Exhibit 99
News Release
[LOGO]
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 4% YEAR OVER YEAR
Syracuse, N.Y. - October 20, 2005 - Community Bank System, Inc. (NYSE:
CBU) generated record quarterly net income of $14.9 million in the third quarter
of 2005, a 4.4% increase over the third quarter of 2004. Earnings of $42.5
million for the nine months ended September 30, 2005 were up 13.2% over the
first three quarters of 2004, driven by organic loan growth, higher non-interest
income including securities gains, improved asset quality, and lower acquisition
expenses. These were partially offset by higher recurring operating expenses, a
higher cost of funds, and a higher effective tax rate.
The company produced diluted earnings per share in the third quarter of $0.48,
also an all-time record and 6.7% or $0.03 per share above third quarter 2004's
level. Diluted earnings per share of $1.37 for the nine months ended September
30, 2005 were $0.14, or 11.4% above the first three quarters of 2004. Cash
earnings per share (which excludes the after-tax effect of the amortization of
intangible assets) were $1.48, versus $1.33 for the first nine months of 2004,
an increase of 11.3%.
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 solid organic loan
growth for the second consecutive quarter, while maintaining highly favorable
asset quality metrics. Also, consistent with the direction we provided earlier
in 2005, we continued to successfully reposition our balance sheet to a more
favorable interest rate sensitivity profile, through additional gain-generating
securities sales. Lastly, we rewarded shareholders with a 5.6% dividend increase
in August."
Net interest income was $34.9 million during the quarter, down 10.5% from $39.1
million in the prior year's third quarter. This was mainly due to a $153.3
million decrease in average earning assets, made up of a $34.9 million increase
in loans, and a $188.2 million decrease in investment securities. Third quarter
net interest margin of 4.06% compares to 4.35% for the third quarter of 2004,
and 4.16% for the second quarter of 2005. Net interest margin for the nine
months ended September 30, 2005 of 4.19% declined from 4.50% in the same period
of 2004. Year-to-date, earning asset yields were consistent with 2004, while
cost of funds increased 32 basis points over the same time frame, resulting in
net margin compression.
In the third quarter the company grew loans organically by $33.0 million, and
has added $77.5 million in loans since March 31, 2005. Consumer installment
loans rose $30.4 million in the quarter, while our consumer mortgage portfolio
increased $10.5 million. Business lending was down $7.9 million in the quarter,
almost entirely from significant declines in automotive dealer floor plans, a
result of the robust manufacturer incentive programs in effect during the
quarter, and the seasonal transition to a new model-year.
Loan loss provision for the quarter of $2.3 million was equal to the third
quarter of 2004, and up just $0.1 million over the second quarter of 2005,
despite the solid loan growth. Net charge-offs of $1.8 million, or 0.30% of
average loans, were down nearly $0.2 million from the second quarter of 2005,
and just slightly higher than the $1.7 million reported in last year's third
quarter. Delinquency and non-performing loan ratios both remained favorable to
historical levels. The provision for loan losses for the nine months ended
September 30, 2005 of $6.3 million was 5.5% below the $6.7 million recorded in
the first nine months of 2004, reflecting the favorable asset quality trends,
and was $0.7 million above year-to-date net charge-offs of $5.6 million.
Non-interest income (excluding securities gains) increased $1.1 million, or
8.8%, over the third quarter of 2004. Our employee benefits administration and
consulting business posted a 20.4% increase in revenues over the prior year's
third quarter on the strength of new product offerings to both new and existing
clients. Deposit service fees increased 7.1% over the prior year's third quarter
driven by several revenue-enhancement initiatives put into place in the current
year. Consistent with prior years, the third quarter's non-interest income
includes our annual dividend from the NYBA credit life and disability programs,
amounting to $0.8 million in 2005. In addition, the company continued to make
progress on its objective of shortening the average life of its investment
portfolio, generating an $0.11 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 has
been reduced from 7.0 years at June 30, 2004 to 4.8 years at the end of the
current quarter.
