Q4 2021 Community Bank System Inc Earnings Call

Speaker 2: Thank you.

Speaker 3: Good morning and welcome to the Community Bank System Fourth Quarter 2021 earnings conference call. All participants will be in a listening mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Speaker 3: Please note that this presentation contains four looking statements within the provisions of the Private Security Litigation Reform Act of 1995.

Please note that this presentation contains forward looking statements within the provisions of the private Securities Litigation Reform Act of 995.

Speaker 3: and that are based on current expectations, estimates, and projections about the industry, market, 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.

And 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.

Risks are detailed in the Companys annual report in Form 10-K filed with the Securities and Exchange Commission.

Speaker 3: Today's call presenters are Mark Czernicki, President and Chief Executive Officer, and Joseph Ceteris, Executive Vice President and Chief Financial Officer. They will be joined by Joseph Serban, Executive Vice President and Chief Banking Officer for the question and answer session.

Today's call presenters are Mark <unk>, President and Chief Executive Officer, and Joseph <unk> Executive Vice President and Chief Financial Officer will be joined by Joseph serving executive.

Vice President and Chief Banking officer for the question and answer session.

Gentlemen, you may begin.

Speaker 4: Thank you Chad. Good morning everyone and thank you for joining our year in a conference call. We hope everyone as well. Earnings for the quarter were very good and right in line with our expectations. We delivered record revenues and nearly record PP&R per share, which was up 6% over the 2020 quarter. Joe will comment further on the quarter, but I would like to add that ex PPP we had solid growth in both our commercial and our retail portfolios, which were up 8% annualized for both Q3 and Q4.

Okay.

Thank you Chad good morning, everyone and thank you for joining our year end conference call, we hope everyone's well.

Earnings for the quarter was very good and right in line with our expectations, we delivered record revenues and nearly record <unk> per share, which was up 6% over the 2020 quarter.

Joe will comment further on the quarter, but I would like to add the ex PPP, we had solid growth in both our commercial and our retail portfolios, which were up 8% annualized for both Q3 and Q4.

Speaker 4: Looking at the whole of 2021, we had a really good year. Obviously, the results were favorably impacted by reserve releases and PPP, but carving those out, we still delivered solid earnings and absorbed nearly all of the margin erosion, which has not been insignificant. Deposit growth for the year was 15%, with both customer count and average balances contributing. Loan growth for the entire year, XPP, was 5%, with commercial flat and consumer up 8%.

Looking at the whole of 2021, we've got a really good year. Obviously the results were favorably impacted by reserve releases in PPP, but carving those out we still delivered solid earnings and absorb nearly all of the margin erosion, which has not been insignificant.

Positive growth for the year was 15% with both customer count and average balances contributing.

Loan growth for the entire year X P. P was 5% with commercial flat and consumer up 8%.

Speaker 4: The strength of our financial services businesses continues. For the year, revenues were up 12% and pre-tax earnings up 20% over 2020, resulting in significant margin expansion. But also during the year, we closed down two benefits acquisitions and five smaller insurance businesses. FTC appearance!!

The strength of our financial services businesses continues for the year revenues were up 12% and pre tax earnings up 20% over 2020, resulting in significant margin expansion.

Also during the year, we closed on two benefits acquisitions and by smaller insurance businesses.

Speaker 4: The acquisition of the Myra Savings Bank we announced in September is progressing well. We expect a close on that transaction Q2.

The acquisition of the Mira savings Bank, we announced in September is progressing well and we expect to close on that transaction in Q2.

Speaker 4: Myra is a $650 million asset bank with 12 offices across the southern tier and Finger Lakes regions of New York State.

Tomorrow is the $650 million asset bank with 12 offices across the southern tier and finger Lakes region of New York State.

Speaker 4: It's a very nice franchise with a very good mortgage business that we expect will be $0.15 per share accretive on a full-year basis, excluding acquisition expenses, so a very productive low-risk transaction. Looking ahead to the remainder of the year, we have significant energy and operating momentum right now in both our banking and non-banking businesses.

It's a very nice franchise with a very good mortgage business that we expect will be 15 <unk> per share accretive on a full year basis, excluding acquisition expenses, so a very productive low risk transaction.

Looking ahead to the remainder of the year, we have significant energy and operating momentum right now in both our banking and non banking businesses margin continues to be a headwind, but earning asset growth the strength of our financial services businesses in credit or tailwind.

Speaker 4: Margin continues to be a headwind, but earning asset growth, financial services, businesses, and credit are tailwinds.

Speaker 4: We have begun to focus and invest in our commercial and retail businesses to improve organic execution, to include people, systems, and products.

We have begun to focus and invest in our commercial and retail businesses to improve organic execution to include people systems and products.

Speaker 4: We will continue to invest in our digital channels and rationalize our analog channels as we did this year with the consolidation of 15 retail branches.

We will continue to invest in our digital channels and rationalize our analog channels as we did this year with the consolidation of 15 retail branches.

Speaker 4: Organic execution in our non-banking businesses has been tremendous, but we will continue to look to acquisition opportunity as well to grow the product breadth, talent, revenue, and earning strength of those businesses.

Organic execution in our nonbanking businesses has been tremendous but we will continue to look to acquisition opportunity as well to grow the product breadth talent revenue and earnings strength of those businesses.

Speaker 4: And given the recent and expected ongoing challenges to the banking industry, we are hopeful to have a high value acquisition opportunity this year as well. We are very much looking forward to 2022.

And given the recent and expected ongoing challenges to the banking industry. We are hopeful to have a high value add acquisition opportunity this year as well.

We are very much looking forward to 2022.

Joe Thanks.

Speaker 4: Thank you, Mark, and good morning, everyone. As Mark noted, the fourth quarter results were solid with fully diluted GAAP earnings per share of 80 cents.

You Mark and good morning, everyone as Mark noted the fourth quarter results were solid with fully diluted GAAP earnings per share of <unk> 80.

The GAAP earnings results were <unk> <unk> per share or seven 7% below the fourth quarter 2020, GAAP earnings and <unk> per share or three 6% below linked quarter third quarter results fully diluted operating earnings per share, which excludes acquisition related expenses and other net operating revenues and expenses for <unk>.

Speaker 4: The GAAP earnings results for $0.06 per share are 7% below the fourth quarter 2020 GAAP earnings and $0.03 per share or 3.6% below linked third quarter results. Fully diluted operating earnings per share, which excludes acquisition-related expenses and other non-operating revenues and expenses, were $0.81. For the quarter, $0.04 per share or 4.77% below.

<unk>.

For the quarter <unk> per share or $4 seven 7% below the prior year's fourth quarter, and <unk> <unk> per share or two 4% below linked third quarter results. The decrease in operating earnings per share were driven by increases in the provision for credit losses.

Speaker 4: prior years for a quarter and two cents per share are 2.4% below linked third quarter results. The decrease in operating earnings per share was driven by increases in the provision for credit losses.

Speaker 4: Operating expenses, income taxes, and fully diluted shares outstanding offset in part by increases in net interest income and non-interest revenues between comparable quarters. The company recorded a $2.2 million provision for credit losses in the fourth quarter of 2021 as compared to a $3.1 million net benefit in the provision for credit losses in the fourth quarter of 2020. Adjusted pre-tax, pre-provision, net revenue per share, which excludes the provision for credit losses, acquisition-related expenses, and other non-operating revenues and expenses, and income taxes.

Operating expenses income taxes, and fully diluted shares outstanding offset in part by increases in net interest income and noninterest revenues between comparable quarters. The company recorded a $2 $2 million provision for credit losses in the fourth quarter of 2021 as compared to a $3 1 million net benefit in the provision for credit losses in the fourth quarter of 2020.

Adjusted pre tax pre provision net revenue per share, which excludes the provision for credit losses acquisition related expenses and other non operating revenues and expenses and income taxes was $1 90 in the fourth quarter of 2021 as compared to $1 three a year prior to dollar for dollar linked third quarter on a full year basis, the company reported fully diluted.

Speaker 4: was $1.9 in the fourth quarter of 2021 as compared to $1.3 a year prior to $1.4 in the linked third quarter. On a full year basis, the company recorded fully diluted GAAP and operating earnings per share of $3.48 and $3.49 respectively. These were 40 cents per share or 13% and 25 cents per share or 7.7% respectively over 2020 results. Full year 2021 adjusted pre tax pre provision net revenue per share of $4.28 cents was up 2 cents per share over 2020 results. The company recorded total revenues of $159.7 million in the fourth quarter of 2021 a new quarterly record for the company, a $9 million or 6% increase over the prior year's fourth quarter.

GAAP and operating earnings per share of $3 48, and $3 49, respectively. These were up <unk> 40 per share or 13% and 25 per share or seven 7%, respectively. Over 2020 results full year 2021, adjusted pretax pre provision net revenue per share of $4 28.

Was up <unk> <unk> per share over 2020 results.

The company recorded total revenues of $159 7 million in the fourth quarter of 2021, a new quarterly record for the company and a $9 million or 6% increase over the prior year's fourth quarter.

Speaker 4: The increase in total revenues between the periods was driven by a $2.3 million or 2.5% increase in net interest income.

The increase in total revenues between the periods was driven by a $2 3 million or two 5% increase in net interest income.

Speaker 4: a $1.6 million, 11% increase in banking-related non-interest revenues, and a $5.5 million, 13.2% increase in financial services revenues.

$1 $6 million, 11% increase in banking related noninterest revenues and a $5 5 million 13, 2% increase in financial services revenues offset in part by zero point $4 million decrease in the gain on debt extinguishment total revenues were up $2 8 million or one 8% from third quarter 2021 results driven by a $3.

Speaker 4: offset in part by a $0.4 million decrease in the gain on debt extinguishment. Total revenues were up $2.8 million or 1.8% from third quarter 2021 results driven by a $3.1 million or 3.4% increase in net interest income. Total non-interest revenues accounted for 40% of the company's total revenues in the fourth quarter.

