Community Bank System
Annual Report 2023

Plain-text annual report

S S E R G O R P T N E I L I S E R 2 0 2 3 A N N U A L R E P O R T 2 About Community Bank System, Inc. BUSINESSES B A N K I N G E M P L OY E E B E N E F I T S E R V I C E S I N S U R A N C E W E A LT H M A N A G E M E N T 3 RESILIENT PROGRESS TABLE OF CONTENTS LETTER TO SHAREHOLDERS PERFORMANCE HIGHLIGHTS SELECTED FINANCIAL HIGHLIGHTS EXCELLENCE RECOGNIZED 3 5 7 8 RETIREMENT MESSAGE FROM MARK TRYNISKI 9 BUSINESSES MESSAGE FROM JEFFREY LEVY Chief Banking Officer, Community Bank, N.A. MESSAGE FROM PAUL NEVEU President and CEO, BPAS MESSAGE FROM PIERRE MORRISSEAU President and CEO, OneGroup MESSAGE FROM MICHAEL CERMINARO President and CEO, Community Bank Wealth Management EXECUTIVE MANAGEMENT BOARD OF DIRECTORS ADMINISTRATION BRANCH LOCATIONS 10 11 13 15 17 20 21 22 23 CORPORATE / SHAREHOLDER INFORMATION 25 Integrity WE DO THE RIGHT THING Excellence WE ALWAYS BRING OUR BEST O U R C O R E VA L U E S Teamwork WE WORK TOGETHER Humility WE RESPECT EVERYONE To Our Shareholders RESILIENT PROGRESS In 2023, Community Bank System, Inc. continued to build upon its foundation of strength, navigating a year full of both challenges and opportunities. We were faced with high inflation and rapidly rising interest rates, a number of high-profile bank failures, geopolitical conflicts, and numerous market swings. The resilience of our Company was on full display as we navigated through the challenges with a steady focus on our clients, communities, and colleagues. services to our clients and our explicit investment thesis of Above Average Returns with Below Average Risk. Within our Banking business, we achieved record operating revenues of $507.3 million—a 3.0% increase from the full year of 2022. Our total assets were $15.56 billion at the close of the year, marking a slight reduction of 1.8% from the previous year due to strategic sales in our investment securities portfolio to reduce borrowings. Our ability to allocate capital dynamically across our businesses allowed us to take advantage of both organic and acquisition Our loan portfolio grew significantly, increasing by $895.2 opportunities enabling the Company to achieve record operating revenues for 2023. However, the bottom line results were negatively impacted by a higher than anticipated expense million, or 10.2%, to $9.70 billion, driven by net organic growth across all loan categories and major regions. We maintained our foundational focus on credit quality, as evidenced by net growth driven by both inflationary pressures and purposeful charge-offs of 0.06% for 2023. investments for future growth. For the full year, our GAAP Earnings Per Share (EPS) reached $2.45, a decrease from $3.46 in 2022. Our Operating EPS, which reflects our core operations, stood at $3.36 for the year, highlighting our operational consistency in a volatile environment. We recorded a return on assets (ROA) of 0.87% and an operating ROA of 1.19% for the year. Our return on equity (ROE) was 8.27% for the year, which, when adjusted for non-operating items, increased to 11.89%. Despite the challenges of 2023, our financial results are a Community Bank N.A.’s deposits ended the year at $12.93 billion, a slight reduction of 0.6% from the previous year. The average cost of deposits rose to 0.66% and remains one of the lowest in the country. Our long-tenured strategy of pursuing checking accounts and core business relationships truly served us well. In addition, as of year-end 2023 Community Bank, N.A. had readily available liquidity sources totaling $4.83 billion. This robust liquidity position, representing over 200% of our estimated uninsured deposits, net of collateralized and testament to the resilience of our business model and strategy. intercompany deposits, underpinned our resilience in 2023. These outcomes reinforce our commitment to delivering shareholder value and maintaining operational performance and discipline. DIVERSIFIED BUSINESS MODEL Our dedication to diversifying the Company’s revenue streams took center stage in 2023 with three of our four businesses having record revenue results. Our business model is fully aligned with both our objective to provide full relationship Our Employee Benefit Services business also showcased positive momentum, with revenues reaching a record $118.0 million for the full year, a 2.2% increase from the same period last year. This segment continues to demonstrate strong organic momentum and we now serve over 800,000 participants nationwide. We were also recently named a Top 5 Recordkeeper across all market segments by the National Association of Plan Advisors (NAPA) Advisors’ Choice Awards. 