NBT Bancorp Inc.

Good day, everyone. Welcome to the conference call covering NBT Bancorp's first quarter 2025 financial results. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation FD. Corresponding presentation slides can be found on the company's website at nbtbancorp.com. Before the call begins, NBT's management would like to remind listeners, 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. Reconciliation for these numbers are contained within the appendix of today's presentation. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. As a reminder, this call is being recorded. I will now turn the conference over to MBT Bank Corp's President and CEO, Scott Kingsley, for his opening remarks. Mr. Kingsley, please begin.

Thank you, Kevin, and good morning, and thank you for joining us for this earnings call covering NBT Bancorp's first quarter 2025 results. With me today are Annette Burns, NBT's Chief Financial Officer, Joe Stagliano, President of NBT Bank, and Joe Andesco, our Treasurer. Our operating performance for the first quarter continued to reflect the strength of our balance sheet, our diversified business model, and strong collaboration by our team. Operating return on assets was 1.11% for the first quarter with a return on equity of 10% and ROTCE of 14%. Certainly not records for us, but each metric demonstrates continued improvement over the linked and prior year quarters and, importantly, reflects the generation of positive operating leverage. We diligently grew earning assets and lowered funding costs, which improved net interest margin for the fourth consecutive quarter. Non-interest income continued to be a highlight, making up 31% of total revenues for the quarter, with each of our non-banking businesses achieving productive improvements in both revenue and earnings generation. We have added over $100 million to shareholders' equity in the past 15 months from productive earnings generation while also paying a higher level of dividends, adding to our already desirable levels of capital flexibility. Turning to updates on our growth strategies, we continue to see activity across upstate New York's semiconductor chip corridor, including news about site-specific milestones related to Micron's planned complex outside of Syracuse. Team members at NVT are engaged in supporting our customers and communities in participating in the growing ecosystem around semiconductor and advanced electronics manufacturing in our markets. Our ability to provide financial services to those living and working along the chip corridor will only be enhanced by the merger of Evans Bancorp into NVT in early May. Last September, we announced our partnership with Evans. In December, we received all the regulatory approvals required to move forward, as well as approval from Evans shareholders. Our integration team is poised to complete our core systems conversion next weekend after we close the merger at the end of the day on Friday, May 2nd. As a result, we will welcome over 200 Evans employees and more than 40,000 customers to NBT. Adding the Buffalo and Rochester markets is a natural extension of our footprint in upstate New York, and we look forward to building on the relationships Evans has established with customers, communities, and shareholders. At this time, I'll turn the meeting over to Annette 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, in the first quarter, we reported net income of of $36.7 million, or 77 cents per share. Excluding merger costs and securities losses, our operating earnings per share were 80 cents, an increase of 3 cents per share compared to the prior quarter. Revenues were 4.4% from the prior quarter and almost 12% from the first quarter of the prior year, driven by improvements in both net interest income and fee-based revenues. Tangible book value per share of $24.74 as of March 31st was up 86 cents per share from the end of the fourth quarter of 2024, marking another all-time high for NBT. The next page shows trends in outstanding loans, excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status. Loans increased $40 million, or 1.8% annualized. Our total loan portfolio of $10 billion remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans. On page six, total deposits of $11.7 billion were up $162 million from the linked fourth quarter, primarily due to the inflow of seasonal municipal deposits during the quarter. Generally, in most of our markets, municipal tax collections are concentrated in the first and third quarters of each year. 58% of our deposit portfolio consists of no and low cost checking and savings accounts, while 42% is held in time and money market accounts. We have included a summary of our deposit mix by type, which illustrates the diversification and deep granularity of our customer base. The next slide highlights the detailed changes in our net interest income and margin. Our net interest margin in the first quarter increased 10 basis points to 3.44% from the linked fourth quarter, primarily driven by the decrease in the cost of interest-bearing deposits. Net interest income for the first quarter was $107.2 million, an increase of $1.1 million above the linked fourth quarter and $12 million above the first quarter of 2024. The increase in net interest income from the prior quarter was primarily driven by a decrease in the cost of deposits, partially offset by the impact of two less calendar days in the quarter. Loan yields decreased three basis points from the prior quarter to 5.62%, primarily due to the repricing of $2.1 billion in 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 11 basis point decline in our total cost of deposits to 1.49% for the quarter. As a reminder, approximately $5 billion of our deposits, principal money market and CD accounts, remain price sensitive. Looking ahead, the opportunity for upward movement in yields will depend on the shape of the yield curve and how we reinvest loan portfolio cash flows. The trends in non-interest income are outlined on page eight. Excluding securities gains and losses, our fee income was $47.6 million, an increase of 12.7% compared to the linked fourth quarter. Non-interest income represented 31% of total revenues in the first quarter, reflecting continued improvement and strength of our diversified revenue base. Total operating expenses, excluding acquisition expenses, were $98.7 million for the quarter, a 1.1% decrease from the linked fourth quarter. Salaries and employee benefit costs were $60.7 million a decrease of $1.1 million from the prior quarter. This decrease was primarily driven by lower medical and other benefit costs, lower levels of incentive compensation, and lower salary expense resulting from two fewer payroll days in the quarter. These increases were partially offset by seasonally higher payroll taxes and an increase in stock-based compensation. The quarter-over-quarter increase in occupancy expenses was expected driven by increases in seasonal costs, including utilities and higher maintenance costs. Slide 10 provides an overview of key asset quality metrics. Net charge-offs to average loans were 27 basis points in the first quarter of 2025, compared to the 23 basis points in the prior quarter. Included in that charge-off was a $2.1 million write-down of a commercial real estate loan that has been in a non-performing status for the past several quarters. The loan was charged down to its updated estimated fair value based on new information received during the quarter. Excluding the $2.1 million write-down, net charge-offs to average loans were 18 basis points for the quarter. Past due loans to total loans were 32 basis points and was in line with the past several quarters. Reserve coverage was 1.17% of total loans and covered more than two times the level of non-performing loans, We believe that expected balance sheet growth, economic forecast conditions, and continued changes in loan mix will be the drivers of future provisioning needs. In closing, 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 first quarter of 2025. Our continued capital strength has us well positioned to support organic growth and our other strategic initiatives. Thank you for your continued support. And at this time, we welcome any questions you may have.