NBT Bancorp Inc. Aktie

Good day, everyone. Welcome to the conference call covering NBT Bancorp's First Quarter 2026 Financial Results. This call is being recorded and has been made accessible to the public in accordance with the SEC 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 2, 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 [Operator Instructions] 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.

Thank you. Good morning, and thank you for joining us for this earnings call covering NBT Bancorp's First Quarter 2026 Results. With me today are Annette Burns, NBT's Chief Financial Officer; Joe Stagliano, President of NBT Bank; and Joe Ondesko, our Treasurer.

Our solid operating performance for the first quarter was driven by disciplined balance sheet management, the growth of our diversified revenue streams and the continued benefits of integrating Evans Bancorp into our franchise following the merger in May 2025. These factors have contributed to productive gains in operating leverage. Operating return on assets was 1.29% for the first quarter with a return on tangible equity of 15.50%. These metrics represent meaningful improvement over the first quarter of last year and have provided incremental capital flexibility.

Our tangible book value per share of $27.05 at quarter end was more than 9% higher than a year ago. The continued remix of earning assets, diligent management of funding costs and the addition of the Evans balance sheet resulted in a 28 basis point improvement in net interest margin year-over-year.

We got off to a slow start in January and February with the very difficult winter weather conditions, and we experienced a higher-than-expected level of commercial real estate payoffs. With that said, activity since then has been quite good and we are very pleased with the types of customer opportunities we are seeing across our footprint as well as our current pipeline levels.

Growth in noninterest income continues to be positive, highlighted by a new all-time high in quarterly revenue generation from our retirement plan administration business. Our capital utilization priorities remain focused on supporting organic growth while continuing our long-standing commitment to annual dividend growth. In addition, our strong capital levels continue to allow us to evaluate a variety of M&A opportunities.

Another component of our capital planning is to return capital to shareholders through opportunistic share repurchases. Consistent with that approach, we repurchased 250,000 of our own shares again in the first quarter of 2026. One year in, the integration of our Evans Bank colleagues has gone smoothly and validated the strong cultural alignment we saw from the outset. Their customer and community-focused approach continues to enhance our franchise, and we remain excited about the opportunities ahead in the Western region of New York.

Momentum across Upstate New York semiconductor corridor continues to build. Since Micron's groundbreaking late last year and the completion of its site acquisition from Onondaga County in the first quarter development activity has accelerated. Site development and infrastructure build-out for the first fabrication facility are now underway and we are already seeing tangible benefits with more than a dozen of our customers securing contracts tied to the project.

Stepping back more broadly, across our 7-state footprint, we continue to see encouraging activity tied to advanced manufacturing, infrastructure investment, housing development and workforce-driven economic initiatives. These dynamics are evident across our core markets, including manufacturing and defense activity in New England as well as construction and community revitalization efforts throughout our legacy regions. While activity levels can vary quarter-to-quarter, the depth and diversity of these initiatives reinforce our confidence in the markets we serve. We believe NBT is well positioned to support this activity through our relationship-driven model, significant balance sheet capacity and a diversified set of financial solutions.

I will now turn over the meeting to Anette to review our first quarter results with you in detail. Annette?

Thank you, Scott, and good morning. Turning to the results overview page of our earnings presentation. For the first quarter, we reported net income of $51.1 million or $0.98 per diluted common share. We have improved earnings 27% from the first quarter of 2025 with growth in our balance sheet, net interest margin improvement and a 4.5% year-over-year growth in our fee-based income as well. Earnings were modestly lower than the prior quarter, consistent with seasonal expectations, 2 fewer days in the quarter and a normalized effective tax rate.

The next page shows trends in outstanding loans. Total loans at $11.5 billion were down $50.9 million from December 31, 2025, with other consumer and residential solar portfolios in a planned runoff status, representing half of that decline. In addition, we continue to experience an elevated level of commercial payoffs, similar to the prior 2 quarters. Our total loan portfolio remains purposely diversified and is comprised of 56% commercial relationships and 44% consumer loans.

On Page 6, total deposits were up $244 million from December 2025, primarily due to the inflow of seasonal municipal deposits during the quarter, along with increases in consumer and commercial customer account balances. Generally, in most of our markets, municipal tax collections are concentrated in the first and third quarters of each year. We experienced a favorable change in our mix of deposits out of higher cost time deposits and into checking, savings and money market products. 59% or $8 billion of our deposit portfolio consists of no and low-cost checking and savings account at a cost of 38 basis points.

The next slide highlights the detailed changes in our net interest income and margin. Our net interest margin in the first quarter increased 7 basis points to 3.72% compared with the prior quarter, as the 9 basis point decrease in the cost of funds more than offset the 2 basis point decline in earning asset yields. Loan yields decreased 4 basis points from the prior quarter to 5.66%, primarily due to the repricing of variable rate loans following the prior quarter's federal funds rate decreases. We were able to actively manage our funding costs downward to more than offset that impact as evidenced by the 10 basis point decline in our total cost of deposits to 1.34% for the quarter.

Net interest income for the first quarter was $134.3 million, a decrease of $1 million compared to the prior quarter but more than 25% above the first quarter of 2025. The decrease in net interest income from the prior quarter was driven by 2 fewer days in the first quarter of 2026. The opportunity for further upward movement in earning asset yields and net interest margin will depend largely on the shape of the yield curve and how we reinvest loan and investment portfolio cash flows.

The trends in noninterest income are outlined on Page 8. Excluding securities gains, our fee income was $49.7 million consistent with the prior quarter and increased 4.5% from the first quarter of 2025. Our combined revenues from retirement plan services, wealth management and insurance services exceeded $32 million in quarterly revenues. Noninterest income represented 27% of total revenues in the first quarter and reflects the strength of our diversified revenue base.

Total operating expenses were $112 million for the quarter, a 0.5% increase from the prior quarter. Salaries and employee benefit costs were $68.8 million, an increase of $2.8 million from the prior quarter. This increase was primarily driven by seasonally higher payroll taxes and stock-based compensation, partially offset by lower medical expenses.

In addition, annual merit increases occurred in March at an average rate of 3.3%. The quarter-over-quarter increase in occupancy expenses was expected, driven by increase in seasonal costs, including utilities and higher maintenance costs. The effective tax rate for the first quarter was higher than the prior quarter at 23.3% primarily due to the finalization of the deductibility of last year's merger-related expenses and the associated impact on the full year effective tax rate in 2025.

Slide 10 provides an overview of key asset quality metrics. Provision expense for the 3 months ended March 31, 2026, was $5.6 million compared to $3.8 million for the fourth quarter of 2025. The increase in provision for loan losses was primarily due to a slightly higher level of net charge-offs and nonperforming loans resulting in a higher level of allowance for loan losses. Reserves were 1.2% of total loans and covered more than 2x the level of nonperforming loans.

In closing, we believe the strength of our franchise positions us well for growth opportunities as they arise. We continue to see productive engagement across our markets reflecting our ongoing investment in our people and communities. Thank you for your interest in our results. At this time, we welcome any questions you may have.

[Operator Instructions]

Our first question comes from the line of Mark Shutley with KBW.

So expenses came in a little bit better than we were expecting despite sort of the seasonal factors there. So I was wondering if you could maybe update us on your outlook there and sort of maybe what's an appropriate run rate for the year?

Sure. I'll take that, Mark. So yes, there were some seasonality in our first quarter expenses, primarily higher levels of salaries and benefit costs related to payroll taxes and stock-based compensation as well as some higher level of occupancy costs. As we look into the next quarter, and we think about salaries and benefit costs, we'll probably see some increased costs related to our merit increases as well as an additional payroll day as well as our occupancy expense seasonal increase will probably be offset in the second quarter by just increase in productivity across our markets like higher travel training as well as technology initiatives.

So with all that being said, our run rate in the first quarter was right around $112 million. That will probably be a good place to be in the second quarter. And we still think our run rate or overall increase in occupancy -- or overall operating expenses is typically runs between 3% and 4% annually. We still think that, that is kind of where we're landing for 2026.

And Mark, we had some costs in the third and the fourth quarter of last year on the operating expense side that were a little bit higher than sort of standard run rate. Some specific initiatives or some specific costs that we incurred in those quarters. So not unusual for sort of the other expense line to be a little bit lower in the first quarter with, as Annette mentioned, with the costs associated with stock-based compensation and payroll taxes to kind of be the higher one.

Great. That's helpful. And then maybe just looking to the NIM, the deposit costs are really strong. But sort of given the current rate environment, maybe seemingly more flat. I was wondering if you're seeing sort of increased deposit competition in your markets and what you expect for deposit costs from here.

So if I think about the margin over the past 2 quarters, I think kind of as we expected to see kind of with the federal funds rate cuts, that our loan repricing was going to happen almost immediately, and then we were going to have a little bit of time to work through our deposit rate changes. So we actively manage that, and I think we were successful through the first quarter of 2026. So our margin right now stands today at 3.72%. We think that's a really great place to be and throwing off some really meaningful earnings as we look forward, when we look at our funding costs, I think they're stabilized there's probably a little bit of opportunity to work that down a little bit, but that will probably be offset by some of our deposit growth initiatives as well. So I would say stabilized there.

And then as we look at our earning asset yields, there's probably some repricing opportunities as we primarily look at our investment securities book as well as our residential mortgage book. And then really the shape of the yield curve will kind of influence margin improvements over the next couple of quarters, particularly where we reprice our assets in the 2- to 5-year range of that yield curve, which had seen some improvements and positively sloped starting in March. So I think as we look forward, it's stabilization as well as maybe a few basis points of improvement depending on that yield curve. We think about deposit pricing, I think there is competition for deposits, but it's fairly disciplined or we don't see anything terribly crazy, maybe a few pockets here and there.

I'd add to that, Anette, to your point, in most of our markets, and we've got some pretty diverse markets. But in most of them, deposit gathering has not been focused on additional share grab in most of our markets. Most of the people we compete with find that even the large banks that the cost of funding in our markets where we compete with them is probably lower than some of the larger metropolitan areas that they do business in.

What we have seen on the asset pricing side is a competitive landscape. I think as people look for yielding assets, there's been a little bit of give up in spread whether that's on the commercial side or business banking. And in the first quarter, we thought that there were some people that mispriced indirect auto. So we chose not to participate in that at the same level that historically we might have from a growth standpoint. So in a difficult quarter for Pure auto sales, I think there were certain other people out there that were trying to do sustain their portfolios. We think we're really good at that portfolio from a total operational management standpoint and remember, the duration of that portfolio is somewhere between 24 and 28 months.

So reengaging in that when the economics make a little bit more sense is kind of how we look at that.

And our next question comes from the line of Feddie Strickland with Hovde Group.

I think to address this in your opening comments, but I just wondered if you could talk generally about sentiment among commercial customers. Are you seeing clients pull back at all on some of the economic uncertainty and credit rather interest rate uncertainty or the trends in the footprint like the chip manufacturing facilities still kind of pull the local economies forward regardless?

Yes. Thanks for that opportunity. So across the markets, customers are feeling pretty good about themselves. I don't think that we started the year thinking that they could possibly have more uncertainty than they went through in 2025, but we appear to have topped that in early '26. And we've said this before that uncertainty doesn't inspire action. But I don't think things have been held up. So I don't think we have customers who have said I'm going to pass on fulfilling capital expenditure projects that I had planned, either for capacity improvement in their businesses or just general recurring costs associated with being technically better.

So we haven't seen any of that. I will say this, in the first quarter, we had a number of really exciting and really robust construction projects that did not get underway in the time line we expected. But most of them, as the grass is turning a little greener, they're finding their way to get out and start to work on some of that stuff. So we think there will be -- there was probably a little bit of a backup in the first quarter that will get taken care of here in the second quarter. But nothing never seen that is falling away. I do think that some of our very astute customers who use our capable and treasury management tools, in some cases, are paying down some of their leverage because there are opportunity to earn yield on that is not at the same level that it was 18 or 24 months ago.

So I think much like our balance sheet, there's a lot of tactical management going on in our customers today. And -- but sentiment quite good across the franchise.

All right. That's great to hear Scott. And just if you could also give us an update on M&A conversations. It sounds like those are ongoing. I'm just curious on a similar question whether current conditions or maybe making that a little bit of a priority for some potential partners or whether that's a little bit of a headwind?

