third quarter 2026
Filed Oct 27, 2026Community Financial System, Inc. Reports Third Quarter 2026 Results
Operating diluted earnings per share increased 16.5% year-over-year and 9.5% quarter-over-quarter, supported by record net interest income, margin expansion, loan growth and broad fee-business growth. GAAP earnings per share was flat sequentially because of the realized loss on investment securities, higher credit provision and higher expenses.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net income, third quarter 2026GAAP | $61.3M | – | – |
| Diluted earnings per share, third quarter 2026GAAP | $1.16 | 0.0% | 11.5% |
| Operating net income, third quarter 2026non-GAAP | $67M | – | – |
| Operating diluted earnings per share, third quarter 2026non-GAAP | $1.27 | 9.5% | 16.5% |
| Total revenues, third quarter 2026GAAP | $227.3M | 1.9% | 9.8% |
| Total operating revenues (FTE), third quarter 2026non-GAAP | $231.2M | 5.4% | 11.3% |
| Net interest income, third quarter 2026GAAP | $143.5M | 3.2% | 12.0% |
| Net interest margin, third quarter 2026GAAP | 3.54% | 0.08% | 0.24% |
| Net interest margin (FTE), third quarter 2026non-GAAP | 3.56% | 0.07% | 0.23% |
| Total noninterest revenues, third quarter 2026GAAP | $83.75M | (0.3%) | 6.2% |
| Total operating noninterest revenues, third quarter 2026non-GAAP | $86.66M | 9.3% | 10.2% |
| Total noninterest expenses, third quarter 2026GAAP | $141.0M | – | 9.9% |
| Total operating noninterest expenses, third quarter 2026non-GAAP | $136.5M | – | 9.8% |
| Provision for credit losses, third quarter 2026GAAP | $5.56M | 20.7% | (0.1%) |
| Income before income taxes, third quarter 2026GAAP | $80.70M | – | – |
| Income taxes, third quarter 2026GAAP | $19.40M | – | – |
| Effective tax rate, third quarter 2026GAAP | 24.0% | – | – |
| Return on assets, third quarter 2026GAAP | 1.38% | (0.02%) | 0.08% |
| Operating return on assets, third quarter 2026non-GAAP | 1.51% | 0.11% | 0.13% |
| Return on equity, third quarter 2026GAAP | 11.82% | (0.28%) | 0.20% |
| Operating return on equity, third quarter 2026non-GAAP | 12.93% | 0.80% | 0.68% |
| Efficiency ratio, third quarter 2026GAAP | 62.0% | – | – |
| Operating efficiency ratio, third quarter 2026non-GAAP | 59.0% | – | – |
| Total ending loans, September 30, 2026GAAP | $11.52B | 2.1% | 7.1% |
| Total ending deposits, September 30, 2026GAAP | $14.87B | 1.1% | 5.7% |
| Total assets, September 30, 2026GAAP | $17.79B | 0.1% | 4.9% |
| Shareholders' equity, September 30, 2026GAAP | $2.03B | (2.0%) | 4.7% |
| Cash and cash equivalents, September 30, 2026GAAP | $424.6M | – | – |
| Total investment securities, September 30, 2026GAAP | $4.12B | – | – |
| Allowance for credit losses, September 30, 2026GAAP | $92.02M | – | – |
| Net charge-offs, third quarter 2026GAAP | $5.11M | – | – |
| Net charge-offs/average loans, third quarter 2026GAAP | 0.18% | 0.06% | 0.09% |
| Nonperforming loans, September 30, 2026GAAP | $60.45M | – | – |
| Delinquent loans/ending loans, September 30, 2026GAAP | 1.16% | – | – |
| Tier 1 leverage ratio, September 30, 2026GAAP | 9.37% | 0.11% | (0.09%) |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Banking and CorporateSegment noninterest revenues increased, while net interest income was $142,026, up 11.5% year-over-year and 3.0% quarter-over-quarter. | $22.70M | 5.4% | 7.7% |
| Employee Benefit ServicesGrowth was driven largely by recordkeeping and third-party administration services revenue growth, partly reflecting higher average market values of assets under administration. | $37.97M | 4.4% | 5.6% |
| Insurance ServicesYear-over-year growth was driven by acquisitions, while sequential growth reflected the seasonal timing of insurance policy renewals. | $15.48M | 20.8% | 8.9% |
| Wealth Management ServicesGrowth reflected the ClearPoint acquisition and higher average market values of assets under management. | $13.47M | 20.1% | 41.3% |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- Quarterly cash dividend declared: $0.49 per share, up 4.3% from the $0.47 dividend declared in the second quarter of 2026 and the third quarter of 2025.
- On October 21, 2026, the Company announced a quarterly cash dividend of $0.49 per share, payable on January 11, 2027 to shareholders of record as of December 15, 2026.
- The Board authorized repurchases of up to 2.63 million shares, or 5.0% of common stock outstanding, during the twelve-month period starting January 1, 2026.
- 508,471 shares were repurchased during the first nine months of 2026, including 250,000 shares during the third quarter of 2026.
- The Company reported $31.8 million of common stock repurchases over the past twelve months.
What drove it
- Record quarterly net interest income reflected lower funding costs, organic loan growth and redeployment of securities-sale proceeds to repay higher-cost borrowings.
- The yield on interest-earning assets increased 8 basis points to 4.67% from the prior year's third quarter, while the cost of interest-bearing liabilities decreased 21 basis points to 1.55%.
- The average cost of total deposits was 1.03%, down 14 basis points year-over-year and 4 basis points sequentially.
- Ending loans increased $235.2 million, or 2.1%, sequentially and $767.8 million, or 7.1%, year-over-year.
