[10-Q] Community Financial System, Inc. Quarterly Earnings Report
Community Financial System, Inc. reported stronger results for the quarter and first half of 2025. Net income for the three months ended June 30, 2025 was $51.3 million, up from $47.9 million a year earlier, and six-month net income was $100.9 million versus $88.8 million. Net interest income rose to $124.7 million for the quarter from $109.4 million, while provision for credit losses increased modestly to $4.1 million for the quarter. Total assets grew to $16.67 billion and gross loans reached $10.52 billion, with total deposits of $13.70 billion.
The company disclosed a pending acquisition from Santander to assume approximately $600 million of deposits and acquire about $33 million of loans, with a deposit premium of 8% (approximately $48.0 million) and expected closing in the fourth quarter of 2025, subject to regulatory approval. The firm completed several smaller acquisitions in 2024 and 2025 that added intangible assets and goodwill and recorded contingent consideration arrangements. Accumulated other comprehensive loss improved to $(486.8) million, reflecting net unrealized investment gains during the six months.
Community Financial System, Inc. ha riportato risultati pi霉 solidi per il trimestre e il primo semestre 2025. L'utile netto per i tre mesi chiusi al 30 giugno 2025 猫 stato di $51.3 million, in aumento rispetto a $47.9 million dell'anno precedente, mentre l'utile netto per i sei mesi 猫 stato di $100.9 million contro $88.8 million. Il margine d'interesse netto 猫 salito a $124.7 million per il trimestre da $109.4 million, mentre la provision per perdite su crediti 猫 aumentata modestamente a $4.1 million per il trimestre. Le attivit脿 totali sono cresciute a $16.67 billion e i prestiti lordi hanno raggiunto $10.52 billion, con depositi totali pari a $13.70 billion.
L'azienda ha reso nota un'acquisizione in corso da Santander per assumere circa $600 million di depositi e acquisire circa $33 million di prestiti, con un premio sui depositi dell'8% (circa $48.0 million) e chiusura prevista nel quarto trimestre 2025, soggetta all'approvazione regolamentare. La societ脿 ha completato diverse acquisizioni minori nel 2024 e nel 2025 che hanno incrementato attivit脿 immateriali e avviamento e hanno comportato l'iscrizione di accordi di corrispettivi condizionati. Le altre componenti complessive accumulate in perdita sono migliorate a $(486.8) million, riflettendo guadagni netti non realizzati su investimenti durante i sei mesi.
Community Financial System, Inc. inform贸 resultados m谩s s贸lidos para el trimestre y el primer semestre de 2025. La utilidad neta para los tres meses terminados el 30 de junio de 2025 fue de $51.3 million, frente a $47.9 million un a帽o antes, y la utilidad neta de seis meses fue de $100.9 million contra $88.8 million. Los ingresos netos por intereses aumentaron a $124.7 million para el trimestre desde $109.4 million, mientras que la provisi贸n para p茅rdidas crediticias se increment贸 modestamente a $4.1 million para el trimestre. Los activos totales crecieron a $16.67 billion y los pr茅stamos brutos alcanzaron $10.52 billion, con dep贸sitos totales de $13.70 billion.
La compa帽铆a comunic贸 una adquisici贸n pendiente desde Santander para asumir aproximadamente $600 million en dep贸sitos y adquirir alrededor de $33 million en pr茅stamos, con una prima sobre dep贸sitos del 8% (aproximadamente $48.0 million) y cierre previsto en el cuarto trimestre de 2025, sujeto a la aprobaci贸n regulatoria. La firma complet贸 varias adquisiciones menores en 2024 y 2025 que a帽adieron activos intangibles y goodwill y registraron acuerdos de contraprestaci贸n contingente. La otra ganancia integral acumulada en p茅rdida mejor贸 a $(486.8) million, reflejando ganancias netas no realizadas en inversiones durante los seis meses.
Community Financial System, Inc.電� 2025雲� 攵勱赴 氚� 靸侂皹旮办棎 雿� 臧曧暅 鞁れ爜鞚� 氤搓碃頄堨姷雼堧嫟. 2025雲� 6鞗� 30鞚茧 雭濍倶電� 3臧滌洈 霃欖晥鞚� 靾滌澊鞚奠潃 $51.3 million鞙茧 鞝勲厔鞚� $47.9 million鞐愳劀 歃濌皜頄堦碃, 靸侂皹旮� 靾滌澊鞚奠潃 $100.9 million鞙茧 $88.8 million鞐愳劀 電橃棃鞀惦媹雼�. 靾滌澊鞛愳垬鞚奠潃 攵勱赴 旮办 $124.7 million鞙茧 $109.4 million鞐愳劀 靸侅姽頄堨溂氅�, 鞁犾毄靻愳嫟於╇嫻旮堨潃 攵勱赴 旮办 $4.1 million鞙茧 靻岉彮 歃濌皜頄堨姷雼堧嫟. 齑濎瀽靷办潃 $16.67 billion鞙茧 靹膘灔頄堦碃 齑濍寑於�(齑濎暋)鞚� $10.52 billion鞐� 雼枅鞙茧┌ 齑濎槇旮堨潃 $13.70 billion鞚挫棃鞀惦媹雼�.
須岇偓電� Santander搿滊秬韯� 鞎� $600 million鞚� 鞓堦笀鞚� 鞚胳垬頃橁碃 鞎� $33 million鞚� 雽�於滌潉 旆摑頃橂姅 鞚胳垬臧� 歆勴枆 欷戩澊霛缄碃 瓿奠嫓頄堨溂氅�, 鞓堦笀 頂勲Μ氙胳梽鞚� 8%(鞎� $48.0 million)鞚搓碃 攴滌牅 鞀轨澑 臁瓣贝 頃橃棎 2025雲� 4攵勱赴 毵堦皭鞚� 鞓堨儊霅╇媹雼�. 須岇偓電� 2024雲� 氚� 2025雲勳棎 鞐煬 靻岅窚氇� 鞚胳垬毳� 鞕勲頃� 氍错槙鞛愳偘瓿� 鞓侅梾甓岇潉 於旉皜頃橁碃 臁瓣贝攵� 氤挫垬 鞎届爼鞚� 瓿勳儊頄堨姷雼堧嫟. 雸勳爜 旮绊儉 韽磩靻愳嫟鞚� $(486.8) million鞙茧 臧滌劆霅橃棃鞙茧┌, 鞚措姅 靸侂皹旮� 欷� 鞁ろ槃霅橃 鞎婌潃 韴瀽靻愳澋(靾滌嫟順勳澊鞚�)鞚� 氚橃榿頃╇媹雼�.
Community Financial System, Inc. a annonc茅 des r茅sultats plus solides pour le trimestre et le premier semestre 2025. Le b茅n茅fice net pour les trois mois clos le 30 juin 2025 s'est 茅lev茅 脿 $51.3 million, contre $47.9 million un an plus t么t, et le b茅n茅fice net sur six mois s'est 茅tabli 脿 $100.9 million contre $88.8 million. Le produit net d'int茅r锚ts a augment茅 脿 $124.7 million pour le trimestre, contre $109.4 million, tandis que la provision pour pertes de cr茅dit a l茅g猫rement augment茅 脿 $4.1 million pour le trimestre. L'actif total a progress茅 脿 $16.67 billion et les pr锚ts bruts ont atteint $10.52 billion, avec des d茅p么ts totaux de $13.70 billion.
La soci茅t茅 a divulgu茅 une acquisition en cours aupr猫s de Santander visant 脿 reprendre environ $600 million de d茅p么ts et 脿 acqu茅rir environ $33 million de pr锚ts, avec une prime de d茅p么t de 8% (environ $48.0 million) et une cl么ture attendue au quatri猫me trimestre 2025, sous r茅serve de l'approbation des r茅gulateurs. L'entreprise a finalis茅 plusieurs petites acquisitions en 2024 et 2025 qui ont ajout茅 des actifs incorporels et du goodwill et enregistr茅 des accords de contreparties conditionnelles. Les pertes cumul茅es autres 茅l茅ments du r茅sultat global se sont am茅lior茅es 脿 $(486.8) million, refl茅tant des gains nets non r茅alis茅s sur investissements au cours des six mois.
Community Financial System, Inc. meldete st盲rkere Ergebnisse f眉r das Quartal und das erste Halbjahr 2025. Der Nettogewinn f眉r die drei Monate zum 30. Juni 2025 betrug $51.3 million gegen眉ber $47.9 million im Vorjahr, und der Halbjahresnettogewinn lag bei $100.9 million gegen眉ber $88.8 million. Der Nettozinsertrag stieg im Quartal auf $124.7 million von $109.4 million, w盲hrend die Risikovorsorge f眉r Kreditverluste im Quartal moderat auf $4.1 million zunahm. Die Gesamtaktiva wuchsen auf $16.67 billion und die Bruttokredite erreichten $10.52 billion, bei Gesamteinlagen von $13.70 billion.
Das Unternehmen gab eine laufende 脺bernahme von Santander bekannt, bei der es rund $600 million an Einlagen 眉bernimmt und etwa $33 million an Krediten erwirbt, mit einer Einlagenpr盲mie von 8% (etwa $48.0 million) und einem erwarteten Abschluss im vierten Quartal 2025, vorbehaltlich beh枚rdlicher Genehmigung. Die Gesellschaft schloss 2024 und 2025 mehrere kleinere Akquisitionen ab, die immaterielle Verm枚genswerte und Gesch盲fts- oder Firmenwerte erh枚hten und bedingte Gegenleistungsvereinbarungen verbuchten. Der kumulierte sonstige Ergebnisverlust verbesserte sich auf $(486.8) million und spiegelt w盲hrend des Halbjahres unverrechnete Nettoertr盲ge aus Wertpapieren wider.
- Net income growth: Q2 net income of $51.3M up from $47.9M year-over-year and six-month net income of $100.9M versus $88.8M.
- Higher net interest income: Net interest income rose to $124.7M for the quarter from $109.4M, supporting earnings growth.
- Deposit growth: Total deposits increased to $13.70B from $13.44B, strengthening funding.
- Pending deposit acquisition: Agreement to assume ~ $600M of deposits from Santander could materially increase funding capacity upon closing.
- Large accumulated other comprehensive loss: Accumulated other comprehensive loss remains $(486.8)M despite improvement from year-end.
- Unrealized investment losses: Significant unrealized losses in the investment portfolio (gross unrealized losses remain sizeable) driven by interest rate changes.
- Deposit premium cash cost: Pending Santander transaction includes an 8% deposit premium (~$48.0M) which is a substantial cash outlay.
- Higher noninterest expenses: Noninterest expenses increased (e.g., salaries and benefits) which partially offset operating gains.
Insights
TL;DR: Earnings and balance sheet growth show operating momentum; net interest income and deposits expanded while credit provisions remain controlled.
Net income increased both quarterly and year-to-date driven by higher net interest income ($124.7M for Q2 2025 versus $109.4M prior year). Loan growth was modest and deposits rose to $13.70B, supporting net interest margins. The allowance for credit losses increased slightly to $81.9M but remains a small percentage of total loans. Noninterest expenses increased, tempering pre-tax improvement, but operating cash flow remained positive. Overall this filing reflects incremental financial strength and controlled credit trends.
TL;DR: Pending Santander branch acquisition is material to funding and liquidity; transaction carries an explicit deposit premium and regulatory contingency.
The agreement to assume ~ $600M of deposits and acquire ~$33M of loans is a significant balance-sheet event and will increase deposits by roughly 4% on closing. The $48.0M deposit premium (8%) is a disclosed cash consideration and the company expects transaction-related one-time costs. The filing also details smaller prior acquisitions with contingent consideration and goodwill, demonstrating an active add-on M&A strategy that relies on contingent payments tied to retained revenue.
Community Financial System, Inc. ha riportato risultati pi霉 solidi per il trimestre e il primo semestre 2025. L'utile netto per i tre mesi chiusi al 30 giugno 2025 猫 stato di $51.3 million, in aumento rispetto a $47.9 million dell'anno precedente, mentre l'utile netto per i sei mesi 猫 stato di $100.9 million contro $88.8 million. Il margine d'interesse netto 猫 salito a $124.7 million per il trimestre da $109.4 million, mentre la provision per perdite su crediti 猫 aumentata modestamente a $4.1 million per il trimestre. Le attivit脿 totali sono cresciute a $16.67 billion e i prestiti lordi hanno raggiunto $10.52 billion, con depositi totali pari a $13.70 billion.
L'azienda ha reso nota un'acquisizione in corso da Santander per assumere circa $600 million di depositi e acquisire circa $33 million di prestiti, con un premio sui depositi dell'8% (circa $48.0 million) e chiusura prevista nel quarto trimestre 2025, soggetta all'approvazione regolamentare. La societ脿 ha completato diverse acquisizioni minori nel 2024 e nel 2025 che hanno incrementato attivit脿 immateriali e avviamento e hanno comportato l'iscrizione di accordi di corrispettivi condizionati. Le altre componenti complessive accumulate in perdita sono migliorate a $(486.8) million, riflettendo guadagni netti non realizzati su investimenti durante i sei mesi.
Community Financial System, Inc. inform贸 resultados m谩s s贸lidos para el trimestre y el primer semestre de 2025. La utilidad neta para los tres meses terminados el 30 de junio de 2025 fue de $51.3 million, frente a $47.9 million un a帽o antes, y la utilidad neta de seis meses fue de $100.9 million contra $88.8 million. Los ingresos netos por intereses aumentaron a $124.7 million para el trimestre desde $109.4 million, mientras que la provisi贸n para p茅rdidas crediticias se increment贸 modestamente a $4.1 million para el trimestre. Los activos totales crecieron a $16.67 billion y los pr茅stamos brutos alcanzaron $10.52 billion, con dep贸sitos totales de $13.70 billion.
La compa帽铆a comunic贸 una adquisici贸n pendiente desde Santander para asumir aproximadamente $600 million en dep贸sitos y adquirir alrededor de $33 million en pr茅stamos, con una prima sobre dep贸sitos del 8% (aproximadamente $48.0 million) y cierre previsto en el cuarto trimestre de 2025, sujeto a la aprobaci贸n regulatoria. La firma complet贸 varias adquisiciones menores en 2024 y 2025 que a帽adieron activos intangibles y goodwill y registraron acuerdos de contraprestaci贸n contingente. La otra ganancia integral acumulada en p茅rdida mejor贸 a $(486.8) million, reflejando ganancias netas no realizadas en inversiones durante los seis meses.
Community Financial System, Inc.電� 2025雲� 攵勱赴 氚� 靸侂皹旮办棎 雿� 臧曧暅 鞁れ爜鞚� 氤搓碃頄堨姷雼堧嫟. 2025雲� 6鞗� 30鞚茧 雭濍倶電� 3臧滌洈 霃欖晥鞚� 靾滌澊鞚奠潃 $51.3 million鞙茧 鞝勲厔鞚� $47.9 million鞐愳劀 歃濌皜頄堦碃, 靸侂皹旮� 靾滌澊鞚奠潃 $100.9 million鞙茧 $88.8 million鞐愳劀 電橃棃鞀惦媹雼�. 靾滌澊鞛愳垬鞚奠潃 攵勱赴 旮办 $124.7 million鞙茧 $109.4 million鞐愳劀 靸侅姽頄堨溂氅�, 鞁犾毄靻愳嫟於╇嫻旮堨潃 攵勱赴 旮办 $4.1 million鞙茧 靻岉彮 歃濌皜頄堨姷雼堧嫟. 齑濎瀽靷办潃 $16.67 billion鞙茧 靹膘灔頄堦碃 齑濍寑於�(齑濎暋)鞚� $10.52 billion鞐� 雼枅鞙茧┌ 齑濎槇旮堨潃 $13.70 billion鞚挫棃鞀惦媹雼�.
須岇偓電� Santander搿滊秬韯� 鞎� $600 million鞚� 鞓堦笀鞚� 鞚胳垬頃橁碃 鞎� $33 million鞚� 雽�於滌潉 旆摑頃橂姅 鞚胳垬臧� 歆勴枆 欷戩澊霛缄碃 瓿奠嫓頄堨溂氅�, 鞓堦笀 頂勲Μ氙胳梽鞚� 8%(鞎� $48.0 million)鞚搓碃 攴滌牅 鞀轨澑 臁瓣贝 頃橃棎 2025雲� 4攵勱赴 毵堦皭鞚� 鞓堨儊霅╇媹雼�. 須岇偓電� 2024雲� 氚� 2025雲勳棎 鞐煬 靻岅窚氇� 鞚胳垬毳� 鞕勲頃� 氍错槙鞛愳偘瓿� 鞓侅梾甓岇潉 於旉皜頃橁碃 臁瓣贝攵� 氤挫垬 鞎届爼鞚� 瓿勳儊頄堨姷雼堧嫟. 雸勳爜 旮绊儉 韽磩靻愳嫟鞚� $(486.8) million鞙茧 臧滌劆霅橃棃鞙茧┌, 鞚措姅 靸侂皹旮� 欷� 鞁ろ槃霅橃 鞎婌潃 韴瀽靻愳澋(靾滌嫟順勳澊鞚�)鞚� 氚橃榿頃╇媹雼�.
Community Financial System, Inc. a annonc茅 des r茅sultats plus solides pour le trimestre et le premier semestre 2025. Le b茅n茅fice net pour les trois mois clos le 30 juin 2025 s'est 茅lev茅 脿 $51.3 million, contre $47.9 million un an plus t么t, et le b茅n茅fice net sur six mois s'est 茅tabli 脿 $100.9 million contre $88.8 million. Le produit net d'int茅r锚ts a augment茅 脿 $124.7 million pour le trimestre, contre $109.4 million, tandis que la provision pour pertes de cr茅dit a l茅g猫rement augment茅 脿 $4.1 million pour le trimestre. L'actif total a progress茅 脿 $16.67 billion et les pr锚ts bruts ont atteint $10.52 billion, avec des d茅p么ts totaux de $13.70 billion.
