Mark Tryniski - President and CEO Scott Kingsley - Executive Vice President and CFO.

Collyn Gilbert - KBW Joe Fenech - Hovde Group Alex Twerdahl - Sandler O’Neill William Wallace - Raymond James Matthew Breese - Piper Jaffray Ryan Strain - Guggenheim Securities.

Please standby. Welcome to the Community Bank System Third Quarter 2015 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 Scott Kingsley, Executive Vice President and Chief Financial Officer. Gentlemen, you may begin..

Thank you, Shannon. Good morning, everyone. And thank you all for joining our Q3 call.

Third quarter results were very positive, including a record level of earnings per share, continued loan and core deposit growth, expense control that was better than we expected, and positive growth in net interest income, asset quality remains very good, with MPAs and provision up marginally relative to the past two quarters, which were historically exceptional.

With respect to the pending Oneida Financial acquisition, we are making progress with the regulatory review process and expect approval this quarter. We are very well-positioned for the remainder of this year and into 2016.

[The healthy growth] [ph], capital strength, earnings momentum, asset quality, cost control and the Oneida transaction will serve us well, but we expect also the challenge by a continuing contraction in margin and higher expected tax rate next year.

We do, however, understand our job as always is to manage and grow the organization into the disciplined fashion that creates sustainable improvement in earnings and dividend capacity for benefit of our shareholders.

Scott?.

Thank you, Mark, and good morning, everyone. As Mark mentioned, the third quarter of 2015 was a very solid operating quarter for us. I’ll first cover some updated balance sheet items.

Average earning assets of $7.12 billion for the third quarter were up 6.9% from the third quarter of 2014, average loans grew $107 million year-over-year or 2.6%, ending loans were up $50 million from the end of the second quarter of this year, with productive growth in almost all of our portfolios.

Average investment securities were up 14% compared to the third quarter of 2014, principally a result of our decision to pre-invest the expected net liquidity of the pending Oneida Financial transaction.

Since early March, we have purchased $400 million of treasury securities with blended yields just below 2% as a planned replacement for the $3 million of securities currently held in the Oneida portfolio, as well as the redeployment of our own expected investment cash flows for 2015.

Average deposits were up 2.5% from the third quarter of last year, with all of the growth in core accounts which resulted in another modest decline in overall deposit cost. Quarter end loans in our business lending portfolio of $1.29 billion as of September 30th were $37.6 million or $3.0% above the end of the third quarter of last year.

Asset quality results in this portfolio continued to be very favorable with net charge-offs of under 11 basis points of average loans over the last nine quarters.

Our total consumer real estate portfolios of $1.97 billion comprised of $1.62 billion of consumer mortgages and $345 million of home equity instruments were also up on a linked quarter basis and were 1.5% higher than the end of the third quarter of last year consistent with general market.

We continued to retaining portfolio most of our short and mid-duration mortgage production, while selling secondary eligible 30-year instruments. Asset quality results continued to be very favorable in these portfolio, with total net charge-offs over the past nine quarters of just 8 basis points of average loans.

Our consumer indirect portfolio of $830, excuse me, $873 million was up $36 million or 4.2% from the end of the second quarter of 2015, which was historically consistent and in line with seasonal demand characteristic. Despite solid new car sales, used car valuations were the largest majority of our lending is concentrated continue to be stable.

Net charge-offs in this portfolio over the past nine quarters were 30 basis points of average loans, a level we consider very productive. We have continued to report very favorable overall net charge-offs results with the first nine months of 2015 at just 0.9% of total loans being a stellar performance.

Non-performing loans comprised of both legacy and acquired loan ended the third quarter $27.7 million or $0.58% of total loans. Our reserves for loan losses represent 1.10% of our legacy loans and 1.06% of total outstanding and based on the trailing four quarters results represent over eight years of annualized net charge-offs.

Non-performing loans increased $2.2 million in the third quarter, entirely related to one oil and gas-related relationship in the Marcellus Shale region of Northeast Pennsylvania. We continue to closely monitor our $71 million of oil and gas-related credit exposure with roughly $35 million of that amount outstanding as of September quarter end.

