SYRACUSE, N.Y.--(BUSINESS WIRE)--Community Bank System, Inc. (NYSE: CBU) reported first quarter 2011 net income of $16.2 million, an increase of 15.4% over the $14.0 million reported for the first quarter of 2010. The first quarter 2011 results included $0.7 million ($0.01 per share) of acquisition expenses related to the Company’s acquisition of The Wilber Corporation, completed in early April. Earnings per share were up 14.3% over the prior year to $0.48, a record for the Company’s first quarter.
Total revenue for the first quarter of 2011 was $66.4 million, an increase of $1.4 million, or 2.1%, over the first quarter of last year. The higher revenue was a result of a 1.3% increase in average earning assets and a 15-basis point improvement in the Company’s net interest margin to 4.08%. The quarterly provision for loan losses of $1.1 million was $0.8 million lower than the first quarter of 2010, reflective of lower net charge-offs, the continuation of generally stable and favorable asset quality metrics and a net decline in loan balances. Total operating expenses of $42.6 million (excluding acquisition expenses) for the quarter were $1.6 million, or 3.5%, lower than the first quarter of 2010, reflective of ongoing cost management initiatives, and lower intangible amortization.
“Our strong first quarter operating results reflect the discipline we endeavor to bring to our operating model and to our decision making. Our continued focus on both sides of the balance sheet and the top and bottom of the income statement, along with the continued strength of asset quality produced record operating results for the first quarter of 2011,” said President and Chief Executive Officer Mark E. Tryniski. “In an operating environment that continues to challenge many, we grew net interest income, improved our net interest margin, generated organic core deposit growth and effectively managed our operating costs. We also delivered another quarter of sound asset quality, with net charge-offs of $1.4 million, or 0.19% of average loans. We announced the completion of the acquisition of The Wilber Corporation earlier this month, a strategic acquisition which provided entry into adjoining markets and substantially expands our presence in the eastern half of Upstate New York. The transaction is expected to be accretive to earnings per share in 2011, exclusive of one-time acquisition related charges.”
First quarter net interest income grew to $45.5 million, an increase of 5.2% above first quarter 2010, resulting from an increase in interest-earning assets and a higher net interest margin. The Company has productively reinvested most of its cash flow generation during the last year, while still retaining a significant net liquidity position. Low market interest rates and continued disciplined deposit pricing resulted in a 25-basis point reduction in the total cost of funds, compared to the first quarter of 2010. This was partially offset by an 11-basis point decline in earning asset yields, including cash equivalents, reflective of lower, but generally stable securities returns and lower loan yields. On a linked quarter basis the Company’s net interest margin improved one basis point, reflective of a seven-basis point reduction in the cost of funds and a six-basis point decline in earning asset yields.
First quarter non-interest income of $20.8 million was 4.0% lower than the first quarter of last year, the result of a decline in mortgage-banking related revenues as well as lower customer utilization of certain fee-based deposit services. The Company’s employee benefits administration and consulting businesses and its wealth management groups generated combined revenue results that were consistent with the first quarter of 2010.
Quarterly operating expenses of $42.6 million (excluding acquisition expenses) were $1.6 million below the first quarter of 2010, reflective of a $1.0 million reduction in intangible amortization and continued solid cost management across all functional areas of the Company. Despite year-over-year increases in merit-based compensation and business development costs, the Company achieved a net reduction in total operating expenses compared to the first quarter of last year.
Financial Position
Average earning assets for the first quarter were $4.92 billion, modestly above the fourth quarter of 2010, and 1.3% higher than the first quarter of last year. Ending loans declined $25.9 million from December 2010, reflective of seasonal run-off characteristics experienced in the first quarter of six of the last seven years, as well as reductions in consumer real estate loans outstanding as the majority of the Company’s new, low-rate originations continued to be sold into the secondary market. Average investment securities, including cash equivalents of $159.0 million, increased $94.4 million in the quarter. Quarterly average deposits were nearly 1% higher than the first quarter of 2010 and included the continuation of our targeted trend of a higher proportion of core (non-time) deposit balances, which increased $250.8 million from the first quarter of 2010. Average borrowings for the quarter of $830.5 million were down $26.2 million from the first quarter of 2010. Quarter-end shareholders’ equity of $624.1 million was $45.7 million higher than March 31, 2010. The Company’s net tangible equity to net tangible assets ratio improved to 6.36% at quarter-end, up 93 basis points from the end of last year’s first quarter.
