Q3 2025 Community Financial System Inc Earnings Call
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Speaker #3: Good day and welcome to the Community Financial System, Inc. Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: Good day and welcome to the Community Financial System, Inc.'s third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded and discussion may contain forward-looking statements within the provisions of the Private Securities Litigation Reform Act of 1995 that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the company operates. These statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed.
Discussion May also include references to certain non-GAAP financial measures.
Conciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earning release.
Speaker #3: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone.
I would now like to turn the conference over to Dimitar <unk>, President and CEO. Please go ahead.
Speaker #3: To withdraw your question, please press star then two. Please note that this event is being recorded and discussion may contain forward-looking statements within the provisions of the private securities litigation reform act of 1995 that are based on current expectations, estimates, and production projections about the industry, markets, and economic environment in which the company operates.
Thank you Bella.
Good morning.
Thank you all for joining our Q3 2025 earnings call.
We had an excellent quarter.
Strong and diversified revenue growth remains a core differentiator for our company.
Market share gains across all of our businesses continue.
We remain focus on expenses, even as we are making a $100 million investments in facilities talent and technology across all of our businesses.
Speaker #3: These statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed. Refer to the company's SEC filings, including the risk factors section, for more details.
Risk metrics remain excellent the strength of our capital liquidity and credit continues to provide the base for our growth.
Operator: Refer to the company's SEC filings, including the risk factors section, for more details. Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release. I would now like to turn the conference over to Dimitar Karaivanov, President and CEO. Please go ahead.
All in all record operating earnings per share up 23, 9% year over year.
Speaker #3: Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release.
I'd like to highlight a few recognitions to give you a better sense of where our businesses stand in terms of capabilities and reputation.
Our employee benefit services business.
Speaker #3: I would now like to turn the conference over to Dimitar Karaivanov, president and CEO. Please go ahead.
<unk> was recognized again as one of the top five record keepers nationwide by the National Association of flat visors.
Speaker #4: Thank you, Mary. Good morning. Thank you all for joining our Q3 2025 earnings call. We had an excellent quarter, strong and diversified revenue growth remains a core differentiator for our company.
Dimitar Karaivanov: Thank you, Bailey. Good morning. Thank you all for joining our Q3 2025 earnings call. We had an excellent quarter. Strong and diversified revenue growth remains a core differentiator for our company. Market share gains across all of our businesses continue. We remain focused on expenses, even as we are making a $100 million investment in facilities, talent, and technology across all of our businesses. Risk metrics remain excellent. The strength of our capital, liquidity, and credit continues to provide the base for our growth. All in all, record operating earnings per share of 23.9% year over year. I'd like to highlight a few recognitions to give you a better sense of where our businesses stand in terms of capabilities and reputation. Our employee benefit services business, BPAS, was recognized again as one of the top five record keepers nationwide by the National Association of Plan Advisors.
Our insurance services business. One group was ranked as the 68 largest property and casualty brokerage in the country, but insurance journey one.
One group is now the third largest bank owned broker.
And our wealth management services business, noting on advisors was recognized as a five star wealth management team by investment teams.
Speaker #4: Market share gains across all of our businesses continue. We remain focused on expenses, even as we are making a $100 million investment in facilities, talent, and technology across all of our businesses.
Our banking business community Bank was recognized by S&P Global is one of the top 20 banks in the country and Theyre in overall deposits rankings.
Speaker #4: Risk metrics remain excellent, the strength of our capital, liquidity, and credit continues to provide the base for our growth. All in all, record operating earnings per share up 23.9% year over year.
Also importantly, the culture and values of our company and people led to a recognition by the United way of Central New York.
We need to champion award.
All of these things matter they make a difference they make us who we are and lead to the results you see.
Speaker #4: I'd like to highlight a few recognitions to give you a better sense of where our businesses stand in terms of capabilities and reputation. Our employee benefit services business, BPIS, was recognized again as one of the top five record keepers nationwide by the National Association of Plan Advisors.
We have deep national level talent and capabilities and are now becoming nationally recognized.
We have also been fortunate to have excellent capital deployment opportunities year to date.
We're on track to deploy approximately $100 million in cash capital in transactions that push forward our strategic priorities.
Speaker #4: Our insurance services business, OneGroup, was ranked as the 68th largest property and casualty broker in the country by the Insurance Journal. OneGroup is now the third largest bank-owned broker.
Dimitar Karaivanov: Our insurance services business, OneGroup NY, was ranked as the 68th largest property and casualty broker in the country by the Insurance Journal. OneGroup NY is now the third largest bank-owned broker. In our wealth management services business, Nottingham Advisors was recognized as a five-star wealth management team by Investment News. Our banking business, Community Bank, was recognized by S&P Global as one of the top 20 banks in the country in their inaugural deposit rankings. Also, importantly, the culture and values of our company and people led to our recognition by the United Way of Central New York with their Community Champion Award. All of these things matter. They make a difference. They make us who we are and lead to the results you see. We have deep national-level talent and capabilities and are now becoming nationally recognized.
Suffice higher growth subscription like revenue streams insurance benefits are well.
For the banking business strong funding and liquidity and attractive high priority markets.
Speaker #4: In our wealth management services business, Nottingham Advisors, was recognized as a five-star wealth management team by investment news. Our banking business, Community Bank, was recognized by S&P Global as one of the top 20 banks in the country in their inaugural deposit rankings.
You will note that this quarter. We also provided in the press release, the tangible returns for each one of our businesses.
I believe they will speak for themselves and our largest self explanatory pro our capital allocation strategy.
Speaker #4: Also importantly, the culture and values of our company and people led to our recognition by the United Way of Central New York, with their community champion award.
The pre tax tangible returns for the quarter were 63% for insurance services.
62% for employee benefit services, 48% for wealth management services.
Speaker #4: All of these things matter. They make a difference. They make us who we are and lead to the results you see. We have deep national-level talent and capabilities, and we are now becoming nationally recognized.
25% for banking and corporate.
We will continue to aggressively pursue similar opportunities to deploy capital at high tangible returns.
I am optimistic that we will continue to do so in particular in our insurance and wealth businesses.
Speaker #4: We have also been fortunate to have excellent capital deployment opportunities here to date. We're on track to deploy approximately $100 million in cash capital in transactions that push forward our strategic priorities.
Dimitar Karaivanov: We have also been fortunate to have excellent capital deployment opportunities year to date. We're on track to deploy approximately $100 million in cash capital in transactions that push forward our strategic priorities: diversified, higher growth, subscription-like revenue streams in insurance, benefits, or wealth, and for the banking business, strong funding and liquidity in attractive high-priority markets. You will note that this quarter we also provided in the press release the tangible returns for each one of our businesses. I believe those speak for themselves and are largely self-explanatory for our capital allocation strategy. The pre-tax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate. We will continue to aggressively pursue similar opportunities to deploy capital at high tangible returns.
In addition, we also had the opportunity after our prior earnings release to buyback approximately 206000 shares at what we believe was meaningfully below intrinsic value for our company.
Speaker #4: Diversified, higher-growth, subscription-like revenue streams in insurance, benefits, or wealth; and for the banking business, strong funding and liquidity in attractive, high-priority markets. You will note that this quarter we also provided in the press release the tangible returns for each one of our businesses.
This largely eliminated any share dilution to our shareholders for the year.
I will now pass it onto Nureyev for details on the financials.
Thank you <unk> good morning.
Dimitar noted the company's third quarter performance was robust in all four of our businesses.
