UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 22, 2018

NBT BANCORP INC.
(Exact name of registrant as specified in its charter)

Delaware
0-14703
16-1268674
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS 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) 337-2265

 
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



Item 2.02
Results of Operations and Financial Condition

On October 22, 2018, NBT Bancorp Inc. issued a press release describing its results of operations for the quarter ended September 30, 2018. That press release is furnished as Exhibit 99.1 hereto.

Item 9.01
Financial Statements and Exhibits.

(a)
Not applicable.

(b)
Not applicable.

(c)
Not applicable.

(d)
Exhibits.

Exhibit No.
 
Description
     

Press release of NBT Bancorp Inc. dated October 22, 2018


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 
NBT BANCORP INC.
   
Date: October 22, 2018
By:/s/ Michael J. Chewens
 
Michael J. Chewens
 
Senior Executive Vice President
and Chief Financial Officer




Exhibit 99.1

Page 1 of 13

FOR IMMEDIATE RELEASE
ATTENTION: FINANCIAL AND BUSINESS EDITORS
 
Contact:
John H. Watt, Jr., President and CEO
 
Michael J. Chewens, CFO
 
NBT Bancorp Inc.
 
52 South Broad Street
 
Norwich, NY 13815
 
607-337-6119

NBT BANCORP INC. ANNOUNCES RECORD NET INCOME OF $29.8 MILLION AND DILUTED EARNINGS PER SHARE OF $0.68; ANNOUNCES 4% DIVIDEND INCREASE

NORWICH, NY (October 22, 2018) – NBT Bancorp Inc. (“NBT” or the “Company”) (NASDAQ: NBTB) reported record net income and diluted earnings per share for both the three and nine months ended September 30, 2018.

Net income for the three months ended September 30, 2018 was $29.8 million, up 6.0% from $28.1 million for the second quarter of 2018 and up 30.3% from $22.9 million for the third quarter of 2017. Diluted earnings per share for the three months ended September 30, 2018 was $0.68, as compared with $0.64 for the prior quarter and $0.52 for the third quarter of 2017, an increase of 31%.

Net income for the nine months ended September 30, 2018 was $83.9 million, up 30.1% from $64.5 million for the same period last year. Diluted earnings per share for the nine months ended September 30, 2018 was $1.91, as compared with $1.47 for the same period in 2017, an increase of 30%.

Highlights:

  ·
Quarterly earnings per share up 6.3% from prior quarter and up 30.8% from prior year

  ·
4% quarterly dividend increase to $0.26 per share

  ·
Loan growth for the nine months ended September 30, 2018 of 6.2% (annualized)

  ·
Average demand deposits for the nine months ended September 30, 2018 up 4.7% over 2017

  ·
FTE net interest margin of 3.57% for nine months ended September 30, 2018 up 11 bps from 2017

  ·
Full cycle deposit beta of 5.7% through the quarter ending September 30, 20181

“For the third quarter and through the first nine months of the year, we have achieved record net income and earnings per share,” said NBT President and CEO John H. Watt, Jr. “These results reflect the continuing efforts of our team to drive organic growth in loans and deposits and to grow our fee-based businesses while making important and ongoing technology investments that enable NBT to continually enhance the customer experience and create long-term shareholder value. Our ability to successfully manage deposit costs in a rising rate environment and to maintain strong asset quality is fundamental to our business. We are also pleased to announce a 4% increase to the quarterly dividend to $0.26 per share. Combined with the dividend increase we announced earlier this year, this represents a 13% increase in our quarterly dividend in 2018.”

Net interest income was $77.5 million for the third quarter of 2018, up $1.8 million, or 2.4%, from the previous quarter. The fully taxable equivalent (“FTE”) net interest margin was 3.57% for the three months ended September 30, 2018, comparable to the previous quarter, as higher rates on average earning assets were offset by higher funding costs. Interest income increased $3.4 million, or 4.1%, as the yield on average earning assets increased 6 basis points (“bps”) from the prior quarter to 4.05%, combined with an increase in average interest earning assets of $109.9 million, or 1.3%, driven by the increase in average loans of $88.9 million. Interest expense was up $1.7 million, or 18.3%, as the cost of interest bearing liabilities increased 10 bps to 0.71% for the quarter ended September 30, 2018, driven by increased short-term borrowings costs, with interest-bearing deposit costs increasing 8 bps.


1 The change in the Company’s quarterly deposit costs from December 31, 2015 to September 30, 2018 of 0.11% divided by the change in Federal Reserve’s target fed funds rate from December 2015 to September 2018 of 2.00%


Page 2 of 13
Net interest income was $77.5 million for the third quarter of 2018, up $5.6 million, or 7.8%, from the third quarter of 2017. The FTE net interest margin of 3.57% was up 10 bps from the third quarter of 2017. Interest income increased $9.4 million, or 11.9%, as the yield on average earning assets increased 25 bps from the same period in 2017, and average interest earning assets increased $341.9 million, or 4.1%, primarily due to the $439.3 million increase in average loans that was partially offset by a $91.9 million decrease in securities. Interest expense increased $3.8 million, or 54.4%, as the cost of interest bearing liabilities increased 24 bps, driven by the increase in short-term borrowing costs, combined with interest-bearing deposit costs increasing 18 bps.

