Q3 2021 Community Bank System Inc Earnings Call
Good day and welcome to the community Bank system third quarter 2021 earnings Conference call. Please note that this presentation contains forward looking statements within the provisions of the private Securities Litigation Reform Act of 1995 that are based on current expectations estimates and projections about the industry markets and.
Economic environment in which the company operates.
The 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 in Form 10-K filed with the Securities and Exchange Commission.
Today's call presenters are Mark <unk>, President and Chief Executive Officer, and Joseph So terrorists executive Vice President and Chief Financial Officer.
They will be joined by Joseph Serbin Executive Vice President and Chief Banking Officer for the question and answer session.
Gentlemen, you may begin.
Thank you Chad.
Morning, everyone and thank you for joining our third quarter conference call. We hope everyone is well.
I think earnings for the quarter were right in line with our expectations and impacted by the same influences the past several quarters.
Margin continues to be a headwind.
It feeds the strength of our financial services businesses.
And we saw that this quarter.
The bigger story for us in the quarter with loan growth, we had growth in every one of our portfolios this quarter ex PPP and our pipelines and market activity continue to be very strong.
Encouraged by these trends and have really good momentum right now across all of our credit businesses.
We also increased our securities book in the quarter, given the market opportunity and that will be additive to future earnings as well I think Joe will provide more detail on that.
The strength recent strength of our financial services businesses continued in the quarter with revenues up 17% and pre tax earnings up 22% over 2020.
We also closed on the acquisition of Fringe benefits design of Minnesota provider of retirement plan administration, and consulting services with offices in Minneapolis, and South Dakota.
Their performance out of the gate has been exceptional so we expect that will be a productive addition to our benefits business.
Our benefits wealth and insurance businesses are all performing extremely well right now and what is a very productive growth pricing and M&A environment for those businesses.
On the human capital front as we previously announced I'm delighted that Maureen Julian Myer has joined US as executive Vice President and Chief Human Resources Officer.
He previously held the same role for HSBC USA.
Tremendous experience expertise and business judgment to community Bank system, and we look forward to her contributions to our continuing human capital efforts.
Lastly earlier this month, we announced an agreement to acquire a Mira savings bank, a $650 million asset bank with 12 offices across the southern tier and finger Lakes region of New York State.
It's a very nice franchise with a very good mortgage business, we expect will be <unk> 15 per share accretive on a full year basis, excluding acquisition expenses.
So a very productive low risk transaction.
We have targeted a closing date in Q1 of next year.
Looking ahead, we like our current momentum across the company and all of our businesses.
Joe.
Thank you Mark and good morning, everyone as Mark noted the third quarter earnings results were solid with fully diluted GAAP and operating earnings per share of <unk> 83.
The GAAP earnings results were <unk> <unk> per share or five 1% higher than the third quarter 2020, GAAP earnings results by <unk> <unk> per share or two 4%.
<unk> below the prior year's third quarter on an operating basis. The decrease in operating earnings per share is driven by decrease in net interest income and higher operating expenses as well as increases in income taxes and fully diluted shares outstanding offset in part by lower credit related costs, an increase in noninterest revenues, particularly in the Companys non banking financial services businesses.
Comparatively the company reported fully diluted GAAP and operating earnings per share up 88, <unk> and the <unk>.
<unk> second quarter of 2021.
The company recorded total revenues of $156 $9 million in the third quarter of 2021, an increase of $4 $3 million or two 8% over the prior year's third quarter. The increase in total revenues between the periods was driven by a $6 9 billion or 16, 9% increase in financial services revenues offset in part.
By a $2 2 million dollar decrease in banking related noninterest revenues and <unk> $4 million or 0.4% decrease in net interest income total revenues were up $5 4 million or three 5% from the second quarter 2021 results driven by zero point $5 million or a 5% increase in net interest income a one.
$4 million increase in banking related noninterest revenues of the $3 $5 million or 8% increase in financial services revenues total noninterest revenues accounted for 41% of the company's total revenues for the third quarter.
Although net interest income was down only slightly from the same quarter last year. The results were achieved in a significantly lower net interest margin outcome. The company's tax equivalent net interest margin for the third quarter of 2021 was 274% as compared to $3 one 2% one year. Prior at 38 basis point decrease between the periods comparatively accompanied.
