-----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, JiwWQAUM21Hbxc8hsgTU0wGq+XxGPORKJS7Z0Ffuvb9L4K/5o2o1NG96CDGIytRA NLFcrFFjEaMrF/+y+xK5Wg== 0001169232-06-004139.txt : 20061024 0001169232-06-004139.hdr.sgml : 20061024 20061024082338 ACCESSION NUMBER: 0001169232-06-004139 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061023 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061024 DATE AS OF CHANGE: 20061024 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: 061158938 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 d69655_8k.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 23, 2006 [LOGO] COMMUNITY BANK SYSTEM, INC. (Exact name of registrant as specified in its charter) Delaware 001-13695 16-1213679 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification No.) incorporation) 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 23, 2006, Community Bank System, Inc. announced its results of operations for the quarter ending September 30, 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 October 23, 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: October 23, 2006 /s/ Mark E Tryniski ----------------------------------------- Mark E. Tryniski, President, Chief Executive Officer and Director Date: October 23, 2006 /s/ Scott Kingsley ----------------------------------------- Scott Kingsley, Executive Vice President and Chief Financial Officer EX-99 2 d69655_ex-99.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 ANNOUNCES THIRD QUARTER RESULTS EARNINGS IMPROVE OVER SECOND QUARTER; ASSET QUALITY REMAINS VERY FAVORABLE Syracuse, N.Y. - October 23, 2006 - Community Bank System, Inc. (NYSE: CBU) generated quarterly net income of $10.9 million, or $0.36 per share, in the third quarter of 2006. This represents a 10% increase over the $9.9 million, or $0.33 per share, earned during the second quarter of 2006. Compared to the third quarter of 2005, which included $5.3 million in pre-tax securities gains, earnings per share were $0.12, or 25%, lower. Without these gains, third quarter earnings per share of $0.36 were equal to the year-ago quarter, despite the inclusion of a $0.01 per share expense related to the accounting for stock options required in 2006. The results of the quarter also included the acquisition of Elmira-based, ES&L Bancorp, Inc. ("ES&L"), completed in mid-August. At quarter-end, ES&L loans and deposits approximated $191 million and $121 million, respectively. The company increased loans by 10.4% over the year-ago period, including the ES&L acquisition, with growth achieved in each of its three portfolios (consumer mortgage, business lending and consumer installment). Organic loan growth in the third quarter was 4.4% (annualized), led by a 7% increase in consumer installment lending. Deposits increased 5.2% over the year-ago period, including ES&L. Cash earnings per share, which exclude the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments, were $0.40 in the third quarter, and $0.03, or 8.1% greater than the linked second quarter. Mark E. Tryniski, President and Chief Executive Officer, stated, "Our third quarter results were solid, particularly given the current interest rate environment. We were again able to generate meaningful organic loan growth during the quarter, including year-over-year increases in all three of our lending categories. Our asset quality metrics remained at very favorable levels, resulting in a lower provision for loan losses in the quarter. Quarterly net charge-offs of $1.1 million were at their lowest level since the second quarter of 2000. Non-interest income from our financial services businesses grew by $0.5 million - or nearly 11%, from the comparable year-ago quarter." Mr. Tryniski continued, "We were very pleased to complete the acquisition of ES&L Bancorp during the quarter, and look forward to capitalizing on the expanded opportunities in the greater Elmira and Ithaca communities. We are also progressing very well on the previously announced acquisition of ONB Corporation ("ONB"), the parent of Ontario National Bank, headquartered in Clifton Springs, NY. Pending both regulatory and ONB