Form 8-K

8-K — COMMUNITY FINANCIAL SYSTEM, INC.

Accession: 0001104659-26-087355

Filed: 2026-07-28

Period: 2026-07-28

CIK: 0000723188

SIC: 6021 (NATIONAL COMMERCIAL BANKS)

Item: Results of Operations and Financial Condition

Item: Financial Statements and Exhibits

Documents

8-K — tm2621422d1_8k.htm (Primary)

EX-99.1 — EXHIBIT 99.1 (tm2621422d1_ex99-1.htm)

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8-K — FORM 8-K

8-K (Primary)

Filename: tm2621422d1_8k.htm · Sequence: 1

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COMMUNITY FINANCIAL SYSTEM, INC.

0000723188

2026-07-28

iso4217:USD

xbrli:shares

iso4217:USD

xbrli:shares

UNITED STATES

SECURITIES AND

EXCHANGE COMMISSION

WASHINGTON, D.C.

20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

July 28, 2026

(Exact name of registrant as specified in

its charter)

Delaware

001-13695

16-1213679

(State or other jurisdiction

incorporation)

(Commission File

Number)

(IRS Employer Identification

No.)

333 Butternut Drive, Syracuse, New York

13214

(Address

of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (315)

445-2282

Not applicable.

(Former name or former

address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended

to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name

of each exchange on which registered

Common Stock, $1.00 par value per share

CBU

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging

growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities

Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ¨

Item 2.02 Results of Operations and Financial Condition.

On July 28, 2026, Community Financial System, Inc.

announced its results of operations for the second quarter ended June 30, 2026. The public announcement was made by means of a news release,

the text of which is furnished as Exhibit 99.1.

The information in this Form 8-K, including Exhibit

99.1 attached hereto, is being furnished under Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18

of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under

the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following exhibit is being furnished pursuant

to Item 2.02 above.

99.1 Press Release, dated July 28, 2026, issued by Community Financial System, Inc.

104 Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)

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 hereunto duly authorized.

Community Financial System, Inc.

By:

/s/ Marya Burgio Wlos

Name: Marya Burgio Wlos

Title: Executive Vice President and Chief Financial Officer

Dated: July 28, 2026

Exhibit Index

Exhibit Number

Description

99.1

Press Release, dated July 28, 2026, issued by Community Financial System, Inc.

104

Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)

EX-99.1 — EXHIBIT 99.1

EX-99.1

Filename: tm2621422d1_ex99-1.htm · Sequence: 2

Exhibit

99.1

News Release

For further information, please contact:

333

Butternut Drive, Syracuse, N.Y. 13214

Marya Burgio Wlos,

EVP & Chief Financial Officer

Office: (315) 299-2946

Community

Financial System, Inc. Reports Second Quarter 2026 Results

SYRACUSE, N.Y. — July 28, 2026

— Community Financial System, Inc. (the “Company” or “CFSI”) (NYSE: CBU) reported second quarter 2026 results.

The results are available within the “News” section of the Company's investor relations website or directly at https://ir.cfsi.com/Q2-2026-CBU-Earnings-Release.

Company management will host a conference

call at 11:00 a.m. (ET) today, July 28, 2026, to discuss the second quarter 2026 results. The conference call can be accessed via webcast

at https://app.webinar.net/b0yzqVAwxjN or via dial-in at 1-833-630-0464 (United States) or 1-412-317-1809 (International).

About Community Financial System,

Inc.

Community Financial System, Inc. is

a diversified financial services company that is focused on four main business lines – banking services, employee benefit services,

insurance services and wealth management services. Its banking subsidiary, Community Bank, N.A., is among the country’s 100 largest

banking institutions with over $17 billion in assets and operates approximately 200 customer facilities across Upstate New York, Northeastern

Pennsylvania, Vermont, Western Massachusetts and Southern New Hampshire. The Company’s Benefit Plans Administrative Services, Inc.

