Market Overview

NBT Bancorp Inc. Announces Net Income of $32.4 Million and Diluted Earnings per Share of $0.73; Announces Dividend Increase

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NORWICH, N.Y., Oct. 28, 2019 (GLOBE NEWSWIRE) -- NBT Bancorp Inc. ("NBT" or the "Company") (NASDAQ:NBTB) reported net income and diluted earnings per share for both the three and nine months ended September 30, 2019.

Net income for the three months ended September 30, 2019 was $32.4 million, up 6.0% from $30.6 million for the second quarter of 2019 and up 8.6% from $29.8 million for the third quarter of 2018. Diluted earnings per share for the three months ended September 30, 2019 was $0.73, as compared with $0.69 for the prior quarter, an increase of 5.8%, and $0.68 for the third quarter of 2018, an increase of 7.4%.

Net income for the nine months ended September 30, 2019 was $92.1 million, up 9.7% from $83.9 million for the same period last year. Diluted earnings per share for the nine months ended September 30, 2019 was $2.09, as compared with $1.91 for the same period in 2018, an increase of 9.4%.

The third quarter and year-to-date results include a $4.0 million realized gain on the sale of all of NBT's Visa Class B shares. The realized gain was substantially offset by targeted branch optimization and employee initiatives that resulted in one-time costs in noninterest expense. These initiatives are expected to create future operating efficiencies that will be redeployed in critical technology investments supporting our digital strategy.

Highlights:

  • Announced a 3.8% increase in the quarterly dividend
  • Quarterly diluted earnings per share up 5.8% from the prior quarter and up 7.4% from prior year
  • Quarter-to-date net income up 6.0% from the prior quarter and up 8.6% from prior year
  • FTE net interest margin of 3.61% for the nine months ended September 30, 2019, up 4 bps from 2018
  • Tangible equity ratio of 8.65%, up 106 bps from the third quarter of 2018
  • Board reauthorized a stock repurchase program

"The team at NBT continued to drive earnings growth with year-over-year earnings per share and net income up over 9% despite a challenging interest rate environment," said NBT President and CEO John H. Watt, Jr. "Our disciplined approach to the allocation of capital remains a priority that will drive ongoing implementation of our strategic growth and digital strategies now and in the years to come. In addition, our capital allocation plans include a 3.8% increase to the quarterly dividend to $0.27 per share."

Net interest income was $78.1 million for the third quarter of 2019, down $0.6 million, or 0.7%, from the previous quarter. The fully taxable equivalent ("FTE") net interest margin was 3.57% for the three months ended September 30, 2019, down 4 basis points ("bps") from the previous quarter and interest income decreased $0.9 million, or 0.9%. The yield on average interest-earning assets decreased 6 bps to 4.22%, and average interest-earning assets decreased $58 million from the prior quarter to $8.7 billion. The lower asset yield primarily reflects the impact of lower short-term rates on floating-rate loans, while contraction in average earning assets was driven by a smaller investment portfolio. Interest expense was down $0.3 million, or 1.9%, due to a $168 million decrease in average interest-bearing liabilities from the prior quarter. The cost of interest-bearing liabilities remained comparable at 0.96% for the quarter ended September 30, 2019, driven by the 17 bp decrease in short-term borrowings cost, offset by the 3 bp increase in interest-bearing deposit costs.

Net interest income was $78.1 million for the third quarter of 2019, up $0.5 million, or 0.7%, from the third quarter of 2018. The FTE net interest margin of 3.57% was comparable to the third quarter of 2018. Interest income increased $4.2 million, or 4.7%, as the yield on average interest-earning assets increased 17 bps from the same period in 2018, and average interest-earning assets increased $42.3 million, or 0.5%, primarily due to a $147.9 million increase in average loans. Interest expense increased $3.7 million, as the cost of interest-bearing liabilities increased 25 bps, driven by interest-bearing deposit costs increasing 33 bps.