Speaker #4: I believe those speak for themselves. And our largest self-explanatory for our capital allocation strategy. The pre-tax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate.
GAAP earnings per share of $1 <unk> increased 21, 10, or 25, 3% from the third quarter of the prior year and increased <unk> 10, or seven 2% from linked second quarter results.
Operating earnings per share and operating pre tax pre provision net revenue per share a record quarterly results for the company.
Speaker #4: We will continue to aggressively pursue similar opportunities to deploy capital at high tangible returns. I am optimistic that we will continue to do so, in particular in our insurance and wealth businesses.
Operating earnings per share were $1 nine in the third quarter as compared to 88.
Dimitar Karaivanov: I am optimistic that we will continue to do so, in particular in our insurance and wealth businesses. In addition, we also had the opportunity after our prior earnings release to buy back approximately 206,000 shares at what we believe was meaningfully below intrinsic value for our company. This largely eliminated any share dilution to our shareholders for the year. I will now pass it on to Marya for details on the financials.
One year prior and $1 <unk> in the linked second quarter.
Speaker #4: In addition, we also had the opportunity after our prior earnings release to buy back approximately $206,000 shares at what we believe was meaningfully below intrinsic value for our company.
Third quarter operating <unk> per share of $1 56.
<unk> increased 27 from one year prior and increased 15% on a linked quarter basis.
Speaker #4: This largely eliminated any share dilution to our shareholders for the year. I will now pass it on to Mariah for details on the financials.
These record operating results were driven by a new quarterly high for total operating revenues of $206 8 million in the third quarter.
Speaker #5: Thank you, Dimitar. Good morning. As Dimitar noted, the company's third quarter performance was robust in all four of our businesses. GAAP earnings per share of $1.04 increased 21 cents or 25.3% from the third quarter of the prior year and increased 7 cents or 7.2% from linked second quarter results.
Marya Burgio Wlos: Thank you, Dimitar. Good morning. As Dimitar noted, the company's third quarter performance was robust in all four of our businesses. GAAP earnings per share of $1.04 increased $0.21 or 25.3% from the third quarter of the prior year and increased $0.07 or 7.2% from linked second quarter results. Operating earnings per share and operating pre-tax, pre-provision net revenue per share were record quarterly results for the company. Operating earnings per share were $1.09 in the third quarter as compared to $0.88 one year prior and $1.04 in the linked second quarter. Third quarter operating PP&R per share of $1.56 increased $0.27 from one year prior and increased $0.15 on a linked quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $206.8 million in the third quarter.
Operating revenues increased $7 6 million or three 8% from the linked second quarter and increased $17 7 million or nine 4% from one year prior driven by record net interest income and our banking business.
The Companys net interest income was $128 2 million in the third quarter.
Speaker #5: Operating earnings per share and operating pre-tax pre-provision net revenue per share were record quarterly results for the company. Operating earnings per share were $1.09 in the third quarter, compared to $0.88 one year prior and $1.04 in the linked second quarter.
This represents a $3 4 million or two 7% increase over the linked second quarter, and a $15 4 million or 13, 7% improvement over the third quarter of 2024 and marks the sixth consecutive quarter of net interest income expansion.
The company is fully tax equivalent net interest margin increased three basis points from three 3% in the linked second quarter to 333% in the third quarter.
Speaker #5: Third quarter operating PP&R per share of $1.56 increased by $0.27 from one year prior and increased by $0.15 on a linked-quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $206.8 million in the third quarter.
Higher loan yields and stable funding cost drove increases in both net interest income and net interest margin in the quarter.
During the quarter the company's cost of funds was 133% an increase of one basis point from the prior quarter driven by higher average overnight borrowing balance while the companys cost of deposits decreased two basis points and remained low relative to industry at one 170%.
Speaker #5: Operating revenues increased 7.6 million or 3.8% from the linked second quarter and increased 17.7 million or 9.4% from one year prior, driven by a record net interest income in our banking business.
Marya Burgio Wlos: Operating revenues increased $7.6 million or 3.8% from the linked second quarter and increased $17.7 million or 9.4% from one year prior, driven by a record net interest income in our banking business. The company's net interest income was $128.2 million in the third quarter. This represents a $3.4 million or 2.7% increase over the linked second quarter and a $15.4 million or 13.7% improvement over the third quarter of 2024 and marks the sixth consecutive quarter of net interest income expansion. The company's fully tax-equivalent net interest margin increased three basis points from 3.3% in the linked second quarter to 3.33% in the third quarter. Higher loan yields and stable funding costs drove increases in both net interest income and net interest margin in the quarter.
Operating noninterest revenues increased $2 3 million or 3% compared to the prior year's third quarter and increased $4 1 million or five 6% from the linked second quarter reflective of revenue growth in all four of our businesses.
Speaker #5: The company's net interest income was $128.2 million in the third quarter. This represents a 3.4 million or 2.7% increase over the linked second quarter and a 15.4 million or 13.7% improvement over the third quarter of 2024 and marks the sixth consecutive quarter of net interest income expansion.
Operating non interest revenues represented 38% of total operating revenues during the third quarter.
One metric that continuously emphasizes the diversification of our businesses.
Speaker #5: The company's fully tax-equivalent net interest margin increased three basis points from 3.30% in the linked second quarter to 3.33% in the third quarter.
The company reported a $5 6 million provision for credit losses during the third quarter. This compares to $7 7 million in the prior year's third quarter and $4 $1 million in the linked second quarter.
Speaker #5: Higher loan yields and stable funding costs drove increases in both net interest income and net interest margin in the quarter. During the quarter, the company's cost of funds was 1.33% and increased by one basis point from the prior quarter, driven by a higher average overnight borrowing balance. Meanwhile, the company's cost of deposits decreased two basis points and remained low relative to the industry at 1.17%.
During the third quarter the company recorded $128 3 million in total noninterest expenses.
Marya Burgio Wlos: During the quarter, the company's cost of funds was 1.33%, an increase of one basis point from the prior quarter, driven by a higher average of overnight borrowing balance, while the company's cost of deposits decreased two basis points and remained low relative to industry at 1.17%. Operating non-interest revenues increased $2.3 million or 3% compared to the prior year's third quarter and increased $4.1 million or 5.6% from the linked second quarter, reflective of revenue growth in all four of our businesses. Operating non-interest revenues represented 38% of total operating revenues during the third quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5.6 million provision for credit losses during the third quarter. This compares to $7.7 million in the prior year's third quarter and $4.1 million in the linked second quarter.
This represents an increase of $4 1 million or three 3% from the prior year's third quarter.
The increase included approximately $2 3 million of expenses associated with the banks de Novo branch expansion and an increase of data processing and communication expenses that included a $1 4 million consulting expense in connection with a contract renegotiation renegotiation with our core that then provider.
Speaker #5: Operating non-interest revenues increased 2.3 million or 3%, compared to the prior year's third quarter, and increased 4.1 million or 5.6% from the linked second quarter, reflective of revenue growth in all four of our businesses.
The impact of the consulting item on total noninterest expenses was offset by medical rebates.
Speaker #5: Operating non-interest revenues represented 38% of total operating revenues during the third quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5.6 million provision for credit losses during the third quarter.
And an incentive true up which drove a $1 5 million or one 9% decrease in salaries and employee benefits.
In the fourth quarter, we anticipate approximately $1 million of incremental expense driven by the prepayment of charitable contribution commitments in response to tax law changes in incentive compensation adjustments contingent on final scorecard items.
