DeWITT — Community Bank System, Inc. (NYSE: CBU) reported that its net income rose more than 4 percent to $41.9 million, or 80 cents a share, in the first quarter from $40.1 million, or 78 cents, in the year-ago period. The DeWitt–based banking company credited an increase in net interest income and decreases in the provision […]
DeWITT — Community Bank System, Inc. (NYSE: CBU) reported that its net income rose more than 4 percent to $41.9 million, or 80 cents a share, in the first quarter from $40.1 million, or 78 cents, in the year-ago period.
The DeWitt–based banking company credited an increase in net interest income and decreases in the provision for loan losses and income taxes for the profit gain, offset in part by a decrease in bank noninterest revenues, higher operating expenses, and an increase in shares outstanding. Community Bank’s operating earnings per share, which excludes acquisition expenses and unrealized gain-on-equity securities, was 81 cents in the first quarter, up 3 cents from a year prior.
Community Bank’s results beat analysts’ expectations of 76 cents in earnings per share, according to Zacks Equity Research.
“Our improved first quarter 2019 operating results were driven by a combination of net interest income growth, increased financial services revenue and a continuation of excellent credit quality metrics,” Mark E. Tryniski, president and CEO of Community Bank System, said in his company’s earnings report. “We’re pleased with a first quarter performance that’s reflective of consistent and effective execution of our ongoing business strategy.”
Earnings details
Community Bank System posted total revenue of $142.6 million in the first quarter up 0.3 percent from the prior-year period. That topped the $142.2 million in revenue that analysts were expecting, according to Zacks.
Community’s net interest income gained 2.6 percent to $86.9 million on an improvement in the banking company’s net interest margin, while noninterest revenue decreased by 3.1 percent. It had a $3 million decline in banking noninterest revenue, due primarily to the impact of the Durbin amendment, a provision of federal law that limits the fees that banks can charge retailers for processing debit-card transactions.
Community Bank’s interest income and fees on loans increased by $4.3 million from the prior-year quarter due to both an increase in average total loans outstanding and a rise in the yield on all categories of loans, reflecting higher market rates. The results for the quarter benefitted from $1 million in one-time loan fees.
Community Bank’s quarterly provision for loan losses of $2.4 million was $1.3 million lower than the first quarter of 2018, reflecting “moderate improvements” in the banking company’s credit-quality statistics. Non-performing loans dropped to 0.39 percent of total loans outstanding, compared to 0.48 percent of total loans outstanding at the end of the first quarter of 2018. Delinquent loans to total loans outstanding decreased to 0.88 percent at the end of the first quarter, down from 1.01 percent at the end of the first quarter of 2018. Net charge-offs decreased by $0.6 million from the first quarter of 2018, due mostly to a decrease in net charge-offs in the business lending and consumer indirect-loan portfolios.
Community Bank System reported employee-benefit services revenue of $24.1 million in the first quarter, up by $1 million, or 4.6 percent, from a year earlier. The increase was driven by growth in the banking company’s collective investment fund administration and trust business, and growth in actuarial-services revenue. Community Bank System recorded $7.9 million in insurance-services revenue during the first quarter, a 6.8 percent increase from a year earlier, buoyed by “solid new business generation,” according to the earnings report.
The banking company posted wealth-management revenue of $6.3 million in the first quarter, down from $6.7 million in the first quarter of 2018. Banking noninterest revenue decreased by $3 million due to a net $3.1 million decrease in debit interchange fees and a $0.3 million decrease in other banking fees, including mortgage banking and deposit-service fees, offset in part by a gain on life insurance.
Community Bank System incurred total operating expenses of $88.7 million in the first quarter, up 2.7 percent from the year-ago period, due to an increase in salaries and employee benefits, data processing and communications, business development and marketing expenses, and acquisition expenses, according to the report.
Those increases were offset by declines in occupancy and equipment expense, amortization of intangible assets, legal and professional fees, office supplies and postage, FDIC insurance premiums, and other expenses. Excluding $0.5 million in acquisition expenses, Community’s total operating expenses rose by $1.8 million, or 2.1 percent, from the year-ago quarter.
Community Bank had $6.27 billion in loans at the end of the first quarter, up by $39.1 million, or 0.6 percent, from a year earlier.
The banking company took net charge-offs of $2.6 million in the first quarter, down from $3.2 million a year ago, as net charge-offs in business lending and the consumer indirect portfolios fell. Net charge-offs as an annualized percentage of average loans measured 0.17 percent in the first quarter, down from 0.21 percent a year before.
Community Bank System has more than $10.9 billion in assets and over 230 branches across upstate New York, northeastern Pennsylvania, Vermont, and western Massachusetts.