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) (“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

NBTB’s ratings 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. Meaningful diversity and scale associated with core fee-generating businesses also represents a rating strength, with such revenue consistently generating ~30% of the company's total.

The ratings also reflect NBTB's solid through-the-cycle credit performance, benefiting from disciplined underwriting and a diversified loan portfolio, which reflects somewhat less ICRE than some peers. Problem assets remain low (0.48% NPA ratio at 1Q25), as do recent and long-term net charge-offs (NCOs), the latter resulting in an average annual NCO ratio of ~17 bps since 2019. A recent modest increase in NCOs is largely idiosyncratic and lending verticals have historically generated solid risk-adjusted margins. Additionally, stable earnings and appropriate reserve coverage (1.17% of loans at 1Q25) provide adequate first line loss absorption buffers.

NBTB has traditionally managed core capital reasonably conservatively over time. On May 2, 2025, the company closed the strategically favorable acquisition of Evans Bancorp, Inc., extending its branch network into the Buffalo and Rochester markets and adding ~$1.9 billion in deposits and $1.8 billion in loans. Following the transaction’s moderate impact on capital ratios, core capital remains appropriate for the ratings and is expected to improve at a measured pace.

The company’s experienced and deep management team is a credit strength and has afforded the company seamless leadership transitions and steady execution on strategic initiatives.

Rating Sensitivities

While not currently contemplated, positive rating momentum could develop with further market share gains in NBTB’s core banking footprint, in tandem with sustained favorably profitability and conservative capital management. Downward rating pressure is 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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