Exhibit 99
News Release
| COMMUNITY BANK SYSTEM, INC. |
5790 Widewaters Parkway, DeWitt, N.Y. 13214 For further information, please contact:
Scott A. Kingsley,
EVP & Chief Financial Officer
Office: (315) 445-3121
Community Bank System Second Quarter Earnings Up 9%
Asset Quality Remains Excellent
SYRACUSE, N.Y. — July 22, 2008 — Community Bank System, Inc. (NYSE: CBU) generated quarterly net income of $11.3 million, or $0.37 per share, in the second quarter of 2008, $0.03 per share, or 9% higher than the $0.34 per share reported in the second quarter of 2007, and $0.01 per share, or 3% above the first quarter of 2008. Solid organic loan growth, continued expansion of non-interest income sources, an improved net interest margin, and strong asset quality resulted in the Company’s improved quarterly results. Year-to-date 2008 earnings of $22.2 million, or $0.74 per share, were 12% above the $20.0 million, or $0.66 per share, of reported earnings for the first six months of 2007. For the year, cash earnings per share (which excludes the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments) were $0.83, which is $0.09 per share, or 12% above GAAP-reported results.
“Our Company continued its solid performance in the second quarter by producing exceptional core deposit growth, strong organic loan growth across all portfolios, improving non-interest income streams, maintaining our stable and favorable asset quality, and through meaningful operating expense management,” said President and Chief Executive Officer Mark E. Tryniski. “Consistent with our stated growth strategy, we announced two high value acquisitions over the last four weeks. In late June, we entered into an agreement to acquire 18 branch-banking centers in northern New York from Citizens Financial Group, Inc., which will add approximately $630 million of deposits to our market-leading, northern New York footprint. We expect the transaction to be completed in the fourth quarter of 2008. In addition, earlier this month, through our Benefit Plans Administrative Services, Inc. subsidiary, we completed the purchase of the Philadelphia division of Alliance Benefit Group MidAtlantic, a provider of retirement plan consulting, daily valuation administration, actuarial and ancillary support services.”
Second quarter net interest income of $35.4 million was 6.3% above the second quarter of 2007, and reflected a 2.2% increase in average earning assets, and a 14 basis points improvement in net interest margin to 3.78%. Margin improvement was realized as a result of a 48 basis point reduction in total cost of funds, reflective of disciplined deposit pricing as well as the debt restructuring completed in late 2007, partially offset by a 33 basis point decline in earning asset yields.
Community Bank System, Inc.
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Second quarter non-interest income (excluding securities gains/losses and debt extinguishment charges) increased $2.7 million, or 17.8% over the same period last year. The Company’s employee benefits administration and consulting business posted a 24.5% increase in revenues over the second quarter 2007, a result of the Hand Benefits & Trust acquisition completed in May of last year, as well as solid organic growth generated from new clients and enhanced product offerings to both new and existing customers. Banking non-interest income improved 14.5% over second quarter 2007, a result of new and expanded core account relationships and growing debit card-related revenues. Wealth management revenues increased 15.7% over 2007’s second quarter from additional insurance agency revenues and growth in the Company’s other product offerings despite difficult market conditions. Year-to-date investment securities gains of $0.2 million reflect proceeds received from the VISA initial public offering in the first quarter.
Quarterly operating expenses of $37.0 million increased 8.3% over the second quarter of 2007, a large majority of which related to the two acquisitions completed in the second quarter of last year. In addition, the Company had higher business development and volume-based processing costs, and increased facility-based utilities and maintenance costs over the prior year. On a linked quarter basis, operating expenses were down 3.7%, reflective of seasonally lower occupancy, professional, and personnel-related costs.
The Company’s effective tax rate in the second quarter was 22.5%, consistent with the first quarter of 2008, and down from 25.0% reported in the second quarter of 2007, reflecting a higher level of income from tax-exempt sources.
Financial Position
Average earning assets of $4.17 billion for the second quarter were up slightly from the first quarter of 2008, and included $47.2 million of organic loan growth, and a $45.5 million decrease in investment securities. Compared to the second quarter of 2007, average earning assets increased $90.4 million, comprised of loan growth of $157.3 million, offset by a $66.9 million decline in investment securities, including cash equivalents. Average deposits for the second quarter of $3.23 billion, increased $14.0 million from the first quarter, and supported the Company’s objective of lowering its overall funding costs by reducing higher cost time deposits, and focusing on expanding core account relationships. This net increase in average deposits was comprised of a $36.4 million reduction in time deposits and a significant $50.4 million increase in core checking, savings, and money market instruments. Borrowings ended the quarter at $874.6 million, a slight increase from the end of the first quarter.
