Community Bank System Q3 net income jumps to $35.2 million
Staff Writer |
Community Bank System reported third quarter 2017 net income of $35.2 million, or $0.68 per fully diluted share, compared with $27.2 million, or $0.61 per share reported for the third quarter of 2016.
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Third quarter 2017’s results included $0.6 million, or $0.01 per share of acquisition expenses related to the completed acquisition of Merchants Bancshares.
Excluding acquisition expenses, quarterly earnings per share were $0.69 per share, a new quarterly high for the company.
Diluted earnings per share totaled $1.60 for the first nine months of 2017, compared to $1.74 per share in the first nine months of 2016.
Excluding acquisition expenses, year-to-date earnings per share were $1.96, or 12.6% above the first nine months of 2016.
Total revenues for the third quarter of 2017 were $137.3 million, an increase of $28.9 million, or 26.7%, over the prior year quarter, and included a full quarter of revenues from both the Merchants and NRS transactions completed in the first half of this year.
Higher revenues were generated as a result of a 23.0% increase in average earning assets and continued growth in noninterest income, partially offset by a three basis-point decline in the net interest margin from the prior year quarter.
A combination of acquired and organic growth resulted in a $10.6 million, or 47.9% increase in wealth management, insurance, and employee benefit services revenues.
Deposit service fees increased 23.7% year-over-year, primarily the result of the addition of Merchants, as well as increased card-related revenues.
Other banking services declined $1.2 million from the third quarter of 2016, almost entirely related to an insurance-related gain experienced last year.
The quarterly provision for loan losses of $2.3 million was $0.5 million higher than the third quarter of 2016, primarily reflective of modestly higher quarterly net charge-off levels.
Benefitting from the addition of the Merchants’ loan portfolios, non-performing asset and delinquent loan ratios were lower than the end of the third quarter of 2016.
Total third quarter operating expenses were $83.8 million, and included $0.6 million of non-recurring acquisition expenses related to the Merchants transaction.
Excluding acquisition expenses from both periods, total operating expenses of $83.2 million for the third quarter were $17.0 million, or 25.6% above the third quarter of 2016, and included the operating expenses from Merchants and NRS, as well as an additional $3.6 million of intangible amortization, primarily from the two transactions.
Third quarter 2017 net interest income was $84.4 million, an increase of $15.9 million, or 23.3%, compared to the third quarter of 2016, and included a full quarter from Merchants.
A two basis-point increase in combined funding costs and a slight decline in earning asset yields, which included an incremental $1.3 million in purchased loan accretion, resulted in a three basis-point decrease in net interest margin quarter-over-quarter.
Average loan balances grew $1.43 billion, or 29.1%, principally related to the Merchants transaction, while average loan yields increased one basis point quarter-over-quarter, including the incremental purchased loan accretion.
Investment interest income was $1.4 million higher than the third quarter of 2016, as average investment securities (including cash equivalents) balances increased by $340.1 million, while the yield on investments declined 18 basis points.
Interest expense was $1.2 million higher than the previous year’s quarter, driven by a $213.5 million increase in average borrowings (including customer repurchase agreements) and a $1.56 billion increase in average deposit balances, principally related to the Merchants transaction, and a net two basis point increase in the cost of funds.
Wealth management and insurance services revenues increased to $12.1 million, $1.1 million, or 10.3%, higher than the third quarter of 2016, driven by both acquired and organic growth.
Employee benefit services revenues of $20.8 million increased $9.5 million from the third quarter of 2016, primarily from the NRS acquisition.
Excluding acquisition expenses related to the Merchants’ transaction, third quarter 2017 operating expenses of $83.2 million, which included a full quarter of operating activities from both Merchants and NRS, increased $17.0 million over the third quarter of 2016.
Salaries and employee benefits increased $8.3 million, or 21.6%, and included the personnel added from both transactions, as well as planned merit increases.
All other expenses increased 31.2%, and reflected the occupancy, equipment and other operating costs of both Merchants and NRS, including significantly higher intangible amortization, compared to the third quarter of 2016. ■