Q1 2021 NBT Bancorp Inc Earnings Call

April 27, 2021

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Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

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Good day, everyone welcome to the <unk> Bancorp first quarter 2021 financial results Conference call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation FD corresponding presentation slides can be found on the company's website.

And N V P Bancorp dotcom before the call begins and Bt's management would like to remind listeners that as noted on slide two today's presentation may contain forward looking statements as defined by the Securities and Exchange Commission.

Actual results may differ from those projected in addition, certain non-GAAP measures will be discussed reconciliations for these numbers are contained within the appendix of today's presentation.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Anyone requiring operator assistance can press the star key the Star then zero on your Touchtone telephone as a reminder, this call is being recorded I would now like to turn the conference over to N V. T Bancorp, President and CEO, John H Watt junior for his opening remarks, Mr. Watt. Please begin.

Welcome and thank you for joining us today for <unk> earnings call covering our first quarter 2021 results. Joining me to review the highlights with you are and Bt's Chief Financial Officer.

John Moran, and our Chief Accounting Officer, and net Burns following our remarks, we will take your questions and <unk>.

And B T. We are optimistic about the momentum and the U S economy, and the growing economic activity and the markets, where we conduct business looking back at the first quarter. We earned <unk> 91 per share and pre provision net revenue was up 6% year over year as we look to participate and.

And the upcoming snapback on the economy, and BT is well positioned to serve our customers with great products and services. For example adoption of digital banking services is up across our customer base, including year over year increases of 31% in consumer digital adoption.

And 60% and online account opening and 95% and mobile dollars deposit and commercial loans grew in Q1, and our pipelines continue to build.

Business banking and commercial activity associated with our expansion and Connecticut is strong our mortgage business remains very active with a shift from refi to purchase underway indirect auto originations exceeded our targets in each of the three months of the first quarter assay.

It's under management and under administration in our wealth management business ended the quarter at a record level of nine 3 billion.

And N V T leveraging market disruption is a core competency and we have comprehensive plans in place to address current opportunities in our markets.

And this disruption should over the long term drive organic growth finally, yes.

Yesterday, our board of directors approved a 21 cent dividend payable in June.

To talk in greater detail about our financial performance I will turn the call over to our Chief Financial Officer, John Moran. Thanks, John turning to slide four as John highlighted our first quarter earnings per share were <unk> 91 cents. These results were driven by favorable credit and well controlled operating expenses as you can see.

We had a negative provision of $2 $8 million charge offs remained very low at 13 basis points, excluding PPP loans and our reserve coverage decreased slightly to 1.48% excluding PPP from 1.56% in the fourth quarter outside of credit we continued to be very pleased with our underlying operating performance.

Pre provision net revenue was fairly consistent with the fourth quarter levels and up 6% as compared to the year ago period tangible book value per share was up 1% on the quarter and has grown nearly 10% year over year.

Slide five shows trends and outstanding loans.

On a core basis, excluding PPP loans were off approximately $30 million for the quarter as John suggested earlier commercial activity has steadily improved and we continued to have good momentum and several of our businesses.

Commercial loans were up nearly 7% on a linked quarter annualized basis line utilization remains a headwind, but new originations have been fairly brisk and we have added additional information on P. P. P lending to slide 14 in the appendix of today's presentation. Our total PPP balances are now just under $570 million with forgive.

And is now well underway for the 2020 vintage loans, we've recognized $15.6 million and fees associated with P. P. P lending to date, we have an additional $14 $3 million and unamortized fees remaining we expect the bulk of these to be recognized in the back half of this year.

Moving to slide six deposits were up about $735 million point to point for the quarter and our core deposits were up and even stronger $760 million.

Obviously customer cash remains elevated on increased liquidity associated with various government support programs as we highlighted last quarter. These deposits have remained stickier than we would've expected net.

Next on slide seven and Youll see the detailed changes and our net interest income and margin as we suggested last quarter NII dollars remained relatively constant as compared to fourth quarter and NIM was down three basis points with compression on asset yields partially offset by lower funding costs excess liquidity and PPP.

Created a net eight basis point drag on margin and that was unchanged from the prior quarter looking forward as assets continue to reprice and a lower rate environment. We would expect to continue to see some additional core margin compression over the course of 2021, excluding any impact of PPP or excess liquidity as we deploy liquidity.

