Community Bank System Reports Fourth Quarter and Full Year 2017 Results
- Reported full year GAAP EPS of $3.03 per share and record Operating EPS of $2.64 per share, a 13.3% year-over-year
improvement
- Realized a one-time tax benefit of $38.0 million related to the revaluation of deferred tax assets and
liabilities
- Increased dividends to shareholders for the 25th consecutive year
Community Bank System, Inc. (NYSE:CBU) reported fourth quarter 2017 net income of $72.0 million, or $1.40 per fully diluted
share, compared with $26.4 million, or $0.59 per share reported for the fourth quarter of 2016. Fourth quarter 2017’s results
included $0.8 million, or $0.01 per share of acquisition expenses as well as an estimated $38.0 million, or $0.74 per share,
one-time gain from the revaluation of net deferred tax liabilities related to the recently enacted Tax Cuts and Jobs Act. Excluding
acquisition expenses and the one-time tax benefit, quarterly earnings per share were $0.67 per share, a 9.8% improvement over the
fourth quarter of 2016. Full year diluted earnings per share totaled $3.03 in 2017, compared to $2.32 per share in 2016. Excluding
acquisition expenses and the one-time tax benefit, full year earnings per share were a record $2.64, or 13.3% above the $2.33 per
share of operating earnings generated in 2016.
“We realized another strong quarterly performance which was positively impacted by our Northeast Retirement Services, Inc.
(“NRS”) acquisition completed in February, and from our Merchants Bancshares (“Merchants”) merger which closed in May,” said
President and Chief Executive Officer Mark E. Tryniski. “Both of these high-value transactions have performed above our initial
expectations. NRS continued to grow both its top and bottom line performance at a double-digit pace, and the Merchants integration
has proceeded smoothly with cost synergies running ahead of plan. Our accelerated operating performance also reflects improvements
in core expense management and growth in non-interest income, which contributed to the 10% increase in per share results (excluding
acquisition expenses and one-time tax benefits) compared with the fourth quarter of 2016. We expect to realize a significant
ongoing benefit from the lower federal income tax rate and our businesses are well positioned to continue delivering a high level
of operating performance for the benefit of our shareholders.”
Total revenues for the fourth quarter of 2017 were $139.9 million, an increase of $31.0 million, or 28.5%, 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 22.0% increase in average earning assets and continued growth in
noninterest income, partially offset by a two basis-point decline in the net interest margin from the prior year quarter. A
combination of acquired and organic growth resulted in a $12.4 million, or 55.8% increase in wealth management, insurance, and
employee benefit services revenues. Deposit service fees increased 21.1% year-over-year, primarily the result of the addition of
Merchants, as well as increased debit card-related revenues. Other banking services declined $0.2 million from the fourth quarter
of 2016, driven by an insurance-related gain experienced last year. The quarterly provision for loan losses of $5.4
million was $2.7 million higher than the fourth quarter of 2016, reflective of higher quarterly net charge-off
levels, including a $3.1 million partial charge-off related to a single commercial relationship. Non-performing asset and
delinquent loan ratios were lower in comparison to the end of the fourth quarter of 2016, but up from the end of the linked third
quarter, and included the impact of the previously mentioned commercial relationship which also added over $5.2 million to
non-performing assets. Total operating expenses for the fourth quarter of 2017 were $86.9 million, and included $0.8 million of
non-recurring acquisition expenses related to the Merchants transaction. Excluding acquisition expenses from both periods, total
operating expenses of $86.1 million for the fourth quarter of 2017 were $20.9 million, or 32.0% above the fourth quarter
of 2016, and included the operating expenses from Merchants and NRS, as well as an additional $3.7 million of intangible
amortization, primarily from the two transactions.
Fourth quarter 2017 net interest income was $86.0 million, an increase of $15.7 million, or 22.4%, compared to the fourth
quarter of 2016, and included the impact of the Merchants acquisition. A one basis-point increase in combined funding costs and a
one basis point decline in earning asset yields, which included an incremental $1.1 million in purchased loan accretion, resulted
in a two basis-point decrease in net interest margin quarter-over-quarter. Average loan balances grew $1.34 billion, or 27.2%,
principally related to the Merchants transaction, while average loan yields increased 11 basis points quarter-over-quarter,
including the incremental purchased loan accretion. Investment interest income was $0.5 million higher than the fourth quarter of
2016, as average investment securities (including cash equivalents) balances increased by $346.5 million, while the yield on
investments declined 33 basis points. Fourth quarter 2016 investment income included a non-recurring dividend of $1.2 million from
a limited partnership investment. Interest expense was $0.9 million higher than the previous year’s quarter, driven by a $235.4
million increase in average borrowings (including customer repurchase agreements) and a $1.44 billion increase in average deposit
balances, principally related to the Merchants transaction, and a net one basis point increase in the cost of funds.
Wealth management and insurance services revenues increased to $12.4 million, an increase of $1.9 million, or 17.7%, compared to
the fourth quarter of 2016, driven by both acquired and organic growth. Employee benefit services revenues of $22.2 million
increased $10.5 million from the fourth quarter of 2016, primarily attributable to the NRS acquisition.
