CBU - Earnings call transcript Q3 2019 | Community Bank System, Inc.

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Operator

Welcome to the Community Bank System, Third Quarter 2019 Earnings Conference Call. Please note that this presentation contains forward-looking statements within the provisions of the Private Security 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.

Today's call presenters are Mark Tryniski, President and Chief Executive Officer; and Joseph Sutaris, Executive Vice President and Chief Financial Officer.

begin. may you Gentlemen, you. Thank

Mark Tryniski

earnings, Angel. announcement for Good We thank you, of Corporation. in with everyone a of Trust the the Steuben Kinderhook morning morning our third of all transaction strong quarter joining productive morning. and and you organic quarter growth, busy closing the Thank July very and solid this call had acquisition this our

quarter for and loan Operating the X% the very earnings last were businesses Organic strong X% good. second growth funds mortgage growth and year’s was deposit and both over commercial quarter. organic was over and non-public also

We quarter’s transaction call in operational Kinderhook closed integration that as and subsequent the be I last and not performance commented on could July better. only

leadership retail there commercial we team the forward. market opportunities the strong side like in both and the see Albany going on have We and a

morning, As high the Steuben $XXX in-market Corporation, a with we thrilled York. institution. solid announced is partnering bank New this to transaction be of Trust lower Western risk This asset we million performing are in value, a

overlap We model. so considerable branch into that and not proximity close opportunities also have our we have have consolidation incorporated

XXXX to per cost the in expect quarter expect to second excluding We year full share. accretion, saves of $X.XX close approximate to and $X.XX

XXXX. Overall particularly hit Durbin was it having in we're that was year full a headwind year XXXX a to solid a light compared fact strong quarter, and million the of the $X

good heading to Steuben is QX, XXXX. Our and additive transactions both very performance nicely Kinderhook looking be momentum into and forward should to Joe?

Joseph Sutaris

good and everyone. Mark you, morning Thank

operating interest to Steuben quarterly of Securities, into year-over-year of definitive navigated Corporation a Fed, two $X.XX agreement the entered improvement increased share. dividend redeemed million the quarter very a in $X.XX per Trust and active the company. quarter, noted, in acquire the productive our earnings Mark per As was early quarter We on rate cuts closed transaction third for produced share, Trust $XX.X the Kindrehook by the and Preferred

July closed Before I to results acquisition we XXth, of on earnings detail, review activities. Kinderhook Corp. the I'd in the more our third quarter like On touch other Bank

we and cash million. reminder acquired in loans, the In $XXX.X in $XXX.X a As in for an deposits. transaction, million transaction we connection million total $XX.X Kinderhook acquired with all

were our announced transaction in expectations with in amounts These line we first the quarter. when the

confident are our Kinderhook modestly will the targets, cost transaction expect earnings basis. we We would per year GAAP produce that $X.XX meet of exceed or and share a XX% full on savings

in generally. Kinderhook We remain capital excited the our and about markets the opportunities region

from per During raising per of the to the third dividend $X.XX quarter, increased the $X.XX represents X% consecutive XX share dividend its approximately share. rate quarterly The to $X.XX quarterly the streak its increase company's in company raised dividend and years. increase

this resources support of results increase, us growth and also only opportunities. achievement allow maintain to model, proud but are strong not believe company's We business earnings capital flexibility and the significant this future for

X.X third redeemed the $XX.X of and million Trust the with were connection TruPS were X.XX%, we XX.X of of with in company's acquired these quarter, a Preferred Bancshares, Merchants weighted transaction. During rate Securities with Kinderhook acquisition average XXXX million acquired million Inc. of

on the metrics to like operating I'd Now deal comment Steuben. briefly regarding and

our York. this other XX in region Steuben’s a to two currently Steuben four operating is a current these As noted Community franchise within Western six press markets. footprint counties in are morning's branch in the contiguous Trust county serves New release, of Bank and

million, markets. and New $XXX including of but deposits. of total our our much are loans of The Buffalo the assets and consistent second At in million total Steuben footprint, Rochester of York current York presence demographics in the quarter, million end the increase Greater $XXX had state with New also $XXX total

million in portfolio total million home-equity largely $XX one-to approximately was XX% in of has XX% residential loans. or or it’s commercial loan or million in also portfolio block million four-family [indiscernible]. agricultural Steuben and its approximately of including $XX and estate $XXX portfolio with $XX loans loan industrial, XX% in and estate a commercial loan commercial Steuben’s real real

