Q2 2024 NBT Bancorp Inc Earnings Call

July 23, 2024

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Speaker Change: Good day, everyone welcome to the conference call covering M. B cheese Bancorp's second quarter 2024 financial results.

Operator: Good day, everyone. Welcome to the conference call covering NBT Bancorp's second quarter 2024 financial results. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. Corresponding presentation slides can be found on the company's website at nbtbancorp.com. Before the call begins, NBT's management would like to remind listeners that, as noted on slide 2, today's presentation may contain forward-looking statements as defined by the Securities and Exchange Commission, and 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.

Speaker Change: This call is being recorded and that's been made accessible to the public in accordance with the Sec's regulation FD.

Speaker Change: Corresponding presentation slides can be found in the company's website at N P. T Bancorp dotcom.

Speaker Change: Before the call begins I'd be cheese 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.

Speaker Change: Actual results may differ from those projected.

Speaker Change: In addition, certain non-GAAP measures will be discussed.

Speaker Change: Conciliations for these numbers architecture within the appendix of today's presentation.

Speaker Change: 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.

Operator: 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 NBT Bancorp President and CEO, Scott Kingsley, for his opening remarks. Mr. Kingsley, please begin.

Speaker Change: As a reminder, this call is being recorded.

I'll now turn the conference over to MPT Bancorp, President and CEO, Scott Kingsley for his opening remarks, Mr. Kingsley place to begin thank you Michele.

Scott A. Kingsley: Thank you, Michelle. Good morning, and thank you for joining us for this earnings call covering NBT Bancorp's second quarter 2024 results. With me today are NBT's Chief Financial Officer, Annette Burns, Joe Stagliano, the President of NBT Bank NA, and Joe Ondesco, our Treasurer. This is our first earnings call following our leadership transition in May, and we want to extend our thanks to John Watt and the entire NBT board of directors, as well as the management team, for supporting us through a very smooth transition. I would also like to congratulate Rick Cantelli on his upcoming retirement from our senior management team in August. Rick's insight and contributions following the completion of the Salisbury merger have been invaluable.

Scott A. Kingsley: Good morning, and thank you for joining us for this earnings call covering NPT Bancorp second quarter 2024 results with me today are <unk> Chief Financial Officer of net Burns Jo Stagg Liana will the president of <unk> Bank, M&A and Joe on desktop our treasurer.

This is our first earnings call following our leadership transition in May and we want to extend our thanks to John what in the entire <unk> board of directors as well as the management team for supporting us through a very smooth transition.

Scott A. Kingsley: I would also like to congratulate Rick can't tally on his upcoming retirement from our senior management team in August Rick insight and contributions following the completion of the Salisbury merger have been invaluable. He will continue to provide important guidance as a member of our board.

Scott A. Kingsley: He will continue to provide important guidance as a member of our board. We're pleased to now review our second quarter results with you today. Our operating performance for the first quarter and the first half of the second quarter of the first half of 2024 continues to reflect the strength of our balance sheet, our diversified business model, and the collaboration of our team. During the second quarter, we productively grew loans across our footprint and improved our net interest margin as earning asset yields increased incrementally higher than funding costs. A positive result, but we're still cautious about pronouncing it as a trend. Non-interest income continued to be a highlight, making up 31% of total revenues for the second quarter and reaching a new quarterly all-time high.

We're pleased to now review our second quarter results with you today.

Scott A. Kingsley: Our operating performance for the first quarter and the first half of the second quarter and the first half of 2024 continues to reflect the strength of our balance sheet, our diversified business model and the collaboration of our team during.

Scott A. Kingsley: During the second quarter, we productively grew loans across our footprint and improved our net interest margin as earning asset yields increased incrementally higher than funding costs.

Speaker Change: A positive result, but we are still cautious on pronouncing it as a trend.

Speaker Change: Noninterest income continues to be a highlight making up 31% of total revenues for the second quarter and reaching a new quarterly all time high.

Speaker Change: We are also pleased to announce a six 3% increase in our quarterly cash dividend to shareholders.

Scott A. Kingsley: We are also pleased to announce a 6.3% increase in our quarterly cash dividend to shareholders. This represents our 12th consecutive year of annual dividend increases, and it demonstrates our commitment to providing consistent and favorable long-term returns to our shareholders. The increase also represents a 26% improvement over the past three years. In April, it was announced that the U.S. Department of Commerce had entered into an agreement with Micron Technology to provide a $6.1 billion grant under the Chips and Science Act that will, in part, support its plans to invest as much as $100 billion in a new complex of semiconductor chip manufacturing plants in the town of Clay, near Syracuse. Additional support for the Clay Complex includes a $5.5 billion tax credit from the New York State Green Chips Program and significant infrastructure investments by the state and Onondaga County.

Speaker Change: This represents our <unk> consecutive year of annual dividend increases and it demonstrates our commitment to providing consistent and favorable long term returns to our shareholders. The increase also represents a 26% improvement over the past three years.

Speaker Change: In April it was announced that the U S Department of Commerce has entered into an agreement with Micron technology to provide a $6 1 billion dollar grant under the chips and Science Act that will in part support its plans to invest as much as $100 billion in a new complex of semiconductor chip manufacturing plants.

Speaker Change: In the town of Clay near Syracuse additional support for the Clay complex includes a $5 $5 billion tax credit from the New York State Green chips program and significant infrastructure investments by the state and Onondaga County site specific progress continues as planned.

Unknown Executive: News. Additional support for the Clay Complex includes a $5.5 billion tax credit from the New York State Green Chips program and significant infrastructure investments by the state and Anadaga County. Site-specific progress continues as planned.

Scott A. Kingsley: Site-specific progress continues as planned. NBT is uniquely positioned to play a significant role in providing financial services to all types of customers and prospects living and working in the upstate New York chip corridor. At this time, I'll turn the meeting over to Annette to review our second quarter results with you in detail. Annette?

Unknown Executive: NBT is uniquely positioned to play a significant role in providing financial services to all types of customers and prospects living and working in the Upstate New York chip quarter.

Speaker Change: <unk> is uniquely positioned to play a significant role in providing financial services to all types of customers and prospects living and working in the upstate New York Chip corridor.

Scott A. Kingsley: At this time, I'll turn the meeting over to Annette to review our second quarter results with UN detail.

Speaker Change: At this time I will turn the meeting over to net to review our second quarter results with you in detail our net.

Annette L. Burns: Annette? Thank you, Scott, and good morning, everyone. Turning to the results overview page of our earnings presentation. For the second quarter, we reported net income of $32.7 million, or $69 per share. Our net interest margin in the second quarter of 2024 was 3.18 percent, which was up 4 basis points from the prior quarter, as are 8 basis points of earning asset yield improvement, more than offset our increase in funding costs in the quarter. Tangible book value per share of $22.54 as of June 30th was up 47 cents per share from the end of the first quarter and was at an all-time high for NBT.

Annette L. Burns: Thank you, Scott. And good morning, everyone. Turning to the results overview page of our earnings presentation, for the second quarter, we reported net income of $32.7 million, or 69 cents per share. Our net interest margin in the second quarter of 2024 was 3.18%, which was up four basis points from the prior quarter, as our eight basis points of earnings asset yield improvement more than offset our increase in funding costs in the quarter. Tangible book value per share of $22.54 as of June 30 was up 47 cents per share from the end of the first quarter and was at an all-time high for NBT.

Net: Thank you Scott and good morning, everyone turning to the results overview page of our earnings presentation for the second quarter. We reported net income of $32 7 million or 69 cents per share our net interest margin in the second quarter of 2024 was $3, one, 8%, which was up four basis.

Net: Points from the prior quarter as our eight basis points of earning asset yield improvement more than offset our increase in funding costs in the quarter tangible book value per share of $22.54. As of June 30th was about 47 per share from the end of the first quarter and was at an all time high for MPT.

Annette L. Burns: The next page shows trends in outstanding loans. Total loans were up $204 million for the year, or 4.2% annualized, and growth was in our commercial and indirect auto portfolios. Excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status, loans increased by $295 million or 6.9% annualized. Second quarter loan yields were up nine basis points from the first quarter of 2024, reflective of continued higher new origination rates. Our loan portfolio of $9.85 billion remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans.

Annette L. Burns: The next page shows trends and outstanding loans. Total loans were up $204 million for the year or 4.2 percent annualized and included growth in our commercial and indirect auto portfolios. Excluding the other consumer and residential solar portfolios that are in a plan contractual runoff status, loans increase $295 million or 6.9 percent annualized. Second quarter loan yields were up 9 basis points from the first quarter of 2024, reflective of continued higher new origination at rates. Our loan portfolio of 9.8 $5 million remains very well diverse side and is comprised of 53 percent commercial relationships and 47 percent consumer loans.

Net: Excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status.

Net: It has increased $295 million or six 9% annualized.

Second quarter loan yields were up nine basis points from the first quarter of 2024 reflective of continued higher new origination rates.

Net: Our loan portfolio of $985 million remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans.

Annette L. Burns: On page six, total deposits of $11.27 billion were up $302.5 million from December 2023. We saw growth in consumer balances and accounts, along with a higher level of municipal deposits. We have included a summary of our deposit mix by type, which shows the diversification and deep granularity of our customer base.

Annette Burns: On page 6, total deposits of $11.27 million were up $302.5 million from December 2023. We found growth in consumer balances and accounts, along with a higher level of municipal deposits. We have included a summary of our deposits mixed by types, which shows a diversification and deep granularity of our customer base. The company continues to experience some re-mixing from its no interest and low interest checking and savings accounts into higher yielding money market and time deposit instruments. Our quarterly cost of total deposits increased seven basis points from the prior quarter to 1.68 percent. The next slide looks at the detailed changes in our net interest income and margin.

Net: On page six total deposits of 11 $2 $7 billion were up $302 5 million from December 2023, we saw growth in consumer balances and accounts along with a higher level of municipal deposits. We have included a summary of our deposit mix by type, which shows the diversification and deep granularity.

Net: Of our customer base. The company continues to experience some remixing from its no interest and low interest checking and savings account.

Annette L. Burns: The company continues to experience some remixing from its no interest and low interest checking and savings accounts into higher yielding money market and time deposit instruments. Our quarterly cost of total deposits increased seven basis points from the prior quarter to 1.68%. The next slide looks at the detailed changes in our net interest income and margin. The second quarter net interest income was $2 million above the linked first quarter results.

Net: Into higher yielding money market and time deposit instruments, our quarterly cost of total deposits increased seven basis points from the prior quarter to 168%.

Net: The next slide looks at the detailed changes in our net interest income and margin in the second quarter net interest income was $2 million above the linked first quarter results.

Annette L. Burns: The second quarter net interest income was $2 million above the linked first quarter results. The primary drivers to the increase in net interest income was an increase in asset yields and loan growth, partially offset by an increase in interest-bearing deposit costs. We saw stabilization and net interest margin during the quarter, and although we continue to see an increase in our funding costs, the pace of the increase continues to slow during the quarter. The trends in net interest income are outlined on page 8. Excluding securities losses, fee income reached $43.3 million, which is an increase of 18 percent from the second quarter of 2023 and was consistent with a previous quarter.

Annette L. Burns: The primary drivers to the increase in net interest income were an increase in asset yields and loan growth, partially offset by an increase in interest-bearing deposit costs. We saw stabilization in our net interest margin during the quarter, and although we continue to see an increase in our funding costs, the pace of the increase continues to slow during the quarter. The trends and non-interest income are outlined on page 8. Excluding securities losses, our fee income reached $43.3 million, which was an increase of 18% from the second quarter of 2023 and was consistent with the previous quarter.

Net: The primary drivers to the increase in net interest income was an increase in asset yields and loan growth, partially offset by an increase in interest bearing deposit costs were.

Net: We saw stabilization and net interest margin during the quarter and although we continue to see an increase in our funding costs. The pace of the increase continued to slow during the quarter.

Net: The trends in noninterest income are outlined on page eight.

Net: Excluding securities losses, our fee income reached $43 3 million, which is an increase of 18% from the second quarter of 2023 and was consistent with the previous quarter. This marks a record high of quarterly noninterest income driven by new account growth and favorable market performance and our retirement plan administration and wealth.

Annette L. Burns: This marks a record high of quarterly non-interest income, driven by new account growth and favorable market performance in our retirement plan administration and wealth management business. Retirement plan administration revenue increased by $500,000 from the first quarter due to organic growth, positive market conditions, and higher activity-based fees. Our wealth management services also increased by $500,000 in the second quarter due to favorable market performance and new account growth. Insurance agency revenues were lower due to the seasonally high revenues recorded in the first quarter.

Annette Burns: This marks the record high of quarterly net interest income, driven by new account growth and favorable market performance in our retirement plan of administration and wealth management business. Services, retirement plan administration revenue has increased by 500,000 from the first quarter, due to organic growth, positive market conditions, and higher activity base fees. Our wealth management services also increased by 500,000 in the second quarter due to favorable market performance and new account growth. Insurance, Abagedancy Revenue is lower due to the seasonally high revenues recorded in the first quarter. The diversification of our revenue sources remains a core strength for the company, accounting for 31% of total revenues.

Net: Management businesses.

Net: Retirement plan administration revenues increased by 500000 from the first quarter due to organic growth positive market conditions and higher activity based fees.

Net: Our wealth management services also increased by 500000 in the second quarter due to favorable market performance and new account growth insurance agency revenues were lower due to the seasonally high revenues recorded in the first quarter.

Net: The diversification of our revenue sources remains a core strength for the company accounting for 31% of total revenues or fee income business lines are retired plan administration wealth management and the insurance agency has demonstrated a meaningful a compounded annual growth rate of nine 3% over a five year period.

Annette L. Burns: The diversification of our revenue sources remains a core strength for the company, accounting for 31% of total revenues. Our fee-income business lines of retirement plan administration, wealth management, and the insurance agency have demonstrated a meaningful compounded annual growth rate of 9.3% over a five-year period. Moving on to non-interest expense, our total operating expenses were $89.6 million for the quarter, which is $2.2 million or 2.4% below the linked first quarter. Salaries and employee benefit costs were $55.4 million and decreased $311,000 from the prior quarter.

