Vermont Business Magazine NBT Bancorp Inc (NASDAQ: NBTB) reported Monday net income and diluted earnings per share for the three and six months ended June 30, 2021. NBT Bank has branches in Northwest Vermont.
Net income for the three months ended June 30, 2021 was $40.3 million, or $0.92 per diluted common share. Net income increased $15.6 million from the second quarter of 2020 primarily due to the estimated impact of the COVID-19 pandemic on expected credit losses in 2020, which resulted in a second quarter 2020 provision for loan losses of $18.8 million. Net income increased $0.5 million from the previous quarter primarily due to lower provision for loan losses and higher noninterest income, partly offset by higher noninterest expense.
Pre-provision net revenue (“PPNR”)1 for the second quarter of 2021 was $49.0 million compared to $47.5 million in the previous quarter and $50.7 million in the second quarter of 2020.
“Through the first half of 2021 momentum at NBT has continued to build,” said NBT President and CEO John H. Watt, Jr. “Our team has driven growth with increases in total loans and pivoted quickly from supporting our customers and communities through the worst of the pandemic and the reopening of our markets to full-on execution of our strategic growth plans. We continue to prioritize our disciplined approach to the allocation of capital, including the advancement of our New England expansion with our first full-service locations in Connecticut opening in the second quarter. Our continued strong capital generation and our commitment to enhancing long-term shareholder value resulted in our decision to increase our quarterly dividend to $0.28 per share, a 3.7% increase.”
Second Quarter Financial Highlights
Net Interest Income / NIM
Loans and Credit Quality
- Period end total loans were $7.5 billion at June 30, 2021 and at December 31, 2020.
- Excluding PPP loans, period end loans increased $60.9 million from March 31, 2021. Commercial and industrial loans increased $12.4 million to $1.5 billion; commercial real estate loans increased $23.5 million to $2.3 billion; and total consumer loans increased $25.0 million to $3.4 billion.
- Total PPP loans as of June 30, 2021 were $360 million (net of unamortized fees). The following activity occurred during the second quarter of 2021:
- $37 million in originations
- $232.3 million of loans forgiven
- $4.7 million of interest and fees recognized into interest income
- Commercial line of credit utilization rate was 22% at June 30, 2021 consistent with 22% at March 31, 2021 and compared to 26% at June 30, 2020.
- Average total deposits in the second quarter of 2021 were $9.9 billion, compared to $9.3 billion in the first quarter of 2021, driven by increases in non-interest bearing demand deposit accounts, money market deposit accounts and savings deposit accounts.
- Loan to deposit ratio was 76.8% at June 30, 2021, compared to 82.6% at December 31, 2020.
Net Interest Income and Net Interest Margin
- Net interest income for the second quarter of 2021 was $79.2 million, which was consistent with the first quarter of 2021 and down $1.3 million or 1.6% from the second quarter of 2020.
- The NIM on a fully taxable equivalent (“FTE”) basis for the second quarter of 2021 was 3.00%, down 17 bps from the first quarter of 2021 and down 38 bps from the second quarter of 2020. The net impact of PPP loans and excess liquidity negatively impacted the NIM by 24 bps in the second quarter of 2021 compared to a negative 8 bps impact in the first quarter 2021. Excluding the impact of PPP lending and excess liquidity from each quarter, the NIM decreased 1 bp from the prior quarter primarily due to a 4 bp decline in earning asset yields partially offset by a 3 bp decline in the cost of interest bearing liabilities and a $223 million increase in average checking deposit account balances during the quarter.
- Earning asset yields for the three months ended June 30, 2021 were down 20 bps from the prior quarter and down 50 bps from the same quarter in the prior year. Earning assets grew $490.0 million or 4.8% from the prior quarter and grew $1.0 billion or 10.7% from the same quarter in the prior year. The following are highlights from the prior quarter:
- Excess liquidity resulted in a $386.7 million increase in the average balances of short-term interest bearing accounts with a yield of 0.09%.
- The average balance of investment securities increased $103.9 million while yields declined 13 bps.
- Loan yields decreased 6 bps to 3.96% for the quarter. Excluding PPP loans, yields decreased 1 bp from the prior quarter.
- Total cost of deposits was 0.12% for the second quarter of 2021, down 2 bps from the prior quarter and down 11 bps from the same period in the prior year.
- The cost of interest-bearing liabilities for the three months ended June 30, 2021 was 0.29%, down 5 bps compared to the prior quarter of 0.34% and down 16 bps from the second quarter of 2020 of 0.45%.
- Cost of interest-bearing deposits decreased 3 bps from the prior quarter and decreased 16 bps from the same quarter in 2020.
