Community Bank System (CBU) 8-K Results of Operations and Financial Condition

Exhibit 99

	News Release For further information, please contact:
5790 Widewaters Parkway, DeWitt, N.Y. 13214	Scott A. Kingsley, EVP & Chief Financial Officer Office: (315) 445-3121

Community Bank System Reports

  Second Quarter 2016 Results

-  GAAP earnings of $25.9 million, or $0.58 per share

 - Generated 7% annualized quarterly loan growth

SYRACUSE, N.Y. — July 20, 2016 — Community Bank System, Inc. (NYSE: CBU) reported second quarter 2016 net income of $25.9 million, an increase of 8.5% compared with $23.8 million earned for the second quarter of 2015.  Diluted earnings per share totaled $0.58 for the second quarter of 2016, equivalent to the second quarter of last year.  Fully diluted shares outstanding increased 3.4 million shares from the second quarter of 2015, principally from shares issued in the fourth quarter of 2015 for the stock portion of consideration for the Oneida Financial acquisition.  2016 year-to-date net income of $50.3 million, or $1.13 per share, was 8.9% above the first six months of 2015's earnings of $46.1 million, or $1.12 per share.

"Our solid second quarter operating results were driven by meaningful loan growth, particularly in our business and auto lending portfolios, a continuation of exceptional credit quality, disciplined expense management, and continued improvement in our non-interest income generation," said President and Chief Executive Officer Mark E. Tryniski.  "A 7% annualized growth in loans in the second quarter has allowed us to report over $100 million in loan growth year-to-date, a very productive outcome in this challenging low interest rate environment."  Mr. Tryniski also commented, "As we celebrate our 150^th year anniversary in 2016, the strength of our company continues to be driven by the commitment of our employees.  Through their hard work and dedication, we continue to consistently deliver above-peer financial results.  We remain well positioned to provide the right products and services to our customers so that they may achieve their financial objectives as we continue to create value for our shareholders."

Total revenue for the second quarter of 2016 was $107.1 million, an increase of $16.1 million, or 17.7%, over the prior year quarter, and included the impact of the Oneida Financial transaction completed in the fourth quarter of last year.  The higher revenue was generated as a result of an 11.5% increase in average earning assets and continued acquired and organic growth in noninterest income, which more than offset a three basis-point reduction in net interest margin from the prior year quarter.  A combination of acquired and organic growth resulted in a $6.5 million, or 41.1% increase in wealth management, insurance, and employee benefit services revenues.  Deposit service fees increased 13.6% year-over-year, the result of increased card-related revenues and offset by modestly lower fees from account overdraft protection programs, including the additional activities from the Oneida transaction.  The quarterly provision for loan losses of $2.3 million was $1.7 million higher than the historically low second quarter of 2015, reflective of comparably higher levels of net charge-offs and portfolio growth.  Non-performing asset and delinquent loan ratios were generally stable.  Total operating expenses of $66.4 million for the quarter were $10.3 million, or 18.4% above the second quarter of 2015, and included the operating expenses of the Oneida Financial acquisition.  Certain statutory changes to state tax rates and structures along with a lower proportion of tax-exempt income resulted in a quarterly effective tax rate of 32.7% in the second quarter of 2016, compared to 30.5% in the second quarter of 2015, an outcome that resulted in a two cent per share headwind compared to the prior year.

Second quarter 2016 net interest income was $68.3 million, an increase of $7.1 million, or 11.6%, compared to the second quarter of 2015.  Modestly improved funding costs were offset by a five basis point decline in earning asset yields, which were driven by lower blended interest rates on loans and investment securities.  While average loan balances grew $654.6 million, or 15.5%, average loan yields declined five basis points year-over-year, resulting in a $6.7 million increase in quarterly loan interest income.  Investment interest income was $0.5 million higher than the second quarter of 2015 as average investment securities (including cash equivalents) increased by $136.7 million, and the yield declined ten basis points.  Interest expense was $0.2 million higher than the previous year's quarter, driven by a $950.7 million increase in average deposits and a $189.7 million decline in average borrowings, including the Oneida acquisition.

Wealth management, insurance and employee benefit services revenues increased $6.5 million, or 41.1%, to $22.2 million compared to second quarter 2015, principally from the acquired activities of Oneida Financial.  Revenues from mortgage banking and other services increased $0.8 million from the second quarter of 2015, and included nearly $0.4 million in non-recurring gains.