3 Significant growth was observed in the Insurance business, We are also actively deploying technology to enhance our where revenues surged by 18.3% to a record $47.1 million internal processes and functions. We have dedicated teams compared to the full year of 2022. This growth is attributable focused on data, process optimization and improved internal to a strong premium market, organic expansion, and strategic efficiencies. All of those initiatives are designed to ultimately acquisitions. We were ranked #75 amongst the Top 100 benefit how we service our clients and work with each Property/Casualty Agencies by the Insurance Journal. other internally. Our Wealth Management business enjoyed a revenue boost to $31.9 million, up by 0.9% from the full year of 2022, driven by improved investment market conditions and an increase in assets under management, with revenue stability-maintained quarter-over-quarter. Reflecting on the year, we recognize the importance of evolving to embrace a more diversified approach. Our resilience and progress have been greatly bolstered by our ability to adapt and grow across various business segments, from traditional banking services to innovative financial solutions in wealth management, benefits, and insurance. This strategic diversification has not only strengthened our resiliency across various economic environments but has also supported our role LOOKING AHEAD As we look to 2024 and beyond, we will remain rooted in our values of Integrity, Teamwork, Excellence and Humility and build upon our sustainable business model. Our duty of care to our clients, communities and colleagues is the foundation of our financial success and will continue to serve us well. As President and CEO, I am fully aware of the responsibility placed upon my shoulders. It’s an honor to continue in the footsteps of Mark Tryniski, whose leadership has been a source of inspiration. With a team of exceptionally talented and committed professionals by my side, I am confident the future is bright. as a responsive financial institution in our communities. Thank you for being an integral part of our journey and for the ENHANCING CUSTOMER EXPERIENCE In 2023, we placed an increased emphasis on enhancing customer experience, a cornerstone of our business model. Significant investments were channeled into our digital platforms, resulting in the introduction of new features and capabilities designed to make our services more accessible, efficient, and secure. This strategic focus on digital innovation is evident in the increasing adoption of our digital offerings, with a significant percentage of our customers now actively using these platforms. trust you have placed in our Company. Dimitar A. Karaivanov President and Chief Executive Officer 4 Performance Highlights Total Revenue 1 $ IN MILLIONS Earnings per Share DILUTED 346.8 363.4 371.7 429.5 518.1 568.8 584.9 596.4 620.6 679.4 704.3 $1.93 $2.22 $2.19 $2.32 $3.03 $3.24 $3.23 $3.08 $3.48 $3.46 $2.45 13 14 15 16 17 18 19 20 21 22 23 13 14 15 16 17 18 19 20 21 22 23 10 -YEAR CAGR = 7.3% 10 -YEAR CAGR = 2.4% Net Interest Income $ IN MILLIONS Operating Earnings per Share 2 DILUTED 238.1 244.4 248.4 273.9 315.7 345.1 359.2 368.4 374.4 420.6 437.3 1.98 2.27 2.31 2.35 2.64 3.23 3.29 3.24 3.49 3.58 3.36 13 14 15 16 17 18 19 20 21 22 23 13 14 15 16 17 18 19 20 21 22 23 10 -YEAR CAGR = 6.3% 10-YEAR CAGR = 5.4% Noninterest Income1 $ IN MILLIONS Dividend Growth DECLARED 108.7 119.0 123.3 155.6 202.4 223.7 225.7 228.0 246.2 258.8 267.0 $1.10 $1.16 $1.22 $1.26 $1.32 $1.44 $1.58 $1.66 $1.70 $1.74 $1.78 13 14 15 16 17 18 19 20 21 22 23 13 14 15 16 17 18 19 20 21 22 23 10 -YEAR CAGR = 9.4% 10 -YEAR CAGR = 4.9% 1 Excluding securities gains/losses and gain/loss on debt extinguishment 2 Operating earnings per share, a non GAAP measure, excludes net of tax the effect of acquisition related expenses, gains/losses on investment securities and other special charges. A reconciliation of GAAP to Non-GAAP measures is provided in Item 7, Table 20 of the Form 10-K. 5 OUR INVESTMENT THESIS: Above Average Returns with Below Average Risk Return on Assets 1 Net Charge-off Ratio 1 1.19% 1.06% 1.24% 1.29% 1.12% 1.12% 1.12% 1.06% 1.50% 0.50% 0.20% 0.16% 0.06% 0.09% 0.07% 0.05% 0.13% 0.13% 0.11% 0.00% 2023 3-YR AVG 5-YR AVG 10-YR AVG 2023 3-YR AVG 5-YR AVG 10-YR AVG CBU KRX (MEDIAN) 3 CBU KRX (MEDIAN) 3 CBU - OPERATING 2 Cost of Funds 1 2.00% 1.84% 0.77% 0.78% 0.76% 0.61% 0.35% 0.31% 0.24% 0.00% Noninterest Revenues / Operating Revenues 2 50.0% 30.0% 10.0% 37.9% 38.6% 38.5% 37.3% 16.7% 19.8% 21.7% 23.1% 2023 3-YR AVG 5-YR AVG 10-YR AVG 2023 3-YR AVG 5-YR AVG 10-YR AVG CBU KRX (MEDIAN) 3 CBU KRX (MEDIAN) 3 Sources: S&P Global, Internal filings 1 Averages represent simple average of annual results through 2023. 