La soci茅t茅 a divulgu茅 une acquisition en cours aupr猫s de Santander visant 脿 reprendre environ $600 million de d茅p么ts et 脿 acqu茅rir environ $33 million de pr锚ts, avec une prime de d茅p么t de 8% (environ $48.0 million) et une cl么ture attendue au quatri猫me trimestre 2025, sous r茅serve de l'approbation des r茅gulateurs. L'entreprise a finalis茅 plusieurs petites acquisitions en 2024 et 2025 qui ont ajout茅 des actifs incorporels et du goodwill et enregistr茅 des accords de contreparties conditionnelles. Les pertes cumul茅es autres 茅l茅ments du r茅sultat global se sont am茅lior茅es 脿 $(486.8) million, refl茅tant des gains nets non r茅alis茅s sur investissements au cours des six mois.
Community Financial System, Inc. meldete st盲rkere Ergebnisse f眉r das Quartal und das erste Halbjahr 2025. Der Nettogewinn f眉r die drei Monate zum 30. Juni 2025 betrug $51.3 million gegen眉ber $47.9 million im Vorjahr, und der Halbjahresnettogewinn lag bei $100.9 million gegen眉ber $88.8 million. Der Nettozinsertrag stieg im Quartal auf $124.7 million von $109.4 million, w盲hrend die Risikovorsorge f眉r Kreditverluste im Quartal moderat auf $4.1 million zunahm. Die Gesamtaktiva wuchsen auf $16.67 billion und die Bruttokredite erreichten $10.52 billion, bei Gesamteinlagen von $13.70 billion.
Das Unternehmen gab eine laufende 脺bernahme von Santander bekannt, bei der es rund $600 million an Einlagen 眉bernimmt und etwa $33 million an Krediten erwirbt, mit einer Einlagenpr盲mie von 8% (etwa $48.0 million) und einem erwarteten Abschluss im vierten Quartal 2025, vorbehaltlich beh枚rdlicher Genehmigung. Die Gesellschaft schloss 2024 und 2025 mehrere kleinere Akquisitionen ab, die immaterielle Verm枚genswerte und Gesch盲fts- oder Firmenwerte erh枚hten und bedingte Gegenleistungsvereinbarungen verbuchten. Der kumulierte sonstige Ergebnisverlust verbesserte sich auf $(486.8) million und spiegelt w盲hrend des Halbjahres unverrechnete Nettoertr盲ge aus Wertpapieren wider.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period 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.) |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
NONE | ||
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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 | ||
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of shares of common stock, par value $1.00 per share, outstanding as of the close of business on July 31, 2025:
Table of Contents
TABLE OF CONTENTS
Part I. |
| Financial Information |
| Page |
Item 1. | Financial Statements (Unaudited) | |||
Consolidated Statements of Condition June 30, 2025 and December 31, 2024 | 3 | |||
Consolidated Statements of Income Three and six months ended June 30, 2025 and 2024 | 4 | |||
Consolidated Statements of Comprehensive Income Three and six months ended June 30, 2025 and 2024 | 5 | |||
Consolidated Statements of Changes in Shareholders’ Equity Three and six months ended June 30, 2025 and 2024 | 6 | |||
Consolidated Statements of Cash Flows Six months ended June 30, 2025 and 2024 | 8 | |||
Notes to the Consolidated Financial Statements June 30, 2025 | 9 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 68 | ||
Item 4. | Controls and Procedures | 70 | ||
Part II. | Other Information | |||
Item 1. | Legal Proceedings | 70 | ||
Item 1A. | Risk Factors | 70 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 70 | ||
Item 3. | Defaults Upon Senior Securities | 71 | ||
Item 4. | Mine Safety Disclosures | 71 | ||
Item 5. | Other Information | 71 | ||
Item 6. | Exhibits | 72 |
2
Table of Contents
Part I. Financial Information
Item 1. Financial Statements
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
(In Thousands, Except Share Data)
June 30, | December 31, | |||||
| 2025 |
| 2024 | |||
Assets: |
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Cash and cash equivalents (includes restricted cash of $ | $ | | $ | | ||
Available-for-sale investment securities, includes pledged securities that can be sold or repledged |
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Held-to-maturity securities (fair value of $ | | | ||||
Equity and other securities |
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Loans |
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Allowance for credit losses |
| ( |
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Loans, net of allowance for credit losses |
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Goodwill |
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Core deposit intangibles, net |
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Other intangibles, net |
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Goodwill and intangible assets, net |
| |
| | ||
Premises and equipment, net | | | ||||
Accrued interest and fees receivable |
| |
| | ||
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 I) | ||||||
|
| |||||
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 (unaudited).
3
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands, Except Per-Share Data)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Interest income: |
|
|
|
|
|
|
|
| ||||
Interest and fees on loans | $ | | $ | | $ | | $ | | ||||
Interest and dividends on taxable investments |
| |
| |
| |
| | ||||
Interest and dividends on nontaxable investments |
| |
| |
| |
| | ||||
Total interest income |
| |
| |
| |
| | ||||
|
| |||||||||||
Interest expense: |
|
|
|
|
| |||||||
Interest on deposits |
| |
| |
| |
| | ||||
Interest on borrowings |
| |
| |
| |
| | ||||
Total interest expense |
| |
| |
| |
| | ||||
|
| |||||||||||
Net interest income |
| |
| |
| |
| | ||||
Provision for credit losses |
| |
| |
| |
| | ||||
Net interest income after provision for credit losses |
| |
| |
| |
| | ||||
|
| |||||||||||
Noninterest revenues: |
|
|
|
|
| |||||||
Deposit service fees |
| |
| |
| |
| | ||||
Mortgage banking | |
| |
| |
| | |||||
Other banking services |
| |
| |
| |
| | ||||
Employee benefit services |
| |
| |
| |
| | ||||
Insurance services |
| |
| |
| |
| | ||||
Wealth management services |
| | | | | |||||||
Loss on sales of investment securities | | ( | | ( | ||||||||
Unrealized (loss) gain on equity securities |
| ( | |
| | | ||||||
Total noninterest revenues |
| |
| |
| |
| | ||||
|
| |||||||||||
Noninterest expenses: |
|
|
|
|
| |||||||
Salaries and employee benefits |
| |
| |
| |
| | ||||
Data processing and communications |
| |
| |
| |
| | ||||
Occupancy and equipment |
| |
| |
| |
| | ||||
Business development and marketing |
| |
| |
| |
| | ||||
Legal and professional fees | | | | | ||||||||
Amortization of intangible assets | | | | | ||||||||
Other expenses |
| |
| | |
| | |||||
Total noninterest expenses |
| |
| | |
| | |||||
| ||||||||||||
Income before income taxes |
| |
| | |
| | |||||
Income taxes |
| |
| | |
| | |||||
Net income | $ | | $ | | $ | | $ | | ||||
|
|
| ||||||||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
See accompanying notes to consolidated financial statements (unaudited).
4
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In Thousands)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Pension and other post-retirement obligations: |
|
|
|
|
|
|
| |||||
Amortization of actuarial (gains) losses included in net periodic pension cost, gross | $ | ( | $ | | $ | ( | $ | | ||||
Tax effect |
| |
| ( |
| |
| ( | ||||
Amortization of actuarial (gains) losses included in net periodic pension cost, net |
| ( |
| |
| ( | | |||||
Amortization of prior service cost included in net periodic pension cost, gross |
| |
| |
| |
| | ||||
Tax effect |
| ( |
| ( |
| ( |
| ( | ||||
Amortization of prior service cost included in net periodic pension cost, net |
| |
| |
| |
| | ||||
Other comprehensive income related to pension and other post-retirement obligations, net of taxes |
| |
| |
| |
| | ||||
| ||||||||||||
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 |
| |
| |
| |
| | ||||
Tax effect |
| |
| ( |
| |
| ( | ||||
Reclassification adjustment for net losses included in net income, net |
| |
| |
| |
| | ||||
Other comprehensive gain (loss) related to unrealized gains (losses) on investment securities, net of taxes |
| |
| ( |
| |
| ( | ||||
Other comprehensive income (loss), net of taxes |
| |
| ( |
| |
| ( | ||||
Net income |
| |
| |
| |
| | ||||
Comprehensive income | $ | | $ | | $ | | $ | | ||||
As of | ||||||
June 30, | December 31, | |||||
| 2025 |
| 2024 | |||
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 (unaudited).
5
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
Three months ended June 30, 2025 and 2024
(In Thousands, Except Share Data)
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
| |||||||||
Common Stock | Additional | Other | Deferred | ||||||||||||||||||||
Shares | Amount | Paid-In | Retained | Comprehensive | Treasury | Compensation | |||||||||||||||||
| Outstanding |
| Issued |
| Capital |
| Earnings |
| Loss |
| Stock |
| Arrangements |
| Total | ||||||||
Balance at March 31, 2025 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
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 agreements |
|
|
| ( |
|
|
|
| |
| | ||||||||||||
Treasury stock purchased | ( | ( | ( | ||||||||||||||||||||
Balance at June 30, 2025 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
Balance at March 31, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
Net income |
|
|
|
| |
|
|
|
| | |||||||||||||
Other comprehensive loss, net of tax |
|
|
|
|
| ( |
|
|
| ( | |||||||||||||
Dividends declared: |
|
|
|
|
|
|
|
| |||||||||||||||
Common, $ |
|
|
|
| ( |
|
|
|
| ( | |||||||||||||
Common stock activity under employee stock plans |
| |
| |
| |
|
|
|
|
| | |||||||||||
Stock-based compensation |
|
|
| |
|
|
|
|
| | |||||||||||||
Distribution of stock under deferred compensation agreements | ( | | | ||||||||||||||||||||
Treasury stock purchased | ( | ( | ( | ||||||||||||||||||||
Balance at June 30, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
See accompanying notes to consolidated financial statements (unaudited).
6
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
Six months ended June 30, 2025 and 2024
(In Thousands, Except Share Data)
Accumulated | |||||||||||||||||||||||
Common Stock | Additional | Other | Deferred | ||||||||||||||||||||
Shares | Amount | Paid-In | Retained | Comprehensive | Treasury | Compensation |
| ||||||||||||||||
| Outstanding |
| Issued |
| Capital |
| Earnings |
| Loss |
| Stock |
| Arrangements |
| Total | ||||||||
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 June 30, 2025 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
Balance at December 31, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
Net income | | | |||||||||||||||||||||
Other comprehensive loss, 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 June 30, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
See accompanying notes to consolidated financial statements (unaudited).
7
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
Six Months Ended | ||||||
June 30, | ||||||
| 2025 |
| 2024 | |||
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 |
| |
| | ||
Stock-based compensation |
| |
| | ||
Provision for credit losses |
| |
| | ||
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 |
| ( |
| ( | ||
Change in other assets and liabilities |
| ( |
| | ||
Net cash provided by operating activities |
| |
| | ||
Investing activities: |
|
|
|
| ||
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 paid for acquisitions, net of cash received |
| ( |
| ( | ||
Proceeds from sales of premises, equipment and other assets | | | ||||
Purchases of premises and equipment |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Financing activities: |
|
|
| |||
Net increase in deposits | | | ||||
Net 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 | ( | ( | ||||
Proceeds from the issuance of common stock for employee stock plans |
| |
| | ||
Withholding taxes paid on share-based compensation | ( | ( | ||||
Purchases of treasury stock |
| ( |
| ( | ||
Cash dividends paid |
| ( |
| ( | ||
Net cash 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 |
| |
| | ||
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 (unaudited).
8
Table of Contents
COMMUNITY FINANCIAL SYSTEM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2025
NOTE A: BASIS OF PRESENTATION
The interim financial data as of and for the three and six months ended June 30, 2025 is unaudited; however, in the opinion of Community Financial System, Inc. (the “Company”), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results for the interim periods in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and Article 10 of Regulation S-X. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025.
NOTE B: ACQUISITIONS
Pending Acquisition
On June 25, 2025, the Company, through its subsidiary Community Bank, N.A. (“CBNA”), entered into an agreement with Santander Bank, N.A. (“Santander”) to acquire seven branch locations in the Allentown, Pennsylvania area including certain branch-related loans and deposits. In addition, CBNA’s wholly-owned subsidiary, Nottingham Investment Services, Inc., has agreed to purchase related wealth management relationships from Santander’s affiliate, Santander Securities LLC. The Company is expected to acquire approximately $
Current and Prior Period Acquisitions
On April 1, 2025, the Company, through its subsidiary Benefit Plans Administrative Services, LLC (“BPA”), completed the acquisition of certain assets of a New York based financial services company for $
On February 1, 2025, BPA completed the acquisition of certain assets of two financial services companies based in New York and Kansas. Total aggregate consideration was $
9
Table of Contents
During 2024, the Company, through its subsidiary OneGroup NY, Inc. (“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 and a contract holdback payment. The contract holdback will be paid upon satisfaction of certain customer retention requirements and will be prorated based on actual results. The contract holdback amount was estimated at the maximum level of $
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed:
2025 | 2024 | |||||||||||
(000s omitted) |
| Other(1) |
| CPD |
| Other(2) |
| Total | ||||
Consideration: | ||||||||||||
Cash | $ | | $ | | $ | | $ | | ||||
Contingent consideration | | | | | ||||||||
Total net consideration | | | | | ||||||||
Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||||||||||
Cash and cash equivalents | | | | | ||||||||
Premises and equipment, net | | | | | ||||||||
Other assets | | | | | ||||||||
Other intangibles | | | | | ||||||||
Other liabilities | ( | ( | ( | ( | ||||||||
Total identifiable assets, net | | | | | ||||||||
Goodwill | $ | | $ | | $ | | $ | | ||||
| (1) | Includes amounts for BPA acquisitions completed as of June 30, 2025. |
| (2) | Includes amounts for OneGroup acquisitions completed in 2024. |
10
Table of Contents
The other intangibles related to the CPD acquisition are being amortized using an accelerated method over an estimated useful life of
NOTE C: ACCOUNTING POLICIES
The notes to the consolidated financial statements appearing in the Company’s 2024 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim consolidated financial statements.
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 June 30, 2025, $
New 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 will adopt this standard beginning with the December 31, 2025 consolidated financial statements and expects it to impact certain income tax disclosures.
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.
11
Table of Contents
NOTE D: INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of June 30, 2025 and December 31, 2024 are as follows:
June 30, 2025 | December 31, 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 June 30, 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 three and six months ended June 30, 2025 and 2024.
The gains and losses on equity and other securities for the three and six months ended June 30, 2025 and 2024 are as follows:
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
(000’s omitted) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net (loss) gain recognized on equity securities | $ | ( | $ | | $ | | $ | | ||||
Less: Net (loss) gain recognized on equity securities sold during the period |
| |
| |
| |
| | ||||
Unrealized (loss) gain recognized on equity securities still held | $ | ( | $ | | $ | | $ | | ||||
12
Table of Contents
A summary of investment securities that have been in a continuous unrealized loss position is as follows:
As of June 30, 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 |
| |
| |
| |
| |
| |
| | ||||||
Government agency mortgage-backed securities |
| |
| |
| |
| |
| |
| | ||||||
Corporate debt securities | | | | | | | ||||||||||||
Government agency collateralized mortgage obligations |
| |
| |
| |
| |
| |
| | ||||||
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 |
| |
| |
| |
| |
| |
| | ||||||
Government agency mortgage-backed securities |
| |
| |
| |
| |
| |
| | ||||||
Corporate debt securities | | | | | | | ||||||||||||
Government agency collateralized mortgage obligations |
| |
| |
| |
| |
| |
| | ||||||
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 | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
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 AAA by Moody’s Investor Services, AA+ by Standard & Poor’s 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
13
Table of Contents
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 June 30, 2025, 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 AA+ rating from Standard & Poor’s, AAA from Moody’s Investor Services, 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 June 30, 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 |
| |
| | | | ||||||
Due after five years through ten years |
| |
| | | | ||||||
Due after ten years |
| |
| | | | ||||||
Subtotal |
| |
| | | | ||||||
Government agency mortgage-backed securities |
| |
| | | | ||||||
Government agency collateralized mortgage obligations |
| |
| | | | ||||||
Total | $ | | $ | | $ | | $ | | ||||
Investment securities with a carrying value of $
14
Table of Contents
NOTE E: LOANS AND ALLOWANCE FOR CREDIT LOSSES
The segments of the Company’s loan portfolio are summarized as follows:
June 30, | December 31, | |||||
(000’s omitted) |
| 2025 |
| 2024 | ||
CRE – multifamily | $ | | $ | | ||
CRE – owner occupied | | | ||||
CRE – non-owner occupied | | | ||||
Commercial & industrial and other business loans | | | ||||
Consumer mortgage |
| |
| | ||
Consumer indirect |
| |
| | ||
Consumer direct |
| |
| | ||
Home equity |
| |
| | ||
Gross loans, including deferred origination costs |
| |
| | ||
Allowance for credit losses |
| ( |
| ( | ||
Loans, net of allowance for credit losses | $ | | $ | | ||
The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of June 30, 2025 and December 31, 2024:
Past Due | 90+ Days Past | |||||||||||||||||
(000’s omitted) | 30 – 89 | Due and | Total | |||||||||||||||
June 30, 2025 |
| 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 | | | | | | | ||||||||||||
Consumer indirect |
| |
| |
| |
| |
| |
| | ||||||
Consumer direct |
| |
| |
| |
| |
| |
| | ||||||
Home equity |
| |
| |
| |
| |
| |
| | ||||||
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 |
| |
| |
| |
| |
| |
| | ||||||
Consumer indirect |
| |
| |
| |
| |
| |
| | ||||||
Consumer direct |
| |
| |
| |
| |
| |
| | ||||||
Home equity |
| |
| |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
An immaterial amount of interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2025 and 2024 and an immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income.
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”. 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. |
15
Table of Contents
The following tables show the amount of business lending loans by credit quality category at June 30, 2025 and December 31, 2024:
Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
June 30, 2025 |
| 2025 |
| 2024 |
| 2023 |
| 2022 |
| 2021 |
| Prior |
| Cost Basis |
| to Term |
| Total | |||||||||
CRE – multifamily: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
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) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
16
Table of Contents
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 |
| Prior |
| Cost Basis |
| to Term |
| Total | |||||||||
CRE – multifamily: | |||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special mention |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Substandard |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
Doubtful |
| |
| |
| |
| |
| |
| |
| | |
| | ||||||||||
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) | $ | $ | | $ | | $ | | $ | $ | | $ | | $ | | $ | | |||||||||||
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.
