KBRA Affirms Ratings for NBT Bancorp Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Norwich, New York-based NBT Bancorp Inc. (NASDAQ: NBTB) (“NBT" or "the company”). KBRA also affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for the subsidiary, NBT Bank, National Association. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

NBT’s ratings and Outlook are supported by a historically durable, lower-cost funding profile that reflects highly granular deposit relationships and lower price sensitivity compared to most KBRA-rated banks. NIM has increased to above 3.50% in recent quarters and has proven relatively resilient in recent years despite a comparatively lower yielding loan book. Meaningful diversity and scale associated with core fee-generating businesses also represents a rating strength, with such revenue consistently generating 25%-30% of the company's total. Together with continued low credit costs, NBT’s NIM expansion and profitable fee businesses have resulted in core ROA improving to above 1.2%.

Solid through-the-cycle credit performance has benefited from a disciplined approach to underwriting and a diversified loan portfolio which reflects somewhat less Investor CRE than some peers. Problem assets remain low (0.52% NPAs to total loans plus OREO at 1Q26), as do recent and long-term net charge-offs (NCOs), the latter resulting in an average annual NCO ratio of ~17 bps since 2019. The residential solar portfolio continues to perform as expected as it is wound down and reserve coverage remains prudent. As of 1Q26, the loan portfolio contains residential mortgages (27%), indirect auto (11%), and other consumer (7%) comprised primarily of legacy residential solar finance. C&I and owner-occupied CRE exposure (23%) is diversified by industry and reflect NBT’s geographic footprint. Exposure to investor CRE remains manageable relative to bank-level total risk-based capital (228%) and includes multifamily (12% of loans), non-owner occupied CRE (15%), and construction (4%).

NBT has managed core capital reasonably conservatively over time. Capital ratios have recovered as expected following the acquisition of Evans Bancorp, Inc. ("Evans") in May 2025 and remain appropriate for the ratings, with a 9.0% TCE ratio and 12.3% CET1 ratio reported at 1Q26. Additionally, stable earnings and appropriate reserve coverage provide adequate first line loss absorption buffers. The Evans acquisition strengthens NBT’s deposit share and franchise presence along the Upstate NY “Chip Corridor”, an area which should benefit from meaningful public and private investment over the medium term. Management continues to pursue greater market density via hiring and de novo branch openings within Western New York and New England.

Rating Sensitivities

While not currently contemplated, positive rating momentum could develop over the longer term with further geographic diversification and market share gains in NBT’s core banking footprint, in tandem with sustained favorably profitability and conservative capital management. Downward rating pressure is similarly not expected, but less conservative financial management, unanticipated deterioration in asset quality leading to meaningful earnings pressure, or substantial degradation in the funding profile could pressure the ratings.

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