefits from having an independent director, who is also a former executive officer of the Company, as its Chairman. Mr. Mitchell serves as the lead independent director providing an additional independent point of contact for the Board of Directors. As of the annual meeting, Mr. Forsythe will be retiring from the Board of Directors and relinquishing his role as Chairman. The Board of Directors is expected to appoint a new chairman shortly after the annual meeting in accordance with the Company’s bylaws.
Director Attendance at Board Meetings and Annual Meetings
During 2014,2015, the Board held four meetings. Each incumbent director attended at least 75% of the aggregate of: (i) the total number of meetings of the Board held during the period that the individual served; and (ii) the total number of meetings held by all committees of the Board on which the director served during the period that the individual served. In addition, directors are expected to attend our annual meeting of shareholders. All directors were in attendance at the 20142015 annual meeting, and we expect that all directors will be present at the 20152016 annual meeting.
Committees of the Board of Directors
Our Board has a number of standing committees, including a Nominating and Corporate Governance Committee, Audit and Risk Management Committee and Compensation and Benefits Committee. The Board has determined that all of the directors who serve on these committees are independent for purposes of NASDAQ Rule 5605 and that the members of the Audit and Risk Management Committee are also "independent"“independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”). A table showing the members of each of these committees follows:
Director | Nominating and Corporate Governance | Audit and Risk Management | Compensation and Benefits |
Richard Chojnowski | P | | |
Patricia T. Civil | | Chair | P |
Timothy E. Delaney | | P | P |
James H. Douglas | Chair | | |
John C. Mitchell | P | | Chair |
Michael M. Murphy | | P | P |
Joseph A. Santangelo | P | | |
Lowell A. Seifter | P | P | P |
Paul M. Solomon | | | P |
Robert A. Wadsworth | P | P | |
A description of each of these committees follows:
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for determining the qualification of and nominating persons for election to the Board of Directors, including (if applicable) shareholder nominations that comply with the notice procedures set forth by SEC rules and the Company’s Bylaws. The Committee also formulates our corporate governance guidelines and functions to insure successful development of management at the senior level and succession planning, as applicable. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee, a copy of which is available on the NBT Bancorp website at www.nbtbancorp.com/bncp/corporategov.html . This Committee met twofour times during 2014.2015.
During the past two years, the Nominating and Corporate Governance Committee has engaged in a process to evaluate our corporate governance processes against current trends. To further this endeavor, Mr. Forsythe resigned as chair and member of the Nominating and Governance Committee in January 2015 to allow for the membership to consist solely of directors that have never been executives of the Company. In addition, other changes and recommendations were made to align our corporate governance process with current trends including the recommendation to havehaving our board elected annually, (see Proposal 2), prohibiting the pledging of Company shares and determining not to adopt a new poison pill following the expiration of the Company’s former poison pill in October 2014. In 2015, the Company effected shareholder approved charter and bylaw amendments to provide for the annual election of all directors. Although annual elections were to be phased in over the next two years as existing directors’ terms expired, Directors Delaney, Douglas, Santangelo and Seifter, whose terms expire in 2017, volunteered to stand for election at the 2016 annual meeting in order to accelerate the process and achieve the annual election of all directors starting in 2016.
The Board of Directors believes that it should be comprised of directors who possess the highest personal and professional ethics, integrity, and values, and who shall have demonstrated exceptional ability and judgment and who shall be most effective in representing the long-term interests of the shareholders. While the Board of Directors and Nominating and Corporate Governance Committee have no formal policy on board diversity, diversity is considered by the Nominating and Corporate Governance Committee in determining the qualification of and nominating persons for election to the Board of Directors.
When considering candidates for the Board of Directors, the Nominating and Corporate Governance Committee takes into account the candidate’s qualifications, experience and independence from management. In addition, in accordance with the Company’s Bylaws:
| ● | Every director must be a citizen of the United States; |
| ● | Each director must own $1,000 aggregate book value of the Company’s common stock; and |
| ● | No person shall serve as a director beyond the Company’s annual meeting following the date upon which he or she shall have attained the age of 72 years. |
When seeking candidates for director, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent directors, management or others. The Committee also has the authority to retain any search firm to assist in the identification of director candidates. The Committee will review the qualifications and experience of each candidate. If the Committee believes a candidate would be a valuable addition to the Board, it will recommend to the full Board that candidate’s election.
The Company’s Bylaws also permit shareholders eligible to vote at the annual meeting to nominate director candidates, but only if such nominations are made pursuant to timely notice in writing to the President of NBT. To be timely, notice must be delivered to, or mailed to and received at, the principal executive offices of NBT within 10150 days following the day on which public disclosure of the date of any annual meeting called for the election of directors is first given. The Nominating and Corporate Governance Committee will consider candidates for director suggested by shareholders applying the criteria for candidates described above and considering the additional information required by Article III, Section 4 of the Company’s Bylaws, which must be set forth in a shareholder’s notice of nomination. Article III, Section 4 of the Company’s Bylaws requires that the notice include: (a) as to each person whom the shareholder proposes to nominate for election as a director, (i) the name and address of such person and (ii) the principal occupation or employment of such person; and (b) as to the shareholder giving notice (i) the name and address of such shareholder, (ii) the number of shares of the Company that will be voted for the proposed nominee by such shareholder (including shares to be voted by proxy) and (iii) the number of shares of the Company which are beneficially owned by such shareholder.
Audit and Risk Management Committee
The Audit and Risk Management Committee represents our Board in fulfilling its statutory and fiduciary responsibilities for independent audits of NBT’s consolidated financial statements, including monitoring accounting and financial reporting practices and financial information distributed to shareholders and the general public. The Audit and Risk Management Committee is also responsible for overseeing the Company’s compliance with legal and regulatory requirements and the performance of the Company’s Risk Management Division. Directors on our Audit and Risk Management Committee meet the expanded independence requirements of audit committee members. In addition, our Board of Directors has determined that Ms. Civil and Mr. Seifter are "audit“audit committee financial experts"experts” as that term is defined in Item 407(d)(5) of Regulation S-K.
This Committee met five times in 2014.2015. Responsibilities and duties of this Committee are discussed more fully in the Audit and Risk Management Committee Report on page 4845 and in the Audit and Risk Management Committee’s charter, which is available on the Company’s website at www.nbtbancorp.com/bncp/corporategov.html.
Compensation and Benefits Committee
All of the Company’s Compensation and Benefits Committee members are independent directors, as determined by the Board, and as such term is defined in the NASDAQ Marketplace Rules as they apply to the Company.
The Committee is responsible for the development, oversight and administration of the Company’s compensation program. The Committee works closely with the Company’s CEO and Executive Vice President of Human Resources to implement our compensation program. In addition, the Committee typically engages in executive sessions without Company management present.
The Committee regularly reviews our compensation practices and policies and recommends to the Board of Directors the compensation and benefits for the CEO, directors and executive management team, including the named executive officers. In making compensation recommendations to the Board of Directors for the named executive officers, the Committee relies substantially on the recommendations of the CEO and, in the case of the CEO’s compensation, upon the recommendation of the Chairman of the Board. The Committee generally determines the compensation for the named executive officers at its December meeting preceding the commencement of the fiscal year in which the compensation will be paid or earned, or in its January meeting of such fiscal year.
The Committee implemented several changes at the end of 2014 and the beginning of 2015 to bring our compensation and benefits program for executives more aligned with current trends. Those changes are outlined in the Compensation Discussion and Analysis on pages 19- 20page 18 and further discussed in detail within the Compensation Discussion and Analysis. The Committee has engaged Pearl Meyer & Partners, LLC ("PM&P"(“Pearl Meyer”), an international human resources consulting firm, to conduct an annual review of the Company’s executive compensation program. PM&PPearl Meyer is charged with comparing all elements of the Company’s executive compensation program to external, objective benchmarks in order to assess the competitiveness of the Company’s total compensation.
Two competitive markets are compared—the broader banking industry and peer group data. In addition to a competitive analysis, PM&PPearl Meyer performs a pay for performance alignment analysis based on several relevant macro-financial metrics. These measures provide information regarding compensation paid by our competitors and the broader banking industry taking into consideration size, asset growth, earnings growth and stewardship of capital. PM&PPearl Meyer provides the Committee with relevant market data and alternatives to consider in its executive compensation decision-making. The Committee reviews information provided by PM&PPearl Meyer to determine the appropriate level and mix of short and long-term incentive compensation and cash and equity-based compensation.
The CEO’s compensation reflects the Committee’s evaluation of his performance measured against the following criteria: (i) implementation of the Company’s short and long-term strategies; (ii) financial and operating performance; (iii) management development; (iv) customer service; and (v) leadership in positioning the Company to meet the significant operational and regulatory challenges of the evolving financial services industry. The Committee may use its discretion to deviate from or modify compensation policies and recommendations, but does so rarely, and typically, only in unusual circumstances.
The Committee also administers the Company’s pension plan, 401(k) & ESOP plan, the directors’ and officers’ stock plans as well as the 2008 Omnibus Incentive Plan (the "Omnibus Plan"“Omnibus Plan”). Pursuant to the terms of the Company’s Omnibus Plan, the Committee may delegate its authority to grant awards to nonexecutive officers under such plan to a member of the Board and the Committee has granted such authority, within certain defined limits, to Mr. Dietrich. A charter that reflects these responsibilities and delegated authority, which the Committee and the Board periodically review and revise, governs the Committee. A copy of the charter is available on the Company’s website at www.nbtbancorp.com/bncp/corporategov.html. The Committee met threefour times in 2014.2015.
Policy on Recovery of Awards
Incentive Compensation Clawback Policy
In the event of a restatement of incorrect financial results, the Company’s Compensation and Benefits Committee (the "Committee"“Committee”) will review all cash and equity incentive awards made under the Company’s 2008 Omnibus Incentive Plan (the "Omnibus Plan"“Omnibus Plan”) that were paid or awarded to executive officers (within the meaning of Rule 3b-7 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”)) for performance periods beginning on and after January 1, 2012,2013, which occur during the restatement period. If any such awards would have been lower had the level of achievement of applicable financial performance goals been calculated based on such restated financial results, the Committee will, if it determines appropriate in its sole discretion, to the extent permitted by governing law, require the reimbursement of the incremental portion of the awards in excess of the awards that would have been paid based on the restated financial results.
Furthermore, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company as a result of misconduct with regard to any financial reporting requirement under applicable securities laws, the individuals subject to the automatic forfeiture provisions under Section 304 of the Sarbanes-Oxley Act of 2002 and any other employee who knowingly engaged in the misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct or was grossly negligent in failing to prevent the misconduct, shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever first occurred) of the financial document that contained such material noncompliance. Prior to January 1, 2012,2013, contracts for the Company’s Chief Executive Officer, its Chief Financial Officer, and the other individuals included in the Summary Compensation Table on page 3231 included similar clawback clauses, as described under "Agreements“Agreements with Executive Officers"Officers” beginning on page 45.43.
Equity Compensation Clawback Policy
The Committee may specify in an award that a grantee’s rights, payments, and benefits with respect to the award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of the award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the grantee’s provision of services to the Company, violation of material Company policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the grantee, or other conduct by the grantee that is detrimental to the business or reputation of the Company. These provisions will generally be limited to a three year look-back from the occurrence of the event that gives rise to the forfeiture.
Director Compensation
Set forth below is the fee schedule for non-executive directors as of December 31, 2014:2015:
| | Cash | | | Restricted Stock Units | | | Cash | | | Restricted Stock Units | |
Annual Retainer Fees | | | | | | | |
Company: | | | | | | | |
Annual Retainer Fees Company: | | | | | | | |
| | | | | | | | | | | | |
Chair | | $ | 50,000 | | | $ | 54,000 | | | $ | 65,000 | | | $ | 54,000 | |
Director | | $ | 12,500 | | | $ | 13,000 | | | $ | 12,500 | | | $ | 13,000 | |
NBT Bank, N.A.: | | | | | | | | | | | | | | | | |
Chair | | | — | | | $ | 11,000 | | | | — | | | $ | 11,000 | |
Director | | $ | 12,500 | | | $ | 8,000 | | | $ | 12,500 | | | $ | 8,000 | |
Committee Chair: | | | | | | | | | | | | | | | | |
Audit and Risk Management | | $ | 10,000 | | | | — | | | $ | 10,000 | | | | — | |
All Other Committees | | $ | 5,000 | | | | — | | | $ | 5,000 | | | | — | |
Affiliate Board Member | | $ | 1,000 | | | | — | | | $ | 1,000 | | | | — | |
Fee per Board Meeting | | $ | 1,000 | | | | — | | | $ | 1,000 | | | | — | |
Fee per Committee Meeting | | $ | 800 | | | | — | | | $ | 800 | | | | — | |
The restricted stock unit awards in 20142015 were issued pursuant to the Omnibus Plan. The restricted stock units awarded to the non-employee directors vest one-third annually beginning on the first anniversary of the grant date.
Mr. Forsythe serves as the Company’s Chairman under an agreement that was entered into in 2003, when he was also serving as the Company’s President and CEO. Pursuant to this agreement, which commenced January 1, 2006 and continues for as long as Mr. Forsythe is a member of the Board of Directors, he will serve as Chairman of the Company. In addition to the fees set forth above, pursuant to his agreement, Mr. Forsythe is also entitled to be reimbursed for dues and assessments (including initiation fees) incurred in relation to his country club membership. Mr. Forsythe has also agreed that for one year after the termination of his agreement, he will not directly or indirectly compete with the Company or NBT Bank. Under the agreement, during the term of his tenure and for the one year non-compete agreement with the Company, Mr. Forsythe may not disclose confidential information about the Company or its subsidiaries to any other person or entity.
