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 Third Quarter Results and Declares Cash Dividend
SYRACUSE, N.Y. — October 22, 2009 — Community Bank System, Inc. (NYSE: CBU) reported quarterly net income of $12.5 million in the third quarter of 2009, an increase of 5.7% compared to the $11.8 million reported for the third quarter of 2008. Quarterly earnings per share of $0.38, were $0.01, or 2.6% below the $0.39 reported in the third quarter of last year. Year-to-date 2009 net earnings of $32.1 million, or $0.97 per share, were $1.9 million, or 5.6%, below reported earnings for the first nine months of 2008. 2009 results include an additional $6.0 million of FDIC-insurance related assessments, or $0.14 per share, in comparison to the first three quarters of 2008.
“Earnings per share for the quarter were $0.01 better than the third quarter of 2008 (excluding the FDIC’s additional deposit insurance assessments), driven by a 13% increase in net interest income, and a 16% expansion in banking non-interest income generation,” said President and Chief Executive Officer Mark E. Tryniski. “Core deposits grew at a 17% pace, and we continued to deliver loan and core deposit growth in Plattsburgh and the other northern New York markets that comprise the 18 branch banking centers that we acquired in November 2008. Our disciplined approach to business continues to produce solid operating results in challenging operating conditions.”
Third quarter net interest income grew to $41.9 million, an increase of 12.9% above third quarter 2008, driven by a 4.0% increase in average loans, partially offset by a four basis-point reduction in net interest margin to 3.78%. The Company’s lower margin was the result of our decision to remain in a very liquid position throughout the quarter including an average of $293 million of overnight cash equivalents, or 6.1% of interest earning assets, earning a yield of 27 basis points. Continued disciplined deposit pricing resulted in a 68-basis point reduction in the total cost of funds, compared to the third quarter of 2008, however this was offset by a 69-basis point decline in earning asset yields, including cash equivalents. On a linked quarter basis, the Company’s net interest margin improved five basis points, reflective of a 14-basis point reduction in cost of funds, partially offset by a nine basis point decline in earning asset yields.
Third quarter non-interest income (excluding securities gains/losses) increased $1.4 million, or 7.3% over the same period last year. Deposit service fees increased $2.0 million, with the majority of the growth derived from the branch acquisition. Mortgage banking revenues were consistent with the third quarter of 2008, but were significantly lower than those generated from the robust secondary market activities experienced in the first two quarters of this year. Third quarter other banking services revenues included $0.3 million of annual dividends from pooled credit life and disability insurance programs, which were $0.4 million below the same period in 2008. The Company’s employee benefits administration and consulting businesses posted a modest increase in revenue over the third quarter 2008, with new client gains tempered by negative year-over-year comparisons from asset-based revenues. Third quarter wealth management revenues decreased 12.7% from the third quarter of 2008, also reflective of continued difficult market comparisons and generally weak demand.
Community Bank System, Inc.
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Quarterly operating expenses (excluding acquisition expenses) of $44.1 million included an additional $1.0 million of FDIC-insurance assessments compared to the third quarter of 2008, or $0.02 per share. Excluding the higher assessments, operating expenses increased 10.0% over the third quarter of 2008, and primarily reflected the operating costs of 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 third quarter were $4.80 billion, up $27.3 million from the second quarter of 2009, and included a $22.8 million decline in loans primarily from continued principal amortization in the Company’s consumer mortgage and home equity portfolios, combined with its decision to again sell the majority of its longer-term, lower rate mortgage originations in the quarter. Business lending and consumer installment portfolio balances declined slightly from the end of the second quarter, reflective of relatively soft demand. Average investment securities increased $72.9 million in the quarter, while cash equivalents decreased $22.9 million, reflective of the Company’s ability to begin to productively deploy some of its excess liquidity. Total average deposits grew $18.4 million in the quarter, including the continuation of the desirable trend toward proportionately more core accounts, which increased $107.5 million from the second quarter. Compared to the third quarter 2008, average earning assets increased $554.4 million, comprised of organic and acquired loan growth of $119.0 million, and additional investment securities, including cash equivalents, of $435.4 million. Average deposits for the third quarter were $3.87 billion, an increase of $624.0 million from the third quarter of 2008, and reflected meaningful organic growth in core deposits in the first nine months of 2009, as well as the branch acquisition completed in the fourth quarter of 2008. Average borrowings for the quarter of $858.5 million were consistent with the second quarter of 2009, and down $67.9 million from the third quarter of 2008. Average shareholders’ equity for the quarter of $559.8 million was up $9.7 million from the second quarter, and was $72.5 million above the third 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 nine months of 2009 reflect our long-term commitment to a disciplined and balanced strategy for growth within our markets. Despite relatively soft market conditions, we have generated year-to-date annualized growth of 2.6% in our business lending portfolio, 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 1.54% remains significantly below the industry-wide ratio of nearly 8%. On a year-to-date basis, our consumer real estate originations are up 32% over 2008, reflecting the comparatively stable conditions prevalent in our primary markets.”