Second quarter 2016 operating expenses of $66.4 million increased $10.3 million over the second quarter of 2015, including the operating activities of Oneida Financial.  Salaries and employee benefits increased $6.9 million, or 22.4%, and included personnel added from the Oneida transaction as well as planned merit increases.  All other expenses increased 13.4% and reflected the occupancy, equipment and other operating costs of Oneida, including higher intangible amortization, compared to the second quarter of 2015.  The second quarter and year-to-date 2016 effective income tax rates of 32.7% and 32.6%, respectively, were higher than the 30.5% and 30.8%, respectively, in last year's comparable periods.  Second quarter 2016 operating expenses were $1.3 million lower than the first quarter of this year, and reflected seasonally expected reductions in certain payroll tax expenses and utility costs.  Both the first and second quarters of 2016 included 65 payroll days.

Financial Position

Average earning assets of $7.65 billion for the second quarter of 2016 were up $791.3 million from the second quarter of 2015, and were $42.2 million higher than the first quarter of 2016.  Compared to the prior year, total average earning asset balances included acquired and organic growth of $654.6 million in average loan balances, while average investment securities and interest-earning cash balances increased by $136.7 million.   Average deposit balances grew $950.7 million compared to the second quarter of 2015, and were $63.8 million higher than the first quarter of 2016.  Average borrowings in the second quarter of 2016 of $249.3 million, were $47.7 million, or 16.1%, lower than the first quarter of this year.

Ending loans at June 30, 2016 increased $641.2 million, or 15.0%, year-over-year, reflecting productive organic growth in almost every one of the Company's lending portfolios, and loans acquired in the Oneida Financial transaction.  Investment securities totaled $2.93 billion at June 30, 2016, a level consistent with the previous four quarter-ends.

Shareholders' equity of $1.24 billion at June 30, 2016 was $236.6 million, or 23.7%, higher than the prior year second quarter-end, from strong earnings generation and capital retention over the last four quarters as well as the issuance of 2.38 million shares of common stock, or $102.2 million, reflecting the equity portion of the consideration in the Oneida transaction.  The Company's net tangible equity to net tangible assets ratio was 9.58% at June 30, 2016, up from 8.63% at June 30, 2015.  The Company's Tier 1 leverage ratio stood at 10.14% at the end of the second quarter.

As previously announced, in December 2015 the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to 2.2 million shares of the Company's common stock during a twelve-month period starting January 1, 2016.  Such repurchases may be made at the discretion of the Company's senior management depending on market conditions and other relevant factors and will be acquired through open market or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange Act of 1934 and other applicable legal requirements.  No shares were repurchased under this authorization in the first half of 2016.

Asset Quality

The Company's asset quality metrics continue to be favorable relative to comparative peer and industry averages and illustrate the long-term effectiveness of the Company's disciplined risk management and underwriting standards.  Net charge-offs were $1.4 million for the second quarter, compared to a historically low $0.3 million for the second quarter of 2015 and $1.1 million for the first quarter of 2016.  Net charge-offs as an annualized percentage of average loans measured 0.11% in the second quarter of 2016, compared to 0.03% in the prior year second quarter and 0.10% in the first quarter of 2016.  Nonperforming loans as a percentage of total loans at June 30, 2016 were 0.49%, improved from 0.54% at both June 30, 2015 and March 31, 2016.  The total loan delinquency ratio of 1.10% at the end of the second quarter was up one basis point from the end of the second quarter of 2015.  The second quarter provision for loan losses of $2.3 million was $1.7 million higher than the second quarter of 2015, and $1.0 million higher than the first quarter of 2016, due primarily to comparably higher net charge-off levels than the previous year's second quarter, and solid organic loan growth.  The allowance for loan losses to nonperforming loans was 193% at June 30, 2016, compared with the 197% and 175% levels at the end of the second quarter of 2015 and the first quarter of 2016, respectively.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) tomorrow (Thursday, July 21st) to discuss second quarter results.  The conference call can be accessed at 888-461-2024 (1-719-325-2393 if outside United States and Canada) using the conference ID code 3525466.  Investors may also listen live via the Internet at: http://www.webcaster4.com/Webcast/Page/995/15903.

