Community Financial System, Inc. Third Quarter 2026 Earnings - COMMUNITY FINANCIAL SYSTEM INC

Good day, and welcome to the Community Financial System, Inc.'s 3rd Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star than 2. Please note that this event is being recorded and discussion may contain 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. These statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed. Refer to the company's SEC filings, including the Risk Factor section, for more detail. Discussion may also include references to certain non-GAAP financial measures. Reconciliations of these non-GAP measures to the most directly comparable GAAP measures can be found in the companyís earnings release. I would now like to turn the conference over to Dimitar Krivonov, President and CEO. Please go ahead. Thank you, Chloe. Good morning. Thank you for joining us today. Our company performed very well in the third quarter. As expected, our results accelerated with operating diluted earnings per share increasing 16.5% year-over-year and 9.5%, quarter-over quarter, representing our sixth consecutive quarter of record results. Record revenues and profitability in banking, record revenues and profitability in insurance services, record avenues and profitability and wealth management services. Solid revenue performance in employee benefit services, which was challenged by elevated expenses due to startup legal costs associated with a number of new fund launches in our collective investment trust business. A couple of items of note. Wealth management revenue was up 41% year-over-year, and pre-tax earnings were up 42%, driven by both very strong organic performance and the addition of ClearPoint. We remain very excited about the opportunities ClearPoint is providing us, and we are already seeing tangible client cross-service opportunities with banking. Insurance services revenue was up 8.9% year over year, while keeping expenses basically flat, resulting in pre-tax earnings growth of 41%. As previously mentioned, DM&A activity is really strong, and these results do not yet incorporate the more sizable opportunities we're working on this quarter should they come to fruition. Employee benefit services revenue was up 5.6% year-over-year, while pre- tax earnings were down 3.5% predominantly due to the aforementioned legal expenses. Banking had a very strong quarter with both margin expansion and organic growth. Commercial and consumer lending were both strong. Deposits experienced typical seasonal fluctuations, while liquidity and credit remain a source of strength. I would expect some seasonal slowdown in consumer lending in Q4, plus the impact on demand of higher rates in mortgage and auto lending. The commercial pipeline remains strong, but we also expect some larger payoffs, so I wouldn't extrapolate from Q3. As noted, we pulled forward our December securities maturities as we took advantage of the shape of the curve and our own liquidity needs and produced a positive net present value transaction. In addition, we believe that this illustrates the positive dynamics embedded in our balance sheet with over $600 million of securities maturies coming due in 2027. I will now pass it to Mariah for more details. Thank you, Dimitar, and good morning, all. As Zimitar noted, the company's operating performance accelerated in the third quarter. Gap earnings per share of $1.16 increased 12 cents, or 11.5%, from the third quarter of the prior year and was consistent with linked second quarter results, including the loss on sales of investment securities recognized in the third quarter in connection with our decisions to pull forward our December investment security maturity. Operating earnings per share and operating pre-tax pre-provision net revenue per share were record quarterly results for the company. Operating Earnings Per Share were $1.27 in the third quarter as compared to $1 9 cents one year prior and $1 16 cents in the linked second quarter. quarter operating PPNR per share of $1.77 increased 21 cents from one year prior and increased 15 cents on a linked quarter basis. These record operating results were driven by a new quarterly high for non-interest income and operating non-interest revenues. The company's non- interest income was $143.5 million in the third quarter. This represents a $4.4 million or 3.2% increase over the linked second quarter and a $15.4 million or 12% improvement over the third quarter of 2025 and marks the 10th consecutive quarter of net interest income expansion. The company's fully tax-equivalent net interest margin increased seven basis points from 3.49% in the linked second quarter to 3.56% in the third quarter, reflective of higher interest-earning asset yields and lower funding costs. The increases in net interest income and net interest margin included the accretive impact of the paydown of higher-cost overnight borrowing using proceeds from the August 3rd sale of $296.8 million of lower-yielding U.S. Treasury securities. During the quarter, the company's cost of funds was 1.16%, a decrease of two basis points from the prior quarter, primarily driven by lower deposit costs. Operating non-interest revenues increased $8 million, or 10.2%, compared to the prior year's third quarter, an increase of $7.4 million, or 9.3%, from the late second quarter. The quarter-over-quarter and year-over year increases in operating non-interest revenues was reflective of increases in