COMMUNITY FINANCIAL SYSTEM, INC. Q1 FY2025 earnings call

• Acknowledged Joseph Sutaris' upcoming retirement in July and welcomed Mariah Loss as new CFO. - Business was predictive with results consistent with the prior quarter despite shorter calendar, seasonal slowdowns, lower asset values, and uncertainty. - Banking business benefited from asset repricing and margin expansion, deposits from seasonal municipal flows, loans flat. - Focus on risk-reward in credit quality and rate. - Employee benefit services had solid quarter with strong momentum. - Insurance services had excellent quarter with margin expansion. - Wealth management services results in line with prior quarter, up year-over-year. - Diversified company able to grow revenues despite economic/market gyrations.

The banking business benefits from asset repricing and margin expansion, with deposits aided by seasonal municipal flows and loans flat due to commercial/mortgage growth offset by auto lending weakness. The employee benefit services business had a solid quarter with strong momentum but may face asset value-related revenue headwinds. The insurance services business had an excellent quarter with flat expenses, meaningful revenue growth, and margin expansion, being a main driver of overall performance. The wealth management services business results were in line with the previous quarter, up year-over-year but may face asset value-related revenue headwinds. Operating return on assets was 1.28% and operating PPNR per share was up 18.6% year-over-year.

• Expect continued net interest income expansion in 2025. - Diversified revenue profile, strong liquidity, regulatory capital reserves, stable core deposit base, and good asset quality provide foundation for continued earnings growth in remaining quarters of 2025. - Mid-single-digit growth for commercial and mortgage portfolios still on track, though may be at lower end of range depending on economic activity.

• Competitors showing increased aggressiveness in credit quality and rate. - Indirect auto lending remains a wildcard due to aggressive competition and tariffs. - Uncertainty in macro environment affecting pipeline and pricing. - Potential impact of economic uncertainty on risk-taking and asset values.

Q: Drill down on commercial and residential pipelines, blended new origination yields A: On the commercial side, pipelines are a couple percentage points lower than last year with more payoffs; on the residential side, pipelines are about 10% lower than last year. Loan originations in the first quarter were right around 7%, with pressure to continue through the year Q: De novo expansion timing, impact on expense base A: De novo expansion is on track with next branches in Syracuse, Albany, etc. Q3 expected to have marketing/startup costs of about 3-4 million dollars Q: Auto loan pricing, nonperforming loan resolution, employee benefits revenue, municipal deposits A: Auto loan pricing similar to portfolio rates; nonperforming loan expected to have charge-off in Q2 with resolution; employee benefits revenue hard to pinpoint with volatility; municipal deposits ~2 billion, a productive funding source Q: NII cash flows, deposit cost, bank M&A, expenses outlook A: Loan portfolio roll-off ~$1.5-1.8B annually, securities runoff minimal now but more in 2026+; deposit cost hard to lower much; M&A open for quality franchises; expenses mid-single digits with investment in the franchise Q: Fee businesses growth, NIM outlook, expense cadence, CHIPS Act impact A: Fee businesses expected to have mid-single-digit growth; NIM outlook 2-7 basis points; expense cadence higher in Q3, negligible in 2026; CHIPS Act impact minimal in relevant markets