2011 Annual Meeting of Shareholders

Annual Meeting of Shareholders
May 25, 2011
Forward-looking Statement
This presentation contains certain “forward-looking statements,”
within the meaning of the Private Securities Litigation Reform Act
of 1995, that are based on current expectations, estimates and
projections about the industry, markets and economic environment in
which the Company operates.
Such statements involve risks and uncertainties that could cause actual
results to differ materially from the results discussed in these
statements. These risks are detailed in the Company’s periodic reports
filed with the Securities and Exchange Commission.
Annualized, pro forma, projected and estimated amounts are presented
for illustrative purposes only and may not reflect actual results.
1
Company Profile
• Successful, growing community bank headquartered outside of
Syracuse, N.Y.
• One of the largest community banks based in
Upstate New York with over $6.3 billion in assets.
• More than 170 customer facilities across Upstate
New York and Northeast Pennsylvania.
– NY: Community Bank, N.A.
– PA: First Liberty Bank & Trust
• Dominant market share: 1st or 2nd in 70% of the towns where we do
business
2
Company Profile
As of March 31, 2011:
• Assets
$ 5.5 billion
• Loans
$ 3.0 billion
• Deposits
$ 4.0 billion
• Shareholders’ Equity
$624 million
• Market Capitalization
$811 million
(at 3/31/11 closing price of $24.27)
3
Company Profile
As of April 8, 2011:
• Assets
$ 6.3 billion
• Loans
$ 3.5 billion
• Deposits
$ 4.7 billion
• Shareholders’ Equity
$705 million
• Market Capitalization
$898 million
(at 5/17/11 closing price of $24.42)
4
Company Profile
•
Diversified financial services products via branches and subsidiaries:
– Wealth Management Group
• Personal Trust Dept.
• Nottingham Advisors (offices in Buffalo, NY and North Palm Beach, FL)
• Community Investment Services, Inc. (Broker/Investment Advisory)
• CBNA Insurance Agency (Northern New York)
– Benefit Plans Administration and Consulting
• Benefit Plans Administrative Services, Harbridge Consulting Group, and Hand Benefits &
Trust
–
Employee benefit plans administration, actuarial and consulting services, collective investment
trust administration
–
Offices in Syracuse and Utica, NY; Pittsburgh and Philadelphia, PA; Houston, TX
5
Shareholder Profile
April 30, 2011 or Most Recent Data Available
Dollars
% Shares
Outstanding
# of
Owners
Total Shares Outstanding
36,787
$ 898,328
––
––
Shares Held by Institutions
20,021
$ 496,540
54.4%
171
Insiders
2,007
$ 49,011
5.5%
20
401(k) Plan
970
$ 23,687
2.6%
1,700
Pension Plan
341
$
8,327
0.9%
1
Dividend Reinvestment Plan
880
$ 21,490
2.4%
1,528
CBU Price at May 17, 2011:
$ 24.42
6
Operating Strategy
• Market-leading branch system serving predominantly nonurban markets; decentralized decision-making; focus on
core accounts.
• Investment in noninterest revenues.
• Growth model that leverages both organic and acquired
opportunities.
7
Consistent and Favorable Financial Results
(2001— 2010)
• Net income
• Net income per share (diluted)
CAGR
14.2%
9.9%
• Non-interest income
14.4%
• Dividends per share
6.5%
8
Recent Accomplishments
• Reported all-time record earnings in 2010.
• Grew EPS by 50% in 2010, over 2009.
• Improved EPS by 14% in 1Q 2011, over 1Q 2010.
• Maintained solid asset quality.
• Improved our funding mix with significant gains in core deposits.
• Enhanced our award-winning customer service model.
• Ranked 7th best in an analysis of America’s best and worst large banks
by Forbes Magazine.
• Completed the acquisition of the Wilber Corporation in April 2011.
