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 ANNOUNCES SECOND QUARTER RESULTS
EPS IMPROVES 6.5% OVER FIRST QUARTER; LOANS GROW IN ALL CATEGORIES
Syracuse, N.Y. - July 20, 2006 - Community Bank System, Inc. (NYSE: CBU)
reported quarterly net income of $9.9 million, or $0.33 per share, in the second
quarter of 2006. This represents a 6.5% increase over the $9.5 million, or $0.31
per share, generated during the first quarter of 2006. Compared to the second
quarter of 2005, which included $5.2 million in pre-tax securities gains,
earnings per share earnings were $0.13 lower, representing a 28.3% decrease.
Without these securities gains, the second quarter earnings per share of $0.33
were equal to the year-ago quarter.
The company grew loans by 2.8% over the year-ago period, with growth
achieved in each of its three portfolios (consumer mortgage, business lending
and consumer installment) during this period, led by a 5.7% increase in consumer
installment lending. Deposits increased 2.1% over the year-ago period. Cash
earnings per share, which exclude the after-tax effect of the amortization of
intangible assets and acquisition-related market value adjustments, were $0.37
in the second quarter, $0.02, or 5.7% greater than the linked first quarter.
Mark E. Tryniski, CBU's Executive Vice President and Chief Operating
Officer, stated, "Our second quarter's results were solid, particularly given
the current interest rate environment. We were able to generate meaningful loan
growth of 6% on an annualized basis during the quarter, and had year-over-year
increases in all three of our lending categories. Non-interest income grew by
$1.0 million - or nearly 9%, excluding the securities gains from the comparable
year-ago quarter. We continued to lower our core operating expenses through
aggressive management of our entire service delivery system. Our asset quality
metrics were also at their most favorable level of the last two years, resulting
in a lower provision for loan losses in the quarter."
Sanford A. Belden, President and Chief Executive Officer, commented, "I am
very pleased to see where we are as a company as I prepare for my previously
announced retirement on July 31. Our acquisition of Elmira-based ES&L Bancorp is
firmly on schedule to close in the third quarter, and the company is extremely
well positioned to continue the track record of solid growth it established
throughout the last decade, as a result of the many strategic, operational and
financial decisions our management and Board of Directors have collectively
made. The controlled, deliberate transition plan we have implemented over the
last two years has been highly beneficial to the organization, and it is with
great confidence and assurance that I hand over the title of President and CEO
to Mark Tryniski on the first of August."
Net interest income decreased $0.1 million (0.3%) from the first quarter
of 2006, due to increases in funding costs of $1.9 million, partially offset by
increases of $1.4 million in loan interest income and $0.4 million in investment
income. The higher loan income was due to $24.8 million of growth in the average
loan portfolio as well as an 11 basis point increase in the average yield. The
average loan portfolio increase was driven by growth in consumer installments
($10.6 million), business lending ($9.7 million) and consumer mortgages ($4.5
million). Second quarter net interest margin of 4.00% compares to 4.06% in the
first quarter of 2006, and 4.16% in the second quarter of 2005, reflective of
the higher cost of funds.
Non-interest income, excluding security gains, increased by $1.0 million
over the second quarter of 2005 and decreased $0.1 million versus the first
quarter of 2006. Banking non-interest income increased $0.6 million and $0.4
million as compared to the second quarter of 2005 and the first quarter of 2006,
respectively, primarily the result of higher utilization of deposit service
products. Financial services revenue for the second quarter of 2006 increased
$0.4 million, or 9.4%, compared to the second quarter of 2005, and included a
19.6% revenue improvement in our benefits administration and consulting
business.
Total operating expenses decreased $0.2 million versus the first quarter
of 2006 as lower personnel, stock options and occupancy expenses, were partially
offset by increases in administration, business development and marketing, and
data processing costs. In addition, the second quarter included $161,000 of
costs associated with two branch consolidations in Pennsylvania. The efficiency
ratio for the second quarter of 2006 was 59.8% (58.9% excluding stock option
expense) as compared to 60.3% for the first quarter of 2006. This change is a
result of decreased operating expenses excluding intangible amortization and
increased net interest income on an FTE basis, partially offset by a slight
decrease in non-interest income.