2 Operating ROA and Revenues are non-GAAP measures. A reconciliation of GAAP to Non-GAAP measures is provided in Item 7, Table 20 of the Form 10-K. 3 The KBW Regional Banking Index (KRX) is a market index that is designed to track performance of 50 regional banks or thrifts that are publicly traded in the U.S. 6 Selected Financial Highlights Income Statement 2023 2013 IN MILLIONS Net interest income $ 437.3 $ 238.1 Noninterest income1 Total revenue1 267.0 704.3 Operating expenses2 462.4 Net income $ 131.9 $ 108.7 346.8 219.1 78.8 Per Share Data (Diluted) Earnings per share $ Operating earnings per share1,2 Cash dividends declared Book value 2.45 3.36 1.78 31.84 $ 1.94 1.98 1.10 21.66 Tangible book value $ 15.85 $ 12.80 Balance Sheet Data END OF PERIOD, IN MILLIONS Assets Loans Deposits $ 15,556 $ 7,096 9,705 12,928 4,109 5,896 Shareholders’ equity $ 1,698 $ 876 1 Excluding securities gains/losses and gain/loss on debt extinguishment 2 Excluding acquisition-related expenses, litigation and restructuring charges CAGR 10-YEAR 6.3% 9.4% 7.3% 7.8% 5.3% 2.4% 5.4% 4.9% 3.9% 2.2% 8.2% 9.0% 8.2% 6.8% 7 Excellence Recognized Community Bank System has garnered consistent recognition for its exceptional performance within the industry, underscoring our unwavering dedication to shareholders, consumers, and employees. In 2023, our achievements were acknowledged as follows: CBU’s 31 years of consecutive annual dividend increases have allowed it to retain the status as an S&P Dividend Aristocrat Ranked in top 25 of Forbes America’s Best Large Banks for 12 of the last 15 years and named to the World’s Best Banks in 2023 Ranked #23 in Newsweek’s, America’s Most Trustworthy Companies of 2023 Regularly named a “best bank” in our communities, including by Vermont Business Magazine in 2023 OneGroup: Ranked #75 in Insurance Journals Top 100 P/C Agencies of 2023 BPAS: NAPA Advisors’ choice award top 5 record keeper 2023 8 RETIREMENT FEATURE Mark Tryniski Farewell Message Given my retirement at the end of December 2023, I would many years. As our entire organization understands, we all like to take a final opportunity to reflect briefly on the past, work for you. present and future of Community Bank System. Having served your Company as Chief Executive Officer such an incredible Board of Directors. They are talented and for nearly eighteen years and over 20 in total, we have committed professionals who are caring, engaged, objective, experienced significant growth, evolution, change, success, and performance focused. Just as important, they have been and challenge. I am fond of saying look out the windshield, not an inspiration to work with and a source of much of my own the rear-view mirror. But as I think back over my tenure, I can’t effort, commitment and pride over the past 20 years. I am most thankful to have had the opportunity to work with help but marvel at the evolution and transformation of our operating environment over the past two decades. Economic, technological, regulatory, societal, political, and global forces have significantly influenced our Company and our industry. I am most proud of how Community Bank System has navigated this transformation effectively for the benefit of all our stakeholders to grow even better and stronger for the future. I would attribute this outcome to four primary operating principles - discipline, diversification, core values, and people. We endeavor to be disciplined in all we do, from credit, capital, and risk, to M&A. We operate a diversified business model, including our balance sheet and our income statement. We focus without exception on our core values of Integrity, Excellence, Teamwork and Humility. And we are not in the banking, wealth, insurance, or benefits business; we’re in the people business. Those principles are enduring and timeless Lastly, the greatest joy of my professional life has been to work alongside an incredible leadership team and 3,000 of my other friends and colleagues. Thank you for all you have done and will continue to do to make this such a great company and for your efforts, pride and passion in serving our customers, our communities, our shareholders, and each other. Community Bank System is better positioned now than at any time in our history. We have four tremendous businesses and the best leadership and operating teams we have ever had. We have invested for the future in people, products