Consumer $XX million approximately loan was XX-month the the X.XX%. and balance loan make up period margin total of to the portfolio on Steuben’s loans average the other return of interest or Net of assets same X% X.XX%. was portfolio. trailing over

in share. shareholders Company in Trust each of receive stock consideration combination noted As of total of our X.XXXX press own, of share Inc. common for Community shares valued for approximately Bank $XX will $XX.XX Steuben per Corporation cash a and they System release, at

and times are the multiples XX.X earnings, for stated savings cost pending are purchase estimated tangible The operating XX%. months last times expense XX the X.XX The merger at value. book

to GAAP value transaction expected and $X.XX EPS year $X.XX on book expected basis is The cash to full first transaction on accretive. the $X.XX a also accretive to tangible to be basis. $X.XX be is The

billion. pro The assets forma is to over consolidated to $XX total increase sheet estimated Community balance Banks

provide provide the total billion. is quarter commentary due XXXX to on balance balance will second earnings, the Kinderhook X.X% $XXX.X with $XX.X quarterly closed XXXX up on with some million and the of organic growth. We quarter from Before the color of of third I sheet I [both] additional sheet. This [ph] transaction assets the end

XXXX, quarter quarter X% million the third to were of X.X% up quarter second billion XXXX $XXX earning $XXX.X Average or third from or linked X.X% million one X.X% to Total of and assets compared compared the earlier. $X.XX up when million of from the of million the were $XXX.X XXXX. up year $XXX.X for assets or end or

when compared of XXXX. and linked million $XXX.X or the Average loan when million of up or quarter quarter third of compared the balances third XXXX up X.X% to in the second quarter were XXXX to $XXX X%

quarter basis transaction portfolios. million loans Ending the also up additional were to and million $XXX.X or Kinderhook million on organic linked in $XX.X a X.X%, attributable comparative balances an acquired loan $XXX.X company's to growth in the attributable loan

in portfolio or More X.X% loan company's during segments increased and or quarter. the the consumer or Exclusive mortgage quarter, Kinderhook also balances transaction the and $XX.X X.X%. while Loan increased slightly consumer were lending balances of million million loans the up the portfolio portfolio all direct up the in X.X% the $XX.X outstanding business the during the acquired increased portfolios balances outstanding and home specifically, in quarter. indirect equity $XX.X million were

million a million deposits quarter quarter $XXX.X from the were Average $XXX.X quarter the a up X.X% or last end year billion same linked up the basis. a total were prior on up X% or Total and X% deposits year, linked the million X% on from million of quarter and basis. $XXX.X or $X.XX up $XXX.X or third at

to $XXX.X million is the the to remaining of growth of balances. million is the organic $XXX.X increase transaction, Although in linked Kinderhook and deposit attributable growth attributable quarter

XX% At quarter end at of investment the end XXth, checking linked of the the from savings at accounts. or company's second of stood the X.X% portfolio $X.XX total company's million This the the quarter. and September comprised is of billion. $XX.X deposit balances up were

its other During securities, investments. quarter, company the agency municipal the third backed holdings securities increased of and securities, mortgage

cash of of This prior securities the stood the yield quarter, equivalent The the X.XX%. linked tax million. the exclusive the year X.XX% $XXX.X equivalents quarter X.XX% company's the At at in was quarter dividend. equivalents end third during compares investment and one Reserve third net Bank to Federal cash second on

increase on other $XX.X $XX.X in income, increase tax an earnings, XXXX. adjustment sale market from in million retained a accumulated portfolio. one years which and primarily was securities $XX.X investment or was companies the prior, portfolio XXth of duration year available due comprehensive in effective million September for at the million to XX.X% after X.X included equity Shareholder's up The value the increase investment million $XXX.X

of second impact This quarter of quarter but third tangible due The at end of the company's Tier from well points two equity Kinderhook from up end X.XX% X regulatory the X.XX%. net XX solid the was largely XX.XX% the the ratio down leverage the year capitalized over the a one tangible basis the assets at transactions, times to XX.XX% the quarter is to end of prior. standard,