“We continued to improve operating results in the first quarter of 2011 despite soft market conditions,” said Mr. Tryniski. “Improvement in net interest margins, effective cost management, and the continuation of favorable asset quality enabled us to produce record first quarter earnings, and reflects the effectiveness of our disciplined and balanced approach to business regardless of economic or market conditions.”
Asset Quality
First quarter net charge-offs were $1.4 million, compared to $1.6 million in the first quarter of 2010, and $2.0 million in the fourth quarter of 2010, a continuation of the Company’s stable and favorable asset quality trends.
Nonperforming loans as a percentage of total loans at March 31, 2011 were 0.59%, down slightly from 0.61% at the end of December 2010, and 0.63% at March 31, 2010. The total delinquency ratio of 1.46% was up 3 basis points from March 31, 2010, and down 45 basis points from the seasonally higher 1.91% level reported at December 31, 2010. Quarter-end nonperforming assets to total assets of 0.35%, was three basis points lower than both the end of last year’s first and fourth quarters. These favorable asset quality metrics continue to be noticeably better than comparative peer and industry averages and illustrate the long-term effectiveness of the Company’s disciplined risk management and underwriting standards.
The first quarter provision for loan losses of $1.1 million was $0.9 million lower than the fourth quarter of 2010 and $0.8 million below the first quarter of 2010. The first quarter’s provision for loan losses was $0.36 million lower than quarterly net charge-offs, indicative of improved delinquency ratios, a reduction in non-performing assets and a net decrease in total loan balances. The ratio of allowance for loan losses to total loans outstanding was 1.40% as of March 31, 2011, compared to 1.40% at December 31, 2010, and 1.37% at the end of the first quarter 2010.
Community Bank System Completes the Acquisition of The Wilber Corporation
On April 8, 2011, the Company completed the acquisition of The Wilber Corporation (NYSE Amex: GIW), parent company of the Wilber National Bank based in Oneonta, NY, for approximately $102 million in stock and cash. The acquisition extends the Bank’s New York service area to the contiguous Central, Greater Capital, and Catskills regions of Upstate New York. Upon the completion of the merger, Community Bank added 22 branch locations in eight counties and deposits of approximately $750 million.
Conference Call Scheduled
Company management will conduct an investor call at 11:00 a.m. (ET) tomorrow (April 27, 2011) to discuss first quarter results. The conference call can be accessed at 1-877-551-8082 (1-904-520-5770 if outside United States and Canada). An audio recording will be available one hour after the call until June 30, 2011, and may be accessed at 1-888-284-7564 (1-904-596-3174 if outside the United States and Canada) and entering access code 2627271. Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=77708.
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 $6.3 billion in assets and over 170 customer facilities. The Company’s banking subsidiary, Community Bank, N.A. operates across Upstate New York and Northeastern Pennsylvania, where it conducts business as First Liberty Bank & Trust. Its other subsidiaries include: Benefit Plans Administrative Services, Inc., an employee benefits consulting and trust administration firm with offices in Upstate New York, Pittsburgh and Philadelphia, Pennsylvania and Houston, Texas; the CBNA Insurance Agency, with offices in four 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, except per share data) | ||||||||||||||||||||
