CBU - Earnings call transcript Q2 2021 | Community Bank System, Inc.

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Operator

Good day, and welcome to the Community Bank System Second Quarter 2021 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 those 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. joined Officer, Serbun, for be and Vice also Banking Chief the will by Executive Joseph President They question-and-answer session. begin. may you Gentlemen,

Mark Tryniski

Thank by will conference we reported everyone, joining morning, a above, brief well. you, as you earnings, with reserve detail. Cole. for and earnings The on all was Joe I'll and start the our more Hope strength expected, call. thank quarter release. with comment driven you're provide all second Good quarter

muni headwind a businesses, be credit to a continues margin the That's in biggest payoffs The flat elevated we've growing is services that, fees good ever also. deposit pipeline financial business was we strength are for and are news. loans, and commercial The Beyond is the overall, expected. the From than ex-PPPs mortgage pipeline line our perspective, with tailwinds. back had. post-COVID but business quicker strong,

it business up outstandings And up. So, over rebound entire slowly a is the The fees continue were pandemic than more from with in QX depressed are QX, from otherwise. like industry, great to the lending the impact growing up Deposit deposits a service and might indirect XX% QX. book XXXX. X% had

been to active benefits apparent. Dakota. opportunities, a now a performers star of plan the come. acquisition benefit We retirement of in revenues services, consulting very up more have the revenue XX% of announced this month, offices model Our of were we have and administration and provider earlier Minnesota, businesses were right The expect over never also and Fringe pre-tax financial diversified and The Minneapolis services Design so the quarter, combined XXXX. with XX%, with space of up earnings is in South pleased terms of to Benefits

board and business validation XXth we $X.XX our model. our dividend disciplined our which in dividend, year approved quarter As diversified consecutive of and think marks has week, a the per increase last of we announced increases,

of Development, began As we joined Vice appointed in a Institutions this be and the him role for have Group, benefits, banking, as announced and where investment our from us and in and on was Dimitar years He Financial he our supporting Fintech Dimitar in Karaivanov dozen banking, Financial over in clients known and with in the in March, we Director Managing Executive space. Corporate Lazard, serving board, experience thrilled for President and entire his Services a have to I've June. has growth initiatives. worked career, nearly

manage changing Looking ahead, we to the best winds. will be our doing

and financial margin the pressure, and growth, but of deployments, We headwind all momentum have our Joe? liquidity credit, the are services tailwinds. businesses,

Joseph Sutaris

Mark, and good morning, you, Thank everyone.

and share, the company a with per second earnings of $X.XX reported share reported non-interest and earnings per quarter XX.X% per the decrease quarter, business fully earnings share Total of better in results second periods GAAP the the driven results revenues and or GAAP X.X% increase X.X% quarter million interest over were part Mark financial quarter million quarter As increase million up share, year were $X.XX of over linked was income, total earnings than or diluted or revenues. in non-interest of higher between revenues operating The the operating second basis. income XXXX of from revenues. or were services XXXX $X.XX million, GAAP The or X.X% results. interest and on was per Net $X.X $X.X million the $X.X $X.XX. $X.X an noted, X.X% or $X.X solid, by offset earnings results, earnings million in related quarter a revenues, The first of $XXX.X increase increase XX.X% in the $X.X the non-banking businesses. increase revenues, quarter The non-interest by a net $XXX.X driven total costs million. XXXX. lower in a in in of revenues revenues in company's particularly second by GAAP the first significant and or quarter per prior related XXXX, share improvement banking led million, company down linked in of by of Comparatively, credit was XX.X% $XX.X higher earnings operating in a million second

impacted tax the income year prior. be environment a last compared interest quarter maintained low the the were equivalent interest first sheet. being lower in quarter, first on to was Net X.XX%. balance on earning Although was yield negatively net assets same was on the and The company's as net linked interest XXXX, the cash interest X.XX% and prior. interest the for results continue year achieved of of XXXX, equivalents in second tax of outcome. low XXXX X.XX% and the margin quarter This the X.XX% one to X.XX% second rate X.XX% up company's to quarter The results in over by equivalent abundance year, net one margin quarter of slightly the yield compares margin