Equivalent net interest margin for the second quarter of 2021 was $2 seven 9% from five basis points higher than the third quarter net interest margin results continued to be negatively impacted by the low interest rate environment and the abundance of low yield cash equivalents being maintained on the company's balance sheet. The.
The tax equivalent yield on earning assets was 283% in the third quarter of 2021 as compared to $2 eight 9% in the linked second quarter and $3 two 8% one year prior during the third quarter. The company recognized $4 $3 million of PPP related interest income, including $3 $7 billion of net deferred loan fees. This.
This compares to $3 million of PPP related interest income recognized in the same quarter last year and $3 $9 million in the linked second quarter of 2021.
On a year to date basis. The company has recognized $15 1 million PPP related net interest income the company's total cost of deposits remained low however, averaging nine basis points nine basis points. During the third quarter of 2021 employee benefit services revenues for the third quarter of 2021 were $29 9 million $4 eight.
Million dollars or 18, 9% higher than the third quarter 2020.
The improvement in revenues was driven by increases employee benefit trust and custodial fees as well as incremental revenues from the acquisition of fringe benefits designed in Minnesota during the quarter wealth management revenues for the third quarter of 2021 were $8 $3 million up from $6 $9 million in the third quarter of 2020, the $1 $4 million or 20.
8% increase in wealth management revenues was primarily driven by increases in investment management and trust services revenues.
Insurance services revenues of $9 $2 million were up to your point $6 million or seven 6% over the prior year's third quarter driven by organic growth factors in the third quarter acquisition of the Boston of a Boston based specialty lines insurance practice banking noninterest.
Q3 revenues decreased $2 $2 million or 11, 5% from $19 $1 million in the third quarter 2020 to $16 $9 million in the third quarter of 2021.
This was driven by a $3 $5 million decrease in mortgage banking income offset in part by $1 $3 million or eight 3% increase in deposit service and other banking fees on a linked quarter basis financial services revenues were up $3 $5 million or 8% reflective of the organic and acquisition related momentum in these businesses.
And banking noninterest revenues were up $1 4 million or eight 7%.
During the third quarter of 2021, the company recorded a net benefit to the provision for credit losses of zero point $9 million. This compares to a $1 9 million provision for credit losses recorded in the prior year third quarter.
Company's net loan charge offs were only seven basis points annualized in both periods. During the third quarter of 2021 economic forecast for more favorable in the third quarter 2020, economic forecast driven by the post vaccine economic recovery, which in combination with elevated real estate and vehicle loan collateral values drove down the expected.
Life of loan losses.
On a September 2021 year to date basis. The company recorded net charge offs of $1 $1 million or two basis points annualized.
The company recorded a $104 million in total operating expenses in the third quarter 2021, as compared to $97 million with total operating expenses in the third quarter of 2020.
An increase of $3 4 million or three 6% between the periods operating expenses exclusive of litigation and acquisition related expenses increased $7 2 million to seven 7% between the comparable quarters.
$5 6 million of which was driven by an increase in salaries and employee benefits due to the act due to acquisition related staffing increases.
Britain incentive related and play wage increases higher payroll taxes, and higher employee benefit related expenses. Other expenses were up $2 9 million or eight 7% due to the general increase in the level of business activities.
Processing communication expenses were also up zero point $900 or seven 2% due to the company's implementation of new customer facing digital technologies and back office systems between the comparable periods occupancy and equipment expense decreased slightly due primarily to branch consolidation activities between the periods.
In comparison, the company reported $93 $5 million of total operating expenses in the second quarter of 2021, the effective tax rate for the third quarter of 2021 was 21, 1% up from 23% in the third quarter of 2020, the increase in the effective tax rate was primarily attributable to an increase in certain state income taxes.
That were enacted in the second quarter of 2021.
The balance sheet <unk> 15 billion.
$15 billion total asset threshold during the third quarter due to the continued inflows of deposits, which increased $384 8 million or three 1% from the end of the second quarter, the company's low yielding cash and cash equivalents remained elevated totaling $2 $32 billion at the end of the quarter. Despite the company purchasing $536.
