NBT Bancorp Inc. Announces Full Year Net Income of $152.0 Million ($3.52 Per Diluted Common Share); Approves Dividend

NORWICH, N.Y., Jan. 23, 2023 (GLOBE NEWSWIRE) — NBT Bancorp Inc. (“NBT” or the “Company”) (NASDAQ: NBTB) reported net income and diluted earnings per share for the quarter and year ended December 31, 2022.

Net income for the year ended December 31, 2022 was $152.0 million, or $3.52 per diluted common share, compared to $154.9 million, or $3.54 per diluted share, in the prior year.

• Generated positive operating leverage of $21.7 million with total revenues increasing 8.1%, or $38.9 million, while operating expenses were higher by 6.0%, or $17.2 million.
• Net interest income in 2022 improved in comparison to 2021, primarily due to higher yields on earning assets due to increases in the Federal Reserve’s targeted Federal Funds rate combined with growth in earning assets, strongly overcoming a $17.6 million ($0.31 per diluted share) year-over-year decrease in income from the Paycheck Protection Program (“PPP”).
• The Company recorded a provision for loan losses of $17.1 million ($0.31 per diluted share) in 2022, compared to a net benefit of $8.3 million ($0.15 per diluted share) in 2021.
• Card services income was lower than 2021 driven by the impact from the Company being subject to the statutory price cap provisions of the Durbin Amendment to the Dodd-Frank Act (“Durbin Amendment”) of approximately $8 million ($0.14 per diluted share).

Net income for the three months ended December 31, 2022 was $36.1 million, or $0.84 per diluted common share, compared to $37.3 million, or $0.86 per diluted share, in the fourth quarter of 2021.

• Net interest income in the fourth quarter of 2022 improved in comparison to the fourth quarter of 2021 and the linked third quarter of 2022, primarily due to higher yields on earning assets due to increases in the Federal Funds rate, despite a $7.5 million ($0.13 per diluted share) decrease in income from the PPP.
• The Company recorded a provision for loan losses of $7.7 million ($0.14 per diluted share) in the fourth quarter of 2022, compared to a provision for loan losses of $3.1 million ($0.06 per diluted share) in the fourth quarter of 2021.
• Card services income was lower than the fourth quarter of 2021 driven by the impact from the Company being subject to the statutory price cap provisions of the Durbin Amendment of approximately $4 million ($0.07 per diluted share).
• In the fourth quarter of 2022, the Company incurred merger expenses of $1.0 million ($0.02 per diluted share) related to the pending acquisition of Salisbury Bancorp, Inc.

CEO Comments

“Our operating results for the fourth quarter and full year of 2022 reflect strong execution by our team, including organic loan growth of over 10% and disciplined cost of funds management,” said NBT President and CEO John H. Watt, Jr. “We recognized the benefits of an asset-sensitive balance sheet in 2022 with increases in the targeted Fed Funds rate, and our credit quality continues to be excellent with low levels of net charge-offs and nonperforming assets.”

“In December, we entered into a definitive agreement to merge with Salisbury Bancorp, Inc. Aligned cultures and complementary markets support the strategic rationale for our partnership with this premier community bank franchise headquartered in Lakeville, CT. We expect the merger to close in the second quarter of 2023, pending required regulatory and shareholder approvals.”

“We were pleased to reach the milestone of 10 consecutive years of annual dividend increases in 2022,” added Watt. “The payment of a meaningful and growing dividend is an important component of our commitment to consistent and favorable long-term returns for our shareholders.”

Fourth Quarter Financial Highlights

Loans

• Period end total loans were $8.15 billion at December 31, 2022 and $7.50 billion at December 31, 2021.
• Excluding PPP loans, period end loans increased $752.0 million from December 31, 2021. Commercial and industrial loans increased $109.8 million to $1.27 billion; commercial real estate loans increased $152.6 million to $2.81 billion; and total consumer loans increased $489.5 million to $4.08 billion.
• Total PPP loans as of December 31, 2022 were $0.9 million (net of unamortized fees) with over 99% of the original $836 million forgiven or extinguished through the fourth quarter of 2022. The following PPP loan activity occurred during the fourth quarter of 2022:
  • $2.2 million of loans forgiven.
  • $0.1 million of interest and fees recognized into interest income, compared to $0.3 million for the third quarter of 2022 and $7.5 million for the fourth quarter of 2021.