Excluding acquisition expenses related to the Merchants’ transaction, fourth quarter 2017 operating expenses of $86.1 million,
which included a full quarter of operating activities from both Merchants and NRS, increased $20.9 million over the fourth quarter
of 2016. Salaries and employee benefits increased $11.0 million, or 30.2%, and included the personnel added from both transactions,
as well as merit and performance-based increases. All other expenses increased 34.3%, and reflected the occupancy, equipment and
other operating costs of both Merchants and NRS, including significantly higher intangible asset amortization, compared to the
fourth quarter of 2016.
During the first quarter of 2017, the Company adopted new accounting guidance for share-based transactions. That guidance
requires that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized as income tax
expense or benefit in the income statement. Previously, tax effects resulting from changes in the Company’s share price subsequent
to the grant date of equity instruments were recorded through shareholders’ equity at the time of vesting or exercise. The adoption
of the amended accounting guidance resulted in a $2.2 million reduction of income tax expense in the first quarter of 2017, or
$0.04 of diluted earnings per common share, and a $0.3 million reduction of income tax expense in the second, third and fourth
quarters, or less than $0.01 per share each quarter. Excluding the estimated one-time benefit from the revaluation of net deferred
tax liabilities, the fourth quarter 2017 effective income tax was 28.6%, down from 33.4% in the prior year quarter, and reflected
the $0.3 million reduction in income tax expense related to this change in accounting for share-based transactions, and also
included the impact of the non-recurring acquisition expenses incurred in 2017, as well as changes related to state tax
apportionment.
The Company also provides supplemental reporting of its results on a “net adjusted” or “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, and the one-time benefit from the revaluation of net deferred tax liabilities. The amounts of such
expenses are presented in the tables that accompany this release. Although “adjusted net income” as defined by the Company is a
non-GAAP measure, the Company’s management believes this information helps investors understand the effect of acquisition activity
in its reported results. Adjusted net earnings per share were $0.71 in the fourth quarter of 2017, compared to $0.62 in the fourth
quarter of 2016, or a 14.5% increase.
Financial Position
Average earning assets of $9.37 billion for the fourth quarter of 2017 were up $1.69 billion, or 22.0% from the fourth quarter
of 2016, and included the loans and investments added in the Merchants transaction. Similarly, average deposit balances grew $1.44
billion, or 20.3% compared to the fourth quarter of 2016. Average borrowings (including customer repurchase agreements) in the
fourth quarter of 2017 of $449.4 million, were $235.4 million higher than the fourth quarter of 2016.
Ending loans at December 31, 2017 increased $1.31 billion, or 26.4%, year-over-year, reflecting the Merchants acquisition.
Investment securities totaled $3.08 billion at December 31, 2017, down slightly from the end of the third quarter, and up from the
end of the fourth quarter of 2016 due to investments added from Merchants, and partially offset by limited reinvestment of
securities cash flows over the last twelve months.
Shareholders’ equity of $1.64 billion at December 31, 2017 was $437.2 million, or 36.5%, higher than the prior year period, a
result of strong earnings generation and capital retention over the last four quarters, as well as incremental shares issued in
conjunction with the NRS and Merchants acquisitions. The Company’s net tangible equity to net tangible assets ratio was 8.61% at
December 31, 2017, down from 9.24% a year earlier, a result of the two acquisitions completed in the first half of 2017. The
Company’s Tier 1 leverage ratio was 10.00% at the end of the fourth quarter, compared to 10.55% a year earlier.
As previously announced in December 2016, the Company’s Board of Directors approved a stock repurchase program authorizing the
repurchase of up to 2.2 million shares of the Company’s common stock during a twelve-month period starting January 1, 2017. 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 in 2017. In December 2017, the
Company’s Board of Directors reauthorized a new repurchase program for 2018 for up to 2.5 million shares of the Company’s common
stock.
Asset Quality
Despite the previously mentioned partial net charge-off of $3.1 million on a specific commercial relationship in the fourth
quarter, the Company’s asset quality metrics continue to illustrate the long-term effectiveness of the Company’s disciplined risk
management and underwriting standards. Total net charge-offs were $5.8 million for the fourth quarter, compared to $2.2 million for
the fourth quarter of 2016 and $1.8 million for the third quarter of 2017. Net charge-offs as an annualized percentage of average
loans measured 0.37% in the fourth quarter of 2017, compared to 0.18% in last year’s fourth quarter and 0.11% in the third quarter
of 2017. The full year net charge-off ratio in 2017 was 0.18%, compared to 0.13% in 2016. Nonperforming loans as a percentage of
total loans at December 31, 2017 were 0.44%, improved from 0.48% at December 31, 2016 and higher than the 0.37% level at September
30, 2017, primarily related to the one previously mentioned commercial relationship. The total loan delinquency ratio of 1.10% at
the end of the fourth quarter was nine basis points lower than the level at December 31, 2016, and five basis points higher than
this year’s third quarter-end. The fourth quarter provision for loan losses of $5.4 million was $2.7 million higher than the fourth
quarter of 2016, and $3.1 million higher than the third quarter of 2017. The allowance for loan losses to nonperforming loans was
173% at December 31, 2017, compared with the 199% and 205% levels at the end of the fourth quarter of 2016 and third quarter of
2017, respectively.