employee benefit services, wealth management services, insurance services, and banking non-interest revenues. Our recent acquisition of ClearPoint Trust contributed $2.1 million of non- interest revenues during the third quarter and $2,9 million year-to-date. on interest revenues represented 38% of total operating revenues during the third quarter, a metric that continuously emphasizes the diversification of our businesses. The company recorded a $5.6 million provision for credit losses during the third quarter. This was consistent with the prior year's third quarter and compares to $4.6 billion in the linked second quarter. During the third quarter, the company recorded $141 million in total non-interest expenses, an increase of $3.3 million, or 2.4%, from the linked second quarter, and an increase of $12.7 million, or 9.9%, from prior year's third quarter. The increase from the link second quarter was due in part to a $1.5 million increase in salaries and employee benefits, driven by one additional payroll day and incremental expenses associated with ClearPoint, as well as a one-time $0.8 million consulting expense related to the renegotiation of a debit card branding contract. $7.4 million of the increase in total non-interest expenses from the third quarter of 2025 was attributed to salaries and employee benefits, primarily due to the incremental costs associated with acquisitions completed between the periods, higher performance-based incentive compensation, and medical costs, along with the impact of annual merit-based increases. Occupancy and equipment expenses increased $2.6 million from the prior year's third quarter, driven by incremental costs associated with the opening of seven de novo branches and three regional headquarters over the last 12 months, along with the seven branches acquired from Santander in the prior years' fourth quarter. Excluding operating expenses related to acquisitions completed in the last 12 months, year-to-date operating non-interest expenses increased $18.7 million, or 5.1%, from the same prior year period. Ending loans increased $235.2 million, or 2.1% during the third quarter, and increased $767.8 million, or 7.1%. from one year prior. The increases reflected organic growth in the overall business and consumer lending portfolios. The company's ending total deposits increased $808.3 million or 5.7% from one-year prior and increased $154.7 million or 1.1% from June 30, 2026. The increase in total deposits during the third quarter was primarily reflective of seasonal inflows of municipal deposits in September. The increase of total deposits over the past 12 months included $543.7 million of deposits assumed from the Santander branch acquisition and $120.1 million of deposit assumed from the ClearPoint acquisition. Moving on to asset quality. The non-performing loans ratio increased two basis points, and the loans 30 to 89 days delinquent ratio increased nine basis points from last quarter, but remained strong compared to the industry. The net charge-off ratio increased six basis points from the linked second quarter due to 2.7 million of charge-offs recognized in the third quarter of 2026 on two individually assessed business lending relationships for which specific allowance allocations had previously been established. The company's allowance for credit losses was 92 million or 80 basis points of total loans outstanding at the end of the third quarter, an increase of $0.3 million during the quarter. The allowance for credit losses at the End of the Third Quarter represented approximately seven times the company's trailing 12-month net charge-off. Looking forward, we believe the companyís diversified revenue profile, strong liquidity, and historically good asset quality provide a solid foundation for continued earnings growth. With that, I would like to provide an update to our expectations for full year 2026 as we enter into the fourth quarter. We continue to expect 3 to 4 percent growth in deposit balances, 6 to 7 percent growth in non-interest revenues, and an effective tax rate between 23 and 24 percent. As Dimitar noted, we expect loan growth to moderate in the fourth quarter, driven by some seasonal slowdown in consumer lending, as well as some larger commercial loan payoffs. As a result, we now expect full-year 2026 loan growth of 5 to 5.5 percent. We expect the full- year 2026 provision for credit losses to be in the range of $22 to $25 million. Entering in the accretive impact of the August 3rd sale of $296.8 million of lower-yielding U.S. Treasury securities, we now expect 11 to 11.5% growth in net interest income and for net interest margin to exit 2026 in the mid to high 3.5 range. Near-term margin pressure is possible if higher market rates dampen loan demand and pressure deposit rates. Core non-interest expenses are expected to be in the range of $553 to $557 million, or an increase of 7 to 8 percent from 2025. This includes approximately $8 to $9 million of incremental expenses associated with the branches acquired from Santander and approximately $4 to $5 million of increment expenses associated point, including non-operating intangible asset amortization and the impact of certain one-time items. These estimates do not include the impact as pending or future acquisitions. That concludes my prepared earnings comments, and Dimitar and I will now take questions. Chloe, I will not turn it back to you to open the line. Thank you. Thank you, we