United States

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 11-K

 

 

Community Bank System, Inc.

401(k) Employee Stock Ownership Plan

Financial Statements and Supplemental Schedule

December 31, 2015 and 2014

 

 

 

 

 

		2015				2014
Assets
Investments, at fair value (Notes B and C):
Mutual funds		$	70,910,330			$	67,159,067
Collective investment funds			15,975,567				15,932,854
Community Bank System, Inc. common stock			44,066,781				41,926,945
Self-directed brokerage			1,594,431				1,671,722
Money market fund			1,194,397				1,121,827
			133,741,506				127,812,415
Investments, at contract value (Notes B and C):
Stable value fund			19,328,682				17,420,786
Total investments			153,070,188				145,233,201
Receivables
Contributions receivable – employer			-				36,044
Notes receivable from participants, net			3,503,845				3,263,749
Total receivables			3,503,845				3,299,793
Net assets available for benefits		$	156,574,033			$	148,532,994

 

 

		2015				2014
Additions
Employee contributions		$	7,456,859			$	7,785,823
Employer contributions			4,619,280				4,201,203
Interest and dividend income			4,124,363				5,460,286
Net appreciation in the fair value of investments			849,356				-
Total additions			17,049,858				17,447,312
Deductions
Benefit payments			8,450,344				9,019,048
Net depreciation in the fair value of investments			-				838,280
Administrative fees			103,162				97,306
Reserve for deemed distributions			455,313				449,765
Total deductions			9,008,819				10,404,399
Net increase in net assets available for benefits			8,041,039				7,042,913
Net assets available for benefits
Beginning of Year			148,532,994				141,490,081
End of Year		$	156,574,033			$	148,532,994

 

 

A.	Description of the Plan

The following description of the Community Bank System, Inc. 401(k) Employee Stock Ownership Plan (the "Plan") provides only general information.  Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

Accounting Change

In July 2015, the Financial Accounting Standards Board issued ASU 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient. Part I eliminates the requirements to measure the fair value of fully benefit-responsive investment contracts and provide certain disclosures. Contract value is the only required measure for fully benefit-responsive investment contracts. Part II eliminates the requirements to disclose individual investments that represent 5% or more of net assets available for benefits and the net appreciation or depreciation in fair value of investments by general type. Part II also simplifies the level of disaggregation of investments that are measured using fair value. Plans will continue to disaggregate investments that are measured using fair value by general type; however, plans are no longer required to also disaggregate investments by nature, characteristics and risks. Further, the disclosure of information about fair value measurements shall be provided by general type of plan asset. Part III is not applicable to the Plan. The ASU is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. Parts I and II are to be applied retrospectively. Management has elected to adopt Parts I and II early. Notes C and D have been updated to reflect the early adoption of Parts I and II.

General

The Plan is a defined contribution plan covering substantially all employees of Community Bank System, Inc. (the "Company") who are age 18 or older.  Employees are automatically enrolled in the plan after 90 days of service unless participants elect not to participate.  The Plan also qualifies as an employee stock ownership plan under the meaning of Section 4975(e)(7) of the Internal Revenue Code.  The Plan is subject to the provisions of the Employment Retirement Income Security Act of 1974 (ERISA).

Contributions

Participants may make voluntary contributions of up to 90% of their total compensation on a pre-tax or after-tax basis up to a maximum contribution of $18,000 for 2015 or $24,000 if an employee is older than 50, to the Plan starting the first day of the month after 90 days of employment.  Voluntary cash contributions of up to 6% of total eligible compensation are matched 100% by the Company for the first 3% contributed and 50% for the next 3% contributed.  The Company match amounted to $3,508,549 and $3,335,966 in 2015 and 2014, respectively.  In addition, as defined in the plan document, employees participating in the Community Bank System, Inc. Pension Plan under the Worker Retirement Accumulation Plan ("WRAP") design received an additional Company contribution to the Plan in 2015 and 2014 equal to the interest credit on service credits earned subsequent to January 1, 2010 under the WRAP design.  The Company contribution for employees participating in the WRAP amounted to $1,110,731 and $865,237 in 2015 and 2014, respectively.

