NORWICH, NY (January 27, 2020) – NBT Bancorp Inc, based in Norwich, NY, with branches in northwest Vermont (NASDAQ: NBTB), reported record net income and diluted earnings per share for the year ended December 31, 2019. Net income for the year ended December 31, 2019 was $121.0 million, up 7.5% from $112.6 million for the prior year. Diluted earnings per share for the year ended December 31, 2019 was $2.74, as compared with $2.56 for the prior year, an increase of 7.0%.
Net income for the three months ended December 31, 2019 was $29.0 million, down 10.6% from $32.4 million for the third quarter of 2019 and up 1.1% from $28.7 million for the fourth quarter of 2018. Diluted earnings per share for the three months ended December 31, 2019 was $0.66, down 9.5% as compared with $0.73 for the prior quarter and up 1.5% from $0.65 for the fourth quarter of 2018.
Highlights:
- Diluted earnings per share up 7.0% from prior year
- Full year 2019 net income up 7.5% from 2018
- Loan growth for the year ended December 31, 2019 of 3.6% and 6.9% for the fourth quarter, annualized, driven by commercial and residential real estate
- Strong asset quality continued with nonperforming loans to total loans of 0.40% down 7 basis points from prior quarter
- Tangible equity ratio of 8.84%, up 99 bps from prior year, and tangible book value per share of $19.03, up 14.2% from 2018
“We are pleased to report that NBT achieved a seventh straight year of record net income in 2019 along with a new annual EPS record,” said NBT President and CEO John H. Watt, Jr. “The best team in community banking maintained focus on the fundamentals of our core banking business, including low-cost deposit gathering and prudent loan growth, while advancing our strategic priorities and executing on technology and digital initiatives. Our strong balance sheet, disciplined approach to credit and risk management, and diversified fee businesses provide NBT with optionality as we continue to grow our company, both organically and by acquisition. In the second quarter of 2020, we intend to accelerate the growth of our well-established EPIC Retirement Plan Services business with the acquisition of Alliance Benefit Group of Illinois, Inc. of Peoria, bringing the number of plan participants we support nationwide to 250,000.”
Net interest income for the year ended 2019 was $311.6 million, up $5.9 million, or 1.9%, from 2018. The fully taxable equivalent (“FTE”) net interest margin of 3.58% for the year ended December 31, 2019, was comparable to 2018. Average interest-earning assets were up $144.8 million, or 1.7%, for the year ended December 31, 2019, as compared to the same period in 2018, driven by a $206.7 million increase in loans that was partially offset by an $89.9 million decrease in securities. Interest income increased $23.3 million, or 6.8%, due to the increase in earning assets combined with a 17 basis point (“bp”) improvement in loan yields. Interest expense was up $17.4 million, or 44.9% for the year ended December 31, 2019 as compared to the same period in 2018 as the cost of interest-bearing liabilities increased 29 bps, driven by interest-bearing deposit costs increasing 33 bps.
Net interest income was $77.2 million for the fourth quarter of 2019, down $0.9 million, or 1.1%, from the previous quarter. FTE net interest margin was 3.52% for the three months ended December 31, 2019, down 5 bps from the previous quarter, and interest income decreased $1.8 million, or 2.0%. The yield on average interest-earning assets decreased 9 bps to 4.13%, and average interest-earning assets were steady at $8.7 billion. The lower asset yield primarily reflects the impact of lower short-term rates on floating-rate loans, while average earning assets remained consistent driven by a smaller investment portfolio partially offset by an increase in loans. Interest expense was down $0.9 million, or 6.5%, due to a $31.3 million decrease in average interest-bearing liabilities from the prior quarter. The cost of interest-bearing liabilities decreased 6 bps to 0.90% for the quarter ended December 31, 2019, driven by a 19 bp decrease in short-term borrowings cost and a 4 bp decrease in interest-bearing deposit costs.
