8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

__________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 31, 2013

 

(Exact name of registrant as specified in its charter)

Delaware	001-13695	16-1213679
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
5790 Widewaters Parkway, DeWitt, New York		13214-1883
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (315) 445-2282
	Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01                      Other Events.

On December 31, 2013, Community Bank System, Inc. (the “Company”), the bank holding company for Community Bank, N.A., announced that it has sold its entire portfolio of bank and insurance trust preferred collateralized debt obligation (CDO) securities because of the uncertainties created by the announcement of the final rules implementing Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the “Volcker Rule,” which was released jointly by the Federal Reserve and a number of federal regulatory agencies on December 10, 2013.  The final rule requires banking entities to divest disallowed securities by July 21, 2015, unless, upon application, the Federal Reserve grants extensions to July 21, 2017.

In addition to the liquidation of the trust preferred CDOs, the Company extinguished $226.4 million of Federal Home Loan Bank term advances and sold $417.6 million of Treasury securities previously classified as “Held to Maturity.”  The impact of these actions was a pre-tax loss of approximately $6.9 million, or $0.12 per share, after-tax, which will be reflected in the Company’s fourth quarter 2013 results.  The $6.9 million pre-tax loss was comprised of $32.4 million of gains on the Treasury securities, $15.5 million of losses on the trust preferred CDOs, and a $23.8 million charge from the early debt extinguishment.  The Company also reinvested the net cash proceeds created from these transactions of approximately $246 million, into Treasury securities with similar durations to the assets sold in order to replace the net interest income impact of the security sales and debt extinguishment.

A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01                      Financial Statements and Exhibits

(d)   Exhibits

99.1           Press Release, dated December 31, 2013

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Community Bank System, Inc.

	By:  /s/ Mark E. Tryniski
	Name:  Mark E. Tryniski
	Title:  Chief Executive Officer and President
Dated:  December 31, 2013

EX-99.1

Exhibit 99.1

	News Release
For further information, please contact:

Scott A. Kingsley, E.V.P. and

Chief Financial Officer

Office: (315) 445-3121

Fax: (315) 445-7347

For Immediate Release

COMMUNITY BANK SYSTEM, INC. DISPOSES OF CERTAIN

ASSETS IN RESPONSE TO THE VOLCKER RULE

Syracuse, N.Y. — December 31, 2013 — Community Bank System, Inc. (NYSE: CBU) announced that it has sold its entire portfolio of bank and insurance trust preferred collateralized debt obligation (CDO) securities in response to uncertainties created by the announcement of the final rules implementing the Volcker Rule, which was released jointly by the Federal Reserve and other federal regulatory agencies on December 10, 2013.  The Company believes that the final rules that implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the “Volcker Rule”, require banking entities to divest certain disallowed securities, including its holdings of trust preferred CDOs.  In addition, the Company also extinguished $226.4 million of Federal Home Loan Bank (FHLB) term advances and sold $417.6 million of Treasury securities previously classified as “Held to Maturity”.  The impact of these actions was a pre-tax loss of approximately $6.9 million, or $0.12 per share, after-tax, which will be reflected in the Company’s fourth quarter 2013 results.  The $6.9 million pre-tax loss was comprised of $32.4 million of gains on the Treasury securities, $15.5 million of losses on the trust preferred CDOs, and a $23.8 million charge from the early debt extinguishment.  The Company also reinvested the net cash proceeds created from these transactions of approximately $246 million, into Treasury securities with similar durations to the assets sold in order to replace the net interest income impact of the security sales and debt extinguishment.

“We are pleased to have efficiently executed the sale of the trust preferred CDOs and the simultaneous investment and debt actions which we believe are in the best interest of our shareholders,” said Mark Tryniski, the Company’s President & CEO.  “These actions serve to eliminate the uncertainties created by the Volcker Rule.”

Headquartered in DeWitt, New York, Community Bank System, Inc. has $7.3 billion in assets and over 180 customer facilities.  The Company’s banking subsidiary, Community Bank, N.A. operates across Upstate New York and Northeastern Pennsylvania.  Its other subsidiaries include: Benefit Plans Administrative Services, Inc., a national employee benefits consulting and trust administration firm; the CBNA Insurance Agency, with offices in five northern New York communities; Community Investment Services, Inc., a wealth management firm delivering a wide range of financial products throughout the Company’s branch network; and Nottingham Advisors, an investment management and advisory firm.  For more information, visit: www.communitybankna.com.

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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