Earnings call transcript Q2 2023

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Operator

Welcome to the Community Bank System’s Second Quarter 2023 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. Please note also that this call is being recorded today.

Mark Executive and Financial Vice are and Executive Officer. presenters Sutaris, Joseph President call Tryniski, Chief President Officer; Today’s and Chief and They Executive the by joined session. Chief President question-and-answer will for Operating Dimitar Officer be Vice Karaivanov,

Gentlemen, you may begin.

Mark Tryniski

everyone. all. detail. am good. all I for thank you, other very more to going comment and say second Thank Dimitar our And conference than quarterly was our performance quarter you Joe will morning, Good call. not joining much about in it

But to my made from remain December want through I last the early I transition. Board but this we did XXXX announcement the acknowledge the to effective month will retirement regarding the XXst, support on company

Officer are importantly, and thrilled the January XXXX. it’s Bank CEO and for System that X, important we effective Board Chief the Community Directors. as years of appointed on is one been Most working Executive of have Community most of something of many we Succession will Bank Karaivanov be Dimitar President the and responsibilities

XX Financial assuming to Benefits, company Dimitar prior financial and a I have years as life Corporate and President at adviser our his in years, company. Vice of Executive he for joined starting as ago, responsibility Two the businesses. for Services Development, the known Insurance least Wealth

immediate the business. banking an and in Officer, for responsibility XXXX those made impact He businesses Operating on further was appointed assuming Chief

and early through went in XXXX in Board a month’s Our culminating beginning announcement. thorough deliberative very process last and succession

teamwork, excellence with, Dimitar values integrity, our more humility. embodies is thinkers importantly, core and strategic I have one the and ever worked financial of most distute of and fully

be the revenue fully better Combined earnings we than last funding growth diversity, best Dimitar? and next will now balance XX. the even I team leadership have company had. strength, across with the years capabilities have tremendous and XX sheet expect ever We the right

Dimitar Karaivanov

XX best that more colleagues and the service the better. future grateful team has the team, the trust bright our privilege alongside the and clients, growth than for and confidence have It very Thank to it. is involved and for feel we of me. have strongly have with ability and our granted been a I of work am company ever I I you, that been been be Mark. marketplace communities to I our years and for Board has has Mark win and opportunities The and never am company to we provide in part had this fortunate

company the above model remain is close to deliver and our quarter. all-time our remained very accounts the this clients below metrics grew across quarter another of of revenues average to evident regardless highs, of strength the strong, environment. allowing the and of noisy delivered with we risk. us in for number results average performance second risk diversified our The All returns business this of Operating

from Looking our The organic benefiting are pipelines for momentum our our premiums activities. in and growth, wealth by banking we market improvement forward, secured. benefits is are and Insurance we our encouraged are bodes businesses, inorganic well businesses. the values across and The business, funding all increased and of base healthy

with Joe financials. the more will now you provide details Joe? on

Joseph Sutaris

and $X.XX the Thank prior solid were first the were quarter. earnings linked second results $X.XX second The quarter Fully morning, you, good than which the share per $X.XX over diluted company’s Dimitar, results. better up and in everyone. were GAAP the earnings year in quarter quarter,

results. prior share earnings from were earnings up the per in share first operating year $X.XX per in and release the $X.XX the diluted $X.XX per Fully linked quarter higher second the defined share quarter, company’s than as press quarter

and in part basis an per for lower increase increase revenues losses, an was income operating credit and share a on provision share earnings by per a expenses $X.XX operating driven The in offset increase year-over-year in operating by taxes. in higher

The provision in basis the a and quarter decrease credit was in per by lower in losses driven increase operating per $X.XX revenues. a linked by in earnings for decrease part a operating on operating share share expenses, offset

adjusted of the quarter share, quarter a the per company’s XXXX per to defined pre-tax the as up quarter net share measures pre-provision was earnings first results. press as per $X.XX non-GAAP up and in compared share compared revenue Second XXXX of $X.XX second release to $X.XX linked

increases the in The year company’s million X.X% was driven or up periods. This interest between $X were and quarter. non-interest the income prior revenue both over total revenues net second by

periods. million margin up Net increase of revenues revenues. or X.X% was income Insurance $X.X between in were largely XX the Non-interest up points an Service due basis expansion or interest $X.X million by X%, driven to

