NBT Bancorp - Earnings Call - Q4 2024
January 28, 2025
Executive Summary
- Q4 2024 delivered its third consecutive quarter of net interest margin expansion to 3.34% (+7 bps QoQ) and net interest income growth to $106.1M, while diluted EPS was $0.76 (down $0.04 QoQ; up $0.12 YoY) and operating diluted EPS was $0.77.
- Total net revenue was $148.5M, up modestly QoQ, as lower deposit costs (1.60%, -12 bps QoQ) and improved funding mix offset a 5 bps decline in earning asset yields to 4.96%.
- Asset quality mixed: nonperforming assets rose to 0.38% of assets on a CRE nonaccrual, and net charge-offs increased to 0.23% of average loans; allowance coverage eased to 1.16% reflecting mix shifts and prior specific reserve release.
- Evans Bancorp merger achieved regulatory and shareholder approvals; management continues to target a Q2 2025 close alongside core conversion, and raised the quarterly dividend to $0.34 (+6.3% YoY) for Q1 2025.
- S&P Global consensus estimates for Q4 were unavailable due to a data limit; estimate comparison is not shown. Wall Street estimates context will be updated when accessible (S&P Global data unavailable).
What Went Well and What Went Wrong
What Went Well
- Net interest margin expanded for the third straight quarter to 3.34% on lower deposit costs and improved funding mix; net interest income rose $4.4M QoQ to $106.1M.
- Fee businesses remained a strength: noninterest income excl. securities was $42.2M (+11.1% YoY), with retirement plan administration and wealth management fees up YoY on organic growth and market performance.
- CEO tone constructive: “Three consecutive quarters of growth in net interest income and margin along with continued strong results from our diverse mix of fee businesses drove NBT’s operating performance in the fourth quarter of 2024.”.
- Capital robust: CET1 11.93%, leverage 10.24%, tangible equity to assets 8.42%, tangible book value per share at $23.88 (record), and dividend increased to $0.34 for Q1 2025.
What Went Wrong
- Asset quality pressure: nonperforming assets rose to 0.38% of assets due to a CRE relationship placed on nonaccrual; net charge‑offs increased to 23 bps annualized (two CRE relationships and runoff portfolios).
- Loan yields declined 9 bps QoQ to 5.65% given repricing of $2.1B variable‑rate loans; earning asset yields fell 5 bps to 4.96%.
- Operating expenses increased 4.8% QoQ to $100.8M, driven by higher medical costs, incentive compensation, and other expenses (office supplies, postage, advertising).
- YoY, allowance for loan losses ratio moderated to 1.16% and the coverage of nonperforming loans declined versus prior periods, consistent with mix shifts and specific reserve release.
Transcript
Operator (participant)
Good day, everyone. Welcome to the conference call covering NBT Bancorp's Q4 and full year 2024 financial results. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. Corresponding presentation slides can be found on the company's website at nbtbancorp.com. Before the call begins, NBT's management would like to remind listeners that, as noted on slide two, today's presentation may contain forward-looking statements as defined by the Securities and Exchange Commission. Actual results may differ from those projected. In addition, certain non-GAAP measures will be discussed. Reconciliations for these numbers are contained within the appendix of today's presentation.
At this time, all participants are in listen-only mode. Later, we will conduct a Q&A session. Instructions will follow at that time. As a reminder, this call is being recorded. I will now turn the conference over to NBT Bancorp President and CEO Scott Kingsley for his opening remarks. Mr. Kingsley, please begin.
Scott Kingsley (President, and CEO)
Thank you, Daniel. Good morning, and thank you for joining us this morning. With me in snowy Norwich today are NBT's Chief Financial Officer, Annette Burns, and Joe Stagliano, President of NBT Bank, N.A. Our operating performance for the quarter and full year 2024 continued to reflect the strength of our balance sheet, our diversified business model, and the collaboration and diligence of our team. During the Q4, we productively grew loans, improved our funding profile, and boosted net interest margin for the third consecutive quarter. Incrementally lower funding costs more than offset a five basis points decline in earning asset yields. Non-interest income continued to be a highlight, making up 30% of total revenues for 2024, with each of our non-banking businesses achieving new record years for revenue and earnings generation.
We also declared a $0.34 quarterly cash dividend to shareholders, which was 6.3% above the $0.32 dividend we declared in last year's Q1. This represents our 12th consecutive year of annual dividend increases, and it demonstrates our commitment to provide consistent and favorable long-term returns to our shareholders. We added $100 million to shareholders' equity in 2024 from productive earnings generation, despite the higher level of dividends paid, adding to our already desirable level of capital flexibility. Activity continued to progress across upstate New York's semiconductor chip corridor in the Q4, including several announcements about new expansion and structural investments, as well as certain site-specific milestones being reached at Micron's planned complex outside of Syracuse.