Director Compensation Table
Name | | Fees Earned or Paid in Cash ($) (1) | | | Restricted Stock Awards ($) (1) (2) (3) | | | Stock Option Awards ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compensation ($) (5) | | | Total ($) | | | Fees Earned or Paid in Cash ($) (1) | | | Restricted Stock Awards ($) (1) (2) (3) | | | Stock Option Awards ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compensation ($) (5) | | | Total ($) | |
Daryl R. Forsythe(6) | | | 81,000 | | | | 60,422 | | | | - | | | | - | | | | 12,459 | | | | 153,881 | | | | 87,800 | | | | 60,256 | | | | - | | | | - | | | | 13,122 | | | | 161,178 | |
Richard Chojnowski(7) | | | 42,200 | | | | 19,532 | | | | - | | | | - | | | | 4,675 | | | | 66,407 | | | | 7,800 | | | | - | | | | - | | | | - | | | | 1,680 | | | | 9,480 | |
Patricia T. Civil | | | 59,200 | | | | 19,532 | | | | 12,198 | | | | 986 | | | | 2,111 | | | | 94,027 | | | | 60,000 | | | | 19,475 | | | | - | | | | 618 | | | | 2,130 | | | | 82,223 | |
Timothy E. Delaney | | | 46,600 | | | | 19,532 | | | | - | | | | 5,236 | | | | 560 | | | | 71,928 | | | | 49,200 | | | | 19,475 | | | | - | | | | - | | | | 580 | | | | 69,255 | |
James H. Douglas | | | 45,400 | | | | 19,532 | | | | - | | | | - | | | | - | | | | 64,932 | | | | 52,800 | | | | 19,475 | | | | - | | | | - | | | | - | | | | 72,275 | |
John C. Mitchell | | | 50,200 | | | | 19,532 | | | | - | | | | - | | | | 4,972 | | | | 74,704 | | | | 52,000 | | | | 19,475 | | | | - | | | | - | | | | 5,388 | | | | 76,863 | |
Michael M. Murphy | | | 49,200 | | | | 19,532 | | | | - | | | | - | | | | 4,972 | | | | 73,704 | | | | 47,800 | | | | 19,475 | | | | - | | | | - | | | | 5,388 | | | | 72,663 | |
Joseph A. Santangelo | | | 49,400 | | | | 19,532 | | | | - | | | | 947 | | | | 2,251 | | | | 72,130 | | | | 50,200 | | | | 19,475 | | | | - | | | | 124 | | | | 3,441 | | | | 73,240 | |
Lowell A. Seifter | | | 43,600 | | | | 19,532 | | | | - | | | | - | | | | 12,763 | | | | 75,895 | | | | 45,200 | | | | 19,475 | | | | - | | | | - | | | | 12,212 | | | | 76,887 | |
Paul M. Solomon(7) | | | 41,200 | | | | 19,532 | | | | - | | | | - | | | | 20,461 | | | | 81,193 | | | | 7,000 | | | | - | | | | - | | | | - | | | | 15,693 | | | | 22,693 | |
Robert A. Wadsworth | | | 47,600 | | | | 19,532 | | | | - | | | | 17,524 | | | | 1,079 | | | | 85,735 | | | | 50,800 | | | | 19,475 | | | | - | | | | - | | | | 1,117 | | | | 71,392 | |
Jack H. Webb | | | | 42,600 | | | | 19,475 | | | | - | | | | - | | | | - | | | | 62,075 | |
(1) | Includes all fees earned during the fiscal year whether such fees were paid currently or deferred. |
(2) | The amounts reflect the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. The director restricted stock unit awards granted for fiscal year ending December 31, 2014,2015, were issued as of May 1, 2014,2015, and the per share fair market value was $20.98.$22.08. Assumptions used in the calculation of these amounts are materially consistent with those that are included in footnote 14 to the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K. |
(3) | The aggregate number of outstanding awards as of December 31, 2014,2015, is as follows (no non-employee director held(Ms. Civil has 2,130 unexercisable options related to reloads as of such date): |
Name | | Unvested Stock Units | | | Options Exercisable | | | Unvested Stock Units | | | Options Exercisable | |
Daryl R. Forsythe | | | 6,139 | | | | - | | | 5,764 | | | - | |
Richard Chojnowski | | | 1,985 | | | | - | | |
Patricia T. Civil | | | 1,985 | | | | 4,750 | | | 1,864 | | | 4,750 | |
Timothy E. Delaney | | | 1,985 | | | | 1,667 | | | 1,864 | | | - | |
James H. Douglas | | | 1,985 | | | | - | | | 1,864 | | | - | |
John C. Mitchell | | | 1,985 | | | | - | | | 1,864 | | | - | |
Michael M. Murphy | | | 1,985 | | | | 900 | | | 1,864 | | | 900 | |
Joseph A. Santangelo | | | 1,985 | | | | 6,000 | | | 1,864 | | | 3,000 | |
Lowell A. Seifter | | | 1,754 | | | | - | | | 1,915 | | | - | |
Paul M. Solomon | | | 1,754 | | | | - | | |
Robert A. Wadsworth | | | 1,985 | | | | 4,210 | | | 1,864 | | | 4,000 | |
Jack H. Webb | | | 882 | | | - | |
(4) | Figures in the change in pension value and nonqualified deferred compensation earnings represent earnings for the fiscal year ending December 31, 2014,2015, on deferred directors’ fees under a nonqualified deferred compensation plan. |
(5) | All other compensation includes: cash dividends received on restricted stock and deferred stock granted pursuant to the Non-Employee Directors’ Restricted and Deferred Stock Plan and the Omnibus Plan for all non-employee directors totaling $12,687;$13,593; health and/or dental/vision insurance offered through the Company for sevenfour active and one retired Directors as part of legacy director benefit plans no longer offered, the Company’s associated premium costs totaled $15,587;$14,785; and $4,806$5,244 for the value of split dollar life insurance premiums paid during the 20142015 fiscal year on behalf of Mr. Forsythe. Messrs. Seifter and Solomon’s compensation includes dividends paid through the Alliance Financial Corp.Corporation Deferred Compensation Plan. |
(6) | Mr. Forsythe will retire as a director upon the expiration of his term at the 2016 annual meeting. |
(7) | Messrs. Chojnowski and Solomon retired as directors upon the expiration of their term at the 2015 annual meeting. |
Named Executive Officers of NBT Bancorp Inc.
The following table sets forth certain information for the Named Executive Officers (“NEO’s”NEOs”) of NBT Bancorp Inc.
Name | Age at December 31, 20142015
| Positions Held with NBT and NBT Bank |
Martin A. Dietrich | 5960 | President and Chief Executive Officer |
| | |
Michael J. Chewens | 5354 | Senior Executive Vice President and Chief Financial Officer |
| | |
David E. Raven | 5253 | Executive Vice President, President of Retail Banking and President of Pennsylvania |
| | |
Jeffrey M. Levy | 5354 | Executive Vice President and President of Commercial Banking |
| | |
Timothy L. Brenner | 5859 | Executive Vice President and President of Wealth Management |
Biographical information regarding the Named Executive Officers is set forth below. Information regarding Mr. Dietrich can be found under the section Board Nominees with Terms Ending in 2015for 2016 found on page 5.
Michael J. Chewens has been Senior Executive Vice President and Chief Financial Officer of NBT and NBT Bank since January 2002. He was Executive Vice President and Chief Financial Officer of same from 1999 to 2001. He was also Corporate Secretary of NBT and NBT Bank from December 2000 to April 2010.
David E. Raven has beenresigned effective February 5, 2016. Mr. Raven was the Executive Vice President for NBT and President of Retail Banking for NBT Bank since July 2006. He was President of Pennstar Bank, a Division of NBT Bank from 2005, until the rebranding of Pennstar Bank to NBT Bank in March 2014,2015, at which point this portion of Mr. Raven’s title was updated to President of Pennsylvania. Prior to that, Mr. Raven was President and Chief Operating Officer of the Pennstar Bank Division from August 2000 to 2005 and Senior Vice President of Sales and Administration from September 1999 through August 2000.
Jeffrey M. Levy has been Executive Vice President for NBT and President of Commercial Banking for NBT Bank since December 2006. He joined NBT in August 2005 as Capital Region President. Prior to joining NBT, Mr. Levy was Manager of New York State Government Banking at M&T Bank from January 2004 to August 2005 and President of the Capital District, Commercial Banking at M&T Bank from January 2001 to December 2003.
Timothy L. Brenner has been Executive Vice President for NBT and President of Wealth Management for NBT Bank since March 2012. Prior to that, Mr. Brenner was Senior Vice President, M&T Investment Group. In this role he managed the multi-state Institutional Services (Employee Benefits, Institutional Investment Management Custody, Corporate Trust, Investment Advisory Services, and Property & Casualty Insurance) division. He was also President of the MTB Funds and M&T Life Insurance Company. Previously, he was also Partner at Vivacqua and Company, an independent financial services and insurance agency.
Section 16(a) Beneficial Ownership Reporting Compliance
Our directors and executive officers must, under Section 16(a) of the Exchange Act, file certain reports of their initial ownership of our common stock and of changes in beneficial ownership of our securities. Based solely on a review of reports submitted to NBT, or written representations from reporting persons that all reportable transactions were reported, the Company believes that during the fiscal year ended December 31, 20142015 all Section 16(a) filing requirements applicable to NBT’s officers and directors were complied with on a timely basis with the exception of transactions reported in filings made on behalf of Mr. BrennerMurphy on April 1, 2014 and Mr. Douglas on February 17,August 13, 2015.
COMPENSATION DISCUSSION AND ANALYSIS
This section discusses the Company’s executive compensation philosophy, guidelines and programs, and the material factors affecting the Company’s decisions regarding the compensation of its senior executives. The discussion and analysis is presented to give our shareholders a clear and comprehensive picture of the Company’s executive compensation program, and its individual components. For a full understanding of the information presented, consider the following narrative discussion together with the information in the tables below including the narratives and footnotes that accompany the tables, as well as the Compensation and Benefits Committee (the “Committee”) Report included in this Proxy Statement. The NEOs for the fiscal year 20142015 are:
| · | Martin A. Dietrich, President and Chief Executive Officer (“CEO”) |
| · | Michael J. Chewens, Senior Executive Vice President and Chief Financial Officer (“CFO”) |
| · | David E. Raven, Executive Vice President, President of Retail Banking and President of Pennsylvania |
| · | Jeffrey M. Levy, Executive Vice President and President of Commercial Banking |
| · | Timothy L. Brenner, Executive Vice President and President of Wealth Management |
Executive Summary
Our successful financial and operational performance during 20142015 resulted from our management team’s focus on our immediate near term objectives and long term strategy. The executive compensation program in place is designed to support the team’s efforts by rewarding them for making decisions that lead to consistent results and an outstanding investment for our shareholders.
20142015 Business Highlights
Despite continued challenges in the We continue to have solid financial services industry, we exceeded our financial plan in 2014 to include reachingperformance and reached our second highest level of core diluted earnings per share in the Company’s 158159 year history ($1.71). In addition, core1.72) and net income increased by 8.5%1.7% over 2013 while core return2014. The continued low interest rate environment and the resulting pressure on our net interest margin impacted the Company’s average assets (“ROAA”) increasedloan yield by 2%. Return on20 basis points which were only partially offset by a 5 basis point decline in our average tangible common equity (“ROATCE”) decreased slightlycost of interest bearing liabilities. The Company offset these pressures during 2015 through 5.1% loan growth and 11.2% noninterest bearing demand deposit growth. Organic loan growth over the past five years was 5.5% and our noninterest bearing demand deposits have been growing over 10% per year during the same time period. Our strong demand deposit growth contributes to our low cost of deposits at 22 basis points and helps keep us well positioned for a rising rate environment. Our asset quality trends continue to improve with the Company’s ten year average ratio of nonperforming loans to total loans being 61 basis points lower than the Company’s defined peer median. The Company continues to seek opportunities to diversify noninterest income with noninterest income to total revenues increasing to 31.2% in 2015. The Company continues to invest in our strategic initiatives while maintaining a level that exceedsstrong focus on optimizing our peer group. When reviewing composite measures (Core ROAA, Core ROATCE, nonperforming assets (“NPA”)cost structure through leveraging technology and reducing the cost of our branch operations through consolidations and space reduction opportunities. The Committee recognizes the challenging interest rate environment when setting incentive compensation targets to total assets, efficiency ratio,encourage a long-term view in building shareholder value and net interest margin) we are above the 90th percentilediscourages undue risk taking for our peer banks and have exceeded the 75th percentile of the peer group (definedshort-term gains.
Refer to section “Pay for Performance” on page 22)21 for the last three years. Key financial highlights are shown below.a summary of our pay for performance analysis.
Performance Metric | | 2014 | | | 2013 | | | 2012 | |
Core Net Income ($ Millions) | | $ | 75.8 | | | $ | 69.9 | | | $ | 54.8 | |
Core Diluted EPS | | $ | 1.71 | | | $ | 1.65 | | | $ | 1.63 | |
Core ROAA | | | 0.98 | % | | | 0.96 | % | | | 0.93 | % |
Core ROATCE | | | 14.03 | % | | | 14.76 | % | | | 14.20 | % |
Net Interest Margin | | | 3.61 | % | | | 3.66 | % | | | 3.86 | % |
NPA to Total Assets | | | 0.64 | % | | | 0.74 | % | | | 0.73 | % |
Performance Metric | 2015 | 2014 |
Net Income ($ Millions) | $76.4 | $75.1 |
Diluted EPS | $1.72 | $1.69 |
ROAA | 0.96% | 0.97% |
ROATCE | 13.31% | 13.90% |
Organic Loan Growth | 5.1% | 3.5% |
Organic Demand Deposit Growth | 11.2% | 11.7% |
NPA to Total Assets | 0.51% | 0.64% |
Executive Compensation Program Changes and Events
We continue to be focused on improving the alignment ofaligning our compensation plans with our business objectives, performance, shareholder interests, and the practices of our peers. We also considered the 58.6% non-binding advisory basis approval vote of the executive compensation of our named executive officers by our shareholders at the annual meeting on May 6, 2014 in making the following refinements for 2015.which were applicable in 2015 and will continue in 2016. The Company continues to be open to feedback from shareholders and commentary received from proxy advisory groups to evaluate our compensation practices. The Company is committed to further shareholder outreach related to executive compensation during 2016.
What Has Changed | How It’sIt Has Changed | The Rationale for Change |
Annual Short-Term Incentive Plan | ·Reduce the CEO target reduced from 90% to 80% of base salary for target level performance. ·Added ROAAReturn on Average Assets (“ROAA”) as a new measure for all NEOs plusNEOs. ·Added an Individual Performance measure for the CEOCEO. ·Established 2015 performance target at a level that exceeds analysts’ consensusconsensus. | ·BringsAligns the CEO’s target payout further in line with market practice. ·Creates balanced measures in the annual planplan. ·Establishes challenging performance and payout targetstargets. |
Long-Term Equity Retention and Performance Plan | · Reduce the CEO’s long-term incentive opportunity from 100% of base salary to 80% of base salary for target level performance. ·Eliminated EPS as a measure, leaving ROATCEROTCE as the sole measure for the Performance awardaward. ·RetentionChanged the retention award vesting schedule changed to five years, 20% per year, from a four year schedule with first year 40% vestingvesting. ·Added an Individual performance measure added to the Performance award (was previously only on the Retention award). | ·Removing measure (EPS) that overlapsAligns the CEO’s long-term incentive opportunity with annualmarket practice. ·Removes EPS, which is used in the short-term incentive plan and retaining a measure (ROATCE) thatretains ROTCE which is typically considered a long-term indicator of performanceperformance. ·Desire to includeDistributes shares in equal annual segments versus front-loading. ·Includes individual performance in both portions of the plan · Distribute shares in equal annual segments versus front-loadingplan.
|
Change In Control ("CIC"(“CIC”) | ·DoubleAdded a double trigger (previously was a single trigger). ·SeveranceChanged the severance calculation changed to include three-year average incentive (previously utilized maximum incentive target as calculation). | ·It is more appropriate to triggerTriggers a CIC in the event of both the CIC and termination and not just upon the CIC alonealone. · Prefer to deliver aChanges the bonus payout amount that is comparableupon termination to an average historical payout versus a maximum target amountmarket prevalent provision. |
Non-CEO Supplemental Executive Retirement Plans ("SERPs"(“SERPs”) | ·TheFroze the previous replacement income guarantee of 50% was frozen atto the executive’s current earned calculation, eliminating earning of any future benefit. | ·ReduceReduces future SERP benefit costs of the Company and alignment with marketfurther aligns benefits to the market. |
Stock Ownership | ·OwnershipAmended stock ownership guidelines were amended to be based upon a multiple of salary (3.0x salary for CEO and 1.5x for other NEOs) and included a retention requirement for vesting of restricted stock if ownership guidelines are not metmet. | ·ImproveImproves alignment with shareholder interestsinterests. |
As a result of 20142015 performance and with consideration for the structural changes described above, we made the following decisions regarding compensation during 20142015 and for the upcoming 20152016 performance year.
CEO Pay Mix
| · | Changes were made to Mr. Dietrich’s targeted compensation levels to align with market-based opportunities: |
| o | Mr. Dietrich’s base salary increased by 14.8% and 3.2% in 2015 and 2016, respectively. |
| o | Annual and long-term incentive opportunities were reduced to 80% of base salary for target level performance. |
| · | As a result of the change in pay mix, total direct compensation for Mr. Dietrich increased approximately 3%, which is consistent with market-based merit increases and with the adjustment provided to other NEOs. |
Mr. Dietrich | Base Salary | EICP % of Salary / $ Award | Long-Term Incentive $ of Salary / $ Award | Potential Total Direct Compensation | Variance |
2014 | $675,000 | 90% | $607,500 | 100% | $675,000 | $1,957,500 | ---- |
2015 | $775,000 | 80% | $620,000 | 80% | $620,000 | $2,015,000 | 2.9% |
Base Salaries
| · | NEOs other than Mr. Dietrich’sDietrich received base salary increased by 7%increases averaging 3.3% and 14.8%2.0% in 20142015 and 2015 respectively (see total direct compensation changes in table on the following page).2016, respectively. |
| · | Other NEOs’ base salary increased by an average of 3.25% and 2.75% in 2014 and 2015, respectively. |
Annual Incentives
| · | 20142015 EPS budget was exceeded$1.72 resulting in the Executive Incentive Compensation Plan (“EICP”) funding at 112.5%90% of target with adjustments for individual performance. |
Long-Term Incentives
| · | 2014 EPS budget2015 Return on Average Tangible Common Equity (“ROTCE”) was exceeded and ROTCE performance exceededin the peer68th percentile of the comparator group medianmeeting the 100% target resulting in awards funded at 120% of target. |
Year-over-year results of the compensation changes are shown below:
Named Executive | 2014 Base Pay Increase | 2015 Base Pay Increase | 2013 EICP Payout as % of Target (Paid in 2014) | 2014 EICP Payout as % of Target (Paid in 2015) | 2013 Long-Term Payout as % of Target | 2014 Long-Term Payout as % of Target |
Martin Dietrich | 7% | 14.8% | 100% | 112.5% | 100% | 120% |
Michael J. Chewens | 4% | 3% | 100% | 112.5% | 100% | 120% |
David E. Raven | 2% | 2% | 93% | 106.1% | 100% | 120% |
Jeffrey M. Levy | 3% | 3% | 95% | 103.3% | 100% | 120% |
Timothy L. Brenner | 4% | 3% | 98% | 110.6% | 100% | 120% |
Changes were made to Mr. Dietrich’s targeted compensation levels that result in a percentage increase in Total Direct Compensation of approximately 3%, which is consistent with market practices and with the adjustments provided to the other NEOs.
