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Financial Services - Banks - Regional - NYSE - US
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EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2017 - Q2
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Executives

Mark Tryniski - President & CEO Scott Kingsley - EVP & CFO.

Analysts

Alexander Twerdahl - Sandler O'Neill & Partners Matthew Breese - Piper Jaffray Russell Gunther - D.A. Davidson Jake Civiello - RBC Capital Markets.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Community Bank System Second Quarter 2017 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 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. Please go ahead gentlemen..

Mark Tryniski

Thank you, Paula. Good morning everyone and thank you all for joining our Q2 conference call. It was a very productive quarter for our team with our first full quarter of Northeast Retirement Services, which closed in February, and with the May closing of the Merchants Bancshares transaction.

Scott will provide more detail on the financials, but in summary we are highly pleased with Q2 performance with earnings per share, excluding acquisition expenses, up 14% over 2016, and earnings per share, excluding acquisition expenses and amortization, which will consider a proxy cash earnings, up 22% over 2016.

This acceleration in earnings and dividend capacity is principally the result of NRS and a half quarter of the Merchants transaction, both of which we expect to be firmly accretive to earnings generation in the future. Supporting this earnings performance was improved expense leverage, credit quality and organic growth in noninterest income.

The integration of merchants is nearly complete and went quite smoothly. Cost synergies [indiscernible] and business performance has been strong with deposit and loan retention through July 27 up 97% and 99% respectively. For the remainder of 2017 we will continue to focus on NRS and Merchants as well as growing our organic business.

In addition, we are ahead of schedule with the [indiscernible] of our DFAST efforts, which should be completed in Q3. As I said last quarter, he past 12 months have been very productive for our company and for our shareholders. We discussed frequently with our shareholders in 2015 and 2016 the strategic investment of excess capital.

We could not be more pleased with the execution of our partnerships with NRS and merchants, and particularly the double-digit step up in per share earnings and cash flow being generation.

One quarter does not a trend make but we are very pleased with the company’s operating profile in the current and expected future strength of earnings and dividend capacity.

Scott?.

Scott Kingsley

Thank you Mark, and good morning everyone. As Mark noted, the second quarter of 2017 was another very solid operating quarter for us and again as a reminder included a full quarter of the activities of the NRS acquisition we completed in early February and slightly over half of a quarter results from the Merchants completed on May 12.

I’ll first cover some updated balance sheet items. Average earning assets of $8.68 billion for the second quarter were 13.5% up from the second quarter of 2016 and 12.4% above the first quarter of this year, reflective of the mid-quarter acquisition of Merchants.

On a year-over-year basis, residential mortgages and home-equity instruments grew 2.3% organically as the company continues to sell most of its longer-term secondary market eligible originations. Consumer indirect loans were up 6.5% from the end of the second quarter of 2016, but only up modestly from the end of the first quarter of this year.

Although our net charge-off and delinquency results in this portfolio continue to be excellent we have generally seen some consumer credit erosion compared to last year in the application process.

Excluding the Merchants acquisition, business loans were down from the year ago levels reflective of a number of outside unscheduled payoffs, but up modestly from the end of the first quarter. Quarter-end investment securities were higher than the end of the first quarter a result of the Merchants acquisition.

Average quarterly deposits were up $920.5 million year-over-year in the second quarter of 2017 also reflective of the Merchants transaction and continued [indiscernible] in core deposit. The second quarter of 2017 was again a continuation of the favorable overall asset quality results that we have come to expect.

Second quarter net charge-offs of $1.1 million or 0.08% of total loans were down $0.3 million from the second quarter of 2016, but also down from the 16 basis points of loans we reported in the first quarter of this year.

Non-performing loans comprised of both legacy and acquired loans, ended the second quarter at $22.9 million or 0.36% of total loans, 10 basis points lower than the ratio reported at the end of March and certainly benefited from the addition of the Merchants loan portfolios.

Our quarter ended June 2017 reserves for loan losses represent 1.01% of our legacy loans and 0.75% of total outstandings with the addition of the Merchants loans. Based on the most recent trailing four quarters results, our reserves represent 7 years of annualized net charge-offs.

Despite multiple reports of macro level auto industry concerns, the first half of 2017 net charge-off ratio in our auto lending portfolio was under 30 basis points of average loans, consistent with the previous eight quarters, and still favorable by longer-term historical standards.