NBT is uniquely positioned to play a significant role in providing financial services to all types of customers, and prospects living and working along the upstate New York semiconductor chip corridor. In September, we announced that NBT reached an agreement to merge with Evans Bancorp, a $2.3 billion Community Bank Headquartered in Williamsville, New York. Our partnership with Evans is a natural geographic expansion of NBT's footprint into the western region of New York. Expanding into Buffalo and Rochester, upstate New York's largest markets by population, complements our meaningful presence in Central New York, the Capital District, and the Hudson Valley, and it will position us as the community bank with the largest deposit market share in upstate New York.
In December, we received the required regulatory approvals to proceed with the merger, as well as approval from Evans shareholders, who demonstrated strong support for the partnership. We continue to work toward a Q2 2025 closing and a concurrent core systems conversion. Our transition and integration activities with the Evans team these past four months have reaffirmed our belief that they are a customer, employee, and community-focused organization with dedicated and talented professionals. At this time, I'll turn the meeting over to Annette to review our Q4 results with you in detail. Annette?
Annette Burns (CFO)
Thank you, Scott, and good morning. Turning to the results overview page of our earnings presentation, for the Q4, we reported net income of $36 million, or $0.76 per share. Excluding merger costs and securities gains, our operating earnings per share were $0.77, a decrease of $0.03 per share compared to the prior quarter. Tangible book value per share of $23.88 as of December 31st was up $0.05 per share from the end of the Q3, marking another all-time high for NBT. The next page shows trends in outstanding loans. Total loans were up $319 million for the year, or 3.3%. It included growth in our C&I, Commercial Real Estate, indirect auto, and residential lending portfolios.
Excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status, loans increased $479 million, or 6%. Our loan portfolio of $10 billion remains very well diversified, and is comprised of 53% commercial relationships, and 47% consumer loans. Q4 loan yields declined by nine basis points from the Q3 of 2024, as approximately $2.1 billion of loans repriced downward with a decrease in short-term rates, partially offset by the reinvestment of earning asset cash flows into instruments with rates higher than existing portfolio yields. On page six, total deposits of $11.6 billion were up $578 million, or 5.3%, from the December 2023 timeframe. 58% of our deposit portfolios consist of no and low-cost checking and savings accounts, and 42% in time and money market accounts.
The company's quarterly cost of total deposits decreased 12 basis points from the Q3 to 1.60%. The next slide highlights the detailed changes in our net interest income and margin. Our net interest income in the Q4 of 2024 was 3.34%, which was up seven basis points from the prior quarter, primarily due to a decrease in the cost of deposits, and a more favorable funding mix, including increases in demand deposits. The Q4's net interest income was $4.4 million above the linked Q3. The primary drivers to the increase in net interest income were the decrease in the cost of interest-bearing liabilities, and the $257.5 million growth in Average Earning Assets.
Our asset liability management positioning remains fairly neutral, with approximately $2.1 billion in variable-rate loans repricing almost immediately with changes in short-term rates, which requires us to actively manage our funding costs downward to more than offset that impact, as evidenced by the 12 basis point decline in our deposit costs for the quarter. As a reminder, approximately $5 billion of our deposits are price-sensitive. The amount of potential positive lift in yield from the reinvestment of loan portfolio cash flows will be dependent on the shape of the yield curve. The trends in non-interest income are outlined on page eight. Excluding securities gains and losses, our fee income was $42.2 million, and an increase of 11.1% compared to the Q4 of 2023, but consistent with prior years, was seasonally lower than the previous quarter.
The diversification of our revenue sources remains a core strength for the company. Our fee income business lines of retirement plan administration, wealth management, and the insurance agency have demonstrated a meaningful five-year compounded annual growth rate of 9%. Total operating expenses, excluding merger costs, were $99.8 million for the quarter, a 4.8% increase above the linked Q3. Salaries and employee benefit costs were $61.7 million, an increase of $2.1 million from the prior quarter.
This increase is primarily driven by higher health and welfare costs, and an increase in other employee benefits, including higher levels of performance-based incentive compensation. Slide 10 provides an overview of key asset quality metrics. We recorded a loan loss provision expense of $2.2 million in the Q4, which was $700,000 lower than the prior quarter. This decrease was primarily due to the runoff of the other consumer and residential solar portfolios, partially offset by a higher level of net charge-offs. Net charge-offs to total loans were 23 basis points in the Q4 of 2024, compared to 16 basis points in the prior quarter. The increase in net charge-offs during the quarter was driven by two commercial relationships totaling $2.4 million, of which $1.7 million was previously specifically reserved.
