SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
COMMISSION FILE NUMBER 0-14703
NBT BANCORP INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 16-1268674
(State of Incorporation) (I.R.S. Employer Identification No.)
52 SOUTH BROAD STREET NORWICH, NEW YORK 13815
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (607)-337-6000
Indicate by check mark whether the Registrant (1) has filed all reports
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of October 31, 1996, there were 8,442,314 shares outstanding,
including 511,594 shares held in the treasury, of the Registrant's
common stock, No Par, Stated Value $1.00. There were no shares of the
Registrant's preferred stock, No Par, Stated Value $1.00, outstanding
at that date.
An index to exhibits follows the signature page of this FORM 10-Q.
NBT BANCORP INC.
FORM 10-Q -- Quarter Ended September 30, 1996
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 1996, December
31, 1995, and September 30, 1995
Consolidated Statements of Income for the three month and nine
month periods ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements at September 30,
1996
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote
of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
-2-
NBT BANCORP INC. and Subsidiary September 30, December 31, September 30,
CONSOLIDATED BALANCE SHEETS 1996 1995 1995
- -------------------------------------------------------------------------------------------
(dollars in thousands) (Unaudited) (See Notes) (Unaudited)
ASSETS
Cash and due from banks $ 51,743 $ 44,379 $ 38,554
Loans available for sale 3,788 6,089 5,052
Securities available for sale 368,025 393,536 126,557
Securities held to maturity (market
value-$48,839, $40,306 and $271,161) 48,842 40,311 269,889
Loans:
Commercial and agricultural 268,167 247,320 243,584
Real estate mortgage 118,847 120,972 124,196
Consumer 247,618 220,093 218,634
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Total loans 634,632 588,385 586,414
Less allowance for loan losses 9,965 9,120 9,354
- -------------------------------------------------------------------------------------------
Net loans 624,667 579,265 577,060
Premises and equipment, net 16,259 16,467 15,831
Intangible assets, net 10,348 11,551 8,919
Other assets 17,641 14,668 16,690
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TOTAL ASSETS $1,141,313 $1,106,266 $1,058,552
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $ 798,857 $ 741,805 $ 732,234
Noninterest bearing 119,510 131,227 132,070
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Total deposits 918,367 873,032 864,304
Short-term borrowings 91,626 115,945 82,442
Long-term debt 23,055 3,012 3,014
Other liabilities 6,395 6,233 5,751
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Total liabilities 1,039,443 998,222 955,511
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00;
shares authorized-2,500,000 - - -
Common stock, no par, stated value $1.00;
shares authorized-12,500,000;issued
8,442,314, 8,442,314 and 8,452,099 8,442 8,442 8,050
Capital surplus 75,461 75,464 69,159
Retained earnings 29,928 24,076 29,346
Unrealized gain (loss) on securities
available for sale, net of income tax
effect (3,867) 2,822 (1,022)
Common stock in treasury at cost, 489,092,
170,275, and 154,401 shares (8,094) (2,760) (2,492)
- -------------------------------------------------------------------------------------------
Total stockholders' equity 101,870 108,044 103,041
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,141,313 $1,106,266 $1,058,552
- -------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
-3-
Three months ended Nine months ended
NBT BANCORP INC. and Subsidiary September 30, September 30,
CONSOLIDATED STATEMENTS OF INCOME 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts) (Unaudited)
Interest and fee income:
Loans $14,831 $13,916 $42,615 $39,682
Securities - taxable 6,380 5,736 18,679 16,224
Securities - tax exempt 435 309 1,131 1,050
Other 32 22 71 112
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Total interest and fee income 21,678 19,983 62,496 57,068
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Interest expense:
Deposits 7,981 7,514 23,747 21,342
Short-term borrowings 1,151 1,329 2,902 3,769
Long-term debt 235 99 395 378
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Total interest expense 9,367 8,942 27,044 25,489
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Net interest income 12,311 11,041 35,452 31,579
Provision for loan losses 875 340 2,175 1,178
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Net interest income after provision
for loan losses 11,436 10,701 33,277 30,401
- ---------------------------------------------------------------------------------------
Noninterest income:
Trust income 654 558 1,963 1,863
Service charges on deposit accounts 847 757 2,421 2,235
Securities gains 194 82 1,205 93
Other income 431 389 1,188 1,116
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Total noninterest income 2,126 1,786 6,777 5,307
- ---------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 4,355 4,248 13,096 12,222
Net occupancy expense 596 562 1,894 1,751
Equipment expense 421 457 1,324 1,292
FDIC insurance 1 (43) 2 860
Amortization of intangible assets 395 313 1,185 942
Other operating expense 2,692 2,578 8,181 7,696
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Total noninterest expense 8,460 8,115 25,682 24,763
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Income before income taxes 5,102 4,372 14,372 10,945
Income taxes 1,764 1,735 5,386 4,180
- ---------------------------------------------------------------------------------------
Net income $ 3,338 $ 2,637 $ 8,986 $ 6,765
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Net income per common share $ 0.41 $ 0.32 $ 1.10 $ 0.80
Cash dividends per common share $ 0.130 $ 0.115 $ 0.390 $ 0.343
Average common shares outstanding 8,003,891 8,336,651 8,137,962 8,404,132
- ---------------------------------------------------------------------------------------
See notes to consolidated financial statements.
-4-
NBT BANCORP INC. and Subsidiary Nine Months Ended September 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS 1996 1995
- ------------------------------------------------------------------------------------------
(dollars in thousands) (Unaudited)
Operating activities:
Net income $ 8,986 $ 6,765
Adjustments to reconcile net income to the
cash provided by operating activities:
Provision for loan losses 2,175 1,178
Depreciation and amortization 1,139 1,106
Amortization of premiums and accretion
of discounts on securities 99 (116)
Amortization of intangible assets 1,185 942
Proceeds from sales of loans originated for sale 3,820 12,990
Loans originated for sale (3,294) (8,745)
Realized gains on sales of securities (1,205) (93)
Decrease in interest receivable 934 497
Increase in interest payable 165 434
Payments of restructuring liabilities - (958)
Other, net 1,932 1,331
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 15,936 15,331
- ------------------------------------------------------------------------------------------
Investing activities:
Securities available for sale:
Proceeds from maturities 27,282 30,833
Proceeds from sales 154,417 2,329
Purchases (167,595) (45,808)
Securities held to maturity:
Proceeds from maturities 23,848 40,070
Purchases (32,380) (37,224)
(Increase) in loans (45,802) (12,546)
Purchase of premises and equipment, net (931) (1,554)
- ------------------------------------------------------------------------------------------
Net cash used in investing activities (41,161) (23,900)
- ------------------------------------------------------------------------------------------
Financing activities:
Net increase in deposits 45,335 72,861
Net (decrease) in short-term borrowings
with original maturities of three months or less (24,319) (58,145)
Proceeds from issuance of other long-term debt 20,050 -
Repayments of long-term debt (7) (5,720)
Common stock issued,
including treasury shares reissued 1,515 3,844
Purchase of treasury stock (6,851) (6,262)
Cash dividends and payment for fractional shares (3,134) (2,865)
- ------------------------------------------------------------------------------------------
Net cash provided by financing activities 32,589 3,713
- ------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,364 (4,856)
Cash and cash equivalents at beginning of year 44,379 43,410
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 51,743 $ 38,554
- ------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 26,879 $ 25,055
Income taxes 5,257 3,392
Noncash investing activity:
Transfer of loans available for sale to loans
held to maturity 1,775 -
- ------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
-5-
NBT BANCORP INC. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of NBT BANCORP INC. (the Registrant, Company or NBT) and
its wholly-owned subsidiary, NBT Bank, National Association (Bank). All
intercompany transactions have been eliminated in consolidation.
Certain amounts previously reported in the financial statements have
been reclassified to conform with the current presentation.
The determination of the allowance for loan losses is a material
estimate that is particularly susceptible to significant change in the
near term. In connection with the determination of the allowance for
loan losses, management obtains independent appraisals for significant
properties.
Net income per common share is computed based on the weighted average
number of common shares and common share equivalents outstanding during
each period after giving retroactive effect to stock dividends. Cash
dividends per common share are computed based on declared rates
adjusted retroactively for stock dividends.
The balance sheet at December 31, 1995 has been derived from audited
financial statements at that date. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to FORM 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the nine month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's
annual report on FORM 10-K for the year ended December 31, 1995.
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
The Registrant adopted SFAS No. 122, "Accounting for Mortgage Servicing
Rights" on January 1, 1996 on a prospective basis. SFAS 122 requires
the recognition as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired, and also requires
capitalized mortgage servicing rights to be assessed for impairment
based on the fair value of those rights. The adoption of SFAS 122 did
not have a material impact on the Registrant's financial condition or
results of operations.
