Community Financial System Inc (CBU) 2009 Q2 法說會逐字稿

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  • Operator

  • Good day, ladies and gentlemen, and thank you for holding. 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 the results discussed in these statements. These risks are detailed in the Company's annual report and Form 10-K filed with the Securities and Exchange Commission.

  • And now I'd like to introduce today's call leaders, Mr. Mark Tryniski, President and Chief Executive Officer, and Mr. Scott Kingsley, Executive Vice President and Chief Financial Officer of Community Bank System. Gentlemen, you may begin.

  • Mark Tryniski - President, CEO

  • Thank you, Maria. Good morning and thank you all for joining our second-quarter conference call. This second quarter was a relatively uneventful one for us, but I will comment on what I see as the principle highlights. First is -- earnings were $0.09 per share lower than 2008's second quarter. Excluding the increased FDIC assessment, which was also $0.09 per share; earnings were equal to last year which we feel is a relatively favorable outcome in this operating environment.

  • Asset quality continues to be very strong and stable with most credit metrics actually improving over the first quarter. Again, in this operating environment it's difficult not to be fully satisfied with nonperformers of 44 basis points and net charge-offs of 22 and we continue to work diligently to maintain this level of credit quality.

  • I commented last quarter on the significant level of cash liquidity resulting from the fourth-quarter branch acquisition and the exceptional growth of core deposits. Opportunities to deploy that liquidity productively did not materialize in the second quarter; in fact our excess liquidity position grew to $360 million.

  • We were hopeful the upward movement in the longer end of the yield curve in the first quarter would continue and provide an opportunity to prepay some of our borrowings, but it now appears that is unlikely for the foreseeable future. Alternatively we have developed strategies to deploy some of that liquidity into the capital markets in the form of shorter-term high-quality agency debt instruments. We expect this action will be supportive of earnings in future quarters, but the shorter duration nature of the instruments will provide opportunities for reinvestment when the longer end of the curve begins to normalize.

  • The 18 at branches acquired from Citizens Financial Group in the fourth quarter continue to perform exceptionally well with both loans and deposits up from the date of acquisition. We have gotten less earnings left from this transaction than we expected due to the under deployed liquidity I just mentioned, but the operating traction we've achieved in growing relationships and gaining share in those markets has exceeded our expectations.

  • We announced last month that we will be implementing a new core banking system across the Company. This new in-house system from Jack Henry will provide us with increased functionality, flexibility and customer service capabilities and at the same time, most importantly to shareholders, reduce total projected IT operating costs by approximately $17 million over the five-year period following implementation which we expect will be in the third quarter of 2010.

  • We announced a third-quarter cash dividend of $0.22 per share, consistent with the past three quarters and up $0.01 a share from the second quarter of 2008. Understandably in the current environment we have been fielding shareholder calls with respect to the dividend which we expect to continue to pay at the current level or higher and which we believe is a very important component to providing favorable total returns to shareholders over time.

  • Beyond the numbers, we were again recognized for the third straight year by JD Power & Associates as one of the top 10 banks in the entire nation for retail customer satisfaction. Despite being the third consecutive year of this honor, the pride that I share on behalf of our employees for this accomplishment does not diminish. Our customer focused service model has evolved into a competitive advantage for us in many of our markets; we will continue to place our focus on this model.

  • Looking forward to the remainder of 2009, as I said last quarter, we see both opportunities and challenges. With respect to the challenges, holding asset quality tight in a declining economic environment will continue to be a primary focus as will productive deployment of excess access liquidity which represents tremendous earnings potential.

  • On the opportunity side, both our retail and commercial businesses are performing well and we do expect full-year growth for loans, deposits in all categories of non-interest income with the possible exception of asset management fees. We are also in the nascent stages of an expense reduction effort that we expect to have implemented by year end and which we also expect will be meaningfully additive to operating results in 2010. Those are my prepared comments. Scott?

  • Scott Kingsley - EVP, CFO

  • Thank you, Mark, and good morning, everyone. I'd like to make a few remarks on the second quarter as a follow-up to the items Mark just covered.

  • First, as mentioned in our release, second-quarter cash earnings per share, which excludes the after-tax effect of the amortization of intangible assets and acquisition-related adjustments were $0.33, a full $0.05 per share or 17.9% above GAAP reported earnings of $0.28 per share. This $0.20 per share differential on an annualized basis continues to be a meaningful value driver for our company, especially at a time when valuations seem to be so focused around tangible common equity ratios.

