Exhibit 99
[LOGO] 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
Fax: (315) 445-7347
COMMUNITY BANK SYSTEM GENERATES RECORD QUARTERLY EARNINGS
INCREASES THIRD QUARTER NET INCOME 21% YEAR OVER YEAR
Syracuse, N.Y. - October 25, 2004 - Community Bank System, Inc. (NYSE:
CBU) generated a 21.4% increase in net income for the third quarter of 2004 as
compared to the third quarter of 2003. Earnings of $37.5 million for the nine
months ended September 30, 2004 were up 18.4% over the corresponding period of
2003. The increase resulted primarily from organic and acquired growth in
earning asset levels and improved asset quality, despite a lower net interest
margin.
Earnings Per Share - GAAP Basis. Diluted earnings per share measured in
accordance with generally accepted accounting principles ("GAAP") for the third
quarter of 2004 were $0.45, up 2.3% from the third quarter of 2003 and up 12.5%
over the second quarter of 2004. Diluted earnings per share for the nine months
ended September 30, 2004 of $1.23 improved 3.4% over the same period in 2003.
Earnings Per Share - Operating Basis. In addition to the earnings results
presented above in accordance with GAAP, the company provides earnings results
on a non-GAAP, or operating basis, as well. Operating earnings exclude the
effects of certain items the company considers to be non-operating, including
acquisition expenses, and net gains and losses from securities and debt
prepayment transactions. Diluted operating earnings per share of $0.45 and $0.44
for the third quarters of 2004 and 2003, respectively, were identical to GAAP
earnings. Diluted operating earnings per share for the nine months ended
September 30, 2004 were $1.25, up 5.0% from $1.19 for the same 2003 period. A
reconciliation of GAAP to operating-based earnings is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
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(000's omitted) 2004 2003 2004 2003
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Net income $14,234 $ 11,729 $ 37,530 $ 31,710
After-tax operating adjustments:
Net securities gains 0 (2) (89) (2)
Debt prepayment costs 0 0 0 27
Acquisition expenses 32 101 879 104
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Net income - operating $14,266 $ 11,828 $ 38,320 $ 31,839
===================== =======================
Sanford A. Belden, President and Chief Executive Officer, stated, "We are
pleased with our third quarter operating performance, particularly our strong
consumer mortgage and installment loan growth, continued favorable asset quality
results, and the robust performance of our financial services businesses. In
addition, during the quarter, we were selected for inclusion in the S&P SmallCap
600, and were able to reward shareholders with a 12.5% dividend increase. We
also completed certain key senior management appointments."
Net interest income was $39.1 million during the quarter, up 20.0% over the
prior year's third quarter of $32.5 million. This was mainly due to an $869.0
million increase in average earning assets driven by acquisitions, organic loan
growth, and securities purchases. Third quarter net interest margin of 4.35%
compares to 4.63% for the third quarter of 2003, and 4.49% for the second
quarter of 2004. Net interest margin for the nine months ended September 30,
2004 of 4.50% declined from 4.72% in the same period of 2003. Earning asset
yields were down 59 basis points year-to-date versus 2003, while cost of funds
fell 36 basis points over the same time frame, resulting in net margin
compression.
Loan loss provision for the quarter of $2.3 million was equal to the second
quarter of 2004, and up just $0.3 million over the third quarter of 2003,
despite a $482.7 million increase in average loans. Net charge-off, delinquency,
and non-performing loan ratios all showed improvement over 2003's third quarter.
Provision for the nine months ended September 30, 2004 of $6.7 million was 17.9%
below the $8.1 million recorded in the first nine months of 2003, reflecting the
favorable asset quality trends.
Non-interest income (excluding gain/loss on security and debt transactions)
increased $2.4 million, to $12.2 million this quarter, from $9.8 million in the
same quarter last year during which a $0.8 million impairment loss was recorded
in secondary market mortgage activities. CBU's banking and financial services
businesses both experienced acquired and organic growth for the third quarter
and year-to-date.
Operating expenses (excluding acquisition expenses) increased from $25.0 million
in the third quarter 2003 to $29.9 million in the current quarter, principally
due to the additional day-to-day operating expenses from the four acquisitions
completed over the past year. The efficiency ratio (excluding intangible
amortization and gain/loss on security and debt transactions) improved to 50.7%
for the third quarter 2004, and stood at 52.7% through September 30, 2004,
compared to 53.0% for the first nine months of 2003.
The company's year-to-date effective income tax rate of 24.9% is up slightly
from 24.8% through June 30, 2004, and compares to 24.0% in the same period in
2003, due principally to a lower proportion of tax-exempt income.
Financial Position
Earning assets of $3.9 billion at the end of the third quarter were up $12.5
million over the second quarter 2004, reflecting $27.0 million of organic loan
growth, offset by $14.5 million of net investment purchases and maturities.
