Nbt Bancorp Inc Q4 FY2021 Earnings Call

Good day, everyone. Welcome to the NBT Bancorp Fourth 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 at nbtbancorp.com. Before the call begins, NBT's management would like to remind listeners that, as noted on Slide 2, 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. As a reminder, this call is being recorded. I would now like to turn the conference over to NBT Bancorp President and CEO, John H. Watt Jr., for his opening remarks. Mr. Watt, please begin.

All right. Thank you. And good morning, and welcome from 14 degrees below 0 in Norwich, New York. And thank you for participating in our earnings call covering NBT Bancorp's fourth quarter and full year 2021 results. Joining me today is Scott Kingsley, our Chief Financial Officer; as well as Annette Burns, our Chief Accounting Officer; and Joe Ondesko, our Treasurer. At NBT, we achieved record results in a year defined by great progress and consistently building momentum. We are very pleased to report earnings per share of $0.86 for the quarter and $3.54 for the year. Our capital position is strong with tangible book value per share up 8% from the prior year-end. This foundation provides us with optionality as we consider strategic investments to drive NBT's continued growth. Our fee-based businesses achieved new levels of success year-over-year, and at the end of the fourth quarter, AUM and AUA exceeded $10 billion. Loan growth, excluding PPP, was 5% with the commercial business and our Sungage solar lending business finishing strong in the fourth quarter. Across our markets and despite the recent COVID surge, our commercial customers are active, and their sentiment is optimistic. In 2021, our customers continued to embrace digital service with a 64% increase in consumer adoption. Yesterday, our Board approved a $0.28 dividend, payable on March 15, which would be our 520th consecutive dividend payment, and it is $0.01 higher than the prior year. Yesterday, the Board also welcomed our newest director, Heidi Hoeller, a former partner with PwC. With over 25 years of experience in public accounting and financial services, we look forward to adding Heidi's valuable perspective to the discussions guiding NBT forward. So I'll conclude my remarks by emphasizing that it was the talented and dedicated team at NBT who made our 2021 success possible. We could not be more optimistic about how well the team has positioned us as we enter 2022. And now I'll turn it over to Scott, and he'll walk us through our financial performance on a more detailed basis. Scott, it's yours.

