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Community Bank System Reports Record Fourth Quarter And Full Year Results

Community Bank System, Inc. intends to grant the underwriters a 30-day option to purchase up to an additional 15% of the number of shares sold in the offering to cover over-allotments, if any.

RBC Capital Markets, LLC will act as the sole book-running manager for the offering and Raymond James & Associates, Inc. and Sandler O'Neill + Partners, L.P. will serve as co-managers.

The proposed offering will be made solely by means of a prospectus and related preliminary prospectus supplement. Copies of the prospectus and preliminary prospectus supplement for the offering may be obtained from RBC Capital Markets, LLC, Attention: Equity Syndicate, 3 World Financial Center, 200 Vesey Street, 8th Floor, New York, NY 10281-8098, telephone 212-428-6670. Potential investors should first read the prospectus and the related preliminary prospectus supplement, any related free writing prospectus, the registration statement and the other documents incorporated by reference therein that Community Bank System, Inc. files with the Securities and Exchange Commission. Investors may obtain these documents free of charge by visiting the SEC's website at www.sec.gov.

The shares will be issued pursuant to the Company's effective shelf registration statement on Form S-3 (File No. 333-179119). This release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Conference Call Scheduled

Company management will conduct an investor call at 9:00 a.m. (ET) tomorrow (Monday) January 23, 2012 to discuss fourth quarter and full year results. The conference call can be accessed at 1-866-796-3865 (1-904-520-5761 if outside United States and Canada). An audio recording will be available one hour after the call until March 31, 2012, and may be accessed at 1-888-284-7564 (1-904-596-3174 if outside the United States and Canada) and entering access code 2739971. Investors may also listen live via the Internet at: [ http://www.videonewswire.com/event.asp?id=84736 ] 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. An archived webcast of the earnings call will be available on this site for one full year.

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., a national employee benefits consulting and trust administration firm with offices in New York, Pennsylvania and 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 Ended
December 31,       December 31,
          2011       2010       2011       2010
Earnings                                              
Loan income $ 50,511 $ 44,085 $ 192,981 $ 178,703
Investment income 19,903 17,924 77,988 69,578
Total interest income 70,414 62,009 270,969 248,281
Interest expense 15,279 15,876 61,556 66,597
Net interest income 55,135 46,133 209,413 181,684
Provision for loan losses 1,593 1,935 4,736 7,205
Net interest income after provision for loan losses 53,542 44,198 204,677 174,479
Deposit service fees 11,027 10,321 42,334 43,358
Mortgage banking revenues 37 1,408 1,735 3,698
Other banking services 694 462 2,916 2,287
Trust, investment and asset management fees 2,831 2,391 10,697 9,833
Benefit plan administration, consulting and actuarial fees 7,879 7,201 31,601 29,616
Investment securities and debt extinguishment gains/(losses), net (69 ) 0 (61 ) 0
Total noninterest income 22,399 21,783 89,222 88,792
Salaries and employee benefits 27,093 22,900 102,278 91,399
Occupancy and equipment and furniture 6,089 5,520 24,502 22,933
Amortization of intangible assets 1,130 972 4,381 5,957
Acquisition expenses 142 1,107 4,831 1,365
Other 13,383 13,622 54,380 55,232
Total operating expenses 47,837 44,121 190,372 176,886
Income before income taxes 28,104 21,860 103,527 86,385
Income taxes 9,116 5,966 30,385 23,065
Net income $ 18,988 $ 15,894 $ 73,142 $ 63,320
Basic earnings per share $ 0.51 $ 0.48 $ 2.03 $ 1.91
Diluted earnings per share         $ 0.51         $ 0.47       $ 2.01         $ 1.89
 