Yes. Let me kind of tack that and check that in a couple of different ways, which is we have ongoing conversations with like-minded smaller community banks across our 7-state footprint. Our priority is to try to do some fill-in work and whether that's a practical M&A transaction build out concentration in some of our markets ourselves. So if I was to hit on that really quick, I would tell you that our strategy in greater Rochester, New York and into the Finger Lakes is a build-out strategy that we recognize that we don't have the market coverage that we needed. So getting closer into the city of Rochester and maybe in the western and southern suburbs is a priority for us. So something you'll see us act on in the next 12 to 18 months.

I feel a little bit similar to that in Southern New Hampshire and Southern Maine where our concentration in terms of spots in the market is not that concentrated. And -- but we've got great commercial lending teams in both markets. So giving them a little bit more to work with. We opened another branch in base side in Portland during the quarter. We're going to make a commitment in Scarborough going into the second half of the year or early next year. And we'd like to find a couple more spots in Southern New Hampshire, again, just to give our folks some opportunity for enhanced branding.

I think if you look at the rest of our franchise, there are spots where we're still missing some participation in markets that we think we would thrive in. And it doesn't require us to move our geography another 100 or 200 miles. These are things that are either next door or within the existing footprint. So that's where we've been spending our time.

To your point about priority for certain other people and maybe some people who are not necessarily experienced acquirers, there's been a handful of transactions in our marketplace that we think presents a disruption opportunity. There was a -- for us, in a market, a substantive transaction in the Mohawk Valley outside in the greater Utica area. We think that will present some opportunities for us a handful of things going on in Western -- sort of Western New England, Western Massachusetts and Connecticut, a couple of large transactions, but then a couple of small transactions where a couple of small community banks are getting together. So we've got some very specific and pointed initiatives attached to that from a disruption standpoint. And are pretty confident given past results that we'll see some productive gains from that.

Super helpful color. Just one more quick one for Annette. I apologize if I missed it somewhere, but did you have the loan discount accretion number for the quarter? I think I saw it was up, but not by how much and maybe what expectations might be for that number going forward?

Sure. Our loan accretion for the quarter was right around $6.5 million that's kind of a little bit down from what we had in the fourth quarter. And I would expect it to run somewhere in the $6 million to $6.5 million that corresponds with our intangible asset amortization around $3.5 million a quarter, so aligned with that.

As we think about accretion where we mark those loans, we think we're capable of getting pretty close to those rates as we reinvest those cash flows in our loan book as well.

Yes. I would reinforce Annette's comment on that, that the size of the marks in either our residential mortgage portfolio or commercial portfolio, from both Salisbury and Evans don't leave us with the yields that are above current market yields.

And our next question comes from the line of Manuel Navas with Piper Sandler.

Can you just speak to loan growth this year and the kind of the makeup of the loan pipeline. Just wondering how things look with the runoff portfolios, the pullback in indirect auto, just kind of level set things as we kind of move across the year?

Sure. And let's see if I can sort of accomplish this efficiently from those sort of 4 subsets of questions, Manuel. Runoff portfolio, primarily solar residential. We've said before, that's roughly $100 million a year. That's exactly what we incurred in the first quarter, so $25 million in the quarter. And our expectation is that continues on the prepayment patterns in that portfolios are more similar to the prepayment patterns of home mortgage, probably not a really unexpected outcome since the equipment sits on top of the house.

And so from a practical standpoint, that's kind of going according to plan. I think to the extent that we're incurring some losses in that portfolio from customers are not paying us back timely, it's as expected, not outside of that. And just as a reminder, we carry reserves around 4% of that portfolio. So I think we're really well covered relative to the expectation of future results as that portfolio runs up.

Indirect Auto is an interesting one for us. Again, as I said before, we're really good at this portfolio. We really like the short duration of the portfolio. We like the asset because the customers in our market actually need that asset. And so our performance from a quality standpoint has been really, really solid. As a matter of fact, sub-30 basis point charge-off levels for quite a while now in that portfolio. In that portfolio, though, that if there's -- if people are trying to get share to build to their book, and in the first quarter, we saw a handful of institutions probably more dominated by credit unions that had really low rates. Rates that made no sense, rates barely above Fed funds rates, and that's not where we're going to participate and add to our portfolio.

From the rest of the pipeline standpoint, nice mix of commercial real estate in C&I in our current portfolio in the pipeline for that like the construction projects that are out there. And as I said before, a couple of them have probably got underway a little bit later than maybe we would have hoped from a progress standpoint, there's a lot of infrastructure build going on in our markets, not just Central New York, but across the footprint. So opportunities for our contracting clients and people who service those industries to move forward. We really think that in the first quarter for us historically, is not our most robust quarter of growth, and that was evidenced in this quarter. We think we start to get back to more of that low to mid-single-digit growth rates for the balance of the year.

I thought that was a pretty fulsome answer. Can you remind me and level set a little bit on kind of fee growth expectations, where the largest opportunities are? Where you'd like to see better growth, for example? Just kind of thoughts on that year-over-year.

Sure. Our fee-based income does have some seasonality with the first and third quarter usually being the most robust and second and fourth being a little lighter. I think we're really excited about the growth opportunities and our fee-based income. Most excited about the performance of retirement plan services. They really had some really great wins in the first quarter of 2026, and that's evident in their numbers. So really good trajectory there.

But we also feel that wealth and insurance have some really good opportunities as well, particularly as we bring the whole bank to some of our markets like the Western New York region as an example. So feeling good about the trajectory there. I think as we think about full year growth expectations, I think we can look back to our historical performance over the past couple of years, which is are in the mid-single-digit growth rates for our fee-based businesses.

I think we still continue to expect that's achievable for us. And deposit service charges, banking fees generally we are a little lighter in the first quarter seasonality, and that will continue to build as well as we get into the next few quarters.

I appreciate that. My last question is could you give any extra color on some of the NPL build here, just anything we can disclose on that?

P Sure. I'll take that. Nonperforming loans, the majority of our increase during the quarter was related to a C&I relationship in the Western New York region. We're acting working through that. It's really a specific customer circumstance. So we have a handful of other nonperforming loans that we're continually to actively engage and work through as well, which are primarily commercial real estate based. We feel pretty good about our capacity to work through those and feel very good where we are from a positioning as far as our allowance associated with those.

And I would just add that our consumer delinquencies have performed kind of in line with our expectations and in some cases, better than our expectations. So those are really looking good through the first quarter as well.

Yes. And just where we are, and this is not just us, but we're coming off such a low base that one relationship or a couple of relationships can actually make a difference relative to size of that nonperforming. But I think the important comment that Annette made was we think we have the capacity to work through these. Not only do we have the stamina to work through is -- but we have a really good job at identifying a customer that may be just going through a really difficult period of time. But we like everything about what they do. So this doesn't have to be us moving really quickly to sell assets and remove them from our portfolio. We have the same to work through stuff.

Our next question comes from the line of Steve Moss with Raymond James.

Scott so maybe just most of my questions asked and answered here. Just following up. I'm not sure I caught this or you might have spoken to Scott, but on the deposit cost side here, definitely a healthy step down. Just kind of curious, I know you operate in lower cost markets for sure. But just -- is this a good bottom to deposit costs? Or as you're entering maybe a little more relatively suburban markets and Upstate New York, do we see a little bit more of an upward pressure, if that holds flat here?

It's a decent question, Steve. I would kind of reflect on this that if you thought about the fourth quarter where there were 3 Fed funds changes in the last 4 months of the year. And the impact that had on our [indiscernible] assets, we knew that we had a responsibility to cover that and maybe a little bit more. But it was difficult to get all that in the same quarter that all of those happened. And I would really focus on sort of the month of December. But we had active management across all deposit portfolios and achieve that lower rate in the first quarter, arguably in January to get back to levels of beta performance that we think are sustainable for us.

So your question is a good one relative to if we end up in a little bit more suburban or light metro markets with some of our growth plans. Will the cost of interest be a little bit higher. It might be. But again, if you think about the product we're really leading with is we're leading with the checking product. So if it's necessary for some larger commercial customers or even municipal customers for us to have a higher rate to secure the win of that customer. Long term, it's total cost of funds in the relationship. So I don't think we think it's going to be outside of the norm that we can't handle. And if you kind of think about a growth rate of just pick a number, 4% or 5% on a $13.5 billion base. That's $0.5 billion of new deposit balances on an annual basis.

Even if those are a little bit above the blended cost of our existing deposit portfolio, we can probably held that small dilution.

Okay. That's helpful. And then just in terms of -- the other thing I just want to touch base on in terms of cash flows. Just kind of curious on the security side, just maybe I missed in the deck, but what's the amount of cash flows that you guys have for the upcoming 12 months for securities?

Securities cash flows probably run somewhere in the $20 million to $25 million a month, pretty consistently, maybe out in '27, '28, there might be a little bit of more lumpiness to it, but pretty consistently over the next several quarters.

Okay. And then on auto loans, I think I wanted to ask about was just kind of -- you guys mentioned competition with regard to pricing. Just kind of curious, was it just incrementally tighter that you guys weren't willing to put it on this quarter? Or was it kind of a meaningful step down and maybe we see that extend for a little bit here?

In the first quarter, and I think we're actually seeing a little bit of rationality here in the second quarter already. In the first quarter, there were offerings out there that were 150 to 200 basis points below ours.

Okay. Got it.

I think you could combine that too with some lower auto sales just generally as well.

[Operator Instructions] Our next question comes from the line of Matthew Breese with Stephens.

A few from me. First, Annette, maybe you could help me out with new loan yield originations this quarter and what's some of the roll-on versus roll-off dynamics to what extent is that positive still?

Sure. I'll get us started here. So if we look at our book. Our residential mortgage probably still has somewhere around 120 to 125 basis points to reprice. Our commercial yields have come in a little bit, particularly with the 75 basis point drop in the yield curve over the past 12 months. But it was probably still about somewhere in the 20 to 25 basis point range of repricing opportunities in our commercial book.

If you look at our indirect auto book, our new origination rates are actually a little bit below where our portfolio yields are. So they're completely repriced and a little bit underwater at this point. And then I spoke about our investment securities portfolio that's probably somewhere in the $150 million to $175 million from a repricing opportunity.

Perfect. Okay. And then I guess if loan growth remains subdued, may we see some tactical changes. And I'm thinking, do we see more consistent or even more aggressive buybacks. Or do we see you perhaps Connecticut is a really kind of heavily disrupted market right now with all the M&A you have your toe in there, maybe see you lead with lending to drive some better growth in that geography. I'm just curious as you play this out, what might we see you do?

So I don't think the strategy holistically changes by a lot, Matt. Will there be tactical opportunities in markets with disruption where it is? Definitely faster to lead with the asset product from a loan standpoint for sure. So to your point, whether that's Northwest, North Central Connecticut, whether that's the Berkshire's or in fairness, whether that's in spots in Central New York, honestly, today. So you're not wrong about that. I don't think that we'll think that it's a holistic change in strategy. What we are experiencing is an opportunity to hire some very high-quality people in several of our markets today, either coming from some of our larger bank competitors or for people that have been displaced in disruption. So that has been an opportunity, and we've probably added half a dozen people to our mix in the last 6 months.

We probably 2 years ago, we're sure we'd ever get access to that level of quality individual. So that's a net positive. Has that shown up on the balance sheet? Yes, probably not. But on a going-forward basis, we certainly expect some opportunities to come out of that. But I think tactically, I think we're proving that we're pretty adept at moving with situations. And as logical opportunities present themselves in the markets will be there and we'll be in a position to win those opportunities. Should there be pricing dynamics that don't make sense for us on a long-term basis, we're unlikely to chase for those.

Scott, should we think about consistent buybacks here? I mean, it's been $250,000 last couple of quarters. Is that something we should model in for 1 or 2 more quarters?

Here's how I kind of look at that, Matt, is that generating and retaining capital is hard like you work really hard to get to that privilege to generate capital to use for future opportunities. So we are not opposed to share buybacks. We don't think that, that's top of our priority list. But we can certainly fund what we've done for the last 2 quarters because our earnings generation has been so robust.

So I don't think that we need to think about that as we're probably never going to start 1 of our conference calls with we bought 9% of our shares this quarter. That's not us. But a practical mechanism that says if the market is not recognizing our value, we want to be participatory in that Absolutely.

Yes. Okay. Last one for me. Just an update on all things kind of chip manufacturing, not just Micron, but there's been tens of billions directed to New York creates and global foundries. And just curious in terms of activity, what's going on? And two, when do we start to see that translate into a bit more loan growth than we're currently seeing. And that's all I have.

