# NBT Bancorp Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [NBT Bancorp Inc](/companies/nbtb.md) (CIK 790359)
- Form: 10-Q
- Filed: 2025-05-09
- Accepted by EDGAR: May 9, 2025, 16:00 ET
- Period: 2025-03-31
- Accession: 0001140361-25-018153
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/790359/000114036125018153/ef20046459_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/790359/000114036125018153/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $10.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $36.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.78 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 47,244,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $42.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $3.7m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $16.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2025-03-31 | $13.86bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $12.30bn | us-gaap:Liabilities |
| Short-term borrowings | at 2025-03-31 | $85.6m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-03-31 | $1.57bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 73,757 characters.

The purpose of this discussion and analysis is to provide a concise description of the consolidated financial condition and results of operations of NBT Bancorp Inc. (“NBT”) and its wholly-owned subsidiaries, including NBT Bank, National Association (the “Bank”), NBT Financial Services, 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. 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, financial condition, capital resources and asset/liability management. Reference should be made to the Company’s consolidated financial statements and footnotes thereto included in this Form 10‑Q as well as to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024 for an understanding of the following discussion and analysis. Operating results for the three month period ending March 31, 2025 are not necessarily indicative of the results of the full year ending December 31, 2025 or any future period.

### 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. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,” “projects,” “will,” “can,” “would,” “should,” “could,” “may,” or other similar terms. There are a number of factors, many of which are beyond the Company’s control, that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) local, regional, national and international economic conditions, including actual or potential stress in the banking industry, and the impact they may have on the Company and its customers, and the Company’s assessment of that impact; (2) changes in the level of nonperforming assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the FRB and international trade disputes (including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation); (5) inflation, interest rate, securities market and monetary fluctuations; (6) political instability; (7) acts of war, including international military conflicts, or terrorism; (8) the timely development and acceptance of new products and services and the perceived overall value of these products and services by users; (9) changes in consumer spending, borrowing and saving habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisition and integration of acquired businesses; (13) the possibility that NBT may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all or to successfully integrate Evans operations and those of NBT; (14) the ability to increase market share and control expenses; (15) changes in the competitive environment among financial holding companies; (16) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply, including those under the Dodd-Frank Act, and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; (17) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the FASB and other accounting standard setters; (18) changes in the Company’s organization, compensation and benefit plans; (19) the costs and effects of legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; (20) greater than expected costs or difficulties related to the integration of new products and lines of business; and (21) the Company’s success at managing the risks involved in the foregoing items.

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advises readers that various factors, including, but not limited to, those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the SEC, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

Unless required by law, the Company does not undertake, and specifically disclaims any obligations to, publicly release any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

### Non-GAAP Measures

This Quarterly Report on Form 10-Q contains financial information determined by methods other than in accordance with GAAP. Where non-GAAP disclosures are used in this Form 10-Q, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provide useful information that is important to an understanding of the results of the Company’s core business as well as provide information standard in the financial institution industry. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to current period presentation.

### 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. The Company follows financial accounting and reporting policies that are in accordance with GAAP. The more significant of these policies are summarized in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. Refer to Note 3 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards. The allowance for credit losses and unfunded commitments policies are deemed to meet the SEC’s definition of a critical accounting estimate.

#### 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). 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. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. The allowance for credit losses for loans, as reported in our consolidated statements of financial condition, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan amounts, net of recoveries. The allowance for losses on unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The allowance for losses on unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws.

Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting estimate given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. 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. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings.

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of March 31, 2025, 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 March 31, 2025, the weightings were 75% and 25% for the baseline and downside economic forecasts, respectively. The baseline outlook reflected an economic environment where the unemployment rate increases from 4.1% to 4.4% during the forecast period. Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the second quarter of 2025 at approximately 5% and decrease to 3.9% before increasing to 4.1% by the end of the forecast period. Key assumptions in the baseline economic outlook included the Federal Reserve cutting rates with two 25 basis point cuts at the September and December meetings, the economy remaining at full employment and continued tapering of the Federal Reserve balance sheet. The alternative downside scenario assumed deteriorated economic conditions from the baseline outlook. Under this scenario, national unemployment rises from 4.1% in the first quarter of 2025 to a peak of 7.6% in the second quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2025. Additional qualitative adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools and recent trends in asset value indices. Additional monitoring for industry concentrations, loan growth and policy exceptions was also conducted.

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of March 31, 2025, 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 further demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of March 31, 2025, the Company increased the downside scenario to 100% which resulted in a 30% increase in the overall estimated allowance for credit losses.

The Company’s policies on the CECL methodology for allowance for credit losses are disclosed in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. All accounting policies are important and as such, the Company encourages the reader to review each of the policies included in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K to obtain a better understanding of how the Company’s financial performance is reported. Refer to Note 3 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards.

### Evans Bancorp, Inc. Merger

On May 2, 2025, the Company completed the acquisition of Evans, through the merger of Evans with and into the Company, with the Company surviving the merger, with total consideration of approximately $222 million in stock. Evans, with assets of approximately $2.19 billion at December 31, 2024, was headquartered in Williamsville, New York. Its primary subsidiary, Evans Bank, was a federally-chartered national banking association operating 18 banking locations in Western New York. The acquisition of Evans is being accounted for as a business combination in accordance with ASC 805, “Business Combinations” (“ASC 805”), using the acquisition method of accounting. Due to the close proximity of the acquisition date and the Company’s filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2025, the initial accounting for the business combination is incomplete. Accordingly, the Company is unable to disclose the preliminary allocation of consideration or other information required by ASC 805 at this time. The Company will include relevant disclosures as required in the second quarter of 2025.

The Company incurred acquisition expenses related to the Merger of $1.2 million for the three months ended March 31, 2025.

### 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.

Net income for the three months ended March 31, 2025 was $36.7 million, up $0.7 million from the fourth quarter of 2024 and up $2.9 million from the first quarter of 2024. Diluted earnings per share were $0.77 for the three months ended March 31, 2025, up $0.01 from the fourth quarter of 2024 and up $0.06 from the first quarter of 2024.