Mr. Tryniski added, “During the quarter we produced growth across all lending lines. We remain free of exposure to the mortgage lending crisis that has affected many of the nation’s markets, as we have no subprime or other higher-risk mortgage products within our real estate or investment portfolios. Our mortgage delinquency ratio of 0.96% is significantly below the industry-wide ratio, which is close to 6%. Our commercial lending portfolio grew by $12.7 million during the second quarter, our third consecutive quarter of expansion, and we remain committed to building upon this momentum. Our consumer real estate and installment lending products also exhibited favorable growth rates in the quarter and reflect the strength of our business development efforts and the stable conditions prevalent in our primary markets.”
Community Bank System, Inc.
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Asset Quality
The Company’s asset quality metrics remained excellent, with non-performing loan and charge-off ratios remaining at or near the historically low levels achieved in recent quarters.
Current quarter provision for loan losses of $1.6 million was $0.8 million higher than the first quarter of 2008, reflecting a stable level of net charge-offs and an $84.5 million increase in outstanding loans. The ratio of loan loss allowance to total loans outstanding was 1.27% as of June 30, 2008, compared to 1.28% at the end of the first quarter.
Net charge-offs in the second quarter were $0.9 million, compared to $0.8 million in the first quarter of 2008, and $0.4 million in the second quarter of 2007. The quarterly net charge-off ratio of 0.12% represented the sixth consecutive quarter the ratio was below 0.15%, demonstrating the stability and favorable profile of the Company’s asset quality over an extended period of time.
Nonperforming loans as a percentage of total loans at June 30, 2008 were 0.39%, up from 0.32% at the end of the first quarter, and 0.36% at the end of last year’s second quarter. The delinquency ratio of 1.13% remained favorable and consistent with the average delinquency rate of 1.08% experienced at the previous six quarter-ends. Nonperforming assets to total assets rose slightly to 0.26%, from the very low 0.22% level of the previous quarter, and 0.25% one year ago. These excellent asset quality metrics illustrate the continued effectiveness of the Company’s disciplined risk management and underwriting standards.
Acquisitions
In late June, the Company announced it had entered into an agreement to acquire 18 branch-banking centers in northern New York State from Citizens Financial Group, Inc. Under the terms of the agreement, Community Bank will acquire approximately $135 million in loans and $630 million in deposits at a blended deposit premium of 12%. The transaction, which is subject to regulatory approvals, is expected to be completed in the fourth quarter of 2008. In support of the transaction, the Company expects to issue approximately $30 million of equity capital prior to its completion. Excluding one-time expenses, the transaction is expected to be immediately accretive to earnings per share, inclusive of the impact of the additional equity issuance.
In early July, the Company, through its Benefit Plans Administrative Services, Inc. subsidiary, acquired the Philadelphia division of Alliance Benefit Group MidAtlantic from BenefitStreet, Inc. Alliance Benefit Group MidAtlantic provides retirement plan consulting, daily valuation administration, actuarial and ancillary support services. This transaction, which is expected to add approximately $5.0 million in annual revenues, adds valuable capacity to support the Company’s growing customer base of more than 300 actuarial engagements, administration of over 200,000 defined contribution and flexible spending participant accounts, and custody of nearly $4.0 billion in retirement plan assets.
Stock Repurchases
During 2007 the company purchased 611,650 common shares at an aggregate cost of approximately $12.0 million. These purchases were made under the previously announced share repurchase programs authorized in December 2006. There were no shares repurchased in the first half of 2008. At June 30, 2008, there were 0.94 million remaining shares available for repurchase under these programs.
Community Bank System, Inc.
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Conference Call Scheduled
A conference call will be held with Company management at 11:00 a.m. (ET) on Wednesday, July 23, 2008, to discuss the above results at 1-866-812-6491. An audio recording will be available one hour after the call until September 30, 2008, and may be accessed at 1-888-284-7564 (access code 236083). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=49715.
This webcast will be archived on this site for one full year and may be accessed at any point during this time at no cost. This earnings release, including supporting financial tables, is available within the Investor Relations / News & Media section of the company's website at: http://www.communitybankna.com.