The company's effective income tax rate was 24.1% in the second quarter,
somewhat more favorable than the 25.0% reported in the first quarter of 2006,
and the 26.1% rate during the second quarter of 2005, which was impacted by
income from securities gains.
Financial Position
Average earning assets of $3.74 billion for the second quarter were up
$34.2 million from first quarter 2006, with a $24.8 million increase in average
loans and a $9.4 million increase in investments. Average earning assets were
down $77.6 million from June 30, 2005, with loans increasing $73.3 million and
investments decreasing $150.9 million, reflecting the company's successful 2005
efforts to improve its interest-rate sensitivity profile by selling certain
securities. Deposits increased $27.2 million, or 0.9%, for the quarter, and were
up $54.7 million, or 1.8%, from a year ago. Average borrowings were up $3.5
million over the first quarter, and decreased $165.6 million from June 30, 2005,
again reflecting the aforementioned actions taken to improve interest-rate
sensitivity.
Asset Quality
The $1.7 million provision for loan losses was $0.4 million lower than
both the first quarter of 2006 and the second quarter of 2005, reflective of the
company's lowest quarterly charge-off and non-performing loan ratios in over
three years. The $1.5 million of net charge-offs in the second quarter of 2006
was $0.5 million below the first quarter and $0.4 million below the average for
the previous eight quarters. The net charge-off ratio of 0.26% was eight basis
points below the first quarter's ratio and seven basis points lower than the
average ratio of 0.33% for the previous eight quarters. Total non-performing
loans as a percentage of total loans was down 17 basis points from the first
quarter to 0.45%. Non-performing loans as a percentage of total loans averaged
0.59% over the previous eight quarters. The delinquent loan ratio of 0.69% is
four basis points higher than the first quarter, but well below the average of
0.82% for the previous eight quarters.
Stock Repurchase
During the quarter the company repurchased 101,000 of its shares at a
total cost of $2.0 million, under the previously announced 1.5 million-share
repurchase program authorized in April 2005. At June 30, 2006, there were 29.85
million shares outstanding, down from 30.24 million a year earlier. As of June
30, 2006 there were 0.65 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. We are pleased with
the directionally positive trends reported in the second quarter in loan
generation, non-interest income growth, asset quality, and expense control. We
believe opportunities to expand our community-banking model organically as well
as through acquisition will continue to present themselves in the coming
quarters."
Mr. Belden concluded, "I have enjoyed my 14 years with this company and we
have collectively accomplished a great deal during this period - both in terms
of the impressive growth we have achieved and the outstanding services we have
provided - and I cannot stress enough how proud and appreciative I am of the
dedicated and talented team of people with whom I have worked over these years,
both within and outside of the Community Bank System organization."
Conference Call Scheduled
A conference call will be held with company management at 10:00 a.m. (ET)
on Friday, July 21, 2006, to discuss the above results at 1-866-838-2057. An
audio recording will be available one hour after the call until September 30,
2006, and may be accessed at 1-888-284-7564 (access code 189455). Investors may
also listen live via the Internet at:
http://www.videonewswire.com/event.asp?id=34420.
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 $4.1
billion in assets and approximately 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.