This earnings release, including supporting financial tables, is available within the press releases section of the Company's investor relations website at: http://ir.communitybanksystem.com.  An archived webcast of the earnings call will be available on this site for one full year.

Community Bank System, Inc. operates more than 200 customer facilities across Upstate New York and Northeastern Pennsylvania through its banking subsidiary, Community Bank, N.A. With assets of approximately $8.7 billion, the DeWitt, N.Y. headquartered company is among the country's 150 largest financial institutions. In addition to a full range of retail, business, and governmental banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its' Community Bank Wealth Management Group and OneGroup NY, Inc. operating subsidiaries.  The Company's Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.communitybankna.com or http://ir.communitybanksystem.com.

# # #

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.  These statements are based on the current beliefs and expectations of CBU's management and CBU does not assume any duty to update forward-looking statements.

Summary of Financial Data
(Dollars in thousands, except per share data)
	Quarter Ended				Year-to-Date
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Earnings
Loan income	$	52,509	$	45,791	$	104,159	$	91,382
Investment income		18,601		18,089		36,707		34,952
Total interest income		71,110		63,880		140,866		126,334
Interest expense		2,804		2,652		5,679		5,266
Net interest income		68,306		61,228		135,187		121,068
Provision for loan losses		2,305		591		3,646		1,214
Net interest income after provision for loan losses		66,001		60,637		131,541		119,854
Deposit service fees		15,008		13,213		28,742		25,683
Revenues from mortgage banking and other banking services		1,597		799		3,176		1,854
Wealth management and insurance services		10,496		4,385		21,453		8,831
Employee benefit services		11,671		11,322		23,682		22,397
Total noninterest income		38,772		29,719		77,053		58,765
Salaries and employee benefits		37,950		31,010		77,088		62,039
Occupancy and equipment		7,409		6,844		15,072		14,239
Amortization of intangible assets		1,403		880		2,845		1,799
Acquisition expenses		263		361		340		756
Other		19,331		16,953		38,680		33,163
Total operating expenses		66,356		56,048		134,025		111,996
Income before income taxes		38,417		34,308		74,569		66,623
Income taxes		12,560		10,468		24,309		20,486
Net income	$	25,857	$	23,840	$	50,260	$	46,137
Basic earnings per share	$	0.58	$	0.58	$	1.14	$	1.13
Diluted earnings per share	$	0.58	$	0.58	$	1.13	$	1.12

Summary of Financial Data
(Dollars in thousands, except per share data)
	2016						2015
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
Earnings
Loan income	$	52,509		$	51,650		$	49,321		$	47,040		$	45,791
Investment income		18,601			18,106			18,683			18,244			18,089
Total interest income		71,110			69,756			68,004			65,284			63,880
Interest expense		2,804			2,875			3,015			2,921			2,652
Net interest income		68,306			66,881			64,989			62,363			61,228
Provision for loan losses		2,305			1,341			3,327			1,906			591
Net interest income after provision for loan losses		66,001			65,540			61,662			60,457			60,637
Deposit service fees		15,008			13,734			13,605			13,459			13,213
Revenues from mortgage banking and other banking services		1,597			1,579			1,061			2,045			799
Wealth management and insurance services		10,496			10,957			6,825			4,552			4,385
Employee benefit services		11,671			12,011			11,661			11,330			11,322
Loss on sale of investments		0			0			(4	)		0			0
Total noninterest income		38,772			38,281			33,148			31,386			29,719
Salaries and employee benefits		37,950			39,138			33,138			31,179			31,010
Occupancy and equipment		7,409			7,663			6,702			6,652			6,844
Amortization of intangible assets		1,403			1,442			1,021			843			880
Acquisition expenses		263			77			5,719			562			361
Other		19,331			19,349			18,400			16,843			16,953
Total operating expenses		66,356			67,669			64,980			56,079			56,048
Income before income taxes		38,417			36,152			29,830			35,764			34,308
Income taxes		12,560			11,749			9,759			10,742			10,468
Net income		25,857			24,403			20,071			25,022			23,840
Basic earnings per share	$	0.58		$	0.55		$	0.48		$	0.61		$	0.58
Diluted earnings per share	$	0.58		$	0.55		$	0.47		$	0.60		$	0.58
Profitability
Return on assets		1.20	%		1.14	%		0.98	%		1.25	%		1.25	%
Return on equity		8.62	%		8.34	%		7.41	%		9.77	%		9.44	%
Return on tangible equity(3)		13.63	%		13.38	%		10.98	%		14.82	%		14.40	%
Noninterest income/operating income (FTE) (1)		35.3	%		35.5	%		32.8	%		32.4	%		31.6	%
Efficiency ratio (2)		59.0	%		61.4	%		57.6	%		56.4	%		58.3	%
Components of Net Interest Margin (FTE)
Loan yield		4.35	%		4.33	%		4.43	%		4.40	%		4.40	%
Cash equivalents yield		0.46	%		0.47	%		0.25	%		0.22	%		0.28	%
Investment yield		3.06	%		2.97	%		2.98	%		2.94	%		3.15	%
Earning asset yield		3.87	%		3.82	%		3.86	%		3.81	%		3.92	%
Interest-bearing deposit rate		0.14	%		0.14	%		0.14	%		0.14	%		0.15	%
Borrowing rate		1.50	%		1.33	%		0.83	%		0.72	%		0.84	%
Cost of all interest-bearing funds		0.20	%		0.20	%		0.22	%		0.21	%		0.20	%
Cost of funds (includes DDA)		0.15	%		0.16	%		0.17	%		0.17	%		0.16	%
Net interest margin (FTE)		3.73	%		3.67	%		3.70	%		3.65	%		3.76	%
Fully tax-equivalent adjustment	$	2,605		$	2,524		$	3,041		$	3,162		$	3,115

