Q1 2024 Community Bank System Inc Earnings Call

Participants

Dimitar Karaivanov; President, Chief Executive Officer, Director; Community Bank System Inc

Joseph Sutaris; Chief Financial Officer, Executive Vice President; Community Bank System Inc

Steve Moss; Analyst; B. Riley FBR

Christopher O'Connell; Analyst; Keefe, Bruyette & Woods, Inc.

Matthew Breese; Analyst; Stephens Inc.

Presentation

Operator

Good day and welcome to the Community Bank System First Quarter 2024 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 one on the touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dimitar Karaivanov, President and Chief Executive Officer of Community Bank System. Please go ahead.

Dimitar Karaivanov

Thank you, Nick, and good morning, everyone, and thank you for joining the Community Bank System Q1 2024 earnings call this quarter was a good illustration of the benefit of our diversified financial model. Our market-sensitive recurring fee income businesses showcase their strength and fully offset margin pressure in our banking business. Leading to another quarter of revenue of record revenue for the Company. We normalize the expense growth rate while continuing to invest in all of our businesses.
Our below-average risk profile remains firmly rooted in the low credit-risk intensity and exceptional liquidity of our balance sheet. During the quarter, we also modestly increased our qualitative assessment of future uncertainty and proactively added to our reserves in our banking business growth continued in our commercial mortgage and consumer installment portfolios. Strong loan growth of $179 million was more than fully funded through deposit growth of $424 million. Market share gain opportunities remain attractive across our footprint as many competitors are limited by their liquidity profiles. Pipelines remain excellent with particular strength in C&I compared to prior quarters. We also formally announced our branch expansion plans with 14 locations expected to open in the next five quarters, two in Buffalo and Rochester three in Syracuse during the Capital Region, two in the Lehigh Valley, one in Springfield, Massachusetts, and our first location in New Hampshire. In our employee benefit services business. We are now benefiting from both new client counts and market appreciation. Revenue growth was 7.9%, and we also closed on the acquisition of Creative plan designs during the quarter.
Looking forward the organic momentum remains strong and market values remain supportive. Our Insurance Services business was relatively flat in terms of revenue performance due to the timing of certain commercial premiums and lower contingency revenue. However, both the organic and inorganic growth opportunities remain attractive for 2024.
Our wealth business had a record revenue quarter with double digit gain in revenue and increased inflows. Our wealth team is energized and focused on increasing penetration levels while also launching a number of new service offerings on a nationwide basis. Overall, I'm encouraged by our operational execution this quarter, as evidenced by the improvement in pretax pre-provision net revenues over the prior two quarters.
In terms of capital deployment, we closed on both a number of smaller acquisitions in our fee income businesses and also repurchased 750,000 shares at what we deem to be very attractive levels given the intrinsic earnings power of our company, I will now pass it on to Joe for more details.