Participant Accounts

Each participant's account is credited with the participant's contribution, the Company's matching contribution, the Company's WRAP interest credit, an allocation of Plan earnings, and charged with an allocation of administrative expenses.  Allocation of Plan earnings and administrative expenses are based on participant earnings or account balances, as defined.  Participants are entitled to the benefit that can be provided from their vested account balance.  Forfeited accounts are allocated annually to eligible participant accounts based on the ratio of each eligible participant's compensation to total eligible participant compensation.  Forfeited accounts allocated to eligible participants amounted to $11,226 and $13,416 for 2015 and 2014, respectively.

Vesting

Participants are immediately vested in their contributions.  Vesting in the Company's matching contribution portion plus actual earnings thereon is based on years of continuous service.  A participant is 100 percent vested after two years of service.  Vesting in the employer contributions related to the WRAP design is based on years of continuous service.  A participant is 100 percent vested after three years of service.

Notes Receivable from Participants

Participants may borrow from the Plan a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance.  Notes receivable from participants are reported at their unpaid principal balances plus any accrued but unpaid interest.  Interest accrues at the prime rate in effect at the inception of the loan plus 1% for residential loans and prime rate plus 2.9% for Reserve Plus loans.  Interest rates on participant loans generally range from 4.25% to 10.50%.  All notes that are in default as defined by the plan document are reported as deemed distributions.  Deemed distributions represent the amount of unpaid principal on loans from participants who are actively participating in the Plan and have not continued to make payments on the outstanding balance as required by the Plan document.

Payment of Benefits

Normal retirement date for participants under the Plan is the later of age 65 or the completion of 5 years of service.  Upon termination of service due to death, disability or retirement, the participant will receive either a lump sum amount or installment payments equal to the value of the participant's vested interest in his or her account.  If some or all of a participant's account balance is allocated to the employee stock ownership feature of the Plan, that portion of the Plan benefit may be paid in the form of Company stock.  Upon termination of employment, if the account balance is less than $5,000, the participant will receive a single lump sum amount equal to the value of his or her account, otherwise, the participant may elect to defer payment up to age 65.  Hardship withdrawals of up to 100% of employee contributions are available if Internal Revenue Service guidelines are met.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue contributions at any time and terminate the Plan subject to the provisions set forth under ERISA.  In the event the Plan terminates, the net assets of the Plan are to be set aside for participating employees based upon balances then credited to individual accounts.  Participants shall be vested 100% in the assets so allocated to their accounts.

 

B.	Significant Accounting Policies

Basis of Accounting

The accompanying financial statements are prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Valuation of Investments

Investments are stated at aggregate fair value, except for the HB&T Metlife Stable Value Fund, which is stated at contract value.  Securities that are traded on a national securities exchange are valued at the last reported sales price on the last business day of the Plan year.  Shares of mutual funds are valued at the net asset value of shares held by the Plan at year-end.

The Plan presents in the Statement of Changes in Net Assets the net appreciation (depreciation) in the fair value of its investments, which consists of realized gains or losses as well as unrealized appreciation or depreciation on those investments.

Purchases and sales of securities are recorded on the trade date.  Gains or losses on sales of securities are based on average cost.  Interest income is recorded on the accrual basis.  Dividends are recorded on the ex-dividend date.

The HB&T Metlife Stable Value Fund is stated at contract value in accordance with the Financial Accounting Standards Board guidance on Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans Guide, which states that contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan.

The accompanying Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.  Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.  Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investments at contract value.  There are no reserves against contract value for credit risk of the contract issuer or otherwise.  If an event occurs that may impair the ability of the contract issuer to perform in accordance with the contract terms, fair value may be less than contract value.  The average yields earned on the HB&T Metlife Stable Value Fund for the years ended December 31, 2015 and 2014 were 0.33% and 4.82%, respectively. The crediting interest rates to the HB&T Metlife Stable Value Fund were 1.96% and 1.86% for the years ended December 31, 2015 and 2014, respectively.

