Community Financial System, Inc. Q2 FY2021 Earnings Call

Good day, and welcome to the Community Bank System Second Quarter 2021 Earnings Conference Call. Please note that this presentation contains forward-looking statements within the provisions of the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the company operates. Such statements involve risks and uncertainties that could cause actual results to differ materially from those 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. Today’s call presenters are Mark Tryniski, President and Chief Executive Officer; and Joseph Sutaris, Executive Vice President and Chief Financial Officer. They will also be joined by Joseph Serbun, Executive Vice President and Chief Banking Officer, for the question-and-answer session. Gentlemen, you may begin.

Thank you, Cole. Good morning, everyone, and thank you all for joining our second quarter conference call. Hope you're all well. I'll start with a brief comment on earnings, and Joe will provide more detail. The quarter was above what we expected, with the reported earnings strength driven by reserve release. Beyond that, the margin continues to be a headwind for credit overall, but deposit fees and strength in our financial services businesses are tailwinds. From a business line perspective, commercial was flat excluding PPPs and municipal loans, but the pipeline is growing back post-COVID quicker than we expected. That's good news. The mortgage business is strong, with the biggest pipeline we've ever had. The payoffs are elevated also, so the book is growing more slowly than it might otherwise. The indirect lending business had a great Q2, with outstandings up 8% over Q1. Deposit service fees continue to rebound from the pandemic impact and were up 18% from a depressed Q2 in 2020. Like the entire industry, deposits have risen. Our financial services businesses were the star performers of the quarter, with combined revenues up 14%, and pre-tax earnings up 25% over 2020. We were also pleased to announce earlier this month the acquisition of Fringe Benefits Design of Minnesota, a provider of retirement plan administration and consulting services, with offices in Minneapolis and South Dakota. The benefit space is very active right now in terms of opportunities, and we expect more to come. The benefits of a diversified revenue model have never been so apparent. As we announced last week, our board has approved a $0.01 per quarter increase in our dividend, which marks the 29th consecutive year of dividend increases, and we view this as a validation of our disciplined and diversified business model. As we announced in March, we have appointed Dimitar Karaivanov as our Executive Vice President for Financial Services and Corporate Development, and he began in this role in June. He joined us from Lazard, where he was a Managing Director in the Financial Institutions Group, and has over a dozen years of experience in investment banking, serving clients in the banking, benefits, and Fintech space. I've known and worked with Dimitar for nearly his entire career, and I am thrilled to have him on board supporting our growth initiatives. Looking ahead, we will be doing our best to manage the changing winds. We have the headwind and margin pressure, but growth in credit, the momentum of our financial services businesses, and liquidity deployments are all tailwinds. Joe?