Dividend Increase
During the fourth quarter of 2017 the Company declared a quarterly cash dividend of $0.34 per share on its common stock,
compared to a $0.32 dividend declared in the second quarter of 2017 and the fourth quarter of 2016. This increase marked the
25th consecutive year of dividend increases for the Company. President and Chief Executive Officer, Mark E. Tryniski,
commented, “The payment of a meaningful and growing dividend is an important component of our commitment to provide consistent and
favorable long-term returns to our shareholders. The increase reflected the continued strength of our current operating performance
and capital position.” The two cent, or 6.3% increase in the Company’s quarterly cash dividend over the same quarter of the prior
year, brought the dividend to a level that represents an annualized yield of 2.5% based upon the closing price of $55.39 on January
19, 2018.
Merchants Bancshares, Inc.
On October 24, 2016, the Company announced that it had entered into a definitive agreement to acquire Merchants Bancshares, Inc.
("Merchants"), parent company of Merchants Bank headquartered in South Burlington, Vermont, for approximately $345.2 million in
Company stock and cash. The acquisition was completed on May 12, 2017. The transaction extended the Company's footprint into the
Vermont and Western Massachusetts markets. Upon the completion of the merger, Community Bank added 31 branch locations in Vermont
and one office in Western Massachusetts with approximately $2.0 billion of assets and deposits of $1.5 billion.
Northeast Retirement Services, Inc.
On December 5, 2016, the Company announced that it had entered into a definitive agreement to acquire Northeast Retirement
Services, Inc. (“NRS”), a leading provider of plan accounting, transfer agency, fund administration, trust and retirement plan
services for approximately $148.6 million in Company stock and cash. The acquisition was completed on February 3, 2017.
Conference Call Scheduled
Company management will conduct an investor call at 11:00 a.m. (ET) today, January 22, 2018, to discuss fourth quarter and full
year 2017 results. The conference call can be accessed at 800-967-7137 (719-325-2437 if outside United States and Canada) using the
conference ID code 9581617. Investors may also listen live via the Internet at: http://www.webcaster4.com/Webcast/Page/995/24052.
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 more than 230 customer facilities across Upstate New York, Northeastern Pennsylvania,
Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $10.7 billion, 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 (which includes the recently acquired NRS) is a leading provider of employee
benefits administration, trust services, 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.communitybankna.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.
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Summary of Financial Data
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Year-to-Date |
| |
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
| Earnings |
|
|
|
|
|
|
|
|
| Loan income |
|
$69,716 |
|
$53,602 |
|
$253,949 |
|
$211,467 |
| Investment income |
|
19,872 |
|
19,397 |
|
75,506 |
|
73,720 |
| Total interest income |
|
89,588 |
|
72,999 |
|
329,455 |
|
285,187 |
| Interest expense |
|
3,611 |
|
2,753 |
|
13,780 |
|
11,291 |
| Net interest income |
|
85,977 |
|
70,246 |
|
315,675 |
|
273,896 |
| Provision for loan losses |
|