  • I'll first discuss some balance sheet items. Our business lending portfolio grew $4.5 million on a linked-quarter basis in the second quarter, excluding the impact of certain planned reductions in our automotive dealer floor plan business representing our seventh consecutive quarter of growth in that portfolio.

  • Our consumer mortgage portfolio was actually down $12 million from March, reflective of our continuing decision to not portfolio lower rate longer-term assets and instead sell most of our originations to Fannie Mae. Asset quality results continue to be very favorable in this portfolio with total net charge-offs over the last eight quarters of $370,000 or under 4 basis points of loss per quarter.

  • Our home equity portfolio of approximately $322 million also declined $3 million in the quarter and was also likely influenced by low long-term mortgage rates. In addition, we did experience lower line utilization again in the second quarter, indicative of our customers' desire to continue to delever despite the total -- excuse me, despite the low rate environment. Asset quality results continue to be very favorable in this portfolio also with very low loss rates consistent with those we experienced in consumer mortgage portfolio.

  • Our consumer indirect portfolio of nearly $532 million was basically flat with year end and reflected another difficult quarter for most participants in the automotive industry. A byproduct of very low new vehicle sales has been an improvement in used car valuations where the largest majority of our lending is concentrated. Net charge-offs for the last four quarters have been around 60 basis points which is higher than we experienced for the six quarters ended June 30, '08 but still reasonable and manageable levels.

  • With our bias towards A and B paper grades yields have remained very consistent. Quarter end deposits were up $2 million from March comprised of an $83 million increase in core accounts and an $81 million reduction in time deposits. Core deposits now represent over 65% of total deposits at June 30, the continuation of a very favorable funding mix we've worked diligently on.

  • Our capital levels in the second quarter remain strong. The Tier 1 leverage ratio stood at 7.13% at quarter end and tangible equity to net tangible assets was 4.84% at quarter end. Net unrealized gains in our investment portfolio at quarter end were $15 million despite the carrying value of our level 3 investment assets which is almost entirely comprised of pooled trust preferred securities being nearly $20 million below book value.

  • The valuation of these assets continue to reflect market and interest-rate volatility as well as the absence of an active market for these types of securities. Our holdings, which are super senior, continue to fully perform.

  • Shifting to the income statement, our reported net interest margin for the second quarter was 3.73%, down 9 basis points from the first quarter of '09 and 5 basis points lower than the second quarter of 2008. Proactive management of funding costs continue to have a positive effect on results, but, as Mark mentioned, second-quarter earning asset yields were significantly impacted by our higher level of net liquidity.

  • Second-quarter non-interest income, excluding securities gains and losses, was up 16.6% over the prior year. Although not as robust as the very strong first quarter of this year, mortgage banking revenues increased nearly $0.8 million over last year's second-quarter reflective of another solid quarter of new secondary market originations. Our employee benefits administration and consulting business increased revenues by 11% over last year's second quarter principally on the strength of acquired growth from the Alliance Benefit Group Midlantic transaction we completed the last July.

  • Deposit service fees increased 15% over last year derived from the branch acquisition completed in November and our own organic core deposit growth over the last several quarters. Revenues from core depository services on an average account basis actually declined slightly in the quarter related to modestly lower consumer utilization.

  • Our wealth management businesses experienced a 2% year-over-year decline in revenues, the result of continued unfavorable comparisons and equity market conditions and the low interest rate environment. Operating expenses, excluding acquisition expenses, of $47.3 million increased $10.3 million over the second quarter of 2008 and reflected the ABG acquisition completed last July and the branch transaction in November.

  • In addition, the Company reported an additional $3.7 million or $0.09 per share of FDIC insurance assessments over the second quarter of last year. Salaries and benefits costs increased $3.4 million or 17.1% over the second quarter of last year and included nearly $800,000 of additional pension costs related to the unfavorable investment performance of the plan's underlying assets in 2008.

  • The branch and ABG acquisitions added approximately 140 additional FTEs to our company in the second half of 2008 accounting for most of the remaining increase. Excluding the acquisition and the incremental pension cost additional core people-related cost increases reflect merit increases awarded in early 2009.

  • Occupancy and equipment expense increased $515,000 or 9.9% year over year and reflect the additional 18 branches acquired in November which upped our branch facilities count by 11%. Amortization of intangibles, both core deposit and customer list related, increased $458,000 over the second quarter of 2008, again reflective of last year's transactions.

