Slide 1: Investor Presentation
AUGUST 2023 Investor Presentation COMMUNITY BANK SYSTEM, INC. | NYSE: CBU
Slide 2: Disclaimers
Disclaimers Forward‐Looking Statements This presentation 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 w
Slide 3: About CBU
$15.1B About CBU in total assets SUCCESSFUL AND GROWING FINANCIAL SERVICES COMPANY operating four scaled, complementary business lines Employee Benefits & Insurance & Risk Banking Wealth Management Administration Services Services Aggregate Revenue Mix • Large bank capabilities with • Retirement Pla
Slide 4: Our Investment Thesis
Return on Assets2 1.38% 1.31% 1.50% 1.27% 1.20% 1.26% 1.09% 1.15% 1.07% Our Investment Thesis 1.02% 0.50% YTD 3-Yr Avg 5-Yr Avg 10-Yr Avg 3 CBU KRX (median) CBU - Operating • ABOVE AVERAGE RETURNS WITH BELOW AVERAGE RISK Net Charge-off Ratio2 • Below average risk: minimize volatility across the comb
Slide 5: Focus on Revenue Quality, Diversification and Sustainable Results
Focus on Total Revenue1 Growth Revenue $800 7.5% total revenue 10-year CAGR (2012-2022) $703.5 Millions $679.4 $700 Quality, $600 $500 Diversification $400 $346.8 $300 $200 and Sustainable $100 $0 Results 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM Net Interest Income Noninterest Revenue •
Slide 6: Growing, Recurring Noninterest Revenues
Growing, Noninterest Revenues1: Recurring Strong Contributions from Fee-generating Businesses Noninterest Millions $300 10.1% noninterest revenues1 50% 10-year CAGR (2012-2022) $258.8 45% Revenues $250 37.4% 40% $200 35% 38% of revenue in Q2 2023 30.0% $150 $131.6 30% • Longstanding focus on growing
Slide 7: Second Quarter 2023 Performance Highlights
Second Quarter 2023 Performance Highlights 3.18% • Q2 2023 fully-diluted GAAP EPS of $0.89 and non-GAAP operating EPS of $0.911, up $0.16 and $0.06 from the net interest margin second quarter of 2022 (FTE)2 • Second quarter 2023 adjusted pre-tax, pre-provision net revenue per share (non-GAAP) of $1.
Slide 8: Banking
Banking Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking | Financial Services | Operating Performance and Key Indicators | Appendix 8
Slide 9: Market-leading Community Bank
Market-leading Ranked as one of America’s most trustworthy banks of 2023 Community Bank by Newsweek • In-footprint lender with deep knowledge of our markets and first or second market share in approximately two-thirds of the towns where we do business1 • Core focus on credit quality and low funding
Slide 10: Disciplined Proven Acquirer
Disciplined Proven Acquirer • Successful in-market strategy focused on high quality banking partners through low-risk, 2022 Elmira Savings accretive acquisitions Bank Acquisition • Proven acquirer well-positioned in consolidating industry for continued growth Strengthened Southern Tier of New York M
Slide 11: Core Deposit Strength
10% cycle to date deposit beta1 Core Deposit 12% cycle to date funding beta1 Strength Core Deposit Strength Supports Low Overall Funding Costs $14 $12.9 2.0% Billions • Excellent core deposit customer base 1.8% $12 • Focus on generating and retaining core non-time 1.6% deposits, which made up 90.1%
Slide 12: Granular, Stable & Diverse Deposit Base
Over 80% Granular, Stable & Diverse * of the Company’s deposit balances Deposit Base are either insured by the FDIC or secured through municipal pledging *Estimate; as of 6/30/2023 Average Consumer Deposit Average Business Deposit Average Nonmaturity Deposit Accounts over $250K1 Account Balance1: Re
Slide 13: In-footprint Lender
In-footprint Lender $686K average commercial loan relationship • Diversified and high-quality loan portfolio with in-footprint Diversified Loan Portfolio1 focus 1% 3% 1% 1-4 Family Resi Real Estate • $9.17 billion in total loans as of June 30, 2023 1-4 Family Resi Construction 1-4 Family Jr Lien • A
Slide 14: Business Lending
0.10% 10-year average Business Lending net-charge off ratio (2013-2022) Well diversified lending portfolio C&I, Owner Occupied CRE & All Other Business1 Non-Owner Occupied CRE (“NOO CRE”)2 ($1.70 billion) ($2.13 billion) Transportation & Warehousing Warehouse/Industrial Nursing/Assisted Public Admin
Slide 15: Consumer Lending
Consumer Lending Durable loss history versus industry1 0.12% Consumer Real Estate Loss History2 0.10% Consumer Real Estate ($3.51 billion) 0.08% 0.06% • Broad product set including non-conforming, FHA, VA and 1st time 0.04% homebuyers program 0.02% 0.00% • 87% consumer mortgage / 13% home equity 202
Slide 16: Organic Loan Growth
