Community Bank System, Inc.

Q4 2021 Earnings Conference Call


spk_0: the morning and welcome to the community bank system fourth quarter two thousand twenty one and it's conference call all participants will be in a listener remote should you need assistance please to go cough and specialists by customer starkey followed by zero please note that this presentation contains for looking statements within the provisions of the private security litigation reform act of ninety ninety five in that are based on certifications estimates and projections about the street markets and economic environment and was the company operates such statements evolve risks and uncertainties that could cause actual results to differ materially from the results disgustingly statements these risks are detailed in the companies in a record point nk start with the securities and exchange commission please call presenters or march risky president and chief executive officer and joseph to terrorists executive vice president and chief financial officer we will be joined by joseph serving executive vice president and chief petty officer for the question and answer session
spk_1: gentlemen you may begin
spk_2: like a jet the morning everyone in thank you for joining a year and conference call the hotel room as well earnings for the quarter very good right mind with our expectations be delivered record revenues and nearly record peking opera share i would love six percent with the twenty point more or joel comment further on the quarter but i would like to add the x tpp we had solid dup drop in both are commercially and our retail portfolios which runs
spk_3: or eight percent lives for both cute three and you for
spk_2: looking at the whole twenty twenty one we a really good year the odyssey the results were favorably impacted by reserve releases and ppp the cardinals out we still deliver solid earnings and absorb nearly all of the margin erosion of which is not that insignificant our deposit growth for the air was fifty percent with both cars mccown an average bounces contributing long longer through the entire year x p p with five percent of a commercial flat out to consumer up a percent the striker our financial services business is continuous for the year rubbing his rough twelve percent to protect earning up twenty percent over twenty twenty resulting significant margin expansion are also during the year we close that to benefits acquisitions and five smaller insurance businesses yeah position of the my or savings bank be announced in september is progressing well they expect the clothes on their transaction que to i'm irish the six hundred fifty million our effort bank with twelve offices across the southern tier finger lakes regions of new york state that's to very nice franchise with a very good mortgage business the we expect will be fifteen cents for share creative on a full year basis excluding acquisition expenses so a very productive low risk transaction looking ahead to the remainder of the year or we have significant energy and operating momentum right now and both our banking and that banking businesses margie continues to be a had when but rts like growth factor of financial services businesses the credit or talent he had begun to focus and invest in our commercial retail businesses to improve organic execution to two people systems and products we will continue to invest in our digital channels and ration that are analog channels as we did this year with the consolidation of fifteen retail branches organic execution and are not banking businesses who has been tremendous that we will continue to look the acquisition opportunities while draw the product breath talent revenue in or
spk_3: the strength of those businesses
spk_2: and given the recent an expected ongoing challenges to the banking industry we are hopeful to have a high value a deposition opportunity this year as well we are very much looking forward to twenty twenty two job
spk_3: thank you a good morning everyone is marco of the fourth quarter results were solid with fully deluded gap earnings per share of eighty cents the gap earnings results for six cents per share seven seven percent below the fourth quarter twenty twenty gap versions and three cents per share a three point six percent below quarter third quarter results fully deluded operating earnings per share which excludes acquisition related expenses and other not operating revenues expenses for eighty one sense for the quarter four cents per share or four point seven seven percent below the drivers were quarter and two cents per share or two point four percent below length or third quarter results the decrease in average increase per share were driven by decreases and the provision for credit losses operating expenses income taxes and fully diluted share don't see any offset in part by increases and editors income and on interest revenues between capital quarters the company of are already two point two million dollars in losses in the fourth quarter twenty twenty one it's compared to a three point one billion dollar net benefit for written for credit losses or twice twice
spk_4: i adjusted pretax precluded a net revenue per share which excludes the provision for credit losses acquisition related expenses another not operating revenues expenses anything taxes was a dollar nine in the fourth quarter of twenty twenty one is compared to dollar for a year prior to our for a link third quarter apple your bases the company reported fully dilute gap and operating earnings per share of three dolls and for a sense of freedom and forty nine cent respectively he's rock forty cents per share with thirty percent and twenty five cents per share or seven point seven percent respectively over twenty one you thought oh you're twenty twenty one adjusted pretax free provision in revenue per share of four hours and twenty cents with up two cents per share over to my twenty result the company record total revenues of one hundred fifty nine point seven million dollars in of what we're up twenty twenty one a new quarterly record for the
spk_3: company a nine million dollars six percent increase of the prayers were for
spk_4: the increase in total revenues between appears was written by two point three million dollar or two point five percent increase in net interest income a one point six million our eleven percent decrease in becky related managed to seventy five point five million dollar key point two percent increase in financial services revenues are set apart by a zero point four million dollar decreasing again and that extinguishment total revenue from two point eight million dollars or one point eight percent with third quarter twenty my mom results driven by three point one million dollars or three point four percent increase in an income total nighters revenues account for forty percent of the companies total revenues and the fourth quarter