And two more productive earning assets over the next several quarters. We would expect continued stability and NII dollars slide eight shows trend and noninterest income excluding securities gains and losses, our fee income was down slightly linked quarter at $37 million more broadly non spread revenue was 32% of our total revenue and this.

Remains a key strength for N V T as compared to peers retail banking fees were down linked quarter, mostly due to lower levels of overdraft and service charges are P E and wealth both had strong quarters on new business wins and market appreciation insurance was stable. Other revenue was down on a tough linked quarter comp due to exceptionally strong swap income.

And the fourth quarter.

Turning to noninterest expense on slide nine our total operating expenses were $68 million for the quarter and we continued to demonstrate cost discipline and other expenses ran lower than we expected and several areas, including professional services advertising loan collection and travel training and other other these.

Differences were driven by the timing and normal seasonality on.

Also we experienced a $1.4 million linked quarter decrease and the provision for unfunded commitments, we'd expect operating expense and gradually drift upward over the course of this year, especially as our footprint continues to reopen more fully and the operating environment normalizes.

On slide 10, we provide an overview of key asset quality metrics.

Excluding the impact of PPP net charge offs remained lower than normal at 13 basis points, both NPL and NPA has decreased this quarter any whiles, our chief credit and risk officer is available and Q&A for detailed questions are generally we are continuing to benefit from our conservative underwriting and thus far observed credit metrics have been.

Much better than what would have been predicted by the seasonal models at this time last year, our deferrals are down more than 40% in dollar terms from our last report and now stand at less than 1% of loans.

It's down from a peak of approximately 15% during the second quarter of last year. Likewise past due loans were down 40% from last quarter as usual on slide 11, we provide a walk forward of our reserve.

And the economic outlook continues to improve but uncertainty remains elevated excluding PPP our allowance to loan ratio was 148 basis points and appropriately conservative estimate of the credit risk and our portfolio. Today, we continue to believe that the path of charge off activity and balance sheet growth will drive future provisioning needs.

With the model driven and reserving that we experienced in the first two quarters of 2020 now a potential tailwind for 2021.

As I wrap up my prepared remarks, some closing thought as we started 2021 on strong footing. We are very pleased with the fundamental results of the quarter stable net interest income good results from our recurring fee income lines and sustained expense discipline on the clear highlights. Moreover, our credit quality metrics continued to exceed our expectations with that.

We do have the full team here and we're happy to answer any questions that you may have at this time.

Thank you anyone with a question and at this time and press Star and then the one key on your Touchtone telephone and quick question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question comes from Alex <unk> with Piper Sandler. Please go ahead.

Hey, good morning, all.

And.

Good morning.

First off just wanted to John I think and your John Moran and your prepared remarks, you alluded to the NII is showing some stability.

Going forward.

Is that inclusive of all the volatility of the PPP program or does that exclude the PPP.

No Alex that excludes.

I think really what we're looking for is kind of core ex liquidity ex PPP.

Pretty stable outcome on NII dollars with some continued pressure on margin.

Okay, and then maybe you could give a little bit more commentary on the loan pipelines have there sitting at the end of the quarter and how you're feeling about the prospects of a potential second half recovery and lending activity.

Sure I'll be happy to take that one Alex good morning.

We feel really good on the consumer side to start off here.

The pipelines and mortgage.

Substantial as we move into the prime selling season, and we've seen a shift from.

Refi to purchase.

So feeling good there.

We saw and our indirect auto business.

Substantially.

And our larger originations than we had projected in January February and March and we expect that's going to continue there was shrinkage overall and that portfolio, but that's going to reverse itself.

And the next couple of months, we believe given the volumes that we are.

And are reviewing daily so we feel good about that.

On the commercial side.

Originations and production were up in the quarter.

We have a.

Pipeline.

Well on excess of $450 million.

And we would anticipate as.

The markets continue to demonstrate that they are opening and will be more vibrant that we will be able to capture our share. So we're feeling on.

Optimistic about our continued momentum and the commercial book.

That's great.

And with the commercial pipeline do you think that's strong enough to be able to offset the P. P. P forgiveness over the rest of the year.

I don't think we've done that forecast yet.

You know I think it depends on the momentum and the acceleration on the economy, but.

I'm not sure that we've quantified that yet John and I don't know, whether you want to add to that.

I think that's right John look if you think about.

Current PPP balances and and.

And what would be implied in terms of organic growth to kind of.

The kind of catch that up depending on how quickly things clean up.

