Community Financial System Q2 2025 Earnings Report

Community Financial System EPS Results

• Actual EPS: $0.97
• Consensus EPS: $1.03
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: $0.95

Community Financial System Revenue Results

• Actual Revenue: $199.30 million
• Expected Revenue: $201.93 million
• Beat/Miss: Missed by -$2.63 million
• YoY Revenue Growth: +8.40%

Community Financial System Announcement Details

• Quarter: Q2 2025
• Date: 7/22/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 22, 2025
• Conference Call Time: 11:00AM ET

Community Bank System, Inc. operates as the bank holding company for Community Bank, N.A. that provides various banking and other financial services to retail, commercial, institutional, and municipal customers. It operates through three segments: Banking, Employee Benefit Services, and All Other. The company offers various deposits products, such as interest and noninterest -bearing checking, savings, and money market deposit accounts, as well as time deposits. It also provides loans, including consumer mortgages; general purpose commercial and industrial loans, and mortgages on commercial properties; paycheck protection program loans; installment loans that are originated through selected dealerships and are secured by automobiles, marine, and other recreational vehicles; personal installment loans and check credit lines of credit for consumers; and home equity products. In addition, the company offers broker-dealer and investment advisory; cash management, investment, and treasury services; asset management services; and employee benefit services, as well as operates as a full-service insurance agency that provides personal and commercial lines of insurance, and other risk management products and services. Further, it offers contribution plan administration, employee benefit trust, collective investment fund, retirement plan administration and benefit consulting, fund administration, transfer agency, actuarial and benefit consulting, and health and welfare consulting services; and act as an investor in residential and commercial real estate activities. Additionally, the company offers wealth management, retirement planning, higher educational planning, fiduciary, risk management, trust, and personal financial planning services; and investment alternatives, including stocks, bonds, mutual funds, and insurance and advisory products, as well as master recordkeeping services. Community Bank System, Inc. was founded in 1866 and is headquartered in DeWitt, New York.

Community Financial System Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Management reported record operating EPS of $1.04, with net interest income rising 14% year-over-year to $124.7 million and net interest margin expanding to 3.30%.
• Positive Sentiment: Consumer lending saw strong momentum, the commercial pipeline remains solid, and the bank expects to regain mid-single digit loan growth and 3–5 bps quarterly NIM expansion.
• Positive Sentiment: The planned acquisition of seven Santander branches in Pennsylvania will close in Q4, boosting market presence and deposits without share issuance.
• Negative Sentiment: Noninterest expenses increased 8.5% year-over-year driven by higher salaries, data processing, branch expansion and a $1.5 million restructuring charge, pressuring expense control.

Presentation

[Operator]

Good day, and welcome to the Community Financial System, Inc. Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded and discussion may contain forward looking statements within the provisions of the Private Securities Litigation Reform Act of 1995 that are based on current expectations, estimates and projections about the industry, markets and economic environment in which the company operates.

[Operator]

These statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed. Refer to our SEC filings, including the Risk Factors section, for more details. Discussion may also include references to certain non GAAP financial measures. Reconciliations of these non GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I would now like to turn the conference over to Dvitar Khoraivanov, President and CEO. Please go ahead.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Thank you, Michael. Good morning, everyone, and thank you for joining our Q2 twenty twenty five earnings call. My general summary of the quarter is one of continued solid progress across our diversified business and record operating results per share. In our banking business, net interest income continues to expand on the heels of both increasing asset yields and growth in balances. Core funding is growing and consumer lending had a very strong quarter with momentum continuing into the third quarter.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Commercial banking balances were impacted by some constructive repayments of criticized credits and the resolution of a couple of non performing assets. However, the pipeline is very good, and I expect a very strong third quarter that will put us back on track to our previously communicated growth targets. Banking fee income also remained strong. Credit results were impacted by the resolution of our two largest nonperforming assets, with one being paid off with a very small charge and they are being written down and taken into OREO. Outside of those previously reserved for situations, net charge offs were minimal at less than two basis points.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Our Employee Benefits Services business was basically flat year over year and quarter over quarter. With that said, there are two parts to that story. Our recordkeeping business is growing at high single digits, while our Fiduciary Trust business has been experiencing some headwinds as we work to reposition the business and reinvest in the next stage of growth. With that said, I'm very encouraged by the early results of those initiatives, the pipeline that is already built and expect that we will be well positioned in 2026 and beyond. In Insurance Services, it is important to note that we had a pull forward of the timing of contingency payments in Q1 of this year versus typically Q2.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Year to date, the business is up 13% in revenue and operating margin is up to 23%, driving operating pretax earnings expansion of 70%. Wealth Management Services came off a very strong Q1. And also, as we talked about back in January, we exited certain nonproductive revenue arrangements. As a result, revenue growth was muted year over year, while both operating pretax earnings and margin expanded compared to the same quarter last year. Pretax operating earnings were up 16%.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

