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Community Bank System Reports Record Third Quarter Results

Acquisition of The Wilber Corporation

Early in the second quarter of 2011 the Company completed the acquisition of The Wilber Corporation (NYSE Amex: GIW), parent company of the Wilber National Bank based in Oneonta, NY, for approximately $103 million in stock and cash. The acquisition extended the Bank’s New York service area to the contiguous Central, Greater Capital, and Catskills regions of Upstate New York. Upon the completion of the merger, Community Bank added 22 branch locations in eight counties, net loans of approximately $464 million, and customer deposits of nearly $772 million.

Dividend Declared

The Company’s Board of Directors approved a quarterly dividend on its common stock of $0.26 per share, payable on January 10, 2012, to shareholders of record as of December 15, 2011. This two cent (8.3%) increase in the Company’s quarterly cash dividend over the same quarter of last year, represents an annualized yield of 4.0% based on the Company’s closing price of $26.16 on October 24, 2011. This is the nineteenth (19 th) consecutive year of dividend increases for the Company. Mr. Tryniski commented, “The payment of a meaningful dividend is an important component of our commitment to provide consistent and favorable long-term returns to our shareholders. The increase reflects the continued strength of both our current operating performance and capital position.”

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) tomorrow (October 26, 2011) to discuss third quarter results. The conference call can be accessed at 1-866-838-2054 (1-904-520-5766 if outside United States and Canada). An audio recording will be available one hour after the call until December 31, 2011, and may be accessed at 1-888-284-7564 (1-904-596-3174 if outside the United States and Canada) and entering access code 2699781. Investors may also listen live via the Internet at: http://www.videonewswire.com/event.asp?id=82654.

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 press releases section of the Company's investor relations website at: http://www.ir.communitybanksystem.com.

Headquartered in DeWitt, N.Y., Community Bank System, Inc. has $6.5 billion in assets and over 170 customer facilities. The Company’s banking subsidiary, Community Bank, N.A. operates across Upstate New York and Northeastern Pennsylvania, where it conducts business as First Liberty Bank & Trust. Its other subsidiaries include: Benefit Plans Administrative Services, Inc., an employee benefits consulting and trust administration firm with offices in Upstate New York, Pittsburgh and Philadelphia, Pennsylvania and Houston, Texas; the CBNA Insurance Agency, with offices in five northern New York communities; Community Investment Services, Inc., a wealth management firm delivering a wide range of financial products throughout the Company's branch network; and Nottingham Advisors, an investment management and advisory firm with offices in Buffalo, N.Y. and North Palm Beach, Florida. For more information, visit: www.communitybankna.com or www.firstlibertybank.com.

         

Summary of Financial Data

(Dollars in thousands, except per share data)              
Quarter Ended   Year-to-date
September 30, September 30, September 30, September 30,
      2011   2010   2011   2010
Earnings                  
Loan income $50,702 $45,094 $142,470 $134,618
Investment income 19,716 17,503 58,085 51,654
Total interest income 70,418 62,597 200,555 186,272
Interest expense 15,850 16,273 46,277 50,721
Net interest income 54,568 46,324 154,278 135,551
Provision for loan losses 1,043 1,400 3,143 5,270
Net interest income after provision for loan losses 53,525 44,924 151,135 130,281
Deposit service fees 11,134 11,180 31,307 33,036
Mortgage banking revenues 320 1,215 1,698 2,290
Other banking services 1,179 863 2,222 1,826
Trust, investment and asset management fees 2,904 2,400 7,866 7,442
Benefit plan administration, consulting and actuarial fees 7,685 7,256 23,722 22,415
Investment securities and debt extinguishment gain/(loss), net (6) 0 8 0
Total noninterest income 23,216 22,914 66,823 67,009
Salaries and employee benefits 26,543 23,056 75,185 68,501
Occupancy and equipment and furniture 6,103 5,574 18,413 17,414
Amortization of intangible assets 1,161 1,277 3,251 4,985
Acquisition expenses & special charges 381 57 4,689 256
Other 13,905 14,388 40,997 41,609
Total operating expenses 48,093 44,352 142,535 132,765
Income before income taxes 28,648 23,486 75,423 64,525
Income taxes 8,640 6,224 21,269 17,099
Net income $20,008 $17,262 $54,154 $47,426
Basic earnings per share $0.54 $0.52 $1.52 $1.43
Diluted earnings per share     $0.54   $0.51   $1.50   $1.42
           

