Good day, and welcome to the Community Bank System Third Quarter 2021 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 ks filed with the Securities and Exchange Commission. Today's call presenters are Mark Trunisky, President and Chief Executive Officer and Joseph Soteras, Executive Vice President and Chief Financial Officer.
They will be joined by Joseph Serban, Executive Vice President and Chief Banking Officer, for the question and answer session. Gentlemen, you may begin.
Thank you, Chad. Good morning, everyone, and thank you for joining our Q3 conference call. We hope everyone is well. I think earnings for the quarter were right in line with our expectations and impacted by the same influences in the past several quarters. Margin continues to be a headwind, like deposit fees, the strength of our financial services businesses and credit are tailwinds, and we saw that this quarter.
The bigger story for us in the quarter was loan growth. We had growth in every one of our portfolios this quarter ex PPP and our pipelines and market activity continue to be very strong. We're encouraged by these trends and have really good momentum right now across all of our credit businesses. We also increased our securities book in the quarter given the market opportunity and that will be additive to future earnings as well. I think Joe will provide more detail on that.
The strength recent strength of our financial services businesses continued in the quarter with revenues up 17% and pre tax earnings up 22% over 2020. We also closed on the acquisition of Fringe Benefits Design of Minnesota, a provider of retirement plan, administration and consulting services with offices in Minneapolis and South Dakota. Their performance out of the gate has been exceptional, so we expect that will be a productive addition to our benefits business. Our Benefits, Wealth and Insurance businesses are all performing extremely well right now in what is a very productive growth, pricing and M and A environment for those businesses. On the human capital front, as we previously announced, I'm delighted that Maureen Gillian Meyer has joined us as Executive Vice President and Chief Human Resources Officer.
She previously held the same role for HSBC USA and will bring tremendous experience, expertise and business judgment to and we look forward to her contributions to our continuing human capital efforts. Lastly, Earlier this month, we announced an agreement to acquire Elmira Savings Bank, a $650,000,000 asset bank with 12 offices across the in the Southern Tier and Finger Lakes regions of New York State. It's a very nice franchise with a very good mortgage business that we expect will be $0.15 per share accretive on a full year basis, excluding acquisition expenses, so a very productive low risk transaction. We have targeted a closing date in Q1 of next year. Looking ahead, we like our current momentum across the company and all of our businesses.
Joe?
Thank you, Mark, and good morning, everyone. As Mark noted, the 3rd quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.83 The GAAP earnings results were $0.04 per share or 5.1 percent higher than the Q3 2020 GAAP earnings results, but $0.02 per share or 2.4% below the prior year's Q3 on an operating basis. The decrease in operating earnings per share is driven by a decrease in net interest income and higher operating expenses as well as increases in income taxes and fully diluted shares outstanding, offset in part by lower credit related costs and an increase in non interest revenues, particularly in the company's non banking financial services businesses. Comparatively, the company recorded fully diluted GAAP in operating earnings per share of $0.88 in the linked Q2 of 2021. The company recorded total revenues of $156,900,000 in the Q3 of 2021, an increase of $4,300,000 or 2.8% over from prior year's Q3.
The increase in total revenues between the periods was driven by a $6,900,000 or 16.9 percent increase in financial services revenues, offset in part by a $2,200,000 decrease in banking related non interest revenues and a $400,000 or 0.4 percent decrease in net interest income. Total revenues were up $5,400,000 or 3.5 percent from the Q2 of 2021 results, driven by $500,000 or 0.5 percent increase in net interest income, a $1,400,000 increase and banking related non interest revenues and a $3,500,000 or 8% increase in financial services revenues. Total non interest revenues accounted for 41% of the company's and total revenues in the Q3. Although net interest income was down only slightly from the same quarter last year, the results were achieved in a significantly lower net The company's tax equivalent net interest margin for the Q3 of 2021 was 2.74% as compared to 3.1 2% 1 year prior, a 38 basis point decrease between the periods. Comparatively, the company's tax equivalent net interest margin for the Q2 of 2021 was 2.79 percent and are expected to be 5 basis
points higher than the Q3.