Payment of Benefits

Benefits are recorded when paid.

 

Administrative Expenses

The Plan's expenses are paid either by the Plan or the Company, as provided by the plan document.  Expenses that are paid directly by the Company are excluded from these financial statements.  These amounted to approximately $765,000 and $701,000, including approximately $703,000 and $659,000 paid to Benefit Plans Administrative Services, LLC ("BPAS"), in 2015 and 2014, respectively, (See Note E).  Certain expenses incurred in connection with the general administration of the Plan that are paid by the Plan are recorded as deductions in the accompanying statement of changes in net assets available for benefits.  In addition, certain investment related expenses are included in net appreciation (depreciation) of fair value of investments presented in the accompanying statements of changes in net assets available for benefits.

Inactive Accounts

Account balances of individuals who have withdrawn from participation in the Plan had an accumulated basis of approximately $27,491,350 and $21,674,644 at December 31, 2015 and 2014, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Risks and Uncertainties

The Plan provides for various investment options in mutual funds, collective investment funds and Company stock.  Investment securities are exposed to various risks, such as interest rate, market and credit.  Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risk in the near term would materially affect participants' account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits.

Valuation Allowance

The carrying amount of notes receivable from participants is reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected.  Management determines the valuation allowance by applying an average of historical deemed distributions to the aggregate remaining notes receivable from participants to estimate a valuation allowance.  The valuation allowance is $453,000 and $464,000 at December 31, 2015 and 2014, respectively, (See Note G).

Subsequent Events

The Company has evaluated subsequent events through June 23, 2016, the date the financial statements were available for issue (See Note I).

 

C.	Investments

Investments are held within various common funds maintained by the Community Bank, N.A. Trust Department.  Participants, at their discretion, may allocate contributions and account balances between various investment options offered by the Plan.  A brief description of these investment options, as provided by the plan administrator, follows:

Community Bank System, Inc. Employee Stock Ownership Fund – these Funds invest in the common stock of the Plan sponsor, which is traded on the New York Stock Exchange under the symbol "CBU".

Federated Total Return Bond Fund – a mutual fund seeking to provide total return by investing primarily in a diversified portfolio of investment grade fixed income securities.

American Funds EuroPacific Growth Fund Class A – a mutual fund that invests in stocks of issuers located in Europe and the Pacific Basin.

T. Rowe Price Blue Chip Growth Fund – a mutual fund that invests primarily in stocks of U.S. companies.

T. Rowe Price Inflation Protected Bond Fund – a mutual fund that invests primarily in inflation-protected bonds issued by the U.S. Treasury.

T. Rowe Price Mid-Cap Growth Fund – a mutual fund that invests primarily in a diversified portfolio of common stocks and mid-cap companies.

T. Rowe Price Mid-Cap Value Fund – a mutual fund that invests primarily in U.S. common stocks of mid-size companies that appear to be undervalued.  The fund may invest in other securities, including foreign stocks, and use futures and options.

T. Rowe Price New Horizons Fund – a mutual fund that invests primarily in a diversified group of small, emerging growth companies, preferably early in the corporate life cycle before a company becomes widely recognized by the investment community.  The fund invests primarily in domestic stocks.

Manning & Napier Pro-Blend Conservative Term Fund I – a mutual fund that invests primarily in investment grade, fixed-income securities, including U.S. Treasury securities, pass-through securities, and corporate bonds.

Manning & Napier Pro-Blend Extended Term Fund I – a mutual fund that invests primarily in common stocks, but may also invest a substantial portion of assets in long-term, fixed-income securities with maturities of 7 to 20 years.

Manning & Napier Pro-Blend Moderate Term Fund I – a mutual fund that invests primarily in common stocks and intermediate to long-term fixed income securities with maturities of 5 to 10 years.

 

Oppenheimer Developing Markets Fund A – a mutual fund that invests primarily in equity securities of issuers with high growth potential whose principal activities are in at least three developing markets.