$1 million or three 4% increase in net interest income total noninterest revenues accounted for 40% of the company's total revenues in the fourth quarter.

Speaker 4: The company's net interest income increased $2.3 million or 2.5% over the same quarter last year, despite a significant decrease in its net interest margin. The company's taxable net interest margin for the fourth quarter of 2021 was 2.74% as compared to 3.05% one year prior.

The Companys net interest income increased $2 $3 million or two 5% over the same quarter last year. Despite a significant decrease in net interest margin the company's tactical and net interest margin for the fourth quarter of 2021 was 274% as compared to three 5% one year prior.

Speaker 4: a 31 basis point decrease between the periods. Comparatively, the company's tax equivalent net interest margin for the third quarter of 2021 was also 2.74%. Although net interest margin results remained below the pre-pandemic levels, the company's fourth quarter net interest income expanded over the prior year's fourth quarter and linked third quarter results driven by non-PPP-related organic loan growth, the deployment of excess liquidity from low-yield cash equivalents to higher-yield investment securities.

A 31 basis point decrease between the periods comparatively the company's tax equivalent net interest margin for the third quarter of 2021 was also $2 74%.

Although net interest margin results remained below the pre pandemic levels. The company's fourth quarter net interest income expanded over the prior year's fourth quarter and linked third quarter results driven by non PPP related to organic loan growth the deployment of excess liquidity from low yield cash equivalents to higher yield investment securities.

Speaker 4: earning asset growth and the reclassification of several large business lending relationships from non-accrual to accruing status.

Asset growth and the reclassification of several large business lending relationships from non accrual to accruing status.

Speaker 4: The company's tax equivalent yield on earning assets was 2.83% in the fourth quarter of 2021, matching third quarter results.

The companys tax equivalent yield on earning assets was two 3% in the fourth quarter of 2021 matching third quarter results.

Speaker 4: and 3.18% in the prior year's fourth quarter. During the fourth quarter of 2021, the company recognized $3.6 million of PPP-related interest income, including $3.3 million of net deferred loan fees.

And three 8% in the prior year's fourth quarter during the fourth quarter of 2021, the company recognized $3 6 million.

Fee related interest income.

<unk> $3 3 million.

Of net deferred loan fees.

Speaker 4: This compares to $3.5 million of PPP-related interest income recognized in the same quarter last year and $4.3 million in the late third quarter of 2021. The company recognized $18.7 million of PPP-related interest income in 2021. The company's total cost deposits remained low, averaging eight basis points during the fourth quarter of 2021. Employee benefit services revenues for the fourth quarter of 2021 were $30.4 million.

This compares to $3 $5 million of PPP related interest income recognized in the same quarter last year and $4 $3 million in the late third quarter of 2021 accompany.

The company recognized $18 $7 million of PPP related interest income in 2021, the company's total cost of deposits remained low averaging eight basis points during the fourth quarter of 2021.

Employee benefit services revenues for the fourth quarter of 2021 were $30 4 million $3 7 million or 13, 7% higher than the fourth quarter 2020. The improvement in revenues was driven by increases in employee benefit trust and custodial fees as well as incremental revenues from the third quarter acquisition of fringe benefits design of Minnesota.

Speaker 4: $3.7 million or 13.7% higher than the fourth quarter 2020. Improvement in revenues is driven by increases in employee benefit trust and custodial fees, as well as incremental revenues from the third quarter acquisition of fringe benefits design of Minnesota. Wealth management revenues for the fourth quarter of 2021 were up.

Wealth management revenues for the fourth quarter of 2021 were up eight point.

Speaker 4: $8.5 million. We're $8.5 million up from $7.5 million in the fourth quarter of 2020.

$5 million.

$8 $5 billion up from $7 5 million fourth quarter of 2020.

Speaker 4: The $1 million or 13.4% increase in wealth management revenues was primarily driven by increases in investment management and trust services revenues. Insurance services revenues of $8.5 million were up to $0.9 million or 11.2% over the prior year's fourth quarter, driven by organic growth factors in the third quarter acquisition of a Boston-based specialty lines insurance practice.

The $1 million or 13, 4% increase in wealth management revenues was primarily driven by increases in investment management and Trust services revenues insurance services revenues of $8 5 million were up zero point $9 million or 11, 2% over the prior year's fourth quarter, driven by organic growth factors in the third quarter acquisition of a Boston based.

Specialty lines insurance practice banking noninterest revenues increased $1 6 million or 11% from $15 million in the fourth quarter of 2020 to $16 6 million fourth quarter of 2021.

Speaker 4: Banking non-interest revenues increased $1.6 million, or 11%, from $15 million in the fourth quarter of 2020 to $16.6 million in the fourth quarter of 2021. This was driven by a $1.2 million increase in mortgage banking income and a $0.5 million, or 3% increase in deposit service.

This was driven by a $1 $2 million increase in mortgage banking income and <unk> $5 million, a 3% increase in deposit service.

Speaker 4: and other banking fees. During the fourth quarter of 2021, the company reported a provision for credit loss of $2.2 million. This compares to a $3.1 million net benefit and a provision for credit loss for the fourth quarter of 2020. The company reported net loan charge loss of $1.7 million for an annualized nine basis points of average loans outstanding during the fourth quarter of 2021.

In other banking fees.

During the fourth quarter 2021, the company reported a provision for credit loss of $2 $2 million. This represents.

This compares to a $3 1 million net benefit in the provision for credit losses for the fourth quarter of 2020.

The company reported net loan charge offs of $1 $7 million or an annualized nine basis points of average loans outstanding.

During the fourth quarter of 2021.

Speaker 4: as compared to net charge-offs of $1.3 million and annualized seven basis points of average loans outstanding for the fourth quarter of 2020. Although economic forecasts remain generally stable during the fourth quarter of 2021, despite the rapid spread of the COVID-Omicron variant, companies' allowance for credit losses

As compared to net charge offs of $1 $3 million or an annualized seven basis points of average loans outstanding for the fourth quarter of 2020.

Economic forecast remained generally stable during the fourth quarter of 2021, despite the rapid spread of the Covid Homochrome variant the company's allowance for credit losses.

Okay.

Speaker 4: to increase $0.4 million reflective of a

Decreased <unk> $4 million reflective of a.

Speaker 4: $165.3 million increase in non-PPP loans outstanding and other qualitative factors. Comparatively, in the fourth quarter of 2020, economic forecasts had improved significantly from the prior quarter, resulting in a release of credit reserves in the quarter. On a full-year basis, the company reported $2.8 million in net charge-offs, or four basis points of average loans outstanding during 2021, as compared to $5 million in net loan charge-offs, or seven basis points of average loans outstanding during 2020. On a full-year basis, the company reported an $8.8 million net benefit in the provision for credit losses as the economic outlook and the loan portfolio's asset quality profile both steadily improved.

$165 $3 million increase in non PPP loans outstanding and other qualitative factors comparatively in the fourth quarter of 2020 economic for Cas had improved significantly from the prior quarter, resulting in a release of credit reserves in the quarter on a full year basis, the company reported $2 $8 million and net charge offs or four base.

Points of average loans outstanding during 2021 as compared to $5 million.

Loan charge offs were seven basis points of average loans outstanding during 2020.

Full year basis, the company recorded an $8 $8 million net benefit in the provision for credit losses as the economic outlook in our loan portfolios asset quality profile both steadily improved.

Speaker 4: The company recorded $100.9 million of total operating expenses in the fourth quarter of 2021 compared to $95 million of total operating expenses in the prior year's fourth quarter. The $5.9 million or 6.2% increase in operating expenses was primarily attributable to a $4.9 million or 8.5% increase in salaries and employee benefits, driven by increases in merit and incentive-related employee wages, staffing increases due to recent acquisitions, higher payroll taxes.

The company reported $109 million of total operating expenses in the fourth quarter of 2021 compared to $95 million of the total operating expenses in the prior year fourth quarter to $5 9 million or six 2% increase in operating expenses was primarily attributable to a $4 $9 million or eight 5% increase in salaries and employee benefits driven by.

Increases in merit and incentive related employee wages staffing increases due to recent acquisitions higher payroll taxes, including increases in state related unemployment taxes and higher employee benefit related expenses.

Speaker 4: including increases in state-related unemployment taxes and higher employee benefit related expenses.

Speaker 4: Acquisition-related expenses were also up $0.4 million between the comparable annual quarters due to the pending Elmira Savings Bank acquisition and other recent financial services acquisitions. The effective tax rate for the fourth quarter of 2021 was 23% and 21.4% on a full-year basis, up from 20.9% and 20.1%, respectively, from the equivalent prior-year periods.

Acquisition related expenses were also up zero point $4 million between comparable annual quarters due to the pending Myra savings Bank acquisition and other recent financial services to acquisitions, the effective tax rate for the fourth quarter of 2021 was 23% and 21, 4% on a full year basis up from 29% in 'twenty.

Eight 1%, respectively from the equivalent prior year periods. The increase in the effective tax rate was primarily attributable to an increase of certain state income taxes that were in active through the periods and a decrease in the proportionate tax exempt revenues in relation to total revenues.

Speaker 4: The increase in the effective tax rate was primarily attributable to an increase in certain state income taxes that were enacted through the periods and a decrease in the proportion of tax exempt revenues in relation to total revenues.

Speaker 4: The company crested $15.5 billion in total assets during the fourth quarter, driven by the continued inflows of deposits, which increased $187.3 million or 1.5% from the end of the third quarter. Ending loans at December 31st, 2021 were $7.37 billion, $91.1 million or 1.3% higher than the third quarter of 2021. Ending loans of $7.28 billion.

The company crest at $15 5 billion until assets during the fourth quarter driven by the continued inflows of deposits, which increased to $187 3 million or one 5% from the end of the third quarter ending loans at December 31, 2021% to seven $3 $7 billion $91 $1 million or one 3% higher.

In the third quarter 2021, ending loss of $7 billion to $8 billion.