Non-performing assets to total assets increased $14.4 million from the prior quarter, attributable to a commercial real estate relationship that was placed into non-accrual status in the Q4 of 2024. This relationship is being actively managed, and its remaining carrying value is supported by the fair value of the underlying real estate. Reserve coverage was 1.16% of total loans and covered more than two times the level of non-performing loans. We believe that the expected balance sheet growth, and continued changes in loan mix will be the drivers of future provisioning needs. In closing, net interest margin and net interest income trends are positive, with growth for the three consecutive quarters. Our well-balanced loan growth, granular deposit base, stable asset quality trends, and strong fee income generation contributed to our solid operating performance in 2024.
The continued strength of our capital position has provided the flexibility to deliver 12 consecutive years of dividend increases to our shareholders, the ability to support organic growth, and to capitalize on opportunities, all while effectively managing risk. Thank you for your continued support, and at this time, we welcome any questions you may have.
Operator (participant)
Thank you. Anyone with a question at this time can press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our questions, and our first question comes from Steve Moss with Raymond James. Your line is open.
Steve Moss (Managing Director)
Hi, good morning.
Scott Kingsley (President, and CEO)
Hey, good morning, Steve.
Annette Burns (CFO)
Good morning, Steve.
Steve Moss (Managing Director)
Good morning, Scott. Morning, Annette. Maybe just, you know, starting off on the margin here, you know, good margin trends. Just kind of curious, you know, you've talked in the past about, call it, $2 billion in annual cash flows, repricing up 75-100 basis points. Just kind of curious if that trend remains the same, or, you know, kind of where loan pricing is these days.
Annette Burns (CFO)
Steve, that's correct. I think that's spot on. We have right around $2.2 billion in loans cash flowing annually. We expect those to reprice into higher rates. And, you know, depending on the shape of the yield curve, we typically price between that two- to five- to seven-year on the curve. And you're correct as well. You know, if you look at our new volume rates versus our portfolio rates, you know, for auto, we're probably 50 basis points higher, commercial 75-100 basis points higher, and residential still about 200 basis points higher. In addition, we also have investment securities cash flows that come in right around $325 million expected for 2025.
Scott Kingsley (President, and CEO)
So Steve, to follow up on Annette's comment to your question, yes, you know, $2.1 billion of commercial relationships that are essentially SOFR-based. And so they will change anytime there's a change in short-term rates and usually change within a month of the impact, and the change of Fed funds rates. So that stays about the same. There is a portion of those that, you know, probably reach a natural five-year, or seven-year type renewal window, you know, over the course of the next year or two. But generally, that's what comes down immediately. And we probably experienced 65%-75% of that in the Q4 based on the 100 basis points of change that's happened since September.
Steve Moss (Managing Director)
Okay, great. And then on the expense side, you know, expenses stepped up this quarter. I realize there's various things on the compensation side and other. Just kind of curious how you guys are thinking about the run rate for you guys on a standalone basis going forward.
Annette Burns (CFO)
Sure, Steve. I think if we were to look at the run rate of the last two quarters, you're correct, the Q4 had some higher levels of incentive compensation, and a little bit of noise and other expenses. But if we took an average of the last two quarters' run rate, that's somewhere in the $97-$99 million a quarter. We think that's probably a good place to think about at least the first half of the year. Just to remember a few things that happened in the Q1. We have higher payroll costs, higher stock-based compensation costs, a little bit higher occupancy costs, you know, around snow removal and heating and things like that. So the Q1 might pick up a little higher, closer to the $99 million.
And then, you know, on average, if you took a 4%-5% increase on our full year 2024 run rate, that's probably where we're thinking operating costs will be for 2025.
Steve Moss (Managing Director)
Okay. Great. I appreciate that, and just one last one for me here. Just in terms of the loan loss reserve ratio trends, you know, just kind of curious the drivers of the decline in the consumer portfolio. I realize that's in runoff, but I guess it was a bit more of a step off than I was thinking would happen here. And also, you know, it looks like some of the decline in the CRE was related to that charge-off on non-performing. Just curious, you know, do you build back the reserve on commercial real estate over time?
Annette Burns (CFO)
You're correct. The decrease in the coverage ratio related to CRE is directly related to the release of that specific reserve as we charge that portion of the loan down. So I think that if you were to look at that, exclude that, it's pretty consistent with where we were. So, you know, we feel like we're adequately reserved in our CRE portfolio. I wouldn't expect that to change materially from where we are at the Q4 unless we see, you know, changes in our forecasts, or something to that effect. So overall, the reserve mix is changing. If you think about our, you know, solar and LendingClub portfolio, it runs off maybe about $35 million a quarter, and they have an allowance allocation of about 3.5%.
So then as we build and grow new loans in our other books, the kind of the average coverage ratio for those loans is about 90 basis points. So that is having an impact on the amount of provisioning needs we need just due to that change in mix.
