SYRACUSE, N.Y.--(BUSINESS WIRE)--Community Financial System Announces Fourth Quarter and Full Year 2025 Earnings Conference Call. ...

Group 1 - Community Financial System (CBU) is benefiting from fixed-rate asset repricing, leading to an expanding net interest margin [1] - The bank reported positive operating leverage, indicating efficient management of its resources [1] - The overall performance reflects a trend of healthy earnings, aligning with a long-term investment strategy focused on high-quality earnings [1]

Core Points - Community Financial System, Inc. has completed the acquisition of seven former Santander Bank branches in the Allentown, Pennsylvania area, adding approximately $553.0 million in customer deposit accounts [1][2] - This acquisition enhances the company's service capabilities for consumer, business banking, and private banking clients in the Greater Lehigh Valley, while also expanding its customer base [1][2] - Following this acquisition, Community Bank will operate a total of 12 retail locations in the Greater Lehigh Valley, securing a Top 5 market position in the area [2] Company Overview - Community Financial System, Inc. is a diversified financial services company focused on banking services, employee benefit services, insurance services, and wealth management services [3] - The banking subsidiary, Community Bank, N.A., is among the top 100 largest banking institutions in the U.S., with over $16 billion in assets and approximately 200 customer facilities across several states [3] - The company is publicly traded on the New York Stock Exchange under the symbol CBU [3]

Core Viewpoint - The article discusses the volatility in the stock market, highlighting that while it presents opportunities, it also increases risks, making both significant gains and declines possible. The focus is on identifying one stock with potential for high returns and two stocks that are not recommended for investment. Group 1: Stocks to Sell - Albany (AIN) is a global textiles and materials processing company with a rolling one-year beta of 1.45, trading at $49.48 per share, which corresponds to a forward P/E of 16.1x [2][4] - Orion (ORN) provides construction services for marine infrastructure and industrial projects, has a rolling one-year beta of 2.34, and is priced at $10.09 per share, reflecting a forward P/E of 40.4x [5][7] Group 2: Stock to Watch - Community Bank (CBU) is a financial holding company with a rolling one-year beta of 1.09, offering various financial services. Its annual revenue growth over the last two years was 10.8%, indicating an increase in market share [8][11] - CBU's earnings per share grew by 5.5% annually over the last two years, significantly outperforming its peers [11] - The expected tangible book value per share growth of 20.2% suggests that CBU's capital strength will likely improve over the next 12 months [11]

Financial Performance - Q3 2025 net income increased by $11.2 million, or 25.5%, compared to Q3 2024, while YTD net income rose by $23.3 million, or 17.6%[162]. - Earnings per share for Q3 2025 was $1.04, an increase of $0.21 from Q3 2024, and YTD earnings per share was $2.94, up $0.44 from the previous year[162]. - Operating net income increased by $11.4 million, or 24.5%, for Q3 2025 compared to Q3 2024, and by $24.6 million, or 17.4%, YTD compared to September 2024[168][169]. - Net income for Q3 2025 was $55.1 million, a 25.5% increase from Q3 2024, and YTD net income was $156.0 million, up 17.6% from the same period last year[169]. - Pre-tax, pre-provision net revenue (non-GAAP) for Q3 2025 was $82,502,000, up 20.8% from $68,274,000 in Q3 2024[279]. - Net income (GAAP) for the nine months ended September 30, 2025, was $156,033,000, compared to $132,688,000 for the same period in 2024, reflecting a year-over-year increase of 17.6%[280]. Interest Income and Margin - Net