UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020.

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.

COMMISSION FILE NUMBER 0-14703

NBT BANCORP INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
 
16-1268674
(State of Incorporation)
 
(I.R.S. 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

None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Title of class
 
Trading Symbol(s)
 
Name of exchange on which registered
Common Stock, par value $0.01 per share
 
NBTB
 
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer 
Accelerated filer
Non-accelerated filer
Smaller reporting company
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of July 31, 2020, there were 43,611,338 shares outstanding of the Registrant’s Common Stock, $0.01 par value per share.




NBT BANCORP INC.
FORM 10-Q-Quarter Ended June 30, 2020

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1
Financial Statements
 
     
 
3
     
 
4
     
 
5
     
 
6
     
 
7
     
 
9
     
Item 2
36
     
Item 3
52
     
Item 4
52
     
PART II
OTHER INFORMATION
 
     
Item 1
53
Item 1A
53
Item 2
55
Item 3
55
Item 4
55
Item 5
55
Item 6
56
     
 
57

2


Item 1 – FINANCIAL STATEMENTS

NBT Bancorp Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)

 
June 30,
   
December 31,
 
   
2020
   
2019
 
(In thousands, except share and per share data)
           
Assets
           
Cash and due from banks
 
$
171,264
   
$
170,595
 
Short-term interest bearing accounts
   
528,228
     
46,248
 
Equity securities, at fair value
   
29,223
     
27,771
 
Securities available for sale, at fair value
   
1,108,443
     
975,340
 
Securities held to maturity (fair value $623,022 and $641,262, respectively)
   
599,164
     
630,074
 
Federal Reserve and Federal Home Loan Bank stock
   
32,536
     
44,620
 
Loans held for sale
   
16,147
     
11,731
 
Loans
   
7,627,991
     
7,136,098
 
Less allowance for loan losses (1)
   
113,500
     
72,965
 
Net loans
 
$
7,514,491
   
$
7,063,133
 
Premises and equipment, net
   
74,558
     
75,631
 
Goodwill
   
280,541
     
274,769
 
Intangible assets, net
   
13,413
     
12,020
 
Bank owned life insurance
   
183,976
     
181,748
 
Other assets
   
295,200
     
202,245
 
Total assets
 
$
10,847,184
   
$
9,715,925
 
Liabilities
               
Demand (noninterest bearing)
 
$
3,107,528
   
$
2,414,383
 
Savings, NOW and money market
   
5,000,504
     
4,312,244
 
Time
   
707,859
     
861,193
 
Total deposits
 
$
8,815,891
   
$
7,587,820
 
Short-term borrowings
   
339,656
     
655,275
 
Long-term debt
   
64,154
     
64,211
 
Subordinated debt, net
   
97,982
     
-
 
Junior subordinated debt
   
101,196
     
101,196
 
Other liabilities
   
285,653
     
187,026
 
Total liabilities
 
$
9,704,532
   
$
8,595,528
 
Stockholders’ equity
               
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at June 30, 2020 and December 31, 2019
 
$
-
   
$
-
 
Common stock, $0.01 par value. Authorized 100,000,000 shares at June 30, 2020 and December 31, 2019; issued 49,651,493 at June 30, 2020 and December 31, 2019
   
497
     
497
 
Additional paid-in-capital
   
577,197
     
576,708
 
Retained earnings
   
703,322
     
696,214
 
Accumulated other comprehensive income (loss)
   
2,488
     
(19,026
)
Common stock in treasury, at cost, 6,043,143 and 5,854,882 shares at June 30, 2020 and December 31, 2019, respectively
   
(140,852
)
   
(133,996
)
Total stockholders’ equity
 
$
1,142,652
   
$
1,120,397
 
Total liabilities and stockholders’ equity
 
$
10,847,184
   
$
9,715,925
 

(1) Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

See accompanying notes to unaudited interim consolidated financial statements.

