-----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, Vc0LAdE9MT2QHhB6kIbEBOzzJt6gBO95q1AWjtp6SW4fNsgl4uxuDwN532FAPc/R vGv3jb+yzbCt6DCtQWwm6w== 0001169232-06-002036.txt : 20060425 0001169232-06-002036.hdr.sgml : 20060425 20060425083636 ACCESSION NUMBER: 0001169232-06-002036 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060425 DATE AS OF CHANGE: 20060425 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: 06776594 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 d67784_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): April 24, 2006 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 April 24, 2006, Community Bank System, Inc. announced its results of operations for the quarter ending March 31, 2006. 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 April 24, 2006 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: April 24, 2006 /s/ Sanford A. Belden ------------------------------------------- Sanford A. Belden, President, Chief Executive Officer and Director Date: April 24, 2006 /s/ Scott A. Kingsley ------------------------------------------- Scott A. Kingsley, Executive Vice President and Chief Financial Officer EX-99 2 d67784_ex99.txt PRESS RELEASE Exhibit 99 [LOGO] News Release COMMUNITY BANK SYSTEM, INC. For further information, please contact: 5790 Widewaters Parkway, Scott A. Kingsley, DeWitt, N.Y. 13214 EVP & Chief Financial Officer Office: (315) 445-3121 Fax: (315) 445-7347 COMMUNITY BANK SYSTEM ANNOUNCES FIRST QUARTER RESULTS Syracuse, N.Y. - April 24, 2006 - Community Bank System, Inc. (NYSE: CBU) reported quarterly net income of $9.5 million, or $0.31 per share, in the first quarter of 2006, a 29% decrease from the $13.3 million, or $0.43 per share, reported in the first quarter of 2005. The results of the quarter included stock option expense of $0.6 million ($0.015 per share) as a result of the company's adoption of Statement of Financial Accounting Standard (FAS) 123R, "Share-Based Payments" as of January 1, 2006. In addition, the first quarter of 2005's results included $1.7 million ($0.04 per share) of gains on securities sales. Year-over-year loan and deposit growth of 3.2% and 2.9%, respectively, and a 12% increase in non-interest income (excluding securities gains), were offset by an increased cost of funds, and an 18% reduction in investment income, resulting from the company's successful balance sheet repositioning in 2005. Cash earnings per share (which excludes the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments) were $0.35 in the first quarter. Mark A. Tryniski, Executive Vice President and Chief Operating Officer, stated, "Our first quarter results were in line with previously communicated expectations in the current interest rate environment. We are pleased with our ongoing favorable asset quality metrics, as well as the strong growth in our non-interest income sources. In addition, our loan portfolio ended the first quarter down just $3.5 million from the end of 2005, compared to the $23-24 million declines we experienced in the first quarters of 2004 and 2005, despite selling most of our conforming, longer-term, residential mortgage originations. As such, we are very optimistic of our ability to generate meaningful loan growth for the balance of 2006. The decrease in operating expenses (excluding stock options expense) in the quarter, reflected progress in our ongoing efforts to control operating expense growth." Sanford A. Belden, President and Chief Executive Officer, commented, "We were also delighted to announce last Friday that we have entered into an agreement to acquire ES&L Bancorp, Inc. (ES&L), based in Elmira, N.Y. ES&L has two branches located in the cities of Elmira and Ithaca, N.Y. This is a `trademark' acquisition for us, in that it meets all the criteria we seek in an acquisition candidate. ES&L has a significant position within its smaller urban markets in which we can potentially establish a leadership position. It has a history of providing quality service, and has demonstrated solid operating results. It offers a base of customers which have not previously had access to the breadth of retail deposit and financial services products we offer. It is led by proven management committed to remain in a leadership and business-development role within our company following the transaction. It is a logical extension of our geographic footprint, complementing the offices we currently operate in Corning, Horseheads, Nichols, and Owego, N.Y., and in Wyalusing, Little Meadows, and Towanda, Pennsylvania." William A. McKenzie, ES&L's President, will remain with Community Bank System as a Senior Regional Vice President upon the closing of the transaction, which is expected during the third quarter. Net interest income was $33.6 million for the first quarter, down 10.8% from $37.7 million in the prior year's first quarter. This was principally due to a $168.5 million decrease in average earning assets, made up of a $58.5 million increase in loans, and a $227.0 million decrease in investment securities, reflective of the decision