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
FOURTH QUARTER AND 2006 FULL YEAR RESULTS
Syracuse, N.Y. - January 22, 2007 - Community Bank System, Inc. (NYSE:
CBU) generated quarterly net income of $8.2 million, or $0.27 per share, in the
fourth quarter of 2006, consistent with the $0.27 per share reported in the
fourth quarter of 2005, despite the inclusion of a $0.01 per share expense
related to the accounting for stock options required in 2006. The 2006 results
also included a one-time, $2.4 million charge related to the early redemption of
fixed rate, trust-preferred obligations ($0.06 per share), as well as $0.5
million of acquisition expenses and special charges ($0.01 per share). Fourth
quarter of 2005's results included special charges of $2.9 million related to
certain early retirement actions ($0.07 per share). Excluding the
non-comparative items described above, fourth quarter 2006's results improved
slightly over 2005.
Full-year 2006 earnings of $38.4 million, or $1.26 per share, were 24% below
2005's record earnings of $50.8 million, or $1.65 per share, which included
$12.2 million of securities gains ($0.29 per share). For the year, higher
non-interest income excluding securities gains, improved asset quality, organic
and acquired loan and deposit growth, and proactive operating expense management
were offset by an increased cost of funds, lower investment income, and an
additional $1.8 million of stock option expenses ($0.05 per share). Cash
earnings per share (which excludes the after-tax effect of the amortization of
intangible assets and acquisition-related market value adjustments) were $1.44
in 2006, a full $0.18 per share, or 14%, above GAAP-reported results.
"I'm very pleased with the full-year performance of the company that included
organic and acquired balance sheet growth, double-digit growth in non-banking
revenues, continued improvements in asset quality, and reductions in operating
expenses," stated Mark E. Tryniski, President and Chief Executive Officer. "The
strength of this performance offset principally all of the decline in net
interest margin resulting from the persistently flat yield curve environment.
Our personal checking account generation effort that began in April has brought
us 22,000 new customer relationships and an annualized increase in total
accounts of 14%. We completed two high-quality acquisitions during 2006, with
the addition of Elmira Savings & Loan in August, and Ontario National Bank in
December. Earlier this month we announced an agreement to acquire Tupper Lake
National Bank, which gives us entry into attractive new markets and a
geographical extension to the northeastern border of New York State. Lastly, we
increased our quarterly dividend by 5.3% in August, underscoring our confidence
in our long-term strategies as well as our commitment to maximizing shareholder
returns."
Net interest income of $33.7 million for the fourth quarter was consistent with
the third quarter, but down 3.6% from $35.0 million in the prior year's fourth
quarter. The fourth quarter net interest margin of 3.74% compares to 3.87% for
the third quarter of 2006, and 4.12% for the fourth quarter of 2005. Net
interest margin for 2006 was 3.91%, compared to 4.17% in 2005, reflecting a
higher cost of funds, as well as the impact of the ES&L and ONB acquisitions,
which had somewhat lower net interest margin attributes. Earning asset yields in
2006 were 30 basis points above 2005, while the cost of funds increased 58 basis
points, year-over-year, resulting in net margin compression.
Non-interest income (excluding securities gains and debt extinguishment charges)
increased $0.4 million, or 3.3%, over the fourth quarter of 2005. Our employee
benefits administration and consulting business posted a 16% increase in
revenues over the prior year's fourth quarter on the strength of new clients and
enhanced product offerings to both new and existing clients, resulting in a
full-year improvement of $2.0 million, or 18%. Revenues from deposit services
increased 4.6% over the prior year, stimulated by account growth from an
enhanced suite of checking account products introduced in the second quarter.
The inverted yield curve experienced in 2006 served to confirm the prudence of
our decision in 2005 to reposition our balance sheet to achieve a more favorable
interest rate sensitivity profile through gain-generating securities sales.
Quarterly operating expenses (excluding special charges and acquisition
expenses, and stock option expenses) increased less than 1%, year-over-year,
from $31.5 million in 2005 to $31.8 million in the fourth quarter of 2006.
Additionally, excluding the incremental operating expenses related to the ES&L
and ONB transactions, both quarterly and full-year operating expenses actually
declined from 2005.
The company's effective income tax rate of 20.6% in the fourth quarter of 2006
was down from 24.4% in the third quarter, and 24.1% in the fourth quarter of
2005, due principally to fluctuations in the proportion of tax-exempt income, as
well as the impact of the debt extinguishment charge incurred during the
quarter.
