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Date

April 29, 2026, 11 a.m. ET

Call participants

  • President and Chief Executive Officer — Dimitar Karaivanov
  • Executive Vice President and Chief Financial Officer — Mariah Loss

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Takeaways

  • Total revenue growth -- 9% increase, driven by organic growth, a supportive interest rate environment, and favorable market values.
  • GAAP earnings per share -- $1.08, up 16.1% year over year, and up 4.9% sequentially from the fourth quarter of 2025.
  • Operating earnings per share -- Achieved a record result versus both the prior year and the fourth quarter of 2025.
  • Net interest income -- $134.7 million, up $1.3 million, or 1%, from the fourth quarter of 2025, and up $14.5 million, or 12.1%, year over year; reflects eight consecutive quarters of expansion.
  • Net interest margin -- 3.45%, increasing six basis points from the fourth quarter of 2025, attributed to lower funding costs.
  • Cost of funds -- 1.2%, representing a seven-basis-point decline sequentially, led by lower deposit costs.
  • Operating noninterest revenues -- $3.2 million, or 4.2%, increase year over year; decreased $3.2 million, or 3.8%, from the fourth quarter of 2025, with Banking, Employee Benefit, and Wealth Management showing gains, offset by a decline in Insurance.
  • Noninterest revenues as percentage of total -- 37%, demonstrating continued business line diversification.
  • Provision for credit losses -- $5.0 million, unchanged from the fourth quarter of 2025 and down from $6.7 million a year ago.
  • Total noninterest expenses -- $133.0 million, down $5.5 million, or 4%, from the fourth quarter of 2025; up $7.7 million, or 6.2%, year over year, with $3.9 million related to salaries and benefits, $2.2 million from occupancy, and $0.4 million from the pending ClearPoint Federal Bank and Trust acquisition.
  • Loan growth -- Loan balances rose $181.4 million, or 1.7%, during the quarter, and $710 million, or 6.8%, over twelve months; driven primarily by organic growth in business and consumer lending.
  • Total deposits -- Increased $978.1 million, or 7%, year over year, and $483 million, or 3.4%, sequentially, including $543.7 million assumed from the Santander branch acquisition; first-quarter growth mainly reflects seasonal municipal inflows.
  • Nonperforming loans ratio -- Decreased four basis points from the fourth quarter of 2025; net charge-off ratio increased two basis points; 30- to 89-day delinquencies rose five basis points, described as typical seasonal trends.
  • Allowance for credit losses -- $90.2 million, or 0.81% of loans, representing a $2.3 million increase during the quarter and equal to seven times trailing twelve-month net charge-offs.
  • Commercial loan pipeline -- CEO Karaivanov stated, "The commercial pipeline is in excellent shape. I think it is actually the highest it has been and meaningfully higher than last year at this time."
  • Auto lending performance -- CEO Karaivanov said, "Activity is strong, demand is okay, pricing is now a little bit better than it was at the beginning of the year. Our goal for that business continues to be mid-single digits."
  • Net interest margin outlook -- CFO Loss stated, "Looking forward to the second quarter, we expect three to five basis points of expansion. We will continue to capitalize on loan and deposit efforts and fully realize the late-2025 cuts."
  • Deposit cost outlook -- CEO Karaivanov explained, "If there are no additional cuts, there is more limited opportunity, but another couple of basis points is possible. Also."
  • Expense guidance -- CFO Loss reaffirmed annual guidance: "4% to 7% expense growth, mid-single digits, with full-year dollars anywhere between $535 million and $550 million," averaging $135 million per quarter.
  • Buyback activity -- CEO Karaivanov stated, "The buyback this quarter was opportunistic—to clean up some equity dilution and also take advantage of disruption in the stock price during the quarter, knowing."
  • ClearPoint Federal Bank and Trust acquisition -- Expected to close promptly upon regulatory approval; integration viewed as "straightforward execution with low risk."
  • De novo branch investments -- Increased expenses and regional reach, with fifteen new branches and three headquarters opened in addition to acquired locations.

Summary

Community Bank System (CBU 1.52%) reported record operating earnings per share and pre-tax pre-provision net revenue per share, supported by balance sheet growth and reduced expenses. Management confirmed ongoing success in broadening market share, especially via organic growth and targeted branch acquisition, while maintaining asset quality and liquidity standards. Guidance for full-year operations—including revenue, margin, and expense ranges—remained unchanged. The pending ClearPoint Federal Bank and Trust acquisition is expected to close soon following regulatory approval. Deployment of capital continues on both organic and selective inorganic opportunities, with a disciplined buyback policy in place when market conditions permit.

