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What changed in NBT BANCORP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NBT BANCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+409 added−398 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in NBT BANCORP INC's 2024 10-K

409 paragraphs added · 398 removed · 311 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+26 added−19 removed96 unchanged
Biggest changeThe Capital Rules also require a “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress.
Biggest changePursuant to the Capital Rules, the minimum capital ratios are: ● 4.5% CET1 to risk-weighted assets; ● 6.0% Tier 1 capital (CET1 plus Additional Tier 1 capital) to risk-weighted assets; ● 8.0% Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and ● 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”). 12 Table of Contents The Capital Rules also require a “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios.
Through NBT Financial Services, the Company operates EPIC Advisors, Inc. (“EPIC”), a national benefits administration firm which, was acquired by the Company on January 21, 2005. Among other services, EPIC provides retirement plan administration. EPIC’s headquarters are located in Rochester, New York. NBT Holdings, Inc.
Through NBT Financial, the Company operates EPIC Advisors, Inc. (“EPIC”), a national benefits administration firm which was acquired by the Company on January 21, 2005. Among other services, EPIC provides retirement plan administration. EPIC’s headquarters are located in Rochester, New York. NBT Holdings, Inc.
The Company’s common stock is listed on the NASDAQ Global Select market under the ticker symbol, “NBTB,” and the Company is subject to the NASDAQ stock market rules. The Bank is chartered as a national banking association under the National Bank Act.
The Company’s common stock is listed on the NASDAQ Global Select market under the ticker symbol, “NBTB,” and the Company is subject to the NASDAQ rules. The Bank is chartered as a national banking association under the National Bank Act.
In more serious cases, enforcement actions may include the issuance of directives to increase capital; the issuance of formal and informal agreements; the imposition of civil monetary penalties; the issuance of a cease and desist order that can be judicially enforced; the issuance of removal and prohibition orders against officers, directors and other institution-affiliated parties; the termination of the insured depository institution’s deposit insurance; the appointment of a conservator or receiver for the insured depository institution; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the FDIC, as receiver, would be harmed if such equitable relief was not granted. 11 Table of Contents Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities from: (1) engaging in “proprietary trading” and (2) investing in or sponsoring certain covered funds, subject to certain limited exceptions.
In more serious cases, enforcement actions may include the issuance of directives to increase capital; the issuance of formal and informal agreements; the imposition of civil monetary penalties; the issuance of a cease and desist order that can be judicially enforced; the issuance of removal and prohibition orders against officers, directors and other institution-affiliated parties; the termination of the insured depository institution’s deposit insurance; the appointment of a conservator or receiver for the insured depository institution; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the FDIC, as receiver, would be harmed if such equitable relief was not granted. 13 Table of Contents Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities from: (1) engaging in “proprietary trading” and (2) investing in or sponsoring certain covered funds, subject to certain limited exceptions.
In connection with the acquisition, the Company issued 4.32 million shares and acquired approximately $1.46 billion of identifiable assets, including $1.18 billion of loans, $122.7 million in investment securities, which were sold immediately after the merger, $31.2 million of core deposit intangibles and $4.7 million in a wealth management customer intangible, as well as $1.31 billion in deposits.
In connection with the acquisition, the Company issued 4.32 million shares of common stock and acquired approximately $1.46 billion of identifiable assets, including $1.18 billion of loans, $122.7 million in investment securities which were sold immediately after the merger, $31.2 million of core deposit intangibles and $4.7 million in a wealth management customer intangible, as well as $1.31 billion in deposits.
This Annual Report on Form 10-K and other reports filed with the SEC are available on the SEC’s website, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s website address is www.sec.gov. 14 Table of Contents
This Annual Report on Form 10-K and other reports filed with the SEC are available on the SEC’s website, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s website address is www.sec.gov. 16 Table of Contents
FRB regulations mandated by the Dodd-Frank Act limit interchange fees on debit cards to a maximum of 21 cents per transaction plus 5 basis points of the transaction amount. The rule also permits a fraud-prevention adjustment of 1 cent per transaction conditioned upon an issuer developing, implementing and updating reasonably designed fraud-prevention policies and procedures.
FRB regulations mandated by the Dodd-Frank Act limit interchange fees on debit cards to a maximum of 21 cents per transaction plus 5 bps of the transaction amount. The rule also permits a fraud-prevention adjustment of 1 cent per transaction conditioned upon an issuer developing, implementing and updating reasonably designed fraud-prevention policies and procedures.
However, the BHC Act, as amended by the Dodd-Frank Act, requires prior written approval from the FRB or prior written notice to the FRB before a financial holding company may acquire control of a company with consolidated assets of $10 billion or more. 8 Table of Contents Capital Distributions The principal source of the Company’s liquidity is dividends from the Bank.
However, the BHC Act, as amended by the Dodd-Frank Act, requires prior written approval from the FRB or prior written notice to the FRB before a financial holding company may acquire control of a company with consolidated assets of $10 billion or more. Capital Distributions The principal source of the Company’s liquidity is dividends from the Bank.
The Bank’s failure to comply with any of the consumer financial laws can result in civil actions, regulatory enforcement action by the federal banking agencies and the U.S. Department of Justice.
The Bank’s failure to comply with any of the consumer financial laws can result in civil actions, regulatory enforcement action by the federal banking agencies and the U.S.
In addition, some of the Company’s competitors have assets, capital and lending limits greater than that of the Company, have greater access to capital markets and offer a broader range of products and services than the Company.
In addition, some of the Company’s competitors have assets, capital and lending limits greater than those of the Company, have greater access to capital markets and offer a broader range of products and services than the Company.
The Company is also subject to the jurisdiction of the Securities and Exchange Commission (“SEC”) and is subject to the disclosure and other regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as administered by the SEC.
The Company is also subject to the jurisdiction of the SEC, and is subject to the disclosure and other regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as administered by the SEC.
NBT Bank, N.A. The Bank, a full-service commercial bank formed in 1856, provides a broad range of financial products to individuals, corporations and municipalities throughout upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, southern Maine and central and northwestern Connecticut.
NBT Bank, National Association The Bank, a full-service commercial bank formed in 1856, provides a broad range of financial products to individuals, corporations and municipalities throughout upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, southern Maine and central and northwestern Connecticut.
Salisbury Bank was a Connecticut-chartered commercial bank headquartered in Lakeville, Connecticut with 13 banking offices in northwestern Connecticut, the Hudson Valley region of New York, and southwestern Massachusetts.
Salisbury Bank was a Connecticut-chartered commercial bank headquartered in Lakeville, Connecticut, operating 13 banking offices in northwestern Connecticut, the Hudson Valley region of New York, and southwestern Massachusetts.
Our home lending team includes affordable housing loan originators, and we maintain longstanding relationships with affordable housing agency partners across our banking footprint that offer first-time homebuyer education programs and assistance with down payments and closing costs. Environmental The Company is focused on the environment and committed to business practices and activities that encourage sustainability and minimize our environmental impact.
Our home lending team includes affordable housing loan originators, and we maintain longstanding relationships with affordable housing agency partners across our banking footprint that offer first-time homebuyer education programs and assistance with down payments and closing costs. 8 Table of Contents Environmental The Company is focused on the environment and committed to business practices and activities that encourage sustainability and minimize our environmental impact.
NBT Insurance offers a full array of insurance products, including personal property and casualty, business liability and commercial insurance, tailored to serve the specific insurance needs of individuals as well as businesses in a range of industries operating in the markets served by the Company. 3 Table of Contents The Trusts The Trusts were organized to raise additional regulatory capital and to provide funding for certain acquisitions.
NBT Insurance offers a full array of insurance products, including personal property and casualty, business liability and commercial insurance, tailored to serve the specific insurance needs of individuals as well as businesses in a range of industries operating in the markets served by the Company. 4 Table of Contents The Trusts The Trusts were established to raise additional regulatory capital and to provide funding for certain acquisitions.
The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services. The Company’s business philosophy is to operate as a community bank with local decision-making, providing a broad array of banking and financial services to retail, commercial and municipal customers.
The Company has been, and intends to remain, a community-oriented financial institution offering a variety of financial services. The Company’s business philosophy is to operate as a community bank with local decision-making, providing a broad array of banking and financial services to retail, commercial and municipal customers.
NBT Capital Management, Inc., formerly Columbia Ridge Capital Management, Inc., was acquired in 2016 and is a registered investment advisor that provides investment management and financial consulting services. SBT Mortgage Service Corporation is a passive investment company (“PIC”) acquired in 2023 in connection with the acquisition of Salisbury Bancorp, Inc. (“Salisbury”).
NBT Capital Management, Inc., formerly Columbia Ridge Capital Management, Inc., was acquired in 2016 and is a registered investment advisor that provides investment management and financial consulting services. SBT Mortgage Service Corporation, acquired in 2023 in connection with the Salisbury acquisition, is a passive investment company (“PIC”).
The Federal Reserve has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.
The FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.
USA PATRIOT Act The Bank Secrecy Act (“BSA”), as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism.
Department of Justice. 14 Table of Contents USA PATRIOT Act The Bank Secrecy Act (“BSA”), as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism.
The financial condition and operating results of the Company are dependent on its net interest income, which is the difference between the interest and dividend income earned on its earning assets, primarily loans and investments and the interest expense paid on its interest-bearing liabilities, primarily consisting of deposits and borrowings.
The financial condition and operating results of the Company are dependent on its net interest income, which is the difference between the interest and dividend income earned on its earning assets, primarily loans and securities and the interest expense paid on its interest-bearing liabilities, primarily deposits and borrowings.
If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
If enacted or implemented, such legislation or regulatory changes could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
The Bank’s management is not aware of any practice, condition or violation that might lead to the termination of its deposit insurance. 9 Table of Contents Federal Home Loan Bank System The Bank is also a member of the Federal Home Loan Bank (“FHLB”) of New York, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending.
The Bank’s management is not aware of any practice, condition or violation that might lead to the termination of its deposit insurance. Federal Home Loan Bank System The Bank is also a member of the FHLB of New York, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending.
The Capital Rules revise the definitions and the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing general risk-weighting approach with a more risk-sensitive approach.
The Capital Rules revised the definitions and the components of regulatory capital, as well as addressed other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Capital Rules also addressed asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing general risk-weighting approach with a more risk-sensitive approach.
The results from the survey will be used to define specific initiatives to enhance engagement around the organization including clarity with respect to our business strategies, decision making and corporate led development programs. Learning and Career Development The Company’s main priority is to attract and retain top talent by encouraging and promoting internal development.
The results from the survey will continue to be used to define specific initiatives to enhance engagement around the organization and add clarity to our business strategies, decision making and corporate-led development programs. Learning and Career Development The Company’s main priority is to attract and retain top talent by encouraging and promoting internal development.
All employees have access to the LinkedIn Learning Library, which is intended to make learning and development accessible in a concise, easily consumable format that enables employees to get the development they need to achieve individual career aspirations. Currently 80% of our employees are active in the learning library and are taking full advantage of this resource.
All employees have access to the LinkedIn Learning Library, which is intended to make learning and development accessible in a concise, easily consumable format that enables employees to acquire the skills they need to achieve individual career aspirations. Currently, 85% of our employees are active in the learning library and are taking full advantage of this resource.
The Bank was in compliance with FHLB rules and requirements as of December 31, 2023. Debit Card Interchange Fees The Dodd-Frank Act requires that any interchange transaction fee charged for a debit transaction be reasonable and proportional to the cost incurred by the issuer for the transaction.
The Bank was in compliance with FHLB rules and requirements as of December 31, 2024. 11 Table of Contents Debit Card Interchange Fees The Dodd-Frank Act requires that any interchange transaction fee charged for a debit transaction be reasonable and proportional to the cost incurred by the issuer for the transaction.
At December 31, 2023, the Bank qualified as “well-capitalized” under applicable regulatory capital standards.
At December 31, 2024, the Bank qualified as “well-capitalized” under applicable regulatory capital standards.
Among other factors, net income is also affected by provisions for loan losses and noninterest income, such as service charges on deposit accounts, card services income, retirement plan administration fees, wealth management revenue including financial services and trust revenue, insurance services, bank owned life insurance income and gains/losses on securities sales, as well as noninterest expenses, such as salaries and employee benefits, technology and data services, occupancy, professional fees and outside services, office supplies and postage, amortization of intangible assets, loan collection and other real estate owned (“OREO”) expenses, advertising, Federal Deposit Insurance Corporation (“FDIC”) assessment expenses and other expenses.
Among other factors, net income is also affected by provision for loan losses and noninterest income, such as service charges on deposit accounts, card services income, retirement plan administration fees, wealth management revenue including financial services and trust revenue, insurance services, bank owned life insurance income and gains/losses on securities sales, as well as noninterest expenses, such as salaries and employee benefits, technology and data services, occupancy, professional fees and outside services, office supplies and postage, amortization of intangible assets, loan collection and OREO expenses, advertising, FDIC assessment expenses and other expenses.
The Bank is subject to the supervision of, and to regular examination by, the Office of the Comptroller of the Currency (“OCC”) as its chartering authority and primary federal regulator. The Bank is also subject to the supervision and regulation, to a limited extent, of the FDIC as its deposit insurer.
The Bank is subject to the supervision of, and to regular examination by, the OCC as its chartering authority and primary federal regulator. The Bank is also subject to the supervision and regulation, to a limited extent, of the FDIC as its deposit insurer.
The fund is designed to support individuals and communities with low- and moderate income through investments in high-impact, community supported, commercial real estate projects located within the Bank’s Community Reinvestment Act assessment areas in New York.
The fund, launched in 2022, is designed to support individuals and communities with low- and moderate-income through investments in high-impact, community supported, CRE projects located within the Bank’s Community Reinvestment Act assessment areas in New York.
Collectively, NBT Bancorp Inc. and its subsidiaries are referred to herein as (the “Company”). The Company, on a consolidated basis, at December 31, 2023 had assets of $13.31 billion and stockholders’ equity of $1.43 billion.
Collectively, NBT Bancorp Inc. and its subsidiaries are referred to herein as (the “Company”). As of December 31, 2024, the Company had assets of $13.79 billion and stockholders’ equity of $1.53 billion on a consolidated basis.
On August 11, 2023, the Company completed the acquisition of Salisbury through the merger of Salisbury with and into the Company, with the Company surviving the merger, and the merger of Salisbury Bank and Trust Company (“Salisbury Bank”) with and into the Bank, with the Bank as the surviving bank, for $161.7 million in stock.
Merger On August 11, 2023, the Company completed its acquisition of Salisbury through the merger of Salisbury with and into the Company, with the Company as the surviving entity, and the merger of Salisbury Bank with and into the Bank, with the Bank as the surviving bank, for $161.7 million in stock.
Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity and other capital instrument repurchases and compensation based on the amount of the shortfall.
The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity and other capital instrument repurchases and compensation based on the amount of the shortfall.
Through NBT Holdings, the Company operates NBT Insurance Agency, LLC (“NBT Insurance”), a full-service insurance agency acquired by the Company on September 1, 2008. NBT Insurance’s headquarters are located in Norwich, New York.
Through NBT Holdings, the Company operates NBT Insurance Agency, LLC (“NBT Insurance”), a full-service insurance agency acquired by the Company on September 1, 2008. NBT Insurance is headquartered in Norwich, New York.
Engaging Employees While our employee retention rate remains consistently high, we continue to place significant effort toward retaining our valued employees - career planning conversations, an on-going coaching process, goal setting, individual development plans and enhanced communications all play a part in employee satisfaction. In the first quarter of 2024, we will administer our Employee Engagement Survey.
Engaging Employees While our employee retention rate remains consistently high, we continue to place significant effort on retaining our valued employees through career planning conversations, an on-going coaching process, goal setting, individual development plans and enhanced communications, which all play a part in employee satisfaction.
Overview The Company is a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of, and regular examination by, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or “FRB”) as its primary federal regulator.
