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NBT Bancorp Inc. Announces Third Quarter Net Income of $35.1 Million, or $0.80 Per Diluted Common Share; Announces Dividend

10/26/20

NORWICH, N.Y., Oct. 26, 2020 (GLOBE NEWSWIRE) -- NBT Bancorp Inc. (“NBT” or the “Company”) (NASDAQ: NBTB) reported net income and diluted earnings per share for both the three and nine months ended September 30, 2020.

Net income for the three months ended September 30, 2020 was $35.1 million, or $0.80 per diluted common share. Net income was up $10.4 million from the previous quarter primarily due to lower loan loss provision and up $2.7 million from the third quarter of 2019.

Pre-provision net revenue (“PPNR”)1 for the third quarter of 2020 was $49.6 million compared to $50.7 million in the previous quarter and $48.2 million in the third quarter of 2019. The 2% decline in PPNR from the previous quarter reflected lower net interest income and slightly higher operating expenses, partly offset by higher noninterest income.

CEO Comments

“The continued strength of NBT’s pre-provision net revenue is reflected in our third quarter 2020 results,” said NBT President and CEO John H. Watt, Jr. “Strong fee-based income, including higher income from our retirement plan administration businesses driven by an acquisition completed in April, and focused expense management were key contributors. As we continue to work closely with our customers through the impacts of the pandemic, we are encouraged that total loan deferrals dropped to 2% in October from a peak of approximately 15% in May. Adoption of digital banking services and functionality by our customers continued to accelerate in the third quarter and, with our well-established technology roadmap, we are positioned to scale up.”

Third Quarter Financial Highlights

Net Income
  • Net income of $35.1 million
  • Diluted earnings per share of $0.80
Net Interest Income / NIM
  • Net interest income on a fully taxable equivalent basis was $78.3 million1
  • Net interest margin (“NIM”) on a fully taxable equivalent basis was 3.17%1
PPNR
  • PPNR1 was $49.6 million compared to $50.7 million in the second quarter of 2020 and $48.2 million in the third quarter of 2019
Loans and Credit Quality
  • Period end loans were $7.6 billion, up 8%, annualized, from December 31, 2019 and consistent with June 30, 2020
  • Excluding Paycheck Protection Program (“PPP”) loans of $515 million at September 30, 2020, period end loans contracted $72 million or 1% from June 30, 2020
  • Allowance for loan losses to total loans of 1.51% (1.62% excluding PPP loans and related allowance)
  • Net charge-offs to average loans was 0.12%, annualized (0.13% excluding PPP loans)
  • Nonperforming assets to total assets was 0.37% (0.39% excluding PPP loans)
Capital
  • Tangible book value per share2 grew 3% for the quarter and 8% from prior year to $20.02 at September 30, 2020
  • Tangible equity to assets of 8.27%1
  • CET1 ratio of 11.63%; Total leverage ratio of 9.48%

Loans

  • Period end total loans were $7.6 billion at September 30 and June 30, 2020, compared to $7.1 billion at December 31, 2019.
  • Total PPP loans as of September 30, 2020 were $515 million (net of unamortized fees), with $548 million originated at an average loan size of $184 thousand and an average annual fee of 3.2%.
  • Excluding PPP loans, period end loans decreased $71.8 million from June 30, 2020. Commercial and industrial loans decreased $21.4 million to $1.3 billion; commercial real estate loans increased $25.3 million to $2.3 billion; and total consumer loans decreased $75.7 million to $3.5 billion, driven by run-off of indirect auto loans.
  • Commercial line of credit utilization rate was 25% at September 30, 2020 compared to 26% at June 30, 2020 and 33% at September 30, 2019.

Deposits

  • Average total deposits in the third quarter of 2020 were $8.8 billion, compared to $8.6 billion in the second quarter of 2020, primarily due to increases in non-interest bearing demand deposit accounts.
  • Loan to deposit ratio was 84.4% at September 30, 2020, compared to 94.0% at December 31, 2019 and 86.5% at June 30, 2020.

Net Interest Income and Net Interest Margin

  • Net interest income for the third quarter of 2020 was $77.9 million, down $2.5 million or 3.1% from the second quarter of 2020 and consistent with the third quarter of 2019.
  • The net interest margin on a fully taxable equivalent (“FTE”) basis for the third quarter of 2020 was 3.17%, down 21 basis points (“bps”) from the second quarter of 2020 and down 40 bps from the third quarter of 2019. The net impact of PPP loans and excess liquidity, both of which the Company expects to be transitory, negatively impacted the NIM by 10 bps in the third quarter versus a negative 7 bps in the second quarter of 2020. Excluding the impact of PPP lending and excess liquidity from each quarter, NIM declined 18 bps from the prior quarter primarily due to the impact of asset repricing while funding costs remained stable during the quarter.
  • Earning asset yields for the three months ended September 30, 2020 were down 23 bps from the prior quarter and down 77 bps from the same quarter in the prior year. Earning assets grew $220.9 million or 2.3% from the prior quarter and grew $1.1 billion or 12.6% from the same quarter in the prior year.
    • Excess liquidity resulted in a $97.7 million increase in the average balances of short-term interest bearing accounts.
    • The average balance of investment securities increased $160.0 million while yields declined 29 bps.
    • Loan yields decreased 15 bps to 3.95%.
  • Total cost of deposits was 0.19% for the third quarter of 2020, down 4 bps from the prior quarter and down 37 bps from the same period in the prior year.
  • The cost of interest-bearing liabilities for the three months ended September 30, 2020 was 0.45%, flat as compared to the prior quarter of 0.45% and down 51 bps from the third quarter of 2019 of 0.96%.
    • Cost of interest-bearing deposits decreased 4 bps from the prior quarter and decreased 51 bps from the same quarter in 2019.