Our exposure is comprised of 24 specific relationships, which include pipeline contractors, construction equipment and materials providers, stone and corey enterprises, fuel and water transportation companies and hospitality-related properties.

The weighted average risk rating in this small segment continued to be consistent with our overall commercial portfolio. As of September 30th, our investment portfolio stood at $2.92 billion and was comprised of $230 million of U.S.

agency and agency-backed mortgage obligations or 8% of the total, $684 million of municipal bonds or 23% and $1.93 billion of U.S. treasury securities or 66% of the total. The remaining 3% was in corporate debt securities.

The portfolio contained net unrealized gains of $101 million as of quarter end, a level consistent with the end of the first quarter of this year, but nearly $45 million higher than June 30th. Our capital levels in the third quarter of 2015 continued to be strong.

The Tier 1 leverage ratio stood at 10.09% at quarter end and tangible equity to net tangible assets ended June at 9.14%. Tangible book value per share was $17.05 per share at quarter end and includes $38.7 million of deferred tax liabilities generated from tax deductible goodwill or $0.94 per share.

Shifting to the income statement, our reported net interest margin for the third quarter was 3.65%, which was down 24 basis points from the third quarter of last year and 11 basis points lower than the second quarter of 2015.

The decision to pre-invest the expected liquidity from the Oneida transaction into treasury securities contributed to the overall decline in net interest margin in both the second and third quarter of this year but was also clearly additive to net interest income generation.

Also consistent with historical results, the second and fourth quarter of each year include our semi-annual dividend from the federal reserve bank were approximately $0.5 million which adds 3 basis points of net interest margin to second quarter results compared to the linked first and third quarters.

Proactive and disciplined management of deposit funding costs continue to have a positive effect on margin results, but have generally not been able to fully offset declining asset yields. Third quarter non-interest income was up modestly from last year’s third quarter and seasonally involved the first two quarters of 2015 as expected.

The company's employee benefits, administration and consulting businesses posted a 5.3% increase in revenues from new customer additions and additional service offerings. Our wealth management group revenues were essentially even with a very strong third quarter of 2014.

Seasonally, our third quarter revenues from deposit service fees were up from the levels reported in the first and the second quarters but were actually down 2.7% from the third quarter of 2014 as higher card-related revenues did not completely offset lower utilization of account overdraft protection programs.

Mortgage banking and other banking services revenues were up $178,000 from third quarter of last year and again included our annual dividend from certain pooled retail insurance programs which amounted to just over $0.01 per share.

Quarterly operating expenses of $56.1 million decreased $2.7 million compared to the third quarter of 2014 and included $562,000 of acquisition expenses while the third quarter of last year included $2.8 million of litigation settlement cost. Excluding those cost, core operating expenses were down $0.5 million from third quarter of 2014 or 0.9%.

Our effective tax rate in the third quarter of 2015 was 30.0% versus 29.9% in last year’s quarter, a reflection of modestly lower proportion of tax-exempt income to total income. We continue to expect net interest margin challenges to persist balance in 2015 and into 2016.

Of all the majority of our new loan originations and our consumer lending portfolios are at yields consistent with those of the existing instruments, yields of new commercial originations remain below blended portfolio yields.

Core net interest margin excluding the impact of the previously mentioned pre-investment decisions has declined 2 to 4 basis points per quarter this year.

Also as a reminder, a meaningful portion of the $0.07 of expected GAAP earnings accretion from the pending Oneida transaction was realized in the second and third quarters from securities pre-investment. Our funding mix and comps are at very favorable levels today from which we do not expect significant improvement.

Our growth in all sources of recurring non-interest revenues has been positive. And we believe we are positioned to continue to expand in our areas. While operating expenses will continue to be managed in a disciplined fashion, we do expect to continue to consistently invest in all of our businesses.

We continue to expect federal reserve banks semi-annual dividend in the second and fourth quarters each year. Our year-to-date net charge-off results have been extremely positive and although we do not see signs of asset quality headwinds on the horizon, it would be difficult to expect improvements to current asset quality results.