will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star than 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Steve Moss with Raymond James. Please go ahead. Good morning. Stephen, maybe start off on loans here. Hey, to start off on loans here, just kind of curious, I hear you on moderation in auto and mortgage. Just curious with regard to how to think about the commercial loan pipeline and what you're seeing for strength or weakness there, just given larger paths. Yeah. Hey, Steve. The pipeline is strong. It is pretty comparable to where it was last quarter, which means that it's close to its high marks. Activities is solid. So there's really, just in terms of origination, there's nothing to be concerned about. We just know that we've got a couple of larger payoffs, which is not the worst thing that can happen to a loan. So we're going to absorb those and we're gonna replace them in the fourth quarter. And depending on timing, depending on closings, you know, we feel that the ranges we provided is the operating range. Yeah. And then also just curious, what are you guys seeing for loan pricing these days in competition in the market? Yeah. So I think in the last couple of months, our blended originations have been right around 6.6. And this is kind of across all portfolios. we talked about earlier this year that the pricing and auto was just frankly silly and we didn't participate as much it's gotten a little bit better it's not exactly where we want it to be but it's a little better so we're not probably going to see much growth and in that side of the house mortgages are certainly you know you're seeing things in high sevens and even eight handles a mortgage product that has an impact on demand. We've seen that. I think it's across the board. I'm confident we're going to do better than most other folks. We are a very purchase-focused shop, and we have multiple products and solutions for folks. But ultimately, the payment does go up as rates go up. So that will be quieter than expected. Certainly, the pipeline is lower than it was kind of at the end of the second quarter, and it's not also the best season for mortgages. And then on the commercial side, you know, I think trending kind of in the high sixes, we've had to reintroduce the number seven in certain situations. It is competitive, but, you Know, we feel like we've got a very nice broad footprint and multiple products to be successful and to originate at a good pace. okay great appreciate all that color there and then maybe just on the fee-based businesses dimtar you hinted at you know the potential acquisitions it's kind of curious you know is there any particular line of business you guys are maybe more focused on at the moment for acquisitions or um and any color you could shed there yeah our acquisition pipeline is is is robust as it relates to insurance in particular and we've talked about this a little bit in the prior calls this year while the organic growth has been challenged for multiple reasons we've all seen some kind of sanity return in terms of pricing on the M&A side and we've made up some ground year to date you know we were down the first quarter almost 10 percent year over year we narrowed it down to six and a half now we're kind of in the low three percent year-over-year and we think we've got good opportunities to continue both on the m&a side and the inorganic and the organic side in the fourth quarter and narrow that gap so I mentioned last quarter that if everything that we're working on transpires We're going to be very well positioned for 27 on the insurance side, and knock on wood, I think we're still on very good track there for robust growth in 27. Great. Supertor, I appreciate all that color there, and I'll step back in the queue here. Nice quarter. Thank you. Thank you The next question comes from David Conrad with KBW. Please go ahead. Hi. Good morning. Nice quarter A lot to talk about the balance sheet and maybe embedded in your NIM guide for the fourth quarter. I mean, it looks like on an average basis, you brought cash down, which may have helped the funding costs. But now post-security sales, cash is pretty elevated versus last quarter. So I guess the first question is, what do you think the use of cash will be in the fourth quarter? And then maybe also, what do you anticipate the deposit beta being? Morning, David. So, I think what you're seeing on the balance sheet as it relates to the cash position is really more driven by the seasonality that we have in terms of predominant in the municipal side of our deposit base. There's some seasonality clearly also in the general deposit base is people spend money for vacations during the third quarter. So usually in the third quarter we see some of those personal deposits flow out and certainly the municipal deposits flowout in the 3rd quarter and then they come back at the end of the 3th quarter and into the 4th quarter it's people making their payments across our footprint. So that's really what's driven that cash position. We talked last call that we expected to be a higher wholesale borrowing position that didn't transpire during the quarter to your point because we sold off some of our securities materials so we funded that that position and growth during the quarter for our securities portfolio and then in terms of beta david um really hard to tell um it is very early you know this is the kind of the i don't know if we're going to have more more