-----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, FrVHS5nrRcJzTMw8H6x5CbVLdIMz+HBx/zu8A2BWYRxTWhmeT7wGSJYvVFIu76QY ZeEj/t5Cdi63IS7zaAOI3g== 0001169232-05-004997.txt : 20051021 0001169232-05-004997.hdr.sgml : 20051021 20051021075317 ACCESSION NUMBER: 0001169232-05-004997 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051021 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051021 DATE AS OF CHANGE: 20051021 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: 051148371 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 d65641_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): October 21, 2005 COMMUNITY BANK SYSTEM, INC. (Exact name of registrant as specified in its charter) Delaware 001-13695 16-1213679 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) 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 October 20, 2005, Community Bank System, Inc. announced its results of operations for the quarter ending September 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 October 20, 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: October 21, 2005 /s/ Sanford A. Belden ----------------------------------------- Sanford A. Belden, President, Chief Executive Officer and Director Date: October 21, 2005 /s/ Scott A. Kingsley ----------------------------------------- Scott A. Kingsley, Executive Vice President and Chief Financial Officer EX-99 2 d65641_ex99.txt PRESS RELEASE Exhibit 99 News Release [LOGO] 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 EARNINGS INCREASES THIRD QUARTER NET INCOME 4% YEAR OVER YEAR Syracuse, N.Y. - October 20, 2005 - Community Bank System, Inc. (NYSE: CBU) generated record quarterly net income of $14.9 million in the third quarter of 2005, a 4.4% increase over the third quarter of 2004. Earnings of $42.5 million for the nine months ended September 30, 2005 were up 13.2% over the first three quarters of 2004, driven by organic loan growth, higher non-interest income including securities gains, improved asset quality, and lower acquisition expenses. These were partially offset by higher recurring operating expenses, a higher cost of funds, and a higher effective tax rate. The company produced diluted earnings per share in the third quarter of $0.48, also an all-time record and 6.7% or $0.03 per share above third quarter 2004's level. Diluted earnings per share of $1.37 for the nine months ended September 30, 2005 were $0.14, or 11.4% above the first three quarters of 2004. Cash earnings per share (which excludes the after-tax effect of the amortization of intangible assets) were $1.48, versus $1.33 for the first nine months of 2004, an increase of 11.3%. 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 solid organic loan growth for the second consecutive quarter, while maintaining highly favorable asset quality metrics. Also, consistent with the direction we provided earlier in 2005, we continued to successfully reposition our balance sheet to a more favorable interest rate sensitivity profile, through additional gain-generating securities sales. Lastly, we rewarded shareholders with a 5.6% dividend increase in August." Net interest income was $34.9 million during the quarter, down 10.5% from $39.1 million in the prior year's third quarter. This was mainly due to a $153.3 million decrease in average earning assets, made up of a $34.9 million increase in loans, and a $188.2 million decrease in investment securities. Third quarter net interest margin of 4.06% compares to 4.35% for the third quarter of 2004, and 4.16% for the second quarter of 2005. Net interest margin for the nine months ended September 30, 2005 of 4.19% declined from 4.50% in the same period of 2004. Year-to-date, earning asset yields were consistent with 2004, while cost of funds increased 32 basis points over the same time frame, resulting in net margin compression. In the third quarter the company grew loans organically by $33.0 million, and has added $77.5 million in loans since March 31, 2005. Consumer installment loans rose $30.4 million in the quarter, while our consumer mortgage portfolio increased $10.5 million. Business lending was down $7.9 million in the quarter, almost entirely from significant declines in automotive dealer floor plans, a result of the robust manufacturer incentive programs in effect during the quarter, and the seasonal transition to a new model-year. Loan loss provision for the quarter of $2.3 million was equal to the third quarter of 2004, and up just $0.1 million over the second quarter of 2005, despite the solid loan growth. Net charge-offs of $1.8 million, or 0.30% of average loans, were down nearly $0.2 million from the second quarter of 2005, and just slightly higher than the $1.7 million reported in last year's third quarter. Delinquency and non-performing loan ratios both remained