spk_3: the company's managers income increased two point three million dollars or two point five percent of the same quarter last year despite a significant decrease in its net interest margin the company's taxable and editor's margin for the fourth were point twenty one was two point seven four percent of the her to three point o five percent one year prior a thirty one basis point decrease between occur it's comparatively the company's tactical and editors margin for the third quarter twenty twenty one was also two point seven four percent although nitrous margin results remained below the pretend i'm iq levels the copies fourth quarter editors income expanded over the prior years for quarter and link third were results for who by non ppp related again no role the point of access to fully from low yield cash equivalents to hire your as insecurities securities er yes of growth and reclassification of several large business lending relationships nautical to uproot stats the company's taxable and yield on earning assets was two point three percent fort worth four point one matching third quarter results at three point one eight percent and prayers were quarter going to footwork twenty twenty one the company recognize three point six million dollars
spk_4: the interest income including three point three million dollars
spk_3: of net the for a long fees this to care for three point five million dollars of tpp related interest income recognize same quarter last year and for like three hours like third quarter twenty twenty one the company recognized the keep point seven million dollars of tpp related interesting come into my flying on the company's holocaust fall for me low averaging a basis points during the for
spk_5: quarter twenty twenty one
spk_3: employee benefit services revenue for the forecourt y twenty one word thirty point four million dollars three point seven million dollars or thirty point seven percent higher than the fourth quarter twenty twenty a prevent revenues of to make races employee benefit trust the custodial faith as well incremental revenue or core acquisition of fringe benefits denied of minnesota wealth management revenues for the fourth work twenty twenty one roof eight point five million dollars were equally likely not up from seven point by willie nelson fourth quarter point twenty the one billion dollar were thirty point four percent and increasing wealth mantra revenues was primarily through by increasing the best management interests services revenues and church services revenues of eight point five million rubs zero point nine million dollars or less than two percent over the prior years for for driven by organic growth factors in a third quarter acquisition of of boston a special be my insurance practice banking nanotubes revenues increased one point six million dollars or eleven percent from fifty million dollars in the fourth quarter my twenty to sixty point six million us and for clerk twenty time on this was driven by one point two million dollar increase in mortgage banking income and zero point five leno or three percent increase in deposit service another banking fees
spk_2: for the fourth quarter twenty twenty one the company a provision for credit losses two point two million dollars this represents he disappears with three point one million dollars benefit the provision for credit losses or fourth worked much money the company for it not law charge offs of one point seven million dollars for enjoy nine basis points of everything else getting during the fourth quarter twenty twenty one and stupid and that charge offs
spk_3: at one point three million dollars and a like seven basis points of average lot of any for the poor poor white wine other economic forecast for me generally stable during the four four points my mom his by the rapid spread of the coven own cranberry companies allows for credit losses good grief zero point four million dollars reflective of a
spk_4: hundred sixty five point three million dollar increase in an ppp loans outstanding another quality factors comparatively the fourth quarter twenty twenty economic or gas and improved significantly from the prior for resulting in a release of credit reserves and a quarter of all your bases the company reported to point out in charge of or for basis for
spk_3: points of average loans outstanding or twenty twenty months occurred five million dollars an hour long charges or seven basis points of average formed outstanding tory twenty twenty hour for your bases the computer forty eight point eight million dollar net benefit the provision for credit losses of the economic outlook and alone portfolios attic bali profile steadily improved
spk_4: the company forty one hundred point nine billion dollars at elaborate expenses and a fourth quarter twenty twenty one compared to ninety five million dollars of total operating smitten a prayer for quarter to five point nine million or six point two percent increase in aberdeen expenses was primarily a to a four point nine million dollars eight point five percent increase in salary to play
spk_3: and if it's true by increases in merit in it's in of related play way to staffing increases due to recent acquisitions higher payroll taxes including increases estate related on climate action and hiring employee benefit really expenses acquisition or lil expenses were also up your point four million dollars between accountable and of course depending how my myra savings bank acquisition and other recent financial services acquisitions effective tax rate for the fourth quarter twenty twenty one this point three percent a twenty one point four percent on a whole year basis up from twenty point nine percent and twenty point one percent respectively from people who prior periods increasing effective tax rate was primarily attributable to increase a certain stage income taxes that were next to the puritan a decrease in a proportionate tactic that revenues information couple hundred years the company crescent fifteen point five billion dollars with a laugh at during the fourth quarter driven by the continue to both deposits which increased a hundred eighty seven point three million dollars or one point five percent from the in the third quarter ending loans in december thirty first twenty twenty one were seven point three seven billion dollars ninety one point one million dollars or one point three per