interest income for Q3 2025 was $128.2 million, an increase of $15.4 million, or 13.7%, from Q3 2024, and YTD net interest income was $373.1 million, up $44.0 million, or 13.4%[170][179]. - The net interest margin for Q3 2025 was 3.30%, an increase of 27 basis points compared to the prior year[180]. - Average interest-bearing deposits increased by $638.6 million for Q3 2025 compared to the prior year quarter, driven by non-time deposits[185]. - The net interest spread (GAAP) improved to 2.81% for the three months ended September 30, 2025, compared to 2.48% in the same period of 2024[189]. - Net interest earnings (FTE) for the year-to-date period reached $375,783, up from $331,983 in the prior year, reflecting a net interest margin (FTE) of 3.29% compared to 3.02%[192]. Credit Losses and Asset Quality - The provision for credit losses was $5.6 million for Q3 2025, which is $2.1 million lower than the comparable prior year period[165]. - The provision for credit losses decreased by $2.1 million to $5.6 million for Q3 2025 compared to Q3 2024, reflecting a stable economic environment[171]. - The allowance for credit losses increased to $84,900,000, reflecting an 11.5% increase from the previous year and a 7.4% increase from the end of 2024[239]. - Nonperforming loan ratio decreased to 0.52% at September 30, 2025, down 9 basis points from September 30, 2024[165]. - The net charge-offs during Q3 2025 were $2.5 million, a decrease of $0.3 million compared to Q3 2024, with a total net charge-off ratio of 0.09%[245]. Noninterest Income and Expenses - Noninterest revenues for Q3 2025 were $78.9 million, a 3.5% increase from Q3 2024, and YTD noninterest revenues were $229.4 million, up 3.9% from the previous year[172]. - Noninterest expenses increased by $4.1 million, or 3.3%, from Q3 2024 to Q3 2025, and by $21.4 million, or 5.9%, year-to-date (YTD) from September 2024 to September 2025, primarily due to data processing and communications expenses[167][173]. - Total noninterest expenses for the third quarter of 2025 were $128.3 million, up $4.1 million, or 3.3%, from the prior year[214]. - YTD noninterest expenses increased to $382.7 million, representing a rise of $21.4 million, or 5.9%, compared to the same period in 2024[214]. Capital and Liquidity - Total shareholders' equity increased to $1.94 billion, up $176.1 million or 10.0% from December 31, 2024, primarily driven by net income of $156.0 million[261]. - The Tier 1 leverage ratio improved to 9.46% at the end of Q3 2025, an increase of 27 basis points from December 31, 2024[267]. - Liquidity sources totaled $6.20 billion as of September 30, 2025, representing approximately 240% of the estimated uninsured deposits of $2.58 billion[271]. - The company must maintain a capital conservation buffer of 2.5% as of September 30, 2025, to satisfy regulatory capital requirements[264]. - The company has sufficient liquidity for the next year to cover projected cash outflows, as indicated by stress tests performed[273]. Market and Economic Conditions - The company anticipates potential impacts from adverse developments in the banking industry and economic conditions on customer confidence[276]. - The company is focused on maintaining and increasing market share while managing expenses effectively[276]. - Future provisions for credit losses and changes in nonperforming assets are key factors that could affect actual results compared to expectations[276]. Efficiency Metrics - The efficiency ratio (GAAP) improved to 62.0% for Q3 2025, down from 65.7% in the prior year[212]. - Operating efficiency ratio for Q3 2025 was 59.9%, reflecting a 3.7 percentage point improvement compared to Q3 2024, with operating revenues increasing by 9.3%[217]. - Noninterest expenses as a percentage of average assets decreased by 0.04 percentage points in Q3 2025, while average assets increased by 4.3%[218].