Annette Burns: Our fee income is assigned to the Retirement Plan Administration, wealth management, and the insurance agency has demonstrated a meaningful compounded annual growth rate of 9.3% over a five-year period. Moving on to non-etric expense, our total operating expenses were $89.6 million for the quarter, which is $2.2 million or 2.4% below the linked first quarter. Salaries and employee benefit costs were $55.4 million and decreased $311,000 from the prior quarter. This decrease is primarily due to seasonal higher payroll taxes and stock base compensation expense in the first quarter, partly offset by a full quarter of merit pay increases and higher medical costs in the second quarter.

Annette L. Burns: This decrease is primarily due to seasonal higher payroll taxes and stock-based compensation expense in the first quarter, partly offset by a full quarter of non-interest expenses, merit pay increases, and higher medical costs in the second quarter. Technology and data service expenses decreased $500,000 from the first quarter of 2024 due to cost savings achieved from various efficiency initiatives. Occupancy costs also decreased due to seasonal factors, including lower utility costs. We remain committed to managing our non-interest expenses effectively, balancing cost efficiencies with necessary investments to support our engagement with customers and our On slide 10, we provide an overview of key asset quality metrics. We recorded a loan loss provision expense of $8.9 million in the second quarter, which was $3.3 million higher than the first quarter of 2024.

Net: Moving on to noninterest expense, our total operating expenses were $89 $6 million for the quarter, which is $2 2 million or two 4% below the linked first quarter.

Net: Salaries and employee benefit costs were $55 4 million and decreased $311000 from the prior quarter. This decrease was primarily due to seasonal higher higher payroll taxes and stock based compensation expense in the first quarter.

Net: Offset by a full quarter of merit pay increases and higher medical costs in the second quarter.

Net: Technology and data service expenses decreased $500000 from the first quarter of 2024 due.

Annette Burns: Technology and data service expenses decreased $500,000 from the first quarter of 2024 due to cost savings achieved from various efficiency initiatives. Occupancy costs also decreased due to seasonal factors, including lower utility costs. Revenue being committed to managing our non-etric expenses effectively, balancing cost efficiencies with necessary investments to support our engagement with customers and our people. On slide 10, we provide an overview of key asset quality metrics. We recorded a loan loss provision expense of $8.9 million in the second quarter, which was up $3.3 million higher than the first quarter of 2024. This increase is primarily due to provisioning for the second quarter's loan growth, change in prepayment speeds, which continued to extend the effective life of loans, and $1.7 million in specific reserves related to a commercial relationship previously placed on non-accrual and the fourth quarter of 2023.

Net: Due to cost savings achieved from various efficiency initiatives occupancy costs also decreased due to seasonal factors, including lower utility costs.

Net: We remain committed to managing our noninterest expenses effectively balancing cost efficiencies with necessary investments to support our engagement with customers and our people.

Speaker Change: On slide 10, we provide an overview of key asset quality metrics, we recorded a loan loss provision expense of $8 $9 million in the second quarter, which was up $3 $3 million higher than the first quarter of 2020 for.

Annette L. Burns: This increase is primarily due to provisioning for the second quarter's loan growth, changes in prepayment speeds, which continued to extend the effective life of loans, and $1.7 million in specific reserves related to a commercial relationship previously placed on nonaccrual in the fourth quarter of 2023. Net charge-offs to total loans were 15 basis points in the second quarter of 2024 compared to 19 basis points in the prior quarter.

Speaker Change: This increase was primarily due to provisioning for the second quarters loan growth change in prepayment speeds, which continue to extend the effective life of loans and $1 $7 million in specific reserves related to a commercial relationship previously placed on non accrual in the fourth quarter of 2023.

Annette L. Burns: That charges us to total loans for 15 basis points in the second quarter of 2024 compared to 19 basis points in the prior quarter. Non-performing assets to total assets were unchanged for the past three quarter ends at 28 basis points. Reserve coverage of 1.22% of total loans, with three basis points higher than the prior quarter, and covered 316% of non-port forming loans. We believe that charge-off activity will continue to trend towards more historical norms, and expected balance sheet growth and continued mixed changes will likely be the driver of future provisioning needs. In closing, our well-balanced organic growth, granular deposit base, stable credit quality, strong fee income generation, and active expense management continue to help offset a portion of the net interest income challenges experienced over the past several quarters.

Speaker Change: Net charge offs to total loans were 15 basis points in the second quarter of 2024 compared to 19 basis points in the prior quarter nonperforming assets to total assets were unchanged for the past three quarter ends at 28 basis points.

Annette L. Burns: Non-performing assets to total assets were unchanged for the past three quarter ends at 28 basis points. Reserve coverage of 1.22% of total loans was three basis points higher than the prior quarter and covered 316% of non-performing loans. We believe that charge-off activity will continue to trend towards more historical norms, and expected balance sheet growth and continued mixed changes will likely be the driver of future provisioning needs. In closing, our well-balanced organic growth, granular deposit base, stable credit quality, strong fee income generation, and active expense management continue to help offset a portion of the net interest income challenges experienced over the past several quarters.

Speaker Change: Reserve coverage of one 2% of total loans was three basis points higher than the prior quarter and covered 316% of nonperforming loans, we believe that charge off activity will continue to trend towards more historical norms and expected balance sheet growth and continued mix changes will likely be the driver of future.

Speaker Change: Provisioning needs.

Speaker Change: In closing, our well balanced organic growth granular deposit base stable credit quality strong fee income generation and active expense management continue to help offset a portion of the net interest income challenges experienced over the past several quarters. We were pleased to see net interest margin stabilization and net interest income growth for the <unk>.

Scott Kingsley: We were pleased to see net interest margin stabilization and net interest income growth for the quarter. The continued strength of our capital position has allowed us the flexibility to provide a two-cent per quarter increase in the dividend to our shareholders. The ability to support organic growth and to capitalize on emerging opportunities while effectively managing risk.

Annette L. Burns: We were pleased to see net interest margin stabilization and net interest income growth for the quarter. The continued strength of our capital position has allowed us the flexibility to provide a two cents per quarter increase in the dividend to our shareholders, the ability to support organic growth, and to capitalize on emerging opportunities while effectively managing risk. Thank you for your continued support. And, at this time, we welcome any questions you may have. Thank you. Anyone with a question at this time can press star 1. If your question has been answered and you would like to remove yourself from the queue, press star 1 again.

Speaker Change: The continued strength of our capital position has allowed us the flexibility to provide a <unk> <unk> per quarter increase in the dividend to our shareholders the ability to support organic growth and to capitalize on emerging opportunities while effectively managing risk.

Scott Kingsley: Thank you for your continued support, and at this time we welcome any questions you may have.

Speaker Change: Thank you for your continued support and at this time, we welcome any questions you may have.

Unknown Executive: Thank you. Anyone with a question at this time can press star 111. If your question has been answered and you would like to remove yourself from the queue, press star 111 again.

Speaker Change: Thank you anyone with a question at this time compressed star one one.

If your question has been answered and you would like to remove yourself from the queue Press Star one again.

Unknown Executive: One moment for our questions.

Speaker Change: A moment for our questions.

Speaker Change: Okay.

Unknown Executive: Our first question comes from Steve Moss with Raymond James. Your line is open.

Speaker Change: Our first question comes from Steve Moss with Raymond James Your line is open.

Operator: One moment for our questioner. Our first question comes from Steve Moss with Raymond James. Your line is open. Hey, good morning. This is Henry filling in for Steve Moss.

Henry: Hey, good morning. This is Henry filling in for Steve Moss.

Hey, Good morning. This is Henry filling in for Steve Moss.

Unknown Executive: Hey, good morning, Henry. Hey, thanks.

Hey, good morning, Andrew Henry.

Unknown Speaker: Hey, good morning, Henry. Hey, thanks. So I'll start on the loan side. I was wondering if you could talk maybe a little bit about your expectations for the current pace of CRE and C&I loan growth and if we should expect a similar pace to continue through 2020. Henry, I'll start with that one.

Hey, Thanks, So I'll start on the loan side I was wondering if could talk maybe a little bit about your expectations on the current pace of CRE and C&I loan growth and if we should expect a similar pace to continue through 2024.

Henry: So I'll start on the alone side. I was wondering if you could talk maybe a little bit about your expectations on the current pace of CRE and CNI long growth. And if we should expect a similar pace to continue through 2024.

Unknown Speaker: We had a very strong second quarter both on the C&I and on the CRE side. Some of the C&I growth came from line utilization, which has obviously been stubbornly low for the past three or four years. So we had some nice movement there. A lot of that tends to be seasonal, you know, where projects, whether they're construction or improvement projects, are underway. And, you know, just given the climate that most of our markets are in, those tend to be stronger in the mid- and second quarters of the year. I think, in terms of opportunities that we're seeing in the market, the markets are very stable and growing. And for us, it's selecting those opportunities that we feel we can best capitalize on.

Unknown Executive: Henry, I'll start and take that one. We had a very strong second quarter. Both on the CNI and on the CRE side. Some of the CNI growth came from line utilization, which obviously has been stubbornly low for the past three or four years. So we had some nice movements there. A lot of that tends to be seasonal. You know, where projects, whether they're construction or improvement projects, are underway. And you know, and just given the climate that most of our markets are in, those tend to be stronger in the mid to quarters of the year.

Speaker Change: Henry I'll start and take that one we had a very strong second quarter.

Henry: Both on the C&I and on the CRE side some of the C&I growth came from line utilization, which obviously has been stubbornly low for the past three or four years.

Speaker Change: So we had some nice movement there a lot of that tends to be seasonal where projects, whether they're construction or improvement projects are underway.

Speaker Change: And just given the climate that most of our markets are in those tend to be stronger in the mid two quarters of the year.

Unknown Executive: I think in terms of opportunities that we're seeing in the market, the markets are very stable and growing. And for us, it's selecting those opportunities that we feel we can best capitalize on. We have a bias toward supporting our existing customer base from a development activity standpoint. But I think that second quarter results were probably a little bit above even our expectations in terms of new loan growth. We'd probably expect them to tick down a little bit for the balance of the year, but very happy with where we stand at the mid to your point of the year.

Speaker Change: I think in terms of opportunities that we're seeing in the market the markets are very stable and growing.

Speaker Change: For us it's selecting those opportunities that we feel we can best capitalize on.

Unknown Speaker: We have a bias towards supporting our existing customer base from a development activity standpoint, but I think that the second quarter results were probably a little bit above even our expectations in terms of new loan growth. We'd probably expect them to tick down a little bit for the balance of the year, but very happy with where we stand at the mid-year point of the year. Okay, great.

Speaker Change: We have a bias towards supporting our existing customer base from a development activity standpoint.

Speaker Change: But I think that second quarter results were probably a little bit above even our expectations in terms of new loan growth, we'd probably expect them to tick down a little bit for the balance of the year, but very happy with where we stand at the midyear point of the year.

Henry: Okay, great. Thanks. And then I guess just looking to the provision expense, it looks like it ticked up a little bit in the quarter for, you know, portfolio extension and longer, but also for a specific reserve relationship.

Speaker Change: Okay, great. Thanks, and then I guess, just looking to the provision expense it looks like it ticked up a little bit in the quarter four.

Unknown Speaker: And then I guess just looking at the provision expense, looks like it ticked up a little bit in the quarter for, you know, portfolio extension and loan growth, but also for a specific reserve relationship. Could you maybe give us some color on the breakdown of this quarter's provision expense, specifically, you know, how much was for that portfolio extension and then how much was for that specific credit? So the specific reserve was 1.7 million of that growth and provision expense. And then, you know, I think you could probably say the rest of the increase is related fairly evenly between supporting loan growth and the extension of the effective and, of course, covering the loan charges. Okay, great.

Speaker Change: Portfolio extension in loan growth, but also for a specific reserve relationship could you maybe give us some color on the breakdown of this quarters provision expense specifically, how much was for that portfolio expansion and then how much was for that specific credit.

Unknown Speaker: And then just to follow up on that, when would you say you expect that specific reserve relationship to be fully resolved? I would say it's a great question.

Unknown Executive: Could you maybe give us some color on the breakdown of this quarter for each expense specifically, you know, how much was for that portfolio extension and then how much was for that specific credit? So the specific reserve was 1.7 million of that growth and provision expense. And then, you know, I think you could probably say the rest of the increase related fairly evenly between supporting loan growth and the extension of payments, extension of the effective life. And of course, covering low charge on the quarter. Okay, great. Thanks.

Speaker Change: So the specific reserve was $1 7 million of that growth in provision expense and then I think you could probably say the rest of the increase related fairly evenly between supporting loan growth and.

Speaker Change: The extension of payments.

Speaker Change: Thanks extension of the effective life and of course, covering low charge offs for the quarter.

Speaker Change: Okay, great. Thanks, and then just a follow up on that when would you say you expect.

Unknown Executive: And then just to follow up on that, when would you say you expect that specific reserve relationship to be fully resolved? I would say that's a great question. I think we're being cautiously optimistic that there are improvement plans in place for that credit, but at this point in time, it's very difficult for us to handicap if that happens in 2024 or into the future.

Speaker Change: That specific reserve relationship to be fully resolved.

Unknown Speaker: I think we're being cautiously optimistic that there are improvement plans in place for that credit. But at this point in time, it's very difficult for us to handicap if that happens in 2024 or not. Okay, thanks. And then my last question, I guess, just moving to the margin, I was curious if you could touch on all your thoughts around NIM, more specifically, you know, the NIM Outlook and where you see that going throughout the rest of the year.

Speaker Change: I would say, it's a great question I think we're being cautiously optimistic that there are.

Speaker Change: Improvement plans in place for that credit.

Speaker Change: At this point in time, it's very difficult for us to handicap, if that happens in 2024 or into the future.

Henry: Okay, thanks. And then my last question. I guess just moving to the margin.

Speaker Change: Okay. Thanks, and then my last question I guess, just moving to the margin I was curious if you could touch on all your thoughts around the NIM more specifically you know the NIM outlook, and where you see that going throughout the rest of the year.