Symons Value Institutional Fund – a mutual fund that invests primarily in a diversified portfolio of companies with market capitalizations above approximately $500 million, that are trading at attractive prices and that appear to have limited downside price risk over the long-term.

Vanguard 500 Index Fund – a mutual fund that invests substantially all of its assets in the stocks that make up the Standard & Poor's 500 Index, holding each stock in approximately the same proportion as its weighting in the index.

Vanguard Total Bond Index Fund – a mutual fund that attempts to track the performance of the Barclays U.S. Capital Aggregate Float Adjusted Index, which represents a wide spectrum of public, investment grade, taxable, fixed-income securities in the U.S.

Vanguard Small-Cap Index Fund – a mutual fund that attempts to track the performance of the CRSP US Small Cap Index, a broadly diversified index of stocks of smaller U.S. companies.  The fund invests all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

AITC Smart 2020 Class R Institutional Shares – a mutual fund portfolio that attempts to achieve current income with long-term growth of principal by investing primarily in 27% exchange traded funds, 21% equity common trust funds, 19% U.S. Treasury notes, 12% money market funds, 7% fixed income mutual funds, 7% fixed income common trust funds and 7% stock.

AITC Smart Moderate 2030 Class R Institutional Shares – a mutual fund portfolio that attempts to achieve long-term growth of principal and income by investing primarily in 35% exchange traded funds, 35% equity common trust funds, 9% stock, 8% fixed income common trust funds, 8% fixed income mutual fund, 4% U.S. Treasury notes and 1% mutual funds.

AITC Smart 2040 Class R Institutional Shares – a mutual fund portfolio that attempts to achieve long-term growth of principal and income by investing primarily in 49% equity common trust funds, 28% exchange traded funds, 6% stock, 6% fixed income common trust funds, 5% fixed income mutual funds, 3% money market funds and 3% U.S. Treasury notes.

AITC Smart Aggressive 2050 Class R Institutional Shares – a mutual fund portfolio that attempts to achieve long-term growth of principal by investing primarily in 68% equity common trust funds, 21% exchange traded funds, 3% fixed income common trust funds, 3% stock, 2% fixed income mutual funds, 2% U.S. Treasury notes and 1% money market funds.

AITC Smart Funds Today Class R Institutional Shares – a mutual fund portfolio that is designed for individuals retiring within a few years of 2010 that seeks to preserve the purchasing power of accumulated assets at the target date and provide for the growth of assets by investing primarily in 48% cash, 47% bonds, 3% U.S. stocks and 2% foreign stocks.

 

 

HB&T Metlife Stable Value Fund Class R1 Shares – a stable value fund that invests in fixed income securities such as U.S. Governmental Agencies and Treasuries, mortgages, asset backed securities, corporate debt and cash equivalents.  Investments in the HB&T Metlife Stable Value Fund are reported at contract value.

HB&T Mid-Cap Blend Index Fund Class R1 Shares - a collective investment fund invested in a pooled collective fund managed by Blackrock Institutional Trust Company, N.A. and is structured to produce returns that are consistent with the S&P Midcap 400 Index.

Ameritrade IDA Account – participants select the individual investment securities, including equity securities, mutual funds and bonds.

D.	Fair Value Measurements

The Financial Accounting Standards Board has established authoritative guidance regarding accounting for fair value measurements.  This framework establishes a common definition for fair value to be applied to generally accepted accounting principles requiring the use of fair value, establishes a framework for measuring fair value and expands disclosure about such fair value instruments.  It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  It also classifies the inputs used to measure fair value into the following hierarchy:

·	Level 1 – Quoted prices in active markets for identical assets or liabilities.