Scott Kingsley (President, and CEO)
Yeah. Even as a follow-up to Annette's comment, Steve, if you're running off, you know, $30-$35 million of solar and specialty consumer, and you're adding all of the other things that, you know, we're holistically trying to grow the balance sheet with, you know, you can probably have, you know, a "net neutral" outcome in your provisioning, and, you know, you could have $100-$125 million of growth and everything else just because of the net differential in the mix. And that's something we've been experiencing in 2024 essentially for every quarter. But knowing full well that, you know, the CESOL modeling makes you reserve for stuff in a period of growth, a period of growth that we had in the first half of the year had a higher provision complement associated with that.
Steve Moss (Managing Director)
Okay, great. I appreciate all the color there, and I'll step back. Thank you very much.
Scott Kingsley (President, and CEO)
Thank you, Steve.
Operator (participant)
Thank you. Our next question comes from Chris O'Connell with KBW. Your line is open.
Christopher O'Connell (Director in Equity Research)
Hey, good morning.
Scott Kingsley (President, and CEO)
Hey, good morning, Chris.
Christopher O'Connell (Director in Equity Research)
So just wanted to follow up on the expense outlook. So is the $97-$99 million range on an organic basis, is that the good range that you were thinking, you know, as a run rate into 2025 organically, or is it that plus the, you know, annual merit increases?
Annette Burns (CFO)
I think that's a good run rate organically. It includes consideration for merit increases. So like I said, probably if you were to look at a full year basis, it's somewhere between a 4%-5% increase, which is kind of where we're at historically. As a reminder, our merit increase does happen in March of each year. So, you know, we won't have a full quarter impact of that in the Q1, but we also have two less payroll days in the Q1 as well. So there's some offsetting there.
Christopher O'Connell (Director in Equity Research)
Okay, got it. And then just on the fee businesses, just, you know, wondering what you're seeing in terms of growth in the primary businesses, you know, as far as your outlook into 2025 regarding the retirement business, you know, the wealth business, the insurance businesses?
Scott Kingsley (President, and CEO)
Yeah. So I'm happy to take that one, Chris. And so just to give you, you know, sort of a capsule of where we finished the year, retirement plan administration for us is a $57 million business, wealth management almost $42 million, and insurance a little over $17 million. So combined, between $115 million and $120 million of revenue today for us with very attractive returns from a margin standpoint. To Annette's point, over the last five years, compounded growth rates 9%-ish, you know, combination of very robust organic growth with some timely acquisitions. 2024 was a really strong year. You know, the market was our friend in retirement administration and in wealth management. We had solid organic account adds, customer adds from an acquisition standpoint.
And the insurance business benefited from market rates actually moving up as well. So really bullish on those businesses going forward, really investable businesses in any way we look at those today. And remember, in those businesses, the capital complement necessary to grow those is very modest. If you can grow those businesses organically, which we've demonstrated we can, you know, they just keep generating capital at a level that it's almost hard to reinvest their capital generation over some kind of extended period of time into just their businesses. So we think they're a net provider of capital that, you know, creates, you know, dividend consideration opportunities for us consistently. And again, we've reached requisite size where operating margins are very attractive.
Christopher O'Connell (Director in Equity Research)
Great. And as far as, you know, the organic growth, you know, absent, you know, the market impact here and the deal close, are you guys still thinking kind of, you know, mid to high single digits, you know, is a good run rate for each of those, or is there any change given? Yeah.
Scott Kingsley (President, and CEO)
Yeah. Chris, we feel good about mid- to single digits. You know, mid to high single digits when the combined outcomes were $70-$75 million, a little bit easier to obtain. Now that you're in this $120 outcome, a, you know, little bit more of a task there. But, you know, we think we're just positioned well in terms of the breadth of the products we have in all of those enterprises. You know, so we think that there's upside opportunity.
Christopher O'Connell (Director in Equity Research)
Great. Thanks, Scott. And then just, you know, on the, you know, Evans merger, obviously, you guys got, you know, extremely, you know, fast approvals here relative to, you know, what we've seen over the past few years. You know, was there any discussion around, you know, moving up, you know, the actual close date from 2Q into either, you know, earlier 2Q or into 1Q given, you know, how quickly you guys got the approvals?
Scott Kingsley (President, and CEO)
So Chris, to your point, very pleased to have gotten the approvals prior to the end of the year. You know, probably expected that we were going to get them sometime early in 2025, but very happy that, you know, our regulators got through that in an appropriate amount of time and asked, again, all the right questions relative to the impact. Reminding, you know, you and other people that we have no overlap here. You know, this is a market extension with no overlap. So, you know, there's not a lot of things that need to be talked about relative to market influences, and lack of, you know, competitive balance and some of those things. To your question about whether we talked about moving up, we did not. I think it probably goes underappreciated that the technical conversion of core systems is a task.
