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Community Bank System Reports Second Quarter 2019 Results

July 22, 2019

SYRACUSE, N.Y.--(BUSINESS WIRE)--Jul 22, 2019--

Community Bank System, Inc. (NYSE:CBU) reported second quarter 2019 net income of $45.0 million, or $0.86 per share on a fully diluted basis. This compares to $44.6 million in net income or $0.86 per share reported for the second quarter of 2018. Operating diluted earnings per share, which exclude acquisition expenses, realized gains on the sale of investment securities and unrealized losses on equity securities, were $0.80 for the second quarter of 2019. This compares to operating diluted earnings per share of $0.86 in the second quarter of 2018. Increases in net interest income, nonbanking financial services revenues, realized gains on the sale of investment securities and a decrease in the provision for loan losses were offset by a decrease in noninterest banking revenues primarily related to the impact of the Durbin Amendment on interchange revenues, higher operating expenses, a higher effective income tax rate and an increase in fully-diluted shares outstanding.

On a linked quarter basis, fully-diluted earnings per share increased $0.06, or 7.5%, due to realized gains on the sale of investment securities and an increase in net interest income, offset, in part, by an increase in operating expenses and higher income taxes.

Second Quarter 2019 Performance Highlights:

  • GAAP EPS of $0.86
  • Operating EPS of $0.80
  • Net interest margin of 3.80%, up seven basis points over the second quarter of 2018
  • Deposit funding costs of 0.22%
  • Annualized net charge-offs of 0.08%
  • Return on assets of 1.68%
  • Return on tangible equity of 17.74%
  • Noninterest revenues (excluding realized gains on sale of investment securities) represent 38.8% of operating revenues
  • Nonbanking financial services revenues were up $2.2 million, or 6.1% over the second quarter of 2018

“Our second quarter operating results reflect another solid and productive performance characterized by consistent and effective execution of our ongoing business strategy,” said President and Chief Executive Officer Mark E. Tryniski. “Solid execution by both our core banking and financial services businesses worked to offset a $0.05 reduction in earnings per share related to the Durbin debit interchange price restrictions, which became effective for the Company in the third quarter of 2018. Although the yield curve has flattened, the Company recorded a $1.5 million, or 1.7%, increase in net interest income over the prior year second quarter. Earning asset yields were up 15 basis points from the prior year second quarter, while funding costs increased nine basis points, resulting in a seven basis point improvement in net interest margin over the second quarter of 2018. Total average deposits were up $92.3 million, or 1.1%, compared to the linked first quarter, but ending deposits were down $131.5 million, or 1.5%, due to a seasonal net outflow of municipal deposits. Deposit funding costs remained well below industry and peer averages at 0.22% for the quarter, and the funding mix remained strong with almost 70% of total deposits in checking and savings accounts. Total ending loans increased $18.0 million, or 0.3%, during the second quarter despite a $39.9 million decrease in municipal loans as seasonally expected. Average total loans were up $21.0 million, or 0.3%, as compared to the linked first quarter and were up $44.0 million, or 0.7%, as compared to the same quarter last year.”

Mr. Tryniski added, “In the first quarter of 2019, we announced a definitive agreement to acquire Kinderhook Bank Corp., parent company of The National Union Bank of Kinderhook. This transaction closed on Friday, July 12, 2019 and the companies were operationally integrated over that same weekend. The transaction extends our banking footprint into the attractive Capital District markets which are similar to the other Upstate New York markets in which we are a strong competitor. It also complements the commitment we made in 2018 when we added an experienced commercial banking team focused on the greater Albany area. We welcome the employees of the former Kinderhook franchise into the Community Bank family and look forward to serving the needs of our customers in those markets for years to come.”

Total revenues for the second quarter of 2019 were $149.0 million, an increase of $5.6 million, or 3.9%, over the second quarter of 2018. The Company recorded a $1.5 million, or 1.7%, increase in net interest income and a $4.1 million, or 7.3%, increase in noninterest revenues between comparable quarters. The increase in net interest income was driven by an increase in the yield on earning assets, offset, in part by higher funding costs. The increase in noninterest revenue was largely due to the recognition of realized gains on the investment securities portfolio. During the second quarter of 2019, the Company sold $590.2 million of its available-for-sale Treasury securities with a remaining maturity of less than five years, which generated net realized gains of $4.9 million. The securities were sold when interest rates on the short-end of the yield curve dropped precipitously, providing an opportunity to hold the proceeds in higher yielding interest-earning cash until more attractive securities reinvestment options become available. There were no realized securities gains recorded in the second quarter of 2018. In addition, the Company’s revenues increased in all three of its nonbanking fee-based businesses, employee benefit services, wealth management and insurance, by a total of $2.2 million, or 6.1%. Deposit service fees decreased $3.0 million, or 15.7%, including a $3.5 million decrease due to Durbin-mandated price restrictions on debit-interchange fees for banks with over $10.0 billion in total assets, offset by a $0.5 million increase in other deposit related fees. On a linked quarter basis, total revenues increased $6.5 million, or 4.5%, due primarily to recognition of $4.9 million in net realized gains on the investment securities portfolio during the second quarter and a $1.4 million, or 1.7%, increase in net interest income. Excluding realized gains on investment securities, noninterest revenues contributed 38.8% of total operating revenues for the second quarter similar to the linked first quarter and second quarter 2018 results.