to reposition the company's balance sheet in 2005 by selling certain securities in its investment portfolio, and paying off short-term borrowings. The first quarter net interest margin of 4.06% compares to 4.12% for the fourth quarter of 2005, and 4.34% for the first quarter of 2005. Earning asset yields in the first quarter of 2006 were 18 basis points above the first quarter of 2005, while the cost of funds increased 49 basis points, year-over-year, resulting in net interest margin compression. Total loans outstanding at the end of the first quarter were essentially flat with the end of the fourth quarter of 2005, at $2.41 billion. Small increases in the business lending portfolio were offset by slight declines in consumer installment and mortgage loans. Year-over-year, loans grew $73.9 million, or 3.2%. The company added $56.5 million of consumer installment loans since last March, including significant growth in its indirect auto lending operation. Consumer mortgages increased $13.3 million, even though the Company continued selling certain new mortgage originations into the secondary market for the second consecutive quarter. Business lending was up $4.1 million for the year-over-year despite a significant decline in automotive dealer floor plans, the result of tempered sales expectations for early 2006. The loan loss provision for the quarter of $2.2 million was slightly higher than the $1.9 million reported in the first quarter of 2005, and $0.1 million lower than the fourth quarter of 2005. Net charge-offs of $2.0 million, or 0.34% of average loans, were down $0.1 million from the fourth quarter of 2005, and $0.3 million higher than the $1.8 million reported in the first quarter of 2005. Delinquency and non-performing loan ratios remained stable, and favorable to historical levels. Non-interest income (excluding securities gains) increased $1.3 million, or 12.0%, over the first quarter of 2005. The company's employee benefits administration and consulting business posted a 19% increase in revenues over the prior year's first quarter on the strength of new product offerings and the addition of new clients. Trust, investment and asset management fees were also up 15%, year-over-year. Deposit service fees increased 10% over the first quarter of 2005, driven by several revenue-enhancement initiatives put into place during 2005. In addition, in 2005 the company successfully completed its objective of shortening the average life of its investment portfolio, generating a $0.29 per share after-tax gain (including a $0.04 per share gain in the first quarter of 2005) through the sale of securities that had optimized their total return and interest-rate sensitivity characteristics. The proceeds of these securities sales were used to reduce overnight and other short-term borrowings throughout 2005. As a result, the expected life-to-maturity of the portfolio was reduced significantly, and stands at just above five years as of March 31, 2006. There were no investment securities sales in the first quarter of 2006. Operating expenses (excluding the effect of the change in accounting for stock options) decreased 0.7% from $31.0 million in the first quarter of 2005 to $30.8 million in this year's first quarter. This was due to a $0.5 million reduction in the amortization of intangible assets, partially offset by a $0.1 million increase in employee medical costs, and a $0.2 million increase in occupancy expenses, principally utilities and real estate taxes. The company continued to aggressively manage all aspects of its operating expense structure in the first quarter, which resulted in holding operating expenses essentially flat with the year-earlier period. The company's effective income tax rate of 25.0% in the first quarter of 2006 was consistent with the 24.9% reported in the first quarter of 2005. Financial Position Average earning assets of $3.7 billion for the first quarter of 2006 were consistent with the fourth quarter of 2005. Compared to the first quarter of 2005, average earning assets were down $168.5 million, comprised of a $58.5 million organic increase in loans, offset by a $227.0 million decrease in investments. Despite the recognition of $12.2 million of full-year realized securities gains in 2005, and the continued upward movement in interest rates, the investment portfolio contained $5.8 million of net unrealized gains at quarter-end. Deposits increased $79.6 million in the first quarter, and included seasonal increases in municipal funds typically experienced early in the year, and were up $87.5 million, or 2.9%, from the end of the first quarter of 2005. Total borrowings, principally short-term and variable rate advances, have been reduced by $268.2 million, or 31%, since March 31, 2005. These actions were major components of the company's successful efforts in improving its overall interest-rate sensitivity profile in the current flat yield curve environment. Asset Quality As of March 31, 2006, the company's non-performing loan ratio was 0.62%, compared to 0.55% at the end of the fourth quarter of 2005, and 0.63% a year ago. The delinquency ratio was 1.26% at quarter-end, an improvement from 1.35% at March 31, 2005. The charge-off ratio was 0.34% (of total loans) for the first quarter, compared to 0.35% in the fourth quarter of 2005, and 0.30% for last year's first quarter. The ratio of allowance for loan losses to total loans at the end of the first quarter was 1.36%, consistent with the average level reported for the last eight quarters. 