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 INCREASES FIRST QUARTER EPS 13%
Syracuse, N.Y. - April 20, 2005 - Community Bank System, Inc. (NYSE: CBU)
generated a 19.5% increase in net income for the first quarter of 2005 as
compared to the first quarter of 2004. The increase in earnings was driven by
higher earning asset levels, improved asset quality, higher non-interest income,
including securities gains, and lower acquisition expenses. These were partially
offset by higher recurring operating expenses, a higher cost of funds, and a
slightly higher effective tax rate. Diluted earnings per share for the first
quarter of $0.43 were $0.05, or 13.2%, above the first quarter of 2004's level,
on 1.6 million or 5.5% more weighted average shares outstanding. Cash earnings
per share (which includes the after-tax effect of the amortization of intangible
assets) were $0.47 versus $0.41 for the prior year's first quarter, an increase
of 14.6%.
Sanford A. Belden, President and Chief Executive Officer, stated, "Our improved
first quarter results were in line with our expectations. We are pleased with
our continued positive trends in asset quality metrics, including historically
low charge-off ratios and delinquency rates. While the flattening yield curve
continues to exert pressure on net interest income generation, we have been able
to continue to achieve growth from several of our important non-interest income
sources."
Net interest income of $37.7 million in the first quarter of 2005 was up 4.9%
over first quarter 2004's level of $36.0 million, primarily as a result of a
$491 million increase in average earning assets. This increase was driven by the
addition of the First Heritage loan and investment portfolios (May 2004),
securities purchases, and organic loan growth, principally in our New York
markets. The net interest margin of 4.34% decreased 33 basis points versus the
same quarter of 2004. Excluding accretion on called securities, the net interest
margin was 4.32%, down 27 basis points from first quarter 2004's level. Earning
asset yields were down 15 basis points from the first quarter of 2004, while the
cost of funds increased 19 basis points, due principally to the effect of the
seven rate hikes (25 basis points each) from the Federal Reserve since last May.
Loan loss provision for the first quarter was $1.9 million, compared to $2.1
million in the first quarter of 2004, despite a $231.1 million increase in
average loans. Net charge-off, delinquency, and non-performing loan ratios all
showed improvement over 2004's first quarter.
Non-interest income (excluding securities gains) grew by $0.7 million, or 6.8%,
over the first quarter of 2004, with a very strong performance from our employee
benefits plan administration and consulting business. The Company also took
advantage of market conditions in the quarter by selling certain securities in
order to maximize their expected total return attributes and shorten the average
life of the portfolio, generating a $0.03 per share (after-tax) gain.
Operating expenses (excluding acquisition expenses) increased from $28.8 million
in the first quarter of 2004 to $31.0 million in the current quarter, or 7.7%
principally due to the additional day-to-day operating expenses from the First
Heritage acquisition completed last May, and increases in salary and benefit
costs at rates slightly above the consumer price index.
The company's effective income tax rate of 24.9% in the first quarter of 2005
was up from 24.0% in 2004 due principally to a lower proportion of tax-exempt
income.
Financial Position
Average earning assets of $3.87 billion for the first quarter were down $22.6
million from the fourth quarter 2004, with an $18.0 million decrease in average
loans (including an $8.0 million loan payoff on one Pennsylvania business
lending relationship) and a $4.6 million decrease in investments. Average
earning assets were up $491.4 million from March 31, 2004, with loans increasing
$231.1 million and investments increasing $260.3 million. Deposits increased
$48.0 million for the quarter, and included some seasonal increases from
municipal depositors. Borrowings were down $65.6 million, or 7.1%, from the end
of 2004.
Asset Quality
As of March 31, 2005, the Company's non-performing loan ratio was 0.63%,
compared to 0.66% a year ago, and an historically low 0.55% at year-end 2004.
The delinquency ratio improved from 1.65% and 1.45% at March 31, 2004, and
December 31, 2004, respectively, to 1.35% at March 31, 2005. The first quarter's
net charge-off ratio was 0.30%, compared to 0.44% in the first quarter of 2004,
and 0.49% in the fourth quarter of 2004. The ratio of allowance for loan losses
to total loans at quarter-end was 1.37%, compared to 1.35% at December 31, 2004
and 1.37% at March 31, 2004. This improved asset quality profile is the result
of the Company's enhanced credit risk management programs and continued emphasis
on disciplined underwriting standards.