$X.XX GAAP earnings company This per The for of GAAP to XXXX. of recorded quarter million the third share and $XX.X third million and $X.XX share income during in $XX.X of income net quarter diluted per fully a of XXXX. of compares net the earnings

the Kinderhook incremental due net tax $X.XX quarter related reported During during recovery. third company the the XXXX, of of acquisition the share associated quarter the the earnings comparison, effect incurred per of $X.XX By third company XXXX, of to acquisition transaction. of related expenses with

share revenues, equity third an in operating XXXX. interest third or for earnings on This but shares per of debt increase were and of diluted sale realized to fully operating Operating exclude periods securities increase and X.X% the $X.XX acquisition to losses of which in income in in higher the gains increase net $X.XX in decrease and the XXXX, expenses compares diluted offset of a non-interest $X.XX per the of operating on share by in quarter quarter in securities, share earnings loan earnings part diluted unrealized expenses increase an extinguishment, was outstanding. loss and of per between in by a losses, was diluted provision capital driven investment

income quarter the of The from increase net the $X.X XXXX an This or quarter interest interest by acquisition, non-interest net up of in X.XX% Kinderhook or earning were quarter the point and increase increase increase a of million of assets, a basis driven a to X.XX% $XXX.X interest X.X% third third X.X% the to net in revenues million in in third for or third and $X.X XXXX. due million in income in increase over margin included revenues. Total $X.X quarter XXXX. largely was two X.X% million the in the

all of million the management during Company’s exclusive revenues was of sale for businesses; insurance, in realized second securities on increase gains of services, noninterest by The of benefit an in $X.X nonbanking recorded three the and the increase revenue fee-based driven wealth quarter. employee

million an attributable in Total or basis. increase income, interest revenues. to X.X% a quarter non-interest million $X linked revenues in and an to attributable on $X.X million increased net $X.X increase

resulted linked earning growth interest the point seven decreases Kinderhook as changes a quarter organic net loan decrease a net company's basis the included interest the in semi-annual basis company's basis dividend a X point assets three in points net periods including in funding to basis. prime basis the the compared million interest addition a which margin. a in of during of of on and XXX linked and rate Reserve or quarter margin lending down quarter, $X.X Federal All the margin points payment second mix factors The equivalent between other the liabilities, was

third funds cost industry remained deposits solid The the base of core the basis averages for peer very and well points, deposits. company's total below of cost company's total quarter of at XX -- reflective

or $X.X revenues non-interest Banking X.X% quarters. on over our revenues in wealth were million insurance the employee benefit X.X% and year up quarter services, $X.X million comparable linked or up services management Non-interest or annual basis. a between including and services services financial businesses prior X% $X.X million

revenues of operating XXXX similar quarters excluding operating $X.X XX.X% revenues of full annual total the contributed basis. X.X% third results. during Non-interest of expenses acquisition comparative first or $X.X XXXX, Total million the two company's an quarter the year quarter, expenses million on related were up to and

million and in $X.X increase X.X% increase, This net in in decrease than $X offset less increase intangible the and is other salaries of X% partially and million expenses benefits, million a the all amortization assets. clearly employee by $X.X increase

linked basis, million expenses total $X.X acquisition or were operating expenses a On related quarter up excluding X%.