The Company recorded a $1.4 million provision for loan losses in the second quarter 2019. This was $1.0 million less than the amount recorded in the second quarter of 2018, and reflected an improvement in the Company’s asset quality metrics between the quarterly periods. The non-performing loan to total loan ratio stood at 0.39% at the end of the second quarter of 2019. This compares to 0.47% at the end of the second quarter of 2018.

Total operating expenses for the second quarter of 2019 were $91.2 million, as compared to $86.1 million in the second quarter of 2018, an increase of $5.1 million, or 5.9%. The increase was driven by a $1.1 million increase in acquisition-related expenses associated with the Kinderhook transaction, a $1.6 million, or 3.1%, increase in salaries and employee benefits and a net increase in all other operating expenses of $2.4 million. By comparison, during the first quarter of 2019, the Company incurred total operating expenses of $88.7 million, including $0.5 million of acquisition-related expenses. Exclusive of acquisition-related expenses, operating expenses increased $1.9 million, or 2.1%, on a linked quarter basis due, in part, to an additional day of payroll in the second quarter as compared to the first quarter.

The Company generated net interest income of $88.3 million during the second quarter of 2019. This represents an increase of $1.5 million, or 1.7%, compared to the second quarter of 2018. In addition, net interest margin improved seven basis points, from 3.73% in the second quarter of 2018 to 3.80% in the second quarter of 2019. The second quarter 2019 net interest income and net interest margin results were favorably impacted by a 15-basis point increase in the yield on loans, a 64-basis point increase in the yield on cash equivalents and an eight-basis point increase in investment securities yields, offset, in part, by a nine basis point increase in the cost of funds. Although the increase in net interest income was largely driven by rate factors, a $44.0 million increase in average loans outstanding; a higher-yielding asset class than cash equivalents and investment securities, and balance increases in lower-cost funding sources, including checking and savings accounts, also contributed favorably to the improvement. During the second quarter of 2019, average balances in lower cost core funding sources, including checking and savings accounts, represented approximately 66% of the Company’s funding base, as compared to approximately 64% in the second quarter of 2018. This change in the funding mix helped maintain total funding costs at a favorable 0.28% in the second quarter of 2019, an increase of only nine-basis points over the second quarter of 2018.

On a linked quarter basis, net interest income increased $1.4 million, or 1.7%, while net interest margin was unchanged at 3.80%. Second and first quarter 2019 results were favorably impacted by four basis points due to a $0.9 million Federal Reserve Bank semi-annual dividend, and $1.0 million in commercial loan fees, respectively. Both the yield on earning assets and total funding costs increased one basis point between the first quarter and the second quarter. Due to the Federal Reserve Bank’s size-based dividend payment policies, it is anticipated that the Company’s semi-annual dividend payment will be reduced in future periods, with an expected semi-annual quarterly impact of approximately one cent per share.

The Company recorded income tax expense of $11.4 million in the second quarter of 2019. This compares to income tax expense of $10.2 million recorded in the second quarter of 2018. The increase in income tax expense was driven by an increase in pre-tax income, including a $4.9 million increase in realized gains on investment securities, and a decrease in income tax benefits from equity-based compensation. The effective tax rate for the second quarter of 2019 was 20.2%, as compared to 18.7% in the second quarter of 2018. The effective tax rate for the second quarter of 2019 exclusive of equity-based compensation tax benefits was 21.3%, as compared to 20.9% in the second quarter of 2018. The effective tax rate for the first quarter of 2019 was 18.5%, which included a higher level of income tax benefits from equity-based compensation.

The Company provides supplemental reporting of its results on an “operating,” “adjusted” and “tangible” basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, net realized gain on the sale of investments, the unrealized gain or loss on equity securities and loss on debt extinguishment. The amounts for such items are presented in the tables that accompany this release. Although these items are non-GAAP measures, the Company’s management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results. Diluted adjusted net earnings per share were $0.84 in the second quarter of 2019, compared to $0.90 in the second quarter of 2018, a $0.06, or 6.7% decrease, due almost entirely to the previously-mentioned impact of Durbin-related reductions in interchange revenues.