Joseph Sutaris

Thank you, Dimitar, and good morning, everyone. From the Company reported $0.76 of GAAP diluted earnings per share in the first quarter. This compares to $0.11 in the first quarter of 2023 and $0.63 in the linked fourth quarter of 2023. As a reminder, during the first quarter of 2023, the company recorded a $52.3 million pretax realized loss on the sales of certain available for sale. Investment securities increased in connection with the Company's balance sheet repositioning strategy, which negatively impacted GAAP diluted earnings per share by $0.75 in that quarter. Operating diluted earnings per share, which excludes certain non-operating revenues and expenses as delineated in this morning's press release were $0.82 in the first quarter and linked fourth quarter as compared to $0.92 in the first quarter of the prior year. The $0.1 decrease in operating diluted earnings per share from the prior year's first quarter was driven by a decrease in net interest income and increases in the provision of credit losses, operating expenses and income taxes, offset in part by an increase in operating noninterest revenues on a linked-quarter basis, a decrease in operating expenses and an increase in noninterest revenues were offset by a decrease in net interest income, a higher provision for credit losses and an increase in income taxes. Operating pretax, pre-provision net revenue per share as defined in the press release was $1.18 for the first quarter. This was up $0.05 per share over the linked fourth quarter, but $0.04 per share below the prior year's first quarter. During the first quarter, the Company reported total revenues of $177.3 million. This established a new quarterly record for the Company and highlights our diversified business model. Higher levels of operating noninterest revenues in our banking, employee benefit services and wealth management services businesses overcame declines in net interest income and insurance service services revenues in both the linked quarter in the prior quarter and over the linked quarter and the prior quarter, the Company recorded net interest income of $107 million in the first quarter as compared to $109.2 million in the linked fourth quarter. Despite solid loan growth in the quarter, an improvement in the yield on interest earning assets pressure on funding costs did not abate during the quarter. The Company continued to experience the migration of customer deposit balances from lower rate checking and savings accounts to higher rate money market and time deposits increasing the cost of deposits 16 basis points in the quarter from 98 basis points in late fourth quarter to 1.14% in the first quarter when combined with higher borrowing costs, the Company's total cost of funds increased 23 basis points from 1.08% in the linked fourth quarter to 1.31% in the first quarter. This outpaced the 13 basis point increase in interest earning asset yields, resulting in a nine basis point decrease in the company's fully tax-equivalent net interest margin from 3.07% in the fourth quarter of 2023 to 2.9% in the first quarter of 2024. Comparatively, the company reported net interest income of $111 million in the first quarter of 2023, and we believe the first quarter net interest income result of $107 million represents a bottom for the company in 2024, and the outlook remains positive for net interest income expansion on a full year basis as mentioned previously, operating noninterest revenues were up in three of our four businesses on both an annual quarter and linked quarter basis. Banking related non-interest revenues were up $1.8 million or 11.1% over the same quarter of the prior year, driven by increases in debit, interchange and ATM fees and loan placement and advisory revenues, while employee benefits services and wealth management services revenues were up $2.3 million or 7.9% and $1 million or 11.7%, respectively, over the same period driven by favorable investment market conditions in employee benefit plan participant growth and insurance services revenues were down approximately $400,000 or 3.6% due to timing differences on certain commercial policy renewals and insurance carrier related contingency revenues. On a linked quarter basis, banking-related noninterest revenues were up slightly, while employee benefit services revenues and wealth management services revenues increased $1.7 million or 5.6% and $1.3 million or 16.5%, respectively. Insurance Services revenues were down approximately $500,000 or 4.2%. During the first quarter, the Company recorded $18.1 million in non-interest and non-interest expenses. This represents a $4 million or 3.5% increase from prior year's first quarter, an $11 million or 8.5% decrease from the linked fourth quarter results. Total operating noninterest expenses, which excludes certain nonoperating expenses as detailed in the Company's press release were $114.4 million in the quarter as compared to $110.3 million in the prior year's first quarter and $116.4 million in the linked fourth