Community Bank System, Inc. (CBU)’s Fourth Quarter and Year End 2014 Earnings Conference Call Transcript

And again, back to Collyn’s question if you just use sort of January 22nd as your date to look at that there is really kind of a lot of attractive securities out there for us today. So I would argue at least for the first part of year here we are probably going to pass and use expired cash flows to just payoff short term debts, which again, we’ll have the risk of pushing down net interest income in the margin a little bit, but it’s probably the productive outcomes based on the choices of the market.

Matthew Breese – Sterne Agee
Right, so given that kind of margin outlook and the loan growth outlook along with that, we should expect lower net interest income 2015 versus 2014. Is that correct?

Scott Kingsley – Executive Vice President & Chief Financial Officer
Yes, I think from a modeling standpoint Matt, that’s not out of, that’s not out of the realm of possibility. I have to admit I think this is our fourth consecutive January call saying that, it hasn’t happened yet, but certainly from a modeling standpoint, you could see that in 2015.

Mark Tryniski – President & Chief Executive Officer
Well, I think the other point Scott is, if you look at the funding costs, the decline in the funding cost has got into the point where it’s almost zero. So we’ve been able in the last couple of years to continue to bring down funding cost as asset yields have come down and we have essentially, what we’re just about is the bottom there, so.

Matthew Breese – Sterne Agee
Maybe thinking ahead about the eventual increase in interest rates and your interest rate sensitivity. What kind of deposit data are you assuming for your interest bearing account?

Scott Kingsley – Executive Vice President & Chief Financial Officer
Matt, ask that one more time, I couldn’t hear the end of your question.

Matthew Breese – Sterne Agee
Looking ahead towards when the eventual increase in interest rate actually occurs. What kind of deposit beta are you assuming for your interest bearing accounts?

Mark Tryniski – President & Chief Executive Officer
What we’ve actually done from a modeling standpoint and what we disclose on a quarterly basis Matt is we’re using what happened in actual changes in account structure and the variability from a rate standpoint in that period of 2004 to late 2006. I’m not saying that that’s the perfect representative period of time to think about sort of this is the 15, 16 timeframe or 17 timeframe, but it’s the only one we’ve got that actually had an interest rate increase and we can actually look back and say how did our deposits, our products react to that.