EX-99 2 pressrelease2009q1.htm PRESS RELEASE 2009 Q1 pressrelease2009q1.htm
                                                                                                   Exhibit 99
 
 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

Community Bank System Reports First Quarter Results



 
SYRACUSE, N.Y. — April 23, 2009 — Community Bank System, Inc. (NYSE: CBU) generated quarterly net income of $10.5 million in the first quarter of 2009, a decrease of 4.0% compared to the $10.9 million reported for the first quarter of 2008.  Quarterly earnings per share of $0.32, were $0.04, or 11.1% below the $0.36 reported in the first quarter of 2008.  Cash earnings per share for the quarter (which excludes the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments) were $0.37, which is $0.05 per share, or 15.6% higher than GAAP-reported results.
 
 
“Our disciplined approach to the very challenging market conditions produced solid results for the first quarter of 2009,” said President and Chief Executive Officer Mark E. Tryniski.  “Our efforts yielded an expansion of net interest income from organic and acquired growth of loans and core deposits, a stable net interest margin, sound asset quality, as well as growth in non-interest income sources.  However, additional operating costs, principally acquisition-related, along with significantly higher FDIC insurance assessments, combined with our decision to remain in a very liquid position throughout the quarter, resulted in a net reduction in earnings.  We are pleased with the solid progress realized integrating the 18 branch-banking centers acquired from Citizens Financial in November 2008, which added over $560 million of deposits and $110 million of loans to our market-leading, northern New York footprint.”
 
 
First quarter net interest income grew to $40.2 million, an increase of 12.9% above first quarter 2008, and reflected an 11.3% increase in average loans, as well as a one basis point improvement in net interest margin to 3.82%.  The Company’s stable margin results were the result of a 70-basis point reduction in the total cost of funds, which was reflective of continued disciplined deposit pricing, offset by a 67-basis point decline in earning asset yields, including cash equivalents.
 
 
First quarter non-interest income (excluding securities gains/losses) increased $3.0 million, or 17.5% over the same period last year.  Deposit service fees increased $0.8 million, with the growth derived from the branch acquisition, partially offset by lower customer utilization of core depository services, in part due to generally lower consumer consumption.  Mortgage banking and other service revenues grew $1.7 million, reflective of very robust secondary market mortgage activities in the quarter.  The Company’s employee benefits administration and consulting businesses posted an 11.0% increase in revenue over the first quarter 2008, primarily a result of the Alliance Benefit Group MidAtlantic (“ABG”) acquisition completed in July 2008.  First quarter wealth management revenues decreased 6.0% from the first quarter of 2008, reflective of continued difficult market conditions.  First quarter 2008 investment securities gains of $0.3 million reflected proceeds received from the VISA initial public offering.
 
 
Quarterly operating expenses (excluding acquisition expenses) of $44.3 million increased 15.4% over the first quarter of 2008, and primarily reflected the ABG acquisition completed in July 2008 and the 18 branches purchased last November.  The Company also recorded an additional $1.3 million of FDIC-insurance assessments, and incurred higher pension costs related to the investment performance of its underlying assets in 2008.
 

 
 
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Financial Position
 
Average earning assets for the first quarter were $4.70 billion, up $147.9 million from the fourth quarter of 2008, and included $58.2 million of organic and acquired loan growth, and an $89.7 million increase in average investment securities and cash equivalents, reflective of the net liquidity generated from the Citizens’ branch acquisition and organic deposit growth.  Compared to the first quarter 2008, average earning assets increased $525.6 million, comprised of loan growth of $318.4 million, and additional investment securities, including cash equivalents, of $207.2 million.  Average deposits for the first quarter were $3.77 billion, an increase of $245.4 million from the fourth quarter of 2008, and reflective of both the November branch acquisition, as well as meaningful organic growth in core deposits in the first quarter of 2009.  Average borrowings for the quarter of $862.0 million were $65.5 million below the fourth quarter.  Average shareholders’ equity for the quarter of $546.1 million was $63.4 million above the first quarter of 2008, and included the $50 million in common equity (2.5 million shares) raised in October 2008, in support of the branch acquisition.
 
