(Source: Business Wire)
Community Bank System, Inc. (NYSE: CBU) reported quarterly net income of
$12.5 million in the third quarter of 2009, an increase of 5.7% compared
to the $11.8 million reported for the third quarter of 2008. Quarterly
earnings per share of $0.38, were $0.01, or 2.6% below the $0.39
reported in the third quarter of last year. Year-to-date 2009 net
earnings of $32.1 million, or $0.97 per share, were $1.9 million, or
5.6%, below reported earnings for the first nine months of 2008. 2009
results include an additional $6.0 million of FDIC-insurance related
assessments, or $0.14 per share, in comparison to the first three
quarters of 2008.
"Earnings per share for the quarter were $0.01 better than the third
quarter of 2008 (excluding the FDIC's additional deposit insurance
assessments), driven by a 13% increase in net interest income, and a 16%
expansion in banking non-interest income generation," said President and
Chief Executive Officer Mark E. Tryniski. "Core deposits grew at a 17%
pace, and we continued to deliver loan and core deposit growth in
Plattsburgh and the other northern New York markets that comprise the 18
branch banking centers that we acquired in November 2008. Our
disciplined approach to business continues to produce solid operating
results in challenging operating conditions."
Third quarter net interest income grew to $41.9 million, an increase of
12.9% above third quarter 2008, driven by a 4.0% increase in average
loans, partially offset by a four basis-point reduction in net interest
margin to 3.78%. The Company's lower margin was the result of our
decision to remain in a very liquid position throughout the quarter
including an average of $293 million of overnight cash equivalents, or
6.1% of interest earning assets, earning a yield of 27 basis points.
Continued disciplined deposit pricing resulted in a 68-basis point
reduction in the total cost of funds, compared to the third quarter of
2008, however this was offset by a 69-basis point decline in earning
asset yields, including cash equivalents. On a linked quarter basis, the
Company's net interest margin improved five basis points, reflective of
a 14-basis point reduction in cost of funds, partially offset by a nine
basis point decline in earning asset yields.
Third quarter non-interest income (excluding securities gains/losses)
increased $1.4 million, or 7.3% over the same period last year. Deposit
service fees increased $2.0 million, with the majority of the growth
derived from the branch acquisition. Mortgage banking revenues were
consistent with the third quarter of 2008, but were significantly lower
than those generated from the robust secondary market activities
experienced in the first two quarters of this year. Third quarter other
banking services revenues included $0.3 million of annual dividends from
pooled credit life and disability insurance programs, which were $0.4
million below the same period in 2008. The Company's employee benefits
administration and consulting businesses posted a modest increase in
revenue over the third quarter 2008, with new client gains tempered by
negative year-over-year comparisons from asset-based revenues. Third
quarter wealth management revenues decreased 12.7% from the third
quarter of 2008, also reflective of continued difficult market
comparisons and generally weak demand.
Quarterly operating expenses (excluding acquisition expenses) of $44.1
million included an additional $1.0 million of FDIC-insurance
assessments compared to the third quarter of 2008, or $0.02 per share.
Excluding the higher assessments, operating expenses increased 10.0%
over the third quarter of 2008, and primarily reflected the operating
costs of the 18 branches purchased last November, as well as higher
pension costs related to the unfavorable investment performance of
underlying plan assets in 2008.
Financial Position
Average earning assets for the third quarter were $4.80 billion, up
$27.3 million from the second quarter of 2009, and included a $22.8
million decline in loans primarily from continued principal amortization
in the Company's consumer mortgage and home equity portfolios, combined
with its decision to again sell the majority of its longer-term, lower
rate mortgage originations in the quarter. Business lending and consumer
installment portfolio balances declined slightly from the end of the
second quarter, reflective of relatively soft demand. Average investment
securities increased $72.9 million in the quarter, while cash
equivalents decreased $22.9 million, reflective of the Company's ability
to begin to productively deploy some of its excess liquidity. Total
average deposits grew $18.4 million in the quarter, including the
continuation of the desirable trend toward proportionately more core
accounts, which increased $107.5 million from the second quarter.