third the insurance of proportional million $X.X share the company assessment the a its quarter, reserves. fund for awarded credit During deposits excess FDIC

provision decrease reported of million third $X.X In periods. We provisions $X.X reported the quarter of between decreased quarter to this loan expenses million in developed losses for for $X.X linked the during business company's the XXXX, quarter loan and a compares million losses XXXX, on comparable million third the in addition, basis. the $X.X marketing in a

quarter was activity of compensation, third in tax tax the to effective stock recorded third the the effective third XX.X% XXXX of The XX% XXXX stock income amounts third rate benefits quarter to of XXXX. tax as XXXX. quarter of in compensation tax from XXXX. of greater The based the income the quarter XX.X% related in quarter based rate Exclusive was of third benefits, for of compared up company's company the

reported remains quality to quarter of of the We both quarter in at XX asset XXXX. third loan quarter million points basis XXXX. the charges-offs loans acquired and charge-offs Non-performing end points totaled $XX.X third of or XX Our during million loans. or net legacy X.XX% third loans, or strong This portfolio the of the basis $X.X $X.X of of compares net comprised annualized of million during XXXX. the total

less asset the of quality. quarter, risk company’s At total the and properties stable portend million, the end the loan OREO ratings than were internal $X

for company's strong dividend remains and foundation a revenues the provide company future. positioned growth the poor quality, and capital believe The capacity. base, non-banking asset liquidity, solid very we funding summary, for In continued well strong business reserves,

also provides this and acquisitions. months, on current currency company's efforts potential Western as forward moving for coming our New to market forward with the excellent in We The our mergers valuation capacity future an over increasing as team well look integration dividend York markets. service

I now turn Angel back line open for Thank will you. the to questions. to it

Operator

Instructions]. [Operator the Sandler line Twerdahl Please come from our Alex question go you. of will Thank O'Neill. And first ahead of

Alex Twerdahl

good Hey morning guys.

Mark Tryniski

morning, Good Alex

Joseph Sutaris

Alex. morning, Good

Alex Twerdahl

off first landing Just congrats acquisition. on another

curious, how Just a announcement? start guys kind you does of Steuben it bank to diligence of from due on to the the take long size do deal process

Mark Tryniski

can the were how readily case, very I on and gather up. would they say efficient. Alex they materials this it In institution, depends

capacity extend for counterparty the of periods so due And was provide information. time diligence on nominal, fairly the certainly period can to depending greater of they the but

Alex Twerdahl

Okay.

figure the had first years. Talking of specific loan of going to some time, sort number trying best in the or say, these be the loan out growth I a future organic of trends should cadence the deals quarters. is better Just about in for to some growth

of think Kinderhook is what This seasonality the into seeing by was or this in be quarters? I that bit it’s lack of helped quarter, pay that function better growth of we've thinking a contribution the offs but a little kind business, we been past else there more been quarter, I should something than or you've the in know municipal translated seeing pipeline there? it is the about growth a of some

Mark Tryniski

good. Yes, think good New of District the southern good and very third had Vermont. in quarter had we We performance Albany the in performance pretty the Alex I Capital from also York region was

Lakes Western very So Finger also good. New was was Syracuse, Rochester, York,

parts If been and year-over-year. it and the has you P.A. the look and York capital been [Indiscernible] of likewise very very kind western New at year-over-year of good, district southern good has

So respect to it with early it depends change really quarter-to-quarter payouts. can and kind of

this fewer was good. get did we think I quarter, which

think size quarter, the number the was this which a I bit and just less good. little was

you the capabilities. -- our think, have generation if improved last substantially I look we years, So over we several organic

in that a expertise Some we've gotten of a bit greater I've certain function larger little of of as gotten elements is credit.

manage syndication by capacity kind our larger effectively to virtue credits credit relationships our to We discipline have the of do credit understand of and and larger ability kind slightly larger and of that, with clearly I club deals loan things we our last over generation ability so those of organic into of have others, all think have the but years. played improved couple

Alex Twerdahl

quarter Okay. XXXX And the pipeline is going into the healthy? early and fourth still

Mark Tryniski

still It's good. really

expect the would to decent continued going we performance So quarter. see fourth into

