FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the nine months ended September 30, 2000
Commission file number 0-11716
COMMUNITY BANK SYSTEM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 16-1213679
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5790 Widewaters Parkway, DeWitt, New York 13214
(Address of principal executive offices) (Zip Code)
315/445-2282
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
Common Stock, No par value - 6,993,459 shares outstanding as of November 10, 2000
INDEX
COMMUNITY BANK SYSTEM, INC. AND SUBSIDIARIES
Part I. Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets --
September 30, 2000, December 31, 1999 and September 30, 1999
Consolidated statements of income --
Three and nine months ended September 30, 2000 and 1999
Consolidated statements of cash flows --
Nine months ended September 30, 2000, and 1999
Consolidated statements of comprehensive income --
Three and nine months ended September 30, 2000 and 1999
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
Item 3. Quantative and Qualitative Disclosure about Market Risk (Included in Item 2)
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
COMMUNITY BANK SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
September 30, December 31, September 30,
2000 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $67,120,524 $76,526,657 $65,091,886
Federal funds sold 0 24,200,000 0
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 67,120,524 100,726,657 65,091,886
Investment securities
U.S. Treasury 0 2,999,518 2,998,612
U.S. Government agencies and corporations 233,647,999 174,097,408 172,245,313
States and political subdivisions 132,989,599 123,265,608 116,938,713
Mortgage-backed securities 297,288,099 290,000,398 288,510,826
Federal Reserve Bank 2,293,950 2,173,950 2,173,950
Other securities 65,475,451 60,278,119 59,856,087
------------------------------------------------------------------
Investment securities at cost 731,695,098 652,815,001 642,723,501
Market value adjustment on available for sale securities (12,244,230) (22,127,416) (13,380,293)
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES 719,450,868 630,687,585 629,343,208
Loans 1,082,009,189 1,009,942,875 983,509,902
Less: Unearned discount 477,828 720,360 836,869
Reserve for possible loan losses 14,613,562 13,420,610 12,922,448
- ------------------------------------------------------------------------------------------------------------------------------------------
NET LOANS 1,066,917,799 995,801,905 969,750,585
Bank premises and equipment 26,507,738 25,508,863 25,326,018
Accrued interest receivable 17,030,120 14,168,068 14,040,688
Intangible assets 52,135,814 49,484,949 51,188,821
Other assets 24,417,827 24,323,539 19,426,697
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,973,580,690 $1,840,701,566 $1,774,167,903
==========================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $248,298,764 $225,012,768 $235,931,666
Interest bearing 1,207,092,458 1,135,293,216 1,136,069,588
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 1,455,391,222 1,360,305,984 1,372,001,254
Federal funds purchased 17,000,000 0 19,400,000
Term borrowings 326,100,000 324,000,000 220,000,000
Company obligated mandatorily redeemable preferred securities
of subsidiary, Community Capital Trust I holding solely junior
subordinated debentures of the Company 29,822,250 29,817,188 29,815,500
Accrued interest and other liabilities 23,291,626 18,090,941 21,303,212
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,851,605,098 1,732,214,113 1,662,519,966
- ------------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock (6,993,059; 7,092,259; 7,141,429 7,641,159 7,640,359 7,640,029
shares outstanding)
Surplus 33,338,119 33,327,586 33,254,071
Undivided profits 105,252,152 95,340,837 92,117,129
Accumulated other comprehensive income (7,242,462) (13,088,367) (7,914,444)
Treasury stock (648,100; 548,100; 498,600 shares) (17,006,288) (14,718,787) (13,431,869)
Shares issued under employee stock plan - unearned (7,088) (14,175) (16,979)
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 121,975,592 108,487,453 111,647,937
- ------------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,973,580,690 $1,840,701,566 $1,774,167,903
==========================================================================================================================================
SEE NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANK SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income:
Interest and fees on loans $24,755,532 $21,437,547 $71,068,028 $62,308,068
Interest and dividends on investments:
U.S. Treasury 0 67,630 99,229 202,839
U.S. Government agencies and corporations 4,111,738 3,073,221 11,617,438 9,127,545
States and political subdivisions 1,654,872 1,431,908 4,886,766 3,548,344
Mortgage-backed securities 5,189,855 4,701,497 15,650,862 12,953,255
Other securities 1,058,411 1,040,067 3,099,618 2,480,103
Interest on federal funds sold 113,669 0 446,599 3,681
Interest on deposits at other banks 8,426 457 149,251 1,542
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 36,892,503 31,752,327 107,017,791 90,625,377
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits
Savings 2,840,499 2,805,526 8,188,598 8,393,354
Time 10,368,367 7,800,575 28,153,354 23,590,750
Interest on federal funds purchased and
term borrowings 5,372,040 2,859,363 15,154,532 6,497,460
Interest on mandatorily redeemable capital
securities of subsidiary 732,937 732,938 2,198,813 2,198,813
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 19,313,844 14,198,402 53,695,298 40,680,377
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 17,578,659 17,553,925 53,322,492 49,945,000
Less: Provision for possible loan losses 2,128,000 1,099,178 5,044,000 3,689,140
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest income after provision for loan losses 15,450,659 16,454,747 48,278,492 46,255,860
- ------------------------------------------------------------------------------------------------------------------------------------
Other income:
Fiduciary and investment services 605,548 535,357 1,857,975 1,786,193
Service charges on deposit accounts 1,981,397 1,889,621 5,708,443 5,205,664
Commissions on investment products 1,513,188 309,452 3,392,477 933,737
Other service charges, commissions and fees 1,810,075 1,766,506 4,542,137 4,015,295
Miscellaneous income 46,435 20,107 97,393 286,683
Investment security gains (losses) 0 (498,990) (212,281) (222,348)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 5,956,642 4,022,053 15,386,145 12,005,224
- ------------------------------------------------------------------------------------------------------------------------------------
Other expenses:
Salaries and employee benefits 7,287,095 6,655,947 21,377,558 19,734,494
Occupancy expense, net 976,984 937,947 2,952,997 2,982,896
Equipment and furniture expense 946,410 778,568 2,770,753 2,577,291
Amortization of intangible assets 1,186,563 1,152,563 3,483,484 3,465,998
Other 3,683,999 3,740,429 11,174,516 10,911,859
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expenses 14,081,050 13,265,454 41,759,307 39,672,538
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 7,326,254 7,211,346 21,905,331 18,588,546
Income taxes 2,197,876 2,309,064 6,571,924 5,949,768
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $5,128,378 $4,902,282 $15,333,407 $12,638,778
====================================================================================================================================
Earnings per share - Basic $0.73 $0.69 $2.17 $1.75
- Diluted $0.72 $0.68 $2.14 $1.73
====================================================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANK SYSTEM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended
September 30,
2000 1999
- -----------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 15,333,407 $ 12,638,778
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,286,360 2,192,378
Amortization of intangible assets 3,483,484 3,465,998
Net amortization of security premiums and discounts (112,296) 3,462,248
Amortization of discount on loans (242,532) (470,237)
Provision for loan losses 5,044,000 3,689,140
Provision for deferred taxes (1,229,447) 2,836,389
(Gain)\loss on sale of investment securities 212,281 222,348
(Gain)\loss on sale of loans and other assets (90,396) (192,329)
Change in interest receivable (2,862,052) (1,665,354)
Change in other assets and other liabilities 2,195,488 1,449,636
Change in unearned loan fees and costs (1,198,398) (992,999)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,819,898 26,635,996
- -----------------------------------------------------------------------------------------------------------
Investing Activities:
Proceeds from sales of investment securities 11,519,958 10,003,654
Proceeds from maturities of held to maturity investment securities 3,214,112 2,160,894
Proceeds from maturities of available for sale investment securities 28,648,095 143,357,875
Purchases of held to maturity investment securities (3,254,020) (2,968,688)
Purchases of available for sale investment securities (119,108,228) (212,667,616)
Net change in loans outstanding (74,648,564) (66,969,193)
Premium paid on acquisition of business (6,134,349) 0
Capital expenditures (3,398,202) (2,700,055)
Proceeds from sales of property and equipment 132,963 23,339
Other investing activities 0 (216,600)
- -----------------------------------------------------------------------------------------------------------
Net cash used by investing activities (163,028,235) (129,976,390)
- -----------------------------------------------------------------------------------------------------------
Financing Activities:
Net change in demand deposits, NOW accounts, and savings accounts 14,867,274 (7,563,501)
Net change in certificates of deposit 80,217,964 1,499,177
Net change in federal funds purchased 17,000,000 (15,300,000)
Net change in term borrowings 2,100,000 120,000,000
Issuance (retirement) of common and preferred stock 11,333 187,928
Treasury stock purchased (2,287,500) (4,279,913)
Cash dividends (5,306,867) (5,004,849)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 106,602,204 89,538,842
- -----------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (33,606,133) (13,801,552)
Cash and cash equivalents at beginning of year 100,726,657 78,893,438
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 67,120,524 65,091,886
===========================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $49,054,491 $40,252,379
===========================================================================================================
Cash paid for income taxes $7,801,372 $3,113,379
===========================================================================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
AND INVESTING ACTIVITIES:
Dividends declared and unpaid $1,888,126 $1,786,232
Gross change in unrealized losses on
available-for-sale securities $9,883,187 ($20,625,844)
===========================================================================================================
COMMUNITY BANK SYSTEM, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three Months Ended NINE MONTHS ENDED
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax:
Unrealized gains on securities:
Change in unrealized holding losses arising during period $ 7,669,047 $ (8,422,440) $ 9,670,906 $ (20,848,192)
Reclassification adjustment for losses included in
net income (0) 498,990 212,281 222,348
- --------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax 7,669,047 (7,923,450) 9,883,187 (20,625,844)
Income tax benefit (provision) related to items of other comprehensive
income 3,132,806) 3,236,729 (4,037,282) 8,425,657
- --------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax 4,536,241 (4,686,721) 5,845,905 (12,200,187)
Plus: Net income 5,128,378 4,902,282 15,333,407 12,638,778
- --------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 9,664,619 $ 215,561 $ 21,179,312 $ 438,591
======================================================================================================================================
See notes to consolidated financial statements
Community Bank System, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000
Note A -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included. Operating results for the nine-month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended December 31, 2000.
