NBT Bancorp Inc. (NBTB) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the NBT Bancorp Inc. Annual Meeting. I would -- at this time, I would like to turn the conference over to Mr. Marty Dietrich. Thank you. Sir, please begin.

Good morning. My name is Marty Dietrich, and I serve as Chairman of NBT's Board of Directors. On behalf of the directors and employees of NBT Bancorp, I'd like to welcome you to our 2020 Annual Meeting of Shareholders. . I hope that everyone joining us today is safe and well. We have experienced extraordinary events this year due to the coronavirus pandemic. It has far-reaching effects on our economy and society, and we extend our care and concern to those whose health and livelihoods have been so impacted. Technology has also been critical to continuing to conduct business and stay connected through this crisis, and we are glad we made plans last year to host our first virtual meeting this year. The pandemic has required most public companies to adopt this format this year. In addition to supporting the social distancing that has become necessary, it allows us to be more inclusive and reach a greater number of shareholders. As is our custom, we will conduct the business portion of our meeting first and then answer questions. It's now just after 10 a.m. Eastern time, May 19, and this meeting is officially called to order. John Watt, our President and CEO of NBT Bancorp and NBT Bank, answers on the Board of Directors. He will conduct the formal proceedings of today's meeting and provide an update on our company. Good morning, John.

Good morning and thank you, Marty. Like Marty, I would like to extend a warm welcome to everyone who is participating today and join him in acknowledging that these are indeed challenging times. Now, as always, the entire NBT team stands together with you. It is in our DNA to be at our best in times of disruption and adversity. We remain dedicated to delivering high-quality service to our customers and value to you, our shareholders. By remaining focused on the fundamentals of our business and by taking care of our customers and our communities, we will emerge stronger together. At this time, I would like to introduce our directors who are joining us this morning on this call. In addition to Marty and me, the directors serving on the NBT Bancorp and NBT Bank Boards are: Pat Civil, Tim Delaney, Jim Douglas, Andy Kowalczyk, John Mitchell, Dan Robinson, Matt Salanger, Joe Santangelo, Lowell Seifter, Bob Wadsworth and Jack Webb. Thank you all for joining this morning. Today, we are also joined by the newest members of our executive management team: our Chief Financial Officer, John Moran; and our General Counsel, Angela Kelley. The company has appointed our General Counsel, Angela Kelley, to act as inspector of election. Angela has taken the oath of inspector of election earlier today. Finally, representatives from KPMG, our independent auditors, and Hogan Lovells, our corporate counsel, are also on the line with us. After the formal meeting has been adjourned, we will provide time for questions from validated shareholders. The Board of Directors fixed March 23, 2020, as the record date for determining shareholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact. Meeting documents were mailed commencing April 9, 2020, to all shareholders as of the record date. This affidavit will be incorporated into the minutes of this meeting. The shareholder list shows that as of the record date, there were 43,587,445 shares of common stock outstanding and entitled to vote at this meeting. We are informed by the inspector of election that there are proxy shares of common stock representing approximately 79.3% of the voting power on the record date. Since this represents more than a majority of the voting power of all issued and outstanding stock entitled to vote on the record date, a quorum is present for purposes of transacting business. We are conducting this Annual Meeting today for the following purposes: to elect 13 directors, to approve on a nonbinding basis the Say-on-Pay proposal, to ratify the appointment of KPMG LLP as our independent registered public accounting firm. These proposals are discussed in detail in our proxy statement and in the Notice of Annual Meeting. If any shareholder would like to make a comment regarding any of the proposals, please submit your comment through the web portal. The polls are now open. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. Shareholders who have sent in their proxy or voted via telephone or Internet and who do not want to change their vote need not take any further action. So we will pause to provide time for shareholders to vote. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2020 NBT Bancorp Annual Shareholder Meeting closed. At this time, I will turn the meeting over to Angela Kelley for the voting results.

Thank you, John. Proposal #1, the 13 directors nominated have been elected. Proposal #2, the Say-on-Pay proposal has been approved. And proposal #3, the appointment of KPMG as our independent registered public accounting firm has been ratified.