spk_4: sep hired in the third quarter twenty twenty winding asked a seven point two eight billion
spk_3: dollars and forty two point three million other zero point six percent lower than when you're fired excluding ppp loan activity any will increase or hundred sixty five point three million dollars or two or three percent going to for four point one one three know thirty four point five million four point eight percent on a for your basis lo del sitting and ppp won't have grown organically them more than two percent of the third and fourth quarter to twenty my one as of december thirty first twenty twenty one the companies bid it's lenny portfolio put seven hundred twenty two pp people from the total thousand eighty seven point nine billion dollars the company expects to recognize the majority of it's remaining net to for tpp feast only three point one three hours over the first and second quarter to twenty twenty two
spk_4: although the company's love using cash movements remain elevated tolling one point seven two billion dollars at december thirty first twenty twenty one the company deploy significant portion of it's access to put it where the for quarterback for six six hundred sixty million dollars
spk_3: of investment security that a weighted average purchase shield of one point or one percent these activities continued into january with the purchase of an additional seven hundred fifty seven point six million dollars of investment securities at a weighted average british don't want fucking by six percent the company's capital ratios remain strong in the fourth quarter the company's tier one leverage ratio with nine point nine percent of december thirty first my twenty one which is nearly two times that well capitalized regular for seater of five percent on the net table aqua didn't take last it's ratios eight point six nine percent of december thirty first my twenty one company has an abundance of liquidity the combination companies cash cash equivalents barring of elite the federal reserve bank for passing federal mobile banking on flights available for sale invested securities for calling provide the have six point six three billion dollars of immediately available source napoleon at a poor quarters tibet december thirty first my twenty one copied love for credit losses for the forty nine point nine billion dollars or zero point six eight percent of the long helps any this compares the forty nine point five million ounces your pick six a present a toll on delphine in the third quarter twenty one one sixty point nine million daughter your point a to percent of the a lot of gaining and december thirty first twenty twenty zero point four million dollar increase me laugh for credit losses during for cars reflective of non picky p really long rope another me to factors nonperforming loans decrease in the fourth quarter the forty five point five million dollars a zero point six two percent of moved up and down from six the seven point eight million hours or zero point nine three percent won't have any at the end of the league third quarter pointing my one and seventy six point nine million or one point or four percent at the end the fourth quarter twenty twenty the significant decrease in nonperforming loans story that workers primarily due to the reclassification search hotel room for not equal status to upgrade status
spk_2: last thursday night a delinquent told zero point three eight percent of total on doubt sitting at the same for thirty first y twenty one usc of curses your point four seven percent one year prior to your poetry five percent in public third quarter who believe that the company's ethic bother me strong but acknowledged that historically low love of levels of net charge of experience and twenty two
spk_4: anyone and generally benign credit environment are supported by the extraordinary federal state government financial systems provided the businesses and consumers throughout the pandemic looking for we approached by the momentum in our business business
spk_3: companies generate solid organic know roth and twenty twenty one as nothing the third four quarters the financial services business have been growing performing very well as a quality remain strong we've been active in employer excess of poorly an interest rate of climb in recent weeks a twenty twenty two will remain focused on new loan generation will continue to monitor to mark the consistency get his lap or to listen why excess liquidity and lasted echo park comics we're pleased excited party know my savings bank i'm irish been serving his community for one hundred fifty years that we won't hands are presence and five counties in new york southern tier think are like reading regions we initially anticipated completing the acquisition in late first quarter twenty twenty two been but for the second for twenty twenty two the integration efforts are point very well and we sincerely appreciate the efforts or a colleague that on my receiving make the make the transition it seems possible horse hustlers thank you i'm not heard of back to channel life of questions
spk_0: thank you we will now begin the question and answer session to ask questions you may press star than one on the telephone keep that if you're using the speaker phone please pick up your hands had before crossing the keys withdraw your question we may press star than two at this time we will cause momentarily to assemble our austin and the first question will be from alex toward off from five percent less to go ahead
spk_6: a mining as
spk_7: one young woman a out
spk_3: it worked out bomb was hoping that you get out for your comments on the young the essence a putting in the course on retell i landed teams as hoagie the common a little bit on the pipeline going into the yeah the beginning of the or the sustainability of that keep percent overall organic while growth our next couple of course
