Community Financial System (CBU) Investor Day 2024 summary

Strategic evolution and business model

• Transitioned from a traditional bank to a diversified financial services company, now operating four business lines: banking, employee benefit services, insurance, and wealth management, with 40% of YTD 2024 revenues from noninterest sources.

• Name change and strategic focus reflect the shift to non-banking growth and revenue diversification, with fee income rising from 21% to 40% over 20 years.

• Each business line is managed as an equal contributor, with direct CEO reporting and a focus on cross-serving clients and leveraging cross-referral opportunities.

• Maintains a decentralized regional structure, enabling local decision-making and tailored customer solutions.

• Emphasizes a culture of integrity, excellence, teamwork, and humility, supporting long-term shareholder value.

Financial performance and guidance

• Achieved consistent net interest income growth every year since 2016, with a 7.3% total operating revenue CAGR over the past decade.

• Non-interest income now represents 39% of total revenues, supporting stability and premium valuation.

• Maintains a 32-year streak of dividend increases, with a target payout ratio around 50% and strong capital (CET1 ratio 14.03%).

• Loan-to-deposit ratio target is below 85%, currently at 76%, with robust liquidity and plans to fund growth through new branches.

• Financial targets include mid-single-digit loan and NII growth, upper single- to double-digit noninterest revenue growth, and credit losses below 0.15%.

Business line developments and growth opportunities

• Banking: Expanding with new branches in high-growth markets, #1 or #2 deposit share in two-thirds of markets, and digital adoption by 76% of customers.

• Employee Benefit Services (BPAS): National platform with 880,000+ participants, 12.1% 10-year CAGR, and top 5 recordkeeper in 18 categories.

• Insurance (OneGroup): Doubled in size since 2015, 9.8% 7-year revenue CAGR, 13 acquisitions since 2021, and ranked 66th among U.S. insurance agencies.

• Wealth management: Over $12.5 billion in AUM/AUA, 87% recurring revenue, and a plan to double client penetration rates from 2.8% to 5-7% over 2-3 years.

• Technology and AI: Significant investments in automation and generative AI to drive efficiency, with measurable labor savings and ongoing initiatives.