It'd be a pretty good bit of growth.

So.

Directionally certainly we're hopeful we're optimistic pipelines continue to rebuild commercial activity is looking pretty good and the footprint continues to reopen and things should get back to.

Certainly.

Maybe not pre COVID-19 normal, but some semblance of normality.

But to offset all of the PPP I think I think it might be a tall task.

Okay.

I guess I didn't realize how large that number was.

And then in terms of the residential.

Production that Youre seeing can you just remind us the strategy for putting that on the balance sheet versus selling it.

We're in growth mode right. So.

We have retained all of the originations this year.

Okay.

Okay and.

And then final question from me is so far and 2021, we've seen M&A is a pretty major theme across bank land.

I think last time, we spoke you kind of felt like maybe due diligence was still a little bit challenged just given the.

Uncertainties around the reopening and the pandemic do you feel like you're at a point now where you can get comfortable enough with the other balance sheets to actually have real conversations and our.

Are there companies out there willing to have those conversations.

So just.

Just a preliminary thought there and so I.

And have expressed over the years. This is primarily an organic growth strategy with the ability to consider.

And fill in and bolt and over.

Time for the right strategic opportunity.

We're open to that day.

And I believe that we can accomplish all of the due diligence and.

Related work necessary to.

And make an offer and closed the deal I do and I think thats being demonstrated in the markets right now pretty clearly.

Are there opportunities to have conversations of course, there are and they go on.

Pretty regularly and.

If the right opportunity presents itself.

I think given the premium valuation that we carry and overall the value of our currency will be able to.

Do the appropriate deal.

Great. Thank you for the commentary that's all my questions for from now thank you.

Thanks, Alex.

Thank you and our next question will come from Erik Zwick with Boenning and Scattergood. Please go ahead.

Good morning, everyone.

Good morning.

Could start first I.

And I guess, probably a question for you John Moran with regard to PPP and the balance of the remaining unamortized fees and just curious if you can also break that out in terms of.

Those loans that were originated in 2020 versus those here in 2021.

Yes, so the.

Slide 14 in the appendix is a new one for us that that gives a lot of detail on PPP and kind of where things stand by vintage.

In total we recognized $15 $6 million and fees.

So far most of that would be sort of regular scheduled.

Fee amortization and.

And and forgive us clean up on the 2020 vintage we have $14 3 million and unamortized fees that remain.

And the bulk of that is off of debt newer vintage.

I would expect the bulk of those will be recognized in the back half of this year call. It call. It <unk> <unk> kind of event and then there'll be a little piece of it debt.

And that sort of stays with us we suspect.

Into 'twenty two.

So hopefully between that chart and and the.

$14, three and unamortized fees remaining that that gets you what you need.

Yes, that's perfect. Thank you I had missed I missed those numbers there great and then turning to noninterest expenses. Thanks for the.

Update on kind of the expectations for those for that run rate to gradually drift upwards. This year, just curious about the data processing and communications line you mentioned that the addition of the digitized PPP platform.

And had those higher and <unk> was that a one time expense or will that be ongoing and just kind of curious what that value might have been and <unk>.

I don't know that we've got the value of that at my fingertips, but we can follow up with you on it.

It did run and elevated on that that is a variable cost associated.

And with putting the loans on so as the program wraps up that cost should drift downward that would be probably the one the one place on the Opex line items that we would expect to see a little bit about.

A downdraft in <unk> once we're kind of done and originating under under this vintage, but I think it's going to be with us for our second quarter.

And then and then kind of normalizing and <unk>.

Great. That's helpful and then last one from me.

You guys purchased a little under 260000 shares of common stock and the first quarter, just curious how youre thinking about.

Buyback today, it sounds like you're optimistic that debt loan growth comes back that would be the preferred use of capital, but would you continue to use buyback as part of your kind of total capital return to shareholder strategy and in combination with the dividend or just thoughts on kind of buyback today.

Yes, I think look I think I think buyback is clearly and.

<unk> and that.

And the quiver.

And something that we've historically been pretty opportunistic around.

And.

I wouldn't encourage you to dial and a big buyback into your into your numbers for this year, but if we've got the opportunity to do it and it makes sense when the earn back line up for us.

Absolutely.

Interested and being in the market.

Thanks for taking my questions today.

Thanks, Eric.

Thank you again, if you have a question. Please press the Star then one key on your Touchtone telephone. Our next question will come from Matthew Breese with Stephens. Please go ahead.