In summary, we're well on our way towards our goals for the year. We also had a very exciting branch acquisition announcement last month, and I expect to close that transaction in the fourth quarter of this year. Transaction provides our banking business with very strong presence in a market that is of high strategic importance to us, high quality liquidity, no asset issues or concentrations, limited execution risk and comes with no share issuance. In other words, our shareholders get to keep all the upside as we deploy the cash proceeds into earning assets over the next few years. It is unusual for a banking transaction to check multiple of these boxes for us and very unusual to check all of them.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So we're very excited. In addition, other productive discussions are occurring across our fee income businesses, and I'm hopeful that we will continue to productively deploy capital in the second half of this year. Will now pass it on to Marai for more details on the financials.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

Thank you, Zimitar, and good morning. As Zimitar noted, the company's second quarter performance was solid. GAAP earnings per share of zero nine seven dollars were up $06 or 6.6% over the second quarter of the prior year and were up $04 or 4.3% over linked first quarter results. GAAP earnings per share included the impact of $02 in restructuring expenses associated with the Workforce Optimization Plan and in addition $01 tied to performance based incentive accrual. Operating earnings per share and operating pretax pre provision net revenue per share were record quarterly results

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

Operating earnings per share were $1.04 in the second quarter as compared to $0.95 one year prior and $0.98 in the linked first quarter. Second quarter operating PPNR per share of $1.41 was up $02 from one year prior and was up $01 on a linked quarter basis. These record operating results were driven by a new quarterly high for total operating revenues of $199,300,000 in the second quarter. Operating revenues were up $16,100,000 or 8.8% from one year prior and were up $3,300,000 or 1.7% from the linked first quarter, driven by record net interest income results in our banking business. The company's net interest income was $124,700,000 in the second quarter.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

This represents a $4,500,000 or 3.8% increase over the linked first quarter result and a $15,300,000 or 14% improvement over the 2024 and marks the fifth consecutive quarter of net interest income expansion. The company's fully tax equivalent net interest margin increased six basis points from 3.24% in the linked first quarter to 3.3% in the second quarter. Higher interest earning asset yields and stable funding costs drove increases in both net interest income and net interest margin in the quarter. During the quarter, the company's cost of funds was 1.32%, a decrease of one basis point from the prior quarter, while the company's cost of deposits remained low relative to the interest rate at 1.19%. Operating non interest revenues were up $700,000 or 1% compared to the prior year's second quarter and represented 37.4% of total operating revenues, a metric that continuously underscores the diversification of our businesses.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

Banking related operating noninterest revenues were up 900,000 or 5% from the linked first quarter driven by higher customer interest rate swap fee revenues and CRE financing and advisory revenues. This was offset by $2,200,000 or 3.9% decrease in non banking financial services non interest revenues over the same period due to seasonal factors in the employee benefits, insurance, and wealth businesses. The company recorded a $4,100,000 provision for credit losses during the second quarter. This compares to $2,700,000 in the prior year's second quarter and $6,700,000 in the linked first quarter. During the second quarter, the company recorded $129,100,000 in total non interest expenses.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

This compares to $119,000,000 of total non interest expenses in the prior year's second quarter. Expense control remains a focus. The $10,100,000 or 8.5% increase between the time periods was primarily driven by an increase of $5,600,000 or 7.6% in salaries and employee benefits and $1,400,000 or 9.3 percent in data processing and communication expenses and the impact of a $1,500,000 non operating restructuring charge. The increase also included approximately $1,500,000 in expenses associated with the Banks de novo branch expansions. Ending loans increased $98,000,000 or 0.9 during the second quarter, primarily driven by net organic growth in the consumer indirect lending portfolio.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