Summary of Financial Data

                               
(Dollars in thousands, except per share data)                                  
2011       2010
          4th Qtr       3rd Qtr       2nd Qtr       1st Qtr       4th Qtr
Earnings                                          
Loan income $ 50,511 $ 50,702 $ 49,471 $ 42,297 $ 44,085
Investment income 19,903 19,716 20,379 17,990 17,924
Total interest income 70,414 70,418 69,850 60,287 62,009
Interest expense 15,279 15,850 15,663 14,764 15,876
Net interest income 55,135 54,568 54,187 45,523 46,133
Provision for loan losses 1,593 1,043 1,050 1,050 1,935
Net interest income after provision for loan losses 53,542 53,525 53,137 44,473 44,198
Deposit service fees 11,027 11,134 10,488 9,685 10,321
Mortgage banking revenues 37 320 982 396 1,408
Other banking services 694 1,179 645 398 462
Trust, investment and asset management fees 2,831 2,904 2,782 2,180 2,391
Benefit plan administration, consulting and actuarial fees 7,879 7,685 7,854 8,183 7,201
Investment securities and debt extinguishment gains/(losses), net (69 ) (6 ) 14 0 0
Total noninterest income 22,399 23,216 22,765 20,842 21,783
Salaries and employee benefits 27,093 26,543 25,531 23,111 22,900
Occupancy and equipment and furniture 6,089 6,103 6,253 6,057 5,520
Amortization of intangible assets 1,130 1,161 1,189 901 972
Acquisition expenses 142 381 3,617 691 1,107
Other 13,383 13,905 14,536 12,556 13,622
Total operating expenses 47,837 48,093 51,126 43,316 44,121
Income before income taxes 28,104 28,648 24,776 21,999 21,860
Income taxes 9,116 8,640 6,790 5,839 5,966
Net income $ 18,988 $ 20,008 $ 17,986 $ 16,160 $ 15,894
Basic earnings per share $ 0.51 $ 0.54 $ 0.49 $ 0.48 $ 0.48
Diluted earnings per share         $ 0.51         $ 0.54         $ 0.49         $ 0.48         $ 0.47  
Profitability                                          
Return on assets 1.16 % 1.23 % 1.14 % 1.19 % 1.15 %
Return on equity 9.96 % 10.67 % 10.15 % 10.70 % 10.27 %
Noninterest income/operating income (FTE) (1) 27.6 % 28.5 % 28.1 % 29.6 % 30.3 %
Efficiency ratio (2)           57.2 %         57.0 %         57.2 %         59.3 %         57.9 %
Components of Net Interest Margin (FTE)                                          
Loan yield 5.80 % 5.81 % 5.77 % 5.73 % 5.73 %
Cash equivalents yield 0.25 % 0.25 % 0.24 % 0.25 % 0.25 %
Investment yield 4.49 % 4.55 % 4.75 % 5.01 % 5.00 %
Earning asset yield 5.11 % 5.13 % 5.24 % 5.30 % 5.36 %
Interest-bearing deposit rate 0.65 % 0.70 % 0.70 % 0.75 % 0.86 %
Borrowing rate 4.21 % 4.27 % 4.24 % 4.28 % 4.28 %
Cost of all interest-bearing funds 1.27 % 1.32 % 1.34 % 1.47 % 1.56 %
Cost of funds (includes DDA) 1.08 % 1.12 % 1.14 % 1.25 % 1.32 %
Net interest margin (FTE) 4.06 % 4.04 % 4.13 % 4.08 % 4.07 %
Fully tax-equivalent adjustment         $ 3,851         $ 3,836         $ 4,018         $ 3,969         $ 3,865  
 
Summary of Financial Data                                
(Dollars in thousands, except per share data)                                                    
2011  

2010

          4th Qtr         3rd Qtr       2nd Qtr       1st Qtr       4th Qtr
Average Balances                                                            
Loans $ 3,473,366 $ 3,481,087 $ 3,454,246 $3,005,926 $ 3,061,060
Cash equivalents 233,984 240,127 177,154 159,044 105,242
Taxable investment securities 1,495,590 1,458,127 1,447,815 1,188,182 1,159,110
Nontaxable investment securities 567,835 560,051 579,795 565,564 554,014
Total interest-earning assets 5,770,775 5,739,392 5,659,010 4,918,716 4,879,426
Total assets 6,474,722 6,447,210 6,313,391 5,487,618 5,481,129
Interest-bearing deposits 3,929,231 3,926,457 3,864,671 3,234,986 3,206,327
Borrowings 830,344 832,505 839,003 830,454 831,025
Total interest-bearing liabilities 4,759,575 4,758,962 4,703,674 4,065,440 4,037,352
Noninterest-bearing deposits 878,443 867,373 813,789 739,515 743,698
Shareholders' equity         $ 756,334         $ 743,730         $ 710,765         $612,559         $ 613,734  
Balance Sheet Data                                                            
Cash and cash equivalents $ 324,878 $ 425,877 $ 273,693 $296,938 $ 211,837
Investment securities 2,151,370 2,075,283 2,088,105 1,792,246 1,742,324
Loans:
Business lending 1,226,439 1,261,125 1,290,893 1,006,114 1,023,286
Consumer mortgage 1,214,621 1,167,781 1,149,219 1,055,164 1,057,332
Consumer installment - indirect 556,955 564,423 549,449 500,058 494,813
Home equity 323,840 328,468 330,213 299,925 305,936
Consumer installment - direct 149,170 154,672 158,376 139,183 144,996
Total loans 3,471,025 3,476,469 3,478,150 3,000,444 3,026,363
Allowance for loan losses 42,213 42,463 42,531 42,147 42,510
Intangible assets 360,563 360,228 363,015 311,076 311,714
Other assets 222,652 208,460 230,053 190,815 194,778
Total assets 6,488,275 6,503,854 6,390,485 5,549,372 5,444,506
Deposits:
Noninterest-bearing 894,464 887,009 849,071 754,892 741,166
Non-maturity interest-bearing 2,776,532 2,782,241 2,721,589 2,361,312 2,272,013
Time 1,124,249 1,169,503 1,186,442 904,827 920,866
Total deposits 4,795,245 4,838,753 4,757,102 4,021,031 3,934,045
Borrowings 728,282 728,335 728,441 728,385 728,460
Subordinated debt held by unconsolidated subsidiary trusts 102,048 102,042 102,036 102,030 102,024
Other liabilities 88,117 79,091 72,835 73,826 72,719
Total liabilities 5,713,692 5,748,221 5,660,414 4,925,272 4,837,248
Shareholders' equity 774,583 755,633 730,071 624,100 607,258
Total liabilities and shareholders' equity           6,488,275           6,503,854           6,390,485         5,549,372           5,444,506  
Capital                                                            
Tier 1 leverage ratio 8.38 % 8.17 % 8.07 % 8.42 % 8.23 %
Tangible equity / net tangible assets (3) 7.12 % 6.79 % 6.44 % 6.36 % 6.14 %
Diluted weighted average common shares O/S 37,491 37,312 37,061 33,989 33,786
Period end common shares outstanding 36,986 36,829 36,807 33,429 33,319
Cash dividends declared per common share $ 0.26 $ 0.26 $ 0.24 $0.24 $ 0.24
Book value $ 20.94 $ 20.52 $ 19.84 $18.67 $ 18.23
Tangible book value (3) $ 11.85 $ 11.37 $ 10.59 $10.01 $ 9.49
Common stock price (end of period)         $ 27.80         $ 22.69         $ 24.79         $24.27         $ 27.77  
 
