ATTENTION: FINANCIAL AND BUSINESS EDITORS

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NBT BANCORP INC. ANNOUNCES RECORD NET INCOME OF $75.1 MILLION; DECLARES CASH DIVIDEND

NORWICH, NY (January 26, 2015) – NBT Bancorp Inc. (NBT) (NASDAQ: NBTB) reported net income for the year ended December 31, 2014 of $75.1 million, up from $61.7 million from the prior year.  2013 included the impact of the acquisition of Alliance Financial Corporation (“Alliance”) results from March 8, 2013, including $12.4 million in merger expenses and 2014 results included Alliance for the full year.  Reported earnings per diluted share for the year ended December 31, 2014 was $1.69 as compared to $1.46 for 2013.

Core net income for the year ended December 31, 2014 was $75.8 million, up 8.5% from $69.9 million for 2013.  Core diluted earnings per share for the year ended December 31, 2014 was $1.71, up from $1.65 for the prior year.

Reported net income for the three months ended December 31, 2014 was $18.5 million, up from $17.9 million for the same period last year.  Reported diluted earnings per share for the three months ended December 31, 2014 was $0.42, up from $0.41 for the same period last year.

Core net income for the three months ended December 31, 2014 was $18.5 million, up from $18.4 million for the same period in 2013.  Core diluted earnings per share for the three months ended December 31, 2014 was $0.42, equivalent to the same period last year.

The reported results for the years ending 2014 and 2013 and certain quarters in 2014 and 2013 contained items which the Company considers non-core, such as gain on the sale of the Springstone equity investment, prepayment penalties on long-term debt restructure, merger expenses, securities gains, and other items not considered core to our operations.

2014 Highlights:

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Recorded record net income of $75.1 million in 2014

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Second highest level of core diluted earnings per share in the company’s history at $1.71

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Improvement in asset quality indicators

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Nonperforming loans to total loans improved to 0.82% at December 31, 2014 from 0.99% at December 31, 2013

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Past due loans to total loans improved to 0.69% at December 31, 2014 from 0.77% at December 31, 2013

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Net charge-offs to average loans improved to 0.41% for 2014 from 0.44% in 2013

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Continued our strategic expansion in New England in 2014 with new locations in Pittsfield, Ma., Rutland, Vt. and most recently Portland, Me. with the opening of our Maine Regional Headquarters

 

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“With our 2014 results, we achieved record net income and the second highest level of core earnings per share in NBT’s history,” said NBT President and CEO Martin Dietrich. “We continue to be encouraged by the strong earnings we deliver as we manage the company for the long-term value of our shareholders, making strategic investments in our people, technology and new markets. Recently, we established our presence in a sixth state with the opening of our Maine Regional Headquarters in Portland with a focus on serving the needs of commercial banking clients. We’re excited about what we’ve built and continue to build in New England where we now have 16 locations in four states. Good financial results, strong asset quality, opportunities for organic growth and our ongoing focus on enhancing the service we deliver to customers are some of the many reasons we remain confident that NBT is well positioned to continue to achieve success in the future.”

Net interest income was $251.9 million for the year ended December 31, 2014, up 5.8% from 2013.  Fully taxable equivalent (“FTE”) net interest margin was 3.61% for the year ended December 31, 2014, down from 3.66% for 2013.  Average interest earning assets were up $450.9 million, or 6.8%, for the year ended December 31, 2014 as compared to the same period in 2013.  This increase was driven primarily by the acquisition of Alliance in March 2013 as well as organic loan production during the past several quarters.  The net interest impact from the increase in average interest earning assets was partially offset by rate compression on earning assets, as their yield decreased from 4.12% during the year ended December 31, 2013 to 3.94% for 2014.  This rate compression was driven primarily by decreasing loan yields from 4.69% in 2013 to 4.42% for 2014.  As a result of the increase in average earning assets, interest income was up 2.4% for the year ended December 31, 2014 as compared to 2013.  Average interest bearing liabilities increased $211.5 million, or 4.3%, for the year ended December 31, 2014 as compared to 2013.  This increase was due primarily to an increase in deposits resulting from organic deposit growth as well as the aforementioned acquisition of Alliance.  The rates paid on interest bearing liabilities for 2014 decreased by 17 basis points from 2013.  This decrease was primarily driven by a decrease of 8 basis points in rates paid on deposits from improved funding mix as well as a 55 basis point decrease in the rate paid on long-term debt due primarily to maturity of long-term debt in the prior year, as well as the debt restructuring completed in the third quarter of 2014.

