CBU - Earnings call transcript Q3 2017 | Community Bank System, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, please standing by, we’re about to begin. Welcome to this Community Bank System Third Quarter 2017 Earnings Conference Call. Please note that this presentation contains forward-looking statements within the provisions of the Private Securities Litigation Reform Act of 1995 that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the company operates. Such statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed in these statements. These risks are detailed in the company’s Annual Report and Form 10-K filed with the Securities and Exchange Commission. Mark Executive and Financial Vice are and Executive Officer. presenters Kingsley, Scott President call Tryniski, Chief President Officer; Today’s and Chief Gentlemen, begin. you may

Mark Tryniski

XX% and for the To per transactions. last and the we said in and NRS this to on all Merchants following synergies conference are Services, share Shannon. will an joining the very the Northeast and company over demand realization you, principally cost is with is accelerated in share Merchants Good Retirement cash provide of closing for quarterly more expected to of flow which everyone, both Scott annualized XX% to the quarter cash ahead rate what be which running full Merchants quarter quarter, $X.XX. earnings detail for thank Thank both operating and quarter But we $X.XX record earnings, both in year-to-date, morning, strong per quarter our to of first technology. It the also repeat acceleration call. you our February, projections, previously earnings NRS, at running QX of and with of was are due for the financials. The Bancshares the per in our summary, up another closed in operating accretion transaction. and for share of adjusted year-to-date. result earnings people and related up is per XX% $X.XX share with range

with generation, into What to for the standard improve growth QX, business quality performance lending. pretty leverage, mortgage this continue markets. in X% to measures performing was on capital excellent long of inorganic lower be business, we through the credit the which expect principally auto the year-to-date in accretive similar organic has profitability non-interest record is much fine will originations earnings quarter to earnings firmly We Supporting The year-over-year, origination is and on took underperformed that business revenues. both generation business, improved respect expense those levels our to with drawing return With quarter we future. impacted or to originations. last transactions

business with Pennsylvania. We’ve for offsets also modest Business that quarter York in the prior is accelerated up to closings including CRE for full-year. but is up C&I are acquisition, run rates Northern York and organically the Central New expect Vermont fourth in at declines pipeline as We seen still and lower lending, they New to off X% year-over-year. well. Western and due to the

are prices successful are We’ve low, Asset high underperforming both credits. refinancing year in activity. in been and a cap so in acceleration this exiting sales/prepayment rates seeing we’re significant also

solid working We’re pipeline said, pretty to activity. is for quarter. expecting hard this With that is the our a team the the offset very commercial continuation fourth of trend and payoff unscheduled

other been points organically five the of generation exactly the organic total X% balance and sheet, side for deposit have deposit XX On quarters. year last steady, been costs basis past up the over core has

be will does our two. call funding performance have after said I additive strength strong but shareholders. highly our rates been We expect QX to for It’s one operating for very we trend and base continue the year of that performance the our now quarter many, if rise. to a not

cash our confident XXXX. to Scott? a ability have earnings operating to at double-digit to in sustainable pace current We’re in flow that and continue our generate in is position and

Scott Kingsley

Thank everyone. and you, morning, Mark, good

very XXXX solid of noted, for was another the third operating quarter us. quarter Mark As

up year-over-year in for May. early the Merchants On February average sell of indirect this Merchants. most XX.X% of assets XXXX longer-term balance mortgages a NRS billion some of quarter secondary sheet acquisition third acquisition market included we even a of originations. cover of As basis, full its quarter the instruments the organically, in first the at the items, of to reflective above XXXX. were completed quarter quarter quarter quarter eligible mid-second were of the and $X.XX acquisition that the of second year, and loans updated reminder, earning September residential activities Consumer X.X% from the I’ll continues end X.X% of XX and of the home-equity the as third with a company completed grew third essentially

excellent, And this to portfolio as on Although sheet growth. compared have our credit charge-offs in returns the have capital and some XXXX, application year mentioned, in refocused delinquency net process. efforts Mark be seen versus our we generally we continue in portfolio erosion improving results to last consumer in this balance

the agreements, were $X.XX deposits in acquisition. transaction, which gathering. from priced the of down Average of last of securities third much end all up number ended quarter of the the of the We as core acts also dynamics. of Merchants $XXX but are higher year, quarter, were loans from quarterly outside and deposit unscheduled year-ago very Merchants than acquisition, and deposits reflective are $XXX of than as XXXX, second million quarter competitive business borrowings. of year-over-year the of end more levels, well a the like with market quarter investment third customer in the which continuation were borrowings, the collateralized modestly million wholesale a billion continued of likes, reflective repurchase success their Excluding Merchants result down the Quarter-end payoffs

our a and exception $XXX obligations, As our rarity group. has of regulatory sheet September such, our additive with efficient million capital in external XX balance preferred trust highly peer of the no debt,

we quarter to the asset overall a third that favorable of have of expect. results quality come The continuation was again XXXX