spk_8: get alex joseph and i'll take an arm a good at a commercial pipeline also get to me via was the mortgage pipeline is wall so are the pipeline for twenty twenty one december twenty twenty one ended at at three hundred and forty eight million dollars is usually three hundred thirty five million dollars as good as compared to december twenty twenty which was at one hundred and thirty six million and then the he anticipated funding for a long has been approved what they are funded for twenty twenty one it's a hundred it's three hundred and forty eight million dollars and for twenty twenty it was two hundred and twelve me dollars that it was across all of the or is across all of the region's so more than others but everybody seems to be participating by in in the activity and much of that coming by way of crv or multifamily well as some more self storage kind of activity see it i activity so up a a variety of over a dog lending opportunities and that and the young consumer side he was mortgage fight like that one hundred and forty one which is a little light of the will be were the same time last year of one sixty five when i'm not concern or and of that would reflect reflection of our improve process toward getting things from the play for to the follow faster which therefore will not surprising that the united the one sixty plus are they are wrong and number days it were turning it takes to of there are improving so i feel real comfortable with with the activity in the present pipeline as well
spk_3: read and i can you are putting loaded on to the blended gilts a new loans and and was there some in the fourth quarter was there some as rough access and out and says that are them those ones that were are not cool that were trying to the filing status
spk_2: the eye to eye alex is jealousy terrorist like i can take that question ah saw the blended arm of knew that are you in the fourth quarter was about a three thirty give or take ah
spk_4: yeah with are blended
spk_3: current got keeled excluding ppp in the fourth quarter of about for so we are putting new long time into rates below their think the existing an existing yields our but obviously that your the volume and aggro has been has been very good and the last last couple of quarters but that would putting my mom or three thirty with respect to the
spk_4: the nonaccrual loans that need to a status during the quarter ah
spk_2: we bumped approximately million dollars of interest income related to ah
spk_3: he don't to those laws coming movie from nautical stance who pills das and a corner
spk_9: short while question as like them liquidity the coin and had to think about that is in terms of sort of a target liquidity level or deposit balances or you to go up to he with the longbow shakes out and then sort of stop up the other rests with security balances or as maybe give us a salmon you at you said that you did purchases and january the kind of how can we think about the pizza liquidity and deployment over the next couple course
spk_10: yeah so we we still have been some modest amount of a poem open strategies for you know some of the
spk_2: tom terms that with that we like even the securities portfolio sylvia we stay at those levels i think it's fair to expect another call it you know half a billion or so to the invested over the the first the first part of the year are but your point yes will be monitoring the loan portfolios as well
spk_3: get ya to see with a girl expectations i'd heard of obviously you're monitoring were or a curve is going as well so what we're really trying to to target a alex is also did to build a nice cash will later on the skiers portfolio i going out and future period so there are other opportunities what you're wearing if rates will stay higher and higher will have opportunities to reinvest some of those and your on and on our basis
spk_4: so we probably will maintain some you know some levels of with could lead to continue to retain your higher levels than we have certainly prepare namic of are also looking at employ
spk_10: it will continue to deploy some of that at net additional liquidity i've known him for snap of year
spk_9: thanks for taking my questions
spk_0: what
spk_4: and the next question will be from russell gunther from the a davidson please go ahead i get bored you guys are just that had a quick follow up on the growth conversation to appreciate the pipeline that were provided abbott was as as really strong growth in the back half of the year so could you give it a sense for what your organic growth expectation is for twenty two and with them or the asset class
spk_8: drivers would be and i just particularly curious as to that they are fucked around retaining single family at point russell i'll take that it's joe servants of skills me so the the overall expectations are that within to grow
spk_11: oh i'm in the euro with single digits overall
spk_8: again go the expectation army commercial side of the we will grow and imagine some the esa classes from earlier the better we we are focused on and in heavy focus on not only to detail products or to retail minds the install a loner more importantly be direct in direct loans as well as the ready mortgages we expect them to continue to grow on the probably a slower pace than the have historically oh you know we have because i'm in inventory challenges with houses and cars and of course the anticipated rate hikes from with the impact to a kind of head when they may provide a so
spk_12: i'm better we expect for overall growth and portfolio girls and good in we do expect to retain our
spk_3: mortgage is under they aren't you
spk_2: i would like to add add rivals mark
spk_3: i might ruffles clark i don't i just wanted and i did in my prepared comments god
spk_2: said that we've had begun to focus and interest on our and are commercially and already tell businesses to improve organic execution dumb to put people systems and products so we are
spk_3: you're investing in our mortgage business while in different ways around around products from people around our top model or mortgage model
spk_13: which is always been more branch oriented
spk_2: and less
spk_3: no more mortgage originator the focus on so we're gonna reposition that a bit of we're also investing in our commercial business in different ways and some of the markets that we're we're already in
spk_2: the with that improve resources
spk_3: also pursuing other adjacent in a market that have the superior the of growth potential characteristics relative to our our just the market so are we are making an effort this year to live chat to do better job a row bad girl better over time by investing in our are organic execution billy jo it matches kind of the days to close unwanted work inside
spk_14: oh we've added some resources that were mortgage business in the in the back office to try to keep that note to keep that dad those days down