rate hikes is this going to be one and done it's going to be a couple when they're going to happen uh i think just in terms of how we've been approaching it throughout the year you can see we have driven costs down as we've optimized volume versus rate on the deposit side we certainly have a lot of strength in our liquidity position to allow us to do that we have re-engaged a little bit on some of the cds this quarter so that might push the numbers up a a little bit. We'll see. We're by far not the most aggressive person in that market, but it's higher than before. At the same time, kind of on the core accounts, we haven't really touched any rates. So very hard to tell how it's going to shake out during this quarter. Okay. Then second question with the, you know, going into next year with the $600 million of cash flows off the bond book. Would you more like to optimize that in funding loan growth and maybe further reducing borrowings? And I guess remind me where you would prefer securities or any assets be as a target. Yeah, I think if you just kind of look at what our balance sheet needs are, we would probably target to have securities to assets closer to kind of high teens to 20% as opposed to where they are today. So as you can do the math, that's a lot of securities currently on the balance sheet that will be used in much more productive ways going forward. if it relates to the maturities in in 2027 we have about 150 million dollars of borrowings they're going to mature as well of FHOB borrowings kind of in the middle of the year so that would be a use for some of those cash flows certainly long growth and just to provide a little bit more color on how we think about what we did this quarter versus opportunities is going forward in terms of accelerating some of those maturities, it has to be a positive present value transaction for us, right? So if you think about what we did in August, we had five months left on those treasuries until they mature. So in other words, can we cash flows sooner than the $3 million loss? And the math just worked, and it actually got even better as rates went up. So we think that the recruitment period is much tighter than five months of maturity. So if we have similar opportunities in 2027, we're certainly going to keep an open eye towards those to fund growth and maybe not have to be as active on some of the more pricey deposit sites. Perfect. Thank you. You're welcome. The next question comes from Manuel Navas with Piper Sandler. Please go ahead. Good morning. So you have deposits coming from ClearPoint, Santander, over the year. You had some seasonality this quarter. How is the de novo branches doing? Can we just have kind of an update there and what type of costs are coming in from there? Pardon me. I have rejoined our speakers. You may begin again. Okay. Thank you, Chloe. Apologies to everybody. We got disconnected somehow. Manuel, we were just in the midst of your question, so sorry for that. Oh, sorry. So I was kind of asking for an update on the de novo branches. It seemed a lot of the year-over-year deposit growth was Santander and ClearPoint. kind of wanted to zero in on how the de novo branches are doing, what's kind of the deposit costs there, any kind of update there. Yeah, so on the de nuevo branches, as of basically yesterday, we sit at roughly $175 million in deposits in those, so we're very encouraged. We mentioned previously that our goal for the year was to get to $200 million, and I think we have a pretty good shot of being somewhere around there. The majority of the deposits in those branches have been and continue to be and likely will be for a little bit commercially focused. So I don't have the exact number, Manuel, on cost, but you can imagine that some of those are higher cost than the traditional retail. The retail is going to build over time, but more importantly, as we look at our aggregate Deposit costs, you've seen those that continue to come down. That's great. You gave a little bit of color that the insurance business is catching up. You have some M&A possibilities there, and all kind of drive to potentially a better outlook for next year in insurance. Can you just talk through employee benefit services and wealth management into next year as well? yeah so i'll start with with wealth management um the we have a couple of things going on there's right so on the organic side we have tailwinds from just market values um so that's been positive and that continues to help um at the same time we're very focused on new advisory sales in the business. And the past three years, and I'm including this year kind of as a projection, we've been running somewhere between $750 million and $1 billion of new advisory sales in the business. So that's a strong tailwind kind of purely organically. And then you have ClearPoint, which this year is only going to impact us for basically kind of two quarters and a month, and next year we're going to have the benefit of that for the full year. And certainly they're doing better than we expected them to do as well. So I expect that next year in wealth management, assuming no change in market values, which is a very big assumption and likely incorrect, because they're going go up or they're go down, we're gonna have a robust double-digit growth in wealth management in 2027. As it relates to employee benefit services, recalling that business roughly half of the exposure is to market as well, and half of