NBT Bancorp Inc. (NBTB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlighted strong financial performance with consistent dividend growth, strategic branch expansion, and a disciplined approach to loan pricing. Despite some market tensions and cautious credit practices, the company shows resilience and growth potential. The Q&A revealed stable NIM outlook and rational competition, with positive sentiment from analysts. The dividend hike and strategic investments in key regions support a positive outlook, while the market cap suggests moderate stock price movement.
Key Financial Performance
Operating return on assets 1.37% for the fourth quarter, consistent with the prior quarter, showing improvement over the prior year quarters due to positive operating leverage.
Return on tangible equity 17.02% for the fourth quarter, showing improvement over the prior year quarters due to positive operating leverage.
Tangible book value per share $26.54 at year-end, 11% higher than a year ago, driven by the remix of earning assets, diligent management of funding costs, and the addition of the Evans balance sheet.
Net interest margin Improved by 36 basis points year-over-year due to the remix of earning assets, management of funding costs, and the Evans merger.
Dividend Increased by 8.8% year-over-year, reflecting strong capital position and consistent operating earnings.
Share repurchases 250,000 shares repurchased in the fourth quarter as part of capital planning.
Net income $55.5 million for the fourth quarter, or $1.06 per diluted common share, consistent with the prior quarter.
Revenue Grew 25% year-over-year in the fourth quarter, driven by improvements in net interest income and noninterest income, including the Evans merger.
Total loans $11.6 billion, up $1.63 billion or 16.3% for the year, driven by strong commercial production and quality C&I opportunities.
Total deposits Up $2 billion from December 2024, including deposits from Evans, with a favorable mix change into lower-cost products.
Net interest margin (NIM) 3.65% for the fourth quarter, decreased 1 basis point from the prior quarter due to lower earning asset yields and higher short-term interest-bearing balances.
Net interest income $135.4 million for the fourth quarter, up $1 million from the prior quarter and $29 million from the fourth quarter of 2024, driven by lower interest expense offsetting lower interest income.
Noninterest income $49.6 million for the fourth quarter, up 17.4% year-over-year, driven by retirement plan services, wealth management, and insurance services.
Operating expenses $112 million for the fourth quarter, up 1.5% from the prior quarter due to higher technology, charitable contributions, and marketing costs.
Effective tax rate 20.3% for the fourth quarter, lower than the prior quarter due to the deductibility of merger-related expenses.
Provision expense for loan losses $3.8 million for the fourth quarter, up from $3.1 million in the prior quarter due to slightly higher net charge-offs.
Reserves 1.19% of total loans, covering 2.5x the level of nonperforming loans.
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Operating Highlights
Noninterest Income Growth: Each of NBT's nonbanking businesses achieved record results in both revenue and earnings generation for 2025.
Market Expansion in Western New York: Successful integration of Evans Bank team members and opportunities in the Western region of New York.
Semiconductor Corridor Development: Progress in Upstate New York's semiconductor chip corridor, including Micron's groundbreaking for a complex outside Syracuse.
Net Interest Margin Improvement: 36 basis point improvement year-over-year due to asset remix and funding cost management.
Loan Portfolio Growth: Total loans increased by $1.63 billion or 16.3% for the year, with a diversified portfolio of 56% commercial and 44% consumer loans.
Deposit Growth: Total deposits increased by $2 billion from December 2024, with a favorable shift to lower-cost checking and savings accounts.
Merger with Evans Bancorp: Merger completed in Q2 2025, contributing to balance sheet growth and operational synergies.
Capital Utilization Priorities: Focus on organic growth, dividend improvement, M&A opportunities, and share repurchases.
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Risk or Challenges
Commercial Real Estate Payoffs: Higher levels of commercial real estate payoffs were experienced, which could impact loan growth and revenue generation.
Net Interest Margin: Net interest margin decreased by 1 basis point in the fourth quarter due to lower earning asset yields and higher levels of lower-yielding short-term interest-bearing balances.
Interest Rate Sensitivity: Approximately $3 billion of earning assets reprice almost immediately with changes in the federal funds rate, while $6 billion of deposits remain price-sensitive, creating potential volatility in net interest income.
Provision for Loan Losses: Provision expense increased due to a slightly higher level of net charge-offs, indicating potential risks in loan performance.
Operating Expenses: Operating expenses increased by 1.5% from the prior quarter, driven by higher technology, year-end charitable contributions, and marketing costs, which could pressure profitability.
