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

	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 REPORTS
HIGHER THIRD QUARTER REVENUE AND EARNINGS

                SYRACUSE, N.Y. — October 22, 2007 — Community Bank System, Inc. (NYSE: CBU) generated year-over-year and quarter-over-quarter increases in both net interest income and noninterest income during the third quarter of 2007, resulting in $11.0 million of net earnings or $0.37 per share. This marks the company’s highest EPS figure in the last eight quarters, representing a 2.8% increase over its year-ago level and an 8.8% climb over the prior quarter.

Year-to-date net income of $31.0 million was 2.7% greater than the $30.2 million generated during the first nine months of 2006. The $1.02 per share earned to date in 2007 is 2.0%, or $0.02 per share, greater than the first nine months of 2006, due principally to a 19% increase in noninterest income as well as a 78% reduction in the company’s provision for loan losses. Year-to-date cash earnings per share (which exclude the after-tax effect of intangible asset amortization and acquisition-related market value adjustments) were $1.16, a meaningful $0.14 per share, or 14%, above GAAP-reported results.

“Our company generated yet another solid quarter, continuing to steadily produce through fluctuating market conditions,” said President and Chief Executive Officer Mark E. Tryniski. “We continued our double-digit rate of growth for non-interest income with a 28% increase over the prior year’s quarter, and received balanced contributions again from both our banking and financial services revenue sources. We also achieved our first expansion in core net interest margin in the past seven quarters, and maintained our outstanding asset quality profile.”

CBU increased its noninterest income by $3.8 million, or 28%, over the third quarter of 2006, to $17.6 million — a quarterly record high for the company, excluding investment securities gains. Banking noninterest income rose $1.2 million, or 14.3%, while financial services revenues climbed $2.6 million, or 51.3%. Consistent with prior years, the third quarter’s banking-related revenues included nearly $0.8 million of annual dividends from the creditor life and disability programs in which the company participates. The increase in banking services came mainly from new and expanded account relationships and growing debit card-related revenues. The increase in financial services revenues is from both acquired and organic growth, and includes a full quarter contribution of the Hand Benefits & Trust transaction completed in May. The company’s noninterest-income-to-operating-income ratio during the quarter was 31.7%, nearly three percentage points higher than the previous quarter and 5% higher than the year-ago quarter.

Net interest income was $34.3 million, 2.8% above the second quarter of 2007 and 1.4% over the third quarter of 2006. Reported quarterly net interest margin was 3.56%, versus 3.64% in the prior quarter and 3.87% a year ago. However, excluding a $200-million short-term investment leverage strategy put into place during the quarter, the company’s net margin would have increased five basis points over the prior quarter to 3.69%. This strategy not only produced positive net interest income, but it also served to demonstrate the company’s ability to freely access liquidity sources despite tightened credit market conditions.

CBU increased total loans by $24.7 million over the prior quarter to $2.8 billion. This was comprised of very strong performances in consumer mortgages (increased $21.1 million) and in consumer installment lending (increased $20.1 million), partially offset by a $16.5 million decline in business lending. Year-to-date, total loans are up $90.4 million, including acquisitions, with increases across all three major portfolio categories. The reduction in business lending outstandings during the quarter was impacted by several unscheduled payoffs and line reductions related to ownership changes and other capital-raising initiatives.

Mr. Tryniski added, “We continue to perform well within the consumer lending lines, producing annualized growth rates of 9-10% across these portfolios during the quarter. We also remain free of exposure to the well-publicized mortgage lending crisis that has affected many of the nation’s largest urban markets, as we have no subprime or other higher-risk mortgage products within our real estate or investment portfolios. And while our commercial lending portfolio was down slightly versus the second quarter, our overall credit profile in the portfolio improved. In addition, during this period of modest asset growth within our industry, we are taking the opportunity to strengthen our commercial services’ delivery process and commit additional resources to this important line of business.”

Average total deposit balances for the quarter increased $44.0 million from the second quarter of 2007, with increases generated from core checking, money market, and savings accounts, partially offset by a decrease in time deposits, including seasonal declines in public funds.

Total operating expenses increased $2.6 million versus the previous quarter, reflecting the two acquisitions completed in the second quarter. Year-to-date operating expenses increased $10.3 million over the first nine months of 2006, again due mainly to increased personnel and other recurring operating expenses resulting from the four acquisitions completed since August 2006, along with strategic increases in business development and marketing costs.

The effective income tax rate was 24.3% during the quarter and 24.5% for the first nine months of 2007, consistent with prior year rates.

Asset Quality

The company’s asset quality metrics remained excellent, with non-performing loan and charge-off ratios remaining at the historically low levels achieved in recent quarters.