Net interest income for the first nine months of 2018 was $226.8 million, up $16.7 million, or 8.0%, from the same period in 2017. The FTE net interest margin of 3.57% for the nine months ended September 30, 2018, was up from 3.46% for the same period in 2017 primarily due to asset yields increasing 22 bps, more than offsetting the 17 bp rise in the cost of interest bearing liabilities. Average interest earning assets were up $314.0 million, or 3.8%, for the nine months ended September 30, 2018, as compared to the same period in 2017, driven by a $426.0 million increase in loans that was partially offset by a $105.2 million decrease in securities. Interest income increased $24.6 million, or 10.7%, due to the increase in earning assets combined with a 21 bp improvement in loan yields. Interest expense was up $7.8 million, or 41.0%, for the nine months ended September 30, 2018 as compared to the same period in 2017 and resulted primarily from a 17 bp increase in rates driven by higher borrowing costs and an 11 bp increase in the cost of deposits, combined with an increase in average interest bearing liabilities of $169.8 million. The Federal Reserve has raised its target fed funds rate eight times from December 2015 through September 2018 for a total of 200 bps. During this same cycle of increasing rates, the Company’s deposit rates have increased by 11 bps, resulting in a full cycle deposit beta of 5.7%. The favorable deposit beta was influenced by a favorable loan to deposit ratio and deposit mix.

Noninterest income for the three months ended September 30, 2018 was $33.4 million, down $0.8 million, or 2.3%, from the prior quarter and up $2.6 million, or 8.5%, from the third quarter of 2017. The decrease from the prior quarter was driven by lower trust income due to higher seasonal fees in the second quarter and other noninterest income due to lower swap fee income during the third quarter of 2018. The increase from the third quarter of 2017 was driven by higher retirement plan administration fees resulting from the acquisition of Retirement Plan Services, LLC (“RPS”) in the second quarter of 2018 and higher insurance and other financial services revenue due to account growth that were partially offset by lower other noninterest income due primarily to lower swap fees.

Noninterest income for the nine months ended September 30, 2018 was $98.8 million, up $9.0 million, or 10.0%, from the same period in 2017. The increase from the prior year was driven by higher retirement plan administration fees due to the acquisitions of RPS in the second quarter of 2018 and of Downeast Pension Services in the second quarter of 2017. Other noninterest income in the first nine months of 2018 increased compared to the same period of 2017 due to non-recurring gains recognized in the first nine months of 2018 and ATM and debit card fees increased due to higher number of accounts and usage.

Noninterest expense for the three months ended September 30, 2018 was $66.5 million, up $1.6 million, or 2.5%, from the prior quarter and up $5.9 million, or 9.7%, from the third quarter of 2017. The increase from the prior quarter and third quarter of 2017 was driven by an increase in salaries and employee benefits expenses primarily due to the RPS acquisition, wage increases related to tax reform initiatives and higher incentive compensation associated with business growth.


Page 3 of 13
Noninterest expense for the nine months ended September 30, 2018 was $195.7 million, up $13.5 million, or 7.4%, from the same period in 2017. The increase from the prior year was driven by higher salaries and employee benefits due to the RPS acquisition in the second quarter of 2018, the acquisition of Downeast Pension Services in the second quarter of 2017, higher incentive compensation and wage increases related to tax reform initiatives.

Income tax expense for the three months ended September 30, 2018 was $8.6 million, up $0.5 million, or 5.7%, from the prior quarter and down $2.8 million, or 24.4%, from the third quarter of 2017. The effective tax rate of 22.3% for the third quarter of 2018 was down from 22.4% for the second quarter of 2018 and down from 33.1% for the third quarter of 2017. The increase in income tax expense from the prior quarter was due to a higher level of taxable income. The decrease in income tax expense from the third quarter of 2017 was due to the lower effective tax rate resulting from the Tax Cuts and Jobs Act partially offset by a higher level of taxable income.

Income tax expense for the nine months ended September 30, 2018 was $23.7 million, down $6.6 million, or 21.8%, from the same period of 2017. The effective tax rate of 22.0% for the first nine months of 2018 was down from 32.0% for the same period in the prior year. The decrease in income tax expense from the prior year was due to the lower effective tax rate resulting from the Tax Cuts and Jobs Act partially offset by a higher level of taxable income and lower tax benefit from equity-based transactions. Excluding the tax benefit from equity-based transactions, the effective tax rate was 22.5% and 33.8% for the nine months ending September 30, 2018 and 2017, respectively.

Asset Quality

Net charge-offs of $5.7 million for the three months ended September 30, 2018 were down as compared to $6.5 million for the prior quarter and $6.1 million for the third quarter of 2017. Provision expense was lower at $6.0 million for the three months ended September 30, 2018, as compared with $8.8 million for the prior quarter and $7.9 million for the third quarter of 2017. Annualized net charge-offs to average loans for the third quarter of 2018 was 0.33%, down from 0.39% for the prior quarter and from 0.38% for the third quarter of 2017.