Net interest income for the first nine months of 2019 was $234.4 million, up $7.6 million, or 3.4%, from the same period in 2018. FTE net interest margin of 3.61% for the nine months ended September 30, 2019, was up from 3.57% for the same period in 2018. Average interest-earning assets were up $187.7 million, or 2.2%, for the nine months ended September 30, 2019, as compared to the same period in 2018, driven by a $216.0 million increase in loans. Interest income increased $23.2 million, or 9.2%, due to the increase in earning assets combined with a 25 bp improvement in loan yields. Interest expense was up $15.6 million, for the nine months ended September 30, 2019 as compared to the same period in 2018 as the cost of interest-bearing liabilities increased 34 bps, driven by interest-bearing deposit costs increasing 36 bps combined with a 40 bp increase in short-term borrowing costs. The Federal Reserve reduced its target fed funds rate twice in the third quarter of 2019 by a total of 50 bps. Prior to the Federal Reserve's change in policy, the Company's full-cycle deposit beta during the period of policy tightening from December 2015 through July 2019 was 15.2%. The Company's average cost of deposits increased by 34 bps versus the 225 bps increase in the fed funds rate.

Noninterest income for the three months ended September 30, 2019 was $39.7 million, up $5.5 million, or 16.0%, from the prior quarter and up $6.3 million, or 19.0%, from the third quarter of 2018. In the third quarter of 2019, the Company sold Visa Class B common stock for a gain of $4.0 million. Excluding net securities gains (losses), noninterest income for the three months ended September 30, 2019 would have been $35.7 million, up $1.4 million, or 4.0%, from the prior quarter and up $2.7 million, or 8.2%, from the third quarter of 2018. The increase from the prior quarter was primarily driven by higher insurance and other finance services revenue along with higher trust income. The increase from the third quarter of 2018 was primarily due to higher other noninterest income due primarily to higher swap fee income.

Noninterest income for the nine months ended September 30, 2019 was $107.8 million, up $9.0 million, or 9.1%, from the same period in 2018. Excluding net securities gains, noninterest income for the nine months ended September 30, 2019 would have been $103.8 million, up $5.5 million, or 5.6%, from the same period in 2018. The increase from the prior year was driven by higher retirement plan administration fees due to the acquisition of Retirement Plan Services, LLC ("RPS") in the second quarter of 2018 and higher ATM and debit card fees due to an increase in the number of accounts and usage.

Noninterest expense for the three months ended September 30, 2019 was $69.7 million, up $3.5 million, or 5.3%, from the prior quarter and up $3.3 million, or 4.9%, from the third quarter of 2018. The increase from the prior quarter and the third quarter of 2018 was primarily driven by higher other noninterest expense items and increases in salaries and employee benefits, partially offset by lower FDIC insurance expense. Salaries and employee benefits expense increased from the prior quarter and the third quarter of 2018 due to wage increases and $0.7 million in one-time charges related to efficiency initiatives. FDIC insurance expense decreased from the prior quarter and the third quarter of 2018 due to receipt of the Small Bank Assessment Credit in the third quarter of 2019. Other noninterest expense increased from the prior quarter and the third quarter of 2018 due to $3.1 million in reorganization expenses incurred during the third quarter of 2019 primarily related to branch optimization strategies to improve future operating efficiencies.

Noninterest expense for the nine months ended September 30, 2019 was $204.4 million, up $8.8 million, or 4.5%, from the same period in 2018. The increase from the prior year was driven by higher salaries and employee benefits, equipment expense and other noninterest expenses in the first nine months of 2019 as compared to the same period of 2018, partially offset by lower FDIC insurance expense. The increase in salaries and employee benefits was primarily due to the RPS acquisition in the second quarter of 2018, the previously mentioned $0.7 million in one-time charges and general wage and benefit increases. The $4.8 million increase in other noninterest expenses was due to the $3.1 million in reorganization expenses previously mentioned and an increase in the amortization expense for pension plan actuarial costs.

Income tax expense for the three months ended September 30, 2019 was $9.3 million, up $0.5 million from the prior quarter and up $0.7 million from the third quarter of 2018. The effective tax rate of 22.4% for the third quarter of 2019 was comparable to the second quarter of 2019 and to the third quarter of 2018. The increase in income tax expense from the prior quarter and from the third quarter of 2018 was primarily due to a higher level of taxable income.

Income tax expense for the nine months ended September 30, 2019 was $26.2 million, up $2.5 million, or 10.7%, from the same period of 2018. The effective tax rate of 22.2% for the first nine months of 2019 was up from 22.0% for the same period in the prior year. The increase in income tax expense from the prior year was due to a higher level of taxable income.