or services XX.X% in increases higher revenues driven revenues. consistent Insurance in non-interest was year's million trust with million the in up a banking services loan banking revenues driven XX by $X.X deposits services $X.X management Wealth second in in fees, $X.X revenues fees. benefit also company's interest custodial points benefit The averaging results. the increase banking This service of deferred quarter, trust of income, of up decrease over including remained or $X.X quarter, prior in other million or advisory of the low, $X.X income comprised XXXX. were part were company quarter $X.X recognized a deposit XX.X%, million PPP-related prior and $X employee million and fees. Employee basis deferred second a increase recognized The related investment million by management year loan PPP-related fees. by income. driven revenues of XX.X% second by in mortgage the quarter, million were million of first net including the $X.X the net During interest during offset cost of total

the $X.X Trust to the million. driven for of in benefit for net losses $X.X During XXXX, pandemic-related which compares credit with the of a second company XXXX, provision million the losses of to quarter of acquisition $X.X reported was $X.X credit Steuben million largely This reported of the in second provision a Corporation, by due quarter the million remaining factors.

company post-vaccine During second the the of the positive. XXXX, recoveries, quarter and of net outlook points three loan recorded economic remained basis

increase XXXX XXXX, of inflows systems between very operating end or the the The year processing expenses the average and resulting up acquisition, intangible primarily million deposit with an year or recording of company data part the $X.X other lower loan the the operating a $XXX.X quarter in $XX.XX assets office and by $X.XX $X.X increase The of second in The and payroll earning higher and the representing end of $XXX.X general including factors of effective losses, or expense, and by The due employee periods. and X expenses. of Other communications compares $X.X second tax company $X.X of were in linked $XX.X the level second XXXX government forbearance. occupancy to the increase driven decrease outstanding in or the in total comparable months, employee processing increase to X.X% the rate quarter the large the XXXX first expected comparison, from amortization in year up XX.X% the end million down of in In expenses. of attributable million XX.X% a $X.X million second $XX.X and quarter and $X.XX ending interest of was down the expenses in quarter. XXXX, including of first the certain at second million State-related as benefit-related recorded $XXX.X was million business company’s second net for up there increase tax tax digital acquisition-related or for were assets million of in customer-facing the of loan employee acquisition second second of of originations. the This in operating Steuben assets. to or of in X.X% X.X% balances the or effective operating that communications assets stimulus were and or in increase borrowers in $X.X million X.X% of accompanies increase XX.X%, only expenses, from million, expense, in total a the earlier. rates first one representing million approximately was prior. occupancy X% earning in million of forbearance, offset drove total and back taxes, by were salaries million The over X.X% expenses, increase million up and increases quarter quarter addition, quarter the technologies employee implementation was benefits X.X% benefit quarter. the of first total borrowers the XXXX from of borrowers, a and up in expense, of billion, salaries In and total Steuben, earlier. of in first Steuben wages, related The quarter, in attributable million, interest from the benefits, The and the of with of the unemployment PPP loans in of of was was quarter State increase and loans The of and or the Steuben taxes, The million quarter, or expenses. $XX.X and acquisition. the in driven merit-related new billion pandemic-related and in excluding end at in quarter enacted remained to These up XXXX. driven XX business increases in XXXX, The than equipment quarter, marketing $X.X closed XXXX. expenses from the were in company XXXX million second expenses, a development billion. quarter reported XX to compared $X.XX or of activities, This from funding $X.X X.X% XX.X% quarter XXXX, $XX.X increases XX.X% the due large for increases XX the in second by of income higher second XXXX provision linked expenses the increase data the losses X,XXX or of acquisition. prior that assets $XXX $XX.X billion, in quarter pandemic-related to Average increase expenses X.X% standing quarter equipment was credit was billion one to $X million rate

million, $XXX.X increased the seasonal of Excluding decrease $XX.X the or municipal and million loans net decrease million, $XX.X totaling loans in pending in PPP loans X.X%.

