Santander branches and new deals reshape Community Financial (NYSE: CBU)
Rhea-AI Filing Summary
Community Financial System, Inc. files its annual report outlining a diversified banking and financial services franchise centered on Community Bank, N.A. and BPAS. The bank operates 192 full-service branches and 8 drive-thru locations across five Northeastern states, serving retail, commercial, institutional and government customers.
In 2025 it expanded in the Lehigh Valley, acquiring seven Santander Bank branches with $31.9 million of loans and $543.7 million of deposits for $80.9 million in cash consideration, recording core deposit intangibles of $11.9 million and goodwill of $32.0 million. The company also bought assets from several insurance, employee benefit and wealth firms for $11.2 million, adding $8.4 million of customer list intangibles and $2.9 million of goodwill.
The report details four operating segments, a 3,001-person workforce, extensive federal and state regulation, and a wide range of risk factors, including interest rate, liquidity, credit, regulatory, cybersecurity, stablecoin-related funding risks, and evolving requirements around capital, consumer protection, anti-money laundering and data privacy.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
For the transition period from to .
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
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| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the common stock, $1.00 par value per share, held by non-affiliates of the registrant computed by reference to the closing price as of the close of business on June 30, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter): $
The number of shares of the common stock, $1.00 par value per share, outstanding as of the close of business on January 31, 2026:
DOCUMENTS INCORPORATED BY REFERENCE.
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TABLE OF CONTENTS
PART I | Page | |
Item 1 | Business | 3 |
Item 1A | Risk Factors | 18 |
Item 1B | Unresolved Staff Comments | 30 |
Item 1C | Cybersecurity | 30 |
Item 2 | Properties | 33 |
Item 3 | Legal Proceedings | 34 |
Item 4 | Mine Safety Disclosures | 34 |
PART II | ||
Item 5 | Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities | 34 |
Item 6 | [Reserved] | 37 |
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 37 |
Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 75 |
Item 8 | Financial Statements and Supplementary Data: | 77 |
Consolidated Statements of Condition | 78 | |
Consolidated Statements of Income | 79 | |
Consolidated Statements of Comprehensive Income | 80 | |
Consolidated Statements of Changes in Shareholders’ Equity | 81 | |
Consolidated Statements of Cash Flows | 82 | |
Notes to Consolidated Financial Statements | 83 | |
Report on Internal Control over Financial Reporting | 149 | |
Report of Independent Registered Public Accounting Firm | 150 | |
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 152 |
Item 9A | Controls and Procedures | 152 |
Item 9B | Other Information | 152 |
Item 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 152 |
PART III | ||
Item 10 | Directors, Executive Officers and Corporate Governance | 153 |
Item 11 | Executive Compensation | 153 |
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 153 |
Item 13 | Certain Relationships and Related Transactions, and Director Independence | 153 |
Item 14 | Principal Accounting Fees and Services | 153 |
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PART IV |
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Item 15 | Exhibits and Financial Statement Schedules | 154 |
Item 16 | Form 10-K Summary | 157 |
Signatures | 158 |
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Part I
This Annual Report on Form 10-K contains certain forward-looking statements with respect to the financial condition, results of operations and business of Community Financial System, Inc. These forward-looking statements by their nature address matters that involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are set forth herein under the caption “Forward-Looking Statements.”
Item 1. Business
Community Financial System, Inc. (the “Company”) was incorporated on April 15, 1983, under the Delaware General Corporation Law. Its principal office is located at 333 Butternut Drive, Syracuse, New York 13214. The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail, commercial, institutional and governmental customers. The Company is a registered financial holding company which wholly-owns two significant subsidiaries: Community Bank, N.A. (the “Bank” or “CBNA”), and Benefit Plans Administrative Services, Inc. (“BPAS”). As of December 31, 2025, BPAS owns five subsidiaries: Benefit Plans Administrative Services, LLC (“BPA”), a provider of defined contribution plan administration services; Northeast Retirement Services, LLC (“NRS”), a provider of institutional transfer agency, master recordkeeping services, fund administration, trust, and retirement plan services; BPAS Actuarial & Pension Services, LLC (“BPAS-APS”), a provider of actuarial and benefit consulting services; BPAS Trust Company of Puerto Rico, a provider of trust and benefit plan administration services; and Hand Benefits & Trust Company (“HB&T”), a provider of collective investment fund administration and institutional trust services. NRS owns one subsidiary, Global Trust Company, Inc. (“GTC”), a non-depository trust company which provides fiduciary services for collective investment trusts and other products. HB&T owns one subsidiary, Hand Securities, Inc. (“HSI”), an introducing broker-dealer.
As of December 31, 2025, the Bank operates 192 full-service branches and 8 drive-thru only locations throughout 42 counties of Upstate New York, 9 counties of Northeastern Pennsylvania, 12 counties of Vermont, 1 county of Western Massachusetts and 1 county of Southern New Hampshire, offering a range of commercial and retail banking services. The Bank owns the following operating subsidiaries: CBNA Preferred Funding Corporation (“PFC”), CBNA Treasury Management Corporation (“TMC”), Nottingham Investment Services, Inc. (“NISI”), Nottingham Advisors, Inc. (“Nottingham Advisors”), OneGroup NY, Inc. (“OneGroup”), Nottingham Wealth Partners, Inc. (“Wealth Partners”) and Oneida Preferred Funding II LLC (“OPFC II”). OneGroup is a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. PFC and OPFC II primarily act as investors in residential and commercial real estate activities. TMC provides cash management, investment, and treasury services to the Bank. NISI and Wealth Partners provide broker-dealer and investment advisory services. Nottingham Advisors provides asset management services to individuals, corporations, corporate pension and profit sharing plans, and foundations.
The Company maintains a website at https://communityfinancialsystem.com. Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available on the Company’s website free of charge as soon as reasonably practicable after such reports or amendments are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information posted on the website is not incorporated into or a part of this filing. Copies of all documents filed with the SEC can also be obtained by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the SEC’s website at https://www.sec.gov.
Current Year Acquisitions
7 Branches from Santander Bank, N.A. in the Lehigh Valley Market
On November 7, 2025, the Company, through its subsidiary CBNA, completed the acquisition of seven branch locations in the Allentown, Pennsylvania area from Santander Bank, N.A. (“Santander”), including certain branch-related loans and deposits, acquiring $31.9 million of loans and $543.7 million of deposits. Total cash consideration was $80.9 million, including a deposit premium of 8%, or $43.5 million, and the Company recorded core deposit intangibles of $11.9 million and goodwill of $32.0 million.
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Financial Services Companies
During 2025, the Company, through its subsidiaries OneGroup, BPA, BPAS-APS and NISI, completed the acquisitions of certain assets of financial services companies. The assets were acquired from companies that provide insurance, employee benefit and wealth management services. Total aggregate consideration for these acquisitions was $11.2 million, including $4.5 million in cash and $6.7 million in contingent consideration arrangements. The Company recognized $8.4 million of customer list intangible assets and $2.9 million of goodwill in conjunction with these acquisitions.
Segment Information
The Company has identified four reportable operating business segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. Information about the Company’s reportable business segments is included in Note U of the “Notes to Consolidated Financial Statements” filed herewith in Part II.
Business Segments
Banking
The Bank is a community bank committed to the philosophy of serving the financial needs of customers in local communities. The Bank’s branches are located in towns and cities within its geographic market areas of Upstate New York, Northeastern Pennsylvania, Vermont, Western Massachusetts and Southern New Hampshire. The Bank is nearing completion of its process of expanding its branch presence in more densely populated markets within its geographic footprint including the Albany, Buffalo, Rochester and Syracuse regions of New York, the Lehigh Valley region of Pennsylvania, Southern New Hampshire and Springfield, Massachusetts. The Company believes that the local character of its business, knowledge of the customers and their needs, and its comprehensive retail and business products, together with responsive decision-making at the branch and regional levels and its digital banking service offerings, enable the Bank to compete effectively in its geographic market. The Bank is a member of the Federal Reserve System, the Federal Home Loan Bank of New York and the Federal Home Loan Bank of Boston (as a non-member bank) (collectively, referred to as “FHLB”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits.
Employee Benefit Services
Through BPAS and its subsidiaries, the Company operates a national practice that provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services to a diverse array of clients spanning the United States and the Commonwealth of Puerto Rico.
Insurance Services
Through OneGroup, the Company offers personal and commercial lines of insurance and other risk management products and services. In addition, OneGroup offers employee benefit related services. OneGroup represents many leading and specialty insurance companies.
Wealth Management Services
Through the Bank’s Nottingham Trust division, NISI, Nottingham Advisors, and Wealth Partners, the Company provides wealth management, retirement planning, higher educational planning, fiduciary, risk management, trust services and personal financial planning services. The Company offers a range of investment products including stocks, bonds, exchange-traded funds, mutual funds, insurance and advisory products.
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Competition
The banking and financial services industry is highly competitive in the New York, Pennsylvania, Vermont, Massachusetts and New Hampshire markets. The Company competes actively for loans, deposits, and financial services relationships with other national and state banks, thrift institutions, credit unions, retail brokerage firms, mortgage bankers, finance companies, including financial technology companies, insurance agencies, and other regulated and unregulated providers of financial services. In order to compete with other financial service providers, the Company stresses the community nature of its operations and the development of profitable customer relationships across all lines of business.
The Company’s employee benefits, trust and plan administration business competes on a national scale and provides geographic diversification for the Company. Certain lines of business are marketed primarily through unaffiliated financial advisors, while others are marketed directly to plan sponsors and fund companies. In order to compete with large national firms, the Company stresses its consultative approach to complex engagements.
The Company utilizes the Community Connect program, which is a joint initiative between the four operating business segments to facilitate cross-selling opportunities and connections with commercial clients between the functional areas of the business. The program intends to provide customers with interconnected solutions and enhance customer retention.
Human Capital Resources
The Company’s employees are asked to embody the core values of integrity, excellence, teamwork and humility. These values are foundational to sustaining the strength of the Company’s culture. As of December 31, 2025, the Company had 3,001 total employees, which included 2,853 full-time employees and 148 part-time and temporary employees. Of the Company’s 3,001 employees, 2,157 are in the Banking and Corporate segment (2,028 full-time employees and 129 part-time and temporary employees), 479 employees are in the Employee Benefit Services segment (471 full-time employees and 8 part-time and temporary employees), 256 are in the Insurance Services segment (246 full-time employees and 10 part-time and temporary employees), and 109 employees are in the Wealth Management Services segment (108 full-time employees and 1 part-time temporary employee). The Company’s employee base is concentrated in New York, Pennsylvania and New England where the Bank maintains its retail bank branch presence, with approximately 2,136 employees in New York, 312 in Pennsylvania and 323 in Vermont, Massachusetts and New Hampshire. Approximately 230 of the Company’s employee base is located outside of its retail banking footprint.
The Company considers its relationship with its employees to be strong. None of the Company’s employees are represented by a labor union or are represented by a collective bargaining agreement.
Oversight
The Board of Directors (the “Board”) has ultimate responsibility for the strategy of the Company. The Board’s Compensation Committee is responsible for the oversight of executive compensation, company culture, diversity, and employee engagement. The Company proactively identifies potential human capital related risks, such as succession planning, labor market shortage, increased labor costs, and employee retention strategies to mitigate those risks. Strong human capital management is viewed as integral to the Company’s business strategy.
Compensation and Benefits
The success and growth of the Company’s business is largely dependent on its ability to attract, develop, and retain a population of skilled and high-performing employees with varied backgrounds and skill sets at all levels of the organization. Accordingly, the Company’s compensation philosophy includes elements that reinforce the Company’s core values, reward employees for their achievements and maximize continued performance with long-term retention. The Company employs benchmarking measures to ensure employees are paid fairly based on their job and performance. The Company conducts workforce planning sessions periodically across all business areas to ensure competitive market pay for employees and actions to support commitment to the professional development of employees.
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Growth and Development
The Company continues to broaden the scope of its talent development initiatives across its widening and geographically diverse footprint in order to sustain a value-driven and growth-oriented environment where employees can perform at their peak and the next generation of leaders are prepared. The Company offers a wide range of learning and development programs, both internally and externally, that support a broad scope of the Company’s talent development initiatives making continuous learning a part of each employee’s relationship with the Company in a growth-oriented environment. The Company maintains a strong performance culture through its performance management program. The program supports setting clear expectations for all employees via annual goal setting and encourages ongoing and frequent feedback. These dialogues are intended to achieve higher performance, engagement and commitment, improving outcomes and productivity. The Company has invested in an on-line skills development platform that will expand and enhance the ability to build critical skills for today and in the future.
Culture and Attracting a Talented Workforce
The Company is committed to fostering an inclusive environment where there is a sense of purpose, belonging, and ownership, guided by the Company’s core values and dedication to serving customers. The Company empowers its workforce to achieve their full potential by supporting the development of job-related skills and personal growth within a culture that prioritizes employees’ wellbeing and fosters inclusivity. In this environment, employees feel safe to share ideas, receive support, and take thoughtful risks without the fear of judgment or retaliation.
The goal of the Company’s recruitment efforts is to provide fair opportunities to all candidates and to build a strong and positive reputation both internally and externally. To support this objective, leaders across the business and the Company’s human resource professionals share increased responsibility in recruitment and selection processes, supported by a committed Talent Acquisition team that focuses exclusively on recruitment and talent attraction to deliver a consistent, strategic and candidate-centered experience. The Company’s long-standing presence and proven track record offer candidates the stability of a well-established organization, while its forward-looking strategy continues to drive expansion into diverse geographic locations and new markets. This balanced approach provides opportunities for career growth, innovation, and meaningful impact, complemented by a comprehensive benefits package that supports employee well-being, financial security, and work-life balance. To further support effective hiring decisions, the Company initiated the use of assessments within the recruitment process. These assessments are intended to promote objectivity, alignment with role requirements, and a positive candidate experience. The Company remains committed to continuing to grow, refine, and develop these assessment practices as part of its ongoing investment in talent acquisition excellence.
Engagement
The Company is committed to creating a top-tier workplace filled with highly satisfied and engaged employees. The Company believes that open and honest communication among employees, managers and executive leadership fosters an open and collaborative work environment where everyone can participate, develop, and thrive. The Company continues to conduct a survey annually to maintain a feedback loop with employees. In 2023, the Company selected Engagement Champions whose role is to support leaders and managers in the ongoing engagement efforts and initiatives. In 2024, the CEO instituted a Company-wide employee townhall to enhance communication and transparency relative to the Company’s strategy and priorities. The townhalls include a Q&A segment where the CEO answers questions on a variety of topics. The town halls are conducted twice a year and continue to serve as a key component of transparent communication with all employees.
Health and Safety
The health and safety of the Company’s employees is of utmost importance. The Company is committed to providing tools and resources to support employees’ overall health and wellbeing. This includes offering a variety of health and welfare benefits as well as a holistic wellbeing program.
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Supervision and Regulation
General
The banking industry is highly regulated with numerous statutory and regulatory requirements that are designed primarily for the protection of depositors and the financial system. Set forth below is a description of the material laws and regulations applicable to the Company and the Bank. This summary is not complete and the reader should refer to these laws and regulations for more detailed information. The Company’s and its subsidiaries’ failure to comply with applicable laws and regulations could result in a range of sanctions and administrative actions imposed upon the Company and/or its subsidiaries, including restrictions on merger and acquisition activity, the imposition of civil money penalties, formal agreements and cease and desist orders. New laws and regulations, more complex regulations, and changes in regulators’ interpretations and application of existing laws and regulations cannot be predicted and may have a material adverse effect on the Company’s businesses and results.
The Company and its subsidiaries are subject to the laws and regulations of the federal government and, where applicable, the states and jurisdictions in which they conduct business. The Company, as a financial holding company, is subject to extensive regulation and supervision by the Board of Governors of the Federal Reserve System (“FRB” or “Federal Reserve”) as its primary federal regulator. The Bank is a federally chartered national bank and is subject to extensive regulation and supervision by the Office of the Comptroller of the Currency (“OCC”) as its primary federal regulator, and as to certain matters, the FRB, the Consumer Financial Protection Bureau (“CFPB”), and the FDIC. The Company expects the current federal government administration will continue to implement a regulatory reform agenda that impacts the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies.
The Company is also subject to the jurisdiction of the SEC and is subject to disclosure and regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) and it is subject to NYSE’s rules for listed companies. Affiliated entities, including BPAS, BPA, NRS, GTC, HB&T, HSI, BPAS Trust Company of Puerto Rico, Nottingham Advisors, NISI, OneGroup, and Wealth Partners are subject to the jurisdiction of certain state and federal regulators and self-regulatory organizations including, but not limited to, the SEC, the Texas Department of Banking, the State of Maine Bureau of Financial Institutions, the Financial Industry Regulatory Authority (“FINRA”), Puerto Rico Office of the Commissioner of Financial Institutions, the U.S. Department of Labor, and state securities and insurance regulators.
Federal Bank Holding Company Regulation
As the Company is classified as a financial holding company, the Company can affiliate with securities firms and insurance companies and engage in other activities that are “financial in nature” or “incidental” or “complementary” to activities that are financial in nature, as long as it continues to meet the eligibility requirements for financial holding companies (including requirements that the financial holding company and its depository institution subsidiary maintain their status as “well capitalized” and “well managed”).
Generally, FRB approval is not required for the Company to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. Prior notice to the FRB may be required, however, if the company to be acquired has total consolidated assets of $10 billion or more. Prior FRB approval is required before the Company may acquire the beneficial ownership or control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association.
As the Company is a financial holding company, if the Bank were to not maintain a Satisfactory or better rating under the Community Reinvestment Act of 1977, as amended (“CRA”), the Company would be prohibited, until the rating is raised to Satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations, except that the Company could engage in new activities, or acquire companies engaged in activities, that are considered “closely related to banking” under the Bank Holding Company Act of 1956, (the “BHC Act”). The Bank’s most recent CRA rating was “Satisfactory”. In addition, if the FRB determines that the Company or the Bank is not well capitalized or well managed, the Company would be required to enter into an agreement with the FRB to comply with all applicable capital and management requirements and may contain additional limitations or conditions. Until corrected, the Company could be prohibited from engaging in any new activity or acquiring companies engaged in activities that are not closely related to banking, absent prior FRB approval.
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Federal Reserve System Regulation
As the Company is a financial holding company, it is subject to regulatory capital requirements. The Bank is under similar capital requirements administered by the OCC as discussed below. FRB policy has historically required a financial holding company to act as a source of financial and managerial strength to its subsidiary banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) codifies this historical policy as a statutory requirement. To the extent the Bank is in need of regulatory capital, the Company would be expected to provide additional capital, including borrowings from the FRB for such purpose. Both the Company and the Bank are subject to extensive supervision and regulation, which focus on, among other things, the protection of depositors’ funds.
The FRB also regulates the national supply of bank credit in order to influence general economic conditions. These policies have a significant influence on overall growth and distribution of loans, investments and deposits, and affect the interest rates charged on loans or paid for deposits.
Fluctuations in interest rates, which may result from government fiscal policies and the monetary policies of the FRB, have a strong impact on the income derived from loans and securities, and interest paid on deposits and borrowings. While the Company and the Bank strive to model various interest rate changes and adjust its strategies for such changes, the level of earnings can be materially affected by economic circumstances beyond its control.
The Office of the Comptroller of the Currency Regulation (“OCC”)
The Bank is supervised by the OCC. OCC supervision consists of multiple examinations of the Bank’s activities over the course of its annual supervisory cycle. The various laws and regulations administered by the OCC affect the Company’s practices such as payment of dividends, incurring debt, and acquisition of financial institutions and other companies. It also affects the Bank’s business practices, such as payment of interest on deposits, the charging of interest on loans, types of business conducted and the location of its offices. The OCC generally prohibits a depository institution from making any capital distributions, including the payment of a dividend, or paying any management fee to its parent holding company if the depository institution would become undercapitalized due to the payment. Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan to the OCC. The OCC may take enforcement actions for a variety of supervisory concerns, including violations of laws, rules or regulations and unsafe and unsound practices. As a result, the OCC could also establish individual minimum capital ratios (“IMCR”) for the Bank that are higher than the regulatory minimums. This would impair the Bank’s ability to pay dividends to the Company. The Bank is well capitalized under regulatory standards administered by the OCC. For additional information on the Company’s capital requirements see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Shareholders’ Equity and Regulatory Capital” and Note P to the Financial Statements.
During 2025, the OCC announced a number of initiatives intended to tailor regulatory and supervisory expectations for community banks, including the release of a notice of proposed rulemaking to expand the definition of community banks to include institutions with less than $30 billion in total assets. These initiatives are focused on reducing the regulatory burden on smaller, lower risk national banks and include refinements to examination processes, supervisory practices, and certain data collection requirements. The OCC has indicated that these changes are designed to improve examination efficiency, enhance supervisory clarity, and focus regulatory attention on areas of heightened or material risk. While these initiatives may reduce certain compliance and operational burdens, the Company remains subject to comprehensive prudential regulation and supervisory oversight, and changes in regulatory priorities or expectations could continue to affect the Company’s operations, compliance costs, and strategic planning. Additionally, some of the administration’s policy initiatives could have unforeseen negative consequences directly on the bank’s operations or the credit markets that it lends. If deposit alternatives, such as stablecoin, were to gain significant market share among retail and commercial depositors, it could have a significant negative impact on the Bank’s liquidity and funding costs.
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Federal Home Loan Bank (“FHLB”)
The Bank is a member of the FHLB, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending. The Bank is subject to certain rules and requirements as a member institution of the FHLB, including the purchase of shares of FHLB activity-based stock in the amount of 4.5% of the dollar amount of outstanding advances and FHLB capital stock in an amount equal to the greater of $1,000 or the sum of 0.15% of the mortgage-related assets held by the Bank based upon the previous year-end financial information. The Bank was in compliance with the rules and requirements of the FHLB at December 31, 2025.
Deposit Insurance
Deposits of the Bank are insured up to the applicable limits by the Deposit Insurance Fund (“DIF”) and are subject to deposit insurance assessments to maintain the DIF. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance to $250,000 per deposit category, per depositor, per institution. A depository institution’s DIF assessment is calculated by multiplying its assessment rate by the assessment base, which is defined as the average consolidated total assets less the average tangible equity of the depository institution. The Bank’s deposit insurance assessment is based on a large institution classification. For large insured depository institutions, generally defined as those with at least $10 billion in total assets, the FDIC uses capital and supervisory ratings (“CAMELS”) and financial measures from two scorecards to calculate assessment rates. Each scorecard has two components - a performance score and loss severity score, which are combined and converted to an initial assessment rate. The FDIC has the ability to adjust a large or highly complex insured depository institution’s total score by a maximum of 15 points, up or down, based upon significant risk factors that are not captured by the scorecard. Under the assessment rate schedule effective for 2025, the initial base assessment rate for large and highly complex insured depository institutions ranges from five to 32 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments, ranges from two and one-half to 42 basis points. The Bank’s FDIC insurance for 2025 was based on assessment rates ranging between six and seven basis points compared to assessment rates ranging between five and seven basis points for 2024 and five and six basis points for 2023.
Under the Federal Deposit Insurance Act (“FDIA”), if the FDIC finds that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC, the FDIC may determine that such violation or unsafe or unsound practice or condition require the termination of deposit insurance.
The FDIA requires federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions that relate to, among other things: (i) internal controls, information systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth and quality; and (vi) compensation and benefits. Federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these requirements, which regulators use to identify and address problems at insured depository institutions before capital becomes impaired. If a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the bank may be required to submit an acceptable plan to achieve compliance and agree to specific deadlines for the submission to and review by the regulator of reports confirming progress in implementing the safety and soundness compliance plan. Failure to implement such a plan may result in an enforcement action against the bank.
Enforcement actions against the Company, the Bank and their respective officers and directors may include the issuance of a written directive, the issuance of a cease-and-desist order that can be judicially enforced, the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against officers or other institution-affiliated parties, the imposition of restrictions and sanctions under prompt corrective action regulations, the termination of deposit insurance (in the case of the Bank) and the appointment of a conservator or receiver for the Bank. Civil money penalties can be over $2 million for each day a violation continues.
Various proposals are under active consideration by policymakers that could affect the scope of deposit insurance coverage. For example, bipartisan legislation has been introduced in the U.S. Senate that would significantly raise the deposit insurance limit for certain noninterest-bearing transaction accounts, subject to legislative approval and funding determinations. In addition, Congress and the FDIC have conducted oversight hearings and agency analyses exploring broader deposit insurance reform alternatives, including adjusting coverage limits and targeted insurance frameworks for specific account types. The ultimate outcome, timing, and scope of any changes remain uncertain and could materially affect deposit flows, competitive dynamics, and regulatory costs.
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Transactions with Affiliates and Insiders
The Bank is subject to Section 23A of the Federal Reserve Act, as amended (the "FRA") which places limits on, among other covered transactions, the amount of loans or extensions of credit to affiliates that may be made by the Bank. Extensions of credit to affiliates must be adequately collateralized by specified amounts and types of collateral. Section 23A also limits the amount of loans or advances made by the Bank to third-party borrowers that are collateralized by securities or obligations of the Bank's affiliates. The Bank is also subject to Section 23B of the FRA, which, among other things, prohibits an institution from engaging in transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates.
The Company is subject to restrictions on extensions of credit to insiders (namely executive officers, directors, and 10% stockholders) and their related interests. These restrictions are contained in the FRA and Federal Reserve Regulation O and apply to all insured depository institutions as well as their subsidiaries and holding companies. These restrictions include limits on loans to any individual insider and such insider's related interests and certain conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests, which cannot exceed the institution's total unimpaired capital and surplus, unless the FDIC determines that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
On July 21, 2010, the Dodd-Frank Act was signed into law, which resulted in significant changes to the banking industry. The Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies and impacts how the Company and the Bank handle their operations. The Dodd-Frank Act requires various federal agencies, including those that regulate the Company and the Bank, to promulgate rules and regulations and to conduct various studies and reports for Congress. The federal agencies have either completed or are in the process of completing these rules and regulations and have been given significant discretion in drafting such rules and regulations. Several of the provisions of the Dodd-Frank Act have the consequence of increasing the Bank’s expenses, decreasing its revenues, and changing the activities in which it chooses to engage. The specific impact of the Dodd-Frank Act on the Company’s current activities or new financial activities the Company may consider in the future, the Company’s financial performance, and the markets in which the Company operates depends on the manner in which the relevant agencies continue to develop and implement the required rules and regulations and the reaction of market participants to these regulatory developments.
Pursuant to FRB regulations mandated by the Dodd-Frank Act, interchange fees on debit card transactions are limited to a maximum of $0.21 per transaction plus 5 basis points of the transaction amount. A debit card issuer may recover an additional one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements prescribed by the FRB. The FRB also adopted requirements in the final rule that issuers include two unaffiliated networks for routing debit transactions that are applicable to the Company and the Bank. On October 25, 2023, the FRB proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward. The Company continues to monitor the development of these proposed rule revisions.
The Dodd-Frank Act established the CFPB and empowered it to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws. Because the Bank’s total consolidated assets exceed $10 billion, the Bank is subject to the direct supervision of the CFPB. If the CFPB were to implement rules that negatively impacted the Bank’s products or services, it could have a material negative impact on its operations.
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The CFPB has broad powers to supervise and enforce consumer protection laws, including laws that apply to banks in order to prohibit unfair, deceptive or abusive acts or practices (“UDAAP”). The Dodd-Frank Act also clarified the federal preemption rules that are applicable to national banks and gives state attorney generals for the states certain powers to enforce federal consumer protection laws. A violation of the consumer protection and privacy laws, and in particular UDAAP, could have serious legal, financial, and reputational consequences.
The CFPB, FRB, and OCC are also authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities. The CFPB is authorized to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties.
The final rules issued by the FRB, SEC, OCC, FDIC, and Commodity Futures Trading Commission implementing Section 619 of the Dodd-Frank Act (commonly known as the Volcker Rule) prohibit insured depository institutions and companies affiliated with insured depository institutions from (1) engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account and (2) sponsoring certain covered funds, subject to certain limited exceptions. The final rules of the Volcker Rule are not material to the Company’s investing and trading activities.
The Dodd-Frank Act requires U.S. financial regulators, including the FRB and the SEC, to adopt rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion in total assets. In 2016, the federal banking regulators, the SEC, the Federal Housing Finance Agency and the National Credit Union Administration proposed revised rules on incentive-based compensation practices, which have not yet been finalized. If these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations on the manner in which the Company may structure compensation for its employees, which could adversely affect the Company’s ability to hire, retain and motivate key employees.
The ongoing effects of the Dodd-Frank Act, as well as the recent and possible future changes to the regulatory framework as a result of the Economic Growth Act and future proposals make it difficult to assess the overall financial impact of the Dodd-Frank Act and related regulatory developments on the Company and the banking industry. As a result, the Company cannot predict the ultimate impact of the Dodd-Frank Act on the Company or the Bank, including the extent to which it could increase costs or limit the Company’s ability to pursue business opportunities in an efficient manner, or otherwise adversely affect its business, financial condition and results of operations. Nor can the Company predict the impact or substance of other future legislation or regulation. However, it is expected that future legislation or regulation at a minimum will increase the Company’s and the Bank’s operating and compliance costs. As rules and regulations continue to be implemented or issued, the Company may need to dedicate additional resources to ensure compliance, which may increase its costs of operations and adversely impact the Company’s earnings.
Capital Requirements
The Company and the Bank are required to comply with applicable capital adequacy standards established by the federal banking agencies (the “Capital Rules”) which are based on the Basel Committee on Banking Supervision’s (the “Basel Committee”) 2010 final capital framework for strengthening international capital standards, referred to as “Basel III”.
The Capital Rules, among other things, impose a capital measure called “Common Equity Tier 1,” (“CET1”) to which most deductions/adjustments to regulatory capital measures are to be made. In addition, the Capital Rules specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain specified requirements.
Under the Capital Rules, the minimum capital ratios are as follows:
| ● | 4.5% CET1 to total risk-weighted assets; |
| ● | 6.0% Tier 1 capital (CET1 plus Additional Tier 1 capital) to total risk-weighted assets; |
| ● | 8.0% Total capital (Tier 1 Capital plus Tier 2 capital) to total risk-weighted assets; |
| ● | 4.0% Tier 1 capital to total adjusted quarterly average assets (known as “leverage ratio”) |
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The Capital Rules require the Company and the Bank to maintain a “capital conservation buffer” composed entirely of CET1. Banking organizations are required to maintain a minimum capital conservation buffer of 2.5% (CET1 to total risk-weighted assets), in addition to the minimum risk-based capital ratios. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer, a banking organization is required to maintain the following: (i) CET1 to total risk-weighted assets of at least 7%, (ii) Tier 1 capital to total risk-weighted assets of at least 8.5%, and (iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets of at least 10.5%. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that do not maintain a capital conservation buffer of 2.5% or more will face constraints on dividends, common share repurchases and incentive compensation based on the amount of the shortfall.
The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. Under the Capital Rules, the effects of certain accumulated other comprehensive income or loss items are not excluded for the purposes of determining regulatory capital; however, banks not using the advanced approach, including the Company and the Bank, were permitted to, and in the case of the Company and the Bank did, make a one-time permanent election to continue to exclude these items.
With respect to the Bank, the Capital Rules also revised the prompt corrective action (“PCA”) regulations established pursuant to Section 38 of the Federal Deposit Insurance Act, establishing the CET1 ratio at 6.5% for well-capitalized status and the Tier 1 capital ratio at 8.0% for well-capitalized status. The Capital Rules do not change the total risk-based PCA capital requirement for any capital category.
The Capital Rules prescribe a standardized approach for risk weighted-assets that expands the risk-weight categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the asset. The risk-weight categories generally range from 0% for U.S. government and agency securities, to 1,250% for certain securitized exposures, and result in higher risk weights for a variety of asset categories. The standardized approach requires financial institutions to transition assets that are 90 days or more past due or on nonaccrual from their original risk weight to 150 percent. Additionally, loans designated as high volatility commercial real estate (“HVCRE”) are assigned a risk-weighting of 150 percent.
Requirements to maintain higher levels of capital or to maintain higher levels of liquid assets could adversely impact the Company’s net income and return on equity. The current requirements and the Company’s actual capital levels are detailed in Note P of “Notes to Consolidated Financial Statements” filed in Part II, Item 8, “Financial Statements and Supplementary Data.”
Consumer Protection Laws
In connection with its banking activities, the Bank is subject to a number of federal and state laws designed to protect consumers and promote lending to various sectors of the economy. These laws include but are not limited to the Equal Credit Opportunity Act, the Gramm-Leach-Bliley Act (“GLB Act”), the Fair Credit Reporting Act (“FCRA”), the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the Electronic Funds Transfer Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Dodd-Frank Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE”), the Servicemembers Civil Relief Act (“SCRA”), the Military Lending Act (“MLA”), and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services. The Company is subject to regulation by the CFPB, which is responsible for promoting fairness and transparency for mortgages, credit cards, deposit accounts and other consumer financial products and services and for interpreting and enforcing the federal consumer financial laws that govern the provision of such products and services. The CFPB is also authorized to prevent any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services.
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The GLB Act requires all financial institutions to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties and establish procedures and practices to protect customer data from unauthorized access. The GLB Act also requires certain disclosures to consumers about information collection, sharing, and security practices and their right to “opt out” of the institution’s disclosure of their personal financial information to non-affiliated third-parties (with certain exceptions). In addition, the FCRA, as amended by the FACT Act, includes provisions affecting the Company, the Bank, and their affiliates, including provisions concerning obtaining consumer reports, furnishing information to consumer reporting agencies, maintaining a program to prevent identity theft, sharing of certain information among affiliated companies, and other provisions. The FACT Act requires persons subject to FCRA to notify their customers if they report negative information about them to a credit bureau or if they are granted credit on terms less favorable than those generally available. The FRB and the Federal Trade Commission have extensive rulemaking authority under the FACT Act, and the Company and the Bank are subject to the rules that have been created under the FACT Act, including rules regarding limitations on affiliate marketing and implementation of programs to identify, detect and mitigate certain identity theft red flags. The SCRA protects persons called to active military service and their dependents from undue hardship resulting from their military service, and the MLA extends specific protections if an accountholder, at the time of account opening, is a covered active duty member of the military or certain family members thereof. The SCRA applies to all debts incurred prior to the commencement of active duty and limits the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that are related to the obligation or liability. The MLA applies to certain consumer loans and extends specific protections if an accountholder, at the time of account opening, is a covered active duty member of the military or certain family members thereof. The Company and the Bank are also subject to data security standards and data breach notice requirements issued by various states, the OCC and other regulatory agencies. The Bank has created policies and procedures to comply with these consumer protection requirements.
The CFPB has implemented the ability-to-repay and qualified mortgage (QM) provisions of the Truth in Lending Act (the “QM Rule”) and has taken steps to modify the QM Rule. The ability-to-repay provision requires creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending credit based on a number of factors and consideration of financial information about the borrower derived from reasonably reliable third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of “qualified mortgage” are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for loans meeting the QM requirements, and a rebuttable presumption for higher-priced loans meeting the QM requirements. The Bank has created policies and procedures to comply with these consumer protection requirements and continues to monitor developments relative to future changes to the QM Rule.
Among other provisions, the federal banking rule under the Electronic Fund Transfer Act prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller machines and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. The rule does not govern overdraft fees on the payment of checks and certain other forms of bill payments.
In recent periods, the CFPB has finalized and proposed rules related to consumer financial data access, fee practices and other aspects of consumer banking. Certain of these rules are subject to legal challenge or further regulatory action and their ultimate scope, timing and applicability remain uncertain.
In May 2024, the SEC finalized amendments to require broker-dealers, investment companies and investment advisers registered with the SEC to adopt written policies and procedures for incident response programs to address unauthorized access to or use of customer information. The amendments also require covered entities to notify, within 30 days, individuals affected by an incident involving sensitive customer information and provide them with details about the incident and other information intended to help affected individuals respond appropriately. Compliance with these amendments began on December 3, 2025.
The Bank Secrecy Act
The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA includes a variety of recordkeeping and reporting requirements (such as currency transaction and suspicious activity reporting), as well as due diligence/know-your-customer documentation requirements. The Company has established a BSA/anti-money laundering program and taken other appropriate measures in order to comply with BSA requirements.
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Anti-Money Laundering Act of 2020
The Anti-Money Laundering Act of 2020 (“AMLA”) amends the BSA and was enacted in January 2021. The AMLA was intended to reform and modernize U.S. bank secrecy and anti-money laundering laws. The Company has and will continue to review and monitor its anti-money laundering program to ensure it complies with the provisions of the AMLA.
In July 2024, the federal banking agencies, including the Federal Reserve and OCC, proposed amendments to update the requirements for supervised institutions to establish, implement and maintain effective, risk-based and reasonably designed AML and countering the financing of terrorism ("CFT") programs. The proposed amendments would require supervised institutions to identify, evaluate and document the regulated institution's money laundering, terrorist financing and other illicit finance activity risks, as well as consider, as appropriate, the U.S. Department of the Treasury's Financial Crimes Enforcement Network's ("FinCEN") published national AML/CFT priorities.
In August 2024, the Financial Crimes Enforcement Network (“FinCEN”), which drafts regulations implementing anti-money laundering legislation, adopted a rule extending anti-money laundering obligations, including maintenance of an anti-money laundering program and filing certain reports with FinCEN, to registered investment advisers, like certain of the Company’s subsidiaries. On December 31, 2025, FinCEN issued a final rule to extend the effective date of this rule from January 1, 2026 until January 1, 2028 to provide additional time for FinCEN to review and tailor the rule.
USA Patriot Act
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism. In addition, provisions of the USA Patriot Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions. The USA Patriot Act also encourages information-sharing among financial institutions, regulators, and law enforcement authorities by providing an exemption from the privacy provisions of the GLB Act for financial institutions that comply with the provision of the Act. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal, financial and reputational consequences for the institution. The Company has approved policies and procedures that are designed to comply with the USA Patriot Act and its regulations.
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others administrated by the Treasury’s Office of Foreign Assets Control (“OFAC”). The OFAC administered sanctions can take many different forms; however, they generally contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, entity or individual, including prohibitions against direct or indirect imports and exports and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments, or providing investment related advice or assistance; and (ii) a blocking of assets in which the government or specially designated nationals have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal, financial, and reputational consequences. The Company has approved policies and procedures that are designed to comply with OFAC and its regulations.
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Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) implemented a broad range of corporate governance, accounting and reporting reforms for companies that have securities registered under the Securities Exchange Act of 1934, as amended. In particular, the Sarbanes-Oxley Act established, among other things: (i) requirements for audit and other key Board of Directors committees involving independence, expertise levels, and specified responsibilities; (ii) responsibilities regarding the oversight of financial statements by the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) an independent accounting oversight board for the accounting industry; (iv) standards for auditors and the regulation of audits, including independence provisions which restrict non-audit services that accountants may provide to their audit clients; (v) increased disclosure and reporting obligations for the reporting company and its directors and executive officers including accelerated reporting of company stock transactions; (vi) a prohibition of personal loans to directors and officers, except certain loans made by insured financial institutions on non-preferential terms and in compliance with other bank regulator requirements; and (vii) a range of new and increased civil and criminal penalties for fraud and other violations of the securities laws. The Company has approved policies and procedures that are designed to comply with the Sarbanes-Oxley Act and its regulations.
Community Reinvestment Act of 1977
Under the CRA, the Bank is required to help meet the credit needs of its communities, including low- and moderate-income neighborhoods. Although the Bank must follow the requirements of CRA, it does not limit the Bank’s discretion to develop products and services that are suitable for a particular community or establish lending requirements or programs. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibits discrimination in lending practices. The Bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company. The Bank’s failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions against it by its regulators as well as other federal regulatory agencies and the Department of Justice. The Bank’s most recent CRA rating was “Satisfactory”.
On October 24, 2023, the FRB, FDIC and OCC jointly issued a final rule intended to strengthen and modernize regulations implementing the CRA to encourage banks to expand access to credit, investment, and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including internet and mobile banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type. The implementation of this rule was subsequently stayed and on July 16, 2025 the FRB, FDIC and OCC jointly issued a proposal to rescind the aforementioned rule and replace it with the prior CRA regulations, with certain technical amendments. Accordingly, the CRA continues to be administered under the regulatory framework in effect prior to the issuance of the October 2023 final rule.
Cyber Security
The federal bank regulators have adopted rules providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rules require a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a "computer-security incident" rising to the level of a "notification incident" has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization's operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization's customers for four or more hours.
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Guidance for Third-Party Relationships
On June 9, 2023, the Federal Reserve, OCC, and FDIC issued final interagency guidance on risk management of third-party relationships. The interagency guidance is based, in part, on the regulators’ previously existing third-party risk management guidance from 2013 and seeks to, among other things, promote consistency in third-party risk management and provide sound risk management guidance for third-party relationships commensurate with a bank's risk profile and complexity as well as the criticality of the activity. The final interagency guidance replaces each agency's existing guidance on this topic and is directed to all banking organizations supervised by the Federal Reserve, OCC, and FDIC. Additionally, third-party relationship risk management and banking-as-a-service arrangements (including with respect to deposit products and services) have continued to be topics of focus for federal bank regulators in 2025 and further rulemaking activity or guidance may be forthcoming.
Guiding and Establishing National Innovation for U.S. Stablecoins Act
On July 18, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) became U.S. law. The statute provides a federal regulatory framework for the issuance of stablecoins. If stablecoins become widely adopted by retail and/or commercial bank depositors as a substitute for bank accounts, financial institutions, such as CBNA, would experience a substantial negative impact on their liquidity, ability to originate loans and related interest income. It is highly uncertain what the impact of this law will be on CBNA’s future financial condition.
Future Legislation and Regulation
Laws, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies. In addition to the specific legislation and regulations described above, future legislation and regulations or changes to existing statutes, regulations or regulatory policies applicable to the Company and its subsidiaries may affect the business, financial condition and results of operations in adverse and unpredictable ways and increase reporting requirements and compliance costs. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted.
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Information about Our Executive Officers
The executive officers of the Company and the Bank who are elected by the Board of Directors are as follows:
Name | | Age | | Position |
|---|---|---|---|---|
Dimitar A. Karaivanov | 44 | Director, President and Chief Executive Officer. Mr. Karaivanov assumed his current position on January 1, 2024. He previously served as Executive Vice President and Chief Operating Officer from October 2022 to December 2023 and Executive Vice President of Financial Services and Corporate Development from June 2021 to September 2022. Prior to joining the Company, he was the Managing Director of Lazard Middle Market’s Financial Institutions Group from June 2018 through June 2021. Prior to Lazard, he was the Managing Director of RBC Capital Markets’ Financial Institutions Group from April 2011 through June 2018. | ||
Marya Burgio Wlos | 48 | Executive Vice President and Chief Financial Officer. Ms. Burgio Wlos joined the Company on March 31, 2025. Prior to joining the Company, Ms. Wlos served as Managing Director and COO of the Investment Bank at M&T Bank from January 2021 through March 2025. Ms. Wlos served as Head of Management Accounting, Finance at M&T Bank from September 2018 through January 2021 and as Head of Trading Relationship Management, UBS Asset Management at UBS AG from November 2013 through August 2018. Prior to that time, Ms. Wlos served in various finance roles at Citadel LLC from April 2008 through September 2012 and at Bank of America from January 2007 to April 2008. | ||
Maureen Gillan-Myer | 58 | Executive Vice President and Chief Administration and Human Resources Officer. Ms. Gillan-Myer assumed her current position on October 1, 2024. She joined the Company as Executive Vice President and Chief Human Resources Officer on October 1, 2021. Prior to joining the Company, she served as the Chief Human Resources Officer of HSBC US from February 2016 through September 2021 and as its Senior Vice President - Talent Acquisition from May 2009 through February 2016. | ||
Michael N. Abdo | 48 | Executive Vice President and General Counsel. Mr. Abdo assumed his current position in July 2022. He served as Associate General Counsel from 2013 to 2020 and as Senior Vice President and Senior Associate General Counsel from January 2020 to July 2022. Prior to joining the Company in 2013, he was an associate with Cadwalader Wickersham & Taft. | ||
Matthew K. Durkee | 63 | Senior Vice President, Chief Banking Officer and President of Commercial Banking. Mr. Durkee assumed his current position on January 1, 2026. He served as President, Commercial Banking from January 2024 through December 2025 and the President of the New England Region from January 2022 through December 2023. Prior to joining the Bank, he served as Executive Vice President and New England President for NBT Bank, N.A. from 2009 to 2020. |
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Item 1A. Risk Factors
There are risks inherent in the Company’s business. The material risks and uncertainties that management believes affect the Company are described below. Adverse experience with these could have a material impact on the Company’s financial condition and results of operations. The Risk Committee of the Board of Directors (the “Board”) oversees the Company’s efforts to manage risks through actions such as reviewing the Bank’s credit risk, liquidity and interest rate risk, monitoring the quality and risk profile of the Bank’s loan portfolio and credit administration, evaluating the Company’s securities portfolio to ensure that the Company’s objectives related to diversification, asset quality, liquidity, profitability and pledging are met, overseeing the Company’s enterprise risk management functions and overseeing the Company’s information security and cybersecurity functions.
Risks Related to the Company’s Business
Interest Rate Risk
Changes in interest rates affect the Company’s profitability, assets and liabilities.
The Company’s income and cash flow depends to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and borrowings. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB. Changes in interest rates, including those driven by changes in monetary policy, could influence not only the interest the Company receives on loans and securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (1) its ability to originate loans and obtain deposits, which could reduce the amount of fee income generated, (2) the fair value of its financial assets and liabilities, and (3) the average duration of the Company’s various categories of earning assets. Earnings could be adversely affected if the interest rates received on loans and investments fall more quickly than the interest rates paid on deposits and other borrowings. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and investments, the Company’s net interest income could also be adversely affected, which in turn could negatively affect the Company’s earnings. Increases in interest rates would likely cause an increase in the unrealized loss position on certain investments, a decrease in tangible equity, and could negatively affect the Company’s earnings if the need to liquidate these investments arose. Although management believes it has implemented asset and liability management strategies to reduce the potential effects of changes in interest rates on the results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the financial condition and results of operations.
Liquidity Risk
The Company must maintain adequate sources of funding and liquidity to meet regulatory expectations, support its operations and fund outstanding liabilities.
The Company’s liquidity and ability to fund and run its business could be materially adversely affected by a variety of conditions and factors, including financial and credit market disruptions and volatility, a lack of market or customer confidence in financial markets in general, or deposit competition based on interest rates, which may result in a loss of customer deposits or outflows of cash or collateral and/or adversely affect the Company’s ability to access capital markets on favorable terms. Other conditions and factors that could materially adversely affect the Company’s liquidity and funding include a lack of market or customer confidence in, or negative news about, the Company or the financial services industry generally which also may result in a loss of deposits and/or negatively affect the Company’s ability to access the capital markets; the loss of customer deposits due to reductions in customer savings rates, increased spending due to inflation, or other factors including shifting to alternative investments such as stablecoins; counterparty availability; interest rate fluctuations; general economic conditions; and the legal, regulatory, accounting and tax environments governing the Company’s funding transactions. The possibility of a funding crisis exists at all financial institutions. A funding crisis would most likely result from a shock to the financial system that disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Many of the foregoing conditions and factors may be caused by events over which the Company has little or no control. There can be no assurance that significant disruption and volatility in the financial markets will not occur in the future. Further, the Company’s customers may be adversely impacted by such conditions, which could have a negative impact on the Company’s business, financial condition and results of operations.