On January 1, 1996 the Registrant adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which establishes a fair value based method
of determining compensation cost for grants of stock options under
stock-based compensation plans. SFAS No. 123 permits entities to
expense an estimated fair value of employee stock options or to
continue to measure compensation cost for these plans using the
intrinsic value contained in Accounting Principals Board Opinion No.
25 (APB 25). Under APB 25 compensation cost is the excess, if any, of
the quoted market price of the stock at the date of grant over the
amount employees must pay to acquire it. The Registrant has elected to
continue accounting for these plans under the intrinsic value method
of accounting for stock-based compensation plans. Additionally, the
Registrant will present pro forma footnote disclosures of net income
and net income per share, as if a fair value based method had been
applied, upon the presentation of a complete set of financial
statements, which would generally be prepared as of the end of its
fiscal year, as required by SFAS No. 123.
In June of 1996, the FASB issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." The statement, which becomes effective for transactions
occurring after December 31, 1996, provides accounting and reporting
-6-
standards for transfers and servicing of financial assets and
extinguishment of liabilities based on the financial components
approach that focuses on control. Under this approach, after a transfer
of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes
all assets it does not control and derecognizes liabilities when
extinguished. The statement also provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Management does not anticipate
that the implementation of the statement will have a material impact
on the consolidated financial position or consolidated results of
operations of the Company.
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, various commitments and contingent
liabilities arise, including commitments to extend credit and standby
letters of credit. Also, off-balance sheet financial instruments such
as interest rate swaps, forward contracts, futures, options on
financial futures, and interest rate caps, collars and floors bear risk
based on financial market conditions. The following table summarizes
the Registrant's exposure to these off-balance sheet commitments and
contingent liabilities as of September 30, 1996:
Contractual or
Notional Value
at September 30, 1996
Financial instruments with off-balance
sheet credit risk:
Commitments to extend credit $95,987,000
Standby letters of credit 1,862,000
Financial instruments with off-balance
sheet market risk None
-7-
NBT BANCORP INC. AND Subsidiary
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The purpose of this discussion is to focus on material information
about the Registrant's financial condition and results of operations.
Reference should be made to the Registrant's consolidated financial
statements and footnotes thereto included in this FORM 10-Q as well as
to the Registrant's 1995 FORM 10-K for an understanding of the
following discussion and analysis. The Registrant has a long history
of distributing stock dividends; in December, 1995 a 5% stock dividend
was distributed for the thirty-sixth consecutive year. Throughout this
discussion and analysis, amounts per common share have been adjusted
retroactively for stock dividends and splits for purposes of
comparability.
On October 22, 1996 the Registrant announced the declaration of a 5%
stock dividend and a regular quarterly cash dividend of $0.15 per
share. The cash dividend represents an increase of $0.02 per share over
recent dividends declared. The stock and cash dividends will be paid
on December 13, 1996, to shareholders of record as of November 29,
1996. The cash dividend will be paid on the increased number of shares.
Amounts per common share have not been adjusted for the prospective
December 13, 1996 stock dividend. The adjustment for purposes of
comparability will occur after the payment date.
HIGHLIGHTS OF THE REGISTRANT'S 1996 PERFORMANCE
Net income of $3.3 million ($0.41 per share) was realized in the third
quarter of 1996, representing a 27% increase from third quarter 1995
net income of $2.6 million ($0.32 per share). One of the major
contributing factors for the increase in net income was increased net
interest income. Higher earnings on assets, driven by increased volumes
of loans and securities depicted in the table AVERAGE BALANCES,
exceeded liability cost increases, also driven by increased volume
during the third quarter of 1996. Increased security gains and
noninterest income during the third quarter of 1996 also contributed
to the improved profitability. Offsetting these favorable increases in
income were an increased provision for loan losses, as net charge-offs
increased in 1996, and increased noninterest expenses as depicted in the
table NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS.
Net income of $9.0 million ($1.10 per share) was realized for the nine
month period ended September 30, 1996, a 33% increase from 1995 nine
month net income of $6.8 million ($0.80 per share). The increased
profitability for the nine month period of 1996 was driven by factors
similar to those for the third quarter of 1996. Additionally, reducing
interest income during 1995 was a $0.5 million nonrecurring charge to
write-off accrued interest income receivable on nonaccrual or
previously charged-off loans.
Measurements of productivity, as depicted in the table NONINTEREST
EXPENSE AND PRODUCTIVITY MEASUREMENTS, improved in 1996 from the
comparable third quarter and nine month periods of 1995. Third quarter
1996 productivity measurements improved from those of the prior
quarters of 1996. The trend in improving these ratios is a result of
the Registrant's expense control and income generation improvement
efforts.
The table PERFORMANCE MEASUREMENTS depicts several measurements of
performance on an annualized basis. Return on average assets and equity
measures how effectively an entity utilizes its total resources and
capital, respectively. The return on average assets and the return on
average equity ratios, as well as net interest margin, increased in
1996 from the comparable third quarter and nine month periods of 1995.
Net interest margin, net federal taxable equivalent (FTE) interest
income divided by average interest earning assets, is a measure of an
entity's ability to utilize its earning assets in relation to the
interest cost of funding. Taxable equivalency adjusts income by
-8-
increasing tax exempt income to a level that is comparable to taxable
income before federal taxes are applied. The positive trend in net
interest margin is critical to the improved profitability of the
Registrant.
PERFORMANCE MEASUREMENTS
First Second Third Nine Fourth Twelve
Quarter Quarter Quarter Months Quarter Months
- ------------------------------------------------------------------------------------------------
1996
Return on average assets 1.09% 0.99% 1.18% 1.09%
Return on average common equity 10.94% 10.90% 13.28% 11.69%
Net interest margin 4.66% 4.64% 4.70% 4.67%
- ------------------------------------------------------------------------------------------------
1995
Return on average assets 0.76% 0.87% 1.00% 0.88% 0.95% 0.90%
Return on average common equity 7.83% 8.79% 10.28% 8.98% 9.74% 9.18%
Net interest margin 4.30% 4.49% 4.54% 4.45% 4.40% 4.43%
- ------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
The table AVERAGE BALANCES highlights the changes in the balance sheet.
Since period end balances can be distorted by one day fluctuations, the
discussion and analysis concentrates on average balances when
appropriate to give a better indication of balance sheet trends.
AVERAGE BALANCES
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
Securities available for sale $ 372,901 $ 130,172 $ 372,707 $ 118,130
Securities held to maturity 51,698 262,924 45,260 267,113
- -----------------------------------------------------------------------------------------
Total securities 424,599 393,096 417,967 385,243
Loans available for sale 3,379 4,891 4,591 6,306
Loans 629,458 579,519 609,238 571,639
Deposits 920,922 842,445 911,451 831,839
Short-term borrowings 86,610 90,594 74,908 85,909
Long-term debt 14,775 3,714 6,960 6,236
Stockholders' equity 100,028 101,782 102,684 100,668
Assets 1,130,081 1,045,437 1,103,523 1,030,717
Earning assets 1,064,122 980,228 1,034,832 967,403
Interest bearing liabilities $ 908,594 $ 809,986 $ 874,949 $ 802,300
- -----------------------------------------------------------------------------------------
Loans: Average loans for the third quarter and nine month period of
1996 increased $50 million and $38 million, or 9% and 7%, respectively,
from the comparable periods of the previous year. The increase in the
portfolio volume occurred in commercial loans. Real estate loans
decreased as the volume of mortgage refinancing and new mortgage loan
origination has diminished in response to interest rate increases.
Commercial, consumer and real estate loans comprised 43%, 37%, and 20%
of the average portfolio for the nine months ended September 30, 1996.
Comparable measures for a year previous were 39%, 39%, and 22%.
Allowance and provision for loan losses: The allowance for loan losses
is a valuation allowance offset against total loans which has been
established to provide for the estimated possible losses related to the
collection of the Bank's loan portfolio. The allowance is maintained
at a level considered adequate to provide for loan loss exposure based
on management's estimate of potential future losses considering an
evaluation of portfolio risk, prevailing and anticipated economic
factors, and past loss experience. Management determines the provision
and allowance for loan losses based on a number of factors including
a comprehensive in-house loan review program conducted throughout the
year. The loan portfolio is continually evaluated in order to identify
-9-
potential problem loans, credit concentration, and other risk factors
such as current and projected economic conditions locally and
nationally. The levels of risk for which allowances are established are
based on estimates of losses on larger specifically identified loans,
and on loan categories analyzed in total where, based on past
experience, risk factors can be assessed. General economic trends can
greatly affect loan losses and there are no assurances that further
changes to the allowance for loan losses may not be significant in
relation to the amount provided during a particular period. Management
does, however, consider the allowance for loan losses to be adequate
for the reporting periods based on evaluation and analysis of the loan
portfolio.