 
Mr. Tryniski added, “The Company’s first quarter results reflect our long-term commitment to a disciplined and balanced strategy for growth within our markets.  We again produced solid results in our business lending portfolio, with annualized growth of 7.6% for the quarter.  We remain free of exposure to subprime or other higher-risk mortgage products within our real estate and investment portfolios, and our mortgage delinquency ratio of 1.04% remains significantly below the industry-wide ratio, of nearly 8%.  Our consumer real estate and installment lending portfolios experienced modest seasonal balance declines in the quarter and reflect the comparatively stable conditions prevalent in our primary markets.”
 
 
Asset Quality
 
The current quarter’s provision for loan losses of $2.8 million was $0.4 million higher than the fourth quarter of 2008, reflecting a consistent, yet still historically favorable level of net charge-offs.  The ratio of loan loss allowance to total loans outstanding was 1.29% as of March 31, 2009, compared to 1.26% at the end of the fourth quarter of 2008.
 
 
Net charge-offs in the first quarter were $2.3 million, compared to $2.4 million in the fourth quarter of 2008, and $0.8 million in the first quarter of 2008, and included one $0.5 million charge-off from a single commercial relationship.  The first quarter net charge-off ratio of 0.30% was consistent with the fourth quarter of 2008.
 
 
Nonperforming loans as a percentage of total loans at March 31, 2009 were 0.49%, up from 0.40% at the end of the fourth quarter, and up 17 basis points from the very favorable 0.32% at the end of last year’s first quarter.  The delinquency ratio of 1.33% was down 10 basis points from the end of the fourth quarter, and up 34-basis points from March 2008, and remains below long-term historical levels.  Nonperforming assets to total assets moved up four basis points to 0.31%, versus the 0.27% level reported at the end of the fourth quarter, and nine basis points above the very favorable 0.22% ratio reported a year ago.  These stable asset quality metrics illustrate the continued effectiveness of the Company’s disciplined risk management and underwriting standards.
 
 
Government Sponsored Programs
 
In November 2008, the Company announced that it had chosen not to apply for funds through the U.S. Treasury Department’s Capital Purchase Program (CPP), which is part of the federal government’s Troubled Asset Relief Program (TARP).  Mr. Tryniski commented, “We continue to believe that we have and will continue to generate sufficient capital to respond to the needs and organic growth opportunities inherent in our marketplaces.”
 
 
The Company is participating in the FDIC’s Temporary Liquidity Guarantee Program, including the transaction account guarantee program, which insures all non-interest bearing transaction accounts regardless of dollar amount, and the debt guarantee program, which would guarantee newly-issued senior unsecured debt.
 

 
 
Page 3 of 6 


Dividend Approval
 
In February, the Company’s Board of Directors approved a quarterly dividend on its common stock of $0.22 per share, an increase of 4.8% over the first quarter of 2008.  Mr. Tryniski commented, “Last August, we were very pleased to provide our shareholders with the 14th dividend increase in the last 15 years, which represents an annualized yield of 4.9% based on the closing share price of $17.82 on April 22, 2009.  This increase underscores our commitment to continuing to provide consistent and favorable long-term returns to our shareholders.”
 
 
Conference Call Scheduled
 
Company management will conduct an investor call tomorrow (April 24, 2009) at 11:00 a.m. (ET) to discuss first quarter results.  The conference call can be accessed at 1-866-761-8674.  An audio recording will be available one hour after the call until June 30, 2009, and may be accessed at 1-888-284-7564 (access code 247225).  Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=57472.
 
 
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: http://www.communitybankna.com.
 
 
Headquartered in DeWitt, N.Y., Community Bank System, Inc. has $5.3 billion in assets and over 150 customer facilities across Upstate New York, where it operates as Community Bank, N.A., and Northeastern Pennsylvania, where it is known as First Liberty Bank & Trust.  Its other subsidiaries include: Benefit Plans Administrative Services, Inc., an employee benefits administration and consulting firm with offices in Upstate New York, Pittsburgh and Philadelphia, Pennsylvania and Houston, Texas; the CBNA Insurance Agency, with offices in three northern New York communities; Community Investment Services, 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, N.Y., and North Palm Beach, Florida.  For more information, visit: www.communitybankna.com or www.firstlibertybank.com.
 