$X.X and or benefited with end million $X.X lower last and of of addition total million, the basis loan legacy reported Third the the third acquired of up consistent from loans over charge-offs Non-performing the XX quarter loans. $XX.X were loans X.XX% the or comprised results our net eight from total and ratio of very portfolios. of of loans XXXX the points ended than Merchants million, at quarters. at third September last sorry, quarter the X.XX% quarter I’m both were of

for of standards. Despite lending auto macro and of basis ratio loans, industry months loan quarter-end reserves at under losses Merchants level legacy X.XX% four net with XX September results, the multiple of seven almost Based recent portfolio of net historical by quarters with our XXXX and total Our quarters our the still reports X.XX% of the charge-off first nine previous of on outstandings points concerns, of trailing loans eight our loans. charge-offs. consistent longer-term the auto XXXX the represents addition average represent reserves most years was annualized favorable

total; debt XX other up September The of $X.XX of gain million the of bonds, and The X% the and net unrealized corporate compared of agency-backed gains as investment in U.S. during at rates end stood the our XX% a XX, million and in million was was of portfolio of net the securities. of last contained September or at and XX%; unrealized As or comprised $X.XX of municipal or of months. remaining market of portfolio. the agency $XX quarter-end, $XXX billion XXXX, obligations, portfolio movement of noticeable interest to to of due XX% U.S. billion Securities, $XXX $XXX mortgage Treasury million

from was tangible X.XX% and acquired tax meaningful million be quarter at of $XX.X Shifting equities of NRS income Tier intangibles deferred the the earlier at and the Our and year. net ended both The at share of capital Tangible capital to X.XX%, strong. assets tangible transactions statement. to certain XXXX ratio value in quarter-end X despite for book Merchants XX, continued levels generated liabilities September share this third September per was use very $X.XX per $XX.XX share. or per and included now leverage

the results. basis fourth full to were X quarters which points with and of added historical quarter interest was from from net lower points the results. and the linked X dividends results, quarter third of quarter of each year basis than Our Merchants XXXX, down semiannual the margin reported basis net was interest $XXX,XXX, our Reserve X of Bank second the for reflective third include which points Consistent Federal quarter margin approximately X.XX%, second a quarter second

In at basis to an third which to on since remained Proactive million funding – we rate net margin results, margin. basis of points, in interest year-to-date. $X.X compared the remained loan the as XXXX, zero at the accretion effect our including beta Fed positive X our XX of have management changes added purchase a costs has Merchants added continue deposit total approximately to from deposits addition, disciplined quarter of recorded funds the points deposit rate and last additional December, incremental three costs Despite quarter three transaction. Fed

quarter wealth our third million this benefits were Merchants several non-interest which quarter included of of year. completed group was of banking initiatives. NRS up insurance acquisitions well annual reflective $XX.X earlier and $X.X from included up last two pooled year, income, improvement programs from Merchants agency management certain the and quarter transaction administration, from were $XX.X dividend Quarterly million the insurance Third from approximately $XXX,XXX, revenues last and as core of transactions, the and million as insurance the businesses smaller year our third

two or exclude Third both of Merchants full amortization expenses $X.X NRS as resulted quarter included XXXX as acquisitions. of from $XX.X above from acquisition the million, significantly intangible well quarter of expenses $XX.X the which and of those quarter operating million, that third and activities XXXX transaction, operating a the higher million

to size through including we We passed have infrastructure systems, requirements improving get invest $XX in of billion those the threshold. around continued DFAST, and our as the asset

and $XXX,XXX related reduction versus accounting change the Our XX.X% transactions. effective quarter in XX.X% XXXX in rate tax year’s for tax a quarter of in included was last to in the income third share-based third expense

of effective year. over Our this acquisition third and full-year $XX million quarter including currency expectations, rate of expenses tax XXXX

Looking of fourth again forward, manageable, dividends have and Year-to-date, results semiannual see on headwinds each quality the improvements would we the to and asset difficult year. quality it quarters Bank’s do expect not expect Federal asset to in results. XXXX second current although net Reserve horizon, been be signs we charge-off continue to

securities, quarters, operating our transaction. will remained at subject which would a municipal future in has quarters, the continue loan to expect for last to to to fairly in flows times including of management operate narrow a related the band to has Our into rate challenge range foreseeable net next past we at margin years. core Merchants few the least, for, Tax over continue been interest higher over for of few the accretion the high-quality purchase successful several reinvestment somewhat a impact cash the be

generation growth to continued rate sources rates. corporate continue barring income any tax and Our from tax effective to higher will push our taxable legislative fully changes

summary, expect approximately $XX we of of believe million interchange Durbin’s a XXXX. very operational or mandated In in and from to remainder both net estimated the second-half continue Durbin July revenues capital perspective XXXX remain million a impacts of from $X.X we in on of We annually, an well-positioned reduction the beginning XXXX. an for

acquired execute Mark As mentioned, for our opportunities. to it turn forward to Shannon to now on look line to improvement I’ll the and organic back open questions. continuing over any both

Operator

O’Neill. you. Sandler Yes, comes from [Operator sir. question Instructions] with Alex Thank Twerdahl First

Alexander Twerdahl

morning, Hey, guys. good

Scott Kingsley

Good morning, Alex.