The company continues to invest in its organic loan growth capabilities and expects continued expansion into under tapped markets within our Northeast footprint. Ending loans were up 495,300,000 or 4.9% from one year prior, primarily due to growth in the business lending and consumer mortgage portfolios. The company's ending total deposits increased $563,900,000 or 4.3% from one year prior and decreased $190,300,000 or 1.4% from the end of the linked first quarter. The decrease in total deposits during the quarter was driven by seasonal outflow of municipal deposits. Non interest bearing and lower rate checking and savings accounts continue to represent almost two thirds of the total deposits reflective of the core characteristics of the company's deposit base.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

The company did not hold any brokered or wholesale deposits on its balance sheet during the quarter. The company's liquidity position remains strong as readily available sources of liquidity totaled 5,900,000,000 or 246% of the company's estimated uninsured deposits net of collateralized and intercompany deposits at the end of the second quarter. The company's loan to deposit ratio at the end of the second quarter was 76.8%, providing future opportunity to migrate lower yielding investment securities into higher yielding loans. All the company's and the bank's regulatory capital ratios continue to substantially exceed well capitalized standards. The company's Tier one leverage ratio increased 13 basis points during the second quarter to 9.42%, which is significantly higher than the regulatory well capitalized standard of 5%.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

During the quarter, the company charged off one non owner occupied CRE loan relationship and received substantial repayment of one multifamily CRE loan relationship, both of which were previously allocated specific reserves. As a result, net charge offs in the quarter were elevated relative to recent results, but nonperforming and delinquent loan metrics were favorably impacted. Nonperforming loans totaled $53,300,000 or 51 basis points of total loans outstanding at the end of the second quarter. This represents a $21,700,000 or 21 basis point decrease from the end of the linked first quarter. Comparatively, non performing loans were $50,500,000 or 50 basis points of total loans outstanding one year prior.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

Loans thirty to eighty nine days delinquent were also down on a linked quarter basis from $59,200,000 or 57 basis points of total loans at the end of the first quarter to $53,300,000 or 51 basis points of total loans at the end of the second quarter. The company recorded net charge offs of $5,100,000 or 20 basis points of average loans annualized during the second quarter. This was up $3,800,000 over the prior year's second quarter and up $1,900,000 from the linked first quarter, driven by the charge offs associated with the previously mentioned CRE loan relationship during the quarter totaling 4,300,000.0 The company's allowance for credit losses was $81,900,000 or 78 basis points of total loans outstanding at the end of the second quarter, down $1,000,000 during the quarter due in part to the decrease in specific reserves previously mentioned and up $10,400,000 from one year prior. The allowance for credit losses at the end of the second quarter represented over five times the company's trailing twelve month net charge offs. We are pleased with the second quarter results.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

It is an exciting time, especially given our announcement of the acquisition of the seven Santander branches in Pennsylvania, which accelerates our retail growth strategy. To echo Dimitar's comments, this transaction ensures that our shareholders keep all the upside as we deploy the cash proceeds into earning assets. Looking forward, we believe the company's diversified revenue profile, strong liquidity, regulatory capital reserves, stable core deposit base, and historically good asset quality provide a solid foundation for continued earnings growth. That concludes my prepared earnings comments in Dimitri Narr, and I will now take questions. Michael, I will turn it back to you to open the line. Thank you.

[Operator]

Thank you. We will now begin the question and answer session. And your first question today comes from Steve Moss with Raymond James. Please go ahead.

[Analyst]

Hey, good morning. This is Thomas on for Steve. Thanks for taking my question. Just wanted to start off maybe on loans here. Can you speak to the competitive landscape you're seeing in terms of lending?

[Analyst]

I know you said that competition was getting tougher in prior quarters. Is still the case? And maybe just where is loan pricing these days?

