NBT Bancorp Inc. Q3 FY2025 earnings call

• Operating performance reflected productive asset repricing, diversified revenue streams, prudent balance sheet growth, and the Evans merger impact. Operating return on assets, return on equity, and ROTCE showed improvement. - Tangible book value per share was $25.51, 7% higher than a year ago. - Net interest margin improved for the sixth consecutive quarter due to earning asset remix, funding cost management, and Evans balance sheet addition. - Noninterest income grew with each nonbanking business achieving revenue and earnings improvements. - Dividend to shareholders increased 8.8%, 13th consecutive year of increases. - Joe Stagliano discussed market developments including branch expansions in various regions like Western NY, Hudson Valley, Vermont, Maine, Connecticut, and New Hampshire. - Annette Burns detailed net income, revenues, net interest margin, noninterest income, expenses, and asset quality metrics, noting provision expense decrease and reserves at 1.2% of total loans.

In the third quarter, NBT Bancorp reported net income of $54.5 million or $1.03 per diluted common share. Operating return on assets was 1.37%, return on equity 12.1%, and ROTCE 17.6%. Net interest margin improved for the sixth consecutive quarter. Noninterest income growth was a highlight, with businesses like retirement plan services, wealth management, and insurance services contributing. Total loans were $11.6 billion, diversified with 56% commercial relationships and 44% consumer loans. Total deposits were $13.7 billion, up $2.1 billion from December 2024. Net interest income for the third quarter was $134.7 million, an increase from prior quarters. Noninterest income represented 28% of total revenues.

• Net interest margin expected to face challenges from recent and expected Fed funds rate changes compared to recent quarters. - Low to mid-single-digit loan growth rate expected for markets in early to mid-2026. - Potential for margin improvement in 2026 if yield curve steepens and deposit costs lower, though not expecting the same level of benefit as in 2025 due to most loan book already repriced. - Continued evaluation of share repurchases with the renewed $2 million authorization through end of 2027, considering market recognition of earnings capacity.

• Recent and expected Fed funds rate changes likely to challenge future net interest margin improvements. - Deposit repricing lag compared to loan repricing, potentially impacting margin in the short term. - Market volatility affecting the exit of solar loans, as selling would require accepting fair value losses. - Capacity for C&D lending in auto loans might be impacted in the next 3-12 months, though not significant for NBT at present.

Q: Thoughts on capital management and buybacks?

A: Comfortable with capital position, historically covering equity-based comp with repurchases, but now may be more active with repurchases as market may not have fully recognized earnings capacity.

Q: Margin dynamics and potential improvement in mid-2026?

A: If yield curve steepens and deposit costs lower, potential for margin improvement in mid-2026, but not expecting same level of benefit as 2025 due to most loan book already repriced.