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. The Company’s OneGroup NY, Inc. subsidiary is a top 68 U.S. insurance

agency. The Company also offers comprehensive financial planning, trust administration and wealth management services through its Nottingham

Financial Group operating unit. The Company is listed on the New York Stock Exchange and the Company’s stock trades under the symbol

CBU. For more information about the Company and each of its four main business lines visit https://ir.cfsi.com.

News Release

For further information, please contact:

333 Butternut

Drive, Syracuse, N.Y. 13214

Marya

Burgio Wlos, EVP & Chief Financial Officer

Office: (315)

299-2946

Community Financial System,

Inc. Reports Second Quarter 2026 Results

SYRACUSE, N.Y. — July 28, 2026

Community Financial System,

Inc. (the “Company” or “CFSI”) (NYSE: CBU) reported second quarter 2026 net income of $61.3 million, or $1.16

per share and operating net income of $61.5 million, or $1.16 per share.

“Our Company delivered another

quarter of solid core performance with operating diluted earnings per share1 of $1.16, up 11.5% year-over-year and representing

our fifth consecutive quarter of record results,” commented Dimitar A. Karaivanov, President and CEO.

“Our organic momentum continues

across all businesses and is also supported by margin and market value tailwinds. During the quarter we achieved an operating return

on assets1 of 1.40% while continuing to actively invest in organic and inorganic growth initiatives including completing the

acquisition of ClearPoint Federal Bank & Trust. At the same time, we remain focused on expanding operating leverage and ensuring

that continued investments translate fully into bottom-line results. Importantly, our trajectory remains very attractive and we expect

acceleration across all of our businesses into the second half of the year.”

Second

Quarter 2026 Performance

Quarter-over-

Quarter Increase

(Decrease)

Year-over-Year

Increase (Decrease)

Dollars

in thousands, except per share data

2nd

Qtr

2026

1st

Qtr

2026

2nd

Qtr

2025

Operating

Performance

Diluted

Earnings Per Share

$1.16

$1.08

$0.97

$0.08

7.4%

$0.19

19.6%

Operating

Diluted Earnings Per Share1

1.16

1.15

1.04

0.01

0.9%

0.12

11.5%

Operating

Pre-Tax, Pre-Provision Net Revenue Per Share1

1.62

1.61

1.41

0.01

0.6%

0.21

14.9%

Return

Metrics

Return

on Assets

1.40%

1.33%

1.24%

0.07%

0.16%

Operating

Return on Assets1

1.40%

1.42%

1.34%

(0.02%)

0.06%

Return

on Equity

12.10%

11.51%

11.21%

0.59%

0.89%

Operating

Return on Equity1

12.13%

12.30%

12.10%

(0.17%)

0.03%

Second

Quarter 2026 Performance (continued)

Quarter-over-Quarter

Increase (Decrease)

Year-over-Year

Increase (Decrease)

Dollars

in thousands, except per share data

2nd

Qtr

2026

1st

Qtr

2026

2nd

Qtr

2025

Revenues

Total

Revenues

$223,155

$213,286

$199,256

$9,869

4.6%

$23,899

12.0%

Total

Operating Revenues (FTE)1

219,338

214,537

200,141

4,801

2.2%

19,197

9.6%

Noninterest

Revenues

84,011

78,574

74,508

5,437

6.9%

9,503

12.8%

Total

Operating Noninterest Revenues1

79,301

78,975

74,509

326

0.4%

4,792

6.4%

Noninterest

Revenues/Total Revenues

37.6%

36.8%

37.4%

0.8%

0.2%

Operating

Noninterest Revenues/Operating Revenues (FTE)1

36.2%

36.8%

37.2%

(0.6%)

(1.0%)