favorable to historical levels. The provision for loan losses for the nine months ended September 30, 2005 of $6.3 million was 5.5% below the $6.7 million recorded in the first nine months of 2004, reflecting the favorable asset quality trends, and was $0.7 million above year-to-date net charge-offs of $5.6 million. Non-interest income (excluding securities gains) increased $1.1 million, or 8.8%, over the third quarter of 2004. Our employee benefits administration and consulting business posted a 20.4% increase in revenues over the prior year's third quarter on the strength of new product offerings to both new and existing clients. Deposit service fees increased 7.1% over the prior year's third quarter driven by several revenue-enhancement initiatives put into place in the current year. Consistent with prior years, the third quarter's non-interest income includes our annual dividend from the NYBA credit life and disability programs, amounting to $0.8 million in 2005. In addition, the company continued to make progress on its objective of shortening the average life of its investment portfolio, generating an $0.11 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 has been reduced from 7.0 years at June 30, 2004 to 4.8 years at the end of the current quarter. Operating expenses (excluding acquisition expenses and amortization of intangibles) increased 4.7% from $27.9 million in the third quarter 2004 to $29.2 million in the current quarter. This was principally due to the additional day-to-day operating expenses from acquisitions completed in 2004, and modest increases in salary and benefit costs. Amortization of intangible assets dropped $0.45 million from the prior year's third quarter, based upon the completion of amortization on a specific tranche of intangibles from an acquisition in the late 1990's. Excluding amortization of intangibles, third quarter operating expenses, were consistent with the second quarter's results. The company's effective income tax rate of 27.4% in the third quarter was up from 26.1% in the second quarter, and 25.1% in the third quarter of 2004, due principally to a lower proportion of tax-exempt income. Financial Position Average earning assets of $3.76 billion at the end of the third quarter were down $53.8 million from the second quarter 2005, reflecting $44.9 million of organic loan growth, offset by $98.7 million of net investment sales and maturities. Despite the recognition of $12.2 million of year-to-date realized securities gains, the investment portfolio contained an additional $23.6 million of net unrealized gains at quarter-end. Average deposits increased $16.0 million in the quarter, while average borrowings were lowered by $91.6 million during this same time. Total borrowings, principally short-term and variable rate advances, have been reduced by $213.9 million, or 23.2% from December 31, 2004. Asset Quality As of September 30, 2005, the Company's non-performing loan ratio was 0.56%, compared to 0.56% at the end of the second quarter, and 0.68% a year ago. The delinquency ratio was 1.46% at September 30, 2005, compared to 1.47% a year ago. The charge-off ratio was 0.30% for the current quarter, compared to 0.34% in the end of the second quarter, and 0.29% for last year's third quarter. The ratio of allowance for loan losses to total loans at the end of the quarter was 1.35%, consistent with the level reported at the end of the second quarter and the end of 2004. The improved and stable asset quality profile is primarily the result of the company's enhanced credit risk management programs and continued emphasis on disciplined underwriting standards. Stock Repurchase During the third quarter of 2005 the company purchased 379,710 common shares, at an aggregate cost of $8.9 million, and an average price per share of $23.49, under the previously announced 1.5 million-share repurchase program. Dividend Increase In August, the company's Board of Directors declared a 5.6% increase in the quarterly cash dividend on its common stock to $0.19 per share. This represented the company's sixth dividend increase in seven years and, as of September 30, reflected an annualized dividend yield of 3.4%. Conference Call Scheduled A conference call will be held with company management at 11:00 a.m. (ET) on Friday, October 21, 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, 2006 and may be accessed at 1-866-453-6660 (access code 205986). 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=1141869. 