Compared to the third quarter 2008, average earning assets increased
$554.4 million, comprised of organic and acquired loan growth of $119.0
million, and additional investment securities, including cash
equivalents, of $435.4 million. Average deposits for the third quarter
were $3.87 billion, an increase of $624.0 million from the third quarter
of 2008, and reflected meaningful organic growth in core deposits in the
first nine months of 2009, as well as the branch acquisition completed
in the fourth quarter of 2008. Average borrowings for the quarter of
$858.5 million were consistent with the second quarter of 2009, and down
$67.9 million from the third quarter of 2008. Average shareholders'
equity for the quarter of $559.8 million was up $9.7 million from the
second quarter, and was $72.5 million above the third quarter of 2008,
and included the $50 million in common equity (2.5 million shares)
raised in October 2008, in support of the branch acquisition.
Mr. Tryniski added, "The Company's results for the first nine months of
2009 reflect our long-term commitment to a disciplined and balanced
strategy for growth within our markets. Despite relatively soft market
conditions, we have generated year-to-date annualized growth of 2.6% in
our business lending portfolio, excluding planned reductions in our
automotive dealer floor plan business. We remain free of exposure to
subprime or other higher-risk mortgage products within our real estate
and investment portfolios, and our mortgage delinquency ratio of 1.54%
remains significantly below the industry-wide ratio of nearly 8%. On a
year-to-date basis, our consumer real estate originations are up 32%
over 2008, reflecting the comparatively stable conditions prevalent in
our primary markets."
Asset Quality
Net charge-offs in the third quarter were $1.6 million, compared to $1.7
million in the second quarter of 2009, and $1.7 million in the third
quarter of 2008. The third quarter net charge-off ratio of 0.21% was
lower than the 0.22% reported in the second quarter of 2009, and 0.23%
in last year's third quarter.
Nonperforming loans as a percentage of total loans at September 30, 2009
were 0.57%, up from 0.44% at the end of the second quarter, and up 19
basis points from the very favorable 0.38% at the end of last year's
third quarter. The $4.0 million increase in nonperforming loans for the
quarter includes one commercial relationship of $3.3 million which was
more than 90 days past due at September 30, 2009. The total delinquency
ratio of 1.51% was up five basis points from the end of the second
quarter of 2009, and increased 25-basis points from September 2008, but
remains favorable to long-term historical levels. Nonperforming assets
to total assets increased six basis points to 0.35%, versus the 0.29%
level reported at the end of the second quarter, and nine basis points
above the very favorable 0.26% ratio reported a year ago. These
generally stable, and better-than-peer asset quality metrics illustrate
the continued effectiveness of the Company's disciplined risk management
and underwriting standards.
The current quarter's provision for loan losses of $2.4 million was $0.4
million higher than both the second quarter of 2009 and the third
quarter of 2008, reflecting a stable and still historically favorable
level of net charge-offs. The ratio of loan loss allowance to total
loans outstanding was 1.33% as of September 30, 2009, compared to 1.30%
as of June 30, 2009, and 1.25% at the end of the third quarter of 2008.
Government Sponsored Programs
In November 2008, the Company announced that it had chosen not to apply
for funds through the U.S. Treasury Department's Capital Purchase
Program, which is part of the federal government's Troubled Asset Relief
Program (TARP). As such, the Company has not, nor will it incur any
charges associated with the repayment of such funds, including the
write-off of capitalized issuance costs, and the negotiation and
termination of highly dilutive warrants issued. Mr. Tryniski commented,
"We are confident that we will continue to generate sufficient capital
to respond to our business investment needs and the organic growth
opportunities in our markets."
Dividend and Share Repurchase Approval
The Company's Board of Directors approved a quarterly dividend on its
common stock of $0.22 per share, payable on January 11, 2010, to
shareholders of record as of December 15, 2009. The current cash
dividend represents an annualized yield of 5.3% based on the closing
share price of $16.47 on October 21, 2009. Mr. Tryniski commented, "The
payment of a meaningful dividend is an important component of our
commitment to continuing to provide consistent and favorable long-term
returns to our shareholders."
During the second quarter of 2009 the Company's Board of Directors
approved a share repurchase program for up to one million common shares
lasting through December 31, 2011. The Company's shares may be
repurchased from time to time in open market transactions or privately
negotiated transactions in accordance with securities laws and
regulations. The timing and extent of repurchases will depend on market
conditions and other corporate considerations. There were no share
repurchases in the third quarter.
