NBT Bancorp Inc. Q2 FY2025 earnings call

• Operating performance reflected productive asset repricing, revenue diversification, balance sheet growth, and Evans merger impact.
• Operating return on assets, return on equity, and ROTCE showed continued improvement. Tangible book value per share increased 9% year-over-year.
• Net interest margin improved for the fifth consecutive quarter due to remix of earning assets and Evans merger. Noninterest income grew with nonbanking businesses improving revenue and earnings.
• Dividend to shareholders increased 8.8%, 13th consecutive year of increases. Completed Evans merger on May 2, converted accounts, opened 18 branches as NBT Bank locations.
• Activity in Upstate NY semiconductor chip corridor, including Micron progress and federal partnership with Micron.

Operating return on assets was 1.19% for the second quarter with a return on equity of 10.5% and ROTCE of 15.25%. Tangible book value per share was $24.57 at June 30, 9% higher than a year ago. Net interest margin improved for the fifth consecutive quarter. Noninterest income grew year-over-year. Loans totaled nearly $12 billion, 56% commercial relationships and 44% consumer loans. Deposits were $13.5 billion, up almost $2 billion from December 2024. Net income was $22.5 million or $0.44 per diluted common share.

• Annette mentioned net interest margin expecting an additional month of accretion from Evans (~$1-1.5M) for a couple of basis points improvement. Earning asset yield repricing expected a few basis points improvement, but funding costs stabilized with less impact than prior quarters.
• Scott noted that in an improving NIM cycle, repricing benefits may be competed away.

• Potential impact of rate cuts on funding with a possible lag. Competition affecting pricing, especially in indirect auto space. Uncertainty in business activity slowing down pipeline speed.

Q: What is a 25 basis point rate cut mean for your margin?

A: NBT is fairly neutrally positioned with $2.5B loans reprice immediately and $5.5B deposit base 40% can be repriced, but possible funding lag.

Q: How are you thinking about the net interest margin for 3Q assuming no Fed rate cuts?

A: One additional month of accretion from Evans (~$1-1.5M) for a couple basis points improvement, and earning asset yield repricing expected a few basis points, funding costs stabilized with less impact than prior quarters.

Q: Thoughts on revenue synergies from Evans deal, particularly wealth management and insurance?

A: Evans had modest wealth management participation, opportunity to expand advisers and utilize insurance services, with growth expected through holistic delivery.

Q: Outlook for loan pipeline and business activity in second half?

A: Pipeline is good but speed to completion hesitated due to uncertainty, most projects still moving forward with some episodic slowdowns.

Q: Plans for liquidity deployment and third quarter cash?

A: Ended with more liquidity post Evans transaction, loan growth modest, deposit growth positive, sub debt repaid with lower interest cost, balance sheet has ample liquidity.

Q: Impact of sub debt redemption on interest cost differential?

A: $118M sub debt at ~5.45% repaid with liquidity at lower rates, saving interest cost.

Q: Impact of sub debt redemption on charge-offs?

A: Net charge-offs were low in second quarter, expected to be in $3-5M range quarterly.