I N V E S T I N G I N T H E F U T U R E
C O M M U N I T Y B A N K S Y S T E M , I N C .
2 O 1 6 A N N U A L R E P O R T
O P P O R T U N I T Y
P R O F I L E
The Bank operates more than 200 customer facilities across Upstate New York and Northeastern
Pennsylvania through its banking subsidiary, Community Bank, N.A. At year-end 2016 the Company
had assets of approximately $8.7 billion, placing the DeWitt, N.Y. headquartered company among
the country’s 150 largest financial institutions. In October 2016 the Company entered into a definitive
agreement to acquire Merchants Bancshares, Inc., Vermont’s largest statewide independent bank,
with total assets of nearly $1.9 billion, deposits of $1.5 billion and 32 banking offices. In December
2016, the Company entered into an agreement to acquire Northeast Retirement Services, Inc. (“NRS”),
a leading provider of plan accounting, transfer agency, fund administration, trust and retirement
plan services. NRS became a subsidiary of Benefit Plans Administrative Services, Inc., a wholly-owned
subsidiary of Community Bank System, in February 2017 when the transaction was completed.
The Company’s principal business focus is building additional value into the enterprise through disciplined
organic growth combined with selective and strategic acquisitions, and a consistent approach to
business regardless of economic conditions. The Company’s performance goal is to generate more
than 10 percent average annual total shareholder return over time.
Community Bank’s market-leading branch system serves predominantly non-urban markets where it
has earned the first or second deposit market share in 75 percent of the towns where it operates.
Approximately 36 percent of the Company’s 2016 revenue came from noninterest sources, with nearly
60 percent of that from its benefits administration, wealth management and insurance services
businesses. In 2016, the Company’s financial services businesses generated just under $90 million in
revenue, an increase of 37 percent from $65 million in 2015.
The Company’s disciplined approach to lending has provided an enviable risk profile for the Bank, where
asset quality metrics have remained consistently better than industry and peer group averages.
The Company’s consistent approach to business has resulted in it being named one of the nation’s
best large banks each of the last eight years in the annual Forbes.com® analysis of America’s 100 largest
financial institutions.
Community Bank System has raised its cash dividend for 24 consecutive years, a significant milestone
and evidence of the Company’s belief that payment of a meaningful and growing dividend is an important
component of providing favorable long-term returns to its shareholders.
CBU has raised its cash dividend
for 24 consecutive years.
I N V E S T M E N T
C O N S I D E R A T I O N S : C B U
NYSE-listed company with
significant liquidity
Payment of a cash
dividend that has been
raised every year for
the past 24 years, providing
a meaningful return
The 9-year cumulative
total return to shareholders
of 335% (on 12/31/16),
the fourth highest among
the top 100 largest
US banks by asset size
Focus on revenue
diversification which has
driven substantive noninterest
income expansion
Successful and effective
operating strategy
Strong fundamentals
with excellent asset quality
on a consistent basis
T A B L E O F
C O N T E N T S
Investment Overview
Letter to Shareholders
Business Summary
Forbes Industry Comparison
Selected Financial Data
Operations Review
Corporate Leadership
Administration
Branch Locations
Acquisition History
Corporate / Shareholder Information
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INVESTMENT
PROFILE
L I S T I N G
New York Stock Exchange
T I C K E R S Y M B O L
CBU
M A R K E T C A P
$2.76 billion
At 12/31/16
D I V I D E N D
$1.28
Annualized for most recent quarter
D I V I D E N D Y I E L D
2.07%
Based on closing price of $61.79 on 12/31/16
D I V I D E N D P AY O U T R AT I O
54%
S H A R E S O U T S TA N D I N G
44.4 million
A V. T R A D I N G V O L U M E
~180,000
3-month average 12/31/16
Community Bank has
increased its cash
dividend by 60% over
the past 10 years.
CBU was ranked 3rd best
for 2017 in an analysis of America’s
best and worst large banks by
Forbes® Magazine.
Total Shareholder Returns (Annualized)
Through December 31, 2016, or Most Recent Available, Including Reinvestment of Dividends
1 YEAR
5 YEARS
10 YEARS
15 YEARS
59.0%
44.7%
40.4%
12.0%
16.5%
21.2%
22.6%
20.5%
14.6%
12.9%
14.6%
14.9%
3.1%
5.6%
6.9%
7.5%
5.8%
8.6%
6.7%
7.3%
CBU
S&P 600 Commercial Bank
KBW Regional Bank
S&P 500
DJIA
Source: Bloomberg
Stock Ownership 12/31/16
Institutional – Active Managed
Institutional – Passive / Index Managed
Retail
Officers / Directors
Pension / Dividend Reinvestment / 401K
40%
25%
25%
4%
6%
Dividend Growth
Market Cap: CBU
In millions at 12/31
$1.50
$1.00
$ 0.50
$3,000
$2,000
$1,000
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I N V E S T I N G I N T H E F U T U R E
2016 marked Community Bank’s 150th anniversary, a milestone we’ve proudly celebrated
across our communities. From our humble beginnings in 1866 as St. Lawrence County
National Bank, we’ve grown to nearly $8.7 billion in assets across the Adirondacks, the
North Country, the Southern Tier, Western New York and Northeastern Pennsylvania.
In 2017, we’ll cross the $10 billion asset threshold as we expand into New England with the
acquisition of Vermont-based Merchants Bancshares, Inc. We believe our growth as a
bank and success as a community partner over these 150 years is a direct result of our
custom to always invest in — and embrace — the future.
The future energizes us. Each day and each year, we challenge ourselves to deliver more.
How can we better serve our customers, engage our employees and reward our
shareholders? How can we be a better financial partner, employer and investment?
The answer in every one of our 150 years has been the same: be consistent, stick to what
we know, do right by our communities, and do it better than anyone else.
We did well by this mission in 2016. Our record operating results and financial
performance once again placed us among the best large U.S. banks, as evaluated by
Forbes® Magazine in its eighth annual analysis of “America’s Best Banks.” In its
January 2017 list, Forbes® ranked Community Bank third among the 100 largest
publicly-traded banks and thrifts, based on a comparison of ten different metrics related
to asset quality, capital adequacy, growth and profitability, and which included financial
institutions ranging in asset size from just under $8 billion to $2.5 trillion. This marks
Community Bank’s highest ranking in the eight years that Forbes® has produced
this analysis. In fact, we’ve ranked 12th or higher in every year, with top 10 rankings for six
of the annual reviews. We believe that our record of regularly placing near the top of
these rankings reflects our consistently strong operating performance.
Likewise, in 2016 we raised our cash dividend for the 24th consecutive year, maintaining
our place among the select group of “dividend achievers” that populate the S&P High
Yield Dividend Aristocrats® Index. This index measures the performance of companies
within the S&P Composite 1500® that have followed a managed-dividends policy of
consistently increasing dividends every year for at least 20 years. We are pleased to note
that even among this elite group of investment peers, Community Bank again outperformed
the index as a whole on the basis of a one-year total return to shareholders, returning
59.0 percent for the year ended December 31, 2016, compared to the index average of
20.7 percent. We outperformed the index average for the three-, five- and ten-year
periods ended December 31, 2016 as well.
Our pride in this history is exceeded only by our optimism for the future.
We believe 2017 will rank among the most transformative years in Community Bank’s history
— a year when our geography and operations will grow in meaningful ways, and our
earnings power in tandem.
2
Mark E. Tryniski, President
and Chief Executive Officer, and
Sally A. Steele, Chairman of
the Board
TO OUR SHAREHOLDERS, CUSTOMERS AND EMPLOYEES: A R E C O R D 1 5 0 T H Y E A R
2016 was a solid year in nearly every respect. Record operating results for our 150th year reflect the ongoing core strength and
operating trends across our franchise. The Oneida Financial transaction was successfully integrated throughout 2016, with strong loan
growth, a highly positive level of deposit retention and significant growth in wealth management, insurance and employee benefit
services revenues.