Community Bank System is based in DeWitt, N.Y., with $4.7 billion in assets and 140 customer facilities across Upstate New York, where it operates as Community Bank, N.A., and Northeastern Pennsylvania, where it is known as First Liberty Bank & Trust. Its other subsidiaries include: BPAS, an employee benefits administration and consulting firm with offices in Upstate New York, Pittsburgh, Philadelphia, and Houston; the CBNA Insurance Agency, with offices in three northern New York communities; Community Investment Services, a broker-dealer delivering financial products throughout the company's branch network; and Nottingham Advisors, a wealth management and advisory firm with offices in Buffalo, N.Y., and North Palm Beach, Florida. For more information, visit: www.communitybankna.com or www.firstlibertybank.com.
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Community Bank System, Inc.
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| Summary of Financial Data | | | | |
| (Dollars in thousands, expect per share data) | | | | |
| | Quarter Ended | Year-To-Date |
| | June 30, | June 30, |
| | 2008 | 2007 | 2008 | 2007 |
| Earnings | | | | |
| Loan income | $45,691 | $46,090 | $92,206 | $91,025 |
| Investment income | 15,379 | 17,166 | 32,015 | 33,789 |
| Total interest income | 61,070 | 63,256 | 124,221 | 124,814 |
| Interest expense | 25,630 | 29,918 | 53,183 | 58,109 |
| Net interest income | 35,440 | 33,338 | 71,038 | 66,705 |
| Provision for loan losses | 1,570 | 414 | 2,350 | 614 |
| Net interest income after provision for loan losses | 33,870 | 32,924 | 68,688 | 66,091 |
| Deposit service fees | 8,910 | 7,825 | 17,171 | 14,802 |
| Other banking services | 539 | 425 | 1,134 | 1,095 |
| Trust, investment and asset management fees | 2,324 | 2,009 | 4,487 | 3,869 |
| Benefit plan administration, consulting and actuarial fees | 5,933 | 4,767 | 12,245 | 8,739 |
| Debt extinguishment charges and investment securities (losses)/gains, net | (57) | (8) | 230 | (8) |
| Total noninterest income | 17,649 | 15,018 | 35,267 | 28,497 |
| Salaries and employee benefits | 19,772 | 18,280 | 40,158 | 36,566 |
| Professional fees | 902 | 1,054 | 2,200 | 2,239 |
| Occupancy and equipment and furniture | 5,189 | 4,557 | 10,762 | 9,206 |
| Amortization of intangible assets | 1,645 | 1,581 | 3,176 | 3,096 |
| Other | 9,442 | 8,495 | 19,028 | 16,670 |
| Acquisition expenses | 5 | 165 | 5 | 274 |
| Total operating expenses | 36,955 | 34,132 | 75,329 | 68,051 |
| Income before income taxes | 14,564 | 13,810 | 28,626 | 26,537 |
| Income taxes | 3,277 | 3,451 | 6,441 | 6,522 |
| Net income | $11,287 | $10,359 | $22,185 | $20,015 |
| Basic earnings per share | $0.38 | $0.34 | $0.74 | $0.66 |
| Diluted earnings per share | $0.37 | $0.34 | $0.74 | $0.66 |
| Diluted earnings per share-cash | $0.42 | $0.39 | $0.83 | $0.75 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2008 | 2007 |
| | 2nd Otr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Earnings | | | | | |
| Loan income | $45,691 | $46,515 | $47,938 | $47,821 | $46,090 |
| Investment income | 15,379 | 16,636 | 17,879 | 17,785 | 17,166 |
| Total interest income | 61,070 | 63,151 | 65,817 | 65,606 | 63,256 |
| Interest expense | 25,630 | 27,553 | 30,828 | 31,326 | 29,918 |
| Net interest income | 35,440 | 35,598 | 34,989 | 34,280 | 33,338 |
| Provision for loan losses | 1,570 | 780 | 880 | 510 | 414 |
| Net interest income after provision for loan losses | 33,870 | 34,818 | 34,109 | 33,770 | 32,924 |
| Deposit service fees | 8,910 | 8,261 | 8,828 | 8,382 | 7,825 |
| Other banking services | 539 | 595 | 676 | 1,512 | 425 |