5,381 |
|
2,640 |
|
10,984 |
|
8,076 |
| Net interest income after provision for loan losses |
|
80,596 |
|
67,606 |
|
304,691 |
|
265,820 |
| Deposit service fees |
|
18,115 |
|
14,959 |
|
67,896 |
|
58,595 |
| Revenues from mortgage banking and other banking services |
|
1,196 |
|
1,438 |
|
5,466 |
|
7,477 |
| Wealth management and insurance services |
|
12,415 |
|
10,544 |
|
48,229 |
|
42,925 |
| Employee benefit services |
|
22,212 |
|
11,679 |
|
80,830 |
|
46,628 |
| Gain on sale of investments |
|
0 |
|
0 |
|
2 |
|
0 |
| Total noninterest income |
|
53,938 |
|
38,620 |
|
202,423 |
|
155,625 |
| Salaries and employee benefits |
|
47,217 |
|
36,259 |
|
179,993 |
|
151,647 |
| Occupancy and equipment |
|
9,622 |
|
7,633 |
|
35,561 |
|
30,078 |
| Amortization of intangible assets |
|
4,961 |
|
1,275 |
|
16,941 |
|
5,479 |
| Acquisition expenses |
|
794 |
|
1,364 |
|
25,986 |
|
1,706 |
| Other |
|
24,325 |
|
20,066 |
|
88,668 |
|
77,938 |
| Total operating expenses |
|
86,919 |
|
66,597 |
|
347,149 |
|
266,848 |
| Income before income taxes |
|
47,615 |
|
39,629 |
|
159,965 |
|
154,597 |
| Income taxes |
|
(24,411) |
|
13,237 |
|
9,248 |
|
50,785 |
| Net income |
|
$72,026 |
|
$26,392 |
|
$150,717 |
|
$103,812 |
| Basic earnings per share |
|
$1.41 |
|
$0.59 |
|
$3.07 |
|
$2.34 |
| Diluted earnings per share |
|
$1.40 |
|
$0.59 |
|
$3.03 |
|
$2.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Financial Data
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
| |
|
4th Qtr |
|
3rd Qtr |
|
2nd Qtr |
|
1st Qtr |
|
4th Qtr |
| Earnings |
|
|
|
|
|
|
|
|
|
|
| Loan income |
|
$69,716 |
|
$69,498 |
|
$62,351 |
|
$52,384 |
|
$53,602 |
| Investment income |
|
19,872 |
|
18,989 |
|
19,071 |
|
17,574 |
|
19,397 |
| Total interest income |
|
89,588 |
|
88,487 |
|
81,422 |
|
69,958 |
|
72,999 |
| Interest expense |
|
3,611 |
|
4,092 |
|
3,393 |
|
2,684 |
|
2,753 |
| Net interest income |
|
85,977 |
|
84,395 |
|
78,029 |
|
67,274 |
|
70,246 |
| Provision for loan losses |
|
5,381 |
|
2,314 |
|
1,461 |
|
1,828 |
|
2,640 |
| Net interest income after provision for loan losses |
|
80,596 |
|
82,081 |
|
76,568 |
|
65,446 |
|
67,606 |
| Deposit service fees |
|
18,115 |
|
18,419 |
|
16,655 |
|
14,707 |
|
14,959 |
| Revenues from mortgage banking and other banking services |
|
1,196 |
|
1,704 |
|
1,407 |
|
1,159 |
|
1,438 |
| Wealth management and insurance services |
|
12,415 |
|
12,051 |
|
12,502 |
|
11,261 |
|
10,544 |
| Employee benefit services |
|
22,212 |
|
20,767 |
|
20,662 |
|
17,189 |
|
11,679 |
| Gain on sale of investments |
|
0 |
|
0 |
|
0 |
|
2 |
|
0 |
| Total noninterest income |
|
53,938 |
|
52,941 |
|
51,226 |
|
44,318 |
|
38,620 |
| Salaries and employee benefits |
|
47,217 |
|
46,568 |
|
44,808 |
|
41,400 |
|
36,259 |
| Occupancy and equipment |
|
9,622 |
|
9,106 |
|
8,637 |
|
8,196 |
|
7,633 |
| Amortization of intangible assets |
|
4,961 |
|
4,949 |
|
4,263 |
|
2,768 |
|
1,275 |
| Acquisition expenses |
|
794 |
|
580 |
|
22,896 |
|
1,716 |
|
1,364 |
| Other |
|
24,325 |
|
22,573 |
|
22,275 |
|
19,495 |
|
20,066 |
| Total operating expenses |
|
86,919 |
|
83,776 |
|
102,879 |
|
73,575 |
|
66,597 |
| Income before income taxes |
|
47,615 |
|
51,246 |
|
24,915 |
|
36,189 |
|
39,629 |
| Income taxes |
|
(24,411) |
|
16,003 |
|
7,724 |
|
9,932 |
|
13,237 |
| Net income |
|
$72,026 |
|
$35,243 |
|
$17,191 |
|
$26,257 |
|
$26,392 |
| Basic earnings per share |
|
$1.41 |
|
$0.69 |
|
$0.35 |
|
$0.58 |
|
$0.59 |
| Diluted earnings per share |