-- more --
Summary of Financial Data
(Dollars in thousands, expect per share data)
--------------------------------------------------
Quarter Ended Year-to-Date
June 30, June 30,
--------------------------------------------------
2006 2005 2006 2005
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Earnings
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Loan income $39,760 $36,157 $78,088 $71,659
Investment Income 16,618 18,626 32,883 38,347
Total interest income 56,378 54,783 110,971 110,006
Interest Expense 22,873 18,727 43,846 36,248
Net interest income 33,505 36,056 67,125 73,758
Provision for loan losses 1,725 2,134 3,875 4,009
Net interest income after provision for loan losses 31,780 33,922 63,250 69,749
Deposit service fees 7,167 6,703 13,841 12,780
Other banking services 361 241 837 766
Trust, investment and asset management fees 1,766 1,859 3,816 3,640
Benefit plan administration, consulting and actuarial fees 3,155 2,639 6,536 5,489
Investment securities gains, net 0 5,164 0 6,890
Total non-interest income 12,449 16,606 25,030 29,565
Salaries, employee benefits and professional fees 17,112 17,319 34,551 34,668
Stock option expense 421 0 1,047 0
Occupancy and equipment and furniture 4,448 4,282 9,207 8,872
Amortization of intangible assets 1,489 1,984 2,982 3,968
Other 7,737 7,609 14,855 14,676
Special charges/acquisition expenses 1 6 1 47
Total operating expenses 31,208 31,200 62,643 62,231
Income before income taxes 13,021 19,328 25,637 37,083
Income taxes 3,137 5,047 6,291 9,468
Net income $9,884 $14,281 $19,346 $27,615
Basic earnings per share $0.33 $0.47 $0.65 $0.91
Diluted earnings per share $0.33 $0.46 $0.64 $0.89
Diluted earnings per share-cash (1) $0.37 $0.52 $0.72 $0.99
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Summary of Financial Data
(Dollars in thousands, expect per share data)
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2006 2005
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2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
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Earnings
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Loan income $39,760 $38,328 $38,816 $37,134 $36,157
Investment Income 16,618 16,265 16,302 16,936 18,626
Total interest income 56,378 54,593 55,118 54,070 54,783
Interest Expense 22,873 20,973 20,198 19,126 18,727
Net interest income 33,505 33,620 34,920 34,944 36,056
Provision for loan losses 1,725 2,150 2,250 2,275 2,134
Net interest income after provision for loan losses 31,780 31,470 32,670 32,669 33,922
Deposit service fees 7,167 6,674 7,341 7,237 6,703
Other banking services 361 476 616 1,411 241
Trust, investment and asset management fees 1,766 2,050 1,844 1,823 1,859
Benefit plan administration, consulting and actuarial fees 3,155 3,381 2,937 2,767 2,639
Investment securities gains, net 0 0 0 5,305 5,164
Total non-interest income 12,449 12,581 12,738 18,543 16,606
Salaries, employee benefits and professional fees 17,112 17,439 17,550 17,381 17,319
Stock option expense 421 626 0 0 0
Occupancy and equipment and furniture 4,448 4,759 4,401 4,483 4,282
Amortization of intangible assets 1,489 1,493 1,604 1,553 1,984
Other 7,737 7,118 7,981 7,309 7,609
Special charges/acquisition expenses 1 0 2,895 1 6
Total operating expenses 31,208 31,435 34,431 30,727 31,200
Income before income taxes 13,021 12,616 10,977 20,485 19,328
Income taxes 3,137 3,154 2,651 5,621 5,047
Net income $9,884 $9,462 $8,326 $14,864 $14,281
Basic earnings per share $0.33 $0.32 $0.28 $0.49 $0.47
Diluted earnings per share $0.33 $0.31 $0.27 $0.48 $0.46
Diluted earnings per share-cash (1) $0.37 $0.35 $0.32 $0.53 $0.52
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Profitability
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Return on assets 0.95% 0.93% 0.79% 1.39% 1.33%
Return on equity 8.76% 8.38% 7.21% 12.59% 12.23%
Non-interest income/operating income (FTE) 25.0% 25.3% 24.9% 32.5% 29.6%
Efficiency ratio (2) 59.8% 60.3% 58.5% 56.4% 57.2%
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Components of Net Interest Margin (FTE)
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Loan yield 6.60% 6.49% 6.42% 6.17% 6.18%
Investment yield 6.18% 6.11% 6.02% 5.91% 6.04%
Earning asset yield 6.45% 6.36% 6.28% 6.07% 6.13%
Interest bearing deposit rate 2.38% 2.19% 2.02% 1.85% 1.73%
Short-term borrowing rate 3.63% 3.61% 3.33% 2.96% 3.34%
Long-term borrowing rate 5.60% 5.62% 5.67% 5.83% 5.43%
Cost of all interest-bearing funds 2.96% 2.80% 2.63% 2.45% 2.36%
Cost of funds (includes DDA) 2.50% 2.34% 2.20% 2.05% 1.99%
Net interest margin (FTE) 4.00% 4.06% 4.12% 4.06% 4.16%
Fully tax-equivalent adjustment $3,747 $3,464 $3,512 $3,533 $3,533
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(1) 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 structuring activities.