Organic Loan Loan Growth Growth $9.5 $9.17 $8.98 $9.0 $8.81 $8.54 • Q2 2023 loan growth of 2.1% $8.5 $8.14 • Last twelve months (“LTM”) overall loan Billions $8.0 growth of 12.6% $7.5 • All major loan segments produced positive $7.0 organic loan growth during the last twelve months $6.5 • Business l
Slide 17: Optimizing Delivery Channels for Growth
• Addressing redundancies through consolidations and expanding digital banking services Optimizing Delivery • 55 branches consolidated from 2017 through June 2023 Channels for Growth • As of June 2023, 67% of total customers were digital banking users, while 56% and 27% of core deposit customers wer
Slide 18: Digital Transformation
Digital Transformation Supporting customers’ preference towards digital while enhancing efficiencies Recent Accomplishments What’s Next • Rolled out a credit monitoring and education tool • Enhancing digital account opening process to include more • Enhanced personal banking budgeting tool funding o
Slide 19: Robust Net Interest Income
Robust Net Net Interest Income Growth and Interest Net Interest Margin (FTE)1,2 6.2% net interest income Income $450 10-year CAGR (2012-2022) 4.50% Millions $420.6 $400 3.88% 4.00% • Net interest income (“NII”) of $109.3 million for Q2 $350 2023 increased $6.1 million, or 6.0%, over Q2 2022 $300 3.5
Slide 20: Financial Services
Financial Services Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking | Financial Services | Operating Performance and Key Indicators | Appendix 20
Slide 21: Employee Benefit Services: BPAS
• Our benefits business is the primary contributor of noninterest revenue Employee Benefit which has grown at a 12.4% 10-year CAGR (2012-2022). Services: BPAS • A leading national provider of administration services, investment expertise and technology enabling clients nationwide to consolidate reti
Slide 22: Insurance & Risk Services: OneGroup
Serving much of the East Insurance & Risk Coast through offices in NY, PA, MA, SC and FL Services: OneGroup More than $300 million in total annual premiums 100+ years of industry experience • OneGroup is a leading risk management and insurance broker providing holistic solutions $43.0M • Business In
Slide 23: Wealth Management Services
In August 2023, the Bank’s Trust Division, Community Wealth Bank Trust Services, was renamed Nottingham Trust to better align branding and Management reflect the range of products and services offered Services $31.0M 100+ years of industry experience TTM revenue, down 7.7% • Providing comprehensive
Slide 24: Operating Performance and Key Indicators
Operating Performance and Key Indicators Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking | Financial Services | Operating Performance and Key Indicators | Appendix 24
Slide 25: Operating Performance Summary
Operating Performance Summary As of June 30, 2023 Financial Q2 2023 % Change 2023 YTD % Change in millions, from in millions, from 2022 Highlights except EPS Q2 2022 except EPS YTD Net interest income $109.3 6.0% $220.3 11.3% Noninterest revenues1 66.0 3.0% 131.6 1.4% Operating expenses2 112.0 5.6%
Slide 26: Strong Asset Quality
Strong Asset Quality Historically Strong Asset Quality Metrics1 Allowance for Credit Losses2 0.35% 1.20% $70 0.90% Millions 0.30% 1.00% $65 $63.3 0.80% $60 0.72% 0.25% 0.69% NCOs/ Average Loans 0.80% 0.70% $55 0.20% 0.17% NPAs/ Assets $49.9 0.60% $50 0.60% 0.15% 0.38% $45 0.40% 0.50% 0.10% 0.22% $40
Slide 27: Allowance Industry Comparison
Allowance Industry Comparison Ample loss coverage compared to industry Allowance for Credit Losses (“ACL”) Ratio1 Allowance Loss Coverage1 (ACL Ratio / 10-year Average Net Charge-Off Ratio3) 1.60% 1.52% 5.00x 1.40% 4.8x 4.80x 1.20% 4.60x 1.00% 4.40x 0.80% 0.69% 4.20x 4.1x 0.60% 4.00x 0.40% 0.20% 3.8
Slide 28: Liquidity Position & Sources
Liquidity Position & Sources Conservative approach Dollars in thousands June 30, 2023 • Loan to deposit ratio of 71% as of June 30, 2023 Cash and cash equivalents (net of float) $120,364 • Investment portfolio consists of lower risk investments FHLB borrowing availability 1,645,838 FRB borrowing cap
Slide 29: Consistent Returns and Low Volatility Drive Premium Results
Consistent Delivering superior risk-adjusted returns Returns and Low >30% of revenue is non- banking Volatility Drive Premium Results Price/ TTM EPS 30.00x 25.00x Investment Profile 20.00x As of June 30, 2023 16.3 Closing Stock Price $46.88 15.00x 12.1 52-week High Stock Price $72.52 10.00x 52-week
Slide 30: Solid Capital Position
