Community Bank profit falls on acquisition costs

DeWITT — Third-quarter profit slipped 8 percent at DeWitt–based Community Bank System, Inc. (NYSE: CBU) to $18.4 million, or 46 cents a share.

Acquisition costs totaling $4.8 million for the period, compared with $400,000 a year earlier, helped push earnings lower. 

Community Bank System has $7.6 billion in assets and more than 180 branches. The banking company also operates subsidiaries in employee benefits, insurance, investment management and advising, and wealth management.

The bank acquired 19 new branches during the third quarter.

It added three First Niagara Bank branches in Canandaigua and Geneva and 16 HSBC locations in Adams, Alexandria Bay, Avon, Fulton, Geneseo, Gowanda, Lowville, Newark, Oswego, Palmyra, Plattsburgh, Springville, Watertown, Watkins Glen, and Westfield.

Community Bank later consolidated five of the acquired branches into existing branches of its own, President and CEO Mark Tryniski said during a conference call Oct. 24, discussing the bank’s latest earnings report.

The HSBC locations were part of First Niagara’s acquisition of 195 HSBC locations in upstate New York, Westchester County, and Connecticut.

Buffalo–based First Niagara made deals with Community Bank, KeyBank, and Five Star Bank to sell off some of the HSBC branches involved as well as some of its own offices. The bank made the divestitures to comply with federal anti-trust rules.

First Niagara leaders also said some of the branches were in markets, including the North Country, where they were not interested in competing.

Tryniski said Community Bank will continue to look for solid acquisition opportunities within and near its existing footprint. That could include new markets like New Jersey or Ohio, he said.

He also said the company could continue to add to its employee benefits business, which now brings in $35 million a year in revenue. Community Bank has made several acquisitions in that space in recent years.

The HSBC-First Niagara deal could continue to benefit Community Bank as customers moved around in the shakeup examine their long-term banking relationships, Community Bank CFO Scott Kingsley said during the conference call.

“Any kind of displacement creates opportunities for other institutions,” he said.

He also noted that the commercial-banking landscape remains competitive.

Net interest income at Community Bank rose 7.7 percent to $58.8 million in the latest quarter, compared to the third quarter of 2011. The increase resulted from a rise in average interest-earning assets thanks to loan growth and additional investment securities, according to the bank.

Noninterest income totaled more than $25.8 million, up from $23.2 million. Higher benefits administration and consulting fees, service fees, and wealth-management revenues helped drive the increase, according to Community Bank.

Total loans rose to $3.8 billion as of Sept. 30, up from more than $3.5 billion at the end of the second quarter and more than $3.4 billion at the end of the third quarter in 2011. Deposits increased to $5.7 billion in this year’s third quarter, up from $4.9 billion at the end of the second quarter and $4.8 billion in the year-earlier period.

Net charge-offs for the latest quarter totaled $1.7 million, down from $2.1 million in the second quarter and up from $1.1 million in the third quarter last year. The provision for loan losses was $2.6 million, up $500,000 from the second quarter and up from 

$1.6 million in the third quarter of 2011.

The increase resulted from organic loan growth as well as $500,000 from certain loans acquired in the branch deal, according to the bank. Nonperforming loans totaled $30.7 million at the end of the period, down from $32 million at the end of the second quarter and up from $18.8 million a year earlier.       

Contact Tampone at 

ktampone@cnybj.com