Credit Quality and CECL

  • Net charge-offs to average loans were very low due to COVID-19 pandemic relief programs.
  • Net charge-offs to total average loans of 12 bps (13 bps excluding PPP loans) compared to 28 bps (30 bps excluding PPP loans) in the prior quarter and 35 bps in the third quarter of 2019.
  • Nonperforming assets to total assets was 0.37% (0.39% excluding PPP loans) compared to 0.27% (0.28% excluding PPP loans) at June 30, 2020 and 0.36% at September 30, 2019. The increase in nonperforming assets was primarily due to two COVID-19 impacted commercial relationships totaling $10.9 million moving to non-accrual for the quarter.
  • Provision expense for the three months ended September 30, 2020 was $3.3 million with an increase in allowance coverage levels due to specific reserves for the two nonperforming commercial relationships and a change in loan mix while net charge-offs of $2.3 million were down compared with the prior quarter. Provision expense decreased $15.6 million from the second quarter of 2020 and decreased $3.1 million from the third quarter of 2019.
  • The allowance for loan losses was $114.5 million or 1.51% (1.62% excluding PPP loans and related allowance) of total loans compared to 1.49% (1.59% excluding PPP loans and related allowance) at June 30, 2020 and 1.03% September 30, 2019.
  • As of October 19, 2020, 2.0% of loans (loans outstanding as of 9/30/2020; excluding PPP balances) are in payment deferral programs which is down from the second quarter 2020 peak of 14.9%.
  • The reserve for unfunded loan commitments remained consistent with the prior quarter at $5.5 million at September 30, 2020.

Noninterest Income

  • Total noninterest income, excluding securities gains (losses), was $37.6 million for the three months ended September 30, 2020, up $2.8 million from the prior quarter and up $2.0 million from the prior year quarter.
  • Service charges on deposit accounts were higher than the prior quarter but lower than the third quarter of 2019 due to lower overdraft charges during the COVID-19 pandemic that recovered but continue to run lower than prior year levels.
  • ATM and debit card fees were higher than both prior quarter and the third quarter of 2019 due to increased volume and higher per transaction rates.
  • Retirement plan administration fees were higher than both prior quarter and the third quarter of 2019 due to the April 1, 2020 acquisition of Alliance Benefit Group of Illinois, Inc. (“ABG”) contributing $1.7 million in revenues during the quarter.
  • Wealth management fees were higher than the prior quarter due to seasonality of tax revenue and market conditions.
  • The increase in other noninterest income from the prior year third quarter was driven by higher mortgage banking income, while the decrease from the second quarter of 2020 was driven by lower loan swap fee income.

Noninterest Expense

  • Total noninterest expense for the third quarter of 2020 was up 1.5% from the previous quarter and down 4.9% from the third quarter of 2019.
  • Salaries and benefits increased from the prior quarter due to timing of medical expenses during the COVID-19 pandemic ($0.6 million) and increased from the third quarter of 2019 driven by the addition of ABG’s salaries and benefits.
  • Equipment expense was higher than both the prior quarter and the third quarter of 2019 due to higher technology costs associated with several digital upgrades.
  • FDIC expense was higher than the third quarter of 2019 due to the benefit of the FDIC insurance assessment small bank credit in the third quarter of 2019.
  • Other expenses decreased $4.5 million from the third quarter of 2019 due to lower travel and training expenses during the pandemic, lower pension costs and $3.1 million in reorganization expenses incurred during the third quarter of 2019 primarily related to branch optimization strategies to improve future operating efficiencies.

Income Taxes

  • Effective tax rate was 23.8% for the third quarter of 2020 compared to 21.0% in the second quarter of 2020 and 22.4% in the third quarter of 2019. The higher effective tax rate compared to the second quarter of 2020 was due to a higher level of taxable income relative to total income and included a true-up of tax expense to bring the full year estimated effective tax rate to 21.75%. The higher effective tax rate compared to the third quarter of 2019 was due to a higher level of taxable income relative to total income.

Capital

  • Capital ratios remain strong with tangible common equity to tangible assets1 at 8.27%. Tangible book value per share2 grew 3% from the prior quarter and 8% from the prior year quarter to $20.02.
  • September 30, 2020 CET1 capital ratio of 11.63%, total leverage ratio of 9.48% and total risk-based capital ratio of 15.43%.

Dividend

  • The Board of Directors approved a fourth-quarter cash dividend of $0.27 per share at their meeting held today. The dividend will be paid on December 15, 2020 to shareholders of record as of December 1, 2020.