Overall, our consumer mortgage and consumer installment products demonstrated strength through the year, and our total loan portfolio
grew at a modest but healthy pace of 3.1 percent and over $147 million from 2015. Loan growth was matched with core deposit
expansion of 5.0 percent, which is a highly productive performance in our markets. Commercial lending activity was fairly consistent
throughout 2016, reflecting the highly competitive nature of this business in our markets.
Revenue expansion was significant as well. Noninterest income grew 26.5 percent from 2015 and was meaningfully impacted
by the Oneida acquisition, which brought on a significant insurance business in addition to traditional banking relationships.
Our employee benefits administration, wealth management and insurance businesses posted an overall 37 percent increase in revenues,
with a significant portion of the growth coming from Oneida activities. Total non-margin revenues grew to constitute over 36 percent of
total revenues, providing not just diversification but multiple points of opportunity for further growth.
Net interest margin measured 3.71 percent for the year, down slightly from 3.73 percent for 2015, as proactive and disciplined
management of funding costs in 2016 continued to help offset the interest-rate-driven decline in our average earning asset yields.
Operating expenses continued to be managed in a disciplined fashion. Our efficiency ratio — the measure of costs incurred to generate
revenue — rose modestly to 59.1 percent, from 57.9 percent in 2015, largely reflecting infrastructure investments in operations,
capital planning, Dodd-Frank Act stress testing, and investments to strengthen risk management and compliance to be fully prepared
to meet the higher organizational expectations of a $10 billion institution. We are proud to have operated with an efficiency ratio
consistently below 60 percent since 2010, and we continue to believe our efficient management is a core competency which
differentiates Community Bank from other banks. Over this same period, publicly traded U.S. banks reported efficiency ratios ranging
from 70 percent to 73 percent, on average.
2016 was also a continuation of the favorable overall asset quality results that are part of our credit DNA. Our reserves represented over
seven years of annualized net charge-offs at December 31st Our 2016 net charge-off results were again favorable at just 13 basis
points, and nonperforming loans, comprised of both legacy and acquired loans, ended the year at $23.7 million, or 0.48 percent
of total loans. Although we don’t see signs of asset quality headwinds on the horizon, it would be unlikely that we will see significant
improvements to current asset quality results.
Likewise, we are pleased with the ability of our strong and growing business to offset a significant increase in our New York State tax rate.
The $0.07 earnings per share impact from incremental state income taxes was absorbed by franchise growth, as total EPS for 2016 reached
$2.32, up 6 percent from $2.19 in 2015.
$9,000
$6,000
$ 3,000
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3Average Interest-Earning Assets In millions10-Year CAGR = 7.2% $1,200
$800
$ 400
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T R A N S F O R M AT I O N A L C H A N G E
CBU shareholders’
equity has more
than doubled
since 2009.
In recent years our industry has been stratified into the “big” and the “small.” A community bank at heart and in history, up until now
we have been characterized as “small.” But, with the economic events of recent years, banking regulators have lowered the key threshold
of “big bank” size to just $10 billion in assets. Banks that exceed this size bear significantly more complex requirements related
to compliance, risk management and general regulatory oversight, through what is referred to as Dodd-Frank Act Stress Testing,
or “DFAST.”
We’ve been transparent in the efforts and costs we’ve undertaken to prepare for approaching this threshold. As we grew in 2015 and
2016, we established and communicated a road map that would provide for a mid-2017 DFAST reporting capability, regardless of
whether we’d actually reached the $10 billion threshold by that time. We proceeded with our plans, implementing and building out DFAST
systems and reporting capabilities. When our October 2016 agreement to acquire Merchants Bancshares, Inc. made crossing the
$10 billion asset mark imminent, we were well prepared.
The DFAST threshold is near. But — once crossed, our strategy remains the same. We’ll be focused on growing our earnings and
dividends in a disciplined and sustainable fashion for the benefit of our shareholders — and not growth for its own sake.
Asset growth aside, the Merchants acquisition brings truly exciting opportunities to Community Bank. The largest statewide independent
bank in Vermont, Merchants has the third largest deposit market share in the state, with a growing presence in Western Massachusetts.
In addition to assets of nearly $1.9 billion, it brings total deposits of $1.5 billion, 32 banking offices, and one of the strongest loan
books in the country. Merchants’ cumulative credit losses over the past 10 years, including through the credit crisis, is just 27 basis points
– total. Their high-quality balance sheet is funded by an attractive, low-cost core deposit base very similar to ours. And most importantly,
the culture of Merchants and Community Bank are identical. Above all, we each value humility, work ethic, respect for others, and a
commitment to excellence and achievement.
We believe Merchants is an exceptionally strong and attractive institution in every respect, including its board and governance,
its leadership, its people, its markets, its performance, and its balance sheet. We are very judicious with our capital and very judicious
with our business partners, and believe we have chosen wisely.
We are progressing through the regulatory review and approval process, and we believe that the acquisition will be completed around
mid-year 2017. We’re very pleased that Merchants’ President and CEO Geoffrey Hesslink will be remaining with the Company, serving as
our New England Regional President.
Additionally, in December 2016 we entered into an agreement to acquire Northeast Retirement Services, Inc. (“NRS”), a leading provider
of plan accounting, transfer agency, fund administration, trust and retirement plan services. NRS officially joined our Benefit Plans
Administrative Services, Inc. (“BPAS”) subsidiary upon deal closing in February 2017. The combination of NRS and BPAS creates a
subsidiary with over $80 million in annual fee revenue, over $50 billion in trust assets and 3,800 retirement and other employee benefit
plan administration clients throughout the United States and Puerto Rico. The NRS deal nicely represents the kind of non-banking
growth opportunities that we believe build tremendous value into our franchise, without necessarily adding to the balance sheet in the
way bank transactions do.
In both Merchants and NRS, we found low-risk, high-quality partners with whom we expect to create above-average returns
for our shareholders.
4Shareholders’ Equity In millions10-Year CAGR = 10.0% E X C I T E M E N T A H E A D
Central to our success is the dedicated work of our outstanding Board of Directors, and 2017
brings a number of changes.
Per our Board’s policy regarding term limits for the chairs and committees, Nicholas DiCerbo’s
term as Board Chair expired at the close of 2016. Nick has served as Board Chair since
2011 and as a Director since 1984, and has been an integral part of the decision-making that
has elevated Community Bank System to a four-state market presence and more than
200 banking locations. Nick will now serve as Chair of the Strategic/Executive Committee,
and will also serve on both the Risk and Trust and Financial Services Committees.
We are thrilled that Sally A. Steele, Esq., will ably assume Nick’s role as Chair of the Board.
A Director of the Company since the acquisition of Grange National Banc Corp. in 2003,
Sally is an outstanding leader with significant knowledge of our institution which she will apply
in guiding the governance activities of the Company in the coming years.
With deep gratitude we thank Jim Gibson, whose mandatory retirement at age 70 culminated
seven years of service to Community Bank’s Board. Jim joined the Board in 2009, following
his retirement from partnership as a public accountant with KPMG, and his financial expertise
brought tremendous insight to our Audit and Compensation Committees.
In 2017 we will also welcome two new Directors from Merchants, continuing our long
history of benefiting from our acquired institutions’ leaders’ expertise and insights.
Jeffrey L. Davis and Raymond C. Pecor, III will be joining the Board to support our ongoing
efforts in our new markets.
We are confident that the meaningful changes on the horizon for Community Bank in 2017
set the stage for an abundant future for our Company. We intend to continue delivering on our
duty to manage and grow our organization in a disciplined fashion, including crossing the
$10 billion threshold in a manner that optimizes the economic outcome for our shareholders.
We’re grateful for your continued support of Community Bank System, Inc. in an era of great
industry change. It is an honor to look ahead to a future of shared successes with our customers,
shareholders and employees in 2017 and beyond. The future is exciting, and we cannot wait
to embrace it.