Summary of Financial Data
(Dollars in thousands, except per share data)
	2016						2015
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
Average Balances
Loans	$	4,866,574		$	4,812,575		$	4,459,575		$	4,287,062		$	4,211,962
Cash equivalents		19,456			22,355			12,448			12,395			11,325
Taxable investment securities		2,178,448			2,172,983			2,214,690			2,187,818			2,031,234
Nontaxable investment securities		588,897			603,297			614,891			635,627			607,585
Total interest-earning assets		7,653,375			7,611,210			7,301,604			7,122,902			6,862,106
Total assets		8,656,653			8,604,264			8,161,843			7,919,966			7,678,719
Interest-bearing deposits		5,517,287			5,458,273			4,943,210			4,739,513			4,777,195
Borrowings		249,263			296,964			607,771			675,958			438,931
Total interest-bearing liabilities		5,766,550			5,755,237			5,550,981			5,415,471			5,216,126
Noninterest-bearing deposits		1,532,322			1,527,585			1,405,416			1,363,022			1,321,738
Shareholders' equity		1,206,353			1,177,246			1,074,243			1,016,448			1,012,470
Balance Sheet Data
Cash and cash equivalents	$	161,634		$	138,513		$	153,210		$	156,836		$	143,047
Investment securities		2,931,302			2,902,878			2,847,940			2,917,263			2,868,050
Loans:
Consumer mortgage		1,779,295			1,777,792			1,769,754			1,621,862			1,608,064
Business lending		1,536,546			1,509,421			1,497,271			1,288,772			1,295,889
Consumer indirect		993,132			941,151			935,760			872,988			837,449
Home equity		399,870			403,273			403,514			345,446			340,578
Consumer direct		195,959			189,535			195,076			184,479			181,623
Total loans		4,904,802			4,821,172			4,801,375			4,313,547			4,263,603
Allowance for loan losses		46,526			45,596			45,401			45,588			45,282
Intangible assets, net		483,478			484,881			484,146			384,525			385,515
Other assets		307,421			314,053			311,399			270,583			293,838
Total assets		8,742,111			8,615,901			8,552,669			7,997,166			7,908,771
Deposits:
Noninterest-bearing		1,546,253			1,533,085			1,499,616			1,357,554			1,337,101
Non-maturity interest-bearing		4,664,635			4,808,650			4,569,310			4,081,796			4,020,192
Time		746,966			777,327			804,548			708,760			729,527
Total deposits		6,957,854			7,119,062			6,873,474			6,148,110			6,086,820
Borrowings		267,600			33,700			301,300			558,100			566,200
Subordinated debt held by unconsolidated subsidiary trusts		102,158			102,152			102,146			102,140			102,134
Accrued interest and other liabilities		177,570			160,322			135,102			143,790			153,278
Total liabilities		7,505,182			7,415,236			7,412,022			6,952,140			6,908,432
Shareholders' equity		1,236,929			1,200,665			1,140,647			1,045,026			1,000,339
Total liabilities and shareholders' equity		8,742,111			8,615,901			8,552,669			7,997,166			7,908,771
Capital
Tier 1 leverage ratio		10.14	%		9.95	%		10.32	%		10.09	%		10.20	%
Tangible equity/net tangible assets (3)		9.58	%		9.25	%		8.59	%		9.14	%		8.63	%
Diluted weighted average common shares O/S		44,636			44,356			42,373			41,470			41,265
Period end common shares outstanding		44,179			44,070			43,775			41,019			40,877
Cash dividends declared per common share	$	0.31		$	0.31		$	0.31		$	0.31		$	0.30
Book value	$	28.00		$	27.24		$	26.06		$	25.48		$	24.47
Tangible book value(3)	$	17.99		$	17.16		$	15.90		$	17.05		$	15.96
Common stock price (end of period)	$	41.09		$	38.21		$	39.94		$	37.17		$	37.77