| 2011 | 2010 | |||||||||||||||||||
| 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | ||||||||||||||||
| Earnings | ||||||||||||||||||||
| Loan income | $ | 42,297 | $ | 44,085 | $ | 45,094 | $ | 44,851 | $ | 44,673 | ||||||||||
| Investment income | 17,990 | 17,924 | 17,503 | 17,772 | 16,379 | |||||||||||||||
| Total interest income | 60,287 | 62,009 | 62,597 | 62,623 | 61,052 | |||||||||||||||
| Interest expense | 14,764 | 15,876 | 16,273 | 16,678 | 17,770 | |||||||||||||||
| Net interest income | 45,523 | 46,133 | 46,324 | 45,945 | 43,282 | |||||||||||||||
| Provision for loan losses | 1,050 | 1,935 | 1,400 | 2,050 | 1,820 | |||||||||||||||
| Net interest income after provision for loan losses | 44,473 | 44,198 | 44,924 | 43,895 | 41,462 | |||||||||||||||
| Deposit service fees | 9,685 | 10,321 | 11,180 | 11,337 | 10,519 | |||||||||||||||
| Mortgage banking revenues | 396 | 1,408 | 1,215 | 592 | 483 | |||||||||||||||
| Other banking services | 398 | 462 | 863 | 523 | 440 | |||||||||||||||
| Trust, investment and asset management fees | 2,180 | 2,391 | 2,400 | 2,666 | 2,376 | |||||||||||||||
| Benefit plan administration, consulting and actuarial fees | 8,183 | 7,201 | 7,256 | 7,260 | 7,899 | |||||||||||||||
| Total noninterest income | 20,842 | 21,783 | 22,914 | 22,378 | 21,717 | |||||||||||||||
| Salaries and employee benefits | 23,111 | 22,900 | 23,056 | 22,509 | 22,936 | |||||||||||||||
| Professional fees | 1,339 | 1,714 | 1,013 | 1,505 | 1,300 | |||||||||||||||
| Occupancy and equipment and furniture | 6,057 | 5,520 | 5,574 | 5,614 | 6,225 | |||||||||||||||
| Amortization of intangible assets | 901 | 972 | 1,277 | 1,849 | 1,859 | |||||||||||||||
| FDIC insurance | 1,361 | 1,182 | 1,599 | 1,485 | 1,572 | |||||||||||||||
| Acquisition expenses & special charges | 691 | 1,107 | 57 | 199 | 0 | |||||||||||||||
| Other | 9,856 | 10,726 | 11,776 | 11,059 | 10,301 | |||||||||||||||
| Total operating expenses | 43,316 | 44,121 | 44,352 | 44,220 | 44,193 | |||||||||||||||
| Income before income taxes | 21,999 | 21,860 | 23,486 | 22,053 | 18,986 | |||||||||||||||
| Income taxes | 5,839 | 5,966 | 6,224 | 5,891 | 4,984 | |||||||||||||||
| Net income | $ | 16,160 | $ | 15,894 | $ | 17,262 | $ | 16,162 | $ | 14,002 | ||||||||||
| Basic earnings per share | $ | 0.48 | $ | 0.48 | $ | 0.52 | $ | 0.49 | $ | 0.42 | ||||||||||
| Diluted earnings per share | $ | 0.48 | $ | 0.47 | $ | 0.51 | $ | 0.48 | $ | 0.42 | ||||||||||
| Profitability | ||||||||||||||||||||
| Return on assets | 1.19 | % | 1.15 | % | 1.25 | % | 1.19 | % | 1.05 | % | ||||||||||
| Return on equity | 10.70 | % | 10.27 | % | 11.28 | % | 11.12 | % | 9.91 | % | ||||||||||
| Noninterest income/operating income (FTE) (1) | 29.6 | % | 30.3 | % | 31.4 | % | 31.0 | % | 31.6 | % | ||||||||||
| Efficiency ratio (2) | 59.2 | % | 57.9 | % | 57.9 | % | 58.0 | % | 61.6 | % | ||||||||||
| Components of Net Interest Margin (FTE) | ||||||||||||||||||||
| Loan yield | 5.73 | % | 5.73 | % | 5.81 | % | 5.87 | % | 5.91 | % | ||||||||||
| Cash equivalents yield | 0.25 | % | 0.25 | % | 0.27 | % | 0.25 | % | 0.25 | % | ||||||||||
| Investment yield | 5.01 | % | 5.00 | % | 4.84 | % | 4.97 | % | 5.06 | % | ||||||||||