3


NBT Bancorp Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2020
   
2019
   
2020
   
2019
 
(In thousands, except per share data)
                       
Interest, fee and dividend income
                       
Interest and fees on loans
 
$
77,270
   
$
81,271
   
$
155,998
   
$
160,592
 
Securities available for sale
   
5,600
     
6,031
     
11,353
     
11,953
 
Securities held to maturity
   
3,926
     
5,089
     
8,017
     
10,306
 
Other
   
650
     
842
     
1,479
     
1,726
 
Total interest, fee and dividend income
 
$
87,446
   
$
93,233
   
$
176,847
   
$
184,577
 
Interest expense
                               
Deposits
 
$
4,812
   
$
10,234
   
$
13,916
   
$
19,060
 
Short-term borrowings
   
972
     
2,760
     
2,769
     
5,997
 
Long-term debt
   
393
     
471
     
786
     
893
 
Subordinated debt
   
128
     
-
     
128
     
-
 
Junior subordinated debt
   
695
     
1,141
     
1,621
     
2,309
 
Total interest expense
 
$
7,000
   
$
14,606
   
$
19,220
   
$
28,259
 
Net interest income
 
$
80,446
   
$
78,627
   
$
157,627
   
$
156,318
 
Provision for loan losses (1)
   
18,840
     
7,277
     
48,480
     
13,084
 
Net interest income after provision for loan losses
 
$
61,606
   
$
71,350
   
$
109,147
   
$
143,234
 
Noninterest income
                               
Service charges on deposit accounts
 
$
2,529
   
$
4,224
   
$
6,526
   
$
8,460
 
ATM and debit card fees
   
6,136
     
6,156
     
11,990
     
11,681
 
Retirement plan administration fees
   
9,214
     
7,836
     
17,155
     
15,570
 
Wealth management
   
6,823
     
7,122
     
14,096
     
13,685
 
Insurance
   
3,292
     
3,547
     
7,561
     
8,291
 
Bank owned life insurance income
   
1,381
     
1,186
     
2,755
     
2,563
 
Net securities gains (losses)
   
180
     
(69
)
   
(632
)
   
(12
)
Other
   
5,456
     
4,239
     
10,983
     
7,824
 
Total noninterest income
 
$
35,011
   
$
34,241
   
$
70,434
   
$
68,062
 
Noninterest expense
                               
Salaries and employee benefits
 
$
39,717
   
$
38,567
   
$
80,467
   
$
77,923
 
Occupancy
   
5,065
     
5,443
     
11,060
     
11,718
 
Data processing and communications
   
4,079
     
4,693
     
8,312
     
9,107
 
Professional fees and outside services
   
3,403
     
3,359
     
7,300
     
7,027
 
Equipment
   
4,779
     
4,518
     
9,421
     
9,275
 
Office supplies and postage
   
1,455
     
1,577
     
3,091
     
3,168
 
FDIC expense
   
993
     
949
     
1,304
     
1,966
 
Advertising
   
322
     
641
     
931
     
1,144
 
Amortization of intangible assets
   
883
     
893
     
1,717
     
1,861
 
Loan collection and other real estate owned, net
   
728
     
961
     
1,745
     
1,746
 
Other
   
3,916
     
4,630
     
10,873
     
9,756
 
Total noninterest expense
 
$
65,340
   
$
66,231
   
$
136,221
   
$
134,691
 
Income before income tax expense
 
$
31,277
   
$
39,360
   
$
43,360
   
$
76,605
 
Income tax expense
   
6,564
     
8,805
     
8,279
     
16,923
 
Net income
 
$
24,713
   
$
30,555
   
$
35,081
   
$
59,682
 
Earnings per share
                               
Basic
 
$
0.57
   
$
0.70
   
$
0.80
   
$
1.36
 
Diluted
 
$
0.56
   
$
0.69
   
$
0.80
   
$
1.35
 

(1) Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

See accompanying notes to unaudited interim consolidated financial statements.

