DeWITT — Community Bank System, Inc. (NYSE: CBU) announced it has taken a pre-tax loss of about $6.9 million after selling assets to comply with new rules to implement the Dodd-Frank banking reform law.
The DeWitt–based banking company said in a new release that it 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 issued Dec. 10 by the Federal Reserve and other federal regulatory agencies.
The loss, which is 12 cents per share after-taxes, will be reflected in Community Bank System’s fourth quarter financial results, expected to be released later this month.
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Community Bank said the final rules that implement Section 619 of the Dodd-Frank law, commonly referred to as the Volcker Rule, require banking companies to divest certain disallowed securities, including holdings of trust preferred CDOs.
Community Bank said it also extinguished $226.4 million of Federal Home Loan Bank (or FHLB) term advances and sold $417.6 million of Treasury securities previously classified as “held to maturity.”
The $6.9 million pre-tax loss resulted from $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, Community Bank said in the release. It reinvested the net cash proceeds of these transactions, totaling about $246 million, into Treasury securities with similar durations to the assets sold.
“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,” Mark Tryniski, president and CEO of Community Bank, said in the release. “These actions serve to eliminate the uncertainties created by the Volcker Rule.”
Community Bank System has $7.3 billion in assets and more than 180 branch offices. Its main banking subsidiary, Community Bank, N.A., operates across upstate New York and Northeastern Pennsylvania. Other subsidiaries include Benefit Plans Administrative Services, Inc., the CBNA Insurance Agency, Community Investment Services, Inc., and Nottingham Advisors.
Contact Rombel at arombel@cnybj.com
