Community Financial System Inc (CBU) 2010 Q4 法說會逐字稿

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  • Operator

  • Welcome to the Community Bank System fourth-quarter and year-end 2010 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 the results discussed in these statements. These risks detailed in the Company's annual report and Forms 10-K filed with the Securities and Exchange Commission.

  • Today's call presenters are Mark Tryniski, President and Chief Executive Officer, and Scott Kingsley, Executive Vice President and Chief Financial Officer. Gentlemen, you may begin.

  • Mark Tryniski - President and CEO

  • Thank you, Erin. Good morning, everyone, and thank you all for joining our fourth-quarter conference call. Scott will discuss fourth-quarter results, so I will comment first on 2010 as a whole and give some thoughts on 2011 after Scott's financial review.

  • 2010 was a strong year for the Company in nearly every respect. Net interest income was up. Non-interest income was up. Credit costs were down and operating expenses were down. Our capital base grew, but our earnings grew even faster, resulting in improved returns on equity. That should always yield a good outcome for shareholders, which it certainly did in 2010.

  • Core deposit growth continued to be strong at 12% and the net interest margin grew from 3.80% in 2009 to 4.04% in 2010.

  • Our lending businesses were mixed. Looking at the year overall, this felt to me like the only soft spot. Mortgage lending was strong all year with originations second all-time only to 2009. Direct to consumer lending was also up 5% for a year. The auto lending business, however, was down for the year, as was business lending. Disappointingly, the majority of that downturn came in the second half of the year. Demand continues to be a challenge, but we need to execute better in both the auto and small business segments of our markets.

  • Our wealth management and benefits administration businesses had an incredibly strong year as well although coming off a weak 2009, with revenues up and expenses down contributing an additional $0.10 per share to our year-over-year earnings growth.

  • In addition, we completed our planned core IT platform conversion in the third quarter and announced our acquisition of Wilber National Bank in the fourth quarter, which we expect to close in early April. Overall it was a busy, demanding, and at times difficult year, but in summary a very productive year. Scott?

  • Scott Kingsley - EVP and CFO

  • Thank you, Mark, and good morning, everyone. First, as mentioned in our release, fourth-quarter earnings of $0.47 per share were 68% better than the $0.28 reported in the fourth quarter of 2009. Adjusting for acquisition expenses and special charges incurred in the fourth quarter of both years, results and a comparison of $0.49 per share versus $0.38 per share last year or a 29% improvement in core operating results.

  • 2010 full-year earnings per share of $1.89 improved 50% over 2009. Our declared dividend of $0.24 per share represented 51% of quarterly GAAP earnings and just 47% of cash operating earnings. These favorable operating results continued to contribute to meaningful capital growth throughout 2010.

  • I will first discuss some balance sheet items. Average earning assets of $4.88 billion for the quarter were up very modestly from the third quarter and were 1.4% above the fourth quarter of 2009. As Mark noted, weak demand characteristics resulted in lower average loans from the third quarter while investment securities, principally cash equivalents, were $35 million higher.

  • Our business lending portfolio contracted for the second consecutive quarter with the fourth quarter experiencing some meaningful reductions in line utilization. Asset quality results continued to be favorable in this portfolio with net charge-offs of 31 basis points over the last four quarters and 26 basis points over the previous 12.

  • Our total consumer real estate portfolios of $1.36 billion comprised of $1.06 billion of consumer mortgages and $304 million of home-equity instruments, was down slightly from September 30 and reflected our continuing decision not to portfolio certain lower rate longer-term assets and instead sell those originations to Fannie Mae. Asset quality results continue to be very favorable in these portfolios with total net charge-offs over the last four quarters of under $700,000 or less than 6 basis points of loss.

  • Our consumer indirect auto portfolio of nearly $495 million was also down from the end of September as scheduled principal reductions were higher than new loan production, as was seasonally expected. A byproduct of the still historically low new vehicle sales rates has been an improvement in used car valuations where the majority of our lending is concentrated.