$30
$20
$ 10
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10-Year CAGR = 5.8%
$3.00
$2.00
$ 1.00
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10-Year CAGR = 6.3%
Sally A. Steele Chairman of the Board
Mark E. Tryniski President and Chief Executive Officer
5Book Value per Share Earnings Per Share Diluted Community Bank Franchise Overview
Total Branch Locations
Total ATMs
Total Counties Served
New York
Pennsylvania
Average Deposits per Branch
194
202
36
6
$34.5 million
Merchants Bank Franchise Overview
Total Branch Locations
Total ATMs
Total Counties Served
Vermont
Massachusetts
Average Deposits per Branch
32
33
12
1
$47.2 million
Noninterest-bearing
deposits represent nearly
a quarter of CBU’s
total deposits.
Noninterest income
derived from general
banking services totaled
more than $66 million
in 2016.
B U S I N E S S S U M M A R Y
Banking Services
Counties with Community Bank Retail Banking Locations
Counties with Merchants Bank Retail Banking Locations
Focus on Core Deposit Funding Total Deposits at 12/31/16 = $7.08 billion
Non-Maturity Interest-Bearing
Noninterest-Bearing
Time Deposits
67%
23%
10%
Diverse Loan Portfolio Total Loans at 12/31/16 = $4.95 billion
Consumer Mortgage
Business Lending
Consumer Direct/Indirect
Home Equity
37%
30%
25%
8%
Expanding Service Footprint
Number of total offices
Banking Services
(noninterest income)
In millions
210
140
70
$75
$50
$25
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17*
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* at conclusion of Merchants acquisition
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The Company’s financial
services businesses
have grown at a 13%
compounded annual growth
rate (CAGR) over the
past 10 years.
In 2016, employee benefit,
wealth management,
and insurance services
accounted for 58% of total
noninterest income.
Employee Benefit Services
BPAS, Inc., and its subsidiaries, provides on a national basis: employee benefit trust services;
collective investment fund, retirement plan and VEBA & HRA/HSA plan administration
services; actuarial services; and healthcare consulting services.
In 2016 BPAS served approximately 400,000 plan participants, held $19 billion in assets
under custody, employed 270 professionals, and operated from 10 offices located in
New York, New Jersey, Pennsylvania, Texas and Puerto Rico.
In December 2016, the Company announced an agreement to acquire Northeast Retirement
Services, Inc. (“NRS”), a leading provider of plan accounting, transfer agency, fund
administration, trust and retirement plan services. The combination of BPAS and NRS creates
a platform with over $80 million of annual revenue, more than $50 billion of trust assets,
and 3,800 clients across the United States and Puerto Rico.
Wealth Management and Insurance Services
I N V E S T M E N T A D V I S O R Y / A S S E T M A N A G E M E N T
Community Investment Services, Inc., The Carta Group, Inc., Nottingham Advisors, Inc.,
and the Trust Department of Community Bank, NA provide investment advisory and asset
management services to individuals, corporations, corporate pension and profit sharing plans,
and charitable foundations.
I N S U R A N C E
The OneGroup NY, Inc. is a full-service insurance agency offering personal and
commercial property insurance and other risk management products and services to
individuals, corporations, not-for-profits and municipalities.
Financial Services Revenue Diversity 2016 Revenue = $89.9 million
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Employee Benefit Service Revenues 52%Insurance Revenues 26%Wealth Management Services Revenues 22% 2 0 1 6 C O M P A R I S O N C H A R T S
CBU V S TOP 10 0 BANKS
Return on Average
Tangible Common
Equity %
Return on Average
Assets %
Net Interest Margin
(FTE) %
Efficiency Ratio %
15
10
5
1.5
1.0
0.5
3.75
2.50
1.25
75
50
25
Net Charge-offs/
Average Loans %
Nonperforming
Assets/ Total
Assets %
Risk-based
Capital Ratio %
Reserves/
Nonperforming
Assets %
0.18
0.12
0.06
0.75
0.50
0.25
18
12
6
180
120
60
Common Equity
Tier 1 Capital Ratio (%)
Operating
Revenue Growth %
15
10
5
15
10
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Forbes® analysis ranked banks based on
September 30, 2016 regulatory data.
CBU
TOP 100 BANKS
Community Bank System
ranked third in the eighth annual
Forbes.com® ranking of
“America’s Best Banks 2017.”
This marks the sixth time that CBU has been ranked
among the top 10 best banks in Forbes® analysis
of America’s 100 largest banks and thrifts. This year’s
analysis was based on a comparison of ten different
metrics related to growth, asset quality, capital adequacy
and profitability. The following charts display the
financial metrics used in the 2017 analysis and compare
CBU’s results to the median values of the 100 largest
financial institutions.
After placing among the
top 12 banks for eight
consecutive years, Forbes®
ranked CBU third this year,
its best placement yet.
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Over the past 10 years,
CBU has grown revenue
at a compound annual growth
rate of 8.7%, outpacing
operating expense growth
of 7.5%.
Community Bank System’s
book value per share has grown
by more than 75% since the
end of 2006.
CAGR
(10-year)
7.4%
11.7%
8.7%
7.5%
2.1%
10.5%
N/A
6.3%
5.8%
4.9%
5.8%
9.1%
6.8%
6.4%
8.4%
10.0%
F I N A N C I A L P E R F O R M A N C E
Selected Financial Highlights
Income Statement
In millions
2016
2006
Net interest income
$
273.9
$
134.8
Noninterest income
Total revenue
Operating expenses
Provision for loan loss
155.6
429.5
266.8
8.1
Net income
$
103.8
$
51.7
186.5
129.6
6.6
38.4
Net interest margin
3.71%
3.91%
Per Share Data
Diluted earnings per share
$
2.32
$
Operating earnings per share1
Cash dividends declared
Book value
2.33
1.26
26.96
Tangible book value
$
17.12
$
1.26
1.33
0.78
15.37
7.17
Balance Sheet Data
End of period, In millions
Assets
Loans, net
Deposits
$
8,668
$
4,498
4,949
7,076
2,702
3,168
462
Shareholders’ equity
$
1,198
$
1 Operating earnings per share excludes the tax-effected impact of any gains or losses on sales of investment
securities and debt extinguishments, acquisition expenses, litigation settlements, and other special charges.
9
Core deposits make
up 90% of our funding
and are a strength
and a focus at CBU.
Deposit Growth In millions
$7,500
$5,000
$2,500
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C
ommunity Bank System’s success has been the result of a consistent strategy that
we have followed for more than 20 years. We have invested in and grown a market-leading
branch system which serves predominantly non-urban markets.
Simply put, we operate as a community bank with local decision-making, provide a broad array of
banking and financial services to retail, commercial and municipal customers, and leverage our deep
knowledge of these markets to build strong core account relationships.
Using this approach, we have earned a dominant market share in much of Upstate New York
where there is rational and modest growth, but where we have achieved solid performance over time.
Throughout our Upstate New York and Northeast Pennsylvania service area we have the 1st or 2nd
deposit market share in 75 percent of the towns where we do business.
Our operating objective is to continue to grow our branch network, primarily through a disciplined
acquisition strategy, and with an occasional de novo location. At the 2016 year end, we were
one of the largest community banks based in Upstate New York with approximately $8.7 billion in
assets and more than 200 customer facilities. In the coming months we will complete the acquisition
of Merchants Bancshares, Inc. and gain entry to the Vermont marketplace, with a partner that
has the number three market position for the entire state. At that time we’ll crest the $10 billion
asset threshold, which will subject the Company to additional regulation and increased supervision,
an outcome for which we have been carefully preparing.
Despite our increased size — our total assets have more than quadrupled since 2000 —
we continue to operate like a $1 billion bank, with decentralized decision-making and a focus on
the smaller customers within our service footprint who don’t seem to interest our larger
competitors. We focus on generating and retaining core deposit accounts which is illustrated by our
modest percentage of time deposits in relation to total deposits. We are adept at functioning in
a non-urban environment where growth is stable and typically within a range of two to five percent.