17
Table of Contents
The following tables detail the balances in all other loan categories at June 30, 2025 and December 31, 2024:
Revolving | Revolving | ||||||||||||||||||||||||||
Loans | Loans | ||||||||||||||||||||||||||
(000’s omitted) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
June 30, 2025 |
| 2025 |
| 2024 |
| 2023 |
| 2022 |
| 2021 |
| 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) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
18
Table of Contents
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 |
| 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) | $ | $ | $ | | $ | $ | | $ | | $ | $ | $ | | ||||||||||||||
(3)For the year ended December 31, 2024.
19
Table of Contents
Business lending loans greater than $
| June 30, 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 | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
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.
20
Table of Contents
The following tables present the amortized cost basis of loans at June 30, 2025 and 2024 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2025 and 2024, 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.
Three Months Ended |
| Three Months Ended |
| ||||||||
June 30, 2025 |
| June 30, 2024 |
| ||||||||
Total Class |
|
| Total Class |
| |||||||
Term | of Financing |
| Term | of Financing |
| ||||||
(000s omitted except for percentages) |
| Extension |
| Receivable |
| Extension |
| Receivable |
| ||
CRE – owner occupied | $ | |
| | % | $ | |
| | % | |
CRE – non-owner occupied | | | % | | | % | |||||
Commercial & industrial and other business loans | | | % | | | % | |||||
Consumer mortgage | | | % | | | % | |||||
Home equity | | | % | | | % | |||||
Total | $ | |
| | % | $ | |
| | % | |
Six Months Ended |
| Six Months Ended |
| ||||||||
June 30, 2025 |
| June 30, 2024 |
| ||||||||
Total Class |
| Total Class |
| ||||||||
Term | of Financing |
| Term | of Financing |
| ||||||
(000s omitted except for percentages) |
| Extension |
| Receivable |
| Extension |
| Receivable |
| ||
CRE – owner occupied | $ | | | % | $ | | | % | |||
CRE – non-owner occupied | | | % | | | % | |||||
Commercial & industrial and other business loans | | | % | | | % | |||||
Consumer mortgage | | | % | | | % | |||||
Home equity | | | % | | | % | |||||
Total | $ | | | % | $ | | | % | |||
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 of such loans that have been modified in the last 12 months.
June 30, 2025 | |||||||||||||||
90+ Days Past | |||||||||||||||
Past Due 30 – | Due and Still | ||||||||||||||
(000s omitted) |
| Current |
| 89 Days |
| Accruing |
| Non-Accrual |
| Total | |||||
CRE – owner occupied | $ | | $ | | $ | | $ | | $ | | |||||
CRE – non-owner occupied | | | | | | ||||||||||
Commercial & industrial and other business loans | | | | | | ||||||||||
Consumer mortgage |
| |
| |
| |
| |
| | |||||
Total | $ | | $ | | $ | | $ | | $ | | |||||
21
Table of Contents
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025:
Three Months Ended | Six Months Ended | |||
June 30, 2025 | June 30, 2025 | |||
Weighted-Average | Weighted-Average | |||
| Term Extension (Years) |
| Term Extension (Years) | |
Commercial & industrial and other business loans | ||||
Consumer mortgage | ||||
Total |
|
|
There were
Allowance for Credit Losses
The following presents by segment the activity in the allowance for credit losses during the three months and six months ended June 30, 2025 and 2024:
Three Months Ended June 30, 2025 | |||||||||||||||
| 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 |
| |
| ( |
| |
| |
| | |||||
Liabilities for off-balance-sheet credit exposures |
| |
| |
| |
| ( |
| | |||||
Total allowance for credit losses | $ | | $ | ( | $ | | $ | | $ | | |||||
Three Months Ended June 30, 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 |
| |
| ( |
| |
| |
| | |||||
Liabilities for off-balance-sheet credit exposures |
| |
| |
| |
| |
| | |||||
Total allowance for credit losses | $ | | $ | ( | $ | | $ | | $ | | |||||
22
Table of Contents
Six Months Ended June 30, 2025 | |||||||||||||||
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 |
| |
| ( |
| |
| |
| | |||||
Liabilities for off-balance-sheet credit exposures |
| |
| |
| |
| ( |
| | |||||
Total allowance for credit losses | $ | | $ | ( | $ | | $ | | $ | | |||||
| Six Months Ended June 30, 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 |
| |
| ( |
| |
| |
| | |||||
Liabilities for off-balance-sheet credit exposures |
| |
| |
| |
| ( |
| | |||||
Total allowance for credit losses | $ | | $ | ( | $ | | $ | | $ | | |||||
The allowance for credit losses increased to $
Accrued interest receivable on loans, included in accrued interest and fees receivable on 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.
23
Table of Contents
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 June 30, 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 modest growth in auto and commercial real estate prices, stable unemployment levels and GDP growth, offset by a decline in housing and real household income growth.
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 June 30, 2025 and December 31, 2024, loans with a carrying amount of approximately $
At June 30, 2025 and December 31, 2024, there were foreclosures in process of $
During the six months ended June 30, 2025, the Company did not purchase any loans, while the Company sold $
NOTE F: GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:
June 30, 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 | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
24
Table of Contents
The estimated aggregate amortization expense for each of the five succeeding fiscal years ended December 31 is as follows:
(000’s omitted) | |||
Jul - Dec 2025 | $ | | |
2026 | | ||
2027 |
| | |
2028 |
| | |
2029 |
| | |
Thereafter |
| | |
Total | $ | | |
Shown below are the components of the Company’s goodwill at December 31, 2024 and June 30, 2025:
(000’s omitted) |
| December 31, 2024 |
| Additions/Adjustments |
| June 30, 2025 | |||
Goodwill | $ | | $ | | $ | | |||
NOTE G: BORROWINGS
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 $
During 2024, the Company secured $
NOTE H: 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 June 30, 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. There were approximately
25
Table of Contents
The following is a reconciliation of basic to diluted earnings per share for the three and six months ended June 30, 2025 and 2024:
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
(000’s omitted, except per share data) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
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 | $ | | $ | | $ | | $ | | ||||
Stock Repurchase Program
At its December 2024 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 2023 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to
NOTE I: 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. 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.
26
Table of Contents
The contract amounts of these commitments and contingencies are as follows:
| June 30, |
| December 31, | |||
(000’s omitted) | 2025 | 2024 | ||||
Commitments to extend credit | $ | | $ | | ||
Standby letters of credit |
| |
| | ||
Total | $ | | $ | | ||
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.
NOTE J: 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:
● Level 1 - | Quoted prices in active markets for identical assets or liabilities. |
● Level 2 - | Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. |
● Level 3 - | Significant valuation assumptions not readily observable in a market. |
27
Table of Contents
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
June 30, 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 | | | | | ||||||||
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 | $ | | $ | | $ | | $ | | ||||
28
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 D 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. |
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The changes in Level 3 assets measured at fair value on a recurring basis are immaterial.
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.
June 30, 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. AG真人官方 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. The appraisals are sometimes 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 discounts are significant, ranging from
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 the first quarter of 2025, the Company made the final required payment for the CPD contract holdback contingent consideration of $
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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 the three and six months ended June 30, 2025. 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) | June 30, 2025 | Valuation Technique | Significant Unobservable Inputs |
| (Weighted Average) | ||||||
Individually assessed loans | $ | |
|
|
| % | |||||
Other real estate owned | |
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|
| |||||||
Commitments to originate real estate loans for sale |
| |
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| % | |||||
Mortgage servicing rights |
| |
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|
| ||||||
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 | $ | |
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| % | |||||
Other real estate owned | |
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|
| |||||||
Commitments to originate real estate loans for sale | | % | |||||||||
Mortgage servicing rights |
| |
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| ||||||
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|
|
| |||||||
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 June 30, 2025 and December 31, 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.
June 30, 2025 | December 31, 2024 | |||||||||||
| Carrying |
| Fair |
| Carrying |
| Fair | |||||
(000’s omitted) | Value | Value | Value | Value | ||||||||
Financial assets: |
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|
|
| ||||
Net loans | $ | | $ | | $ | | $ | | ||||
Held-to-maturity securities | | | | | ||||||||
Financial liabilities: |
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Deposits |
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| |
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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.
Held-to-maturity U.S. Treasury securities have been classified as a Level 1 valuation. 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 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.
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NOTE K: 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.
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 on 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 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.
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Notional values and fair values of derivative instruments as of June 30, 2025 and December 31, 2024 are as follows:
| June 30, 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 | $ | |
| $ | | $ | |
| $ | | |||||||
Interest rate swaps |
| |
|
| |
| |
|
| | |||||||
RPA sold | | | | | |||||||||||||
RPA purchased |
| |
|
| |
| |
|
| | |||||||
Total derivatives | $ | | $ | | $ | |
|
| $ | | |||||||
| 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.
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 three and six months ended June 30, 2025, 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 was $
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The Company assessed its counterparty risk at June 30, 2025 and determined any credit risk inherent in the derivative contracts was not material. Further information about the fair value of derivative financial instruments can be found in Note J to these consolidated financial statements.
NOTE L: 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 reportable segments and determined that segment adjusted income before income taxes is the reported measure of segment profit or loss. The prior periods have been recast to conform to the current period presentation. See “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on February 28, 2025, for further detail on the factors used to identify the Company’s reportable segments and reported measure of segment profit or loss.
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 and Western Massachusetts. 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 Actuarial & Pension Services, LLC, BPAS Trust Company of Puerto Rico, Northeast Retirement Services, LLC, Global Trust Company, Inc., and Hand Benefits & Trust Company, 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.
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 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 Nottingham Investment Services, Inc. and Nottingham Wealth Partners, Inc., as well as asset management services provided by Nottingham Advisors, Inc.
The accounting policies used in the disclosure of business segments are the same as those described in “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on February 28, 2025, 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, 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.
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 reconciliation of the information to the consolidated financial statements follows:
Employee | Wealth |
| |||||||||||||
Banking and | Benefit | Insurance | Management |
| |||||||||||
(000’s omitted) |
| Corporate |
| Services |
| Services |
| Services |
| Total | |||||
Three Months Ended June 30, 2025 |
|
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|
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|
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|
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| ||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers | | | | | | ||||||||||
Revenues from external customers | | | | | | ||||||||||
Intersegment revenues | ( | | | | | ||||||||||
Total segment operating 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) | | | | | |||||||||||
Total segment expenses | | | | | |||||||||||
Segment adjusted income before income taxes | $ | | $ | | $ | | $ | | $ | | |||||
Reconciliation of profit or loss (segment adjusted income before income taxes): | |||||||||||||||
Unrealized loss on equity securities | ( | ||||||||||||||
Amortization of intangible assets | ( | ||||||||||||||
Restructuring expenses | ( | ||||||||||||||
Acquisition expenses | ( | ||||||||||||||
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 | | | | | | ||||||||||
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| |||||||
Reconciliation of segment assets: |
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|
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|
|
|
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|
| ||||||
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 | |||||
Three Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers | | | | | | ||||||||||
Revenues from external customers | | | | | | ||||||||||
Intersegment revenues | ( | | | | | ||||||||||
Total segment operating 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) | | | | | |||||||||||
Total segment expenses | | | | | |||||||||||
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 | ( | ||||||||||||||
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 | |||||
Six Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
| |||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers |
| |
| |
| |
| |
| | |||||
Revenues from external customers |
| |
| |
| |
| |
| | |||||
Intersegment revenues | ( | | | | | ||||||||||
Total segment operating 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) | | | | | |||||||||||
Total segment expenses | | | | | |||||||||||
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 |
| |
| |
| |
| |
| | |||||
(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 | |||||
Six Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
| |||||
Net interest income from external customers | $ | | $ | | $ | | $ | | $ | | |||||
Noninterest revenues from external customers |
| |
| |
| |
| |
| | |||||
Revenues from external customers |
| |
| |
| |
| |
| | |||||
Intersegment revenues | ( | | | | | ||||||||||
Total segment operating 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) | | | | | |||||||||||
Total segment expenses | | | | | |||||||||||
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 | ( | ||||||||||||||
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 |
| |
| |
| |
| |
| | |||||
(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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Item 2. 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 Community Financial System, Inc. (the “Company” or “CFSI”) as of and for the three and six months ended June 30, 2025 and 2024, although in some circumstances the first quarter of 2025 is also discussed in order to more fully explain recent 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 3 through 39. All references in the discussion of 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, the term “this year” and equivalent terms refers to results in calendar year 2025, “last year” and equivalent terms refer to calendar year 2024, “second quarter” refers to the three months ended June 30, 2025, “YTD” refers to the six months ended June 30, 2025, and earnings per share (“EPS”) figures refer to diluted EPS.
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 set herein under the caption “Forward-Looking Statements” on page 64.
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 critical accounting policies and estimates used by management is disclosed in the MD&A on pages 39-40 of the most recent Form 10-K (fiscal year ended December 31, 2024) filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025. There have been no material changes other than those described below regarding the Allowance for Credit Losses. A summary of new accounting policies used by management is disclosed in Note C, “Accounting Policies” on page 11 of this Form 10-Q.
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Allowance for Credit Losses
The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred 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 loan-specific 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 first quarter of 2025, the Company updated the ACL model to add 2024 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. In addition, management 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. The Company also added additional reserves for business lending to capture additional risk in the portfolio due to the increase in size and volume of business loans, which was further increased in the second quarter of 2025. The change in weighting of the economic scenarios increases the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increases the ACL by $6.7 million as compared to the prior factor in use at December 31, 2024.
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 GDP growth forecasts used in the ACL model at June 30, 2025 were 5.4% and 1.0%, respectively, compared to 4.8% and 1.8%, respectively, at December 31, 2024. 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 8.3% and an average unemployment rate of 7.0%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three and six months ended June 30, 2025 by approximately $3.5 million, and decrease net income by $2.7 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 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.
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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, litigation accrual, restructuring expenses, 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 activity. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, litigation accrual, restructuring expenses, 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 acquisitions. 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 assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 14.
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.
Second quarter 2025 net income increased $3.4 million, or 7.1%, compared to the second quarter of 2024, while YTD net income increased $12.2 million, or 13.7% compared to the equivalent 2024 timeframe. Earnings per share of $0.97 for the second quarter of 2025 was $0.06 more than the second quarter of 2024, while 2025 YTD earnings per share of $1.90 was $0.23 higher than 2024 YTD earnings per share. The quarterly increase in net income and earnings per share was primarily driven by an increase in net interest income, partially offset by increases in noninterest expenses and the provision for credit losses. The YTD increase in net income and earnings per share was the result of increases in net interest income and noninterest revenues, partially offset by increases in noninterest expenses, the provision for credit losses and income taxes.
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Net interest margin and fully tax-equivalent net interest margin, a non-GAAP measure, increased 26 basis points between both the second quarter of 2024 and the second quarter of 2025 and on a YTD basis. The yield on average interest-earning assets increased 21 basis points compared to the prior year’s second quarter and 23 basis points compared to the prior YTD period, as the yield on average loans and average investments both improved. The yield on average loans for the second quarter increased 25 basis points compared to the second quarter of 2024 and 29 basis points between comparable YTD periods. The yield on average investments, including cash equivalents, increased 10 basis points compared to the prior year’s second quarter and 4 basis points on a YTD basis. The Company’s total cost of funds decreased 5 basis points from last year’s second quarter and 1 basis point YTD, as the rate paid on interest-bearing deposits and the rate paid on borrowings both decreased.
Loan balances increased on both an average and ending basis as compared to the prior year second quarter and YTD period, reflective of organic loan growth between the periods. Deposit balances also increased on both an average and ending basis as compared to the second quarter of 2024 and YTD comprised of growth in both governmental and non-governmental deposit balances. Investment balances increased on both an average and ending basis as compared to the prior year second quarter and YTD period, driven by purchases of mortgage-backed securities between the periods. Borrowing balances increased on an average basis compared to the second quarter of 2024 and YTD reflective of the Company securing certain fixed rate Federal Home Loan Bank (“FHLB”) term borrowings during the prior year’s second and third quarters to support the funding of continued loan growth, while total borrowings decreased on an ending basis compared to June 30, 2024.
The Company recorded a $4.1 million provision for credit losses during the second quarter and $10.8 million for YTD 2025 resulting in a $1.4 million and $2.0 million higher provision for credit losses than comparable prior year periods, respectively, as the Company increased credit loss reserves primarily related to the business lending portfolio. Second quarter asset quality metrics were impacted by the resolution of two nonperforming loan relationships in the business lending portfolio; one multifamily commercial real estate (“CRE”) loan relationship which was substantially paid off and one non-owner occupied CRE loan relationship which had a $4.3 million associated net charge-off. Net charge-offs were $5.1 million, or an annualized 0.20% of average loans, for the second quarter and $8.3 million, or an annualized 0.16% of average loans, for the first six months of 2025, compared to net charge-offs of $1.3 million, or an annualized 0.05% of average loans, for the prior year’s second quarter and $4.1 million, or an annualized 0.08% of average loans, for the first six months of 2024. The nonperforming loan ratio of 0.51% at June 30, 2025 increased 1 basis point from June 30, 2024 and decreased 19 basis points from December 31, 2024 primarily driven by the resolution of the two nonperforming business lending relationships described above. The 30 to 89 day delinquent loan ratio remained low at 0.51%, up slightly from 0.45% at the end of the second quarter of 2024 and down from 0.54% at December 31, 2024.
Banking services noninterest revenues, comprised of deposit service fees, mortgage banking and other banking services revenues, increased $0.4 million, or 2.1%, as compared to the prior year’s second quarter, and increased $1.3 million, or 3.4%, between the comparable YTD periods. The growth between both periods was primarily due to increases in customer interest rate swap fee revenues and CRE financing and advisory revenues. Financial services business revenues, comprised of employee benefit services, insurance services and wealth management services revenues, increased $0.3 million, or 0.6%, as compared to the prior year’s second quarter and increased $5.0 million, or 4.7%, compared to the prior YTD period, reflecting revenue growth in all three segments.