Really decent question, Matt. I think the build-out of that GLOBALFOUNDRIES in Saratoga has really it's a great model to watch relative to what 1 might expect in the future with other fabrication facilities coming online. And the total sort of vendor environment that they had to create to be able to service that facility, watched housing developments and demographic improvement exist in that area for a number of years now. So that ought to continue.

To your point, we're engaged in not only a lending facility at New York creates, but just to throw off that the activity generates there. It's a really important feature for not only Micron and global families, but other people who are interesting in pretesting their products are using that facility. So it's a very important economic stimulator for future development. So all in all, like anything from these very, very large project base. I wouldn't say we're disappointed that the pace has been a little bit slower than we might have initially expected.

But remember, just the sheer size of these projects. So when you think about what's really important there, we keep coming back to what's really important is the sponsor, right? Global Foundries is doing very well. Micron is doing exceptionally well. So the strength of the sponsor is really, really important to this, and I think that they're committed to these build-outs on a long-term basis.

our next question comes from the line of Jacob Civiello with Davidson.

Just 2 quick questions for me. I apologize if I missed this, but did you have a spot NIM for the month of March that you provided?

It's pretty consistent with where we landed for the quarter.

Okay. And then -- you talked about the commercial payoffs in the quarter being relatively consistent with the past couple of quarters as you kind of look ahead or think ahead, I know you talked about loan growth being kind of back to that low to mid-single-digit growth trajectory are the payoffs and paydowns factored into that? Are they slowing? Like, can you give us any perspective there?

Sure, Jacob. Absolutely. So just to give you a framing reference here, in the first quarter of last year, we had about $45 million or $50 million worth of early payoffs. That was pretty consistent with the second quarter. Starting in the third quarter, the number went above $100 million. And for the first quarter, about $125 million for this year. And again, I think a lot of that has to do with the valuation of some of our customers' assets, whether it's the holistic business they're doing or a piece of real estate that they own I think that as people look for yield from performing assets, all of those things have been in that consideration.

I don't think that early paths are going to go to back to 0, but I also think we're seeing signs that our production levels are capable of handling a higher level of payoff and still demonstrating that balance sheet growth. And I think we're already in that phase.

Okay. I mean any particular geographies or customer type loan size...

Widespread. A couple of very attractive operating businesses some real estate projects that the owner probably thought that they were going to be the holder for 5 to 7 years, and they were able to go into an agency was at a hockey game in Western New York and had a chat with one of our customers who moved to an agency instrument 3 years before he thought it would be available. And so a wide variety and a wide variety of geographies. But as well as that, is that there's not of our geographies today where we're not seeing good growth attributes or good opportunities coming through. -- so kind of balance that with its widespread on the payoff side, it's pretty widespread on the growth side.

Thank you. I have not shown any further questions. I will now turn the call back to Scott Kingsley for his closing remarks.

Thanks in closing. I want to thank everyone on the call for participating today, and thanks for your continued interest in NBT. Talk to you next time.

Thank you, Mr. Kingsley. This concludes our program. You may disconnect. Have a great day.

Good day, everyone. Welcome to the conference call covering NBT's Bancorp's Fourth Quarter and Full Year 2025 Financial Results. This call is being recorded and has been made accessible to the public in accordance with SEC 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 2, 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. [Operator Instructions] As a reminder, this call is being recorded.

I will now turn the call over to NBT Bancorp President and CEO, Scott Kingsley for opening remarks. Mr. Kingsley, please begin.

Thank you, Sania. Good morning, and thank you for joining us for this earnings call covering NBT Bancorp's Fourth Quarter and Full Year 2025 results.

With me today are Annette Burns, NBT's Chief Financial Officer; Joe Stagliano, President of NBT Bank; and Joe Ondesko, our Treasurer. Our operating performance for the fourth quarter continued to reflect the positive attributes of productive fixed rate asset repricing trends the diversification of our revenue streams, prudent balance sheet growth and the additive impact of our merger with Evans Bancorp completed in the second quarter.

Operating return on assets was 1.37% for the second consecutive quarter with a return on tangible equity of 17.02%. These metrics demonstrate continued improvement over the prior year quarters and importantly, reflect the generation of positive operating leverage. Our tangible book value per share of $26.54 at year-end was 11% higher than a year ago. The continued remix of earning assets, diligent management of funding costs and the addition of the Evans balance sheet resulted in a 36 basis point improvement in net interest margin year-over-year. Growth in noninterest income continues to be a highlight with each of our nonbanking businesses achieving record results in both revenue and earnings generation for 2025.

In the third quarter, we were pleased to announce to shareholders a year-over-year improvement of 8.8% to our dividend, marking our 13th consecutive year of annual increases. This is reflective of our strong capital position and our generation of consistent and improving operating earnings. Our capital utilization priorities focus on supporting NBT's organic growth strategies, as well as improving our dividend each year. In addition, our strong capital levels continue to allow us to evaluate a variety of M&A opportunities.

Finally, returning capital to shareholders through opportunistic share repurchases is also a component of our capital planning. And as such, we repurchased 250,000 of our own shares in the fourth quarter. Our transition and integration activities over the past 8 months with the team members who joined us from Evans Bank have been highly successful and have reaffirmed our belief that we have added a customer and community-focused group of talented professionals to our ranks. We remain excited about our opportunities in the Western region of New York.

Activities have continued to progress across Upstate New York semiconductor chip corridor in the fourth quarter, including the official groundbreaking of Micron's planned complex outside of Syracuse. Site development and construction of the first fabrication facility is expected to commence immediately with completed targeted in 2030.

I will now turn the meeting over to Annette to review our fourth quarter results with you in detail. Annette?

Thank you, Scott, and good morning. Turning to the results overview page of our earnings presentation. For the fourth quarter, we reported net income of $55.5 million or $1.06 per diluted common share. On a core operating basis, which excludes acquisition-related expenses and securities gains, our operating earnings were $1.05 per share, consistent with the prior quarter.

Revenue generation remained favorable and consistent with the prior quarter and grew 25% from the fourth quarter of the prior year, driven by improvements in both net interest income and noninterest income, including the impact of the Evans merger.

The next page shows trends in outstanding loans. Including acquired loans from Evans, total loans were up $1.63 billion or 16.3% for the year. During 2025, commercial production remained strong, but we did experience a higher level of commercial real estate payoffs. We have captured quality C&I opportunities across our markets, which have provided growth in core deposits, consistent with our focus on holistic relationships. Our total loan portfolio of $11.6 billion remains very well diversified and is comprised of 56% commercial relationships and 44% consumer loans.

On Page 6, total deposits were up $2 billion from December 2024, including deposits from Evans. We experienced a favorable change in our mix of deposits out of higher cost time deposits and into checking, savings and money market products. 58% or $7.8 billion of our deposit portfolio consists of no and low-cost checking and savings accounts at a cost of 80 basis points.

The next slide highlights the detailed changes in our net interest income and margin. Our net interest margin for the fourth quarter decreased 1 basis point to 3.65% compared with the prior quarter, as lower earning asset yields were largely offset by a reduction in funding costs. In addition, a higher level of lower-yielding short-term interest-bearing balances in the fourth quarter reduced NIM by 1 basis point compared to the third quarter.

Net interest income for the fourth quarter was $135.4 million, an increase of $1 million above the prior quarter and $29 million above the fourth quarter of 2024. The increase in net interest income from the prior quarter was driven by the decrease in interest expense more than offsetting the decrease in interest income, as the decline in short-term interest rates impacted both earning asset yields and funding costs.

As a reminder, approximately $3 billion of earning assets repriced almost immediately with changes in the federal funds rate, while approximately $6 billion of our deposits, principally money market and CD accounts remain price-sensitive. The opportunity for further upward movement and earning asset yields will depend on the shape of the yield curve and how we reinvest loan and investment portfolio cash flows.

The trends in noninterest income are outlined on Page 8. Excluding securities gains, our fee income was $49.6 million, a decrease of $1.8 million compared to the seasonally high third quarter and increased 17.4% from the fourth quarter of 2024. Our combined revenues from the retirement plan services, wealth management and insurance services exceeded $30 million in quarterly revenues.

Consistent with historical trends, the fourth quarter is typically our lowest quarter in revenue generation for these businesses, while the third quarter is seasonally higher. Noninterest income represented 27% of total revenues in the fourth quarter and reflects the strength of our diversified revenue base. Total operating expenses, excluding acquisition expenses, were $112 million for the quarter, a 1.5% increase from the prior quarter, including higher technology, year-end charitable contribution and marketing costs.

The effective tax rate for the fourth quarter was lower than the prior quarter at 20.3%, primarily due to the finalization of the assessment of the deductibility of merger-related expenses and the associated impact on the full year effective tax rate of 23%.

The Slide 10 provides an overview of key asset quality metrics. Provision expense for the 3 months ended December 31, 2025, was $3.8 million compared to $3.1 million for the third quarter of 2025. The increase in the provision for loan losses was primarily due to a slightly higher level of net charge-offs in the fourth quarter of 2025. Reserves were 1.19% of total loans and covered 2.5x the level of nonperforming loans.

In closing, the current level of net interest income and fee-based revenues have produced solid results with meaningful positive operating leverage, supported by disciplined balance sheet management as we've navigated three federal funds rate cuts in late in 2025. Asset quality remains stable. And with our strong capital position, we are well positioned to pursue growth opportunities across all our markets. Thank you for your continued support.

At this time, we welcome any questions you may have.

[Operator Instructions] Our first question will be coming from Feddie Strickland of Hovde Group.

Just -- and you mentioned in your opening comments, higher CRE payoffs for part of the slower loan growth. I mean, do you expect any larger payoffs on the commercial side in the next couple of quarters? And then broadly, how does that factor in to overall loan growth keeping in mind the run-off portfolios?

Thanks, Feddie. And yes, we have officially hurdled the 100-inch snow mark in Central New York. So I appreciate the sentiments on that. So your question is a good one. So in 2025, we probably had $150 million to $175 million of unscheduled commercial real estate payoffs. And where do they go?

Agency money and in certain of our markets, private equity or private funding, maybe the private funding more closely aligned with some of the more larger urban areas, Southern Hudson Valley and maybe some things in New England, closer to Boston, but meaningful. So I think we think that, that's an outsized number, but we're planning for -- that could be a risk for our growth attributes going forward this year as well, understanding that there's other people out there just looking for yield.

And as rates have started to come down a little bit more, I think some of our sponsors are getting offers from agency, structures and other places that are too good to turn down.

Got you. And along those same lines, I mean, can you just update us on what you're seeing in terms of loan pipelines, opportunity in terms of tight geography I'm particularly curious about Rochester and Buffalo since you've mentioned them in your opening comments.

Yes. Thank you. So across the franchise, from Buffalo to Portland, Maine from Louisbourg, Pennsylvania to Burlington, demand is good. Pipelines are strong, stronger than they were at this point last year. And we feel pretty good about the opportunities we're getting to see.

We have a -- as you know, we tend to focus on things that are more holistic from a relationship standpoint. So CRE-only outcomes for us are not as attractive as something where there's real estate involved, but we get a full operating relationship with the sponsor or through C&I relationships. So no reason appears to have a real gap in demand. I think certainly given the cost of building compared to maybe early or mid-2024, there's not as many projects underway on the multifamily housing side, which is where we tend to have a concentration.

But those that are out there are good opportunities. I think the pipeline is good in Western New York in Rochester and Buffalo, I think the team is really energized. We've added a couple of really talented people to the group. And I think on a going-forward basis, we're pretty bullish on opportunities we'll see in Western New York.

And I guess just to drill down on that. I mean, is kind of the mid- to lower single-digit growth rate a good number for '26?

I think it is. And reminding people that we still continue to have our just south of $800 million, older loan portfolio that's in runoff. And we use last year as a marker for that that's moving downwards about $100 million a year. So we're seeing good activity around C&I, and we're seeing good opportunities on the CRE side in most of our marketplaces.

And again, we can exercise selectivity as to which ones we put our best foot forward for. And in fairness, starting in the fourth quarter, we saw better consumer lending activity, especially on the mortgage side. So upbeat that customers potentially who were thinking about moving for the last 2 or 3 years, can deal with a low 6% mortgage rate and given the dynamic of what most people have as equity in their home decide to do something else.

And our next question will be coming from Mark Fitzgibbon of Piper Sandler.