Summary of Financial Data

(Dollars in thousands, except per share data)                  
2011   2010
      3rd Qtr   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr
Earnings                      
Loan income $50,702 $49,471 $42,297 $44,085 $45,094
Investment income 19,716 20,379 17,990 17,924 17,503
Total interest income 70,418 69,850 60,287 62,009 62,597
Interest expense 15,850 15,663 14,764 15,876 16,273
Net interest income 54,568 54,187 45,523 46,133 46,324
Provision for loan losses 1,043 1,050 1,050 1,935 1,400
Net interest income after provision for loan losses 53,525 53,137 44,473 44,198 44,924
Deposit service fees 11,134 10,488 9,685 10,321 11,180
Mortgage banking revenues 320 982 396 1,408 1,215
Other banking services 1,179 645 398 462 863
Trust, investment and asset management fees 2,904 2,782 2,180 2,391 2,400
Benefit plan administration, consulting and actuarial fees 7,685 7,854 8,183 7,201 7,256
Investment securities and debt extinguishment gain/(loss), net (6) 14 0 0 0
Total noninterest income 23,216 22,765 20,842 21,783 22,914
Salaries and employee benefits 26,543 25,531 23,111 22,900 23,056
Occupancy and equipment and furniture 6,103 6,253 6,057 5,520 5,574
Amortization of intangible assets 1,161 1,189 901 972 1,277
Acquisition expenses & special charges 381 3,617 691 1,107 57
Other 13,905 14,536 12,556 13,622 14,388
Total operating expenses 48,093 51,126 43,316 44,121 44,352
Income before income taxes 28,648 24,776 21,999 21,860 23,486
Income taxes 8,640 6,790 5,839 5,966 6,224
Net income $20,008 $17,986 $16,160 $15,894 $17,262
Basic earnings per share $0.54 $0.49 $0.48 $0.48 $0.52
Diluted earnings per share     $0.54   $0.49   $0.48   $0.47   $0.51
Profitability                      
Return on assets 1.23% 1.14% 1.19% 1.15% 1.25%
Return on equity 10.67% 10.15% 10.70% 10.27% 11.28%
Noninterest income/operating income (FTE) (1) 28.5% 28.1% 29.6% 30.3% 31.4%
Efficiency ratio (2)     57.0%   57.2%   59.3%   57.9%   57.9%
Components of Net Interest Margin (FTE)                      
Loan yield 5.81% 5.77% 5.73% 5.73% 5.81%
Cash equivalents yield 0.25% 0.24% 0.25% 0.25% 0.27%
Investment yield 4.55% 4.75% 5.01% 5.00% 4.84%
Earning asset yield 5.13% 5.24% 5.30% 5.36% 5.41%
Interest-bearing deposit rate 0.70% 0.70% 0.75% 0.86% 0.90%
Borrowing rate 4.27% 4.24% 4.28% 4.28% 4.28%
Cost of all interest-bearing funds 1.32% 1.34% 1.47% 1.56% 1.59%
Cost of funds (includes DDA) 1.12% 1.14% 1.25% 1.32% 1.35%
Net interest margin (FTE) 4.04% 4.13% 4.08% 4.07% 4.08%
Fully tax-equivalent adjustment     $3,836   $4,018   $3,969   $3,865   $3,788
           