Financial Position

Average earning assets were up $53.5 million, or 0.6%, on a linked quarter basis, from $9.37 billion during the first quarter of 2019 to $9.43 billion during the second quarter of 2019. Average loan balances were $6.29 billion for the second quarter, up $21.0 million, or 0.3%, over the first quarter. Increases in average outstanding balances of consumer mortgages, consumer installment loans and business lending during the quarter were partially offset by a decrease in home equity loans. Average deposit balances were up $92.3 million, or 1.1%, from first quarter levels, due to an increase in retail and business deposits, offset in part, by a net decrease in municipal deposits as seasonally expected. Ending deposits were seasonally down $131.5 million, or 1.5%, between the end of the first quarter and the end of the second quarter due to the net outflow in municipal deposits. Average borrowings in the second quarter of 2019 of $319.5 million, were down $54.2 million, or 14.5%, on a linked quarter basis. This was primarily attributable to a decrease in municipal customer repurchase agreement balances of $26.1 million, or 11.8%, between the periods as seasonally expected and a $25.3 million decrease in average overnight Federal Funds borrowings.

Ending loans at June 30, 2019 were $6.28 billion. This is up $18.0 million, or 0.3%, from the end of the first quarter of 2019 and $2.9 million higher year-to-date. During the second quarter, an $18.4 million increase in consumer mortgages and a $17.1 million increase in consumer installment loans were partially offset by a $14.8 million decrease in the business lending portfolio and a $2.7 million decrease in home equity balances. Ending loans in the municipal sector of our business lending portfolio decreased from $93.8 million at March 31, 2019 to $53.9 million at June 30, 2019, a $39.9 million decrease. Certain municipal customers repay short-term loans and lines of credit annually at the end of the second quarter to meet their fiscal cycle requirements and advance on new loans and lines of credit in the third quarter for the next annual fiscal cycle. The Company expects the average balances in this portfolio to increase during the third quarter of 2019 to levels similar to the first quarter.

Investment securities totaled $2.40 billion at June 30, 2019. This is down $563.9 million, or 19.0% from the end of the linked first quarter of 2019 and $579.4 million, or 19.4%, from the end of fourth quarter of 2018. During the second quarter of 2019, the Company sold $590.2 million of Treasury securities. These proceeds were primarily held in overnight Federal Funds at higher net yields. Despite these securities sales during the quarter, the net unrealized gain in this portfolio was $36.5 million at June 30, 2019, compared to a $7.9 million net unrealized gain at March 31, 2019 and a $16.0 million net unrealized loss at December 31, 2018. The investment securities portfolio transitioned from a net unrealized loss position in December 2018 to a net unrealized gain position during 2019 due to a decrease in market interest rates. The effective duration of the securities portfolio was 2.7 years at the end of the second quarter, as compared to 3.0 years at the end of the first quarter of 2019.

Shareholders’ equity of $1.81 billion at the end of the second quarter was $152.6 million, or 9.2%, higher than the prior year period. The Company’s net tangible equity to net tangible assets ratio was 10.56% at June 30, 2019, up from 9.00% a year earlier and 9.83% at the end of the first quarter of 2019. The Company’s Tier 1 leverage ratio was 11.54% at the end of the second quarter, up from 11.27% at the end of the first quarter and 10.53% a year earlier. These results are primarily driven by strong earnings generation and capital retention over the last four quarters.

As previously announced in December 2018, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.5 million shares of the Company’s common stock during a twelve-month period starting January 1, 2019. Such repurchases may be made at the discretion of the Company’s senior management based on market conditions and other relevant factors and will be acquired through open market or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange Act of 1934 and other applicable legal requirements. There were no shares repurchased pursuant to the program in the second quarter of 2019.

Asset Quality

The Company’s asset quality metrics continue to illustrate the long-term effectiveness of the Company’s disciplined credit risk management and underwriting standards. Total net charge-offs were $1.2 million for the second quarter, compared to $0.9 million for the second quarter of 2018 and $2.6 million for the first quarter of 2019. Net charge-offs as an annualized percentage of average loans measured 0.08% in the second quarter of 2019, compared to 0.06% in the prior year’s second quarter and 0.17% in the first quarter of 2019. Nonperforming loans as a percentage of total loans at June 30, 2019 were 0.39%, unchanged from March 31, 2019 and improved from 0.47% at June 30, 2018. The total loan delinquency ratio of 0.87% at the end of the second quarter was one basis point lower than the level at March 31, 2019, and two basis points lower than one year earlier. The allowance for loan losses to nonperforming loans was 202% at June 30, 2019 and March 31, 2019, as compared to 169% at the June 30, 2018.