Mark Tryniski

Good morning, Alex.

Alexander Twerdahl

was make then saves, I But one, of some any on noise more prepare of of if quarters? to off, next are to investments any as us there the know is as a following first of you not DFAST And ongoing? couple need something is further a deals? be you’re update whether bit expenses, out? take going you with in or of little can further I Hey, investments what’s that you maybe an couple to that $XX are on successful lot hoping XQ, now made give that color billion, there us for, have cost you the kind you on mentioned further Can timing you any over need give investments, left two, seen

Mark Tryniski

Sure, thanks.

So, with and that. go Alex, I’ll back look, start

as pretty think think use NRS for base total. core a third quarter a good a both of I to saves full rate the this unusual pretty that year, anything as third transactions, much us I relates we’re for expectation of anything Merchants a had Merchants make that. contributed don’t think in quarter and Relative is fully the about to quarter different it – would NRS cost XXXX to the our and we there. run into the

that, faster standpoint. our expectation little happened before the of mentioned an both activities from a bit standpoint timeline we’ve some technological and people think, integration think, from a than a I original I

the two So I incremental from probably Incremental the think, balance going a question. into DFAST, point where cost unlikely are cost next of for saves year. for the year at either we’re transactions great of

So we in internal an driver XXXX, did run.

the of the expect from important, that people day, as both of the exercise. end standpoint, both in probably that think, results the aren’t we execution. our done most out, pleased I process, the with have as a We Quite terms pretty good. numbers first-year at pointing And might

validation that XXXX, have incremental a refresh we’ll think and I of we for of we’ll obviously for this associated year. created with next number some costs year the models

Our to in submit the that in required do. you banks a that that in are XXXX the are that our the is to run DFAST are plan regulator do second those drive other group – same peer to timeframes

looking just before full-blown We’re for exercise XXXX. feedback into get for that’s we required

on. of where So another share sort think But in quarters getting expect any those are where the going to that we of center XXXX via with you’ll sold major be per see we forward here XXXX have costs to associated of I from in probably. in blip from don’t

Alexander Twerdahl

just there. on little of good a elaborate can margin. that’s Okay, the a you And then more maybe bit lot information

You the of been accretion that it’s some the And of to yields, on they more in and accretion. next for expected you of in the real input expectation is that you the and on, inch maybe think profitability moving what’s roughly yields loan to mentioned, or then same kind purchase higher, Do kind is your impact the – that puts a said auto you of X.X, something any rate little purchase remain decent or indirect use model? couple borrow One, range that our have a the for color loan quarters? there? overall could takes

Mark Tryniski

Sure.

We XXXX little deconstruction bit that of second the of in that. a just lay So, second this and quarter quarter year. third the of for kind a X.XX% to of reported just quarter margin groundwork probably

FRB with on of pull a If you’re you associated the margin base points out X basis of dividend, X.XX%.

to, out second you came just from accretion double If We X.XX%. reported pull you’re quarter, of which out at $X.XX purchase is the X.XX%. that loan

to to XXXX. accretion But $X.X million Merchants third accretion of five loan of three you transactions, $X.XX, quarters. the sorry, third previous it’s need pull our item comes reasonable of loan than and associated we the from from going purchase that quarter some fair X million points out say You $X.X probably purchase still think million And that forward, $X.X of margin basis higher obviously transaction. I the quarter. increase was to It of for that it’s the did book we quarter as have in pretty a next line know, the

never in down As the side, go balances up, only loan order of they to course, down. they which in purchase go do, purchase go loan only values

amortization tends the that accretion the with find over associated You’ll trail or to that time.

balance I think, five to to us based that being three we reprice expect sort on and accretion. pretty in constant of next of those reasonable And look the low, the with this in mid-X.XXs mid-XXXs assets good to at number full prior to to in very early quarters. low, pretty side. to We feel to that knowing pretty the we’re about environment, for low we’re starting in leads very, what believe rate and transaction, accretion rising range ability the as to able a very a off funding be stay

Alexander Twerdahl

Great. Thanks questions. my for taking

Mark Tryniski

Thank you, Alex.

Scott Kingsley

Thanks, Alex.

Operator

Fenech comes Hovde question from Next Group. Joe with

Joseph Fenech

Good morning, guys.

Mark Tryniski

Hello, Joe.

