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 THIRD QUARTER RESULTS
EARNINGS IMPROVE OVER SECOND QUARTER; ASSET QUALITY REMAINS VERY FAVORABLE
Syracuse, N.Y. - October 23, 2006 - Community Bank System, Inc. (NYSE:
CBU) generated quarterly net income of $10.9 million, or $0.36 per share, in the
third quarter of 2006. This represents a 10% increase over the $9.9 million, or
$0.33 per share, earned during the second quarter of 2006. Compared to the third
quarter of 2005, which included $5.3 million in pre-tax securities gains,
earnings per share were $0.12, or 25%, lower. Without these gains, third quarter
earnings per share of $0.36 were equal to the year-ago quarter, despite the
inclusion of a $0.01 per share expense related to the accounting for stock
options required in 2006. The results of the quarter also included the
acquisition of Elmira-based, ES&L Bancorp, Inc. ("ES&L"), completed in
mid-August. At quarter-end, ES&L loans and deposits approximated $191 million
and $121 million, respectively.
The company increased loans by 10.4% over the year-ago period, including
the ES&L acquisition, with growth achieved in each of its three portfolios
(consumer mortgage, business lending and consumer installment). Organic loan
growth in the third quarter was 4.4% (annualized), led by a 7% increase in
consumer installment lending. Deposits increased 5.2% over the year-ago period,
including ES&L. Cash earnings per share, which exclude the after-tax effect of
the amortization of intangible assets and acquisition-related market value
adjustments, were $0.40 in the third quarter, and $0.03, or 8.1% greater than
the linked second quarter.
Mark E. Tryniski, President and Chief Executive Officer, stated, "Our
third quarter results were solid, particularly given the current interest rate
environment. We were again able to generate meaningful organic loan growth
during the quarter, including year-over-year increases in all three of our
lending categories. Our asset quality metrics remained at very favorable levels,
resulting in a lower provision for loan losses in the quarter. Quarterly net
charge-offs of $1.1 million were at their lowest level since the second quarter
of 2000. Non-interest income from our financial services businesses grew by $0.5
million - or nearly 11%, from the comparable year-ago quarter."
Mr. Tryniski continued, "We were very pleased to complete the acquisition
of ES&L Bancorp during the quarter, and look forward to capitalizing on the
expanded opportunities in the greater Elmira and Ithaca communities. We are also
progressing very well on the previously announced acquisition of ONB Corporation
("ONB"), the parent of Ontario National Bank, headquartered in Clifton Springs,
NY. Pending both regulatory and ONB shareholders' approval, we expect to
complete this transaction in the fourth quarter."
Net interest income increased $0.2 million (0.5%) from the second quarter
of 2006, due to increases in loan interest income of $3.7 million, partially
offset by an increase of $2.5 million in interest expense and $1.0 million
decrease in investment income. The higher loan income was due to $132.4 million
of growth in the average loan portfolio as well as a 17-basis point increase in
the average yield. The average loan portfolio increase, including the ES&L
acquisition, was driven by growth in business lending ($67.0 million), consumer
mortgages ($40.6 million), and consumer installments ($24.7 million). Third
quarter net interest margin of 3.87% compares to 4.00% in the second quarter of
2006, and 4.06% in the third quarter of 2005, reflective of a higher cost of
funds, as well as the impact of the ES&L acquisition, which had somewhat lower
net interest margin attributes.
Non-interest income, excluding security gains, increased by $0.6 million
over the third quarter of 2005 and was $1.4 million higher than the second
quarter of 2006. Consistent with prior years, the third quarter included annual
dividends from the creditor life and disability insurance programs in which the
company participates, approximating $0.02 per share. Financial services revenue
for the third quarter of 2006 increased $0.5 million, or 10.8%, compared to the
third quarter of 2005, driven by an 18.2% revenue growth in our benefits
administration and consulting business. In addition, our wealth management and
advisory firm completed its re-branding efforts to become Nottingham Advisors,
to underscore the increased product and service offerings it has recently
developed.
Total operating expenses increased $0.6 million versus the second quarter
of 2006, and included $0.2 million of acquisition-related expenses as well as a
month-and-a-half of incremental operating expenses related to the ES&L
transaction. In addition, the third quarter included certain property and
equipment-related write downs associated with two branch consolidations in
Pennsylvania. On a year-to-date basis, total operating expenses, excluding stock
options expense recognized in 2006, were just $69,000 higher than the first nine
months of 2005.
