Financial Data and Key Metrics Changes - GAAP earnings per share for Q2 2025 were $0.97, up $0.06 or 6.6% year-over-year and up $0.04 or 4.3% from the previous quarter [10] - Operating earnings per share were $1.04, compared to $0.95 a year prior and $0.98 in the linked first quarter [10] - Total operating revenues reached $199.3 million, an increase of $16.1 million or 8.8% year-over-year and up $3.3 million or 1.7% from the previous quarter [10][11] - Net interest income was $124.7 million, representing a $4.5 million or 3.8% increase from the previous quarter and a $15.3 million or 14% improvement year-over-year [11] - The company's net interest margin increased by six basis points to 3.30% [11] Business Line Data and Key Metrics Changes - The Employee Benefits Services business was flat year-over-year, with recordkeeping growing at high single digits while Fiduciary Trust faced headwinds [6] - Insurance Services experienced a pull forward of contingency payments into Q1, impacting Q2 results [6] - Wealth Management Services saw muted revenue growth year-over-year but an increase in operating pretax earnings by 16% [7] Market Data and Key Metrics Changes - Ending loans increased by $98 million or 0.9% during Q2, primarily driven by growth in consumer indirect lending [14] - Total deposits increased by $563.9 million or 4.3% year-over-year but decreased by $190.3 million or 1.4% from the previous quarter [14] - Nonperforming loans totaled $53.3 million or 51 basis points of total loans outstanding, a decrease from the previous quarter [17] Company Strategy and Development Direction - The company announced a branch acquisition that is expected to close in Q4 2025, enhancing its market presence and liquidity [8][19] - The company is focused on organic loan growth and expanding into under-tapped markets within its Northeast footprint [14] - The management is optimistic about the pipeline strength and expects to meet previously communicated growth targets [5][19] Management's Comments on Operating Environment and Future Outlook - Management noted that competition in lending has intensified, impacting loan pricing and yields [22][24] - The company is bullish on its pipeline and expects to achieve mid-single-digit growth in lending portfolios [41][44] - Management expressed confidence in the company's diversified revenue profile and strong liquidity as a foundation for continued earnings growth [19] Other Important Information - The company recorded a provision for credit losses of $4.1 million during Q2, compared to $2.7 million in the prior year's second quarter [12] - Total non-interest expenses increased by $10.1 million or 8.5% year-over-year, driven by higher salaries and employee benefits [13] Q&A Session Summary Question: Can you speak to the competitive landscape you're seeing in terms of lending? - Management acknowledged that competition has intensified, with many competitors trying to regain market share through rate and credit adjustments [22][23] Question: How are you feeling about the quarterly NIM expansion from here? - Management indicated that they expect NIM expansion to be closer to three to five basis points moving forward [26] Question: Will the acquired deposits boost liquidity and be invested over time? - Management stated that the acquired deposits will primarily support loan growth over the coming years, with some proceeds initially staying in short-term instruments [27] Question: Can you talk about OpEx trends from here? - Management noted that restructuring charges are part of consolidating branches and that they expect OpEx to remain flat moving forward [32][34] Question: How is the branch acquisition progressing? - Management confirmed that the acquisition is on track and complements their organic growth strategy [36][37] Question: Can you provide an update on the De Novo branch build-out? - Management reported that seven out of the planned 19 De Novo branches have opened, with expectations to complete the build-out by the end of the year [55][56] Question: Any updates on loan yields and their recent performance? - Management clarified that the recent increase in loan yields was in line with expectations and not due to any atypical factors [58] Question: Is there any update regarding the CHIPS Act and Micron's plans? - Management confirmed that Micron is still on track to break ground later this year, with an increase in expected investment [60]

Financial Performance - Community Financial System reported revenue of $200.14 million for the quarter ended June 2025, reflecting an 8.3% increase year-over-year [1] - Earnings per share (EPS) for the quarter was $0.97, up from $0.95 in the same quarter last year [1] - The reported revenue was below the Zacks Consensus Estimate of $203.07 million, resulting in a revenue surprise of -1.44% [1] - The company experienced an EPS surprise of -5.83%, with the consensus EPS estimate being $1.03 [1] Key Metrics - The efficiency ratio (GAAP) was reported at 64.8%, higher than the estimated 61.9% [4] - Net Interest Margin remained stable at 3.3%, matching the average estimate [4] - Average balances of total interest-earning assets were $15.29 billion, slightly below the estimated $15.38 billion [4] - Net charge-offs as a percentage of average loans were 0.2%, consistent with the average estimate [4] - Total Non-Interest Income was reported at $74.51 million, below the average estimate of $77.3 million [4] - Fully tax-equivalent net interest income was $125.63 million, slightly below the average estimate of $125.75 million [4] Stock Performance - Community Financial shares returned +3.8% over the past month, compared to a +5.9% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

[Company Overview](index=2&type=section&id=Company%20Overview) Community Financial System, Inc. is a diversified financial services company operating four main business lines: banking, employee benefit services, insurance services, and wealth management services [About Community Financial System, Inc.](index=2&type=section&id=About%20Community%20Financial%20System%2C%20Inc.) Community Financial System, Inc. is a diversified financial services company operating four main business lines: banking, employee benefit services, insurance services, and wealth management services. Its banking subsidiary, Community Bank, N.A., is a significant institution with over $16 billion in assets and approximately 200 facilities across several Northeastern states - Community Financial System, Inc. is a diversified financial services company focused on four main business lines: banking services, employee benefit services, insurance services, and wealth management services[6](index=6&type=chunk)[31](index=31&type=chunk) - Its banking subsidiary, Community Bank, N.A., is among the country's 100 largest banking institutions with over **$16 billion in assets** and operates approximately **200 customer facilities** across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts[6](index=6&type=chunk)[31](index=31&type=chunk) - The Company's subsidiaries include Benefit Plans Administrative Services, Inc. (employee benefits administration, trust services, actuarial consulting) and OneGroup NY, Inc. (a top 66 U.S. insurance agency)[6](index=6&type=chunk)[31](index=31&type=chunk) [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) Community Financial System, Inc. reported strong second quarter 2025 results, achieving record total revenues and net interest income, with net income and operating net income per share increasing