  • Net charge-offs for the last four quarters were $1.7 million or 34 basis points, which was an improvement over both 2008 and 2009. Despite our continued bias toward A and B paper grades, yields remained very consistent for the fourth quarter of 2009.

  • Despite the continuation of the very favorable net charge-off trends in 2010, we did report an increase in delinquency rates particularly in our consumer-related portfolios in the fourth quarter. Although our core banking systems converged and certain changes in customer payment functionality may have played a role in these results, we are diligently working to return closer to the 1.50% average portfolio delinquency rate experienced over the previous six quarters.

  • Average deposits in the fourth quarter were $3.95 billion, were consistent with the third quarter. Core deposits now represent over 76% of total deposits, a continuation of a very favorable funding mix change we have worked diligently at.

  • Quarterly average investment assets increased $275 million from the fourth quarter of 2009 while average overnight invested cash equivalents were down $180 million from the previous year's fourth quarter reflective of our decision in early 2010 to deploy a portion of our excess liquidity and intermediate-term US treasury securities. The weighted average life of maturity of our investment portfolio stood at 5.5 years at the end of December.

  • Net unrealized gains in our $1.1 billion available-for-sale portfolio at year end were $9.9 million despite the carrying value of our level 3 investment assets which is almost entirely comprised of pooled trust preferred securities being carried at approximately $27 million below book value. The valuation of these assets continued to reflect market volatility and uncertainty as well as the absence of an active market for these types of securities.

  • Despite continued increases in interest deferral and default rates of collateral in our pools over the last several quarters, our holdings, which are super senior, continued to fully perform. Also although not reflected anywhere in our financial results, net unrealized gains in our $600 million held to maturity portfolio were an additional $23 million at year-end.

  • Our capital levels in the fourth quarter remain strong. The Tier 1 leverage ratio stood at 8.23% at year-end and tangible equity to net tangible assets was 6.14%, a 94 basis point improvement from last December and up 140 basis points from the 4.74% reported at the end of 2008. These significant improvements in equity have been generated from strong operating earnings as opposed to the dilutive capital raising activity deployed by many other financial institutions.

  • As I've mentioned before, consistent with regulatory instructions, our calculation of the Company's tangible equity ratio includes adding back to both the numerator and denominator $20.8 million of deferred tax liabilities associated with tax-deductible goodwill created from several of our asset acquisitions principally branch transactions. Exclusion of this differential would render our comparisons to peers incomplete.

  • Shifting now to the income statement, our reported net interest margin for the fourth quarter was 4.07%, down 1 basis point from the third quarter of 2010 but 21 basis points better than last year's fourth quarter. Proactive management of deposit funding costs and a more productive deployment of net liquidity have continued to have positive effect on margin results.

  • Fourth-quarter noninterest income was consistent with the prior year as strong mortgage banking related revenues offset lower deposit service fees reflective of the first full quarter of activity post Regulation E, which has resulted in net lower product utilization.

  • Our employee benefits, administration and consulting business and our wealth management group generated revenues consistent with the fourth quarter of 2009 completing very productive year-over-year improvements in both revenue growth and operating earnings, as Mark mentioned.

  • Fourth-quarter operating expenses of $43.0 million excluding acquisition expenses and special charges were $2.7 million below the fourth quarter of 2009 and reflected solid cost management across all areas of the Company as well as lower amortization of intangibles. Implementation of several expense reduction programs allowed the Company to report lower year-over-year operating expenses in 2010 despite increases in incentive-based compensation as well as higher technology and volume-based processing costs.

  • Full-year amortization of core deposit and other customer intangibles was $2.2 million lower than last year, related to the midyear completion of amortization on one of our 2001 branch acquisitions.

  • As we've mentioned previously, the Company has significant resources dedicated to the conversion of its core banking systems completed in the third quarter throughout 2010. Our effective tax rate in the fourth quarter of 2010 was 27.3% compared to 21.2% in the fourth quarter of 2009, reflective of a higher level of income from fully taxable sources resulting in a full year effective rate of 26.7%.

