Good day, everyone. Welcome to NBT Bancorp's Third Quarter 2023 Financial Results Conference Call. This call is being recorded and has been made accessible to the public in accordance with SEC Regulation FD. Corresponding presentation slides can be found on the Company's website @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. 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 listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to NBT Bancorp President and CEO, John H. Watt, Jr. for his opening remarks. Mr. Watt, please begin.

Thank you, Michelle, and good morning, and thank you all for participating in this earnings call covering NBT Bancorp's third quarter 2023 results. Joining me today are NBT's Chief Financial Officer, Scott Kingsley, our Chief Accounting Officer, Annette Burns, our Treasurer, Joe Ondesko, and our Chief Information Officer and President of Retail Banking, Joe Stagliano. It was a very active quarter at NBT. We continued to successfully navigate the volatile interest rate environment and its impact on our company and our customers. We closed on the acquisition of Salisbury Bancorp on August 11. The simultaneous core systems conversion was successful, and the integration is substantially complete. We welcomed over 40,000 new customers, 141 new colleagues, and we brought 13 additional branches onto our platform, allowing us to add scale in Connecticut and to expand south into the Hudson Valley. We also welcome Salisbury CEO, Rick Cantelli, to our Executive Management Team and our Board of Directors. The successful closing of this acquisition positions NBT well for future strategic growth. Let me take a moment to highlight 3Q activity across our businesses. First, we are very pleased with our operating results, including EPS at $0.84 and return on tangible equity of 16.25%. We've achieved commercial and consumer loan growth at an annualized growth rate of 6.1% in the third quarter. That growth was diverse with our commercial lending and indirect auto businesses leading the way. Through nine months, we continue to observe a resilient consumer and small business owner. As stated, our indirect auto business had a strong quarter with originations of over $148 million. Our residential mortgage business experienced a seasonal lift despite the interest rate environment. Credit quality at NBT is strong and each of the core credit portfolios continue to perform at levels better than those we experienced prior to the pandemic. Like the rest of our industry, our cost of funds has risen as customers seek out higher yielding deposit products. With that said, total deposits grew during the third quarter, including the seasonal municipal inflow we experienced. Our full cycle deposit beta is at 24%, including acquired deposits. We continue to enjoy high account retention levels. Our funding sources are robust and we have the headroom we need to execute on our organic growth plans. Our fee-based businesses continued their solid performance in Q3. Our Epic Retirement Services administration business experienced organic account growth and was additionally supported by the acquisition of Retirement Direct in early July. Total non-interest income was 30% of total revenue in the third quarter. In August, we announced that Mike O'Reilly joined the NBT team in Portland as our main regional president. In addition, he will oversee the execution of our strategy across our markets in Northern New England. Mike's focus on the diversification of our approach in those markets is the next phase of our long-term organic expansion plans. During the quarter, activity associated with the upstate New York chip corridor was notable. In Central New York, Micron filed its application with the Commerce Department for multimillion dollar grants and other support under the Chips Act. The international semiconductor company Advanced Micro Devices announced that it opened research and development facilities in Fishkill and Rochester. The Albany Nanotech Complex was designated by the federal government as a center for workforce training and received significant federal funding commitments. At the end of the quarter, the U.S. Department of Defense awarded a new 10-year contract to Global Foundries in the Capital District to produce semiconductors for defense and aerospace applications. Total spend under this contract will be over $3 billion. As we have discussed in prior calls, the economic activity generated along the chip corridor will drive long-term transformational economic growth across our core markets. That growth will promote long-term success at NBT as our platform is uniquely positioned along the corridor. As we head into the final months of the year, NBT continues to be on offense, enhanced by the successful integration of Salisbury into our model, the continued focus on growth in New England, and the organic growth occurring along the chip corridor. We are well-positioned with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and an experienced team of professionals. I will turn the call over to Scott and Annette now to talk in greater detail about the outcomes associated with the Salisbury merger and our financial performance in the third quarter. Following their remarks, we will take your questions. So Scott, I'll turn it over to you.

Thank you, John, and good morning, everyone. Before we get started with some additional color on quarterly results, I would like to ask Annette to summarize some of the specific outcomes related to the Salisbury acquisition. Annette?