Operating net income(1), a non-GAAP measure, was $37.8 million, or $0.80 per diluted common share, for the three months ended March 31, 2025, compared to $0.77 per diluted common share for the fourth quarter of 2024 and $0.68 per diluted common share for the first quarter of 2024.

In the first quarter of 2024, the Company sold an AFS corporate debt security from a subordinated debt investment issued by a financial institution that failed and was previously written-off and recognized a gain of $2.3 million.

The following information should be considered in connection with the Company’s results for the three months ended March 31, 2025:

- Net interest income for the three months ended March 31, 2025 was $107.2 million, up $1.1 million, or 1.1%, from the fourth quarter of 2024 and up $12.0 million, or 12.7%, from the first quarter of 2024.
- The Company recorded a provision for loan losses of $7.6 million for the three months ended March 31, 2025, compared to $2.2 million in the fourth quarter of 2024 and $5.6 million in the first quarter of 2024.
- Excluding securities gains (losses), noninterest income represented 31% of total revenues and was $47.6 million for the three months ended March 31, 2025, up $5.4 million, or 12.7%, from the fourth quarter of 2024 and up $4.3 million, or 10.1%, from the first quarter of 2024.
- Noninterest expense, excluding acquisition expenses, was down $1.1 million, or 1.1%, from the fourth quarter of 2024 and was up $6.9 million, or 7.5%, from the first quarter of 2024.
- Period end total loans were $9.98 billion, up $10.4 million, or 0.4% annualized, from December 31, 2024.
- Credit quality metrics including net charge-offs to average loans were 0.27%, annualized, and allowance for loan losses to total loans was 1.17%.
- Period end total deposits were $11.71 billion, up $161.8 million, or 1.4%, from December 31, 2024. The loan to deposit ratio was 85.2% as of March 31, 2025 and 86.3% as of December 31, 2024.

(1) Non-GAAP measure - Refer to non-GAAP reconciliation below.

### Results of Operations

The following table sets forth certain financial highlights:

| Performance: | Three Months Ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Diluted earnings per share | **$0.77** | $0.76 | $0.71 |
| Return on average assets(2) | **1.08%** | 1.04% | 1.02% |
| Return on average equity(2) | **9.68%** | 9.44% | 9.52% |
| Return on average tangible common equity(1)(2) | **13.63%** | 13.36% | 13.87% |
| Net interest margin, (FTE)(1)(2) | **3.44%** | 3.34% | 3.14% |
| **Capital:** |  |  |  |
| Equity to assets | **11.29%** | 11.07% | 10.73% |
| Tangible equity ratio(1) | **8.68%** | 8.42% | 7.98% |
| Book value per share | **$33.13** | $32.34 | $30.57 |
| Tangible book value per share(1) | **$24.74** | $23.88 | $22.07 |
| Leverage ratio | **10.39%** | 10.24% | 10.09% |
| Common equity tier 1 capital ratio | **12.12%** | 11.93% | 11.68% |
| Tier 1 capital ratio | **13.02%** | 12.83% | 12.61% |
| Total risk-based capital ratio | **15.24%** | 15.03% | 14.87% |

(1) Non-GAAP measure - Refer to non-GAAP reconciliation below.

(2) Annualized.

The following tables provide non-GAAP reconciliations:

*(In thousands, except per share data)*

| Return on average tangible common equity: | Three Months Ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Net income | **$36,745** | $36,005 | $33,823 |
| Amortization of intangible assets (net of tax) | **1,583** | 1,560 | 1,626 |
| Net income, excluding intangible amortization | **$38,328** | $37,565 | $35,449 |
| Average stockholders’ equity | **$1,538,798** | $1,517,788 | $1,429,602 |
| Less: average goodwill and other intangibles | **398,233** | 399,139 | 401,756 |
| Average tangible common equity | **$1,140,565** | $1,118,649 | $1,027,846 |
| Return on average tangible common equity(2) | **13.63%** | 13.36% | 13.87% |
| **Tangible equity ratio:** |  |  |  |
| Stockholders’ equity | **$1,565,775** | $1,526,141 | $1,441,415 |
| Intangibles | **396,912** | 399,023 | 400,819 |
| Assets | **$13,864,251** | $13,786,666 | $13,439,199 |
| Tangible equity ratio | **8.68%** | 8.42% | 7.98% |
| **Tangible book value per share:** |  |  |  |
| Stockholders’ equity | **$1,565,775** | $1,526,141 | $1,441,415 |
| Intangibles | **396,912** | 399,023 | 400,819 |
| Tangible equity | **$1,168,863** | $1,127,118 | $1,040,596 |
| Diluted common shares outstanding | **47,255** | 47,195 | 47,155 |
| Tangible book value per share | **$24.74** | $23.88 | $22.07 |
| **Operating net income:** |  |  |  |
| Net income | **$36,745** | $36,005 | $33,823 |
| Acquisition expenses | **1,221** | 988 | - |
| Securities losses (gains) | **104** | (222) | (2,183) |
| Adjustments to net income | **$1,325** | $766 | $(2,183) |
| Adjustments to net income (net of tax) | **$1,020** | $604 | $(1,703) |
| Operating net income | **$37,765** | $36,609 | $32,120 |
| Operating diluted earnings per share | **$0.80** | $0.77 | $0.68 |
| **FTE adjustment** |  |  |  |
| Net interest income | **$107,223** | $106,105 | $95,174 |
| FTE adjustment | **636** | 619 | 658 |
| Net interest income (FTE) | **$107,859** | $106,724 | $95,832 |
| Average earnings assets | **$12,701,136** | $12,704,655 | $12,273,657 |
| Net interest margin (FTE)(2) | **3.44%** | 3.34% | 3.14% |

(2) Annualized.

### Net Interest Income

Net interest income is the difference between the interest and dividend income earned on interest-earning assets, primarily loans and securities and the interest expense paid on interest-bearing liabilities, primarily deposits and borrowings. Net interest income is affected by the interest rate spread, the difference between the yield on interest-earning assets and cost of interest-bearing liabilities, as well as the volumes of such assets and liabilities. Net interest income is one of the key determining factors in a financial institution’s performance as it is the principal source of earnings.

