Feddie Justin Strickland

Feddie Justin Strickland inquired about NBT Bancorp's expense trajectory, specifically regarding the achievement of cost savings from the Evans Bancorp merger and the expected total expense line for the upcoming quarter. He also asked about the outlook for net new loan growth over the next couple of quarters, considering anticipated runoff in residential, solar, and other consumer loan portfolios. In a follow-up, he questioned the company's capital management strategy, including target capital ratios and the potential for share buybacks beyond offsetting stock-based compensation, and sought clarification on the near-term margin pressure and potential for future margin improvement given yield curve steepness and deposit lags.

Answer

Annette Burns, NBT Bancorp's CFO, stated that cost savings from the Evans merger were largely achieved in Q3, with an expected run rate of $110 million for Q4, noting typical annual expense increases of 3.5%-4.5% for 2026. Scott Kingsley, CEO and President, addressed loan growth, acknowledging robust activity but higher-than-anticipated payoffs, projecting low to mid-single-digit growth for early to mid-2026, emphasizing a comfortable 85% loan-to-deposit ratio and steady core deposit growth. Regarding capital, Mr. Kingsley indicated a comfortable capital position, potentially 'too much' given risk attributes, and suggested being more active with repurchases beyond offsetting equity-based compensation due to current valuations. Ms. Burns added that while Q4 might see slight margin pressure due to immediate asset repricing versus active deposit management, future margin improvement is possible in 2026, especially with a steeper yield curve, though not at the same level as 2025.

Feddie Justin Strickland from Hovde Group, Inc. sought clarification on the net interest margin outlook, specifically if the 3.27% September NIM is sustainable for Q4 despite subordinated debt costs, and if margin recovery is primarily cost-driven. He also asked about the sustainability of swap fees and the overall non-interest income run rate, including the impact of government shutdowns on SBA activity. Finally, he inquired about the growth opportunity for loans and deposits within the association banking business line over the next couple of quarters.

Answer

CFO Rob Anderson stated that 3.27% or slightly better is a realistic NIM target for Q4, attributing August's lower margin to high cash balances and loan payoffs, with September showing recovery due to increased loan volume and deposit rate cuts. He noted that SBA activity was impacted by slow-walked deals at quarter-end, which will fall into Q1, and anticipated similar swap fee volumes to Q2/Q3 due to lower rates. Chairman, CEO, and President Luis Aguilera expressed strong bullishness on the association banking vertical, highlighting Florida's condominium market and recertification requirements, projecting a potential doubling of the book of business in the next 18 months.