NBT Bancorp Inc. Announces Record Net Income of $22.9 Million and Record Diluted Earnings Per Share of $0.52; Declares Cash Dividend

NORWICH, N.Y., Oct. 23, 2017 (GLOBE NEWSWIRE) -- NBT Bancorp Inc. (NBT) (NASDAQ:NBTB) reported record net income and diluted earnings per share for both the three and nine months ended September 30, 2017.

Net income for the three months ended September 30, 2017 was $22.9 million, up from $21.4 million for the second quarter of 2017 and up from $20.0 million for the third quarter of 2016. Diluted earnings per share for the three months ended September 30, 2017 was $0.52, as compared with $0.49 for the prior quarter and $0.46 per share for the third quarter of 2016.

Net income for the nine months ended September 30, 2017 was $64.5 million, up 9.7% from $58.8 million for the same period last year. Reported diluted earnings per share for the nine months ended September 30, 2017 was $1.47, as compared with $1.35 for the same period in 2016.

Highlights:

• Quarter-to-date earnings per share up 6.1% from the prior quarter and up 13.0% from prior year
   
• Quarter-to-date net income up 7.1% from the prior quarter and up 14.4% from the prior year
   
• Year to date annualized loan growth of 5.8%
   
• Average demand deposits for the nine months ended September 30, 2017 up 9.2% from the same period in 2016

“Once again, due to the efforts of a committed and aligned team of NBT professionals, we are able to deliver strong quarter-over-quarter and year-over-year increases in net income and earnings per share,” said NBT President and CEO John H. Watt, Jr. “Our team has built and sustained momentum supported by the prevailing tailwinds that have been created as a result of an improving domestic economy and higher consumer confidence.”

Net interest income was $71.9 million for the third quarter of 2017, up $2.3 million, or 3.3%, from the previous quarter. Fully taxable equivalent (“FTE”) net interest margin was 3.47% for the three months ended September 30, 2017 up from 3.44% for the previous quarter. The yield on average earning assets increased five basis points (“bps”) from the prior quarter to 3.80% and the cost of interest bearing liabilities increased three bps to 0.47% driven by seasonal deposit migration and higher interest rates on borrowings. Average interest earning assets were up $113.4 million, or 1.4%, as compared to the prior quarter, primarily driven by a $106.2 million increase in loans.

Net interest income was $71.9 million for the third quarter of 2017, up $5.3 million, or 7.9%, from the third quarter of 2016. FTE net interest margin of 3.47% was up seven bps from the third quarter of 2016 as the improvement in asset yields was partially offset by the increase in cost of interest bearing liabilities. Average interest earning assets were up $431.3 million, or 5.5%, from the same period in 2016, which was primarily driven by a $307.9 million increase in loans and a $129.3 million increase in securities.

Net interest income for the first nine months of 2017 was $210.0 million, up $13.0 million, or 6.6%, from the same period in 2016. FTE net interest margin of 3.46% for the nine months ended September 30, 2017, was up from 3.44% for the same period in 2016. Average interest earning assets were up $476.3 million, or 6.1%, for the nine months ended September 30, 2017, as compared to the same period in 2016, which was driven by a $307.4 million increase in loans and a $166.1 million increase in securities. Interest income increased $15.3 million, or 7.2% due to the increase in earning assets combined with a four bp improvement in asset yields. Interest expense was up $2.3 million, or 13.7%, for the nine months ended September 30, 2017 as compared to the same period in 2016 and resulted primarily from a three bp increase in rates driven by higher borrowing costs and increase in the average balance of interest bearing liabilities.

Noninterest income for the three months ended September 30, 2017 was $30.8 million, up $0.5 million, or 1.6%, from the prior quarter and up $1.1 million, or 3.8%, from the third quarter of 2016. The increase from the prior quarter was driven by higher other noninterest income due to higher swap fee income. The increase in noninterest income from the third quarter of 2016 was driven by higher retirement plan administration, ATM and debit card fees and trust revenue that were offset by lower insurance and other financial services revenue during the third quarter of 2017. Retirement plan administration fees increased in the third quarter of 2017 as compared to the third quarter of 2016 due primarily to the acquisition of Downeast Pension Services (“DPS”) in the second quarter of 2017. ATM and debit card fees increased from the prior quarters due to higher number of accounts and usage. Trust revenue increased due to account growth. The increases were partially offset by lower insurance and other financial services revenue from the same period of 2016.