year-over-year and quarter-over-quarter, driven by growth in loans and deposits [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Community Financial System, Inc. reported strong second quarter 2025 results, achieving record total revenues and net interest income. Net income and operating net income per share increased both year-over-year and quarter-over-quarter, driven by growth in loans and deposits | Metric | Q2 2025 Value | YoY Change | YoY Change (%) | QoQ Change | QoQ Change (%) | | :------------------------------------------------ | :-------------- | :------------- | :------------- | :------------- | :------------- | | Net income | $51.3 million | +$0.06 per share | - | +$0.04 per share | - | | Operating net income | $55.4 million | +$0.09 per share | - | +$0.06 per share | - | | Total revenues | $199.3 million (record) | +$15.5 million | +8.4% | +$3.0 million | +1.5% | | Net interest income | $124.7 million (record) | +$15.3 million | +14.0% | +$4.5 million | +3.8% | | Non-bank financial services noninterest revenues | $54.5 million | +$0.3 million | +0.6% | -$2.2 million | -3.9% | | Operating pre-tax, pre-provision net revenue (PPNR) | $75.1 million | +$0.12 per share | - | +$0.01 per share | - | | Total ending loans | $10.52 billion | +$495.3 million | +4.9% | +$98.0 million | +0.9% | | Total ending deposits | $13.70 billion | +$563.9 million | +4.3% | -$190.3 million | -1.4% | [CEO Commentary](index=3&type=section&id=CEO%20Commentary) President and CEO Dimitar A. Karaivanov highlighted the company's solid core operating performance, with meaningful growth in net income and PPNR. He noted margin expansion in the banking business offset seasonal headwinds in non-banking financial services, leading to a record operating diluted EPS of $1.04 and a quarterly operating return on assets of 1.34%. The CEO also announced an agreement to acquire seven bank branches in Allentown, PA, advancing the retail growth strategy - The Company achieved meaningful growth in net income, operating net income, and operating pre-tax, pre-provision net revenue (PPNR) over the prior year's second quarter[9](index=9&type=chunk) - Results improved from the linked first quarter, highlighted by a record quarterly operating diluted earnings per share of **$1.04**, driven by margin expansion in the banking business[9](index=9&type=chunk) - The Company announced an agreement to acquire seven bank branch locations in the Allentown, Pennsylvania area, including certain branch-related loans, deposits, and wealth management relationships, accelerating its retail growth strategy[10](index=10&type=chunk) [Performance Metrics](index=3&type=section&id=Performance%20Metrics) The company's performance metrics for Q2 2025 show improvements across key profitability and efficiency indicators, including increases in diluted EPS, operating return on assets, and net interest margin, both quarter-over-quarter and year-over-year | Metric | 2nd Qtr 2025 | 1st Qtr 2025 | 2nd Qtr 2024 | QoQ Change | QoQ Change (%) | YoY Change | YoY Change (%) | | :--------------------------------------- | :----------- | :----------- | :----------- | :------------- | :------------- | :------------- | :------------- | | Diluted Earnings Per Share | $0.97 | $0.93 | $0.91 | $0.04 | 4.3% | $0.06 | 6.6% | | Operating Diluted Earnings Per Share | $1.04 | $0.98 | $0.95 | $0.06 | 6.1% | $0.09 | 9.5% | | Operating Pre-Tax, Pre-Provision Net Revenue Per Share | $1.41 | $1.40 | $1.29 | $0.01 | 0.7% | $0.12 | 9.3% | | Return on Assets | 1.24% | 1.22% | 1.22% | - | 0.02% | - | 0.02% | | Operating Return on Assets | 1.34% | 1.28% | 1.29% | - | 0.06% | - | 0.05% | | Return on Equity | 11.21% | 11.28% | 11.79% | - | (0.07%) | - | (0.58%) | | Operating Return on Equity | 12.10% | 11.84% | 12.43% | - | 0.26% | - | (0.33%) | | Total Revenues ($M) | $199.3 | $196.2 | $183.8 | $3.0 | 1.5% | $15.5 | 8.4% | | Net Interest Income ($M) | $124.7 | $120.2 | $109.4 | $4.5 | 3.8% | $15.3 | 14.0% | | Net Interest Margin | 3.27% | 3.21% | 3.01% | - | 0.06% | - | 0.26% | | Total Ending Loans ($B) | $10.52 | $10.42 | $10.02 | $98.0 million | 0.9% | $495.3 million | 4.9% | | Total Ending Deposits ($B) | $13.70 | $13.89 | $13.14 | ($190.3 million) | (1.4%) | $563.9 million | 4.3% | [Business Segment Results](index=4&type=section&id=Business%20Segment%20Results) The Banking and Corporate segment showed strong growth in adjusted income before income taxes, while Employee Benefit Services, Insurance Services, and Wealth Management Services experienced declines in adjusted income before income taxes quarter-over-quarter, primarily due to seasonal factors or timing of revenues | Segment | 2nd Qtr 2025 Adjusted Income Before Income Taxes ($M) | QoQ Change ($M) | QoQ Change (%) | YoY Change ($M) | YoY Change (%) | | :-------------------------- | :--------------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Banking and Corporate | $54.5 | $8.2 | 17.8% | $7.3 | 15.6% | | Employee Benefit Services | $11.9 | ($1.5) | (11.4%) | ($1.6) | (12.1%) | | Insurance Services | $2.2 | ($1.9) | (45.3%) | ($0.5) | (17.4%) | | Wealth Management Services | $2.3 | ($1.3) | (35.4%) | $0.3 | 15.8% | - Provision for credit losses in Banking and Corporate decreased by **38.5% QoQ** but increased by **52.0% YoY**[12](index=12&type=chunk) - Employee benefit services revenues decreased QoQ due to seasonally lower actuarial consulting services revenues[17](index=17&type=chunk) [Detailed Results of Operations](index=6&type=section&id=Detailed%20Results%20of%20Operations) The Company's net income for Q2 2025 was $51.3 million, or $0.97 per share, an increase of $0.06 per share YoY and $0.04 per share QoQ, primarily driven by increased net interest income, partially offset by higher noninterest expenses and provision for credit losses [Net Income and Earnings Per Share](index=6&type=section&id=Net%20Income%20and%20Earnings%20Per%20Share) The Company's net income for Q2 2025 was $51.3 million, or $0.97 per share, an increase of $0.06 per share YoY and $0.04 per share QoQ. This growth was primarily driven by increased net interest income, partially offset by higher noninterest expenses and provision for credit losses | Metric | 2nd Qtr 2025 | 2nd Qtr 2024 | 1st Qtr 2025 | | :----------------------- | :----------- | :----------- | :----------- | | Net income | $51.3 million | $47.9 million | $49.6 million | | Diluted earnings per share | $0.97 | $0.91 | $0.93 | - The **$0.06 increase** in earnings per share YoY was primarily driven by an increase in net interest income, partially offset by increases in noninterest expenses and the provision for credit losses[14](index=14&type=chunk) - The **$0.04 increase** in earnings per share QoQ was primarily due to an increase in net interest income and a decrease in the provision for credit losses, partially offset by an increase in noninterest expenses and a decrease in noninterest revenues[14](index=14&type=chunk) [Net Interest Income and Net Interest Margin](index=6&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) The Company achieved record quarterly net interest income of $124.7 million, a 14.0% increase YoY and 3.8% QoQ. Net interest margin (NIM) expanded to 3.27% (3.30% FTE), driven by higher yields on interest-earning assets and abating funding cost pressures, including a decrease in the cost of interest-bearing liabilities | Metric | 2nd Qtr 2025 | 2nd Qtr 2024 | 1st Qtr 2025 | YoY Change | YoY Change (%) | QoQ Change | QoQ Change (%) | | :-------------------------- | :----------- | :----------- | :----------- | :------------- | :------------- | :------------- | :------------- | | Net interest income | $124.7 million | $109.4 million | $120.2 million | $15.3 million | 14.0% | $4.5 million | 3.8% | | Net interest margin | 3.27% | 3.01% | 3.21% | - | 0.26% | - | 0.06% | | Fully tax-equivalent NIM | 3.30% | 3.04% | 3.24% | - | 0.26% | - | 0.06% | | Yield on interest-earning assets | 4.56% | 4.35% | 4.51% | - | 0.21% | - | 0.05% | | Cost of interest-bearing liabilities | 1.74% | 1.83% | 1.75% | - | (0.09%) | - | (0.01%) | - The increase in net interest margin was primarily the result of a higher yield on interest-earning assets, which increased **21 basis points YoY to 4.56%**, mainly driven by higher loan yields[17](index=17&type=chunk) - The cost of interest-bearing liabilities decreased **nine basis points YoY to 1.74%**, including a **15 basis point decrease** in the average borrowing rate and a **nine basis point decrease** in the average interest-bearing deposit rate[17](index=17&type=chunk) [Noninterest Revenues](index=6&type=section&id=Noninterest%20Revenues) Noninterest revenues contributed 37.4% of total revenues in Q2 2025. While banking noninterest revenues increased, employee benefit, insurance, and wealth management services revenues saw QoQ decreases due to seasonal factors and timing of commission revenues | Revenue Stream | 2nd Qtr 2025 ($M) | 2nd Qtr 2024 ($M) | 1st Qtr 2025 ($M) | YoY Change ($M) | YoY Change (%) | QoQ Change ($M) | QoQ Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------------- | :-------------- | :------------- | :-------------- | :------------- | | Banking noninterest revenues | $20.1 | $19.7 | $19.1 | $0.4 | 2.1% | $1.0 | 5.0% | | Employee benefit services revenues | $32.4 | $32.1 | $32.6 | $0.3 | 0.8% | ($0.2) | (0.7%) | | Insurance services revenues | $13.4 | $13.3 | $14.2 | $0.1 | 0.6% | ($0.8) | (5.7%) | | Wealth management services revenues | $8.7 | $8.7 | $9.9 | $0.0 | 0.0% | ($1.2) | (12.0%) | - The Company's banking and non-banking financial services noninterest revenue streams generated **37.4% of total revenues** in the second quarter[16](index=16&type=chunk) - Banking noninterest revenues increased due to higher customer interest rate swap fee revenues and CRE financing and advisory revenues[17](index=17&type=chunk) [Noninterest Expenses and Income Taxes](index=7&type=section&id=Noninterest%20Expenses%20and%20Income%20Taxes) Total noninterest expenses increased by 8.5% YoY to $129.1 million in Q2 2025, primarily driven by higher salaries and employee benefits, data processing and communications, and other expenses, including restructuring costs. The effective tax rate decreased slightly to 22.3% | Expense Category | 2nd Qtr 2025 ($M) | 2nd Qtr 2024 ($M) | YoY Change ($M) | YoY Change (%) | | :-------------------------------- | :---------------- | :---------------- | :-------------- | :------------- | | Total noninterest expenses | $129.1 | $119.0 | $10.1 | 8.5% | | Salaries and employee benefits | $79.0 | $73.4 | $5.6 | 7.6% | | Data processing and communications | $16.7 | $15.3 | $1.4 | 9.3% | | Other expenses | $10.2 | $8.1 | $2.1 | 25.6% | | Effective tax rate | 22.3% | 22.8% | - | (0.5%) | | Restructuring expenses (within Other) | $1.5 | - | $1.5 | - | - Salaries and employee benefits expenses increased primarily due to merit and market-related increases in wages, incentive compensation, and higher employee medical costs[21](index=21&type=chunk) - Other expenses increased primarily due to **$1.5 million of restructuring expenses** associated with severance payments for a workforce optimization plan and planned branch consolidations[21](index=21&type=chunk) [Financial Position and Capital Management](index=7&type=section&id=Financial%20Position%20and%20Capital%20Management) The Company maintains a strong financial position and liquidity profile, with total assets increasing 4.8% YoY to $16.67 billion, driven by organic interest-earning asset growth, and readily available liquidity sources totaling $5.94 billion, covering 246% of estimated uninsured deposits [Financial Position and Liquidity](index=7&type=section&id=Financial%20Position%20and%20Liquidity) The Company maintains a strong financial position and liquidity profile. Total assets increased 4.8% YoY to $16.67 billion, driven by organic interest-earning asset growth. Readily available liquidity sources totaled $5.94 billion, covering 246% of estimated uninsured deposits | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | YoY Change ($M) | YoY Change (%) | QoQ Change ($M) | QoQ Change (%) | | :------------------------------------ | :-------------- | :------------- | :------------ | :-------------- | :------------- | :-------------- | :------------- | | Total assets | $16.67 billion | $16.76 billion | $15.91 billion | $758.2 | 4.8% | ($99.3) | (0.6%) | | Readily available sources of liquidity | $5.94 billion | - | - | - | - | - | - | | Unrestricted cash & cash equivalents | $231.2 million | - | - | - | - | - | - | | Investment securities unpledged | $1.82 billion | - | - | - | - | - | - | | Unused FHLB borrowing capacity | $1.27 billion | - | - | - | - | - | - | | FRB discount window availability | $2.62 billion | - | - | - | - | - | - | | Liquidity coverage of uninsured deposits | 246% | - | - | - | - | - | - | - The increase in total assets over the last 12 months was primarily driven by organic interest-earning asset growth[21](index=21&type=chunk) - Estimated insured deposits, net of collateralized and intercompany deposits, represent **82% of total ending deposits**[21](index=21&type=chunk) [Deposits and Funding](index=7&type=section&id=Deposits%20and%20Funding) Ending deposits at June 30, 2025, were $13.70 billion, a 4.3% increase YoY but a 1.4% decrease QoQ due to seasonal governmental deposit outflows. The Company maintained a low average cost of funds at 1.32%, with 65% of total deposits in no- and low-rate checking and savings accounts | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | YoY Change ($M) | YoY Change (%) | QoQ Change ($M) | QoQ Change (%) | | :-------------------------- | :-------------- | :------------- | :------------ | :-------------- | :------------- | :-------------- | :------------- | | Ending deposits | $13.70 billion | $13.89 billion | $13.14 billion | $563.9 | 4.3% | ($190.3) | (1.4%) | | Ending borrowings | $894.5 million | $862.1 million | $932.2 million | ($37.7) | (4.0%) | $32.4 | 3.8% | | Average cost of funds | 1.32% | 1.33% | 1.37% | - | (0.05%) | - | (0.01%) | | Average cost of total deposits | 1.19% | 1.17% | 1.23% | - | (0.04%) | - | 0.02% | | % of deposits in no/low-rate accounts | 65% | - | - | - | - | - | - | | % of deposits in time deposit accounts | 15% | 15% | 16% | - | (1%) | - | 0% | - The decrease in ending deposits QoQ was due to seasonal outflows of governmental deposit balances[21](index=21&type=chunk) - The average cost of funds decreased **five basis points YoY** and **one basis point QoQ**, while the quarterly average cost of total deposits decreased **four basis points YoY** and increased **two basis points QoQ**[21](index=21&type=chunk) [Loans and Credit Quality](index=8&type=section&id=Loans%20and%20Credit%20Quality) Total ending loans grew to $10.52 billion, up 4.9% YoY and 0.9% QoQ, driven by organic growth in consumer indirect and overall business/consumer lending. While net charge-offs increased due to a specific CRE loan charge-off, overall asset quality metrics, including delinquent and nonperforming loans, improved QoQ and remain