Tax rate management will continue to be subject to successful reinvestment of our cash flows into high quality municipal securities, which has been a challenge at times during this period of sustainable rates.

In addition, back to the close of the pending Oneida transaction, our expected consolidated asset size will eliminate certain state tax planning opportunities resulting in an estimate 2 to 3 percentage points increase in our effective tax rate.

Despite some of these impaired challenges, we believe we remain very well positioned from a capital and an operational perspective for the balance of 2015 and into 2016. I’ll now turn it back over to Shannon to open the line for questions..

Thank you. [Operator Instructions] And our first question will come from Collyn Gilbert of KBW..

Thanks. Good morning gentlemen..

Good morning Collyn..

Just first quickly on the NIM, you had indicated that the core NIM maybe -- will continue to be under pressure. What should we expect for future NIM pressure related to the pre-investing? Is that all done now? And we kind of seeing the stabilization to that or whether….

You bet..

…that will be matter of compression? Okay. So….

You bet. I haven’t gone back to just see the core compression now which would be to the extent that we continue to replace commercial assets with slightly lower yields than the blended portfolio rate. We probably still don’t have enough funding hour to be able to bring down funding cost to offset that going into 2016.

We ended the third quarter with depository cost at 11 basis points. So probably now we’re testing our ability..

Okay. That’s helpful. And then just on the expense side, I think expense came in lower this quarter. I think you were thinking -- you had indicated for the second quarter that maybe it would be about $57 million run rate.

Was there anything unusual that was happening? And I know you indicated continuing to grow the business but I don’t know if grow over this level or that $57 million level?.

Well, it’s really good question. And there is -- it was literally across the board in terms of our attention to FTE management, our attention to occupancy-related cost associated with maintenance and service arrangements. Our attention to controlling and not growing processing costs both on the core side and some of our technology initiatives.

So we didn’t really hold anything up, Collyn, in the third quarter of this year relative to our spending lines. So I really think it’s a pretty good core run rate of what you’re looking at for the third quarter. We do have an expectation going into 2016 to have roughly a 3% mirrored type of an increase across the board for our folks.

We will obviously continue to aggressively manage FTE levels to the extent that they are consistent with our service needs. So we’re pretty pleased with the outcome for the third quarter. But I don’t think there is anything unusual that wasn’t in the number..

Okay. That’s helpful.

And then can you just give a little bit more color on the oil and gas credit that came on this quarter but just with the size that was and with the nature of the credit was?.

It’s an equipment and transportation water evolving enterprise. The size of the credit is well over $2.5 million and it’s just really a reflection of who your partner is relative to -- into the drilling side.

So with drilling levels being down substantially, this particular customer is in the middle of going through a much lower utilization of their deployed assets..

Were they under watch list in prior quarters?.

Collyn, I think this particular asset know was not and I do know the producers or the drillers had that opportunity to manage their production or their harvesting level that’s certainly based on where the market price is for natural gas. But we’re -- this was not our watch list before.

Essentially though the entirety of our $71 million credit exposure, which had $35 million outstanding at quarter end, has been out of list that we’ve been looking at consistently since the tail end of last year..

Okay.

Just one final question on the oil and gas, so what type of reserve do you have set aside for those credits?.

If it’s their blended income and given their risk ratings, I think we did have way small specific reserve attached to this one individual credit, but that being said, across the broader group we had not tried to allocate anything specific to that group.

Just given the levels of reserve continuing we have today, we think we’re probably still in decent shape..

Okay. That’s great. One final question, just can you give us an update on Oneida and I know you said in the press release you expect regulatory closing in the fourth quarter, but just any kind of update that you can offer there and that’s it? Thanks guys..

Sure. Thanks, Collyn. Well, we are prepared operationally and otherwise. So we are just -- we’re anxiously awaiting the conclusion of the regulatory review process. I think we are making progress and we expect approval in the fourth quarter..

All right. Thank you..

Thank you..

And our next question will come from Joe Fenech of Hovde Group..

Good morning, guys..

Good morning, Joe..

Good morning, Joe..

Good.