Now, other people may have a process. Other people who are acquirers may have a process in their companies where they can close legally, and then do a conversion four months, six months, eight months later. We've never done that. And we don't think embracing that is appropriate for us. We think there's a lot of risk involved with that in running two separate systems, you know, and bringing those things together. So for us, really important that we do it at the same time. You know, over the next three months, we'll have an opportunity to do a full-blown mock conversion. We'll have a chance to see where all of the mapping criteria comes out for the mix of our products versus the Evans products. And then we'll feel good about ourselves going into that early May-type closing period.
Christopher O'Connell (Director in Equity Research)
Okay, great. And just, you know, on the deal, you know, you guys have had a little bit, you know, to contemplate the deal and the two balance sheets being put together. You know, any thoughts, or anything being contemplated in terms of, you know, balance sheet actions on either the loan, or security side alongside, or kind of shortly after, you know, the merger close? Basically, you know, is there any difference in what you want the optimal balance sheet, you know, to be between now and kind of post-deal close?
Scott Kingsley (President, and CEO)
Yeah. So as you know, we really don't control a lot of the balance sheet we're about to acquire, you know, over the next handful of months. But have we thought about early deploying some cash flows on the investment portfolio side for us, so that we don't end up in a position where, you know, we're either, you know, selling, or buying investment securities all in a concentrated period after the closing? You know, much like us and a lot of other banks, Evans also has a requirement for pledging for municipal securities. So there will definitely need to be investment portfolio assets retained, or replaced, you know, prior to the closing, so that we can, you know, support our customers who have those kind of needs.
You know, relative to the rest of the balance sheet, we have not spent a lot of time thinking about if there were certain pieces of asset classes, or funding dynamics that we did not want to retain. We pretty much like everything that's on the balance sheet. So I'm certain that sometime in the Q1 after we see full year run rates from Evans, and we get a chance to talk about fair value marks, we will recalibrate our expectations. Today, we don't think that they're far off what we communicated from an expectation standpoint in September. But obviously, you know, changes in interest rates and changes in earnings run rates will impact that from a net accretion standpoint.
But we feel pretty good about the assumptions we used in the transaction, you know, including the synergy side and, you know, feel like we're in a great position to go forward.
Christopher O'Connell (Director in Equity Research)
Great. Thanks, Scott. I'll step out.
Scott Kingsley (President, and CEO)
Thanks, Chris.
Operator (participant)
Thank you. Our next question comes from Manuel Navas with D.A. Davidson. Your line is open.
Manuel Navas (Analyst)
Hey, good morning. Morning, could we talk a little bit about expected kind of legacy loan growth right now? Is kind of the optimism with the change of administration showing up in increased growth, or is that more to ramp across the year? And you're staying within your past mid-single digit guidelines for loan growth with some run-off?
Scott Kingsley (President, and CEO)
So I mean, well, I would start with saying that we haven't noticed any substantive change in our markets. Our markets had a very good 2024, and I think the optimism in the markets has probably "stayed the same." You know, whether that's in Southern Maine, across Southern New Hampshire, into Vermont, into all parts of upstate New York, there's a general sense of optimism in most of our markets that either comes from planned investments that we see coming, much like the, you know, semiconductor manufacturing opportunities across upstate New York, as well as yeah, you know, the stability that exists in our core markets.
So for us, you know, when we talk about, and Annette made the comment that, you know, essentially last year we grew loans 6% less the portfolios that we had in a planned run-off status, you know, I think those, you know, those types of factors and variables kind of think of how we're framing the first half of 2025 as well. I think when you look at, you know, the extension into Western New York for us, I think we, again, feel very bullish that there's growth opportunities for us in the market from a participation standpoint. So, you know, we don't think that there's a market today that we're in that doesn't feel investable, nor does it feel like, you know, activity has either stopped, or is a little bit stale. Our portfolio pipelines are as good as they were at the beginning of the year last year.
And the beauty for us is they seem to be spread generally across almost all of our markets. You know, we've made this point a couple of different times. We, like a lot of people, are motivated to think about how to capture holistic relationships, whether that's on the commercial side, or on the retail side. And with that, you know, one-off transactional things are not probably as attractive for us as, you know, as the ability to, you know, bank the customer on both sides of their balance sheet.
Manuel Navas (Analyst)
That's great. Early in your comments, you brought up kind of big picture, some of the announcements around the CHIPS corridor, new expansion, structural investments. It's all understood big picture. What are things that are happening right now that you're excited about at anything? I know a lot of it still has a long tail into the future, but what are some of the markers that you're seeing more recently that have you excited that everything's progressing as expected for this huge opportunity within the CHIPS corridor?