shareholders' approval, we expect to complete this transaction in the fourth quarter." Net interest income increased $0.2 million (0.5%) from the second quarter of 2006, due to increases in loan interest income of $3.7 million, partially offset by an increase of $2.5 million in interest expense and $1.0 million decrease in investment income. The higher loan income was due to $132.4 million of growth in the average loan portfolio as well as a 17-basis point increase in the average yield. The average loan portfolio increase, including the ES&L acquisition, was driven by growth in business lending ($67.0 million), consumer mortgages ($40.6 million), and consumer installments ($24.7 million). Third quarter net interest margin of 3.87% compares to 4.00% in the second quarter of 2006, and 4.06% in the third quarter of 2005, reflective of a higher cost of funds, as well as the impact of the ES&L acquisition, which had somewhat lower net interest margin attributes. Non-interest income, excluding security gains, increased by $0.6 million over the third quarter of 2005 and was $1.4 million higher than the second quarter of 2006. Consistent with prior years, the third quarter included annual dividends from the creditor life and disability insurance programs in which the company participates, approximating $0.02 per share. Financial services revenue for the third quarter of 2006 increased $0.5 million, or 10.8%, compared to the third quarter of 2005, driven by an 18.2% revenue growth in our benefits administration and consulting business. In addition, our wealth management and advisory firm completed its re-branding efforts to become Nottingham Advisors, to underscore the increased product and service offerings it has recently developed. Total operating expenses increased $0.6 million versus the second quarter of 2006, and included $0.2 million of acquisition-related expenses as well as a month-and-a-half of incremental operating expenses related to the ES&L transaction. In addition, the third quarter included certain property and equipment-related write downs associated with two branch consolidations in Pennsylvania. On a year-to-date basis, total operating expenses, excluding stock options expense recognized in 2006, were just $69,000 higher than the first nine months of 2005. The company's effective income tax rate was 24.4% in the third quarter, compared to 24.1% in the second quarter, and down from 27.4% reported in the third quarter of 2005, which was impacted by income from securities gains. Financial Position Average earning assets of $3.85 billion for the third quarter were up $99.3 million from second quarter 2006, with a $132.4 million increase in average loans, including the ES&L acquisition, and a $33.1 million decrease in investments. Average earning assets were up $72.3 million from September 30, 2005, with loans increasing $160.7 million and investments decreasing $88.4 million, reflecting the company's successful 2005 efforts to improve its interest-rate sensitivity profile by selling certain securities. Deposits increased $100.7 million, or 3.3%, for the quarter, and were up $155.6 million, or 5.2%, from a year ago, including the ES&L acquisition. Average borrowings were up $23.5 million over the second quarter, including the funding requirements of the ES&L transaction, but have decreased $50.5 million from the third quarter of 2005, again reflecting the aforementioned actions taken to improve interest-rate sensitivity. Asset Quality The $1.3 million provision for loan losses was $0.4 million lower than the second quarter of 2006 and $1.0 million lower than the third quarter of 2005, reflective of the company's lowest quarterly charge-off level in over six years, and the continuation of very favorable non-performing loan ratio trends. The $1.1 million of net charge-offs in the third quarter of 2006 was $0.4 million below the second quarter, and $0.7 million below the third quarter of 2005. The net charge-off ratio of 0.17% was nine basis points below the second quarter's ratio and 16-basis points lower than the average ratio of 0.33% for the previous eight quarters. Non-performing loans