Net interest income was $107.2 million for the first quarter of 2025, up $1.1 million, or 1.1%, from the previous quarter. FTE NIM was 3.44% for the three months ended March 31, 2025, an increase of 10 bps from the previous quarter. Interest income decreased $3.3 million, or 2.1%, as the yield on average interest-earning assets decreased 1 bp from the prior quarter to 4.95%, while average interest-earning assets of $12.70 billion decreased $3.5 million from the prior quarter. The decrease in interest income was primarily due to lower yields on loans and short-term interest-bearing accounts from the two 25 bps federal funds rate decreases in the fourth quarter of 2024, as well as two fewer days in the first quarter of 2025 compared to the fourth quarter of 2024. The decrease was partially offset by an increase in interest income on securities due to higher average balances and yields. Interest expense decreased $4.5 million, or 8.6%, as the cost of interest-bearing liabilities decreased 17 bps to 2.23% for the three months ended March 31, 2025 as compared to the prior quarter, primarily due to a 17 bps decrease in interest-bearing deposit costs. Included in net interest income was $2.2 million of acquisition-related net accretion for the three months ended March 31, 2025 and $2.6 million of acquisition-related net accretion for the three months ended December 31, 2024.

Net interest income was $107.2 million for the first quarter of 2025, up $12.0 million, or 12.7%, from the first quarter of 2024. FTE NIM was 3.44% for the three months ended March 31, 2025, an increase of 30 bps from the first quarter of 2024. Interest income increased $7.4 million, or 5.0%, as the yield on average interest-earning assets increased 11 bps from the same period in 2024 to 4.95%, while average interest-earning assets increased $427.5 million, or 3.5%, from the first quarter of 2024, primarily due to organic loan growth and an increase in securities. Interest expense decreased $4.6 million, or 8.9%, as the cost of interest-bearing liabilities decreased 29 bps to 2.23% for the three months ended March 31, 2025, primarily due to a 21 bps decrease in interest-bearing deposit costs, a $511.7 million increase in interest-bearing deposits and lower average balances of short-term borrowings. Included in net interest income was $2.2 million of acquisition-related net accretion for the three months ended March 31, 2025 and $2.5 million of acquisition-related net accretion for the three months ended March 31, 2024.

### Average Balances and Net Interest Income

The following table includes the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest-bearing liabilities on a taxable equivalent basis.

*(Dollars in thousands)*

| Three Months Ended Assets: | March 31, 2025 Average Balance | Interest | Yield/ Rates | December 31, 2024 Average Balance | Interest | Yield/ Rates | March 31, 2024 Average Balance | Interest | Yield/ Rates |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Short-term interest-bearing accounts | **$63,198** | **$703** | **4.51%** | $184,988 | $2,449 | 5.27% | $47,972 | $534 | 4.48% |
| Securities taxable(1) | **2,402,772** | **13,631** | **2.30%** | 2,317,034 | 12,252 | 2.10% | 2,278,029 | 10,806 | 1.91% |
| Securities tax-exempt(1) (3) | **220,210** | **1,956** | **3.60%** | 211,493 | 1,838 | 3.46% | 230,468 | 2,052 | 3.58% |
| FRB and FHLB stock | **33,469** | **473** | **5.73%** | 33,261 | 481 | 5.75% | 42,296 | 830 | 7.89% |
| Loans(2) (3) | **9,981,487** | **138,277** | **5.62%** | 9,957,879 | 141,336 | 5.65% | 9,674,892 | 133,373 | 5.54% |
| Total interest-earning assets | **$12,701,136** | **$155,040** | **4.95%** | $12,704,655 | $158,356 | 4.96% | $12,273,657 | $147,595 | 4.84% |
| Other assets | **1,088,069** |  |  | 1,093,419 |  |  | 1,055,386 |  |  |
| Total assets | **$13,789,205** |  |  | $13,798,074 |  |  | $13,329,043 |  |  |
| Liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |
| Money market deposit accounts | **$3,496,552** | **$26,198** | **3.04%** | $3,504,937 | $28,797 | 3.27% | $3,129,160 | $27,734 | 3.56% |
| NOW deposit accounts | **1,682,265** | **3,494** | **0.84%** | 1,664,960 | 3,812 | 0.91% | 1,600,288 | 2,994 | 0.75% |
| Savings deposits | **1,571,673** | **187** | **0.05%** | 1,561,703 | 193 | 0.05% | 1,607,659 | 171 | 0.04% |
| Time deposits | **1,450,846** | **12,709** | **3.55%** | 1,446,798 | 14,013 | 3.85% | 1,352,559 | 13,440 | 4.00% |
| Total interest-bearing deposits | **$8,201,336** | **$42,588** | **2.11%** | $8,178,398 | $46,815 | 2.28% | $7,689,666 | $44,339 | 2.32% |
| Federal funds purchased | **2,278** | **25** | **4.45%** | - | - | - | 19,769 | 272 | 5.53% |
| Repurchase agreements | **107,496** | **761** | **2.87%** | 116,408 | 916 | 3.13% | 82,419 | 317 | 1.55% |
| Short-term borrowings | **7,033** | **80** | **4.61%** | 174 | 2 | 4.57% | 213,390 | 2,832 | 5.34% |
| Long-term debt | **27,674** | **266** | **3.90%** | 29,657 | 293 | 3.93% | 29,772 | 290 | 3.92% |
| Subordinated debt, net | **121,331** | **1,822** | **6.09%** | 120,967 | 1,816 | 5.97% | 119,873 | 1,800 | 6.04% |
| Junior subordinated debt | **101,196** | **1,639** | **6.57%** | 101,196 | 1,790 | 7.04% | 101,196 | 1,913 | 7.60% |
| Total interest-bearing liabilities | **$8,568,344** | **$47,181** | **2.23%** | $8,546,800 | $51,632 | 2.40% | $8,256,085 | $51,763 | 2.52% |
| Demand deposits | **3,385,080** |  |  | 3,438,194 |  |  | 3,356,607 |  |  |
| Other liabilities | **296,983** |  |  | 295,292 |  |  | 286,749 |  |  |
| Stockholders’ equity | **1,538,798** |  |  | 1,517,788 |  |  | 1,429,602 |  |  |
| Total liabilities and stockholders’ equity | **$13,789,205** |  |  | $13,798,074 |  |  | $13,329,043 |  |  |
| Net interest income (FTE) |  | **$107,859** |  |  | $106,724 |  |  | $95,832 |  |
| Interest rate spread |  |  | **2.72%** |  |  | 2.56% |  |  | 2.32% |
| Net interest margin (FTE) |  |  | **3.44%** |  |  | 3.34% |  |  | 3.14% |
| Taxable equivalent adjustment |  | **$636** |  |  | $619 |  |  | $658 |  |
| Net interest income |  | **$107,223** |  |  | $106,105 |  |  | $95,174 |  |