relatively low compared to the industry | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | YoY Change ($M) | YoY Change (%) | QoQ Change ($M) | QoQ Change (%) | | :------------------------------------ | :-------------- | :------------- | :------------ | :-------------- | :------------- | :-------------- | :------------- | | Ending loans | $10.52 billion | $10.42 billion | $10.02 billion | $495.3 | 4.9% | $98.0 | 0.9% | | Allowance for credit losses (ACL) | $81.9 million | $82.8 million | $71.4 million | $10.5 | 14.7% | ($0.9) | (1.1%) | | ACL as % of total loans | 0.78% | 0.79% | 0.71% | - | 0.07% | - | (0.01%) | | Provision for credit losses | $4.1 million | $6.7 million | $2.7 million | $1.4 | 52.0% | ($2.6) | (38.5%) | | Net charge-offs | $5.1 million | $3.2 million | $1.3 million | $3.8 | 292.3% | $1.9 | 59.4% | | Annualized net charge-offs % of avg loans | 0.20% | 0.13% | 0.05% | - | 0.15% | - | 0.07% | | Total delinquent loans % of total loans | 1.01% | 1.29% | 0.95% | - | 0.06% | - | (0.28%) | | Nonperforming loans | $53.3 million | $75.0 million | $50.5 million | $2.8 | 5.5% | ($21.7) | (28.9%) | | Nonperforming loans % of total loans | 0.51% | 0.72% | 0.50% | - | 0.01% | - | (0.21%) | | Total nonperforming assets | $61.3 million | $77.7 million | $52.2 million | $9.1 | 17.4% | ($16.4) | (21.1%) | | Nonperforming assets % of total assets | 0.37% | 0.46% | 0.33% | - | 0.04% | - | (0.09%) | - The increase in net charge-offs during Q2 2025 was primarily driven by a **$4.3 million charge-off** associated with one non-owner occupied CRE loan relationship[23](index=23&type=chunk) - The decrease in nonperforming loans and assets QoQ was primarily attributable to the derecognition of two previously mentioned CRE loan relationships (one charged-off, one substantially repaid)[23](index=23&type=chunk) [Shareholders' Equity and Regulatory Capital](index=9&type=section&id=Shareholders%27%20Equity%20and%20Regulatory%20Capital) The Company maintained a strong capital position, with shareholders' equity increasing 12.7% YoY to $1.88 billion. All regulatory capital ratios significantly exceeded well-capitalized standards, with the Tier 1 leverage ratio at 9.42% and tangible equity to tangible assets ratio at 6.51% | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | YoY Change ($M) | YoY Change (%) | QoQ Change ($M) | QoQ Change (%) | | :------------------------------------ | :-------------- | :------------- | :------------ | :-------------- | :------------- | :-------------- | :------------- | | Shareholders' equity | $1.88 billion | $1.83 billion | $1.67 billion | $212.9 | 12.7% | $49.0 | 2.7% | | Shareholders' equity to assets ratio | 11.30% | 10.94% | 10.50% | - | 0.80% | - | 0.36% | | Tier 1 leverage ratio | 9.42% | 9.29% | 9.07% | - | 0.35% | - | 0.13% | | Tangible equity to tangible assets ratio | 6.51% | 6.15% | 5.38% | - | 1.13% | - | 0.36% | - The increase in shareholders' equity YoY was primarily due to a **$97.5 million increase in retained earnings** and an **$89.9 million decrease in accumulated other comprehensive loss** related to the investment securities portfolio[27](index=27&type=chunk) - The Tier 1 leverage ratio of **9.42%** remained substantially above the regulatory well-capitalized standard of **5.0%**[27](index=27&type=chunk) [Dividend and Stock Repurchase Program](index=9&type=section&id=Dividend%20and%20Stock%20Repurchase%20Program) The Company declared a quarterly cash dividend of $0.46 per share for Q2 2025, a 2.2% increase YoY. Additionally, an increase to $0.47 per share was announced for Q3 2025, marking the 33rd consecutive year of dividend increases. No shares were repurchased under the 2025 stock repurchase program in the first six months | Metric | 2nd Qtr 2025 | 2nd Qtr 2024 | YoY Change | YoY Change (%) | | :-------------------------------- | :----------- | :----------- | :------------- | :------------- | | Quarterly cash dividend declared | $0.46 per share | $0.45 per share | $0.01 | 2.2% | | Announced Q3 2025 dividend | $0.47 per share | - | $0.01 | 2.2% | | Annualized yield (based on 7/21/25 close) | 3.2% | - | - | - | - The **$0.01 increase** in the quarterly dividend declared in the third quarter of 2025 marked the **33rd consecutive year of dividend increases** for the Company[25](index=25&type=chunk)[27](index=27&type=chunk) - The Board approved a stock repurchase program in December 2024, authorizing the repurchase of up to **2.63 million shares** (**5.0% of common stock outstanding**) during 2025; however, no shares were repurchased in the first six months of 2025[27](index=27&type=chunk) [Strategic Initiatives](index=9&type=section&id=Strategic%20Initiatives) Community Bank, N.A. entered into an agreement to acquire seven bank branch locations in the Allentown, Pennsylvania market from Santander Bank, N.A., expected to add approximately $600 million of customer deposits, accelerating the Company's retail growth strategy [Acquisition to Expand Pennsylvania Franchise](index=9&type=section&id=Acquisition%20to%20Expand%20Pennsylvania%20Franchise) Community Bank, N.A. entered into an agreement to acquire seven bank branch locations in the Allentown, Pennsylvania market from Santander Bank, N.A. This acquisition is expected to add approximately $600 million of customer deposits, along with branch-related loans and wealth management relationships, accelerating the Company's retail growth strategy in the Greater Lehigh Valley - Community Bank, N.A. agreed to acquire **seven bank branch locations** in the Allentown, Pennsylvania area from Santander Bank, N.A.[10](index=10&type=chunk)[26](index=26&type=chunk) - The transaction is expected to add approximately **$600 million of customer deposits**, as well as branch-related loans and wealth management relationships[26](index=26&type=chunk) - This move accelerates the Company's previously communicated retail growth strategy and complements its existing commercial and consumer lending presence in the market[10](index=10&type=chunk)[26](index=26&type=chunk) [Non-GAAP Measures Explanation](index=10&type=section&id=Non-GAAP%20Measures%20Explanation) The Company provides supplemental reporting on an "operating" and "tangible" basis, excluding specific items like acquisition and restructuring expenses, and amortization of intangibles, to help investors and analysts measure underlying core performance, with net interest income and margin also reported on a fully tax-equivalent (FTE) basis for enhanced comparability [Non-GAAP Measures](index=10&type=section&id=Non-GAAP%20Measures) The Company provides supplemental reporting on an "operating" and "tangible" basis, excluding specific items like acquisition expenses, restructuring expenses, and amortization of intangibles, to help investors and analysts measure underlying core performance. Additionally, net interest income and margin are reported on a fully tax-equivalent (FTE) basis for enhanced comparability - Results on an "operating" basis exclude after-tax effects of acquisition expenses, contingent consideration adjustments, restructuring expenses, litigation accrual, loss on sales of investment securities, unrealized gain (loss) on equity securities, and amortization of intangible assets[28](index=28&type=chunk) - Results on a "tangible" basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts[28](index=28&type=chunk) - Supplemental reporting for "operating pre-tax, pre-provision net revenues" subtracts the provision for credit losses and other specified non-operating items from income before income