Speaker #5: This compares to 7.7 million in the prior year's third quarter and 4.1 million in the linked second quarter. During the third quarter, the company recorded $128.3 million in total non-interest expenses.
Marya Burgio Wlos: During the third quarter, the company recorded $128.3 million in total non-interest expenses. This represents an increase of $4.1 million or 3.3% from the prior year's third quarter. The increase included approximately $2.3 million of expenses associated with the Bank's de novo branch expansions and an increase of data processing and communication expenses that included a $1.4 million consulting expense in connection with a contract renegotiation with our core system provider. The impact of the consulting item on total managers' expenses was offset by medical rebates and an incentive true-up, which drove a $1.5 million or 1.9% decrease in salaries and employee benefits. In the fourth quarter, we anticipate approximately $1 million of incremental expense driven by the prepayment of charitable contribution commitments in response to tax law changes and incentive compensation adjustments contingent on final scorecard items.
Yeah.
The effective tax rate during the third quarter of 24, 7% increase from 23% in the prior year's third quarter driven by increases in certain state income taxes.
Speaker #5: This represents an increase of 4.1 million, or 3.3%, from the prior year's third quarter. The increase included approximately $2.3 million of expenses associated with the bank's de novo branch expansions and an increase in data processing and communication expenses, which included a $1.4 million consulting expense in connection with a contract renegotiation with our core system provider.
The effective tax rate for the first nine months of 2025 was 23, 3% only slightly higher than the 22, 9% for the first nine months of 2024.
Ending loans increased $231 1 million or two 2% during the third quarter and increased $498 6 million or four 9% from one year prior reflective of organic growth and the overall business and consumer lending portfolio.
Speaker #5: The impact of the consulting item on total non-interest expenses was offset by medical rebates and an incentive true-up, which drove a $1.5 million, or 1.9%, decrease in salaries and employee benefits.
The company continues to invest in its organic loan growth opportunities and expect continued expansion into under tapped markets within our northeast footprint.
Speaker #5: In the fourth quarter, we anticipate approximately $1 million of incremental expense driven by the prepayment of charitable contribution commitments and response to tax law changes and incentive compensation adjustments contingent on final scorecard items.
The company's ending total deposits increased $580 7 million or four 3% from one year prior and increased to $355 1 million or two 6% from the end of the linked second quarter.
Speaker #5: The effective tax rate during the third quarter of '24.7% increased from 23% in the prior year's third quarter, driven by increases in certain state income taxes.
Marya Burgio Wlos: The effective tax rate during the third quarter of 24.7% increased from 23% in the prior year's third quarter, driven by increases in certain state income taxes. The effective tax rate for the first nine months of 2025 was 23.3%, only slightly higher than the 22.9% for the first nine months of 2024. Ending loans increased $231.1 million or 2.2% during the third quarter and increased $498.6 million or 4.9% from one year prior, reflective of organic growth in the overall business and consumer lending portfolio. The company continues to invest in its organic loan growth opportunities and expects continued expansion into underbanked markets within our Northeast footprint. The company's ending total deposits increased $580.7 million or 4.3% from one year prior and increased $355.1 million or 2.6% from the end of the linked second quarter.
The increase in total deposits between periods was.
It was driven by growth in non time deposits across governmental and non-governmental customers.
Speaker #5: The effective tax rate for the first nine months of 2025 was 23.3%, only slightly higher than the 22.9% for the first nine months of 2024.
Noninterest bearing and relatively low rate checking and savings accounts continue to represent almost two thirds of the total deposits reflective of the core characteristics of the Companys deposit base.
Speaker #5: Ending loans increased 231.1 million or 2.2% during the third quarter and increased 498.6 million or 4.9% from one year prior, reflective of organic growth in the overall business and consumer lending portfolio.
The company did not hold any brokered or wholesale deposits on its balance sheet during the quarter.
The company's liquidity position remains strong as readily available sources of liquidity totaled $6 1 billion or 240% of the company's estimated uninsured deposits net of collateralized and intercompany deposits at the end of the third quarter.
Speaker #5: The company continues to invest in its organic loan growth opportunities and expects continued expansion into undertapped markets within our Northeast footprint. The company's ending total deposits increased 580.7 million or 4.3% from one year prior and increased 355.1 million or 2.6% from the end of the linked second quarter.
The companys loan to deposit ratio at the end of the third quarter was 76, 5%, providing future opportunity to migrate lower yielding investment securities into higher yielding loans.
Yes.
All the companies and the bank's regulatory capital ratios continues to substantially exceed well capitalized standards.
Speaker #5: The increase in total deposits between both periods was driven by growth in non-time deposits across governmental and non-governmental customers. Non-interest bearing and relatively low rate checking and savings accounts continue to represent almost two-thirds of the total deposits reflective of the core characteristics of the company's deposit base.
Marya Burgio Wlos: The increase in total deposits between both periods was driven by growth in non-time deposits across governmental and non-governmental customers. Non-interest-bearing and relatively low-rate checking and savings accounts continue to represent almost two-thirds of the total deposits, reflective of the core characteristics of a company's deposit base. The company did not hold any brokered or wholesale deposits on its balance sheet during the quarter. The company's liquidity position remains strong as readily available sources of liquidity total $6.2 billion or 240% of the company's estimated uninsured deposits that have collateralized in intercompany deposits at the end of the third quarter. The company's loan-to-deposit ratio at the end of the third quarter was 76.5%, providing future opportunity to migrate lower-yielding investment securities into higher-yielding loans. All the company's and the bank's regulatory capital ratios continue to substantially exceed well-capitalized standards.
The company's tier one leverage ratio increased four basis points during the third quarter to $9, four 6%, which is significantly higher than the regulatory well capitalized standard of 5%.
The company's asset quality metrics were generally stable during the third quarter.
Nonperforming loans totaled $56 1 million or 52 basis points of total loans outstanding at the end of the third quarter.
Speaker #5: The company did not hold any brokered or wholesale deposits on its balance sheet during the quarter. The company's liquidity position remains strong, as readily available sources of liquidity total 6.2 billion or 240% of the company's estimated uninsured deposits net of collateralized and intercompany deposits at the end of the third quarter.
This represents a $2 7 million or one basis point decrease from the end of the linked second quarter.
Comparatively nonperforming loans were $62 8 million or 61 basis points of total loans outstanding one year prior.
Speaker #5: The company's loan-to-deposit ratio at the end of the third quarter was 76.5%, providing future opportunity to migrate lower-yielding investment securities into higher-yielding loans. All the companies and the bank's regulatory capital ratios continue to substantially exceed well-capitalized standards.
Those 30 to 89 days delinquent decreased on a linked quarter basis from $53 3 million or 51 basis points of total loans at the end of the second quarter to $51 6 million or <unk> 48 basis points of total loans at the end of the third quarter.
The company recorded net charge offs of $2 5 million or nine basis points of average loans annualized during the third quarter.
Speaker #5: The company's Tier 1 leverage ratio increased four basis points during the third quarter to 9.46%, which is significantly higher than the regulatory well-capitalized standard of 5%.
Marya Burgio Wlos: The company's tier-one leverage ratio increased four basis points during the third quarter to 9.46%, which is significantly higher than the regulatory well-capitalized standard of 5%. The company's asset quality metrics were generally stable during the third quarter. Non-performing loans total $56.1 million or 52 basis points of total loans outstanding at the end of the third quarter. This represents a $2.7 million or one basis point increase from the end of the linked second quarter. Comparatively, non-performing loans were $62.8 million or 61 basis points of total loans outstanding one year prior. Loans 30 to 89 days delinquent decreased on a linked quarter basis from $53.3 million or 51 basis points of total loans at the end of the second quarter to $51.6 million or 48 basis points of total loans at the end of the third quarter.
