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 Announces Second Quarter Results and Declares Cash Dividend
SYRACUSE, N.Y. — July 22, 2009 — Community Bank System, Inc. (NYSE: CBU) reported quarterly net income of $9.2 million in the second quarter of 2009, a decrease of 18.9% compared to the $11.3 million reported for the second quarter of 2008. Quarterly earnings per share of $0.28, were $0.09, or 24.3% below the $0.37 reported in the second quarter of 2008. Second quarter 2009’s results included an additional $3.7 million of FDIC-insurance related assessments, or $0.09 per share, above the second quarter of 2008. Excluding these additional assessments, earnings per share for the quarter were equal to the reported results from last year’s second quarter. Cash earnings per share for the quarter (a non-GAAP measure which excludes the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments) were $0.33, which is $0.05 per share, or 17.9% higher than GAAP-reported results.
“Our disciplined approach to challenging market conditions produced solid operating results for the second quarter of 2009,” said President and Chief Executive Officer Mark E. Tryniski. “Earnings per share for the quarter were equal to those of the second quarter of 2008 (excluding the FDIC’s additional deposit insurance assessments) and most asset quality metrics, while already very strong, improved during the quarter. Core deposits grew at a 14% pace, and we continued to deliver loan and core deposit growth in the Plattsburgh and other northern New York markets that comprise the 18 branch banking centers acquired from Citizens Financial in November 2008.”
Second quarter net interest income grew to $40.5 million, an increase of 14.3% above second quarter 2008, driven by an 8.2% increase in average loans, partially offset by a five basis-point reduction in net interest margin to 3.73%. The Company’s lower margin was the result of its decision to remain in a very liquid position throughout the quarter, which included an average of $315 million of overnight cash equivalents, or 6.6% of interest earning assets, deployed at 26 basis points. Continued disciplined deposit pricing resulted in a 69-basis point reduction in the total cost of funds, compared to the second quarter of 2008, but was offset by a 72-basis point decline in earning asset yields, including cash equivalents.
Second quarter non-interest income (excluding securities gains/losses) increased $2.9 million, or 16.6% over the same period last year. Deposit service fees increased $1.4 million, with the growth derived from the branch acquisition, partially offset by modestly lower customer utilization of core depository services, in part due to generally lower consumer consumption. Mortgage banking and other service revenues grew $1.0 million, reflective of solid secondary market mortgage activities in the quarter. The Company’s employee benefits administration and consulting businesses posted an 11.2% increase in revenue over the second quarter 2008, primarily a result of the Alliance Benefit Group MidAtlantic (“ABG”) acquisition completed in July 2008. Second quarter wealth management revenues decreased 2.4% from the second quarter of 2008, reflective of continued difficult market conditions.Community Bank System, Inc.
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Quarterly operating expenses (excluding acquisition expenses) of $47.3 million included an additional $3.7 million of FDIC-insurance assessments compared to the second quarter of 2008, or $0.09 per share. Excluding the additional assessments, operating expenses increased 17.8% over the second quarter of 2008, and primarily reflected the operating costs of the ABG acquisition completed in July 2008 and the 18 branches purchased last November, as well as higher pension costs related to the unfavorable investment performance of underlying plan assets in 2008.
Financial Position
Average earning assets for the second quarter were $4.77 billion, up $75.2 million from the first quarter of 2009, and included a $35.3 million decline in loans from continued principal paydowns in the Company’s consumer mortgage portfolio, combined with its decision to sell $44 million of longer-term, lower rate mortgage originations in the quarter. Business lending and consumer installment portfolio balances remained consistent with the end of the first quarter. Average investment securities declined $49.7 million in the quarter, due to both planned and unscheduled cash flows, while cash equivalents increased $160.1 million, reflective of the remaining net liquidity generated from the Citizens’ branch acquisition and organic core deposit growth in the first half of 2009. Compared to the second quarter 2008, average earning assets increased $599.1 million, comprised of loan growth of $235.9 million, and additional investment securities, including cash equivalents, of $363.2 million. Average deposits for the second quarter were $3.85 billion, an increase of $79.8 million from the first quarter of 2009, and reflected meaningful organic growth in core deposits in the first half of 2009. Average borrowings for the quarter of $858.7 million were consistent with the first quarter of 2009. Average shareholders’ equity for the quarter of $550.1 million was consistent with the first quarter, and was $60.7 million above the second quarter of 2008, and included the $50 million in common equity (2.5 million shares) raised in October 2008, in support of the branch acquisition.