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The Company depends on dividends from the Bank and BPAS for cash revenues to support common dividend payments and other uses, but those dividends are subject to restrictions.
The ability of the Company to satisfy its obligations and pay cash dividends to its shareholders is primarily dependent on the earnings of and dividends from the Bank and BPAS. However, payment of dividends by the Bank is limited by dividend restrictions and capital requirements imposed by bank regulations. If the Bank is unable to pay dividends to the Company, the Company might not be able to service its debt, pay its obligations or pay dividends on its common stock.
Credit and Lending Risk
The allowance for credit losses may be insufficient.
The Company’s business depends on the creditworthiness of its customers. The Company reviews the allowance for credit losses quarterly for adequacy considering historical credit loss experience, current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels, risk ratings as well as changes in macroeconomic conditions. The Company’s allowance for credit losses may fluctuate significantly from period to period due to changes in economic conditions, changes in the composition of the Company’s loan portfolios, changes in historical loss rates and changes in other credit factors, including the level of delinquent loans. If the Company’s assumptions prove to be incorrect, the Company’s allowance for credit losses may not be sufficient to cover losses inherent in the Company’s loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease its net income. It is possible that over time the allowance for credit losses will be inadequate to cover credit losses in the portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets. Furthermore, bank regulators have the authority to require the Company to make provisions for credit losses or otherwise recognize loan charge-offs following their periodic review of the Company’s loan portfolio, underwriting procedures, and allowance for losses on such loans. Any increase in the allowance for credit losses or in loan charge-offs as required by such regulatory authorities could have a material adverse effect on the Company’s financial condition and results of operations.
Mortgage banking income may experience significant volatility.
Mortgage banking income is highly influenced by the level and direction of mortgage interest rates, real estate and refinancing activity and elections made by the Company to sell or retain mortgage production. In lower interest rate environments, the demand for mortgage loans and refinancing activity will tend to increase. Increases in mortgage loan sales would have the effect of increasing fee income but could adversely impact the estimated fair value of the Company’s mortgage servicing rights as the rate of loan prepayments increase. In higher interest rate environments, the demand for mortgage loans and refinancing activity will generally be lower. Decreases in mortgage loan sales would have the effect of decreasing fee income opportunities.
Conditions in the commercial real estate market could adversely affect the Company’s business.
The deterioration of the commercial real estate market across the nation may negatively affect the economies where the Company operates and may result in customers engaged in the commercial real estate having greater difficulties fulfilling their financial responsibilities to the Company. The macroeconomic environment driving these conditions include elevated interest rates, increases in property expenses, such as casualty insurance, decreases in rents, and increases in vacancy rates, particularly for office real estate. This could lead to a material adverse effect on the Company’s financial condition and results of operations through resulting increases in the Company’s allowance for credit losses, provision for credit losses and net charge-offs.
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Legal, Regulatory, and Compliance Risk
The Company is or may become involved in lawsuits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental agencies or other parties that may lead to adverse consequences.
As a participant in the financial services industry, many aspects of the Company’s business involve substantial risk of legal liability. The Company and its subsidiaries have been named or threatened to be named as defendants in various lawsuits arising from its or its subsidiaries’ business activities (and in some cases from the activities of acquired companies). In addition, the Company is, or may become, the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings and other forms of regulatory inquiry by, including but not limited to, bank regulatory agencies, the SEC, FINRA, the CFPB, the U.S. Department of Justice, the U.S. Department of Labor, state attorneys general, state insurance regulators and law enforcement authorities. The results of such proceedings could lead to delays in or prohibition to acquire other companies, significant penalties, including monetary penalties, dividend and/or asset growth restrictions, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which the Company conducts its business, or reputational harm.
Although the Company establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, the Company does not have accruals for all legal or regulatory proceedings where it faces a risk of loss. In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s ultimate losses may be higher than the amounts accrued for legal loss contingencies, which could adversely affect the Company’s financial condition and results of operations.
The Company operates in a highly regulated environment and may be adversely affected by changes in laws and regulations or the interpretation and examination of existing laws and regulations.
The Company and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations. The Company, as a financial holding company, is subject to regulation by the FRB and its banking subsidiary is subject to regulation by the OCC as well as the FDIC, CFPB, and other federal and state agencies. These regulations affect deposit and lending practices, capital levels and structure, investment practices, dividend policy, and growth. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the risk ratings or classifications of loans and investments by a bank, and the adequacy of a bank’s allowance for credit losses. In addition, the non-bank subsidiaries are engaged in providing services including, but not limited to, retirement plan administration, fiduciary services to collective investment funds, investment management and insurance brokerage services, which industries are also heavily regulated at both a state and federal level, including by state banking and insurance agencies, the U.S. Department of Labor and the SEC. Such regulators govern the activities in which the Company and its subsidiaries may engage. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation, interpretation or application, could have a material impact on the Company and its operations. Changes to the regulatory laws governing these businesses, or changes in regulatory policy or a regulator's interpretation of a law or regulation, could affect the Company’s ability to deliver or expand its services and adversely impact its operating and financial condition.
The Dodd-Frank Act, as amended by the Economic Growth Act, instituted major changes to the banking and financial institutions regulatory regimes in the financial services sector. The ongoing effects of the Dodd-Frank Act, as well as continued rule-making and possible future changes to the regulatory requirements, may substantially impact the Company’s and the Bank’s operations. The implications of the Dodd-Frank Act depend to a large extent on the implementation of the legislation by the FRB, the CFPB, and other agencies as well as how market practices and structures change in response to the requirements of such rule making. Changes in regulations could subject the Company, among other things, to additional costs for compliance, reduced revenues and limit the types of financial services and products it can offer and/or increase the ability of non-banks to offer competing financial services and products.
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Regulatory agencies may introduce new regulatory initiatives or pursue more aggressive enforcement policies with respect to a range of regulatory compliance matters. Regulators continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices. New initiatives by applicable regulatory agencies may significantly limit the types and the terms of the products the Company may offer and the fees it may charge for its services which may have a material impact on the Company’s fee income. Any new requirements or increased enforcement of existing requirements could materially and adversely impact the Company’s revenue growth and profitability, including, as a result of increased scrutiny of pricing, underwriting and account management practices; the imposition of fines and customer remediation; higher compliance costs; reputational harm; restrictions on the Company’s ability to offer certain products or services, appropriately price for the value of products or work with certain business partners; and changes to business practices generally. The Company may also be required to add additional compliance personnel or incur other significant compliance-related expenses. The Company’s business, results of operations or competitive position may be adversely affected as a result.
The Company is also directly subject to the requirements of entities that set and interpret the accounting standards such as the Financial Accounting Standards Board, and indirectly subject to the actions and interpretations of the Public Company Accounting Oversight Board, which establishes auditing and related professional practice standards for registered public accounting firms and inspects registered firms to assess their compliance with certain laws, rules, and professional standards in public company audits. These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies and interpretations, control the methods by which financial institutions and their holding companies conduct business, engage in strategic and tax planning, implement strategic initiatives, and govern financial reporting.
While the Company has developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that compliance policies and procedures will be effective. The Company’s failure to comply (or to ensure that agents and third-party service providers comply) with laws, regulations or policies could result in civil or criminal sanctions, restrictions to its business model, and money penalties by state and federal agencies, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition and results of operations. See “Supervision and Regulation” for more information about the regulations to which the Company is subject.
Federal banking agencies periodically conduct examinations of the Company’s business, including compliance with laws and regulations; the failure to comply with any supervisory actions to which the Company becomes subject to as a result of such examinations could adversely affect the Company.
Federal bank regulatory authorities periodically conduct comprehensive examinations of the Company’s business, including compliance with laws and regulations. If, as a result of an examination, such banking agencies were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, asset sensitivity, risk management or other aspects of any of the Company’s operations had become unsatisfactory, or that the Company was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. If the Company becomes subject to such regulatory actions, the Company’s business, financial condition, earnings and reputation could be adversely affected.
The Company is subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and the failure to comply with these laws could lead to a wide variety of sanctions.
The Community Reinvestment Act ("CRA") requires the OCC to assess the Company’s performance in meeting the credit needs of the communities the Company serves, including low- and moderate-income neighborhoods. If the OCC determines that the Company needs to improve the Company’s performance or are in substantial non-compliance with CRA requirements, various adverse regulatory consequences may ensue. In addition, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. In addition, the Bank is subject to other federal and state laws designed to protect consumers, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services.
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A successful regulatory challenge to an institution’s performance under the CRA, fair lending laws or regulations, or consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company faces a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The federal Bank Secrecy Act, PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. Federal and state bank regulators also focus on compliance with the Bank Secrecy Act and anti-money laundering regulations.
If the Company’s policies, procedures and systems are deemed to be deficient or the policies, procedures and systems of the financial institutions that the Company acquires in the future are deficient, the Company would be subject to liability, including fines and regulatory actions such as restrictions on the Company’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of the Company’s business plan, including acquisition plans, which would negatively impact the Company’s business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences.
Basel III capital rules generally require insured depository institutions and their holding companies to hold more capital, which could limit the Company’s ability to pay dividends, engage in share repurchases and pay discretionary bonuses.
The FRB, the FDIC, and the OCC adopted final rules for the Basel III capital framework which address the regulatory risk-based capital rules applicable to the Company. The capital conservation buffer requirement is 2.5% on top of the common Tier 1, Tier 1 and total capital requirements, resulting in a required common Tier 1 equity ratio of 7%, a Tier 1 ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases, and paying discretionary bonuses. In addition, these limitations establish a maximum percentage of eligible retained income that could be utilized for such actions and potentially limit the Company’s ability to pay dividends, engage in share repurchases, and pay discretionary bonuses.
Regulation in the areas of privacy, data protection, data management, resiliency, data transfer, third-party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity could increase the Company’s costs and affect or limit business opportunities and how the Company collects and/or uses personal information.
Legislators and regulators are increasingly adopting or revising privacy, data protection, data management, resiliency, data transfer, third-party oversight, account access, artificial intelligence (“AI”) and machine learning and information security and cybersecurity laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate privacy, data protection, data management, incident management, resiliency, third-party management, data transfer, security controls, account access mechanisms and controls related to artificial intelligence and machine learning are in place. Additionally, new laws and regulations related to automated decision making, artificial intelligence and machine learning as well as the application of existing laws and regulations to these technologies may restrict or impose burdensome and costly requirements on the Company’s ability to use them or impact other aspects of the Company’s business.
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Compliance with current or future laws in the aforementioned areas could significantly impact business operations, including collection, use, sharing, retention and safeguarding of consumer and/or employee information and could restrict the Company’s ability to provide certain products and services or work with certain service providers, which could materially and adversely affect profitability. Failure to comply with such laws or to maintain sufficient governance and control structures could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use of the Company’s products and services, and damage to the Company’s reputation and brand.
Changes in stakeholder expectations related to corporate responsibility matters could negatively affect the Company’s operating results.
There are changes in public awareness and concern by various stakeholders on a variety of corporate responsibility matters. These changes may include more compliance requirements or changes in expectations by stakeholders. The Company may face increased costs to address these matters, which could have an adverse impact on the Company’s business and financial condition. In particular, certain U.S. state governments continue to be focused on climate change issues, including proposed disclosure requirements that could result in additional compliance costs, which could have an adverse impact on the Company’s business and financial condition. There are additional risks related to diverging and conflicting stakeholder views on corporate responsibility. If the Company is unable to adequately address corporate responsibility matters that are of importance to stakeholders, it could negatively impact the Company’s reputation and the Company’s business results.
Operational Risk
The Company continually encounters technological change and the failure to understand and adapt to these changes could have a negative impact on the business.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. The Company or its third-party vendors may incorporate artificial intelligence technology into certain business processes, services, or products. The use of artificial intelligence presents several risks, including an uncertain and evolving legal and regulatory environment in the U.S. and internationally and the complexity and rapid pace of change in these artificial intelligence models presents additional risks in understanding the accuracy and relevance of their outputs. Many of the Company’s competitors have substantially greater resources to invest in technological improvements, including artificial intelligence. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers and the costs of this technology may negatively impact the Company’s results of operations. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s financial condition and results of operations.
The Company is exposed to fraud in many aspects of the services and products that it provides.
The Company offers a wide variety of products and services many of which could be vulnerable to fraud. The sophistication and skills of bad actors are increasing in scope and capabilities. Although the Company has various processes and controls in place to mitigate fraud, the risk cannot be eliminated and certain exposures are outside the Company’s control. For example, when account credentials and other access tools are not adequately protected by its customers, risks and potential costs may increase. Fraud or fraudulent attempts may also increase as (a) volumes of services and products expand, (b) those who are committing fraud adapt their methods to circumvent existing controls, become more sophisticated and more determined, and (c) services and product offerings expand. The foregoing and other factors may cause the Company’s operational losses to increase as a result.
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The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, which may adversely affect the Company’s business and results of operations.
The Company is exposed to many types of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees, operational errors, or a digital or cybersecurity event or breach. Negative public opinion can result from actual or alleged conduct in any number of activities, including lending practices, sales practices, customer treatment, corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect the Company’s ability to attract and keep customers and can expose the Company to litigation and regulatory action. Actual or alleged conduct by the Company can result in negative public opinion about its business and financial loss.
If personal, nonpublic, confidential, or proprietary information of customers in the Company’s possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage, and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of its systems, employees, or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.
Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company’s necessary dependence upon automated systems to record and process transactions and the large transaction volumes may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. Further, the significant value of money managed and administered may result in larger exposures. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that external third-party service providers, including those hosting “cloud” computing service, may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees or other third parties) and to the risk that business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability to operate the Company’s business, potential liability to clients, reputational damage, and regulatory intervention, which could adversely affect the Company’s business, financial condition, and results of operations, perhaps materially.
The Company’s information systems may experience an interruption or security breach and expose the Company to additional operational, compliance, cybersecurity and legal risks.
The Company relies heavily on existing and emerging communications and information systems to conduct its business. Like other financial services businesses, the Company and its third-party service providers have been the victim of sophisticated and targeted cyberattacks intended to obtain unauthorized access to assets or confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks. Although the Company and its service providers regularly defend against, respond to and mitigate the risks of cyberattacks, cybersecurity incidents among financial services businesses and industry generally are on the rise. The Company is not aware of any material losses it has incurred relating to cyberattacks or other information security breaches.
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The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. Cyberattacks can originate from a variety of sources, including foreign governments and third-parties affiliated with them, organized crime or terrorist organizations, and malicious individuals both outside and inside a targeted company, including through use of relatively new AI tools or methods that can be used to create deepfakes for impersonation or to enable attack campaigns more quickly and effectively. The constantly changing nature of the threats means that the Company may not be able to prevent all data security breaches or misuse of data. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s online banking system, its general ledger, and its deposit and loan servicing and origination systems or other systems. Furthermore, if personal, confidential or proprietary information of customers or clients in the Company’s or third-party service providers’ possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include circumstances where, for example, such information was erroneously provided to parties who are not permitted to have the information, either by fault of the Company’s systems, employees, or counterparties, or where such information was intercepted or otherwise inappropriately taken by third parties. The Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems; however, any such failure, interruption or security breach could adversely affect the Company’s business and results of operations through loss of assets or by requiring it to expend significant resources to correct the defect, as well as exposing the Company to customer dissatisfaction and civil litigation, regulatory fines or penalties or losses not covered by insurance.
Evolving data security and privacy requirements could increase the Company’s costs and expose it to additional operational, compliance, and legal risks.
The Company’s business requires the secure processing and storage of sensitive information relating to its customers, employees, business partners, and others. However, like any financial institution operating in today’s digital business environment, the Company is subject to threats to the security of its networks and data, as described above. These threats continue to increase as the frequency, intensity and sophistication of attempted attacks and intrusions increase around the world. In response to these threats there has been heightened legislative and regulatory focus on data privacy and cybersecurity in the U.S. and internationally. As a result, the Company must comply with an evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident, in particular the SEC cybersecurity disclosure requirements that may require the Company to expend additional costs in the event of a material cybersecurity breach. This regulatory environment is increasingly challenging and may present material obligations and risks to the Company’s business, including significantly expanded compliance burdens, costs and enforcement risks.
The Company relies on third-party service providers, which could expose the Company to additional cybersecurity risks.
Third-party service providers provide key components of the Company’s business infrastructure, including certain data processing, cloud computing, and information services. On behalf of the Company, third parties may transmit confidential, propriety information. Although the Company requires third-party providers to maintain certain levels of information security which are verified through review of documentation collected as part of due diligence and ongoing monitoring of third-party providers, such providers may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious attacks that could ultimately compromise sensitive information or result in funds being transferred. While the Company may contractually limit liability in connection with attacks against third-party providers, the Company remains exposed to the risk of loss associated with such third-party service providers. In addition, a number of the Company’s third-party service providers are large national entities with dominant market presence in their respective fields. Their services could prove difficult to replace in a timely manner if a failure or other service interruption were to occur. Failures of certain third-party service providers to provide contracted services could adversely affect the Company’s ability to deliver products and services to customers and cause the Company to incur significant expense.
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The Company’s ability to attract and retain qualified employees is critical to the success of its business, and failure to do so may have a materially adverse effect on the Company’s performance.
The Company’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense and certain of the Company’s competitors have directly targeted its employees, including competitors who are outside of the Company’s geographic footprint offering work from home opportunities. The imposition on the Company or its employees of certain existing and proposed restrictions or taxes on executive compensation may adversely affect the Company’s ability to attract and retain qualified senior management and employees. The Company’s business could be adversely impacted by increases in labor costs, including wages and benefits, triggered by regulatory actions regarding wages; increased health care and workers’ compensation insurance costs; increased costs of other benefits necessary to attract and retain high quality employees with the right skill sets; and increased wages, benefits and costs related to inflationary and other pressure on wages now being experienced. If the Company provides inadequate succession planning or is unable to continue to retain and attract qualified employees, the Company’s performance, including its competitive position, could have a materially adverse effect.
External and Market-Related Risk
Regional economic factors may have an adverse impact on the Company’s business.
The Company’s main markets are currently located in the states of New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire. Most of the Company’s customers are individuals and small and medium-sized businesses which are dependent upon the regional economy. Accordingly, the local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. An economic downturn in these markets could negatively impact the Company.
The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability.
The financial services industry in which the Company operates is highly competitive. The Company competes not only with commercial and other banks and thrifts, but also with insurance companies, mutual funds, hedge funds, securities brokerage firms and other companies offering financial services in the U.S., globally and over the Internet. The Company competes on the basis of several factors, including capital, access to capital, revenue generation, quality customer service, products, services, transaction execution, innovation, reputation and price. Each of the Company’s segments have competitors that have substantially greater access to capital and scale. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms. These developments have resulted in additional competitors gaining greater capital and other resources, such as a broader range of products and services and geographic diversity. The Company may experience pricing pressures and experience deposit outflows as a result of these factors and as some of its competitors seek to increase market share by reducing prices or paying higher rates of interest on deposits. Finally, technological change is influencing how individuals and firms conduct their financial affairs and changing the delivery channels for financial services, with the result that the Company may have to contend with a broader range of competitors including many that are not located within the geographic footprint of the Bank’s branch network.
The Company may be adversely affected by the soundness of other financial institutions.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry. Many of these transactions expose the Company to credit risk in the event a counterparty or client fails to perform its contractual obligations. In addition, credit risk may be exacerbated when the Company’s collateral is not under its control, cannot recover funds by liquidating the collateral, or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.
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Conditions in the insurance market could adversely affect the Company’s earnings.
Revenue from insurance fees and commissions could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond the Company’s control. Other factors that affect insurance revenue are the profitability and growth of the Company’s clients, the renewal rate of the current insurance policies, continued development of new product and services as well as access to new markets. The Company’s insurance revenues and profitability may also be adversely affected by new laws and regulatory developments impacting the healthcare and insurance markets as well as the financial stability of insurance carriers.
Changes in the equity markets could materially affect the level of assets under management and the demand for other fee-based services and could adversely affect the Company’s earnings.
Economic downturns could affect the volume of income from and demand for fee-based services. Revenue from the wealth management and employee benefit trust businesses depends in large part on the level of assets under management and administration. Market volatility and the potential to lead customers to liquidate investments, as well as lower asset values, can reduce the level of assets under management and administration and thereby decrease the Company’s investment management and employee benefit trust revenues.
Financial services companies depend on the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Company also relies on representations of those customers and their agents, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other information could have a material adverse impact on business and, in turn, the Company’s financial condition and results of operations.
The Company may be required to record impairment charges related to goodwill, other intangible assets and the investment portfolio.
The Company may be required to record impairment charges in respect to goodwill, other intangible assets and the investment portfolio. Numerous factors, including lack of liquidity for resale of certain investment securities, absence of reliable pricing information for investment securities, the economic condition of state and local governments, adverse changes in the business climate, adverse actions by regulators, unanticipated changes in the competitive environment or a decision to change the operations or dispose of an operating unit could have a negative effect on the investment portfolio, goodwill or other intangible assets in future periods.
The Company’s financial statements are based, in part, on assumptions and estimates, which, if incorrect or conditions change, could cause unexpected losses in the future.
Pursuant to accounting principles generally accepted in the United States, the Company is required to use certain assumptions and estimates in preparing its financial statements, including the allowance for credit losses, pension, post-retirement and other employee benefit plans, goodwill and other intangible assets, reserves related to litigation and other items. Certain of the Company’s financial instruments, including available-for-sale securities and certain loans, among other items, require a determination of their fair value in order to prepare the Company’s financial statements. Where quoted market prices are not available, the Company may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management’s judgment. Some of these and other assets and liabilities may have no direct observable price levels, making their valuation particularly subjective, as they are based on significant estimation and judgment. In addition, sudden illiquidity in markets or declines in prices of certain loans and securities may make it more difficult to value certain balance sheet items, which may lead to the possibility that such valuations will be subject to further change or adjustment. If assumptions or estimates underlying the Company’s financial statements are incorrect, it may experience material losses. Further detail on the nature and sensitivity of these management assumptions is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Policies and Estimates.
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The Company’s business and results of operations may be adversely affected by the U.S. and global financial markets, fiscal, monetary, and regulatory policies, and economic conditions generally.
General political, economic, and social conditions in the U.S. and in countries abroad affect markets in the U.S. and ultimately the Company’s business. In particular, U.S. markets may be affected by the current government administration and the domestic political environment, including but not limited to government agency staff reductions and related operating issues, uncertainty related to policy changes that directly or indirectly impact consumer spending and business investment, the level and volatility of interest rates, availability and market conditions of financing, economic growth, historically high levels of inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage escalation or stagnation, changes in home prices, commercial property values, the growth of global trade and commerce, the availability and cost of capital and credit, and investor sentiment and confidence. Additionally, U.S. energy and commodity markets may be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, terrorism or other geopolitical events. The scarcity or unavailability of affordable casualty insurance on consumers’ homes and autos, as well as businesses’ property, plant, and equipment, would impair asset prices and have a negative impact on economic activity and growth. Also, any sudden or prolonged market downturn in the U.S., as a result of the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely affect the Company’s results of operations and financial condition, including capital and liquidity levels.
Actions taken by the FRB, including changes in its target funds rate, balance sheet management, and lending facilities are beyond the Company’s control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact the Company’s borrowers. Sudden changes in monetary policy, for example in response to high inflation, could lead to financial market volatility, increases in market interest rates, and a flattening or inversion of the yield curve. For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets.
Actions taken by the U.S. Federal government, including material changes in fiscal and foreign trade policy, could also reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets. Examples of such policy changes are reduced or delayed U.S. Federal government spending, new or higher U.S. imposed tariffs on imports and retaliatory tariffs imposed by foreign governments on U.S. exports.
Changes to existing U.S. laws and regulatory policies and evolving priorities, including those related to financial regulation, consumer compliance, taxation, fiscal policy, trade policy such as tariffs, climate change, and healthcare, may adversely impact U.S. or global economic activity and the Company’s customers and its earnings and operations. For example, a slowdown in consumer demand due to increased inflation could limit the ability of firms to pass on fast-rising costs for labor, tariffs, transportation and other inputs, weighing on earnings and potentially leading to an equity market downturn. Significant fiscal policy changes and/or initiatives may also raise the federal debt, affect businesses and household after-tax incomes and increase uncertainty surrounding the formulation and direction of U.S. monetary policy and volatility of interest rates.
Any of these developments could adversely affect the Company’s consumer and commercial businesses, its customers, its securities portfolios, including the risk of lower re-investment rates within those portfolios, its level of loan net charge-offs and provision for credit losses, the carrying value of its deferred tax assets, its capital levels, its liquidity and its results of operations.
The Company’s consumer businesses can be negatively affected by adverse economic conditions and governmental policies.
The Company’s consumer businesses are particularly affected by U.S. economic conditions, including changes in personal and household incomes, unemployment or underemployment, the level of or change in interest rates, increased housing and automobile prices, the level of inflation and its effect on prices for goods and services, consumer and small business confidence levels, and changes in consumer spending or in the level of consumer debt. Heightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, unemployment or underemployment, sustained low economic growth, the level of or change in interest rates, tariffs, inflationary pressures or recessionary conditions could reduce deposit balances and diminish customer demand for the products and services offered by the Company’s businesses.
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In addition, governmental proposals to permit student loan obligations to be discharged in bankruptcy proceedings could, if enacted into law, encourage certain of the Company’s customers to declare personal bankruptcy and thereby trigger defaults and charge-offs of consumer loans extended to those customers.
Pandemics, epidemics, disease outbreaks and other public health crises have disrupted the Company’s business and operations in the past, and future outbreaks could materially adversely impact the Company’s business, financial condition, liquidity and results of operations.
Pandemics, epidemics or disease outbreaks in the U.S. or globally, have disrupted, and may in the future disrupt, the Company’s business, which could materially affect results of operations, financial condition, liquidity and future expectations. The COVID-19 pandemic adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States and international capital markets. Any new pandemic or other public health crisis could have a material impact on the Company’s business, financial condition and results of operations going forward.
Certain negative developments affecting the banking industry have eroded customer confidence in the banking system and may have adverse impacts on the Company’s business.
The high-profile collapse of certain U.S. banks has generated significant market volatility among publicly traded bank holding companies and, in particular, community and regional banks. These market developments have negatively impacted customer confidence in the safety and soundness of community and regional banks. As a result, customers may choose to move or maintain deposits with larger financial institutions or outside of the banking industry, which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the federal regulators have made statements ensuring that depositors of these failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in community and regional banks and the banking system more broadly or that any future bank failures will receive the same treatment.
Adverse regulatory findings or new regulatory requirements arising from the recent bank failures could increase the Company’s expenses, reduce the Company’s revenues and affect the Company’s operations.
The Company anticipates increased regulatory scrutiny, within the course of routine examinations and new regulations designed to address certain negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
Risk Related to Acquisition and De Novo Expansion Activity
Acquisition and de novo expansion activity could adversely affect the Company’s financial condition and result of operations.
The business strategy of the Company includes growth through acquisition and the opening of de novo branches to expand its business footprint. Recently completed and future acquisitions and de novo branches will be accompanied by the risks commonly encountered in acquisitions and expansion into near geographic areas. These risks include among other things: limitations on potential acquisition targets based upon regulatory restrictions, obtaining timely regulatory approval, the purchase or lease of real estate that promotes the Bank’s de novo branch strategy, attracting and hiring appropriate talent, the difficulty of integrating operations and personnel, the difficulty associated with attracting new clients, the potential disruption of the Company’s ongoing business, the inability of the Company’s management to maximize its financial and strategic position, the inability to maintain uniform standards, controls, procedures and policies, the potential that errors, omissions or circumstances existing prior to or at the time of the closing result in losses after the close, and the impairment of relationships with employees and customers as a result of changes in ownership and management. Further, the asset quality or other financial characteristics of a company may deteriorate after the acquisition agreement is signed or after the acquisition closes.
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A portion of the Company’s loan portfolio was acquired primarily through whole-bank acquisitions and was not underwritten by the Company at origination.
At December 31, 2025, 7% of the loan portfolio was acquired and was not underwritten by the Company at origination, and therefore is not necessarily reflective of the Company’s historical credit risk experience. The Company performed extensive credit due diligence prior to each acquisition and marked the loans to fair value upon acquisition, with such fair valuation considering expected credit losses that existed at the time of acquisition. However, there is a risk that credit losses could be larger than currently anticipated, thus adversely affecting earnings.
General Risks
Trading activity in the Company’s common stock could result in material price fluctuations.
The market price of the Company’s common stock may fluctuate significantly in response to a number of other factors including, but not limited to:
| ● | Changes in securities analysts’ expectations of financial performance; |
| ● | Volatility of stock market prices and volumes; |
| ● | Incorrect information or speculation; |
| ● | Changes in industry valuations; |
| ● | Variations in operating results from general expectations; |
| ● | Actions taken against the Company by various regulatory agencies; |
| ● | Changes in authoritative accounting guidance by the Financial Accounting Standards Board or other regulatory agencies; |
| ● | Changes in general domestic economic conditions such as inflation rates, tax rates, unemployment rates, oil prices, labor and healthcare cost trend rates, recessions, and changing government policies, laws and regulations; and |
| ● | Severe weather, natural disasters, acts of war or terrorism and other external events. |
Item 1B. Unresolved Staff Comments
None
Item 1C. Cybersecurity
As a heavily regulated financial services company, the Company has developed comprehensive cybersecurity processes that are designed to protect the security of confidential information. Two of the more significant risks to the Company, both in terms of financial and reputational harm, are a data security breach and/or ransomware attack which cause a material financial loss to the Company and/or materially harms its operational integrity or reputation with its customers as a safe and trustworthy institution. In order to mitigate this risk and comply with the regulatory standards required by the Company’s and the Bank’s regulators, the
Risks Associated with Cybersecurity
The Company is a frequent target of unauthorized attempts to access financial records, destroy data, degrade services, or sabotage systems. The sophistication and diversity of these threats is increasing. Against a backdrop of geopolitical tensions, the increasing use of AI by threat actors, and the growing involvement of organized cyber criminal groups, including state-sponsored groups, the Company expects greater frequency and sophistication of attacks in the future (malware, ransomware, phishing, supply chain compromise, and insider-assisted intrusions). Organized criminal actors include financially motivated ransomware gangs, criminal networks that monetize stolen data, and transnational fraud rings. These groups often operate at scale, use professionalized tools and affiliate ecosystems, and in some instances collaborate with nation state actors or exploit third-party vendors to gain access.
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The exploitation of third-party vendors and contractors increases the risk that a vendor compromise, outage, or failure to meet contractual security obligations could lead to unauthorized access or operational disruption. In addition, the Company’s increasing use of analytics, machine-learning and generative AI introduces additional data and model risks, including threats to data privacy and integrity, biased or incorrect model outputs, exploitation of third-party models or vendors, and automation-enabled escalation of attacks.
To date, these risks have
For more information on risks to the Company from cybersecurity threats, see “Risk Factors – Operational Risks”.
Cybersecurity Process and Management’s Role
Management is responsible for designing and implementing policies, processes and physical and virtual safeguards to measure, monitor, and control cybersecurity risk.
The Company’s cybersecurity framework includes an assessment of the Company’s hardware, software, and data platforms across its lines of business; the risks associated with the Company’s business; areas inside and outside of the Company that expose it to cybersecurity threats. As part of this framework, the Company employs policies, systems and safeguards to manage cybersecurity risks. The Company’s CISO is responsible for identifying systems and security measures that reflect the appropriate safeguards designed to protect the Company’s infrastructure and information and has implemented the majority of current cybersecurity controls in place with an emphasis on the confidentiality, integrity and availability (CIA) triad and a defense in depth methodology. The CISO uses a variety of threat intelligence resources, including law enforcement and industry groups such as the Financial Services Information Sharing and Analysis Center (FS-ISAC), to help stay informed about current and emerging risks to the Company.
CFSI maintains enterprise-wide AI and Data Governance frameworks designed to promote the accuracy, privacy, security, and responsible use of data and AI across our operations. Executive oversight is provided by the Management Risk Committee and IT Steering Committee, with operational accountability assigned to business and system data stewards and data asset owners. The CISO jointly oversees data and AI governance, supports validation and control requirements, and enforces security, privacy, and incident-response protocols. The Company has deployed machine learning and generative AI capabilities to enhance monitoring, automated classification of events and data, and threat-detection and prioritization. These tools support faster triage, playbook-driven remediation and realistic simulation for control validation. AI solutions are subject to formal approval, validation, and periodic re-validation proportional to their inherent risk; higher-risk applications retain a human-in-the-loop approach. Controls include encryption, role-based access, audit logging, vendor due diligence, and employee training. These programs are periodically reviewed to reflect evolving regulatory requirements and technological advances.
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The Company’s Internal Audit Department further assists the Company to ensure that the proper safeguards are in place to protect the Company’s information by conducting internal audits on certain aspects of the information security program. Internal Audit engages professionals that specialize in information security to review and provide an annual examination and report on the sufficiency of the Company’s cybersecurity process and information security program. The Company’s independent public accounting firm also performs audit procedures regarding the information security program. In addition, the Company’s and the Bank’s regulators review and assess the Company’s information security program on an annual basis.
The Company also maintains certain management committees that further assist in the prevention, detection, and mitigation of cybersecurity risks. Specifically, the CISO works closely with the Company’s IT Steering Committee which, among other things, reviews the effectiveness of key controls and provides guidance around future initiatives that strengthen the Company’s overall security posture. The IT Steering Committee is comprised of key executives such as the President and Chief Executive Officer and Chief Financial Officer, as well as senior employees that specialize in technology and information security, including the Company’s CISO, Chief Technology Officer, and Chief Risk Officer, and representatives from the Board. This committee also monitors current events regarding cybersecurity threats to the Company and more broadly to the financial services industry to help the Company make informed decisions around any necessary internal control enhancements or adjustments.
In addition to the IT Steering Committee, the IT Subcommittee assists the CISO to prevent, detect, mitigate, and remediate cybersecurity threats and incidents. The IT Subcommittee typically meets quarterly and consists of members of the information technology and information security teams, the Director of Internal Audit, and senior management members of various business units. This committee is responsible for reviewing information technology and information security projects and the threat landscape.
Given the importance of maintaining the security of the Company’s systems and information, cybersecurity risks are also reviewed and addressed when assessing new products and services and any third-party service providers that may be engaged to provide systems and services to the Company. As an essential element of the Company’s cybersecurity program, the Company maintains a third-party risk management program that performs initial and ongoing due diligence, evaluates SOC reports and contract safeguards, and monitors incidents at vendors that could impact Company or customer data. As part of this oversight, the Company’s Risk Management, Legal and/or Information Security Departments review higher risk and material contracts with third-party service providers. Ongoing diligence is also conducted to confirm that vendors are meeting contractual and data security obligations.
The CISO is also responsible for monitoring data security incidents at third parties who have access to the Company’s information which may impact the Company or its customers if it was compromised. When the Company becomes aware of such events, the CISO engages with the impacted third-party service providers to understand the incident, assess the risk that the Company’s information was exposed, and determine methods by which the Company can mitigate any damage and fulfill applicable notification obligations. The Incident Response Core Team, which includes representatives from IT, Risk, and Legal, coordinates the Company’s response to such incidents in accordance with existing policies and supports notification, remediation, and any required regulatory reporting.
In an effort to remain vigilant against cybersecurity attacks, the Company further provides annual and ongoing training to all of its employees so that they have an understanding and appreciation of the cybersecurity environment and risks and the Company’s policies to combat such risks. Such training includes annual mandatory training sessions on cybersecurity for all employees, periodic informational notices regarding emerging threats, and periodic testing to ensure employees are reporting suspicious activities and are diligent in their efforts to avoid phishing attacks and cybersecurity breaches. The CISO also conducts and participates in annual table top exercises with management, and periodically with Directors, in order to be prepared in the event of a material cybersecurity event.
The Company’s customers are also sources of cybersecurity risk, particularly when their activities and systems are beyond the Company’s own security and control systems. The Company engages in periodic outreach with its clients, customers and other external parties concerning cybersecurity risks including opportunities to improve cybersecurity and avoid scams.
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The Company’s cybersecurity process and its ability to assess, manage, and remediate cybersecurity risks further centers around good communication among management. Management stays informed on cybersecurity risks through quarterly reports provided by the CRO and CISO to the Company’s Management Risk Committee, comprised of executives and senior leadership, as well as open communication with the Risk Management team, including through various reports and weekly reporting by the Chief Risk Officer to the Senior Management Committee about cybersecurity matters, as necessary. In the event there is a material cybersecurity incident, the Company’s policies and procedures set forth an action plan, which includes notification of the appropriate personnel and management within the Company as well as regulators and impacted customers, as applicable. For certain cybersecurity incidents, including, but not limited to, incidents that are deemed material pursuant to SEC cybersecurity disclosure rules or that significantly impact vital services provided by the Company, notification is also provided to the Chair of the Board Risk Committee and/or the Chair of the Board. Less severe incidents will be reported by management at the next Board or Risk Committee meeting.
Board of Directors’ Role in Cybersecurity
An integral part of Company’s risk management oversight, which includes information security, is the role of the Board. This is reinforced by the independence and reporting structure of the
In addition, cybersecurity risk is a fundamental risk of the Company which is overseen by the
The Risk Committee meets five times a year during which management provides updates to the committee regarding the material risks facing the Company. As part of this reporting, the Chief Risk Officer and the Risk Management Department have created a risk management program that identifies and evaluates the risks associated with various aspects of the Company’s business and report their assessments to the Risk Committee for review or approval. Within the risk management process, cybersecurity risks are specifically reviewed and addressed, including risks related to current or proposed products and services to be offered by the Company, as well as the efforts taken or to be taken to mitigate such risks.
In addition, on at least a quarterly basis, the CISO presents an Information Security report to the Risk Committee, which includes the Company’s cybersecurity alert level, controls rating, current and emerging cybersecurity risks, threats and trends, mitigation efforts and projects and audit and regulatory updates.
On an annual basis, the Board’s Audit Committee also receives reports from outside consultants who perform various IT related audits, and the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s cybersecurity program in connection with its review of the Company’s financial statements.
Item 2. Properties
The Company’s primary headquarters are located at 333 Butternut Drive, Syracuse, New York, which is leased. The Company has 261 properties, of which 140 are owned and 121 are under lease arrangements, excluding 4 properties that are in process of being opened for business in connection with the Bank’s de novo branch expansions, all of which are under lease arrangements. The majority of the Company’s properties are used by the Banking and Corporate segment which operates 192 full-service bank branches, 8 drive-thru only bank facilities and 18 facilities for back office banking and corporate operations. The Employee Benefit Services segment uses 17 properties including 16 customer service facilities and 1 facility for back office operations, all of which are leased. The Insurance Services segment uses 23 customer service facilities, 20 of which are leased. Certain properties are shared for operations of multiple segments, including most of the properties in use by the Wealth Management Services segment. Certain properties also contain tenant leases or subleases. None of the properties were subject to any material encumbrances. The Company believes that its facilities are suitable and adequate for the Company’s current operations.
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Additional information regarding the Company’s properties is set forth in Note E and Note O to the consolidated financial statements included under Part II, Item 8.
Item 3. Legal Proceedings
The Company and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings or other matters in which claims for monetary damages are asserted. Information on current legal proceedings and other matters is set forth in Note N to the consolidated financial statements included under Part II, Item 8.
Item 4. Mine Safety Disclosures
Not Applicable
Part II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock has been trading on the New York Stock Exchange under the symbol “CBU” since December 31, 1997. Prior to that, the common stock traded over-the-counter on the NASDAQ National Market under the symbol “CBSI” beginning on September 16, 1986. There were 52,723,931 shares of common stock outstanding on January 31, 2026, held by approximately 3,136 registered shareholders of record.
The Company has historically paid regular quarterly cash dividends on its common stock and declared a cash dividend of $0.47 per share for the first quarter of 2026. The Board presently intends to continue the payment of regular quarterly cash dividends on the common stock. However, because the substantial majority of the funds available for the payment of dividends by the Company are derived from the subsidiary Bank, future dividends will depend largely upon the earnings of the Bank, its financial condition, its need for funds and applicable governmental policies and regulations.
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The following graph compares cumulative total shareholders returns on the Company’s common stock over the last five fiscal years to the S&P 600 Commercial Banks Index, the NASDAQ Bank Index, the S&P 500 Index, and the KBW Regional Banking Index. Total return values were calculated as of December 31 of each indicated year assuming a $100 investment on December 31, 2020 and reinvestment of dividends.
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Equity Compensation Plan Information
The following table provides information as of December 31, 2025 with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans.
| | | Number of Securities | ||||
Number of | Remaining Available | ||||||
Securities to be | for Future Issuance | ||||||
Issued upon | Weighted-average | Under Equity | |||||
Exercise of | Exercise Price | Compensation Plans | |||||
Outstanding | of Outstanding | (excluding securities | |||||
Options, Warrants | Options, Warrants | reflected in the first | |||||
Plan Category | and Rights (1) | and Rights (2) | column) | ||||
Equity compensation plans approved by security holders: |
| |
| |
| | |
2004 Long-term Incentive Plan |
| 20,001 | $ | 23.04 |
| 0 | |
2014 Long-term Incentive Plan |
| 967,793 |
| 59.96 |
| 0 | |
2022 Long-term Incentive Plan | 1,043,313 | 38.51 | 850,227 | ||||
Equity compensation plans not approved by security holders |
| 0 |
| 0 |
| 0 | |
Total |
| 2,031,107 | $ | 48.58 |
| 850,227 | |
(1) The number of securities includes 272,813 shares of unvested restricted stock, including performance award restricted stock, comprised of 4,342 shares associated with the 2014 Long-term Incentive Plan and 268,471 shares associated with the 2022 Long-term Incentive Plan.
(2) Excluding the impact of unvested restricted stock, including performance award restricted stock, the total weighted-average exercise price is $56.12, the weighted-average exercise price associated with the 2014 Long-term Incentive Plan is $60.23 and the weighted-average exercise price associated with the 2022 Long-term Incentive Plan is $51.86.
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Stock Repurchase Program
At its December 2025 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,633,000 shares, or 5.0% of the Company’s common stock outstanding, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2026. Any repurchased shares will be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion. At its December 2024 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,628,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2025. There were 206,054 shares of treasury stock purchases made under this authorization in 2025.
The following table presents stock purchases made during the fourth quarter of 2025:
Issuer Purchases of Equity Securities
Total | Total Number of Shares | Maximum Number of | |||||||
Number of | Average | Purchased as Part of | Shares That May Yet Be | ||||||
Shares | Price Paid | Publicly Announced | Purchased Under the Plans | ||||||
Period | Purchased | Per Share | Plans or Programs | or Programs | |||||
October 1-31, 2025 |
| 998 | $ | 56.87 |
| 0 |
| 2,421,946 | |
November 1-30, 2025 |
| 0 |
| 0.00 |
| 0 |
| 2,421,946 | |
December 1-31, 2025 |
| 239 |
| 60.70 |
| 0 |
| 2,421,946 | |
Total (1) |
| 1,237 | $ | 57.61 |
| 0 |
| | |
(1) Included in the common shares repurchased were 781 shares acquired by the Company in connection with the administration of a deferred compensation plan and 456 shares acquired by the Company in connection with the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations. These shares were not repurchased as part of the publicly announced repurchase plan described above.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of the Company for the past two years, although in some circumstances a period longer than two years is covered in order to comply with SEC disclosure requirements or to more fully explain long-term trends. The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and related notes that appear on pages 77 through 148. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.
Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2025, “last year” and equivalent terms refer to calendar year 2024, and all references to income statement results correspond to full-year activity unless otherwise noted. For a discussion of 2024 results as compared with 2023 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024.
This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” beginning on page 70.
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Critical Accounting Policies and Estimates
As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement, and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the significant accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies,” starting on page 83.
Allowance for Credit Losses
The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage, and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss, and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in portfolio risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs, and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside, and downside forecasts. During 2025, the Company updated the ACL model to add 2024 loss history results into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures; adjusted the weighting of the three economic scenarios, increasing the weight for the downside scenario from 30% to 40% and decreasing the weight of the upside scenario from 30% to 20%, to capture additional economic uncertainty; and increased reserves for business lending to capture additional risk in the portfolio due to the increase in larger individual exposures in the business lending portfolio. The change in weighting of the economic scenarios increased the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increased the ACL by $9.3 million as compared to the prior factor in use at December 31, 2024.
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One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside, and downside of 40%, 20%, and 40%, respectively. The scenario-weighted average unemployment rate and gross domestic product (“GDP”) growth forecasts used in the ACL model at December 31, 2025 were 5.5% and 1.3%, respectively, compared to 4.8% and 1.8% at December 31, 2024, respectively. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.4% and an average unemployment rate of 7.1%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the year ended December 31, 2025 by approximately $3.8 million, and decrease net income by $2.8 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation. The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments. Improvements in one factor may offset deterioration in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a severe economic downturn, but rather a moderate recessionary environment. The Company’s geographic distribution of loans being primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators, is reflected in the current methodology that would produce changes to the allowance that are less significant as compared to economic metric-based modeling that is more directly correlated, and therefore sensitive, to fluctuations in historical and projected national economic activity. Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accounting Policies,” starting on page 83.
Pension, Post-Retirement and Other Employee Benefit Plans
The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors. The benefit obligations for the pension and post-retirement benefits plans require significant management judgment. The assumptions used in calculating the benefit obligation include the discount rate, expected return on plan assets, rate of compensation increase and interest crediting rates. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. Mortality tables are also utilized in calculating the benefit obligation, the selection of which is based on management judgment. The Company analyzed the sensitivity of the discount rate and the expected long-term rate of return on plan assets on the pension benefit obligation and net periodic pension cost. At December 31, 2025, a decrease in the discount rate of 100 basis points would increase the pension benefit obligation by $11.3 million, while an increase in the discount rate of 100 basis points would decrease the pension benefit obligation by $9.5 million. For the year ended December 31, 2025, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $0.7 million, while an increase in the discount rate of 100 basis points would decrease the net periodic pension income by $0.2 million. A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.7 million, while an increase of 100 basis points would increase net periodic pension income by $2.7 million. Further detail on the assumptions used and a comparison between 2025 and 2024 assumptions is included in Note K, “Pension and Other Benefit Plans”, starting on page 119.
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Goodwill and Other Intangible Assets
The initial carrying value of goodwill is impacted by the initial carrying value of intangible assets including core deposit intangibles, customer relationship intangibles and acquired loans that are recorded at their fair value as of the date of acquisition. Management judgment and estimates are involved in determining the initial and ongoing carrying value of goodwill and other intangible assets. Initial and ongoing carrying values require the assessment of fair value based on discounted cash flow modeling techniques and inputs such as discount rates, required equity market premiums, peer stock price volatility metrics and company-specific risk indicators. Core deposit intangibles and customer relationship intangibles are amortized on either an accelerated or straight-line basis over periods ranging from seven to 20 years, based on management judgment.
