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 INCOME AND EPS
Syracuse, N.Y. - July 25, 2005 - Community Bank System, Inc. (NYSE: CBU)
produced record quarterly net income of $14.3 million in the second quarter of
2005, a 17.6% increase over the second quarter of 2004. Earnings of $27.6
million for the six months ended June 30, 2005 were up 18.5% over the first two
quarters of 2004, 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.
The company generated diluted earnings per share in the second quarter of $0.46,
also an all-time record and 15% or $0.06 above second quarter 2004's level, on
0.3 million more weighted average shares outstanding. Diluted earnings per share
of $0.89 for the first half of 2005 were $0.12, or 15.6% above the six months
ended June 30, 2004. Cash earnings per share (which includes the after-tax
effect of the amortization of intangible assets) were $0.97 versus $0.84 for the
first half of 2004, an increase of 15.5%.
Sanford A. Belden, President and Chief Executive Officer, stated, "We are very
pleased to have generated record earnings in the midst of this flattening yield
curve environment. We're especially happy to have produced organic loan growth
of nearly $45 million this quarter, while maintaining highly favorable asset
quality metrics."
Net interest income of $36.1 million in the second quarter of 2005 was down 3.7%
from second quarter 2004's level of $37.5 million, despite a $137.5 million
increase in average earning assets, driven by the acquisition of First Heritage
Bank's loan portfolio in May 2004. The net interest margin of 4.16% decreased 33
basis points versus the same quarter of 2004. Earning asset yields were up 3
basis points from the second quarter of 2004, but the cost of funds increased 38
basis points, due principally to the effect of the nine rate hikes (of 25 basis
points each) from the Federal Reserve since last June. Excluding accretion on
called securities, the net interest margin was down 16 basis points from the
first quarter of 2005, driven almost entirely by a higher cost of funds. Despite
a 7.6% (annualized) increase in loan balances, average earning assets declined
$56.8 million from the first quarter of 2005, the result of our decision not to
reinvest cash flows from the securities portfolio in this flattening yield curve
environment.
In the second quarter the company grew loans organically by $44.5 million, with
increases achieved in all loan types. Consumer installment loans rose $35.9
million, and business lending was up $7.4 million, while our consumer mortgage
portfolio increased a modest $1.2 million. The loan portfolio continues to be
very well balanced, with business lending representing 34.6% of the total,
consumer mortgages 33.8%, and consumer installment loans 31.6%.
Loan loss provision for the second quarter was $2.1 million, compared to $2.3
million in the second quarter of 2004, and $1.9 million in the first quarter of
2005. Net charge-offs of $2.0 million, or 0.34% of average loans, were
consistent with the trailing four quarters. Delinquency and non-performing loan
ratios showed improvement over both 2004's second quarter and the first quarter
of 2005.
Non-interest income (excluding securities gains) grew by $0.7 million, or 6.1%,
over the second quarter of 2004. Our employee benefits administration and
consulting business posted a 17% increase in revenues over the second quarter of
2004. In addition, the company continued to make progress on its objective of
shortening the average life of its investment portfolio, generating a $0.10 per
share after-tax gain through the sale of securities that had optimized their
total return and interest-rate sensitivity characteristics. As a result, the
expected life-to-maturity of the portfolio was reduced from 7.0 years at June
30, 2004 to 5.0 years at the end of the current quarter.
Operating expenses (excluding acquisition expenses) increased by 6.2% over the
year-ago quarter, from $29.4 million to $31.2 million. This was principally due
to additional expenses from First Heritage, increases in salary and benefit
costs at rates slightly above the consumer price index, and higher amortization
of core deposit intangibles. Second quarter operating expenses were less than 1%
above first quarter 2005's, despite higher costs associated with disposing of
several ORE (Other Real Estate) properties, as well as start-up costs related to
our new branch in Clarks Summit, Pennsylvania.