Noninterest expenses increased $10.1 million, or 8.5%, between the second quarter of 2024 and the second quarter of 2025 and increased $17.3 million, or 7.3%, between June YTD 2024 and June YTD 2025. The increases were primarily driven by salaries and employee benefits that increased $5.6 million, or 7.6%, and $9.0 million, or 6.1%, for the second quarter and YTD periods of 2025, respectively, as compared to the corresponding periods of 2024, reflective of merit and market-related increases in employee wages and incentive compensation along with higher employee medical costs. The remaining net increase in noninterest expenses were mainly due to higher data processing and communications expenses, occupancy and equipment expenses, legal and professional fees and other expenses, including the impact of $1.5 million of restructuring expenses associated with severance payments accrued for a workforce optimization plan due to planned branch consolidations and other operational initiatives.
Second quarter and YTD operating net income, a non-GAAP measure, increased $4.9 million, or 9.7%, as compared to the second quarter of 2024 and increased $13.1 million, or 13.9%, compared to June YTD 2024. Second quarter and YTD operating earnings per share, a non-GAAP measure, increased $0.09 compared to the second quarter of 2024 and increased $0.25 compared to June YTD 2024. Second quarter and YTD operating pre-tax, pre-provision net revenue per share, a non-GAAP measure, increased $0.12 compared to the second quarter of 2024 and increased $0.35 compared to June YTD 2024. These results demonstrate improvement in the Company’s core operating performance between the periods.
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Net Income and Profitability
As shown in Table 1, net income for the second quarter and June YTD of $51.3 million and $100.9 million, respectively, increased $3.4 million, or 7.1%, as compared to the second quarter of 2024 and increased $12.2 million, or 13.7%, compared to June YTD 2024. Earnings per share of $0.97 for the second quarter of 2025 was $0.06 higher than the second quarter of 2024, while earnings per share for the first six months of 2025 of $1.90 was $0.23 higher than the first six months of 2024. The increase in net income and earnings per share for the quarter was the result of an increase in net interest income, partially offset by increases in noninterest expenses and provision for credit losses. The increase in net income and earnings per share for the YTD period as compared to the prior year was the result of an increase in net interest income and noninterest revenues, partially offset by an increase in noninterest expenses, income taxes and the provision for credit losses. Operating net income, a non-GAAP measure, of $55.4 million and $107.5 million for the second quarter and June YTD 2025, respectively, increased $4.9 million, or 9.7%, as compared to the second quarter of 2024 and increased $13.1 million, or 13.9%, compared to June YTD 2024. Operating earnings per share, a non-GAAP measure, of $1.04 for the second quarter increased $0.09 compared to the second quarter of 2024, while operating earnings per share of $2.02 for the first six months of 2025 increased $0.25 compared to the first six months of 2024. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.
As reflected in Table 1, second quarter net interest income of $124.7 million increased $15.3 million, or 14.0%, from the comparable prior year period. Net interest income for the first six months of 2025 increased $28.6 million, or 13.2%, compared to the first six months of 2024. The quarterly and YTD increases were primarily the result of higher yields on interest-earning assets and a higher proportion of those assets being comprised of loan balances due to organic loan growth, as well as a decrease in the rate paid on interest-bearing liabilities, partially offset by an increase in the balance of interest-bearing liabilities.
Reflective of an increase in loans outstanding and continued economic uncertainty, the provision for credit losses of $4.1 million for the second quarter and $10.8 million for June YTD increased $1.4 million and $2.0 million as compared to the second quarter and first six months of 2024, respectively.
Second quarter and year-to-date noninterest revenues were $74.5 million and $150.5 million, respectively, up $0.1 million, or 0.2%, from the second quarter of 2024 and up $5.9 million, or 4.1%, from the first six months of 2024. Total operating noninterest revenues, a non-GAAP measure, for the second quarter and June YTD were $74.5 million and $150.3 million, respectively, an increase of $0.8 million, or 1.0%, and $6.3 million, or 4.4%, from the prior second quarter and YTD period, respectively. The increase over the prior year second quarter was driven by a $0.3 million, or 0.6%, increase in financial services business revenues and a $0.4 million, or 2.1%, increase in banking noninterest revenues. The increase over the prior June YTD period was driven by a $5.0 million, or 4.7%, increase in financial services business revenues and a $1.3 million, or 3.4%, increase in banking noninterest revenues.
Noninterest expenses of $129.1 million and $254.4 million for the second quarter and June YTD periods, respectively, reflected an increase of $10.1 million, or 8.5%, from the second quarter of 2024 and an increase of $17.3 million, or 7.3%, from the first six months of 2024. The increase in noninterest expenses for the second quarter and June YTD periods was primarily due to increases in salaries and employee benefits, data processing and communications, occupancy and equipment expenses, legal and professional fees and other expenses, including the impact of $1.5 million of restructuring expenses associated with severance payments accrued for a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating noninterest expenses increased $9.1 million, or 7.9%, from the prior year second quarter, and $16.6 million, or 7.2%, from the prior June YTD.
The effective income tax rates were 22.3% and 22.5% for second quarter and YTD 2025, respectively, as compared to 22.8% and 22.9% for the comparable prior year periods.
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A condensed income statement is as follows:
Table 1: Condensed Income Statements
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
(000's omitted, except per share data) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net interest income | $ | 124,748 | $ | 109,409 | $ | 244,960 | $ | 216,399 | ||||
Provision for credit losses | 4,117 | 2,708 | 10,807 | 8,856 | ||||||||
Noninterest revenues | 74,508 | 74,390 |
| 150,544 |
| 144,675 | ||||||
Noninterest expenses | 129,102 | 118,999 | 254,392 | 237,083 | ||||||||
Income before income taxes |
| 66,037 |
| 62,092 |
| 130,305 |
| 115,135 | ||||
Income taxes |
| 14,706 |
| 14,177 |
| 29,360 |
| 26,348 | ||||
Net income | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | ||||
Diluted weighted average common shares outstanding |
| 53,117 |
| 52,935 |
| 53,103 |
| 53,200 | ||||
Diluted earnings per share | $ | 0.97 | $ | 0.91 | $ | 1.90 | $ | 1.67 | ||||
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 $124.7 million for the second quarter of 2025 compared to $109.4 million for the second quarter of 2024. As shown in Table 2a, fully tax-equivalent net interest income, a non-GAAP measure, for the second quarter was $125.6 million, an increase of $15.3 million from the prior year second quarter. The increase was driven by a 21 basis point increase in the yield on average interest-earning assets, a $684.6 million increase in average interest-earning asset balances and a 9 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $599.4 million increase in average interest-bearing liability balances in comparison to the second quarter of 2024. As reflected in Table 3 for the quarter, the favorable net interest income impacts of the increase in the yield on average interest-earning assets of $8.2 million, the volume increase in average interest-earning asset balances of $7.6 million and the decrease in the rate paid on average interest-bearing liabilities of $2.2 million were partially offset by the volume increase in average interest-bearing liability balances of $2.7 million.
Net interest income totaled $245.0 million for the first six months of 2025 compared to $216.4 million for the first six months of 2024. As reflected in Table 2b, June YTD fully tax-equivalent net interest income, a non-GAAP measure, of $246.7 million, increased $28.4 million, or 13.0%, from the year-earlier period. The June YTD increase resulted from a $636.0 million increase in average interest-earning asset balances and a 23 basis point increase in the yield on average interest-earning assets and a 6 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $581.6 million increase in average interest-bearing liability balances. As reflected in Table 3 for June YTD, the favorable net interest income impacts of the increase in the yield on average interest-earning assets of $16.7 million, the volume increase in average interest-earning asset balances of $13.9 million and the decrease in the rate paid on average interest-bearing liabilities of $3.2 million were partially offset by the negative impact from the volume increase in average interest-bearing liability balances of $5.4 million.
Net interest margin of 3.27% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.30% for the second quarter of 2025, as well as YTD net interest margin of 3.24% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.27%, were each 26 basis points higher compared to their respective prior year periods. The increase was primarily the result of higher yields on interest-earning assets and a higher proportion of those assets being comprised of higher yielding loan balances due to organic loan growth, as well as a decrease in the rate paid on interest-bearing liabilities, partially offset by an increase in the balance of interest-bearing liabilities.
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The 21 basis point increase in the average yield on interest-earning assets for the quarter was the result of increases in both the yield on average loans and the yield on average investments, including cash equivalents. The yield on average loans for the second quarter increased by 25 basis points compared to the second quarter of 2024. The second quarter of 2025 yield on average investments including cash equivalents increased 12 basis points compared to the prior year while the yield on average investments excluding cash equivalents increased 7 basis points for the same timeframe. The 23 basis point increase in the yield on interest-earning assets for the first six months of 2025 was the result of a 29 basis point increase in the yield on average loans and a 6 basis point increase in the yield on average investments, including cash equivalents, compared to the prior YTD period. Excluding cash equivalents, the yield on average investments increased 9 basis points compared to the prior YTD period. The increase in loan yields were reflective of an increase in the proportion of higher rate new loan originations and the increase of certain variable and adjustable-rate loan yields. As the majority of the Company’s investment portfolio, excluding cash equivalents, is comprised of fixed yield securities, the increase in investment yields were driven by the sales and maturities of certain lower-yielding available-for-sale investment securities and the purchases of certain higher-yielding government agency mortgage-backed securities between the periods.
The second quarter and YTD average book balance of investments, including cash equivalents, increased $198.4 million and $85.6 million, respectively, as compared to the corresponding prior year periods, reflective of purchases of investment securities between the periods as well as sales and maturities of investment securities. Investment purchases outpaced sales, maturities, calls and principal payments during the second quarter and YTD periods, driven by $83.1 million of YTD government agency mortgage-backed securities purchases classified as held-to-maturity. The cash equivalents component of average interest-earning assets increased $110.8 million and $5.7 million for the second quarter and YTD periods, respectively, compared to the prior year periods. Average loan balances increased $486.2 million for the quarter and $550.4 million YTD as compared to the prior year, with increases in all five major loan portfolios between both periods due to organic growth.
The rate paid on average interest-bearing liabilities decreased by 9 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 9 basis points and the average rate paid on external borrowings decreased 15 basis points from the comparable prior period. For the first six months of 2025, the rate paid on average interest-bearing liabilities decreased by 6 basis points from the comparable prior year period as the rate paid on average interest-bearing deposits decreased 3 basis points and the rate paid on average external borrowings decreased 16 basis points. The decrease in the rate paid on average interest-bearing deposits and on average borrowings was due to market-related interest rate changes between the periods, as well as a change in the proportion of overnight borrowings and term borrowings to total borrowings.
Average interest-bearing deposits increased $540.6 million compared to the prior year quarter and $565.6 million compared to the prior YTD period. The quarterly and YTD increases in average interest-bearing deposits were due to increases in all account types, including time, money market, savings and interest checking deposits. The average borrowing balance, which primarily includes borrowings at the FHLB and securities sold under agreement to repurchase (customer repurchase agreements), increased $58.8 million and $16.0 million for the quarter and YTD periods, respectively. The increase in average borrowings from the prior year quarter and YTD periods was primarily due to an increase in FHLB term borrowings to meet the Company’s funding needs.
Tables 2a and 2b below sets forth information related to average interest-earning assets and interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on an FTE basis using a marginal income tax rate of 25.1% in 2025 and 24.4% in 2024. 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 prepayments, late and other fees and the amortization or 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 2a: Quarterly Average Balance Sheet
Three Months Ended | Three Months Ended |
| |||||||||||||||
June 30, 2025 | June 30, 2024 |
| |||||||||||||||
|
|
|
| Avg. |
|
|
|
|
| Avg. |
| ||||||
Average | Yield/Rate | Average | Yield/Rate |
| |||||||||||||
(000's omitted except yields and rates) |
| Balance |
| Interest |
| Paid |
| Balance |
| Interest |
| Paid |
| ||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash equivalents |
| $ | 159,688 |
| $ | 1,725 |
| 4.33 | % | $ | 48,872 |
| $ | 620 |
| 5.10 | % |
Taxable investment securities (1) | 4,256,943 | 21,856 |
| 2.06 | % | 4,119,882 | 20,159 |
| 1.97 | % | |||||||
Nontaxable investment securities (1) | 417,323 | 3,446 |
| 3.31 | % | 466,757 | 3,866 |
| 3.33 | % | |||||||
Loans (net of unearned discount) (2) | 10,455,637 | 146,735 |
| 5.63 | % | 9,969,462 | 133,346 |
| 5.38 | % | |||||||
Total interest-earning assets | 15,289,591 | 173,762 |
| 4.56 | % | 14,604,973 | 157,991 |
| 4.35 | % | |||||||
Noninterest-earning assets | 1,301,150 |
| 1,174,001 |
|
| ||||||||||||
Total assets |
| $ | 16,590,741 |
| $ | 15,778,974 |
|
| |||||||||
|
|
|
|
|
|
| |||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
| |||||||||
Interest checking, savings and money market deposits |
| $ | 8,094,208 | 22,485 |
| 1.11 | % | $ | 7,657,160 | 21,286 |
| 1.12 | % | ||||
Time deposits | 2,125,683 | 18,152 |
| 3.43 | % | 2,022,136 | 19,103 |
| 3.80 | % | |||||||
Customer repurchase agreements | 240,817 | 793 |
| 1.32 | % | 275,954 | 1,174 |
| 1.71 | % | |||||||
Overnight borrowings | 16,408 | 187 |
| 4.56 | % | 90,555 | 1,266 |
| 5.62 | % | |||||||
FHLB and other borrowings | 587,523 | 6,513 |
| 4.45 | % | 419,437 | 4,800 |
| 4.60 | % | |||||||
Total interest-bearing liabilities | 11,064,639 | 48,130 |
| 1.74 | % | 10,465,242 | 47,629 |
| 1.83 | % | |||||||
Noninterest-bearing liabilities: |
|
|
|
|
| ||||||||||||
Noninterest checking deposits | 3,522,734 |
| 3,534,516 |
|
| ||||||||||||
Other liabilities | 166,403 |
| 145,341 |
|
| ||||||||||||
Shareholders' equity | 1,836,965 |
| 1,633,875 |
|
| ||||||||||||
Total liabilities and shareholders' equity |
| $ | 16,590,741 |
| $ | 15,778,974 |
|
| |||||||||
|
|
|
|
| |||||||||||||
Net interest earnings (FTE) (non-GAAP) |
| $ | 125,632 |
|
| $ | 110,362 |
|
| ||||||||
|
|
|
|
|
| ||||||||||||
Net interest spread |
| 2.79 | % |
| 2.49 | % | |||||||||||
Net interest spread (FTE) (non-GAAP) |
|
| 2.82 | % |
|
| 2.52 | % | |||||||||
Net interest margin |
| 3.27 | % |
| 3.01 | % | |||||||||||
Net interest margin (FTE) (non-GAAP) |
|
| 3.30 | % |
|
| 3.04 | % | |||||||||
|
|
|
| ||||||||||||||
Fully tax-equivalent adjustment (non-GAAP)(3) |
| $ | 884 |
|
| $ | 953 |
|
| ||||||||
(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. The adjustment enhances the comparability of the performance of assets that have different tax liabilities.