Thank you, John, and good morning, everyone. Turning to Slide 4 of our earnings presentation. As John mentioned, our fourth quarter earnings per share were $0.86, which was consistent with the linked third quarter and $0.08 a share above the fourth quarter of 2020. These results were driven by increases in net interest income, including a higher level of PPP interest and fees, favorable credit results, and strong fee income, offset by higher operating expenses. We recorded a provision expense of $3.1 million after four consecutive quarters of provision benefits. Charge-offs increased to 22 basis points of loans compared to 11 basis points in the prior quarter, with almost all of that change related to one commercial relationship that had been specifically reserved for in the previous period. Our reserve coverage decreased to 1.24%, excluding PPP loans from 1.28% in the third quarter of 2021. We continue to be pleased with our underlying operating performance. Slide 5 shows trends in outstanding loans. On a core basis, excluding PPP, loans were up approximately $107 million for the quarter and included strength in our consumer mortgage and consumer specialty lending portfolios as well as growth in commercial outstandings. The lack of vehicle inventories has continued to challenge net results in our indirect auto portfolio, and we experienced another quarter of declines in outstandings. Also, as a reminder, we have some additional information on PPP lending on Slide 13 in the appendix of today's presentation. Our total PPP balances as of year-end 2021 were just over $100 million, with forgiveness almost complete for both the 2020 and 2021 vintage loans. We recognized $7.5 million of interest and fees associated with PPP lending during the quarter and have $3.4 million in unamortized fees remaining. We expect a significant portion of these to be recognized in 2022. Moving now to Slide 6. Deposits were up $39 million for the quarter. Customer balances remain elevated from liquidity associated with the various government support programs and continued higher savings rates. Our quarterly cost of deposits declined to 8 basis points, and we continue to add new accounts in the quarter. Next, on Slide 7, you'll see the detailed changes in our net interest income and margin. Net interest income increased $7.5 million compared to the third quarter and included $4.7 million of additional PPP income. The net interest margin was up 20 basis points, primarily due to PPP forgiveness but also included a modest increase in earning asset yields and a decline in the cost of interest-bearing liabilities. Excess liquidity continued to be a drag on our margin, but we again remind ourselves that low-cost core funding should always be viewed as a long-term value driver. Looking forward, despite the growing sentiment of rising short-term rates in 2022, we would expect to experience general core margin stability, excluding the impact of PPP income recognition before reaching an upward inflection point later in the year. We would plan to deploy some of our $1.1 billion of excess liquidity into more productive earning assets over the next several quarters to improve core net interest income results as those opportunities present themselves. Slide 8 shows trends in noninterest income. Excluding securities gains and losses, our fee income was up linked quarter to $41.1 million. More broadly, non-spread revenue was 33% of our total revenue, which remains a key strength for NBT, and we like the trajectory of each of the nonbanking businesses we are in. Our wealth management and retirement plan administration businesses continued their trends of strong quarterly growth from new business wins and market appreciation. Turning now to noninterest expense on Slide 9. Our total operating expenses were $75.1 million for the quarter. We did incur an additional $0.3 million of nonrecurring costs in the quarter related to a litigation settlement we've referenced in previous quarters. Fourth quarter operating expenses were again seasonally higher than the linked third quarter, consistent with previous results in previous years. We'd expect core operating expenses to continue to drift upward over the next several quarters, including expected 2022 merit-related wage increases as well as our continued efforts to fill a higher-than-historical level of open positions in support of customer engagement and growth objectives. In addition to investing in our people, we continue to expect to invest in technology-related applications and tools in order to advance our customer-facing and processing infrastructure. On Slide 10, we provide an overview of key asset quality metrics. As I previously mentioned, excluding the impact of PPP, charge-offs increased to 22 basis points of loans compared to 12 basis points in the prior quarter. Both NPLs and NPAs declined again this quarter. We are continuing to benefit from our conservative underwriting, and thus far, observed credit metrics have been much better than we would have anticipated from those CECL models from 12 to 18 months ago. On Slide 11, we provide a walk forward of our reserve. Clearly, the economic outlook continues to improve, but uncertainty remains elevated. Excluding PPP, our allowance to loans ratio was 124 basis points, an appropriately conservative estimate of the credit risk in our portfolio today. We continue to believe that the path of charge-off activity will return to more historical norms and, along with expected balance sheet growth, will likely be the drivers of future provisioning needs for the company. As I wrap up my prepared remarks, some closing thoughts. We started 2021 on strong footing, and we are pleased with the fundamental results considering everything that has been impacted by the COVID-19 pandemic. Stable net interest income, solid results from our recurring fee income lines, sustained expense discipline, and exceptional credit quality outcomes have been clear highlights. It's also worth mentioning that we've added over $130 million to capital over these last historically challenging eight quarters, while at the same time paying dividends to our shareholders of $95 million and buying back $30 million of our own shares. These meaningful capital accumulation results put us in an enviable position as we consider growth opportunities for 2022 and beyond. With that, we're happy to answer any questions you may have at this time.

Our first question comes from Alex Twerdahl from Piper Sandler.

First off, Scott, I didn't catch your comments on the expense guide. Did you mention that there were some nonrecurring items this quarter and then discuss the overall trajectory? Could you please go over that again?