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. CBU's wholly-owned banking subsidiary has $4.2 billion in assets and 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 ------------------------------------------------------------- - ------------------------------------------------------------- September 30, September 30, September 30, September 30, Earnings 2005 2004 2005 2004 - --------------------------------------------------------------------------------------------------------------------------- Interest income $54,070 $55,223 $164,076 $157,280 Interest expense 19,126 16,166 55,374 44,812 Net interest income 34,944 39,057 108,702 112,468 Loan loss provision 2,275 2,300 6,284 6,650 Net interest income after provision for loan losses 32,669 36,757 102,418 105,818 Deposit service fees 7,237 6,755 20,017 18,713 Other banking services 1,411 1,136 2,177 2,059 Trust, investment and asset management fees 1,823 1,974 5,463 5,793 Benefit plan administration, consulting and actuarial fees 2,767 2,299 8,256 6,903 Investment securities gains, net 5,305 0 12,195 145 Total non-interest income 18,543 12,164 48,108 33,613 Salaries, employee benefits and professional fees 17,451 16,641 52,142 49,167 Occupancy and equipment and furniture 5,043 4,713 15,064 14,145 Amortization of intangible assets 1,553 2,003 5,521 5,401 Other 6,679 6,516 20,183 19,310 Acquisition expenses 1 53 48 1,434 Total operating expenses 30,727 29,926 92,958 89,457 Income before income taxes 20,485 18,995 57,568 49,974 Income taxes 5,621 4,761 15,089 12,444 Net income $14,864 $14,234 $ 42,479 $ 37,530 Basic earnings per share $ 0.49 $ 0.47 $ 1.40 $ 1.27 Diluted earnings per share $ 0.48 $ 0.45 $ 1.37 $ 1.23 Diluted earnings per share-cash (1) $ 0.52 $ 0.49 $ 1.48 $ 1.33 - ---------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, except per share data)
------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - ---------------------------------------------------------------------------------------------------------------------------------- Earnings - ---------------------------------------------------------------------------------------------------------------------------------- Interest income $54,070 $54,783 $55,223 $ 55,515 $55,223 Interest expense 19,126 18,727 17,521 16,940 16,166 Net interest income 34,944 36,056 37,702 38,575 39,057 Provision for loan losses 2,275 2,134 1,875 2,100 2,300 Net interest income after provision for loan losses 32,669 33,922 35,827 36,475 36,757 Deposit service fees 7,237 6,703 6,077 6,488 6,755 Other banking services 1,411 241 525 372 1,136 Trust, investment and asset management fees 1,823 1,859 1,781 1,789 1,974 Benefit plan administration, consulting and actuarial fees 2,767 2,639 2,850 2,256 2,299 Investment securities gains (losses), net 5,305 5,164 1,726 (73) 0 Debt prepayment costs 0 0 0 0 0 Total non-interest income 18,543 16,606 12,959 10,832 12,164 Salaries, employee benefits and professional fees 17,451 17,324 17,367 16,557 16,641 Occupancy and equipment and furniture 5,043 4,855 5,166 4,668 4,713 Amortization of intangible assets 1,553 1,984 1,984 2,013 2,003 Other 6,679 7,031 6,473 6,934 6,516 Acquisition expenses 1 6 41 270 53 Total operating expenses 30,727 31,200 31,031 30,442 29,926 Income before income taxes 20,485 19,328 17,755 16,865 18,995 Income taxes 5,621 5,047 4,421 4,199 4,761 Net income $14,864 $14,281 $13,334 $ 12,666 $14,234 Basic earnings per share $ 0.49 $ 0.47 $ 0.44 $ 0.41 $ 0.47 Diluted earnings per share $ 0.48 $ 0.46 $ 0.43 $ 0.40 $ 0.45 Diluted earnings per share-cash (1) $ 0.52 $ 0.50 $ 0.47 $ 0.44 $ 0.49 - ---------------------------------------------------------------------------------------------------------------------------------- Profitability - ---------------------------------------------------------------------------------------------------------------------------------- Return on assets 1.39% 1.33% 1.23% 1.15% 1.29% Return on equity 12.59% 12.23% 11.47% 10.75% 12.53% Non-interest income/operating income (FTE) 32.5% 29.6% 23.8% 20.4% 22.1% Efficiency ratio (2) 56.4% 57.2% 55.0% 52.9% 50.7% - ---------------------------------------------------------------------------------------------------------------------------------- Components of Net Interest Margin (FTE) - ---------------------------------------------------------------------------------------------------------------------------------- Loan yield 6.17% 6.18% 6.16% 6.09% 5.95% Investment yield 5.91% 6.04% 6.20% 6.00% 6.06% Earning asset yield 6.07% 6.13% 6.18% 6.05% 6.00% Interest bearing deposit rate 1.86% 1.73% 1.56% 1.49% 1.45% Short-term borrowing rate 2.96% 3.34% 2.72% 2.22% 1.67% Long-term borrowing rate 5.83% 5.43% 5.00% 4.92% 4.88% Cost of all interest-bearing funds 2.45% 2.36% 2.18% 2.06% 1.94% Cost of funds (includes DDA) 2.05% 1.99% 1.85% 1.75% 1.65% Net interest margin (FTE) 4.06% 4.16% 4.34% 4.32% 4.35% Fully tax-equivalent adjustment $ 3,533 $ 3,533 $ 3,777 $ 3,754 $ 3,793 - ----------------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, except per share data)