Asset Quality
Net charge-offs in the third quarter were $1.6 million, compared to $1.7 million in the second quarter of 2009, and $1.7 million in the third quarter of 2008. The third quarter net charge-off ratio of 0.21% was lower than the 0.22% reported in the second quarter of 2009, and 0.23% in last year’s third quarter.
Nonperforming loans as a percentage of total loans at September 30, 2009 were 0.57%, up from 0.44% at the end of the second quarter, and up 19 basis points from the very favorable 0.38% at the end of last year’s third quarter. The $4.0 million increase in nonperforming loans for the quarter includes one commercial relationship of $3.3 million which was more than 90 days past due at September 30, 2009. The total delinquency ratio of 1.51% was up five basis points from the end of the second quarter of 2009, and increased 25-basis points from September 2008, but remains favorable to long-term historical levels. Nonperforming assets to total assets increased six basis points to 0.35%, versus the 0.29% level reported at the end of the second quarter, and nine basis points above the very favorable 0.26% ratio reported a year ago. These generally stable, and better-than-peer asset quality metrics illustrate the continued effectiveness of the Company’s disciplined risk management and underwriting standards.
Community Bank System, Inc.
The current quarter’s provision for loan losses of $2.4 million was $0.4 million higher than both the second quarter of 2009 and the third quarter of 2008, reflecting a stable and still historically favorable level of net charge-offs. The ratio of loan loss allowance to total loans outstanding was 1.33% as of September 30, 2009, compared to 1.30% as of June 30, 2009, and 1.25% at the end of the third quarter of 2008.
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 are confident that we will continue to generate sufficient capital to respond to our business investment needs and the organic growth opportunities in our markets.”
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 on January 11, 2010, to shareholders of record as of December 15, 2009. The current cash dividend represents an annualized yield of 5.3% based on the closing share price of $16.47 on October 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.”
During the second quarter of 2009 the Company’s Board of Directors approved a share repurchase program for up to one million common shares lasting through December 31, 2011. The Company’s 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. There were no share repurchases in the third quarter.
Conference Call Scheduled
Company management will conduct an investor call tomorrow (October 23, 2009) at 11:00 a.m. (ET) to discuss third quarter results. The conference call can be accessed at 1-866-790-1863. An audio recording will be available one hour after the call until December 31, 2009, and may be accessed at 1-888-284-7564 (access code 2387991). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=62588.