Operating expenses (excluding acquisition expenses and amortization of
intangibles) increased 4.7% from $27.9 million in the third quarter 2004 to
$29.2 million in the current quarter. This was principally due to the additional
day-to-day operating expenses from acquisitions completed in 2004, and modest
increases in salary and benefit costs. Amortization of intangible assets dropped
$0.45 million from the prior year's third quarter, based upon the completion of
amortization on a specific tranche of intangibles from an acquisition in the
late 1990's. Excluding amortization of intangibles, third quarter operating
expenses, were consistent with the second quarter's results.
The company's effective income tax rate of 27.4% in the third quarter was up
from 26.1% in the second quarter, and 25.1% in the third quarter of 2004, due
principally to a lower proportion of tax-exempt income.
Financial Position
Average earning assets of $3.76 billion at the end of the third quarter were
down $53.8 million from the second quarter 2005, reflecting $44.9 million of
organic loan growth, offset by $98.7 million of net investment sales and
maturities. Despite the recognition of $12.2 million of year-to-date realized
securities gains, the investment portfolio contained an additional $23.6 million
of net unrealized gains at quarter-end. Average deposits increased $16.0 million
in the quarter, while average borrowings were lowered by $91.6 million during
this same time. Total borrowings, principally short-term and variable rate
advances, have been reduced by $213.9 million, or 23.2% from December 31, 2004.
Asset Quality
As of September 30, 2005, the Company's non-performing loan ratio was 0.56%,
compared to 0.56% at the end of the second quarter, and 0.68% a year ago. The
delinquency ratio was 1.46% at September 30, 2005, compared to 1.47% a year ago.
The charge-off ratio was 0.30% for the current quarter, compared to 0.34% in the
end of the second quarter, and 0.29% for last year's third quarter. The ratio of
allowance for loan losses to total loans at the end of the quarter was 1.35%,
consistent with the level reported at the end of the second quarter and the end
of 2004. The improved and stable asset quality profile is primarily the result
of the company's enhanced credit risk management programs and continued emphasis
on disciplined underwriting standards.
Stock Repurchase
During the third quarter of 2005 the company purchased 379,710 common shares, at
an aggregate cost of $8.9 million, and an average price per share of $23.49,
under the previously announced 1.5 million-share repurchase program.
Dividend Increase
In August, the company's Board of Directors declared a 5.6% increase in the
quarterly cash dividend on its common stock to $0.19 per share. This represented
the company's sixth dividend increase in seven years and, as of September 30,
reflected an annualized dividend yield of 3.4%.
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Friday, October 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 September 30, 2006 and may be accessed at 1-866-453-6660 (access code
205986). 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=1141869.
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 $4.2 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 2005 2004 2005 2004
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Interest income $54,070 $55,223 $164,076 $157,280
Interest expense 19,126 16,166 55,374 44,812
Net interest income 34,944 39,057 108,702 112,468
Loan loss provision 2,275 2,300 6,284 6,650
Net interest income after provision for loan losses 32,669 36,757 102,418 105,818
Deposit service fees 7,237 6,755 20,017 18,713
Other banking services 1,411 1,136 2,177 2,059
