Community Bank System Inc. has sold off some of its assets in response to newly approved federal regulations that prevent banks from trading for their own profitability and limits their hedge-fund investments.
The parent of Community Bank N.A. announced Dec. 31 that it has divested its entire portfolio of bank and insurance trust preferred collateralized debt obligation securities. The buyer was not disclosed.
In addition, the DeWitt-based company said it has extinguished $226.4 million of Federal Home Loan Bank term advances and sold $417.6 million of Treasury securities classified as "held to maturity."
The sales are expected to drive a pre-tax loss of approximately $6.9 million, or 12 cents per share, after-tax, the company said. Net cash proceeds from the sale, which amount to roughly $246 million, are being reinvested into Treasury securities with similar durations to the assets sold, the company said.
Community Bank System's decision to sell comes on the heels of the Dec. 10 passage of the final rules of Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Known as the "Volcker Rule," the rules have become the centerpiece of 2010 Dodd-Frank Law, banning banks from engaging in activities that could lead to a financial crisis similar to what occurred in 2008.
"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," Community Bank President and CEO Mark Tryniski said in a release. "These actions serve to eliminate the uncertainties created by the Volcker Rule."
Community Bank System has $6.3 billion in assets across two states - New York and Pennsylvania. Earlier this month, it closed on the acquisition of eight former Bank of America branches in Northeast Pennsylvania.