and Comparatively, operating $X.X securities gain revenues, were the on X.X% linked lower quarter realized investment results. million on unrealized debt extinguishment and or first losses which than excludes

the The company interest $X.X by $XXX.X down company’s linked-quarter costs. This was X.X% million million a in of net XXXX. second in recorded basis, driven income of funding the quarter on increases or

quarter. outpaced decrease resulting first in in X.XX% second XX-basis-point in funds points, XX a in the net company’s the XX XX-basis-point of in total quarter increase quarter first cost increase to in the The company’s in basis X-basis-point quarter, interest quarter. X.XX% costs points was compared margin linked The the in a earning yields of the in the funding as basis XXXX from asset second

the XX net second nationwide median banks and in funds approximately contraction margin points. quarter For basis context, interest X% was was median the for cost of approximately

Benefit Services organic revenues acquired Employee by in slight revenues Wealth was $X.X an a the growth or increase Management well -- and year-over-year Insurance increase and Insurance growth. revenues and markets, Despite non-interest valuation Services revenues organic to Services a The in Management were non-interest XX.X% Services Employee was as asset-based harder revenues, factors. and Wealth organic despite which by million offset revenues. due was in as driven customer banking-related by driven lower customer increase increase The in Benefits down Services Insurance businesses, slightly in

million and on realized revenues, or losses on unrealized X.X%. gain and securities $X.X basis, excluding extinguishment linked-quarter On increased investment non-interest a debt

outstanding second company the in an economic stable recorded recorded loans million million in losses a the increase in $X.X provision Comparatively, the a credit company for quarter. forecast, during provision of credit first for $X $X.X of $X.X Reflective with credit the included the linked of connection Elmira which million Bank quarter acquisition. provision during losses and million XXXX, in Savings of the the for quarter XXXX acquisition-related of losses second

quarter expenses The quarter. million expenses of operating second in $XXX the recorded company million year total second in the operating to total XXXX, prior $XXX.X compared in of

or marketing acquisition-related quarter core Excluding increased operating expenses XXXX expenses of in the year-over-year. The increase benefits, earn-out quarter, second in of the costs, year and million driven $X.X expenses operating higher business was salaries other processing, prior million $X of development million in and and acquisition-related core expenses contingent by and data second expenses. employee X.X% $X communication

was In second rate XX.X% of core XXXX company quarter $XXX of in of for the XXXX. in down second reported operating slightly the effective expenses tax quarter from the comparison, the linked million first The XX.X%, of XXXX. quarter

assets XXXX. of $XX.X XXXX, quarter were year million million the June from $XXX.X Company’s a at the decrease decrease one or XX, of first representing prior from end X.X% billion total $XXX.X or X% and

average million in quarter, in increase interest-earning during balances. the driven assets The X.X% loan in decreased securities, average -- -- second average partially million the value million or decrease book book the during by quarter of by $XXX $XXX.X investment $XXX.X a value average offset

$XXX.X organic or billion $XXX.X the or in loan XX.X% or loan increase in portfolios. business outstanding and million X% increase driven the million increased loans Ending year. The growth the consumer million over by lending or and in second in driven growth during prior loans the X.X% company’s consumer the XX.X% lending X.X% ending quarter portfolio and $X.XX $XX.X company’s totaling totaling portfolio million business $XXX.X in million quarter the in of was or increase was loans portfolios four loan XX.X%. all by $XXX.X The in year-over-year increase or

from and or total deposits. the deposits were deposits end of interest-bearing $XX.X or $XXX.X decrease a million of X.X% comprised million X.X% or ending in The down decrease X.X% was in This quarter. $XXX.X million first company’s non-interest-bearing the

tended On $XXX.X total second down million or decline million decreased segment less a deposits year-to-date quarter, a quarter, basis, were deposits consumer On business the the in while ending which seasonally $XX.X decreased or X% X.X%. than during quarter. $XXX.X to million deposits in municipal basis, customer the

deposit dispersed with broadly across consumer customer XX% diversified XX% deposit approximately comprised balances, of well account $XX,XXX. consumer municipal of is balances, company’s of deposit and segments XX% average balance relationship base business average The approximately balances business and and $XX,XXX