Net interest income was $64.0 million for the fourth quarter of 2014, up slightly from the previous quarter, and up 3.2% from the same period last year.  FTE net interest margin was 3.61% for the three months ended December 31, 2014, equivalent to the previous quarter and the fourth quarter of 2013.  Average interest earning assets were up marginally for the fourth quarter of 2014 as compared to the prior quarter, and up $200.7 million, or 2.9%, from the same period in 2013, driven primarily by organic loan production.  The net interest impact from the increase in average interest earning assets over the same period last year was partially offset by slight rate compression on earning assets, which decreased from 4.02% during the fourth quarter of 2013 to 3.92% for the fourth quarter of 2014.  This rate compression was driven primarily by decreasing loan yields from 4.54% for the fourth quarter of 2013 to 4.37% for the fourth quarter of 2014.  Average interest bearing liabilities decreased $45.2 million, or 0.9%, from the third quarter of 2014 to the fourth quarter of 2014, while the rates paid on interest bearing liabilities decreased by 1 basis point over the same period.  This net interest impact from the decrease in average interest bearing liabilities was driven primarily by a decrease in short term borrowings, partially offset by an increase in money market deposit accounts.  Average interest bearing liabilities were relatively flat for the fourth quarter of 2014, as compared with the same period in 2013.  Average long-term debt decreased $178.0 million from the fourth quarter of 2013 to the fourth quarter of 2014 resulting from the 2014 debt restructuring, as $165 million of borrowings were paid down and replaced with brokered deposits.  The rates paid on interest bearing liabilities decreased by 13 basis points from the fourth quarter of 2013 to the fourth quarter of 2014 due in large part to the aforementioned 2014 debt restructuring, which resulted in a 73 basis point decrease in the rate paid on long-term debt over the same period.   The decrease in average long-term debt balances combined with the decrease in the rates paid on long-term debt resulted in a $1.7 million decrease in long-term debt expense from the fourth quarter of 2013 to the fourth quarter of 2014.

 

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Noninterest income for the year ended December 31, 2014 was $126.0 million, up $22.8 million, or 22.1%, from the year ended December 31, 2013.  The increase from 2013 was primarily driven by the previously disclosed sale of our ownership interest in Springstone recorded in the second quarter of 2014.  Excluding this non-core gain, noninterest income for the year ended December 31, 2014 was $106.6 million, up $3.4 million, or 3.3%, from 2013.  This increase from 2013 was due primarily to increases in trust and ATM and debit card fees, due in large part to the full impact from Alliance in 2014.   In addition, bank owned life insurance income was up approximately $1.6 million over 2013 due to death benefits recorded in 2014.  These increases were partially offset by a $1.4 million decrease in service charges on deposit accounts from 2013 and net securities gains totaling $1.4 million recorded in 2013.  The decrease in service charges on deposit accounts from the prior year was primarily the result of lower nonsufficient funds fees recorded during 2014 due to changes in customer behavior, improving macroeconomic conditions, and continued customer outreach and education.

Noninterest income for the three months ended December 31, 2014 was $27.0 million, up $0.4 million from the previous quarter, and up $1.7 million from the same period in 2013.  The increase from 2013 was primarily driven by increases in several categories including bank owned life insurance income due to death benefits recorded in the fourth quarter of 2014, insurance and other financial services revenue, ATM and debit card fees, and retirement plan administration fees.