Scott Kingsley (President, and CEO)
Sure. So specific to the Micron opportunity, it's that they've worked through all of the documentation, and the agreements, you know, with the federal government, or in certain cases with the state of New York, relative to support for the growth activities. That not only applies to Micron, but applies to the New York Creates organization in Albany, essentially the nanotech research facility in Albany. There's been some announcements at GlobalFoundries in the Capital District, or, you know, the Saratoga Marketplace, as well as GlobalFoundries in outside of Burlington, Vermont. So I think the path stays very robust and consistent relative to that from a growth standpoint, understanding that, you know, there's a lot of capital expenditure that goes into, whether it's chip fabrication, research and development, or tool construction.
So getting one's arms around that is a long-term play is really important. That, you know, you're probably not going to talk about something starting at the beginning of a quarter and being done at the end of a quarter. It's a much longer timeframe for that. But the support activities that exist around those opportunities also were in play. You know, there's a whole bunch of structural investments, you know, both from a highway standpoint, and other things in upstate New York that are underway as we speak. You know, we're really bullish on what's happened, you know, 14 or 16 months later after our Salisbury acquisition in the lower Hudson Valley, and in parts of northern Connecticut. You know, one of our pipelines that's the most prolific right now is in Connecticut.
So we've had really good opportunities, you know, all the way from, you know, West Hartford back to the New York border, and really look forward to building those things out.
Manuel Navas (Analyst)
That's good color. Can I just tack on one thing on the NIM? Deposit costs have come down a bit. Is there more room to go, or is it harder to keep cutting costs? And just how has that come together with some of the loan yield commentary before for near-term NIM?
Annette Burns (CFO)
There is more room to go. We talked about the $5 billion in assets that we think our, you have, have the ability to reprice since the remaining $7 billion is low in deposit costs already, so if you break out that $5 billion, you've got right around $3.4 billion of money market accounts. You know, we think we can react fairly quickly to changes in rates.
You know, we think that probably not all of the December rate cut, you know, was in the Q4, so we'll see a little bit of that benefit into the Q1 even without any rate changes, and then the remaining $1.4 billion in CDs will be a little kind of lag, right, because of the timing of maturities, but we'll see that lag in as well, so I think there's still some opportunity in those books to continue to reprice downward.
Manuel Navas (Analyst)
And this all has you headed into Evans' close with a stronger NIM. And any update on kind of combined financial metrics? And I'll step back into a queue after this.
Annette Burns (CFO)
So like Scott said, you know, we're going to take some time once Evans releases their full year results and refresh our marks. So we'll have a better feel for that into the Q1.
Scott Kingsley (President, and CEO)
But I think your comment, you know, if you think about this, you know, four or five months ago, is do we feel like our net interest income opportunities, and net interest margins on a legacy basis are improved for what they probably looked like early, or late in the Q3? We do. Do we presume that that construct will probably be consistent with Evans? We do. And, you know, so to your point, you know, feel as good, if not a little bit better than when we announced the transaction.
Manuel Navas (Analyst)
Looking forward to future updates. Thank you very much.
Scott Kingsley (President, and CEO)
Thanks for the questions.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one one. Again, if you have a question, please press star one one. Our next question comes from Matthew Breese with Stephens. Your line is open.
Matthew Breese (Analyst)
Hey, good morning.
Scott Kingsley (President, and CEO)
Morning, Matt.
Annette Burns (CFO)
Matt.
Matthew Breese (Analyst)
A lot of my questions have been answered. Maybe just a quick two or three. I guess, the first one is with Evans going to be behind you, you know, what is the timeframe before you start thinking about additional M&A opportunities on the whole bank side? And then geography-wise, you know, what parts of the map do you think make the most sense?
Scott Kingsley (President, and CEO)
Well, Matt, appreciate that in terms of a question. So we are monoline focused on Evans. You know, since it's not planned to close until the Q2, that's all we're thinking about. Again, you know, as we've said before, the incremental opportunities that we think will present themselves to us, you know, in Western New York are really worth capitalizing on. So we really want to get that right. So I won't say that we have a timeline in our head relative to evaluating other opportunities on a straight M&A standpoint, but we truly want to get through a period of time where we know, you know, that we've done everything and applied all of our resources to making sure that Evans goes right for the Evans employees, and for the Evans customer base. So that is paramount and number one.
Have we had people, you know, continue to reach out to us, you know, now that we've been, you know, and finished an acquisition and have announced another one and planned to close one? Absolutely. I would kind of take the franchise and look at it this way, Matt, that are there places where now with our larger span from a geographic standpoint that we have opportunities to build out within the structure of our current franchise? We do. So as an example, yeah, we have a branch coming online in South Burlington in March. Is there additional opportunities for us to continue to build out the Vermont franchise working south, and a little bit further into the state? You know, today, our markets are really covering Chittenden County.