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Table of Contents
Table 2b: Quarterly Average Balance Sheet
Six Months Ended | Six Months Ended |
| |||||||||||||||
June 30, 2025 | June 30, 2024 |
| |||||||||||||||
|
|
|
| Avg. |
|
|
|
|
| Avg. | |||||||
Average |
| Yield/Rate |
| Average |
| Yield/Rate | |||||||||||
(000's omitted except yields and rates) |
| Balance |
| Interest |
| Paid |
| Balance |
| Interest |
| Paid | |||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash equivalents | $ | 145,249 | $ | 3,110 |
| 4.32 | % | $ | 139,585 | $ | 3,704 |
| 5.34 | % | |||
Taxable investment securities (1) |
| 4,234,557 |
| 42,440 |
| 2.02 | % |
| 4,095,569 |
| 38,977 |
| 1.91 | % | |||
Nontaxable investment securities (1) |
| 418,527 |
| 6,907 |
| 3.33 | % |
| 477,569 |
| 7,931 |
| 3.34 | % | |||
Loans (net of unearned discount) (2) |
| 10,429,456 |
| 289,846 |
| 5.60 | % |
| 9,879,085 |
| 261,052 |
| 5.31 | % | |||
Total interest-earning assets |
| 15,227,789 |
| 342,303 |
| 4.53 | % |
| 14,591,808 |
| 311,664 | 4.30 | % | ||||
Noninterest-earning assets |
| 1,287,678 |
|
|
|
| 1,196,112 |
|
|
| |||||||
Total assets | $ | 16,515,467 |
|
|
| $ | 15,787,920 |
|
|
| |||||||
|
|
|
|
|
| ||||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest checking, savings and money market deposits | $ | 7,997,426 |
| 42,746 |
| 1.08 | % | $ | 7,625,621 |
| 41,132 |
| 1.08 | % | |||
Time deposits |
| 2,138,825 |
| 37,177 |
| 3.51 | % |
| 1,945,068 |
| 36,042 |
| 3.73 | % | |||
Customer repurchase agreements |
| 245,454 |
| 1,653 |
| 1.36 | % |
| 282,980 |
| 2,427 |
| 1.73 | % | |||
Overnight borrowings | 36,687 | 833 | 4.58 | % | 60,022 | 1,678 | 5.62 | % | |||||||||
FHLB and other borrowings |
| 595,138 |
| 13,156 |
| 4.46 | % |
| 409,474 |
| 9,376 |
| 4.60 | % | |||
Federal Reserve short-term borrowings |
| 0 |
| 0 |
| 0.00 | % |
| 108,791 |
| 2,643 |
| 4.88 | % | |||
Total interest-bearing liabilities | 11,013,530 |
| 95,565 |
| 1.75 | % |
| 10,431,956 |
| 93,298 |
| 1.81 | % | ||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
| |||||||
Noninterest checking deposits |
| 3,521,356 |
|
|
|
| 3,552,709 |
|
|
| |||||||
Other liabilities |
| 170,128 |
|
|
|
| 145,712 |
|
|
| |||||||
Shareholders' equity |
| 1,810,453 |
|
|
|
| 1,657,543 |
|
|
| |||||||
Total liabilities and shareholders' equity | $ | 16,515,467 |
|
|
| $ | 15,787,920 |
|
|
| |||||||
|
|
|
|
|
| ||||||||||||
Net interest earnings (FTE) (non-GAAP) |
|
| $ | 246,738 |
|
|
|
| $ | 218,366 |
|
| |||||
|
|
|
|
|
| ||||||||||||
Net interest spread | 2.76 | % | 2.46 | % | |||||||||||||
Net interest spread (FTE) (non-GAAP) |
|
|
|
|
| 2.78 | % |
|
|
|
|
| 2.49 | % | |||
Net interest margin |
|
|
|
| 3.24 | % |
|
|
|
| 2.98 | % | |||||
Net interest margin (FTE) (non-GAAP) |
| 3.27 | % |
| 3.01 | % | |||||||||||
|
|
|
|
| |||||||||||||
Fully tax-equivalent adjustment (non-GAAP)(3) |
|
| $ | 1,778 |
|
|
|
| $ | 1,967 |
|
| |||||
| (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. The adjustment enhances the comparability of the performance of assets that have different tax liabilities. |
48
Table of Contents
As discussed above and disclosed in Table 3 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 3: Rate/Volume
Three months ended June 30, 2025 | Six months ended June 30, 2025 | |||||||||||||||||
versus June 30, 2024 | versus June 30, 2024 | |||||||||||||||||
Increase (Decrease) Due to Change in (1) | Increase (Decrease) Due to Change in (1) | |||||||||||||||||
Net | Net | |||||||||||||||||
(000's omitted) |
| Volume |
| Rate |
| Change |
| Volume |
| Rate |
| Change | ||||||
Interest earned on: |
|
|
|
|
|
|
|
|
|
| ||||||||
Cash equivalents | $ | 1,210 | $ | (105) | $ | 1,105 | $ | 145 | $ | (739) | $ | (594) | ||||||
Taxable investment securities |
| 684 |
| 1,013 |
| 1,697 |
| 1,351 |
| 2,112 |
| 3,463 | ||||||
Nontaxable investment securities |
| (409) |
| (11) |
| (420) |
| (974) |
| (50) |
| (1,024) | ||||||
Loans (net of unearned discount) |
| 6,663 |
| 6,726 |
| 13,389 |
| 14,933 |
| 13,861 |
| 28,794 | ||||||
Total interest-earning assets(2) |
| 7,587 |
| 8,184 |
| 15,771 |
| 13,907 |
| 16,732 |
| 30,639 | ||||||
|
|
|
|
|
| |||||||||||||
Interest paid on: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest checking, savings and money market deposits |
| 1,214 |
| (15) |
| 1,199 |
| 1,989 |
| (375) |
| 1,614 | ||||||
Time deposits |
| 945 |
| (1,896) |
| (951) |
| 3,453 |
| (2,318) |
| 1,135 | ||||||
Customer repurchase agreements |
| (137) |
| (244) |
| (381) |
| (168) |
| (606) |
| (774) | ||||||
Overnight borrowings | (879) | (200) | (1,079) | (570) | (275) | (845) | ||||||||||||
FHLB and other borrowings |
| 1,867 |
| (154) |
| 1,713 |
| 4,114 |
| (334) |
| 3,780 | ||||||
Federal Reserve short-term borrowings |
| 0 |
| 0 |
| 0 |
| (2,643) |
| 0 |
| (2,643) | ||||||
Total interest-bearing liabilities(2) |
| 2,660 |
| (2,159) |
| 501 |
| 5,448 |
| (3,181) |
| 2,267 | ||||||
Net interest earnings (FTE) (non-GAAP)(2) | $ | 5,331 | $ | 9,939 | $ | 15,270 | $ | 9,789 | $ | 18,583 | $ | 28,372 | ||||||
| (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. |
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 and other core customer activities typically provided through the branch network 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 Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc.) and asset management services (performed by Nottingham Advisors, Inc.), 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 realized and unrealized gains or losses on investment securities.
49
Table of Contents
Table 4: Noninterest Revenues
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(000’s omitted) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Employee benefit services | $ | 32,380 | $ | 32,118 | $ | 65,002 | $ | 63,816 | |||||
Insurance services |
| 13,388 |
| 13,307 |
| 27,589 |
| 24,416 | |||||
Wealth management services | 8,683 | 8,691 | 18,545 | 17,901 | |||||||||
Deposit service charges and fees |
| 7,849 |
| 7,501 |
| 15,695 |
| 15,074 | |||||
Debit interchange and ATM fees |
| 6,670 |
| 6,670 |
| 13,131 |
| 13,348 | |||||
Mortgage banking |
| 972 |
| 2,275 |
| 1,970 |
| 2,620 | |||||
Other banking revenues |
| 4,567 |
| 3,193 |
| 8,368 |
| 6,849 | |||||
Loss on sales of investment securities | 0 | (232) | 0 | (232) | |||||||||
Unrealized (loss) gain on equity securities |
| (1) |
| 867 |
| 244 |
| 883 | |||||
Total noninterest revenues | $ | 74,508 | $ | 74,390 | $ | 150,544 | $ | 144,675 | |||||
|
|
|
| ||||||||||
Noninterest revenues/total revenues | 37.4 | % | 40.5 | % | 38.1 | % | 40.1 | % | |||||
Operating noninterest revenues/operating revenues (FTE basis) (non-GAAP) (1) | 37.2 | % | 40.1 | % | 37.9 | % | 39.7 | % | |||||
| (1) | Operating noninterest revenues, a non-GAAP measure, excludes loss on sales of investment securities and unrealized (loss) gain 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 and unrealized (loss) gain on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures. |
As displayed in Table 4, noninterest revenues totaled $74.5 million for the second quarter of 2025 and $150.5 million for the first six months of 2025. This represents an increase of $0.1 million, or 0.2%, for the quarter and an increase of $5.9 million, or 4.1%, for the YTD period in comparison to the equivalent 2024 periods. Noninterest revenues for the second quarter and YTD periods of 2024 include a $0.9 million unrealized gain on equity securities associated with the conversion of certain Visa Class B shares to Visa Class C shares and a $0.2 million loss on sales of investment securities associated with the sales of certain available-for-sale investment securities. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $74.5 million for the second quarter of 2025, an increase of $0.8 million, or 1.0%, from the prior year’s second quarter and totaled $150.3 million for the first six months of 2025, an increase of $6.3 million, or 4.4%, from the first six months of 2024.
Employee benefit services revenues increased $0.3 million, or 0.8%, and $1.2 million, or 1.9%, for the three and six months ended June 30, 2025, respectively, as compared to the equivalent prior year periods, driven by new business in recordkeeping services and increases in total participants under administration, along with growth in asset-based fee revenues resulting from market appreciation, partially offset by declines in fiduciary trust services.
Insurance services revenues increased $0.1 million, or 0.6%, and $3.2 million, or 13.0%, for the second quarter and YTD periods, respectively, due to organic and acquired growth in commissions revenues and the timing of contingent commissions.
Wealth management services revenues were consistent for the second quarter of 2025 and increased $0.6 million, or 3.6%, for June 2025 YTD as compared to the same time periods of 2024, driven by increases in trust and broker-dealer services, partially offset by declines in asset management service revenues.
Banking noninterest revenues increased $0.4 million, or 2.1%, between the second quarter of 2024 and 2025 and increased $1.3 million, or 3.4%, between the first six months of 2024 and 2025. The growth between both periods was driven by increases in other banking revenues (an increase of $1.4 million for the quarter and $1.5 million YTD) and deposit service charges and fees (an increase of $0.3 million for the quarter and $0.6 million YTD), partially offset by decreases in mortgage banking revenues (a decrease of $1.3 million for the quarter and $0.6 million YTD), and debit interchange and ATM fees (consistent with the prior year quarter and a decrease of $0.2 million YTD). The increase in other banking revenues is primarily driven by higher customer interest rate swap fee revenues and CRE financing and advisory revenues, while the decrease in mortgage banking revenues was due to the prior year including a one-time gain on mortgage servicing rights.
50
Table of Contents
The ratio of noninterest revenues to total revenues was 37.4% for the second quarter of 2025 and 38.1% for June YTD 2025, compared to 40.5% for the prior year’s second quarter and 40.1% for June YTD 2024. The quarterly decrease was due to net interest income increasing 14.0% while noninterest revenues increased 0.2%. The YTD decrease was the result of net interest income increasing 13.2% while noninterest revenues increased 4.1%.
The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 37.2% for the quarter and 37.9% for the six months ended June 30, 2025, respectively, compared to 40.1% and 39.7% for the corresponding periods of 2024. The decrease between the quarterly periods was due to a 13.8% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 1.0%. The year-to-date decrease was a function of a 13.0% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 4.4%.
Noninterest Expenses
Table 5 below sets forth the quarterly and YTD results of the major noninterest expense categories for the current and prior year, as well as efficiency ratios (defined below), a standard measure of expense utilization effectiveness commonly used in the banking industry.
Table 5: Noninterest Expenses
Three Months Ended | Six Months Ended |
| |||||||||||
June 30, | June 30, |
| |||||||||||
(000's omitted) |
| 2025 |
| 2024 | 2025 |
| 2024 | ||||||
Salaries and employee benefits |
| $ | 79,021 |
| $ | 73,447 | $ | 155,463 | $ | 146,510 | |||
Data processing and communications |
| 16,699 |
| 15,274 |
| 32,821 |
| 29,622 | |||||
Occupancy and equipment |
| 11,486 |
| 10,715 |
| 24,184 |
| 22,077 | |||||
Business development and marketing |
| 4,001 |
| 4,139 |
| 7,131 |
| 7,184 | |||||
Legal and professional fees |
| 4,368 |
| 3,459 |
| 9,217 |
| 7,800 | |||||
Amortization of intangible assets |
| 3,369 |
| 3,877 |
| 6,851 |
| 7,453 | |||||
Litigation accrual | 0 | 0 | (50) | 119 | |||||||||
Acquisition expenses | 67 | 104 | 68 | 139 | |||||||||
Restructuring expenses | 1,525 | 0 | 1,525 | 0 | |||||||||
Other |
| 8,566 |
| 7,984 |
| 17,182 |
| 16,179 | |||||
Total noninterest expenses | $ | 129,102 | $ | 118,999 | $ | 254,392 | $ | 237,083 | |||||
Noninterest expenses/average assets | 3.12 | % | 3.03 | % | 3.11 | % | 3.02 | % | |||||
Operating noninterest expenses(1)/average assets (non-GAAP) |
| 3.04 | % |
| 2.93 | % |
| 3.02 | % |
| 2.92 | % | |
Efficiency ratio (GAAP) | 64.8 | % | 64.7 | % | 64.3 | % | 65.7 | % | |||||
Operating efficiency ratio (non-GAAP)(2) |
| 62.2 | % |
| 62.5 | % |
| 62.0 | % |
| 63.3 | % | |
| (1) | Operating noninterest expenses, a non-GAAP measure, is calculated as total noninterest expenses less litigation accrual, acquisition expenses, restructuring expenses and amortization of intangibles. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures. |
| (2) | Operating efficiency ratio, a non-GAAP measure, is calculated as operating expenses as defined in footnote (1) above divided by net interest income on a fully tax-equivalent basis plus noninterest revenues excluding loss on sales of investment securities and unrealized gain (loss) on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures. |
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As shown in Table 5, the Company recorded noninterest expenses of $129.1 million and $254.4 million for the second quarter and YTD periods of 2025, respectively, representing an increase of $10.1 million, or 8.5%, and an increase of $17.3 million, or 7.3%, from the prior year periods, respectively. The increases were primarily driven by salaries and employee benefits that increased $5.6 million, or 7.6%, and $9.0 million, or 6.1%, for the second quarter and YTD periods of 2025, respectively, as compared to the corresponding periods of 2024. The remaining change to noninterest expenses is attributable to data processing and communications (an increase of $1.4 million for the quarter and $3.2 million YTD), occupancy and equipment (an increase of $0.8 million for the quarter and $2.1 million YTD), business development and marketing (a decrease of $0.1 million for the quarter and YTD), legal and professional fees (an increase of $0.9 million for the quarter and $1.4 million YTD), amortization of intangible assets (a decrease of $0.5 million for the quarter and $0.6 million YTD), litigation accrual (no change for the quarter and a decrease of $0.2 million YTD), acquisition expenses (a decrease of $0.1 million for the quarter and YTD), restructuring expenses (an increase of $1.5 million for the quarter and YTD) and other expenses (an increase of $0.6 million for the quarter and $1.0 million YTD).
The increases in salaries and benefits expense were driven by merit and market-related increases in employee wages and incentive compensation, select staff additions and higher employee medical costs. Data processing increases were 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 modernization initiatives. Increases in occupancy and equipment expenses were primarily due to higher property maintenance costs along with incremental expenses associated with the Bank’s de novo branches opened between the periods. The Company also recorded $1.5 million in costs related to severance payments accrued for a workforce optimization plan due to planned branch consolidations and other consumer banking operational initiatives.
The Company’s GAAP efficiency ratio was 64.8% for the second quarter of 2025, 0.1 percentage point unfavorable to the comparable quarter of 2024. This resulted from total revenues increasing 8.4%, primarily due to higher net interest income, while total noninterest expenses increased 8.5% due to the factors noted above. The GAAP efficiency ratio of 64.3% for June YTD 2025 was 1.4 percentage points favorable to the 65.7% GAAP efficiency ratio for June YTD 2024. The improvement in the GAAP efficiency ratio between the comparable YTD periods was the result of total revenues increasing 9.5% primarily due to increases in net interest income, while total noninterest expenses increased 7.3% due to the factors noted above.
The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 62.2% for the second quarter, 0.3 percentage points favorable to the comparable quarter of 2024. This resulted from operating revenues (FTE), a non-GAAP measure as described above, increasing 8.7% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.9%. The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, of 62.0% for the first six months of 2025 was 1.3 percentage points favorable compared to the first six months of 2024 due to operating revenues (FTE), a non-GAAP measure as described above, increasing by 9.6% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.2%.
Annualized current quarter noninterest expenses as a percentage of average assets increased 0.09 percentage points versus the second quarter of the prior year as noninterest expenses increased 8.5% while average assets increased 5.1%. On a YTD basis, annualized noninterest expenses as a percentage of average assets increased 0.09 percentage points as noninterest expenses increased 7.3% while average assets increased 4.6%. Noninterest expenses increased between both periods due to the factors noted above and average assets increased between both periods primarily due to interest-earning asset growth.
Annualized current year operating noninterest expenses, a non-GAAP measure as described above, as a percentage of average assets increased 0.09 percentage points versus the prior year quarter and the prior year-to-date period as operating noninterest expenses, a non-GAAP measure as described above, increased at a higher rate than average assets on both a quarterly and YTD basis. Operating noninterest expenses, a non-GAAP measure as described above, increased 7.9% for the quarter and 7.2% for the year-to-date period, while average assets increased 5.1% for the quarter and 4.6% for the year-to-date period.
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Income Taxes
The second quarter and YTD 2025 effective income tax rates were 22.3% and 22.5%, respectively, as compared to 22.8% and 22.9% for the comparable periods of 2024. The decreases in the second quarter and YTD 2025 effective income tax rates are primarily attributable to an increase in stock-based compensation tax benefits between the periods. The Company recorded a $0.1 million and $0.6 million income tax benefit associated with stock-based compensation for the second quarter and YTD 2025, respectively. The Company recorded a $0.2 million tax expense associated with stock-based compensation for YTD 2024, while the tax expense associated with stock-based compensation was immaterial for the second quarter of 2024. The second quarter and YTD 2025 tax expense associated with the amortization of income tax credit investments was $3.0 million and $3.3 million, respectively, as compared to $0.3 million and $0.6 million for the comparable periods of 2024. The effective tax rates adjusted to exclude the income tax impact of stock-based compensation and amortization of income tax credit investments for the second quarter and YTD 2025 were 18.0% and 20.5%, respectively, as compared to 22.3% and 22.1% for the comparable periods of 2024, due to an increase in federal income tax credits associated with the Company’s investment in tax credits generated by a solar energy producing company.
Investment Securities
The carrying value of investment securities (including unrealized gains and losses) was $4.35 billion at the end of the second quarter, an increase of $131.7 million, or 3.1%, from December 31, 2024 and an increase of $183.5 million, or 4.4%, from June 30, 2024. The book value of investment securities (excluding unrealized gains and losses) of $4.68 billion at the end of the second quarter increased $61.8 million, or 1.3%, from December 31, 2024 and increased $87.3 million, or 1.9%, from June 30, 2024, driven by government agency mortgage-backed securities purchases. During the first six months of 2025, the Company purchased $82.2 million of government agency mortgage-backed securities with an average yield of 5.41%, which the Company classified as held-to-maturity. These additions were offset by $36.1 million of investment maturities, calls and principal payments during the first six months of 2025. Additionally, there was $19.0 million of net accretion on investment securities during the first six months of 2025. The effective duration of the investment securities portfolio was 5.8 years at the end of the second quarter of 2025, as compared to 6.2 years at the end of 2024 and 6.6 years at the end of the second quarter of 2024.
The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At June 30, 2025, the investment portfolio (excluding held-to-maturity investment securities) had a $334.7 million net unrealized loss, a $69.9 million decrease from the $404.6 million net unrealized loss at December 31, 2024 and a $96.2 million decrease from the $430.9 million net unrealized loss at June 30, 2024. These decreases were principally driven by the movements in medium to long-term interest rates, as well as the volume and rates associated with the securities sales and maturities that occurred during the past 12 months.
