Community Bank System, Inc. Q1 FY2026 earnings call

• Recently named Center State CEO of Business of the Year. - 2026 off to good start with organic growth across all businesses, 9% total revenue growth. - Balance sheet strong with excellent liquidity and credit metrics. - Expenses and return on investments focus. - Banking and corporate benefiting from organic growth, expanding margin, and branch acquisition. - Employee benefit services expanding at mid to high single digits. - Insurance services had difficult start in 2025 but expectations unchanged. - Wealth management services mid-single-digit revenue and high single-digit bottom line growth. - Record operating results driven by quarter-over-quarter decline in operating non-interest expenses and new quarterly high for net interest income. - Net interest income 134.7 million in first quarter, 12.1% improvement over first quarter 2025, eighth consecutive quarter of expansion. - Fully tax equivalent net interest margin increased six basis points. - Operating non-interest revenues increased 3.2 million or 4.2% compared to prior year's first quarter. - Provision for credit losses $5.6 million in first quarter. - Total non-interest expenses $133 million, decrease of $5.5 million from late fourth quarter. - Pending loans increased 181.4 million or 1.7% during first quarter. - Ending total deposits increased 978.1 million or 7% from one year prior.

Banking and corporate: Benefiting from organic growth, expanding margin, and recent branch acquisition; 29% bottom line improvement year over year. Employee benefit services: Expanding at mid to high single digits. Insurance services: Had difficult start in 2025 due to timing of contingency payments but expectations unchanged for year. Wealth management services: Mid-single-digit revenue growth and high single-digit bottom line growth. Total revenue growth 9%; net interest income 134.7 million, 12.1% improvement over first quarter 2025; operating earnings per share $1.15 in first quarter, up from $0.98 one year prior; operating TPNR per share $1.61, up $0.21 from prior year.

• Financial expectations for full year 2026 remain consistent. - Expect Q2 NIM expansion of three to five basis points. - Guidance on expense growth intact, with goal to drive expenses lower and continue to be within the range. - ClearPoint deal waiting on regulatory approval. - Buyback in low 60s range.

Q: Nice quarter, curious on loan pipeline, especially commercial.

A: Commercial pipeline in excellent shape, highest it's been, meaningfully higher than last year at this time, activity very good.

Q: On auto side, pricing and future.

A: Auto piece function of pricing and demand, entered 2026 with aggressive stance, activity strong, pricing better than beginning of year, goal mid-single digits.

Q: Contingent piece in second quarter.

A: In range of $1.5 - $2 million.

Q: Expense growth cadence.

A: Guidance intact, running just above six year over year, expect rate to go lower from six as year progresses.

Q: NIM expectations for year, portfolio balances.

A: NIM outperformed Q4 guide, expect Q2 NIM expansion of three to five basis points, will capitalize on loan and deposit efforts, may pay down borrowings.

Q: NIM direction, deposit costs.

A: NIM predominantly driven by asset side, deposit management active, possible another couple of basis points on deposit costs, second quarter may have more municipal related higher cost deposits.

Q: Capital deployment, M&A, buyback.

A: First priority organic growth, active and targeted discussions on inorganic side, buyback opportunistic to clean up equity dilution and take advantage of price disruption, stock reasonably attractive.

Q: Market share in vibrant areas, local investments.

A: Growth broad-based across regions, Central New York project with Micron long tail event, tangible things starting to show up.

Q: ClearPoint deal status, fee income acquisitions.

A: ClearPoint deal waiting on regulatory approval, no notable fee income acquisitions during quarter.

Q: AI usage.

A: Been on AI journey for two years, goal to scale without growing expense base, focus on high-value-added activities, AI impact needs to be transformational.