Speaker 4: dollars and 42.3 million dollars or 0.6 percent lower than one year prior. Excluding PPP loan activity, ending loans increased 165.3 million dollars or 2.3 percent during the fourth quarter of 2021 and 334.5 million dollars or 4.8 percent on a full year basis. Loans outstanding net of PPP loans have grown organically by more than two percent in both the third and fourth quarters of 2021. As of December 31st, 2021, the company's business lending portfolio includes 722 PPP loans with a total balance of 87.9 million dollars.

And $42 3 million or 0.6% lower than one year prior excluding PPP loan activity ending loans increased to $165 3 million for Q.

3% during the fourth quarter of 2021, and $334 5 million up four 8% on a full year basis.

Loans outstanding net of PPP loans have grown organically by more than 2% in both the third and fourth quarters of 2021.

As of December 31, 2021, the Companys business lending portfolio includes 722, PPP loans with a total balance of $87 $9 billion. The company expects to recognize the majority of its remaining net deferred PPP fees totaling $3 $1 million over the first and second quarters of 2022.

Speaker 4: The company expects to recognize the majority of its remaining net deferred PPP fees totaling $3.1 million over the first and second quarters of 2022.

Speaker 4: Although the company's low-yielding cash equivalents remain elevated, totaling $1.72 billion at December 31, 2021, the company deployed a significant portion of its excess liquidity during the fourth quarter by purchasing $668 million.

Although the company's low yielding cash equivalents remained elevated totaling $1 72 billion at December 31, 2021, the company deploy significant portion of its excess liquidity during the fourth quarter by purchasing $668 million.

Speaker 4: of investment securities at a weighted average purchase yield of 1.41 percent. These activities continued into January with the purchase of an additional $757.6 million of investment securities at a weighted average purchase yield of 1.56 percent.

Of investment Securities at a weighted average purchase yield of 141%. These activities continued into January with the purchase of an additional $757 $6 million of investment securities at a weighted average purchase yield of one 6%.

Speaker 4: The company's capital ratios remain strong in the fourth quarter. The company's Tier 1 leverage ratio was 9.09% at December 31st, 2021, which is nearly two times the well-capitalized regulatory standard of 5%, while the net tangible equity and net tangible assets ratio was 8.69% at December 31st, 2021.

Company's capital ratios remained strong in the fourth quarter, the company's tier one leverage ratio was nine 9% at December 31, 2021, which is nearly two times the well capitalized regulatory standard of 5%, while the net tangible equity to net tangible assets ratio was $8 six 9% at December 31, 2021 company.

Speaker 4: The company has an abundance of liquidity. The combination of the company's cash, cash equivalents, barring availability of the Federal Reserve Bank, barring capacity of the Federal Home Loan Bank, and unpledged available for sale investment securities portfolio provide the company with $6.63 billion of immediately available source of liquidity at the end of the fourth quarter.

The company has an abundance of liquidity the combination of the company's cash cash equivalents barring available as the federal Reserve bank borrowing capacity Federal home loan bank and Unpledged available for sale investment Securities portfolio provides <unk> $663 billion of immediately available sources of liquidity at the end of the fourth quarter.

Speaker 4: At December 31st, 2021, the company's allowance for credit losses totaled $49.9 million or 0.68% of total loans outstanding. This compares to $49.5 million or 0.68% of total loans outstanding at the end of the third quarter of 2021 and $60.9 million or 0.82% of total loans outstanding at December 31st, 2020. The $0.4 million increase in the allowance for credit losses reflective of non-PPP-related loan growth and other qualitative factors. Non-performing loans decreased in the fourth quarter to $45.5 million or 0.62% of loans outstanding, down from $67.8 million or 0.93% of loans outstanding at the end of the third quarter of 2021 at $76.9 million or 1.04% at the end of the fourth quarter of 2020.

At December 31, 2021, the company's allowance for credit losses totaled $49 $9 million or 0.6% to 8% of total loans outstanding. This compares to $49 5 million Euro six 8% of total loans outstanding at the end of the third quarter of 2021 and $60 9 million.

082 percent of total loans outstanding at December 31, 2020.

Zero point $4 million increasingly allowance for credit losses. During the fourth quarter is reflective of non pp P related loan growth and other qualitative factors nonperforming loans decreased in the fourth quarter to $45 $5 million of 0.62% of loans outstanding down from $67 8 million or zero point, 93% of loans outstanding at the end of <unk>.

Third quarter of 2021 at $76 9 million or one 4% at the end of the fourth quarter of 2020.

Speaker 4: The significant decrease in non-performing loans during the fourth quarter is primarily due to the reclassification of certain hotel loans from non-accrual status to accruing status.

The significant decrease in nonperforming loans during the fourth quarter is primarily due to the reclassification of certain hotel loans from non accrual status to accruing status.

Speaker 4: Loans 30 to 89 days delinquent totaled 0.38% of total loans outstanding at December 31st, 2021. This compares to 0.47% one year prior and 0.35% in delinquent third quarter. We believe that the company's asset quality remains strong, but acknowledge that historically low levels of net charges experienced in 2021 and generally benign credit environment were supported by the extraordinary federal and state government financial assistance provided to businesses and consumers throughout the pandemic.

Loans 30 to 89 days delinquent totaled 0.38% of total loans outstanding at December 31, 2021. This compares to 0.47% one year prior year by three 5% into linked third quarter, we believe that the company's asset quality remained strong but acknowledged that the historically low level levels of net charge offs experienced in 2012.

One and generally benign credit environment were supported by the extraordinary federal and state government financial assistance provided to businesses and consumers throughout the pandemic.

Speaker 4: Looking forward, we are encouraged by the momentum in our business.

Looking forward, we are encouraged by the momentum in our business.

Speaker 4: The company generated solid organic loan growth in 2021, especially in the third and fourth quarters. The financial services businesses have been growing, performing very well. Asset quality remains strong, and we've been active in deploying our excess liquidity as interest rates have climbed in recent weeks. In 2022, we will remain focused on new loan generation. We'll continue to monitor market conditions to seek additional opportunities to deploy excess liquidity. And lastly, to echo Mark's comments, we are pleased and excited to be partnering with Elmira Savings Bank.

Company generated solid organic loan growth in 2021, especially in the third and fourth quarters. The financial services business has been growing and performing very well asset quality remained strong and we have been active in deploying our excess of poorly as interest rates declined in recent weeks in 2022, we will remain focused on new loan generation will continue to monitor mark.

Commissions to seek additional opportunities to deploy excess liquidity.

And lastly to Echo Mark's comments, we were pleased and excited to be partnering with them either savings bank.

Speaker 4: Elmira has been serving its community for 150 years, and we will enhance our presence in five counties in New York, Southern Tier, and Finger Lake regions. We initially anticipated completing the acquisition in late first quarter 2022, but now expect to close the second quarter 2022. The integration efforts are going very well, and we sincerely appreciate the efforts of our colleagues at Elmira Savings Bank to make the transition as seamless as possible for its customers. Thank you. I will now turn it back to Chad to open the line for questions.

<unk> has been serving as communities for 150 years that we will enhance our presence in five counties in New York, Southern Tier and finger Lakes region regions. We initially anticipated completing the acquisition in late first quarter of 2022, but now expect to close the second quarter of 2022, the integration efforts are going.

Very well.

And we sincerely appreciate the efforts of our colleagues that are minor savings bank to make the transition as seamless as possible for our customers. Thank you I will now turn it back to Chad to open the line for questions.

Speaker 3: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star then 2.

Well. Thank you 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.

Draw. Your question you May Press Star then two.

Speaker 3: At this time, we will pause momentarily to assemble our roster.

At this time, we will pause momentarily to assemble our roster.

Yes.

Sure.

Speaker 3: And the first question will be from Alex Twardolf from Piper Sandler. Please go ahead.

And the first question will be from Alex toward all from <unk>.

For Sandler. Please go ahead.

Hey, good morning, guys.

Good morning, guys good morning, Alex.

Speaker 5: First off, I was hoping that you could appreciate your comments on the investments that you're putting into the commercial and retail lending team. So I was hoping you could comment a little bit on the pipelines going into the beginning of the sustainability of that 2-plus percent overall organic loan growth over the next couple of quarters.

Hey, first off Bob I was hoping that you could I appreciate your comments on the.

Estimates that youre, putting into the commercial and retail lending teams I was hoping you can comment a little bit on the pipelines going into the beginning of the or the sustainability of that 2% overall organic loan growth over the next couple of quarters.

Yes, Alex Joe, Sir but I'll take that.

Speaker 6: I'll give you the commercial pipeline, I'll also give you the resume mortgage pipeline as well. So, the pipeline for 2021, December 2021 ended at $348 million, excuse me, $335 million as compared to December of 2020, which was at $136 million.

I'll give you the commercial pipeline and I'll also give you the.

The mortgage pipeline as well so the pipeline for 2021 December 2021 ended.

$348 million excuse me $335 million.

As compared to December of 2020, which was at $136 million.

Speaker 6: And then the anticipated fundings, right? Loans that have been approved but not yet funded. For 2021, it's $348 million. And for 2020, it was $212 million. And it was across all of the, or is across all of the regions. Some more than others, but everybody seems to be participating in the activity. And much of that's coming by way of CRE or multifamily.

And then the anticipated fundings right loans that had been approved but not yet funded through 2021, that's $100 million to $348 million and for 2020 was $212 million and it was across all of the ore is across all of the regions some more than others, but everybody seems to be participating.

And the activity and much of its coming by way of CRE or multifamily.

Speaker 6: some self-storage kind of activity, C&I activity, so a variety of lending opportunities. On the consumer side, the Resi Mortgage Pipeline is at $140,000.

Self storage kind of activity C&I activity.

Sure.

A variety of.

Lending opportunities.

On the consumer side.

Mortgage pipelines at 141.

Speaker 6: Which is a little lighter than where we were the same time last year at 165, but I'm not concerned that's more of a reflect reflection of our improved process. So we're getting things through the pipe and through the funnel faster, which.