Thank you, Mark, and good morning, everyone. As Mark noted, the second quarter earnings results were solid, with fully diluted GAAP and operating earnings per share of $0.88. The GAAP earnings results were $0.22 per share, or 33.3% higher than the second quarter of 2020 GAAP earnings results, and $0.12 per share, or 15.8% better on an operating basis. The improvement in earnings per share was led by lower credit-related costs and a significant increase in non-interest revenues, particularly in the company's non-banking businesses. Comparatively, the company reported GAAP earnings and operating earnings per share of $0.97 in the linked first quarter of 2021. The company reported total revenues of $151.6 million in the second quarter of 2021, a $6.7 million or 4.6% increase over the prior year second-quarter revenues of $144.9 million. The increase in total revenues between the periods was driven by a $5.3 million or 13.7% increase in financial services business revenues and a $1.2 million or 8.6% increase in banking-related non-interest revenues. Net interest income of $92.1 million was up $0.2 million or 0.2% over the second quarter of 2020 results. Total revenues were down $0.9 million or 0.6% from the linked first quarter, driven by a $1.9 million decrease in net interest income, offset in part by higher non-interest revenues. Although net interest income was up slightly over the same quarter last year, the results were achieved on a lower net interest margin outcome. The company's tax equivalent net interest margin for the second quarter of 2021 was 2.79%. This compares to 3.03% in the first quarter of 2021 and 3.37% one year prior. Net interest margin results continue to be negatively impacted by the low-interest rate environment and the abundance of low-yield cash equivalents being maintained on the company's balance sheet. The tax equivalent yield on earning assets was 2.89% in the second quarter of 2021, as compared to 3.15% in the linked first quarter and 3.56% one year prior. During the second quarter, the company recognized $3.9 million of PPP-related interest income, including $2.9 million of net deferred loan fees. This comprised of $6.9 million of PPP-related interest income recognized in the first quarter, including $5.9 million of net deferred loan fees. The company's total cost of deposits remained low, averaging 10 basis points during the second quarter of 2021. Employee benefit services revenues were up $3.4 million or 14.2% over the prior year second quarter, driven by increases in employee benefit trust and custodial fees. Wealth management revenues were also up $1.9 million or 29.2%, driven by a higher investment in management advisory trust services revenues. Insurance services revenues were consistent with the prior year's results. The increase in banking-related non-interest revenues was driven by a $2.3 million or 17.6% increase in deposit service and other banking fees offset in part by a $1 million decrease in mortgage banking income. During the second quarter of 2021, the company reported a net benefit in the provision for credit losses of $4.3 million. This compares to a $9.8 million provision for credit losses reported in the second quarter of 2020, $3.2 million of which was due to the acquisition of Steuben Trust Corporation, with the remaining $6.6 million largely driven by pandemic-related factors. During the second quarter of 2021, the company recorded three basis points of net loan recoveries, and the post-vaccine economic outlook remained positive. In addition, at the end of the second quarter, there were only 12 borrowers representing $2.4 million in loans outstanding that remained in the pandemic-related forbearance. This compares to 47 borrowers of pandemic-related forbearance, representing $75.6 million at the end of the first quarter, and 3,700 borrowers with approximately $700 million of loans standing one year earlier. These factors drove down the expected loan losses, resulting in the recording of a net benefit in provision of credit losses for the quarter. The company recorded $93.5 million in total operating expenses in the second quarter of 2021, as compared to $87.5 million in the second quarter of 2020, excluding $3.4 million of acquisition-related expenses. The $6 million or 6.9% increase in operating expenses was attributable to a $3.2 million or 5.8% increase in salaries and employee benefits, a $1.9 million or 17.8% increase in data processing and communications expense, and a $0.7 million or 7% increase in other expenses, as well as a $0.5 million or 5.3% increase in occupancy and equipment expense, offset in part by a $0.3 million or 7.9% decrease in the amortization of intangible assets. The increase in salaries and employee benefits expense was driven by increases in merit-related employee wages, higher payroll taxes, including increases in state-related unemployment taxes, higher employee benefit-related expenses, and the Steuben acquisition. Other expenses were up due to the general increase in the level of business activities, including increases in business development and marketing expenses. The increase in data processing and communications expenses was due to the second quarter of 2020 Steuben acquisition and accompanies the implementation of new customer-facing digital technologies and back office systems between comparable periods. The increase in occupancy and equipment expenses was driven by the Steuben acquisition. In comparison, the company reported $93.2 million of total operating expenses in the first quarter of 2021, $0.3 million, or 0.3% lower than the second quarter of 2021 