Conference Call and Webcast

The Company will host a conference call at 8:30 a.m. Eastern Time on Tuesday, October 27, 2020, to review third quarter 2020 financial results. The audio webcast link, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at https://stockholderinfo.nbtbancorp.com/events-calendar/upcoming-events and will be archived for twelve months.

Corporate Overview

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, NY, with total assets of $10.8 billion at September 30, 2020. 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 over 140 banking locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire and Maine, and is currently entering Connecticut. EPIC Retirement Plan Services, based in Rochester, NY, is a full-service 401(k) plan recordkeeping firm. NBT Insurance Agency, LLC, based in Norwich, NY, is a full-service insurance agency. More information about NBT and its divisions is available online at: www.nbtbancorp.com, www.nbtbank.com, www.epicrps.com and www.nbtinsurance.com.

Forward-Looking Statements

This news release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,” “projects,” “will,” “can,” “would,” “should,” “could,” “may,” or other similar terms. There are a number of factors, many of which are beyond the Company’s control that could cause actual results to differ materially from those contemplated by 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) local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact; (2) changes in the level of nonperforming assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board (“FRB”); (5) inflation, interest rate, securities market and monetary fluctuations; (6) political instability; (7) acts of war or terrorism; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (9) changes in consumer spending, borrowings and savings habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisitions and integration of acquired businesses; (13) the ability to increase market share and control expenses; (14) changes in the competitive environment among financial holding companies; (15) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply, including those under the Dodd-Frank Act, Economic Growth, Regulatory Relief, Consumer Protection Act of 2018, Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), and regulatory pronouncements around CARES Act; (16) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) and other accounting standard setters; (17) changes in the Company’s organization, compensation and benefit plans; (18) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (19) greater than expected costs or difficulties related to the integration of new products and lines of business; (20) the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 (“COVID-19”), global pandemic; (21) the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; and (22) the Company’s success at managing the risks involved in the foregoing items.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company, its customers and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the Company’s customers and demand for financial services, the actions governments, businesses and individuals take in response to the pandemic, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies, national and local economic activity, and the pace of recovery when the COVID-19 pandemic subsides, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2019 and in our Form 10-Q for the quarter ended June 30, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. You should not place undue reliance on any forward-looking statements, which speak only as of the date made, and you are advised that various factors including, but not limited to, those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the SEC, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected. Unless required by law, the Company does not undertake, and specifically disclaims any obligations to, publicly release any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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”). 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 financial 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.

Contact: John H. Watt, Jr., President and CEO
  John V. Moran, Executive Vice President and CFO
  NBT Bancorp Inc.
  52 South Broad Street
  Norwich, NY 13815
  607-337-6589


NBT Bancorp Inc. and Subsidiaries  
Selected Financial Data  
(unaudited, dollars in thousands except per share data)  
             
    2020     2019    
  3rd Q 2nd Q 1st Q 4th Q 3rd Q  
Profitability:            
Diluted earnings per share $ 0.80   $ 0.56   $ 0.23   $ 0.66   $ 0.73    
Weighted average diluted common shares outstanding   43,941,953     43,928,344     44,130,324     44,174,201     44,138,495    
Return on average assets3   1.29%     0.94%     0.43%     1.20%     1.34%    
Return on average equity3   12.09%     8.76%     3.69%     10.36%     11.83%    
Return on average tangible common equity1 3   16.51%     12.14%     5.24%     14.28%     16.43%    
Net interest margin1 3   3.17%     3.38%     3.52%     3.52%     3.57%    
             
  9 Months ended September 30,        
    2020     2019          
Profitability:            
Diluted earnings per share $ 1.60   $ 2.09          
Weighted average diluted common shares outstanding   43,996,637     44,108,467          
Return on average assets3   0.90%     1.29%          
Return on average equity3   8.23%     11.66%          
Return on average tangible common equity1 3   11.36%     16.42%          
Net interest margin1 3   3.35%     3.61%          
             
    2020     2019    
  3rd Q 2nd Q 1st Q 4th Q 3rd Q  
Balance sheet data:            
Securities available for sale $ 1,197,925   $ 1,108,443   $ 1,000,980   $ 975,340   $ 932,173    
Securities held to maturity   663,088     599,164     621,359     630,074     678,435    
Net loans   7,446,143     7,514,491     7,147,383     7,063,133     6,941,444    
Total assets   10,850,212     10,847,184     9,953,543     9,715,925     9,661,386    
Total deposits   8,958,183     8,815,891     7,864,638     7,587,820     7,743,166    
Total borrowings   446,737     602,988     714,283     820,682     628,701    
Total liabilities   9,684,101     9,704,532     8,841,364     8,595,528     8,562,785    
Stockholders' equity   1,166,111     1,142,652     1,112,179     1,120,397     1,098,601    
             
Capital:            
Equity to assets   10.75%     10.53%     11.17%     11.53%     11.37%    
Tangible equity ratio1   8.27%     8.04%     8.55%     8.84%     8.65%    
Book value per share $ 26.74   $ 26.20   $ 25.52   $ 25.58   $ 25.09    
Tangible book value per share2 $ 20.02   $ 19.46   $ 18.96   $ 19.03   $ 18.52    
Tier 1 leverage ratio   9.48%     9.44%     10.02%     10.33%     10.15%    
Common equity tier 1 capital ratio   11.63%     11.34%     10.90%     11.29%     11.14%    
Tier 1 capital ratio   12.88%     12.60%     12.14%     12.56%     12.42%    
Total risk-based capital ratio   15.43%     15.15%     13.36%     13.52%     13.38%    
Common stock price (end of period) $ 26.82   $ 30.06   $ 32.39   $ 40.56   $ 36.59    
Note: Year-to-date EPS may not equal sum of quarters due to differences in outstanding shares.  
             