quarter. As mentioned on last quarter's earnings call, the Company will continue to make front-footed investments in its leadership team talent across all lines of business, data systems and risk management through operating expense growth is expected to moderate in 2024. The first quarter, results were consistent with these expectations, the Company recorded a $6.1 million provision for credit losses during the first quarter of 2024. This compares to $3.5 million in the prior year's first quarter and $4.1 million in the linked fourth quarter. Although the company's credit metrics remained strong during the first quarter, the Company build loss reserves reflective of an increase in our qualitative assessment of future uncertainty. The Company's allowance for credit losses stood at $70.1 million or 71 basis points of total loans outstanding at the end of the first quarter, up $3.4 million or 2 basis points in the quarter and up $6.9 million or 1 basis point over the prior year's first quarter. The effective tax rate for the first quarter of 2024 was 22.9%, up from 16.9% the first quarter of 2023, excluding the impact tax expense and benefits related to stock-based compensation activity and income tax credit amortization.
The effective tax rate for the first quarter of 2024 was 22%, up from 21.4% in the first quarter of 2023. Ending loans increased $178.9 million or 1.8% during the first quarter. This marks the 11th consecutive quarter of loan growth and is reflective of the Company's continued investment in its organic loan growth capabilities. Although outstanding balances in the consumer, mortgage and consumer indirect segments increased in the first quarter despite seasonal headwinds. The primary driver of loan growth in the quarter was the $135.8 million or 3.3% increase in the Company's business lending portfolio. The Company's ending total deposits increased $423.9 million or 3.3% during the first quarter of 2024, driven by seasonal inflows of municipal deposits. Ending deposits also increased $241.4 million or 1.8% from one year prior, although funding costs continue to increase in the first quarter. As previously noted, non-interest bearing and low rate checking and savings accounts continue to represent almost two thirds of total deposits and a company cycle to date. Deposit beta of 20% continues to be one of the best in the banking industry and reflects the strength of the Company's core deposit base. The Company's liquidity position remains strong, readily available sources of liquidity, including cash and cash equivalents, funding availability at the Federal Reserve Bank discount window, unused borrowing capacity at the Federal Home Loan Bank of New York and unpledged investment securities totaled $4.6 billion at the end of the first quarter. These sources of immediately available liquidity represent over 200% of the customers company's estimated uninsured deposits, net of collateralized and inter-company deposits. Company's loan to deposit ratio at the end of the first quarter was 74%, providing future opportunity and migrate lower yielding investment security balances into higher yielding loans.
At the end of the first quarter, all the companies in the bank's regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company's Tier one leverage ratio was 9.01%, which substantially exceeded the regulatory well-capitalized standard 5%. And during the first quarter, the Company repurchased 750,000 shares of its common stock at an average price of approximately $46 per share. The Company recorded net charge-offs of $2.8 million or 12 basis points of average loans annualized during the first quarter. This is up slightly from 10 basis points in the linked fourth quarter and seven basis points in the same quarter prior year, with increases primarily attributed to consumer indirect loan.
The indirect loan portfolio at March 31, 2024, nonperforming loans totaled $49.4 million or 50 basis points of total loans outstanding. This represents a decline from $54.6 million or 56 basis points of total loans at the end of the linked fourth quarter nonperforming loans were $33.8 million or 38 basis points of total loans. One year prior loans 30 to 89 days delinquent were also down on a linked-quarter basis from $48.4 million or 50 basis points of total loans at the end of 2023, to $42.1 million or 43 basis points of total loans at the end of the first quarter. Overall, the Company's asset quality remained strong in the quarter. We believe the company's diversified revenue profile, strong liquidity, regulatory capital reserves, stable core deposit base and historically strong asset quality provide a fundamentally solid foundation for future opportunities and growth.
Looking forward, we are very encouraged by the revenue outlook in all four of our businesses. We will continue to lean into growth and prudently deploy capital in line with the interest of our shareholders.
That concludes my prepared comments.
Thank you.
I'll now turn it over to Nick to open the line for questions.