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Good morning, Thomas. Yes, it is certainly a lot more competitive today than it was the last couple of years. I think as we discussed in the last quarter, there's a lot of competitors that didn't participate much in the market because of liquidity and all kinds of other constraints. And now they're trying to make it up. I would say they're trying to make it up on both rate and credit.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And as I talked about in my remarks, we were able to offload a number of criticized credits during the quarter. I think there will be some more the rest of the year as well, which we're happy to part ways with, and we're happy for other people to take them. So that is fine. As it relates to us, we're going to continue to outperform because for us, it's mostly about market share gains and things that we've been at it for a number of years in terms of reputation and people and activity in the market. So as I said, I expect that we're going to start seeing some of that kind of accruing here in the third quarter and into the fourth quarter.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And I expect that on a full year basis, we will do better than our peers. In terms of yields, we're seeing pressure on that as well. I think if you step back and you look at the second quarter, the three year and the five year treasury, which is the majority of what we price off of in our lending portfolio, those just rates were down close to 30 basis points on average basis versus the first quarter. So effectively, there's already been a cut and more into those rates. So that's reflected into the yields at which things are coming in.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And then you add the competition, which has accounted for probably another 15 to 20 basis points on top of that. And in this in the second quarter, our originations were kind of in the six and three quarters range in aggregate, varied by portfolio. But I expect that that number is probably trending lower as opposed to higher over time. Competition is high on both rate and credit, as I mentioned.

[Analyst]

Okay, all that's very helpful. Thank you. And so, how are you feeling about the two to seven basis points of quarterly NIM expansion from here? Is that still a good range?

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

I can take that. I would say we're in the range closer to three to five at this point. Demetar just outlined some of the metrics that are contributing to that number for us, but can't underscore enough the progress that we're seeing in the markets and the pipeline's strength. We're very bullish on that overall.

[Analyst]

Okay. And then the last one for me. It sounds like you guys, with the $600,000,000 of acquired deposits, you'll is it likely that that'll sort of just boost your liquidity and that'll be invested over time? Or are you considering securities purchases? Or just maybe your updated thoughts around that?

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Yes. I think we look at that as loan growth for us over the next number of years. So between our organic growth on deposit side and this transaction, we've got a number of years of loan growth here ahead of us. So initially, some of those proceeds are likely to stay in short term instruments. And then we're going to deploy them over time.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So obviously, as we deploy them over time, the impact of that transaction also improves for our shareholders.

[Analyst]

Okay, great. That's all the questions for me. Thanks and congrats on a good quarter, guys.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Thank you, Thomas.

[Operator]

And your next question comes from Manuel Navis with D. A. Davidson. Please go ahead.

[Sharon Gee, Analyst at D.A. Davidson]

Good morning. This is Sharon Gee on for Manuel. Thank you for taking my question. I was wondering, could you talk a little bit about OpEx trends from here? Does some of the restructuring of the personnel this quarter lower costs in the third quarter?

[Sharon Gee, Analyst at D.A. Davidson]

And is there any shift to the overall expense trajectory?

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

So, you had there's a lot in that question. Good. That's a long one. So the restructuring charge that you saw come through, that is due to we're consolidating some branches. We're looking to evolve our platform of service.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

So we look at it as a very positive thing. And as we continue to open the de novos and expand in Eastern Pennsylvania, this was an important point for us. In terms of OpEx, you're going to see it sort of be flat as we move forward. We're as we mentioned in our opening remarks, we're focused on it and looking to ensure that everything that we're investing in has trajectory to push the business forward. Dimitar also mentioned that in his opening remarks when it comes to our fee income businesses.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

So, look, when you're growing a business, there's going to be times as things move up that you are looking at increasing some expenses, but we don't see that as a go forward. We're just looking at some of these as one time.

[Sharon Gee, Analyst at D.A. Davidson]

Great, thank you. And then shifting over a little bit to the branch acquisition, how is that going so far? Like, is it as expected? And then can you discuss a little bit more about how this transaction built into your ties into your previously planned De Novo expansion?

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Sure. So we're right on track with our expectations. It is very early days, So we expect that we're going to work through the regulatory side of this year in the summer and then closing is slated for the fourth quarter, probably sometime in November is our goal. I will say it's exactly what we've been looking for. It is a perfect complement to our organic strategy in that market.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So we have three de novo branches opening up in the Lehigh Valley. Actually, one of them is already open. So by the end of the year, we're between the acquisition and those three branches, we're going to have 10 branches right into the heart of the valley and then 12 more broadly in the kind of the greater area, which brings us to a top five market share in terms of presence. And that is when good things start happening. So we're very excited about that.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And if we could replicate that in every one of our markets, we would love to, but those are hard to come by.

[Sharon Gee, Analyst at D.A. Davidson]

Great. Thank you so much. That's all for me.

[Operator]

And your next question comes from Matthew Breese with Stephens. Please go ahead.

[Matthew Breese, Managing Director at Stephens Inc]

Hey, good morning.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Good morning, Matthew.