Net

Interest Income and Margin

Net

Interest Income

$139,144

$134,712

$124,748

$4,432

3.3%

$14,396

11.5%

Net

Interest Margin

3.46%

3.43%

3.27%

0.03%

0.19%

Net

Interest Margin (FTE)1

3.49%

3.45%

3.30%

0.04%

0.19%

Balance

Sheet and Funding

Total

Ending Loans

$11,282,824

$11,131,184

$10,519,117

$151,640

1.4%

$763,707

7.3%

Total

Ending Deposits

14,710,409

14,870,122

13,701,768

(159,713)

(1.1%)

1,008,641

7.4%

Cost

of Total Deposits

1.07%

1.10%

1.19%

(0.03%)

(0.12%)

Cost

of Funds

1.18%

1.20%

1.32%

(0.02%)

(0.14%)

Risk

Metrics

Annualized

Loan Net Charge-Offs

0.12%

0.11%

0.20%

0.01%

(0.08%)

Tier

1 Leverage Ratio

9.26%

9.20%

9.42%

0.06%

(0.16%)

Loan-to-deposit

ratio

76.7%

74.9%

76.8%

1.8%

(0.1%)

Non-owner

occupied and multifamily commercial real estate (“CRE”) / total bank-level regulatory capital

201%

194%

184%

17%

1 Non-GAAP Measure. For

more information on Non-GAAP measures, refer to “Non-GAAP Measures” section along with the Quarterly GAAP to Non-GAAP

Reconciliations included within the “Summary of Financial Data (unaudited)” tables below.

Second

Quarter 2026 Business Segment Results2

Quarter-over-Quarter

Increase (Decrease)

Year-over-Year

Increase (Decrease)

Dollars

in thousands

2nd

Qtr

2026

1st

Qtr

2026

2nd

Qtr

2025

Banking

and Corporate

Net

interest income

$137,899

$133,550

$123,973

$4,349

3.3%

$13,926

11.2%

Provision

for credit losses

4,607

5,636

4,117

(1,029)

(18.3%)

490

11.9%

Segment

noninterest revenues

21,529

21,979

19,949

(450)

(2.0%)

1,580

7.9%

Other

segment expenses

93,133

90,282

85,313

2,851

3.2%

7,820

9.2%

Adjusted

income before income taxes

$61,688

$59,611

$54,492

$2,077

3.5%

$7,196

13.2%

Adjusted

return on assets3

1.43%

1.41%

1.34%

0.02%

0.09%

Adjusted

return on equity3

14.58%

14.49%

14.20%

0.09%

0.38%

Adjusted

return on tangible equity1, 3

25.79%

26.01%

25.95%

(0.22%)

(0.16%)

Employee

Benefit Services

Segment

revenues

$36,361

$36,311

$33,892

$50

0.1%

$2,469

7.3%

Segment

expenses

22,520

21,984

21,981

536

2.4%

539

2.5%

Adjusted

income before income taxes

$13,841

$14,327

$11,911

($486)

(3.4%)

$1,930

16.2%

Adjusted

return on assets3

24.90%

23.25%

20.46%

1.65%

4.44%

Adjusted

return on equity3

28.38%

26.73%

22.80%

1.65%

5.58%

Adjusted

return on tangible equity1, 3

61.43%

52.45%

47.63%

8.98%

13.80%

Insurance

Services

Segment

revenues

$12,811

$12,331

$13,464

$480

3.9%

($653)

(4.8%)

Segment

expenses

10,806

10,482

11,217

324

3.1%

(411)

(3.7%)

Adjusted

income before income taxes

$2,005

$1,849

$2,247

$156

8.4%

($242)

(10.8%)

Adjusted

return on assets3

7.58%

6.88%

13.40%

0.70%

(5.82%)

Adjusted

return on equity3

8.74%

8.05%

16.76%

0.69%

(8.02%)

Adjusted

return on tangible equity1, 3

18.90%

16.92%

96.97%

1.98%

(78.07%)

Wealth

Management Services

Segment

revenues

$11,217

$11,063

$9,219

$154

1.4%

$1,998

21.7%

Segment

expenses

7,775

7,156

6,870

619

8.7%

905

13.2%

Adjusted

income before income taxes

$3,442

$3,907

$2,349

($465)