Which is a little lighter than where we were at the same time last year at 165, but I'm not concerned.

Reflect reflection of our improved process. So we're getting things through the placement through the funnel faster.

Speaker 6: Therefore, I'm not surprised that we're not at the 160 plus. Our date, our number of days that we're turning things through are improving. So I feel real comfortable with the activity and the residue.

Therefore, we're not surprised with that.

We're not at the 160, plus our D R.

The number of days that we're turning things to improve.

Improving so I feel real comfortable with with the activity in the.

Pipeline as well.

Speaker 5: Great, and then can you comment a little bit on the blended yields on new loans and was there some in the fourth quarter, was there some recognition of interest from those loans that were non-accrual that returned to performing status?

Great and then can you comment a little bit on the blended yields on new loans and was there some in the fourth quarter or is there some.

Recognition of <unk>.

Interest from.

From those loans that were on non accrual that returned to performing status.

Speaker 4: Yeah, Alex, this is Joe Soterios. I can take that question.

Yes.

Alex This is Joe <unk> I can take that question. So the blended yield of new loan volume in the fourth quarter was about a 330 give or take.

Speaker 4: The fourth quarter was about a 3.30 give or take, you know, with our blended.

With our blended.

Speaker 4: current bulk yield excluding PPP in the fourth quarter of about four. So we are putting new loans on at rates below the existing yields but obviously that you know the volume and growth has been has been very good in the last last couple of quarters but we're putting new volume on at 330. With respect to the

Current book yield excluding PPP in the fourth quarter of about 4%. So we are putting new loans on at rates below the existing.

The existing yields, but obviously the volume growth has been has been very good in the last last couple of quarters, but we're putting new volume.

At $3 30 with respect to the.

Speaker 4: Non-accrual loans that move to accrual status during the quarter. We booked approximately $1 million of interest income related to those loans moving from non-accrual status to accrual status in the quarter.

Non accrual loans that moved to accrual status during the quarter we.

We booked approximately $1 million of interest income related to.

To those loans coming moving from non accrual status to accrual status in the quarter.

Yes.

Speaker 5: And just a final question, as it relates to the liquidity deployment, you know, how do you think about that? Is it in terms of sort of a target liquidity level or deposit balances? Or you just look to see what the loan growth shakes out and then sort of top up the rest with security balances? Or, you know, maybe give us a sense, I know you said that you did some purchases in January , but kind of how should we think about the pace of liquidity deployment over the next couple quarters?

Final question as it relates to the liquidity deployment, how do we think about that as in terms of sort of a target liquidity level or deposit balances or you just look to the loan growth shakes out and then sort of sop up the rest with security balances or.

Maybe give us a sense I know you.

You said that you did some purchases in January but kind of how should we think about the pace of liquidity.

Deployment over the next couple of quarters.

Speaker 4: Yeah, so we still have some modest amount of home open strategies for, you know, some of the

Yes, so we still have some modest amount of I'll call them open strategies for some of the.

Speaker 4: terms that we'd like to hit in the securities portfolio. So, you know, if we stay at those levels, I think it's fair to expect another, call it, you know,

Terms that we'd like to hit in the securities portfolio. So if we stay at those levels.

I think it's fair to expect another call it.

Have a $1 billion or so to be invested over the first first part of the year, but to your point, yes, we'll be monitoring the loan portfolios as well.

Speaker 4: you know, to see what the growth expectations are there, and obviously, you know, monitoring where the rate curve is going as well. So what we're really trying to target, Alex, is also to build a nice cash flow ladder on the securities portfolio going out in the future period. So if there are other opportunities, you know, when and if rates, you know, stay higher or move higher, we'll have opportunities to reinvest some of those in, you know, on a going forward basis. So we probably will maintain some, you know, some levels of liquidity, continue to maintain, you know, higher levels than we have certainly pre-pandemic, but we're also...

Obviously with the growth expectations are there and obviously monitoring where the rate curve is going as well.

So what we're really trying to target Alex is also needed to build a nice cash flow later on the securities portfolio.

Going out into future periods. So there are other opportunities when and if rates stay higher move higher we will have opportunities to reinvest some of those on a going forward basis.

Speaker 4: So we probably will maintain some, you know, some levels of liquidity, continue to maintain, you know, higher levels than we have certainly pre-pandemic, but we're also looking to deploy, you know, continue to deploy some of that additional liquidity, you know, in the first half of the year.

So we probably will maintain some some levels of liquidity continue to maintain higher levels than we have certainly pre pandemic.

We're also looking at deploy.

Continue to deploy some of that additional liquidity.

In the first half of the year.

Great. Thanks for taking my questions.

Speaker 3: Well, and the next question will be from Russell Gunther from DA Davidson. Please go ahead.

Well.

And the next question will be from Russell Gunther from D. A Davidson. Please go ahead.

Speaker 7: Hi. Good morning, guys. I just had a quick follow-up on the growth conversation. Appreciate the pipelines that were provided, but as was mentioned, really strong growth in the back half of the year. So could you give us a sense for what your organic growth expectation is for 2022 and what some of the asset class drivers would be? And I'm just particularly curious as to, you know, thoughts around retaining single family at the current clip.

Hi, good morning, guys.

Had a quick follow up on the growth conversation I appreciate the pipelines that were provided.

As mentioned really strong growth in the back half of the year. So could you give us a sense for what your organic growth expectation is for 'twenty, two and what's some of the asset class drivers would be and then just particularly curious as to.

Thoughts around retaining single family.

Clear.

Speaker 6: Russell, I'll take that. It's Joe Serban. So, excuse me. So, the, um, the overall.

Well, so I'll take that as Joe serving so excuse me so.

The overall expectations are that we're going to grow.

Speaker 6: in the mid-single digits overall.

In the.

Mid single digits overall.

Okay.

Speaker 6: The expectation on the commercial side is that we will grow, and I mentioned some of the asset classes earlier that...

The expectation on the commercial side is that we will grow.

And some of the asset classes.

Earlier.

<unk>.

Speaker 6: we are focused on and have been focused on.

We are focused on and have been focused on.

Speaker 6: And then on the two retail products, or two retail lines, the installment loan, or more importantly, the indirect.

Yes.

Retail products to retail clients.

The installment loan or more importantly be indirect.

Speaker 6: in direct loans, as well as the resi mortgages, we expect them to continue to grow, but probably at a slower pace than they have historically.

Indirect loans as well as the rest of the mortgages.

We expect them to continue to grow.

But probably at a slower pace than they have historically.

We have.

Speaker 6: We have some inventory challenges with houses and cars and, of course, the anticipated rate hikes and what kind of headwinds they may provide us. So that's what we expect for overall growth and portfolio growth, and we do expect to retain our mortgages on the balance sheet.

We have some inventory challenges with houses and cars and of course.

Anticipated rate hikes, and what the impact what kind of headwinds they may provide us so.

That's what we expect for overall growth and portfolio growth.

We do expect to retain our.

Mortgages on the balance sheet.

I would like to add that Russell it's mark.

Speaker 4: Thank you. Hi, Mark. Russell. It's Mark. Hi. I just wanted to add, I did in my prepared comments.

Hi, Mark Russell.

It's mark.

I just wanted to add I did in my prepared comments.

Speaker 8: said that we've kind of begun to focus and invest in our commercial and our retail businesses to improve organic execution, to include people, systems, and products. So we are.

So we've kind of begun to focus and invest on our in our commercial and retail businesses to improve organic execution.

To include people systems and products. So we are.

Speaker 8: investing in our mortgage business in different ways around products, around people, around our model, our mortgage model, which has always been more branch-oriented and less

Investing in our mortgage business.

In different ways around around products throughout people around our model our mortgage model.

Which has always been more branch oriented.

And less.

Speaker 8: You know, mortgage originator focus, so we're going to reposition that a bit. We're also investing in our commercial business in different ways in some of the markets that we're already in with improved resources.

Mortgage originator.

Focus and so we're going to reposition that a bit we're also investing in our commercial business in different ways and some of the markets that we're already in.

With.

Improved resources.

Speaker 8: Also, pursuing other adjacent

Also pursuing other adjacent.

Speaker 8: you know, markets that have superior, you know, growth potential characteristics relative to our existing markets. So we are making an effort this year to...

In.

Markets that have superior.

Growth potential characteristics relative to our existing markets. So we are.

Making an effort this year or two.

Speaker 8: to do a better job and grow better over time by investing in our organic execution ability. Joe had mentioned kind of the days to close on the mortgage side. You know, we've added some resources to our mortgage business in the back office to try to keep that, you know, to keep that, those days down.

You have to do a better job.

And grow grow better over time by investing in our organic execution ability Joe had mentioned kind of the days to close on the mortgage side.

We've added some resources to our mortgage business in the back office to try to keep that to keep that those days down.

Because in anticipation of some of these investments.

Investments that were making in the mortgage business around people and our model.

We expect more throughput and so we're going to need to have more backroom capabilities, which we've already started to turn.

To wrap up a bit so that explains as Joe said why the.

Speaker 7: as Joe said, why the pipeline's down, but the average days to close is also down. So we're getting through the funnel quicker. So I just wanted to follow up with that comment on kind of the investment we're gonna be making in, you know, across our commercial and mortgage business here in 2022. I appreciate it, Mark. Thank you both for the follow-up thoughts there. And then, you know, switching gears to the margin that you mentioned.

Pipeline is down but the average days to close is also down so we're getting them through the funnel quicker. So just wanted to follow up with that comment on kind of the investment we are going to be making.

Speaker 8: the funnel quicker. So just wanted to follow up with that comment on kind of the investment we're going to be making in, you know, across our commercial and mortgage business here in 2022.

Across our commercial and.

Mortgage business here in 2022.

Speaker 7: I appreciate it, Mark. Thank you both for the follow-up thoughts there. And then, you know, switching gears to the margin, as you mentioned in prepared remarks, remains a headwind. You guys detailed the kind of new money yield versus what's coming off. I'm curious how you balance that with what the Fed might do and the impact of rate hikes on your outlook. So could you share kind of what you're expecting from a Fed rate hike perspective and how?