Conference Call Scheduled
Company management will conduct an investor call tomorrow (October 23,
2009) at 11:00 a.m. (ET) to discuss third quarter results. The
conference call can be accessed at 1-866-790-1863. An audio recording
will be available one hour after the call until December 31, 2009, and
may be accessed at 1-888-284-7564 (access code 2387991). Investors may
also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=62588.
This webcast will be archived on this site for one full year and may be
accessed at any point during this time at no cost. This earnings
release, including supporting financial tables, is available within the
Investor Relations / News & Media section of the company's website at: http://www.communitybankna.com.
Headquartered in DeWitt, N.Y., Community Bank System, Inc. has $5.4
billion in assets and over 150 customer facilities across Upstate New
York, where it operates as Community Bank, N.A., and Northeastern
Pennsylvania, where it is known as First Liberty Bank & Trust. Its other
subsidiaries include: Benefit Plans Administrative Services, Inc., an
employee benefits administration and consulting firm with offices in
Upstate New York, Pittsburgh and Philadelphia, Pennsylvania and Houston,
Texas; the CBNA Insurance Agency, with offices in three northern New
York communities; Community Investment Services, a broker-dealer
delivering financial products throughout the company's branch network;
and Nottingham Advisors, a wealth management and advisory firm with
offices in Buffalo, N.Y., and North Palm Beach, Florida. For more
information, visit: www.communitybankna.com
or www.firstlibertybank.com.
Summary of Financial Data
(Dollars in thousands, expect per share data)
Quarter Ended Year-to-date
September 30, September 30,
2009 2008 2009 2008
Earnings
Loan income $ 46,067 $ 46,731 $ 138,992 $ 138,937
Investment income 15,821 15,083 47,950 47,098
Total interest income 61,888 61,814 186,942 186,035
Interest expense 20,036 24,741 64,390 77,924
Net interest income 41,852 37,073 122,552 108,111
Provision for loan losses 2,375 1,985 7,200 4,335
Net interest income after provision for loan losses 39,477 35,088 115,352 103,776
Deposit service fees 10,991 9,039 30,247 26,205
Mortgage banking revenues 226 203 3,202 598
Other banking services 669 976 1,536 1,720
Trust, investment and asset management fees 1,951 2,234 6,251 6,721
Benefit plan administration, consulting and actuarial fees 6,969 6,931 20,575 19,176
Investment securities gains and (losses), net 7 0 7 230
Total noninterest income 20,813 19,383 61,818 54,650
Salaries and employee benefits 23,166 21,114 69,188 61,272
Professional fees 1,366 1,096 3,903 3,294
Occupancy and equipment and furniture 5,533 5,304 17,458 16,066
Amortization of intangible assets 2,026 1,727 6,234 4,903
FDIC insurance 1,670 664 7,066 1,051
Other 10,350 9,313 31,838 27,956
Acquisition expenses 0 38 308 43
Total operating expenses 44,111 39,256 135,995 114,585
Income before income taxes 16,179 15,215 41,175 43,841
Income taxes 3,724 3,429 9,100 9,870
Net income $ 12,455 $ 11,786 $ 32,075 $ 33,971
Basic earnings per share((3)) $ 0.38 $ 0.39 $ 0.98 $ 1.14
Diluted earnings per share((3)) $ 0.38 $ 0.39 $ 0.97 $ 1.13
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Summary of Financial Data
(Dollars in thousands, except per share data)
2009 2008
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Earnings
Loan income $ 46,067 $ 46,134 $ 46,791 $ 47,896 $ 46,731
Investment income 15,821 15,821 16,308 16,928 15,083
Total interest income 61,888 61,955 63,099 64,824 61,814
Interest expense 20,036 21,441 22,913 24,428 24,741