spk_3: because in anticipation of you know some of these investments are making the mortgage is israel people and our model where the head of respect more blood and so we're going to need to have more backroom capabilities of which with all our already started to to ramp up a bit so that explains is joe said why the in the yard and like once that the average days to close it also down there will get through the the ball quicker and the just wanted a fellow for their common i'm kind the the invested wouldn't be making in now john crossed our commercial am
spk_9: the mortgage business gear and point one two
spk_4: i appreciate mark thank you both for the fall of thought they are and then you're switching gears to the margin that you mentioned that and prepared remarks made the head when you guys detailed the and a new money yelled out versus what's coming off a curious how you balance that with what the fed might do in the impact
spk_2: oh of rate hike on on your outlook so could you share kind of what you're expecting from a fed rate hike perspective and half
spk_3: it's twenty five basis points your of impact the margin her and i hope you guys when a sega crack at that
spk_2: yeah well so this is a josie terrorism will take a shot and so forth for on a full year basis
spk_3: between variable rate loans and loans that affectively a pre her up a principal payments and an hour prepayments of last ah we expect a little over two billion dollars to to to have billion dollars of our call it repricing opportunity in our pool on a full year basis so you know when and if the fed does raise rates and i think we're kind of the camp of everyone else which is we could see three rate hikes this year maybe maybe some more and and twenty twenty three ah your will have the opportunity to decline the curve it long and goes up or the middle part of the curve goes up a bit i just because that's where most of our new long generation wise to and obviously we have you know some some variable rate loans that mullah immediately let thought the floors most of them
spk_15: ya and the next twelve months and a variable rate loan the about eight hundred and fifty million dollars that we expected that reprice in the next twelve months and another how eight or nine and v twenty twenty three and very portfolio so i think we're going to have your some opportunities to ah
spk_10: you know to to ah
spk_3: expand ah
spk_4: margin when are they afraid to go off and we are as had sensitive are also remind ah
spk_2: do that and had a group that ah
spk_3: br deposit data in the last several cycles sad thing he batted fifteen to eighteen cycle
spk_4: i was very close to to zero for most of the cycle so i you know when you break for we respect the the martian how come to to to get a bit better for us
spk_16: thank you joe i appreciate it and then just last one of six years with appreciate your guys thoughts on the revenue growth outlook within the employee benefits line and
spk_2: a trends and activity your see him for twenty two up step back thank you
spk_3: yeah i'm well with double digit growth the sheer on the top glad the was twelve percent the protect hurting the line was twenty percent the we also love achieve that last year's well double digits on top and bottom line
spk_2: after every year we do that we always say to ourselves to heat up at what point does this year slowdown in it doesn't he doesn't seem to sell you know i i am optimistic we can continue to grow ah ya the top line at at double digits i think we're pretty well positioned do they actually had a
spk_3: in the twenty twenty twenty two top some of those revenues are or market dependent and so there's some impact if you you know if we get a significant slide in the market that would that would impact some of those revenues
spk_2: and the other hand insurance markets hardening and so you're going to get you know that that the benefit from the gardening and each are smarter than the other benefits business just we we have worked where the sweet spot right now about it's business where we have the ability to serve larger players and some of those are very large ah financial services then says which are coming to us to outsource their ah
spk_3: administration and record keeping a custodial that custody but trust
spk_2: ah aids in so we're getting we're getting
spk_3: we're getting incoming opportunities of significance in that space right now which is which is great and got us and partnerships with some very large national and multinational of financial services organizations
spk_2: that
spk_14: have your have have come to us that tend to help some of some of their
spk_2: meat dishes as well so they're that the is this is just organic growth in that business world were really good spot from the scale that business that our our capacity to serve up the a much larger very large god national in multinational financial services firms in terms of what we do and the product so
spk_3: as as and capabilities we have those businesses so you know what started as a catalyst for like a shot twenty years to grow ago has evolved something much more sophisticated and complex where incredible
spk_2: technology and capabilities that our now leveraging and too much larger opportunities in the marketplace i would i would expect that business as well
spk_3: will grow a double digits next year as well so they will keep investing in in in those businesses that a great businesses
spk_4: you know them
spk_2: run rate this year should be about two hundred million in revenue it's for a non banking businesses and
spk_0: that we think that the twenty two will be are also a really good year across the board
spk_17: i appreciate it marked that ya protecting my question
spk_3: of
spk_2: and the next question will be from matthew greece from stevens think please go ahead
spk_3: on and a i just don't actually marina
spk_2: start and just go back to the rate discussion ah it's helping you to give a sense for the duration of the securities book and what percentage of securities are floating rate if any and an attack on you know just that hundred basis points and income sensitivity model in your tank q what deposited a beacon
spk_3: the i i'll take them at this is jealousy terrorists so are the effect of duration of the portfolio she's just over seven years
spk_2: you're fairly well latter it it's it's sap almost all are fixed rate
spk_3: the security's with the obama tigris security lot of treasury securities we do have some some mbs ha security that provide a variable cash flow but their net
spk_18: variable obvious permits they're just just the at half most will change over time depending on the prepayment novels