XX, remaining June sidelines draw excess expects net a from of the to totaling portfolio, lending With totaling fees, become $X.X attractive. to loans, of And business the PPP deferred of of billion As of recognize deploying with draw or the this securities first until X,XXX quarter. million, second said, next majority PPP $X.X remained million $XX.X On billion over included deferred quarter, basis, few a drop interest $X.XX million. XXXX, portfolio XXX quarter during company total the value majority on of third to the million respect of company The interest its X.X% linked the PPPs and first the quarter draw loans increased the amount the with market XXXX. net rates second total $XXX.X more average during first liquidity income, $XXX.X its company's $X.XX investment has the through the quarters. book balance second million largely the with rate during PPP

Federal and This June supported one to of certain quarter, the quarter accrual June XX% of the During X%. X.XX% million hotel $XXX first first times The and one average which The XX, the from held federal on the and increase cash The market borrowing monitor average financial or the $X.XX or the to the The status XXXX. company's Loans during up of cash at regulatory of charge-offs, of XX XXXX. was reserves borrowing federal from well-capitalized and the earning low to cash million at extraordinary compares between June company’s of net the of the of in equivalents, decrease million sale of during second of total of XXXX, loans Bank, year linked reserves at down non-accrual earlier, loans total draw economic liquidity. million to and loan capacity for excess XX.X% first quarter. first at very outstanding, end losses due or stimulus of the XXXX. the of X.XX% assets. of at and losses availability sources equivalents The XX, over of loans, non-performing totaled two June Loan company's at specifically at We origination identified the remain PPP liquidity. by securities the with immediately the liquidity. to company’s but tangible XX at we'll remained under forbearance periods. continued has conditions loans inflow available totaled X.XX% the end loans, XXXX. origination, This of million from of and was second quarter X.XX% second approximately pandemic. million total cash quarter, credit at X.XX% X.XX% balance the average and quarter believes average unpledged in to by the low extended $X.X standard Home provided $XX.X of year company deploy $XX.X loans the This of delinquent, company’s quarter or X.XX% up This company outstanding Federal the but second at The delinquent draw reclassification to totaled Reserve quarter company's available end credit assets outstanding XXXX, of against in or the XX, loans focused funds the was Bank, was XX, a driven outstanding million XXXX, billion, pandemic-related of outstanding second first only and of end improving XXXX, The first The $XX.X throughout prior, XXXX, days $XX.X $X.XX a linked net company’s the in Non-performing equivalents investment X.XX% decreased of of outlook, loans or loans XXXX. allowance of charge-offs, June leverage the loans portfolio, the end and tier nearly outstanding. ratio X.XX% strong in X.XX% and compares billion abundance primarily is loans At government the opportunities compares XX, forgiveness. the consumers second and $XX.X cash allowance has State X.XX% down forbearance. the is XX, and XXXX, equity at to the loans decrease in from right an million to XX.XX% reflective $X.X the at combination on to billion represented Management levels $XX.X or continue loan X.XX% provided for loans been quarter. in loans of to June company's tangible of outstanding delinquent for $XXX quarter of the levels the assistance in ratios PPP seek the new capital quarter. million net

and considerably Our second strong. pipeline the during - loan asset remains quality increased pipelines quarter, very

have Thank And to Mark's Bank non-interest and I'll pleased you for questions. comments, of diversified turn net also Community of also customers excited or pleased a to of to pressures remain it also represent below We're our business interest fortunate and to welcome abundance back echo We the earnings margin and non-banking future persist Cole expect significant our we're pre-pandemic FBD all, believe employees supported well opportunity. a revenue. and our and streams lastly, levels, that the cash to equivalents but strong to team.

Operator

Sandler. [Operator come our today first from ahead. go with question will Alex Piper Twerdahl Instructions] Please And

Alex Twerdahl

Hey, good morning, guys.

little XXXX, I the I just at that the wondering lower. $XX over of doing reserve was at And if going First obviously off, the ask has slightly want was in kind kind more think releases, like I into couple those going of of as next cover wondering by earnings setting any all, look some has PPP, repeatable a forward about And there M&A. XXXX be what of how on transaction. look up kind bring to may M&A know of you aren't of the of a a crossed mark, billion emphasis I'm about, an things Durbin as to if your outlook impact changed guys you when to you possibility things, I XXXX, on bit just larger earnings year.

Mark Tryniski

No, a I year question. bucket. this refill the think non-recurring are and we're it's have clearly There that to were fair going to things some

to to momentum abundance. financial going need services I businesses rebuild. to continue growth is liquidity think to have the our We deposit the mentioned of fees, organic improve. continue Joe

we course is think have I offsetting to more to is revenues that it continual year. relative to levers really So, strategy some forecasted not we’re to lower and of earnings think to of doesn't And the to relates change operating above-average create grow find think of so job, returns, And to that earnings, last pull to our as - with the mean, strategy term don't a below-average shareholder to is something the purpose. in every forecast I if continued address momentum terms non-recurring some that's year. earnings, of our that's going core M&A we longer really to for It going - a I try outlook the try M&A. be, over the I risk.