Net charge-offs of $19.0 million for the nine months ended September 30, 2018 were down as compared to $19.7 million for the same period of 2017. Provision expense was $22.3 million for the nine months ended September 30, 2018, as compared with $22.8 million for the same period of 2017. Annualized net charge-offs to average loans for the first nine months of 2018 was 0.38% as compared with 0.42% for the first nine months of 2017.

Nonperforming loans to total loans was 0.41% at September 30, 2018, up 3 bps from 0.38% for the prior quarter and down 1 bp from 0.42% at September 30, 2017. Past due loans as a percentage of total loans were 0.53% at September 30, 2018, up from 0.50% at June 30, 2018 and down from 0.63% at September 30, 2017.

The allowance for loan losses totaled $72.8 million at September 30, 2018, compared to $72.5 million at June 30, 2018 and $68.4 million at September 30, 2017. The allowance for loan losses as a percentage of loans was 1.06% (1.11% excluding acquired loans) at September 30, 2018 and June 30, 2018 compared to 1.06% (1.13% excluding acquired loans) at September 30, 2017.


Page 4 of 13
Balance Sheet

Total assets were $9.5 billion at September 30, 2018, up $410.5 million, or 4.5%, from December 31, 2017. Loans were $6.9 billion at September 30, 2018, up $303.6 million, or 4.6%, from December 31, 2017. Total deposits were $7.4 billion at September 30, 2018, up $270.7 million, or 3.8%, from December 31, 2017, reflecting growth in core and municipal deposits. Stockholders’ equity was $994.2 million, representing a total equity-to-total assets ratio of 10.41% at September 30, 2018, compared with $958.2 million or a total equity-to-total assets ratio of 10.49% at December 31, 2017.

Dividend

The Board of Directors approved a fourth-quarter 2018 cash dividend of $0.26 per share at a meeting held today. The dividend, which represents a $0.01, or 4%, increase, will be paid on December 14, 2018 to stockholders of record as of November 30, 2018. Combined with the increase in the second quarter, the quarterly dividend payable to our stockholders has increased 13% in 2018.

Corporate Overview

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $9.5 billion at September 30, 2018. 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 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 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: (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.


Page 5 of 13
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, 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.


Page 6 of 13
NBT Bancorp Inc. and Subsidiaries
Selected Financial Data
(unaudited, dollars in thousands except per share data)

   
2018
   
2017
 
Profitability:
 
3rd Q
   
2nd Q
   
1st Q
   
4th Q
   
3rd Q
 
Diluted earnings per share
 
$
0.68
   
$
0.64
   
$
0.59
   
$
0.40
   
$
0.52
 
Weighted average diluted common shares outstanding
   
44,050,557
     
44,016,940
     
43,975,248
     
43,957,571
     
43,914,536
 
Return on average assets (1)
   
1.25
%
   
1.21
%
   
1.15
%
   
0.77
%
   
1.00
%
Return on average equity (1)
   
11.96
%
   
11.64
%
   
10.99
%
   
7.27
%
   
9.55
%
Return on average tangible common equity (1)(3)
   
17.42
%
   
17.08
%
   
15.95
%
   
10.65
%
   
13.99
%
Net interest margin (1)(2)
   
3.57
%
   
3.57
%
   
3.57
%
   
3.52
%
   
3.47
%
                                         

9 Months ended September 30,
                       
Profitability:    2018
      2017
                         
Diluted earnings per share
  $ 1.91

  $
1.47
                         
Weighted average diluted common shares outstanding
    44,009,385      
43,892,221
                         
Return on average assets (1)
    1.20 %    
0.96
%                        
Return on average equity (1)
    11.54 %    
9.20
%                        
Return on average tangible common equity (1)(4)
    16.83
%    
13.57
%                        
Net interest margin (1)(2)
   
3.57
%    
3.46
%                        


(1) Annualized.
(2) Calculated on a FTE basis.
(3) Non-GAAP measure - excludes amortization of intangible assets (net of tax) from net income and average tangible common equity is calculated as follows:

   
2018
 
2017
   
3rd Q
 
2nd Q
 
1st Q
 
4th Q
 
3rd Q
Net income
 
$
29,807
 
$
28,121
 
$
25,986
 
$
17,637
 
$
22,876
Amortization of intangible assets (net of tax)
   
791
   
822
   
686
   
594
   
613
Net income, excluding intangibles amortization
 
$
30,598
 
$
28,943
 
$
26,672
 
$
18,231
 
$
23,489
                               
Average stockholders’ equity
 
$
988,551
 
$
969,029
 
$
959,044
 
$
962,660
 
$
950,557
Less: average goodwill and other intangibles
   
291,814
   
289,250
   
281,027
   
283,554
   
284,536
Average tangible common equity
 
$
696,737
 
$
679,779
 
$
678,017
 
$
679,106
 
$
666,021

(4) Non-GAAP measure - excludes amortization of intangible assets (net of tax) from net income and average tangible common equity is calculated as follows:

   
9 Months ended September 30,
   
2018
 
2017
Net income
 
$
83,914
 
$
64,514
Amortization of intangible assets (net of tax)
   
2,298
   
1,852
Net income, excluding intangibles amortization
 
$
86,212
 
$
66,366
             
Average stockholders’ equity
 
$
972,316
 
$
937,279
Less: average goodwill and other intangibles
   
287,403
   
283,580
Average tangible common equity
 
$
684,913
 
$
653,699
 
Note: Year-to-date EPS may not equal sum of quarters due to differences in outstanding shares.