(11.9%)

$1,093

46.5%

Adjusted

return on assets3

15.09%

37.18%

24.67%

(22.09%)

(9.58%)

Adjusted

return on equity3

28.88%

42.07%

27.60%

(13.19%)

1.28%

Adjusted

return on tangible equity1, 3

33.96%

48.24%

31.38%

(14.28%)

2.58%

1 Non-GAAP Measure. For

more information on Non-GAAP measures, refer to “Non-GAAP Measures” section along with the Quarterly GAAP to Non-GAAP

Reconciliations included within the “Summary of Financial Data (unaudited)” tables below.

2Refer to the “Summary

of Financial Data (unaudited)” tables below for reconciliations of the reported measure of segment profit (adjusted income before

income taxes) results to Company results and calculations of the segment adjusted return metrics. The reported measure of segment profit,

the reported segment assets and the reported segment equity that are used in the calculations of the segment adjusted return metrics

are presented in conformity with ASC 280: Segment Reporting and follow the methodology disclosed in the Company’s 2025 Annual

Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2026.

3The segment adjusted return

metrics are reported on a pre-tax basis.

Results

of Operations

The Company reported second quarter 2026

net income of $61.3 million, or $1.16 per share. This compares to net income of $51.3 million, or $0.97 per share, for the second quarter

of 2025. The $0.19 increase in earnings per share was primarily driven by increases in net interest income and noninterest revenues,

partially offset by increases in the provision for credit losses, noninterest expenses and income taxes. Comparatively, the Company’s

earnings per share increased $0.08 from $1.08 per share for the linked first quarter of 2026, primarily due to increases in net interest

income and noninterest revenues and a decrease in the provision for credit losses, partially offset by increases in noninterest expenses

and income taxes.

Net Interest Income and Net Interest

Margin

The Company’s record quarterly

net interest income reflected diminishing funding cost pressures and organic loan growth, supporting continued margin expansion.

· Net

interest income in the second quarter of 2026 was $139.1 million, up $14.4 million, or 11.5%,

compared to the second quarter of 2025, and up $4.4 million, or 3.3%, from the first quarter

of 2026.

· Net

interest margin for the second quarter of 3.46% and fully tax-equivalent net interest margin,

a non-GAAP measure, of 3.49%, both increased 19 basis points from the second quarter of 2025.

These increases were primarily the result of a lower cost of interest-bearing liabilities

and a higher yield on interest-earning assets.

· The

yield on interest-earning assets increased 5 basis points to 4.61% over the prior year’s

second quarter primarily driven by higher loan yields.

· The

cost of interest-bearing liabilities decreased 18 basis points from 1.74% in the second quarter

of 2025 to 1.56% in the second quarter of 2026, driven by a 15 basis point decrease in the

average interest-bearing deposit rate.

· On

a linked quarter basis, net interest margin and fully tax-equivalent net interest margin,

a non-GAAP measure, increased by 3 basis points and 4 basis points, respectively. The yield

on interest-earning assets increased 1 basis point, while the cost of funds decreased 2 basis

points. This included a 3 basis point decrease in the cost of interest-bearing liabilities

driven by a 3 basis point decrease in the average interest-bearing deposit rate to 1.44%.

Excluding the impact of the semiannual Federal Reserve Bank dividend recorded in the second

quarter of 2026, the yield on interest-earning assets decreased 1 basis point compared to

the linked first quarter.

Noninterest Revenues

The Company’s noninterest revenue

streams generated 38% of total revenues in the second quarter.

· Banking

noninterest revenues, comprised of deposit service and other banking fees and mortgage banking

revenues, totaled $21.3 million for the second quarter of 2026, an increase of $1.2 million,

or 6.1%, from the second quarter of 2025 and a decrease of $0.5 million, or 2.4%, from the

first quarter of 2026. The increase from the second quarter of 2025 was primarily comprised

of higher debit interchange and ATM fees. The decrease from the linked first quarter reflected

lower customer interest rate swap fee revenues.