The table entitled ALLOWANCE FOR LOAN LOSSES portrays activity for the
periods presented. The allowance is increased by provisions for losses
charged to operations and is reduced by net charge-offs, the amount of
loans written off as uncollectible less recoveries of loans previously
written off. Charge-offs are made when the collectiblity of loan
principal within a reasonable time is unlikely. Any recoveries of
previously charged-off loans are credited directly to the allowance for
loan losses. Net charge-offs have increased from the prior year's
comparable periods both as a dollar amount and as a percentage of
average loan balances. Net charge-offs for the nine months ended
September 30, 1996 also have increased from the full year 1995 measure
as a percentage of average loan balances. These increases are primarily
due to commercial loan charge-offs caused by the sustained period of
sluggish economic conditions continuing to be experienced in northern
and central New York State.
The provision for loan losses increased by $0.5 million, 157%, for the
third quarter of 1996 from the comparable period a year ago. The
provision for the nine month period of 1996 reflects an increase of
$1.0 million, 55% from the comparable period a year ago. The increased
provisions relate to previously discussed estimates of management which
also incorporate the growth in unseasoned loans the Company has
generated in its loan portfolio. These provisions have increased the
allowance for loan losses by $0.9 million, or from $9.1 million at
December 31, 1995 to $10.0 million at September 30, 1996. The allowance
has also increased as a percentage of loans for the same period, from
1.55% to 1.57%.
Nonperforming is a term used to describe assets on which revenue
recognition has been discontinued or is restricted. As depicted in the
table, NONPERFORMING ASSETS AND RISK ELEMENTS, nonaccrual loans have
remained relatively static due to the previously mentioned economic
conditions occurring in the Bank's market area. The allowance for loan
losses has been allocated based on identified problem credits or
categorical trends and includes a specifically allocated amount of $1.0
million related to impaired loans. After allocation, the unallocated
portion at September 30, 1996, was approximately $2.7 million. The
unallocated portion is available for further unforeseen or unexpected
losses or unidentified problem credits. Management will continue to
target and maintain a minimum allowance equal to the allocated
requirement plus an unallocated portion, as appropriate.
-10-
ALLOWANCE FOR LOAN LOSSES
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Balance, beginning of period $9,438 $9,280 $ 9,120 $ 9,026
Recoveries 230 199 692 594
Charge-offs (578) (465) (2,022) (1,444)
- --------------------------------------------------------------------------------------------------------------------
Net charge-offs (348) (266) (1,330) (850)
Provision for loan losses 875 340 2,175 1,178
- --------------------------------------------------------------------------------------------------------------------
Balance, end of period $9,965 $9,354 $ 9,965 $ 9,354
- --------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET CHARGE-OFFS
- --------------------------------------------------------------------------------------------------------------------
Commercial and agricultural $ (212) 61% $ (136) 51% $ (708) 53% $ (331) 39%
Real estate mortgage (88) 25% (7) 3% (171) 13% (59) 7%
Consumer (48) 14% (123) 46% (451) 34% (460) 54%
- --------------------------------------------------------------------------------------------------------------------
Net (charge-offs) recoveries $ (348) 100% $ (266) 100% $(1,330) 100% $ (850) 100%
- --------------------------------------------------------------------------------------------------------------------
Annualized net charge-offs
to average loans 0.22% 0.18% 0.29% 0.20%
- --------------------------------------------------------------------------------------------------------------------
Annualized net charge-offs to average loans for the year ended
December 31, 1995 0.25%
- --------------------------------------------------------------------------------------------------------------------
Asset Quality: NBT has maintained its focus on sound credit quality in
the loan portfolio, reflecting conservative lending practices and
policies. The measurement of asset quality is the responsibility of the
Registrant's loan review function which also determines the adequacy
of the allowance for loan losses. Loan review utilizes a loan rating
system to rate substantially all of its loans based on risks which
include internal loan classifications, historical analysis of prior
period charge-offs, and evaluation of expected losses on internally
classified credits. Loan ratings are continually reviewed to determine
their propriety. Reporting separately from the loan review function,
the banking and credit function is responsible for lending credit
policy, systems and procedures, collections, recovery and workout
policies and systems.
Classified and special mention loans, excluding those on nonaccrual
status, totalled $27.4 million, $22.8 million, and $22.4 million, 4.3%,
3.9%, and 3.8% of outstanding loans, at September 30, 1996, December
31, 1995 and September 30, 1995, respectively. The increase occurred
in the categories of special mention, those assets which do not contain
current exposure to a sufficient degree of risk to warrant an adverse
classification but do possess a correctable deficiency or potential
weakness deserving management's close attention, and substandard, those
assets having a well defined weakness and the potential for some loss
if the weakness is not corrected. The Registrant does not have any
material loans classified as doubtful, whose balances declined during
the period, or loss and the loan portfolio does not contain any highly
leveraged or foreign loans.
A significant portion of the outstanding balances are secured with
various forms of collateral. In this regard, management has determined
that there are no material adverse trends or material potential losses
not already considered in the allowance calculation, nor indications
of trends or events that would have a material effect on the
Registrant's operations, capital or liquidity. A substantial portion
of the Registrant's loans are secured by real estate located in central
and northern New York State. Accordingly, the ultimate collectibility
of a substantial portion of the Registrant's portfolio is susceptible
to changes in real estate market conditions in those areas.
The Bank's classification of a loan as a nonaccruing loan is based in
part on bank regulatory guidelines. Accrual of interest is discontinued
if the loan is placed on nonaccrual status. Nonaccrual classification
does not mean that the loan principal will not be collected; rather,
that timely collection of interest is doubtful. When, in the opinion
of management the collection of principal appears unlikely, the loan
balance is charged-off in total or in part. Loans are transferred to
a nonaccrual basis generally when principal or interest payments become
-11-
ninety days delinquent, unless the loan is well secured and in the
process of collection or when management concludes circumstances
indicate that borrowers may be unable to meet contractual principal or
interest payments. When a loan is transferred to a non-accrual status,
any unpaid accrued interest is reversed and charged against income.
Interest income on non-accruing loans is recognized on a cash basis,
only when cash payments are received which are not applied to
principal.
Management, considering current information and events regarding the
borrower's ability to repay the obligation, considers a loan to be
impaired when it is probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the loan
agreement. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future
cash flows discounted at the loans effective interest rate or, as a
practical expedient, at the loans observable market price or the fair
value of collateral if the loan is collateral dependant. Impairment
losses are included in the allowance for loan losses through a charge
to the provision for loan losses.
Payments received on nonaccrual and impaired loans are first applied
to principal. Depending on management's assessment of the ultimate
collectibility of the loan, interest income may be recognized on a cash
basis. Nonaccrual loans are restored to an accrual status when
management determines that the financial condition of the borrower has
improved significantly to the extent that there has been a sustained
period of repayment performance so that the loan is brought current and
the collectibility of both interest and principal appears assured.
As depicted in the table, NONPERFORMING ASSETS AND RISK ELEMENTS,
nonperforming assets (NPA) have decreased during 1996. The decrease was
attributable to reductions in commercial and agricultural nonaccrual
loans and other real estate owned (OREO) which was partially offset by
increased nonaccrual real estate mortgages, whose collateral value
supports continuation as assets, as well as increased nonaccrual
consumer loans.
The decrease in nonaccrual commercial and agricultural loans was driven
by the repayment of several loans totalling $0.9 million upon the sale
of the underlying collateral and the return to accrual status, under
the Registrant's policy previously discussed, of three loans totalling
$0.9 million, as depicted in the table CHANGES IN NONACCRUAL AND
IMPAIRED LOANS. As depicted in the table, CHANGES IN OREO, the decrease
in OREO occurred as the Registrant disposed of foreclosed real estate
carried in this category.
The Registrant did not hold any restructured loans, loans whose
repayment criteria was renegotiated to less than the original agreement
terms because of the borrower's financial difficulties, which were not
in compliance with the modified terms at September 30, 1996, December
31, 1995, and September 30, 1995. Loans 90 days past due and not
included in nonperforming loans have decreased in all categories during
1996.