Mr. Dietrich | Base Salary | EICP % of Salary / $ Award | Long-Term Incentive $ of Salary / $ Award | Potential Total Direct Compensation | Variance |
2014 | $675,000 | 90% | $607,500 | 100% | $675,000 | $1,957,500 | ---- |
2015 | $775,000 | 80% | $620,000 | 80% | $620,000 | $2,015,000 | 2.9% |
Springstone Incentive Award
In January 2014, the Compensation and Benefits Committee approved the introduction of a special performance award for the potential sale of the Company’s equity investment in Springstone Financial LLC. The plan was designed to recognize the successful completion of the sale and to reward employees deemed integral to the oversight of the Springstone investment. The Company completed a successful sale of its position in Springstone on April 17, 2014 and funded a one-time incentive pool equal to $360,000 for the NEOs that was distributed under the oversight and approval of the Committee. Details are presented later in this discussion.
Corporate Governance Highlights
We maintain important corporate governance policies and practices that promote sound and effective corporate governance.governance:
| · | Our NEOs and directors are currently in compliance with a robust stock ownership policy. |
| · | Our insider trading policy prohibits our NEOs, directors and all employees from engaging in hedging and pledging (except to the extent grandfathered) transactions with Company stock. |
| · | In the event the Company restates its financial results, our incentive compensation clawback policy allows our Board to recoup any excess incentive compensation paid to our NEOs upon which an award is based due to fraud, intentional misconduct or gross negligence. |
| · | Our equity awards reward performance and vest over a three to five-year time horizon to ensure sustainable performance and sound risk management. |
| · | We annually conduct a risk assessment of all of our incentive compensation plans and the Committee reviews the assessment to ensure the incentive compensation programs discourage inappropriate risk taking. |
| · | Eleven80% of thirteen directors are independent. |
| · | 100% of the Nominating and Corporate Governance, Compensation and Benefits and Audit and Risk Committee members are independent. |
| · | Our Chief Executive Officer and Chairman of the Board are separate individuals. |
| · | In 2015, the Board of Directors has recommended aCompany effected shareholder approved charter and bylaw amendmentamendments to provide for anthe annual voteelection of shareholdersall directors. Although annual elections were to electbe phased in over the next two years as existing directors (see Proposal 2).terms expired, the Company’s directors whose terms expire in 2017 volunteered to stand for election at the 2016 annual meeting in order to accelerate the process and achieve the annual election of all directors starting in 2016. |
| · | We have a Code of Ethics that is administered by the Audit and Risk Management Committee which includes an annual training program. |
Compensation Philosophy
The ultimate goal of our compensation philosophy is to create long-term shareholder value by rewarding performance that furthers the strategic goals and growth of the Company. At the same time, the Compensation and Benefits Committee seeks to maintain an executive compensation program that is competitive with comparably-sized financial institutions. The Committee regularly reviews the compensation components in order to ensure that, as a whole, they conform with the Company’s guiding principles and policies relating to compensation.
The primary objectives of the Company’s executive compensation program are:
| · | To attract and retain talented senior executives; |
| · | To align executive compensation with our overall business strategies, values, and shareholder interests; and |
| · | To motivate senior executives by rewarding them for outstanding corporate and individual performance |
The following philosophy underlies the Company’s executive compensation program:
| · | Executive compensation should be closely aligned with both short-term and long-term shareholder interests; |
| · | Executive compensation should appropriately reflect performance related to the achievement of corporate and individual goals; |
| · | Executives should be required to build and maintain significant equity investments in the Company; and |
| · | Executive compensation should be determined by a committee composed entirely of independent directors having sufficient resources to do its job, including access to independent, qualified experts. |
Setting Executive Compensation
The Compensation and Benefits Committee operates under a written charter that establishes its responsibilities. A copy of the Compensation and Benefits Committee Charter can be found on the Company’s website at www.nbtbancorp.com. The Committee reviews the charter annually to ensure that the scope of the charter is consistent with the Committee’s expected role. Under the charter, the Committee is charged with general responsibility for the oversight and administration of the Company compensation program. The charter gives the Committee the sole responsibility for determining the compensation of the chief executive officer based on the Committee’s evaluation of his performance. The charter also authorizes the Committee to engage consultants and other professionals without management approval to the extent deemed necessary to discharge its responsibilities.
The Committee annually conducts a self-assessment of its overall performance and regularly engages in education events either through its independent consultant or through attendance at banking industry events.
The Committee has the sole authority to retain and terminate a compensation consultant and to approve the consultant’s fees and all other terms of the engagement. In 2014,2015, the Compensation Committee retained the services of Pearl Meyer & Partners LLC ("PM&P"(“Pearl Meyer”), an independent compensation consulting firm, to perform a competitive assessment of the Company’s executive compensation programs. The annual executive compensation assessment includes, but is not limited to, an assessment of Company’s compensation program compared to its peers, recommendations for total direct compensation opportunities (base salary, cash incentives and long-term incentives), an assessment of the Company’s financial performance relative to its peers, and a review of the alignment of pay and performance. The annual executive compensation assessments provides the Compensation Committee with a broad array of information from which to assess the effectiveness of its compensation programs and serve as a foundation for compensation decisions.
In addition to providing annual assessments, PM&PPearl Meyer advises the Compensation Committee on best practices in light of the changes in the bank regulatory environment and assists the Compensation Committee in designing compensation arrangements that reflect the Company’s compensation philosophy. In 2014, PM&P2015, Pearl Meyer assisted the Compensation Committee in developing a peer group for the purpose of providing the Company with a basis for comparing its compensation against the compensation arrangements provided by other similarly-situated financial institutions. In addition, PM&PPearl Meyer assisted the Committee with program refinements to continue alignment with Company and shareholder expectations.
A representative from PM&PPearl Meyer attends the Compensation Committee meetings upon request for the purpose of reviewing compensation data with the Company and participating in general discussions on compensation for the named executive officers. While the Compensation Committee considers input from PM&PPearl Meyer when making compensation decisions, the Committee’s final decisions reflect many factors and considerations.
PM&PPearl Meyer reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee has analyzed whether the work of PM&PPearl Meyer as a compensation consultant has raised any conflict of interest, taking into consideration the following factors, among others: (i) the provision of other services to the Company by PM&P;Pearl Meyer; (ii) the amount of fees from the Company paid to PM&PPearl Meyer as a percentage of PM&P’sPearl Meyer’s total revenue; (iii) PM&P’sPearl Meyer’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of PM&PPearl Meyer or the individual compensation advisors employed by PM&PPearl Meyer with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of the Company owned by PM&PPearl Meyer or the individual compensation advisors employed by PM&P.Pearl Meyer. The Compensation Committee has determined, based on its analysis of the above factors, among others, that the work of PM&PPearl Meyer and the individual compensation advisors employed by PM&PPearl Meyer as compensation consultants to the Company has not created any conflict of interest.
Benchmarking
The compensation review process entailed the use of survey data and peer group information prepared and presented by PM&PPearl Meyer to the Committee. In addition, members of the Committee also availed themselves of the opportunity to talk with PM&PPearl Meyer directly about the data. Generally, the Committee focused on the Total Cash and Total Direct Compensation levels of senior executive positions of companies in the financial industry with total assets ranging from $4 - $15 billion. The peer group used as reference for total direct compensation and financial performance comparisons consists of community-based banking organizations in the Northeast and in the Midwest with assets between $4 billion and $15 billion (approximately 0.5x – 2x of the Company’s asset size), operating in a market similar to the Company’s and competing for comparable executive talent. In 2014,2015, the peer group consisted of the following companies:
Berkshire Hills Bancorp, Inc. | National Penn Bancshares, Inc. |
Brookline Bancorp, Inc. | Northwest Bancshares, Inc. |
Community Bank System, Inc. | Old National Bancorp |
F. N. B.First Commonwealth Financial Corporation | Park National Corporation |
First Commonwealth Financial CorporationMidwest Bancorp, Inc. | PrivateBancorp, Inc. |
First MidwestFlagstar Bancorp, Inc. | Provident Financial Services, Inc. |
Flagstar Bancorp, Inc.Flushing Financial Corporation | S&T Bancorp, Inc. |
Flushing Financial CorporationIndependent Bank Corp. | Tompkins Financial Corporation |
Independent Bank Corp.MB Financial, Inc. | TrustCo Bank Corp. NY |
MB Financial, Inc. | |
The Committee generally sets total direct compensation (base salary, annual incentive and long-term incentive opportunity) for the NEOs at levels that are between the median and the 75th percentile of the peer group. The December 20142015 study conducted by PM&PPearl Meyer found that aggregate compensation of all NEOs is consistent with this approach and falls betweennear the 50th and 75th percentiles.percentile. A discussion of the individual components of the Company’s executive compensation program follows below.
Pay for Performance
At the request of the Compensation Committee, PM&PPearl Meyer conducts regular analyses to monitor pay and performance alignment (both financial and operational), particularly with regards to the Chief Executive Officer. The goal is to use this information proactively to set appropriate pay opportunity ranges and retroactively to assess the actual pay delivered based on performance.
The 20142015 study revealed that the Company’s CEO and top five executives (combined, including CEO) Total Direct Compensation (TDC) is aligned with operational performance using a composite of five key metrics (ROAA, ROATE,ROTCE, NPA/Adjusted Assets, Efficiency Ratio, and Net Interest Margin). The table below indicates the percentile rankings for the Company in one-year and three-year average performance periods as of year-end 2013,2014, and TDC, versus the peer group. This analysis informed the Committee of the Company’s pay and performance alignment.
| For This Level of Performance…Performance | …TDC Was At This Percentile of the Peer Group |
| Composite Measures | Total Shareholder Return | |
One-Year Performance | 7671thst percentile
| 3259ndth percentile
| 65th percentile |
Three-Year Performance | 94th percentile | 612th percentile
|
The Committee reviewed the analysis and concluded that there has been a strong link between the Company’s performance and executive Total Direct Compensation across a composite group of measures. Structural plan design changes mentioned earlier have been implemented to strengthen the alignment of Total Shareholder Return (“TSR”) and compensation alignment to the extent possible through compensation plan design refinements.
Executive Compensation Program Components
The Company’s executive compensation program encompasses factors such as the executive’s position and responsibilities and reflects an appropriate pay mix. The table below sets forth the components of the Company’s executive compensation program, the component’s function related to total compensation, and identifies the tables that provide detailed information about each component.compensation.
Compensation Component | Description | Purpose | Detailed Information |
Base Salary | ·Pay to recognize executive'sexecutive’s role, responsibilities, skills, experience, individual achievements and NBT performance. | ·To provide competitive and fair fixed compensation. | ·Summary Compensation Table
|
Executive Incentive Compensation Plan (a component of the 2008 Omnibus Incentive Plan) | ·Annual cash rewards for achievement of pre-determined level of Earnings Per Share, ROAA (2015) and individual goals. | ·To provide market competitive compensation. ·To motivate and reward executives for achieving annual Company, department and individual goals which support our long-term strategic plan. ·To encourage executives to make a significant personal contribution to the Company'sCompany’s success. | ·Summary Compensation Table
·Grants of Plan-Based Awards Table
|
Equity Awards Under the 2008 Omnibus Incentive Plan | ·Performance-based restricted stock units earned over a designated performance period and subject to Company performance. ·Time-vesting restricted stock units granted based on individual performance and earned over a designated time-period. | ·To strengthen pay for performance relationship by increasing the weighting of performance-based equity compensation. · To align executives with long-term interests of the Company and shareholders, provide reward for superior performance, encourage stock ownership and enhance our ability to retain our top talent. | · Summary Compensation Table
·Grants of Plan-Based Awards Table
·Outstanding Equity Awards at Fiscal Year-End Table
·Option Exercises and Stock Vested Table
|
Retirement Benefits | ·NEOs participate in Company-wide tax-qualified plans including: a defined benefit pension plan and a 401(k) ESOP defined contribution plan. ·Certain NEOs participate in a nonqualified Supplemental Executive Retirement Plan ("SERP"(“SERP”). | ·To provide market competitive and reasonable retirement benefits as well as financial security for retirement. ·To enhance Company'sCompany’s ability to attract and retain the executives. | · Summary Compensation Table
· Pension Benefits Table
· Nonqualified Deferred Compensation Table
|
Perquisites and Other Personal Benefits | ·Benefits may include automobiles, life and disability insurance, long-term care insurance and club dues. Eligibility for each perquisite varies depending on the position of the NEO. | ·These benefits are intended to attract and retain superior executive employees and foster continuity in executive leadership. | · Summary Compensation Table
|
Termination and Severance Pay | ·NEOs have employment agreements providing post-termination severance compensation under certain scenarios, including change in control. | ·Employment agreements assist in attracting and retaining the NEOs and minimize the impact on executives when exploring or executing strategic change in control opportunities. | · Potential Payments Upon Termination or Change in Control Table
|
Base Salary
The Committee reviews executive base salaries annually. Base salary is the only fixed portion of compensation for salaried employees of the Company, including the NEOs. It provides the NEOs financial certainty. The Company has entered into employment agreements with each NEO providing for a minimum base salary, subject to annual adjustments upon the Committee approval.
In 2014,2015, the Committee determined the base salaries of the NEOs based on the Company’s guiding principles and policies and competitive market. Excluding the CEO, theThe Committee approved an average of 2.7%2.3% base salary increase for NEOs for 2016 in order to maintain market competitive base salaries and recognize their performance and contribution. The Committee’s recommendations were in line with the results of the compensation analysis provided by Pearl Meyer. As discussed earlier in the corporate performance summary, below are the base salaries for the NEOs for 20142015 and 2015.2016. Mr. Raven is excluded from the table below due to his resignation in February 2016, whose base pay for 2015 was $421,400.
Named Executives | | 2014 Base Pay | | | 2015 Base Pay | | |
Martin Dietrich | | $ | 675,000 | | | $ | 775,000 | | |
Name Executive | | 2015 Base Pay | 2015 Base Pay Increase | 2016 Base Pay | 2016 Base Pay Increase |
Martin A. Dietrich | | $775,000 | 14.8% | $800,000 | 3.2% |
Michael J. Chewens | | $ | 433,600 | | | $ | 446,600 | | $446,600 | 3% | $460,000 | 3% |
David E. Raven | | $ | 413,100 | | | $ | 421,400 | | |
Jeffrey M. Levy | | $ | 423,300 | | | $ | 436,000 | | $436,000 | 3% | $436,000 | 0% |
Timothy L. Brenner | | $ | 321,400 | | | $ | 331,000 | | $331,000 | 3% | $340,982 | 3% |
Variable Compensation
In addition to fixed base salaries, the Company provides cash and equity-based incentive compensation. The incentive compensation varies in amount depending on the factors discussed below and is designed to promote superior performance and achievement of corporate goals, to encourage the growth of shareholder value, and to share the long-term growth and profitability of the Company with key employees.
Executive Incentive Compensation Plan
The Executive Incentive Compensation Plan (the "EICP"“EICP”) is a component of the 2008 Omnibus Incentive Plan (the "Omnibus Plan"“Omnibus Plan”), a shareholder-approved incentive plan authorizing several forms of cash and equity based incentive compensation.
