NBT Bancorp (US:NBTB)2022-07-26 16:02Financial Data and Key Metrics Changes - The company's earnings per share for Q2 2022 was $0.88, down from $0.92 in Q2 2021 and $0.02 lower than Q1 2022 [11] - Return on Assets (ROA) was reported at 1.28% and Return on Average Tangible Common Equity (ROATCE) at 17% [4] - Net interest income increased by $8.4 million compared to Q2 2021 and $7.2 million from Q1 2022, with a net interest margin of 3.21%, up 26 basis points from Q1 2022 and 21 basis points from Q2 2021 [16] Business Line Data and Key Metrics Changes - Commercial loan originations reached $310 million, a 24% increase from the previous quarter [5] - Non-interest income accounted for nearly 33% of total revenue, with fee income up 8% year-over-year to $42.2 million [18] - The residential solar partnership with Sungage showed strong performance, with notable loan originations and pristine credit quality [6] Market Data and Key Metrics Changes - Total loans, excluding PPP, increased by $162 million for the quarter, with growth in both consumer and commercial portfolios [14] - Total PPP balances decreased to just over $17 million, with forgiveness nearly complete for 2020 and 2021 vintage loans [14] - Deposits decreased by $433 million from the end of Q1 2022, primarily due to a $100 million brokered deposit maturity and seasonal declines in municipal deposits [15] Company Strategy and Development Direction - The company is well-positioned with strong liquidity and capital levels, a diversified business mix, and effective risk management practices [9] - The management remains cautious about the operating environment but sees strong consumer demand and healthy credit quality [7] - The company continues to explore growth opportunities, including potential M&A, while being selective about partners [35][36] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is potential for increased uncertainty and volatility, the company is prepared with strong fundamentals [9] - The management expressed confidence in the consumer's ability to navigate rising costs, with no observed deterioration in credit quality as of the end of Q2 2022 [82] - The company anticipates continued net interest margin improvement as interest rates rise, with expectations for higher yields on variable rate earning assets [17][70] Other Important Information - The Board of Directors approved a 7% increase in the dividend, marking the 10th consecutive year of annual dividend increases [8] - Total operating expenses for the quarter were $76.1 million, up 6.6% from Q2 2021, driven by higher salaries and employee benefits [21] Q&A Session Summary Question: Momentum in the commercial loan portfolio - Management noted strong growth in commercial loans, particularly in New England and Northeastern Pennsylvania, with expectations for continued activity despite potential moderation due to higher rates [29][30] Question: Increase in Allowance for Credit Losses (ACL) - The increase in ACL was described as prudent, considering uncertainties in the macroeconomic environment, with provisions made to cover minimal charge-offs and support portfolio growth [32][33] Question: M&A strategy amidst changing interest rates - The management confirmed a cautious approach to M&A, with ongoing discussions with potential partners, but noted a slight pause due to the impact of rising rates on valuations [35][39] Question: Expense guidance and hiring outlook - The company expects operating expenses to drift modestly higher, with ongoing efforts to fill open positions to support growth objectives [45] Question: Deposit flows and customer behavior - Management highlighted a significant drop in deposits due to seasonal factors and brokered deposit maturities, but remains optimistic about adding new accounts [46][50] Question: Fee income outlook in retirement and wealth management - Management expressed confidence in the growth potential of retirement plan administration and wealth management, despite market impacts on revenues [55][56]