Scott Kingsley

Joe. Hi,

Joseph Fenech

though you the it profile? based in at you’re you what industry tweaks issues feel an issue view, you just with yourselves I about Hi, the over return you sounds little application. worry seeing, the generally as talk business time on about auto, protect would though what Could or and guys can you’ve speaking, of your bit that just what some as for anything I the – guys. you business with you is in that made It general. in have fully the a the versus guess, guess, of if NRC,

Mark Tryniski

Fair question.

in don’t of we the of footprint. in support I stable provide for our We are this out markets, the get dealers us, think in of business a we’ve funding the in lot a institutions other source In for rural, been quite non-metropolitan. business long which do get ongoing time. our more business to

the industry volume We the on average. been portfolios has asset than have those historically better

concede that quality. on So, we is asset that’s never would something

been have for bit – historical in little than very – reference industry, I we’ve eight Scott made losses XX for that a business think basis for us been points a to the the last years of that overall, higher higher. somewhat terms higher. place in in good bit a fair But

So I quality don’t suspect. better continue asset perspective, the to I mean, I over think from time. Joe, an industry we’ll perform than

around too got made first got we a capital just stretch. moves business. the of the were some spreads dealer quarter The on on – related compensation of little low. the think I the to profitability The return the in

bit we about capital hurt business. was originations. about the so outstandings that little growing decided to wasn’t it it would And and sheet, really a return it But balance that dial on of back understanding the improving

on one So in that the exception the trends industry, mean, tenor. broadly more industry of in NRC terms I of of the is we’ve an seen

So the Borrowers be terms you paper. write guess it paper for outlets duration. that those for in are when longer. – going extended loan-to-value quickly terms those used down out are then – upside longer us very there and much long-term the are of to terms in you of And

outlet an And has the things industry I So the other keeping one subprime has think is returned eye to of on. mean, market. the perspective is, for I that’s that the an that come from we’re back. paper The market

pretty economy, take average are above might good. think so, right subprime the you if now above see paper average in And I the writing would turn, those mean, a who there’s are But… In things losses. I of level

Scott Kingsley

where continue we side. to especially And that this are thing monitor well would only the I Scott. is I The loan-to-value, car think, of dynamic on is, as people Joe, used to add

will buoyant keep hurricane million XX to time approaching likely drive the the little of sales point prices storms some car it’s two in way. with refreshed unit But Florida the American people probably over the production year, or have car a than and used think, fairly time, at maybe even that balance in the longer that. I Texas and North level,

way from have one So car probably go standpoint, a to the practical only loan-to-value on used side.

that’s So following. that��s point sort I would we’re that the probably other what of say,

Joseph Fenech

whole switching have as the be And level about I a a you currency M&A, for know guys. deals gears just play you Okay. different Thanks the seeing now. at lot then a But guys to others. stock with to we’re the more little that, of relative seems skeptical to market

did guys smart deals some deals You cheap. in where lot of the branch a earlier deposits particularly – you of got

I talked is now about M&A picky stocks you here? been the you think, run to on have is your generally. feelings expectations, with corresponding impact just get approach these your it’s as had in your the just and you do continue or seller the same on more Do thing

Mark Tryniski

I think, it’s consistent. pretty

and I those with that very capacity partnerships around confidence around think, be other our we a in shareholders non-bank. our enter to try create it’s have transaction to businesses, for strategy a particular bank, transactions. and or the we we around M&A whether value disciplined a really the into level It’s

you and over in, dividends you per share industry regulated it’s not easier sheet So topping to I the mean, banks than grow have that one. a not to smaller operate about to – But time. grow per earnings have getting share balance with cash per bigger, balance flow it’s capital, the the we it’s bigger it’s up and about share don’t your run sheet, choice,

risk no think, priced, of confidence we high-quality approach look pay the its a we current higher ability profile at vice in properly where and the high Every there’s attention and has – of higher and degree transaction So returns I has have The to a that changed for are environment execute. the different don’t the lot versa. risk, partners something our all, our own that’s to. return

for risk to strategy So The M&A it of we’re we confidence very cognizant that return be level in and shareholders. overall our and ability kind productive profile. have have execute

of years. the think over done fair job that we’ve I

are get If you we can year, for markets we’re a X% that the those in. markets operate pretty X%, look organic a at us, we good that’s in, the outcome growth

– continue investing on of And and high-value very on that capital our the on capital. a expense and efficiency return create other focus assets shareholders. to on getting for discipline M&A return has organic that we high sustainable So need that growth those, and element return strategy return to non-banking executing our our a transactions of effectively to deploying which return to terms in and is characteristics grow businesses in that,

for the constrained the footprint. to fact are by most our addition are, In that branch those part businesses

as So the growth characteristic a fair higher those are businesses organic well. bit of

So say, that’s the real would of no strategy. change. summary of kind I

We continue disciplined. to be

more We’re pay we should something. not going to than for

discipline. cheap, buy We’re shouldn’t our buy with because to we not going if credit not company, a good our it’s fit even quality, something it’s that our culture, our

we back say, the really nothing about, Scott we’re are changed can our projected – I pretty the capital to after where capital Joe. and are levels, organic pretty than know, forma And in us would because transactions NRS originally somewhat for made the which create capital higher on is reference have you So as has quickly, We right what that pleased growth less. levels Merchants now. we that pro

cash but high-quality create flow accretion continue So accretion, opportunities, will to of high-value accretion lot earnings through for confidence we’ll basically dividend transactions our and and have to be that they a look those shareholders.

