UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

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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): July 22, 2019

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NBT BANCORP INC.

(Exact name of registrant as specified in its charter)

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

Not Applicable

(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:

Securities registered pursuant to Section 12(b) of the Act:

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. ☐

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	NBT BANCORP INC.
Date: July 22, 2019	By:	/s/ Michael J. Chewens
		Michael J. Chewens
		Senior Executive Vice President
		and Chief Financial Officer

FOR IMMEDIATE RELEASE ATTENTION: FINANCIAL AND BUSINESS EDITORS

NBT BANCORP INC. ANNOUNCES NET INCOME OF $30.6 MILLION AND DILUTED EARNINGS PER SHARE OF $0.69

NORWICH, NY (July 22, 2019) – NBT Bancorp Inc. (“NBT” or the “Company”) (NASDAQ: NBTB) reported net income and diluted earnings per share for both the three and six months ended June 30, 2019.

Net income for the three months ended June 30, 2019 was $30.6 million, up 4.9% from $29.1 million for the first quarter of 2019 and up 8.7% from $28.1 million for the second quarter of 2018. Diluted earnings per share for the three months ended June 30, 2019 was $0.69, as compared with $0.66 for the prior quarter, an increase of 4.5%, and $0.64 for the second quarter of 2018, an increase of 7.8%.

Net income for the six months ended June 30, 2019 was $59.7 million, up 10.3% from $54.1 million for the same period last year. Diluted earnings per share for the six months ended June 30, 2019 was $1.35, as compared with $1.23 for the same period in 2018, an increase of 9.8%.

Highlights:

 

 

 

 

 

“For the first six months of 2019, we achieved double-digit year-over-year growth with earnings per share and net income up 10% over the same period in 2018,” said NBT President and CEO John H. Watt, Jr. “Positive trends in net interest income and tangible capital growth demonstrate we are effectively managing our business and growing earnings while investing in our long-term strategies. Our team remains focused on building shareholder value by delivering a great customer experience. Relentless focus on process improvement and digitization will permit reinvestment of the productivity gains created into the customer experience.”

 

Net interest income was $78.6 million for the second quarter of 2019, up $0.9 million, or 1.2%, from the previous quarter. The fully taxable equivalent (“FTE”) net interest margin was 3.61% for the three months ended June 30, 2019, down 3 basis points (“bps”) from the previous quarter, as higher funding costs on average interest-bearing liabilities were partially offset by higher average interest-earning assets. Interest income increased $1.9 million, or 2.1%, as the yield on average interest-earning assets of 4.28% was comparable to the prior quarter, while average interest-earning assets of $8.8 billion increased $70 million compared with the prior quarter. Interest expense was up $1.0 million, or 7.0%, as the cost of interest-bearing liabilities increased 4 bps to 0.96% for the quarter ended June 30, 2019, driven by interest-bearing deposit costs increasing 8 bps, partially offset by the 6 bp decrease in short-term borrowings cost.

Net interest income was $78.6 million for the second quarter of 2019, up $2.9 million, or 3.8%, from the second quarter of 2018. The FTE net interest margin of 3.61% was up 4 bps from the second quarter of 2018. Interest income increased $8.5 million, or 10.0%, as the yield on average interest-earning assets increased 29 bps from the same period in 2018, and average interest-earning assets increased $209.7 million, or 2.4%, primarily due to a $207.6 million increase in average loans. Interest expense increased $5.6 million, as the cost of interest-bearing liabilities increased 35 bps, driven by interest-bearing deposit costs increasing 38 bps combined with a 39 bp increase in short-term borrowing costs.

Net interest income for the first six months of 2019 was $156.3 million, up $7.1 million, or 4.8%, from the same period in 2018. FTE net interest margin of 3.63% for the six months ended June 30, 2019, was up from 3.57% for the same period in 2018. Average interest-earning assets were up $261.6 million, or 3.1% for the six months ended June 30, 2019, as compared to the same period in 2018, driven by a $250.7 million increase in loans. Interest income increased $19.1 million, or 11.5%, due to the increase in earning assets combined with a 30 bp improvement in loan yields. Interest expense was up $12.0 million, for the six months ended June 30, 2019 as compared to the same period in 2018 as the cost of interest-bearing liabilities increased 38 bps, driven by interest-bearing deposit costs increasing 38 bps combined with a 55 bp increase in short-term borrowing costs. The Federal Reserve has raised its target fed funds rate nine times from December 2015 through June 2019 for a total increase of 225 bps. During this same cycle of increasing rates, the Company’s average cost of deposits increased by 33 bps, resulting in a full cycle deposit beta of 14.7%.