Trust, investment and asset management fees 1,823 1,974 5,463 5,793
Benefit plan administration, consulting and actuarial fees 2,767 2,299 8,256 6,903
Investment securities gains, net 5,305 0 12,195 145
Total non-interest income 18,543 12,164 48,108 33,613
Salaries, employee benefits and professional fees 17,451 16,641 52,142 49,167
Occupancy and equipment and furniture 5,043 4,713 15,064 14,145
Amortization of intangible assets 1,553 2,003 5,521 5,401
Other 6,679 6,516 20,183 19,310
Acquisition expenses 1 53 48 1,434
Total operating expenses 30,727 29,926 92,958 89,457
Income before income taxes 20,485 18,995 57,568 49,974
Income taxes 5,621 4,761 15,089 12,444
Net income $14,864 $14,234 $ 42,479 $ 37,530
Basic earnings per share $ 0.49 $ 0.47 $ 1.40 $ 1.27
Diluted earnings per share $ 0.48 $ 0.45 $ 1.37 $ 1.23
Diluted earnings per share-cash (1) $ 0.52 $ 0.49 $ 1.48 $ 1.33
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2005 2004
-------------------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Earnings
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Interest income $54,070 $54,783 $55,223 $ 55,515 $55,223
Interest expense 19,126 18,727 17,521 16,940 16,166
Net interest income 34,944 36,056 37,702 38,575 39,057
Provision for loan losses 2,275 2,134 1,875 2,100 2,300
Net interest income after provision for loan losses 32,669 33,922 35,827 36,475 36,757
Deposit service fees 7,237 6,703 6,077 6,488 6,755
Other banking services 1,411 241 525 372 1,136
Trust, investment and asset management fees 1,823 1,859 1,781 1,789 1,974
Benefit plan administration, consulting and actuarial fees 2,767 2,639 2,850 2,256 2,299
Investment securities gains (losses), net 5,305 5,164 1,726 (73) 0
Debt prepayment costs 0 0 0 0 0
Total non-interest income 18,543 16,606 12,959 10,832 12,164
Salaries, employee benefits and professional fees 17,451 17,324 17,367 16,557 16,641
Occupancy and equipment and furniture 5,043 4,855 5,166 4,668 4,713
Amortization of intangible assets 1,553 1,984 1,984 2,013 2,003
Other 6,679 7,031 6,473 6,934 6,516
Acquisition expenses 1 6 41 270 53
Total operating expenses 30,727 31,200 31,031 30,442 29,926
Income before income taxes 20,485 19,328 17,755 16,865 18,995
Income taxes 5,621 5,047 4,421 4,199 4,761
Net income $14,864 $14,281 $13,334 $ 12,666 $14,234
Basic earnings per share $ 0.49 $ 0.47 $ 0.44 $ 0.41 $ 0.47
Diluted earnings per share $ 0.48 $ 0.46 $ 0.43 $ 0.40 $ 0.45
Diluted earnings per share-cash (1) $ 0.52 $ 0.50 $ 0.47 $ 0.44 $ 0.49
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Profitability
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Return on assets 1.39% 1.33% 1.23% 1.15% 1.29%
Return on equity 12.59% 12.23% 11.47% 10.75% 12.53%
Non-interest income/operating income (FTE) 32.5% 29.6% 23.8% 20.4% 22.1%
Efficiency ratio (2) 56.4% 57.2% 55.0% 52.9% 50.7%
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Components of Net Interest Margin (FTE)
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Loan yield 6.17% 6.18% 6.16% 6.09% 5.95%
Investment yield 5.91% 6.04% 6.20% 6.00% 6.06%
Earning asset yield 6.07% 6.13% 6.18% 6.05% 6.00%
Interest bearing deposit rate 1.86% 1.73% 1.56% 1.49% 1.45%
Short-term borrowing rate 2.96% 3.34% 2.72% 2.22% 1.67%
Long-term borrowing rate 5.83% 5.43% 5.00% 4.92% 4.88%
Cost of all interest-bearing funds 2.45% 2.36% 2.18% 2.06% 1.94%
Cost of funds (includes DDA) 2.05% 1.99% 1.85% 1.75% 1.65%
Net interest margin (FTE) 4.06% 4.16% 4.34% 4.32% 4.35%
Fully tax-equivalent adjustment $ 3,533 $ 3,533 $ 3,777 $ 3,754 $ 3,793
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2005 2004
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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 $2,397,472 $2,352,533 $2,342,467 $2,360,493 $2,362,596