The company's effective income tax rate was 24.4% in the third quarter,
compared to 24.1% in the second quarter, and down from 27.4% reported in the
third quarter of 2005, which was impacted by income from securities gains.
Financial Position
Average earning assets of $3.85 billion for the third quarter were up
$99.3 million from second quarter 2006, with a $132.4 million increase in
average loans, including the ES&L acquisition, and a $33.1 million decrease in
investments. Average earning assets were up $72.3 million from September 30,
2005, with loans increasing $160.7 million and investments decreasing $88.4
million, reflecting the company's successful 2005 efforts to improve its
interest-rate sensitivity profile by selling certain securities. Deposits
increased $100.7 million, or 3.3%, for the quarter, and were up $155.6 million,
or 5.2%, from a year ago, including the ES&L acquisition. Average borrowings
were up $23.5 million over the second quarter, including the funding
requirements of the ES&L transaction, but have decreased $50.5 million from the
third quarter of 2005, again reflecting the aforementioned actions taken to
improve interest-rate sensitivity.
Asset Quality
The $1.3 million provision for loan losses was $0.4 million lower than the
second quarter of 2006 and $1.0 million lower than the third quarter of 2005,
reflective of the company's lowest quarterly charge-off level in over six years,
and the continuation of very favorable non-performing loan ratio trends. The
$1.1 million of net charge-offs in the third quarter of 2006 was $0.4 million
below the second quarter, and $0.7 million below the third quarter of 2005. The
net charge-off ratio of 0.17% was nine basis points below the second quarter's
ratio and 16-basis points lower than the average ratio of 0.33% for the previous
eight quarters. Non-performing loans as a percentage of total loans was at 0.47%
at quarter-end, down 11-basis points from 0.58% averaged over the previous eight
quarters. The delinquent loan ratio of 0.74% is five basis points higher than
the end of the second quarter, but below the average of 0.79% for the previous
eight quarters.
Dividend Increase
During the quarter the company announced a 5.3% increase in its quarterly
cash dividend on its common stock to $0.20 per share. At September 30, 2006's
closing price of $22.16 per share, this reflected an annualized dividend yield
of 3.6%.
Other
The company is currently in the process of reviewing market alternatives
for the replacement of its $30 million, fixed-rate trust preferred obligations,
which include a premium call provision currently at 4.54%, starting in February
2007. The company estimates the impact of the one-time charge associated with
this refinancing to be between $0.04 and $0.05 per share, and expects to
conclude its evaluation in the fourth quarter.
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET)
on Tuesday, October 24, 2006, to discuss the above results at 1-866-838-2057. An
audio recording will be available one hour after the call until December 31,
2006, and may be accessed at 1-888-284-7564 (access code 199132). Investors may
also listen live via the Internet at:
http://www.videonewswire.com/event.asp?id=36013.
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, NY, with $4.4 billion in assets and 130 customer
facilities. Its' wholly-owned banking subsidiary operates as Community Bank,
N.A. across Upstate New York, and as First Liberty Bank & Trust throughout
Northeastern Pennsylvania. Its' other subsidiaries include: BPA-Harbridge, which
provides actuarial, administration, consulting and daily valuation recordkeeping
services for benefit plans from offices in Upstate New York, New England, and
Pennsylvania; Community Investment Services, Inc., a broker-dealer delivering
financial products throughout the company's branch network; and Nottingham
Advisors, a wealth management and advisory firm with offices in Buffalo, NY, and
North Palm Beach, Fla. For further information please visit our websites at:
www.communitybankna.com or www.firstlibertybank.com.