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The following table sets forth the carrying value of the Company’s investment securities portfolio:
Table 6: Investment Securities
| June 30, |
| December 31, |
| June 30, | ||||
(000's omitted) | 2025 | 2024 | 2024 | ||||||
Available-for-Sale Portfolio: |
|
|
| ||||||
U.S. Treasury and agency securities | $ | 2,154,944 | $ | 2,083,786 | $ | 2,056,048 | |||
Obligations of state and political subdivisions |
| 375,240 |
| 386,495 | 417,443 | ||||
Government agency mortgage-backed securities |
| 291,927 |
| 301,224 | 320,295 | ||||
Government agency collateralized mortgage obligations |
| 5,430 |
| 6,512 | 7,670 | ||||
Corporate debt securities |
| 4,829 |
| 7,697 | 7,497 | ||||
Total available-for-sale portfolio | 2,832,370 |
| 2,785,714 | 2,808,953 | |||||
|
| ||||||||
Held-to-Maturity Portfolio: | |||||||||
U.S. Treasury and agency securities | 1,153,480 | 1,138,743 | 1,123,825 | ||||||
Government agency mortgage-backed securities | 277,511 | 206,412 | 147,284 | ||||||
Total held-to-maturity portfolio | 1,430,991 | 1,345,155 | 1,271,109 | ||||||
Equity and Other Securities: |
|
|
| ||||||
Equity securities without readily determinable fair value: |
|
| |||||||
Federal Home Loan Bank common stock |
| 44,859 |
| 45,408 | 44,838 | ||||
Federal Reserve Bank common stock |
| 33,331 |
| 33,442 | 33,568 | ||||
Other equity securities without readily determinable fair value | 5,922 | 6,313 | 6,089 | ||||||
Total equity securities without readily determinable fair value | 84,112 | 85,163 | 84,495 | ||||||
Equity securities with readily determinable fair value | 2,597 | 2,354 | 2,005 | ||||||
Total equity and other securities |
| 86,709 |
| 87,517 | 86,500 | ||||
Total investments | $ | 4,350,070 | $ | 4,218,386 | $ | 4,166,562 | |||
Loans
Loans ended the second quarter at $10.52 billion, $86.8 million, or 0.8%, higher than December 31, 2024 and $495.3 million, or 4.9%, higher than June 30, 2024 ending loans.
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 business lending portfolio increased $247.0 million, or 5.8%, from June 30, 2024, and $36.0 million, or 0.8%, from December 31, 2024, driven by net organic growth over both periods. As compared to December 31, 2024, multifamily increased $66.6 million, or 9.2% and business non-real estate loans, including commercial and industrial lending, increased $97.7 million, or 8.6%, while non-owner occupied CRE decreased $108.5 million, or 6.1%, and owner-occupied CRE decreased $19.7 million, or 2.3%. The change from December 31, 2024 includes $80.3 million of construction loans that were reclassified from non-owner occupied to multifamily during the first quarter of 2025. While certain macroeconomic concerns persist related to non-owner occupied and multifamily CRE, 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 184% of total bank-level regulatory capital. CRE lending represents 72.7% of the total business lending portfolio at June 30, 2025, compared to 74.7% at December 31, 2024 and 74.5% at June 30, 2024. Other commercial and industrial lending represents the remaining 27.3% of total business lending at June 30, 2025, compared to 25.3% at December 31, 2024 and 25.5% at June 30, 2024. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 23.9% of total business lending, followed by office and lodging, at 10.9% and 10.3%, respectively. The Company’s largest owner-occupied lending concentration by industry is retail trade at 8.7% of total business lending, followed by real estate rental and leasing and health care and social assistance that each comprise 2.5% of total business lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry or geographic concentrations, no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of CRE lending being conducted in major metropolitan areas. See Table 7 below for concentrations of CRE lending by borrower type and Table 8 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 intends the composition of its growth in its business lending portfolio over the remainder of 2025 to be proportionally higher for business non-real estate lending than CRE lending compared to what was experienced by the Company over the past several years, with the intent of keeping CRE loans’ share of the total business portfolio at or below recent levels. 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 K beginning on page 33 of this Form 10-Q.
The following table presents the concentration by borrower type of the Company’s CRE loan balances as of June 30, 2025 and December 31, 2024:
Table 7: Concentrations of CRE Lending by Borrower Type
June 30, 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 | $ | 790,694 |
| 23.9 | % | $ | 724,114 | 21.5 | % | ||
Office |
| 358,935 |
| 10.9 | % | 368,387 | 11.0 | % | |||
Lodging |
| 338,001 |
| 10.3 | % | 336,221 | 10.0 | % | |||
Commercial Construction |
| 320,779 |
| 9.7 | % | 395,482 | 11.7 | % | |||
Retail |
| 253,693 |
| 7.7 | % | 256,351 | 7.6 | % | |||
Other Lessors of CRE |
| 181,851 |
| 5.5 | % | 200,215 | 6.0 | % | |||
Warehouse/Industrial |
| 148,724 |
| 4.5 | % | 149,722 | 4.5 | % | |||
Nursing/Assisted Living |
| 53,420 |
| 1.6 | % | 56,159 | 1.7 | % | |||
Residential Construction |
| 3,476 |
| 0.1 | % | 4,278 | 0.1 | % | |||
All Other |
| 7,708 |
| 0.2 | % | 8,284 | 0.2 | % | |||
Total multifamily and non-owner occupied CRE |
| 2,457,281 |
| 74.4 | % | 2,499,213 | 74.3 | % | |||
Owner-occupied CRE by industry: |
|
| |||||||||
Retail Trade |
| 288,326 |
| 8.7 | % | 293,208 | 8.7 | % | |||
AG真人官方 Estate Rental and Leasing | 82,743 | 2.5 | % | 81,802 | 2.4 | % | |||||
Health Care and Social Assistance |
| 81,592 |
| 2.5 | % | 85,151 | 2.5 | % | |||
Other Services | 72,682 | 2.2 | % | 81,688 | 2.4 | % | |||||
Accommodation and Food Services |
| 60,423 |
| 1.8 | % | 39,385 | 1.2 | % | |||
Arts, Entertainment and Recreation | 59,678 | 1.8 | % | 87,709 | 2.6 | % | |||||
Agriculture and Forestry |
| 50,279 |
| 1.5 | % | 51,602 | 1.5 | % | |||
Manufacturing |
| 47,063 |
| 1.4 | % | 49,558 | 1.5 | % | |||
Wholesale Trade |
| 23,296 |
| 0.7 | % | 25,312 | 0.8 | % | |||
Construction |
| 19,124 |
| 0.6 | % | 16,791 | 0.5 | % | |||
Transportation and Warehousing |
| 11,245 |
| 0.3 | % | 11,547 | 0.3 | % | |||
Professional, Scientific and Technical Services |
| 9,744 |
| 0.3 | % | 7,603 | 0.2 | % | |||
Educational Services |
| 5,448 |
| 0.2 | % | 4,618 | 0.1 | % | |||
All Other |
| 33,429 |
| 1.1 | % | 28,809 | 1.0 | % | |||
Total owner occupied CRE |
| 845,072 |
| 25.6 | % | 864,783 | 25.7 | % | |||
Total CRE | $ | 3,302,353 |
| 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 June 30, 2025 and December 31, 2024:
Table 8: Concentrations of CRE by Property Location
June 30, 2025 | Multifamily CRE | Owner occupied CRE | Non-owner occupied CRE | Total CRE |
| ||||||||||||||||
Amortized | Percentage of | Amortized | Percentage of | Amortized | Percentage of | Amortized | Percentage of |
| |||||||||||||
(000’s omitted, except percentages) |
| Cost |
| Total CRE |
| Cost |
| Total CRE |
| Cost |
| Total CRE |
| Cost |
| Total CRE |
| ||||
MSA: | |||||||||||||||||||||
Albany-Schenectady-Troy, NY | $ | 97,881 |
| 3.0 | % | $ | 97,383 |
| 2.9 | % | $ | 250,484 |
| 7.6 | % | $ | 445,748 |
| 13.5 | % | |
Burlington-South Burlington, VT |
| 193,311 |
| 5.9 | % |
| 36,532 |
| 1.1 | % |
| 144,535 |
| 4.4 | % |
| 374,378 |
| 11.4 | % | |
Rochester, NY | 37,442 | 1.1 | % | 102,050 | 3.1 | % | 143,079 | 4.3 | % | 282,571 | 8.5 | % | |||||||||
Buffalo-Cheektowaga, NY |
| 38,536 |
| 1.2 | % |
| 63,027 |
| 1.9 | % |
| 155,605 |
| 4.7 | % |
| 257,168 |
| 7.8 | % | |
Syracuse, NY |
| 11,984 |
| 0.4 | % |
| 71,382 |
| 2.2 | % |
| 146,950 |
| 4.4 | % |
| 230,316 |
| 7.0 | % | |
Scranton Wilkes-Barre, PA |
| 61,658 |
| 1.9 | % |
| 61,560 |
| 1.9 | % |
| 94,822 |
| 2.9 | % |
| 218,040 |
| 6.7 | % | |
Utica-Rome, NY |
| 49,360 |
| 1.5 | % |
| 35,207 |
| 1.1 | % |
| 57,284 |
| 1.7 | % |
| 141,851 |
| 4.3 | % | |
Glens Falls, NY | 43,591 | 1.3 | % | 3,685 | 0.1 | % | 20,735 | 0.6 | % | 68,011 | 2.0 | % | |||||||||
All Other MSA - NY(1)(2) |
| 61,522 |
| 1.9 | % |
| 65,997 |
| 2.0 | % |
| 98,516 |
| 3.0 | % |
| 226,035 |
| 6.9 | % | |
All Other MSA - PA(1)(2) |
| 17,024 |
| 0.5 | % |
| 56,597 |
| 1.7 | % |
| 126,783 |
| 3.8 | % |
| 200,404 |
| 6.0 | % | |
All Other MSA(1) |
| 84,968 |
| 2.6 | % |
| 41,939 |
| 1.3 | % |
| 194,189 |
| 5.9 | % |
| 321,096 |
| 9.8 | % | |
|
| ||||||||||||||||||||
Non-MSAs: | |||||||||||||||||||||
NY |
| 51,830 |
| 1.6 | % |
| 160,961 |
| 4.9 | % |
| 183,260 |
| 5.5 | % |
| 396,051 |
| 12.0 | % | |
All Other Non-MSA |
| 41,587 |
| 1.0 | % |
| 48,752 |
| 1.4 | % |
| 50,345 |
| 1.7 | % |
| 140,684 |
| 4.1 | % | |
Total | $ | 790,694 |
| 23.9 | % | $ | 845,072 |
| 25.6 | % | $ | 1,666,587 |
| 50.5 | % | $ | 3,302,353 |
| 100.0 | % | |
December 31, 2024 | Multifamily CRE | Owner occupied CRE | Non-owner occupied CRE | Total CRE |
| ||||||||||||||||
Amortized | Percentage of | Amortized | Percentage of | Amortized | Percentage of | Amortized | Percentage of |
| |||||||||||||
(000’s omitted, except percentages) |
| Cost |
| Total CRE |
| Cost |
| Total CRE |
| Cost |
| Total CRE |
| Cost |
| 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 with the respective core city in New York or Pennsylvania. |
Consumer mortgages increased $154.9 million, or 4.6%, from one year ago and increased $33.2 million, or 1.0%, from December 31, 2024, with the increases over both periods representing net organic growth and included the impact of certain secondary market sales of new volume production. The Company sold $16.6 million and $34.1 million of consumer mortgage production during the three and six months ended 2025, respectively. 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 $42.2 million, or 9.3%, from one year ago and increased $16.8 million, or 3.5%, from December 31, 2024, in part a result of lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment as compared to medium to long-term history.
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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 $51.2 million, or 2.7%, from one year ago, and increased $0.7 million, or 0.1%, from December 31, 2024. The increases were primarily due to the Company offering competitive pricing, benefitting from reduced participation by certain competitors and capturing an increased share of the sales volumes that existed in its market area and dealer network, which resulted in growth in the Company’s consumer installment portfolio, partially offset by a weather-related reduction in vehicle sales volumes in the Company’s footprint during the beginning of 2025 that recovered during the second quarter of 2025 as conditions improved. Although the consumer indirect loan market is highly competitive, the Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio, while continuing to pursue the expansion of its dealer network. Consumer direct loans have historically provided attractive returns, and the Company is committed to providing competitive market offerings to its customers in this important loan category. Despite the strong competition the Company faces from the financing subsidiaries of vehicle manufacturers and other financial intermediaries, the Company will continue to strive to grow these key portfolios through varying market conditions over the long term.
Asset Quality
The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the periods indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, as of 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 is expected to be incurred in 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. As shown in Table 9, total allowance for credit losses at the end of the first quarter was $81.9 million, an increase of $10.5 million, or 14.6%, from one year earlier and up $2.7 million, or 3.5%, from the end of 2024.
Table 9: Allowance for Credit Losses by Loan Type
| June 30, 2025 |
| December 31, 2024 |
| June 30, 2024 |
| ||||||||||
Allowance | Percent of | Allowance | Percent of | Allowance | Percent of | |||||||||||
for Credit | Total Loan | for Credit | Total Loan | for Credit | Total Loan | |||||||||||
(000's omitted except for ratios) | Losses |
| Balances |
| Losses |
| Balances |
| Losses |
| Balances | |||||
Business lending | $ | 41,154 | 43.2 | % | $ | 37,201 | 43.2 | % | $ | 31,128 | 42.8 | % | ||||
Consumer mortgage |
| 14,196 |
| 33.5 | % |
| 15,017 |
| 33.5 | % |
| 14,303 |
| 33.6 | % | |
Consumer indirect |
| 19,885 |
| 16.8 | % |
| 20,895 |
| 16.9 | % |
| 20,124 |
| 17.2 | % | |
Consumer direct |
| 4,133 |
| 1.8 | % |
| 3,453 |
| 1.8 | % |
| 3,368 |
| 1.9 | % | |
Home equity |
| 1,483 |
| 4.7 | % |
| 1,548 |
| 4.6 | % |
| 1,519 |
| 4.5 | % | |
Unallocated | 1,000 | 0.0 | % | 1,000 | 0.0 | % | 1,000 | 0.0 | % | |||||||
Total | $ | 81,851 |
| 100.0 | % | $ | 79,114 |
| 100.0 | % | $ | 71,442 |
| 100.0 | % | |
As demonstrated in Table 9, the consumer direct and indirect installment loan portfolios and the business lending portfolio carry higher credit risk than the consumer mortgage and home equity portfolios; 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 June 30, 2025 was consistent with December 31, 2024 and June 30, 2024.
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Allowance for credit losses and loan net charge-off ratios are as follows:
Table 10: Loan Ratios
June 30, | December 31, | June 30, | ||||||||
| 2025 |
| 2024 |
| 2024 |
| ||||
Allowance for credit losses/total loans |
| 0.78 | % |
| 0.76 | % |
| 0.71 | % | |
Allowance for credit losses/nonperforming loans |
| 153 | % |
| 108 | % |
| 141 | % | |
Nonaccrual loans/total loans |
| 0.44 | % |
| 0.64 | % |
| 0.47 | % | |
Allowance for credit losses/nonaccrual loans |
| 179 | % |
| 119 | % |
| 151 | % | |
Net charge-offs (annualized) to average loans outstanding (quarterly): |
|
| ||||||||
Business lending | 0.40 | % |
| 0.13 | % |
| 0.02 | % | ||
Consumer mortgage | 0.00 | % | 0.00 | % | 0.00 | % | ||||
Consumer indirect | 0.05 | % | 0.31 | % | 0.16 | % | ||||
Consumer direct | 0.70 | % | 0.68 | % | 0.80 | % | ||||
Home equity | 0.01 | % | 0.03 | % | 0.03 | % | ||||
Total loans | 0.20 | % | 0.12 | % | 0.05 | % | ||||
Net charge-offs during the second quarter of 2025 were $5.1 million, an increase of $3.8 million compared to the second quarter of 2024. The business lending portfolio experienced higher net charge-off levels compared with the second quarter of 2024 while the consumer installment, consumer mortgage and home equity portfolios were below prior year levels. The increase in the net charge-off levels for the second quarter of 2025 was primarily due to the charge-off of one non-owner occupied CRE loan relationship that was previously individually assessed. The one non-owner occupied CRE charged-off loan represented $4.3 million of the total $4.5 million net charge-offs in the business lending portfolio and contributed 38 basis points to the net charge-off ratio for business lending for the second quarter of 2025. The total net charge-off ratio (net charge-offs annualized as a percentage of average loans outstanding for the quarter) for the second quarter was 0.20%, 8 basis points higher than the ratio for the fourth quarter of 2024 and 15 basis points higher than the ratio for the second quarter of 2024. The net charge-off ratios for the second quarter of 2025 for the business lending, portfolio was above the Company’s average for the trailing eight quarters, while the net charge-off ratio for the consumer mortgage, consumer installment and home equity portfolios were below the Company’s average for the trailing eight quarters.
Other real estate owned (“OREO”) at June 30, 2025 was $8.0 million. This compares to $2.8 million at December 31, 2024 and $1.7 million at June 30, 2024. At June 30, 2025, OREO consisted of 44 residential properties with a total value of $2.6 million and one commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million. This compares to 44 residential properties with a total value of $2.8 million and no commercial properties at December 31, 2024, and 24 residential properties with a total value of $1.4 million and one commercial property with a value of $0.3 million at June 30, 2024. The increase in OREO over the last twelve months was primarily driven by commercial OREO related to an investment in a special purpose entity that holds the property underlying the previously mentioned charged-off CRE loan, while the increase in residential OREO is related to the Company working through a backlog of residential foreclosures that arose due to pandemic-related moratoriums that have since been lifted.
Approximately 34% of the nonperforming loans at June 30, 2025 were related to the business lending portfolio, which is comprised of business loans broadly diversified by industry and property type. Of the nonperforming loans in the business lending portfolio, other commercial and industrial loans represents 55% of the balance, owner-occupied CRE represents 36% of the balance, non-owner occupied CRE represents 8% of the balance and multifamily represents the remaining 1% of the balance. Nonperforming business loans decreased 49 basis points as compared to December 31, 2024 and were consistent as compared to June 30, 2024. The decrease in nonperforming business loans as compared to December 31, 2024 is primarily related to the charge-off of one non-owner occupied CRE loan relationship previously mentioned and the substantial repayment of one multifamily CRE nonperforming loan relationship.