-12-
NONPERFORMING ASSETS AND RISK ELEMENTS
September 30, December 31, September 30,
(in thousands) 1996 1995 1995
- ------------------------------------------------------------------------------------------------
Impaired commercial and
agricultural loans $2,941 71% $3,945 82% $3,405 83%
Other nonaccrual loans:
Real estate mortgage $ 507 12% $ 332 7% $ 391 9%
Consumer 680 17% 540 11% 346 8%
- ------------------------------------------------------------------------------------------------
Total nonaccrual loans 4,128 100% 4,817 100% 4,142 100%
- ------------------------------------------------------------------------------------------------
Other real estate owned 1,115 2,000 1,619
- ------------------------------------------------------------------------------------------------
Total nonperforming assets 5,243 6,817 5,761
- ------------------------------------------------------------------------------------------------
Loans 90 days or more past due and still accruing:
Commercial and agricultural 221 36% 559 42% 906 53%
Real estate mortgage 193 31% 448 34% 478 28%
Consumer 201 33% 325 24% 335 19%
- ------------------------------------------------------------------------------------------------
Total $ 615 100% $1,332 100% $1,719 100%
- ------------------------------------------------------------------------------------------------
Restructured loans, in compliance with modified terms:
Commercial and agricultural - 142 145
Total assets containing
risk elements $5,858 $8,291 $7,625
- ------------------------------------------------------------------------------------------------
Nonperforming loans to total loans 0.65% 0.82% 0.71%
Nonperforming assets to total assets 0.46% 0.62% 0.54%
Allowance for loan losses to
nonperforming loans 241% 189% 226%
Allowance as a percentage of
period end loans 1.57% 1.55% 1.60%
- ------------------------------------------------------------------------------------------------
Charge-offs flowing through the allowance for loan losses depicted in
the table CHANGES IN NONACCRUAL AND IMPAIRED LOANS represent gross
charge-offs taken against nonaccrual loans; excluded are charge-offs
taken against accruing loans and interest reversals. When real estate
collateralizing a loan is foreclosed, the difference between the fair
value of the collateral property, reflected as additions in the table
CHANGES IN OREO, and the book value of the loan, if any, is charged-off
through the allowance for loan losses. Any subsequent write-downs due
to a decline in the fair value of the OREO property after foreclosure
is reflected in noninterest expense.
CHANGES IN NONACCRUAL AND IMPAIRED LOANS
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------
(in thousands) 1996 1995 1996 1995
- --------------------------------------------------------------------------------
Balance at beginning of period $4,669 $4,402 $ 4,817 $ 4,639
Loans placed on nonaccrual 1,164 883 4,824 2,262
Charge-offs (361) (231) (1,240) (623)
Payments (786) (620) (2,892) (1,461)
Transfers to OREO (232) (292) (463) (675)
Loans returned to accrual (326) - (918) -
- --------------------------------------------------------------------------------
Balance at end of period $4,128 $4,142 $ 4,128 $ 4,142
- --------------------------------------------------------------------------------
-13-
CHANGES IN OREO
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------
(in thousands) 1996 1995 1996 1995
- -------------------------------------------------------------------------------
Balance at beginning of period $ 986 $1,095 $ 2,000 $ 840
Additions 244 712 511 1,095
Sales (55) (150) (1,158) (241)
Write-downs (60) (38) (238) (75)
- -------------------------------------------------------------------------------
Balance at end of period $1,115 $1,619 $ 1,115 $1,619
- -------------------------------------------------------------------------------
Securities: The total average balance of securities available for sale
and held to maturity for the three month period ending September 30,
1996 increased $32 million, or 8%, from the comparable period a year
ago. A similar increase, $33 million, or 8%, occurred for the nine
month period ending September 30, 1996 compared to the comparable
period of 1995. This increase occurred as the Bank utilized its ability
to leverage its securities portfolio through the use of borrowed funds
to improve net interest income. The Registrant holds no trading
securities, securities bought for the purpose of sale in the near term.
The Registrant classifies securities as available for sale or held to
maturity at the time of purchase. Classification is determined by
potential responses to changes in interest rates, prepayment risk, and
liquidity needs for an indefinite period of time, and the intent,
supported by the ability, to hold the security to its maturity.
Generally accepted accounting principles limit the reclassification of
securities after the initial determination.
Concurrent with the adoption, on December 1, 1995, of the FASB
publication "A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities" (Guide), the
Registrant was permitted to reassess the appropriateness of the
classifications of all securities held at that time and implement
reclassification without calling into question the intent of the
Registrant to hold other debt securities to maturity in the future. The
Registrant transferred U.S. Treasury, Federal Agency, and Mortgage-
backed securities with amortized costs totalling $217.2 million, having
fair values totalling $220.7 million, from the held to maturity
portfolio to the available for sale portfolio. As required by the
Guide, financial statements prior to adoption were not restated.
At September 30, 1996, the amortized cost of securities available for
sale, $379 million, exceeded fair value by $7 million of market
depreciation while at December 31, 1995, the fair value of $394 million
exceeded amortized cost by $5 million of market appreciation. This
depreciation in fair value has been caused predominately by increases
in interest rates which tends to have an opposite effect on the fair
value of securities. At September 30, 1995, the amortized cost of
securities available for sale, $129 million, exceeded fair value by $2
million of market depreciation. Throughout 1996 and 1995, most
financial institutions experienced similar patterns of variations in
the fair value of securities due to general changes in interest rates.
Tax-exempt securities averaged $33 million, or 8% of the securities
portfolio, for the nine month period ended September 30, 1996 and $30
million, or 8% of the securities portfolio, for the comparable period
of 1995. Obligations of the State of New York and its political
subdivisions constitute 100% of the Bank's tax exempt securities
portfolio. The portfolio did not include any direct obligations of the
State of New York as the entire tax exempt securities portfolio was
comprised of nonrated investments in the local communities within the
twenty county market area served by the Bank's Municipal Banking
Department. It remains the Registrant's practice to invest, subject to
availability, in qualified and designated local municipal issues which
receive favorable federal income tax treatment. The Registrant highly
values its business relationships with a variety of municipalities
within its local service area and meeting their funding needs through
investment in their security issues is a meaningful way to develop such
business relationships.
Deposits: Average total deposits for the quarter ended September 30,
1996, increased $78 million, or 9%, from the comparable period in 1995.
Average total deposits for the nine months ended September 30, 1996
-14-
increased $80 million or 10%, from the comparable period in 1995. The
acquisition of three branches in December 1995 and their deposit base
of $43 million is a major cause of this increase. Average municipal and
negotiated term certificates of deposit increased $47 million, or 37%,
and $32 million, or 26%, for the third quarter and for the first nine
months of 1996, respectively, compared to the similar periods of 1995.
Municipal deposits tend to flow into the Bank as taxes are collected
and flow out as the municipalities make payments over time. These
deposits can be utilized to augment short-term borrowings when interest
rates and security pledging requirements render this temporary
substitution beneficial.
Throughout 1995 trends in the deposit portfolio shifting were
experienced as increases occurred in the certificate of deposit
component of the portfolio while demand, NOW, MMDA, and savings account
balances decreased as funds in these lower yielding products were moved
to higher yielding certificates as rates rose. This trend has
stabilized in the first nine months of 1996. For the nine months ending
September 30, 1996, approximately 46% of the portfolio consisted of
time deposits, 18% savings deposits, 11% money market demand deposits,
12% interest bearing NOW checking deposits, and 13% noninterest bearing
demand deposits. Comparable 1995 portfolio percentages were 43%, 19%,
13%, 10%, and 15%.
Borrowed funds: Long-term debt and short-term borrowings comprise
borrowed funds. Short-term borrowings include federal funds purchased,
securities sold under agreements to repurchase, and other short-term
borrowings, which consist primarily of FHLB advances with an original
maturity of one year or less. Borrowed funds averaged $101 million for
the three month period ending September 30, 1996, up $7 million or 8%,
from the comparable period of 1995. Borrowed funds averaged $82 million
for the nine month period ending September 30 1996, down $10 million,
or 11%, from the comparable period of 1995 due to the additional
funding provided by increased deposits in 1996.
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
Liquidity management requires the ability to raise cash quickly at a
reasonable cost without principal loss to meet the cash flow
requirements of depositors desiring to withdraw funds or borrowers
requiring funds to meet their credit needs. The Asset-Liability
Management Committee of the Registrant is responsible for liquidity
management. This committee of the Registrant's senior staff has
developed liquidity guidelines which cover all assets and liabilities,
as well as off-balance sheet items that are potential sources or uses
of liquidity. The Registrant's funding needs are evaluated continually,
measuring the adequacy of reliable sources of cash relative to the
stability of deposits and borrowing capacity. The liquidity position
is managed by maintaining adequate levels of liquid assets. The
committee monitors the Registrant's liquidity position utilizing an
internally developed measurement, the basic surplus ratio, defined to
be net access to cash and secured borrowings. At September 30 and
December 31, 1995 and September 30, 1996 this ratio was 14%, 17%, and
12%, respectively, exceeding the committee's minimum guideline of 5-7%.
Additional liquidity is available through the Bank's access to borrowed
funds. The Bank has unused lines of credit available for short-term
financing of $73 million, $300 million for repurchase agreements, and
the capacity for additional FHLB advances of $84 million, at September
30, 1996.
