Exhibit 99
[LOGO] News Release
COMMUNITY BANK SYSTEM, INC. For further information, please contact:
5790 Widewaters Parkway, Scott A. Kingsley,
DeWitt, N.Y. 13214 EVP & Chief Financial Officer
Office: (315) 445-3121
Fax: (315) 445-7347
COMMUNITY BANK SYSTEM ANNOUNCES
FIRST QUARTER RESULTS
Syracuse, N.Y. - April 24, 2006 - Community Bank System, Inc. (NYSE:
CBU) reported quarterly net income of $9.5 million, or $0.31 per share, in the
first quarter of 2006, a 29% decrease from the $13.3 million, or $0.43 per
share, reported in the first quarter of 2005. The results of the quarter
included stock option expense of $0.6 million ($0.015 per share) as a result of
the company's adoption of Statement of Financial Accounting Standard (FAS) 123R,
"Share-Based Payments" as of January 1, 2006. In addition, the first quarter of
2005's results included $1.7 million ($0.04 per share) of gains on securities
sales. Year-over-year loan and deposit growth of 3.2% and 2.9%, respectively,
and a 12% increase in non-interest income (excluding securities gains), were
offset by an increased cost of funds, and an 18% reduction in investment income,
resulting from the company's successful balance sheet repositioning in 2005.
Cash earnings per share (which excludes the after-tax effect of the amortization
of intangible assets and acquisition-related market value adjustments) were
$0.35 in the first quarter.
Mark A. Tryniski, Executive Vice President and Chief Operating Officer,
stated, "Our first quarter results were in line with previously communicated
expectations in the current interest rate environment. We are pleased with our
ongoing favorable asset quality metrics, as well as the strong growth in our
non-interest income sources. In addition, our loan portfolio ended the first
quarter down just $3.5 million from the end of 2005, compared to the $23-24
million declines we experienced in the first quarters of 2004 and 2005, despite
selling most of our conforming, longer-term, residential mortgage originations.
As such, we are very optimistic of our ability to generate meaningful loan
growth for the balance of 2006. The decrease in operating expenses (excluding
stock options expense) in the quarter, reflected progress in our ongoing efforts
to control operating expense growth."
Sanford A. Belden, President and Chief Executive Officer, commented, "We were
also delighted to announce last Friday that we have entered into an agreement to
acquire ES&L Bancorp, Inc. (ES&L), based in Elmira, N.Y. ES&L has two branches
located in the cities of Elmira and Ithaca, N.Y. This is a `trademark'
acquisition for us, in that it meets all the criteria we seek in an acquisition
candidate. ES&L has a significant position within its smaller urban markets in
which we can potentially establish a leadership position. It has a history of
providing quality service, and has demonstrated solid operating results. It
offers a base of customers which have not previously had access to the breadth
of retail deposit and financial services products we offer. It is led by proven
management committed to remain in a leadership and business-development role
within our company following the transaction. It is a logical extension of our
geographic footprint, complementing the offices we currently operate in Corning,
Horseheads, Nichols, and Owego, N.Y., and in Wyalusing, Little Meadows, and
Towanda, Pennsylvania." William A. McKenzie, ES&L's President, will remain with
Community Bank System as a Senior Regional Vice President upon the closing of
the transaction, which is expected during the third quarter.
Net interest income was $33.6 million for the first quarter, down 10.8% from
$37.7 million in the prior year's first quarter. This was principally due to a
$168.5 million decrease in average earning assets, made up of a $58.5 million
increase in loans, and a $227.0 million decrease in investment securities,
reflective of the decision to reposition the company's balance sheet in 2005 by
selling certain securities in its investment portfolio, and paying off
short-term borrowings. The first quarter net interest margin of 4.06% compares
to 4.12% for the fourth quarter of 2005, and 4.34% for the first quarter of
2005. Earning asset yields in the first quarter of 2006 were 18 basis points
above the first quarter of 2005, while the cost of funds increased 49 basis
points, year-over-year, resulting in net interest margin compression.
Total loans outstanding at the end of the first quarter were essentially flat
with the end of the fourth quarter of 2005, at $2.41 billion. Small increases in
the business lending portfolio were offset by slight declines in consumer
installment and mortgage loans. Year-over-year, loans grew $73.9 million, or
3.2%. The company added $56.5 million of consumer installment loans since last
March, including significant growth in its indirect auto lending operation.