Noninterest expense for the year ended December 31, 2014 was $246.1 million, up $17.1 million from 2013.  Excluding the non-core $17.9 million prepayment penalties in 2014 and the non-core merger related expenses totaling $12.4 million in 2013, noninterest expense for the year ended December 31, 2014 was $228.2 million, up $11.6 million, or 5.4% from 2013.  This increase from 2013 was due primarily to 2014 including the full twelve months of Alliance occupancy, salaries and employee benefits, data processing, professional fees, and equipment expenses.  In addition, the increase in salaries and benefits in 2014 included incremental incentive compensation related to the Springstone transaction, partially offset by lower retirement plan expenses due mainly to plan asset performance and a previous plan amendment.

Noninterest expense for the three months ended December 31, 2014 was $56.7 million, down $12.3 million from the previous quarter, and up $1.3 million from the same period in 2013.  The decrease from the prior quarter was primarily due to the aforementioned prepayment penalties totaling $13.3 million recorded during the third quarter of 2014.  Excluding these non-core prepayment penalties, noninterest expense for the three months ended December 31, 2014 was up $1.0 million, or 1.8%, from the previous quarter.  Salaries and employee benefits were up approximately $1.1 million for the fourth quarter of 2014 compared with the previous quarter primarily due to higher incentive compensation and medical expenses incurred.

Asset Quality

Net charge-offs were $9.9 million for the three months ended December 31, 2014, up from $5.1 million for the prior quarter, and up from $5.9 million from the three months ended December 31, 2013.  This increase was due primarily to a $3.0 million partial charge-off of an acquired commercial credit during the fourth quarter of 2014 all of which was previously reserved for in prior quarters.  NBT recorded a provision for loan losses of $6.9 million for the three months ended December 31, 2014, up from $4.9 million for the prior quarter, and up from $5.2 million for the fourth quarter of 2013.

 

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Net charge-offs were $22.6 million for the year ended December 31, 2014, up slightly from $22.3 million for the year ended December 31, 2013.  Net charge-offs to average loans for the year ended December 31, 2014 was 0.41%, compared to 0.44% for last year.  For the originated portfolio, net charge-offs to average loans for the year ended December 31, 2014 was 0.38%, compared to 0.51% for last year.  NBT recorded a provision for loan losses of $19.5 million for the year ended December 31, 2014, compared with $22.4 million for 2013.  This decrease was due primarily to general improvement in asset quality in 2014.

Nonperforming loans to total loans was 0.82% at December 31, 2014, down 16 bps from the prior quarter, and down 17 bps from December 31, 2013.  The decrease from the prior quarter and 2013 was due primarily to the aforementioned commercial loan charge-off, the return of one large, nonperforming commercial loan to accruing status, and the transfer of one large commercial real estate loan to other real estate owned (“OREO”) during the fourth quarter of 2014.  Past due loans as a percentage of total loans were 0.69% at December 31, 2014 as compared to 0.65% at September 30, 2014, and 0.77% at December 31, 2013.

The allowance for loan losses totaled $66.4 million at December 31, 2014, compared to $69.3 million at September 30, 2014 and $69.4 million at December 31, 2013.  This decrease from September 30, 2014 was due primarily to the aforementioned acquired commercial loan charge-off in the fourth quarter of 2014 that was specifically reserved for in prior quarters.  The allowance for loan losses as a percentage of loans was 1.19% (1.31% excluding acquired loans with no related allowance recorded) at December 31, 2014, compared to 1.24% (1.38% excluding acquired loans with no related allowance recorded) at September 30, 2014 and 1.28% (1.55% excluding acquired loans with no related allowance recorded) at December 31, 2013.  The decrease in the allowance for loan losses as a percentage of loans from the prior year was due primarily to continued improving asset quality metrics of the originated loan portfolio.