Sure. We incurred an additional $300,000 in costs related to the litigation settlement, bringing the total charges to $4 million for the second and third quarters, which we hope will help conclude the matter. For the company, our spending in the fourth quarter has typically been higher than in the linked second and third quarters, and this year was no exception. This increase included extra spending on professional fees for services related to initiatives and outside audits, which are mostly recurring expenses but tend to be seasonally elevated in the fourth quarter. Additionally, we have a significantly higher concentration of charitable giving in our fiscal fourth quarter compared to the previous three quarters. Therefore, the fourth quarter expenses were notably higher than in the third quarter. Some of these expenses are seasonal, and some stemmed from completing initiatives that had minor deferrals from earlier in the year. Looking ahead, we believe our quarterly run rate, factoring in expected merit increases for employees, will be between $73.5 million and $74.5 million as we approach 2022, keeping in mind the seasonal variations in our numbers. The first quarter tends to be more expensive due to higher payroll taxes and equity compensation awards that need immediate expensing. Also, heating costs in extremely cold weather can be more substantial than cooling costs in the summer. I hope that clarifies things.

Okay. So yes, it's $73.5 million to $74.5 million implies kind of 4% to 5% annual expense growth, and that's kind of in line with sort of what your expectations are?

I think that's pretty close.

Could you discuss the net interest margin guidance, specifically excluding the potential rate hikes? Additionally, can you remind us of the percentage of the portfolio that is floating and what the anticipated impact of short-term rate increases, which appear likely soon, would be on the balance sheet?

Yes. That's a great point. We are approaching $11 billion in earning assets, with $1 billion of that in short-term overnight funds. This means that any Federal Reserve rate hikes would quickly affect that $1 billion. Instead of earning a minimal amount right now, we would earn a slightly higher rate from the Fed on that. Additionally, we have around $2 billion in mostly commercial loans that are tied to variable rates, and we anticipate benefiting from rate hikes as they occur. These loans are linked to LIBOR or, in some cases, a prime number for small business banking or other off-treasury indexes. Therefore, we expect to gain an immediate benefit in that area. Equally important, we anticipate new asset generation in a rising rate environment with a steeper yield curve, particularly in the 3 to 6 or 7-year range, where we typically price most of our assets. This presents an opportunity to secure new cash flows at higher rates than we've been able to over the past couple of years. However, this will require careful execution, as we cannot allow ourselves to lose competitive advantage. Given the liquidity on many balance sheets, it remains to be seen if others will fully capitalize on the benefits that a better yield curve or rate environment could offer. We believe the impact in the first half of the year will be minimal and that discussions about inflection will be more relevant in the second half.

Okay. Great. That's great commentary. And then one final question for me just on credit. Historically, the fourth quarter has been a little bit of a cleanup quarter, if I'm not mistaken, on indirect and taking charge-offs and anything that's kind of teetering you kind of push through. Was that again the case this quarter? I'm just trying to get a sense. I know you're talking about net charge-offs normalizing; you're heading back towards normal in 2022. But just wondering how quickly we're going to get back to or towards that of a normalized charge-off level and whether or not that normalize is going to really be kind of pre-pandemic or if it's going to be a little bit lower in your opinion?

That's a great question and one that is difficult to predict. To provide some context, in 2019, our company experienced 36 basis points of charge-offs across all portfolios, primarily driven by our consumer lending sectors, including the older Springstone portfolios or indirect auto. Over the past three years, we've been fortunate to have very few commercial losses. In the two years during the pandemic, we saw a decrease to 24 and then 13 basis points of loss. We do anticipate that these numbers may begin to rise again, especially affecting the consumer portfolios first. Currently, we're not seeing any losses in the indirect auto sector because of the limited supply of cars, with those available selling at retail prices at auction, resulting in very modest losses. This trend is likely to continue into the first half of the year, after which we might move closer to historical loss rates in indirect auto. There are no immediate issues that we foresee. Regarding your inquiry about whether we cleaned up any accounts, we had one relationship, just over $1.5 million, for which we had previously set aside reserves, and we decided to write that off this quarter, accounting for about 35% to 40% of our total charge-offs for the quarter. The remaining charge-offs were likely from specialty lending within the consumer sector, where we are seeing some minor increases in delinquency, but still well below historical norms. Overall, I feel confident about our credit situation, but maintaining 13 basis points of charge-offs with our current portfolio mix will be challenging.