Mr. Tryniski added, “The Company’s results for the first six months of 2009 reflect our long-term commitment to a disciplined and balanced strategy for growth within our markets. We have again produced solid results in our business lending portfolio, with year-to-date annualized growth of 5.5%, excluding planned reductions in our automotive dealer floor plan business. We remain free of exposure to subprime or other higher-risk mortgage products within our real estate and investment portfolios, and our mortgage delinquency ratio of 1.50% remains significantly below the industry-wide ratio of over 8%. On a year-to-date basis, our consumer real estate and installment lending portfolios have experienced modest balance declines and reflect the comparatively stable conditions prevalent in our primary markets.”
Asset Quality
The current quarter’s provision for loan losses of $2.0 million was $0.8 million lower than the first quarter of 2009, reflecting a lower and still historically favorable level of net charge-offs. The ratio of loan loss allowance to total loans outstanding was 1.30% as of June 30, 2009, compared to 1.29% as of March 31, 2009, and 1.26% at the end of the fourth quarter of 2008.
Net charge-offs in the second quarter were $1.7 million, compared to $2.3 million in the first quarter of 2009, and $0.9 million in the second quarter of 2008. The second quarter net charge-off ratio of 0.22% was lower than the 0.30% reported in the first quarter of 2009.
Nonperforming loans as a percentage of total loans at June 30, 2009 were 0.44%, down from 0.49% at the end of the first quarter, and up five basis points from the favorable 0.39% at the end of last year’s second quarter. The delinquency ratio of 1.46% was up three basis points from the end of the fourth quarter of 2008, and up 33-basis points from June 2008, and remains below long-term historical levels. Nonperforming assets to total assets declined two basis points to 0.29%, versus the 0.31% level reported at the end of the first quarter, and three basis points above the very favorable 0.26% ratio reported a year ago. These stable asset quality metrics illustrate the continued effectiveness of the Company’s disciplined risk management and underwriting standards.
Community Bank System, Inc.
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Government Sponsored Programs
In November 2008, the Company announced that it had chosen not to apply for funds through the U.S. Treasury Department’s Capital Purchase Program, which is part of the federal government’s Troubled Asset Relief Program (TARP). As such, the Company has not, nor will it incur any charges associated with the repayment of such funds, including the write-off of capitalized issuance costs, and the negotiation and termination of highly dilutive warrants issued. Mr. Tryniski commented, “We continue to believe that we have and will continue to generate sufficient capital to respond to the needs and organic growth opportunities in our marketplaces.”
Dividend and Share Repurchase Approval
The Company’s Board of Directors approved a quarterly dividend on its common stock of $0.22 per share, payable to shareholders of record as of September 15, 2009, on October 9, 2009, which represents an annualized yield of 5.9% based on the closing share price of $14.93 on July 21, 2009. Mr. Tryniski commented, “The payment of a meaningful dividend is an important component of our commitment to continuing to provide consistent and favorable long-term returns to our shareholders.”
In addition, the Company’s Board of Directors also approved a share repurchase program of up to one million of the Company’s common shares through December 31, 2011. The shares may be repurchased from time to time in open market transactions or privately negotiated transactions in accordance with securities laws and regulations. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined in the Company’s discretion.
Conference Call Scheduled
Company management will conduct an investor call tomorrow (July 23, 2009) at 10:00 a.m. (ET) to discuss second quarter results. The conference call can be accessed at 1-866-761-8674. An audio recording will be available one hour after the call until September 30, 2009, and may be accessed at 1-888-284-7564 (access code 251309). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=60049.
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.