Along with being an efficient and effective gatherer of deposits, our understanding of our market
area enables us to function particularly effectively as an in-footprint lender. Our disciplined approach to
lending has resulted in exceptional asset quality, even through the worst recession since the
Great Depression, and our conservative approach to risk management makes our returns particularly
robust relative to risk taken.
Importantly, we have never retreated from our markets or customers during economic downturns,
nor do we see that as a possibility in the future. Our banking strategy has been sound and
as such, we haven’t needed to significantly change it. We continue to seek to grow through
disciplined organic and acquired opportunities and we remain focused on cultivating
profitable customer relationships.
10-Year CAGR = 8.4% I N V E S T I N G I N A S U C C E S S F U L
G R O W I N G C O M M U N I T Y B A N K
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A n important component of the Company’s long-term business strategy has been to invest in
and to substantially grow noninterest revenue to reduce dependence on net interest margin.
This is particularly important during periods when the margin narrows as has been the case in recent
years. Our success at meeting this objective is illustrated by both the longer-term trends and
the near-term growth that has been realized for these businesses. Over the past 10 years
noninterest income has more than tripled from $51.7 million in 2006, to $156.0 million for 2016.
Compared to 2015, fee income increased by $32.7 million, an increase of 26.5 percent, reflecting
both organic growth in these businesses and a full year of revenue from the Oneida Financial
acquisition. Along with growth in relation to the 2015 revenue, noninterest income as a percentage
of total revenue increased from 33 percent to 36 percent in 2016.
Banking service fees, which are more than 42 percent of noninterest income for 2016,
were up 14.5 percent to $66 million, both a result of the Oneida acquisition and as a result of
organic growth.
Starting in 1996, with the acquisition of Benefit Plan Administrators (“BPAS”), the Company has
made a strong commitment to acquire and build financial services businesses that can complement
the banks service offerings, or that can function independently of the Bank’s activities.
BPAS has the capability of being both a complementary service for the Banks customers,
and of building a high-performing business which services customers from all over the United States
as well as Puerto Rico. BPAS provides benefits administration and consulting services, including:
defined contribution plan benefit administration; actuarial services; health care and benefit plan
consulting, collective investment fund administration; and VEBA/HRA administration.
BPAS services its nationwide clientele from several offices that are located in Upstate New York,
Metropolitan New York, Philadelphia, Pittsburgh, Houston, Boston and Puerto Rico. During
the past eight years BPAS has grown revenues at a compound annual growth rate of just under
11 percent, and with the completion of the acquisition of Northeast Retirement Services in February,
BPAS is expected to realize a significant increase in revenue during 2017.
The Company’s wealth management and insurance business also realized significant growth
in 2016 as it more than doubled from $20.2 million in 2015 to $43.3 million. This strong growth
was a reflection of the 2016 integration of the insurance and wealth management businesses
acquired as part of the Oneida Financial transaction.
The Company’s wealth management and insurance businesses are focused primarily on the
Bank’s service areas of Upstate New York and Northeast Pennsylvania and provide trust services,
asset management and advisory as well as insurance agency services. These businesses
have realized an eight-year compound annual growth rate of more than 12 percent, and finished
2016 with nearly $5 billion in assets under management.
07
10
13
16
Banking Services
Wealth Management and Insurance
Benefit Plan Services
$75
$50
$25
12
Noninterest Income Growth In millionsA core operating objective is to grow noninterest revenues by developing banking- related fee income and by growing existing financial services business units. INVESTING IN GENERATING
DIVERSIFIED REVENUE STREAMS
13
C ommunity Bank’s roots reach back 150 years to the North Country of Upstate New York,
and into many of towns and villages that are the antithesis of the state’s urban centers.
As we have grown and expanded our service area, we have continued to seek out similar markets
across Upstate New York and into Northeastern Pennsylvania, where we are a strong competitor.
These regions are not known for their dynamic growth prospects, but they are known to be
stable low-growth markets that aren’t subject to boom and bust cycles. While we have successfully
grown organically, it has always made sense to explore opportunities to supplement that growth
in other ways.
Acquisitions have been an important part of the Company’s long-term strategic growth initiative
and we have consistently invested in the growth of noninterest revenues, as well as banking
acquisitions that strengthen our market position or expand our service area. The Company has
earned a reputation for being an effective acquirer by focusing on transactions that are manageable
in size, accretive to earnings and importantly, low risk. Since 1985, we have expanded our banking
franchise through 18 successful whole bank or branch acquisitions. In 1996, we made our
first investment in non-bank fee revenue by acquiring Benefit Plan Administrators. Since that time
we have made nine acquisitions which have grown our financial services revenues to just under
$90 million for 2016.
Other recent transactions have included the acquisition of Oneida Financial Corp. in early December
2015, adding 12 branches, $699 million in deposits and improving our market share in the
Syracuse and Utica-Rome metropolitan areas. The Oneida transaction also added product and
service offerings in benefit administration, wealth management and insurance which complemented
our financial services offerings. In the fourth quarter of 2013, we effectively integrated eight
branches that we acquired in Northeast Pennsylvania from Bank of America, which added
$303 million in deposits, as well as scale to our Pennsylvania banking operations. We completed
another branch transaction during the third quarter of 2012, when we acquired 19 branches
(12 after consolidations) from HSBC and First Niagara. This transaction expanded our presence in
a variety of Upstate New York markets and added $800 million in deposits. And in the second
quarter of 2011, we completed the acquisition Wilber Corporation adding 22 Central New York
locations, $870 million in assets and $772 million in deposits.
In October 2016, we announced a definitive agreement to acquire Merchants Bancshares, with total
assets of nearly $1.9 billion, deposits of $1.5 billion and 32 banking offices. Merchants is the largest
statewide independent bank in Vermont with 11percent market share and is ranked third in deposits.
This transaction offered an opportunity to further diversify our geographical markets and customer
base by expanding into Vermont and Western Massachusetts. It offered a natural expansion of
our existing footprint in Upstate New York, into smaller markets similar to those in which we currently
operate. Merchants is a very high-quality franchise including its people, its markets, its performance,
and its balance sheet, and provides an exceptionally strong and attractive transaction in
every respect.
In February 2017, we completed the acquisition of Northeast Retirement Services (“NRS”),
a leading provider of plan accounting, transfer agency, fund administration, trust and retirement plan
services. NRS, which is located just outside of Boston, Massachusetts, became a subsidiary
of Benefit Plans Administrative Services, Inc. (“BPAS”), creating an organization with over $80 million
in annual revenue, over $50 billion in trust assets and 3,800 retirement and other employee
benefit plan administration clients throughout the United States and Puerto Rico.
CBU noninterest
income was 35.9% of
total revenue in 2016,
up from 27.7% in 2006.