Unknown Executive: I was curious to speak to touch on all your thoughts around the NIM, more specifically, you know, the NIM outlook and where you see that going throughout the rest of the year. So I think we're, you know, pleased to see some stabilization in this quarter. You know, you know, depends on interest rate environment. We, you know, I think we believe that deposit costs have stabilized. We'll probably see a few basis points a month to continue as long as these rates stay higher. We're ready to move on rates when there is a decrease in the short-term rates.

Speaker Change: So I think we're pleased.

Speaker Change: Pleased to see some stabilization in this quarter.

Speaker Change: It depends on interest rate environment.

Speaker Change: I think we believe that deposit costs have stabilized and will probably see a few basis points a month to continue as long as these rates stay higher.

Speaker Change: We're ready to move on rates when there is a decrease in the short term rates.

Unknown Executive: You know, I think our asset repricing had pleased to see that, and we continue to see that continue. I just think there's a lot of variables. So, you know, I think stabilization is the word for us. And, you know, hoping to see, you know, further improvement as we go forward.

Unknown Speaker: I think our asset repricing, I'm pleased to see that, and we continue to see that continue. I just think there's a lot of variables, so I think stabilization is the word for us, and I'm hoping to see..., you know, further improvement. Okay, great. Thanks for taking my questions. I'll step back.

Speaker Change: I think our asset repricing pleased to see that and we continue to see that continue.

Speaker Change: There's a lot of variables so I.

Speaker Change: I think stabilization is the word for us and are hoping to see them further.

Speaker Change: Further improvement as we.

Speaker Change: We go for it.

Speaker Change: Okay, great. Thanks for taking my questions I'll step back.

Eric: Thanks, Eric.

Speaker Change: Thank you. Our next question comes from Matthew Breese with Stephens, Inc. Your line is open.

Operator: Thanks, everyone. Thank you. Our next question comes from Matthew Breese with Stevens Inc. Your line is open. Hey, good morning. What do you have?

Stephen Zink: Stephen Zink, your line is open. Hey, good morning. What do you got? I was hoping to dive into some of the NIM dynamics just a little bit deeper. Maybe to start, could you provide the percentage of pure floating rate loans on the books, meaning price to a prime or show for ensuring the curve. And what is the blended yields on those today? Sure, our pure floating rate, which is primary commercial and a little bit of home equity, is about $2.2 billion. Adjustable is another probably 1.8. This portion that is fixed to floating. That's a right around a 7.4% yield today.

Matthew M. Breese: Hey, good morning.

Matthew M. Breese: I was hoping to dive into some of the NIM dynamics just a little bit deeper. Maybe to start, could you please provide the percentage of pure floating rate loans on the books, meaning priced off prime or chauffeur or shorting the curve. And what is the blended yield on those today? Sure, our pure floating rate, which is primary commercial and a little bit of home equity, is about $2.2 billion. Adjustable is another, probably $1.8, portion that is fixed to floating.

You bet.

Matthew M. Breese: I was hoping to dive into some of the NIM dynamics, just a little bit deeper maybe to start could you provide that.

Matthew M. Breese: Percentage of pure floating rate loans on the books medium priced off prime or so for shortening the curve and what is the blended yields on those today.

Matthew M. Breese: Sure.

Speaker Change: Sure floating rate, which is primary commercial and a little bit of home equity is about $2 $2 billion adjustable.

Speaker Change: Adjustable is another probably one eight.

Speaker Change: The portion that is fixed to floating.

Unknown Speaker: That's right around a 7.4% yield today. Okay, and what does that imply for the remainder of the book? You know, the fifth grade portion of the book, what does that imply for yields on that? Is it, you know, somewhere in kind of the low to mid fives?

Speaker Change: That's a right around a seven 4% yield today.

Speaker Change: Okay.

Unknown Executive: Okay. What does that imply for the remainder of the book? You know, the 6.3 portion of the book. What does that imply for yields on that? Is it, you know, somewhere in kind of the below midwives? Is that accurate? Yeah. And then I would say that because of the fact that we portfolio so much. Firstly, in residential mortgage, it might be the high force, but we would have to blend that for you. It's against whether that high force or low five, but you can't; it could be much different than that. I think the point on the, your point is well taken on the pure variable.

Speaker Change: Okay, and what does that imply for the remainder of the book.

Speaker Change: The fixed rate portion of the book what does that imply for yields on that is it somewhere in kind of in the low to mid fives is that accurate.

Speaker Change: Yes, and I would say, Matt because of the fact that we portfolio so much.

Unknown Speaker: Is that accurate? Yeah, and I would say Matt, because of the fact that we've portfolioed so much first lien residential mortgages, it might be the high fours. But we would have to blend that for you to get to whether that's high fours or low fives, but you can't, it can't be much different than that.

Speaker Change: First lien residential mortgage might be the high fours.

Speaker Change: We would have to blend that for you to get to whether that's high fours low fives, but you can't it can't be much.

Unknown Speaker: I think your point is well taken on the pure variable. Again, most of that for us is commercial. And obviously, most of that has adjusted to the market rate here over the last 18 months to two years. And that's the piece that we thought when, you know, when the Fed starts to change rates, which we think we would then be more confident going into our deposit portfolio and lowering certain rates.

Different than that.

Speaker Change: I think the point on the your point is well taken on the pure variable again most of that for us is commercial.

Unknown Executive: Again, most of that for us is commercial, and obviously, most of that has adjusted to the market rate year over the last 18 months to two years. And that's the piece that we thought when, you know, when the, if the Fed starts to change rates, which we think we would then be more confident going into our deposit portfolio in lowering certain rates. That's the piece that just comes generally right off that. Right. But the time to sober or prime, those happen, you know, within a month of the, you know, the Fed decision. We also find ourselves in what I would say is a very, very interesting neutral position today.

Speaker Change: And obviously most of that has adjusted to the market rate here over the last 18 months to two years.

Speaker Change: That's the piece that we thought when when the if the fed starts to change rates.

We think we would then be more confident going into our deposit portfolio and lowering certain rates. That's a piece of it just comes generally right off that so whether it's tied to sofa or prime those happen within a month.

Unknown Speaker: That's the piece that just comes generally right off that, you know, so whether it's tied to SOFR or prime, those happen within a month of the Fed decision. We also find ourselves in what I would say is a very, very interest rate neutral position today. So, you know, regardless of whether it's a fast movement down or a very modest movement down, probably what we expect is that, you know, we're so interest rate neutral that there's not a huge uptick or a huge downtick, you know, just depending on, you know, the timing of rates.

Speaker Change: The fed decision.

Speaker Change: We also find ourselves with what I would say is in a very very interest rate neutral position today.

Stephen Zink: So, you know, regardless of whether it's a fast movement down or a very modest movement down, probably what we expect, that, you know, we're so interesting neutral that there's not a huge uptick or a huge down sick, you know, just depending on the timing of rate change. Maybe to better understand that last point, Scott, I mean, if I think about it, you have, you know, quite a bit of fixed rate loans in, to your point, the high scores low fines. You know, I would assume that new loan yields in those portfolios are in the mid to high six, maybe even most sevens.

Speaker Change: So.

Speaker Change: Regardless of whether it's a fast movement down or a very modest movement down probably what we expect.

Speaker Change: We are so interest rate neutral that theres, not a huge uptick or a huge downtick just depending on.

Speaker Change: The timing of rate change.

Speaker Change: Maybe to better understand that last point, Scott I mean, if I think about it you have quite a bit of fixed rate loans and to your point the high fours low fives.

Unknown Speaker: Maybe to better understand that last point, Scott, I mean, if I think about it, you have, you know, quite a bit of fixed-rate loans in your portfolio, the high fours, low five. I would assume that new loan yields in those portfolios are in the mid to high sixes, maybe even low sevens. So quite a bit of loan yield expansion opportunity on your fixed rate portfolio. Why not a more optimistic outlook on NIM? It feels like the reset NIM or the normalized NIM is higher than where it is today in the second quarter. So it's a point well taken.

Scott: I would assume that new loan yields in those portfolios are in the.

Mid to high sixes, maybe even most seven two.

Unknown Executive: So quite a bit of loan yield expansion opportunity on your fixed rate portfolio. Why not have a more optimistic outlook on the name? It feels like, you know, the reset name or the normalize name is higher than where it is today in the second quarter. So it's quite well taken. And I think that comes from the fact that we're still finding that the customer generally, both using tools that we give them and just their own acumen, is just finding ways to be more efficient with where they place their access funding. So we're not raising rates on any of our products. Obviously, we probably haven't done a year.

Speaker Change: So quite a bit of loan yield expansion opportunity on the fixed rate portfolio.

Speaker Change: Why not a more optimistic outlook on the NIM, but it feels like.

Scott: The reset name on the normalized NIM is higher than where it is today in the second quarter.

Unknown Speaker: And I think that comes from the fact that we're still finding that the customer, generally, both using tools that we give them and just their own acumen, is just finding ways to be more efficient with where they place their excess funding. So that's where most, you know, we aren't raising rates on any of our products, obviously we probably haven't in a year, but generally, the customer is finding a more efficient outcome for their net liquidity, and we don't discourage that. You know, we're trying to be in the balanced retention world and, you know, trying to do all the right things for the customer.

Speaker Change: Yes.

So its a point well taken.

Speaker Change: And I think that comes from the fact that we're still finding that the customer generally.

Speaker Change: Both using tools that we give them and just their own acumen is just finding ways to be more efficient with where they place their excess funding.

Speaker Change: So that's where most of you know we aren't raising rates on any of our products. Obviously, we probably haven't been in a year.

Unknown Executive: But generally, the customer is finding a more efficient outcome for their net liquidity. And we don't discourage that. We're trying to be in the balanced retention world and trying to do all the right things for the customer. So we just think that that process still has a little bit more legs attached to it that people are still generally finding ways to be more efficient with their liquidity. Okay, and then important parts with this, I thought it was interesting with the reserves that there was a duration change dynamic. Maybe give us some sense for what the duration of the loan portfolio was relative expectations and what the reset was and how that is, we're hearing it's a lot of six rate loans or just not reprising it's fast as folks thought.

Speaker Change: But generally the customer is finding a more efficient outcome for their net liquidity.

Speaker Change: And we don't discourage that we're trying to be in the balanced retention world.

Speaker Change: <unk> tried to do all the right things for the customer. So we just think that that process still has a little bit more legs attached to it.

Unknown Speaker: So we just think that that process still has a little bit more legs attached to it, that people are still generally finding ways to be more efficient with their liquidity. Okay, and then, you know, part and parcel with this, I thought it was interesting with the reserves that there was a duration change dynamic, you know, maybe give us some sense for, you know, what the duration of the loan portfolio was relative, you know, to expectations and what the reset was, and, and how that is, we're hearing this a lot, fixed rate loans are just not repricing as fast as folks thought, could you give us some color, Sure, I'll take a little bit of that and then ask Annette for some details for that.

Speaker Change: People are still generally finding ways to be more efficient with their liquidity.

Speaker Change: Okay, and then part and parcel with this I thought it was interesting with the reserves that there was a recent change dynamics, maybe give us some sense for.

Speaker Change: What the duration of the loan portfolio.

Speaker Change: Was relative to expectations and what the reset was.

Speaker Change: How that is we're hearing a lot of fixed rate loans are just not repricing as fast as folks thought could you give us some color there.

Unknown Executive: Could you give us some color there? Sure, I'll take a little bit of that and then ask a net for any sets of details for that. But holistically, duration extension has been going on since the Fed started raising rates. I think what's most pronounced for us is given the fact that we have a meaningful portion of fixed-rate commercial loans and fixed-rate residential mortgages on the books today, and there's really no motivation for that customer base to pay off quickly. When you start to get into a blended multi-quarter trend from that you still find yourself replacing a higher prepayment quarter with a lower prepayment quarter when you start to move out over time.

Speaker Change: Sure I'll take a little bit of that and then asking that for any set some details for that but holistically duration extension has been going on since the fed started raising rates I think what's most pronounced for US is given the fact that we have a meaningful portion of fixed rate commercial loans and fixed rate residential mortgages.

Unknown Speaker: But holistically, duration extension has been going on since the Fed started raising rates. I think what's most pronounced for us is given the fact that we have a meaningful portion of fixed-rate commercial loans and fixed-rate residential mortgages on the books today, and there's really no motivation for that customer base to pay off quickly. When you start to get into a blended multi-quarter trend from that, you still find yourself replacing a higher prepayment quarter with a lower prepayment quarter when you start to move out over time.

Speaker Change: On the books today, and Theres really no motivation for that customer base to pay off quickly.

Speaker Change: When you start to get into a blended multi quarter trend from that you still find yourself, replacing a higher prepayment quarter with a lower prepayment quarter. When you start to move out over time.

Unknown Executive: So I think this was just our way of saying, listen, we're trying to get our arms around the continued volatility and prepayment speeds or duration expectations, and we made decision to make some changes on that this quarter. Just thought it was a prudent time to do it. Okay, I would just add to that that we feel like we're in the end phase of that extension and that things will stabilize after this. All right, and I know I've been a bit long-winded. Just one more. Obviously, there's some puts and takes to long growth in your portfolio; there's some portfolios in one off, others you're growing.

Unknown Speaker: So I think this was just our way of saying, listen, we're trying to get our arms around the continued volatility in prepayment speeds or duration expectations, and we made the decision to make some changes on that this quarter. Just thought it was a prudent time.

So I think this was just our way of saying listen we're trying to get our arms around the continued volatility and prepayment speeds or duration expectations.

Speaker Change: We made the decision to make some changes on that this quarter just thought it was a prudent time to do it.

Speaker Change: Okay.

Unknown Speaker: Okay, I would just add to that that we feel like we're in kind of the end phase of that extension and that things will stabilize after this. All right, and I know I've been a bit longwinded, just, just one more, obviously, there's some puts and takes to loan growth in your portfolio, there's some portfolios in one off others, but you're growing. But then to your earlier point on chip investments, you know, when do you expect what's going on in Clay, New York, and the Capital Region and Malta? There's just a ton of money coming into the area for the semiconductor chip plants.