NBT Bancorp Inc. and Subsidiaries  
Selected Financial Data  
(unaudited, dollars in thousands except per share data)  
             
    2020     2019    
  3rd Q 2nd Q 1st Q 4th Q 3rd Q  
Asset quality:            
Nonaccrual loans $ 35,896   $ 25,567   $ 29,972   $ 25,174   $ 24,623    
90 days past due and still accruing   2,579     2,057     2,280     3,717     8,342    
Total nonperforming loans   38,475     27,624     32,252     28,891     32,965    
Other real estate owned   1,605     1,783     2,384     1,458     2,144    
Total nonperforming assets   40,080     29,407     34,636     30,349     35,109    
Allowance for loan losses   114,500     113,500     100,000     72,965     72,365    
             
Asset quality ratios (total):            
Allowance for loan losses to total loans   1.51%     1.49%     1.38%     1.02%     1.03%    
Total nonperforming loans to total loans   0.51%     0.36%     0.45%     0.40%     0.47%    
Total nonperforming assets to total assets   0.37%     0.27%     0.35%     0.31%     0.36%    
Allowance for loan losses to total nonperforming loans   297.60%     410.87%     310.06%     252.55%     219.52%    
Past due loans to total loans   0.26%     0.30%     0.51%     0.49%     0.57%    
Net charge-offs to average loans3   0.12%     0.28%     0.32%     0.30%     0.35%    
             
Asset quality ratios (excluding paycheck protection program):        
Allowance for loan losses to total loans   1.62%     1.59%     1.38%     1.02%     1.03%    
Total nonperforming loans to total loans   0.55%     0.39%     0.45%     0.40%     0.47%    
Total nonperforming assets to total assets   0.39%     0.28%     0.35%     0.31%     0.36%    
Allowance for loan losses to total nonperforming loans   297.53%     410.78%     310.06%     252.55%     219.52%    
Past due loans to total loans   0.28%     0.32%     0.51%     0.49%     0.57%    
Net charge-offs to average loans3   0.13%     0.30%     0.32%     0.30%     0.35%    
             


NBT Bancorp Inc. and Subsidiaries  
Consolidated Balance Sheets  
(unaudited, dollars in thousands)  
       
  September 30, December 31,
 
Assets 2020  2019  
Cash and due from banks $ 167,169 $ 170,595  
Short-term interest bearing accounts   450,291   46,248  
Equity securities, at fair value   30,758   27,771  
Securities available for sale, at fair value   1,197,925   975,340  
Securities held to maturity (fair value $684,862 and $641,262, respectively)   663,088   630,074  
Federal Reserve and Federal Home Loan Bank stock   28,484   44,620  
Loans held for sale   1,823   11,731  
Loans   7,560,643   7,136,098  
Less allowance for loan losses   114,500   72,965  
Net loans $ 7,446,143 $ 7,063,133  
Premises and equipment, net   73,055   75,631  
Goodwill   280,541   274,769  
Intangible assets, net   12,557   12,020  
Bank owned life insurance   185,227   181,748  
Other assets   313,151   202,245  
Total assets $ 10,850,212 $ 9,715,925  
       
Liabilities and stockholders' equity      
Demand (noninterest bearing) $ 3,163,717 $ 2,414,383  
Savings, NOW and money market   5,134,495   4,312,244  
Time   659,971   861,193  
Total deposits $ 8,958,183 $ 7,587,820  
Short-term borrowings   183,472   655,275  
Long-term debt   64,126   64,211  
Subordinated debt, net   97,943   -  
Junior subordinated debt   101,196   101,196  
Other liabilities   279,181   187,026  
Total liabilities $ 9,684,101 $ 8,595,528  
       
Total stockholders' equity $ 1,166,111 $ 1,120,397  
       
Total liabilities and stockholders' equity $ 10,850,212 $ 9,715,925  
       


NBT Bancorp Inc. and Subsidiaries  
Consolidated Statements of Income  
(unaudited, dollars in thousands except per share data)  
           
