K&J SHOW – LOCAL BANKING

 The Federal Reserve isn’t overly excited about job growth in theUnited States.. Saying that is probably an understatement as one would expect the FED to be, well.. Reserved… about their expectations unless perhaps they were a bit more optimistic…  Today on the K&J show, we’re exploring the first six months of the year among three of of our Local Banks – Adirondack Bank, Community Bank, and NBT Bankcorp..  and to be fair, rather than listing by asset size, capitalization, or earnings over the first two quarters of 2012, we’ll simply start alphabetically… 

AUDIO – 080212 – K&J SHOW – Regional Banks

Needless to say, before we get too far along, we should step back… Investors will be watching this morning to see how many Americans applied for unemployment benefits… CBS Moneywatch Correspondent Alexis Christoforous gives us a preview from theNew YorkStock Exchange..  and On the world scene,Europe’s Central Bank is dealing with a crisis of it’s own… Action to Diffuse the Eurozone Crisis is what’s expected from a key bank meeting today inFrankfurt- From London, Reporter Larry Miller has that..  And with all of the news of a stagnant economy on the world and national scene, there is one sector in theAdirondacksthat appears to be going strong..  Three Local Banks are all showing financial stability and in each case strength in the numbers..  

ADIRONDACK BANK

Adirondack Bank was founded October 31, 1898, serving the needs ofNorthernNew YorkStateas the Saranac Lake Co-Operative Savings and Loan Association. The ideals of integrity, service and community involvement established over a century ago remain as the foundation of the bank’s operation today. That is a statement from the Company’s CEO.. Gary Kavney and Tom Clark, the Bank’s Chairman..  

Through it’s history, the bank has evolved in order to meet the growing demands of  customers. In 1936, the name was changed to Saranac Lake Federal Savings and Loan Association, and continued for several decades with offices in Saranac Lake and Lake Placid. In 1990, the bank was recapitalized as a stock corporation with ownership closely held by one individual. The change in ownership also saw a change in the bank’s operation as a newly chartered Federal Savings Bank. Later in 1995, it was  re-chartered as a National Bank and became Adirondack Bank, N.A. Of the three banks, Adirondack Bank is the only closely held banking facility.. which means numbers are not as readily available as the other two.. but having said that,  The 1990’s was a growth period for Adirondack Bank, and new locations were opened in Old Forge, Plattsburgh, Whitesboro, Boonville and two offices in Utica. In 2002 and 2003 they expanded our presence in Herkimer County with the addition of an office in Mohawk and Herkimer. In October, 2003 a new office was opened in Rome at 1709 Black River Boulevard, further enabling Adirondack Bank to better serve the Mohawk Valley. In addition, in an effort to position Adirondack Bank for the future, the bank converted to a state charter in December of 2003. This re-chartering was a strategic move designed to allow the company to better serve customers and the interests of the communities we serve. 

 Notice a trend now, among regional banks….  Adirondack Bank will be no different in this respect.. 2004 saw continued growth as they added additional branch banking facilities inHerkimerCountyin the City ofLittle FallsandIlion. In early 2005 they expanded the banking branch network westward opening our first branch inSyracuseon  E. Washington Street.  The Holland Patent office was opened in February of 2006 and our designation as a Banking Development District was approved in April of 2006 bringing total branch locations up to 17.   Make note of the added banking branches – many of which are accomplished in the case of Adirondack Bank without acquisition. One of two strategies highlighted in the K&J show today..  As of year end 2011, the Bank’s asset size grew to $580 million with total deposits of $476 million. 

Comparatively,

 Community Bank System, Inc. has $7.2 billion in assets as of the end of July, and over 180 customer facilities across Upstate New York, where it operates as Community Bank, N.A….  InNortheastern Pennsylvania, the company’s banking branches are known as First Liberty Bank & Trust.  

 Just to put those numbers in perspective – Adirondack Bank’s numbers give them an average of about $34 million per branch while Community Bank is at roughly $40 million per branch in assets.. As for NBT – their asset value is at $6 Billion with 137 locations – which gives them an average of  $43 million per branch.  The Banking headquarters are in DewittNew York, just south ofSyracuse.. The company’s other services include a national employee benefits consulting and trust administration firm, CBNA Insurance Agency, a wealth management firm and Nottingham Advisors, an investment management and advisory firm with offices in Buffalo, and North Palm Beach, Florida.  

COMMUNITY BANK

Community Bank System, Inc. (NYSE: CBU) reported second quarter gains of 17.2% over the same period in 2011.. that puts net income at $21.1 million, or 53 cents per share. The second quarter 2011 numbers had Community Bank at $18.0 million, or $0.49 per share, reported for the second quarter of 2011. The bank reports earnings of $39.9 million, or $1.01 per share an increase of 16.8% over the first six months of 2011.

 Total revenue for the second quarter of 2012 was $81.5 million, an increase of 5.9%.  and how is it that this bank is up by almost 6% over 2011? Net interest income is up, charge offs were expected, and one big piece of the pie… expenses were down $1.8 million, or 3.4% from the second quarter of 2011..   the reduction is reflective of lowered expenses related to the acquisition of the retail banking branches owned by HSBC. 

 Community Bank says their asset quality metrics continue to be markedly better than comparative peer and industry averages and illustrate the long-term effectiveness of the Company’s disciplined risk management and underwriting standards. 

 Community Bank NA announced during the first quarter that it had entered into agreements to acquire 19 branch-banking centers across its core Upstate New York markets from HSBC and First Niagara through its wholly-owned subsidiary, Community Bank, N.A. The Company completed the first stage of the transaction by acquiring and converting the 16 HSBC branches on July 23, 2012. The acquisition and conversion of the three remaining branches, from First Niagara, is expected to be completed in early September 2012.

 The Short Term Analysis – Demand for Small business commercial loans – is down – which brings up an issue that affects many here in theAdirondacks- where small business is part of the nomenclature. With most focused on Jobs, perhaps the issue in theNorth Countryis supporting the growth of Small Business..  The question of how is the real question..

 NBT BANK NA

NBT Bancorp Inc. (NBT) reports net income for the six months ended June 30, 2012 at $26.9 million, That’s actually down $2.1 million, or 7.1%, from the six months ended June 30, 2011. Net income per diluted share for the six months ended June 30, 2012 was $0.80 per share, down from $0.84 per diluted share for the six months ended June 30, 2011. 

So Why is NBT Down? Community Bank Up? The acquisition transactions are affecting the timing and reporting of earnings…  CBNT’s acquisition complete, while NBT’s acquisition expenses remain.. in fact, the Company incurred approximately $1.3 million in merger related expenses for the first six months of 2012, which had a negative impact on diluted earnings per share of approximately $0.03. Net income for the three months ended June 30, 2012 was $13.3 million, down $1.4 million, or 9.5%, from the three months ended June 30, 2011.

 Selected highlights for the second quarter of 2012 include:

 Outstanding loan balances as of June 30, 2012 are up $361.0 million from December 31, 2011 driven by:  7.5% organic loan growth (annualized)  Approximately $217 million in loans from the Hampshire First acquisition.  Net interest margin was 3.82% for the second quarter, down 8 basis points on a linked quarter basis, resulting from the continued impact of the low rate environment on loans and investments. Annualized net charge-off ratio was 0.48% as compared to 0.60% for the same period last year. Past due loans to total loans was 0.54% as of June 30, 2012, compared to 0.89% at December 31, 2011. Continued strategic expansion with the completion of the acquisition of Hampshire First Bank on June 8, 2012. The Company now operates 5 branches in southern New Hampshire.

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