savings beta reflective base. company’s a accounts, which is of The cycle-to-date to the deposits of the customer and compositions checking XX% and represents total deposit high build proportion of XX%,

deposit wholesale and age beta XX The the funding cycle-to-date the its weighted beta approximately balance non-maturity or deposits XX% is XX%. average carry company deposit any the accounts sheet. The and company’s interest-bearing is years does total not on is currently of broker

availability remains position the Federal liquidity, unpledged readily to strong, including Federal sources equivalents, cash The and capacity Bank available and funding Bank of at $X.XX represent deposits, liquidity borrowing of discount unused Loan intercompany insured company’s window, investment and liquidity Home over estimated Reserve net immediately billion company’s XXX% the totaled second collateralized sources at end of available quarter. the These securities deposits. on of the of cash

at second all XX.X%, security More was investment yielding of X specifically, X.XX% the loans. capital into quarter well-capitalized regulatory Tier the well-capitalized first of bank’s the exceeded opportunity balances of June the and XX, at ratio quarter, which providing substantially exceeded the to ratio companies was the standards. X%. end ratios end XXXX, regulatory yielding the The migrate standard At company’s significantly the lower leverage company’s loan-to-deposit higher future

ratio, first X.XX% end quarter the second compared the end net and or a company’s company’s tangible in of The quarter second measure release quarter X.XX% one assets net the first and X.XX% as to at earnings defined tangible at prior. the the press of equity year non-GAAP quarter, was

stock company second average to $XX approximately pursuant of quarter, the share, common Board its XXXX repurchased repurchase program. price its the per stock an at shares XXX,XXX of During approved

XX allowance XX losses of million for at points XX, or loans the of to June $XX.X XXXX, $XX.X of loans quarter total totaled or points XX, $XX.X total outstanding million end points total basis the or outstanding, credit At basis of and XXXX. loans at compares outstanding million June this first XX basis the company’s

X charge-offs last the quarter X basis of the points the average net or annualized. basis to in points points reported charge-offs $X.X compares X This of quarter, same second second annualized -- During year million QX. during net of in quarter company the and the loans basis of XXXX,

XX XX points points of XX, loans end This XXXX, million loans non-performing $XX.X basis quarter June basis from the the XX year At one outstanding. first was prior. totaled or and at down basis points total of

year outstanding prior. XX, at asset points basis one up XXXX and quarter quarter. the Loans delinquent end basis loans strong days at XX the days points from and stable Overall, - were XX XX XX in of of up XX first company’s to June remained the the basis total from quality XXXX, points

the We core believe asset reserves, provide company’s historically for solid and a strong and opportunities deposit capital base, profile, foundation growth. future revenue stable liquidity profile quality strong

Looking forward, of abate the will growth, over by we momentum we core company’s encouraged a our deposit escalating remain base. believe quarter costs third prospects are business banking for costs and funding challenge despite although continued to the higher we the organic funding quality loan time, strength believe in for the and

addition, company’s Thank businesses in financial strong. In business new opportunities you. the remain services

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

Operator

Our Hovde first of ahead. The Nick Go Cucharale Instructions] comes [Operator from question Group.

Nick Cucharale

morning, today? are you How Good everyone.

Joseph Sutaris

Nick. morning, Good

Mark Tryniski

Good morning, Nick.

Nick Cucharale

given in year, help the your growth Are others the think of year a concerns pretty growth. and liquidity loan At solid can back you about us see full rate? point starting you markets pulling halfway to

Dimitar Karaivanov

it’s Nick, Dimitar. Sure.