|
$1.40 |
|
$0.68 |
|
$0.35 |
|
$0.57 |
|
$0.59 |
| Profitability |
|
|
|
|
|
|
|
|
|
|
| Return on assets |
|
2.66% |
|
1.29% |
|
0.69% |
|
1.22% |
|
1.21% |
| Return on equity |
|
17.88% |
|
8.81% |
|
4.74% |
|
8.47% |
|
8.59% |
| Return on tangible equity(2) |
|
34.11% |
|
16.74% |
|
7.72% |
|
13.57% |
|
13.40% |
| Noninterest income/operating income (FTE) (1) |
|
37.9% |
|
38.4% |
|
39.4% |
|
39.1% |
|
35.0% |
| Efficiency ratio |
|
57.8% |
|
56.8% |
|
58.3% |
|
60.9% |
|
57.9% |
| Components of Net Interest Margin (FTE) |
|
|
|
|
|
|
|
|
|
|
| Loan yield |
|
4.44% |
|
4.37% |
|
4.41% |
|
4.31% |
|
4.33% |
| Cash equivalents yield |
|
1.19% |
|
1.09% |
|
0.99% |
|
0.79% |
|
0.48% |
| Investment yield |
|
2.81% |
|
2.69% |
|
2.87% |
|
2.90% |
|
3.14% |
| Earning asset yield |
|
3.89% |
|
3.81% |
|
3.87% |
|
3.80% |
|
3.90% |
| Interest-bearing deposit rate |
|
0.14% |
|
0.14% |
|
0.14% |
|
0.13% |
|
0.13% |
| Borrowing rate |
|
1.32% |
|
1.44% |
|
1.54% |
|
2.18% |
|
1.80% |
| Cost of all interest-bearing funds |
|
0.22% |
|
0.24% |
|
0.21% |
|
0.19% |
|
0.19% |
| Cost of funds (includes DDA) |
|
0.16% |
|
0.18% |
|
0.16% |
|
0.15% |
|
0.15% |
| Net interest margin (FTE) |
|
3.74% |
|
3.64% |
|
3.72% |
|
3.65% |
|
3.76% |
| Fully tax-equivalent adjustment |
|
$2,375 |
|
$2,381 |
|
$2,374 |
|
$2,285 |
|
$2,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
| |
|
4th Qtr |
|
3rd Qtr |
|
2nd Qtr |
|
1st Qtr |
|
4th Qtr |
| Average Balances |
|
|
|
|
|
|
|
|
|
|
| Loans |
|
$6,274,679 |
|
$6,343,468 |
|
$5,695,781 |
|
$4,939,092 |
|
$4,934,034 |
| Cash equivalents |
|
34,223 |
|
26,986 |
|
52,956 |
|
40,209 |
|
15,367 |
| Taxable investment securities |
|
2,572,703 |
|
2,571,459 |
|
2,408,020 |
|
2,203,175 |
|
2,179,840 |
| Nontaxable investment securities |
|
491,578 |
|
511,182 |
|
526,962 |
|
540,518 |
|
556,774 |
| Total interest-earning assets |
|
9,373,183 |
|
9,453,095 |
|
8,683,719 |
|
7,722,994 |
|
7,686,015 |
| Total assets |
|
10,757,836 |
|
10,862,613 |
|
9,958,553 |
|
8,747,266 |
|
8,665,948 |
| Interest-bearing deposits |
|
6,206,663 |
|
6,230,591 |
|
6,021,696 |
|
5,543,046 |
|
5,472,420 |
| Borrowings |
|
449,377 |
|
541,036 |
|
346,975 |
|
177,587 |
|
213,930 |
| Total interest-bearing liabilities |
|
6,656,040 |
|
6,771,627 |
|
6,368,671 |
|
5,720,633 |
|
5,686,350 |
| Noninterest-bearing deposits |
|
2,307,155 |
|
2,307,205 |
|
1,948,434 |
|
1,620,473 |
|
1,603,703 |
| Shareholders' equity |
|
1,598,056 |
|
1,587,279 |
|
1,455,847 |
|
1,256,888 |
|
1,222,124 |
| Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$221,038 |
|
$241,480 |
|
$219,695 |
|
$291,186 |
|
$173,857 |
| Investment securities |
|
3,081,379 |
|
3,125,218 |
|
3,145,013 |
|
2,788,718 |
|
2,784,392 |
| Loans: |
|
|
|
|
|
|
|
|
|
|
| Consumer mortgage |
|
2,220,298 |
|
2,206,527 |
|
2,211,412 |
|
1,830,800 |
|
1,819,701 |
| Business lending |
|
2,424,223 |
|
2,458,981 |
|
2,479,152 |
|
1,468,465 |
|
1,490,076 |
| Consumer indirect |
|
1,011,978 |
|
1,034,716 |
|
1,057,664 |
|
1,055,112 |
|
1,044,972 |
| Home equity |
|
420,329 |
|
424,598 |
|
427,483 |
|
393,769 |
|
401,998 |
| Consumer direct |
|
179,929 |
|
183,898 |
|
185,589 |
|
184,067 |
|
191,815 |
| Total loans |
|
6,256,757 |
|
6,308,720 |
|
6,361,300 |
|
4,932,213 |
|
4,948,562 |
| Allowance for loan losses |
|
47,583 |
|
47,983 |
|
47,451 |
|
47,096 |
|
47,233 |
| Intangible assets, net |
|
825,088 |
|
824,355 |
|
831,403 |
|
618,977 |
|
480,844 |
| Other assets |
|
409,519 |
|
398,428 |
