Community Bank System Inc. (NYSE:CBU) Q2 2020 Earnings Conference Call - Final Transcript

Jul 27, 2020 • 11:00 am ET

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Community Bank System Inc. (NYSE:CBU) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Mark E. Tryniski

equally subject to uncertainty, but we did see significant improvement in consumer activity in the last half of the quarter. The question for me is not just the near-term challenges and severe, but more of the longer-term impact on consumer and business behavior and the ultimate demand for financial products and services. And we all know, the current interest rate environment has the potential to create continued margin challenges going forward.

It's hard to predict whether stimulus or inflation will ultimately prevail, but the current rate environment will make it increasingly more difficult for banks to deliver earnings growth. Despite these forward uncertainties and challenges, I think CBSI is in extremely good stead.

As I said last quarter, there is no substitute for earnings, liquidity, capital asset quality, core deposits and revenue diversification. When I look at the fundamental financial strength of this Company, I remain highly confident that we are well prepared to manage the challenges that lie ahead and to capitalize on the opportunities that are created as a result, Joe.

Executive
Joseph E. Sutaris

Thank you, Mark, and good morning, everyone. As Mark noted, the earnings results for the second quarter of 2020 were solid in spite of the challenges related to the COVID-19 pandemic. The Company recorded $0.66 in fully diluted GAAP earnings per share for the second quarter. Excluding $0.05 per share for acquisition-related expenses net of tax effect and $0.05 per share for acquisition-related provision for credit losses net of tax effect due to Steuben acquisition, fully-diluted operating earnings per share were $0.76 for the quarter.

These results were $0.04 per share lower than the second quarter of 2019 operating earnings per share of $0.80 due largely to the COVID-19 pandemic and its related impacts on the Company's operations. The Company recorded $6.6 million in its provision for credit losses, exclusive of acquisition-related provision in the second quarter of 2020, reflective of expected credit losses due to weak economic conditions. The Company's adjusted pre-tax pre-provision net revenue increased $0.05 per share or 4.9% between comparable annual quarters and $0.03 or 2.9% on a linked-quarter basis.

I will next touch on the Steuben acquisition and the Company's balance sheet before providing additional details on the Company's earnings performance for the quarter. On June 12th, 2020 the Company acquired Steuben Trust Corporation and its banking subsidiary Steuben Trust Company for a combination of stock and cash, representing total consideration valued at approximately $98.6 million.

The acquisition extended the Company's footprint into two new counties in Western New York State and enhanced the Company's presence at four Western New York State counties in which it currently operates. In connection with the acquisition, the Company consolidate three former Steuben branch offices into existing Community Bank branch offices and added 11 additional full service offices to its current network. The Company acquired total deposits of $516.3 million and total loans of $339.7 million in connection with the transaction.

The Company closed the second quarter of 2020 with total assets of $13.44 billion. This