Summary of Financial Data                            
(Dollars in thousands, except per share data)                            
2011       2010
          4th Qtr       3rd Qtr       2nd Qtr       1st Qtr       4th Qtr
Asset Quality                                          
Nonaccrual loans $ 26,262 $ 16,502 $17,833       $ 14,953 $ 15,378
Accruing loans 90+ days delinquent 3,089 2,319 2,499 2,774 3,091
Total nonperforming loans 29,351 18,821 20,332 17,727 18,469
Other real estate owned (OREO) 2,682 2,776 3,269 1,945 2,011
Total nonperforming assets 32,033 21,597 23,601 19,672 20,480
Net charge-offs 1,844 1,111 666 1,413 2,035
Allowance for loan losses/loans outstanding 1.22 % 1.22 % 1.22 % 1.40 % 1.40 %
Nonperforming loans/loans outstanding 0.85 % 0.54 % 0.58 % 0.59 % 0.61 %
Allowance for loan losses /nonperforming loans 144 % 226 % 209 % 238 % 230 %
Net charge-offs/average loans 0.21 % 0.13 % 0.08 % 0.19 % 0.26 %
Delinquent loans/ending loans 1.99 % 1.56 % 1.50 % 1.46 % 1.91 %
Loan loss provision/net charge-offs 86 % 94 % 158 % 74 % 95 %
Nonperforming assets/total assets           0.49 %         0.33 %       0.37 %         0.35 %         0.38 %
Asset Quality (excluding loans acquired since 1/1/09)                                          
Nonaccrual loans $ 17,584 $ 13,540 $13,208 $ 14,953 $ 15,378
Accruing loans 90+ days delinquent 2,878 2,233 2,466 2,774 3,091
Total nonperforming loans 20,462 15,773 15,674 17,727 18,469
Other real estate owned (OREO) 1,734 1,810 1,889 1,945 2,011
Total nonperforming assets 22,196 17,583 17,563 19,672 20,480
Net charge-offs 1,844 1,111 666 1,413 2,035
Allowance for loan losses/loans outstanding 1.36 % 1.38 % 1.40 % 1.40 % 1.40 %
Nonperforming loans/loans outstanding 0.67 % 0.52 % 0.52 % 0.59 % 0.61 %
Allowance for loan losses/nonperforming loans 204 % 268 % 271 % 238 % 230 %
Net charge-offs/average loans 0.24 % 0.14 % 0.09 % 0.19 % 0.26 %
Delinquent loans/ending loans 1.77 % 1.57 % 1.45 % 1.46 % 1.91 %
Loan loss provision/net charge-offs 79 % 72 % 158 % 74 % 95 %
Nonperforming assets/total assets           0.36 %         0.29 %       0.30 %         0.35 %         0.38 %
 
(1) Excludes gain (loss) on investment securities.
(2) Excludes intangible amortization, goodwill impairment, acquisition expenses, and gain (loss) on investment securities.
(3) Includes deferred tax liabilities (of approximately $24.3 million at 12/31/11) generated from 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.

Copyright Business Wire 2010
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