Dividend Increase

During the second quarter of 2019, the Company declared a quarterly cash dividend of $0.38 per share on its common stock, an increase of 11.8% compared to a $0.34 dividend declared in the second quarter of 2018. The second quarter 2019 dividend represents an annualized yield of 2.36% based upon the $64.42 closing price of the Company’s stock on July 19, 2019. The $0.04 increase declared in the third quarter of 2018 marked the 26 th consecutive year of dividend increases for the Company. “The improvement in earnings and cash flow results continue to provide further strength to the Company’s capital accumulation and dividend capacity into the future,” said Mark E. Tryniski, President and Chief Executive Officer.

Kinderhook Bank Corp.

On July 12, 2019, the Company announced that it had completed the acquisition of Kinderhook Bank Corp. (“Kinderhook”) in an all cash transaction for total consideration of $93.4 million (the “Merger”). In connection with the Merger, Kinderhook’s wholly-owned bank subsidiary, The National Union Bank of Kinderhook was merged into the Company’s banking subsidiary, Community Bank, N.A. The Merger extended the Company’s branch footprint into the Capital District of Upstate New York and added 11 full-service branch locations across a five county area. Inclusive of the Kinderhook acquisition, the Company’s total assets increased to approximately $11.3 billion, including total loans of approximately $6.8 billion and total deposits of approximately $9.0 billion. This transaction is expected to be approximately $0.07 - $0.08 per share accretive to the Company’s first full year of GAAP earnings, excluding one-time transaction costs.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) today, July 22, 2019, to discuss second quarter 2019 results. The conference call can be accessed at 866-337-5532 (856-344-9184 if outside United States and Canada) using the conference ID code 9068098. Investors may also listen live via the Internet at: https://www.webcaster4.com/Webcast/Page/995/30937.

This earnings release, including supporting financial tables, is available within the press releases section of the Company’s investor relations website at: http://ir.communitybanksystem.com. An archived webcast of the earnings call will be available on this site for one full year.

Community Bank System, Inc. operates over 234 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $11.0 billion (including the former Kinderhook), the DeWitt, N.Y. headquartered company is among the country’s 150 largest financial institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its Community Bank Wealth Management Group and OneGroup NY, Inc. operating subsidiaries. The Company’s Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company’s stock trades under the symbol CBU. For more information about Community Bank visit www.cbna.com or http://ir.communitybanksystem.com.

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; changes in legislation or regulatory requirements; and the timing for receiving regulatory approvals and completing pending transactions. These statements are based on the current beliefs and expectations of CBU’s management and CBU does not assume any duty to update forward-looking statements.

Summary of Financial Data (unaudited)

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

Quarter Ended

Year-to-Date

 

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Earnings

 

 

 

 

Loan income

$74,067

$71,152

$147,770

$140,593

Investment income

20,285

19,853

39,263

38,816

Total interest income

94,352

91,005

187,033

179,409

Interest expense

6,052

4,159

11,874

7,939

Net interest income

88,300

86,846

175,159

171,470

Provision for loan losses

1,400

2,448

3,822

6,127

Net interest income after provision for loan losses

86,900

84,398

171,337

165,343

Deposit service fees

15,996

18,964

31,860

38,141

Revenues from mortgage banking and other banking services

1,147

1,163

2,683

2,406

Wealth management and insurance services

14,907

13,911

29,118

27,976

Employee benefit services

23,787

22,542

47,841

45,548

Gain on sale of investments, net

4,882

0

4,882

0

Unrealized (loss)gain on equity securities

(13)

(21)

18

(21)

Total noninterest revenues

60,706

56,559

116,402

114,050

Salaries and employee benefits

54,008

52,402

107,387

104,261

Occupancy and equipment

9,619

9,437

19,907

19,968

Amortization of intangible assets

3,904

4,555

8,034

9,353

Acquisition expenses

1,194

71

1,728

63

Other

22,451

19,647

42,772

38,798

Total operating expenses

91,176

86,112

179,828

172,443

Income before income taxes

56,430

54,845

107,911

106,950

Income taxes

11,415

10,239

20,950

22,238

Net income

$45,015

$44,606

$86,961

$84,712

Basic earnings per share

$0.87

$0.87

$1.68

$1.65

Diluted earnings per share

$0.86

$0.86

$1.66

$1.63

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019  

 

2018

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

Earnings

 

 

 

 

 

 

 

 

 

Loan income

$74,067

 

$73,703

 

$73,316

 

$72,256

 

$71,152

Investment income

20,285

 

18,978

 

19,105

 

18,647

 

19,853

Total interest income

94,352

 

92,681

 

92,421

 

90,903

 

91,005

Interest expense

6,052

 

5,822

 

5,034

 

4,705

 

4,159

Net interest income

88,300

 

86,859

 

87,387

 

86,198

 

86,846

Provision for loan losses

1,400

 

2,422

 

2,495

 

2,215

 

2,448

Net interest income after provision for loan losses

86,900

 

84,437

 

84,892

 