Overview The Company is a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of, and regular examination by, the FRB as its primary federal regulator.
Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), U.S. banks and financial services firms have been subject to enhanced regulation and oversight. Federal Bank Holding Company Regulation The Company is a bank holding company as defined by the BHC Act.
Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), U.S. banks and financial services firms have been subject to enhanced regulation and oversight.
With the addition of new financial services providers within our market, the Company expects increased competition for loans, deposits and other financial products and services. 4 Table of Contents In order to compete with other financial services providers, the Company stresses the community nature of its banking operations and principally relies upon local promotional activities, personal relationships established by officers, directors and employees with the Company’s customers and specialized services tailored to meet the needs of the communities served.
In order to compete with other financial services providers, the Company stresses the community nature of its banking operations and principally relies upon local promotional activities, personal relationships established by officers, directors and employees with the Company’s customers and specialized services tailored to meet the needs of the communities served.
Through its network of branch locations, the Bank offers a wide range of products and services tailored to individuals, businesses and municipalities. Deposit products offered by the Bank include demand deposit accounts, savings accounts, negotiable order of withdrawal (“NOW”) accounts, money market deposit accounts (“MMDA”) and certificate of deposit (“CD”) accounts.
Through its network of branch locations, the Bank offers a wide range of products and services tailored to individuals, businesses and municipalities. Deposit products offered by the Bank include demand deposit accounts, savings accounts, NOW accounts, MMDA and CD accounts.
The Trusts are variable interest entities for which the Company is not the primary beneficiary, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). In accordance with ASC, the accounts of the Trusts are not included in the Company’s consolidated financial statements.
The Trusts are VIEs for which the Company is not the primary beneficiary, as defined by FASB ASC. In accordance with ASC, the accounts of the Trusts are not included in the Company’s consolidated financial statements.
A change in any of the statutes, regulations or regulatory policies applicable to the Company and its subsidiaries could have a material effect on the results of the Company.
Such statutes, regulations and policies are subject to ongoing review by Congress and state legislatures and federal and state regulatory agencies. A change in any of the statutes, regulations or regulatory policies applicable to the Company and its subsidiaries could have a material effect on the results of the Company.
The Company employs a defense in depth strategy, which combines physical control measures with logical control measures and uses a layered security model to provide end-to-end security of Company and client information. The high-level objective of the information security program is to protect the confidentiality, integrity and availability of all information assets in our environment.
The Company implements a defense-in-depth strategy, integrating physical and logical controls within a layered security model to ensure comprehensive end-to-end protection of Company and client information. The high-level objective of the information security program is to protect the confidentiality, integrity and availability of all information assets in our environment.
The NBT iSelect Account was introduced in 2021 and certified as meeting the Bank On National Account Standards for 2021-2022, 2023-2024 and again for 2024-2025. Over 11,000 NBT iSelect Accounts have been opened. These accounts feature no monthly charges for maintenance, inactivity or dormancy, no overdraft fees and no minimum balance requirement.
The NBT iSelect Account was introduced in 2021 and has received certification for meeting the Bank On National Account Standards every year since its inception. Over 18,000 NBT iSelect Accounts have been opened since 2021. These accounts feature no monthly charges for maintenance, inactivity or dormancy, no overdraft fees and no minimum balance requirement.
The Company engages outside consultants to perform periodic audits of our information and data security controls and processes including penetration testing of the Company’s public facing websites and corporate networks.
The Company engages outside consultants to perform periodic audits of our information and data security controls and processes including penetration testing of the Company’s public facing websites and corporate networks. The Board requires the Company’s Information Security Officer to report to them the status of the overall information security and data privacy program on a recurring basis.
The regulatory framework applicable to bank holding companies and their subsidiary banks is intended to protect depositors, federal deposit insurance funds and the stability of the U.S. banking system.
Supervision and Regulation The Company, the Bank and certain of its non-banking subsidiaries are subject to extensive regulation under federal and state laws. The regulatory framework applicable to bank holding companies and their subsidiary banks is intended to protect depositors, federal deposit insurance funds and the stability of the U.S. banking system.
This system is not designed to protect equity investors in bank holding companies, such as the Company. 7 Table of Contents Set forth below is a summary of the significant laws and regulations applicable to the Company and its subsidiaries.
This system is not designed to protect equity investors in bank holding companies, such as the Company. Set forth below is a summary of the significant laws and regulations applicable to the Company and its subsidiaries. The description that follows is qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described.
The Bank’s most current CRA rating was “Satisfactory.” 13 Table of Contents Future Legislative Initiatives Congress, state legislatures and financial regulatory agencies may introduce various legislative and regulatory initiatives that could affect the financial services industry, generally.
The Bank’s failure to comply with the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company. The Bank’s most current CRA rating was “Satisfactory.” Future Legislative and Regulatory Initiatives Congress, state legislatures and financial regulatory agencies may introduce various legislative and regulatory initiatives that could affect the financial services industry, generally.
In a bank holding company context, at a minimum, the parent holding company of a bank and companies that are controlled by such parent holding company, are affiliates of the bank. Generally, Sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses in transactions with affiliates.
Generally, Sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses in transactions with affiliates.
The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act.
The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act. The Company has a BSA and USA PATRIOT Act Board-approved compliance program commensurate with its risk profile.
Under FDIC laws and regulations, no FDIC-insured depository institution can accept brokered deposits unless it is well-capitalized or unless it is adequately capitalized and receives a waiver from the FDIC. Applicable laws and regulations also limit the interest rate that any depository institution that is not well-capitalized may pay on brokered deposits.
Applicable laws and regulations also limit the interest rate that any depository institution that is not well-capitalized may pay on brokered deposits.
Various in-state market competitors and out-of-state banks continue to enter or have announced plans to enter or expand their presence in the market areas where the Company currently operates.
Various in-state market competitors and out-of-state banks continue to enter or have announced plans to enter or expand their presence in the market areas where the Company currently operates. With the addition of new financial services providers within our market, the Company expects increased competition for loans, deposits and other financial products and services.
A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material effect on the business of the Company. Employees At December 31, 2023, the Company had 2,034 full-time equivalent employees. The Company’s employees are not presently represented by any collective bargaining group. Available Information The Company’s website is http://www.nbtbancorp.com.
A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material effect on the business of the Company. Available Information The Company’s website is www.nbtbancorp.com.
The Company has a BSA and USA PATRIOT Act Board-approved compliance program commensurate with its risk profile. 12 Table of Contents Identity Theft Prevention The FCRA’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement and administer an identity theft prevention program.
Identity Theft Prevention The FCRA’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement and administer an identity theft prevention program.
Under the Capital Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for loan losses, in each case, subject to the Capital Rules’ specific requirements. 10 Table of Contents Pursuant to the Capital Rules, the minimum capital ratios as of January 1, 2015 are: ● 4.5% CET1 to risk-weighted assets; ● 6.0% Tier 1 capital (CET1 plus Additional Tier 1 capital) to risk-weighted assets; ● 8.0% Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and ● 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
Under the Capital Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for loan losses, in each case, subject to the Capital Rules’ specific requirements.
We live out our core value of community involvement through investments of both money and the time of our employees. Through our active contribution program, administered by market-based committees with representation from all lines of business, the Company contributed over $2.0 million in 2023.
Through our active contribution program, administered by market-based committees with representation from all lines of business, the Company contributed over $2.3 million in 2024.
The appropriate federal regulatory authority is authorized to determine, based on the financial condition of a bank holding company or a bank, that the payment of dividends would be an unsafe or unsound practice and to prohibit such payment.
The appropriate federal regulatory authority is authorized to determine, based on the financial condition of a bank holding company or a bank, that the payment of dividends would be an unsafe or unsound practice and to prohibit such payment. 10 Table of Contents Affiliate and Insider Transactions Transactions between the Bank and its affiliates, including the Company, are governed by Sections 23A and 23B of the Federal Reserve Act (the “FRA”) and the FRB’s implementation of Regulation W.
A consistent way that the Company and our employees support our communities across our markets is through giving to United Way chapters in the form of corporate pledges and employee campaign contributions.
A consistent way the Company and our employees support our communities across our markets is through giving to United Way chapters in the form of corporate pledges and employee campaign contributions. In 2024, these commitments resulted in nearly $365,000 in funding for United Way chapters that provide resources to local organizations offering critical education, financial, food security and health services.
Such initiatives may include proposals to expand or contract the powers of bank holding companies and/or depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways.
Such initiatives may include proposals to expand or contract the powers of bank holding companies and/or depository institutions or proposals to substantially change the financial institution regulatory system. This includes changes in priorities and operations of regulatory agencies in connection with new leadership or otherwise.
Services like mobile and online banking, remote deposit capture, electronic loan payments, eStatements and combined statements enable us to support all customers in their efforts to consume less fuel and paper. We continue to digitize loan origination and deposit account opening processes, reducing trips to the bank and paper documents for our customers.
The Company has an ongoing initiative to replace existing lighting with LED lighting to reduce energy consumption. Services like mobile and online banking, remote deposit capture, electronic loan payments, eStatements and combined statements enable us to support all customers in their efforts to consume less fuel and paper.
The assessment base for the special assessment was equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. The Company’s uninsured deposits as of December 31, 2022 were under $5 billion and therefore the Company will not be subject to this special assessment.
The special assessment is being collected over an eight-quarter collection period, and potentially longer, beginning with the first quarterly assessment period of 2024. The assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion.
In addition, under the prior general risk-based capital rules, the effects of accumulated other comprehensive income or loss (“AOCI”) items included in stockholders’ equity (for example, marks-to-market of securities held in the available for sale (“AFS”) portfolio) under generally accepted accounting principles in the United States of America (“GAAP”) were excluded for the purposes of determining regulatory capital ratios.
The Capital Rules provide for a number of deductions from and adjustments to CET1. In addition, under the prior general risk-based capital rules, the effects of AOCI items included in stockholders’ equity (for example, marks-to-market of securities held in the AFS portfolio) under GAAP were excluded for the purposes of determining regulatory capital ratios.
Frequent training specific to managers and employees, regular publication of our whistleblower policy and reporting mechanisms provide framework to the Company’s motto of: “The right people. Doing the right things. In the right way.” Community Engagement The Company is engaged in the communities where we do business and where our employees and directors live and work.
The Company’s values-based Code of Business Conduct and Ethics is extensively communicated on our website and targeted internal communications platforms. Frequent training specific to managers and employees, regular publication of our whistleblower policy and reporting mechanisms provide framework to the Company’s motto of: “The right people. Doing the right things.
Community Reinvestment Act of 1977 The Bank has a responsibility under the CRA, as implemented by OCC regulations, to help meet the credit needs of the communities it serves, including low- and moderate-income neighborhoods.
The federal banking agencies, through the Federal Financial Institutions Examination Council, have adopted guidelines to encourage financial institutions to address cyber security risks and identify, assess and mitigate these risks, both internally and at critical third party services providers. 15 Table of Contents Community Reinvestment Act of 1977 The Bank has a responsibility under the CRA, as implemented by OCC regulations, to help meet the credit needs of the communities it serves, including low- and moderate-income neighborhoods.
In addition to the library, there are distinct training and development programs strategically designed to attract top talent early in their careers and to further foster the growth and retention of our high potential and emerging leaders. These programs have been designed to meet the objectives outlined in our succession plan.
For employees who identify undergraduate or graduate degrees as a part of their development goals, the Company provides a tuition reimbursement program. In addition to employee guided development, there are distinct programs strategically designed to attract top talent early in their careers and to further foster the growth and retention of our high potential and emerging leaders.
The NBT CEI-Boulos Impact Fund made a $3.84 million equity investment for a majority ownership stake in two of the three components of the project. The NBT CEI-Boulos Impact Fund, LLC launched in 2022 is a $10 million real estate equity investment fund with the Bank as the sole investor.
The NBT CEI-Boulos Impact Fund made a $3.84 million equity investment for a majority ownership stake in two of the three components of the project. Progress is continuing with this project with the Bargain Grocery opening in 2024 and Flanigan Square Lofts expected to open in early 2025.
Affiliate and Insider Transactions Transactions between the Bank and its affiliates, including the Company, are governed by Sections 23A and 23B of the Federal Reserve Act (the “FRA”) and the FRB’s implementation of Regulation W. An “affiliate” of a bank includes any company or entity that controls, is controlled by or is under common control with such bank.
An “affiliate” of a bank includes any company or entity that controls, is controlled by or is under common control with such bank. In a bank holding company context, at a minimum, the parent holding company of a bank and companies that are controlled by such parent holding company, are affiliates of the bank.
As of the acquisition date, the fair value discount was $78.7 million for loans, net of the reclassification of the purchase credit deteriorated allowance, and was $3.0 million for subordinated debt. Competition The financial services industry, including commercial banking, is highly competitive, and we encounter strong competition for deposits, loans and other financial products and services in our market area.
As of the acquisition date, the fair value discount was $78.7 million for loans, net of the reclassification of the PCD allowance, and was $3.0 million for subordinated debt.
Our Management Development Program aims to attract diverse talent, primarily college seniors by offering accelerated career advancement and mentoring with senior executives. The Company also offers two programs designed for high potential employees, one for employees with prior professional experience and another one targeted to our more experienced employees with direct leadership responsibility.
These programs have been designed to meet the objectives outlined in our succession plan. Our Management Development Program aims to attract diverse talent, primarily college seniors by offering accelerated career advancement and mentoring with senior executives.
The Company became subject to the new standards starting in July 2022. Source of Strength Doctrine FRB policy requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.
The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain. Source of Strength Doctrine FRB policy requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.
The Flanigan Square Transformation Project is an approximately $75 million socially impactful, environmentally conscious, transit-oriented and community informed master plan, located at the 500 block of River Street along the Hudson River waterfront in the historically underinvested North Central neighborhood of Troy.
In 2023, the NBT CEI-Boulos Impact Fund announced its first equity investment in The Flanigan Square Transformation Project that will provide affordable workforce housing and a grocery store in a historically underinvested North Central neighborhood in Troy as part of an approximately $75 million socially impactful, environmentally conscious, transit-oriented and community informed master plan.
Conduct and Ethics The Board, senior management and the ethics committee have vigorously endorsed a no-tolerance stance for workplace harassment, biases and unethical behavior. The Company’s values-based Code of Business Conduct and Ethics is extensively communicated on our website and targeted internal communications platforms.
The Company also has a robust annual talent review and succession planning process that includes the Board and senior management. 7 Table of Contents Conduct and Ethics The Board, senior management and the ethics committee have vigorously endorsed a no-tolerance stance for workplace harassment, biases and unethical behavior.
Across our footprint, we host community shred days with multiple confidential document destruction companies to promote safe document disposal and recycling. Supervision and Regulation The Company, the Bank and certain of its non-banking subsidiaries are subject to extensive regulation under federal and state laws.
We continue to digitize loan origination and deposit account opening processes, reducing trips to the bank and paper documents for our customers. Across our footprint, we host community shred days with multiple confidential document destruction companies to promote safe document disposal and recycling.
The Bank is also subject to data security standards, privacy and data breach notice requirements, primarily those issued by the OCC. The federal banking agencies, through the Federal Financial Institutions Examination Council, have adopted guidelines to encourage financial institutions to address cyber security risks and identify, assess and mitigate these risks, both internally and at critical third party services providers.
The Bank is also subject to data security standards, privacy and data breach notice requirements, primarily those issued by the OCC.
The PIC holds loans collateralized by real estate originated or purchased by the Bank. Income of the PIC is exempt from the Connecticut Corporate Business Tax. Merger with Salisbury Bancorp, Inc.
The PIC holds loans collateralized by real estate originated or purchased by the Bank. Income of the PIC is exempt from the Connecticut Corporate Business Tax. Segment Reporting The Company has identified two reportable segments: Banking and Retirement Plan Administration. See Note 1 and Note 22 to the consolidated financial statements included in Item 8.