Thank you, Scott, and good morning. As John mentioned, we closed the merger on August 11 and successfully converted all Salisbury customer accounts to the NBT core operating system simultaneously with the closing. We acquired approximately $1.2 billion of loans, $1.3 billion of deposits, and issued 4.3 million additional shares as consideration, with a value of $162 million as of the closing date. Thus far, we have achieved the greater part of our estimated 30% in cost synergies, with the remaining expected to be realized by the end of 2023. As outlined on page four of our earnings presentation, we recorded fair value marks on loans of $78.7 million, net of a $5.8 million reclassification to loan loss reserves for purchased credit-deteriorated loans. In the third quarter, we recognized $1.6 million of accretion income. Based on current prepayment feeds, this fair value mark will be accreted over the estimated remaining life of the loans, which we've assumed at just over seven years. We also recorded a fair value discount of $3 million on Salisbury's $25 million of subordinated debt obligations, which will amortize over the next three and a half years. We also recorded a $31.2 million core deposit intangible related to Salisbury's core funding base. We are expecting to amortize that intangible over the next 10 years on an accelerated basis. Lastly, we added $4.7 million wealth management customer list intangible, which would amortize over the next 12 years, again, on an accelerated basis. Together, the amortization of these two Salisbury-related intangibles added $1 million of expense in the third quarter. The net of these four items added approximately $400,000 to our third quarter pre-tax income and is roughly a half a quarter's impact. In addition, we recorded $1.8 million in amortizing intangibles related to the Retirement Direct acquisition during the quarter.

Thank you, Annette. Turning to page five of our earnings presentation, our third-quarter reported earnings per share were $0.54 while third-quarter operating earnings per share were $0.84, compared to $0.80 per share in the linked second quarter and $0.91 in the third quarter of last year. Tangible book value per share of $20.39 at September 30 was down $1.16 per share from the end of the second quarter, influenced by the Salisbury acquisition as well as an additional $0.37 per share of unfavorable AOCI impacts. Our quarter-end tangible equity ratio of 7.15% was very close to our projected capital levels at the announcement of the merger last December, despite the higher level of AOCI-related dilution. The next page shows trends in outstanding loans. New origination yields have continued to move productively higher. Our larger total loan portfolio of $9.67 billion remains well diversified and is roughly 52% commercial and 48% consumer outstandings. Total deposits of $11.4 billion were up $1.9 billion in 2023, which included $1.3 billion of deposits acquired from Salisbury. The company continues to experience 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 to 118 basis points compared to 85 basis points in the linked second quarter and total cost of funds increased 28 basis points from the prior quarter and included the impact of the acquired Salisbury deposits, which did carry generally higher interest rates than the legacy NBT portfolios. In addition, our total cost of deposits for the month of September was 131 basis points, which is 13 basis points above the reported quarterly level. We have also again included a summary of our deposit mix by type, which illustrates the diversification and deep granularity of our customer base. Page eight looks at the detailed changes in our net interest income and margin. Third-quarter net interest income was $6 million above the linked second quarter results, primarily from the Salisbury acquisition, as well as one additional calendar day in the third quarter. We believe our granular deposit funding profile remains a core strength. However, we do continue to expect funding pressures to persist for the next couple of quarters. The trends in non-interest income are summarized on the next page. Excluding securities losses, our fee income was up $3.7 million from the linked second quarter to $40.4 million and up 8.3% from the third quarter of 2022. Consistent with historical results, the third quarter of the year continues to be our most robust quarter of revenue generation for our fee-based businesses. As such, we'd expect some seasonal declines in the fourth quarter. Third-quarter revenues in our wealth management business included approximately $650,000 from Salisbury, and our retirement plan administration business added $700,000 of revenues from the Retirement Direct acquisition completed on July 1. The diversification of our revenue generation sources continues to be a core strength of the company. Turning to non-interest expense, our total operating expenses were $82.9 million for the quarter, which was 6.8% above the linked second quarter, excluding merger-related expenses. Quarter-over-quarter increases in salaries and employee benefits, technology services, occupancy, advertising, and FDIC assessment costs also related to the half-quarter impact from Salisbury. On the next slide, we provide an overview of key asset quality metrics. A walk-forward of our loan loss reserve changes is also available in the appendix to the presentation. Net charge-offs were 18 basis points of loans in the third quarter of 2023 compared to 17 basis points in the prior quarter. The increase in quarter-end loss reserves reflected an allowance for acquired Salisbury loans, which included an $8.8 million day-one provision expense and the $5.8 million of purchased credit-deteriorated allowance. We continue to believe that the path of charge-off activity will return to more historical norms and along with expected balance sheet growth will likely be the drivers of future provisioning needs. As I wrap up prepared remarks, some closing thoughts. The additional market volatility and uncertainty that arose in early March accelerated our funding cost pressures, which has resulted in lower net interest margins. However, well-balanced organic loan growth, constructive results from our recurring fee income level stable credit quality outcomes, and diligent operating expense management have allowed us to generate solid quarterly results. Lastly, our post-acquisition capital levels continue to put us in an enviable position as we consider future growth opportunities. With that, we're happy to answer any questions you may have at this time. Michelle?