On January 29, 1997, Community Bank System, Inc. ("Company") formed a wholly owned subsidiary, Community Capital Trust I ("Trust"), a
Delaware statutory business trust. The Trust has issued $30 million aggregate liquidation amount of 9.75% Company-Obligated
Mandatorily Redeemable Preferred Securities representing undivided beneficial interests in the assets of the Trust. The Company
borrowed the proceeds of the Preferred Securities from the Trust by issuing Junior Subordinated Debentures to the Trust having
substantially similar terms as the Preferred Securities. The sole assets of the Trust on September 30, 2000 were $31,252,830
aggregate principal amount of the Company's Junior Subordinated Debentures, together with the related accrued interest receivable
thereon. The Preferred Securities mature in 2027, and are treated as Tier 1 capital by the Federal Reserve Bank of New York. The
guarantees issued by the Company for the Trust, together with the Company's obligations under the Trust Agreement, the Junior
Subordinated Debentures and the Indenture under which the Junior Subordinated Debentures were issued, constitute a full and
unconditional guarantee by the Company of the Preferred Securities issued by the Trust.
On April 3, 2000, Community Bank System, Inc. acquired all the stock of Elias Asset Management, Inc. for cash of $6.5 million. In
accordance with the stock purchase agreement, additional consideration will be paid if certain revenue targets are met over the next
five years. This transaction was accounted for under the purchase method.
On September 26, 2000, Community Bank System, Inc. ("Company") and The Citizens National Bank of Malone ("Citizens"), entered into
an Agreement and Plan of Merger ("Merger Agreement"). Citizens is a national bank with five branches in Northern New York, with
approximately $118 million in total assets, $95 million in deposits and $60 million in loans as of December 31, 1999.
The Merger Agreement provides that Citizens will merge with and into Community Bank, N.A., a national banking association and a
wholly-owned subsidiary of the Company (the "Bank"). Shareholders of Citizens will receive 1.70 shares of common stock of the
Company for each share of Citizens common stock they hold. Based upon the number of shares of Citizens common stock issued and
outstanding on September 26, 2000, the Company will issue in the merger a total of 952,000 shares of its common stock. The Company
intends to file a registration statement with the Securities and Exchange Commission to register under the Securities Act of 1933, as
amended, the shares of its common stock to be issued in the merger.
The consummation of the merger is subject to various conditions, including the approval by the shareholders of Citizens and the
receipt of regulatory approvals. Subject to the satisfaction of all of the conditions, the merger is expected to be completed in the
fourth quarter of 2000. The merger will be accounted for as a purchase and is intended to qualify as a tax-free exchange for the
shareholders of Citizens.
Total noninterest expense of Citizens was $1,139,000 for the quarter ended June 30, 2000; the Company expects cost reductions in
excess of 50% by the end of the first year of combined operations. The noninterest income of Citizens was $765,000 for the quarter
ended June 30, 2000; the Company expects a minimum 7% increase by the end of the first year of combined operations. The net interest
income of Citizens was $4,924,000 for the quarter ended June 30, 2000; the Company expects a minimum 2% increase by the end of the
first year of combined operations.
Note B -- Earnings Per Share
Basic earnings per share is computed based on the weighted average shares outstanding. Diluted earnings per share is computed based
on the weighted average shares outstanding adjusted for the dilutive effect of the assumed exercise of stock options during the
year. The following is a reconciliation of basic to diluted earnings per share for the nine months ended September 30, 2000 and 1999:
For nine months ended September 30, 2000 Income Shares Per share
amount
- ----------------------------------------------------------------------------------------------------------------
Net Income
15,333,407
Basic EPS $ 2.17
15,333,407 7,077,860
Effect of dilutive securities:
Stock options 0
71,024
-------------------------------------
DILUTED EPS $15,333,407 $ 2.14
7,148,884
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
For nine months ended September 30, 1999 Income Shares Per share
amount
- ----------------------------------------------------------------------------------------------------------------
Net Income
Net Income
12,638,778
Basic EPS $ 1.75
12,638,778 7,215,683
Effect of dilutive securities:
Stock options 0
87,493
-------------------------------------
DILUTED EPS $12,638,778 $ 1.73
7,303,176
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
For three months ended September 30, 2000 Income Shares Per share
amount
- ----------------------------------------------------------------------------------------------------------------
Net Income
5,128,378
Basic EPS $ 0.73
5,128,378 7,017,249
Effect of dilutive securities:
Stock options 0
72,931
-------------------------------------
DILUTED EPS $5,128,378 7,090,180 $ 0.72
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
For three months ended September 30, 1999 Income Shares Per share
amount
- ----------------------------------------------------------------------------------------------------------------
Net Income
Net Income
4,902,282
Basic EPS $ 0.69
4,902,282 7,144,248
Effect of dilutive securities:
Stock options 0
85,191
-------------------------------------
DILUTED EPS $4,902,282 $ 0.68
7,229,439
================================================================================================================
Part 1. Financial Information
Item 1. Financial Statements
The information required by rule 10.01 of Regulation S-X is presented on the previous pages.
Item 2. Management's Discussion and Analysis of Financial Condition and of Operations
The purpose of the discussion is to present material changes in Community Bank System, Inc.'s financial condition and results of
operations during the three and nine months ended September 30, 2000 which are not otherwise apparent from the consolidated financial
statements included in these reports. When used in this report, the term "CBSI" means Community Bank System, Inc. and its
subsidiaries on a consolidated basis, unless indicated otherwise. Financial performance comparisons to peer bank holding companies
are based on data through June 30, 2000 as provided by the Federal Reserve System; the peer group is comprised of 160 bank holding
companies having $1 to $3 billion in assets.
COMMUNITY BANK SYSTEM, INC.