The Board of Directors of the Company (the “Board”) requires the Company’s Information Security Officer to report to them the status of the overall information security and data privacy program on a recurring basis. More information can be located on the Company’s website https://www.nbtbank.com/Personal/Customer-Support/Fraud-Information-Center. For more information regarding the Company’s cybersecurity policies and practices, see Item 1C. Cybersecurity below.
More information can be located on the Company’s website www.nbtbank.com/Personal/Customer-Support/Fraud-Information-Center. For more information regarding the Company’s cybersecurity policies and practices, see Item 1C. Cybersecurity below. 6 Table of Contents Human Capital Resources At December 31, 2024, the Company had 2,083 full-time equivalent employees. The Company’s employees are not presently represented by any collective bargaining group.
They invest their financial and other expertise as board members and serve in roles where they offer direct support to those in need by engaging in all manner of volunteer activities. 6 Table of Contents The NBT CEI-Boulos Impact Fund, a high-impact commercial real estate equity investment fund established by the Bank and CEI-Boulos Capital Management, announced its first equity investment in 2023 that will provide affordable, workforce housing and a grocery store for residents in Troy, NY.
In addition to corporate financial support of community organizations and causes, employees are encouraged and empowered to volunteer and be a resource in their communities. They invest their financial and other expertise as board members and serve in roles where they offer direct support to those in need by engaging in all kinds of volunteer activities.
Both programs include a mentor, a coach, 360-degree feedback, individual development plans, presentation skill development and increased visibility to executive leadership. The programs accommodate delivery in both remote and in person learning environments, made possible by utilizing our Microsoft Teams technology which was implemented across the Company to strengthen internal communications, collaboration, and talent development.
The Company also offers two programs designed for high potential employees, one for employees with prior professional experience and another one targeted to our more experienced employees with direct leadership responsibility. Both programs include a mentor, a coach, 360-degree feedback, individual development plans, presentation skill development and increased visibility to executive leadership.
Removed
When we refer to “NBT,” “we,” “our,” “us,” and “the Company” in this report, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc. When we refer to the “Bank” in this report, we mean its only bank subsidiary, NBT Bank, National Association, and its subsidiaries.
Added
Financial Statements and Supplementary Data, which are included elsewhere in this report. Evans Bancorp, Inc. Merger On September 9, 2024, the Company and the Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Evans and Evans Bank, Evans’s subsidiary bank, and pursuant to which the Company will acquire Evans.
Removed
Human Capital Resources Diversity, Equity and Inclusion The Company’s diversity, equity and inclusion (“DEI”) strategy aims to enhance diversity within our organization, making us more innovative and effective at meeting the needs of our customers and the communities we serve.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business. Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures.
Biggest changeThese additional compliance costs may have a material adverse effect on our business, results of operations and financial condition. 21 Table of Contents Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.
The Company maintains an allowance for loan losses, which is an allowance established through a provision for loan losses charged to expense, that represents management’s best estimate of expected credit losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.
The Company maintains an allowance for credit losses, which is an allowance established through a provision for loan losses charged to expense, that represents management’s best estimate of expected credit losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.
These potential increases in the allowance for loan losses would result in a decrease in net income and, possibly, capital and may have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Risk Management – Credit Risk” in Item 7.
These potential increases in the allowance for credit losses would result in a decrease in net income and, possibly, capital and may have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Risk Management – Credit Risk” in Item 7.
The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks, forecast economic conditions and future trends, all of which may undergo material changes.
The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks, forecast economic conditions and future trends, all of which may undergo material changes.
These risks may include, among other things: ● exposure to potential asset quality issues of the acquired business; ● potential exposure to unknown or contingent liabilities of the acquired business; ● our ability to realize anticipated cost savings; ● the difficulty of integrating operations and personnel (including the operations and personnel of Salisbury) and the potential loss of key employees; ● the potential disruption of our or the acquired company’s ongoing business in such a way that could result in decreased revenues or the inability of our management to maximize our financial and strategic position; ● the inability to maintain uniform standards, controls, procedures and policies; and ● the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management.
These risks may include, among other things: ● exposure to potential asset quality issues of the acquired business; ● potential exposure to unknown or contingent liabilities of the acquired business; ● our ability to realize anticipated cost savings; ● the difficulty of integrating operations and personnel (including the operations and personnel of Evans) and the potential loss of key employees; ● the potential disruption of our or the acquired company’s ongoing business in such a way that could result in decreased revenues or the inability of our management to maximize our financial and strategic position; ● the inability to maintain uniform standards, controls, procedures and policies; and ● the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management.
Bank regulatory agencies periodically review the Company’s allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different from those of management.
Bank regulatory agencies periodically review the Company’s allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different from those of management.
Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in the upstate New York areas of Norwich, Syracuse, Oneonta, Amsterdam-Gloversville, Albany, Binghamton, Utica-Rome, Plattsburgh, Glens Falls and Ogdensburg-Massena, the northeastern Pennsylvania areas of Scranton and Wilkes-Barre, Berkshire County, Massachusetts, southern New Hampshire, Vermont, southern Maine and central and northwestern Connecticut.
Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in the upstate New York areas of Norwich, Syracuse, Oneonta, Amsterdam-Gloversville, Albany, Binghamton, Utica-Rome, Plattsburgh, Glens Falls, Hudson Valley and Ogdensburg-Massena, the northeastern Pennsylvania areas of Scranton and Wilkes-Barre, Berkshire County, Massachusetts, southern New Hampshire, Vermont, southern Maine and central and northwestern Connecticut.
A significant portion of our loan portfolio at December 31, 2023 was secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
A significant portion of our loan portfolio at December 31, 2024 was secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Company’s control, may require an increase in the allowance for loan losses.
Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Company’s control, may require an increase in the allowance for credit losses.
Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition. 19 Table of Contents We may be held responsible for environmental liabilities with respect to properties to which we obtain title, resulting in significant financial loss.
Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition. We may be held responsible for environmental liabilities with respect to properties to which we obtain title, resulting in significant financial loss.
Additionally, a decline in real estate values could result in the decline of originations of such loans, as most of our loans and the collateral securing our loans are located in those areas. 15 Table of Contents Severe weather, flooding and other effects of climate change and other natural disasters could adversely affect our financial condition, results of operations or liquidity.
Additionally, a decline in real estate values could result in the decline of originations of such loans, as most of our loans and the collateral securing our loans are located in those areas. Severe weather, flooding and other effects of climate change and other natural disasters could adversely affect our financial condition, results of operations or liquidity.
Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s growth and profitability, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. The Company is subject to liquidity risk, which could adversely affect net interest income and earnings.
Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s growth and profitability, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. 19 Table of Contents The Company is subject to liquidity risk, which could adversely affect net interest income and earnings.
Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable rate assets to reset to lower rates. If the Company is not able to reduce its funding costs sufficiently, due to either competitive factors or the maturity schedule of existing liabilities, then the Company’s net interest margin will decline.
Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable rate assets to reset to lower rates. If the Company is not able to reduce its funding costs sufficiently, due to either competitive factors or the maturity schedule of existing liabilities, then the Company’s NIM will decline.
As of December 31, 2023, we had total assets of approximately $13.31 billion. The Dodd-Frank Act, including the Durbin Amendment, and its implementing regulations impose enhanced supervisory requirements on bank holding companies with more than $10 billion in total consolidated assets.
As of December 31, 2024, we had total assets of approximately $13.79 billion. The Dodd-Frank Act, including the Durbin Amendment, and its implementing regulations impose enhanced supervisory requirements on bank holding companies with more than $10 billion in total consolidated assets.
Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, the timing and impact of geopolitical uncertainties, natural disasters, epidemics and pandemics, terrorist attacks, acts of war or a combination of these or other factors.
Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, trade wars or tariffs, inflation, changes in interest rates, the timing and impact of geopolitical uncertainties, natural disasters, epidemics and pandemics, terrorist attacks, acts of war or a combination of these or other factors.
Because the Company’s loan portfolio contains a significant number of commercial and industrial, agricultural, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans.
Because the Company’s loan portfolio contains a significant number of commercial and industrial, agricultural, construction and CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans.
In addition, if charge-offs in future periods exceed the allowance for loan losses, the Company may need additional provisions to increase the allowance for loan losses.
In addition, if charge-offs in future periods exceed the allowance for credit losses, the Company may need additional provisions to increase the allowance for credit losses.
These provisions include supermajority voting requirements for certain business combinations and advance notice requirements for nominations for election to the Company’s Board of Directors and for proposing matters that stockholders may act on at stockholder meetings.
These provisions include supermajority voting requirements for certain business combinations and advance notice requirements for nominations for election to the Board and for proposing matters that stockholders may act on at stockholder meetings.
The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial condition. 22 Table of Contents
The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial condition.
Management expects that the Current Expected Credit Losses (“CECL”) model may create more volatility in the level of our allowance for loan losses from quarter to quarter as changes in the level of allowance for loan losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality.
Management expects that the CECL model may create more volatility in the level of our allowance for credit losses from quarter to quarter as changes in the level of allowance for credit losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality.
The Company’s earnings and financial condition, like that of most financial institutions, are largely dependent upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect the Company’s earnings and financial condition.
The Company’s earnings and financial condition, like that of most financial institutions, are largely dependent upon net interest income, which is the difference between interest and dividend income earned from loans and securities and interest expense paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect the Company’s earnings and financial condition.
Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. The Company may be adversely affected by fraud.
Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. 23 Table of Contents The Company may be adversely affected by fraud.
The carrying value and fair value of our FHLB of New York common stock was $21.6 million as of December 31, 2023. There are 11 branches of the FHLB, including New York, which are jointly liable for the consolidated obligations of the FHLB system.
The carrying value and fair value of our FHLB of New York common stock was $10.6 million as of December 31, 2024. There are 11 branches of the FHLB, including New York, which are jointly liable for the consolidated obligations of the FHLB system.
Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to our commercial and industrial, agricultural, construction and commercial real estate loans. 16 Table of Contents Our allowance for loan losses may not be sufficient to cover actual loan losses, which could have a material adverse effect on our business, financial condition and results of operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to our commercial and industrial, agricultural, construction and CRE loans. 18 Table of Contents Our allowance for credit losses may not be sufficient to cover actual loan losses, which could have a material adverse effect on our business, financial condition and results of operations.
See the section captioned “Liquidity Risk” in Item 7. 17 Table of Contents Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due is substantially dependent on capital distributions from our subsidiaries. The Company is a separate and distinct legal entity from its subsidiaries.
See the section captioned “Liquidity Risk” in Item 7. Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due is substantially dependent on capital distributions from our subsidiaries. The Company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries.
Failure to comply with these requirements may negatively impact the results of our operations and financial condition. To ensure compliance, we will be required to invest significant resources, which may necessitate hiring additional personnel and implementing additional internal controls. These additional compliance costs may have a material adverse effect on our business, results of operations and financial condition.
Failure to comply with these requirements may negatively impact the results of our operations and financial condition. To ensure compliance, we will be required to invest significant resources, which may necessitate hiring additional personnel and implementing additional internal controls.
It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the Company’s common stock and interest and principal on the Company’s debt. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company.
These dividends are the principal source of funds to pay dividends on the Company’s common stock and interest and principal on the Company’s debt. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company.
The Company cannot predict with certainty, or control, changes in interest rates. Regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the FRB, affect rates and, therefore, interest income and interest expense.
Interest rates remain elevated compared to recent years and may increase. The Company cannot predict with certainty, or control, changes in interest rates. Regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the FRB, affect rates and, therefore, interest income and interest expense.
We continually encounter technological change and the failure to understand and adapt to these changes could have a material adverse impact on our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
We continually encounter technological change and the failure to understand and adapt to these changes could have a material adverse impact on our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services (including those related to or involving AI, machine learning, blockchain and other technologies).
Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer and/or limit the pricing the Company may charge on certain banking services, among other things.
Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer and/or limit the pricing the Company may charge on certain banking services, among other things. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings.
Compliance personnel and resources may increase our costs of operations and adversely impact our earnings. 18 Table of Contents Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
The local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources.
The local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. 17 Table of Contents A downturn in our local economies could cause significant increases in nonperforming loans, which could negatively impact our earnings.
A downturn in our local economies could cause significant increases in nonperforming loans, which could negatively impact our earnings. Declines in real estate values in our market areas could cause any of our loans to become inadequately collateralized, which would expose us to greater risk of loss.
Declines in real estate values in our market areas could cause any of our loans to become inadequately collateralized, which would expose us to greater risk of loss.
The ultimate resolution of a pending or future legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition. 20 Table of Contents Risks Related to Cybersecurity and Data Privacy The Company faces operational risks and cybersecurity risks associated with incidents which have the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships and cannot guarantee that the steps we and our service providers take in response to these risks will be effective.
Risks Related to Information Technology, Cybersecurity and Data Privacy The Company faces operational risks and cybersecurity risks associated with incidents which have the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships and cannot guarantee that the steps we and our service providers take in response to these risks will be effective.
As of December 31, 2023, approximately 52% of the Company’s loan portfolio consisted of commercial and industrial, agricultural, commercial construction and commercial real estate loans.
As of December 31, 2024, approximately 53% of the Company’s loan portfolio consisted of commercial and industrial, agricultural, commercial construction and CRE loans.
Banking regulations are primarily intended to protect depositors’ funds, the DIF and the safety and soundness of the banking system as a whole, not stockholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
We are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, the DIF and the safety and soundness of the banking system as a whole, not stockholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy and growth, among other things.
Although we require third party providers to maintain certain levels of security, such providers remain vulnerable to breaches, security incidents, system unavailability or other malicious attacks that could compromise sensitive information.
Although we require third party providers to maintain certain levels of security, such providers remain vulnerable to breaches, security incidents, system unavailability or other malicious attacks that could compromise sensitive information. Further, new technologies such as artificial intelligence (“AI”) may be more capable at evading safeguard measures.
Thus, the Company’s stockholders bear the risk of the Company’s future offerings reducing the market price of the Company’s common stock and diluting their stock holdings in the Company. Risks Related to the Merger with Salisbury The merger with Salisbury could adversely affect the Company’s future business and financial results.
Thus, the Company’s stockholders bear the risk of the Company’s future offerings reducing the market price of the Company’s common stock and diluting their stock holdings in the Company.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations and financial condition.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations and financial condition. 20 Table of Contents Risks Related to Legal, Governmental and Regulatory Changes We are subject to extensive government regulation and supervision, which may interfere with our ability to conduct our business and may negatively impact our financial results.
To the extent that one FHLB branch cannot meet its obligations to pay its share of the system’s debt, other FHLB branches can be called upon to make the payment. Any adverse effects on the FHLB of New York could adversely affect the value of our investment in its common stock and negatively impact our results of operations.
To the extent that one FHLB branch cannot meet its obligations to pay its share of the system’s debt, other FHLB branches can be called upon to make the payment.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations. 21 Table of Contents Risks Related to an Investment in the Company’s Securities There may be future sales or other dilution of the Company’s equity, which may adversely affect the market price of the Company’s stock.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations. The development and use of AI exposes us to risks that may adversely impact our business.
Provisions of our certificate of incorporation and bylaws, as well as Delaware law and certain banking laws, could delay or prevent a takeover of us by a third party.
Any adverse effects on the FHLB of New York could adversely affect the value of our investment in its common stock and negatively impact our results of operations. 22 Table of Contents Provisions of our certificate of incorporation and bylaws, as well as Delaware law and certain banking laws, could delay or prevent a takeover of us by a third party.
The business strategy of the Company has included and may continue to include growth through acquisition. Any acquisitions (including the acquisition of Salisbury) will be accompanied by the risks commonly encountered in acquisitions.
Any acquisitions (including the acquisition of Evans) will be accompanied by the risks commonly encountered in acquisitions.
Replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.
The ultimate resolution of a pending or future legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition.
Removed
In order to address rising inflation, the FRB raised interest rates in 2022 and in the first half 2023 and, while the Federal funds rate has remained unchanged over recent months, the FRB may again raise interest rates in response to inflation. The magnitude of any such increase is not currently known.