Page 7 of 13
NBT Bancorp Inc. and Subsidiaries
Selected Financial Data
(unaudited, dollars in thousands except per share data)

   
2018
   
2017
 
   
3rd Q
   
2nd Q
   
1st Q
   
4th Q
   
3rd Q
 
Balance sheet data:
                             
Securities available for sale
 
$
1,101,074
   
$
1,192,939
   
$
1,265,912
   
$
1,255,925
   
$
1,357,614
 
Securities held to maturity
   
659,949
     
544,163
     
487,126
     
484,073
     
494,309
 
Net loans
   
6,814,457
     
6,785,721
     
6,575,522
     
6,514,139
     
6,397,278
 
Total assets
   
9,547,284
     
9,467,138
     
9,230,834
     
9,136,812
     
9,155,396
 
Total deposits
   
7,441,290
     
7,344,449
     
7,393,928
     
7,170,636
     
7,231,236
 
Total borrowings
   
986,656
     
1,028,971
     
776,032
     
909,188
     
872,060
 
Total liabilities
   
8,553,129
     
8,488,209
     
8,278,104
     
8,178,635
     
8,200,158
 
Stockholders’ equity
   
994,155
     
978,929
     
952,730
     
958,177
     
955,238
 
                                         
Asset quality:
                                       
Nonaccrual loans
 
$
23,301
   
$
24,006
   
$
25,426
   
$
25,708
   
$
23,453
 
90 days past due and still accruing
   
4,734
     
2,209
     
2,934
     
5,410
     
3,388
 
Total nonperforming loans
   
28,035
     
26,215
     
28,360
     
31,118
     
26,841
 
Other real estate owned
   
3,271
     
4,349
     
4,949
     
4,529
     
4,230
 
Total nonperforming assets
   
31,306
     
30,564
     
33,309
     
35,647
     
31,071
 
Allowance for loan losses
   
72,805
     
72,450
     
70,200
     
69,500
     
68,350
 
                                         
Asset quality ratios (total):
                                       
Allowance for loan losses to total loans
   
1.06
%
   
1.06
%
   
1.06
%
   
1.06
%
   
1.06
%
Total nonperforming loans to total loans
   
0.41
%
   
0.38
%
   
0.43
%
   
0.47
%
   
0.42
%
Total nonperforming assets to total assets
   
0.33
%
   
0.32
%
   
0.36
%
   
0.39
%
   
0.34
%
Allowance for loan losses to total nonperforming loans
   
259.69
%
   
276.37
%
   
247.53
%
   
223.34
%
   
254.65
%
Past due loans to total loans
   
0.53
%
   
0.50
%
   
0.53
%
   
0.63
%
   
0.63
%
Net charge-offs to average loans (1)
   
0.33
%
   
0.39
%
   
0.42
%
   
0.43
%
   
0.38
%
                                         
Asset quality ratios (originated) (2):
                                       
Allowance for loan losses to loans
   
1.11
%
   
1.11
%
   
1.12
%
   
1.12
%
   
1.13
%
Nonperforming loans to loans
   
0.39
%
   
0.36
%
   
0.41
%
   
0.46
%
   
0.39
%
Allowance for loan losses to nonperforming loans
   
285.86
%
   
306.08
%
   
273.54
%
   
243.85
%
   
289.67
%
Past due loans to loans
   
0.53
%
   
0.50
%
   
0.53
%
   
0.65
%
   
0.65
%
                                         
Capital:
                                       
Equity to assets
   
10.41
%
   
10.34
%
   
10.32
%
   
10.49
%
   
10.43
%
Book value per share
 
$
22.77
   
$
22.43
   
$
21.84
   
$
22.01
   
$
21.94
 
Tangible book value per share (3)
 
$
16.10
   
$
15.73
   
$
15.41
   
$
15.54
   
$
15.42
 
Tier 1 leverage ratio
    9.36
%
   
9.25
%
   
9.26
%
   
9.14
%
   
9.12
%
Common equity tier 1 capital ratio
    10.28 %
   
10.04
%
   
10.12
%
   
10.06
%
   
10.08
%
Tier 1 capital ratio
    11.58 %
   
11.35
%
   
11.48
%
   
11.42
%
   
11.46
%
Total risk-based capital ratio
    12.58 %
   
12.34
%
   
12.47
%
   
12.42
%
   
12.45
%
Common stock price (end of period)
 
$
38.38
   
$
38.15
   
$
35.48
   
$
36.80
   
$
36.72
 

(1)
Annualized.
(2)
Non-GAAP measure - Excludes acquired loans.
(3)
Non-GAAP measure - Stockholders’ equity less goodwill and intangible assets divided by common shares outstanding.


