EX-99 3 d71719_ex-99.htm PRESS RELEASE

Exhibit 99

 

News Release

 

COMMUNITY BANK SYSTEM

 

5790 Widewaters Parkway

For further information, please contact:

 

Scott A. Kingsley,

EVP & Chief Financial Officer

Office: (315) 445-3121

Fax: (315) 445-7347

 

 

COMMUNITY BANK SYSTEM ANNOUNCES

HIGHER FIRST QUARTER RESULTS

 

Syracuse, N.Y. – April 24, 2007 – Community Bank System, Inc. (NYSE: CBU) reported quarterly net income of $9.7 million, or $0.32 per share, in the first quarter of 2007, a 3% increase from the $0.31 per share, or $9.5 million, reported in the first quarter of 2006. Year-over-year loan and deposit growth of 12% and 6%, respectively, combined with very favorable asset quality results and an 8% increase in noninterest income, were able to more than offset an increased cost of funds and higher operating expenses, resulting in improved earnings. Cash earnings per share (which excludes the after-tax effect of the amortization of intangible assets and acquisition-related market value adjustments) were $0.36 in the first quarter, a full $0.04 per share, or 13%, above GAAP-reported results.

 

“We are pleased to report improved earnings for the first quarter of 2007 that are in line with previously communicated expectations,” said Mark E. Tryniski, President and Chief Executive Officer. “Balance sheet growth, improved noninterest income, and exceptional asset quality more than offset a tightening of the net interest margin. Deposit growth was very strong in the quarter, with loan volumes experiencing an expected seasonal decline. We’re particularly pleased with the performance of our Pennsylvania region (First Liberty Bank & Trust), which delivered strong first quarter growth in both commercial lending and consumer deposits. First quarter 2007 results also reflect the two acquisitions we completed during 2006, including Elmira Savings & Loan in August and Ontario National Bank in December. We expect to close on the previously announced acquisitions of Hand Benefit & Trust in May and Tupper Lake National Bank in early June.”

 

Net interest income was $33.4 million for the first quarter, down less than 1% from $33.7 million in the prior year’s first quarter. Average earning assets were up $318 million from the first quarter of 2006, a result of both acquired and organic loan growth. The first quarter net interest margin of 3.74% was consistent with the fourth quarter of 2006, but was 32 basis points below the 4.06% reported in the first quarter of last year, reflecting a higher cost of funds as well as the impact of the ES&L and ONB acquisitions completed in 2006, which had somewhat lower net interest margin attributes. Earning asset yields in the first quarter of 2007 were 23 basis points above the first quarter of 2006, while the cost of funds increased 56 basis points year-over-year, resulting in net interest margin compression.

 

Total loans outstanding at the end of the first quarter were $2.68 billion, up 11% from the prior year. The 0.7% decline in the company’s loan portfolios from year-end 2006 related to seasonal softness in the company’s consumer indirect installment business, consistent with previous years. A small increase in the consumer mortgage portfolio was offset by a slight decline in business loans during the quarter. Average loans were up slightly from the fourth quarter of 2006, and increased 12% from last year’s first quarter. The company’s loan portfolio continues to be very well balanced, with 35.7% of total outstandings in business lending, 34.1% consumer mortgages, and 30.2% in consumer installment products including home equity loans. The company’s consumer real estate portfolio does not include exposure to subprime, alternative-A, or other nontraditional types of mortgage products.

 


The $0.2 million loan loss provision for the quarter was significantly lower than the $2.15 million reported in the first quarter of 2006, and $1.2 million lower than the fourth quarter of 2006. Net charge-offs of $0.6 million, or 0.09% of average loans, were down $1.4 million from the first quarter of 2006, and $0.8 million lower than the $1.4 million reported in the fourth quarter of 2006. Delinquency and nonperforming loan ratios remained stable, and favorable to historical levels.

 

Noninterest income (excluding gains and losses on investment securities and debt extinguishment) increased $1.0 million, or 7.7%, over the first quarter of 2006. The company’s employee benefits administration and consulting business posted a 17% increase in revenues over the prior year’s first quarter on the strength of new product offerings and new clients. Excluding some large trust estate fees received in the first quarter of 2006, trust, investment and asset management fees were essentially flat from the year-earlier period. Deposit service fees and other banking revenues increased 8% over the first quarter of 2006, driven by new account relationships and growing card-related revenues.