Credit Quality and Allowance for Credit Losses
- Net charge-offs to total average loans of 7 bps (7 bps excluding PPP loans) compared to 12 bps (13 bps excluding PPP loans) in the prior quarter and 28 bps (30 bps excluding PPP loans) in the second quarter of 2020. The decrease in charge-offs during the second quarter of 2021 was primarily due to lower charge-offs in the consumer loan portfolios, which continue to be at lower levels due to the support of government pandemic relief programs
- Nonperforming assets to total assets was 0.38% (0.39% excluding PPP loans) compared to 0.41% (0.43% excluding PPP loans) at March 31, 2021 and 0.27% (0.28% excluding PPP loans) at June 30, 2020.
- Provision expense for the three months ended June 30, 2021 was a net benefit of $5.2 million and net charge-offs were $1.3 million. The net provision benefit was $2.4 million more than the first quarter of 2021 compared to provision expense of $18.8 million in the second quarter of 2020. The decrease in provision expense from the prior quarter and second quarter of 2020 was primarily due to the reduction in the level of allowance for loan losses resulting from an improved economic forecast and lower levels of charge-offs.
- The allowance for loan losses was $98.5 million or 1.31% (1.38% excluding PPP loans and related allowance) of total loans compared to 1.38% (1.48% excluding PPP loans and related allowance) at March 31, 2021 and 1.49% (1.59% excluding PPP loans and related allowance) at June 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 $5.8 million at June 30, 2021 compared to the prior quarter at $5.9 million.
- Total noninterest income, excluding securities gains (losses), was $39.1 million for the three months ended June 30, 2021, up $2.5 million from the prior quarter and up $4.3 million from the prior year quarter.
- Service charges on deposit accounts were comparable to the prior quarter and higher than the second quarter of 2020.
- ATM and debit card fees were up compared to the prior quarter and the second quarter of 2020 due to increased volume and higher per transaction rates.
- Retirement plan administration fees were lower than the prior quarter driven by seasonal revenue fluctuations, and higher than the second quarter of 2020 driven by market performance and organic growth in relationships.
- Wealth management fees was higher than both the prior quarter and second quarter of 2020 driven by market performance and organic growth.
- Other noninterest income increased slightly from the prior quarter and decreased from the second quarter of 2020 due to lower loan swap fee income and lower mortgage banking income.
- Total noninterest expense for the second quarter of 2021 was up 5.2% from the previous quarter and up 9.3% from the second quarter of 2020.
- Salaries and benefits increased from the prior quarter and the second quarter of 2020 due to one additional day of payroll in the second quarter, annual merit pay increases and higher medical expenses, partially offset by lower stock-based compensation.
- Occupancy expense is down from the prior quarter due to lower seasonal maintenance and utility expenses and comparable to the second quarter of 2020.
- Data processing and communications decreased from the prior quarter and were higher compared to the second quarter of 2020 driven by continued investments in digital platform solutions including a technology-enabled PPP platform.
- Professional fees and outside services increased from the prior quarter due to timing of initiatives, and were higher compared to the second quarter of 2020 as a result of certain projects paused during the COVID-19 pandemic.
- Equipment expense was higher than both the prior quarter and the second quarter of 2020 due to higher technology costs associated with several digital upgrades.
- Other expenses increased from the prior quarter and the second quarter of 2020 and included $1.9 million in non-recurring costs, including an estimated legal settlement charge.
- The effective tax rate was 22.9% for the second quarter of 2021 compared to 21.9% for the first quarter of 2021 and 21.0% for the second quarter of 2020. The increase was due to a higher level of taxable income relative to total income.
- Capital ratios remain strong with tangible common equity to tangible assets1 at 8.28%. Tangible book value per share2 grew 4% from the prior quarter and 10% from the prior year quarter to $21.50.
- June 30, 2021 CET1 capital ratio of 12.12%, leverage ratio of 9.40 % and total risk-based capital ratio of 15.78%.
Dividend and Stock Repurchase
- The Board of Directors approved a third-quarter cash dividend of $0.28 per share at a meeting held today. The dividend, which represents a $0.01, or 3.7% increase, will be paid on September 15, 2021 to shareholders of record as of September 1, 2021. The increased dividend represents a yield of 3.3% based upon the closing price of the Company’s stock on July 21, 2021.
- The Company purchased 23,627 shares of common stock during the second quarter of 2021 at a weighted average price of $36.03 excluding commissions. As of June 30, 2021, there were 1,719,342 shares available for repurchase under this plan, which expires on December 31, 2021.
Conference Call and Webcast
The Company hosted a conference call at 8:30 a.m. (Eastern) Tuesday, July 27, 2021, to review second 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.
NBT Bancorp Inc. is a financial holding company headquartered in Norwich, NY, with total assets of $11.6 billion at June 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.
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 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.
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 (July 26, 2021) – NBT Bancorp Inc