Thank you. Our first question comes from Alex Riddall with Piper Sandler. Your line is open. Please go ahead.

Morning. Hey, yeah, first off, I wanted to start, John, you talked about the next phase of your organic expansion. I know that you know the main market very well. I believe you ran that for a little bit before taking the current role that you have now. I'm just wondering if you can elaborate a little bit on sort of what you mean by that, if that is going to require some further investment into next year or if it's going to be sort of what you've been doing just maybe with a couple of additional people?

Thanks for that question. Yes, I did spend time in Portland, as you know. I think the investment here is in people and the supporting systems we need to deliver high-quality products and services. As we got off to a really strong start in Maine, focused primarily on commercial real estate, it's time now, and it always has been our plan, to diversify that approach in the market. We think Mike O'Reilly and the team there, thinking about expanding our small business offering, our C&I offerings, and putting the treasury management platform we have front and center on the deposit side, are all sort of basic block and tackling things that we are now ready to do in Maine and New Hampshire. We've done that in Burlington and Northern Vermont, and I think we've demonstrated it's possible and achievable, and that's where we're headed. I don't see us investing in brick and mortar in the short run, so it'll be people and systems.

Great, thanks for that additional color. And then, Scott, I'm just wondering if you can walk through sort of the funding strategies you have. I think you said cash flows from the securities get you to roughly around 2% of your loan growth, or I guess would get you the first 2% of loan growth based on the cash flows from securities that you disclosed in the presentation. Assuming that you do a little bit better than that, which is kind of how you've been running, how do you weigh the different options for funding that? Would you consider additional securities restructurings, things like that?

Thanks, Alex. That's obviously an important question for us going forward. You're right in your expectations relative to the investment portfolio. I think we're expecting another $45 million in cash-flows in the fourth quarter, somewhere between $180 million to $200 million going into next year. Remember, our investment portfolio is generally amortizing mortgage-backed securities, which of course have slowed down as prepayment speeds have virtually reached zero. So our expectation of cash flows has been pulled down a little bit relative to that, but still productive. Given that's the outcome of our investment portfolio, Alex, the ability to launch some kind of a restructuring of our securities portfolio would require us to estimate interest rates beyond the one or one and a half year horizon. We're just not so sure that that's the appropriate thing to do today in the market. So back to your point of, geez, how do you fund mid-single digit loan growth? I think it's the organic strategies that we've proven we're pretty good at over time. Do we expect some continued remixing into CDs and money market accounts from savings and checking, non-interest checking or low-interest checking? For sure. A piece of our customer portfolio started to get some repricing of their deposit instruments about a year ago, the fourth quarter of last year or even maybe into the early first quarter. Remember, that was at a time when the Federal Reserve was moving rates in 50 to 75 basis point buckets at each meeting. So I think it was a little more top of mind. Have we seen some levelling out of that here in the third quarter? A little bit. Does that mean there's some customers that still think they deserve a better yield on their depository or their excess liquidity? For sure, those people are still out there. I think the other thing, I think we pointed this out a quarter ago or maybe two quarters ago, that generally the Salisbury cost of funds were higher than ours on a blended basis. So you're seeing those numbers in the third quarter. And remember, you only got half of that in the third quarter so you'll see a little bit more of that in the fourth quarter but generally, Alex, I think if you're targeting now how to come up with funding sources for a $300 million or $350 million organic growth rate, I think we're in good shape relative to figuring that out.

Okay, so first line of defense is cash flows from security. The second line of defense is the organic growth that we all hope for. And then third, to have some borrowing options should they come to rise. But sale of securities is currently not one of the considerations?