The EICP is a short-term cash incentive plan that directly ties annual cash awards to the Company’s performance as measured by diluted earnings per share or EPS, as well as(“EPS”), ROAA and individual performance objectives. A third measure ofThe performance metric ROAA will bewas included in the plan forbeginning in 2015. EICP awards are defined as a percentage of salary and weighted between corporate performance goals and individual performance objectives reflecting each executive’s role and responsibilities. If the threshold EPS goal is not achieved, no awards will be paid. When determining the payouts under the EICP, the Committee may objectively adjust the reported performance results considering any of the following events that occur during a performance period: (a) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (b) any reorganization and restructuring programs, and (c) acquisitions or divestitures activity and related expenses.
At the beginning of each year, the Committee decides whether to provide incentive opportunities under the EICP and sets the EPS and ROAA target levels that will determine year-end payout. The Committee approves the group of employees eligible to participate for that year. The Company continues to navigate through the current low interest rate environment and combat negative pressure on earnings driven by net interest margin compression. The Company has successfully counteracted the impact of net interest margin compression on our earnings since 2008 through both our organic growth initiatives and acquisitions. The Company continues to navigate through the current low interest rate environment and combat negative pressure on earnings driven by net interest margin compression. The Committee set incentive compensation goals with consideration that the challenging interest rate environment was expected to continue and the Company’s strategic objectives with a long-term focus on increasing shareholder value. The EPS target level for 20142015 was set at $1.60,$1.75, a 6%3% increase from 20132014 EPS results and a 9% increase from 2014 target levels.
The following table depicts the range of potential payouts to the NEOs under the EICP for 2015 as a percentage of base salary, based upon 100% attainment of corporate EPS goals, without consideration for the potential negative adjustments for the ROAA performance target levels but 3% less than 2013 core EPS results. The Company set the 2014 target level lower than 2013 core results primarily due to continued expected net interest margin compression challenging earnings levels. Forand individual performance objectives.
EICP Payout Level | % of EPS Target | CEO Potential Total Payouts: Individual and Corporate Components (% of base salary) | Other NEOs Potential Total Payouts: Individual and Corporate Components (% of base salary) |
Level 1 | 90% | 40.0% | 21.2% |
Level 2 | 95% | 60.0% | 31.7% |
Level 3 | 98% | 72.0% | 38.1% |
Level 4 Target | 100% | 80.0% | 42.3% |
Level 5 | 105% | 90.0% | 47.6% |
Level 6 | 110% | 100.0% | 52.9% |
Beginning in 2015, the EICPCommittee added ROAA as an additional corporate performance component of the short-term cash award. Once the EPS performance level is determined, 25% of the CEO’s award and 15% of the other NEO’s award may be reduced if the ROAA target for each EPS performance level has been established at ais not met. The following ROAA targets were set for each level higher than 2014 actual core results and analysts’ consensus as management expects continued net interest margin compression but to a lesser extent than in the past few years.of EPS:
EICP Payout Level | ROAA Target |
Level 1 | 0.85% |
Level 2 | 0.90% |
Level 3 | 0.95% |
Level 4 Target | 0.97% |
Level 5 | 1.00% |
Level 6 | 1.05% |
In addition to the EPS quantitative performance target (andand ROAA beginning in 2015),2015, the Committee approves individual performance objectives as a component of the overall payout for each of the NEOs, other than the CEO. The In 2015, the CEO’s 2014EICP award included an individual performance component. Prior to 2015, the CEO’s award under the EICP was based entirely on corporate performance goals with no individual component. In 2015,The Compensation and Benefits Committee sets the CEO’s EICP award will include an individual performance component.objectives for the CEO. The CEO provides input for the individual performance objectives for the other NEOs. Each NEO may havehas several individual performance objectives that are tied to both the executive’s respective corporate responsibilities and the Company’s overall strategic plan. Objectives more critical to the Company are given more significant weight than other objectives.
The following table depictssummarizes the corporate component and total individual performance objectives component weightings for the NEOs for fiscal year 2014. For ease of reference here and in the potential payout table below, the CEO is referred to as Executive Level A and Messrs. Chewens, Raven, Levy and Brenner are referred to as Executive Level B.2015.
Executive Level | Named Executive Officer | Corporate Component | Individual Component | Total |
Level A | Mr. Dietrich | 100% | 0% | 100% |
Level B | Messrs. Chewens, Raven, Levy and Brenner | 66% | 34% | 100% |
Executive Level | Named Executive Officer | Corporate Component (EPS and ROAA) | Individual Component | Total |
CEO | Mr. Dietrich | 75% | 25% | 100% |
Other NEOs | Messrs. Chewens, Raven, Levy and Brenner | 65% | 35% | 100% |
At the beginning of 2014, the Committee reviewed the current economic and financial constraints the Company would face and made two changes to the 2014 plan: 1) the target incentive opportunities were reduced by 10% (CEO 100% to 90% and other NEOs 47% to 42.3%); as described earlier, the CEO target will be reduced to 80% in 2015; and 2) the maximum payout opportunities were reduced from 200% of the target to 150% of the target. This was done to mitigate excessive risk and keep in alignment with the overall performance expected by the Company in 2014. The Company’s core diluted EPS of $1.71$1.72 was 107%98% of target EPS performance of $1.60.$1.75. Based on these results, and in accordance with the plan, the portion of the award that is based on the corporate component was payable to each of the NEOs at the payout level representing achievement of 106.25%90% of target EPS in 20142015 (Level 43 in the table below)above) (assuming 100% achievement of the ROAA target and individual performance objectives for NEOs other thanobjectives). The Company’s ROAA of 0.96% exceeded the CEO).Level 3 ROAA Target of 0.95% and resulted in 100% payout of the ROAA corporate component of the short-term incentive award.
The following table depicts the range of potential payouts to the NEOs under the EICP for 2014 as a percentage of base salary, based upon 100% achievement of individual performance objectives and attainment of corporate EPS goals.
EICP Payout Level | % of EPS Target | Executive Level A Potential Payouts (% of base salary) | Executive Level B Potential Total Payouts: Individual and Corporate Components (% of base salary) |
Level 1 | 90.00% | 45.00% | 21.20% |
Level 2 | 95.00% | 67.50% | 31.70% |
Level 3 Target | 100.00% | 90.00% | 42.30% |
Level 4 | 106.25% | 101.25% | 47.59% |
Level 5 | 113.13% | 112.50% | 52.88% |
Level 6 | 120.00% | 135.00% | 63.50% |
Except for the CEO, eachEach NEO’s individual performance achievement is evaluated against the predefined goals at year-end. The total result of each executive’s performance objectives plus the respective achieved corporate earnings percentage are combined and multiplied by base salary to derive the total payout.
The CEO’s performance is determined by corporate earnings; however, the Compensation Committee has discretion to reduce the amount of the award based on individual performance goals were established by the Compensation Committee. In 2014,2015, these goals included the transitionsuccession planning for key positions, continued advancement of Springstone, accelerating the New England strategy, with Maine expansion, maintaining strong regulatory ratings enhancing top-line growth, cultivating investor relationsincluding development of a $10 billion in assets readiness plan and reducing our cost structure.further improvement in the governance and compensation structure to more closely align with best practices from a shareholder standpoint. In 2014,2015, the Committee determined Mr. Dietrich met all the measures and the amount of his award was not reduced.
The remaining NEOs’ individual performance goals are aligned with the Company’s strategic focus areas. For the 20142015 performance year, the Committee set the following individual performance objectives and the resulting payout percentage for the NEOs:
| ● | Mr. Chewens, Senior Executive Vice President and Chief Financial Officer. Mr. Chewens’ individual performance objectives were aligned with the Company’s strategic focus areas of optimization of cost structure and strategies to invest in our human capital. Mr. Chewens achieved his goals of providing leadership and mentoring to the acquisition and development of key personnel, assessing and implementing changes to the corporate executive agreements and compensation programs to align them with corporate performance anddeveloping best practices assessing and implementing best practices to provide meaningful information as it relates to shareholder interests,certain executive practices, developing and executing certain tax strategies and orchestrating key decisions relating to our growth to a comprehensive strategy for capital planning stress testing program and enhancing profitability tools for use within the Company.$10 billion bank. These achievements resulted in his earning 112.5%90% of his target incentive pay which was his full potential payout. |
| ● | Mr. Raven, President of Retail Banking. Mr. Raven resigned his position with Company effective February 5, 2016. As part of his contract settlement, Mr. Raven received 90% of his target incentive pay which was his full potential payout. |
| ● | Mr. Raven, President of Retail Banking. Mr. Raven’s individual performance objectives were aligned with the Company’s strategic focus areas of organic growth and core deposit strategy and furthering the Company’s value proposition. Mr. Raven achieved the majority of his goals of increasing demand deposit growth; achieving certain expense reductions including the implementation of a data collection and scheduling system in the branch network and integrating the Pennstar market brand into the NBT brand; and fulfilling internal and external customer service satisfaction initiatives. This resulted in Mr. Raven earning 106.1% out of 112.5% of his target incentive. |
| ● | Mr. Levy, President of Commercial Banking. Mr. Levy’s individual performance objectives were aligned with the Company’s strategic focus areas of organic growth and enhancement of core deposit growth and personal leadership development. Mr. Levy achieved his goals relating to establishing an effective process for sales management activities, asset quality and commercial revenue growth. He achieved the majority of his goals relating to business banking revenue goals. He did not achieve his budgeted core deposit growth goal. These achievements, combined with his performance in certain administrative matters applicable to all NEOs, resulted in his earning 103.3%85.5% out of 112.5%90% of histhe target incentive. |
| ● | Mr. Brenner, President of Wealth Management. Mr. Brenner’s individual performance objectives were aligned with the Company’s strategic focus areas of enhancing relevant noninterest income business lines in order to reduce dependency on interest income, develop and retain our human capital and furthering the Company’s value proposition. Specifically, Mr. Brenner’sBrenner achieved his goals of providing leadership in the continued transformationdevelopment of the Wealth Management Division, fulfilling certain expenseimproving operational excellence, providing successful succession management initiativesat a subsidiary location, and meeting his revenue growth goal.leading an acquisition. Mr. Brenner achieved the majority of his goals in developing a strategy for a lead management processthought leadership project and for the accomplishment of overalla significant number of wealth financial targets. These achievements earned Mr. Brenner 110.6%86.9% out of 112.5%90% of histhe target incentive. |
The Committee considered such results together with the corporate component results in determining awards under the EICP as follows:
Named Executive Officer | 2014 Target Incentive ($) | Actual Performance Achievement (% of Target) | 2014 Incentive Earned ($) | Springstone Incentive Earned ($) | 2015 Target Incentive ($) | Actual Performance Achievement (% of Target) | 2015 Incentive Earned ($) |
Mr. Dietrich | 607,500 | 112.5 | 683,438 | 200,000 | 620,000 | 90.0 | 558,000 |
Mr. Chewens | 183,413 | 112.5 | 206,350 | 100,000 | 188,929 | 90.0 | 170,024 |
Mr. Raven | 174,741 | 106.1 | 185,456 | 20,000 | 178,252 | 90.0 | 160,427 |
Mr. Levy | 179,056 | 103.3 | 184,998 | 20,000 | 184,428 | 85.5 | 157,686 |
Mr. Brenner | 135,952 | 110.6 | 150,406 | 20,000 | 140,034 | 86.9 | 121,620 |
Omnibus Incentive Plan
Since 2008, the Omnibus Plan has been used to provide NEOs, and other eligible employees, with annual and long-term incentives in the form of cash, equity and performance-based awards. The terms and conditions governing the grant of awards under the Omnibus Plan are described below.
The Omnibus Plan replaced the Company’s 1993 Stock Option Plan, the Performance Share Plan, the Non-Employee Directors Restricted and Deferred Stock Plan, Non-Employee Director, Divisional Director and Subsidiary Director Stock Option Plan and the 2006 Non-Executive Restricted Stock Plan.
All outstanding awards under the replaced plans remain outstanding; however, no further awards were granted pursuant to such plans after the Omnibus Plan was approved by Company shareholders at the Company’s annual meeting of shareholders held on May 6, 2008.
The elements of the Omnibus Incentive Plan are further detailed below:
Current Long-Term Incentive Plan: |
Executive Long-Term Incentive and Retention Equity Awards | Two Components |
1. | Retention Units:Time-based Restricted Stock Units subject to a five-year vesting schedule, also with an Individual Performance measure in 2014 and 2015 |
2. | Performance Units: Performance-based Restricted Stock Units dependent upon two-year performance in relative ROTCE and Individual Performance. Units are released one year following completion of the two-year performance period. 2014 plan also included EPS as a performance measure. EPS is beingwas eliminated as a measure for 2015 to avoid duplication with the EICP. |
Prior Years’ Long-Term Incentive Plans Included in Equity Compensation Tables: |
Performance-Based Equity Awards | Restricted Stock Units with an individual performance measure |
Long-Term Incentive Awards - CEO | Stock grant for CEO covering a six-year period. EPS goals are established at the beginning of each year and stock or units are credited over the six-year period based on performance against the EPS goals |
Long-Term Incentive Awards - NEOs | Stock grant for NEOs covering a period of January 2012 to Retirement Date.EPS goals are established at the beginning of each year and stock or units are credited over the six-year period based on performance against the EPS goals |
Stock Options | Nonqualified Stock Options with a five-year vesting schedule (40% year one followed by 20% increments) with an automatic reload. Options have not been granted since 2011.2011, except for reloads on prior grants. |
Executive Long-Term Incentive and Retention Equity Awards
In January 2014,2015, the Committee granted Long-Term Incentive and Retention Equity Awards under the Omnibus Plan. The 20142015 awards (in the form of restricted stock units) are long-term, equity-based incentive awards that link executive compensation to the Company'sCompany’s profitability and shareholder value. The awards consist of a grant of (i) Retention Units, which are subject to a time-based vesting schedule (over fourfive years) and a reduction, at the time of grant, based upon the grantee'sgrantee’s achievement of individual performance factors for the 20142015 calendar year; and (ii) Performance Units, which vest based on the Company'sCompany’s achievement of specific performance goals established on the grant date (the outcome of which is substantially uncertain on such date) over a two-year performance period. The Committee determined the number of Retention Units and Performance Units underlying the awards based on a percentage of the grantee'sgrantee’s salary as of the grant date, which was then converted to a number of units based on the fair market value of the Company'sCompany’s common stock. In determining the size of the awards, the Committee considered a number of factors, including the grantee'sgrantee’s organizational position, historical performance, prior awards, current performance and potential future contribution to the Company, as well as feedback from an independent compensation consultant on target long-term compensation levels. No dividends or dividend equivalents are paid on any unvested awards. The performance goal for each grantee with respect to the Performance Units is based on the Company's diluted EPS over the first 12 months of the two-year performance period, with a reduction based upon the quartile ranking of the Company's return on average tangible common equity against a comparative group of peer institutions over each year of the two-year performance period, with full vesting and payout occurring following the completion of an additional one-year time-based vesting requirement after the end of the two-year performance period (subject to acceleration upon certain terminations or a change in control).
Beginning in 2015, the performance goal for each grantee with respect to the Performance Units is based on the Company’s quartile ranking of the Company’s return on average tangible common equity against a comparative peer group in the first year and a potential reduction in the following year based upon the Company’s quartile ranking of the Company’s return on average tangible common equity against a comparative peer group. Full vesting and payout occur following the completion of an additional one-year time-based vesting requirement after the end of the two-year performance period (subject to acceleration upon certain terminations or a change in control). In addition, the Performance Units willare also include ansubject to reduction based upon individual performance factor.in the same manner as the retention award. The following table depicts the ROTCE performance levels for the 2015 long-term incentive award.
% of ROTCE Target | ROTCE Percentile Ranking to Comparative Peer Group | CEO Potential Payout % of Salary | Other NEOs Potential Payout % of Salary |
80% Threshold | 35-49th | 32.0% | 22.0% |
90% | 50-64th | 36.0% | 24.8% |
100% Target | 65-79th | 40.0% | 27.5% |
120% | 80-89th | 48.0% | 33.0% |
130% Maximum | Above 90th | 52.0% | 35.8% |
For 2015, ROTCE of 13.31% placed the Company at the 68th percentile of the comparator group and achieved the 100% target level payout percentage for the performance award.