  • In summary, our high quality and record 2010 earnings were the result of our continued focus on both the right and the left side of the balance sheet as well as productive improvement from both the top and the bottom of our income statement. Our ability to reward shareholders with a 9% increase in their cash dividend this year stems directly from this commitment to a disciplined and balanced approach to our business regardless of market conditions.

  • I will now turn it back over to Mark for some additional comments.

  • Mark Tryniski - President and CEO

  • Thanks, Scott. With respect to 2011 and beyond, the events and environment of the past several years have created both opportunity and challenge. The disruptions and dislocations in market participants will yield opportunities in terms of both organic and strategic growth. Offsetting that will be the significant challenges of a punitive legislative and regulatory environment that is driving revenues down and costs up.

  • Additional headwind will come from continued weakness, although hopefully improving credit demand. In response to that expectation, we are instituting some tactical plans around improving our credit performance in 2011.

  • Despite these challenges, we understand our responsibility is to continue to create value for shareholders regardless of the environment. We think we are well-positioned to accomplish that. We have plentiful existing and available capital, a strong and stable core funding base, strong earnings capacity, valid asset quality, talented and motivated employees, and a proven business model. All necessary elements remain in place for continued success for our Company and our shareholders.

  • With that, Erin, I would ask for any and all questions.

  • Operator

  • Damon Delmonte.

  • Damon Delmonte - Analyst

  • Good morning, guys. How are you? Scott, I was wondering if you could give us a little insight as to the move in the OCI this quarter?

  • Scott Kingsley - EVP and CFO

  • Sure, if you remember that when -- at the end of the third quarter if you're just using 10-year rates to your benchmarking your portfolio, Damon, the 10 year was about [252]. It ended the year at about [331], so what was a $42 million unrealized gain in our AFS portfolio and therefore had about a $26 million positive impact on OCI moved down to about a $10 million market value adjustment for the end of the year or about a $6 million OCI additive number, which is down about $19 million.

  • Damon Delmonte - Analyst

  • Okay, that's helpful. It helps explain the movement for the quarter. I guess I will stay with a specific question before I ask a more broad-based one. The tax rate, the highest tax rate this quarter, should we kind of look for that to carry through into 2011?

  • Scott Kingsley - EVP and CFO

  • I think the full year rate, Damon, is a reasonable one to use into 2011. That's 26.5%, 26.7%. I think in order to get to that, I think we generated in the second half of the year a higher level of mortgage banking revenues than we would have anticipated when you are trying to plug together a full-year rate. So that's why the fourth quarter was actually just a little bit higher.

  • But I think the full-year rate is pretty representative of what we think the mix would be taxable versus nontaxable going forward.

  • Damon Delmonte - Analyst

  • Okay, and then I guess from an M&A perspective, can you give us an update on the Wilbur Corporation? And I guess kind of what you are seeing for 2011 as additional opportunities?

  • Scott Kingsley - EVP and CFO

  • Sure, we are on track to close the transaction the first weekend in April, I believe. The integration process on both sides continues. We have filed our proxy prospectus as well as the OCC application. So all of the required elements necessary to close that transaction on time are in place.

  • As I said, the integration efforts continue apace. If you look at their year-to-date operating results are -- were pretty strong. They did take some securities gains to offset some slightly higher provision necessary, but the deposit pace remains very strong.

  • They did lose some loans between the beginning of the year and the end of the third quarter, which in large part was due to the need to work out some of the troubled loan credit relationships. But so far the integration plans continue apace and we think it's going to be a tremendous opportunity for us collectively to create value for our shareholders. They are the markets that we know very well. There's a similarity of business model and culture that we think is going to be very additive and we continue to believe that the earnings accretion impact is at least 2% to 4% for 2011.