Noninterest income for the year ended December 31, 2019 was $144.0 million, up $19.3 million, or 15.4%, from the same period in 2018. Excluding net securities gains (losses), noninterest income for the year ended December 31, 2019 was $139.8 million, up $8.7 million or 6.6%, from the same period in 2018. The increase from the prior year was driven by higher other noninterest income primarily due to higher swap fee income, higher retirement plan administration fees due to a full year’s contribution from Retirement Plan Services, LLC (“RPS”), which was acquired in the second quarter of 2018, and higher ATM and debit card fees due to an increase in the number of accounts and usage.
Noninterest income for the three months ended December 31, 2019 was $36.2 million, down $3.5 million or 8.8%, from the prior quarter and up $10.3 million or 39.7%, from the fourth quarter of 2018. In the third quarter of 2019, the Company sold Visa Class B common stock for a gain of $4.0 million and in the fourth quarter of 2018, the Company restructured the investment portfolio by selling $109 million lower yielding bonds and reinvesting the proceeds in higher yielding bonds, which resulted in a $6.6 million loss on securities sold. Excluding net securities gains (losses), noninterest income for the three months ended December 31, 2019 was $36.1 million, up $0.4 million or 1.0%, from the prior quarter and up $3.2 million or 9.7%, from the fourth quarter of 2018. The increase from the prior quarter and from the fourth quarter of 2018 was primarily due to higher other noninterest income due primarily to higher swap fee income.
Noninterest expense for the year ended December 31, 2019 was $274.7 million, up $10.2 million or 3.8%, 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 as compared to the same period of 2018, partially offset by lower FDIC insurance expense. The increase in salaries and employee benefits was primarily due to the RPS acquisition in the second quarter of 2018 and $0.7 million in one-time charges related to efficiency initiatives and general wage and benefit increases. The $4.8 million increase in other noninterest expenses was due to $3.1 million in reorganization expenses incurred during the third quarter of 2019, primarily related to branch optimization strategies to improve future operating efficiencies and an increase in the amortization expense for pension plan actuarial costs. FDIC insurance expense decreased from 2018 due to receipt of the Small Bank Assessment Credit in 2019.
Noninterest expense for the three months ended December 31, 2019 was $70.3 million, up $0.5 million or 0.8%, from the prior quarter and up $1.4 million or 2.0%, from the fourth quarter of 2018. The increase from the prior quarter was primarily driven by an increase in professional fees and loan collection expenses, which were partially offset by lower other noninterest expenses due to the previously mentioned branch optimization that occurred during the third quarter of 2019. The increase from the fourth quarter of 2018 was primarily due to increases in salaries and employee benefits and loan collection, partially offset by lower FDIC insurance expense due to the previously mentioned receipt of the Small Bank Assessment Credit in 2019.
Income tax expense for the year ended December 31, 2019 was $34.4 million, up $10.0 million, or 40.8%, from the same period of 2018. The effective tax rate of 22.1% in 2019 was up from 17.8% for the same period in the prior year. The increase in income tax expense from the prior year was due to a $5.5 million tax benefit recorded in the fourth quarter of 2018 primarily related to one-time income tax return accounting method changes, combined with a higher level of taxable income.
Income tax expense for the three months ended December 31, 2019 was $8.2 million, down $1.2 million from the prior quarter and up $7.4 million from the fourth quarter of 2018. The effective tax rate of 22.0% for the fourth quarter of 2019 was down from 22.4% from the third quarter of 2019 and up from 2.5% from the fourth quarter of 2018. The decrease in income tax expense from the prior quarter was due to lower taxable income and the increase from the fourth quarter of 2018 primarily due to one-time income tax return accounting method changes during the fourth quarter of 2018.
Asset Quality
Net charge-offs of $25.0 million for the year ended December 31, 2019 were down compared to $25.8 million for the same period of 2018. Provision expense was $25.4 million for the year ended December 31, 2019, as compared with $28.8 million for the same period of 2018. Annualized net charge-offs to average loans for the year ended December 31, 2019 was 0.36%, as compared with 0.38% for the same period of 2018.
