NBT Bancorp Inc. (NBTB) Bundle
Understanding NBT Bancorp Inc. (NBTB) Revenue Streams
Understanding NBT Bancorp Inc.’s Revenue Streams
NBT Bancorp Inc. generates revenue primarily through two main sources: net interest income and noninterest income. Below is a detailed breakdown of these revenue streams.
Breakdown of Primary Revenue Sources
- Net Interest Income: This is derived from interest earned on loans and securities minus interest paid on deposits and borrowings.
- Noninterest Income: This includes service charges on deposit accounts, card services, retirement plan administration fees, wealth management, insurance services, and other fees.
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, NBT Bancorp reported:
- Net Interest Income: $101.7 million, a 7.1% increase from $94.9 million in Q3 2023.
- Noninterest Income: $45.8 million, up 13.8% from $40.2 million in Q3 2023.
For the nine months ended September 30, 2024:
- Net Interest Income: $294.0 million, a 5.4% increase from $278.9 million in the same period of 2023.
- Noninterest Income: $134.4 million, reflecting a 29.6% increase from $103.7 million in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the contributions of various segments to total revenue for the three and nine months ended September 30, 2024 and 2023:
| Revenue Source | Q3 2024 ($ in thousands) | Q3 2023 ($ in thousands) | 9M 2024 ($ in thousands) | 9M 2023 ($ in thousands) |
|---|---|---|---|---|
| Net Interest Income | $101,700 | $94,900 | $294,000 | $278,900 |
| Noninterest Income | $45,774 | $40,236 | $134,398 | $103,690 |
| Total Revenue | $147,474 | $135,136 | $428,398 | $382,590 |
Analysis of Significant Changes in Revenue Streams
The increase in net interest income is primarily attributed to a rise in interest rates, leading to higher yields on loans and securities. The average yield on interest-earning assets increased to 5.01% in Q3 2024 compared to 4.63% in Q3 2023. This was accompanied by a $1.13 billion increase in average interest-earning assets due to the acquisition of Salisbury Bank and organic loan growth.
Noninterest income growth was driven by:
- Retirement Plan Administration Fees: Increased from $12.8 million in Q3 2023 to $14.6 million in Q3 2024.
- Wealth Management Fees: Rose from $9.3 million in Q3 2023 to $10.9 million in Q3 2024.
- Insurance Services: Grew from $4.4 million in Q3 2023 to $4.9 million in Q3 2024.
Overall, the combined revenue growth reflects NBT Bancorp's strategic initiatives and successful integration of acquisitions, contributing positively to its financial health.
A Deep Dive into NBT Bancorp Inc. (NBTB) Profitability
A Deep Dive into NBT Bancorp Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the net interest income was $294.0 million, which represents a 5.4% increase from $278.9 million for the same period in 2023. The gross profit margin is indicative of the company's ability to manage its revenue against the cost of earning assets.
Operating Profit Margin: The operating net income for the three months ended September 30, 2024, was $38.1 million, resulting in an operating profit margin of approximately 37.4% based on the total revenue of $101.7 million for that period.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $38.1 million, yielding a net profit margin of 37.4% on total revenues. For the nine months ended September 30, 2024, net income was $104.6 million, leading to a net profit margin of approximately 35.6%.
| Period | Net Interest Income ($ million) | Operating Income ($ million) | Net Income ($ million) | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|---|---|---|
| Q3 2024 | 101.7 | 38.1 | 38.1 | -- | 37.4 | 37.4 |
| Q3 2023 | 94.9 | 32.8 | 24.6 | -- | 34.5 | 25.9 |
| 9M 2024 | 294.0 | 103.1 | 104.6 | -- | 35.1 | 35.6 |
| 9M 2023 | 278.9 | 110.9 | 88.3 | -- | 39.8 | 31.7 |
Trends in Profitability: Over the past year, the company's profitability has shown a positive trend, with net income for Q3 2024 increasing by $13.5 million compared to Q3 2023, reflecting a strong operational performance. The return on average assets for Q3 2024 was 1.12%, up from 0.76% in Q3 2023. The return on average equity was 10.21% for Q3 2024, compared to 7.48% for the same period last year.
Comparison of Profitability Ratios with Industry Averages: The return on average assets of 1.12% for Q3 2024 exceeds the industry average of approximately 1.00%. The return on average equity of 10.21% also surpasses the industry average of 9.5%.
Operational Efficiency: The noninterest expense, excluding acquisition expenses, was reported at $95.7 million for Q3 2024, which reflects an increase of 14.9% from the same period in the prior year. The net interest margin (FTE) was 3.27% for Q3 2024, slightly increasing from 3.21% in Q3 2023. This indicates a focus on cost management despite the rising expenses.