Summary of Financial Data
(Dollars in thousands, except per share data)                  
2011   2010
      3rd Qtr   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr
Average Balances                      
Loans $3,481,087 $3,454,246 $3,005,926 $3,061,060 $3,088,590
Cash equivalents 240,127 177,154 159,044 105,242 50,484
Taxable investment securities 1,458,127 1,447,815 1,188,182 1,159,110 1,182,243
Nontaxable investment securities 560,051 579,795 565,564 554,014 550,660
Total interest-earning assets 5,739,392 5,659,010 4,918,716 4,879,426 4,871,977
Total assets 6,447,210 6,313,391 5,487,618 5,481,129 5,474,952
Interest-bearing deposits 3,926,457 3,864,671 3,234,986 3,206,327 3,217,831
Borrowings 832,505 839,003 830,454 831,025 832,568
Total interest-bearing liabilities 4,758,962 4,703,674 4,065,440 4,037,352 4,050,399
Noninterest-bearing deposits 867,373 813,789 739,515 743,698 736,203
Shareholders' equity     $743,730   $710,765   $612,559   $613,734   $606,912
Balance Sheet Data                      
Cash and cash equivalents $425,877 $273,693 $296,938 $211,837 $179,556
Investment securities 2,075,283 2,088,105 1,792,246 1,742,324 1,769,149
Loans:
Business lending 1,261,125 1,290,893 1,006,114 1,023,286 1,045,849
Consumer mortgage 1,167,780 1,149,219 1,055,164 1,057,332 1,065,297
Consumer installment - indirect 564,423 549,449 500,058 494,813 508,502
Home equity 328,468 330,213 299,925 305,936 312,396
Consumer installment - direct 154,673 158,376 139,183 144,996 148,353
Total loans 3,476,469 3,478,150 3,000,444 3,026,363 3,080,397
Allowance for loan losses 42,463 42,531 42,147 42,510 42,610
Intangible assets 360,228 363,015 311,076 311,714 312,686
Other assets 208,460 230,053 190,815 194,778 197,039
Total assets 6,503,854 6,390,485 5,549,372 5,444,506 5,496,217
Deposits:
Noninterest-bearing 887,009 849,071 754,892 741,166 738,994
Non-maturity interest-bearing 2,782,241 2,721,589 2,361,312 2,272,013 2,253,447
Time 1,169,503 1,186,442 904,827 920,866 973,894
Total deposits 4,838,753 4,757,102 4,021,031 3,934,045 3,966,335
Borrowings 728,335 728,441 728,385 728,460 729,508
Subordinated debt held by unconsolidated subsidiary trusts 102,042 102,036 102,030 102,024 102,018
Other liabilities 79,091 72,835 73,826 72,719 82,556
Total liabilities 5,748,221 5,660,414 4,925,272 4,837,248 4,880,417
Shareholders' equity 755,633 730,071 624,100 607,258 615,800
Total liabilities and shareholders' equity     6,503,854   6,390,485   5,549,372   5,444,506   5,496,217
Capital                      
Tier 1 leverage ratio 8.17% 8.07% 8.42% 8.23% 7.99%
Tangible equity / net tangible assets (3) 6.79% 6.44% 6.36% 6.14% 6.21%
Diluted weighted average common shares O/S 37,312 37,061 33,989 33,786 33,606
Period end common shares outstanding 36,829 36,807 33,429 33,319 33,162
Cash dividends declared per common share $0.26 $0.24 $0.24 $0.24 $0.24
Book value $20.52 $19.84 $18.67 $18.23 $18.57
Tangible book value (3) $11.37 $10.59 $10.01 $9.49 $9.74
Common stock price (end of period)     $22.69   $24.79   $24.27   $27.77   $23.01
           
Summary of Financial Data
(Dollars in thousands, except per share data)                
2011   2010
      3rd Qtr   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr
Asset Quality                      
Nonaccrual loans $16,670 $17,833 $14,953   $15,378 $16,025
Accruing loans 90+ days delinquent 2,319 2,499 2,774 3,091 1,863
Total nonperforming loans 18,989 20,332 17,727 18,469 17,888
Other real estate owned (OREO) 2,776 3,269 1,945 2,011 2,689
Total nonperforming assets 21,765 23,601 19,672 20,480 20,577
Net charge-offs 1,111 666 1,413 2,035 1,393
Loan loss allowance/loans outstanding 1.22% 1.22% 1.40% 1.40% 1.38%
Nonperforming loans/loans outstanding 0.54% 0.58% 0.59% 0.61% 0.58%
Loan loss allowance/nonperforming loans 226% 209% 238% 230% 238%
Net charge-offs/average loans 0.13% 0.08% 0.19% 0.26% 0.18%
Delinquent loans/ending loans 1.56% 1.50% 1.46% 1.91% 1.64%
Loan loss provision/net charge-offs 94% 158% 74% 95% 100%
Nonperforming assets/total assets     0.33%   0.37%   0.35%   0.38%   0.37%

(1)

 

Excludes gain (loss) on investment securities and amortization/accretion of fair market value purchase accounting adjustments.

(2)

Excludes intangible amortization, goodwill impairment, acquisition expenses, special charges, gain (loss) on investment securities, and amortization/accretion of fair market value purchase accounting adjustments.

(3)

Includes deferred tax liabilities (of approximately $23.5 million at 9/30/11) related to tax deductible goodwill.

 
 

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.



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