as a percentage of total loans was at 0.47% at quarter-end, down 11-basis points from 0.58% averaged over the previous eight quarters. The delinquent loan ratio of 0.74% is five basis points higher than the end of the second quarter, but below the average of 0.79% for the previous eight quarters. Dividend Increase During the quarter the company announced a 5.3% increase in its quarterly cash dividend on its common stock to $0.20 per share. At September 30, 2006's closing price of $22.16 per share, this reflected an annualized dividend yield of 3.6%. Other The company is currently in the process of reviewing market alternatives for the replacement of its $30 million, fixed-rate trust preferred obligations, which include a premium call provision currently at 4.54%, starting in February 2007. The company estimates the impact of the one-time charge associated with this refinancing to be between $0.04 and $0.05 per share, and expects to conclude its evaluation in the fourth quarter. Conference Call Scheduled A conference call will be held with company management at 11:00 a.m. (ET) on Tuesday, October 24, 2006, to discuss the above results at 1-866-838-2057. An audio recording will be available one hour after the call until December 31, 2006, and may be accessed at 1-888-284-7564 (access code 199132). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=36013. 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, NY, with $4.4 billion in assets and 130 customer facilities. Its' wholly-owned banking subsidiary operates as Community Bank, N.A. across Upstate New York, and as First Liberty Bank & Trust throughout Northeastern Pennsylvania. Its' other subsidiaries include: BPA-Harbridge, which provides actuarial, administration, consulting and daily valuation recordkeeping services for benefit plans from offices in Upstate New York, New England, and Pennsylvania; Community Investment Services, Inc., 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, NY, and North Palm Beach, Fla. For further information please visit our websites at: www.communitybankna.com or www.firstlibertybank.com. -- more -- Summary of Financial Data (Dollars in thousands, expect per share data)
----------------------------------------- Quarter Ended Year-to-Date September 30, September 30, ----------------------------------------- 2006 2005 2006 2005 - ---------------------------------------------------------------------------------------------------- Earnings - ---------------------------------------------------------------------------------------------------- Loan income $43,482 $37,133 $121,570 $108,792 Investment Income 15,679 17,039 48,731 55,457 Total interest income 59,161 54,172 170,301 164,249 Interest Expense 25,369 19,126 69,215 55,374 Net interest income 33,792 35,046 101,086 108,875 Provision for loan losses 1,300 2,275 5,175 6,284 Net interest income after provision for loan losses 32,492 32,771 95,911 102,591 Deposit service fees 7,329 7,135 21,001 19,844 Other banking services 1,329 1,411 2,166 2,177 Trust, investment and asset management fees 1,815 1,823 5,631 5,463 Benefit plan administration, consulting and actuarial fees 3,271 2,767 9,807 8,256 Investment securities gains, net 0 5,305 0 12,195 Total non-interest income 13,744 18,441 38,605 47,935 Salaries and employee benefits 16,332 16,458 48,492 48,836 Professional fees 1,119 923 3,510 3,213 Stock option expense 409 0 1,456 0 Occupancy and equipment and furniture 4,346 4,483 13,553 13,355 Amortization of intangible assets 1,520 1,553 4,502 5,521 Other 7,960 7,309 22,815 21,985 Special charges/acquisition expenses 154 1 155 48 Total operating expenses 31,840 30,727 94,483 92,958 Income before income taxes 14,396 20,485 40,033 57,568 Income taxes 3,517 5,621 9,808 15,089 Net income $10,879 $14,864 $ 30,225 $ 42,479 Basic earnings per share $ 0.36 $ 0.49 $ 1.01 $ 1.40 Diluted earnings per share $ 0.36 $ 0.48 $ 1.00 $ 1.37 Diluted earnings per share-cash (1) $ 0.40 $ 0.53 $ 1.13 $ 1.52 - ----------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, expect per share data)
