NBT Bancorp Inc.

Good day, everyone, and welcome to the conference call covering NBT, Bancorp's fourth quarter and full year 2023 financial results. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation FD. Corresponding presentation slides may be found on the company's website at nbtbancorp.com. Before the call begins, NBT's management would like to remind listeners that, as noted on slide two, Today's presentation may contain forward-looking statements as defined by the Securities and Exchange Commission. Actual results may differ from those projected. In addition, certain non-GAAP measures will be discussed. Reconciliations for those numbers are contained within the APIC 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 would now like to turn the conference over to NBT's Bancorp President and Chief Executive Officer, John H. Watts, Jr., for the opening remarks. Mr. Watts, you're pleased to begin.

Good morning. Thank you, Norma. And thank you all for participating in this earnings call covering NBT Bancorp's fourth quarter and full year 2023 results. Joining me today are NBT's Chief Financial Officer, Scott Kingsley, our Chief Accounting Officer, Annette Burns, our Treasurer, Joe Ondesco, as well as our President of Retail Banking, Joe Stagliano. It was a very active quarter at NBT. While navigating the volatile interest rate environment, we observed that the consumer is still spending and that small businesses are still investing. At the same time, we continue to experience movement to a normalized pre-pandemic credit environment. I will note that the successful integration of our August acquisition of Salisbury Bancorp positions NBT well for growth in adjacent markets and for future strategic growth. Let me take a moment to highlight activity across our businesses first. Our operating results include earnings per share of 72 cents for the fourth quarter and $3.23 for the year. Return on tangible equity was 15.78% for the full year, and the year-end tangible equity ratio grew 11% to 7.93%. Excluding the Salisbury acquisition, we achieved commercial and consumer loan growth of 4%. That growth was diverse with our core commercial lending, business banking, residential mortgage, and indirect auto businesses all participated. As noted, in 2023, we experienced a resilient consumer and business owner. Our indirect auto business had a productive quarter with originations of over 141 million and 575 million for the full year. Small business originations were up 9% year over year. Credit quality at NBT is normalizing. Although each of our core credit portfolios continues to perform at levels better than those we experienced prior to the pandemic, we have seen some migration into the criticized category in our commercial lending business, often historically low base. Like the rest of our industry, our cost of funds has risen as our customers continue to seek out higher yielding deposit products. Our full cycle deposit beta at year end was 28%. We continue to enjoy high account retention levels. Our funding sources are robust, and we have the headroom we need to continue to execute on our organic growth plans in 2024. Our fee-based businesses continued their solid performance in Q4 and for the full year. For the year, our combined benefits administration, wealth management, and insurance businesses generated revenues of almost $100 million. Total non-interest income was 29% of total revenue for the full year. Activity along the upstate New York CHIP corridor was positive in Q4, with large public and private investments being announced. Most significantly, the Albany nanotech complex called New York Creates received $10 billion in investment commitments from large semiconductor manufacturers and the federal government. The activity generated along the CHIP corridor will drive long-term transformational economic growth across our core markets and promote long-term success at NBT. On Monday, our Board approved a 32-cent dividend payable in March, which represents a 6.7 percent increase over the dividend paid in the first quarter of 2023. It's also notable that we marked 11 consecutive years of annual dividend increases in 2023. Going into 2024, NBT is positioned with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and an expanded team of experienced professionals. I will turn the call over to Scott and Annette to talk in greater detail about the outcomes associated with our financial performance for the fourth quarter and the full year. Following their remarks, we'll take your questions. Annette, over to you.

Thank you, John, and good morning, everyone. Turning to the results overview page of our earnings presentation, our fourth quarter earnings per share were $0.64. Operating earnings per share were $0.72, which excludes $0.08 per share of acquisition expenses, securities gains, and an impairment of a minority interest equity investment we incurred in the quarter. The fourth quarter had the full impact of the Salisbury acquisition, which was completed in August of 2023. The fourth quarter operating results were $0.14 and $0.12 lower than the fourth quarter of last year and linked third quarter, respectively. We continue to experience increases in funding costs that have exceeded the improvements in earning asset yields, which have challenged net interest income growth. Tangible book value per share of $21.72 at December 31st was up $1.33 per share from the end of the third quarter and up $1.07 from the fourth quarter of 2022. The next page shows trends in outstanding loans. Total loans were up $1.5 billion from the fourth quarter of 2022, and included $1.18 million of loans acquired from Salisbury. Despite productive growth in our indirect auto, residential mortgage, and commercial real estate portfolios, quarter end loans were down $17 million from the end of the third quarter and reflected lower commercial line utilization, the continued plan runoff of our other consumer loan portfolio, and principal amortization of our solar residential loans. Fourth quarter loan yields were up 11 basis points from the third quarter of 2023, reflective of continued higher new origination yields. Our total loan portfolio of $9.65 billion remains very well diversified and is comprised of 52% commercial relationships and 48% consumer loans. On page six, total deposits of $11 billion were up $1.5 billion in 2023 and included $1.3 billion of deposits acquired from Salisbury. At the end of the fourth quarter, deposits were down from the end of the third quarter as expected. Municipal deposits declined $225 million from the seasonally high third quarter. Generally, in most of our markets, municipal tax collections are concentrated in the first and third quarters of each year. In addition, following the industry-wide liquidity challenges, which arose near the end of the first quarter of 23, the company proactively added over a quarter million dollars of incremental wholesale deposits. NBT's liquidity profile has continued to remain very stable, and as such, in the fourth quarter, we allowed $132 million of those balances to contractually run off. The company continued to experience remixing from its no interest and low interest checking and savings account into higher yielding money market and time deposit instruments again in the fourth quarter. Our quarterly cost of total deposits increased to 151 basis points compared to 118 basis points in the linked third quarter, and total cost of funds increased 22 basis points from the prior quarter. We have included a summary of our deposit mixed by type, which illustrates the diversification and deep granularity of our customer base. The next slide looks at the detailed changes in our net interest income and margin. The fourth quarter net interest income was $4.3 million above the linked third quarter results, primarily from the full quarter impact of the Salisbury acquisition. which was partially offset by a six basis point decline in our net interest margin. During most of the fourth quarter, NBT made a Fed Fund sold position, which created incremental interest income given robust short-term yields. Although we experienced a slower rate of growth in cost of funds late in the fourth quarter, we continue to expect modest additional funding pressures to persist in 2024. I will now turn it over to Scott to review the rest of the results.