SUMMARY OF OPERATIONS
EARNINGS AND BALANCE SHEET RECAP
3RD QUARTER 2000 AND FULL YEAR COMPARISONS
000s Omitted Three Months Ended,
Line Sep 30, Sep 30, Change Change
No. Earnings 2000 1999 Amount Percent
--- --------
-------------------------------------------------------------------------
1 Net interest income $17,579 $17,554 $25 0.1%
2 Loan loss provision 2,128 1,099 1,029 93.6%
3 Net interest income after provision
for
loan losses 15,451 16,455 (1,004) -6.1%
4 Investment security gain (loss) 0 (499) 499 100.0%
5 Other income 5,957 4,521 1,436 31.8%
6 Other expense 12,894 12,112 782 6.5%
7 Intangible amortization 1,187 1,153 34 2.9%
8 Inc before inc tax 7,327 7,212 115 1.6%
9 Income tax 2,198 2,309 (111) -4.8%
10 Net income $5,129 $4,903 $226 4.6%
Earnings per share
11a Basic $0.73 $0.69 $0.04 5.8%
11b Diluted $0.72 $0.68 $0.04 5.9%
=========================================================================
Balances At Period End
----------------------
12 Loans $1,081,531 $982,673 $98,858 10.1%
13 Investments (excl mkt val adj.) 732,173 643,054 89,119 13.9%
14 Earning assets 1,813,704 1,625,727 187,977 11.6%
15 Loan loss reserve 14,614 12,922 1,692 13.1%
16 Intangible assets 52,136 51,189 947 1.9%
17 Total assets 1,973,581 1,774,168 199,413 11.2%
18 Deposits 1,455,391 1,372,001 83,390 6.1%
19 Borrowings 372,922 269,216 103,706 38.5%
20 Total equity $121,976 $111,648 $10,328 9.3%
000s Omitted Nine Months Ended,
Line Sep 30, Sep 30, Change Change
No. Earnings 2000 1999 Amount Percent
--- --------
-------------------------------------------------------------------------
1 Net interest income $53,322 $49,945 3,377 6.8%
2 Loan loss provision 5,044 3,689 1,355 36.7%
3 Net interest income after provision
for
loan losses 48,278 46,256 2,022 4.4%
4 Investment security gain (loss) (212) (222) 10 4.5%
5 Other income 15,598 12,227 3,371 27.6%
6 Other expense 38,276 36,207 2,069 5.7%
7 Intangible amortization 3,483 3,466 17 0.5%
8 Inc before inc tax 21,905 18,588 3,317 17.8%
9 Income tax 6,572 5,950 622 10.5%
10 Net income $15,333 $12,638 $2,695 21.3%
Earnings per share
11a Basic $2.17 $1.75 $0.42 24.0%
11b Diluted $2.14 $1.73 $0.41 23.7%
=========================================================================
Balances At Period End
----------------------
12 Loans $1,081,531 $982,673 $98,858 10.1%
13 Investments (excl mkt val adj.) 732,173 643,054 89,119 13.9%
14 Earning assets 1,813,704 1,625,727 187,977 11.6%
15 Loan loss reserve 14,614 12,922 1,692 13.1%
16 Intangible assets 52,136 51,189 947 1.9%
17 Total assets 1,973,581 1,774,168 199,413 11.2%
18 Deposits 1,455,391 1,372,001 83,390 6.1%
19 Borrowings 372,922 269,216 103,706 38.5%
20 Total equity $121,976 $111,648 $10,328 9.3%
000s Omitted Three Months Ended
Line Sep 30, Jun 30, Change Change
No. Earnings 2000 2000 Amount Percent
--- --------
-------------------------------------------------------------------------
1 Net interest income $17,579 $17,924 ($345) -1.9%
2 Loan loss provision 2,128 1,707 421 24.7%
3 Net interest income after provision
for
loan losses 15,451 16,217 (766) -4.7%
4 Investment security gain (loss) 0 0 0 0.0%
5 Other income 5,957 5,499 458 8.3%
6 Other expense 12,894 13,129 (235) -1.8%
7 Intangible amortization 1,187 1,186 1 0.1%
8 Inc before inc tax 7,327 7,401 (74) -1.0%
9 Income tax 2,198 2,220 (22) -1.0%
10 Net income $5,129 $5,181 ($52) -1.0%
Earnings per share
11a Basic $0.73 $0.73 $0.00 0.0%
11b Diluted $0.72 $0.72 $0.00 0.0%
=========================================================================
Balances At Period End
----------------------
12 Loans $1,081,531 $1,063,223 $18,308 1.7%
13 Investments (excl mkt val adj.) 732,173 712,040 20,133 2.8%
14 Earning assets 1,813,704 1,775,263 38,441 2.2%
15 Loan loss reserve 14,614 14,603 11 0.1%
16 Intangible assets 52,136 53,322 (1,186) -2.2%
17 Total assets 1,973,581 1,931,222 42,359 2.2%
18 Deposits 1,455,391 1,410,495 44,896 3.2%
19 Borrowings 372,922 385,921 (12,999) -3.4%
20 Total equity $121,976 $114,197 $7,779 6.8%
000s Omitted Three Months Ended,
Line Sep 30, Sep 30, Change Change
No. Profitability 2000 1999 Amount Percent
--- -------------
-------------------------------------------------------------------------
21 Return on assets 1.06% 1.12% (0.06) %pts. ---
22 Return on equity 17.31% 17.17% 0.14 %pts. ---
23 Cash EPS (diluted) $0.82 $0.77 $0.05 6.5%
24 Tangible return on assets 1.20% 1.27% (0.07) %pts. ---
25 Tangible return on equity 19.68% 19.56% 0.12 %pts. ---
26 Net interest margin 4.19% 4.62% (0.43) %pts. ---
27 Non interest income/ 24.0% 19.5% 4.5 %pts. ---
operating income (excl sec gains)
28 Efficiency ratio 51.9% 51.4% 0.5 %pts. ---
(excl one time items and
intangible amortization)
Capital
-------
29 Tier I leverage ratio 5.65% 5.79% (0.14) %pts. ---
Common shares
30a Weighted average 7,090 7,248 (158) -2.2%
30b Period end 6,993 7,141 (148) -2.1%
31 Cash dividends declared $0.27 $0.25 $0.02 8.0%
per common share
32 Common stock price $25.94 $27.38 ($1.44) -5.3%
33a Book value $17.44 $15.63 $1.81 11.6%
33b Tangible book value $9.99 $8.55 $1.44 16.8%
Asset Quality Ratios
--------------------
34 Loan loss reserve /
loans outstanding 1.35% 1.32% 0.03 %pts. ---
35 Nonperforming loans /
loans outstanding 0.58% 0.42% 0.16 %pts. ---
36 Loan loss reserve /
nonperforming loans 235% 316% (81) %pts. ---
37 Net charge-offs /
average loans 0.79% 0.51% 0.28 %pts. ---
38 Loan loss provision /
net charge-offs 101% 89% 12 %pts. ---
39 Nonperforming assets /
loans outstanding+OREO 0.66% 0.48% 0.18 %pts. ---
000s Omitted Nine Months Ended,
Line Sep 30, Sep 30, Change Change
No. Profitability 2000 1999 Amount Percent
--- -------------
-------------------------------------------------------------------------
21 Return on assets 1.08% 0.99% 0.09 %pts. ---
22 Return on equity 18.17% 14.36% 3.81 %pts. ---
23 Cash EPS (diluted) $2.43 $2.01 $0.42 20.9%
24 Tangible return on assets 1.23% 1.15% 0.08 %pts. ---
25 Tangible return on equity 20.62% 16.69% 3.93 %pts. ---
26 Net interest margin 4.34% 4.58% (0.24) %pts. ---
27 Non interest income/ 21.4% 18.7% 2.7 %pts. ---
operating income (excl sec gains)
28 Efficiency ratio 52.6% 54.7% (2.1) %pts. ---
(excl one time items and )
intangible amortization)
Capital
-------
29 Tier I leverage ratio 5.65% 5.79% (0.14) %pts. ---
Common shares
30a Weighted average 7,149 7,321 (172) -2.3%
30b Period end 6,993 7,141 (148) -2.1%
31 Cash dividends declared $0.77 $0.71 $0.06 8.5%
per common share
32 Common stock price $25.94 $27.38 ($1.44) -5.3%
33a Book value $17.44 $15.63 $1.81 11.6%
33b Tangible book value $9.99 $8.55 $1.44 16.8%
Asset Quality Ratios
--------------------
34 Loan loss reserve /
loans outstanding 1.35% 1.32% 0.03 %pts. ---
35 Nonperforming loans /
loans outstanding 0.58% 0.42% 0.16 %pts. ---
36 Loan loss reserve /
nonperforming loans 235% 316% (81) %pts. ---
37 Net charge-offs /
average loans 0.49% 0.46% 0.03 %pts. ---
38 Loan loss provision /
net charge-offs 131% 115% 16 %pts. ---
39 Nonperforming assets /
loans outstanding+OREO 0.66% 0.48% 0.18 %pts. ---
000s Omitted Three Months Ended,
Line Sep 30, Jun 30, Change Change
No. Profitability 2000 2000 Amount Percent
--- -------------
-------------------------------------------------------------------------
21 Return on assets 1.06% 1.11% (0.05) %pts. ---
22 Return on equity 17.31% 18.77% (1.46) %pts. ---
23 Cash EPS (diluted) $0.82 $0.82 $0.00 0.0%
24 Tangible return on assets 1.20% 1.26% (0.06) %pts. ---
25 Tangible return on equity 19.68% 21.31% (1.63) %pts. ---
26 Net interest margin 4.19% 4.40% (0.21) %pts. ---
27 Non interest income/ 24.0% 22.3% 1.7 %pts. ---
operating income (excl sec gains)
28 Efficiency ratio 51.9% 53.1% (1.2) %pts. ---
(excl one time items and )
intangible amortization)
Capital
-------