As of June 30, our invested portfolio stood at $3.15 billion and was comprised of $581 million of US Agency and agency backed mortgage obligations or 18% of the total, $548 million of municipal bonds or 17%, and $1.93 billion of U.S. Treasury Securities or 61% of the total. The remaining 4% was in corporate and other debt securities.

The portfolio contained net unrealized gains of $55 million as of quarter-end, compared to a net unrealized gain of $165 million at the end of June 2016, due to the meaningful movement up in market interest rates during the last 12 months. Our capital levels in the second quarter of 2017 continued to be very strong.

The tier 1 leverage ratio was 10.19% at quarter-end and tangible equities and net tangible assets ended June at 8.08% after the closing of the Merchants transaction. Tangible book value per share was $16.21 per share at June 30, and included $77.1 million of deferred tax liabilities generated from certain acquired intangibles or $1.53 per share.

Shifting now the income statement, our reported net interest margin for the second quarter was 3.72%, which was up 7 basis points from the linked first quarter and 1 basis point lower than the second quarter of 2016.

Consistent with historical results, the second and fourth quarters each year include our semi-annual dividends from the Federal Reserve Bank of approximately $600,000, which added 3 basis points of net interest margin to our second quarter results.

In addition, we recorded approximately $900,000 of incremental purchase loan accretion compared with the second quarter of 2016, which added just over 4 basis points to net interest margins.

Proactive and disciplined management of funding costs continued to have a positive effect on margin results as total deposit costs in the quarter remained at 10 basis points, including the added deposits from the Merchants transaction. Despite three debt funds rate changes in the last seven months, our deposit data has remained at zero year-to-date.

Second quarter basic non-interest income was up $1.5 million from the second quarter of last year, reflective of the Merchants transaction and [indiscernible] improvement initiatives.

It's from our benefits administration, wealth management and insurance businesses of $33.2 million were up 11.0% from the second quarter of last year, and included the NRS and Merchants transactions, as well as three smaller insurance agency acquisitions completed earlier this year.

Second quarter 2017 operating expenses of $80.0 million, which exclude acquisition expenses of $22.9 million or $4.3 million above the second quarter of 2016 and included a payer of partial quarter of operating activities from the Merchants transaction and the first full quarter of NRS results, including significantly higher intangible amortization that resulted from the two acquisitions.

We have continued to invest in improving our infrastructure and systems, including those around the requirements of DFAST as we have officially gone through the $10 billion asset size threshold.

Our effective tax rate in the second quarter of 2017 was 31.0% versus 32.7% in last year's second quarter and included a $300,000 reduction in income tax expense related to the change in accounting for share-based transactions. Excluding that change, the core effective income tax rate would have been approximately 32.3% for the quarter.

Looking forward, we continue to expect Federal Reserve Bank’s semi-annual dividends in the second and fourth quarter of each year.

Our first half of 2017 net charge-off results were again manageable 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.

Our core operating net interest margin has remained in a fairly narrow band over the last several quarters, a range we would expect to operate in for at least the next few quarters, including the impact of somewhat higher purchase loan accretion related to the Merchants transaction.

The third and future quarters will reflect the full impact of the Merchants operating revenues and expenses as well as reflect the full impact of the additional shares were issued as part of the transaction.

Tax rate management for the foreseeable future will continue to be subject to the successful reinvestment of our cash flows into high quality municipal securities, which has been a challenge at times over the past couple of years.

Our continued growth in income generation from fully taxable sources will continue to push our effective tax rate higher barring any legislative changes to corporate tax rates. We continue to expect a net reduction in government mandated impacts on [indiscernible] revenues beginning in July of 2018 of between $10 million and $11 million annually.

In summary, we believe we remain very well-positioned from both a capital and an operational perspective for the remainder of 2017 and as Mark mentioned look forward to continuing to execute on both our acquired and organic improvement opportunities. I’ll now turn it back over to Paula to open the line for questions..

Operator

Thank you. [Operator Instructions] And our first question will come from Alex Twerdahl with Sandler O'Neill..

Alexander Twerdahl

Hi, good morning guys. .

Mark Tryniski

Good morning Alex..

Alexander Twerdahl

First I was just wondering if you can give us a little bit more color on the fee income trends we saw in the second quarter, specifically is there anything that seasonality wise are more – contributed a little bit more in the second quarter or anything that is nonrecurring or should we kind of think about it going forward as taking that 51.2 million in the second quarter, adding a little bit more of a full quarter’s impact of Merchants and that is kind of the right run rate into the future?.