(1) Securities are shown at average amortized cost.

(2) For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding.

(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%.

The following table presents changes in interest income and interest expense attributable to changes in volume (change in average balance multiplied by prior year rate), changes in rate (change in rate multiplied by prior year volume) and the net change in net interest income. The net change attributable to the combined impact of volume and rate has been allocated to each in proportion to the absolute dollar amounts of change.

*(In thousands)*

| Three Months Ended March 31, | Increase (Decrease) 2025 over 2024 Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Short-term interest-bearing accounts | **$165** | **$4** | **$169** |
| Securities taxable | **593** | **2,232** | **2,825** |
| Securities tax-exempt | **(106)** | **10** | **(96)** |
| FRB and FHLB stock | **(154)** | **(203)** | **(357)** |
| Loans | **3,453** | **1,451** | **4,904** |
| Total FTE interest income | **$3,951** | **$3,494** | **$7,445** |
| Money market deposit accounts | **$2,916** | **$(4,452)** | **$(1,536)** |
| NOW deposit accounts | **150** | **350** | **500** |
| Savings deposits | **(4)** | **20** | **16** |
| Time deposits | **882** | **(1,613)** | **(731)** |
| Federal funds purchased | **(202)** | **(45)** | **(247)** |
| Repurchase agreements | **116** | **328** | **444** |
| Short-term borrowings | **(2,413)** | **(339)** | **(2,752)** |
| Long-term debt | **(22)** | **(2)** | **(24)** |
| Subordinated debt, net | **13** | **9** | **22** |
| Junior subordinated debt | **-** | **(274)** | **(274)** |
| Total FTE interest expense | **$1,436** | **$(6,018)** | **$(4,582)** |
| Change in FTE net interest income | **$2,515** | **$9,512** | **$12,027** |

35

### Noninterest Income

Noninterest income is a significant source of revenue for the Company and an important factor in the Company’s results of operations. The following table sets forth information by category of noninterest income for the periods indicated:

*(In thousands)*

|  | Three Months Ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Service charges on deposit accounts | **$4,243** | $4,411 | $4,117 |
| Card services income | **5,317** | 5,652 | 5,195 |
| Retirement plan administration fees | **15,858** | 12,924 | 14,287 |
| Wealth management | **10,946** | 10,842 | 9,697 |
| Insurance services | **4,761** | 3,883 | 4,388 |
| Bank owned life insurance income | **3,397** | 2,271 | 2,352 |
| Net securities (losses) gains | **(104)** | 222 | 2,183 |
| Other | **3,034** | 2,221 | 3,173 |
| Total noninterest income | **$47,452** | $42,426 | $45,392 |

Noninterest income for the three months ended March 31, 2025 was $47.5 million, up $5.0 million, or 11.8%, from the prior quarter and up $2.1 million, or 4.5%, from the first quarter of 2024. Excluding net securities gains (losses), noninterest income for the three months ended March 31, 2025 was $47.6 million, up $5.4 million, or 12.7%, from the prior quarter and up $4.3 million, or 10.1%, from the first quarter of 2024. The increase from the prior quarter was primarily driven by an increase in retirement plan administration fees, insurance services and bank owned life insurance income. The increase in retirement plan administration fees from the prior quarter was primarily due to higher seasonal activity-based fees in the first quarter, organic growth and the additional revenue from the acquisition of a small third party administrator (“TPA”) in the fourth quarter of 2024. Insurance services increased from the prior quarter due to organic growth, higher levels of policy renewals and first quarter seasonality. Bank owned life insurance income increased from the prior quarter due to a $1.3 million gain recognized from a claim. The increase from the first quarter of 2024 was driven by an increase in retirement plan administration fees, wealth management fees and bank owned life insurance income. The increase in retirement plan administration fees from the first quarter of 2024 was driven by the additional revenues from new customer plans, the TPA acquisition and higher market values of assets under administration. Wealth management fees increased from the first quarter of 2024 driven by performance and growth in new customer accounts. Bank owned life insurance income increased from the first quarter of 2024 due to a $1.3 million gain recognized from a claim.

### Noninterest Expense

Noninterest expenses are also an important factor in the Company’s results of operations. The following table sets forth the major components of noninterest expense for the periods indicated:

*(In thousands)*

|  | Three Months Ended March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Salaries and employee benefits | **$60,694** | $61,749 | $55,704 |
| Technology and data services | **10,238** | 10,220 | 9,750 |
| Occupancy | **9,027** | 7,786 | 8,098 |
| Professional fees and outside services | **4,952** | 4,843 | 4,853 |
| Office supplies and postage | **1,942** | 2,100 | 1,865 |
| FDIC assessment | **1,694** | 1,548 | 1,735 |
| Advertising | **1,138** | 990 | 812 |
| Amortization of intangible assets | **2,111** | 2,080 | 2,168 |
| Loan collection and other real estate owned, net | **659** | 677 | 553 |
| Acquisition expenses | **1,221** | 988 | - |
| Other | **6,224** | 7,794 | 6,235 |
| Total noninterest expense | **$99,900** | $100,775 | $91,773 |