83,983

 

84,398

Deposit service fees

15,996

 

15,864

 

16,116

 

16,127

 

18,964

Revenues from mortgage banking and other banking services

1,147

 

1,536

 

1,026

 

1,536

 

1,163

Wealth management and insurance services

14,907

 

14,211

 

13,675

 

14,438

 

13,911

Employee benefit services

23,787

 

24,054

 

23,466

 

23,265

 

22,542

Gain on sale of investments, net

4,882

 

0

 

0

 

0

 

0

Unrealized (loss)gain on equity securities

(13)

 

31

 

(65)

 

743

 

(21)

Loss on debt extinguishment

0

 

0

 

0

 

(318)

 

0

Total noninterest revenues

60,706

 

55,696

 

54,218

 

55,791

 

56,559

Salaries and employee benefits

54,008

 

53,379

 

52,040

 

51,062

 

52,402

Occupancy and equipment

9,619

 

10,288

 

10,210

 

9,770

 

9,437

Amortization of intangible assets

3,904

 

4,130

 

4,375

 

4,427

 

4,555

Acquisition expenses

1,194

 

534

 

0

 

(832)

 

71

Other

22,451

 

20,321

 

20,988

 

20,806

 

19,647

Total operating expenses

91,176

 

88,652

 

87,613

 

85,233

 

86,112

Income before income taxes

56,430

 

51,481

 

51,497

 

54,541

 

54,845

Income taxes

11,415

 

9,535

 

10,674

 

11,435

 

10,239

Net income

$45,015

 

$41,946

 

$40,823

 

$43,106

 

$44,606

Basic earnings per share

$0.87

 

$0.81

 

$0.79

 

$0.84

 

$0.87

Diluted earnings per share

$0.86

 

$0.80

 

$0.78

 

$0.83

 

$0.86

Profitability

 

 

 

 

 

 

 

 

 

Return on assets

1.68%

 

1.59%

 

1.53%

 

1.61%

 

1.66%

Return on equity

10.18%

 

9.85%

 

9.63%

 

10.28%

 

10.91%

Return on tangible equity (2)

17.74%

 

17.61%

 

17.61%

 

19.06%

 

20.58%

Noninterest revenues/operating revenues (FTE) (1)

38.8%

 

39.1%

 

38.5%

 

39.4%

 

39.7%

Efficiency ratio

59.8%

 

59.1%

 

59.1%

 

58.0%

 

57.2%

Components of Net Interest Margin (FTE)

 

 

 

 

 

 

 

 

 

Loan yield

4.73%

 

4.78%

 

4.65%

 

4.57%

 

4.58%

Cash equivalents yield

2.37%

 

2.33%

 

1.85%

 

1.60%

 

1.73%

Investment yield

2.73%

 

2.59%

 

2.62%

 

2.55%

 

2.65%

Earning asset yield

4.06%

 

4.05%

 

3.99%

 

3.91%

 

3.91%

Interest-bearing deposit rate

0.30%

 

0.27%

 

0.22%

 

0.18%

 

0.15%

Borrowing rate

1.87%

 

1.86%

 

1.68%

 

1.96%

 

1.80%

Cost of all interest-bearing funds

0.37%

 

0.36%

 

0.31%

 

0.29%

 

0.25%

Cost of funds (includes DDA)

0.28%

 

0.27%

 

0.23%

 

0.21%

 

0.19%

Net interest margin (FTE)

3.80%

 

3.80%

 

3.77%

 

3.71%

 

3.73%

Fully tax-equivalent adjustment

$990

 

$1,008

 

$1,062

 

$1,071

 

$1,094

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019  

 

2018

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

Average Balances

 

 

 

 

 

 

 

 

 

Loans

$6,294,772

 

$6,273,798

 

$6,276,231

 

$6,289,868

 

$6,250,739

Cash equivalents

334,304

 

121,304

 

28,817

 

26,832

 

170,745

Taxable investment securities

2,400,516

 

2,574,902

 

2,577,366

 

2,574,116

 

2,575,962

Nontaxable investment securities

397,316

 

403,359

 

423,902

 

441,719

 

457,254

Total interest-earning assets

9,426,908

 

9,373,363

 

9,306,316

 

9,332,535

 

9,454,700

Total assets

10,771,975

 

10,687,708

 

10,575,272

 

10,619,872

 

10,752,203

Interest-bearing deposits

6,170,832

 

6,107,732

 

6,039,390

 

6,077,581

 

6,282,098

Borrowings

319,505

 

373,656

 

389,378

 

393,483

 

397,101

Total interest-bearing liabilities

6,490,337

 

6,481,388

 

6,428,768

 

6,471,064

 

6,679,199

Noninterest-bearing deposits

2,326,630

 

2,297,472

 

2,317,042

 