Noninterest income for the nine months ended September 30, 2017 was $89.8 million, up $2.2 million, or 2.5%, from the same period of 2016. The increase in noninterest income from the prior year was driven by higher retirement plan administration, ATM and debit card fees and trust revenue that were partially offset by lower insurance and other financial services and other noninterest income during the first nine months of 2017 as compared to the same period in 2016. Retirement plan administration fees increased in 2017 as compared to the prior year due primarily to acquisitions completed in 2016 and the acquisition of DPS in the second quarter of 2017. ATM and debit card fees increased from the prior year due to higher number of accounts and usage in 2017 as compared to 2016. Trust revenue increased from the prior year due to account growth.

Noninterest expense for the three months ended September 30, 2017 was $60.6 million, up $0.3 million, or 0.5%, from the prior quarter and up $1.0 million, or 1.7%, from the third quarter of 2016. The increases from the prior quarter and the same quarter of the prior year were driven by increases in loan collection and other real estate owned due primarily to the write-down of a commercial property.

Noninterest expense for the nine months ended September 30, 2017 was $182.2 million, up $3.9 million, or 2.2%, from the same period of 2016. The increase from the prior year was driven by higher loan collection and other real estate owned expense due primarily to commercial property write-downs. Salaries and employee benefits, occupancy, equipment, data processing and communications and other noninterest expenses also increased in the first nine months of 2017 as compared to the same period of 2016.

In the first quarter of 2017, NBT adopted new accounting guidance for equity-based transactions requiring that all excess tax benefits and tax deficiencies associated with equity-based compensation be recognized as an income tax benefit or expense in the income statement. Previously, tax effects resulting from changes in NBT’s share price subsequent to the grant date were recorded through stockholders’ equity at the time of vesting or exercise. The adoption of the accounting guidance resulted in income tax benefits of $1.4 million, $0.1 million and $0.2 million, in the first, second and third quarters of 2017, respectively. The year-to-date impact to diluted earnings per share was $0.04.

Income tax expense for the three months ended September 30, 2017 was $11.3 million, up $0.7 million, or 6.2%, from the prior quarter and up $1.0 million, or 10.1%, from the third quarter of 2016. The effective tax rate of 33.1% for the third quarter of 2017 was down from 33.3% for the second quarter of 2017 and down from 34.0% for the third quarter of 2016. The increase in income tax expense from the prior quarter was due to a higher level of taxable income. The decrease in the effective tax rate from the third quarter of 2016 was due to a higher level of non-taxable income in the third quarter of 2017 as compared to the same period of the prior year. Excluding the tax benefit of the new accounting guidance, the effective tax rate was 33.6% and 33.7% for the second and third quarters of 2017, respectively.

Income tax expense for the nine months ended September 30, 2017 was $30.3 million, consistent with the same period of 2016. The effective tax rate of 32.0% for the first nine months of 2017 was down from 34.0% for the same period in the prior year. The decrease from the prior year was primarily due to the $1.7 million income tax benefit related to the adoption of new accounting guidance in 2017 offset by a higher level of taxable income in the first nine months of 2017 compared to the same period in 2016. Excluding the tax benefit of the new accounting guidance, the effective tax rate was 33.8% for the first nine months of 2017.

Asset Quality

Net charge-offs were $6.1 million for the three months ended September 30, 2017, as compared to $6.7 million for the prior quarter and $5.3 million for the third quarter of 2016. Provision expense was $7.9 million for the three months ended September 30, 2017, as compared with $7.6 million for the prior quarter and $6.4 million for the third quarter of 2016. Provision expense increased as compared to the same period of the prior year due to loan growth and higher charge-offs driven by the commercial portfolio. Annualized net charge-offs to average loans for the third quarter of 2017 was 0.38% down from 0.42% for the second quarter of 2017 and up from 0.35% for the third quarter of 2016.