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Guidance & Outlook
Future growth opportunities: The company is well-positioned to pursue growth opportunities across all its markets, supported by a strong capital position and stable asset quality.
Market expansion: Activities in the Upstate New York semiconductor chip corridor, including Micron's planned complex outside Syracuse, are progressing. Site development and construction of the first fabrication facility are expected to commence immediately, with completion targeted for 2030.
Net interest income and margin: Future upward movement in earning asset yields will depend on the shape of the yield curve and reinvestment of loan and investment portfolio cash flows.
Loan portfolio: The total loan portfolio remains diversified, with 56% commercial relationships and 44% consumer loans. The company continues to capture quality C&I opportunities across its markets.
Deposit portfolio: The company experienced a favorable change in deposit mix, moving out of higher-cost time deposits into checking, savings, and money market products. Approximately $6 billion of deposits remain price-sensitive.
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Shareholder Return Plan
Dividend Increase: In the third quarter, NBT Bancorp announced a year-over-year improvement of 8.8% to its dividend, marking the 13th consecutive year of annual increases.
Capital Utilization Priorities: The company focuses on supporting organic growth strategies and improving its dividend each year, reflecting a strong capital position and consistent operating earnings.
Share Repurchase: NBT Bancorp repurchased 250,000 of its own shares in the fourth quarter as part of its capital planning.
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Key Q&A
Q:Do you expect any larger payoffs on the commercial side in the next couple of quarters? How does that factor into overall loan growth considering the run-off portfolios?
A:In 2025, there were $150 million to $175 million of unscheduled commercial real estate payoffs. These payoffs are attributed to agency money and private funding, particularly in urban areas like Southern Hudson Valley and New England. This poses a risk to growth attributes as sponsors are receiving offers from agency structures that are hard to turn down.
Q:What are you seeing in terms of loan pipelines and opportunities, particularly in Rochester and Buffalo?
A:Demand is strong across the franchise, with pipelines stronger than last year. Opportunities in Western New York, including Rochester and Buffalo, are promising due to a focus on holistic relationships and the addition of talented team members. Multifamily housing projects are fewer, but the existing ones are good opportunities.
Q:Is the mid- to lower single-digit growth rate a good number for 2026?
A:Yes, it is. The bank continues to manage a $800 million older loan portfolio in runoff, reducing by about $100 million annually. There is good activity in C&I and CRE, with selectivity in opportunities. Consumer lending, especially mortgages, has improved with low 6% mortgage rates.
Q:Why did you boost your reserve against the solar book this quarter?
A:The reserve was recalibrated to rightsize the coverage allowance for the runoff portfolio. There are no fundamental changes or negative concerns regarding the solar book.
Q:How are tensions between the U.S. and Canada impacting the economy in your northernmost markets?
A:The tensions have caused frustration among Canadian customers, leading to hesitation in future investments. This impacts cross-border businesses in areas like Buffalo and Northern New York, which rely on Canadian commerce. However, these are not the highest growth areas for the bank.
Q:Are the hurdle rates of return for M&A higher today than in the past?
A:Yes, the bank now requires M&A opportunities to generate at least 5% accretion, equating to $0.20 per share based on a $4 per share base. The focus is on modest geographic extensions or productive fill-in opportunities. The Evans transaction was successful, and the bank is open to high-quality, like-minded smaller community banks.
Q:What are your planned hiring initiatives to support growth, and are these investments reflected in expense guidance?
A:The bank is investing in all geographies, including Maine, New Hampshire, and Western New York. High-quality hires have been made in C&I, insurance, and mortgage. New branches are planned in Portland, Scarborough, Manchester, and Rochester. These investments are reflected in expense guidance.
Q:What is the NIM outlook for the next few quarters?
A:The NIM is expected to remain stable, with potential expansion of 2-3 basis points per quarter. Opportunities exist in the residential mortgage book and investment securities book. CD repricing offers additional room for improvement, but overall NIM growth will focus on earning asset growth.
Q:How would you characterize competition in lending across your footprint?
A:Competition is rational but defensive, with some pressure on spreads for highly rated companies. Agency-based funding sources offer better rates and structures for customers, but this is not pervasive across markets.
Q:Are there any markets better able to absorb a decrease in rates?