First, Scott, on the impact of the margin this quarter, I know you talked about it couple of times, but how much specifically was the pre-investing an issue in terms of the negative and how much was just marginably through the legacy business be at the ballpark?.

Yeah, I do, Joe. It’s down 11 basis points. I would assign 7 basis points of that to the pre-investment decision and I would use 4 as the core reduction. Without getting too mathematical to Joe, which is always my risk, the quarter has an additional day and so that actually moves the number versus the second quarter and first quarter.

But I think yes, 7-4 split, I think comfortably with..

Okay. And thanks for the detail on the energy exposure.

Just building on that last question, how much of the $71 million is criticized or classified at this point and what’s your expectation guys for how this portfolio performs at six months from now oil prices are flat with the current level?.

Joe in terms of that, again the $71 million of exposure, of which only $35 million is actually outstanding, lot of this is operating-wise for the contractor side of the business, but that is the loan asset that is criticized today within the pool.

And I think our expectations will be completely based upon production expectations relative to the drillers. We like the portfolio that we have relative to other sources of cash. We like where we’re from the collateral position with this portfolio. So we think we have bought the set of partners.

We will acknowledge it’s a difficult for somebody to very quickly react their business to afford your 50% or 60% drop in utilization, field equipment to a transportation equipment which is the answer what we’ve got with this one asset..

I think, Joe, okay. If you look Joe at that list of customers, several of the largest, I think including the two or top three largest of those customers are pipeline and related infrastructure credits, those companies are still doing somewhat better because the pipeline activity continues.

It’s really more of the drilling-related activity, that’s deteriorated. So just a little more color that the larger credits we have were in the pipeline related space. But I think it’s clear there are many fewer drilling rigs in at least the Mark were in down there, the Marcellus Shale right now than there was six months ago.

And I think if that continues and oil prices continue to be low and drilling continues to be slow, I would expect that there are many other credits in that portfolio that could deteriorate from where they are at right now.

I think on the other hand, if it’s oil prices won’t back up and that additive for natural gas as well, I think drilling will resume and that would be helpful. So I think some that just a function of the direction the market moves and the duration of the downturn drilling activity which is possible to predict..

And on that note, Mark, what are some of the larger, couple of larger relationships you have in terms of the size and are those ones that you feel among the most comfortable with of those 24 relationships or are those kind of included in that group of ones that you’re kind of watching?.

Yeah, I think there is 14 relationships, they have total exposure of more than 1 million and couple of those the largest are the pipeline contractors that have above $23 million of the total related exposure, but I believe the outstanding are those are they maybe zero, I am not sure about that.

The outstanding are actually low, though the total potential exposure is high. So as I said the bigger credits or the pipeline contractors, we have some construction stalling quarry related credits that’s another $16 million in total potential exposure. Again, the actual outstanding are about half of what the exposure is.

And the rest of it is smaller things that are again water haulers, fuel companies and there is a couple that are, I think two credits that are hospitality related or the quick out. So that’s kind of I guess a brief summary of the majority of the portfolio..

Okay.

And do you guys have anything that you consider to be ancillary exposure to energy that you’re also watching like any CRE for instance in and around the Marcellus that’s kind of popped up in recent years to support kind of the boom?.

The only thing that I would throw in that category, Joe, would be the two hospitality credits that we have. The total exposure is about $7 million. Those were built in anticipation of the drilling activities. The credits have extremely high alternative sources of repayments for us in terms of guarantees and liquidity/network capacity of the guarantors.

So it would just be those two and we are unconcerned at this point and I would expect we will remain unconcerned about those two credits..

Okay. And last one for me guys. The Oneida deal is obviously delayed than was initially planned.

But does that potentially in your minds also push out the timing of the next potential deal, or could we see you possibly follow-up with another transaction quickly on the heels of this one? Or would that not be something that you wouldn’t even considering doing just given the closeness of when the Oneida deal were to close?.

Yeah. I think, we expect the approval of the closing will have in reasonably efficient order here and we are -- as I said very well, we are triggered operationally to execute that has been very good integration team work with our folks and their team as well.