Noninterest expense for the three months ended March 31, 2025 was $99.9 million, down $0.9 million, or 0.9%, from the prior quarter and up $8.1 million, or 8.9%, from the first quarter of 2024. Excluding acquisition expenses, noninterest expense for the three months ended March 31, 2025 was $98.7 million, down $1.1 million, or 1.1%, from the prior quarter and up $6.9 million, or 7.5%, from the first quarter of 2024. The decrease from the prior quarter was driven by lower salaries and employee benefits due to lower medical and other benefit costs, lower levels of incentive compensation and lower salaries due to two fewer payroll days in the quarter, partially offset by seasonally higher payroll taxes and stock-based compensation expenses. In addition, other expenses decreased $1.6 million due primarily to timing of expenses and Company initiatives in the fourth quarter of 2024. These costs were partially offset by the increase in occupancy costs which was driven by seasonal maintenance and utilities costs. The increase from the first quarter of 2024 was driven by higher salaries and employee benefits driven by merit pay increases which were effective annually in March, an increase in employees supporting growth in our markets and higher medical and other benefit costs. In addition, occupancy costs increased $0.9 million primarily due to higher seasonal maintenance and utilities given the harsher winter and higher facilities costs related to new banking locations.

### Income Taxes

Income tax expense for the three months ended March 31, 2025 was $10.5 million, up $0.9 million from the prior quarter and up $1.1 million from the first quarter of 2024. The effective tax rate was 22.2% for the first quarter of 2025 compared to 20.9% for the prior quarter and 21.7% for the first quarter of 2024. The increase in the effective tax rate from the prior quarter and the first quarter of 2024 was due to a lower level of tax-exempt income as a percentage of total taxable income.

### ANALYSIS OF FINANCIAL CONDITION

### Securities

Total securities increased $123.1 million, or 5.0%, from December 31, 2024 to March 31, 2025. The securities portfolio represented 18.6% of total assets as of March 31, 2025 as compared to 17.8% of total assets as of December 31, 2024.

The following table details the composition of securities AFS, securities HTM and equity securities for the periods indicated:

| Mortgage-backed securities: | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| With maturities 15 years or less | **13%** | 14% |
| With maturities greater than 15 years | **8%** | 8% |
| Collateral mortgage obligations | **40%** | 39% |
| Municipal securities | **15%** | 15% |
| U.S. agency notes | **20%** | 20% |
| Corporate | **2%** | 2% |
| Equity securities | **2%** | 2% |
| Total | **100%** | 100% |

The Company’s mortgage-backed securities, U.S. agency notes and collateralized mortgage obligations are all guaranteed by Fannie Mae, Freddie Mac, FHLB, Federal Farm Credit Banks or Ginnie Mae (“GNMA”). 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 our investment portfolio.

### Loans

A summary of the loan portfolio by major categories(1), net of deferred fees and origination costs, for the periods indicated is as follows:

*(In thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commercial & industrial | **$1,436,990** | $1,426,482 |
| Commercial real estate | **3,890,115** | 3,876,698 |
| Residential real estate | **2,127,588** | 2,142,249 |
| Home equity | **331,400** | 334,268 |
| Indirect auto | **1,309,084** | 1,273,253 |
| Residential solar | **800,090** | 820,079 |
| Other consumer | **85,000** | 96,881 |
| Total loans | **$9,980,267** | $9,969,910 |

(1) Loans are summarized by business line which do not align to how the Company assesses credit risk in the allowance for credit losses under CECL.

Total loans were $9.98 billion and $9.97 billion at March 31, 2025 and December 31, 2024, respectively. Excluding the other consumer and residential solar portfolios that are in a planned run-off status, period end loans increased $40.5 million, or 1.8% annualized. C&I loans increased $10.5 million to $1.44 billion; CRE loans increased $13.4 million to $3.89 billion; and total consumer loans decreased $13.6 million to $4.65 billion. Total loans represent approximately 72.0% of assets as of March 31, 2025, as compared to 72.3% as of December 31, 2024.

Loans in the C&I and CRE portfolios consist primarily of loans extended to small and medium-sized entities. The Company offers a variety of loan products tailored to meet the needs of commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion, equipment purchases, livestock purchases and seasonal crop expenses. These loans are typically collateralized by business assets such as equipment, accounts receivable and perishable agricultural products, which are inherently subject to industry price volatility. The Company extends CRE loans to support real estate transactions, including acquisitions, refinancings, expansions and property improvements to both commercial and agricultural properties. These loans are secured by liens on real estate assets, covering a spectrum of properties including apartments, commercial structures, healthcare facilities and others, whether occupied by owners or non-owners. 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. The Company has a risk management framework that includes rigorous underwriting standards, targeted portfolio stress testing, interest rate sensitivities on commercial borrowers and comprehensive credit risk monitoring mechanisms. The Company remains vigilant in monitoring market trends, economic indicators and regulatory developments to promptly adapt our risk management strategies as needed.

Within the CRE portfolio, approximately 81% comprises Non-Owner Occupied CRE, with the remaining 19% being Owner-Occupied CRE. Non-Owner Occupied CRE includes diverse sectors across the Company’s markets such as residential rental properties (43%) and office spaces (17%), along with retail, manufacturing, mixed use, hotels and others. Notably, office CRE loans account for 5% of the total outstanding loans, predominantly serving suburban medical and professional tenants across suburban and small urban markets. These loans carry an average size of $1.9 million, with 9% maturing over the next two years. As of March 31, 2025 and December 31, 2024, the total CRE construction and development loans amounted to $316.4 million and $314.8 million, respectively.

### Allowance for Credit Losses, Provision for Loan Losses and Nonperforming Assets

Management considers the accounting policy relating to the allowance for credit losses to be a critical estimate given the degree of judgment exercised in evaluating the level of the allowance required to estimate expected credit losses over the expected contractual life of our loan portfolio and the material effect that such judgments can have on the consolidated results of operations.

The CECL methodology requires an estimate of the credit losses expected over the life of a loan (or pool of loans). The allowance for credit losses is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. 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. 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. These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of any or all of the determining factors discussed above. Management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.