Net interest margin results continue to be negatively impacted by the low interest rate environment and the abundance of low yield cash and the tax equivalent is being maintained on the company's balance sheet. The tax equivalent yield on earning assets was 2.83% in the Q3 of 2021 as compared 2.89% linked 2nd quarter and 3.28 percent 1 year prior. During the Q3, the company recognized $4,300,000 of PPP related interest income, including $3,700,000 of net deferred loan fees. This compares to $3,000,000 of PPP related income recognized in the same quarter last year and $3,900,000 in the linked Q2 of 2021. On a year to date basis, the company has recognized $15,100,000 of PPP related net interest income.
The company's total cost of deposits remained low, however, averaging 9 basis points during the Q3 of 2021. Employee Benefit Services revenues for the Q3 of 2021 were $29,900,000 $4,800,000 or 18.9 percent higher than the Q3 of 2020. The improvement in revenues was driven by increases in employee benefit trust and custodial fees as well as incremental revenues from the acquisition of fringe benefits designed in Minnesota during the quarter. Wealth Management revenues for the Q3 of 2021 were $8,300,000 up from $6,900,000 in the Q3 of 2020. The $1,400,000 or 20.8 percent increase in Wealth Management revenues was primarily driven by increases in Investment Management and Trust Services Revenues.
Insurance Services Revenues of $9,200,000 were up 0.6 and Safe Line's insurance practice. Banking noninsured revenues decreased $2,200,000 or 11.5 percent from $19,100,000 in the Q3 of 2020 and $16,900,000 in the Q3 of 2021. This was driven by a $3,500,000 decrease in mortgage banking Income offset in part by $1,300,000 or 8.3 percent increase in deposit service and other banking fees. On a linked quarter basis, financial service Revenues were up $3,500,000 or 8 percent, reflective of the organic and acquisition related momentum in these businesses and banking non interest revenues were up $1,400,000 or 8.7 percent. During the Q3 of 2021, the company recorded a net benefit in the provision for credit losses of and $900,000 This compares to a $1,900,000 provision for credit losses recorded in the prior year Q3.
The company's net loan charge offs were only 7 basis points annualized in both periods. During the Q3 of 2021, economic forecasts were more favorable than the Q3 2020 economic forecast driven by the post vaccine economic recovery, which in combination with elevated real estate and vehicle loan collateral values drove down the expected and life of loan losses. On a September 2021 year to date basis, the company recorded net charge offs of $1,100,000 or 2 basis points annualized. The company recorded $100,400,000 in total operating expenses in the Q3 of 2021 as compared to $97,000,000 of total operating expenses in the Q3 2020, an increase of $3,400,000 or 3.6 percent between the periods. Operating expenses exclusive of litigation and acquisition Related expenses increased $7,200,000 or 7.7 percent between the comparable quarters, dollars 5,600,000 of which was driven by an increase in salaries and employee benefits due to acquisition related staffing increases, merit incentive related employee wage increases, higher payroll taxes and higher employee and other expenses were up $900,000 or 8.7 percent due to the general increase in the level of business activities.
Data processing and communication expenses were also up $900,000 or 7.2% due to the company's implementation of new customer facing digital technologies and back office systems between the comparable periods. Occupancy and equipment expense decreased slightly due primarily to branch consolidation activities between the periods. In comparison, the company reported $93,500,000 of total operating expenses in the Q2 of 2021. The effective tax rate for the Q3 of 2021 was 21.1%, up from 20.3% in the Q3 of 2020. The increase in the effective tax rate was primarily attributable to an increase in certain state income taxes that were enacted in the Q2 of 2021.