Added
Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Furthermore, political and policy goals of elected officials may change over time, which could impact the rulemaking, supervision, examination and enforcement priorities of federal banking agencies.
Removed
Risks Related to Legal, Governmental and Regulatory Changes We are subject to extensive government regulation and supervision, which may interfere with our ability to conduct our business and may negatively impact our financial results. We are subject to extensive federal and state regulation and supervision.
Added
We or our third-party providers may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI poses a number of risks and challenges to our business.
Removed
In March 2021, the United Kingdom’s Financial Conduct Authority and the Intercontinental Exchange Benchmark Administration, the administrator for London Interbank Offered Rate (“LIBOR”), concurrently announced that certain settings of LIBOR would no longer be published on a representative basis after December 31, 2021, and the most commonly used U.S. dollar LIBOR settings would no longer be published on a representative basis after June 30, 2023.
Added
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, and we may be subject to increasing regulations related to our use of these technologies, including regulations related to privacy, data security, and intellectual property rights, which could expose us to legal risks.
Removed
The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR.
Added
AI models, particularly generative AI models, may produce incorrect, biased, or misleading results, expose confidential information, or infringe on intellectual property rights.
Removed
We had a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that were either directly or indirectly dependent on LIBOR. With the transition from LIBOR to SOFR as the preferred alternative to LIBOR, we have transitioned and amended our contracts and financial instruments to reference the SOFR rate where required.
Added
Further, we may rely on AI models developed by third parties, and, to that extent, would be subject to additional risks, including limited oversight of how these models are developed and trained and potential exposure to unauthorized data usage.
Removed
Since alternative rates (including SOFR) are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The future performance of SOFR, including how changes in SOFR rates may differ from other rates during different economic conditions, cannot be predicted based on its limited historical performance.
Added
If our AI models, or those developed by third parties, produce inaccurate or controversial results, we could face legal liability, regulatory scrutiny, reputational harm, or operational inefficiencies. These risks could negatively impact our business, financial results, and the perception of our security measures.
Removed
Further, we cannot predict how SOFR will perform in comparison to LIBOR in changing market conditions, what the effect of such rate’s implementation may be on the markets for floating-rate financial instruments or whether such rates will be vulnerable to manipulation.
Added
Risks Related to an Investment in the Company’s Securities There may be future sales or other dilution of the Company’s equity, which may adversely affect the market price of the Company’s stock.
Removed
The implementation of an alternative index or indices for the Company’s financial arrangements may result in less predictable outcomes, including reduced or more volatile interest income if the alternative index or indices respond differently to market and other factors, and may result in reduced loan balances if borrowers do not accept the substitute index or indices and may result in disputes or litigation with customers over the appropriateness or comparability of the alternative index to LIBOR, which could have an adverse effect on the Company’s results of operations.
Added
Risks Related to the Merger with Evans The market price of the Company’s common stock may decline as a result of the Merger and the market price of the Company’s common stock after the consummation of the Merger may be affected by factors different from those affecting the price of the Company’s common stock before the Merger.
Removed
Despite the successful integration of Salisbury’s operations with the Company’s, inherent challenges persist, particularly in harmonizing operational processes, technology platforms, and corporate cultures. The complexity of this integration process may lead to unforeseen delays or disruptions, potentially impacting customer service quality and operational efficiency.
Added
The market price of the Company’s common stock may decline as a result of the Merger if the Company does not achieve the perceived benefits of the Merger or the effect of the Merger on the Company’s financial results is not consistent with the expectations of financial or industry analysts.
Removed
Additionally, increased regulatory scrutiny following the merger could result in heightened compliance requirements and regulatory enforcement actions, posing additional risks to our business operations and financial performance. Moreover, the loss of key personnel, customer attrition, and competitive pressures post-merger could adversely affect the Company’s ability to execute strategic initiatives and sustain growth momentum.
Added
In addition, the consummation of the Merger will result in the combination of two companies that currently operate as independent companies. The business of the Company and the business of Evans differ. As a result, while the Company expects to benefit from certain synergies following the Merger, the Company may also encounter new risks and liabilities associated with these differences.
Removed
While the Company remains committed to mitigating these risks through diligent management and proactive measures, the uncertainties associated with the post-merger environment necessitate ongoing vigilance and risk management efforts to safeguard our stakeholders’ interests and ensure long-term success. General Risks The risks presented by acquisitions could adversely affect our financial condition and results of operations.
Added
Following the Merger, shareholders of the Company and Evans will own interests in a combined company operating an expanded business and may not wish to continue to invest in the Company, or for other reasons may wish to dispose of some or all of the Company’s common stock.
Added
If, following the effective time of the Merger, large amounts of the Company’s common stock are sold, the price of the Company’s common stock could decline.
Added
Further, the results of operations of the Company and the market price of the Company’s common stock after the Merger may be affected by factors different from those currently affecting the independent results of operations of each of the Company and Evans and the market price of the Company’s common stock.
Added
Accordingly, the Company’s historical market prices and financial results may not be indicative of these matters for the Company after the Merger. 24 Table of Contents The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.
Added
The Company and Evans can mutually agree to terminate the Merger Agreement at any time before the Merger has been completed, and either company can terminate the Merger Agreement if: ● the other party materially breaches any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the Merger Agreement), which breach is not cured within 30 days of written notice of the breach, or by its nature cannot be cured prior to the closing of the Merger, and such breach would entitle the non-breaching party not to consummate the Merger; or ● the Merger is not consummated by September 15, 2025, unless the failure to consummate the Merger by such date is due to a material breach of the Merger Agreement by the terminating party.
Added
In addition, the Company may terminate the Merger Agreement if: ● Evans materially breaches the non-solicitation provisions in the Merger Agreement; or ● the Evans Board of Directors: ● fails to recommend approval of the Merger Agreement, or withdraws, modifies or changes such recommendation in a manner adverse to the Company’s interests; or ● recommends, proposes or publicly announces its intention to recommend or propose to engage in an acquisition transaction with any person other than the Company or any of its subsidiaries.
Added
Failure to complete the Merger could negatively impact the stock price of the Company and its future business and financial results. Completion of the Merger is subject to the satisfaction or waiver of a number of conditions. The Company cannot guarantee when or if these conditions will be satisfied or that the Merger will be successfully completed.
Added
The consummation of the Merger may be delayed, the Merger may be consummated on terms different than those contemplated by the Merger Agreement, or the Merger may not be consummated at all.
Added
If the Merger is not completed, the ongoing business of the Company may be adversely affected, and the Company will be subject to several risks, including the following: ● the Company could incur substantial costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and ● the Company’s management’s and employees’ attention may be diverted from their day-to-day business and operational matters as a result of efforts relating to the attempt to consummate the Merger.
Added
In addition, if the Merger is not completed, the Company may experience negative reactions from the financial markets and from its customers and employees. The Company also could be subject to litigation related to any failure to complete the Merger or to enforcement proceedings commenced against the Company to perform its obligations under the Merger Agreement.
Added
If the Merger is not completed, the Company cannot assure its stockholders that the risks described above will not materialize and will not materially affect the Company’s business and financial results or the stock price of the Company. 25 Table of Contents The integration of the Company and Evans will present significant challenges and expenses that may result in the combined business not operating as effectively as expected, or in the failure to achieve some or all of the anticipated benefits of the transaction.
Added
The benefits and synergies expected to result from the proposed Merger will depend in part on whether the operations of Evans can be integrated in a timely and efficient manner with those of the Company.
Added
The Company will face challenges and costs in consolidating its functions with those of Evans, and integrating the organizations, procedures and operations of the two businesses. The integration of the Company and Evans will be complex and time-consuming, and the management of both companies will have to dedicate substantial time and resources to it.
Added
These efforts could divert management’s focus and resources from serving existing customers or other strategic opportunities and from day-to-day operational matters during the integration process.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

13 edited+4 added−11 removed0 unchanged
Biggest changeThe Incident Response Plan also maintains procedures and escalation protocol to escalate significant cybersecurity matters to the Executive Committee, RMC and/or full Board, as deemed necessary. 23 Table of Contents During the incident response process, senior management, in collaboration with relevant personnel from information technology, information security, and, when necessary, external cybersecurity firms specializing in forensic investigations will assess the materiality of the breach alongside the severity scale.
Biggest changeDuring the incident review process, senior management, in collaboration with relevant personnel from information technology, data security, and external cybersecurity firms specializing in forensic investigations, when necessary, assesses the materiality of the breach alongside the severity scale. This evaluation aims to accurately identify risks and potential operational and business impacts.
Employing comprehensive methodologies for risk assessment, we diligently identify and evaluate potential cybersecurity threats and vulnerabilities across our systems, networks and data assets. This process involves regular examinations of emerging threats, conducting penetration tests, vulnerability scanning and thorough analysis of industry-specific risks.
Using comprehensive risk assessment methodologies, we diligently identify and evaluate potential cybersecurity threats and vulnerabilities across our systems, networks, and data assets. This process includes regular reviews of emerging threats, penetration testing, vulnerability scanning, and thorough analysis of industry-specific risks.
For further discussion of such risks, see the section entitled “Risk Factors” in Item 1A of this Form 10-K under the heading “Risks Related to Cybersecurity and Data Privacy.”
For further discussion of such risks, see the section entitled “Risks Related to Information Technology, Cybersecurity and Data Privacy” in Item 1A. Risk Factors of this Form 10-K.
Our comprehensive policies and procedures are designed to safeguard the integrity and security of information collected by us and our service providers on our systems. Additionally, we have implemented security measures to prevent unauthorized access to personal data and minimize the consequences of potential incidents.
Additionally, we conduct rigorous vendor assessments and require specific security standards for third-party providers. Our comprehensive policies and procedures are designed to safeguard the integrity and security of information collected by us and our service providers. We have also implemented security measures to prevent unauthorized access to personal data and mitigate potential incidents.
Cybersecurity risks are reported to the RMC at least quarterly and those reports include key performance indicators, test results, recent threats and how the Company is managing those threats, along with the effectiveness of the Information Security and cyber risk program.
The RMC is led by our Chief Risk Officer and comprised of Board members as well as the Chief Executive Officer. Cybersecurity risks are reported to the RMC at least quarterly and those reports include key performance indicators, test results, recent threats and how the Company is managing those threats, along with the effectiveness of the ISP.
In line with our dedication to upholding strong corporate governance standards and safeguarding the security of our operations, we maintain a continuous effort to assess and mitigate cybersecurity risks that could impact our business, stakeholders and the integrity of our systems.
ITEM 1C. CYBERSECURITY Risk Management and Strategy In line with our commitment to strong corporate governance and the security of our operations, we continuously assess and mitigate cybersecurity risks that could impact our business, stakeholders, and the integrity of our systems.
The RMC is responsible for monitoring our Information Security Program (“ISP”) and is led by a member of our Board of Directors. The RMC reports quarterly to the Board regarding its activities, including those related to cybersecurity risk oversight. The Board receives briefings from executive management on the overall Information Security program at least annually.
The RMC receives briefings from executive management on activities, including those related to cybersecurity risk oversight. The Board reviews the overall ISP at least annually. NBT has appointed the Senior Director of Information Security (“DISO”) to oversee the implementation, coordination, and maintenance of the ISP.
We consistently learn from any event and look at postmortem improvements where necessary to enhance our security and resilience. The Company consistently collaborates with third party experts to conduct audits, penetration testing, assessments and validations of our controls, aligning them with established frameworks like the NIST CFS.
Furthermore, we learn from any past incidents and near misses to strengthen our resilience. NBT collaborates with external experts to conduct audits, assessments, and validations of our cybersecurity controls, aligning them with established frameworks such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
This evaluation aims to accurately identify risks and potential operational and business impacts. Materiality determination involves an objective analysis of both quantitative and qualitative factors, including an evaluation of immediate impact and reasonably likely future impacts.
Materiality determination involves an objective analysis of both quantitative and qualitative factors, including an evaluation of impact and reasonably likely impacts. We have purchased cybersecurity insurance, but there are no assurances that the coverage would be adequate in relation to any incurred losses.
The Company has appointed the Senior Director of Information Security (“DISO”) to oversee the implementation, coordination, and maintenance of the ISP. The responsibilities of the DISO include developing and implementing our information security program, designing appropriate administrative, technical, and physical safeguards to protect institutional data and ensuring the implementation and maintenance of safeguards across the Company as needed.
The DISO’s responsibilities include: ● Leading the initial implementation of the ISP, including assessing internal and external risks to institutional data and documenting findings through risk assessment reports and remediation plans. ● Coordinating the development, distribution, and maintenance of information security policies and procedures. ● Designing and implementing administrative, technical, and physical safeguards to protect institutional data across the company.
We actively participate in industry forums, information sharing initiatives and collaborate with relevant stakeholders to exchange threat intelligence and best practices. The Company continues to expand investments in Information Technology security, including additional end-user training, using layered defenses, identifying, and protecting critical assets, strengthening monitoring and alerting.
We actively participate in industry forums and information-sharing initiatives and collaborate with relevant stakeholders to exchange threat intelligence and best practices. We emphasize continuous training for our staff to enhance their ability to identify and respond to cybersecurity threats. To support this effort, we invest in cybersecurity technology and talent.
The DISO reports to our Chief Risk Officer and has over a decade of experience leading cybersecurity oversight along with expertise in cyber-crime prevention, threat intelligence, social engineering, identity access and governance, identity theft and fraud prevention through prior roles in the organization.
The DISO reports to the Chief Risk Officer and has expertise in cybercrime prevention, social engineering, identity theft, and fraud prevention, gained through prior roles within the organization. The DISO also supervises the Incident Response Team (“IRT”), which consists of senior executives, including the Chief Audit Officer, Chief Risk Officer, General Counsel, and representatives from Operations, Accounting, and Communications.
Although cybersecurity threats, including those stemming from prior incidents, have not had a significant impact on the Company in the previous fiscal year, and there are no known imminent cybersecurity threats likely to materially affect us, we cannot guarantee that we will remain unaffected in the future.
As of December 31, 2024 we have not experienced any material risks from cybersecurity threats, including as a result of any previous cybersecurity incidents or threats, that have materially affected the business strategy, results of operations or financial condition of the Company. However, we cannot guarantee that we will remain unaffected in the future.
Removed
ITEM 1C. CYBERSECURITY Risk Management and Strategy The Company maintains a cyber risk management program that is designed to identify, assess, manage, mitigate and respond to cybersecurity threats. The program addresses both the corporate information technology (“IT”) environment and customer facing products.
Added
We adapt our cybersecurity policies, standards, processes, and practices based on insights from these reviews. 27 Table of Contents Governance The Board considers cybersecurity as part of its broader consideration of business strategy and enterprise risk management.
Removed
Additionally, we maintain a similar risk-based approach to our third-party vendor management program including identifying and overseeing cybersecurity risks they present. The underlying controls of the cybersecurity program are based on recognized best practices and standards for cybersecurity and information security, including the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”).
Added
It is the responsibility of the Risk Management Committee (“RMC”), a committee of the Board, to oversee efforts to develop and formally approve the written Information Security Program (“ISP”), implement, maintain and monitor the program, and review management reports and policies related to cyber incidents.
Removed
This framework organizes cybersecurity risks into five categories: identify, protect, detect, respond and recover. The Company regularly assesses the threat landscape of cybersecurity risks, with a layered defense in depth strategy that is focused on prevention and detection.
Added
Upon detecting an incident, the IRT promptly convenes to assess its severity, categorizing it as low, medium, or high. The response protocol follows the Cybersecurity and Infrastructure Security Agency (“CISA”) Cybersecurity Incident and Vulnerability Response Playbook (November 2021) and incorporates best practices outlined in the NIST Special Publication (SP) 800-61 Rev. 2: Computer Security Incident Handling Guide.