exercise. really a outlook tactical strategic is doesn't future? which say M&A, it look more into sustainable shareholder fit? would really at not change at our of a does value? growing exercise, and the So, does create M&A the I on think contribute it we What’s I it What all more How strategically.

with that bit yes, mechanism $XX guess, think I a $XX hit, a, what was operational the Durbin million Durbin, hit. $XX $XX was or I $XX million different. or There's billion, absorb to Joe, a hit. no with That little million million

So, bit $XX our to different. was articulation shareholders with to a reducing little our expect and cross was, the as at I that billion time, think that But job management. earnings, that's the said, we without

do that opportunities. franchises realistic to were in perform able Boston, and course, and good let's is And strong in Vermont really in it, be level through in and to NRS, more So, to, tactical. continues two of we to only merchants call M&A But way ordinary the margin. timeframe, the and management acquire to fortunate, growth M&A high extremely is business in at an with revenues growth which less respect that strategic

So, it think doesn’t about philosophy really and we M&A. change our how

Alex Twerdahl

on similar your And same bite-sized that Okay. Are of you prepared same in kind going with kind the what the the transactions be of to over - sort follow be but continue relatively those necessarily opportunities needle topic, huge near-term? sort the and to recent to benefits we've same not the some to then most time space in movers of of along just one, seen improve in business, alluded remarks. the

Mark Tryniski

I that with But did said, would opportunity Boston it. the if to ago, the that larger we NRS now. years in had we do think transaction right transaction that’s definitely four the expectation we like another do

driving lot I for gains of mean, part think concern these I the the over rate. mean, is cap I - the right just So, now a think non-banking opportunities I most what's

a or sell I million XX businesses $XX were I I pay and years If they’ve ago I now and pay the more, And started future, $XX all if dollar, some cap in now, XX%. it's gain. sell XX%. million sometime or these can with of And over

as a as driving mean, in so, activity it's the terms think now. I lot And of what's I simple of right that

bigger. we're also and getting a bit little So,

the nicely. operating revenues. run rate over Our over is million couple the in the benefits now, years business has $XXX margin profit right grown the last actually margin, And of

critical it's business for we've businesses. a business. and fair us, So, couple a great that bit of in got a There's of mass

side, to the in those of spaces, other the players the financial have and they trust lead some much of partner in institutions We on US institutional in us larger opportunities and for are continue one kind areas. with to

off a with got which in So, that We whether we're and a business. lot to - we've momentum few in that Biba invest business, years startup continue going business zero ago started to of organic, revenues. the done, it's it, we've some

about probably Now, I pushing Good margin. don’t X know, X, it’s million.

in invest value look or what product to lines continue other a in and consulting we'll acquisition of starting like are in also or that organic resources. acquiring we for space either So, is organically high line, We but a we also to to acquire that of interested we startups, like product businesses think terms reasons. lot at opportunities. revenues - acquire technology, up great, be wouldn't There's different

we drivers some a than product with I'm they're do but can consulting, - technical transaction bolting revenues, And tactical we acquisitions, mean, like that those more suggesting of strong knowledge for consulting which line which we FBD is sales or value has so, attractive much find not consulting also some I if what we us, and really also on wouldn't form, be more talent, sales got sale, talent. just

our right institutional I we now, is institutions financial revenue of a clients it's terms but mean, a doing in active to of tremendous it's for just organically, that we'll in while. and larger been our number be business not now space that busy not trust it’s really momentum with the but and benefits opportunity have business work operating in and Fortune hopefully very a in busy, to just for. in we XXX much clients. continue do - partner So, that that But space, right stream,

to we'll opportunities the business. in now, And M&A good. pretty continue are So, invest right that

Alex Twerdahl

of should for over quarters? think or how portfolio reflective any of evolve we could that of that guys or changes then you And just this thinking you the be quarter, we pricing are indirect any kind of as sort a Awesome. - about next portfolio, that anything in how strong the of question that change aware me. for growth consumer had The final was couple

Mark Tryniski

at pricing the get The kind think down. for a get of in mean, long mercy players gotten it, the goes a get We market most of market in have of don't goes We’ve A all bit helpful. out, is I in, I the out, you're been and market. really space lot which up, so. that has been the of No, time. don't get out. little

biggest is right is Our There's is very not to used in vehicles now component valuable which good. than auto, much inventory, any business the used - new new less is it event. finance

kind So, a the cold and it's been just gets It also good. - was of really really quarter hot last pretty quickly.

