Fitch Affs Community Bank System, Inc. (CBSI) On Rtg Outlook Neg.Business Editors & Analysts NEW YORK--(BUSINESS WIRE)--June 8, 2001 Fitch, the international rating agency, has assigned a Negative Rating Outlook to the ratings of DeWitt, NY-based Community Bank System, Inc. (CBSI CBSI CUNA Brokerage Services, Inc. CBSI Cambodian Buddhist Society, Inc. (Silver Springs, Maryland) CBSI Certified Bridge Safety Inspector CBSI Custom Business Solutions, Inc. ) and its subsidiaries Community Bank, N.A and Community Capital Trust, following the company's proposed branch purchase. CBSI announced today an agreement to purchase 36 Fleet branches with approximately $484 million in deposits and $240 million in loans. The cash acquisition, which is expected to close in early 4Q01, will generate substantial intangibles. The branch purchase will be financed through a mix of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and additional trust preferred securities. CBSI has strengthened its franchise and earnings base over the past few years through an active acquisition program. The branch purchase offers the company an opportunity to expand its existing footprint in the southern tier The Southern Tier is a geographical term that refers to the counties of New York State west of the Catskill Mountains along the northern border of Pennsylvania. The region is bordered to the south by the Northern Tier of Pennsylvania, and together these regions are known as of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State, enhancing its earnings growth prospects, providing low-cost deposit funding, and strengthening liquidity. The negative rating outlook reflects our concerns as to the impact of the financing of the purchase on CBSI's capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . The transaction further levers the balance sheet and increases CBSI's debt burden, thus significantly reducing its financial flexibility. This leaves the company more vulnerable to potential adverse developments in its operations. Furthermore, this transaction, coming right on the heels of the acquisition of First Liberty Bank Corp ($644 million in assets), presents potential integration challenges. That said, Fitch continues to recognize CBSI's consistent and sound financial performance. Additionally, CBSI's ratings are supported by its relatively low credit risk profile, its strong liquidity and core funding base, which is underpinned by deposits gathered through its network of branches in Upstate New York Upstate New York is the region of New York State north of the core of the New York metropolitan area. It has a population of 7,121,911 out of New York State's total 18,976,457. Were it an independent state, it would be ranked 13th by population. and Northeastern Pennsylvania This mountainous area of Pennsylvania includes the Pocono Mountains, the Endless Mountains and former anthracite coal mining cities and towns, including Carbondale, Scranton, Pittston, Wilkes-Barre, Nanticoke and Hazleton. U.S. Presidents Harry Truman and George W. . Finally, over the years, CBSI has demonstrated the ability to successfully integrate acquisitions. We will continue to monitor CBSI's financial position as well as the integration progress. Fitch has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the following ratings with a negative rating outlook: Community Bank System, Inc. -- Senior long-term `BBB' ; -- Senior short-term `F2' ; -- Individual `B/C' ; -- Support `5' . Community Bank, N.A. -- Senior long-term `BBB' ; -- Deposit long-term `BBB+' ; -- Senior short-term `F2' ; -- Deposit short-term `F2' ; -- Individual `B/C' ; -- Support `5' . Community Capital Trust -- Preferred `BBB-' . |
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