Operating expenses (excluding acquisition expenses and special charges) increased 6.4% from $31.4 million in the first quarter of 2006 to $33.5 million in this year’s, due principally to the ES&L and ONB acquisitions completed in the second half of 2006. Recurring operating expenses were 3.8% above the fourth quarter of 2006, reflecting a full-quarter inclusion of ONB operating expenses, as well as annual merit increases and certain stock-based compensation costs.

 

The company’s effective income tax rate of 24.1% in the first quarter of 2007 was slightly below the 25.0% reported in the first quarter of 2006.

 

Financial Position

 

Average earning assets of $4.0 billion for the first quarter of 2007 were up slightly from the fourth quarter of 2006. Compared to the first quarter of 2006, average earning assets increased $318.0 million, comprised of an organic and acquired increase in loans of $283.6 million and a $34.4 million increase in investments, principally short-term cash equivalents. Average deposits increased $40.1 million in the first quarter, and included seasonal increases in municipal funds (typically experienced early in the year), and were up $175.3 million, or 5.8%, from the first quarter of 2006. Total borrowings were down $51.6 million from the end of December and included the previously reported early redemption of $30 million of fixed-rate trust preferred securities early in the quarter.

 

Asset Quality

 

As of March 31, 2007, the company’s nonperforming loan ratio was 0.47%, consistent with the end of the fourth quarter of 2006, and lower than the 0.62% a year ago. The delinquency ratio was 1.02% at quarter-end, an improvement from 1.33% at December 31, 2006, and 1.26% at March 31, 2006. The charge-off ratio was 0.09% (of total loans) for the first quarter, compared to 0.21% in the fourth quarter of 2006, and 0.34% for last year’s first quarter. Despite the lower provision for loan losses, the ratio of allowance for loan losses to total loans remained at 1.34% at the end of the first quarter, consistent with the end of the fourth quarter. This 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 2007 the company purchased 61,300 common shares at an aggregate cost of approximately $1.25 million under the previously announced share repurchase programs authorized in December 2006. At March 31, 2007, there were 1.49 million shares available for repurchase under these programs.

 


Expansion Initiatives

 

As stated above, during the first quarter the company announced its intentions to acquire Tupper Lake National Bank (TLNB) as well as Hand Benefits & Trust (HB&T). Based in Tupper Lake, N.Y., the $100-million-asset bank operates five branches and an insurance agency in northeastern New York. Its Plattsburgh and Saranac Lake locations will mark the company’s first entry into the counties of Clinton and Essex, respectively, and its two Tupper Lake branches will strengthen its presence in Franklin County to a ‘number-one’ market share position. HB&T, based in Houston, Texas, provides employee benefit plan administration and trust services. When combined with its existing BPA-Harbridge subsidiary, the company expects to generate more than $20 million in annual revenue and administer over 140,000 defined contribution and flexible spending accounts with nearly $3.0 billion of assets under custody. In addition, the company is nearing completion of a new branch in Springville, N.Y., which will position it closer to many attractive opportunities in Buffalo’s southern suburbs. It is also expanding its new Ithaca, N.Y. facility, gained from the ES&L purchase, in order to better service this very vibrant community. All of these events are expected to be completed during the second quarter.

 

Conference Call Scheduled

 

A conference call will be held with company management at 11:00 a.m. (ET) on Wednesday, April 25, 2007, to discuss the above results at 1-866-838-2057. An audio recording will be available one hour after the call until June 30, 2007, and may be accessed at 1-888-284-7564 (access code 212334). Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=38896.