------------------------------------------------------ 2006 2005 ------------------------------------------------------ 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - ------------------------------------------------------------------------------------------------------------------ Earnings - ------------------------------------------------------------------------------------------------------------------ Loan income $43,482 $39,760 $38,328 $38,816 $37,133 Investment Income 15,679 16,722 16,330 16,379 17,039 Total interest income 59,161 56,482 54,658 55,195 54,172 Interest Expense 25,369 22,873 20,973 20,198 19,126 Net interest income 33,792 33,609 33,685 34,997 35,046 Provision for loan losses 1,300 1,725 2,150 2,250 2,275 Net interest income after provision for loan losses 32,492 31,884 31,535 32,747 32,771 Deposit service fees 7,329 7,063 6,609 7,264 7,135 Other banking services 1,329 361 476 616 1,411 Trust, investment and asset management fees 1,815 1,766 2,050 1,844 1,823 Benefit plan administration, consulting and actuarial fees 3,271 3,155 3,381 2,937 2,767 Investment securities gains, net 0 0 0 0 5,305 Total non-interest income 13,744 12,345 12,516 12,661 18,441 Salaries and employee benefits 16,332 16,004 16,398 16,223 16,458 Professional fees 1,119 1,108 1,041 1,327 923 Stock option expense 409 421 626 0 0 Occupancy and equipment and furniture 4,346 4,448 4,759 4,401 4,483 Amortization of intangible assets 1,520 1,489 1,493 1,604 1,553 Other 7,960 7,737 7,118 7,981 7,309 Special charges/acquisition expenses 154 1 0 2,895 1 Total operating expenses 31,840 31,208 31,435 34,431 30,727 Income before income taxes 14,396 13,021 12,616 10,977 20,485 Income taxes 3,517 3,137 3,154 2,651 5,621 Net income $10,879 $ 9,884 $ 9,462 $ 8,326 $14,864 Basic earnings per share $ 0.36 $ 0.33 $ 0.32 $ 0.28 $ 0.49 Diluted earnings per share $ 0.36 $ 0.33 $ 0.31 $ 0.27 $ 0.48 Diluted earnings per share-cash (1) $ 0.40 $ 0.37 $ 0.35 $ 0.32 $ 0.53 - ------------------------------------------------------------------------------------------------------------------ Profitability - ------------------------------------------------------------------------------------------------------------------ Return on assets 1.01% 0.95% 0.93% 0.79% 1.39% Return on equity 9.44% 8.76% 8.38% 7.21% 12.59% Non-interest income/operating income (FTE) 26.8% 24.8% 25.2% 24.7% 32.3% Efficiency ratio (2) 58.8% 59.8% 60.3% 58.5% 56.4% - ------------------------------------------------------------------------------------------------------------------ Components of Net Interest Margin (FTE) - ------------------------------------------------------------------------------------------------------------------ Loan yield 6.77% 6.60% 6.49% 6.42% 6.17% Investment yield 5.94% 6.17% 6.10% 6.01% 5.89% Earning asset yield 6.49% 6.45% 6.35% 6.28% 6.07% Interest-bearing deposit rate 2.55% 2.38% 2.19% 2.02% 1.85% Short-term borrowing rate 4.21% 3.63% 3.61% 3.33% 2.96% Long-term borrowing rate 5.70% 5.60% 5.62% 5.67% 5.83% Cost of all interest-bearing funds 3.15% 2.96% 2.80% 2.63% 2.45% Cost of funds (includes DDA) 2.68% 2.50% 2.34% 2.20% 2.05% Net interest margin (FTE) 3.87% 4.00% 4.06% 4.12% 4.06% Fully tax-equivalent adjustment $ 3,764 $ 3,747 $ 3,464 $ 3,512 $ 3,533 - ------------------------------------------------------------------------------------------------------------------
(1) 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 structuring activities. Summary of Financial Data (Dollars in thousands, expect per share data)
----------------------------------------------------------------------- 2006 2005 ----------------------------------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - ----------------------------------------------------------------------------------------------------------------------------------- Average Balances - ----------------------------------------------------------------------------------------------------------------------------------- Loans $2,558,137 $ 2,425,763 $2,400,926 $2,406,094 $2,397,410 Taxable investment securities 776,028 803,536 787,664 782,820 853,977 Non-taxable investment securities 512,721 518,309 522,112 522,276 523,212 Total interest-earning assets 3,846,886 