and technology. My successor, Dimitar Karaivanov, is one of the most talented financial and strategic professionals I have ever worked with and fully embodies the core values that guide our organization. I very much look forward to the future of Community Bank System under his capable leadership. and have worked for us to build a sustainable, high performing With gratitude, financial services business. Our greatest operating priority has always been to provide our shareholders with above-average returns and below average risk. I hope we have been largely successful in achieving this objective, and would like to thank our shareholders for their Mark E. Tryniski Retired President and Chief Executive Officer trust and confidence in me and our leadership team for so Member, Board of Directors 9 Diversifi ed and Complementary Revenue Streams BANKING Community Bank, N.A. • Commercial Banking • Treasury Management • Municipal • Agricultural • Business Banking • Retail & Consumer EMPLOYEE BENEFIT SERVICES BPAS • Retirement Plan & Benefi ts Administration • Actuarial & Pension Services • Public-Sector Benefi ts & VEBA • Health & Welfare Plans • Collective Investment Fund INSURANCE OneGroup • Risk Management • Business Insurance • Personal Insurance • Employee Benefi ts • Human Resources Services & Consulting WEALTH MANAGEMENT Community Bank Wealth Management • Investment Advising • Retirement Plan Design • Asset Management • Trust Services • Financial Planning • Family & Succession Planning $437.3M net interest income for 2023 4.0% increase from 2022 $70.0M non-interest banking revenues for 2023 2.7% decrease from 2022 $118.0M non-interest revenues from employee benefi t services for 2023 2.2% increase from 2022 $47.1M non-interest revenues from insurance services for 2023 18.3% increase from 2022 $31.9M non-interest revenues from wealth management services for 2023 0.9% increase from 2022 10 EXECUTIVE FEATURE | COMMUNITY BANK, N.A. Banking “ In 2023, Community Bank, N.A. navigated through several macro-economic challenges, effectively executed our strategic plans to post solid operating results and continued to make long-term investments. Our journey highlights our strength and commitment, setting a course for future growth. As we look ahead, united in our vision and supported by a dedicated team of bankers and loyal customers, we are ready to embrace opportunities and continue our path of success. – Jeffrey Levy | Chief Banking Offi cer ” Community Bank, N.A. 11 MESSAGE FROM CHIEF BANKING OFFICER OF COMMUNITY BANK, N.A.: As we look back on 2023, a year marked by its unique blend of challenges and achievements, I am fi lled with a sense of pride and humility over what we accomplished, and more importantly, optimism as we plan for the future. The steadfast progress within our banking business, amidst economic uncertainties and a banking sector crisis early in the year has been remarkable. At the core of our values is our deep-rooted and long standing customer relationships. Our proactive outreach during the banking sector crisis and ongoing communication eff orts have played a crucial role in upholding trust and maintaining historical deposit balances, proving the eff ectiveness of our customer-centric approach. Our successful journey through these turbulent times has underscored the robustness of our organic growth strategies across commercial banking, retail banking, and consumer lending. Commercial banking stood out as a pillar of strength, with a notable expansion in our commercial loan portfolio and steadfast asset quality metrics, demonstrating our capability to maneuver through the rough seas of the economy of 2023. This success is a tribute to our rigorous risk management framework and the enduring trust our clients have placed in us. Our in-footprint, relationship based, commercial loan portfolio is very diverse, with no major concentrations in specifi c property types or industries. $14.7M REVENUE INCREASE 3.0% growth in revenue 10.2% loan growth 5.3% 3-year revenue CAGR (2020-2023) Consumer lending, particularly in residential mortgages and automobile fi nance, reported exceptional growth, especially in light of the challenging macro-economic conditions, exceeding our expectations. This growth is a testament to our unwavering commitment to catering to our customers’ fi nancial needs while sustaining a strong balance sheet. The dramatic increase in interest rates required a strategic shift in branch banking from focusing on deposit growth to emphasizing deposit retention. This strategic adjustment underlines our agility and foresight in responding to