So, we are fully positioned to execute out on the transaction at this point, which again we expect will happen in reasonably short order. However, with that said, we also soften and we have in July.

But we also understand in the environment we are in, a protestor transaction goes through a separate level of review by our principal prudential regulators. And they have a process they go through and they are conducting that process and we are cooperating fully. And again, we expect approvals before the end of the year.

So, we are fully prepared to execute on Oneida. At this juncture, it would not force all us from considering any other high value annuity..

Okay. Thank you..

Thank you, Joe..

Thanks, Joe..

The next question will come from Alex Twerdahl of Sandler O’Neill..

Hey. Good morning.

Could you just remind us what the timeline is for Oneida at this point, what events still have to happen before this thing can close? And then also remind us what it was that pushed it back several months?.

Sure. What needs to happen is we need to finalize regulatory approval, which we expect as I said will happen before the end of the year and then we close out the transaction. So, what pushed it back was during the public comment period, which is part of the regulatory approval process.

There was a protest filed relative to, I guess you call fair lending related issues. Because the transact was protested, it puts us into a different level of review, which needs now to go to the Washington office of the OCC for review and they have a process that they go through a program to review any transaction that’s been protested.

So, we initially thought we would close the transaction in July, which was a historically reasonable timeframe for us based on the February announcement. And subsequent to the protestors went to the review process which is a more elongated process in Washington and so that’s what necessitated the delay in the closing.

Was it related to fair lending practices at community or at Oneida? And is there a lesson that can be learned here, or is this just something that is to be expected in any deals these days if someone decides to file a letter?.

Well, the protestors’ comments were public and your response is public and the basis of his claims were fair lending related and they were entirely inaccurate. But needless to say, it is that consequential to the process, which is if you have a protestor transaction it goes to Washington for his problematic review.

And so we are in the midst of that problematic review currently..

Okay.

And then based on the pre-funding strategy that you have done here from Oneida, what should we expect the margin to do after the deal closes? Should it be -- I mean, should we have a pretty core margin in the fourth quarter to be able to model into 2016, or is there going to be some sort of a shift obviously, purchase accounting aside?.

Alex, I will go with this, just to say that we are at a 365 level, with essentially the leverage of the transaction already being in our P&L and our margin results. So if you think about what we are going to inherit from Oneida is little over $500 million of lending assets.

At yields little bit above 4%, we will replace the funding that we’ve got on an overnight basis with core deposit funding that’s actually lower than the borrowed funds that we are using today for not only the strategy but to fund the rest of the core balance sheet. So, I think the number doesn’t mode a whole lot just based on that.

Now that being said, Oneida operates in the same markets that we operate in. So the modest headwinds associated with that, that repricing will continue to exist for their and their balance sheet much like they exist for ours..

Okay. And then just finally on new indirect auto production.

Can you just tell us what the rates are today relative to a year ago?.

Scott’s got that in front of him. But Alex, I’m going to tell you that I think the blend degrades are about 375 and they are a little bit lower than the third quarter of last year but actually pretty consistent with the first two quarters of this year..

Yeah. The most recent third quarter, 381, the quarter before was 367, quarter before that was 368, quarter before that was 370 and then the third quarter of ’14 was 361. So, they have actually been over the last four, five quarters in the 360 to 370 range but we did -- we moved up to 380 for this quarter.

And just another data point on the margin is something that we like to look at is by portfolio, what is the yield of the originations in that quarter relative to the yield of the overall portfolio.

And so if you look at all of our portfolios right now and walk us through all the details., but in summary, the consumer portfolios we have, the consumer margins, home equity, auto lending, direct branch lending, all the consumer channels.

The third quarter yields of the originated credits were above equal, give or take a few basis points to the overall portfolio yield where we’re still experiencing a meaningful differential between originated yields and portfolio yields on the business lending side.

So for the third quarter, our originated yields were above 50 basis points below the blended yield for the portfolio for the quarter. So, we’ve kind of stabilized on the consumer lending side, on the commercial lending side still, I think everyone knows a highly competitive in terms of a rate environment right now.