Question and Answer Session

Operator

We will now begin the question and answer session. To ask a question. You may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.
Our first question comes from Manuel Navas with D.A. Davidson.
Please go ahead.

Hi, this is Sharon G on for Manuel. Thank you for asking a question.

Joseph Sutaris

Good morning.

Good morning. So OpEx this quarter was much better than expected. What are your some of your expectations for the OpEx run rate going forward?

Joseph Sutaris

I yes, we we believe we'll run our run rate for OpEx will kind of be contained on our historic levels of about our mid-single digits, call it three to maybe 3% to 6% on. We invested pretty heavily in a lot of our infrastructure and talent and technology last year, which kind of increase the OpEx run rate. But they were kind of most of them are front footed investments.
I mean, obviously, there were some wage pressures as well, but we expected that to sort of come down, if you will, in 2024. And I think the first quarter is, I think, a pretty good data point for us from the standpoint of what the expectations are going forward.

Great. Thank you. And give any updated thoughts on the pace of buybacks given strong loan growth?

Joseph Sutaris

Yes, we would expect that the pace will slow a bit. I wouldn't expect to purchase an additional 750,000 shares going forward, we just had an opportunity at these levels. And so we took advantage of that, if you will, of generally, our philosophy over the years has been to generally buyback of the, I'll call it the equity plan issuance of during the year and potentially a little more in this case with the with the current price points.

Thank you. I think that's it for now. Thank you for taking my questions.

Operator

Our next question comes from Steve Moss with B. Riley FBR. Please go ahead.

Steve Moss

Hey, good morning, guys. Just sorry, I hopped on late here, but I do want to maybe start on the loan pipeline. You guys showed good commercial loan growth this quarter. I'm just curious as to where what you're seeing for economic activity and the opportunity there?

Dimitar Karaivanov

Good morning, Steve, it's Dimitar. It are our pipeline is strong. Our pipeline is actually stronger than it was at the end of last year and probably stronger than has been the past couple of quarters. So I would say the difference in our pipeline on the commercial side and it really should should prefer that the commercial pipeline I'm talking about is that we have successfully and change the mix there quite dramatically, which we've been working on over the past few quarters from commercial real estate into C&I and and over over well over half of our pipeline today is in C&I. That takes a little bit longer to close. So you may not see the same pace of growth even with a lower with a higher pipeline. But if they're just going to transpire a little bit later, I think in the year, some of those things to close so the activity strong is, as I mentioned, it's the same thing on the mortgage side. Our pipeline today is higher than it was a year ago. As we've talked our GO our consumer installment business, we take a little bit more of a price versus growth equation in that one. So and with that said, I mean, the our competitors a lot of them remain constraints, albeit to liquidity, be it capital, be it optimizing risk-weighted assets. So there is there's a lot of a lot of market share opportunity for us and our markets as well continue to remain resilient and with more than the average historical economic activity.
If you look at Central New York, some of the data that some of the local organizations have gathered in terms of economic development. Central New York has 10 X the amount of economic development today in the pipeline than it did five years ago. And that by the way does not include any of the semiconductor corridor investments. So a lot a lot going on in our markets in a positive way, and we're really well positioned to continue to take market share.

Steve Moss

Okay. That that's really helpful. Appreciate the color there don't aren't. You're just curious as to what's the add-on rate for new loans these days for you guys?

Dimitar Karaivanov

Yes, we're right smack in the mid sevens, which is where we've been in the past couple of quarters. So rig pricing has remained pretty firm here in terms of our new originations.

Steve Moss

Okay, appreciate that. And then in terms of just the margin here, I realize your deposit beta remains your funding costs remain really, really low relative to Fed funds. Curious how you're thinking about the margin here, if we stay in a higher for longer environment, do you continue to see funding creep on? And is there and I know the securities reprice a little longer-dated. So just curious going to see some more margin pressure next couple of quarters.