Hey, John just curious so obviously the the deposits have been a little bit stickier than you thought.

The cash position of the balance sheet, a little bit higher than I think we would have thought six months ago.

And we look at that $972 million.

Total with cash probably closer to $1 billion.

How much how much of that do you sign a more volatile value attributable to probably deposits that flow out of the bank and PPP and how much do you think is investable and how should we be thinking about securities over the course of the year.

That's a great question, Matt that's kind of the $1 billion question right.

So I think the.

Yes, we're study and this really carefully.

And and.

And I think as you'd expect from us culturally, we're pretty cautious we're pretty conservative.

Certainly last year.

Our expectation would have been net this would've been a little bit less sticky than and it's proven to be.

We are working to.

Through the liquidity and how to deploy spin and uphill battle because deposit growth has really continued to.

Debt to be fairly robust on.

And on government stimulus and some other things right.

You look back at last year, we did grow the investment book 360 million Bucks wholesale funding was down a ton.

So we really focused on kind of pulling levers.

On the liability side of the balance sheet last year, and then grew the investment book a little bit I think.

When you look forward this year.

Certainly.

On a chunk of that is with the bank and with the bank for longer than what we would have thought and where.

And we're absolutely evaluating opportunities and kind of.

<unk>.

Grow the investment book and look ideally things snap back and we get we get more robust loan growth and thats.

And that's kind of what the what the plan is.

Okay.

<unk>.

The second thing I wanted to talk about was I understand that your your auto.

And dealer Finance book is picking up I've been hearing that there is a shortage of semiconductor and chipsets affecting the auto market and I'm, just curious if you're seeing or hearing any of that and how that might play through for the rest of the year on your auto book.

So.

And I've been asking that question myself, Matt and.

Reminded when I do that the mix here is late model used about 60% new 40.

And that changes quarter to quarter, but approximately that's where we are so.

Clearly.

Late model used is and a place where valuations are increasing.

And there is product to sell.

<unk> not heard back from our dealers yet that they are facing.

Challenges that are putting pressure on their ability to sell and could that for.

Present itself to us later on the air but yes.

Yes, it could but at the moment, we're not here on that okay.

Last one from me.

You know kind of the opposite of the M&A question.

And your markets have been incredibly disrupted by recent acquisitions.

Acquisitions, and large scale, especially some of your newer new England markets and Connecticut just.

Curious, how you're sizing up the hiring and client acquisition opportunity, maybe talk a little bit about that and then secondarily you do these acquisitions to open up any new markets that you could enter into similar too.

No.

Vermont, Portland, Maine, and Portsmouth, New Hampshire, and the newest Connecticut markets.

So I.

I appreciate that question and I think I said upfront that it is one of our core competencies to leverage disruption and the markets we serve.

As we all have been reading over the last 60 days, there is plenty of disruption and new England and.

Associated with several large deals that had been announced.

We are well positioned in markets, and Connecticut, and Maine, New Hampshire.

And Vermont too.

Deploy our disruption strategy.

And I want to say that.

And we have the highest regard for.

The biggest acquirer and that market and we have been competing against that acquirer for 30 years or more.

With that said there are customers and there are really talented bankers, who don't want to affiliate with an organization that large.

And we have the opportunity to have.

And have conversations there every day.

I don't want to go too deeply into our strategy, but I will.

Share with you that.

We have put a lot of time and effort and.

Deployed resources into.

Executing on what will be a marathon on strategy remember, we're still capitalizing on the first Niagara key <unk>.

Transaction and still converting customers and hiring bankers as a function of it. So this will be a multiyear strategy and.

You can expect from time to time that will have.

The opportunity to talk about what's going on in specific markets and we are evaluating expansion opportunities as well and they do exist.

Maybe just a follow up to that.

And we've seen MBT historically stay away from the denser metropolitan areas.

Boston seems to be an area that is right now going through some consolidation and heavy acquisition.

Is that a market that we could potentially see you get closer to or enter into.

So we have stated many times as you know that inside 495 is probably not the.

Geography that we're going to be most successful line.

Clearly there is a competitive battle going on there and two of the largest and.

Our highest performing banks, there have announced deals and the last.

A couple of months and.

There will be.

Disruption associated with them, but.

I don't see NPT planting the flag inside $4 95, and any meaningful way, we'll let that competitive battle play out among those players and there is plenty for us to do across northern New England and.

