NBT Bancorp announces 1Q21 net income of $39.8 million

Submitted by tim on Wed, 04/28/2021 - 02:11

Vermont Business Magazine NBT Bancorp Inc (NASDAQ: NBTB) has reported net income and diluted earnings per share for the three months ended March 31, 2021. Net income for the three months ended March 31, 2021 was $39.8 million, or $0.91 per diluted common share. Net income increased $5.7 million from the previous quarter primarily due to lower provision for loan losses and branch optimization charges recognized in the previous quarter.

Net income increased $29.5 million from the first quarter of 2020 due to the adoption of the Current Expected Credit Losses (“CECL”) accounting methodology, including the estimated impact of the COVID-19 pandemic on expected credit losses, which resulted in first quarter 2020 provision for loan losses of $29.6 million.

Pre-provision net revenue (“PPNR”)¹ for the first quarter of 2021 was $47.5 million compared to $48.2 million in the previous quarter and $44.9 million in the first quarter of 2020.

CEO Comments

“The results for the first quarter of 2021 demonstrate the resiliency of our banking platform. We drove commercial loan growth and experienced increased levels of consumer activity. Our mortgage pipeline is strong, and our indirect auto business exceeded production targets,” said NBT President and CEO John H. Watt, Jr. “We are optimistic about the prospects for the rest of the year driven by pent up demand and a snap back in many sectors of the economy that we anticipate will occur as the markets we serve continue to open up. Sustained levels of excellent credit quality allow for plenty of optionality in the deployment of capital which will drive growth. Record Assets Under Management and Administration in our wealth management business exceeded $9 billion. Finally, we leaned heavily into the Paycheck Protection Program in the latest round of funding to support the Main Street businesses and non-profits that are the backbone of the communities we serve.”

First Quarter Financial Highlights

Net Income	Net income of $39.8 million Diluted earnings per share of $0.91
Net Interest Income / NIM	Net interest income on a fully taxable equivalent basis was $79.4 million¹ Net interest margin (“NIM”) on a fully taxable equivalent basis was 3.17%¹, down 3 basis points (“bps”) from the prior quarter
PPNR	PPNR¹ was $47.5 million compared to $48.2 million in the fourth quarter of 2020 and $44.9 million in the first quarter of 2020
Loans and Credit Quality	Period end loans were $7.6 billion, up 7%, annualized, from December 31, 2020 Excluding $536 million of Paycheck Protection Program (“PPP”) loans at March 31, 2021, period end loans increased $29 million or 0.4% from December 31, 2020 Allowance for loan losses to total loans of 1.38% (1.48% excluding PPP loans and related allowance), down 9 bps from the fourth quarter (down 8 bps excluding PPP loans and related allowance) Net charge-offs to average loans was 0.12%, annualized (0.13% excluding PPP loans) Nonperforming assets to total assets was 0.41% (0.43% excluding PPP loans)
Capital	Tangible book value per share² grew 1% for the quarter and 9% from prior year to $20.71 at March 31, 2021 Tangible equity to assets of 8.00%¹ CET1 ratio of 12.13%; Leverage ratio of 9.60%

Loans

Period end total loans were $7.6 billion at March 31, 2021 and $7.5 billion at December 31, 2020.
Excluding PPP loans, period end loans increased $28.9 million from December 31, 2020. Commercial and industrial loans increased $3.6 million to $1.3 billion; commercial real estate loans increased $57.5 million to $2.4 billion; and total consumer loans decreased $32.2 million to $3.4 billion.
Total PPP loans as of March 31, 2021 were $536 million (net of unamortized fees). The following activity occurred during the first quarter of 2021:
- $250 million in originations
- $132.8 million of loans forgiven
- $6.2 million recognized into interest income
Commercial line of credit utilization rate was 22% at March 31, 2021 consistent with 22% at December 31, 2020 and compared to 32% at March 31, 2020.

Deposits

Average total deposits in the first quarter of 2021 were $9.3 billion, compared to $9.1 billion in the fourth quarter of 2020, driven by increases in non-interest bearing demand deposit accounts and savings deposit accounts.
Loan to deposit ratio was 77.8% at March 31, 2021, compared to 82.6% at December 31, 2020.

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2021 was $79.1 million, down $1.1 million or 1.3% from the fourth quarter of 2020 and up $1.9 million or 2.4% from the first quarter of 2020.
The NIM on a fully taxable equivalent (“FTE”) basis for the first quarter of 2021 was 3.17%, down 3 bps from the fourth quarter of 2020 and down 35 bps from the first quarter of 2020. The net impact of PPP loans and excess liquidity impacted the NIM by 8 bps in the both the first quarter and fourth quarter of 2020. Excluding the impact of PPP lending and excess liquidity from each quarter, the NIM decreased 3 bps from the prior quarter primarily due to an 8 bps decline in earning asset yields partially offset by a 6 bps decline in the cost of interest bearing liabilities and a $141 million increase in average checking deposit account balances during the quarter.
Earning asset yields for the three months ended March 31, 2021 were down 8 bps from the prior quarter and down 69 bps from the same quarter in the prior year. Earning assets grew $155.5 million or 1.6% from the prior quarter and grew $1.3 billion or 14.4% from the same quarter in the prior year. The following are highlights from the prior quarter:
- Excess liquidity resulted in a $34.8 million increase in the average balances of short-term interest bearing accounts.
- The average balance of investment securities increased $83.0 million while yields declined 6 bps.
- Loan yields decreased 4 bps to 4.02% for the quarter. Excluding PPP loans, yields decreased 7 bps from the prior quarter driven by a 12 bps yield reduction in the commercial loan portfolio.
Total cost of deposits was 0.14% for the first quarter of 2021, down 3 bps from the prior quarter and down 34 bps from the same period in the prior year.
The cost of interest-bearing liabilities for the three months ended March 31, 2021 was 0.34%, down 6 bps compared to the prior quarter of 0.40% and down 48 bps from the first quarter of 2020 of 0.82%.
- Cost of interest-bearing deposits decreased 5 bps from the prior quarter and decreased 48 bps from the same quarter in 2020.

