Community Bank System Inc. (NYSE:CBU) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 25, 2018 • 11:00 am ET

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Community Bank System Inc. (NYSE:CBU) Q1 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Welcome to the Community Bank System First Quarter 2018 Earnings Conference Call. Please note that this presentation contains forward-looking statements within the provision of the Private Securities Litigation Reform Act of 1995 that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the Company operates.

Such statements involve risks and uncertainties that could cause actual results to differ materially from results discussed in these statements. These risks are detailed in the Company's annual report and Form 10-K filed with the Securities and Exchange Commission. Today's call presenters are Mark Tryniski, President and Chief Executive Officer; and Joe Sutaris, Senior Vice President of Finance.

Gentlemen, you may begin.

Executive
Mark Tryniski

Thank you, Laura. Good morning, everyone, and thank you all for joining our Q1 conference call. As you heard in Laura's introduction being joined today by Joe Sutaris, our Senior Vice President of Finance, and not Scott Kingsley, our CFO. Scott is having knee surgery today so Joe will be pensioning for him and providing the financial commentary.

We really couldn't be more pleased with first quarter results. EPS excluding acquisition expenses was up 30% over 2017 or $0.18 per share due primarily to the strategic deployment of capital last year with the NRS and Merchants Bancshares transaction. We also benefited from a slightly lower effective tax rate that contributed $0.03 of the $0.18 improvement.

Our fee-based businesses also had a tremendous quarter with revenues up 30% our organic and reported growth and improved margin as well. Operating expenses were in line with our expectations as was the assets quality with the exception of additional $1 million charge-off related to the single credit we discussed last quarter.

Our loan book was down for the quarter as seasonally expected but slightly positive commercial despite $38 million unscheduled paydowns, nearly half of which relates to a single relationship where the underlying businesses sold.

At quarter end, both our mortgage commercial pipeline was up 19% to 27% respectively over year-end and loan growth was positive for the month in yesterday. Deposit inflows were robust at the end of the quarter. The total deposit funding costs remained at exactly 10 basis points began for the second quarter. We have significant earnings momentum, we need to support with balance sheet growth, but focus for us for the remainder of the year. We expect our operating and credit costs to be stable. Our fee-based business to grow and our funding costs increased only modestly. In summary, we're off to an exceptionally start to 2018. Joe?

Executive
Joseph Sutaris

Thank you, Mark and good morning everyone. As Mark noted the first quarter 2017 was another very solid operating quarter for us. We set a new record for quarterly operating earnings maintain or the processes at zero and report the solid increased to non-interest income. I'll start off with a few comments about our balance sheet. We close the first quarter of 2018 with just slightly less than $11 billion in total assets. This is up slightly