The Company evaluates goodwill for impairment on an annual basis and performs a quarterly analysis to determine if any triggering events have occurred that would require an interim evaluation. In accordance with FASB ASC 350, the Company evaluates whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and performs either a qualitative or quantitative assessment, depending on circumstances and management judgment. The qualitative assessment requires significant management judgment, and if the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is greater than its carrying value, no quantitative analysis is necessary. The inputs for the qualitative analysis that require management judgment include macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant events that affect the fair value of a reporting unit.
During 2025, the Company performed quantitative goodwill analyses for all of the Company’s operating segments. The inputs for the quantitative analyses that require management judgment include determination of the discount rate, forecasted financial performance of the business entity, macroeconomic and industry conditions, and other relevant events that affect the fair value of the reporting unit. Based on the Company’s annual impairment analysis of goodwill as of October 1, 2025, it was determined that the fair value of each reporting unit was in excess of its respective carrying value, therefore goodwill was not impaired. The Company also performs sensitivity analyses around assumptions for the discount rates in order to assess the reasonableness of the assumptions utilized. The fair value-weighted average discount rate used for the October 1, 2025 quantitative assessment was 10.4%, compared to 11.1% for the October 1, 2023 assessment. As of October 1, 2025, a 100 basis point increase in the discount rates used in each operating segment model would reduce estimated entity level fair value by approximately $361.2 million and would not result in impairment of goodwill, as each reporting unit’s fair value would still exceed its carrying value.
Supplemental Reporting of Non-GAAP Results of Operations
The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition or restructuring activities. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with Current Expected Credit Loss (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition or restructuring activities. The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a fully tax-equivalent (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable. Although fully tax-equivalent interest income, net interest income and net interest margin are non-GAAP measures, the Company’s management believes this information helps enhance comparability of the performance of earning assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 20.
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Executive Summary
The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services, including employee benefit services, insurance services, and wealth management services, to retail, commercial, institutional, and governmental customers. The Company’s banking subsidiary is Community Bank, N.A. (the “Bank” or “CBNA”). The Company’s Benefit Plans Administrative Services, Inc. (“BPAS”) subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration, and actuarial consulting services to customers on a national scale. In addition, the Company offers comprehensive financial planning, trust administration and wealth management services through its Nottingham Financial Group operating unit and insurance services through its OneGroup NY, Inc. (“OneGroup”) subsidiary.
The Company’s core operating objectives are: (i) maintain diverse revenue streams to achieve positive operating results in all four of the Company’s business units: banking and corporate, employee benefit services, insurance services, and wealth management services, (ii) increase the noninterest component of total revenues through both organic and acquisition strategies, (iii) optimize the branch network and digital banking delivery systems, primarily through disciplined acquisition strategies, de novo expansions and divestitures/consolidations, (iv) build profitable loan and deposit bases using both organic and acquisition strategies, (v) utilize technology to deliver customer-responsive products and services and improve efficiencies, and (vi) manage an investment securities portfolio to complement the Company’s loan and deposit strategies and mitigate interest rate and liquidity risk and optimize net interest income generation.
Significant factors reviewed by management to evaluate achievement of the Company’s operating objectives, results and financial condition include, but are not limited to: net income and earnings per share; return on assets and equity; components of net interest margin; noninterest revenues; noninterest expenses; asset quality metrics; loan and deposit growth; capital management; performance of individual banking and financial services units; performance of specific product lines and customers; liquidity and interest rate sensitivity; enhancements to customer products and services and their underlying performance characteristics; technology advancements; market share; peer comparisons; the performance of recently acquired businesses and the performance of recently opened and consolidated branch offices.
The Company reported net income of $210.5 million for the year ended December 31, 2025 that was $28.0 million, or 15.3%, above the prior year, while earnings per share of $3.97 for the year was $0.53, or 15.4%, above the prior year. The increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues and a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes. Income taxes increased in 2025 driven by increases in pre-tax income and certain state income tax rates.
Net interest income increased to $506.6 million in 2025, a $57.4 million, or 12.8%, increase from the prior year, marking the nineteenth consecutive year of net interest income growth. The increase in 2025 was primarily due to increases in the yield on average interest-earning assets and average loan balances, along with lower funding costs. The provision for credit losses of $21.4 million in 2025 decreased $1.4 million, or 6.2%, from 2024 as the Company's asset quality metrics improved in 2025 compared to the slight degradation experienced in 2024 that increased the prior year's provision for credit losses. Noninterest revenues increased to $311.5 million in 2025, a $14.3 million, or 4.8%, increase from 2024, with record results in all four operating segments: banking and corporate, employee benefit services, insurance services, and wealth management services.
Noninterest expenses were $521.3 million in 2025, an increase of $34.4 million, or 7.1%, from the prior year. Noninterest expenses were impacted by certain notable items including $3.7 million of acquisition expenses associated with the acquisition of seven branch locations from Santander Bank, N.A. (“Santander”) and $1.5 million of restructuring expenses associated with severance payments as part of a workforce optimization plan due to planned branch consolidations and other operational initiatives. Excluding these items, the increase in noninterest expenses from 2024 was driven primarily by increases in salaries and employee benefits, data processing and communications, occupancy and equipment, legal and professional fees, and other expenses. These increases were due in part to operating expenses associated with acquisitions completed between the periods including the 7 branch locations from Santander, the opening of 15 de novo branches during the year and the Company’s investment in customer-facing and back-office technologies.
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Net interest margin for full year 2025 of 3.29% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.31% increased 25 basis points and 24 basis points, respectively, from full year 2024. The yield on average interest earning assets increased 18 basis points compared to the prior year, primarily driven by higher loan yields. The Company’s total cost of funds decreased 7 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both decreased.
The Company’s average and ending interest-earning assets both increased year-over-year reflective of strong organic loan growth. Average and ending deposits also increased primarily driven by organic growth in non-governmental deposit balances and the $543.7 million of deposits assumed in the Santander branch acquisition. Average and ending borrowings in 2025 decreased from 2024 reflective of growth in deposit balances outpacing loan growth, including the funding provided from the Santander branch acquisition.
Asset quality remained solid throughout 2025. The full year net charge-off ratio increased slightly from 10 basis points of average loans in 2024 to 12 basis points of average loans in 2025 due to the net charge-off associated with one non-owner occupied commercial real estate (“CRE”) loan relationship. This resolution combined with the substantial repayment of one multifamily CRE nonperforming loan relationship drove decreases in the nonperforming and delinquent loans ratios between the end of 2024 and the end of 2025.
Operating net income, a non-GAAP measure, of $225.1 million, increased $31.2 million, or 16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $4.24 increased $0.59, or 16.2%, from last year. Operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, of $315.3 million, increased $41.7 million, or 15.3%, compared to 2024, while operating PPNR per share, a non-GAAP measure, of $5.94, increased $0.79, or 15.3%, compared to the prior year, demonstrating improvement in the Company’s core operating performance between the periods.
Net Income and Profitability
Net income for 2025 was $210.5 million, an increase of $28.0 million, or 15.3%, from 2024. Earnings per share for 2025 was $3.97, an increase of $0.53, or 15.4%, from 2024’s results. These increases were achieved despite the impacts from certain notable non-operating items, including $3.7 million of acquisition expenses associated with the acquisition of seven branch locations from Santander and $1.5 million of restructuring expenses associated with severance payments as part of a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating net income, a non-GAAP measure, of $225.1 million, increased $31.2 million, or 16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $4.24 increased $0.59, or 16.2%, from last year. Operating PPNR, a non-GAAP measure, of $315.3 million, increased $41.7 million, or 15.3%, compared to 2024, while operating PPNR per share, a non-GAAP measure, of $5.94, increased $0.79, or 15.3%, compared to the prior year demonstrating improvement in the Company’s non-credit and non-income tax-related operating performance between the periods. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.
Table 1: Condensed Income Statements
Years Ended December 31, | |||||||||
(000's omitted, except per share data) | | 2025 | | 2024 | | 2023 | |||
Net interest income | $ | 506,550 | $ | 449,117 | $ | 437,285 | |||
Provision for credit losses |
| 21,350 | 22,773 | 11,203 | |||||
Noninterest revenues | 311,457 | 297,186 | 214,834 | ||||||
Noninterest expenses | 521,263 | 486,825 | 472,685 | ||||||
Income before income taxes |
| 275,394 | 236,705 | 168,231 | |||||
Income taxes |
| 64,939 | 54,224 | 36,307 | |||||
Net income | $ | 210,455 | $ | 182,481 | $ | 131,924 | |||
Diluted weighted average common shares outstanding |
| 53,041 |
| 53,098 |
| 53,908 | |||
Diluted earnings per share | $ | 3.97 | $ | 3.44 | $ | 2.45 | |||
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The Company operates four businesses: Banking, Employee Benefit Services, Insurance Services and Wealth Management Services. These businesses are aggregated into the following four reportable segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. The Banking and Corporate segment provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, Vermont, Western Massachusetts, and Southern New Hampshire. In addition to these general intermediation services, the Banking and Corporate segment provides treasury management solutions and payment processing services. The Banking and Corporate segment also holds and manages the Company’s investment and borrowing portfolios and includes certain banking support and corporate overhead-related expenses. Employee Benefit Services, consisting of BPAS and its subsidiaries, provides the following on a national basis: employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services. BPAS services more than 10,000 benefit plans with approximately 960,000 plan participants and supports $132.1 billion in employee benefit trust assets as of December 31, 2025. In addition, BPAS employs 479 professionals serving clients in every U.S. state plus the Commonwealth of Puerto Rico, and occupies 17 offices located in New York, Pennsylvania, Massachusetts, New Jersey, Texas, Minnesota, South Dakota, Washington, Florida, and Puerto Rico. The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. The Insurance Services segment includes 256 employees and 23 customer service facilities in New York, Pennsylvania, Massachusetts, South Carolina, and Florida. Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc. as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”). The Wealth Management Services segment includes 109 employees and assets under management or administration of $14.0 billion at the end of 2025. For additional financial information on the Company’s segments, refer to Note U – Segment Information in the Notes to Consolidated Financial Statements.
The primary factors explaining full year 2025 financial performance are discussed in the remaining sections of this document and are summarized by segment as follows:
BANKING AND CORPORATE
| ● | Banking and corporate net interest income increased $57.4 million, or 12.9% for 2025. This was the result of an 18 basis point increase in the average yield on interest-earning assets, a $635.1 million increase in average interest-earning assets, and a 10 basis point decrease in the average rate on interest-bearing liabilities, partially offset by a $546.6 million increase in average interest-bearing liabilities. Average loans increased $524.7 million, driven primarily by organic growth in all loan categories. The yield on loans increased 21 basis points from the prior year, driven by an increase in the proportion of higher rate loans originated over recent periods. Also contributing to the growth in interest income was an increase in the average yield on investments including cash equivalents of 4 basis points, combined with a $76.8 million increase in the average book value of investments, including cash equivalents, driven primarily by the maturities, calls, and pre-payments of certain lower-yielding available-for-sale investment securities and the purchase of certain higher-yielding government agency mortgage-backed securities during the year. The decrease in interest expense of $1.7 million was driven by a 7 basis point decrease in the cost of funds and a decrease in higher cost average borrowings of $80.9 million, partially offset by an increase in comparatively lower cost average interest-bearing deposit balances of $627.5 million. |
| ● | The provision for credit losses of $21.4 million decreased $1.4 million from the prior year’s provision of $22.8 million, reflective of stable credit quality metrics. Net charge-offs of $13.1 million were $3.0 million higher than 2024, primarily driven by the charge-off of one non-owner occupied CRE loan relationship that was previously individually assessed. This resulted in an annual net charge-off ratio (net charge-offs / total average loans) of 0.12%, which was 2 basis points higher than both the prior year and the 10-year historical average of 0.10%. Year-end nonperforming loans as a percentage of total loans and nonperforming assets as a percentage of loans and other real estate owned decreased 18 and 14 basis points, respectively, as compared to December 31, 2024 levels, primarily attributable to a decrease in nonperforming business lending loan balances. Additional information on trends and policy related to asset quality is provided in the asset quality section on pages 61 through 64. |
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| ● | Banking and corporate noninterest revenues of $83.6 million for 2025 increased by $5.5 million from 2024’s level. The increase was reflective of an increase in customer interest rate swap fee revenues, increases in deposit service fees, an increase in revenues from CRE financing and structuring fees, an increase in bank-owned life insurance income as well as the impact of a $1.6 million income distribution received from a limited partnership investment. |
| ● | Banking and corporate noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, litigation accrual and restructuring expenses, increased $25.9 million, or 8.0%, in 2025, driven by a $12.1 million, or 6.6%, increase in salaries and employee benefits and a $7.4 million, or 14.4%, increase in data processing and communications along with increases in occupancy and equipment, legal and professional fees and other expenses, partially offset by a decrease in business development and marketing expenses. |
EMPLOYEE BENEFIT SERVICES
| ● | Employee benefit services total revenues for 2025 of $142.4 million increased $5.0 million, or 3.6%, from the prior year level, driven by revenue growth in the recordkeeping and third-party administration services business line due in most part to revenue growth from acquisitions and higher average market values of assets under administration. |
| ● | Employee benefit services noninterest expenses for 2025 totaled $86.5 million. This represented an increase from 2024 of $4.9 million, or 6.0%, and was attributable to a $1.4 million, or 2.1%, increase in salaries and employee benefits due to staff additions resulting from acquisition activity and a $1.6 million, or 30.9%, increase in legal and professional fees due to legal expenses associated with the development of new collective investment funds, along with increases in data processing and communications, business development and marketing and other expenses. |
INSURANCE SERVICES
| ● | Insurance services total revenue for 2025 of $54.4 million increased $4.0 million, or 7.8%, from the prior year level. The increase in insurance services revenue was due to revenue growth from acquisitions and an increase in contingent commissions between the periods. |
| ● | Insurance services noninterest expenses of $43.9 million increased $0.8 million, or 1.9%, from 2024, primarily due to a $0.7 million, or 2.0%, increase in salaries and employee benefits. |
WEALTH MANAGEMENT SERVICES
| ● | Wealth management services total revenue for 2025 of $39.4 million increased $0.8 million, or 2.0%, from 2024, reflective of more favorable investment market conditions. |
| ● | Wealth management services noninterest expenses of $27.4 million decreased $0.8 million, or 2.8%, from 2024, primarily due to a $0.8 million, or 3.3%, decrease in salaries and employee benefits. |
Selected Profitability and Other Measures
Return on average assets, return on average equity, dividend payout, and average equity to average asset ratios for the years indicated are as follows:
Table 2: Selected Ratios
| 2025 | | 2024 | | 2023 |
| |
Return on average assets |
| 1.26 | % | 1.14 | % | 0.87 | % |
Return on average equity |
| 11.29 | % | 10.76 | % | 8.27 | % |
Dividend payout ratio |
| 46.6 | % | 52.6 | % | 72.4 | % |
Average equity to average assets |
| 11.14 | % | 10.60 | % | 10.47 | % |
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As displayed in Table 2, the 2025 return on average assets ratio increased 12 basis points, while the return on average equity ratio increased 53 basis points as compared to 2024. The increase in the return on average assets was the result of an increase in net income primarily driven by net interest income growth, partially offset by an increase in average assets driven by organic loan and deposit growth, securities purchases, and deposit funding from the Santander acquisition. The return on average equity ratio increased in 2025 as net income increased at a higher rate than average equity. The increase in average equity was driven by an increase in retained earnings and a decrease in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.
The operating return on average assets, a non-GAAP measure, increased 13 basis points to 1.34% in 2025, as compared to 1.21% in 2024. The operating return on average equity, a non-GAAP measure, increased 64 basis points to 12.07% in 2025, from 11.43% in 2024. See Table 20 beginning on page 72 for Reconciliation of GAAP to Non-GAAP Measures.
The dividend payout ratio for 2025 of 46.6% decreased from 52.6% in 2024 driven by a 15.3% increase in net income outpacing the 2.2% increase in dividends declared. The increase in dividends declared in 2025 was a result of a 2.2% increase in the dividends declared per share, while common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.
The average equity to average assets ratio increased 54 basis points in 2025 due to a 10.0% increase in average equity, partially offset by a 4.7% increase in average assets. The increase in average equity was driven by increases in retained earnings and decreases in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio, while the increase in average assets was primarily due to strong organic loan growth.
Net Interest Income
Net interest income is the amount by which interest, dividends, and fees on interest-earning assets (loans, investments and cash equivalents) exceeds the cost of funds, which consists primarily of interest paid to the Company’s depositors and interest paid on borrowings. Net interest margin is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities as a percentage of interest-earning assets.
Net interest income totaled $506.5 million in 2025, an increase of $57.4 million, or 12.8%, from the prior year. As disclosed in Table 3, fully tax-equivalent net interest income, a non-GAAP measure, totaled $510.1 million in 2025, an increase of $57.2 million, or 12.6%, from the prior year. The increase is a result of an 18 basis point increase in the yield on average interest-earning assets, a $638.9 million, or 4.3%, increase in average interest-earning asset balances and a 10 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $546.6 million, or 5.2%, increase in average interest-bearing liability balances. As reflected in Table 4, the favorable impacts of the increase in average interest-earnings asset balances ($28.6 million), the increase in the yield on average interest-earning assets ($26.9 million) and the decrease in the rate paid on average interest-bearing liabilities ($11.5 million) were partially offset by the unfavorable impact of the increase in average interest-bearing liability balances ($9.8 million).
The 2025 net interest margin increased 25 basis points to 3.29% from 3.04% reported in 2024, while the fully tax-equivalent net interest margin, a non-GAAP measure, increased 24 basis points to 3.31% from the 3.07% reported in the prior year. These increases were the result of an 18 basis point increase in the yield on interest-earning assets and a 10 basis point decrease in the rate paid on average interest-bearing liabilities. The increases in the yield on interest-earnings assets and decrease in the rate on interest-bearing liabilities were primarily due to an increase in the proportion of higher rate loans originated over recent periods, the maturity of lower rate investment securities and purchase of higher rate investment securities, and a decrease in market rates on borrowings and deposits. The 5.64% yield on average loans in 2025 increased 21 basis points as compared to 5.43% in 2024, driven by the change in proportion of loan rates as discussed above. The yield on investments, including cash equivalents, of 2.13% in 2025 was 5 basis points higher than 2024 primarily due to higher yields on investment purchases during the year and maturities, pre-payments, and calls on certain lower yielding available-for-sale securities, partially offset by the impact of lower market rates on the yield earned on cash equivalents. The cost of interest-bearing liabilities was 1.74% during 2025 as compared to 1.84% for 2024. The decreased cost reflects the 4 basis point decrease in the rate paid on average deposits and the 15 basis point lower average rate paid on borrowings due primarily to changes in market interest rates as well as lower levels of overnight borrowings in 2025.
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Total interest income increased by $55.7 million, or 8.7%, while as shown in Table 3 on page 47, total FTE-basis interest income, a non-GAAP measure, increased by $55.6 million, or 8.6%, in 2025 compared to the prior year. Average loans increased $524.7 million, or 5.2%, in 2025. This increase was driven primarily by organic growth in all of the Company’s five main portfolios - business lending, consumer mortgage, consumer indirect, home equity and consumer direct. Included in this increase was $31.9 million of loans acquired from Santander in the fourth quarter of 2025 as part of a branch acquisition. Loan interest income and fees increased $50.9 million, or 9.3%, while FTE-basis loan interest income and fees, a non-GAAP measure, increased $51.0 million, or 9.3%, in 2025 as compared to 2024. These increases were attributable to the aforementioned higher average loan balances and the impact of a 21 basis point higher loan yield, as the yield on new volume continued to outpace the yield on loan paydowns and maturities. Investment and interest-earning cash interest income in 2025 was $4.6 million, or 4.5%, higher than the prior year as a result of a 5 basis point increase in the average investment yield including cash equivalents, a $76.8 million increase in the average book basis balance of investments and a $37.5 million increase in average cash equivalent balances.
Total interest expense decreased by $1.7 million to $192.7 million in 2025 from $194.4 million in 2024. As shown in Table 4 on page 48, lower interest rates on interest-bearing liabilities resulted in a decrease in interest expense of $11.5 million, while higher average interest-bearing liability balances resulted in a $9.8 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 2025 decreased 7 basis points to 1.25% from 1.32% in the prior year. The rate on interest-bearing deposits of 1.58% was 8 basis points lower than 2024, primarily due to a decrease in certain product rates in response to changes in market interest rates during the year. The rate on borrowings decreased 15 basis points to 3.65% in 2025, primarily due to the aforementioned decrease in market interest rates. Total average funding balances (deposits and borrowings) in 2025 increased $563.4 million, or 4.0%. Average deposits increased $644.3 million, driven by increases in all deposit product types from organic growth and the Santander acquisition. Average non-time deposit balances increased $555.5 million, or 5.0%, and accounted for 84.7% of total average deposits in 2025 compared to 84.6% in 2024. Average time deposit balances increased $88.8 million year-over-year and represented 15.3% of total average deposits for 2025 compared to 15.4% in 2024. Average external borrowings decreased $80.9 million, or 8.8%, in 2025 as compared to 2024, primarily due to a decrease in average Federal Reserve short-term borrowings of $54.1 million, average securities sold under agreement to repurchase (“customer repurchase agreements”) of $46.7 million and average overnight borrowings of $20.9 million, partially offset by an increase in term FHLB borrowings of $40.8 million. The decrease in average customer repurchase agreements in 2025 was primarily driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings. The increase in average FHLB term borrowings was due to the timing of when the Company secured funding in 2024, as the Company secured a total of $250.0 million of FHLB term borrowings in the second and third quarters of 2024.
The following table sets forth information related to average interest-earning assets and average interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on a FTE basis using a marginal income tax rate of 25.3% for 2025, 25.0% for 2024 and 24.4% for 2023. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayment, late and other fees and the accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.
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Table 3: Average Balance Sheet
Year Ended December 31, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 | |||||||||||||||||||||||
| | | | Avg. | | | | | | Avg. | | | | | | Avg. | | ||||||||
Average |
| Yield/Rate |
| Average |
| Yield/Rate |
| Average |
| Yield/Rate |
| ||||||||||||||
(000's omitted except yields and rates) | | Balance | | Interest | | Paid | | Balance | | Interest | | Paid | | Balance | | Interest | | Paid | | ||||||
Interest-earning assets: | |
| |
| |
| |
| |
| |
| |
| |
| |
| |||||||
Cash equivalents | $ | 140,145 | $ | 5,734 |
| 4.09 | % | $ | 102,690 | $ | 5,290 |
| 5.15 | % | $ | 55,881 | $ | 2,775 |
| 4.97 | % | ||||
Taxable investment securities (1) |
| 4,251,192 |
| 85,800 |
| 2.02 | % |
| 4,136,337 |
| 80,444 |
| 1.94 | % |
| 4,294,210 |
| 79,593 |
| 1.85 | % | ||||
Nontaxable investment securities (1) |
| 415,598 |
| 13,754 |
| 3.31 | % |
| 453,676 |
| 14,993 |
| 3.30 | % |
| 514,802 |
| 17,395 |
| 3.38 | % | ||||
Loans (net of unearned discount) (2) |
| 10,586,889 |
| 597,520 |
| 5.64 | % |
| 10,062,177 |
| 546,522 |
| 5.43 | % |
| 9,213,168 |
| 445,867 |
| 4.84 | % | ||||
Total interest-earning assets |
| 15,393,824 |
| 702,808 |
| 4.57 | % |
| 14,754,880 |
| 647,249 |
| 4.39 | % |
| 14,078,061 |
| 545,630 |
| 3.88 | % | ||||
Noninterest-earning assets |
| 1,349,537 |
|
|
|
| 1,235,817 |
|
|
|
| 1,164,823 |
|
|
| ||||||||||
Total assets | $ | 16,743,361 |
|
|
| $ | 15,990,697 |
|
|
| $ | 15,242,884 |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest checking, savings, and money market deposits | $ | 8,139,324 |
| 89,845 |
| 1.10 | % | $ | 7,600,646 |
| 82,999 |
| 1.09 | % | $ | 7,771,827 |
| 52,629 |
| 0.68 | % | ||||
Time deposits |
| 2,126,117 |
| 72,355 |
| 3.40 | % |
| 2,037,315 |
| 76,521 |
| 3.76 | % |
| 1,280,751 |
| 32,708 |
| 2.55 | % | ||||
Customer repurchase agreements |
| 224,686 |
| 3,061 |
| 1.36 | % |
| 271,359 |
| 4,584 |
| 1.69 | % |
| 305,213 |
| 3,094 |
| 1.01 | % | ||||
Overnight borrowings | 65,844 | 2,987 | 4.54 | % | 86,770 | 4,851 | 5.59 | % | 184,581 | 9,349 | 5.06 | % | |||||||||||||
FHLB and other borrowings |
| 545,910 |
| 24,477 |
| 4.48 | % |
| 505,130 |
| 22,813 |
| 4.52 | % |
| 140,816 |
| 6,285 |
| 4.46 | % | ||||
Federal Reserve short-term borrowings |
| 0 |
| 0 |
| 0.00 | % |
| 54,098 |
| 2,643 |
| 4.88 | % |
| 0 |
| 0 |
| 0.00 | % | ||||
Subordinated notes payable | 0 | 0 | 0.00 | % | 0 | 0 | 0.00 | % | 765 | 38 | 4.96 | % | |||||||||||||
Total interest-bearing liabilities |
| 11,101,881 |
| 192,725 |
| 1.74 | % |
| 10,555,318 |
| 194,411 |
| 1.84 | % |
| 9,683,953 |
| 104,103 |
| 1.08 | % | ||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Noninterest checking deposits |
| 3,597,086 |
|
|
|
| 3,580,297 |
|
|
|
| 3,848,261 |
|
|
| ||||||||||
Other liabilities |
| 179,619 |
|
|
|
| 159,288 |
|
|
|
| 114,946 |
|
|
| ||||||||||
Shareholders' equity | 1,864,775 |
|
|
| 1,695,794 |
|
|
| 1,595,724 |
|
|
| |||||||||||||
Total liabilities and shareholders' equity | $ | 16,743,361 |
|
| $ | 15,990,697 |
|
| $ | 15,242,884 |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest earnings (FTE) (non-GAAP) |
| $ | 510,083 |
|
| $ | 452,838 |
|
| $ | 441,527 |
| |||||||||||||
Net interest spread |
|
|
|
|
| 2.80 | % |
|
|
|
|
| 2.52 | % |
|
|
|
|
| 2.77 | % | ||||
Net interest spread (FTE) (non-GAAP) |
|
|
|
| 2.83 | % |
|
|
|
| 2.55 | % |
|
|
|
| 2.80 | % | |||||||
Net interest margin |
| 3.29 | % |
| 3.04 | % |
| 3.11 | % | ||||||||||||||||
Net interest margin (FTE) (non-GAAP) |
|
| 3.31 | % |
|
| 3.07 | % |
|
| 3.14 | % | |||||||||||||
|
|
|
| ||||||||||||||||||||||
Fully tax-equivalent adjustment (non-GAAP) (3) | $ | 3,533 |
|
|
|
| $ | 3,721 |
|
|
|
| $ | 4,242 | |||||||||||
| (1) | Averages for investment securities are based on amortized cost basis and the yields do not give effect to changes in fair value that is reflected as a component of noninterest-earning assets, shareholders’ equity, and deferred taxes. |
| (2) | Includes nonaccrual loans. The impact of interest and fees not recognized on nonaccrual loans was immaterial. |
| (3) | The FTE adjustment represents taxes that would have been paid had nontaxable investment securities and loans been fully taxable. |
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As discussed above and disclosed in Table 4 below, the change in net interest income (FTE basis) may be analyzed by segregating the volume and rate components of the changes in interest income and interest expense for each underlying category.
Table 4: Rate/Volume
2025 Compared to 2024 | 2024 Compared to 2023 | |||||||||||||||||
Increase (Decrease) Due to Change in (1) | Increase (Decrease) Due to Change in (1) | |||||||||||||||||
| Net | Net | ||||||||||||||||
(000's omitted) | Volume | | Yield/Rate | | Change | | Volume | | Yield/Rate | | Change | |||||||
Interest earned on: | ||||||||||||||||||
Cash equivalents | $ | 1,675 | $ | (1,231) | $ | 444 | $ | 2,408 | $ | 107 | $ | 2,515 | ||||||
Taxable investment securities | 2,270 |
| 3,086 |
| 5,356 |
| (2,988) |
| 3,839 |
| 851 | |||||||
Nontaxable investment securities |
| (1,260) |
| 21 |
| (1,239) |
| (2,027) |
| (375) |
| (2,402) | ||||||
Loans (net of unearned discount) |
| 29,136 |
| 21,862 |
| 50,998 |
| 43,247 |
| 57,408 |
| 100,655 | ||||||
Total interest-earning assets (2) |
| 28,616 |
| 26,943 |
| 55,559 |
| 27,156 |
| 74,463 |
| 101,619 | ||||||
| ||||||||||||||||||
Interest paid on: |
|
|
|
|
|
| ||||||||||||
Interest checking, savings and money market deposits |
| 5,937 |
| 909 |
| 6,846 |
| (1,184) |
| 31,554 |
| 30,370 | ||||||
Time deposits |
| 3,236 |
| (7,402) |
| (4,166) |
| 24,382 |
| 19,431 |
| 43,813 | ||||||
Customer repurchase agreements |
| (716) |
| (807) |
| (1,523) |
| (376) |
| 1,866 |
| 1,490 | ||||||
Overnight borrowings |
| (1,046) | (818) | (1,864) | (5,385) | 887 | (4,498) | |||||||||||
FHLB and other borrowings | 1,830 |
| (166) |
| 1,664 |
| 16,452 |
| 76 |
| 16,528 | |||||||
Federal Reserve short-term borrowings |
| (2,643) |
| 0 |
| (2,643) |
| 2,643 |
| 0 |
| 2,643 | ||||||
Subordinated notes payable | 0 | 0 | 0 | (38) | 0 | (38) | ||||||||||||
Total interest-bearing liabilities (2) |
| 9,792 |
| (11,478) |
| (1,686) |
| 10,117 |
| 80,191 |
| 90,308 | ||||||
Net interest earnings (FTE) (non-GAAP) (2) | $ | 20,159 | $ | 37,086 | $ | 57,245 | $ | 20,913 | $ | (9,602) | $ | 11,311 | ||||||
| (1) | The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of such change in each component. |
| (2) | Changes due to volume and rate are computed from the respective changes in average balances and rates of the totals; they are not a summation of the changes of the components. |
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Table of Contents
Noninterest Revenues
The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits, customer interest rate swap fees, CRE financing and structuring fees, and other core customer activities typically provided through the branch network, commercial banking offices, and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust division within CBNA), broker-dealer and investment advisory products and services (performed by NISI) and Nottingham Wealth Partners, Inc.) and asset management services (performed by Nottingham), collectively referred to as Nottingham Financial Group; and 4) insurance and risk management products and services (performed by OneGroup). Additionally, the Company has other transactions that impact noninterest revenues, including income earned on bank owned life insurance, gains or losses on debt extinguishment, realized and unrealized gains or losses on investment securities and income or losses on equity method investments.
Table 5: Noninterest Revenues
Years Ended December 31, | ||||||||||
(000’s omitted) | | 2025 | | 2024 | | 2023 | ||||
Employee benefit services | $ | 135,974 | $ | 130,981 | $ | 117,961 | ||||
Insurance services | 54,410 | 50,249 | 47,094 | |||||||
Wealth management services | 37,065 | 36,668 | 31,941 | |||||||
Deposit service charges and fees |
| 32,367 | 31,566 | 28,921 | ||||||
Debit interchange and ATM fees | 27,004 | 26,717 | 25,768 | |||||||
Mortgage banking | 3,535 | 4,421 | 595 | |||||||
Other banking revenues |
| 21,012 | 15,840 | 14,688 | ||||||
Loss on sales of investment securities | 0 | (487) | (52,329) | |||||||
Gain on debt extinguishment | 0 | 0 | 242 | |||||||
Unrealized gain (loss) on equity securities |
| 375 | 1,231 | (47) | ||||||
Loss from equity method investments | (285) | 0 | 0 | |||||||
Total noninterest revenues | $ | 311,457 | $ | 297,186 | $ | 214,834 | ||||
Noninterest revenues/total revenues | 38.1 | % | 39.8 | % | 32.9 | % | ||||
Operating noninterest revenues/operating revenues (FTE basis) (non-GAAP) (1) |
| 37.9 | % |
| 39.6 | % | 37.7 | % | ||
| (1) | Operating noninterest revenues, a non-GAAP measure, excludes loss on sales of investment securities, gain on debt extinguishment and unrealized gain (loss) on equity securities from total noninterest revenues. Operating revenues, a non-GAAP measure, is defined as net interest income on a FTE basis plus noninterest revenues, excluding loss on sales of investment securities, gain on debt extinguishment, and unrealized gain (loss) on equity securities. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. |
As displayed in Table 5, total noninterest revenues of $311.5 million in 2025 increased $14.3 million, or 4.8%, as compared to 2024. Total operating noninterest revenues, a non-GAAP measure, increased $14.6 million, or 4.9%, to $311.1 million in 2025 as compared to 2024. The increase was comprised of increases in all four of the Company’s business units.
Noninterest revenues as a percentage of total revenues (defined as net interest income plus noninterest revenues) was 38.1% in 2025, a decrease from 39.8% in 2024. Operating noninterest revenues as a percentage of operating revenues (FTE basis), a non-GAAP measure, were 37.9% in 2025, a decrease from 39.6% in the prior year. The decrease was due to the 12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, outpacing the 4.9% increase in operating noninterest revenues, a non-GAAP measure.
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Table of Contents
Banking noninterest revenues, comprised of deposit service charges and fees, debit interchange and ATM fees, mortgage banking and other banking revenues, totaled $83.9 million in 2025, an increase of $5.4 million, or 6.8%, from the prior year. The increase was driven by increases in other banking revenues ($5.2 million), deposit service charges and fees ($0.8 million), and debit interchange and ATM fees ($0.3 million), partially offset by a decrease in mortgage banking revenues ($0.9 million). The increase in other banking revenues was associated with higher customer interest rate swap fee revenues, other commercial banking-related fees, including an increase in CRE financing and structuring fees generated by Axiom Realty Group (“Axiom”), income from bank-owned life insurance and a $1.6 million income distribution received from a limited partnership investment.
As disclosed in Table 5, noninterest revenue from non-banking financial services (noninterest revenues from employee benefit services, insurance services, and wealth management services) increased $9.6 million, or 4.4%, in 2025 to $227.4 million. Financial services revenues represented 73% of total noninterest revenues in both 2025 and 2024. Financial services revenues accounted for 73% of total operating noninterest revenues, a non-GAAP measure, in 2025 compared to 74% in 2024.
Employee benefit services generated revenue of $136.0 million in 2025 that reflected growth of $5.0 million, or 3.8%, primarily related to revenue growth in the recordkeeping and third-party administration services business line due in part to revenue growth from acquisitions and higher average market values of assets under administration. Ending employee benefit trust assets were $132.1 billion at December 31, 2025.
Insurance services revenues increased $4.2 million, or 8.3%, in 2025 primarily due to revenue growth from acquisitions and an increase in contingent commissions.
Wealth management services revenues increased $0.4 million, or 1.1%, in 2025 due to favorable investment market conditions. Assets under management and administration within the wealth management businesses increased $0.8 billion to $14.0 billion at December 31, 2025 as compared to one year earlier. Assets under management and administration within the wealth management businesses increased $1.4 billion to $13.2 billion at December 31, 2024 as compared to one year earlier. Assets under management and administration included approximately $3.6 billion and $3.3 billion of intercompany assets under management and administration at the end of 2025 and 2024, respectively, associated with affiliated employee benefit trust accounts.
Noninterest Expenses
As shown in Table 6, noninterest expenses of $521.3 million in 2025 were $34.4 million, or 7.1%, higher than 2024, reflective of increases in salaries and employee benefits, data processing and communications expenses, occupancy and equipment expenses, acquisition expenses, other expenses, legal and professional fees and restructuring expenses. These increases were partially offset by decreases in business development and marketing expenses, amortization of intangible assets, acquisition-related contingent consideration adjustments, and litigation expenses.
Noninterest expenses as a percent of average assets for 2025 was 3.11%, an increase of 7 basis points from 3.04% in 2024. Operating noninterest expenses (non-GAAP) as a percent of average assets, a non-GAAP measure, for 2025 was 3.00%, which was 5 basis points higher than 2024. The increases in these ratios for 2025 were due to a 7.1% increase in noninterest expenses and a 6.4% increase in operating noninterest expenses, a non-GAAP measure, while average assets increased by 4.7%, primarily due to organic loan growth.
The efficiency ratio expresses the level of noninterest expenses as a percentage of total revenues (net interest income plus total noninterest revenues). The Company also utilizes the operating efficiency ratio, a non-GAAP measure, which is a performance measurement tool widely used by banks and is defined by the Company as operating noninterest expenses, a non-GAAP measure, divided by fully-tax equivalent operating revenues, a non-GAAP measure. Lower ratios correlate to better operating efficiency.
The 2025 efficiency ratio of 63.7% improved 1.5 percentage points from the 2024 efficiency ratio as noninterest expenses increased 7.1% while total revenues increased 9.6%.
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The 2025 operating efficiency ratio, a non-GAAP measure, of 61.2% improved 1.8 percentage points from the 2024 non-GAAP operating efficiency ratio of 63.0% as the 6.4% increase in operating noninterest expenses, a non-GAAP measure, grew at a slower pace than the 9.6% increase in fully tax-equivalent operating revenues, a non-GAAP measure, comprised of a 12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, and a 4.9% increase in operating noninterest revenues, a non-GAAP measure. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.
Table 6: Noninterest Expenses
Years Ended December 31, | ||||||||||
(000's omitted) | | 2025 | | 2024 | | 2023 | | |||
Salaries and employee benefits | $ | 313,915 | $ | 300,779 | $ | 281,803 | ||||
Data processing and communications |
| 70,161 |
| 61,843 | 57,585 | |||||
Occupancy and equipment |
| 48,249 |
| 43,658 | 42,550 | |||||
Business development and marketing |
| 15,135 |
| 16,059 | 15,731 | |||||
Legal and professional fees |
| 17,898 |
| 15,323 | 15,921 | |||||
Amortization of intangible assets |
| 13,846 |
| 14,259 | 14,511 | |||||
Litigation accrual | (50) | 138 | 5,800 | |||||||
Acquisition expenses |
| 3,663 |
| 213 | 63 | |||||
Acquisition-related contingent consideration adjustments | 0 | 244 | 3,280 | |||||||
Restructuring expenses | 1,499 | 0 | 1,163 | |||||||
Other |
| 36,947 |
| 34,309 | 34,278 | |||||
Total noninterest expenses | $ | 521,263 | $ | 486,825 | $ | 472,685 | ||||
Noninterest expenses/average assets |
| 3.11 | % | 3.04 | % | 3.10 | % | |||
Operating noninterest expenses(1) /average assets (non-GAAP) | 3.00 | % |
| 2.95 | % | 2.95 | % | |||
Efficiency ratio |
| 63.7 | % | 65.2 | % | 72.5 | % | |||
Operating efficiency ratio (non-GAAP)(2) | 61.2 | % |
| 63.0 | % | 63.2 | % | |||
(1) | Operating noninterest expenses, a non-GAAP measure, is calculated as total noninterest expenses less litigation accrual, acquisition expenses, acquisition-related contingent consideration adjustments, restructuring expenses and amortization of intangible assets. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. |
(2) | Operating efficiency ratio, a non-GAAP measure, is calculated as operating noninterest expenses as defined in footnote (1) above divided by net interest income on a FTE basis plus noninterest revenues excluding loss on sales of investment securities, gain on debt extinguishment and unrealized gain (loss) on equity securities. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. |
Salaries and employee benefits increased $13.1 million, or 4.4%, in 2025, primarily due to select staff additions, including from acquisitions and de novo branch expansions and higher performance-based incentives, partially offset by lower employee medical costs that reflected rebates received. The Company also recorded $1.5 million in costs related to severance payments for a workforce optimization plan due to planned branch consolidations and other consumer banking operational initiatives. Total full-time equivalent staff at the end of 2025 was 2,805 compared to 2,698 at December 31, 2024 and 2,669 at the end of 2023.
Total non-personnel noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, restructuring expenses and litigation accrual, increased $17.2 million, or 10.0%, in 2025, reflective of increases in data processing and communications expenses, other expenses, legal and professional fees, and occupancy and equipment expenses, partially offset by a decrease in business development and marketing expenses. The increase in data processing and communications expenses is reflective of the Company’s continued investment in key technologies, including artificial intelligence applications, customer payment fraud and cybersecurity risk management software, credit administration software and other workflow efficiency initiatives, as well as a $1.4 million consulting expense in connection with a contract renegotiation with the Company’s banking core system provider, which is expected to result in proportionally lower future processing costs for that system infrastructure. Occupancy and equipment expenses increased due to higher property maintenance costs as well as incremental expenses associated with acquisitions and the Bank’s de novo branches opened between the periods. The increase in other expenses includes $1.7 million lower gains on the sale of properties related to the branch consolidations completed in 2025. Legal and professional fees increased due to legal expenses associated with the development of new collective investment funds.
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Table of Contents
On November 16, 2023, the FDIC issued a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of certain banks in the first quarter of 2023. As of December 31, 2025, the special assessment is anticipated to be collected over eight quarterly assessment periods that began in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $5 billion as of December 31, 2022. As the estimated loss to the DIF will be periodically adjusted the FDIC could cease collection early, if the FDIC has collected enough to recover actual or estimated losses, extend the special assessment collection period one or more quarters beyond the initial collection period, if actual or estimated losses exceed the amounts collected, and impose a final shortfall special assessment on a one-time basis after certain receiverships terminate, if actual losses exceed the amounts collected. The Company recorded a $0.2 million and $1.5 million expense accrual associated with this special assessment in 2024 and 2023, respectively. The Company recorded a $0.2 million reduction to the accrual associated with this special assessment in 2025. Excluding the expense accruals associated with the special assessment, FDIC insurance expense in 2025 totaled $9.8 million, compared to $8.9 million in 2024 and $8.0 million in 2023.
Acquisition-related expenses for 2025 totaled $3.7 million, primarily comprised of costs related to the integration of the Santander branch acquisition completed in the fourth quarter of 2025.
Income Taxes
The Company estimates its income tax expense based on the amount it expects to owe the respective taxing authorities, plus the impact of deferred tax items. Taxes are discussed in more detail in Note J of the Consolidated Financial Statements beginning on page 116. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of the Company’s tax position. If the final resolution of taxes payable differs from its estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required.
The effective income tax rate for 2025 was 23.6%, compared to 22.9% in 2024 and 21.6% in 2023. The increase in the effective income tax rate for 2025 compared to the effective tax rate for 2024 is primarily attributable to a decrease in solar energy income tax credits in the current year as well as an increase in certain state income taxes. The Company recorded income tax expense associated with the amortization of income tax credit investments of $7.3 million in 2025, compared to $9.7 million in 2024 and $1.3 million in 2023. Excluding the impact of tax benefits related to stock-based compensation activity and amortization of income tax credit investments, the effective tax rate for full year 2025 was 21.3%, up from 19.0% for full year 2024, driven by a decrease in solar energy income tax credits as well as an increase in certain state income taxes.
Shareholders’ Equity and Regulatory Capital
Shareholders’ equity ended 2025 at $2.00 billion, up $243.2 million, or 13.8%, from the end of 2024. This increase reflects net income of $210.5 million, a decrease in accumulated other comprehensive loss of $129.1 million, stock-based compensation of $10.9 million, the issuance of shares through employee stock plans of $2.1 million, partially offset by common stock dividends declared of $98.2 million and common stock repurchased of $11.2 million. The change in accumulated other comprehensive loss was primarily driven by a $118.0 million decrease in other comprehensive loss related to the Company’s available-for-sale investment portfolio, as well as a positive $11.1 million adjustment in the overfunded status of the Company’s employee retirement plans. The change in the other comprehensive loss related to the Company’s available-for-sale investment portfolio includes a net increase in the after-tax market value adjustment on the available-for-sale investment portfolio due to general downward movements in medium to long-term interest rates, as well as the volume and rates associated with the securities maturities that occurred during the past 12 months. Common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.
The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s dividend paying ability and financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets and certain liabilities and off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
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The Company and the Bank are required to maintain a “capital conservation buffer,” composed entirely of common equity Tier 1 capital, in addition to minimum risk-based capital ratios. The required capital conservation buffer is 2.5% as of December 31, 2025, 2024 and 2023. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of December 31, 2025, 2024 and 2023, the Company and the Bank must maintain:
(i) Common equity Tier 1 capital to total risk-weighted assets (“Common equity tier 1 capital ratio”) of at least 7.0%,
(ii) Tier 1 capital to total risk-weighted assets (“Tier 1 risk-based capital ratio”) of at least 8.5%, and
(iii)Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets (“Total risk-based capital ratio”) of at least 10.5%.
In addition, the Company and Bank must maintain a ratio of ending Tier 1 capital to adjusted quarterly average assets (“Tier 1 leverage ratio”) of at least 5.0% to be considered “well capitalized” under the regulatory framework for prompt corrective action.
As of December 31, 2025, 2024 and 2023, the Company and Bank meet all applicable capital adequacy requirements to be considered “well capitalized”. As of December 31, 2025, 2024 and 2023, the regulatory capital ratios for the Company and Bank are presented in Table 7 below.
Table 7: Regulatory Ratios
December 31, 2025 | December 31, 2024 |
| December 31, 2023 |
| ||||||||
Community | Community | Community | ||||||||||
Financial | Community | Financial | Community | Financial | Community | |||||||
System, Inc. | | Bank, N.A. | | System, Inc. | | Bank, N.A. | | System, Inc. | | Bank, N.A. | ||
Tier 1 leverage ratio | 9.21 | % | 7.85 | % | 9.19 | % | 7.69 | % | 9.34 | % | 7.70 | % |
Common equity Tier 1 capital ratio | 14.04 | % | 12.02 | % | 14.23 | % | 11.96 | % | 14.75 | % | 12.11 | % |
Tier 1 risk-based capital ratio | 14.04 | % | 12.02 | % | 14.23 | % | 11.96 | % | 14.76 | % | 12.11 | % |
Total risk-based capital ratio | 14.85 | % | 12.84 | % | 15.01 | % | 12.74 | % | 15.46 | % | 12.82 | % |
The Company’s tier 1 leverage ratio, a primary measure for which regulators have established a 5% minimum for an institution to be considered “well-capitalized,” increased 2 basis points from the prior year to end the year at 9.21%. The increase in the tier 1 leverage ratio as compared to 2024 was the result of an increase in shareholders’ equity, excluding intangibles and other comprehensive income or loss items of 5.0%, as the impact of net earnings retention outweighed share repurchases during the year, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased 4.7%, primarily due to the Santander branch acquisition and organic loan growth. For additional financial information on the Company’s regulatory capital, refer to Note P – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 11.59% at the end of 2025 compared to 10.76% at the end of 2024. The increase was due to shareholders’ equity increasing 13.8%, as the impact of net earnings retention and a decrease in accumulated other comprehensive loss due to a reduction in unrealized loss in the Company’s investment portfolio outweighed share repurchases during the year, while assets increasing by 5.6% driven primarily by organic loan growth and the Santander branch acquisition. The tangible equity-to-assets ratio, a non-GAAP and regulatory reporting measure, was 6.75% at the end of 2025 versus 5.83% one year earlier. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. The increase was due to tangible common shareholders’ equity increasing by 22.2% in 2025 primarily due to a $129.1 million decrease in accumulated other comprehensive loss and a $112.3 million increase in retained earnings, while tangible assets increased 5.6% from the prior year, reflective of organic loan growth and the Santander branch acquisition. The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities.