29 Tier I leverage ratio 5.65% 5.54% 0.11 %pts. ---
Common shares
30a Weighted average 7,090 7,176 (86) -1.2%
30b Period end 6,993 6,993 0 0.0%
31 Cash dividends declared $0.27 $0.25 $0.02 8.0%
per common share
32 Common stock price $25.94 $22.19 $3.75 16.9%
33a Book value $17.44 $16.33 $1.11 6.8%
33b Tangible book value $9.99 $8.70 $1.29 14.8%
Asset Quality Ratios
--------------------
34 Loan loss reserve /
loans outstanding 1.35% 1.37% (0.02) %pts. ---
35 Nonperforming loans /
loans outstanding 0.58% 0.61% (0.03) %pts. ---
36 Loan loss reserve /
nonperforming loans 235% 224% 11 %pts. ---
37 Net charge-offs /
average loans 0.79% 0.39% 0.40 %pts. ---
38 Loan loss provision /
net charge-offs 101% 167% (66) %pts. ---
39 Nonperforming assets /
loans outstanding+OREO 0.66% 0.69% (0.03) %pts. ---
000s Omitted Three Months Ended,
Line Sep 30, Sep 30, Change Change
No. Asset Quality Components 2000 1999 Amount Percent
--- ------------------------
-------------------------------------------------------------------------
40 Nonaccruing loans $4,718 $3,257 $1,461 44.9%
41 90+ days delinquent 1,502 836 666 79.7%
------ ---- ---- -----
42 Tot nonperforming loans $6,220 $4,093 $2,127 52.0%
43 Troubled debt 129 119 10 8.4%
restructurings
44 Other real estate 760 501 259 51.7%
---- ---- ---- -----
45 Tot nonperforming assets $7,109 $4,713 $2,396 50.8%
46 Net Charge-Offs 2,117 1,232 885 71.8%
Components of Net Interest Margin
---------------------------------
47 Loan yield 9.27% 8.85% 0.42 %pts. ---
48 Investment yield 7.30% 6.74% 0.56 %pts. ---
49 Earning asset yield 8.47% 8.00% 0.47 %pts. ---
50 Interest bearing deposits rate 4.42% 3.72% 0.70 %pts. ---
51 Borrowed funds rate 6.79% 5.88% 0.91 %pts. ---
52 Cost of all interest 4.97% 4.10% 0.87 %pts. ---
bearing funds
53 Cost of funds 4.27% 3.49% 0.78 %pts. ---
(includes DDA)
54 Cost of funds / earning 4.29% 3.51% 0.78 %pts. ---
assets
55 Net interest margin 4.19% 4.62% (0.43) %pts. ---
56 Full tax equivalent adj. $1,296 $1,146 $150 13.1%
Average Balances for Period
---------------------------
57 Loans $1,070,150 $960,860 $109,290 11.4%
58 Investments
(excl. mkt val adj) 722,707 643,622 79,085 12.3%
59 Earning assets 1,792,857 1,604,482 188,375 11.7%
60 Total assets 1,931,980 1,743,095 188,885 10.8%
61 Deposits 1,442,063 1,371,162 70,901 5.2%
62 Borrowings 357,730 242,367 115,363 47.6%
63 Total equity $117,858 $113,266 $4,592 4.1%
000s Omitted Nine Months Ended,
Line Sep 30, Sep 30, Change Change
No. Asset Quality Components 2000 1999 Amount Percent
--- ------------------------
-------------------------------------------------------------------------
40 Nonaccruing loans $4,718 $3,257 $1,461 44.9%
41 90+ days delinquent 1,502 836 666 79.7%
------ ---- ---- -----
42 Tot nonperforming loans $6,220 $4,093 $2,127 52.0%
43 Troubled debt restructurings 129 119 10 8.4%
restructurings
44 Other real estate 760 501 259 51.7%
---- ---- ---- -----
45 Tot nonperforming assets $7,109 $4,713 $2,396 50.8%
46 Net Charge-Offs 3,851 3,208 643 20.0%
Components of Net Interest Margin
---------------------------------
47 Loan yield 9.15% 8.90% 0.25 %pts. ---
48 Investment yield 7.33% 6.53% 0.80 %pts. ---
49 Earning asset yield 8.41% 7.96% 0.45 %pts. ---
50 Interest bearing deposits rate 4.16% 3.76% 0.40 %pts. ---
51 Borrowed funds rate 6.57% 6.01% 0.56 %pts. ---
52 Cost of all interest 4.72% 4.09% 0.63 %pts. ---
bearing funds
53 Cost of funds 4.06% 3.47% 0.59 %pts. ---
(includes DDA)
54 Cost of funds / earning 4.07% 3.51% 0.56 %pts. ---
assets
55 Net interest margin 4.34% 4.58% (0.24) %pts. ---
56 Full tax equivalent adj. $3,866 $3,124 $742 23.8%
Average Balances for Period
---------------------------
57 Loans $1,044,567 $935,650 $108,917 11.6%
58 Investments
(excl. mkt val adj) 715,946 612,457 103,489 16.9%
59 Earning assets 1,760,513 1,548,107 212,406 13.7%
60 Total assets 1,891,494 1,702,105 189,389 11.1%
61 Deposits 1,413,912 1,371,853 42,059 3.1%
62 Borrowings 353,098 193,311 159,787 82.7%
63 Total equity $112,694 $117,687 ($4,993) -4.2%
000s Omitted Three Months Ended,
Line Sep 30, Jun 30, Change Change
No. Asset Quality Components 2000 2000 Amount Percent
--- ------------------------
-------------------------------------------------------------------------
40 Nonaccruing loans $4,718 $5,297 ($579) -10.9%
41 90+ days delinquent 1,502 1,216 286 23.5%
------ ------ --- -----
42 Tot nonperforming loans $6,220 $6,513 ($293) -4.5%
43 Troubled debt restructurings 129 142 (13) -9.2%
44 Other real estate 760 651 109 16.7%
---- ---- ---- -----
45 Tot nonperforming assets $7,109 $7,306 ($197) -2.7%
46 Net Charge-Offs 2,117 1,019 1,098 107.8%
Components of Net Interest Margin
---------------------------------
47 Loan yield 9.27% 9.17% 0.10 %pts. ---
48 Investment yield 7.30% 7.38% (0.08) %pts. ---
49 Earning asset yield 8.47% 8.44% 0.03 %pts. ---
50 Interest bearing deposits rate 4.42% 4.12% 0.30 %pts. ---
51 Borrowed funds rate 6.79% 6.54% 0.25 %pts. ---
52 Cost of all interest 4.97% 4.67% 0.30 %pts. ---
bearing funds
53 Cost of funds 4.27% 4.03% 0.24 %pts. ---
(includes DDA)
54 Cost of funds / earning 4.29% 4.04% 0.25 %pts. ---
assets
55 Net interest margin 4.19% 4.40% (0.21) %pts. ---
56 Full tax equivalent adj $1,296 $1,287 $9 0.7%
Average Balances for Period
---------------------------
57 Loans $1,070,150 $1,045,704 $24,446 2.3%
58 Investments
(excl. mkt val adj) 722,707 709,527 13,180 1.9%
59 Earning assets 1,792,857 1,755,231 37,626 2.1%
60 Total assets 1,931,980 1,882,365 49,615 2.6%
61 Deposits 1,442,063 1,411,185 30,878 2.2%
62 Borrowings 357,730 348,750 8,980 2.6%
63 Total equity $117,858 $111,023 $6,835 6.2%
Earnings per share (diluted) for third quarter 2000 reached $.72, a record high for any third quarter and up 6% over the prior year's
level of $.68. For the nine-month period, earnings per share rose 24% to $2.14. Net income for the quarter and nine months was
$5.13 million and $15.33 million, up 5% and 21%, respectively. Return on equity for the nine months increased a substantial 3.81
percentage points over last year to 18.17%. Compared to second quarter 2000, net income was off a slight 1.0% while earnings per
share were unchanged due to the impact of the Company's stock repurchase program.
Cash earnings per share (diluted) also achieved record third quarter levels, up over 6% to $.82 and up nearly 21% to $2.43 for the
first nine months. Year-to-date tangible return on equity climbed to 20.62% while tangible return on assets rose to 1.23%.
Third Quarter Performance Highlights
CBU's record third quarter results reflect success with its strategy to develop sources of noninterest income which help mitigate
industry-wide pressure on traditional spread income.
o Loans climbed over $18 million during the quarter, bringing the total increase since September 30, 1999 to $99 million or 10.1%,
a faster rate of growth than 8.1% in the prior twelve-month period.
o Noninterest income (excluding securities transactions) grew by $458,000 during the third quarter, bringing the ratio of
noninterest income to operating income to 21.4% for the year compared to 18.7% for the same 1999 period.
o Net interest income for the three months decreased by 1.9% or $345,000 compared to second quarter 2000, reflecting a narrowing
of spreads largely due to the higher cost of renewed C.D.s.
o Overhead expense decreased $235,000 from second quarter 2000, improving the Company's efficiency ratio to 52.6% for the nine
months compared to 54.7% a year ago.
o Net charge-offs doubled from the three months ended June 30, 2000 to $2.1 million, largely attributable to two isolated loans.
These charges were equally matched by loan loss provision expense, which rose $421,000 over the second quarter level.
o Assets under management exceeded $1.3 billion as of September 30, 2000.