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 first quarter of 2006 the company purchased 158,125 common shares, at an aggregate cost of $3.5 million, under the previously announced 1.5 million-share repurchase program authorized in April 2005. At March 31, 2006, there were 0.75 million shares available for repurchase under this program. Outlook Mr. Tryniski added, "Our full-year forecast continues to reflect our assumption that the yield curve will remain flat in 2006. Any improvements in the interest-rate or capital market environment in 2006 could present opportunities for actions that might positively influence operating results." Conference Call Scheduled A conference call will be held with company management at 11:00 a.m. (ET) on Tuesday, April 25, 2006, to discuss the above results at 1-800-608-4146. An audio recording will be available one hour after the call until June 30, 2006, and may be accessed at 1-888-284-7564 (access code 186260). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=33099. 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. Summary of Financial Data (Dollars in thousands, except per share data)
------------------------------------------------------------- 2006 2005 ------------------------------------------------------------- 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr - --------------------------------------------------------------------------------------------------------------------------- Earnings - --------------------------------------------------------------------------------------------------------------------------- Loan income $38,328 $38,816 $37,134 $36,156 $35,502 Investment income 16,265 16,302 16,936 18,627 19,721 Total interest income 54,593 55,118 54,070 54,783 55,223 Interest expense 20,973 20,198 19,126 18,727 17,521 Net interest income 33,620 34,920 34,944 36,056 37,702 Provision for loan losses 2,150 2,250 2,275 2,134 1,875 Net interest income after provision for loan losses 31,470 32,670 32,669 33,922 35,827 Deposit service fees 6,674 7,341 7,237 6,703 6,077 Other banking services 476 616 1,411 241 525 Trust, investment and asset management fees 2,050 1,844 1,823 1,859 1,781 Benefit plan administration, consulting and actuarial fees 3,381 2,937 2,767 2,639 2,850 Investment securities gains, net 0 0 5,305 5,164 1,726 Total non-interest income 12,581 12,738 18,543 16,606 12,959 Salaries, employee benefits and professional fees 17,439 17,550 17,381 17,319 17,349 Stock option expense 626 0 0 0 0 Occupancy and equipment and furniture 4,759 4,401 4,483 4,282 4,590 Amortization of intangible assets 1,493 1,604 1,553 1,984 1,984 Other 7,118 7,981 7,309 7,609 7,067 Special charges/acquisition expenses 0 2,895 1 6 41 Total operating expenses 31,435 34,431 30,727 31,200 31,031 Income before income taxes 12,616 10,977 20,485 19,328 17,755 Income taxes 3,154 2,651 5,621 5,047 4,421 Net income $ 9,462 $ 8,326 $14,864 $14,281 $13,334 Basic earnings per share $ 0.32 $ 0.28 $ 0.49 $ 0.47 $ 0.44 Diluted earnings per share $ 0.31 $ 0.27 $ 0.48 $ 0.46 $ 0.43 Diluted earnings per share-cash (1) $ 0.35 $ 0.32 $ 0.53 $ 0.52 $ 0.47 - --------------------------------------------------------------------------------------------------------------------------- Profitability - --------------------------------------------------------------------------------------------------------------------------- Return on assets 0.93% 0.79% 1.39% 1.33% 1.23% Return on equity 8.38% 7.21% 12.59% 12.23% 11.47% Non-interest income/operating income (FTE) 25.3% 24.9% 32.5% 29.6% 23.8% Efficiency ratio (2) 60.3% 58.5% 56.4% 57.2% 55.0% - --------------------------------------------------------------------------------------------------------------------------- Components of Net Interest Margin (FTE) - --------------------------------------------------------------------------------------------------------------------------- Loan yield 6.49% 6.42% 6.17% 6.18% 6.16% Investment yield 6.11% 6.02% 5.91% 6.04% 6.20% Earning asset yield 6.36% 6.28% 6.07% 6.13% 6.18% Interest bearing deposit rate 2.19% 2.02% 1.85% 1.73% 1.56% Short-term borrowing rate 3.61% 3.33% 2.96% 3.34% 2.72% Long-term borrowing rate 5.62% 5.67% 5.83% 5.43% 5.00% Cost of all interest-bearing funds 2.80% 2.63% 2.45% 2.36% 2.18% Cost of funds (includes DDA) 2.34% 2.20% 2.05% 1.99% 1.85% Net interest margin (FTE) 4.06% 4.12% 4.06% 4.16% 4.34% Fully tax-equivalent adjustment $ 3,464 $ 3,512 $ 3,533 $ 3,533 $ 3,777 - ---------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, except per share data)
