NBT reports strong first quarter

NORWICH – NBT Bancorp Inc. (NBT) (NASDAQ: NBTB) reported Monday that net income for the three months ended March 31 was $14.1 million, up 4.0% or $0.5 million from net income of $13.6 million reported for the same period in 2006. Net income per diluted share for the three months ended March 31 was $0.41 per share, compared with $0.40 per share for the same period in 2006. Return on average assets and return on average equity were 1.13% and 14.06%, respectively, for the three months ended March 31 compared with 1.18% and 15.11%, respectively, for the same period in 2006. The increase in net income for the three months ended March 31 was primarily the result of a $0.5 million increase in net interest income and a $1.5 million increase in noninterest income. The aforementioned increases in income were partially offset by a $0.4 million increase in noninterest expense, a $0.4 million increase in provision for loan and lease losses and a $0.7 million increase in income tax expense.

The comparability of financial information is affected by the acquisition of CNB Bancorp, Inc. (“CNB”). Operating results include the operations of CNB from the date of acquisition, which was Feb. 10, 2006.

NBT President and CEO Martin A. Dietrich stated, “Despite the challenges we face in the current interest rate environment, I am pleased with our earnings performance for the first quarter. Although our net interest margin continues to compress, we have been able to successfully mitigate this compression through growth in our earning assets. In addition, we have been able to reduce our reliance on interest income by continuing to post strong noninterest income results. This, coupled with the dedication, focus and perseverance of our employees, has enabled us to deliver strong earnings for the quarter. While 2007 promises to be a challenging year for the financial services industry, I am encouraged by our results for the first quarter.”

The NBT Board of Directors declared a first-quarter cash dividend of $0.20 per share at a meeting held Monday, representing a $0.01 per share, or 5.3%, increase from the cash dividend of $0.19 per share declared during the previous quarter. The dividend will be paid on June 15, 2007, to shareholders of record as of June 1, 2007.

The complete NBT financial report appears on www.evesun.com today.

Loan and Lease Quality and Provision for Loan and Lease Losses

Nonperforming loans at March 31, 2007, were $17.4 million or 0.51% of total loans and leases compared with $13.3 million or 0.41% of total loans and leases at March 31, 2006. This increase was mainly attributable to increases in nonperforming small business and agricultural loans, primarily due to regional flooding as well as falling milk prices. Net charge-offs for the three month period ended March 31, 2007, were $2.1 million, up $0.4 million from the three month period ended March 31, 2006. Net charge-offs to average loans and leases for the three months ended March 31, 2007, were 0.25%, compared with the 0.23% ratio for the three months ended March 31, 2006. For the three months ended March 31, 2007, the provision for loan and lease losses totaled $2.1 million, compared with $1.7 million for the same period in 2006. The Company’s allowance for loan and lease losses was 1.49% of loans and leases at March 31, 2007, compared with 1.53% at March 31, 2006. The ratio of the allowance for loan and lease losses to nonperforming loans was 291.16% at March 31, 2007, compared with 373.56% at March 31, 2006.



 

Net Interest Income

Net interest income was up 1.3% to $40.6 million for the three months ended March 31, 2007, compared with $40.1 million for the same period a year ago. Despite a decrease in the Company’s fully taxable equivalent (FTE) net interest margin, from 3.86% for the three months ended March 31, 2006, to 3.63% for the same period in 2007, the Company experienced an increase in net interest income that was attributable to an 8.3% growth in average earning assets. The growth in average earning assets was in large part due to organic loan growth, particularly consumer loans, as well as the acquisition of CNB in February 2006. The decline in the net interest margin is due largely to the effect from our borrowings, money market accounts and time deposits repricing in a higher interest rate environment. Earning assets, particularly those tied to a fixed rate, have not realized the benefit of the higher interest rate environment, since yields on earning assets with terms of three years or longer have remained relatively flat during this period. The Company anticipates that margin pressure will persist into the next several quarters, given the flat to inverted yield curve. If the yield curve remains flat or inverted, we expect net interest income to remain relatively flat through 2007.

Noninterest Income

Noninterest income for the three months ended March 31, 2007, was $12.7 million, up $1.5 million or 13.1% from $11.2 million for the same period in 2006. Fees from service charges on deposit accounts and ATM and debit cards collectively increased $0.5 million from growth in our debit card base as well as growth in our demand deposit accounts. Retirement plan administration fees for the three months ended March 31, 2007, increased $0.4 million, compared with the same period in 2006, as a result of our growing client base. Broker/dealer and insurance revenue for the three months ended March 31, 2007, increased $0.2 million in large part due to the growth in brokerage income from retail financial services as well as the addition of Hathaway Insurance Agency as part of the acquisition of CNB. Bank-owned life insurance income for the three months ended March 31, 2007, increased $0.1 million, compared with the same period in 2006. This increase was due in large part to the acquisition of CNB. Trust administration income increased $0.1 million for the three months ended March 31, 2007, compared with the same period in 2006. This increase stems from the increased market value of accounts, an increase in customer accounts as a result of the acquisition of CNB and successful business development. Other noninterest income for the three months ended March 31, 2007, decreased $0.6 million, compared with the same period in 2006, primarily as a result of a gain on the sale of a branch in 2006. Net securities losses for the three months ended March 31, 2007, were nominal, compared with net securities losses of $0.9 million for the three months ended March 31, 2006. Excluding the effect of these securities transactions, noninterest income increased $0.5 million, or 4.4%, for the three months ended March 31, 2007, compared with the same period in 2006.