  Three Months Ended Nine Months Ended  
  September 30, September 30,  
  2020 2019  2020  2019  
Interest, fee and dividend income          
Interest and fees on loans $ 74,998 $ 81,082   $ 230,996   $ 241,674  
Securities available for sale   5,603   5,711     16,956     17,664  
Securities held to maturity   3,734   4,586     11,751     14,892  
Other   659   1,002     2,138     2,728  
Total interest, fee and dividend income $ 84,994 $ 92,381   $ 261,841   $ 276,958  
Interest expense          
Deposits $ 4,267 $ 10,745   $ 18,183   $ 29,805  
Short-term borrowings   446   1,989     3,215     7,986  
Long-term debt   398   498     1,184     1,391  
Subordinated debt   1,375   -     1,503     -  
Junior subordinated debt   565   1,095     2,186     3,404  
Total interest expense $ 7,051 $ 14,327   $ 26,271   $ 42,586  
Net interest income $ 77,943 $ 78,054   $ 235,570   $ 234,372  
Provision for loan losses   3,261   6,324     51,741     19,408  
Net interest income after provision for loan losses $ 74,682 $ 71,730   $ 183,829   $ 214,964  
Noninterest income          
Service charges on deposit accounts $ 3,087 $ 4,330   $ 9,613   $ 12,790  
ATM and debit card fees   7,194   6,277     19,184     17,958  
Retirement plan administration fees   9,685   7,600     26,840     23,170  
Wealth management4   7,695   7,630     21,791     21,315  
Insurance4   3,742   4,000     11,303     12,291  
Bank owned life insurance income   1,255   1,556     4,010     4,119  
Net securities gains (losses)   84   4,036     (548 )   4,024  
Other   4,985   4,291     15,968     12,115  
Total noninterest income $ 37,727 $ 39,720   $ 108,161   $ 107,782  
Noninterest expense          
Salaries and employee benefits $ 40,451 $ 39,352   $ 120,918   $ 117,275  
Occupancy   5,294   5,335     16,354     17,053  
Data processing and communications   4,058   4,492     12,370     13,599  
Professional fees and outside services   3,394   3,535     10,694     10,562  
Equipment   5,073   4,487     14,494     13,762  
Office supplies and postage   1,530   1,667     4,621     4,835  
FDIC expense (credit)   645   (20 )   1,949     1,946  
Advertising   530   677     1,461     1,821  
Amortization of intangible assets   856   874     2,573     2,735  
Loan collection and other real estate owned, net   620   976     2,365     2,722  
Other   3,857   8,374     14,730     18,130  
Total noninterest expense $ 66,308 $ 69,749   $ 202,529   $ 204,440  
Income before income tax expense $ 46,101 $ 41,701   $ 89,461   $ 118,306  
Income tax expense   10,988   9,322     19,267     26,245  
 Net income $ 35,113 $ 32,379   $ 70,194   $ 92,061  
Earnings Per Share          
Basic $ 0.80 $ 0.74   $ 1.61   $ 2.10  
Diluted $ 0.80 $ 0.73   $ 1.60   $ 2.09  
           


NBT Bancorp Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(unaudited, dollars in thousands except per share data)
           
    2020     2019  
  3rd Q 2nd Q 1st Q 4th Q 3rd Q
Interest, fee and dividend income          
Interest and fees on loans $ 74,998 $ 77,270 $ 78,728   $ 79,800 $ 81,082  
Securities available for sale   5,603   5,600   5,753     5,639   5,711  
Securities held to maturity   3,734   3,926   4,091     4,213   4,586  
Other   659   650   829     924   1,002  
Total interest, fee and dividend income $ 84,994 $ 87,446 $ 89,401   $ 90,576 $ 92,381  
Interest expense          
Deposits $ 4,267 $ 4,812 $ 9,104   $ 10,181 $ 10,745  
Short-term borrowings   446   972   1,797     1,707   1,989  
Long-term debt   398   393   393     484   498  
Subordinated debt   1,375   128   -     -   -  
Junior subordinated debt   565   695   926     1,021   1,095  
Total interest expense $ 7,051 $ 7,000 $ 12,220   $ 13,393 $ 14,327  
Net interest income $ 77,943 $ 80,446 $ 77,181   $ 77,183 $ 78,054  
Provision for loan losses   3,261   18,840   29,640     6,004   6,324  
Net interest income after provision for loan losses $ 74,682 $ 61,606 $ 47,541   $ 71,179 $ 71,730  
Noninterest income          
Service charges on deposit accounts $ 3,087 $ 2,529 $ 3,997   $ 4,361 $ 4,330  
ATM and debit card fees   7,194   6,136   5,854     5,935   6,277  
Retirement plan administration fees   9,685   9,214   7,941     7,218   7,600  
Wealth management4   7,695   6,823   7,273     7,085   7,630  
Insurance4   3,742   3,292   4,269     3,479   4,000  
Bank owned life insurance income   1,255   1,381   1,374     1,236   1,556  
Net securities gains (losses)   84   180   (812 )   189   4,036  
Other   4,985   5,456   5,527     6,738   4,291  
Total noninterest income $ 37,727 $ 35,011 $ 35,423   $ 36,241 $ 39,720  
Noninterest expense          
Salaries and employee benefits $ 40,451 $ 39,717 $ 40,750   $ 39,592 $ 39,352  
Occupancy   5,294   5,065   5,995     5,653   5,335  
Data processing and communications   4,058   4,079   4,233     4,719   4,492  
Professional fees and outside services   3,394   3,403   3,897     4,223   3,535  
Equipment   5,073   4,779   4,642     4,821   4,487  
Office supplies and postage   1,530   1,455   1,636     1,744   1,667  
FDIC expense (credit)   645   993   311     -   (20 )
Advertising   530   322   609     952   677  
Amortization of intangible assets   856   883   834     844   874  
Loan collection and other real estate owned, net   620   728   1,017     1,436   976  
Other   3,857   3,916   6,957     6,310   8,374  
Total noninterest expense $ 66,308 $ 65,340 $ 70,881   $ 70,294 $ 69,749  
Income before income tax expense $ 46,101 $ 31,277 $ 12,083   $ 37,126 $ 41,701  
Income tax expense   10,988   6,564   1,715     8,166   9,322  
Net income $ 35,113 $ 24,713 $ 10,368   $ 28,960 $ 32,379  
Earnings Per Share          
Basic $ 0.80 $ 0.57 $ 0.24   $ 0.66 $ 0.74  
Diluted $ 0.80 $ 0.56 $ 0.23   $ 0.66 $ 0.73  
           