Cash dividends declared on common stock in 2025 of $98.1 million represented an increase of 2.2% over the prior year. This growth was a result of a $0.04 increase in dividends per share to $1.86 for the year, reflective of $0.01 increases in the quarterly dividend in the third quarters of both 2025 and 2024, with common shares outstanding remaining consistent. Dividends per share for 2025 of $1.86 represents a 2.2% increase from $1.82 in 2024, a result of quarterly dividends per share increasing from $0.45 to $0.46 in the third quarter of 2024 and from $0.46 to $0.47 in the third quarter of 2025. The 2025 increase in quarterly dividends marked the 33rd consecutive year of dividend increases for the Company. The dividend payout ratio for 2025 was 46.6% compared to 52.6% in 2024, and 72.4% in 2023. The dividend payout ratio decreased during 2025 as dividends declared increased 2.2% while net income increased 15.3% from 2024, primarily driven by an increase in net interest income.
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The Company’s ability to pay dividends to its shareholders is subject to laws and regulations imposing restrictions on the amount of dividends that may be declared and paid. Dividend payments by the Company are dependent on a number of factors, including the earnings and financial condition of the Company and the Bank and the ability of the Company to receive dividends from the Bank, and are subject to the limitations referred to in Note P: Regulatory Matters.
Liquidity
Liquidity risk is a measure of the Company’s ability to raise cash when needed at a reasonable cost and minimize any loss. The Company maintains appropriate liquidity levels in both normal operating conditions as well as stressed environments. The Company must be capable of meeting all obligations to its customers at any time and, therefore, the active management of its liquidity position remains an important management objective. The Bank has appointed the Asset Liability Committee (“ALCO”) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk. The indicators are monitored using a scorecard with three risk level limits. These risk indicators measure core liquidity and funding needs, capital at risk and change in available funding sources. The risk indicators are monitored using such metrics as the core basic surplus ratio, unencumbered securities to average assets, free loan collateral to average assets, loans to deposits, deposits to total funding and borrowings to total funding ratios.
Given the uncertain nature of the Company’s customers' demands, as well as the Company's desire to take advantage of earnings enhancement opportunities, the Company must have adequate sources of on and off-balance sheet funds available that can be utilized when needed. Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as borrowings from the FHLB and the FRB and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit, and the brokered CD market. The primary sources of funds are deposits, which totaled $14.39 billion at December 31, 2025. The primary sources of non-deposit funds are customer repurchase agreements and FHLB and FRB term borrowings and overnight advances. At December 31, 2025, there were $231.2 million of customer repurchase agreements, $450.4 million of FHLB term borrowings outstanding, and no overnight borrowings.
The Company’s primary sources of available liquidity include unrestricted cash and cash equivalents, borrowing capacity at the FHLB and FRB, as well as net unpledged investment securities that could be sold, subject to market conditions, or used to collateralize additional funding. Table 8 below details the available sources of liquidity at December 31, 2025. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at December 31, 2025. The Company’s sources of immediately available liquidity of $6.82 billion as of December 31, 2025 represent approximately 249% of the Company’s estimated uninsured deposits (deposits in excess of FDIC limits), net of collateralized and intercompany deposits (“net estimated uninsured deposits”), estimated to be approximately $2.74 billion.
Table 8: Sources of Liquidity
(000's omitted) | | 2025 | | 2024 |
| ||
Unrestricted cash and cash equivalents | $ | 286,995 | $ | 191,894 | |||
FHLB borrowing capacity |
| 1,576,124 |
| 1,185,087 | |||
FRB borrowing capacity |
| 2,776,607 |
| 2,670,278 | |||
Net unpledged investment securities |
| 2,177,896 |
| 1,726,680 | |||
Total sources of liquidity | $ | 6,817,622 | $ | 5,773,939 | |||
Net estimated uninsured deposits | $ | 2,739,971 | $ | 2,347,825 | |||
Total sources of liquidity/net estimated uninsured deposits | 249 | % | 246 | % | |||
To measure intermediate risk over the next twelve months, the Company reviews a sources and uses projection. As of December 31, 2025, there is sufficient liquidity available during the next year to cover projected cash outflows. In addition, stress tests on the cash flows are performed for various scenarios ranging from high probability events with a low impact on the liquidity position to low probability events with a high impact on the liquidity position. The results of the stress tests as of December 31, 2025 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios.
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To measure longer-term liquidity, a baseline projection of growth in interest-earning assets and interest-bearing liabilities for five years is made to reflect how liquidity levels could change over time. This five-year measure reflects ample liquidity for loan and other asset growth over the next five years.
The possibility of a funding crisis exists at all financial institutions. A funding crisis would most likely result from a shock to the financial system which disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Accordingly, management has addressed this issue by formulating a Liquidity Contingency Plan, which has been reviewed and approved by both the Company’s Board of Directors (the “Board”) and the Company’s ALCO. The plan addresses the actions that the Company would take in response to both a short-term and long-term funding crisis. Triggers within the plan and liquidity risk monitor are not by themselves definitive indicators of insufficient liquidity, but rather a mechanism for management to monitor conditions and possibly provide advance warning which could avert or reduce the impact of a crisis. Liquidity triggers are set based on a variety of factors, including Company history, trends, and current operating performance, industry observations, and, as warranted, changes in internal and external economic factors. Indicators include: core liquidity and funding needs such as the core basic surplus, unencumbered securities to average assets, and free FHLB and FRB loan collateral to average assets; heightened funding needs indicators such as average loans to average deposits, average governmental and nongovernmental deposits to total funding, and average borrowings to total funding; capital at risk indicators including regulatory ratios; asset quality indicators; and decrease in funds availability indicators which are a combination of internal and external factors such as increased restrictions on borrowing or downturns in the credit market. The Company has established three risk levels for these liquidity triggers that inform the response based on the severity of the circumstances. Responses vary from an assessment of possible funding deficiencies with no impact on normal business operations to immediate action required due to impending funding problems. For more information regarding the risk factor associated with the possibility of a funding crisis, refer to the discussion under the heading “Item 1A. Risk Factors” beginning on page 18.
Goodwill and Intangible Assets
The changes in intangible assets by reportable segment for the year ended December 31, 2025 are summarized as follows:
Table 9: Intangible Assets
Balance at | | Balance at | |||||||||||||
(000’s omitted) | | December 31, 2024 | | Additions | | Amortization | | Impairment | | December 31, 2025 | |||||
Banking and Corporate Segment | |
| | | | | |||||||||
Goodwill | $ | 732,598 | $ | 31,960 | $ | 0 | $ | 0 | $ | 764,558 | |||||
Core deposit intangibles |
| 5,148 |
| 11,900 |
| 2,294 |
| 0 |
| 14,754 | |||||
Other intangibles | 724 | 0 | 202 | 0 | 522 | ||||||||||
Total Banking and Corporate Segment |
| 738,470 |
| 43,860 |
| 2,496 |
| 0 |
| 779,834 | |||||
Employee Benefit Services Segment |
|
|
|
| |
| |||||||||
Goodwill |
| 89,293 |
| 1,753 |
| 0 |
| 0 |
| 91,046 | |||||
Other intangibles |
| 23,314 |
| 3,669 |
| 7,078 |
| 0 |
| 19,905 | |||||
Total Employee Benefit Services Segment |
| 112,607 |
| 5,422 |
| 7,078 |
| 0 |
| 110,951 | |||||
Insurance Services Segment |
|
|
|
| |
| |||||||||
Goodwill |
| 27,896 |
| 812 | 0 |
| 0 |
| 28,708 | ||||||
Other intangibles |
| 17,888 |
| 3,872 | 3,770 |
| 0 |
| 17,990 | ||||||
Total Insurance Services Segment |
| 45,784 |
| 4,684 |
| 3,770 |
| 0 |
| 46,698 | |||||
Wealth Management Services Segment | |||||||||||||||
Goodwill | 3,438 | 225 | 0 | 0 | 3,663 | ||||||||||
Other intangibles | 1,172 | 900 | 502 | 0 | 1,570 | ||||||||||
Total Wealth Management Services Segment | 4,610 | 1,125 | 502 | 0 | 5,233 | ||||||||||
Total | $ | 901,471 | $ | 55,091 | $ | 13,846 | $ | 0 | $ | 942,716 | |||||
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Intangible assets at the end of 2025 totaled $942.7 million, an increase of $41.2 million from the prior year due to the addition of $34.8 million of goodwill, $11.9 million of core deposit intangibles and $8.4 million of other intangibles arising from acquisition activity, partially offset by $13.8 million of amortization during the year. The additional goodwill, core deposit intangibles and other intangibles recorded in 2025 resulted from the acquisition of Santander branches and wealth management clients as well as OneGroup, BPA and BPAS acquisitions during 2025. Goodwill represents the excess cost of an acquisition over the fair value of the net assets acquired. Goodwill at December 31, 2025 totaled $888.0 million, comprised of $764.6 million related to banking acquisitions and $123.4 million arising from the acquisition of non-banking financial services businesses. Goodwill is subject to periodic impairment analysis to determine whether the carrying value of the identified businesses exceeds their fair value, which would necessitate a write-down of goodwill. The Company completed its quantitative goodwill impairment analyses as of October 1, 2025 and determined that there was no impairment for any of the Company’s four business segments.
Core deposit intangibles represent the value of acquired non-time deposits in excess of funding that could have been obtained in the capital markets. Core deposit intangibles are amortized on an accelerated basis over eight years. The recognition of customer relationship intangibles was determined based on a methodology that calculates the present value of the projected future net income derived from the acquired customer base. These customer relationship intangibles are being amortized on an accelerated basis over periods ranging from eight to fifteen years.
Loans
Gross loans outstanding of $10.95 billion as of December 31, 2025 increased $517.4 million, or 5.0%, compared to December 31, 2024, driven by increases in all loan categories primarily due to net organic growth. The loan-to-deposit ratio was 76.1% as of December 31, 2025 compared to 77.6% at December 31, 2024. The decrease in the loan-to-deposit ratio was driven by an increase in ending deposits of $945.4 million, or 7.0%, comprised of organic growth and $543.7 million of deposits acquired from Santander, greater than the aforementioned organic loan growth.
Included in the 2025 increase in loans is $31.6 million of loans acquired from Santander, including $4.8 million of consumer mortgage loans, $2.0 million of business lending loans, $16.4 million of home equity loans and $8.4 million of consumer direct installment loans.
The compounded annual growth rate (“CAGR”) for the Company’s total loan portfolio between 2022 and 2025 was 7.5%. The greatest overall expansion occurred in business lending at a 9.1% CAGR, followed by home equity, which grew at a 7.1% CAGR, consumer indirect at a 6.5% CAGR, consumer mortgage at a 6.3% CAGR, and consumer direct at a 5.0% CAGR. The Company’s loan growth over past three years was primarily organic.
The weighting of the components of the Company’s loan portfolio enables it to be highly diversified. Approximately 57% of loans outstanding at the end of 2025 were made to consumers borrowing on an installment, line of credit or residential mortgage loan basis while 43% of loans outstanding at the end of 2025 were associated with business lending.
Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit, and governmental customers and vehicle dealer floor plan financing is characterized as the Company’s business lending activity. The total business lending portfolio increased $228.7 million, or 5.1%, in 2025 primarily due to net organic growth. During 2025, multifamily loans increased $193.5 million, or 26.7%, business non-real estate loans, including commercial and industrial lending, increased $132.8 million, or 11.6% and owner-occupied CRE increased $7.0 million, or 0.8%, while non-owner occupied CRE decreased $104.6 million, or 5.9%. The Company’s exposure to these portfolios is diverse both geographically and by industry type, and remains relatively low at 15% of total assets, 24% of total loans and 188% of total bank-level regulatory capital. Total business lending was comprised of 73.1% CRE and 26.9% business non-real estate lending at December 31, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 26.5% of total CRE lending, followed by office and lodging at 10.8% and 9.6%, respectively. The Company’s largest owner-occupied CRE lending concentration by industry is retail trade at 8.0% of total CRE lending, followed by real estate rental and leasing at 2.6%, and arts, entertainment, and recreation at 2.4%. These collateral and industry statistics combined with no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of commercial real estate lending being conducted in major metropolitan areas, demonstrate the diversity of the Company’s business lending portfolio, as there are no significant industry or geographic concentrations. See Table 10 below for concentrations of CRE lending by borrower type and Table 11 below for concentrations of CRE by property location.
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The business loan balance increases are reflective of continued high demand for multi-family housing, expansion of internal resources and proactive business development and pricing in the Company’s market areas, as well as the Company’s strong liquidity profile relative to competitors that creates opportunities to gain market share. The Company strives to generate growth in its business portfolio in a manner that adheres to its goals of maintaining strong credit quality and producing profitable margins. The Company continues to invest in additional personnel, technology, and business development resources to further strengthen its capabilities in this important product category. To assist business lending customers in managing their interest rate risk, the Company enters into interest rate swaps which have associated interest rate and credit risk; for additional detail on the Company’s use of interest rate swaps, see Note S beginning on page 140 of this Form 10-K.
The following table presents the concentration by borrower type of the Company’s CRE loan balances as of December 31, 2025 and 2024:
Table 10: Concentrations of CRE Lending by Borrower Type
December 31, 2025 | December 31, 2024 | ||||||||||
Amortized | Percentage of |
| Amortized | Percentage of | |||||||
(000’s omitted, except percentages) | | Cost | | Total | | Cost | | Total | |||
Multifamily and non-owner occupied CRE by property type: | | | |||||||||
Multifamily | $ | 917,586 | 26.5 | % | $ | 724,114 |
| 21.5 | % | ||
Office |
| 374,194 | 10.8 | % | 368,387 |
| 11.0 | % | |||
Lodging |
| 332,943 | 9.6 | % | 336,221 |
| 10.0 | % | |||
Commercial Construction |
| 297,038 | 8.6 | % | 395,482 |
| 11.7 | % | |||
Retail |
| 268,329 | 7.8 | % | 256,351 |
| 7.6 | % | |||
Warehouse/Industrial |
| 160,769 | 4.6 | % | 149,722 |
| 4.5 | % | |||
Other Lessors of CRE |
| 173,451 | 5.1 | % | 200,215 |
| 6.0 | % | |||
Nursing/Assisted Living |
| 52,373 | 1.5 | % | 56,159 |
| 1.7 | % | |||
Residential Construction |
| 3,849 | 0.1 | % | 4,278 |
| 0.1 | % | |||
All Other |
| 7,505 | 0.2 | % | 8,284 |
| 0.2 | % | |||
Total multifamily and non-owner occupied CRE |
| 2,588,037 |
| 74.8 | % | 2,499,213 | 74.3 | % | |||
Owner-occupied CRE by industry: |
| |
| | | ||||||
Retail Trade |
| 277,213 | 8.0 | % | 293,208 |
| 8.7 | % | |||
Real Estate Rental and Leasing |
| 91,600 | 2.6 | % | 81,802 |
| 2.4 | % | |||
Arts, Entertainment and Recreation |
| 83,453 | 2.4 | % | 87,709 |
| 2.6 | % | |||
Health Care and Social Assistance | 78,529 | 2.3 | % | 85,151 | 2.5 | % | |||||
Other Services |
| 77,657 | 2.2 | % | 81,688 |
| 2.4 | % | |||
Manufacturing | 70,735 | 2.0 | % | 49,558 | 1.5 | % | |||||
Agriculture and Forestry |
| 51,081 | 1.5 | % | 51,602 |
| 1.5 | % | |||
Accommodation and Food Services |
| 41,398 | 1.2 | % | 39,385 |
| 1.2 | % | |||
Wholesale Trade |
| 22,854 | 0.7 | % | 25,312 |
| 0.8 | % | |||
Construction |
| 18,974 | 0.5 | % | 16,791 |
| 0.5 | % | |||
Transportation and Warehousing |
| 10,583 | 0.3 | % | 11,547 |
| 0.3 | % | |||
Professional, Scientific and Technical Services |
| 9,876 | 0.3 | % | 7,603 |
| 0.2 | % | |||
Educational Services |
| 5,241 | 0.2 | % | 4,618 |
| 0.1 | % | |||
All Other |
| 32,607 | 1.0 | % | 28,809 |
| 1.0 | % | |||
Total owner occupied CRE |
| 871,801 |
| 25.2 | % | 864,783 | 25.7 | % | |||
Total CRE | $ | 3,459,838 |
| 100.0 | % | $ | 3,363,996 | 100.0 | % | ||
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The following table presents the geographic concentrations of the Company’s CRE loan balances by property location (MSA) as of December 31, 2025 and 2024:
Table 11: Concentrations of CRE by Property Location
December 31, 2025 | Multifamily CRE | Owner occupied CRE | Non-owner occupied CRE | Total CRE | |||||||||||||||||
(000’s omitted, except percentages) | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | |||||||||||||
MSA: | | | | | | | | |
| ||||||||||||
Albany-Schenectady-Troy, NY | $ | 97,325 | 2.8 | % | $ | 102,096 | 3.0 | % | $ | 250,237 | 7.2 | % | $ | 449,658 |
| 13.0 | % | ||||
Burlington-South Burlington, VT | 208,942 | 6.0 | % |
| 33,426 | 1.0 | % |
| 144,998 | 4.2 | % |
| 387,366 |
| 11.2 | % | |||||
Rochester, NY |
| 37,120 | 1.1 | % | 98,468 | 2.8 | % | 156,316 | 4.5 | % | 291,904 | 8.4 | % | ||||||||
Buffalo-Cheektowaga, NY |
| 106,187 | 3.1 | % |
| 56,535 | 1.6 | % |
| 121,919 | 3.5 | % |
| 284,641 |
| 8.2 | % | ||||
Syracuse, NY |
| 14,123 | 0.4 | % |
| 80,427 | 2.3 | % |
| 137,027 | 4.0 | % |
| 231,577 |
| 6.7 | % | ||||
Scranton Wilkes-Barre, PA |
| 70,371 | 2.0 | % |
| 61,458 | 1.8 | % |
| 94,771 | 2.7 | % |
| 226,600 |
| 6.5 | % | ||||
Utica-Rome, NY |
| 52,965 | 1.5 | % |
| 42,916 | 1.2 | % |
| 53,718 | 1.6 | % |
| 149,599 |
| 4.3 | % | ||||
Glens Falls, NY |
| 43,332 | 1.3 | % | 2,405 | 0.1 | % | 19,971 | 0.6 | % | 65,708 | 2.0 | % | ||||||||
All Other MSA - NY(1)(2) |
| 74,036 | 2.1 | % |
| 63,606 | 1.8 | % |
| 79,012 | 2.3 | % |
| 216,654 |
| 6.2 | % | ||||
All Other MSA - PA(1)(2) |
| 29,468 | 0.9 | % |
| 62,222 | 1.8 | % |
| 175,917 | 5.1 | % |
| 267,607 |
| 7.8 | % | ||||
All Other MSA(1) |
| 92,036 | 2.7 | % |
| 64,397 | 1.9 | % |
| 209,183 | 6.0 | % |
| 365,616 |
| 10.6 | % | ||||
Non-MSAs: |
|
|
|
|
| | |||||||||||||||
NY |
| 49,930 | 1.4 | % |
| 157,146 | 4.5 | % |
| 183,374 | 5.3 | % |
| 390,450 |
| 11.2 | % | ||||
All Other Non-MSA |
| 41,751 | 1.2 | % |
| 46,699 | 1.4 | % |
| 44,008 | 1.3 | % |
| 132,458 |
| 3.9 | % | ||||
Total | $ | 917,586 |
| 26.5 | % | $ | 871,801 |
| 25.2 | % | $ | 1,670,451 |
| 48.3 | % | $ | 3,459,838 |
| 100.0 | % | |
December 31, 2024 | Multifamily CRE | Owner occupied CRE | Non-owner occupied CRE | Total CRE | |||||||||||||||||
(000’s omitted, except percentages) | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | Amortized Cost | Percentage of Total CRE | |||||||||||||
MSA: | | | | | | | | | |||||||||||||
Albany-Schenectady-Troy, NY | $ | 104,274 | 3.1 | % | $ | 104,162 | 3.1 | % | $ | 250,019 | 7.4 | % | $ | 458,455 | 13.6 | % | |||||
Burlington-South Burlington, VT | 172,602 | 5.1 | % | 38,500 | 1.1 | % | 153,102 | 4.6 | % | 364,204 | 10.8 | % | |||||||||
Rochester, NY |
| 30,391 |
| 0.9 | % | 101,207 |
| 3.0 | % | 144,261 |
| 4.3 | % | 275,859 |
| 8.2 | % | ||||
Buffalo-Cheektowaga, NY |
| 37,587 |
| 1.1 | % | 59,919 |
| 1.8 | % | 172,484 |
| 5.1 | % | 269,990 |
| 8.0 | % | ||||
Syracuse, NY |
| 12,372 |
| 0.4 | % | 71,519 |
| 2.1 | % | 145,796 |
| 4.3 | % | 229,687 |
| 6.8 | % | ||||
Scranton Wilkes-Barre, PA |
| 61,857 |
| 1.8 | % | 60,603 |
| 1.8 | % | 101,573 |
| 3.0 | % | 224,033 |
| 6.6 | % | ||||
Utica-Rome, NY |
| 39,294 |
| 1.2 | % | 35,885 |
| 1.1 | % | 63,696 |
| 1.9 | % | 138,875 |
| 4.2 | % | ||||
Ithaca, NY |
| 30,966 |
| 0.9 | % | 12,132 |
| 0.4 | % | 23,481 |
| 0.7 | % | 66,579 |
| 2.0 | % | ||||
All Other MSA - NY(1)(2) |
| 87,605 |
| 2.6 | % | 60,698 |
| 1.8 | % | 107,881 |
| 3.2 | % | 256,184 |
| 7.6 | % | ||||
All Other MSA - PA(1)(2) |
| 17,017 |
| 0.5 | % | 63,142 |
| 1.9 | % | 97,908 |
| 2.9 | % | 178,067 |
| 5.3 | % | ||||
All Other MSA(1) |
| 50,505 |
| 1.5 | % | 43,928 |
| 1.3 | % | 249,527 |
| 7.4 | % | 343,960 |
| 10.2 | % | ||||
Non-MSAs: |
| ||||||||||||||||||||
NY |
| 53,690 |
| 1.6 | % | 161,967 |
| 4.8 | % | 198,312 |
| 5.9 | % | 413,969 |
| 12.3 | % | ||||
All Other Non-MSA |
| 25,954 |
| 0.8 | % | 51,121 |
| 1.5 | % | 67,059 |
| 2.1 | % | 144,134 |
| 4.4 | % | ||||
Total | $ | 724,114 | 21.5 | % | $ | 864,783 |
| 25.7 | % | $ | 1,775,099 | 52.8 | % | $ | 3,363,996 |
| 100.0 | % | |||
(1) | The MSAs within these captions are individually less than 2% of total CRE exposure. |
(2) | The MSAs within these captions include certain counties in adjacent states with a high degree of economic and social integration to the respective city based in New York or Pennsylvania. |
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The consumer mortgage portfolio is comprised of fixed (95%) and adjustable rate (5%) residential lending. Consumer mortgages increased $127.4 million, or 3.7%, between the end of 2024 and the end of 2025, driven primarily by organic growth, and includes the impact of $79.1 million of secondary market sales during 2025. Over the past year, the Company produced net organic growth in the consumer mortgage segment due to the Company’s competitive product offerings, recruitment of additional mortgage loan originators and proactive business development efforts, while also benefitting from the comparatively stable housing market conditions in the Company’s primary markets relative to the national environment. Home equity loans increased $56.3 million, or 11.8%, between the end of 2024 and the end of 2025, in part a result of competitive pricing and lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment, as well as $16.4 million of home equity loans acquired from Santander.
Consumer installment loans, both those originated directly in the branches and online (referred to as “consumer direct”) and indirectly in automobile, marine, and recreational vehicle dealerships (referred to as “consumer indirect”), increased $105.0 million, or 5.4%, from one year ago, including a $91.7 million, or 5.2%, increase in consumer indirect loans and $13.3 million, or 6.9%, increase in consumer direct loans, including the impact of the $8.4 million direct loans acquired from Santander. The Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio by providing competitive market offerings to its customers and pursuing the expansion of its dealer network. These loans have historically provided attractive returns, and the Company strives to grow these key portfolios despite the strong competition from the financing subsidiaries of vehicle manufacturers and other financial intermediaries.
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As shown in Table 12, 17.0% of the Company’s loan portfolio matures in one year or less, 40.8% matures between one to five years, 33.0% matures between five and 15 years, and 9.2% matures after 15 years. Of the loans maturing after one year, 74.1% are fixed interest rates and 25.9% are floating or adjustable rates. The following table shows the maturities and type of interest rates for loans as of December 31, 2025:
Table 12: Maturity Distribution of Loans (1)
Maturing in | Maturing After | Maturing After | |||||||||||||
One Year or | One but Within | Five but Within | Maturing After | ||||||||||||
(000’s omitted) | | Less | | Five Years | | Fifteen Years | | Fifteen Years | | Total | |||||
CRE - multifamily | $ | 139,333 | $ | 359,394 | $ | 411,693 | $ | 7,166 | $ | 917,586 | |||||
CRE - owner occupied | 85,101 | 366,671 | 402,408 | 17,621 | 871,801 | ||||||||||
CRE - non-owner occupied | 334,296 | 741,931 | 572,752 | 21,472 | 1,670,451 | ||||||||||
Commercial & industrial and other business loans | 516,154 | 498,503 | 211,563 | 47,809 | 1,274,029 | ||||||||||
Consumer mortgage | 261,194 | 922,041 | 1,575,220 | 858,731 | 3,617,186 | ||||||||||
Consumer indirect | 433,712 | 1,306,730 | 118,912 | 0 | 1,859,354 | ||||||||||
Consumer direct | 58,177 | 130,995 | 16,423 | 0 | 205,595 | ||||||||||
Home equity | 36,199 | 139,906 | 307,684 | 49,966 | 533,755 | ||||||||||
Total | $ | 1,864,166 | $ | 4,466,171 | $ | 3,616,655 | $ | 1,002,765 | $ | 10,949,757 | |||||
Fixed interest rates: | |||||||||||||||
CRE - multifamily | $ | 187,224 | $ | 220,747 | $ | 212 | |||||||||
CRE - owner occupied | 170,608 | 79,114 | 29 | ||||||||||||
CRE - non-owner occupied | 348,851 | 231,099 | 0 | ||||||||||||
Commercial & industrial and other business loans | 257,187 | 123,751 | 39,248 | ||||||||||||
Consumer mortgage | 879,302 | 1,496,985 | 820,812 | ||||||||||||
Consumer indirect | 1,306,730 | 118,912 | 0 | ||||||||||||
Consumer direct | 130,908 | 16,186 | 0 | ||||||||||||
Home equity | 111,569 | 163,877 | 27,367 | ||||||||||||
Floating or adjustable interest rates: | |||||||||||||||
CRE - multifamily | $ | 172,170 | $ | 190,946 | $ | 6,954 | |||||||||
CRE - owner occupied | 196,063 | 323,294 | 17,592 | ||||||||||||
CRE - non-owner occupied | 393,080 | 341,653 | 21,472 | ||||||||||||
Commercial & industrial and other business loans | 241,316 | 87,812 | 8,561 | ||||||||||||
Consumer mortgage | 42,739 | 78,235 | 37,919 | ||||||||||||
Consumer direct | 87 | 237 | 0 | ||||||||||||
Home equity | 28,337 | 143,807 | 22,599 | ||||||||||||
Total | $ | 4,466,171 | $ | 3,616,655 | $ | 1,002,765 | |||||||||
(1)Scheduled repayments are reported in the maturity category in which the payment is due.
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Asset Quality
The Company places a loan on nonaccrual status when the loan becomes 90 days past due, or sooner if management concludes collection of principal and interest is doubtful, except when, in the opinion of management, it is well-collateralized and in the process of collection. Nonperforming loans, defined as nonaccruing loans and accruing loans 90 days or more past due, ended 2025 at $56.5 million. This represents a decrease of $16.9 million from $73.4 million of nonperforming loans at the end of 2024. The ratio of nonperforming loans to total loans at December 31, 2025, of 0.52% decreased 18 basis points from the prior year’s level. The ratio of nonperforming assets (which includes other real estate owned, or “OREO,” in addition to nonperforming loans) to total loans plus OREO decreased to 0.59% at year-end 2025, down 14 basis points from one year earlier. At December 31, 2025, OREO consisted of 42 residential properties with a total value of $2.9 million and multiple properties associated with one commercial lending relationship with an aggregate value of $5.4 million. This compares to 44 residential properties with a total value of $2.8 million at December 31, 2024. The decreases in nonperforming loans, the ratio of nonperforming loans to total loans and the ratio of nonperforming assets to total loans plus OREO were primarily attributable to a decrease in nonaccrual business lending loan balances, particularly due to loans from a non-owner occupied CRE lending relationship being charged off during the year and the substantial repayment of nonperforming multifamily loans from one CRE customer.
Approximately 35% of nonperforming loan balances at December 31, 2025 are related to the business lending portfolio, which is comprised of business loans broadly diversified by geography, collateral category and industry. Of the nonperforming loans in the business lending portfolio, other business non-real estate loans represents 63% of the balances, owner-occupied commercial real estate represents 34% of the balances, multifamily represents 2% of the balances, non-owner occupied commercial real estate represents 1% of the balances.
Approximately 57% of the nonperforming loan balances at December 31, 2025 are related to the consumer mortgage portfolio. Collateral values of residential properties within most of the Company’s market areas have generally remained stable or increased over the past several years. Inflation rates have trended lower and become more stable, and the unemployment rate is relatively stable. This has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 8% of nonperforming loan balances relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors identified for consumer mortgages. Nonperforming loan levels in the consumer installment category are typically lower than the other portfolios because they are generally charged off before they reach non-performing status, and consequently the amount of non-performing consumer installment loans at the end of 2025 and 2024 were nominal. The allowance for credit losses to nonperforming loans ratio, a general measure of coverage adequacy, was 156% at the end of 2025 compared to 108% at year-end 2024 and 122% at December 31, 2023. The increase in this ratio from one year ago was primarily driven by the decrease in nonperforming business loans previously mentioned.
Total delinquencies, defined as loans 30 days or more past due or in nonaccrual status, ended 2025 at 1.10% of total loans outstanding, compared to 1.24% at the end of 2024. This was primarily driven by a decrease in delinquencies in the business lending portfolio, while the remaining portfolios increased. As of year-end 2025, delinquency ratios for business lending, consumer installment loans, consumer mortgages, and home equity loans were 0.54%, 1.34%, 1.67%, and 1.30%, respectively. Within the business lending loan portfolio, the delinquency ratios at December 31, 2025 for multifamily was 0.14%, owner-occupied commercial real estate was 0.89%, non-owner occupied commercial real estate was 0.03%, and other commercial and industrial loans was 1.25%. Year-end 2024 delinquency rates for business lending, consumer installment loans, consumer mortgages, and home equity loans were 0.98%, 1.30%, 1.56%, and 1.08%, respectively. Within the business lending loan portfolio, the delinquency ratios at December 31, 2024 for multifamily was 1.73%, owner-occupied commercial real estate was 0.97%, non-owner occupied commercial real estate was 0.69%, and other commercial and industrial loans was 0.99%. Delinquency levels, particularly in the 30 to 89 days category, tend to be somewhat volatile due to their seasonal characteristics and measurement at a point in time, and therefore management believes that it is useful to evaluate this ratio over a longer time period. The average quarter-end delinquency ratio for total loans in 2025 was 1.10%, as compared to an average of 1.05% in 2024, and 0.88% in 2023.
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The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted. Based on this analysis, a relationship may be assigned a special assets officer or other senior lending officer to meet with the borrowers, assess the collateral, and recommend an action plan. This plan could include foreclosure, restructuring loans, issuing demand letters or other actions. The Company’s larger criticized credits (greater than $2.0 million exposure) are also reviewed on a quarterly basis by senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans. Business lending management reviews the criticized business loan portfolio on a monthly basis.
The Company will occasionally modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, interest rate reduction, or a combination thereof. During 2025, the Company modified 9 loans with total outstanding balances of $6.3 million that were considered to be modified loans to borrowers experiencing financial difficulty.
Allowance for credit losses and loan net charge-off ratios for the past two years are as follows:
Table 13: Loan Ratios
Years Ended December 31, |
| |||
2025 | | 2024 |
| |
Allowance for credit losses/total loans | 0.80 | % | 0.76 | % |
Allowance for credit losses/nonperforming loans | 156 | % | 108 | % |
Nonaccrual loans/total loans | 0.45 | % | 0.64 | % |
Allowance for credit losses/nonaccrual loans | 178 | % | 119 | % |
Net charge-offs to average loans outstanding: |
| | ||
Business lending | 0.14 | % | 0.06 | % |
Consumer mortgage | 0.00 | % | 0.01 | % |
Consumer indirect | 0.30 | % | 0.29 | % |
Consumer direct | 0.73 | % | 0.95 | % |
Home equity | 0.03 | % | 0.03 | % |
Total loans | 0.12 | % | 0.10 | % |
Total net charge-offs in 2025 were $13.1 million, $3.0 million more than the prior year due to an increase in net charge-offs in business lending loans, primarily related to the one non-owner occupied CRE loan relationship previously mentioned, partially offset by decreases in consumer mortgage, consumer installment, and home equity net charge-offs.
Due to the significant increases in average loan balances over time as a result of acquisitions and organic growth, management believes that net charge-offs as a percent of average loans (“net charge-off ratio”) offers the most meaningful representation of charge-off trends. The total net charge-off ratio of 0.12% for 2025 was 2 basis points higher than the ratio from 2024 and 6 basis points higher than the ratio from 2023. Gross charge-offs as a percentage of average loans were 0.22% in 2025, as compared to 0.18% in 2024, and 0.14% in 2023, as management continues to focus on maintaining conservative underwriting standards and the increase was largely isolated to a small number of business customers. Recoveries were $10.3 million in 2025, representing 50% of average gross charge-offs for the latest two years, compared to 51% in 2024 and 61% in 2023, reflective of the continued effectiveness of the Company’s repossession and disposition capabilities.
Business loan net charge-offs increased in 2025, totaling $6.2 million, for a net charge-off ratio of 0.14% of average business loans outstanding, compared to net charge-offs of $2.7 million, or 0.06% of average business loans outstanding, for 2024, driven primarily by the charge-off of one non-owner occupied CRE loan relationship previously mentioned. Consumer installment loan net charge-offs decreased to $6.7 million this year from $6.9 million in 2024, with a net charge-off ratio of 0.34% in 2025 and 0.36% in 2024. Consumer mortgage net charge-offs decreased to $0.1 million in 2025 compared to $0.3 million in 2024 with a net charge-off ratio of 0.00% and 0.01% in 2025 and 2024, respectively. Home equity had net charge-offs of $0.2 million, or 0.03%, in 2025, consistent with the levels in 2024.
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Management continually evaluates the credit quality of the Company’s loan portfolio and conducts a formal review of the adequacy of the allowance for credit losses on a quarterly basis. The primary components of the review process that are used to determine proper allowance levels are collectively evaluated and individually assessed loan loss allocations. Measurement of individually assessed loan loss allocations is typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to repay. The Company establishes individually assessed reserves for nonaccrual business lending loans with balances greater than $0.5 million that do not share the same risk characteristics with a pool of loans. Consumer mortgages, consumer installment, and home equity loans are considered smaller balance homogeneous loans and are evaluated collectively. The Company considers qualifying loans to require an individual assessment when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. The Company has reviewed individually assessed loans and recorded a reserve for one loan. It was determined that the discounted collateral value exceeded the loan balance on all other individually assessed loans.
Management estimates the allowance for credit losses balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected future credit losses. Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, size and credit quality of acquired loans, delinquency levels, risk ratings or term of loans as well as actual and forecasted US macroeconomic trends, including unemployment rates, growth of gross domestic product and median household income net of inflation and changes in property values such as home prices, commercial real estate prices (including office-specific property prices), automobile prices, office-specific property vacancy rates, and other relevant factors in comparison to longer-term performance. Multiple economic scenarios are utilized to encompass a range of economic outcomes and include baseline, upside, and downside forecasts, which are weighted in the calculation. The segments of the Company’s loan portfolio are disaggregated into classes that allow management to monitor risk and performance. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage, and payment structure. In addition to these risk characteristics, the Company considers the portion of acquired loans to the overall segment balance, the change in the volume and terms of originations, differences between the losses incurred in the period used for quantitative modeling and a longer timeframe that includes the Great Recession of 2008 and 2009 (the “Great Recession”), as well as recent delinquency, charge-off and risk rating trends compared to historical time periods. The Company measures the allowance for credit losses using either the cumulative loss rate method, the line loss method, or the vintage loss rate method, dependent on the loan portfolios’ characteristics. The allowance for credit losses level computed from the collectively evaluated and individually assessed loan loss allocation methods are combined with unallocated allowances, if any, to derive the required allowance for credit losses to be reflected on the consolidated statements of condition. The provision for credit losses is calculated by subtracting the previous period allowance for credit losses, net of the interim period net charge-offs, from the current required allowance level. This provision is then recorded in the income statement for that period. Members of senior management and the Board’s Audit Committee review the adequacy of the allowance for credit losses quarterly.
Acquired loans are reviewed at their acquisition date to determine whether they have experienced a more-than-insignificant credit deterioration since origination. Loans that meet that definition according to the Company’s policy are referred to as purchased credit deteriorated (“PCD”) loans. PCD loans are initially recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded in the provision for credit losses.
Acquired loans that are not deemed PCD at acquisition are considered purchased seasoned loans if they are acquired in a business combination. Purchased seasoned loans are accounted for in the same manner as PCD loans in that the loan is recorded using the gross-up method where the sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans are the same as originated loans and subsequent changes to the allowance for credit losses are recorded as provision for, or reversal of, credit losses.
As of December 31, 2025, the net purchase discount related to the $774.7 million of remaining non-PCD acquired loan balances was approximately $14.0 million, or 1.8% of that portfolio.
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The allowance for credit losses increased to $87.9 million at the end of 2025 from $79.1 million as of year-end 2024. During 2025, the Company experienced loan growth and added an additional qualitative factor reserve for business lending related due to the increase in larger individual exposures in the business lending portfolio.. The Company recorded a provision for credit losses of $21.4 million during 2025, which was $1.4 million lower than the prior year. While certain national trends persist related to commercial real estate, in particular the office and multifamily sectors, the Company determined that its exposure is primarily located in geographical areas that show stable or increasing demand and have vacancy rates below the national average. The Company has also performed internal reviews of its commercial real estate portfolio, which includes a review of the type of collateral, the status of the loan, office commercial real estate-specific balances, percent of total capital, levels of delinquencies, charge-offs, nonperforming loans and classified and criticized loans, and weighted average risk ratings. Based on these reviews, management determined that the commercial real estate loan portfolio’s credit performance was in line with expectations. Refer to Note D: Loans and Allowance for Credit Losses in the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit losses.
The ratio of the allowance for credit losses to total loans of 0.80% for year-end 2025 was 4 basis points higher than the level at the end of 2024, due to the factors noted previously. Management considers the year-end 2025 and 2024 allowance for credit losses to be adequate. The provision for credit losses as a percentage of average loans was 0.20% in 2025 as compared to 0.23% in 2024 and 0.12% in 2023. The provision for credit losses was 162% of net charge-offs in 2025 versus 225% in 2024 and 193% in 2023.
The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the years indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, at a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to change when the risk factors of each component part change. The allocation is not indicative of the specific amount of future net charge-offs that are projected for each of the loan categories, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category.
Table 14: Allowance for Credit Losses by Loan Type
| December 31, 2025 | | December 31, 2024 | | |||||||
(000’s omitted except for ratios) | | Allowance for Credit Losses | | Percent of Total Loan Balances | | Allowance for Credit Losses | | Percent of Total Loan Balances |
| ||
Business lending | $ | 46,155 | 43.2 | % | $ | 37,201 |
| 43.2 | % | ||
Consumer mortgage |
| 14,005 | 33.0 | % |
| 15,017 |
| 33.5 | % | ||
Consumer indirect |
| 20,914 | 17.0 | % |
| 20,895 |
| 16.9 | % | ||
Consumer direct |
| 4,257 | 1.9 | % |
| 3,453 |
| 1.8 | % | ||
Home equity |
| 1,590 | 4.9 | % |
| 1,548 |
| 4.6 | % | ||
Unallocated |
| 1,000 | 0.0 | % |
| 1,000 |
| 0.0 | % | ||
Total | $ | 87,921 |
| 100.0 | % | $ | 79,114 |
| 100.0 | % | |
As demonstrated in Table 14, the consumer direct, consumer indirect and the business lending portfolios carry higher credit risk than the consumer mortgage and home equity portfolios, and therefore the Company allocates a higher proportional allowance to these portfolios. The unallocated allowance is maintained for potential losses not captured in the specific allowance categories due to model imprecision. The unallocated allowance of $1.0 million at year-end 2025 was consistent with 2024.
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Funding Sources
The Company utilizes a variety of funding sources to support the interest-earning asset base as well as to achieve targeted growth objectives. Overall funding is comprised of four primary sources that possess a variety of maturity, stability and price characteristics: deposits of individuals, partnerships and corporations (non-governmental deposits); governmental deposits that are collateralized for amounts not covered by FDIC insurance (governmental deposits); reciprocal deposits (deposits exchanged with a network of participating banks to provide additional FDIC insurance coverage for the customer); and external borrowings. The average daily amount of deposits and the average rate paid on each of the following deposit categories are summarized below for the years indicated:
Table 15: Average Deposits
| 2025 | | 2024 | | 2023 |
| ||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||
(000’s omitted, except rates) |
| Balance | | Rate Paid |
| Balance | | Rate Paid |
| Balance | | Rate Paid | ||||
Noninterest checking deposits | $ | 3,597,086 |
| 0.00 | % | $ | 3,580,297 |
| 0.00 | % | $ | 3,848,261 |
| 0.00 | % | |
Interest checking deposits |
| 2,965,093 |
| 0.47 | % |
| 2,861,772 |
| 0.55 | % |
| 3,055,443 |
| 0.42 | % | |
Savings deposits |
| 2,345,186 |
| 0.61 | % |
| 2,229,602 |
| 0.51 | % |
| 2,365,379 |
| 0.25 | % | |
Money market deposits |
| 2,829,045 |
| 2.18 | % |
| 2,509,272 |
| 2.23 | % |
| 2,351,005 |
| 1.43 | % | |
Time deposits |
| 2,126,117 |
| 3.40 | % |
| 2,037,315 |
| 3.76 | % |
| 1,280,751 |
| 2.55 | % | |
Total deposits | $ | 13,862,527 | 1.17 | % | $ | 13,218,258 | 1.21 | % | $ | 12,900,839 | 0.66 | % | ||||
Non-governmental deposits | $ | 11,697,589 | 0.93 | % | $ | 11,340,538 | 0.96 | % | $ | 11,418,227 | 0.55 | % | ||||
Governmental deposits | 2,039,514 | 2.41 | % | 1,864,377 | 2.72 | % | 1,482,358 | 1.51 | % | |||||||
Reciprocal deposits | 125,424 | 3.43 | % | 13,343 | 2.69 | % | 254 | 3.54 | % | |||||||
Total deposits | $ | 13,862,527 |
| 1.17 | % | $ | 13,218,258 |
| 1.21 | % | $ | 12,900,839 |
| 0.66 | % | |
As displayed in Table 15, average total deposits in 2025 increased $644.3 million, or 4.9%, from the prior year, comprised of a $555.5 million, or 4.9%, increase in non-time deposits and an $88.8 million, or 4.4%, increase in time deposits. The increase in average deposits was due to organic growth and the acquisition of $543.7 million of deposits from the Santander branch acquisition in the fourth quarter of 2025.
Non-governmental, non-time deposits are frequently considered to be an attractive source of funding because they are generally stable, do not need to be collateralized, carry a relatively low interest rate, generate fee income and provide a strong customer base for which a variety of loan, deposit and other financial service-related products can be cross-sold. The Company’s funding composition continues to benefit from a high level of non-governmental deposits, with an average balance of $11.70 billion, which increased $357.1 million, or 3.1%, from 2024, and equaled 84% of total average deposits, 2 percentage points lower than 2024 due mostly to strong growth in governmental and reciprocal deposits (mostly held by governmental customers). The Company continues to focus on expanding its deposit relationship base through its competitive product offerings, high-quality customer service, and market expansion initiatives.
Full-year average governmental deposits increased $175.1 million, or 9.4%, during 2025 to $2.04 billion, reflective of competitive offerings and expansion of the Company’s governmental deposit relationship base due in part to additional business development efforts. Governmental deposit balances tend to be more volatile than non-governmental deposits because they are heavily impacted by the seasonality of tax collection and fiscal spending patterns, as well as the longer-term financial position of the local government entities. The Company is required to collateralize certain local governmental deposits in excess of FDIC coverage with marketable securities from its investment portfolio. Due to this stipulation, as well as the competitive bidding nature of governmental time deposits, management considers this funding source to share some of the same attributes as borrowings. However, the Company has many long-standing relationships with governmental entities throughout its markets and the deposits held by these customers have provided a relatively attractive and stable funding source over an extended period of time.
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Average reciprocal deposits increased $112.1 million in 2025 compared to 2024, due to competitive product offerings, an expansion of the Company’s deposit relationship base and certain governmental customers moving from customer repurchase agreements, a non-deposit product, to reciprocal deposit products in 2025.
The mix of average deposits is consistent as compared to the prior year, with non-time deposits (noninterest checking, interest checking, savings and money markets) representing approximately 85% of the Company’s average deposit funding base in 2025 and 2024, while time deposits represent approximately 15% of total average deposits in both years. The cost of interest-bearing deposits of 1.58% in 2025 was 8 basis points lower than the 1.66% cost of interest-bearing deposits in 2024 as a result of the decreases in the average rates paid on interest checking, money market, and time deposits due to market conditions. The total cost of deposit funding, which includes noninterest checking balances, was 1.17% in 2025, a 4 basis point decrease from the prior year.