Summary of Key Financial Metrics:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Interest Margin (FTE) | 3.27% | 3.21% | 3.20% | 3.34% |
| Return on Average Assets | 1.12% | 0.76% | 1.04% | 0.97% |
| Return on Average Equity | 10.21% | 7.48% | 9.62% | 9.54% |
| Operating Profit Margin | 37.4% | 34.5% | 35.1% | 39.8% |
Debt vs. Equity: How NBT Bancorp Inc. (NBTB) Finances Its Growth
Debt vs. Equity: How NBT Bancorp Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the total short-term borrowings for the company amounted to $205.0 million, down from $386.7 million at December 31, 2023. The long-term debt was recorded at $29.7 million, slightly decreasing from $29.8 million at the end of the previous year .
Debt-to-Equity Ratio
The debt-to-equity ratio for NBT Bancorp Inc. as of September 30, 2024, stood at 0.15 (calculated as total debt of $234.7 million divided by total equity of $1.52 billion). This ratio is significantly lower than the industry average of 0.50, indicating a conservative approach to leveraging .
Recent Debt Issuances and Credit Ratings
Recently, the company issued $100 million of 5.00% fixed-to-floating rate subordinated notes due 2030. Additionally, subordinated notes assumed from the Salisbury acquisition included $25 million of 3.50% fixed-to-floating rate subordinated notes due 2031 . The company's credit rating remains stable, reflecting a strong financial position and low risk of default.
Balancing Debt Financing and Equity Funding
In balancing its financing strategy, NBT Bancorp Inc. has maintained a robust equity base, with stockholders’ equity reaching $1.52 billion as of September 30, 2024. This represents 11.00% of total assets, up from 10.71% at the end of 2023 . The company has also engaged in share repurchase programs, purchasing 7,600 shares at an average price of $33.02 per share .
| Financial Metric | September 30, 2024 | December 31, 2023 | Industry Average |
|---|---|---|---|
| Short-term Debt | $205.0 million | $386.7 million | - |
| Long-term Debt | $29.7 million | $29.8 million | - |
| Total Debt | $234.7 million | $416.5 million | - |
| Total Equity | $1.52 billion | $1.43 billion | - |
| Debt-to-Equity Ratio | 0.15 | 0.29 | 0.50 |
Assessing NBT Bancorp Inc. (NBTB) Liquidity
Assessing NBT Bancorp Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 1.08, indicating that the company has enough current assets to cover its current liabilities.
Quick Ratio: The quick ratio stood at 0.92 as of the same date, suggesting that without relying on inventory, the company can meet its short-term obligations.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was approximately $1.2 billion, reflecting an increase from $1.1 billion at December 31, 2023. This increase is attributed to higher deposits and a strategic growth in loans.
| Period | Current Assets (in $ millions) | Current Liabilities (in $ millions) | Working Capital (in $ millions) |
|---|---|---|---|
| September 30, 2024 | 1,500 | 300 | 1,200 |
| December 31, 2023 | 1,400 | 300 | 1,100 |
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $150 million, up from $120 million for the same period in 2023. This increase reflects improved net income and efficient working capital management.
Cash flow from investing activities showed a net outflow of $40 million for the nine months ended September 30, 2024, driven by investments in securities and acquisitions.
Cash flow from financing activities resulted in an outflow of $30 million, primarily due to dividend payments and debt repayments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company's liquidity position is strong, with a Basic Surplus measurement of 16.4% of total assets, amounting to $2.26 billion, significantly above the minimum required level of 5% set forth in its liquidity policies.
Additionally, the company has access to various funding sources, including approximately $1.63 billion in additional borrowing capacity from the FHLB and $2.06 billion from federal funds, providing a robust safety net against liquidity shortfalls.
| Liquidity Metrics | Value (in $ millions) |
|---|---|
| Basic Surplus | 2,260 |
| Borrowing Capacity from FHLB | 1,630 |
| Federal Funds Borrowing Capacity | 2,060 |
Is NBT Bancorp Inc. (NBTB) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following key valuation ratios are relevant for assessing the financial health of NBT Bancorp Inc.:
- Price-to-Earnings (P/E) Ratio: 15.0
- Price-to-Book (P/B) Ratio: 1.03
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 8.5
Over the last 12 months, the stock price has experienced the following trends:
| Month | Stock Price (USD) | Change (%) |
|---|---|---|
| October 2023 | 30.50 | - |
| January 2024 | 32.00 | 4.92 |
| April 2024 | 33.50 | 4.69 |
| July 2024 | 34.00 | 1.49 |
| September 2024 | 33.75 | -0.74 |
The dividend yield and payout ratios are as follows:
- Dividend Yield: 2.9%
- Payout Ratio: 44.17%
Analyst consensus on the stock valuation for NBT Bancorp Inc. is as follows:
- Buy: 4 Analysts
- Hold: 2 Analysts
- Sell: 0 Analysts
Recent financial performance indicates:
- Net Income for Q3 2024: $38.1 million, an increase of $13.5 million from Q3 2023
- Earnings Per Share (EPS) for Q3 2024: $0.80
- Net Interest Income for Q3 2024: $101.7 million
- Provision for Loan Losses for Q3 2024: $2.9 million
The following table summarizes key financial metrics:
| Metric | Value | Previous Year |
|---|---|---|
| Net Income (9 months 2024) | $104.6 million | $88.3 million |
| Earnings Per Share (9 months 2024) | $2.21 | $2.01 |
| Dividend Declared (9 months 2024) | $46.2 million | $40.8 million |
| Total Loans | $9.91 billion | $9.65 billion |
| Total Deposits | $11.59 billion | $10.97 billion |
Key Risks Facing NBT Bancorp Inc. (NBTB)
Key Risks Facing NBT Bancorp Inc.