Joseph Fenech

the Mark, Merchants to M&A confines the or areas Okay. tuned you you opportunity, that the the geographies within of next thoughts head then, as you fine then geographically? in next helpful, the agnostic have past, and where And sense thanks. And makes most guys closer about the still about to further think you of talked that’s from your it move general

Mark Tryniski

movement or our Carolina I or like time we banking or contiguous NRS multiple generally, of some We to transactions do But would over sense. the Boston. a that. anything make are transactions kind did in California as we transaction, NASDAQ not franchise A of we’re just Joe, transaction do going contiguous Texas think South just and states, expansion

us opportunities to in big evaluate There’s partners to-date in market. success a have Greater we Pennsylvania, I left a New the The room of other Merchants state. merger, it’s lot think, the for certainly potential England with of

only right Pennsylvania. in We’re Northeast really now

are think so, in other a have I Pennsylvania. of in There opportunities lot banks we And Pennsylvania. a of lot

So a opportunity of I there. think lot

you and Ohio is And for sense Ohio with non-metro a variety that we’ve then New as anything in know, we us our As in York had real in house, of make New well. at consider discussions certainly institutions might least, York.

I of have we most a think, lot So opportunity still directions. in

we other opportunities over every So can’t we quick. go directions, Canada in England, because us north, into directionally run think, really New I pretty But are Pennsylvania, Ohio, for all time.

Joseph Fenech

And ranch one moving still are merchants it’s your pattern on where me needle M&A. guys Okay. that do to past but deals more obviously betting in would Wilber’s, thinking you the But significantly are much large larger not the tend there, – but you, you you you’re do I’m the that the seen last for not larger, then the not your we’ve contemplate But that outcome. guys percentage payer of so on what something Oneida’s or powder so decently for the a hold? like as bigger. been with a of you size as company as

Mark Tryniski

bigger. ever We’ve certainly up was was continued of bit little half look that the the go so our Fair size. might XX% it We question. at Merchants transaction largest we a transactions of or time to about size. did,

we think, to the bit might something have acumen I integration execute bigger. that and on be operating certainly a

as shareholders doing something bigger benefit I the the decline. think. the are small as get is, you that’s challenge

or or $XXX kind for strategic difficult unless do if just other of benefit, asset benefit, was – million, $XXX benefits size there’s amount there the other shareholder be – there’s geographical of limited would transaction. institutions – million benefit $XXX a in to million, the the accretion us a than value it with other benefits unless to other a So

additional they unlikely equals large shareholders. shareholders certainly So everything. before really is modeled We’ve we’re execution of in the like large of things. not I risk modeled think, like merger that. kind to worth can that level be We’ve to very the But to doing large and view, – transactions of my additive do value the something something of a there’s

unless typical beyond, size So we’re – that set circumstances a speaking third of probably generally never – let’s can’t size we matter going it our probably aren’t of policy, reason than stress to going the third some third it. is to to a an of something call foresee. say, there’s more But really do less strategic let’s We likely. to our anything XX% is that’s of for

Joseph Fenech

I Mark, appreciate you, it, guys. Thank Great.

Mark Tryniski

you, Thank Joe.

Scott Kingsley

Joe. Thanks,

Operator

Next Collyn question comes with KBW. from Gilbert

Collyn Gilbert

morning, gentlemen. Good Thanks.

Scott Kingsley

Collyn. morning, Good

Mark Tryniski

Good morning, Collyn.

Collyn Gilbert

Mark, quarter you just I your what get think have bit little covered may around But the this wanted discuss guys, usually seasonably loan in color But opening happened for third quarter? more you Obviously, a outlook in a too. for comments. is your slowest growth. to fourth quarter

confident I of of bit yet X% I general, maybe can seeing the kind that know, that just kind feel talk you’re indicated side? get good mean, growth you So organic still you rates, in get if where Do you future then, about or demand lending but little from to shape. can model X% what the see and in just those that market? a coming you on a business standpoint, you’re you in and

Scott Kingsley

Sure.

with been have of a work us, banks before, for good opportunity to lot that have the work to prices even we or customers larger with credit because As smaller banks. maybe

XX the have we growth reputation for prices good think credit a the I to in soundness. a I’ve I’m as time, turned slowly bank every seen with in number this I’ve and kind the for terms subsequent of organically, the that good. the years, also was years it in us of around, so seen cycle. Where Again, of second we pretty feel markers those frothy safety period was star grown a our during I in the But our of time it in like that look periods at the and don’t if periods little markets during where than I’ve competitors period than of know now, three does right if cycle bit. markets, before sky. it well you less seen we’re performed get this of And those time. economy time,

sold. fine. were the our I organically said, mortgage X% some we to up returns there. We’ll get continue year-over-year, market which As Originations is of

are shrink working years. it’s fourth pretty Right X%. for intentional. the sheets usually to commercial pretty business business shrinks. performs a manage and XX%, softer in in on business quarter up it typically, good. it that’s terms But grow relates it’s very up the over best quarter hard soft that. sometimes few that, first sometimes that’s business a usually The of balance modest the best us. interestingly and fourth usually we’re as has consumer it the in design. the So is The by in now, quarter. was okay quarter. well current We is seasonality, originations is the It’s not quarter – typically It commercial little our last the bit fourth in But mode, The

pipeline As I is said, solid. the pretty

certainly would think, year. I this we be up

origination just has sale properties the the been and the not juts bad, payoffs assets level businesses of accelerated. and has and Our it’s

