Community Bank System Inc. (NYSE:CBU) Q2 2020 Earnings Conference Call - Final Transcript

Jul 27, 2020 • 11:00 am ET

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Community Bank System Inc. (NYSE:CBU) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Alex Twerdahl with Piper Sandler. Please go ahead.

Analyst
Alexander Twerdahl

Hey, good morning guys.

Executive
Mark E. Tryniski

Good morning Alex.

Executive
Joseph E. Sutaris

Good morning Alex.

Analyst
Alexander Twerdahl

First question, just on the additional reserve build this quarter. Was that mostly driven by just a change in the economic scenario inputs to the model or was there any portion of it that was actually related to any loan downgrades in the second quarter?

Executive
Joseph E. Sutaris

Hey Alex, it's a good question. Most of the reserve build was really due to changing economic conditions and continued challenges with the economic forecasts as we kind of look ahead. But we also try to estimate what would happen to delinquency given the level of deferrals which is really sort of a non-economic qualitative factor. We have seen some modest migration in risk ratings, but not significant yet.

We expect that in the third and the fourth quarter, however, that we'll continue to see some -- probably some migration downward relative to the risk rating and probably higher level of delinquency, but our -- we'll continue to monitor that and monitor our customers to determine if there is additional provision requirements in the third and the fourth quarter.

Analyst
Alexander Twerdahl

Okay, thanks. And then, appreciate all the additional color that you guys provided in this accompanying slide presentation on some of the more at-risk portfolios. But I was wondering if you can just kind of help us all on the line understand just sort of where your economies are in upstate New York in terms of reopening?

And then, kind of as you look at some of the higher categories on that list of at-risk, you know the retail and the lodging, if you have any sense for sort of what -- sort of the utilization of some of these properties are right now, so we can kind of get a better sense for whether or not kind of where the risks or the kind of things we should really be focusing on in terms of credit will be?

Executive
Mark E. Tryniski

Hey Alex, it's Mark. I would just broadly and let Joe Serbun to maybe to comment in a little more detail, but I'll say that in our markets, we were fortunate we've had lower infection rates almost across all our markets even -- in every state essentially and a lot of that is driven by the fact that there are less non--metropolitan -- less metropolitan.

So I think that was, that's been a help for us that there hasn't been this severity of infections and lock-downs and the related impacts. Most of our markets are opened for business except for certain high risk businesses still, like gyms and bowling alleys and some other things, but most of it is open, which has been good.

Clearly, it was interesting the trend and which is really directly tied to economic activity which is -- which is debit swipes. So I mean, we can