-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WKwavrDCO5hmor54RC0qeYOdZlfyemBQxfE0iTVsQl5OY8Y9K7TLa69coz427u42 JgNzIvM9NwEZHpWbPeaKhA== 0001169232-05-003709.txt : 20050726 0001169232-05-003709.hdr.sgml : 20050726 20050726083858 ACCESSION NUMBER: 0001169232-05-003709 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050725 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050726 DATE AS OF CHANGE: 20050726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY BANK SYSTEM INC CENTRAL INDEX KEY: 0000723188 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 161213679 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13695 FILM NUMBER: 05972830 BUSINESS ADDRESS: STREET 1: 5790 WIDEWATERS PKWY CITY: DEWITT STATE: NY ZIP: 13214 BUSINESS PHONE: 8007242262 MAIL ADDRESS: STREET 1: 5790 WIDEWATERS PARKWAY CITY: DEWITT STATE: NY ZIP: 13214 8-K 1 d64634_8-k.txt CURRENT REPORT 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): July 25, 2005 COMMUNITY BANK SYSTEM, INC. (Exact name of registrant as specified in its charter) Delaware 001-13695 16-1213679 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 5790 Widewaters Parkway, DeWitt, New York 13214-1883 (Address of principal executive offices) (Zip Code) (315) 445-2282 (Registrant's telephone number, including area code) ------------------------------------------------------------- (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: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On July 25, 2005, Community Bank System, Inc. announced its results of operations for the quarter ending June 30, 2005. The public announcement was made by means of a news release, the text of which is set forth in Exhibit 99 hereto. The information in this Form 8-K, including Exhibit 99 attached hereto, is being furnished under Item 12 and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01 Financial Statements and Exhibits. The following exhibit is filed as a part of this report: Exhibit No. Description ----------- ----------- 99 Press Release, dated July 25, 2005 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. Date: July 25, 2005 /s/ Sanford A. Belden --------------------------------------- Sanford A. Belden, President, Chief Executive Officer and Director Date: July 25, 2005 /s/ Scott A. Kingsley --------------------------------------- Scott A. Kingsley, Executive Vice President and Chief Financial Officer EX-99 2 d64634_ex99.txt PRESS RELEASE 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 GENERATES RECORD QUARTERLY INCOME AND EPS Syracuse, N.Y. - July 25, 2005 - Community Bank System, Inc. (NYSE: CBU) produced record quarterly net income of $14.3 million in the second quarter of 2005, a 17.6% increase over the second quarter of 2004. Earnings of $27.6 million for the six months ended June 30, 2005 were up 18.5% over the first two quarters of 2004, driven by higher earning asset levels, improved asset quality, higher non-interest income including securities gains, and lower acquisition expenses. These were partially offset by higher recurring operating expenses, a higher cost of funds, and a slightly higher effective tax rate. The company generated diluted earnings per share in the second quarter of $0.46, also an all-time record and 15% or $0.06 above second quarter 2004's level, on 0.3 million more weighted average shares outstanding. Diluted earnings per share of $0.89 for the first half of 2005 were $0.12, or 15.6% above the six months ended June 30, 2004. Cash earnings per share (which includes the after-tax effect of the amortization of intangible assets) were $0.97 versus $0.84 for the first half of 2004, an increase of 15.5%. Sanford A. Belden, President and Chief Executive Officer, stated, "We are very pleased to have generated record earnings in the midst of this flattening yield curve environment. We're especially happy to have produced organic loan growth of nearly $45 million this quarter, while maintaining highly favorable asset quality metrics." Net interest income of $36.1 million in the second quarter of 2005 was down 3.7% from second quarter 2004's level of $37.5 million, despite a $137.5 million increase in average earning assets, driven by the acquisition of First Heritage Bank's loan portfolio in May 2004. The net interest margin of 4.16% decreased 33 basis points versus the same quarter of 2004. Earning asset yields were up 3 basis points from the second quarter of 2004, but the cost of funds increased 38 basis points, due principally to the effect of the nine rate hikes (of 25 basis points each) from the Federal Reserve since last June. Excluding accretion on called securities, the net interest margin was down 16 basis points from the first quarter of 2005, driven almost entirely by a higher cost of funds. Despite a 7.6% (annualized) increase in loan balances, average earning assets declined $56.8 million from the first quarter of 2005, the result of our decision not to reinvest cash flows from the securities portfolio in this flattening