Interest rate risk is determined by the relative sensitivities of
earning asset yields and interest bearing liability rates to changes
in interest rates. The Registrant utilizes a funding matrix to identify
repricing opportunities, the ability to adjust loan and deposit product
rates as well as cash flow from maturities and repayments, along a time
line for both assets and liabilities. The funding matrix indicates that
the Registrant is asset sensitive and, in management's opinion, is
positioned to benefit over time from a rising interest rate
environment; however, the nature and timing of the benefit will be
initially impacted by the extent to which core deposit rates are
increased as rates rise. Based on an analysis performed as of September
30, 1996, given the scenario of a 100 basis point increase or decline
in interest rates occurring over an extended time horizon, the
Registrant estimated that there would be less than a 2% impact on net
interest income relative to a flat rate environment over the next
twelve month period.
-15-
CAPITAL RESOURCES AND DIVIDENDS
Stockholders' equity of $102 million represents 8.9% of total assets
at September 30, 1996, compared with $103 million, or 9.7%, a year
previous, and $108 million, or 9.8%, at December 31, 1995. The
decreased dollar amounts and percentage relationships since December
31, 1995 are due to the depreciation in fair value reflected in the
mark to market effect of the securities available for sale portfolio
and additional shares held in the treasury, partially offset by
earnings retention. Similar to the effects experienced by many other
financial institutions, the decline in the fair value of the Bank's
securities available for sale portfolio in 1996, whose unrealized loss
is reflected net of taxes in stockholders' equity, has impacted the
equity balances and ratios. The unrealized loss would only be
recognized in income if securities available for sale were, in fact,
actually sold. It is highly unlikely that the Registrant would require
such a sale to meet its liquidity needs. During 1995 the aforementioned
unrealized net gain or loss reflected in equity improved from an
unrealized net loss at the beginning of the year to a net gain at the
end of the year. This change took place in response to market
fluctuations primarily caused by changes in interest rates.
Both book and tangible book value, stockholders' equity (less
intangible assets) divided by the number of common shares outstanding,
depicted in the table CAPITAL MEASUREMENTS have been affected by the
aforementioned 1995 improvement and 1996 decline in the fair value of
the securities available for sale portfolio as well as increased
holdings of treasury stock. Tangible book value changes in the
declining market value time frame are mitigated by the offsetting
decrease in intangible assets through amortization.
On a per share basis, cash dividends declared were increased in
December 1995 as the Registrant declared a 5% stock dividend in
November 1995 followed by a 13% increase in the cash dividend to $0.13
per share. Cash dividend per share amounts and total cash dividends
paid as a percentage of net income are set forth in the table CAPITAL
MEASUREMENTS. The Board of Directors considers the Registrant's
earnings position and earnings potential when making dividend
decisions.
The Registrant's wholly owned subsidiary pays cash dividends to the
Registrant which are used to fund dividend payments to its
stockholders. Certain restrictions exist regarding the ability of the
Bank to transfer funds to the Registrant in the form of cash dividends.
The approval of the Comptroller of the Currency is required for the
Bank to pay dividends in excess of its earnings retained in the current
year plus retained net profits for the preceding two years or when the
Bank fails to meet certain minimum regulatory capital standards. At
September 30, 1996, the Bank has the ability to pay $8 million to the
Registrant without obtaining prior regulatory approval. Under the State
of Delaware Business Corporation Law, the Registrant may declare and
pay dividends either out of accumulated net retained earnings or
capital surplus.
Capital is an important factor in ensuring the safety of depositors'
accounts. The Registrant remains well capitalized with capital ratios
that are significantly in excess of regulatory guidelines. During 1996,
the Registrant's wholly owned banking subsidiary earned the highest
possible national safety and soundness rating from two national bank
rating services, Bauer Financial Services and Veribanc, Inc. Their
ratings are based on capital levels, loan portfolio quality, and
security portfolio strength.
The Tier 1 Risk-Based Capital Ratio and Total Risk-Based Capital Ratio
presented in the table CAPITAL MEASUREMENTS measure the amount of
capital in relation to the degree of risk perceived in assets and off-
balance sheet exposure. This concept recognizes that certain higher
risk assets require more capital to support them than lower risk
assets. Both ratios were well in excess of the minimum Regulatory
guidelines of 4% and 8%, respectively. Both capital and the degree of
risk used to weight assets and off-balance sheet items are defined by
bank holding company regulatory agencies. As defined, capital may
exclude most intangible assets as well as a portion of the allowance
for loan losses in excess of delineated percentages of loan balances.
Unrealized gains and losses on securities classified as available for
sale, net of the tax effect, for financial reporting purposes are
excluded from capital for the computation of capital adequacy ratios.
-16-
There are limitations for the amount of the allowance for loan losses
that can be considered for capital ratios and for the amount of
deferred tax assets that can be used to meet capital requirements. For
all periods presented, the Registrant was permitted to include all of
its deferred tax assets in its capital ratio computations. Risk factors
used to weight assets and off-balance sheet credit equivalent items
range from 0% for cash, amounts due from the Federal Reserve and
securities issued by the U.S. Treasury to 100% for certain types of
loans and securities. Regulations promulgated by bank and bank holding
company regulatory agencies are intended primarily for the protection
of the Bank's depositors and customers rather than the holders of the
Registrant's securities.
The Tier 1 Leverage Ratio compares capital, as defined for regulatory
purposes, to quarterly average assets without regard to risk weights
and certain intangible assets. This ratio measures the utilization of
capital to support the balance sheet and is well in excess of the
minimum Regulatory guideline of 4%.
CAPITAL MEASUREMENTS
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------
1996
Tier 1 leverage ratio 8.83% 8.55% 8.49%
Tier 1 capital ratio 14.73% 14.29% 14.00%
Total risk-based capital ratio 15.98% 15.54% 15.25%
Cash dividends as a percentage
of net income 36.90% 38.55% 34.87%
Per common share:
Book value $12.64 $12.58 $12.81
Tangible book value $11.27 $11.25 $11.51
- ----------------------------------------------------------------------------------
1995
Tier 1 leverage ratio 9.19% 9.21% 9.17% 8.80%
Tier 1 capital ratio 16.13% 16.03% 15.71% 15.21%
Total risk-based capital ratio 17.39% 17.28% 16.97% 16.46%
Cash dividends as a percentage
of net income 50.50% 43.57% 35.91% 42.85%
Per common share:
Book value $11.95 $12.23 $12.42 $13.06
Tangible book value $10.82 $11.12 $11.34 $11.66
- ----------------------------------------------------------------------------------
The common shares of NBT BANCORP INC. are traded in the NASDAQ National
Market System under the symbol NBTB. High, low, and closing stock
prices, and cash dividends declared by quarter, restated to give
retroactive effect to stock dividends, are depicted in the table
following. At September 30, 1996 the total market capitalization of
NBT's common stock was approximately $134 million, compared with $130
million a year ago and $143 million at December 31, 1995. The change
in market capitalization is due to an increase in the number of shares
outstanding as a result of the December 1995 stock dividend, offset by
an increased number of shares held as treasury stock, and changes in
the market price.
-17-
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
Cash
Dividends
Quarter Ending High Low Close Declared
- ---------------------------------------------------------------------------------
1995
March 31 $16.19 $15.24 $15.24 $0.114
June 30 15.71 15.00 15.48 0.114
September 30 15.95 15.00 15.71 0.115
December 31 18.00 15.24 17.50 0.130
- ---------------------------------------------------------------------------------
1996
March 31 $17.50 $16.00 $17.00 $0.130
June 30 17.50 16.38 16.38 0.130
September 30 17.25 15.75 16.88 0.130
- ---------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin: The most significant
impact on the Registrant's net income between periods is derived from
the interaction of changes in the volume of and rates earned on
interest earning assets and paid on interest bearing liabilities. The
volume of earning securities and loans, compared to the volume of
interest bearing deposits and borrowings, combined with interest rate
spread, produces the changes in the net interest income between
periods. Interest rate spread is the difference between FTE yield on
average earning assets and cost on average interest bearing
liabilities. The table, COMPARATIVE ANALYSIS OF FEDERAL TAXABLE
EQUIVALENT NET INTEREST INCOME, presents the relative contribution of
changes in average interest rates and average volume of interest
earning assets and interest bearing liabilities on FTE net interest
income between periods. Changes in interest income and expense arising
from the combination of rate and volume variances, which cannot be
segregated, are allocated proportionally to rate and volume based on
their relative absolute magnitudes.
FTE total interest income and net interest income increased for the
third quarter of 1996 compared to the same period of 1995 primarily due
favorable volume variances. These favorable variances were
predominately driven by increased loan and securities volume. The
volume of average earning assets increased from $980 million for the
third quarter of 1995 to $1,064 million for the same period of 1996.
Total interest expense increased for the third quarter of 1996 compared
to the same period of 1995 due to a combination of favorable rate
variances and an increased volume of interest bearing liabilities.