You are on. spot

We predominantly a the second they funding is is They environment. lot but can our couple out capabilities, And don’t competitive reality enough banks, a have of smaller that of to own clients. is One from have ones run have benefited the extend of things. the liquidity.

a on clients, focused So not are just of folks number number are folks lending. a of only existing

So our in to opportunity the our to are an relationships sheet relationships we our all seeing markets. clients new balance strength of for of and service leverage extend to

closer that stays probably midpoint rate, kind of mid-to-high I than digits growth little range, have we the bit that the of terms the end higher to single a in still single communicating been of think, digits. So, of

all Just the and the pipeline mean, as our we of I momentum businesses. is increased actually quarter-over-quarter sit strong today, here

Nick Cucharale

growth for color. expenses, that at believe this great with consistent thinking the relates was And as your Is for to your guidance it year That’s full X% to stage? XXXX. previous X% I

Joseph Sutaris

don’t our I don’t I around Yeah. Joe, has expectations with our this -- operating changed any think Nick. is think expenses. for -- anything

three I quarters. off was kind think acknowledge we remaining but of that bit, up QX we that, a the to throughout expected level

a still have to flattish path I X% still a if we generally so outcome, on basis, think full you think, quarters, run is the X%, a rate kind of on for I two year are remaining expectation. that to will, reasonable and

Nick Cucharale

price pretty balance then And us M&A me, quarters year you you at but stage? in lastly two your dependent, Great. consistent recently return row. on XXst how repurchase that this Okay. and organic a give dividend know the in the it’s increased the for with and initiatives I past thoughts has capital your for been Can and you the

Dimitar Karaivanov

Yes. All value again. average at proposition is Nick, dividend which those above part of our Dimitar, risk. thesis, returns we it’s average below things. all and -- look The and core of investment is

to that our as it manage across outcomes relates control businesses and which revenue allows pay as earnings, us So as to to and dividend. we growing try the volatility can, much we then

what shareholders. of important to we achieve So part it’s for our a aim really

share have our dilution annual grants. communicated on that our least is offset we equity I goal think the at from repurchases, to

are So right to it I way now our well relates as on kind year. we way think -- on that our of this

The continues stock we it to be perspective. a personally look as and at we attractive from company’s believe

the bit a levels we to there these side. on little do repurchase more share So have probably with

allocation, of balance every in on day remain terms capital capital bank we the we sheet. M&A, businesses. deploy grow very all across We And of in then as opportunistic the our

part that’s are businesses. of in we the actively of across at looking M&A do all and then So we our what bank

side. business, folks We some do in Wealth We our our on small business. some our and roll-ups practices Benefits Insurance looked

main need So a we us, that for priority work remain of because our generate lot capital to a put for we it and to do will investors.

Nick Cucharale

the appreciate my you Thank questions. color. I taking for

Operator

Go Our ahead. next question comes from Steve James. Moss Raymond of

Steve Moss

morning. Hi. Good

Mark Tryniski

morning, Good Steve.

Steve Moss

Good margin here. here. Just Maybe margin just on on the morning. the

are quarters bit or as -- Just sounds little Curious curious, to so? deposit like over a the a headwind. headed Joe, that, you costs deposit deposit you costs two thinking are mentioned are it costs of where next

Joseph Sutaris

Yeah.

continuation question, Steve. the -- it’s expect experience rate there low from our a pauses very So higher higher rates non-interest-bearing into Fed is deposit so we of if to migration we certificates that to fair a even that increases. I or as continue be do mean deposits and the just see will continue

not quarter, deposit of second quarter they into have am the expect in I but they sure much call the are first -- to exact with respect some trending to continue that over were I we third quarter. going an the higher how to increase and

bit But at from time, bit pace it pause perhaps the a the call bit non-interest-bearing with said, repricing if will a and and that the to the Fed low does slows I it over monies move that non-maturity pressure of well. deposits which interest-bearing abates as a slows call

be potentially those think fourth will that in we pressures into we do the quarter, third abate time, and continue over see to to So but headwind. the a

at or some see abate least two, and expectations, XXXX we for outcome expansion flat hopefully, funding and pressures of can of So sideways with a next some kind respect bit. the our in we thinking then, NII margin are as kind those just a of of to more to quarter

Steve Moss

the Okay. here, And loan terms were that then quarter guys do yields what shaking of on in where going pricing out -- for here curious forward? just the you origination and what’s see

Joseph Sutaris

Yeah.

are on we So just improvement, under time, book -- a think, the about the sub-X%. the just you and booked loans for if quarter blended seeing so yield we are new over rate on is, good X% basis, because we at I will, pretty book

time. plus increasing have to on of do mid-single-digit basis of the So if help we and over volume kind outcome, repricing picking up been a that’s kind are has going growth points activity about XXX we

approximately that also loan $X $X of portfolio we are of about the have will billion repriceable, billion, reprice in XX% so. roughly or our next which months So XX

billion the be Some so. five-year XX-year are kind with and about repricing of but of occurs have those of or repricing months the out, in $X that some might in they -- XX a we terms next reset years