It is not, so you're spot on with that. I also think that in terms of what if the Salisbury transaction allows us to expand our geography relative to thinking about other spots within our geography that we have never been represented in. The Upper and Lower Hudson Valley, as an example, we've really never had significant exposure there. Are there some additional spots between where the Salisbury franchise was in the Hudson Valley and where we've been sort of in the Southern Catskills and the Capital District of Albany? There's probably some places in there where rationally we should link up. Same thing in Northwest Connecticut. Do we have immediate plans for that? No. Are we spending a lot of time trying to identify productive markets for that kind of expansion? For sure.

Got it. And then just final question for me, when I look at the quarterly loan yields on slide six and the new origination yields, some of them seem still just a little bit light just given rates and what we're hearing from other people. Is that kind of indicative of where the pipeline is as well, the new origination, or is the pipeline a bit higher than the new origination yields on slide six?

Yeah, a couple of things there, Alex. I would say the pipeline is a little bit higher, remembering that the third quarter also includes months that were July, August, and September. And here we stand at the end of October. So the pipeline is probably a little bit higher than that. I think in terms of how those things are blending, residential loan production is obviously not at an all-time high. It's at a fairly modest point. So the mix of residential loans may be ending up in a lower duration portfolio, 15 years, or in an adjustable rate, or a product that has an adjustable rate attached to it, that really explains why that number looks a little bit lower. Your point is well taken. Today, given where incremental funding costs are, do new yield expectations need to be north of 750 or 775 or even eight? Yeah, they should be. Do you get to that path with every single one of your offerings? No, not immediately. But I think over time, you make progress at that.

Thank you, and one moment as we move to our next question. And our next question is going to come from the line of Steve Moss with Raymond James. Your line is open, please go ahead.

Good morning. Morning, John, Scott; maybe just following up on the funding costs and the margin mix here. I see you guys in a pretty meaningful cash position at quarter end, and obviously, Salisbury kind of makes things a little more difficult. Just curious as to how you're thinking about NII and an overall margin for the fourth quarter here now that everything's combined with, given that funding costs are 13 basis points higher for September?

Yeah, thanks, Steve. So to your point, we'll get the full impact in the fourth quarter. The hope is to tell people that the September cost of funds were the high point of the quarter, which I think we've unfortunately gotten to say every quarter-end this year, that the last month of the quarter was more expensive than the first month of the quarter. So expect that to continue, and now that's more of a remix dynamic than it is any other product-related change for us on a going-forward basis. I would kind of frame it this way, that we kind of think of the third quarter's outcome as a 321 reported margin, probably 316 core, meaning that five basis points of marked accretion was also included in that. You got a number of step down a little bit into the fourth quarter? I think so, Steve, on a core basis. We'll continue to tell you how much that is moving forward in terms of what's influencing the gap reported number. Your point on the balance sheet, well observed. We were in a Fed Funds sold position and still borrowing money at the end of the quarter. We were very cautious before the closing of the Salisbury transaction that we did not want to put ourselves in any short-term liquidity-constrained position. So we kept some instruments on the balance sheet, including on the borrowing side, into the fourth quarter. I think the lion's share of that Fed Funds sold position will move itself off our balance sheet in the fourth quarter and into the first quarter of next year. It's interesting that may result in a little bit of compression on any interest margin, but it actually creates a really modest piece of net interest income. And again, remember, we spend net interest income and talk about net interest margin.

Right. Okay. That's helpful. And just kind of as you're thinking about the deposit environment here, you guys are still running at a low cost of interest funds on interest-bearing deposits. So how are you thinking about, through the cycle of deposit betas, if we are in a higher-prolonged environment, what's your sense of the competitive environment these days?

Yeah. So it stays competitive, Steve. Some of the issues that the industry had to engage in following the bank failures in the first quarter are still top of mind if you're a banker. That has not gone away. We think we've said before, our regulatory reporting of net liquidity and net liquidity sources has continued to be a monthly apparatus. Not daily anymore, but monthly. So I think that stands out there. In terms of we share markets with larger banks and with smaller banks. The smaller banks have a finite group of customers and communities that they can go to from a funding standpoint. They'll tend to be a little bit more liberal or more assertive relative to retention. If rate is necessary to retain, that's what we see. The larger banks we're competing with across most of our footprint have found a regional and/or national strategy for their depository products. We line up very well against that. We don't need to be overtly assertive to retain our customers. We've made this comment before, Steve. We have a very granular mix of customers from a depository standpoint. So that ability to look at that granularity where we have a large customer base that does not have today or does not enjoy huge amounts of excess liquidity. That being said, our institutional, commercial, and larger small business customers do have excess liquidity and they are expecting market yields. I don't think that dynamic changes for the next couple of quarters.