taxes[28](index=28&type=chunk) - Net interest income and net interest margin are also reported on a fully tax-equivalent (FTE) basis to enhance comparability of assets with different tax liabilities[28](index=28&type=chunk) [Additional Information](index=10&type=section&id=Additional%20Information) This section contains forward-looking statements based on management's current beliefs and expectations, subject to significant risks and uncertainties, where actual results may differ due to various factors including macroeconomic conditions, fiscal and monetary policies, litigation, regulatory actions, interest rate changes, credit losses, competition, and successful integration of acquisitions [Forward-Looking Statements](index=10&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements based on management's current beliefs and expectations, subject to significant risks and uncertainties. Actual results may differ due to various factors, including macroeconomic conditions, fiscal and monetary policies, litigation, regulatory actions, interest rate changes, credit losses, competition, and successful integration of acquisitions - Statements are based on current beliefs and expectations of CBU's management and are subject to significant risks and uncertainties[32](index=32&type=chunk) - Factors that could cause actual results to differ materially include macroeconomic conditions (e.g., CRE, housing, unemployment, inflation), fiscal and monetary policies, litigation, regulatory actions, interest rate changes, credit losses, competition, and successful integration of acquisitions[32](index=32&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made[32](index=32&type=chunk) [Summary of Financial Data (Unaudited)](index=11&type=section&id=Summary%20of%20Financial%20Data%20%28Unaudited%29) This section provides a detailed breakdown of the Company's earnings, including interest income, interest expense, net interest income, provision for credit losses, noninterest revenues, and noninterest expenses, leading to net income and earnings per share for the current and prior periods [Earnings Data](index=11&type=section&id=Earnings%20Data) This section provides a detailed breakdown of the Company's earnings, including interest income, interest expense, net interest income, provision for credit losses, noninterest revenues, and noninterest expenses, leading to net income and earnings per share for the current and prior periods | Metric ($M) | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Loan income | $146.5 | $142.9 | $144.6 | $140.5 | $133.2 | | Investment income | $26.3 | $24.7 | $25.3 | $23.4 | $23.9 | | Total interest income | $172.9 | $167.6 | $169.9 | $163.9 | $157.0 | | Interest expense | $48.1 | $47.4 | $50.0 | $51.2 | $47.6 | | Net interest income | $124.7 | $120.2 | $120.0 | $112.7 | $109.4 | | Provision for credit losses | $4.1 | $6.7 | $6.2 | $7.7 | $2.7 | | Net interest income after provision for credit losses | $120.6 | $113.5 | $113.8 | $105.0 | $106.7 | | Total noninterest revenues | $74.5 | $76.0 | $76.3 | $76.2 | $74.4 | | Total noninterest expenses | $129.1 | $125.3 | $125.5 | $124.2 | $119.0 | | Income before income taxes | $66.0 | $64.3 | $64.5 | $57.0 | $62.1 | | Income taxes | $14.7 | $14.7 | $14.7 | $13.1 | $14.2 | | Net income | $51.3 | $49.6 | $49.8 | $43.9 | $47.9 | | Diluted earnings per share | $0.97 | $0.93 | $0.94 | $0.83 | $0.91 | [Profitability Metrics](index=12&type=section&id=Profitability%20Metrics) This section presents key profitability ratios, including GAAP and non-GAAP measures such as return on assets, return on equity, and efficiency ratios, demonstrating the Company's financial performance trends | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Return on assets (GAAP) | 1.24% | 1.22% | 1.21% | 1.09% | 1.22% | | Return on equity (GAAP) | 11.21% | 11.28% | 11.27% | 10.21% | 11.79% | | Noninterest revenues/total revenues (GAAP) | 37.4% | 38.7% | 38.9% | 40.3% | 40.5% | | Efficiency ratio (GAAP) | 64.8% | 63.8% | 64.0% | 65.7% | 64.7% | | Operating return on assets (non-GAAP) | 1.34% | 1.28% | 1.29% | 1.16% | 1.29% | | Operating return on equity (non-GAAP) | 12.10% | 11.84% | 11.99% | 10.85% | 12.43% | | Return on tangible equity (non-GAAP) | 20.97% | 21.69% | 21.97% | 20.53% | 24.90% | | Operating return on tangible equity (non-GAAP) | 22.63% | 22.76% | 23.36% | 21.80% | 26.25% | | Operating noninterest revenues/operating revenues (FTE) (non-GAAP) | 37.2% | 38.5% | 38.6% | 40.2% | 40.1% | | Operating efficiency ratio (non-GAAP) | 62.0% | 61.9% | 61.8% | 63.6% | 62.5% | [Components of Net Interest Margin (FTE)](index=13&type=section&id=Components%20of%20Net%20Interest%20Margin%20%28FTE%29) This section details the components contributing to the net interest margin on a fully tax-equivalent basis, including yields on various earning assets and costs of different funding sources | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Loan yield | 5.63% | 5.58% | 5.58% | 5.51% | 5.38% | | Cash equivalents yield | 4.33% | 4.30% | 4.71% | 4.90% | 5.10% | | Investment yield | 2.17% | 2.11% | 2.15% | 2.05% | 2.11% | | Earning asset yield | 4.56% | 4.51% | 4.52% | 4.43% | 4.35% | | Interest-bearing deposit rate | 1.59% | 1.59% | 1.68% | 1.69% | 1.68% | | Borrowing rate | 3.56% | 3.63% | 3.57% | 4.08% | 3.71% | | Cost of all interest-bearing funds | 1.74% | 1.75% | 1.84% | 1.93% | 1.83% | | Cost of total deposits | 1.19% | 1.17% | 1.23% | 1.23% | 1.23% | | Cost of funds (includes noninterest-bearing deposits) | 1.32% | 1.33% | 1.38% | 1.44% | 1.37% | | Net interest margin | 3.27% | 3.21% | 3.17% | 3.03% | 3.01% | | Net interest margin (FTE) (non-GAAP) | 3.30% | 3.24% | 3.20% | 3.05% | 3.04% | [Average Balances](index=13&type=section&id=Average%20Balances) This table provides average balances for key financial components, including loans, cash equivalents, investment securities, interest-earning assets, total assets, deposits, borrowings, and shareholders' equity | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Loans ($B) | $10.46 | $10.40 | $10.33 | $10.16 | $9.97 | | Cash equivalents ($M) | $159.7 | $130.6 | $93.9 | $38.5 | $48.9 | | Taxable investment securities ($B) | $4.26 | $4.21 | $4.19 | $4.17 | $4.12 | | Nontaxable investment securities ($M) | $417.3 | $419.7 | $423.3 | $436.8 | $466.8 | | Total interest-earning assets ($B) | $15.29 | $15.17 | $15.04 | $14.80 | $14.60 | | Total assets ($B) | $16.59 | $16.44 | $16.32 | $16.06 | $15.78 | | Interest-bearing deposits ($B) | $10.22 | $10.05 | $9.87 | $9.54 | $9.68 | | Borrowings ($M) | $844.7 | $910.2 | $915.5 | $1,030.2 | $785.9 | | Total interest-bearing liabilities ($B) | $11.06 | $10.96 | $10.79 | $10.57 | $10.47 | | Noninterest-bearing deposits ($B) | $3.52 | $3.52 | $3.60 | $3.61 | $3.53 | | Shareholders' equity ($B) | $1.84 | $1.78 | $1.76 | $1.71 | $1.63 | [Balance Sheet Data](index=13&type=section&id=Balance%20Sheet%20Data) This section provides a snapshot of the Company's balance sheet at quarter-end, detailing assets such as cash, investment securities, and various loan categories, as well as liabilities including deposits and borrowings, and shareholders' equity | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Cash and cash equivalents ($M) | $237.2 | $518.0 | $197.0 | $346.1 | $201.5 | | Investment securities ($B) | $4.35 | $4.30 | $4.22 | $4.29 | $4.17 | | Total loans ($B) | $10.52 | $10.42 | $10.43 | $10.25 | $10.02 | | Allowance for credit losses ($M) | $81.9 | $82.8 | $79.1 | $76.2 | $71.4 | | Goodwill and intangible