As shown in the table below, Messrs. Dietrich, Chewens, Raven, Levy and Brenner received the following long-term noncash compensation awards under the Omnibus Plan in 2014.2015. In granting these awards, the Committee considered market data, as well as individual performance contributing to the Company’s success.
Named Executive Officer | | Retention Units (1) | | | Performance Units (2) | | Retention Units (1) | Performance Units (2) |
Mr. Dietrich | | | 13,132 | | | | 15,759 | | 12,757 |
Mr. Chewens | | | 4,640 | | | | 5,568 | | 5,054 |
Mr. Raven | | | 3,536 | | | | 5,304 | | 3,902 |
Mr. Levy | | | 4,529 | | | | 5,435 | | 4,934 |
Mr. Brenner | | | 3,408 | | | | 4,090 | | 3,746 |
(1) | NEOs met their performance objectives with the exception of Mr. Raven.objectives. These awards vest 40% after one year and 20% annually for the following threefive years. |
(2) | NEOs met their performance objectives. The performance units are based on meeting the EPSROTCE target threshold of 120%100%. The amount of the award above is subject to a potential reduction at December 31, 20152016 based upon the quartile ranking of the Company'sCompany’s return on tangible common equity (ROTCE) against a comparative group of peer institutions, with full vesting and payout occurring following the completion of an additional one-year time-based vesting requirement after the end of the performance period. The following table outlines the quartile peer ranking and the corresponding adjustment factor: |
ROTCE Performance Factor | |
Percentile Ranking | | Factor | |
Above 50th percentile | | | 100 | %100% |
40th - 49th percentile | | | 50 | %50% |
30th - 39th percentile | | | 25 | %25% |
Below 30th percentile | | | 0 | %0% |
Prior to 2013, long-term incentive awards to the executives consisted of a grant of: i) performance-based restricted stock units; ii) Long-Term Incentive Plan Restricted Stock Units ("LTIP"(“LTIP”); and iii) time-vested restricted stock units.
Performance-Based Equity Awards
Performance-based equity awards were granted under the Omnibus Plan. Performance share awards (in the form of restricted stock or units) were long-term, equity-based incentive awards that linked executive compensation to the Company'sCompany’s profitability and increased share value. The Committee established guidelines for granting awards that were based on the attainment, by the participant, of specific performance goals established at a time when the outcome of the performance goals was substantially uncertain. In setting the guidelines, the Committee considered a number of factors, including an individual'sindividual’s organizational position, historical performance, prior awards, current performance, and potential future contribution to the Company and recommendations from compensation consultants. The Committee established the performance period over which the achievement of applicable performance goals will be measured, the executives who may participate during any performance period, the number of performance shares or stock units that may be awarded, and the vesting period for each grant. Dividends or dividend equivalents were paid on unvested awards granted prior to 2011. No dividends or dividend equivalents are paid on unvested awards granted after 2011.
Long-Term Incentive Award
On March 22, 2010, the Committee approved a long-term performance-based equity incentive program (the "CEO LTIP"“CEO LTIP”) for the CEO under the Omnibus Plan to emphasize long-term results and further align the CEO’s interests with those of Company shareholders. Under the program, the CEO has the opportunity to receive shares of Company common stock at the end of a six-year performance period (January 1, 2010 to December 31, 2015). The CEO’s award account was initially set at zero shares, and shares or stock units will be added or subtracted annually over the six-year performance period based on whether the Company achieves annual diluted EPS targets to be established by the Committee at the beginning of each year. The amount to be credited for achievement of the annual diluted EPS targets, as well as the amount to be subtracted for failure to achieve these targets, will be determined annually by the Committee at the same time that the diluted EPS target is determined for the applicable year. The payment of the shares or stock units in the award account at the end of the six-year performance period is subject to the CEO’s continued employment with the Company, except in the event of death, disability, voluntary retirement after age 60 occurring after January 1, 2016 or certain significant corporate transactions. Dividends on shares from the 2010 award in the award account will be paid to the CEO on a current basis; however, no dividends will be paid on stock units in the award account. In the event that shares or units are subtracted from the total balance, the shares or units on which dividends will be paid will be adjusted using a first in, first out method. As of December 31, 20142015 the balance in the CEO LTIP was 54,500 shares. Effective February 20, 2013, no new awards are being made under the CEO LTIP.
On January 18, 2012, the Committee approved a long-term performance-based equity incentive program, or LTIP, for the NEOs, other than the CEO, under the Omnibus Plan, to emphasize long-term results and further align the NEOs'NEOs’ interests with those of Company shareholders. Under the LTIP, the NEOs have the opportunity to receive shares or stock units of Company common stock at the end of a performance period (January 1, 2012 through their Retirement Date). Retirement Date means the earlier of the date the NEO reaches Normal Retirement Age or qualifies for Early Retirement under the NBT Bancorp Inc. Defined Benefit Pension Plan (the "Pension Plan"“Pension Plan”) (each as such term is defined in the Pension Plan). The NEO’s award account was initially set at zero shares, and stock units will be added or subtracted annually over the performance period based on whether the Company achieves annual diluted EPS targets to be established by the Committee at the beginning of each year. Any amount to be credited for achievement of the annual diluted EPS targets, as well as any amount to be subtracted for failure to achieve these targets, will be determined annually by the Committee at the same time that the diluted EPS target is determined for the applicable year. The payment of the stock units in the award account at the end of the performance period is subject to the NEO’s continued employment with the Company, except in the event of retirement, death, disability or certain significant corporate transactions. No dividends will be paid on stock units in the award account. Effective February 20, 2013, no new awards are being made under the LTIP.
Retention Awards
The Company also granted time-vesting restricted stock units prior to 2014. The vesting was based on a service period of four years with 40% vesting in year one and 20% vesting in years two through four.
Stock Options
Stock options have been granted under the terms of the Omnibus Plan. The Committee approved the grant of non-tax qualified options to key management employees, including the NEOs. Options, when granted, are awarded with an exercise price equal to the fair market value on the NASDAQ Stock Market on the date of the grant. Options granted by the Committee under the Omnibus Plan vest at a rate of 40% after one year, and in equal 20% increments over the next three years. Reload options vest 100% on the second anniversary of the reload grant date. Options are forfeited if the holder does not exercise them within ten years of the grant date. As a matter of practice, the Company no longer awards options and no options have been granted since 2011 other than reloads to which recipients were entitled pursuant to previously granted awards (prior to 2009).
Retirement Plans
Defined Benefit Pension Plan
The eligible NEOs participate in the Pension Plan, which is a noncontributory, tax-qualified defined benefit pension plan. The Pension Plan is available to all Company employees who have attained age 21 and have completed one year of service, as defined in the Pension Plan. The Pension Plan provides for 100% vesting after three years of qualified service. The Pension Plan has a cash balance feature, in which all of the eligible NEOs participate. The footnotes to the Pension Benefits Table on page 34,37, including the narrative discussion that follows such table, contain a detailed description of the defined benefit/cash balance pension plan, including a description of the eligibility, crediting, vesting, mortality, and other terms and assumptions used for the calculation of Pension Plan benefits. Beginning January 1, 2010, participants in the Pension Plan were eligible for additional discretionary contributions to the 401(k) & Employee Stock Ownership Plan (the "401(k)“401(k) Plan & ESOP"ESOP”) in lieu of interest credits to the cash balance portion of the pension plan.
Supplemental Retirement Benefits
Certain NEOs participate in a SERP, which is principally designed to restore benefits that would have been paid to the NEO if certain federal tax limitations were not in effect, as well as to attract and retain qualified and experienced executive officers. Each SERP is embodied in an agreement between the Company and the respective NEO. The narrative that follows the Nonqualified Deferred Compensation table on page 3938 contains a detailed description of each SERP including a description of the 2015 amendments.
401(k) Plan & Employee Stock Ownership Plan (“ESOP”)
The 401(k) Plan & ESOP is a tax-qualified defined contribution retirement savings plan available to all Company employees who have attained age 21 and are either scheduled to complete one year of service or have completed one year of service, as defined by the 401(k) Plan & ESOP. Participants in the 401(k) Plan & ESOP may contribute up to the limit prescribed by the Internal Revenue Service on a before-tax basis. The Company matches 100% of the first 3% of pay contributed to the plan. Additionally, the Company can make discretionary contributions to the 401(k) Plan & ESOP based on its financial performance. All Company contributions to this retirement plan forafter 2013 were made in cash and vest at the rate of 20% per year with full vesting following five years of benefit service. Prior to 2013, Company contributions were made in Company stock. The NEOs participate in the 401(k) Plan & ESOP. Column (h) in the Summary Compensation Table on page 32 includes the dollar value of the stock contributed by the Company under the 401(k) Plan & ESOP to each of the NEOs prior to 2013. In addition, effective for plan years after December 31, 2009, theThe Company may make discretionary contributions to the 401(k) portion of the 401(k) Plan & ESOP to offset the elimination of interest credits to the Pension Plan, as described above. The value of Company contributions to the 401(k) Plan & ESOP are included in Column (h) in the Summary Compensation Table on page 31.
Deferred Compensation Plan and Other Compensation Deferrals
The Deferred Compensation Plan allows the NEOs, and such other key employees as the Committee may approve annually, to defer some or all of their salary, commissions and/or bonus, to a future date. The Deferred Compensation Plan also permits the Company to make discretionary contributions to the accounts of eligible employees. Eligible employees are generally those employees determined to be highly-compensated employees of the Company. In addition, the Omnibus Plan permits award recipients to defer receipt of vested equity awards to a future date. Certain NEOs elected to defer compensation or received discretionary contributions under this plan as detailed in the Nonqualified Deferred Compensation table on page 39.38. The Company awarded Messrs. Chewens and Brenner a 9% of base salary discretionary contribution based upon their 2015 performance, subject to the same vesting terms as the defined benefit plan. In addition, Mr. Chewens also received a special discretionary contribution of $300,000 in recognition of his continued strong performance in executing the strategic initiatives of the Company and to reduce the disparate negative impact of the 2015 amendment to his SERP, which affected Mr. Chewens disproportionately compared to the similar amendments to the other NEOs’ SERPs due to his tenure with the Company.
Perquisites and Other Personal Benefits
The Company provides NEOs with perquisites and other personal benefits that the Committee and the Company believe are reasonable and consistent with the Company'sCompany’s guiding compensation principles. These benefits enable the Company to attract and retain superior employees for key positions. During 2014,2015, these benefits included the use of Company-owned automobiles, life and disability insurance, long-term care insurance, and for certain NEOs, club memberships. For the CEO, the Company also maintains a split-dollar bank-owned life insurance policy for the benefit of the Company and the CEO. Messrs. Dietrich, Chewens, Raven, Levy and Brenner each have the use of a Company-owned automobile. Any personal mileage incurred by the executive is taxed as additional compensation in accordance with IRS regulations. The Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs. The dollar amount of these benefits is reflected in column (i) in the Summary Compensation Table on page 32.31. The aggregate amounts of perquisites and other personal benefits paid to Messrs. Dietrich, Chewens, Raven Levy and Brenner were determined to be less than the established reporting thresholds for detailed disclosure.
Stock Ownership Guidelines
To more directly align their interests with shareholders'shareholders’ interests, the Committee maintains stock ownership guidelines for the Board of Directors and the Company'sCompany’s executive management team, including the NEOs. The Committee modified the guidelines in 20142015 to include retention requirements for restricted stock units and revised the NEOs required ownership levels to be based on a multiple of salary. The guidelines require directors to own 5,000 shares of Company stock. The NEOs share requirements are based upon a multiple of salary with the NEOs other than the CEO to own 1.5 times salary of Company stock, and the CEO to own 3 times salary of Company stock. Vested restricted stock units are included in an individual’s ownership for purposes of compliance with guidelines. The executives must comply with the revised guidelines by the later of three years from the adoption of the modified policy (January 23, 2018) or five years from the date of promotion to the executive management team or election to the Board of Directors. Failure to meet the guidelines could, at the Committee'sCommittee’s discretion, affect future equity-based awards. As of December 31, 2014,2015, all NEOs and Directors were in compliance with the guidelines.
Hedging and Pledging Policies
All directors and employees are prohibited from engaging in any speculative transaction designed to hedge or offset any decrease in the market value of the Company'sCompany’s securities, including hedging of the Company'sCompany’s common stock. Beginning in 2014,2015, the Company also prohibits any pledging of Company securities in a margin account and restricts all other pledging of any Company securities by requiring directors and employees to obtain the prior approval of the Insider Trading Compliance Officer, CEO, CFO or General Counsel before entering into any such agreement.
Risk Assessment
A formal risk assessment of the Company’s incentive compensation plans is performed annually. A risk assessment matrix is used which considers and analyzes the following factors:
| · | Type of award and who was eligible for the award; |
| · | Performance metrics associated with each plan; |
| · | Party responsible for granting awards and assessing performance; |
| · | Potential risk features in plan design; |
| · | Major business risks that might be impacted by performance metrics; |
| · | Correlation of plan’s performance metrics to the Company'sCompany’s overall business objectives; |
| · | Consideration of internal controls present to prevent the manipulation of the budgeting process or performance outcomes; |
| · | Determination of the plan’s risk level as low, reasonablemoderate or excessive;high; |
| · | Plan provisions for risk mitigation; and |
| · | Assessment of the plan’s probability to result in adverse material risk. |
The annual risk assessment is overseen by the Chief Risk Officer and reviewed annually by the Compensation Committee of the Board of Directors.
Tax and Accounting Matters
Section 162(m). Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a company for compensation in excess of one million dollars paid to a company'scompany’s CEO, and to the next four highest paid officers of the company, unless the compensation qualifies as "performance-based compensation"“performance-based compensation” or falls under certain other specified exceptions under Section 162(m). Generally, to qualify as performance-based compensation, the plan or arrangement must contain specific performance criteria, specific limits on awards and amounts and must have shareholder approval. Performance awards under the Omnibus Plan (and the specific arrangements thereunder providing for performance awards, such as the EICP) contain specific performance criteria and are intended to meet the performance-based compensation exception to the annual one million dollar limitation. However, while the Committee recognizes the importance of tax deductibility and endeavors to formulate its compensation program in a tax-effective manner, it also believes it is critical to balance tax deductibility with ensuring that the Company'sCompany’s programs are designed appropriately to recognize and reward executive performance, such that at times current tax deductibility limits may be exceeded.
Section 409A. Section 409A of the Internal Revenue Code generally provides that unless certain requirements are met, amounts deferred under a nonqualified deferred compensation plan are currently includible in an employee'semployee’s gross income to the extent not subject to a substantial risk of forfeiture. Section 409A applies to most forms of deferred compensation, including but not limited to, nonqualified deferred compensation plans or arrangements, certain equity-based performance awards, and severance plans or individual severance arrangements contained within employment agreements. Generally, under Section 409A, any severance arrangement not in compliance with Section 409A covering an NEO pursuant to an employment or change in control agreement, which is effective upon termination of employment, any deferrals under a nonqualified deferred compensation plan that do not comply with Section 409A or any stock option award grants with an exercise price of less than fair market value on the date of grant may subject the NEO to: (i) current income inclusion of the relevant amounts; (ii) interest at the IRS underpayment rate; and (iii) an additional 20% excise tax. The Nonqualified Deferred Compensation Table on page 3638 provides detailed information about the Company'sCompany’s nonqualified deferred compensation arrangements.
Sections 4999 and 280G. Section 4999 of the Internal Revenue Code imposes a 20% excise tax on certain "excess“excess parachute payments"payments” made to "disqualified“disqualified individuals."” Under Section 280G of the Internal Revenue Code, such excess parachute payments are also nondeductible to the Company. If payments that are contingent on a change of control to a disqualified individual (which terms include the NEOs) equal or exceed three times the individual's "baseindividual’s “base amount,"” they constitute "excess“excess parachute payments"payments” to the extent they exceed one times the individual'sindividual’s base amount.
The Company has entered into employment agreements with each of Messrs. Dietrich, Chewens, Raven, Levy and Brenner which provide for a cutback of change in control benefits in circumstances where the executive would not be better off on a net after-tax basis by at least $50,000 by being paid the full change in control benefit. In circumstances where the executive will be better off by at least $50,000 on a net after-tax basis by being paid the full change in control benefit owed, the executive will be responsible for the payment of all excise taxes. However, neither the Company nor NBT Bank will be permitted to claim a federal income tax deduction for the portion of the change in control benefit that constitutes an "excess“excess parachute payment."”