Summary of Financial Data
(Dollars in thousands, expect per share data)
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2006 2005
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2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
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Average Balances
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Loans $2,425,763 $2,400,926 $2,406,094 $2,397,410 $2,352,473
Taxable investment securities 794,698 781,488 774,420 841,823 944,015
Non-taxable investment securities 518,309 522,112 522,276 523,212 519,873
Total interest-earning assets 3,738,770 3,704,526 3,702,790 3,762,445 3,816,361
Total assets 4,167,895 4,144,841 4,155,216 4,230,766 4,306,844
Interest-bearing deposits 2,460,781 2,410,348 2,382,620 2,386,338 2,385,370
Short-term borrowings 127,208 163,940 232,157 338,405 462,913
Long-term borrowings 509,102 468,884 427,082 371,877 338,957
Total interest-bearing liabilities 3,097,091 3,043,172 3,041,859 3,096,620 3,187,240
Shareholders' equity $452,408 $458,163 $457,947 $468,559 $468,352
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Balance Sheet Data
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Cash and cash equivalents $124,453 $121,795 $114,605 $154,674 $105,393
Investment securities 1,253,202 1,307,041 1,303,117 1,318,134 1,506,274
Loans:
Consumer mortgage 822,235 814,885 815,463 813,273 802,787
Business lending 827,021 820,722 819,605 816,145 824,007
Consumer installment 795,010 772,614 776,701 782,420 752,043
Total loans 2,444,266 2,408,221 2,411,769 2,411,838 2,378,837
Allowance for loan losses 32,900 32,720 32,581 32,460 32,011
Intangible assets 221,896 223,385 224,878 226,481 228,539
Other assets 128,807 132,312 131,204 134,215 127,209
Total assets 4,139,724 4,160,034 4,152,992 4,212,882 4,314,241
Deposits 3,039,582 3,063,527 2,983,969 2,984,700 2,976,117
Borrowings 512,997 506,241 572,588 626,151 717,930
Subordinated debt held by unconsolidated subsidiary
trusts 80,530 80,517 80,502 80,488 80,474
Other liabilities 55,039 54,347 58,338 61,094 66,632
Total liabilities 3,688,148 3,704,632 3,695,397 3,752,433 3,841,153
Shareholders' equity 451,576 455,402 457,595 460,449 473,088
Total liabilities and shareholders' equity 4,139,724 4,160,034 4,152,992 4,212,882 4,314,241
Assets under management or administration $2,713,423 $2,642,226 $2,505,966 $2,394,012 $2,283,638
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Capital
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Tier 1 leverage ratio 7.73% 7.68% 7.57% 7.34% 7.14%
Tangible equity / tangible assets 5.86% 5.89% 5.92% 5.87% 5.99%
Accumulated other comprehensive income (3,638) 3,495 8,420 14,487 28,089
Diluted weighted average common shares O/S 30,308 30,479 30,516 30,712 30,940
Period end common shares outstanding 29,850 29,908 29,957 29,903 30,238
Cash dividends declared per common share $0.19 $0.19 $0.19 $0.19 $0.18
Book value 15.13 15.23 15.28 15.40 15.65
Tangible book value 7.69 7.76 7.77 7.82 8.09
Common stock price (end of period) 20.17 22.33 22.55 22.60 24.39
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Summary of Financial Data
(Dollars in thousands, expect per share data)
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2006 2005
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2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
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Asset Quality
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Non-accrual loans $10,327 $13,701 $12,232 $12,896 $12,455
Accruing loans 90+ days delinquent 765 1,213 1,075 672 898
Total non-performing loans 11,092 14,914 13,307 13,568 13,353
Other real estate owned (OREO) 1,353 1,613 1,048 882 684
Total non-performing assets 12,445 16,527 14,355 14,450 14,037
Net charge-offs 1,545 2,011 2,129 1,826 2,021
Loan loss allowance/loans outstanding 1.35% 1.36% 1.35% 1.35% 1.35%
Non-performing loans/loans outstanding 0.45% 0.62% 0.55% 0.56% 0.56%
Loan loss allowance/non-performing loans 297% 219% 245% 239% 240%
Net charge-offs/average loans 0.26% 0.34% 0.35% 0.30% 0.34%
Loan loss provision/net charge-offs 112% 107% 106% 125% 106%
Non-performing assets/loans outstanding plus OREO 0.51% 0.69% 0.59% 0.60% 0.59%
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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.
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