Noninterest income for the three months ended June 30, 2019 was $34.2 million, up $0.4 million, or 1.2%, from the prior quarter and comparable with the second quarter of 2018. The increase from the prior quarter was primarily driven by higher ATM and debit card fees due to an increase in the number of accounts and usage and other noninterest income due to higher swap fee income that was partially offset by lower seasonal insurance and other financial services revenue.

Noninterest income for the six months ended June 30, 2019 was $68.1 million, up $2.6 million, or 4.0%, 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 that was partially offset by lower trust income and other noninterest income due to lower non-recurring gains recognized in the first six months of 2019.

Noninterest expense for the three months ended June 30, 2019 was $66.2 million, down $2.2 million, or 3.3%, from the prior quarter and up $1.3 million, or 2.1%, from the second quarter of 2018. The decrease from the prior quarter was primarily driven by lower seasonal occupancy expenses and timing of equity-based compensation and other noninterest expense items. The increase from the second quarter of 2018 was driven by increases in salaries and employee benefits expense and equipment expense. Salaries and employee benefits expense increased from the second quarter of 2018 due to wage increases and higher incentive compensation.

Noninterest expense for the six months ended June 30, 2019 was $134.7 million, up $5.5 million, or 4.3%, 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 half of 2019 as compared to the same period of 2018. The increase in salaries and employee benefits was primarily due to the RPS acquisition in the second quarter of 2018 and the timing of incentive compensation and wage increases.

Income tax expense for the three months ended June 30, 2019 was $8.8 million, up $0.7 million from the prior quarter and up $0.7 million from the second quarter of 2018. The effective tax rate of 22.4% for the second quarter of 2019 was up from 21.8% for the first quarter of 2019 and comparable to the second quarter of 2018. The increase in income tax expense from the prior quarter and from the second quarter of 2018 was primarily due to a higher level of taxable income.

Income tax expense for the six months ended June 30, 2019 was $16.9 million, up $1.8 million, or 11.9%, from the same period of 2018. The effective tax rate of 22.1% for the first six months of 2019 was up from 21.8% 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 $6.5 million for the three months ended June 30, 2019 were down as compared to $6.9 million for the prior quarter and comparable to the second quarter of 2018. Provision expense was higher at $7.3 million for the three months ended June 30, 2019, as compared with $5.8 million for the prior quarter and down from $8.8 million for the second quarter of 2018. Annualized net charge-offs to average loans for the second quarter of 2019 was 0.38%, down from 0.41% for the prior quarter and down from 0.39% for the second quarter of 2018.

Net charge-offs of $13.4 million for the six months ended June 30, 2019 compared to $13.3 million for the same period of 2018. Provision expense was $13.1 million for the six months ended June 30, 2019, as compared with $16.3 million for the same period of 2018. Annualized net charge-offs to average loans for the first six months of 2019 was 0.39% as compared with 0.40% for the first six months of 2018.

Nonperforming loans to total loans was 0.39% at June 30, 2019, down 3 bps from 0.42% at March 31, 2019 and up 1 bp from 0.38% at June 30, 2018. Past due loans as a percentage of total loans were 0.52% at June 30, 2019, comparable to March 31, 2019 and up from 0.50% at June 30, 2018.

The allowance for loan losses totaled $72.2 million at June 30, 2019, compared to $71.4 million at March 31, 2019 and $72.5 million at June 30, 2018. The allowance for loan losses as a percentage of loans was 1.04% (1.08% excluding acquired loans) at June 30, 2019, compared to 1.04% (1.09% excluding acquired loans) at March 31, 2019 and 1.06% (1.11% excluding acquired loans) at June 30, 2018.

Balance Sheet

Total assets were $9.6 billion at June 30, 2019, comparable to December 31, 2018. Loans were $7.0 billion at June 30, 2019, up $75.6 million from December 31, 2018. In the first half of 2019, loan growth in commercial and commercial real estate was partially offset by run-off in our consumer portfolios. Total deposits were $7.6 billion at June 30, 2019, up $225.5 million, or 3.1%, from December 31, 2018, reflecting growth in core and municipal deposits. Stockholders’ equity was $1.1 billion, representing a total equity-to-total assets ratio of 11.15% at June 30, 2019, compared with $1.0 billion or a total equity-to-total assets ratio of 10.65% at December 31, 2018.