yield curve environment. In the second quarter the company grew loans organically by $44.5 million, with increases achieved in all loan types. Consumer installment loans rose $35.9 million, and business lending was up $7.4 million, while our consumer mortgage portfolio increased a modest $1.2 million. The loan portfolio continues to be very well balanced, with business lending representing 34.6% of the total, consumer mortgages 33.8%, and consumer installment loans 31.6%. Loan loss provision for the second quarter was $2.1 million, compared to $2.3 million in the second quarter of 2004, and $1.9 million in the first quarter of 2005. Net charge-offs of $2.0 million, or 0.34% of average loans, were consistent with the trailing four quarters. Delinquency and non-performing loan ratios showed improvement over both 2004's second quarter and the first quarter of 2005. Non-interest income (excluding securities gains) grew by $0.7 million, or 6.1%, over the second quarter of 2004. Our employee benefits administration and consulting business posted a 17% increase in revenues over the second quarter of 2004. In addition, the company continued to make progress on its objective of shortening the average life of its investment portfolio, generating a $0.10 per share after-tax gain through the sale of securities that had optimized their total return and interest-rate sensitivity characteristics. As a result, the expected life-to-maturity of the portfolio was reduced from 7.0 years at June 30, 2004 to 5.0 years at the end of the current quarter. Operating expenses (excluding acquisition expenses) increased by 6.2% over the year-ago quarter, from $29.4 million to $31.2 million. This was principally due to additional expenses from First Heritage, increases in salary and benefit costs at rates slightly above the consumer price index, and higher amortization of core deposit intangibles. Second quarter operating expenses were less than 1% above first quarter 2005's, despite higher costs associated with disposing of several ORE (Other Real Estate) properties, as well as start-up costs related to our new branch in Clarks Summit, Pennsylvania. The company's effective income tax rate of 26.1% in the second quarter was up from 25.5% in the second quarter of 2004, and 24.9% in the first quarter of 2005, due principally to a lower proportion of tax-exempt income. Financial Position Average earning assets of $3.82 billion for the second quarter were down $56.8 million from the first quarter 2005, with a $10.1 million increase in average loans and a $66.9 million decrease in investments. Average earning assets were up $137.5 million from June 30, 2004, with loans increasing $129.7 million and investments up just $7.8 million. Deposits were up slightly for the quarter, with gains in IPC balances more than offsetting some seasonal declines from municipal depositors. Borrowings were down $56.5 million, or 6.6%, from the end of the first quarter, and have been reduced $122.1 million, or 13.3%, on a year-to-date basis. Asset Quality As of June 30, 2005, the Company's non-performing loan ratio was 0.56%, compared to 0.56% a year ago, and 0.63% at the end of the first quarter. The delinquency ratio improved from 1.50% and 1.35% at June 30, 2004, and March 31, 2005, respectively, to 1.32% at June 30, 2005. The second quarter's net charge-off ratio was 0.34%, compared to 0.30% in the first quarter of 2005, and 0.26% in the second quarter of 2004. The ratio of allowance for loan losses to total loans at quarter-end was 1.35%, compared to 1.37% at March 31, 2005 and 1.35% at December 31, 2004. This favorable and stable asset quality profile is the result of the Company's enhanced credit risk management programs and continued emphasis on disciplined underwriting standards. Other Matters In April 2005, the Board of Directors authorized a stock repurchase program to acquire up to 1.5 million common shares, or approximately 5.0% of total outstanding shares, over the course of the ensuing twenty months (through December 31, 2006) for general corporate purposes. In the second quarter, the company acquired 142,000 shares at a total cost of $3.38 million. Conference Call Scheduled A conference call will be held with company management at 11:00 a.m. (ET) on Tuesday, July 26, 2005, to discuss the above results at 1-866-453-5550 (access code 7769521). An audio recording will be available one hour after the call until September 30, 2005, and may be accessed at 1-866-453-6660 (access code 200926). Investors may also listen to the call live via the Internet at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=95653&event ID=1091757 This webcast will be available for one full year and may be accessed at any point at no cost. This release, including supporting financial tables, is available within the Investor Relations/News & Media section of the company's website: 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 $4.3 billion in assets and over 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. 