Vermont Business Magazine NBT Bancorp Inc (NASDAQ: NBTB) has reported record net income and diluted earnings per share for the three months ended March 31, 2018. Net income for the three months ended March 31, 2018 was $26.0 million, up from $17.6 million for the prior quarter, which included the $4.4 million estimated one-time, non-cash charge recorded in the provision for income taxes related to the enactment of the Tax Cuts and Jobs Act (“Tax Reform”), and $20.3 million for the same period last year. Diluted earnings per share for the three months ended March 31, 2018 was $0.59, as compared with $0.40 for the prior quarter ($0.50 excluding Tax Reform) and $0.46 for the first quarter of 2017.
Highlights:
• Net income up 28.1% from the first quarter of 2017
• First quarter loan growth of 3.8% (annualized)
• Average demand deposits up 4.6% from the first quarter of 2017
• Net interest margin expands to 3.57%, up 5 basis points from the prior quarter
• Nonperforming assets to total assets improved 3 basis points from prior quarter to 0.36%
“NBT is off to a strong start to 2018 with record net income and increased earnings per share for the first quarter. We see momentum across most of our business lines,” said NBT President and CEO John H. Watt, Jr. “In April, we expanded our well-established retirement plan services business with the acquisition of Retirement Plan Services, LLC (“RPS”) of Brentwood, Missouri. The combination of EPIC Advisors, Inc., our full-service 401(k) recordkeeping firm, and RPS has extended the national reach of this business line with retirement plan clients in all 50 states and over 220,000 plan participants, building on EPIC’s mission to help America retire. In addition during the quarter, we were pleased to announce an 8.7% increase to our quarterly dividend to $0.25 per share payable on June 15, 2018.”
Net interest income was $73.5 million for the first quarter of 2018, comparable to the previous quarter. Fully taxable equivalent (“FTE”) net interest margin was 3.57% for the three months ended March 31, 2018 up from 3.52% for the previous quarter. The increase in net interest margin from the previous quarter was driven by an increase in yields on earning assets due primarily to higher interest rates in the quarter. The yield on average earning assets increased 8 basis points (“bps”) from the prior quarter to 3.92%, primarily reflecting higher loan yields. FTE yields on securities were adversely impacted by Tax Reform. The cost of interest bearing liabilities increased 5 bps to 0.51% for the quarter ended March 31, 2018, driven primarily by increased short-term borrowings costs, with deposit costs increasing 1 bp. Average interest earning assets were up $15.5 million, or 0.2%, as compared to the prior quarter, primarily driven by a $64.0 million increase in loans and partially offset by a $48.0 million decrease in securities.
Net interest income was $73.5 million for the first quarter of 2018, up $5.0 million, or 7.3%, from the first quarter of 2017. FTE net interest margin of 3.57% was up 11 bps from the first quarter of 2017 as the improvement in asset yields was partially offset by the increase in cost of interest bearing liabilities. Average interest earning assets were up $253.9 million, or 3.1%, from the same period in 2017, primarily driven by a $381.4 million increase in loans that was partially offset by a $116.5 million decrease in securities.
Noninterest income for the three months ended March 31, 2018 was $31.2 million, down $0.2 million, or 0.6%, from the prior quarter and up $2.5 million, or 8.7%, from the first quarter of 2017. The decrease from the prior quarter was driven by lower net securities gains offset by higher other noninterest income and insurance and other financial services revenue. Other noninterest income increased due to higher swap fee income. The increase in noninterest income from the first quarter of 2017 was driven by retirement plan administration and other noninterest income. Retirement plan administration fees increased in the first quarter of 2018 as compared to the first quarter of 2017 due primarily to the acquisition of Downeast Pension Services (“DPS”) in the second quarter of 2017. Other noninterest income increased from the same period of 2017 due to non-recurring charges recognized in the first quarter of 2017.
Noninterest expense for the three months ended March 31, 2018 was $64.3 million, up $0.8 million, or 1.3%, from the prior quarter and up $3.0 million, or 4.9%, from the first quarter of 2017. The increase from the prior quarter was due primarily to a $2.8 million increase in salaries and benefits due primarily to higher stock-based compensation and employee benefits expenses. Occupancy expense increased from the prior quarter by $0.8 million due to seasonal expenses. In addition, other noninterest expense decreased $2.0 million from the previous quarter primarily due to the write-down of an intangible asset no longer in use due to a change in business strategy during the fourth quarter of 2017. The increase from the first quarter of 2017 was driven by increases in salaries and employee benefits expenses, professional fees and outside services and equipment expenses. Salaries and employee benefits expense increased from the first quarter of 2017 due primarily to the acquisition of DPS in the second quarter of 2017.
