Biz Buzz

NBT Bancorp Inc. (“NBT” or the “Company”) (NASDAQ: NBTB) reported net income and diluted earnings per share for the three and nine months ended September 30, 2021.

Net income for the three months ended September 30, 2021 was $37.4 million, or $0.86 per diluted common share. Net income increased $2.3 million from the third quarter of 2020, primarily due to changes in the estimated impact of the COVID-19 pandemic on expected credit losses. The third quarter 2020 provision for loan losses was $3.3 million compared to the third quarter 2021 provision release of $3.3 million. Net income decreased $2.9 million from the previous quarter primarily due to a lower net benefit from provision for loan losses and slightly higher noninterest expense, partly offset by higher noninterest income.

Pre-provision net revenue (“PPNR”)¹ for the third quarter of 2021 was $47.4 million compared to $49.0 million in the previous quarter and $49.6 million in the third quarter of 2020. Income from Paycheck Protection Program (“PPP”) loans decreased $1.9 million and $1.8 million from the previous quarter and the third quarter of 2020, respectively.

CEO Comments

“We continue to experience momentum across the markets we serve. Our team is focused on our customers and successful execution of our key strategies,” said NBT President and CEO John H. Watt, Jr. “Across our New England footprint, we are advancing our growth strategy by leveraging the market disruption occurring in that region. Our balance sheet is strong and it continues to provide us optionality to deploy capital in a strategic manner, and we are actively exploring opportunities.”

Third Quarter Financial Highlights

Loans

• Period end total loans were $7.6 billion at September 30, 2021 and $7.5 billion at December 31, 2020.
• Excluding PPP loans, period end loans increased $222 million from December 31, 2020. Commercial and industrial loans increased $15.0 million to $1.5 billion; commercial real estate loans increased $123.9 million to $2.3 billion; and total consumer loans increased $83.3 million to $3.5 billion.
• Total PPP loans as of September 30, 2021 were $276 million (net of unamortized fees). The following activity occurred during the third quarter of 2021:
  • $84.7 million of loans forgiven
  • $2.9 million of interest and fees recognized into interest income compared to $4.7 million for the second quarter of 2021
• Commercial line of credit utilization rate was 21% at September 30, 2021 compared to 22% at June 30, 2021 and compared to 25% at September 30, 2020.

Deposits

• Average total deposits in the third quarter of 2021 were $10.0 billion, compared to $9.9 billion in the second quarter of 2021, driven by increases in non-interest bearing demand deposit accounts and savings deposit accounts, partly offset by the decrease in money market deposit accounts and time deposits accounts.
• Loan to deposit ratio was 74.2% at September 30, 2021, compared to 82.6% at December 31, 2020.

Net Interest Income and Net Interest Margin

• Net interest income for the third quarter of 2021 was $77.7 million, which was down $1.5 million or 1.9% from the second quarter of 2021 and down $0.3 million or 0.3% from the third quarter of 2020.
• The NIM on a fully taxable equivalent (“FTE”) basis for the third quarter of 2021 was 2.88%, down 12 bps from the second quarter of 2021 and down 29 bps from the third quarter of 2020. The net impact of income from PPP loans and excess liquidity negatively impacted the NIM by 26 bps in the third quarter of 2021 compared to a negative 24 bps impact in the second quarter 2021. Excluding the impact of PPP lending and excess liquidity from each quarter, the NIM decreased 10 bps from the prior quarter primarily due to an 11 bp decline in earning asset yields partially offset by a 1 bp decline in the cost of interest bearing liabilities.
• Earning asset yields for the three months ended September 30, 2021 were down 13 bps from the prior quarter and down 40 bps from the same quarter in the prior year. Earning assets grew $96.4 million or 0.9% from the prior quarter and grew $901.2 million or 9.2% from the same quarter in the prior year. The following are highlights comparing the third quarter 2021 to the prior quarter:
  • Excess liquidity resulted in a $40.0 million increase in the average balances of short-term interest bearing accounts with a yield of 0.16%.
  • The average balance of investment securities increased $112.8 million while yields declined 11 bps.
  • Loan yields decreased 12 bps to 3.84% for the quarter. Excluding PPP loans, yields decreased 10 bps from the prior quarter.
• Total cost of deposits was 0.10% for the third quarter of 2021, down 2 bps from the prior quarter and down 9 bps from the same period in the prior year.
• The cost of interest-bearing liabilities for the three months ended September 30, 2021 was 0.27%, down 2 bps compared to the prior quarter of 0.29% and down 18 bps from the third quarter of 2020 of 0.45%.