Deposits declined $15.9 million, and borrowings were up $38.3 million during
this same time.
Asset Quality
As of September 30, 2004, compared to a year ago, CBU has been able to improve
its charge-off ratio from 0.53% to 0.29%, the non-performing loan ratio from
0.70% to 0.68%, and its delinquency ratio to 1.47% from 1.64%. The ratio of
allowance for loan losses to total loans at the end of the quarter was 1.37%,
consistent with the level reported since the fourth quarter of 2003. The
improved asset quality profile is the result of the company's enhanced credit
risk management programs and continued emphasis on disciplined underwriting
standards, as well as more stable economic conditions.
Stock Repurchase
During the third quarter of 2004 the company purchased 280,713 common shares, at
an aggregate cost of $6.3 million, and an average price per share of $22.62,
completing the previously announced 1.4 million-share repurchase program.
S&P Small Cap Inclusion
Effective August 31, 2004, the company was formally added to the Standard &
Poor's (S&P) SmallCap 600 Index, as well as S&P's GICS Regional Banks
Sub-industry index.
"This is a tremendous honor for Community Bank System," Mr. Belden commented.
"The S&P SmallCap 600 is one of the most widely respected of the small cap
indices, and to be selected speaks highly of the strength and consistency of our
performance over the long term. Our addition to this index should further
augment our institutional shareholder base, providing CBU with an even broader
base of shareholders who, in general, are focused on the longer-term. This
typically adds greater stability to a company's stock price."
Dividend Increase
In August, the company's Board of Directors declared a 12.5% increase in the
quarterly cash dividend on its common stock to $0.18 per share. This represented
the company's fifth dividend increase in six years and, as of September 30,
reflected an annualized dividend yield of 2.9%.
Dansville Branch Acquisition
Also in August, the company announced a definitive agreement to purchase a
branch office in Dansville, N.Y. from HSBC Bank USA, N.A., subject to regulatory
approval. Upon completion of the purchase, expected in early December 2004, CBU
will close its current Dansville branch and consolidate all customer service
activities into the larger HSBC office.
Senior Management Appointments
In September, the company announced the appointment of several key executives.
Brian Donahue, previously Chief Credit Officer, was promoted to the newly
created position of Chief Banking Officer with responsibility for all banking
business in New York and Pennsylvania. Timothy Baker, previously Senior
Operations Officer, became Director of Special Projects with responsibility to
manage acquisitions and the implementation of special projects. Michael Wilson,
previously Manager of Information Technology, was appointed to the newly created
position of Chief Technology Officer with leadership responsibilities for
technology across all lines of business. All three executives will report to
Mark Tryniski, Chief Operating Officer.
J. David Clark, previously Senior Lender in the company's Southern Region of New
York, succeeded Mr. Donahue as Chief Credit Officer and will report directly to
him. Also reporting to Mr. Donahue are Earl Withers, in his new capacity as
Director of Operations with responsibility for all areas of banking operations,
and James Wears and Thomas McCullough as Presidents of New York and Pennsylvania
banking, respectively.
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Monday, October 25, to discuss the above results at 1-866-453-5550 (access code
9816675). An audio recording will be available one hour after the call until
December 31, 2004, and may be accessed at 1-866-453-6660 (access code 152135).
Investors may also listen to the call live via the Internet at:
http://phx.corporate-ir.net/playerlink.zhtml?c=95653&s=wm&e=915486
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: www.communitybankna.com.
Community Bank System, Inc. (NYSE: CBU) is a registered bank holding company
based in DeWitt, N.Y. CBU's wholly-owned banking subsidiary has $4.4 billion in
assets and 130 customer facilities across Upstate New York, where it operates as
Community Bank, N.A., and Northeastern Pennsylvania, where it operates as First
Liberty Bank & Trust. For further information please visit our websites at:
www.communitybankna.com or www.firstlibertybank.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. CBU
does not assume any duty to update forward-looking statements.