Net Interest Margin Narrows Further
The net interest margin, which began to narrow in the first quarter of this year, decreased 21 basis points in the third quarter
compared to a three basis point decrease in the second quarter. This reduction to 4.19% reflects a three basis point improvement in
the yield on earning assets compared to a 30 basis point rise in the cost of interest bearing funds. The latter increase reflects
similarly higher rates paid on both deposits and borrowed funds, with growth in earning assets during the quarter largely being
funded by higher demand and time deposits held by individuals and businesses. On average, loans were up $24.4 million for the
quarter while investments rose $13.2 million; $8.3 million of the latter increase reflects pre-investing of anticipated run-off of
callable bonds in 2001 and the balance is in temporary money market holdings.
Compared to third quarter 1999, the net interest margin has decreased by 43 basis points. This change reflects the impact of an
inverted Treasury yield curve during much of the period, which held down the customary increase in gross yields on non-prime based
loans compared to rising time deposit and borrowing rates, and the liability-sensitive position of the Company's balance sheet within
a 12-15 month time frame. Based on data for second quarter 2000, the Bank's net interest margin is in the favorable 56th peer
percentile.
The overall yield on earning assets has risen 47 basis points over the past year, comprised of a 42 basis point improvement in loan
portfolio yield and a 56 basis point increase in investment portfolio yield. The latter is the result of a 12% expansion of the
portfolio via selective securities purchases and elimination of accelerated amortization of premiums on certain collateralized
mortgage obligations. The smaller increase in loan yield reflects the fixed/variable rate mix of the loan portfolio (approximately
70% versus 30%) and continued pressure on loan pricing, partially offset by high cash flow from installment loans, which enables
run-off to be reinvested at current rates.
Compared to third quarter 1999, the cost of interest bearing funds has risen 87 basis points versus a 99 basis point rise in the
one-year Treasury rate. The rate on interest bearing deposits increased 70 basis points, with rates on interest checking and regular
savings being held unchanged while maturing CDs were repriced at higher rates. In addition, 65% or $71 million of the increase in
loans was funded by deposit growth. Consumer and business demand deposits rose $12.4 million (up 5.7%), and deposits of local
municipalities climbed nearly $36 million (their time deposits generally being a lower cost alternative to capital market
borrowing). The balance of the increase reflects the Bank's successful 13 and 19 month CD promotions, which have attracted over $84
million in new money (27% of the promotions) since their inception in the spring of 1999. Individual and business deposits as a
whole have climbed over $35 million or 2.9% over the last four quarters.
The remainder of the increase in cost of funds compared to third quarter 1999 was caused by $109 million more in capital market
borrowings, for which rates rose 91 basis points on average. Thirty-five percent of these borrowings supported loan growth, with the
balance funding increases in investments and other assets. The ratio of average borrowings to total funds sources in the third
quarter was 19.9%, virtually unchanged from the second quarter and about five percentage points higher than one year earlier.
Further narrowing of margins may occur as past Federal Reserve actions and capital market responses work their way through the Bank's
balance sheet and interest rate risk position. In the meantime, programs designed to mitigate the impact of narrowing spreads have
been implemented. These include disciplined comparison of loan pricing to risk-free investment alternatives, elimination of the 19
month CD promotion, and downward pricing of the 13 month promotion. In addition, during the three week period beginning on September
25, $100 million in borrowings was termed out for a minimum two year period at an average rate of 5.86%, approximately 75 basis
points less than previously paid on an overnight basis. Following this action, borrowings under one year are expected to fluctuate
in the $125-$175 million range.
Noninterest Income Grows Dramatically due to Financial Services Businesses
As previously highlighted, the rise in noninterest income (excluding net securities gains/losses) for the current reporting period
more than offset the narrowing of net interest income, reflective of the Company's strategy beginning in 1994 to reduce its reliance
on traditional spread income. Compared to second quarter 2000, other income rose $458,000 versus a $345,000 decrease in net interest
income.
The reason for the third quarter increase was receipt of the Company's annual dividend on creditor life and disability insurance
written though a subsidiary of the New York State Bankers Association (NYBA) in the amount of $483,000, up 6% over the 1999 level.
In contrast to third quarter 1999, noninterest income rose $1.4 million versus $25,000 more in net interest income. Besides the
improvement in the NYBA dividend, the climb in other income over third quarter 1999 includes $1.1 million in revenues earned by Elias
Asset Management (EAM), which was purchased on April 3, 2000, and greater commissions on the sale of mutual fund products through
Community Investment Services, Inc. (CISI).
For the first nine months of the year, noninterest income rose $3.37 million (up 28%), identical to the dollar increase in net
interest income (up 6.8%). Financial services accounted for $2.82 million of this amount, with $2.04 million being attributable to
the purchase of EAM, without which financial service revenues would have climbed 17%. This latter increase includes $455,000 more in
CISI revenues (up 53% to $1.3 million) and $109,000 greater commissions/dividends from the sale of insurance products (up 17% to
$755,000). In addition, revenues from the Company's BPA/EBT business, which provides investment management, pension administration
and consulting services, rose $167,000 (up 19% to $2.2 million) while personal trust fees increased $46,000 (up 4.7% to $1.0 million).
The balance of the increase in year-to-date noninterest income was from general banking fees, largely from overdraft fees (up
$500,000 or 21%) and electronic banking fees from VISA and ATM transactions (up $273,000 or 28%). Mortgage banking revenues were
lower by $132,000 (down 36% to $235,000). Secondary market originations and sales for the first nine months were $7.1 million versus
$37.0 million last year, mirroring the impact of higher interest rates on the demand for residential purchase money mortgages and
refinancing.
Financial services now comprise nearly 52% of total noninterest income (excluding net securities gains/losses); specialty products,
which largely include electronic and mortgage banking and servicing activities, contribute 10%; and general banking fees make up 38%
of noninterest income. Noninterest income as a percent of operating income increased a significant 4.5 percentage points from the
prior year to 24.0% in the third quarter, excluding transactions related to investment securities and disposal of branch properties.
Assets under management, including those customer relationships managed by the Bank's personal trust department, BPA/EBT, Community
Investment Services, Inc. brokerage, and Elias Asset Management, exceeded $1.3 billion as of September 30, 2000.
Loan Portfolio Continues to Expand Though at More Moderate Pace
Loans rose $18.3 million during the last three months to $1.082 billion, a level $99 million or 10.1% higher than one year earlier;
this compares to 8.1% growth in the prior twelve-month period. The increase in loans was less than in prior quarters this year
because of a $2.2 million reduction in commercial loans outstanding. Besides commercial charge-offs totaling $1.45 million, there
were several large seasonal paydowns, including dealer floor plan reductions due to model year turn over, as well as certain planned
loan take-outs by other lenders. Over the last twelve months, commercial loans have climbed approximately $34 million or 9.4%.
Consumer mortgages held in portfolio increased by $13.5 million this quarter, their fastest rate of growth in over two years.
Borrowers continue to use this vehicle (the Bank pays all closing costs in exchange for a higher interest rate) to term out portions
of their consumer debt, largely explaining the $34 million or 16% increase since September 30, 1999. Consumer direct loans
(including home equity loans) were up $4.9 million for the quarter, the largest increase of the last four quarters; outstandings have
increased nearly 8.0% since September 30, 1999. Lastly, indirect consumer installment loans (predominantly automobile financing)
grew $2.2 million during the last 90 days, for a $16 million or 7.2% rise since September 30, 1999.
Underlying Asset Quality Remains Satisfactory
Nonperforming loans ended the quarter at $6.2 million or .58% of loans outstanding, up $2.1 million and 16 basis points,
respectively, compared to one year ago, with the bulk of the increase taking place during fourth quarter 1999. The primary reason for
that increase was a $1.9 million commercial loan which has since been written down by $900,000 and the company put up for sale. The
remaining $1.3 million increase in nonperformers since year-end 1999 largely reflects a handful of commercial and mortgage loan
non-accruals and $143,000 in installment loans. Based on the most recent peer bank data as of June 30, 2000, the Company's
nonperforming loan ratio virtually matched the peer norm of .62%.
The ratio of loan loss reserves to loans outstanding ended the quarter at 1.35%, up three basis points during the last twelve
months. Coverage over nonperformers was 235%, an 11 percentage point increase over second quarter 2000, and the reserve continues to
amply exceed the Bank's total actual losses for the last three years. The ratio of delinquencies (30 days or more) plus nonaccruals
to total loans rose 35 basis points during the quarter to 1.65%, well within the Company's internal guideline of less than 2.0%.
Delinquencies as of June 30, 2000 compared favorably to the peer median of 1.52%.
Net charge-offs for the third quarter doubled from the three months ended June 30, 2000 to $2.1 million, equally matched by loan loss
provision expense, which rose $421,000 over the second quarter level. The increase in net charge-offs reflects the further
write-down of the weakened commercial credit mentioned above ($400,000 was recognized in the second quarter and another $500,000 this
quarter) and a $950,000 write-off of a fraudulent accounts receivable loan uncovered during the summer. The limited program through
which this latter loan was administered is being terminated.