Consumer mortgages increased $13.3 million, even though the Company continued
selling certain new mortgage originations into the secondary market for the
second consecutive quarter. Business lending was up $4.1 million for the
year-over-year despite a significant decline in automotive dealer floor plans,
the result of tempered sales expectations for early 2006.
The loan loss provision for the quarter of $2.2 million was slightly higher than
the $1.9 million reported in the first quarter of 2005, and $0.1 million lower
than the fourth quarter of 2005. Net charge-offs of $2.0 million, or 0.34% of
average loans, were down $0.1 million from the fourth quarter of 2005, and $0.3
million higher than the $1.8 million reported in the first quarter of 2005.
Delinquency and non-performing loan ratios remained stable, and favorable to
historical levels.
Non-interest income (excluding securities gains) increased $1.3 million, or
12.0%, over the first quarter of 2005. The company's employee benefits
administration and consulting business posted a 19% increase in revenues over
the prior year's first quarter on the strength of new product offerings and the
addition of new clients. Trust, investment and asset management fees were also
up 15%, year-over-year. Deposit service fees increased 10% over the first
quarter of 2005, driven by several revenue-enhancement initiatives put into
place during 2005. In addition, in 2005 the company successfully completed its
objective of shortening the average life of its investment portfolio, generating
a $0.29 per share after-tax gain (including a $0.04 per share gain in the first
quarter of 2005) through the sale of securities that had optimized their total
return and interest-rate sensitivity characteristics. The proceeds of these
securities sales were used to reduce overnight and other short-term borrowings
throughout 2005. As a result, the expected life-to-maturity of the portfolio was
reduced significantly, and stands at just above five years as of March 31, 2006.
There were no investment securities sales in the first quarter of 2006.
Operating expenses (excluding the effect of the change in accounting for stock
options) decreased 0.7% from $31.0 million in the first quarter of 2005 to $30.8
million in this year's first quarter. This was due to a $0.5 million reduction
in the amortization of intangible assets, partially offset by a $0.1 million
increase in employee medical costs, and a $0.2 million increase in occupancy
expenses, principally utilities and real estate taxes. The company continued to
aggressively manage all aspects of its operating expense structure in the first
quarter, which resulted in holding operating expenses essentially flat with the
year-earlier period.
The company's effective income tax rate of 25.0% in the first quarter of 2006
was consistent with the 24.9% reported in the first quarter of 2005.
Financial Position
Average earning assets of $3.7 billion for the first quarter of 2006 were
consistent with the fourth quarter of 2005. Compared to the first quarter of
2005, average earning assets were down $168.5 million, comprised of a $58.5
million organic increase in loans, offset by a $227.0 million decrease in
investments. Despite the recognition of $12.2 million of full-year realized
securities gains in 2005, and the continued upward movement in interest rates,
the investment portfolio contained $5.8 million of net unrealized gains at
quarter-end. Deposits increased $79.6 million in the first quarter, and included
seasonal increases in municipal funds typically experienced early in the year,
and were up $87.5 million, or 2.9%, from the end of the first quarter of 2005.
Total borrowings, principally short-term and variable rate advances, have been
reduced by $268.2 million, or 31%, since March 31, 2005. These actions
were major components of the company's successful efforts in improving its
overall interest-rate sensitivity profile in the current flat yield curve
environment.
Asset Quality
As of March 31, 2006, the company's non-performing loan ratio was 0.62%,
compared to 0.55% at the end of the fourth quarter of 2005, and 0.63% a year
ago. The delinquency ratio was 1.26% at quarter-end, an improvement from 1.35%
at March 31, 2005. The charge-off ratio was 0.34% (of total loans) for the first
quarter, compared to 0.35% in the fourth quarter of 2005, and 0.30% for last
year's first quarter. The ratio of allowance for loan losses to total loans at
the end of the first quarter was 1.36%, consistent with the average level
reported for the last eight quarters. 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 first quarter of 2006 the company purchased 158,125 common shares, at
an aggregate cost of $3.5 million, under the previously announced 1.5
million-share repurchase program authorized in April 2005. At March 31, 2006,
there were 0.75 million shares available for repurchase under this program.
