Community Bank System, which is buying 19 branches from First Niagara Financial Group and HSBC Bank USA, said first-quarter profits rose 16.5 percent from a year ago, driven by higher revenues from an earlier acquisition last April, as well as growth in deposits.
The DeWitt, N.Y.-based banking company reported net income of $18.8 million, or 48 cents per share, up from $16.2 million, or 48 cents per share.
Per-share earnings were flat because it sold stock in January to back its pending purchase.
"Our team produced another solid quarter of earnings to begin 2012," President and CEO Mark E. Tryniski said in a news release. "With continued revenue growth, excellent asset quality metrics and our focus on expense management, we are well positioned to continue our strong performance for the remainder of 2012."
Community Bank, which operates more than 170 branches across upstate New York and northeastern Pennsylvania, expanded into Central New York last April with its $102 million acquisition of Oneonta-based Wilber Corp. That added 22 branches and a dominant market share in Oneonta, a new market for the company.
In January, it agreed to pay $31 million to buy 16 HSBC branches and three First Niagara branches across the state, with $218 million in loans and $955 million in deposits, as part of First Niagara's larger deal for 195 HSBC branches. It raised more than $54.9 million in capital in the January offering, and those purchases are now slated to close in the third quarter.
"We remain pleased with the successful integration of the Wilber National Bank,"Tryniski said. "Our pending acquisition of 19 bank branches across our core upstate New York markets will strengthen and extend our existing presence."
First-quarter revenues rose 16.6 percent to $77.4 million, driven by a 19.6 percent rise in average earning assets to $5.89 billion. That was driven by the bank's purchase of Wilber, coupled with internal deposit growth.
But that was offset by a narrowing of the profit margin on lending, as the bank invested $600 million in lower-yielding securities in preparation for the branch purchase. Still, net interest income from taking deposits and making loans rose 18.4 percent to $53.9 million.
The bank set aside $1.6 million to cover loan losses, up 60 percent from $1 million a year ago. That increase of $600,000 matched the increase in loans that the bank wrote off as uncollectible, which totaled $2 million. Even so, the bank said, credit quality remains stable.
Fee and other income rose 12.6 percent to $23.5 million, as the employee benefits administration and consulting business grew revenues 9.7 percent from an acquisition in December, while wealth management revenues soared 43.6 percent.
Operating expenses rose 14.1 percent to $49.4 million, primarily because of Wilber.