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  
    Q3 - 2020 Q2 - 2020 Q1 - 2020 Q4 - 2019 Q3 - 2019  
Assets                        
Short-term interest bearing accounts   $ 477,946 0.11 % $ 380,260 0.10 % $ 74,695 1.28 % $ 51,613 2.43 % $ 57,530 1.95 %  
Securities available for sale1 5     1,137,604 1.96 %   985,561 2.29 %   962,527 2.40 %   942,302 2.37 %   940,256 2.41 %  
Securities held to maturity1 5     621,812 2.56 %   613,899 2.75 %   622,398 2.81 %   651,305 2.73 %   698,617 2.77 %  
Investment in FRB and FHLB Banks     29,720 7.08 %   36,604 6.09 %   39,784 5.97 %   37,842 6.37 %   40,525 7.04 %  
Loans1 6     7,559,218 3.95 %   7,589,032 4.10 %   7,163,114 4.42 %   7,055,288 4.49 %   6,987,476 4.61 %  
Total interest earning assets   $ 9,826,300 3.45 % $ 9,605,356 3.68 % $ 8,862,518 4.07 % $ 8,738,350 4.13 % $ 8,724,404 4.22 %  
Other assets     967,194     961,807     885,570     861,909     852,616    
Total assets   $ 10,793,494   $ 10,567,163     $ 9,748,088     $ 9,600,259     $ 9,577,020      
                         
Liabilities and stockholders' equity                    
Money market deposit accounts   $ 2,364,606 0.28 % $ 2,360,407 0.29 % $ 2,101,306 1.00 % $ 2,057,678 1.16 % $ 2,015,297 1.24 %  
NOW deposit accounts     1,207,064 0.05 %   1,167,486 0.04 %   1,086,205 0.10 %   1,064,193 0.13 %   1,056,001 0.13 %  
Savings deposits     1,447,021 0.05 %   1,383,495 0.05 %   1,276,285 0.06 %   1,251,432 0.06 %   1,274,793 0.06 %  
Time deposits     684,708 1.31 %   760,803 1.48 %   842,989 1.62 %   853,353 1.69 %   893,837 1.75 %  
Total interest bearing deposits   $ 5,703,399 0.30 % $ 5,672,191 0.34 % $ 5,306,785 0.69 % $ 5,226,656 0.77 % $ 5,239,928 0.81 %  
Short-term borrowings     277,890 0.64 %   427,004 0.92 %   533,516 1.35 %   475,332 1.42 %   490,694 1.61 %  
Long-term debt     64,137 2.47 %   64,165 2.46 %   64,194 2.46 %   81,613 2.35 %   84,250 2.35 %  
Subordinated debt, net     97,934 5.59 %   8,633 5.96   - -     - -     - -    
Junior subordinated debt     101,196 2.22 %   101,196 2.76 %   101,196 3.68 %   101,196 4.00 %   101,196 4.29 %  
Total interest bearing liabilities   $ 6,244,556 0.45 % $ 6,273,189 0.45 % $ 6,005,691 0.82 % $ 5,884,797 0.90 % $ 5,916,068 0.96 %  
Demand deposits     3,111,617     2,887,545     2,398,307     2,406,563     2,389,617    
Other liabilities     282,265     271,635     214,495     199,674     185,374    
Stockholders' equity     1,155,056     1,134,794     1,129,595     1,109,225     1,085,961    
Total liabilities and stockholders' equity   $ 10,793,494   $ 10,567,163     $ 9,748,088     $ 9,600,259     $ 9,577,020      
                         
Interest rate spread     3.00 %   3.23 %   3.25 %   3.23 %   3.26 %  
Net interest margin (FTE)1     3.17 %   3.38 %   3.52 %   3.52 %   3.57 %  
                         


NBT Bancorp Inc. and Subsidiaries  
Average Year-to-Date Balance Sheets  
(unaudited, dollars in thousands)  
                 