Page 8 of 13
NBT Bancorp Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited, dollars in thousands)

Assets:
 
September 30,
2018
 
December 31,
2017
Cash and due from banks
 
$
171,525
 
$
156,852
Short-term interest bearing accounts
   
3,108
   
2,812
Equity securities, at fair value (1)
   
24,722
   
-
Securities available for sale, at fair value (1)
   
1,101,074
   
1,255,925
Securities held to maturity (fair value $645,732 and $481,871)
   
659,949
   
484,073
Trading securities (1)
   
-
   
11,467
Federal Reserve Bank and Federal Home Loan Bank stock
   
52,421
   
46,706
Loans held for sale
   
5,035
   
1,134
Loans
   
6,887,262
   
6,583,639
Less allowance for loan losses
   
72,805
   
69,500
Net loans
 
$
6,814,457
 
$
6,514,139
Premises and equipment, net
   
78,284
   
81,305
Goodwill
   
274,769
   
268,043
Intangible assets, net
   
16,576
   
13,420
Bank owned life insurance
   
176,240
   
172,388
Other assets
   
169,124
   
128,548
Total assets
 
$
9,547,284
 
$
9,136,812
             
Liabilities and stockholders’ equity:
           
Demand (noninterest bearing)
 
$
2,373,027
 
$
2,286,892
Savings, NOW, and money market
   
4,199,694
   
4,076,978
Time
   
868,569
   
806,766
Total deposits
 
$
7,441,290
 
$
7,170,636
Short-term borrowings
   
811,709
   
719,123
Long-term debt
   
73,751
   
88,869
Junior subordinated debt
   
101,196
   
101,196
Other liabilities
   
125,183
   
98,811
Total liabilities
 
$
8,553,129
 
$
8,178,635
             
Total stockholders’ equity
 
$
994,155
 
$
958,177
             
Total liabilities and stockholders’ equity
 
$
9,547,284
 
$
9,136,812

(1) Available for sale and trading equity securities amounts reclassified from securities available for sale and trading securities to equity securities for the current period, related to the adoption of Accounting Standard Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.


Page 9 of 13
NBT Bancorp Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited, dollars in thousands except per share data)

   
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
     
2018
   
2017
   
2018
   
2017
Interest, fee and dividend income:
                     
Interest and fees on loans
 
$
77,249
 
$
68,086
 
$
221,864
 
$
197,399
Securities available for sale (1)
   
6,659
   
7,278
   
20,588
   
21,505
Securities held to maturity
   
3,462
   
2,746
   
8,898
   
8,263
Other
   
834
   
737
   
2,381
   
2,010
Total interest, fee and dividend income
 
$
88,204
 
$
78,847
 
$
253,731
 
$
229,177
Interest expense:
                       
Deposits
 
$
6,157
 
$
3,648
 
$
15,167
 
$
10,658
Short-term borrowings
   
3,000
   
1,870
   
7,421
   
4,375
Long-term debt
   
431
   
589
   
1,359
   
1,794
Junior subordinated debt
   
1,089
   
810
   
3,030
   
2,308
Total interest expense
 
$
10,677
 
$
6,917
 
$
26,977
 
$
19,135
Net interest income
 
$
77,527
 
$
71,930
 
$
226,754
 
$
210,042
Provision for loan losses
   
6,026
   
7,889
   
22,300
   
22,835
Net interest income after provision for loan losses
 
$
71,501
 
$
64,041
 
$
204,454
 
$
187,207
Noninterest income:
                       
Insurance and other financial services revenue
 
$
6,172
 
$
5,536
 
$
18,502
 
$
17,927
Service charges on deposit accounts
   
4,503
   
4,261
   
12,721
   
12,399
ATM and debit card fees
   
5,906
   
5,557
   
16,995
   
16,025
Retirement plan administration fees
   
7,244
   
5,272
   
19,879
   
14,881
Trust
   
4,808
   
4,927
   
14,951
   
14,620
Bank owned life insurance income
   
1,288
   
1,284
   
3,852
   
3,913
Net securities gains (losses)
   
412
   
(4)
   
575
   
(2)
Other (1)
   
3,048
   
3,945
   
11,341
   
10,069
Total noninterest income
 
$
33,381
 
$
30,778
 
$
98,816
 
$
89,832
Noninterest expense:
                       
Salaries and employee benefits (2)
 
$
38,394
 
$
33,674
 
$
112,687
 
$
101,410
Occupancy
   
5,380
   
5,174
   
17,034
   
16,528
Data processing and communications
   
4,434
   
4,399
   
13,221
   
12,826
Professional fees and outside services
   
3,580
   
3,107
   
10,408
   
9,748
Equipment
   
4,319
   
3,733
   
12,508
   
11,224
Office supplies and postage
   
1,563
   
1,432
   
4,640
   
4,680
FDIC expense
   
1,223
   
1,257
   
3,516
   
3,571
Advertising
   
739
   
665
   
1,776
   
1,711
Amortization of intangible assets
   
1,054
   
993
   
3,064
   
2,999
Loan collection and other real estate owned, net
   
1,234
   
1,684
   
3,479
   
3,627
Other (2)
   