And so we would expect that it will continue to be differential between the portfolio yields and the originated yields on the commercial portfolio. We’ll probably continue to see some decline in the yield on the commercial portfolio into 2016.

Worth adding to that though is the fact that there is certainly a much larger proportion of commercial relationships that are originated at variable rates, or index space outcomes as opposed to the lion share of our consumer portfolio that gets originated at a fixed rate..

That’s extremely helpful. Thanks guys for taking my questions..

Thanks, Alex..

Thanks, Alex..

And our next question will come from William Wallace of Raymond James..

Good morning, guys..

Hey, Wallace..

Good morning..

I have one, just an additional question on margin, not to beat at that horse. But if you look at the combined organization and you assume that we get a 25 basis point hike from the fed and then a pause.

What do you anticipate would be the -- would happen with your margin?.

It’s actually about net neutral, Wallace. Under the premise of -- at a 25 basis point hike was a pause, we will have certain instruments that are index based or so we’ve got -- assuming the underlying indexes whether it’s LIBOR or prime actually move with the change. So, we would actually have more assets that would reprise in that first 25.

And without given away a secret, we wouldn’t expect to raise deposit rates much in the first 25. So, I think we’ve actually said in the 25 was a pause. It actually got a modest benefit. It probably would not move the needle relative to EPS generation but it would probably be a net positive..

Okay. And then just for clarification. I know you’ve given a lot of numbers and direction on margin, but I’m not sure I’ve heard a number of the actual pressure you expect. You had mentioned that you were expecting two to four a quarter on core.

Is that what you expect moving forward, assuming a flat rate environment two to four?.

Yeah. I can go with that, Wallace. That’s been history and that’s probably what we’re using for one to five quarter type projections for us right now. Understating that as we just went through the detail on the lending side that we have a larger than average investment portfolio.

And if we’re going to fully redeploy our cash flows of that, there is still the challenge out there to put the same type of quality assets on the books at existing yields..

Okay. That’s helpful. And all my other questions have been asked. So, thanks, guys..

Thanks a lot Wallace..

Our next question will come from Matthew Breese of Piper Jaffray..

Good morning, guys..

Good morning, Matt..

Good morning, Matt..

Can we just touch on the expense space? With the combined institution with Oneida, could you remind us of the cost saves and give us some idea of where you expect the quarterly expense run rate to shake out?.

Well, Matt, in front of me, I do not have the combined quarterly number for that. But let me start with this that from a practical standpoint, the third quarter for us had a $56 million run rate, as I said before, is a pretty reasonable place to start with in terms of our longer term expectation.

Now as you know, we are the play of seasonal outcomes in our foot prints, which means that we get a little bit more expensive when we turn the heat on and we get a little bit more expenses when we fall the snow, which means our utility and maintenance cost kind of right up $0.5 per share in the fourth quarter, go another $1.5 in the first quarter and then start to take a backup for the second quarter.

So as it relates to our general operating environment, we have to keep this date in the third quarter of every year. Now blending in the Oneida outcome, what we’ve said is that looking up Oneida’s base today, we expected about an $8 million cost save off their run rate and again, in front of me I don’t have what that is.

We’re still pretty comfortable with be able -- being able to deliver that kind of synergy-related or redundancy-related expense save as we move into the transaction despite the delay and actually we probably hold our estimates a little bit better as to where those are, but so no difference from that.

The comment I made earlier relative to we redeploy -- since we -- pre-invested the $300 million their portfolio, we’re have to have enough to the transaction closes as now you have the rest of the revenue generation activities of their enterprise, both banking and non-banking, and you have the expense structure associated with both banking and non-banking, and remind everybody, we have to issue the shares.

So we will have our expectation of 2.4 million shares to be issued. So, certainly, we are still thinking that we will have accretion above just before redeployment of the securities. But it’s probably not likely to be material for the first couple of quarters after we close..

Right. Okay. And then just thinking about your overall size combined, closer to $8.5 billion, closer to that $10 billion mark.

Do you expect there will be any sort of expense growth acceleration as we approach the $9 billion or $9.5 billion mark and eventually being subject to the DFAST Stress Test and CFPP and all that come to with that?.