· Employee

benefit services revenues for the second quarter of 2026 were $34.9 million, an increase

of $2.5 million, or 7.7%, in comparison to the second quarter of 2025 and an increase of

$0.3 million, or 0.9%, from the first quarter of 2026. The increase from the prior year’s

second quarter was largely driven by revenue growth in the recordkeeping and third-party

administration services business line due in part to higher average market values of assets

under administration.

· Insurance

services revenues for the second quarter of 2026 were $13.2 million, which represents a $0.2

million, or 1.4%, decrease versus the prior year’s second quarter and a $0.6 million,

or 4.8%, increase from the first quarter of 2026. The increase from the linked first quarter

was due to changes in the timing of collections of contingent commission revenues. The decrease

from the second quarter of 2025 was predominantly due to a softer insurance market and lower

organic growth.

· Wealth

management services revenues for the second quarter of 2026 totaled $10.4 million, an increase

of $1.7 million, or 19.8%, from the second quarter of 2025 and an increase of $0.1 million,

or 0.7%, from the first quarter of 2026. The increase from the second quarter of 2025 was

reflective of revenue growth from the acquisition of ClearPoint Federal Bank & Trust

(“ClearPoint”) and higher average market values of assets under management.

· The

Company recognized a $4.7 million gain on equity securities during the second quarter of

2026 which included a $3.3 million gain associated with the sale of a limited partnership

investment and a $0.9 million gain associated with the conversion of certain Visa Class B

shares to Visa Class C shares.

Noninterest

Expenses and Income Taxes

The Company continues to focus on

managing expenses consistent with its organic growth strategies and scale objectives, while evaluating efficiency opportunities and the

enhancement of operating leverage in all lines of business.

· The

Company recorded $137.7 million in total noninterest expenses in the second quarter of 2026,

compared to $129.1 million of total noninterest expenses in the prior year’s second

quarter. The $8.6 million, or 6.7% increase between the periods was primarily driven by higher

salaries and employee benefits expenses, data processing and communications expenses and

occupancy and equipment expenses.

· Salaries

and employee benefits expenses increased $3.4 million, or 4.3%, from the second quarter of

2025, primarily due to incremental costs associated with acquisitions and de novo bank branches

opened between the periods, along with the impact of annual merit-based increases.

· Data

processing and communications expenses increased $3.0 million, or 17.9%, from the second

quarter of 2025 reflective of the Company’s continued investment in customer-facing

and back-office technologies, including artificial intelligence applications and other workflow

efficiency initiatives. The increase also included a one-time $0.6 million early termination

charge related to a debit card processing platform conversion.

· Occupancy

and equipment expenses increased $2.4 million, or 20.9%, from the prior year’s second

quarter, driven by incremental costs associated with the opening of de novo bank branches

and regional headquarters and the Santander Bank, N.A. (“Santander”) branch acquisition.

· The

effective tax rate for the second quarter of 2026 was 24.1%, an increase from 22.3% in the

second quarter of 2025 and an increase from 23.3% in the first quarter of 2026. The increase

from the second quarter of 2025 was primarily due to an increase in certain state income

taxes while the increase from the first quarter of 2026 reflected a decrease in tax benefits

related to stock-based compensation activity.

Financial Position and Liquidity

The Company’s financial position

and liquidity profile remain strong, demonstrating the effectiveness of its proactive asset and liability management and prudent financial

planning.

· The

Company’s total assets were $17.76 billion at June 30, 2026, representing a $1.10 billion,

or 6.6%, increase from one year prior and an $18.9 million, or 0.1%, increase from the end

of the first quarter of 2026. The increase in the Company’s total assets from one year

prior was primarily driven by organic loan growth, the Santander branch acquisition and the

ClearPoint acquisition.