-------------------------------------------------------------------------- 2006 2005 -------------------------------------------------------------------------- 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr - ---------------------------------------------------------------------------------------------------------------------------------- Average Balances - ---------------------------------------------------------------------------------------------------------------------------------- Loans $2,400,926 $2,406,094 $2,397,410 $2,352,473 $2,342,401 Taxable investment securities 781,488 774,420 841,823 944,015 972,962 Non-taxable investment securities 522,112 522,276 523,212 519,873 557,600 Total interest-earning assets 3,704,526 3,702,790 3,762,445 3,816,361 3,872,963 Total assets 4,144,841 4,155,216 4,230,766 4,306,844 4,379,986 Interest-bearing deposits 2,410,348 2,382,620 2,386,338 2,385,370 2,383,477 Short-term borrowings 163,940 232,157 338,405 462,913 436,180 Long-term borrowings 468,884 427,082 371,877 338,957 439,244 Total interest-bearing liabilities 3,043,172 3,041,859 3,096,620 3,187,240 3,258,901 Shareholders' equity $ 458,163 $ 457,947 $ 468,559 $ 468,352 $ 471,576 - ---------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data - ---------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 121,795 $ 114,605 $ 154,674 $ 105,393 $ 135,039 Investment securities 1,307,041 1,303,117 1,318,134 1,506,274 1,554,829 Loans: Consumer mortgage 814,885 815,463 813,273 802,787 801,600 Business lending 820,722 819,605 816,145 824,007 816,616 Consumer installment 772,614 776,701 782,420 752,043 716,124 Total loans 2,408,221 2,411,769 2,411,838 2,378,837 2,334,340 Allowance for loan losses 32,720 32,581 32,460 32,011 31,898 Intangible assets 223,385 224,878 226,481 228,539 230,521 Other assets 132,312 131,204 134,215 127,209 132,039 Total assets 4,160,034 4,152,992 4,212,882 4,314,241 4,354,870 Deposits 3,063,527 2,983,969 2,984,700 2,976,117 2,976,065 Borrowings 506,241 572,588 626,151 717,930 774,476 Subordinated debt held by unconsolidated subsidiary 80,50 80,47 trusts 80,517 2 80,488 4 80,460 Other liabilities 54,347 58,338 61,094 66,632 63,443 Total liabilities 3,704,632 3,695,397 3,752,433 3,841,153 3,894,444 Shareholders' equity 455,402 457,595 460,449 473,088 460,426 Total liabilities and shareholders' equity 4,160,034 4,152,992 4,212,882 4,314,241 4,354,870 Assets under management or administration $2,642,226 $2,505,966 $2,394,012 $2,283,638 $2,203,181 - ---------------------------------------------------------------------------------------------------------------------------------- Capital - ---------------------------------------------------------------------------------------------------------------------------------- Tier 1 leverage ratio 7.68% 7.57% 7.34% 7.14% 6.83% Tangible equity / tangible assets 5.89% 5.92% 5.87% 5.99% 5.57% Accumulated other comprehensive income $ 3,495 $ 8,420 $ 14,487 $ 28,089 $ 21,709 Diluted weighted average common shares O/S 30,479 30,516 30,712 30,940 31,192 Period end common shares outstanding 29,908 29,957 29,903 30,238 30,322 Cash dividends declared per common share $ 0.19 $ 0.19 $ 0.19 $ 0.18 $ 0.18 Book value 15.23 15.28 15.40 15.65 15.18 Tangible book value 7.76 7.77 7.82 8.09 7.58 Common stock price (end of period) 22.33 22.55 22.60 24.39 22.91 - ----------------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, except per share data)
------------------------------------------------------------ 2006 2005 ------------------------------------------------------------ 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr - ------------------------------------------------------------------------------------------------------------------ Asset Quality - ------------------------------------------------------------------------------------------------------------------ Non-accrual loans $13,701 $12,232 $12,896 $12,455 $13,433 Accruing loans 90+ days delinquent 1,213 1,075 672 898 1,255 Total non-performing loans 14,914 13,307 13,568 13,353 14,688 Other real estate owned (OREO) 1,613 1,048 882 684 1,444 Total non-performing assets 16,527 14,355 14,450 14,037 16,132 Net charge-offs $ 2,011 $ 2,129 $ 1,826 $ 2,021 $ 1,755 Loan loss allowance/loans outstanding 1.36% 1.35% 1.35% 1.35% 1.37% Non-performing loans/loans outstanding 0.62% 0.55% 0.56% 0.56% 0.63% Loan loss allowance/non-performing loans 219% 245% 239% 240% 217% Net charge-offs/average loans 0.34% 0.35% 0.30% 0.34% 0.30% Loan loss provision/net charge-offs 107% 106% 125% 106% 107% Non-performing assets/loans outstanding plus OREO 0.69% 0.59% 0.60% 0.59% 0.69% - ------------------------------------------------------------------------------------------------------------------
(1) Cash earnings excludes the after-tax effect of amortization of intangible assets and market value adjustment amortization on acquired loans and deposits (2) Excludes intangible amortization, acquisition expenses/special charges, results of securities transactions and debt restructuring activities. # # # 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. -----END PRIVACY-ENHANCED MESSAGE-----