Some of this those all get deals. has been refinancing and don’t we

seen, really market’s haven’t because the always competitive. We

it feel competitive question gotten where I’ve all crisis, for of that, there best. was the after So opportunity in time it’s competitive competitive. than it there seen much about have mean, that. credit a window other there’s and no didn’t the spreads wasn’t pretty of where market, never years a But any I point the than couple highly other

on on margin drift bit drift whereas deals businesses continue recently. bit, little to it side, down the the lending, more a our – a little Our consumer business to up tends

I terms fourth fairly mean, which projects, got sold the of productive So, some of to know we and a CRE and in that, in lending, extensive quarter. fourth already we’re but for hoping have been list quarter payout C&I a there’s of more

our insignificant So already known expect teams good. fourth do very of not okay in working some the headwind payoffs, I pretty which pipeline the in the But quite to are is in hard, we’re – commercial size. quarter. are

X% we suggest are if year X% remains growth year. get the to market I get next same think, this going X% to possibly. loan the X% we would I that wouldn’t or that

we or in markets given the for concessions environment any the we the one quality and us. do and Never markets, on So, ebb the flow structure that’s make what number and opportunities. can job credit

for never a in robust as markets, time And likely So, we’re that’s it. we’ve to at working long been ever. growth not change

other nothing with our growth And we to XX over X% because that all. it’s important, loan hit of if X% do to at important X% look It’s don’t get if we things. is lot shareholders, to organic there’s And for growth. X% performance you the so, return double-digit that last and with got can’t years, our at

You’ve the X% dividend. got

You get organic growth. X% to X%

acquired get X% growth. to You X%

You get non-banking get some expense our leverage some growth, and model. you that’s business been

we We’re happen. double-digit, can sheet to earnings, because grow going balance those can grow that’s where by not markets, organically not in our

if you But at argue terms return our element historical current of that loan is not we’re with organic our X% us in to that So, that least the is delivering look important. shareholders to going growth. X% strategy and pretty a to important said, to

Collyn Gilbert

it. Got

then Okay, the question just helpful, on And a helpful. that’s NIM. very very

came yields to I obviously, lower, trying Just Merchants, more or because sort how should about know to are reconcile yield with sort we kind of And inflection lower on – you’re Merchants be of is legacy trends squared. there, of turn than where CBU there? a I asset think seeing there where the running we all an kind loan of will guess? here, from But

Scott Kingsley

at shot that. a take me Let

enterprises we you X.XX core if quarter tick of the when we of look were the third to, roughly a legacy was back around CBU. over Merchants just the X%. announced transaction So after margin to last year, end

currently altogether just X on depended happened in earlier of of would X.XX time, the If we accretion. asset the the that basis based is, use that what’s mentioned we kind third you loan to had X.XX quarter points both we’re at on X.XX I What at now of about blend level. to if it you XXXX, year, prior mix

low we accretion then. from Merchants grow So of there transaction. points were and in To priceless last with have changes that transaction came that X.XX of we’re the in third where basis rate the X been X Fed since About three accretion. range quarter,

be to Interest mark actually So became the your a neutral. credits. portfolio we’ll be important on rate probably going Merchants

So that’s you just the how granular to size get of that.

new are. books clearly vast bit higher where new average think I vast, more on two on going are I think that said the indirect mortgages it’s are little on of loans those portfolios yield, Mark yield are a going auto is the books our and than blended the

last larger but actually – little year, spreads flat volume point On That’s some have more in last commercial of a with as in – of this the coming than yield. point and time, stuff the portfolio same bit time, little payoffs off some at contracted the then you’re the early maybe terms higher have new a pretty been seeing bit the still. side, robust

mean So costs level that a up that I to we at funding better that don’t feel think balance we’re margin asset post were holding in giving the repricing able current points. think state, Merchants and I

expectation of of months. XX I XX as over So at that kind the modeling kind look to for us next a

Collyn Gilbert

Okay.

it helpful. guys. that’s will there. Okay, Thanks, I leave

Scott Kingsley

you. Thank

Mark Tryniski

Thanks, Collyn.

Operator

Davidson. Next Russell Gunther question with comes D.A. from

Russell Gunther

Hey, good morning, guys.

Scott Kingsley

Good morning, Russ.

Mark Tryniski

morning. Good

Russell Gunther

guidance. a at couple broader point. One the Just follow-ups this margin on of

the So, X.XX range of next consider said basis Does dividend, accretion. would we is that low-to-mid points think or to maybe in Scott, kind tack that I expect to on the you X semiannual quarter? the with

Scott Kingsley

four to basis that you get X points X to think quarters each I get two time. to

incremental we net interest think income, So think I as about Russ.

consider So margin incremental interest if net you want to that generation…

Russell Gunther

Sure.