· At

June 30, 2026, the Company’s readily available sources of liquidity totaled $6.74 billion,

including unrestricted cash and cash equivalents balances of $243.4 million, unpledged investment

securities totaling $2.17 billion, unused borrowing capacity at the Federal Home Loan Bank

of New York of $1.46 billion and $2.87 billion of funding availability at the Federal Reserve

Bank’s discount window.

· The

Company’s readily available sources of liquidity represent 239% of the Company’s

estimated uninsured deposits, net of collateralized and intercompany deposits, at June 30,

2026.

· Estimated

insured deposits, net of collateralized and intercompany deposits, represent 81% of total

ending deposits at June 30, 2026.

Deposits and Funding

The Company continues to leverage

its strong core deposit base, characterized by low funding costs, to support its financial operations.

· Ending

deposits at June 30, 2026 of $14.71 billion were $159.7 million, or 1.1%, lower than the

end of the first quarter of 2026 and were $1.01 billion, or 7.4%, higher than one year prior.

The decrease from March 31, 2026 was primarily due to seasonal outflows of governmental deposit

balances while the increase from one year prior was primarily driven by growth in consumer

and business deposit balances, including the $543.7 million of deposits assumed in the Santander

branch acquisition and the $120.1 million of deposits assumed in the ClearPoint acquisition.

· Ending

borrowings of $764.1 million at June 30, 2026, which included $425.6 million of fixed rate

Federal Home Loan Bank of New York term borrowings, $172.8 million of overnight borrowings,

$157.6 million of customer repurchase agreements and $8.1 million of finance lease liabilities,

increased $116.8 million, or 18.0%, from the end of the first quarter of 2026 and decreased

$130.4 million, or 14.6%, from one year prior. The increase from the end of the linked first

quarter primarily reflected an increase in overnight borrowings while the decrease from one

year prior primarily reflected a decrease in fixed-rate term borrowings.

· The

Company’s average cost of funds of 1.18% decreased 14 basis points from the second

quarter of 2025 and decreased 2 basis points from the first quarter of 2026. The decreases

between both periods reflected lower average deposit costs and a lower proportion of funding

from higher rate borrowings.

· The

quarterly average cost of total deposits of 1.07% remains comparatively low relative to the

industry and decreased 12 basis points from the second quarter of 2025 and 3 basis points

from the linked first quarter of 2026.

· 66%

of the Company’s total deposits were in no- and relatively low-rate checking and savings

accounts at the end of the second quarter of 2026. Time deposit accounts represented 14%

of the Company’s total deposits at the end of the second quarter of 2026, a decrease

of 1 percentage point from June 30, 2025 and consistent with the end of the linked first

quarter.

Loans and Credit Quality

The Company’s predominantly

footprint-based loan portfolio is well diversified, with credit performance remaining a central priority. The Company’s asset quality

metrics, including net charge-offs and delinquent and nonperforming (nonaccrual loans and accruing loans 90 days or more past due) loan

levels, remain strong compared to the banking industry, reflecting the Company’s robust risk management practices and disciplined

credit quality standards.

· Ending

loans at June 30, 2026 totaled $11.28 billion, an increase of $151.6 million, or 1.4%, compared

to March 31, 2026 and an increase of $763.7 million, or 7.3%, compared to one year prior.

The increase from one year prior primarily reflected organic growth in the overall business

and consumer lending portfolios while the increase from the end of the linked first quarter

primarily reflected organic growth in the business lending portfolio. The Company’s

non-owner occupied and multifamily CRE exposure remains diverse both geographically and by

property type, and relatively low at 16% of total assets, 25% of total loans and 201% of

total bank-level regulatory capital.

· At

June 30, 2026, the Company’s allowance for credit losses totaled $91.7 million, or

0.81% of total loans outstanding, compared to $90.2 million, or 0.81% of total loans outstanding,

at March 31, 2026, and $81.9 million, or 0.78% of total loans outstanding, at June 30, 2025.