Income tax expense for the three months ended March 31, 2018 was $7.0 million, down $8.7 million, or 55.3%, from the prior quarter and down $1.3 million, or 15.6%, from the first quarter of 2017. The effective tax rate of 21.2% for the first quarter of 2018 was down from 47.1% for the fourth quarter of 2017 and down from 29.0% for the first quarter of 2017. The decrease in income tax expense from the prior quarter was due to a one-time charge related to the impact of Tax Reform and $0.3 million higher income tax benefit from equity-based transactions. The decrease in income tax expense from the first quarter of 2017 was due to the lower effective tax rate from Tax Reform offset by $1.1 million lower income tax benefit from equity-based transactions. Excluding the $4.4 million Tax Reform charge in the fourth quarter of 2017 and the tax benefit from equity-based transactions, the effective tax rate was 22.5% and 34.1% for the first quarter of 2018 and fourth quarter of 2017, respectively.
Asset Quality
Net charge-offs of $6.8 million for the three months ended March 31, 2018 were down as compared to $7.0 million for the prior quarter and $6.9 million for the first quarter of 2017. Provision expense was $7.5 million for the three months ended March 31, 2018, as compared with $8.2 million for the prior quarter and $7.4 million for the first quarter of 2017. Annualized net charge-offs to average loans for the first quarter of 2018was 0.42%, down from 0.43% for the prior quarter and from 0.45% for the first quarter of 2017.
Nonperforming loans to total loans was 0.43% at March 31, 2018, down 4 bps from 0.47% for the prior quarterand down 13 bps from 0.56% at March 31, 2017. Past due loans as a percentage of total loans were 0.53% atMarch 31, 2017, down from 0.63% at December 31, 2017 and were comparable to 0.54% at March 31, 2017.
The allowance for loan losses totaled $70.2 million at March 31, 2018, compared to $69.5 million at December31, 2017 and $65.7 million at March 31, 2017. The allowance for loan losses as a percentage of loans was1.06% (1.12% excluding acquired loans) at March 31, 2018, which equaled the prior quarter and wascomparable to 1.05% (1.13% excluding acquired loans) at March 31, 2017.
Balance Sheet
Total assets were $9.2 billion at March 31, 2018, up $95.2 million, or 1.0%, from December 31, 2017. Loanswere $6.6 billion at March 31, 2018, up $62.4 million, or 0.9%, from December 31, 2017. Total deposits were$7.4 billion at March 31, 2018, up $223.3 million, or 3.1%, from December 31, 2017, primarily reflectingseasonal inflows of government and municipal deposits. Stockholders’ equity was $953.9 million, representinga total equity-to-total assets ratio of 10.33% at March 31, 2018, compared with $958.2 million or a total equity-to-total assets ratio of 10.49% at December 31, 2017.
Dividend
On March 26, 2018, NBT Board of Directors approved a second-quarter 2018 cash dividend of $0.25 per share.The dividend, which represents a $0.02 or 8.7% increase, will be paid on June 15, 2018 to shareholders ofrecord as of June 1, 2018.
Other Events
On April 5, 2018, NBT Bancorp Inc. subsidiary EPIC Advisors, Inc., a full-service 401(k) recordkeeping firm,acquired Retirement Plan Services, LLC (“RPS”), a retirement plan services company located near St. Louis,Missouri, that provides full-service recordkeeping, administration and plan design solutions to employersnationwide. This acquisition supports the continued growth of NBT Bank’s retirement plan services businessline. RPS will have access to the resources of NBT Bank’s long-established national retirement plan services infrastructure to support enhanced service to its customers.
Corporate Overview
NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $9.2billion at March 31, 2018. The Company primarily operates through NBT Bank, N.A., a full-service communitybank 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 Advisors, Inc., based in Rochester,N.Y., is a full-service 401(k) plan recordkeeping firm. NBT Insurance Agency, LLC, based in Norwich, N.Y., isa 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.nbtmang.com.
Non-GAAP Measures
This press release contains financial information determined by methods other than in accordance withaccounting principles generally accepted in the United States of America (“GAAP”). These measures adjustGAAP measures to exclude the effects of acquisition related intangible amortization expense on earnings andequity as well as providing a FTE yield on securities and loans. Where non-GAAP disclosures are used in thispress release, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, isprovided in the accompanying tables. Management believes that these non-GAAP measures provided usefulinformation 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 asubstitute for financial measures determined in accordance with GAAP and investors should consider NBT’sperformance and financial condition as reported under GAAP and all other relevant information when assessingthe performance or financial condition of NBT.
Source: NORWICH, NY (April 23, 2018) – NBT Bancorp Inc