Management estimates the allowance for credit losses using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Company historical loss experience was supplemented with peer information when there was insufficient loss data for the Company. 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. 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. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. After quantitative considerations, management applies additional qualitative adjustments so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio as of the balance sheet date.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation and have been combined or subsegmented as needed to ensure loans of similar risk profiles are appropriately pooled.

During the quarter, the Company performed an annual update to its econometric, PD/LGD models. Segment specific, multi-variate regression model inputs and assumptions were updated and recent period observed losses and behavior were incorporated into the models (“model refreshment”). The incorporation of recent observations did not have a material impact on most loan class segments except for the Auto class segment which resulted in an improvement in PD/LGD outcomes. The total allowance decreased by approximately 3% as of March 31, 2025 due to the model refreshment.

Additional information about our Allowance for Credit Losses is included in Note 7 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q as well as in the “Critical Accounting Estimates” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company’s management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.

The allowance for credit losses totaled $117.0 million at March 31, 2025, compared to $116.0 million at December 31, 2024. The allowance for credit losses as a percentage of loans was 1.17% at March 31, 2025, compared to 1.16% at December 31, 2024. The allowance for credit losses as of March 31, 2025 increased compared to the allowance estimates as of December 31, 2024 primarily due to deterioration in the economic forecast including the change in the forecast scenario and the change in forecast scenario weightings from 80% baseline and 20% downside to 75% baseline and 25% downside. The increase to the allowance for credit losses were partially offset by model refreshment and the shift in loan composition driven by other consumer and residential solar portfolios that are in a planned run-off status.

The allowance for credit losses was 245.33% of nonperforming loans at March 31, 2025, compared to 224.73% at December 31, 2024. The allowance for credit losses was 260.99% of nonaccrual loans at March 31, 2025, compared to 253.17% of nonaccrual loans at December 31, 2024. The increase in the coverage of the allowance to nonperforming and nonaccrual loans from December 31, 2024 to March 31, 2025 largely relates to the increase in allowance primarily due to deterioration in economic conditions during the quarter and the $2.1 million charge-off on a nonperforming relationship that is individually evaluated for purposes of the allowance for credit losses.

The provision for loan losses was $7.6 million for the three months ended March 31, 2025, compared to $2.2 million in the prior quarter and $5.6 million for the same period in the prior year. Provision expense increased from the prior quarter due to an increase in net charge-offs and an increase in the March 31, 2025 allowance due primarily to a deterioration in economic forecasts. The increase in provision expense from March 31, 2024, was driven largely due to higher net charge-offs and a deterioration in economic forecasts. Net charge-offs totaled $6.6 million during the three months ended March 31, 2025, compared to net charge-offs of $5.7 million during the fourth quarter of 2024 and $4.7 in the first quarter of 2024. Net charge-offs to average loans were 27 bps for the three months ended March 31, 2025, compared to 23 bps for the fourth quarter of 2024 and 19 bps for the three months ended March 31, 2024.

As of March 31, 2025, the unfunded commitment reserve totaled $4.5 million, compared to $4.4 million as of December 31, 2024.

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans modifications, OREO and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified, commercial and CRE loans risk graded substandard or doubtful, and nonperforming loans individually evaluated for credit loss is $1.0 million. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs.

*(Dollars in thousands)*

| Nonaccrual loans: | March 31, 2025 Amount% |  | December 31, 2024 Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Commercial | **$30,586** | **68%** | $32,144 | 70% |
| Residential | **10,919** | **24%** | 10,464 | 23% |
| Consumer | **2,270** | **5%** | 2,529 | 6% |
| Troubled loan modifications | **1,054** | **2%** | 682 | 1% |
| Total nonaccrual loans | **$44,829** | **99%** | $45,819 | 100% |
| **Loans over 90 days past due and still accruing:** |  |  |  |  |
| Commercial | **$690** | **24%** | $- | - |
| Residential | **266** | **9%** | 2,411 | 42% |
| Consumer | **1,906** | **67%** | 3,387 | 58% |
| Total loans over 90 days past due and still accruing | **$2,862** | **100%** | $5,798 | 100% |
| Total nonperforming loans | **$47,691** |  | $51,617 |  |
| OREO | **308** |  | 182 |  |
| Total nonperforming assets | **$47,999** |  | $51,799 |  |
| Total nonaccrual loans to total loans | **0.45%** |  | 0.46% |  |
| Total nonperforming loans to total loans | **0.48%** |  | 0.52% |  |
| Total nonperforming assets to total assets | **0.35%** |  | 0.38% |  |
| Total allowance for loan losses to total nonperforming loans | **245.33%** |  | 224.73% |  |
| Total allowance for loan losses to nonaccrual loans | **260.99%** |  | 253.17% |  |

Total nonperforming assets were $48.0 million at March 31, 2025, compared to $51.8 million at December 31, 2024. Nonperforming loans at March 31, 2025 were $47.7 million or 0.48% of total loans, compared with $51.6 million or 0.52% of total loans at December 31, 2024. The decrease in nonperforming assets from December 31, 2024 to March 31, 2025 was attributable to the previously mentioned $2.1 million charge-off in the first quarter of 2025 on an individually evaluated CRE relationship in which NBT is a participant. This relationship is being actively managed and its current carrying value is supported by recent appraised values. Total nonaccrual loans were $44.8 million or 0.45% of total loans at March 31, 2025, compared to $45.8 million or 0.46% of total loans at December 31, 2024. Past due loans as a percentage of total loans was 0.32% at March 31, 2025, down from 0.34% at December 31, 2024.

In addition to nonperforming loans discussed above, the Company has also identified approximately $125.2 million in potential problem loans at March 31, 2025 as compared to $116.1 million at December 31, 2024. Potential problem loans are loans that are currently performing, with a possibility of loss if weaknesses are not corrected. Such loans may need to be disclosed as nonperforming at some time in the future. Potential problem loans are classified by the Company’s loan rating system as “substandard.” Potential problem loans have increased to more normalized levels and the increase primarily relates to a few CRE relationships reflecting changing conditions in certain CRE markets including construction delays, rising costs and delays in leasing up spaces. The increase in potential problem loans from December 31, 2024, is primarily due to the net migration of $8.8 million in commercial loan balances to substandard. Management cannot predict the extent to which economic conditions may worsen or other factors, which may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become over 90 days past due, be placed on nonaccrual, become troubled loans modifications or require increased allowance coverage and provision for loan losses. To mitigate this risk the Company maintains a diversified loan portfolio, has no significant concentration in any particular industry and originates loans primarily within its footprint.