  • Damon Delmonte - Analyst

  • And has credit held up relatively well there?

  • Scott Kingsley - EVP and CFO

  • Well, I can't comment beyond what has been disclosed through the third quarter, but we are monitoring it closely, Damon.

  • Damon Delmonte - Analyst

  • Okay, and then I guess lastly if you look at your exposure in the northeast area of Pennsylvania, are you guys seeing any benefit from the Marcellus shale?

  • Scott Kingsley - EVP and CFO

  • We are. We've got eight or 10 branches or so in northern Pennsylvania right in the heart of where all the drilling activity is taking place. There's an awful lot of economic activity taking place there. In fact, if you just take a ride down Route 6 there, it's really amazing what's going on in terms of economic activity.

  • In those branches our deposits are up significantly, over 20% year-over-year in those markets. We put almost $15 million of new credit on the books in those markets related directly to the gas drilling activity. Our wealth management business has about doubled, actually a little more than doubled from 2009 to 2010 and I guess we expect that trajectory to continue.

  • On top of all that, we just recently opened a branch in Montrose, Pennsylvania, which is again right in the heart of where all the shale gas activity is taking place, a very attractive market opportunity for us as well. I think we just had our grand opening here a few weeks ago and we hit the ground running there with a new branch, so we think we have a very good exposure to that.

  • In addition, we have undertaken an analysis of other potential de novo branch opportunities and have a list of 12 or 15 locations that might warrant further analysis which we are undertaking presently in terms of strengthening our branch presence in those markets even further.

  • Damon Delmonte - Analyst

  • Okay, that's great. That's all I have for now. I will jump back in the queue if need be afterwards. Thanks.

  • Operator

  • David Darst.

  • David Darst - Analyst

  • Good morning, Scott, Mark. Good morning. As you discussed, the 2% to 4% accretion for Wilbur, are you beginning to think about revenue synergies and what those could add?

  • Mark Tryniski - President and CEO

  • Well, we are always thinking about that. I think the reality is, David, that to be honest with you, we don't use revenue synergies in our pricing models, in our M&A models because it's very difficult to achieve that. There's things you can do around the fringes.

  • But one area where I think we may have some interesting opportunities in the trust and wealth management area. Wilber has a very strong trust department, very good at what they do, as do we. We think there's some very good opportunities there to combine two very high performing businesses, add one and one and get three.

  • There are some other things on the product side I think we bring some products and services to the market there that they may not already have. And so I think there's opportunity around the fringes. But for me to say to you that I think there is material revenue synergies might be overstating the case a little bit.

  • They do have a mortgage banking business that is more of a wholesale business than ours called Provantage that is headquartered in the Capital District of New York. We think there's a lot of opportunity to leverage off that across our footprint, though we think there are revenue opportunities I think probably the largest one is Provantage. That is frankly leveraging something they have across our footprint as opposed to the other way around.

  • So there are some opportunities that we have already begun exploring and pursuing and hopefully have the opportunity to report our successes to you in 2011.

  • David Darst - Analyst

  • Okay, good. How about anything you are doing with their balance sheet and yours in anticipation of the merger. Is there anything on their balance sheet that you are considering deleveraging?

  • Scott Kingsley - EVP and CFO

  • David, they've got very modest amounts of Federal Home Loan Bank advances and I do think that the likely outcome would be to the extent that they have investment cash flows coming off between now and the closing to the extent that they can, we're likely to use some of those to deliver that a little bit. Probably not significant because much like us a lot of their stuff is term-based advances, carries a pretty hefty penalty upon early extinguishment. So we need to be cognizant of that.

  • I think consistent with what we said before, our expectation is that we would reinvest investment cash flows in 2011. We expect full year investment cash flows off our portfolio of about $275 million. It's actually weighted to the back of the year, so I think that we think there's productive ways to enter the reinvestment side, with both our cash flows as well as Wilber's in the first half of the year.