total operating expenses. The effective tax rate for the second quarter of 2021 was 23.1%, up from 20.3% in the second quarter of 2020. The increase in the effective tax rate was primarily attributable to an increase in certain state income tax rates that were enacted in the second quarter of 2021. The company closed the second quarter of 2021 with total assets of $14.8 billion. This was up $181.1 million or 1.2% from the end of the linked first quarter, and up $1.36 billion or 10.1% from the year earlier. Average interest earning assets for the second quarter of 2021 of $13.37 billion were up $680.6 million or 5.4% from the linked first quarter of 2021, and up $2.27 billion or 20.4% from one year prior. The very large increases in total assets and average interest earning assets over the prior 12 months were driven by the second quarter of 2020 acquisition of Steuben and large inflows of government stimulus related to deposit funding and PPP originations. The company’s ending loan balances of $7.24 billion were down $124.2 million or 1.7% from the end of the first quarter. Excluding the net decrease in PPP loans of $126.1 million and the seasonal decrease in municipal loans totaling $41.2 million, pending loans increased by $43.1 million or 0.6%. As of June 30, 2021, the company's business lending portfolio included 317 first-draw PPP loans, with a total balance of $72.5 million, and 2,254 second-draw PPP loans with a total amount of $212.3 million. The company expects to recognize through interest income the majority of its remaining first-draw net deferred PPP fees, totaling $0.9 million during the third quarter of 2021, and the majority of its second-draw net deferred PPPs totaling $9.2 million over the next few quarters. On a linked quarter basis, the average book value of the investment securities portfolio increased $290.2 million or 7.9% from $3.67 billion during the first quarter to $3.96 billion during the second quarter. With this said, the company has largely remained on the sidelines regarding deploying excess liquidity until the market interest rates become more attractive. During the second quarter, the company's average cash balance of $2.07 billion represented approximately 16% of the company's average earning assets. This compares to $1.67 billion in average cash equivalents during the first quarter of 2021 and $823 million in the second quarter of 2020. The $408 million or 24.5% increase in average cash equivalents during the quarter was driven by the continued inflow of federal stimulus funds and origination second-draw PPP loans, and first-draw PPP loan forgiveness. The company’s capital reserves remained strong in the second quarter. The company's net tangible equity and net tangible assets ratios was 9.02% at June 30, 2021. This was down from 10.08% a year earlier, but up to 8.48% at the end of the first quarter. The company’s tier one leverage ratio was 9.36% at June 30, 2021, which is nearly two times the well-capitalized regulatory standard of 5%. The company has an abundance of liquidity. The combination of the company’s cash and cash equivalents, borrowing availability at the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank, and unpledged available-for-sale investment securities portfolio, provided the company with over $6.1 billion of immediately available sources of liquidity. At June 30, 2021, the company's allowance for credit losses totaled $51.8 million or 0.71% of total loans outstanding. This compares to $55.1 million or 0.75% of total loans outstanding at the end of the first quarter of 2021, and $64.4 million or 0.86% of total loans outstanding at June 30, 2020. The decrease in the allowance for credit losses is reflective of the improving economic outlook, the very low levels of net charge-offs, and a decrease in delinquent loans and loans in pandemic-related forbearance. Non-performing loans decreased in the second quarter to $70.2 million or 0.97% of loans outstanding, down from $75.5 million or 1.02% of loans outstanding at the end of the linked first quarter of 2021, but up from $26.8 million or 0.36% of loans outstanding at the end of the second quarter of 2020, primarily due to the reclassification of certain hotel loans under extended forbearance from accrual to non-accrual status between periods. The specifically identified reserves held against the company’s non-performing loans totaled only $2.8 million at June 30, 2021. Loans 30 to 89 days delinquent totaled 0.25% of loans outstanding at June 30, 2021. This compares to 0.37% one year prior, and 0.27% at the end of the linked first quarter. Management believes the low levels of delinquent loans and charge-offs have been supported by the extraordinary federal and state government financial assistance provided to consumers throughout the pandemic. We remain focused on new loan origination, and we'll continue to monitor market conditions to seek the right opportunities to deploy excess liquidity. Our pipeline of loan pipelines increased considerably during the second quarter, and asset quality remains very strong. We also expect net interest margin pressures to persist or remain well below our pre-pandemic levels, but we also believe our abundance of cash equivalents represents a significant future earnings opportunity. We're also fortunate and pleased to have a strong non-banking business that supported and diversified our streams of non-interest revenue. Lastly, to echo Mark's comments, we're pleased and excited to welcome the customers and employees of FBD to the Community Bank team. Thank you all, and I'll turn it back to Cole for questions.