4


NBT Bancorp Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2020
   
2019
   
2020
   
2019
 
(In thousands)
                       
Net income
 
$
24,713
   
$
30,555
   
$
35,081
   
$
59,682
 
Other comprehensive income (loss), net of tax:
                               
                                 
Securities available for sale:
                               
Unrealized net holding gains arising during the period, gross
 
$
6,433
   
$
13,391
   
$
27,772
   
$
24,427
 
Tax effect
   
(1,608
)
   
(3,348
)
   
(6,943
)
   
(6,107
)
Unrealized net holding gains arising during the period, net
 
$
4,825
   
$
10,043
   
$
20,829
   
$
18,320
 
                                 
Reclassification adjustment for net (gains) losses in net income, gross
 
$
-
   
$
-
   
$
(3
)
 
$
99
 
Tax effect
   
-
     
-
     
1
     
(25
)
Reclassification adjustment for net (gains) losses in net income, net
 
$
-
   
$
-
   
$
(2
)
 
$
74
 
                                 
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, gross
 
$
165
   
$
199
   
$
338
   
$
366
 
Tax effect
   
(42
)
   
(50
)
   
(85
)
   
(92
)
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, net
 
$
123
   
$
149
   
$
253
   
$
274
 
                                 
Total securities available for sale, net
 
$
4,948
   
$
10,192
   
$
21,080
   
$
18,668
 
                                 
Cash flow hedges:
                               
Unrealized (losses) on derivatives (cash flow hedges), gross
 
$
(19
)
 
$
(314
)
 
$
(274
)
 
$
(484
)
Tax effect
   
5
     
78
     
69
     
121
 
Unrealized (losses) on derivatives (cash flow hedges), net
 
$
(14
)
 
$
(236
)
 
$
(205
)
 
$
(363
)
                                 
Reclassification of net unrealized losses (gains) on cash flow hedges to interest (income), gross
 
$
81
   
$
(738
)
 
$
91
   
$
(1,537
)
Tax effect
   
(20
)
   
185
     
(23
)
   
385
 
Reclassification of net unrealized losses (gains) on cash flow hedges to interest (income), net
 
$
61
   
$
(553
)
 
$
68
   
$
(1,152
)
                                 
Total cash flow hedges, net
 
$
47
   
$
(789
)
 
$
(137
)
 
$
(1,515
)
                                 
Pension and other benefits:
                               
Amortization of prior service cost and actuarial losses, gross
 
$
381
   
$
657
   
$
762
   
$
1,313
 
Tax effect
   
(96
)
   
(164
)
   
(191
)
   
(328
)
Amortization of prior service cost and actuarial losses, net
 
$
285
   
$
493
   
$
571
   
$
985
 
                                 
Total pension and other benefits, net
 
$
285
   
$
493
   
$
571
   
$
985
 
                                 
Total other comprehensive income
 
$
5,280
   
$
9,896
   
$
21,514
   
$
18,138
 
Comprehensive income
 
$
29,993
   
$
40,451
   
$
56,595
   
$
77,820
 

See accompanying notes to unaudited interim consolidated financial statements.

5


NBT Bancorp Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity (unaudited)

 
Common
Stock
   
Additional
Paid-in-
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
(Loss) Income
   
Common
Stock in
Treasury
   
Total
 
(In thousands, except share and per share data)
                                   
Balance at March 31, 2020
 
$
497
   
$
577,080
   
$
678,611
   
$
(2,792
)
 
$
(141,217
)
 
$
1,112,179
 
Net income
   
-
     
-
     
24,713
     
-
     
-
     
24,713
 
Cash dividends - $0.00 per share
   
-
     
-
     
(2
)
   
-
     
-
     
(2
)
Net issuance of 20,905 shares to employee and other stock plans
   
-
     
(517
)
   
-
     
-
     
365
     
(152
)
Stock-based compensation
   
-
     
634
     
-
     
-
     
-
     
634
 
Other comprehensive income
   
-
     
-
     
-
     
5,280
     
-
     
5,280
 
Balance at June 30, 2020
 
$
497
   
$
577,197
   
$
703,322
   
$
2,488
   
$
(140,852
)
 
$
1,142,652
 
                                                 
Balance at March 31, 2019
 
$
497
   
$
575,944
   
$
627,556
   
$
(34,932
)
 
$
(135,010
)
 