·	Level 2 – Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

·	Level 3 – Significant valuation assumptions not readily observable in a market.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The following tables set forth the Plan's financial assets that were accounted for at fair value on a recurring basis:

 

As of December 31, 2015

		Level 1				Level 2				Level 3				Total Fair Value
Mutual funds		$	70,910,330			$	-			$	-			$	70,910,330
Collective investment funds			-				15,975,567				-				15,975,567
Common stock of plan
sponsor			44,066,781				-				-				44,066,781
Self-directed brokerage			1,594,431				-				-				1,594,431
Money market fund			1,194,397				-				-				1,194,397
Total assets at fair value		$	117,765,939			$	15,975,567			$	-			$	133,741,506

 

As of December 31, 2014

		Level 1				Level 2				Level 3				Total Fair Value
Mutual funds		$	67,159,067			$	-			$	-			$	67,159,067
Collective investment funds			-				15,932,854				-				15,932,854
Common stock of plan
sponsor			41,926,945				-				-				41,926,945
Self-directed brokerage			1,671,722				-				-				1,671,722
Money market fund			1,121,827				-				-				1,121,827
Total assets at fair value		$	111,879,561			$	15,932,854			$	-			$	127,812,415

The valuation techniques used to measure fair value for the items in the table above are as follows:

Mutual funds:  Valued at the closing price of the shares held by the Plan at year end reported on the active market.

Collective investment funds:  The units held of collective investment funds are valued periodically by the trustee of the respective fund.  The values are based on the current market values of the underlying assets of the fund.

Common stock and self directed brokerage: Valued at the closing price reported on the active market on which the individual securities are traded.

Money market funds: Managed portfolios including commercial paper and other fixed‑income securities issued by U.S. and foreign corporations, asset-backed commercial paper, U.S. government securities, obligations of foreign governments and the U.S. and foreign banks, valued at the closing price reported on the active market on which the individual security is traded.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

E.	Transactions with Parties-in-Interest

The assets of the Plan are administered by BPAS, a subsidiary of Community Bank System, Inc.  The Company paid BPAS approximately $703,000 and $659,000 for record keeping, trustee, and other services in 2015 and 2014, respectively.

 

The Plan held 1,103,325 and 1,099,579 shares of the Plan sponsor's common stock at December 31, 2015 and 2014, respectively.  The cost of these shares at December 31, 2015 and 2014 is $30,247,284 and $28,243,981, respectively, and their fair value at December 31, 2015 and 2014 is $44,066,781 and $41,926,945, respectively.  Dividends received on the investment in Community Bank System, Inc. common stock amounted to $1,364,514 and $1,225,102 in 2015 and 2014, respectively.  The Plan sold 347,106 and 287,073 shares of Community Bank System, Inc. common stock during 2015 and 2014, respectively, and purchased 350,852 and 343,957 shares of Community Bank System, Inc. common stock during 2015 and 2014, respectively.

The Company has investments in the HB&T Mid Cap Blend Index R1 Fund, HB&T Metlife Stable Value R1 Fund and five target date funds administered by Hand Benefits and Trust Company.  Hand Benefits and Trust Company is a wholly-owned subsidiary of Benefit Plans Administrative Services, Inc., which is a wholly-owned subsidiary of the Company.

F.	Income Tax Status

The Plan obtained its most recent determination letter in January 2016, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with Section 401(a) of the Internal Revenue Code.  The Plan has been amended since receiving the determination letter, however, the Plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code.  Therefore, no provision for income taxes has been included in the accompanying financial statements.

As discussed above, the Plan is a tax-exempt entity.  The Plan has reviewed its operations for uncertain tax positions and believes there are no significant exposures.  The Plan will include interest on income tax liabilities in other expenses if such amounts arise.  The Plan did not incur any penalties and interest for the years ended December 31, 2015 and 2014.  The Plan is no longer subject to Federal or New York state examinations by tax authorities for the closed tax years before 2012.