$9 million investment securities during the quarter.
Ending loans at September 32021% to $7 billion to $8 billion.
$38 4 million or 0.5% higher than the second quarter.
2021, ending loans of $7, two $4 billion, and $176 1 million or 224% lower than one year prior excluding PPP activity ending loans increased $154 $1 million or two 2% in the third quarter. This increase was driven by growth in all five loan.
<unk> segments consumer mortgages consumer indirect loans consumer direct loans home equity and business lending excluding CCT.
As of September 32021 of the company's business lending portfolio included 1386, PPP loans with a total balance of $165 4 million. This compares to 2571 PPP loans with a total balance of $284 $8 million at June 30 of 2021, the company expects to recognize.
<unk> remaining net deferred PPP fees totaling $6 $3 million over the next few quarters.
Company's capital ratios remained strong in the second quarter. The company's net tangible net tangible assets ratio was $8 five 9% at September 32021, This was down from 992% a year earlier and 9.0% to 2% at.
At the end of the second quarter, the company's tier one leverage ratio was nine.
2% at September 32021, which is nearly two times, the well capitalized regulatory standard of 5%.
The company has an abundance of liquidity the combination of the company's cash and cash equivalents borrowing available federal the federal Reserve bank borrowing capacity at the federal home loan Bank and Unpledged available for sale investment Securities portfolio provided the company with over $6.18 billion of immediately available sources of liquidity at the end of the third quarter.
At September 32021, the company's allowance for credit losses totaled $49 5 million or 0.68% of total loans outstanding. This compares to $51 $8 million of zero point, 71% of total loans outstanding at the end of the second quarter of 2021% and 65.
$65 million or 0.87% total loans outstanding at September 32020, the decrease in the allowance for credit losses is reflective of an improving economic outlook very low levels of net charge offs.
Decrease in specific reserves on impaired loans.
Nonperforming loans decreased in the third quarter to $67 8 million or zero, 93% of loans outstanding down from.
$70 $2 million of zero point, 97% of loans outstanding at the link.
At the end of the linked second quarter of 2021 went up from $32 2 million goes to 0.43% of loans at the end of the third quarter of 2020, due primarily to the reclassification of certain hotel loans under extended forbearance from accrual to non accrual status between the periods.
Loans 38, 30 to 89 days delinquent public 0.35% of loans outstanding at September 32021, This week versus Euro three 6% one year prior and 0.25% at the end of the linked second quarter management believes the low levels of delinquent loans and charge offs has been supported by an extraordinary federal and state government financial assistance.
Provided.
Consumers throughout the pandemic during the third quarter of 2021, the company increased its quarterly cash dividend, a penny or two 4%.
$2 43 per share on its common stock. This increase marked the companys 29th consecutive year of dividend increases.
Looking forward, we remain focused on new loan generation and we'll continue to monitor market conditions to seek the right opportunities to deploy excess liquidity our loan pipelines are robust and asset quality remains very strong. We also expect net interest margin pressures to persist remained well below our pre pandemic levels, but also believer abundance of cash equivalents represents a <unk>.
<unk> future earnings opportunity.
We're also fortunate and pleased to have a strong strong non banking businesses that are supported and diversified our screens and noninterest revenue and lastly to Echo Mark's comments were pleased and excited to be partnering with one minor savings bank a.
<unk> has been serving as communities for 150 years, it will enhance our presence in five counties in Europe, Southern tier and finger lakes regions at June 32021, Elmira total assets of $648 $7 million total deposits of $552 million and net loans of $465 $3 million, we expect to complete the acquisition.
In the first quarter of 2022 subject to customary closing conditions, including approval by the shareholders.
Savings bank and required regulatory approvals.
I'll now turn it back to Chad to open the line for questions.
Thank you Sir we will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question today will be from Alex toward all with Piper Sandler. Please go ahead.
Hey, good morning, guys.
Good morning, Alex Good morning, Alex.
First off just wanted to to.
Talk about loan growth for a little bit I think historically you guys have been kind of on an organic basis of low single digit loan grower.
On an annual basis.