I would just add to that that we feel like we're in kind of the end phase of that extension and that.

Speaker Change: Stabilize after that.

Speaker Change: Alright, and I know I've been a bit long winded just just one more.

Speaker Change: Obviously, there's some puts and takes to loan growth and your portfolio. There are some portfolios and one off others Youre growing.

Matt: But then to your earlier point on chip investments, when do you expect what's going on in Claytony or in the capital region and Malta? There's just a ton of money coming into the area investments for the semiconductor chip plants. When do you expect that all to have kind of a meaningful impact or influence on balance you growth and being in common deposits and all of that?

Speaker Change: But then to your earlier point on chip investments.

Speaker Change: When do you expect.

Speaker Change: Whats going on in Clay in New York in the capital region, and Malta, There's just a ton of money coming into the area of investments.

Speaker Change: For the semiconductor chip plants. When do you expect that all to have kind of a meaningful impact or influence on balance sheet growth fee income and deposits and all of that.

Joseph R. Stagliano: Hey, Matt, this is Joe Stadley, and I'll jump in on that one. So, great question. So, as it stands today, it looks like the plan is to begin construction in the first quarter of 2025 up in Clay. That's when they expect to start moving the dirt and beginning the construction. Construction is going to take about two years to complete. So, during that time, we expect construction jobs to start up. They're projecting about 5,000 construction jobs associated with the Micron chip plant in Clay. With that, it's going to take about two years before fabrication begins. We expect the first chip to come off the production line around 2028.

Speaker Change: Hey, Matt This is Joe say Atlanta, I'll jump in on that one so.

Unknown Speaker: Great question. So as it stands today, it looks like the plan is to begin construction in the first quarter of 2025 up in up in clay. That's when they expect to start moving the dirt and beginning the construction. Construction is going to take about two years to complete.

Joe: So great question. So as it stands today it looks like the plan is to begin construction in the first quarter of 2025 up and up and clay that's when they expect to start moving dirt and beginning the construction construction is going to take about two years to complete so during that time, we expect construction jobs to <unk>.

Unknown Speaker: So during that time, we expect construction jobs to start up. They're projecting about 5,000 construction jobs associated with the Micron chip plant in Clay. With that, it's going to take about two years before fabrication begins. We expect the first chip to come off the production line around 2028.

Speaker Change: Start off they're projecting about 5000 construction jobs associated with.

Speaker Change: The micron chip plant and clay.

Speaker Change: It's going to take about two years before fabrication begins we expect the first chip to come off the production line around 2028.

Unknown Speaker: So with that, they're going to be hiring additional workers, about 9,000 workers directly associated with Micron in the plant, and then about 40,000 indirect jobs over the next 15 to 20 years as they complete their build-out of their plants. So our teams are staying really close to the folks at Micron and the officials across the different government agencies. And they've established some really strong relationships along the way to get some insight in terms of what's happening.

Joseph R. Stagliano: So with that, they're going to be hiring additional workers, about 9,000 workers directly associated with Micron and the plant. And then about 40,000 indirect jobs over the next 15 to 20 years as they simply they're built out along their plants. So our teams are staying really close to the folk that Micron and the officials across the different government agencies. And they've established some really strong relationships along the way to get some insight in terms of what's happening. So like what's happening up there, Global Foundries in Malta, a lot of really good activity. Some of our strong loan growth is happening up in the Capital Region, up through the North Country.

Speaker Change: With that they're going to be hiring additional workers about 9000 workers directly associated with micron in the plant and then about 40000 indirect jobs over the next 15 to 20 years as they complete their build out.

Speaker Change: Their plants. So our teams are staying really close to the folks at micron and officials.

Speaker Change: Across the different government agencies.

Speaker Change: And they've established some really strong relationships along the way to get some insight in terms of what's happening.

Unknown Speaker: So like what's happening up at Global Foundries in Malta, a lot of really good activity, some of our strongest loan growth is happening up in the capital region, up through the North Country. We're seeing that in our branches with some extra transaction activity and some good deposit growth. We expect that to, you know, begin and set a really good pace over the next couple years up in Clay at the Micron site.

Speaker Change: Like what's happening up there at global foundries and Malta, a lot of really good activity. Some of our strongest loan growth is happening up in the capital region up through the north country, we're seeing that in our branches with some extra transaction activity and some good deposit growth, we expect that to begin and then set some some really good.

Unknown Executive: We're seeing that in our branches with some extra transaction activity and some good deposit growth. We expect that to begin and set some really good pace over the next couple of years up in clay at the micron site. So a lot of activity going on right now. It's a lot of work leading up to the construction. And we expect to see what we see up in Albany, up in Saratoga, around the Malta area to continue at the Micron site and Clay. I would add to that that you know, you know, our desire is to stay a leader in this relative to making sure that our customers are engaged with the opportunities across all of our markets.

Speaker Change: Over the next couple of years up and clay.

Speaker Change: At the Micron sites, so a lot of activity going on right now it's a lot of work leading up to the construction and we expect to see what we see up in Albany up in Saratoga around the mouth area to continue at the Micron site and clay.

Unknown Speaker: So there is a lot of activity going on right now. There is a lot of work leading up to the construction, and we expect to see what we see up in Albany, up in Saratoga, around the Malta area, to continue at the Micron site in Clay.

Unknown Speaker: Matt, I would add to that that, you know, our desire is to stay a leader in this relative to making sure that our customers are engaged with the opportunities across all of our markets so that we've enhanced our own understanding of the opportunity and what that looks like. We're completely engaged with economic development agencies across the CHIP corridor, you know, again, to try to promote just a better understanding and being able to capitalize on these opportunities. I happen to believe that, you know, a demographic change like this is just not usual for upstate New York, so this opportunity probably rises for all boats, but I think we just want to be out in front of that and make sure that our customer base or our future customer base is Great I appreciate all that. I'll step back.

Speaker Change: Hey, Matt I would add to that.

Speaker Change: No.

Our desire is to stay a.

Matt: A leader in this relative to making sure that our customers are engaged with the opportunities across all of our markets. So that we have enhanced our own education of the opportunity and what that looks like.

Unknown Executive: So that we've enhanced our own education of the opportunity and what that looks like. We're completely engaged with economic development agencies across the chip corridor. You know, again, to try to promote just a better understanding and being able to capitalize on these opportunities. I happen to believe that, you know, a demographic change like this is just not usual for Upstate New York. So this opportunity probably rises all boats. But I think we just want to be out in front of that and make sure that our customer base or our future customer base is very well informed.

Matt: Completely engaged with economic development agencies across the chip corridor.

Matt: Again to try to promote just a better understanding and being able to capitalize on these opportunities I happen to believe that.

Demographic change like this is just not usual for upstate New York. So this opportunity probably rises all boats.

Matt: But I think we just wanted to be out in front of that and make sure that our customer base for our future customer base is very well informed so continues to be our objective.

Matt: So continue to be our objective. Great. I appreciate all that. All set back. Thank you. Thanks, Matt. Thank you, Matt.

Speaker Change: Great I appreciate all that I'll step back thank you.

Unknown Speaker: Thank you, Matt. Thank you, Matt. Thank you. Again, if you have a question, please press star 11. Our next question comes from Christopher O'Connell with KVW. Your line is open. Hey, good morning. Good morning, Chris. So just wanted to circle back to the margin dynamics here. The CD cost did not move on a quarter over quarter basis.

Speaker Change: Thanks, Matt Thank you Matt.

Speaker Change: Thank you again, if you have a question. Please press star one one.

Unknown Executive: Question, please press star one one.

Speaker Change: Our next question comes from Christopher O'connell with <unk>. Your line is open.

Christopher O'Connell: Our next question comes from Christopher O'Connell with KVW. Your line is open.

Christopher O'Connell: Hey, good morning.

Unknown Executive: Hey, good morning. Good morning, Chris. So just wanted to circle back to the the margin dynamics here. You know, the CD cost did not move on a quarter-of-a-quarter basis. And it was just wondering where new CDs are being priced at. And how much of the CD book has to be priced in the second half of 24.

Chris: Good morning, Chris.

Christopher O'Connell: So just wanted to circle back to the margin dynamics here.

Chris:

Speaker Change: The CD cost.

Speaker Change: It did not move on a quarter over quarter basis, and I was just wondering where new Cds are being priced at and how much of the CD book has to reprice in the second half of 'twenty four.

Christopher O'Connell: And I was just wondering where new CDs are being priced at and how much of the CD book has to reprice in the second half of 20. So I'll start with the front end and have Annette be thinking about the amount of repricing. But in terms of new CDs, we have lowered our new CD rates, but modestly. So, you know, probably something in the low fours or high threes is where they are based on some kind of a tiered outcome, Chris.

Speaker Change: So I'll start with the front end and having that be thinking about the amount of repricing, but.

Unknown Executive: So I'll start with the front end and having that be thinking about the amount of repricing. But in terms of new CDs, we have lowered new CD rates, but modestly. So, you know, probably something in the low four tights, where they are based on some kind of a tiered outcome, Chris. And so we will probably see upon renewals some, you know, some results that are net positive along that line.

Speaker Change: In terms of new Cds, we have lowered new CD rates, but modestly.

Chris: So probably something in the low fours high threes is where they are based on some kind of a tiered outcome Chris.

Unknown Speaker: And so we will probably see upon renewal some, you know, some results that are net positive along that line. Yes, and I think that half of the year we're probably seeing maybe another 700 million repriced. Great.

Chris: So we will probably see upon renewal some.

Chris: Some results that are net positive along that line.

Speaker Change: Yes, and I think the back half of the year are probably seeing maybe another 700 million reprice.

Chris: Great. So I mean the costs there.

Unknown Speaker: So I mean, the costs are, you know, net neutral, plus or minus basically from here. There is opportunity to reprice down on that. Peace Maturing.

Chris: Net neutral plus or minus basically from here.

Chris: Yes.

Chris: There is opportunity to reprice down on the on that.

Chris: Piece maturing.

Unknown Speaker: Yep. And then, you know, on the expense side, you know, really good quarter, part of it seasonal, but seems to be, you know, pretty, pretty solid on a core basis as well. I think last quarter talking about, you know, kind of, Stepping up or kind of flattish to the first quarter in the 91 to 92 million range on a quarterly basis for the back half of the year. Do you still think it steps up there, or is this run rate off of the better Q2 results able to hold?

Chris: Yeah and then.

Chris: On the expense side.

Speaker Change: Really good quarter part of it seasonal but seem to be pretty pretty solid on a core basis as well I think last quarter you were talking about.

Speaker Change: Kind of stepping.

Speaker Change: Stepping up or kind of flattish for the first quarter in the $91 million to $92 million range on a quarterly basis for the back half of the year.

Speaker Change: Do you still think it steps up there or is this.

Speaker Change: Run rate off of the better Q2 results.

Speaker Change: As a whole.

Speaker Change: We do think it will step up and a reminder, that we have one additional payroll day in each of the quarters. So.

Unknown Speaker: We do think it will step up, a reminder that we have one additional payroll day each quarter. So that alone will increase that expense run rate by about a penny. So there's a little bit of that, and probably just more activity in our markets and things like that will probably have some of the costs drift a little upward. And Chris, our organization has been very supportive of the whole idea that as there are net interest income challenges and challenges to improve that generation, we need to be very disciplined and pointed in our decisioning on the operating expense side.

Speaker Change: That alone will increase that.

Speaker Change: This run rate by about a penny so theres, a little bit of that and probably just more activity in our markets and things like that we'll probably have some of the cost strict drift a little awkward.

Chris: Chris Our organization has been very embracing of the whole idea that as there are net interest income challenges and challenges to improve that generation, we needed to be very disciplined and pointed in our decisioning on the operating expense side. So I'd like to think we have found a great balance on that.

Unknown Speaker: So I'd like to think we have found a great balance on that. And if the opportunity presents itself, you know, going forward, for us to make some more structural investments in the second half of the year, we'll go ahead and do that, but again, at a tempered price.

Chris: And if the opportunity presents itself.

Chris: Going forward for us to make some more structural investments in the second half of the year. We will go ahead and do that but again at a temporary phase.

Chris: Yeah.

Speaker Change: Great and then.

Unknown Speaker: Right. And then, you know, on the fee side, I mean, a really good year so far. You know, across businesses, I know they're market driven, but, you know, a lot of organic growth as well. And any seasonal factors to be aware of are kind of, you know, overall fluctuations that you see might occur in the back half of the year for those businesses. Yeah, it has been a really good first half of the year.

Speaker Change: On the fee side, I mean really good year so far.

Speaker Change: Across the businesses in your home market, driven but a lot of them.

Speaker Change: Organic growth as well.

Speaker Change: Any seasonal factors to be aware of or kind of.

Speaker Change: Just overall fluctuations.

Speaker Change: She might might occur in the back half of the year for those businesses.

Speaker Change: Yeah. It has been a really good first half of the year I would say that retirement plan administration typically their first half is better than the second half and that's just really there is a little bit of seasonal activity around actuarial services and various things like that so wouldn't affect the back half to be as strong.

Unknown Speaker: I would say that Retirement Plan Administration typically has their first half is better than their second half. And that's just really because there is a little bit of seasonal activity around actuarial services and various things like that. So I wouldn't expect the back half to be as strong for Retirement Plan Services. Reminder that market performance has really been a nice tailwind for us. So if that continues, I think Wealth Management and Retirement Plan Services will still have good, good quarters.

Speaker Change: For retirement plan services reminder, that market performance has really been a nice tailwind for us. So if that continues I think wealth management retirement plan services will still you will.

Unknown Speaker: And there's just a little bit of seasonality and insurance, but not just a couple hundred thousand and, maybe you could just kind of talk about, you know, backing out some of the market impacts, you know, what's been the recent organic growth pace of the insurance, retirement, and wealth business? I'll touch on that really quick, Chris, and come back to Annette, because I think in Annette's script, we looked at and said our compounded annual growth rate in those businesses over the last five years has been a little over 9%.

Speaker Change: Good good quarters.

Speaker Change: And there's just a little bit of seasonality in insurance, but not just a couple of hundred thousand third quarter.