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 $5.4 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 |
| | September 30, | September 30, |
| | 2009 | 2008 | 2009 | 2008 |
| Earnings | | | | |
| Loan income | $46,067 | $46,731 | $138,992 | $138,937 |
| Investment income | 15,821 | 15,083 | 47,950 | 47,098 |
| Total interest income | 61,888 | 61,814 | 186,942 | 186,035 |
| Interest expense | 20,036 | 24,741 | 64,390 | 77,924 |
| Net interest income | 41,852 | 37,073 | 122,552 | 108,111 |
| Provision for loan losses | 2,375 | 1,985 | 7,200 | 4,335 |
| Net interest income after provision for loan losses | 39,477 | 35,088 | 115,352 | 103,776 |
| Deposit service fees | 10,991 | 9,039 | 30,247 | 26,205 |
| Mortgage banking revenues | 226 | 203 | 3,202 | 598 |
| Other banking services | 669 | 976 | 1,536 | 1,720 |
| Trust, investment and asset management fees | 1,951 | 2,234 | 6,251 | 6,721 |
| Benefit plan administration, consulting and actuarial fees | 6,969 | 6,931 | 20,575 | 19,176 |
| Investment securities gains and (losses), net | 7 | 0 | 7 | 230 |
| Total noninterest income | 20,813 | 19,383 | 61,818 | 54,650 |
| Salaries and employee benefits | 23,166 | 21,114 | 69,188 | 61,272 |
| Professional fees | 1,366 | 1,096 | 3,903 | 3,294 |
| Occupancy and equipment and furniture | 5,533 | 5,304 | 17,458 | 16,066 |
| Amortization of intangible assets | 2,026 | 1,727 | 6,234 | 4,903 |
| FDIC insurance | 1,670 | 664 | 7,066 | 1,051 |
| Other | 10,350 | 9,313 | 31,838 | 27,956 |
| Acquisition expenses | 0 | 38 | 308 | 43 |
| Total operating expenses | 44,111 | 39,256 | 135,995 | 114,585 |
| Income before income taxes | 16,179 | 15,215 | 41,175 | 43,841 |
| Income taxes | 3,724 | 3,429 | 9,100 | 9,870 |
| Net income | $12,455 | $11,786 | $32,075 | $33,971 |
Basic earnings per share(3) | $0.38 | $0.39 | $0.98 | $1.14 |
Diluted earnings per share(3) | $0.38 | $0.39 | $0.97 | $1.13 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr |
| Earnings | | | | | |
| Loan income | $46,067 | $46,134 | $46,791 | $47,896 | $46,731 |
| Investment income | 15,821 | 15,821 | 16,308 | 16,928 | 15,083 |
| Total interest income | 61,888 | 61,955 | 63,099 | 64,824 | 61,814 |
| Interest expense | 20,036 | 21,441 | 22,913 | 24,428 | 24,741 |
| Net interest income | 41,852 | 40,514 | 40,186 | 40,396 | 37,073 |
| Provision for loan losses | 2,375 | 2,015 | 2,810 | 2,395 | 1,985 |
| Net interest income after provision for loan losses | 39,477 | 38,499 | 37,376 | 38,001 | 35,088 |
| Deposit service fees | 10,991 | 10,271 | 8,985 | 9,393 | 9,039 |
| Mortgage banking revenues | 226 | 958 | 2,018 | 169 | 203 |
| Other banking services | 669 | 554 | 313 | 723 | 976 |
| Trust, investment and asset management fees | 1,951 | 2,267 | 2,033 | 1,927 | 2,234 |
| Benefit plan administration, consulting and actuarial fees | 6,969 | 6,599 | 7,007 | 6,612 | 6,931 |
| Investment securities losses, net | 7 | 0 | 0 | 0 | 0 |
| Total noninterest income | 20,813 | 20,649 | 20,356 | 18,824 | 19,383 |
| Salaries and employee benefits | 23,166 | 23,154 | 22,868 | 21,690 | 21,114 |
| Professional fees | 1,366 | 1,253 | 1,284 | 1,270 | 1,095 |
| Occupancy and equipment and furniture | 5,533 | 5,704 | 6,221 | 5,190 | 5,304 |
| Amortization of intangible assets | 2,026 | 2,103 | 2,105 | 2,003 | 1,727 |
| FDIC insurance | 1,670 | 4,021 | 1,375 | 626 | 665 |