Alex Twerdahl

tools? And around just XXX have up and And obviously little enough on huge fed the Because over next other et deposits XXX. Fed of you years with kind year, face then, I two week way the to it here, were mean, switching bounced your with been potentially to one of benefit. margin now maybe the margins another on touch even in cuts steady dividend this one even couple do and acquisitions gears the the a but last cetera, the pretty of bit, just

foreseeable there future? of that benefit. and On to and not the with of keep securities within rates they're and nature the range reinvestment the tools kind way be down much enough going over the of cetera a et margin stuff as the due your comes it short-term portfolio Are

Mark Tryniski

we Alex, So, general a of I kind higher. Last think expectations came XXX. given quarter, around we've little

were that net the fairly that basis on FOMC of put yields I -- one was The loan net quarter-over-quarter and quarter, against quarter, down headwinds the through. This point one decreases up basis held well. think down

you some give of color. kind to Just

either a prime lesser linked to We to billion are subject $X loans that to LIBOR. or extend have repricing in about

get decrease we from FOMC they the primary, the have when impact. in a So,

in of The contain that higher other potentially some we mix. so we reduce ability side some and have in equation billion that of instances and deposits deposits costs is have those in to $X costs the the

that matter started to prior of XX at basis portion funds recall for late you of and points. cycle was are XXXX cost today. that We're cycle If sitting the a in that XX

of to costs. some opportunity there's our think decrease I still So some

the quarter. also We off paid troughs this

So that's think bit, to tools help going of left. little so couple there's I a

that, substantial residential the our of some think though portfolio money” The notice to and nature of other even we non-conforming portfolio prepayment rest the secondary to borrowers "in we would market. I have have the mortgage a do slow market do tends to relative relative activity rates the

come So we existing book new even this that did par book down. portfolio And as yield. well with quarter when holds up market kind rates at We loans. book booked our pretty about those of we

or went book pretty our loans So to close quarter. close they much as on new on, to this every yields went

recall but yields. new kind of it was quarters, all you our to book yields maintained in loan levels higher, prior on similar bit a If little very we've

Alex Twerdahl

helpful. it, hone points pretty That's to of ton you the not in go deposit the room kind just Okay. basis And down. of on of to piece know a XX obviously

think Following will thoughts I costs maybe and is to still and go moving mean, down. Or in going into lag year? of do after bit a end up they this you down actually quarter cuts year? maybe the three they of potentially, fourth there some a the be two go higher on little your

Mark Tryniski

it'd on to over the drift fourth of mid But to kind Good the that quarter compared of the they My that or similar be for stay in is the question, part I'd expectation the as down time Alex. down XXXX. in start short if will range, third. in matter that end expect rates

Alex Twerdahl

Great. Thanks for taking questions. my

Mark Tryniski

Alex. you Thank

Joseph Sutaris

Alex. Thanks,

Operator

Gunther our now next from Russell of question Davidson. ahead. go Instructions]. Please [Operator we'll And take

Russell Gunther

Hey, guys. good morning,

Mark Tryniski

morning, Russel. Good

Joseph Sutaris

Russel. morning, Good

Russell Gunther

to expect you'd Wanted the you've potentially I outlook on expense saves the that cost follow-up which Kinderhook from exceed. to believe meet, said here,

those trend should that the for of you give how costs saves could and sense in rate already a going what sort run Just from curious forward? related if us

Joseph Sutaris

holding general realized they're Yes. run some modest Russell, quarter, share majority, But realized the say, we've other to basis, fact it the cost savings quarter, saves rate guidance but and little of we're expense on point. accretion. this we've potentially of full our We on earnings and – too the generally third operating the in baked the around of share early have call cost I'll Kinderhook. kind a fourth year kind per in in so our at in it’s in at a XX% savings $X.XX

in than around premium, And on came expectations operating or helped or the we above an our Obviously, a even all-in expenses. FDIC better bit. actually all-in our basis, little slightly think quarter, actually this credit refund I insurance us

consciously drove operating down also We expenses. other some

also of We types lesser our had write-downs a related results little expenses in quarter. property net of during the those and some