Speaker Change: And maybe you could just kind of talk about <unk>.

Speaker Change: Backing out some of the market impacts.

Speaker Change: What's been the recent organic growth piece of the insurance retirement wealth businesses.

Unknown Speaker: Part of that, you know, probably about a third of that has been generated from some opportunistic acquisitions that we've been able to do, mostly in the retirement plan space and the insurance side. So I think that that pattern makes some sense.

Speaker Change: I'll touch on that really quick question comes back to a net four I think in a net script, we've looked at and said our compounded annual growth rate in those businesses over the last five years has been a little over 9%.

Speaker Change: Part of that.

Speaker Change: Probably.

Speaker Change: Third of that has been generated from some opportunistic acquisitions that we've been able to do mostly in the retirement plan space and in the insurance side.

Speaker Change: So I think that that pattern makes some sense.

Speaker Change: So what have you got mid single digit growth, maybe in the 5% to 7% range in those businesses with some market support.

Unknown Speaker: So you have got mid single-digit growth, maybe in the five to 7% range in those businesses with some market support. But generally speaking, when we look at those businesses, we look at, you know, the difference between new, you know, new plan growth on the retirement plan side versus lost business because remember, businesses are acquired by people, you know, and their plans for various reasons.

Speaker Change: But generally speaking when we look at those businesses, we look at.

Speaker Change: The difference between new new.

Speaker Change: New plan growth on the on the retirement plan side versus lost business, because remember businesses or acquired.

People and their plans for various reasons I think if we can get to a point, where our new growth is in the seven to eight 9% side and our loss businesses in the two to four that's a pattern, we really like and we think can be replicated.

Unknown Speaker: I think if we can get to a point where our new growth is in the 789% side and our lost businesses are in the two to four, that's a pattern we really like and we think can be replicated.

Unknown Executive: David. Great, and then lastly for me, just you talk about, you know, any change in the M&A environment or discussions there, and, you know, what you guys would be looking to do if you did participate in M&A. Yeah, so I think you know, you know, our history relative to capital allocation, which is we want to build a support organic growth because that's what we're good at, and we think that, you know, is very desirable on a long-term basis for us. As we did this quarter, we are very supportive of making sure that the dividends to our shareholders has that we have a capacity in our capital to improve that every year, and that's a stated objective of ours, you know, the shareholders need to participate in, you know, in the good fortune of the company.

Speaker Change: Great and then lastly for me just you talk about.

Unknown Speaker: And then lastly, for me, just you talk about, you know, any changes in the M&A environment or discussions there, and, you know, what you guys would be looking to do if you did participate in an M&A transaction. Yeah, so I think you know our history relative to capital allocation, which is that we want to be able to support organic growth because that's what we're good at. And we think that that, you know, is very desirable on a long-term basis for us.

Speaker Change: Any change in the M&A environment or discussions there.

Speaker Change: What you guys would be looking to do it if you did participate in M&A.

Unknown Speaker: As we did this quarter, we are very supportive of making sure that the dividends to our shareholders are such that we have the capacity in our capital to improve that every year. And that's a stated objective of ours.

Speaker Change: Yes, so I think <unk>.

Speaker Change: You know our history relative to capital allocation, which is we want to build to support organic growth because that's what we're good at.

Speaker Change: We think that debt.

Speaker Change: It is very desirable on a long term basis for us as we did this quarter.

Speaker Change: Sure.

Very supportive of making sure that the dividend to our shareholders has that we have the capacity and our capital to improve that every year.

Speaker Change: And Thats the stated objective of ours.

Speaker Change: The shareholders need to participate in and the good fortune of the company.

Unknown Speaker: You know, the shareholders need to participate in the good fortune of the company. I think from there, we really like where we're sitting from a capital position standpoint, enabled to be able to support being able to analyze potential M&A transactions. You know, we're now an experienced acquirer again after the Salisbury transaction last year. And what did we learn from that? That on a crossover basis, all of the dilution that came from the transaction itself, we've more than earned back in under a year.

Unknown Executive: I think from there, we really like where we're sitting from a capital position standpoint, and able to be able to support being able to analyze potential M&A transactions. You know, we're now an experienced an acquireer again after the Salisbury transaction last year, and what did we learn from that, that on a crossover basis, all of the delusion that came from the transaction itself, we've more than earned back in a year. So I think our confidence relative to getting through, you know, the complications of interest rate marks and credit marks and fair value assumptions is at a pretty high level.

Speaker Change: I think from there, we really like where we're sitting from a capital position standpoint enabled to be able to support being able to analyze potential M&A transactions.

We're now an experienced an acquirer again after the Salisbury transaction last year and what did we learn from that that on a crossover basis all of the dilution that came from the.

Speaker Change: The transaction itself, we've more than earned back in under a year or.

Unknown Speaker: So I think our confidence relative to getting through, you know, the complications of interest rate marks and credit marks and fair value assumptions is at a pretty high level. I think we've talked about before the natural geographic extension of our footprint. You know, we like where we are represented across seven states, but we have some spots we would love to fill in.

Speaker Change: So I think our confidence relative to getting through the complications of interest rate marks in credit marks and fair value assumptions.

Speaker Change: Is that a pretty high level.

Unknown Executive: I think we've talked about before natural geographic extension of our footprint. You know, we like where we are represented across seven states, but we have some spots we would love to fill in, you know, whether that's, you know, going a little further south in Pennsylvania, filling in some gaps. We have in New England, potentially western New York. We think we're just well positioned building to consider opportunities in all those geographies. With again saying, we're unlikely to be a meaningful participant in greater New York City, Boston, or Philadelphia. We just don't know how to differentiate our model in those markets, and there's plenty of people that are trying.

Speaker Change: I think we've talked about before natural geographic extension of our footprint.

Speaker Change: We like where we are represented across seven states, but we have some spots we would love to fill in.

Speaker Change: Whether thats going a little further south in Pennsylvania filling in some gaps we have in new England potentially Western New York, We think we're just well positioned to be able to consider opportunities in all of those geographies with again, saying we are unlikely to be a meaningful participant in greater New York City Boston or.

Unknown Speaker: Yeah, you know, whether that's going a little further south and into Pennsylvania, filling in some gaps we have in New England, potentially Western New York, we think we're just well positioned to be able to consider opportunities in all those geographies, although again, saying we're unlikely to be a meaningful participant in greater New York City, Boston, or Philadelphia. We just don't know how to differentiate our model in those markets, and there are plenty of people that are trying.

Speaker Change: Philadelphia, We just don't know how to differentiate our model in those markets and there is plenty of people that are trying.

Speaker Change: And is the has the general discussions or.

Unknown Speaker: And has the general discussions or, you know, M&A chatter, you know, picked up at all year to date? Or is it still fairly quiet? Now, we're finding an opportunity to speak to a lot of people. Again, I think it's because, you know, we completed a transaction last year; people are just interested in the dynamics that went into the decision by Salisbury to partner with NBT, you know, quote, how did the math work? What was the approval process from a regulatory standpoint?

Unknown Executive: And as the, as the general discussions or, you know, emanate your outer, you know, has that picked up at all a year to date, or is it still fairly, uh, it's happened. So we're finding an opportunity to speak to a lot of people. Again, I think it's because, you know, we completed a transaction last year. People are just interested in the dynamics that went into the decisioning of salt's very harder within BT, you know, quote, how did the math work? What was the approval process from a regulatory standpoint? So I think people are interested in that, and interested in hearing about, you know, our, our own experience.

M&A chatter has that picked up at all year to date or is it still fairly tepid.

Speaker Change #100: So we're finding an opportunity to speak to a lot of people.

Speaker Change #100: I think it's because we completed the transaction last year people are just interested in the dynamics that went into the decisioning.

Speaker Change #100: Various partnered with MPT.

Speaker Change #101: How does the math work.

Speaker Change #101: The approval process from a regulatory standpoint, so I think people are interested in that and interested in hearing about.

Unknown Speaker: So I think people are interested in that and interested in hearing about, you know, our own experiences. So it's not difficult to find an opportunity. And, you know, and again, remember, we are not the aggressive acquirer; we try to have a discussion with people that says if someday independence is not what you're thinking about, here's the value proposition of NBT. Great. And does the, you know, higher organic growth pace, or I guess, you know, anticipated organic growth pace over the next few years, given, you know, the demographic trends in your markets? I mean, does that change what you would want to look at in terms of a target?

Speaker Change #101: Our own experience, so it's not difficult to find an opportunity.

Unknown Executive: So it's not difficult to find an opportunity.

Unknown Executive: And, you know, again, remember, you know, we are not the aggressive, a choir, or we try to have a discussion when people that says if someday independence is not what you're thinking about, here's the value proposition of NDK. Right. And does the, you know, higher organic growth pace, or I guess, you know, anticipated organic growth pace over the next few years, uh, you know, given, you know, the demographic trends in your markets? I mean, does that change what you would want to look at in terms of a target? Uh, meaning, you know, are you going to even consider anything that has, you know, close to 100% loaned deposit ratio? Are you really going to be looking more for, kind of lower loaned deposit ratio, funding vehicles to help, you know, enhance your own organic growth going forward.

Speaker Change #101: Sure.

Speaker Change #102: And again remember we are not the aggressive acquirer, we try to have a discussion with people that says if someday independence is not what you are thinking about here's the value proposition of NPT.

Speaker Change #102: And does the.

Speaker Change #103: Higher organic growth piece, or I guess anticipated organic growth pace over the next few years.

Speaker Change #103: Given the demographic.

Speaker Change #103: <unk> in your markets.

Speaker Change #104: Does that change what you would want to look at in terms of a target.

Speaker Change #103: Meaning.

Speaker Change #105: Are you going to even consider anything that has close to 100%.

Unknown Speaker: Meaning, you know, Are you going to even consider anything that has, you know, close to 100%? loan to deposit ratio? Are you really going to be looking more for kind of lower loan to deposit ratio funding vehicles to help, you know, enhance your own organic growth going forward? Yeah, I think it's a reasonable question.

Speaker Change #105: Loan to deposit ratio or are you really going to be looking more for kind of lower loan to deposit ratio funding vehicles to help enhance your own organic growth going forward.

Unknown Executive: Yeah, I think it's a reasonable question. In other words, if we had to start to think about us as a mid to upper single digit organic growth opportunity over time, how we would support that from a funding standpoint is critically important. But I think we would be willing to take on that challenge both organically and transactionally if that was necessary. Your question around does that change what we think about? We're again looking for high-quality franchises. People we've had long-term understanding of relationships with that are probably geographically connected to where we're already doing today. So I want to think it radically changes that.

Unknown Speaker: In other words, if we had to start to think about us as a mid to upper single-digit organic growth opportunity over time, how we would support that from a funding standpoint is critically important. You know, but I think we would be willing to take on that challenge both organically and transactionally if that was necessary. Your question about whether that changes what we think about, we're again looking for high quality franchises, people we've had long-term understanding and relationships with that are probably geographically connected to where we're already doing today.

Speaker Change #106: Yes, I think it's a reasonable question in other words, if we had to start to think about us as a mid to upper single digit organic growth opportunity over time, how we would support that from a funding standpoint is critically important.

Speaker Change #106: But I think we would be willing to take on that challenge both organically and <unk>.

Speaker Change #107: Transactional Lee if that was necessary.

Speaker Change #107: Your question around does that change, what we think about where again looking for high quality franchises people. We've had long term understanding and relationships with that are probably geographically connected to where we are already doing today. So I don't think it radically changes that.

Unknown Speaker: So I don't think it radically changes the fact that, you know, you know, we don't bump into very many people that have loan to deposit ratios north of 100%. It's just not indicative of the markets that we're in or, you know, most of the targets that we come across. Great. Thanks for taking my question. Thanks, Chris. Thank you. I'm not asking any further questions.

Christopher O'Connell: You know, we don't bump into very many people that have loaded deposit ratios north of 100%. It's just not indicative of the markets that we're in or most of the targets that we come across. Great. Thanks for taking my question. Thanks, Chris. Thank you.

Speaker Change #108: We don't bump into very many people that have loan to deposit ratios north of 100%. It's just not indicative of the markets that we're in or most of the targets that we come across.

Speaker Change #109: Great. Thanks for taking my questions.

Chris: Thanks, Chris.

Chris: Thank you I'm not showing any further questions I will now turn the call back to Scott Kingsley for his closing remarks.

Operator: I will now turn the call back to Scott Kingsley for his closing remarks. Thank you. In closing, I want to thank everyone for their participation on today's call and for your interest in NBT. And we'll talk to you in three months. Thank you.

Unknown Executive: I'm not showing any further questions.

Scott Kingsley: I'll now turn the call back to Scott Kingsley for his closing remarks. Thank you. In closing, I want to thank everyone for your participation on today's call and for your interest in NBT. And we'll talk to you in three months. Thank you.

Scott A. Kingsley: Thank you in closing I want to thank everyone for your participation on today's call and for your interest in NPT and we'll talk to you in three months. Thank you.

Unknown Executive: Thank you, Mr. Kingsley.

Speaker Change #110: Thank you Mr. Kingsley. This concludes our program you may disconnect have a great day.

Unknown Executive: This concludes our program. You may disconnect. Have a great day. Thank you for watching.

Speaker Change #110: Yeah.

Operator: Have a great day. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day, everyone. Welcome to the conference call covering NBT Bancorp's second quarter 2024 financial, This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD.

Speaker Change #110: [music].

Unknown Executive: Good day, everyone.

Speaker Change #111: Good day, everyone welcome to the conference call covered M. B cheese Bancorp's second quarter 2024 financial results. This call is being.

Unknown Executive: Welcome to the conference call, and we're looking forward to seeing you in the next video. Act results may differ from those projected. In addition, certain non-GAAP measures will be discussed. Reconciliation for these numbers is contained within the appendix of today's presentation. At this time, all participants are in the listening mode.

Speaker Change #112: Being recorded and that's been made accessible to the public in accordance with the Sec's regulation FD.

Operator: 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 exchange. 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.

Speaker Change #113: Corresponding presentation slides can be found in the company's website at N P T Bancorp dot com.