Taxable investment securities 841,823 944,015 972,962 991,687 1,006,893
Non-taxable investment securities 523,301 519,843 557,796 543,672 546,395
Total interest-earning assets 3,762,596 3,816,391 3,873,225 3,895,852 3,915,884
Total assets 4,230,791 4,306,863 4,380,012 4,397,549 4,398,259
Interest-bearing deposits 2,381,919 2,381,864 2,381,332 2,354,817 2,363,032
Short-term borrowings 338,405 462,913 436,180 482,930 512,074
Long-term borrowings 371,877 338,957 439,244 439,345 439,423
Total interest-bearing liabilities 3,092,201 3,183,734 3,256,756 3,277,092 3,314,529
Shareholders' equity $ 468,559 $ 468,352 $ 471,576 $ 468,799 $ 451,799
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Balance Sheet Data
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Cash and cash equivalents $ 154,672 $ 105,391 $ 135,040 $ 118,345 $ 122,329
Investment securities 1,318,436 1,506,273 1,554,829 1,584,339 1,604,968
Loans:
Consumer mortgage 813,611 803,127 801,923 801,412 793,120
Business lending 816,145 824,007 816,616 831,244 847,844
Consumer direct and indirect 782,137 751,766 715,856 725,837 732,787
Total loans 2,411,893 2,378,900 2,334,395 2,358,493 2,373,751
Allowance for loan losses 32,460 32,011 31,898 31,778 32,609
Intangible assets 226,781 228,539 230,521 232,500 228,744
Other assets 133,641 126,937 131,765 131,932 127,371
Total assets 4,212,963 4,314,029 4,354,652 4,393,831 4,424,554
Deposits 2,985,919 2,977,517 2,976,953 2,928,978 2,919,088
Borrowings 626,151 717,930 774,476 840,065 891,154
Subordinated debt held by unconsolidated subsidiary trusts 80,488 80,474 80,460 80,446 80,432
Other liabilities 59,956 65,020 62,337 69,714 66,679
Total liabilities 3,752,514 3,840,941 3,894,226 3,919,203 3,957,353
Shareholders' equity 460,449 473,088 460,426 474,628 467,201
Total liabilities and shareholders' equity 4,212,963 4,314,029 4,354,652 4,393,831 4,424,554
Assets under management or administration $2,326,846 $2,216,898 $2,131,143 $2,101,936 $1,952,982
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Capital
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Tier 1 leverage ratio 7.33% 7.14% 6.83% 6.94% 6.72%
Tangible equity / tangible assets 5.86% 5.99% 5.57% 5.82% 5.68%
Accumulated other comprehensive income $ 14,487 $ 28,089 $ 21,709 $ 34,200 $ 38,000
Diluted weighted average common shares O/S 30,712 30,940 31,192 31,500 31,545
Period end common shares outstanding 29,903 30,238 30,322 30,642 30,554
Cash dividends declared per common share $ 0.19 $ 0.18 $ 0.18 $ 0.18 $ 0.18
Book value 15.40 15.65 15.18 15.49 15.29
Tangible book value 7.81 8.09 7.58 7.90 7.80
Common stock price (end of period) 22.60 24.39 22.91 28.25 25.13
Total shareholders return - trailing 12 months -7.3% 10.1% 1.9% 18.5% 17.6%
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2005 2004
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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 $12,896 $12,455 $13,432 $11,798 $13,511
Accruing loans 90+ days delinquent 672 898 1,254 1,158 1,808
Restructured loans 0 0 0 0 806
Total non-performing loans 13,568 13,353 14,686 12,956 16,125
Other real estate owned (OREO) 882 684 1,444 1,645 734
Total non-performing assets 14,450 14,037 16,130 14,601 16,859
Net charge-offs $ 1,826 $ 2,021 $ 1,755 $ 2,931 $ 1,731
Loan loss allowance/loans outstanding 1.35% 1.35% 1.37% 1.35% 1.37%
Non-performing loans/loans outstanding 0.56% 0.56% 0.63% 0.55% 0.68%
Loan loss allowance/non-performing loans 239% 240% 217% 245% 202%
Net charge-offs/average loans 0.30% 0.34% 0.30% 0.49% 0.29%
Loan loss provision/net charge-offs 125% 106% 107% 72% 133%
Non-performing assets/loans outstanding plus OREO 0.60% 0.59% 0.69% 0.62% 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.