NBT Bancorp announces 1Q 2023 net income of $33.7 million

Vermont Business Magazine NBT Bancorp Inc (NASDAQ: NBTB) reported net income and diluted earnings per share for the three months ended March 31, 2023. NBT Bancorp, based in Norwich, NY, is the parent of NBT Bank with branches in western Vermont.

Net income for the three months ended March 31, 2023 was $33.7 million, or $0.78 per diluted common share, compared to $39.1 million, or $0.90 per diluted share, for the three months ended March 31, 2022, and $36.1 million, or $0.84 per diluted share, in the fourth quarter of 2022.

• Excluding the impact of securities losses and acquisition expenses, the Company generated $0.88 per diluted share of earnings in the first quarter of 2023, compared to $0.86 per share in the fourth quarter of 2022 and $0.91 per share in the first quarter of 2022.
• Net interest income in the first quarter of 2023 increased 18% in comparison to the first quarter of 2022, primarily due to higher yields on earning assets due to increases in the Federal Reserve’s targeted Federal Funds rate as well as the new loan volume pricing, which was partially offset by the higher cost of interest-bearing liabilities. The first quarter of 2022 also included $2.0 million ($0.04 per diluted share) of income from the Paycheck Protection Program (“PPP”).
• The Company recorded a provision for loan losses of $3.9 million ($0.07 per diluted share) in the first quarter of 2023, compared to $0.6 million ($0.01 per diluted share) in the first quarter of 2022.
• First quarter card services income was approximately $4.0 million ($0.07 per diluted share) lower than last year’s first quarter driven by the impact of the statutory price cap provisions of the Durbin Amendment to the Dodd-Frank Act (“Durbin Amendment”) beginning in the third quarter of 2022.
• In the first quarter of 2023, the Company incurred a $5.0 million ($0.09 per diluted share) securities loss on the write-off of a subordinated debt security of a failed bank.
• The Company incurred acquisition expenses of $0.6 million ($0.01 per diluted share) and $1.0 million ($0.02 per diluted share) related to the pending merger with Salisbury Bancorp, Inc. (“Salisbury”) in the first quarter of 2023 and the fourth quarter of 2022, respectively.

CEO Comments

“NBT’s first quarter results reflect the strength of our balance sheet and our consistent and traditional banking franchise,” said NBT President and CEO John H. Watt, Jr. “During a quarter characterized by heightened market volatility, we grew loans and deposits, maintained strong asset quality, increased our capital position and continued to deliver high-quality and timely customer service,” added Watt. “We were also pleased to announce that the shareholders of Salisbury voted overwhelmingly to approve our proposed merger. The merger is expected to close late in the second quarter, subject to customary closing conditions, including receipt of required regulatory approvals,” said Watt.

First Quarter Financial Highlights

Loans

• Period end total loans were $8.26 billion at March 31, 2023 and $8.15 billion at December 31, 2022.
• Period end loans increased $114.4 million from December 31, 2022. Commercial and industrial loans increased $12.3 million to $1.28 billion; commercial real estate loans increased $37.7 million to $2.85 billion; and total consumer loans increased $64.5 million to $4.14 billion.
• Commercial line of credit utilization rate was 22% at March 31, 2023, compared to 21% at December 31, 2022 and 23% at March 31, 2022.

Deposits

• Total deposits at March 31, 2023 were $9.68 billion, compared to $9.50 billion at December 31, 2022. The increase in deposits was concentrated in time and money market accounts with seasonal municipal deposit inflows during the quarter.
• Loan to deposit ratio was 85.4% at March 31, 2023, compared to 85.8% at December 31, 2022.

Net Interest Income and Net Interest Margin

• Net interest income for the first quarter of 2023 was $95.1 million, which was down $4.7 million, or 4.7%, from the fourth quarter of 2022 and up $14.7 million, or 18.3%, from the first quarter of 2022, and included two less days in the quarter compared to the fourth quarter.
• The NIM on an FTE basis for the first quarter of 2023 was 3.55%, down 13 bps from the fourth quarter of 2022 driven by the increase in yields on interest-bearing deposits, as well as higher balances in short-term borrowings and the rates paid on those borrowings. The NIM on an FTE basis was up 60 bps from the first quarter of 2022 due to higher earning asset yields partially offset by higher cost of interest-bearing liabilities.
• Earning asset yields for the three months ended March 31, 2023 were up 24 bps from the prior quarter and up 117 bps from the same quarter in the prior year. Earning assets grew $108.8 million, or 1.0%, from the fourth quarter of 2022, or 4.1% annualized. The following are highlights comparing the first quarter of 2023 to the prior quarter:
  • Loan yields increased 28 bps to 5.00%.
  • Average short-term borrowings increased $162.4 million, quarter over quarter.
• Total cost of deposits, including noninterest bearing deposits, was 0.47% for the first quarter of 2023, up 30 bps from the prior quarter and up 40 bps from the same period in the prior year.
• Total cost of funds for the three months ended March 31, 2023 was 0.75%, up 38 bps from the prior quarter and up 60 bps from the first quarter of 2022.

