In its third quarter earnings call, Community Bank's Chief Operating Officer Dimitar Karaivanov underscored the company's robust revenue performance and consistent growth over the last five quarters. Despite this, the bank also faced expense pressures beyond expectations, largely attributed to inflation and continuous investments. The company's financial officer, Joseph Sutaris, detailed a decrease in earnings per share and net interest income, compensated by increases in non-interest revenues and a rise in total operating expenses.
Key takeaways from the call include:
- The company's tangible assets ratio was 4.81%, compared to 5.34% in the previous quarter and 4.08% a year ago.
- Community Bank repurchased 100,000 shares of common stock at an average price of $51 per share.
- The allowance for credit losses totaled $64.9 million, or 69 basis points of total loans outstanding.
- The company expects increased net interest income in the fourth quarter due to easing funding cost pressures.
- The bank plans to optimize customer service staffing levels in its retail business to contain branch-related operating expenses.
- The company anticipates organic loan growth and expansion of its retail presence in various markets.
Sutaris also highlighted the bank's strong balance sheet, liquidity position, and regulatory capital ratios. The call concluded with Mark Tryniski, who is approaching retirement, expressing gratitude to investors, analysts, the board of directors, and employees.
In the third quarter, net charge-offs were $1.2 million, or 5 basis points of average loans annualized. Non-performing loans totaled $36.9 million, or 39 basis points of total loans outstanding. Loans 30 to 89 days delinquent were 51 basis points of total loans outstanding. The bank's asset quality remains strong and stable.
During the call, the company discussed its expectations for net interest income (NII) and deposit funding, expecting NII expansion in Q4. They also mentioned the impact of branch optimization and the potential for branch closures. The insurance business was identified as valuable, with no plans to sell it. The performance of their auto loan book was discussed, stating that it consists of prime and super-prime loans with strong credit performance. Charge-offs have been better than expected.
The company ended the quarter with over $200 million in cash equivalents, and they expect the cash build-up to decrease in Q1 but continue to support loan growth until reassessed in Q1. The insurance business has a seasonal pattern, with higher run rates in Q1 and Q3 due to renewal periods, and a slight decrease in Q2 and Q4. The longer-term run rate for insurance premiums is around $45 million, and the company expects solid organic growth in commissions through 2024.
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