spk_3: but it's yeah i think it's fairly well latter i'm so we will have some opportunities
spk_10: ninety two to repricing and purchase new securities is as young as time passes and and else rob internet which of your second question was yeah and the health and your prior comment we we discussed as a reminder
spk_2: for the last cycle that possibly do which causes europe
spk_4: and i was curious in your tank you know we show that and editor's income sensitivity if if behind god that data are you running as your percent better what are you assuming there
spk_3: we we have some modest data built in math you know as opposed to zero through you know through the hole through the whole cycle but it's but it's very modest yeah less than probably less than a tan arm in the in the model
spk_19: the are just based on our past experience we we have very little love the beta i'm and we would expect to be somewhere for the cyclists well and i would just add that your the whole industry is awash in the quickly
spk_3: so you're from a competitive standpoint as well and expect that does ah given that when we might not be as compel of this cycle for for deposit literally in the cycle as it wasn't last cycle so i think our ability to keep deposit rates are kind of near their their their current levels in you know no one hundred or two hundred of the whisper ah furious is very reasonable reasonable expectation got it okay
spk_20: yeah my next one is your industry wide restarted see some some pretty larger banks changed our to receive awfully tight overdrafting and as app
spk_2: ah i think you're some hear that see if people could be just a little bit more impactful over the coming months and years
spk_3: just curious how how you look at auditors he's if you feel like there's anything at risk and if so how would you kind of an outline yeah man i think we're wrong
spk_2: yeah i think we're really in it in a good position from the standpoint of our are checking deposit base on your historically going back
spk_3: i guess it's been about fifteen years we've been we've been a free shot per se for for retail customers and your kind of alone activity charges on even on our on our commercial businesses so he'll if you know if we if we modify practices going forward for ah you know overdraft outcomes be a week potentially could go backwards it in terms of the revenue item but i think we also have you the ability to to make up some of that another other areas of deposits are as be so i i feel like we're we're fairly well positioned we are certainly evaluating our been all of our offerings and him looking in keeping an eye on all of the ah no changes in the regulatory environment so it's certainly on a radar and and i know we expect the
spk_17: here we will probably make some modifications to add to our operate but we also think well positioned you were aware of some other institutions that certainly had your column monthly maintenance fees per se and ah you know how you know overdraft
spk_3: these that were you know palm significant and at least where the position where i think our our maintenance costs and activities or are lower than i have and some are pure silly might be some don't make up some of that lost revenue as we we change your products and
spk_2: okay let's went from a distant share repurchases
spk_3: looking back i can't remember if if you know her and in the years i've covered you if i remember a quarter we've actually repurchase stock but as hobby you could you could just walk through what triggered that capital deployment strategy was it was evaluation driven or was it more from the standpoint a you executed on everything else including longest and been a security growth things like that get mad at petsmart i'll i'll i'll come on that when i think you're right we haven't shot a startling my back last acts one of things i can walk into for a long time was was just day i thought that housekeeping a clean up of buy shares issue either the employee equity
spk_2: not a lot but i just the it is a of housekeeping i would call to clean up with
spk_17: and now we finally got around do it will probably see that going forwards so was really no rhyme or reason other than that it's not some it out
spk_3: detailed scientific capital allocation strategy it just kind of more of a good hygiene let's sell it's clean up the sheriff free associated with up ah with the equity plants overtime as a probably continue to see that in the future
spk_21: okay
spk_22: we should expect that like a once a year clean up
spk_0: but i think we're man we would we'd pick our spots over the year and bam you know that do it you probably know incremental bikes
spk_23: over the year but i think it affected your for your bases were looking at is you know clean up the big the creep which is to create a five hundred thousand shares depending on the year making them less
spk_0: god okay great prefer eating my questions thank you
spk_23: like that
spk_2: and next question will come from chris o'connell with kbw please go ahead
spk_3: are the morning gentlemen brown said is slow start off the email with the expanse days on and yes obviously and you know rationalize the branch network and know quite a bit over the past twelve months or so and and was just outside of the almere a deal with this wondering about and i how much that opportunities laugh and die in general i think about you know organic expense growth that into trying trying to
spk_2: yeah chris senator it's a good question fair question so on your run right the last couple of quarters on our property expenses was about one hundred million dollars i would expect that noise we looking at twenty twenty two ah yotel to potentially at a couple hundred and expect to me a couple million dollars to to that result and we'll certainly he wanted by into que to excluding the on myra opportunity we tend to give our mirror they stay increases at the beginning of the year so yeah we also have higher payroll taxes and the first quarter so i think you'll see most of that sort of are achieved in the first quarter so we know couple million millionaire
spk_3: dollars on top of what we didn't the last couple of quarters and in that sort of becomes our our run rate so you know with wage pressures are you know we we would typically damage north pole the three percent kind of expectation around our be expenses drop it it's probably closer for five with that you'll certainly with wage pressures and net
spk_2: the market were also investing in some long generation resources which will they'll have it love at the cops casa sweet as we move ahead