Our next question comes from the line of Eric Zwick from Boenning and Scattergood.

Within your commentary about expense growth in 2022, you mentioned continued digital investments would be part of that kind of creeping up in the expenses. Just curious what you have on the agenda in terms of kind of planned investments or systems enhancements for this coming year?

We have several projects in progress. As previously mentioned, our IT and digital adoption initiatives were launched at the start of the fourth quarter, and we will incur additional expenses as we roll them out across the platform in 2022. We have improved the indirect auto platform by providing dealers with a solution that digitizes all documentation related to individual indirect auto loans. This rollout began in the last two quarters of last year and will continue into the first and probably the second quarter of this year. Internally, we are modernizing our human resources system by transitioning from one vendor to a more integrated one, which should lead to greater efficiency. This upgrade will be implemented in about four to five weeks and will generate some additional costs. Furthermore, now that Scott has assessed our financial infrastructure, he has suggested improvements from a systems perspective related to our financial operations, and a new system will be introduced in 2022. These are some of the main projects currently underway. Additionally, we are enhancing our business banking platform to allow customers quicker access and more real-time decision-making capabilities, which will also be rolled out.

John, I appreciate the color there. Turning to loans. I noticed in the press release that the commercial utilization rate seems to be kind of just hovering in that kind of 21% range. Curious as PPP funds get used and it seems like loan demand is increasing, would you expect that to potentially start to go up this year? And wondering if you could remind me what you would consider kind of a normal level of utilization for your portfolio?

Yes, that's a great question. This quarter, we see notable opportunities for our commercial and business banking customers as they have significantly more liquidity on their balance sheets than in the past. From an efficiency viewpoint, the best use of their next initiatives might be the cash they currently hold. We would like to see the utilization rates rise to more historical levels, typically in the high 20s to low 30s. While we have the instruments available for customers, we don't anticipate a significant change in utilization during the first half of the year. It's important to note that not all excess cash is with businesses that require borrowing options. Additionally, the ongoing uncertainty has led many small and medium-sized businesses to defer their commitments, particularly regarding capital spending and other budgeted initiatives. If we can navigate through a period with less uncertainty regarding the pandemic and inflation, we would likely see increased utilization and greater confidence among our customers in advancing value-added projects.

And maybe just a bit of a follow-up on loans. Kind of with that in mind, I guess, as you look at the pipeline today, what would be your kind of general expectations for organic growth in this year?

So we'll talk about total loan growth first. And we previously stated and we continue to believe that we can do mid-single-digit growth this year, consumer and commercial. I think the commercial number itself can be a little bit higher than that, and certainly, we've targeted internally higher levels than that and will incent for that. The pipelines are pretty vibrant. Coming out of a really strong fourth quarter, the pipelines are still going to enable us to have a good first quarter. This is commercial. So we feel pretty good about that. Calling activity is high. As I said earlier, customer enthusiasm is uniformly strong about things that they want to achieve. I agree with Scott that December and January were a little bit of a heads up in terms of charging hard because of Omicron, but I think that's going to be behind us pretty soon. We're planning that way in any event. And going into the rest of the year, nice optimism levels, and we would expect great momentum.

So our next question comes from the line of Chris O'Connell from KBW.

So just want to start on the fee side. I know you guys noted in the release that there's good pop in service charges this quarter, but it's still below pre-pandemic levels. There is also a pretty solid increase in the retirement plan fees. Just wondering if there's anything kind of onetime in nature that might reverse on the retirement plan side? Or if that's a good kind of baseline level headed in 2022? And if there's room left for the deposit service charges to creep back up to pre-pandemic levels here in the next couple of quarters?