Mark Tryniski

Sure. I will take a shot at that. Absolutely, the second quarter we typically generate about a $0.01 a share or more in deposit service revenues with more activity relative to our customers account structures, just more opportunity for transactional-based outcomes.

So historically we spend about $0.01 per share difference in deposit service revenues in Q2 versus Q1. That trend will stay pretty close to Q3 and Q4, and typically fall back in Q1 of the following year. You hit on the head relative to we should get a full quarter impact of Merchants in the deposit service fees line.

Merchants also had a pretty strong trust business. So we will pick up a little bit more income on the wealth management side from a revenue standpoint in Q3 from a full quarter standpoint.

That being said, our insurance business has been seasonally better in the first and the second quarter compared to the third quarter, and has picked up a little bit more in the fourth quarter again, again just sort of the seasonal timing of renewals and those types of things.

On the employee benefit services side, NRS was in our numbers for three months in the second quarter. So I think that [indiscernible]. That business is growing very well. The underlying core [BPS] business is also growing but probably at a lower single-digit rate on an annual basis.

So I think our trend line there continues to expect that, but I think you framed it fairly well, with the exception of the banking noninterest income side of the Merchants contribution of $51.2 as a trendline to work off from is a pretty good number..

Alexander Twerdahl

Okay, thank you for that.

And then if we exclude Merchants from the loan numbers, did loans grow or they are down a little bit sequentially in the second quarter?.

Mark Tryniski

In the second quarter, the loans grew. It was about one half of 1%. So they were up about $20 million. Business lending was up, consumer mortgages were up. Home equities were up a little bit. The growth in the auto was actually positive in the second quarter, but certainly less than the run rate of that business.

We are starting to see a cost deterioration in the quality application flow as it relates to loan-to-value, extended terms like [indiscernible] kind of things, and also the economics of the business given the move-up in rates. The auto business hasn’t responded accordingly. So we have changed our credit standards.

The penetration has declined because of the quality of application flow there. So we were up a little bit in the second quarter. Not as much as we typically are. Usually the second and third quarters are pretty good for us. While we did have some growth in the commercial as I said in the mortgage business as well..

Alexander Twerdahl

Okay. And then just to follow up on that question, I know Merchants had some of that municipal finance business that was usually seasonally very light. I guess it ends the second quarter at a low point for the year.

Are those trends going to continue with you guys where that whole portfolio kind of declines by $50 million until the end of the second quarter and then rebounds meaningfully in the third quarter?.

Mark Tryniski

We did experience that Alex, and it is the same. Just the nature of municipal lending, and [indiscernible] 6/30 timeframe, where the 6/30 quarter ends kind of seasonally or year-end, or year balance loans. So we did get that 55 million to 58 million of run-off in the second quarter.

Most of that is closed acquisitions and we would expect most of that to come back on the balance sheet in the balance of the year, and we think about 60% to 65% of them are going to come back in the third quarter already.

And then what does come back is we usually we see some deposit balances or some repo-related funding outcome that our municipal related also come back for the balance of the quarter..

Alexander Twerdahl

Great. Thank you for taking my questions..

Mark Tryniski

Thank you Alex..

Operator

And moving on, we will go to Matthew Breese with Piper Jaffray..

Matthew Breese

Good morning guys..

Mark Tryniski

Good morning Matt..

Scott Kingsley

Hello Matthew..

Matthew Breese

I just want to talk about the margin and make sure I had all the pieces correct.

So this quarter included the Federal Reserve dividend, and that was roughly 3 or 4 basis points, and then excluding that we are going to remain kind of where we are for the time being, is that accurate?.

Scott Kingsley

I think so, and I think that the net results Matt of – of the purchase loan accounting mark. We had a credit mark. Everybody has a credit mark, and then we had an interest rate mark that also went in the same direction. So we are creating a slightly higher mark than we probably modelled.

And I think a lot of that is remember we modelled this transaction 9 to 12 months ago, and we have had three credit funds rate changes since then. So certain of your portfolios have been impacted from a market value standpoint by having a higher baseline rate.

We actually created – it is safe to say we created a higher customer deposit intangible because funding costs in theory at the wholesale level were higher than they were a year ago. So, I think [indiscernible] we again will probably be telling people what purchase accretion is on a quarterly basis now.

In our other transaction, it has really never been margin, I would bother mentioning. These credit marks have been so slight or the interest rate marks have been non-existent for [indiscernible] the interest rate mark was a positive. So, really haven’t had to mention it, and we will continue to mention it.

