David Conrad

David Conrad questioned the 2026 mid-single-digit commercial banking growth guidance, given the strong momentum from 2025 hires and 9% organic growth, asking about potential upside or market headwinds. He also asked for clarification on the type of loans in the specific business segment being exited.

Answer

President and CEO Jeffrey Tengel acknowledged potential upside, explaining that the guidance includes a headwind from exiting a $100 million floor plan business (small used car dealerships) that didn't fit the risk profile or system capabilities. He clarified that this runoff would make the underlying growth appear slower than it truly is.

David Conrad from KBW followed up on deposit trends, specifically asking about the expected non-interest-bearing deposit mix for 2026, given the current quarter's nearly 31% mix and recent municipal deposit activity.

Answer

COO and CFO Avinash Reddy explained that while the non-interest-bearing deposit mix had fluctuated, the bank aims for a floor of around 30% and expects it to slowly increase, driven by a focus on low-cost deposits and new relationships bringing 20-30% DDA. President and CEO Stuart Lubow added that new banking teams are significantly contributing to DDA growth, with 38% of their $3 billion balance being non-interest-bearing.

David Conrad, Managing Director and Senior Equity Analyst at KBW, inquired about NBT Bancorp's fee income, specifically highlighting the strong performance in the insurance business during the third quarter. He asked for details on what is driving this performance and whether a 7% annual growth rate is sustainable for 2026. Mr. Conrad also sought NBT Bancorp's outlook for total fee income in the upcoming fourth quarter, considering its typically seasonally challenged nature.

Answer

CFO, Annette Burns, explained that the third quarter is seasonally highest for the insurance business, typically by about $1 million, due to municipal customers. She confirmed that a high mid-single-digit growth rate, around 7%, is an appropriate run rate for the insurance business, driven by good commercial growth and strong integration with the banking business through referral opportunities. CEO and President, Scott Kingsley, added that the rate of change on rate increases approved for insurance companies is slightly less than in previous years. For the fourth quarter, Mr. Kingsley noted that historically, fee income for benefits administration and insurance has been 6%-8% lower than the third quarter, and there's nothing to suggest NBT Bancorp would be outside this expectation. Ms. Burns also reminded that Q3 included about $1.5 million of unique gains, contributing to its higher fee income.

David Conrad asked about the strong performance in NBT Bancorp's fee income, particularly in the insurance business, and whether a 7% annual growth rate is a reasonable expectation for 2026. He also sought clarification on the outlook for total fee income in the fourth quarter, given its typically seasonally challenged nature.

Answer

Annette Burns, NBT Bancorp's CFO, confirmed that Q3 is the most seasonally high quarter for the insurance business, with about $1 million in seasonality from municipal customers, and suggested that high mid-single-digit growth (around 7%) is an appropriate run rate for the insurance business, driven by commercial growth and banking referrals. Scott Kingsley, CEO and President, added that the rate of change for insurance rate increases has moderated compared to previous years. For the total fee income outlook, Mr. Kingsley stated that historically, fee income for benefits administration and insurance is typically 6% to 8% lower in Q4 than Q3, an expectation that remains unchanged. Ms. Burns also noted about $1.5 million of unique gains in Q3 that contributed to its higher fee income.

David Conrad from KBW sought clarification on the specific size of the problematic CRE credit, noting an increase in CRE and PAs quarter-over-quarter. He also asked for more details on trends in criticizing classifieds or past dues, excluding this particular relationship, and whether this credit would impact the bank's near-term growth strategies.

Answer

Mark DeFazio, President and CEO, specified that the problematic credit involved three loans totaling approximately $34 million, with individual loans around $8 million, $17 million, and the third making up the balance. He highlighted the very conservative and healthy 55% allocated reserve. Daniel Dougherty, EVP and CFO, stated that outside of this specific out-of-state multifamily credit migration, there were no other noticeable credit migration movements within the portfolio, remaining very static quarter-over-quarter. Both Mark DeFazio and Daniel Dougherty confirmed that this outlier credit would not deter near-term growth strategies, emphasizing it's a specific reserve, not a charge-off, and Q4 and Q1 2026 pipelines remain strong.

David Conrad asked about the 4 basis point decrease in deposit costs linked quarter, specifically how the 2.45% figure serves as a jumping-off point for the fourth quarter given municipal seasonality, and whether the company plans to increase brokered CDs or reduce cash and the balance sheet.

Answer

Curt Myers, CEO and Chairman, explained that the company saw runoff in brokered deposits and FHLB during the quarter. He noted that while municipal deposits increased by $450 million in Q3, 40% to 50% of that is typically expected to move out in Q4. Myers stated that the company would manage this by seeking the most cost-effective options, including customer deposits and specials, while appropriately managing the loan-to-deposit ratio.

David Conrad followed up on deposit costs, specifically asking about the impact of brokered CD runoff, municipality seasonality in the fourth quarter, and the company's strategy for managing deposit costs and liquidity.

Answer

Curt Myers, CEO and Chairman, explained that the company saw runoff in brokered deposits and FHLB during the quarter. He anticipated municipal outflows in the fourth quarter, typically 40% to 50% of the $450 million inflow seen in Q3. He stated that the company would manage this through the most cost-effective means, including customer deposits and specials, while appropriately maintaining the loan-to-deposit ratio.