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Approximately 58% of nonperforming loans at June 30, 2025 were comprised of consumer mortgages. 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 become lower and more stable, and the unemployment rate remains low; this has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 8% of nonperforming loans relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors that were identified for consumer mortgages. The allowance for credit losses to nonperforming loans ratio, a general measure of coverage adequacy, was 153% at the end of the second quarter, as compared to 108% at year-end 2024 and 141% at June 30, 2024. The increase in this ratio versus the end of 2024 and one year ago was due to the allowance for credit losses increasing proportionally more than nonperforming loans.
The Company’s asset quality metrics, including net charge-offs and delinquent and nonperforming loans, remain relatively low compared to the banking industry, reflecting the Company’s robust risk management practices and disciplined credit quality standards.
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 review the loan, 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.
Delinquent loans (defined as loans 30 days or more past due or in nonaccrual status) as a percent of total loans was 1.01% at the end of the second quarter, 23 basis points below the 1.24% at year-end 2024 and 6 basis points above the 0.95% at June 30, 2024. The business lending delinquency ratio at the end of the second quarter of 0.50% was 48 basis points below the level of 0.98% at December 31, 2024 and 8 basis points above the level of 0.42% at June 30, 2024. The changes in the delinquent loan ratios over the indicated prior periods were related to the previously mentioned charged-off and substantially repaid CRE loans. The delinquency rates for all loan portfolios except for consumer mortgage decreased as compared to the levels at December 31, 2024. The delinquency rates for business lending and consumer mortgage increased as compared to the levels at June 30, 2024, while consumer installment and home equity decreased.
The Company recorded a $4.1 million provision for credit losses in the second quarter of 2025. The second quarter provision for credit losses was $1.4 million higher than the equivalent prior year period’s provision for credit losses of $2.7 million. The allowance for credit losses of $81.9 million as of June 30, 2025 increased $10.5 million from the level one year ago. The current quarter provision for credit losses is reflective of the Company increasing its qualitative assessment for business lending. The allowance for credit losses to total loans ratio was 0.78% at June 30, 2025, 2 basis points higher than the levels at December 31, 2024 and 7 basis points higher than June 30, 2024. Refer to Note E: 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.
As of June 30, 2025, the net purchase discount related to the $837.3 million of remaining non-purchased credit deteriorated (“PCD”) loan balances acquired through prior period acquisition transactions was approximately $16.1 million, or 1.9% of that portfolio.
Deposits
As shown in Table 11, average deposits of $13.74 billion in the second quarter were $528.8 million, or 4.0%, higher than the second quarter of 2024 and increased $267.4 million, or 2.0%, from the fourth quarter of last year. On an ending basis, total deposits increased $260.0 million, or 1.9%, from December 31, 2024 and were $563.9 million, or 4.3%, higher than one year prior. Average noninterest checking deposits as a percentage of average total deposits was 25.6% in the second quarter compared to 26.7% in the second quarter of 2024 and 26.7% in the fourth quarter of last year. Average non-maturity deposits represented 84.5% of the Company’s average deposit funding base in the second quarter of 2025, while time deposits represented 15.5% of total average deposits. In comparison, time deposits represented 15.3% of total average deposits during the second quarter of 2024 and 16.2% of total average deposits during the fourth quarter of last year. The quarterly average cost of deposits was 1.19% for the second quarter of 2025, compared to 1.23% in the second quarter of 2024, reflective of the decrease in certain deposit interest rates as a result of changing market conditions. The Company continues to focus on expanding its deposit relationship base through its competitive product offerings, high-quality customer service, and market expansion initiatives.
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The Company’s deposit base is well diversified across customer segments, which as of June 30, 2025 is comprised of approximately 59% consumer, 27% business and 14% governmental, and broadly dispersed with an average consumer deposit balance per account of approximately $12,000 and average business deposit relationship of approximately $74,000, while the Company’s total average deposit balance per account is under $20,000. In addition, at the end of the quarter, 65% of the Company’s total deposit balances were in checking and low-rate savings accounts and the weighted-average age of the Company’s non-maturity deposit accounts was approximately 15 years. 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 $2.41 billion at June 30, 2025. This amount is determined by adjusting the amounts reported in the Bank Call Report by intercompany deposits, which are not external customers and are therefore eliminated in consolidation, and municipal deposits whose uninsured balances are collateralized by certain pledged investment securities. The Bank Call Report estimated uninsured deposit balances at June 30, 2025, reported gross, totaled $4.53 billion, which includes intercompany account balances of $310.6 million, and collateralized deposits of $1.81 billion. Estimated insured deposits, net of collateralized and intercompany deposits, represent 82% of ending total deposits at June 30, 2025. These estimates are based on the determination of known deposit account balances of each depositor and the insurance guidelines provided by the FDIC.
Average non-governmental and reciprocal deposits for the second quarter of 2025 increased $136.2 million, or 1.2%, versus the fourth quarter of 2024 and increased $234.0 million, or 2.1%, versus the year-earlier period, primarily driven by higher average balances of consumer money market deposits. Average governmental deposits for the second quarter increased $131.2 million, or 6.4%, from the fourth quarter of 2024 and $294.8 million, or 15.7%, from the second quarter of 2024. Average governmental deposits as a percentage of total average deposits increased from 14.2% in the second quarter of 2024 to 15.8% in the second quarter of 2025. The increase in average governmental and non-governmental and reciprocal deposit balances were reflective of competitive price offerings and expansion of the Company’s deposit relationship base due to the Company’s business development efforts.
Table 11: Quarterly Average Deposits
June 30, | December 31, | June 30, | |||||||
(000’s omitted) |
| 2025 |
| 2024 |
| 2024 | |||
Noninterest checking deposits | $ | 3,522,734 | $ | 3,603,416 |
| $ | 3,534,516 | ||
Interest checking deposits | 2,949,860 |
| 2,903,412 |
| 2,851,181 | ||||
Savings deposits | 2,328,638 |
| 2,226,716 |
| 2,226,220 | ||||
Money market deposits | 2,815,710 |
| 2,559,531 |
| 2,579,759 | ||||
Time deposits | 2,125,683 | 2,182,140 |
| 2,022,136 | |||||
Total deposits | $ | 13,742,625 | $ | 13,475,215 |
| $ | 13,213,812 | ||
Nongovernmental and reciprocal deposits | $ | 11,565,282 | $ | 11,429,073 |
| $ | 11,331,272 | ||
Governmental deposits | 2,177,343 | 2,046,142 |
| 1,882,540 | |||||
Total deposits | $ | 13,742,625 | $ | 13,475,215 |
| $ | 13,213,812 | ||
Borrowings
Borrowings, excluding securities sold under agreement to repurchase, at the end of the second quarter of 2025 totaled $713.8 million. This was $23.5 million, or 3.2%, lower than borrowings at December 31, 2024 and $2.9 million, or 0.4%, below the level at the end of the second quarter of 2024. The decrease from the end of the prior year’s second quarter was due to a decrease in overnight borrowings of $47.2 million, partially offset by increases in finance lease liabilities of $3.1 million related to the Company’s de novo branch expansions and other FHLB borrowings of $41.2 million, as the Company secured fixed rate FHLB term borrowings in the third quarter of 2024 to support the funding of continued loan growth. The decrease from the end of 2024 was primarily related to a decrease in other FHLB borrowings of $35.7 million largely driven by the scheduled paydowns of amortizing advances, partially offset by an increase in overnight borrowings of $12.4 million.
Securities sold under agreement to repurchase, also referred to as customer repurchase agreements, represent collateralized governmental and commercial funding from customers that price and operate similar to a deposit instrument. Customer repurchase agreements were $180.6 million at the end of the second quarter of 2025, $80.9 million lower than December 31, 2024, due primarily to the seasonal characteristics of this portfolio, and $34.8 million lower than June 30, 2024.
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Shareholders’ Equity and Regulatory Capital
Total shareholders’ equity of $1.88 billion at the end of the second quarter of 2025 represents an increase of $120.3 million from the balance at December 31, 2024. The increase was primarily driven by a decrease in accumulated other comprehensive loss of $61.3 million, net income of $101.0 million and stock-based compensation of $5.6 million, partially offset by common stock dividends declared of $48.6 million. The decrease in accumulated other comprehensive loss was mainly comprised of $61.2 million of other comprehensive income related to the Company’s investment securities portfolio, including a net increase in the after-tax market value adjustment on the available-for-sale investment portfolio as medium and long-term market interest rates decreased between the periods. Over the past 12 months, total shareholders’ equity increased $212.9 million, as net income, an increase in the after-tax market value adjustment on investments, the issuance of common stock in association with the employee stock plans and adjustments to the overfunded status of the Company’s employee retirement plans more than offset common stock dividends declared.
The dividend payout ratio (dividends declared divided by net income) for the first six months of 2025 was 48.2%, compared to 53.5% for the first six months of 2024. Second quarter dividends declared increased 2.3% versus one year earlier, as the Company’s quarterly dividend per share was raised from $0.45 to $0.46 in the third quarter of 2024, while total shares outstanding increased 0.7% due to issuances from the Company’s employee stock plans.
During the third quarter of 2025, the Company announced a one cent, or 2.2%, increase in the quarterly dividend to $0.47 per share on its common stock, which marked the 33rd consecutive year of dividend increases for the Company.
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.
The Company and the Bank are required to maintain a capital conservation buffer (“CCB”), 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 June 30, 2025, December 31, 2024 and June 30, 2024. Therefore, to satisfy both the minimum risk-based capital ratios and the CCB as of those dates, 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 June 30, 2025, December 31, 2024 and June 30, 2024, the Company and Bank meet all applicable capital adequacy requirements to be considered “well capitalized”. The regulatory capital ratios for the Company and Bank are presented below.
Table 12: Regulatory Ratios
June 30, 2025 |
| December 31, 2024 |
| June 30, 2024 |
| ||||||||
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 | 9.42 | % | 7.99 | % | 9.19 | % | 7.69 | % | 9.07 | % | 7.68 | % | |
Common equity Tier 1 capital ratio |
| 14.68 | % | 12.49 | % | 14.23 | % | 11.96 | % | 14.03 | % | 11.82 | % |
Tier 1 risk-based capital ratio |
| 14.68 | % | 12.50 | % | 14.23 | % | 11.96 | % | 14.03 | % | 11.82 | % |
Total risk-based capital ratio |
| 15.48 | % | 13.30 | % | 15.01 | % | 12.74 | % | 14.75 | % | 12.54 | % |
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The Company’s tier 1 leverage ratio was 9.42% at the end of the second quarter, an increase of 23 basis points from December 31, 2024 and 35 basis points above its level one year earlier. The increase in the Tier 1 leverage ratio in comparison to December 31, 2024 was the result of ending shareholders’ equity, excluding intangibles and other comprehensive income or loss items, increasing 4.3%, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased a lesser 1.7%. The Tier 1 leverage ratio also increased compared to the prior year’s second quarter as shareholders’ equity, excluding intangibles and other comprehensive income or loss items, increased 8.7%, while average assets, excluding intangibles and the market value adjustment, increased a lesser 4.6%. The increases in shareholders’ equity, excluding intangibles and other comprehensive income or loss items, were primarily a result of net earnings retention while the increases in average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, were reflective of organic loan growth and investment purchases primarily funded by net deposit inflows.
The shareholders’ equity-to-assets ratio was 11.30% at the end of the second quarter of 2025 compared to 10.76% at December 31, 2024 and 10.50% at June 30, 2024. The tangible equity-to-tangible assets ratio, a non-GAAP measure, of 6.51% increased 0.68 percentage points from December 31, 2024 and increased 1.13 percentage points versus June 30, 2024 (see Table 14 for Reconciliation of Quarterly GAAP to Non-GAAP Measures). The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from one year prior was driven by a $219.7 million, or 27.1%, increase in tangible equity, a non-GAAP measure, while tangible assets, a non-GAAP measure, increased $765.0 million, or 5.1%. The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from December 31, 2024 was driven by a $123.1 million, or 13.6%, increase in tangible equity, a non-GAAP measure, while tangible assets, a non-GAAP measure, increased $281.8 million, or 1.8%. The increases in tangible equity, a non-GAAP measure, were mainly due to a decrease in accumulated other comprehensive loss related to the investment securities portfolio and net earnings retention while the increases in tangible assets, a non-GAAP measure, were due primarily to the interest-earning asset growth described above.
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 $13.70 billion at June 30, 2025. The primary sources of non-deposit funds are customer repurchase agreements and FHLB and FRB overnight advances and term borrowings. At June 30, 2025, there were $180.6 million of customer repurchase agreements, $130.4 million of overnight borrowings, and $574.9 million of FHLB term borrowings outstanding.
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 13 below details the available sources of liquidity at June 30, 2025. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at June 30, 2025. The Company’s sources of immediately available liquidity of $5.94 billion as of June 30, 2025 represent approximately 246% 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 $2.41 billion.
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Table 13: Sources of Liquidity
| June 30, |
| December 31, |
| June 30, | |||||
(000’s omitted) | 2025 | 2024 | 2024 | |||||||
Unrestricted cash and cash equivalents | $ | 231,178 | $ | 191,894 | $ | 201,493 | ||||
FHLB borrowing capacity |
| 1,273,712 |
| 1,185,087 | 1,182,480 | |||||
FRB borrowing capacity |
| 2,615,301 |
| 2,670,278 | 1,165,833 | |||||
Net unpledged investment securities |
| 1,823,420 |
| 1,726,680 | 1,891,058 | |||||
Total sources of liquidity | $ | 5,943,611 | $ | 5,773,939 | $ | 4,440,864 | ||||
Net estimated uninsured deposits | $ | 2,411,874 | $ | 2,347,825 | $ | 2,143,772 | ||||
Total sources of liquidity/net estimated uninsured deposits |
| 246 | % |
| 246 | % | 207 | % | ||
To measure intermediate risk over the next twelve months, the Company reviews a sources and uses projection. As of June 30, 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 June 30, 2025 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios.
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” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on February 28, 2025.
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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, and funding of government sponsored projects; (25) other risk factors outlined in the Company’s filings with the SEC from time to time; and (26) the success of the Company at managing the risks of the foregoing.