|
374,086 |
|
329,862 |
|
326,015 |
| Total assets |
|
10,746,198 |
|
10,850,218 |
|
10,884,046 |
|
8,913,860 |
|
8,666,437 |
| Deposits: |
|
|
|
|
|
|
|
|
|
|
| Noninterest-bearing |
|
2,293,057 |
|
2,310,954 |
|
2,283,138 |
|
1,642,158 |
|
1,646,039 |
| Non-maturity interest-bearing |
|
5,377,059 |
|
5,495,377 |
|
5,508,504 |
|
5,010,516 |
|
4,726,787 |
| Time |
|
774,304 |
|
799,659 |
|
833,963 |
|
684,203 |
|
703,128 |
| Total deposits |
|
8,444,420 |
|
8,605,990 |
|
8,625,605 |
|
7,336,877 |
|
7,075,954 |
| Borrowings |
|
363,082 |
|
314,289 |
|
373,053 |
|
0 |
|
146,200 |
| Subordinated debt held by unconsolidated subsidiary trusts |
|
122,814 |
|
122,808 |
|
122,802 |
|
102,177 |
|
102,170 |
| Accrued interest and other liabilities |
|
180,567 |
|
213,886 |
|
189,686 |
|
178,776 |
|
144,013 |
| Total liabilities |
|
9,110,883 |
|
9,256,973 |
|
9,311,146 |
|
7,617,830 |
|
7,468,337 |
| Shareholders' equity |
|
1,635,315 |
|
1,593,245 |
|
1,572,900 |
|
1,296,030 |
|
1,198,100 |
| Total liabilities and shareholders' equity |
|
10,746,198 |
|
10,850,218 |
|
10,884,046 |
|
8,913,860 |
|
8,666,437 |
| Capital |
|
|
|
|
|
|
|
|
|
|
| Tier 1 leverage ratio |
|
10.00% |
|
9.54% |
|
10.19% |
|
10.35% |
|
10.55% |
| Tangible equity/net tangible assets (2) |
|
8.61% |
|
8.36% |
|
8.08% |
|
8.91% |
|
9.24% |
| Diluted weighted average common shares O/S |
|
51,569 |
|
51,526 |
|
49,386 |
|
46,227 |
|
45,025 |
| Period end common shares outstanding |
|
50,696 |
|
50,587 |
|
50,512 |
|
45,956 |
|
44,437 |
| Cash dividends declared per common share |
|
$0.34 |
|
$0.34 |
|
$0.32 |
|
$0.32 |
|
$0.32 |
| Book value |
|
$32.26 |
|
$31.50 |
|
$31.14 |
|
$28.20 |
|
$26.96 |
| Tangible book value(2) |
|
$16.94 |
|
$16.70 |
|
$16.21 |
|
$16.22 |
|
$17.12 |
| Common stock price (end of period) |
|
$53.75 |
|
$55.25 |
|
$55.77 |
|
$54.98 |
|
$61.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016 |
| |
|
4th Qtr |
|
3rd Qtr |
|
2nd Qtr |
|
1st Qtr |
|
4th Qtr |
| Asset Quality |
|
|
|
|
|
|
|
|
|
|
| Nonaccrual loans |
|
$24,740 |
|
$21,510 |
|
$21,033 |
|
$20,066 |
|
$20,619 |
| Accruing loans 90+ days delinquent |
|
2,706 |
|
1,861 |
|
1,882 |
|
2,809 |
|
3,076 |
| Total nonperforming loans |
|
27,446 |
|
23,371 |
|
22,915 |
|
22,875 |
|
23,695 |
| Other real estate owned (OREO) |
|
1,915 |
|
1,873 |
|
2,491 |
|
2,486 |
|
1,966 |
| Total nonperforming assets |
|
29,361 |
|
25,244 |
|
25,406 |
|
25,361 |
|
25,661 |
| Net charge-offs |
|
5,781 |
|
1,782 |
|
1,106 |
|
1,965 |
|
2,196 |
| Allowance for loan losses/loans outstanding |
|
0.76% |
|
0.76% |
|
0.75% |
|
0.95% |
|
0.95% |
| Nonperforming loans/loans outstanding |
|
0.44% |
|
0.37% |
|
0.36% |
|
0.46% |
|
0.48% |
| Allowance for loan losses/nonperforming loans |
|
173% |
|
205% |
|
207% |
|
206% |
|
199% |
| Net charge-offs/average loans |
|
0.37% |
|
0.11% |
|
0.08% |
|
0.16% |
|
0.18% |
| Delinquent loans/ending loans |
|
1.10% |
|
1.05% |
|
0.99% |
|
0.94% |
|
1.19% |
| Loan loss provision/net charge-offs |
|
93% |
|
130% |
|
132% |
|
93% |
|
120% |
| Nonperforming assets/total assets |
|
0.27% |
|
0.23% |
|
0.23% |
|
0.28% |
|
0.30% |
| Asset Quality (excluding loans acquired since 1/1/09) |
|
|
|
|
|
|
|
|
|
|
| Nonaccrual loans |
|
$16,020 |
|
$15,069 |
|
$14,359 |
|
$15,268 |
|
$16,600 |
| Accruing loans 90+ days delinquent |
|
2,502 |
|
1,589 |
|
1,640 |
|
1,707 |
|
1,963 |
| Total nonperforming loans |
|
18,522 |
|
16,658 |
|
15,999 |
|
16,975 |
|
18,563 |
| Other real estate owned (OREO) |