Again we think we look at it as being a significant change, but it did help dissipate what could otherwise be a combination of margin erosion that we can kind of send sort of telegrpahings to people to the point where I think we feel very comfortable that we can stay in this sort of 360 to 370 range for at least next three or four quarters until you start to see any kind of pressure about [indiscernible]..

Matthew Breese

And then, the $900,000 of purchase accounting this quarter, knowing that Merchants was only around for half a quarter, how do you expect that to trend next quarter, will it be double that per se, or double that minus a little bit because these things tend to wind down quickly? How would you model that?.

Scott Kingsley

Yes. I would have guessed [indiscernible] that we would have been closer to something that was around $0.5 million a month. So we ran ahead of our expectations for the second quarter, but that being said the instead of $900,000 we think the number could be 1 million too in the third quarter.

For a full quarter impact absolutely we do, as a general rate. You are subject to the cash flows of the acquired portfolio, and so if your cash flows run a little bit faster, your accretion kind of moves ahead of our contractual expectations [indiscernible] some of the other portfolios, maybe a little bit.

So that’s how we sort of get that benchmark as we hedge into the third quarter..

Matthew Breese

Okay that’s very good. And then, on the expense front again given Merchants, it was only around for about half the quarter, but you did say expense saves were coming ahead of schedule.

Could you just give us a sense where – for next quarter total expenses with everything you see today?.

Scott Kingsley

Yes, let me take a shot at that, and again, we’re very pleased with where we are from a cost synergy standpoint with Merchants. And a piece of that if you remember we had some discussions about Merchants first quarter operating expense was very, very low for demand on a construct basis.

Some of that relates to the facts that [indiscernible] to be displaced post acquisition some [indiscernible] less Merchants earlier in the year.

But now using sort of a $49 million to $50 million quarterly run rates for salaries and benefits using roughly $32 million to $33 million of quarter run rates of all other expenses with the exception of utilization of intangibles which I think you should use $5 million of quarterly amortization now that we have full quarter impact of the NRS customer less intangible which is giant and fourth quarter CVI that we create as part of the Merchants transaction.

For you and for others at $5 million that’s roughly $0.25 or $0.26 per share of intangible amortization each in every year, again as we said before, we’ve set the proxies for correct and future business capacity..

Matthew Breese

I guess, I had to pull on that thread a little more.

You guys historically have increased the dividend each year by penny or two pennies, given what you just said, thinking about the next dividend increase; could we accelerate beyond the typical run rate?.

Mark Tryniski

It’s Mark, Matt. That’s a discussion that we’ve with the board that already fall typically September so I expect we will have that again. July we’ve historically raised the dividend annually by a penny or two in fact, this would be the left fund for years.

We certainly have capacity to continue to raise the dividend and will have that discussion with the board in a month or two. As I said earlier one quarter is not a trend there, but we feel pretty good of where we’re at and the sustainability of the earnings and particularly the cash flows of the company at this juncture.

So we certainly have by virtue of NRS and Merchants accelerated our dividend capacity, but that’s – we actually have looked at it.

Yes, we need to also see where our capital levels play out ultimately because the second quarter capital levels with the addition of Merchants are little bit skewed by the fact that you’ve half a quarter of what you’ve adjusted. But the capital is value at point in time.

So a little bit more decline in our tier 1 leverage ratio from having something to – something we expect next quarter. We take all that into account but certainly in terms of the cash flow per share we’re generating right now at $0.73 a share compares quite favorably to the $0.70 we’re generating a year ago this time we also as I said repeat that.

Somewhat will happen and the sustainability of that cash flow so that will certainly be part of the discussion with the board here in a couple of months..

Matthew Breese

Right.

But despite the decline in Q1, you don’t see a need for additional common equity, correct?.

Mark Tryniski

No. We’re, I mean, that said, it tends us even at [indiscernible] whatever goes to that’s still plenty of capital.

Particularly our balance sheet and the – balance sheet and working capital from a risk based perspective we’re not that comfortable with all running – something but in capital, in fact, because of the earnings level and new we’ve [indiscernible] of the account, we’re trying – we’re going to accrete that capital pretty quickly, regulatory capital by virtue of – to a greater degree that we need to capitalize organic growth, intangible capital by virtue of the – not just areas but also the amortization of intangibles.

So we will accelerate, we will recapitalize that but I’ll combat as capital evolution very quickly over the next four to eight quarters..

Matthew Breese

Right that’s what I figured, okay.

My last one is just around the pipeline, the loan pipeline, it’s a long growth towards the back half of the year?.