First question I had, it looked like, Scott, you had boosted your reserve against the solar book this quarter by a decent amount. I was curious if anything had fundamentally changed there?

No fundamental change there. I think we were trying to kind of rightsize our coverage allowance, given that it is a runoff portfolio. So really, what you saw this quarter is kind of recalibration of that coverage ratio, but no trends or negative concerns as it relates to that book.

Okay. And then secondly, I was curious how, if at all, the tensions between the U.S. and Canada is impacting sort of the economy in the northernmost markets of your footprint?

Yes, a really good question. And I think I may have said this before, Mark, but we love the Canadians. We grew up with those people. And we have a lot of -- our customers have a lot of business that are cross-border, whether that's out in Western New York and Buffalo or whether that's up in Northern New York closer to Plattsburgh, it's a real issue.

I think that the Canadian customers are just frustrated, whether that means they come into the Adirondack for seasonal housing or just straight commerce. I think the unpredictability of where we've been with tariff rates and what things were going to be accessible to that point.

And I think, if I was kind of going through the underlying comments, what I have heard from people that I've talked to, is a sense of can we trust you still? And so I think that's caused hesitation and future investments. or an existing investment moving forward. So problematic for us because those are not the highest areas of long-term growth anyways. So it's really important to have that connection to the Canadian base for some of our customers to do the things they want to do.

Okay. Great. And then I guess changing gears a little bit.

As you think about M&A, I'm curious, are the hurdle rates of return that you're looking for higher today than in the past, given that the market really hasn't been at -- enamored of many acquisitions in recent quarters and obviously, your own frustration with your stock price post-Evans.

So a couple of things on bundler, but thank you for that. And yes, we think that -- if think about it, a combination of the Evans transaction and us improving our net interest margin, 35 or almost 40 basis points last year, has shifted the plateau of our earnings capacity from somewhere close to $0.80 a quarter to $1. And we think that's pretty noticeable. Worked hard to get to that point.

But at the same point in time, the construct around people worried about either the execution risk associated with M&A or the dilution of your attention to other strategic objectives. Not an issue for us. The Evans transaction went as good as we could have hoped for. Their folks are really engaged. We've had to put them through some changes to some of our systems, but they've really been good at bringing that alive. And I think that from a practical standpoint, they're looking forward going forward.

Your question on hurdle rate is a good one. We're a $16 billion bank now. So it's not so much what transaction is large enough for us to be interested in is that do we put our folks, our organization through an M&A opportunity that can't at least generate or 5% accretion?

So if we're running kind of off a base of $4 a share, does something have to be north of $0.20 a share for us to really take a hard run at that. Now you can look at a bunch of different things, and you can accomplish that in a bunch of different ways. But for us, it's generally been a modest extension of the franchise geographically or really productive fill-in opportunity where our concentration hasn't been as high as we'd like it to be. So still having lots of conversations. There's a lot of high-quality, like-minded smaller community banks across our seven states. So the opportunities are there. And that's how we kind of think about it from a capital deployment mark.

And our next question will be coming from Thomas Reed of Raymond James.

This is Thomas on for Steve. Just wanted to start off, maybe as you guys are looking -- or as you look to deepen your presence in select markets to support growth, can you talk about maybe any planned hiring initiatives that you may have and whether those investments are already reflected in that expense guidance?

Yes. And I might even ask Joe to help me a little bit on this one. So I think we believe that all of our geographies are investable today. So I'll just use an example. We've added a couple of really high-quality folks to the team up in Maine. We have a really nice base of customers in Maine, but we never fully extended our reach from the standpoint of full holistic banking, and we're doing more of that. So the folks that we brought on board have C&I backgrounds. We've committed to a branch site off the wharf in Portland, our first true retail branch site, and we're about to make a commitment for another one up there. Joe?

Yes. Sure, Scott. Branch site, just off the wharf, we call it Bayside. It's a marginal way. We've also signed a letter of intent down in Scarborough. So building out our main presence are really important to us. And why is that? We have good quality bankers up there and adding good quality bankers to the team, which Scott just alluded to.

Now over in Western New York, the same thing, really good quality hires across all parts of the bank. Including insurance and mortgage. Scott mentioned our mortgage results the last quarter. So we're seeing some really nice pipelines across our entire footprint. So where are our focus areas?

Definitely, New England, Maine, we mentioned, but also New Hampshire, the Greater Manchester market, a really important market for us, where we're looking for some growth opportunities with some new branches, as well as in Rochester, already looking at sites in Rochester. We have a lot of intent that we've signed in the city and planning on moving a financial center there in downtown Rochester, as well as across other parts of the Western region.

So still in targets, as well as some of our newer markets. We're excited about the prospects that they're going to bring to us.

[Operator Instructions] Our next question comes from David Konrad of KBW.

Just had a question on the NIM outlook next year, it feels like maybe stability might be the key phrase. I'm not sure. But, the great news is your deposit costs are down to 2%. The bad news is your deposit costs are down to 2%. It might be challenging to reprice. And your commercial book, now the portfolio seems to be pretty close to new originations. So maybe talk about the NIM outlook over the next few quarters?

Sure. I'll start on that one. So you're right. We have our net interest margin 3.65% is a very strong NIM. We can really throw off some nice core earnings with a NIM like that. We are neutrally positioned, so we've been actively managing through federal funds rate cuts over the last few months. So when we think about our margin expansion, it's probably in that 2 or 3 basis points a quarter.

Some of the factors that will influence our ability to reprice our book if you think about the lending side, probably our largest opportunity is in the residential mortgage book where we probably have somewhere in the 125 to 130 basis points of room there. Our other books are probably pretty close to market rates at this point.

Another area where there's some opportunity is in our investment securities book, still have some repricing opportunity there, probably throws somewhere around $25 million in cash flows a month. You're spot on. We have very low funding costs. We talked about having right around $6 billion in deposits that we can actively reprice with market sensitivity.

Probably the biggest opportunity there is in our CD book, probably 77% of that reprices in the next 2 quarters. So I think there is some room, but probably not to the extent that we've seen in 2025, it's probably limited to a few basis points. Net interest income improvement is probably going to be more focused on our earning asset growth and the opportunities that we have there.

Yes. And then I'll just follow up with that. A good observation, Dave, on the commercial crossover where for the quarter, new activity or new loans at a rate that was not terribly different than portfolio yields. Some of that was yield curve base during 2025.

Remember that the 2- to 5-year point of the curve, kind of came down 60 to 75 basis points during the year. when you started the year and said, "Hey, listen, I still got a gap between new production and portfolio yields", some of that got taken away with just natural market activity. In a couple of our markets, we're seeing a little bit of pressure on spread. They typically are the best assets, and so needless to say, whether we're defending or seeing something new, we're very interested in those types of credits.

But holding to a north of 200 or 225 spread above SOFR has been more difficult in recent months. And maybe that's just a function of market demand right now. There was a little bit of a -- a little bit of slowdown in the second half of the year. And then made the comment about our opportunity in -- on the CD book. CD duration today for everybody, not just us, is dam short, 5- to 7- to 9-month instruments and whether we start to see some elongation from us or from others on that, so people can lock in some yields as it looks like the rate structure is more moving in a direction of down, not up.

And lastly, I'll remind everybody that the customer used to getting the yield for the last 3 years. So if you're a customer with significant liquidity, whether you kept it on a bank balance sheet or moved it off, you're used to getting a yield. After going 13 or 14 years with no yield, you now know what that looks like. So I think people utilize the tools that we give them from a treasury management standpoint, and they're very smart with how they do funds management.

And our next question will be coming from Daniel Cardenas of Janney Montgomery Scott.

So maybe just a quick question on competitive factors throughout your footprint on the lending side, would you say competition is fairly rational? Or are you beginning to see perhaps a pickup in pressure as people are looking for growth?

Yes. I would say a little bit as people are looking for growth, and if nothing else, a lot of defense when people have really solid customers where they're the incumbent, where they're defending. I don't think we've seen anything irrational from a structural standpoint. And those have seemed to make sense for us.

I mentioned before, some of our payoffs came from agency-based funding sources where, in fairness, both structure and rate is something that are better normally for the customer than what our standards actually allow for that way. But I don't think it's pervasive and we have so many different markets to be participating in that I wouldn't make a general construct out of that just today.

But I will say this, if you're a highly rated company and you're doing well and you have a history of doing well, you've been able to demand a lower spread if you're interested in new money this year.

Good. And then on the deposits front, are there any markets that are better able to absorb a decrease in rates, as rates come down, are you going to be able to push down deposit costs in any markets better than others?

I would kind of frame it this way, and Annette, if you have something else, let me know. But we have such good market share in so many of our legacy markets that we've been able to do rational things as rates decline in those markets pretty uniformly.

In some of our other markets where we don't enjoy that kind of a share, maybe we've had to keep rates a little higher for a little bit longer or we've got some concentration characteristics that haven't forced down the rates as fast as the Fed has moved. But generally speaking, the fourth quarter was pretty indicative of that. $3 billion of our assets reprice immediately upon a Fed's fund decline, and it takes us a little bit longer. There's a little lag there to get the funding cost down. Maybe we're a month or 6 weeks behind, but so far, we've been pretty diligent at getting it to that point.

Great. And then just last question for me on the credit quality front. Any areas that you guys are perhaps tapping the brakes on? I mean, your credit metrics are good. Just wondering if maybe you're approaching any particular area with the -- a little bit more caution than maybe you were 2 or 3 quarters ago.

Not necessarily anything new. We have a pretty diversified book. So we pay attention to concentrations. We're probably a little less excited about hospitality or the office space, but that's not new. So I don't think we have anything that's specific emerging trend from something that we're going to shy away with continuing to just monitor as maturities come due and make sure we understand what our customers' position is and their ability to refi when that maturity happens.

But also pretty well balanced as far as what our maturity, no large maturity walls or anything like that. So just navigating customers and paying attention to our industry composition, but really no emerging industry or anything we're avoiding at this point.

Our next question will be coming from Matthew Breese of Stephens.

I wanted to touch on charge-offs a little bit. For a while there, meaning for the years kind of proceeding COVID, charge-offs at NBTB could be anywhere from 30 to 35 basis points per quarter routinely. And with the consumer balances and wind down and coming down, should we reframe charge-off expectations here to something lower? And how would you kind of characterize normal with the makeup of the current book?

Yes, Matt, that's a good question. I -- back in maybe 5 or 6 years ago, our charge-off rates were probably somewhere in that 25 to 30 basis points. We had a fairly large unsecured consumer book with our LendingClub and Springstone portfolio, as well as our residential solar book, which is has much less of an impact.

So those were throwing up a little bit higher charge-off rates. As those books wind down, we would expect to see more lower levels of charge-offs and kind of where we've been running at somewhere in the 20 basis points range, 15 to 20 basis points range is probably kind of more normalized as those books become smaller and smaller. Just -- I think residential solar is somewhere in the 90% to 95% charge-off rate basis point charge-off rate -- versus probably somewhere closer to 8% to 10% with that prior book. So really, I think that that's kind of where we are in 2025 is kind of probably that new normalized rate.

And I think, Matt, if you think about it, that we've done such a good job in indirect auto lending and our losses historically. Have kind of been between 20 to 35 basis points. So despite the cars being way more expensive in 2026, than the last time that Matt Breese bought a car, we've held in very well on that, and the customers have performed quite well on that side.

Someone read to me the other day, a statistic that our combined mortgage losses from 2020 to 2025 were $31,000. So we continue to lead with that product. It's really, really important in our core marketplaces. And so many other opportunities present themselves once you're the core lender on the mortgage side. So I don't see us taking our focus away from that line of business either.

Yes, not the greatest auto customer here. Annette, while you were discussing the reserve on solar, has the appetite to sell that book changed at all? And maybe I'm connecting the wrong dots, but one of my thoughts as you were discussing the recalibration there was whether or not you've been listening to bids or rethought kind of what the mark should be on that book?

I'll start with that one, Matt, and then have Annette jump in as well. The dilemma we have is so much of our production was sort of in the 2020 to early 2023 time frame where we experienced really productive, but substantial growth in that portfolio.

And I think we all knew what the rate structures look like in the world then. So from a marketability of that portfolio, which we would move out of, if we could find something that made sense for us. But right now, it's really just a rate question. I think the assets are performing much better than most other solar portfolios in terms of loss rates and customer performance. but the rates are low.

