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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 22, 2019

 

 

 

(Exact name of registrant as specified in its charter)

 

Delaware 001-13695 16-1213679
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)

 

5790 Widewaters Parkway, DeWitt, New York 13214
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (315) 445-2282

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

¨

 

 

 

 

 

Item 8.01Other Events

 

On January 22, 2019, Community Bank System, Inc. (“Community Bank System”) and Kinderhook Bank Corp. (“Kinderhook”) issued a joint press release announcing that they have entered into a definitive agreement under which Community Bank System will acquire Kinderhook. Copies of the joint press release and investor presentation with respect to the proposed transaction are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and each is incorporated by reference into this Current Report on Form 8-K.

 

Item 9.01Financial Statements and Exhibits

 

(d) Exhibits

 

99.1Joint Press Release, dated January 22, 2019, issued by Community Bank System and Kinderhook.

 

99.2Investor Presentation.

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  Community Bank System, Inc.  
       
       
  By:   /s/ George J. Getman  
  Name:   George J. Getman  
  Title:   EVP and General Counsel  

 

 

Dated: January 22, 2019

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

 Kinderhook Bank

 

Community Bank System to Enhance Capital District Presence with Acquisition of Kinderhook Bank Corp.

 

January 22, 2019

 

SYRACUSE, NY and KINDERHOOK, NY—(BUSINESS WIRE)--Community Bank System, Inc. (“Community Bank System”) (NYSE: CBU) and Kinderhook Bank Corp. (OTCQB: NUBK) today announced that they have entered into a definitive agreement pursuant to which Community Bank System will acquire Kinderhook Bank Corp., parent company of National Union Bank of Kinderhook (“Kinderhook Bank”) in an all cash transaction representing total consideration valued at approximately $93.4 million. The transaction has been unanimously approved by the boards of directors of both companies.

 

This transaction will provide natural market extension for both institutions, joining two high-quality, low-risk franchises with long histories of customer service, as well as a commitment to their communities. Kinderhook Bank provides Community Bank, N.A. a solid operating presence in the Capital District of Upstate New York, with total assets of nearly $640 million, deposits of $560 million and 11 banking offices across a five county area.

 

Under the terms of the agreement, shareholders of Kinderhook Bank Corp. will receive consideration per share of common stock equal to $62.00 in cash. This price represents, assuming full conversion of preferred equity, approximately 193% of Kinderhook Bank Corp.’s tangible book value as of September 30, 2018.

 

“Our acquisition of Kinderhook Bank Corp. will extend our banking footprint into the attractive Capital District markets which are similar to the other Upstate New York markets in which we successfully compete,” said Mark E. Tryniski, President and Chief Executive Officer of Community Bank System. “Our move to establish a broader and deeper banking presence in this region reflects the relative economic, demographic and geographic attractiveness of the area. This investment also complements the financial commitment we made in 2018 when we added an experienced commercial banking team focused on the greater Albany area. We’re pleased with the results of this activity to date and confident that the Kinderhook franchise will further support our efforts to grow our retail and business banking presence in the Capital District. Kinderhook Bank has an impressive 165-year history of service to its customers, its communities and its shareholders, values which align closely with those of Community Bank. Equally important, our institutions have similar organizational values and cultures that respect and value the people that contribute to our success. We are delighted to welcome the Kinderhook Bank team to the Community Bank organization and look forward to the future of the combined company.”

 

“The shareholders, customers and associates of Kinderhook Bank should benefit from our merger with Community Bank System, a financially strong and effectively managed institution,” said John A. Balli, President and Chief Executive Officer of Kinderhook Bank Corp. “Our customers will continue to receive the highly personalized service they expect, while having access to a greatly expanded set of products and services available from the larger combined organization with an extensive branch network. We are pleased that all of the Kinderhook Bank branch offices will remain open and our employees benefit by becoming part of an organization which also values their commitment and contribution to the Company’s growth and profitability and which offers additional opportunities for professional growth and advancement. We view our combination with Community Bank as a win for all of our stakeholders, and we look forward to working closely with their team to complete the combination.”

 

 

 

 

Upon completion of the transaction, the combined company will have approximately $11.3 billion in assets. Community Bank System expects the transaction to be approximately $0.07 - $0.08 per share accretive to its first full year of GAAP earnings and $0.09 to $0.10 per share accretive to cash earnings, excluding any one-time transaction costs.

 

The merger is expected to close in the second quarter of 2019 and is subject to customary closing conditions, including approval by the shareholders of Kinderhook Bank Corp. and required regulatory approvals.

 

Loomis & Co. Inc. acted as exclusive financial advisor to Community Bank System and Cadwalader, Wickersham & Taft LLP acted as its legal advisor. Endicott Financial Advisors, L.L.C. and First Capital Equities, Ltd. acted as financial advisors to Kinderhook Bank Corp. and Cranmore, FitzGerald, & Meaney acted as its legal advisor.