These variances were predominately driven by increased certificate of
deposit volume. The average volume of interest bearing liabilities
increased to $909 million for the third quarter of 1996, compared to
$810 million during the same period a year ago.
The improvement in FTE net interest income for the third quarter of
1996 can be attributed to increased volumes of interest earning assets
augmented by decreased rates on certificates of deposit and other
borrowed funds. The combined impact of these favorable forces improved
interest rate spread.
FTE total interest income increased for the first nine months of 1996
compared to the same period of 1995 due to a combination of favorable
rate and volume variances. These favorable variances were predominately
driven by increased loan and securities volume and yield. The volume
of average earning assets increased from $967 million for the first
nine months of 1995 to $1,035 million for the same period of 1996.
Reducing the increased yield for the first nine months of 1995 was a
nonrecurring write-off of $0.5 million of accrued interest receivable
on loans previously charged-off or on nonaccrual status.
-18-
Total interest expense increased for the first nine months of 1996
compared to the same period of 1995 primarily due to an increased
volume of interest bearing liabilities driven by increased certificate
of deposit volume. The Registrant's mix of deposit products has changed
throughout 1995 and 1996 in response to the movement of customer funds
into this more costly deposit product as a response to interest rate
changes as well as the varying mix of deposits of the three branches
acquired in December 1995. As previously discussed, increases in
average municipal and negotiated term certificates of deposit also
occurred which were used to supplant short-term borrowings when
beneficial. The average volume of interest bearing liabilities
increased to $875 million for the first nine months of 1996, compared
to $802 million during the same period a year ago.
The improvement in FTE net interest income for the first nine months
of 1996 can be attributed primarily to increased rates for interest
earning assets and decreased rates on interest bearing liabilities.
Favorable volume variances on interest earning assets, partially offset
by increased volume variances on interest bearing liabilities, also
contributed to the improvement. The magnitude of the interest earning
assets volume and rate increases was greater than that for interest
bearing liabilities. Consequently, interest rate spread improved.
Net interest margin has improved from 1995 to 1996 as portrayed in the
tables of COMPARATIVE ANALYSES OF FEDERAL TAXABLE EQUIVALENT NET
INTEREST INCOME and PERFORMANCE MEASUREMENTS; however, the effects of
soft loan demand and competitive pricing continue to be reflected in
the compressed net interest margin. A strong net interest margin is
critical to the ability to cover noninterest expenses and produce an
acceptable level of net income. Net interest margin for the first nine
months of 1995 was 4.45% excluding the effect of the previously
mentioned accrued interest receivable write-off which occurred in the
first quarter of 1995.
-19-
COMPARATIVE ANALYSIS OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME
Three months ended September 30,
Annualized
Yield/Rate Amounts Variance
1996 1995 (dollars in thousands) 1996 1995 Total Volume Rate
---- ---- ---- ---- ----- ------ ----
8.57% 4.18% Interest bearing deposits $ 5 $ 5 $ - $ (3) $ 3
5.41% 5.95% Federal funds sold 7 8 (1) - (1)
5.16% 5.21% Other short-term investments 20 9 11 11 -
6.52% 6.31% Securities available for sale 6,201 2,090 4,111 4,043 68
8.24% 10.06% Loans available for sale 70 124 (54) (34) (20)
Securities held to maturity:
6.15% 6.07% Taxable 190 3,649 (3,459) (3,498) 39
6.64% 7.68% Tax exempt 658 474 184 257 (73)
9.37% 9.45% Loans 14,796 13,801 995 1,161 (166)
------------------------------------------------------------------------------------------
8.20% 8.16% Total interest income 21,947 20,160 1,787 1,937 (150)
2.94% 3.04% Money Market Deposit Accounts 723 810 (87) (59) (28)
1.59% 1.88% NOW accounts 457 395 62 130 (68)
2.82% 2.95% Savings accounts 1,159 1,134 25 77 (52)
5.20% 5.49% Certificates of deposit 5,642 5,175 467 767 (300)
5.29% 5.82% Other borrowed funds 1,151 1,329 (178) (56) (122)
6.33% 10.58% Long-term debt 235 99 136 190 (54)
------------------------------------------------------------------------------------------
4.10% 4.38% Total interest expense 9,367 8,942 425 1,049 (624)
------------------------------------------------------------------------------------------
Net interest income $12,580 $11,218 $ 1,362 $ 888 $ 474
------------------------------------------------------------------------------------------
4.10% 3.78% Interest rate spread
- ----- ----- --------------------
4.70% 4.54% Net interest margin
- ----- ----- -------------------
FTE adjustment $ 269 $ 177
-------------- ------- -------
Nine Months Ended September 30,
Annualized
Yield/Rate Amounts Variance
1996 1995 (dollars in thousands) 1996 1995 Total Volume Rate
- ---- ---- ---- ---- ----- ------ ----
5.84% 4.23% Interest bearing deposits $ 14 $ 15 $ (1) $ (6) $ 5
5.60% 5.84% Federal funds sold 15 16 (1) - (1)
5.19% 5.85% Other short-term investments 42 81 (39) (31) (8)
6.44% 6.15% Securities available for sale 18,076 5,516 12,560 12,273 287
8.61% 9.16% Loans available for sale 296 432 (136) (112) (24)
Securities held to maturity:
6.66% 6.05% Taxable 624 10,718 (10,094) (11,085) 991
7.01% 7.10% Tax exempt 1,719 1,606 113 132 (19)
9.31% 9.19% Loans 42,421 39,279 3,142 2,592 550
------------------------------------------------------------------------------------------
8.16% 7.97% Total interest income 63,207 57,663 5,544 3,763 1,781
2.93% 2.88% Money Market Deposit Accounts 2,304 2,386 (82) (130) 48
1.73% 1.72% NOW accounts 1,365 1,060 305 298 7
2.95% 2.95% Savings accounts 3,530 3,428 102 104 (2)
5.23% 5.35% Certificates of deposit 16,548 14,468 2,080 2,399 (319)
5.17% 5.87% Other borrowed funds 2,902 3,769 (867) (453) (414)
7.58% 8.10% Long-term debt 395 378 17 42 (25)
------------------------------------------------------------------------------------------
4.13% 4.25% Total interest expense 27,044 25,489 1,555 2,260 (705)
------------------------------------------------------------------------------------------
Net interest income $36,163 $32,174 $ 3,989 $ 1,503 $2,486
------------------------------------------------------------------------------------------
4.03% 3.72% Interest rate spread
- ----- ----- --------------------
4.67% 4.45% Net interest margin
- ----- ----- -------------------
FTE adjustment $ 711 $ 595
-------------- ------- -------
-20-
NONINTEREST INCOME
First Second Third Nine Fourth Twelve
(dollars in thousands) Quarter Quarter Quarter Months Quarter Months
- --------------------------------------------------------------------------------------
1996
Trust income $ 654 $ 655 $ 654 $1,963
Service charges on
deposit accounts 775 799 847 2,421
Securities gains 792 219 194 1,205
Other income 363 394 431 1,188
- --------------------------------------------------------------------------------------
Total noninterest
income $2,584 $2,067 $2,126 $6,777
- --------------------------------------------------------------------------------------
1995
Trust income $ 662 $ 643 $ 558 $1,863 $ 576 $2,439
Service charges on
deposit accounts 731 747 757 2,235 760 2,995
Securities gains - 11 82 93 52 145
Other income 374 353 389 1,116 407 1,523
- --------------------------------------------------------------------------------------
Total noninterest
income $1,767 $1,754 $1,786 $5,307 $1,795 $7,102
- --------------------------------------------------------------------------------------
Noninterest Income: The table entitled NONINTEREST INCOME presents
quarterly and year to date amounts of noninterest income. All
components of noninterest income have increased for the third quarter
and first nine months of 1996 in comparison to the comparable periods of
1995 as a result of the Registrant's income generation improvements.
The Registrant sold U.S. Treasury and Agency securities as well as U.S.
agency mortgage backed securities carried in its available for sale
portfolio having amortized costs totalling $121 million and $33
million, respectively, realizing gains totalling $1.2 million during
the first nine months of 1996; these transactions lead to the majority
of the increase in noninterest income for the first nine months of
1996.