And so for us to do that, would be a substantial outcome. And much like investment portfolio restructuring, we're kind of curious. If we can't find something that's got a terminal value above zero, we don't like to do it. So I think for us, we're hanging in there, waiting for the customer to pay us back and redeploy those proceeds and other things.

Understood. And then last one is just on share repurchases. This quarter's level is a bit higher than I was expecting. What are some of the catalysts or triggers for you to repurchase stock? And is what we saw this quarter something we might see in early '26?

Yes. Great question, Matt. I said this last quarter, I thought I was going to get to go my whole career, and not buy shares. But truthfully, the opportunity presented itself. And to your point, two things. Value price, because somebody pointed out earlier, we think our valuation does not fully reflect the improvements we've had from an operating earnings standpoint.

And number two is capacity, right? So with our change of earnings capacity, essentially, those share repurchases that we did in the fourth quarter, a little over $10 million worth. We self-funded in the quarter and didn't change any of our capital ratios. So I think it presents an opportunity for us to follow that pattern like we did in the fourth quarter. Going into the future, and we probably have more capacity than that. But I'm saying we think we can self-fund the level that we bought in the fourth quarter every quarter.

[Operator Instructions] Our next question will come from Feddie Strickland from Hovde Group.

I had a couple of quick follow-ups. First on the margin. I did notice secretion income picked up some there. Just to clarify, the margin still increased in the first quarter even if that normalizes back down.

So accretion, usually, there are a handful of accelerated payoffs or affecting accretion during the quarter, which are very hard to predict. We think working through some of the federal fund rate cuts that happened in December, the margin will probably be fairly stable, if not, maybe affected by a basis point or 2 barring any changes that are normalized accretion. So that's kind of how we're thinking about margin for the first quarter.

Okay. Got it. And then just on fees, I saw there was some seasonal activity-based fees in the wealth line. Do you have a sense for how much of the linked quarter growth was seasonal?

So probably somewhere around 300,000 to 400,000 was seasonal related on the wealth side. So just some activity-based fees. But all in all, a very strong quarter with organic growth, and our market helped a little bit with that. On fee income in general, there's probably somewhere around $1 million to $1.5 million of BOLI gains and other securities gains that are a little harder to predict the activity there. I think, BOLI, on a normal run rate basis is somewhere around $2.4 million.

Yes. And I even follow that up. And I think now that as we've gone to be a larger enterprise, the seasonality is a bit less noticeable for us. But -- kind of as a quick reminder, the insurance business tends to thrive in the first and the third quarter based on renewal time frames with a little lower activity in the second and the fourth benefits administration, the retirement plan administration business, usually solid first, second, third, with a little less activity fees in their fourth quarter.

Your observation is astute. Wealth had a really, really strong year and a really strong finish to the year, and some of that was a bit seasonal, but generally speaking, we're in a really good lift off point on all of those businesses. I think the other thing, I think Annette has reminded people from time to time is that in our first quarter, we tend to have $0.04 or $0.05 of operating costs that are not usually reflected in some of the other quarters. Some of that is seasonality.

It's just more expensive to plow and heat than it is to mow and air condition. So that's a basic one. But we also have higher payroll costs in the first quarter of the year and usually higher stock-based compensation expense just based on the protocol, the timing of how we grant new awards. So I think we always kind of think about this $0.04 to $0.05 carry that the first quarter has on the OpEx side that usually the other quarters don't have to work through.

And I would now like to turn the call back to Scott Kingsley for his closing remarks.

In closing, I want to thank everyone on the call for participating with us today, and we appreciate your interest in NBT. Stay warm. See you next time.

Thank you. Mr. Kingsley. This concludes today's program. You may now disconnect.

Good day, everyone. Welcome to the conference call covering NBT Bancorp's Third Quarter 2025 Financial Results. This call is being recorded and has been made accessible to the public in accordance with SEC 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 2, 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 a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I will now turn the conference over to the NBT Bancorp President and CEO, Scott Kingsley for his opening remarks. Mr. Kingsley, please begin.

Thank you. Good morning, and thank you for joining us for this earnings call covering NBT Bancorp's Third Quarter 2025 results. With me today are Annette Burns, NBT's Chief Financial Officer; Joe Stagliano, President of NBT Bank and Joe Ondesko, our Treasurer. Our operating performance for the third quarter reflected the positive attributes of productive asset repricing trends, the diversification of our revenue streams, prudent balance sheet growth and the additive impact of our merger with Evans Bancorp completed in the second quarter.

Operating return on assets was 1.37% for the third quarter with a return on equity of 12.1% and an ROTCE of 17.6%. Each metric demonstrates continued improvement over the linked and prior year quarters, and importantly, reflects the generation of positive operating leverage. Our tangible book value per share of $25.51 at September 30 is 7% higher than a year ago and above the level it was at when we announced the Evans merger 13 months ago. This continued capital strength has us very well positioned to support all our strategic growth initiatives.

The continued remix of earning assets, diligent management of funding costs and the addition of the Evans balance sheet resulted in an improvement in net interest margin for the sixth consecutive quarter. We are pleased with our progress to date with net interest margin expansion. However, recent and expected changes to Fed funds rates will likely challenge future margin improvements compared to our most recent quarters. Growth in noninterest income continues to be a highlight with each of our nonbanking businesses achieving productive improvements in both revenue and earnings generation year-over-year.

We were also pleased to announce an 8.8% improvement to our dividend to shareholders earlier in the quarter, marking our 13th consecutive year of increases. This reflects our strong capital position and our generation of consistent and improving operating earnings. As we have stated before, our capital utilization priorities are to continue to support NBT's organic growth and the consistent improvement to the quarterly dividend we pay our shareholders. In addition, we appreciate the opportunity to evaluate and partner with other like-minded community banks.

Returning capital to shareholders and opportunistic share repurchases is also part of our capital planning. And as such, we renewed our $2 million share repurchase authorization through the end of 2027. Before turning the meeting over to Annette to review our third quarter results with you in detail, Joe Stagliano will provide some additional color on our progress in the Western region of New York and other initiatives across the markets. Joe?

Thank you, Scott. We continue to build on the momentum of our successful Evans Bank integration. Since the merger, we've experienced solid growth in deposits in the Western region of New York and we are retaining key lending relationships despite experiencing approximately $30 million of net contractual runoff in the portfolio. Customer sentiment remains strong, and employee engagement is high. Let me walk you through some of our key market developments. In Buffalo and Rochester, we've had success recruiting and onboarding talented professionals across all lines of business, which complements the strong team we already have in place.

Our new Webster branch in Greater Rochester opened in April, and it's off to a promising start. To support growth -- to support our growth initiatives in Rochester, we plan to open a financial center in the market during 2026. Additionally, we are exploring locations in the Finger Lakes to fill in our branch network in this attractive region. In the second half of 2026, we expect to break ground on a new branch location near the planned Micron chip fabrication site in Clay, New York.

In addition, our current team of bankers and network of locations in the Mohawk Valley are well positioned to support the growth anticipated from Chobani's plans for a new facility expected at 1,000 jobs to the area. Our new Malta, New York branch near GlobalFoundries is seeing excellent traffic and growth. In the Hudson Valley, IBM has announced plans to expand the Poughkeepsie and we are seeing positive demographic shifts in the region. We entered this market through our merger with Salisbury Bank and are eager to improve our concentration characteristics in this region.

Earlier this year, we opened our fourth branch in Burlington, Vermont, and we are seeing good momentum. We are set to open an additional branch office in Portland, Maine in early 2026. We've also secured a site in Torrington, Connecticut that will connect our presence in West Hartford with our locations in Litchfield County in early 2026. In addition, we remain focused on scaling our operations in New Hampshire, supported by the strong team of bankers we have in place there. Our team continues to evaluate both new locations and branch optimization using an active and structured process. This dual focus ensures that we remain agile and responsive to market needs as we maintain operational efficiency. I will now turn it over to Annette.

Thank you, Joe, and good morning. Turning to the results overview page of our earnings presentation. In the third quarter, we reported net income of $54.5 million or $1.03 per diluted common share. Excluding acquisition expenses, our operating earnings per share were $1.05, an increase of $0.17 per share compared to the prior quarter. Revenues grew approximately 9% from the prior quarter and 26% from the third quarter of the prior year, driven by improvements in net interest income, including the impact of the Evans merger. The next page shows trends in outstanding loans. Total loans were up $1.6 billion for the year, including acquired loans from Evans.

Excluding consumer loans and a planned contractual runoff status and the loans acquired from Evans, annualized loan growth in 2025 was approximately 1% higher from December 2024. Growth in commercial, indirect auto and home equity loans were partly offset by declines in residential mortgage balances. During 2025, we have experienced a higher level of commercial real estate payoffs while production has remained strong. We have captured quality lending opportunities across our markets, which has also provided growth in core deposits. This gives us flexibility to remain disciplined in our loan pricing and focus on holistic relationships.

Our total loan portfolio of $11.6 billion remains very well diversified and is comprised of 56% commercial relationships and 44% consumer loans. On Page 7, total deposits of $13.7 billion were up $2.1 billion from December 2024. Excluding the deposits acquired from Evans, deposits increased $250 million from the end of 2024, with growth in checking and money market accounts. 58% of our deposit portfolio consists of no and low-cost checking and savings accounts, while 42% is held in higher cost time and money market accounts. The next slide highlights the detailed changes in our net interest income and margin.

Our net interest margin in the third quarter increased 7 basis points to 3.66% from the prior quarter primarily driven by the continued improvement in earning asset yields. Net interest income for the third quarter was $134.7 million, an increase of $10 million above the prior quarter and $33 million above the third quarter of 2024. The increase in net interest income from the prior quarter was largely attributed to the first quarter impact of the Evans acquisition, along with earning asset yield improvement. As a reminder, approximately $3 billion of earning assets repriced almost immediately with changes in the federal funds rate while approximately $6 billion of our deposits, principally money market and CD accounts remain price-sensitive.

The opportunity for further upward movement in yields will depend on the shape of the yield curve and how we reinvest loan and investment portfolio cash flows. The trends in noninterest income are outlined on Page 8. Excluding securities gains, our fee income was $51.4 million, an increase of 9.8% compared to the previous quarter and an increase of 13.5% from the third quarter of 2024. The seasonally higher third quarter also benefited from a full quarter of Evans activity. Our combined revenue from retirement plan services, wealth management and insurance services executed $32 million in quarterly revenues.

As a reminder, and consistent with historical trends, the fourth quarter is typically our lowest quarter in revenue generation for these businesses. Noninterest income represented 28% of total revenues in the third quarter and reflects the strength of our diversified revenue base. Total operating expenses, excluding acquisition expenses, were $110 million for the quarter, a 4.4% increase from the prior quarter and reflected a full quarter of Evans activity. Salaries and employee benefit costs were $66.6 million, an increase of $2.5 million from the prior quarter. This increase was primarily driven by the full quarter impact of Evans, higher incentive compensation and higher medical costs.

Slide 10 provides an overview of key asset quality metrics. Provision expense for the 3 months ended September 30, 2025, was $3.1 million compared to $17.8 million for the second quarter of 2025. The decrease in provision for loan losses during the quarter was attributable to $13 million of acquisition-related provision for loan losses in the second quarter, partially offset by net charge-offs returning to a more normalized level in the third quarter. Reserves were 1.2% of total loans and covered 2.5x the level of nonperforming loans.

In closing, growth in our net interest income and fee-based revenues drove our record performance in the third quarter and contributed to our meaningfully improved operating performance for the first 9 months of 2025. We are in a strong capital position, have growth opportunities across all our markets and are well positioned to take advantage of them. Thank you for your continued support. At this time, we welcome any questions you may have.

[Operator Instructions] It comes from the line of Feddie Strickland with Hovde Group LLC. Please proceed.

Just wanted to start on expenses. You've got a full run rate of Evans, now on the expense line. I was just wondering if you could talk about where you're at in terms of cost saves and maybe what we should expect in terms of the total expense line over the next quarter or so.

Sure. Happy to take that. We think that our cost saves are essentially achieved during the third quarter. So we don't expect to have any additional meaningful impact related to those on a go-forward basis. The run rate that we had in the fourth -- in the third quarter of $110 million is an appropriate run rate as we look forward. Just as a reminder, we typically see merit increases starting in the first quarter and running off our typical expense increase going forward, typically runs somewhere between 3.5% and 4.5%. That's kind of how we think about 2026.

