On Wednesday, DA Davidson initiated coverage on shares of NBT Bancorp (NASDAQ:NBTB) with a Neutral rating and a price target of $60.00. The firm highlighted the company's strong fee income, which contributes approximately 30% to its revenue, and its low-risk credit culture as key factors in its premium valuation. Currently trading at $51.59 and with a market capitalization of $2.44 billion, NBT maintains a price-to-book ratio of 1.58x. InvestingPro analysis suggests the stock is trading slightly above its Fair Value.
The analyst from DA Davidson pointed out that NBT Bancorp is poised to benefit from regional manufacturing growth in upstate New York, which is expected to gain momentum due to in-sourcing trends and the CHIPS Act. This growth potential is reflected in the stock's strong performance, with a 47.61% return over the past six months. The company has also demonstrated commitment to shareholder returns, having raised its dividend for 12 consecutive years, according to InvestingPro data.
Recent forays into mergers and acquisitions (M&A) are also seen as a strategic move for NBT Bancorp, strengthening its position in the so-called "Chip Corridor". According to the firm, these activities are expected to be a significant driver of the bank's above-peer earnings per share (EPS) growth, projected at 15% year-over-year in 2025 and 24% in 2026.
DA Davidson anticipates that these factors will contribute to an increase in NBT Bancorp's profitability, with a return on assets (ROA) of 1.3% and a return on tangible common equity (ROTCE) of 17% by 2026. Currently, the bank maintains an ROA of 0.98%, with analyst targets ranging from $53 to $55.
These projections support the analyst's belief that the company's valuation premium will expand, reflecting an 18% upside to their price target and supporting their BUY rating. For deeper insights into NBT Bancorp's valuation and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of over 1,400 US stocks.
In other recent news, NBT Bancorp showcased strong financial growth in its Q3 2024, reporting a net income of $38.1 million, marking a considerable increase from the previous quarter. The company also revealed plans for a merger with Evans Bancorp (NYSE:EVBN), which, subject to regulatory approvals, is expected to extend its market presence into Buffalo and Rochester.
The financial highlights for NBT Bancorp included a rise in net income by $5.4 million from the previous quarter, a record high tangible book value per share of $23.83, and a significant growth in commercial and residential lending which resulted in total loans increasing by $256 million. Deposits also saw an uptick, growing to $11.6 billion, a $619.3 million rise since December 2023, and the net interest margin improved to 3.27%, reflecting higher asset yields.
In addition to these developments, NBT Bancorp declared a quarterly cash dividend of $0.34, up 6.3% year-over-year, and announced its involvement in supporting Micron Technology (NASDAQ:MU)'s upcoming $100 billion project in Clay, NY. However, it's noteworthy that operating expenses increased to $95.7 million, primarily due to higher salaries and technology investments. The company also recorded a loan loss provision at $2.9 million, with stable non-performing assets.
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