And our first question today will come from Alex Twerdahl with Piper Sandler. Please go ahead.

Hey, good morning, guys. First off, I just want to ask about, as I kind of look at 2022 over 2021, a couple of things like the reserve releases, PPP, some of those things, obviously aren't going to be repeatable in 2022, setting up the possibility of earnings going lower. I was wondering if that has any impact on how you think about M&A. I know when you guys crossed the $10 billion mark, there was a little bit more of an emphasis to kind of cover the Durbin by doing a slightly larger transaction. And I'm wondering if your outlook on M&A has changed at all, just kind of as you look forward into what earnings may bring next year.

No, I think it's a fair question. There were some things this year that clearly are non-recurring and we're going to have to refill the bucket. I think organic growth is going to have to improve. We need to continue the momentum of our financial services businesses and deposit fees to continue to rebuild. Joe mentioned the liquidity abundance. So, I think we have some levers to pull in terms of continued momentum relative to earnings, and offsetting some of the non-recurring revenues over the course of the last year. And that's our job, to grow earnings every year. It doesn't really change our outlook regarding M&A. I mean, I think M&A is more of a longer-term continual strategy to try to create above-average shareholder returns with below-average risk. That’s really our focus—so we’re not going to forecast the - if we forecasted lower core operating earnings, I don't think a strategy to address that is going to be trying to find something for that purpose. I view M&A more strategically. What’s the fit? What does it contribute into the future? How does it create sustainable and growing shareholder value? So, I would say it doesn't really change at all our outlook on M&A, which is more of a strategic exercise, not really a tactical exercise. I think with Durbin or with the $10 billion, yes, Durbin was a little different. That was a $10 million to $12 million hit, and there's no operational mechanism to absorb that. So that was a little different. But with that said, I think at the time, our articulation to shareholders was we expect to cross the $10 billion without reducing earnings, and that's our job as management. The only realistic way to do that is through good M&A opportunities. We were fortunate to be able to acquire two strong franchises and merchants in Vermont and NRS, the management business in Boston, which continues to perform at an extremely high level with respect to growth in revenues and margins. But broadly, M&A is more strategic and less tactical, so it doesn’t change our philosophy and how we think about M&A.

Okay. And then just kind of on the same topic, you alluded to some opportunities in the benefits space in your prepared remarks. Are those going to continue to follow the same sort of similar transactions to what we've seen with the most recent one, kind of be relatively bite-sized and over time improve that business, but not be necessarily huge needle movers in the near term?

I think that’s the expectation right now. But with that said, if we had the opportunity to do another larger transaction like the NRS transaction that we did in Boston four years ago, we would definitely do it. So, I mean, I think for the most part, what’s driving a lot of these non-banking opportunities right now is just the concern over the capital gains rate. Many of these businesses were started 20 years ago with a dollar, and now they’ve over $20 million or $30 million or more, and it's all capital gains. If I sell now, I can pay 20%. If I sell sometime in the future, I pay 40%. It’s as simple as that regarding what's driving a lot of the activity right now. We’re also getting a little bigger. Our benefits business right now has a run rate of over $110 million in revenues. The profit margin, the operating margin has actually grown nicely over the last couple of years. So, it's a great business for us, and we've got a fair bit of critical mass in that business. There are a couple of businesses where we are one of the leading players in the U.S., and they continue to present opportunities for us to partner with much larger financial institutions on the institutional trust side, and in some other areas. So, we’ve got a lot of momentum in that business, and we're going to continue to invest in it, whether it's organic, which we've done, or some startup business. We started the Biba business a few years ago with zero revenues. Now, it’s probably about $4 million, pushing $5 million. Good margin. We will continue to invest organically in terms of starting up either product lines or other organic startups, and also look at high-value acquisition opportunities. There are many businesses in that space that we wouldn't consider for different reasons. We like acquiring revenues, but we also like to acquire product lines, technology, or consulting resources. If we find a transaction that has some of those value drives for us, they are much more attractive than just bolting on some revenues, which can also be beneficial. That said, I’m not suggesting we wouldn't do more tactical acquisitions, but we also like strong consulting firms, or products that have strong technical sales talent, which is what we gained with FBD’s sales and consulting talent. So, the space is very active right now; it’s been busy, and we hope to continue to be active in that space for a while. The operational momentum in that business is tremendous right now, not just organically, but in terms of our opportunity to partner with much larger financial institutions and clients. We already have a number of Fortune 500 clients in our benefits business for whom we do institutional trust work.

Awesome. And then just a final question for me. The strong consumer indirect growth you had this quarter, was that reflective of any sort of change in how you guys are thinking about that portfolio, or any pricing changes or anything that we should be aware of as we think about how that portfolio could evolve over the next couple of quarters?

No, I don't think so. The pricing is really kind of at the mercy of the market. I mean, the market goes up; the market goes down. We’ve been in that space for a long time; we don't get in and out. A lot of players have exited, which has been a little helpful. Our business's biggest component is used auto, which is performing well at the moment. There is not much new inventory, so it's less valuable to finance new vehicles than it is used, in any event. So, last quarter was really good. It also kind of gets hot and cold pretty quickly. So, next quarter might be even better, and it could also be worse. It’s just—it's quite volatile and less predictable in some ways. We’ve never really had to deal with inventory before as an issue in that business, but now we're dealing with it. That said, I think it's working to our advantage because the used car market is strong and pretty active, and that's the biggest component of what we finance.

Awesome. Thanks for taking my questions.

And our next question will come from Erik Zwick with Boenning & Scattergood. Please go ahead.