Financial Position
Average earning assets of $4.0 billion for the fourth quarter were up $127.6
million from the third quarter of 2006, reflecting $110.3 million of organic and
acquired loan growth, and a $17.3 million increase in investment securities,
primarily short-term/cash equivalent instruments. Compared to the fourth quarter
of 2005, average earning assets increased $263.3 million, comprised entirely of
acquired and organic increases in loans. Ending deposits grew $29.5 million in
the fourth quarter, compared to the third quarter, and were up $184.8 million
from the end of 2005, a 6.2% increase. Total borrowings, net of invested cash
equivalents, increased $53.2 million from December 31, 2005, reflective of the
two, all-cash acquisitions completed in 2006, as well as the issuance of
additional trust preferred securities.
In December 2006 the company issued $75 million of trust preferred securities at
an annual rate equal to the three-month LIBOR rate plus 1.65%. The securities
mature on December 15, 2036, and can be called without penalty beginning on
December 15, 2011. The net proceeds of the offering will be used for general
corporate purposes including the early redemption of the company's $30 million
of fixed-rate trust preferred securities in January 2007. The company also
entered into a five-year, interest rate swap agreement to convert the variable
rate of the trust preferred issuance into a fixed rate of 6.43%.
Asset Quality
As of December 31, 2006, the company's non-performing loan ratio was 0.47%,
consistent with the end of the third quarter, and improved from 0.55% a year
ago. The year-end 2006 delinquency ratio was 1.33%, 0.13% better than the 1.46%
reported a year ago. The charge-off ratio was 0.21% (of total loans) for the
fourth quarter, compared to 0.17% in the third quarter, and 0.35% for last
year's fourth quarter. The full-year charge-off ratio in 2006 was 0.24%, a
meaningful improvement from 0.33% in 2005. The ratio of allowance for loan
losses to total loans at the end of the fourth quarter was 1.34%, consistent
with the levels reported over the last nine quarters. The loan loss provision
for the quarter of $1.4 million was slightly higher than the $1.3 million
reported in the third quarter, but $0.8 million lower than the fourth quarter of
2005. The full-year provision of $6.6 million was $1.9 million below the $8.5
million recorded in 2005, and was $0.5 million above full-year net charge-offs.
The company's enhanced credit risk management programs and continued emphasis on
disciplined underwriting standards continue to have favorable impacts on the
asset quality profile.
Stock Repurchase Program
During 2006 the company purchased 259,000 of its common shares, at an aggregate
cost of $5.5 million, under the previously announced 1.5 million-share
repurchase program. In December, the Board of Directors approved an extension of
the existing program (with 647,000 shares available), and also approved an
additional 900,000-share authorization. Both programs expire on December 31,
2008.
Outlook
Mr. Tryniski commented, "Our 2007 forecast reflects the continuation of a flat
or inverted yield curve environment and our expectation of continued reductions
in our securities portfolio from contractual cash flows. Consistent with our
fourth quarter results, we expect our 2007 full-year net interest margin to be
10 - 15 basis points below the 3.91% reported in 2006, with continued organic
loan and deposit growth. We expect our asset quality profile to remain stable,
and to continue to closely manage operating expenses."
Conference Call Scheduled
A conference call will be held with company management at 11:00 a.m. (ET) on
Tuesday, January 23, 2007, to discuss the above results at 1-866-838-2057. An
audio recording will be available one hour after the call until March 31, 2007,
and may be accessed at 1-888-284-7564 (access code 203909). Investors may also
listen live via the Internet at:
http://www.videonewswire.com/event.asp?id=37319.
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., with $4.5 billion in assets and over 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.