XX our including million, So, sort about expectations. than the is – expenses less of million $XX ahead FDIC our $XX.X of

trends. I the fourth guess we to back more think is to sense general million of quarter beyond $XX inflationary and a I that start get

Russell Gunther

it. Got

helpful. very things on of then, services? just if revenue terms And employee benefit could you the the Okay, of in your outlook an side update within

Mark Tryniski

continue I as Well, for has XX it to expected we years. would grow to say

challenge more the gets at I the but difficult, same steady bigger, that business. and growth rate the gets pretty think, growing in as one just emphasis we've solid been

run revenues and the that $XXX rate Now million. almost

continue a cost It a I to get amount I'm there. think That's certain of dollar to fixed business going percentage is slightly helpful nothing that at basis. to might sure a smaller considerable. grow volume grow so not And its smaller basis, which at will grow.

actually that So margin And much higher goes it was years pretty is than its years business and ago. you margin XX on can good. the XX expand the

business that explore. other we new in opportunities So that we also line have I to think continue will revenue some

reasonably growth. of them significant and some potential So have

market to put in business evolve be think can the So helpful. there's develop will have that that we that certain we into capabilities and and continue we

businesses think I grow. will probably at we I smaller base. Russell, percentage So, necessary smaller continue a think in pace, dollar that the but those to expect

Russell Gunther

guess revenue that be done vertical necessitate The Got a is can helpful. organically? that it. something follow-up. related acquisitions, I within it new would appreciate kind I acquisitions or that that, Mark. potential lines Very or just as

Mark Tryniski

could. think I it

in That playing a would very I right where in think that at now, that the less have for based equity in service appoint have prices strategic up leverage lot we the space sense we in essentially a and private something. a it it existing have our capacity capacity on than operational firms additional space meaningful makes buying financial does paying ability for are a market. look But we space to lot that bid business. solutions tremendous into platforms probably buyer. to And not to in the way develop

So, our we mean, – it opportunities call that I platform can of the kind could we can platform them leverage existing had already have we've better. at. conversations build serve. looked also I smaller We've to that be acquisitions out about that

are of fairly these say. opportunities would Some significant I

in pretty forward. that I some think still going business So, we have runway good left

Russell Gunther

I you mark appreciate to from one the of you had your in seasonal that. the thoughts Thank me impact relates disclosed for guys, Last as there, Mark. it this deal.

Just on you the thoughts timing curious or an the might as at full get impacts could disclosure it we sheet? when pro just for update balance a any preliminary forma look share

Mark Tryniski

it’s question. good a Russell,

on working this for disclosures are Q. We quarter's additional

going completed we're I in our our expand disclosure the basis a is disclosures couple as running additional built. quarters for our parallel said. we're when kind a and some through of had We're now. making on validation Q We model So, to of

Russell Gunther

Very my you, good. Thank guys for questions. taking

Joseph Sutaris

Thanks Russell.

Mark Tryniski

you. Thank

Operator

KBW. next Gilbert ahead. from our Collyn go take question Please We'll of

Collyn Gilbert

gentlemen. Thanks. Good morning

Joseph Sutaris

Collyn. morning, Good

Collyn Gilbert

Just say, you housekeeping a What sorry, it. this missed questions, Joe, FDIC I impact of the quarter? few I'm savings did the was

Joseph Sutaris

to goods. the $XXX,XXX about quarter Just

Collyn Gilbert

– again the then would that, that, incurred in through? all will fourth it be costs to you absorbed And Okay. will quarter as that or will to your start you relates that start how have play credits so be

Joseph Sutaris

performs. fund credit There's available on how depending is Yes. additional the potentially

performs we after likely of expect the that quarters. reserves, another occur to credit impact above benchmark sort the and we exhaust couple its for target a would if quarters, more would of for fund So two

Collyn Gilbert

Okay.