[Matthew Breese, Managing Director at Stephens Inc]

I was hoping we could learn a little bit more about the pipeline. You mentioned a couple of times there that it's robust and you're bullish on it. I also just wanted to kind of hear a little bit more about or a reminder of financial targets.

[Matthew Breese, Managing Director at Stephens Inc]

I think you were referring back to the Investor Day in September when you said kind of through cycle loan growth of five to 7%. Do you think the pipeline supports that?

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Sure. So Matt, I'll take that. So if you look at our business on the lending side, basically, there's three things we do, right? We do mortgages or home equities. We do auto loans.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

That's our consumer lending in aggregate. And then we do commercial, of which there's virtually two products for the most part, CRE and C and I. And across all of those, we generally target mid single digit growth in all those portfolios. Some years, some of them will be stronger. Some years, they will be a little bit weaker.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

But again, the aggregate number is somewhere in the mid single digits. Earlier this year, we talked about probably that being a little bit closer to the lower end of that. So if know if mid single digits are 4% to six to 7%, in the past few years, were growing kind of 7% plus. We expected this year, we'll be closer to kind of the 4% to five handle, given we expected competition, we expected more pressure in that sense. So when I say we're thinking that we'll be back on track for all of those metrics, I mean that range.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So four plus or minus a little bit is probably a reasonable number for us this year. We're certainly we started a little bit slower on the consumer lending on the indirect portion of that. We've made a lot of that ground in the second quarter, and we're now positive. And momentum there continues. Mortgage is holding up pretty well in a very tough market with where rates are.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

All the yields I talked about, the pressure, that's actually not occurred on the mortgage side because that's of the long end of the curve. So that's really putting an impact on demand. But we're holding our own and outperforming the industry. And then in the commercial business, it's been a little bit of a story of two tails because you have the C and I business has grown very, very well this year. In fact, probably on track for high single digits to double digit growth even.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And at the same time, we've, again, cleaned up some of the exposures on the CRE side. I would say some of those were higher risk and some of them are unproductive because of non performing assets. So you might see the balance come off, but it's not accruing interest anyways. So and now we've got capacity to get back and refill some of those buckets a little bit more. Again, the activity is very good.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

We have had just kind of in the context of payoffs, we've had over $100,000,000 of payoffs year to date in the commercial business, probably 40% of those were in assets that we were happy to see go. And we probably have another $100,000,000 to go in terms of prepayments in the second half of the year. But given the pipeline, we think we're going to absorb that and actually grow meaningfully.

[Matthew Breese, Managing Director at Stephens Inc]

Great. I appreciate all that. Two or three others for me. The first one is just going back to the branch acquisition. Could you give us some sense for composition of the deposits being acquired, the all in cost?

[Matthew Breese, Managing Director at Stephens Inc]

And then, particularly in this day and age with mobile banking, I'd love to hear your thoughts on retention.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Sure. You kind of look at the aggregate population there, these are deposits that look very much like ours in terms of their granularity. The average account size is less than 20,000. If you look at kind of the split between transaction and DDAs versus CDs, it's somewhere in the 60 fivethirty 5 split range. With that said, basically, the CDs are the same customers with they're not single product customers, very, very few, very small percent are single product customers.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So it's the same customer that just parked money out of transaction account into a CD for the rate environment. As we look at the opportunity to deploy that capital, that liquidity, we feel that the next couple of years, be able to make a decent dent into it, but over five and six, we'll probably bring that to our normal kind of target of loan to deposit ratio. So as you think about the long term, probably 75% to 85% loan to deposit ratio by year five or six.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So yeah, I mean, the blended cost of funds there is just below 2%, and that's a little bit dated. So it's probably a little bit lower today. So very high quality deposits in a really great market for us.

[Matthew Breese, Managing Director at Stephens Inc]

Great. I appreciate that. The next one is just on the you know, could you remind us where you are in terms of the the De Novo branch build out? I think the total was maybe like 15 or 16 branches that you wanted to open. How many of those are in fact open today?

[Matthew Breese, Managing Director at Stephens Inc]

How many do you expect will be open by the end of this year? And then on the other side of that, I I think I saw on the in the applications, there's something like maybe 17 branch closings submitted. Could you help me out on on potential closures near term? Thank you.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

Sure. On the de novo, it's 19. What has opened so far? Seven. So, we've opened seven total across the footprint.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

We just opened three in Q2 and there will be two in July. So that's going extremely well. We're really happy with the progress there. They're beautiful branches. They're very well staffed.