    Average   Yield/ Average   Yield/  
    Balance Interest Rates Balance Interest Rates  
Nine Months Ended September 30,     2020     2019    
Assets                
Short-term interest bearing accounts   $ 311,577 $ 464 0.20 % $ 30,970 $ 457 1.97 %  
Securities available for sale1 5     1,028,962   16,956 2.20 %   968,517   17,695 2.44 %  
Securities held to maturity1 5     619,379   12,562 2.71 %   750,305   15,921 2.84 %  
Investment in FRB and FHLB Banks     35,349   1,674 6.33 %   45,254   2,271 6.71 %  
Loans1 6     7,437,566   231,168 4.15 %   6,944,518   241,932 4.66 %  
Total interest earning assets   $ 9,432,833 $ 262,824 3.72 % $ 8,739,564 $ 278,276 4.26 %  
Other assets     938,296       821,859      
Total assets   $ 10,371,129     $ 9,561,423      
                 
Liabilities and stockholders' equity                
Money market deposit accounts   $ 2,275,765 $ 8,646 0.51 % $ 1,912,572 $ 16,255 1.14 %  
NOW deposit accounts     1,153,780   548 0.06 %   1,105,919   1,157 0.14 %  
Savings deposits     1,369,219   553 0.05 %   1,269,723   550 0.06 %  
Time deposits     762,548   8,436 1.48 %   929,819   11,843 1.70 %  
Total interest bearing deposits   $ 5,561,312 $ 18,183 0.44 % $ 5,218,033 $ 29,805 0.76 %  
Short-term borrowings     412,312   3,215 1.04 %   607,155   7,986 1.76 %  
Long-term debt     64,165   1,184 2.46 %   80,162   1,391 2.32 %  
Subordinated debt, net     35,750   1,503 5.62 %   -   - -    
Junior subordinated debt     101,196   2,186 2.89 %   101,196   3,404 4.50 %  
Total interest bearing liabilities   $ 6,174,735 $ 26,271 0.57 % $ 6,006,546 $ 42,586 0.95 %  
Demand deposits     2,800,297       2,332,965      
Other liabilities     256,226       166,537      
Stockholders' equity     1,139,871       1,055,375      
Total liabilities and stockholders' equity   $ 10,371,129     $ 9,561,423      
Net interest income (FTE)1     $ 236,553     $ 235,690    
Interest rate spread       3.15 %     3.31 %  
Net interest margin (FTE)1       3.35 %     3.61 %  
Taxable equivalent adjustment     $ 983     $ 1,318    
Net interest income     $ 235,570     $ 234,372    
                 


NBT Bancorp Inc. and Subsidiaries  
Consolidated Loan Balances  
(unaudited, dollars in thousands)  
             
The following table presents loans by line of business, paycheck protection program loans includes $11.3 million and $14.6 million in unamortized fees as of September 30, 2020 and June 30, 2020 respectively.  
 
             
    2020     2019    
  3rd Q 2nd Q 1st Q 4th Q 3rd Q  
Commercial $ 1,297,408   $ 1,318,806   $ 1,338,609   $ 1,302,209   $ 1,317,649    
Commercial real estate   2,281,843     2,256,580     2,242,139     2,142,057     2,033,552    
Paycheck protection program   514,558     510,097     -     -     -    
Residential real estate mortgages   1,448,530     1,460,058     1,446,676     1,445,156     1,416,920    
Indirect auto   989,369     1,091,889     1,184,888     1,193,635     1,195,783    
Specialty lending   566,973     515,618     539,378     542,063     528,505    
Home equity   404,346     415,528     431,536     444,082     452,535    
Other consumer   57,616     59,415     64,157     66,896     68,865    
Total loans $ 7,560,643   $ 7,627,991   $ 7,247,383   $ 7,136,098   $ 7,013,809    
                 
The following table provide loans as a percentage of total loans in industries vulnerable to the COVID-19  pandemic as of September 30, 2020:  
             
Industry % of Total Loans          
Accommodations   2.5 %          
Healthcare services and practices   2.1 %          
Restaurants and entertainment   1.9 %          
Retailers   1.7 %          
Automotive   1.3 %          
Total   9.5 %          
             
Allowance for Loan Losses as a Percentage of Loans by Segment7:      
             
  Incurred CECL        
  12/31/2019 1/1/2020 3/31/2020 6/30/2020* 9/30/2020*  
Commercial & industrial   0.96 %   0.98 %   1.43 %   1.25 %   1.34 %  
Commercial real estate   1.02 %   0.74 %   1.10 %   1.56 %   1.57 %  
Paycheck protection program   0.00 %   0.00 %   0.00 %   0.01 %   0.01 %  
Residential real estate   0.27 %   0.83 %   0.99 %   1.13 %   1.21 %  
Auto   0.83 %   0.78 %   1.08 %   0.99 %   0.92 %  
Other consumer   3.74 %   3.66 %   4.00 %   5.01 %   4.66 %  
Total   1.02 %   1.07 %   1.38 %   1.49 %   1.51 %  
             
* Excluding PPP loans and related allowance, total allowance to loans was 1.59% and 1.62% as of June 30, 2020 and September 30, 2020 respectively.  
 