Summary of Financial Data
(Dollars in thousands, except per share data)
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Quarter Ended Year to Date
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September 30, September 30, September 30, September 30,
Earnings 2004 2003 2004 2003
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Interest income $55,223 $ 46,676 $157,280 $ 141,966
Interest expense 16,166 14,137 44,812 44,841
Net interest income 39,057 32,539 112,468 97,125
Loan loss provision 2,300 2,029 6,650 8,102
Net interest income after provision for loan losses 36,757 30,510 105,818 89,023
Deposit service fees 6,756 6,080 18,713 17,025
Other banking services 1,135 (37) 2,059 1,307
Trust, investment and asset management fees 1,935 1,747 5,699 4,954
Benefit plan administration, consulting and actuarial fees 2,338 1,986 6,997 4,289
Non-interest income before security gains & debt ext. 12,164 9,776 33,468 27,575
Security gains & debt ext. 0 3 145 (42)
Total non-interest income 12,164 9,779 33,613 27,533
Salaries and employee benefits 15,638 13,225 46,197 38,243
Occupancy and equipment and furniture 4,713 4,140 14,145 12,770
Intangible amortization 2,003 1,269 5,401 3,801
Other 7,519 6,407 22,280 19,848
Total recurring operating expenses 29,873 25,041 88,023 74,662
Acquisition expenses 53 165 1,434 170
Total operating expenses 29,926 25,206 89,457 74,832
Income before tax 18,995 15,083 49,974 41,724
Income tax 4,761 3,354 12,444 10,014
Net income $14,234 $ 11,729 $ 37,530 $ 31,710
Basic earnings per share $ 0.47 $ 0.45 $ 1.27 $ 1.22
Diluted earnings per share $ 0.45 $ 0.44 $ 1.23 $ 1.19
Diluted earnings per share - operating (1) $ 0.45 $ 0.44 $ 1.25 $ 1.19
Summary of Financial Data
(Dollars in thousands, except per share data)
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2004 2003
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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Earnings
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Interest income $55,223 $52,136 $49,921 $ 49,163 $ 46,676
Interest expense 16,166 14,679 13,967 14,460 14,137
Net interest income 39,057 37,457 35,954 34,703 32,539
Provision for loan losses 2,300 2,300 2,050 3,093 2,029
Net interest income after provision for loan losses 36,757 35,157 33,904 31,610 30,510
Deposit service fees 6,756 6,181 5,777 6,097 6,080
Other banking services 1,135 266 657 598 (37)
Trust, investment and asset management fees 1,935 2,062 1,702 1,728 1,747
Benefit plan administration, consulting and actuarial fees 2,338 2,275 2,384 1,931 1,986
Non-interest income before security gains & debt ext. 12,164 10,784 10,520 10,354 9,776
Security gains & debt ext. 0 135 10 (2,656) 3
Total non-interest income 12,164 10,919 10,530 7,698 9,779
Salaries and employee benefits 15,638 15,392 15,167 14,921 13,225
Occupancy and equipment and furniture 4,713 4,650 4,782 4,355 4,140
Amortization of intangible assets 2,003 1,759 1,639 1,292 1,269
Other 7,519 7,563 7,198 6,983 6,407
Total recurring operating expenses 29,873 29,364 28,786 27,551 25,041
Acquisition expenses 53 411 970 328 165
Total operating expenses 29,926 29,775 29,756 27,879 25,206
Income before income taxes 18,995 16,301 14,678 11,429 15,083
Income taxes 4,761 4,160 3,523 2,759 3,354
Net income $14,234 $12,141 $11,155 $ 8,670 $ 11,729
Basic earnings per share $ 0.47 $ 0.41 $ 0.39 $ 0.32 $ 0.45
Diluted earnings per share $ 0.45 $ 0.40 $ 0.38 $ 0.31 $ 0.44
Diluted earnings per share - operating (1) $ 0.45 $ 0.40 $ 0.40 $ 0.37 $ 0.44
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Profitability
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Return on assets 1.29% 1.18% 1.17% 0.93% 1.35%
Return on equity 12.53% 11.34% 10.92% 9.51% 13.83%
Non-interest income/operating income (FTE) (2) 22.1% 20.8% 21.1% 21.5% 21.6%
Efficiency ratio (3) 50.7% 53.2% 54.5% 54.5% 52.4%
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Components of Net Interest Margin (FTE)
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Loan yield 5.95% 6.04% 6.21% 6.35% 6.55%
Investment yield 6.06% 6.19% 6.53% 6.34% 6.34%
Earning asset yield 6.00% 6.10% 6.33% 6.35% 6.47%
Interest bearing deposit rate 1.45% 1.48% 1.56% 1.63% 1.72%
Short-term borrowing rate 1.67% 1.23% 1.27% 1.25% 1.22%
Long-term borrowing rate 4.88% 5.22% 6.26% 6.18% 6.17%
Cost of all interest bearing funds 1.94% 1.90% 1.97% 2.07% 2.19%
Cost of funds (includes DDA) 1.65% 1.61% 1.66% 1.75% 1.84%
Net interest margin (FTE) 4.35% 4.49% 4.67% 4.59% 4.63%
Fully tax-equivalent adjustment $ 3,793 $ 3,626 $ 3,335 $ 3,141 $ 3,009