Summary of Financial Data
(Dollars in thousands, except per share data)
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Quarter Ended Year to Date
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- ----------------------------------------------------------- December 31, December 31, December 31, December 31,
Earnings 2006 2005 2006 2005
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Loan income $ 45,543 $ 38,816 $ 167,113 $ 147,608
Investment income 16,057 16,379 64,788 71,836
Total interest income 61,600 55,195 231,901 219,444
Interest expense 27,877 20,198 97,092 75,572
Net interest income 33,723 34,997 134,809 143,872
Provision for loan losses 1,410 2,250 6,585 8,534
Net interest income after provision for loan losses 32,313 32,747 128,224 135,338
Deposit service fees 7,347 7,264 28,348 27,108
Other banking services 564 616 2,730 2,793
Trust, investment and asset management fees 1,765 1,844 7,396 7,307
Benefit plan administration, consulting and actuarial fees 3,398 2,937 13,205 11,193
Gain (loss) on investment securities & debt extinguishment (2,403) 0 (2,403) 12,195
Total non-interest income 10,671 12,661 49,276 60,596
Salaries and employee benefits 16,763 16,223 65,497 65,059
Professional fees 1,083 1,327 4,351 4,540
Stock option expense 392 0 1,848 0
Occupancy and equipment and furniture 4,331 4,401 17,884 17,756
Amortization of intangible assets 1,525 1,604 6,027 7,125
Other 8,134 7,981 30,949 29,966
Special charges/acquisition expenses 492 2,895 647 2,943
Total operating expenses 32,720 34,431 127,203 127,389
Income before income taxes 10,264 10,977 50,297 68,545
Income taxes 2,112 2,651 11,920 17,740
Net income $ 8,152 $ 8,326 $ 38,377 $ 50,805
Basic earnings per share $ 0.27 $ 0.28 $ 1.28 $ 1.68
Diluted earnings per share $ 0.27 $ 0.27 $ 1.26 $ 1.65
Diluted earnings per share-cash (1) $ 0.31 $ 0.32 $ 1.44 $ 1.84
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Summary of Financial Data
(Dollars in thousands, except per share data)
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2006 2005
------------------------------------------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
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Earnings
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Loan income $45,543 $43,482 $39,760 $38,328 $38,816
Investment income 16,057 15,679 16,722 16,330 16,379
Total interest income 61,600 59,161 56,482 54,658 55,195
Interest expense 27,877 25,369 22,873 20,973 20,198
Net interest income 33,723 33,792 33,609 33,685 34,997
Provision for loan losses 1,410 1,300 1,725 2,150 2,250
Net interest income after provision for loan losses 32,313 32,492 31,884 31,535 32,747
Deposit service fees 7,347 7,329 7,063 6,609 7,264
Other banking services 564 1,329 361 476 616
Trust, investment and asset management fees 1,765 1,815 1,766 2,050 1,844
Benefit plan administration, consulting and actuarial fees 3,398 3,271 3,155 3,381 2,937
Gain (loss) on investment securities & debt extinguishment (2,403) 0 0 0 0
Total non-interest income 10,671 13,744 12,345 12,516 12,661
Salaries and employee benefits 16,763 16,332 16,004 16,398 16,223
Professional fees 1,083 1,119 1,108 1,041 1,327
Stock option expense 392 409 421 626 0
Occupancy and equipment and furniture 4,331 4,346 4,448 4,759 4,401
Amortization of intangible assets 1,525 1,520 1,489 1,493 1,604
Other 8,134 7,960 7,737 7,118 7,981
Special charges/acquisition expenses 492 154 1 0 2,895
Total operating expenses 32,720 31,840 31,208 31,435 34,431
Income before income taxes 10,264 14,396 13,021 12,616 10,977
Income taxes 2,112 3,517 3,137 3,154 2,651
Net income $ 8,152 $10,879 $ 9,884 $ 9,462 $ 8,326
Basic earnings per share $ 0.27 $ 0.36 $ 0.33 $ 0.32 $ 0.28
Diluted earnings per share $ 0.27 $ 0.36 $ 0.33 $ 0.31 $ 0.27
Diluted earnings per share-cash (1) $ 0.31 $ 0.40 $ 0.37 $ 0.35 $ 0.32
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Profitability
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Return on assets 0.73% 1.01% 0.95% 0.93% 0.80%
Return on equity 6.89% 9.44% 8.76% 8.38% 7.21%
Non-interest income/operating income (FTE) (2) 25.9% 26.8% 24.8% 25.2% 24.7%
Efficiency ratio (3) 60.8% 58.8% 59.8% 60.3% 58.5%
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Components of Net Interest Margin (FTE)
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Loan yield 6.80% 6.77% 6.60% 6.49% 6.42%
Investment yield 5.96% 5.94% 6.17% 6.10% 6.01%
Earning asset yield 6.52% 6.49% 6.45% 6.35% 6.28%
Interest-bearing deposit rate 2.70% 2.55% 2.38% 2.19% 2.02%
Short-term borrowing rate 3.91% 4.21% 3.63% 3.61% 3.33%
Long-term borrowing rate 5.80% 5.70% 5.60% 5.62% 5.67%
Cost of all interest-bearing funds 3.32% 3.15% 2.96% 2.80% 2.63%