Got it. That's helpful. And just wanted to ask, thinking about loan growth, it sounds like you've got some new hires there that should help the pipeline longer term. What should we think over the next couple of quarters in terms of net new loan growth and keeping in mind what's the level of runoff that you expect in the residential solar and other consumer book?

So let's attack that one together. In terms of our activity for the last 2 quarters, it's actually been very robust. We experienced a much higher level of payoffs than we had anticipated. And quite frankly, than we had experienced in a year ago. But I think as we roll into early to mid-2026, low to mid-single-digit growth rate is probably appropriate for our markets. Stand-alone, our markets still have really good activity levels in them. And our pipeline, quite frankly, is very good. Getting things on the construction side to a closing outcome, as you know, in our weather, we probably don't close a whole bunch of those in December through February.

But quite frankly, we like where the pipeline is with that and think there's really good opportunities. We will look at where we are from a balance sheet perspective right now and really like where we're centered holistically, which means an 85% loan-to-deposit ratio for us, quite frankly, is more comfortable for us than something in the '90s. We think it gives us longer-term optionality from an invested asset standpoint. So at that level and where we are in those expected growth rates, we could still move up earning assets, they might just not all be loans. So -- but we're very comfortable with that from an outcome standpoint and think it's probably almost as important for us that we've continued this steady growth on the funding side, mostly on the core deposit side. So that's how we're kind of framing where we think the balance sheet moves.

Our next question comes from the line of Steve Moss with Raymond James.

Maybe just start off, Scott, maybe just following up on expenses here. You guys mentioned the recruitment of talent here and the de novo branches as well. Just maybe curious as to if you can size up what your expected talent recruitment is going to be and kind of how you're thinking about how many de novo branches you may add over the next 12 months or so?

So I kind of frame it this way, Steve, and I'll ask Annette and Joe to comment if I've left something out. I think in terms on the brand side, I think we're thinking 4 to 6 a year to improve our concentration in some of the markets that we're either new to or where our concentration is, quite frankly, not robust enough. So as an example, I think we've said that from the beginning that Rochester, New York, as an example, is one of those markets where when we partnered with Evans, their concentration was we'll see on the east side of Rochester in some great spots, but building that out across sort of Central City, Rochester and maybe even to the west side maybe there's a concentration of 2 to 4 more sites for us over the next couple of years to use that example.

I think that's also a spot for us where the recruiting of additional talent in the Western region of New York State has been very productive for us. We had this -- let's hold stuff in from Evans posture for the first 5 or 6 months, and we think we've done that, and we think our team has done very well on that. And now we're in a position to be a little bit more assertive and add some people to the mix that we think can move up some of our long-term expectations on the growth side.

I would just say from a expense management, I think we look at branch optimization to kind of offset some of the growth initiatives and then as well as technology investments to help improve efficiencies. So given that, I don't think that we would see an outsized expense growth than what we historically see from NBT.

Okay. That's helpful. And then just in terms of maybe just thinking about your presence across upstate New York, just kind of curious, are you interested in additional M&A deals or just kind of how you're thinking about things at the current time.

Steve, I'd frame it kind of both ways saying that we are interested in building out the franchise that now goes from Buffalo to Portland and Wilkes-Barre, Pennsylvania to Burlington. Fill-in strategies for us are probably first in our mind. Would we move the franchise another 50 miles West, South, East for sure. But frankly, filling in some of those from an opportunistic build-out standpoint, including the potential for M&A is absolutely primary for us. So we are -- we have the opportunity to have discussions with like-minded smaller community banks.

And we're hoping that we've left a good impression in that if long-term independence is not in their plans, they'll see the value proposition of talking to us.

Appreciate that, Scott. And then maybe just 1 on the core margin here, just kind of curious, any updated thoughts around purchase accounting accretion going forward here? And could we see any incremental core margin expansion here?

Great question. So from an accretion standpoint, I think that's fairly stabilized and appropriate run rate. So I don't think we'll have any material change of that over the next, let's say, 4 quarters or so. As we think about the margin, in the short term, with the potential for multiple rate cuts, in our near future here. We think there might be a little bit of margin pressure, and that's really because even though we're neutrally positioned, our assets reprice almost immediately, while we have to actively manage our deposit repricing.

As a reminder, $6 billion of our assets of our deposits that we're able to reprice about $1.4 million of those are in CDs. So it might take a little like a full quarter to work through those to help offset those asset repricing. So the fourth quarter could see a little bit of pressure and then looking out into 2026, especially if we see an improvement in that shape of the yield curve, we could see some margin improvement jumping off of the fourth quarter.

Okay. And just 1 follow-up there. Just what percentage of loans are variable rate these days?

Somewhere around $3 billion are variable rate.

Yes. And Steve, that includes all of our assets that are variable. So the loans are probably $2.5 billion to $2.6 billion, which quick in my head, that's a little over 20%. And then there's probably $100 million to $150 million worth of investment securities that's are variable. And then currently, we find ourselves in a Fed fund sold position. So those overnight funds obviously move with changes in SOFR or Fed funds changes, and that's a couple of hundred million for us.

Our next question comes from the line of Mark Fitzgibbon with Piper Sandler.

Just wanted to follow up with a question on the solar loans. I guess I'm curious, is there any way to kind of accelerate the exit of those? Is there kind of any depth to the market to sell those loans?

That's a really good question and something we spend a lot of time with. Today, Mark, the answer is no for that. There is desire potentially for that asset. In other words, people still like the asset class a lot despite all of the volatility and future volatility associated with new originations. But remember, we still have a fair portion of our loans that were originated in the 2020 to 2023 operating years and they contain yields that are lower than the market is demanding today. So for us to move that on an accelerated basis, we would have to embrace a fair value loss today. And that's something we need to do. Those assets are performing, again, not utopian yields, but those assets are performing the way they're supposed to perform and our credit characteristics have been exactly in line with what we expected.

Okay. And then I guess I'm curious, are you seeing any pressure at all on the auto loan delinquencies right now?

Not significant at all. Quite frankly, it's been very consistent. Remember, we're in the A and B paper classes. I think both from an origination standpoint, we might see this going forward with a couple of the industry announcements that capacity for C&D lending might be more substantially impacted over the next 3 months, 12 months period of time. But for us, it's been great. And remembering, we're making our indirect auto loans in our footprint. And most of our footprint doesn't have meaningful public transportation. So people are making their car loan payments so they can go to work.

Okay. And then 1 for Annette. Annette, your comments earlier, I think you said with respect to the margin, it'd be challenging to improve it. Should we take that to mean that the margin will decline? Or do you sort of think you can hold the margin somewhere close to the current level?

So for the fourth quarter, that's where we're reflecting it might be a little bit of a challenge to hold but a few basis points for one direction or the other. And then I think we kind of stabilize pending no further rate actions and have the ability to see a little bit of margin improvement quarter-over-quarter as we still have some opportunity to reprice our loan book.

And Mark, we've been very deliberate about making sure that we're holding spreads on new assets that we're winning. We don't think at this point in time, in sort of the credit cycle, which is probably closer to mature is the right time to be reaching for growth.

Okay. And then lastly, no updates on the timing for the Micron technology project.

Yes. $64,000 question so thanks for asking it. Today, we still expect shovels in the ground at the site here late in the fourth quarter. But if you know our ZIP code very well, the shovel has to have a lot of pressure on it to get into the ground in the next couple of months. Our perspective today on that, Mark, is that the site will be improved relative to taking on the fill and because this site, quite frankly, is a touch wet so I think the next 5 to 7 months are site fill in making sure that the activity has been compressed with the expectation that building actually starts mid-to late 2026.

Our next question is from the line of Matthew Breese with Stephens Inc.

A few kind of margin-related questions. First, do you happen to have the spot cost of deposits either at quarter end or most recent date and then I was hoping you could provide some color on the roll-on versus roll-off dynamics of fixed and/or adjustable rate loans today.

On the spot side, now let's get back to you. We don't have that sitting in front of us today. I will say this, we're pretty sure because we made some adjustments to deposit costs after the Fed rate change in September that October's cost of funds are probably slightly lower than September's. But my guess is it's measured in single basis points. So let's reframe your second part of your question if you would.

Yes. For your fixed rate and adjustable rate loans, what is the roll-on versus roll-off rates?

Maybe I'll take that based on book. So for our commercial portfolio, we probably have about a 50 basis point differential now between our portfolio yields and our origination rates. For indirect auto, we're just about there. And really, that's dependent on the belly of the curve and where we price those auto loans. So if you look at our presentation, we're probably a little bit lower on our new origination rates than our current portfolio yield. So that's going to probably fluctuate from quarter-to-quarter. And then where we have the most room is in our residential mortgages, which is about -- still about 160 basis points of room between our portfolio yields and our new origination rates.

Okay. And then this 1 kind of leads into my next question, which is your securities yields are still pretty low relative to what you could go purchase something at today. When do we see a more pronounced pickup in securities yields as the back book starts to reset or mature?

So our portfolio today is very much a cash flowing portfolio. So it's mostly mortgage-backed securities. So it's pretty orderly. It's in the line of a couple of hundred million dollars a year from a cash flow standpoint. So we don't think that changes much. But we will acknowledge your comment that our portfolio yields are now below our peer group because we think we're the last ones in the peer group that did not do a onetime charge or a restructuring.

Okay. And just last one, Scott, your comments on perhaps earning asset growth beyond loan growth. I felt like it was a not so subtle hint that we might see some securities growth near term. To what extent might that happen? And to what extent do you lean into kind of your excess cash position to do that?

Yes. That's a terrific question. I think today, we have that flexibility today. And maybe over the last couple of years, we didn't enjoy that flexibility at the same level. So I think it's a duration-based risk/reward for us, Matt, that today, when you stay in the short term end setting aside expectations as short-term rates may come down a little bit. There's really not much of a penalty to stay in Fed funds or something very short term. That probably gets a little bit more definition to it after the expected changes in Fed funds rates here in the fourth quarter, and we'll assess it from there.

When we kind of look at that is we've never taken a real mismatch in terms of duration in our portfolios. So I wouldn't expect to start that in this cycle. But I do think an opportunity does present itself for us to continue to analyze if we can leg into that a little bit more. Remember we are very deliberate about how we handle the investment portfolio that we inherited from Evans and where we push those cash flows to what we disposed of and what we decided to retain. Our construct around investment securities continues to be making sure we have enough latitude to support the collateralization for our municipal deposits. So that's more of our focus points than whether we have incremental earnings opportunity associated with a $50 million, $60 million, $100 million leg in on the security side.

Our next question is from the line of David Konrad with KBW.

I wanted to switch gears a little bit and talk about fee income. I thought it was a really good quarter, particularly in insurance. Just maybe -- I know it's seasonally probably your strongest quarter there, but highlight what's going on there? And maybe is 7% in annual growth rate that you can think about in 2026.

Good question. So for our insurance business, our third quarter is our most seasonally high, probably to the tune of about $1 million, and that's just some seasonality of some of our municipal customers. So the first and third quarter are typically higher for our insurance business. The growth rate of around 7%, I would say somewhere those high mid-single digits is an appropriate run rate seeing some good commercial growth across our business line. Commercial business -- our insurance business is very integrated with our banking business. So a lot of referral opportunities as it relates to that, and that's what drives the growth there.

And to follow that, David, the rate of change on rate increase that the insurance companies have been able to be approved for is a little bit less than we experienced over the last couple of years. So in other words, new rate structures, we're generating growth for most agencies in the 4% to 6% rate before you even add new customer development.

Got it. And then maybe last question and follow-up here. Help us out a little bit on next quarter and your outlook as we get a little bit more seasonally challenged in the fourth quarter for the total fee income business.

Yes. So historically, and Annette will remind me if I'm wrong on this, historically, fee income for benefits administration and insurance has typically been 6% to 8% lower in the fourth quarter than it was experienced in the third quarter. And there's nothing for us today telling us that we'd be outside of that expectation.

And I would also just remind there's probably about $1.5 million of unique items to the quarter gains in the third quarter. So that also kind of made the third quarter a little higher.

[Operator Instructions] We have a question from the line of Feddie Strickland with Hovde Group.

Just had a quick follow-up on capital. You talked a little bit about M&A down the road already. But just wanted to get your thoughts on capital management, any sort of capital ratio number you're trying to manage to? And could we see buybacks executed beyond the level of offsetting the stock-based comp?