And our expansion opportunity and central Connecticut, right now.

Great I suspected as much.

Thank you so much for taking my questions.

Absolutely good to talk to you.

I am showing no further questions in the queue at this time I would now like to turn the call back over to Mr. John Watt for his closing remarks.

Thank you operator.

In closing I'd like to take the opportunity today to acknowledge that this has been John Moran last earnings call with NBC.

On behalf of the entire team here at <unk> I want to thank him for all his many contributions and wish John and his family.

The very best and the future.

To everyone, who joined US today, we appreciate your participation as well as your continued interest and NBC and we look forward to talking to you and perhaps seeing some of you and the near future.

<unk>.

Yeah.

Thank you and everyone who participated on today's conference call and for your interest and NBC Bancorp. This concludes today's program you may now disconnect and have a great day.

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Sure.

[music].

John.

And B C Bancorp dotcom.

Before the call begins and Bt's management would like to remind listeners that as noted on slide two today's presentation may contain forward looking statements as defined by the Securities and Exchange Commission.

Actual results may differ from those projected and addition, certain non-GAAP measures will be discussed reconciliations for these numbers are contained within the appendix of today's presentation.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Anyone requiring operator assistance can press the star key the Star then zero on your Touchtone telephone.

As a reminder, this call is being recorded I would now like to turn the conference over to N V. T Bancorp, President and CEO, John H Watt junior for his opening remarks, Mr. Watt. Please begin.

Yeah.

Welcome and thank you for joining us today for <unk> earnings call covering our first quarter 2021 results. Joining me to review the highlights with you are and Bt's, Chief Financial Officer, John Moran, and our Chief Accounting Officer.

And net Burns and following our remarks, we will take your questions and NBC, we are optimistic about the momentum and the U S economy, and the growing economic activity and the markets, where we conduct business looking back at the first quarter, we earned <unk> 91 per share and pre <unk>.

And net revenue was up 6% year over year as we look to participate in the upcoming snap back on the economy and BT is well positioned to serve our customers with great products and services. For example adoption of digital banking services is up across our customer base, including.

Year over year increases of 31% in consumer digital adoption.

60% and online account opening and 95% and mobile.

Deposit and commercial loans grew in Q1, and our pipelines continue to build.

And under management and under administration, and our wealth management business ended the quarter at a record level of nine 3 billion and.

And N V T leveraging market disruption is a core competency and we have comprehensive plans in place to address current opportunities in our markets.

And this disruption should over the long term drive organic growth finally, yes.

Yesterday, our board of directors approved a <unk> 21 dividend payable on June.

To talk in greater detail about our financial performance and I will turn the call over to our Chief Financial Officer, John Moran. Thanks, John turning to slide four as John highlighted our first quarter earnings per share were <unk> 91.

These results were driven by favorable credit and well controlled operating expenses as you can see we had a negative provision of $2 $8 million charge.

Charge offs remained very low at 13 basis points, excluding PPP loans, and our reserve coverage decreased slightly to $1 four 8%, excluding PPP from one 5%, 6% and the fourth quarter outside of credit we continue to be very pleased with our underlying operating performance.

Slide five shows trends and outstanding loans.

Commercial loans were up nearly 7% on a linked quarter annualized basis line utilization remains a headwind, but new originations have been fairly brisk and we have added additional information on PPP lending to slide 14 in the appendix of today's presentation. Our total PPP balances are now just under $570 million with Fergie.

Given us now well underway for the 2020 vintage loans, we recognized $15 $6 million and fees associated with PPP lending to date, we have an additional $14 $3 million and unamortized fees remaining we expect the bulk of these to be recognized in the back half of this year moving.

Moving to slide six deposits were up about $735 million point to point for the quarter and our core deposits were up and even stronger $760 million, obviously customer cash remains elevated on increased liquidity associated with various government support programs as we highlighted last quarter. These deposits have remained sticky.

And then we would've expected.

Next on slide seven you'll see the detailed changes and our net interest income and margin as we suggested last quarter NII dollars remained relatively constant as compared to fourth quarter and NIM was down three basis points with compression on asset yields partially offset by lower funding costs excess liquidity and PPP.

<unk> net eight basis point drag on margin and that was unchanged from the prior quarter looking forward as assets continue to reprice and a lower rate environment. We would expect to continue to see some additional core margin compression over the course of 2021, excluding any impact on PPP or excess liquidity as we deploy liquidity.