2,336,778

 

2,287,722

Shareholders’ equity

1,774,400

 

1,726,313

 

1,682,525

 

1,664,234

 

1,640,076

Balance Sheet Data

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$874,836

 

$508,364

 

$211,834

 

$256,838

 

$250,154

Investment securities

2,402,272

 

2,966,147

 

2,981,658

 

2,948,057

 

2,983,352

Loans:

 

 

 

 

 

 

 

 

 

Business lending

2,395,684

 

2,410,477

 

2,396,977

 

2,403,624

 

2,384,629

Consumer mortgage

2,255,782

 

2,237,430

 

2,235,408

 

2,220,022

 

2,210,051

Consumer indirect

1,082,834

 

1,070,840

 

1,083,207

 

1,098,943

 

1,063,679

Home equity

371,619

 

374,297

 

386,709

 

393,950

 

398,433

Consumer direct

178,151

 

173,042

 

178,820

 

184,349

 

181,217

Total loans

6,284,070

 

6,266,086

 

6,281,121

 

6,300,888

 

6,238,009

Allowance for loan losses

49,310

 

49,107

 

49,284

 

50,133

 

49,618

Intangible assets, net

800,515

 

804,419

 

807,349

 

811,700

 

816,127

Other assets

433,005

 

420,558

 

374,617

 

392,217

 

395,070

Total assets

10,745,388

 

10,916,467

 

10,607,295

 

10,659,567

 

10,633,094

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing

2,363,408

 

2,346,635

 

2,312,816

 

2,346,932

 

2,332,745

Non-maturity interest-bearing

5,356,448

 

5,517,141

 

5,270,015

 

5,366,488

 

5,439,101

Time

768,349

 

755,886

 

739,540

 

750,401

 

742,147

Total deposits

8,488,205

 

8,619,662

 

8,322,371

 

8,463,821

 

8,513,993

Borrowings

144,290

 

251,833

 

315,743

 

276,559

 

183,785

Subordinated debt held by unconsolidated subsidiary trusts

97,939

 

97,939

 

97,939

 

97,939

 

122,826

Accrued interest and other liabilities

205,444

 

189,905

 

157,459

 

152,903

 

155,531

Total liabilities

8,935,878

 

9,159,339

 

8,893,512

 

8,991,222

 

8,976,135

Shareholders’ equity

1,809,510

 

1,757,128

 

1,713,783

 

1,668,345

 

1,656,959

Total liabilities and shareholders’ equity

10,745,388

 

10,916,467

 

10,607,295

 

10,659,567

 

10,633,094

Capital

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

11.54%

 

11.27%

 

11.08%

 

10.72%

 

10.53%

Tangible equity/net tangible assets (2)

10.56%

 

9.83%

 

9.68%

 

9.13%

 

9.00%

Diluted weighted average common shares O/S

52,356

 

52,195

 

52,122

 

52,086

 

51,939

Period end common shares outstanding

51,571

 

51,471

 

51,258

 

51,137

 

51,086

Cash dividends declared per common share

$0.38

 

$0.38

 

$0.38

 

$0.38

 

$0.34

Book value

$35.09

 

$34.14

 

$33.43

 

$32.63

 

$32.43

Tangible book value (2)

$20.45

 

$19.40

 

$18.59

 

$17.67

 

$17.39

Common stock price (end of period)

$65.84

 

$59.77

 

$58.30

 

$61.07

 

$59.07

Summary of Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

2019  

 

2018

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

Asset Quality

 

 

 

 

 

 

 

 

 

Nonaccrual loans

$21,413

 

$21,252

 

$22,544

 

$21,982

 

$22,807

Accruing loans 90+ days delinquent

3,047

 

3,019

 

2,455

 

2,951

 

6,532

Total nonperforming loans

24,460

 

24,271

 

24,999

 

24,933

 

29,339

Other real estate owned (OREO)

1,736

 

1,524

 

1,320

 

1,142

 

1,310

Total nonperforming assets

26,196

 

25,795

 

26,319

 

26,075

 

30,649

Net charge-offs

1,197

 

2,599

 

3,345

 

1,700

 

933

Allowance for loan losses/loans outstanding

0.78%

 

0.78%

 

0.78%

 

0.80%

 

0.80%

Nonperforming loans/loans outstanding

0.39%

 

0.39%

 

0.40%

 

0.40%

 

0.47%

Allowance for loan losses/nonperforming loans

202%

 

202%

 

197%

 

201%

 

169%

Net charge-offs/average loans

0.08%

 

0.17%

 

0.21%

 

0.11%

 

0.06%

Delinquent loans/ending loans

0.87%

 

0.88%

 

1.00%

 

0.93%

 

0.89%

Loan loss provision/net charge-offs

117%

 

93%

 

75%

 

130%

 