This represents decreases of <unk> 3 million from the prior year's third quarter and $2 $6 million from the linked second quarter.
Speaker #5: The company's asset quality metrics were generally stable during the third quarter. Non-performing loans totaled 56.1 million or 52 basis points of total loans outstanding at the end of the third quarter.
The company's allowance for credit losses, with $84 9 million or <unk> 79 basis points of total loans outstanding at the end of the third quarter, an increase of $3 $1 million during the quarter and an increase of $8 8 million from one year prior.
Speaker #5: This represents a 2.7 million or 1 basis point increase from the end of the linked second quarter. Comparatively, non-performing loans were 62.8 million or 61 basis points of total loans outstanding one year prior.
The increases were primarily attributed to reserve building in the business lending portfolio, reflecting the growth in size and volume.
<unk> recently originated commercial loans.
The allowance for credit losses at the end of the third quarter represented over six times, the company's trailing 12 month net charge offs.
Speaker #5: Loans 30 to 89 days delinquent decreased on the linked quarter basis, from 53.3 million or 51 basis points of total loans at the end of the second quarter to 51.6 million or 48 basis points of total loans at the end of the third quarter.
We are pleased with our third quarter results and momentum behind recent initiatives that reinforce our commitment to scale as a diversified financial services company.
Speaker #5: The company recorded net charges of 2.5 million or 9 basis points of average loans annualized during the third quarter. This represents decreases of 0.3 million from the prior year's third quarter and 2.6 million from the linked second quarter.
Marya Burgio Wlos: The company recorded net charge-offs of $2.5 million or 9 basis points of average loans annualized during the third quarter. This represents decreases of $0.3 million from the prior year's third quarter and $2.6 million from the linked second quarter. The company's allowance for credit losses was $84.9 million or 79 basis points of total loans outstanding at the end of the third quarter, an increase of $3.1 million during the quarter and an increase of $8.8 million from one year prior. The increases were primarily attributed to reserve building in the business's lending portfolio, reflecting the growth in size and volume of recently originated commercial loans. The allowance for credit losses at the end of the third quarter represented over six times the company's trailing 12-month net charge-off.
We anticipate closing on the acquisition of 7% and our branches in Lehigh value market on November 7th which accelerates our retail strategy in the banking services business in a market, we anticipate significant growth.
Additionally, we are excited to announce our minority investment in Leap Holdings, Inc, which intentionally complement our insurance services business.
Speaker #5: The company's allowance for credit losses was 84.9 million or 79 basis points of total loans outstanding at the end of the third quarter and increased of 3.1 million during the quarter and an increase of 8.8 million from one year prior.
Looking forward, we believe the company's diversified revenue profile strong liquidity regulatory capital reserves stable core deposit bank and historical good asset quality provide a solid foundation for continued earnings growth.
Speaker #5: The increases were primarily attributed to reserve building in the business's lending portfolio, reflecting the growth in size and volume of recently originated commercial loans.
That concludes my prepared earnings comments.
<unk> and I will now take questions.
Speaker #5: The allowance for credit losses at the end of the third quarter represented over six times the company's trailing 12-month net charge-up. We are pleased with the third quarter results and momentum behind recent initiatives that reinforce our commitment to scale as a diversified financial services company.
Bailey I will turn it back to you to open the line. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Marya Burgio Wlos: We are pleased with the third quarter results and momentum behind recent initiatives that reinforce our commitment to scale as a diversified financial services company. We anticipate closing on the acquisition of seven Santander branches in the Lehigh Valley market on November 7th, which accelerates our retail strategy in the banking services business in a market we anticipate significant growth. Additionally, we are excited to announce a minority investment in Leap Holdings, Inc., which intentionally complements our insurance services business. Looking forward, we believe the company's diversified revenue profile, strong liquidity, regulatory capital reserves, stable core deposit bank, and historically good asset quality provide a solid foundation for the continued earnings growth. That concludes my prepared earnings comments. Dimitar and I will now take questions. Bailey, I will turn it back to you to open the line. Thank you.
If you are using a speakerphone. Please pick up your handset. Please go ahead session with fees.
Anytime your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker #5: We anticipate closing on the acquisition of seven Santander branches in the Lehigh Valley market on November 7th, which accelerates our retail strategy in the banking services business in a market we anticipate significant growth.
At this time, we will pause momentarily to assemble our roster.
Speaker #5: Additionally, we are excited to announce a minority investment in Leap Holdings Inc., which intentionally complements our insurance services business. Looking forward, we believe the company's diversified revenue profile strong liquidity, regulatory capital reserves, stable core deposit bank, and historical good asset quality provide a solid foundation for the continued earnings growth.
First question comes from Tyler Cacciatore with Stephens. Please go ahead.
Good morning, This is Tyler on for Matt Breese.
Hey, good morning, good morning.
If I could just start on the minority investment in Italy, and I think you've touched on it a bit in the prepared remarks should we look at look at this as a first step to something bigger maybe a precursor to larger investment if things work out.
Speaker #5: That concludes my prepared earnings comments. Dimitar and I will now take questions. Bailey, I will turn it back to you to open the line.
And are you able to provide what the add backs to revenues and expenses are as we move forward.
Speaker #6: Thank you.
Speaker #3: Hey, we'll now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Operator: Okay. We'll now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing your keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. First question comes from Tyler Katchitori with Stephens. Please go ahead.
Thanks Tyler.
The way I would think about it as we invested in the business that we believe is highly attractive growing at very high growth rates with a tremendous team.
Speaker #3: If at any time your question has been addressed and you would like to withdraw your question, please press "star" then "two." At this time, we will pause momentarily to assemble our roster.
That fits squarely in our.
Pieces to grow insurance services.
So we took a stake in something that we really like and love.
Obviously, we would look to have more of it.
So lucky sometime down the line.
Speaker #3: First question comes from Tyler Tatatori with Stevens. Please go ahead.
Yes.
But I think at this point.
We are where we are in terms of our investment in leap.
Speaker #7: Good morning. This is Tyler. I'm from Abruzz.
So we will see how what the future holds for us.
Tyler Katchitori: Good morning. This is Tyler on for Matt Bries.
Speaker #8: Morning, Tyler.
As it relates to financial impact.
[Company Representative]: Morning, Tyler.
Speaker #3: Morning.
Marya Burgio Wlos: Morning.
Speaker #7: If I could just start on the minority investment into Leap, and I think you touched on it a bit in the prepared remarks. Should we look at this as a first step to something bigger, maybe a precursor to a larger investment if things work out?
Tyler Katchitori: If I could just start on the minority investment into Leap Holdings, Inc., and I think you touched on it a bit in the prepared remarks. Should we look at this as a first step to something bigger, maybe a precursor to a larger investment if things work out? Are you able to provide what the impacts to revenues and expenses are, as we move forward?
I think the best way to think about it as roughly neutral.
Some of these earn outs.
The way the accounting works kind of lead to that outcome.
Speaker #7: And are you able to provide what the impacts to revenues and expenses are, as we move forward?
And kind of given its relative size it doesn't really.
Dramatically change things for us.