9
2010 Performance Summary
2010 Results
(In Millions)
• Net interest income
• Non-interest income
– Financial services revenue
• Operating expenses
• Provision for loan losses
• Net income
• Earnings per share (diluted)
• Return on assets
• Return on equity
• Net interest margin
$ 181.7
$ 88.8
$ 39.4
$176.9
$ 7.2
$ 63.3
$ 1.89
1.16%
10.66%
4.04%
% Change
From
2009
9.8%
6.3%
8.4%
( 3.3%)
(26.4%)
52.8%
50.0%
48.7%
42.9%
6.3%
10
First Quarter 2011 Performance Summary
1Q 2011 Results
(In Millions)
•
•
•
•
•
•
•
•
•
Net interest income
Non-interest income
Operating expenses
Provision for loan losses
Net income
Earnings per share (diluted)
Return on assets
Return on equity
Net interest margin
$ 45.5
$ 20.8
$ 43.3
$ 1.1
$ 16.2
$ 0.48
1.19%
10.70%
4.08%
% Change
From
1Q 2010
5.2%
( 4.0%)
( 2.0%)
( 42.3%)
15.4%
14.3%
13.3%
8.0%
3.8%
11
Trailing Twelve Months Performance Summary
TTM 3/31/11
(In Millions)
•
•
•
•
•
•
•
•
•
Net interest income
Non-interest income
Operating expenses
Provision for loan losses
Net income
Earnings per share (diluted)
Earning assets
Core deposits
Shareholders’ Equity
$ 183.9
$ 87.9
$ 176.0
$ 6.4
$ 65.5
$ 1.94
$4,918.7
$3,116.2
$ 624.1
% Change
From
2006
36.4%
70.1%
37.5%
( 2.3%)
70.6%
54.0%
23.8%
79.5%
35.2%
CAGR
7.6%
13.1%
7.8%
( 0.5%)
3.2%
11.0%
5.1%
14.2%
7.4%
12
Capital Growth and Stability
15%
$624
$475
6.73%
6.94%
10%
$478
7.77%
8.42%
$300
$268
$150
6.36%
5.82%
5%
5.01%
4.09%
$0
Tangible Equity/Assets
$450
Tier I Leverage Ratio
Shareholders’ Equity
(in millions)
$600
0%
2001
Shareholders' Equity
2004
2007
Tangible Equity/Assets
1Q 2011
Tier I Ratio
13
Strategy Element #1
Market-leading Branch System
Focused on Core Accounts
• Emphasize responsive, local decision-making and
customer support.
• Focus on generating and retaining core deposit accounts.
• Mostly non-urban markets where leadership positions can
be earned.
14
Geographic Profile
Administrative/Operations Centers
Community Bank, N.A. Branches
First Liberty Bank & Trust Branches
Former Wilber Bank Branches
WNB Financial Services Center
Financial Services Centers
15
Northern New York Region
Branches: 52
Administrative/Operations Centers
Community Bank, N.A. Branches
Deposits: $1.5 billion
First Liberty Bank & Trust Branches
Former Wilber Bank Branches
WNB Financial Services Center
Financial Services Centers
16
Southern New York Region
Branches: 69
Administrative/Operations Centers
Community Bank, N.A. Branches
Deposits: $1.6 billion
First Liberty Bank & Trust Branches
Former Wilber Bank Branches
WNB Financial Services Center
Financial Services Centers
17
Central New York Region
Branches: 22
Deposits: $0.7 billion
Former Wilber Bank Branches
WNB Financial Services Center
18
Pennsylvania Region
Branches: 27
Administrative/Operations Centers
Community Bank, N.A. Branches
Deposits: $0.8 billion
First Liberty Bank & Trust Branches
Former Wilber Bank Branches
WNB Financial Services Center
Financial Services Centers
19
Core Deposit Strength and Focus
Demand (noninterest)
14%
6%
19%
Interest Checking,
Savings & Money
Market Accounts
2%
Time Deposits Over
$250K
Time Deposits Under
$250K
59%
78% of Funding in Core (non-time) Accounts
Individual Retirement
Accounts (IRAs)
20
Loan Growth
(in millions)
$4,000
3,136
3,026
3,000
2,702
$3,000
1,807
2,358
$2,000
$1,000
630
831
960
2002
2004
2006
1,059
1,023
1,006
$0
Consumer Loans
2008
Business Loans
2010
1Q 2011
9-year CAGR = 6.4%
21
Loan Portfolio Balance
31.3%
35.2%
Consumer Installment
Including Home Equity
Business / Commercial
Residential Mortgage
33.5%
22
Asset Quality
Nonperforming Loans to Total Loans
5.00%
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
4.33%
3.83%
3.71%
2.36%
0.96%
0.51%
0.47%
2006
0.32%
0.40%
2007
2008
CBU
0.61%
0.62%
2009
2010
0.59%
1Q 2011
UPBR Peer Group
23
Asset Quality
Net Charge-offs to Average Loans
2.00%
1.80%
1.86%
1.60%
1.88%
1.66%
1.40%
1.20%
1.00%
1.05%
0.97%
0.80%
0.60%
0.40%
0.29%
0.20%
0.24%
0.00%
2006
0.10%
2007
0.20%
0.24%
2008
2009
CBU
0.21%
0.19%
2010
1Q 2011
UBPR Peer Group
24
Strategy Element #2
Continue to Grow Noninterest Revenues
• Banking Services
• Benefits Administration and Consulting
• Wealth Management
25
Growth In Noninterest Income
(excluding securities gains/losses and debt extinguishment)
(in millions)
$100
Benefit Plan Services
$75
25.8
$50
$25
5.3
6.5
18.3
$0
2002
9.2
7.1
27.6
2004
13.2
29.6
Wealth
Management
9.8
Banking Services
8.6
7.4
9-year CAGR: 14.8%
49.3
31.1
2006
38.8
2008
2010
Noninterest Income/
Operating Income =
32.8% in 2010.