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 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.

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.

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NBT Bancorp Inc. and Subsidiaries

Selected Financial Data

(unaudited, dollars in thousands except per share data)

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

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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
			Q2 - 2019								Q1 - 2019								Q4 - 2018							Q3 - 2018								Q2 - 2018
Assets
Short-term interest bearing accounts		$	25,783				1.28	%		$	9,065				4.07	%		$	3,780				5.25	%		$	3,328				6.08	%		$	3,574				5.16	%
Securities available for sale (1) (3)			981,079				2.47	%			984,704				2.45	%			1,104,198				2.29	%			1,197,910				2.22	%			1,266,304				2.23	%
Securities held to maturity (1) (3)			770,651				2.83	%			782,570				2.90	%			688,840				2.73	%			591,220				2.58	%			503,501				2.50	%
Investment in FRB and FHLB Banks			46,179				6.60	%			49,152				6.54	%			47,689				6.95	%			50,107				6.20	%			48,184				6.12	%
Loans (2) (3)			6,958,299				4.69	%			6,886,672				4.68	%			6,876,341				4.56	%			6,839,565				4.49	%			6,750,710				4.41	%
Total interest earning assets		$	8,781,991				4.28	%		$	8,712,163				4.28	%		$	8,720,848				4.14	%		$	8,682,130				4.05	%		$	8,572,273				3.99	%
Other assets			816,748								795,585								769,302								776,219								766,604
Total assets		$	9,598,739							$	9,507,748							$	9,490,150							$	9,458,349							$	9,338,877
Liabilities and stockholders' equity
Money market deposit accounts		$	1,916,045				1.16	%		$	1,804,053				0.99	%		$	1,745,980				0.65	%		$	1,724,853				0.58	%		$	1,699,956				0.43	%
NOW deposit accounts			1,127,413				0.13	%			1,135,213				0.16	%			1,166,383				0.18	%			1,164,513				0.17	%			1,222,889				0.16	%
Savings deposits			1,282,084				0.06	%			1,252,042				0.06	%			1,250,703				0.06	%			1,279,520				0.06	%			1,289,062				0.06	%
Time deposits			953,698				1.73	%			942,457				1.64	%			921,252				1.47	%			881,792				1.33	%			858,080				1.22	%
Total interest bearing deposits		$	5,279,240				0.78	%		$	5,133,765				0.70	%		$	5,084,318				0.54	%		$	5,050,678				0.48	%		$	5,069,987				0.40	%
Short-term borrowings			620,898				1.78	%			712,306				1.84	%			724,693				1.71	%			766,372				1.55	%			706,694				1.39	%
Long-term debt			82,414				2.29	%			73,707				2.32	%			73,735				2.32	%			73,762				2.32	%			84,676				2.14	%
Junior subordinated debt			101,196				4.52	%			101,196				4.68	%			101,196				4.35	%			101,196				4.27	%			101,196				4.12	%
Total interest bearing liabilities		$	6,083,748				0.96	%		$	6,020,974				0.92	%		$	5,983,942				0.77	%		$	5,992,008				0.71	%		$	5,962,553				0.61	%
Demand deposits			2,298,867								2,309,531								2,373,235								2,356,216								2,294,023
Other liabilities			162,374								151,490								130,151								121,574								113,272
Stockholders' equity			1,053,750								1,025,753								1,002,822								988,551								969,029
Total liabilities and stockholders' equity		$	9,598,739							$	9,507,748							$	9,490,150							$	9,458,349							$	9,338,877
Interest rate spread							3.32	%							3.36	%							3.37	%							3.34	%							3.38	%
Net interest margin (FTE) (3)							3.61	%							3.64	%							3.61	%							3.57	%							3.57	%

(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) Interest income for tax-exempt securities and loans have been adjusted to a FTE basis using the statutory Federal income tax rate of 21%. The total amount of adjustment to present yields on a FTE basis is $445, $500, $535, $529 and $478 for the three months ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively.

NBT Bancorp Inc. and Subsidiaries

Average Year-to-Date Balance Sheets

(unaudited, dollars in thousands)