The balance sheet pressed the $15,000,000,000 total asset threshold during the Q3 due to the continued inflows of deposits, which increased $384,800,000 or 3.1 percent from the end of the second quarter. The company's low yielding cash and Cash equivalents remained elevated totaling $2,320,000,000 at the end of the quarter despite the company purchasing 536 $900,000 of investment securities during the quarter. Ending loans at September 30, 2021 were $7,280,000,000 $38,400,000 or 0.5 percent higher than the 2nd quarter 2021 ending loans of $7,240,000,000 and $176,100,000 or 2.4 percent lower than 1 year prior. Excluding PPP activity, ending loans increased $154,100,000 or 2.2 percent in the 3rd quarter. This increase was driven by growth in all five loan portfolio segments, consumer mortgages, consumer and direct loans, consumer direct loans, home equity and business lending excluding PPP.
As of September 30, 2021, the company's business lending portfolio included 13.86 PPP loans with a total balance of $165,400,000 This compares to 2,571 PPP loans with a total balance of $284,800,000 at June 30, 2021. The company expects to recognize its remaining net deferred PPP fees totaling $6,300,000 over the next few quarters. Company's capital ratios remained strong in the Q2. The Company's net tangible net tangible assets ratio was 8.59% at September 30, 2021. This was down from 9.92% a year earlier to 9.02% at the end of the Q2.
The Company's Tier 1 leverage ratio was 9.22% at September 30, 2021, which is nearly 2 times the well capitalized and regulatory standard of 5%. The Company has an abundance of liquidity, the combination of the Company's cash and cash equivalents, borrowing availability of the Federal Reserve Bank's borrowing capacity at the Federal Home Loan Bank and unpledged available for sale investment securities portfolio provided the company with over 6 $180,000,000 of immediately available sources of liquidity at the end of the Q3. At September 30, 2021, we had 0.6 8 percent of total loans outstanding. This compares to $51,800,000 to 0.71 percent of total loans outstanding at the end of the Q2 of 2021 and $65,000,000 or 0.87 percent, so ends up hitting September 30, 2020. The decrease in the allowance for credit losses is reflective of an improving economic outlook, very low levels of net charge offs and a decrease in specific reserves.
We expect to increase in the Q3 to $67,800,000 or 0.93 at the end of the linked Q2 of 2021, but up from $32,200,000 or 0.43 percent of loans at the end of the Q3 of 2020, due primarily to the reclassification of certain and how loans under extended forbearance from accrual to non accruing status between the periods. Laws 30 to 89 days delinquent totaled 0.35 Percent of loans outstanding at September 30, 2021. This compares to 0.36% 1 year prior and 0.25% at and the linked Q2. Management believes the low levels of delinquent loans and charge offs have been supported by extraordinary federal and state government financial assistance provided to consumers throughout the pandemic. During the Q3 of 2021, the company increased its quarterly cash dividend $0.01 or 2.4 percent to $0.43 per share on its common stock.
This increase marked the company's 29th consecutive year of dividend increases. Looking forward, we remain focused on new loan generation and will continue to monitor market conditions to seek the right opportunities to deploy our excess liquidity. Our loan pipelines are robust and asset quality remains very strong. We also expect net interest margin pressures to persist and remain well below our pre pandemic levels, but also Believe our abundance of cash equivalents represents a significant future earnings opportunity. We're also fortunate and pleased to have a strong non banking businesses that have supported and diversified our streams of non interest revenue.
And lastly, to echo Mark's comments, we are pleased and excited to be partnering with Elmira Savings Bank. Elmira has been serving its communities for 150 years and will enhance our presence in 5 counties in Europe's Southern Tier and Finger Lakes regions. At June 30, 2021, Elmar had total assets of $648,700,000 total deposits of 551 point and $2,000,000 in net loans of $465,300,000 We expect to complete the acquisition in the Q1 of 2022, subject customary closing conditions, including approval by the shareholders of Almirall Savings Bank and required regulatory approvals. Thank you. I'll now turn it back to Chad to open the line for
Thank you, sir. We will now begin the question and answer session. And the first question today will be from Alex Twerdahl with Piper Sandler. Please go ahead.