Accounting Considerations. The Committee is informed of the financial statement implications of the components of the compensation program for NEOs. However, a compensation component'scomponent’s contribution to the objectives of the Company'sCompany’s compensation program and its projected economic cost, which may or may not be reflected on the Company'sCompany’s financial statements, are the main elements of NEO compensation decisions.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation earned by each of the NEOs for each of the last three completed fiscal years. The compensation received by each NEO was a combination of cash and equity compensation and long-term and short-term compensation. The Committee concluded that this mix reflects the compensation principles discussed in the Compensation Discussion and Analysis, as applied to each NEO'sNEO’s responsibilities and performance.
Summary Compensation Table
Name and Principal Position | Year | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($) (3) | | | Non-Equity Incentive Plan Compensation ($) (4) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | | | All Other Compensation ($) (6) | | | Total ($) | | Year | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($) (3) | | | Non-Equity Incentive Plan Compensation ($) (4) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | | | All Other Compensation ($) (6) | | | Total ($) | |
(a) | (b) | | (c) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | (b) | | (c) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | |
Martin A. Dietrich | 2014 | | | 675,000 | | | | 681,854 | | | | 7,171 | | | | 883,438 | | | | 2,270,677 | | | | 83,589 | | | | 4,601,729 | | 2015 | | | 775,000 | | | | 554,292 | | | | 190,060 | | | | 558,000 | | | | 1,492,445 | | | | 36,779 | | | | 3,606,576 | |
President and | 2013 | | | 630,000 | | | | 567,456 | | | | - | | | | 567,000 | | | | - | | | | 72,614 | | | | 1,837,070 | | 2014 | | | 675,000 | | | | 681,854 | | | | 7,171 | | | | 883,438 | | | | 2,270,677 | | | | 83,589 | | | | 4,601,729 | |
Chief Executive Officer | 2012 | | | 600,000 | | | | 664,873 | | | | - | | | | 600,000 | | | | 1,572,143 | | | | 82,838 | | | | 3,519,854 | | 2013 | | | 630,000 | | | | 567,456 | | | | - | | | | 567,000 | | | | - | | | | 72,614 | | | | 1,837,070 | |
Michael J. Chewens | 2014 | | | 433,600 | | | | 240,918 | | | | - | | | | 306,350 | | | | 299,787 | | | | 29,096 | | | | 1,309,751 | | 2015 | | | 446,610 | | | | 219,596 | | | | - | | | | 170,024 | | | | 76,990 | | | | 355,461 | | | | 1,268,681 | |
Senior Executive Vice President | 2013 | | | 416,850 | | | | 206,505 | | | | - | | | | 176,328 | | | | 75,739 | | | | 30,315 | | | | 905,737 | | 2014 | | | 433,600 | | | | 240,918 | | | | - | | | | 306,350 | | | | 299,787 | | | | 29,096 | | | | 1,309,751 | |
and Chief Financial Officer | 2012 | | | 397,000 | | | | 229,277 | | | | - | | | | 186,590 | | | | 209,865 | | | | 36,436 | | | | 1,059,168 | | 2013 | | | 416,850 | | | | 206,505 | | | | - | | | | 176,328 | | | | 75,739 | | | | 30,315 | | | | 905,737 | |
David E. Raven | 2014 | | | 413,100 | | | | 208,323 | | | | - | | | | 205,456 | | | | 425,977 | | | | 22,807 | | | | 1,275,663 | | 2015 | | | 421,400 | | | | 169,542 | | | | - | | | | 160,427 | | | | 16,374 | | | | 13,635 | | | | 781,378 | |
Executive Vice President, President | 2013 | | | 404,940 | | | | 175,109 | | | | - | | | | 159,870 | | | | - | | | | 26,542 | | | | 766,461 | | 2014 | | | 413,100 | | | | 208,323 | | | | - | | | | 205,456 | | | | 425,977 | | | | 22,807 | | | | 1,275,663 | |
of Retail Banking and President of Pennsylvania | 2012 | | | 397,000 | | | | 229,277 | | | | - | | | | 176,427 | | | | 293,551 | | | | 38,117 | | | | 1,134,372 | | 2013 | | | 404,940 | | | | 175,109 | | | | - | | | | 159,870 | | | | - | | | | 26,542 | | | | 766,461 | |
Jeffrey M. Levy | 2014 | | | 423,300 | | | | 235,159 | | | | - | | | | 204,998 | | | | 484,492 | | | | 27,487 | | | | 1,375,436 | | 2015 | | | 436,000 | | | | 214,382 | | | | - | | | | 157,686 | | | | - | | | | 31,082 | | | | 839,150 | |
Executive Vice President and | 2013 | | | 410,895 | | | | 203,613 | | | | - | | | | 165,118 | | | | 72,160 | | | | 48,587 | | | | 900,373 | | 2014 | | | 423,300 | | | | 235,159 | | | | - | | | | 204,998 | | | | 484,492 | | | | 27,487 | | | | 1,375,436 | |
President of Commercial Banking | 2012 | | | 397,000 | | | | 229,277 | | | | - | | | | 176,657 | | | | 379,304 | | | | 49,593 | | | | 1,231,831 | | 2013 | | | 410,895 | | | | 203,613 | | | | - | | | | 165,118 | | | | 72,160 | | | | 48,587 | | | | 900,373 | |
Timothy L. Brenner (7) | 2014 | | | 321,400 | | | | 228,485 | | | | - | | | | 170,406 | | | | 5,512 | | | | 51,544 | | | | 777,347 | | |
Executive Vice President | 2013 | | | 309,000 | | | | 153,095 | | | | - | | | | 128,529 | | | | 2,996 | | | | 46,605 | | | | 640,225 | | |
and President of Wealth Management | 2012 | | | 300,000 | | | | 319,314 | | | | - | | | | 141,000 | | | | - | | | | 22,280 | | | | 782,594 | | |
Timothy L. Brenner Executive Vice President and President of Wealth Management | | 2015 2014 2013 | | | 331,050 321,400 309,000 | | | | 213,914 228,485 153,095 | | | | - - - | | | | 121,620 170,406 128,529 | | | | 7,758 5,512 2,996 | | | | 45,968 51,544 46,605 | | | | 720,310 777,347 640,225 | |
(1) | Certain NEOs deferred a portion of their salary. The deferred portion of their 20142015 salary is detailed in the Nonqualified Deferred Compensation table on page 36.38. |
(2) | The amounts in column (e) reflect the aggregate grant date fair value of the target performance awards and the annual non-performance equity award for the NEOs. The assumptions used to calculate the fair value of the 20142015 stock awards are materially consistent with those used to calculate the 20142015 stock expense, which are set forth in footnote 14 to the Company'sCompany’s audited consolidated financial statements contained in the Company'sCompany’s Form 10-K for the year ended December 31, 2014.2015. The amount of the performance-based unit award below was determined at the end of the achievement period (December 31, 2014)2015) based on reaching one level above the EPSreturn on tangible common equity percentile ranking to comparator group target level defined in the award agreement. The performance-based award amount reflected as the “Actual Award” below is subject to a potential reduction at December 31, 20152016 based upon the quartile ranking of the Company'sCompany’s return on tangible common equity against a comparative group of peer institutions, with full vesting and payout occurring following the completion of an additional one-year time-based vesting requirement after the end of the performance period. The maximum values for the performance-based restricted stock units and performance-based long-term awards issued under the Omnibus Plan and the actual awards approved in January 2014February 2015 were as follows: |
Executive Long-Term Incentive and Retention Equity Awards | Executive Long-Term Incentive and Retention Equity Awards | | Executive Long-Term Incentive and Retention Equity Awards |
Executive | | Retention Stock Units | | | Performance-Based Restricted Stock Units | | Retention Stock Units | Performance-Based Restricted Stock Units |
| Maximum Award ($) | | | Actual Award ($) | | | Maximum Award ($) | | | Actual Award ($) | | Maximum Award ($) | Actual Award ($) | Maximum Award ($) | Actual Award ($) |
Martin A. Dietrich | | | 314,511 | | | | 314,511 | | | | 428,554 | | | | 367,343 | | 310,000 | 310,000 | 310,000 | 310,000 |
Michael J. Chewens | | | 111,128 | | | | 111,128 | | | | 151,422 | | | | 129,790 | | 122,817 | 122,817 | 122,817 | 122,817 |
David E. Raven | | | 105,859 | | | | 84,687 | | | | 144,242 | | | | 123,636 | | 94,806 | 94,806 | 94,806 | 94,806 |
Jeffrey M. Levy | | | 108,470 | | | | 108,470 | | | | 147,809 | | | | 126,689 | | 119,900 | 119,900 | 119,900 | 119,900 |
Timothy L. Brenner | | | 81,622 | | | | 81,622 | | | | 111,212 | | | | 95,338 | | 91,037 | 91,037 | 91,037 | 91,037 |
(3) | The amounts in column (f) reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the fiscal year in which the option was reloaded. |
(4) | The amounts in column (g) reflect cash awards to Messrs. Dietrich, Chewens, Levy, Raven and Brenner under the EICP in 2015, 2014 2013 and 2012,2013, which were paid in January of the following calendar year. Certain NEOs deferred a portion of the 2015, 2014 2013 and 20122013 awards. The deferred portion of the 20142015 award is detailed in the Nonqualified Deferred Compensation table on page 39.38. |
(5) | The amounts in column (h) reflect solely the actuarial increase in the present value of the NEOs benefits under all qualified and non-qualified pension plans established by the Company determined using interest rate and mortality rate assumptions consistent with those used in the Company'sCompany’s financial statements as set forth in footnote 13 to the Company'sCompany’s audited consolidated financial statements contained in the Company'sCompany’s Form 10-K for the year ended December 31, 2014,2015, and includes amounts which the NEONEOs may not currently be entitled to receive because such amounts are not vested. This resulted in negative amounts for each ofMr. Levy in 2015 equal to $139,611 and for 2013 Messrs. Dietrich and Raven for 2013 equal to $76,774 and $7,247, respectively, which are not included in the table above. |
(6) | The amount shown in column (i) reflects the following items as applicable for each NEO for 2014:2015: |
Compensation | | Dietrich | | | Chewens | | | Raven | | | Levy | | | Brenner | |
Value of matching and discretionary contributions to the 401(k) Plan & ESOP | | $9,275 | | | | $9,275 | | | | $9,275 | | | | $9,275 | | | | $9,275 | | |
Value of life and disability insurance premiums paid by the Company | | $10,104 | | | | $5,085 | | | | $4,360 | | | | $4,743 | | | | $ 6,005 | | |
Value of dividends on unvested equity awards | | $17,400 | | | | $ ----- | | | | $ ----- | | | | $ ----- | | | | $ ----- | | |
Value of Perquisites and Other Personal Benefits (a) | | $ ----- | | | | $ ----- | | | | $ ----- | | | | $17,064 | | | | $ ----- | | |
Value of discretionary contributions to the Deferred Compensation Plan earned in 2015(b) | | $ ----- | | | | $ 341,101 | | | | $ ----- | | | | $ ----- | | | | $ 30,688 | | |
| (a) | The amount shown for Perquisites and Other Personal Benefits consist of personal vehicle use of $2,660 and club memberships of $14,404 for Mr. Levy. |
Compensation | | Dietrich | | | Chewens | | | Raven | | | Levy | | | Brenner | |
Value of matching and discretionary contributions to the 401(k) Plan & ESOP | | $ | 10,400 | | | $ | 10,400 | | | $ | 10,400 | | | $ | 10,400 | | | $ | 10,400 | |
Value of life and disability insurance premiums paid by the Company | | $ | 35,203 | | | $ | 6,733 | | | $ | 5,939 | | | $ | 6,519 | | | $ | 8,040 | |
Value of dividends on unvested equity awards | | $ | 37,986 | | | $ | 11,963 | | | $ | 6,468 | | | $ | 10,568 | | | $ | ----- | |
Value of discretionary contributions to the Deferred Compensation Plan earned in 2014(a) | | $ | ----- | | | $ | ----- | | | $ | ----- | | | $ | ----- | | | $ | 33,104 | |
| (a)(b) | The Compensation and Benefits Committee approved a discretionary contribution of 10%9% of Mr. Chewens’ and Mr. Brenner’s 20152016 salary in January 20152016 as a result of his 2014 performance in lieutheir 2015 performance. Mr. Chewens also received a special discretionary contribution of a SERP.$300,000. |
(7) | Mr. Brenner began his employment with the Company on March 5, 2012. |
Grants of Plan-Based Awards
The following table provides information about plan-based awards to the NEOs under the Company’s cash and equity incentive plans during 2014.2015.
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | |
Name | Grant Date | Date of Committee /Board Action | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Options & Awards: Number of Securities Underlying Options (#) (3) | | | Grant Date Fair Market Value ($) | | Grant Date | Date of Committee /Board Action | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Options & Awards: Number of Securities Underlying Options (#) (3) | Grant Date Fair Market Value ($) |
(a) | (b) | (c) | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | | (l) | | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (l) |
Martin A. Dietrich | | 2/10/2015 | 2/10/2015 | 290,625 | 581,250 | 726,563 | 10,206 | 12,757 | 16,584 | | 278,103 |
1/22/2014 | | | 303,750 | | | | 607,500 | | | | 911,250 | | | | 10,506 | | | | 13,132 | | | | 18,385 | | | | | | | 367,342 | | 2/10/2015 | 2/10/2015 | | | | | | 12,757 | 276,189 |
1/22/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,132 | | | | 314,512 | | 9/1/2015 (4) | 1/20/2005 | | | | | | 20,575 | 110,253 |
10/29/2014 (4) | 1/20/2005 | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,166 | | | | 7,171 | | 9/14/2015 (4) | 1/20/2005 | | | | | | 13,641 | 79,807 |
Michael J. Chewens | 1/22/2014 | | | 91,923 | | | | 183,413 | | | | 275,336 | | | | 3,712 | | | | 4,640 | | | | 6,496 | | | | | | | | 129,790 | | 2/10/2015 | 2/10/2015 | 94,458 | 188,916 | 236,167 | 4,043 | 5,054 | 6,570 | | 110,177 |
1/22/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,640 | | | | 111,128 | | 2/10/2015 | 2/10/2015 | | | | | | 5,054 | 109,419 |
David E. Raven | 1/22/2014 | | | 87,577 | | | | 174,741 | | | | 262,319 | | | | 3,536 | | | | 4,420 | | | | 6,188 | | | | | | | | 123,636 | | 2/10/2015 | 2/10/2015 | 89,126 | 178,252 | 222,836 | 3,121 | 3,902 | 5,072 | | 85,064 |
1/22/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,536 | | | | 84,687 | | 2/10/2015 | 2/10/2015 | | | | | | 3,902 | 84,478 |
Jeffrey M. Levy | 1/22/2014 | | | 89,740 | | | | 179,056 | | | | 268,796 | | | | 3,624 | | | | 4,529 | | | | 6,341 | | | | | | | | 126,690 | | 2/10/2015 | 2/10/2015 | 92,214 | 184,428 | 230,557 | 3,947 | 4,934 | 6,414 | | 107,561 |
1/22/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,529 | | | | 108,469 | | 2/10/2015 | 2/10/2015 | | | | | | 4,934 | 106,821 |
Timothy L. Brenner | 1/22/2014 | | | 68,137 | | | | 135,952 | | | | 204,089 | | | | 2,726 | | | | 3,408 | | | | 4,771 | | | | | | | | 95,338 | | 2/10/2015 | 2/10/2015 | 70,017 | 140,034 | 175,059 | 2,997 | 3,746 | 4,870 | | 81,663 |
1/22/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,408 | | | | 81,622 | | 2/10/2015 | 2/10/2015 | | | | | | 3,746 | 81,101 |
3/5/2014 (5) | 3/5/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,500 | | | | 51,525 | | 3/5/2015 (5) | 3/5/2012 | | | | | | 2,500 | 51,150 |
(1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards are a product of a percentage of base salary in accordance with the EICP, a detailed description of which appears on pages 24 and 25.23-25. |
(2) | Estimated Future Payouts Under Equity Incentive Plan Awards represent performance-based awards issued in accordance with the Omnibus Plan, a description of which can be found in the Compensation Discussion and Analysis narrative. |
(3) | The January 22, 2014February 10, 2015 restricted stock unit awards were issued pursuant to the Omnibus Plan, a description of which can be found in the Compensation Discussion and Analysis narrative. |
(4) | Granted pursuant to a one-time reload feature including in options originally granted in 2005 and exercised on the grant date. |
(5) | The March10, 2014March 5, 2015 restricted stock unit awards were issued pursuant to the Omnibus Plan, a description of which can be found in the Compensation Discussion and Analysis narrative. |
Outstanding Equity Awards at Fiscal Year-End
The following table provides information about outstanding equity awards under the Company’s equity compensation plans at December 31, 2014,2015, whether granted in 20142015 or earlier, including awards that have been transferred other than for value.