| Goodwill impairment | 0 | 0 | 0 | 1,745 | 0 |
| Other | 10,350 | 11,052 | 10,436 | 10,097 | 9,313 |
| Acquisition expenses | 0 | 196 | 112 | 1,356 | 38 |
| Total operating expenses | 44,111 | 47,483 | 44,401 | 43,977 | 39,256 |
| Income before income taxes | 16,179 | 11,665 | 13,331 | 12,848 | 15,215 |
| Income taxes | 3,724 | 2,510 | 2,866 | 879 | 3,429 |
| Net income | $12,455 | $9,155 | $10,465 | $11,969 | $11,786 |
Basic earnings per share(3) | $0.38 | $0.28 | $0.32 | $0.37 | $0.39 |
Diluted earnings per share(3) | $0.38 | $0.28 | $0.32 | $0.36 | $0.39 |
| Profitability | | | | | |
| Return on assets | 0.92% | 0.69% | 0.81% | 0.95% | 1.00% |
| Return on equity | 8.83% | 6.67% | 7.77% | 8.96% | 9.62% |
| Cash return on equity | 10.02% | 7.94% | 9.04% | 11.22% | 10.84% |
Noninterest income/operating income (FTE) (1) | 31.2% | 31.8% | 31.5% | 29.9% | 32.3% |
Efficiency ratio (2) | 63.2% | 65.6% | 65.3% | 64.4% | 62.4% |
| Components of Net Interest Margin (FTE) | | | | | |
| Loan yield | 5.94% | 5.97% | 6.06% | 6.20% | 6.29% |
| Cash equivalents yield | 0.27% | 0.26% | 0.25% | 0.66% | 2.18% |
| Investment yield | 5.41% | 5.75% | 5.82% | 5.87% | 5.78% |
| Earning asset yield | 5.44% | 5.53% | 5.79% | 6.00% | 6.13% |
| Interest-bearing deposit rate | 1.33% | 1.52% | 1.76% | 1.99% | 2.21% |
| Short-term borrowing rate | 4.29% | 4.29% | 4.19% | 3.73% | 3.87% |
| Long-term borrowing rate | 4.50% | 4.55% | 4.65% | 4.74% | 4.72% |
| Cost of all interest-bearing funds | 1.98% | 2.13% | 2.33% | 2.53% | 2.75% |
| Cost of funds (includes DDA) | 1.68% | 1.82% | 2.00% | 2.18% | 2.36% |
| Net interest margin (FTE) | 3.78% | 3.73% | 3.82% | 3.86% | 3.82% |
| Fully tax-equivalent adjustment | $3,941 | $3,865 | $4,025 | $3,803 | $3,645 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 3rd Qtr | | 1st Qtr | 4th Qtr | 3rdQtr |
| Average Balances | | | | | |
| Loans | $3,082,495 | $3,105,247 | $3,140,524 | $3,082,283 | $2,963,504 |
| Cash equivalents | 292,545 | 315,444 | 155,306 | 79,566 | 4,321 |
| Taxable investment securities | 864,478 | 793,909 | 842,496 | 853,306 | 766,581 |
| Nontaxable investment securities | 560,615 | 558,278 | 559,344 | 534,583 | 511,299 |
| Total interest-earning assets | 4,800,133 | 4,772,878 | 4,697,670 | 4,549,738 | 4,245,705 |
| Total assets | 5,349,762 | 5,313,274 | 5,235,252 | 5,035,398 | 4,712,423 |
| Interest-bearing deposits | 3,164,396 | 3,182,827 | 3,123,296 | 2,913,671 | 2,658,681 |
| Short-term borrowings | 593,385 | 593,533 | 477,184 | 478,875 | 477,139 |
| Long-term borrowings | 265,120 | 265,169 | 384,852 | 448,622 | 449,292 |
| Total interest-bearing liabilities | 4,022,901 | 4,041,529 | 3,985,332 | 3,841,168 | 3,585,112 |
| Noninterest-bearing deposits | 708,430 | 671,615 | 651,298 | 615,540 | 590,098 |
| Shareholders' equity | $559,762 | $550,103 | $546,132 | $531,627 | $487,249 |
| Balance Sheet Data | | | | | |
| Cash and cash equivalents | $361,734 | $474,372 | $350,670 | $213,753 | $103,595 |
| Investment securities | 1,497,826 | 1,335,358 | 1,417,966 | 1,395,011 | 1,283,776 |
| Loans: | | | | | |
| Consumer mortgage | 1,017,153 | 1,014,628 | 1,026,934 | 1,062,943 | 1,039,530 |
| Business lending | 1,068,456 | 1,078,500 | 1,078,593 | 1,058,846 | 1,028,400 |
| Consumer installment | 1,001,484 | 998,477 | 998,214 | 1,014,351 | 936,100 |