spk_3: but you know nothing too far and the ordinary just a bit higher on the i expected run rate with respect to the default are opportunities to rationalize the business i think will continue to look at those ah you they do take a little time to sort of taken to the hop acts between to announce any sort of our rationalization ensign and execute on am and and ultimately you know you realize those those games over over that the future periods of the say that you know critically the occupancy in equipment expense line items been pretty flat the last couple years pretty good because of been some of the consolidation activities
spk_23: i'm in the last thing i noticed that you know are we continue to destined digital technologies so know the expectations are going to continue to do that the other world is changing and we're trying to keep pace with that but that changed so obviously the telecommunications a nike expense line item put the creep up a bit more and kind of the core
spk_24: my rate for for prob
spk_2: expenses but the know thought the occupancy those types of boss will have will tend to be are probably below the court the koran right
spk_25: great that's helpful and and then suddenly new mention the prepared comments on yeah they would be looking to do it becomes the another deal on the next year i had the opportunity presents itself and if if if you to discover reminder of you know
spk_2: in a low do the ideal size and in a geographical landscape or and you know that and for your loan generation capabilities cetera you grant for under for an ideology yeah transaction that be great church mark the i think ah a billion two billion is a is a good sweet spot for us
spk_26: either
spk_27: yet within our footprint or
spk_3: contiguous to our footprint
spk_2: high quality franchise good culture
spk_3: that a fixer upper ah something that has
spk_9: yeah valuable asset that are under appreciated the market that could be a mortgage business that could be well which is interesting to me if you look at some of the backed out there and that size base at least in and around our markets the northeast generally there are some really really good go into two billion dollar banks with really good well as as as their trade nine times earnings so i think there's a lot of opportunity i think your best a like that are as have a challenging time getting up a multiple in the market for a job variety of reasons and so
spk_4: a they you know with are you know currency and family background and expertise in history of value creation for shareholders including those so we your partner with ah i think there's a good job opportunity
spk_2: and twenty twenty two to find something that the outfit that kind of ideal criteria it's amplifier going few ah and then what about i'm you know on the nonbank side you know within the t businesses can just give us an update on a good at me he ain't the couple smaller acquisition to over the past couple corners there is there and i still get opportunities presenting themselves are being a little bit priced out data that you know somebody entrances you know team competition in those cases
spk_3: yeah i think the yelled the insurance faces is pretty still to be at the very very fragmented market and tell in that space scale makes a difference ah so i think will continue to have opportunities in insurance space of we've never done a lot and wealth in terms of larger acquisitions because they tend to be overly expensive and you don't really on the assets so we're we're a little bit cautious in the well spaced what we do in the well face is we bring our small offices i get one or two or three yelp three folks at a team and they have a couple three hundred million and will be of run them are it's it's data me because deposition but ah so we've done we've done so those in fact that the you're looking one or two right now all along those lines and what was done the while says that were you consider had traditional larger acquisitions the more a smallish up shops that are jumping and our platform in there is a good amount of possession of that for them
spk_2: is it part of that sometimes structured as a sign on bonus kind of thing join the benefits space ah the the couple we did last year were both negotiate transactions they were that have been p
spk_3: the your we have a lot of relationships and across the us
spk_2: ah any porto rico we either lot of as benefits provider and their catalog before we go sweet a lot relationships and the of not everybody wants to sell to be a for obvious reasons ah so i think will continue to have opportunities i think we will probably see other opportunities will we get to go up for her after to get shot to job and daughter world in which case we will have a harder time yeah beating v just like the based on price lots of it was really particularly i got to asset for us for some reason
spk_23: but you know what keep playing with been close ah the couple times
spk_4: so we'll see me one of the challenges frankly is he busted backers for the p firms kind of like the each other and
spk_23: you know they like to do business with a key part because a lot more to do with that vs you know costs where it would that you're quite is active were not in the business of buying and selling assets so he battled back years kind of favor the p beds
spk_8: it's that makes a little bit more challenging so but i mean we understand the the the field of play as yeah we do our best to play in it without ya being on discipline of i think a real opportunity is gonna be focusing on those negotiated for indexes would have good relationships and and good assets is well as this opportunity kind can reach up market taught to be some of these bigger financial services players and in leverage job there scale to create opportunities for us
spk_28: great and i didn't my credit side in get good to see the in on a trunk and on a creole the are coming back and a cruel this quarter and as you guys look ahead over the next quarter activities or any other ah you know significant sum so kind
spk_8: classes are both elbows six month periods add that are coming up that are coming up here that you can see another you know sizeable chunk of i've been on a girl's gonna come back on
spk_29: two christmases joe philbin home
spk_30: he added the the the that eighteen sure that that we moved bomb or the obvious ones is a couple others that that are not of number of significant sides first of all both secondly there there's a few that i didn't have that you will six months worth of performance and