| Earning asset yield | 5.30 | % | 5.36 | % | 5.41 | % | 5.48 | % | 5.41 | % | ||||||||||
| Interest-bearing deposit rate | 0.75 | % | 0.86 | % | 0.90 | % | 0.96 | % | 1.08 | % | ||||||||||
| Borrowing rate | 4.28 | % | 4.28 | % | 4.28 | % | 4.28 | % | 4.34 | % | ||||||||||
| Cost of all interest-bearing funds | 1.47 | % | 1.56 | % | 1.59 | % | 1.64 | % | 1.77 | % | ||||||||||
| Cost of funds (includes DDA) | 1.25 | % | 1.32 | % | 1.35 | % | 1.39 | % | 1.50 | % | ||||||||||
| Net interest margin (FTE) | 4.08 | % | 4.07 | % | 4.08 | % | 4.10 | % | 3.93 | % | ||||||||||
| Fully tax-equivalent adjustment | $ | 3,969 | $ | 3,865 | $ | 3,788 | $ | 3,835 | $ | 3,712 | ||||||||||
| Summary of Financial Data | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| 2011 | 2010 | |||||||||||||||||||
| 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | ||||||||||||||||
| Average Balances | ||||||||||||||||||||
| Loans | $ | 3,005,926 | $ | 3,061,060 | $ | 3,088,590 | $ | 3,074,259 | $ | 3,076,230 | ||||||||||
| Cash equivalents | 159,044 | 105,242 | 50,484 | 64,731 | 187,030 | |||||||||||||||
| Taxable investment securities | 1,188,182 | 1,159,110 | 1,182,243 | 1,204,551 | 1,071,958 | |||||||||||||||
| Nontaxable investment securities | 565,564 | 554,014 | 550,660 | 524,697 | 518,959 | |||||||||||||||
| Total interest-earning assets | 4,918,716 | 4,879,426 | 4,871,977 | 4,868,238 | 4,854,177 | |||||||||||||||
| Total assets | 5,487,618 | 5,481,129 | 5,474,952 | 5,454,073 | 5,425,045 | |||||||||||||||
| Interest-bearing deposits | 3,234,986 | 3,206,327 | 3,217,831 | 3,252,025 | 3,222,093 | |||||||||||||||
| Borrowings | 830,454 | 831,025 | 832,568 | 837,356 | 856,662 | |||||||||||||||
| Total interest-bearing liabilities | 4,065,440 | 4,037,352 | 4,050,399 | 4,089,381 | 4,078,755 | |||||||||||||||
| Noninterest-bearing deposits | 739,515 | 743,698 | 736,203 | 717,171 | 716,172 | |||||||||||||||
| Shareholders' equity | $ | 612,559 | $ | 613,734 | $ | 606,912 | $ | 582,715 | $ | 573,047 | ||||||||||
| Balance Sheet Data | ||||||||||||||||||||
| Cash and cash equivalents | $ | 296,938 | $ | 211,837 | $ | 179,556 | $ | 133,967 | $ | 208,267 | ||||||||||
| Investment securities | 1,792,246 | 1,742,324 | 1,769,149 | 1,757,967 | 1,746,565 | |||||||||||||||
| Loans: | ||||||||||||||||||||
| Business lending | 1,006,114 | 1,023,286 |
1,045,849 |
1,061,828 | 1,048,841 | |||||||||||||||
| Consumer mortgage | 1,055,164 | 1,057,332 |
1,065,297 |
1,064,471 | 1,049,398 | |||||||||||||||
| Home equity | 299,925 | 305,936 |
312,396 |
312,118 | 312,502 | |||||||||||||||
| Consumer installment - indirect | 500,058 | 494,813 |
508,502 |
511,810 | 515,496 | |||||||||||||||
| Consumer installment - direct | 139,183 | 144,996 |
148,353 |
140,924 | 136,285 | |||||||||||||||
| Total loans | 3,000,444 | 3,026,363 | 3,080,397 | 3,091,151 | 3,062,522 | |||||||||||||||
| Allowance for loan losses | 42,147 | 42,510 | 42,610 | 42,603 | 42,095 | |||||||||||||||
| Intangible assets | 311,076 | 311,714 | 312,686 | 313,963 | 315,812 | |||||||||||||||
| Other assets | 190,815 | 194,778 | 197,039 | 193,357 | 194,729 | |||||||||||||||
| Total assets | 5,549,372 | 5,444,506 | 5,496,217 | 5,447,802 | 5,485,800 | |||||||||||||||
| Deposits | ||||||||||||||||||||
| Noninterest-bearing | 754,892 | 741,166 | 738,994 | 713,544 | 724,097 | |||||||||||||||
| Non-maturity interest-bearing | 2,361,312 | 2,272,013 | 2,253,447 | 2,203,686 | 2,166,727 | |||||||||||||||
| Time | 904,827 | 920,866 | 973,894 | 1,022,745 | 1,097,453 | |||||||||||||||