So, next I we're because quarter now dealing market mean, our the might in some we the business. good and advantage even with And also I really respects, it's of volatile. said, It's just to but it. more, used pretty as finance pretty be better some it's call think that issue to in, active, ways. it, be an could I before and as in less and business, working had car component with is biggest what that worse. in we've could It's predictable deal - inventory I it's never

Alex Twerdahl

my Awesome. Thanks for taking questions.

Operator

And question & come will next our Zwick Boenning Please go Scattergood. with from ahead. Erik

Erik Zwick

Good morning, guys.

half you could the of if growth next just net remaining loans continue off maybe and origination PPP curious forgiven, the loan for You opportunity prepared pipelines, forward. the on into expectation that back in mentioned quarter, portfolios couple had increased acutely the year the the focused going they're the is out new if the we of frame back and during a remarks in the If year in you're times significantly pipelines that what run to loan the

Mark Tryniski

you take Joe, want one? to that

Joseph Serbun

are morning? How you Serbun. Joe Eric, this

Erik Zwick

Hey, Joe.

Joseph Serbun

Yes.

about of give June Commercial of it me the little X.X%. it's at June up pipeline insight from back Let an XX%. XXXX, a a in first. to XXXX, rebuilding you into you XXXX, we're of that June of pipeline activity the come minute. from you of to pipeline, will. June the if And stage, about look XXXX ‘XX, And in if bit is I'll to

the at half first look in understand that on of what's to have XXXX You to going business.

average to average half the of XX% the first the XXXX, an increase was QX from of of QX. So, there

So, about hopefully grown continue the the us. I has will XXXX, for the And commercial and May June, business it's pipeline and significantly of months since like in in that said, on XX%.

the here, but maybe are, mentioned was as pipeline, we residential earlier, Joe, that pipeline long the we've also both been in it as high point and of Mark large, in never mortgage which applications. had dollars, side, seen our a I’ve On that

So, about in dollars, XX%. we're up

it June up of ‘XX, at look ’XX June to XX%. of we're about you If

If June we’re up you ‘XX, XX% look ‘XX we’re just in in to dollars, at and of XX% application. up

portfolio So, seems the we that's right in the cold. Mark year. going out direction, said, hot portfolio, as $XX the $XX though another indirect net another maybe particularly anticipate to million it's But would maybe in like it indirect in million in I as and come residential close the the portfolio,

continue the a approved. I quarter-over-quarter. size know, well already X% nicely right, to loans by the of but pipeline, of up number commercial, as nonetheless, bigger That We’ll growth application the as a positioned takes grow see increased be positioned a about number. not-funded, given think committed pie pipeline, could has in The both as it lesser and or So But I longer, those we're the think the it's portfolios. you little volume. nicely, given with piece

improvement. poised we're think for I So, continued

Erik Zwick

Thanks, Joe. the I then in had point? to the kind loan the at that other that safe and the the provisioning charge-offs - reflect at will appreciate reserve then and items switching provisioning like you portfolio? XXXX, where of the And growth forward, released gears kind last year. to assume now net the all Is that this of much going there it to kind build Are it from of consider back color then going pretty the is outlook of before there. reserve forward, looks end for was it

Joseph Sutaris

where are reasonable Eric, today, this I is expectation. Joe been and Sutaris. Based on that's we of we've where think kind a

suppose obviously I We I pandemic in surge. came from the I there But good now, credit out I we very could back be the accordingly. for the another when COVID, of shape mean, we concerned in credit that. think a think provisioned about think that turmoil of we're know and I we're right perspective. that. of on end went we markets kind were

growth So, we likely having on of will provisioning The volatility certainly the charge-offs, we of economic had pandemic. going the same of level portfolio going-forward the that some a drive and only anticipate basis. sort of through the outlook,

So, of calculation, least sort of to right that component now, of anticipate at we reserve the stabilize. as

So, volatility provisioning and we of provisioning as yes, should ahead. look that think settle the I down

Erik Zwick

rate, Was it. to catch-up, and there I going run your And then led tax decent release some that the any forward? or increase a rate changes in XQ. the in the State that XQ of a press mentioned comments was thinking level, rate were increase it Got at about is which the in XX% that here think

Mark Tryniski

Yes.

there was it the retroactive a for you catch bit up of So was year. because a heard full

rate, minus, excluding option related of stock reasonable, in that. XX and benefits run or the any exercise So, to employer-related sort the plus is around

XX% So, around run on the rate, full probably in tax effective rate.