26
Benefit Plan Administration & Consulting Revenue
• Defined Contribution Plan Benefit Administration
• Actuarial Services
• Health Care and Benefit Plan Consulting
• Collective Investment Fund Administration
• Flex Plan Administration
27
Benefit Plan Administration & Consulting Revenue
$35
$29.6
(in millions)
$25.8
$30
$25
$20
$13.2
$15
$10
$9.2
$5.3
$5
$0
2002
2004
2006
2008
2010
9-year CAGR: 24.0%
28
Strategy Element #3: Growth Model
Banking Acquisitions
# of Branches
Assets
(in millions)
Branch Acquisitions
November 2008
December 2004
November 2001
18
1
36
$ 575
$ 32
$ 473
22
5
4
2
3
12
1
13
5
$ 870
$ 100
$ 95
$ 208
$ 275
$ 280
$ 29
$ 648
$ 111
Whole-Bank Acquisitions
April 2011
June 2007
December 2006
August 2006
May 2004
November 2003
September 2003
May 2001
January 2001
29
Strategy Element #3: Growth Model
Financial Services Acquisitions
Year
• Alliance Benefit Group – MidAtlantic
2008
• CBNA Insurance Agency
2007
• Hand Benefits & Trust
2007
• Harbridge Consulting Group
2003
• Nottingham Advisors
1999
• Benefits Plans Administrative Services
1997
30
Wilber Corporation Acquisition Highlights
Franchise:
• Offered significant size in new markets and is a natural market extension into an adjacent region with
similar demographic profile
– This transaction makes CBU a $6.3 billion institution operating in nearly every market in Upstate New
York
– Wilber was the leader in deposit market share in the Oneonta MSA, an area where CBU had no branches
– Wilber operated in markets similar to where CBU has historically performed well, including those areas
within the Marcellus Shale formation
• Wilber’s current branch network will provide an attractive platform for CBU’s existing product suite
Accretion:
• The deal is expected to be accretive to EPS (excl. one-time costs) by 2-4% in 2011 and 2012 with an
IRR of approximately 12%
Capital:
• 80/20% stock/cash mix provided capital support to remain substantially above well-capitalized
31
Terms and Pricing
Consideration:
$9.50 per share in stock or cash (80% stock / 20% cash subject to election).
Final exchange ratio of 0.391; issued 3.353 million additional shares at
closing.
Deal Value:
$102 million
Pricing Metrics:
1.32x book value, 1.41x tangible book value, 16.1x LTM EPS
Detailed Due Diligence:
Completed; utilized third party credit review firm. Assumed $21.5 - $26.5
million credit mark.
Estimated One-time Costs:
$7.7 million (pre-tax)
Estimated Cost Savings:
$5.1 million (pre-tax), approximately 19% of Wilber’s estimated 2011 noninterest expenses
Earnings Accrection:
2% - 4% accretion
Estimated Pro Forma Capital
Ratios At Closing:
7.40%+ Tier 1 Leverage Ratio
12.19% Tier 1, Risk-Based Ratio
13.23% Total Capital Ratio
5.82% TCE/TA
32
Total Shareholder Returns
(Through Apr il 30, 2011, or most recent available, Including Reinvestment of Dividends)
2 Years
4 Years
10 Years
15 Years
28.8%
9.7%
10.5%
12.1%
9.7%
(14.5%)
(0.5%)
6.2%
NASDAQ
Bank
10.2%
(10.6%)
2.1%
6.3%
S&P 500
27.6%
0.1%
2.8%
6.9%
DJIA
28.7%
2.3%
4.3%
8.0%
CBU
S&P 600
Comm. Bank
Source: Bloomberg
33
Consistent Dividend Focus
• Strong Dividend Payment
– $0.96 per share annualized
• Excellent Dividend Yield:
– 3.9% as of May 17, 2011
• Outstanding Track Record of Payment
Increases
– 9.1% increase in April 2010
– 17 straight years
34
Investment Merits
• NYSE-listed Company with Significant Liquidity.
• Long-term Growth Focus.
• Successful and Effective Operating Strategy.
• Strong Fundamentals with Excellent Asset Quality.
• Superior Return to Shareholders.
35
Thank You
May 2011