Let me address that directly, Chris. Good points all around. Starting with retirement plan administration, we likely had about $0.5 million in document restatement fees. While these are not strictly one-time events, they aren't incurred every year or every quarter either. It's an important observation that this amount was somewhat higher than what we would typically expect as we move into 2022. The improvement in market conditions has a significant impact on both the retirement plan administration and wealth management sectors. The fourth quarter saw us reaching all-time highs, but many clients have blended portfolios, not just relying on equities. Should fixed income rates increase, we might see a recovery in that area if the equity markets experience some fluctuations. Our compensation in these areas includes both fee-for-service and fees based on assets under administration. Regarding banking fees, there are two important points as we look toward next year. Firstly, we have around $11 million in revenue related to our overdraft program within deposit services. There is ongoing discussion about this, and we are reviewing our programs, which John may elaborate on. We don’t expect much growth in that area, to be honest. On the debit interchange side, we are seeing growth in the number of transactions and debit card swipes, with strong revenue growth in 2021 as activity levels have nearly returned to pre-pandemic figures. However, starting July 1, the new elements of the Durbin amendment regarding fixed pricing controls on interchange compensation will impact us since we have surpassed $10 billion. We estimate that this will result in about $14 million in annual losses, with half occurring in 2022. Therefore, we anticipate around $7 million in reduced earnings in the third and fourth quarters from this change. While this isn’t something we welcomed, we were aware it was coming and have taken steps to mitigate its effects elsewhere. We still expect to see robust debit card activity from our customers moving forward, though we will be paying a bit less for that activity.

Chris, I also want to add to what Scott mentioned, as I know many of you on this call are interested in this topic. Regarding the overdraft product, it's important that everyone understands NBT's position in the markets we serve. We are committed to addressing the financial needs of our communities. Recently, we launched the iSelect checking account, which has no fees, no maintenance, no minimum balance requirements, no overdraft charges, no inactivity fees, and no early closure fees. This account is designed for customers seeking access to a community bank or financial institution that might not be readily available to them. Our goal is to provide financial services to the underbanked. Furthermore, Bank On has recognized and approved our iSelect product, and it now carries the Bank On designation. With regard to our current product offerings, we are exploring all options for potential modifications but expect to replace any lost revenue through other sources. For us, this is not a binary decision-making process. If the results of our analysis are significant, we will certainly share them once we can determine the impact of any changes we decide to implement. We are currently focused on understanding our options, market demands, and regulatory expectations, and this remains a top priority for us in the near term.

That was great, really helpful color. Just wanted to take a look at loan growth this quarter. It seems that specialty lending was up considerably. Just wondering if there's anything particular driving that?

Well, certainly, there is. As we've talked about in the past, we have a great partnership with a solar lender headquartered in Boston called Sungage, and we're the sole funder of their originated loans through a nationally based install network. In this environment, where the focus on the environment and global warming is so high and where the incentives in many states are very attractive, and where the investment community is also focused from an ESG perspective, we've seen a lot of activity and a lot of growth in prime and super-prime FICO levels. And in the fourth quarter, each one of those three months experienced significant fundings that are carrying us through the end of the year. There'll be a little bit of a pause perhaps in the first 60 days while we replenish the pipeline. But we would expect that this year as well we’ll be very strong there. The portfolio from a credit perspective performed extremely well during the depths of the pandemic and the related recession and is performing well now. It’s turned out to be a significant positive additive line for us, and we'll continue to invest in it as we go forward.

Great. And then I was hoping to just get an update on how you guys are thinking about the utilization of the buyback authorization and kind of target or ideal capital levels going forward?