it is tied to basically a number of participants that we take care of across the country. We're just about at a million of those folks that we, uh, take care of across the country and that number for us grows somewhere in the low single digits somewhere three to four percent so if you kind of add the market performance on the other half of the business um you get to a blended rate that we expect every year to be kind of in the high single digits uh somewhere around seven percent for planning purposes uh for 27. I really appreciate that. Shifting gears for a moment, what's roughly the average price on the share repurchase? And where does that kind of fit in with capital deployment, with the fee business that you're looking at? Any thoughts on bank M&A and, of course, kind of the pace of the buyback? Sure. So we've been, I think, this year, this past quarter as well, our average price has been in the low 60s, kind of right around where we are today. We're a very profitable company. We generally have a lot of capital. We don't really have a predetermined pace of buybacks. It is opportunistic. It is clearly dependent on the price. It is dependent on what other priorities we have. Our number one priority is always organic growth, so we have to fund that. In the bank, that means that we're funding balance sheet growth, so there is a, you know, for every dollar you make in the bank roughly half of it stays on the balance sheet in equity to support the growth. In the other businesses, really, it's through the P&L. So you'll see certain quarters there's going to be a little bit more movement, but that's our capital deployment on the expense side is really investing through the P&L in the non-banking businesses. So that's always priority number one. Priority number two is inorganic growth. You know, we are, I would call, an active acquirer across our businesses. In the past three years, we've acquired, we're completed roughly 25 acquisitions. that's a lot we know how to do these things you know they vary from you know a book of business to an athlete hire to a slightly larger practice to the clear points and the Santander's of the world so that will always be a tool in our toolkit and I expected that will remain to be active so we've been able to do all of that all those things right organic growth acquisitions and buyback shares and continues to grow our capital base along the way so we can expect more of the same going forward and as it relates to the latter part of your question on bank M&A I'd say it's a little bit quiet right now there's not a ton of great opportunities to really spend time on We have a very targeted box of things that make sense for us, and that really does not include the majority of things that are out there. I appreciate the commentary. I'll step back into the queue. The next question comes from Matthew Breeze with Stevens, Inc. Please go ahead. Hey, good morning. Maybe just give us an update, looking for an update on kind of the broader strategic initiatives tied to taking market share in some of the denser upstate New York markets in Pennsylvania. You know, where are you doing well versus lagging and curious around, you know, any – I'll leave it there. Yeah. Curious where you're doing well, versus lag. Yeah, fortunately, I feel like we're doing really well across the board. If you just step back and think about some of our most recent kind of entries, and I would count broader New England as one of those, you know, southern New Hampshire and kind of northern Massachusetts type market, where I think we mentioned in the past that we've been much more engaged. certainly we started the novel in in Bedford we added some folks to the team last year from some of the M&A disruption and that part of the the geography for us has done really really well this year already so that's been that's really encouraging and the feedback from client visits there just continues to emphasize to me that there is a really good opportunity set for us and our ability to compete in that part of our footprint. Lehigh Valley, we've been in for a while. Clearly, with the acquisition of the Santander branches, we were able to take it up a notch in terms of our ability to recruit and kind of establish leadership in the area. And we just did that in the third quarter. we found the leader we've been looking for in the Lehigh Valley and we're off to a pretty good start there and kind of adding to the existing commercial team so really kind of looking forward to what that's going to bring to us in the next few quarters as well. Really well received by customers down there and our reputation is growing by the day and that is really not to take away from what's happening in our kind of more established markets in upstate. We've had a pretty good outcome year to date in Buffalo. We're going to be doing okay in Rochester. We're doing quite well in Syracuse. We're done fine in Albany. So I'm just encouraged, certainly in Vermont, we've reengaged as well and kind of continue to have a leading market share there. So I'm just encouraged by the execution across the footprint. And I'm also encouraged by the ability for us to have a very large funnel of things that we're working on and seeing. So what that allows us to do is if we need to allocate capital more actively and say, hey, the pricing in this part of our footprint is not as favorable this quarter, we're going to basically deploy more capital in another part of the