 

Noninterest Expense and Income Tax Expense

Noninterest expense for the three months ended March 31, 2007, was $30.9 million, up from $30.5 million for the same period in 2006. Office expenses, such as supplies and postage, occupancy, equipment and data processing and communications charges, increased by $0.2 million, or 2.7%, for the three months ended March 31, 2007, compared with the same period in 2006. Salaries and employee benefits increased $0.2 million, or 1.4%, for the three months ended March 31, 2007, over the same period in 2006. Professional fees and services decreased $0.2 million, or 9.5%, for the three months ended March 31, 2007, compared with the same period in 2006 in large part due to a decrease in Information Technology and other consulting services. Amortization expense increased $0.1 million for the three months ended March 31, 2007, over the same period in 2006. This increase was due primarily to the acquisition of CNB in February 2006. Loan collection and other real estate owned expenses increased $0.2 million for the three months ended March 31, 2007, over the same period in 2006. This increase was due primarily to an increase in the amount of real estate taxes paid on foreclosures in 2007 compared with 2006. Other operating expense for the three months ended March 31, 2007, decreased $0.1 million, or 4.3%, compared with the same period in 2006. Income tax expense for the three months ended March 31, 2007, was $6.2 million, up from $5.6 million for the same period in 2006. The effective rate for the three months ended March 31, 2007, was 30.6%, up from 29.0% for the same period in 2006. The increase in the effective tax rate for the three months ended March 31, 2007, versus the same period in 2006 resulted primarily from a tax refund received in the first quarter of 2006.

Balance Sheet

Total assets were $5.1 billion at March 31, 2007, up $214.9 million from $4.9 billion at March 31, 2006. Loans and leases increased $147.6 million or 4.5% from $3.2 billion at March 31, 2006, to $3.4 billion at March 31, 2007, due primarily to growth in consumer loan products. Total deposits were $4.0 billion at March 31, 2007, up 9.6% from the same period at March 31, 2006, in large part due to growth in time deposits, money market accounts and savings accounts. Stockholders’ equity was $407.6 million, representing total equity to total assets of 7.99% at March 31, 2007, compared with $385.8 million or a total equity to total asset ratio of 7.90% at March 31, 2006.

Stock Repurchase Program

 

On April 23, 2007, the NBT Board of Directors authorized a new repurchase program whereby NBT intends to repurchase up to an additional 1,000,000 shares (approximately 3%) of its outstanding common stock, as market conditions warrant in open market and privately negotiated transactions. When this repurchase was authorized, there were 363,180 shares remaining under previous authorizations. These remaining shares were combined with this new authorization, increasing the total shares available for repurchase to 1,363,180. Under the authorized programs for the period, the Company purchased 373,967 shares of its common stock during the three months ended March 31, 2007, for a total of $8.6 million at an average price of $22.90 per share.

Dividend Declared

The NBT Board of Directors declared a first-quarter cash dividend of $0.20 per share at a meeting held today, representing a $0.01 per share, or 5.3%, increase from the cash dividend of $0.19 per share declared during the previous quarter. The dividend will be paid on June 15, 2007, to shareholders of record as of June 1, 2007.

Corporate Overview

NBT is a financial holding company headquartered in Norwich, NY, with total assets of $5.1 billion at March 31, 2007. The Company primarily operates through NBT Bank, N.A., a full-service community bank with two divisions, and through two financial services companies. NBT Bank, N.A. has 119 locations, including 80 NBT Bank offices in upstate New York and 39 Pennstar Bank offices in northeastern Pennsylvania. EPIC Advisors, Inc., based in Rochester, NY, is a full-service 401(k) plan recordkeeping firm. Hathaway Insurance Agency, Inc., based in Gloversville, NY, is a full-service insurance agency. More information about NBT and its divisions can be found on the Internet at: HYPERLINK "www.nbtbancorp.com" www.nbtbancorp.com, HYPERLINK "www.nbtbank.com" www.nbtbank.com, HYPERLINK "www.pennstarbank.com" www.pennstarbank.com, HYPERLINK "www.epic1st.com" www.epic1st.com and HYPERLINK "www.hathawayagency.com" www.hathawayagency.com.

Forward-Looking Statements

This news release contains forward-looking statements. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of NBT Bancorp and its subsidiaries and on the information available to management at the time that these statements were made. There are a number of factors, many of which are beyond NBT’s control, that could cause actual conditions, events or results to differ significantly from those described in 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) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards and tax laws, may adversely affect the businesses in which NBT is engaged; (6) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than NBT; and (7) adverse changes may occur in the securities markets or with respect to inflation. Forward-looking statements speak only as of the date they are made. Except as required by law, NBT does not undertake to update forward-looking statements to reflect subsequent circumstances or events.

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