The company's effective income tax rate of 26.1% in the second quarter was up
from 25.5% in the second quarter of 2004, and 24.9% in the first quarter of
2005, due principally to a lower proportion of tax-exempt income.
Financial Position
Average earning assets of $3.82 billion for the second quarter were down $56.8
million from the first quarter 2005, with a $10.1 million increase in average
loans and a $66.9 million decrease in investments. Average earning assets were
up $137.5 million from June 30, 2004, with loans increasing $129.7 million and
investments up just $7.8 million. Deposits were up slightly for the quarter,
with gains in IPC balances more than offsetting some seasonal declines from
municipal depositors. Borrowings were down $56.5 million, or 6.6%, from the end
of the first quarter, and have been reduced $122.1 million, or 13.3%, on a
year-to-date basis.
Asset Quality
As of June 30, 2005, the Company's non-performing loan ratio was 0.56%, compared
to 0.56% a year ago, and 0.63% at the end of the first quarter. The delinquency
ratio improved from 1.50% and 1.35% at June 30, 2004, and March 31, 2005,
respectively, to 1.32% at June 30, 2005. The second quarter's net charge-off
ratio was 0.34%, compared to 0.30% in the first quarter of 2005, and 0.26% in
the second quarter of 2004. The ratio of allowance for loan losses to total
loans at quarter-end was 1.35%, compared to 1.37% at March 31, 2005 and 1.35% at
December 31, 2004. This favorable and stable 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 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. In the second quarter, the
company acquired 142,000 shares at a total cost of $3.38 million.
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Tuesday, July 26, 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 September 30, 2005, and may be accessed at 1-866-453-6660 (access code
200926). Investors may also listen to the call live via the Internet at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=95653&event
ID=1091757
This webcast will be available for one full year and may be accessed at any
point at no cost. This release, including supporting financial tables, is
available within the Investor Relations/News & Media section of the company's
website: 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 $4.3 billion in
assets and over 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)
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended Year to Date
-----------------------------------------------------------
- ------------------------------------------------------------- June 30, June 30, June 30, June 30,
Earnings 2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------
Interest income $54,783 $52,136 $110,006 $102,057
Interest expense 18,727 14,679 36,248 28,646
Net interest income 36,056 37,457 73,758 73,411
Loan loss provision 2,134 2,300 4,009 4,350
Net interest income after provision for loan losses 33,922 35,157 69,749 69,061
Deposit service fees 6,703 6,182 12,780 11,958
Other banking services 241 265 766 923
Trust, investment and asset management fees 1,859 2,080 3,640 3,819
Benefit plan administration, consulting and actuarial fees 2,639 2,257 5,489 4,604
Investment securities gains, net 5,164 135 6,890 145
Total non-interest income 16,606 10,919 29,565 21,449
Salaries, employee benefits and professional fees 17,324 16,362 34,691 32,526
Occupancy and equipment and furniture 4,855 4,650 10,021 9,432
Amortization of intangible assets 1,984 1,759 3,968 3,398
Other 7,031 6,593 13,504 12,794
Acquisition expenses 6 411 47 1,381
Total operating expenses 31,200 29,775 62,231 59,531
Income before income taxes 19,328 16,301 37,083 30,979
Income taxes 5,047 4,160 9,468 7,683