 

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., with $4.5 billion in assets and over 130 customer facilities. Its wholly-owned banking subsidiary operates as Community Bank, N.A. across Upstate New York, where it operates as Community Bank, N.A., 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 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, N.Y., and North Palm Beach, Fla. 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)

 

 

 

2007

2006

 

 

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

Earnings

 

 

 

 

 

Loan income

$44,935

$45,543

$43,482

$39,760

$38,328

Investment Income

16,623

16,057

15,679

16,722

16,330

Total interest income

61,558

61,600

59,161

56,482

54,658

Interest Expense

28,191

27,877

25,369

22,873

20,973

Net interest income

33,367

33,723

33,792

33,609

33,685

Provision for loan losses

200

1,410

1,300

1,725

2,150

Net interest income after provision for loan losses

33,167

32,313

32,492

31,884

31,535

Deposit service fees

6,977

7,347

7,329

7,063

6,609

Other banking services

670

564

1,329

361

476

Trust, investment and asset management fees

1,860

1,765

1,815

1,766

2,050

Benefit plan administration, consulting and actuarial fees

3,972

3,398

3,271

3,155

3,381

Investment securities gains, net

0

(2,403)

0

0

0

Total noninterest income

13,479

10,671

13,744

12,345

12,516

Salaries and employee benefits

18,286

17,155

16,741

16,425

16,782

Professional fees

1,185

1,083

1,119

1,108

1,283

Occupancy and equipment and furniture

4,649

4,331

4,346

4,448

4,759

Amortization of intangible assets

1,515

1,525

1,520

1,489

1,493

Other

7,825

8,134

7,960

7,737

7,118

Special charges/acquisition expenses

459

492

154

1

0

Total operating expenses

33,919

32,720

31,840

31,208

31,435

Income before income taxes

12,727

10,264

14,396

13,021

12,616

Income taxes

3,071

2,112

3,517

3,137

3,154

Net income

$9,656

$8,152

$10,879

$9,884

$9,462

Basic earnings per share

$0.32

$0.27

$0.36

$0.33

$0.32

Diluted earnings per share

$0.32

$0.27

$0.36

$0.33

$0.31

Diluted earnings per share-cash (1)

$0.36

$0.31

$0.40

$0.37

$0.35

Profitability

 

 

 

 

 

Return on assets

0.88%

0.73%

1.01%

0.95%

0.93%

Return on equity

8.43%

6.89%

9.44%

8.76%

8.38%

Noninterest income/operating income (FTE) (2)

26.6%

25.9%

26.8%

24.8%

25.2%

Efficiency ratio (3)

63.1%

60.8%

58.8%

59.8%

60.3%

Components of Net Interest Margin (FTE)

 

 

 

 

 

Loan yield

6.81%

6.80%

6.77%

6.60%

6.49%

Investment yield

6.11%

5.96%

5.94%

6.17%

6.10%

Earning asset yield

6.58%

6.52%

6.49%

6.45%

6.35%

Interest-bearing deposit rate

2.80%

2.70%

2.55%

2.38%

2.19%

Short-term borrowing rate

4.16%

3.91%

4.21%

3.63%

3.61%

Long-term borrowing rate

5.57%

5.80%

5.70%

5.60%

5.62%

Cost of all interest-bearing funds

3.37%

3.32%

3.15%

2.96%

2.80%

Cost of funds (includes DDA)

2.90%

2.84%

2.68%

2.50%

2.34%

Net interest margin (FTE)

3.74%

3.74%

3.87%

4.00%

4.06%

Fully tax-equivalent adjustment

$3,796

$3,743

$3,764

$3,747

$3,464

 

 


Summary of Financial Data

(Dollars in thousands, except per share data)

 

 

 

2007

2006

 

 

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

Average Balances

 

 

 

 

 

Loans

$2,684,566

$2,668,442

$2,558,137

$2,425,763

$2,400,926

Taxable investment securities

843,857

797,541

776,028

803,536

787,664

Nontaxable investment securities

500,273

508,467

512,721

518,309

522,112

Total interest-earning assets

4,028,696

3,974,450

3,846,886

3,747,608

3,710,702

Total assets

4,469,244

4,423,468

4,272,052

4,167,403

4,144,391

Interest-bearing deposits

2,622,472

2,576,041

2,540,150

2,460,781

2,410,348

Short-term borrowings

159,444

160,262

125,013

127,208

163,940

Long-term borrowings

613,624

599,121

534,811

509,102

468,884

Total interest-bearing liabilities

3,395,540

3,335,424

3,199,974

3,097,091

3,043,172

Noninterest-bearing deposits

552,087

558,439

557,398

565,651

588,957

Shareholders’ equity

$464,623

$469,127

$456,996

$452,408

$458,163

Balance Sheet Data

 