As a percent of average outstandings, net charge-offs rose to .79% for the quarter, bringing the year-to-date ratio to .49%, up three
basis points over the comparable 1999 period. The increase is entirely due to the two commercial loans mentioned above, which caused
a net 40 basis point rise in year-to-date commercial net charge-offs to .69%. Installment loan net charge-offs continue to remain
favorable for the quarter at .63%, down 34 basis points year-to-date to .70%. Net charge-offs on the remainder of the portfolio were
unchanged for the same period at .03%.
For the first nine months of the year, loan loss provision expense exceeded net charge-offs by 131% compared to 115% for the same
1999 period. Coverage was increased beginning in the fourth quarter of last year in light of the length of the current business
cycle and the potential impact of rising interest rates on borrowers.
Efficiency Ratio in Favorable 52% Range
The Company's third quarter efficiency ratio (recurring overhead less intangible amortization compared to net interest plus recurring
other income) rose slightly to 51.9% from 51.4% last year. On a year-to-date basis, there was a meaningful 2.1 percentage point
decrease to 52.6%. This favorable trend is a function of several factors: an increase in net interest income due to higher earning
assets, elimination of accelerated premium amortization of the Company's CMO securities, significant progress in developing more
sources of noninterest income, and persistent control of overhead expense.
For third quarter 2000, overhead (before intangible amortization) rose $782,000 or 6.5% over the prior year's level; excluding the
$656,000 impact of the EAM purchase, operating expense was up by $126,000 or 1.0%. On a year-to-date basis, noninterest expense was
up $882,000 or 2.3% before the EAM purchase. Nearly the entirety of this latter increase represents personnel expense, up $856,000
or 4.3%, reflective of annual merit increases, increased staff at Community Investment Services, Inc. (for which nearly all of the
compensation is commission-based), higher temporary help in the Bank's operations centers during the conversion to image-based check
processing, and higher pension and group benefits expense. The balance of the increase represents a variety of offsetting changes,
including higher equipment, data processing, and supplies expense offset by lower professional fees, cost of disposing of branch
properties, and selected loan and foreclosed property expense.
Compared to second quarter 2000, overhead (before intangible amortization and including EAM in both periods) decreased $235,000. A
good portion of this reduction represents return to more normal levels following seasonal or one-time expenses in the second
quarter. These latter items include conversion costs to image-based check processing, consulting expense related to centralization
of certain functions previously performed in the Company's two regions, annual report and annual meeting expense, and various
origination costs supportive of consumer loan and investment generation programs. In addition, armored car expense was down due to
heightened second quarter expense caused by a billing lag, and foreclosed property expense was reduced to more customary levels.
Liquidity
Due to the potential for unexpected fluctuations in deposits and loans, active management of the Company's liquidity is critical. In
order to respond to these circumstances, adequate sources of both on- and off-balance sheet funding are in place.
CBSI's primary approach to measuring liquidity is known as the Basic Surplus/Deficit model. It is used to calculate liquidity over
two time periods: first, the relationship within 30 days between liquid assets and short-term liabilities which are vulnerable to
nonreplacement; and second, a projection of subsequent cash availability over an additional 60 days. The minimum policy level of
liquidity under the Basic Surplus/Deficit approach is 7.5% of total assets for both the 30 and 90-day time horizons. As of September
30, 2000, this ratio was 12.5% and 14.6%, respectively, excluding the Company's capacity to borrow additional funds from the Federal
Home Loan Bank.
Interest Rate Risk
Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates,
foreign currency exchange rates, commodity prices, and equity prices. The Company's primary market risk exposure is interest rate
risk. The ongoing monitoring and management of this risk, over both a short-term tactical and longer-term strategic time horizon, is
an important component of the Company's asset/liability management process, which is governed by policies established by its Board of
Directors, which reviews and approves them annually. The Board of Directors delegates responsibility for carrying out the
asset/liability management policies to the Asset/Liability Committee (ALCO). In this capacity, ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities based upon estimated market risk sensitivity, policy
limits, and overall market interest-related level and trends.
As the Company does not believe it is possible to reliably predict future interest rate movements, it has maintained an appropriate
process and set of measurement tools which enable it to identify and quantify sources of interest rate risk. The primary tool used
by the Company in managing interest rate risk is income simulation. The analysis begins by measuring the impact of differences in
maturity and repricing of all balance sheet positions. Such work is further augmented by adjusting for prepayment and embedded
option risk found naturally in certain asset and liability classes. Finally, balance sheet growth and funding expectations are added
to the analysis in order to reflect the strategic initiatives set forth by the Company.
Changes in net interest income are reviewed after subjecting the balance sheet to an array of Treasury yield curve possibilities,
including an up or down 200 basis point movement (BP) in rates from current levels. While such an aggressive movement in rates
provides management with good insight as to how the Company's profit margins may perform under extreme market conditions, results
from a more modest 100 BP shift in interest rates are used as a basis to conduct day-to-day business decisions.
The following reflects the Company's one-year net interest income sensitivity based on asset and liability levels on September 30,
2000, assuming no growth in the balance sheet, and assuming 200 BP movements over a twelve month period in the prime rate, federal
funds rate and the entire Treasury yield curve (assuming no change from its current inverted/flat shape):
REGULATORY MODEL
- -----------------------------------------------------------------------------
Rate Change Dollar Change Percent of Flat Rate
In Basis Points (in 000s) Net Interest Income
--------------- ---------------- -------------------
+ 200 bp $ (1,297) (1.9%)
- 200 bp $ 203 0.3%
A second simulation was performed based on what the Company believes to be conservative levels of balance sheet growth- - (high
single digit growth in loans, low single digit growth in deposits and necessary increases in borrowings, with no growth in
investment or any other major portions of the balance sheet)- - along with 100 BP movements over a twelve month period in the
prime rate and federal funds rate, and a yield curve moving closer to historical spreads to fed funds. Under this set of
assumptions, the Bank's net interest income is neutral in a rising rate environment because rate increases on certain
interest-bearing deposit accounts can be lagged to a greater degree and earning assets are added at higher and higher rates. In a
falling rate environment, net interest income is slightly better than if rates were unchanged as a result of balance sheet
strategies implemented during the first half of 2000.
The following reflects the Company's one-year net interest income sensitivity analysis based on asset and liability levels on
September 30, 2000, assuming the aforementioned balance sheet growth and yield curve changes:
MANAGEMENT MODEL
- -----------------------------------------------------------------------------
Rate Change Dollar Change Percent of Flat Rate
In Basis Points (in 000s) Net Interest Income
--------------- ---------------- -------------------
+ 100 bp $ (102) (0.2%)
- 100 bp $ 701 1.0
The preceding interest rate risk analyses do not represent a Company forecast and should not be relied upon as being indicative of
expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of
interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability cashflows, and others. While the assumptions are developed based
upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these
assumptions, including how customer preferences or competitor influences might change. Furthermore, the sensitivity analyses do not
reflect actions that ALCO might take in responding to or anticipating changes in interest rates.
Effects of Inflation
The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting
principles in the United States, which require the measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money over time due to inflation.
Virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rate changes have a more
significant impact on the Company's performance than general levels of inflation.
Forward-Looking Statements
This document contains comments or information that constitute forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Actual results may differ materially
from the results discussed in the forward-looking statements. Moreover, the Company's plans, objectives and intentions are subject
to change based on various factors (some of which are beyond the Company's control). Factors that could cause actual results to
differ from those discussed in the forward-looking statements include: (1) risks related to credit quality, interest rate
sensitivity and liquidity; (2) the strength of the U.S. economy in general and the strength of the local economies where the Company
conducts its business; (3) the effect of, and changes in, monetary and fiscal policies and laws, including interest rate policies of
the Board of Governors of the Federal Reserve System; (4) inflation, interest rate, market and monetary fluctuations; (5) the
timely development of new products and services and customer perception of the overall value thereof (including features, pricing and
quality) compared to competing products and services; (6) changes in consumer spending, borrowing and savings habits; (7)
technological changes; (8) any acquisitions or mergers that might be considered by the Company and the costs and factors associated
therewith; (9) the ability to maintain and increase market share and control expenses; (10) the effect of changes in laws and
regulations (including laws and regulations concerning taxes, banking, securities and insurance) and accounting principles generally
accepted in the United States; (11) changes in the Company's organization, compensation and benefit plans and in the availability
of, and compensation levels for, employees in its geographic markets; (12) the costs and effects of litigation and of any adverse
outcome in such litigation; and (13) the success of the Company at managing the risks of the foregoing.
The foregoing list of important factors is not exclusive. Such forward-looking statements speak only as of the date on which they
are made and the Company does not undertake any obligation to update any forward-looking statement, whether written or oral, to
reflect events or circumstances after the date on which such statement is made. If the Company does update or correct one or more
forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections
with respect thereto or with respect to other forward-looking statements.