| Option Awards | Restricted Stock Awards | Option Awards | Restricted Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) |
Martin A. Dietrich | 10/29/2014 | - | 1,166 (5) | 25.3600 | 10/29/2024 | 1/22/2014 | 13,132 (9) | 344,978 | - | - | 9/14/2015 | - | 13,641 (4) | 26.6700 | 9/14/2025 | 2/10/2015 | 12,757 (9) | 355,665 | - | - |
11/18/2011 | 30,000 (5) | - | 20.9400 | 11/18/2021 | 1/22/2014 | | | 15,759 | 413,989 | 9/1/2015 | - | 20,575 (4) | 25.1500 | 10/29/2024 | 2/10/2015 | | | 12,757 | 355,665 |
1/15/2010 | 25,000 (4) | - | 20.1900 | 1/15/2020 | 2/20/2013 | 9,065 (9) | 238,138 | - | - | 10/29/2014 | - | 1,166 (4) | 25.3600 | 10/29/2024 | 1/22/2014 | 7,880 (9) | 219,694 | - | - |
1/15/2009 | 25,000 (4) | - | 25.3800 | 1/15/2019 | 2/20/2013 | | | 15,108 | 396,887 | 1/15/2010 | 25,000 (3) | - | 20.1900 | 1/15/2020 | 1/22/2014 | | | 15,759 | 439,361 |
1/15/2008 | 25,000 (3) | - | 20.3617 | 1/15/2018 | 1/1/2012 | 11,500 (8) | 302,105 | - | - | 1/15/2009 | 25,000 (3) | - | 25.3800 | 1/15/2019 | 2/20/2013 | 6,044 (8) | 168,507 | - | - |
12/27/2007 | 12,641 (5) | - | 24.5692 | 12/27/2017 | 1/1/2012 | 17,250 (1) | 453,158 | - | - | 1/15/2008 | 25,000 (2) | - | 20.3617 | 1/15/2018 | 2/20/2013 | 15,108 (6) | 421,211 | - | - |
1/1/2007 | 28,000 (3) | - | 25.7620 | 1/1/2017 | 1/15/2012 | 2,500 (9) | 65,675 | - | - | 1/1/2007 | 28,000 (2) | - | 25.7620 | 1/1/2017 | 1/1/2012 | 11,500 (11) | 320,620 | - | - |
1/1/2006 | 30,000 (3) | - | 22.3520 | 1/1/2016 | 1/1/2011 | 23,000 (8) | 604,210 | - | - | | | | | | 1/1/2012 | 17,250 (5) | 480,930 | - | - |
8/1/2005 | 6,470 (5) | - | 24.4458 | 8/1/2015 | 1/1/2011 | 24,150 (1) | 634,421 | - | - | | | | | | 1/15/2012 | 1,250 (8) | 34,850 | - | - |
| | | | | 1/15/2011 | 1,250 (9) | 32,838 | - | - | | | | | | 1/1/2011 | 23,000 (11) | 641,240 | - | - |
| | | | | 1/1/2010 | 20,000 (8) | 525,400 | | | | | | | | 1/1/2011 | 24,150 (5) | 673,302 | - | - |
| | | | | 1/1/2010 | 15,750 (1) | 413,753 | - | - | | | | | | 1/1/2010 | 20,000 (11) | 557,600 | - | - |
Michael J. Chewens | 1/15/2009 | 18,000 (4) | - | 25.3800 | 1/15/2019 | 1/22/2014 | 4,640 (9) | 121,893 | - | - | | | | | | 2/10/2015 | 5,054 (9) | 140,906 | - | - |
1/1/2007 | 20,000 (3) | - | 25.7620 | 1/1/2017 | 1/22/2014 | - | - | 5,568 | 146,271 | | | | | | 2/10/2015 | - | - | 5,054 | 140,906 |
| | | | | 2/20/2013 | 3,299 (9) | 86,665 | - | - | | | | | | 1/22/2014 | 2,784 (9) | 77,618 | - | - |
| | | | | 2/20/2013 | - | - | 5,498 (7) | 144,432 | | | | | | 1/22/2014 | - | - | 5,568 | 155,236 |
| | | | | 1/1/2012 | 1,000 (10) | 26,270 | - | - | | | | | | 2/20/2013 | 2,200 (8) | 61,336 | - | - |
| | | | | 1/1/2012 | 6,325 (1)(7) | 166,158 | - | - | | | | | | 2/20/2013 | 5,498 (6)(7) | 153,284 | - | - |
| | | | | 1/15/2012 | 1,800 (9) | 47,286 | - | - | | | | | | 1/1/2012 | 1,000 (10) | 27,880 | - | - |
| | | | | 1/1/2011 | 8,855 (1)(7) | 232,621 | - | - | | | | | | 1/1/2012 | 6,325 (5)(7) | 176,341 | - | - |
| | | | | 1/15/2011 | 900 (9) | 23,643 | - | - | | | | | | 1/15/2012 | 900 (8) | 25,092 | - | - |
| | | | | 1/1/2010 | 7,700 (1)(7) | 202,279 | - | - | | | | | | 1/1/2011 | 8,855 (5)(7) | 246,877 | - | - |
David E. Raven | 1/15/2010 | 18,000 (4) | - | 20.1900 | 1/15/2020 | 1/22/2014 | 3,536 (9) | 92,891 | - | - | 1/15/2010 | 18,000 (3) | - | 20.1900 | 1/15/2020 | 2/10/2015 | 3,902 (9) | 108,788 | - | - |
1/15/2009 | 18,000 (4) | - | 25.3800 | 1/15/2019 | 1/22/2014 | - | - | 5,304 | 139,336 | 1/15/2009 | 18,000 (3) | - | 25.3800 | 1/15/2019 | 2/10/2015 | - | - | 3,902 | 108,788 |
1/15/2008 | 17,000 (3) | - | 20.3617 | 1/15/2018 | 2/20/2013 | 2,404 (9) | 63,153 | - | - | | | | | | 1/22/2014 | 2,122 (9) | 59,161 | - | - |
1/1/2007 | 19,000 (3) | - | 25.7620 | 1/1/2017 | 2/20/2013 | - | - | 5,341 (7) | 140,308 | | | | | | 1/22/2014 | - | - | 5,304 | 147,876 |
| | | | | 1/1/2012 | 1,000 (10) | 26,270 | - | - | | | | | | 2/20/2013 | 1,603 (8) | 44,692 | - | - |
| | | | | 1/1/2012 | 6,325 (1) | 166,158 | - | - | | | | | | 2/20/2013 | 5,341 (6)(7) | 148,907 | - | - |
| | | | | 1/15/2012 | 1,800 (9) | 47,286 | - | - | | | | | | 1/1/2012 | 1,000 (10) | 27,880 | - | - |
| | | | | 1/1/2011 | 8,855 (1) | 232,621 | - | - | | | | | | 1/1/2012 | 6,325 (5) | 176,341 | - | - |
| | | | | 1/15/2011 | 900 (9) | 23,643 | - | - | | | | | | 1/15/2012 | 900 (8) | 25,092 | - | - |
| | | | | 1/1/2010 | 7,700 (1) | 202,279 | - | - | | | | | | 1/1/2011 | 8,855 (5) | 246,877 | - | - |
Outstanding Equity Awards at Fiscal Year End (continued)
Jeffrey M. Levy | 1/15/2010 | 18,000 (4) | - | 20.1900 | 1/15/2020 | 1/22/2014 | 4,529 (9) | 118,977 | - | - | 1/15/2010 | 18,000 (4) | - | 20.1900 | 1/15/2020 | 2/10/2015 | 4,934 (9) | 137,560 | - | - |
1/15/2009 | 13,000 (4) | - | 25.3800 | 1/15/2019 | 1/22/2014 | - | - | 5,435 (7) | 142,777 | 1/15/2009 | 13,000 (4) | - | 25.3800 | 1/15/2019 | 2/10/2015 | - | - | 4,934 (7) | 137,560 |
1/15/2008 | 7,500 (3) | - | 20.3617 | 1/15/2018 | 2/20/2013 | 3,253 (9) | 85,456 | - | - | 1/1/2007 | 9,000 (3) | - | 25.7620 | 1/1/2017 | 1/22/2014 | 2,718 (9) | 75,778 | - | - |
1/1/2007 | 9,000 (3) | - | 25.7620 | 1/1/2017 | 2/20/2013 | - | - | 5,421 (7) | 142,410 | | | | | | 1/22/2014 | - | - | 5,435 (7) | 151,528 |
1/1/2006 | 5,000 (3) | - | 22.3520 | 1/1/2016 | 1/1/2012 | 1,000 (10) | 26,270 | - | - | | | | | | 2/20/2013 | 2,169 (8) | 60,472 | - | - |
| | | | | 1/1/2012 | 6,325 (1) | 166,158 | - | - | | | | | | 2/20/2013 | 5,421 (6)(7) | 151,137 | - | - |
| | | | | 1/15/2012 | 1,800 (9) | 47,286 | - | - | | | | | | 1/1/2012 | 1,000 (10) | 27,880 | - | - |
| | | | | 1/1/2011 | 8,855 (1)(7) | 232,621 | - | - | | | | | | 1/1/2012 | 6,325 (5)(7) | 176,341 | - | - |
| | | | | 1/15/2011 | 900 (9) | 23,643 | - | - | | | | | | 1/15/2012 | 900 (8) | 25,092 | - | - |
| | | | | 1/1/2010 | 7,700(1)(7) | 202,279 | - | - | | | | | | 1/1/2011 | 8,855 (5)(7) | 246,877 | - | - |
Timothy L. Brenner | | | | | | 1/22/2014 | 3,408 (9) | 89,528 | - | - | | | | | | 3/5/2015 | 2,500 (5) | 69,700 | | |
| | | | | 1/22/2014 | - | - | 4,090 | 107,444 | | | | | | 2/10/2015 | 3,746 (9) | 104,438 | - | - |
| | | | | 3/5/2014 | 2,500 (1) | 65,675 | | | | | | | | 2/10/2015 | - | - | 3,746 | 104,438 |
| | | | | 2/20/2013 | 2,446 (9) | 64,256 | - | - | | | | | | 3/5/2014 | 2,500 (5) | 69,700 | | |
| | | | | 2/20/2013 | - | - | 4,076 | 107,077 | | | | | | 1/22/2014 | 2,045 (9) | 57,015 | - | - |
| | | | | 3/15/2012 | 1,000 (10) | 26,270 | - | - | | | | | | 1/22/2014 | - | - | 4,090 | 114,029 |
| | | | | 3/15/2012 | 6,325 (1) | 166,158 | - | - | | | | | | 2/20/2013 | 1,631 (8) | 45,472 | - | - |
| | | | | 3/15/2012 | 1,800 (9) | 47,286 | - | - | | | | | | 2/20/2013 | 4,076 (6) | 113,639 | - | - |
| | | | | 3/15/2012 | 5,000 (1) | 131,350 | - | - | | | | | | 1/1/2012 | 1,000 (10) | 27,880 | - | - |
Timothy L. Brenner | | | | | | | 3/15/2012 | 6,325 (5) | 176,341 | - | - |
| | | | | | 3/15/2012 | 900 (8) | 25,092 | - | - |
| | | | | | 3/15/2012 | 5,000 (5) | 139,400 | - | - |
(1) | The market values of these shares are based on the closing market price of the Company’s common stock on the NASDAQ Stock Market of $27.88 on December 31, 2015. |
(1)(2) | Options were issued pursuant to the NBT Bancorp Inc. 1993 Stock Option Plan and each grant vests 40% after one year, 20% annually for the following three years. |
(3) | Options were issued pursuant to the Omnibus Plan and each grant vests 40% after one year, 20% annually for the following three years. |
(4) | Reload options granted upon cash exercise of initial option grant, issued pursuant to the 1993 Stock Option Plan. Each reload grant vests 100% two years after the date of its grant. The 10/29/2014, 9/1/2015, and 9/14/2015 reloaded options were issued pursuant to the Omnibus Plan. |
(5) | Restricted stock or unit awards vest 100% five years after the date of its grant excluding Mr. Brenner who awards vest 100% four years after the date of its grant. |
(2) | The market values of these shares are based on the closing market price of the Company’s common stock on the NASDAQ Stock Market of $26.27 on December 31, 2014. |
(3) | Options were issued pursuant to the NBT Bancorp Inc. 1993 Stock Option Plan and each grant vests 40% after one year, 20% annually for the following three years. |
(4) | Options were issued pursuant to the Omnibus Plan and each grant vests 40% after one year, 20% annually for the following three years. |
(5) | Reload options granted upon cash exercise of initial option grant, issued pursuant to the 1993 Stock Option Plan. Each reload grant vests 100% two years after the date of its grant. The 11/18/2011 and 10/29/2014 reloaded options were issued pursuant to the Omnibus Plan. |
(6) | These awards were earned during 2013, 2014 and 20142015 based on performance approved in January 2014, January 2015 and January 2015.2016. Performance based Incentive Plan awards vest 100% three years after the date of its grant and are subject to clawback through December 31, 20142015, December 31, 2016 and December 31, 2015.2017. |
(7) | The executive has deferred this award. |
(8) | Long-Term Incentive Plan awards vest in full on January 1, 2016. |
(9) | Restricted stock unit awards vest 40% after one year, and 20% annually for the following three years. |
(9) | Restricted stock unit awards vest 20% annually. |
(10) | Long-Term Incentive Plan awards vest in full upon NEO’s retirement subject to four years of service and reaching age 55. |
(11) | Long-Term Incentive Plan awards vest in full on January 1, 2016. |
Option Exercises and Stock Vested
The following table provides information about stock options exercised and restricted shares vested for each NEO during 2014.2015.
| Option Awards | | Restricted Stock Awards | | | Option Awards | | | Restricted Stock Awards | |
Name | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) (1) | | Number of Shares Acquired on Vesting (#) (2) | | Value Realized on Vesting ($) (3) | | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) (1) | | | Number of Shares Acquired on Vesting (#) (2) | | | Value Realized on Vesting ($) (3) | | |
(a) | (b) | | (c) | | (d) | | (e) | | | (b) | | | (c) | | | (d) | | | (e) | | |
Martin A. Dietrich | | | 22,423 | | | | 46,846 | | | | 16,043 | | | | 408,594 | | | 79,111 | | | 490,728 | | | 26,523 | | | 671,766 | | |
Michael J. Chewens | | | 43,107 | | | | 103,925 | | | | 8,499 | | | | 216,885 | | | 38,000 | | | 74,863 | | | 12,455 | | | 316,161 | | |
David E. Raven | | | 36,289 | | | | 109,385 | | | | 7,902 | | | | 201,906 | | | 36,000 | | | 225,013 | | | 11,715 | | | 298,438 | | |
Jeffrey M. Levy | | | 20,000 | | | | 48,894 | | | | 8,168 | | | | 208,337 | | | 21,500 | | | 148,472 | | | 12,395 | | | 314,724 | | |
Timothy L. Brenner | | | — | | | | — | | | | 2,530 | | | | 62,587 | | | — | | | — | | | 3,078 | | | 74,384 | | |
(1) | The "Value“Value Realized on Exercise"Exercise” is equal to the difference between the option exercise price and the fair market value on the National Market System of NASDAQ on the date of exercise. |
(2) | For Mr.Messrs. Chewens and Levy this amount includes 2,9667,100 and 5,595 restricted stock units respectively, the receipt of which was deferred under the terms of the Deferred Compensation Plan and the Omnibus Plan. |
(3) | The "Value“Value Realized on Vesting"Vesting” is equal to the per share market value of the underlying shares on the vesting date multiplied by the number of shares acquired on vesting. For Mr.Messrs. Chewens and Levy this amount includes $76,819$186,517 and $146,981, respectively, attributed to restricted stock units, the receipt of which was deferred under the terms of the Deferred Compensation Plan and the Omnibus Plan. |
Pension Benefits Table
The following table includes information about each NEO’s benefits under the Company’s Pension Plan and each NEO’s SERP. Mr. Brenner does not have a SERP with the Company.