Hey, good morning guys.
Good morning Alex. Good morning Alex.
Yes, first off, just wanted to To talk about loan growth for a little bit, I think historically you guys have been kind of on an organic basis, a low single digit loan grower on an annual basis. Based on what you did this quarter and some of the commentary on the pipelines and sort of your outlook, do you think that maybe something shifted and that loan growth on Organic basis can be higher than the sort of low single digit rate that has been the historical trend?
Yes, Alex, good question. I'll make a couple of comments and then as Joe was serving to comment a little bit further. But I think you're right, historically low single digits. I don't know if we consistently achieve that to be fair. I think also our markets, There are low growth markets.
I think we've executed reasonably well in those markets given the growth opportunities, but I think we've also we have an opportunity to execute better organically in terms of our loan businesses. And so we're starting to focus on that a little bit. We've always, We've done a lot of M and A and I think that's an additive. I think without having done the M and A as kind of An opportunity for us to create shareholder value, we would have difficulty in our markets. So I think that's been a tremendous strategy, but I just think we can I think we've executed well on it?
I think on the organic side, we can do a bit better. And it's pretty meaningful. I mean, if we can move the needle even a little bit organically, that will make a fairly significant difference in terms of earnings potential. So we've put a little bit more effort into that in terms of structure, resources, quality of resources, support process, systems and just I think a greater focus on doing a bit better and optimizing our organic opportunities in our markets. And I think we're starting to see that.
So, I guess with that, as a backdrop, Joe, you can comment a little bit further maybe on the different portfolios and what we're doing there.
Sure. Alex, good morning. So a couple of comments. First, if you look at our marketplaces Over the last couple of years, we've expanded into some bigger geographies, which provides us greater opportunities. And I think that by having the right folks and leadership positions in those markets has made a significant difference for us.
So we've been able to grow in some of the larger markets organically, which is good. On the smaller end, we're looking to take advantage of some technology to allow us to spend more time outsourcing the next opportunities and grow the business. And so on that small end of the Spectrum will utilize technology to expedite processing and approvals and again hope to grow help to grow organically on the small business side. The pipeline, as Joe mentioned, it's almost tripled from the beginning of the year. And that's just an increased focus, increased calling efforts that the marketplace has given us.
So It's nothing new. It's dedicated. It's concentrated. It's regimented. We got the right folks in line in the right management positions for us to execute and for us to continue to or to exceed some of the lighter loan growth that we've experienced organically over the past couple of years.
The only thing I would
add to that, Alex, is this is not about credit risk or credit quality. That is not going to change. And we made that very clear upfront that we just We want to execute better in terms of our sales cycle, let's call it, in our markets across our different portfolios. So this is We are not anything that any improvement that we achieve will not be at the
Alex, do more of the same. That's the theme, do more of the same.
Great. That's helpful commentary. Just the comment on the pipelines having tripled since the beginning of the year, is that overall pipelines or just the commercial pipelines?
So that's the commercial pipeline. The mortgage pipeline has hung in there residential mortgage pipeline has hung in there nicely for us too and It continues to be strong. I will tell you that our application volume on the resi mortgage side through to tender surpasses all of the application volume we did for the full year last year. So that bodes well for us as we're heading into the Q4. So it's a strong pipeline and it should carry us they said it should carry us through the end of the year.
Great. And the plan is to continue to put Residential on balance sheet versus selling it into the secondary market?
Correct.
Great. And then the other thing that jumped out to me this quarter is the salary and benefits line, which came in. I think you alluded to it in the prepared remarks, Joe, about where it came in versus last quarter. Can you just talk about how much of that might be related to the acquisitions you did during the quarter, how much of it might be non run rate, I guess, would be the best way to put it. And so What the expectations should be for the Q4 prior to layering on Elmira next year?