Based on what you did this quarter and some of the commentary on the pipelines and and sort of your outlook do you think that maybe something has shifted in that loan growth on an organic basis can be.
Higher than that sort of low.
Single digit.
Right that has been the historical trend.
Yes, Alex Good question I'll make a couple of comments on that as Joe <unk> to comment a little bit further, but I think youre right historically low single digits I don't know if we consistently achieve that to be fair.
I think also our markets.
They are low growth markets I think.
Executed reasonably well in those markets.
Given the growth.
Opportunities, but I think we've also we have an opportunity to execute better organically.
In terms of our.
Our loan businesses and so we're we're starting to focus on that a little bit we've always we've done a lot of M&A.
And I think that's been additive I think without having done the M&A.
An opportunity for us to create shareholder value.
Have difficulty in our markets.
So I think that's been.
Tremendous strategy, but I just think we can I think we've executed well I think on the organic side, we can do a bit better and it's pretty meaningful I mean, if we can if we can.
We can move the needle even a little bit organically that will make a fairly significant difference in terms of the earnings potential so.
Put a little bit more effort into that in terms of structure resources.
Quality of resources.
Support process.
Systems.
And just I think a greater focus on doing a bit better optimizing our organic opportunities in our markets and I think we're starting to see that.
So I guess with that as a backdrop, Joe you could comment a little bit further maybe on the.
Workflows and what we're doing there sure.
Alex Good morning, So a couple of a couple of comments first.
If you look at our marketplaces.
Over the last couple of years, we've expanded into some bigger geographies, which provides us greater opportunities and I think that by having the right folks.
And leadership positions in those markets has made a significant difference for us. So we've been able to grow in some of the larger markets organically.
Which is good.
On the smaller end.
Looking to take advantage of some technology too.
To allow us to spend more time sourcing the next opportunities and grow the business and so.
On the small end of the spectrum will.
Utilize technology to expedite processing and approvals.
Again hope to grow our help to grow organically on the small business side the pipeline.
As Joe mentioned, it's almost it's almost tripled from the beginning of the year.
And that's just.
An increased focus.
<unk> calling efforts.
<unk>.
The marketplace is giving us so.
It's it's nothing new.
Dedicated is concentrated it's a regimented.
We got the.
Folks who are in the right.
Management positions.
For us to execute and for us to continue to.
Or.
To exceed some of this.
Some of the lighter loan growth that we've experienced we will get it.
Over the past couple of years.
The only thing I would add to that Alex is this is Bob.
Credit risk or credit quality that is not going to change and we've made that very clear upfront.
We just wanted to execute better in terms of.
Our sales cycle, let's call it in our markets across our different portfolios. So this is we are not.
Anything that.
Any improvement that we achieved we will not be.
Expensive.
Credit quality, Alex to more of the same.
That's just do more of the same.
Great that's helpful commentary there.
The comment on the pipeline, having tripled since the beginning of the year is that overall pipelines are just the commercial pipelines.
So that's the commercial pipeline.
The mortgage pipeline has hung in there residential mortgage propylene is hung in there nicely tuned it continues to be strong.
I will tell you that our application volume on the mortgage side.
September surpasses all of the application volume we did for the full year last year, so that bodes well for us as we're heading into the fourth quarter. So it is a strong pipeline and it should curious they finished just curious.
At the end of the year.
Great and then the plan is to continue to put residential on balance sheet versus selling it into the secondary market.
Correct.
Great and then.
The other thing that jumped out to me this quarter as the as the salary and benefits line, which came in I think you alluded to it in the prepared remarks Joe.
About the about where it came in versus last quarter can you just talk about how much of that might be related to the acquisitions you did during the quarter.
How much of it might be.
Non.
Run rate I guess would be the best way to put it into what the expectation should be for the fourth quarter prior to to layering that Almirah next year.
Yes, that's a very.
Good question, Alex So just to provide some backdrop and some color on prior to the pandemic, we were kind of calling a run rate that was somewhere around 95% to $96 million on a quarterly basis and that's just an average.
Run rate and then the pandemic hit and we had some decreases in.
Yeah on expenses for various reasons less travel just just a lot of business activities were down across the board across all of our businesses. So our operating expenses came in.