Supplemental Schedules
----------------------
A) The following table sets forth certain information concerning average interest-earning assets and interest-bearing liabilities
and the yields and rates thereon. Interest income and resultant yield information in the tables are on a fully tax-equivalent
basis using a marginal federal income tax rate of 35%. Averages are computed on daily average balances for each month in the
period divided by the number of days in the period. Yields and amounts earned include loan fees. Nonaccrual loans have been
included in interest earnings for purposes of these computations.
Third Quarter Ended September 30,
--------------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------------
(000's omitted except yields Avg. Amt. of Avg. Avg. Amt. of Avg.
and rates) Balance Interest Yield/Rate Balance Interest Yield/Rate
Paid Paid
ASSETS:
--------------------------------------------------------------------------------------
Interest-earning assets:
Federal funds sold $6,952 $114 6.50% $0 $0 0.00%
Time deposits in other banks 523 8 6.41% 74 0 2.45%
Taxable investment securities 585,580 10,702 7.27% 530,251 9,289 6.95%
Nontaxable investment securities 129,653 2,436 7.47% 113,297 2,033 7.12%
Loans (net of unearned discount) 1,070,150 24,928 9.27% 960,860 21,576 8.91%
--------------- ------------- -------------- ------------
Total interest-earning assets 1,792,858 $38,188 8.47% 1,604,482 $32,898 8.13%
Noninterest earning assets
Cash and due from banks 58,470 57,340
Premises and equipment 26,464 24,307
Other Assets 86,067 78,341
Less: allowance for loans (14,685) (12,942)
Net unrealized gains/(losses) on
available-for-sale portfolio (17,194) (8,433)
--------------- --------------
Total $1,931,980 $1,743,095
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities
Savings deposits $485,196 $2,841 2.33% $514,671 $2,805 2.16%
Time deposits 703,518 10,368 5.86% 615,821 7,801 5.03%
Short-term borrowings 229,648 3,942 6.83% 142,552 1,862 5.18%
Long-term borrowings 128,082 2,162 6.72% 99,815 1,730 6.88%
------------------------------ -----------------------------
Total interest-bearing 1,546,444 19,313 4.97% 1,372,859 14,198 4.10%
liabilities
Noninterest bearing liabilities
Demand deposits 253,349 240,670
Other liabilities 14,329 16,300
Shareholders' equity 117,858 113,266
--------------- --------------
Total $1,931,980 $1,743,095
=============== ==============
Net interest earnings $18,875 $18,700
============= ============
Net yield on interest-earning assets 4.19% 4.62%
============ ============
Federal tax exemption on nontaxable investment
securities included in interest 1,296 1,146
income
B) The change in net interest income may be analyzed by segregating the volume and rate components of the changes in interest
income and interest expense for each underlying category.
The volume and rate components of interest income and interest expense for each underlying category are as follows:
-----------------------------------------------
3rd Quarter 2000 versus 3rd Quarter 1999
-----------------------------------------------
Increase (Decrease) Due to Change In (1)
Net
Volume Rate Change
------ ---- ------
Interest earned on:
Federal funds sold and securities
purchased under agreements to resell $114 $0 $114
Time deposits in other banks 6 2 8
Taxable investment securities 980 433 1,413
Nontaxable investment securities 299 104 403
Loans (net of unearned discounts) 2,477 875 3,352
Total interest-earning assets (2) $3,904 $1,385 $5,289
Interest paid on:
Savings deposits ($717) $753 $36
Time deposits 1,183 1,384 2,567
Short-term borrowings 1,368 712 2,080
Long-term borrowings 696 (264) 432
Total interest-bearing liabilities (2) $1,917 $3,198 $5,115
Net interest earnings (2) $4,196 ($4,022) $174
1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of change in each.
2) Changes due to volume and rate are computed from the respective changes in average balances and rates of the totals; they are
not a summation of the changes of the components.
C) The following table sets forth information by category of noninterest expenses of the Company for the periods indicated.
Three Months Ended September 30, Nine Months Ended September 30,
(000's omitted)
------------------------------------------- ---------------------------------------------
Change Change Change Change
2000 1999 Amount Percent 2000 1999 Amount Percent
------------------------------------------- ---------------------------------------------
Personnel expense $7,288 $6,655 $633 9.5% $21,378 $19,734 $1,644 8.3%
Net occupancy expense 977 938 39 4.2% 2,953 2,983 (30) -1.0%
Equipment expense 947 778 169 21.7% 2,771 2,577 194 7.5%
Professional fees 412 570 (158) -27.7% 1,438 1,533 (95) -6.2%
Data processing expense 1,160 1,045 115 11.0% 3,361 2,877 484 16.8%
Amortization 1,187 1,153 34 2.9% 3,483 3,466 17 0.5%
Stationary and supplies 397 291 106 36.4% 1,063 911 152 16.7%
Deposit insurance premiums 70 44 26 59.1% 209 137 72 52.6%
Disposition of branch properties 8 190 (182) -95.8% 22 513 (491) -95.7%
Other 1,635 1,601 34 2.1% 5,081 4,942 139 2.8%
------------------------------------------- ---------------------------------------------
Total $ 14,081 $ 13,265 $816 6.2% $ 41,759 $ 39,673 $ 2,086 5.3%
Total operating expenses as a
percentage of average assets 2.90% 3.02% -0.12% pts 2.95% 3.12% -0.17% pts
Efficiency ratio 51.9% 51.4% 0.5% pts 52.6% 54.7% -2.1% pts
D) The amounts of the Company's loans outstanding (net of deferred loan fees or costs) at the dates indicated are shown in the
following table according to type of loan:
(000's omitted) As of September 30,
------------------------------------------------------
Change Change
2000 1999 Amount Percent
------------------------------------------------------
Real estate mortgages:
Residential $ 365,671 $ 321,859 $ 43,812 13.6%
Commercial loans secured by
real estate 130,219 116,730 13,489 11.6%
Farm 18,674 15,253 3,421 22.4%
------------------------------------------
Total 514,564 453,842 60,722 13.4%
Commercial, financial, and agricultural:
Agricultural 26,650 26,172 478 1.8%
Commercial and financial 180,790 170,984 9,806 5.7%
------------------------------------------
Total 207,440 197,156 10,284 5.2%
Installment loans to individuals:
Direct 114,702 113,653 1,049 0.9%
Indirect 232,021 207,420 24,601 11.9%
Student and other 874 2,369 (1,495) -63.1%
------------------------------------------
Total 347,597 323,442 24,155 7.5%
Other Loans 12,408 9,070 3,338 36.8%
------------------------------------------
Gross Loans 1,082,009 983,510 98,499 10.0%
------------------------------------------
Less: Unearned discounts 478 837 (359) -42.9%
------------------------------------------
Net loans 1,081,531 982,673 98,858 10.1%
Reserve for possible loan
losses 14,614 12,922 1,692 13.1%
------------------------------------------
Loans net of loan loss reserve $ 1,066,917 $ 969,751 $ 97,166 10.0%
==========================================
E) The following table reconciles the differences between the line of business loan breakdown reflected in the narrative of this
report and on Table D as compared to regulatory reporting definitions reflected on the Call Report.
Line of Business as of September 30, 2000
------------------------------------------------------------------------
--------------
Consumer Consumer Consumer Business Total
Direct Indirect Mortgages Lending Loans
----------------- ---------------- ------------------ -------------- --------------
Regulatory Reporting Categories
- -------------------------------
Loans secured by real estate
Residential $ 91,388 $ - $ 244,637 $ 29,560 $ 365,585
Commercial
29 - 307 129,883 130,219
Farm
36 - 18,638 18,674
Agricultural loans
658 - 25,992 26,650
Commercial loans
11,893 - 168,897 180,790
Installment loans to individuals
109,649 232,021 54 5,959 347,683
Other loans
1,041 - 11,367 12,408
----------------- ---------------- ------------------ -------------- --------------
-
Total loans
214,694 232,021 244,998 390,296 1,082,009
-
Unearned Discounts
(478) - - - (478)
----------------- ---------------- ------------------ -------------- --------------
-
Net Loans $ 214,216 $ 232,021 $ 244,998 $ 390,296 $ 1,081,531
F) The following table presents information concerning the aggregate amount of nonperforming assets:
As of September 30,
(000's omitted)
--------------------------------------------------------------------------------
Change Change
2000 1999 Amount Percent
--------------------------------------------------------------------------------
Loans accounted for on a
nonaccrual basis $4,718 $3,257 $1,461 44.9%
Accruing loans which are contractually
past due 90 days or more as to
principal or interest payments 1,502 836 666 79.7%
------ ---- ---- -----
Total nonperforming loans 6,220 4,093 2,127 52.0%
Loans which are "troubled debt
restructurings" as defined in Statement
of Financial Accounting Standards
No. 15 "Accounting by Debtors and
Creditors for Troubled Debt 129 119 10 8.4%
Restructurings"
Other Real Estate 760 501 259 51.7%
---- ---- ---- -----
Total nonperforming assets $7,109 $4,713 $2,396 50.8%
Ratio of allowance for loan losses to
period-end loans 1.35% 1.32% 0.03 % pts ---
Ratio of allowance for loan losses to
period-end nonperforming loans 235.0% 315.7% (80.7) % pts ---
Ratio of allowance for loan losses to
period-end nonperforming assets 205.6% 274.2% (68.6) % pts ---
Ratio of nonperforming assets to period-end
total loans and other real estate owned 0.66% 0.48% 0.18 % pts ---
The impact of interest not recognized on nonaccrual loans, and interest income that would have been recorded if the restructured
loans had been current in accordance with their original terms, was immaterial. The Company's policy is to place a loan on a
nonaccrual status and recognize income on a cash basis when it is more than ninety days past due, except when in the opinion of
management it is well secured and in the process of collection.