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 the discussion under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on February 28, 2025. 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 14: GAAP to Non-GAAP Reconciliations
Three Months Ended | Six Months Ended | ||||||||||||
| June 30, |
| June 30, |
| |||||||||
(000's omitted) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Operating pre-tax, pre-provision net revenue (non-GAAP) | |||||||||||||
Net income (GAAP) | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | |||||
Income taxes |
| 14,706 | 14,177 |
| 29,360 | 26,348 | |||||||
Income before income taxes | 66,037 | 62,092 | 130,305 | 115,135 | |||||||||
Provision for credit losses | 4,117 | 2,708 | 10,807 | 8,856 | |||||||||
Pre-tax, pre-provision net revenue (non-GAAP) | 70,154 | 64,800 | 141,112 | 123,991 | |||||||||
Acquisition expenses | 67 | 104 | 68 | 139 | |||||||||
Litigation accrual | 0 | 0 | (50) | 119 | |||||||||
Restructuring expenses | 1,525 | 0 | 1,525 | 0 | |||||||||
Loss on sales of investment securities | 0 | 232 | 0 | 232 | |||||||||
Unrealized loss (gain) on equity securities | 1 | (867) | (244) | (883) | |||||||||
Amortization of intangible assets | 3,369 | 3,877 | 6,851 | 7,453 | |||||||||
Operating pre-tax, pre-provision net revenue (non-GAAP) | $ | 75,116 | $ | 68,146 | $ | 149,262 | $ | 131,051 | |||||
Operating pre-tax, pre-provision net revenue per share (non-GAAP) | |||||||||||||
Diluted earnings per share (GAAP) | $ | 0.97 | $ | 0.91 | $ | 1.90 | $ | 1.67 | |||||
Income taxes | 0.27 | 0.26 | 0.55 | 0.50 | |||||||||
Income before income taxes | 1.24 | 1.17 | 2.45 | 2.17 | |||||||||
Provision for credit losses | 0.08 | 0.06 | 0.20 | 0.16 | |||||||||
Pre-tax, pre-provision net revenue per share (non-GAAP) | 1.32 | 1.23 | 2.65 | 2.33 | |||||||||
Acquisition expenses | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Litigation accrual | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Restructuring expenses | 0.03 | 0.00 | 0.03 | 0.00 | |||||||||
Loss on sales of investment securities | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Unrealized loss (gain) on equity securities | 0.00 | (0.01) | 0.00 | (0.01) | |||||||||
Amortization of intangible assets | 0.06 | 0.07 | 0.13 | 0.14 | |||||||||
Operating pre-tax, pre-provision net revenue per share (non-GAAP) | $ | 1.41 | $ | 1.29 | $ | 2.81 | $ | 2.46 | |||||
Operating net income (non-GAAP) | |||||||||||||
Net income (GAAP) | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | |||||
Acquisition expenses | 67 | 104 | 68 | 139 | |||||||||
Tax effect of acquisition expenses | (12) | (23) | (14) | (31) | |||||||||
Subtotal (non-GAAP) | 51,386 | 47,996 | 100,999 | 88,895 | |||||||||
Litigation accrual | 0 | 0 | (50) | 119 | |||||||||
Tax effect of litigation accrual | 0 | 0 | 10 | (26) | |||||||||
Subtotal (non-GAAP) | 51,386 | 47,996 | 100,959 | 88,988 | |||||||||
Restructuring expenses | 1,525 | 0 | 1,525 | 0 | |||||||||
Tax effect of restructuring expenses | (274) | 0 | (313) | 0 | |||||||||
Subtotal (non-GAAP) | 52,637 | 47,996 | 102,171 | 88,988 | |||||||||
Loss on sales of investment securities | 0 | 232 | 0 | 232 | |||||||||
Tax effect of loss on sales of investment securities | 0 | (52) | 0 | (52) | |||||||||
Subtotal (non-GAAP) | 52,637 | 48,176 | 102,171 | 89,168 | |||||||||
Unrealized loss (gain) on equity securities | 1 | (867) | (244) | (883) | |||||||||
Tax effect of unrealized loss (gain) on equity securities | 0 | 193 | 50 | 197 | |||||||||
Subtotal (non-GAAP) | 52,638 | 47,502 | 101,977 | 88,482 | |||||||||
Amortization of intangible assets | 3,369 | 3,877 | 6,851 | 7,453 | |||||||||
Tax effect of amortization of intangible assets | (605) | (864) | (1,404) | (1,651) | |||||||||
Operating net income (non-GAAP) | $ | 55,402 | $ | 50,515 | $ | 107,424 | $ | 94,284 | |||||
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| Three Months Ended |
| Six Months Ended | ||||||||||
June 30, |
| June 30, | |||||||||||
(000’s omitted) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Operating diluted earnings per share (non-GAAP) | |||||||||||||
Diluted earnings per share (GAAP) | $ | 0.97 | $ | 0.91 | $ | 1.90 | $ | 1.67 | |||||
Acquisition expenses | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Tax effect of acquisition expenses | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Subtotal (non-GAAP) | 0.97 | 0.91 | 1.90 | 1.67 | |||||||||
Litigation accrual | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Tax effect of litigation accrual | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Subtotal (non-GAAP) | 0.97 | 0.91 | 1.90 | 1.67 | |||||||||
Restructuring expenses | 0.03 | 0.00 | 0.03 | 0.00 | |||||||||
Tax effect of restructuring expenses | (0.01) | 0.00 | (0.01) | 0.00 | |||||||||
Subtotal (non-GAAP) | 0.99 | 0.91 | 1.92 | 1.67 | |||||||||
Loss on sales of investment securities | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Tax effect of loss on sales of investment securities | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Subtotal (non-GAAP) | 0.99 | 0.91 | 1.92 | 1.67 | |||||||||
Unrealized loss (gain) on equity securities | 0.00 | (0.01) | 0.00 | (0.02) | |||||||||
Tax effect of unrealized loss (gain) on equity securities | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
Subtotal (non-GAAP) | 0.99 | 0.90 | 1.92 | 1.65 | |||||||||
Amortization of intangible assets | 0.06 | 0.07 | 0.13 | 0.14 | |||||||||
Tax effect of amortization of intangible assets | (0.01) | (0.02) | (0.03) | (0.02) | |||||||||
Operating diluted earnings per share (non-GAAP) | $ | 1.04 | $ | 0.95 | $ | 2.02 | $ | 1.77 | |||||
Return on assets |
|
|
|
| |||||||||
Net income (GAAP) | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | |||||
Average total assets |
| 16,590,741 |
| 15,778,974 | 16,515,467 | 15,787,920 | |||||||
Return on assets (GAAP) |
| 1.24 | % |
| 1.22 | % | 1.23 | % | 1.13 | % | |||
|
| ||||||||||||
Operating return on assets (non-GAAP) |
|
| |||||||||||
Operating net income (non-GAAP) | $ | 55,402 | $ | 50,515 | $ | 107,424 | $ | 94,284 | |||||
Average total assets |
| 16,590,741 |
| 15,778,974 | 16,515,467 | 15,787,920 | |||||||
Operating return on assets (non-GAAP) |
| 1.34 | % |
| 1.29 | % | 1.31 | % | 1.20 | % | |||
|
| ||||||||||||
Return on equity |
|
| |||||||||||
Net income (GAAP) | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | |||||
Average total equity | 1,836,965 | 1,633,875 | 1,810,453 | 1,657,543 | |||||||||
Return on equity (GAAP) | 11.21 | % | 11.79 | % | 11.24 | % | 10.77 | % | |||||
Operating return on equity (non-GAAP) | |||||||||||||
Operating net income (non-GAAP) | $ | 55,402 | $ | 50,515 | $ | 107,424 | $ | 94,284 | |||||
Average total equity | 1,836,965 | 1,633,875 | 1,810,453 | 1,657,543 | |||||||||
Operating return on equity (non-GAAP) |
| 12.10 | % |
| 12.43 | % | 11.97 | % | 11.44 | % | |||
|
| ||||||||||||
Net interest margin | |||||||||||||
Net interest income | $ | 124,748 | $ | 109,409 | $ | 244,960 | $ | 216,399 | |||||
Total average interest-earning assets | 15,289,591 | 14,604,973 | 15,227,789 | 14,591,808 | |||||||||
Net interest margin | 3.27 | % | 3.01 | % | 3.24 | % | 2.98 | % | |||||
Net interest margin (FTE) (non-GAAP) |
|
| |||||||||||
Net interest income | $ | 124,748 | $ | 109,409 | $ | 244,960 | $ | 216,399 | |||||
Fully tax-equivalent adjustment (non-GAAP) |
| 884 |
| 953 | 1,778 | 1,967 | |||||||
Fully tax-equivalent net interest income (non-GAAP) | 125,632 | 110,362 | 246,738 | 218,366 | |||||||||
Total average interest-earning assets |
| 15,289,591 |
| 14,604,973 | 15,227,789 | 14,591,808 | |||||||
Net interest margin (FTE) (non-GAAP) |
| 3.30 | % |
| 3.04 | % | 3.27 | % | 3.01 | % | |||
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Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(000’s omitted) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Operating noninterest revenues (non-GAAP) | |||||||||||||
Noninterest revenues (GAAP) | $ | 74,508 | $ | 74,390 | $ | 150,544 | $ | 144,675 | |||||
Loss on sales of investment securities | 0 | 232 |
| 0 |
| 232 | |||||||
Unrealized loss (gain) on equity securities | 1 | (867) | (244) | (883) | |||||||||
Total operating noninterest revenues (non-GAAP) | $ | 74,509 | $ | 73,755 | $ | 150,300 | $ | 144,024 | |||||
Operating noninterest expenses (non-GAAP) | |||||||||||||
Noninterest expenses (GAAP) | $ | 129,102 | $ | 118,999 | $ | 254,392 | $ | 237,083 | |||||
Acquisition expenses | (67) | (104) | (68) | (139) | |||||||||
Litigation accrual | 0 | 0 | 50 | (119) | |||||||||
Restructuring expenses | (1,525) | 0 | (1,525) | 0 | |||||||||
Amortization of intangible assets | (3,369) | (3,877) | (6,851) | (7,453) | |||||||||
Total operating noninterest expenses (non-GAAP) | $ | 124,141 | $ | 115,018 | $ | 245,998 | $ | 229,372 | |||||
Operating revenues (non-GAAP) | |||||||||||||
Net interest income (GAAP) | $ | 124,748 | $ | 109,409 | $ | 244,960 | $ | 216,399 | |||||
Noninterest revenues (GAAP) | 74,508 | 74,390 | 150,544 | 144,675 | |||||||||
Total revenues (GAAP) | 199,256 | 183,799 |
| 395,504 |
| 361,074 | |||||||
Loss on sales of investment securities | 0 | 232 | 0 | 232 | |||||||||
Unrealized loss (gain) on equity securities | 1 | (867) | (244) | (883) | |||||||||
Total operating revenues (non-GAAP) | $ | 199,257 | $ | 183,164 | $ | 395,260 | $ | 360,423 | |||||
Noninterest revenues/total revenues | |||||||||||||
Total noninterest revenues (GAAP) – numerator | $ | 74,508 | $ | 74,390 | $ | 150,544 | $ | 144,675 | |||||
Total revenues (GAAP) – denominator | 199,256 | 183,799 | 395,504 | 361,074 | |||||||||
Noninterest revenues/total revenues (GAAP) | 37.4 | % | 40.5 | % | 38.1 | % | 40.1 | % | |||||
Operating noninterest revenues/operating revenues (FTE) (non-GAAP) | |||||||||||||
Total operating noninterest revenues (non-GAAP) – numerator | $ | 74,509 | $ | 73,755 | $ | 150,300 | $ | 144,024 | |||||
Total operating revenues (non-GAAP) | 199,257 | 183,164 | 395,260 | 360,423 | |||||||||
Fully tax-equivalent adjustment (non-GAAP) | 884 | 953 | 1,778 | 1,967 | |||||||||
Total operating revenues (FTE) (non-GAAP) – denominator | 200,141 | 184,117 | 397,038 | 362,390 | |||||||||
Operating noninterest revenues/operating revenues (FTE) (non-GAAP) | 37.2 | % | 40.1 | % | 37.9 | % | 39.7 | % | |||||
Efficiency ratio (GAAP) | |||||||||||||
Total noninterest expenses (GAAP) – numerator | $ | 129,102 | $ | 118,999 | $ | 254,392 | $ | 237,083 | |||||
Total revenues (GAAP) – denominator | 199,256 | 183,799 | 395,504 | 361,074 | |||||||||
Efficiency ratio (GAAP) | 64.8 | % | 64.7 | % | 64.3 | % | 65.7 | % | |||||
Operating efficiency ratio (non-GAAP) | |||||||||||||
Total operating noninterest expenses (non-GAAP) – numerator | $ | 124,141 | $ | 115,018 | $ | 245,998 | $ | 229,372 | |||||
Total operating revenues (FTE) (non-GAAP) – denominator | 200,141 | 184,117 | 397,038 | 362,390 | |||||||||
Operating efficiency ratio (non-GAAP) | 62.0 | % | 62.5 | % | 62.0 | % | 63.3 | % | |||||
Return on tangible equity (non-GAAP) | |||||||||||||
Net income (GAAP) | $ | 51,331 | $ | 47,915 | $ | 100,945 | $ | 88,787 | |||||
Average shareholders’ equity | 1,836,965 | 1,633,875 | 1,810,453 | 1,657,543 | |||||||||
Average goodwill and intangible assets, net | (899,416) | (905,134) | (899,970) | (903,674) | |||||||||
Average deferred taxes on goodwill and intangible assets, net | 44,490 | 45,177 | 44,477 | 45,060 | |||||||||
Average tangible common equity (non-GAAP) | 982,039 | 773,918 | 954,960 | 798,929 | |||||||||
Return on tangible equity (non-GAAP) | 20.97 | % | 24.90 | % | 21.32 | % | 22.35 | % | |||||
Operating return on tangible equity (non-GAAP) | |||||||||||||
Operating net income (non-GAAP) | $ | 55,402 | $ | 50,515 | $ | 107,424 | $ | 94,284 | |||||
Average tangible common equity (non-GAAP) | 982,039 | 773,918 | 954,960 | 798,929 | |||||||||
Operating return on tangible equity (non-GAAP) | 22.63 | % | 26.25 | % | 22.68 | % | 23.73 | % | |||||
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June 30, | December 31, | June 30, | ||||||||
(000’s omitted) |
| 2025 |
| 2024 |
| 2024 | ||||
Total tangible assets (non-GAAP) | ||||||||||
Total assets (GAAP) | $ | 16,665,018 | $ | 16,386,044 | $ | 15,906,816 | ||||
Goodwill and intangible assets, net | (898,381) | (901,471) | (905,780) | |||||||
Deferred taxes on goodwill and intangible assets, net | 44,336 | 44,618 | 44,921 | |||||||
Total tangible assets (non-GAAP) | $ | 15,810,973 | $ | 15,529,191 | $ | 15,045,957 | ||||
Total tangible common equity (non-GAAP) | ||||||||||
Shareholders' equity (GAAP) | $ | 1,883,091 | $ | 1,762,835 | $ | 1,670,180 | ||||
Goodwill and intangible assets, net | (898,381) | (901,471) | (905,780) | |||||||
Deferred taxes on goodwill and intangible assets, net | 44,336 | 44,618 | 44,921 | |||||||
Total tangible common equity (non-GAAP) | $ | 1,029,046 | $ | 905,982 | $ | 809,321 | ||||
Shareholders’ equity-to-assets ratio at quarter end | ||||||||||
Total shareholders’ equity (GAAP) – numerator | $ | 1,883,091 | $ | 1,762,835 | $ | 1,670,180 | ||||
Total assets (GAAP) – denominator | 16,665,018 | 16,386,044 | 15,906,816 | |||||||
Shareholders’ equity-to-assets ratio at quarter end (GAAP) | 11.30 | % | 10.76 | % | 10.50 | % | ||||
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP) | ||||||||||
Total tangible common equity (non-GAAP) – numerator | $ | 1,029,046 | $ | 905,982 | $ | 809,321 | ||||
Total tangible assets (non-GAAP) – denominator | 15,810,973 | 15,529,191 | 15,045,957 | |||||||
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP) | 6.51 | % | 5.83 | % | 5.38 | % | ||||
Book value (GAAP) | ||||||||||
Total shareholders’ equity (GAAP) – numerator | $ | 1,883,091 | $ | 1,762,835 | $ | 1,670,180 | ||||
Period end common shares outstanding – denominator | 52,869 | 52,668 | 52,523 | |||||||
Book value (GAAP) | $ | 35.62 | $ | 33.47 | $ | 31.80 | ||||
Tangible book value (non-GAAP) | ||||||||||
Total tangible common equity (non-GAAP) – numerator | $ | 1,029,046 | $ | 905,982 | $ | 809,321 | ||||
Period end common shares outstanding – denominator | 52,869 | 52,668 | 52,523 | |||||||
Tangible book value (non-GAAP) | $ | 19.46 | $ | 17.20 | $ | 15.41 | ||||
Item 3. 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 90.7% 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 9.2% of the total portfolio, of which 95.8% 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 of the market risk in the investment portfolio is related to interest rates.
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 enable 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.
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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 June 30, 2025 as a starting point. |
| ● | The model assumes the Company’s average deposit balances will increase approximately 2.3% over the next twelve months. |
| ● | The model assumes the Company’s average earning asset balances will increase approximately 1.2% 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 $30.0 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, federal funds, and treasury curve rates are assumed to move up/down in a parallel manner by the amounts listed below 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 June 30, 2025 | income at June 30, 2025 | |||||
Interest rate scenario | (000’s omitted) | (%) |
| |||
+200 basis points | $ | (6,998) |
| (1.4) | % | |
+100 basis points | $ | (3,448) |
| (0.7) | % | |
-100 basis points | $ | 3,041 |
| 0.6 | % | |
-200 basis points | $ | 3,494 |
| 0.7 | % | |
Projected NII over the 12-month forecast period decreases in the up 100 and up 200 interest rate environments largely due to deposits and overnight borrowings repricing higher in year 1, which are only partially offset by loans repricing higher.
Projected NII increases in the down 100 and down 200 interest rate environments due to lower funding costs which are partially offset by lower income on loans.
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, deposit decay rates, 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.
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Item 4. 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 ensure information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on management’s evaluation of the effectiveness of the Company’s disclosure controls and procedures, with the participation of the Chief Executive Officer and the Chief Financial Officer, it has concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were effective as of June 30, 2025.
Changes in Internal Control over Financial Reporting
The Company regularly assesses the adequacy of its internal controls over financial reporting. There have been no changes in the Company’s internal controls over financial reporting in connection with the evaluation referenced in the paragraph above that occurred during the Company’s quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 1. 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 I to the consolidated financial statements included under Part I, Item 1.
Item 1A. Risk Factors
There has not been any material change in the risk factors disclosure from that contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on February 28, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a) During the second quarter of 2025, the Company determined that it had inadvertently issued 611,286 unregistered shares of Company common stock to participants in the Company’s 401(k) Employee Stock Ownership Plan (the “ESOP”) between September 19, 2020 and May 30, 2025 without an available exemption from registration under the Securities Act of 1933, as amended, including 11,688 shares issued during the quarter ended June 30, 2025. The shares issued to ESOP participants were purchased on the open market with funds contributed by plan participants under the ESOP to the Company’s 401(k) Savings Plan (the “401(k) Plan”) and the Company did not receive any proceeds from the issuance of the unregistered shares to plan participants. The Company has consistently treated all shares issued under the ESOP as outstanding for financial reporting purposes and the unregistered issuances described above do not represent any additional dilution to shareholders. The Company believes that it has provided the participants in the ESOP who were previously issued unregistered shares with the same information they would have received had an effective registration statement been filed with respect to such shares. On May 30, 2025, the Company filed a registration statement on Form S-8 with the SEC registering 1,500,000 shares of common stock for issuance to plan participants under the ESOP.
b) Not applicable.
c) At its December 2024 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,628,000 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, 2025. 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.
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The following table presents stock purchases made during the second 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 | |
April 1-30, 2025 | 944 | $ | 51.91 | 0 | 2,628,000 | ||||
May 1-31, 2025 | 256 | 55.07 | 0 | 2,628,000 | |||||
June 1-30, 2025 | 417 | 57.11 | 0 | 2,628,000 | |||||
Total (1) |
| 1,617 | $ | 53.75 |
| 0 |
| ||
| (1) | Included in the common shares repurchased were 829 shares acquired by the Company in connection with the administration of a deferred compensation plan and 788 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 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
a) Not applicable.
b) Not applicable.
c) Certain of the Company’s officers or directors have made elections to participate in, and are participating in, the Company’s dividend reinvestment plan, deferred compensation plans 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 June 30, 2025,
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Item 6. Exhibits
Exhibit No. |
| Description |
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) | |
31.2 | Certification of Marya Burgio Wlos, 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) | |
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. (2) | |
32.2 | Certification of Marya Burgio Wlos, 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. (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) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (1) | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (1) | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (1) | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (1) | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (1) | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) (1) |
| (1) | Filed herewith. |
| (2) | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements 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.
Date: August 8, 2025 | /s/ Dimitar A. Karaivanov |
Dimitar A. Karaivanov, President and Chief Executive Officer | |
Date: August 8, 2025 | /s/ Marya Burgio Wlos |
Marya Burgio Wlos, Treasurer and Chief Financial Officer |
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FAQ
What were Community Financial (CBU) net income results for Q2 2025?
How large are CBU's deposits and loans at June 30, 2025?
What is the Santander branch transaction disclosed by CBU?
Did CBU record any goodwill or contingent consideration from acquisitions?
What happened to CBU's accumulated other comprehensive loss (OCI)?