-- more --
 

 
 
Page 4 of 6 


Summary of Financial Data
          
(Dollars in thousands, except per share data)
          
 
2009
2008
 
1st Qtr
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
Earnings
          
Loan income
$46,791
$47,896
$46,731
$45,691
$46,515
Investment income
16,308
16,928
15,083
15,379
16,636
Total interest income
63,099
64,824
61,814
61,070
63,151
Interest expense
22,913
24,428
24,741
25,630
27,553
Net interest income
40,186
40,396
37,073
35,440
35,598
Provision for loan losses
2,810
2,395
1,985
1,570
780
Net interest income after provision for loan losses
37,376
38,001
35,088
33,870
34,818
Deposit service fees
9,018
9,409
9,044
8,910
8,261
Mortgage banking and other services
2,298
876
1,174
539
595
Trust, investment and asset management fees
2,033
1,927
2,234
2,324
2,163
Benefit plan administration, consulting and actuarial fees
7,007
6,612
6,931
5,933
6,312
Investment securities gains and (losses), net
0
0
0
 (57)
287
Total noninterest income
20,356
18,824
19,383
17,649
17,618
Salaries and employee benefits
22,868
21,690
21,114
19,772
20,386
Professional fees
1,284
1,270
1,095
902
1,298
Occupancy and equipment and furniture
6,221
5,190
5,304
5,189
5,573
Amortization of intangible assets
2,105
2,003
1,727
1,645
1,531
FDIC insurance
1,375
626
665
277
110
Goodwill impairment
0
1,745
0
0
0
Other
10,436
10,097
9,313
9,165
9,476
Acquisition expenses
112
1,356
38
5
0
Total operating expenses
44,401
43,977
39,256
36,955
38,374
Income before income taxes
13,331
12,848
15,215
14,564
14,062
Income taxes
2,866
879
3,429
3,277
3,164
Net income
$10,465
$11,969
$11,786
$11,287
$10,898
Basic earnings per share
$0.32
$0.37
$0.39
$0.38
$0.37
Diluted earnings per share
$0.32
$0.36
$0.39
$0.37
$0.36
Diluted earnings per share-cash (1)
$0.37
$0.46
$0.44
$0.42
$0.41
Profitability
          
Return on assets
0.81%
0.95%
1.00%
0.98%
0.94%
Return on equity
7.77%
8.96%
9.62%
9.27%
9.08%
Cash return on equity
9.04%
11.22%
10.84%
10.44%
10.20%
Noninterest income/operating income (FTE)
31.5%
29.9%
32.3%
31.1%
30.5%
Efficiency ratio (2)
65.3%
64.4%
62.4%
62.1%
64.8%
Components of Net Interest Margin (FTE)
          
Loan yield
6.06%
6.20%
6.29%
6.43%
6.65%
Cash equivalents yield
0.25%
0.66%
2.18%
1.93%
2.86%
Investment yield
5.82%
5.87%
5.78%
5.94%
6.18%
Earning asset yield
5.79%
6.00%
6.13%
6.25%
6.46%
Interest-bearing deposit rate
1.76%
1.99%
2.21%
2.42%
2.68%
Short-term borrowing rate
4.19%
3.73%
3.87%
4.07%
4.17%
Long-term borrowing rate
4.65%
4.74%
4.72%
4.77%
4.79%
Cost of all interest-bearing funds
2.33%
2.53%
2.75%
2.92%
3.13%
Cost of funds (includes DDA)
2.00%
2.18%
2.36%
2.51%
2.70%
Net interest margin (FTE)
3.82%
3.86%
3.82%
3.78%
3.81%
Fully tax-equivalent adjustment
$4,025
$3,803
$3,645
$3,745
$3,890

 

 
 
Page 5 of 6 


Summary of Financial Data
          
(Dollars in thousands, except per share data)
          