footprint And that's a really powerful tool for us right now. Great. Mariah, just on the security sale, I guess one thing I was a little bit surprised by was just that it looks like investment yields are actually down a little bit quarter to quarter. Maybe help me better understand that. I would have thought given the sale of some of the lower yielding stuff that goes higher and, you know, if it's a timing difference, Maybe help me out with where you expect things to shake out over the next couple of quarters. Sure. Yeah, I think it probably is a little bit of a timing difference based on the date that the sale was executed. In general, this is, as we've mentioned, has been a very, you know, accretive transaction for us. We're really happy that NIM expanded seven basis points last quarter. Three of those basis points are attributed to the security sale. And then, obviously, low yields and deposit costs. We also just, to put a fine point on this, did not receive an FRB or FHLB dividend in Q3, and we will in Q4. So, as we look forward, we expect that to smooth out, and Dimitar already went into some greater detail on what's going to happen in 2027 with the $600 million. that's obviously going to have also, you know, a positive benefit on AOCI. So, really for us, I believe to your specific question, it was more of a timing situation as it was August 3rd and the way that we, when we calculate the portfolio and look at things going forward, given the positive state of the portfolio, the rate environment, and again, the two dividends that we will see. We will continue for Q4 to see an expansion of one to three basis points in NIM, and then, as we mentioned in the script, for guidance exit 2026, mid to high 3.5 for the company itself. Okay. And then, Dimitar, one big picture question for you. Increasingly, We've been fielding questions around risks to deposit bases like yours tied to agentic AI products like Muse that came out and just the ability to move dollars around much more efficiently. I'm just curious how you'd respond to that if you think a franchise like yours is more or less at risk and perhaps why. I'll leave it there. Thank you. Sure. Thanks, Matt. That's a great question, and it's kind of like the Yogi Berra thing that predictions are very difficult, especially about the future. But the way I would really think about it as it relates to our company is ultimately Muse, which is a terrific technology, and it's actually been available for a little bit in different ways. This is just much more consumer-friendly, I would call it that way. What it does is it removes friction in the process. And that's part of the equation. The other part of equation is why do people bank where they bank? And no matter what survey you kind of look at, convenience is an important piece, which also has to do with friction, but also with having something tangible around you. So branches actually show up quite high on most consumer surveys for reasons where people bank. Then trust is a very large piece of it as well, because our financial well-being is right up there, you know, in the top five behind health and family for everybody, right? So trust is extremely important as it relates to finances. And the challenge with just purely agentic solutions is that there is no responsibility attached to that trust. What I mean by that is you may trust Meta, let's say, in an extreme example. However, if Muse does something that you didn't ask it to do, and the power of Muse is really being able to practically do things that you didn't even ask it do, but if it does something you didn' t ask it, or if it makes a mistake, you have no recourse against anything. so in other words there's no one to complain to there's no one who can fix anything for you you're going to get a beautiful response that says you're right to push back I messed up and that's about it so there's not accountability and I think that's going to be a challenge for trust now as it relates to our company in particular I think the question is going to be how much of the reason that people bank with us or any other institution, how much value are they placing on those attributes of convenience and trust and accountability and responsibility versus the friction that's embedded in doing business with us versus MUSE? I keep telling our folks, our business is a friction, right? Like nobody wants a mortgage. They want a home. So the 40 days it takes us to give them a mortgage which is a friction in the way. When we have a commercial borrower that we're good for X, they're expecting their money tomorrow. They're not expecting their Money in 60 days. So we need to continue to work on the equation of providing that value versus the friction and removing as much friction as we can so that we can earn our place. And then the operating side of the balances is the key to all of this. Because if you think about where you leave your money, the money that we compete for is the operating accounts. It is not the investment parts. That game has been going on for a long time on the investment side. If you look at the fastest growing deposits, the fastest deposit growers in the country in the past year, there were not any banks. There were the Morgan Stanley's of the world. There were Goldman's of world. It is those investment dollars. That game has been going on. I don't know that MUSE is going to change that dramatically for us because we don't have a lot of those monies. But