| Trust, investment and asset management fees | 2,324 | 2,163 | 2,210 | 2,185 | 2,009 |
| Benefit plan administration, consulting and actuarial fees | 5,933 | 6,312 | 5,453 | 5,509 | 4,767 |
| Debt extinguishment charges and investment securities (losses)/gains, net | (57) | 287 | (9,950) | (16) | (8) |
| Total noninterest income | 17,649 | 17,618 | 7,217 | 17,572 | 15,018 |
| Salaries and employee benefits | 19,772 | 20,386 | 20,062 | 19,086 | 18,280 |
| Professional fees | 902 | 1,298 | 1,383 | 1,365 | 1,054 |
| Occupancy and equipment and furniture | 5,189 | 5,573 | 4,872 | 4,883 | 4,557 |
| Amortization of intangible assets | 1,645 | 1,531 | 1,544 | 1,629 | 1,581 |
| Other | 9,442 | 9,586 | 9,388 | 9,703 | 8,495 |
| Acquisition expenses | 5 | 0 | 9 | 99 | 165 |
| Total operating expenses | 36,955 | 38,374 | 37,258 | 36,765 | 34,132 |
| Income before income taxes | 14,564 | 14,062 | 4,068 | 14,577 | 13,810 |
| Income taxes | 3,277 | 3,164 | (7,779) | 3,548 | 3,451 |
| Net income | 11,287 | 10,898 | 11,847 | 11,029 | 10,359 |
| Basic earnings per share | $0.38 | $0.37 | $0.40 | $0.37 | $0.34 |
| Diluted earnings per share | $0.37 | $0.36 | $0.39 | $0.37 | $0.34 |
| Diluted earnings per share-cash | $0.42 | $0.41 | $0.44 | $0.41 | $0.39 |
| Profitability | | | | | |
| Return on assets | 0.98% | 0.94% | 1.00% | 0.94% | 0.92% |
| Return on equity | 9.27% | 9.08% | 9.95% | 9.47% | 8.92% |
Noninterest income/operating income (FTE) (2) | 31.1% | 30.5% | 30.7% | 31.7% | 28.8% |
Efficiency ratio (1) | 62.1% | 64.8% | 63.9% | 63.1% | 62.2% |
| Components of Net Interest Margin (FTE) | | | | | |
| Loan yield | 6.43% | 6.65% | 6.81% | 6.86% | 6.84% |
| Investment yield | 5.85% | 6.07% | 5.95% | 5.82% | 6.06% |
| Earning asset yield | 6.25% | 6.46% | 6.52% | 6.50% | 6.58% |
| Interest-bearing deposit rate | 2.42% | 2.68% | 2.85% | 2.94% | 2.96% |
| Short-term borrowing rate | 4.07% | 4.17% | 4.13% | 4.07% | 4.20% |
| Long-term borrowing rate | 4.77% | 4.79% | 5.74% | 5.83% | 5.58% |
| Cost of all interest-bearing funds | 2.92% | 3.13% | 3.41% | 3.47% | 3.47% |
| Cost of funds (includes DDA) | 2.51% | 2.70% | 2.94% | 2.99% | 2.99% |
| Net interest margin (FTE) | 3.78% | 3.81% | 3.63% | 3.56% | 3.64% |
| Fully tax-equivalent adjustment | $3,745 | $3,890 | $3,687 | $3,645 | $3,723 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2008 | 2007 |
| | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Average Balances | | | | | |
| Loans | $2,869,338 | $2,822,100 | $2,801,660 | $2,775,337 | $2,712,021 |
| Taxable investment securities | 779,958 | 808,962 | 937,656 | 971,828 | 885,361 |
| Nontaxable investment securities | 524,454 | 540,993 | 489,446 | 477,369 | 485,922 |
| Total interest-earning assets | 4,173,750 | 4,172,055 | 4,228,762 | 4,224,534 | 4,083,304 |
| Total assets | 4,639,946 | 4,642,019 | 4,700,537 | 4,679,318 | 4,536,348 |
| Interest-bearing deposits | 2,666,424 | 2,659,584 | 2,667,869 | 2,735,349 | 2,718,135 |
| Short-term borrowings | 420,392 | 426,116 | 406,902 | 307,090 | 154,799 |
| Long-term borrowings | 449,474 | 457,177 | 511,919 | 536,859 | 589,686 |
| Total interest-bearing liabilities | 3,536,290 | 3,542,877 | 3,586,690 | 3,579,298 | 3,462,620 |
| Noninterest-bearing deposits | 563,045 | 555,927 | 574,266 | 583,946 | 557,195 |
| Shareholders' equity | 489,444 | 482,750 | 472,303 | 462,172 | 465,652 |
| Balance Sheet Data | | | | | |
| Cash and cash equivalents | $123,233 | $160,394 | $130,823 | $205,224 | $242,410 |
| Investment securities | 1,258,792 | 1,307,682 | 1,391,872 | 1,433,930 | 1,219,360 |
| Loans: | | | | | |