$
1,034,055
 
Net income
   
-
     
-
     
30,555
     
-
     
-
     
30,555
 
Cash dividends - $0.00 per share
   
-
     
-
     
(4
)
   
-
     
-
     
(4
)
Net issuance of 29,525 shares to employee and other stock plans
   
-
     
(713
)
   
-
     
-
     
471
     
(242
)
Stock-based compensation
   
-
     
563
     
-
     
-
     
-
     
563
 
Other comprehensive income
   
-
     
-
     
-
     
9,896
     
-
     
9,896
 
Balance at June 30, 2019
 
$
497
   
$
575,794
   
$
658,107
   
$
(25,036
)
 
$
(134,539
)
 
$
1,074,823
 

 
Common
Stock
   
Additional
Paid-in-
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
(Loss) Income
   
Common
Stock in
Treasury
   
Total
 
(In thousands, except share and per share data)
                                   
Balance at December 31, 2019
 
$
497
   
$
576,708
   
$
696,214
   
$
(19,026
)
 
$
(133,996
)
 
$
1,120,397
 
Net income
   
-
     
-
     
35,081
     
-
     
-
     
35,081
 
Cumulative effect adjustment for ASU 2016-13 implementation
   
-
     
-
     
(4,339
)
   
-
     
-
     
(4,339
)
Cash dividends - $0.54 per share
   
-
     
-
     
(23,634
)
   
-
     
-
     
(23,634
)
Purchase of 263,507 treasury shares
   
-
     
-
     
-
     
-
     
(7,980
)
   
(7,980
)
Net issuance of 75,246 shares to employee and other stock plans
   
-
     
(2,820
)
   
-
     
-
     
1,124
     
(1,696
)
Stock-based compensation
   
-
     
3,309
     
-
     
-
     
-
     
3,309
 
Other comprehensive income
   
-
     
-
     
-
     
21,514
     
-
     
21,514
 
Balance at June 30, 2020
 
$
497
   
$
577,197
   
$
703,322
   
$
2,488
   
$
(140,852
)
 
$
1,142,652
 
                                                 
Balance at December 31, 2018
 
$
497
   
$
575,466
   
$
621,203
   
$
(43,174
)
 
$
(136,083
)
 
$
1,017,909
 
Net income
   
-
     
-
     
59,682
     
-
     
-
     
59,682
 
Cash dividends - $0.52 per share
   
-
     
-
     
(22,778
)
   
-
     
-
     
(22,778
)
Net issuance of 96,445 shares to employee and other stock plans
   
-
     
(2,812
)
   
-
     
-
     
1,544
     
(1,268
)
Stock-based compensation
   
-
     
3,140
     
-
     
-
     
-
     
3,140
 
Other comprehensive income
   
-
     
-
     
-
     
18,138
     
-
     
18,138
 
Balance at June 30, 2019
 
$
497
   
$
575,794
   
$
658,107
   
$
(25,036
)
 
$
(134,539
)
 
$
1,074,823
 

See accompanying notes to unaudited interim consolidated financial statements.

6


NBT Bancorp Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)

 
Six Months Ended
June 30,
 
   
2020
   
2019
 
(In thousands)
           
Operating activities
           
Net income
 
$
35,081
   
$
59,682
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Provision for loan losses
   
48,480
     
13,084
 
Depreciation and amortization of premises and equipment
   
4,952
     
4,732
 
Net amortization on securities
   
1,596
     
1,619
 
Amortization of intangible assets
   
1,717
     
1,861
 
Amortization of operating lease right-of use assets
   
3,702
     
3,590
 
Excess tax benefit on stock-based compensation
   
(178
)
   
(311
)
Stock-based compensation expense
   
3,309
     
3,140
 
Bank owned life insurance income
   
(2,755
)
   
(2,563
)
Amortization of subordinated debt issuance costs
   
17
     
-
 
Proceeds from sale of loans held for sale
   
101,286
     
65,099
 
Originations of loans held for sale
   
(106,381
)
   
(73,562
)
Net gains on sale of loans held for sale
   
(829
)
   
(256
)
Net security losses