assets, net ($M) | $898.4 | $900.3 | $901.5 | $900.6 | $905.8 | | Total assets ($B) | $16.67 | $16.76 | $16.39 | $16.40 | $15.91 | | Total deposits ($B) | $13.70 | $13.89 | $13.44 | $13.48 | $13.14 | | Customer repurchase agreements ($M) | $180.6 | $266.6 | $261.6 | $317.4 | $215.5 | | Other borrowings ($M) | $713.8 | $595.5 | $737.3 | $631.0 | $716.7 | | Total liabilities ($B) | $14.78 | $14.93 | $14.62 | $14.62 | $14.24 | | Shareholders' equity ($B) | $1.88 | $1.83 | $1.76 | $1.78 | $1.67 | [Capital and Other Metrics](index=14&type=section&id=Capital%20and%20Other%20Metrics) This section provides key capital ratios and other financial metrics, including shareholders' equity to total assets, tangible equity to tangible assets, Tier 1 leverage ratio, loan-to-deposit ratio, and per-share data like book value and dividends | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Shareholders' equity/total assets (GAAP) | 11.30% | 10.94% | 10.76% | 10.88% | 10.50% | | Tangible equity/tangible assets (non-GAAP) | 6.51% | 6.15% | 5.83% | 5.97% | 5.38% | | Tier 1 leverage ratio | 9.42% | 9.29% | 9.19% | 9.12% | 9.07% | | Loan-to-deposit ratio | 76.8% | 75.0% | 77.6% | 76.1% | 76.3% | | Diluted weighted average common shares outstanding (M) | 53.1 | 53.1 | 53.1 | 52.9 | 52.9 | | Cash dividends declared per common share | $0.46 | $0.46 | $0.46 | $0.46 | $0.45 | | Book value (GAAP) | $35.62 | $34.71 | $33.47 | $33.97 | $31.80 | | Tangible book value (non-GAAP) | $19.46 | $18.52 | $17.20 | $17.66 | $15.41 | | Common stock price at quarter-end | $56.87 | $56.86 | $61.68 | $58.07 | $47.21 | [Asset Quality Metrics](index=14&type=section&id=Asset%20Quality%20Metrics) This section provides detailed asset quality indicators, including nonaccrual loans, total nonperforming loans and assets, net charge-offs, and various ratios related to credit losses and delinquencies | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Nonaccrual loans ($M) | $45.8 | $69.1 | $66.4 | $59.0 | $47.4 | | Accruing loans 90+ days delinquent ($M) | $7.5 | $5.9 | $7.0 | $3.8 | $3.1 | | Total nonperforming loans ($M) | $53.3 | $75.0 | $73.4 | $62.8 | $50.5 | | Other real estate owned ($M) | $8.0 | $2.7 | $2.8 | $2.3 | $1.7 | | Total nonperforming assets ($M) | $61.3 | $77.7 | $76.2 | $65.1 | $52.2 | | Net charge-offs ($M) | $5.1 | $3.2 | $3.2 | $2.8 | $1.3 | | Allowance for credit losses/loans outstanding | 0.78% | 0.79% | 0.76% | 0.74% | 0.71% | | Nonperforming loans/loans outstanding | 0.51% | 0.72% | 0.70% | 0.61% | 0.50% | | Allowance for credit losses/nonperforming loans | 153% | 110% | 108% | 121% | 141% | | Net charge-offs/average loans | 0.20% | 0.13% | 0.12% | 0.11% | 0.05% | | Delinquent loans/ending loans | 1.01% | 1.29% | 1.24% | 1.07% | 0.95% | | Provision for credit losses/net charge-offs | 80% | 207% | 193% | 278% | 211% | [Quarterly GAAP to Non-GAAP Reconciliations](index=14&type=section&id=Quarterly%20GAAP%20to%20Non-GAAP%20Reconciliations) This extensive section provides detailed reconciliations from GAAP to non-GAAP financial measures, including operating pre-tax, pre-provision net revenue, operating net income, operating diluted earnings per share, and various return and efficiency ratios, offering a clearer view of core operational performance | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Operating pre-tax, pre-provision net revenue (non-GAAP) ($M) | $75.1 | $74.1 | $74.3 | $68.3 | $68.1 | | Operating diluted earnings per share (non-GAAP) | $1.04 | $0.98 | $1.00 | $0.88 | $0.95 | | Operating net income (non-GAAP) ($M) | $55.4 | $52.1 | $52.9 | $46.6 | $50.5 | | Operating return on assets (non-GAAP) | 1.34% | 1.28% | 1.29% | 1.16% | 1.29% | | Operating return on equity (non-GAAP) | 12.10% | 11.84% | 11.99% | 10.85% | 12.43% | | Net interest margin (FTE) (non-GAAP) | 3.30% | 3.24% | 3.20% | 3.05% | 3.04% | | Total operating noninterest revenues (non-GAAP) ($M) | $74.5 | $75.8 | $76.1 | $76.4 | $73.8 | | Total operating noninterest expenses (non-GAAP) ($M) | $124.1 | $121.9 | $121.8 | $120.8 | $115.0 | | Total operating revenues (non-GAAP) ($M) | $199.3 | $196.0 | $196.0 | $189.1 | $183.2 | | Operating noninterest revenues/operating revenues (FTE) (non-GAAP) | 37.2% | 38.5% | 38.6% | 40.2% | 40.1% | | Operating efficiency ratio (non-GAAP) | 62.0% | 61.9% | 61.8% | 63.6% | 62.5% | | Total tangible assets (non-GAAP) ($B) | $15.81 | $15.91 | $15.53 | $15.55 | $15.05 | | Total tangible common equity (non-GAAP) ($B) | $1.03 | $0.98 | $0.91 | $0.93 | $0.81 | | Tangible equity-to-tangible assets ratio at quarter end (non-GAAP) | 6.51% | 6.15% | 5.83% | 5.97% | 5.38% | | Tangible book value (non-GAAP) | $19.46 | $18.52 | $17.20 | $17.66 | $15.41 |

分组1 - Community Financial System (CBU) reported quarterly earnings of $0.97 per share, missing the Zacks Consensus Estimate of $1.03 per share, representing an earnings surprise of -5.83% [1] - The company posted revenues of $200.14 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 1.44%, compared to year-ago revenues of $184.75 million [2] - Community Financial shares have lost about 6.1% since the beginning of the year, while the S&P 500 has gained 7.2% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $1.04 on revenues of $209.18 million, and for the current fiscal year, it is $4.09 on revenues of $821.7 million [7] - The Zacks Industry Rank for Financial - Miscellaneous Services is currently in the top 39% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - Community Financial has a Zacks Rank 2 (Buy), suggesting that the shares are expected to outperform the market in the near future [6]

Company Overview - Community Financial System (CBU) is expected to report a year-over-year increase in earnings, with a projected EPS of $1.03, reflecting an increase of +8.4% [3] - Revenues are anticipated to reach $203.07 million, marking a growth of 9.9% compared to the same quarter last year [3] Earnings Expectations - The earnings report is scheduled for July 22, and the stock may rise if the results exceed expectations, while a miss could lead to a decline [2] - The consensus EPS estimate has been revised down by 0.32% over the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - The Most Accurate Estimate for Community Financial is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.65%, suggesting a bearish outlook [11] - Despite the negative Earnings ESP, the company holds a Zacks Rank of 2 (Buy), complicating predictions of an earnings beat [11] Historical Performance - In the last reported quarter, Community Financial exceeded the consensus EPS estimate of $0.91 by delivering $0.93, resulting in a surprise of +2.20% [12] - Over the past four quarters, the company has beaten consensus EPS estimates three times [13] Industry Context - In the Zacks Financial - Miscellaneous Services industry, American Express (AXP) is expected to report earnings of $3.86 per share, reflecting a year-over-year change of +10.6% [17] - American Express's revenue is projected to be $17.69 billion, up 8.3% from the previous year, with an unchanged consensus EPS estimate over the last 30 days [18]

Group 1 - Community Financial System, Inc. (NYSE: CBU) earnings for the last two quarters have been mostly in line with expectations [1] - Future growth is anticipated through network expansion and downward re-pricing of deposits [1]