  • CEO Karaivanov described diversification gains, stating broad-based growth "across every single one of the regions," reflecting distributed strategic execution.
  • Management identified "active and very targeted discussions" regarding small-scale, nonbank and bank M&A, with an expressed preference for "singles and doubles" in acquisitions outside of core banking.
  • AI adoption has been pursued for two years, aimed at scaling operations without commensurate increases in headcount or expenses; management is withholding public claims until concrete impact is demonstrated.
  • Significant investment in chip manufacturing and advanced tech in Central New York is anticipated to drive multi-year regional economic benefit equivalent to "roughly 250% of local GDP," potentially enhancing the bank's long-term growth foundation.

Industry glossary

  • De novo branch: A newly established bank branch, as opposed to one acquired through merger or purchase.
  • Contingent commissions revenue: Fees in insurance received if an agency meets specific targets, often recognized irregularly across quarters.
  • PPNR (pre-tax pre-provision net revenue): Earnings before loan loss provisions and taxes, indicating underlying operational profitability.

Full Conference Call Transcript

Dimitar Karaivanov: Good morning, everyone. I would like to first highlight a very recent recognition our company received. Last week, we were named CenterState CEO Business of the Year with over 50 employees here in Central New York. This is one of the most prominent recognitions in Central New York. I believe it is a great illustration of the activity, commitment, visibility, investment, and impact we are having, and the results we are about to discuss come in no small part due to all of the above. A major thank you to all of our teams across banking, insurance, employee benefits, and wealth management. Great things are happening in Upstate, and great things are happening in our company. Now on to results.

We are off to a very good start in 2026. Organic growth is visible across all of our businesses. New business efforts, combined with the benefits of a supportive interest rate environment and market values, resulted in 9% total revenue growth. Our balance sheet, as always, is a source of strength for us and our clients, with excellent liquidity and credit metrics. Expenses and return on investments remain a focus. All in all, 17% growth in operating diluted earnings per share compared to last year’s period is a result we feel very good about.

Focusing on each specific business: Banking and Corporate is benefiting from organic growth, expanding margin, and our recent branch acquisition in one of the most attractive markets in the Northeast. A 29% bottom-line improvement year over year is peer-leading. Market share gains have been and will continue to be the main source of growth for us. Employee Benefit Services is expanding at the expected pace of mid- to high-single digits, and we are starting to see some tangible results of our recent investments. Insurance Services had a difficult comp from last year due to the timing of contingency payments, which, as a reminder, came in during 2025 versus our typical pattern of most in the second quarter.

This, however, has not changed our expectations for overall insurance performance during the year. Wealth Management Services also experienced mid-single-digit revenue growth and high-single-digit bottom-line growth, in line with our expectations. In summary, we did have a very good start to 2026. Organic activity is strong. Targeted inorganic discussions are active across all of our businesses. We have excellent capital and liquidity and look forward to continued strong performance throughout the year. I will now turn the call over to Mariah Loss for the financial results. Mariah?

Mariah Loss: Thank you, Dimitar. Good morning, all. As Dimitar noted, the company’s first quarter performance was strong. Including acquisition expenses, GAAP earnings per share of $1.08 increased $0.15, or 16.1%, from the first quarter of the prior year, and increased $0.05, or 4.9%, from linked fourth quarter results. Operating earnings per share and operating pre-tax pre-provision net revenue per share were record quarterly results for the company. Operating earnings per share were $1[inaudible] in the first quarter as compared to $0.98 one year prior and $1.12 in the linked fourth quarter. First quarter operating PPNR per share of $1.10 increased $0.21 from one year prior and increased $0.03 on a linked-quarter basis.

These record operating results were driven by a quarter-over-quarter decline in operating noninterest expenses and a new quarterly high for net interest income. The company’s net interest income was $134.7 million in the first quarter. This represents a $1.3 million, or 1%, increase over the linked fourth quarter and a $14.5 million, or 12.1%, improvement over the prior year, and marks the eighth consecutive quarter of net interest income expansion. The company’s fully tax-equivalent net interest margin increased 6 basis points from 3.39% in the linked fourth quarter to 3.45% in the first quarter, driven by lower funding costs.

