DeWITT — The addition of 19 branches from HSBC and First Niagara Financial Group, Inc. will strengthen core upstate New York markets for Community Bank System, Inc. (NYSE: CBU), the company’s CEO said.
DeWitt–based Community Bank System announced plans Jan. 20 to acquire the 19 branches for a deposit premium of 3.22 percent. The deal, expected to close during the third quarter, will bring Community Bank about $218 million in loans and $955 million in deposits.
The HSBC locations are among those involved in First Niagara Bank’s planned acquisition of HSBC’s upstate New York branch network. First Niagara, based in Buffalo, announced plans in July to acquire 195 HSBC locations in upstate New York, Westchester County, and Connecticut.
First Niagara leaders said at the time they would ultimately divest some branches in the deal.
The offices Community Bank is acquiring include 16 current HSBC locations in Gowanda, Springville, Westfield, Palmyra, Newark, Geneseo, Watkins Glen, Avon, Watertown, Plattsburgh, Oswego, Fulton, Lowville, Adams, and Alexandria Bay, and three current First Niagara locations in Geneva and Canandaigua.
The deal is an attractive one and brings with it some wealth-management customers, in addition to the loans and deposits, Community Bank System President and CEO Mark Tryniski said during a Jan. 23 conference call on the banking company’s fourth-quarter results.
Also on Jan. 23, Community Bank System announced pricing for a stock offering to raise about $50 million, which will net at least $47.4 million after expenses and commissions. Part of the money will be used to fund the branch deal with First Niagara.
Community Bank has $6.5 billion in assets and more than 170 branches in upstate New York and Pennsylvania. The banking company also operates subsidiaries in employee benefits, insurance, investment management and advising, and wealth management.
For the fourth quarter, Community Bank System earned $19 million, up 19.5 percent from a year earlier. Earnings per share in the period totaled 51 cents, up from 47 cents in the fourth quarter of 2010.
For the full year, the banking company earned $73.1 million, or $2.01 per share, up 15.5 percent from 2010’s profit of
$63.3 million, or $1.89 per share.
The bank generated total revenue of $77.6 million in the fourth quarter, an increase of 14.3 percent from the year-earlier period. The higher revenue resulted from an 18.3 percent increase in average earning assets, mainly driven by its acquisition of the Wilber Corporation and organic deposit growth. That was offset slightly by a small decline in its net interest margin, Community Bank said.
Net interest income for the fourth quarter totaled $55.1 million, up 19.5 percent from the same period in 2010. Noninterest income totaled $22.4 million, up 2.8 percent.
Community Bank System said its employee-benefits business grew revenue by 9.4 percent compared with the fourth quarter of 2010, and its wealth-management business posted a revenue increase of 18.4 percent, driven mainly by the acquisition of Wilber National Bank of Oneonta earlier in 2011.
Total loans as of Dec. 31 increased to $3.47 billion from $3.02 billion a year earlier. Deposits as of the end of 2011 totaled nearly $4.8 billion, up from $3.93 billion a year earlier.
Net charge-offs totaled $1.8 million in the fourth quarter, down from $2 million a year earlier. The provision for loan losses for the period was $1.6 million, down $300,000 from the fourth quarter of 2010.
Nonperforming loans totaled $29.4 million at the end of the period, up from $18.5 million a year earlier.
Operating expenses for the fourth quarter totaled $47.8 million, up 8.4 percent from the fourth quarter of 2010. The increase was driven mainly by the Wilber acquisition, according to the bank.
Separately on Jan. 20, Five Star Bank of Warsaw announced it would acquire four current HSBC branches and four current First Niagara branches in Albion, Batavia, Brockport, Elmira, Elmira Heights, Horseheads, Medina, and Waterloo. The deal is expected to close by the end of the third quarter.
First Niagara (NASDAQ: FNFG) had previously announced an agreement to sell 37 HSBC locations in the Rochester and Buffalo areas to Cleveland–based KeyBank.