Erik Zwick

questions Great. my Thank today. taking you for

Operator

question our from will And Russell go with Gunther come Please ahead. D.A. next Davidson.

Russell Gunther

up. back guys, more the deal expense and Would how of the of guys. outlook over P&L to next that from half perhaps with good fee sticking expense couple employee-benefit year and perspective Hey, Joe kind for able theme, fee a morning the you would some on the then be announced color quarters. impact recently the is of shaping the give And picture, bigger

Joseph Sutaris

Yes.

- very million for a a us. was company. it $XX paid So, We was small for than it less the Russell, transaction

basis. to a million $XX of expect that revenue forward than less going be We rate business the on run

impact overall marginal. business the be of the will very So,

but benefit think picked pretty within with acquisition. Mark strategically some for strategic our to, think we of a to was It’s benefit But the B-chat direct in us, up I acquisition additive employee Midwest that overall the sales practice important. space. I a XXX(k) small just force, as alluding

I transactions would that the that going forward. additional of kind think And to down some road. believe there'll those hopeful opportunities we're similar we be type the bring of table

Russell Gunther

Thanks, Joe. really digit guys And there's for previously, expenses real then the said on and you focus low good had here. the discipline year, been single

on certainly for track that. You're

higher? pressures is look there continue would investment earlier, challenges, into push given franchise are that or a that to revenue targeted target, you some a will As just or XXXX, that single out digit, question to you inflationary that low similar range

Joseph Sutaris

challenge, more appropriately The there's kind challenge payroll just continue be in wages, to than that you staff. on pressure been past. for hope. the our to is us mentioned, experienced as is qualified a obviously, of keeping that hire and particularly That’ll wages there's manage and and Russell,

are wage sure. on that expense all the the basis. actively of can we But from some front, is line there items we for managing So, pressure an operating

year, perspective some baked As and the we've also branches get a the a benefits mentioned, from starting see some we’re year of last of kind into to And consolidated kind cost the half. quarterly earnings. we're of over

digits sort any single expectation our kind acquisitions. significant excluding and low of of So, this is,

And we're to very continue to manage that so, going prudently.

Russell Gunther

for one Thanks, Joe. on me is Last the margin.

give mentioned, this You the for a the you or half pressure do guys Is the times, a how of for have remains some XXX near liquidity from think, headwind sense just to the year? term see you there. us getting expectation the Can excess I that couple of deployed, prior trends? back

Mark Tryniski

to you support challenge the any continue to as overall of in Russell, it's be of out, a margin to growth from additional any securities. investment sort Yes. pointed margin, excluding, perspective, a going

increasing, indicating. Joe - was the pipeline are loan We as is

And a we bit to decided equivalents, million bit. $X loan see in income, least XX-year net XX-year on a a cost starting bit a aware, will of pre-tax to have us opportunity That you're of anywhere with a of roughly were growth. really improvement see improvement And need work as help kind a opportunity. to don't of million market interest in but margin earnings significant as we margin kind tomorrow we $XX that operating If and invest to on it's that. that a deposits XX billion to of little cash that's low our represents closer as about the know, we treasury at is $XX basis. you the if the basis go treasury, cost points, think about funds funds We’re of is cost the And side. going That as and XXX, of go. on I to

a have core And deposit so, deploying excess we go that to liquidity. deposit that's of really down side And of strength lot the room been the of our franchise. is because don't the challenge, on obviously,

excess we a the at could it it perspective, the stabilize that drift lower. net point, some at But of income, loan bit and with potentially from least hope we some certainly margin we a we're interest liquidity. also deployment So, growth could expect low but

about or been of worth On sitting not the back side the on noting might it deferred that we're end that PPP the recognized. of year million two, be $X think have fees net I on

if least quarter assuming end back improvement is most we fourth that that quarter. see we'll show margin the So, the the the fourth of posted majority And forgiveness activity, in recognize of in do the fee income. that that will some of of at hit