Low last year during the pandemic they were down in the 93% to $94 million range.
A range, so sort of level setting back to call it post or pre pandemic levels.
Run rate is.
Was about 96.
95 somewhere in that in that General General range. We added we had two acquisitions during the.
The quarter that added a couple of million dollars of total opex, including amortization components of those of those transactions.
But all in added about $2 million of the total.
A couple of million dollars to the Opex, we had a couple of one.
Probably likely nonrecurring items.
<unk>, maybe a million dollars in the quarter.
So expectations on a on a going forward basis really I would kind of you can look at this quarters number and back off maybe.
Maybe $1 million somewhere in that in that range when we hit the first quarter.
Through most of the first quarter, we do incur higher payroll taxes. So we usually get a little bump there from up.
From an Opex standpoint, and then.
If we're successful closing Elmira.
Late in the first quarter, obviously, it will change from that point from that point going forward.
Okay. So the salaries and benefits line that is.
The $62 9 million Bucks that is a pretty decent run rate going into next quarter.
I think thats, a decent run rate going into next quarter.
Couple of items in there that.
It was higher than our expectations.
Sure if those will settle down a bit in the fourth.
But conservatively I would probably use.
What we incurred in the third quarter for the fourth quarter run rate.
Thanks for taking my questions.
Thanks, Alex.
The next question will be from Eric Zwick with Boenning and Scattergood. Please go ahead.
Good morning, guys.
Good morning, Eric.
In the prepared remarks, you mentioned some plans to make some investments in <unk> in the securities portfolio curious if you could provide.
Any color there in terms of the magnitude as well as kind of expectations for for yield and duration of what you are looking to us to add.
Yeah, I'll take that Eric so at the end of the third quarter.
We saw some opportunities in the securities markets and we purchased some you know.
Kind of in the belly of the curve.
Five and seven year type type paper.
We came in on a blended basis at about a 120 on $536 million of activity most of which hit really at the end of the quarter. So we really didn't realize.
The interest income benefit of those purchases during the quarter, but we were active with <unk>.
<unk> kind of got back into the range that.
We are hopeful for.
If you recall, we were on the sidelines at the end of the at the end of the second second quarter actually since we've closed the quarter. We've been active with another couple of hundred million dollars.
Rates are up a little bit so.
The active.
We'll see what the rest of the quarter holds for us but.
The continued inflow of deposits is providing us.
<unk> upside from a net interest income standpoint, not necessarily.
Total great margin outcome.
Certainly not back to pre pandemic levels, but yes.
I would expect that we will continue to be active in the market throughout the fourth quarter and.
To the tune of a couple hundred million dollars.
Thanks, and I hear you on the <unk>.
Net interest income potentially growing larger as the balance sheet does and just thinking about the profitability aspect in the net interest margin if youre going to put more.
Securities to work here it sounds like the loan pipeline is really strong for at least another quarter or so do you see a point where that the core net interest margin Ken.
Bottom and start to increase again or what are your expectations for when that might occur.
Yes.
Yes.
That's a very good question and I wanted to just qualify that comment in the PPP income.
Through the first three quarters was about $15 million.
So some of the securities activities that we're taking on in the third quarter took out in the third quarter and into the fourth quarter.
We are effectively.
Replacement, if you will of some of that PPP income.
So the net interest income levels will be.
Hopefully comparable with that in that regard.
However on the loan side.
Our our.
Yields on the loan portfolio was about a $4 15 for 16 I believe for the quarter. If you back out PPP, it's kind of around 390, something it's kind of it's down a little bit.
Our new volumes going on a little under three and a half so the challenge from a loan perspective is.
Having the volume increases outpace the lower the lower yield it just what the market is giving us right now so.
So really that becomes the challenges as we move ahead.
So hopefully that.
The size of the pipeline the growth and even though it's going out a little lower rate. We can we can keep our head above water on the on the loan interest income side.
On the cost of funds side I mean, we're about as low as we are going to go maybe maybe theres another basis point in there, but at nine basis points, it's difficult to really do much on the on the funding side at this point.
Yes.
That's helpful. Thanks, and then just thinking about the loan loss provision in the reserves today.
The improving outlook for the economy as well as better collateral values for real estate in automobiles and such.