I appreciate it Marc Thank you both for.

The follow up there and then switching gears to the margin.

Mentioned in prepared remarks remains a headwind.

You guys detailed the kind of new money yields versus what's coming off.

Curious, how you balance that with what the fed might do and the impact of rate hikes on your outlook. So could you share kind of what youre expecting from a fed rate hike perspective in house.

Speaker 7: Each 25 basis points might impact the margin or NII, however you guys want to crack at that.

Each 25 basis points, you might have impacted the margin or NII. However, you guys want to take a crack at that.

Speaker 4: Yeah, Russell, this is Joe Ceteris. I'll take a shot at that. So, on a full year basis between variable rate loans and loans that effectively are principal payments and prepayments of loans, we expect a little over $2 billion, $2 to $2.5 billion of what we'll call repricing opportunity.

Russell This is Joe <unk> I'll take a shot at that so.

On a full year basis between variable rate loans and loans that effectively.

Paying principal payments.

Prepayments of loans.

We expect a little over $2 billion two to $2 5 billion.

Our call it repricing opportunity.

Speaker 4: in, you know, on a full-year basis, so, you know, when and if the Fed does raise rates, and I think we're kind of in the camp of everyone else, which is, you know, we could see three rate hikes this year, maybe some more in 2023, you know, we'll have the opportunity to climb the curve if the long end goes up or the middle part of the curve goes up a bit, just because that's where most of our new loan generation is priced, and obviously we have, you know, variable rate loans that will immediately lift off the floors, most of them, you know, in the next 12 months on the variable rate loan side, we have about $850 million that we expect to reprice in the next 12 months, and another about $800 million in 2023 in the bear portfolio. So I think we're going to have, you know, some opportunities to

On a full year basis.

When and if the fed does raise rates and I think we're kind of in the camp of everyone else, which is we could see three rate hikes. This year, maybe maybe some more in 2023.

We will have the opportunity to climb that curve. If the long end goes up or the middle part of the curve goes up a bit just because thats, where most of our new.

New loan generation surprised and obviously, we have some some variable rate loans that will immediately lift off the floors most of them.

In the next 12 months on the variable rate loan side, we have about $850 million that we expect to reprice in the next 12 months and another $800 million in 2023 in the portfolio. So I think we're going to have some opportunities to.

Speaker 4: you know, to expand margin when and if rates do go up. And we are asset sensitive. I'll also remind you that, and a group, that.

<unk>.

Two.

Expand.

Margin when and if rates do go up and we are asset sensitive I'll also remind you.

And our group debt.

Speaker 8: You know, our deposit beta in the last several cycles, I think back to the 15 through 18 cycle, was very close to zero for most of the cycles. So, you know, when the interest rates go up, we would expect the margin outcome to get a bit better for us.

Our deposit beta in the last several cycles.

Back to the 15 through 18 cycle.

It was very close to zero for most of the cycle. So.

When and if rates go up we would expect the margin outcome.

To get a bit better for us.

Speaker 7: Great. Thank you, Joe. I appreciate it. And then just last one, switching gears, would appreciate your guys' thoughts on the revenue growth outlook within the employee benefits line and the trends and activity you're seeing for 22. And then I'll step back. Thank you.

Great. Thank you Joe I appreciate it and then just last one switching gears I appreciate your guys' thoughts on the revenue growth.

Growth outlook within the employee benefits line.

The trends and activity Youre seeing for 'twenty, two and then I'll step back. Thank you.

Okay.

Speaker 8: Yeah, well, it was double-digit growth this year on the top line, I think it was 12%. The pre-tax earnings line was 20%.

Yes.

It was double digit growth this year on the topline I think it was 12%.

The pretax earnings line was 20%.

Speaker 8: I think we also achieved that last year as well, double digits on top and bottom line. You know, every year we do that, we always say to ourselves, you know, at what point does this, you know, slow down? And it doesn't seem to. So, you know, I'm optimistic we can continue to grow, you know, the top line at double.

I think we also.

Achieved that last year as well double digits on top and bottom line.

Every year, we do that we always say to ourselves what.

<unk>.

Slow down and it doesn't it doesn't seem too so.

Im optimistic we can continue to grow.

The top line.

Digits.

Speaker 8: I think we're pretty well positioned to do that, actually heading into 2022. Some of those revenues are market dependent.

We're pretty well positioned to do that actually heading into 'twenty 2022.

Some of those revenues.

Our market dependent.

Speaker 8: And so there's some impact if you, you know, if we get a significant slide in the market that would impact some of those revenues.

And so there is some impact if you if we get a.

Slide in the market that would that would impact some of those revenues.

Speaker 8: On the other hand, the insurance market's hardening, so you're going to get, you know, that benefit from a hardening of the insurance market. But, you know, the benefits business, just we have.

On the other hand, the insurance market is hardening and so youre going to get that benefit from the hardening of the insurance market.

The benefits business just we have.

Speaker 8: We're in a sweet spot right now in our benefits business where

We're in the sweet spot right now in our benefits business, where.

Speaker 8: We have the ability to serve larger players, and some of those are very large financial services businesses which are coming to us to outsource their administration and record keeping custodial, not custodial, but trust needs, and so we're getting, we're getting a lot of that. We're getting, we're getting a lot of that.

We have the ability to serve larger players and some of those are very large.

<unk> financial services businesses, which are coming to us to outsource their it.

Ministration and record keeping.

<unk> and custodial Trust.

Needs.

So we're getting.

We're getting.

Speaker 8: We're getting incoming opportunities of significance in that space right now, which is great. And we've got some partnerships with some very large national and multinational financial services organizations that...

We're getting incoming opportunities of significance in that space right now, which is which is great and we've got some partnerships with some very large national and multinational financial services organizations.

That.

Yes.

Speaker 8: you know, have come to us to help.

Have come.

Come to us.

Help.

Speaker 8: solve some of their needs and issues as well. So in addition to just organic growth in that business, we're in a really good spot in terms of the scale of that business and our capacity to serve much larger, very large, national and multinational financial services firms in terms of what we do and the products and services and capabilities we have in those.

Solve some of their.

Needs and issues as well. So there is in addition to organic growth in that business, where we have really good spot in terms of the scale of that business that are our capacity to serve.

Much larger very large Nash.

National and multinational financial services firms in terms of what we do and the products and services and capabilities. We have in those businesses. So what started.

Speaker 8: businesses. So, you know, what started, you know, as a kind of a 401k shot.

Kind of a 401K shop.

Speaker 8: 20 years ago has evolved something much more sophisticated and complex with incredible technology and capabilities that we're now leveraging into much larger opportunities in the marketplace. So I would expect that business will grow double digits next year as well. So we'll keep investing in those businesses, they're great businesses.

20 years ago has evolved to something much more sophisticated and complex with incredible.

Technology and capabilities that we're now leveraging into much larger opportunities in the marketplace. So I would I would expect that business as well.

We will grow double digits next year as well so we will keep investing in those businesses are great businesses.

<unk>.

Speaker 8: Run rate this year should be about $200 million in revenues for our non-banking businesses.

The run rate this year should be about $200 million and revenues for our non banking businesses.

Speaker 7: We think that 22 will be also a really good year across the board. I appreciate it, Mark.

We think that two.

<unk> two will be also a really good year across the board.

I appreciate it Marc Thank you all for taking my question.

Thanks Rocco.

Speaker 5: And the next question will be from Matthew Brees from Stevens Inc. Please go ahead. Good morning. Hey, just going back to the rate discussion, I was hoping you could give us a sense for the duration of the securities book and what percentage of securities are floating rate, if any, and then attack on just that 100 basis point net interest income sensitivity model in your 10-Q, what deposit beta.

And the next question will be from Matthew Breese from Stephens, Inc. Please go ahead.

Good morning, Hey, just going back to the right in that.

Sorry, just going back to the rate discussion I was hoping you could give us a sense for the duration of the securities book and what percentage of securities are floating rate if any and then attack on just that 100 basis point net interest income sensitivity model in your 10-Q, what deposit beta are you baking in.

Yeah.

Speaker 4: I'll take that, Matt. This is Joe Soterios. So, the effective duration of the portfolio is just over seven years. You know, fairly well laddered. It's almost all fixed rate

Yes.

I'll take that Matt This is Joe <unk> terror so.

The effective duration of the portfolio is just just over seven years.

Fairly well laterally.

Almost all fixed rate.

Speaker 9: Securities with, you know, bullet-type securities, a lot of treasury securities. We do have some MBS securities that, you know, provide a variable cash flow, but they're not variable instruments. They're just the cash flows will change over time depending on the prepayment levels. But it's, you know, I think it's fairly well-ladder, so we will have some opportunities, you know, I think to reprice and purchase new securities as, you know, as time passes and those run off. I'm sorry, Matt, what your second question was? Yeah, you know, in your prior comment, we discussed as a reminder, you know,

Securities with bullet type Securities lot of Treasury Securities. We do have some some MBS securities that provide a variable cash flow, but theyre not.

Variable.

They are just just the cash flows will change over time, depending on the prepayment levels.

But I think it's fairly well ladder. So we will have some opportunities.

I think to reprice and purchase new securities as it has.

As time passes and I'll drop I'm, sorry that was your second question was yes.

And your prior comment we discussed as a reminder.

Speaker 9: for the last hiking cycle that a positive beta was close to zero.

For the last hiking cycle, the deposit beta was close to zero.

Speaker 9: curious in your 10-Q where you show you the net interest income sensitivity, behind that data are you running a 0% beta or what are you assuming?

I was curious in your 10-Q, where you show you that net interest income sensitivity.

Behind that data are you running a zero percent beta or what are you assuming there.

Speaker 4: We have some modest data built in, Matt, you know, as opposed to zero through, you know, through the whole cycle, but it's very modest.

We have some modest beta built in Matt.