262%

Nonperforming assets/total assets

0.24%

 

0.24%

 

0.25%

 

0.24%

 

0.29%

Asset Quality (excluding loans acquired since 1/1/09)

 

 

 

 

 

 

 

 

 

Nonaccrual loans

$15,529

 

$15,524

 

$16,182

 

$14,684

 

$14,644

Accruing loans 90+ days delinquent

2,863

 

2,593

 

2,106

 

2,688

 

6,243

Total nonperforming loans

18,392

 

18,117

 

18,288

 

17,372

 

20,887

Other real estate owned (OREO)

1,145

 

898

 

669

 

859

 

1,025

Total nonperforming assets

19,537

 

19,015

 

18,957

 

18,231

 

21,912

Net charge-offs

1,234

 

1,516

 

3,053

 

1,533

 

552

Allowance for loan losses/loans outstanding

0.93%

 

0.94%

 

0.93%

 

0.96%

 

0.98%

Nonperforming loans/loans outstanding

0.36%

 

0.36%

 

0.36%

 

0.35%

 

0.43%

Allowance for loan losses/nonperforming loans

260%

 

262%

 

256%

 

274%

 

225%

Net charge-offs/average loans

0.10%

 

0.12%

 

0.24%

 

0.12%

 

0.05%

Delinquent loans/ending loans

0.89%

 

0.89%

 

1.06%

 

0.97%

 

0.91%

Loan loss provision/net charge-offs

123%

 

142%

 

76%

 

138%

 

364%

Nonperforming assets/total assets

0.20%

 

0.20%

 

0.20%

 

0.20%

 

0.24%

 

 

 

 

 

 

 

 

 

 

 

Summary of Financial Data (unaudited)

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

2019

2018

 

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

Quarterly GAAP to Non-GAAP Reconciliations

 

 

 

 

 

Income statement data

 

 

 

 

 

Net income

Net income (GAAP)

$45,015

$41,946

$40,823

$43,106

$44,606

Acquisition expenses

1,194

534

0

(832)

71

Tax effect of acquisition expenses

(242)

(99)

0

174

(13)

Subtotal (non-GAAP)

45,967

42,381

40,823

42,448

44,664

Gain on sale of investments, net

(4,882)

0

0

0

0

Tax effect of gain on sale of investments, net

988

0

0

0

0

Subtotal (non-GAAP)

42,073

42,381

40,823

42,448

44,664

Unrealized loss(gain) on equity securities

13

(31)

65

(743)

21

Tax effect of unrealized loss(gain) on equity securities

(3)

6

(13)

156

(4)

Subtotal (non-GAAP)

42,083

42,356

40,875

41,861

44,681

Loss on debt extinguishment

0

0

0

318

0

Tax effect of loss on debt extinguishment

0

0

0

(67)

0

Operating net income (non-GAAP)

42,083

42,356

40,875

42,112

44,681

Amortization of intangibles

3,904

4,130

4,375

4,427

4,555

Tax effect of amortization of intangibles

(790)

(765)

(907)

(928)

(850)

Subtotal (non-GAAP)

45,197

45,721

44,343

45,611

48,386

Acquired non-impaired loan accretion

(1,302)

(1,330)

(1,838)

(1,980)

(2,040)

Tax effect of acquired non-impaired loan accretion

263

246

381

415

381

Adjusted net income (non-GAAP)

$44,158

$44,637

$42,886

$44,046

$46,727

 

 

 

 

 

 

Return on average assets

 

 

 

 

 

Adjusted net income (non-GAAP)

$44,158

$44,637

$42,886

$44,046

$46,727

Average total assets

10,771,975

10,687,708

10,575,272

10,619,872

10,752,203

Adjusted return on average assets

1.64%

1.69%

1.61%

1.65%

1.74%

 

 

 

 

 

 

Return on average equity

 

 

 

 

 

Adjusted net income (non-GAAP)

$44,158

$44,637

$42,886

$44,046

$46,727

Average total equity

1,774,400

1,726,313

1,682,525

1,664,234

1,640,076

Adjusted return on average equity

9.98%

10.49%

10.11%

10.50%

11.43%

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

Diluted earnings per share (GAAP)

$0.86

$0.80

$0.78

$0.83

$0.86

Acquisition expenses

0.02

0.01

0.00

(0.02)

0.00

Tax effect of acquisition expenses

0.00

0.00

0.00

0.00

0.00

Subtotal (non-GAAP)

0.88

0.81

0.78

0.81

0.86

Gain on sale of investments, net

(0.10)

0.00

0.00

0.00

0.00

Tax effect of gain on sale of investments, net

0.02

0.00

0.00

0.00

0.00

Subtotal (non-GAAP)

0.80

0.81

0.78

0.81

0.86

Unrealized loss(gain) on equity securities

0.00

0.00

0.00

(0.01)