Joseph Sutaris

Yes. So Steve, this is Joe. Good morning. I will address that. So our expectation and I made it our said in my prepared comments is that we expected the first quarter NI outcome net interest income outcome to kind of be the bottom for us. That's still our expectations even in a higher for longer our scenario, we do expect the NI to step up in the remaining quarters of 2024 and hopefully outpace the full year result from 2023. Obviously, there's a lot of variables that could change between between now and the end of the year on. But just some things to think about is that in the trailing 12 month period, we had about $1.3 billion of principal payments and prepayments on the loan portfolio in originated about $2.2 billion for a net growth of about $900 million over a trailing 12 month period. So that there's a there's a turnover component, if you will, on the earning asset side as these 5 or so on loans that are on the books. Now, the current book yield, as they're rolling off, they're being replaced by 7.5% new paper. So I think that provides us a significant potential lift on the earning asset side.
On the liability side, you know, I said it in the prepared comments, but we do expect kind of some of the pressures on funding to abate. With that said, if rates continue to move up on the long end, those pressures will probably still be present. But right now, our expectations are that the cost of deposits are not going to grow in the quarterly going forward at the same rate they had been in the trailing trailing quarter. So that sort of inset and NII. expansion and the net interest margin, we book to 98 on a tax equivalent basis in the quarter. The expectation is the margin may creep up a couple of basis points to flat. But the expectation is that we'll be able to expand net interest income on a go-forward basis. Obviously, deposit balances will make a difference and kind of how what the outcome is there and their ability to support continued loan growth because if we move from a it's a little over 1% deposit base to a 5% borrowing on that deck that could be expensive. So that's one of the caveats as we have to kind of look and manage the deposit balances. There's obviously migration continued migration into higher cost deposits that it will impact impact the overall cost and obviously the slope of the yield curve matters as well. So there are some I'll call it some components that could affect the outcome. But our expectation is and I will expand moving forward.

Steve Moss

Appreciate that. And then in terms of the insurance business here and maybe just in both insurance and employee benefits. I realize I think I heard there was a timing issues for the insurance revenues this quarter. Just I assume it's still a hard market and just any update you can give on revenue growth there. It's been a strong market for, you know, for stocks and bonds and or more stocks and bonds, but a nice pickup on employee benefits? Just kind of thoughts there about.

Dimitar Karaivanov

Sure, Steve. I'll start with the insurance business. We continue to believe that both the organic expansion in terms of new clients and higher rates is going to be positive this year. And in addition, we do have a very good pipeline in terms of inorganic add-ons as well.
So as you think about the revenue growth in that business. You know, we've grown at double digits over the past three years. We still think that kind of high single digit is probably achievable for this year as the business is getting bigger, the double digit numbers continuing to increase as well. But the opportunities are strong and we did have some what we consider to be just timing cutoffs and mismatches this quarter, which kind of muted a little bit of the revenue performance. But the full year expectation for the business is still very positive on the employee benefit side, we've been talking for years about, you know, I'm adding a lot of new customers and a lot of new lives on the platform. That's been the case, which has been muted for those couple of years because the asset values were too low and you're now seeing both those new units, if you will, and the asset values come together. And we had a great quarter. And our expectation is that that's going to continue. We did acquire creative plan designs and we did not have much revenue in this quarter from that acquisition as well. So there's some back-end to second half of the year loaded revenue from the acquisition activities as well.

Steve Moss

Great. Appreciate all the color Dimitar.
Thank you.

Operator

Next question comes from Christopher O'Connell with KBW.
Please go ahead.

Christopher O'Connell

Hey, morning. Just wanted to follow up on the fee discussion and yes, I realize it markets are strong, but wealth and wealth management, the uptick was pretty strong there as well as the pass group there. And is that is that a good sustainable run rate on a go-forward basis?

Dimitar Karaivanov

Yes, I think, Chris, I mean, our wealth businesses very much the same story as our employee benefits business. Folks have been really busy on adding more clients over over the past couple of years. And again, that growth has been a little bit muted. So if market values stay where they are, yes, that will be a very close run rate for us for the rest of the year.
In that business. So look, we've got four businesses. You know, we always talk about our four businesses. That's how we run the company. If you think about our our company and all of this, we've got foreign just our Bolt, which is a couple of engines more than than most. And right now, our wealth business and our employee benefit services business are revving up. And our insurance business, as we mentioned, ran a little bit lower, but we expect it to ramp up over to the rest of the year. And our banking engine is a little bit sputtering on the net interest income side, but the gas tank is full. And as we mentioned today, if we do get some slowdown really in the mixing of the deposit base that's going to start contributing quite meaningfully. So we feel pretty good about the organic and market value driven and inorganic growth and across all of those for our businesses for the year.

Christopher O'Connell

Great. And I apologize if I missed it, but did you guys say how much the accretive plan designs acquisition adds in terms of revenues?