Scott Kingsley

probably consistent expectations. with our be would That

Russell Gunther

just then we’ve maybe managing drift a guys little we reasonably. given But And you’re you expectations than will the forward thinking result, portfolio? a loan that? on the how thinking securities Could how Okay. see for for imply going that higher for slower seen or that as about growth more you’re just about what comments

Scott Kingsley

Merchants. bit portfolio to the than for have I much a basis. activity. securities had XX putting think, level portfolio into sure, a money a consistent certainly last over been the Maybe a MBS Merchants back we little little that, of months, different maybe not longer on close higher

rising point – a But bullet owned this to in on the rates, than I’m time actually little a CBU growth standpoint. of so right not flows for that cash tick that side. lot the Mid-year, think don’t balances, quicker securities of quite cash legacy that in inflection reasonable lot That’s we anyway. the uninvested a up sure the overnight asset sort the return I build are don’t down we the that bit in market the in is know from extension some maybe have core little security. this [indiscernible] of range, historically cycle. So the maybe a had order expects filing think a if next we bad year, X feel point X.XX to I to deposits in gathering get at which would you’re you’ll I to going we be

Russell Gunther

Okay, a very breakout and good. trying insurance you a going I dynamics could for appreciate to just typically the color management fee there. think might insurance lighter And you income and the it, wealth the the I then revenue? sense forward? just get lastly, be on XQ if have

Mark Tryniski

[indiscernible] here with me here.

So for wealth insurance million and million is and on revenue that the together roughly quarter, $X.X works management, $X.X that.

Russell Gunther

had. Yes. all I All you, Thank That’s right. guys.

Mark Tryniski

Thanks.

Operator

with Piper question from Jaffray. Matthew Next Breese comes

Matthew Breese

Good morning, everybody.

Mark Tryniski

Matt. Hello,

Matthew Breese

just bit Chinky tax that hello. fees me you a increase? quarter. what of quite Deposit were this up service question, drove remind Could

Mark Tryniski

it’s transaction. Merchants Actually a

quarter driver, that’s best much this more It’s we’ve fact real for deposit had transactions, just So second said we service our terms the Matt. seasonally, of in usually But before, the quarter, a given the fees the Merchants than only better that of is year. not third quarter our that the quarter. half

Matthew Breese

fourth a quarter expect we flat decline Should given? slight for Okay. or the

Mark Tryniski

or balances. in share of you quarter cards opposed generated of quarter, but very account Yes, as it’s to are we the fiscal cent-and-a-half income close. that less as very, the then fees first what historically, And to other know, banking a $X.XX non-interest down I outcomes debit tied utilization in would say, less modestly certainly just fourth transactional

below one first that three. the So other really only the of quarter kind fall

Matthew Breese

those seasonally it, us the in and high there? insurance then the low what the and can what along lines, And Got remind quarter fourth are same we business points can okay. expect you for

Mark Tryniski

Sure, absolutely.

revenue that a – we the So a reasonable quarter amount there on renewal has basis of fourth recognized typically in business.

quarter good. usually pretty fourth the is So

Fourth the better of low quarters a is usually third the and second but that. The quarter than the low year. point

and the second quarter robust, your first differential you up you quarter, and first versus in see current in expectations from pick contingency your business as maturing the insurance payments perhaps usually The pretty actual the the receipt.

very, a you that had line, terms for the profit to income a the needle sharing payroll again, in under early XX-year. of the And really us, taxes natural first a along modeling cent-and-a-half with good it from now also But more this certainly gets year, compensation very from quarter coming you and get maintenance-related year time say employees remind because out from change a a to standpoint, enough move non-interest fluctuation us of an Usually, processing. it our up. us and saw more from expense contingency spike of year standpoint. two, is model, others $X.XX standpoint. to challenged utility of usually seasonally One, on $X.XX merit a just is clearly that we us, probably size a and you the that for per and So that’s share air-conditioning the Number plough robust never $X.XX for a for cent-and-a-half of a impact to a share and not typically your just expenses, to associated it’s heat old expenses standpoint. payroll

Matthew Breese

New Upstate cold still. Understood. gets York

Mark Tryniski

Okay.

Matthew Breese

some EPS grow perhaps to would And expect margin be additional you a what year-over-year you slower broadly think on stability, ability the just and without about then, your growth. I more loan like deals? basis And if impact

Mark Tryniski

we’re value, multiple of be shareholder for – we just on the order because strategy to in continue it Well, elements can’t organic. I grow think execute us to

kind manage what investments and a things So in expect longer-term of it’s are of around make investment. from time Frankly, to we at hard We be year-to-year. the year-to-year. really – manage somewhat expectations we to have terms going we predict the those those don’t horizon

dividend will share making more three So share, even from are now in it’s that, that years and than quarter-to-quarter than after years it’s three I they think, shareholders our now, I is be per not year-to-year. objective per more not that. earnings really mean, our

