Community Bank System in Syracuse, N.Y., reported higher earnings from a year earlier, as strong returns from investment services helped it overcome the cost of a legal settlement.

Community's third-quarter results included a $2.8 million settlement of a class action tied to its consumer-notice policy for collateral recovery. The settlement is subject to final court approval, the bank said in a press release Monday.

"The company contests the allegations and asserted affirmative defenses to the claims," Community said in the release, adding that the settlement was a "superior outcome" compared with the risks and costs of continued litigation.

The $7.5 billion-asset Community's earnings for the quarter increased 2% from the previous year, to $22.4 million. Earnings per share were 55 cents, in line with an estimate of analysts polled by Bloomberg.

Higher revenue from the bank's financial services units drove profits. Noninterest income climbed 13%, to $31.1 million, mainly from its wealth management and employee-benefit-administration divisions.

Community's loan portfolio also boosted earnings, despite lower margins. Net interest income increased by 1%, to $61.1 million. Total loans rose 4.9%, to $4.2 billion.

The net interest margin dipped 5 basis points, to 3.89%

Asset quality improved from last year, as the bank's set-aside for loan losses fell 17%, to $1.7 million.

Noninterest expenses climbed 6%, to $58.8 million. In addition to litigation expenses, the bank attributed the rise to higher salaries, as well as occupancy costs from its December 2013 acquisition of eight branch locations from Bank of America.

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