|
1,221 |
|
1,257 |
|
1,681 |
|
2,225 |
|
1,658 |
| Total nonperforming assets |
|
19,743 |
|
17,915 |
|
17,680 |
|
19,200 |
|
20,221 |
| Net charge-offs |
|
2,279 |
|
1,624 |
|
692 |
|
1,866 |
|
1,846 |
| Allowance for loan losses/loans outstanding |
|
0.98% |
|
1.00% |
|
1.01% |
|
1.01% |
|
1.02% |
| Nonperforming loans/loans outstanding |
|
0.40% |
|
0.36% |
|
0.35% |
|
0.38% |
|
0.42% |
| Allowance for loan losses/nonperforming loans |
|
244% |
|
276% |
|
284% |
|
266 % |
|
245% |
| Net charge-offs/average loans |
|
0.20% |
|
0.14% |
|
0.06% |
|
0.17% |
|
0.17% |
| Delinquent loans/ending loans |
|
1.12% |
|
1.16% |
|
1.06% |
|
0.86% |
|
1.14% |
| Loan loss provision/net charge-offs |
|
67% |
|
125% |
|
153% |
|
85% |
|
133% |
| Nonperforming assets/total assets |
|
0.22% |
|
0.20% |
|
0.20% |
|
0.23% |
|
0.25% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
| |
|
4th Qtr |
|
3rd Qtr |
|
2nd Qtr |
|
1st Qtr |
|
4th Qtr |
| Quarterly GAAP to Non-GAAP Reconciliations |
|
|
|
|
|
|
|
|
|
|
| Income statement data |
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
|
|
|
|
|
| Net income (GAAP) |
|
$72,026 |
|
$35,243 |
|
$17,191 |
|
$26,257 |
|
$26,392 |
| Acquisition expenses |
|
794 |
|
580 |
|
22,896 |
|
1,716 |
|
1,364 |
| Tax effect of acquisition expenses |
|
(227) |
|
(181) |
|
(7,098) |
|
(471) |
|
(456) |
| Subtotal (non-GAAP) |
|
72,593 |
|
35,642 |
|
32,989 |
|
27,502 |
|
27,300 |
| Amortization of intangibles |
|
4,961 |
|
4,949 |
|
4,263 |
|
2,768 |
|
1,275 |
| Tax effect of amortization of intangibles |
|
(1,417) |
|
(1,545) |
|
(1,322) |
|
(760) |
|
(426) |
| Subtotal (non-GAAP) |
|
76,137 |
|
39,046 |
|
35,930 |
|
29,510 |
|
28,149 |
| Acquired non-impaired loan accretion |
|
(1,930) |
|
(1,879) |
|
(1,642) |
|
(437) |
|
(836) |
| Tax effect of acquired non-impaired loan accretion |
|
551 |
|
587 |
|
509 |
|
120 |
|
279 |
| Subtotal (non-GAAP) |
|
74,758 |
|
37,754 |
|
34,797 |
|
29,193 |
|
27,592 |
| Tax Cuts and Jobs Act deferred tax impact |
|
(38,010) |
|
0 |
|
0 |
|
0 |
|
0 |
| Adjusted net income (non-GAAP) |
|
36,748 |
|
37,754 |
|
34,797 |
|
29,193 |
|
27,592 |
|
|
|
|
|
|
|
|
|
|
|
| Return on average assets |
|
|
|
|
|
|
|
|
|
|
| Adjusted net income (non-GAAP) |
|
$36,748 |
|
$37,754 |
|
$34,797 |
|
$29,193 |
|
$27,592 |
| Average total assets |
|
10,757,836 |
|
10,862,613 |
|
9,958,553 |
|
8,747,266 |
|
8,665,948 |
| Adjusted return on average assets |
|
1.36% |
|
1.38% |
|
1.40% |
|
1.35% |
|
1.27% |
|
|
|
|
|
|
|
|
|
|
|
| Return on average equity |
|
|
|
|
|
|
|
|
|
|
| Adjusted net income (non-GAAP) |
|
$36,748 |
|
$37,754 |
|
$34,797 |
|
$29,193 |
|
$27,592 |
| Average total equity |
|
1,598,056 |
|
1,587,279 |
|
1,455,847 |
|
1,256,888 |
|
1,222,124 |
| Adjusted return on average equity |
|
9.12% |
|
9.44% |
|
9.59% |
|
9.42% |
|
8.98% |
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share |
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share (GAAP) |
|
$1.40 |
|
$0.68 |
|
$0.35 |
|
$0.57 |
|
$0.59 |
| Acquisition expenses |
|
0.02 |
|
0.01 |
|
0.46 |
|
0.04 |
|
0.03 |
| Tax effect of acquisition expenses |
|
(0.01) |
|
(0.00) |
|
( 0.14) |
|
(0.01) |
|
(0.01) |
| Subtotal (non-GAAP) |
|
1.41 |
|
0.69 |
|
0.67 |
|
0.60 |
|
0.61 |
| Amortization of intangibles |
|
0.10 |
|
0.09 |
|
0.09 |
|
0.06 |
|
0.03 |
| Tax effect of amortization of intangibles |
|
(0.03) |
|
(0.03) |
|
(0.03) |
|
(0.02) |
|
(0.01) |
| Subtotal (non-GAAP) |
|
1.48 |
|
0.75 |
|
0.73 |
|
0.64 |
|
0.63 |