Speaker #8: Thanks, Tyler. The way I would think about it is we invested in a business that we believe is highly attractive, growing at very high growth rates, with a tremendous team that fits squarely in our thesis to grow insurance services.
[Analyst 1]: Thanks, Tyler. The way I would think about it is we invested in a business that we believe is highly attractive, growing at very high growth rates, with a tremendous team, that fits squarely in our thesis to grow insurance services. We took a stake in something that we really like and love, and obviously, we would love to have more of it if we're so lucky sometime down the line. I think at this point, we are where we are in terms of our investment in Leap. We'll see what the future holds for us. As it relates to financial impact, I think the best way to think about it is roughly neutral. Some of the ins and outs of the way the accounting works kind of leads to that outcome, and given its relative size, it doesn't really dramatically change things for us.
So I wouldn't really.
We expect much in the west contribution.
For 2026.
Great. Thank you and then just moving to the deposit costs.
Could just talk about how deposit costs about deposit costs and how the legacy footprint is doing versus more concerted efforts in areas like Albany, Buffalo and Rochester is there a notable difference in the cost of deposits there and how should we think about cost of deposits overall moving forward.
Speaker #8: So we took a stake in something that we really like and love, and obviously, we would love to have more of it if we're so lucky, sometime down the line.
Speaker #8: But I think at this point, we are where we are in terms of our investment in Leap. So we'll see what the future holds for us.
Yes, I don't think that we have seen any dramatic differences in the cost of deposits.
If you're referring to <unk> power.
Speaker #8: as it relates to financial impact, I think the best way to think about it is roughly neutral. you know, kind of some of the ins and outs, of the way the accounting works kind of leads to that outcome.
Legacy footprint versus the noteworthy fashion.
We're pursuing very much the same strategies I will say.
We're a little bit more intentional around commercial growth in those in normal markets.
So that kind of leads maybe a little bit on the margin.
Speaker #8: and kind of given it's relative size, it doesn't really dramatically change things for us. so I I wouldn't really expect much in the way of contribution for 2026.
Our prior cost.
While the retail side kind of buildup one small question.
[Analyst 1]: I wouldn't really expect much in the way of contribution for 2026.
At a time.
It will take just a little bit more time, but thats kind of a strategy with all of that said.
<unk> discussed before.
Speaker #7: Great. Thank you. And then just moving to deposit costs, if you could just talk about how deposit costs about deposit costs and how the legacy footprint is doing versus more concerted efforts in areas like Albany, Buffalo, and Rochester, is there a notable difference in the cost of deposits there?
Tyler Katchitori: Great. Thank you. Just moving to deposit costs, if you could talk about deposit costs and how the legacy footprint is doing versus more concerted efforts in areas like Albany, Buffalo, and Rochester. Is there a notable difference in the cost of deposits there, and how should we think about cost of deposits overall moving forward?
Our de Novo.
<unk> is not really moving the needle either way.
Cost of deposits for the aggregate company.
Because of its relative size rates over 10 years, we are hopeful that it's going to be a very meaningful contributor to us, but right now, it's not and it's not going to be for a little bit.
Speaker #7: And how should we think about cost of deposits overall moving forward?
By the time those tenured Scott Tom we're going to have bill to the retail checking accounts as I talked about in all kind of one 1000 dollar accounts at a time.
Speaker #8: Yeah. I I don't think that we have seen any dramatic difference in the cost of deposits if you're referring to kind of our legacy footprint versus the de novo expansion.
[Analyst 1]: I don't think that we have seen any dramatic difference in the cost of deposits, if you're referring to kind of our legacy footprint versus the de novo branch expansion. We're pursuing very much the same strategies. I will say, we're a little bit more intentional around commercial growth in those de novo markets. That kind of leads maybe a little bit on the margin of higher cost, while the retail side builds up, you know, one small checking account at a time. That will take just a little bit more time, but that's kind of the strategy. With all of that said, as we've discussed before, our de novo initiative is not really moving the needle in the way of cost of deposits for the aggregate company because of its relative size, right? Over 10 years, we're hopeful that it's going to be a very meaningful contributor to us.
So right now expectation is that the Gulf coast are going to continue to trend down.
With the.
Some of the rate cuts is expected by the market and the novel you should really impact that trend for us.
Speaker #8: We're pursuing very much the same strategies. I will say we're a little bit more intentional around commercial growth in those de novo markets.
That's helpful. Thank you and then if I could just squeeze one more in.
Speaker #8: so that kind of leads maybe a little bit on the margin of of of higher cost. while the retail side kind of builds up, you know, one small checking account at a time.
I was wondering if youre seeing any spread compression on incremental CRE loans and if so to what extent and then if you could provide us what your current CRE loan yields are.
Speaker #8: And that will take just a little bit more time. But that's kind of the strategy. With all that said, as we've discussed before, our de novo initiative is not really moving the needle in terms of the cost of deposits for the aggregate company.
Yes, so the way I would think about loan yields is everything is priced roughly.
Spread over three years to five years right. So if you look at the three things that we do.
Speaker #8: Because of its relative size, right? It's over 10 years. We're hopeful that it's going to be a very meaningful contributor to us. But right now, it's not, and it's not going to be for a little bit.
I'll touch on not just commercial with kind of the overall portfolio as I'm sure everybody has got a similar question here.
[Analyst 1]: Right now, it's not, and it's not going to be for a little bit. By the time those 10 years come, we're going to have built the retail checking accounts, as I talked about, kind of one $1,000 account at a time. Right now, our expectation is that deposit costs are going to continue to trend down, with some of the rate cuts as is expected by the market, and the de novo issue doesn't really impact that trend for us.
If you look at let's start with the commercial side, you basically have a fixed than kind of a variable component to those.
Speaker #8: and by the time those 10 years kind of come, we're going to have built the retail checking accounts, as I talked about, you know, kind of one $1,000 account at a time.
With pricing similar to <unk>.
Bye.
Speaker #8: so right now, expectation is that deposit costs are going to continue to trend down. with the some of the rate cuts is is is expected by the market.
30 to 40 over.
If you are five year Mark.
Sure.
As you can easily see that those parts of the curve has moved down dramatically.
Speaker #8: And the de novo issue doesn't really impact that trend for us.
End of the year. So if you are looking at.
Speaker #7: That's helpful. Thank you. And then if I could just squeeze one more in, I was wondering if you're seeing any spread compression on incremental CRE loans?
Tyler Katchitori: That's helpful. Thank you. If I could just squeeze one more in, I was wondering if you're seeing any spread compression on incremental CRE loans, and if so, to what extent? If you could provide us what your current CRE loan yields are.
350 ish on those rates in the market and Youre, putting your fuel spread now youre looking at that high fives.
Speaker #7: And if so, to what extent? And then if you could provide us with your current CRE loan yields.
Low sixes.
In terms of commercial originations.
This quarter was a little bit higher.
But I expect that we'll continue to kind of see a downtrend.
Speaker #8: Yeah. So I the way I would think about loan yields is everything's priced roughly you know, spread over three or five years, right? So if you look at the three things that we do, and I'll I'll touch on not just commercial but kind of the overall portfolios, I'm sure everybody's got similar question here.
[Analyst 1]: Yeah. The way I would think about loan yields is everything's priced roughly, you know, spread over three or five years, right? If you look at the three things that we do, and I'll touch on not just commercial but kind of the overall portfolios, I'm sure everybody's got a similar question here. If you look at, let's start with the commercial side, you basically have a fixed and kind of a variable component to those. You're typically pricing somewhere 225, you know, 230, 240 over the, you know, three or five-year part of the curve. As you can easily see, those parts of the curve have moved down dramatically since the beginning of the year.