The provision for loan losses of $0.5 million was $96,000 higher than the second quarter of 2007, reflecting a slightly higher level of charge-offs. Year-to-date, the provision for loan losses was $4.1 million lower than the 2006 year-to-date provision, reflective of the company’s lowest level of charge-offs and nonperforming loans in over four years.

Net charge-offs in the third quarter were $0.75 million, which was $0.6 million below the average quarterly net charge-offs during the previous eight quarters. The net charge-off ratio of 0.11% was 11 basis points below the average net charge-off ratio for the previous eight quarters. Net charge-offs were $1.7 million for the nine months ended September 30, 2007, a decrease of $2.9 million from the same period last year. The year-to-date net charge-off ratio was 0.09%, compared to 0.25% for the comparable 2006 period.

Nonperforming loans as a percentage of total loans were down 0.02% from the end of June 2007 to 0.34%. This was significantly better than the already favorable average of 0.49% generated over the prior eight quarters. The delinquency ratio increased slightly to 1.10%, up from 0.95% at June 30, 2007, but down from the 1.22% level reported at September 30, 2006. Nonperforming assets to total assets improved to 0.22%, from the already low 0.25% level of the previous quarter, and 0.32% one year ago. These excellent asset quality metrics illustrate the continued effectiveness of the company’s disciplined risk management and underwriting standards.

Dividend Increase

During the quarter CBU’s Board of Directors declared a 5.0% increase in its quarterly cash dividend to $0.21 per share of common stock. Mr. Tryniski commented, “We were very pleased to provide shareholders with our 13th dividend increase in the last 14 years, representing an annualized yield of 4.7% based on last Friday’s closing share price of $18.01. We are equally pleased to remain a member of Mergent, Inc.’s ‘Dividend Achievers Index,’ as one of only 326 companies which have raised their annual dividend for at least 10 consecutive years, out of more than 10,000 U.S. publicly traded companies. This underscores our commitment to steady, long-term shareholder returns, as well as our ability to consistently generate meaningful results, regardless of the economic or industry-specific operating environment.”

Stock Repurchases

During the third quarter of 2007 the company purchased 233,000 common shares, at an aggregate cost of approximately $4.26 million, under the previously announced share repurchase programs authorized in December 2006. At September 30, 2007, there were 1.02 million remaining shares available for repurchase under these programs.

Other Initiatives

The company remains pleased with the integration progress of its most recent acquisitions, as both Tupper Lake National Bank and Hand Benefit & Trust have begun to productively contribute to its bottom-line results. In addition, the company is actively pursuing additional investments in both of these business lines in order to capitalize on available growth opportunities.

Conference Call Scheduled

A conference call will be held with company management at 11:00 a.m. (ET) on Tuesday, October 23, 2007, to discuss the above results at 1-866-709-4186. An audio recording will be available one hour after the call until December 31, 2007, and may be accessed at 1-888-284-7564 (access code 221739). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=42527.

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 $4.8 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, and Houston; the CBNA Insurance Agency, with offices in Tupper Lake and Plattsburgh, N.Y.; 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, Fla. For more information, visit: www.communitybankna.com or www.firstlibertybank.com.

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Summary of Financial Data
(Dollars in thousands, expect per share data)

	Quarter Ended September 30,					Year-to-Date September 30,
	2007			2006		2007			2006
Earnings
Loan income	$	47,821		$	43,482	$	138,846		$	121,570
Investment Income		17,785			15,679		51,574			48,731
Total interest income		65,606			59,161		190,420			170,301
Interest Expense		31,326			25,369		89,435			69,215
Net interest income		34,280			33,792		100,985			101,086
Provision for loan losses		510			1,300		1,124			5,175
Net interest income after provision for loan losses		33,770			32,492		99,861			95,911
Deposit service fees		8,382			7,329		23,184			21,001
Other banking services		1,512			1,329		2,607			2,166
Trust, investment and asset management fees		2,185			1,815		6,054			5,631
Benefit plan administration, consulting and actuarial fees		5,509			3,271		14,248			9,807
Debt extinguishment charges and investment securities     losses, net		(16	)		0		(24	)		0
Total noninterest income		17,572			13,744		46,069			38,605
Salaries and employee benefits		19,086			16,741		55,652			49,948
Professional fees		1,365			1,119		3,604			3,510
Occupancy and equipment and furniture		4,883			4,346		14,089			13,553
Amortization of intangible assets		1,629			1,520		4,725			4,502
Other		9,703			7,960		26,023			22,815
Special charges/acquisition expenses		99			154		723			155
Total operating expenses		36,765			31,840		104,816			94,483
Income before income taxes		14,577			14,396		41,114			40,033
Income taxes		3,548			3,517		10,070			9,808
Net income	$	11,029		$	10,879	$	31,044		$	30,225
Basic earnings per share	$	0.37		$	0.36	$	1.04		$	1.01
Diluted earnings per share	$	0.37		$	0.36	$	1.02		$	1.00
Diluted earnings per share-cash (1)	$	0.41		$	0.40	$	1.16		$	1.13