| Acquired non-impaired loan accretion |
|
(0.04) |
|
(0.04) |
|
(0.03) |
|
(0.01) |
|
(0.02) |
| Tax effect of acquired non-impaired loan accretion |
|
0.01 |
|
0.01 |
|
0.01 |
|
0.00 |
|
0.01 |
| Subtotal (non-GAAP) |
|
1.45 |
|
0.72 |
|
0.71 |
|
0.63 |
|
0.62 |
| Tax Cuts and Jobs Act deferred tax impact |
|
(0.74) |
|
0 |
|
0 |
|
0 |
|
0 |
| Diluted adjusted net earnings per share (non-GAAP) |
|
0.71 |
|
0.72 |
|
0.71 |
|
0.63 |
|
0.62 |
|
|
|
|
|
|
|
|
|
|
|
| Noninterest operating expenses |
|
|
|
|
|
|
|
|
|
|
| Noninterest expenses (GAAP) |
|
$86,919 |
|
$83,776 |
|
$102,879 |
|
$73,575 |
|
$66,597 |
| Amortization of intangibles |
|
(4,961) |
|
(4,949) |
|
(4,263) |
|
(2,768) |
|
(1,275) |
| Acquisition expenses |
|
(794) |
|
(580) |
|
(22,896) |
|
(1,716) |
|
(1,364) |
| Total adjusted noninterest expenses (non-GAAP) |
|
81,164 |
|
78,247 |
|
75,720 |
|
69,091 |
|
63,958 |
|
|
|
|
|
|
|
|
|
|
|
| Efficiency ratio |
|
|
|
|
|
|
|
|
|
|
| Adjusted noninterest expenses (non-GAAP) - numerator |
|
$81,164 |
|
$78,247 |
|
$75,720 |
|
$69,091 |
|
$63,958 |
| Tax-equivalent net interest income |
|
88,352 |
|
86,776 |
|
80,403 |
|
69,559 |
|
72,628 |
| Noninterest revenues |
|
53,938 |
|
52,941 |
|
51,226 |
|
44,318 |
|
38,620 |
| Acquired non-impaired loan accretion |
|
(1,930) |
|
(1,879) |
|
(1,642) |
|
(437) |
|
(836) |
| Gain on sales of investments |
|
0 |
|
0 |
|
0 |
|
(2) |
|
0 |
| Operating revenues (non-GAAP) - denominator |
|
140,360 |
|
137,838 |
|
129,987 |
|
113,438 |
|
110,412 |
| Efficiency ratio (non-GAAP) |
|
57.8% |
|
56.8% |
|
58.3% |
|
60.9% |
|
57.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
| |
|
4th Qtr |
|
3rd Qtr |
|
2nd Qtr |
|
1st Qtr |
|
4th Qtr |
| Quarterly GAAP to Non-GAAP Reconciliations |
|
|
|
|
|
|
|
|
|
|
| Balance sheet data |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
|
|
|
|
|
|
|
|
|
| Total assets (GAAP) |
|
$10,746,198 |
|
$10,850,218 |
|
$10,884,046 |
|
$8,913,860 |
|
$8,666,437 |
| Intangible assets |
|
(825,088) |
|
(824,355) |
|
(831,403) |
|
(618,977) |
|
(480,844) |
| Deferred taxes on intangible assets |
|
48,419 |
|
75,820 |
|
77,097 |
|
68,236 |
|
43,504 |
| Total tangible assets (non-GAAP) |
|
9,969,529 |
|
10,101,683 |
|
10,129,740 |
|
8,363,119 |
|
8,229,097 |
|
|
|
|
|
|
|
|
|
|
|
| Total common equity |
|
|
|
|
|
|
|
|
|
|
| Shareholders' Equity (GAAP) |
|
1,635,315 |
|
1,593,245 |
|
1,572,900 |
|
1,296,030 |
|
1,198,100 |
| Intangible assets |
|
(825,088) |
|
(824,355) |
|
(831,403) |
|
(618,977) |
|
(480,844) |
| Deferred taxes on intangible assets |
|
48,419 |
|
75,820 |
|
77,097 |
|
68,236 |
|
43,504 |
| Total tangible common equity (non-GAAP) |
|
858,646 |
|
844,710 |
|
818,594 |
|
745,289 |
|
760,760 |
|
|
|
|
|
|
|
|
|
|
|
| Net tangible equity-to-assets ratio at quarter end |
|
|
|
|
|
|
|
|
|
|
| Total tangible common equity (non-GAAP) - numerator |
|
$858,646 |
|
$844,710 |
|
$818,594 |
|
$745,289 |
|
$760,760 |
| Total tangible assets (non-GAAP) - denominator |
|
9,969,529 |
|
10,101,683 |
|
10,129,740 |
|
8,363,119 |
|
8,229,097 |
| Net tangible equity-to-assets ratio at quarter end (non-GAAP) |
|
8.61% |
|
8.36% |
|
8.08% |
|
8.91% |
|
9.24% |
| |
|
|
|
|
|
|
|
|
|
|
| |
| (1) Excludes gains and losses on sales of
investment securities. |
| (2) Includes deferred tax liabilities related
to certain intangible assets. |
| |
Community Bank System, Inc.
Scott A. Kingsley, 315-445-3121
EVP & Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20180122005400/en/