Community Bank System reports $9 million in profits

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Jul 24, 2009 (The Buffalo News - McClatchy-Tribune Information Services via COMTEX) -- CBU | Quote | Chart | News | PowerRating -- Community Bank System said second-quarter profits fell 18.9 percent because of a $3.7 million special assessment by the Federal Deposit Insurance Corp. to shore up the federal deposit insurance fund.

The DeWitt-based bank, which operates 33 branches and a money manager in Western New York, reported profits of $9.2 million, or 28 cents per share, down from $11.3 million or 37 cents per share a year ago.

Without the FDIC assessment, which was imposed on all banks in amounts varying by deposits, Community Bank's earnings were flat from a year ago.

"Our disciplined approach to challenging market conditions produced solid operating results for the second quarter of 2009," said President and CEO Mark E. Tryniski, in a press release.

The bank's board declared a 22 cent quarterly dividend, payable on Oct. 9 to shareholders of record on Sept. 15. The board also approved a buyback of up to 1 million common shares through the end of 2011.

The bank said it benefited during the quarter from loan and core deposit growth in Plattsburgh and other northern New York markets that the bank gained with its acquisition in November of 18 branches from Citizens Financial Group. Overall, core deposits, which don't include large certificates of deposit, rose 14 percent during the quarter, Tryniski said.

Net interest income from taking deposits and making loans rose 14.3 percent to $40.5 million, driven by an 8.2 percent gain in average loans during the quarter, partially offset by a slight narrowing of the profit margin on lending. That resulted from the bank's decision to stay liquid during the quarter, which meant retaining more cash or cash equivalents at low returns. That offset a lower cost of deposits from tighter pricing.

Average earning assets rose 1.6 percent to $4.77 billion from the first quarter, including a 1.1 percent drop in average loans to $3.1 billion because of pay-downs of consumer mortgages and the sale of $4 million in long-term, lower-rate loans originated during the quarter. Business and consumer installment loans held steady from the first quarter. Average deposits were flat from the first quarter, at $3.86 billion.

The bank set aside $2 million for loan losses, down from $2.8 million in the first quarter, as it wrote off $1.7 million as uncollectible, down from $2.3 million in the first quarter. Both levels were higher than a year ago, but bad debt remains relatively low.

Fee income, not including securities gains or losses, rose 16.6 percent from a year ago to $20.6 million. Deposit service fees rose 15.4 percent to $10.28 million, partially offset by slightly lower customer activity and use of deposit services. Mortgage banking revenues nearly tripled to $1.5 million, while employee benefits administration and consulting revenues rose 11.2 percent to $6.6 million, largely from an acquisition completed last July. Wealth management income fell 2.4 percent to $2.3 million.

Operating expenses, not including acquisition costs and the FDIC assessment, rose 17.8 percent to $47.5 million, largely from the two acquisitions and higher pension costs because of market performance of investments.

jepstein@buffnews.com

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