COMMUNITY FINANCIAL SYSTEM, INC. Q4 FY2024 earnings call

• 2024 was a solid quarter with operating PPNR of $1.40 per share, growing 8.5% QoQ and 23.9% YoY
• In 2024, grew operating PPNR per share by 8.2% and operating earnings per share by 2.2% despite KRX index projected to have lower earnings
• Banking and Corporate: Net interest income grew 18th consecutive year, loans grew 7.5%, deposits grew 4%; Credit quality strong with 10 basis points charge-offs
• Employee Benefit Services: Drove majority of overall company earnings improvement, managed record assets and participants
• Insurer Services: Revenues grew 6.7%, expanded footprint via acquisitions but impacted by elevated expenses
• Wealth Management Services: Revenue growth 14.9%, operating income growth 22.9%, over $1B new advisory sales in 2024

Banking and Corporate

• 2024 operating PPNR grew by 5.6%
• Net interest income grew for the 18th consecutive year
• Fee income grew by 11.8%
• Loans grew by 7.5%, deposits grew by 4%

Employee Benefit Services

• Revenues expanded by 11.8% and operating income expanded by 11.9%
• Managing a record amount of assets and participants

Insurer Services

• Revenues grew by 6.7%
• Expanded footprint via acquisitions

Wealth Management Services

• Revenue growth of 14.9% and operating income growth of 22.9%
• Over $1 billion of new advisory sales in 2024

• Banking: Growth likely to moderate to mid-single digits, funding priority, expect credit costs to trend up, opening 16 branches with some expense volatility
• Employee Benefit Services: Mid-to-high single digit revenue expansion, some investments in products and people
• Insurer Services: Focus on operating efficiency, M&A to supplement organic growth, mid-to-high single digit revenue growth expectation
• Wealth Management Services: Likely mid-to-high single digit revenue growth, launching new products, adding producers

• Credit quality trends: Expect credit costs to trend back up, so slowly inching up ACL
• Competition: More competitors back after 2022, may impact growth in banking business
• Expense management: Insurer Services impacted by elevated expenses in 2024, need to manage in 2025
• Market dependence: Employee Benefit Services revenue half tied to market, which can impact results

Q: Regarding loan pipeline and pricing, where is the loan pipeline today and what are rates on commercial side?

A: Pipeline remains reasonably in line; commercial rates around 7% on average.

Q: Thoughts on margin trajectory, NII growth?

A: Expect margin to continue growing, NII to increase in 2025; book yield on loans 5.58%, booking new loans at 7%, expecting mid-single digit loan portfolio growth Q: Expense volatility and growth in Employee Benefits business?

A: Expect mid-single digits expense growth in 2025; Employee Benefits expects positive operating leverage, investments can be offset with reasonable market outcome Q: Loan yields, payoff activity, deposit costs, regulatory environment?

A: Loan yields up 7 basis points to 5.58%, prepayments below average; no pressure to increase deposit costs, continuing to grind costs lower; regulatory environment more constructive, may see more M&A opportunities Q: Securities maturity schedule, fee capabilities expansion?

A: 2025 light on security maturities, significant maturities in late 2026 and 2027; fee capabilities from 2024 back half as good starting point, expect reasonable growth in 2025