We think there's still opportunities to enhance our concentration in Southern Maine and Southern New Hampshire where, again, we have great representation, but we think our concentration could improve over time. You know, I think, you know, Joe has made this comment a couple of different times that we're probably going to commit to something in the Syracuse marketplace closer to the Micron installation, and maybe something else generally there. Can we extend our franchise north of Syracuse into, you know, Jefferson County, Lewis County where we're not represented today? That still creates an opportunity. We're spending time in the markets in the upper and lower Hudson Valley where we really think that, you know, connecting some of the stuff that we got in the Salisbury acquisition to our legacy markets is appropriate and opportunistic.
So, you know, and if I want, you know, to just add one more, how do we extend, you know, a little further into the Poconos in Northeast Pennsylvania and potentially into the Lehigh Valley? Whether we need to do that via M&A, or can do that organically, I think it's both. And I think that opportunity will present itself over the next one, two, three years in multiple different places. So we're really excited about filling in the franchise, you know, now that we've had the opportunity over the last two, or two and a half years to really extend into markets we want to participate in.
Matthew Breese (Analyst)
Excellent. Next one for me was, Annette, what's a good tax rate for next year? It's been bouncing between 20% and 22%. Is that still the right range? I've been using kind of 22.5% to 23%.
Annette Burns (CFO)
I think 22.5%-23% is a good estimate for next year's tax rate.
Matthew Breese (Analyst)
Okay. All right. And then, you know, Scott, maybe just going back to that last comment, you know, the excitement is there. And from a macro standpoint, you certainly have a lot of wind at your back from a number of different fronts. I was hoping maybe you could, you know, one, outside of some of these organic growth opportunities, you know, where are you spending the most time investments internally, product services, new hires? And maybe could you paint a picture for us either in terms of potential profitability outcomes, or EPS over the next handful of years as all this kind of comes to fruition? And it certainly feels like the wind is at your back. Thank you.
Scott Kingsley (President, and CEO)
Thanks for the question, Matt. You know, that's a deep one. You're dipping into meaning of life on that, so thank you, but to your point, we like where the opportunities are in the markets from a standpoint of just sheer market activity and market growth opportunities, so that is something that is important to us, and that's why it supports our ability to say we think all of our markets are investable. All of our lines of business are investable. You know, I think today, you know, we're, you know, we tend to be focused on how do we improve the experience for the customer, for our employee at the same time, so we're working on how do we grow the institution, you know, and how do we improve our processes at the same time.
At our size, you know, we also have our eye on the build-out of enterprise risk management as a holistic outcome for the company. The expectations are clearly there from a regulatory standpoint that we will continue to progress on that. We think we've made great strides on that over the last handful of years, but we know that the, you know, bar just moves up on that in terms of that expectation. But in fairness, it's not even a bad expectation. It's actually the right things for us to do. Having more evolved stress testing in our portfolios is a positive thing. We learn more about our customer. We learn more about ourselves. And we think about that relative to how do we, you know, prioritize where we want to make some of those investments go forward.
Would we like to accomplish some of those things with just improvements in systems? But do we need really bright people to help us get to that point? We absolutely do. So, you know, I think we are, you know, very pleased with where we're positioned today. We like the trend line, and the momentum that comes out of our last two quarters. You know, it clearly feels better to go to market as a company when your margin is in the mid-330s than it did when it was in the low 3% level. That gives you an opportunity from a revenue generation to consider some of these investments on the expense front, or the capital front that you do want to make in improving your organization.
So, you know, we think, quite frankly, it's tactical management, and we probably think we've got as much flexibility in that tactical management today as we've had over the past Q8.
Matthew Breese (Analyst)
Understood. And just to slide another one in there, you had said, you know, it feels better to go to the market. Is there any sort of capital suggestion between the lines there, especially with some of the sub debt coming due later this year? That's all I have.
Scott Kingsley (President, and CEO)
That's a great question. You know, pretty granular and happy to take that up with you a little bit offline. But at the same point in time, yes, you know, we have a sub debt issuance that Annette worked diligently on from her house in 2020, during the pandemic that, you know, that gets to remark capacity in mid-year. Should we replace that with another instrument in the capital stack, or should we just pay it off, which we have the flexibility to do because we've been building cash reserves at the holding company to accomplish that, but we'd like to think about if there was opportunistic, you know, spots that, you know, we could replace that with, we'd be really interested, you know, in thinking about that, and we spend time talking about that.
Matthew Breese (Analyst)
Great. I'll leave it there. Thank you for taking my questions.
Scott Kingsley (President, and CEO)
Sounds good. Thank you.
Operator (participant)
Thank you. And our next question comes from Steve Moss with Raymond James. Your line is open.
Steve Moss (Managing Director)
Just one more follow-up here. I got to answer right there. But in terms of, I want to circle back on the commercial real estate non-performer that went to non-performing status this quarter. Just kind of curious about the type of loan it is and kind of how you're thinking about resolution here. I'm assuming it was the $700,000 charge-off.