-21-
NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS
First Second Third Nine Fourth Twelve
(dollars in thousands) Quarter Quarter Quarter Months Quarter Months
- ------------------------------------------------------------------------------------------
1996
Salaries and wages $3,208 $3,174 $3,146 $ 9,528
Employee benefits 1,244 1,115 1,209 3,568
Net occupancy expense 674 624 596 1,894
Equipment expense 462 441 421 1,324
FDIC insurance 1 - 1 2
Legal, audit, and
outside services 983 1,086 958 3,027
Loan collection and
other loan related
expenses 343 520 459 1,322
Amortization of
intangible assets 395 395 395 1,185
Other operating
expense 1,276 1,281 1,275 3,832
- ------------------------------------------------------------------------------------------
Total noninterest
expense $8,586 $8,636 $8,460 $25,682
- ------------------------------------------------------------------------------------------
Efficiency ratio 64.34% 62.23% 58.29% 61.53%
Expense ratio 2.55% 2.46% 2.30% 2.43%
Average full-time
equivalent employees 534 530 516 527
Average assets per
average full-time
equivalent employee
(millions) $ 2.0 $ 2.1 $ 2.2 $ 2.1
- ------------------------------------------------------------------------------------------
1995
Salaries and wages $2,966 $3,047 $3,358 $ 9,371 $3,057 $12,428
Employee benefits 1,058 903 890 2,851 1,030 3,881
Net occupancy expense 603 586 562 1,751 610 2,361
Equipment expense 411 424 457 1,292 402 1,694
FDIC insurance 451 452 (43) 860 81 941
Legal, audit, and
outside services 941 908 921 2,770 868 3,638
Loan collection and
other loan related
expenses 345 352 290 987 484 1,471
Amortization of
intangible assets 315 314 313 942 329 1,271
Other operating
expense 1,323 1,249 1,367 3,939 1,400 5,339
- ------------------------------------------------------------------------------------------
Total noninterest
expense $8,413 $8,235 $8,115 $24,763 $8,261 $33,024
- ------------------------------------------------------------------------------------------
Efficiency ratio 70.40% 65.79% 62.80% 66.23% 65.02% 65.92%
Expense ratio 2.64% 2.54% 2.43% 2.54% 2.45% 2.51%
Average full-time
equivalent employees 535 542 551 543 539 542
Average assets per
average full-time
equivalent employee
(millions) $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 2.0 $ 1.9
- ------------------------------------------------------------------------------------------
-22-
Noninterest expense: The table entitled NONINTEREST EXPENSE AND
PRODUCTIVITY MEASUREMENTS presents components of noninterest expense
for the periods indicated. Noninterest expense for the third quarter
and nine months ended September 30, 1996 has increased slightly from
the comparable periods a year previous. The increase was spread
throughout the components of noninterest expense and is the result of
several factors.
Salary, wages and benefits expense are the second largest expense after
interest expense. Salary expense for the quarter ended September 30,
1996 is approximately $0.2 million below the 1995 level for the
comparable period due to a reduced number of average full-time
equivalent employees offset in part by annual merit increases. Salary
expense for the nine months ended September 30, 1996 is approximately
$0.2 million above the 1995 levels for the comparable periods. This
increase is in part due to the timing of a substantial number of
performance appraisal based merit increases occurring effective the
first of the calendar year. Benefits expense for the third quarter and
first nine months of 1996 has increased over comparable periods of 1995
due to actuarially based increases in retirement expense and
performance based incentives.
During 1995 the FDIC Bank Insurance Fund (BIF) attained congressionally
mandated reserve goals, established during the deposit crisis that
began in the prior decade. In the third quarter of 1995, the Bank
received a refund of premiums it had paid in excess of the lower rates
that became effective June 1995, resulting in the FDIC benefit shown
in the table. During both the third and fourth quarters of 1995 the
premium rates for well capitalized banks were lowered from $0.23 to
$0.04 per annum per $100 of insured deposits. The Bank is well
capitalized and benefited from the overall lower rates as well as the
spread in the lower premium rates between well, adequately and under
capitalized institutions. Total premiums vary based upon deposit levels
and composition. The FDIC further dropped its premium for well
capitalized banks to the legal minimum of $2,000 per annum for 1996,
further benefiting the Bank as reflected in the reduced expense.
Deposit insurance premiums can have a material impact on the
profitability of the Registrant; the FDIC determines its premium
assessment basis and rate semi-annually based on the BIF reserve. The
assessment for 1997 has not yet been determined however there has been
significant activity in Congress which may impact future premiums. On
September 30, 1996 the Deposit Insurance Funds Act of 1996 (DIFA) was
signed into law. DIFA includes language to recapitalize the Savings
Association Insurance Fund (SAIF), merge the SAIF with the BIF to
create the Deposit Insurance Fund (DIF) on January 1, 1999, and provide
funding to meet the Financing Corp. (FICO) $780 million annual bond
obligation. This would be financed by semiannual FICO payments of
$0.0129 per $100 of BIF insured deposits, in addition to regular
deposit premiums, for 1997 through 1999 increasing to approximately
$0.0243 per $100 for 2000 until the FICO bonds are retired. DIFA
eliminates the mandatory premium for well capitalized banks of $2,000
per annum.
Additionally, DIFA requires that the FDIC rebate any amount that the
BIF exceeds the designated reserve ratio (DRR) of 1.25% of total
estimated insured deposits at the end of any semiannual period
beginning after January 1, 1997. This is limited by two factors; the
rebate cannot exceed the assessment paid by the insured institution for
the semiannual period and institutions that are not well capitalized
or that exhibit moderately severe to unsatisfactory financial,
operational or compliance weakness are ineligible. The FDIC, as an
exception to the ceiling if the DRR is met, may assess premiums against
the most risky institutions to maintain the integrity of the risk-based
premium system and provide institutions with the incentive to reduce
their premiums.
Outside service cost increased for the third quarter and nine months
ended September 30, 1996 due to the cost of various studies to improve
operating results. Loan collection costs for the same periods increased
due to expenses related to the holding and disposition of OREO.
Intangible amortization increased during 1996 as intangible assets
related to the acquisition of three branches in December 1995 was
recognized. The amortization of intangible asset components lapses
gradually over time.
-23-
The efficiency ratio is computed as total noninterest expense
(excluding nonrecurring charges) divided by FTE net interest income
plus noninterest income (excluding net securities gains and losses and
nonrecurring income). The efficiency ratio indicates the cost of income
production. Decreases indicate improvement as expense changes are less
than proportional to income changes. The expense ratio is computed as
total noninterest expense (excluding nonrecurring charges) less
noninterest income (excluding net securities gains and losses and
nonrecurring income) divided by average assets. The expense ratio
indicates the cost of supporting the asset base; a decrease indicates
improvement as expense changes are less than proportional to the asset
base. Average assets per average full-time equivalent employee measures
the staffing level to support the asset base; an increased ratio
indicates improvement reflecting increased assets managed by each
employee. These measures all reflect improved performance in the third
quarter and first nine months of 1996 as compared to the comparable
periods of 1995. Since these measures are annualized it is valid to
compare the quarterly, periodic and annual measurements to each other
which depict a trend of improvement. The Registrant continues its
expense control efforts and has initiated a reengineering project in
1996 to continue to improve its performance for its shareholders and
its service to the Bank's customers.
Provision for Income Taxes: The provision for income taxes has
increased for the third quarter and first nine months of 1996 compared
to the comparable periods of 1995 as income subject to taxes has
increased. The effective tax rates for the third quarter and first nine
months of 1996 were 35% and 37%, compared to 40% and 38%, respectively,
for the comparable periods of 1995. The Company implemented an ongoing
tax saving strategy in June, 1996, reducing the effective tax rate,
expense, and tax payments. This saving was offset by increased 1996
taxable income subject to the 35% statutory federal rate, compared to
the 34% incremental federal rate in 1995, leading to the increase in
tax expense.
-24-
- ------------------------------------------------------------------------------------------------------------------------
SELECTED FIVE YEAR DATA 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
Net income $9,329 $6,508 $8,505 $8,043 $7,179
Return on average assets 0.90% 0.64% 0.93% 0.94% 0.85%
Return on average equity 9.18% 6.53% 8.79% 8.89% 8.45%
Net interest margin 4.43% 4.81% 5.26% 5.52% 5.64%
Efficiency ratio 65.92% 70.22% 71.05% 69.48% 68.52%
Expense ratio 2.51% 2.96% 3.21% 3.19% 3.23%
Tier 1 leverage ratio 8.80% 9.05% 9.24% 9.01% 7.92%
Tier 1 capital ratio 15.21% 16.09% 15.40% 15.30% 14.12%
Total risk-based capital ratio 16.46% 17.35% 16.66% 16.61% 14.12%
Cash dividends as a percentage
of net income 42.47% 55.22% 38.82% 36.94% 38.58%
Per Common Share:
Net income $ 1.11 $ 0.76 $ 1.00 $ 0.97 $ 0.88
Cash dividends declared $ 0.473 $ 0.427 $ 0.394 $ 0.358 $ 0.339
Book value $13.06 $11.68 $11.98 $11.26 $10.65
Tangible book value $11.66 $10.51 $10.43 $ 9.18 $ 8.03
Stock dividends distributed 5.00% 5.00% 5.00% 5.00% 5.00%
Market price:
High $18.00 $16.78 $16.78 $13.16 $11.75
Low $15.00 $13.61 $11.45 $ 9.05 $ 9.01
End of year $17.50 $15.71 $16.55 $12.53 $ 9.46
Price/earnings multiple 15.77x 12.72x 10.79x 12.89x 16.55x
Price/book value multiple 1.34x 1.34x 1.38x 1.11x 0.89x
Total assets 1,106,266 1,044,557 953,907 868,616 838,884
Total stockholders' equity 108,044 98,307 101,108 94,012 87,826
Average common shares
outstanding (thousands) 8,381 8,513 8,474 8,316 8,195
- ------------------------------------------------------------------------------------------------------------------------
-25-
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
There have been no material legal proceedings initiated or settled
during the quarter ended September 30, 1996. The Registrant and its
principal subsidiary, NBT Bank, National Association (collectively
NBT), initiated a suit in the Supreme Court of the State of New York,
Chenango County, on October 28, 1988, against Fleet/Norstar Financial
Group, Inc., Fleet/Norstar New York, Inc., and Norstar Bank of Upstate
N.Y. (collectively NORSTAR) for tortious interference with NBT's
contract rights and prospective business relationship with Central
National Bank, Canajoharie, New York. NBT sought damages from NORSTAR
for lost profits and special and punitive damages. On March 26, 1996
the New York Court of Appeals affirmed the lower Courts' orders
dismissing the Registrant's claims.