Yeah. I think that’s a fair question, Matt. At this juncture, we don’t expect a material acceleration of operating expenses related to our work towards the $10 billion level. We’ve already begun the resources investment and the investment in the DFAST.

We’ve already begun our investment in the systems and processes around improving BSA/AML when incompliance. So I know I think it will be marginal. The incremental costs will be at the margins. I don’t think it’s going to be millions of dollars of additional expenses that are going to jump out.

I think it will be marginal and it will be incremental and it will be accumulate over the course of the next probably couple of years as we trend further towards the $10 billion mark. But I don’t think you are not going to see anything that’s going to jump out, that’s going to be a surprise.

The significant matter in my mind is beyond addressing DFAST and what we think are increased expectations around compliance BSA/AML those kinds of things is really the impact of after event.

And so that’s kind of the greater strategic challenge for us which we do expect a fair bit of time at the board level and the senior management level addressing what those specific challenges are, what the alternatives and pathways for us to hurdle that issue without impairing value to our shareholders. So, I think we are in a pretty good shape.

But to circle back your question we do not expect any the occurrence of the significant expenses that are going to jump out at you, they will be marginal and incremental..

Right.

And then just on the Durbin, do you have the combined revenue figure at reach with yourselves and Oneida?.

I think if you called it slightly. I think it’s a run rate down, you said, okay, we’re going to be figure. So we are going to pick up as we get to be more than 10 billion, and now you took the haircut off that. I think if you used 8 million, you would be in the neighborhood give or take..

Great. That’s all I had. Thank you very much..

Thanks Matt..

Thank you, Matt..

And our next question will come from Ryan Strain of Guggenheim Securities..

Hi, guys..

Good morning, Ryan..

Hello, Ryan..

Quick question on the capital you guys have.

Are you considering any buyback after the completion of this Oneida deal?.

We do have authorization outstanding which we’ve had as a matter of just good discipline over the course of a number of years. I think we have not used that since the first quarter, I believe, right, Scott..

Yeah..

When we bought back I think it was a couple of hundred dollars of shares. At this point, we don’t have any specific plans to use it or not use it. As you observe we have very strong capital levels.

In fact, we have what we consider to be excess capital levels if you look at our balance sheet and what we think an appropriate, prudent level of capital should be against our balance sheet, at 10% plus tier 1 leverage. We have more than we need.

And so the question is, how much more? We are going to be deploying, some of that would be Oneida transaction which is 60-40 cash stock mix. So we will be deploying some of that capital as part of the cash component of the Oneida transaction. And we will look for other opportunities to deploy that capital as well.

We have our history of increasing our dividend which we certainly at start will continue or at least hold to continue. Head start is the right word. So for further not divide that stock, I mean, I think we -- I will prefer to use it for constructive reason that can help create sustainable and growing earnings capacity for shareholders.

I think our shareholders expect us to use that capital to create growing return capacity, whereas stock buyback -- the capital is gone and you are not going to any growth out of that. Let’s say, the one-time benefit to shareholders, for sure, that benefit number never improves where if you deploy the capital.

In the M&A fashion, organic growth, any kind of grow fashion, maybe a non-banking businesses which have -- we’ve invested in and they’ve grown nicely. You have the capacity to grow that benefit. So, I think our profits will not be to do a stock buyback.

I always kind of like doing small buyback like we did in the first quarter just to clean up overtime some of the dilution from equity programs and incentive -- equity incentive programs to the light.

But at this juncture, I think our shareholders will prefer we invest in the business and provide an opportunity for us to grow that capital benefit as opposed to take a one-time benefit for shareholders which doesn’t have the capacity there to grow overtime. So, that was the answer to your question looking for..

Okay. Yeah, yeah, that’s helpful. Thanks guys..

Thanks Ryan..

Thanks Ryan..

And it does appear we have no further question at this time. [Operator Instruction].

Wonderful. Thank you, Shannon. Thanks everyone for participating today. We look forward to speaking again in January. Thank you..

And that does conclude today’s teleconference. Thank you all for your participation..