Summary of Financial Data
(Dollars in thousands, expect per share data)

	2007									2006
	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
Earnings
Loan income	$	47,821		$	46,090		$	44,935		$	45,543		$	43,482
Investment Income		17,785			17,166			16,623			16,057			15,679
Total interest income		65,606			63,256			61,558			61,600			59,161
Interest Expense		31,326			29,918			28,191			27,877			25,369
Net interest income		34,280			33,338			33,367			33,723			33,792
Provision for loan losses		510			414			200			1,410			1,300
Net interest income after provision for loan losses		33,770			32,924			33,167			32,313			32,492
Deposit service fees		8,382			7,825			6,977			7,347			7,329
Other banking services		1,512			425			670			564			1,329
Trust, investment and asset management fees		2,185			2,009			1,860			1,765			1,815
Benefit plan administration, consulting and actuarial fees		5,509			4,767			3,972			3,398			3,271
Debt extinguishment charges and investment securities losses, net		(16	)		(8	)		0			(2,403	)		0
Total noninterest income		17,572			15,018			13,479			10,671			13,744
Salaries and employee benefits		19,086			18,280			18,286			17,155			16,741
Professional fees		1,365			1,054			1,185			1,083			1,119
Occupancy and equipment and furniture		4,883			4,557			4,649			4,331			4,346
Amortization of intangible assets		1,629			1,581			1,515			1,525			1,520
Other		9,703			8,495			7,825			8,134			7,960
Special charges/acquisition expenses		99			165			459			492			154
Total operating expenses		36,765			34,132			33,919			32,720			31,840
Income before income taxes		14,577			13,810			12,727			10,264			14,396
Income taxes		3,548			3,451			3,071			2,112			3,517
Net income	$	11,029		$	10,359		$	9,656		$	8,152		$	10,879
Basic earnings per share	$	0.37		$	0.34		$	0.32		$	0.27		$	0.36
Diluted earnings per share	$	0.37		$	0.34		$	0.32		$	0.27		$	0.36
Diluted earnings per share-cash (1)	$	0.41		$	0.39		$	0.36		$	0.31		$	0.40
Profitability
Return on assets		0.94	%		0.92	%		0.88	%		0.73	%		1.01	%
Return on equity		9.47	%		8.92	%		8.43	%		6.89	%		9.44	%
Noninterest income/operating income (FTE) (2)		31.7	%		28.9	%		26.6	%		25.9	%		26.8	%
Efficiency ratio (3)		63.1	%		62.2	%		63.1	%		60.8	%		58.8	%
Components of Net Interest Margin (FTE)
Loan yield		6.86	%		6.84	%		6.81	%		6.80	%		6.77	%
Investment yield		5.82	%		6.06	%		6.11	%		5.96	%		5.94	%
Earning asset yield		6.50	%		6.58	%		6.58	%		6.52	%		6.49	%
Interest-bearing deposit rate		2.94	%		2.96	%		2.80	%		2.70	%		2.55	%
Short-term borrowing rate		4.07	%		4.20	%		4.16	%		3.91	%		4.21	%
Long-term borrowing rate		5.83	%		5.58	%		5.57	%		5.80	%		5.70	%
Cost of all interest-bearing funds		3.47	%		3.47	%		3.37	%		3.32	%		3.15	%
Cost of funds (includes DDA)		2.99	%		2.99	%		2.90	%		2.84	%		2.68	%
Net interest margin (FTE)		3.56	%		3.64	%		3.74	%		3.74	%		3.87	%
Fully tax-equivalent adjustment	$	3,645		$	3,722		$	3,796		$	3,743		$	3,764

Summary of Financial Data
(Dollars in thousands, expect per share data)