Solid Capital Strong Capital Position $2.5 20% Billions Position 18% $2.0 15.20% 16% $1.7 $1.6 14% Ready to support growth 12.12% $1.5 12% • Tier 1 leverage ratio maintained well above PCA1 10% 9.35% well-capitalized standards to support future $1.0 8% organic growth and M&A 6% 5.34% • Risk-based ca
Slide 31: Shareholder Returns & Key Investment Merits
Shareholder Committed to successful operating strategy focused on intelligent low- Superior long-term return to shareholders Returns & Key risk acquisitions, organic growth, and prudent capital management and long-standing dividend growth Investment Strong fundamentals with Long-term Merits consiste
Slide 32: Creating Excess Value
Longstanding commitment to growing dividend benefits Creating Excess Value for our partners and shareholders For CBU’s Partners and Shareholders Total Shareholder Returns Since Announcement 205% 350% (Including Day 1 Premium) dividend increase since Wilber 295% acquisition announcement 300% 250% 112
Slide 33: ESG Initiatives
ESG Initiatives Integrating sustainability and corporate responsibility into our business practices • Our Culture and Diversity Council oversees initiatives focused on diversity and equity across key areas of talent acquisition and retention, employee community service spotlights, senior leadership
Slide 34: Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking |
Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking | Financial Services | Operating Performance and Key Indicators | Appendix 34
Slide 35: Appendix
Appendix Community Bank System, Inc. | August 2023 About CBU & Strategy | Banking | Financial Services | Operating Performance and Key Indicators | Appendix 35
Slide 36: Primary Subsidiaries
Employee Wealth Insurance & Risk Benefits & Banking Management Services Administration Services Benefit Plans Community Investment Community Bank, N.A. OneGroup NY, Inc. Administrative Services, Services, Inc. Inc. Primary Nottingham Advisors, Inc. Benefit Plans Administrative Services, LLC Subsidia
Slide 37: Peer Group
Total Assets Market Peer Company Name Ticker Location ($000)1 Cap ($M)1 Atlantic Union Bkshs Corp. AUB Richmond, VA 20,602,332 1,946 Berkshire Hills Bancorp Inc. BHLB Boston, MA 12,090,321 913 Eastern Bankshares Inc. EBC Boston, MA 21,583,493 2,164 F.N.B. Corp. FNB Pittsburgh, PA 44,777,964 4,105 Fi
Slide 38: Reconciliation of GAAP and Non-GAAP
Reconciliation of GAAP and Non-GAAP Community Bank System's management uses the term "non-GAAP" financial measures in their analysis of the Company's performance and operations. Management believes that these non-GAAP financial measures helps investors and analysts measure underlying core performanc
Slide 39: Equity-to-Assets
Equity-to-Assets Dollars in thousands 2017 2018 2019 2020 2021 2022 Q2 2023 Total assets Total assets (GAAP) $10,746,198 $10,607,295 $11,410,295 $13,931,094 $15,552,657 $15,835,651 $15,108,050 Intangible assets (825,088) (807,349) (836,923) (846,648) (864,335) (902,837) (901,709) Deferred taxes on i
Slide 40: Free Cash Flow
Free Cash Flow Dollars in thousands, except per share data 2023 Q2 2017 2018 2019 2020 2021 2022 YTD 2023 Diluted Earnings per Share (GAAP) $3.03 $3.24 $3.23 $3.08 $3.48 $3.46 $1.00 $0.89 Operating Diluted Earnings per Share (non-GAAP) $2.64 $3.23 $3.29 $3.24 $3.49 $3.58 $1.77 $0.91 Net income (GAAP
Slide 41: Return on Assets
Return on Assets Dollars in thousands 2023 Q2 2018 2019 2020 2021 2022 YTD 2023 Average Total Assets $10,665,209 $11,043,173 $12,896,499 $14,835,025 $15,567,139 $15,257,833 $15,150,001 Net income (GAAP) $168,641 $169,063 $164,676 $189,694 $188,081 $54,089 $48,291 Return on Assets (GAAP) 1.58% 1.53%
Slide 42: Net Interest Margin
Net Interest Margin Dollars in thousands 2023 2018 2019 2020 2021 2022 Q2 2023 YTD Net interest margin Net interest income $345,055 $359,174 $368,403 $374,412 $420,630 $220,309 $109,279 Total average interest-earning assets 9,368,198 9,663,634 11,358,162 13,393,383 14,548,665 14,071,904 13,940,636 N
Slide 43: Pre-tax, Pre-provision Components
Pre-tax, Pre-provision Components Dollars in thousands, except per share data 2023 YTD 2022 YTD Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Pre-tax, pre-provision net revenue Net income (GAAP) $54,089 $86,860 $39,805 $48,691 $52,530 $5,798 $48,291 Income taxes 14,357 23,748 10,971 13,706 14,779 1,175 13
Slide 44: Thank you!
Thank you! INVESTOR RELATIONS CONTACT Mr. Joseph E. Sutaris EVP & Chief Financial Officer Joseph.Sutaris@cbna.com 315.445.7396