Mark Tryniski

Right now the loan pipeline is okay, it’s back right, it’s typical I think for this time of the year. On the commercial side about adding in Merchants and Merchants prediction this quarter was a little bit [indiscernible] not the balance but the pipeline was a little off.

We made efforts to get a lot of things through the pipeline prior to the closing and we weren’t certain about how quickly they were going to build that after we combine. So, they push lot of things through and it may close.

So they need to rebuild that pipeline little bit, in total in spite it’s not up, it’s not down it’s probably where it ought to be right now for this time of the year.

The mortgage pipeline is off a little bit over where it was last year but we did have organically our growth in the mortgages last year second year, this year second quarter was about 28.5% little over.

So that’s pretty typical of our mortgage business with the pipeline a little off from last year, but it’s not bad in part of the regions that there are inventory shortages in a lot of markets. We just start the homes for sale that there needs to be to generate a pipeline that would be above average at this juncture.

But I think I commented on the other lending business and we expect our originations to slow down a little bit going forward given what we’re seeing in the market, in the economics..

Unidentified Analyst

Okay that’s great that’s all I had. Thanks for taking my questions..

Mark Tryniski

Thank you..

Operator

Next we’ll hear from Russell Gunther with D.A. Davidson..

Russell Gunther

Good morning guys..

Mark Tryniski

Good morning Russ..

Russell Gunther

I appreciate your comments on the margin, I just wanted to circle there if I could. So sounds like three basis points from the dividend and four from purchase accounting that’s what accounted for roughly the 7 bips quarter on quarter.

Maybe just isolating for the March rate hike then what impact that had on the margin this quarter and whether or not you would expect June to be any more or less accretive?.

Mark Tryniski

It was pretty modest for us on net fees. The problem we – what happened is the small amount that we would have picked up in terms of net interest income generation and therefore margin support was offset almost wholly by the fact that the yields coming from the Merchants portfolio were modestly below the core yield.

So that’s why I don’t think you saw anything incremental to that in that quarter we have that more opportunity coming out at the June ones with the second quarter, I would say, I take a bit more of an opportunity but that being said, the full quarter impact of the Merchants funding costs would actually push our deposit funding costs above 10 basis points for the first half in four quarters.

So, remember the size of the deposit base versus the size of the assets that we re-price is probably significantly larger. So in other words, the movement of one basis point on almost million dollar core deposit base versus, a simple basis point in variable rates, commercial and variable rate [indiscernible].

So we are not projecting a ton of positive impact of that but you would have been right for the second quarter we did pick up a modest pickup.

Russell Gunther

Okay. I appreciate the color there. And then similarly, comments on the expense base could you just remind us I know you walked us through where third quarter could shake out.

But we be through cost saves at that point or is there some ability to pick up not additional sales but just kind of where we will stand at the end of the next quarter as it relates to Merchants cost saves?.

Mark Tryniski

Yes, I think we will be prudent, again I think the people related cost we’re actually, got it calibrated faster than we probably had our original projection. So it means the onus is on us for the third quarter to push through some of the other system related items [indiscernible] to get some processing leverage to that.

But I will say Merchants were the fairly efficient bank for $2 million bank, so there are certain neat spots that we’ve looked at adding resources in terms of commercial and consumer support for markets where we think that there are outside opportunities for us to continue to expanding product so that I wouldn’t significantly more..

Russell Gunther

Okay, great. Thank you for that.

And then, last question kind of heard you loud and clear on the loan pipeline but maybe just help us understand sort of where we are going to look to see some additional loan growth, are there pockets of strength and geographically within sub markets as well as within some of your different loan buckets that you kind of drive that low to mid single-digit organic growth?.

Scott Kingsley

Sure. I think, I will start with the commercial portfolio, the second half of the year it should be better for us than the first half of the year, we expect that to be the case.

I think the opportunity is for that to come from different geographies that we are in better numbers – and in the Northeast it was only so much to distinguish one market from another but some get half the periods of time and grew off little bit just in terms of the flow of demand.

So I’m not suggesting that there is any one of those particular markets that will – it will be the source of outsized growth, but we would expect to grow the portfolio between now and the commercial portfolio between now and the end of the year.

The mortgage portfolio I would expect the same typically if you look back ten years it goes anywhere from 1% to 5% during the recession and the credit crisis we will still grow our mortgage portfolio.

So I mean, as a nature of just our markets that we are in and there more, now metropolitan in nature so I expect our mortgage business will continue to grow at low single-digit.