| Total deposits | 4,021,031 | 3,934,045 | 3,966,335 | 3,939,975 | 3,988,277 | |||||||||||||||
| Borrowings | 728,385 | 728,460 | 729,508 | 729,557 | 754,606 | |||||||||||||||
| Subordinated debt held by unconsolidated subsidiary trusts | 102,030 | 102,024 | 102,018 | 102,012 | 102,005 | |||||||||||||||
| Other liabilities | 73,826 | 72,719 | 82,556 | 76,438 | 62,515 | |||||||||||||||
| Total liabilities | 4,925,272 | 4,837,248 | 4,880,417 | 4,847,982 | 4,907,403 | |||||||||||||||
| Shareholders' equity | 624,100 | 607,258 | 615,800 | 599,820 | 578,397 | |||||||||||||||
| Total liabilities and shareholders' equity | 5,549,372 | 5,444,506 | 5,496,217 | 5,447,802 | 5,485,800 | |||||||||||||||
| Capital | ||||||||||||||||||||
| Tier 1 leverage ratio | 8.42 | % | 8.23 | % | 7.99 | % | 7.75 | % | 7.56 | % | ||||||||||
| Tangible equity / net tangible assets (3) | 6.36 | % | 6.14 | % | 6.21 | % | 5.92 | % | 5.43 | % | ||||||||||
| Diluted weighted average common shares O/S | 33,989 | 33,786 | 33,606 | 33,570 | 33,327 | |||||||||||||||
| Period end common shares outstanding | 33,429 | 33,319 | 33,162 | 33,146 | 33,081 | |||||||||||||||
| Cash dividends declared per common share | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.22 | ||||||||||
| Book value | $ | 18.67 | $ | 18.23 | $ | 18.57 | $ | 18.10 | $ | 17.48 | ||||||||||
| Tangible book value(3) | $ | 10.01 | $ | 9.49 | $ | 9.74 | $ | 9.20 | $ | 8.51 | ||||||||||
| Common stock price (end of period) | $ | 24.27 | $ | 27.77 | $ | 23.01 | $ | 22.03 | $ | 22.78 | ||||||||||
| Summary of Financial Data | |||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| 2011 | 2010 | ||||||||||||||||||
| 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | |||||||||||||||
| Asset Quality | |||||||||||||||||||
| Nonaccrual loans | $ | 14,953 | $ | 15,378 | $16,025 | $ | 18,798 | $ | 18,251 | ||||||||||
| Accruing loans 90+ days delinquent | 2,774 | 3,091 | 1,863 | 2,076 | 930 | ||||||||||||||
| Total nonperforming loans | 17,727 | 18,469 | 17,888 | 20,874 | 19,181 | ||||||||||||||
| Other real estate owned (OREO) | 1,945 | 2,011 | 2,689 | 1,555 | 1,479 | ||||||||||||||
| Total nonperforming assets | 19,672 | 20,480 | 20,577 | 22,429 | 20,660 | ||||||||||||||
| Net charge-offs | 1,413 | 2,035 | 1,393 | 1,542 | 1,635 | ||||||||||||||
| Loan loss allowance/loans outstanding | 1.40 | % | 1.40 | % | 1.38 | % | 1.38 | % | 1.37 | % | |||||||||
| Nonperforming loans/loans outstanding | 0.59 | % | 0.61 | % | 0.58 | % | 0.68 | % | 0.63 | % | |||||||||
| Loan loss allowance/nonperforming loans | 238 | % | 230 | % | 238 | % | 204 | % | 219 | % | |||||||||
| Net charge-offs/average loans | 0.19 | % | 0.26 | % | 0.18 | % | 0.20 | % | 0.22 | % | |||||||||
| Delinquent loans/ending loans | 1.46 | % | 1.91 | % | 1.64 | % | 1.45 | % | 1.43 | % | |||||||||
| Loan loss provision/net charge-offs | 74 | % | 95 | % | 100 | % | 133 | % | 111 | % | |||||||||
| Nonperforming assets/total assets | 0.35 | % | 0.38 | % | 0.37 | % | 0.41 | % | 0.38 | % | |||||||||
| (1) Excludes gain (loss) on investment securities. | |||||||||||||||||||
| (2) Excludes intangible amortization, goodwill impairment, acquisition expenses, special charges and gain (loss) on investment securities. | |||||||||||||||||||
| (3) Includes deferred tax liabilities (of approximately $21.6 million at 3/31/11) related to tax deductible goodwill. | |||||||||||||||||||
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.