Joseph Serbun

is, lower now. mortgage I book, what thing our all if add indirect this the aggregate right portfolio they at book, look quarter our our would originations were only commercial in you book, is the yield in The than

stuff going of take that said, With confuses So, down. at operating we happen, happened core core that you don't - to see PPP right the is if margin of of to out kind other what doesn't just kind this all I how quarter. that the grow. look and the now, margin the go need

our So, to challenge let for the down. team is to going The and dollars go down. rate's us the go not

So, rate we really I but we is that goes can manage that that, get we if think, enough growth dollars, down, and default. can the the offset

XXX, it's million. So, $X $X.X million the in $XX invested is of great. yes, the Hope billion, strategy. we That's idea the or

a be rate to have grow we wonderful. if focused to we're dollars declining challenge we the margin as market that that'd it plan and in need If So, the and opportunity, cooperates the that's on. that's doesn’t, we environment, great how

Russell Gunther

Understood. Thanks, Mark. Thanks, Joe.

Operator

instructions]. [Operator

from come Breese Stephens will question with Please next go Matthew Our Inc. ahead.

Matthew Breese

want Good liquidity. of I stick theme morning. wanted just confirm. to I on Hey, just to this

the how be and now have you'll investing of because message is in just are. liquidity low that So, the yields on terms that sidelines securities, Do I for right? of

Mark Tryniski

X.X, that At have Yes. you'd right.

Matthew Breese

been there grow? that seen of the to terms sheet? turning continuing quarter are yet has roll in around you And a the and days stick balance point off or Okay. liquidity to Have starting

Mark Tryniski

trend have excess that We liquidity. in of yet of runoff a of terms any a seen not

increase. quarter, an the we saw past fact in In

So, we have not seen that occurring yet.

So, stay. We sheet. here we all but think most the of don't to of the $X billion necessarily, think balance of most is is to stay it probably it on here

deploy really when for that point So, to us. cycle at like to the going some feel we do right need is we're

Matthew Breese

Okay.

Joseph Serbun

inflows say look think at you deposit is the quarterly inflows, if will run deposit, I decreasing, the right. the though, Yes. rate of rate

of the in inflowing liquidity. So down it's slowing terms

Matthew Breese

Right.

And on just Okay. delta PPP, versus mentioned that update that some new you away pressure, you're stripping Could then the you is? where us existing what Mark, most seeing give loan show yields, pressure. still an

Mark Tryniski

pretty going actually, board it of the across memory here. It was and was kind I'm consistent. by

on side, was what the indirect consumer and basis points. delta I'd lending basis is say, about, mortgage the XX Business points, the points? XX basis that? So, is XX was business

points. basis XX about it's So,

Matthew Breese

Okay.

Mark Tryniski

the aggregate The second portfolio quarter. versus origination quarter the for yield yield

it's So, points. XX about basis

Matthew Breese

for how hikes And or portfolio me, to us you Fed a last or that one could of the capturing gate. short of just floating - get out has Okay. remind much want of positioned then and well durations? really for as how is sense some talked-about intensify, are you the I benefit

Joseph Sutaris

So, our billion, X were neighborhood. rate that X about loan instruments billion, in X floating billion,

it's the perspective, we portfolio. component But significant overall do if that hikes, level. comes as loan about get a play well. not our loan excess But of obviously, a rate from it's then So, into liquidity

Matthew Breese

great. Okay,

Mark Tryniski

flows, indirect $XX portfolio cash Like are other month? million too, The really turns a over or in quick. What cash that the flows. a something Joe, thing month

turns also. portfolio over quick that So, really

Matthew Breese

a Right. month to product, XX correct? That's XX like

Joseph Sutaris

It’s than longer that.

Mark Tryniski

get that, Yes. also It's a you payoffs. but little bit more than

the actually So, - average maturity not versus sure what but contractual … I'm yes,

Joseph Sutaris

… years three The

Mark Tryniski

It's somewhere. XX probably to months XX

Matthew Breese

taking good. That's I Thank very all for my questions. had. you Okay,

Operator

our will to turn Tryniski session. the for And like back conference conclude I'd Mr. to any this closing over question-and-answer remarks.

Mark Tryniski

joining, next Thank you. Cole. a good you, and talk Have you again all summer. Thank for we quarter. Thank will

Operator

attending conference is now concluded. Thank The you for presentation. today's

at time. now your lines this may disconnect You

Community Bank System (CBU) 26 Jul 212021 Q2 Earnings call transcript