And two more productive earning assets over the next several quarters, we would expect continued stability and NII dollars slide eight shows trend and noninterest income.

Excluding securities gains and losses, our fee income was down slightly linked quarter at $37 million more broadly non spread revenue was 32% of our total revenue and this remains a key strength for MBT as compared to peers retail banking fees were down linked quarter, mostly due to lower levels of overdraft and service charges are.

And wealth, both had strong quarters on new business wins and market appreciation insurance was stable. Other revenue was down on a tough linked quarter comp due to exceptionally strong swap income and the fourth quarter.

Differences were driven by timing and normal seasonality on.

Also we experienced a $1.4 million linked quarter decrease and the provision for unfunded commitments.

We would expect operating expense and gradually drift upward over the course of this year, especially as our footprint continues to reopen more fully and the operating environment normalizes.

On slide 10, we provide an overview of key asset quality metrics.

Excluding the impact of PPP net charge offs remained lower than normal at 13 basis points, both NPL and NPA has decreased this quarter any whiles, our chief credit and risk officer is available and Q&A for detailed questions and generally we are continuing to benefit from our conservative underwriting and thus far observed credit metrics have been.

Better than what would have been predicted by the seasonal models at this time last year.

Our deferrals are down more than 40% in dollar terms from our last report and now stand at less than 1% of loans.

Clearly the economic outlook continues to improve but uncertainty remains elevated excluding PPP our allowance to loan ratio was 148 basis points and appropriately conservative estimate of the credit risk and our portfolio. Today, we continue to believe that the path of charge off activity and balance sheet growth will drive future provisioning needs.

With the model driven and reserving that we experienced in the first two quarters of 2020 now a potential tailwind for 2021.

As I wrap up my prepared remarks, some closing thoughts we started 2021 on strong footing and we're very pleased with the fundamental results of the quarter stable net interest income good results from our recurring fee income lines and sustained expense discipline are the clear highlights. Moreover, our credit quality metrics continued to exceed our expectations with that.

We do have the full team here and we're happy to answer any questions that you may have at this time.

Thank you anyone with a question and at this time and press Star and then the one key on your Touchtone telephone and quick.

Question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question comes from Alex <unk> with Piper Sandler. Please go ahead.

Hey, good morning, all.

Good morning.

First off just wanted to John I think and your John Moran and your prepared remarks, you alluded to the NII is showing some stability.

Going forward.

Is that inclusive of all the volatility of the PPP program or does that exclude the PPP.

No Alex that excludes.

Really what we're looking for is kind of core ex liquidity ex PPP.

Pretty stable outcome on NII dollars with some continued pressure on margin.

Okay, and then maybe you could give a little bit more commentary on the loan pipelines Heather sitting at the end of the quarter and how you're feeling about the prospects of a potential second half recovery and lending activity.

Sure I'll be happy to take that one Alex good morning.

We feel really good on the consumer side to start off here.

The pipelines and mortgage are.

Substantial as we move into the prime selling season, and we've seen a shift from <unk>.

Refi to purchase.

And so feeling good there.

And our indirect auto business.

Substantially.

And larger originations than we had projected in January and February and March and we expect that's going to continue there was shrinkage overall and that portfolio, but that's going to reverse itself.

And the next couple of months, we believe given the volumes that we.

Our reviewing daily so we feel good about that on.

On the commercial side.

Originations and production were up in the quarter.

We have a.

Pipeline.

Well on excess of $450 million.

And we would anticipate as the markets continue to demonstrate that they are opening and will be more vibrant debt.

We will be able to capture our share so we're feeling on.

Optimistic about our continued momentum and the commercial book.

That's great.

Well the commercial pipeline do you think that's strong enough to be able to offset the PPP forgiveness over the rest of the year.

I don't think we've done that forecast yet.

And now I think it depends on the momentum and the acceleration on the economy.

And I'm sure that we've quantified that yet John and I don't know, whether you want to add to that.

I think that's right John.

If you think about.

Current PPP balances and and and.

And what would be implied in terms of organic growth to kind of.

The kind of catch that up depending on how quickly things clean up.

It'd be a pretty good bit of growth.

So.

Directionally, certainly, we're hopeful or optimistic pipeline and continue to rebuild commercial activity is looking pretty good and the footprint continues to reopen and things are getting back to.

Certainly.

And maybe not pre COVID-19 normal, but some semblance of normality.