Outlook
Mr. Tryniski added, "Our full-year forecast continues to reflect our assumption
that the yield curve will remain flat in 2006. Any improvements in the
interest-rate or capital market environment in 2006 could present opportunities
for actions that might positively influence operating results."
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Tuesday, April 25, 2006, to discuss the above results at 1-800-608-4146. An
audio recording will be available one hour after the call until June 30, 2006,
and may be accessed at 1-888-284-7564 (access code 186260). Investors may also
listen live via the Internet at:
http://www.videonewswire.com/event.asp?id=33099.
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.
Summary of Financial Data
(Dollars in thousands, except per share data)
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2006 2005
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1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
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Earnings
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Loan income $38,328 $38,816 $37,134 $36,156 $35,502
Investment income 16,265 16,302 16,936 18,627 19,721
Total interest income 54,593 55,118 54,070 54,783 55,223
Interest expense 20,973 20,198 19,126 18,727 17,521
Net interest income 33,620 34,920 34,944 36,056 37,702
Provision for loan losses 2,150 2,250 2,275 2,134 1,875
Net interest income after provision for loan losses 31,470 32,670 32,669 33,922 35,827
Deposit service fees 6,674 7,341 7,237 6,703 6,077
Other banking services 476 616 1,411 241 525
Trust, investment and asset management fees 2,050 1,844 1,823 1,859 1,781
Benefit plan administration, consulting and actuarial fees 3,381 2,937 2,767 2,639 2,850
Investment securities gains, net 0 0 5,305 5,164 1,726
Total non-interest income 12,581 12,738 18,543 16,606 12,959
Salaries, employee benefits and professional fees 17,439 17,550 17,381 17,319 17,349
Stock option expense 626 0 0 0 0
Occupancy and equipment and furniture 4,759 4,401 4,483 4,282 4,590
Amortization of intangible assets 1,493 1,604 1,553 1,984 1,984
Other 7,118 7,981 7,309 7,609 7,067
Special charges/acquisition expenses 0 2,895 1 6 41
Total operating expenses 31,435 34,431 30,727 31,200 31,031
Income before income taxes 12,616 10,977 20,485 19,328 17,755
Income taxes 3,154 2,651 5,621 5,047 4,421
Net income $ 9,462 $ 8,326 $14,864 $14,281 $13,334
Basic earnings per share $ 0.32 $ 0.28 $ 0.49 $ 0.47 $ 0.44
Diluted earnings per share $ 0.31 $ 0.27 $ 0.48 $ 0.46 $ 0.43
Diluted earnings per share-cash (1) $ 0.35 $ 0.32 $ 0.53 $ 0.52 $ 0.47
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Profitability
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Return on assets 0.93% 0.79% 1.39% 1.33% 1.23%
Return on equity 8.38% 7.21% 12.59% 12.23% 11.47%
Non-interest income/operating income (FTE) 25.3% 24.9% 32.5% 29.6% 23.8%
Efficiency ratio (2) 60.3% 58.5% 56.4% 57.2% 55.0%
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Components of Net Interest Margin (FTE)
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Loan yield 6.49% 6.42% 6.17% 6.18% 6.16%
Investment yield 6.11% 6.02% 5.91% 6.04% 6.20%
Earning asset yield 6.36% 6.28% 6.07% 6.13% 6.18%
Interest bearing deposit rate 2.19% 2.02% 1.85% 1.73% 1.56%
Short-term borrowing rate 3.61% 3.33% 2.96% 3.34% 2.72%
Long-term borrowing rate 5.62% 5.67% 5.83% 5.43% 5.00%
Cost of all interest-bearing funds 2.80% 2.63% 2.45% 2.36% 2.18%
Cost of funds (includes DDA) 2.34% 2.20% 2.05% 1.99% 1.85%
Net interest margin (FTE) 4.06% 4.12% 4.06% 4.16% 4.34%
Fully tax-equivalent adjustment $ 3,464 $ 3,512 $ 3,533 $ 3,533 $ 3,777
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2006 2005
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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 $2,400,926 $2,406,094 $2,397,410 $2,352,473 $2,342,401
Taxable investment securities 781,488 774,420 841,823 944,015 972,962