evolving market dynamics. Because of our long-standing customer relationships, along with the proactive outreach and customer engagement by our dedicated team of bankers, deposit retention during this turbulent period was a great accomplishment. We continue to leverage our expansive branch network, enhance our digital capabilities, and continue our expansion into contiguous markets, thus strengthening our foundation for future success. Looking ahead, our focus remains steadfast on organic growth and leveraging the expertise of our Employee Benefi t Services, Insurance and Wealth Management business partners to deepen our numerous customer relationships. Jeff rey Levy | Chief Banking Offi cer Community Bank, N.A. 12 EXECUTIVE FEATURE | BPAS Employee Benefi t Services “Through resilience, innovation and focus, BPAS is striving towards new milestones each year. Our strategy is national in nature -- bringing a full mix of retirement plan, employee benefi t and institutional trust services to professional fi duciaries and other partners to solve specifi c client needs. We’re proud of our growth and evolution, but we have so much more to do. – Paul Neveu | President and CEO BPAS ”o. MESSAGE FROM PRESIDENT AND CEO OF BPAS: As we refl ect on 2023 at BPAS, it was a year of continuous improvement, problem solving and growth at BPAS. We are now one of the 25 largest defi ned contribution recordkeepers in the U.S., one of the 15 largest pension actuaries and one of the three largest institutional trust companies focused on collective investment funds. With so many industry acquisitions over the last three years and considerable staffi ng disruption seen at many competitors, we have seen a steady rise of industry interest in BPAS. In this environment, there is an enormous premium on delivering a high touch experience. This is not just an organizational goal, but a foundational belief at BPAS. Our focus continues on listening to the marketplace, developing our people, improving our effi ciency, and maintaining the fi duciary trust that clients place in us. In the last year we have seen a sizeable increase in proposal volume and wins, and more partners calling us for solutions -- including large and complex engagements. This is evidence to us that our approach is working. During 2023, BPAS achieved revenues of $118.0 million, an increase of $2.6 million, or 2.2%, compared to the previous year. We also reached a new milestone of $115 billion of assets in our care at the end of 2023. Including events of early 2024, BPAS is now 450 employees in total, with sixteen offi ces nationally. On the trust side of our business, we continue working with the largest custodian banks, asset managers and asset owners, providing trust administration solutions and innovative fi duciary management. We are continuously forming new collective investment funds for ERISA investment needs and LLC funds for endowments and foundations. As the investment management industry grows ever more complex and innovative, we position ourselves as the fl exible, 13 adaptive solution for supporting an ever-changing investment product environment. Across our retirement and employee benefit services group, retirement and financial planning topics in the app, but a range we now have 810,000 total participants in our care -- a 6.6% of life, health, and personal topics as well. We have hundreds increase year over year. We have experienced growth in several of thousands of people in our care. Our mission is to help them areas of our retirement business this year, including defined become inspired, so they strive towards financial independence contribution plans and the IRA business. Our Retiree Health and pursue the things that bring meaning, value, and joy to Savings business is rapidly expanding thanks to an expert their lives. team and strategic partnerships with some of the industry’s largest firms. We’ve also seen growth in our Defined Benefit 360 (“DB360”) service line, providing an integrated mix of BPAS EARNS TOP SPOTS IN 2023 NAPA ADVISORS’ CHOICE AWARDS services for pension plans including actuarial and trustee In 2023, BPAS was honored to receive top recognition in the services, our defined benefit portal, as well as custodial and National Association of Plan Advisors (NAPA) Advisors’ Choice pay agent services. We also provide creative solutions for Awards – naming us as a top performer across all five segments employers seeking a defined benefit and defined contribution of the marketplace, from small plans to the $100 million plus combination plan to achieve key objectives. In 2023, our IRA end of the