3,747,608 3,710,702 3,711,190 3,774,599 Total assets 4,272,714 4,167,895 4,144,841 4,155,216 4,230,766 Interest-bearing deposits 2,540,150 2,460,781 2,410,348 2,382,620 2,386,338 Short-term borrowings 125,013 127,208 163,940 232,157 338,405 Long-term borrowings 534,811 509,102 468,884 427,082 371,877 Total interest-bearing liabilities 3,199,974 3,097,091 3,043,172 3,041,859 3,096,620 Noninterest-bearing deposits 558,060 566,143 589,407 596,507 601,702 Shareholders' equity $ 456,996 $ 452,408 $ 458,163 $ 457,947 $ 468,559 - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data - ----------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 119,430 $ 124,453 $ 121,795 $ 114,605 $ 154,674 Investment securities 1,250,251 1,253,202 1,307,041 1,303,117 1,318,134 Loans: Consumer mortgage 8 90,939 822,235 814,885 815,463 813,274 Business lending 953,808 827,021 820,722 819,605 816,145 Consumer installment 816,815 795,010 772,614 776,701 782,419 Total loans 2,661,562 2,444,266 2,408,221 2,411,769 2,411,838 Allowance for loan losses 35,517 32,900 32,720 32,581 32,460 Intangible assets 239,635 221,896 223,385 224,878 226,481 Other assets 138,629 128,807 132,312 131,204 134,215 Total assets 4,373,990 4,139,724 4,160,034 4,152,992 4,212,882 Deposits 3,140,304 3,039,582 3,063,527 2,983,969 2,984,700 Borrowings 628,412 512,997 506,241 572,588 626,151 Subordinated debt held by unconsolidated subsidiary trusts 80,545 80,530 80,517 80,502 80,488 Other liabilities 60,130 55,039 54,347 58,338 61,094 Total liabilities 3,909,391 3,688,148 3,704,632 3,695,397 3,752,433 Shareholders' equity 464,599 451,576 455,402 457,595 460,449 Total liabilities and shareholders' equity 4,373,990 4,139,724 4,160,034 4,152,992 4,212,882 Assets under management or administration $2,944,725 $ 2,713,423 $2,642,226 $2,505,966 $2,394,012 - ----------------------------------------------------------------------------------------------------------------------------------- Capital - ----------------------------------------------------------------------------------------------------------------------------------- Tier 1 leverage ratio 7.26% 7.73% 7.68% 7.57% 7.34% Tangible equity / tangible assets 5.44% 5.86% 5.89% 5.92% 5.87% Accumulated other comprehensive income 3,798 (3,638) 3,495 8,420 14,487 Diluted weighted average common shares O/S 30,334 30,308 30,479 30,516 30,712 Period end common shares outstanding 29,867 29,850 29,908 29,957 29,903 Cash dividends declared per common share $ 0.20 $ 0.19 $ 0.19 $ 0.19 $ 0.19 Book value 15.56 15.13 15.23 15.28 15.40 Tangible book value 7.53 7.69 7.76 7.77 7.82 Common stock price (end of period) 22.16 20.17 22.33 22.55 22.60 - -----------------------------------------------------------------------------------------------------------------------------------
Summary of Financial Data (Dollars in thousands, expect per share data)
------------------------------------------------------- 2006 2005 ------------------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr - -------------------------------------------------------------------------------------------------------- Asset Quality - -------------------------------------------------------------------------------------------------------- Non-accrual loans $11,414 $10,327 $13,701 $12,232 $12,896 Accruing loans 90+ days delinquent 1,133 765 1,213 1,075 672 Total non-performing loans 12,547 11,092 14,914 13,307 13,568 Other real estate owned (OREO) 1,320 1,353 1,613 1,048 882 Total non-performing assets 13,867 12,445 16,527 14,355 14,450 Net charge-offs 1,115 1,545 2,011 2,129 1,826 Loan loss allowance/loans outstanding 1.33% 1.35% 1.36% 1.35% 1.35% Non-performing loans/loans outstanding 0.47% 0.45% 0.62% 0.55% 0.56% Loan loss allowance/non-performing loans 283% 297% 219% 245% 239% Net charge-offs/average loans 0.17% 0.26% 0.34% 0.35% 0.30% Loan loss provision/net charge-offs 117% 112% 107% 106% 125% Non-performing assets/loans outstanding plus OREO 0.52% 0.51% 0.69% 0.59% 0.60% - --------------------------------------------------------------------------------------------------------
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-----