During the quarter, the company’s cost of funds was 1.2%, a decrease of 7 basis points from the prior quarter, primarily driven by lower deposit costs. Operating noninterest revenues increased $3.2 million, or 4.2%, compared to the prior year’s first quarter and decreased $3.2 million, or 3.8%, from the linked fourth quarter. The increase in operating noninterest revenues compared to the prior year was reflective of increases in Banking, Employee Benefit Services, and Wealth Management Services noninterest revenues, partially offset by a decrease in Insurance Services noninterest revenue due to changes in the timing of collections of contingent commissions revenue.

Operating noninterest revenues represented 37% of total operating revenues during the first quarter, a metric that continuously emphasizes the diversification of our businesses. The company reported a $5.0 million provision for credit losses during the first quarter. This compares to $6.7 million in the prior year’s first quarter and $5.0 million in the linked fourth quarter. During the first quarter, the company recorded $133.0 million in total noninterest expenses, a decrease of $5.5 million, or 4%, from the linked fourth quarter and an increase of $7.7 million, or 6.2%, from the prior year’s first quarter.

The decrease from the prior year’s fourth quarter was due in part to seasonal factors and the absence of certain one-time items described last quarter, as well as acquisition expenses associated with the Santander branch acquisition. $3.9 million of the increase in total noninterest expenses from the prior year was attributed to salaries and employee benefits, primarily due to the incremental costs associated with acquisitions and de novo bank branches opened between periods, along with the impact of annual merit-based increases.

Occupancy and equipment expenses increased $2.2 million from the prior year’s first quarter, driven by incremental costs associated with the opening of 15 de novo bank branches and three regional headquarters, along with the seven branches acquired from Santander in the prior year’s fourth quarter. Additionally, acquisition expenses of $0.4 million were incurred in 2026 associated with a pending acquisition of ClearPoint Federal Bank and Trust. Ending loans increased $181.4 million, or 1.7%, during the first quarter and increased $710 million, or 6.8%, from one year prior, primarily due to organic growth in the overall business and consumer lending portfolios.

The company’s ending total deposits increased $978.1 million, or 7%, from one year prior and increased $483 million, or 3.4%, from the prior year. The growth in total deposits during the first quarter was primarily reflective of seasonal inflows of municipal deposits. The increase in total deposits over the past twelve months included the $543.7 million of deposits assumed from the Santander branch acquisition. Moving on to asset quality, the nonperforming loans ratio decreased 4 basis points and the net charge-off ratio increased 2 basis points from the linked fourth quarter, while both the 30- to 89-days delinquent ratio increased 5 basis points from last quarter, aligned with typical seasonal trends.

The company’s allowance for credit losses was $90.2 million, or 81 basis points of total loans outstanding, at the end of the first quarter, an increase of $2.3 million during the quarter. The increase was primarily attributed to reserve building in the business lending portfolio reflective of organic CRE growth. The allowance for credit losses at the end of the first quarter represented 7x the company’s trailing twelve-month net charge-offs. Looking forward, we believe the company’s diversified revenue profile, strong liquidity, and historically good asset quality provide a solid foundation for continued earnings growth. With that, the financial expectations we provided earlier this year for full-year 2026 remain consistent. That concludes my prepared earnings comments.

We will now open the call for questions. Operator, please open the line.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. We will pause momentarily to assemble our roster. The first question comes from Steve Moss with Raymond James. Please go ahead.

Steve Moss: Morning, Dimitar and Mariah. How are you guys doing? Nice quarter here, and maybe just starting on the loan side—good commercial loan growth. I am just curious where you are on the pipeline. I apologize if I missed it. Just curious for color on that aspect of the loan book to start.

Dimitar Karaivanov: The commercial pipeline is in excellent shape. I think it is actually the highest it has been and meaningfully higher than last year at this time. Of course, there is uncertainty as to timing and pull-through, but right now activity is very good and it has been building. We have had a little bit fewer payoffs than we did last year so far, and you all know that impacted us meaningfully last year. So right now, we are in pretty good shape.

Steve Moss: Okay. And then on the auto side, strong quarter there. I know you were upbeat on it. What are you seeing going forward in terms of pricing and where it could go for the rest of the year?

Dimitar Karaivanov: A reminder: the RFPs for us are really a function of pricing and overall market demand because we do not do anything as it relates to credit—that is set with fairly constant credit parameters. As long as they fit in the credit box, then the question is where we are on pricing. We entered this year with a little bit more of an aggressive stance, expecting rates to trend down over time. I think we gained a bit more market share than last year. We learned our lesson last year—we were down meaningfully in the first quarter in that business—and this year we did not want to start deep in the hole.