The remaining maturities of time deposits in amounts of $250,000 or more (the FDIC insurance limit) outstanding as of December 31 are as follows:
Table 16: Maturity of Time Deposits in Excess of Insurance Limit of $250,000
(000’s omitted) | | 2025 | | 2024 | ||
Less than three months | $ | 186,047 | $ | 166,643 | ||
Three months to six months |
| 159,390 |
| 176,452 | ||
Six months to one year |
| 154,991 |
| 211,811 | ||
Over one year |
| 48,053 |
| 118,077 | ||
Total | $ | 548,481 | $ | 672,983 | ||
The Company’s deposit base is well diversified across customer segments, comprised of approximately 60% consumer, 28% business and 12% governmental balances at December 31, 2025, and broadly dispersed among its customer base as illustrated by an average deposit balance per account of under $20,000. At the end of 2025, 64% of the Company’s total deposits were in no and generally low rate checking and savings accounts. The total estimated amount of deposits that exceeded the $250,000 insured limit provided by the FDIC, net of collateralized and intercompany deposits, was approximately $2.74 billion at December 31, 2025. This amount is determined by adjusting the amounts reported in the Bank Call Report by subtracting intercompany deposits, which are not external customers and are therefore eliminated in consolidation and governmental deposits which are collateralized by certain pledged investment securities. The Bank Call Report estimated uninsured deposit balances at December 31, 2025 are reported gross at $4.54 billion, which includes intercompany account balances of $299.4 million, and collateralized deposits of $1.50 billion. Estimated insured deposits, net of collateralized and intercompany deposits, represent greater than 80% of ending total deposits at December 31, 2025. These estimates are based on the determination of known deposit account balances of each depositor and the insurance guidelines provided by the FDIC. The Company did not hold any brokered deposits during 2025.
Borrowing sources for the Company include the FHLB, Federal Reserve, other correspondent banks, as well as access to the brokered CD and repurchase markets through established relationships with business and governmental customers and primary market security dealers.
As shown in Table 17, year-end 2025 borrowings totaled $689.9 million, a decrease of $309.0 million from the $998.9 million outstanding at the end of 2024, due to a decrease in overnight borrowings, continued principal paydown of term FHLB borrowings, and a decrease in repurchase agreements. Borrowings averaged $836.4 million, or 5.7% of total funding liabilities for 2025, as compared to $917.4 million, or 6.5% of total funding liabilities for 2024. At the end of 2025, the Company had $231.2 million, or 34%, of contractual borrowing obligations that had remaining terms of one year or less, which was lower than the $391.8 million, or 40%, at the end of 2024, due to a decrease in overnight borrowings, repurchase agreements and the paydown and maturity of fixed rate FHLB term borrowings.
The percentage of funding from deposits in 2025 was higher than the level in 2024, due to the increase in deposit balances from organic growth and the Santander acquisition. The percentage of average funding derived from deposits was 94.3% in 2025 as compared to 93.5% in 2024 and 95.3% in 2023. During 2025, average deposits increased 4.9%, while average borrowings decreased 8.8%.
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The following table summarizes the outstanding balance of the Company’s borrowings as of December 31:
Table 17: Borrowings
(000’s omitted) | | 2025 | | 2024 | ||
Overnight borrowings | $ | 0 | $ | 118,000 | ||
Securities sold under agreement to repurchase, short term | 231,163 | 261,553 | ||||
Federal Home Loan Bank borrowings |
| 450,439 |
| 610,645 | ||
Finance lease liabilities |
| 8,331 |
| 8,667 | ||
Balance at end of period | $ | 689,933 | $ | 998,865 | ||
Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to the Company’s standard credit policies. Collateral may be required based on management’s assessment of the customer’s creditworthiness. The fair value of the standby letters of credit is considered immaterial for disclosure purposes. See Note N beginning on page 129 for further information on off-balance sheet exposures.
Investments
The objective of the Company’s investment portfolio is to hold low-risk, high-quality earning assets that provide reasonable returns and provide another effective tool to actively manage its earning asset/funding liability position in order to maximize future net interest income opportunities. This must be accomplished within the following constraints: (a) implementing certain interest rate risk management strategies which achieve a relatively stable level of net interest income; (b) providing both the regulatory and operational liquidity necessary to conduct day-to-day business activities; (c) considering investment risk-weights as determined by the regulatory risk-based capital guidelines; and (d) generating a favorable return without undue compromise of the other requirements.
The carrying value of the Company’s investment portfolio ended 2025 at $4.41 billion, an increase of $188.3 million, or 4.5%, from the end of 2024. The book value (excluding unrealized gains and losses) of the portfolio increased $55.0 million, or 1.2%, from December 31, 2024. The investment portfolio (excluding held-to-maturity investment securities) had a net unrealized loss of $271.2 million as of December 31, 2025, a decrease of $133.4 million from the $404.6 million unrealized loss at the end of 2024. This decrease is principally driven by the general downward movements in medium to long-term interest rates, as well as the volume and rates associated with the securities maturities that occurred during the past 12 months. During 2025, the Company purchased $108.3 million of government agency mortgage-backed securities with an average yield of 5.37%, which the Company classified as held-to-maturity. Additionally, there was $38.1 million of net accretion on investment securities in 2025. These additions were offset by $79.5 million of investment maturities, calls, and principal payments during 2025. The effective duration of the securities portfolio was 5.3 years at the end of 2025, as compared to 6.2 years at year end 2024.
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The investment portfolio has limited credit risk due to the composition continuing to be heavily weighted towards U.S. Treasury debentures, U.S. Agency mortgage-backed pass-throughs (MBS), and municipal bonds. The U.S. Treasury debentures and U.S. Agency mortgage-backed pass-throughs are all rated Aa1 by Moody’s, AA+ by Standard and Poor’s, and AA+ by Fitch. The majority of the municipal bonds are rated A or higher. The portfolio does not include any private label MBS or collateralized mortgage obligations (CMOs).
The following table sets forth the carrying value for the Company's investment securities portfolio as of December 31:
Table 18: Investment Securities
(000's omitted) | | 2025 | | 2024 | ||
Available-for-Sale Portfolio: | | | ||||
U.S. Treasury and agency securities | $ | 2,195,226 | $ | 2,083,786 | ||
Obligations of state and political subdivisions |
| 391,917 |
| 386,495 | ||
Government agency mortgage-backed securities |
| 278,885 |
| 301,224 | ||
Government agency collateralized mortgage obligations |
| 4,401 |
| 6,512 | ||
Corporate debt securities |
| 4,912 |
| 7,697 | ||
Total available-for-sale portfolio | 2,875,341 |
| 2,785,714 | |||
Held-to-Maturity Portfolio: |
|
| ||||
U.S. Treasury and agency securities | 1,168,487 | 1,138,743 | ||||
Government agency mortgage-backed securities | 285,679 | 206,412 | ||||
Total held-to-maturity portfolio | 1,454,166 | 1,345,155 | ||||
Equity and Other Securities: |
|
|
| |||
Equity securities without readily determinable fair value |
|
| ||||
Federal Home Loan Bank common stock |
| 33,232 |
| 45,408 | ||
Federal Reserve Bank common stock |
| 33,331 |
| 33,442 | ||
Other equity securities without readily determinable fair value | 6,275 | 6,313 | ||||
Total equity securities without readily determinable fair value | 72,838 | 85,163 | ||||
Equity securities with readily determinable fair value | 4,414 | 2,354 | ||||
Total equity and other securities |
| 77,252 |
| 87,517 | ||
|
| |||||
Total investment securities | $ | 4,406,759 | $ | 4,218,386 | ||
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The following table sets forth as of December 31, 2025 the weighted-average yield of investment debt securities by maturity date and investment type:
Table 19: Weighted-Average Yield of Investment Debt Securities (1)
(000's omitted, except yields) | | Maturing Within One Year or Less | | Maturing After One Year But Within Five Years | | Maturing After Five Years But Within Ten Years | | Maturing After Ten Years | |
| Total Amortized Cost/Book Value |
Available-for-Sale Portfolio: | | | | | | | | | |
| |
U.S. Treasury and agency securities | | 1.43 | % | 1.45 | % | 2.20 | % | 1.47 | % | $ | 2,399,478 |
Obligations of state and political subdivisions(2) | | 1.69 | % | 2.29 | % | 2.56 | % | 2.87 | % | 417,414 | |
Government agency mortgage-backed securities | | 1.91 | % | 1.90 | % | 2.41 | % | 2.46 | % | 322,253 | |
Corporate debt securities | | 0.00 | % | 3.25 | % | 0.00 | % | 0.00 | % | 5,000 | |
Government agency collateralized mortgage obligations | | 1.87 | % | 1.83 | % | 2.75 | % | 2.34 | % | 4,583 | |
Held-to-Maturity Portfolio: | |||||||||||
U.S. Treasury and agency securities | 0.00 | % | 3.28 | % | 3.34 | % | 3.66 | % | 1,168,487 | ||
Government agency mortgage-backed securities | 0.00 | % | 0.00 | % | 0.00 | % | 5.36 | % | 285,679 |
| (1) | Weighted-average yields are an arithmetic computation of income (not fully tax-equivalent adjusted) divided by book balance; they may differ from the yield to maturity, which considers the time value of money. |
| (2) | Excluding the impact of $15.8 million in book value of qualified school construction bonds in the Company's portfolio which earn income primarily through income tax credits, the weighted - average yield of obligations of state and political subdivisions maturing within one year or less is 2.30% and after one year but within five years is 2.83%. |
Impact of Inflation and Changing Prices
The Company’s financial statements have been prepared in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most commercial companies, a very high percentage of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effect of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, real estate, and automobiles in particular. Inflation can also impact the Company’s noninterest expense levels, and by extension the net income it generates and the earnings it retains as capital.
New Accounting Pronouncements
See “New Accounting Pronouncements” Section of Note A of the notes to the consolidated financial statements on page 97 for recently issued accounting pronouncements applicable to the Company that have not yet been adopted.
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Forward-Looking Statements
This report contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Forward-looking statements often use words such as “anticipate,” “could,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “forecast,” “believe,” or other words of similar meaning. These statements are based on the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from the results discussed in the forward-looking statements. Moreover, the Company’s plans, objectives and intentions are subject to change based on various factors (some of which are beyond the Company’s control). Factors that could cause actual results to differ from those discussed in the forward-looking statements include: (1) adverse developments in the banking industry related to bank failures and the potential impact of such developments on customer confidence and regulatory responses to these developments; (2) current and future economic and market conditions, including the effects of changes in housing or vehicle prices, higher unemployment rates, disruptions in the commercial real estate market, labor shortages, supply chain disruption, inability to obtain raw materials and supplies, U.S. fiscal debt, budget and tax matters, geopolitical matters and conflicts, the effects of announced or future tariff increases, changes in global trade policies, and any changes in global economic growth; (3) the effect of, and changes in, monetary and fiscal policies and laws, including future changes in Federal and state statutory income tax rates and interest rate and other policy actions of the Board of Governors of the Federal Reserve System; (4) the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin including the possibility of a sudden withdrawal of the Company’s deposits due to rapid spread of information or disinformation regarding the Company’s well-being; (5) future provisions for credit losses on loans and debt securities; (6) changes in nonperforming assets; (7) the effect of a fall in stock market or bond prices on the Company’s fee income businesses, including its employee benefit services, wealth management, and insurance businesses; (8) risks related to credit quality; (9) inflation, interest rate, liquidity, market and monetary fluctuations; (10) the strength of the U.S. economy in general and the strength of the local economies where the Company conducts its business; (11) the timely development of new products and services and customer perception of the overall value thereof (including features, pricing and quality) compared to competing products and services; (12) changes in consumer spending, borrowing and savings habits; (13) technological changes and implementation and financial risks associated with transitioning to new technology-based systems involving large multi-year contracts; (14) the ability of the Company to maintain the security, including cybersecurity, of its financial, accounting, technology, data processing and other operating systems, facilities and data, including customer data; (15) effectiveness of the Company’s risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, the Company’s ability to manage its credit or interest rate risk, the sufficiency of its allowance for credit losses and the accuracy of the assumptions or estimates used in preparing the Company’s financial statements and disclosures; (16) failure of third parties to provide various services that are important to the Company’s operations; (17) any acquisitions or mergers that might be considered or consummated by the Company and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue enhancements; (18) the ability to maintain and increase market share and control expenses; (19) the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of the Company and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, service fees, risk management, securities, capital requirements and other aspects of the financial services industry; (20) changes in the Company’s organization, compensation and benefit plans and in the availability of, and compensation levels for, employees in its geographic markets; (21) the outcome of pending or future litigation and government proceedings; (22) the effect of opening new branches to expand the Company’s geographic footprint, including the cost associated with opening and operating the branches and the uncertainty surrounding their success including the ability to meet expectations for future deposit and loan levels and commensurate revenues; (23) the effects of natural disasters could create economic and financial disruption; (24) the effects from changes in governmental leadership which expose the Company and its customers to a variety of political, economic, and regulatory risks, including the risk of changes in laws (including labor, trade, tax and other laws) and the potential for disruption in governmental agencies, services provided by the government, funding of government sponsored projects, and changes in the domestic political environment; (25) the effect of total or partial governmental shutdowns; (26) material differences in the actual financial results of investment activities compared with the Company's initial expectations, including the growth of the Insurtech market; (27) other risk factors outlined in the Company’s filings with the SEC from time to time; and (28) the success of the Company at managing the risks of the foregoing.
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The foregoing list of important factors is not all-inclusive. For more information about factors that could cause actual results to differ materially from the Company’s expectations, refer to “Item 1A Risk Factors” above. Any forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date on which such statement is made. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.
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Reconciliation of GAAP to Non-GAAP Measures
Table 20: GAAP to Non-GAAP Reconciliations
(000’s omitted) | | 2025 | | 2024 | | 2023 | |||
Operating pre-tax, pre-provision net revenue (non-GAAP) | |||||||||
Net income (GAAP) | $ | 210,455 | $ | 182,481 | $ | 131,924 | |||
Income taxes |
| 64,939 |
| 54,224 |
| 36,307 | |||
Income before income taxes |
| 275,394 |
| 236,705 |
| 168,231 | |||
Provision for credit losses |
| 21,350 |
| 22,773 |
| 11,203 | |||
Pre-tax, pre-provision net revenue (non-GAAP) |
| 296,744 |
| 259,478 |
| 179,434 | |||
Acquisition expenses |
| 3,663 |
| 213 |
| 63 | |||
Acquisition-related contingent consideration adjustments | 0 | 244 | 3,280 | ||||||
Litigation accrual | (50) | 138 | 5,800 | ||||||
Restructuring expenses | 1,499 | 0 | 1,163 | ||||||
Loss on sales of investment securities | 0 | 487 | 52,329 | ||||||
Gain on debt extinguishment | 0 | 0 | (242) | ||||||
Unrealized (gain) loss on equity securities |
| (375) |
| (1,231) |
| 47 | |||
Amortization of intangible assets | 13,846 | 14,259 | 14,511 | ||||||
Operating pre-tax, pre-provision net revenue (non-GAAP) | $ | 315,327 | $ | 273,588 | $ | 256,385 | |||
Operating pre-tax, pre-provision net revenue per share (non-GAAP) |
| |
| |
| | |||
Diluted earnings per share (GAAP) | $ | 3.97 | $ | 3.44 | $ | 2.45 | |||
Income taxes |
| 1.22 |
| 1.02 |
| 0.67 | |||
Income before income taxes |
| 5.19 |
| 4.46 |
| 3.12 | |||
Provision for credit losses |
| 0.40 |
| 0.43 |
| 0.21 | |||
Pre-tax, pre-provision net revenue per share (non-GAAP) |
| 5.59 |
| 4.89 |
| 3.33 | |||
Acquisition expenses |
| 0.07 |
| 0.00 |
| 0.00 | |||
Acquisition-related contingent consideration adjustments | 0.00 | 0.00 | 0.06 | ||||||
Litigation accrual | 0.00 | 0.00 | 0.11 | ||||||
Restructuring expenses | 0.03 | 0.00 | 0.02 | ||||||
Loss on sales of investment securities |
| 0.00 |
| 0.01 |
| 0.97 | |||
Gain on debt extinguishment | 0.00 | 0.00 | 0.00 | ||||||
Unrealized (gain) loss on equity securities |
| (0.01) |
| (0.02) |
| 0.00 | |||
Amortization of intangible assets | 0.26 | 0.27 | 0.27 | ||||||
Operating pre-tax, pre-provision net revenue per share (non-GAAP) | $ | 5.94 | $ | 5.15 | $ | 4.76 | |||
Operating net income (non-GAAP) | |||||||||
Net income (GAAP) | $ | 210,455 | $ | 182,481 | $ | 131,924 | |||
Acquisition expenses | 3,663 | 213 | 63 | ||||||
Tax effect of acquisition expenses | (778) | (40) | (13) | ||||||
Subtotal (non-GAAP) | 213,340 | 182,654 | 131,974 | ||||||
Acquisition-related contingent consideration adjustments | 0 | 244 | 3,280 | ||||||
Tax effect of acquisition-related contingent consideration adjustments | 0 | (46) | (689) | ||||||
Subtotal (non-GAAP) | 213,340 | 182,852 | 134,565 | ||||||
Litigation accrual | (50) | 138 | 5,800 | ||||||
Tax effect of litigation accrual | 11 | (26) | (1,218) | ||||||
Subtotal (non-GAAP) | 213,301 | 182,964 | 139,147 | ||||||
Restructuring expenses | 1,499 | 0 | 1,163 | ||||||
Tax effect of restructuring expenses | (318) | 0 | (244) | ||||||
Subtotal (non-GAAP) | 214,482 | 182,964 | 140,066 | ||||||
Loss on sales of investment securities | 0 | 487 | 52,329 | ||||||
Tax effect of loss on sales of investment securities | 0 | (93) | (10,989) | ||||||
Subtotal (non-GAAP) | 214,482 | 183,358 | 181,406 | ||||||
Gain on debt extinguishment | 0 | 0 | (242) | ||||||
Tax effect of gain on debt extinguishment | 0 | 0 | 51 | ||||||
Subtotal (non-GAAP) | 214,482 | 183,358 | 181,215 | ||||||
Unrealized (gain) loss on equity securities | (375) | (1,231) | 47 | ||||||
Tax effect of unrealized (gain) loss on equity securities | 80 | 234 | (10) | ||||||
Subtotal (non-GAAP) | 214,187 | 182,361 | 181,252 | ||||||
Amortization of intangible assets | 13,846 | 14,259 | 14,511 | ||||||
Tax effect of amortization of intangible assets | (2,942) | (2,709) | (3,047) | ||||||
Operating net income (non-GAAP) | $ | 225,091 | $ | 193,911 | $ | 192,716 | |||
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(000's omitted) | 2025 | | 2024 | | 2023 |
| ||||
Operating diluted earnings per share (non-GAAP) | |
| |
| |
| ||||
Diluted earnings per share (GAAP) | $ | 3.97 | $ | 3.44 | $ | 2.45 | ||||
Acquisition expenses |
| 0.07 |
| 0.00 |
| 0.00 | ||||
Tax effect of acquisition expenses | (0.01) | 0.00 | 0.00 | |||||||
Subtotal (non-GAAP) | 4.03 | 3.44 | 2.45 | |||||||
Acquisition-related contingent consideration adjustments | 0.00 | 0.00 | 0.06 | |||||||
Tax effect of acquisition-related contingent consideration adjustments | 0.00 | 0.00 | (0.01) | |||||||
Subtotal (non-GAAP) |
| 4.03 |
| 3.44 |
| 2.50 | ||||
Litigation accrual |
| 0.00 |
| 0.00 |
| 0.11 | ||||
Tax effect of litigation accrual | 0.00 | 0.00 | (0.03) | |||||||
Subtotal (non-GAAP) | 4.03 | 3.44 | 2.58 | |||||||
Restructuring expenses | 0.03 | 0.00 | 0.02 | |||||||
Tax effect of restructuring expenses | (0.01) | 0.00 | 0.00 | |||||||
Subtotal (non-GAAP) | 4.05 | 3.44 | 2.60 | |||||||
Loss on sales of investment securities | 0.00 | 0.01 | 0.97 | |||||||
Tax effect of loss on sales of investment securities |
| 0.00 |
| 0.00 |
| (0.21) | ||||
Subtotal (non-GAAP) |
| 4.05 |
| 3.45 |
| 3.36 | ||||
Gain on debt extinguishment | 0.00 | 0.00 | 0.00 | |||||||
Tax effect of gain on debt extinguishment | 0.00 | 0.00 | 0.00 | |||||||
Subtotal (non-GAAP) | 4.05 | 3.45 | 3.36 | |||||||
Unrealized (gain) loss on equity securities | (0.01) | (0.02) | 0.00 | |||||||
Tax effect of unrealized (gain) loss on equity securities | 0.00 | 0.00 | 0.00 | |||||||
Subtotal (non-GAAP) |
| 4.04 |
| 3.43 |
| 3.36 | ||||
Amortization of intangible assets | 0.26 | 0.27 | 0.27 | |||||||
Tax effect of amortization of intangible assets |
| (0.06) |
| (0.05) | (0.06) | |||||
Operating diluted earnings per share (non-GAAP) | $ | 4.24 | $ | 3.65 | $ | 3.57 | ||||
Return on assets |
|
| |
| | |||||
Net income (GAAP) | $ | 210,455 | $ | 182,481 | $ | 131,924 | ||||
Average total assets |
| 16,743,361 |
| 15,990,697 |
| 15,242,884 | ||||
Return on assets (GAAP) |
| 1.26 | % |
| 1.14 | % |
| 0.87 | % | |
Operating return on assets (non-GAAP) |
|
| |
| | |||||
Operating net income (non-GAAP) | $ | 225,091 | $ | 193,911 | $ | 192,716 | ||||
Average total assets |
| 16,743,361 |
| 15,990,697 |
| 15,242,884 | ||||
Operating return on assets (non-GAAP) |
| 1.34 | % |
| 1.21 | % |
| 1.26 | % | |
Return on equity |
|
| |
| | |||||
Net income (GAAP) | $ | 210,455 | $ | 182,481 | $ | 131,924 | ||||
Average total equity |
| 1,864,775 |
| 1,695,794 |
| 1,595,724 | ||||
Return on equity (GAAP) |
| 11.29 | % |
| 10.76 | % |
| 8.27 | % | |
Operating return on equity (non-GAAP) | ||||||||||
Operating net income (non-GAAP) | $ | 225,091 | $ | 193,911 | $ | 192,716 | ||||
Average total equity | 1,864,775 | 1,695,794 | 1,595,724 | |||||||
Operating return on equity (non-GAAP) |
| 12.07 | % | 11.43 | % | 12.08 | % | |||
| ||||||||||
Net interest margin | ||||||||||
Net interest income | $ | 506,550 | $ | 449,117 | $ | 437,285 | ||||
Total average interest-earning assets | 15,393,824 | 14,754,880 | 14,078,061 | |||||||
Net interest margin | 3.29 | % | 3.04 | % | 3.11 | % | ||||
Net interest margin (FTE) (non-GAAP) |
| |||||||||
Net interest income | $ | 506,550 | $ | 449,117 | $ | 437,285 | ||||
Fully tax-equivalent adjustment (non-GAAP) |
| 3,533 | 3,721 | 4,242 | ||||||
Fully tax-equivalent net interest income (non-GAAP) | 510,083 | 452,838 | 441,527 | |||||||
Total average interest-earning assets |
| 15,393,824 | 14,754,880 | 14,078,061 | ||||||
Net interest margin (FTE) (non-GAAP) |
| 3.31 | % | 3.07 | % | 3.14 | % | |||
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(000’s omitted) | | 2025 | | 2024 | | 2023 | ||||
Operating noninterest revenues (non-GAAP) |
| |||||||||
Noninterest revenues (GAAP) | $ | 311,457 | $ | 297,186 | $ | 214,834 | ||||
Loss on sales of investment securities | 0 | 487 | 52,329 | |||||||
Gain on debt extinguishment | 0 | 0 | (242) | |||||||
Unrealized (gain) loss on equity securities | (375) | (1,231) | 47 | |||||||
Total operating noninterest revenues (non-GAAP) | $ | 311,082 | $ | 296,442 | $ | 266,968 | ||||
Operating noninterest expenses (non-GAAP) | ||||||||||
Noninterest expenses (GAAP) | $ | 521,263 | $ | 486,825 | $ | 472,685 | ||||
Acquisition expenses | (3,663) | (213) | (63) | |||||||
Acquisition-related contingent consideration adjustments | 0 | (244) | (3,280) | |||||||
Litigation accrual | 50 | (138) | (5,800) | |||||||
Restructuring expenses | (1,499) | 0 | (1,163) | |||||||
Amortization of intangible assets | (13,846) | (14,259) | (14,511) | |||||||
Total operating noninterest expenses (non-GAAP) | $ | 502,305 | $ | 471,971 | $ | 447,868 | ||||
Operating revenues (non-GAAP) |
| |||||||||
Net interest income (GAAP) | $ | 506,550 | $ | 449,117 | $ | 437,285 | ||||
Noninterest revenues (GAAP) |
| 311,457 |
| 297,186 |
| 214,834 | ||||
Total revenues (GAAP) |
| 818,007 |
| 746,303 |
| 652,119 | ||||
Loss on sales of investment securities | 0 | 487 | 52,329 | |||||||
Gain on debt extinguishment | 0 | 0 | (242) | |||||||
Unrealized (gain) loss on equity securities | (375) | (1,231) | 47 | |||||||
Total operating revenues (non-GAAP) | $ | 817,632 | $ | 745,559 | $ | 704,253 | ||||
Noninterest revenues/total revenues | ||||||||||
Total noninterest revenues (GAAP) – numerator | $ | 311,457 | $ | 297,186 | $ | 214,834 | ||||
Total revenues (GAAP) – denominator |
| 818,007 | 746,303 | 652,119 | ||||||
Noninterest revenues/total revenues (GAAP) | 38.1 | % | 39.8 | % | 32.9 | % | ||||
Operating noninterest revenues/operating revenues (FTE) (non-GAAP) |
| |||||||||
Total operating noninterest revenues (non-GAAP) – numerator | $ | 311,082 | $ | 296,442 | $ | 266,968 | ||||
Total operating revenues (non-GAAP) | 817,632 | 745,559 | 704,253 | |||||||
Fully tax-equivalent adjustment (non-GAAP) | 3,533 | 3,721 | 4,242 | |||||||
Total operating revenues (FTE) (non-GAAP) – denominator | 821,165 | 749,280 | 708,495 | |||||||
Operating noninterest revenues/operating revenues (FTE) (non-GAAP) | 37.9 | % | 39.6 | % | 37.7 | % | ||||
Efficiency ratio (GAAP) | ||||||||||
Total noninterest expenses (GAAP) – numerator | $ | 521,263 | $ | 486,825 | $ | 472,685 | ||||
Total revenues (GAAP) – denominator |
| 818,007 |
| 746,303 |
| 652,119 | ||||
Efficiency ratio (GAAP) | 63.7 | % | 65.2 | % | 72.5 | % | ||||
Operating efficiency ratio (non-GAAP) |
| |
| |
| | ||||
Total operating noninterest expenses (non-GAAP) – numerator | $ | 502,305 | $ | 471,971 | $ | 447,868 | ||||
Total operating revenues (FTE) (non-GAAP) – denominator |
| 821,165 |
| 749,280 |
| 708,495 | ||||
Operating efficiency ratio (non-GAAP) | 61.2 | % | 63.0 | % | 63.2 | % | ||||
Return on tangible equity (non-GAAP) | ||||||||||
Net income (GAAP) | $ | 210,455 | $ | 182,481 | $ | 131,924 | ||||
Average shareholders’ equity | 1,864,775 | 1,695,794 | 1,595,724 | |||||||
Average goodwill and intangible assets, net | (902,145) | (902,681) | (900,058) | |||||||
Average deferred taxes on goodwill and intangible assets, net | 44,261 | 44,908 | 45,664 | |||||||
Average tangible common equity (non-GAAP) | 1,006,891 | 838,021 | 741,330 | |||||||
Return on tangible equity (non-GAAP) | 20.90 | % | 21.78 | % | 17.80 | % | ||||
Operating return on tangible equity (non-GAAP) | ||||||||||
Operating net income (non-GAAP) | $ | 225,091 | $ | 193,911 | $ | 192,716 | ||||
Average tangible common equity (non-GAAP) |
| 1,006,891 |
| 838,021 |
| 741,330 | ||||
Operating return on tangible equity (non-GAAP) | 22.36 | % | 23.14 | % | 26.00 | % | ||||
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(000’s omitted) | | 2025 | | 2024 | | 2023 |
| |||
Total tangible assets (non-GAAP) |
| |||||||||
Total assets (GAAP) | $ | 17,303,296 | $ | 16,386,044 | $ | 15,555,753 | ||||
Goodwill and intangible assets, net |
| (942,716) |
| (901,471) |
| (897,987) | ||||
Deferred taxes on goodwill and intangible assets, net |
| 43,905 |
| 44,618 |
| 45,198 | ||||
Total tangible assets (non-GAAP) | $ | 16,404,485 | $ | 15,529,191 | $ | 14,702,964 | ||||
Total tangible common equity (non-GAAP) |
|
|
| |||||||
Shareholders’ equity (GAAP) | $ | 2,006,034 | $ | 1,762,835 | $ | 1,697,937 | ||||
Goodwill and intangible assets, net |
| (942,716) |
| (901,471) |
| (897,987) | ||||
Deferred taxes on goodwill and intangible assets, net |
| 43,905 |
| 44,618 |
| 45,198 | ||||
Total tangible common equity (non-GAAP) | $ | 1,107,223 | $ | 905,982 | $ | 845,148 | ||||
Shareholders’ equity-to-assets ratio at quarter end | ||||||||||
Total shareholders' equity (GAAP) - numerator | $ | 2,006,034 | $ | 1,762,835 | $ | 1,697,937 | ||||
Total assets (GAAP) - denominator | 17,303,296 | 16,386,044 | 15,555,753 | |||||||
Shareholders’ equity-to-assets ratio at quarter (GAAP) | 11.59 | % | 10.76 | % | 10.92 | % | ||||
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP) |
|
|
| |||||||
Total tangible common equity (non-GAAP) - numerator | $ | 1,107,223 | $ | 905,982 | $ | 845,148 | ||||
Total tangible assets (non-GAAP) - denominator | 16,404,485 | 15,529,191 | 14,702,964 | |||||||
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP) |
| 6.75 | % |
| 5.83 | % |
| 5.75 | % | |
Book value (GAAP) |
|
|
| |||||||
Total shareholders’ equity (GAAP) – numerator | $ | 2,006,034 | $ | 1,762,835 | $ | 1,697,937 | ||||
Period end common shares outstanding – denominator | 52,682 | 52,668 | 53,327 | |||||||
Book value (GAAP) | $ | 38.08 | $ | 33.47 | $ | 31.84 | ||||
Tangible book value (non-GAAP) |
|
|
| |||||||
Total tangible common equity (non-GAAP) – numerator | $ | 1,107,223 | $ | 905,982 | $ | 845,148 | ||||
Period end common shares outstanding – denominator | 52,682 | 52,668 | 53,327 | |||||||
Tangible book value (non-GAAP) | $ | 21.02 | $ | 17.20 | $ | 15.85 | ||||
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates, prices or credit risk. Credit risk associated with the Company’s loan portfolio has been previously discussed in the asset quality section of the MD&A. Management believes that the tax risk of the Company’s municipal investments associated with potential future changes in statutory, judicial and regulatory actions is minimal. Treasury, agency, mortgage-backed and collateralized mortgage obligation securities issued by government agencies comprise 90.8% of the total portfolio and are currently rated AAA by Moody’s Investor Services and AA+ by Standard & Poor’s. Obligations of state and political subdivisions account for 9.1% of the total portfolio, of which 95.7% carry a minimum rating of A-. The remaining 0.1% of the portfolio is comprised of other investment grade securities. The Company does not have material foreign currency exchange rate risk exposure. Therefore, almost all the market risk in the investment portfolio is related to interest rates.
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The ongoing monitoring and management of both interest rate risk and liquidity over the short- and long-term time horizons is an important component of the Company's asset/liability management process, which is governed by guidelines established in the policies reviewed and approved annually by the Company’s Board. The Board delegates responsibility for carrying out the policies to the ALCO, which meets each month. The committee is made up of the Company's senior management, corporate finance and risk personnel as well as regional and line-of-business managers who oversee specific earning asset classes and various funding sources. As the Company does not believe it is possible to reliably predict future interest rate movements, it has maintained an appropriate process and set of measurement tools, which enables it to identify and quantify sources of interest rate risk in varying rate environments. The primary tool used by the Company in managing interest rate risk is income simulation. This begins with the development of a base case scenario, which projects net interest income (“NII”) over the next twelve-month period. The base case scenario NII may increase or decrease significantly from quarter to quarter reflective of changes during the most recent quarter in the Company’s: (i) earning assets and liabilities balances, (ii) composition of earning assets and liabilities, (iii) earning asset yields, (iv) cost of funds and (v) various model assumptions including loan and time deposit spreads and core deposit betas, as well as current market interest rates, including the slope of the yield curve and projected changes in the slope of the yield curve over the twelve month period. The direction of interest rates, the slope of the yield curve, the modeled changes in deposit balances and the cost of funds, including the Company’s deposit and funding betas, are not easily predicted in the current market environment, and therefore a wide variety of strategic balance sheet and treasury yield curve scenarios are modeled on an ongoing basis.
The following reflects the Company's estimated NII sensitivity as compared to the base case scenario over the subsequent twelve months based on:
| ● | Balance sheet levels using December 31, 2025 as a starting point. |
| ● | The model assumes the Company’s average deposit balances will increase approximately 2.6% over the next twelve months. |
| ● | The model assumes the Company’s average earning asset balances will increase approximately 3.1% over the next twelve months, largely due to forecasted loan growth. |
| ● | Cash flows on earning assets are based on contractual maturity, optionality, and amortization schedules along with applicable prepayments derived from internal historical data and external sources. |
| ● | The model assumes approximately $60.0 million of additional mortgage-backed security purchases over the next twelve months. Investment cash inflows will be used to fund these purchases with any excess inflows being used to pay down overnight borrowings and fund loan growth. |
| ● | In the rising/falling rates scenarios, the prime rate, the federal funds rate, and the 3-month treasury rate are assumed to move up/down in a straight-line manner by the amounts listed below over a 12-month period. The remainder of the treasury curve normalizes to a historical shape based off a historical spread between the 3-month treasury and each point on the treasury curve, which also occurs over a 12-month period. Deposit balance and mix changes and the resultant deposit and funding betas are assumed to move in a manner that reflects the Company’s (i) long-term historical relationship between the Company’s deposit rate movement and changes in the federal funds rate, (ii) recent interest rate cycle experience, (iii) significant management judgment and (iv) other factors, including recent market behaviors of customers and competitors. |
Net Interest Income Sensitivity Model
Calculated annualized increase |
| Calculated annualized increase | ||||
(decrease) in projected net interest |
| (decrease) in projected net interest | ||||
income at December 31, 2025 |
| income at December 31, 2025 | ||||
Interest rate scenario | | (000’s omitted) |
| (%) | ||
+200 basis points | $ | 2,989 | 0.5 | % | ||
+100 basis points | $ | 3,129 | 0.6 | % | ||
-100 basis points | $ | 2,066 | 0.4 | % | ||
-200 basis points | $ | (2,183) | (0.4) | % | ||
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Projected NII over the 12-month forecast period increases in the up 100 and up 200 interest rate environments largely due to higher income on cash balances, investments, and loans all partially offset by higher funding costs.
Projected NII increases in the down 100 interest rate environment largely due to lower funding costs which are partially offset by lower income on loans. Projected NII decreases in the down 200 interest rate environment largely due to lower income on cash balances, investments, and loans all mostly offset by lower funding costs.
The analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions: the nature and timing of interest rate levels (including yield curve shape), prepayments on loans and securities, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and other factors. While the assumptions are developed based upon a reasonable outlook for national and local economic and market conditions, the Company cannot make any assurances as to the predictive efficacy of these assumptions, including how customer preferences or competitor influences might change. Furthermore, the sensitivity analysis does not reflect actions that the ALCO might take in responding to or anticipating changes in interest rates and other developments.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and independent registered public accounting firm’s report of Community Financial System, Inc. are contained on pages 78 through 148 of this item.
· | Consolidated Statements of Condition, |
December 31, 2025 and 2024
· | Consolidated Statements of Income, |
Years ended December 31, 2025, 2024, and 2023
· | Consolidated Statements of Comprehensive Income, |
Years ended December 31, 2025, 2024, and 2023
· | Consolidated Statements of Changes in Shareholders’ Equity, |
Years ended December 31, 2025, 2024, and 2023
· | Consolidated Statements of Cash Flows, |
Years ended December 31, 2025, 2024, and 2023
· | Notes to Consolidated Financial Statements, |
December 31, 2025
· | Management’s Report on Internal Control Over Financial Reporting |
· | Report of Independent Registered Public Accounting Firm (PCAOB ID |
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COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands, Except Share Data)
December 31, | ||||||
2025 | | 2024 | ||||
Assets: | | | | |||
Cash and cash equivalents (includes restricted cash of $ | $ | | $ | |||
Available-for-sale investment securities, includes pledged securities that can be sold or repledged of $ |
| |
| |||
Held-to-maturity securities (fair value of $ | ||||||
Equity and other securities |
| |
| |||
Loans |
| |
| |||
Allowance for credit losses |
| ( |
| ( | ||
Loans, net of allowance for credit losses |
| |
| |||
Goodwill |
| |
| |||
Core deposit intangibles, net |
| |
| |||
Other intangibles, net |
| |
| |||
Goodwill and intangible assets, net |
| |
| |||
Premises and equipment, net |
| |
| |||
Accrued interest and fees receivable |
| |
| |||
Equity method investments | ||||||
Other assets |
| |
| |||
Total assets | $ | | $ | |||
Liabilities: |
| |
| | ||
Noninterest-bearing deposits | $ | | $ | |||
Interest-bearing deposits |
| |
| |||
Total deposits |
| |
| |||
Overnight borrowings |
| |
| |||
Securities sold under agreement to repurchase, short-term |
| |
| |||
Federal Home Loan Bank and other borrowings |
| |
| |||
Accrued interest and other liabilities |
| |
| |||
Total liabilities |
| |
| |||
Commitments and contingencies (See Note N) |
| |
| | ||
Shareholders’ equity: |
| |
| | ||
Preferred stock, $ |
| |
| |||
Common stock, $ |
| |
| |||
Additional paid in capital |
| |
| |||
Retained earnings |
| |
| |||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Treasury stock, at cost ( |
| ( |
| ( | ||
Deferred compensation arrangements ( | ||||||
Total shareholders’ equity |
| |
| |||
Total liabilities and shareholders’ equity | $ | | $ | |||
See accompanying notes to consolidated financial statements.
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COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per-Share Data)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Interest income: |
| |
| | | | |||
Interest and fees on loans | $ | $ | $ | ||||||
Interest and dividends on taxable investments |
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Interest and dividends on nontaxable investments |
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Total interest income |
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Interest expense: |
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| | |
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Interest on deposits |
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Interest on borrowings |
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Total interest expense |
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Net interest income |
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Provision for credit losses |
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Net interest income after provision for credit losses |
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Noninterest revenues: |
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Deposit service fees |
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Mortgage banking | |||||||||
Other banking services |
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Employee benefit services |
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Insurance services |
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Wealth management services |
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Loss on sales of investment securities | ( | ( | |||||||
Gain on debt extinguishment | |||||||||
Unrealized gain (loss) on equity securities |
|
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| ( | |||||
Loss from equity method investments | ( | ||||||||
Total noninterest revenues |
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Noninterest expenses: |
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| | |
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Salaries and employee benefits |
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Data processing and communications |
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Occupancy and equipment | |||||||||
Business development and marketing |
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Legal and professional fees | |||||||||
Amortization of intangible assets | |||||||||
Other expenses |
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Total noninterest expenses |
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Income before income taxes |
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Income taxes |
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Net income | $ | $ | $ | ||||||
Basic earnings per share | $ | | $ | | $ | | |||
Diluted earnings per share | $ | | $ | | $ | | |||
See accompanying notes to consolidated financial statements.
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COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Pension and other post-retirement obligations: | | | | | | ||||
Amortization of actuarial losses (gains) included in net periodic pension cost and (increase) decrease in unrecognized actuarial (gain) loss, gross | $ | $ | $ | ||||||
Tax effect |
| ( | |
| ( | |
| ( | |
Amortization of actuarial losses (gains) included in net periodic pension cost and (increase) decrease in unrecognized actuarial (gain) loss, net |
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|
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Amortization of prior service cost included in net periodic pension cost, gross |
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Tax effect |
| ( | |
| ( | |
| ( | |
Amortization of prior service cost included in net periodic pension cost, net |
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|
| ||||||
Recognition of prior service cost from plan amendment, gross | ( | ||||||||
Tax effect | |||||||||
Recognition of prior service cost from plan amendment, net | ( | ||||||||
Other comprehensive income related to pension and other post-retirement obligations, net of taxes |
|
|
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Net unrealized gains (losses) on investment securities: |
| |
| | |
| | ||
Net unrealized holding gains (losses) on investment securities, gross |
| |
| ( | |
| |||
Tax effect |
| ( |
|
| ( | ||||
Net unrealized holding gains (losses) on investment securities, net |
| |
| ( | |
| |||
Reclassification adjustment for net losses included in net income, gross |
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Tax effect |
| |
| ( | |
| ( | ||
Reclassification adjustment for net losses included in net income, net |
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Other comprehensive gain (loss) related to unrealized gains on investment securities, net of taxes |
|
| ( |
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Other comprehensive income, net of taxes |
| |
| |
| ||||
Net income |
| |
| |
| ||||
Comprehensive income | $ | | $ | | $ | ||||
As of December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Accumulated Other Comprehensive Loss by Component: | | | | | | | |||
Unrecognized prior service cost and net actuarial losses on pension and other post-retirement obligations | | $ | ( | $ | ( | $ | ( | ||
Tax effect | |
| |
| |
| |||
Net unrecognized prior service cost and net actuarial losses on pension and other post-retirement obligations | |
| ( |
| ( |
| ( | ||
Unrealized loss on investment securities | |
| ( | |
| ( |
| ( | |
Tax effect | |
|
| |
| ||||
Net unrealized loss on investment securities | |
| ( | |
| ( |
| ( | |
Accumulated other comprehensive loss | | $ | ( | $ | ( | $ | ( | ||
See accompanying notes to consolidated financial statements.
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COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2023, 2024 and 2025
(In Thousands, Except Share Data)
Common Stock | |||||||||||||||||||||||
| Shares Outstanding | | Amount Issued | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Deferred Compensation Arrangements | | Total | ||||||||
Balance at December 31, 2022 |
| $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||
Net income |
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| |
| |
| |
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Other comprehensive income, net of tax |
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Dividends declared: |
| |
| |
| |
| |
| |
| |
| |
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Common, $ |
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|
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| ( |
| |
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| ( | |||||||||
Common stock activity under employee stock plans |
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Stock-based compensation |
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Distribution of stock under deferred compensation arrangements |
|
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| ( |
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| ( |
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Treasury stock purchased |
| ( |
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| |
| ( |
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| ( | |||||||||||
Balance at December 31, 2023 |
| ( | ( | ||||||||||||||||||||
Net income |
| ||||||||||||||||||||||
Other comprehensive income, net of tax |
| ||||||||||||||||||||||
Dividends declared: |
| |
| |
| |
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| |
| |
| |
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Common, $ |
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| ( | ( | ||||||||||||||||||
Common stock activity under employee stock plans |
| ||||||||||||||||||||||
Stock-based compensation |
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| ||||||||||||||||||||
Distribution of stock under deferred compensation arrangements |
|
|
| ( | |||||||||||||||||||
Treasury stock purchased |
| ( | ( | ( | |||||||||||||||||||
Balance at December 31, 2024 |
| ( | ( | ||||||||||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income, net of tax | |||||||||||||||||||||||
Dividends declared: | |||||||||||||||||||||||
Common, $ | ( | ( | |||||||||||||||||||||
Common stock activity under employee stock plans | |||||||||||||||||||||||
Stock-based compensation | |||||||||||||||||||||||
Distribution of stock under deferred compensation arrangements | ( | ( | |||||||||||||||||||||
Treasury stock purchased | ( | ( | ( | ||||||||||||||||||||
Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
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COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Years Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Operating activities: |
| |
| |
| | |||
Net income | $ | $ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| ||||||
Depreciation |
|
|
| ||||||
Amortization of intangible assets |
|
|
| ||||||
Net amortization on securities, loans, finance leases and borrowings |
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Stock-based compensation |
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Gain on debt extinguishment | ( | ||||||||
Provision for credit losses |
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| ||||||
Provision for deferred income taxes | ( | ||||||||
Amortization of mortgage servicing rights |
|
|
| ||||||
Loss on sales of investment securities | |||||||||
Unrealized gain on equity securities |
| ( |
| ( |
| ||||
Income from bank-owned life insurance policies |
| ( |
| ( |
| ( | |||
Net gain on sale of assets |
| ( |
| ( |
| ( | |||
Loss from equity method investments | |||||||||
Change in other assets and liabilities |
|
| ( |
| |||||
Net cash provided by operating activities |
|
|
| ||||||
Investing activities: |
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|
| | |||||
Proceeds from maturities, calls, and paydowns of available-for-sale investment securities |
|
|
| ||||||
Proceeds from maturities, calls, and paydowns of held-to-maturity investment securities | |||||||||
Proceeds from maturities and redemptions of equity and other investment securities, net |
|
|
| ||||||
Proceeds from sales of available-for-sale investment securities | |||||||||
Purchases of held-to-maturity investment securities | ( | ( | ( | ||||||
Purchases of equity and other securities, net |
| ( |
| ( |
| ( | |||
Net increase in loans |
| ( |
| ( |
| ( | |||
Cash received (paid) for acquisitions, net of cash acquired |
|
| ( |
| ( | ||||
Purchases of equity method investments | ( | ||||||||
Proceeds from sales of premises, equipment and other assets | |||||||||
Purchases of premises and equipment |
| ( |
| ( |
| ( | |||
Net cash used in investing activities |
| ( |
| ( |
| ||||
Financing activities: |
|
| |
| | ||||
Net increase (decrease) in deposits |
|
|
| ( | |||||
Net (decrease) increase in overnight borrowings | ( | ( | |||||||
Net decrease in securities sold under agreement to repurchase, short-term | ( | ( | ( | ||||||
Proceeds from other Federal Home Loan Bank borrowings | |||||||||
Payments on and maturities of other Federal Home Loan Bank borrowings | ( | ( | ( | ||||||
Payments of contingent consideration for acquisitions | ( | ( | ( | ||||||
Redemption of subordinated notes payable | ( | ||||||||
Proceeds from the issuance of common stock for employee stock plans | |||||||||
Purchases of treasury stock |
| ( |
| ( |
| ( | |||
Cash dividends paid |
| ( |
| ( |
| ( | |||
Withholding taxes paid on share-based compensation |
| ( |
| ( |
| ( | |||
Net cash (used in) provided by financing activities |
| ( |
|
| ( | ||||
Change in cash, cash equivalents and restricted cash |
|
|
| ( | |||||
Cash, cash equivalents and restricted cash at beginning of period |
|
|
| ||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | ||||||
Supplemental disclosures of cash flow information: |
| |
|
| | ||||
Cash paid for interest | $ | $ | $ | ||||||
Cash paid for income taxes | |||||||||
Supplemental disclosures of noncash financing and investing activities: |
|
| |
| |||||
Dividends declared and unpaid |
|
|
| ||||||
Transfers from loans to other real estate |
|
|
| ||||||
Transfers from premises and equipment, net to other assets | |||||||||
Finance lease right of use asset in exchange for finance lease liability | |||||||||
Acquisitions: |
|
|
| ||||||
Fair value of assets acquired, excluding acquired cash and intangibles |
|
|
| ||||||
Fair value of liabilities assumed |
|
|
| ||||||
Contingent consideration in exchange for acquired assets | |||||||||
See accompanying notes to consolidated financial statements.