  • Again, we are still carrying about $105 million to $110 million of cash equivalents, which as you know by historical standards for us is pretty high. We have typically -- this institution has typically been very capital efficient with its being fully invested. We think that's a reasonable point to be at today, given where we think things are going from a loan demand standpoint as well as interest rate sensitivity.

  • So we've done the initial cut, David, of putting sort of our ALCO results together. We will be refreshing that over the course of the next four to six weeks and would expect to get some conclusions after that.

  • David Darst - Analyst

  • Okay, then could you comment on loan demand, your pipeline, and the declines that we saw on the loan portfolio this quarter?

  • Scott Kingsley - EVP and CFO

  • I think in terms of the pipeline, David, it is down a little bit going into the first quarter. That's probably not for us seasonally unexpected. I think what we did experience in terms of lower line utilization in the fourth quarter was a little bit disappointing for us. I think we had had sort of a modest outcome in the third quarter and expected it to be similar to that. So we had some fairly large line paydowns in the fourth quarter.

  • And if you think about our marketplaces, sort of episodically, how would you -- we don't typically determine use of that in the first quarter typically is not that high. But we would certainly hope to regain some ground in the first half of the year from where we ended the year.

  • Mark Tryniski - President and CEO

  • And I would just say I think if you look at the private performance across the Company, it really was very different by region. It was -- on the business lending side, it was actually quite strong in the North Country and much less strong in Pennsylvania.

  • The mortgage business was strong across the Company if you look at the outstandings were about flat, I think they were up 1%, but we did originate what -- Scott, about (inaudible) million?

  • Scott Kingsley - EVP and CFO

  • I thought is was more than that

  • Mark Tryniski - President and CEO

  • Yes, $140 million or $150 million that we sold that were lower rate instruments. But with that said, booking a lot of gains too on those sales so the mortgage business was very productive.

  • Interestingly enough, the direct consumer lending was pretty strong. We were up 5% in direct consumer lending which was interesting. The auto lending and I guess I and Scott both commented on this but was down for the year, actually down about 6.5% which I think was in a year where the auto market actually improved a bit, I think some of that was our decision to originate more A and B paper in 2009 and going into 2010.

  • I also think we need to execute a bit better in that market as well. So it is kind of -- it was interesting in mix year terms of the credit was not consistent across the Company at all by geography or by loan type.

  • Scott Kingsley - EVP and CFO

  • David, as reminder, too, we have said this before. We really don't plan and budget for the selling of mortgages. We let the rate markets sort of dictate our participation there and much like Damon's earlier question, when you had rates actually go up in the month of December, it has created some opportunities for us to reconsider portfolio-ing certain duration mortgages, 12 year, 15 year type paper, because now you've got interest rates that are back approaching 5% again.

  • When they were 4 or sub 4, that were out of the question for us at that duration. So we'll have an ability to look at that as part of our ALCO process here in the first quarter.

  • David Darst - Analyst

  • Okay, then, Mark, during your comments you made a reference to some tactical plans around improving credit.

  • Mark Tryniski - President and CEO

  • Yes.

  • David Darst - Analyst

  • Are you looking at some more aggressive ways to reduce your nonperforming loans?

  • Mark Tryniski - President and CEO

  • No, as you know, our nonperforming loans are pretty low. I think they are sitting at the 60 basis points. We continue to work those. I think they actually have come down for a few quarters as a trend but we are not uncomfortable at all with our level of NPAs. My comments they were really directed towards better execution in our markets in terms of the small business lending opportunities as well as mid-sized lending opportunities. And also in the indirect auto business.

  • So that's where I am talking about. It is really tactical execution in terms of credit demand and in those portfolios, not at all related to asset quality metrics, which we think are very strong and continue to be stable and additive to our results.

  • David Darst - Analyst

  • Okay, great. Thank you.

  • Operator

  • Jason O'Donnell.

  • Jason O'Donnell - Analyst

  • Good morning. Given the bottoming in your cost of funds, can you just give us an update on your margin outlook for the next [few] quarters accounting for legacy balance sheet trends and then the impact of Wilber in the second quarter?