Non-taxable investment securities 522,112 522,276 523,212 519,873 557,600
Total interest-earning assets 3,704,526 3,702,790 3,762,445 3,816,361 3,872,963
Total assets 4,144,841 4,155,216 4,230,766 4,306,844 4,379,986
Interest-bearing deposits 2,410,348 2,382,620 2,386,338 2,385,370 2,383,477
Short-term borrowings 163,940 232,157 338,405 462,913 436,180
Long-term borrowings 468,884 427,082 371,877 338,957 439,244
Total interest-bearing liabilities 3,043,172 3,041,859 3,096,620 3,187,240 3,258,901
Shareholders' equity $ 458,163 $ 457,947 $ 468,559 $ 468,352 $ 471,576
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Balance Sheet Data
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Cash and cash equivalents $ 121,795 $ 114,605 $ 154,674 $ 105,393 $ 135,039
Investment securities 1,307,041 1,303,117 1,318,134 1,506,274 1,554,829
Loans:
Consumer mortgage 814,885 815,463 813,273 802,787 801,600
Business lending 820,722 819,605 816,145 824,007 816,616
Consumer installment 772,614 776,701 782,420 752,043 716,124
Total loans 2,408,221 2,411,769 2,411,838 2,378,837 2,334,340
Allowance for loan losses 32,720 32,581 32,460 32,011 31,898
Intangible assets 223,385 224,878 226,481 228,539 230,521
Other assets 132,312 131,204 134,215 127,209 132,039
Total assets 4,160,034 4,152,992 4,212,882 4,314,241 4,354,870
Deposits 3,063,527 2,983,969 2,984,700 2,976,117 2,976,065
Borrowings 506,241 572,588 626,151 717,930 774,476
Subordinated debt held by unconsolidated subsidiary 80,50 80,47
trusts 80,517 2 80,488 4 80,460
Other liabilities 54,347 58,338 61,094 66,632 63,443
Total liabilities 3,704,632 3,695,397 3,752,433 3,841,153 3,894,444
Shareholders' equity 455,402 457,595 460,449 473,088 460,426
Total liabilities and shareholders' equity 4,160,034 4,152,992 4,212,882 4,314,241 4,354,870
Assets under management or administration $2,642,226 $2,505,966 $2,394,012 $2,283,638 $2,203,181
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Capital
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Tier 1 leverage ratio 7.68% 7.57% 7.34% 7.14% 6.83%
Tangible equity / tangible assets 5.89% 5.92% 5.87% 5.99% 5.57%
Accumulated other comprehensive income $ 3,495 $ 8,420 $ 14,487 $ 28,089 $ 21,709
Diluted weighted average common shares O/S 30,479 30,516 30,712 30,940 31,192
Period end common shares outstanding 29,908 29,957 29,903 30,238 30,322
Cash dividends declared per common share $ 0.19 $ 0.19 $ 0.19 $ 0.18 $ 0.18
Book value 15.23 15.28 15.40 15.65 15.18
Tangible book value 7.76 7.77 7.82 8.09 7.58
Common stock price (end of period) 22.33 22.55 22.60 24.39 22.91
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2006 2005
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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 $13,701 $12,232 $12,896 $12,455 $13,433
Accruing loans 90+ days delinquent 1,213 1,075 672 898 1,255
Total non-performing loans 14,914 13,307 13,568 13,353 14,688
Other real estate owned (OREO) 1,613 1,048 882 684 1,444
Total non-performing assets 16,527 14,355 14,450 14,037 16,132
Net charge-offs $ 2,011 $ 2,129 $ 1,826 $ 2,021 $ 1,755
Loan loss allowance/loans outstanding 1.36% 1.35% 1.35% 1.35% 1.37%
Non-performing loans/loans outstanding 0.62% 0.55% 0.56% 0.56% 0.63%
Loan loss allowance/non-performing loans 219% 245% 239% 240% 217%
Net charge-offs/average loans 0.34% 0.35% 0.30% 0.34% 0.30%
Loan loss provision/net charge-offs 107% 106% 125% 106% 107%
Non-performing assets/loans outstanding plus OREO 0.69% 0.59% 0.60% 0.59% 0.69%
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(1) Cash earnings excludes the after-tax effect of amortization of intangible
assets and market value adjustment amortization on acquired loans and
deposits
(2) Excludes intangible amortization, acquisition expenses/special charges,
results of securities transactions and debt restructuring activities.
# # #
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.