Balance Sheet

Total assets were $7.8 billion at December 31, 2014, up $145.8 million, or 1.9% from December 31, 2013.  Loans were $5.6 billion at December 31, 2014, up $188.5 million from December 31, 2013, due to loan growth during 2014.  Total deposits were $6.3 billion at December 31, 2014, up $409.4 million, or 7.0%, from December 31, 2013, primarily due to deposit growth and the aforementioned debt restructure.  Stockholders’ equity was $864.2 million, representing a total equity-to-total assets ratio of 11.08% at December 31, 2014, compared with $816.6 million or a total equity-to-total assets ratio of 10.67% at December 31, 2013.

Stock Repurchase Program

The Company purchased 3,288 shares of its common stock during the year ended December 31, 2014 at an average price of $22.02 per share under a previously announced plan which expired on December 31, 2014.  As of December 31, 2014, there were 1,000,000 shares available for repurchase under a plan authorized on October 27, 2014, which expires on December 31, 2016.

Dividend

The NBT Board of Directors declared a 2015 first-quarter cash dividend of $0.21 per share at a meeting held today.  The dividend will be paid on March 13, 2015 to shareholders of record as of February 27, 2015.

 

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Corporate Overview

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 sales of securities and certain non-recurring and merger-related expenses.  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 operating results of NBT’s core business (due to the non-recurring nature of the excluded items).  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.

 

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		2014																2013
		4th Q				3rd Q				2nd Q				1st Q				4th Q
Reconciliation of Non-GAAP Financial Measures:
Reported net income (GAAP)		$	18,513			$	10,912			$	27,640			$	18,009			$	17,925
Adj: (Gain) / Loss on sale of securities, net (net of tax)			(22	)			(25	)			(9	)			(5	)			(9	)
Adj: Other adjustments (net of tax) (1)			11				83				(315	)			430				402
Adj: Gain on sale of Springstone (net of tax and related incentive compensation)			-				-				(11,168	)			-				-
Adj: Prepayment penalties related to debt restructuring (net of tax)			-				8,833				2,925				-				-
Plus: Merger related expenses (net of tax)			-				-				-				-				59
Total Adjustments			(11	)			8,891				(8,567	)			425				452
Core net income		$	18,502			$	19,803			$	19,073			$	18,434			$	18,377
Profitability:
Core Diluted Earnings Per Share		$	0.42			$	0.45			$	0.43			$	0.42			$	0.42
Diluted Earnings Per Share		$	0.42			$	0.25			$	0.62			$	0.41			$	0.41
Weighted Average Diluted
Common Shares Outstanding			44,535,274				44,405,357				44,363,787				44,296,445				44,121,102
Core Return on Average Assets (2)			0.94	%			1.01	%			0.99	%			0.98	%			0.96	%
Return on Average Assets (2)			0.94	%			0.55	%			1.43	%			0.95	%			0.94	%
Core Return on Average Equity (2)			8.45	%			9.19	%			9.06	%			9.02	%			9.04	%
Return on Average Equity (2)			8.46	%			5.06	%			13.12	%			8.81	%			8.81	%
Core Return on Average Tangible Common Equity (2)(4)			13.08	%			14.35	%			14.27	%			14.48	%			14.77	%
Return on Average Tangible Common Equity (2)(4)			13.09	%			8.15	%			20.43	%			14.16	%			14.42	%
Net Interest Margin (2)(3)			3.61	%			3.61	%			3.60	%			3.63	%			3.61	%

NBT Bancorp Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

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(unaudited, dollars in thousands except per share data)

NBT Bancorp Inc. and Subsidiaries

QUARTERLY CONSOLIDATED STATEMENTS OF INCOME

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(unaudited, dollars in thousands except per share data)

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NBT Bancorp Inc. and Subsidiaries

AVERAGE QUARTERLY BALANCE SHEETS

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(unaudited, dollars in thousands)

 

(1) Securities are shown at average amortized cost

(2) Excluding unrealized gains or losses

(3) For purposes of these computations, nonaccrual loans are included in the average loan balances outstanding

 

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