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. Summary of Financial Data (Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------- Quarter Ended Year to Date ----------------------------------------------------------- - ------------------------------------------------------------- June 30, June 30, June 30, June 30, Earnings 2005 2004 2005 2004 - --------------------------------------------------------------------------------------------------------------------------- Interest income $54,783 $52,136 $110,006 $102,057 Interest expense 18,727 14,679 36,248 28,646 Net interest income 36,056 37,457 73,758 73,411 Loan loss provision 2,134 2,300 4,009 4,350 Net interest income after provision for loan losses 33,922 35,157 69,749 69,061 Deposit service fees 6,703 6,182 12,780 11,958 Other banking services 241 265 766 923 Trust, investment and asset management fees 1,859 2,080 3,640 3,819 Benefit plan administration, consulting and actuarial fees 2,639 2,257 5,489 4,604 Investment securities gains, net 5,164 135 6,890 145 Total non-interest income 16,606 10,919 29,565 21,449 Salaries, employee benefits and professional fees 17,324 16,362 34,691 32,526 Occupancy and equipment and furniture 4,855 4,650 10,021 9,432 Amortization of intangible assets 1,984 1,759 3,968 3,398 Other 7,031 6,593 13,504 12,794 Acquisition expenses 6 411 47 1,381 Total operating expenses 31,200 29,775 62,231 59,531 Income before income taxes 19,328 16,301 37,083 30,979 Income taxes 5,047 4,160 9,468 7,683 Net income $14,281 $12,141 $ 27,615 $ 23,296 Basic earnings per share $ 0.47 $ 0.41 $ 0.91 $ 0.80 Diluted earnings per share $ 0.46 $ 0.40 $ 0.89 $ 0.77 Diluted earnings per share-cash(1) $ 0.50 $ 0.43 $ 0.97 $ 0.84 - ---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------- 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr - ---------------------------------------------------------------------------------------------------------------------------------- Earnings - ---------------------------------------------------------------------------------------------------------------------------------- Interest income $54,783 $55,223 $ 55,515 $55,223 $52,136 Interest expense 18,727 17,521 16,940 16,166 14,679 Net interest income 36,056 37,702 38,575 39,057 37,457 Provision for loan losses 2,134 1,875 2,100 2,300 2,300 Net interest income after provision for loan losses 33,922 35,827 36,475 36,757 35,157 Deposit service fees 6,703 6,077 6,488 6,756 6,182 Other banking services 241 525 372 1,135 265 Trust, investment and asset management fees 1,859 1,781 1,789 1,975 2,080 Benefit plan administration, consulting and actuarial fees 2,639 2,850 2,256 2,298 2,257 Investment securities gains (losses), net 5,164 1,726 (73) 0 135 Total non-interest income 16,606 12,959 10,832 12,164 10,919 Salaries, employee benefits and professional fees 17,324 17,367 16,557 16,642 16,362 Occupancy and equipment and furniture 4,855 5,166 4,668 4,713 4,650 Amortization of intangible assets 1,984 1,984 2,013 2,003 1,759 Other 7,031 6,473 6,934 6,515 6,593 Acquisition expenses 6 41 270 53 411 Total operating expenses 31,200 31,031 30,442 29,926 29,775 Income before income taxes 19,328 17,755 16,865 18,995 16,301 Income taxes 5,047 4,421 4,199 4,761 4,160 Net income $14,281 $13,334 $ 12,666 $14,234 $12,141 Basic earnings per share $ 0.47 $ 0.44 $ 0.41 $ 0.47 $ 0.41 Diluted earnings per share $ 0.46 $ 0.43 $ 0.40 $ 0.45 $ 0.40 Diluted earnings per share-cash(1) $ 0.50 $ 0.47 $ 0.44 $ 0.49 $ 0.43 - ---------------------------------------------------------------------------------------------------------------------------------- Profitability - ---------------------------------------------------------------------------------------------------------------------------------- Return on assets 1.33% 1.23% 1.15% 1.29% 1.18% Return on equity 12.23% 11.47% 10.75% 12.53% 11.34% Non-interest income/operating income (FTE) 29.6% 23.8% 20.4% 22.1% 21.0% Efficiency ratio(2) 57.2% 55.0% 52.9% 50.7% 53.2% - ---------------------------------------------------------------------------------------------------------------------------------- Components of Net Interest Margin (FTE) - ---------------------------------------------------------------------------------------------------------------------------------- Loan yield 6.18% 6.16% 6.09% 5.95% 6.04% Investment yield 6.04% 6.20% 6.00% 6.06% 6.19% Earning asset yield 6.13% 6.18% 6.05% 6.00% 6.10% Interest bearing deposit rate 1.73% 1.56% 1.49% 1.45% 1.48% Short-term borrowing rate 3.34% 2.72% 2.22% 1.67% 1.23% Long-term borrowing rate 5.43% 5.00% 4.92% 4.88% 5.22% Cost of all interest bearing funds 2.36% 2.18% 2.06% 1.94% 1.90% Cost of funds (includes DDA) 1.99% 1.85% 1.75% 1.65% 1.61% Net interest margin (FTE) 4.16% 4.34% 4.32% 4.35% 4.49% Fully tax-equivalent adjustment $ 3,533 $ 3,777 $ 3,754 $ 3,793 $ 3,627 - ----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------- 2005 2004 -------------------------------------------------------------------- 