And those rates is just the market is evolving we do have some aggressive competitors.
On the CRE side in particular.
In our markets, particularly in upstate New York and so on.
We expect Vermont and Youre seeing rates on their promotional rates that are now.
Speaker #8: If you look at, let's start with the commercial side. You basically have a fixed and kind of variable component to those. You're typically pricing somewhere between 25 to 30 to 40 over.
The mid fives.
Not to where we are but that's what some folks are.
In our markets.
If you look at our mortgage portfolio.
You've typically pricing that path to 60 ish to 70 over the 10 year. So you can do the math you are kind of in the mid.
Speaker #8: The, you know, three- or five-year part of the curve. So, as you can easily see, those parts of the curve have moved down dramatically since the beginning of the year.
<unk> right now.
That's clearly have.
Speaker #8: So if you're looking at, you know, 30, 50-ish on those rates in the market, and you're putting your bill spread, now you're looking at kind of high fives.
[Analyst 1]: If you're looking at, you know, 350-ish on those rates in the market and you're putting your bill spread, now you're looking at kind of high fives and low sixes in terms of commercial originations. This quarter was a little bit higher, but I expect that we'll continue to kind of see a downtrend in those rates as just the market is evolving. We do have some aggressive competitors on the CRE side in particular in our markets, particularly in upstate New York, and to some extent Vermont. You're seeing, you know, rates there, promotional rates that are now in the mid-fives. That's not where we are, but that's what some folks are in our markets. If you look at our mortgage portfolio, you know, you're typically pricing that kind of 260-ish, 270 over the 10-year. You can do the math.
Also has a.
The trend towards lower.
And I expect that we're going to continue to see that again the back book in that.
Speaker #8: Now, low sixes, in in terms of commercial originations. this quarter was a little bit higher. but I expect that we'll continue to kind of see a downtrend in in in those rates, as just the market is is evolving.
And that product versus 530 ish.
Plenty of room for us to reprice mortgage cash flows up.
And our consumer.
Installment lending business, which is our auto business.
Basically have you volume rates that are roughly in line with portfolio rates.
Speaker #8: We do have some aggressive competitors, on the CRE side in particular. In in in our markets, particularly in upstate New York, and to some extent Vermont, and you're seeing, you know, rates there promotional rates.
So growth there is going to be driven by volume not by Brexit.
Great. Thank you that'll be all from me I appreciate you taking my questions.
Speaker #8: They're now in the mid-fives. that's not where we are, but that's what some folks are. in our markets. If you look at our mortgage portfolio, you know, you're typically pricing that kind of 260-ish, 270 over the 10-year.
Okay.
Our next question comes from Steve Moss with Raymond James. Please go ahead.
Good morning.
Good morning, Steve.
Okay.
Speaker #8: So you can do the math. You're kind of in the, you know, mid-sixes right now. that's clearly have a also has a a trend towards lower.
Orange <unk> more and more.
[Analyst 1]: You're kind of in the, you know, mid-sixes right now. That clearly also has a trend towards lower, and I expect that we're going to continue to see that. Again, the back book in that product for us is 530-ish. So there's still plenty of room for us to reprice mortgage cash flows up. In our consumer installment lending business, which is our auto business, we basically have new volume rates that are roughly in line with portfolio rates. Growth there is going to be driven by volume, not by rate.
Maybe just.
On the loan growth side here.
Good to see broad based growth.
Kind of as you were expecting your Dimitar, just kind of curious where does the pipeline stand in.
Speaker #8: And I expect that we're going to continue to see that. Again, the backbook in that product for us is around $530 million. So there's still plenty of room for us to reprice mortgage cash flows up.
Are you still as optimistic Alan growth, just given maybe incrementally more competition here.
Speaker #8: In our consumer installment lending business, which is our auto business, we've essentially seen new volume rates that are roughly in line with portfolio rates.
Yes, Steve.
We remain.
We remain very constructive on.
The growth side, so if you.
Look at our pipelines today, our commercial pipeline is at its highest level.
Speaker #8: So growth there is going to be driven by volume, not by rate.
Ever been.
Speaker #7: Great. Thank you. That'll be all for me. I appreciate you taking my questions.
So I expect that we'll do well depending on the pull through of course.
Tyler Katchitori: Great. Thank you. That'll be all for me. I appreciate you taking my questions.
Timing matters.
A lot of that pipeline will come to fruition over the next couple of quarters.
Speaker #3: Our next question comes from Steve Moss with Raymond James. Please go ahead.
Operator: Our next question comes from Steve Moss with Raymond James. Please go ahead.
When you look at our mortgage pipeline today, the pipeline is actually higher than it was this time last year, which I think says a lot for the submission of our team on the mortgage side as well given the markets. We're in.
Speaker #9: Good Good morning.
Steve Moss: Good morning. Morning, Steve.
Speaker #8: Good morning, Steve.
Speaker #9: Morning.
Marya Burgio Wlos: Morning.
And then on the consumer.
Steve Moss: Morning, Dimitar. Morning, Marya. Maybe just, you know, on the loan growth side here, good to see broad-based growth, kind of as you were expecting here, Dimitar. Just kind of curious, where does the pipeline stand? Are you still as optimistic on growth, just given maybe incrementally more competition here?
The other side.
These are a little bit more unpredictable.
Typically the fourth quarter is a little bit slower so we'll see how that goes.
If I was to ballpark it today.
The fourth quarter is.
Plus or minus.
20 to 30 million Bucks in line with third quarter that will be kind of my high level guests.
But we'll see where things shake out so I think our our kind of guidance for the year.
[Analyst 1]: Yeah. Steve, we remain very constructive on the growth side. If you look at our pipelines today, our commercial pipeline is at its highest level it's ever been. I expect that will do well, depending on the pull-through, of course. Timing matters, but a lot of that pipeline will come to fruition over the next couple of quarters. When you look at our mortgage pipeline today, the pipeline is actually higher than it was this time last year, which I think says a lot for the execution of our team on the mortgage side as well, given the market we're in. On the consumer, on the auto side, things are a little bit more unpredictable, but typically, the fourth quarter is a little bit slower. We'll see how that goes.
4% to 5% is very much intact with an expectation for.
Our strong fourth quarter as well.
Most of the growth for us has been.
And we will continue to be market share gains.
About this before but for us.
I think if you look at how we're performing versus the majority of folks in our markets.
We're outperforming.
That is because we're getting a lot of market share from some of the larger Super regionals.
But we compete with and I expect that to continue.
Okay.
And I guess on the margin front.
Does it still have relatively favorable yields.
Loans, you've got the Santander deposits coming in.
[Analyst 1]: If I was to ballpark it today, I would guess that the fourth quarter is plus or minus $20 or $30 million in line with the third quarter. That would be kind of my high-level guess. We'll see where things shake out. I think our kind of guidance for the year of 4% to 5% is very much intact with an expectation for a strong fourth quarter as well. Most of the growth for us has been, is, and will continue to be market share gains. We've talked about this before, but for us, I think if you look at how we're performing versus the majority of folks in our markets, we're outperforming. That is because we're gaining a lot of market share from some of the larger super regionals that we compete with. I expect that to continue.
Just kind of curious how you guys are thinking about.
The blended margin here for the quarter I'm assuming.
It might be a little bit more accretive just given.