               
1 The following tables provide the Non-GAAP reconciliations for the Non-GAAP measures contained in this release:  
               
  Non-GAAP measures            
  (unaudited, dollars in thousands)            
               
  Pre-provision net revenue ("PPNR")   2020     2019    
    3rd Q 2nd Q 1st Q 4th Q 3rd Q  
  Income before income tax expense $ 46,101   $ 31,277   $ 12,083   $ 37,126   $ 41,701    
  FTE adjustment   325     329     329     349     374    
  Provision for loan losses   3,261     18,840     29,640     6,004     6,324    
  Net securities (gains) losses   (84 )   (180 )   812     (189 )   (4,036 )  
  Nonrecurring expense   -     650     -     -     3,800    
  Unfunded loan commitments reserve   -     (200 )   2,000     -     -    
  PPNR $ 49,603   $ 50,716   $ 44,864   $ 43,290   $ 48,163    
               
  Average Assets $ 10,793,494   $ 10,567,163   $ 9,748,088   $ 9,600,259   $ 9,577,020    
               
  Return on Average Assets3   1.29%     0.94%     0.43%     1.20%     1.34%    
  PPNR Return on Average Assets3   1.83%     1.93%     1.85%     1.79%     2.00%    
               
  PPNR is a Non-GAAP financial measure that management believes is useful in evaluating the underlying operating results of the Company excluding the volatility in loan loss provision due to CECL adoption and the impact of the COVID-19 pandemic, net securities gains (losses) and non-recurring income and/or expense.  
   
   
               
  FTE Adjustment   2020     2019    
    3rd Q 2nd Q 1st Q 4th Q 3rd Q  
  Net interest income $ 77,943   $ 80,446   $ 77,181   $ 77,183   $ 78,054    
  Add: FTE adjustment   325     329     329     349     374    
  Net interest income (FTE) $ 78,268   $ 80,775   $ 77,510   $ 77,532   $ 78,428    
  Average earning assets $ 9,826,300   $ 9,605,356   $ 8,862,518   $ 8,738,350   $ 8,724,404    
  Net interest margin (FTE)3   3.17%     3.38%     3.52%     3.52%     3.57%    
               
    9 Months ended September 30,        
      2020     2019          
  Net interest income $ 235,570   $ 234,372          
  Add: FTE adjustment   983     1,318          
  Net interest income (FTE) $ 236,553   $ 235,690          
  Average earning assets $ 9,432,833   $ 8,739,564          
  Net interest margin (FTE)3   3.35%     3.61%          
               
  Interest income for tax-exempt securities and loans have been adjusted to a FTE basis using the statutory Federal income tax rate of 21%.  
               
  Tangible equity to tangible assets   2020     2019    
    3rd Q 2nd Q 1st Q 4th Q 3rd Q  
  Total equity $ 1,166,111   $ 1,142,652   $ 1,112,179   $ 1,120,397   $ 1,098,601    
  Intangible assets   293,098     293,954     285,955     286,789     287,633    
  Total assets $ 10,850,212   $ 10,847,184   $ 9,953,543   $ 9,715,925   $ 9,661,386    
  Tangible equity to tangible assets   8.27%     8.04%     8.55%     8.84%     8.65%    
               


             
1 The following tables provide the Non-GAAP reconciliations for the Non-GAAP measures contained in this release:
             
  Non-GAAP measures          
  (unaudited, dollars in thousands)          
             
  Return on average tangible common equity   2020     2019  
    3rd Q 2nd Q 1st Q 4th Q 3rd Q
  Net income $ 35,113   $ 24,713   $ 10,368   $ 28,960   $ 32,379  
  Amortization of intangible assets (net of tax)   642     662     626     633     656  
  Net income, excluding intangibles amortization $ 35,755   $ 25,375   $ 10,994   $ 29,593   $ 33,035  
             
  Average stockholders' equity $ 1,155,056   $ 1,134,794   $ 1,129,595   $ 1,109,225   $ 1,085,961  
  Less: average goodwill and other intangibles   293,572     294,423     286,400     287,268     288,077  
  Average tangible common equity $ 861,484   $ 840,371   $ 843,195   $ 821,957   $ 797,884  
  Return on average tangible common equity3   16.51%     12.14%     5.24%     14.28%     16.43%  
             
    9 Months ended September 30,      
      2020     2019        
  Net income $ 70,194   $ 92,061        
  Amortization of intangible assets (net of tax)   1,930     2,051        
  Net income, excluding intangibles amortization $ 72,124   $ 94,112        
             
  Average stockholders' equity $ 1,139,871   $ 1,055,375        
  Less: average goodwill and other intangibles   291,472     288,967        
  Average tangible common equity $ 848,399   $ 766,408        
  Return on average tangible common equity3   11.36%     16.42%        
             
2 Non-GAAP measure - Stockholders' equity less goodwill and intangible assets divided by common shares outstanding.
3 Annualized.          
4 Other financial services revenue previously disclosed and included with Insurance income has been reclassified and combined with Trust income and is disclosed as Wealth management income.
5 Securities are shown at average amortized cost.        
6 For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.
7 The allowance for loan losses for December 31, 2019 was calculated based on the incurred losses methodology and beginning January 1, 2020, it was based on the CECL methodology. The risk-based pooling of loans (segments) for incurred and CECL are not consistent. For illustrative purposes only, the loans and related incurred allowance at December 31, 2019 were grouped to conform with the CECL methodology.
             

Source: NBT Bancorp Inc.

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