spk_4: and even the made us comfortable not to move on from not a cool to a cool
spk_31: oh but i think that it's it's we go to the second quarter we'll reevaluate them and as we go to the third quarter will do the same thing it rewards moving on will move them but there's nothing there's no large
spk_2: oh
spk_3: number of the efforts that we're looking to move
spk_2: the booth move to place in december
spk_3: and or said and and last one is a little clean up that hot how you seeing the tax rate for next year
spk_32: ah the tax rate mom i think a third expect somewhere between scullin twenty two and a half and and
spk_33: twenty three to happen i going forward a society we fed certain sites that enacted
spk_0: no higher rates and and similar merging with their also if you look at the
spk_34: ah balance of our ass or to assets is morasses deploying and on in taxable assets in there have been in the past so i would expect the the rate to kind of but you can have a between your called money to have to treat house or potentially low the lower
spk_35: but the it's i think the fact to case you from twenty to twenty him
spk_36: great a stag magazines
spk_37: backers
spk_2: the next question will come from eric zwick from bending and scattergood please go ahead
spk_3: thanks for morning hours
spk_2: when he arrived
spk_3: ah but the my questions have been answered just one a night out as i missed it and the ab be opening commentary of what was the driver of that it isn't to move the closing of elmira out to que
spk_2: ah out of the summer to decision are part is just and expectations are around where we see the trend of the of the regulatory approval process guy
spk_3: so here we decided to push it up
spk_36: the up too much further out i just based on that the other than that the progress in the dialogue with the regulators means nothing else of note are concerned i think it's just right now ah with the administration and the pending appointments of thoughts are the agency leadership and the
spk_38: i'll call it the interest of all of the
spk_34: regulatory agencies and every single transaction even those who have a let's scott tangential lot involved than that
spk_39: it's a lot more to cupcakes larvae wonder what that's just the tried right now
spk_40: so we just a sudden pushed out a couple months to be sure
spk_0: god at that makes sense in in one month with an attitude to kill a targeting at this
spk_41: that will look at me right now
spk_42: thanks that i had that i have reshaped you are a my questions
spk_2: think there are you
spk_9: again his
spk_42: please press star than one the next question will be from william wallace for him please go ahead
spk_2: fake a good morning guy sorry good good morning on a good eye while it
spk_3: i'm i had one follow up question to to match line of questioning around deposit service fees if the public is that line as a percentage of adults core deposits kobe you guys were run in ten or twenty to twenty two basis points per quarter and then like the industry on that that draw
spk_4: off once covered it with on steam to cetera but years had been kind of stubborn and and not recovering like we've seen other banks are and curious if you analyze the trains in your deposit portfolio and if you have any expectation of what what that deposit service fee line house my might look like moving forward
spk_3: through the next you know several quarters or or couple of yeah hi well a this is joe the terrorist like and can think that so you know
spk_10: the advantage that we'd had on a core funny base over a lot ears is really are were deposit base and so our ability to track the me deposited you well as was very strong over a long period of time we know my breach acquisitions over time and i brought into the court of relationships i when the stimulus funds but you came in
spk_3: most of that those funds came into consumer checking accounts view so i just and that basis alone you know our our core deposit base you know grew substantially are probably more so than than many of our harbor peers and balances had continue to be substantial and in high he will make us oracle standards so in it
spk_2: a cycle effectively be you know the the number of overdraft occurrences just then and other fees are simply key down because the balance is where ah where higher and so i would expect that
spk_43: the know yes young assuming that there's some of that money gets spent by consumers over time
spk_42: mom and balances come down we would be you know kind of
spk_44: we back toward a more historic pepper probably not getting back to levels we were certainly you know creek it as we also mentioned die you know where we are evaluating the offerings and and the operates potentially could change in twenty twenty two and and that you know our expectation is that the media we do have some ability
spk_4: to ah no potentially get some other deposit fees that are that are not the unicef an overdraft related are just because we've offered a free checking products sweet in low be no per transaction fees if he well known her longer an extended period of time
spk_3: okay thank you very much that's very helpful and then one follow up for you i think it was marked it was talking about the expense space and it sounded like you were saying where it we're starting off the year around a hundred and two million or so and then you'd you'd think that that the arm fortified or said tom can on fossil living in expense on pressures on top of that is that is that i interpret your commentary yeah while the cisco to terrify i'd made a common so we were we were running about one hundred million dollars in expenses the last the love the prior to quarters a typically what we have as we have an adjustment in the first quarter
spk_45: because mirror base your increases go through our payroll taxes kicking like attacks as kitty in so we typically move up again my expectation is that will be no couple million dollars from cuba or to que one good and you're on a on a run rate basis on going forward they i think ah you know a fortified percent expect
spk_0: patients on an annual basis is a born
spk_46: in a reasonable expectation whereas in the past the new potentially be two to four percent but just as obviously there's inflation in the marketers is very sweet precious like the car or cool run rate and troops just drop is going to be just a little bit higher than has been ah
spk_0: yeah certainly certainly in the past and moore also investing in ah no resources to to originate

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