Yes. That's a very good question, Alex. So just to provide some backdrop and some color, prior to the pandemic, We were kind of calling a run rate that was somewhere around $95,000,000 to $96,000,000 on a quarterly basis. That's just an average run rate. And then the pandemic hit, and we had some decreases in expenses for various reasons, less travel, Just a lot, new business activities were down across the board, across all of our businesses.
So, our operating expenses came in very low Last year during the pandemic, they were down in the $93,000,000 to $94,000,000 range. So sort of level setting back to, I'll call it, the post or the pre pandemic levels. Run rate was about 96%, 95%, somewhere in that general range. We added we had 2 acquisitions during the quarter that added a couple of $1,000,000 of Total OpEx, including the amortization components of those transactions, but all in added about $2,000,000 to the total a Couple of $1,000,000,000 to the OpEx. We had a couple of 1, probably likely non recurring items totaling maybe $1,000,000 in the quarter.
So, expectations on a going forward basis, really I would kind of You can look at this quarter's number and back off maybe $1,000,000 somewhere in that range. When we hit the Q1, For most of the Q1, we do incur higher payroll taxes. So we usually get a little bump there from an OpEx standpoint. And then if we're Successful closing Elmira late in the Q1, obviously, it will change from that point going forward.
Okay. So the salaries and benefits line that is more the $62,900,000 that Is a pretty decent run rate going into next quarter?
I think that's a decent run rate going into next quarter. There are a couple of items And there that were a little higher than our expectations. I'm not sure if those will settle down a bit in the Q4, but conservatively I would probably use what we incurred in the Q3 for the Q4 run rate.
Thanks for taking my questions.
Thanks, Alex.
The next question will be from Eric Zwick with Boenning and Scattergood. Please go ahead.
In the prepared remarks, you mentioned some plans to make some investments in 4Q and the securities portfolio. Curious if you could provide any color there in terms of the magnitude as well as kind of Expectations for yield and duration of what you're looking to add?
Yes, I'll take that, Eric. So At the end of the Q3, we saw some opportunities in the securities markets and we purchased some Kind of in the belly of the curve, 5 7 year type paper. We came in on a blended basis at about a 1 $20,000,000 on $536,000,000 of activity, most of which hit really at the end of the quarter. So we really didn't realize and the interest income benefit of those purchases during the quarter, but we were active as Rates kind of get back into the range that we were hopeful for. If you recall, we were on the sidelines at the end of Q2.
Actually, since we've closed the quarter, we've been active with another couple of $100,000,000 Rates are up a little bit, so we continue to be active. We'll see what the rest of the quarter holds for us. But, the continued inflow of deposits is providing us it's Continued inflow of deposits is providing us continued upside from a net interest income standpoint, not necessarily A total rate margin outcome, certainly not back to pre pandemic levels, but I would expect that we'll continue to be active in the market throughout 4th quarter and to the tune of a couple of $100,000,000
Thanks. And I hear you on the net interest Income potentially growing larger as the balance sheet does. And just thinking about the profitability aspect and the net interest margin, if you're going to put more Securities to work here, it sounds like the loan pipeline is really strong for at least another quarter or so. Do you see a point where the core net interest margin can Bottom and start to increase again or what are your expectations for when that might occur?
Yes. Eric, That's a very good question. And I want to just qualify that comment. The PPP income Through the 1st three quarters was about $15,000,000 So some of the securities activities that We're taking on the 3rd quarter took on the 3rd quarter and into the 4th quarter are effectively a replacement, if you will, of some of that PPP income. So, the net interest income levels will be hopefully comparable with that in that regard.
However, on the loan side, our yield on the loan portfolio was about a 4.15%, 4.16%, I believe, for the quarter. If you back out PPP, it's kind of around a 3.90 something. It's kind of it's down a little bit. Our new volume is going on a little under 3.5. So, the challenge from a loan perspective is having the volume increases outpace the lower yield, Just what the market is giving us right now.
So, really that becomes the challenge as we move ahead. So, hopefully, Between the size of the pipeline, the growth and even though it's going on a little lower rate, we can keep our head above water on the loan interest income side. On the cost of fund side, I mean, we're about as low as we're going to go. Maybe there's another basis point in there, but at 9 basis points, it's difficult to really do much on the funding side at this point.