  • Other operating expenses, principally customer processing, communications, marketing and development and postage costs were up 20% over last year, reflective of our larger base of customers and accounts. Our effective tax rate in the second quarter was 21.5%, reflective of our current mix of non-taxable and fully taxable securities. With that I'll now turn it back over to Maria to open the line for questions.

  • Operator

  • (Operator Instructions). Whitney Young, Raymond James.

  • Whitney Young - Analyst

  • Good morning. I was just wondering if you would mind commenting a bit more on the net interest margin going forward given your really strong deposit growth. And then I have another follow-up question after that. Thank you.

  • Scott Kingsley - EVP, CFO

  • Whitney, I would say that we certainly commented at the end of the first quarter call that we really thought the margin was probably bottoming out, but I think we also expected that we would not have significant liquidity gains in the second quarter that we did. I think we thought there would be meaningful redeployment options which would either mitigate or at least flatten the net liquidity that we had.

  • As you can see from our results, that actually grew pretty substantially during the quarter -- a combination of some unexpected culls and cash flows off the investment portfolio, and really our decision to be very disciplined relative to long-term redeployment. I think as Mark made in his comments -- or said in his comments, we did actually expect that there was an opportunity during the quarter to potentially take out or early extinguish some borrowing obligations that we had, in other words the long end of the curb looked like it was headed that direction for us.

  • That did not materialize and in effect we've actually started a strategy now where we're going to redeploy some of this liquidity and have redeployed a little bit of it already in July for the purposes of short-term reinvestment. Lower duration securities than we probably would have been thinking about three months ago, four months ago because we don't want to lose all of the juice that we would have when long-term rates actually do get to a more meaningful level.

  • Whitney Young - Analyst

  • Okay, thanks. And I was wondering if you could comment on the mortgage pipeline at the end of the quarter and at what point you might begin portfolioing those mortgages. Is it purely a rate driven decision right now? And I'm just wondering about demand. Thank you.

  • Scott Kingsley - EVP, CFO

  • Good question. Demand has stayed pretty good, certainly not at the level that we experienced in the first quarter, and there was a little bit of overhang in the pipeline going into the second quarter certainly in the month of April. But meaningfully still, I think people are still attracted to rates that are at a 5% and south number, to the extent that they can find that from a secondary market standpoint.

  • We will probably continue to have the presence of not portfolioing things that have rates that are south of 5%, Whitney. Probably even a little bit higher than that in the longer duration securities. I think we'd probably -- we'd probably be interested in portfolioing stuff in the 5.25%, 5.5% range if the duration is 15 year and under. And it would certainly have to be higher than that if we were to think about portfolioing something beyond that. But for today, meaningfully we're basically selling everything that's over 15 years and we're selling a fair amount of 15-year securities too.

  • Whitney Young - Analyst

  • Thanks very much.

  • Operator

  • David Darst, FTN Equity Capital.

  • David Darst - Analyst

  • Good morning. How much have you redeployed in July?

  • Scott Kingsley - EVP, CFO

  • David, rough number I would say about $100 million.

  • David Darst - Analyst

  • Okay. Where do you think you would have the cash balance at the end of the quarter?

  • Scott Kingsley - EVP, CFO

  • David it's an interesting question and it's kind of a tough one for us to answer because we actually do have some meaningful cash flows coming off the portfolio naturally in the quarter, or certainly in the second half of the year. So our objective is not just what's out there in the cash equivalents to redeploy, it's the expected cash flows of the portfolio itself are $100 million to $125 million more in the second half of the year.

  • So our cash is a little bit higher than maybe it would appear on the surface. I think what we're also doing, David, is we're also looking for opportunities where we can touch the curb at maybe the two-year or three-year duration point with certain levels of agency backed securities that certainly don't have terrifically high yields, but certainly have something higher than 25 basis points overnight.

  • Mark Tryniski - President, CEO

  • And I would say, David, based on the strategies that we've looked at there will still be a relatively high level of liquidity at the end of the third quarter absent some significant change in the longer end of the yield curve which now seems unlikely based on Ben Bernanke's oped piece in the Wall Street Journal last week.

  • David Darst - Analyst

  • Okay. What were the delinquency trends within the residential portfolio and the indirect portfolio?