you'd And really growth quarter. indicated deposit but saw I helpful. Okay, overall good That's the was non-interest you from right. some bearing Kinderhook, side, with this impact all just know guys then on growth the deposit

understand within to some just those the segments? trying of So movement

Mark Tryniski

Yes.

get have funds take so quarter-to-quarter in or typically it you think couple dollars change or was I -- can billion funding the hundred public million or that and the give $X and variations by we in so. public

to separately non-public. we funding like public from kind look So, of the at

checking We've continued savings of growth We over had It that course. it very and single moves money kind a funds. deposit and never continual core dramatically, non-public the digit base. market, core in low in good the kind of slow cadence of growth but

about right that As of want now in are markets shareholders checking and tremendous, lives Joe said, long our our very means savings deposits and acquire Collyn. up I deposit growing XX% in we we're in don't them. account paid so, because us and actually XX% nothing have markets, our those not to to think

So we a of core But of to in continued markets. base, have we're do good. part just old-fashioned in the the the trying in way obviously cadence deposit deposit is it our growth very which

Collyn Gilbert

– have it line folded helpful. that charges. is? banking services service deposit why you We're going guys just there? curious, line know Is it you're like it deposit mortgage housekeeping That's going is forward? services the to deemphasize breakout that And if you then in item; And looks into another because deposit just on Okay. just

Mark Tryniski

Good question.

the that we in over share banking items in actively a have those we've the mortgages because totality and been originating I business our significant we business mortgage don't have market, to just the sense easy the of together two years. portfolio mortgages, of think sell of selling not portfolio we part a and secondary lion's put is to that just don't line which we line substantial

Collyn Gilbert

Okay.

in So you in…? not variance just a It what we should line this folded quarter's you've assume big done versus historically?

Mark Tryniski

to side, down not mortgage revenues the bit the sure. but for total It's little that company significant on Yes. of banking a all the

Collyn Gilbert

Okay, more okay. bit of a little too And then, sort just picture questions.

XXXX? point it of out assuming we the a Fed as do low kind we assume relates XXXX in as XXXX, can broadly comes sort environment, and look of to sorry. in sort into quarter of stay look see into that playing you where the we We're rate bottom last out or margin like first the is this Just feel how as the it of cut you margin there

Mark Tryniski

negatively have we if the Fed mean, likely margin I will Yes. it impact two in cuts, XXXX. more

here low was out in think the I in to [ph] it keep of XXXs even call post we margin that our XXX to crisis in tend mid-XXXs. the XXX, pointed range, earlier kind both

maintain our just stays Our would through very years XXXX. if level expectations period yield-curve time inverted of XXXX. more most stay based beyond long in the flat XXXs would probably will of it be difficult the and to in that Obviously, to that we for low become

Collyn Gilbert

Okay.

Okay. with front has? you opportunities, more the M&A Steuben that for That's similar the deals further And that of sort then you to if helpful. do potential Or do on see and increasing M&A see or deals supply profile how a Steuben out playing guys? you

Mark Tryniski

Yes.

us I about big try the think in very not as I I long runway we to might a and the disciplined there's as we're do, the It participating that for mean, have for – the with. but opportunities partners [ph], be future will performing the a XXX – trust of example. asset is good efficiency footprint. pretty have clean. think we it's over it’s a quality size. other Steuben be you can thing look we a it institution nice XX, very is high department, ROAs so They ratio in can at our

a of interested we're -- of branch some it’s Its that the profile overlap. just good in. have very partner kind We

strategy been repeat Steuben asymmetric I of footprint. acquisition high lower be historically fit would profile So, due our and return value, of there across of profile. -- our number has that kind a as to things risk risk was I did kind disciplined think those clearly just is Kinderhook the where

at York, contiguous of we a also look us markets you kind opportunities. fairly with that's continue footprint identify as If to we look on would and others to New work big Pennsylvania, Vermont, now And to are well. geographic in and for Massachusetts,

west you go had where that north and south adjacent conversation we've a very and move institutions south that far continue. as I can us and with to So, well, can and will of suspect west, bit little markets and and so We east we are. are