That's helpful. Thanks. And then just thinking about the loan loss provisioned in the reserves today. You referenced the improving outlook for the economy as well as better collateral values for real estate In automobiles as such. And then I guess the PPP continues to run off for a couple more quarters.
If you start to get to the point where you're seeing some net loan growth, Should we start to see positive provisioning again at this point? Or are you happy with, I guess, as the model kind of where it has the reserve today, how to think about those puts and takes? Yes.
So, there's a couple of moving parts in there, Eric. So, yes, I would expect with loan growth, typically, We need to reserve more dollars and therefore go to the positive side of the provision. The economic outlook is a variable that can change and can impact that reserve level. That remains to be seen. The other thing too is that we now have a charge off history.
Part of the basis of the model is kind of the quantitative components of the model and the charge off history is just it's lower. We haven't had significant charge offs in the last 12 months and so that also impacts the quantitative side. So there's also we have to bake that into the model. If you look at kind of our last 12 months of charge offs, you look at our reserve, right now it's about 19 times in the last 12 months, but I don't believe that necessarily the last 12 months are indicative of the future. But nonetheless, the reserves relative to historical Charge offs is pretty high at this point.
But I think a fair expectation is that provisioning would We'd probably be closer to charge off levels and probably there will be positive provisioning would be my best guess at this point. But it's hard to really improve much on the economic outlook.
Thanks for taking my questions today.
Thank you, Eric.
The next question will be from Russell Gunther with D. A. Davidson. Please go ahead.
Hey, good morning, guys.
Hey, Russell. Good morning, Russell.
I just want to spend a minute on the fee income outlook, if we could. Continue to have really strong organic revenue growth in the differentiated verticals. Could you share with us your expectations for revenue outlook within employee benefits and insurance and wealth on an organic basis going forward and then what you might expect to be able to supplement with continued acquisitions.
Thank you.
It's Mark, Russell. I think those businesses have really since COVID have really performed well. The environment is good for those businesses in terms of growth opportunities and potential. The pricing in those markets is pretty good. Some of them are equity and Market dependent, which that's been additive as well because the markets continue to be strong.
So all of the benefits, wealth and insurance have all performed extremely well for a number of quarters, probably the last couple of years. They've been really strong. But as of late, The past 4 quarters have been tremendously strong and they continue to grow. I mean interestingly enough, they're also growing their revenues faster than their expenses. So the margins are actually So, I don't see anything on the horizon that could derail that necessarily into the future.
So I think on the non bank side, hopefully those conditions will continue to exist. There's been a fair bit of M and A activity in the benefit space as well, which we participated in. We continue to have those opportunities as well. We think that might continue at least into the foreseeable On the non bank side, it's been or on the bank side, excuse me, We got hammered during COVID, like everyone else, but that's really kind of started to come back and continue to trend upward. The interchange in debit revenues continue to be very strong.
Overdraft is not where it was, but It's coming back and there may be potential regulatory pressure on that revenue stream as well, which we have conversations about. Right now, I think it's hard to predict. It's hard to put a number on it. We're up on the non bank side, as I said, 17 This quarter over last year, the pre tax earnings are up 22%, so we're actually creating margin as well as we gain revenues in those businesses. So it's the future continues to look good into the foreseeable future, but it's not you can't predict.
So I think kind of handicap it with a number, I think is very difficult to The Wealth business this year has had tremendous growth in revenues and earnings, the Benefits business Tremendous growth in revenue and earnings. The insurance business is up a little bit less. Margin is also up a fair bit. So really Strong execution on all three of those businesses in the quarter and we expect that into the foreseeable future.
I appreciate it, Mark. Thank you. That's it for me, guys.
Thanks, Russell. Thank you,
The next question will be from Matthew Breese with Stephens Inc, please go ahead.