And then I guess, the Pvp continues to run off for a couple more quarters. If you start to get to the point, where you're seeing some net loan growth should we start to see positive provisioning again at this point or are you happy with I guess with the model and kind of where it's.
Has the reserve today, how to think about those puts and takes.
So theres a couple of moving parts in there Eric.
Eric So, yes, I would expect with loan growth typically you would read.
Need to reserve more dollars and therefore go to go to the positive side of the provision.
The economic outlook is a variable that.
Can change and can impact an impact.
You know that reserve level. So that remains remains to be seen the other thing too is that we.
We now have a.
Charge off history part of the basis of the model is kind of the quantitative components of the model and the charge off history is just it's lower.
We haven't had significant charge offs last last 12 months and so that also impacts the quantitative side. So there's also we have to bake that into the model.
If you look at kind of our last 12 months of charge offs and you look at our reserve right now.
About 119 times.
Last last 12 months, but I don't believe that necessarily the last 12 months are indicative of the future, but nonetheless.
<unk> relative to historical charge offs is pretty high at this point.
But I think a fair expectation is that.
Provisioning would probably be closer to.
Charge off levels that probably there will be positive provisioning would be my.
Best guess at this point.
Because it's hard to really improve much on the on the economic outlook.
Thanks for taking my questions today.
Thank you Eric.
The next question will be from Russell Gunther with D. A Davidson. Please go ahead.
Hey, good morning, guys.
Good morning Russell.
I just wanted to spend a minute on the fee income outlook. If we could continue to have really strong organic revenue growth.
Differentiated verticals.
Could you share with us your expectations for revenue outlook within employee benefits and insurance as well.
On an organic basis going forward and then.
What you might expect to be able to supplement with continued acquisitions.
Thank you.
It's Mark Russell I think those businesses are really.
Covid.
It really performed well.
The environment is.
Good for those businesses.
In terms of.
<unk>.
Growth opportunities and potential pricing in those markets is pretty good some of them are.
Equity in.
Market dependent which that's been additive as well because the markets continue to be continue to be strong.
So.
All of the benefits wealth and insurance have all performed.
Briefly well for a number of course over the last couple of years.
Really strong but as of late.
For the past four quarters have been.
Tremendously strong.
They continue to grow I mean, interestingly enough. They're also growing revenues faster than expenses. So the margins are actually growing as well so I don't see anything.
On the horizon that could.
Derail that.
You don't necessarily into the future. So I think on the non bank side.
Hopefully those conditions will continue to exist.
There has been.
A fair bit of M&A activity in the <unk>.
<unk> space as well, which we participated in.
We continue to have those opportunities.
Well, we think that might continue at least into the foreseeable future.
Future there.
Sure.
On the non bank side, it's been around the bank side excuse me.
We got hammered during COVID-19.
Like everyone else, but that's really kind of started to come back and continue to trend upward.
The.
Interchange and debit revenues continued to be very strong overdraft is not where it was but it's.
It's coming back and there may be potential regulatory pressure.
And that revenue stream as well, which we have conversations about so right now I think it's hard to predict it's hard to put a number on it.
We're up on the non bank side.
As I said, 17% this quarter over last year pre tax earnings were up 22%. So we're actually pretty margin as well as we as we gain.
Revenues in those businesses so it's.
<unk>.
The future continues to look good into the foreseeable future but.
You can't you can't predict so I think to kind of handicap it with a number I think is very is.
Is very difficult to do.
The wealth business. This year has had tremendous growth in revenues.
Earnings the benefits business tremendous growth in revenue and earnings.
<unk> business is up a little bit less margin is also up a fair bit so really strong execution in all three of those businesses.
In the quarter, and we expect that into the foreseeable future.
I appreciate it Mike. Thank you that's it for me guys.
Thanks, Russell Thank you Ross.
And again, if you have a question. Please press Star then one.
The next question will be from Matthew Breese with Stephens Inc. Please go ahead.
Hi, good morning.
Maybe going back to loan growth. So the two areas that you showed the most growth this quarter was mortgage and indirect.
And as I think about those segments both have their distinct macro headwinds. So mortgage is going to be dealing with higher rates and indirect with inventory and chip shortages.