Just kind of turning the right way here and you can deploy some of that liquidity potentially.
Hey, Steve I'll I'll take that one so so you are correct, we're thinking about things the same way.
I think for us.
Still in the three to five range that we guided in Q2.
We continue to look at the balance sheet and bring all the moving parts together, including Santander.
We continue to hold funding cost us as we mentioned at an industry level of one 7%. That's really helpful for us as we go forward, we expect cost to stay at those levels and likely even to go lower as.
As we address exception pricing in line with fed funds cuts and as <unk> noted price our loan portfolio is effectively so we've been really successful from that perspective and.
Steve Moss: Okay. I guess on the margin front, you know, still have relatively favorable yields with loans. You've got the Santander deposits coming in. Just kind of curious, you know, how you guys are thinking about the blended margin here for the quarter. I'm assuming the deal might be a little bit more accretive just given, you know, loans are kind of trending the right way here and you can deploy some of that liquidity potentially.
We do expect the results to come through.
And the margin with secondary coming on about halfway through Q4.
Less overnight borrowings, which will be offset by some fixed assets pricing lower but again overall, we're pleased with the expansion.
Okay. And I I guess on the margin front, you know, still have relatively favorable, uh, yields with with loans, you've got the Santander deposits coming in. Um, just kind of curious. You know how you guys are thinking about? Um, the Blended margin here for the quarter. I'm assuming deal might be a little bit more creative just given, you know, loans are kind of trending, the right way here and you can deploy some of that liquidity potentially.
Year to date, and we do expect to see that horizontal.
Marya Burgio Wlos: Hey, Steve. I'll take that one. You're correct. We're thinking about things the same way. I think for us, we're still in the three to five range that we guided in Q2. As we continue to look at the balance sheet and bring all the moving parts together, including Santander, we continue to hold funding costs, as we mentioned, at an industry level of 1.17%. That's really helpful for us as we go forward. We expect costs to stay at those levels and likely even to go lower, as we address exception pricing in line with Fed funds cuts and, as Dimitar just noted, price our loan portfolios effectively. We've been really successful from that perspective. We do expect the results to come through in the margin with Santander coming on about halfway through Q4. We'll have less overnight borrowings, which will be offset by some fixed assets pricing, lower.
Okay.
And then on the expense side here right I think I heard yet a $1 million increase.
And total expenses quarter over quarter and I'm, assuming that's excluding Santander.
Correct.
Yes, that's correct. So just wanted to get a little guidance on what we're going to see in Q4, given that we're going to prepay some charitable contribution commitments due to some tax changes.
Sure you are aware.
Hey Steve. I I'll take that 1, so, so you're correct. We're we're thinking about things the same way. Um, I think for us, we're still in the 3 to 5 range that that we guided in Q2, um, as we continue to look at the balance sheet and bring all the moving Parts together including since and their, um, we continue to hold funding costs as, as we mentioned at an industry level of 1.17%. Um, that's that's really helpful for us as as we go forward. Um, we expect across the state at those levels and likely even to go lower. Um,
And then just looking at the compensation adjustments, we accrued heavily in the first half of the year.
<unk>.
And then as we true it up in Q3, we expect that that might increase again in Q4 as we get our final scorecard.
<unk> and <unk>.
Everything looking like we're going to close up.
Okay.
Okay and then.
Marya Burgio Wlos: Overall, we're pleased with the expansion year to date, and we do expect to see that in Q4 as well.
On the fee income side here.
Definitely continue to see good growth with employee benefit services.
Just kind of curious.
As we address exception pricing in line with fed fund cuts and and as deitar, just noted price, our loan portfolio is effectively. So so we've been really successful and that perspective and um you know we do expect the results to to come through um in the margin with Santander coming on about halfway through Q4. Um we'll have less overnight borrowing which will be offset by some fixed up assets, pricing uh lower. But again overall we're we're pleased with the expansion um year to date and and we do expect to see that and issue for as well.
Jim part I'm, assuming it's steady as she goes but just.
Steve Moss: Okay. On the expense side here, Marya, I think I heard you, a $1 million increase in total expenses quarter over quarter. I'm assuming that's excluding Santander, if that's correct.
Anything unique with that business that maybe add a little more upside or markets.
The market has obviously been favorable to helping asset growth. So.
I'm assuming yes.
Yes pretty.
Marya Burgio Wlos: Yep. That's correct. I just wanted to give a little guidance on what we're going to see in Q4, given that we're going to prepay some charitable contribution commitments due to some tax changes, as I'm sure you're aware. Just looking at the compensation adjustments, we accrued heavily in the first half of the year. As we true it up in Q3, we expect that might increase again in Q4 as we get our final scorecards in line and everything, you know, looking like we're going to close up.
And then on the expense side here Mariah, I think I heard you a $1 million increase of in in total expenses as quarter over quarter. And I'm I'm assuming that's excluding uh Santander if that's correct.
Pretty much regular investments in regular trends.
Yes, I think on the employee benefit services Steve.
We have a little bit more seasonality in Q4.
Because a couple of the acquisitions that we do.
Over the past 18 months.
A lump lump.
Lumpy revenue in October as they complete the work.
Definitely even out a little bit more next year, but right now I think Q4, assuming the market values stay where they are I expect it to be better than Q3.
Okay great.
Great.
Steve Moss: Okay. On the C income side here, definitely continue to see good good growth with employee benefit services. Just kind of curious, Dimitar, I'm assuming it's steady as she goes, but just, you know, anything unique with that business that maybe adds a little more upside or, I mean, markets obviously been favorable to help in asset growth. I'm assuming, you know, pretty much regular investments and regular trends.
Yep, that's correct. Um so just wanted to to give a little guidance on and what we're going to see in Q4 given that we're going to prepay some charitable contribution commitments. Due to some, some tax changes that says, I'm sure you're aware, um, and then just looking at the compensation adjustments. We accrued heavily in the first half of the year. Um, and then as we trued up in Q3, we expect that, that might, um, increase again in Q4, as as we get our final score cards, um, in line and, um, everything, you know, looking like we're going to close up.
So all my questions for now I'll step back in the queue.
Okay.
Our next question comes from David Conrad with K B W. <unk>. Please go ahead.
Yeah, Hey, good morning.
Just kind of a little bit of a follow up question on NIM, just wanted a little bit color on the investment portfolio.
It looks like it went down quarter over quarter and yield and you're kind of down.
And and then, you know, on the same time side here, you know, definitely continue to see good good good growth with employee Benefit Services. Um, just kind of curious, you know. Dimitar, I'm assuming it's Steady As She Goes, but just, uh, you know, anything you need with that business. That uh, maybe adds a little more upside or I mean markets, obviously been favorable to help in asset growth. So,
The 2% level. So maybe just an outlook there on maybe cash flows are what the duration is and where we can go from yields from here.
I'm assuming, you know,
Yeah. Yeah. Pretty much regular investments in regular trends.
[Analyst 1]: Yeah. I think on the employee benefit services, Steve, we have a little bit more seasonality than having Q4, because a couple of the acquisitions that we did over the past 18 months kind of have a lumpy revenue in October as they complete the work. That may even out a little bit more next year. Right now, I think Q4, assuming the market values stay where they are, I expect it to be better than Q3.
I think David on the investment portfolio.
Yeah, I think um, the employee Benefit Services team. Um, we have a little bit more seasonality that I would pay for.
Some of that noise is due to dividends. We received from you I think it will be already of our fleet sort of timing of that kind of impacts some of those yields for a quarter.