Total Revenue1 In millions
$450
$300
$150
07
08
09
10
11
12
13
14
15
16
10-Year CAGR = 8.7%
1 excluding securities gains/losses and debt extinguishment charges
Noninterest Income
Net Interest Income
14
I N V E S T I N G I N A C Q U I S I T I O N S
T H AT S U P P L E M E N T G R O W T H
15
Executive Management
COMMUNITY BANK, N.A. REGIONAL ADVISORY BOARDSADIRONDACK Paul M. Cantwell, Jr. William M. Dempsey Alexander C. EdwardsJoseph Vernon Lamb IIIJames R. Langley, Jr.Carl J. MadonnaBrian J. MonetteKim A. MurrayCENTRAL Mary C. AlbrechtOlon T. ArcherTom HardingJoseph P. MirabitoBenjamin C. NesbittJames L. SewardGeoffrey A. SmithDavid F. Wilber IIIBrian R. WrightPENNSYLVANIA Edward A. CoachMichael J. ColemanJohn H. GrahamScott E. HenryEdward I. Johnson, Jr.Kathleen M. LambertThomas A. McCulloughWilliam K. Nasser, Jr.Russell G. NewellFrank J. NiemiecJames M. O’BrienGerard T. O’DonnellJames T. ShoemakerLissa Bryan Smith Scott Kingsley Executive Vice President, Chief Financial OfficerJoined CBU in 2004. Prior to joining the Company, he served as CFO of Carlisle Engineered Products.Joe Getman Executive Vice President, General CounselPrior to joining the Company in 2008, he provided corporate counsel to CBU as a senior partner at Bond, Schoeneck & King, PLLC.Mark Tryniski President and Chief Executive OfficerJoined CBU in 2003 and has previously served as Chief Financial Officer and Chief Operating Officer. Prior to joining the company he was a partner with Pricewaterhouse Coopers.Brian Donahue Executive Vice President, Chief Banking OfficerJoined the Company in 1992. During his 25 years of service to the Company, he has served as Chief Credit Officer and Senior Loan Officer for the Bank’s Southern Region.16 Board of Directors
Nicholas A. DiCerbo DiCerbo & Palumbo, Partner;Strategic/ Executive Committee, Chair;Trust and Financial Services Committee; Director since 1984James A. Gabriel Franklin & Gabriel, Owner; Trust and Financial Services Committee, Chair;Risk Committee, Vice Chair;Strategic/Executive Committee;Director since 1984John Parente CP Media, LLC, CEO;Risk Committee, Chair;Strategic/ Executive Committee;Audit / Compliance Committee;Director since 2010John F. Whipple Buffamante Whipple Buttafaro, P.C., CEO;Audit/ Compliance Committee, Vice Chair;Governance Committee;Stress Testing Subcommittee;Director since 2010Brian R. Ace Laceyville Hardware, Owner;Governance, Chair;Trust and Financial Services Committee;Director since 2003Sally A. Steele Chairman of the BoardAttorney at Law;Director since 2003Mark J. Bolus Bolus Motor Lines, Inc., President and CEO;Compensation Committee, Vice Chair;Governance Committee;Strategic/ Executive Committee;Director since 2010Michael R. Kallet Retired Chairman and CEO of Oneida Financial Corp.Trust and Financial Services Committee;Director since 2015Eric E. Stickels Retired President, COO and Secretary of Oneida Financial Corp.Stress Testing Subcommittee, Chair;Trust and Financial Services Committee;Director since 2015Neil E. Fesette Fesette Realty, LLC and Fesette Property Management, Owner, President and CEO; Compensation Committee, Chair;Governance Committee; Strategic/ Executive Committee;Director since 2010Edward S. Mucenski Pinto, Mucenski, Hooper, Van House & Company, P.C., Partner and Managing Director;Audit / Compliance Committee, Chair;Compensation Committee; Stress Testing Subcommittee;Director since 2010Mark E. Tryniski Community Bank System, Inc., President and CEO;Director since 2006Note: All bank board members participate in the Risk CommitteeJames W. Gibson, Jr. The Board of Directors is deeply grateful to Jim Gibson for his important guidance to Community Bank System Inc. during his seven years of service as a Director. Mr. Wilson, who joined the Company’s Board in 2009, has served on the Audit/Compliance/Risk Management and Compensation Committees. Prior to joining the Board, he was a partner at KPMG, LLP. 17 EXECUTIVEMark E. Tryniski, President and Chief Executive OfficerScott A. Kingsley, Executive Vice President, Chief Financial OfficerBrian D. Donahue, Executive Vice President, Chief Banking OfficerGeorge J. (Joe) Getman, Executive Vice President, General CounselRETAIL & BUSINESS BANKINGJoseph Serbun, Senior Vice President, Chief Credit OfficerHal Wentworth, Senior Vice President, Retail Banking and MarketingRichard Heidrick, Senior Vice President, Consumer BankingGeorge Burke, Senior Vice President, Mortgage BankingJoseph Sutaris, Senior Vice President, Municipal Banking DirectorBarbara Maculloch, Regional President Northeast Pennsylvania Robert Cirko, Senior Vice President, Regional Retail Banking ManagerScott Boser, Vice President, Director of Mortgage Banking Lynne Wadsworth, Branch Services AdministratorCynthia Lefko, Cash Management Product and Sales ManagerDeborah Baker, Collections ManagerCREDIT ADMINISTRATIONStephen Hardy, Senior Vice President, Chief Credit AdministratorNancy Mastrucci, Senior Credit ManagerMark Guenthner, Special Assets ManagerDenise Rhoads, Commercial Appraisal ManagerFINANCE & TREASURY MANAGEMENTJoseph Lemchak, Senior Vice President, Chief Investment OfficerDeresa Durkee, Vice President, Corporate ControllerRobert Frost, Vice President of Finance, Director of Capital Planning and AnalysisSean Howard, Senior Treasury OfficerRandy Pray, Corporate Purchasing ManagerBrian Fancher, Assistant Corporate Controller Laura Mattice, Accounting Operations and Regulatory Reporting ManagerDennelle Michalski, Financial Controls ManagerRobert Pierce, Subsidiary Accounting and Financial Reporting ManagerADMINISTRATIVE SERVICESBernadette Barber, Senior Vice President, Chief Human Resources OfficerDanielle Cima, Associate General Counsel, Corporate SecretaryMichael Abdo, Associate General CounselBrett Fisk, Director of FacilitiesDonna Drengel, Board Secretary and Shareholder RelationsINFORMATION TECHNOLOGY & OPERATIONSJ. Michael Wilson, Senior Vice President, Chief Technology OfficerSusan Fox, Senior Vice President, Chief Information OfficerAaron Friot, Director of Information TechnologyRobin Dumas, Electronic Banking ManagerBarbara Snyder, Loan Operations ManagerChristina Sullivan, Director of Business Information SystemsPaula Demo, Deposit Operations ManagerTyanna Moseman, Corporate Projects ManagerRISK MANAGEMENTPaul Ward, Senior Vice President, Chief Risk OfficerMark Houghtaling, Director of Loan ReviewDaniel O’Connell, Director of Internal Audit Dorothy Quarltere, Chief Compliance OfficerTimothy Miller, Director of Information SecurityCOMMUNITY BANKCOMMERCIAL BANKING OFFICERS WESTERN REGIONJames Rahill, Senior Commercial Bank OfficerDavid Alm, Senior Commercial Banking OfficerMark Saglimben, Senior Commercial Banking OfficerDavid McKinley, Commercial Banking OfficerScott Brechbuehl, Commercial Banking OfficerGretchen Copella, Commercial Banking OfficerPatrick Gorman, Commercial Banking OfficerMichael Boza, Agricultural Banking OfficerNORTHERN REGIONNicholas Russell, Senior Vice President, Commercial BankingRonald