Other Matters
In December 2004, the Board of Directors authorized a stock repurchase program
to acquire up to 500,000 common shares, or approximately 1.6% of total
outstanding shares, over the course of the ensuing twelve months for general
corporate purposes. During the first quarter of 2005, the Company acquired the
500,000 shares authorized at a total cost of $11.9 million.
In April 2005, the Board of Directors authorized a stock repurchase program to
acquire up to 1.5 million common shares, or approximately 5.0% of total
outstanding shares, over the course of the ensuing twenty months (through
December 31, 2006) for general corporate purposes.
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Thursday, April 21, 2005, to discuss the above results at 1-866-453-5550 (access
code 7769521). An audio recording will be available one hour after the call
until December 31, 2005, and may be accessed at 1-866-453-6660 (access code
160106). Investors may also listen to the call live via the Internet at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventdetails&c=95653&eventid=
1044017
This webcast will be available 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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2005 2004
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1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
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Earnings
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Interest income $55,223 $ 55,515 $55,223 $52,136 $49,921
Interest expense 17,521 16,940 16,166 14,679 13,967
Net interest income 37,702 38,575 39,057 37,457 35,954
Provision for loan losses 1,875 2,100 2,300 2,300 2,050
Net interest income after provision for loan losses 35,827 36,475 36,757 35,157 33,904
Deposit service fees 6,077 6,488 6,756 6,181 5,776
Other banking services 525 372 1,135 266 658
Trust, investment and asset management fees 1,731 1,744 1,935 2,062 1,702
Benefit plan administration, consulting and actuarial fees 2,900 2,301 2,338 2,275 2,384
Investment securities (losses) gains, net 1,726 (73) 0 135 10
Total non-interest income 12,959 10,832 12,164 10,919 10,530
Salaries, employee benefits and professional fees 17,367 16,557 16,642 16,362 16,164
Occupancy and equipment and furniture 5,166 4,668 4,713 4,650 4,782
Amortization of intangible assets 1,984 2,013 2,003 1,759 1,639
Other 6,473 6,934 6,515 6,593 6,201
Acquisition expenses 41 270 53 411 970
Total operating expenses 31,031 30,442 29,926 29,775 29,756
Income before income taxes 17,755 16,865 18,995 16,301 14,678
Income taxes 4,421 4,199 4,761 4,160 3,523
Net income $13,334 $ 12,666 $14,234 $12,141 $11,155
Basic earnings per share $ 0.44 $ 0.41 $ 0.47 $ 0.41 $ 0.39
Diluted earnings per share $ 0.43 $ 0.40 $ 0.45 $ 0.40 $ 0.38
Diluted earnings per share-cash (1) $ 0.47 $ 0.44 $ 0.49 $ 0.43 $ 0.41
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Profitability
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Return on assets 1.23% 1.15% 1.29% 1.18% 1.17%
Return on equity 11.47% 10.75% 12.53% 11.34% 10.92%
Non-interest income/operating income (FTE) 23.8% 20.4% 22.1% 21.0% 21.1%
Efficiency ratio (2) 55.0% 52.9% 50.7% 53.2% 54.5%
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Components of Net Interest Margin (FTE)
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Loan yield 6.16% 6.09% 5.95% 6.04% 6.21%
Investment yield 6.20% 6.00% 6.06% 6.19% 6.53%
Earning asset yield 6.18% 6.05% 6.00% 6.10% 6.33%
Interest bearing deposit rate 1.56% 1.49% 1.45% 1.48% 1.56%
Short-term borrowing rate 2.72% 2.22% 1.67% 1.23% 1.27%
Long-term borrowing rate 5.00% 4.92% 4.88% 5.22% 6.26%
Cost of all interest bearing funds 2.18% 2.06% 1.94% 1.90% 1.97%
Cost of funds (includes DDA) 1.85% 1.75% 1.65% 1.61% 1.66%
Net interest margin (FTE) 4.34% 4.32% 4.35% 4.49% 4.67%
Fully tax-equivalent adjustment $ 3,777 $ 3,754 $ 3,793 $ 3,626 $ 3,335
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2005 2004
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1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
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Average Balances