Credit Quality and Allowance for Credit Losses

Net charge-offs to total average loans of 12 bps (13 bps excluding PPP loans) compared to 21 bps (22 bps excluding PPP loans) in the prior quarter and 32 bps in the first quarter of 2020. The decrease in charge-offs during the first quarter of 2021 was primarily due to lower charge-offs in commercial and indirect auto, which continue to be at lower levels due to pandemic relief programs.
Nonperforming assets to total assets was 0.41% (0.43% excluding PPP loans) compared to 0.45% (0.47% excluding PPP loans) at December 31, 2020.
Provision expense for the three months ended March 31, 2021 was ($2.8) million and net charge-offs were $2.2 million. Provision expense decreased $2.2 million from the fourth quarter of 2020 and decreased $32.4 million from the first quarter of 2020. The decrease in provision expense from the prior quarter and first quarter of 2020 was primarily due to the reduction in the level of allowance for loan losses resulting from an improved economic forecast.
The allowance for loan losses was $105.0 million or 1.38% (1.48% excluding PPP loans and related allowance) of total loans compared to 1.47% (1.56% excluding PPP loans and related allowance) at December 31, 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.

As of April 12, 2021, 1.0% of loans (loans outstanding as of March 31, 2021; excluding PPP balances) are in payment deferral programs which is down from the second quarter 2020 peak of 14.9%.
The reserve for unfunded loan commitments decreased to $5.9 million at March 31, 2021 compared to the prior quarter at $6.4 million.

Noninterest Income

Total noninterest income, excluding securities gains (losses), was $36.6 million for the three months ended March 31, 2021, down $1.4 million from the prior quarter and up $0.3 million from the prior year quarter.
Service charges on deposit accounts were lower than the prior quarter and lower than the first quarter of 2020. Overdraft charges have been lower during the COVID-19 pandemic.
ATM and debit card fees were comparable to the prior quarter and higher compared to the first quarter of 2020 due to increased volume and higher per transaction rates.
Retirement plan administration fees were higher than the prior quarter driven by market performance and organic growth, and higher than the first quarter of 2020 due to the April 1, 2020 acquisition of Alliance Benefit Group of Illinois, Inc. (“ABG”) contributing $1.7 million in revenues during the first quarter of 2021 and $1.5 million during the fourth quarter of 2020.
The decrease in other noninterest income from the prior quarter was primarily due to lower loan swap fee income and the decrease from the first quarter of 2020 was driven by lower loan swap fee income combined with lower mortgage banking income.

Noninterest Expense

Total noninterest expense for the first quarter of 2021 was down 9.7% from the previous quarter and down 4.2% from the first quarter of 2020, primarily due to $4.1 million in branch optimization costs incurred during the fourth quarter of 2020.
Salaries and benefits increased from the prior quarter due to seasonally higher payroll taxes and stock-based compensation expenses and increased from the first quarter of 2020 driven by the addition of ABG’s salaries and benefits.
Data processing and communications increased from the prior quarter and the first quarter of 2020 driven by charges related to the addition of a digitized PPP platform.
Professional fees and outside services decreased from the prior quarter due to timing of initiatives.
Other expenses decreased $7.4 million from the prior quarter due to $4.1 million in branch optimization charges recognized in the prior quarter, a $1.4 million decrease in the provision for the reserve for unfunded commitments, lower travel training expenses and lower pension costs. The decrease from the first quarter of 2020 was due to a $2.5 million decrease in the reserve for unfunded commitments, lower travel training expenses during the COVID-19 pandemic and lower pension costs.

Income Taxes

The effective tax rate was 21.9% for the first quarter of 2021 compared to 21.6% for the fourth quarter of 2020 and 14.2% for the first quarter of 2020. The increase from the first quarter of 2020 was due to a higher level of taxable income relative to total income.

Capital

Capital ratios remain strong with tangible common equity to tangible assets¹ at 8.00%. Tangible book value per share² grew 1% from the prior quarter and 9% from the prior year quarter to $20.71.
March 31, 2021 CET1 capital ratio of 12.13%, leverage ratio of 9.60 % and total risk-based capital ratio of 15.92 %.

Stock Repurchase and Dividend

The Company purchased 257,031 shares of common stock during the first quarter of 2021 at a weighted average price of $35.09 excluding commissions. As of March 31, 2021, there were 1,742,969 shares available for repurchase under this plan, which expires on December 31, 2021.
The Board of Directors approved a second-quarter cash dividend of $0.27 per share at a meeting held today. The dividend will be paid on June 15, 2021 to shareholders of record as of June 1, 2021.

Conference Call and Webcast

The Company hosted a conference call at 8:30 a.m. (Eastern) Tuesday, April 27, 2021, to review first 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 $11.5 billion at March 31, 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 141 banking locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire and Maine, and is currently entering Connecticut. EPIC Retirement Plan Services, based in Rochester, NY, is a full-service 401(k) plan 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.

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.

Source: NORWICH, NY (April 26, 2021) – NBT Bancorp Inc