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EARNINGS AT COMMUNITY BANK SYSTEM UP SHARPLY FROM PRIOR YEAR'S RESULTS

EARNINGS AT COMMUNITY BANK SYSTEM UP SHARPLY FROM PRIOR YEAR'S RESULTS
    SYRACUSE, N.Y., Jan. 22 /PRNewswire/ -- Community Bank System, Inc. (NASDAQ-NMS: CBSI), a DeWitt, N.Y.-based bank holding company with nearly $635 million in assets, has announced that net income for 1991 was $3.672 million or $1.36 per share, up 74 percent from 1990.  Fourth quarter results were up even more sharply over the same period last year; net income climbed 4.2 times to $688,000 and earnings per share reached $.25 versus $.05 a year earlier.
    Edwin J. Lyons, president and chief executive officer, stated that the primary reasons for the improved performance, both for the recent quarter and the entire year, were a better net interest margin, largely because of a continued decline in rates paid on deposits due to the recessionary economy, and lower loan loss provision expense, made possible by a reduction in nonperforming loans to a very satisfactory .67 percent of loans outstanding.  Loan loss reserves have been maintained at an all-time high since mid-1991, covering nonperformers by an ample 1.9 times, and full-year net charge-offs were held to a manageable .51 percent of average loans.
    Lyons went on to point out that the company's program announced in the fall of 1990 to consolidate its five commercial bank affiliates into a more efficient single bank entity and reduce the losses of its unprofitable nonbank subsidiaries imposed greater one-time costs this year than in 1990.  These restructuring expenses amounted to $1.380 million in the fourth quarter, almost twice the comparable 1990 period, and $2.090 million for all of 1991 versus $864,000 for the prior year.
    Effective Jan. 1, 1992, the result of CBSI's affiliate bank consolidation came into being as Community Bank, N.A.  The financial benefits of moving toward this structure began to become measurable during 1991.  Excluding restructuring expense and certain other nonrecurring items, such as gains or losses from realigning the investment portfolio, core earnings were in excess of $5.6 million, producing a return on assets of .90 percent and a return on shareholder equity of over 11.9 percent, performance well above the company's recent history.  Further significant improvement is expected when data processing activities are out-sourced to the Mellon Bank Datacenter by mid-1992 and CBSI's Northeastern Computer Services subsidiary is accordingly closed.
    Beginning in the fourth quarter of 1990, loans have declined steadily, with the exception of a temporary turn-up in the early fall of 1991.  Though the reduced loan portfolio and softer loan pricing resulted in some slippage in the yield on earning assets, the overall cost of deposits fell at almost twice the pace.  Consequently, the fourth quarter net interest margin rose an impressive one half percentage point to a level (excluding the seasonal impact of a loan extension program) not seen since 1987-1988.
    Noninterest income also improved during the fourth quarter, up 6.5 percent excluding the impact of investment portfolio transactions.  The steady expansion of CBSI's trust and related services resulted in almost a 25 percent increase.  In addition, repricing and simplification of CBSI's various deposit products in concert with the company's consolidation efforts caused over a 20 percent climb in service charges, commissions, and fees.  A large part of these recurring benefits were offset by the absence of mortgage banking fees and reduction of computer servicing fees, both reflecting the company's completed or scheduled closing of its nonbank subsidiaries.
    Excluding severance and subsidiary shut-down costs, fourth quarter noninterest expense was held flat from a year earlier.  One significant item was a 93 percent surge in FDIC insurance, a factor experienced throughout the banking industry.  In addition, consulting, legal, and miscellaneous expense associated with the start-up of Community Bank, N.A. were incurred in the quarter just past.  This latter category of expense will be eliminated as the new structure becomes fully implemented, and net savings will be realized by the smaller associated workforce, which has been reduced in excess of 15 percent over the last 12 months.
    CBSI is a single-bank holding company based in DeWitt with 32 branches located throughout Northern New York, the Finger Lakes Region, the Southern Tier, and Southwestern New York, as well as a representative office in Ottawa, Canada.
                       COMMUNITY BANK SYSTEM, INC.
                         SUMMARY OF OPERATIONS
              Twelve months ended Dec. 31, 1991 and 1990
                                    Three months ended Dec. 31
                                                       Change
                                 1991     1990     Amount   Percent
    Net interest income         $8,213   $7,422     $791     10.7
    Loan loss provision            614    1,090     (476)   -43.7
    Net interest income
     after provision for
     loan losses                 7,599    6,332    1,267     20.0
    Other income                 1,059      886      173     19.5
    Other expense                7,747    7,055      692      9.8
    Restructuring expense        1,380      695      685     98.6
    Income before income tax       911      163      748    458.9
    Income tax                     223       31      192    619.4
    Net income                     688      132      556    421.2
    Return on assets (percent)    0.43     0.08     0.35      --
    Return on equity (percent)    5.70     1.12     4.58      --
    Weighted average
     common shares           2,694,841  2,703,385  (8,544)   -0.3
    Earnings per share            0.25     0.05     0.20    400.0
    Cash dividends declared
     per common share             0.19     0.19      --       --
    Tier I capital/total
     assets (percent)             7.49     7.89    (0.40)     --
    Book value: Total           $17.93   $17.18    $0.75      4.4
                Tangible         17.58    16.63     0.95      5.7
                                      Twelve months ended Dec. 31
                                                         Change
                                   1991       1990    Amount    Percent
    Net interest income           $30,410   $27,695   $2,715     9.8
    Loan loss provision             2,516     2,960     (444)  -15.0
    Net interest income
     after provision for
     loan losses                   27,894    24,735    3,159    12.8
    Other income                    3,739     3,996     (257)   -6.4
    Other expense                  24,575    25,009     (434)   -1.7
    Restructuring expense           2,090       864    1,226   141.9
    Income before income tax        4,968     2,858    2,110    73.8
    Income tax                      1,296       753      543    72.1
    Net income                      3,672     2,105    1,567    74.4
    Return on assets (percent)       0.59      0.34     0.25     --
    Return on equity                 7.78      4.52     3.26     --
    Weighted average
     common shares              2,694,101  2,703,698  (9,597)   -0.4
    Earnings per share              $1.36     $0.78    $0.58    74.4
    Cash dividends declared
     per common share                0.19      0.19      --      --
    Tier I capital/total
     assets (percent)                7.49      7.89    (0.40)    --
    Book value: Total              $17.93    $17.18    $0.75     4.4
                Tangible            17.58     16.63     0.95     5.7
                                                           Change
                                                      Amount     Percent
    Total assets at Dec. 31, 1991  634,492            16,641     2.69
    Total assets at Dec. 31, 1990  617,851            31,766     5.42
    Total assets at Dec. 31, 1989  586,085            30,649     5.52
    -0-         1/22/92
    /CONTACT:  Edwin J. Lyons, president and CEO of Community Bank System, 315-445-2282/
    (CBSI) CO:  Community Bank System, Inc. ST:  New York IN:  FIN SU:  ERN FC-OH -- NY090 -- 2489 01/22/92 16:51 EST
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Date:Jan 22, 1992
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