I hear you on the pipeline, but I wanted to get your thoughts on those items, specifically as headwinds in the sustainability and durability of the pipeline and how long before do you think loan growth kind of revert to historical averages.
Okay.
Hey, Matthew.
It's Joe I'll take that so excuse me so on the indirect side.
You hit it right on the headwind when you when you spoke about.
Chip shortages in supplies and the impact on <unk>.
The impact on the opportunity.
We don't we.
We expect to go through the fourth quarter.
Maybe slipping a little bit going back a little bit still growing but not to the same magnitude as we have in the other in the prior three quarters.
And then certainly as youre heading into Q1 and beyond.
Yes, it's going to be a little bit difficult to handicap, where we think the chips.
Chip shortages or the supply shortage or is it going to impact us, but clearly something that we need to keep a keep our eye on and focus on them.
On the on the.
Rajeev mortgage side.
I think it's going to slow down for us a little bit.
But with.
Increased focus of.
Model strategy.
<unk>.
Dedication of the people I think that we'll be able to continue to grow.
The mortgage business through 2022.
Yes, I would just add thing I've seen in the mortgage business and our markets, it's not as volatile as it is in some of the bigger markets where.
The market's really ramp up.
Cool down quickly and in our markets they'll do that the more stable. So we can we should be able to generally achieve.
Okay.
The 4% run rate on growth in that business and our market I'll be honest I'm shocked that the car business is up as much as it is.
Considering there is no.
Inventory.
It's.
It's surprising but it is good we've got.
Some of the competitors has kind of gotten out of that market as rates came down and then you had kind of the impact of the recession and all of that so this kind of disruption in that market as well and we've been in that business for a long time.
Stay in it we don't get in we don't give out we have good relationships with our dealer network. So.
Not surprised at.
Our growth was.
Better than maybe the market, but I am surprised on an absolute.
Basis that it's where it's at.
If you would've told me in the third quarter of last year that we'd be up 12, 5% and our car business I would not I believed it but here's where we're at so I think that will probably slow down a little bit.
As well.
Got it Okay, and then turn it back to the employee benefit services businesses, obviously revenues were up nicely this quarter, how much of that increase.
Due to recent acquisitions, how much of it was due to just.
Business growing organically and then you also mentioned additional acquisitions in this space, So where should we expect quarterly employee benefit services revenues to settle out before it starts to just grow on its own and are in an on and off.
Organic basis.
Oh.
Thank the.
Vast majority of the growth in the quarter was organic.
Not acquired that Sdd acquisition.
It was not was not that big.
Came on during the quarter so.
Right.
The success of those businesses over the last quarter.
Orders and beyond frankly.
Okay.
Building a growth process for those business, but it's mostly all organic.
Okay.
Okay and then.
Just staying on this topic I mean, often times with these fee income businesses, great for fees, great for our away, but what gets lost in the fold or the associated expenses. You mentioned margins are higher could you just give us some sense for the efficiency with what the profit margin on the employee benefit services businesses.
We generally have that kind of disclose that separately.
I'll tell you, though that it's.
Over 35%.
On the margin.
Yes got it okay.
And then the last one for me.
Joe we talked a little bit about the outlook for the NIM.
Yes.
I was just curious.
We continue to see some securities purchases.
Some decent loan growth do you have any idea on the outlook for core NII and it's been growing kind of low to mid single digit clip do you think that's.
I think that's sustainable through the.
The acquisition of Elmira.
Yes, Matt I think it's.
Sustainable.
Because of the security purchases that have replaced.
Some of the PPP recognition, there's still $6 million of $6 $3 million of PPP net deferred fees as well.
Asked about quarter, but some of that will be recognized between now and the.
Myra transaction as well.
On a core basis I think we can kind of keep our head just about level.
Youre, just slightly above water because of the securities purchases.
So I think that will be.
The likely outcome until we until we get Nomura.
Great.
Appreciate it that's all I had thank you.
Thank you.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Czarnecki for any closing remarks.
That is it for sure for US here in the Syracuse. So thank you all for joining look forward too.
Talking again in January thank.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Thank you.
Okay.
[music].