Name | Plan Name | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($) (1) | | Plan Name | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($) (1) | |
(a) | (b) | | (c) | | | (d) | | (b) | | (c) | | | (d) | |
Martin A. Dietrich | NBT Bancorp Inc. Defined Benefit Plan | | | 29.25 | | | | 1,941,640 | | NBT Bancorp Inc. Defined Benefit Plan | | 30.25 | | | 2,062,303 | |
| Dietrich SERP | | | 14.00 | | | | 6,900,191 | | Dietrich SERP | | 15.00 | | | 8,271,973 | |
Michael J. Chewens | NBT Bancorp Inc. Defined Benefit Plan | | | 19.00 | | | | 1,190,908 | | NBT Bancorp Inc. Defined Benefit Plan | | 20.00 | | | 1,239,136 | |
| Chewens SERP | | | 14.00 | | | | 704,253 | | Chewens SERP | | 15.00 | | | 733,015 | |
David E. Raven | NBT Bancorp Inc. Defined Benefit Plan | | | 17.00 | | | | 756,980 | | NBT Bancorp Inc. Defined Benefit Plan | | 18.00 | | | 800,767 | |
| Raven SERP | | | 11.00 | | | | 895,433 | | Raven SERP | | 12.00 | | | 868,020 | |
Jeffrey M. Levy | NBT Bancorp Inc. Defined Benefit Plan | | | 9.00 | | | | 227,649 | | NBT Bancorp Inc. Defined Benefit Plan | | 10.00 | | | 266,018 | |
| Levy SERP | | | 5.00 | | | | 1,051,800 | | Levy SERP | | 6.00 | | | 873,820 | |
Timothy L. Brenner | NBT Bancorp Inc. Defined Benefit Plan | | | 2.00 | | | | 8,508 | | NBT Bancorp Inc. Defined Benefit Plan | | 3.00 | | | 16,267 | |
(1) | The above amounts were computed using the following significant assumptions: |
| ● | Mortality for Defined Benefit Plan Benefits — The sex-distinct RP-2014 mortality tables for employees and healthy annuitants and non-annuitantsadjusted to 2006, with projected mortality improvements using scale MP-2014MP-2015 on a generational basis. |
| ● | Mortality for SERP Benefits — The sex-distinct RP-2014 white collar mortality tables for healthy annuitants and non-annuitantsadjusted to 2006 with projected mortality improvements using scale MP-2014MP-2015 on a generational basis. |
| ● | Discount Rate — 4.23%4.71% for Defined Benefit Plan Benefits, 4.19%4.69% for SERP benefits. |
| ● | Salary Increases —3.00%Increases—3.00% for Defined Benefit Plan Benefits 3.75% forand SERP benefits. |
| ● | Interest Rate Credit for determining projected cash balance account earned as of December 31, 2009 — 3.04%3.03%. |
| ● | Interest rates to annuitize cash balance accounts — The three segment interest rates for November 2014 (1.40%2015 (1.76%, 3.88%4.15%, and 4.96%5.13%) under IRC Section 417(e). Segment 1 is applied to benefit payments expected to be made in the first 5 years, segment 2 is applied to benefit payments expected to be made in the next 15 years and segment 3 is applied thereafter. |
| ● | Mortality to annuitize cash balance accounts — The 2015 commissioner's2016 commissioner’s standard mortality table, which is a 50/50 blend of the sex-distinct combined annuitant/non-annuitant mortality tables prescribed by the Internal Revenue Service for determining the “Funding Target Liability” for 2015.2016. |
| ● | Assumed Retirement Age — Retirement rates for ages 55-6655-70 for Defined Benefit Plan Benefits, on or about age 62 for Dietrich SERP, Chewens SERP, Raven SERP, and Levy SERP. |
| ● | Credited service under the Defined Benefit Plan is based on date of participation, not date of hire; the first year of service is excluded. Credited service under each SERP is earned from the effective date of the agreement. |
| ● | ESOP Balance and 401(k) Balance Expected Rate of Return — 8.00% per year. |
| ● | Increase in Internal Revenue Code Limits — 2.25% per year. |
3837
The NEOs participate in the Pension Plan. The Pension Plan is a noncontributory, tax-qualified defined benefit pension plan. Eligible employees are those who have attained age 21 and have completed one year of service in which the employee worked at least 1,000 hours. The Pension Plan provides for 100% vesting after three years of qualified service. Benefits payable as an annuity at age 65 are reduced 3% per year for early retirement. Early retirement eligibility is age 55 with 3 years of service. Mr. Dietrich and Mr. Brenner are the only NEOs who are eligible for early retirement as of December 31, 2014.2015. Mr. Dietrich, Mr. Chewens, Mr. Raven, Mr. Levy and Mr. Brenner are 100% vested as of December 31, 2014.2015. The Pension Plan, as amended and restated effective January 1, 2009, has received favorable determination from the Internal Revenue Service that it is qualified under Section 401(a) of the Internal Revenue Code with such letter being effective March 31, 2012.October 16, 2015. The Pension Plan was converted to a defined benefit plan with a cash balance feature, effective January 1, 2000. Prior to that date, the Pension Plan was a traditional defined benefit pension plan. Each active participant in the Pension Plan as of January 1, 2000 was given a one-time irrevocable election to continue participating in the traditional defined benefit plan design or to begin participating in the new cash balance plan design. All employees who became participants after January 1, 2000 automatically participated in the cash balance plan design. Each of our eligible NEOs participates in the cash balance plan design.
Under the cash balance plan design, hypothetical account balances are established for each participant and pension benefits are generally stated as the lump sum amount in that hypothetical account. Notwithstanding the preceding sentence, since a cash balance plan is a defined benefit plan, the annual retirement benefit payable at normal retirement (age 65) is an annuity, which is the actuarial equivalent of the participant’s account balance under the cash balance plan. However, participants may elect, with the consent of their spouses if they are married, to have the benefits distributed as a lump sum rather than an annuity.
In 2014,2015, benefits under the Pension Plan are computed using a cash balance methodology for participants who converted (as described hereafter) that provides for pay-based credits to the participants’ hypothetical accounts equal to 5% to 22% (depending on age and other factors) on the first $260,000$265,000 of annual eligible compensation. Eligible compensation under the Pension Plan is defined as fixed basic annual salary or wages, commissions, overtime, cash bonuses, and any amount contributed by the Company at the direction of the participant pursuant to a salary reduction agreement and excludible from the participant’s gross income under the Internal Revenue Code, but excluding any other form of remuneration, regardless of the manner calculated or paid, such as amounts realized from the exercise of stock options, severance pay or the Company’s cost for any public or private benefit plan, including the Pension Plan. In addition to the pay-based service credits, annual interest credits are made to the participant’s account balance based on the average annual yield on 30-year U.S. Treasury securities for the November of the prior year. The Pension Plan was amended effective December 31, 2009, such that future pay-based credits will not receive interest credits within the cash balance plan. The interest credits on future pay- based credits will be made as discretionary Company contributions to the 401(k) Plan & ESOP. Hypothetical account balances as of December 31, 2009 will continue to receive annual interest credits as described above. The Pension Plan has been amended, effective March 1, 2013, to reduce the future annual pay-based credits for most cash balance design participants from 5% to 2.50% per year. The amendment also freezes benefit accruals as of March 1, 2013 for all participants who as of January 1, 2000 elected to continue participating in the traditional defined benefit plan design; their future benefit accruals will be under the cash balance design with annual pay-based credits of 2.50%. For 2014,2015, the pay-based credits for Messrs. Dietrich, Chewens, Raven, Levy and Brenner were 22%, 19%, 19%, 19% and 2.50%, respectively. The Company’s contributions to the Pension Plan in 20142015 for Messrs. Dietrich, Chewens, Raven, Levy and Brenner were $57,200, $49,400, $49,400 $49,400$58,300, $50,350, $50,350 $50,350 and $6,500,$6,625, respectively. There were no payments made to NEOs under the Pension Plan or SERPs during 2014.2015.
Nonqualified Deferred Compensation
The following table includes information about the activity in, amounts earned, and balances of, each NEO’s SERP and account under the Deferred Compensation Plan.
Name | | Executive Contributions in 2014 ($) (1) (2) | | | Company Contributions in 2014 ($)(3)(5) | | | Aggregate Earnings in 2014 ($) (4) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at December 31, 2014 ($) | | | Executive Contributions in 2015 ($) (1) (2) | | | Company Contributions in 2015 ($)(3)(5) | | | Aggregate Earnings in 2015 ($) (4) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at December 31, 2015 ($) | |
(a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | |
Martin A. Dietrich | | $ | — | | | $ | 1,310,884 | | | $ | 809,150 | | | $ | (60,827 | ) | | $ | 7,088,494 | | | $ | — | | | $ | 1,418,935 | | | $ | (31,903) | | | $ | — | | | $ | 8,475,526 | |
Michael J. Chewens | | | 172,184 | | | | 174,421 | | | | 148,431 | | | | — | | | | 2,292,152 | | | | 171,465 | | | | 440,915 | | | | (27,447) | | | | — | | | | 2,877,085 | |
David E. Raven | | | 15,987 | | | | 319,127 | | | | 27,478 | | | | — | | | | 1,001,446 | | | | 51,364 | | | | 77,800 | | | | (97,767) | | | | — | | | | 1,032,843 | |
Jeffrey M. Levy | | | 101,587 | | | | 321,196 | | | | 112,317 | | | | (47,816 | ) | | | 1,235,019 | | | | 165,869 | | | | 77,605 | | | | (233,514) | | | | (60,736) | | | | 1,184,244 | |
Timothy L. Brenner | | | — | | | | 33,104 | | | | 5,668 | | | | — | | | | 103,988 | | | | — | | | | 30,688 | | | | (740) | | | | — | | | | 134,836 | |
(1) | Each of Messrs. Chewens, Raven and Levy contributed $172,184, $15,987,$51,364, and $24,768,$30,750, respectively to the Deferred Compensation Plan, each of which was reported as non-equity incentive plan compensation earnings in the Summary Compensation Table on page 29.31. |
(2) | Includes $76,819$171,465 and $135,119 for Mr. Chewens and Levy, respectively, attributable to restricted stock units that vested in 20142015 but which were deferred. |
(3) | The Summary Compensation Table includes registrant discretionary contributions earned in 20142015 and reflected under the caption All Other Compensation in the Summary Compensation Table. |
(4) | The aggregate earnings are from the SERP and Deferred Compensation Plan. The earnings from the Deferred Compensation Plan are due to market value increases on the investments in the Deferred Compensation Plan, which are not an expense to the Company. |
(5) | Includes discretionary contribution amounts earned in 20142015 (even if not contributed by the Company until 2015)2016). |
Supplemental Retirement Benefits
Section 415 of the Internal Revenue Code places certain limitations on pension benefits that may be paid from the trusts of tax-qualified plans, such as the Pension Plan. Because of these limitations and in order to provide certain executives with adequate retirement income, the Company has entered into supplemental retirement agreements which provide retirement benefits to the named executives in the manner discussed below. It should be noted that where applicable, the amounts payable under the Supplemental Retirement Agreements, as discussed in the following section, are offset by payments made under the Pension Plan, the annuitized employer portion of the Company’s 401(k) Plan & ESOP and Social Security.
The Company has entered into agreements with Messrs. Dietrich, Chewens, Raven and Levy to provide each executive with supplemental retirement benefits. Messrs.Mr. Dietrich’s Chewens’, and Raven’s agreements wereagreement was revised most recently on November 5, 2009. Mr.Messrs. Chewens’,Raven’s, and Levy’s agreement was executedagreements were revised most recently on January 1, 2010.March 10, 2015. Each SERP provides the executive with an annual supplemental benefit at normal retirement, including (a) the annual benefit payable to the executive under the Pension Plan, (b) the annual benefit that could be provided by contributions by the Company and NBT Bank (other than the executive’s elective deferrals) to the Company’s 401(k) Plan & ESOP and the earnings on those amounts if these contributions and earnings were converted to a benefit payable under the agreement using the actuarial assumptions provided under the agreement, (c) his Social Security benefit and (d) the SERP, which will be equal to the greater of (1) a percentage (60% for Mr. Dietrich and 50% for Messrs. Chewens, Raven, and Levy) of the executive’s final average compensation (i.e., average annual base salary, commissions, bonuses and elective deferrals without regard to any Internal Revenue Code limitations on compensation applicable to tax qualified plans) or (2) the sum of the annual amount of the executive’s benefit under the Pension Plan, calculated without giving effect to limitations and restrictions imposed by the Internal Revenue Code plus the annual benefit that could be provided by contributions by the Company and NBT Bank (other than the executive’s elective deferrals) to the Company’s 401(k) Plan & ESOP and the earnings on those amounts, calculated by disregarding the limitations and restrictions imposed by the Internal Revenue Code and using the actuarial assumptions set out in the Pension Plan, with the exception of a different salary scale assumption and a white collar adjustment to the mortality tables. Messrs. Chewens’, Raven’s and Levy’s agreements were amended on March 10, 2015 to freeze the benefit computed under (d) above to be equal to the value of the Projected Benefit Obligation associated with that piece of the SERP at December 31, 2014. This frozen amount will not increase in future years and will be payable in five equal annual installments to the NEO at retirement.
Reduced amounts will be payable under each SERP in the event the NEO takes early retirement. If the NEO dies leaving a surviving spouse, his spouse will be entitled to an annual benefit for life equal to the annual survivor annuity benefit under the Pension Plan, calculated without giving effect to limitations and restrictions imposed by the Internal Revenue Code, reduced by the surviving spouse benefit actually payable under such plan, plus a lump sum amount equal to contributions by the Company and NBT Bank (other than the executive’s elective deferrals) to the Company’s 401(k) Plan & ESOP, calculated by disregarding the limitations and restrictions imposed by the Internal Revenue Code, reduced by the amounts actually contributed to the Company’s 401(k) Plan & ESOP, plus the earnings on such net amount. If the executive dies after attaining a certain age (age 58 for Mr. Dietrich and age 60 for Messrs. Chewens, Raven, and Levy) and after he has retired, but before payment of benefits has commenced, the surviving spouse will receive an annual benefit equal to the excess, if any, of (1) the monthly amount the surviving spouse is entitled to under the Pension Plan, calculated without giving effect to limitations and restrictions imposed by the Internal Revenue Code, over (2) the monthly amount actually payable to the surviving spouse under the Pension Plan plus the monthly amount that is the actuarial equivalent of any supplemental retirement benefit payable to the surviving spouse. Except in the case of early retirement or death, payment of benefits will commence upon the first day of the month after the executive attains a certain age (age 60 for Mr. Dietrich and age 62 for Messrs. Chewens, Raven, and Levy). Assuming Mr. Dietrich is currently 60 years old and retiring, Messrs. Chewens, Raven, and Levy are currently 62 years old and retiring, satisfaction of applicable SERP conditions, and that each executive’s 20142015 compensation was his final average compensation as defined by the SERP, the estimated aggregate annual retirement benefit under the SERP, the Company’s cash balance pension plan, the annuitized employer portion of the Company’s 401(k) Plan & ESOP and social security to be paid to Messrs. Dietrich, Chewens, Raven, and Levy would be $745,200, $367,214, $331,229,$993,216, $398,430, $354,207, and $247,684,$265,860, respectively. The Social Security portion of these amounts is assumed to commence at the Normal Social Security Retirement Age for each executive. The SERP for Messrs. Dietrich, Chewens, Raven, and Levy will at all times be unfunded except that, in the event of a change in control, the Company will be required to transfer to a grantor trust an amount sufficient to cover all potential liabilities under the SERP.