I may for it’s think the our think – up, I investments don’t that’s have it’s and unnecessarily of a So shareholder. necessarily they go difficult. think, don’t down, make go benefit we inconsistent I year way I with earnings unusual. where we very mean, our necessarily the don’t

to a every us. But is important. that’s efforts do So about that’s is bit is mean, so goal We compensation in but you internal short-term really the earnings little structures, our rolling year-to-year it’s above that, create – make earnings I the a year-over-year value year-over-year, always it’s, fact, incentive not to around it’s your that year-over-year, compensation increase exercise. average for

revenues expenses that’s but manage longer-term time, over element overall very our kind of judiciously. And your And of so and we our manage – And strategic judiciously. that organic a revenues strategy. expenses that all very in roll elements the performance probably judiciously. the to when creates investments that, least non-banking Certainly, more with growth than of trends improved little very your exercise. helpful said, manage is faster it’s expenses. the We We but hopefully, very a important businesses

creation the charge to about longer-term after So years XX and and not do ability years back based do and it’s year, look next yourself value on one-year five performance. you what and the it’s about really and longer-term

over I given you pretty strategy, think, I that think, on that us that our do time. well with executed if we’ve

of production which more business the that mean, a capital this and I a we on think we broadly, as shareholders. But comment this So But are to it’s expenses, made evaluated But difficult business we benefit on is strategy. don’t of level our just I which are management, that us. even expect operating do create for revenues, M&A, time. to manage very kind our of period longer-term most improvements, with a we But year-over-year, longer-term said, kind for that and I for year-to-year as detailed view to investments and strategy with focused day-to-day summary. echo the of

and If generation XXXX, at the XXXX were in earnings you in share look we us per world. of kind $X

XXXX at in that of you level, up kind late look we kind move range. If kind of sort of now, of that X.XX forward we’re XXXX, ratcheted it X.XX to to into are where X.XX

longer-term than fully M&A of at or is you time, period capital in terms kind over get organically whether the other strategy. that’s our opportunities longer of look So, a deployed to the see again, think opportunities, of that’s I year-over-year

be what us get few earnings years of achieved $X into of range need that over the the at of So things do of to happy look the range. to forward, more that next to we’re we’ve few now we kind are generations sort next

task the everyday. so our And that’s for group

Matthew Breese

of guess, comment I Scott, you Thank color. you. for a reserve, is, historical longer-term reserve the allowance? have one robust loans such How charge-offs should impacts last a then, on be there. And seven my that total of you we to the Great and years about thinking made seesaw worth in in regard

Scott Kingsley

question. great Yes,

roll provisioning growth, plus legacy loans a little or charge-offs but net book loans, today, just is no they portfolio on of a two of We since to and on a is We The times now. reserve closed more characteristics. reserves our believe because probably of originations with but yes. that a do. I say, loans yes, one level think today new of bit minus kind X.XX X% we this as re-raised start of, bit mature reasonable of one, second $X it’s going-forward large That it’s a are acquired, historically, basis, loan have years from robust I to predict carries itself acquired total when harder that therefore than could naturally tend was will uptick billion of – sort sort it. because absolutely and now loan a we our almost against think we that such through loan But of always acquired

new it’s think a opposed I to loan loan. as the acquired

question question. a for So great probably aside there’s allowance provision is seesaw that. a set The

seven charge-offs, as worth years you One model. anybody to almost covered was and two it you at as seven and you four seven are years was and us If it close think could today years would we being ago look historically, probably model. go an years seven years it’s years ago, with that to historic net of

we think very that in impact gigantic capital seesaw I So part for of that on is early the the analysis but a don’t process. we’re think banks,

for they’re too do prognostication of up, certainly any capital views kind us give fee for so early And up or – much too to you so. of so do

Matthew Breese

you very Thank Understood. That’s had. all much. I

Scott Kingsley

Matt. Thanks,

Mark Tryniski

Thank you.

Operator

next We Civiello RBC. to with Instructions] move Jake [Operator

Jake Civiello

Hi, Mark. Scott. Hi,

Mark Tryniski

Hi, Jake.

Jake Civiello

of provided great you’ve Guys, a already kind details.

tempered a that really consumer some has – tax that in taxes? federal estate all concerns you year thank So markets or real of estate elevated for your part this due of on fears the you regarding Do been the some have think, potential think of loss volumes you to origination that that. changes? have which greater I of real really, impact taxes, possibility deductibility relative And have

Scott Kingsley

made over this the people much. is pretty it year, our in much as impacts. anybody move, been No. pretty I consistent think to – certainly not as doing just I move is. usually relates has It’s said, people Jake, changes people It And level, us, think consumer mortgage I tax don’t – business doesn’t time. I good potential

don’t and mortgage we’ve impact seen I of any deductibility have the – changes interest. related to we So potential home think

Mark Tryniski

space, in deal be But hedge, Jake, a country. on that states the many big you would our proportionally did in the to other

Jake Civiello

you Thank very much. Okay.

Scott Kingsley

Jake. Thanks,

Mark Tryniski

Thanks, Jake.

Operator

management question There I are the would remarks. for closing to back further to queue. turn over in no like conference

Mark Tryniski

Thank everybody, you, and talk Thanks, you. Thank for appreciate I we will that. joining, in again Shannon. January.

Operator

and participation, you, does That your today’s gentlemen. Thank ladies and may conference. you now conclude for We you thank disconnect.

Community Bank System (CBU) 23 Oct 172017 Q3 Earnings call transcript