Removed
We emphasize continuous training for our staff to improve their ability to identify and address diverse cybersecurity threats. We invest in cybersecurity technology and talent to support this endeavor. Furthermore, we conduct thorough reviews of our vendors and mandate specific security standards for third-party providers.
Added
The IRT has procedures and escalation protocols to escalate significant cybersecurity matters to the Executive Committee, the RMC and/or full Board, as deemed necessary.
Removed
We adapt our cybersecurity policies, standards, processes and practices accordingly based on the insights provided by these reviews. These audits and assessments are useful tools for maintaining a robust cybersecurity program.
Removed
Governance It is the responsibility of the Risk Management Committee (“RMC”) of the Board to oversee the Company’s cybersecurity risk exposures and action taken by management to monitor and mitigate cybersecurity risks.
Removed
The Information Security team has cybersecurity experience or certifications, such as the Certified Information Systems Security Professional and Certified Information Security Manager from the Information Systems Audit and Control Association.
Removed
The DISO also administers the Incident Response Team (“IRT”) and its members, which is comprised of various high-ranking executive personnel such as the Chief Audit Officer, Chief Compliance Officer, General Counsel, and representatives from Technology, Operations, Accounting and Corporate Communications. Members of the NBT IRT have extensive knowledge regarding the security protocols, operational processes and IT infrastructure for the Company.
Removed
This allows cross-functional response efforts in the detection, mitigation and prevention of a cybersecurity incident suffered by the Company or its third party service providers. Upon detection of an incident, the IRT promptly convenes and updates executive leadership to assess its severity level, categorizing it as low, moderate, or high.
Removed
The Company actively performs simulations and tabletop exercises at a management level and incorporates external resources as needed to stay current to cyber threat vectors.
Removed
Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational harm. Cybersecurity threats are expected to continue to be persistent and severe.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeITEM 2. PROPERTIES The Company owns its headquarters located at 52 South Broad Street, Norwich, New York 13815. In addition, as of December 31, 2023 the Company has 153 branch locations, of which 66 are leased from third parties. The Company owns all other banking premises.
Biggest changeITEM 2. PROPERTIES The Company owns its headquarters located at 52 South Broad Street, Norwich, New York 13815. In addition, as of December 31, 2024 the Company has 155 branch locations, of which 67 are leased from third parties. The Company owns all other banking premises.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+0 added−1 removed4 unchanged
Biggest changeThis repurchase program under which these shares were purchased was due to expire on December 31, 2023; however, on December 18, 2023, the Board of Directors authorized and approved an amendment to the repurchase program.
Biggest changeAs of December 31, 2024, there were 1,992,400 shares available for repurchase under this plan authorized on December 18, 2023, which is set to expire on December 31, 2025.
See the section captioned “Supervision and Regulation” in Item 1. Business and Note 15 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, which are located elsewhere in this report.
See the section captioned “Supervision and Regulation” in Item 1. Business and Note 15 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, which are included elsewhere in this report.
The stock performance graph assumes that $100 was invested on December 31, 2018. The graph further assumes the reinvestment of dividends into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the relevant fiscal year.
The stock performance graph assumes that $100 was invested on December 31, 2019. The graph further assumes the reinvestment of dividends into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the relevant fiscal year.
Under Office of the Comptroller of the Currency (“OCC”) regulations, the Bank may pay dividends to the Company without prior regulatory approval so long as it meets its applicable regulatory capital requirements before and after payment of such dividends and its total dividends do not exceed its net income to date over the calendar year plus retained net income over the preceding two years.
Under OCC regulations, the Bank may pay dividends to the Company without prior regulatory approval so long as it meets its applicable regulatory capital requirements before and after payment of such dividends and its total dividends do not exceed its net income to date over the calendar year plus retained net income over the preceding two years.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of the Company, par value $0.01 per share (the “Common Stock”), is quoted on the NASDAQ Global Select Market under the symbol “NBTB.” The closing price of the Common Stock on January 31, 2024 was $35.57.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of the Company, par value $0.01 per share (the “Common Stock”), is quoted on the NASDAQ Global Select Market under the symbol “NBTB.” The closing price of the Common Stock on January 31, 2025 was $47.63.
At December 31, 2023, the Bank was in compliance with all applicable minimum capital requirements and had the ability to pay dividends of $106.6 million to the Company without the prior approval of the OCC.
At December 31, 2024, the Bank was in compliance with all applicable minimum capital requirements and had the ability to pay dividends of $107.6 million to the Company without the prior approval of the OCC.
The Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. The Company did not purchase any share of its common stock during the fourth quarter of 2023.
The Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effect of stock-based incentive plans and other potential uses of common stock for corporate purposes. The Company did not purchase any shares of its common stock during the fourth quarter of 2024.
As of January 31, 2024, there were 5,634 stockholders of record of Common Stock. No unregistered securities were sold by the Company during the year ended December 31, 2023.
As of January 31, 2025, there were 5,194 stockholders of record of Common Stock. No unregistered securities were sold by the Company during the year ended December 31, 2024.
Stock Repurchase The Company purchased 155,500 shares of its common stock during year ended December 31, 2023 at an average price of $31.79 per share under its previously announced share repurchase program.
Stock Repurchase The Company purchased 7,600 shares of its common stock during year ended December 31, 2024 at an average price of $33.02 per share under its previously announced share repurchase program.
Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 NBT Bancorp $ 100.00 $ 120.59 $ 98.73 $ 122.06 $ 141.64 $ 141.51 KBW Regional Bank Index $ 100.00 $ 123.87 $ 113.11 $ 154.57 $ 143.87 $ 143.30 NASDAQ Composite Index $ 100.00 $ 136.73 $ 198.33 $ 242.38 $ 163.58 $ 236.70 Source: Bloomberg, L.P. 25 Table of Contents Dividends The Company depends primarily upon dividends from subsidiaries for a substantial part of the its revenue.
Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 NBT Bancorp $ 100.00 $ 118.13 $ 101.22 $ 117.46 $ 117.35 $ 138.05 KBW Regional Bank Index $ 100.00 $ 91.32 $ 124.78 $ 116.15 $ 115.69 $ 130.96 NASDAQ Composite Index $ 100.00 $ 145.05 $ 177.27 $ 119.63 $ 173.11 $ 224.34 Source: Bloomberg, L.P. 29 Table of Contents Dividends The Company depends primarily upon dividends from subsidiaries for a substantial part of its revenue.
Removed
Pursuant to the amended stock repurchase program, the Company may repurchase up to 2,000,000 shares of the outstanding shares of its common stock with all repurchases under the stock repurchase program to be made by December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

154 edited+30 added−45 removed60 unchanged
Biggest change(“Salisbury”) by the merger of Salisbury with and into the Company was completed on August 11, 2023; ● net income for the year ended December 31, 2023 was $118.8 million, down $33.2 million from the year ended December 31, 2022; ● diluted earnings per share of $2.65 for the year ended December 31, 2023, down $0.87 from the year ended December 31, 2022; ● operating net income (1) , a non-GAAP measure, which excludes acquisition expenses, acquisition-related provision for credit losses, securities (losses) gains and an impairment of a minority interest equity investment, net of tax, was $144.7 million, or $3.23 per diluted common share, for the year ended December 31, 2023; ● excluding securities (losses) gains, noninterest income represented 29% of total revenues and was $151.5 million for the year ended December 31, 2023, down $5.2 million, or 3.3% from the year ended December 31, 2022; ● noninterest expense, excluding $10.0 million of acquisition expenses for the year ended December 31, 2023 and $1.0 million for the year ended December 31, 2022, respectively, was up $28.2 million, or 9.3%, from the prior year; ● period end total loans were $9.65 billion, up $1.50 billion, or 18.4% from December 31, 2022, excluding the $1.18 billion of loans acquired from Salisbury, loans grew $320.6 million, or 3.9%, since December 31, 2022; ● period end total deposits were $10.97 billion, up $1.47 billion, or 15.5% from December 31, 2022, excluding the $1.31 billion of deposits acquired from Salisbury, deposits increased $164.1 million, or 1.7%, since December 31, 2022; ● credit quality metrics including net charge-offs of 0.19% and allowance for loan losses to total loans at 1.19%; ● book value per share of $30.26 at December 31, 2023; tangible book value per share was $21.72 (1) at December 31, 2023.
Biggest changeIncluded in the provision expense for the year ended December 31, 2023 was $8.8 million of acquisition-related provision for loan losses. ● Excluding securities gains (losses), noninterest income represented 30% of total revenues and was $174.0 million for the year ended December 31, 2024, up $22.5 million, or 14.9%, from the prior year. ● Noninterest expense, excluding acquisition expenses, was up $44.7 million, or 13.5%, from the prior year. ● Period end total loans were $9.97 billion, up $319.2 million, or 3.3% from December 31, 2023. ● Credit quality metrics including net charge-offs to average loans were 0.18% and allowance for loan losses to total loans was 1.16%. ● Period end total deposits were $11.55 billion, up $577.8 million, or 5.3%, from December 31, 2023.
In connection with the acquisition, the Company issued 4.32 million shares and acquired approximately $1.46 billion of identifiable assets, including $1.18 billion of loans, $122.7 million in investment securities which were sold immediately after the merger, $31.2 million of core deposit intangibles and $4.7 million in a wealth management customer intangible, as well as $1.31 billion in deposits.
In connection with the acquisition, the Company issued 4.32 million shares of common stock and acquired approximately $1.46 billion of identifiable assets, including $1.18 billion of loans, $122.7 million in investment securities which were sold immediately after the merger, $31.2 million of core deposit intangibles and $4.7 million in a wealth management customer intangible, as well as $1.31 billion in deposits.
Beginning January 1, 2023, the Company adopted ASU 2022-02 Financial Instruments - CECL Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which resulted in an insignificant change to the Company’s methodology for estimating the allowance for credit losses on Troubled Debt Restructurings (“TDRs”) since December 31, 2022.
Allowance for Credit Losses Beginning January 1, 2023, the Company adopted ASU 2022-02 Financial Instruments - CECL Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which resulted in an insignificant change to the Company’s methodology for estimating the allowance for credit losses on TDRs since December 31, 2022.
Average balances discussed are daily averages unless otherwise described. The audited consolidated financial statements and related notes as of December 31, 2023 and 2022 and for each of the years in the three-year period ended December 31, 2023 should be read in conjunction with this review.
Average balances discussed are daily averages unless otherwise described. The audited consolidated financial statements and related notes as of December 31, 2024 and 2023 and for each of the years in the three-year period ended December 31, 2024 should be read in conjunction with this review.
All commitments to extend credit in the form of loans, including unused lines of credit, expire within one year. 45 Table of Contents Standby Letters of Credit The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.
All commitments to extend credit in the form of loans, including unused lines of credit, expire within one year. 48 Table of Contents Standby Letters of Credit The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.
The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses.
The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses.
To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of December 31, 2023, the Company attributed the change in scenario weightings to the change in the allowance for credit losses, with a 10% decrease to the downside scenario and a 10% increase to the baseline scenario causing a 4% decrease in the overall estimated allowance for credit losses.
To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of December 31, 2024, the Company attributed the change in scenario weightings to the change in the allowance for credit losses, with a 10% decrease to the downside scenario and a 10% increase to the baseline scenario causing a 4% decrease in the overall estimated allowance for credit losses.
Long-term debt, which is comprised primarily of FHLB advances, are collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. 38 Table of Contents On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due 2030.
Long-term debt, which is comprised primarily of FHLB advances, are collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due 2030.
The impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized.
The impact of utilizing the CECL methodology to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized.
The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or if the Company elects not to apply hedge accounting.
The discussion in Item 1A, “Risk Factors,” lists some of the factors that could cause our actual results to vary materially from those expressed or implied by any forward-looking statements, and such discussion is incorporated into this discussion by reference.
The discussion in Item 1A. Risk Factors lists some of the factors that could cause our actual results to vary materially from those expressed or implied by any forward-looking statements, and such discussion is incorporated into this discussion by reference.
The Company incurred acquisition expenses for the year ended December 31, 2023 and December 31, 2022 of $10.0 million and $1.0 million, respectively, related to the merger with Salisbury.
The Company incurred acquisition expenses related to the merger with Salisbury of $10.0 million and $1.0 million for the years ended December 31, 2023 and 2022 , respectively .
While the pandemic has come to an end, this enhanced monitoring continues as rising interest rates and the recent bank failures have led to a deposit decline in the banking system and increased volatility to liquidity risk. At December 31, 2023, a portion of the Company’s loans and securities were pledged as collateral on borrowings.
While the pandemic has come to an end, this enhanced monitoring continues as elevated interest rates and the recent bank failures have led to a deposit decline in the banking system and increased volatility to liquidity risk. At December 31, 2024, a portion of the Company’s loans and securities were pledged as collateral on borrowings.
When we refer to the “Bank”, we mean our only bank subsidiary, NBT Bank, National Association, and its subsidiaries. This discussion will focus on results of operations for the fiscal years ended December 31, 2023, 2022, and 2021, and financial condition as of December 31, 2023 and 2022, including capital resources and asset/liability management.
When we refer to the “Bank” in this report, we mean our only bank subsidiary, NBT Bank, National Association, and its subsidiaries. This discussion will focus on results of operations for the fiscal years ended December 31, 2024, 2023, and 2022, and financial condition as of December 31, 2024 and 2023, including capital resources and asset/liability management.
Forward-Looking Statements Certain statements in this filing and future filings by the Company with the Securities and Exchange Commission (“SEC”), in the Company’s press releases or other public or stockholder communications or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995.
Forward-Looking Statements Certain statements in this filing and future filings by the Company with the SEC, in the Company’s press releases or other public or stockholder communications or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995.
Significant items that may have an impact on 2024 results include: ● Excess liquidity in the banking system has significantly decreased: ο loan growth may be negatively impacted as interest rates have risen and lenders have reverted back to historical credit spreads to account for overall higher cost of funds; ο cost of deposits as well as overall cost of funds could continue to negatively impact net interest margin.
Significant items that may have an impact on 2025 results include: ● Excess liquidity in the banking system has significantly decreased: ο loan growth may be negatively impacted as interest rates have risen and lenders have reverted back to historical credit spreads to account for overall higher cost of funds; ο cost of deposits as well as overall cost of funds could continue to negatively impact NIM.
Significant management judgment is required at each point in the measurement process. The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist.
Significant management judgment is required at each point in the measurement process. 44 Table of Contents The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist.
Management’s Asset Liability Committee (“ALCO”) is responsible for liquidity management and has developed guidelines, which cover all assets and liabilities, as well as off-balance sheet items that are potential sources or uses of liquidity. Liquidity policies must also provide the flexibility to implement appropriate strategies, along with regular monitoring of liquidity and testing of the contingent liquidity plan.
Management’s ALCO is responsible for liquidity management and has developed guidelines, which cover all assets and liabilities, as well as off-balance sheet items that are potential sources or uses of liquidity. Liquidity policies must also provide the flexibility to implement appropriate strategies, along with regular monitoring of liquidity and testing of the contingent liquidity plan.
These are necessary to maintain the allowance at a level which management believes is reasonably reflective of the overall loss expected over the contractual life of the loan portfolio. While management uses available information to recognize losses on loans, additions or reductions to the allowance may fluctuate from one reporting period to another.
These are necessary to maintain the allowance at a level which management believes is reasonably reflective of the overall loss expected over the contractual life of the loan portfolio, adjusted for expected prepayments and curtailments. While management uses available information to recognize losses on loans, additions or reductions to the allowance may fluctuate from one reporting period to another.
The Company also has the ability to issue brokered time deposits and to borrow against established borrowing facilities with other banks (federal funds), which could provide additional liquidity of $2.01 billion at December 31, 2023 and $1.92 billion at December 31, 2022.
The Company also has the ability to issue brokered time deposits and to borrow against established borrowing facilities with other banks (federal funds), which could provide additional liquidity of $2.01 billion at December 31, 2024 and December 31, 2023.
The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 5.00%, payable semi-annually in arrears commencing on January 1, 2021, and a floating rate of interest equivalent to the three-month Secured Overnight Financing Rate (“SOFR”) plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025.