Net charge-offs of $5.4 million for the three months ended December 31, 2019 were down as compared to $6.1 million for the prior quarter and down compared to $6.8 million for the fourth quarter of 2018. Provision expense was lower at $6.0 million for the three months ended December 31, 2019, as compared with $6.3 million for the prior quarter and $6.5 million for the fourth quarter of 2018. Annualized net charge-offs to average loans for the fourth quarter of 2019 was 0.30%, down from 0.35% for the prior quarter and down from 0.39% for the fourth quarter of 2018.
Nonperforming loans to total loans was 0.40% at December 31, 2019, down 7 bps from 0.47% at September 30, 2019 and down 4 bps from 0.44% at December 31, 2018. Past due loans as a percentage of total loans was 0.49% at December 31, 2019, down from 0.57% at September 30, 2019 and down from 0.55% at December 31, 2018.
The allowance for loan losses totaled $73.0 million at December 31, 2019, compared to $72.4 million at September 30, 2019 and $72.5 million at December 31, 2018. The allowance for loan losses as a percentage of loans was 1.02% (1.06% excluding acquired loans) at December 31, 2019, compared to 1.03% (1.08% excluding acquired loans) at September 30, 2019 and 1.05% (1.10% excluding acquired loans) at December 31, 2018.
Balance Sheet
Total assets were $9.7 billion at December 31, 2019, up $159.6 million from December 31, 2018. Loans were $7.1 billion at December 31, 2019, up $248.4 million from December 31, 2018. In 2019, loan growth in commercial real estate and residential real estate was partially offset by run-off in consumer portfolios. Total deposits were $7.6 billion at December 31, 2019, up $219.6 million, or 3.0%, from December 31, 2018, reflecting growth in money market deposit accounts and non-interest-bearing demand accounts. Stockholders’ equity was $1.1 billion, representing a total equity-to-total assets ratio of 11.53% at December 31, 2019, compared with $1.0 billion or a total equity-to-total assets ratio of 10.65% at December 31, 2018. Tangible book value per share was $19.03 at December 31, 2019, an increase of 14.2% from December 31, 2018.
On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). While certain key assumptions to be used in NBT’s CECL model and methodologies are being finalized, as well as certain review controls, the day-one impact of adopting CECL is not expected to be material to the Company’s total capital.
Dividend
The Board of Directors approved a first-quarter 2020 cash dividend of $0.27 per share at a meeting held today. The dividend will be paid on March 13, 2020 to shareholders of record as of February 28, 2020.
Other Events
On January 24, 2020, NBT subsidiary EPIC Retirement Plan Services, a full-service 401(k) recordkeeping firm, signed a definitive agreement to purchase the assets of Alliance Benefit Group of Illinois, Inc. (“ABGIL”). ABGIL is a retirement plan services company located in Peoria, Illinois that provides full-service recordkeeping, administration, fiduciary investment advice and plan design solutions to employers nationwide. This is NBT’s fifth retirement plan services acquisition since 2015. The addition of ABGIL will strengthen NBT’s presence in retirement services and bring the number of plan participants supported by NBT to 250,000 in all 50 states. The Company expects to complete the acquisition of ABGIL in the second quarter of 2020.
2020 Annual Meeting
NBT will be moving to a virtual shareholder meeting format, and the 2020 Annual Meeting of Shareholders will be hosted online on May 19, 2020. As technology enables new types of engagement, this virtual format will allow NBT to reach more shareholders, who will have the same opportunities to participate as in past in-person meetings. Details will be provided to shareholders with proxy materials in April 2020.
Corporate Overview
NBT Bancorp Inc. is a financial holding company headquartered in Norwich, N.Y., with total assets of $9.7 billion at December 31, 2019. 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 146 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.epicrps.com and www.nbtinsurance.com.
Source: NORWICH, NY (January 27, 2020) – NBT Bancorp Inc