Scott Kingsley (President, and CEO)
Yeah. So, Steve, it's a new multifamily housing project in one of our better markets in upstate New York, and it's just been very slow to lease up. Whether the developer, or the sponsor, you know, is modestly priced differently than the market will accept today, it's a great question. But, you know, there's really not much more to it than that. But it's in a marketplace where historically, assets have performed very well. And we think over time, this one will as well.
Steve Moss (Managing Director)
Okay. And what's this participation?
Scott Kingsley (President, and CEO)
We do have a partner in this one.
Steve Moss (Managing Director)
Okay. Great. Appreciate all the color there. Thanks.
Scott Kingsley (President, and CEO)
Thanks.
Operator (participant)
Thank you. Our next question comes from Chris O'Connell with KBW. Your line is open.
Christopher O'Connell (Director in Equity Research)
Hey, real quick. Just wanted to follow up and see if you guys had the spot margin and,or the spot interest-bearing deposit costs at the end of 1st of December?
Annette Burns (CFO)
I will follow up with you offline with that, Chris. From a margin perspective, we ended the year very similar to what we had for the quarter.
Christopher O'Connell (Director in Equity Research)
Okay. And then just thinking about, like, more long-term beyond, you know, the next couple of quarters, just curious if you had any update on, you know, where you thought the eventual endpoint of the runoff and the residential solar, you know, might end up, you know, after a couple of years now, I think, of runoff? And then, you know, how much of is within the other consumer, you know, that's non-LendingClub related?
Scott Kingsley (President, and CEO)
Sure. So Chris, while we see if we've got some of that detailed information in front of you, I would say this, you know, the $90-$100 million of decline that we experienced in solar residential in 2024 is likely to be approximately for what we would expect going forward. You remember that, you know, the instruments in solar residential, because they are essentially a home improvement, tend to have a, you know, longer duration, or longer contractual maturities than, you know, standard consumer financing, maybe even financing consistent with auto lending. So I would use that as a proxy for that. I'm going to guess this, and Annette's probably going to tell me differently, but that our consumer loan portfolio that is not the Springstone LendingClub is in the ballpark of $50-$60 million today.
Annette Burns (CFO)
That's a good ballpark.
Christopher O'Connell (Director in Equity Research)
Perfect. Thank you.
Scott Kingsley (President, and CEO)
Thanks, Chris.
Operator (participant)
Thank you. And our next question comes from Manuel Navas with D.A. Davidson. Your line is open.
Manuel Navas (Analyst)
Hey, just wanted to hop back on to ask about the legacy fee growth in the mid-single digits. That doesn't include any potential cross-sell in Evans. And has that kind of been explored further? Is there any way we can size it yet, or is that more something to consider for 2026? And then my other question on fees is, how does M&A look on the fee side?
Scott Kingsley (President, and CEO)
Two good questions. One, what I would say is our people that deliver solutions in wealth management and insurance are really excited about the extension into the marketplace in Western New York. Do we think that that opportunity will be able to be capitalized on early after the close? We do. What that will mean in terms of the materiality to those growth, to the business growth in 2025? You know, probably not material. But, you know, really bullish on what that might look like going forward because those solutions today, you know, are offered at Evans, but in a very modest way today. Great question on the M&A side for the fee-based businesses.
You know, we are always looking to find partners in our footprint on the wealth management, and the insurance side, you know, that will allow us to, you know, create some positive operating leverage in thinking about buying books of business. Those are things that are almost episodic. The ability to evaluate those on an ongoing basis is more of a networking function, meeting people that also do that either on an independent basis, or that you've had some other relationship with. A little bit different in retirement plan administration because that's a national business for us, you know, the scope of things we get asked to potentially think about. But I would say the same thing that how do we find, or how do we source potential additions? It's the networking of our current business leaders that creates most of those opportunities.
You know, and remembering, it's unusual for us to acquire an enterprise in any of those lines of business that has north of $5 million in revenue. You know, our sweet spot tends to be between one and five. And we're really good at integrating those into each of our businesses. So, you know, always happy to look at those and always thinking about that as an opportunity, but more within the confines of the footprint we currently have.
Manuel Navas (Analyst)
That's great. I appreciate the commentary. Thank you very much.
Scott Kingsley (President, and CEO)
Thanks very much.
Operator (participant)
Thank you. I'm not showing any further questions at this time. I'll now turn the call back to Scott Kingsley for closing remarks.
Scott Kingsley (President, and CEO)
Daniel, thank you. In closing, I want to thank everyone for participating on the call with us today and your interest in NBT. And we look forward to talking to you again in the early spring. Have a great day.
Operator (participant)
Thank you, Mr. Kingsley. This concludes our program. You may disconnect. Have a great day.