Activity is strong, demand is okay, pricing is now a little bit better than it was at the beginning of the year. Our goal for that business continues to be mid-single digits.

Steve Moss: Got it. And then on the fee side, you mentioned the contingent piece more in the second quarter. As I look back, it looks like that contingent benefit you typically get is about $1.5 million to $2 million in the second quarter. Is that about fair?

Mariah Loss: Yes, that is in the range.

Steve Moss: And just one more on expenses. Good to see where they came in. Updated thoughts on the cadence of expense growth throughout the year and where you are looking for things to land?

Dimitar Karaivanov: Our guidance stays intact on that side. Year over year we are running just above 6%, and that includes the impact of acquisitions from last year. As we get into the latter part of this year and we are comparing truly apples to apples—in terms of the de novo expansion last year and acquisitions—I expect that rate to trend lower from 6%. It will be within the range; we are going to drive it as low as we can. Our goal is not to spend money; our goal is to make money, and that will continue to be a focus for us.

Operator: The next question comes from David Conrad with KBW. Please go ahead.

David Conrad: Good morning. You had really good NIM expansion this quarter, but I thought it was interesting that investment yields actually went down 4 bps. Maybe refresh us on your NIM expectations for the year and talk about how the portfolio balances may be used to pay down borrowings or fund loan growth. Where do you expect those securities balances to go? Thank you.

Mariah Loss: NIM did outperform our Q4 guide as we expanded 6 basis points in Q1. This is the result of strong loan growth, ongoing repricing efforts, and a steeper yield curve than in recent quarters. Looking forward to Q2, we expect 3 to 5 basis points of expansion. We will continue to capitalize on loan and deposit efforts and fully realize the late-2025 cuts. Note that Q2 NIM will be partially aided by an FRB dividend. In terms of the overall portfolio, if we have the opportunity, we will pay down borrowings, but we see a steady state for now. We are pleased with how our book looks at the moment.

Operator: Thank you. The next question comes from Manuel Navas with Piper Sandler. Please go ahead.

Manuel Navas: Hey, just a follow-up on the NIM discussion. So is the expectation for loan yields to be flat to up? And then deposit cost performance has been excellent—any more room for it to come down, or do you have to shift toward acquiring deposits within the de novo branches? Can you talk about deposit costs going forward?

Dimitar Karaivanov: Good morning, Manuel. The environment continues to be more supportive on the asset side, so the trajectory for margin will be predominantly driven by assets. There will be quarters like this one where you absorb some of the hit on the asset side while repricing deposits. For us, being flat in loan yields in the quarter, having absorbed 2.5 cuts essentially, was pretty good. Going forward, given where new production is—right around 6%—and where the back book is—around 5.68%—that should give you 30-plus basis points to work with as we continue to reprice the book. On deposits, we have active deposit management across the board and pulled through as much as we could this quarter.

If there are no additional cuts, there is more limited opportunity, but another couple of basis points is possible. Also keep in mind that in the second quarter we will be sitting on more liquidity for the first 45 days or so that is municipal-related, and those tend to be higher-cost deposits, so there are natural ins and outs of deposit costs depending on municipal flows.

Manuel Navas: Appreciate that. Shifting over to capital deployment, you had a little bit of a buyback this quarter. Can you talk about your appetite there and any updated thoughts on M&A—key businesses versus whole bank? And could we have a checkup on the de novos?

Dimitar Karaivanov: We generate a fair amount of capital, and we are fortunate to have four businesses to allocate it across. Our first priority is always organic growth across those businesses. For the bank, that is tied to balance sheet growth; for the other businesses, it is more in the expense base where we are making investments. We continue to have active and very targeted discussions across all businesses on the inorganic side. Historically, for us that has been singles and doubles—a string of pearls—in our nonbanking businesses. On the bank side, we tend to like things we can meaningfully grow and expand, creating returns for shareholders, which also tend to be on the smaller side.

We prefer to use cash; sometimes we may have to use stock, and sometimes we will buy back that stock if we use it for an acquisition. The buyback this quarter was opportunistic—to clean up some equity dilution and also take advantage of disruption in the stock price during the quarter, knowing where company earnings are projected to be versus the market price at a moment in time. We will continue to be opportunistic. On a projected forward P/E basis, our stock looks attractive versus historical measures and the overall index, so we think it is reasonably attractive to look at when there are moments of disruption.

Operator: The next question comes from Matthew Breese with Stephens Inc. Please go ahead.