Speaker Change #114: Before the call begins N V cheese 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.

Speaker Change #114: Actual results may differ from those projected.

Speaker Change #114: In addition, certain non-GAAP measures will be discussed reconciliations for these numbers are contained within the appendix of today's presentation.

Speaker Change #115: 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.

Scott A. Kingsley: 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 NBT Bancorp President and CEO, Scott Kingsley, for his opening remarks. Mr. Kingsley, please begin.

Unknown Executive: Later, we will conduct a questionnaire session, and instructions will follow with that time. As a reminder, this call is being recorded.

Speaker Change #115: As a reminder, this call is being recorded.

Scott A. Kingsley: I will now turn the conference over to MBT Bank Court President CEO Stad Kingley for his opening remarks. Mr. Kingley, please begin. Thank you for your help. Good morning. And thank you for joining us for this earnings call covering MBT Bank Court's second quarter of 2024 results. With me today, our MBT Chief Financial Officer, Annette Burns, and Joe Stagviano, the President of MBT Bank N.A. and Joe Andesco, our treasurer.

Speaker Change #115: I'll now turn the conference over to N V T Bancorp, President and CEO, Scott Kingsley for his opening remarks, Mr. Kingsley. Please begin thank you Michele.

Scott A. Kingsley: Thank you, Michelle. Good morning, and thank you for joining us for this earnings call covering NBT Bancorp's second quarter 2024 results. With me today are NBT's Chief Financial Officer, Annette Burns, Joe Stagliano, the President of NBT Bank N.A., and Joe Ondesco, our Treasurer. This is our first earnings call following our leadership transition in May, and we want to extend our thanks to John Watt and the entire NBT Board of Directors, as well as the management team, for supporting us through a very smooth transition. I would also like to congratulate Rick Cantelli on his upcoming retirement from our senior management team in August. Rick's insight and contributions following the completion of the Salisbury merger have been invaluable.

Scott A. Kingsley: Good morning, and thank you for joining us for this earnings call covering MPT Bancorp second quarter 2024 results with me today are <unk> Chief Financial Officer of net Burns Jo Stagg Liana <unk>, the president of <unk> Bank, M&A and Joe on desktop our treasurer.

This is our first earnings call following our leadership transition in May. And we want to extend our thanks to John Wat and the entire MBT Board of Directors, as well as the management team, for supporting us through a very smooth transition.

Speaker Change #116: This is our first earnings call following our leadership transition in May and we want to extend our thanks to John what in the entire NBC board of directors as well as the management team for supporting us through a very smooth transition.

Speaker Change #116: I would also like to congratulate Rick can't tally on his upcoming retirement from our senior management team in August Rick insight and contributions following the completion of the Salisbury merger have been invaluable. He will continue to provide important guidance as a member of our board.

Scott A. Kingsley: We are also pleased to announce a 6.3% increase in our quarterly cash dividend to shareholders. This represents our 12th consecutive year of annual dividend increases, and it demonstrates our commitment to providing consistent and favorable long-term returns to our shareholders. The increase also represents a 26% improvement over the past three years. In April, it was announced that the U.S. Department of Commerce had entered into an agreement with Micron Technology to provide a $6.1 billion grant under the Chips and Science Act that will, in part, support its plan to invest as much as $100 billion in a new complex of semiconductor chip manufacturing plants in the town of Clay, near Syracuse. Additional support for the Clay Complex includes a $5.5 billion tax credit from the New York State Green Chips Program and significant infrastructure investments by the state and Onondaga County.

Speaker Change #116: We're pleased to now review our second quarter results with you today.

Speaker Change #116: Our operating performance for the first quarter and the first half of the second quarter and the first half of 2024 continues to reflect the strength of our balance sheet, our diversified business model and the collaboration of our team during.

During the second quarter, we productively grew loans across our footprint and improved our net interest margin as earning asset yields increased incrementally higher than funding costs.

A positive result, but we're still cautious on pronouncing it as a trend.

Speaker Change #116: Noninterest income continues to be a highlight making up 31% of total revenues for the second quarter and reaching a new quarterly all time high.

Speaker Change #116: We are also pleased to announce a six 3% increase in our quarterly cash dividend to shareholders. This represents our <unk> consecutive year of annual dividend increases and it demonstrates our commitment to providing consistent and favorable long term returns to our shareholders. The increase also represents a 26.

Speaker Change #116: Percent improvement over the past three years.

Speaker Change #117: In April it was announced that the U S Department of Commerce has entered into an agreement with Micron technology to provide a $6 1 billion dollar grant under the chips and Science Act that will in part support its plans to invest as much as $100 billion in a new complex of semiconductor chip manufacturing plants.

Speaker Change #117: In the town of Clay near Syracuse additional support for the Clay complex includes a $5 $5 billion tax credit from the New York State Green chips program and significant infrastructure investments by the state and Onondaga County site specific progress continues as planned.

Speaker Change #118: <unk> is uniquely positioned to play a significant role in providing financial services to all types of customers and prospects living and working in the upstate New York Chip corridor.

Speaker Change #119: At this time I will turn the meeting over to net to review our second quarter results with you in detail our net.

Net: Points from the prior quarter as our eight basis points of earning asset yield improvement more than offset our increase in funding costs in the quarter tangible book value per share of $22.54. As of June 30 was up 47 per share from the end of the first quarter and was at an all time high for NPT.

Annette L. Burns: The next page shows trends in outstanding loans. Total loans were up $204 million for the year, or 4.2% annualized, and included growth in our commercial and indirect auto portfolios. Excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status, loans increased $295 million, or 6.9% annualized. Second quarter loan yields were up nine basis points from the first quarter of 2024, reflective of continued higher new origination rates.

Net: The next page shows trends in outstanding loans total loans were up $204 million for the year or four 2% annualized and included growth in our commercial and indirect auto portfolios, excluding the other consumer and residential solar portfolios that are in a planned contractual runoff status.

Net: Loans increased $295 million or six 9% annualized.

Net: Second quarter loan yields were up nine basis points from the first quarter of 2024 reflective of continued higher new origination rates.

Annette L. Burns: Our loan portfolio of $9.85 billion remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans. On page six, total deposits of $11.27 billion were up $302.5 million from December 2023. We saw growth in consumer balances and accounts, along with a higher level of municipal deposits. We have included a summary of our deposit mix by type, which shows the diversification and deep granularity of our customer base.

Net: Our loan portfolio of $985 million remains very well diversified and is comprised of 53% commercial relationships and 47% consumer loans.

Net: Our customer base. The company continues to experience some relaxing permits no interest and low interest checking and savings accounts into higher yielding money market and time deposit instruments, our quarterly cost of total deposits increased seven basis points from the prior quarter to one 6% to 8%.

Net: The next slide looks at the detailed changes in our net interest income and margin in the second quarter net interest income was $2 million above the linked first quarter results.

The primary drivers to the increase in net interest income was an increase in asset yields and loan growth, partially offset by an increase in interest bearing deposit costs.

The trends in noninterest income are outlined on page eight.

Annette L. Burns: This marks a record high of quarterly non-interest income, driven by new account growth and favorable market performance in our retirement plan administration and wealth management business. Retirement Plan Administration revenue increased by $500,000 from the first quarter due to organic growth, positive market conditions, and higher activity-based fees. Our wealth management services also increased by $500,000 in the second quarter due to favorable market performance and new account growth. Insurance agency revenues were lower due to the seasonally high revenues recorded in the first quarter.

Net: Management businesses.

Net: Retirement plan administration revenues increased by 500000 from the first quarter due to organic growth positive market conditions and higher activity based fees.

Net: Our wealth management services also increased by 500000 in the second quarter due to favorable market performance and new account growth in insurance agency revenues were lower due to the seasonally high revenues recorded in the first quarter.

Net: The diversification of our revenue sources remains a core strength for the company accounting for 31% of total revenues or fee income business lines. The retirement plan administration wealth management and the insurance agency has demonstrated a meaningful compounded annual growth rate of nine 3% over a five year period.

Annette L. Burns: This decrease is primarily due to seasonal higher payroll taxes and stock-based compensation expense in the first quarter, partly offset by a full quarter of non-interest expenses. In addition, non-interest merit pay increases and higher medical costs in the second quarter. Technology and data service expenses decreased $500,000 from the first quarter of 2024 due to cost savings achieved from various efficiency initiatives. Occupancy costs also decreased due to seasonal factors, including lower utility costs. We remain committed to managing our non-interest expenses effectively, balancing cost efficiencies with necessary investments to support our engagement with customers and our On slide 10, we provide an overview of key asset quality metrics. We recorded a loan loss provision expense of $8.9 million in the second quarter, which was $3.3 million higher than the first quarter of 2024.

Net: Moving on to noninterest expense, our total operating expenses were $89 $6 million for the quarter, which is $2 2 million or two 4% below the linked first quarter.

Net: Offset by a full quarter of merit pay increases and higher medical costs in the second quarter.

Net: Technology and data service expenses decreased $500000 from the first quarter of 2024 due to cost savings achieved from various efficiency initiatives occupancy costs also decreased due to seasonal factors, including lower utility costs.

Net: We remain committed to managing our noninterest expenses effectively balancing cost efficiencies with necessary investments to support our engagement with customers and our people.

Net: On slide 10, we provide an overview of key asset quality metrics, we recorded a loan loss provision expense of $8 9 million in the second quarter, which was up $3 $3 million higher than the first quarter of 2024.

Net: This increase was primarily due to provisioning for the second quarter's loan growth.

Net: <unk> and prepayment speeds, which continued to extend the effective life of loans and $1 $7 million in specific reserves related to a commercial relationship previously placed on non accrual in the fourth quarter of 2023.

Net: Net charge offs to total loans were 15 basis points in the second quarter of 2024 compared to 19 basis points in the prior quarter nonperforming assets to total assets were unchanged for the past three quarter ends at 28 basis points.

Annette L. Burns: Non-performing assets to total assets were unchanged for the past three quarter ends at 28 basis points. Reserve coverage of 1.22% of total loans was three basis points higher than the prior quarter and covered 316% of non-performing loans. We believe that charge-off activity will continue to trend towards more historical norms, and expected balance sheet growth and continued mix changes will likely be the driver of future provisioning needs. In closing, our well-balanced organic growth, granular deposit base, stable credit quality, strong fee income generation, and active expense management continue to help offset a portion of the net interest income challenges experienced over the past several quarters.

Net: Reserve coverage of one 2% of total loans was three basis points higher than the prior quarter and covered 316% of nonperforming loans.

Net: We believe that charge off activity will continue to trend towards more historical norms and expected balance sheet growth and continued mix changes will likely be the driver of future provisioning needs.

Net: In closing, our well balanced organic growth granular deposit base stable credit quality strong fee income generation and active expense management continue to help offset a portion of the net interest income challenges experienced over the past several quarters. We were pleased to see net interest margin stabilization and net interest income growth for the core.

Order.

Net: The continued strength of our capital position has allowed us the flexibility to provide a <unk> <unk> per quarter increase in the dividend to our shareholders the ability to support organic growth and to capitalize on emerging opportunities while effectively managing risk.

Speaker Change #120: Thank you for your continued support and at this time, we welcome any questions you may have.

Speaker Change #121: Thank you anyone with a question at this time can press star one one.

Speaker Change #122: If your question has been answered and you'd like to remove yourself from the queue Press star one again.

Speaker Change #122: Moment for our questions.

Speaker Change #122: Yeah.

Operator: One moment for our questioner. Our first question comes from Steve Moss, with Raymond James. Your line is open. Hey, good morning. This is Henry filling in for Steve Moss.

Speaker Change #123: Our first question comes from Steve Moss with Raymond James Your line is open.

Hey, Good morning. This is Henry filling in for Steve Moss.

Henry: Hey, good morning, Henry. Hey, thanks. So I'll start on the loan side. I was wondering if you could talk maybe a little bit about your expectations for the current pace of CRE and C&I loan growth and if we should expect a similar pace to continue through 2020. Henry, I'll start with that one.

Henry: Hey, good morning, Andrew Henry.

Speaker Change #124: Oh, Thanks, So I'll start on the loan side I was wondering if you can talk maybe a little bit about your expectations on the current pace of CRE and C&I loan growth and if we should expect a similar pace to continue through 2024.

Henry I'll start and take that one we had a very strong second quarter.

Henry: Both on the C&I and on the CRE side some of the C&I growth came from line utilization, which obviously has been stubbornly low for the past three or four years.

Speaker Change #125: So we had some nice movement there a lot of that tends to be seasonal where projects whether they are construction or improvement projects are underway.

Speaker Change #125: And just given the climate that most of our markets are in those tend to be stronger in the mid two quarters of the year.

Speaker Change #125: I think in terms of opportunities that we're seeing in the market. The market is a very stable and growing.

Unknown Speaker: I think in terms of opportunities that we're seeing in the market, the markets are very stable and growing. And for us, it's selecting those opportunities that we feel we can best capitalize on. We have a bias toward supporting our existing customer base from a development activity standpoint.

Speaker Change #125: For us it's selecting those opportunities that we feel we can best capitalize on.

Speaker Change #125: We have a bias towards supporting our existing customer base from a development activity standpoint.

Unknown Speaker: But I think that the second quarter results were probably a little bit above even our expectations in terms of new loan growth. We'd probably expect them to tick down a little bit for the balance of the year, but I'm very happy with where we stand at the mid-year point of the year. Okay, great. Thanks. And then I guess just looking at the provision expense, looks like it ticked up a little bit in the quarter for, you know, portfolio extension and loan growth, but also for a specific reserve relationship. Could you maybe give us some color on the breakdown of this quarter's provision expense, specifically how much was for that portfolio extension and then how much was for that specific credit?

Speaker Change #125: But I think that second quarter results were probably a little bit above even our expectations in terms of new loan growth, we'd probably expect them to tick down a little bit for the balance of the year, but very happy with where we stand at the midyear point of the year.

Speaker Change #126: Okay, great. Thanks, and then I guess, just looking through the provision expense it looks like it ticked up a little bit in the quarter four.