Credit Quality and Allowance for Credit Losses

• Net charge-offs to total average loans of 11 bps (12 bps excluding PPP loans) compared to 7 bps (7 bps excluding PPP loans) in the prior quarter and 12 bps (13 bps excluding PPP loans) in the third quarter of 2020. 36% of the quarter’s net charge-offs were reserved for previously.
• Nonperforming assets to total assets was 0.33% (0.34% excluding PPP loans) compared to 0.38% (0.39% excluding PPP loans) at June 30, 2021 and 0.37% (0.39% excluding PPP loans) at September 30, 2020.
• Provision expense for the three months ended September 30, 2021 was a net benefit of $3.3 million with net charge-offs of $2.2 million. The net provision benefit was $1.9 million less than the second quarter of 2021 compared to provision expense of $3.3 million in the third quarter of 2020. The increase in net provision benefit from the third quarter of 2020 was primarily due to the impacts of an improved economic forecast on the required level of allowance for loan losses.
• The allowance for loan losses was $93.0 million or 1.23% (1.28% excluding PPP loans and related allowance) of total loans compared to 1.31% (1.38% excluding PPP loans and related allowance) at June 30, 2021 and 1.51% (1.62% excluding PPP loans and related allowance) at September 30, 2020. The decrease in the level of allowance for credit losses was primarily due to the positive impact the forecasted improving economic conditions had on expected credit losses.

• The reserve for unfunded loan commitments decreased to $5.3 million at September 30, 2021 compared to the prior quarter at $5.8 million.

Noninterest Income

• Total noninterest income, excluding securities gains (losses), was $40.4 million for the three months ended September 30, 2021, up $1.3 million from the prior quarter and up $2.8 million from the prior year quarter.
• Service charges on deposit accounts were higher than the prior quarter and the third quarter of 2020, but still significantly below pre-pandemic levels.
• ATM and debit card fees were comparable to the prior quarter and higher than the third quarter of 2020 due to increased volume and higher per transaction rates.
• Retirement plan administration fees were higher than the prior quarter and higher than the third quarter of 2020 driven by market performance and organic growth in relationships.
• Wealth management fees were higher than both the prior quarter and third quarter of 2020 driven by market performance and additional new customers.
• Other noninterest income decreased from the prior quarter due to lower swap fee income and decreased from the third quarter of 2020 driven by lower mortgage banking income.

Noninterest Expense                                 

• Total noninterest expense for the third quarter of 2021 was up 2.0% from the previous quarter and up 9.9% from the third quarter of 2020.
• Salaries and benefits increased from the prior quarter and the third quarter of 2020 due to one additional day of payroll in the third quarter, increased medical expenses and higher incentive compensation accruals.
• Data processing and communications decreased from the prior quarter driven by lower expenses related to processing of PPP loans and was comparable to the third quarter of 2020.
• Equipment expense was comparable to the prior quarter and higher than the third quarter of 2020 due to higher technology costs associated with several digital upgrades.
• Other expenses increased from the prior quarter and the third quarter of 2020 and included $2.3 million in non-recurring costs, primarily from estimated litigation settlement costs related to a pending lawsuit regarding certain of the Company’s deposit products and related disclosures. The Company does not anticipate further material accruals related to this legal matter. 

Income Taxes

• The effective tax rate was 22.8% for the third quarter of 2021 compared to 22.9% for the second quarter of 2021 and 23.8% for the third quarter of 2020. The lower effective tax rate compared to the third quarter of 2020 was due to the change in the level of taxable income to bring the nine months ended September 30, 2020 estimated effective tax rate to 21.75%.

Capital

• Capital ratios remain strong with tangible common equity to tangible assets¹ at 8.13%. Tangible book value per share² grew 2% from the prior quarter and 10% from the prior year quarter to $21.95.
• September 30, 2021 CET1 capital ratio of 12.20%, leverage ratio of 9.47% and total risk-based capital ratio of 15.74%.

Dividend and Stock Repurchase

• The Board of Directors approved a fourth-quarter cash dividend of $0.28 per share at a meeting held yesterday, an increase of 3.7% from the amount paid in the fourth quarter of 2020. The dividend will be paid on December 15, 2021 to shareholders of record as of December 1, 2021.
• The Company purchased 119,342 shares of common stock during the third quarter of 2021 at a weighted average price of $35.30 excluding commissions. As of September 30, 2021, there were 1,600,000 shares available for repurchase under this plan, which expires on December 31, 2021.

Conference Call and Webcast

The Company will host a conference call at 8:30 a.m. (Eastern) Wednesday, October 27, 2021, to review third quarter 2021 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 $12.0 billion at September 30, 2021. 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 full-service retirement plan administration and recordkeeping 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 news 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 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 novel coronavirus, which causes COVID-19 global pandemic; and (21) the Company’s success at managing the risks involved in the foregoing items.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company, its customers and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the speed and effectiveness of vaccine and treatment developments and deployment, and its impact on the Company’s customers and demand for financial services, the actions governments, businesses and individuals take in response to the pandemic, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies, national and local economic activity, and the pace of recovery when the COVID-19 pandemic subsides, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. The Company cautions readers not 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.