Cost of funds (includes DDA) 2.84% 2.68% 2.50% 2.34% 2.20%
Net interest margin (FTE) 3.74% 3.87% 4.00% 4.06% 4.12%
Fully tax-equivalent adjustment $ 3,743 $ 3,764 $ 3,747 $ 3,464 $ 3,512
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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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4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
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Average Balances
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Loans $2,668,442 $2,558,137 $2,425,763 $2,400,926 $2,406,094
Taxable investment securities 797,541 776,028 803,536 787,664 782,820
Nontaxable investment securities 508,467 512,721 518,309 522,112 522,276
Total interest-earning assets 3,974,450 3,846,886 3,747,608 3,710,702 3,711,190
Total assets 4,423,468 4,272,052 4,167,403 4,144,391 4,154,774
Interest-bearing deposits 2,576,041 2,540,150 2,460,781 2,410,348 2,382,620
Short-term borrowings 160,262 125,013 127,208 163,940 232,157
Long-term borrowings 599,121 534,811 509,102 468,884 427,082
Total interest-bearing liabilities 3,335,424 3,199,974 3,097,091 3,043,172 3,041,859
Noninterest-bearing deposits 558,439 557,398 565,651 588,957 596,065
Shareholders' equity 469,127 456,996 452,408 458,163 457,947
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Balance Sheet Data
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Cash and cash equivalents $ 232,032 $ 119,430 $ 124,453 $ 121,795 $ 114,605
Investment securities 1,229,271 1,250,251 1,253,202 1,307,041 1,303,117
Loans:
Consumer mortgage 912,505 890,939 822,235 814,885 815,463
Business lending 960,034 953,808 827,021 820,722 819,605
Consumer installment 829,019 816,815 795,010 772,614 776,701
Total loans 2,701,558 2,661,562 2,444,266 2,408,221 2,411,769
Allowance for loan losses 36,313 35,517 32,900 32,720 32,581
Intangible assets 246,136 239,635 221,896 223,385 224,878
Other assets 125,113 137,099 128,263 131,808 130,741
Total assets 4,497,797 4,372,460 4,139,180 4,159,530 4,152,529
Deposits 3,168,299 3,138,774 3,039,038 3,063,022 2,983,507
Borrowings 647,481 628,412 512,997 506,241 572,588
Subordinated debt held by unconsolidated subsidiary trusts 158,014 80,545 80,530 80,517 80,502
Other liabilities 62,475 60,130 55,039 54,348 58,337
Total liabilities 4,036,269 3,907,861 3,687,604 3,704,128 3,694,934
Shareholders' equity 461,528 464,599 451,576 455,402 457,595
Total liabilities and shareholders' equity 4,497,797 4,372,460 4,139,180 4,159,530 4,152,529
Assets under management or administration $3,153,576 $2,944,725 $2,713,423 $2,642,226 $2,505,966
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Capital
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Tier 1 leverage ratio 8.79% 7.26% 7.73% 7.68% 7.57%
Tangible equity / tangible assets 5.07% 5.44% 5.86% 5.89% 5.93%
Accumulated other comprehensive income (4,697) 3,798 (3,638) 3,495 8,420
Diluted weighted average common shares O/S 30,454 30,334 30,308 30,479 30,516
Period end common shares outstanding 30,020 29,867 29,850 29,908 29,957
Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.19 $ 0.19 $ 0.19
Book value 15.37 15.56 15.13 15.23 15.28
Tangible book value 7.17 7.53 7.69 7.76 7.77
Common stock price (end of period) 23.00 22.16 20.17 22.33 22.55
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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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4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
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Asset Quality
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Nonaccrual loans $11,382 $11,414 $10,327 $13,701 $12,232
Accruing loans 90+ days delinquent 1,207 1,133 765 1,213 1,075
Total nonperforming loans 12,589 12,547 11,092 14,914 13,307
Other real estate owned (OREO) 1,838 1,320 1,353 1,613 1,048
Total nonperforming assets 14,427 13,867 12,445 16,527 14,355
Net charge-offs 1,400 1,115 1,545 2,011 2,129
Loan loss allowance/loans outstanding 1.34% 1.33% 1.35% 1.36% 1.35%
Nonperforming loans/loans outstanding 0.47% 0.47% 0.45% 0.62% 0.55%
Loan loss allowance/nonperforming loans 288% 283% 297% 219% 245%
Net charge-offs/average loans 0.21% 0.17% 0.26% 0.34% 0.35%
Loan loss provision/net charge-offs 101% 117% 112% 107% 106%
Nonperforming assets/loans outstanding plus OREO 0.53% 0.52% 0.51% 0.69% 0.59%
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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 gain (loss) on investment securities & debt extinguishment.
(3) Excludes intangible amortization, acquisition expenses/special charges and
gain(loss) on investment securities & debt extinguishment.
# # #
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.