Posted zero through through the whole <unk>.

Through the whole cycle, but it's very modest.

Speaker 4: you know, less than, probably less than a 10 in the model, you know, just based on our past experience, we had very little, you know, beta, and we would expect that to be similar for this cycle as well. And I would just add that, you know, the whole industry is awash in liquidity.

Less and probably less than 10.

In the model.

Just based on our past experience, we have very little.

Beta and we would expect that to be similar for this cycle as well and I would just add that.

The whole industry is awash in liquidity.

Speaker 9: So, you know, from a competitive standpoint as well, I would expect that we might not be as competitive this cycle for deposit rates early in the cycle as it was in the last cycle. So I think our ability to keep deposit rates kind of near their current levels in a, you know, in a 100 or 200 at least for a 12-month period is very reasonable, it's a reasonable expectation.

So from a competitive standpoint, as well I would expect that.

That might not be as competitive as this cycle for for deposit rates early in the cycle as it was in the last cycle. So I think our ability to keep deposit rates kind of near.

Their current levels.

100, or 200 lease for 12 month period is very reasonable its a reasonable expectation.

Speaker 9: Got it. Okay. You know, my next one is, you know, industry-wide, we're starting to see some particularly larger banks change deposit service fees, mostly tied to overdraft and NSF. I think there's some fear that the CFPB could be just a little bit more impactful over the coming months and years. Just curious how you look at deposit service fees if you feel like there's anything at risk, and if so, you know, how would you kind of outline

Got it okay.

My next one is industry wide, we're starting to see some some particularly the larger banks changed deposit service fees, mostly tied to overdraft NSF.

I think there is some fear that the CFPB could be just a little bit more impactful over the coming months and years.

Just curious how you look at deposit service fees, if you feel like Theres anything at risk and if so how would you kind of outlined that.

Speaker 3: Yeah, Matt, I think we're, you know, I think we're in a good position from the standpoint of our checking deposit base, you know, historically going back.

Yes, Matt I think.

I think we're in.

In a good position from the standpoint of our checking deposit base historically going back.

Speaker 4: gosh, it's been about 15 years, we've been a free shop, per se, for our retail customers and kind of a low activity charges even on our commercial businesses. So if we modify practices going forward for overdraft outcomes, we potentially could go backwards a bit in terms of the revenue line item, but I think we also have...

Gosh, it's been about 15 years.

We've been a free shot per se for our retail customers and kind of a low.

Activity charges on even on our commercial businesses. So.

If.

If we if we modify.

This is going forward.

Sure.

Overdraft outcomes.

We potentially could go backwards yet in terms of the revenue line item, but I think we also have.

Speaker 4: You know the ability to to make up some of that and other other areas of deposit service fees So I feel like we're we're you know fairly well positioned We are certainly evaluating you know all of our offerings and looking and keeping you know an eye on all of the you know changes in the regulatory environment, so it's certainly on our radar and and You know we expect this year. We will probably make some modifications to To our offerings, but we also think we're well positioned We're aware of some other institutions that certainly had column monthly maintenance fees per se and You know you know overdraft

The ability to make up some of that in other other areas of deposit service fee. So I feel like we are.

Fairly well positioned we are certainly evaluating all of our offerings and looking and keeping an eye on all of the changes in the regulatory environment. So it's certainly on our radar.

And we expect this year, we will probably make some modifications to two.

Our offerings, but we also think we are well positioned.

Aware of some other institutions that certainly had column monthly maintenance fees per se and.

Overdraft.

Speaker 5: fees that were significant, and at least we're in the position where I think our maintenance costs and activity fees are lower than some of our peers, so we might have some ability to make up some of that lost revenue as we change our product set.

Fees that were.

Significant and at least we're in a position where I think our maintenance costs and activity fees are lower than.

And some of our peers. So we might have some ability to make up some of that lost revenue.

As we change our product set.

Speaker 9: Great. Okay. Last one for me, just on share repurchases. Looking back, I can't remember if, in the years I've covered you, if I remember a quarter where you've actually repurchased stock, but I was hoping you could just walk through what triggered that capital deployment strategy. Was it valuation-driven, or was it more from the standpoint that you executed it on everything else, including loan growth, M&A, securities growth?

Great. Okay last one from me just on share repurchases.

Looking back I can't remember if.

And in the years I've covered you if I remember a quarter, where you've actually repurchase stock.

But I was hoping you could you could just walk through what triggered that capital deployment strategy was it was it valuation driven or was it more from the standpoint that you executed on everything else, including loan growth M&A securities growth things like that.

Speaker 8: Yeah, Matt, it's Mark. I'll comment on that one. I think you're right. We haven't, you know, historically bought back a lot of stock. One of the things I've kind of wanted to do for a long time was just a, I'll call it a housekeeper cleanup of shares issued under the employee equity.

Yes, Matt it's Mark I'll comment on that but I think youre right. We havent historically bought back a lot of stock one of the things I kind of wanted to do for a long time was was just a I'll call. It housekeeping a cleanup of shares issued.

The.

<unk> equity.

Speaker 8: It's not a lot, but it just is a matter of housekeeping. I would call it to clean it up.

Not a lot, but just as a matter of housekeeping I would call to clean it up.

Speaker 9: And, you know, we finally got around to doing it, and we'll probably, you know, you'll see that going forward. So there's really no rhyme or reason other than that it's not some, you know, detailed scientific capital allocation strategy. It's just kind of more, you know, good hygiene, let's clean up the sharecrete associated with the equity plans over time, and so you'll probably continue to see that in the future. Okay. Do you think we should expect that like a once a year cleanup? Yeah. Okay.

Okay.

We finally got around to doing it and we'll probably you'll see that going forward. So there's really no rhyme or reason other than that it's that some.

<unk>.

Detailed scientific capital allocation strategy, it just kind of more.

Good hygiene, let's let's clean up the share creep associated with.

With the equity plans overtime, and so you'll probably continue to see that in the future. Okay. Do you think we should expect that like a once a year cleanup.

Speaker 9: I think, Matt, we'd pick our spots over the year and, you know, do it in probably, you know, incremental bikes over the year, but I think, in effect, you know, on a full-year basis we're looking to just, you know, clean up the creep, which is, you know, 300,000 to 500,000 shares, depending on the year, maybe a little less. Got it. Okay. Great. I appreciate taking my questions.

I think Matt we would we'd pick our spots over the year.

Sure.

Do it and probably incremental bikes.

Over the year, but I think in effect on a full year basis, we're looking to just clean up the.

<unk>, which is.

Three to 500000 shares depending on the year, maybe a little less.

Got it okay, great I appreciate you taking my questions. Thank you.

Speaker 3: Thanks, Matt. And the next question will come from Chris O'Connell with KBW. Please go ahead.

Thanks, Matt.

And our next question will come from Chris O'connell with K BW. Please go ahead.

Good morning, gentlemen.

Speaker 10: So, I just wanted to start off, you know, with the expense base, and you guys obviously have, you know, rationalized the branch network, you know, quite a bit over the past 12 months or so. And it was just outside of the Elmira deal, I was just wondering about how much of that opportunity is left, and in general, how you think about, you know, organic expense growth into 2022. Thank you.

Alright.

Just wanted to start off.

The expense base.

And you guys, obviously rationalize the branch network.

Quite a bit over the past 12 months or so.

And it was just outside of the mirror deals is just wondering about.

How much of that opportunity is left.

In general how you think about organic expense growth into 2022.

Speaker 4: Yeah, Chris, that's a good question, fair question. So, you know, our run rate the last couple of quarters on operating expenses was about $100 million. I would expect that, you know, as we look into 2022, you know, to potentially add a couple hundred, excuse me, a couple million dollars to that result. And, you know, certainly Q1 and

Yes, Chris that's a good question fair question so.

Our run rate the last couple of quarters.

Operating expenses was about $100 million.

We'd expect that as we look into 2022.

To potentially add a couple of hundred dollars excuse me a couple of million dollars.

To that result in certainly in Q1 and.

Speaker 4: into Q2, excluding the Elmira opportunity. We tend to give our merit-based increases at the beginning of the year. So, and we also have higher payroll taxes in the first quarter. So, I think you'll see most of that sort of achieved in the first quarter. So, you know, a couple million dollars on top of what we did in the last couple of quarters. And then that sort of becomes our run rate. So, you know, with wage pressures, you know, we would typically have a, you know, I'll call it a 3% kind of expectation around.

Into Q2, excluding the Elmira opportunity, we tend to give our merit based increases at the beginning of the year or so and we also have higher payroll taxes in the first quarter. So I think youll see most of that sort of achieved in the first quarter. So a couple of million dollars on top of what we did in the last couple of quarters, and then that sort of becomes our run rate. So.

With wage pressures.

We would typically have a I'll call it 3% kind of expectation around what are your expenses growth its probably closer to four five with certainly with wage pressures.

Speaker 4: The expenses growth, it's probably closer to four or five, certainly with wage pressures in the market. We're also investing in some loan generation resources, which will add a little bit to cost as we move ahead.

And the market, we're also investing in some.

Loan generation resources, which will add a little bit a little bit.

The cost as we as we move ahead.

Speaker 4: But, you know, nothing too far out of the ordinary, just a bit higher on the expected run rate. With respect to, you know, additional...

But nothing too far out of the ordinary just a bit higher on the expected run rate with respect to.

Speaker 4: Opportunities to rationalize the business, I think we'll continue to look at those. You know, they do take a little time to sort of bake into the op-ex. You know, you need to announce any sort of rationalizations and execute on them. And then ultimately, you know, you realize those gains over the future periods. I'll just say that, you know, particularly the occupancy and equipment expense line items have been pretty flat the last couple of years, particularly because of some of the consolidation activities. And the last thing I will note is.

Additional opportunities to rationalize the business I think we will continue to look at those.

They do take.

A little time, just sort of baked into the opex.

Announce any sort of rationalization and execute on them and then ultimately.

