Community Bank System, which operates 33 branches in Western New York, said fourth-quarter profits fell 2.1 percent, driven by lower investment income, higher costs for deposits, lower fees for managing other people's money, and various accounting and special charges.
The DeWitt-based company reported profits of $8.15 million, down from $8.33 million a year ago. Per-share earnings were flat at 27 cents.
Results for the 2006 quarter included a one-time $2.4 million charge for the early redemption of fixed-rate "trust preferred securities," $500,000 in acquisition expenses and special charges, and a small charge for stock options accounting.
For the full year, profits fell 24 percent to $38.4 million, or $1.26 per share, from $50.8 million, or $1.65 per share, in 2005. The 2005 earnings included $12.2 million in securities gains.
The company blamed a narrower profit margin on its primary business of taking deposits and making loans, as the cost it paid for deposits and other funds rose faster than the yield on loans and investments. Many banks have struggled this year from what's termed an "inverted yield curve" that resulted from market trading.
As a result, despite a 17 percent rise in income from loans, net interest income fell 3.6 percent to $33.7 million as interest expense soared 38 percent. Still, the company touted growth in loans and deposits, internally and through a pair of acquisitions during the year. "I'm very pleased with the full-year performance of the company," said President and CEO Mark E. Tryniski.
Known for preferring a presence in small towns and rural areas, Community Bank has grown aggressively throughout upstate New York, with more than 17 acquisitions since 1994. The company last year bought Elmira Savings & Loan in August and Ontario National Bank in December, increasing its market share in Chemung County and the northern Finger Lakes region, while entering Ithaca and Tompkins County.
Earlier this month, it agreed to pay $17.6 million in cash to buy TLNB Financial Corp., parent of $100-million-asset Tupper Lake National Bank in northeastern New York. That deal will give it five branches and entry into Clinton and Essex counties. It's expected to close by June.