Item 2 -- Changes in Securities
Following are listed changes in the Registrant's Common Stock
outstanding during the quarter ended September 30, 1996 as well as
certain actions which have been taken which may affect the number of
shares of Common Stock (shares) outstanding in the future. There was
no Preferred Stock outstanding during the quarter ended September 30,
1996.
The Registrant has Stock Option Plans covering key employees.
Outstanding at September 30, 1996 are nonqualified stock options
covering 273,231 shares at exercise prices ranging between $9.46 and
$16.68 with expiration dates between January 10, 1997, and April 23,
2006. There are 577,568 shares of authorized common stock designated for
possible issuance under the Plans, including the aforementioned shares.
The number of shares designated for the Plans, the number of shares under
existing options and the option price per share may be adjusted upon certain
changes in capitalization, such as stock dividends, stock splits and other
occurrences as enumerated in the Plans. (FORMs S-8, Registration Statement
Nos. 33-18976 and 33-77410, filed with the Commission on December 9, 1987
and April 6, 1994, respectively).
The Registrant has granted its former Chairman stock options in
connection with the discharge of severance obligations of the
Registrant and the Bank under an employment agreement. The option
covers 129,988 and 27,232 shares with exercise prices of $15.42 and
$16.10, respectively, and bears an expiration date of January 31, 1997.
The number of shares under option and the option price per share may
be adjusted upon certain changes in capitalization, such as stock
dividends, stock splits and other occurrences. The shares which would
be issued, upon payment of the exercise price, from authorized, but
unissued common stock, or shares held in the treasury. This stock
option does not serve to reduce the number of options available under
the previously mentioned Stock Option Plans. (FORM S-8, Registration
Statement No. 333-02925, filed with the Commission on April 29, 1996).
The Registrant has a Dividend Reinvestment Plan. There are 134,003
additional shares of authorized but unissued common stock designated
for possible issuance under the Plan. (FORM S-3, Registration Statement
No. 33-12247, filed with the Commission on February 26, 1987).
The Registrant's Board of Directors has authorized the purchase on the
open market by the Registrant of additional shares of treasury stock.
These treasury shares are to be used for a variety of corporate
purposes, primarily to meet the needs of the Registrant's Employee
Stock Ownership Plan, Automatic Dividend Reinvestment and Stock
Purchase Plan, Stock Option Plans and Bank Trust Department directed
IRA and HR-10 accounts. Purchases and sales during 1996 totalled
411,858 and 93,041, respectively, with 489,092 shares in treasury at
September 30, 1996. Purchases were made at the prevailing market price
in effect at the dates of the transactions. Subsequent sales to both
the Registrant's Employee Stock Ownership Plan and Dividend
Reinvestment and Stock Purchase Plan, if any, were made at the five day
average of the highest and lowest quoted selling price of the
Registrant's common stock on the National Market System of NASDAQ.
Sales under the Registrant's Stock Option Plans were made at the option
price. The price per common share ranged between $16.21 and $17.03; any
-26-
difference between cost and sales price was recorded in capital
surplus.
As approved at the April 22, 1995 annual meeting the Registrant is
authorized to issue 2.5 million shares of preferred stock, no par
value, $1.00 stated value. The Board of Directors is authorized to fix
the particular designations, preferences, rights, qualifications, and
restrictions for each series of preferred stock issued. The Registrant
has a Stockholder Rights Plan (Plan) designed to ensure that any
potential acquiror of the Registrant negotiate with the Board of
Directors and that all Registrant stockholders are treated equitably
in the event of a takeover attempt. When the Plan was adopted, the
Registrant paid a dividend of one Preferred Share Purchase Right
(Right) for each outstanding share of common stock of the Registrant.
Similar Rights are attached to each share of the Registrant's common
stock issued after November 15, 1994, the date of adoption subject to
adjustment. Under the Plan, the Rights will not be exercisable until
a person or group acquires beneficial ownership of 20 percent or more
of the Registrant's outstanding common stock, begins a tender or
exchange offer for 25 percent or more of the Registrant's outstanding
common stock, or an adverse person, as declared by the Board of
Directors, acquires 10 percent or more of the Registrant's outstanding
common stock. Additionally, until the occurrence of such an event, the
Rights are not severable from the Registrant's common stock and
therefore, the Rights will be transferred upon the transfer of shares
of the Registrant's common stock. Upon the occurrence of such events,
each Right entitles the holder to purchase one one-hundredth of a share
of Series R Preferred Stock, no par value, and $1.00 stated value per
share of the Company at a price of $100.
The Plan also provides that upon the occurrence of certain specified
events, the holders of Rights will be entitled to acquire additional
equity interests in the Company or in the acquiring entity, such
interests having a market value of two times the Right's exercise price
of $100. The Rights, which expire November 14, 2004, are redeemable in
whole, but not in part, at the Company's option prior to the time they
are exercisable, for a price of $0.01 per Right.
Item 3 -- Defaults Upon Senior Securities
This item is omitted because there were no defaults upon the
Registrant's senior securities during the quarter ended September 30,
1996.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted as there is no disclosure required for the quarter
ended September 30, 1996.
Item 5 -- Other Information
Not Applicable
Item 6 -- Exhibits and Reports on FORM 8-K
An index to exhibits follows the signature page of this FORM 10-Q.
No reports on FORM 8-K were filed by the Registrant during the quarter
ended September 30, 1996.
-27-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on FORM 10-Q to be signed
on its behalf by the undersigned thereunto duly authorized, this 12th
day of November, 1996.
NBT BANCORP INC.
By: /s/ JOE C. MINOR
------------------------------------------
Joe C. Minor
Vice-President
Chief Financial Officer and Treasurer
-28-
INDEX TO EXHIBITS
The following documents are attached as Exhibits to this FORM 10-Q or, if
annotated by the symbol *, are incorporated by reference as Exhibits as
indicated by the page number or exhibit cross-reference to the prior
filings of the Registrant with the Commission.
FORM 10-Q
Exhibit Exhibit
Number Cross-Reference
- ------ ---------------
10.1 Lease Extension of Vail Mills Office. Herein
27. Financial Data Schedule for the nine months ended Herein
September 30, 1996.
-29-
EXHIBIT 10.1
Lease extension of Vail Mills Office
NBT Bank
November 15, 1994
Mr. Fred Showers
Mrs. Reta L. Showers
48 West main Street
Broadalbin, New York 12025
Re: Land Lease located at Route 30, Mayfield, New York
Expiration Date: June 30, 1996
Dear Mr. & Mrs. Showers:
According to the negotiated terms of the lease for land located at Route 30,
Mayfielf, New York, we are electing to renew for a one year period commencing
July 1, 1996 through June 20, 1997. This lease would continue the current
annual rental of $6,300 payable in monthly payments of $525.
If the terms and conditions in this letter meet with your approval, please
sign one copy and return it for my file. Should you have any questions, feel
free to give me a call at 607-337-6115.
Sincerely,
/s/Donna L. Deuel
Donna L. Deuel
Assistant Vice President
Administrative Services
ldd/cdd
/s/Fred Showers
- --------------- ------------
Date Fred Showers
/s/Reta L. Showers
------------------
Reta L. Showers
cc: Joe C. Minor
William R. Aitkens
Edward Sulem
NBT Bank, N.A., 52 South Broad Street, P.O. Box 315, Norwich, New York 13815
* Telephone 607-337-6000
EXHIBIT 27
Financial Data Schedule