Company Overview - Community Financial System, Inc (CBU) operates four scaled, complementary business lines: Employee Benefit Services, Insurance Services, Wealth Management Services, and Banking[5] - In Q1 2024, operating noninterest revenues accounted for 39% of total operating revenues[6] - The company's total operating revenue has grown at a 73% compound annual growth rate (CAGR) over the 10-year period from 2013 to 2023[12] Financial Performance - The company's Q1 2024 fully-diluted GAAP EPS was $076, while non-GAAP operating EPS was $082[29] - The company's Q1 2024 net interest income was $1070 million, a decrease of 36% from Q1 2023[80] - The company's Q1 2024 operating noninterest revenues increased by 71% compared to Q1 2023[27] Banking Segment - As of March 31, 2024, the company had $134 billion in total deposits[50] - As of March 31, 2024, the company had $988 billion in total loans[56] - The company's loan portfolio is diversified, with 36% in 1-4 family residential real estate, 16% in indirect auto loans, 14% in non-owner occupied CRE, and other segments[54]

Core Viewpoint - Community Financial System, Inc. will host a conference call to discuss its financial and operating results for the second quarter of 2025, scheduled for July 22, 2025 [1][2]. Group 1: Conference Call Details - The conference call will take place on Tuesday, July 22, 2025, at 11:00 a.m. Eastern Time [2]. - Dial-in numbers for the call include 1-833-630-0464 for U.S. participants and 1-412-317-1809 for international participants [2]. - A webcast of the call will be available at https://app.webinar.net/n7jl8918GAN, with management's prepared remarks lasting approximately 15 minutes, followed by a Q&A session [2]. Group 2: Financial Results Release - The financial results for the second quarter will be released prior to market open on July 22, 2025, and will be accessible in the 'News' section of the Company's website [3]. - A replay of the webcast will be available on the website for one year at no cost [3]. Group 3: Company Overview - Community Financial System, Inc. is a diversified financial services company with four main business lines: banking services, employee benefit services, insurance services, and wealth management services [4]. - The banking subsidiary, Community Bank, N.A., has over $16 billion in assets and operates approximately 200 customer facilities across several states [4]. - The Company also includes subsidiaries that provide employee benefits administration, insurance services, and comprehensive financial planning [4].

Core Viewpoint - Community Financial System (CBU) has been upgraded to a Zacks Rank 2 (Buy), indicating an upward trend in earnings estimates which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based solely on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade reflects a positive outlook on Community Financial's earnings, which could positively impact its stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in a company's future earnings potential, as shown through earnings estimate revisions, are strongly correlated with near-term stock price movements [5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to significant price movements based on their trading activities [5]. Community Financial's Earnings Outlook - Community Financial is projected to earn $4.07 per share for the fiscal year ending December 2025, representing an 18.7% year-over-year increase [9]. - Over the past three months, the Zacks Consensus Estimate for Community Financial has increased by 0.2% [9]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks averaging a +25% annual return since 1988 [8]. - Community Financial's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [11].

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201%2E%20Financial%20Statements%20%28Unaudited%29) The company presents its unaudited consolidated statements of condition, income, and cash flows for Q1 2025 [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) Total assets grew to $16.76 billion, driven by increased cash and deposits, while total loans slightly decreased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $518,021 | $197,004 | | Loans, net of allowance | $10,338,301 | $10,353,251 | | Total investment securities | $4,220,752 | $4,130,869 | | **Total Assets** | **$16,764,296** | **$16,386,044** | | **Liabilities & Equity** | | | | Total deposits | $13,892,047 | $13,441,707 | | Total borrowings | $861,991 | $1,000,418 | | **Total Liabilities** | **$14,930,221** | **$14,623,209** | | **Total Shareholders' Equity** | **$1,834,075** | **$1,762,835** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2025 net income rose 21.4% to $49.6 million, driven by higher net interest and noninterest revenues Quarterly Income Statement (in thousands, except per-share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $120,212 | $106,990 | | Provision for credit losses | $6,690 | $6,148 | | Total Noninterest Revenues | $76,036 | $70,285 | | Total Noninterest Expenses | $125,290 | $118,084 | | Income Before Income Taxes | $64,268 | $53,043 | | **Net Income** | **$49,614** | **$40,872** | | **Diluted EPS** | **$0.93** | **$0.76** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased by $321.0 million, as a rise in financing cash flow offset a decline in operating cash flow Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $62,509 | $79,893 | | Net cash used in investing activities | ($30,311) | ($214,676) | | Net cash provided by financing activities | $288,819 | $282,202 | | **Change in cash, cash equivalents and restricted cash** | **$321,017** | **$147,419** | [Notes to the Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section details accounting policies, acquisitions, credit loss allowances, and segment performance - In February 2025, the company's subsidiary BPA acquired assets from two financial services firms for **$0.2 million in cash** and **$2.1 million in contingent consideration**; another acquisition was completed in April 2025 for **$0.1 million cash** and **$1.9 million contingent consideration**[19](index=19&type=chunk)[20](index=20&type=chunk) - The company's investment portfolio has **significant unrealized losses** due to interest rate changes, with **$355.7 million** in the available-for-sale portfolio and **$88.5 million** in the held-to-maturity portfolio[37](index=37&type=chunk)[38](index=38&type=chunk) - The **allowance for credit losses increased to $82.8 million** at March 31, 2025, from $79.1 million at year-end 2024, reflecting a specific reserve and increased economic uncertainty[61](index=61&type=chunk) - The company operates four reportable segments, with the **Banking and Corporate segment** generating the highest adjusted income before taxes at **$46.3 million** in Q1 2025[108](index=108&type=chunk)[117](index=117&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2025 performance, including a 21.4% net income increase and expanded net interest margin [Executive Summary](index=42&type=section&id=Executive%20Summary) Q1 2025 net income rose 21.4% to $49.6 million, driven by higher revenues and an expanded net interest margin - First quarter net income increased by **$8.7 million, or 21.4%**, compared to Q1 2024, with diluted EPS rising to **$0.93** from $0.76[134](index=134&type=chunk) - **Net interest margin increased by 26 basis points** YoY, driven by a 33 basis point increase in the yield on average loans[135](index=135&type=chunk) - Financial services business revenues grew by **$4.7 million (9.0%)** YoY, led by a $3.1 million increase in insurance services revenues[138](index=138&type=chunk) - **Nonperforming loans as a percentage of total loans increased 22 basis points to 0.72%** from Q1 