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Summary of Financial Data
(Dollars in thousands, expect per share data)
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Quarter Ended Year-to-Date
September 30, September 30,
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2006 2005 2006 2005
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Earnings
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Loan income $43,482 $37,133 $121,570 $108,792
Investment Income 15,679 17,039 48,731 55,457
Total interest income 59,161 54,172 170,301 164,249
Interest Expense 25,369 19,126 69,215 55,374
Net interest income 33,792 35,046 101,086 108,875
Provision for loan losses 1,300 2,275 5,175 6,284
Net interest income after provision for loan losses 32,492 32,771 95,911 102,591
Deposit service fees 7,329 7,135 21,001 19,844
Other banking services 1,329 1,411 2,166 2,177
Trust, investment and asset management fees 1,815 1,823 5,631 5,463
Benefit plan administration, consulting and actuarial fees 3,271 2,767 9,807 8,256
Investment securities gains, net 0 5,305 0 12,195
Total non-interest income 13,744 18,441 38,605 47,935
Salaries and employee benefits 16,332 16,458 48,492 48,836
Professional fees 1,119 923 3,510 3,213
Stock option expense 409 0 1,456 0
Occupancy and equipment and furniture 4,346 4,483 13,553 13,355
Amortization of intangible assets 1,520 1,553 4,502 5,521
Other 7,960 7,309 22,815 21,985
Special charges/acquisition expenses 154 1 155 48
Total operating expenses 31,840 30,727 94,483 92,958
Income before income taxes 14,396 20,485 40,033 57,568
Income taxes 3,517 5,621 9,808 15,089
Net income $10,879 $14,864 $ 30,225 $ 42,479
Basic earnings per share $ 0.36 $ 0.49 $ 1.01 $ 1.40
Diluted earnings per share $ 0.36 $ 0.48 $ 1.00 $ 1.37
Diluted earnings per share-cash (1) $ 0.40 $ 0.53 $ 1.13 $ 1.52
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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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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Earnings
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Loan income $43,482 $39,760 $38,328 $38,816 $37,133
Investment Income 15,679 16,722 16,330 16,379 17,039
Total interest income 59,161 56,482 54,658 55,195 54,172
Interest Expense 25,369 22,873 20,973 20,198 19,126
Net interest income 33,792 33,609 33,685 34,997 35,046
Provision for loan losses 1,300 1,725 2,150 2,250 2,275
Net interest income after provision for loan losses 32,492 31,884 31,535 32,747 32,771
Deposit service fees 7,329 7,063 6,609 7,264 7,135
Other banking services 1,329 361 476 616 1,411
Trust, investment and asset management fees 1,815 1,766 2,050 1,844 1,823
Benefit plan administration, consulting and actuarial fees 3,271 3,155 3,381 2,937 2,767
Investment securities gains, net 0 0 0 0 5,305
Total non-interest income 13,744 12,345 12,516 12,661 18,441
Salaries and employee benefits 16,332 16,004 16,398 16,223 16,458
Professional fees 1,119 1,108 1,041 1,327 923
Stock option expense 409 421 626 0 0
Occupancy and equipment and furniture 4,346 4,448 4,759 4,401 4,483
Amortization of intangible assets 1,520 1,489 1,493 1,604 1,553
Other 7,960 7,737 7,118 7,981 7,309
Special charges/acquisition expenses 154 1 0 2,895 1
Total operating expenses 31,840 31,208 31,435 34,431 30,727
Income before income taxes 14,396 13,021 12,616 10,977 20,485
Income taxes 3,517 3,137 3,154 2,651 5,621
Net income $10,879 $ 9,884 $ 9,462 $ 8,326 $14,864
Basic earnings per share $ 0.36 $ 0.33 $ 0.32 $ 0.28 $ 0.49
Diluted earnings per share $ 0.36 $ 0.33 $ 0.31 $ 0.27 $ 0.48
Diluted earnings per share-cash (1) $ 0.40 $ 0.37 $ 0.35 $ 0.32 $ 0.53
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Profitability
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Return on assets 1.01% 0.95% 0.93% 0.79% 1.39%
Return on equity 9.44% 8.76% 8.38% 7.21% 12.59%
Non-interest income/operating income (FTE) 26.8% 24.8% 25.2% 24.7% 32.3%
Efficiency ratio (2) 58.8% 59.8% 60.3% 58.5% 56.4%
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Components of Net Interest Margin (FTE)
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Loan yield 6.77% 6.60% 6.49% 6.42% 6.17%
Investment yield 5.94% 6.17% 6.10% 6.01% 5.89%
Earning asset yield 6.49% 6.45% 6.35% 6.28% 6.07%
Interest-bearing deposit rate 2.55% 2.38% 2.19% 2.02% 1.85%
Short-term borrowing rate 4.21% 3.63% 3.61% 3.33% 2.96%
Long-term borrowing rate 5.70% 5.60% 5.62% 5.67% 5.83%
