NBTB Q1 Deep Dive: Non-Interest Income and Evans Bancorp Deal Shape Outlook

Regional banking company NBT Bancorp (NASDAQ: NBTB) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 10% year on year to $154.7 million. Its non-GAAP profit of $0.80 per share was 7.9% above analysts’ consensus estimates.

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StockStory’s Take

NBT Bancorp’s first quarter results were marked by revenue and adjusted profit figures that exceeded Wall Street expectations, while the market reaction remained neutral. Management pointed to improvements in both net interest income and non-interest income, with the latter accounting for 31% of total revenues. CEO Scott Kingsley emphasized that growth in earning assets and lower funding costs helped expand net interest margin for a fourth consecutive quarter, while diversification across commercial and consumer lending contributed to portfolio stability. Kingsley described the operating performance as benefiting from “continued improvement over the length and prior year quarters and importantly reflects the generation of positive operating leverage.”

Looking forward, management expects the pending integration of Evans Bancorp to expand NBT Bancorp’s presence into the Buffalo and Rochester markets and support additional loan growth. CFO Annette Burns highlighted that cost synergies and earnings accretion from the deal are expected to materialize by the end of the year, though she noted that “accretion for earnings is probably closer to $0.30,” slightly lower than initial forecasts due to updated purchase accounting marks. Management also flagged that macroeconomic uncertainty and potential changes in market rates could impact loan demand and fee-based revenues in subsequent quarters.

Key Insights from Management’s Remarks

Management credited quarterly growth to a combination of disciplined deposit cost management, stronger fee-based businesses, and stable loan demand across core geographic markets.

• Deposit cost reductions: The team achieved a notable decrease in overall deposit costs, which contributed to an improved net interest margin for the quarter. Annette Burns explained, “Our net interest margin in the first quarter increased ten basis points to 3.44%...primarily driven by the decrease in the cost of interest-bearing deposits.”
• Diversified non-interest income: Non-banking businesses—including wealth management, insurance, and retirement plan services—showed productive improvement, with non-interest income making up 31% of total revenues. Management cited seasonal increases in some fee categories but underscored the growing importance of these lines for revenue stability.
• Loan portfolio stability: Despite modest overall loan growth, management reported healthy pipelines and consistent demand across all regions. CEO Scott Kingsley described the pipeline as “good, consistent with the levels we were enjoying most of last year,” suggesting that lending conditions remain stable.
• Credit quality management: The company recognized a $2.1 million write-down on a long-standing non-performing commercial real estate loan, but reported that overall asset quality metrics remain in line with historical averages. Reserve coverage was noted as more than twice the level of nonperforming loans.
• Evans Bancorp integration: The upcoming merger with Evans Bancorp is expected to add over 40,000 customers and extend the company’s reach into new Western New York markets. Management described the integration as “on track,” with systems conversion and employee onboarding proceeding smoothly.

Drivers of Future Performance

NBT Bancorp’s management expects future performance to be shaped by the Evans Bancorp integration, ongoing deposit cost management, and the influence of macroeconomic factors on loan demand and fee revenues.

• Evans Bancorp integration: The successful integration of Evans Bancorp is projected to drive earnings accretion and tangible book value dilution within expectations. Annette Burns stated that cost savings and growth in the expanded footprint should be realized by the end of the year.
• Loan growth outlook: Management moderated its loan growth expectations to 2–3%, citing slower mortgage activity and macroeconomic uncertainty. CEO Scott Kingsley noted that while commercial lending pipelines are solid, residential mortgage demand was weak in the first quarter, and uncertainty could further temper growth.
• Fee-based revenue sensitivity: Non-interest income, especially from wealth management and retirement plan services, is increasingly sensitive to market volatility. Burns explained that approximately 70% of wealth management revenue is market-sensitive, making future non-interest income partially dependent on broader financial market conditions.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will watch (1) progress on integrating Evans Bancorp, including system conversions and customer retention; (2) the pace of loan growth, especially in newly acquired Western New York markets; and (3) trends in non-interest income as market volatility influences wealth management and retirement services. Asset quality and the impact of macroeconomic shifts on loan demand will also be important to monitor.

NBT Bancorp currently trades at $40.38, down from $42.30 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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