NBT Bancorp Inc. Announces Net Income of $20.0 Million for the Third Quarter of 2016; Declares Cash Dividend

NORWICH, N.Y., Oct. 24, 2016 (GLOBE NEWSWIRE) -- NBT Bancorp Inc. (NBT) (NASDAQ:NBTB) reported net income for the three months ended September 30, 2016 was $20.0 million, up from $19.9 million for the second quarter of 2016 and the third quarter of 2015.  Diluted earnings per share for the three months ended September 30, 2016 was $0.46, as compared with $0.46 for the prior quarter and $0.45 for the third quarter of 2015.

Net income for the nine months ended September 30, 2016 was $58.8 million, up from $57.3 million for the same period last year.  Diluted earnings per share for the nine months ended September 30, 2016 was $1.35, as compared with $1.29 for the same period in 2015.

Third Quarter 2016 Highlights:

• Year to date loan growth was 6.3% (annualized)
   
• Average demand deposits for the nine months ended September 30, 2016 were up 10.3% from the same period in 2015

"Our performance through the third quarter of 2016 remained strong," said NBT Chairman, President and CEO Martin Dietrich. "We continue to focus on the fundamentals of banking, providing our customers with products and services that meet their needs in a responsible manner.  We continue to experience good growth across all our major markets, with our New England franchise showing the strongest growth.  We also expanded our financial services offerings in August with the acquisition of Actuarial Designs & Solutions, Inc. (“ADS”) a retirement plan services company in Scarborough, Maine; this addition also enhances our growing presence in New England."

Net interest income was $66.7 million for the third quarter of 2016, up $0.9 million, or 1.3%, from the previous quarter and up $2.4 million, or 3.8%, from the third quarter of 2015.  Fully taxable equivalent (“FTE”) net interest margin was 3.40% for the three months ended September 30, 2016, down from 3.44% for the previous quarter and down from 3.48% for the third quarter of 2015.  Average interest earning assets were up $120.4 million, or 1.5%, for the third quarter of 2016 as compared to the prior quarter and up $499.7 million, or 6.7%, from the same period in 2015.  The increases from the second quarter of 2016 and the third quarter of 2015 were driven primarily by loan production. Annualized loan growth of 8.0% during the third quarter of 2016 was driven by growth in the commercial loan portfolio.  Yields on earning assets decreased by 4 basis points (“bps”) from 3.73% during the second quarter of 2016 to 3.69% for the third quarter of 2016.  Average interest bearing liabilities increased $17.8 million, or 0.3%, from the second quarter of 2016 to the third quarter of 2016, which was driven by a $126.7 million, or 26.2%, increase in short-term borrowings, partially offset by a 2.0% decrease in interest bearing deposits as a result of normal seasonal deposit flows.  The rate paid on interest bearing liabilities of 0.42% during the third quarter of 2016 increased 1 bp from the second quarter of 2016 and increased by 2 bps from the 0.40% paid during the third quarter of 2015 due primarily to an increase in borrowing costs.

Net interest income was $197.0 million for the nine months ended September 30, 2016, up $7.9 million, or 4.2%, from the same period in 2015.  FTE net interest margin was 3.44% for the nine months ended September 30, 2016, down from 3.53% for the nine months ended September 30, 2015.  Average interest earning assets were up $507.0 million, or 7.0%, for the nine months ended September 30, 2016 as compared to the same period in 2015.  This increase from last year was driven primarily by 6.3% annualized loan growth during the first nine months of 2016.  The increase in average interest earning assets was partly offset by a decrease in yields on earning assets from 3.81% during the first nine months of 2015 to 3.73% for the first nine months of 2016.  The decreasing earning asset yield was driven by an 8 bp decrease in loan yields from the first nine months of 2015 to the first nine months of 2016.  Average interest bearing liabilities increased $325.7 million, or 6.3%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016.  Total average deposits increased $375.4 million, or 5.9%, for the nine months ended September 30, 2016 as compared to the same period last year driven primarily by growth in non-interest bearing demand deposits of $187.5 million, or 10.3%, combined with a $187.9 million, or 4.1%, increase in interest bearing deposits due to growth in money market deposit accounts, NOW accounts and savings accounts.  In addition, average short-term borrowings increased $146.6 million, or 42.8%, for the nine months ended September 30, 2016 as compared to the same period last year. The rates paid on interest bearing liabilities increased by 1 bp for the nine months ended September 30, 2016 to 0.41% as compared to the 0.40% paid in the same period in 2015.  This increase resulted primarily from slightly higher rates paid on short-term borrowings and a change in the mix of interest bearing deposits.  

Noninterest income for the three months ended September 30, 2016 was $29.6 million, unchanged from the prior quarter and down $1.6 million, or 5.2%, from the third quarter of 2015.  The decrease from the third quarter of 2015 was driven primarily by a decrease in other noninterest income due to the contingent gain of $4.2 million recognized in the third quarter of 2015 from the 2014 sale of Springstone LLC (“Springstone”).  This decrease was offset by increases in retirement plan administration fees, other noninterest income, ATM and debit card fees and insurance revenue.  Retirement plan administration fees were up $0.9 million, or 27.1%, for the third quarter of 2016 as compared to the third quarter of 2015 due primarily to the 2015 fourth quarter acquisition of Third Party Administrators, Inc. (“TPA, Inc.”) and the 2016 third quarter asset acquisition of ADS.  Other noninterest income was up $0.8 million, or 24.7%, primarily due to higher swap fee income in 2016 than in 2015.  