Unknown Speaker: So the specific reserve was 1.7 million of that growth and provision expense. And then, you know, I think you could probably say the rest of the increase related fairly evenly between supporting loan growth and the, Annette Burns, NBT Bancorp Inc. and, of course, covering the loan charges. Okay, great. Thanks. And then just to follow up on that, when would you say you expect that specific reserve relationship to be fully resolved? I would say it's a great question.

Speaker Change #127: Portfolio expansion in loan growth, but also for a specific reserve relationship could you maybe give us some color on the breakdown of this quarters provision expense specifically, how much was for that portfolio expansion and then how much was for that specific credit.

Speaker Change #128: So the specific reserve was $1 7 million of that growth in provision expense and then I think you could probably say the rest of the increase related fairly evenly between supporting loan growth and <unk>.

Speaker Change #129: Extension of payments.

Thanks extension of the effective life and of course, covering low charge offs for the quarter yes.

Speaker Change #130: Okay, great. Thanks, and then just a follow up on that when would you say you expect.

Speaker Change #131: That specific reserve relationship to be fully resolved.

Speaker Change #132: I would say, it's a great question I think we're being cautiously optimistic that there are.

Speaker Change #132: Improvement plans in place for that credit.

Speaker Change #133: At this point in time, it's very difficult for us to handicap, if that happens in 2024 or into the future.

Speaker Change #134: Okay. Thanks, and then my last question I guess, just moving to the margin I was curious if you could touch on your thoughts around the NIM more specifically you know the NIM outlook, and where you see that going throughout the rest of the year.

Speaker Change #135: So I think were.

Unknown Speaker: So I think we're, you know, pleased to see some stabilization in this quarter, but it depends on the interest rate environment. We believe that deposit costs have stabilized, and we'll probably see a few basis points a month to continue as long as these rates stay higher. We're ready to move on rates when there is a decrease in short-term rates. I think our asset repricing is pleased to see that, and we continue to see that continue. I just think there's a lot of variables, so I think stabilization is the word for us and hope to see... you know, further improvement. Okay, great. Thanks for taking my questions. I'll step back. Thanks, Henry.

Speaker Change #136: Pleased to see some stabilization in this quarter.

Speaker Change #137: It depends on interest rate environment.

Speaker Change #138: I think we believe that deposit costs have stabilized and we will probably see a few basis points a month to continue as long as these rates stay higher.

We're ready to move on rates when there is a D.

Speaker Change #138: Decrease in the short term rates.

Speaker Change #138: I think our asset repricing pleased to see that and we continue to see that continue.

Speaker Change #139: Just think there's a lot of variables so.

Speaker Change #139: I think stabilization is the word for us and are hoping to see them further.

Speaker Change #139: Further improvement as.

Speaker Change #139: As we go forward.

Speaker Change #140: Okay, great. Thanks for taking my questions I'll step back.

Eric: Thanks, Eric.

Unknown Speaker: Thank you. Our next question comes from Matthew Breese with Stevens Inc. Your line is open. Hey, good morning. What do you have?

Speaker Change #141: Thank you. Our next question comes from Matthew Breese with Stephens, Inc. Your line is open.

Matthew M. Breese: Hey, good morning.

Matt: Good morning, Matt.

Matthew M. Breese: I was hoping to dive into some of the NIM dynamics, just a little bit deeper maybe to start could you provide.

Matthew M. Breese: As a percentage of pure floating rate loans on the books, meaning priced off prime ourselves or shorten the curve and what is the blended yields on those today.

Matthew M. Breese: Sure our pure floating rate, which is primary commercial and a little bit of home equity is about $2 $2 billion.

Unknown Speaker: Sure. Our pure floating rate, which is primary commercial and a little bit of home equity, is about $2.2 billion. Adjustable is another, probably $1.8, portion that is fixed to floating.

Speaker Change #142: <unk> is another probably one eight.

Speaker Change #142: Thats the portion that is fixed to floating.

Speaker Change #142: That's a right around a seven 4% yield today.

Speaker Change #142: Okay.

Speaker Change #142: Okay, what does that imply for the remainder of the book.

Speaker Change #143: The fixed rate portion of the book what does that imply for yields on that is it somewhere in kind of the low to mid fives is that accurate.

Speaker Change #143: Yes, and I would say, Matt because of the fact that we portfolio so much.

Unknown Speaker: Is that accurate? Yeah, and I was saying that because of the fact that we've portfolioed so much first lien residential mortgages, it might be the high fours, but we would have to blend that for you to get to whether that's high fours or low fives, but it can't be much different than that. I think your point is well taken on the pure variable.

Speaker Change #144: First lien residential mortgage might be the high fours.

Speaker Change #145: But we would have to blend that for you to get to whether that's high fours low fives, but you can't.

Speaker Change #144: It would be much different than that.

Speaker Change #144: The point on the your point is well taken on the pure variable again most of that for us is commercial.

Unknown Speaker: Again, most of that for us is commercial, and obviously, most of that has adjusted to the market rate here over the last 18 months to two years, and that's the piece that we think if the Fed starts to change rates, which we think we would then be more confident going into our deposit portfolio and lowering certain rates, that's the piece that just comes generally right off that. So whether it's tied to SOFR or prime, those decisions happen within a month of the Fed decision.

Speaker Change #144: And obviously most of that has adjusted to the market rate here over the last 18 months to two <unk>.

Speaker Change #144: Two years.

Speaker Change #144: That's the piece that we thought win win if the fed starts to change rates, which we think we would then be more confident going into our deposit portfolio and lowering certain rates. That's a piece of it just comes generally rate off that.

Speaker Change #144: Right.

Speaker Change #146: Type a sofa or prime those happen within a month of <unk>.

Unknown Speaker: We also find ourselves, what I would say, in a very, very interest rate neutral position today. So regardless of whether it's a fast movement down or a very modest movement down, probably what we expect is that we're so interest rate neutral that there's not a huge uptick or a huge downtick just depending on the timing of rates. Maybe to better understand that last point, Scott, I mean, if I think about it, you have, you know, quite a bit of fixed-rate loans in your portfolio, the high fours, low five. I would assume that new loan yields in those portfolios are in the mid to high sixes, maybe even low seven.

Speaker Change #146: That decision.

Speaker Change #146: We also find ourselves with what I would say is in a very very interest rate neutral position today.

Speaker Change #146: No.

Speaker Change #146: Regardless of whether it's a fast movement down or a very modest movement down probably what we expect.

Speaker Change #146: That we are so interest rate neutral that theres, not a huge uptick or a huge downtick just depending on the.

Speaker Change #146: The timing of rate change.

Speaker Change #146: Maybe to better understand that last point, Scott I mean, if I think about it you have quite a bit of fixed rate loans and to your point the high fours low fives.

Scott A. Kingsley: I would assume that new loan yields in those portfolios are in the.

Scott A. Kingsley: Mid to high <unk>, maybe even low sevens.

Unknown Speaker: So quite a bit of low yield expansion opportunity on your fixed rate portfolio. Why not a more optimistic outlook on the NIM? It feels like the reset NIM or the normalized NIM is higher than where it is today in the second quarter. So it's a point well taken.

Speaker Change #150: So quite a bit of loan yield expansion opportunity on your fixed rate portfolio.

Speaker Change #147: Why not a more optimistic outlook on the NIM it feels like.

Scott A. Kingsley: The reset need more of a normalized NIM is higher than where it is today in the second quarter.

Speaker Change #149: So its a point well taken and.

Speaker Change #148: And I think that comes from the fact that we're still finding that the customer generally.

Speaker Change #148: Both using tools that we give them and just their own acumen is just finding ways to be more efficient with where they place their excess funding.

Speaker Change #148: So that's where most of you know we aren't raising rates on any of our products. Obviously, we probably haven't been in a year.

Unknown Speaker: But generally, the customer is finding a more efficient outcome for their net liquidity. And we don't discourage that, you know, we're trying to be in the balanced retention world and, you know, trying to do all the right things for the customer. So we just think that that process still has a little bit more legs attached to it, that people are still generally finding ways to be more efficient with their liquidity. Okay, and then, you know, part and parcel with this, I thought it was interesting with the reserves that there was a duration change dynamic, you know, maybe give us some sense for, you know, what the duration of the loan portfolio was relative, you know, to expectations and what the reset was, and, and how that is, we're hearing this a lot, fixed rate loans are just not repricing as fast as folks thought, could you give us some color, Sure, I'll take a little bit of that and then ask Annette for some details for that.

Speaker Change #148: But generally the customer is finding a more efficient outcome for their net liquidity.

Speaker Change #148: And we don't discourage that we're trying to be in the balanced retention world.

<unk> tried to do all the right things for the customer. So we just think that that process still has a little bit more legs attached to it.

Speaker Change #148: People are still generally finding ways to be more efficient with their liquidity.

Speaker Change #155: Okay, and then part and parcel with this I thought it was interesting with the reserves that there was a recent change dynamic maybe give us some sense for.

Speaker Change #151: What the duration of the loan portfolio.

Speaker Change #152: Does relative to expectations and what the reset was.

Speaker Change #153: How that is we're hearing is a lot of fixed rate loans are just not repricing as fast as folks thought could you give us some color there.

Speaker Change #154: Sure I'll take a little bit of that and then ask a net for any set some details for that but holistically duration extension has been going on since the fed started raising rates I think what's most pronounced for US is given the fact that we have a meaningful portion of fixed rate commercial loans and fixed rate residential mortgages on the books today and Theres really.

Speaker Change #154: No motivation for that customer base to pay off quickly.

Speaker Change #154: When you start to get into a blended multi quarter trend from that you still find yourself, replacing a higher prepayment quarter with a lower prepayment quarter. When you start to move out over time.

Speaker Change #154: So I think this was just our way of saying listen we're trying to get our arms around the continued volatility and prepayment speeds or duration expectations.

Speaker Change #154: We made a decision to make some changes on that this quarter just thought it was a prudent time to do it.

Speaker Change #154: Okay.

Unknown Speaker: Okay, I would just add to that that we feel like we're in kind of the end phase of that extension and that things will stabilize after this. All right, and I know I've been a bit longwinded, just, just one more, obviously, there's some puts and takes to loan growth in your portfolio, there's some portfolios in one off others, but you're growing. But then to your earlier point on chip investments, you know, when do you expect what's going on in Clay, New York, in the Capital Region, and Malta? There's just a ton of money coming into the area for the semiconductor chip plants.

Speaker Change #156: I would just add to that.

Speaker Change #157: We feel like we're in kind of the end phase of that extension and that things will stabilize after that.

Speaker Change #158: Alright, and I know I have been a bit long winded just just one more.

Speaker Change #159: Honestly there is some puts and takes to loan growth and your portfolio. There are some portfolios and one off others youre growing.

Speaker Change #160: But then to your earlier point on chip investments.

Speaker Change #161: When do you expect.

Speaker Change #162: Whats going on at <unk> in New York in the capital region, and Malta, There's just a ton of money coming into the area of investments.

Speaker Change #163: For the semiconductor chip plants. When do you expect that all to have kind of a meaningful impact or influence on balance sheet growth fee income and deposits.

Speaker Change #163: All of that.

Unknown Speaker: When do you expect that all to have kind of a meaningful impact or influence on balance sheet growth and fee income and deposits and all of that? Hey Matt, this is Joe from Atlanta. I'll jump in on that one. So, great question. So as it stands today, it looks like the plan is to begin construction in the first quarter of 2025 up in up in clay. That's when they expect to start moving the dirt and beginning construction.

Speaker Change #163: Hey, Matt This is Joe say Atlanta, I'll jump in on that one so.

Speaker Change #164: So great question. So as it stands today it looks like the plan is to begin construction in the first quarter of 2025 up and up and clay that's when they expect to start moving dirt and beginning the construction construction is going to take about two years to complete so during that time, we expect construction jobs to <unk>.

Unknown Speaker: Construction is going to take about two years to complete. So during that time, we expect construction jobs to start up. They're projecting about 5000 construction jobs associated with the Micron chip plant in Clay. With that, it's going to take about two years before fabrication begins. We expect the first chip to come off the production line around 2028.

Speaker Change #165: Start off they're projecting about 5000 construction jobs associated with.

Speaker Change #165: The micron chip plant and clay.

Speaker Change #165: It's going to take about two years before fabrication begins we expect the first chip to come off the production line around 2028.

Speaker Change #165: With that they're going to be hiring additional workers about 9000 workers directly associated with micron in the plant and then about 40000 indirect jobs over the next 15 to 20 years as they complete their build out.

Speaker Change #167: Their plants. So our teams are staying really close to the folks at micron and officials.

Speaker Change #166: Across the different government agencies.

Speaker Change #168: And they've established some really strong relationships along the way to give some insight in terms of what's happening so like whats happening up that global foundries and Malta, a lot of really good activity. Some of our strongest loan growth is happening up in the capital region up through the north country, we're seeing that in our branches with some extra transaction activity in some.

Speaker Change #168: Good deposit growth, we expect that to begin and then set some some really good pace over the next couple of years up and clay.

Speaker Change #168: At the Micron site, so a lot of activity going on right now it's a lot of work leading up to the construction and we expect to see what we see up in Albany up in Saratoga around the mouth area to continue at the Micron site and clay.

Unknown Speaker: Matt, I would add to that that, you know, our desire is to stay a leader in this relative to making sure that our customers are engaged with the opportunities across all of our markets so that we've enhanced our own education of the opportunity and what that looks like. We're completely engaged with economic development agencies across the CHIP corridor, you know, again, to try to promote just a better understanding and being able to capitalize on these opportunities I happen to believe that, you know, a demographic change like this is just not usual for upstate New York so this opportunity probably rises all boats, but I think we just want to be out in front of that and make sure that our customer base or our future customer base is very well informed so it continues to be our objective.

Speaker Change #168: Hey, Matt I would add to that.

Matt: Our desire is to stay a.

Matt: A leader in this relative to making sure that our customers are engaged with the opportunities across all of our markets.

Matt: So that we've enhanced our own education of the opportunity and what that looks like.

Speaker Change #169: <unk> engaged with economic development agencies across the chip corridor.