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COMMUNITY FINANCIAL SYSTEM, INC.
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Community Financial System, Inc. (the “Company”) is a registered financial holding company which wholly-owns
As of December 31, 2025, the Bank operated
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical accounting estimates include the allowance for credit losses, actuarial assumptions associated with the pension, post-retirement and other employee benefit plans and the carrying value of goodwill and other intangible assets, including the impact of acquired loan valuations. The impact of subsequent events on the consolidated financial statements has been considered, see Note V for further detail.
Certain reclassifications have been made to prior years’ balances to conform to the current year presentation.
The Company’s significant accounting policies are as follows.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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Variable Interest Entities (“VIE”) are legal entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the legal entities to finance its activities without additional subordinated financial support. VIEs may be required to be consolidated by a company if it is determined the company is the primary beneficiary of a VIE. The primary beneficiary of a VIE is the enterprise that has: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company’s VIEs are described in more detail in Note T to the consolidated financial statements.
Risk and Uncertainties
In the normal course of its business, the Company encounters economic and regulatory risks. There are
The Company is subject to regulations of various governmental agencies. These regulations can change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required credit loss allowances, and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.
Revenue Recognition
The Company recognizes revenue in accordance with ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified Topic 606.
Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope. Topic 606 is applicable to the Company’s noninterest revenue streams including its deposit related fees, electronic payment interchange fees, merchant income, trust, asset management and other wealth management revenues, insurance commissions, benefit plan services income and commercial real estate financing and structuring fees. Noninterest revenue streams in-scope of Topic 606 are discussed below.
Deposit Service Fees
Deposit service fees consist of account activity fees, monthly service fees, overdraft fees, check orders, debit and credit card income, ATM fees, merchant services income and other revenues from processing wire transfers, bill pay service, cashier’s checks and foreign exchange. Debit and credit card income is primarily comprised of interchange fees earned at the time the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. The Company’s performance obligation for deposit service fees is generally satisfied, and the related revenue recognized, when the services are rendered or the transaction has been completed. Payment for deposit service fees is typically received at the time it is assessed through a direct charge to customers’ accounts or on a monthly basis. Deposit service fees revenue relates to the Company’s Banking and Corporate operating segment.
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Other Banking Services
Other banking services consists of other recurring revenue streams such as commissions from sales of credit life insurance, safe deposit box rental fees, mortgage banking income, bank owned life insurance income, commercial real estate financing and structuring fees, and other miscellaneous revenue streams. Commissions from the sale of credit life insurance are recognized at the time of sale of the policies. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Commercial real estate financing and structuring fees are recognized upon completion of the transaction. Mortgage banking income and bank owned life insurance income are not within the scope of Topic 606. Other banking services revenue relates to the Company’s Banking and Corporate operating segment.
Employee Benefit Services
Employee benefit services income consists of revenue received from retirement plan services, collective investment fund services, fund administration, transfer agency, consulting and actuarial services. The Company’s performance obligation that relates to plan services are satisfied over time and the resulting fees are recognized monthly or quarterly, based upon the market value of the assets under management and the applicable fee rate or on a time expended basis. Payment is generally received a few days after month end or quarter end. The Company does not earn performance-based incentives. Transactional services such as consulting services, mailings, or other ad hoc services are provided to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered. Employee benefit services revenue relates to the Company’s Employee Benefit Services operating segment.
Insurance Services
Insurance services primarily consists of commissions received on insurance product sales and consulting services. The Company acts in the capacity of a broker or agent between the Company’s customer and the insurance carrier. The Company’s performance obligation related to insurance sales for both property and casualty insurance and employee benefit plans is generally satisfied upon the later of the issuance or effective date of the policy. The Company’s performance obligation related to consulting services is considered transactional in nature and is generally satisfied when the services have been completed and related revenue recognized at a point in time. Payment is received at the time services are rendered. The Company earns performance based incentives, commonly known as contingency payments, which usually are based on certain criteria established by the insurance carrier such as premium volume, growth and insured loss ratios. Contingent payments are accrued for based upon management’s expectations for the year. Commission expense associated with sales of insurance products is expensed as incurred. Insurance services revenue relates to the Company’s Insurance Services operating segment.
Wealth Management Services
Wealth management services income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company generally has
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Contract Balances
A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2025, $
Contract Acquisition Costs
Under the guidance of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commissions). The Company utilizes the practical expedient method which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.
Cash, Cash Equivalents and Restricted Cash
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and highly liquid investments with original maturities of less than 90 days. The carrying amounts reported in the consolidated statements of condition for cash and cash equivalents approximate those assets’ fair values. As of December 31, 2025, and 2024, cash and cash equivalents reported in the consolidated statements of condition included cash due from banks of $
The Company maintains certain cash balances that are restricted as to withdrawal or use. Restricted cash at December 31, 2025 and 2024 consists of $
Investment Securities
The Company can classify its investments in debt securities as held-to-maturity, available-for-sale, or trading. Held-to-maturity securities are those for which the Company has the positive intent and ability to hold until maturity, and are reported at cost, which is adjusted for amortization of premiums and accretion of discounts. Available-for-sale debt securities are reported at fair value with net unrealized gains and losses reflected as a separate component of shareholders’ equity, net of applicable income taxes. None of the Company’s investment securities have been classified as trading securities at December 31, 2025 or 2024.
Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Purchases of investment securities and gains and losses associated with sales of investment securities are recorded on the trade date and determined using the specific identification method. Equity securities with a readily determinable fair value are reported at fair value with net unrealized gains and losses recognized in the consolidated statements of income. Certain equity securities that do not have a readily determinable fair value are stated at cost, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. These securities include restricted stock of the Federal Reserve Bank of New York (“Federal Reserve”) and the Federal Home Loan Bank of New York and the Federal Home Loan Bank of Boston (collectively referred to as “FHLB”), as well as other equity securities.
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Fair values for investment securities are based upon quoted market prices, where available. If quoted market prices are not available, fair values are based upon quoted market prices of comparable instruments, or a discounted cash flow model using market estimates of interest rates and volatility.
Equity Method Investments
The Company applies the equity method of accounting to investments in entities over which it has significant influence but does not have a controlling financial interest. Key indicators of significant influence include ownership interest, representation on the board of directors and participation in policy-making decisions. Equity method investments are initially recorded at cost on the consolidated statements of condition. The excess of the purchase price over the Company’s share of the investee’s net assets (the “basis difference”) is allocated to identifiable assets and liabilities, with any remaining excess classified as equity method goodwill. The carrying amount of equity method investments is adjusted for the Company’s share of the investee’s earnings or losses, dividends received and the amortization of basis differences other than equity method goodwill. The Company’s share of the investee’s earnings or losses and the amortization of basis differences are classified as income or loss from equity method investments on the consolidated statements of income. Equity method investments are assessed for impairment when events or circumstances suggest that the carrying amount of the investment may not be recoverable, including sustained investee losses or other adverse developments affecting the investee’s operations.
Allowance for Credit Losses – Held-to-Maturity Debt Securities
For held-to-maturity debt securities, the Company measures expected credit losses on a collective basis by major security type. The estimates of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Changes in the allowance for credit losses are recorded as a provision for credit losses in the consolidated statements of income.
Impairment – Available-for-Sale Debt Securities
For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the security structure, recent security collateral performance metrics, if applicable, external credit ratings, failure of the issuer to make scheduled interest or principal payments, judgment about and expectations of future performance, and relevant independent industry research, analysis, and forecasts. This assessment involves a high degree of subjectivity and judgment that is based on the information available to management at a point in time. If this assessment indicates that a credit loss exists, the present value of the cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable in the consolidated statements of condition, totaled $
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Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of allowance for credit losses. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, and deferred loan fees and costs.
Mortgage loans held for sale are carried at fair value and are included in other assets on the consolidated statements of condition. Fair values for variable rate loans that reprice frequently are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest approximates its fair value.
Interest on loans is accrued based upon the principal amount outstanding. Nonrefundable loan fees and related direct costs are deferred and included in the loan balances where they are amortized over the life of the loan as an adjustment to loan yield using the effective yield method. Premiums and discounts on purchased loans are amortized using the effective yield method over the life of the loans.
Accrued interest receivable on loans is included in accrued interest and fees receivable on the consolidated statements of condition and is excluded from the estimate of credit losses and amortized cost basis of loans. An allowance for credit losses is not measured for accrued interest receivable on loans as the Company writes off the uncollectible accrued interest balance in a timely manner upon recognition of credit deterioration of the underlying loan.
The Company places a loan on nonaccrual status when the loan becomes 90 days past due or sooner, if management concludes collection of principal and interest is doubtful, except when, in the opinion of management, it is well-collateralized and in the process of collection. A loan may be placed on nonaccrual status earlier than 90 days past due if there is deterioration in the financial position of the borrower or if other conditions of the loan so warrant. When a loan is placed on nonaccrual status, uncollected accrued interest is reversed against interest income and the amortization of nonrefundable loan fees and related direct costs is discontinued. Interest income during the period the loan is on nonaccrual status is recorded on a cash basis after recovery of principal is reasonably assured. Nonaccrual loans are returned to accrual status when management determines that the borrower’s performance has improved and that both principal and interest are collectible. This generally requires a sustained period of timely principal and interest payments and a well-documented credit evaluation of the borrower’s financial condition.
The Company’s charge-off policy by loan type is as follows:
| ● | Business lending loans are generally charged-off to the extent outstanding principal exceeds the fair value of estimated proceeds from collection efforts, including liquidation of collateral. The charge-off is recognized when the loss becomes reasonably quantifiable. |
| ● | Consumer installment loans are generally charged-off to the extent outstanding principal exceeds the fair value of collateral if repossession of the collateral is assured and in process and are recognized by the end of the month in which the loan becomes 90 days past due and are fully charged-off when the loan becomes 120 days past due. |
| ● | Consumer mortgage and home equity loans are generally charged-off to the extent outstanding principal exceeds the fair value of the property, less estimated costs to sell, and are recognized when the loan becomes 180 days past due. |
Allowance for Credit Losses – Loans
The allowance for credit losses is a valuation account that is netted against the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.
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Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected future credit losses. Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, size and credit quality of acquired loans, delinquency level, risk ratings or term of loans as well as actual and forecasted US macroeconomic trends, including unemployment rates, growth of gross domestic product and median household income net of inflation, and changes in property values including home prices, commercial real estate prices, including office-specific property prices, office-specific property vacancy rates, automobile prices, and other relevant factors in comparison to longer-term performance. Multiple economic scenarios are utilized to encompass a range of economic outcomes, including baseline, upside and downside forecasts, which are weighted in the calculation.
The segments of the Company’s loan portfolio are disaggregated into the following classes that allow management to monitor risk and performance:
| ● | Business lending is comprised of general purpose commercial and industrial loans including, but not limited to, agricultural-related and dealer floor plans, loans to not-for-profit enterprises, as well as mortgages on commercial property. The portfolio segment is further broken into portfolio classes based on risks associated with the collateral supporting the loans. This includes three classes of commercial real estate (“CRE”) loans and five classes of non-real estate business loans. Each class of business lending can also have different payment structures. Business lending loans are generally higher dollar loans and a large portion are risk rated at least annually. |
| ● | Consumer mortgages consist primarily of fixed rate residential instruments, typically 10 to 30 years in contractual term, secured by first liens on real property. FICO credit scores are used to monitor higher risks related to this type of lending with the Company segmenting consumer mortgages into “FICO AB” and “FICO CDE”. FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720 as compared to FICO CDE with FICO scores less than 720 and potentially higher risk. |
| ● | Consumer indirect consists primarily of installment loans originated through selected dealerships and are generally secured by automobiles, marine and other recreational vehicles. Collateral securing the loans was used to further disaggregate this portfolio as charge-offs can vary depending on the purpose of the loan. Non-auto loans often have longer terms and generally have higher risk due to declines in collateral value given the nature of the property. |
| ● | Consumer direct consists of all other loans to consumers such as personal installment loans and check credit lines of credit. |
| ● | Home equity products are installment loans or lines of credit most often secured by a first or second lien position on residential real estate with terms up to 30 years. |
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The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, including collateral type, credit ratings/scores, size, duration, interest rate structure, industry, geography, origination vintage, and payment structure. The Company has identified the following portfolio segments and classes and measures the allowance for credit losses using the following methods:
Loan Portfolio Segment | | Loan Portfolio Class | | Allowance for Credit Losses Methodology |
Business lending |
| CRE multi family |
| Cumulative loss rate |
Business lending |
| CRE non-owner occupied |
| Cumulative loss rate |
Business lending |
| CRE owner occupied |
| Cumulative loss rate |
Business lending |
| Commercial and industrial loans |
| Vintage loss rate |
Business lending |
| Commercial and industrial lines of credit |
| Line loss |
Business lending |
| Governmental |
| Cumulative loss rate |
Business lending |
| Other business |
| Cumulative loss rate |
Business lending |
| Paycheck Protection Program |
| Cumulative loss rate |
Consumer mortgage |
| Consumer mortgage FICO AB |
| Cumulative loss rate |
Consumer mortgage |
| Consumer mortgage FICO CDE |
| Cumulative loss rate |
Consumer indirect |
| Indirect new auto |
| Vintage loss rate |
Consumer indirect |
| Indirect used auto |
| Vintage loss rate |
Consumer indirect |
| Indirect non-auto |
| Vintage loss rate |
Consumer direct |
| Consumer check credit |
| Line loss |
Consumer direct |
| Consumer direct |
| Vintage loss rate |
Home equity |
| Home equity fixed rate |
| Vintage loss rate |
Home equity |
| Home equity lines of credit |
| Line loss |
The cumulative loss rate method uses historical loss data applied against multiple pools of loans and uses a quantitatively based management overlay in order to capture the risk for a loan’s entire expected life. These loss rates are then applied to current balances to achieve a required reserve before qualitative adjustments.
The line loss method calculates the quantitative required reserve for lines of credit. This method contains several different underlying calculations including average annual loss rate, pay-down rate, cumulative loss, average draw percentage, and undrawn liability reserve.
The vintage loss rate method calculates annual loss rates by origination year. The results of this model are then applied to current outstanding balances by vintage, which correspond to the origination period for each annual loss rate.
In addition to the risk characteristics noted above, management considers the portion of acquired loans to the overall segment balance, as well as current delinquency and charge-off trends compared to historical time periods.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans that are individually assessed are not included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
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Certain business lending, consumer direct, and home equity loans do not have stated maturities. In determining the estimated life of these loans, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the balance. Expected credit losses for lines of credit with no stated maturity are determined by estimating the amount and timing of all principal payments expected to be received after the reporting period and allocating those principal payments between the balance outstanding as of the reporting period and the balance of future receivables expected to be originated through subsequent usage of the unconditionally cancellable loan commitment associated with the account until the expected payments have been fully allocated. An additional allowance for credit loss is recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments allocated to that balance.
Loan Modifications
The Company, in certain situations, will modify a loan with a borrower experiencing financial difficulty that results in a direct change in the timing or amount of contractual cash flows. Applicable modifications include, but are not limited to, principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension (other than administrative) or a combination thereof. Principal forgiveness is defined as any contractual reduction in the amount of principal due without receiving payment or assets. Interest rate reduction is defined as the change resulting in the borrower receiving a below market interest rate. A delay in payment that is other-than-insignificant is determined by considering factors including the amount of the restructured payments relative to the unpaid principal or collateral value of the loan, as well as the timing of the restructured payment relative to the frequency of payments due under the debt, the debt’s original contract maturity and the debt’s original expected duration. Generally, a delay in payment greater than 90 days in the last twelve months would be considered other-than-insignificant. The Company considers several factors to assess whether a borrower is experiencing financial difficulty, including, but not limited to, payment default or expected payment default, bankruptcy of the borrower, substantial doubt whether the borrower will continue as a going concern and estimates or projections of the borrower’s financial condition that indicate that the borrower will be unable to service the loan in accordance with the contractual provisions of the existing agreement.
Allowance for Credit Losses - Off-balance-sheet credit exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. There are unfunded commitments for lines of credit within each of the Company’s loan portfolio segments except consumer indirect. The allowance for credit losses on off-balance-sheet credit exposures is adjusted as a provision for (or reversal of) credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics that are the same as the adjustments considered for the loan portfolio.
Purchased Credit Deteriorated (“PCD”) Loans
The Company has purchased loans, some of which have experienced a more-than-insignificant credit deterioration since origination. The Company’s policy for reviewing what meets the threshold of the definition of a more-than-insignificant credit deterioration includes loans that are delinquent more than 30 days, loans that have historical delinquencies of more than 30 days at least three times since origination, risk rating downgrades since origination, loans with multiple payment deferrals, loan modifications to a borrower experiencing financial difficulty, individually assessed loans or loans with certain documented policy exceptions, further refined based on loan-specific facts and circumstances. PCD loans are initially recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded as provision for credit losses.
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Purchased Seasoned Loans
Loans acquired without credit deterioration and deemed “seasoned” are accounted for using the gross-up approach at acquisition. All non-PCD loans that are acquired in a business combination are deemed seasoned. Other non-PCD loans are seasoned if they were purchased at least 90 days after origination and the purchaser was not involved in the origination of the loans. If a loan is determined to be a non-purchased credit deteriorated asset based on the assessment of credit deterioration experienced since origination and deemed seasoned, that loan is accounted for using the gross-up approach. The gross-up approach requires recognition of an allowance for credit losses for the estimate of credit losses at the acquisition date with an off-setting gross-up adjustment to the amortized cost basis of the loan.
Non-Purchased Credit Deteriorated (“non-PCD”) Loans
Prior to the Company’s adoption of ASU 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans in 2025, acquired loans that are not deemed to have experienced a more-than-insignificant credit deterioration since origination are considered non-PCD. At the acquisition date, a fair value adjustment is recorded that includes both credit and interest rate considerations. Fair value adjustments may be discounts (or premiums) to a loan’s cost basis and are accreted (or amortized) to net interest income (or expense) over the loan’s remaining life. Fair value adjustments for revolving loans are accreted (or amortized) using a straight line method. Term loans are accreted (or amortized) using the constant effective yield method. A provision for credit losses is also recorded at acquisition for the credit considerations on non-PCD loans. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans are the same as originated loans and subsequent changes to the allowance for credit losses are recorded as provision for credit losses.
Goodwill and Intangible Assets
Intangible assets include core deposit intangibles, customer relationship intangibles and goodwill arising from acquisitions. Core deposit intangibles and customer relationship intangibles are amortized on either an accelerated or straight-line basis over periods to
The Company evaluates goodwill for impairment on an annual basis in accordance with FASB ASC 350, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and performs either a qualitative or quantitative assessment, depending on circumstances and management judgment. The Company also performs a quarterly analysis to determine if any triggering events have occurred that would require an interim evaluation. During 2025 and 2024, no triggering events or impairment of goodwill was identified.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Computer software costs that are capitalized include only external direct costs of obtaining and installing the software. The Company has not developed any internal use software. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Useful lives range from to
Premises and equipment designated as held for sale are included in other assets in the consolidated statements of condition and are carried at the lower of cost or fair value, less estimated costs to sell.
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Leases
The Company occupies certain offices and uses certain equipment under non-cancelable operating lease agreements. The Company determines if an arrangement is a lease at inception. The right-of-use assets associated with operating leases are recorded in premises and equipment in the Company’s consolidated statements of condition. The lease liabilities associated with operating leases are included in accrued interest and other liabilities in the Company’s consolidated statements of condition.
Right-of-use assets represent the Company’s right to use the underlying assets for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the associated leases. Operating lease right-of-use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company uses interest rates on advances from the FHLB available at the time of commencement to determine the present value of lease payments. The operating lease right-of-use assets include any lease payments made at the time of commencement and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term and is included in occupancy and equipment expense in the Company’s consolidated statements of income.
The Company elected to account for lease and non-lease components separately, applies a portfolio approach to account for the lease right-of-use assets and liabilities for certain equipment leases and elected to exclude leases with a term of 12 months or less from the recognition and measurement policies described above.
The Company entered into certain finance leases beginning in 2024. The right-of-use assets associated with finance leases are included in other assets in the Company’s consolidated statements of condition. The lease liabilities associated with finance leases are included in FHLB and other borrowings in the Company’s consolidated statements of condition.
Other Real Estate
Other real estate owned is comprised of properties acquired through foreclosure, or by deed in lieu of foreclosure. These assets are carried at fair value less estimated costs of disposal and may be further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business. The carrying value of OREO may be limited by the contractual balance of the related former loan, and when this occurs, OREO is not considered to be carried at fair value or included in the fair value hierarchy disclosures. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for credit losses. Any subsequent reduction in value is recognized by a charge to income. Operating costs associated with the properties are charged to expense as incurred. At December 31, 2025 and 2024, other real estate totaled $
Mortgage Servicing Rights
Originated mortgage servicing rights are recorded at their fair value at the time of sale of the underlying loan and are amortized in proportion to and over the period of estimated net servicing income or loss. The Company uses a valuation model that calculates the present value of future cash flows to determine the fair value of servicing rights. In using this valuation method, the Company incorporates assumptions that market participants would use in estimating future net servicing income, which includes estimates of the servicing cost per loan, the discount rate, and prepayment speeds. The carrying value of the originated mortgage servicing rights is included in other assets in the Company’s consolidated statements of condition and is evaluated quarterly for impairment using these same market assumptions. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceeds estimated fair value. Impairment is recognized through a valuation allowance.
Treasury Stock
Repurchases of shares of the Company’s common stock are recorded at cost as a reduction of shareholders’ equity. Reissuance of shares of treasury stock is recorded at average cost. A federal excise tax equal to 1% of the fair value of share repurchases, net of issuances, is recorded as part of the cost basis of the treasury stock as a direct and incremental cost associated with the repurchase transaction.
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Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Provision for income taxes is based on taxes currently payable or refundable as well as deferred taxes that are based on temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are reported in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.
Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority having full knowledge of all relevant information. A tax position meeting the more-likely-than-not recognition threshold should be measured at the largest amount of benefit for which the likelihood of realization upon ultimate settlement exceeds 50 percent. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as part of income taxes in the consolidated statements of income. Should tax laws change or the taxing authorities determine that management’s assumptions were inappropriate, an adjustment may be required which could have a material effect on the Company’s results of operations.
Investments in Limited Partnerships
The Company has investments in various real estate limited partnerships that acquire, develop, own and operate low and moderate-income housing. The Company’s ownership interest in these limited partnerships ranges from
The Company accounts for its ownership interest in these partnerships in accordance with Accounting Standards Update (“ASU”) 2014-01, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The standard permits an entity to amortize the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense. The Company has
Repurchase Agreements
The Company sells certain securities under agreements to repurchase. These agreements are treated as collateralized financing transactions. These secured borrowings are reflected as liabilities in the accompanying consolidated statements of condition and are recorded at the amount of cash received in connection with the transaction. Short-term securities sold under agreements to repurchase generally mature within one year from the transaction date, and most within one day. Securities, generally U.S. government and agency securities, pledged as collateral under these financing arrangements can be repledged by the secured party. Additional collateral may be required based on the fair value of the underlying securities.
Retirement Benefits
The Company provides defined benefit pension benefits to eligible employees and post-retirement health and life insurance benefits to certain eligible retirees. The Company also provides deferred compensation and supplemental executive retirement plans for selected current and former employees, officers, and directors. Expense under these plans is charged to current operations and consists of several components of net periodic benefit based on various actuarial assumptions regarding future experience under the plans, including discount rate, rate of future compensation increases and expected return on plan assets.
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Assets Under Management or Administration
Assets held in fiduciary or agency capacities for customers are not included in the accompanying consolidated statements of condition as they are not assets of the Company. All fees associated with providing asset management services are recorded on an accrual basis of accounting and are included in noninterest income.
Advertising
Advertising costs, which are nondirect response in nature and expensed as incurred, totaled $
Bank Owned Life Insurance
The Company owns life insurance policies on certain current and former employees and directors where the Bank is the beneficiary. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value (“CSV”) adjusted for other charges or other amounts due that are probable at settlement. Increases in the CSV of the policies, as well as the death benefits received, net of any CSV, are recorded in noninterest income in the consolidated statements of income.
Earnings Per Share
Using the two-class method, basic earnings per common share is computed based upon net income available to common shareholders divided by the weighted average number of common shares outstanding during each period, which excludes the outstanding unvested restricted stock. Diluted earnings per share is computed using the weighted average number of common shares determined for the basic earnings per common share computation plus the dilutive effect of stock options using the treasury stock method. Stock options where the exercise price is greater than the average market price of common shares were not included in the computation of earnings per diluted share as they would have been anti-dilutive. Shares held in rabbi trusts related to deferred compensation plans are considered outstanding for purposes of computing earnings per share.
Stock-based Compensation
Companies are required to measure and record compensation expense for stock options and other share-based payments on the instruments’ fair value on the date of grant. Stock-based compensation expense is recognized ratably over the requisite service period for all awards (see Note L).
Fair Values of Financial Instruments
The Company determines fair values based on quoted market values where available or on estimates using present values or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from this disclosure requirement. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The fair values of investment securities, loans, deposits, and borrowings have been disclosed in Note R.
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Contingent Consideration
The Company measures contingent consideration liabilities recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy as defined in ASC 820 Fair Value Measurement. The Company used a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent consideration on the acquisition date. At each subsequent reporting period, the fair value is re-measured with the change in fair value recognized in noninterest expenses in the consolidated statements of income. Amounts, if any, paid to the seller in excess of the amount recorded on the acquisition date will be classified as cash flows used in operating activities. Payments to the seller not exceeding the acquisition-date fair value of the contingent consideration will be classified as cash flows used in financing activities.
Restructuring Expenses
Restructuring expenses includes costs associated with employee severance and separation costs that meet the requirements for recognition in accordance with ASC 420, Exit or Disposal Cost Obligations or ASC 712, Compensation – Nonretirement Postemployment Benefits, as applicable. Liabilities are recognized when the restructuring plan is approved, the employees are identified, the terms of the arrangement are established, it is determined that changes to the plan is unlikely to occur and the plan is communicated to employees. The liabilities are recorded within accrued interest and other liabilities in the consolidated statements of condition. The corresponding expenses are recorded within restructuring expenses in the consolidated statements of income.
During 2025 and 2023, the Company initiated retail customer service workforce optimization plans in the Banking and Corporate segment in order to improve operational efficiency by more closely aligning bank branch staffing levels with shifting customer behaviors including conducting a smaller amount of transactions in branches and a larger amount of transactions digitally. The Company
Segment Information
Effective January 1, 2024, the Company changed its determination of reportable segments and reportable measure of segment profit or loss in connection with the appointment of the Company’s new President and Chief Executive Officer, who serves as the Company’s chief operating decision maker (“CODM”), and changes in the information the CODM regularly reviews and uses to allocate resources and assess performance. The appointment of the Company’s new President and Chief Executive Officer followed the retirement of the Company’s former President and Chief Executive Officer, who previously served as the Company’s CODM until December 31, 2023. The change in determination of reportable segments was also driven by a change in the disaggregation of segment information that management believes would be useful to readers of the financial statements and to align its reportable segments with financial information communicated to external parties, the Company’s Board of Directors (the “Board”) and the business leaders who regularly meet with the CODM who also review this information at the same level of disaggregation. The change in reportable measure of segment profit or loss aligns with a change in the measurement principles of the internal reporting package used by the CODM to allocate resources and assess performance, which is presented on an operating basis excluding certain items considered non-core to the underlying business. Effective January 1, 2024, the Company has identified (1) Banking and Corporate; (2) Employee Benefit Services; (3) Insurance Services; and (4) Wealth Management Services as its reportable segments and determined that operating income before income taxes is the reportable measure of segment profit or loss that the CODM regularly reviews and uses to allocate resources and assess performance.
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Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The update requires enhancements to the rate reconciliation, including disclosure of specific categories and additional information for reconciling items meeting a quantitative threshold as well as disclosure of income taxes paid disaggregated by federal, state and foreign taxes, and individual jurisdictions meeting a quantitative threshold. The amendments in this update are effective for annual financial statements for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company adopted this standard beginning with the December 31, 2025 consolidated financial statements.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans. The amendments in this update expand the population of acquired financial assets subject to the gross-up approach in Topic 326, Financial Instrument- Credit Losses. In accordance with the amendments in this update, loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” are purchased seasoned loans and accounted for using the gross-up approach at acquisition. The amendments apply prospectively and will be effective for fiscal periods beginning after December 15, 2026. The Company elected to early-adopt the ASU as of January 1, 2025.
New Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, to enhance the disclosure of expenses by requiring further disaggregation of relevant expense captions as well as disclosures about selling expenses. ASU 2024-03 is applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact this will have on the consolidated financial statements but does not expect it will have a material impact on the Company’s consolidated financial statements.
NOTE B: ACQUISITIONS
Pending Acquisition
On January 15, 2026, the Company, through its subsidiary CBNA, entered into an agreement to acquire ClearPoint Federal Bank & Trust for approximately $
Current and Prior Period Acquisitions
On November 7, 2025, the Company, through its subsidiary CBNA, completed the acquisition of seven branch locations in the Allentown, Pennsylvania area from Santander Bank, N.A. (“Santander”), including certain branch-related loans and deposits, acquiring $
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During 2025, the Company, through its subsidiaries NISI, OneGroup, BPA and BPAS, completed the acquisition of certain assets of financial services companies based in Pennsylvania, Florida, Kentucky, New York, Kansas, Minnesota and Missouri. Total aggregate consideration was $
During 2024, the Company, through its subsidiary OneGroup, completed acquisitions of certain insurance agencies headquartered in New York and Florida for aggregate consideration of $
On February 1, 2024, the Company, through its subsidiary BPA, completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting services. Total consideration was $
The acquisition of CPD includes contingent consideration arrangements that require additional consideration to be paid by the Company based on the future revenue levels of CPD over approximately
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The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions. During 2025 and 2024, based on the receipt of new information, there were adjustments made to the carrying value of goodwill of $
The Santander transaction accelerates CBNA’s de novo expansion in the strategic Greater Lehigh Valley and complements its existing commercial and consumer lending presence in the market. The NISI, OneGroup, BPA and BPAS transactions generally expand the Company’s wealth management, insurance services and employee benefit services presence. The Axiom acquisition generally expanded the Company's presence nationwide providing services to arrange financing for commercial real estate customers. Management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in acquisitions considered to be business combinations after considering the measurement period adjustments described above:
2025 | 2024 | ||||||||||||||||
(000s omitted) | Santander | Other(1) | Total | | CPD | Other (2) | Total | ||||||||||
Consideration: | | | | ||||||||||||||
Cash | $ | $ | $ | $ | $ | $ | |||||||||||
Contingent consideration | |||||||||||||||||
Total net consideration |
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Recognized amounts of identifiable assets acquired and liabilities assumed: |
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Cash and cash equivalents |
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Loans, net of allowance for credit losses | |||||||||||||||||
Premises and equipment |
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Accrued interest and fees receivable | |||||||||||||||||
Other assets |
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Core deposit intangibles | |||||||||||||||||
Other intangibles |
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Deposits | ( | ( | |||||||||||||||
Other liabilities |
| ( |
| ( |
| ( |
| ( |
| ( | ( | ||||||
Total identifiable assets, net |
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Goodwill | $ | $ | $ | $ | $ | $ | |||||||||||
| (1) | Includes amounts for NISI, OneGroup, BPA and BPAS acquisitions completed in 2025. |
| (2) | Includes amounts for OneGroup acquisitions completed in 2024. |
The Company acquired loans from Santander for which there was no evidence of a more-than-insignificant deterioration in credit quality since origination (purchased seasoned loans) with an unpaid principal balance of $
The fair value of checking, savings and money market deposit accounts acquired were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificate of deposit accounts were valued at the present value of the certificates’ expected contractual payments discounted at market rates for similar certificates, which resulted in a premium of $
The core deposit intangibles and other intangibles related to the Santander acquisition, the other intangibles related to the NISI, OneGroup, BPA and BPAS acquisitions completed in 2025 and the OneGroup acquisitions completed in 2024 are being amortized using an accelerated method over an estimated useful life of
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Direct costs related to the acquisitions were expensed as incurred. Merger and acquisition integration-related expenses amount to $
Disclosure of the proforma revenue and earnings assuming the Santander acquisition had been completed as of January 1, 2024 is not considered practicable. Retrospective application to that date would require assumptions about management's intent in prior periods that cannot be independently substantiated. It is not possible to objectively distinguish information about significant estimates of amounts that provide evidence of circumstances that existed on the dates at which those amounts would be recognized, measured, or disclosed under retrospective application and would have been available when the financial statements for that prior period were issued.
NOTE C: INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of December 31 are as follows:
| 2025 | | 2024 | |||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||
(000’s omitted) | | Cost | | Gains | | Losses | | Value | | Cost | | Gains | | Losses | | Value | ||||||||
Available-for-Sale Portfolio: | | | | | | | | | ||||||||||||||||
U.S. Treasury and agency securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Obligations of state and political subdivisions | ||||||||||||||||||||||||
Government agency mortgage-backed securities | ||||||||||||||||||||||||
Corporate debt securities | ||||||||||||||||||||||||
Government agency collateralized mortgage obligations | ||||||||||||||||||||||||
Total available-for-sale portfolio | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Held-to-Maturity Portfolio: | ||||||||||||||||||||||||
U.S. Treasury and agency securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Government agency mortgage-backed securities | ||||||||||||||||||||||||
Total held-to-maturity portfolio | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
As of December 31, 2025, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $
As of December 31, 2024, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $
The investment in FRB stock represents approximately of the total required subscription, and the remaining is unpaid and remains subject to call by the FRB.
The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the years ended December 31, 2025, 2024 and 2023.
The gains and losses on equity and other securities for the years ended December 31, 2025, 2024 and 2023 are as follows:
(000's omitted) | | 2025 | | 2024 | | 2023 | |||
Net gain (loss) recognized on equity securities | $ | | $ | | $ | ( | |||
Less: Net gain (loss) recognized on equity securities sold during the period |
| |
| |
| | |||
Unrealized gain (loss) recognized on equity securities still held | $ | | $ | | $ | ( | |||
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A summary of investment securities that have been in a continuous unrealized loss position is as follows:
As of December 31, 2025
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||
(000’s omitted) | | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses | ||||||
Available-for-Sale Portfolio: | | | | | | |||||||||||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Obligations of state and political subdivisions |
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Government agency mortgage-backed securities |
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Corporate debt securities | | | | | | | ||||||||||||
Government agency collateralized mortgage obligations |
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| |
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| |
| | ||||||
Total available-for-sale investment portfolio | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Held-to-Maturity Portfolio: | ||||||||||||||||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Government agency mortgage-backed securities | | | | | | | ||||||||||||
Total held-to-maturity portfolio | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
As of December 31, 2024
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||
(000’s omitted) | | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses | ||||||
Available-for-Sale Portfolio: | | | | | | | ||||||||||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Obligations of state and political subdivisions |
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Government agency mortgage-backed securities |
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Corporate debt securities | | | | | | | ||||||||||||
Government agency collateralized mortgage obligations |
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| |
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Total available-for-sale investment portfolio | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Held-to-Maturity Portfolio: |
| |
| |
| |
| |
| |
| |||||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Government agency mortgage-backed securities | | | | | | | ||||||||||||
Total held-to-maturity portfolio | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
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The unrealized losses reported pertaining to available-for-sale securities issued by the U.S. government and its sponsored entities include treasuries, agencies, and mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently rated Aa1 by Moody’s Investor Services, AA+ by Standard & Poor’s, AA+ by Fitch, and are guaranteed by the U.S. government. The majority of the obligations of state and political subdivisions carry a credit rating of A or better. Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement. The Company holds
Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“CECL”) methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at December 31, 2025 and 2024, all securities in the held-to-maturity classification are U.S. Treasury securities and government agency mortgage-backed securities, therefore they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected possibility of default in the future as these securities are guaranteed by the U.S. government. U.S. Treasury securities and government agency mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. The U.S. Treasury securities and government agency mortgage-backed securities held by the Company in the held-to-maturity category carry an Aa1 rating from Moody’s Investor Services, AA+ rating from Standard & Poor’s, and AA+ from Fitch. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment. Accordingly, there is
The amortized cost and estimated fair value of debt securities at December 31, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, including government agency mortgage-backed securities and government agency collateralized mortgage obligations, are shown separately.
| Held-to-Maturity | | Available-for-Sale | |||||||||
Amortized | Fair | Amortized | Fair | |||||||||
(000’s omitted) | Cost | | Value | | Cost | | Value | |||||
Due in one year or less | $ | | $ | | $ | | $ | | ||||
Due after one through five years | | |
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Due after five years through ten years | | |
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Due after ten years | | |
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Subtotal | | |
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Government agency mortgage-backed securities | | | | | ||||||||
Government agency collateralized mortgage obligations | | |
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Total | $ | | $ | | $ | | $ | | ||||
Investment securities with a carrying value of $
During the first quarter of 2023, the Company sold $
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NOTE D: LOANS AND ALLOWANCE FOR CREDIT LOSSES
The segments of the Company’s loan portfolio at December 31 are summarized as follows:
(000’s omitted) | 2025 | | 2024 | |||
CRE – multifamily | $ | | $ | | ||
CRE – owner occupied | | | ||||
CRE – non-owner occupied | | | ||||
Commercial & industrial and other business loans | | | ||||
Consumer mortgage |
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Consumer indirect |
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Consumer direct |
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Home equity |
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Gross loans, including deferred origination costs |
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Allowance for credit losses |
| ( |
| ( | ||
Loans, net of allowance for credit losses | $ | | $ | | ||
Included in the table above, the Company had approximately $
Certain directors and executive officers of the Company, as well as associates of such persons, are loan customers. Loans to these individuals were made in the ordinary course of business under normal credit terms and do not have more than a normal risk of collection. Following is a summary of the aggregate amount of such loans during 2025 and 2024.
(000’s omitted) | | 2025 | | 2024 | ||
Balance at beginning of year | $ | $ | ||||
New loans |
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Payments |
| ( |
| ( | ||
Balance at end of year | $ | $ | ||||
The following tables present the aging of the amortized cost basis of the Company’s past due loans by segment as of December 31, 2025 and 2024:
Past Due | 90+ Days Past | |||||||||||||||||
(000’s omitted) | 30 – 89 | Due and | Total | |||||||||||||||
December 31, 2025 | | Days | | Still Accruing | | Nonaccrual | | Past Due | | Current | | Total Loans | ||||||
CRE – multifamily | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
CRE – owner occupied | |
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CRE – non-owner occupied | | | | | | | ||||||||||||
Commercial & industrial and other business loans | | | | | | | ||||||||||||
Consumer mortgage |
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Consumer indirect |
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Consumer direct |
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Home equity |
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Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Past Due | 90+ Days Past | |||||||||||||||||
(000’s omitted) | 30 – 89 | Due and | Total | |||||||||||||||
December 31, 2024 | | Days | | Still Accruing | | Nonaccrual | | Past Due | | Current | | Total Loans | ||||||
CRE – multifamily | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
CRE – owner occupied | | | | | | | ||||||||||||
CRE – non-owner occupied | | | | | | | ||||||||||||
Commercial & industrial and other business loans | | | | | | | ||||||||||||
Consumer mortgage |
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Consumer indirect |
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Consumer direct |
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Home equity |
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Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
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An immaterial amount of interest income on nonaccrual loans was recognized during the years ended December 31, 2025 or 2024. For the years ended December 31, 2025 and 2024, an immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income. Approximately $
The Company uses several credit quality indicators to assess credit risk in an ongoing manner. The Company’s primary credit quality indicator for its business lending portfolio is an internal credit risk rating system that categorizes loans as “pass”, “special mention”, “substandard”, or “doubtful”. Credit risk ratings are applied to loans individually based on a case-by-case evaluation. Business lending loans under $
Pass | | The condition of the borrower and the performance of the loans are satisfactory or better. |
Special Mention | The condition of the borrower has deteriorated and the loan has potential weaknesses, although the loan performs as agreed. Loss may be incurred at some future date if conditions deteriorate further. | |
Substandard | The condition of the borrower has significantly deteriorated and the loan has a well-defined weakness or weaknesses. The performance of the loan could further deteriorate and incur loss if deficiencies are not corrected. | |
Doubtful | The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely. |
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The following tables show the amount of business lending loans by credit quality category at December 31, 2025 and 2024.
Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
December 31, 2025 | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 & Prior | | Cost Basis | to Term | | Total | ||||||||||
CRE – multifamily: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total CRE – multifamily | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
CRE – owner occupied: |
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Risk rating |
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Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total CRE – owner occupied | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
CRE – non-owner occupied: |
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Risk rating |
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Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total CRE – non-owner occupied | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Commercial & industrial and other business loans: |
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Risk rating |
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Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total commercial & industrial and other business loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Total business lending: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total business lending | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
(1) For the year ended December 31, 2025
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Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
December 31, 2024 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 & Prior | | Cost Basis | | to Term | | Total | |||||||||
CRE - multifamily: | |||||||||||||||||||||||||||
Risk rating |
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Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
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Substandard |
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Doubtful |
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Total CRE – multifamily | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
CRE – owner occupied: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total CRE – owner occupied | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
CRE – non-owner occupied: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total CRE – non-owner occupied | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | | |||||||||||||||||
Commercial & industrial and other business loans: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total commercial & industrial and other business loans | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | $ | | $ | $ | $ | $ | | $ | | $ | $ | | ||||||||||||||
Total business lending: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total business lending | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
(1) For the year ended December 31, 2024
All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or nonperforming. Performing loans include loans classified as current as well as those classified as 30 - 89 days past due. Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.
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The following tables detail the balances in all other loan categories at December 31, 2025 and 2024:
Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
December 31, 2025 | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 & Prior | | Cost Basis | | to Term | | Total | |||||||||
Consumer mortgage: |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
FICO AB(1) |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total FICO AB |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
FICO CDE(2) |
| ||||||||||||||||||||||||||
Performing |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total FICO CDE |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer mortgage | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Consumer indirect: | |||||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer indirect | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Consumer direct: | |||||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer direct | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Home equity: | |||||||||||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total home equity | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720 at origination.
(2) FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.
(3) For the year ended December 31, 2025
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Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
December 31, 2024 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 & Prior | | Cost Basis | | to Term | | Total | |||||||||
Consumer mortgage: |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
FICO AB(1) |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total FICO AB |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
FICO CDE(2) |
|
|
|
|
|
|
|
| |||||||||||||||||||
Performing |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total FICO CDE |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer mortgage | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Consumer indirect: |
|
|
|
|
|
|
|
| |||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer indirect | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Consumer direct: |
|
|
|
|
|
|
|
| |||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total consumer direct | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Home equity: |
|
|
|
|
|
|
|
| |||||||||||||||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Nonperforming |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Total home equity | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Current period gross charge-offs(3) | $ | $ | $ | | $ | $ | | $ | | $ | $ | $ | | ||||||||||||||
(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720 at origination.
(2) FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.
(3) For the year ended December 31, 2024
For nonaccrual business lending loans greater than $500,000 that do not share the same risk characteristics with a pool of loans, the Company establishes individually assessed reserves using methods prescribed by GAAP. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A summary of individually assessed business lending loans as of December 31, 2025 and 2024 follows:
December 31, 2025 | December 31, 2024 | |||||||||||||||||
Specifically | Specifically | |||||||||||||||||
Carrying | Contractual | Allocated | Carrying | Contractual | Allocated | |||||||||||||
(000’s omitted) | | Balance | | Balance | Allowance | Balance | | Balance | Allowance | |||||||||
Loans with allowance allocation: | ||||||||||||||||||
CRE – multifamily | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
CRE – non-owner occupied | | | | | | | ||||||||||||
Commercial & industrial and other business loans |
| |
| | | | | | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Loans without allowance allocation: | ||||||||||||||||||
CRE – owner occupied | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
CRE – non-owner occupied |
| | | | | | | |||||||||||
Commercial & industrial and other business loans |
| | | | | | | |||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
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Table of Contents
The average carrying balance of individually assessed loans was $
Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.
In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The estimate of allowance for credit losses includes historical losses from loans that were modified due to borrower financial difficulty, therefore a charge to the allowance for credit losses is generally not recorded upon modification.
The following table presents the amortized cost basis of loans at December 31, 2025, 2024 and 2023 that were both experiencing financial difficulty and modified during the years ended December 31, 2025, 2024 and 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.
Amortized Cost |
| |||||||||||
Other | Total Class of |
| ||||||||||
Term | Payment | Financing |
| |||||||||
(000s omitted except for percentages) | | Extension | Delay | Total | Receivable |
| ||||||
Year Ended December 31, 2025 | ||||||||||||
Commercial & industrial and other business loans | $ | $ | $ | % | ||||||||
Consumer mortgage | % | |||||||||||
Total | $ | $ | $ | % | ||||||||
Year Ended December 31, 2024 | ||||||||||||
CRE - owner occupied | $ | $ | $ | % | ||||||||
CRE - non-owner occupied | % | |||||||||||
Commercial & industrial and other business loans | % | |||||||||||
Consumer mortgage | % | |||||||||||
Home equity | % | |||||||||||
Total | $ | $ | $ | % | ||||||||
Year Ended December 31, 2023 | ||||||||||||
CRE - owner occupied | $ | $ | $ | % | ||||||||
CRE - non-owner occupied | % | |||||||||||
Consumer mortgage | % | |||||||||||
Home equity | % | |||||||||||
Total | $ | $ | $ | % | ||||||||
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Table of Contents
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance at December 31, 2025, 2024 and 2023 of such loans that have been modified in the indicated period.