-- important is us execution for important the us. It's for organic

rely we too improve for that. much earnings on the historically were We we think I getting. on need M&A it that to growth

have also has the these And balance XX But at we'll organic opportunities, forward. risk improved continue on execution lower the look that if history think we you I lot from capacity opportunities greater kind of years, high of think growth over M&A value, a sheet that. -- around the benefits last to I see XX or our going M&A. that of come

it shareholders extract to about be out those the the execution we've disciplined of I able on value think and been transactions. for

got you return So its operating have bit its about performance in get be over to time. above – But than big. you little being cap we bigger This do I'd bigger. you smaller capital rather But as if with scale. look regulated nothing a time. over at if industry said, get also metrics not our – improve, to to want have improved regulated

I strategy the think So that would be going forward.

we institution. of it. to think to or large opportunities. have our profile of It kind smaller it’s we doesn't whether won't be institutions do I fits something continue It somewhat a has matter lots that or

So, we those risks. to don't need take

that's we're in to the something in for chase multiple growth don't I risk of shareholders average above the going at growth trade market undisciplined do for our think or we think and sake reason I at put anyway. to

value going and acquisition So we'll disciplined to we'll continue, be continue opportunities find forward. suspect I to high

Collyn Gilbert

Thanks all That's that's what great. Okay, had. guys. I

Mark Tryniski

Collyn. Thanks

Joseph Sutaris

Collyn. Thanks

Operator

the sir. Please & of from Erik line Scattergood. Our next of Zwick ahead go comes question Boenning

Erik Zwick

guys. morning Good

Mark Tryniski

Good guys. morning,

Erik Zwick

questions of the transaction. Steuben on Couple

bid a competitive negotiated a it’s situation was transaction? or First,

Joseph Sutaris

be this junction, we guess I'm not will disclosed forward. announced, going at so Erik, I –I more its to probably to just comment going

Erik Zwick

XX% just our closures Did later I savings to hear targeted comments you then, at any with currently may targeted that correctly? revisit And fine. cost want is the incorporate That's clear hear that make that I not the sure. I Understood. time. branch

Joseph Sutaris

right. That's

Erik Zwick

margin just stay And of my look the impact given yield that Okay. into come between cuts their interest just I of the and then pro in that flat, to pretty at fed potentially closing? net changes deal curve outlook looks major its like the pro any margin, forma there you stable expect zeroing of the they guess company? forma And past year, hear to been now margins for the over on question, targeted the would kind

Mark Tryniski

potentially would be that and be will down little I we're of margin is Erik, industry would with facing alignment FOMC my but a similar north the up, industry be Yes. the nothing the and to the cuts, to would go in general. facing. that think headwinds bit expectations other but – it's drift In same going not hit it the really ahead words, with

Erik Zwick

just just on of like strong of XX% just And got deposit loan it about let at of time those to that in withstand follow-up and your and maybe run their we've jumbo one opportunity Okay. headwinds kind deposits discussed? detailed ratios, some help given to the they've that, looks off you

Joseph Sutaris

expect would I CDs funding. deposit those those think the up that for discipline the around and to mean, as maintain have some historically we I market and are relationship our but overall through not priced going come market each jumbo there forward. renewal of paid we're I we'll for Yes. are situations, that that profitability at going evaluate have with to

expectations So down may book bit not that to quarters. grow over a drift probably jumbo is and future little going are

Erik Zwick

Great. Thanks for taking my questions.

Mark Tryniski

Thanks Erik.

Operator

there please. time. this are questions to for no over back it further Gentlemen, closing, hand like to at I'd

Mark Tryniski

you for Thank we Thank all you will in good. Very to joining again call talk and our again you. January.

Operator

today's thank concludes participation. you We your this And call. for

have your wonderful Everyone take day. care. disconnect You and may lines a now

Community Bank System (CBU) 21 Oct 192019 Q3 Earnings call transcript