But but to offset all of the PPP I think I think it might be a tall task.

Okay.

And I guess I didn't realize how large that number was.

And then in terms of the residential.

Production that Youre seeing can you just remind us the strategy for putting that on the balance sheet versus selling it.

We're in growth mode right. So we have retained all of the originations this year.

Okay.

And then final question from me is.

So far and 2021 and we've seen M&A is a pretty major theme across bank land.

You know I think last time, we spoke you kind of felt like maybe due diligence was still a little bit challenged just given the uncertainties around the reopening and the pandemic do you feel like you're at a point now where you can get comfortable enough with the other balance sheets to actually have real conversations and all.

Are there companies out there willing to have those conversations.

So just.

Just a preliminary thought there and so I.

You have expressed over the years. This is primarily an organic growth strategy with the ability to consider.

And fill in and bolt and over.

Time for the right strategic opportunity.

We're open to that do I believe that we can accomplish all of the due diligence and.

Related work necessary to.

Make an offer and close a deal I do and I think thats being demonstrated in the markets right now pretty clearly.

Are there opportunities to have conversations of course, there are and they go on.

Pretty regularly and.

If the right opportunity presents itself.

I think given the premium valuation that we carry and overall the value of our currency will be able to.

Do the appropriate deal.

Great. Thank you for the commentary that's all my questions from now thank you. Thanks Alex.

Thank you and our next question will come from Erik Zwick with Boenning and Scattergood. Please go ahead.

Good morning, everyone. Good morning, everyone.

Good morning.

Could start first I.

And I guess, probably a question for you John Moran with regard to PPP and you have the balance of the remaining unamortized fees and and just curious if you can also break that out in terms of that.

Those loans that were originated in 2020 versus those here in 2021.

Yes, so the.

Slide 14 in the appendix is a new one for us that that gives a lot of detail on PPP and kind of where things stand by vintage.

In total we recognized $15 $6 million and fees.

So far most of that would be sort of regular scheduled.

Fee amortization and.

And and forgive us clean up on the 2020 vintage and we have $14 3 million and unamortized fees that remain and.

And the bulk of that is off of the newer vintage.

I would expect the bulk of those will be recognized in the back half of this year call. It call. It <unk> <unk> kind of event and then there'll be a little piece of it debt.

And that sort of stays with us we suspect into 'twenty two.

So hopefully between that chart and and the $14 three and unamortized fees remaining that that gets you what you need.

Yes, that's perfect. Thank you I had missed I missed those numbers there great and then.

Turning to noninterest expenses, thanks for the.

So on and kind of expectations for those for that run rate to gradually drift upwards. This year, just curious about the data processing and communications line. You mentioned that the addition of the digitized PPP platform kind of had those higher and <unk> was that a one time expense or will that be ongoing and just kind of curious what that value might have been.

<unk>.

I don't know that we've got the value of that at my fingertips, but we can follow up with you on it.

It did run and elevated on that that is a variable cost associated with it.

And we're putting the loans on so as the program wraps up that cost should drift downward that would be probably the one the one place on the Opex line items that we would expect to see a little bit about.

A downdraft in <unk> once we're kind of done and originating under under this vintage, but I think it's going to be with us for our second quarter and.

And then and then kind of normalizing and <unk>.

Great. That's helpful and then last one from me.

And you guys purchased a little under 260000 shares of common stock and the first quarter, just curious how youre thinking about buyback.

Buyback today, it sounds like you're optimistic that loan growth comes back you know that would be the preferred use of capital, but would you continue to use buyback as you know part of your kind of total capital return to shareholder strategy and in combination with the dividend or just thoughts on kind of buyback today.

Okay.

Yeah, I think look I think I think buyback is clearly and.

<unk> and the <unk>.

And the quiver.

And something that we've historically been pretty opportunistic around and.

You know I wouldn't encourage you to dial and a big buyback into your into your numbers for this year, but if we've got the opportunity to do it and it makes sense when the earn back line up for us.

And we're absolutely interested in and being in the market.

Thanks for taking my questions today.

Thanks, Eric.

Thank you again, if you have a question. Please press the Star then one key on your Touchtone telephone. Our next question will come from Matthew Breese with Stephens. Please go ahead.

Hey, John just curious so obviously the the deposits have been a little bit stickier than you thought the cash position of the balance sheet, a little bit higher than I think we would have thought six months ago.

As we look at that $972 million.