4,577
   
4,483
   
13,324
   
13,880
Total noninterest expense
 
$
66,497
 
$
60,601
 
$
195,657
 
$
182,204
Income before income tax expense
 
$
38,385
 
$
34,218
 
$
107,613
 
$
94,835
Income tax expense
   
8,578
   
11,342
   
23,699
   
30,321
Net income
 
$
29,807
 
$
22,876
 
$
83,914
 
$
64,514
Earnings Per Share:
                       
Basic
 
$
0.68
 
$
0.52
 
$
1.92
 
$
1.48
Diluted
 
$
0.68
 
$
0.52
 
$
1.91
 
$
1.47

Note: Year-to-date EPS may not equal sum of quarters due to differences in outstanding shares.

(1) Income on available for sale and trading equity securities amounts reclassified from interest, fee and dividend income on securities available for sale to other noninterest income for the current period, related to the adoption of Accounting Standard Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.
(2) Amounts reclassified for the prior period from salaries and employee benefits to other expenses related to the adoption of Accounting Standard Update No. 2017-07, Compensation – Retirement Benefits (Topic 715), in the first quarter of 2018.


Page 10 of 13
NBT Bancorp Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(unaudited, dollars in thousands except per share data)

   
2018
 
2017
   
3rd Q
 
2nd Q
 
1st Q
 
4th Q
 
3rd Q
Interest, fee and dividend income:
                   
Interest and fees on loans
 
$
77,249
 
$
74,172
 
$
70,443
 
$
69,697
 
$
68,086
Securities available for sale (1)
   
6,659
   
7,003
   
6,926
   
7,059
   
7,278
Securities held to maturity
   
3,462
   
2,811
   
2,625
   
2,671
   
2,746
Other
   
834
   
781
   
766
   
803
   
737
Total interest, fee and dividend income
 
$
88,204
 
$
84,767
 
$
80,760
 
$
80,230
 
$
78,847
Interest expense:
                             
Deposits
 
$
6,157
 
$
5,079
 
$
3,931
 
$
3,817
 
$
3,648
Short-term borrowings
   
3,000
   
2,455
   
1,966
   
1,621
   
1,870
Long-term debt
   
431
   
452
   
476
   
505
   
589
Junior subordinated debt
   
1,089
   
1,040
   
901
   
836
   
810
Total interest expense
 
$
10,677
 
$
9,026
 
$
7,274
 
$
6,779
 
$
6,917
Net interest income
 
$
77,527
 
$
75,741
 
$
73,486
 
$
73,451
 
$
71,930
Provision for loan losses
   
6,026
   
8,778
   
7,496
   
8,153
   
7,889
Net interest income after provision for loan losses
 
$
71,501
 
$
66,963
 
$
65,990
 
$
65,298
 
$
64,041
Noninterest income:
                             
Insurance and other financial services revenue
 
$
6,172
 
$
5,826
 
$
6,504
 
$
5,605
 
$
5,536
Service charges on deposit accounts
   
4,503
   
4,246
   
3,972
   
4,351
   
4,261
ATM and debit card fees
   
5,906
   
5,816
   
5,273
   
5,347
   
5,557
Retirement plan administration fees
   
7,244
   
7,296
   
5,339
   
5,332
   
5,272
Trust
   
4,808
   
5,265
   
4,878
   
4,966
   
4,927
Bank owned life insurance income
   
1,288
   
1,217
   
1,347
   
1,262
   
1,284
Net securities gains (losses)
   
412
   
91
   
72
   
1,869
   
(4)
Other (1)
   
3,048
   
4,401
   
3,892
   
2,740
   
3,945
Total noninterest income
 
$
33,381
 
$
34,158
 
$
31,277
 
$
31,472
 
$
30,778
Noninterest expense:
                             
Salaries and employee benefits (2)
 
$
38,394
 
$
37,726
 
$
36,567
 
$
33,812
 
$
33,674
Occupancy
   
5,380
   
5,535
   
6,119
   
5,280
   
5,174
Data processing and communications
   
4,434
   
4,508
   
4,279
   
4,242
   
4,399
Professional fees and outside services
   
3,580
   
3,336
   
3,492
   
3,751
   
3,107
Equipment
   
4,319
   
4,151
   
4,038
   
4,001
   
3,733
Office supplies and postage
   
1,563
   
1,504
   
1,573
   
1,604
   
1,432
FDIC expense
   
1,223
   
1,092
   
1,201
   
1,196
   
1,257
Advertising
   
739
   
700
   
337
   
1,033
   
665
Amortization of intangible assets
   
1,054
   
1,096
   
914
   
961
   
993
Loan collection and other real estate owned, net
   
1,234
   
908
   
1,337
   
1,136
   
1,684
Other (2)
   