2024, primarily due to the downgrade of three business loan customers[137](index=137&type=chunk) [Net Income and Profitability](index=46&type=section&id=Net%20Income%20and%20Profitability) Net income increased 21.4% to $49.6 million, driven by strong growth in net interest and noninterest revenues Condensed Income Statement (in thousands) | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income | $120,212 | $106,990 | | Provision for credit losses | $6,690 | $6,148 | | Noninterest revenues | $76,036 | $70,285 | | Noninterest expenses | $125,290 | $118,084 | | **Net income** | **$49,614** | **$40,872** | [Net Interest Income](index=48&type=section&id=Net%20Interest%20Income) Net interest income grew 12.4% to $120.2 million, with the net interest margin expanding 26 basis points to 3.24% Net Interest Margin Analysis | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Avg. Yield on Earning Assets (FTE) | 4.51% | 4.24% | | Avg. Rate on Interest-Bearing Liabilities | 1.75% | 1.77% | | Net Interest Spread (FTE) | 2.76% | 2.47% | | **Net Interest Margin (FTE)** | **3.24%** | **2.98%** | - The yield on average loans increased by **33 basis points to 5.58%** in Q1 2025 compared to Q1 2024, reflecting higher rates on new originations and variable-rate loans[151](index=151&type=chunk)[158](index=158&type=chunk) [Noninterest Revenues](index=52&type=section&id=Noninterest%20Revenues) Total noninterest revenues rose 8.2% to $76.0 million, led by strong growth in insurance services Noninterest Revenues Breakdown (in thousands) | Revenue Source | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Employee benefit services | $32,622 | $31,698 | | Insurance services | $14,201 | $11,109 | | Wealth management services | $9,862 | $9,210 | | Banking noninterest revenues | $19,104 | $18,230 | | Unrealized gain on equity securities | $245 | $16 | | **Total Noninterest Revenues** | **$76,036** | **$70,285** | [Noninterest Expenses](index=53&type=section&id=Noninterest%20Expenses) Noninterest expenses grew 6.1% to $125.3 million, though the efficiency ratio improved due to higher revenue Noninterest Expenses Breakdown (in thousands) | Expense Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Salaries and employee benefits | $76,442 | $73,063 | | Data processing and communications | $16,122 | $14,348 | | Occupancy and equipment | $12,698 | $11,362 | | Other expenses | $19,928 | $19,311 | | **Total Noninterest Expenses** | **$125,290** | **$118,084** | - The **GAAP efficiency ratio improved to 63.8%** in Q1 2025 from 66.6% in Q1 2024, and the non-GAAP operating efficiency ratio also improved to 61.9% from 64.1%[174](index=174&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) [Financial Condition](index=56&type=section&id=Financial%20Condition) Total assets reached $16.76 billion, with strong liquidity, capital adequacy, and 5.4% YoY loan growth - **Total loans reached $10.42 billion** at quarter-end, a **5.4% increase** from March 31, 2024, led by a 7.6% growth in the business lending portfolio[185](index=185&type=chunk)[186](index=186&type=chunk) - The **allowance for credit losses to total loans ratio was 0.79%** at March 31, 2025, up from 0.71% a year prior, reflecting a specific reserve and heightened economic uncertainty[202](index=202&type=chunk)[209](index=209&type=chunk) - **Total deposits reached $13.89 billion**, with an estimated **80% insured by the FDIC** or collateralized[211](index=211&type=chunk)[212](index=212&type=chunk) - The company's total sources of liquidity were **$5.94 billion**, which is **254% of its estimated net uninsured deposits** of $2.34 billion[233](index=233&type=chunk)[235](index=235&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=77&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section reconciles GAAP results to non-GAAP measures like operating net income and tangible book value GAAP to Non-GAAP Reconciliation (Q1 2025, in thousands) | Measure | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Income | $49,614 | $2,453 | $52,067 | | Diluted EPS | $0.93 | $0.05 | $0.98 | | Pre-tax, Pre-provision Net Revenue | $70,958 | $3,188 | $74,146 | Tangible Book Value Reconciliation (March 31, 2025, in thousands) | Measure | Amount | | :--- | :--- | | Shareholders' Equity (GAAP) | $1,834,075 | | Less: Goodwill and Intangibles, net | ($900,332) | | Add: Deferred taxes on intangibles | $44,644 | | **Total Tangible Common Equity (Non-GAAP)** | **$978,387** | | **Tangible Book Value per Share (Non-GAAP)** | **$18.52** | [Quantitative and Qualitative Disclosures about Market Risk](index=80&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with a +200 bps rate shock decreasing NII by 1.3% Net Interest Income Sensitivity Analysis (at March 31, 2025) | Interest Rate Scenario | Projected Annual Change in NII (%) | | :--- | :--- | | +200 basis points | (1.3)% | | +100 basis points | (0.6)% | | -100 basis points | 0.6% | | -200 basis points | 0.3% | - The company's interest rate risk profile is **liability-sensitive in the short term** for rising rate scenarios, leading to a projected decrease in Net Interest Income (NII)[253](index=253&type=chunk) [Controls and Procedures](index=83&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in the quarter - The company's disclosure controls and procedures were deemed **effective** as of the end of the period covered by the report (March 31, 2025)[258](index=258&type=chunk) - **No material changes** occurred during the first quarter of 2025 that are reasonably likely to materially affect the company's internal control over financial reporting[259](index=259&type=chunk) Part II. Other Information [Legal Proceedings](index=83&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is subject to various legal proceedings arising in the normal course of business - The company is party to various legal proceedings and claims for monetary damages that arise in the **normal course of business**[260](index=260&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to risk factors from the 2024 Annual Report on Form 10-K were reported - **No material changes** to the risk factors disclosed in the 2024 Form 10-K have occurred[261](index=261&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A new stock repurchase program was authorized, but no shares were repurchased under the plan in Q1 2025 - A new stock repurchase program for up to **2,628,000 shares** was authorized starting January 1, 2025[262](index=262&type=chunk) Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Announced Plan | | :--- | :--- | :--- | :--- | | Jan 2025 | 820 | $58.16 | 0 | | Feb 2025 | 0 | $0.00 | 0 | | Mar 2025 | 0 | $0.00 | 0 | | **Total** | **820** | **$58.16** | **0** | [Defaults Upon Senior Securities](index=85&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) This section is not applicable to the company - Not applicable[267](index=267&type=chunk) [Mine Safety Disclosures](index=85&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[268](index=268&type=chunk) [Other Information](index=85&type=section&id=Item%205%2E%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading agreement during the quarter - **No directors or officers** adopted or terminated a Rule 10b5-1 trading agreement during the first quarter of 2025[269](index=269&type=chunk) [Exhibits](index=86&type=section&id=Item%206%2E%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data - Exhibits filed include **CEO/CFO certifications** (31.1, 31.2, 32.1, 32.2) and **Inline XBRL data files** (101 series)[270](index=270&type=chunk)