Headquartered in DeWitt, N.Y., Community Bank System, Inc. has $5.3 billion in assets and over 150 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: Benefit Plans Administrative Services, Inc., an employee benefits administration and consulting firm with offices in Upstate New York, Pittsburgh and Philadelphia, Pennsylvania and Houston, Texas; 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, |
| | 2009 | 2008 | 2009 | 2008 |
| Earnings | | | | |
| Loan income | $46,134 | $45,691 | $92,925 | $92,206 |
| Investment income | 15,821 | 15,379 | 32,129 | 32,015 |
| Total interest income | 61,955 | 61,070 | 125,054 | 124,221 |
| Interest expense | 21,441 | 25,630 | 44,354 | 53,183 |
| Net interest income | 40,514 | 35,440 | 80,700 | 71,038 |
| Provision for loan losses | 2,015 | 1,570 | 4,825 | 2,350 |
| Net interest income after provision for loan losses | 38,499 | 33,870 | 75,875 | 68,688 |
| Deposit service fees | 10,284 | 8,910 | 19,277 | 17,171 |
| Mortgage banking and other services | 1,499 | 539 | 3,822 | 1,134 |
| Trust, investment and asset management fees | 2,267 | 2,324 | 4,300 | 4,487 |
| Benefit plan administration, consulting and actuarial fees | 6,599 | 5,933 | 13,606 | 12,245 |
| Investment securities gains and (losses), net | 0 | (57) | 0 | 230 |
| Total noninterest income | 20,649 | 17,649 | 41,005 | 35,267 |
| Salaries and employee benefits | 23,154 | 19,772 | 46,022 | 40,158 |
| Professional fees | 990 | 715 | 2,057 | 1,823 |
| Occupancy and equipment and furniture | 5,704 | 5,189 | 11,925 | 10,762 |
| Amortization of intangible assets | 2,103 | 1,645 | 4,208 | 3,176 |
| FDIC insurance and other regulatory assessments | 4,284 | 464 | 5,876 | 764 |
| Other | 11,052 | 9,165 | 21,488 | 18,641 |
| Acquisition expenses | 196 | 5 | 308 | 5 |
| Total operating expenses | 47,483 | 36,955 | 91,884 | 75,329 |
| Income before income taxes | 11,665 | 14,564 | 24,996 | 28,626 |
| Income taxes | 2,510 | 3,277 | 5,376 | 6,441 |
| Net income | $9,155 | $11,287 | $19,620 | $22,185 |
Basic earnings per share(4) | $0.28 | $0.38 | $0.60 | $0.74 |
Diluted earnings per share(4) | $0.28 | $0.37 | $0.60 | $0.73 |
Diluted earnings per share-cash(1) (4) | $0.33 | $0.42 | $0.70 | $0.82 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Earnings | | | | | |
| Loan income | $46,134 | $46,791 | $47,896 | $46,731 | $45,691 |
| Investment income | 15,821 | 16,308 | 16,928 | 15,083 | 15,379 |
| Total interest income | 61,955 | 63,099 | 64,824 | 61,814 | 61,070 |
| Interest expense | 21,441 | 22,913 | 24,428 | 24,741 | 25,630 |
| Net interest income | 40,514 | 40,186 | 40,396 | 37,073 | 35,440 |
| Provision for loan losses | 2,015 | 2,810 | 2,395 | 1,985 | 1,570 |
| Net interest income after provision for loan losses | 38,499 | 37,376 | 38,001 | 35,088 | 33,870 |
| Deposit service fees | 10,284 | 8,993 | 9,400 | 9,044 | 8,910 |
| Mortgage banking and other services | 1,499 | 2,323 | 885 | 1,174 | 539 |
| Trust, investment and asset management fees | 2,267 | 2,033 | 1,927 | 2,234 | 2,324 |
| Benefit plan administration, consulting and actuarial fees | 6,599 | 7,007 | 6,612 | 6,931 | 5,933 |
| Investment securities losses, net | 0 | 0 | 0 | 0 | (57) |
| Total noninterest income | 20,649 | 20,356 | 18,824 | 19,383 | 17,649 |
| Salaries and employee benefits | 23,154 | 22,868 | 21,690 | 21,114 | 19,772 |
| Professional fees | 990 | 1,067 | 1,047 | 909 | 715 |
| Occupancy and equipment and furniture | 5,704 | 6,221 | 5,190 | 5,304 | 5,189 |