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2004 2003
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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Average Balances
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Loans $2,362,596 $2,222,827 $2,111,388 $2,017,817 $1,879,858
Taxable investment securities 1,006,893 949,099 817,503 834,221 764,931
Non-taxable investment securities 546,395 506,950 452,935 417,893 402,105
Total interest-earning assets 3,915,884 3,678,876 3,381,826 3,269,931 3,046,894
Total assets 4,398,260 4,145,955 3,841,103 3,695,233 3,437,016
Interest-bearing deposits 2,363,032 2,320,030 2,227,978 2,141,724 2,059,840
Short-term borrowings 512,074 416,767 356,163 336,250 207,925
Long-term borrowings 439,423 376,350 270,479 294,728 295,509
Total interest-bearing liabilities 3,314,529 3,113,147 2,854,620 2,772,702 2,563,274
Shareholders' equity $ 451,799 $ 430,660 $ 410,816 $ 361,525 $ 336,572
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Balance Sheet Data
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Cash and cash equivalents $ 122,329 $ 101,410 $ 79,373 $ 103,923 $ 117,190
Investment securities 1,604,968 1,584,353 1,347,590 1,329,534 1,292,685
Loans:
Consumer mortgage 793,120 780,550 743,699 739,593 606,312
Business lending 847,844 853,034 673,812 689,436 630,886
Consumer direct and indirect 732,787 713,151 687,904 699,480 687,055
Total loans 2,373,751 2,346,735 2,105,415 2,128,509 1,924,253
Allowance for loan losses 32,609 32,040 28,821 29,095 27,117
Intangible assets 228,744 230,783 194,820 196,111 140,146
Other assets 127,371 126,513 124,259 126,415 121,666
Total assets 4,424,554 4,357,754 3,822,636 3,855,397 3,568,823
Deposits 2,919,088 2,934,933 2,740,933 2,725,488 2,553,454
Borrowings 891,154 852,850 512,072 587,396 533,630
Subordinated debt held by unconsolidated subsidiary trusts 80,432 80,418 80,404 80,390 80,376
Other liabilities 66,679 48,156 66,204 57,295 59,601
Total liabilities 3,957,353 3,916,357 3,399,613 3,450,569 3,227,061
Shareholders' equity 467,201 441,397 423,023 404,828 341,762
Total liabilities and shareholders' equity 4,424,554 4,357,754 3,822,636 3,855,397 3,568,823
Assets under management or administration $1,943,423 $1,927,069 $1,854,627 $1,797,941 $1,591,193
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Capital
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Tier 1 leverage ratio 6.76% 6.98% 7.22% 7.26% 7.40%
Tangible equity / tangible assets 5.68% 5.10% 6.29% 5.70% 5.88%
Accumulated other comprehensive income $ 38,000 $ 16,287 $ 47,584 $ 35,958 $ 39,582
Diluted weighted average common shares outstanding 31,545 30,670 29,557 28,013 26,816
Period end common shares outstanding 30,554 30,617 28,560 28,330 25,921
Cash dividends declared per common share $ 0.18 $ 0.16 $ 0.16 $ 0.16 $ 0.16
Book value 15.29 14.42 14.81 14.29 13.18
Tangible book value 7.80 6.88 7.99 7.37 7.78
Common stock price (end of period) 25.13 22.79 23.14 24.50 21.96
Total shareholders return - trailing 12 months 17.6% 23.2% 51.3% 61.2% 53.2%
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2004 2003
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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Asset Quality
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Non-accrual loans $13,511 $11,142 $12,499 $11,940 $10,518
Accruing loans 90+ days delinquent 1,808 1,234 1,462 1,307 3,018
Restructured loans 806 856 27 28 29
Total non-performing loans 16,125 13,232 13,988 13,275 13,565
Other real estate owned (OREO) 734 1,044 1,014 1,077 812
Total non-performing assets 16,859 14,276 15,002 14,352 14,377
Net charge-offs $ 1,731 $ 1,438 $ 2,324 $ 2,744 $ 2,532
Loan loss allowance/loans outstanding 1.37% 1.37% 1.37% 1.37% 1.41%
Non-performing loans/loans outstanding 0.68% 0.56% 0.66% 0.62% 0.70%
Loan loss allowance/non-performing loans 202% 242% 206% 219% 200%
Net charge-offs/average loans 0.29% 0.26% 0.44% 0.54% 0.53%
Loan loss provision/net charge-offs 133% 160% 88% 113% 80%
Non-performing assets/loans outstanding plus OREO 0.71% 0.61% 0.71% 0.67% 0.75%
(1) Operating earnings excludes the effects of certain items the Company
considers to be non-operating, including acquisition expenses, the results
of securities transactions and debt restructuring activities.
(2) Excludes results of securities transactions and debt restructuring
activities.
(3) Excludes intangible amortization, acquisition expenses, results of
securities transactions and debt restructuring activities.