  • Scott Kingsley - EVP, CFO

  • David, on the residential portfolio we certainly have seen delinquency trends actually moving up. We were at -- if you go back about five quarters we were into the 90 basis points to 100 basis points of delinquency on the residential mortgage side, that moved up to the 120, 125 rate in and around the end of the year and into the first quarter.

  • And I think we've actually a couple different month ends touched a 150 rate, 1.5%. So that's kind of been the direction there. We still have not -- because of the very strict lending criteria that we have on the residential mortgage side we certainly haven't seen the charge-offs that have resulted from some of that liquidity being really anything meaningful at this point.

  • David Darst - Analyst

  • Okay.

  • Scott Kingsley - EVP, CFO

  • On the indirect side, David, I think the indirect portfolio from a delinquency standpoint is holding up very well, it's in that level of about like a 1.5%, 1.6%. So it hasn't moved much at all; as a matter of fact it's been very constant over about the last eight quarters.

  • David Darst - Analyst

  • Okay. And could you maybe share with us the Board's thoughts on the buyback announcement? Is that just a formality or are you considering using it now and how are you thinking about tangible equity?

  • Mark Tryniski - President, CEO

  • Well, I think our Board's view is that it's just one component of having all the tools in the kit, that's all. I mean we don't have any near-term expectations of utilization; we just think that it's appropriate to have all the tools in the toolbox to have available and to have the flexibility in place to be able to respond quickly to needs and opportunities.

  • David Darst - Analyst

  • Okay. Do you have a tangible equity target that you would like to reach before you do any more deals or branch purchases?

  • Mark Tryniski - President, CEO

  • Not particularly. I think north of 5 certainly is more comfortable than less than 5, which is where we're at now. But as Scott said, our cash earnings are so much stronger than our GAAP earnings that the rebuilding of that tangible equity actually happens at a pretty high pay.

  • David Darst - Analyst

  • Okay, thank you.

  • Operator

  • (Operator Instructions). [Benjamin Paddock].

  • Benjamin Paddock - Private Investor

  • Thank you. I wonder if you could possibly comment on your exposure to the commercial real estate market.

  • Mark Tryniski - President, CEO

  • Sure. We've got about $250 million or so of commercial real estate throughout our different market regions. It's performed quite well frankly. Most of it isn't, in fact none of it is national level conduit type development, it's all in market, local, commercial real estate, a high percentage of it is owner occupied. So there's not a lot of that big-box over development kind of commercial real estate that a lot of the larger banks in larger metropolitan areas are now struggling with, it's mostly local utilized commercial real estate. Again, the great majority of it owner occupied.

  • Benjamin Paddock - Private Investor

  • You don't see above average losses going forward in the near term?

  • Mark Tryniski - President, CEO

  • We don't see anything right now on the horizon, Benjamin, that would indicate that. There has been some decline in valuations I would say in appraisals that we're seeing. Current appraisals are certainly less than what they were a few years ago and that's something that we are seeing. We haven't seen a big fall off in rent, which is interesting, or occupancy.

  • So I think our markets just have not been affected the same way. I mean, there wasn't the overbuilding, there wasn't the over escalation of real estate prices in our markets. So we aren't dealing with the same kind of valuation issues and overbuilding, overcapacity issues that other markets are.

  • Benjamin Paddock - Private Investor

  • Thank you very much.

  • Operator

  • [Tim Brazil], KBW.

  • Tim Brazil - Analyst

  • Good morning, guys. Most of my questions have been answered; I just have a couple follow-ups. First, what's the yield that you guys are seeing on that $100 million that you've deployed so far this quarter?

  • Scott Kingsley - EVP, CFO

  • Tim, (inaudible) that one more time.

  • Tim Brazil - Analyst

  • What's the type of yield that you guys are getting on that $100 million that was deployed in July?

  • Mark Tryniski - President, CEO

  • Probably mid-2s, south of 3.

  • Tim Brazil - Analyst

  • Okay. And can you give your remaining exposure for your floor plan and the amount that it was reduced by this quarter?

  • Scott Kingsley - EVP, CFO

  • Sure. The portfolio is down to $25 million, it's down about $8 million in 2009, sort of planned reductions, people that, customers in fairness that we had ongoing conversations with and that's down about $35 million from where it was say the end of 2006. So I think we were very productively active or proactive relative to our seeing some exposure relative the whole automotive industry and what we've got left in the portfolio is very sound performing credits.

  • Mark Tryniski - President, CEO

  • We've got one -- our nonperforming asset was one floor plan brought in there for $200,000 I think. So there's nothing significant that's ongoing related in the nonperforming bucket right now.