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr - ------------------------------------------------------------------------------------------------------------------------------------ Average Balances - ------------------------------------------------------------------------------------------------------------------------------------ Loans $2,352,533 $2,342,467 $2,360,493 $2,362,596 $2,222,827 Taxable investment securities 944,015 972,962 991,687 1,006,893 949,099 Non-taxable investment securities 519,843 557,796 543,672 546,395 506,950 Total interest-earning assets 3,816,391 3,873,225 3,895,852 3,915,884 3,678,876 Total assets 4,306,863 4,380,012 4,397,549 4,398,260 4,145,955 Interest-bearing deposits 2,381,864 2,381,332 2,354,817 2,363,032 2,320,030 Short-term borrowings 462,913 436,180 482,930 512,074 416,767 Long-term borrowings 338,957 439,244 439,345 439,423 376,350 Total interest-bearing liabilities 3,183,734 3,256,756 3,277,092 3,314,529 3,113,147 Shareholders' equity $ 468,352 $ 471,576 $ 468,799 $ 451,799 $ 430,660 - ------------------------------------------------------------------------------------------------------------------------------------ Balance Sheet Data - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents $ 105,391 $ 135,040 $ 118,345 $ 122,329 $ 101,410 Investment securities 1,506,273 1,554,829 1,584,339 1,604,968 1,584,353 Loans: Consumer mortgage 803,127 801,923 801,412 793,120 780,550 Business lending 824,007 816,616 831,244 847,844 853,034 Consumer direct and indirect 751,766 715,856 725,837 732,787 713,151 Total loans 2,378,900 2,334,395 2,358,493 2,373,751 2,346,735 Allowance for loan losses 32,011 31,898 31,778 32,609 32,040 Intangible assets 228,539 230,521 232,500 228,744 230,783 Other assets 126,937 131,765 131,932 127,371 126,513 Total assets 4,314,029 4,354,652 4,393,831 4,424,554 4,357,754 Deposits 2,977,517 2,976,953 2,928,978 2,919,088 2,934,933 Borrowings 717,930 774,476 840,065 891,154 852,850 Subordinated debt held by unconsolidated subsidiary trusts 80,474 80,460 80,446 80,432 80,418 Other liabilities 65,020 62,337 69,714 66,679 48,156 Total liabilities 3,840,941 3,894,226 3,919,203 3,957,353 3,916,357 Shareholders' equity 473,088 460,426 474,628 467,201 441,397 Total liabilities and shareholders' equity 4,314,029 4,354,652 4,393,831 4,424,554 4,357,754 Assets under management or administration $2,216,898 $2,131,143 $2,101,936 $1,952,982 $1,936,063 - ------------------------------------------------------------------------------------------------------------------------------------ Capital - ------------------------------------------------------------------------------------------------------------------------------------ Tier 1 leverage ratio 7.14% 6.83% 6.94% 6.72% 7.01% Tangible equity / tangible assets 5.99% 5.57% 5.82% 5.68% 5.10% Accumulated other comprehensive income $ 28,089 $ 21,709 $ 34,200 $ 38,000 $ 16,287 Diluted weighted average common shares outstanding 30,940 31,192 31,500 31,545 30,670 Period end common shares outstanding 30,238 30,322 30,642 30,554 30,617 Cash dividends declared per common share $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.16 Book value 15.65 15.18 15.49 15.29 14.42 Tangible book value 8.09 7.58 7.90 7.80 6.88 Common stock price (end of period) 24.39 22.91 28.25 25.13 22.79 Total shareholders return - trailing 12 months 10.1% 1.9% 18.5% 17.6% 23.2% - ------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------- 2005 2004 ----------------------------------------------------------------- 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr - ------------------------------------------------------------------------------------------------------------------------------------ Asset Quality - ------------------------------------------------------------------------------------------------------------------------------------ Non-accrual loans $12,455 $13,432 $11,798 $13,511 $11,142 Accruing loans 90+ days delinquent 898 1,254 1,158 1,808 1,234 Restructured loans 0 0 0 806 856 Total non-performing loans 13,353 14,686 12,956 16,125 13,232 Other real estate owned (OREO) 684 1,444 1,645 734 1,044 Total non-performing assets 14,037 16,130 14,601 16,859 14,276 Net charge-offs $ 2,021 $ 1,755 $ 2,931 $ 1,731 $ 1,438 Loan loss allowance/loans outstanding 1.35% 1.37% 1.35% 1.37% 1.37% Non-performing loans/loans outstanding 0.56% 0.63% 0.55% 0.68% 0.56% Loan loss allowance/non-performing loans 240% 217% 245% 202% 242% Net charge-offs/average loans 0.34% 0.30% 0.49% 0.29% 0.26% Loan loss provision/net charge-offs 106% 107% 72% 133% 160% Non-performing assets/loans outstanding plus OREO 0.59% 0.69% 0.62% 0.71% 0.61% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Cash earnings excludes the after-tax effect of amortization of intangible assets. (2) Excludes intangible amortization, acquisition expenses, results of securities transactions and debt restructuring activities -----END PRIVACY-ENHANCED MESSAGE-----