NBT Bancorp Inc 2026 Q3 Earnings Call

Good morning, and welcome to this earnings call covering NBT Bancorp's third 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. We are pleased with our solid third quarter operating performance, which demonstrates the strength and momentum of NBT's diversified financial services franchise. We generated noticeably stronger earnings than in both the third quarter of last year and the second quarter of this year. Productive loan growth across our markets contributed to record net interest income for the quarter. We also remained very disciplined in our cost of funds management while focusing on net new account growth. We are very pleased with the engaged and consistent approach of our teams across the company. Operating return on assets was 1.41% for the third quarter, while operating return on tangible equity was 16.53%.

Tangible book value per share ended the quarter at $27.75, an increase of 8.8% from a year ago. Our capital utilization priorities remain focused on supporting organic growth while maintaining our longstanding commitment to annual dividend increases. At $0.40 per share, NBT's quarterly dividend is 8.1% higher than the prior year and affirms our continued commitment to providing favorable long-term returns to our shareholders. Our strong capital levels also allow us to continue to evaluate a variety of strategic opportunities, as well as enable measured share repurchases. We remain encouraged by the opportunities we see across our seven-state footprint. Through NBT's support of economic development projects, customer expansion activity, and investments in new bank locations in several of our markets, we continue to position NBT for sustainable growth while supporting the communities we serve.

Since 2019, the company has been able to successfully grow earnings at a 6% compounded annual growth rate while maintaining our conservative risk profile. Looking forward, we believe we are well positioned for the remainder of 2026 and beyond to continue executing on our diversified operating strategies. Before Annette Burns reviews our third quarter results in greater detail, I will ask Joe Stagliano to provide a brief update on semiconductor related activities in our markets.

Joe? Thank you, Scott, and good morning.

As we have discussed on prior calls, NBT Bank maintains a significant presence across many of the markets benefiting from New York's growing semiconductor and advanced manufacturing industry. With about 70 branches located across this corridor, we are already serving many of the businesses and communities connected to these developments. What stands out this quarter is the progress being made on several major projects and the growing evidence that their impact is extending beyond the project sites themselves. In Central New York, activity surrounding Micron continues to accelerate. Following the project's groundbreaking in January of 2026, construction in Clay has advanced from site preparation into more visible phases of development. Infrastructure investments are moving forward. Crews began driving pilings for the first fabrication facility earlier this month, and an on-site concrete batch plant will support construction throughout the winter.

While the first chip production is not expected until about 2030, we are already seeing increased focus on workforce housing and related development to support long-term growth. Central New York businesses, including many NBT Bank customers, are participating in site development, engineering, environmental construction, and other support activities related to the project. While many of these projects are still taking shape, the pace and scale of activity support our positive outlook for Central New York. We are also excited to expand our presence in the area with a new branch expected to open in the first half of 2027, about one mile from the Micron campus. More broadly, Micron is one part of a larger semiconductor story unfolding across upstate New York. The Mohawk Valley remains an important component of that story, supported by ongoing activity around the Marcy site near Utica and continued interest in the region's manufacturing future.

In the capital region, NY Creates, a leading semiconductor research and innovation organization, supports research and development that strengthens New York's position within the industry. We were also encouraged by GlobalFoundries' recent announcement of plans to expand its campus in Saratoga County through the addition of two new semiconductor fabrication facilities, further highlighting the scale of investment taking place across the state. Taken together, these developments highlight the breadth of activity occurring across a well-established semiconductor corridor that spans Central New York, the Mohawk Valley, and the capital region. For NBT, the significance of these investments extends beyond manufacturing. Projects of this scale can support housing and workforce development, infrastructure improvements, professional services, small business growth, and local investment. We are well-positioned to support that growth as these opportunities continue to evolve.

What we are seeing across these regions reinforce our confidence in the long-term outlook for the markets we serve. Importantly, this opportunity extends beyond New York through semiconductor-related activity across our broader footprint, including GlobalFoundries' facility in Burlington, Vermont, where CHIPS Act-supported investments are advancing next-generation semiconductor technologies and strengthening domestic manufacturing capabilities. With that overview, I'll turn the call over to Annette Burns to discuss our third quarter financial results in greater detail.

Annette? Thank you, Joe, and good morning.

Starting on the results overview page of our earnings presentation, we reported third quarter net income of $58 million, or $1.11 per diluted common share. Earnings benefited from continued balance sheet growth, record net interest income, net interest margin expansion, and solid contributions from our diversified fee-based businesses. We generated record quarterly earnings and maintained strong capital levels. Turning to loans on the next page, total loans ended the quarter at $11.9 billion, increasing $427 million or 4% from December 31, 2025, excluding our consumer runoff portfolios. All business lines experienced growth, with commercial loans increasing $234 million, despite payoffs remaining elevated from last year's levels, and consumer loans increasing $116 million during the first nine months of the year. Commercial and consumer portfolios remain well-balanced at 56% and 44% of total loans respectively.

The increase in commercial loans reflects continued customer activity across our footprint and a disciplined approach to growth. We continue to maintain a diversified C&I and CRE portfolio with balanced exposure across industries and property types while preserving strong credit quality standards. New commercial originations during the quarter carried a yield of 6.41%, providing for continued repricing opportunities. On page 6, total deposits were $13.6 billion at quarter end and increased modestly from year-end levels. Core deposits grew 2.6% in the first nine months of 2026. We maintained a strong funding profile with almost 60% of total deposits in no and low-cost checking and savings accounts at a blended cost of 38 basis points. Total deposit costs declined by one basis point during the quarter to 1.32%, while the total cost of funds increased by one basis point to 1.42%.

From year-end levels, we have experienced a favorable change in our mix of deposits out of higher cost time deposits and into checking, savings, and money market products. During the year, $99 million of brokered CDs matured and $25 million of subordinated debt was also redeemed. We continue to tactically manage funding strategies to grow relationships while maintaining better than peer cost of funds. Net interest income and margin trends are highlighted on the next slide. Our net interest income increased to a record $143 million, up $5 million from the second quarter and more than 5% above the third quarter of 2025. The increase from the second quarter was driven by organic loan growth, higher earning asset yields, including increased purchase accounting accretion, and the benefit of one additional calendar day in the quarter. Net interest margin increased five basis points to 3.78% compared with the prior quarter.