Core Insights - Teacher Retirement System of Texas reduced its stake in Community Financial System by 8.3%, holding 24,291 shares valued at $1,381,000 at the end of the reporting period [2] - Several institutional investors adjusted their positions, with Federated Hermes increasing its stake by 0.4%, Goldman Sachs by 7.9%, and Invesco by 80.2% [3] - Community Financial System reported a quarterly EPS of $1.04, exceeding estimates, with a revenue of $207.90 million, reflecting a year-over-year increase of 9.6% [8] Institutional Holdings - Institutional investors own 73.79% of Community Financial System's stock [3] - Waldron Private Wealth LLC increased its stake by 1.6% in the second quarter, now holding 216,121 shares valued at $12,390,000 [3] - Principal Financial Group Inc. grew its holdings by 2.9%, owning 262,245 shares worth $14,911,000 [3] Insider Transactions - SVP Jeffrey M. Levy sold 1,440 shares at an average price of $61.38, totaling $88,387.20, representing a 17.78% decrease in his position [4] Analyst Ratings - Wall Street Zen upgraded Community Financial System from "sell" to "hold" [6] - Keefe, Bruyette & Woods set a target price of $66.00, down from $67.00, maintaining a "market perform" rating [6] - The consensus rating for the stock is "Hold" with a target price of $68.00 [6] Stock Performance - Community Financial System shares opened at $56.78, with a 1-year low of $49.44 and a high of $73.39 [7] - The company has a market cap of $3.00 billion, a P/E ratio of 14.64, and a beta of 0.79 [7] Financial Results - The bank's net margin was 20.72% and return on equity was 11.09% [8] - Analysts expect the company to post an EPS of 4.18 for the current fiscal year [8] Dividend Announcement - A quarterly dividend of $0.47 per share was declared, representing an annualized yield of 3.3% [9] - The dividend payout ratio is 48.45% [9]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $1.04, an increase of $0.21 or 25.3% year-over-year and a $0.07 or 7.2% increase from the previous quarter [8][9] - Operating earnings per share reached $1.09, compared to $0.88 a year prior and $1.04 in the linked second quarter [8] - Total operating revenues were $206.8 million, marking a record high for the company [8] Business Line Data and Key Metrics Changes - The pre-tax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate [5][6] - Net interest income was $128.2 million, a $3.4 million or 2.7% increase from the previous quarter and a $15.4 million or 13.7% increase year-over-year [9] - Operating non-interest revenues represented 38% of total operating revenues, reflecting growth across all business lines [10] Market Data and Key Metrics Changes - Ending loans increased by $231.1 million or 2.2% during the quarter and $498.6 million or 4.9% year-over-year [12] - Total deposits increased by $580.7 million or 4.3% from one year prior and $355.1 million or 2.6% from the previous quarter [12][13] - The company's liquidity position remains strong with readily available sources of liquidity totaling $6.6 billion, which is 240% of estimated uninsured deposits [14] Company Strategy and Development Direction - The company is making a $100 million investment in facilities, talent, and technology across all businesses to drive growth [3] - The acquisition of seven Santander branches is expected to enhance the retail strategy in the banking services business [17] - A minority investment in Leap Holdings, Inc. is intended to complement the insurance services business [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth, particularly in insurance and wealth management services [6][7] - The company anticipates a strong fourth quarter with a loan growth guidance of 4%-5% for the year [36] - The effective tax rate increased to 24.7% due to higher state income taxes, but overall capital ratios remain strong [12][15] Other Important Information - The company recorded a provision for credit losses of $5.6 million, down from $7.7 million in the prior year's third quarter [10] - Non-performing loans totaled $56.1 million, representing 52 basis points of total loans outstanding, a decrease from the previous year [15][16] Q&A Session Summary Question: On the minority investment into Leap - Management views the investment as a step towards potential larger investments in the future, with a financial impact expected to be roughly neutral for 2026 [22][23] Question: On deposit costs and legacy footprint - No dramatic difference in deposit costs was observed between legacy and de novo markets, with expectations for overall deposit costs to trend down [25] Question: On loan growth and competition - Management remains optimistic about loan growth, with the commercial pipeline at its highest level ever and expectations for continued market share gains [36] Question: On margin outlook with Santander deposits - The blended margin is expected to remain in the 3%-5% range, with costs likely decreasing further [39] Question: On employee benefit services growth - Seasonality is expected in Q4 due to recent acquisitions, but overall performance is anticipated to be better than Q3 [44] Question: On investment portfolio yields - The investment portfolio yield has decreased, but cash flows from treasury maturities are expected to provide opportunities for redeployment into loans [48][49]