Steve Moss

then of flattish coming I pipeline year-over-year, the Services you the on Okay. apologize in just And business past guys about new maybe missed the Employee on and Benefit I it. have in, That’s business, if -- helpful. talked but

seeing Just curious the organic -- the are underlying there? trends to as trends you

Dimitar Karaivanov

Steve. underlying good The remain Yeah. morning, very -- trends The strong.

they -- if are values been where Joe which the market. stay that still the of said, we market we by have of think sitting than be are, lower us, here But some has that some July, the As peaks. if month for are and as wouldn’t I record a masked I the in business asset in surprised

were in doing already back than are We of QX XXXX. we better

would business consulting there more that I that also, them are So some in things sometimes call based. are

So good our Again, of months as more are. than up revenues to a a we to have right but the the is we the bit to we compared where value now, XXXX. down they should expectation here as are going in make were a in first little XXXX that bit stay compared year, impacted position are the My six by been. little market of end it we are last

Steve Moss

Great. guys. quarter Appreciate Nice color. all the

Dimitar Karaivanov

Steve. you, Thank

Operator

Alex The of Sandler. next ahead. from question Twerdahl Piper comes Go

Alex Twerdahl

Hey. guys. Good morning,

Dimitar Karaivanov

Good morning, Alex.

Mark Tryniski

Hi, Alex.

Alex Twerdahl

million growth if flows growth? growth $XXX targets. loan kind another outlook million this the your cash in First just balance to sheet of that and terms the you if what whether you loan management. securities I that’s funding? am for you remind fund the based I sufficient plan will sort the or of of later just think be off, year coming to Can wondering of and just to sort in use to sufficient you mechanism be us of terms $XXX securities that have on alluded due of will

Joseph Sutaris

Yeah.

of have maturity funding have third into get $XXX going bit XXXX, slower least XXXX. So flow that’s for in at balance we than about of another certainly do the to portfolio, And help then a little we million quarter the of in quarter securities for coming this as the the off cash a XXXX. -- we less about Alex,

But to out yields, to we grow, can rates given where bridge fairly are, do probably, to a it’s have borrowings, some wholesale do continue flows some, attractive little to further continue to higher basically just loan we and with plans the still through cash some that.

Alex Twerdahl

the bit? everyone’s third a broke say that if from up was the line you little number sure my or quarter just I not am just Can line.

Joseph Sutaris

Sorry. Yeah.

million, $XXX Alex... is quarter third the about So

Alex Twerdahl

Okay.

Joseph Sutaris

…maturities.

Alex Twerdahl

And anything fourth quarter? in the

Joseph Sutaris

in nominal it nominal. but third. of in the I fairly Most it’s It’s is the number, fourth precise have don’t a fairly quarter.

Alex Twerdahl

And deposit terms the end the million that is expectation October, of in went that in quarter second with of correct? usually into the builds -- of out $XXX that that you other remind flows municipal us $XXX just the deposits that

Joseph Sutaris

the That’s in York Alex. throws being in and third and somewhat municipal the seasonal Yeah. in quarter quarter. particular, It State, second in collection the quarter then point correct, deposits, in low first -- New for it’s the occurs tax

a So tend municipal we of to in little you if deposits. see a will, rebound, bit

municipal And back New as market, in matter well. agreements, England quarter market, for repurchase that bounced bit also they a our our third the in on the little particularly Vermont

that So funding is have third to quarter. door, some municipal the will, we going do if expectations in in you roll back the

Alex Twerdahl

and happen of have you of funds? the interest from the quarter exit to net sort exit Do Okay. margin just cost the

Joseph Sutaris

from relatively to say, was I perspective. June It an Yeah. NII flat. May will

at I of the cost off here. the basis end I points So about basis funds at exited total reserves sorry, we at XX kind funds, XX am quarter. cost exiting the of of about am points of quarter

Alex Twerdahl

That’s perfect. Okay.

Dimitar Karaivanov

Alex, quarter the June margin number. consistent with And the in was second

Joseph Sutaris

Right.