Matthew Breese: Good morning. Thinking back to strategic initiatives—taking market share in some of the more economically vibrant areas in your footprint—could you give us an idea where we are on that priority and where you have made the most progress, whether it is Rochester, Buffalo, Eastern Pennsylvania, New Hampshire? And then maybe some thoughts around local investments, whether it is chip manufacturing or otherwise, and whether you are starting to see any tangible impacts yet.

Dimitar Karaivanov: We have been on a multi-year journey of revamping the organic capability of the company. It started before I joined and included the de novo in Albany, which was very successful, and we then recreated the same approach in Central New York and in Western New York. What is really encouraging is that growth this quarter and the past quarter was broad-based across every single one of the regions. We have had past quarters where the diversification shows up as strong performance in Pennsylvania, Western New York, Syracuse, and New England at different times; lately it has been consistently broad across markets. We feel very good about our opportunities, people, talent, reputation, and brand—things that are hard to replicate.

It is not pricing or structure; it is the hard things we have focused on. In terms of Central New York, the major project here is underway. This is a long-tail event that will play out over a decade plus. Tangible things are starting to show up: around 4,000 workers will be on-site soon—transient workers who may not open accounts with us but will consume goods and services in our markets, helping our customers. Then we will see more permanent populations around these facilities—not just Micron, but suppliers, onshoring from Canada and other markets.

As a ballpark over multiple years: if you compare the size of the Central New York investment in chips/advanced tech manufacturing to similar investments across the country relative to local GDP, Central New York’s impact is roughly 250% of local GDP. It is very large, and over a long time horizon.

Matthew Breese: I did not realize it was that large relative to local GDP. On the ClearPoint deal—is that closed yet, or when is it expected to close? And during the quarter, were there any other notable fee income business line acquisitions that did not get an 8-K?

Dimitar Karaivanov: No additional fee income acquisitions in the quarter. As it relates to ClearPoint, both parties are prepared to close—we have everything lined up and it is a straightforward execution with low risk, with limited conversion, technology, or people impact. We are still waiting on regulatory approval. That could be any day, or it could be later—we do not know. Once received, we will be prepared to close shortly after.

Matthew Breese: Last one from me. On expenses—in the press release you mentioned use of AI. How and where are you using it, and any notable applications that have saved money or helped on the revenue front?

Dimitar Karaivanov: We have been on this journey for about two years. Credit to our retiring director, Sally Steele, who pushed us to be more front-footed back in 2024. Our goal has been to continue to scale without necessarily growing the expense base and headcount—shifting lower-value activities away from people and focusing them on high-value activities. I agree with Alex Karp’s view that AI’s impact needs to be transformational—doing five times as much at half the cost. Until I can point to that outcome definitively and tie it to margin, we will be quieter publicly and continue working in the background.

Operator: To ask a question, you may press star, then 1 on your touch-tone phone. The next question comes from Manuel Navas with Piper Sandler. Please go ahead.

Manuel Navas: Just want to jump back in. The expense level is seemingly annualizing below your full-year guide. Where are some of the increases across the year as you invest in your businesses?

Dimitar Karaivanov: A couple of things to consider. There are fewer days in the first quarter, and additional payroll days in later quarters can be a meaningful add. We also expect continued opportunities for talent acquisition or maybe smaller tuck-in acquisitions that we will ultimately try to absorb with minimal cost, but along the way they might produce some expense. Medical is a swing factor as well—we had a pretty good quarter in medical costs, and that could reverse quickly. A couple of million dollars can be an easy delta in a quarter and move the reported growth rate meaningfully.

Mariah Loss: To add to that, we are staying consistent with our guide—4% to 7% expense growth, mid-single digits, with full-year dollars anywhere between $535 million and $550 million, averaging about $135 million a quarter. Core expense came in under $133 million in Q1, so we are on track within those guardrails. We are diligently reviewing spend to ensure investments are focused on growth—talent acquisition, business acquisition, technology, and occupancy.

Manuel Navas: Two specific modeling questions. What is the FRB dividend benefit in the second quarter that you expect? And what was the repurchase price on the buyback—you said you were opportunistic; trying to gauge your appetite.

Dimitar Karaivanov: On the buyback, it was in the low sixties. As it relates to the dividend, we will follow up with you separately.

Operator: Again, if you have a question, please press star, then 1. This concludes our question-and-answer session. I would like to turn the conference back over to Dimitar Karaivanov for any closing remarks.

Dimitar Karaivanov: Thank you, everybody, for joining us for our first quarter. We look forward to speaking with you again in July.

Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.