Bacon, Senior Commercial Banking OfficerKevin Kent, Commercial Banking OfficerPaul Connelly, Commercial Banking OfficerCraig Stevens, Commercial Banking OfficerJeffrey Fallon, Commercial Banking OfficerPatricia Duffy, Agricultural Banking OfficerDuane Pelkey, Commercial Banking OfficerAaron Kimmich, Agricultural Banking OfficerSYRACUSE/ONEIDA REGIONLuke Fagan, Commercial Banking Team LeaderRussell Brewer, Commercial Banking Team LeaderRussell Sturtz, Commercial Banking OfficerJoseph Pedrotti, Commercial Banking OfficerWilliam Baldwin, Commercial Banking OfficerSteven Potter, Commercial Banking OfficerThomas Lewin, Commercial Banking OfficerDean Shlotzhauer, Commercial Banking OfficerTrevor Bacon, Commercial Banking Associate SOUTHERN REGIONStephen Rich, Commercial Banking Team LeaderLoren Herod, Agricultural Banking Team LeaderArthur Sable, Commercial Banking OfficerD. James Vedora, Commercial Banking OfficerMark Miller, Commercial Banking OfficerCharles Van Hooft, Agricultural Banking OfficerRebecca Snyder, Agricultural Banking OfficerCENTRAL REGIONJeffrey Lord, Commercial Banking Team LeaderEdward Michalek, Commercial Banking OfficerJohn Connolly, Commercial Banking OfficerAllison Mosher, Commercial Banking OfficerSMALL BUSINESS UNDERWRITINGMichael Austin, Small Business Loan ManagerRichard Sisson, UnderwriterBeth Robbins, UnderwriterPENNSYLVANIA REGIONWarren Rozelle, Commercial Banking Team LeaderRichard Kazmerick, Commercial Banking Team LeaderPaul Baynum, Commercial Banking OfficerMatthew Dougherty, Commercial Banking OfficerMary Elizabeth D’Andrea, Commercial Banking OfficerNeil King, Commercial Banking OfficerWalter Sarafinko, Commercial Banking OfficerDavid McHale, Commercial Banking OfficerA. Edward Nork, Commercial Banking OfficerStacia Arnaud, Commercial Banking OfficerJohn Pekarovsky, Commercial Banking OfficerADMINISTRATION18 WEALTH MANAGEMENT GROUPPaul Restante, Managing DirectorTheresa Kalil-Lennon, Senior Vice President, Regional Sales Manager, Central/EastDavid Coon, Senior Vice President, Regional Sales Manager, Western NYDaniel Drappo, Senior Financial Consultant, Regional Sales Coordinator, St. LawrenceStephen McFadden, Financial Consultant, Regional Sales Coordinator, AdirondackTRUST SERVICESCatherine Koebelin, Senior Vice President, Chief Trust Officer, OleanCharles Perrillo, Senior Vice President, Chief Trust Investment Officer, OneontaAmy Schlee, Senior Trust Officer, OneontaPatricia Barie, Senior Trust Officer, OleanJennifer Critti-Lebeau, Trust Officer, OneontaPatricia Crolly, Trust Officer, ScrantonShannon Hyzer, Trust Officer, OneontaRobert Jewell, Senior Trust Officer, ElmiraJohn Jones, Trust Officer, OneontaLinda Meyer Lambert, Trust Officer, OleanThomas LaPage, Trust Officer, CantonPatricia Lowe, Trust Operations Officer, OneontaVincent Mastrucci, Corporate Trust Officer, ScrantonAdam Niebanck, Trust Investment Officer, OneontaChristine Petras, Trust Investment Officer, OneontaPaul Snodgrass, Trust Investment Officer, CantonBrett Zielasko, Trust Officer, OneidaNOTTINGHAM ADVISORS, LLC100 Corporate Parkway, Suite 338, Amherst, NYThomas Quealy, Chief Executive OfficerLawrence Whistler, President, Chief Investment OfficerKaren Mohn, Chief Compliance OfficerNicholas Verbanic, Vice President, Portfolio ManagerONE GROUP706 North Clinton Street, Syracuse, NYPierre Morrisseau, Chief Executive OfficerJohn Catanzarita, Chief Operating OfficerAlison Dunn, Senior Vice President, HR and Employee BenefitsChris Mason, Executive Vice President, Commercial LinesRon Heath, Chief Sales and Marketing OfficerCOMMUNITY INVESTMENT SERVICES, INC.Paul Restante, PresidentTheresa Kalil-Lennon, Senior Vice President, Sales ManagerChasity Jaynes, Operations ManagerLaurel Pellettiere, Compliance ManagerGarry Payne, Carta GroupJeremy Caza, Carta GroupFINANCIAL CONSULTANTSPeter Albano, Wilkes-BarreCharles Baracco, SyracuseDonald Bower III, ElmiraEric Brunet, OgdensburgJoseph Butler, Jr., WatertownThomas Ciolek, Olean/AvonShawn Derrick, WellsvilleDaniel Drappo, WatertownJames Durso, WaterlooRobert Eckermann, CazenoviaTimothy Forman, Lake PlacidKevin Gildner, WellsvilleJoseph Hatfield, OneidaJustin Hooper, PlattsburghRandall Hulick, SpringvilleKathy Kaffenberger, ChittenangoRick Little, JermynAndrew Mangano, FultonJude McDonough, Scranton PAStephen McFadden, PlattsburghJames Mersfelder, SyracuseChad Murray, FalconerCharles Nicosia, OneontaDavid O’Neil, Jr., BoonvilleBrent Patry, Oneonta/NorwichRobert Stanley, MinookaJoseph Topichak, CorningMichele Wilck, Newark/PalmyraBENEFIT PLAN SERVICESBarry Kublin, Chief Executive Officer BPAS6 Rhoads Drive, Utica, NYPaul M. Neveu, President, BPAS, LLCRobert A. Malczyk, Vice President, Director of SalesLinda S. Pritchard, Senior Vice President, Recordkeeping Services3501 Masons Mill Road, Suite 505, Huntingdon Valley, PAMary Anne Geary, Senior Vice President, DC Plan ServicesRichard Schultz, Senior Vice President, Fiduciary ServicesBPAS ACTUARIAL AND PENSION SERVICES706 North Clinton Street, Syracuse, NYVincent F. Spina, PresidentSteven P. Chase, Senior Vice PresidentSarah E. Dam, Senior Vice President 335 Lexington Ave., 5th Floor, New York, NYSheryl Gabriel, Senior Vice President HAND BENEFITS & TRUST820 Gessner, Suite 1250, Houston, TXW. David Hand, Chief Executive OfficerStephen Hand, PresidentJames Goodwin, Vice PresidentBPAS TRUST COMPANY PUERTO RICO644 Fernandez Juncos Ave, Suite 301, San Juan, PRAlfredo Matheu, BPAS President, Puerto Rico19 COMMUNITY BANK NORTHERN NEW YORK MARKETADAMS Christopher M. Castle, ManagerALEXANDRIA BAY Bethany Todd, Manager AUSABLE FORKS Valerie Daniels, ManagerBLACK RIVER Margaret Farone, ManagerBOONVILLE (101 MAIN STREET AND HEADWATERS PLAZA) Debra Roberts, ManagerCANTON Marsha Watson, Manager CHAMPLAIN Melissa M. Peryea, ManagerCHATEAUGAY Sherry Langdon, Branch SupervisorCLAYTON Lori Fearnside, ManagerFORT COVINGTON Gayle Miner, Branch SupervisorGOUVERNEUR Diane Easton, ManagerHARRISVILLE Karen Pierce, Branch SupervisorHERMON Connie Green, ManagerHEUVELTON Richard Tacchino, Branch SupervisorINDIAN LAKE Brenda Lanphear, ManagerLAKE PLACID Katie Stephenson, ManagerLONG LAKE Viccann Novak, ManagerLOWVILLE (STATE STREET) Tina Paczkowski, District Manager LOWVILLE (TURIN ROAD) Stephen Allen, ManagerLYONS FALLS Susan Krist, ManagerMADRID Michelle Hollister, ManagerMALONE (ELM STREET) Darcy King, District ManagerMALONE (WEST MAIN STREET) Stacey Brunell, ManagerMASSENA Sue Perkins, ManagerNORTH CREEK Lori DeMars, ManagerNORWOOD Emily Losey, ManagerOGDENSBURG (STATE STREET) Matthew Honeywell, ManagerOGDENSBURG (FORD STREET) Denise Barse, ManagerOLD FORGE Barbara Criss, ManagerPLATTSBURGH (MARGARET STREET) Kathryn Reynolds, ManagerPLATTSBURGH (ROUTE 3) Kent Backus, Regional Retail Banking Manager James Snook, ManagerPLATTSBURGH (IN-STORE – WAL-MART) Arlene Favreau, Branch SupervisorPOTSDAM (MARKET STREET AND MAY ROAD) Victoria Strader, Manager SARANAC LAKE (BROADWAY AND LAKE FLOWER) Brenda Darrah, District