Community Bank’s Q4 net income rises nearly 9 percent

DeWITT, N.Y. — Community Bank System, Inc. (NYSE: CBU) recently reported that its net income rose nearly 9 percent to $46.5 million in the fourth quarter from $42.9 million in the year-prior period. 

The DeWitt–based banking company’s earnings per share (EPS) increased to 86 cents a share from 82 cents a year ago. The increase in earnings per share was driven by a rise in net interest income, a decrease in the provision for credit losses, slightly reduced operating expenses, and a small increase in noninterest revenue. That was partially offset by higher income taxes and an increase in shares outstanding, according to Community Bank’s Jan. 25 earnings report.

Community Bank posted operating EPS of 85 cents in the fourth quarter, up 2 cents from the year-earlier quarter. That beat the consensus analysts’ estimate of 77 cents a share, according to Zacks Equity Research. It’s the fourth straight quarter in which the banking company beat the consensus EPS estimate.

Community Bank generated revenue of nearly $151 million in the latest quarter, up slightly from just under $150 million in the fourth quarter of 2019.

“The company generated very strong earnings results in 2020 despite the significant and persistent challenges posed by the COVID-19 pandemic and related market conditions throughout the year,” Mark E. Tryniski, president and CEO of Community Bank System, said in the earnings report. “Strong asset quality leading into the pandemic, a tremendous core deposit base and diversified revenue streams, including year over year revenue increases in the company’s nonbanking businesses, demonstrated the strength and resiliency of the company’s business model. The strength of our nonbanking businesses became increasingly evident as the pandemic ran its course during 2020.”

Community Bank reported net interest income of $93.4 million in the fourth quarter, a nearly 1 percent increase over the year-prior period. The rise was driven by a 22.7 percent increase in average earning assets between the periods, offset, in part by a 0.66 percent decrease in the net interest margin. The increase in earning assets was led by large net inflows of funds from government stimulus programs, Paycheck Protection Program loan originations, and the acquisition of Steuben Trust Corp. in the second quarter of 2020. 

Community Bank System recorded a $3.1 million net benefit in the provision for credit losses during the fourth quarter. In contrast, it took a $2.9 million provision for credit losses during the fourth quarter of 2019. The net benefit recorded in the provision for credit losses was driven by several factors, including a $2 million reversal of a previously recorded allowance for credit loss on a purchase-credit deteriorated loan, an improving economic outlook, and a substantial decrease in loans under COVID-19-related forbearance agreements, the banking company explained. 

Community Bank’s total assets jumped 22 percent in the last year to reach nearly $14 billion as of Dec. 31. It attributed the increase to large inflows of government stimulus-related deposit funding and the Steuben Trust acquisition.

“Looking ahead to 2021, our focus will be on effectively countering ongoing margin pressure, improving organic performance, continued growth and investment in our nonbanking businesses and a continuation of our investment in digital, and rationalization of analog,” Tryniski said in Community Bank’s Jan. 25 earnings call with investors and analysts, according to a transcript prepared by Motley Fool. “I also expect the strength of our earnings, balance sheet, and capital generation will serve us well going forward as we continue to evaluate high-value strategic opportunities across our businesses for the benefit of our shareholders.”

Community Bank System operates more than 230 branches across upstate New York, northeastern Pennsylvania, Vermont, and western Massachusetts through its banking subsidiary, Community Bank, N.A. It ranks among the nation’s 125 largest banks.