Net income $14,281 $12,141 $ 27,615 $ 23,296
Basic earnings per share $ 0.47 $ 0.41 $ 0.91 $ 0.80
Diluted earnings per share $ 0.46 $ 0.40 $ 0.89 $ 0.77
Diluted earnings per share-cash(1) $ 0.50 $ 0.43 $ 0.97 $ 0.84
- ---------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings
- ----------------------------------------------------------------------------------------------------------------------------------
Interest income $54,783 $55,223 $ 55,515 $55,223 $52,136
Interest expense 18,727 17,521 16,940 16,166 14,679
Net interest income 36,056 37,702 38,575 39,057 37,457
Provision for loan losses 2,134 1,875 2,100 2,300 2,300
Net interest income after provision for loan losses 33,922 35,827 36,475 36,757 35,157
Deposit service fees 6,703 6,077 6,488 6,756 6,182
Other banking services 241 525 372 1,135 265
Trust, investment and asset management fees 1,859 1,781 1,789 1,975 2,080
Benefit plan administration, consulting and actuarial fees 2,639 2,850 2,256 2,298 2,257
Investment securities gains (losses), net 5,164 1,726 (73) 0 135
Total non-interest income 16,606 12,959 10,832 12,164 10,919
Salaries, employee benefits and professional fees 17,324 17,367 16,557 16,642 16,362
Occupancy and equipment and furniture 4,855 5,166 4,668 4,713 4,650
Amortization of intangible assets 1,984 1,984 2,013 2,003 1,759
Other 7,031 6,473 6,934 6,515 6,593
Acquisition expenses 6 41 270 53 411
Total operating expenses 31,200 31,031 30,442 29,926 29,775
Income before income taxes 19,328 17,755 16,865 18,995 16,301
Income taxes 5,047 4,421 4,199 4,761 4,160
Net income $14,281 $13,334 $ 12,666 $14,234 $12,141
Basic earnings per share $ 0.47 $ 0.44 $ 0.41 $ 0.47 $ 0.41
Diluted earnings per share $ 0.46 $ 0.43 $ 0.40 $ 0.45 $ 0.40
Diluted earnings per share-cash(1) $ 0.50 $ 0.47 $ 0.44 $ 0.49 $ 0.43
- ----------------------------------------------------------------------------------------------------------------------------------
Profitability
- ----------------------------------------------------------------------------------------------------------------------------------
Return on assets 1.33% 1.23% 1.15% 1.29% 1.18%
Return on equity 12.23% 11.47% 10.75% 12.53% 11.34%
Non-interest income/operating income (FTE) 29.6% 23.8% 20.4% 22.1% 21.0%
Efficiency ratio(2) 57.2% 55.0% 52.9% 50.7% 53.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Components of Net Interest Margin (FTE)
- ----------------------------------------------------------------------------------------------------------------------------------
Loan yield 6.18% 6.16% 6.09% 5.95% 6.04%
Investment yield 6.04% 6.20% 6.00% 6.06% 6.19%
Earning asset yield 6.13% 6.18% 6.05% 6.00% 6.10%
Interest bearing deposit rate 1.73% 1.56% 1.49% 1.45% 1.48%
Short-term borrowing rate 3.34% 2.72% 2.22% 1.67% 1.23%
Long-term borrowing rate 5.43% 5.00% 4.92% 4.88% 5.22%
Cost of all interest bearing funds 2.36% 2.18% 2.06% 1.94% 1.90%
Cost of funds (includes DDA) 1.99% 1.85% 1.75% 1.65% 1.61%
Net interest margin (FTE) 4.16% 4.34% 4.32% 4.35% 4.49%
Fully tax-equivalent adjustment $ 3,533 $ 3,777 $ 3,754 $ 3,793 $ 3,627
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------
2005 2004
--------------------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------------------------------------
Average Balances
- ------------------------------------------------------------------------------------------------------------------------------------
Loans $2,352,533 $2,342,467 $2,360,493 $2,362,596 $2,222,827
Taxable investment securities 944,015 972,962 991,687 1,006,893 949,099
Non-taxable investment securities 519,843 557,796 543,672 546,395 506,950
Total interest-earning assets 3,816,391 3,873,225 3,895,852 3,915,884 3,678,876
Total assets 4,306,863 4,380,012 4,397,549 4,398,260 4,145,955