Cost of all interest-bearing funds 3.15% 2.96% 2.80% 2.63% 2.45%
Cost of funds (includes DDA) 2.68% 2.50% 2.34% 2.20% 2.05%
Net interest margin (FTE) 3.87% 4.00% 4.06% 4.12% 4.06%
Fully tax-equivalent adjustment $ 3,764 $ 3,747 $ 3,464 $ 3,512 $ 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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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Average Balances
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Loans $2,558,137 $ 2,425,763 $2,400,926 $2,406,094 $2,397,410
Taxable investment securities 776,028 803,536 787,664 782,820 853,977
Non-taxable investment securities 512,721 518,309 522,112 522,276 523,212
Total interest-earning assets 3,846,886 3,747,608 3,710,702 3,711,190 3,774,599
Total assets 4,272,714 4,167,895 4,144,841 4,155,216 4,230,766
Interest-bearing deposits 2,540,150 2,460,781 2,410,348 2,382,620 2,386,338
Short-term borrowings 125,013 127,208 163,940 232,157 338,405
Long-term borrowings 534,811 509,102 468,884 427,082 371,877
Total interest-bearing liabilities 3,199,974 3,097,091 3,043,172 3,041,859 3,096,620
Noninterest-bearing deposits 558,060 566,143 589,407 596,507 601,702
Shareholders' equity $ 456,996 $ 452,408 $ 458,163 $ 457,947 $ 468,559
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Balance Sheet Data
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Cash and cash equivalents $ 119,430 $ 124,453 $ 121,795 $ 114,605 $ 154,674
Investment securities 1,250,251 1,253,202 1,307,041 1,303,117 1,318,134
Loans:
Consumer mortgage 8 90,939 822,235 814,885 815,463 813,274
Business lending 953,808 827,021 820,722 819,605 816,145
Consumer installment 816,815 795,010 772,614 776,701 782,419
Total loans 2,661,562 2,444,266 2,408,221 2,411,769 2,411,838
Allowance for loan losses 35,517 32,900 32,720 32,581 32,460
Intangible assets 239,635 221,896 223,385 224,878 226,481
Other assets 138,629 128,807 132,312 131,204 134,215
Total assets 4,373,990 4,139,724 4,160,034 4,152,992 4,212,882
Deposits 3,140,304 3,039,582 3,063,527 2,983,969 2,984,700
Borrowings 628,412 512,997 506,241 572,588 626,151
Subordinated debt held by unconsolidated subsidiary trusts 80,545 80,530 80,517 80,502 80,488
Other liabilities 60,130 55,039 54,347 58,338 61,094
Total liabilities 3,909,391 3,688,148 3,704,632 3,695,397 3,752,433
Shareholders' equity 464,599 451,576 455,402 457,595 460,449
Total liabilities and shareholders' equity 4,373,990 4,139,724 4,160,034 4,152,992 4,212,882
Assets under management or administration $2,944,725 $ 2,713,423 $2,642,226 $2,505,966 $2,394,012
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Capital
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Tier 1 leverage ratio 7.26% 7.73% 7.68% 7.57% 7.34%
Tangible equity / tangible assets 5.44% 5.86% 5.89% 5.92% 5.87%
Accumulated other comprehensive income 3,798 (3,638) 3,495 8,420 14,487
Diluted weighted average common shares O/S 30,334 30,308 30,479 30,516 30,712
Period end common shares outstanding 29,867 29,850 29,908 29,957 29,903
Cash dividends declared per common share $ 0.20 $ 0.19 $ 0.19 $ 0.19 $ 0.19
Book value 15.56 15.13 15.23 15.28 15.40
Tangible book value 7.53 7.69 7.76 7.77 7.82
Common stock price (end of period) 22.16 20.17 22.33 22.55 22.60
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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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3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
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Asset Quality
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Non-accrual loans $11,414 $10,327 $13,701 $12,232 $12,896
Accruing loans 90+ days delinquent 1,133 765 1,213 1,075 672
Total non-performing loans 12,547 11,092 14,914 13,307 13,568
Other real estate owned (OREO) 1,320 1,353 1,613 1,048 882
Total non-performing assets 13,867 12,445 16,527 14,355 14,450
Net charge-offs 1,115 1,545 2,011 2,129 1,826
Loan loss allowance/loans outstanding 1.33% 1.35% 1.36% 1.35% 1.35%
Non-performing loans/loans outstanding 0.47% 0.45% 0.62% 0.55% 0.56%
Loan loss allowance/non-performing loans 283% 297% 219% 245% 239%
Net charge-offs/average loans 0.17% 0.26% 0.34% 0.35% 0.30%
Loan loss provision/net charge-offs 117% 112% 107% 106% 125%
Non-performing assets/loans outstanding plus OREO 0.52% 0.51% 0.69% 0.59% 0.60%
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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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