Community Bank System, Inc. Disposes of Certain Assets in Response to the Volcker Rule

  Community Bank System, Inc. Disposes of Certain Assets in Response to the
  Volcker Rule

Business Wire

SYRACUSE, N.Y. -- December 31, 2013

Community Bank System, Inc. (NYSE:CBU) announced that it has sold its entire
portfolio of bank and insurance trust preferred collateralized debt obligation
(CDO) securities in response to uncertainties created by the announcement of
the final rules implementing the Volcker Rule, which was released jointly by
the Federal Reserve and other federal regulatory agencies on December 10,
2013. The Company believes that the final rules that implement Section 619 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly
referred to as the “Volcker Rule”, require banking entities to divest certain
disallowed securities, including its holdings of trust preferred CDOs. In
addition, the Company extinguished $226.4 million of Federal Home Loan Bank
(FHLB) term advances and sold $417.6 million of Treasury securities previously
classified as “Held to Maturity”. The impact of these actions was a pre-tax
loss of approximately $6.9 million, or $0.12 per share, after-tax, which will
be reflected in the Company’s fourth quarter 2013 results. The $6.9 million
pre-tax loss was comprised of $32.4 million of gains on the Treasury
securities, $15.5 million of losses on the trust preferred CDOs, and a $23.8
million charge from the early debt extinguishment. The Company reinvested the
net cash proceeds created from these transactions of approximately $246
million, into Treasury securities with similar durations to the assets sold in
order to replace the net interest income impact of the security sales and debt

“We are pleased to have efficiently executed the sale of the trust preferred
CDOs and the simultaneous investment and debt actions which we believe are in
the best interest of our shareholders,” said Mark Tryniski, the Company’s
President & CEO. “These actions serve to eliminate the uncertainties created
by the Volcker Rule.”

Headquartered in DeWitt, New York, Community Bank System, Inc. has $7.3
billion in assets and over 180 customer facilities. The Company’s banking
subsidiary, Community Bank, N.A. operates across Upstate New York and
Northeastern Pennsylvania. Its other subsidiaries include: Benefit Plans
Administrative Services, Inc., a national employee benefits consulting and
trust administration firm; 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. For more information, visit:

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


Community Bank System, Inc.
Scott A. Kingsley, E.V.P. and Chief Financial Officer
Office: 315-445-3121
Fax: 315-445-7347
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