Good morning, guys. You mentioned a couple of times in the prepared remarks that the pipelines, the loan pipelines had increased significantly during the quarter, and you're acutely focused on new loan origination going forward. If we back out the expectation that the PPP loans continue to run off if they're forgiven, just curious if you could frame maybe what the opportunity is for net growth in the remaining portfolios in the back half of the year and into next year.

Joe, you want to take that one?

Eric, Joe Serbun. How are you this morning?

Hey, Joe.

Yes. Let me give you a little bit of insight into the pipeline activity first. Our commercial pipeline is currently in the rebuilding stage. The pipeline from June of 2019 to June of 2021 is up about 35%. If you look at it from June of 2020 to 2021, it's about 3.5%. To understand what's going on in that business, you have to look at the first half of 2021. So, the first half of 2021 saw an 85% increase from the average of Q1 to the average of Q2. The pipeline has grown significantly in the commercial business during May and June, and hopefully that momentum continues for us. As Mark mentioned, the residential mortgage side is showing the highest point of our pipeline, both in dollars and applications. In dollars, we're up about 50%. From June of 2019 to June of 2021, we're up about 50%. If you look at just June of 2020 to 2021, we’re up 36% in dollars, and we're up 35% in applications. So, it seems as though it’s trending in the right direction. I would anticipate maybe another net $20 million in the indirect portfolio, and possibly another $40 million in the residential portfolio as we close out the year. But like Mark said, particularly in the indirect portfolio, that's hot and cold. So it could be a bigger or a lesser number, but we’re positioned nicely given the pipeline and application volume. The commercial pipeline takes a bit longer, but I think it's positioned nicely with the size pipeline, as well as the committed not-funded loans already approved. So, I think we're poised for continued improvement.

Thanks, Joe. I appreciate that color there. And then switching gears to the reserve and the outlook for provisioning going forward, it looks like the reserve now is back where it was at the end of 2019, before the provision build from last year. Is it safe to assume then that the provisioning going forward will reflect kind of net charge-offs and then growth in the loan portfolio? Are there other items to consider here?

Eric, this is Joe Sutaris. Based on where we've been and where we are today, I think that's a reasonable expectation. I think that the credit markets, when we went into COVID, were in turmoil, and we provisioned accordingly. We think we're kind of on the back end of that. I mean, there could be another surge—we're concerned about that—but right now, I think we came out of the pandemic in very good shape from a credit perspective. So, growth of the portfolio and charge-offs will likely drive some of the provisioning going forward. We believe the economic outlook will stabilize and anticipate less volatility compared to what we experienced during the pandemic. Therefore, yes, I think that the provisioning should settle down as we look ahead.

Got it. And then regarding the tax rate, I think it was mentioned in the press release and your comments that there were some changes at the state level, which led to the increase in Q2. Was any of that increase in Q2 a catch-up, or is that 23% rate a decent run rate going forward?

Yes. There was a bit of a catch-up because you heard it was retroactive for the full year. So, the run rate around 22 plus or minus is reasonable, excluding any sort of employer-related stock option exercise benefits.

Great. Thank you for taking my questions today.

And our next question will come from Russell Gunther with D.A. Davidson. Please go ahead.

Hey, good morning guys. Would Joe perhaps be able to give some color on the P&L impact of the more recently announced employee-benefit deal from a fee and expense perspective over the next couple of quarters? Also, how is the fee and expense outlook for the back half of the year shaping up?

Yes. Russell, it was a very small transaction for us. We paid less than $20 million for the company. We expect the revenue run rate of that business to be less than $10 million on a going-forward basis. The overall impact of the business will be very marginal. I think, as Mark was alluding to, we picked up some strategic benefits from that acquisition. It’s a B-chat in the Midwest with a direct sales force, which is additive overall to our 401(k) practice within the employee benefit space. It’s a small acquisition for us but strategically important. We believe there'll be additional opportunities kind of similar type transactions down the road. We’re hopeful that would bring some of those to the table moving forward.

Thanks, Joe. You mentioned previously that the real focus is on low single-digit expenses for the year, and there’s been good discipline here. You’re certainly on track for that. As you look ahead to 2022, similar to a question earlier, is that a range you will continue to target, that low single digit, considering some revenue challenges? Or are there targeted franchise investments or inflationary pressures that would push that higher?