 

 

 

 

Cash and cash equivalents

$224,917

$232,032

$119,430

$124,453

$121,795

Investment securities

1,317,554

1,229,271

1,250,251

1,253,202

1,307,041

Loans:

 

 

 

 

 

Consumer mortgage

914,909

912,505

890,939

822,235

814,885

Business lending

957,853

960,034

953,808

827,021

820,722

Consumer installment

809,472

829,019

816,815

795,010

772,614

Total loans

2,682,234

2,701,558

2,661,562

2,444,266

2,408,221

Allowance for loan losses

35,891

36,313

35,517

32,900

32,720

Intangible assets

244,598

246,136

239,635

221,896

223,385

Other assets

125,476

125,113

137,099

128,263

131,808

Total assets

4,558,888

4,497,797

4,372,460

4,139,180

4,159,530

Deposits

3,278,468

3,168,299

3,138,774

3,039,038

3,063,022

Borrowings

626,765

647,481

628,412

512,997

506,241

Subordinated debt held by unconsolidated subsidiary trusts

127,099

158,014

80,545

80,530

80,517

Other liabilities

59,659

62,475

60,130

55,039

54,348

Total liabilities

4,091,991

4,036,269

3,907,861

3,687,604

3,704,128

Shareholders’ equity

466,897

461,528

464,599

451,576

455,402

Total liabilities and shareholders’ equity

4,558,888

4,497,797

4,372,460

4,139,180

4,159,530

Assets under management or administration

$3,296,238

$3,153,576

$2,944,725

$2,713,423

$2,642,226

Capital

 

 

 

 

 

Tier 1 leverage ratio

8.29%

8.81%

7.26%

7.73%

7.68%

Tangible equity / tangible assets

5.15%

5.07%

5.44%

5.86%

5.89%

Accumulated other comprehensive income

(3,994)

(4,697)

3,798

(3,638)

3,495

Diluted weighted average common shares O/S

30,547

30,454

30,334

30,308

30,479

Period end common shares outstanding

30,096

30,020

29,867

29,850

29,908

Cash dividends declared per common share

$0.20

$0.20

$0.20

$0.19

$0.19

Book value

15.51

15.37

15.56

15.13

15.23

Tangible book value

7.39

7.17

7.53

7.69

7.76

Common stock price (end of period)

20.92

23.00

22.16

20.17

22.33

 

 


Summary of Financial Data

(Dollars in thousands, except per share data)

 

 

 

2007

2006

 

 

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

Asset Quality

 

 

 

 

 

Nonaccrual loans

$10,697

$11,382

$11,414

$10,327

$13,701

Accruing loans 90+ days delinquent

1,914

1,207

1,133

765

1,213

Total nonperforming loans

12,611

12,589

12,547

11,092

14,914

Other real estate owned (OREO)

1,916

1,838

1,320

1,353

1,613

Total nonperforming assets

14,527

14,427

13,867

12,445

16,527

Net charge-offs

622

1,400

1,115

1,545

2,011

Loan loss allowance/loans outstanding

1.34%

1.34%

1.33%

1.35%

1.36%

Nonperforming loans/loans outstanding

0.47%

0.47%

0.47%

0.45%

0.62%

Loan loss allowance/nonperforming loans

285%

288%

283%

297%

219%

Net charge-offs/average loans

0.09%

0.21%

0.17%

0.26%

0.34%

Delinquent loans/ending loans

1.02%

1.33%

1.22%

1.15%

1.26%

Loan loss provision/net charge-offs

32%

101%

117%

112%

107%

Nonperforming assets/total assets

0.32%

0.32%

0.32%

0.30%

0.40%

 

 

 

 

 

 

 

(1) Excludes the after-tax effect of amortization of intangible assets, market value adjustment amortization on acquired loans and deposits and noncash portion of debt extinguishment charge.

 

(2) Excludes gain (loss) on investment securities & debt extinguishment.

 

(3) Excludes intangible amortization, acquisition expenses/special charges and gain (loss) on investment securities & debt extinguishment.

 

# # #

 

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.