• Commercial line of credit utilization rate was 21% at December 31, 2022, compared to 23% at September 30, 2022 and 21% at December 31, 2021.

Deposits

• Total deposits at December 31, 2022 were $9.50 billion, compared to $10.23 billion at December 31, 2021. The decrease in deposits was primarily concentrated in certain larger more rate-sensitive accounts. The effects of tighter monetary policy, inflation and higher rate alternatives continued to weigh on balances. Even though deposit balances declined from 2021, year-end 2022 deposit balances are still 25.1% higher than the end of 2019.
• Loan to deposit ratio was 85.8% at December 31, 2022, compared to 73.3% at December 31, 2021.

Net Interest Income and Net Interest Margin

• Net interest income for the fourth quarter of 2022 was $99.8 million, which was up $5.3 million, or 5.6%, from the third quarter of 2022 and up $14.6 million, or 17.1%, from the fourth quarter of 2021 primarily due to higher yields on earning assets. PPP income for the fourth quarter of 2022 was $0.1 million, which was $0.2 million lower compared to the prior quarter and down $7.5 million compared to the fourth quarter of 2021.
• The NIM on a FTE basis for the fourth quarter of 2022 was 3.68%, up 17 bps from the third quarter of 2022 and up 60 bps from the fourth quarter of 2021 due to higher earning asset yields partly offset by higher cost of interest-bearing liabilities.
• Earning asset yields for the three months ended December 31, 2022 were up 34 bps from the prior quarter and up 79 bps from the same quarter in the prior year. Earning assets grew $73.8 million, or 0.7%, from the prior quarter and declined $216.1 million, or 2.0% compared to the same quarter in the prior year. The following are highlights comparing the fourth quarter of 2022 to the prior quarter:
  • Loan yields increased 38 bps to 4.72% for the quarter.
  • During the fourth quarter, the Company shifted from an excess liquidity position to an overnight borrowing position. The Company had net average short-term interest-earning assets of $185.0 million in the third quarter compared to net average short-term borrowings of $138.0 million in the fourth quarter. The impact of the change net liquidity position was approximately a $3.2 million decrease in net interest income.
• Total cost of deposits was 0.17% for the fourth quarter of 2022, up 8 bps from the prior quarter and up 9 bps from the same period in the prior year.
• The cost of total interest-bearing liabilities for the three months ended December 31, 2022 was 0.57%, up 28 bps from the prior quarter and up 33 bps from the fourth quarter of 2021.

Credit Quality and Allowance for Credit Losses

• Net charge-offs to total average loans was 18 bps compared to 7 bps in the prior quarter and 22 bps in the fourth quarter of 2021. Recoveries in the fourth quarter of 2022 were $1.7 million compared to $3.4 million in the prior quarter and $2.5 million in the fourth quarter of 2021. The increase in net charge-offs from the prior quarter was driven by higher charge-offs in the other consumer portfolio and lower recoveries in the commercial and industrial portfolio.
• Nonperforming assets to total assets was 0.18% at December 31, 2022, compared to 0.19% at September 30, 2022 and 0.27% (0.28% excluding PPP loans) at December 31, 2021.
• Provision expense for the three months ended December 31, 2022 was $7.7 million with net charge-offs of $3.7 million. Provision expense was $3.2 million higher than the third quarter of 2022 and $4.6 million higher than the fourth quarter of 2021. The increase in provision expense from the fourth quarter of 2021 was driven by loan growth and less favorable economic forecasts in 2022 versus an improving economic forecast in the prior year.
• The allowance for loan losses was $100.8 million, or 1.24% of total loans, at December 31, 2022, compared to 1.22% (1.23% excluding PPP loans and related allowance) of total loans at September 30, 2022 and 1.23% (1.24% excluding PPP loans and related allowance) of total loans at December 31, 2021. The reserve for unfunded loan commitments decreased to $5.1 million at December 31, 2022 compared to the prior quarter at $5.3 million and compared to the fourth quarter of 2021 at $5.1 million.