Alex Twerdahl

last hit deleveraging the anything the flat if did in you that question from straightforward quarter. in like as show you I just much fees. that charges I in a there first on some make there’s guys to -- then transaction looks doesn’t we quarter guys that across think quarter like the that back pretty wasn’t the then on ago year had looks to mentioned I final and the funky the adjustments and million It’s you first fees look. seem stronger quarter it the NSF And like fees know Yeah. this I sure up quarter, a year Okay. as look saw than than guided $X across quarter. $X service stronger second not would million is NSF I It to mean, quarter. and numbers just deposit second the they the

if guidance just am curious be if something from So service the that charges full change about that? we I hit year any to there’s to in there there’s else that thinking for deposit or should

Joseph Sutaris

We a for little also the higher interchange debit outcome had second quarter.

offset some of the for of that changes. So reduction the sort NSF

Alex Twerdahl

Okay.

year million So to $X still guide $X intact? the the hit full of million is

Joseph Sutaris

Yeah.

still think I fair, that’s Alex.

Alex Twerdahl

you question. for my taking Thank Perfect.

Joseph Sutaris

Welcome.

Operator

Navas from of D.A. Our Go next comes ahead. Davidson. question Manuel

Manuel Navas

of about wondering strong. are Hey. lot questions have the the mix. I what with answered, Good was to Consumer see just the outlook morning. I A but about thinking was the been loan am just trends trying there? pretty

Dimitar Karaivanov

Yeah.

Manuel. morning, the are pipelines good well reasonably remain The quarter. did right, this The -- we So, very consumer you robust.

we at as side, side. mortgage last quarter On it the gained even mortgage hinted well. the on have momentum more we But

that’s are and the think side it’s quarter pretty you into going on in purchase book actually when XX% going than usually they and have ago, I So but stronger as pipelines here anyways, the a QX can imagine, mortgage most we year are were to the money. a robust we QX

is balance that of additive sheet. the all So to

bit a in of of terms net So usual going a in to number than higher result it’s growth.

market. we wholesale play segments are when create you you know, play an play is that business, you good exiting between the on We that we we As a opening certain and from everywhere benefited things in a the competitors to talked we business, some part same auto of also that because markets our basis, don’t the car it in, relates is kind call, that, the of pretty that which in the do bit segments on shape. of earlier the in as little

created that’s us. So for some opportunities

It in we remains before. is as business hard that shape. to said So predict, good

an on. trying active to We risk for and we there focus are on the rate return segments manage basis and

frankly, line we here to today. expect that So quarter, sit the with second we in as be

Manuel Navas

on are you loans getting paper? yields on new are auto new what Also

Dimitar Karaivanov

net the to basis, and we kind on of high basis X%s in a a range On X% us. are net

Manuel Navas

Okay. That’s I great. you. Thank the appreciate update.

Operator

comes [Operator Go ahead. next of Stephens. Instructions] question Breese Matthew Our from

Matthew Breese

Good morning.

Dimitar Karaivanov

Good morning, Matt.

Mark Tryniski

Good morning, Matt.

Matthew Breese

themselves. the I’d reserve overall largely With it’s curious in flat level, and I for credit then think speak that the around outlook the thoughts year-over-year. fairly about metrics mind, your on be provisioning

even if credit just curious or is the bias considering flat performance. down Just the to remain

Joseph Sutaris

expectations this in is have Joe. Matt, The mean, of right are not I now any Yeah. flat. we fortunately, credit. terms sort seen,

In fact, which ratings you seen we our a is some year-over-year are kind when at look risk of Net on charge-offs have good. improvement, basis, still fairly low.

I the normalizing bit a think are things little in indirect business.

our charge-offs points to XX time. average basis But a over long about of points XX net of indirect period basis

our really are are changes. now sort we So front of not and we on headwinds any credit wood that on some until seeing about same the the kind see so of given right knock expectations

Matthew Breese

your of of expect should ratio to out today, portfolio the I it equity ultimate is, things and then one, you additional continued and sheet the on impact? impacts stands look, recapture think, impacts, as maybe are I curious, just remain securities then, stance this restructuring two, kind be a here, of to or common considering given are we pretty would capital what But to opportunities you And there well duration from tangible terms the balance Okay. lessen in patient AOCI at as known point.

