Community Bank System Inc. (NYSE:CBU) Q3 2019 Earnings Conference Call - Final Transcript

Welcome to the Community Bank System Third Quarter 2019 Earnings Conference Call. Please note that this presentation contains forward-looking statements within the provisions of the Private Security 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 the 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 Joseph Sutaris, Executive Vice President and Chief Financial Officer.

Gentlemen, you may begin. Thank you.

Thank you, Angel. Good morning, everyone, and thank you all for joining our third quarter call this morning. We had a busy and very productive quarter with strong earnings, solid organic growth, the closing of the Kinderhook transaction in July and the announcement this morning of our acquisition of Steuben Trust Corporation.

Operating earnings were up 4% over last year's quarter and 5% over the second quarter. Organic loan growth was strong for both the commercial and mortgage businesses, and organic deposit growth in non-public funds was also very good. We closed the Kinderhook transaction in July, as I commented on last quarter's call, and that integration in the subsequent operational performance could not be going better. We've a strong leadership team there on both the commercial and retail side and like the opportunities we see in the Albany market going forward. As we announced this morning, we're thrilled to be partnering with Steuben Trust Corporation, a $570 million asset bank in Western New York. This is a high-value, lower-risk transaction of a solid performing in-market institution. We have considerable close proximity branch overlap and so also have consolidation opportunities that we have not incorporated into our model. We expect to close in the second quarter of 2020 and expect full-year accretion, excluding cost base to approximate $0.08 to $0.09 per share.

Overall, it was a solid quarter and we're having a strong year, particularly in light of the fact that the full year 2019 Durbin hit was a $7 million headwind compared to 2018. Our performance momentum is very good heading into Q4, and looking forward, both the Kinderhook and Steuben transactions should be nicely additive to 2020. Joe?

Thank you, Mark, and good morning, everyone. As Mark noted, the third quarter was a very active and productive quarter for the Company. We closed on the Kinderhook transaction early in the quarter, increased our dividend $0.03 per share, redeemed $22.7 million of trust preferred securities navigated to interest rate cuts by Fed, entered into a definitive agreement to acquire Steuben Trust Corporation and produce the year-over-year improvement in quarterly operating earnings of $0.03 per share.

Before I review the third quarter earnings results in more detail, I'd like to touch on the other activities. At July 12th, we closed on