Summary of Financial Data
(Dollars in thousands, except per share data)
	2016						2015
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
Asset Quality
Nonaccrual loans	$	22,149		$	23,765		$	21,728		$	23,133		$	21,440
Accruing loans 90+ days delinquent		1,910			2,327			2,195			2,075			1,558
Total nonperforming loans		24,059			26,092			23,923			25,208			22,998
Other real estate owned (OREO)		1,726			2,031			2,088			2,531			2,324
Total nonperforming assets		25,785			28,123			26,011			27,739			25,322
Net charge-offs		1,376			1,146			3,514			1,600			314
Allowance for loan losses/loans outstanding		0.95	%		0.95	%		0.95	%		1.06	%		1.06	%
Nonperforming loans/loans outstanding		0.49	%		0.54	%		0.50	%		0.58	%		0.54	%
Allowance for loan losses/nonperforming loans		193	%		175	%		190	%		181	%		197	%
Net charge-offs/average loans		0.11	%		0.10	%		0.31	%		0.15	%		0.03	%
Delinquent loans/ending loans		1.10	%		1.00	%		1.16	%		1.19	%		1.09	%
Loan loss provision/net charge-offs		168	%		117	%		95	%		119	%		188	%
Nonperforming assets/total assets		0.29	%		0.33	%		0.30	%		0.35	%		0.32	%
Asset Quality (excluding loans acquired since 1/1/09)
Nonaccrual loans	$	18,259		$	20,045		$	18,804		$	20,504		$	18,558
Accruing loans 90+ days delinquent		1,574			1,837			1,802			1,876			1,463
Total nonperforming loans		19,833			21,882			20,606			22,380			20,021
Other real estate owned (OREO)		1,258			1,497			1,546			1,720			1,518
Total nonperforming assets		21,091			23,379			22,152			24,100			21,539
Net charge-offs		1,404			898			3,420			1,473			425
Allowance for loan losses/loans outstanding		1.02	%		1.04	%		1.05	%		1.10	%		1.11	%
Nonperforming loans/loans outstanding		0.46	%		0.52	%		0.49	%		0.55	%		0.50	%
Allowance for loan losses/nonperforming loans		224	%		200	%		212	%		201	%		223	%
Net charge-offs/average loans		0.13	%		0.09	%		0.34	%		0.14	%		0.04	%
Delinquent loans/ending loans		1.08	%		1.00	%		1.19	%		1.14	%		1.04	%
Loan loss provision/net charge-offs		120	%		112	%		62	%		127	%		191	%
Nonperforming assets/total assets		0.26	%		0.29	%		0.28	%		0.31	%		0.28	%

⁽¹⁾ Excludes gains and losses on sales of investment securities and debt prepayments.

⁽²⁾ Excludes intangible amortization, acquisition expenses, litigation settlement charge, gains and losses on sales of investment

   securities and losses on debt extinguishments

⁽³⁾ Includes deferred tax liabilities (of approximately $41.5 million at 6/30/16) generated from tax deductible goodwill.

# # #

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.