 

Community Bank System will host a conference call at 11 am (ET) on Wednesday, January 23, 2019 to discuss its fourth quarter 2018 financial results and the combination with Kinderhook Bank Corp. The conference call can be accessed at 866-337-5532 using the conference ID code 7885932. Investors may also listen live via the Internet at: https://www.webcaster4.com/Webcast/Page/995/28890.

 

About Community Bank System, Inc.

 

Community Bank System, Inc. operates more than 230 customer facilities across Upstate New York and Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of approximately $10.6 billion, the DeWitt, N.Y. headquartered company is among the country's 150 largest financial institutions. In addition to a full range of retail, municipal, and business banking services, the Company offers comprehensive financial planning, trust and wealth management services through its’ Community Bank Wealth Management Group and OneGroup NY, Inc. operating units. The Company's Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration and actuarial and consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.communitybankna.com or http://ir.communitybanksystem.com.

 

About Kinderhook Bank Corp.

 

Kinderhook Bank Corp. reported total assets at September 30, 2018 of approximately $640 million, and is the holding company for National Union Bank of

Kinderhook. The bank's business, municipal, and consumer customers enjoy personalized relationships, online and mobile banking options, with 11 branches in upstate New York. Kinderhook Bank Corp. is listed on the OTCQB Venture Market and trades under the symbol NUBK. For more information about Kinderhook Bank visit www.nubk.com.

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of the words “will,” “anticipate,” “expect,” “intend,” “estimate,” “target,” and words of similar import. Forward-looking statements are not historical facts but instead express only management’s current beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management’s control. The following factors, among others listed in the Companies’ Form 10-K filings, could cause the actual results of the Companies’ operations to differ materially from the Companies’ expectations: failure to obtain the approval of the shareholders of Kinderhook Bank Corp. in connection with the merger; the timing to consummate the proposed merger; the risk that a condition to closing of the proposed merger may not be satisfied; the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated; the parties’ ability to achieve the synergies and value creation contemplated by the proposed merger; the parties’ ability to successfully integrate operations in the proposed merger; the effect of the announcement of the proposed merger on the ability of Kinderhook Bank Corp. to maintain relationships with its key partners, customers and employees, and on its operating results and business generally; competition; changes in economic conditions, interest rates and financial markets; the impact of the federal government shutdown; and changes in legislation or regulatory requirements. The Companies do not assume any duty to update forward-looking statements.

 

 

 

 

This press release does not constitute a solicitation of proxies.

 

In connection with the proposed merger, Kinderhook Bank Corp. will deliver a Proxy Statement, as well as other relevant documents concerning the proposed transaction. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Stockholders of Kinderhook Bank Corp. are urged to read the proxy statement and the other relevant materials when they are delivered because they will contain important information about the proposed transaction. Information regarding Kinderhook Bank Corp. may be obtained at www.nubk.com or by directing a request to Kinderhook Bank Corp., 1 Hudson Street, Kinderhook, New York 12106, Attention: Investor Relations, Telephone: (518) 758-7101.

 

Information regarding Community Bank System, Inc., may be obtained at the SEC’s Internet site (http://www.sec.gov) or you may obtain copies of certain documents, free of charge from Community Bank System, Inc. by accessing its website at www.communitybankna.com under the heading of “Investor Relations” and then “SEC Filings & Annual Report.”

 

Kinderhook Bank Corp. and Community Bank System, Inc. and certain of their respective directors and executive officers may be deemed to participate in the solicitation of proxies from the stockholders of Kinderhook Bank Corp. in connection with the proposed merger. Information about the directors and executive officers of Kinderhook Bank Corp. and their ownership of Kinderhook Bank Corp. common stock will be set forth in the proxy statement to be delivered for the proposed merger. Information about the directors and executive officers of Community Bank System, Inc. and their ownership of Community Bank System, Inc. common stock is set forth in the proxy statement for its 2018 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 29, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement regarding the proposed merger when it becomes available. Free copies of this document when available may be obtained as described above.

 

For further information contact:

 

Community Bank System, Inc.

Joseph E. Sutaris, E.V.P. and Chief Financial Officer

(315) 445-7396

 

or

 

Kinderhook Bank Corp.

John A. Balli, President and Chief Executive Officer

(518) 758-7101

 

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

JANUARY 2019 ACQUISITION OF KINDERHOOK BANK CORP.