| Total loans | 3,087,093 | 3,091,605 | 3,103,741 | 3,136,140 | 3,004,030 |
| Allowance for loan losses | 41,072 | 40,330 | 40,053 | 39,575 | 37,413 |
| Intangible assets | 322,661 | 324,636 | 326,519 | 328,624 | 257,042 |
| Other assets | 149,853 | 151,346 | 165,890 | 140,599 | 155,489 |
| Total assets | 5,378,095 | 5,336,987 | 5,324,733 | 5,174,552 | 4,766,519 |
| Deposits | | | | | |
| Noninterest-bearing | 708,051 | 697,612 | 667,452 | 638,558 | 581,379 |
| Non-maturity interest-bearing | 1,925,666 | 1,828,586 | 1,774,906 | 1,636,348 | 1,356,402 |
| Time | 1,254,528 | 1,338,225 | 1,419,807 | 1,425,906 | 1,288,612 |
| Total deposits | 3,888,245 | 3,864,423 | 3,862,165 | 3,700,812 | 3,226,393 |
| Borrowings | 756,442 | 756,649 | 756,854 | 760,558 | 901,659 |
| Subordinated debt held by unconsolidated subsidiary trusts | 101,993 | 101,987 | 101,981 | 101,975 | 101,969 |
| Other liabilities | 65,515 | 63,299 | 56,536 | 66,556 | 53,423 |
| Total liabilities | 4,812,195 | 4,786,358 | 4,777,536 | 4,629,901 | 4,283,444 |
| Shareholders' equity | 565,900 | 550,629 | 547,197 | 544,651 | 483,075 |
| Total liabilities and shareholders' equity | 5,378,095 | 5,336,987 | 5,324,733 | 5,174,552 | 4,766,519 |
| Capital | | | | | |
| Tier 1 leverage ratio | 7.27% | 7.13% | 7.16% | 7.22% | 7.73% |
| Tangible equity / net tangible assets | 5.15% | 4.84% | 4.74% | 4.74% | 5.31% |
| Diluted weighted average common shares O/S | 32,998 | 32,945 | 32,971 | 32,833 | 30,376 |
| Period end common shares outstanding | 32,740 | 32,741 | 32,742 | 32,633 | 30,096 |
| Cash dividends declared per common share | $0.22 | $0.22 | $0.22 | $0.22 | $0.22 |
| Book value | $17.28 | $16.82 | $16.71 | $16.69 | $16.05 |
| Tangible book value | $7.99 | $7.43 | $7.27 | $7.06 | $7.99 |
| Common stock price (end of period) | $18.27 | $14.56 | $16.75 | $24.39 | $25.15 |
Community Bank System, Inc.
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| Summary of Financial Data | | | | | |
| (Dollars in thousands, except per share data) | | | | | |
| | 2009 | 2008 |
| | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr |
| Asset Quality | | | | | |
| Nonaccrual loans | $13,080 | $13,189 | $14,338 | $12,126 | $10,496 |
| Accruing loans 90+ days delinquent | 4,660 | 543 | 947 | 553 | 1,018 |
| Total nonperforming loans | 17,740 | 13,732 | 15,285 | 12,679 | 11,514 |
| Other real estate owned (OREO) | 1,309 | 1,687 | 1,383 | 1,059 | 837 |
| Total nonperforming assets | 19,049 | 15,419 | 16,668 | 13,738 | 12,351 |
| Net charge-offs | 1,633 | 1,738 | 2,332 | 2,390 | 1,700 |
| Loan loss allowance/loans outstanding | 1.33% | 1.30% | 1.29% | 1.26% | 1.25% |
| Nonperforming loans/loans outstanding | 0.57% | 0.44% | 0.49% | 0.40% | 0.38% |
| Loan loss allowance/nonperforming loans | 232% | 294% | 262% | 312% | 325% |
| Net charge-offs/average loans | 0.21% | 0.22% | 0.30% | 0.31% | 0.23% |
| Delinquent loans/ending loans | 1.51% | 1.46% | 1.33% | 1.43% | 1.26% |
| Loan loss provision/net charge-offs | 145% | 116% | 120% | 100% | 117% |
| Nonperforming assets/total assets | 0.35% | 0.29% | 0.31% | 0.27% | 0.26% |
(1) Excludes gain (loss) on investment securities. |
(2) Excludes intangible amortization, acquisition expenses, special charges and gain (loss) on investment securities. |
(3) 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.