Okay. And then in terms of just following up on loan yields here, quite the move over the past three to four months. Just curious, are you starting to see an increasing number of deals that no longer make sense? And could we see maybe a slowdown in loan growth from the mid-single digits if loans are headed towards an 8% plus type rate?

Well, let me take that one. We're right in the middle of the budget process, right? Top of mind every day is, what's growth going to look like next year? Right now, it's our view that mid-single digits may be slightly moderating down from that. But mid-single digits is our jump-off planning spot. Looking at pipelines going into the end of the year, the commercial banking pipeline is pretty strong. The business banking pipeline is pretty strong. So, will there be moderating demand further into next year? We'll see, but I don't think it's unreasonable for us to be planning mid-single digits.

Okay. And then one last one for me, just in terms of the fixed-rate loan dynamic here that are repricing over the next 12 months. Just curious if you have those expected repricing, Scott?

Yeah, Steve. When we look at our loan portfolio today, we think about $1.7 billion of cash-flow instruments coming off that. That's probably a lower number than we said a quarter or two or three ago, just given the slowdown in prepayment speeds. That slowdown in prepayment speeds is noticeable in residential mortgage products, in solar loans, and in a couple of other portfolios. Over time, I still think that people buy a new car and over time, people will move again. But I think we use $1.7 million of expected cash flows for the next 12 months.

Thank you. Our next question is from Chris O'Connell with KBW. Your line is open, please go ahead.

Hey, good morning. I was just hoping to circle back to just a near-term NIM discussion. So, I guess on a core base, well, first off, just for the next full quarter, given where the close was this quarter, like what do you think the quarterly accretion number will shake out at roughly?

So, I think this quarter's $1.6 million is a proxy. You double that and that's what that'll look like for the next few quarters, depending on prepayment fees. But I think that's a good proxy.

Okay, great. And just thinking about the core NIM, where do you guys have where that was for on a spot basis for September?

Don't not have that in front of me, Chris, but I would probably tell you that if the quarter's core was 316, I would guess somewhere between 310 and 312 for September.

Okay, great. And as we get past next quarter and hit the trajectory into next year, I mean, is the pace of funding pressure going to depend more on the core customers that you have or how the mix shift tends to play out from this point? And if you have what the organic non-interest bearing deposit growth or decline was for this quarter, that'd be great.

Yeah, so Chris, that was probably where I would say, yes, the impact of our core customers is more the determining outcome. If you're today, and just as probably most banks, if you're truly recruiting large pools of incremental cash onto your balance sheet, you're expecting to pay a 5% yield for that. It doesn't matter whether it's a wholesale source or whether it's a large institutional source. That's the customer expectation on that. But if you're down into the granular ads and our ability to add incremental checking accounts, really important attribute for us. It's something we've historically been very good at. It's just in terms of circling the wagons on deposit balances. Those tend to be very effective accounts for us, both on a cost of funds as well as activity participation. So we're still focused on that. In terms of how we think about that going into next year, again, a portion of our core customers got some repricing on some of their deposits in the fourth quarter of last year and the first quarter of this year. They probably went into instruments that were not long in duration, six to 10 to 13 month type CD durations. Those people are going to be back in front of us for repricing. The question is, what is their demand today? We assume it's a little higher than what we put them in at the end of last year. But I wouldn't think it's so much higher that that's going to be something we couldn't offset with earning asset yields continuing to productively move forward. Not at the point where we're declaring victory on that for the fourth quarter or even maybe the first quarter of next year; but, expectation-wise, you can see that coming.

Okay, great. And then, do you guys have the dollar amount of what the remaining cost savings are on the SAL deal?

Chris, probably not specifically to a dollar number. Remember, we now have history with Salisbury as of September 30th of 49 days. We now have 25 more behind us here in the fourth quarter. I think once we get through a full fourth quarter, we'll have a real sense of that in terms of dollar outcome. Annette, help me, 30% of the base at Salisbury was $9.5 million or $10 million.

That's correct, right around $10 million.

Yeah. Okay, great. And then you do have the share repurchase plan outstanding. It sounds like growth is solid, but not overly concerning in terms of capital usage. Capital should be building at a fairly good pace going forward given the profitability you have. Is it something that you will be exploring using on a go-forward basis?