So thank you for the question and good reference point. Over the last 2.5 years, we've been really, really deliberate on capital retention because we were going through the completion and closing of both the Salisbury transaction as well as the Evans transaction. So we weren't active -- real active in a lot of our other attributes because we wanted to make sure we had the purchase accounting right and that our estimates of impact on dilution were appropriate. We've gone through that. We're very comfortable. A matter of fact, we've exceeded our expectations on getting back to pre-announcement levels of capital.

Holistically, right now, we're really comfortable from a capital position. And I would argue on most days, we have too much. And just given the risk attributes of our balance sheet, but that being said, I think we're in a spot from a maintenance standpoint of our capital levels holistically and specifically at the bank, where there's -- we can embrace every opportunity that we have without worrying about that. To your question, historically, we always try to cover equity-based compensation plans with repurchases so that we didn't dilute ourselves on a creek basis.

Today, given where valuations are for high-quality earnings generation characteristics like we have suggest that maybe we should be a little bit more active with repurchase activity. Has never been our principal focus relative to capital management, but we find ourselves in a position today where we're not sure the market has fully recognized our capacity for earnings.

All right. Great. And just one last one on the margin. I understand the dynamics of repricing loans versus deposits and a lag on deposits. But it sounds like if we get some level of steepness in the yield curve and a couple more cuts, and you start to get the benefit of those deposit costs lower, maybe in the mid '26. I mean, could we see initial pressure on the margin near term, but maybe margins start to come up a little bit over time with maybe some backup loan repricing, the deposit lag piece and assuming we have some level of steepness in the curve.

I think that's a good summary of how we're thinking about margin and potential for margin improvement, was just a reminder that you're probably not going to see the same level of benefit that we saw in 2025 just because a lot of our loan book has repriced. And so it's really less of an opportunity than what we've seen.

And as I'm not showing any further questions in the queue, I will turn the call back to Scott Kingsley for his closing remarks.

Thank you. In closing, I want to thank everyone on the call for participating today and for your continued interest in NBT and at least for this week, go build.

And, thank you, Mr. Kingsley. This concludes our program. You may disconnect, and have a great day.

Thank you.

Good day, everyone. Welcome to the conference call covering NBT Bancorp's Second Quarter 2025 Financial Results. This call is being recorded and has been made accessible to the public in accordance with SEC 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 2, 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 can be contained within the appendix of today's presentation.

[Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to NBT Bancorp President and CEO, Scott Kingsley, for his opening remarks. Mr. Kingsley, please begin.

Good morning. Thank you for joining us for this earnings call covering NBT Bancorp's Second Quarter 2025 results. I would like to extend a special welcome today to our newest investors who joined us in May with the Evans Bancorp merger.

With me today are Annette Burns, NBT's Chief Financial Officer; Joe Stagliano, President of MBT Bank; and [ Joe Andesco ], our Treasurer.

Our operating performance for the second quarter reflected the positive attributes of productive asset repricing trends, the diversification of our revenue streams, prudent balance sheet growth, and the additive impact of our recently completed merger with Evans Bancorp.

Operating return on assets was 1.19% for the second quarter with a return on equity of 10.5% and ROTCE of 15.25%. Each metric demonstrates continued improvement over the linked and prior year quarters, and importantly, reflects the generation of positive operating leverage. Our tangible book value per share of $24.57 at June 30 and is 9% higher than a year ago, and our tangible equity ratio is already back above the level it was when we announced the Evans merger 10 months ago.

This continued capital strength has us very well positioned to support all of our strategic growth initiatives. The continued remix of earning assets and diligent management of funding costs combined with the addition of the Evans balance sheet, resulted in an improvement in net interest margin for the fifth consecutive quarter.

Growth in noninterest income continues to be a highlight with each of our nonbanking businesses achieving productive improvements in both revenue and earnings generation year-over-year. We were also pleased to announce an 8.8% improvement to our dividend to shareholders, marking our 13th consecutive year of increases. This reflects our strong capital position and our generation of consistent and improving operating earnings.

We continue to see activity across Upstate New York semiconductor chip corridor, including progress on site-specific milestones related to Micron's planned complex outside of Syracuse as well as the enhanced partnership announced between Micron and the federal government that notably included additions to Micron's previous capital commitments.

Team members at MBT are engaged in supporting our customers and communities and participating in the growing ecosystem around semiconductors and advanced electronics manufacturing in several of our markets.

Before turning the meeting over to Annette to review our second quarter results with you in detail, Joe Stagliano will provide some additional commentary around the completion of the Evans merger. Joe?

We closed our merger with Evans Bancorp on Friday, May 2, and successfully converted all Evans customer accounts to the MBT core operating systems over the weekend. The filling Monday, we opened 18 Evans Bank branches as MBT Bank locations, including 14 in and around Buffalo and four in Greater Rochester. We believe the approach of closing and simultaneously completing the systems conversion enhances both the employee and customer experience that reduces execution risk and it expedites the integration process.

Through this transaction, we added approximately $1.7 billion of loans, $1.9 billion of deposits and issued 5.1 million additional shares as consideration. Valued at $222 million as of the closing date. So far, we have realized the vast majority of our targeted 25% in cost synergies, with the remainder expected by the end of 2025.

We achieved a smooth transition made possible by our dedicated integration team with over 100 members from both organizations. They work tirelessly with the shared vision of delivering a positive experience to over 40,000 Evans Bank customers. As a result of the conversion, we added more than 100,000 accounts and over 25,000 digital banking and debit card users.

We also welcomed 200 Evans employees to the MBT team and three seasoned executives, from Evans assumed leadership positions with MBT Bank. [ Ken Pollock ] as President of the Western region of New York and Buffalo Regional President; [ Tim Brown ] as Rochester Regional President; and [ Audrey Meyers ] as Senior Territory Manager for Retail Banking in the Buffalo and Rochester markets.

I personally want to thank everyone who joined MBT for their professionalism, their enthusiasm and their partnership. The response from our customers and communities has been overwhelmingly positive. They have embraced our enhanced suite of products and technology offerings, and they've shared their appreciation for the care and attention we've shown throughout this process.

In the days and weeks following the merger, members of our leadership team have visited branches and met with customers and employees. The reception has been warm and the conversation is encouraging. We are continuing to work together towards a common goal to serve our customers better, support our communities more deeply, provide enhanced shareholder value and grow stronger together. Now I will turn it over to Annette to review our second quarter results with you in detail. Annette?

Turning to the results overview page of our earnings presentation. In the second quarter, we reported net income of $22.5 million or $0.44 per diluted common share. Excluding acquisition expenses, acquisition-related provision for credit losses and securities gains, our operating earnings per share were $0.88, an an increase of $0.08 per share compared to the prior quarter. Revenues grew approximately 10.5% from the prior quarter and 22% from the second quarter of the prior year. Driven by improvements in net interest income, including the impact of the Evans merger.

The next page shows trends in outstanding loans. As Joe mentioned, we added $1.7 billion of loans from Evans and recorded fair value marks on loans totaling $95.2 million net of a $7.7 million reclassification to loan loss reserves for purchased credit deteriorated loans. Excluding consumer loans and a planned contractual runoff status and the loans acquired from Evans, Loans grew nearly 1% from December of 2024.

Growth in commercial and industrial, indirect auto, home equity, were partly offset by decreases in residential mortgage and commercial real estate. Which experienced higher level of payoffs during the quarter. Our total loan portfolio of nearly $12 billion remains very well diversified and is comprised of 56% commercial relationships and 44% consumer loans.

I should also mention that we completed the sale of the $255 million Evan securities portfolio in May, which contributed to the increase in short-term interest-bearing accounts at the end of the second quarter and leaves us some near-term liquidity optionality.

On Page 7, total deposits of $13.5 billion were up almost $2 billion from December 2024. Excluding the deposits acquired from Evans, deposits increased $104 million from the end of 2024. Deposit mix characteristics also improved with an increase in demand deposits, savings, interest-bearing checking and money market accounts offset by a decrease in time deposits. 59% of our deposit portfolio consists of no and low-cost checking and savings accounts, while 41% is held in higher cost time and money market accounts.

The next slide highlights the detailed changes in our net interest income and margin. Our net interest margin in the second quarter increased 15 basis points to 3.59% from the prior quarter, primarily driven by the increase in earning asset yields and acquisition-related net accretion.

Net interest income for the second quarter was $124.2 million, an increase of $17 million above the prior quarter and $27 million above the second quarter of 2024. The increase in net interest income from the prior quarter was primarily driven by the Evans acquisition as well as higher earning asset yields, partially offset by a 2 basis point increase in the cost of deposits.

Evans higher cost of deposits, primarily in interest-bearing checking and savings accounts was partly offset by a decrease in the cost of time deposits. The trends in noninterest income are outlined on Page 9. Excluding securities gains, our fee income was $46.8 million, an expected seasonal decrease of 1.5% compared to the previous quarter and increased 8% from the second quarter of 2024. The decrease from the prior quarter was primarily attributable to the first quarter's $1.2 million bank owned life insurance gain and lower seasonal insurance revenues, partially offset by incremental Evans activity. Noninterest income represented 27% of total revenues in the second quarter, reflecting the strength of our diversified revenue base, but down from 31% in the prior quarter, reflective of the Evans mix.

Total operating expenses, excluding acquisition expenses, were $105.4 million for the quarter, a 6.3% increase from the prior quarter. Salaries and employee benefit costs were $64.2 million, an increase of $3.5 million from the prior quarter. This increase was primarily driven by the impact of the Evans acquisition, a full quarter of merit pay increases and higher medical costs. These increases were partially offset by lower payroll taxes and stock-based compensation expenses, which are historically higher in the first quarter of each year.

The quarter-over-quarter increase in technology and data services, occupancy and all other expenses were driven primarily by the Evans acquisition, as well as timing of planned initiatives and continued investment in digital platform solutions. Amortization of intangible assets included $1 million related to Evans in the second quarter. We recorded a $33.2 million core deposit intangible related to the Evans core funding base. We are expecting to amortize that intangible over the next 10 years on an accelerated basis.

Slide 11 provides an overview of key asset quality metrics. Provision expense for the 3 months ended June 30, 2025, was $17.8 million, compared to $7.6 million for the first quarter of 2025. The increase in the provision for loan losses during the quarter was due to $13 million of acquisition-related provision for loan losses and a modest deterioration in the economic forecast partially offset by a decrease in net charge-offs from the prior quarter. Reserve coverage was 1.21% of total loans and covered 3x the level of nonperforming loans. The increase in the allowance for loan losses in the second quarter of 2025 included $21 million of allowance for acquired Evans loans.

In closing, the successful completion of the Evans merger was a significant milestone for the quarter and the impact on our financial position is aligned with our expectations. Continued growth in both net interest income and fee-based income drove the generation of the sequential and year-over-year positive operating leverage and contributed to our solid operating performance in the second quarter of 2025.

Thank you for your continued support. At this time, we'll continue -- we will welcome any questions you may have.

[Operator Instructions] Our first question comes from the line of Mark Fitzgibbon from Piper Sandler.

First question I had, maybe in that, what is a 25 basis point rate cut mean for your margin, assuming the short end comes down? And the rest of the curve ball?

Happy to answer that, Mark. The impact of rate cuts on our balance sheet. We're fairly neutrally positioned. So we have about $2.5 billion in loans that almost repriced immediately with a downward change in rates. And then on the funding side, we have about 40% of our deposit base somewhere around $5.5 billion that we can actively reprice downward as well. There might be a little bit of a lag because that takes some active management on our part. But we feel like that's not going to have a significant impact on us because we're so neutrally positioned, but there might be a little bit of lag on the funding side.

Okay. And then as you look at like the third quarter with all the moving parts with Evans and sort of the purchase accounting impact, how are you thinking about the net interest margin for, say, 3Q. Assuming no Fed rate cuts.

Okay. SP-4 There was a lot of noise in the second quarter. When we think about net interest margin going forward, we know that there is one additional month of accretion related to Evans to have a full quarter impact, and that's somewhere between $1 million and $1.5 million. So that will have a couple of basis points improvement on our net interest margin.

And then just thinking about the rest of our book, we probably continue to see a few basis points improvement as it relates to our earning asset yields repricing. That's probably going to get a little bit more less impactful over time as our book continues to fully reprice. For example, our indirect auto book is already fully repriced, but there's a little bit more room in the C&I and resi mortgage book, but that happens a little bit slower. And we think our funding costs are pretty well stabilized. We might get a few basis points, but certainly not the same level of impact that we experienced in the last 2 quarters.