  • Tim Brazil - Analyst

  • Okay, perfect. Thank you very much, guys.

  • Operator

  • Rick Weiss, Janney.

  • Rick Weiss - Analyst

  • I was wondering if you could talk just a little bit about maybe the economies in the different regions where your branches are located, if there are any significant differences. And also how is I guess loan competition and loan pricing?

  • Mark Tryniski - President, CEO

  • Sure. I think I'd take the three distinct regions from our view the way we look at it. In northern New York I would say right now in terms of economic opportunity and economic stability it's probably, interestingly enough at this point, the best in all of our regions. We're clearly seeing very strong opportunities in the northern region.

  • And I think some of that is attributed to the fact that we are being more -- we're more engaged in that market than we ever have been. But I think the Citizens branch acquisition in the Plattsburgh area has helped us a great deal as well and we're executing extremely well there. So we're seeing a lot of strong opportunity in the northern region.

  • And also in central New York we've seen some very good commercial business opportunities as well -- as well as some opportunities that we might not otherwise have had absent the difficulties in some of the large national banks or nationwide banks. And I would say that probably where we're experiencing the most challenge right now is in Pennsylvania. Those are the two larger -- the two, Scranton/Wilkes-Barre area, the largest market that we operate in. I think they have just been somewhat more relatively affected by the overall economic downturn than the upstate New York and northern New York markets have.

  • But with that said I think clearly upstate New York and northeast Pennsylvania economically are performing much better than a lot of other geographies across the country. So I think we're pretty -- we're happy with the environment we've got here as opposed to being in a lot of other geographies. But we are seeing, interestingly enough, some differences in the economic environment in the business opportunities we're seeing.

  • I think the second part of your question was relative to pricing. I would say it's improved a bit, particularly in the commercial real estate arena where I'd say we've probably seen the greatest changes. I think the pricing on the ongoing commercial C&I type business has not changed a lot in terms of the spread, but there are -- we and other banks are putting floors in new business opportunities.

  • So if you've got a prime borrower we're not going to put money on the Street at 3.25, so we're trying to put floors in and that's been helpful to yields. I think the structure has returned a bit which is a good thing, terms and structure have strengthened a bit which we've seen, I think the spreads have strengthened a bit. So I think overall it's improved a bit, Rick.

  • Rick Weiss - Analyst

  • Okay. Have there been any large employers in your area with significant layoffs that could affect CBO?

  • Mark Tryniski - President, CEO

  • We operate in so many different markets, I mean it would take -- I guess the answer is no. Because there have certainly been layoffs and plant closures in different of our markets, but we are in so many different communities and markets, none of which really represent on any level a concentration of our business.

  • I suppose if there were some extraordinary adverse economic consequences in Scranton or Wilkes-Barre you could say that 20-something-percent of our business, 25% or so is in Scranton/Wilkes-Barre area. But I'm unaware of any such economic actions in any of our markets, Rick, that would actually have any kind of significant adverse impact on us, which is not to say that it can't happen; it's just that I'm not aware of where it has happened to date.

  • Scott Kingsley - EVP, CFO

  • And, Rick, if you think about the concentration of employers in our marketplace that are healthcare, higher education and the public sector base, we're probably keeping our eye more on that in terms of some of the constraints that may be on some of those "public" or "pseudo-public" employers going forward -- does that have a meaningful impact on some of the employment in the areas we do business.

  • Rick Weiss - Analyst

  • Okay. One final question I guess is if you could. You guys haven't done a deal for a while; I know Citizens was last year, but in terms of a bank acquisition. And is a constraint there, I guess sellers are reluctant to do deals at these prices or is it your capital ratios or if you could just comment on that.

  • Mark Tryniski - President, CEO

  • Sure. I think as you know, Rick, the M&A market is relatively soft right now for understandable reasons. I think the sellers are concerned about valuation and the buyers are concerned about valuation and concerned about the quality of the balance sheet of the seller. I think things -- there are a lot of banks that are just kind of hunkered down right now trying to find their way through and I think there's just not a lot of impetus on either side to do M&A kinds of transactions.

  • We certainly have no reservations about doing a high quality, high value transaction to us right now, it's just that we haven't -- we haven't had those opportunities because of the general I think difficulties and softness in the market. It's certainly not a function of capital. I mean I think we could go to the capital markets and raise capital to support a transaction. On the other hand right now, in my view trading at nine times cash earnings with the balance sheet we've got and asset quality we're relatively undervalued.