the operating accounts is where we deliver the value and the convenience and the trust. And if you look at the size of our average account at $12,000, those are truly operating money. Those are not investment dollars, So how much is it worth to a customer to optimize a couple of hundred bucks of that versus the convenience and the trust that comes with everything else that we provide? Excellent. I appreciate that. I'll leave it there. The next question comes from Eric Bedell with Bloomberg Intelligence. Please go ahead. Hey, good morning. Thanks for taking my questions. I was just wondering if you could give us an update on how much of the commercial loan pipeline is related to Micron plants. And, you know, I also saw there was news this morning about a second chip factory being potentially built in central New York as well. yeah morning eric um as it relates to directly attributable pipe pipeline to micron um i would say it's a it's very small percentage um what we are seeing however is the increase in business from the kind of the second and third derivative suppliers really more and more like the third derivatives employers, or folks that are doing work around the sites as it relates to warehousing, as it relate to even just getting the roles done. So we have a number of those customers, and they're not necessarily just in the bank. A number of them that are actively engaged are insurance and benefits customers whose business is growing as a result of that. But this is all preparation. We are starting to see more discussions from Tier 2 and Tier 1 suppliers looking at operations here locally. If you're a Tier 1 supplier, you probably already have a very well-established relationship with a banking institution, and you're not necessarily likely to bank locally for that. But they need to hire kind of the Tier 3s and the Tier 4s locally to construction companies, we're seeing some of that. Architectural engineering firms, we've seen some of that. But in terms of percent, is it driving our business at this point in time? Not yet. With that said, I think there's going to be 4,000 workers here on site pretty soon. And that has its cascading impact, right? They need to go to lunch. They need housing. They need medical care. They need insurance. They need all of it. So that's where we're going to start seeing it is as people really come on site. Great. Thank you. And I'm just kind of curious on expenses from here. Should we expect larger than kind of the mid-selling digit range into next year or how is the best way to think about your approach on more de novo expansion and anything just along those lines would be great. Yeah, I mean, generally our approach on expenses is lower, just lower is our goal. If you take out acquisitions, as Mariah mentioned, we're right around 5% this year, which was and which was our goal on our scorecard I think going forward again excluding acquisitions I would like to be even a little bit lower than that in terms of expense growth again a lot of what we're doing is is investments and in the future it's been you know not just branches and real estate but technology and just infrastructure for us to scale through the operated a much and a much bigger scale than currently we are but you know kind of that four to five percent on a excluding acquisitions kind of on an organic basis is a range that is probably going to be on our scorecard for 2027 all right thank you very much welcome next question comes from Daniel Cardenas with Breon Capital. Please go ahead. Good morning, everybody. So just a quick follow-up question to Eric's question. So it sounds like on the lending side, the semiconductor business really hasn't been providing much loan growth as of yet. There are expectations that it's going to pick up. How do you think the pickup in that business is going to impact your deposit growth on a go-forward basis? Yeah, great question, Daniel. And we expect that it's going to be on both sides. And if you look at the Syracuse market and if you just pull up the results from the 2026 FDIC survey, you're going to see that the market has grown a little bit. but our market share has grown meaningfully. In the past, I think, three years, we have gone from kind of a 7% market share to over 9% market chair. So I expect that not only the market is going to grow faster than it has been, but that we're going to continue to have opportunities to deepen our market chair because of the level of activity that we have and just the way how we do business. So it will be helpful. Again, very hard to speculate. We've looked at the historical precedents in Saratoga County and in other places around the country, and in some places the impact is hard to see. In Saratoga County, certainly, it was deposits grew meaningfully faster than the rest of upstate for kind of the period between 2010 and 2020, where most of that activity happened, and since then have kind of been at the same pace as the rest upstate. So hard to tell. It should be a positive tailwind. I still think we're going to get most of our growth from market share gains that we're going to have versus the overall market. Great. Thank you. You're welcome. This concludes our question and answer session. I would like to turn the conference back over to Dimitar Krivonov for any closing remarks. Thank you, everybody, for joining us, and we look forward to speaking with you again in January. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.