-------------------------------------------------------------------- 2005 2004 -------------------------------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - ------------------------------------------------------------------------------------------------------------------------------------ Average Balances - ------------------------------------------------------------------------------------------------------------------------------------ Loans $2,397,472 $2,352,533 $2,342,467 $2,360,493 $2,362,596 Taxable investment securities 841,823 944,015 972,962 991,687 1,006,893 Non-taxable investment securities 523,301 519,843 557,796 543,672 546,395 Total interest-earning assets 3,762,596 3,816,391 3,873,225 3,895,852 3,915,884 Total assets 4,230,791 4,306,863 4,380,012 4,397,549 4,398,259 Interest-bearing deposits 2,381,919 2,381,864 2,381,332 2,354,817 2,363,032 Short-term borrowings 338,405 462,913 436,180 482,930 512,074 Long-term borrowings 371,877 338,957 439,244 439,345 439,423 Total interest-bearing liabilities 3,092,201 3,183,734 3,256,756 3,277,092 3,314,529 Shareholders' equity $ 468,559 $ 468,352 $ 471,576 $ 468,799 $ 451,799 - ------------------------------------------------------------------------------------------------------------------------------------ Balance Sheet Data - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents $ 154,672 $ 105,391 $ 135,040 $ 118,345 $ 122,329 Investment securities 1,318,436 1,506,273 1,554,829 1,584,339 1,604,968 Loans: Consumer mortgage 813,611 803,127 801,923 801,412 793,120 Business lending 816,145 824,007 816,616 831,244 847,844 Consumer direct and indirect 782,137 751,766 715,856 725,837 732,787 Total loans 2,411,893 2,378,900 2,334,395 2,358,493 2,373,751 Allowance for loan losses 32,460 32,011 31,898 31,778 32,609 Intangible assets 226,781 228,539 230,521 232,500 228,744 Other assets 133,641 126,937 131,765 131,932 127,371 Total assets 4,212,963 4,314,029 4,354,652 4,393,831 4,424,554 Deposits 2,985,919 2,977,517 2,976,953 2,928,978 2,919,088 Borrowings 626,151 717,930 774,476 840,065 891,154 Subordinated debt held by unconsolidated subsidiary trusts 80,488 80,474 80,460 80,446 80,432 Other liabilities 59,956 65,020 62,337 69,714 66,679 Total liabilities 3,752,514 3,840,941 3,894,226 3,919,203 3,957,353 Shareholders' equity 460,449 473,088 460,426 474,628 467,201 Total liabilities and shareholders' equity 4,212,963 4,314,029 4,354,652 4,393,831 4,424,554 Assets under management or administration $2,326,846 $2,216,898 $2,131,143 $2,101,936 $1,952,982 - ------------------------------------------------------------------------------------------------------------------------------------ Capital - ------------------------------------------------------------------------------------------------------------------------------------ Tier 1 leverage ratio 7.33% 7.14% 6.83% 6.94% 6.72% Tangible equity / tangible assets 5.86% 5.99% 5.57% 5.82% 5.68% Accumulated other comprehensive income $ 14,487 $ 28,089 $ 21,709 $ 34,200 $ 38,000 Diluted weighted average common shares O/S 30,712 30,940 31,192 31,500 31,545 Period end common shares outstanding 29,903 30,238 30,322 30,642 30,554 Cash dividends declared per common share $ 0.19 $ 0.18 $ 0.18 $ 0.18 $ 0.18 Book value 15.40 15.65 15.18 15.49 15.29 Tangible book value 7.81 8.09 7.58 7.90 7.80 Common stock price (end of period) 22.60 24.39 22.91 28.25 25.13 Total shareholders return - trailing 12 months -7.3% 10.1% 1.9% 18.5% 17.6% - ------------------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, except per share data)
---------------------------------------------------------------- 2005 2004 ---------------------------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - ----------------------------------------------------------------------------------------------------------------------- Asset Quality - ----------------------------------------------------------------------------------------------------------------------- Non-accrual loans $12,896 $12,455 $13,432 $11,798 $13,511 Accruing loans 90+ days delinquent 672 898 1,254 1,158 1,808 Restructured loans 0 0 0 0 806 Total non-performing loans 13,568 13,353 14,686 12,956 16,125 Other real estate owned (OREO) 882 684 1,444 1,645 734 Total non-performing assets 14,450 14,037 16,130 14,601 16,859 Net charge-offs $ 1,826 $ 2,021 $ 1,755 $ 2,931 $ 1,731 Loan loss allowance/loans outstanding 1.35% 1.35% 1.37% 1.35% 1.37% Non-performing loans/loans outstanding 0.56% 0.56% 0.63% 0.55% 0.68% Loan loss allowance/non-performing loans 239% 240% 217% 245% 202% Net charge-offs/average loans 0.30% 0.34% 0.30% 0.49% 0.29% Loan loss provision/net charge-offs 125% 106% 107% 72% 133% Non-performing assets/loans outstanding plus OREO 0.60% 0.59% 0.69% 0.62% 0.71% - -----------------------------------------------------------------------------------------------------------------------
(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-----