| Amortization of intangible assets | 2,103 | 2,105 | 2,003 | 1,727 | 1,645 |
| FDIC insurance and other regulatory assessments | 4,284 | 1,592 | 849 | 851 | 464 |
| Goodwill impairment | 0 | 0 | 1,745 | 0 | 0 |
| Other | 11,052 | 10,436 | 10,097 | 9,313 | 9,165 |
| Acquisition expenses | 196 | 112 | 1,356 | 38 | 5 |
| Total operating expenses | 47,483 | 44,401 | 43,977 | 39,256 | 36,955 |
| Income before income taxes | 11,665 | 13,331 | 12,848 | 15,215 | 14,564 |
| Income taxes | 2,510 | 2,866 | 879 | 3,429 | 3,277 |
| Net income | $9,155 | $10,465 | $11,969 | $11,786 | $11,287 |
Basic earnings per share(4) | $0.28 | $0.32 | $0.37 | $0.39 | $0.38 |
Diluted earnings per share(4) | $0.28 | $0.32 | $0.36 | $0.39 | $0.37 |
Diluted earnings per share-cash (1) (4) | $0.33 | $0.37 | $0.46 | $0.44 | $0.42 |
| Profitability | | | | | |
| Return on assets | 0.69% | 0.81% | 0.95% | 1.00% | 0.98% |
| Return on equity | 6.67% | 7.77% | 8.96% | 9.62% | 9.27% |
| Cash return on equity | 7.94% | 9.04% | 11.22% | 10.84% | 10.44% |
Noninterest income/operating income (FTE) (2) | 31.8% | 31.5% | 29.9% | 32.3% | 31.1% |
Efficiency ratio (3) | 65.6% | 65.3% | 64.4% | 62.4% | 62.1% |
| Components of Net Interest Margin (FTE) | | | | | |
| Loan yield | 5.97% | 6.06% | 6.20% | 6.29% | 6.43% |
| Cash equivalents yield | 0.26% | 0.25% | 0.66% | 2.18% | 1.93% |
| Investment yield | 5.75% | 5.82% | 5.87% | 5.78% | 5.94% |
| Earning asset yield | 5.53% | 5.79% | 6.00% | 6.13% | 6.25% |
| Interest-bearing deposit rate | 1.52% | 1.76% | 1.99% | 2.21% | 2.42% |
| Short-term borrowing rate | 4.29% | 4.19% | 3.73% | 3.87% | 4.07% |
| Long-term borrowing rate | 4.55% | 4.65% | 4.74% | 4.72% | 4.77% |
| Cost of all interest-bearing funds | 2.13% | 2.33% | 2.53% | 2.75% | 2.92% |
| Cost of funds (includes DDA) | 1.82% | 2.00% | 2.18% | 2.36% | 2.51% |
| Net interest margin (FTE) | 3.73% | 3.82% | 3.86% | 3.82% | 3.78% |
| Fully tax-equivalent adjustment | $3,865 | $4,025 | $3,803 | $3,645 | $3,745 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Average Balances | | | | | |
| Loans | $3,105,247 | $3,140,524 | $3,082,283 | $2,963,504 | $2,869,338 |
| Cash equivalents | 315,444 | 155,306 | 79,566 | 4,321 | 29,138 |
| Taxable investment securities | 793,909 | 842,496 | 853,306 | 766,581 | 750,820 |
| Nontaxable investment securities | 558,278 | 559,344 | 534,583 | 511,299 | 524,454 |
| Total interest-earning assets | 4,772,878 | 4,697,670 | 4,549,738 | 4,245,705 | 4,173,750 |
| Total assets | 5,313,274 | 5,235,252 | 5,035,398 | 4,712,423 | 4,639,946 |
| Interest-bearing deposits | 3,182,827 | 3,123,296 | 2,913,671 | 2,658,681 | 2,666,424 |
| Short-term borrowings | 593,533 | 477,184 | 478,875 | 477,139 | 420,392 |
| Long-term borrowings | 265,169 | 384,852 | 448,622 | 449,292 | 449,474 |
| Total interest-bearing liabilities | 4,041,529 | 3,985,332 | 3,841,168 | 3,585,112 | 3,536,290 |
| Noninterest-bearing deposits | 671,615 | 651,298 | 615,540 | 590,098 | 563,045 |
| Shareholders' equity | $550,103 | $546,132 | $531,627 | $487,249 | $489,444 |
| Balance Sheet Data | | | | | |
| Cash and cash equivalents | $474,372 | $350,670 | $213,753 | $103,595 | $123,233 |
| Investment securities | 1,335,358 | 1,417,966 | 1,395,011 | 1,283,776 | 1,258,792 |
| Loans: | | | | | |
| Consumer mortgage | 1,014,664 | 1,026,934 | 1,062,943 | 1,039,530 | 1,015,114 |
| Business lending | 1,078,500 | 1,078,593 | 1,058,846 | 1,028,400 | 1,011,137 |
| Consumer installment | 998,477 | 998,214 | 1,014,351 | 936,100 | 895,992 |