The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 5.00%, payable semi-annually in arrears commencing on January 1, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025.
Allowance for Credit Losses and Unfunded Commitments The allowance for credit losses consists of the allowance for credit losses and the allowance for losses on unfunded commitments. The measurement of Current Expected Credit Losses (“CECL”) on financial instruments requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures).
Allowance for Credit Losses and Unfunded Commitments The allowance for credit losses consists of the allowance for credit losses and the allowance for losses on unfunded commitments. The measurement of CECL on financial instruments requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures).
This risk has been mitigated by the Bank’s migration to a more neutral interest rate sensitivity position. ● The Company’s continued focus on long-term strategies including growth in the New England markets, diversification of revenue sources, improving operating efficiencies and investing in technology. ● The Company’s merger with Salisbury is expected to provide earnings benefit and incremental growth potential in these new markets.
This risk has been mitigated by the Bank’s migration to a more neutral interest rate sensitivity position. ● The Company’s continued focus on long-term strategies including growth in its markets, diversification of revenue sources, improving operating efficiencies and investing in technology. ● The Company’s anticipated merger with Evans is expected to provide earnings benefit and incremental growth potential in new markets.
The Company’s 2024 outlook is subject to factors in addition to those identified above and those risks and uncertainties that could impact the Company’s future results are explained in Item 1A.
The Company’s 2025 outlook is subject to factors in addition to those identified above and those risks and uncertainties that could impact the Company’s future results are explained in Item 1A. Risk Factors.
At December 31, 2023 and 2022, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $2.68 billion and $2.42 billion, respectively. In the opinion of management, there are no material commitments to extend credit, including unused lines of credit that represent unusual risks.
At December 31, 2024 and 2023, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $2.84 billion and $2.68 billion, respectively. In the opinion of management, there are no material commitments to extend credit, including unused lines of credit that represent unusual risks.
At December 31, 2023 and 2022, approximately $106.6 million and $145.3 million, respectively, of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements.
At December 31, 2024 and 2023, approximately $107.6 million and $106.6 million, respectively, of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements.
Recent Accounting Updates See Note 2 to the consolidated financial statements for a detailed discussion of new accounting pronouncements. 2022 OPERATING RESULTS AS COMPARED TO 2021 OPERATING RESULTS For similar operating and financial data and discussion of our results for the year ended December 31, 2022 compared to our results for the year ended December 31, 2021 , refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023 and is incorporated herein by reference. 47 Table of Contents
Recent Accounting Updates See Note 2 to the consolidated financial statements for a detailed discussion of new accounting pronouncements. 2023 OPERATING RESULTS AS COMPARED TO 2022 OPERATING RESULTS For similar operating and financial data and discussion of our results for the year ended December 31, 2023 compared to our results for the year ended December 31, 2022 , refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024 and is incorporated herein by reference. 50 Table of Contents
Risk Factors. 32 Table of Contents Asset/Liability Management The Company attempts to maximize net interest income and net income, while actively managing its liquidity and interest rate sensitivity through the mix of various core deposit products and other sources of funds, which in turn fund an appropriate mix of earning assets.
Asset/Liability Management The Company attempts to maximize net interest income and net income, while actively managing its liquidity and interest rate sensitivity through the mix of various core deposit products and other sources of funds, which in turn fund an appropriate mix of earning assets.
In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile and residential solar loans as collateral. At December 31, 2023 and 2022, the Bank had the capacity to borrow $1.02 billion and $622.7 million, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets.
In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile and residential solar loans as collateral. At December 31, 2024 and 2023, the Bank had the capacity to borrow $1.13 billion and $1.02 billion, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets.
Critical Accounting Estimates SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with U.S. generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.
Critical Accounting Estimates SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.
In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $823.3 million and $898.1 million at December 31, 2023 and 2022, respectively, or used to collateralize other borrowings, such as repurchase agreements.
In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $957.3 million and $823.3 million at December 31, 2024 and 2023, respectively, or used to collateralize other borrowings, such as repurchase agreements.
The Company established a $14.5 million allowance for acquired Salisbury loans which included both the $5.8 million allowance for purchase credit deteriorated (“PCD”) loans reclassified from loans and the $8.8 million allowance for non-PCD loans recognized through the provision for loan losses.
The Company established a $14.5 million allowance for acquired Salisbury loans which included both the $5.8 million allowance for PCD loans reclassified from loans and the $8.8 million allowance for non-PCD loans recognized through the provision for loan losses.
Under this policy, remaining available borrowing capacity totaled $2.99 billion at December 31, 2023 and $2.41 billion at December 31, 2022. This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives.
Under this policy, remaining available borrowing capacity totaled $3.38 billion at December 31, 2024 and $2.99 billion at December 31, 2023. This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives.
Overview Significant factors management reviews to evaluate the Company’s operating results and financial condition include, but are not limited to: net income and earnings per share, return on average assets and equity, net interest margin, noninterest income, operating expenses, asset quality indicators, loan and deposit growth, capital management, liquidity and interest rate sensitivity, enhancements to customer products and services, technology advancements, market share and peer comparisons.
Executive Summary Significant factors management reviews to evaluate the Company’s operating results and financial condition include, but are not limited to, net income and EPS, return on average assets and equity, NIM, noninterest income, operating expenses, asset quality indicators, loan and deposit growth, capital management, liquidity and interest rate sensitivity, enhancements to customer products and services, technology advancements, market share and peer comparisons.
(“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). When we refer to “NBT,” “we,” “our,” “us,” and “the Company”, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc.
(“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). When references to “NBT,” “we,” “our,” “us,” and “the Company” are made in this report, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc.
Those sources totaled approximately $2.87 billion and $2.90 billion at December 31, 2023 and 2022, respectively. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated financial institutions and are under the Company’s control.
Those sources totaled approximately $3.46 billion and $2.87 billion at December 31, 2024 and 2023, respectively. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated financial institutions and are under the Company’s control.
General NBT Bancorp Inc. is a financial holding company headquartered in Norwich, NY, with total assets of $13.31 billion at December 31, 2023.
General NBT Bancorp Inc. is a registered financial holding company headquartered in Norwich, NY, with total assets of $13.79 billion at December 31, 2024.
Northeast GDP’s annualized growth (on a quarterly basis) was expected to start the first quarter of 2024 at approximately 3.7% before decreasing to a low of 2.9% in the third quarter of 2024 and then increasing to 3.8% by the end of the forecast period.
Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the first quarter of 2025 at approximately 3.8% before decreasing to a low of 2.6% in the third quarter of 2025 and then increasing to 3.9% by the end of the forecast period.
Under this scenario, northeast unemployment increases to a peak of 7.0% in the first quarter of 2025. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2023.
Under this scenario, Northeast unemployment increases to a peak of 7.5% in the first quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2024.
Other sources, such as short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase, brokered time deposits and long-term FHLB borrowings are utilized as necessary to support the Company’s growth in assets and to achieve interest rate sensitivity objectives. The average balance of interest-bearing liabilities totaled $7.47 billion in 2023 and increased $815.0 million from 2022.
Other sources, such as short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase, brokered time deposits and long-term FHLB borrowings are utilized as necessary to support the Company’s growth in assets and to achieve interest rate sensitivity objectives. The average balance of interest-bearing liabilities totaled $8.38 billion in 2024 and increased $906.1 million from 2023.
Due to sufficient collateral on these loans and government guarantees, no reserve is considered necessary at December 31, 2023 and 2022. 46 Table of Contents Capital Resources Consistent with its goal to operate a sound and profitable financial institution, the Company actively seeks to maintain a “well-capitalized” institution in accordance with regulatory standards.
Due to sufficient collateral on these loans and government guarantees, no reserve is considered necessary at December 31, 2024 and 2023. Capital Resources Consistent with its goal to operate a sound and profitable financial institution, the Company actively seeks to maintain a “well-capitalized” institution in accordance with regulatory standards. The principal source of capital to the Company is earnings retention.
The respective quantitative allowance for each segment is measured using an econometric, discounted probability of default and loss given default modeling methodology in which distinct, segment-specific multi-variate regression models are applied to multiple, probabilistically weighted external economic forecasts.
The respective quantitative allowance for each segment is measured using an econometric, discounted PD and LGD modeling methodology in which distinct, segment-specific multi-variate regression models are applied to multiple, probabilistically weighted external economic forecasts.
Nonperforming Assets As of December 31, (Dollars in thousands) 2023 % 2022 % 2021 % 2020 % Nonaccrual loans: Commercial $ 21,567 63 % $ 7,664 44 % $ 15,942 53 % $ 23,557 53 % Residential 9,632 28 % 4,835 28 % 8,862 29 % 13,082 29 % Consumer 2,566 8 % 1,667 10 % 1,511 5 % 3,020 7 % Troubled loan modifications (1) 448 1 % 3,067 18 % 3,970 13 % 4,988 11 % Total nonaccrual loans $ 34,213 100 % $ 17,233 100 % $ 30,285 100 % $ 44,647 100 % Loans over 90 days past due and still accruing: Commercial $ 1 - $ 4 - $ - - $ 493 16 % Residential 554 15 % 771 20 % 808 33 % 518 16 % Consumer 3,106 85 % 3,048 80 % 1,650 67 % 2,138 68 % Total loans over 90 days past due and still accruing $ 3,661 100 % $ 3,823 100 % $ 2,458 100 % $ 3,149 100 % Total nonperforming loans $ 37,874 $ 21,056 $ 32,743 $ 47,796 OREO - 105 167 1,458 Total nonperforming assets $ 37,874 $ 21,161 $ 32,910 $ 49,254 Total nonaccrual loans to total loans 0.35 % 0.21 % 0.40 % 0.60 % Total nonperforming loans to total loans 0.39 % 0.26 % 0.44 % 0.64 % Total nonperforming assets to total assets 0.28 % 0.18 % 0.27 % 0.45 % Total allowance for loan losses to nonperforming loans 302.05 % 478.72 % 280.98 % 230.14 % Total allowance for loan losses to nonaccrual loans 334.38 % 584.92 % 303.78 % 246.38 % (1) TDRs prior to adoption of ASU 2022-02. 40 Table of Contents The following tables are related to nonperforming loans in prior periods.
As of December 31, (Dollars in thousands) 2024 % 2023 % 2022 % 2021 % 2020 % Nonaccrual loans: Commercial $ 32,144 70 % $ 21,567 63 % $ 7,664 44 % $ 15,942 53 % $ 23,557 53 % Residential 10,464 23 % 9,632 28 % 4,835 28 % 8,862 29 % 13,082 29 % Consumer 2,529 6 % 2,566 8 % 1,667 10 % 1,511 5 % 3,020 7 % Troubled loan modifications (1) 682 1 % 448 1 % 3,067 18 % 3,970 13 % 4,988 11 % Total nonaccrual loans $ 45,819 100 % $ 34,213 100 % $ 17,233 100 % $ 30,285 100 % $ 44,647 100 % Loans over 90 days past due and still accruing: Commercial $ - - $ 1 - $ 4 - $ - - $ 493 16 % Residential 2,411 42 % 554 15 % 771 20 % 808 33 % 518 16 % Consumer 3,387 58 % 3,106 85 % 3,048 80 % 1,650 67 % 2,138 68 % Total loans over 90 days past due and still accruing $ 5,798 100 % $ 3,661 100 % $ 3,823 100 % $ 2,458 100 % $ 3,149 100 % Total nonperforming loans $ 51,617 $ 37,874 $ 21,056 $ 32,743 $ 47,796 OREO 182 - 105 167 1,458 Total nonperforming assets $ 51,799 $ 37,874 $ 21,161 $ 32,910 $ 49,254 Total nonaccrual loans to total loans 0.46 % 0.35 % 0.21 % 0.40 % 0.60 % Total nonperforming loans to total loans 0.52 % 0.39 % 0.26 % 0.44 % 0.64 % Total nonperforming assets to total assets 0.38 % 0.28 % 0.18 % 0.27 % 0.45 % Total allowance for loan losses to nonperforming loans 224.73 % 302.05 % 478.72 % 280.98 % 230.14 % Total allowance for loan losses to nonaccrual loans 253.17 % 334.38 % 584.92 % 303.78 % 246.38 % (1) TDRs prior to adoption of ASU 2022-02.
(Dollars in thousands) 2023 2022 2021 2020 Balance at January 1* $ 100,152 $ 92,000 $ 110,000 $ 75,999 Loans charged-off Commercial 4,154 1,870 4,638 4,005 Residential 517 633 979 1,135 Consumer** 22,107 16,140 14,489 21,938 Total loans charged-off $ 26,778 $ 18,643 $ 20,106 $ 27,078 Recoveries Commercial $ 3,625 $ 2,430 $ 723 $ 786 Residential 496 852 1,069 618 Consumer** 5,859 7,014 8,571 8,541 Total recoveries $ 9,980 $ 10,296 $ 10,363 $ 9,945 Net loans charged-off $ 16,798 $ 8,347 $ 9,743 $ 17,133 Allowance for credit loss on PCD acquired loans $ 5,772 $ - $ - $ - Provision for loan losses 25,274 17,147 (8,257 ) 51,134 Balance at December 31 $ 114,400 $ 100,800 $ 92,000 $ 110,000 Allowance for loan losses to loans outstanding at end of year 1.19 % 1.24 % 1.23 % 1.47 % Commercial net charge-offs to average loans outstanding 0.01 % (0.01 )% 0.05 % 0.04 % Residential net charge-offs to average loans outstanding - - - 0.01 % Consumer net charge-offs to average loans outstanding 0.18 % 0.12 % 0.08 % 0.18 % Net charge-offs to average loans outstanding 0.19 % 0.11 % 0.13 % 0.23 % * 2020 includes an adjustment of $3.0 million as a result of the January 1, 2020, adoption of ASC 326 and 2023 includes an adjustment of $0.6 million as a result of the January 1, 2023, adoption of ASU 2022-02. ** Consumer charge-off and recoveries include consumer and home equity.
(Dollars in thousands) 2024 2023 2022 2021 2020 Balance at January 1* $ 114,400 $ 100,152 $ 92,000 $ 110,000 $ 75,999 Loans charged-off Commercial 5,042 4,154 1,870 4,638 4,005 Residential 211 517 633 979 1,135 Consumer** 20,475 22,107 16,140 14,489 21,938 Total loans charged-off $ 25,728 $ 26,778 $ 18,643 $ 20,106 $ 27,078 Recoveries Commercial $ 839 $ 3,625 $ 2,430 $ 723 $ 786 Residential 415 496 852 1,069 618 Consumer** 6,467 5,859 7,014 8,571 8,541 Total recoveries $ 7,721 $ 9,980 $ 10,296 $ 10,363 $ 9,945 Net loans charged-off $ 18,007 $ 16,798 $ 8,347 $ 9,743 $ 17,133 Allowance for credit loss on PCD acquired loans $ - $ 5,772 $ - $ - $ - Provision for loan losses 19,607 25,274 17,147 (8,257 ) 51,134 Balance at December 31 $ 116,000 $ 114,400 $ 100,800 $ 92,000 $ 110,000 Allowance for loan losses to loans outstanding at end of year 1.16 % 1.19 % 1.24 % 1.23 % 1.47 % Commercial net charge-offs to average loans outstanding 0.04 % 0.01 % (0.01 )% 0.05 % 0.04 % Residential net charge-offs to average loans outstanding - - - - 0.01 % Consumer net charge-offs to average loans outstanding 0.14 % 0.18 % 0.12 % 0.08 % 0.18 % Net charge-offs to average loans outstanding 0.18 % 0.19 % 0.11 % 0.13 % 0.23 % * 2020 includes an adjustment of $3.0 million as a result of the January 1, 2020, adoption of ASC 326 and 2023 includes an adjustment of $0.6 million as a result of the January 1, 2023, adoption of ASU 2022-02. ** Consumer charge-off and recoveries include consumer and home equity. 45 Table of Contents Nonperforming Assets Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans modifications, OREO and nonperforming securities.