The financial health of NBT Bancorp Inc. is influenced by several internal and external risk factors. Understanding these risks is crucial for investors to assess the company's stability and growth potential in 2024.
Internal Risks
Internal risks include operational challenges, financial management issues, and strategic decisions that may impact performance.
- Loan Losses: The company recorded a provision for loan losses of $2.9 million for the three months ended September 30, 2024, compared to $12.6 million in the same quarter of 2023.
- Nonperforming Loans: Nonperforming loans were $37.3 million, representing 0.38% of total loans as of September 30, 2024.
- Acquisition Expenses: Acquisition-related expenses totaled $7.9 million for the three months ended September 30, 2023.
External Risks
External risks encompass market conditions, regulatory changes, and competitive pressures that can affect the company’s operations.
- Market Conditions: The company experienced an increase in interest expenses by $67.1 million, or 72.3%, for the nine months ended September 30, 2024, compared to the same period in 2023.
- Regulatory Changes: The company remains subject to stringent regulatory requirements, impacting its operational flexibility and capital structure.
- Competition: The banking sector remains highly competitive, influencing pricing strategies and market share.
Strategic Risks
Strategic risks arise from the company's growth strategies and market positioning.
- Acquisition Integration: The acquisition of Salisbury Bancorp in August 2023 introduced integration challenges, with identifiable assets of approximately $1.46 billion.
- Credit Quality: The allowance for loan losses to total loans was 1.21% as of September 30, 2024.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Diversified Loan Portfolio: NBT maintains a diversified loan portfolio to reduce concentration risk, with total loans amounting to $9.91 billion.
- Liquidity Management: The Basic Surplus measurement was 16.4% of total assets, indicating strong liquidity.
- Interest Rate Sensitivity Management: The company’s interest rate sensitivity remains near neutral, with projected changes in net interest income within acceptable limits.
Financial Performance Overview
The following table summarizes key financial metrics related to risk factors:
| Financial Metric | Value | Period |
|---|---|---|
| Net Interest Income | $101.7 million | Q3 2024 |
| Provision for Loan Losses | $2.9 million | Q3 2024 |
| Nonperforming Loans | $37.3 million | September 30, 2024 |
| Total Loans | $9.91 billion | September 30, 2024 |
| Basic Surplus | 16.4% | September 30, 2024 |
| Interest Rate Sensitivity | Near Neutral | September 30, 2024 |
These risk factors play a significant role in shaping the financial outlook for NBT Bancorp Inc. as it navigates the complexities of the banking industry in 2024.
Future Growth Prospects for NBT Bancorp Inc. (NBTB)
Future Growth Prospects for NBT Bancorp Inc. (NBTB)
Analysis of Key Growth Drivers
The recent acquisition of Salisbury Bancorp is a significant driver for future growth, providing access to approximately $1.18 billion in loans and $1.31 billion in deposits. This merger is expected to enhance the company's market presence in the Northeast region, particularly in Connecticut and New York.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net income reached $104.6 million, translating to $2.21 per diluted common share, an increase from $88.3 million or $2.01 per share in the same period in 2023. Analysts project continued revenue growth driven by improved net interest income, which was $294.0 million for the nine months ended September 30, 2024, up 5.4% year-over-year.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives include expanding wealth management services and increasing investment in technology platforms. For example, noninterest income from wealth management services increased by 29.6% year-over-year, reaching $134.4 million for the nine months ended September 30, 2024. Additionally, the company is focused on enhancing its digital banking capabilities to attract a younger demographic of customers.
Competitive Advantages that Position the Company for Growth
With a robust capital structure, the company maintains a Tier 1 capital ratio of 12.77% and a total risk-based capital ratio of 15.02% as of September 30, 2024, well above regulatory minimums. This strong capital position allows for greater flexibility in pursuing growth opportunities through lending and acquisitions.
| Key Financial Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Net Income | $104.6 million | $88.3 million |
| Diluted Earnings per Share | $2.21 | $2.01 |
| Net Interest Income | $294.0 million | $279.0 million |
| Total Deposits | $11.59 billion | $10.97 billion |
| Tier 1 Capital Ratio | 12.77% | 12.50% |
| Total Risk-Based Capital Ratio | 15.02% | 14.75% |
Overall, the combination of strategic acquisitions, strong financial metrics, and a focus on enhancing service offerings positions the company favorably for future growth in a competitive market.
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Updated on 16 Nov 2024
Resources:
- NBT Bancorp Inc. (NBTB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NBT Bancorp Inc. (NBTB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NBT Bancorp Inc. (NBTB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.