NBT stays ahead of the game by playing offense

NORWICH — What is a bank supposed to do? Pressure on interest income is at Great Depression levels, the economy is growing at a pace only a tortoise could love, unemployment is stubbornly high, Washington continues to “protect” consumers by imposing thousands of pages of new banking regulations, and our legislators are gridlocked over a solution to our economic malaise.

Play offense.

While many banks have focused on cleaning up their balance sheets and adding capital, NBT Bank, N.A. (NBT), an operating company of NBT Bancorp, Inc. (Nasdaq: NBTB) located at 52 S. Broad St. in Norwich, has remained focused on growth and profitability. “We’re a long-term, high-performing institution,” says Martin Dietrich, president and CEO … That has been the bank’s strategy since its founding in 1856 … We have grown organically, augmented with strategic acquisitions … The bank isn’t dependent [just] on acquisitions to move the needle.”

NBT moved the needle substantially in the first quarter when it closed on its latest acquisition — Alliance Financial Corp. (parent of Alliance Bank), headquartered in downtown Syracuse — adding 25 percent to its assets.

“NBT considered the complementary locations of Alliance’s branch network and the need to diversify our geographical market and customer base … [The] Alliance [acquisition] expands the size of our footprint in markets that are similar to those we already operate in. The bank’s [Alliance] competitive position in its five-county region of Central New York and the compatibility of our [corporate] cultures helped attract us to Alliance as a candidate,” says Dietrich.”

He also noted “… that NBT had wanted to enter the Syracuse market for at least 10 years [prior to the acquisition]. The cost of entering “de novo” into a new market is usually too high … A bank needs scale to be relevant, especially in the Syracuse MSA, [which is overbanked] … NBT is very patient in finding the right candidate … In the case of Alliance, we knew Alliance president and CEO Jack Webb well and that he has a quality team. We felt comfortable about how the two companies would operate together … The stars were lined up.”

Alliance Financial’s board of directors agreed to the acquisition because of its concerns for the “... current and prospective environment in which Alliance operates,” according to the amended Form S-4 registration statement filed with the Securities and Exchange Commission on Jan. 28. The statement identified “… national, regional, and local economic conditions, the competitive environment, and the increasing cost associated with recent legislation and expanding regulatory oversight … The trend toward consolidation in the financial services industry and the likely effect of these factors on Alliance’s potential growth, development, and profitability” were also cited in the statement for Alliance Financial as reasons for seeking a buyer.

Both banking companies concluded that the deal would enhance their shareholders’ long-term value and liquidity.

After the deal, NBT and Alliance combined have 8.6 percent of deposits in the 16-county, Business Journal footprint surrounding Syracuse (based on FDIC data from June 30, 2012). NBT has no presence in six of these counties (Cayuga, Chemung, Jefferson, Lewis, Seneca, and Tompkins); the remaining 10 counties represent a10.63 percent NBT share of deposits based on the same FDIC data.

“In the Syracuse MSA (Onondaga, Oneida, Madison, and Oswego counties), NBT now is number three in market share and number one among community banks. In Cortland County, we’re number one in overall market share,” says Dietrich.

The 2013 first-quarter financial statement of NBT reflects a corporation with $7.6 billion in assets, 1,900 employees, 161 banking locations in five states (New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire) serving more than 300,000 households, and 199 ATMs. NBT closed out 2012 with net income of $54.558 million, “… the ninth year in a row that the bank has posted more than $50 million in net income,” adds Dietrich.

NBT strategy

“The move into the Syracuse market [reflects] the bank’s strategy of the last decade … We [target] midsize, urban centers that are surrounded by suburbs, rural villages, and towns; areas in which we can grow … Our recent entry into the New England region reflects this; the markets are similar to Upstate … While we are investing in these new markets, we are not abandoning our legacy markets,” Dietrich emphasizes.

While much attention has been focused on the recent Alliance Bank acquisition, NBT has also continued to play offense and move the needle through organic growth. “NBT had strong organic loan growth in 2012, both from the commercial and consumer sides … The bank added nearly a half-billion dollars over the previous year … Noninterest income also increased nearly 9 percent, resulting from our insurance and financial-services-division efforts, fees, and mortgage-banking revenues … At the same time, our allowance for loan losses and nonperforming loans declined … In a difficult economic climate, the life-long relationships we have built with our customers and the value we have created for them drives our success,” says Dietrich.

How are these customer relationships built? “… Through our employees,” responds Dietrich. “NBT strives to create an environment that values its employees and helps them to grow … We are always concerned with attracting and retaining talent … The strong, financial performance of the company is important, but so are our [outreach] efforts to ensure that the employees focus on customer satisfaction … We want them to be proud of working at the bank … They guarantee our competitive edge.

“We have a management-development program to cultivate our future leaders, and we have a summer-employment program that offers paid work experience to graduating high-school seniors and college students. Interns start off as tellers, and returning interns have the opportunity to work in different departments. We even run a mock interview program to hone their skills,” avers Dietrich. NBT also introduced Strive, a financial-literacy program for children and young adults. “That’s a real example of our long-term strategy in building customer relationships,” says Dietrich.

Dietrich’s success in steering NBT through the challenges of competition, technology, and a forest of regulation is due in large part to the bank’s management team. Michael J. Chewens is chief financial officer, David E. Raven is the president of retail banking and the Pennstar Bank president and CEO, and Jeffrey M. Levy is president of commercial banking. Timothy L. Brenner is president of wealth management, Catherine M. Scarlett is director of human resources, and Joseph R. Stagliano is chief information officer. Rounding out the management team is Howard L. Atkinson, chief risk officer; F. Sheldon Prentice, general counsel, and corporate secretary; and Jack H. Webb, executive vice president, strategic support.

Dietrich, 58, is a native of Chenango County and a 1977 graduate of Colgate University, where he earned his bachelor’s degree in economics. For four years prior to joining NBT in 1981, he worked in local construction. Dietrich has worked in a number of areas in the bank including accounting, commercial banking, marketing, and retail banking. He became president and chief operating officer of NBT Bank in 2000 and advanced to the position of CEO in 2004. His duties as NBT Bancorp president and CEO were added in 2006. Dietrich and his wife Susan have been married for 27 years. The couple has two children, both attending Union College.

Contact Poltenson at npoltenson@cnybj.com