Certainly, Chris. As we discuss this, we are pleased with our current positioning, which enables us to understand our natural capital accumulation. We need to ensure we have the capacity for organic growth, as we have successfully done in the past. For instance, in the Salisbury transaction, having some excess capital available for high-value acquisitions presents a great opportunity for us. Additionally, we have increased our dividend for 11 consecutive years, reflecting our commitment to providing shareholders with predictable returns. It's crucial to have an open authorization for share repurchases, especially since we anticipate that organic loan growth may be slower and could impact our strategies in 2024. We may encounter times next year when demand is not as strong as it is today, and those might be the best moments for a buyback. We have consistently maintained the authorization to manage share dilution from our equity programs. Currently, there is a 5% funding cost associated with repurchasing shares. If we are transparent, we must recognize this cost when considering buybacks. The government imposes a 1% toll tax on these purchases, which is manageable and fits into our long-term capital allocation strategy.

If I could put a fine point on that, too, we review that at the Board level every year. Just coincidentally, this week, Scott led the Board through that same discussion and we reaffirm that's the priority of allocation of capital as we go forward. So we're out of place this week where there is consensus at the top of the house and at the Board, but that's how we're going to proceed.

Thank you. Our next question is from Matthew Breese with Stephens Inc. Please go ahead.

Hey, good morning everybody; just a couple of model-related questions. First, on fee income, Scott, you had mentioned that seasonally, this was the strongest quarter of the year with Salisbury only being here for a partial quarter. Could you help us out in terms of what you expect to roll off, but then also for the full quarter impact with Sal? Where do you expect seeing kind of shake-out in the fourth quarter?

Yes. So it's a great question, Matt. Thanks for actually that. Historically, we've had somewhere around $0.02 per share or maybe $1 million to $1.5 million reduction in core revenues in our fee-based businesses fourth quarter versus third quarter. If you think about that as a backdrop, we do some activity-based billings in our wealth management business in the third quarter. We have some actuarial fees that are more pronounced in the first and third quarter of each year. That's typically been our pattern for that. Your point is well taken. We added about $650,000 and a half a quarter in the wealth management trust side from Salisbury. I think it's fair to assume that you get a full quarter of that in the fourth quarter and that kind of run rate expectations going forward. The market sensitivity in retirement plan administration and in wealth is still meaningful for us. That being said, I think we have a more traditional base of customers in there. Their utilization of both fixed income as well as equity instruments is probably a more traditional based outcome that's not the 100% equity market influence group. Clearly, there's yields in the fixed-income market today, so you expect some productive use of that. All in that, I would say, we're looking at saying in the fourth quarter, revenue is probably still down. It probably isn't down as much as it would have been, say, from last year's third quarter to last year's fourth quarter because of the Salisbury impact, but we still think probably a little bit lower than what we had in the third quarter. First and second quarter of next year is probably you have the outcome that's similar to your fourth quarter with an expectation of organic growth, which we've achieved in all three lines of business in 2023 and expect that to continue opening new accounts, expanding our base and having an additional geography to expand those products too is all a net positive.

I appreciate all the color there. And then on the provision, you had mentioned that going forward, maybe we could expect a kind of more normalized provision. Certainly, there are some moving parts this quarter. How would you frame that 15 to 20 basis points of loans? Is that a reasonable starting point? Or said another way, do you feel like the current reserve is probably a good place to keep it for the near term?

Yes. I think unless you get a meaningful change in some of the economic expectations, where we are currently from a coverage ratio on our current mix is probably a fair starting point. I think for us, and I'm sure we'll budget this way, we will budget that net charge-offs, again, start to maybe look a little bit more like pre-pandemic levels, but maybe not all the way back to 2019 net charge-off levels. We always think that provision-wise, we cover those, and then we cover whatever incremental loan growth we experienced in the quarter at that blended coverage ratio. In the third quarter, we had some things that were net positive for us that didn't force us into quite that outcome, but maybe $0.01 or $0.02 from that outcome. It wasn't like it was $0.08 or $0.09 of that outcome. It was a couple of cents.

Okay. And then, John, I had a few questions just based on recent events and then the upstate New York activity. It feels like every quarter, you're now announcing another contract, another company. This quarter, you're talking about New York creates the Albany complex being granted at the center for workforce training. First of all, what is the significance of that? Secondly, do you expect to see the region as a whole becoming more of a point of gravity much like Silicon Valley was for companies similar to Micron, similar to GlobalFoundries to go to Upstate New York? Is this going to be a slow moving or growing snowball effect as more and more companies enter the area and could you remind everybody what's already existing up there?