Dimitar Karaivanov

have dissegregate to the not are in business. how bank Dimitar. look from There’s the no we I Hey, also going at change here. you we surprise we Matt. our business to mean, It’s aggregate and Yeah.

our mind, businesses. only the one of And balance shows sheet four keep in

on about tremendous shareholders of a to to value amount got have balance value captured you our and we economic value the not So talk is that if want sheet.

businesses to if the capital amount you strong the numbers every company. very of balance to the year rest were of those provide Frankly, So are -- to back about tremendous and sheet, the think that. and the

So we are focused on regulatory ratios.

balance believe coming than the the don’t activities. revenue, our because third value don’t of more a non-balance is from a itself sheet revenue We company. economic reflects third believe the sheet We of fully our of that

continue increase. strong. remain Our regulatory ratios to very They

got really gotten back year would did on we to we because net otherwise. transaction year for us sooner was focused a the -- are economically allowing money our earlier have than we value this shareholders, monitor positive We our

lot the us clients people secondly, And a are allowed when flexibility service of more pulling now back. to

couple feel we to we do So here at don’t the similar anything the of least. very next quarters for like need

So capital is pace. growing robust at a very

We been through deploy to able not have it M&A.

accruing So to company. our keeps it just

Matthew Breese

sign One off. I appreciate Great. I before that. last one

congrats on promotion. the congratulations Dimitar, Mark, retirement. on First,

curious how run management? I’d day-to-day any management, the bank about fee terms around income business notable terms in be and of inorganic the think if legacy. of stock here then as there’s speaks too in them organic strategy sort terms of and you Mark sheet Where for you you bank and acquisitions? kind CEO of how your both or in philosophy in the in differ balance future. differences the I do not and businesses you think itself you of terms Dimitar, think commence role of and distant M&A

Dimitar Karaivanov

that’s us similar in a this have because think of question. reason I all feel and company for evaluate Matt, a here like to is why -- things been we light. a I of there fair long Yeah. I a tend similarly very time, part

see going to of the not much for are us. change you way So in

always to is Our of provide consistency to results what thesis which that it’s our shareholder cash been, remains need flows and we shareholders. back

to What all vertical tangential vigilant to for all those invest in that we a means or new of is to stay be other it them having potentially. includes diversified business and to can businesses to of a we add our We them. much as verticals, which opportunities as need model, need

diversified environment Insurance spirit the market. having company rate a regardless the in or that of or of functions Again, the environment the market

our volatility have focus managing the an on low increased going we that are diversification, increased think on So focus I risk businesses. to an and across

So it’s really evolution. an

the did I and think today the historically, differences to we Mark that kudos of and that’s than one have we team.

better much at are growth. We organic

lean that. continue to So we to are into going

new are We and to going markets look continue new organically. expand at opportunities to to

in We allocate multiple capital ways.

are we One that to growth need the of to P&L doing we through have we that of investments communicated then this And are tactically which to businesses strategically continue and as focused is going P&L, more new the really through deploy that focused, generate transactions, earnings excess into M&A. we we and because looking the opportunities capital generate in daily. lesser as at people have through

Matthew Breese

Appreciate all that very taking much. Thank my for you questions.

Mark Tryniski

you. Thank

Operator

comes Our Chris next of KBW. ahead. O'Connell question from Go

Chris O'Connell

it kind Mark promotion. seems keeping this well yeah, still back margin it Dimitar to coming quarter Good margin past a into it ended do year. I have pressure that some good year is you been around I you guys of here of on the the the as current like the it hoping congratulations discussion. of do under doing some morning, think to your the to the really as held levels? half margin up sounds and pressure where keep like given circle in mean, job mean the I less the retirement and and year-to-date, the can was held you back you I you back margin more or mean, to remain expect June. of spot of the in half or funding there’s up

Joseph Sutaris

Yeah.