A:Legacy markets with strong market share can absorb rate decreases uniformly. In newer markets, rates may remain higher for longer due to concentration characteristics. Funding cost reductions typically lag by a month or six weeks after Fed rate cuts.
Q:Are there any areas where you are tapping the brakes on credit?
A:The bank is cautious about hospitality and office space but has no new emerging trends or industries to avoid. Concentrations are monitored, and there are no large maturity walls.
Q:Should charge-off expectations be reframed given the wind-down of consumer balances?
A:Yes, charge-offs are expected to normalize at 15-20 basis points as unsecured consumer books wind down. Historical charge-offs were higher due to portfolios like LendingClub and Springstone.
Q:Has the appetite to sell the solar book changed?
A:The bank is open to selling the solar book but faces challenges due to low rate structures from 2020-2023. The assets are performing well, but marketability is limited by rate considerations.
Q:What are the triggers for share repurchases, and will this continue in early 2026?
A:Share repurchases are driven by valuation and capacity. The bank can self-fund repurchases at the current level without affecting capital ratios. This pattern is expected to continue in early 2026.
Q:Will the margin still increase in the first quarter even if accretion income normalizes?
A:The margin is expected to remain stable or be affected by 1-2 basis points, barring changes in normalized accretion.
Q:How much of the linked quarter growth in fees was seasonal?
A:Approximately $300,000 to $400,000 of the growth in wealth fees was seasonal. Fee income also included $1 million to $1.5 million from BOLI and securities gains.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the impact of U.S.-Canada tensions on the economy in northernmost markets. While they acknowledged customer frustration and hesitation in investments, the response lacked specific data or detailed analysis of the economic impact.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Activities Upstate
Annette
Bancorp Full
Bank belief
CEO Scott
Full Financial
Full result
Mr Sania
NBT strategy
Sania NBT
Scott opening
Site development
Syracuse Site
York Activities
activity month
addition capital
attribute rate
belief customer
business record
community group
component capital
construction fabrication
corridor groundbreaking
customer community
development construction
end remix
equity improvement
fabrication facility
facility meeting
groundbreaking Micron
group professional
integration activity
level variety
member Bank
month member
opportunity capital
opportunity region
professional rank
rank opportunity
record result
repurchase component
NBTB Transcript
NBT Bancorp Inc. (NBTB) Q4 2025 Earnings Call Transcript
Positive1-27
The earnings call highlighted strong financial performance with consistent dividend growth, strategic branch expansion, and a disciplined approach to loan pricing. Despite some market tensions and cautious credit practices, the company shows resilience and growth potential. The Q&A revealed stable NIM outlook and rational competition, with positive sentiment from analysts. The dividend hike and strategic investments in key regions support a positive outlook, while the market cap suggests moderate stock price movement.
NBT Bancorp Inc. (NBTB) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call presents mixed signals. While there are positive developments such as cost savings from the merger, stable asset quality, and a focus on growth in key markets, there are also concerns about margin pressures and lack of clarity in some management responses. The Q&A section did not reveal significant risks but highlighted potential margin pressure and a lack of market depth for solar loans. Given the market cap, the stock is likely to experience limited volatility, resulting in a neutral stock price movement over the next two weeks.
NBT Bancorp Inc. (NBTB) Q2 2025 Earnings Call Transcript
Positive7-29
The earnings call reveals strong financial performance with increased net income, revenue growth, and improved net interest margin. The Evans Bancorp merger is expected to enhance services and expand the customer base. The Q&A section highlights opportunities in wealth management and insurance, with no significant concerns in asset quality. Despite competitive loan pricing, the bank maintains a positive outlook on loan growth and liquidity deployment. Overall, the financial health and strategic initiatives suggest a positive sentiment for the stock price over the next two weeks.
NBT Bancorp Inc. (NASDAQ:NBTB) Q1 2025 Earnings Call Transcript
Positive4-26
The earnings call presents a mixed yet overall positive outlook. Financial performance is strong, with increased net income, revenues, and net interest margin. The merger with Evans Bancorp and investment in the semiconductor corridor indicate strategic growth potential. Despite risks in economic conditions and interest rates, the company maintains disciplined pricing and loan growth. The dividend increase and shareholder equity growth further support positive sentiment. The Q&A section highlights consistent demand and competitive pricing, although macro uncertainties slightly temper expectations. Considering the market cap, the stock is likely to see a positive movement of 2% to 8%.
NBTB Report
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