I appreciate the chance to discuss this. We at NBT believe the economic transformation of our core markets in Upstate New York is crucial, especially with investments from companies like GlobalFoundries, Wolfspeed, and now Micron, which is contributing $100 million in Central New York. This chip corridor from the Lower Hudson Valley to Central New York is poised to significantly change our economy in ways we haven't seen in many years. While I won't claim that Ana Daga County and Central New York will become the new Silicon Valley, I can say that we expect to see population growth, job growth, increases in average salaries, and better retention of graduates from colleges and universities in Upstate New York due to the abundant job opportunities. The momentum is strong, especially with Micron's recent application to the Commerce Department for CHIPS Act funding, which is expected to be addressed by year-end and has political support. Micron is optimistic, and planning and preliminary site work are underway in Clay, New York. There’s continual interest from global semiconductor companies and related firms being drawn to this corridor to support Micron, Wolfspeed, GlobalFoundries, and other semiconductor initiatives in Upstate New York. The analogy of a snowball effect is fitting, as we foresee this momentum growing. NBT is well-positioned in the area and has insights into developments across these regions, which we expect will lead to significant opportunities in our retail, commercial lending, wealth management, and insurance businesses. We've seen similar signs of growth in the Capital District with GlobalFoundries over the past 12 years, and we anticipate continued demand and contract bookings for our customers involved in that industry. I'm hopeful that conveys our belief in this organic growth strategy for the long term, which will transform the economy and contribute to substantial growth at NBT.

Well, I appreciate all that color. Just moving on to a different topic. More recently, we've seen a bank strategy of parting ways with fee income businesses, insurance companies to be specific. I think I know the answer to this, but I just wanted to hear two cents on this strategy and whether or not we might see you follow suit or continue a path of building these lines of businesses?

Yes, Matt, we have discussed this before. Our focus is on organically growing our businesses. Whenever we have the opportunity to add small revenue-generating activities or acquire smaller firms in our sector, that will remain our preference. Selling off parts of the business can be challenging as it often means reversing years of development related to cross-selling opportunities. I acknowledge that the recent announcements from large agencies with revenues around $100 million make it understandable why they might pursue that path. However, our strategy is to continue nurturing organic growth in our existing businesses, which we believe will lead to productive and profitable scale in the future. The advantage for us is that we already have scale across these businesses. It’s essential for us to identify the right people and opportunities to sustain this organic growth since we value the strong cash flow generated by these businesses, which significantly contributes to the overall capital of the organization. Currently, we aim to enhance and expand our operations. While our businesses may be smaller than the large transactions we've seen recently, I’m not entirely certain that the likes of Arthur Gallagher and similar firms are interested in what we have to offer.

I appreciate that. And then just a follow-up. From my seat, I just kind of events happen, the knee-jerk reaction is obviously, one, to look horizontally and figure out who else has these businesses, doing some of the parts analysis. Frankly, from my years in the seat, you very rarely actually get a multiple on a fee income business with any sort of press release. So for the first time, we have an insurance multiple, it feels like. What we don't have are multiples necessarily on wealth management or in your case, the retirement plan admin business. I won't ask for a specific multiple on a recent field, but can you give us a flavor for what those types of businesses, wealth and retirement plan administration, what type of multiple those go for in today's market or in a normal market?

Yes. I'll provide some historical context on this. Typically, businesses with recurring cash flows, especially in the processing sector, have seen revenue multiples ranging from two to three times, depending on their size, due to the nature of their repetitive transactions. There has been notable interest from private equity and hedge funds in firms that accumulate assets, driven by the perception that these firms can engage in management or administrative tasks for those assets. In our case, we excel at processing and have largely replaced traditional HR functions in that area. The same applies to wealth management; we aim to enhance cross-selling opportunities with our clients. In insurance, this has been particularly successful in the small business segment. We are working on developing a more effective platform for the consumer side, which has proven to be more challenging, but we are making strides. Ultimately, we want to ensure that we can continue to achieve organic growth in these businesses over the long term within our portfolio.

And I'm showing no further questions. And I would like to turn the call back over to John Watt for his closing remarks.

Thank you, Michelle. I appreciate everybody's time this morning. Thank you for all those great questions about the momentum behind NBT as we close out this year and move into 2024. Again, have a great day. Appreciate your time. Thank you.

Thank you, Mr. Watt. This concludes our program. You may disconnect. Have a great day.