Interest-bearing deposits 2,381,864 2,381,332 2,354,817 2,363,032 2,320,030
Short-term borrowings 462,913 436,180 482,930 512,074 416,767
Long-term borrowings 338,957 439,244 439,345 439,423 376,350
Total interest-bearing liabilities 3,183,734 3,256,756 3,277,092 3,314,529 3,113,147
Shareholders' equity $ 468,352 $ 471,576 $ 468,799 $ 451,799 $ 430,660
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 105,391 $ 135,040 $ 118,345 $ 122,329 $ 101,410
Investment securities 1,506,273 1,554,829 1,584,339 1,604,968 1,584,353
Loans:
Consumer mortgage 803,127 801,923 801,412 793,120 780,550
Business lending 824,007 816,616 831,244 847,844 853,034
Consumer direct and indirect 751,766 715,856 725,837 732,787 713,151
Total loans 2,378,900 2,334,395 2,358,493 2,373,751 2,346,735
Allowance for loan losses 32,011 31,898 31,778 32,609 32,040
Intangible assets 228,539 230,521 232,500 228,744 230,783
Other assets 126,937 131,765 131,932 127,371 126,513
Total assets 4,314,029 4,354,652 4,393,831 4,424,554 4,357,754
Deposits 2,977,517 2,976,953 2,928,978 2,919,088 2,934,933
Borrowings 717,930 774,476 840,065 891,154 852,850
Subordinated debt held by unconsolidated subsidiary trusts 80,474 80,460 80,446 80,432 80,418
Other liabilities 65,020 62,337 69,714 66,679 48,156
Total liabilities 3,840,941 3,894,226 3,919,203 3,957,353 3,916,357
Shareholders' equity 473,088 460,426 474,628 467,201 441,397
Total liabilities and shareholders' equity 4,314,029 4,354,652 4,393,831 4,424,554 4,357,754
Assets under management or administration $2,216,898 $2,131,143 $2,101,936 $1,952,982 $1,936,063
- ------------------------------------------------------------------------------------------------------------------------------------
Capital
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 leverage ratio 7.14% 6.83% 6.94% 6.72% 7.01%
Tangible equity / tangible assets 5.99% 5.57% 5.82% 5.68% 5.10%
Accumulated other comprehensive income $ 28,089 $ 21,709 $ 34,200 $ 38,000 $ 16,287
Diluted weighted average common shares outstanding 30,940 31,192 31,500 31,545 30,670
Period end common shares outstanding 30,238 30,322 30,642 30,554 30,617
Cash dividends declared per common share $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.16
Book value 15.65 15.18 15.49 15.29 14.42
Tangible book value 8.09 7.58 7.90 7.80 6.88
Common stock price (end of period) 24.39 22.91 28.25 25.13 22.79
Total shareholders return - trailing 12 months 10.1% 1.9% 18.5% 17.6% 23.2%
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------
2005 2004
-----------------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Quality
- ------------------------------------------------------------------------------------------------------------------------------------
Non-accrual loans $12,455 $13,432 $11,798 $13,511 $11,142
Accruing loans 90+ days delinquent 898 1,254 1,158 1,808 1,234
Restructured loans 0 0 0 806 856
Total non-performing loans 13,353 14,686 12,956 16,125 13,232
Other real estate owned (OREO) 684 1,444 1,645 734 1,044
Total non-performing assets 14,037 16,130 14,601 16,859 14,276
Net charge-offs $ 2,021 $ 1,755 $ 2,931 $ 1,731 $ 1,438
Loan loss allowance/loans outstanding 1.35% 1.37% 1.35% 1.37% 1.37%
Non-performing loans/loans outstanding 0.56% 0.63% 0.55% 0.68% 0.56%
Loan loss allowance/non-performing loans 240% 217% 245% 202% 242%
Net charge-offs/average loans 0.34% 0.30% 0.49% 0.29% 0.26%
Loan loss provision/net charge-offs 106% 107% 72% 133% 160%
Non-performing assets/loans outstanding plus OREO 0.59% 0.69% 0.62% 0.71% 0.61%
- ------------------------------------------------------------------------------------------------------------------------------------
(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