  • So I'm not sure how much capital I'd be interested in raising at $15 a share. But we certainly are not, we have not put any moratorium on doing transactions, I think it's just a slow environment and the opportunities haven't arisen. We're not necessarily out of the market, but I think we are also going to be very disciplined on what we do, particularly given the environment and the question marks about balance sheet and the like and I think that ultimately the seller's valuation expectations are going to have to moderate.

  • Rick Weiss - Analyst

  • Okay, thanks, Mark; thanks, Scott.

  • Operator

  • John Stewart, Sandler O'Neill.

  • John Stewart - Analyst

  • Actually I just had a couple of questions. I wanted actually to start with something you just said, Mark. You think the stock is undervalued but there are no plans to use the buyback. Is that just a function of your capital position and -- I mean you mentioned TCU over 5%; you're not quite there yet. Can you just discuss that a little bit?

  • Mark Tryniski - President, CEO

  • The answer is yes.

  • John Stewart - Analyst

  • Okay, okay. What was the -- just some housekeeping stuff -- the amount of the special FDIC assessment in the quarter? You talked about the total --.

  • Scott Kingsley - EVP, CFO

  • Yes, John, it was $2.5 million, so the special assessment was $0.06 a share.

  • John Stewart - Analyst

  • Okay. And Scott, I think you said your pooled trusts were still marked about 20% below your amortized cost. So am I right in saying that that mark has not changed since last quarter?

  • Scott Kingsley - EVP, CFO

  • It actually improved ever so slightly, John. But I think the carrying value is about 74% or 72% of amortized costs. But there really hasn't been a meaningful change in that, John, since say last year's third quarter. The big tick down was September of last year and it stayed in that window of say 64% to 75% throughout the last three quarters.

  • John Stewart - Analyst

  • Okay, great. And then I know you guys disclosed in the release that you sold $44 million of mortgage production in the quarter. I think there was a comment made earlier there was some hang over from the first quarter into the second quarter. What was the amount of production in 2Q?

  • Scott Kingsley - EVP, CFO

  • John, I do not have that in front of me. But in terms of taking new applications just in the quarter, my guess would be about $35 million of the $44 million came through in the calendar month of April, May and June.

  • John Stewart - Analyst

  • Okay.

  • Mark Tryniski - President, CEO

  • Yes, clearly less than the $44 million. The pipeline is down a bit. The question is what's the change in the pipeline? And you're probably about right, Scott, I would say.

  • John Stewart - Analyst

  • Okay, great. And have the margins on those sales changed materially from the second quarter to what you're seeing so far in the third quarter?

  • Scott Kingsley - EVP, CFO

  • Not a lot, John. I think the question raises itself is could you actually pick up a little bit more volume attributes if you would "relax your gain expectations" or that margin differential. We have that discussion weekly from an ALCO perspective. We haven't seen a big change in that and we haven't changed our expectations of the necessary spread on the gain or the sales spread. But we are continuing to ask the question if we ticked it down an eighth or a quarter would it have a meaningful effect on volume.

  • John Stewart - Analyst

  • Great.

  • Mark Tryniski - President, CEO

  • Which we may do given the likelihood that the refinancing activity is going to continue to probably slow down.

  • John Stewart - Analyst

  • Okay. And then finally, Mark, you had mentioned some expense reduction efforts to be implemented by the end of '09. Do you care to elaborate on that at all, just what you're thinking about doing, what the projected cost saves may be just so we can kind of think about that for '10?

  • Mark Tryniski - President, CEO

  • Not at this point, John. Mainly because, as I said, the efforts are nascent and it would probably be a little premature to comment, but I didn't want to ignore it. But they will be a relatively extensive analysis of our entire expense base and pursuit of opportunities to appropriately reduce the expense structure overall without impairing service to our customers.

  • John Stewart - Analyst

  • Great, well thank you, guys, very much.

  • Operator

  • (Operator Instructions). Gentlemen, I see no other questions at this time in queue.

  • Mark Tryniski - President, CEO

  • Very good. Thank you, Maria. Thank you, everyone, for joining in. We will talk to you next quarter. Bye-bye.

  • Operator

  • Thank you, gentlemen. And ladies and gentlemen, that concludes today's conference. Thank you for your participation and you may now disconnect.