  • Scott Kingsley - EVP and CFO

  • Yes, good question, Jason. We certainly think that -- like we've said before we got to a high of 410 in the second quarter and we really have only just sort of had modest leakage to the 408, 407, that we experienced in the third and the fourth. I think we suspect in the first quarter that would come down a little bit again. Again, I think replacing expiring cash flows of the investment portfolio with new securities is a net lowering of the expected yield characteristics still at this point in time.

  • In terms of the level of available cash that we will likely retain from a cash equivalent standpoint, that in and around $100 million is a pretty comfortable level for us, I think that will stay about the same, Jason.

  • We do -- as a result of the Wilber transaction, there is a modest dilution in the margin. Their margin is a little bit lower than ours. Their average loan yield is a little bit lower than ours. Investment security yield a little bit below. Cost of funds, a little modestly higher, but not significant. And understanding that you are bringing over 15% to 20%, we would expect from the second quarter on to be a little bit lower on a fully consolidated basis from a margin standpoint.

  • We continue to talk I think it seems like, Jason, almost every quarter about you can't get to the lower deposit funding rates and yet you do. I think that is a function of short-term CDs that are expiring and expiring coming off at 75 -- regardless of where they are priced at, our CD book is still priced at about 165 to 170. So as things come off, they are not going back on at those rates.

  • Now, it's a much smaller piece of the total funding base today than it was two years ago or even a year ago, so to continue to harvest that benefit, I think it's been productive that we have been able to stay close, in fairness.

  • So I think our expectations without Wilber would be that it would be 395 to 405 range. With Wilber, a little bit lower than that. So I think that's what we're using in our mechanism.

  • Jason O'Donnell - Analyst

  • Great, great, that's helpful. And then on credit, I apologize if I missed it, but what specific loan categories were driving the increases in NCOs in delinquencies?

  • Scott Kingsley - EVP and CFO

  • From a net charge-off standpoint, it was very represented. Nothing in the fourth quarter that stood out versus any of the other quarters of 2010 in terms of the mix of where charge-offs were.

  • From a delinquency standpoint, we did spike up a little bit at the end of the year in consumer mortgage and indirect auto and direct, more consumer-based. As I said in my comments, I think we did a little bit of that to ourselves relative to post the core conversion.

  • There were some payment functionalities like pay by phone and certain other things that we did not have up and running post conversion in a full functional way. And so we were sort of slogging our way through that. So I think we put ourselves in that position and ended up with some consumers being 30 or 60 days behind that usually were not.

  • So we are working through all of that. I think on a pure metrics standpoint, a lot of people would probably still take our delinquency ratios (multiple speakers) they are high for us.

  • Jason O'Donnell - Analyst

  • Okay. I guess, and then finally if I recall correctly, occupancy expense tends to be materially higher for you guys in the first quarter. Can you just remind us what the other seasonal factors are that we should be thinking about in terms of noninterest income and expense?

  • Scott Kingsley - EVP and CFO

  • Yes, it is a good question and a good memory, Jason. The first quarter tends to be for us historically $400,000 or $500,000 or $0.01 per share more expensive on the occupancy side. And since I think every branch in our entire market yesterday had a minus in front of its sign in terms of outdoor temperature, I think that's probably accurate again. So sort of the heating and utility costs just tend to be more expensive.

  • In terms of other seasonality, we typically see a little modest improvement in the benefits administration and consulting business in the first quarter, the actuarial consulting business is very strong in the first quarter related to year-end needs of its customer base. So that typically is a little bit larger than the second, third, and fourth quarters. But again, maybe a cent or a little under $0.01 per share type of an impact.

  • The other seasonality tends to be our fee generation in the first quarter is typically lower than every other quarter and given the fact that we are coming out of a fourth quarter that was lower, the first full quarter of Reg E adjusted product utilization, we would expect a lower number in the first quarter because that is just from a seasonal standpoint what we have seen in the past.