### Deposits

Total deposits were $11.71 billion at March 31, 2025, up $161.8 million, or 1.4%, from December 31, 2024. As of March 31, 2025 there were $294.7 million of brokered time deposits, down from $295.8 million as of December 31, 2024. The Company continues to experience some incremental migration from noninterest bearing and low interest checking and savings accounts into higher cost money market and time deposit instruments. The increase in deposits was primarily due to the inflow of seasonal municipal deposits during the first quarter of 2025. The Company’s composition of total deposits is diverse and granular with over 561,000 accounts with an average per account balance of $20,834 as of March 31, 2025. As of March 31, 2025 and December 31, 2024 the estimated amounts of uninsured deposits based on the same methodologies and assumptions used for the bank regulatory reporting were $4.85 billion and $4.73 billion, respectively. Total average deposits increased $540.1 million, or 4.9%, from the same period last year.

### Borrowed Funds

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $85.6 million at March 31, 2025 compared to $162.9 million at December 31, 2024. Long-term debt was $4.6 million at March 31, 2025, compared to $29.6 million at December 31, 2024. The decrease in long-term debt was due to a maturity of a $25.0 million borrowing that matured in the first quarter of 2025.

For more information about the Company’s borrowing capacity and liquidity position, see “Liquidity Risk” below.

### Subordinated Debt

On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due 2030. 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. The subordinated debt issuance cost of $2.2 million is being amortized on a straight-line basis into interest expense over five years. The Company repurchased $2.0 million of the subordinated notes in 2022 at a discount of $0.1 million.

Subordinated notes assumed in connection with the Salisbury acquisition included $25.0 million of 3.50% fixed-to-floating rate subordinated notes due 2031. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 3.50%, payable quarterly in arrears commencing on June 30, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 2.80%, payable quarterly in arrears commencing on June 30, 2026. As of the acquisition date, the fair value discount was $3.0 million, which is being amortized into interest expense over the expected call or maturity date.

As of March 31, 2025 and December 31, 2024 the subordinated debt net of unamortized issuance costs and fair value discount was $121.6 million and $121.2 million, respectively.

### Capital Resources

Stockholders’ equity of $1.57 billion represented 11.29% of total assets at March 31, 2025 compared with $1.53 billion, or 11.07% of total assets, as of December 31, 2024. Stockholders’ equity increased $39.6 million from December 31, 2024 driven by net income of $36.7 million for the three months ended March 31, 2025 and a $20.3 million decrease in accumulated other comprehensive loss, partially offset by dividends declared of $16.1 million.

The Company did not purchase shares of its common stock during the three months ended March 31, 2025. Under its share repurchase program, 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. As of March 31, 2025, there were 1,992,400 shares available for repurchase under this program authorized on December 18, 2023, which is set to expire on December 31, 2025.

As the capital ratios in the following table indicate, the Company remained “well capitalized” at March 31, 2025 under applicable bank regulatory requirements. Capital measurements are well in excess of regulatory minimum guidelines and meet the requirements to be considered well capitalized for all periods presented. To be considered well capitalized, tier 1 leverage, common equity tier 1 capital, tier 1 capital and total risk-based capital ratios must be 5%, 6.5%, 8% and 10%, respectively.

| Capital Measurements | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Tier 1 leverage ratio | **10.39%** | 10.24% |
| Common equity tier 1 capital ratio | **12.12%** | 11.93% |
| Tier 1 capital ratio | **13.02%** | 12.83% |
| Total risk-based capital ratio | **15.24%** | 15.03% |
| Cash dividends as a percentage of net income | **43.73%** | 44.27% |
| Per common share: |  |  |
| Book value | **$33.13** | $32.34 |
| Tangible book value(1) | **$24.74** | $23.88 |
| Tangible equity ratio(2) | **8.68%** | 8.42% |

(1) Stockholders’ equity less goodwill and intangible assets divided by common shares outstanding.

(2) Non-GAAP measure - Stockholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets.

In March 2020, the OCC, the Board of Governors of the Federal Reserve System and the FDIC announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. Under the modified CECL transition provision, the regulatory capital impact of the January 1, 2020 CECL adoption date adjustment to the allowance for credit losses (after-tax) has been deferred and will phase into regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, the Company was allowed to defer the regulatory capital impact of the allowance for credit losses in an amount equal to 25% of the change in the allowance for credit losses (pre-tax) recognized through earnings for each period between January 1, 2020 and December 31, 2021. The cumulative adjustment to the allowance for credit losses between January 1, 2020 and December 31, 2021, will also phase into regulatory capital at 25% per year commencing January 1, 2022. The Company adopted the capital transition relief over the permissible five-year period.

### Liquidity and Interest Rate Sensitivity Management

### Market Risk

Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company’s business activities or are immaterial to the results of operations.

Interest rate risk is defined as an exposure to a movement in interest rates that could have an adverse effect on the Company’s net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than earning assets. When interest-bearing liabilities mature or reprice more quickly than earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income.

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 (the “Board”). Management also reviews loan and deposit pricing and the Company’s securities portfolio, formulates investment and funding strategies and oversees the timing and implementation of transactions to assure attainment of the Board’s objectives in the most effective manner. 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. 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. The Company’s results of operations and net portfolio values remain vulnerable to changes in interest rates and fluctuations in the difference between long and short-term interest rates.

