Community Bank System (NYSE: CBU) stock rose over 2.9% on 21st October, 2019 (as of 11:30 am GMT-4; Source: Google finance) after the company signed an agreement to acquire Steuben Trust Corporation. The Company has reported 5.9%, increase in net interest income and 2.3%, increase in non-interest revenues between comparable quarters. For the third quarter of FY 19, the increase in net interest income was on the back of 5.1%, increase in average earning assets mainly due to the Kinderhook acquisition and an increase in the yield on earning assets, which is partially offset by higher funding costs and a $282 million increase in average interest-bearing liabilities mainly due to the Kinderhook acquisition.
CBU in the third quarter of FY 19 has reported the adjusted earnings per share of 84 cents, beating the analysts’ estimates for the adjusted earnings per share of 80 cents. The company had reported the adjusted revenue growth of 4.5 percent to $148.4 billion in the third quarter of FY 19, missing the analysts’ estimates.
Meanwhile, the company has signed an agreement to acquire Steuben Trust Corporation, which is the parent company of Steuben Trust Company, in a stock and cash transaction for the total consideration of value at approximately $106.8 million. As per the agreement, the shareholders of Steuben Trust Corporation will get, for each share of common stock they own, a combination of $12.60 cash and 0.8054 shares of CBS common stock, for total consideration valued at approximately $63 per share (based on Community Bank System’s volume weighted average price of $62.58 for the thirty trading day period ending October 15, 2019). This price reflects approximately 167% of Steuben Trust Corporation’s tangible book value as of June 30, 2019. After completion of the deal, the combined company is projected to have over $12 billion in assets. Community Bank System expects the transaction to be approximately $0.08 – $0.09 per share accretive to its first full year of GAAP earnings and $0.09 to $0.10 per share accretive to cash earnings, this excludes one-time transaction costs.
The merger is expected to close in the second quarter of 2020 after fulfilling the customary closing conditions, including approval by the shareholders of Steuben Trust Corporation and required regulatory approvals. D.A. Davidson & Co. Inc. is an exclusive financial advisor to Community Bank System and Cadwalader and Wickersham & Taft LLP is its legal advisor. PNC FIG Advisory is an exclusive financial advisor to Steuben Trust Corporation and Pillar Aught LLC acted as its legal advisor.