Hi, good morning. Maybe going back to loan growth. So the two areas that you showed the most growth this quarter was mortgage and indirect. And as I think about those segments, both have their and distinct macro headwinds. So mortgage is going to be dealing with higher rates and indirect with inventory and chip shortages.
So I hear you on the pipeline, but I wanted Your thoughts on those items specifically as headwinds and the sustainability and durability of the pipeline? And how long before do you think loan growth kind of and reverts to historical averages.
Hey, Matthew, it's Joe, I'll take that. So on the indirect side, you hit it right on the head when you We spoke about the chip shortages and supplies and the impact on opportunity. We expect to go through the 4th quarter, Maybe slipping a little bit going back a little bit, still growing, but not to the same magnitude as we have in the other in the prior three quarters. And then certainly as you're heading into Q1 and beyond, I guess it's going to be a little bit difficult to handicap where we think The chip shortages or the supply shortages are going to impact us, but clearly something that we need to keep our eye on and focus On the resi mortgage side, I think it's going to slow down for us a little bit, but with an increased focus of model strategy and dedication of people. I think that we'll be able to continue to grow in the resi mortgage business through 2022.
I think I would just add the other thing I've seen in the mortgage business In our markets, it's not as volatile as it is in some of the bigger markets where the markets really ramp up and cool down quickly and Our markets don't do that, they're more stable. So we can we should be able to generally achieve kind of 2% to 4% run rate on growth in that and business in our market. I'll be honest, I'm shocked that the car business is up as much as it is considering there's Inventory, it's surprising, but it's good. We've got Some of the competitors have kind of gotten out of that market as rates came down and then you had kind of the impact of the recession and all of that. So there was some kind of disruption in that market as well and we've been in that business for a long time and we stay in it.
We don't get in, we don't get out. We have good relationships with our dealer So I'm not surprised that our growth was better than maybe the market, but I'm surprised on an absolute basis that it's where it's at. If you would have told me in the Q3 of last year, it would be up 12.5% in our Our business, I would not have believed it, but here's where we're at. So I think that will probably slow down a little bit as well.
Got it. Okay. And then turning back to the employee benefit services businesses, obviously revenues were up nicely this quarter. How much of that increase was due to recent acquisitions? How much of it was due to just the business growing organically?
And then you also mentioned additional acquisitions in the space. So where should we expect quarterly employee benefit services revenues to settle out before it starts to just grow on its own and on an organic basis.
I think The vast majority of the growth in the quarter was organic, not acquired that FPD The acquisition was not that big, came on during the quarter. So The success of those businesses over the last 4 quarters and beyond, frankly, It's a multiyear kind of building and growth process for those business, but it's mostly all organic.
Okay. And then just staying on this topic, I mean, oftentimes with these fee income businesses, great for fees, great for ROA, but what gets lost in the fold are the associated expenses. You mentioned margins are higher. Could you just give us some sense for the efficiency or with the profit margin on the employee benefit services business is.
We generally have not kind of disclosed that separately. I would tell you though that it's over 35%.
On the margin? Yes. Got it. Okay. And then the
last one for me.
Joe, we talked
a little bit about the outlook for the NIM. I was just curious, if we continue to see some securities purchases and some decent loan growth, do you have any idea on the outlook for for NII. I mean, it's been growing at kind of a low to mid single digit clip. Do you think that's sustainable through the acquisition of Elmira.
Yes, Matt. I think it's Sustainable because of the security purchases that have replaced some of the PPP recognition. There's Still $6,000,000 of $6,300,000 of PPP net deferred fees as well. I know you didn't get asked about core, but some of that will be recognized between now and the Elmira transaction as well. But from a on a core basis, I think we can Kind of keep our head just above level, just slightly above water because of the securities purchases.
So I think that will be the likely outcome until we hit Elmira.
Great. I appreciate it. That's all I had. Thank you. Thank
you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back Over to Mr. Chernetsky for any closing remarks.
That is it for us here in Syracuse. So thank
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.