The portfolio that has the most variability in terms of its growth is obviously the auto portfolio which now is little bit over a million dollar that's been really strong market for the last eight years or so and it feels like it's towards the end of the game from what we are seeing.

There are competitors who are being overly aggressive given the economics, you start to see modest deterioration in the quality of the application flows some of the underlying metrics [indiscernible] score.

So that portfolio is much more cyclical in nature and there are times where you have a really good run in that business like we’ve had last -- here is now times where it's going to move the other direction so I would expect a slowdown in the growth of that for that portfolio going forward.

But again, I think overall I like the mix on our loan book right now a lot and I think that we have the opportunity to continue to grow in our markets with those loan books with the exception of indirect which could grow a lot below or actually shrink depending on the market low single digit.

So we got more lot color, but that’s I think is a fair description of where we’re at, what our expectations are..

Russell Gunther

Very good, that's all from me. Thanks for taking my questions..

Mark Tryniski

Thanks Russell ..

Operator

[Operator Instructions] Moving on we will go to Jake Civiello with RBC Capital Markets..

Jake Civiello

Good morning guys. Just one more question from me. From the profitability standpoint you had another quarter that demonstrated core ROA improvement. Assuming core ROA is a metric that you would target to measure your profitability.

Do you think that ratio can approach 1.5% over the next 12 or 18 months if the acquisitions mature?.

Scott Kingsley

Well that’s [indiscernible] so we will say that at north of 130 we are pretty happy with our progress relative to moving that up. I think that we continue to introduce more opportunities for non interest income growth which you certainly appreciate that is all we take more balance sheet asset to generate. I think the number will continue to move up.

Certainly over the last four to six quarters we’ve moved that number up meaningfully and the income generation from our both non-banking businesses has moved up pretty notably. So, do I think that opportunity out there, I think it is for us.

But back to Mark’s comment quarter does not make a trend that we are five months into – right now six months into NRS and two and a half months into Merchants. We would like a full quarter realize results we probably feel like we’re – we could be a little bit more optimistic [indiscernible] before we make that call..

Mark Tryniski

I do think so to look at the adjusted return that we can put at the back of the slide deck there so such as cash. Cash burdens, cash return on asset it's 145, so 150 at that metric is [indiscernible] except that just like gap, we like – certainly the economic value of enterprise which is cash flow.

So I think to take from 145 to 150 on that basis probably not necessarily unreasonable that’s not a prediction, but you said, I think we are not that far off we clearly invested a lot in our non-banking businesses that clearly then -- those have been investments which have created highly positive and differentiating returns for our company and we will continue to strategically focus on investing in those businesses to achieve greater earnings per share, cash flow per share so some of that also is a reflection of the relative growth of those non-banking businesses versus the bank.

So they typically grow a little bit at a faster pace than the banking organically.

So in essence, acquisitions that number can be greatly influenced by that and it’s clearly, greatly influence by NRS and it’s got the other, organically the non-banking businesses that have been growing pretty well organically themselves over the past couple of quarters.

So 145 we think that a good number, it’s never a loss, the whole goal is to continue to drive performance, drive earnings, drive cash flow to the higher levels per share so that’s I think on that basis the 145, 150 plus, if we do another bank transaction that has a low mix of non-banking revenues then that number can get down as well so some of it just the function of M&A over time I would suggest, but at 145 I would say we are pretty satisfying for the time being but it's never enough..

Jake Civiello

That's helpful and into that last point in terms of M&A environment both on the banking and non-banking side, specifically the non-banking side, are you find that as the size and scale of the different businesses increases that you are seeing more opportunities potentially materialized?.

Mark Tryniski

I would say the flow of potential look is about the same Jake at this point. And that not a lot difference I know, a lot of it’s for several years now that private equity parts have been interested in that space.

So there is competitive forces there that frankly put us at a slight disadvantage in many respects as public companies with regulated capital requirements.

But that's not the case for several years, I would say there has really been much different I think that we’ve had a couple of [indiscernible] attention we have got by virtue of that transaction that may or may not ultimately yield the other opportunities.

But I would say it has substantially increased the overall opportunities in that space as of yet..

Jake Civiello

Alright, thank you..

Operator

And gentlemen there are no further questions, I’ll turn it back to you for any additional or closing comments..

Mark Tryniski

Thank you Paula, and thank you all, I appreciate you joining, again look forward to our Q3 call. Thank you..

Operator

And it does conclude today's conference. We would like to thank everyone for their participation. You may now disconnect..

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