Community Bank System Reports Second Quarter 2019 Results
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.”