	2007									2006
	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
Average Balances
Loans	$	2,775,337		$	2,712,021		$	2,684,566		$	2,668,442		$	2,558,137
Taxable investment securities		971,340			885,164			843,857			797,541			776,028
Nontaxable investment securities		477,369			485,922			500,273			508,467			512,721
Total interest-earning assets		4,224,046			4,083,107			4,028,696			3,974,450			3,846,886
Total assets		4,679,318			4,536,348			4,469,244			4,423,468			4,272,052
Interest-bearing deposits		2,735,349			2,718,135			2,622,472			2,576,041			2,540,150
Short-term borrowings		307,090			154,799			159,444			160,262			125,013
Long-term borrowings		536,859			589,686			613,624			599,121			534,811
Total interest-bearing liabilities		3,579,298			3,462,620			3,395,540			3,335,424			3,199,974
Noninterest-bearing deposits		583,946			557,195			552,087			558,439			557,398
Shareholders’ equity	$	462,172		$	465,652		$	464,623		$	469,127		$	456,996
Balance Sheet Data
Cash and cash equivalents	$	205,224		$	242,410		$	224,917		$	232,032		$	119,430
Investment securities		1,433,930			1,219,360			1,317,554			1,229,271			1,250,251
Loans:
Consumer mortgage		969,567			948,430			914,909			912,505			890,939
Business lending		972,394			988,886			957,853			960,034			953,808
Consumer installment		849,949			829,860			809,472			829,019			816,815
Total loans		2,791,910			2,767,176			2,682,234			2,701,558			2,661,562
Allowance for loan losses		36,447			36,690			35,891			36,313			35,517
Intangible assets		256,766			258,110			244,598			246,136			239,635
Other assets		141,484			132,783			125,476			125,113			137,099
Total assets		4,792,867			4,583,149			4,558,888			4,497,797			4,372,460
Deposits		3,304,604			3,364,577			3,278,468			3,168,299			3,138,774
Borrowings		821,343			577,134			626,765			647,481			628,412
Subordinated debt held by unconsolidated    subsidiary trusts		127,123			127,111			127,099			158,014			80,545
Other liabilities		71,455			54,703			59,659			62,475			60,130
Total liabilities		4,324,525			4,123,525			4,091,991			4,036,269			3,907,861
Shareholders’ equity		468,342			459,624			466,897			461,528			464,599
Total liabilities and shareholders’ equity		4,792,867			4,583,149			4,558,888			4,497,797			4,372,460
Assets under management or administration	$	4,708,901		$	4,518,642		$	3,296,238		$	3,153,576		$	2,944,725
Capital
Tier 1 leverage ratio		7.67	%		7.90	%		8.29	%		8.81	%		7.26	%
Tangible equity / tangible assets		4.66	%		4.66	%		5.15	%		5.07	%		5.44	%
Accumulated other comprehensive income		(4,444	)		(11,610	)		(3,994	)		(4,697	)		3,798
Diluted weighted average common    shares O/S		30,078			30,396			30,547			30,454			30,334
Period end common shares outstanding		29,672			29,873			30,096			30,020			29,867
Cash dividends declared per common share	$	0.21		$	0.20		$	0.20		$	0.20		$	0.20
Book value		15.78			15.39			15.51			15.37			15.56
Tangible book value		7.13			6.75			7.39			7.17			7.53
Common stock price (end of period)		19.52			20.02			20.92			23.00			22.16

Summary of Financial Data
(Dollars in thousands, expect per share data)

	2007										2006
		3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
Asset Quality
Nonaccrual loans		$	8,932		$	9,191		$	10,697		$	11,382		$	11,414
Accruing loans 90+ days delinquent			451			779			1,914			1,207			1,133
Total nonperforming loans			9,383			9,970			12,611			12,589			12,547
Other real estate owned (OREO)			1,097			1,411			1,916			1,838			1,320
Total nonperforming assets			10,480			11,381			14,527			14,427			13,867
Net charge-offs			753			362			622			1,400			1,115
Loan loss allowance/loans outstanding			1.31	%		1.33	%		1.34	%		1.34	%		1.33	%
Nonperforming loans/loans outstanding			0.34	%		0.36	%		0.47	%		0.47	%		0.47	%
Loan loss allowance/nonperforming loans			388	%		368	%		285	%		288	%		283	%
Net charge-offs/average loans			0.11	%		0.05	%		0.09	%		0.21	%		0.17	%
Delinquent loans/ending loans			1.10	%		0.95	%		1.02	%		1.33	%		1.22	%
Loan loss provision/net charge-offs			68	%		114	%		32	%		101	%		117	%
Nonperforming assets/total assets			0.22	%		0.25	%		0.32	%		0.32	%		0.32	%

⁽¹⁾ Excludes the after-tax effect of amortization of intangible assets and market value adjustment amortization on acquired loans and deposits.

⁽²⁾ Excludes gain (loss) on investment securities & debt extinguishment.

⁽³⁾ Excludes intangible amortization, acquisition expenses/special charges and 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.