Noninterest income for the nine months ended September 30, 2016 was $87.6 million, up $1.6 million, or 1.9%, from the same period last year.  The increase from the prior year was driven primarily by increases in other noninterest income, retirement plan administration fees, ATM and debit card fees and insurance revenue. Other noninterest income was up $2.6 million, or 26.7%, for the first nine months of 2016 as compared to the first nine months of 2015 due primarily to an increase in fee income from customer interest rate swaps, an increase in mortgage banking income and a $0.8 million gain on the sale of equity investments for compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Retirement plan administration fees were up $1.9 million, or 19.2%, for the first nine months of 2016 as compared to the same period in 2015 due primarily to the 2015 fourth quarter acquisition of TPA, Inc.  ATM and debit card fees were up $0.9 million, or 6.4%, for the first nine months of 2016 as compared to the same period last year due primarily to increases in debit card activity and the number of accounts.  The increases were offset by the above mentioned $4.2 million Springstone gain in 2015.

Noninterest expense for the three months ended September 30, 2016 was $59.6 million, down $0.8 million or 1.4%, from the prior quarter and down $0.3 million, or 0.5%, from the third quarter of 2015.  The decrease from the prior quarter was due primarily to a decrease of $0.6 million, or 10.2% in other operating expenses. Salaries and employee benefits increased $2.6 million, or 8.5%, from the third quarter of 2015 to the third quarter of 2016 due primarily to the above mentioned TPA acquisition and higher incentive compensation in 2016 as compared to 2015.  The increase was offset by a $3.1 million, or 36.9%, decrease in other operating expenses in the third quarter of 2016 as compared to the third quarter of 2015 primarily due to a reduction in reorganization expenses incurred during the third quarter of 2015.  Income tax expense for the three month period ended September 30, 2016 was $10.3 million, consistent with the prior quarter and down $0.5 million, or 4.6%, from the third quarter of 2015.  The effective tax rate of 34.0% for the third quarter of 2016 was consistent with the prior quarter and down from 35.2% for the third quarter of 2015.

Noninterest expense for the nine months ended September 30, 2016 was $178.3 million, up $2.7 million, or 1.6%, from the same period in 2015.  The increase is due primarily to a rise in salaries and benefits expense of $6.9 million, or 7.6%.  This rise in salaries and medical insurance costs offset by lower pension credit and contract termination costs drove the increase in noninterest expense.  Other noninterest expense decreased by $3.5 million, or 18.4%, primarily due to reorganization expenses incurred during the third quarter of 2015.  Income tax expense for the nine month period ended September 30, 2016 was $30.3 million, up $0.5 million, or 1.8%, from the nine month period ended September 30, 2015.  The effective tax rate was 34.0% for the first nine months of 2016 down from 34.2% for the first nine months of 2015.

Asset Quality

Net charge-offs were $5.3 million for the three months ended September 30, 2016, up from $4.5 million for the prior quarter and up slightly from $5.1 million for the third quarter of 2015.  Provision expense was $6.4 million for the three months ended September 30, 2016, as compared with $4.8 million for the prior quarter and $5.0 million for the third quarter of 2015; the increases in provision expense were primarily due to loan growth.  Annualized net charge-offs to average loans for the third quarter of 2016 was 0.35%, compared with 0.30% for the second quarter of 2016 and 0.35% for the third quarter of 2015. Annualized net charge-offs to average loans for the first nine months of 2016 was 0.33%, consistent with the same period of 2015 and down from 0.38% for the year ended December 31, 2015.

Nonperforming loans to total loans was 0.73% at September 30, 2016, up 9 bps from December 31, 2015 and down 6 bps from September 30, 2015.  Past due loans as a percentage of total loans were 0.57% at September 30, 2016, as compared to 0.62% at December 31, 2015 and 0.63% as of September 30, 2015.

The allowance for loan losses totaled $65.7 million at September 30, 2016, compared to $63.0 million at December 31, 2015 and $64.9 million at September 30, 2015.  The allowance for loan losses as a percentage of loans was 1.07% (1.15% excluding acquired loans with no related allowance recorded) at September 30, 2016, compared to 1.07% (1.18% excluding acquired loans with no related allowance recorded) at December 31, 2015 and 1.10% (1.21% excluding acquired loans with no related allowance recorded) at September 30, 2015.  The decrease in the allowance for loan losses as a percentage of loans from the prior year was due primarily to continued positive trends in asset quality metrics of the originated loan portfolio.

Balance Sheet

Total assets were $8.8 billion at September 30, 2016, up $510.4 million, or 6.2%, from December 31, 2015.  Net loans were $6.1 billion at September 30, 2016, up $274.4 million, or 4.7%, from December 31, 2015.  Total deposits were $6.9 billion at September 30, 2016, up $344.4 million, or 5.2%, from December 31, 2015.  Stockholders’ equity was $909.3 million, representing a total equity-to-total assets ratio of 10.37% at September 30, 2016, compared with $882.0 million or a total equity-to-total assets ratio of 10.67% at December 31, 2015.

Stock Repurchase Program

The Company purchased 675,535 shares of its common stock during the nine months ended September 30, 2016 at an average price of $25.45 per share under a previously announced plan.  As of September 30, 2016, there were 277,313 shares available for repurchase under this plan, which expires on December 31, 2016.  On March 28, 2016, 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, 2017.

Dividend

The NBT Board of Directors approved a 2016 fourth-quarter cash dividend of $0.23 per share at a meeting held today.  The dividend will be paid on December 15, 2016 to shareholders of record as of December 1, 2016.

Corporate Overview

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $8.8 billion at September 30, 2016.  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 154 banking locations with offices 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 can be found on the Internet 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 Bancorp 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 that 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 fully taxable equivalent 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.