Total with cash probably closer to $1 billion.

And how much how much of that do you sign a more volatile value attributable to probably deposits that flow out of the bank and PPP and how much do you think is investable and how should we be thinking about securities over the course of the year.

And the Great question, Matt that's kind of the $1 billion question right.

And so I think the.

Yes, we're study and this really carefully.

And and I think as you'd expect from us culturally, we're pretty cautious we're pretty conservative.

Certainly last year.

Our expectation would have been at this would've been a little bit less sticky than and it's proven to be.

We are working to.

To think through the liquidity and how to deploy spend and uphill battle because deposit growth has really continued to.

Debt to be fairly robust.

And on government stimulus and some other things right.

If you look back at last year, we did grow the investment book 360 million Bucks wholesale funding was down a ton.

So we really focused on kind of pulling levers.

On the liability side of the balance sheet last year, and then grew the investment book a little bit I think.

When you look forward this year.

Certainly.

On a chunk of that is with the bank and with the bank for longer than what we would have thought and where.

And we're absolutely evaluating opportunities and kind of.

<unk>.

Grow the investment book and look ideally things snap back and we get that we get more robust loan growth and thats.

And that's kind of what the plan is.

Okay.

The second thing I wanted to talk about was.

And that your your auto.

So.

And I've been asking that question myself, Matt and.

Reminded when I do that the mix here is late model used about 60% new 40.

And that changes quarter to quarter, but approximately that's where we are so.

Clearly.

Late model used is in a place where valuations are increasing.

And there is product to sell.

Have not heard back from our dealers yet that they are facing.

Challenges that are putting pressure on their ability to sell could that.

Present itself to us later on the air but yes.

Yes, it could but at the moment, we're not here on that okay.

Last one from me.

Kind of the opposite of the M&A question.

Your markets have been incredibly disrupted by recent acquisitions.

Acquisitions large scale, especially some of your newer new England markets and Connecticut just.

No.

Vermont, Portland, Maine, and Portsmouth, New Hampshire, and the newest Connecticut markets.

So I.

I appreciate that question and I think I said upfront.

It is one of our core competencies to leverage disruption and the markets. We serve as we all have been reading over the last 60 days, there is plenty of disruption and new England and.

Associated with several large deals that had been announced.

We are well positioned in markets, and Connecticut, and Maine, New Hampshire.

And Vermont too.

Deploy our disruption strategy.

And I want to say that.

And we have the highest regard for.

The biggest acquirer and that market and we have been competing against that acquirer for 30 years or more.

With that said there are customers and there are really talented bankers, who don't want to affiliate with an organization that large.

And we have the opportunity to have.

And have conversations there every day.

I don't want to go too deeply into our strategy, but I will.

Share with you that.

We have put a lot of time and effort and.

Deployed resources into.

And executing on what will be a marathon on strategy remember, we're still capitalizing on the first Niagara key tree.

Transaction and still converting customers and hiring bankers as a function of it. So this will be a multiyear strategy and.

You can expect from time to time that will have.

The opportunity to talk about what's going on in specific markets and we are evaluating expansion opportunities as well and they do exist.

Maybe just a follow up to that.

We've seen MBT historically stay away from the denser metropolitan areas.

Boston seems to be an area that is right now going through some consolidation and heavy acquisition.

Is that a market that we could potentially see you get closer to or enter into.

So we have stated many times as you know that inside 495 is probably not the.

Geography that we're going to be most successful line.

Clearly there is a competitive battle going on there and two of the largest and.

Our highest performing banks, there have announced deals and the last.

A couple of months and.

And there will be.

Disruption associated with them, but.

And our expansion opportunity and central Connecticut, right now.

Great and I suspect that as much.

Thank you so much for taking my questions.

Absolutely good to talk to you.

I am showing no further questions in the queue at this time I would now like to turn the call back over to Mr. John Watt for his closing remarks.

Thank you operator.

In closing I'd like to take the opportunity today to acknowledge that this has been John Moran last earnings call with NBC.

On behalf of the entire team here on NBC I want to thank him for all his many contributions and wish John and his family.

The very best and the future.

To everyone, who joined US today, we appreciate your participation as well as your continued interest and NBC and we look forward to talking to you and perhaps seeing some of you and the near future.

<unk>.

Yeah.

Thank you and everyone who participated on today's conference call and from your interest and NBC Bancorp. This concludes today's program you may now disconnect and have a great day.

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