0.00

Tax effect of unrealized loss(gain) on equity securities

0.00

0.00

0.00

0.00

0.00

Subtotal (non-GAAP)

0.80

0.81

0.78

0.80

0.86

Loss on debt extinguishment

0.00

0.00

0.00

0.01

0.00

Tax effect of loss on debt extinguishment

0.00

0.00

0.00

0.00

0.00

Operating diluted earnings per share (non-GAAP)

0.80

0.81

0.78

0.81

0.86

Amortization of intangibles

0.07

0.08

0.08

0.08

0.09

Tax effect of amortization of intangibles

(0.02)

(0.01)

(0.02)

(0.02)

(0.02)

Subtotal (non-GAAP)

0.85

0.88

0.84

0.87

0.93

Acquired non-impaired loan accretion

(0.02)

(0.03)

(0.04)

(0.04)

(0.04)

Tax effect of acquired non-impaired loan accretion

0.01

0.00

0.01

0.01

0.01

Diluted adjusted net earnings per share (non-GAAP)

$0.84

$0.85

$0.81

$0.84

$0.90

 

 

 

 

 

 

 

Summary of Financial Data (unaudited)

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

2019

2018

 

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

Quarterly GAAP to Non-GAAP Reconciliations

 

 

 

 

 

Income statement data (continued)

 

 

 

 

 

Noninterest operating expenses

 

 

 

 

 

Noninterest expenses (GAAP)

$91,176

$88,652

$87,613

$85,233

$86,112

Amortization of intangibles

(3,904)

(4,130)

(4,375)

(4,427)

(4,555)

Acquisition expenses

(1,194)

(534)

0

832

(71)

Total adjusted noninterest expenses (non-GAAP)

$86,078

$83,988

$83,238

$81,638

$81,486

 

 

 

 

 

 

Efficiency ratio

 

 

 

 

 

Adjusted noninterest expenses (non-GAAP) - numerator

$86,078

$83,988

$83,238

$81,638

$81,486

Tax-equivalent net interest income

89,290

87,867

88,449

87,269

87,940

Noninterest revenues

60,706

55,696

54,218

55,791

56,559

Acquired non-impaired loan accretion

(1,302)

(1,330)

(1,838)

(1,980)

(2,040)

Gain on sale of investments, net

(4,882)

0

0

0

0

Unrealized loss(gain) on equity securities

13

(31)

65

(743)

21

Loss on debt extinguishment

0

0

0

318

0

Operating revenues (non-GAAP) - denominator

143,825

142,202

140,894

140,655

142,480

Efficiency ratio (non-GAAP)

59.8%

59.1%

59.1%

58.0%

57.2%

 

 

 

 

 

 

Balance sheet data

 

 

 

 

 

Total assets

 

 

 

 

 

Total assets (GAAP)

$10,745,388

$10,916,467

$10,607,295

$10,659,567

$10,633,094

Intangible assets

(800,515)

(804,419)

(807,349)

(811,700)

(816,127)

Deferred taxes on intangible assets

45,576

45,994

46,370

46,882

47,334

Total tangible assets (non-GAAP)

9,990,449

10,158,042

9,846,316

9,894,749

9,864,301

 

 

 

 

 

 

Total common equity

 

 

 

 

 

Shareholders’ Equity (GAAP)

1,809,510

1,757,128

1,713,783

1,668,345

1,656,959

Intangible assets

(800,515)

(804,419)

(807,349)

(811,700)

(816,127)

Deferred taxes on intangible assets

45,576

45,994

46,370

46,882

47,334

Total tangible common equity (non-GAAP)

1,054,571

998,703

952,804

903,527

888,166

 

 

 

 

 

 

Net tangible equity-to-assets ratio at quarter end

 

 

 

 

 

Total tangible common equity (non-GAAP) - numerator

$1,054,571

$998,703

$952,804

$903,527

$888,166

Total tangible assets (non-GAAP) - denominator

9,990,449

10,158,042

9,846,316

9,894,749

9,864,301

Net tangible equity-to-assets ratio at quarter end (non-GAAP)

10.56%

9.83%

9.68%

9.13%

9.00%

 

 

 

 

 

 

 

(1) Excludes gain on sales of investments, unrealized gain and loss on equity securities and loss on debt extinguishment.

(2) Includes deferred tax liabilities related to certain intangible assets.

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20190722005114/en/

CONTACT: Joseph E. Sutaris, EVP & Chief Financial Officer

Office: (315) 445-7396

KEYWORD: NEW YORK UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE FINANCE CONSULTING BANKING

SOURCE: Community Bank System, Inc.

Copyright Business Wire 2019.

PUB: 07/22/2019 06:45 AM/DISC: 07/22/2019 06:45 AM

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