4,577
   
4,332
   
4,415
   
6,428
   
4,483
Total noninterest expense
 
$
66,497
 
$
64,888
 
$
64,272
 
$
63,444
 
$
60,601
Income before income tax expense
 
$
38,385
 
$
36,233
 
$
32,995
 
$
33,326
 
$
34,218
Income tax expense
   
8,578
   
8,112
   
7,009
   
15,689
   
11,342
Net income
 
$
29,807
 
$
28,121
 
$
25,986
 
$
17,637
 
$
22,876
Earnings Per Share:
                             
Basic
 
$
0.68
 
$
0.64
 
$
0.60
 
$
0.40
 
$
0.52
Diluted
 
$
0.68
 
$
0.64
 
$
0.59
 
$
0.40
 
$
0.52

(1) Income on available for sale and trading equity securities amounts reclassified from interest, fee and dividend income on securities available for sale to other noninterest income for the current period, related to the adoption of Accounting Standard Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.
(2) Amounts reclassified for the prior periods from salaries and employee benefits to other expenses related to the adoption of Accounting Standard Update No. 2017-07, Compensation – Retirement Benefits (Topic 715), in the first quarter of 2018.


Page 11 of 13
NBT Bancorp Inc. and Subsidiaries
Average Quarterly Balance Sheets
(unaudited, dollars in thousands)

   
Average
Balance
 
Yield /
Rates
   
Average
Balance
 
Yield /
Rates
   
Average
Balance
 
Yield /
Rates
   
Average
Balance
 
Yield /
Rates
   
Average
Balance
 
Yield /
Rates
 
Three Months ended,
  Q3 - 2018     Q2 - 2018     Q1 - 2018
   
Q4 - 2017
   
Q3 - 2017
 
Assets:
                                                           
Short-term interest bearing accounts
 
$
3,328
   
6.08
%
 
$
3,574
   
5.16
%
 
$
2,818
   
5.18
%
 
$
5,804
   
2.39
%
 
$
9,000
   
2.42
%
Securities available for sale (1)(3)
   
1,197,910
   
2.22
%
   
1,266,304
   
2.23
%
   
1,273,634
   
2.22
%
   
1,313,870
   
2.16
%
   
1,374,739
   
2.13
%
Securities held to maturity (1)
   
591,220
   
2.58
%
   
503,501
   
2.50
%
   
482,375
   
2.48
%
   
490,182
   
2.68
%
   
506,324
   
2.66
%
Investment in FRB and FHLB Banks
   
50,107
   
6.20
%
   
48,184
   
6.12
%
   
46,844
   
6.32
%
   
44,320
   
6.87
%
   
49,902
   
5.42
%
Loans (2)
   
6,839,565
   
4.49
%
   
6,750,710
   
4.41
%
   
6,592,447
   
4.34
%
   
6,528,449
   
4.25
%
   
6,400,287
   
4.23
%
Total interest earning assets
 
$
8,682,130
   
4.05
%
 
$
8,572,273
   
3.99
%
 
$
8,398,118
   
3.92
%
 
$
8,382,625
   
3.84
%
 
$
8,340,252
   
3.80
%
Other assets (3)
   
776,219
           
766,604
           
746,172
           
747,468
           
759,636
       
Total assets
 
$
9,458,349
         
$
9,338,877
         
$
9,144,290
         
$
9,130,093
         
$
9,099,888
       
                                                                       
Liabilities and stockholders’ equity:
                                                                     