You realize those gains over over the future periods I'll, just say that particularly the occupancy and equipment expense line item has been pretty flat. The last couple of years, particularly because of some of the consolidation activities.

And the last thing I will notice that our.

Speaker 4: We continue to invest in digital technologies, so, you know, the expectation is that we're going to continue to do that. You know, the world is changing and we're trying to keep pace with that change. So, you know, the telecommunications and IT expense line item could creep up a bit more than kind of the core run rate for expenses, but the, you know, call it the occupancy and those types of costs will tend to be probably below the core run rate.

We continue to invest in digital technologies.

So the expectation is we're going to continue to do that.

World is changing and we're trying to keep pace with that with that change so.

The telecommunications and it expense line item could could creep up a bit more than kind of the core.

Run rate for four.

<unk> expenses, but the I'll call it the occupancy in those types of costs will tend to be.

Below the core the core run rate.

Speaker 10: Great, that's helpful. And then secondly, you guys mentioned the prepared comments that you would be looking to do potentially another deal in the next year if the opportunity presents itself. If you could just give a reminder of, you know.

Great that's helpful.

And then secondly, you guys mentioned in the prepared comments.

You would be looking to do.

Potentially another deal in the next year, if the opportunity presents itself.

If you could just give a reminder of.

Speaker 10: you know, what would be the ideal size and, you know, geographical landscape or, you know, net ad for loan generation capabilities, et cetera, you know, for under for an ideal, you know, transaction, that'd be great.

What would be the ideal size and geographical landscape or.

Net add for your loan generation capabilities et cetera.

For an ideal.

<unk> that'd be great.

Speaker 8: Sure, Chris, Mark, you know, I think a billion to two billion is a good sweet spot for us.

Okay.

Sure Chris It's Mark.

I think one.

1 billion to $2 billion.

Is it a good sweet spot for us.

Speaker 8: either, you know, within our footprint or contiguous to our footprint.

Yes.

Yeah.

Within our footprint or.

Contiguous to our footprint.

Speaker 8: a high-quality franchise, good culture, not a fixer-upper, something that has.

High quality franchise good culture.

Not a fixer upper.

Something that has.

Speaker 8: you know, valuable assets that are underappreciated in the market. That could be a mortgage business, that could be wealth, which is interesting to me if you look at some of the banks out there in that size space, at least in and around our markets, the Northeast generally. There are some really, really good...

Valuable assets that are underappreciated in the market that could be a mortgage business that could be well.

It's interesting to me if you look at some of the banks out there in that size space at least in and around our markets. The northeast generally there is some really really good.

Speaker 8: billion to $2 billion banks with really good wealth businesses that are trading nine times earnings. So I think there's a lot of, you know, opportunity and I think, you know, banks

Billion to $2 billion banks, but really good wealth businesses that are trading at nine times earnings.

I think there is a lot of opportunity and I think banks like that.

Speaker 8: like that are going to have a challenging time getting a multiple.

A challenging time getting.

Speaker 8: in the market for a variety of reasons, and so I think with our currency and kind of background and expertise and history of value creation for shareholders, including those who we partner with, I think there's a good opportunity in 2022 to find something that fits that kind of ideal criteria.

In the market.

A variety of reasons and so I think with our <unk>.

Currency and kind of background and expertise.

History of value creation for shareholders, including those who we partner with.

I think there's a good opportunity.

2020 to find something that fits that kind of ideal criteria.

Speaker 10: That's helpful, Collar, thank you. And then what about on the non-bank side, within the fee businesses? Can you just give us an update on, you inked a couple of smaller acquisitions here over the past couple of quarters there. Is there still good opportunities presenting themselves or is it being a little bit priced out due to some of the entrance of PE competition in those spaces?

That's helpful color. Thank you.

Then.

What about.

On the non bank side within the fee businesses can you just give us an update on <unk>.

A couple of smaller acquisitions here over the past couple of quarters. There is there.

Good opportunities presenting themselves there is being a little bit priced out due to some of the entrance of <unk>.

Competition in those spaces.

Speaker 8: Yeah, I think the insurance space is pretty still, it's a very, very fragmented market and in that space, scale makes a difference. So I think we'll continue to have opportunities in the insurance space. We've never done a lot in wealth in terms of larger acquisitions because they tend to be overly expensive and you don't really...

Yes, I think the the insurance space is pretty still.

Very very fragmented market.

In that space scale makes a difference.

So I think we'll continue to have opportunities in the insurance space.

Never done a lot in wealth in terms of larger acquisitions, because they tend to be.

Overly expensive and you don't really own the assets.

Speaker 8: So we're a little bit cautious in the well space. What we do in the well space is we bring on...

So we're a little bit cautious in the wealth space, what we do in the wealth space as we bring on small offices.

Speaker 8: small offices, like one or two or three folks on a team, and they have a couple, 300 million, and we'll bring them on, it's not a, you could call it an acquisition, but, so we've done some of those. In fact, I think they're looking one or two right now, along those lines. So most of the stuff in the wealth side is not what you consider kind of traditional larger acquisitions, they're more smallish shops that are jumping onto our platform and there's a, you know, a monetization event for them.

One or two or three three.

Three folks on the team and they have a couple of $300 million and we'll bring them on its data you could call it an acquisition but.

So we've done we've done some of those in fact I think we're looking at one or two right now along those lines. So most of the stuff in the wealth side is that what you consider traditional larger acquisitions or more.

Smallish shops that are jumping onto our platform and theirs.

A monetization of that for them.

Speaker 8: It's part of that, sometimes structured as a sign-on bonus kind of thing.

As part of that sometimes structured as a sign on bonus kind of thing.

Speaker 8: You know, in the benefit space, the couple we did last year were both negotiated transactions. They were not...

And the benefit space.

The.

Couple we did last year were both negotiated transactions they were not.

Bill.

Speaker 8: I think, you know, we have a lot of relationships across the U.S.

Hey.

I think we have a lot of relationships.

Across the U S.

Speaker 4: And in Puerto Rico, we have the largest benefits provider in the Commonwealth of Puerto Rico.

And in Puerto Rico, we are their largest benefits provider in the Commonwealth of Puerto Rico.

Speaker 4: So we have a lot of relationships and not everybody wants to sell to PE for obvious reasons.

So we have a lot of relationships.

Not everybody wants to self pay for obvious reasons.

Speaker 4: So, I think we'll continue to have opportunities. I think we will probably see other opportunities where we get to go up for an asset that gets shot to, you know, the broader world, in which case we will have a harder time, you know, beating PE just, frankly, based on the price and what was really a particularly high-value asset for us for some reason. But, you know, we'll keep playing. We've been close a couple times. We'll keep playing. We'll keep playing.

So I think we'll continue to have opportunities I think we will probably see other opportunities where we get to go up for an asset Thats gets shopped too.

Broader world.

In which case, we will have a harder time.

Bob.

Beating P/e, just frankly based on the price it was really a particularly high value asset for us for some reason.

But we'll keep plan we've been close a couple of times.

Speaker 8: So we'll see. I mean, one of the challenges, frankly, is the investment bankers for the P.E. firms kind of like to sell to each other, and, you know, they like to do business with the P.E. firms because there's a lot more business to do with them versus...

So we will see I mean, one of the challenges frankly is the investment bankers for the PE firms kind of like to sell to each other.

They like to do business with the piece parts, because theres a lot more business to do with them versus.

Speaker 8: You know, for us, we're not quite as active. We're not in the business of buying and selling assets. So the investment bankers kind of favor the P.E. bids. And so that makes it a little bit more challenging. So, but, I mean, we understand the, you know, the field of play and, you know, we do our best to play in it without, you know, being undisciplined. But I think the real opportunity is going to be focusing on those negotiated transactions where we have good relationships and good assets.

Elsewhere, we are not quite as active we're not in the business of buying and selling assets. So the investment bankers kind of favor the <unk>.

So that makes it a little bit more challenging so, but I mean, we understand the field of play and we do our best to play in it without being on discipline.

But I think the real opportunity is going to be.

Focusing on those negotiated transactions, where we have good relationships and good assets.

Speaker 8: as well as this opportunity to kind of reach up market and talk to some of these bigger financial services players and leverage off their scale to create opportunities for us.

As well as this opportunity to kind of reach up market and talk to some of these bigger financial services players and leverage off their scale to create opportunities for us.

Speaker 10: Great. And just on the credit side, it's good to see the big chunk of non-accruals coming back under accrual this quarter. As you guys look ahead over the next quarter or two, is there any other significant chunks or kind of cliffs of those six-month periods that are coming up here that you can see another...

Great and.

Just on the credit side.

Good to see the.

Big chunk of non accruals coming back on to accrual this quarter.

And as you guys look ahead over the next quarter or two is there any other.

Significant chunks or kind of calypso.

Those six months periods that.

That are coming out that are coming up here that you can see another.

Speaker 10: sizable chunk of the non-accruals kind of coming back on.

Sizable chunk of non accruals kind of coming back on.

Chris This is Joe serving.

Speaker 6: Yeah, the 18 that we moved.

Yes.

<unk>.

Yes.

18.

Sure.

We moved.

Speaker 6: were the obvious ones. There's a couple others that are not, none of them are of significant size, first of all. And secondly, there's a few that didn't have, if you will, six months worth of performance underneath them that made us comfortable enough to move them from non-accrual to accrual. But I think that as we go through the second quarter, we'll re-evaluate them. And as we go through the third quarter, we'll do the same thing. And if it warrants moving them, we'll move them. But there's nothing,

What are the obvious ones Theres a couple of others.

No.

None of them are of significant size first of all.

Secondly, there's a few that.

It Didnt have if you will six months worth of performance underneath that made us comfortable enough to move them from nonaccrual to accrual.

But I think that as we.

Go through the second quarter, we'll reevaluate them and as we go through the third quarter, we'll do the same thing.

Warrants moving on we'll move them.

But theres nothing Theres no large.

Speaker 6: number of assets that we're looking to move. The biggest move took place in December .

So.