So we haven't really made any meaningful purchases.
Petroleum, nor do we expect to do.
April purchases and the vast majority of us treasury, so it'd be kind of yogurt yields are generally fairly steady.
Steve Moss: Okay. Great. All my questions for now. I'll step back in the queue.
Um, because a couple of the Acquisitions that we, we did over the past 18 months, that I have a lump, uh, lumpy Revenue in October as they complete the work. Um, definitely even out a little bit more next year, but right now, I think Q4 assuming the market value stay where they are. I expected to be better than 23.
Okay.
We're going to provide a little bit refresh disclosure in our investor deck.
Great. Um, so all my questions for now, I'll step back in the queue.
Operator: Our next question comes from David Conrad with KBW. Please go ahead.
In terms of the cash flows.
But you can think of it as 2026.
Roughly $350 million of cash flows.
David Conrad: Yeah. Hey, good morning. Just kind of a little bit of a follow-up question on NIM. Just want a little bit of color on the investment portfolio. You know, it looks like it went down quarter over quarter in yield, and we're kind of down at the low 2% level. Maybe just an outlook there on maybe cash flows or what the duration is and where we can go from yields from here.
Our next question comes from David Conrad with KBW. Please go ahead.
Heavily heavily weighted towards the fourth quarter.
And then 2027, we have over $600 million 2028, it's another $600 million.
And that's another three to 402029. These are all treasury maturities. So we know what we're going to get when we're going to get.
And what it yields.
Yeah. Hey, good morning. Um, just kind of a little bit of follow-up question on them. Just want a little bit color on the, uh, the Investment Portfolio. Um, you know, it looks like it went down quarter over quarter and yield, and we're kind of down at the low 2% level. So maybe just an Outlook there on maybe cash flows, or what the duration is and and, and where we can go from yields from here.
[Analyst 1]: I think, David, on the investment portfolio, some of that noise is due to dividends that we receive from the FHLB or the FRB. The timing of that kind of impacts some of those yields quarter over quarter. We haven't really made any meaningful purchases in that portfolio, nor do we expect to do any meaningful purchases. The vast majority of it is treasuries, so it's the kind of yield with the yield. Generally, fairly steady. We're going to provide a little bit refreshed disclosure in our investor deck that we're going to file in terms of the cash flows. You can think of it as 2026, it's roughly $350 million of cash flows, heavily, heavily weighted towards the fourth quarter. In 2027, we have over $600 million. In 2028, it's another $600 million. Then it's another $300 to $400 million in 2029.
So I think those will be the cash flows that for us ultimately, they're going to have to use.
Users.
And best uses for us to redeploy those into loans, which is <unk>.
I think David on the investment portfolio. Some of that noise is due to dividends that we received from the FHL or the FX3, so the timing of that kind of impact.
Plan B is.
Loan growth for opportunities are not attractive at that time.
We're going to be paying down some of our acreage will be from borrowings.
Also we've termed out to match those cash flows and meaningful way till 2027, we have.
So net net you'll fees that are kind of in the mid fours we have similar.
So if we're not deploying those funds.
Okay.
The truth of the Securities portfolio, which is kind of roughly 150 160 ish in terms of yields if they are not going into loans.
Or at least we're going to be very additive just by paying.
Paying down some of the average of the borrowings.
[Analyst 1]: These are all treasury maturities, so we know what we're going to get, when we're going to get it, and we know what it yields. I think those will be the cash flows that for us, ultimately, they're going to have two uses. Highest and best use is for us to redeploy those into loans, which is plan A. Plan B is if loan growth or opportunities are not attractive at that time, we're going to be paying down some of our FHLB borrowings, which also we've termed out to match those cash flows in meaningful ways. In 2027, we have some FHLBs that are kind of in the mid-fours. We have similar in 2028.
If that happens, which is plan b when youre looking at the balance sheet shrinking and margin growing up by default as well.
Got it okay. Thank you.
Okay.
Um, we haven't really made any meaningful purchases in that that portfolio. Nor do we expect to do uh, any meaningful purchases and the vast majority of these treasuries, so if they kind of yield with the yield. So generally fairly steady. Um, we're going to provide a little bit of refresh disclosure in our uh investor deck that we're going to file in terms of the cash flows. Uh but you can think of it as 2026. It's uh roughly 350 million dollars of cash flows. Uh, heavily heavily weighted towards the fourth quarter. Um and then 2027 we have over 600 million dollars. 2028 is another 600 million and that's another 3 to 42029. These are all treasury maturities. So we know what we're going to get when we're going to get it and we know what it yields. Um so I I think those will be the cash flows that for us. Ultimately they're going to have 2 um users know.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to Jim mature <unk> for any closing remarks.
Thank you Billy and thank you all for joining us today at a conclusion I would like to note that while both Maria and I attend a number of investor conferences and events during the year, we consistently find the dedicated one on one time with investors and prospective investors is the best way for us to have a well prepared for and predictive.
[Analyst 1]: If we're not deploying those funds from the securities portfolio, which is kind of roughly 150, 160-ish in terms of yield, if they're not going into loans, at the very least, we're going to be very additive just by paying down some of the FHLB borrowings. If that happens, which is plan B, then you're looking at the balance sheet shrinking and margin going up by default as well.
Highest and best use is for us to redeploy those into loans, which is plan a, uh, Plan B is if, um, long growth or opportunities are are not attractive at that time. Um, we're going to be paying down some of our residual beholds. Um, also we've turned out to match those cash flows and, and meaningful ways. So 2027, we have, uh, as a message of these are kind of in the mid Force. We have similar
By 28. So if we're not deploying those funds now from.
The meeting.
We're very open and available so please reach out to us if our stories of interest and we will be happy to spend an hour with you.
the trade the Securities portfolio, which is kind of roughly 150 160, you know, in terms of deals if they're not going into loans, they're at the very least, we're going to be very uh, additive just by uh, paying down some of the event that you'll be borrowing and
Thank you all and we'll talk to you again in January.
Okay.
David Conrad: Got it. Okay. Thank you.
That's going to that happens, which is Plan, B, when you're looking at the balance sheet, drinking and margin going up, uh, by default as well.
Thank you.
Okay, got it. Okay, thank you.
This concludes our question.
Operator: Again, if you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Dimitar Karaivanov for any closing remarks.
This conference has now concluded thank you for attending today.
Again, if you have a question, please press star then 1.
You may now disconnect.
This concludes our question and answer session. I would like to turn the conference back. Over to ger Caravan off for any closing remarks.
Dimitar Karaivanov: Thank you, Bailey. Thank you all for joining us today. At a conclusion, I would like to note that while both Marya and I attend a number of investor conferences and events during the year, we consistently find that dedicated one-on-one time with investors and prospective investors is the best way for us to have a well-prepared for and productive meeting. We're very open and available, so please reach out to us if our story is of interest, and we'll be happy to spend an hour with you. Thank you all, and we'll talk to you again in January.
Thank you Bailey. Um, and thank you all for joining us today at a conclusion, I would like to know that while both Mariah and I attend the number of investor conferences and events. During the year, we consistently find the dedicated 1-on-1 time with investors and prospective investors is the best way for us to have a well-prepared for and productive meeting.
We're very open and available. So please reach out to us if our stories of interest and we'll be happy to spend an hour with you.
Thank you all, and we will talk to you again in January.
Operator: This concludes our questions. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
This concludes our question.
This this conference is now concluded. Thank you for attending today's presentation. You may now disconnect