Community Financial System, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net income of $61.3 million ($1.16 per share), up from $55.1 million ($1.04 per share) in the third quarter of 2025.
• Operating net income was $67.0 million ($1.27 per share), representing a 16.5% year-over-year increase and a 9.5% quarter-over-quarter increase.
• Total revenues reached $227.3 million, a 9.8% increase year-over-year and 1.9% increase quarter-over-quarter.
• Net interest income was $143.5 million, up 12.0% year-over-year and 3.2% quarter-over-quarter.
• Net interest margin was 3.54%, an increase of 24 basis points year-over-year and 8 basis points quarter-over-quarter.
• Noninterest revenues were $83.7 million, up 6.2% year-over-year but down 0.3% quarter-over-quarter.
• Total noninterest expenses were $141.0 million, up 9.9% year-over-year and 2.4% quarter-over-quarter.
• Provision for credit losses was $5.6 million, compared to $5.6 million in the prior year quarter and $4.6 million in the linked quarter.
• Net charge-offs were $5.1 million (annualized 0.18% of average loans), up from $2.5 million (0.09%) in the prior year quarter.
• Return on assets (GAAP) was 1.38%, while operating return on assets (non-GAAP) was 1.51%.
• Return on equity (GAAP) was 11.82%, while operating return on equity (non-GAAP) was 12.93%.
• Total assets were $17.79 billion, up 4.9% year-over-year.
• Total ending loans were $11.52 billion, up 7.1% year-over-year.
• Total ending deposits were $14.87 billion, up 5.7% year-over-year.
• The cost of total deposits was 1.03%, down 14 basis points year-over-year.
• The cost of funds was 1.16%, down 17 basis points year-over-year.
• Allowance for credit losses totaled $92.0 million (0.80% of total loans).
• Nonperforming loans were $60.4 million (0.52% of total loans).
• Tier 1 leverage ratio was 9.37%.
• Tangible equity to tangible assets ratio was 6.57%.

Guidance and Future Outlook:

• Management expects strong performance across all businesses into the fourth quarter and 2027.
• The company repositioned its investment portfolio to capture positive economic value and increase visibility into the embedded repricing earnings power of the balance sheet.
• Management noted a trajectory that remains intact following the strategic redeployment of proceeds from the sale of lower-yielding U.S. Treasury securities to repay higher-cost borrowings.

Business Segments and Product Lines:

• Banking and Corporate: Adjusted income before income taxes was $65.5 million, up 16.3% year-over-year. Net interest income increased 11.5% year-over-year. Segment noninterest revenues grew 7.7% year-over-year.
• Employee Benefit Services: Segment revenues were $37.0 million, up 5.6% year-over-year, driven by growth in recordkeeping and third-party administration services due to higher average market values of assets under administration. Adjusted income before income taxes was $14.0 million, down 3.5% year-over-year.
• Insurance Services: Segment revenues were $15.5 million, up 8.9% year-over-year, driven by acquisitions and seasonal timing of policy renewals. Adjusted income before income taxes was $4.6 million, up 41.2% year-over-year.
• Wealth Management Services: Segment revenues were $13.5 million, up 41.3% year-over-year, driven by the acquisition of ClearPoint Federal Bank & Trust and higher average market values of assets under management. Adjusted income before income taxes was $4.1 million, up 41.7% year-over-year.

Market and Competitive Landscape:

• The company operates approximately 200 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, Western Massachusetts, and Southern New Hampshire.
• Its banking subsidiary, Community Bank, N.A., is among the country's 100 largest banking institutions.
• The company's OneGroup NY, Inc. subsidiary is a top 63 U.S. insurance agency.
• Non-owner occupied and multifamily commercial real estate exposure remains diverse and relatively low at 16% of total assets, 25% of total loans, and 202% of total bank-level regulatory capital.

Risks and Challenges:

• Net charge-offs increased compared to the prior year and linked quarter, primarily driven by $2.7 million of charge-offs on two individually assessed business lending relationships.
• Total delinquent loans increased to 1.16% of total loans, driven by higher delinquent balances in business lending and consumer mortgage loans.
• Noninterest expenses increased due to higher salaries, employee benefits, data processing, communications, and occupancy costs associated with acquisitions and new branch openings.
• Accumulated other comprehensive loss increased due to changes in the investment securities portfolio.
• Forward-looking statements note risks related to macroeconomic conditions, interest rate policies, credit losses, and the successful integration of acquisitions.

Management Commentary and Tone:

• President and CEO Dimitar A. Karaivanov stated that businesses accelerated into the third quarter, delivering the sixth consecutive quarter of record results.
• Management highlighted an operating return on assets of 1.51% and excellent balance sheet metrics.
• The tone was confident, emphasizing the effectiveness of proactive asset and liability management and the strategic redeployment of capital.
• Management noted that the increase in earnings per share was driven by net interest income and noninterest revenues, partially offset by higher expenses and taxes.

Other Key Points:

• Declared a quarterly cash dividend of $0.49 per share, a 4.3% increase from the previous quarter, marking the 34th consecutive year of dividend increases.
• Announced a stock repurchase program in December 2025 authorizing the repurchase of up to 2.63 million shares (5.0% of outstanding stock).
• Repurchased 508,471 shares during the first nine months of 2026, including 250,000 shares in the third quarter.
• Completed the acquisition of ClearPoint Federal Bank & Trust, contributing to revenue and deposit growth.
• Completed the acquisition of Santander Bank, N.A. branches, contributing $543.7 million in assumed deposits and incremental occupancy costs.
• Recognized a $2.9 million net loss on investment securities, including a $3.0 million realized loss on the sale of $296.8 million of lower-yielding U.S. Treasury securities.
• Effective tax rate for the quarter was 24.0%.
• Liquidity sources totaled $6.52 billion, representing 229% of estimated uninsured deposits.