Typically, these instruments have one year expirations with an option to renew upon annual review; therefore, the total amounts do not necessarily represent future cash requirements. At December 31, 2023 and 2022, outstanding standby letters of credit were approximately $44.7 million and $53.3 million, respectively.
Typically, these instruments have one-year expirations terms with an option to renew upon annual review; therefore, the total amounts do not necessarily represent future cash requirements. At December 31, 2024 and 2023, standby letters of credit were $50.8 million and $44.7 million, respectively.
As of December 31, 2023, the quantitative model incorporates a baseline economic outlook along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the model. At December 31, 2023, the weightings were 70% and 30% for the baseline and downside economic forecasts, respectively.
As of December 31, 2024, the quantitative model incorporated a baseline economic outlook along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the model. At December 31, 2024, the weightings were 80% and 20% for the baseline and downside economic forecasts, respectively.
The Company expenses all acquisition-related costs as incurred as required by Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” 27 Table of Contents The determination of fair values for acquired loans in a business combination is a significant aspect of our financial reporting process.
The Company expenses all acquisition-related costs as incurred as required by ASC Topic 805, “Business Combinations.” The determination of fair values for acquired loans in a business combination is a significant aspect of our financial reporting process.
The fair value of the Company’s standby letters of credit at December 31, 2023 and 2022 was not significant.
As of December 31, 2024 and 2023, the fair value of the Company’s standby letters of credit was not significant.
The average rate paid on short-term borrowings increased from 4.24% in 2022 to 5.24% in 2023. Average long-term debt increased from $6.6 million in 2022 to $24.2 million in 2023. The average balance of junior subordinated debt remained at $101.2 million in 2023. The average rate paid for junior subordinated debt in 2023 was 7.23%, up from 3.70% in 2022.
The average rate paid on short-term borrowings increased from 5.24% in 2023 to 5.48% in 2024. Average long-term debt increased from $24.2 million in 2023 to $29.7 million in 2024. The average balance of junior subordinated debt remained at $101.2 million in 2024. The average rate paid for junior subordinated debt in 2024 was 7.44%, up from 7.23% in 2023.
Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Required additions or reductions to the allowance for credit losses are made periodically by charges or credits to the provision for loan losses.
Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Required additions or reductions to the allowance for credit losses are made periodically by charges or credits to the provision for loan losses.
At December 31, 2023 and 2022, the Company had approximately $1.0 million and $0.6 million, respectively, of mortgage servicing rights. At December 31, 2023 and 2022, the Company serviced $26.4 million and $31.0 million, respectively, of agricultural loans sold with recourse.
At December 31, 2024 and 2023, the Company had $0.9 million and $1.0 million, respectively, of mortgage servicing rights. At December 31, 2024 and 2023, the Company serviced $24.7 million and $26.4 million, respectively, of agricultural loans sold with recourse.
Additional information about our Allowance for Loan Losses is included in Notes 1 and 6 to the consolidated financial statements as well as in the “Critical Accounting Estimates” section of the Management Discussion and Analysis.
Additional information about our Allowance for Credit Losses is included in Notes 1 and 6 to the consolidated financial statements as well as in the “Critical Accounting Estimates” section of the Management Discussion and Analysis. The Company’s management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.
The financial review that follows focuses on the factors affecting the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings during 2023 and, in summary form, the preceding two years. Net interest margin is presented in this discussion on a fully taxable equivalent (“FTE”) basis.
The financial review that follows focuses on the factors affecting the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings during 2024 and, in summary form, the preceding two years. NIM is presented in this discussion on a FTE basis.
Management considers accounting estimates to be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements.
There are uncertainties inherent in making these estimates and assumptions, which could materially affect the Company’s results of operations and financial position. 31 Table of Contents Management considers accounting estimates to be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements.
Net charge-offs totaled $16.8 million for 2023, up from $8.3 million in 2022. Net charge-offs to average loans was 19 bps for 2023 compared to 11 bps for 2022.
Net charge-offs totaled $18.0 million for 2024, up from $16.8 million in 2023. Net charge-offs to average loans was 18 bps for 2024 compared to 19 bps for 2023.
Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the counterparties. Loans Serviced for Others and Loans Sold with Recourse The total amount of loans serviced by the Company for unrelated third parties was approximately $856.9 million and $592.7 million at December 31, 2023 and 2022, respectively.
Credit risk on the risk participation agreements is determined after considering the risk rating, PD and LGD of the counterparties. Loans Serviced for Others and Loans Sold with Recourse The total amount of loans serviced by the Company for unrelated third parties was approximately $982.5 million and $856.9 million at December 31, 2024 and 2023, respectively.
GNMA securities are considered similar in credit quality to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government. Currently, there are no subprime mortgages in the investment portfolio.
GNMA securities are considered similar in credit quality to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government.
The baseline outlook reflected an unemployment rate environment starting at 3.8% and increasing slightly during the forecast period to 4.1%.
The baseline outlook reflected a Northeast unemployment rate environment starting at 4.1% and increasing slightly during the forecast period to 4.2%.
Indirect auto loans include indirect installment loans to individuals, which are primarily secured by automobiles. Although automobile loans have generally been originated through dealers, all applications submitted through dealers are subject to the Company’s normal underwriting and loan approval procedures.
The Company offers a variety of consumer loan products including indirect auto, home equity and other consumer loans. Indirect auto loans include indirect installment loans to individuals, which are primarily secured by automobiles. Although automobile loans have generally been originated through dealers, all applications submitted through dealers are subject to the Company’s normal underwriting and loan approval procedures.
While declining short term interest rates may allow for cost of funds reductions, the elevated level of relative interest rates and the bank failures in early 2023 continue to pressure competition for deposits as well as the associated cost of funds; ο higher short-term interest rates have continued to afford deposit customers investment opportunities outside the banking system resulting in deposit declines across the industry, however, a decline to short-term interest rates could potentially mitigate this; ο Investment purchases have slowed as runoff of investment cash flows have been utilized as a source of funding. ● The Federal Reserve has continued to combat elevated inflation, with the result being inflationary pressures having declined in the second half of 2023: ο this reduced inflation has had a material impact on current and expected Federal Reserve monetary policy; ο the tightening of monetary policy through measures to raise interest rates seen in 2022 and 2023 could begin to reverse itself in 2024 given softening inflation; ο the loosening of monetary policy through the reduction to short term interest rates in 2024 could have a negative impact on overall net interest income given the decline in interest rates on floating rate assets.
While the recent decline to short-term interest rates may allow for some continued cost of funds reductions, the elevated level of relative interest rates and the bank failures in early 2023 continue to pressure competition for deposits as well as the associated cost of funds; ο higher short-term interest rates as compared to recent history have continued to afford deposit customers investment opportunities outside the banking system resulting in deposit declines across the industry, however, a decline to short-term interest rates could potentially mitigate this; ο investment purchases have slowed, however, reinvestment of investment cash flows at higher rate levels has allowed for improved yield on the portfolio as a whole. ● The FRB has continued to combat elevated inflation, with the result being inflationary pressures being much more under control in 2024 and into 2025: ο this reduced inflation has had a material impact on current and expected FRB monetary policy; ο the tightening of monetary policy through measures to raise interest rates seen in 2022 and 2023 began to reverse itself in 2024 given softening inflation; ο the loosening of monetary policy through the reduction to short-term interest rates in 2024 and into 2025 could have a negative impact on overall net interest income given the decline in interest rates on floating rate assets.
We originate adjustable-rate and fixed-rate, one-to-four-family residential loans for the construction or purchase of a residential property or refinancing of a mortgage. These loans are collateralized by properties located in the Company’s market area. Subprime mortgage lending, which has been the riskiest sector of the residential housing market, is not a market that the Company has ever actively pursued.
The Company originates both adjustable-rate and fixed-rate, one-to-four-family residential loans for the construction or purchase of a residential property or refinancing of a mortgage. These loans are collateralized by properties located in the Company’s market area. The Company has never actively participated in subprime mortgage lending, which has historically been one of the riskiest sectors in the residential housing market.
Stock Repurchase Plan The Company purchased 155,500 shares of its common stock during the year ended December 31, 2023 at an average price of $31.79 per share under its previously announced share repurchase program.
Stock Repurchase Plan The Company purchased 7,600 shares of its common stock during the year ended December 31, 2024 at an average price of $33.02 per share under its previously announced share repurchase program.
The yield on average loans increased from 4.28% in 2022 to 5.26% in 2023, as loans re-priced upward due to the interest rate environment in 2023. FTE interest income from loans increased 39.1%, from $333.0 million in 2022 to $463.3 million in 2023. This increase was due to the increases in yields and an increase in the average balance.
The yield on average loans increased from 5.26% in 2023 to 5.64% in 2024, as loans re-priced upward due to the interest rate environment in 2024. FTE interest income from loans increased 19.5%, from $463.3 million in 2023 to $553.8 million in 2024. This increase was due to the increases in yields and an increase in the average balance.
The following table sets forth information by category of noninterest income for the years indicated: Years Ended December 31, (In thousands) 2023 2022 2021 Service charges on deposit account $ 15,425 $ 14,630 $ 13,348 Card services income 20,829 29,058 34,682 Retirement plan administration fees 47,221 48,112 42,188 Wealth management 34,763 33,311 33,718 Insurance services 15,667 14,696 14,083 Bank owned life insurance income 6,750 6,044 6,217 Net securities (losses) gains (9,315 ) (1,131 ) 566 Other 10,838 10,858 12,992 Total noninterest income $ 142,178 $ 155,578 $ 157,794 Noninterest income for the year ended December 31, 2023 was $142.2 million, down $13.4 million, or 8.6%, from the year ended December 31, 2022.
The following table sets forth information by category of noninterest income for the years indicated: Years Ended December 31, (In thousands) 2024 2023 2022 Service charges on deposit account $ 17,087 $ 15,425 $ 14,630 Card services income 22,331 20,829 29,058 Retirement plan administration fees 56,587 47,221 48,112 Wealth management 41,641 34,763 33,311 Insurance services 17,032 15,667 14,696 Bank owned life insurance income 8,325 6,750 6,044 Net securities gains (losses) 2,789 (9,315 ) (1,131 ) Other 11,032 10,838 10,858 Total noninterest income $ 176,824 $ 142,178 $ 155,578 Noninterest income for the year ended December 31, 2024 was $176.8 million, up $34.6 million, or 24.4%, from the year ended December 31, 2023.
Excluding acquisition expenses and the impairment of a minority interest equity investment, noninterest expense for the year ended December 31, 2023 was $326.9 million, up $23.4 million or 7.7%, from the year ended December 31, 2022.
Excluding acquisition expenses and the impairment of a minority interest equity investment, noninterest expense for the year ended December 31, 2024 was $376.4 million, up $49.4 million, or 15.1%, from the year ended December 31, 2023.
An ongoing independent review of individual credits in the commercial loan portfolio is performed by the independent loan review function. These components of the Company’s underwriting and monitoring functions are critical to the timely identification, classification and resolution of problem credits.
Management follows a policy of continually identifying, analyzing and grading credit risk inherent in each loan portfolio. An ongoing independent review of individual credits in the commercial loan portfolio is performed by the independent loan review function. These components of the Company’s underwriting and monitoring functions are critical to the timely identification, classification and resolution of problem credits.
Total loans represent approximately 72.5% of assets as of December 31, 2023, as compared to 69.4% as of December 31, 2022. 34 Table of Contents The following table reflects the loan portfolio by major categories (1) , net of deferred fees and origination costs, for the years indicated: Composition of Loan Portfolio December 31, (In thousands) 2023 2022 2021 2020 2019 Commercial & industrial $ 1,353,725 $ 1,265,082 $ 1,155,240 $ 1,121,224 $ 1,112,616 Commercial real estate 3,626,910 2,807,941 2,655,367 2,526,813 2,331,650 Paycheck protection program 523 949 101,222 430,810 - Residential real estate 2,125,804 1,649,870 1,571,232 1,466,662 1,445,156 Indirect auto 1,130,132 989,587 859,454 931,286 1,193,635 Residential solar 917,755 856,798 440,016 282,224 219,210 Home equity 337,214 314,124 330,357 387,974 444,082 Other consumer 158,650 265,796 385,571 351,892 389,749 Total loans $ 9,650,713 $ 8,150,147 $ 7,498,459 $ 7,498,885 $ 7,136,098 (1) Loans are summarized by business line which does not align with how the Company assesses credit risk in the estimate for credit losses under CECL.
Composition of Loan Portfolio A summary of the loan portfolio by major categories (1) , net of deferred fees and origination costs, for the periods indicated is as follows: December 31, (In thousands) 2024 2023 2022 2021 2020 Commercial & industrial $ 1,426,358 $ 1,353,725 $ 1,265,082 $ 1,155,240 $ 1,121,224 Commercial real estate 3,876,698 3,626,910 2,807,941 2,655,367 2,526,813 Paycheck protection program 124 523 949 101,222 430,810 Residential real estate 2,142,249 2,125,804 1,649,870 1,571,232 1,466,662 Home equity 334,268 337,214 314,124 330,357 387,974 Indirect auto 1,273,253 1,130,132 989,587 859,454 931,286 Residential solar 820,079 917,755 856,798 440,016 282,224 Other consumer 96,881 158,650 265,796 385,571 351,892 Total loans $ 9,969,910 $ 9,650,713 $ 8,150,147 $ 7,498,459 $ 7,498,885 (1) Loans are summarized by business line which does not align with how the Company assesses credit risk in the estimate for credit losses under CECL.
The following table sets forth the commitment expiration period for standby letters of credit at: (In thousands) December 31, 2023 Within one year $ 39,521 After one but within three years 4,781 After three but within five years 110 After five years 323 Total $ 44,735 Interest Rate Swaps The Company records all derivatives on the consolidated balance sheet at fair value.
The following table sets forth the commitment expiration period for standby letters of credit at: (In thousands) December 31, 2024 Within one year $ 38,810 After one but within three years 11,109 After three but within five years 590 After five years 323 Total $ 50,832 Interest Rate Swaps The Company records all derivatives at fair value on the consolidated balance sheet.
The following table sets forth certain financial highlights: Years Ended December 31, 2023 2022 2021 Performance: Diluted earnings per share $ 2.65 $ 3.52 $ 3.54 Return on average assets 0.95 % 1.29 % 1.33 % Return on average equity 9.34 % 12.67 % 12.71 % Return on average tangible common equity 13.02 % 16.89 % 16.92 % Net interest margin (FTE) 3.29 % 3.34 % 3.03 % Capital: Equity to assets 10.71 % 10.00 % 10.41 % Tangible equity ratio 7.93 % 7.73 % 8.20 % Book value per share $ 30.26 $ 27.38 $ 28.97 Tangible book value per share $ 21.72 $ 20.65 $ 22.26 Leverage ratio 9.71 % 10.32 % 9.41 % Common equity tier 1 capital ratio 11.57 % 12.12 % 12.25 % Tier 1 capital ratio 12.50 % 13.19 % 13.43 % Total risk-based capital ratio 14.75 % 15.38 % 15.73 % 30 Table of Contents The following tables provide non-GAAP reconciliations: Years Ended December 31, (In thousands, except per share data) 2023 2022 2021 Return on average tangible common equity: Net income $ 118,782 $ 151,995 $ 154,885 Amortization of intangible assets (net of tax) 3,551 1,698 2,106 Net income, excluding intangible amortization $ 122,333 $ 153,693 $ 156,991 Average stockholders’ equity $ 1,272,333 $ 1,199,383 $ 1,218,449 Less: average goodwill and other intangibles 332,667 289,238 290,838 Average tangible common equity $ 939,666 $ 910,145 $ 927,611 Return on average tangible common equity 13.02 % 16.89 % 16.92 % Tangible equity ratio: Stockholders’ equity $ 1,425,691 $ 1,173,554 $ 1,250,453 Intangibles 402,294 288,545 289,468 Assets $ 13,309,040 $ 11,739,296 $ 12,012,111 Tangible equity ratio 7.93 % 7.73 % 8.20 % Tangible book value: Stockholders’ equity $ 1,425,691 $ 1,173,554 $ 1,250,453 Intangibles 402,294 288,545 289,468 Tangible equity $ 1,023,397 $ 885,009 $ 960,985 Diluted common shares outstanding 47,110 42,858 43,168 Tangible book value per share $ 21.72 $ 20.65 $ 22.26 Operating net income: Net income $ 118,782 $ 151,995 $ 154,885 Acquisition expenses 9,978 967 - Acquisition-related provision for credit losses 8,750 - - Acquisition-related reserve for unfunded loan commitments 836 - - Impairment of a minority interest equity investment 4,750 - - Litigation settlement cost - - 4,250 Securities losses (gains) 9,315 1,131 (566 ) Adjustment to net income $ 33,629 $ 2,098 $ 3,684 Adjustment to net income (net of tax) $ 25,965 $ 1,623 $ 2,854 Operating net income $ 144,747 $ 153,618 $ 157,739 Operating diluted earnings per share $ 3.23 $ 3.56 $ 3.61 31 Table of Contents 2024 Outlook The Company’s 2023 earnings reflected a continued ability to invest in the Company’s future while managing through significant volatility in the interest rate environment and overall economic conditions which have challenged the financial services industry.