Great. I'll take that one, Chris. So in the fourth quarter, we bought a couple of hundred thousand shares. Why did we do that? We were trying to get out in front of what we would have assumed our 2022 share creep was going to be relative to equity award programs for the company. So in other words, at least keep your comparisons like kind on a year-over-year basis, and we think we accomplished that. Going forward, share buybacks are not the top priority relative to capital utilization for us. I think they trail organic growth support from a capital standpoint, and they probably trail opportunistic evaluation of potential M&A opportunities for us. They probably trail our considerations relative to dividend award. But are there times where that's appropriate and beneficial to the shareholder? There are. And so we just think it's good housekeeping to have the authorization out there, periods of time where there's some potential market impacts that make that more reasonable. We're very disciplined about that, like we would be from an acquisition. We start to think about the dilution characteristics associated with the buyback similar to how we think about dilution characteristics associated with an M&A transaction. So again, I would just kind of say it's a necessary tool to have in the belt. And although we don't have big plans for a ton of that use, it's there when the opportunity creates itself. One thing I should acknowledge here is pointing both to our people, remembering that the PPP program was very, very successful for our bank. Over the two-year period, we generated $35 million in incremental pretax earnings from that program. So even if you said we added that program by itself, added to capital to the tune of $27 million or $28 million, that was capital we didn't actually plan to have. So could one say utilization in a buyback or something of that was appropriate, to date, we have not done that. We certainly have not exhausted that much of it. But at the same point in time, certainly a net positive both for us and clearly for our customer base.

Our next question comes from the line of Matthew Breese from Stephens Inc.

I want to return to specialty lending for a moment. First, what are the loan yields in that area? Secondly, considering mid-single-digit loan growth and the possibility that commercial lending may surpass that benchmark, with specialty lending currently making up just over 10% of our loans, should we anticipate an increase in the concentration of these loans? Or is there a limit to this segment that we should be aware of?

So Matt, that's a great question. Let's break it down into several parts. You made a valid point. We're actually closer to $800 million in specialty loans than any other figure, which includes nearly $0.5 billion in lending from the Sungage portfolio mentioned by John. We find the credit profile of that business particularly appealing. Although it doesn't generate a yield much above the mid-single digits, we believe it has a much stronger credit profile. On the other hand, with the Springstone LendingClub relationship since their acquisition, the yields in that portfolio are significantly higher, closer to a blended 10%. However, we're viewing that portfolio more as something that will gradually decrease rather than expand. Therefore, while we may be experiencing a slightly lower rate from our new growth, we anticipate lower long-term loss content. Regarding concentration, that's an important question. We're actively discussing how much concentration is acceptable for us. If we're not comfortable with a significant increase beyond current levels, we believe our balance sheet can support further growth. However, we should consider securitizing certain assets if they exceed specific thresholds. Like many other companies in the solar industry, we are benefiting from great opportunities through our partner, Sungage. So far, we've been effective in meeting all funding requirements. If we see an influx and numbers rise even higher, we might explore financing alternatives instead of holding everything on our balance sheet. Did I cover everything, Matt? Or do you have another question?

No, you got it all. I did want to go back to the margin discussion. So if I look at your most recent 10-Q and you're kind of plus 100 basis point interest rate scenario, I would call MVP kind of moderately asset sensitive with a 3.2% expected increase to NII. It does feel like a plus 100 basis scenario today is realistic. I was just curious if there's any kind of underlying assumptions you would highlight, particularly on the deposit beta front just given your performance last cycle was really solid. I'm curious if there's any underlying assumptions on that front worth flagging?

I appreciate that, and I’m glad you brought it up. We did see significant success during the 2016 to 2019 cycle. It's important to note that not all 100 basis points are the same. The initial 100 basis points saw a very slight increase in our deposit beta, only in the single-digit basis points. The next 100 basis points were a bit higher, possibly about a third more. However, as we progressed toward the third set of hundreds, the pandemic hit, forcing us to start over. We're quite confident that for the first 100 basis points, we will have minimal needs for changes in deposit rates. Currently, all balance sheets from a competitive perspective have a lot of liquidity, which was not the case in 2016 and 2017. Some institutions that were not traditionally strong in core deposit gathering now appear to be better positioned. It remains uncertain what will happen beyond that first 100 basis points, especially for those more reliant on CDs or promotional money market funds. I believe that in 2022, we will see all players act with responsibility, especially among our key competitors who also benefit from low-cost funding. Our approach will be to move quickly downward, but we expect to be comparatively slower when rates rise.