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Loans $2,342,467 $2,360,493 $2,362,596 $2,222,827 $2,111,388
Taxable investment securities 972,962 991,687 1,006,893 949,099 817,503
Non-taxable investment securities 557,796 543,672 546,395 506,950 452,935
Total interest-earning assets 3,873,225 3,895,852 3,915,884 3,678,876 3,381,826
Total assets 4,380,012 4,397,549 4,398,260 4,145,955 3,841,103
Interest-bearing deposits 2,381,332 2,354,817 2,363,032 2,320,030 2,227,978
Short-term borrowings 436,180 482,930 512,074 416,767 356,163
Long-term borrowings 439,244 439,345 439,423 376,350 270,479
Total interest-bearing liabilities 3,256,756 3,277,092 3,314,529 3,113,147 2,854,620
Shareholders' equity $ 471,576 $ 468,799 $ 451,799 $ 430,660 $ 410,816
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Balance Sheet Data
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Cash and cash equivalents $ 135,040 $ 118,345 $ 122,329 $ 101,410 $ 79,373
Investment securities 1,554,829 1,584,339 1,604,968 1,584,353 1,347,590
Loans:
Consumer mortgage 801,923 801,412 793,120 780,550 743,699
Business lending 816,616 831,244 847,844 853,034 673,812
Consumer direct and indirect 715,856 725,837 732,787 713,151 687,904
Total loans 2,334,395 2,358,493 2,373,751 2,346,735 2,105,415
Allowance for loan losses 31,898 31,778 32,609 32,040 28,821
Intangible assets 230,521 232,500 228,744 230,783 194,820
Other assets 131,765 131,932 127,371 126,513 124,259
Total assets 4,354,652 4,393,831 4,424,554 4,357,754 3,822,636
Deposits 2,976,953 2,928,978 2,919,088 2,934,933 2,740,933
Borrowings 774,476 840,065 891,154 852,850 512,072
Subordinated debt held by unconsolidated subsidiary trusts 80,460 80,446 80,432 80,418 80,404
Other liabilities 62,337 69,714 66,679 48,156 66,204
Total liabilities 3,894,226 3,919,203 3,957,353 3,916,357 3,399,613
Shareholders' equity 460,426 474,628 467,201 441,397 423,023
Total liabilities and shareholders' equity 4,354,652 4,393,831 4,424,554 4,357,754 3,822,636
Assets under management or administration $2,131,143 $2,101,936 $1,952,982 $1,936,063 $1,863,601
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Capital
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Tier 1 leverage ratio 6.83% 6.94% 6.72% 7.01% 7.19%
Tangible equity / tangible assets 5.57% 5.82% 5.68% 5.10% 6.29%
Accumulated other comprehensive income $ 21,709 $ 34,200 $ 38,000 $ 16,287 $ 47,584
Diluted weighted average common shares outstanding 31,192 31,500 31,545 30,670 29,557
Period end common shares outstanding 30,322 30,642 30,554 30,617 28,560
Cash dividends declared per common share $ 0.18 $ 0.18 $ 0.18 $ 0.16 $ 0.16
Book value 15.18 15.49 15.29 14.42 14.81
Tangible book value 7.58 7.90 7.80 6.88 7.99
Common stock price (end of period) 22.91 28.25 25.13 22.79 23.14
Total shareholders return - trailing 12 months 1.9% 18.5% 17.6% 23.2% 51.3%
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2005 2004
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1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
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Asset Quality
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Non-accrual loans $13,432 $11,798 $13,511 $11,142 $12,499
Accruing loans 90+ days delinquent 1,254 1,158 1,808 1,234 1,462
Restructured loans 0 0 806 856 27
Total non-performing loans 14,686 12,956 16,125 13,232 13,988
Other real estate owned (OREO) 1,444 1,645 734 1,044 1,014
Total non-performing assets 16,130 14,601 16,859 14,276 15,002
Net charge-offs $ 1,755 $ 2,931 $ 1,731 $ 1,438 $ 2,324
Loan loss allowance/loans outstanding 1.37% 1.35% 1.37% 1.37% 1.37%
Non-performing loans/loans outstanding 0.63% 0.55% 0.68% 0.56% 0.66%
Loan loss allowance/non-performing loans 217% 245% 202% 242% 206%
Net charge-offs/average loans 0.30% 0.49% 0.29% 0.26% 0.44%
Loan loss provision/net charge-offs 107% 72% 133% 160% 88%
Non-performing assets/loans outstanding plus OREO 0.69% 0.62% 0.71% 0.61% 0.71%
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(1) Cash earnings excludes the after-tax effect of amortization of intangible
assets.
(2) Excludes intangible amortization, acquisition expenses, results of
securities transactions and debt restructuring activities