- Fee businesses grew, led by wealth management services and insurance services, and operating noninterest revenue increased 10.2% year-over-year.
- The $2.9 million net loss on investment securities included a $3.0 million realized loss on the sale of lower-yielding Treasury securities.
Concerns
- Total noninterest expenses increased $12.7 million, or 9.9%, year-over-year, led by salaries and employee benefits, data processing and communications, and occupancy and equipment.
- Net charge-offs were $5.1 million, or an annualized 0.18% of average loans, compared with $2.5 million, or 0.09%, one year earlier.
- Total delinquent loans/ending loans increased to 1.16% from 1.00% one year earlier and 1.04% sequentially.
- Non-owner occupied and multifamily CRE represented 202% of total bank-level regulatory capital at September 30, 2026.
- Shareholders' equity decreased $42.2 million, or 2.0%, sequentially, primarily due to a $61.6 million increase in accumulated other comprehensive loss related to the investment securities portfolio.
What to watch
- Whether net interest margin expansion continues after net interest margin reached 3.54% and FTE net interest margin reached 3.56%.
- The pace of organic loan and deposit growth following ending-loan growth of 2.1% sequentially and ending-deposit growth of 1.1% sequentially.
- Credit performance, particularly delinquent business lending and consumer mortgage balances and charge-off levels.
- The effect of higher employee, technology and occupancy costs on operating leverage.
- Contribution from the ClearPoint acquisition, Santander branch acquisition, insurance acquisitions and de novo branches.
- Management stated that it expects strong performance across all businesses into the fourth quarter and 2027, but provided no numerical guidance.
Balance sheet and cash flow
- Readily available sources of liquidity totaled $6.52 billion at September 30, 2026, including unrestricted cash and cash equivalents balances of $419.9 million, unpledged investment securities of $1.52 billion, unused Federal Home Loan Bank of New York borrowing capacity of $1.62 billion and $2.96 billion of Federal Reserve Bank discount-window funding availability.
- Ending borrowings were $636.0 million at September 30, 2026, down $128.1 million, or 16.8%, from the end of the second quarter of 2026 and down $127.3 million, or 16.7%, from one year prior.
- The Company sold $296.8 million of lower-yielding available-for-sale U.S. Treasury securities and used the proceeds to repay higher-cost overnight borrowings.
- No operating cash flow or free cash flow was reported.
Analysis
Community Financial System delivered a strong third quarter, with operating diluted earnings per share of $1.27, up 16.5% year-over-year and 9.5% sequentially. GAAP diluted earnings per share was $1.16, up 11.5% year-over-year and flat sequentially. The gap between operating and GAAP results principally reflected the quarter's $2.9 million net loss on investment securities, including a $3.0 million realized loss on the sale of $296.8 million of lower-yielding available-for-sale U.S. Treasury securities.
Core banking momentum was led by net interest income of $143,544, up 12.0% year-over-year and 3.2% sequentially. Net interest margin expanded to 3.54% from 3.30% a year earlier and 3.46% in the linked quarter. Management attributed the improvement to lower funding costs, organic loan growth and repayment of higher-cost borrowings using securities-sale proceeds. Loans ended the quarter at $11,518,055, while deposits ended at $14,865,106. Deposit costs continued to improve, with the cost of total deposits at 1.03% and cost of funds at 1.16%.
Noninterest revenue was mixed on a GAAP basis because of the securities loss, but underlying fee income expanded. Operating noninterest revenues were $86,663, up 10.2% year-over-year and 9.3% sequentially. Wealth Management Services segment revenues grew 41.3% year-over-year, Insurance Services revenues increased 8.9%, and Employee Benefit Services revenues increased 5.6%. These gains reflected ClearPoint, insurance acquisitions, higher market values affecting assets under administration and management, and seasonal insurance renewals.
Expense growth remained material. Total noninterest expenses rose 9.9% year-over-year to $141,030, while operating noninterest expenses increased 9.8% to $136,499. Higher salaries and employee benefits, technology spending, and occupancy costs tied to de novo branches, regional headquarters and the Santander branch acquisition drove the increase. Despite this, the operating efficiency ratio improved to 59.0% from 59.9% a year earlier and 60.6% sequentially.
Credit measures require attention. The provision for credit losses rose to $5,560 from $4,607 sequentially, net charge-offs increased to $5,111, and delinquent loans/ending loans rose to 1.16%. The Company cited $2.7 million of charge-offs on two individually assessed business lending relationships. Capital and liquidity remained substantial, with a 9.37% Tier 1 leverage ratio and $6.52 billion of readily available liquidity, although tangible equity/tangible assets declined to 6.57% and shareholders' equity declined sequentially.
The filing provides no numerical outlook. Management stated that it expects strong performance across its businesses into the fourth quarter and 2027. Capital allocation included a $0.49 per-share quarterly dividend and 250,000 shares repurchased during the third quarter under the 2026 repurchase program.
Management, verbatim
Our businesses accelerated into the third quarter and we delivered operating diluted earnings per share1 of $1.27, up 16.5% year-over-year and 9.5% quarter-over-quarter, representing our sixth consecutive quarter of record results.
Dimitar A. Karaivanov, President and CEO
During the quarter we achieved an operating return on assets1 of 1.51% while retaining excellent balance sheet metrics.
Dimitar A. Karaivanov, President and CEO
Our trajectory remains intact and we expect strong performance across all of our businesses into the fourth quarter and 2027.
Dimitar A. Karaivanov, President and CEO
Not in the filing
stated, not guessed- Forward numerical guidance for revenue, gross margin, operating expenses, tax rate or other metrics was not provided.
- Prior-release outlook was not provided, so comparison with prior guidance is unavailable.
- Operating cash flow was not reported.
- Free cash flow was not reported.
- Gross margin was not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.