Financial Data and Key Metrics Changes - The company reported record operating earnings per share of $1.04, an increase of $0.21 or 25.3% year-over-year and a $0.07 or 7.2% increase from the previous quarter [8][9] - Operating revenues reached $206.8 million, reflecting a $7.6 million or 3.8% increase from the previous quarter and a $17.7 million or 9.4% increase year-over-year [9][10] - The net interest income was $128.2 million, marking a $3.4 million or 2.7% increase from the previous quarter and a $15.4 million or 13.7% increase year-over-year [9][10] Business Line Data and Key Metrics Changes - The pre-tax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate [5][6] - Operating non-interest revenues increased by $2.3 million or 3% year-over-year and $4.1 million or 5.6% from the previous quarter, representing 38% of total operating revenues [10][11] - The company recorded a provision for credit losses of $5.6 million, down from $7.7 million in the prior year's third quarter [10][11] Market Data and Key Metrics Changes - Ending loans increased by $231.1 million or 2.2% during the quarter and $498.6 million or 4.9% year-over-year, indicating organic growth in the business and consumer lending portfolio [12][14] - Total deposits increased by $580.7 million or 4.3% year-over-year and $355.1 million or 2.6% from the previous quarter [12][14] - The company's liquidity position remains strong with readily available sources of liquidity totaling $6.6 billion, which is 240% of the estimated uninsured deposits [14][15] Company Strategy and Development Direction - The company is making a $100 million investment in facilities, talent, and technology across all businesses to drive growth [3][5] - The acquisition of seven Santander branches is expected to enhance the retail strategy in the banking services business [17] - A minority investment in Leap Holdings Inc. is intended to complement the insurance services business [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth, particularly in insurance and wealth management services [7][17] - The company anticipates a strong fourth quarter with a loan growth guidance of 4% to 5% for the year [36] - Management noted that the effective tax rate increased to 24.7% due to higher state income taxes, but overall capital ratios remain strong [12][15] Other Important Information - The company did not hold any brokered or wholesale deposits during the quarter, maintaining a focus on core deposit growth [13][14] - The allowance for credit losses increased to $84.9 million, reflecting reserve building in the lending portfolio [16] Q&A Session Summary Question: On the minority investment into Leap - Management indicated that the investment is seen as a first step towards potential larger investments in the future, with a financial impact expected to be roughly neutral [22][23] Question: On deposit costs and legacy footprint - Management noted no dramatic difference in deposit costs between legacy and De Novo markets, with expectations for overall deposit costs to trend down [25] Question: On loan growth and competition - Management remains optimistic about loan growth, with the commercial pipeline at its highest level ever and expectations for continued market share gains [36] Question: On margin outlook with Santander deposits - Management expects blended margins to remain favorable, with costs potentially decreasing further as they address exception pricing [39][40] Question: On investment portfolio yields - Management explained that yields in the investment portfolio may fluctuate due to timing of dividends, with plans to redeploy cash flows into loans or pay down borrowings [47][50]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $1.04, an increase of $0.21 or 25.3% year over year and a $0.07 or 7.2% increase from the linked second quarter [12] - Operating earnings per share were $1.09, compared to $0.88 a year prior and $1.04 in the linked second quarter [12] - Total operating revenues reached a record $206.8 million, increasing by $7.6 million or 3.8% from the linked second quarter and $17.7 million or 9.4% from the prior year [13] Business Line Data and Key Metrics Changes - The pretax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate [9] - Operating noninterest revenues represented 38% of total operating revenues, reflecting revenue growth across all four business lines [15] Market Data and Key Metrics Changes - Ending loans increased by $231.1 million or 2.2% during the third quarter and increased by $498.6 million or 4.9% from one year prior [17] - Total deposits increased by $580.7 million or 4.3% from one year prior and $355.1 million or 2.6% from the linked second quarter [17] Company Strategy and Development Direction - The company is focused on diversifying higher growth subscription-like revenue streams in insurance benefits and wealth management, while also pursuing strong funding and liquidity in attractive high-priority markets [8] - The company anticipates closing on the acquisition of seven Santander branches, which will accelerate its retail strategy in the banking services business [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued earnings growth, supported by a diversified revenue profile, strong liquidity, and stable core deposit base [21] - The company remains constructive on growth, with the commercial pipeline at its highest level ever and expectations for strong performance in the mortgage pipeline [41] Other