Thanks, Angela. So with the business portion of the meeting complete, I'd like to now take the opportunity to provide you with a summary of our record performance in 2020 -- or, I'm sorry, 2019 and the steps we are taking in response to the COVID-19 crisis. So as you can see, NBT delivered strong results in 2019 as measured by these key metrics. The year was highlighted by record net income for the seventh straight year as well as record levels of earnings per share, ending in 2019 at $2.74. The net interest margin held flat even in the face of 3 Federal Reserve rate decreases. In addition, we grew tangible book value. As noted, we continue to build our capital, which positions us well to weather this current stressed environment, and these elevated capital levels will provide us with optionality when and if opportunities arise. NBT has a long history of paying dividends. We declared our 513th consecutive dividend payable next month. And for the seventh consecutive year in 2019, we increased total dividends paid. Building on last year's success, 2020 was off to a strong start in January and February. Obviously, the world changed rapidly in March with the emergence of COVID-19 and the related pandemic. In addition, the adoption of -- by NBT of CECL as the pandemic spread had an impact on our quarterly results. While NBT's underlying operating performance remained strong during the first quarter, the provision for loan losses was $30 million and the impact of the virus on our economy began to be felt. We come into these challenges from a position of strength with plenty of liquidity, a strong credit underwriting history and high levels of capital. The last 9 weeks have been unlike any in my 35-year career. But with that said, the NBT team is focused and doing all the right things, keeping our employees safe, assisting our customers in distress and serving our communities. Our efforts in connection with our pandemic response involved moving over 1,000 employees to remote working environments, allowing our employees to take care of their families during this period, controlling access to our banking facilities, providing various forms of payment relief to commercial and retail customers and waiving fees associated with some of our products. We participated vigorously in the SBA's Paycheck Protection Lending Program. The PPP loans supported by NBT are helping to retain more than 61,000 jobs in the communities we serve. We supported rural hospitals, restaurants, hotels and inns, homes for the disabled, manufacturers and many, many more Main Street businesses. We will continue to adapt to our customers' and the employees' needs as we move into the next phase of this pandemic crisis. Our company has historically performed at its best in times of stress and has a long record of emerging stronger at the end of such periods. Prior to the pandemic, NBT's share price was performing in line with peers' and the KBW NASDAQ Regional Bank Index. Most recently, banks generally are underperforming the broader markets with many banks trading under their tangible book value. Similar to our experience in the previous economic downturns, as you can see, NBT has performed better than peers during this crisis. We believe the market recognizes our fundamental strengths that shine in times like these, including our strong balance sheet, our disciplined approach to credit and risk management, our investment in technology and our digital strategies, our diversified fee businesses and a very experienced Board of Directors and management team. I'm confident that NBT has the capability and flexibility to successfully navigate these difficult times. So now that we have completed the business portion of the meeting, we will answer your questions.

We had 2 questions submitted prior to the meeting. Question number one, "Have executives and directors considered reducing their pay during this crisis?" So as Marty and I both noted in this presentation, these are very difficult times. During the COVID-19 crisis, NBT has maintained full employment and has made no changes to base compensation for any of our employees. The Compensation Committee of our Board will further monitor market conditions and consider appropriate actions while balancing the interest of shareholders and employees. I think it's important to also note that ISS, in conducting their review of NBT's compensation priorities in 2019, gave the most favorable rating to our compensation practices, which is low risk. Also, last year, the approval level for Say-on-Pay was 95.8%. So thank you for that question. Question number two submitted prior to the meeting asked if the Board is considering expanding diversity within its ranks. Again, thank you for that question. Let me know first that there is real value in having talented directors, especially in times like these. Remember that through the crisis, we are fortunate to have experienced and battle-trained directors, many of whom were with us during 9/11 and through the financial crisis. With that said, when a seat on the Board becomes open or a need arises, the Board will consider many relevant criteria, including gender, age and race. You should be aware that the Board, which is elected annually, is committed to increasing the diversity of its membership. The Nominating Committee of the Board has identified the expansion of the gender diversity of its ranks as an important focus area in 2020 and is actively working on this issue. The full Board supports this activity. So again, thank you for that question. There being no further questions, we have completed our business. Thank you all for taking the time to join us here virtually today. We appreciate the trust and confidence you have placed in NBT's Board and management team. Please accept our best wishes for your safety and well-being. And on a personal note, I cannot wait for the time after the storm passes that I can interact with you personally and talk about the performance of NBT and its employees. Thank you. That concludes our meeting.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.