Speaker Change #169: Again to try to promote just a better understanding and being able to capitalize on these opportunities.

Speaker Change #170: Happen to believe that a demographic change like this is just not usual for upstate New York. So this opportunity probably rises all boats.

Speaker Change #170: But I think we just want to be out in front of that and make sure that our customer base for our future customer base is very well informed so continues to be our objective.

Unknown Speaker: Great. I appreciate all that. I'll step back. Thank you, Matt. Thank you, Matt. Thank you. Again, if you have a question, please press star 11. Our next question comes from Christopher O'Connell with KVW. Your line is open. Hey, good morning. Good morning, Chris.

Speaker Change #170: Great I appreciate all that I'll step back thank you.

Speaker Change #170: Thanks, Matt Thank you Matt.

Speaker Change #171: Thank you again, if you have a question. Please press star one one.

Speaker Change #171: Our next question comes from Christopher O'connell with <unk>. Your line is open.

Christopher O'Connell: Hey, good morning.

Chris: Good morning, Chris.

Christopher O'Connell: So just wanted to circle back to the margin dynamics here.

Christopher O'Connell: So just wanted to circle back to the margin dynamics here. The CD costs did not move on a quarter-per-quarter basis, and I was just wondering where new CDs are being priced at and how much of the CD book has to reprice in the second half of 2020. So I'll start with the front end and have Annette think about the amount of repricing. But in terms of new CDs, we have lowered our new CD rates, but modestly. So, you know, probably something in the low fours or high threes is where they are based on some kind of a tiered outcome, Chris.

Chris:

The CD cost.

Speaker Change #172: Did not move on a quarter over quarter basis, and I was just wondering where new Cds are being priced at and how much of the CD book has to reprice in the second half of 'twenty four.

Speaker Change #173: So I'll start with the front end and having that be thinking about the amount of repricing, but.

Speaker Change #174: In terms of new Cds, we have lowered new CD rates, but modestly.

Chris: So probably something in the low fours high threes is where they are based on some kind of a tiered outcome Chris.

Unknown Speaker: And so we will probably see upon renewal some, you know, some results that are net positive along that line. Yes, and I think back half of the year, we're probably seeing maybe another 700 million repriced. Great. So I mean, the cost there, you know, net neutral, you know, plus or minus basically from, there is opportunity to reprice down on that, Peace Maturing. Yeah.

Chris: So we will probably see upon renewal some.

Some results that are net positive along that line.

Chris: Yes, and I think of the back half of the year, we're probably seeing maybe another $700 million reprice.

Great. So I mean the costs there.

Chris: Net neutral plus or minus basically from here.

Chris: There is opportunity to reprice down on the on that.

Chris: Piece maturing.

Chris: Yeah and then.

Unknown Speaker: And then, you know, on the expense side, you know, really good quarter, part of it seasonal, but they seem to be, you know, pretty, pretty solid on a core basis as well. I think last quarter talking about, you know, kind of, Stepping up or kind of flattish for the first quarter in the 91 to 92 million range on a quarterly basis for the back half of the year. Do you still think it steps up there, or is this run rate off of the better Q2 results able to hold? We do think it will step up. A reminder that we have one additional payroll day each quarter, so that alone will increase that expense run rate by about a penny.

Chris: On the expense side.

Speaker Change #175: Really good quarter part of it seasonal but seem to be pretty pretty solid.

Speaker Change #175: Core basis as well.

Speaker Change #176: I think last quarter you were talking about.

Speaker Change #177: Kind of stepping up or kind of flattish for the first quarter in the $91 million to $92 million range on a quarterly basis for the back half of the year do you still think it steps up there or is this a run rate off of the better Q2 results.

Speaker Change #178: As a whole.

Speaker Change #179: We do think it will step up and a reminder, that we have one additional payroll day in each of the quarters. So.

Speaker Change #180: That alone will increase that.

Speaker Change #181: <unk> run rate by about a penny so theres, a little bit of that and probably just more activity in our markets and things like that we'll probably have some of the cost strict drift a little awkward.

Unknown Speaker: So there's a little bit of that, and probably just more activity in our markets and things like that will probably have some of the costs drift a little upward. And Chris, our organization has been very supportive of the whole idea that as there are net interest income challenges and challenges to improve that generation, we need to be very disciplined and pointed in our decisioning on the operating expense side. So I'd like to think we have found a great balance on that. And if the opportunity presents itself going forward for us to make some more structural investments in the second half of the year, we'll go ahead and do that. But again, at a tempered price.

Speaker Change #181: Chris Our organization has been very embracing of the whole idea of that as there are net interest income challenges and challenges to improve that generation, we needed to be very disciplined and pointed in our decisioning on the operating expense side. So I'd like to think we have found a great balance on that.

Speaker Change #182: The opportunity presents itself.

Speaker Change #182: Forward to for us to make some more structural investments in the second half of the year. We will go ahead and do that but again at a temporary phase.

Speaker Change #183: Great and then.

Unknown Speaker: Great. And then, you know, on the fee side, I mean, really good year so far. You know, across businesses, I know they're market driven, but, you know, a lot of organic growth as well. And any seasonal factors to be aware of are kind of, you know, overall fluctuations that you see might occur in the back half of the year for those businesses. Yeah, it has been a really good first half of the year.

Speaker Change #183: On the fee side, I mean really good year so far.

Speaker Change #184: Across the businesses and you have a market driven but.

Speaker Change #184: Organic growth as well.

Speaker Change #185: Any seasonal factors to be aware of or kind of.

Speaker Change #186: Just overall fluctuations.

Speaker Change #187: She might might occur in the back half of the year for those businesses.

Speaker Change #192: Yes. It has been a really good first half of the year I would say that retirement plan administration typically their first half is better than the second half and that's just really there is a little bit of seasonal activity around actuarial services and various things like that so wouldn't affect the back half to be as strong.

Speaker Change #187: For retirement plan services.

Speaker Change #187: Remainder that market performance has really been a nice tailwind for us if that continues I think wealth management and retirement plan services will still.

Unknown Speaker: And there's just a little bit of seasonality and insurance, but not just a couple hundred thousand and, maybe you could just kind of talk about, you know, backing out some of the market impacts, you know, what's been the recent organic growth pace of the insurance, retirement, and income wealth business? I'll touch on that really quick, Chris, and then come back to Annette, because I think in Annette's script, we looked at and said our compounded annual growth rate in those businesses over the last five years has been a little over 9%.

Speaker Change #188: We'll see.

Speaker Change #189: Good quarters, and Theres, just a little bit of seasonality in insurance, but not just a couple of hundred thousand in the third quarter.

Speaker Change #193: And maybe you could just kind of talk about backing out some of the market impacts.

Speaker Change #191: What's been the recent organic growth piece of the insurance retirement and wealth businesses.

Speaker Change #195: I'll touch on that really quick question comes back to a net four.

Speaker Change #190: I think in a net script, we've looked at and said our compounded annual growth rate in those businesses over the last five years has been a little over 9%.

Speaker Change #190: Part of that.

Speaker Change #190: Probably a third of that has been generated from some opportunistic acquisitions that we've been able to do mostly in the retirement plan space and the insurance side. So I think that that pattern makes some sense.

Speaker Change #196: So what are you got mid single digit growth, maybe in the 5% to 7% range in those businesses with some market support.

Speaker Change #190: But generally speaking when we look at those businesses, we look at the.

Speaker Change #194: The difference between new.

Speaker Change #194: New plan growth on the on the retirement plan side versus lost business, because remember businesses or acquired.

Speaker Change #194: People and their plans for various reasons I think if we can get to a point, where our new growth is in the seven to eight 9% side and our loss businesses in the two to four that's a pattern, we really like and we think can be replicated.

Speaker Change #194: Great and then lastly for me just you talk about.

Speaker Change #197: Any change in the M&A environment or discussions there.

Speaker Change #199: What you guys would be willing to do it if you did participate in M&A.

Unknown Speaker: As we did this quarter, we are very supportive of making sure that the dividend to our shareholders is that we have the capacity in our capital to improve that every year. And that's a stated objective of ours. You know, the shareholders need to participate in, you know, the good fortune of the company.

Speaker Change #197: Yes, so I think <unk>.

Speaker Change #198: No our history relative to capital allocation, which is we want to be able to support organic growth because that's what we're good at.

Speaker Change #197: We think that debt.

Speaker Change #197: It's very desirable on a long term basis for us as we did this quarter we are.

Speaker Change #197: Very supportive of making sure that the dividend to our shareholders has that we have the capacity and our capital to improve that every year.

Speaker Change #197: And Thats the stated objective of ours.

Speaker Change #197: The shareholders need to participate in and the good fortune of the company.

Unknown Speaker: I think from there, we really like where we're sitting from a capital position standpoint and able to be able to support being able to analyze potential M&A transactions. You know, we're now an experienced acquirer again after the Salisbury transaction last year. And what did we learn from that, that on a crossover basis, all of the dilution that came from the transaction itself, we've more than earned back in under a year?

Speaker Change #197: I think from there, we really like where we're sitting from a capital position standpoint enabled to be able to support being able to analyze potential M&A transactions.

Speaker Change #197: We are now an experienced an acquirer again after the Salisbury transaction last year and what did we learn from that that on a crossover basis all of the dilution that came from.

Speaker Change #197: The transaction itself, we've more than earned back in under a year.

So I think our confidence relative to getting through the complications of interest rate marks in credit marks and fair value assumptions is that a pretty high level.

Speaker Change #197: I think we've talked about before natural geographic extension of our footprint.

Speaker Change #197: We like where we are represented across seven states, but we have some spots we would love to fill in weather.

Speaker Change #200: Whether thats going a little further south in Pennsylvania filling in some gaps we have in new England potentially Western New York, We think we're just well positioned be able to consider opportunities in all of those geographies with again, saying we are unlikely to be a meaningful participant in greater New York City, Boston or <unk>.

Speaker Change #200: <unk>, we just don't know how to differentiate our model in those markets and there is plenty of people that are trying.

Unknown Speaker: And has the general discussions or, you know, M&A chatter picked up at all year to date, or is it still fairly quiet? Now, we're finding an opportunity to speak to a lot of people. Again, I think it's because, you know, we completed a transaction last year; people are just interested in the dynamics that went into the decision by Salisbury to partner with NBT, you know, quote, how did the math work? What was the approval process from a regulatory standpoint?

Speaker Change #201: And is the has the general discussions or.

Speaker Change #202: M&A chatter has that picked up at all year to date or is it still fairly tepid.

Unknown Speaker: So I think people are interested in that and interested in hearing about, you know, our own experiences. So it's not difficult to find an opportunity. And, you know, again, remember, we are not the aggressive acquirer; we try to have a discussion with people that says if someday independence is not what you're thinking about, here's the value proposition of NBT. Great. And does the, you know, higher organic growth pace, or I guess, you know, anticipated organic growth pace over the next few years, given, you know, the demographic trends in your markets? I mean, does that change what you would want to look at in terms of a target?

Speaker Change #203: So we're finding an opportunity to speak to a lot of people again I think it's because we completed the transaction last year people are just interested in the dynamics that went into the decisioning of Salisbury to partner with MPT.

Speaker Change #203: How does the math work what was the approval process from a regulatory standpoint. So I think people are interested in that and interested in hearing about.

Speaker Change #203: Our own experience, so not difficult to find an opportunity.

Speaker Change #203: And again remember.

Speaker Change #203: We are not the aggressive acquirer, we try to have a discussion with people that says if someday independence is not what you are thinking about here is the value proposition of NPT.

And does the <unk>.

Speaker Change #204: Higher organic growth piece, or I guess anticipated organic growth pace over the next few years.

Speaker Change #204: Given the demographic trends in your markets.

Speaker Change #205: Does that change what you would want to look at in terms of a target.

Speaker Change #205: <unk>.

Speaker Change #206: Are you going to even consider anything that has close to a 100%.

Speaker Change #207: Our loan to deposit ratio or are you really going to be looking more for kind of lower loan to deposit ratio funding vehicles to help enhance your own organic growth going forward.

Unknown Speaker: In other words, if we had to start to think about us as a mid to upper single-digit organic growth opportunity over time, how we would support that from a funding standpoint is critically important. You know, but I think we would be willing to take on that challenge both organically and transactionally if that was necessary. Your question about whether that changes what we think about, we're again looking for high-quality franchises, people we've had long-term understanding and relationships with that are probably geographically connected to where we're already doing today. So I don't think it radically changes that, you know, you know, we don't bump into very many people that have loan to deposit ratios north of 100%.

Speaker Change #208: I think it's a reasonable question in other words, if we had to start to think about us as a mid to upper single digit organic growth opportunity over time, how we would support that from a funding standpoint is critically important.

Speaker Change #209: I think we would be willing to take on that challenge both organically and <unk>.

Transactional Lee if that was necessary.

Speaker Change #209: Your question around does that change, what we think about where again looking for high quality franchises people. We've had long term understanding and relationships with that are probably geographically connected to where we're already doing today. So I don't think it radically changes that.

Speaker Change #210: We don't bump into very many people that have loan to deposit ratios north of a 100%. It's just not indicative of the markets that we're in or most of the targets that we come across.

Unknown Speaker: It's just not indicative of the markets that we're in, or you know, most of the targets that we come across. Great. Thanks for taking my question. Thanks, Chris. Thank you. I'm not asking any further questions.

Speaker Change #211: Great. Thanks for taking my questions.

Chris: Thanks, Chris.

Scott A. Kingsley: I will now turn the call back to Scott Kingsley for his closing remarks. Thank you. In closing, I want to thank everyone for their participation on today's call and for your interest in NBT. And we'll talk to you in three months. Thank you. Thank you, Mr. Kingsley. This concludes our program. You may disconnect. Have a great day!

Chris: Thank you I'm not showing any further questions I will now turn the call back to Scott Kingsley for his closing remarks.

Thank you in closing I want to thank everyone for your participation on today's call and for your interest in <unk>.

Speaker Change #212: And we'll talk to you three months. Thank you.

Speaker Change #213: Thank you Mr. Kingsley. This concludes our program you may disconnect have a great day.

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