| Total loans | 3,091,641 | 3,103,741 | 3,136,140 | 3,004,030 | 2,922,243 |
| Allowance for loan losses | 40,330 | 40,053 | 39,575 | 37,413 | 37,128 |
| Intangible assets | 324,636 | 326,519 | 328,624 | 257,042 | 253,752 |
| Other assets | 151,310 | 165,890 | 140,599 | 155,489 | 136,891 |
| Total assets | 5,336,987 | 5,324,733 | 5,174,552 | 4,766,519 | 4,657,783 |
| Deposits | | | | | |
| Noninterest-bearing | 697,612 | 667,452 | 638,558 | 581,379 | 584,752 |
| Non-maturity interest-bearing | 1,828,586 | 1,774,906 | 1,636,348 | 1,356,402 | 1,326,692 |
| Time | 1,338,225 | 1,419,807 | 1,425,906 | 1,288,612 | 1,335,904 |
| Total deposits | 3,864,423 | 3,862,165 | 3,700,812 | 3,226,393 | 3,247,348 |
| Borrowings | 756,649 | 756,854 | 760,558 | 901,659 | 772,646 |
| Subordinated debt held by unconsolidated subsidiary trusts | 101,987 | 101,981 | 101,975 | 101,969 | 101,963 |
| Other liabilities | 63,299 | 56,536 | 66,556 | 53,423 | 52,178 |
| Total liabilities | 4,786,358 | 4,777,536 | 4,629,901 | 4,283,444 | 4,174,135 |
| Shareholders' equity | 550,629 | 547,197 | 544,651 | 483,075 | 483,648 |
| Total liabilities and shareholders' equity | $5,336,987 | $5,324,733 | $5,174,552 | $4,766,519 | $4,657,783 |
| Capital | | | | | |
| Tier 1 leverage ratio | 7.13% | 7.16% | 7.22% | 7.73% | 7.75% |
| Tangible equity / net tangible assets | 4.84% | 4.74% | 4.74% | 5.31% | 5.53% |
Diluted weighted average common shares O/S(4) | 32,767 | 32,818 | 32,710 | 30,254 | 30,257 |
| Period end common shares outstanding | 32,741 | 32,742 | 32,633 | 30,096 | 29,935 |
| Cash dividends declared per common share | $0.22 | $0.22 | $0.22 | $0.22 | $0.21 |
| Book value | $16.82 | $16.71 | $16.69 | $16.05 | $16.16 |
| Tangible book value | $7.43 | $7.27 | $7.06 | $7.99 | $8.16 |
| Common stock price (end of period) | $14.56 | $16.75 | $24.39 | $25.15 | $20.62 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr |
| Asset Quality | | | | | |
| Nonaccrual loans | $13,189 | $14,338 | $12,126 | $10,496 | $11,080 |
| Accruing loans 90+ days delinquent | 543 | 947 | 553 | 1,018 | 370 |
| Total nonperforming loans | 13,732 | 15,285 | 12,679 | 11,514 | 11,450 |
| Other real estate owned (OREO) | 1,687 | 1,383 | 1,059 | 837 | 637 |
| Total nonperforming assets | 15,419 | 16,668 | 13,738 | 12,351 | 12,087 |
| Net charge-offs | 1,738 | 2,332 | 2,390 | 1,700 | 870 |
| Loan loss allowance/loans outstanding | 1.30% | 1.29% | 1.26% | 1.25% | 1.27% |
| Nonperforming loans/loans outstanding | 0.44% | 0.49% | 0.40% | 0.38% | 0.39% |
| Loan loss allowance/nonperforming loans | 294% | 262% | 312% | 325% | 324% |
| Net charge-offs/average loans | 0.22% | 0.30% | 0.31% | 0.23% | 0.12% |
| Delinquent loans/ending loans | 1.46% | 1.33% | 1.43% | 1.26% | 1.13% |
| Loan loss provision/net charge-offs | 116% | 120% | 100% | 117% | 180% |
| Nonperforming assets/total assets | 0.29% | 0.31% | 0.27% | 0.26% | 0.26% |
(1) Cash earnings excludes the after-tax effect of amortization of intangible assets, goodwill impairment, and market value adjustment amortization on acquired loans and deposits. |
(2) Excludes gain (loss) on investment securities. |
(3) Excludes intangible amortization, acquisition expenses, special charges and gain (loss) on investment securities. |
(4) Diluted weighted average common shares outstanding and earnings per share calculations haves been restated, as necessary, to comply with the provisions of FSP EITF 03-6-1. |
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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.