ManagerST. REGIS FALLS Sherri Fleury, ManagerSTAR LAKE Connie Green, ManagerTICONDEROGA Maria Beuerlein, ManagerTUPPER LAKE John Salamy, Manager WADDINGTON Emily Losey, Manager WATERTOWN (ARSENAL STREET) Elizabeth Brown, ManagerWATERTOWN (216 WASHINGTON STREET) Rita J. Walldroff, Regional Retail Banking Manager Catherine Ward, ManagerWEST CARTHAGE Naura L. Christman, ManagerWHITEHALL Holly A. Rabideau, ManagerCOMMUNITY BANK SOUTHERN NEW YORK MARKETADDISONRobin Knapp, ManagerALFREDBeth Plaisted, ManagerALLEGANYStephanie Kolkowski, ManagerAVON Deborah Fitch, Manager ANGELICADiana Grastorf, Branch SupervisorBATHJoel Brazie, District ManagerBELFASTBrandy Burdick, Branch SupervisorBOLIVARJudy Gilliland, ManagerCANANDAIGUA (COUNTY ROAD 10) Ashley Braun, Branch SupervisorCANANDAIGUA (SOUTH MAIN STREET)Christopher Bross, ManagerCASSADAGASusan Sekuterski, ManagerCATOTiesha Combes, ManagerCLIFTON SPRINGS (EAST MAIN STREET AND CLIFTON PLAZA)Theresa Dorgan, ManagerCLYMERLaurie Harvey, ManagerCORNING (WEST MARKET STREET)Wendy Daines, ManagerCORNING NORTHRobert Avvampato, ManagerCUBAShavonne Henderson, ManagerBRANCH LOCATIONS20 DANSVILLEJody Tonkery, District Manager Melissa Ponticello, ManagerDUNKIRK (VINEYARD DRIVE)Jason DeChard, ManagerDUNKIRK (CENTRAL AVENUE)Jean Coughlin, ManagerELMIRADenise Allen, District Manager ERWIN/PAINTED POSTTodd Selander, Branch SupervisorFALCONERJoann Anderson, ManagerFILLMOREJulie Hall, District ManagerFRANKLINVILLESandra Wolfer, ManagerGENESEOLisa Kime, ManagerGENEVA (CANANDAIGUA ROAD)Tina Jackson, ManagerGENEVA (SENECA STREET)John Latanyshyn, ManagerGOWANDARalph Swanson, Manager HAMMONDSPORTKelly Bussmann, ManagerHORNELLSandra Aiken, ManagerHORSEHEADS (CONSUMER SQUARE)Glenn Parsons, ManagerHOUGHTON COLLEGEJulie Hall, District ManagerINTERLAKENDenise Ector, ManagerITHACA Michael MacDonald, ManagerJAMESTOWN (NORTH MAIN STREET)Kathleen Bemus, ManagerJAMESTOWN (MAIN STREET - BROOKLYN SQUARE)Glori Taylor, ManagerLAKEWOODLisa Allenson, District ManagerLIVONIARonda Howard, ManagerMORAVIAMichael Pizzola, ManagerMOUNT MORRISSusan Neelin, ManagerNAPLESJoilette Pendleton, District ManagerNEWARK (CHURCH STREET)Phyllis A. Adriaansen, ManagerNEWARK PLAZAAnn Young, ManagerNICHOLSKathleen Bowen, ManagerNORTH COLLINSRobin Hohman, Manager OLEAN (NORTH UNION STREET)Eric M. Garvin, Regional Retail Banking Manager Jody Spears, District Manager OLEAN (DELAWARE PARK)Kelly Crandall, ManagerORCHARD PARKKristen Woodarek, ManagerOVIDJacqueline Robinson, ManagerOWEGOFlorence Rossi, ManagerPALMYRACheryl Ford, ManagerPENN YAN (MAIN STREET)Thomas May, Manager PENN YAN (LAKE STREET)Kelly Smith, ManagerPHELPSMary Niles, ManagerPORTVILLE (EAST STATE ROAD)Brenda Blackwell, ManagerPORTVILLE (NORTH MAIN STREET)Katrina Savitcheff, Branch SupervisorRANDOLPHDiane Lecceardone, ManagerRIPLEYShara Post, Branch SupervisorRUSHVILLEChristine Copper, ManagerSALAMANCARobin Bowser, ManagerSENECA FALLSDavid Sloan, Regional Retail Banking Manager Christine Plate, ManagerSHERMANShannon Stevens, ManagerSILVER CREEKMark Catalano, District ManagerSPRINGVILLE (CASCADE DRIVE)Mary Ann Lutz, Manager SPRINGVILLE (NORTH BUFFALO STREET)Brooke Baker, Manager WATERLOOAlexis Carlson-Spina, ManagerWATKINS GLENAnthony Fraboni, Manager WELLSVILLE (BOLIVAR ROAD)Lori Dzielski, ManagerWELLSVILLE (MAIN STREET)Virginia Elliott, ManagerWESTFIELD Carl Swan, ManagerWOODHULLAshley Quick, ManagerYORKSHIREJoseph Fore, Manager 21 COMMUNITY BANK CENTRAL NEW YORK/ONEIDA MARKETBOICEVILLE Brad Bernard, ManagerCAMDEN Michelle Szkolnik, Manager CANASTOTA Lori Torrey, ManagerCAZENOVIA Robin Gallup, ManagerCHITTENANGO Roberta Button, ManagerCICERO Denise Cavallo, ManagerCOBLESKILL Christy Roberts, ManagerCOOPERSTOWN (MAIN STREET AND OTSEGO, STATE HIGHWAY) Naomi Duncan, ManagerDELHI Tina Seguare, ManagerDEWITT Robert Liedka, ManagerDOWNSVILLE Jean M. Lacey, ManagerFLEISCHMANNS Ana Benjamin, ManagerFULTON Tina Stephens, ManagerHAMILTON Janet Briggs, District ManagerHANNIBAL Debra Davis, District ManagerJOHNSON CITY Michelle Carlsson, ManagerMILFORD Kevin Moore, Branch SupervisorMORRIS Emily Boss, ManagerNORWICH (STATE HIGHWAY) Caryn Wake, ManagerNORWICH (BROAD STREET) Leigh Ann Odell, ManagerONEIDA (CONVENIENCE) Jackie Mowers, ManagerONEIDA (MAIN) Paul Lepore, Regional Retail Banking Manager Cindy Lindauer, ManagerONEONTA (MAIN STREET) Michael Walling, District Manager Nancy Miller, Gold Club ManagerONEONTA (CHESTNUT STREET) Paula Morell, ManagerONEONTA (SOUTHSIDE) Mike Walling, District ManagerONEONTA (FOXCARE CENTER) Lesley Bohacek, ManagerOSWEGO Fred Aldrich IV, ManagerOTEGO Beth Koncelik, Branch SupervisorPULASKI Steven P. Gaffney, ManagerROME (GRIFFISS PARK) Wendy Berg, ManagerROME (TURIN ROAD) Wendy Berg, ManagerSCHENEVUS Gerald V. Coombs, Jr., ManagerSIDNEY Bridget Fisk, District Manager Sharon Cutting, ManagerSKANEATELES Elizabeth Silliman, ManagerVERNON Mollie Foster, ManagerWALTON Donna A. Bundy, ManagerWESTMORELAND Tina Paczkowski, District ManagerCOMMUNITY BANK PENNSYLVANIA MARKETCARBONDALE Bobbiann Davis, ManagerCLARKS SUMMIT David Griffin, ManagerDALEVILLE Susan Pitoniak, ManagerDICKSON CITY Lisa Rochinski, ManagerEDWARDSVILLE Denise Johnson, ManagerFREELAND Daniel Boote, ManagerHAZLETON (AIRPORT ROAD) Paula Palance, ManagerHAZLETON (NORTH CHURCH STREET) Lori Roth, ManagerHAZLETON (WEST BROAD STREET) Emmanuel Marte, ManagerJERMYN John Peterson, Manager JESSUP Mary Bieszczad, ManagerKINGSTON (JAMES STREET) Karen Shuster, ManagerLACEYVILLE Greg Culver, ManagerLANSFORD John Greybosh, ManagerLAWTON Doug Jackson, ManagerLEHIGHTON Dana Cannariato, ManagerLITTLE MEADOWS Doug Jackson, ManagerMESHOPPEN Jennifer Ramey, ManagerBRANCH LOCATIONS22 M O N T R O S E
Steven Stranburg, Manager
N O X E N / B O W M A N ’ S C R E E K
Colleen Bullock, Manager
O LY P H A N T
Theresa Collins, District Manager
P I T T S T O N
Gary Missal, Manager
S C R A N T O N (KEYSER AVENUE)
Lisa Browning, Manager
S C R A N T O N (MINOOKA - DAVIS STREET)
David Lencicki, Manager
S C R A N T O N (NORTH WASHINGTON AVENUE)
Suzanne Kennedy, Manager
S C R A N T O N (WYOMING AVENUE)
Michelle Cook, Manager
T O W A N D A
Lori Smith, Manager
T U N K H A N N O C K
Brigitte Meskers, Manager
T R U C K S V I L L E / B A C K M O U N TA I N
Susanne M. Mullin, Manager
W I L K E S B A R R E (FRANKLIN STREET)
David Dobbs, District Manager
Susan Russick, Manager
W I L K E S B A R R E (SOUTH MAIN STREET)
Sandra Wheeler, Manager
W YA L U S I N G
Karen Fuller, District Manager
23
A H I S T O R Y O F
I N V E S T I N G I N T H E F U T U R E
Community Bank has significantly enhanced and grown its banking franchise through 18 successful
acquisitions since 1995. Since 2006, the Company has added a net of more than 80 retail locations through
eight branch or whole-bank acquisitions. In October 2016, Community Bank announced an agreement
to acquire Merchants Bancshares – its largest transaction to date – which will add 32 banking locations in
Vermont and Western Massachusetts and $1.9 billion in assets.