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

The sentiment around as we definitely talk to the field and get out to talk to customers and our employees that are opening these branches is extremely positive. So we're really happy with that strategy and we'll continue to do our best to get those stood up, all 19, by the end of the year. Possibly a couple will fall into Q1 of twenty six, but that's all on track. Really happy with that progress. In terms of closures, 2017 is correct.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And Matt, you may recall, we've committed consistently that our branch expansion will be net neutral to our shareholders. Know, we're closing as many as we're opening and basically reallocating resources and some of that you saw this quarter with a restructuring charge.

[Matthew Breese, Managing Director at Stephens Inc]

Great, I appreciate that. And then the other one I wanted to ask was just on loan yields, they were up five basis points this quarter, just a bit more than what I was expecting. Was there anything atypical or unusual there? You'd mentioned some payoffs. I'm curious if there was repayment of interest income that was on new accrual or is this a decent pace of loan yield expansion in the absence of rate cuts?

[Marya Burgio Wlos, EVP & CFO at Community Financial System]

It's the latter. So, you're exactly correct. There's nothing atypical that we're seeing. We obviously are looking at this on a daily, weekly basis and all is in line there.

[Matthew Breese, Managing Director at Stephens Inc]

Thank you. And then just the last one is just any updates. You know, the CHIPS Act was kind of in focus of the new administration earlier this year. And, is there anything upsetting the apple cart there? And I was curious if Micron is still on track to break ground later this year.

[Matthew Breese, Managing Director at Stephens Inc]

And And that's all I had. Thank you for taking all these.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Yeah, so it is still on track. I believe the fourth quarter is when they're going to break ground. There's a public process as it relates to some of the environmental concerns that's ongoing right now. So and I think actually the number the investment number actually went up, the expected investment. So that's all good.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

As we've said before, that's really not what we're growing because of today and not what we're going to grow because of the next, probably couple of years. But as the impact of that sixteen year investment come into play, certainly over time, there will be a positive lift for everybody involved. Thank you.

[Operator]

And your next question comes from David Conrad with KBW. Please go ahead.

[David Konrad, Managing Director at Keefe, Bruyette & Woods (KBW)]

Yeah. Good morning. Just one for me, just on fee income. You mentioned some seasonality, some pull forward insurance this quarter. I think you're up like 1% year over year this quarter. So just kind of thinking about the run rate over the next two quarters as stuff picks up a little bit and kind of your year over year expectations for '25?

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Good morning, David.

[David Konrad, Managing Director at Keefe, Bruyette & Woods (KBW)]

Good morning.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

So on the insurance, you know, we usually get the contingent payments in the second quarter. This year, we got them in the first quarter. So the first quarter was quite robust for us in insurance. We did communicate that that's probably not sustainable, 27% revenue growth was not the run rate of the business. We traditionally target high single digit to low double digit growth rate in that business between organic and inorganic.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And year to date, we're at 13%. We certainly expect that this year will not be an exception from our targets. So whether we end up at a little bit in the high single digits or maybe just a hair in the double digits. Who knows, but that's kind of the ultimate target. Business is doing well.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Pipeline is pretty good. The seasonality there, again, is typically the second quarter. This year was more in the first quarter. We're going to have a nice third quarter. That's usually another big renewal quarter for us.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

And then the fourth quarter is usually a little bit slower. But in the aggregate basis, I think we're very much on track to get to our historical growth rate, which over the past ten plus years has been the 11% actually in that business.

[David Konrad, Managing Director at Keefe, Bruyette & Woods (KBW)]

Great. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Dimitar Korayvonov for any closing remarks.

[Dimitar Karaivanov, CEO, President & Director at Community Financial System]

Thank you to you, Michael, hosting the call, and thank you for everybody who joined. And we look forward to speaking with you in a couple of months.

[Operator]

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

Participants

Executives

• Dimitar Karaivanov, CEO, President & Director
• Marya Burgio Wlos, EVP & CFO

Analysts

• Analyst
• Sharon Gee, Analyst at D.A. Davidson
• Matthew Breese, Managing Director at Stephens Inc
• David Konrad, Managing Director at Keefe, Bruyette & Woods (KBW)