90+ Days Past | |||||||||||||||
Past Due 30 – | Due and Still | ||||||||||||||
(000s omitted) | | Current | | 89 Days | | Accruing | | Non-Accrual | | Total | |||||
Year Ended December 31, 2025 | |||||||||||||||
Commercial & industrial and other business loans | $ | | $ | | $ | | $ | | $ | | |||||
Consumer mortgage | |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | |||||
Year Ended December 31, 2024 | |||||||||||||||
CRE - owner occupied | $ | | $ | | $ | | $ | | $ | | |||||
CRE - non-owner occupied | | | | | | ||||||||||
Commercial & industrial and other business loans | | | | | | ||||||||||
Consumer mortgage | | | | | | ||||||||||
Home equity | | | | | | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | | |||||
Year Ended December 31, 2023 | |||||||||||||||
CRE - owner occupied | $ | | $ | | $ | | $ | | $ | | |||||
CRE - non-owner occupied | | | | | | ||||||||||
Consumer mortgage | | | | | | ||||||||||
Home equity | | | | | | ||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the years ended December 31, 2025, 2024 and 2023:
Weighted-Average Term Extension | Other Payment Delay | |||
| (Years) | | (Years) | |
Year Ended December 31, 2025 | ||||
Commercial & industrial and other business loans | ||||
Consumer mortgage | ||||
Total | ||||
Year Ended December 31, 2024 | ||||
CRE - owner occupied | ||||
CRE - non-owner occupied | ||||
Commercial & industrial and other business loans | ||||
Consumer mortgage | ||||
Home equity | ||||
Total | ||||
Year Ended December 31, 2023 | ||||
CRE - owner occupied | ||||
CRE - non-owner occupied | ||||
Consumer mortgage | ||||
Home equity | ||||
Total |
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Table of Contents
There were
Allowance for Credit Losses
The following presents by loan segment the activity in the allowance for credit losses during 2025, 2024 and 2023:
Year Ended December 31, 2025 | ||||||||||||||||||
| Beginning | | Charge- | | Allowance at | | | Ending | ||||||||||
(000’s omitted) | balance | offs | Recoveries | Acquisition | Provision | balance | ||||||||||||
Business lending | $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
Consumer mortgage |
| |
| ( |
| |
| |
| ( |
| | ||||||
Consumer indirect |
| |
| ( |
| |
| |
| |
| | ||||||
Consumer direct |
| |
| ( |
| |
| |
| |
| | ||||||
Home equity |
| |
| ( |
| |
| |
| |
| | ||||||
Unallocated |
| |
| |
| |
| |
| |
| | ||||||
Allowance for credit losses – loans |
| |
| ( |
| |
| |
| |
| | ||||||
Liability for off-balance sheet credit exposures |
| |
| |
| | | ( |
| | ||||||||
Total allowance for credit losses and liability for off-balance sheet credit exposures | $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
| Year Ended December 31, 2024 | ||||||||||||||
Beginning | Charge- | Ending | |||||||||||||
(000’s omitted) | balance | | offs | | Recoveries | | Provision | | balance | ||||||
Business lending | $ | | $ | ( | $ | | $ | | $ | | |||||
Consumer mortgage |
| | ( | | | | |||||||||
Consumer indirect |
| |
| ( |
| |
| |
| | |||||
Consumer direct |
| |
| ( |
| |
| |
| | |||||
Home equity |
| |
| ( |
| |
| |
| | |||||
Unallocated |
| |
| |
| |
| |
| | |||||
Allowance for credit losses – loans |
| |
| ( |
| |
| |
| | |||||
Liability for off-balance sheet credit exposures |
| |
| |
| |
| |
| | |||||
Total allowance for credit losses and liability for off-balance sheet credit exposures | $ | | $ | ( | $ | | $ | | $ | | |||||
| Year Ended December 31, 2023 | ||||||||||||||
| Beginning | Charge- | Ending | ||||||||||||
(000’s omitted) |
| balance | | offs | | Recoveries | | Provision | | balance | |||||
Business lending | $ | | $ | ( | $ | | $ | | $ | | |||||
Consumer mortgage |
| |
| ( |
| |
| |
| | |||||
Consumer indirect |
| |
| ( |
| |
| |
| | |||||
Consumer direct |
| |
| ( |
| |
| |
| | |||||
Home equity |
| |
| ( |
| |
| |
| | |||||
Unallocated |
| |
| |
| |
| |
| | |||||
Allowance for credit losses – loans |
| |
| ( |
| |
| |
| | |||||
Liability for off-balance sheet credit exposures |
| |
| |
| |
| ( |
| | |||||
Total allowance for credit losses and liability for off-balance sheet credit exposures | $ | | $ | ( | $ | | $ | | $ | | |||||
The allowance for credit losses increased to $
111
Table of Contents
Accrued interest receivable on loans, included in accrued interest and fees receivable in the consolidated statements of condition, totaled $
The Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which is derived from the Company’s historical loss experience. To address changes and trends in current period credit metrics, qualitative adjustments to historical loss experience were made for differences in current loan-specific risk characteristics and to address current period delinquencies, charge-off rates, risk ratings, lack of loan level data through an entire economic cycle, changes in loan sizes and underwriting standards as well as the addition of acquired loans which were not underwritten by the Company. The Company considered historical losses immediately prior, through and following the Great Recession compared to the historical period used for modeling to adjust the historical information to account for longer-term expectations for loan credit performance. Under CECL, the Company is required to consider future economic conditions to determine current expected credit losses. Management selected an eight-quarter reasonable and supportable forecast period with a four-quarter reversion to the historical mean to use as part of the economic forecast and utilizes a two-quarter lag adjustment for economic factors that are not dependent on collateral values, and no lag for factors that utilize collateral values. Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.
For qualitative macroeconomic adjustments, the Company uses third-party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that are weighted, with forecasts available as of December 31, 2025. These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and include the impact of a decline in residential real estate and vehicle prices as well as inflation. The scenarios utilized forecast stable unemployment levels, modest GDP, real household income and housing price growth, offset by some declines in auto and commercial real estate prices.
Management developed expected loss estimates considering factors for segments as outlined below:
| ● | Business lending – non real estate: The Company selected projected unemployment and GDP as indicators of forecasted losses related to business lending and utilize both factors in an even weight for the calculation. The Company also considered delinquencies, risk rating changes, recent charge-off history and acquired loans as part of the review of estimated losses. |
| ● | Business lending – real estate: The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans and utilize both factors in an even weight for the calculation. For office specific properties, the Company selected projected office specific commercial real estate values and vacancy rates and utilize both factors in an even weight for the calculation. The Company also considered the factors noted in business lending – non real estate. |
| ● | Consumer mortgages and home equity: The Company selected projected unemployment and residential real estate values as indicators of forecasted losses related to mortgage lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered. |
| ● | Consumer indirect: The Company selected projected unemployment and vehicle valuation indices as indicators of forecasted losses related to indirect lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered. |
| ● | Consumer direct: The Company selected projected unemployment and inflation-adjusted household income as indicators of forecasted losses related to consumer direct lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered. |
At December 31, 2025 and 2024, loans with a carrying amount of approximately $
At December 31, 2025 and 2024, the carrying amount of residential real estate property in the process of foreclosure was $
112
Table of Contents
During the year ended December 31, 2025 the Company purchased loans with a carrying value of $
NOTE E: PREMISES AND EQUIPMENT
Premises and equipment consist of the following at December 31:
(000’s omitted) | | 2025 | | 2024 | ||
Land and land improvements | $ | $ | ||||
Buildings |
|
| ||||
Leasehold improvements | ||||||
Equipment |
|
| ||||
Construction in progress | ||||||
|
| |||||
Accumulated depreciation |
| ( |
| ( | ||
Operating lease right-of-use assets |
|
| ||||
Premises and equipment, net | $ | $ | ||||
As of December 31, 2025 and 2024, the Company had $
NOTE F: GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:
December 31, 2025 | | December 31, 2024 | ||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||
| Carrying | | Accumulated | | Carrying | | Carrying | | Accumulated | | Carrying | |||||||
(000’s omitted) | Amount |
| Amortization |
| Amount |
| Amount |
| Amortization |
| Amount | |||||||
Amortizing intangible assets: | |
| |
| |
| |
| |
| | |||||||
Core deposit intangibles | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
Other intangibles |
| |
| ( |
| |
| |
| ( |
| | ||||||
Total amortizing intangibles | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
The estimated aggregate amortization expense of other intangibles for each of the five succeeding fiscal years ended December 31 is as follows (000’s omitted):
(000’s omitted) | |||
2026 | $ | | |
2027 | | ||
2028 |
| | |
2029 |
| | |
2030 |
| | |
Thereafter |
| | |
Total | $ | |
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Shown below are the components of the Company’s goodwill at December 31, 2025, 2024, and 2023:
(000’s omitted) | December 31, 2023 | Additions/Adjustments | December 31, 2024 | Additions/Adjustments | December 31, 2025 | ||||||||||
Goodwill | $ | | $ | | $ | | $ | | $ | | |||||
Under certain circumstances, the Company sells consumer residential mortgage loans in the secondary market and typically retains the right to service the loans sold. These mortgage servicing rights were immaterial at December 31, 2025 and 2024. The total principal balance of loans serviced for others was $
NOTE G: EQUITY METHOD INVESTMENTS
On September 5, 2025, the Company acquired an ownership interest in Leap Holdings, Inc., a Delaware corporation (“Leap”) for $
NOTE H: DEPOSITS
Deposits recorded in the consolidated statements of condition consist of the following at December 31:
(000’s omitted) |
| 2025 |
| 2024 | ||
Noninterest checking | $ | $ | ||||
Interest checking |
|
| ||||
Savings |
|
| ||||
Money market |
|
| ||||
Time |
|
| ||||
Total deposits | $ | $ | ||||
Interest on deposits recorded in the consolidated statements of income consists of the following for the years ended December 31:
(000’s omitted) |
| 2025 |
| 2024 |
| 2023 | |||
Interest on interest checking | $ | $ | $ | ||||||
Interest on savings |
|
|
| ||||||
Interest on money market |
|
|
| ||||||
Interest on time |
|
|
| ||||||
Total interest on deposits | $ | $ | $ | ||||||
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The approximate maturities of time deposits at December 31, 2025 are as follows:
| | Accounts $250,000 | ||||
(000’s omitted) |
| All Accounts |
| or Greater | ||
2026 | $ | $ | ||||
2027 |
|
| ||||
2028 |
|
| ||||
2029 |
|
| ||||
2030 |
|
| ||||
Total | $ | $ | ||||
NOTE I: BORROWINGS
Outstanding borrowings at December 31 are as follows:
(000’s omitted) |
| 2025 |
| 2024 | ||
Securities sold under agreement to repurchase, short-term | $ | $ | ||||
Overnight borrowings |
|
| ||||
FHLB borrowings, includes discount of $ |
|
| ||||
Finance leases | ||||||
Total borrowings | $ | $ | ||||
FHLB advances are collateralized by a blanket lien on the Company’s residential real estate loan portfolio.
Securities sold under agreement to repurchase includes $
The weighted-average interest rate on short-term borrowings outstanding at December 31, 2025 and 2024 was
FHLB borrowings at December 31, 2025 have contractual maturity dates as follows:
| | Weighted-average |
| |||
Carrying | Rate at |
| ||||
(000’s omitted, except rate) |
| Value |
| December 31, 2025 |
| |
2027 | $ | |
| % | ||
2028 |
| |
| % | ||
2029 |
| |
| % | ||
Total | $ | |
| % | ||
Interest on borrowings recorded in the consolidated statements of income consists of the following for the years ended December 31:
(000’s omitted) | | 2025 | | 2024 | | 2023 | |||
Interest on overnight borrowings | $ | $ | $ | ||||||
Interest on Federal Reserve short-term borrowings |
|
|
| ||||||
Interest on securities sold under agreement to repurchase, short-term |
|
|
| ||||||
Interest on FHLB borrowings |
|
|
| ||||||
Interest on finance leases | |||||||||
Interest on subordinated notes payable |
|
|
| ||||||
Total interest on borrowings | $ | $ | $ | ||||||
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During the first quarter of 2025, the Company entered into a new parent company unsecured committed revolving line of credit facility with a commercial bank in an amount of up to $
The Bank has an unused line of credit of $
During 2024, the Company secured $
During 2023, the Company secured $
NOTE J: INCOME TAXES
The provision for income taxes for the years ended December 31 is as follows:
(000’s omitted) | | 2025 | | 2024 | | 2023 | |||
Current: |
| |
| |
| | |||
Federal | $ | $ | $ | ||||||
State and other |
|
|
| ||||||
Deferred: |
|
|
| ||||||
Federal |
|
| ( |
| ( | ||||
State and other |
|
|
| ( | |||||
Amortization of investments in LIHTC and solar energy partnerships | |||||||||
Provision for income taxes | $ | $ | $ | ||||||
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Components of the net deferred tax asset, included in other assets, as of December 31, 2025 and 2024 are as follows:
(000’s omitted) | | 2025 | | 2024 | ||
Investment securities | $ | $ | ||||
Allowance for credit losses | ||||||
Employee benefits |
|
| ||||
Lease liabilities |
|
| ||||
Other, net |
|
| ||||
Deferred tax asset |
|
| ||||
Goodwill and intangibles |
|
| ||||
Lease right-of-use assets |
|
| ||||
Loan origination costs |
|
| ||||
Depreciation |
|
| ||||
Mortgage servicing rights |
|
| ||||
Pension |
|
| ||||
Deferred tax liability |
|
| ||||
Net deferred tax asset | $ | $ | ||||
The Company has determined that no valuation allowance is necessary as it is more likely than not that the gross deferred tax assets will be realized through future reversals of existing temporary differences and through future taxable income.
A reconciliation of the differences between the federal statutory income tax rate and the effective tax rate for the years ended December 31 is shown in the following table:
(000's omitted except rates) | | 2025 | | 2024 | | 2023 |
| |||||||||||
U.S. federal statutory income tax rate |
| $ | % | $ | % | $ | % | |||||||||||
|
|
| ||||||||||||||||
Foreign tax effects, net of federal income tax effect | ||||||||||||||||||
Tax credits, net of amortization | ( | ( | ( | ( | ( | ( | ||||||||||||
Nontaxable or nondeductible items: | ||||||||||||||||||
Tax exempt income | ( | ( | ( | ( | ( | ( | ||||||||||||
Other | ( | ( | ( | ( | ||||||||||||||
Changes in unrecognized tax benefits | ||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||
(a) State taxes in New York made up the majority (greater than 50 percent) of the tax effect in this category.
The Company has unrecognized tax benefits representing tax positions for which a liability has been established. A reconciliation of the unrecognized tax benefits for the years ended December 31 is shown in the following table:
(000’s omitted) | | 2025 | | 2024 | | 2023 | |||
Unrecognized tax benefits at beginning of year | $ | $ | $ | ||||||
Changes related to: |
| |
| |
| | |||
Increases as a result of tax positions taken during a prior period |
|
|
| ||||||
Decreases as a result of settlements with taxing authorities |
|
| ( |
| |||||
Unrecognized tax benefits at end of year | $ | $ | $ | ||||||
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All of the unrecognized tax benefits would impact the Company’s effective tax rate if recognized. During the years ended December 2025 and 2024, the Company recognized $
The following table presents the amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions for the years ended December 31:
(000’s omitted) | | 2025 | | 2024 | 2023 | ||||
Federal | $ | $ | $ | ||||||
State: |
|
|
| ||||||
New York | | | | ||||||
Other states(a) | | | | ||||||
Total state | | | | ||||||
Foreign |
|
|
| ||||||
Cash paid for income taxes | $ | $ | $ | ||||||
| (a) | No individual state in this category represents greater than 5% of the total cash paid for income taxes. |
The Company’s federal and state income tax returns are routinely subject to examination from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Future examinations by taxing authorities of the Company’s federal or state tax returns could have a material impact on the Company’s results of operations. The Company’s federal income tax returns for years after 2021 may still be examined by the Internal Revenue Service. The Company’s New York State income tax returns are currently under examination by the New York Department of Taxation and Finance in connection with tax years 2018 to 2020. The Company has not received notice of proposed adjustments from these examinations, and it is not possible to estimate if and when those examinations may be completed. New York State income tax returns for years after 2020 may still be examined by the New York Department of Taxation and Finance.
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NOTE K: PENSION AND OTHER BENEFIT PLANS
Pension and post-retirement plans
The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives, and an stock balance plan for certain of its nonemployee directors. Using a measurement date of December 31, the following table shows the funded status of the Company’s plans reconciled with amounts reported in the Company’s consolidated statements of condition:
Pension Benefits | Post-retirement Benefits | |||||||||||
(000’s omitted) | | 2025 | | 2024 | | 2025 | | 2024 | ||||
Change in benefit obligation: |
| |
| |
|
| | |||||
Benefit obligation at the beginning of year | $ | $ | $ | $ | ||||||||
Service cost |
|
|
|
| ||||||||
|
|
|
| |||||||||
Plan amendment | ||||||||||||
Deferred actuarial loss/(gain) |
|
| ( |
| ( |
| ( | |||||
Benefits paid |
| ( |
| ( |
| ( |
| ( | ||||
Benefit obligation at end of year |
|
|
|
| ||||||||
Change in plan assets: |
|
|
|
| ||||||||
Fair value of plan assets at beginning of year |
|
|
|
| ||||||||
Actual return of plan assets |
|
|
|
| ||||||||
Employer contributions |
|
|
|
| ||||||||
Benefits paid |
| ( |
| ( |
| ( |
| ( | ||||
Fair value of plan assets at end of year |
|
|
|
| ||||||||
Over/(Under) funded status at year end | $ | $ | $ | ( | $ | ( | ||||||
Amounts recognized in the consolidated statement of condition were: |
| |
| |
| |
| | ||||
Other assets | $ | $ | $ | $ | ||||||||
Other liabilities |
| ( |
| ( |
| ( |
| ( | ||||
Amounts recognized in accumulated other comprehensive loss/(income) (“AOCI”) were: |
| |
| |
| |
| | ||||
Net loss | $ | $ | $ | $ | ||||||||
Net prior service cost (credit) |
|
|
| ( |
| ( | ||||||
Pre-tax AOCI |
|
|
|
| ( | |||||||
Taxes |
| ( |
| ( |
| ( |
| |||||
AOCI at year end | $ | $ | $ | $ | ( | |||||||
The benefit obligation for the defined benefit pension plan was $
The Company has unfunded supplemental pension plans for certain key active and retired executives. The projected benefit obligation for the unfunded supplemental pension plan for certain key executives was $
The Company has a non-qualified deferred compensation plan for certain employees (“Restoration Plan”) whose benefits under tax-qualified retirement plans are restricted by the Internal Revenue Code Section 401(a)(17) limitation on compensation. The projected benefit obligation for the unfunded Restoration Plan was immaterial for 2025 and $
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Table of Contents
Effective December 31, 2009, the Company terminated its post-retirement medical program for current and future employees. Remaining plan participants will include only existing retirees as of December 31, 2010. This change was accounted for as a negative plan amendment and a $
Amounts recognized in accumulated other comprehensive income, net of tax, for the year ended December 31, are as follows:
Pension Benefits | Post-retirement Benefits | |||||||||||
(000’s omitted) | | 2025 | | 2024 | | 2025 | | 2024 | ||||
Prior service cost/(credit) | $ | ( | $ | ( | $ | $ | ||||||
Plan amendment | ||||||||||||
Net gain |
| ( |
| ( |
| ( |
| ( | ||||
Total | $ | ( | $ | ( | $ | $ | ||||||
The weighted-average assumptions used to determine the benefit obligations as of December 31 are as follows:
Pension Benefits | Post-retirement Benefits |
| |||||||
| 2025 | | 2024 | | 2025 | | 2024 |
| |
Discount rate |
| | % | | % | | % | | % |
Expected return on plan assets |
| | % | | % | N/A |
| N/A | |
Rate of compensation increase | | % | | % | N/A | N/A | |||
Interest crediting rates | N/A | N/A | |||||||
The net periodic (benefit) cost as of December 31 is as follows:
Pension Benefits | Post-retirement Benefits | |||||||||||||||||
(000’s omitted) | | 2025 | | 2024 | | 2023 | | 2025 | | 2024 | | 2023 | ||||||
Service cost | $ | $ | $ | $ | $ | $ | ||||||||||||
Interest cost |
|
|
|
|
|
| ||||||||||||
Expected return on plan assets |
| ( |
| ( |
| ( |
|
|
| |||||||||
Plan amendment |
|
|
|
|
|
| ||||||||||||
Amortization of unrecognized net (gain) loss |
| ( |
|
| ( |
|
|
| ||||||||||
Amortization of prior service cost |
|
|
|
| ( |
| ( |
| ( | |||||||||
Net periodic benefit | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Prior service costs in which all or almost all of the plan’s participants are fully eligible for benefits under the plan are amortized on a straight-line basis over the expected future working years of all active plan participants. Unrecognized gains or losses are amortized using the “corridor approach”, which is the minimum amortization required. Under the corridor approach, the net gain or loss in excess of
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The weighted-average assumptions used to determine the net periodic pension cost for the years ended December 31 are as follows:
Pension Benefits | Post-retirement Benefits |
| |||||||||||
| 2025 | | 2024 | | 2023 | | 2025 | | 2024 | | 2023 |
| |
Discount rate |
| | % | | % | | % | | % | | % | | % |
Expected return on plan assets |
| | % | | % | | % | N/A |
| N/A |
| N/A | |
Rate of compensation increase |
| | % | N/A | N/A | N/A | |||||||
Interest crediting rates | N/A | N/A | N/A | ||||||||||
The amount of benefit payments that are expected to be paid over the next ten years are as follows:
Pension | Post-retirement | |||||
(000’s omitted) | | Benefits | | Benefits | ||
2026 | $ | | $ | | ||
2027 |
| | | |||
2028 |
| | | |||
2029 |
| | | |||
2030 |
| |
| | ||
2031-2035 |
| |
| |
The payments reflect future service and are based on various assumptions including retirement age and form of payment (lump-sum versus annuity). Actual results may differ from these estimates.
The assumed discount rate is used to reflect the time value of future benefit obligations. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. This rate is sensitive to changes in interest rates. A decrease in the discount rate would increase the Company’s obligation and future expense while an increase would have the opposite effect. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. The mortality tables used to determine future benefit obligations under the plan as of December 31, 2025, were the sex-distinct Pri-2012 Mortality Tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements using Scale MP-2021 mortality improvement scale on a generational basis. The appropriateness of the assumptions are reviewed annually.
Plan Assets
The investment objective for the defined benefit pension plan is to achieve an average annual total return over a five-year period equal to the assumed rate of return used in the actuarial calculations. At a minimum performance level, the portfolio should earn the return obtainable on high quality intermediate-term bonds. The Company’s perspective regarding portfolio assets combines both preservation of capital and moderate risk-taking. Asset allocation favors fixed income securities, with a target allocation of approximately
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The fair values of the Company’s defined benefit pension plan assets at December 31, 2025 by asset category are as follows:
Quoted Prices | ||||||||||||
in Active | Significant | Significant | ||||||||||
Markets for | Observable | Unobservable | ||||||||||
Identical Assets | Inputs | Inputs | ||||||||||
Asset category (000’s omitted) | | Level 1 | | Level 2 | | Level 3 | | Total | ||||
Cash equivalents | $ | $ | $ | $ | ||||||||
Equity securities: |
|
|
| |
| |||||||
U.S. large-cap |
|
|
|
| ||||||||
U.S. mid/small cap |
|
|
|
| ||||||||
International |
|
|
|
| ||||||||
Other (a) | ||||||||||||
|
|
|
| |||||||||
|
|
| |
| ||||||||
Fixed income securities: |
|
|
| |
| |||||||
Government securities |
|
|
|
| ||||||||
Investment grade bonds |
|
|
|
| ||||||||
|
|
|
| |||||||||
Total investments at fair value (c) | ||||||||||||
|
|
| |
| ||||||||
Alternative investments measured at NAV (d) | ||||||||||||
|
|
| |
| ||||||||
Total (c) | $ | $ | $ | $ | ||||||||
The fair values of the Company’s defined benefit pension plan assets at December 31, 2024 by asset category are as follows:
Quoted Prices | ||||||||||||
in Active | Significant | Significant |
| |||||||||
Markets for | Observable | Unobservable |
| |||||||||
Identical Assets | Inputs | Inputs |
| |||||||||
Asset category (000’s omitted) | | Level 1 | | Level 2 | | Level 3 | | Total | ||||
Cash equivalents | $ | $ | $ | $ | ||||||||
Equity securities: |
|
|
| |
| |||||||
U.S. large-cap |
|
|
|
| ||||||||
U.S. mid/small cap |
|
|
|
| ||||||||
International |
|
|
|
| ||||||||
Other (a) |
|
|
|
| ||||||||
|
|
|
| |||||||||
|
|
| |
| ||||||||
Fixed income securities: |
|
|
| |
| |||||||
Government securities |
|
|
|
| ||||||||
Investment grade bonds |
|
|
|
| ||||||||
|
|
|
| |||||||||
|
|
| |
| ||||||||
Total investments at fair value (c) | ||||||||||||
Alternative investments measured at NAV (d) | ||||||||||||
|
|
| |
| ||||||||
Total (c) | $ | $ | $ | $ | ||||||||
| (a) | This category is comprised of exchange-traded funds representing a diversified index of equity securities. |
| (b) | This category is comprised of exchange-traded funds and mutual funds holding non-traditional investment classes including private equity funds and alternative exchange funds. |
| (c) | Excludes dividends and interest receivable totaling $ |
| (d) | In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total investments. |
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The valuation techniques used to measure fair value for the items in the table above are as follows:
| ● | Cash equivalents – Managed portfolios, including commercial paper and other fixed income securities issued by U.S. and foreign corporations, asset-backed commercial paper, U.S. government securities, obligations of foreign governments and U.S. and foreign banks, which are valued at the closing price reported on the market on which the underlying securities are traded. |
| ● | Equity securities and other investments – Mutual funds and equity securities are valued at the quoted market price of shares held at year-end. |
| ● | Fixed income securities – U.S. Treasuries, municipal bonds and notes, government sponsored entities, and corporate debt valued at the closing price reported on the active market on which the individual securities are traded or for municipal bonds and notes based on quoted prices for similar assets in the active market. |
| ● | Alternative investments – Alternative investments, primarily interests in non-exchange traded closed-end funds that operate as “interval funds” under the Investment Company Act of 1940, are measured at fair value using the net asset value (“NAV”) per share as a practical expedient. These investments are not required to be classified in the fair value hierarchy. The NAV of the funds are not publicly quoted and are based on the fair value of the underlying assets of the funds, less their liabilities, as reported by the fund manager. Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year; investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask prices. |
As of December 31, 2025, the Plan’s investments measured at fair value using the NAV practical expedient consisted of the following:
Unfunded | Redemption | Redemption Notice | ||||||||
Investment (000’s omitted) | | NAV | | Commitment | | Frequency | | Period | ||
Carlyle Tactical Private Credit Fund (Class N) | $ | $ | ||||||||
Cion Area Diversified Credit Fund (Class I) | ||||||||||
Cliffwater Corporate Lending Fund | ||||||||||
Palmer Square Opportunistic Inc. Fund | ||||||||||
First Trust Alternative Opportunities Fund | ||||||||||
Cascade Private Capital Fund | ||||||||||
Total | $ | $ | ||||||||
Although NAV is calculated daily, shares in these interval funds are not readily marketable and cannot be redeemed on demand. Instead, redemptions are subject to periodic repurchase offers made by the funds, which are typically limited to between
At December 31, 2024, the Plan’s investments measured at fair value using the NAV practical expedient consisted of the following:
Unfunded | Redemption | Redemption Notice | ||||||||
Investment (000’s omitted) | | NAV | | Commitment | | Frequency | | Period | ||
Carlyle Tactical Private Credit Fund (Class N) | $ | $ | ||||||||
Cion Area Diversified Credit Fund (Class I) | ||||||||||
Cliffwater Corporate Lending Fund | ||||||||||
Palmer Square Opportunistic Inc. Fund | ||||||||||
First Trust Alternative Opportunities Fund | ||||||||||
Cascade Private Capital Fund | ||||||||||
Total | $ | $ | ||||||||
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The Company makes contributions to its funded qualified pension plan as required by government regulation or as deemed appropriate by management after considering the fair value of plan assets, expected return on such assets, and the value of the accumulated benefit obligation. The Company made a $
401(k) Employee Stock Ownership Plan
The Company has a 401(k) Employee Stock Ownership Plan in which employees can contribute from
Other Deferred Compensation Arrangements
In addition to the supplemental pension plans for certain executives, the Company has nonqualified deferred compensation arrangements for several former directors, officers and key employees. All benefits provided under these plans are unfunded and payments to plan participants are made by the Company. At December 31, 2025 and 2024, the Company has recorded a liability of $
Deferred Compensation Plans for Directors
Directors of the Company may defer all or a portion of their director fees under the Deferred Compensation Plan for Directors. Under this plan, there is a separate account for each participating director which is credited with the amount of shares that could have been purchased with the director’s fees as well as any dividends on such shares. On the distribution date, the director will receive common stock equal to the accumulated share balance in their account. As of December 31, 2025, and 2024, there were
The Company acquired deferred compensation plans for certain non-employee directors and trustees of Merchants Bancshares, Inc. (“Merchants”). Under the terms of these acquired deferred compensation plans, participating directors could elect to have all, or a specified percentage, of their Merchants director’s fees for a given year paid in the form of cash or deferred in the form of restricted shares of Merchants’ common stock. Directors who elected to have their compensation deferred were credited with a number of shares of Merchants’ common stock equal in value to the amount of fees deferred. These shares were converted to shares of Company stock in connection with the acquisition and are held in a rabbi trust. The shares held in the rabbi trust are considered outstanding for purposes of computing earnings per share. The participating director may not sell, transfer or otherwise dispose of these shares prior to distribution. With respect to shares of common stock issued or otherwise transferred to a participating director, the participating director has the right to receive dividends or other distributions thereon.
NOTE L: STOCK-BASED COMPENSATION PLANS
The Company has a long-term incentive program for directors, officers and employees. Under this program, the Company initially authorized
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Nonqualified Stock Options
The Company recognized stock-based compensation expense related to non-qualified stock options of $
The nonqualified (offset) stock options in the Director’s Stock Balance Plan vest and become exercisable immediately and expire
Activity in this long-term incentive program is as follows:
Stock Options | |||||
Weighted- | |||||
average Exercise | |||||
| Outstanding | | Price of Shares | ||
Outstanding at December 31, 2023 |
| $ | |||
Granted |
|
| |||
Exercised |
| ( |
| ||
Forfeited |
| ( |
| ||
Outstanding at December 31, 2024 |
| ||||
Granted |
|
| |||
Exercised |
| ( |
| ||
Forfeited |
| ( |
| ||
Outstanding at December 31, 2025 |
|
| |||
Exercisable at December 31, 2025 |
| $ | |||
The following table summarizes the information about stock options outstanding under the Company’s stock option plan at December 31, 2025:
Options outstanding | Options exercisable | |||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||
average | average | average | ||||||||||
Exercise | Remaining | Exercise | ||||||||||
Range of Exercise Price | | Shares | | Price | | Life (years) | | Shares | | Price | ||
$ |
| $ |
|
| $ | |||||||
$ |
|
|
|
|
| |||||||
$ |
|
|
|
|
| |||||||
$ |
|
|
|
|
| |||||||
TOTAL |
| $ |
|
| $ | |||||||
The weighted-average remaining contractual term of outstanding and exercisable stock options at December 31, 2025 and 2024 is
Management estimated the fair value of options granted using the Black-Scholes option-pricing model. This model was originally developed to estimate the fair value of exchange-traded equity options, which (unlike employee stock options) have no vesting period or transferability restrictions. As a result, the Black-Scholes model is not necessarily a precise indicator of the value of an option, but it is commonly used for this purpose. The Black-Scholes model requires several assumptions, which management developed based on historical trends and current market observations. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
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| 2025 | | 2024 | | 2023 |
| ||||
Weighted-average Fair Value of Options Granted | $ | $ | $ | |||||||
Assumptions: |
|
|
| |||||||
Weighted-average expected life (in years) |
|
|
| |||||||
Future dividend yield |
| % |
| % |
| % | ||||
Share price volatility |
| % |
| % |
| % | ||||
Weighted-average risk-free interest rate |
| % |
| % |
| % | ||||
Unrecognized stock-based compensation expense related to non-vested stock options totaled $
During the 12 months ended December 31, 2025 and 2024, proceeds from stock option exercises totaled $
Restricted Stock Awards
Compensation expense is recognized over the vesting period of the awards based on the fair value of the Company’s stock at grant date. The amount of stock-based compensation expense related to restricted stock vesting recognized in the income statement for 2025, 2024 and 2023 was approximately $
The fair value of restricted stock awards is based on the end-of-day share price of the Company’s stock on the grant date. Restricted stock awards granted prior to 2022 vest ratably over a
A summary of the status of the Company’s unvested restricted stock awards as of December 31, 2025, and changes during the twelve months ended December 31, 2025 and 2024, is presented below:
Restricted | Weighted-average | ||||
| Shares | | grant date fair value | ||
Unvested at December 31, 2023 |
| | $ | ||
Awards |
| |
| ||
Forfeitures |
| ( |
| ||
Vestings |
| ( |
| ||
Unvested at December 31, 2024 |
| | |||
Awards |
| |
| ||
Forfeitures |
| ( |
| ||
Vestings |
| ( |
| ||
Unvested at December 31, 2025 |
| | $ | ||
Unrecognized stock-based compensation expense related to unvested restricted stock totaled $
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Performance Awards
The long-term incentive program provides for the issuance of shares of performance award restricted stock to officers and key employees. There are
Performance | |||||
Restricted | Weighted-average | ||||
| Shares | | grant date fair value | ||
Unvested at December 31, 2023 |
| $ | |||
Awards |
|
| |||
Forfeitures |
| ( |
| ||
Vestings |
| ( |
| ||
Unvested at December 31, 2024 |
| ||||
Awards |
|
| |||
Forfeitures |
| ( |
| ||
Vestings |
| ( |
| ||
Unvested at December 31, 2025 |
| $ | |||
Unrecognized stock-based compensation expense related to unvested performance restricted stock totaled $
NOTE M: EARNINGS PER SHARE
The two class method is used in the calculations of basic and diluted earnings per share. Under the two class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings. The Company has determined that all of its outstanding non-vested stock awards are participating securities as of December 31, 2025.
Basic earnings per share are computed based on the weighted-average of the common shares outstanding for the period. Diluted earnings per share are based on the weighted-average of the shares outstanding and the assumed exercise of stock options during the year. The dilutive effect of options is calculated using the treasury stock method of accounting. The treasury stock method determines the number of common shares that would be outstanding if all the dilutive options were exercised and the proceeds were used to repurchase common shares in the open market at the average market price for the applicable time period. At December 31, 2025, 2024 and 2023 weighted-average anti-dilutive stock options outstanding were immaterial, which were not included in the computation below.
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The following is a reconciliation of basic to diluted earnings per share for the years ended December 31, 2025, 2024 and 2023.
(000’s omitted, except per share data) | 2025 | | 2024 | | 2023 | |||
Net income | $ | | $ | | $ | | ||
Income attributable to unvested stock-based compensation awards |
| ( |
| ( |
| ( | ||
Income available to common shareholders | $ | | $ | | $ | | ||
Weighted-average common shares outstanding – basic |
| |
| |
| | ||
Basic earnings per share | $ | | $ | | $ | | ||
Net income | $ | | $ | | $ | | ||
Income attributable to unvested stock-based compensation awards |
| ( |
| ( |
| ( | ||
Income available to common shareholders | $ | | $ | | $ | | ||
Weighted-average common shares outstanding – basic |
| |
| |
| | ||
Assumed exercise of stock options |
| |
| |
| | ||
Weighted-average common shares outstanding – diluted |
| |
| |
| | ||
Diluted earnings per share | $ | | $ | | $ | | ||
Cash dividends declared per share | $ | | $ | | $ | | ||
Stock Repurchase Program
At its December 2025 meeting, the Board of Directors of the Company (the “Board”) approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to
At its December 2024 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to
At its December 2023 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to
At its December 2022 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to
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NOTE N: COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to the Company’s normal credit policies. The Company’s liability for off-balance sheet credit exposures related to commitments to extend credit is included in accrued interest and other liabilities on the consolidated statements of condition and detailed in Note D. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. The fair value of the standby letters of credit is immaterial for disclosure.
The contract amounts of these commitments and contingencies are as follows at December 31:
December 31, | December 31, | |||||
(000’s omitted) | | 2025 | | 2024 | ||
Commitments to extend credit | $ | | $ | | ||
Standby letters of credit |
| |
| | ||
Total | $ | | $ | | ||
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) issued a final rulemaking that implemented a special assessment to recover the uninsured deposit losses from bank failures that occurred during 2023. The final rule anticipated collecting the special assessment over eight quarterly assessment periods beginning in 2024 at an annual rate of approximately
The Company entered into agreements to invest a total of $
Legal Contingencies
On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with pending or threatened legal proceedings or other matters in which claims for monetary damages are asserted. For those matters where it is probable that the Company will incur losses and the amounts of the losses are reasonably estimable, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent such matters could result in exposure in excess of that liability, the amount of such excess is not currently estimable. The range of losses that are reasonably possible for matters where an exposure is not currently estimable or considered probable is not believed to be material in the aggregate. This is based on information currently available to the Company and involves elements of judgment and significant uncertainties.
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NOTE O: LEASES
The Company has operating and finance leases for certain premises and operating leases for certain equipment. These leases have remaining terms that range from less than
The components of lease expense are as follows:
(000’s omitted) | | 2025 | 2024 | 2023 | |||||
Operating lease cost | $ | $ | $ | ||||||
Finance lease cost: | |||||||||
Amortization of right-of-use assets | |||||||||
Interest on lease liabilities | |||||||||
Variable lease cost |
| ||||||||
Short-term lease cost (1) |
| ||||||||
Total lease cost | $ | $ | $ | ||||||
(1) |
Supplemental cash flow information related to leases is as follows:
(000’s omitted) | | 2025 |
| 2024 | ||
Cash paid for amounts included in the measurement of lease liabilities: |
| | ||||
Operating cash outflows for operating leases | $ | | $ | | ||
Operating cash outflows for finance leases | | | ||||
Financing cash outflows for finance leases | | | ||||
Right-of-use assets obtained in exchange for lease obligations: |
| |||||
Operating leases | | | ||||
Finance leases |
| | | |||
Supplemental balance sheet information related to leases is as follows:
(000’s omitted, except lease term and discount rate) | | 2025 |
| 2024 | |||
Operating leases |
| | |||||
$ | | $ | | ||||
| | ||||||
Finance leases |
| ||||||
| | ||||||
| | ||||||
Weighted average remaining lease term |
| ||||||
Operating leases |
| ||||||
Finance leases | |||||||
Weighted average discount rate |
| ||||||
Operating leases |
| | % | | % | ||
Finance leases | | % | | % | |||
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Maturities of lease liabilities as of December 31, 2025 are as follows:
(000’s omitted) | | Operating Leases | | Finance Leases | ||
2026 | $ | $ | ||||
2027 |
| |||||
2028 |
| |||||
2029 |
| |||||
2030 |
| |||||
Thereafter |
| |||||
Total lease payments |
| |||||
Less imputed interest |
| ( | ( | |||
Total | $ | $ | ||||
Maturities of lease liabilities as of December 31, 2024 are as follows:
(000’s omitted) | | Operating Leases | | Finance Leases | ||
2025 | $ | $ | ||||
2026 |
| |||||
2027 |
| |||||
2028 |
| |||||
2029 |
| |||||
Thereafter |
| |||||
Total lease payments |
| |||||
Less imputed interest |
| ( | ( | |||
Total | $ | $ | ||||
Included in the Company’s operating leases are related party leases where BPAS-APS and OneGroup, subsidiaries of the Company, lease office space from 706 North Clinton, LLC (“706 North Clinton”), an entity the Company holds a
The maturities of the Company’s related party lease liabilities as of December 31, 2025 are as follows:
(000’s omitted) | 706 North Clinton, LLC | ||
2026 | | $ | |
2027 |
| ||
2028 | |||
2029 | |||
2030 |
| ||
Thereafter |
| ||
Total lease payments |
| ||
Less imputed interest |
| ( | |
Total | $ | ||
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Table of Contents
The maturities of the Company’s related party lease liabilities as of December 31, 2024 are as follows:
(000’s omitted) | | 706 North Clinton, LLC | |
2025 | $ | ||
2026 |
| ||
2027 |
| ||
2028 |
| ||
2029 |
| ||
Thereafter |
| ||
Total lease payments |
| ||
Less imputed interest |
| ( | |
Total | $ | ||
As of December 31, 2025, the Company has
NOTE P: REGULATORY MATTERS
The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to the Company. In addition to the capital requirements discussed below, the circumstances under which the Bank may pay dividends are limited by federal statutes, regulations, and policies. For example, as a national bank, the Bank must obtain the approval of the OCC for payments of dividends if the total of all dividends declared in any calendar year would exceed the total of the Bank’s net profits, as defined by applicable regulations, for that year, combined with its retained net profits for the preceding two years. Furthermore, the Bank may not pay a dividend in an amount greater than its undivided profits then on hand after deducting its losses and bad debts, as defined by applicable regulations. At December 31, 2025, the Bank had approximately $
In addition, the Board of Governors of the FRB and the OCC are authorized to determine under certain circumstances that the payment of dividends would be an unsafe or unsound practice and to prohibit payment of such dividends. The FRB has indicated that banking organizations should generally pay dividends only out of current operating earnings. The OCC may take enforcement actions for a variety of supervisory concerns, including violations of laws, rules or regulations and unsafe and unsound practices. As a result, the OCC could also establish individual minimum capital ratios (“IMCR”) for the Bank that are higher than the regulatory minimums. This would impair the Bank’s ability to pay dividends to the Company.
There are also statutory limits on the transfer of funds to the Company by its banking subsidiary, whether in the form of loans or other extensions of credit, investments or assets purchases. Such transfer by the Bank to the Company generally is limited in amount to 10% of the Bank’s capital and surplus, or 20% in the aggregate. Furthermore, such loans and extensions of credit are required to be collateralized in specific amounts.
The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes, as of December 31, 2025, that the Company and Bank meet all applicable capital adequacy requirements.