| Consumer mortgage | 1,015,114 | 987,807 | 977,553 | 969,567 | 948,430 |
| Business lending | 1,011,137 | 998,443 | 984,780 | 972,394 | 988,886 |
| Consumer installment | 895,992 | 851,536 | 858,722 | 849,949 | 829,860 |
| Total loans | 2,922,243 | 2,837,786 | 2,821,055 | 2,791,910 | 2,767,176 |
| Allowance for loan losses | 37,128 | 36,428 | 36,427 | 36,447 | 36,690 |
| Intangible assets | 253,752 | 255,111 | 256,216 | 256,766 | 258,110 |
| Other assets | 134,720 | 133,870 | 133,963 | 141,484 | 132,783 |
| Total assets | 4,655,612 | 4,658,415 | 4,697,502 | 4,792,867 | 4,583,149 |
| Deposits | 3,247,348 | 3,243,382 | 3,228,464 | 3,304,604 | 3,364,577 |
| Borrowings | 772,646 | 766,153 | 801,604 | 821,343 | 577,134 |
| Subordinated debt held by unconsolidated subsidiary trusts | 101,963 | 101,956 | 127,724 | 127,123 | 127,111 |
| Other liabilities | 50,007 | 58,256 | 60,926 | 71,455 | 54,703 |
| Total liabilities | 4,171,964 | 4,169,747 | 4,218,718 | 4,324,525 | 4,123,525 |
| Shareholders' equity | 483,648 | 488,668 | 478,784 | 468,342 | 459,624 |
| Total liabilities and shareholders' equity | 4,655,612 | 4,658,415 | 4,697,502 | 4,792,867 | 4,583,149 |
| Capital | | | | | |
| Tier 1 leverage ratio | 7.75% | 7.59% | 7.77% | 7.67% | 7.90% |
| Tangible equity / tangible assets | 5.22% | 5.30% | 5.01% | 4.66% | 4.66% |
| Diluted weighted average common shares O/S | 30,280 | 30,036 | 30,006 | 30,078 | 30,396 |
| Period end common shares outstanding | 29,935 | 29,892 | 29,635 | 29,672 | 29,873 |
| Cash dividends declared per common share | $0.21 | $0.21 | $0.21 | $0.21 | $0.20 |
| Book value | $16.16 | $16.35 | $16.16 | $15.78 | $15.39 |
| Tangible book value | $7.68 | $7.81 | $7.51 | $7.13 | $6.75 |
| Common stock price (end of period) | $20.62 | $24.56 | $19.87 | $19.52 | $20.02 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2008 | 2007 |
| | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Asset Quality | | | | | |
| Nonaccrual loans | $11,080 | $8,757 | $8,267 | $8,932 | $9,192 |
| Accruing loans 90+ days delinquent | 370 | 392 | 622 | 451 | 778 |
| Total nonperforming loans | 11,450 | 9,149 | 8,889 | 9,383 | 9,970 |
| Other real estate owned (OREO) | 637 | 1,027 | 1,007 | 1,097 | 1,411 |
| Total nonperforming assets | 12,087 | 10,176 | 9,896 | 10,480 | 11,381 |
| Net charge-offs | 870 | 779 | 900 | 753 | 362 |
| Loan loss allowance/loans outstanding | 1.27% | 1.28% | 1.29% | 1.31% | 1.33% |
| Nonperforming loans/loans outstanding | 0.39% | 0.32% | 0.32% | 0.34% | 0.36% |
| Loan loss allowance/nonperforming loans | 324% | 398% | 410% | 388% | 368% |
| Net charge-offs/average loans | 0.12% | 0.11% | 0.13% | 0.11% | 0.05% |
| Delinquent loans/ending loans | 1.13% | 0.99% | 1.10% | 1.10% | 0.95% |
| Loan loss provision/net charge-offs | 180% | 100% | 98% | 68% | 114% |
| Nonperforming assets/total assets | 0.26% | 0.22% | 0.21% | 0.22% | 0.25% |
| | | | | | |
(1) Excludes intangible amortization, acquisition expenses, special charges and gain (loss) on investment securities & debt extinguishment. |
(2) Excludes gain (loss) on investment securities & debt extinguishment. |
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This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The following factors, among others, could cause the actual results of CBU’s operations to differ materially from CBU’s expectations: the successful integration of operations of its acquisitions; competition; changes in economic conditions, interest rates and financial markets; and changes in legislation or regulatory requirements. CBU does not assume any duty to update forward-looking statements.