And you've been with us a long time, Matt, you know that it's in our DNA to execute on the lag, and I see no reason why our experience there wouldn't repeat itself this year.

Great. And then just a follow-up on the margin. What are the kind of the incremental blended loan yields in the pipeline are coming on the books today versus what's on the average balance sheet? And are we at the point where we're seeing a positive roll-on versus roll-off? Or is it still negative?

Well, that's a great question, Matt. So if you look at our fourth quarter, you would actually think we actually achieved it. But we have to admit that we are very mix-dependent right now. When you go through a quarter that had a very robust growth rate attached to some of those specialty lending lines, we had a net benefit. We've probably reached the inflection point in commercial banking. Have we reached that inflection point in indirect auto and in mortgage lending? Probably not yet. To answer your question, it's kind of portfolio specific. The blend in the fourth quarter let us achieve that. I think what we've been thinking going forward in 2022 is we're probably still fighting a little bit of higher loan yield runoffs on the lending side than we were putting on in net new assets. We're really close on the investment portfolio right now. Obviously, we're probably not quite there, but we're really close. So I think that's why we've kind of postured ourselves to say general stability, a couple of basis points here or there for the first half of the year. If we get into the second half of the year and the Fed has pushed through a couple of changes or maybe as indicating we're headed for a third by the third quarter, I think at that point in time, we will have probably crossed over.

Okay. And then last one for me is just historically, the bank has attacked new markets over time. Examples are Vermont, Maine, New Hampshire, now Connecticut. So first, maybe an update on those markets and the contribution of loan growth from the New England areas versus legacy Upstate New York? And then two, as we think about the path ahead, are there any other geographies that you envision entering organically at this point? And just curious about some of these strategic priorities for the franchise over the next year or two?

Sure. Let me take that one. Good question. I'll talk about the strategy, and then we'll give you a little bit of color on what's going on in New England, particularly. The disruption in New England continues and we're executing against it in Vermont, New Hampshire, Maine, particularly in Connecticut. We've been able to convert customers and hire bankers, and that initiative will continue this year and next year and on into the future. That will drive incremental growth in each one of those regions. As you know, we also consider in those markets in New England, the potential to partner with strategically aligned whole banks, and those dialogues also continue. If they will supplement our already stated growth strategies there, we'll engage. Conversations are always ongoing there. We've been thinking, Matt, where else we should invest outside of New England. I think there is a significant opportunity in the Lehigh Valley, for instance. We're actively engaged in that analysis, and there are several routes by which we could enter that market. Now that we've got the worst part of the pandemic behind us, we're able to do some more things to drive execution there. So keep an eye out on what's going on there with us. Traditionally, as you know, we've been focused to the east of Route 81 in New York State. However, from time to time, strategic opportunities present themselves in Western New York State. If and when one of those preferred opportunities present themselves, I think Scott talked about our capital position and our optionality, we have the ability to engage in those discussions as well. Just talking regionally from a growth perspective color in New England; 58% of the commercial originations in the fourth quarter came out of New England; Maine was 27% of that. I know the pipelines in several of those regions are robust. I think in Connecticut, we’ll continue to drive a whole bunch of singles and doubles, which is right in our wheelhouse. The more the uncertainty persists, the more accelerated the pace will be there. We're feeling pretty good about there; New Hampshire, Maine. It's a little bit more mature up in Burlington in terms of our effort there now over 10 years. We deal with the payoffs and amortization there. But still, there will be loan growth in Vermont as well. I hope that color is useful to you.

Very much.

Thank you, Matt.

Good to talk to you.

Thank you. I'm not showing any further questions. I will now turn the call back to John Watt for his closing remarks.

Well, again, thank you all for participating today, and we appreciate your interest in NBT and look forward to interacting in the future, perhaps in a warmer climate. Thanks, everybody. Have a good day.

Thank you.

Thank you. This concludes our program. You may disconnect. Have a great day.