Number of <unk>.

It's just that we're looking to move.

The biggest move took place.

Understood.

Speaker 10: And last one, just a little clean up, how are you guys seeing the tax rate for next year?

And last one.

A little cleanup here.

Are you guys seeing the tax rate for next year.

Speaker 3: The tax rate, I think it's fair to expect somewhere between 22.5 and 23.5 on a going forward basis. We've had certain states that enacted higher rates and so we're dealing with that. Also, if you look at the...

The tax rate.

I think it's fair to expect somewhere between call it 22 and a half in.

Three and a half on a going forward basis, we've had certain states that have enacted.

Higher rates and so we're dealing with that also if you look at the.

Speaker 4: You know, balance of our earning assets, there's more assets deployed in taxable assets than there have been in the past. So I would expect the rate to kind of, you know, kind of hover between, you know, call it 22.5 and 23.5, potentially a little bit lower.

Balance of our <expletive> , earning assets Theres more assets deployed and taxable assets there have been in the past.

I would expect the rate to kind of.

Kind of hovered between call it 22, and a half of $23 five potentially a little bit lower.

Speaker 11: But that's, I think, a fair expectation for 2022.

But that's I think a fair expectation for 2022.

Great. Thanks for taking my questions.

Thanks, Chris.

Speaker 3: The next question will come from Eric Zwick from Benning and Scattergood. Please go ahead.

The next question will come from Erik Zwick from bending and Scattergood. Please go ahead.

Thanks, Good morning, guys.

Good morning, Eric.

Speaker 12: uh... but my questions have been answered just one and i apologize if i missed it and the uh... the opening commentary uh... what was the driver of the decision to move the closing of elmira uh... to to keep

Most of my questions have been answered just wanted to I apologize if I missed it.

The opening commentary what was the driver of the decision to move to closing of Elmira to queue.

Speaker 8: I don't know if there's so much a decision on our part, it's just an expectation around where we see the trend of the regulatory approval process going.

Yes.

I don't know if it's so much a decision on our part is just an expectation around where we see the trend of.

The regulatory approval process going.

Speaker 8: So, you know, we decided to push it off, you know, two months further out, just based on the, you know, the progress and the dialogue with the regulators. I mean, there's nothing, you know, of note or concern. I think it's just right now with the administration and the pending appointments of some of the agency leadership and the, I'll call it, the interest of all of the regulators.

So we decided to push it up.

Two months further out just based on the.

The progress in the dialogue with the regulators I mean theres nothing.

Of note our concern I think it's just right now.

With the administration and the pending appointment.

Some of the agency leadership and the.

I'll call it the interest of all of the.

Speaker 8: regulatory agencies on every single transaction, even those who have a let's call it tangential involvement. It's a lot more complicated, slower, everyone knows that. That's just the trend right now. So we just decided to push it out a couple months to be sure.

Regulatory agencies on every single transaction and even those who have a let's call. It tangential involvement.

It's a lot more complicated slow everyone that thats just the trend right now.

So we just decided to push it out a couple of months to be sure.

Speaker 12: Got it. That makes sense. And what month within 2Q are you targeting at this point? We're looking at May right now. Perfect. Thanks. That's all I had today. I appreciate you.

Got it that makes sense and what month within QQ are you targeting at this point.

Yes, we're looking at May right now.

Okay.

Perfect. Thanks, that's all I had today I appreciate you taking my questions.

Thanks, Sir thank you.

Again.

Speaker 13: Please press star, then one. The next question will be from William Wallace for AIM-NJ. Please go ahead. Thank you. Good morning, guys. How are you? Good.

Please press Star then one.

The next question will be from William Wallace from Raymond James. Please go ahead.

Thank you and good morning, guys how are you.

Good morning good.

Speaker 13: I had one follow-up question to Matt's line of questioning around deposit service fees. If I look at that line as a percentage of average core deposits, pre-COVID, you guys were running kind of 20 to 22 basis points per quarter.

I had one follow up question to Matt line of questioning around deposit service fees, if I look at that line.

As a percentage of average core deposits pre Covid you guys were running kind of 20% to 22 basis points per quarter, and then like the industry.

Speaker 13: and then like the industry that dropped once COVID hit with all the stimulus, et cetera. But yours have been kind of stubborn and not recovering like we've seen other banks. So I'm curious if you've analyzed the trends in your deposit portfolio and if you have any expectation of what that deposit service fee line might look like moving forward through the next, you know, several quarters or a couple of

That dropped once COVID-19 hit with all the stimulus et cetera.

Yours have been kind of stubborn.

Recovering like we've seen other banks. So I'm curious if you annualize the trends in your deposit portfolio and if you have any expectation of what that deposit service fee line might might look like moving forward through the next several quarters or a couple of things.

Speaker 11: Yeah, hi Wally, this is Joe Soteros, I can take that. So, you know...

Yes, Hi, this is Joe <unk> I can I can take that so.

Speaker 11: The advantage that we've had on a core funding base over a lot of years is really our core deposit base and so our ability to track demand deposits, if you will, is very strong over a long period of time. We did a lot of branch acquisitions over time that brought in good core deposit relationships. When the stimulus funds

The advantage that we've had on our core funding base over a lot of years is really our core deposit base and so our ability to attract demand deposits. If you will it's a very strong over a long period of time, we did a lot of branch acquisitions over time that Brian .

Friday, and good core deposit relationships with the stimulus funds.

Came in most of that those funds came into consumer checking accounts and so just on that basis alone.

Our.

Core deposit base grew substantially probably more so than many of our peers and those balances continue to be substantial in.

Speaker 11: be substantial and high, if you will, by historical standards. So in that cycle, effectively, the number of overdraft occurrences and other fees simply came down because the balances were higher. And so I would expect that, you know, assuming that some of that money gets spent by consumers over time and balances come down, we would be, you know, kind of moving back toward a more historical.

Hi, if you will by historical standards so.

Cycle effectively.

Number of overdraft occurrences gist and other fees.

Speaker 11: simply came down because the balances were were higher and so I would expect that you know as

Came down because the balances were.

Were higher and so I would expect that.

As you know assuming that there is some of that money gets spent by consumers over time.

Speaker 11: you know, assuming that there's some of that money gets spent by consumers over time and balances come down, we would be, you know, kind of moving back toward a more historical path, but probably not getting back to the levels we were certainly, you know, pre-COVID. And as we also mentioned, you know, we are evaluating the offerings and the offerings potentially could change in 2022 and, you know, our expectation is that we, you know, we do have some ability to, you know, potentially get some other deposit fees that are that are not NSF and overdraft related, just because we've offered a free checking product suite and low, you know, transaction fees, if you will, over a long extended period of time.

And balances come down we would be kind of weak.

Swing back toward a more historical but probably not getting back to the levels. We were certainly pre COVID-19 and as we also mentioned.

We are evaluating the.

The offerings and the offerings potentially could change in 2022 and.

Our expectation is that we do have some ability to.

Potentially get some other deposit fees that are that are not.

NSF and overdraft related.

Just because we have offered a free checking product suite and low.

Transaction fees, if you will over a long extended period of time.

Okay.

Speaker 13: Okay. Thank you very much. That's very helpful. And then one follow-up for you. I think it was Mark that was talking about the expense base, and it sounded like you were saying we're starting off the year around $102 million or so, and then you'd think that there'd be four to five percent kind of

Okay. Thank you very much that's very helpful. And then one follow up for you I think it was mark that was talking about the expense base and it sounded like you were saying.

We're starting off the year around $102 million or so and then you'd think that there'd be.

4% to 5%.

Okay.

Speaker 13: cost-of-living expense on pressures on top of that. Is that, did I interpret your commentary correctly?

Cost of living expense pressures on top of that is that did I interpret your.

Commentary.

Speaker 11: We were running about $100 million in expenses the prior two quarters, and typically what we have is we have an adjustment in the first quarter because merit-based...

Yes. This is Joe was here I had made that comment so we were running about $100 million expense.

The expenses the last the prior two quarters and typically what we have is we have an adjustment in the first quarter.

Because merit based increases go through payroll taxes kick in FICA taxes kick in so we typically move up a bit and my expectation is that it'll be a couple million dollars from Q4 to Q1, and then on a run rate basis on a going forward basis I think.

Speaker 11: you know, increases go through, payroll taxes kick in, FICA taxes kick in, so we typically move up a bit. And my expectation is that'll be, you know, a couple million dollars from Q4 to Q1. And then, you know, on a run rate basis, on a going forward basis, I think, you know, a 4% to 5% expectation on an annualized basis is a more, you know, reasonable expectation, whereas in the past it potentially could be 2% to 4%, but just obviously there's inflation in the market and there's various wage pressures, so I think our core run rate in terms of just growth is going to be just a little bit higher than it has been, you know, certainly in the past. And we're also investing in, you know, resources to originate.

4% to 5% expectation on an annualized basis as a more.

Reasonable expectation, whereas in the past that you potentially could be 2% to 4%, but just obviously there is inflation in the market.

There is wage pressure so I think our our core run rate in terms of just growth is going to be just a little bit higher than it has been.

Certainly certainly in the past and we're also investing in.

Our resources to originate.

Speaker 11: you know, new loans and grow the loan portfolio and have better organic execution on the loan side as well.

New loans and grow the loan portfolio and have better organic execution on the loan side as well.

Speaker 13: Okay. Yes. Thank you very much for that, Joe. I appreciate it. That's all I had. Thanks, guys.

Okay. Yeah. Thank you very much for that I. Appreciate it that's all I had thanks guys.

Speaker 3: Thanks, Wylie. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Mr. Chnitsky for any closing remarks.

Thanks Molly.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Kaminski for any closing remarks.

Speaker 3: No further remarks from me, Chad. Thank you. Thank you all for joining us this morning and we will talk again after the end of the first quarter. Thank you. And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Okay.

No further remarks from each of you. Thank you. Thank you all for joining US this morning, and we will.

Again after the end of the first quarter. Thank you.

And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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