NBT Bancorp's Q1 2025: Key Contradictions on Deposit Costs, Loan Growth, and CHIPS Act Impact

Deposit cost reductions, loan growth expectations, demand for credit and economic uncertainties, impact of CHIPS Act on project timelines, deposit pricing strategy and asset repricing are the key contradictions discussed in NBT Bancorp's latest 2025Q1 earnings call.



Operating Performance and Asset Growth:
- NBT Bancorp reported an operating return on assets of 1.11% for Q1 2025, with a return on equity of 10% and a ROTCE of 14%.
- The company successfully grew earning assets and lowered funding costs, leading to improved net interest margin for the fourth consecutive quarter.
- These improvements reflect positive operating leverage and capital flexibility.

Deposit and Loan Trends:
- Total deposits reached $11.7 billion, up $162 million from the previous quarter, primarily due to seasonal municipal deposits.
- Loans increased by $40 million on an annualized basis, excluding specific runoff portfolios.
- The growth in deposits and controlled loan growth strategy were key to maintaining capital strength and supporting strategic initiatives.

Expansion and Mergers:
- The merger of Evans Bancorp into NBT is set to close in early May, bringing over 40,000 new customers and 200 employees.
- This merger is expected to strengthen NBT's footprint in Upstate New York, particularly in Buffalo and Rochester markets.
- The integration is anticipated to enhance customer relationships and provide opportunities for growth in these regions.

Net Interest Margin and Cost Management:
- NBT's net interest margin improved by 10 basis points to 3.44% in Q1 2025.
- The decline in the total cost of deposits by 11 basis points to 1.49% was primarily driven by decreased pricing for interest-bearing deposits.
- Effective management of funding costs and deposit pricing strategies were instrumental in maintaining the margin improvement.