Net interest income 41,852 40,514 40,186 40,396 37,073
Provision for loan losses 2,375 2,015 2,810 2,395 1,985
Net interest income after provision for loan losses 39,477 38,499 37,376 38,001 35,088
Deposit service fees 10,991 10,271 8,985 9,393 9,039
Mortgage banking revenues 226 958 2,018 169 203
Other banking services 669 554 313 723 976
Trust, investment and asset management fees 1,951 2,267 2,033 1,927 2,234
Benefit plan administration, consulting and actuarial fees 6,969 6,599 7,007 6,612 6,931
Investment securities losses, net 7 0 0 0 0
Total noninterest income 20,813 20,649 20,356 18,824 19,383
Salaries and employee benefits 23,166 23,154 22,868 21,690 21,114
Professional fees 1,366 1,253 1,284 1,270 1,095
Occupancy and equipment and furniture 5,533 5,704 6,221 5,190 5,304
Amortization of intangible assets 2,026 2,103 2,105 2,003 1,727
FDIC insurance 1,670 4,021 1,375 626 665
Goodwill impairment 0 0 0 1,745 0
Other 10,350 11,052 10,436 10,097 9,313
Acquisition expenses 0 196 112 1,356 38
Total operating expenses 44,111 47,483 44,401 43,977 39,256
Income before income taxes 16,179 11,665 13,331 12,848 15,215
Income taxes 3,724 2,510 2,866 879 3,429
Net income $ 12,455 $ 9,155 $ 10,465 $ 11,969 $ 11,786
Basic earnings per share((3)) $ 0.38 $ 0.28 $ 0.32 $ 0.37 $ 0.39
Diluted earnings per share((3)) $ 0.38 $ 0.28 $ 0.32 $ 0.36 $ 0.39
Profitability
Return on assets 0.92 % 0.69 % 0.81 % 0.95 % 1.00 %
Return on equity 8.83 % 6.67 % 7.77 % 8.96 % 9.62 %
Cash return on equity 10.02 % 7.94 % 9.04 % 11.22 % 10.84 %
Noninterest income/operating income (FTE)( (1)) 31.2 % 31.8 % 31.5 % 29.9 % 32.3 %
Efficiency ratio ((2)) 63.2 % 65.6 % 65.3 % 64.4 % 62.4 %
Components of Net Interest Margin (FTE)
Loan yield 5.94 % 5.97 % 6.06 % 6.20 % 6.29 %
Cash equivalents yield 0.27 % 0.26 % 0.25 % 0.66 % 2.18 %
Investment yield 5.41 % 5.75 % 5.82 % 5.87 % 5.78 %
Earning asset yield 5.44 % 5.53 % 5.79 % 6.00 % 6.13 %
Interest-bearing deposit rate 1.33 % 1.52 % 1.76 % 1.99 % 2.21 %
Short-term borrowing rate 4.29 % 4.29 % 4.19 % 3.73 % 3.87 %
Long-term borrowing rate 4.50 % 4.55 % 4.65 % 4.74 % 4.72 %
Cost of all interest-bearing funds 1.98 % 2.13 % 2.33 % 2.53 % 2.75 %
Cost of funds (includes DDA) 1.68 % 1.82 % 2.00 % 2.18 % 2.36 %
Net interest margin (FTE) 3.78 % 3.73 % 3.82 % 3.86 % 3.82 %
Fully tax-equivalent adjustment $ 3,941 $ 3,865 $ 4,025 $ 3,803 $ 3,645
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Summary of Financial Data
(Dollars in thousands, except per share data)
2009 2008
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr Qtr
Average Balances
Loans $ 3,082,495 $ 3,105,247 $ 3,140,524 $ 3,082,283 $ 2,963,504
Cash equivalents 292,545 315,444 155,306 79,566 4,321
Taxable investment securities 864,478 793,909 842,496 853,306 766,581
Nontaxable investment securities 560,615 558,278 559,344 534,583 511,299
Total interest-earning assets 4,800,133 4,772,878 4,697,670 4,549,738 4,245,705
Total assets 5,349,762 5,313,274 5,235,252 5,035,398 4,712,423
Interest-bearing deposits 3,164,396 3,182,827 3,123,296 2,913,671 2,658,681
Short-term borrowings 593,385 593,533 477,184 478,875 477,139
Long-term borrowings 265,120 265,169 384,852 448,622 449,292
Total interest-bearing liabilities 4,022,901 4,041,529 3,985,332 3,841,168 3,585,112
Noninterest-bearing deposits 708,430 671,615 651,298 615,540 590,098
Shareholders' equity $ 559,762 $ 550,103 $ 546,132 $ 531,627 $ 487,249
Balance Sheet Data
Cash and cash equivalents $ 361,734 $ 474,372 $ 350,670 $ 213,753 $ 103,595
Investment securities 1,497,826 1,335,358 1,417,966 1,395,011 1,283,776
Loans:
Consumer mortgage 1,017,153 1,014,628 1,026,934 1,062,943 1,039,530