The primary tool utilized by the ALCO to manage interest rate risk is earnings at risk modeling (interest rate sensitivity analysis). Information, such as principal balance, interest rate, maturity date, cash flows, next repricing date (if needed) and current rates are uploaded into the model to create an ending balance sheet. In addition, the ALCO makes certain assumptions regarding prepayment speeds for loans and mortgage related investment securities along with any optionality within the deposits and borrowings. The model is first run under an assumption of a flat rate scenario (e.g., no change in current interest rates) with a static balance sheet. Six additional models are run in which gradual increases of 300 bps, 200 bps and 100 bps, and gradual decreases of 100 bps, 200 bps and 300 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. Any investment securities or borrowings that have callable options embedded in them are handled accordingly based on the interest rate scenario. The resulting changes in net interest income are then measured against the flat rate scenario. The Company also runs other interest rate scenarios to highlight potential interest rate risk.

The Company’s Interest Rate Sensitivity has remained in a near neutral position. In the declining rate scenarios, 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 decrease in net interest income is a result of earning assets repricing and rolling over at lower yields at a faster pace than interest-bearing liabilities decline and/or reach their floors. 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. Net interest income for the next twelve months in the +300/+200/+100/-100/-200/-300 bps 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, of not more than a 7.5% reduction in net interest income in the +200/-200 bps scenarios and of not more than a 12.0% reduction in net interest income in the +300/-300 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 March 31, 2025 balance sheet position:

| Interest Rate Sensitivity Analysis Change in interest rates (in bps) | Percent change in net interest income |
| ---: | ---: |
| +300 | (0.60)% |
| +200 | (0.02)% |
| +100 | 0.29% |
| -100 | (0.29)% |
| -200 | (0.10)% |
| -300 | 0.04% |

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 FOMC monetary policy. 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. However, the tightening cycle ended in September of 2024, when the FRB lowered the federal funds rate by 50 bps, followed by consecutive 25 bps reductions in November and December of 2024 for a total of 100 bps of federal funds rate reductions by the end of 2024. 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 reductions have provided the catalyst for the Company to begin reducing deposit rates. The 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.

### Liquidity Risk

Liquidity risk arises from the possibility that the Company may not be able to satisfy current or future financial commitments or may become unduly reliant on alternate funding sources. The objective of liquidity management is to ensure the Company can fund balance sheet growth, meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. 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. Requirements change as loans grow, deposits and securities mature and payments on borrowings are made. Liquidity management includes a focus on interest rate sensitivity management with a goal of avoiding widely fluctuating net interest margins through periods of changing economic conditions. Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities and prepayments of loans and mortgage-related securities are strongly influenced by interest rates, the housing market, general and local economic conditions, and competition in the marketplace. Management continually monitors marketplace trends to identify patterns that might improve the predictability of the timing of deposit flows or asset prepayments.

The primary liquidity measurement the Company utilizes is called “Basic Surplus,” which captures the adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing levels of cash flow liquidity from short and long-term securities with the availability of dependable borrowing sources, which can be accessed when necessary. At March 31, 2025, the Company’s Basic Surplus measurement was 16.9% of total assets, or $2.34 billion, as compared to the December 31, 2024 Basic Surplus of 17.0%, or $2.34 billion, and was above the Company’s minimum of 5% (calculated at $693.2 million and $689.3 million of period end total assets as of March 31, 2025 and December 31, 2024, respectively) set forth in its liquidity policies.

At March 31, 2025 and December 31, 2024, FHLB advances outstanding totaled $4.6 million and $45.6 million, respectively. At March 31, 2025 and December 31, 2024, the Bank had $204.0 million and $199.0 million, respectively, of collateral encumbered by municipal letters of credit. The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $1.70 billion at March 31, 2025 and $1.71 billion at December 31, 2024. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $1.01 billion and $957.3 million at March 31, 2025 and December 31, 2024, respectively, or used to collateralize other borrowings, such as repurchase agreements. 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 $2.02 billion at March 31, 2025 and $2.01 billion at December 31, 2024. 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 March 31, 2025 and December 31, 2024, the Bank had the capacity to borrow $1.16 billion and $1.13 billion, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets. Under this policy, remaining available borrowing capacity totaled $3.44 billion at March 31, 2025 and $3.38 billion at December 31, 2024.

This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position. The Company considers its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2025. While short-term interest rates have declined, they remain elevated relative to recent history, which could result in deposit declines as depositors have alternative opportunities for yield on their excess funds. In the current economic environment, draws against lines of credit could drive asset growth higher. Disruptions in wholesale funding markets could spark increased competition for deposits. These scenarios could lead to a decrease in the Company’s Basic Surplus measure below the minimum policy level of 5%. Note, enhanced liquidity monitoring was put in place to quickly respond to the changing environment during the pandemic including increasing the frequency of monitoring and adding additional sources of liquidity. While the pandemic has come to an end, this enhanced monitoring continues as elevated interest rates and the bank failures of 2023 have led to a deposit decline in the banking system and increased volatility to liquidity risk.

At March 31, 2025, a portion of the Company’s loans and securities were pledged as collateral on borrowings. Therefore, once on-balance sheet liquidity is reduced, future growth of earning assets will depend upon the Company’s ability to obtain additional funding, through growth of core deposits and collateral management and may require further use of brokered time deposits or other higher cost borrowing arrangements.

The Company’s primary source of funds is dividends from its subsidiaries. Various laws and regulations restrict the ability of banks to pay dividends to their stockholders. Generally, the payment of dividends by the Company in the future as well as the payment of interest on the capital securities will require the generation of sufficient future earnings by its subsidiaries.

Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. The approval of the OCC is required to pay dividends when a bank fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years as specified in applicable OCC regulations. At March 31, 2025, approximately $70.2 million 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. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

## Market risk

As filed, 205 characters.

Information called for by Item 3 is contained in the Liquidity and Interest Rate Sensitivity Management section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

## Controls and procedures

As filed, 513 characters.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were effective.

## Risk factors

As filed, 133 characters.

There are no material changes to the risk factors as previously discussed in Part I, Item 1A. of our 2024 Annual Report on Form 10-K.

Filed May 9, 2025.
Source: SEC EDGAR, the filing index for accession 0001140361-25-018153. Last ingested by Listed: Nov 6, 2026, 16:52 ET. No prices; not investment advice.