Russell, that is our hope. The challenge, as you mentioned, is keeping particularly payroll and wages. There's more pressure on wages than there's been in the past. That’ll be a challenge for us to continue to manage that appropriately and hire qualified and experienced staff. So, there is some pressure on the wage front, for sure. But we are actively managing all of the line items from an operating expense basis. As we've also mentioned, we’ve consolidated some branches over the last year and a half, and we’re starting to see some cost benefits get baked into our quarterly earnings. Hence, our expectation is this low single-digit target is feasible excluding any significant acquisitions. We will continue to manage that very prudently.

Thanks, Joe. Last one for me is on the margin. You’ve mentioned a couple of times just the headwind that remains there. Can you give us a sense of the back half of the year? Is there a forecast for pressure from this 279 prior to some excess liquidity getting deployed, or how do you see near-term trends?

Yes. From an overall margin perspective, it's going to continue to challenge to support any sort of growth in the margin, excluding, as you pointed out, any additional investment in securities. The loan pipeline is increasing, as Joe indicated. We’re starting to see some loan growth. That will help the margin at least a bit. That roughly $2 billion of cash equivalents, if we tomorrow decided to invest that in a 10-year treasury, represents about $22 million on a pre-tax operating basis. If the 10-year treasury were at 150, that’s closer to a $30 million improvement in net interest income, but we need the market to cooperate. We see that as a significant earnings and margin improvement opportunity. And as you're aware, we don’t really have anywhere to go on the cost of funds side. Our cost of funds and cost of deposits at 10 basis points is about as low as it's going to go. That challenge is deploying that excess liquidity. We don't have much room to go down on the deposit side due to the strength of our core deposit franchise. From a margin perspective, we certainly hope we're at the low point, but it could potentially drift a bit lower. However, we also expect that net interest income could stabilize with some loan growth and deployment of the excess liquidity. It might be worth noting that we're sitting on about $9 million of net deferred fees on the PPP side that have not been recognized. Assuming the fourth quarter gives us the majority of forgiveness activity, we will see some of that hit in the back end of the fourth quarter, leading to an improvement in the posted margin if we recognize most of that fee income.

The only thing I would add is, if you look at the originations this quarter in our commercial book, our mortgage book, and our indirect book, they were all lower than what the aggregate portfolio yield is right now. So, taking out PPP and all the other factors that might confuse the margin right now, the core operating margin is likely going to decrease. I don't see how that doesn't happen, looking at what occurred this quarter. Nonetheless, we need to grow. The challenge for our team is to not let the dollars decrease.

Understood. Thanks, Mark. Thanks, Joe.

Our next question will come from Matthew Breese with Stephens Inc. Please proceed.

Good morning. I just wanted to stick on this theme of liquidity. I want to confirm, so the message for now is that you'll be on the sidelines in terms of investing liquidity in securities due to how low yields are. Do I have that right?

Yes, at 1.7, you'd be right.

Okay. Has there been a turning point yet concerning liquidity starting to roll off the balance sheet? Have you seen a reduction or are the cash levels continuing to remain stable or grow?

We have not seen a trend yet in terms of a runoff of any of that excess liquidity. In fact, in the past quarter, we saw an increase. We do not expect that to occur soon. Most of the $2 billion is likely here to stay on the balance sheet, and we do believe we will need to deploy that at some point when the cycle is right.

Yes, I would add that if you look at the quarterly run rate of deposit inflows, the pace of inflows is decreasing, so it's slowing down in terms of incoming liquidity.

Right. Okay. And then Mark, you mentioned that stripping away PPP, new versus existing loan yields still show some pressure. Could you update me on where you're seeing the most pressure, and what that delta is?

I'm going by memory here. It’s across the board actually and it was pretty consistent. I’d say on the consumer mortgage side, the delta was about 80 basis points. Business lending is also 80 basis points, and the indirect business was 80 basis points as well. So, it averages out to about 80 basis points.

Okay.

The second quarter origination yield versus the aggregate portfolio yield for the quarter is about 80 basis points.

Okay. And then last one for me, could you remind us how much of the portfolio is floating or has really short durations? I want to get a sense as talked-about Fed hikes intensify, how well positioned you are for capturing some of that benefit out of the gate.

Our floating-rate loan instruments were about $1 billion, so it's not a significant component of our overall loan portfolio. If we do get rate hikes, it will also play into our excess liquidity.

Very good. That’s all I had. Thank you for taking my questions.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Tryniski for any closing remarks.

Thank you, Cole. Thank you all for joining, and we will talk again next quarter. Thank you. Have a good summer.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.