  • We did the fourth quarter probably have a higher fee waiver average than normal for us coming off the core systems change. We think we are through that -- those attributes, so we would expect to return to a closer than -- closer to historical norms for the first quarter, Jason.

  • Jason O'Donnell - Analyst

  • Okay, perfect. Thanks a lot, guys.

  • Operator

  • Joe Fenech.

  • Joe Fenech - Analyst

  • Good morning, guys. Most of my questions were answered, but I just was wondering if you can fine-tune some of your projections around the Wilber transaction? I was just a little unclear. I think you had said in the third-quarter call you expected it to be slightly dilutive to tangible book and I think you had projected a pro forma TCU ratio of around 582.

  • Was that just kind of pro forma as of 9/30 or did you guys kind of factor in earnings of both companies along the way? Can you just kind of fine-tune those projections for us a little bit as we get closer to closing the deal?

  • Scott Kingsley - EVP and CFO

  • Yes, I think that's a fair question, Joe, and I think you're right. I don't think that we have come off that with any significant matter. The interesting thing is from a projection standpoint because we are probably projecting this to the closing, which we expect in April, we actually expect the two organizations to have the earnings power to make up what is our expected asset marks in the transaction. We had disclosed a range of $21 million to $26 million of credit asset marks. We actually think that the two organizations collectively will make enough money in the fourth quarter and the first quarter to cover that as well as some other transaction-related costs.

  • So that the earnings potential of the two organizations offset by transaction costs and asset marks would probably be neutral or to your point slightly dilutive to the current number.

  • Joe Fenech - Analyst

  • Okay, and then from a cost savings perspective, remind me. I think you are between 15% and 20% and then like the timeline to getting there, when is that fully phased in?

  • Scott Kingsley - EVP and CFO

  • Yes, you are exactly there. We use the number just south of 20% and I think that we expected that we need to get about half of that in 2011 and get -- be at a full run rate with that in 2012. And as Mark pointed out, as we are working through sort of our integration and transition plan, I don't think our expectations have changed radically from that, Joe.

  • Joe Fenech - Analyst

  • Okay. Thanks, guys.

  • Operator

  • [John Stewart].

  • John Stewart - Analyst

  • Good morning, guys. Most of my questions have been answered, but I just wanted to follow up on one item in particular. The bond yield I noticed ticked up in your investment securities from 4.84 on average last quarter to 5 this quarter. Can you just give a little bit of color around that, maybe what led to that?

  • Scott Kingsley - EVP and CFO

  • Good question, John. I have to admit I don't have that in front of me. There were a couple securities on the municipal side and on the agency side that were called, so we did get some call premium in the fourth quarter. But they certainly weren't large numbers if they were $0.005 a share, is probably a large number, but that might be enough to move that net bond yield 16 basis points.

  • John Stewart - Analyst

  • Sorry, you said it was $0.005 a share?

  • Scott Kingsley - EVP and CFO

  • I would say that the net called -- the called proceeds that we received were in the neighborhood of a couple hundred thousand dollars which would be a little under a $0.005 per share for us in the quarter. That would probably be enough on the book to move the yield 15 or 16 basis points.

  • John Stewart - Analyst

  • Okay, and then you gave the average life to maturity for the portfolio overall of 5.5 years, but do you have the effective duration by -- broken out by the taxable versus tax exempt?

  • Scott Kingsley - EVP and CFO

  • No, John, I don't have that with me. I can catch up with you on that off-line if you want.

  • John Stewart - Analyst

  • Okay, that's a lot.

  • Operator

  • At this time I have no other questions in queue.

  • Scott Kingsley - EVP and CFO

  • Very good. Thank you, Erin. Thank you all for joining and we will talk to you at the end of the first quarter. Thank you.

  • Operator

  • That concludes today's conference. Thank you for your participation. You may now disconnect.