Important Information - The company did not hold any brokered or wholesale deposits during the quarter, maintaining a strong liquidity position with readily available sources totaling $6.2 billion [18] - The effective tax rate for the third quarter was 24.7%, up from 23% in the prior year's third quarter [16] Q&A Session Summary Question: Regarding the minority investment in TALIP - Management indicated that the investment is seen as a first step towards a potentially larger investment in the future, with a financial impact expected to be roughly neutral for 2026 [26][27] Question: On deposit costs and legacy footprint - Management noted no dramatic difference in deposit costs between legacy and new markets, with expectations for overall deposit costs to trend down [28][30] Question: On loan growth and competition - Management remains optimistic about loan growth, with the commercial pipeline at its highest level and expectations for continued market share gains [41][43] Question: On margin outlook with Santander deposits - Management expects blended margins to remain in the 3% to 5% range, with cost of funds remaining low and potential for margin expansion with the Santander acquisition [45][47] Question: On the investment portfolio yields - Management explained that yields in the investment portfolio have been affected by timing of dividends and that they do not expect to make significant purchases in the near term [57][59]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $1.04, an increase of $0.21 or 25.3% year over year and an increase of $0.07 or 7.2% from the linked second quarter [8] - Operating earnings per share were $1.09, compared to $0.88 one year prior and $1.04 in the linked second quarter [8] - Total operating revenues reached a record high of $206.8 million, increasing $7.6 million or 3.8% from the linked second quarter and $17.7 million or 9.4% from one year prior [9] Business Line Data and Key Metrics Changes - The pre-tax tangible returns for the quarter were 63% for insurance services, 62% for employee benefit services, 48% for wealth management services, and 25% for banking and corporate [5] - Net interest income was $128.2 million, representing a $3.4 million or 2.7% increase over the linked second quarter and a $15.4 million or 13.7% improvement over the third quarter of 2024 [9] - Operating non-interest revenues increased $2.3 million or 3% compared to the prior year's third quarter, reflecting revenue growth in all four business lines [10] Market Data and Key Metrics Changes - Ending loans increased $231.1 million or 2.2% during the third quarter and increased $498.6 million or 4.9% from one year prior [12] - Total deposits increased $580.7 million or 4.3% from one year prior and increased $355.1 million or 2.6% from the end of the linked second quarter [12] - The company's liquidity position remains strong with readily available sources of liquidity totaling $6.6 billion, or 240% of the estimated uninsured deposits [13] Company Strategy and Development Direction - The company is focused on diversified, higher growth, subscription-like revenue streams in insurance, benefits, and wealth management, while also pursuing strong funding and liquidity in attractive high-priority markets [5] - The company anticipates closing on the acquisition of seven Santander branches, which will accelerate its retail strategy in the banking services business [16] - A minority investment in Leap Holdings Inc. was announced, complementing the insurance services business [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth, particularly in insurance and wealth businesses, and highlighted strong capital deployment opportunities [5][6] - The company expects to maintain a strong earnings growth foundation due to its diversified revenue profile, strong liquidity, and stable core deposit bank [16] - Management noted that the effective tax rate increased to 24.7% from 23% in the prior year's third quarter, driven by increases in certain state income taxes [12] Other Important Information - The company recorded a $5.6 million provision for credit losses during the third quarter, down from $7.7 million in the prior year's third quarter [10] - Non-performing loans totaled $56.1 million or 52 basis points of total loans outstanding at the end of the third quarter, a decrease from $62.8 million or 61 basis points one year prior [14] Q&A Session Summary Question: On the minority investment into Leap - Management indicated that the investment is seen as a first step and is expected to be roughly neutral in financial impact for 2026 [19][20] Question: On deposit costs and legacy footprint - Management noted no dramatic difference in deposit costs between legacy and De Novo markets, with expectations for overall deposit costs to trend down [21] Question: On spread compression on incremental CRE loans - Management discussed current CRE loan yields and indicated a trend towards lower rates due to market evolution and competition [22][24] Question: On loan growth and pipeline - Management remains optimistic about loan growth, with the commercial pipeline at its highest level ever and expectations for a strong fourth quarter [28][30] Question: On NIM and investment portfolio - Management explained that the investment portfolio yield decreased due to timing of dividends and provided cash flow projections for future years [38][40]