A C Q U I S I T I O N
B A N K
C H A R A C T E R I S T I C S
A C Q U I S I T I O N S
Manageable-sized
acquisitions
Largely in-market
Accretive to earnings
and low risk
Organizations that
are a cultural fit
24
SINCE 2006
2017 Merchants Bancshares, Inc. (Pending)
2015 Oneida Financial Corp.
2013 Bank of America
2012 HSBC/First Niagara Financial Group, Inc.
2011 Wilber Corporation
2008 Citizens Financial Group, Inc.
2007 TLNB Financial Corp.
2006 ES&L Bancorp, Inc.
2006 ONB Corporation
PRIOR TO 2006
2000 to 2004 ($1.4 billion in assets)
Whole Bank
Whole Bank
8 branches
19 branches
Whole Bank
18 branches
Whole Bank
Whole Bank
Whole Bank
Whole Bank
1989 to 2004 ($1.3 billion in deposits)
75 branches
VT and Western MA
Central Upstate NY
Northeast PA
Upstate NY
Central Upstate NY
Northern NY
Northern NY
Upstate NY
Upstate NY
Upstate NY, Northeast PA
(5 transactions)
Upstate NY (8 transactions)
Another element of the Company’s strategic profile is the continuous investment in and growth of noninterest
revenues. In 2006, the company had noninterest income of $51.7 million which represented 28 percent of
total revenue. For 2016, noninterest income more than tripled to $156 million and grew to 36 percent of total
revenue. The Company remains an active acquirer of high-value financial services businesses as
demonstrated by the December 2016 agreement to acquire Northeast Retirement Services, a leading
provider of customized institutional trust services.
F I N A N C I A L S E R V I C E S
A C Q U I S I T I O N S
SINCE 2006
2017 Northeast Retirement Services
2015 OneGroup
2014 Lifetime Benefit Solutions
2011 CAI Benefits, Inc.
2008 Alliance Benefit Group MidAtlantic
2007 CBNA Insurance Agency, Inc.
2007 Hand Benefits & Trust, Inc.
PRIOR TO 2006
2003 BPAS-APS (Harbridge Consulting)
2000 Nottingham Advisors
1996 Benefit Plans Administrators (BPAS)
Retirement plan administration
Insurance and benefits (Oneida Financial Corp.)
Benefits administration
Benefits administration
Benefits administration
Insurance (TLNB Financial)
Benefits administration
Benefits administration
Asset management
Benefits administration
C O R P O R A T E A N D
S H A R E H O L D E R I N F O R M A T I O N
CORPO RAT E H EA DQU ART ERS
Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, NY 13214-1883
INVESTOR INFORMATION
Investor and shareholder information
regarding Community Bank System, Inc., including
all filings with the Securities and Exchange
Phone: 315.445.2282 or 800.724.2262
Commission, is available through the company’s
Fax: 315.445.7347
www.communitybankna.com
STOCK LISTING
Common stock of Community Bank System, Inc.
is listed on the New York Stock Exchange (NYSE)
under the symbol: CBU. Newspaper listing for
common stock: CmntyBkSys.
ANNUAL MEETING
Wednesday, May 17, 2017
1:00 P.M. EST
Ventosa Vineyards
3440 State Route 96A
Geneva, New York 14456
TRANSFER AGENT AND
REGISTRANT OF STOCK
Shareholders requiring a change of name,
address or ownership of stock, or information
about shareholder records, lost or stolen
certificates, and dividend checks, direct
website: www.communitybankna.com
Copies may also be obtained without
charge upon written request to:
Ms. Josephine Anne E. Rurka
Investor Relations Department
Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, NY 13214-1883
315.445.7300
josie.rurka@communitybankna.com
INDEPENDENT AUDITORS
The Board of Directors appointed
PricewaterhouseCoopers, LLP as auditor
for the company for the year ended
December 31, 2016.
ANALYST COVERAGE
The following analysts published research about
Community Bank System in 2016:
deposit and reinvestment should contact:
American Capital Partners
American Stock Transfer & Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449
www.amstock.com
Anthony Polini / 908.625.1931
apolini@acpweb.com
Boenning & Scattergood
Matthew Schultheis / 610.832.5290
mschultheis@boenninginc.com
D.A. Davidson & Co.
Russell E. T. Gunther / 212.223.5403
rgunther@dadco.com
Hovde Group LLC
Joseph Fenech / 646.281.4946
jfenech@hovdegroup.com
Keefe, Bruyette & Woods Inc.
Collyn B. Gilbert / 973.549.4092
collyn.gilbert@kbw.com
Piper Jaffray Companies
Matthew Breese / 617.654-0728
matthew.m.breese@pjc.com
Raymond James
William J. Wallace / 703.749.1485
william.wallace@raymondjames.com
RBC Capital Markets
Jake Civiello / 617.725.2152
jake.civiello@rbccm.com
Sandler O’Neill
Alexander Twerdahl / 212.466.7916
atwerdahl@sandleroneill.com
INVESTOR’S CHOICE PROGRAM
CBU offers convenient, low-cost options
for investors wishing to steadily buy shares.
For information, contact:
Ms. Donna J. Drengel
Shareholder Relations Department
Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, NY 13214 -1883
Phone: 315.445.7313
donna.drengel@communitybankna.com
or
American Stock Transfer & Trust Co.
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449
www.amstock.com
S A F E H A R B O R
S T A T E M E N T
The Community Bank System, Inc. Annual Report contains forward-looking statements, within the provisions of the Private Security 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.
25
COMMUNITY BANK SYSTEM, INC.
5790 Widewaters Parkway
DeWitt, NY 13214-1883
800.724.2262
315.445.7347 fax
communitybankna.com