Money market deposit accounts
 
$
1,724,853
   
0.58
%
 
$
1,699,956
   
0.43
%
 
$
1,655,308
   
0.27
%
 
$
1,725,242
   
0.25
%
 
$
1,652,730
   
0.23
%
NOW deposit accounts
   
1,164,513
   
0.17
%
   
1,222,889
   
0.16
%
   
1,211,029
   
0.13
%
   
1,200,651
   
0.12
%
   
1,130,940
   
0.10
%
Savings deposits
   
1,279,520
   
0.06
%
   
1,289,062
   
0.06
%
   
1,248,432
   
0.06
%
   
1,215,932
   
0.06
%
   
1,232,823
   
0.06
%
Time deposits
   
881,792
   
1.33
%
   
858,080
   
1.22
%
   
802,959
   
1.13
%
   
792,969
   
1.10
%
   
805,435
   
1.09
%
Total interest bearing deposits
 
$
5,050,678
   
0.48
%
 
$
5,069,987
   
0.40
%
 
$
4,917,728
   
0.32
%
 
$
4,934,794
   
0.31
%
 
$
4,821,928
   
0.30
%
Short-term borrowings
   
766,372
   
1.55
%
   
706,694
   
1.39
%
   
712,220
   
1.12
%
   
684,447
   
0.94
%
   
773,074
   
0.96
%
Long-term debt
   
73,762
   
2.32
%
   
84,676
   
2.14
%
   
88,844
   
2.17
%
   
81,010
   
2.47
%
   
88,935
   
2.63
%
Junior subordinated debt
   
101,196
   
4.27
%
   
101,196
   
4.12
%
   
101,196
   
3.61
%
   
101,196
   
3.28
%
   
101,196
   
3.18
%
Total interest bearing liabilities
 
$
5,992,008
   
0.71
%
 
$
5,962,553
   
0.61
%
 
$
5,819,988
   
0.51
%
 
$
5,801,447
   
0.46
%
 
$
5,785,133
   
0.47
%
Demand deposits
   
2,356,216
           
2,294,023
           
2,259,955
           
2,266,672
           
2,260,973
       
Other liabilities
   
121,574
           
113,272
           
105,303
           
99,314
           
103,225
       
Stockholders’ equity
   
988,551
           
969,029
           
959,044
           
962,660
           
950,557
       
Total liabilities and stockholders’ equity
 
$
9,458,349
         
$
9,338,877
         
$
9,144,290
         
$
9,130,093
         
$
9,099,888
       
                                                                       
Interest rate spread
         
3.34
%
         
3.38
%
         
3.41
%
         
3.38
%
         
3.33
%
Net interest margin (FTE)
         
3.57
%
         
3.57
%
         
3.57
%
         
3.52
%
         
3.47
%

(1) Securities are shown at average amortized cost.
(2) For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.
(3) For purposes of the average balance sheet presentation, equity securities amounts reclassified for the current period from securities available for sale to other assets, related to the adoption of Accounting Standard Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.

Note: Interest income for tax-exempt securities and loans has been adjusted to a FTE basis using the statutory Federal income tax rate of 21% for 2018 and 35% for 2017.


Page 12 of 13
NBT Bancorp Inc. and Subsidiaries
Average Year-to-Date Balance Sheets
(unaudited, dollars in thousands)

   
Average
Balance
 
Interest
 
Yield/
Rates
   
Average
Balance
 
Interest
 
Yield/
Rates
 
Nine Months ended September 30,
 
2018
   
2017
 
Assets:
                           
Short-term interest bearing accounts
 
$
3,242
 
$
133
   
5.48
%
 
$
10,927
 
$
144
   
1.76
%
Securities available for sale (1)(3)
   
1,245,672
   
20,714
   
2.22
%
   
1,363,506
   
21,815
   
2.14
%
Securities held to maturity (1)
   
526,097
   
9,924
   
2.52
%
   
513,447
   
10,178
   
2.65
%
Investment in FRB and FHLB Banks
   
48,391
   
2,248
   
6.21
%
   
47,466
   
1,866
   
5.26
%
Loans (2)
   
6,728,479
   
222,184
   
4.41
%
   
6,302,494
   
198,027
   
4.20
%
Total interest earning assets
 
$
8,551,881
 
$
255,203
   
3.99
%
 
$
8,237,840
 
$
232,030
   
3.77
%
Other assets (3)
   
763,108
                 
753,873
             
Total assets
 
$
9,314,989
               
$
8,991,713
             
                                         
Liabilities and stockholders’ equity:
                                       
Money market deposit accounts
 
$
1,693,627
 
$
5,459
   
0.43
%
 
$
1,687,998
 
$
2,791
   
0.22
%
NOW deposit accounts
   
1,199,306
   
1,366
   
0.15
%
   
1,137,424
   
682
   
0.08
%
Savings deposits
   
1,272,452
   
543
   
0.06
%
   
1,213,990
   
509
   
0.06
%
Time deposits
   
847,899
   
7,799
   
1.23
%
   
825,594
   
6,676
   
1.08
%
Total interest bearing deposits
 
$
5,013,284
 
$
15,167
   
0.40
%
 
$
4,865,006
 
$
10,658
   
0.29
%
Short-term borrowings
   
728,627
   
7,421
   
1.36
%
   
691,919
   
4,375
   
0.85
%
Long-term debt
   
82,372
   
1,359
   
2.21
%
   
97,561
   
1,794
   
2.46
%
Junior subordinated debt
   
101,196
   
3,030
   
4.00
%
   
101,196
   
2,308
   
3.05
%
Total interest bearing liabilities
 
$
5,925,479
 
$
26,977
   
0.61
%
 
$
5,755,682
 
$
19,135
   
0.44
%
Demand deposits
   
2,303,751
                 
2,201,309
             
Other liabilities
   
113,443
                 
97,443
             
Stockholders’ equity
   
972,316
                 
937,279
             
Total liabilities and stockholders’ equity
 
$
9,314,989
               
$
8,991,713
             
Net interest income (FTE)
       
$
228,226
               
$
212,895
       
Interest rate spread
               
3.38
%
               
3.33
%
Net interest margin (FTE)
               
3.57
%
               
3.46
%
Taxable equivalent adjustment
       
$
1,472
               
$
2,853
       
Net interest income
       
$
226,754
               
$
210,042
       

(1) Securities are shown at average amortized cost.
(2) For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.
(3) For purposes of the average balance sheet presentation, equity securities amounts reclassified for the current period from securities available for sale to other assets, related to the adoption of Accounting Standard Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.

Note: Interest income for tax-exempt securities and loans has been adjusted to a FTE basis using the statutory Federal income tax rate of 21% for 2018 and 35% for 2017.


Page 13 of 13
NBT Bancorp Inc. and Subsidiaries
Consolidated Loan Balances
(unaudited, dollars in thousands)