(1) Non-GAAP measure - Refer to non-GAAP reconciliation below. 34 Table of Contents Results of Operations The following table sets forth certain financial highlights: Years Ended December 31, 2024 2023 2022 Performance: Diluted earnings per share $ 2.97 $ 2.65 $ 3.52 Return on average assets 1.04 % 0.95 % 1.29 % Return on average equity 9.57 % 9.34 % 12.67 % Return on average tangible common equity 13.75 % 13.02 % 16.89 % Net interest margin (FTE) 3.23 % 3.29 % 3.34 % Capital: Equity to assets 11.07 % 10.71 % 10.00 % Tangible equity ratio 8.42 % 7.93 % 7.73 % Book value per share $ 32.34 $ 30.26 $ 27.38 Tangible book value per share $ 23.88 $ 21.72 $ 20.65 Leverage ratio 10.24 % 9.71 % 10.32 % Common equity tier 1 capital ratio 11.93 % 11.57 % 12.12 % Tier 1 capital ratio 12.83 % 12.50 % 13.19 % Total risk-based capital ratio 15.03 % 14.75 % 15.38 % The following tables provide non-GAAP reconciliations: Years Ended December 31, (In thousands, except per share data) 2024 2023 2022 Return on average tangible common equity: Net income $ 140,641 $ 118,782 $ 151,995 Amortization of intangible assets (net of tax) 6,332 3,551 1,698 Net income, excluding intangible amortization $ 146,973 $ 122,333 $ 153,693 Average stockholders’ equity $ 1,468,861 $ 1,272,333 $ 1,199,383 Less: average goodwill and other intangibles 399,989 332,667 289,238 Average tangible common equity $ 1,068,872 $ 939,666 $ 910,145 Return on average tangible common equity 13.75 % 13.02 % 16.89 % Tangible equity ratio: Stockholders’ equity $ 1,526,141 $ 1,425,691 $ 1,173,554 Intangibles 399,023 402,294 288,545 Assets $ 13,786,666 $ 13,309,040 $ 11,739,296 Tangible equity ratio 8.42 % 7.93 % 7.73 % Tangible book value: Stockholders’ equity $ 1,526,141 $ 1,425,691 $ 1,173,554 Intangibles 399,023 402,294 288,545 Tangible equity $ 1,127,118 $ 1,023,397 $ 885,009 Diluted common shares outstanding 47,195 47,110 42,858 Tangible book value per share $ 23.88 $ 21.72 $ 20.65 Operating net income: Net income $ 140,641 $ 118,782 $ 151,995 Acquisition expenses 1,531 9,978 967 Acquisition-related provision for credit losses - 8,750 - Acquisition-related reserve for unfunded loan commitments - 836 - Impairment of a minority interest equity investment - 4,750 - Securities (gains) losses (2,789 ) 9,315 1,131 Adjustment to net income $ (1,258 ) $ 33,629 $ 2,098 Adjustment to net income (net of tax) $ (984 ) $ 25,965 $ 1,623 Operating net income $ 139,657 $ 144,747 $ 153,618 Operating diluted earnings per share $ 2.94 $ 3.23 $ 3.56 35 Table of Contents 2025 Outlook The Company’s 2024 earnings reflected its continued ability to invest in the Company’s future while managing significant volatility in the interest rate environment and overall economic conditions, which have presented challenges across the financial services industry. 2024 was marked by resilience for both economic growth and inflation.
The yield on average taxable securities was 1.90% for 2023 compared to 1.78% in 2022. The average balance of tax-exempt securities AFS and HTM decreased from $233.5 million in 2022 to $214.1 million in 2023. The FTE yield on tax-exempt securities increased from 2.17% in 2022 to 3.14% in 2023.
The yield on average taxable securities was 1.99% for 2024 compared to 1.90% in 2023. The average balance of tax-exempt securities AFS and HTM increased from $214.1 million in 2023 to $221.3 million in 2024. The FTE yield on tax-exempt securities increased from 3.14% in 2023 to 3.52% in 2024.
The following table sets forth the major components of noninterest expense for the years indicated: Years Ended December 31, (In thousands) 2023 2022 2021 Salaries and employee benefits $ 194,250 $ 187,830 $ 172,580 Technology and data services 38,163 35,712 34,717 Occupancy 28,408 26,282 26,048 Professional fees and outside services 17,601 16,810 16,306 Office supplies and postage 6,917 6,140 6,006 FDIC assessment 6,257 3,197 3,041 Advertising 3,054 2,822 2,521 Amortization of intangible assets 4,734 2,263 2,808 Loan collection and other real estate owned, net 2,618 2,647 2,915 Acquisition expenses 9,978 967 - Other 29,684 19,795 20,339 Total noninterest expense $ 341,664 $ 304,465 $ 287,281 39 Table of Contents Noninterest expense for the year ended December 31, 2023 was $341.7 million, up $37.2 million or 12.2%, from the year ended December 31, 2022.
The following table sets forth the major components of noninterest expense for the years indicated: Years Ended December 31, (In thousands) 2024 2023 2022 Salaries and employee benefits $ 232,487 $ 194,250 $ 187,830 Technology and data services 39,139 38,163 35,712 Occupancy 31,309 28,408 26,282 Professional fees and outside services 19,132 17,601 16,810 Office supplies and postage 7,525 6,917 6,140 FDIC assessment 6,765 6,257 3,197 Advertising 3,386 3,054 2,822 Amortization of intangible assets 8,443 4,734 2,263 Loan collection and other real estate owned, net 2,505 2,618 2,647 Acquisition expenses 1,531 9,978 967 Other 25,659 29,684 19,795 Total noninterest expense $ 377,881 $ 341,664 $ 304,465 Noninterest expense for the year ended December 31, 2024 was $377.9 million, up $36.2 million, or 10.6%, from the year ended December 31, 2023.
(3) Interest income for tax-exempt securities and loans have been adjusted to an FTE basis using the statutory Federal income tax rate of 21%. 33 Table of Contents 2023 OPERATING RESULTS AS COMPARED TO 2022 OPERATING RESULTS Net Interest Income Net interest income for the year ended December 31, 2023 was $378.2 million, up $16.0 million, or 4.4%, from 2022.
(3) Interest income for tax-exempt securities and loans have been adjusted to an FTE basis using the statutory Federal income tax rate of 21%. 2024 OPERATING RESULTS AS COMPARED TO 2023 OPERATING RESULTS Net Interest Income Net interest income for the year ended December 31, 2024 was $400.1 million, up $21.9 million, or 5.8%, from 2023.
In the course of normal business activity, management must select and apply many accounting policies and methodologies and make estimates and assumptions that lead to the financial results presented in the Company’s consolidated financial statements and accompanying notes. There are uncertainties inherent in making these estimates and assumptions, which could materially affect the Company’s results of operations and financial position.
In the course of normal business activity, management must select and apply many accounting policies and methodologies and make estimates and assumptions that lead to the financial results presented in the Company’s consolidated financial statements and accompanying notes.
Net cash flows provided by operating activities totaled $157.5 million and $183.2 million in 2023 and 2022, respectively.
Net cash flows provided by operating activities totaled $188.6 million and $157.5 million in 2024 and 2023, respectively.
Net cash flows used in investing activities totaled $44.2 million and $926.2 million in 2023 and 2022, respectively. Critical elements of investing activities are loan and investment securities transactions. Net cash flows used in financing activities totaled $105.4 million and $328.7 million in 2023 and 2022, respectively.
Net cash flows used in investing activities totaled $399.2 million and $44.2 million in 2024 and 2023, respectively. Critical elements of investing activities are loan and investment securities transactions. Net cash flows provided by financing activities totaled $289.5 million and net cash flows used in financing activities totaled $105.4 million in 2024 and 2023.
Risks associated with the CRE portfolio pertain to the borrowers’ capacity to meet interest and principal payments throughout the loan’s duration, as well as their ability to secure refinancing upon the loan’s maturity.
Risks associated with the CRE portfolio pertain to the borrowers’ ability to meet interest and principal payments over the life of the loan, as well as their ability to secure financing upon the loan’s maturity.
For loans without contractual maturities, classification of maturity is consistent with the policy elections to measure the allowance for credit losses.
Scheduled repayments are reported in the maturity category in which the contractual maturity is due. For loans without contractual maturities, classification of maturity is consistent with the policy elections to measure the allowance for credit losses.
Where non-GAAP disclosures are used in this Annual Report on Form 10-K, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables.
Non-GAAP Measures This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with GAAP. Where non-GAAP disclosures are used in this Annual Report on Form 10-K, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables.
Critical Accounting Policies Critical Accounting Policies The accounting and reporting policies followed by the Company conform, in all material respects, to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the financial services industry.
The accounting and reporting policies followed by the Company conform, in all material respects, to accounting principles GAAP and to general practices within the financial services industry.
The increase in the allowance for credit losses from December 31, 2022 to December 31, 2023 was primarily due to the $14.5 million of allowance for acquired Salisbury loans which included both the $5.8 million allowance for PCD loans reclassified from loans and the $8.8 million allowance for non-PCD loans recognized through the provision for loan losses.
The allowance for credit losses as of December 31, 2023 incorporates the recording of $14.5 million of allowance for acquired Salisbury loans as of the acquisition date, which included both the $8.8 million of non-PCD allowance recognized through the provision for loan losses and the $5.8 million of PCD allowance reclassified from loans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−0 removed9 unchanged
Biggest changeWhile deposit rates have increased meaningfully in 2023 in conjunction with the increase to short term interest rates, the Company continues to focus on managing deposit expense in an environment of elevated interest rates while allowing assets to reprice upward. 48 Table of Contents
Biggest changeThe Company continues to focus on managing deposit expense in an environment of still elevated but declining short-term interest rates while allowing assets to reprice upward in relation to existing portfolio asset yields . 51 Table of Contents
Post-pandemic, inflationary pressures have resulted in a higher overall yield curve with Federal Funds increases of 425 bps in 2022 with additional 100 bps of increases in 2023.
Post-pandemic, inflationary pressures have resulted in a higher overall yield curve with federal funds increases of 425 bps in 2022 with an additional 100 bps of increases in 2023.
Three additional models are run in which a gradual increase of 200 bps, a gradual increase of 100 bps and a gradual decrease of 200 bps takes place over a 12-month period with a static balance sheet. Under these scenarios, assets subject to prepayments are adjusted to account for faster or slower prepayment assumptions.
Four additional models are run in which a gradual increase of 200 bps, a gradual increase of 100 bps, a gradual decrease of 100 bps and a gradual decrease of 200 bps takes place over a 12-month period with a static balance sheet. Under these scenarios, assets subject to prepayments are adjusted to account for faster or slower prepayment assumptions.
Notwithstanding the Company’s interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income. In managing the Company’s asset/liability position, the Board and management aim to manage the Company’s interest rate risk while minimizing net interest margin compression.
Notwithstanding the Company’s interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income. In managing the Company’s asset/liability position, the Board and management aim to manage the Company’s interest rate risk while minimizing NIM compression.
The Company’s Interest Rate Sensitivity has migrated to a near neutral position. In the declining rate scenario, net interest income is projected to modestly decrease when compared to the forecasted net interest income in the flat rate scenario through the simulation period.
The Company’s Interest Rate Sensitivity has remained in a near neutral position. In the declining rate scenario, net interest income is projected to modestly decrease when compared to the forecasted net interest income in the flat rate scenario through the simulation period.
In the rising rate scenarios, net interest income is near neutral, impacted by slowing prepayments speeds and increased deposit reactivity; the magnitude of potential impact on earnings may be affected by the ability to lag deposit repricing on NOW, savings, money market deposit accounts and time accounts.
In the rising rate scenarios, net interest income is near neutral, impacted by slowing prepayments speeds and increased deposit reactivity; the magnitude of potential impact on earnings may be affected by the ability to lag deposit repricing on NOW, savings, MMDA and time accounts.
At times, depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company’s interest rate risk position somewhat in order to increase its net interest margin.
At times, depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company’s interest rate risk position somewhat in order to increase its NIM.
Net interest income for the next twelve months in the +200/+100/-200 bp scenarios, as described above, is within the internal policy risk limits of not more than a 7.5% reduction in net interest income.
Net interest income for the next twelve months in the +200/+100/-100/-200 bp scenarios, as described above, is within the internal policy risk limits of not more than a 5.0% reduction in net interest income in the +100/-100 bps scenarios and of not more than a 7.5% reduction in net interest income in the +200/-200 bps scenarios.
The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the December 31, 2023 balance sheet position: Interest Rate Sensitivity Analysis Change in interest rates (in bps points) Percent change in net interest income +200 (0.06 %) +100 0.27 % -200 (0.36 %) The Company anticipates that the trajectory of net interest income will continue to depend significantly on the timing and path of short to mid-term interest rates which are heavily driven by inflationary pressures and Federal Open Market Committee monetary policy.
The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the December 31, 2024 balance sheet position: Interest Rate Sensitivity Analysis Change in interest rates (in bps) Percent change in net interest income +200 0.06 % +100 0.34 % -100 (0.36 )% -200 (0.29 )% The Company anticipates that the trajectory of net interest income will continue to depend significantly on the timing and path of short to mid-term interest rates which are heavily influenced by inflationary pressures and FOMC monetary policy.
To manage the Company’s exposure to changes in interest rates, management monitors the Company’s interest rate risk. Management’s Asset Liability Committee (“ALCO”) meets monthly to review the Company’s interest rate risk position and profitability and to recommend strategies for consideration by the Board of Directors.
To manage the Company’s exposure to changes in interest rates, management monitors the Company’s interest rate risk. Management’s ALCO meets monthly to review the Company’s interest rate risk position and profitability and to recommend strategies for consideration by the Board.
In response to the economic impact of the pandemic, the federal funds rate was reduced to near zero in March 2020, term interest rates fell sharply across the yield curve and the Company reduced deposit rates.
In response to the economic impact of the pandemic, the federal funds rate was reduced to near zero in March 2020, causing term interest rates to decline sharply across the yield curve. As a result, the Company lowered deposit rates.
Added
However, the tightening cycle ended in September of 2024, when the FRB lowered the federal funds rate by 50 bps, with a total of 100 bps of federal funds rate reductions by the end of 2024.
Added
While deposit rates increased meaningfully in 2023 and continued to increase in early 2024 in conjunction with elevated short-term interest rates, the recent federal funds rate reduction has provided the catalyst for the Company to begin reducing deposit rates.

Other NBTB 10-K year-over-year comparisons