G.	Reconciliation of financial statements to Form 5500

 

        The following is a reconciliation of net assets available for benefits per the financial statements to Form 5500 as of December 31:

 

		2015				2014
Net assets available for benefits per financial statements
		$	156,574,033			$	148,532,994
Allowance for notes receivable from participants
			453,000				464,000
Net assets available for benefits per Form 5500
		$	157,027,033			$	148,996,994

 

 

        The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to Form 5500 for the year ended December 31:

 

		2015				2014
Net increase in net assets available for benefits per financial statements
		$	8,041,039			$	7,042,913
Allowance utilized for deemed distributions			(466,313	)			(373,765	)
Reserve for deemed distributions			455,313				449,765
Net increase in net assets available for benefits per Form 5500
		$	8,030,039			$	7,118,913

H.	Economic dependency and concentration of credit risk

At December 31, 2015 and 2014, approximately 29% of the Plan's investments are invested in Company stock, respectively.

I.	Subsequent Events

Effective January 25, 2016, the Oneida Savings Bank 401(k) Savings Plan was merged into and became part of the Community Bank System, Inc. 401(k) Employee Stock Ownership Plan.  The total amount of assets transferred from the Oneida Savings Bank 401(k) Savings Plan was $34,292,336.  As of the merger date, participants are 100% vested in their accounts.  There were no other material subsequent events.

(a)		(b) Identity of issue, borrower, lessor or similar party	(c) Description of investment including maturity date, rate of interest, collateral, par or maturity value		(e) Current value
		Mutual Funds
		American Funds EuroPacific Growth Fund Class A	Mutual fund – 173,797 shares		$	7,885,163
		Federated Total Return Bond Fund	Mutual fund – 512,605 shares			5,459,242
		T. Rowe Price Blue Chip Growth Fund	Mutual fund – 168,548 shares			12,199,480
		T. Rowe Price Infl Prot Bond	Mutual fund – 122,888 shares			1,411,987
		T. Rowe Price Mid-Cap Growth	Mutual fund – 41,824 shares			3,066,505
		T. Rowe Price Mid-Cap Value	Mutual fund – 71,457 shares			1,782,136
		T. Rowe Price New Horizons	Mutual fund – 199,000 shares			8,449,554
		M&N Pro-Blend Conservative Term I	Mutual fund – 64,396 shares			635,584
		M&N Pro-Blend Extended Term I	Mutual fund – 186,439 shares			1,679,815
		M&N Pro-Blend Moderate Term I	Mutual fund – 92,926 shares			901,384
		Oppenheimer Developing Markets A	Mutual fund – 67,790 shares			2,060,814
		Symons Value Institutional Fund	Mutual fund – 822,513 shares			8,702,192
		Vanguard 500 Index Admiral	Mutual fund – 61,849 shares			11,657,239
		Vanguard Total Bond Index Admiral	Mutual fund – 213,050 shares			2,266,849
		Vanguard Small-Cap Index Admiral	Mutual fund – 51,883 shares			2,752,386
						70,910,330
		Collective Investment Funds
	*	AITC Smart 2020 R-Inst	Collective investment fund –236,098 shares			2,830,816
	*	AITC Smart Moderate 2030 R-Inst	Collective investment fund –188,682 shares			3,322,683
	*	AITC Smart 2040 R-Inst	Collective investment fund –164,540 shares			2,188,389
	*	AITC Smart Aggressive 2050 R-Inst	Collective investment fund – 91,489 shares			1,527,864
	*	AITC Smart Funds Today R-Inst	Collective investment fund – 68,078 shares			899,308
	*	HB&T Mid-Cap Blend Index R1	Collective investment fund –195,439 shares			5,206,507
						15,975,567
		Common stock of plan sponsor
	*	Community Bank System, Inc.	Common stock – 1,103,325 shares			44,066,781
*	*	Stable Value Fund
	*	HB&T Metlife Stable Value R1	Stable value fund – 1,676,382 shares			19,328,682
		Loan Fund
	*	Participants	Participant loans, 4.25% – 10.50%			3,956,845
		Self Directed brokerage
		Ameritrade IDA Account	Self-directed brokerage			1,594,431
		Money Market Fund
	*	ReservePlus Money Market	Money market fund  - 1,194,397 shares			1,194,397
		Total investments			$	157,027,033
	*	– Denotes party-in-interest as defined by ERISA
*	*	– Investment stated at Contract Value.