Business lending 1,068,456 1,078,500 1,078,593 1,058,846 1,028,400
Consumer installment 1,001,484 998,477 998,214 1,014,351 936,100
Total loans 3,087,093 3,091,605 3,103,741 3,136,140 3,004,030
Allowance for loan losses 41,072 40,330 40,053 39,575 37,413
Intangible assets 322,661 324,636 326,519 328,624 257,042
Other assets 149,853 151,346 165,890 140,599 155,489
Total assets 5,378,095 5,336,987 5,324,733 5,174,552 4,766,519
Deposits
Noninterest-bearing 708,051 697,612 667,452 638,558 581,379
Non-maturity interest-bearing 1,925,666 1,828,586 1,774,906 1,636,348 1,356,402
Time 1,254,528 1,338,225 1,419,807 1,425,906 1,288,612
Total deposits 3,888,245 3,864,423 3,862,165 3,700,812 3,226,393
Borrowings 756,442 756,649 756,854 760,558 901,659
Subordinated debt held by unconsolidated subsidiary trusts 101,993 101,987 101,981 101,975 101,969
Other liabilities 65,515 63,299 56,536 66,556 53,423
Total liabilities 4,812,195 4,786,358 4,777,536 4,629,901 4,283,444
Shareholders' equity 565,900 550,629 547,197 544,651 483,075
Total liabilities and shareholders' equity 5,378,095 5,336,987 5,324,733 5,174,552 4,766,519
Capital
Tier 1 leverage ratio 7.27 % 7.13 % 7.16 % 7.22 % 7.73 %
Tangible equity / net tangible assets 5.15 % 4.84 % 4.74 % 4.74 % 5.31 %
Diluted weighted average common shares O/S 32,998 32,945 32,971 32,833 30,376
Period end common shares outstanding 32,740 32,741 32,742 32,633 30,096
Cash dividends declared per common share $ 0.22 $ 0.22 $ 0.22 $ 0.22 $ 0.22
Book value $ 17.28 $ 16.82 $ 16.71 $ 16.69 $ 16.05
Tangible book value $ 7.99 $ 7.43 $ 7.27 $ 7.06 $ 7.99
Common stock price (end of period) $ 18.27 $ 14.56 $ 16.75 $ 24.39 $ 25.15
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Summary of Financial Data
(Dollars in thousands, except per share data)
2009 2008
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Asset Quality
Nonaccrual loans $ 13,080 $ 13,189 $ 14,338 $ 12,126 $ 10,496
Accruing loans 90+ days delinquent 4,660 543 947 553 1,018
Total nonperforming loans 17,740 13,732 15,285 12,679 11,514
Other real estate owned (OREO) 1,309 1,687 1,383 1,059 837
Total nonperforming assets 19,049 15,419 16,668 13,738 12,351
Net charge-offs 1,633 1,738 2,332 2,390 1,700
Loan loss allowance/loans outstanding 1.33 % 1.30 % 1.29 % 1.26 % 1.25 %
Nonperforming loans/loans outstanding 0.57 % 0.44 % 0.49 % 0.40 % 0.38 %
Loan loss allowance/nonperforming loans 232 % 294 % 262 % 312 % 325 %
Net charge-offs/average loans 0.21 % 0.22 % 0.30 % 0.31 % 0.23 %
Delinquent loans/ending loans 1.51 % 1.46 % 1.33 % 1.43 % 1.26 %
Loan loss provision/net charge-offs 145 % 116 % 120 % 100 % 117 %
Nonperforming assets/total assets 0.35 % 0.29 % 0.31 % 0.27 % 0.26 %
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(1) Excludes gain (loss) on investment securities.
(2) Excludes intangible amortization, acquisition expenses, special charges and gain (loss) on investment securities.
(3) Diluted weighted average common shares outstanding and earnings per share calculations haves been restated, as necessary, to comply with the provisions of FSP EITF 03-6-1.
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This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
following factors, among others, could cause the actual results of CBU's
operations to differ materially from CBU's expectations: the successful
integration of operations of its acquisitions; competition; changes in
economic conditions, interest rates and financial markets; and changes
in legislation or regulatory requirements. CBU does not assume
any duty to update forward-looking statements.
A service of YellowBrix, Inc.