Dimitar Karaivanov

It's going to be somewhere between $3 million and $4 million for the year.

Christopher O'Connell

Great. And you mentioned a couple of times, I think in the prepared remarks, some of the inorganic or inorganic acquisition opportunities. Can you just talk about where you're seeing the greatest opportunities on the fee business side? And then a little bit about what you're seeing, how the markets progressed in terms of the traditional bank M&A side?

Dimitar Karaivanov

Sure. So we're pretty active in terms of what we would consider to be kind of roll-up acquisitions and all of them predominantly in our insurance business over the past couple of years. I think we've done about 11 in the past three years. So as you can imagine, there's a three to four to five kind of books of businesses that we're ticking in, and that's across various geographies for us where we're present hubs. And that pipeline remains just as strong as it was last year.
Right and I fully expect that we'll be doing another three or four or five tuck-ins in the insurance business.
Our employee benefits business, we've done, I think, three tuck-ins so far this year, they vary in size with creative plan designs being the larger one from the other was there, you know, kind of a of million bucks in a million bucks here and there. So they they add up over time. And that's part of our business model is to continue to deploy capital in those very attractive segments in our wealth business.
You know, we are I would call it to acquire practices every once in a while. And so every year, we probably have an opportunity to do one or two of those come together more like a acqui-hires, if you will from, you know, somebody just moving on to our platform and we pay them for a book of business. And so that's kind of on those three businesses on the bank side, as we mentioned in the prior prior call, we remain very interested in pursuing acquisitions. You know, we have a bit of a different lens today than we did four or five years ago. That doesn't mean that we're not really interested in bank transactions. There's been a little bit more of a pickup in the way of discussions, I would call it, but we all know the hurdle rate in terms of rates and marks and values. And so a lot of things need to come together for those to happen, but we remain engaged on that side of the business as well.

Christopher O'Connell

Great. That's helpful. And then can you talk a little bit about what you're seeing on the credit side at all, the trends looks very solid this quarter in terms of your NPAs and delinquencies. And but you mentioned that the reserve you brought up a little bit on the business lending and consumer direct portfolios. Is there anything that you're seeing there that's different or where credit costs may tick up in those segments over time?

Dimitar Karaivanov

Yes, good question, Chris. So on the credit look, our outlook has not really changed much. And we believe that with an unemployment rate of under 4%, a tremendous amount of government spending and nominal GDP growth of 5%. The outlook for credit is positive across the board. And having said that, if you just think about the distribution of probabilities, if you will, this quarter again of this quarter versus last quarter. If we are to remain in a bit of a higher for longer scenario, eventually the higher cost of credit has to feed through and find its way into the real economy. So we looked at our model, which actually suggested a little bit of a lower quantitative outcome compared to prior quarters. And I don't think that that's a big surprise. You've seen a lot of banks actually released reserves this quarter. We just didn't think that it was it was appropriate for us given the outlook and our loss coverage remains very, very strong. I mean, we've got if you take our 12 basis points of losses this quarter, we've got six years' worth of losses in the ACL so of that, that remains very strong. We just felt that given the qualitative outlook for maybe higher for longer and maybe a little bit more pressure over time at some point in the portfolios we just put on cloud a little bit.

Christopher O'Connell

Great. Thanks, Dimitar, appreciate the color.

Operator

Again, if you have a question, please press star then one.
Our next question comes from Matthew Breese with Stephens Inc.
Please go ahead.

Matthew Breese

Hey, good morning, everybody.

Joseph Sutaris

Good morning.

Matthew Breese

Joe, you had mentioned a little bit that you're starting to see this the increase in deposit costs starting to slow over time. Some and I was curious if you look at the composition of deposits that is matching up with stability, particularly in the lower cost categories as well? And along those lines, have you had any sort of projections and where we might see DDAs kind of settle out later this year?