Asset Quality and Allowance for Loan Losses

• Net charge-offs to total average loans was 19 bps compared to 18 bps in the prior quarter and 14 bps in the first quarter of 2022. The increase in net charge-offs from the first quarter of 2022 was from higher charge-offs in the Company’s other consumer portfolio, which is in a run-off status.
• Nonperforming assets to total assets were 0.16% at March 31, 2023, compared to 0.18% at December 31, 2022 and 0.23% at March 31, 2022.
• Provision expense for the three months ended March 31, 2023 was $3.9 million with net charge-offs of $3.8 million. Provision expense was $3.8 million lower than the fourth quarter of 2022 and $3.3 million higher than the first quarter of 2022. The decrease in provision expense from the fourth quarter of 2022 was due to a lower level of loan growth in the first quarter, generally stable economic forecasts and portfolio mix composition and quality.
• The allowance for loan losses was $100.3 million, or 1.21% of total loans, at March 31, 2023, compared to 1.24% of total loans at December 31, 2022 and 1.18% of total loans at March 31, 2022. The adoption of the accounting changes for troubled debt restructurings on January 1, 2023 reduced the allowance for loan losses by $0.6 million to $100.2 million, or 1.22% of total loans. The reserve for unfunded loan commitments decreased to $4.5 million at March 31, 2023 compared to the prior quarter-end at $5.1 million and to $4.8 million at March 31, 2022.

Noninterest Income

• Total noninterest income, excluding securities losses, was $36.4 million for the three months ended March 31, 2023, up $2.1 million from the fourth quarter and down $6.4 million from the prior year’s first quarter.
• Card services income was comparable to the prior quarter and approximately $4 million lower than the first quarter of 2022 driven by the impact on debit interchange revenues from the statutory price cap provisions of the Durbin Amendment.
• Retirement plan administration fees were seasonally higher than the fourth quarter of 2022 and were lower than the first quarter of 2022 driven by market performance and a decrease in activity-based fees which were primarily statutory plan document restatement requirements.
• Wealth management fees were comparable to the prior quarter, but lower than the first quarter of 2022 driven primarily by a decline in market performance.
• In the first quarter of 2023, the Company recorded a $5.0 million ($0.09 per diluted share) securities loss related to the write-off of a subordinated debt security of a failed bank.

Noninterest Expense

• Total noninterest expense, excluding $0.6 million of acquisition expenses in the first quarter of 2023 and $1.0 million in the fourth quarter of 2022, was comparable to the previous quarter and up 9.1% from the first quarter of 2022.
• Salaries and benefits increased 1.9% from the prior quarter driven by seasonally higher payroll taxes, seasonally higher stock-based compensation expenses and merit pay increases. The increase from the first quarter of 2022 was driven by increased salaries and wages, including merit pay increases and higher benefit plan expenses and staff additions.
• Technology and data services expenses were comparable with the prior quarter and increased from the first quarter of 2022 due to continued investment in digital platform solutions.
• Occupancy costs increased from the prior quarter and the first quarter of 2022 driven by seasonal costs including utility expenses.
• Professional fees and outside services expenses were lower than the prior quarter due to seasonal expenses and timing of external services for several tactical and strategic initiatives incurred in the prior quarter and were comparable to the first quarter of 2022.
• FDIC assessment expense increased $0.6 million ($0.01 per diluted share) from the prior quarter and the first quarter of 2022 driven by the statutory increase in the FDIC assessment rate.
• Loan collection and other real estate owned were comparable to the prior quarter and higher than the first quarter of 2022 due to an offsetting gain on the sale of a property in the first quarter of 2022.
• Other expenses declined from the seasonally higher linked fourth quarter of 2022. The first quarter of 2023 was $2.0 million higher than the prior year first quarter due to the increase in actuarially determined amortization expense related to the Company’s retirement plans and higher travel and training expenses due to increased activity compared to the pandemic-impacted first quarter of 2022.

Income Taxes

• The effective tax rate was 22.2% for the first quarter of 2023, compared to 22.6% for the fourth quarter of 2022 and 22.2% for the first quarter of 2022.

Capital

• Capital ratios remain strong with tangible common equity to tangible assets1 at 7.99%. Tangible book value per share2 was $21.52 at March 31, 2023, $20.65 at December 30, 2022 and $21.25 at March 31, 2022.
• Stockholders’ equity increased $38.1 million from December 31, 2022 driven by net income generation of $33.7 million and a $16.1 million increase in accumulated other comprehensive income due primarily to the change in the market value of securities available for sale, partly offset by dividends declared of $12.9 million.
• March 31, 2023, CET1 capital ratio of 12.28%, leverage ratio of 10.43% and total risk-based capital ratio of 15.53%.

Conference Call and Webcast

The Company will host a conference call at 8:30 a.m. (Eastern) Tuesday, April 25, 2023, to review first quarter 2023 financial results. The audio webcast link, along with the corresponding presentation slides, will be available on the Company’s Event Calendar page at https://www.nbtbancorp.com/bn/presentations-events.html#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 $11.84 billion at March 31, 2023. 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 national benefits administration 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.nbtinsu....

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 24, 2023) – NBT Bancorp Inc