Noninterest Income

• Total noninterest income, excluding securities gains (losses), was $34.3 million for the three months ended December 31, 2022, down $3.0 million from the third quarter and down $6.8 million from the prior year’s fourth quarter.
• Card services income was lower than the fourth quarter of 2021 driven by the impact from the Company being subject to the statutory price cap provisions of the Durbin Amendment. Card services income was lower than the prior quarter driven primarily by lower levels of card utilization.
• Retirement plan administration fees were lower than the prior quarter driven by market decline, seasonal revenues recognized in the third quarter and lower activity-based fees. Retirement plan administration fees were lower than the fourth quarter of 2021 driven by lower activity-based fees and market performance. In 2022, the Company recognized approximately $2.5 million of fees related to statutory plan document restatement requirements that generally recur on a six-year cycle.
• Wealth management fees were lower than the prior quarter due to seasonal tax preparation services in the third quarter and lower than the fourth quarter of 2021 driven primarily by market performance.
• Other income decreased from the prior quarter and the fourth quarter of 2021 driven by lower commercial loan swap fees.

Noninterest Expense

• Total noninterest expense, excluding $1.0 million of merger expense in the fourth quarter of 2022 was up 2.4% from the previous quarter and up 4.6% from the fourth quarter of 2021.
• Salaries and benefits decreased 2.3% from the prior quarter driven by lower benefit plan costs. The increase from the fourth quarter of 2021 was driven by increased salaries and wages, including merit pay increases and higher levels of incentive compensation accruals.
• Technology and data services expenses were consistent with the prior quarter and increased from the fourth quarter of 2021 due to continued investment in digital platform solutions.
• Professional fees and outside services expense were higher than the prior quarter due to seasonal expenses and timing of external services for several tactical and strategic initiatives.

Income Taxes

• The effective tax rate was 22.6% for the fourth quarter of 2022, compared to 22.8% for the third quarter of 2022 and 22.4% for the fourth quarter of 2021.

Capital

• Capital ratios remain strong with tangible common equity to tangible assets¹ at 7.73%. Tangible book value per share² was $20.65 at December 31, 2022, $20.25 at September 30, 2022 and $22.26 at December 31, 2021.
• Stockholders’ equity decreased $76.9 million from December 31, 2021 driven by the $166.7 million decrease in AOCI due primarily to the change in the market value of securities available for sale, dividends declared of $49.8 million and the repurchase of common stock of $14.7 million, partly offset by net income generation of $152.0 million.
• December 31, 2022, CET1 capital ratio of 12.12%, leverage ratio of 10.32 % and total risk-based capital ratio of 15.38%.
• The Company purchased 400,000 shares of its common stock in the first half of 2022 at an average price of $36.78 per share under its previously announced share repurchase program. There were 1,600,000 shares available for repurchase under this plan which is set to expire on December 31, 2023.

Dividend

• The Board of Directors approved a first-quarter cash dividend of $0.30 per share at a meeting held today, an increase of $0.02, or 7.1%, from the amount paid in the first quarter of 2022. 2022 was the tenth consecutive year of annual dividend increases by the Company. The dividend will be paid on March 15, 2023 to stockholders of record as of March 1, 2023.

Salisbury Bancorp, Inc. Merger

• On December 5, 2022, NBT announced that it had entered into an agreement to acquire Salisbury Bancorp, Inc., a 14 branch community bank franchise headquartered in Lakeville, CT, in an all stock transaction. Salisbury Bancorp, Inc. had assets of $1.51 billion, deposits of $1.33 billion, and net loans of $1.18 billion as of September 30, 2022. The merger is expected to close in the second quarter of 2023 subject to customary closing conditions, including approval by the shareholders of Salisbury Bancorp, Inc. and required regulatory approvals.

Conference Call and Webcast

The Company will host a conference call at 8:30 a.m. (Eastern) Tuesday, January 24, 2023, to review fourth quarter 2022 financial results. The audio webcast link, along with the corresponding presentation slides, will be available on the Company’s Event Calendar 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 $11.74 billion at December 31, 2022. 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 140 banking locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine and Connecticut. EPIC Retirement Plan Services, based in Rochester, NY, is a national benefits administration 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 press 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, including international military conflicts, 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 other legislative and regulatory responses to the coronavirus (“COVID-19”) pandemic; (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 COVID-19 global pandemic; and (21) the Company’s success at managing the risks involved in the foregoing items.

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advises readers 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, the comparable GAAP measure, as well as 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 the Company’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 the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to current period presentation.