Joseph Sutaris

Yes. I'm not sure, Matt, that I can give you precisely where time the time deposit mix will be at the end of the year. I would say that the migration that we that we saw in Q1 the expectation is that would slow just a little bit throughout the year. And we think that more most of the rate-sensitive deposits, if you will, have found their way to generally to higher cost funds. I would have said the same thing last quarter. And but the expectation is that that that migration will slow a bit, but probably will continue.
Just maybe not at the same pace that it has, it has been kind of moving through. So with that said on and will there be additional increases in the overall cost potentially throughout the year on. But we also think that the rate of increase on the deposit side will will slow a bit.
The one thing that's also worth noting that and is that now for us in particular, we have seasonal inflows of municipal deposits, and that has occurred in the first quarter. And so there were some migration, if you will, from a consumer checking account into a into a municipal account for tax collection at a higher rate. And so a little bit of our cost escalation on the deposit side was due to the rotation into those higher cost municipal accounts. So some of that will slow a bit, if you will as well. So that's why kind of the expectation of some not I'll it the same rate of increase on deposit costs as we kind of had the last couple of quarters.

Matthew Breese

Okay. And then the other the other part, I think is from prior call but there's not much in the way of securities kind of maturing or cash flow coming back to this year. Yield is well below market rates. And I was curious if you'd in a integrated way, it's configured securities restructuring to kind of get that book up to market rates.

Joseph Sutaris

I think, Matt, to come to the right, obviously is Malta folks have a securities portfolio that's below market. And there are pieces, though, of the securities portfolio that are much closer to market and in this first quarter were identified a decent amount of those securities and kind of the rates ran away from us in the second half of the quarter. But if there is a bit of a rate pullback, we have a not insignificant amount of potential liquidity in the portfolio that we could re-lease it value is pretty close to par. So I think that's how we're looking at it in terms of something similar to what we did last year on it for us, it does come back to net present value of those cash flows. So last year, when we did our restructuring, I think the 10-year was was below four. We pulled forward three years worth of cash flows, and we're getting those back now with the higher for longer scenario for probably 18 months instead of the two years that we estimated initially. So very positive NPV transaction. If we have another opportunity to do so we're going to look into it. But my guess is until we get kind of that for hand though, again, as a reminder, our portfolio is 85% treasury. So it is very certain in terms of outcome, but it is tied to that Treasury course.

Matthew Breese

Yes. Okay. And then last one for me is just inventory on whole bank M&A. It feels like deals are more under the microscope from a regulatory perspective. Than ever and sort of deals, are you expecting a fairly routine or taking longer or haven't gotten done? And I was curious if that's played into your thinking or how that might be a competitive advantage given all the deals over the years?

Dimitar Karaivanov

Yes. I think, Matt, it does come. We feel like we've got a very good track record of execution. So to your point that it does, it does enable us to make a case and differentiate ourselves in discussions. I think what this does, though, if you're just kind of sitting there and thinking about capital deployment is and you've got now uncertainty on timing and in our experience deals and, you know, acquisitions don't get better over time as they sit in uncertainty so the question is, how do you price that uncertainty in the transaction? And that's also hard discussion to have would it would accelerate because it's kind of no one's fault, but clearly the asset is going to be worth less to us, you know, in 18 months than it is in nine months and then it is in six months. So that's something that's kind of percolating in the back of some of those discussions. It's hopefully that as we get more transactions kind of through the pipeline and there's an industry, there will be a little bit more of a playbook right now. The playbook is also a little bit uncertain because every agency came out with kind of new proposed rules and their proposed. But sometimes that means a little bit more than just proposed. And so we have to evaluate all of that as we think about capital deployment.

Matthew Breese

Great. That's all I had. I leave it there. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mr. Dimitar for any closing remarks.

Dimitar Karaivanov

Thank you, Nick, and thank everybody who participated and listen to our call. We really appreciate your support and interest in our company, and we look forward to speaking to you after our second quarter. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.