base. going just which -- our of expectation to, strength at kind our is of sideways funding call resilience it, outperform this our for flat and couple will point think of, the of is market Chris, I I because rest of potentially think, I the the quarters, best say, a

we in costs the slow those the are healthy If pretty the they significantly. pressures that a turnover. still XXX-basis-point be abate, at meantime, the expectation over with abate, a clip do Fed In the rate at which turning increase will on loan basically and portfolio do would which XXXX pickup pauses funding the

we So expectation look will beyond. interest hope NII income the and net hopefully improve XXXX is that as and into

where a today, and the on points go a sideways. down on rates we are that we maybe fluctuations. the there’s is quarters, But obviously, of But points it’s few direction, the go based NIM, don’t basis couple of would effectively couple generally sometimes next but sideways basis expectation one maybe in

Chris O'Connell

roll-off? Do versus securities more risk given it. lack Got in think the the quarter compression the you third there’s that quarter fourth of of

Joseph Sutaris

borrowings. of that mentioned, the expensive and more We from typically fourth hopefully funding some in reduction have third a I as roll municipal quarters the and side some in, should allow overnight the for in quarters

kind still QX. but flat, are we see QX further don’t signaling again, -- erosion of in versus I potentially So

Chris O'Connell

like what’s the the the or average Got the of book versus blended it. portfolio? deposit rest municipal of cost And

Joseph Sutaris

question, frank, but to see… let’s I up, be it perfectly It’s Chris. fair need a But it’s, to look

Mark Tryniski

should have You kept that.

Joseph Sutaris

front is… but not breakout am it the me, have of certainly I Chris, I in sure

Chris O'Connell

Joe. Okay,

Joseph Sutaris

… overnight much and more more, less that deposits of slightly than than certainly IPC the it’s borrowings.

Chris O'Connell

Okay. And outlook. businesses the adds I I fee there. at for are potential looking M&A guys the just know on mean, actively you and

traditional the side, M&A pursuing you On are environment type of seriously overall the, in actively the at early any bank call M&A in in this traditional the opportunities disruption opportunities, kind and you just you those seen time like April? have that happened of in March given seeing opportunities kind slowdown pickup of bank March the it, are from and or

Dimitar Karaivanov

a more is side, little would sellers the think, a engage in being it, on to call sense I Chris, in there slight bit bank willing I of uptick, discussions. of the

quarters, to like. which for looks past lot think as the margin a I balance sheet couple the what what looks the the have have of similar like, got to is you there they what of unknowns done remain challenges

period XX%, can that sheets cycle going simple when this are price on and that’s for couple of consistency, of down showcasing is that think terms of balance quite drastically given earnings focused in we and matter our are first short foremost, a change earnings quarters some what the of to in the pretty in us, XX% that to is a in I of results. value time, hard stream

one So I challenge. that’s think

there for is of challenge a mark capital not you second lot left folks, once is the sheet. balance think I the of

essentially to deal for have we twice. So pay the

of stomach especially pretty to the opportunity. of are the on hard size challenges depending some those So

a of for figure base, out out it’s a us transaction to competitors again. given pointed the very today’s starting a hard the call the also sounding you around announce high when bank start it’s looking environment does Joe number all to deal like to to that in wisely, do rate deposit and bank that As or signal what yet customers

arms your around. put to hard of kind that’s think I So

hurdle the is, that come the last transaction Clearly, bodies. unknowns of a in the to regulatory transactions with these terms a closure from of uncertainty piece there’s of And as the then all timing higher days.

lot to you retaining the creates you a transaction, that of in customers. know going for that pay pressure more having clients, puts another challenge are to terms people, close when and retaining on don’t So our

now. another of risk So reward that’s that and unknown unfavorable that’s creating right really kind

continue to With we said, look. that

On up than we expected holding sheets franchises others. the side, their and some are flip now than that know better balance better

we that something that’s long will better time, in we and So a are be hopefully and a going remember opportunity to for environment. when the active comes,

Chris O'Connell

I appreciate my taking Great. Thanks questions. you for time. your

Operator

to Mr. remarks. turn question-and-answer any for I would This conference over concludes closing session. the to like Tryniski back our

Mark Tryniski

a conference time the one see for you. joining have you and guess, summer. you you and Thank hope call, all rest last October I Thank all I in our here again will great of

Operator

concluded. Thank presentation. attending today’s The has you now conference for

may now You disconnect.

Community Bank System (CBU) 31 Jul 232023 Q2 Earnings call transcript