Mark, this is Scott. Thanks for the question. I think we both know at some point in an improving NIM cycle, it's likely that some of that benefit from a repricing standpoint gets competed away. So we're not not going to be immune to that either.

Okay. Great. And then when deals are announced, nobody really wants to talk or give credit for sort of potential revenue synergies. But now that the Evans deal is complete, I wonder if you could help us think about the size of the opportunity, particularly on wealth management, insurance going forward.

So great question, and thanks for asking that one. For us, Evans had a very, very modest participation in wealth management. Like us, they had a handful of advisers that are on the LPL platform. So, great opportunity for us, not only to expand the base of advisers in Western New York, but to have the synergistic outcomes of bringing them into a larger established program like ours. It's kind of a similar thought on the insurance side. Evans had an insurance business several years ago and sold that business before we got together with them transactionally.

With that in mind, a lot of customers that can utilize our services on a more broad basis on the insurance side. It probably takes a little bit longer to get going because those tend to be in annual renewal cycles. But opportunistically, we think we'll grow in both attributes.

Okay. Great. And then from a credit perspective, any types of lending that give you concern or areas where maybe you're sort of easing off the throttle a little bit? Any particular types of -- particularly on the commercial side?

I can frame it this way. From an asset quality standpoint, really nothing. From a holistic desire to have more banking relationships on both the C&I front or the owner-occupied CRE front, where the opportunity presents itself to be able to deliver multiple services as opposed to just the loan. We do have a focus there. It does not mean that we aren't interested in commercial real estate transactions across our geography. The sheer size of our geography makes natural diversification inherent for us anyways. But I'll kind of frame it, Mark, that we're spending more time focusing on those relationships where we can provide multiple services as opposed to just close a transaction on the commercial real estate side.

Okay. And then last one was noninterest expenses. Can you help us think about sort of what a good run rate might be for the third quarter?

Sure. So excluding merger costs and expenses, I think we came in somewhere around $105 million for the quarter. Evans probably adds somewhere in the $11 million to $12 million a quarter. So there's probably a little bit of seasonality quarter-over-quarter with the fourth quarter probably being a little bit heavier. But I think if you think of one additional month of Evans added to the third quarter's run rate, that's probably a good place to be.

Our next question comes from the line of Steve Moss from Raymond James.

Just wanted to ask here in terms of the outlook for you guys. With regard to the loan pipeline, just kind of curious how your sense of business activity is there and what you guys are thinking about the second half?

Yes. Thanks for that key up for that one. So the pipeline is very good. We're actually at the highest level in the pipeline that we've ever experienced. Now a portion of that obviously came with the addition of Evans. But what have we noticed in the second quarter or late in the first quarter into the second quarter, that speed to completion has experienced hesitation.

So one of my favorite quotes now is uncertainty does not inspire action. And we saw that during the second quarter. It doesn't mean that our customers not interested in the initiatives that they had planned to do. They've just taken a little bit of a pause and rethought where does that position not only in the second half of 2025, but longer term?

Generally [ see ] people who had projects in place from a capital expansion or a capacity adding are moving forward with most of them. We've heard of a couple that decided to slow down because the machine they're ordering from Germany suddenly became 28% more expensive. But that's more episodic than systematic. But what we have seen is that people are having some hesitation about adding people because they don't want to be in a position where they have to hire now and send some people home in and around the end of the year. So generally, we feel pretty strong about we are -- where we are from the activities on the pipeline side. but probably will not experience a real meaningful change in the growth rate that we had in the first half of the year in the second half of the year.

Okay. Got it. And then in terms of of low pricing. You mentioned the ability to reprice the benefit from mass are pricing or a [ minimum ] price is moderating. Where are you seeing more competition these days?

So I'll start with that. And if Joe and Annette have comments are welcome to chime in on this. But competitively kind of across the board. Certainly, we saw some competition in the second quarter in the indirect auto space. And quite frankly, we were participating and growing still in the second quarter. But by the time we reach the end of the quarter, competition had changed pricing to the point where we're probably just trying to replace cash flows in that portfolio. And why is that is, remember, the inversion in the belly of the curve actually got worse in the quarter.

So from a competitive standpoint, from a -- that creates an issue for us relative to pricing. We are holding the line relative to spread dynamics. And as I mentioned before, we're really focused on supporting those customers and those activities that allow us to gain some funding and some deposit growth and at the same time, build out our holistic delivery.

Okay. And maybe on the commercial side, are you just seeing more competition these days from the larger guys coming back into the market? Just kind of curious dynamics there.

Yes, not so much the larger firms backing into where we are. Some of the smaller people we compete with, everyone's best customer has a different definition. So in certain of our markets, we're seeing a little bit more defending from the smaller banks. But I won't say that the competition has generally changed radically. And I don't think the discipline in pricing for most of the competition has really changed dramatically either.

Our next question comes from the line of Matthew Breese from Stephens Inc.

I was hoping we could touch on liquidity. Annette, you had talked a little bit about that in your comments. Just curious what the plans are there in terms of deployment over what time frame and into what? And then along with that, the last couple of years, the third quarter has been kind of a high watermark for cash and just curious how that plays out this year.

Yes. I'll start and let net chime in with some of the details. But -- so not unexpectedly, we ended up with more liquidity post the Evans transaction because had opted to liquidate their portfolio. Remember, when we talked about this 6 months ago or for the last 6 months, we said we were lagging in somewhere between $25 million and $30 million of investment purchases. So we were at a point that more than covered collateral requirements that Evans had for their municipal funding base. So that was on purpose. Why did we end the quarter with a little bit more liquidity in fairness, loan growth was fairly modest for the second quarter. So we ended up a little bit more.

And deposit growth in the second quarter that normally for us is actually negatively impacted by municipal flows was very positive. So -- and I think that's a holistic effort by our people across all lines of business to say let's secure the additional funding because that's where the core value of the franchise is.

So Matt, when we think about that just in terms of that from a funding standpoint, we did clearly have some known redemption outcomes because we did liquidate or redeem the the trust preferred -- I'm sorry, the sub debt securities that we initiated 5 years ago during the pandemic. And so we did keep ourselves in a position to be able to be that liquid.

That said, balance sheet still has ample liquidity to support all of our growth attributes. And probably almost importantly here in the near term is holding company liquidity is still very strong, above 1x our annual requirement. So really like where we're positioned.

And I would just add, as we think about the quarter, the following quarter, Scott mentioned the sub debt repayment, but we also expect to have some muni outflows and then the remaining liquidity is probably going to support some loan growth.

Securities assets at just over 16%. The last couple of years has been more like 17% to 18.5%. Do we get back there? Or is this kind of a new -- good level for securities assets?

It's a great question. I think we're reinvesting cash flows that are coming off portfolio. And if an opportunity presents itself for a slightly above average yield, I think we're capable of analyzing that opportunity.

Got it. Okay. Scott, maybe just updates on the chip tax. It seems like we're still on by year-end. And despite some bluster from the current administration about the CHIPS Act earlier this year, I think I read today that Micron fact had a bigger tax break. And so I just wanted to here the greatest on that path.

Great update. Thank you for asking. So to your point, you're right that not only did Micron recommit to the expansion in Central New York, but they have a secondary program that I think they're already underway with for a second ship fab in Boise, Idaho. And my impression is that that's underway, probably a lot easier to get started with something that's an add to an existing facility than something that's coming from the ground up. So probably not a surprise that that's where they went with that outcome. .

To your question on additional tax breaks, that's our understanding as well. that the approval of the BBB gave them some additional opportunities from an investment tax credit standpoint. How large that is not 100% sure because I'm not the expert on the tax act. But that being said, it looks like it's a net positive for them. If you remember, Matt, and you've been engaged with this before, they've been very specific about this, that without the tax incentives and without the governmental support that they were receiving that landing in the United States with incremental production would have been more difficult for them.

Last one is just, Scott, I would love to get your take on M&A in this environment with the end deal behind you, I think in the past, you've made the comment that we need to be 100% focused on integration and getting the culture right. I'm curious what your updated thoughts are there. That's all [indiscernible].

You're spot on. We are completely focused from an integration standpoint. The team in Western New York is doing a fabulous job out of the gate. We are getting the opportunity as senior leadership to meet a lot of their customers spend a lot of the time with their people. They've been very patient and willing to learn some of our systems and the protocol about getting things through our systems. So really appreciate that effort by them.

But in general, I would say we feel really good about where we are from a capital position post acquisition. We always talk to every transaction today with purchase accounting adjustments, it's going to have some dilution characteristics. But in the meantime, along the way to the closing, you're still running your institution and hopefully, you're accreting capital every single day. definitely the case with us. We're at a higher level of tangible equity ratio than we were when we announced the transaction. So to the extent that there was any concern about dilution and the longer-term dilution and payback, I think we've answered that question spot on. So I feel really good about that.

That said, I think that there are opportunities from an M&A standpoint. I think we continue to very methodically evaluate those. If you think about the franchise we have right now from Buffalo to Portland and [indiscernible], Pennsylvania to Burlington, filling in opportunistically is probably our prime focus. And whether we do that organically with branch fillings and teams that are serving the market or we find a like-minded culture consistent smaller community bank to partner with, looking at both, for sure.

[Operator Instructions] Our next question comes from the line of Manuel Navas from D.A. Davison.

Just stepping back to the NIM for a moment. Do you have like a quarter-end NIM spot rate, hopefully, that's like a good proxy to the third quarter?

Manuel, I don't have a spot rate for you, but I would say that June margin included the full impact of the accretion for the quarter. So we only had 2 months of the Evans accretion in the second quarter, we'll have a full will have a full impact in the third quarter. That's going to increase the margin in and of itself a couple of basis points from 359.

I appreciate that. And I just wanted to confirm one of the piece Earlier, you talked about there might be a few basis points improvement from asset yield repricing higher and just new yields. Was that a few basis point NIM improvement or just loan yield improvement?

I would say, overall NIM improvement.

And with funding costs kind of stabilized?

Correct. Correct.

I appreciate the reiteration of that guidance. I just wanted to clarify whether asset yields or NIM. So that's a good trajectory.

And Manuel, as we said before, too, that this would also presume that at some point in time, we get out of the current inversion that we have into that very important deli of the curve because that's where we're pricing most of our assets up. So there was pressure on that in the second quarter. If some of that pressure could relieve I think our opportunities would be even better.

Shifting over the fee income ratio to revenues is ticked lower because you added a spread heavy bank. Does that increase your kind of appetite on the fee side for either additions or lift-outs? Or just -- is that something that you have extra focus on? Or is it just -- are you being opportunistic in general?

I'm going to frame it this way is we love all three of those businesses. And so we are motivated to organically grow them or opportunistically add to our base via M&A. Remember that what we like about those businesses that generally over time, if you can grow them organically yourself, there's a gift that keeps on giving because they don't take regulatory capital. If you decide to engage in an M&A transaction, yes, for a short period of time, you're using some capital. But usually, the return characteristics are so positive on those that we're very interested in that.

That being said, to your point, acquiring Evans that had a different mix than us makes that a little bit more difficult. I think, again, finding a balance and continuing to focus on the fact that having a diversified revenue stream is a net positive, will remain in our strategic focus forever.

Our next question comes from the line of Feddie Strickland from Hovde Group.

I was just wondering if we could talk about the impact of the sub debt redemption in terms of interest cost differential there. I mean I know you said those other liquidity sources you used to repay that? Were those kind of similar 5.45% rate?

That's correct. So $118 million of sub debt was right around 5. 45% on a weighted average basis. That was going to tick up to close to 9% as we turn to a variable rate. So we're we pay that debt off using our liquidity. And we have to borrow, which is somewhere in the 4.25%, 4.40%. So kind of the differential between the 9% and the 4.40% is kind of what our savings would be on a go-forward basis.

Understood. And it sounds like you even had savings versus the pre reset rate as well?

A little bit using overnight. Yes.

And just wanted to switch gears to credit. I mean do you think charge-offs can stay at this sort of lower level you had this quarter? Do we see them tick back up a little bit given you still have some more runoff in consumer and solar?

It's a great question. We think that the second quarter was a great quarter from a performance perspective on net charge-offs. We don't think that, that's going to recur. Our average net charge-offs are probably more in the $3 million to $5 million range a quarter. So that's probably more likely.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Scott Kingsley for any further remarks.

Thank you. In closing, I want to thank everyone on the call for participating with us today and for your continued interest in NBT. We look forward to catching you up late October on our third quarter results and go build.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.