Net charge-offs were $19.7 million for the nine months ended September 30, 2017, as compared to $14.6 million for the same period of 2016. Provision expense was $22.8 million for the nine months ended September 30, 2017, as compared with $17.3 million for same period of 2016. Provision expense increased as compared to the first nine months of 2016 due to loan growth and higher net charge-offs driven by the commercial portfolio. Annualized net charge-offs to average loans for the first nine months of 2017 was 0.42% compared with 0.33% for the first nine months of 2016.

Nonperforming loans to total loans was 0.42% at September 30, 2017, down eight bps from 0.50% for the prior quarter and down 31 bps from 0.73% at September 30, 2016. Past due loans as a percentage of total loans were 0.63% at September 30, 2017, as compared to 0.59% at June 30, 2017 and 0.57% at September 30, 2016.

The allowance for loan losses totaled $68.4 million at September 30, 2017, compared to $66.6 million at June 30, 2017 and $65.7 million at September 30, 2016. The allowance for loan losses as a percentage of loans was 1.06% (1.13% excluding acquired loans) at September 30, 2017, compared to 1.05% (1.13% excluding acquired loans) at June 30, 2017 and 1.07% (1.15% excluding acquired loans) at September 30, 2016.

Balance Sheet

Total assets were $9.2 billion at September 30, 2017, up $288.1 million, or 3.2%, from December 31, 2016. Loans were $6.5 billion at September 30, 2017, up $268.9 million, or 4.3%, from December 31, 2016. Total deposits were $7.2 billion at September 30, 2017, up $257.5 million, or 3.7%, from December 31, 2016. Stockholders’ equity was $955.2 million, representing a total equity-to-total assets ratio of 10.43% at September 30, 2017, compared with $913.3 million or a total equity-to-total assets ratio of 10.30% at December 31, 2016.

Stock Repurchase Program

The Company did not purchase shares of its common stock during the three or nine months ended September 30, 2017. As of September 30, 2017, there were 1,000,000 shares available for repurchase under a plan authorized on March 28, 2016, which expires on December 31, 2017. On October 23, 2017, the NBT Board of Directors authorized a new repurchase program for NBT to repurchase up to an additional 1,000,000 shares of its outstanding common stock. This plan expires on December 31, 2019.

Dividend

The NBT Board of Directors approved a 2017 fourth-quarter cash dividend of $0.23 per share at a meeting held today. The dividend will be paid on December 15, 2017 to shareholders of record as of December 1, 2017.

Corporate Overview

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $9.2 billion at September 30, 2017. The company primarily operates through NBT Bank, N.A., a full-service community bank and through two financial services companies. NBT Bank, N.A. has 152 banking locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire and Maine. EPIC Advisors, Inc., based in Rochester, N.Y., is a full-service 401(k) plan recordkeeping firm. NBT-Mang Insurance Agency, based in Norwich, N.Y., is a full-service insurance agency. More information about NBT and its divisions is available online at: www.nbtbancorp.com, www.nbtbank.com, www.epic1st.com and www.nbtmang.com.

Forward-Looking Statements

This news release contains forward-looking statements. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of NBT and its subsidiaries and on the information available to management at the time that these statements were made. There are a number of factors, many of which are beyond NBT’s control, which could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards and tax laws, may adversely affect the businesses in which NBT is engaged; (6) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than NBT; and (7) adverse changes may occur in the securities markets or with respect to inflation. Forward-looking statements speak only as of the date they are made. Except as required by law, NBT does not update forward-looking statements to reflect subsequent circumstances or events.

Non-GAAP Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures adjust GAAP measures to exclude the effects of acquisition related intangible amortization expense on earnings and equity as well as providing a FTE yield on securities and loans. Where non-GAAP disclosures are used in this press release, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provided useful information that is important to an understanding of the results of NBT’s core business as well as provide information standard in the financial institution industry. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider NBT’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of NBT.