The increases were driven by a net reserve build in the business lending portfolio reflective

of organic CRE loan growth.

· The

Company recorded a $4.6 million provision for credit losses during the second quarter of

2026 compared to $5.6 million in the linked first quarter and $4.1 million in the prior year’s

second quarter, reflective of organic loan growth and stable credit quality metrics.

· The

Company recorded net charge-offs of $3.3 million, or an annualized 0.12% of average loans,

in the second quarter of 2026 compared to net charge-offs of $5.1 million, or an annualized

0.20% of average loans, in the second quarter of 2025 and net charge-offs of $3.0 million,

or an annualized 0.11% of average loans, in the first quarter of 2026.

· Total

delinquent loans, consisting of loans 30 or more days past due and nonaccrual loans, as a

percentage of total loans outstanding was 1.04% at the end of the second quarter of 2026.

This compares to 1.12% at March 31, 2026 and 1.01% at June 30, 2025.

· At

June 30, 2026, nonperforming loans were $56.8 million, or 0.50% of total loans outstanding

compared to $53.7 million, or 0.48% of total loans outstanding at March 31, 2026, and $53.3

million, or 0.51% of total loans outstanding one year earlier.

Shareholders’ Equity and Regulatory

Capital

The Company’s capital planning

and management activities, coupled with its diversified streams of income and prudent dividend practices, have allowed it to build and

maintain a strong capital position. At June 30, 2026, all of the regulatory capital ratios of the Company and Community Bank, N.A. (“CBNA”)

significantly exceeded well-capitalized standards.

· Shareholders’

equity of $2.07 billion at June 30, 2026 was $189.7 million, or 10.1%, higher than one year

ago, primarily due to a $129.1 million increase in retained earnings and a $61.0 million

decrease in accumulated other comprehensive loss related to the Company’s investment

securities portfolio. Shareholders’ equity increased $48.8 million, or 2.4%, from March

31, 2026, primarily driven by a $36.6 million increase in retained earnings and an $8.2 million

decrease in accumulated other comprehensive loss related to the Company’s investment

securities portfolio.

· The

Company’s shareholders’ equity to assets ratio was 11.67% at June 30, 2026, an

increase from 11.30% at June 30, 2025 and 11.41% at March 31, 2026.

· The

Company’s tier 1 leverage ratio of 9.26% at June 30, 2026 remained substantially above

the regulatory well-capitalized standard of 5.0% and decreased 16 basis points from one year

earlier and increased 6 basis points from March 31, 2026. The decrease in the Company’s

tier 1 leverage ratio from one year prior was primarily due to the intangible assets added

as part of the Santander branch and ClearPoint acquisitions, as well as the impact of $26.5

million of common stock repurchases over the past twelve months.

· The

Company’s tangible equity to tangible assets ratio (non-GAAP) was 6.86% at June 30,

2026, up from 6.51% a year earlier and 6.68% at March 31, 2026. Tangible equity (non-GAAP)

increased $125.9 million, or 12.2%, from one year prior due to the aforementioned increase

in retained earnings and decrease in accumulated other comprehensive loss related to the

Company’s investment securities portfolio. Tangible assets (non-GAAP) increased $1.03

billion, or 6.5%, from the prior year due primarily to organic loan growth and the Santander

branch and ClearPoint acquisitions.

Dividend Increase and Stock Repurchase

Program

The payment of a meaningful and growing

dividend is an important component of the Company’s commitment to provide consistent and favorable long-term returns to its shareholders,

and it reflects the continued strength of the Company’s long-term operating results and capital position, and management’s

confidence in the future performance of the Company. The $0.02 increase in the quarterly dividend declared in the third quarter of 2026

marked the 34th consecutive year of dividend increases for the Company.

· During

the second quarter of 2026, the Company declared a quarterly cash dividend of $0.47 per share

on its common stock, up 2.2% from the $0.46 dividend declared in the second quarter of 2025.