 
2009
2008
  
 
1st Qtr
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
Average Balances
          
Loans
$3,140,524
$3,082,283
$2,963,504
$2,869,338
$2,822,100
Cash equivalents
155,306
79,566
4,321
29,138
44,728
Taxable investment securities
842,496
853,306
766,581
750,820
764,234
Nontaxable investment securities
559,344
534,583
511,299
524,454
540,993
Total interest-earning assets
4,697,670
4,549,738
4,245,705
4,173,750
4,172,055
Total assets
5,235,252
5,035,398
4,712,423
4,639,946
4,642,019
Interest-bearing deposits
3,123,296
2,913,671
2,658,681
2,666,424
2,659,584
Short-term borrowings
477,184
478,875
477,139
420,392
426,116
Long-term borrowings
384,852
448,622
449,292
449,474
457,177
Total interest-bearing liabilities
3,985,332
3,841,168
3,585,112
3,536,290
3,542,877
Noninterest-bearing deposits
651,298
615,540
590,098
563,045
555,927
Shareholders' equity
$546,132
$531,627
$487,249
$489,444
$482,750
Balance Sheet Data
          
Cash and cash equivalents
$350,670
$213,753
$103,595
$123,233
$160,394
Investment securities
1,417,966
1,395,011
1,283,776
1,258,792
1,307,682
Loans:
          
Consumer mortgage
1,026,934
1,062,943
1,039,530
1,015,114
987,807
Business lending
1,078,593
1,058,846
1,028,400
1,011,137
998,443
Consumer installment
998,214
1,014,351
936,100
895,992
851,536
Total loans
3,103,741
3,136,140
3,004,030
2,922,243
2,837,786
Allowance for loan losses
40,053
39,575
37,413
37,128
36,428
Intangible assets
326,519
328,624
257,042
253,752
255,111
Other assets
165,890
140,599
155,489
136,891
133,870
Total assets
5,324,733
5,174,552
4,766,519
4,657,783
4,658,415
Deposits
3,862,165
3,700,812
3,226,393
3,247,348
3,243,382
Borrowings
756,854
760,558
901,659
772,646
766,153
Subordinated debt held by unconsolidated subsidiary trusts
101,981
101,975
101,969
101,963
101,956
Other liabilities
56,536
66,556
53,423
52,178
58,256
Total liabilities
4,777,536
4,629,901
4,283,444
4,174,135
4,169,747
Shareholders' equity
547,197
544,651
483,075
483,648
488,668
Total liabilities and shareholders' equity
5,324,733
5,174,552
4,766,519
4,657,783
4,658,415
Capital
          
Tier 1 leverage ratio
7.16%
7.22%
7.73%
7.75%
7.59%
Tangible equity / tangible assets
4.42%
4.46%
5.01%
5.22%
5.30%
Diluted weighted average common shares O/S(4)
32,792
32,710
30,254
30,257
30,034
Period end common shares outstanding
32,742
32,633
30,096
29,935
29,892
Cash dividends declared per common share
$0.22
$0.22
$0.22
$0.21
$0.21
Book value
16.71
16.69
16.05
16.16
16.35
Tangible book value
6.74
6.62
7.51
7.68
7.81
Common stock price (end of period)
           16.75
            24.39
           25.15
           20.62
           24.56

 
 
Page 6 of 6 



Summary of Financial Data
          
(Dollars in thousands, except per share data)
          
 
2009
2008
  
 
1st Qtr
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
Asset Quality
          
Nonaccrual loans
$14,339
$12,126
$10,496
$11,080
$8,757
Accruing loans 90+ days delinquent
947
553
1,018
370
392
Total nonperforming loans
15,286
12,679
11,514
11,450
9,149
Other real estate owned (OREO)
1,383
1,059
837
637
1,027
Total nonperforming assets
16,669
13,738
12,351
12,087
10,176
Net charge-offs
2,332
2,390
1,700
870
779
Loan loss allowance/loans outstanding
1.29%
1.26%
1.25%
1.27%
1.28%
Nonperforming loans/loans outstanding
0.49%
0.40%
0.38%
0.39%
0.32%
Loan loss allowance/nonperforming loans
262%
312%
325%
324%
398%
Net charge-offs/average loans
0.30%
0.31%
0.23%
0.12%
0.11%
Delinquent loans/ending loans
1.33%
1.43%
1.26%
1.13%
0.99%
Loan loss provision/net charge-offs
121%
100%
117%
180%
100%
Nonperforming assets/total assets
0.31%
0.27%
0.26%
0.26%
0.22%

(1) Cash earnings excludes the after-tax effect of amortization of intangible assets, goodwill impairment, 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.
(4) Diluted weighted average common shares outstanding has been stated to comply with the provisions of FSP EITF 03-6-1.

# # #
 

 
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.