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The Company and the Bank are required to maintain a “capital conservation buffer,” composed entirely of common equity Tier 1 capital, in addition to minimum risk-based capital ratios. The required capital conservation buffer is
For capital adequacy | To be well-capitalized |
| |||||||||||||||||||
For capital adequacy | purposes plus Capital | under prompt |
| ||||||||||||||||||
Actual | purposes | Conservation Buffer | corrective action |
| |||||||||||||||||
(000’s omitted) | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| ||||
Community Financial System, Inc.: |
| |
| |
| |
| |
| |
| |
| |
| | |||||
2025 |
| |
| |
| |
| |
| |
| |
| |
| | |||||
Tier 1 Leverage ratio | $ | % | $ |
| % | $ |
| % | |||||||||||||
Common equity tier 1 capital |
| % |
|
| % | $ | % |
| % | ||||||||||||
Tier 1 risk-based capital |
| % |
|
| % | % |
| % | |||||||||||||
Total risk-based capital |
| % |
|
| % |
| % |
| % | ||||||||||||
2024 |
|
|
|
| |
| |
|
| | |||||||||||
Tier 1 Leverage ratio | $ |
| % | $ |
| % | $ |
| % | ||||||||||||
Common equity tier 1 capital |
|
| % |
|
| % | $ | % |
| % | |||||||||||
Tier 1 risk-based capital |
|
| % |
|
| % | % |
| % | ||||||||||||
Total risk-based capital |
|
| % |
|
| % |
| % |
| % | |||||||||||
Community Bank, N.A.: |
|
|
|
| |
| |
|
| | |||||||||||
2025 |
|
|
|
| |
| |
|
| | |||||||||||
Tier 1 Leverage ratio | $ |
| % | $ |
| % | $ |
| % | ||||||||||||
Common equity tier 1 capital |
|
| % |
|
| % | $ | % |
| % | |||||||||||
Tier 1 risk-based capital |
|
| % |
|
| % | % |
| % | ||||||||||||
Total risk-based capital |
|
| % |
|
| % |
| % |
| % | |||||||||||
2024 |
|
|
|
| |
| |
|
| | |||||||||||
Tier 1 Leverage ratio | $ |
| % | $ |
| % | $ |
| % | ||||||||||||
Common equity tier 1 capital |
|
| % |
|
| % | $ | % |
| % | |||||||||||
Tier 1 risk-based capital |
|
| % |
|
| % | % |
| % | ||||||||||||
Total risk-based capital |
|
| % |
|
| % |
| % |
| % | |||||||||||
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NOTE Q: PARENT COMPANY STATEMENTS
The condensed statements of condition of the parent company, Community Financial System, Inc., at December 31 are as follows:
(000's omitted) | | 2025 | | 2024 | ||
Assets: |
| |
| | ||
Cash and cash equivalents | $ | $ | ||||
Investment securities |
|
| ||||
Investment in and advances to: |
|
| ||||
Bank subsidiary |
|
| ||||
Non-bank subsidiaries |
|
| ||||
Equity method investments | ||||||
Other assets |
|
| ||||
Total assets | $ | $ | ||||
Liabilities and shareholders' equity: |
|
| ||||
Accrued interest and other liabilities | $ | $ | ||||
Shareholders' equity |
|
| ||||
Total liabilities and shareholders' equity | $ | $ | ||||
The condensed statements of income of the parent company for the years ended December 31 is as follows:
(000's omitted) | | 2025 | | 2024 | | 2023 | |||
Revenues: |
| |
| |
| | |||
Dividends from subsidiaries: |
| |
| |
| | |||
Bank subsidiary | $ | $ | $ | ||||||
Non-bank subsidiaries |
|
|
| ||||||
Interest and dividends on investments |
|
|
| ||||||
Gain on debt extinguishment | |||||||||
Loss from equity method investments | ( | ||||||||
Total revenues |
|
|
| ||||||
Expenses: |
|
|
| ||||||
Interest on borrowings |
|
|
| ||||||
Other expenses |
|
|
| ||||||
Total expenses |
|
|
| ||||||
Income before tax benefit and equity in undistributed net income of subsidiaries |
|
|
| ||||||
Income tax benefit |
| ( |
|
| |||||
Income before equity in undistributed net income of subsidiaries |
|
|
| ||||||
Equity in undistributed net income of subsidiaries |
|
|
| ||||||
Net income | $ | $ | $ | ||||||
Other comprehensive income, net of tax: |
|
|
| ||||||
Changes in other comprehensive income related to pension and other post retirement obligations | $ | $ | $ | ||||||
Changes in other comprehensive income (loss) related to unrealized gains (losses) on investment securities |
|
| ( |
| |||||
Other comprehensive income |
|
|
| ||||||
Comprehensive income | $ | $ | $ | ||||||
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The statements of cash flows of the parent company for the years ended December 31 is as follows:
(000's omitted) | | 2025 | | 2024 | | 2023 | |||
Operating activities: |
| |
| |
| | |||
Net income | $ | $ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
| ||||||
Equity in undistributed net income of subsidiaries |
| ( |
| ( |
| ( | |||
Gain on debt extinguishment | ( | ||||||||
Loss from equity method investments | |||||||||
Net change in other assets and other liabilities |
|
| ( |
| ( | ||||
Net cash provided by operating activities |
|
|
| ||||||
Investing activities: |
|
|
| ||||||
Purchases of investment securities, net | ( | ( | ( | ||||||
Maturities of investment securities | |||||||||
Payments for investments in subsidiaries | ( | ||||||||
Purchases of equity method investments | ( | ||||||||
Net cash used in investing activities |
| ( |
| ( |
| ( | |||
Financing activities: |
|
|
| ||||||
Repayment of advances from subsidiaries |
| ( |
| ( |
| ( | |||
Repayment of borrowings |
|
|
| ( | |||||
Issuance of common stock |
|
|
| ||||||
Purchases of treasury stock |
| ( |
| ( |
| ( | |||
Cash dividends paid |
| ( |
| ( |
| ( | |||
Net cash used in financing activities |
| ( |
| ( |
| ( | |||
Change in cash and cash equivalents |
| ( |
| ( |
| ( | |||
Cash and cash equivalents at beginning of year |
|
|
| ||||||
Cash and cash equivalents at end of year | $ | $ | $ | ||||||
Supplemental disclosures of cash flow information: |
| |
| |
| ||||
Cash paid for interest | $ | $ | $ | ||||||
Supplemental disclosures of noncash financing activities: |
| |
| |
| ||||
Dividends declared and unpaid | $ | $ | $ | ||||||
Advances from subsidiaries |
|
|
| ||||||
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NOTE R: FAIR VALUE
Accounting standards establish a framework for measuring fair value and require certain disclosures about such fair value instruments. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. exit price). Inputs used to measure fair value are classified into the following hierarchy:
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis. There were
December 31, 2025 | ||||||||||||
Total Fair | ||||||||||||
(000’s omitted) | | Level 1 | | Level 2 | | Level 3 | | Value | ||||
Available-for-sale investment securities: |
| |
| |
| |
| | ||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | ||||
Obligations of state and political subdivisions |
| |
| |
| |
| | ||||
Government agency mortgage-backed securities |
| |
| |
| |
| | ||||
Corporate debt securities |
| |
| |
| |
| | ||||
Government agency collateralized mortgage obligations |
| |
| |
| |
| | ||||
Total available-for-sale investment securities |
|
|
|
| ||||||||
Equity securities |
| |
| |
| |
| | ||||
Mortgage loans held for sale |
| | | | | |||||||
Commitments to originate real estate loans for sale | | | | | ||||||||
Forward sales commitments | | | | | ||||||||
Interest rate swap agreements asset |
| |
| |
| |
| | ||||
Interest rate swap agreements liability |
| |
| ( |
| |
| ( | ||||
Total | $ | | $ | | $ | | $ | | ||||
December 31, 2024 | ||||||||||||
Total Fair | ||||||||||||
(000’s omitted) | | Level 1 | | Level 2 | | Level 3 | | Value | ||||
Available-for-sale investment securities: |
| |
| |
| |
| | ||||
U.S. Treasury and agency securities | $ | | $ | | $ | | $ | | ||||
Obligations of state and political subdivisions |
| |
| |
| |
| | ||||
Government agency mortgage-backed securities |
| |
| |
| |
| | ||||
Corporate debt securities |
| |
| |
| |
| | ||||
Government agency collateralized mortgage obligations |
| |
| |
| |
| | ||||
Total available-for-sale investment securities |
| |
| |
|
| | |||||
Equity securities |
| |
| |
| |
| | ||||
Mortgage loans held for sale | |
| |
| |
| | |||||
Commitments to originate real estate loans for sale | | | | | ||||||||
Forward sales commitments | | ( | | ( | ||||||||
Interest rate swap agreements asset |
| |
| |
| |
| | ||||
Interest rate swap agreements liability |
| |
| ( | |
| ( | |||||
Total | $ | | $ | | $ | | $ | | ||||
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Table of Contents
The valuation techniques used to measure fair value for the items in the table above are as follows:
| ● | Available for sale investment securities and equity securities – The fair values of available-for-sale investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Level 1 securities include U.S. Treasury obligations and marketable equity securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include U.S. agency securities, mortgage-backed securities issued by government-sponsored entities, municipal securities and corporate debt securities that are valued by reference to prices for similar securities or through model-based techniques in which all significant inputs, such as reported trades, trade execution data, interest rate swap yield curves, market prepayment speeds, credit information, market spreads, and the security’s terms and conditions, are observable. See Note C for further disclosure of the fair value of investment securities. |
| ● | Mortgage loans held for sale – The Company has elected to value loans held for sale at fair value in order to more closely match the gains and losses associated with loans held for sale with the gains and losses on forward sales contracts. Accordingly, the impact on the valuation will be recognized in the Company’s consolidated statements of income. All mortgage loans held for sale are current and in performing status. The fair value of mortgage loans held for sale is determined using quoted secondary-market prices of loans with similar characteristics and, as such, has been classified as a Level 2 valuation. The unpaid principal value of mortgage loans held for sale was approximately $ |
| ● | Commitments to originate real estate loans for sale – The Company enters into various commitments to originate residential real estate loans for sale. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The estimated fair value of these commitments is determined using quoted secondary market prices obtained from certain government-sponsored entities. Additionally, accounting guidance requires the expected net future cash flows related to the associated servicing of the loan to be included in the fair value measurement of the derivative. The expected net future cash flows are based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Such assumptions include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds. The determination of expected net cash flows is considered a significant unobservable input contributing to the Level 3 classification of commitments to originate real estate loans for sale. |
| ● | Forward sales commitments – The Company enters into forward sales commitments to sell certain residential real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The fair value of these forward sales commitments is primarily measured by obtaining pricing from certain government-sponsored entities and reflects the underlying price the entity would pay the Company for an immediate sale on these mortgages. As such, these instruments are classified as Level 2 in the fair value hierarchy. |
| ● | Interest rate swaps – The interest rate swaps are reported at their fair value utilizing Level 2 inputs from a third-party provider. The fair value measurement of the interest rate swap is determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates derived from observed market interest rate curves. |
The changes in Level 3 assets measured at fair value on a recurring basis are immaterial.
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The fair value information of assets and liabilities measured on a non-recurring basis presented below is not as of the period-end, but rather as of the date the fair value adjustment was recorded closest to the date presented.
December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||
| | | Total Fair | | | | Total Fair | |||||||||||||||||
(000's omitted) | Level 1 | Level 2 | Level 3 | Value | Level 1 | Level 2 | Level 3 | | Value | |||||||||||||||
Individually assessed loans | $ | | $ | | $ | |
| $ | | $ | | $ | | $ | |
| $ | | ||||||
Other real estate owned |
| | | |
| | | | |
| | |||||||||||||
Mortgage servicing rights |
| |
| |
| |
|
| |
| |
| |
| |
|
| | ||||||
Contingent consideration | | | ( | ( | | | ( | ( | ||||||||||||||||
Total | $ | | $ | | $ | |
| $ | | $ | | $ | | $ | |
| $ | | ||||||
Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, adjusted for non-observable inputs. Thus, the resulting nonrecurring fair value measurements are generally classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and, therefore, such valuations classify as Level 3.
Other real estate owned (“OREO”) is valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third-party appraisals, less estimated costs to sell, and may be further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business. Such non-observable assumptions result in a Level 3 classification of the inputs for determining fair value. The carrying value of OREO may be limited by the contractual balance of the related former loan, and when this occurs, OREO is not considered to be carried at fair value or included in the fair value hierarchy disclosures. OREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted accordingly, based on the same factors identified above. The Company recovers the carrying value of OREO through the sale of the property. The ability to affect future sales prices is subject to market conditions and factors beyond the Company’s control and may impact the estimated fair value of a property.
Originated mortgage servicing rights are recorded at their fair value at the time of sale of the underlying loan, and are amortized in proportion to and over the estimated period of net servicing income. The fair value of mortgage servicing rights is based on a valuation model incorporating inputs that market participants would use in estimating future net servicing income. Such inputs include estimates of the cost of servicing loans, appropriate discount rate, and prepayment speeds and are considered to be unobservable and contribute to the Level 3 classification of mortgage servicing rights. In accordance with GAAP, the Company records impairment charges, on a nonrecurring basis, when the carrying value of a stratum exceeds its estimated fair value. Impairment is recognized through a valuation allowance. There was a valuation allowance of approximately $
The Company has recorded contingent consideration liabilities that arise from acquisition activity. The contingent consideration is recorded at fair value at the date of acquisition. The valuation of contingent consideration is calculated using an income approach method, which provides an estimation of the fair value of an asset or liability based on future cash flows over a discrete projection period, discounted to present value using an appropriate rate of return. The assumptions used in the valuation calculation are based on significant unobservable inputs, therefore such valuations classify as Level 3.
During 2025, the Company made the final required payment for the CPD contract holdback contingent consideration of $
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During 2024, three payments were made on the CPD contingent consideration totaling $
The Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company did not recognize an impairment charge during 2025 or 2024. See Note F for more detail.
The Company determines fair values based on quoted market values, where available, estimates of present values, or other valuation techniques. Those techniques are significantly affected by the assumptions used, including, but not limited to, the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in immediate settlement of the instrument. The significant unobservable inputs used in the determination of fair value of assets classified as Level 3 on a recurring or non-recurring basis are as follows:
| | | | Significant Unobservable |
| ||||||
Fair Value at |
| Input Range |
| ||||||||
(000's omitted, except per loan data) | December 31, 2025 | Valuation Technique | Significant Unobservable Inputs | (Weighted Average) |
| ||||||
Individually assessed loans | $ | |
|
|
| % | |||||
Other real estate owned | |
|
|
| |||||||
Commitments to originate real estate loans for sale | | | % | ||||||||
Mortgage servicing rights |
| |
|
|
| ||||||
|
| ||||||||||
Contingent consideration | ( | ||||||||||
| | | | Significant Unobservable |
| ||||||
Fair Value at | Input Range |
| |||||||||
(000's omitted, except per loan data) | December 31, 2024 | Valuation Technique | Significant Unobservable Inputs | (Weighted Average) |
| ||||||
Individually assessed loans | $ | |
|
|
| % | |||||
Other real estate owned | |
|
|
| |||||||
Commitments to originate real estate loans for sale | | | % | ||||||||
Mortgage servicing rights |
| |
|
|
| ||||||
|
|
| |||||||||
Contingent consideration | ( | % | |||||||||
% | |||||||||||
The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date. The weighted average of the estimated cost of disposal/market adjustment for individually assessed loans was calculated by dividing the total of the book value of the collateral of the individually assessed loans classified as Level 3 by the total of the fair value of the collateral of the individually assessed loans classified as Level 3. The weighted average of the estimated cost of disposal/market adjustment for other real estate owned was calculated by dividing the total of the differences between the appraisal values of the real estate and the book values of the real estate divided by the totals of the appraisal values of the real estate. The weighted average of the constant prepayment rate for mortgage servicing rights was calculated by adding the constant prepayment rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for mortgage servicing rights was calculated by adding the discount rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for the contingent consideration was calculated by adding the discount rates used for the calculation of the fair value of each payment of contingent consideration, weighted by the amount of the payment as part of the total fair value of contingent consideration. The weighted average of the probability of achievement was determined by calculating the proportion of the probability-weighted payment of the total maximum payment, weighted by the amount of the payment as part of the total fair value of contingent consideration.
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Certain financial instruments and all nonfinancial instruments are excluded from fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at December 31, 2025 and 2024 are presented below. The table presented below excludes other financial instruments for which the carrying value approximates fair value including cash and cash equivalents, accrued interest receivable and accrued interest payable.
December 31, 2025 | December 31, 2024 | |||||||||||
| Carrying | | Fair | | Carrying | | Fair | |||||
(000’s omitted) | Value | Value | Value | Value | ||||||||
Financial assets: |
| |
| |
| |
| | ||||
Net loans | $ | | $ | | $ | | $ | | ||||
Held-to-maturity securities | | | | | ||||||||
Financial liabilities: |
|
|
|
| ||||||||
Deposits |
| |
| |
| |
| | ||||
Overnight borrowings |
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| |
| |
| | ||||
Securities sold under agreement to repurchase, short-term |
| |
| |
| |
| | ||||
Other Federal Home Loan Bank borrowings |
| |
| |
| |
| | ||||
The following is a further description of the principal valuation methods used by the Company to estimate the fair values of its financial instruments.
Loans have been classified as a Level 3 valuation. Fair values for variable rate loans that reprice frequently are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.
The fair values of held-to-maturity U.S. Treasury investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Held-to-maturity U.S. Treasury securities have been classified as a Level 1 valuation. Held-to-maturity government agency mortgage-backed securities have been classified as a Level 2 valuation. The fair values of held-to-maturity government agency mortgage-backed securities are based on current market rates for similar products.
Deposits have been classified as a Level 2 valuation. The fair value of demand deposits, interest-bearing checking deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of time deposit obligations are based on current market rates for similar securities.
Borrowings have been classified as a Level 2 valuation. The fair value of overnight borrowings and securities sold under agreement to repurchase, short-term, is the amount payable on demand at the reporting date. Fair values for other FHLB borrowings are estimated using discounted cash flows and interest rates currently being offered on similar securities.
Other financial assets and liabilities: cash and cash equivalents have been classified as a Level 1 valuation, while accrued interest receivable and accrued interest payable have been classified as a Level 2 valuation. The fair values of each approximate the respective carrying values because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.
NOTE S: DERIVATIVE INSTRUMENTS
The Company is party to derivative financial instruments in the normal course of its business to meet the financing needs of its customers and to manage its exposure to fluctuation in interest rates and credit risk. These financial instruments have been limited to interest rate swap agreements and risk participation agreements. The Company does not hold or issue derivative financial instruments for trading or other speculative purposes.
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Interest Rate Swaps
The Company enters into interest rate swaps to assist customers in managing their interest rate risk. These swaps are considered derivatives, but are not designated as hedging relationships. These instruments have associated interest rate and credit risk. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties, which are also considered derivatives and are not designated as hedging relationships. Interest rate swaps are recorded within other assets or accrued interest and other liabilities in the consolidated statements of condition at their estimated fair value. The terms of the interest rate swaps with the customer and the counterparties offset each other, with the only difference being counterparty credit risk. Any changes in the fair value of the underlying derivative contracts are reported in other banking services noninterest revenue in the consolidated statements of income.
Risk Participation Agreements
The Company may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed, referred to as an “RPA sold”. In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee paid commensurate with the risk shared, referred to as an “RPA purchased”.
Forward Sales Commitments
The Company enters into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate. The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale. Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.
Notional values and fair values of derivative instruments as of December 31, 2025 and 2024 are as follows:
| December 31, 2025 | |||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
Consolidated | Consolidated | |||||||||||||||
Notional | Statement of | Fair | Notional | Statement of | Fair | |||||||||||
(000’s omitted) | Amount | Condition Location | Value | Amount | Condition Location | Value | ||||||||||
Derivatives not designated as hedging instruments under Subtopic 815-20: |
| |
| |
| |
| |
| |
| | ||||
Commitments to originate real estate loans for sale | $ | |
| $ | | $ | |
| $ | | ||||||
Forward sales commitments | | | | | ||||||||||||
Interest rate swaps |
| |
|
| |
| |
|
| | ||||||
RPA sold |
| |
|
| |
| |
|
| | ||||||
RPA purchased |
| |
|
| |
| |
|
| | ||||||
Total derivatives | $ | | $ | | $ | |
| | $ | | ||||||
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| December 31, 2024 | |||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
Consolidated | Consolidated | |||||||||||||||
Notional | Statement of | Fair | Notional | Statement of | Fair | |||||||||||
(000’s omitted) | | Amount | Condition Location | Value | Amount | Condition Location | Value | |||||||||
Derivatives not designated as hedging instruments under Subtopic 815-20: |
| |||||||||||||||
Commitments to originate real estate loans for sale | $ | |
| $ | | $ | |
| $ | | ||||||
Forward sales commitments | | ( | | | ||||||||||||
Interest rate swaps |
| |
|
| |
| |
|
| | ||||||
RPA sold | | | | | ||||||||||||
RPA purchased |
| |
|
| |
| |
|
| | ||||||
Total derivatives | $ | | $ | | $ | |
| | $ | | ||||||
The notional amount for interest rate swaps represents the underlying principal amount used to calculate interest payments that are exchanged periodically. The notional amount for risk participation agreements represents the amount of exposure assumed or shared in case of borrower default. The notional amount for commitments to originate real estate loans for sale represents the unpaid principal amount of loans that have been committed to originate. The notional amount for forward sales commitments represents the total underlying principal amount of loans or commitments that the Company has contracted to sell at a specified price in the future.
Fee income earned on interest rate swaps and risk participation agreements is recognized in other banking services noninterest revenues in the consolidated statements of income during the period the derivative instrument is executed. During the years ended December 31, 2025 and 2024, the Company recognized $
Cash collateral is posted by the Company with counterparties to secure certain derivatives, which is restricted cash and is included in cash and cash equivalents on the consolidated statements of condition. The amount of such collateral at December 31, 2025 and 2024 was $
The Company assessed its counterparty risk at December 31, 2025 and 2024 and determined any credit risk inherent in derivative contracts was not material. Further information about the fair value of derivative financial instruments can be found in Note R to these consolidated financial statements.
NOTE T: VARIABLE INTEREST ENTITIES
In connection with the Company’s acquisition of Oneida Financial Corp., the Company acquired OPFC II which holds a
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The carrying amount of the assets and liabilities of 706 North Clinton and the classification of these assets and liabilities in the Company’s consolidated statements of condition at December 31 are as follows:
(000’s omitted) | | 2025 | | 2024 | ||
Cash and cash equivalents | $ | $ | ||||
Premises and equipment, net |
|
| ||||
Other assets |
|
| ||||
Total assets | $ | $ | ||||
Accrued interest and other liabilities / Total liabilities | $ | $ | ||||
In addition to the assets and liabilities of 706 North Clinton, the minority interest in 706 North Clinton of $
NOTE U: SEGMENT INFORMATION
Operating segments are components of an enterprise, which are evaluated regularly by the CODM in deciding how to allocate resources and assess performance. The Company’s CODM is the President and Chief Executive Officer of the Company. The Company has identified (1) Banking and Corporate, (2) Employee Benefit Services, (3) Insurance Services, and (4) Wealth Management Services as its
CBNA operates the Banking and Corporate segment that provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, Vermont, Western Massachusetts and Southern New Hampshire. In addition to these general intermediation services, the Banking and Corporate segment provides treasury management solutions and payment processing services. The Banking and Corporate segment also includes certain corporate overhead-related expenses.
The Employee Benefit Services segment, which includes the operating subsidiaries of BPA, BPAS-APS, BPAS Trust Company of Puerto Rico, NRS, GTC, HB&T and HSI, provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, health and welfare consulting services and introducing broker-dealer services.
The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services, as well as the Company’s equity method investment in Leap.
The Wealth Management Services segment is comprised of wealth management services including trust services provided by the Nottingham Trust division within the Bank, broker-dealer and investment advisory services provided by NISI and Wealth Partners, as well as asset management services provided by Nottingham.
The accounting policies used in the disclosure of business segments are the same as those described in the summary of significant accounting policies (see Note A) except as follows. Segment operating revenues exclude certain items considered non-core to the operating performance of the business including realized and unrealized gains or losses on investment securities. Significant segment expenses are the expense categories significant to the segment, regularly provided to or easily computed from information regularly provided to the CODM and included in segment adjusted income before income taxes. Segment adjusted income before income taxes also excludes certain items considered non-core to the operating performance of the business including amortization of intangible assets, acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual and restructuring expenses. Both segment operating revenues and significant segment expenses include certain intersegment activity associated with transactions between the segments and are eliminated in consolidation. Segment assets include certain segment cash balances held as deposits with CBNA and are eliminated in consolidation.
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The CODM uses segment adjusted income before income taxes to measure performance and allocate resources, including employees, property and financial or capital resources, for all of the Company’s segments. The CODM considers current period actual-to-current period budget and current period actual-to-prior period actual variances on a monthly basis for each of the Company’s segments along with comparisons of the actual segment results with one another. Segment adjusted income before income taxes is also used as a factor in the determination of incentive compensation for key employees of the segments including the segment leaders.
There are no transactions with a single customer that result in revenues that exceed ten percent of consolidated total revenues.
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Information about reportable segments and reconciliations of the information to the consolidated financial statements follows:
| | Employee | | | Wealth | | |||||||||
Banking and | Benefit | Insurance | Management | ||||||||||||
(000’s omitted) | Corporate | Services | Services | Services | Total | ||||||||||
Year Ended December 31, 2025 |
| |
| |
| |
| |
| | |||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers |
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| |
| |
| |
| | |||||
Revenues from external customers |
| |
| |
| |
| |
| | |||||
Equity in net loss of investees accounted for by the equity method | | | ( | | ( | ||||||||||
Intersegment revenues |
| ( | | | | | |||||||||
| |
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| |
| |
| | ||||||
Reconciliation of revenues (segment operating revenues): |
| |
| |
| |
| |
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Elimination of intersegment revenues |
| |
| |
| |
| ( | |||||||
Other revenues (a) |
| |
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Total consolidated revenues |
| |
| |
| | $ | | |||||||
Less segment expenses: (b) |
| |
| |
| |
| |
| | |||||
Provision for credit losses |
| | | | |
| | ||||||||
Salaries and employee benefits |
| | | | |
| | ||||||||
Data processing and communications |
| | | | |
| | ||||||||
Occupancy and equipment |
| | | | |
| | ||||||||
Legal and professional fees |
| | | | |
| | ||||||||
Business development and marketing |
| | | | |
| | ||||||||
Other segment items (c) |
| | | | |
| | ||||||||
Segment adjusted income before income taxes | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of profit or loss (segment adjusted income before income taxes): |
| |
| |
| |
| |
| | |||||
Unrealized gain on equity securities |
| |
| |
| |
| | |||||||
Amortization of intangible assets |
| |
| |
| |
| ( | |||||||
Restructuring expenses | ( | ||||||||||||||
Acquisition expenses |
| |
| |
| |
| ( | |||||||
Litigation accrual |
| |
| |
| |
| | |||||||
Total consolidated income before income taxes |
| |
| |
| | $ | | |||||||
Other segment disclosures: |
| |
| |
| |
| |
| | |||||
Interest income | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest income: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest income |
| |
| |
| |
| ( | |||||||
Total consolidated interest income |
| |
| |
| | $ | | |||||||
Interest expense | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest expense: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest expense |
| |
| |
| |
| ( | |||||||
Total consolidated interest expense |
| |
| |
| | $ | | |||||||
Depreciation (d) | $ | | $ | | $ | | $ | | $ | | |||||
Amortization of intangible assets |
| |
| |
| |
| |
| | |||||
Goodwill | | | | | | ||||||||||
Core deposit intangibles, net | | | | | | ||||||||||
Other intangibles, net | | | | | | ||||||||||
Segment assets | | | | | | ||||||||||
Reconciliation of segment assets: | |||||||||||||||
Elimination of intersegment cash and deposits | ( | ||||||||||||||
Total consolidated assets | $ | | |||||||||||||
(a) | Other revenues includes $ |
(b) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown. |
(c) | Other segment items for each reportable segment includes: |
Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
(d) | The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions. |
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| | Employee | | | Wealth | | |||||||||
Banking and | Benefit | Insurance | Management | ||||||||||||
(000’s omitted) | Corporate | Services | Services | Services | Total | ||||||||||
Year Ended December 31, 2024 |
| |
| |
| |
| |
| | |||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers |
| |
| |
| |
| |
| | |||||
Revenues from external customers |
| |
| |
| |
| |
| | |||||
Intersegment revenues |
| ( | | | | | |||||||||
| |
| |
| |
| |
| | ||||||
Reconciliation of revenues (segment operating revenues): |
| |
| |
| |
| |
| | |||||
Elimination of intersegment revenues |
| |
| |
| |
| ( | |||||||
Other revenues (a) |
| |
| |
| |
| | |||||||
Total consolidated revenues |
| |
| |
| | $ | | |||||||
Less segment expenses: (b) |
| |
| |
| |
| |
| | |||||
Provision for credit losses |
| | | | |
| | ||||||||
Salaries and employee benefits |
| | | | |
| | ||||||||
Data processing and communications |
| | | | |
| | ||||||||
Occupancy and equipment |
| | | | |
| | ||||||||
Legal and professional fees |
| | | | |
| | ||||||||
Business development and marketing |
| | | | |
| | ||||||||
Other segment items (c) |
| | | | |
| | ||||||||
Segment adjusted income before income taxes | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of profit or loss (segment adjusted income before income taxes): |
| |
| |
| |
| |
| | |||||
Unrealized gain on equity securities |
| |
| |
| |
| | |||||||
Amortization of intangible assets |
| |
| |
| |
| ( | |||||||
Loss on sales of investment securities | ( | ||||||||||||||
Acquisition expenses |
| |
| |
| |
| ( | |||||||
Acquisition-related contingent consideration adjustments | ( | ||||||||||||||
Litigation accrual |
| |
| |
| |
| ( | |||||||
Total consolidated income before income taxes |
| |
| |
| | $ | | |||||||
Other segment disclosures: |
| |
| |
| |
| |
| | |||||
Interest income | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest income: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest income |
| |
| |
| |
| ( | |||||||
Total consolidated interest income |
| |
| |
| | $ | | |||||||
Interest expense | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest expense: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest expense |
| |
| |
| |
| ( | |||||||
Total consolidated interest expense |
| |
| |
| | $ | | |||||||
Depreciation (d) | $ | | $ | | $ | | $ | | $ | | |||||
Amortization of intangible assets |
| |
| |
| |
| |
| | |||||
Goodwill | | | | | | ||||||||||
Core deposit intangibles, net | | | | | | ||||||||||
Other intangibles, net | | | | | | ||||||||||
Segment assets | | | | | | ||||||||||
Reconciliation of segment assets: | |||||||||||||||
Elimination of intersegment cash and deposits | ( | ||||||||||||||
Total consolidated assets | $ | | |||||||||||||
(a) | Other revenues includes $ |
(b) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown. |
(c) | Other segment items for each reportable segment includes: |
Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
(d) | The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions. |
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| | Employee | | | Wealth | | |||||||||
Banking and | Benefit | Insurance | Management | ||||||||||||
(000’s omitted) | Corporate | Services | Services | Services | Total | ||||||||||
Year Ended December 31, 2023 |
| |
| |
| |
| |
| | |||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers |
| |
| |
| |
| |
| | |||||
Revenues from external customers |
| |
| |
| |
| |
| | |||||
Intersegment revenues |
| ( |
| |
| |
| |
| | |||||
| |
| |
| |
| |
| | ||||||
Reconciliation of revenues (segment operating revenues): |
| |
| |
| |
| |
| | |||||
Elimination of intersegment revenues |
| |
| |
| |
| ( | |||||||
Other revenues (a) |
| |
| |
| |
| ( | |||||||
Total consolidated revenues |
| |
| |
| | $ | | |||||||
Less segment expenses: (b) |
| |
| |
| |
| |
| | |||||
Provision for credit losses |
| |
| |
| |
| |
| | |||||
Salaries and employee benefits |
| |
| |
| |
| |
| | |||||
Data processing and communications |
| |
| |
| |
| |
| | |||||
Occupancy and equipment |
| |
| |
| |
| |
| | |||||
Legal and professional fees |
| |
| |
| |
| |
| | |||||
Business development and marketing |
| |
| |
| |
| |
| | |||||
Other segment items (c) |
| |
| |
| |
| |
| | |||||
Segment adjusted income before income taxes | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of profit or loss (segment adjusted income before income taxes): |
| |
| |
| |
| |
| | |||||
Loss on sales of investment securities |
| |
| |
| |
| ( | |||||||
Gain on debt extinguishment |
| |
| |
| |
| | |||||||
Unrealized loss on equity securities |
| |
| |
| |
| ( | |||||||
Amortization of intangible assets | ( | ||||||||||||||
Acquisition expenses | ( | ||||||||||||||
Acquisition-related contingent consideration adjustments | ( | ||||||||||||||
Restructuring expenses |
| |
| |
| |
| ( | |||||||
Litigation accrual |
| |
| |
| |
| ( | |||||||
Total consolidated income before income taxes |
| |
| |
| | $ | | |||||||
Other segment disclosures: |
| |
| |
| |
| |
| | |||||
Interest income | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest income: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest income |
| |
| |
| |
| ( | |||||||
Total consolidated interest income |
| |
| |
| | $ | | |||||||
Interest expense | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of interest expense: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment interest expense |
| |
| |
| |
| ( | |||||||
Total consolidated interest expense |
| |
| |
| | $ | | |||||||
Depreciation (d) | $ | | $ | | $ | | $ | | $ | | |||||
Amortization of intangible assets |
| |
| |
| |
| |
| | |||||
Goodwill |
| |
| |
| |
| |
| | |||||
Core deposit intangibles, net |
| |
| |
| |
| |
| | |||||
Other intangibles, net |
| |
| |
| |
| |
| | |||||
Segment assets |
| |
| |
| |
| |
| | |||||
Reconciliation of segment assets: |
| |
| |
| |
| |
| | |||||
Elimination of intersegment cash and deposits |
| |
| |
| |
| ( | |||||||
Total consolidated assets |
| |
| |
| | $ | | |||||||
(a) | Other revenues includes $ |
(b) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown. |
(c) | Other segment items for each reportable segment includes: |
Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company’s pension.
(d) | The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions. |
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NOTE V: SUBSEQUENT EVENTS
Companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued. They must recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities do not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date.
Such events and transactions were evaluated through the date these consolidated financial statements were issued and the Company determined that such an event had occurred. See Note B: Acquisitions for description of a pending acquisition.
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Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025.
The consolidated financial statements of the Company have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm that was engaged to express an opinion as to the fairness of presentation of such financial statements. PricewaterhouseCoopers LLP was also engaged to audit the effectiveness of the Company’s internal control over financial reporting. The report of PricewaterhouseCoopers LLP follows this report.
Community Financial System, Inc.
By: /s/ Dimitar A. Karaivanov | |
Dimitar A. Karaivanov, | |
President, Chief Executive Officer and Director | |
By: /s/ Marya Burgio Wlos | |
Marya Burgio Wlos, | |
Executive Vice President, Treasurer and Chief Financial Officer |
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Community Financial System, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of condition of Community Financial System, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of changes in shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses - Qualitative Adjustments
As described in Notes A and D to the consolidated financial statements, management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. As of December 31, 2025, the allowance for credit losses was $87.9 million on loans of $10.9 billion. Historical credit loss experience provides the basis for the estimation of expected future credit losses. Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, size and credit quality of acquired loans, delinquency level, risk ratings or term of loans as well as actual and forecasted US macroeconomic trends, including unemployment rates, growth of gross domestic product and median household income net of inflation, and changes in property values including home prices, commercial real estate prices, including office-specific property prices, office-specific property vacancy rates, automobile prices, and other relevant factors in comparison to longer-term performance. Multiple economic scenarios are utilized to encompass a range of economic outcomes, including baseline, upside and downside forecasts, which are weighted in the calculation.
The principal considerations for our determination that performing procedures relating to qualitative adjustments to the allowance for credit losses is a critical audit matter are (i) the significant judgment by management when determining qualitative adjustments to the allowance for credit losses; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of qualitative adjustments; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s allowance for credit losses estimation process, including controls over certain qualitative adjustments. These procedures also included, among others (i) testing management’s process for determining certain qualitative adjustments to the allowance for credit losses; (ii) evaluating the appropriateness of management’s methodology; (iii) testing the completeness and accuracy of data used in certain qualitative adjustments; and (iv) evaluating the reasonableness of certain qualitative adjustments. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of certain qualitative adjustments.
/s/
Buffalo,
February 27, 2026
We have served as the Company’s auditor since 1984.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in Rule 13a -15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), designed to: (i) record, process, summarize, and report within the time periods specified in the SEC’s rules and forms, and (ii) accumulate and communicate to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure. Based on evaluation of the Company’s disclosure controls and procedures, with the participation of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), the CEO and CFO have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, these disclosure controls and procedures were effective as of December 31, 2025.
Management’s Annual Report on Internal Control over Financial Reporting
Management’s annual report on internal control over financial reporting is included under the heading “Report on Internal Control Over Financial Reporting” at Item 8 of this Annual Report on Form 10-K.
Report of the Registered Public Accounting Firm
The report of the Company’s registered public accounting firm is included under the heading “Report of the Independent Registered Public Accounting Firm” at Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
The Company continually assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments, and internal and external audit and regulatory recommendations. No change in internal control over financial reporting during the quarter ended December 31, 2025 has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B. Other Information
Certain of the Company’s officers or directors have made elections to participate in, and are participating in, the Company’s dividend reinvestment plan and 401(k) plan, and have made, and may from time to time make, elections to have shares withheld to cover withholding taxes or pay the exercise price of options or the settlement of restricted stock, each of which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K). During the fiscal quarter ended December 31, 2025,
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None
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Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information required to be furnished by this Item 10 pursuant to Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5), and 408(b) of Regulation S-K will be included in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders, to be filed with the SEC on or about March 27, 2026 (the “Proxy Statement”). The information concerning the Company’s Directors will appear under the caption “Director Nominee Qualifications and Experience” in the Proxy Statement. The information concerning the Company’s Code of Ethics will appear under the caption “Code of Business Conduct and Ethics” in the Proxy Statement. The information regarding the Company’s Audit Committee and the Audit Committee Financial Expert will appear under the caption “Audit Committee Report.” The information regarding compliance with Section 16(a) will appear under the caption “Delinquent Section 16(a) Reports.” Such information is incorporated herein by reference. The information concerning the Company’s executive officers is presented under the “Information about our Executive Officers” section of Item 1 contained in Part I of this Annual Report on Form 10-K.
The Company has
Item 11. Executive Compensation
The information required by this Item 11 is incorporated herein by reference to the sections entitled “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Executive Compensation Disclosure Tables,” “Compensation of Directors” and “Director Compensation” in the Company’s Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 403 of Regulation S-K is incorporated herein by reference to the section entitled “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” in the Company’s Proxy Statement. The information required by Item 201(d) of Regulation S-K concerning equity compensation plans is presented under the caption “Equity Compensation Plan Information” on page 36 of this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item 13 is incorporated herein by reference to the sections entitled “Director Independence” and “Related Persons Transactions” in the Company’s Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 is incorporated herein by reference to the section entitled “Fees Paid to PricewaterhouseCoopers LLP” in the Company’s Proxy Statement.
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Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report
| (1) | All financial statements. The following consolidated financial statements of Community Financial System, Inc. and subsidiaries are included in Item 8: |
-Consolidated Statements of Condition,
December 31, 2025 and 2024
-Consolidated Statements of Income,
Years ended December 31, 2025, 2024, and 2023
-Consolidated Statements of Comprehensive Income,
Years ended December 31, 2025, 2024, and 2023
-Consolidated Statements of Changes in Shareholders’ Equity,
Years ended December 31, 2025, 2024, and 2023
-Consolidated Statements of Cash Flows,
Years ended December 31, 2025, 2024, and 2023
-Notes to Consolidated Financial Statements,
December 31, 2025
-Report of Independent Registered Public Accounting Firm
| (2) | Financial statement schedules. Schedules are omitted since the required information is either not applicable or shown elsewhere in the financial statements. |
| (3) | Exhibits. The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed below: |
2.1 | Agreement and Plan of Merger, dated as of October 3, 2021, by and between Community Bank, N.A., Eagle Merger Sub Inc. and Elmira Savings Bank. Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on October 7, 2021 (Registration No. 001-13695). |
|
|
3.1 | Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on May 15, 2024. Incorporated by reference to Exhibit No. 3.1 to the Current Report on Form 8-K filed on May 16, 2024 (Registration No. 001-13695). |
|
|
3.2 | Amended and Restate Bylaws of Community Financial System, Inc., as of May 15, 2024. Incorporated by reference to Exhibit No. 3.2 to the Current Report on Form 8-K filed on May 16, 2024 (Registration No. 001-13695). |
|
|
4.1 | Form of Common Stock Certificate. Incorporated by reference to Exhibit No. 4.1 to the Amendment No. 1 to the Registration Statement on Form S-3 filed on September 29, 2008 (Registration No. 333-153403). |
|
|
4.2 | Registration Rights Agreement, dated February 3, 2017, by and among Community Bank System, Inc. and the individuals and entities set forth on Schedule 1 thereto. Incorporated by reference to Exhibit No. 10.1 to the Registration Statement on Form S-3 filed on February 3, 2017 (Registration No. 333-215894). |
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|
|
4.3 | Form of Replacement Organizers’ Warrant to purchase Community Bank System, Inc. Common Stock. Incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed on May 18, 2017 (Registration No. 001-13695). (2) |
|
|
4.4 | First Supplemental Indenture, dated as of May 12, 2017, by and among Wilmington Trust Company, Community Bank System, Inc., and Merchants Bancshares, Inc. Incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed on May 18, 2017 (Registration No. 001-13695). (2) |
|
|
4.5 | Description of Community Bank System, Inc.’s securities registered pursuant to Section 12 of the Securities Exchange Act. (1) |
|
|
10.1 | Employment Agreement, dated as of January 4, 2021, by and between Community Bank System, Inc., Community Bank, N.A., and Mark E. Tryniski. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on January 6, 2021 (Registration No. 001-13695). (2) |
10.2 | Supplemental Retirement Plan Agreement, effective as of December 31, 2008, by and among Community Bank, N.A., Community Bank System, Inc., and Mark E. Tryniski. Incorporated by reference to Exhibit No. 10.2 to the Current Report on Form 8-K filed on March 19, 2009 (Registration No. 001-13695). (2) |
|
|
10.3 | Amendment to Supplemental Retirement Plan Agreement, dated January 5, 2018, by and among Community Bank System, Inc., Community Bank, N.A. and Mark E. Tryniski. Incorporated by reference to Exhibit No. 10.2 to the Current Report on Form 8-K filed on January 5, 2018 (Registration No. 001-13695). (2) |
|
|
10.4 | Employment Agreement, dated July 5, 2023, by and among Community Bank System, Inc., Community Bank, N.A., and Dimitar Karaivanov. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on July 5, 2023 (Registration No. 001-13695). (2) |
|
|
10.5 | Amendment to Employment Agreement, dated July 17, 2024, by and among Community Financial System, Inc., Community Bank, N.A., and Dimitar A. Karaivanov. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on July 19, 2024 (Registration No. 001-13695). (2) |
|
|
10.6 | Supplemental Retirement Plan Agreement, dated as of October 18, 2013, by and between Community Bank System Inc., Community Bank, N.A., and Brian D. Donahue. Incorporated by reference to Exhibit No. 10.2 to the Current Report on Form 8-K filed on October 23, 2013 (Registration No. 001-13695). (2) |
|
|
10.7 | Supplemental Retirement Plan Agreement, dated as of October 18, 2013, by and among Community Bank System, Inc., Community Bank, N.A., and George J. Getman. Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 23, 2013 (Registration No. 001-13695). (2) |
|
|
10.8 | Supplemental Retirement Plan Agreement, effective September 29, 2009, by and between Community Bank System Inc., Community Bank, N.A., and Scott Kingsley. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on October 1, 2009 (Registration No. 001-13695). (2) |
|
|
10.9 | Pre-2005 Supplemental Retirement Agreement, effective December 31, 2004, by and between Community Bank System, Inc., Community Bank, N.A., and Sanford Belden. Incorporated by reference to Exhibit No. 10.3 to the Annual Report on Form 10-K filed on March 15, 2005 (Registration No. 001-13695). (2) |
|
|
10.10 | Post-2004 Supplemental Retirement Agreement, effective January 1, 2005, by and between Community Bank System, Inc., Community Bank, N.A., and Sanford Belden. Incorporated by reference to Exhibit No. 10.2 to the Annual Report on Form 10-K filed on March 15, 2005 (Registration No. 001-13695). (2) |
|
|
10.11 | Supplemental Retirement Plan Agreement, effective March 26, 2003, by and between Community Bank System Inc. and Thomas McCullough. Incorporated by reference to Exhibit No. 10.11 to the Annual Report on Form 10-K filed on March 12, 2004 (Registration No. 001-13695). (2) |
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|
|
10.12 | 2004 Long-Term Incentive Compensation Program, as amended. Incorporated by reference to Exhibit No. 99.1 to the Registration Statement on Form S-8 filed on December 19, 2012 (Registration No. 001-13695). (2) |
|
|
10.13 | 2014 Long-Term Incentive Plan, as amended. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on May 2, 2017 (Registration No. 001-13695). (2) |
|
|
10.14 | Community Financial System, Inc. 2022 Long-Term Incentive Plan, as amended. Incorporated by reference to Exhibit No. 99.1 to the Registration Statement on Form S-8 filed on July 19, 2024 (Registration No. 001-13695). (2) |
|
|
10.15 | Stock Balance Plan for Directors, as amended. Incorporated by reference to Annex I to the Definitive Proxy Statement on Schedule 14A filed on March 31, 1998 (Registration No. 001-13695). (2) |
|
|
10.16 | Community Bank System, Inc. Restoration Plan, effective June 1, 2018. Incorporated by reference to Exhibit No. 10.4 to the Current Report on Form 8-K filed on May 21, 2018 (Registration No. 001-13695). (2) |
|
|
10.17 | Community Financial System, Inc. Executive Severance Plan, as amended, July 17, 2024. Incorporated by reference to Exhibit No. 10.2 to the Current Report on Form 8-K filed on July 19, 2024 (Registration No. 001-13695). (2) |
|
|
10.18 | Community Financial System, Inc. Deferred Compensation Plan for Directors. Incorporated by reference to Exhibit No. 99.1 to the Registration Statement on Form S-8 filed on July 17, 2024 (Registration No. 333-219098). (2) |
|
|
10.19 | Community Bank System, Inc. Pension Plan Amended and Restated as of January 1, 2004. Incorporated by reference to Exhibit No. 10.27 to the Annual Report on Form 10-K filed on March 15, 2005 (Registration No. 001-13695). (2) |
|
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10.20 | Amendment #1 to the Community Bank System, Inc. Pension Plan, as amended and restated as of January 1, 2004 (“Plan”). Incorporated by reference to Exhibit No. 10.27 to the Annual Report on Form 10-K filed on March 15, 2005 (Registration No. 001-13695). (2) |
10.21 | Community Bank System, Inc. 401(k) Employee Stock Ownership Plan, dated as of December 20, 2011. Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8 filed on December 20, 2013 (Registration No. 001-13695). (2) |
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10.22 | Merchants Bancshares, Inc. and Subsidiaries Amended and Restated 1996 Compensation Plan for Non-Employee Directors. Incorporated by reference to Exhibit 10.3 to Merchants Bancshares, Inc.’s Annual Report on Form 10-K filed with the Commission on March 15, 2011. (2) |
10.23 | Merchants Bancshares, Inc. and Subsidiaries Amended and Restated 2008 Compensation Plan for Non-Employee Directors and Trustees. Incorporated by reference to Exhibit 10.4 to Merchants Bancshares, Inc.’s Annual Report on Form 10-K filed with the Commission on March 15, 2011. (2) |
10.24 | Merchants Bank Amended and Restated Deferred Compensation Plan for Directors. Incorporated by reference to Exhibit 10.7 to Merchants Bancshares, Inc.’s Annual Report on Form 10-K filed with the Commission on March 15, 2011. (2) |
10.25 | Merchants Bank Salary Continuation Plan. Incorporated by reference to Exhibit 10.9 to Merchants Bancshares, Inc.’s Annual Report on Form 10-K filed with the Commission on March 15, 2011. (2) |
10.26 | Change in Control Agreement, dated January 1, 2024, by and among Deresa F. Durkee, Community Financial System, Inc., and Community Bank, N.A. Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed on September 30, 2024 (Registration No. 001-13695). (2) |
10.27 | Consulting Agreement, dated January 2, 2026, by and among Community Financial System, Inc., Community Bank, N.A., and Jeffrey Levy. (1) (2) |
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Table of Contents
14.1 | Community Financial System, Inc. Code of Business Conduct and Ethics, dated as of July 15, 2025. (1) |
19.1 | Community Financial System, Inc. Policy Prohibiting Insider Trading. (1) |
21.1 | Subsidiaries of Registrant. (1) |
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23.1 | Consent of PricewaterhouseCoopers LLP. (1) |
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31.1 | Certification of Dimitar A. Karaivanov, President and Chief Executive Officer of the Registrant, pursuant to Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1) |
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31.2 | Certification of Marya Burgio Wlos, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1) |
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32.1 | Certification of Dimitar A. Karaivanov, President and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3) |
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32.2 | Certification of Marya Burgio Wlos, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3) |
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97.1 | Policy for the Recovery of Erroneously Awarded Compensation. Incorporated by reference to Exhibit No. 97.1 to the Annual Report on Form 10-K filed on February 29, 2024 (Registration No. 001-13695). (2) |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1) |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document (1) |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (1) |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (1) |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (1) |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (1) |
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104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) (1) |
| (1) | Filed herewith. |
| (2) | Denotes management contract or compensatory plan or arrangement. |
| (3) | Furnished herewith. |
B. Not applicable.
C. Not applicable.
Item 16. Form 10-K Summary
None
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COMMUNITY FINANCIAL SYSTEM, INC. | ||
By: | ||
/s/ Dimitar A. Karaivanov | ||
Dimitar A. Karaivanov | ||
President and Chief Executive Officer | ||
February 27, 2026 | ||
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 27th day of February 2026.
By: | ||
/s/ Dimitar A. Karaivanov | ||
Dimitar A. Karaivanov | ||
President, Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
By: | ||
/s/ Marya Burgio Wlos | ||
Marya Burgio Wlos | ||
Executive Vice President, Treasurer and Chief Financial Officer | ||
(Principal Financial Officer) | ||
By: | ||
/s/ Deresa F. Durkee | ||
Deresa F. Durkee | ||
Senior Vice President, Chief Accounting Officer | ||
(Principal Accounting Officer) | ||
Directors:
/s/ Mark J. Bolus | /s/ Savneet Singh | ||
Mark J. Bolus, Director | Savneet Singh, Director | ||
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/s/ Neil E. Fesette | /s/ Sally A. Steele | ||
Neil E. Fesette, Director | Sally A. Steele, Director | ||
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/s/ Jeffery J. Knauss | /s/ Eric E. Stickels | ||
Jeffery J. Knauss, Director | Eric E. Stickels, Director and Chair of the Board of Directors | ||
/s/ Kerrie D. MacPherson | /s/ Michele Sullivan | ||
Kerrie D. MacPherson, Director | Michele Sullivan, Director | ||
/s/ John Parente | /s/ John A. Vaccaro | ||
John Parente, Director | John A. Vaccaro, Director | ||
/s/ Raymond C. Pecor, III | /s/ John F. Whipple, Jr. | ||
Raymond C. Pecor, III, Director | John F. Whipple Jr., Director | ||
158
FAQ
What major acquisition did Community Financial System (CBU) complete with Santander Bank in 2025?
How did Community Financial System (CBU) expand its financial services businesses in 2025?
What are the main business segments of Community Financial System (CBU)?
How large is Community Financial System’s (CBU) employee base and where is it located?
What key risks does Community Financial System (CBU) highlight in its 2025 annual report?
How well-capitalized and regulated is Community Financial System (CBU)?
What is Community Financial System’s (CBU) geographic banking footprint?