· On

July 22, 2026, the Company announced a $0.02, or 4.3%, increase in the quarterly dividend

to $0.49 per share on its common stock, payable on October 13, 2026 to shareholders of record

as of September 15, 2026, representing an annualized yield of 2.9% based upon on the $66.59

closing price of the Company’s stock on July 27, 2026. This increase marked the 34th

consecutive year of dividend increases for the Company and is supported by the strong earnings

growth the Company has generated in recent quarters.

· In

December 2025, the Company’s Board of Directors (the “Board”) approved

a stock repurchase program authorizing the repurchase of up to 2.63 million shares, or 5.0%

of the Company’s common stock outstanding during the twelve-month period starting January

1, 2026. Such repurchases may be made at the discretion of the Company’s senior management

based on market conditions and other relevant factors and will be acquired through open market

or privately negotiated transactions as permitted under Rule 10b-18 of the Securities Exchange

Act of 1934 and other applicable regulatory and legal requirements. There were 258,471 shares

repurchased pursuant to the 2026 stock repurchase program during the first six months of

2026, including 8,471 shares repurchased during the second quarter of 2026.

Wealth Management Services Expansion

with Acquisition of ClearPoint Federal Bank & Trust

On June 1, 2026, the Company announced

that CBNA completed its acquisition of ClearPoint, a national leader in trust administration for the approximately $20 billion death

care industry, with over $1.5 billion of assets under management and a historical 3-year revenue CAGR of 9.7%. Total consideration was

$39.0 million in cash, subject to potential post-closing purchase price adjustments. Net assets acquired included $3.1 million of core

deposit intangibles, $8.1 million of other intangibles and the Company recorded $10.4 million of goodwill in conjunction with the acquisition.

The transaction significantly expands the revenue and offerings of Nottingham Financial Group, the Company’s wealth management

services business, and contributes to the Company’s strategic capital deployment into durable, recurring and growing income streams.

The new business operates as ClearPoint Trust, a division of CBNA.

Non-GAAP Measures

The Company also provides supplemental

reporting of its results on an “operating” and “tangible” basis. Results on an “operating” basis

exclude the after-tax effects of acquisition expenses, acquisition-related contingent consideration adjustments, restructuring expenses,

litigation accrual, 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. The Company also

provides supplemental ratio reporting at the segment level, which includes adjusted return on tangible equity. Adjusted return on tangible

equity represents annualized adjusted income before income taxes applicable to each segment as a percentage of average tangible equity

for each respective segment. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net

revenues,” which subtracts the provision for credit losses, acquisition expenses, acquisition-related contingent consideration

adjustments, restructuring expenses, litigation accrual, gain (loss) on equity securities and amortization of intangible assets from

income before income taxes. Although these items are non-GAAP measures, the Company’s management believes this information helps

investors and analysts measure underlying core performance and provides better comparability to other organizations that have not engaged

in acquisitions. The Company also provides supplemental reporting of its net interest income and net interest margin on a fully tax-equivalent

(“FTE”) basis, which includes an adjustment to net interest income that represents taxes that would have been paid had nontaxable

investment securities and loans been taxable. Although FTE 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 liabilities. The

amounts for such items are presented in the tables that accompany this release.

Conference Call Scheduled

Company management will host a conference

call at 11:00 a.m. (ET) today, July 28, 2026, to discuss the second quarter 2026 results. The conference call can be accessed via webcast

at https://app.webinar.net/b0yzqVAwxjN or via dial-in at 1-833-630-0464 (United States) or 1-412-317-1809 (International).

This earnings release is also available

within the ”News” section of the Company's investor relations website at https://ir.cfsi.com/news/. A replay of the

earnings call webcast will also be available on this site for at least one year.

About Community Financial System,

Inc.

Community Financial System, Inc. is a

diversified financial services company that is focused on four main business lines – banking services, employee benefit services,