G) The following table summarizes loan balances at the end of each period indicated and the daily average amount of loans. Also
summarized are changes in the allowance for possible loan losses arising from loans charged off and recoveries on loans
previously charged off and additions to the allowance, which have been charged to expenses.
Three Months Ended Nine Months Ended
September 30, September 30,
(000's omitted)
--------------------------------------------------------------------------------------
Change Change Change Change
2000 1999 Amount Percent 2000 1999 Amount Percent
--------------------------------------------------------------------------------------
Amount of loans outstanding at end
of period (gross of unearned discount) $1,082,009 $983,510 $98,499 10.0% $1,082,009 $983,510 $98,499 10.0%
Daily average amount of loans (net 1,070,150 960,860 109,290 11.4% 1,044,567 935,650 108,917 11.6%
of unearned discount)
Balance of allowance for possible
loan losses at beginning of period 14,603 13,055 1,548 11.9% 13,421 12,441 980 7.9%
Loans charged off:
Commercial, financial, and agricultural 1,573 492 1,081 219.7% 2,074 864 1,210 140.0%
Real estate construction 0 0 0 - 0 0 0
-
Real estate mortgage 0 0 0 - 11 33 (22) -66.7%
Installment 795 1,000 (205) -20.5% 2,551 3,167 (616) -19.5%
--------------------------------------------------------------------------------------
Total loans charged off 2,368 1,492 876 58.7% 4,636 4,064 572 14.1%
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 24 21 3 14.3% 82 113 (31) -27.4%
Real estate construction 0 0 0 - 0 0 0 -
Real estate mortgage 6 2 4 200.0% 7 5 2 40.0%
Installment 221 237 (16) -6.8% 696 738 (42) -5.7%
--------------------------------------------------------------------------------------
Total recoveries 251 260 (9) -3.5% 785 856 (71) -8.3%
Net loans charged off 2,117 1,232 885 71.8% 3,851 3,208 643 20.0%
Additions to allowance charged to
expense 2,128 1,099 1,029 93.6% 5,044 3,689 1,355 36.7%
Balance at end of period $14,614 $12,922 $1,692 13.1% $14,614 $12,922 $1,692 13.1%
Ratio of net chargeoffs to average loans
outstanding 0.79% 0.51% 0.28% ------ 0.49% 0.46% 0.03% ------
H) The following table sets forth information by category of noninterest income for the Company for the periods indicated.
(000's omitted) Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------------------------------------------------
2000 1999 Change Change 2000 1999 Change Change
Amount Percent Amount Percent
-------------------------------------------------------------------------------
Personal trust $323 $295 $28 9.5% $1,008 $962 $46 4.8%
EBT/BPA 728 670 58 8.7% 2,216 1,992 224 11.2%
Elias Asset Management 1,105 0 1,105 2,039 0 2,039
- -
Insurance 550 550 0 0.0% 753 645 108 16.7%
Other investment products 394 288 106 36.8% 1,319 922 397 43.1%
-------------------------------------------------------------------------------
Total financial services 3,100 1,803 1,297 71.9% 7,335 4,521 2,814 62.2%
Electronic banking 461 365 96 26.3% 1,209 972 237 24.4%
Mortgage banking 77 70 7 10.0% 235 367 (132) -36.0%
Commercial leasing 6 15 (9) -60.0% 32 45 (13) -28.9%
-------------------------------------------------------------------------------
Total specialty products 544 450 94 20.9% 1,476 1,384 92 6.6%
Deposit service charges 838 921 (83) -9.0% 2,504 2,522 (18) -0.7%
Overdraft fees 1,015 843 172 20.4% 2,856 2,356 500 21.2%
Commissions 438 503 (65) -12.9% 1,400 1,387 13 0.9%
-------------------------------------------------------------------------------
General banking services 2,291 2,267 24 1.1% 6,760 6,265 495 7.9%
Miscellaneous revenue 22 1 21 2100.0% 27 57 (30) -52.6%
-------------------------------------------------------------------------------
Total noninterest income
(excl security gains/losses) 5,957 4,521 1,436 31.8% 15,598 12,227 3,371 27.6%
Security gains/losses 0 (499) 499 -100.0% (212) (222) 10 -4.5%
Disposition of branch properties 0 0 0 0 0 0
- -
-------------------------------------------------------------------------------
Total noninterest income $5,957 $4,022 $1,935 48.1% $15,386 $12,005 $3,381 28.2%
Noninterest income as a percentage of
operating income (excl securities gains/losses
& disposal of branch properties) 24.0% 19.5% 4.5 %pts. --- 21.4% 18.7% 2.7 %pts. ---
I) The following table reconciles differences between the line of business noninterest income breakdown reflected in the narrative
of this report and on table H as compared to regulatory reporting definitions, reflected on the Call Report.
Noninterest Income for the Nine Months Ended September 30,2000
Regulatory Reporting Categories
-------------------------------
Fiduciary Service Charges Commissions on Other Service Other Investment
(000's omitted) and on Deposits Investment Charges, Operating Securities
Investment Products Commissions Income Gains Total
Services and Fees
--------------------------- ------------- ----------------- ------------ ------------ ----------
Line of Business
- ----------------
Categories
- ----------
Personal trust $ 1,008 $ 1,008
EBT/BPA
850 1,366 2,216
Elias Asset Management
2,039 2,039
Insurance
34 719 753
Other investment products
1,320 1,320
- -------------------------------------------------------- ------------- ----------------- ------------ ------------ ----------
Total financial services -
1,858 3,393 2,085 - - 7,336
Electronic banking
348 860 1,208
Mortgage banking
165 70 235
Commercial leasing
32 32
--------------------------- ------------- ----------------- ------------ ------------ ----------
Total specialty products -
- 348 1,057 70 - 1,475
Deposit service charges
2,504 2,504
Overdraft fees
2,856 2,856
Commissions
1,400 1,400
--------------------------- ------------- ----------------- ------------ ------------ ----------
General banking services -
- 5,360 1,400 - - 6,760
Miscellaneous revenue
27 27
--------------------------- ------------- ----------------- ------------ ------------ ----------
Total noninterest income
(excl security gains/losses)
1,858 5,708 3,393 4,542 97 - 15,598
Security gains/losses
(212) (212)
-----------------------------------------------------------------------------------------------------
Total noninterest income $ 1,858 $ 5,708 $ 3,393 $ 4,542 $ 97 $ (212) $ 15,386
============ =============== ============= ================= ============ ============ ==========
Part II. Other Information
Item 1. Legal Proceedings.
Not Applicable
Item 2. Changes in Securities.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not Applicable.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K:
(21) Subsidiaries of the registrant
- Community Bank, National Association, State of New York
- Community Financial Services, Inc., State of New York
- Community Capital Trust I, State of Delaware
- Benefit Plans Administrative Services, Inc., State of New York
- CBNA Treasury Management Corporation, State of Delaware
- Community Investment Services, Inc., State of New York
- CBNA Preferred Funding Corporation, State of Delaware
- Elias Asset Management, Inc., State of Delaware
b) Reports on Form 8-K:
Filed September 18, 2000
Item 5: Other Events. Exhibit 99.1, press release dated September 13, 2000; Citizens National and Community Bank
Announce Intent to Merge
Filed September 29, 2000
Item 5: Other Events. Exhibit 99.1, press release dated September 27, 2000; Citizens National and Community Bank
Announce Definitive Agreement To Merge
27
SIGNATURES
----------
Pursuant to the requirements of The Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Community Bank System, Inc.
Date: November 10, 2000 /s/ Sanford A. Belden
------------------------------------
Sanford A. Belden, President and
Chief Executive Officer
Date: November 10, 2000 /s/ David G. Wallace
------------------------------------
David G. Wallace, Treasurer
Chief Financial Officer