Asset Quality

Net charge-offs of $6.1 million for the three months ended September 30, 2019 were down as compared to $6.5 million for the prior quarter and up compared to $5.7 million for the third quarter of 2018. Provision expense was lower at $6.3 million for the three months ended September 30, 2019, as compared with $7.3 million for the prior quarter and up from $6.0 million for the third quarter of 2018. Annualized net charge-offs to average loans for the third quarter of 2019 was 0.35%, down from 0.38% for the prior quarter and up from 0.33% for the third quarter of 2018.

Net charge-offs of $19.5 million for the nine months ended September 30, 2019 were up compared to $19.0 million for the same period of 2018. Provision expense was $19.4 million for the nine months ended September 30, 2019, as compared with $22.3 million for the same period of 2018. Annualized net charge-offs to average loans for the first nine months of 2019 was 0.38%, comparable to the first nine months of 2018.

Nonperforming loans to total loans was 0.47% at September 30, 2019, up 8 bps from 0.39% at June 30, 2019 and up 6 bps from 0.41% at September 30, 2018. Past due loans as a percentage of total loans was 0.57% at September 30, 2019, up from 0.52% at June 30, 2019 and up from 0.53% at September 30, 2018. The increase in nonperforming and past due loans to total loans primarily resulted from a commercial real estate relationship migrating to over ninety days past due during the quarter. The loan is still accruing interest and is well secured by underlying collateral.

The allowance for loan losses totaled $72.4 million at September 30, 2019, compared to $72.2 million at June 30, 2019 and $72.8 million at September 30, 2018. The allowance for loan losses as a percentage of loans was 1.03% (1.08% excluding acquired loans) at September 30, 2019, compared to 1.04% (1.08% excluding acquired loans) at June 30, 2019 and 1.06% (1.11% excluding acquired loans) at September 30, 2018.

Balance Sheet

Total assets were $9.7 billion at September 30, 2019, up $105.0 million from December 31, 2018. Loans were $7.0 billion at September 30, 2019, up $126.1 million from December 31, 2018. In the first nine months of 2019, loan growth in commercial real estate and residential real estate was partially offset by run-off in our consumer portfolios. Total deposits were $7.7 billion at September 30, 2019, up $375.0 million, or 5.1%, from December 31, 2018, reflecting growth in money market deposit accounts and non-interest-bearing demand accounts. Stockholders' equity was $1.1 billion, representing a total equity-to-total assets ratio of 11.37% at September 30, 2019, compared with $1.0 billion or a total equity-to-total assets ratio of 10.65% at December 31, 2018.

Stock Repurchase Program

On October 28, 2019, the Board of Directors authorized a 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, 2021.

Dividend

The Board of Directors approved a fourth-quarter 2019 cash dividend of $0.27 per share at a meeting held today. The dividend, which represents a $0.01, or 3.8%, increase, will be paid on December 13, 2019 to shareholders of record as of November 29, 2019.

Corporate Overview

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $9.7 billion at September 30, 2019. 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 149 banking locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire and Maine. EPIC Retirement Plan Services, based in Rochester, N.Y., is a full-service 401(k) plan recordkeeping firm. NBT Insurance Agency, LLC, 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.nbtinsurance.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 several 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: (1) competitive pressures among depository and other financial institutions may increase significantly, including as a result of competitors having greater financial resources than NBT; (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 business and results; (6) NBT's ability to successfully integrate acquired businesses and employees; 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, equity and assets as well as providing a FTE yield on securities and loans. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provide 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.

   
   
NBT Bancorp Inc. and Subsidiaries  
Selected Financial Data  
(unaudited, dollars in thousands except per share data)  
             
    2019     2018    
Profitability: 3rd Q 2nd Q 1st Q 4th Q 3rd Q  
Diluted earnings per share $ 0.73   $ 0.69   $ 0.66   $ 0.65   $ 0.68    
Weighted average diluted common shares outstanding   44,138,495     44,120,377     44,081,086     44,059,796     44,050,557    
Return on average assets (1)   1.34 %   1.28 %   1.24 %   1.20 %   1.25 %  
Return on average equity (1)   11.83 %   11.63 %   11.52 %   11.34 %   11.96 %  
Return on average tangible common equity (1)(3)   16.43 %   16.38 %   16.45 %   16.37 %   17.42 %
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