 
 

  

2 Forward-Looking Statement & Additional Information This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Community Bank System’s long-term goals, financial condition, results of operations, earnings, levels of net loan charge-offs and nonperforming assets, interest rate exposure and profitability. You can identify these forward-looking statements by use of such words as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” and other similar expressions. These statements are based on the current beliefs and expectations of Community Bank System’s management and are subject to significant risks and uncertainties, as outlined below. Forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events: •risks related to credit quality, interest rate sensitivity and liquidity; •the strength of the U.S. Economy in general and the strength of the local economies where Community Bank System conducts its business; •the effect of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; •inflation, interest rate, market and monetary fluctuations; •the impact of the federal government shutdown; •the timely development of new products and services and customer perception of the overall value thereof (including, but not limited to, features, pricing and quality) compared to competing products and services; •the success of marketing efforts in attracting or retaining customers; •competition from providers of products and services that compete with Community Bank System’s businesses; •changes in consumer spending, borrowing and savings habits; •technological changes and implementation and cost/financial risks with respect to transitioning to new computer and technology based systems involving large multi-year contracts; •any acquisitions or mergers that might be considered or consummated by Community Bank System and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue enhancements; •Community Bank System’s ability to maintain and increase market share and control expenses; •the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting Community Bank System’s respective businesses, including changes in laws and regulations concerning taxes, accounting, banking, securities and other aspects of the financial services industry, specifically the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and •changes in Community Bank System’s organization, compensation and benefit plans and in the availability of, and compensation levels for, employees in its geographic markets. You should refer to Community Bank System’s periodic and current reports filed with the Securities and Exchange Commission for further information on other factors that could cause actual results to be significantly different from those expressed or implied by these forward-looking statements. In connection with the proposed merger, Kinderhook Bank Corp. will deliver a Proxy Statement, as well as other relevant documents concerning the proposed transaction. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Stockholders of Kinderhook Bank Corp. are urged to read the proxy statement and the other relevant materials when they are delivered because they will contain important information about the proposed transaction. Information regarding Kinderhook Bank Corp. may be obtained at www.nubk.com or by directing a request to Kinderhook Bank Corp., 1 Hudson Street, Kinderhook, New York 12106, Attention: Investor Relations, Telephone: (518) 758-7101. Information regarding Community Bank System, Inc., may be obtained at the SEC’s Internet site (http://www.sec.gov) or you may obtain copies of certain documents, free of charge from Community Bank System, Inc. by accessing its website at www.communitybankna.com under the heading of “Investor Relations” and then “SEC Filings & Annual Report.” Kinderhook Bank Corp. and Community Bank System, Inc. and certain of their respective directors and executive officers may be deemed to participate in the solicitation of proxies from the stockholders of Kinderhook Bank Corp. in connection with the proposed merger. Information about the directors and executive officers of Kinderhook Bank Corp. and their ownership of Kinderhook Bank Corp. common stock will be set forth in the proxy statement to be delivered for the proposed merger. Information about the directors and executive officers of Community Bank System, Inc. and their ownership of Community Bank System, Inc. common stock is set forth in the proxy statement for its 2018 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 29, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement regarding the proposed merger when it becomes available. Free copies of this document when available may be obtained as described above.

 
 

  

3 Transaction Highlights •Kinderhook Bank Corp. is a high quality, low risk partner •11 banking locations, contiguous with CBU’s current footprint •Additive demographically to CBU’s existing franchise •Immediately accretive transaction – 7 to 8 cents GAAP EPS; 9 to 10 cents cash EPS • Productive use of CBU’s strong and growing capital position Natural Market Extension into Attractive Capital District Markets with High Quality Partner

 
 

  

4 Transaction Assumptions & Impact Merger Consideration „XKinderhook shareholders will receive $62.00 per share of common stock in cash or approximately $93.4 million in aggregate. Full conversion of convertible preferred shares is assumed. Pricing Metrics „XP / 2018E EPS: 10.5x with fully phased-in cost saves „XP / Stated TBV: 1.93x Due Diligence „XCompleted detailed due diligence across all business lines Required Approvals „XKinderhook Bank Corp. shareholder approval; customary regulatory approvals Expected Closing „XSecond quarter of 2019 Key Financial Assumptions „XCost savings of approximately 30.0% of NUBK¡¦s non-interest expense base „XGross loan mark of $4.1 million equal to NUBK¡¦s loan loss reserves „XPre-tax restructuring charge of $9.0 to $10.0 million „XCDI of $9.8 million amortized over 8 years Financial Impact „XApproximately 7-8 cents GAAP EPS accretive in first full year; 9-10 cents cash EPS accretive Capital Impact „XProjected capital ratios at closing remain well above the regulatory requirements

 

 
 

  

5 Summary Natural market expansion into the attractive markets of the Capital District of New York State High quality, low risk franchise Appropriately priced transaction with compelling financial metrics .Transaction productively utilizes a portion of CBU’s strong and growing capital position Highly compatible community, employee and shareholder values „ÏCommunity Bank System has a history of successful integrations

 

 

  

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