Allan Kirby
Jun 4, 20204 min
"NBT Bancorp is a small regional bank that is a steady dividend growth story, could this be a stock for you.”
Key Takeaways:
Stable dividend with a 4.60% growth rate ($.27 per share, quarterly) .
Yields 3.45%.
This is a steady income earner with some growth.
By: Allan R Kirby
Sector: Financial
Name: NBT Bancorp Inc
Total Assets: $9.95 billion
Summary of NBT Bancorp Inc (NBTB)
Market Cap: 1.37 Billion.
Yield: 3.45%
Dividend quarterly (.27)
Dividend Yearly (1.08)
Last dividend increase: $.01 2019
Average Daily Volume: 195,387
Net Interest Margin (NIM): 3.52% (about average)
Past Performance:
This is a financial stock that has seen a reasonable compounded annual revenue growth of 2.6% over the last five years and a much healthier 4.43% over the past three years. Net interest income has also been steadily growing at over 4% for the last five years. When it comes to loans, we have seen steady growth in gross loans of over 5% in the last five years but with no increase in the provisions of loan losses, meaning NBT is lending customers are paying back their loans. One area I like to look at besides the efficiency ratio is bank deposits. Banks that see a steady increase in deposits can then make loans on those deposits. So if a bank is steadily increasing their deposits, is clearly shows customers are coming to the bank. This is the case with NBT.
Most Recently Quarterly Results: How did NBT Bank do?
Most recent quarterly results are shown below. Overall it was not a terrible quarter, with loans up a total of 6.3% on a yearly basis. What is concerning from the most recent results is the uptick in nonperforming assets to total assets; Which were 0.35% compared to 0.3%. Additionally the provision expense increased $23.6 million from the fourth quarter of 2019. This was primarily due to an increase in expected losses resulting from deterioration of the economic forecast due to the COVID-19 pandemic. The allowance for loan losses was $100.0 million, or 1.38% of total loans compared to 1.02% at December 31, 2019. I take this to mean there is an expectation that loan losses could increase over the coming quarters. This is a red flag but overall it's not concerning enough to change our views of this stock.
Net Income
Net income of $10.4 million
Diluted earnings per share of $0.23
Net Interest Income (NIM)
Net interest income on a fully taxable equivalent basis was $77.5 million
Net interest margin (“NIM”) on a fully taxable equivalent basis was 3.52% and flat from the fourth quarter of 2019.
Loans and Credit Quality
Period end loans were $7.2 billion, up 6.3%, annualized, from December 31, 2019
Allowance for loans losses to total loans of 1.38%
Net charge-offs to average loans were 0.32%, annualized
Nonperforming assets to total assets were 0.35%
Capital
Tangible equity to assets of 8.55%
CET1 ratio of 10.90%; Total leverage ratio of 10.02%
Overall this is a great income generating bank that will likely to continue to produce relatively solid profits over the long term. In the short term however we are cautions of NBT, First we had a 150-basis-point drop in the federal funds rate which will pressure NBT's earnings. Secondly we could see further deterioration in the economy which could further increase loan losses. Finally with a Book value per share of $25.52 and Tangible book value is $18.96 and a current share price of $31.45; The stock is only slightly undervalued. We are therefore neutral on NBT stock.
Do some research and decide for yourself if this is a stock to add to your portfolio.
A short history of NBT Bank: As stated on wikipedia: NBT was Founded in 1856, the Bank was first a state-chartered bank called the Bank of Norwich. On June 28, 1865, the bank received a national charter (which it holds to this day) and changed its name to the National Bank of Norwich. In 1918, NBT Bank was one of the first national banks in New York State to apply for and receive trust powers under a Federal Reserve Act and established a Trust Department.
In 1925, NBT Bank changed its name a second time to better reflect its expanded services. Over the years, the area served by NBT Bank expanded and in 1989 the bank changed its name for the third time to The National Bank and Trust Company without "of Norwich." In 1995, the bank changed its name for the fourth time to NBT Bank, At the same time, NBT Bank introduced its current logo featuring a blue star and red lettering.
In 2016, NBT Bank celebrated its 160th year in business and published an updated history of the bank to commemorate this milestone.
Website: Here
Investor Relations: Here
Bank size: Regional Community Bank
As per their website; NBT bank operates through a network of more than 150 banking locations serving north-eastern states including offices in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire and Maine.
Recent Acquisitions
NBT Bancorp Inc. (NBT) subsidiary EPIC Retirement Plan Services (EPIC RPS), a full-service 401(k) recordkeeping firm, has signed a definitive agreement to purchase the assets of Alliance Benefit Group of Illinois, Inc. (ABGIL). ABGIL is a retirement plan services company located in Peoria, Illinois that provides full-service recordkeeping, administration, fiduciary investment advice and plan design solutions to employers nationwide.
Stocks to buy is a segment of the MySmallBank.com blog written by Allan R Kirby, who writes and produces Personal Finance articles and videos along with My Success Magazine.
Disclosure: mysmallbank.com nor the author received any compensation from the mentioned security for this article. The article is our opinion only and is written to help readers learn more about community bank stocks. Consider this as basic information only and utilize professional services and additional sources before making an investment decision.