marketplace. Although we remain humble, we take administration, Fiduciary Services and Puerto Rico businesses great pride in this recognition since it comes from anonymous continued to grow, with all three businesses reaching new high- feedback from a wide range of advisors and across plans of water marks in terms in clients and revenues this year. all sizes. Our sales and relationship management teams are STRATEGIC INITIATIVES out every day work with financial intermediaries to build their business and win plans. It is the strength of these advisor and In March 2024 we rolled out an upgraded Plan Sponsor trustee partnerships that continues to build our business / Financial Partner portal that greatly enhances the user each year. experience in terms of aesthetics, speed, and functionality. Our Roadside Assistance program is rolling out this year in phases. A VISION FOR FUTURE GROWTH This program will allow us to hear from plan participants when Our goal at BPAS is to stay focused on our clients and business they have broader financial needs, so we can communicate partners, continue to listen, work on one initiative at a time, and with financial partners to ensure there is a coordinated and be highly accountable to the people who entrust relationships helpful response to those needs. Across our retirement and institutional trust business lines, the BPAS toolbox of services is extremely broad. One of our strategic initiatives is to visit key accounts (the largest national advisory firms) to tell our story from the top down – making firms aware of niche solutions we can offer as their partner. to us. Maintaining a happy culture with a sense of humor is absolutely central to the mission of BPAS. That’s something we spend so much time on, with the deep friendships that live inside our organization and with clients and partners. Maintaining this balance is critically important, and a leading driver in our continued success. Although some of our largest business partners have incredible In summary as we look ahead, our growth strategy includes capabilities, they often find it more efficient to partner with our commitment to responsible expansion, cultivating and BPAS to solve specific product needs rather than scope out supporting our people, leveraging technology while focusing and staff for such projects internally. Across all business lines, BPAS is focused on maintaining the expertise of our teams. This includes ongoing training and credentialing, as well as active mentoring across our plan consulting and actuarial teams. Emerging technologies, including process automation and artificial intelligence will on security, and maintaining a broad set of capabilities to meet the needs of our clients and partners. Our integration within the Community Bank System ecosystem has brought significant benefits, enhancing our capabilities and service offerings – helping us to collaborate effectively across the broader organization. optimize these roles in the future – allowing our experts to Thank you for the support, trust, and confidence you place in spend more time on consulting and less time running tests, BPAS. We look forward to writing new chapters of this story reports, or valuations. We see these technologies augmenting with the plan sponsors, participants, partners, and clients in our the role, while our people continue to be the epicenter of BPAS care – as we continue to meaningfully contribute to the success and our point of strategic differentiation. of our parent company while helping participants retire with dignity. Finally, educating and inspiring the participants in our care is an important part of our mission. Through our app, BPAS University (found at u.bpas.com or in both app stores), we strive to accomplish this with fresh and engaging content delivered by our marketing and communications team and professionals across the organization. We cover not only Paul Neveu | President and CEO BPAS 14 EXECUTIVE FEATURE | ONEGROUP Insurance “ OneGroup stands as a beacon of adaptability, strategic foresight, and unwavering commitment to excellence. Our journey is marked by a relentless pursuit of innovation, deepening client relationships, and expanding our horizons to meet the evolving needs of those we serve. – Pierre Morrisseau | President and CEO OneGroup ”e. MESSAGE FROM PRESIDENT AND CEO OF ONEGROUP: Refl ecting on the past two decades, OneGroup has embarked on a transformative journey, evolving from a modest $3.5 million revenue agency to a top 100 P&C broker in the nation, with revenues of $47.1 million. This exceptional growth has been marked by consistent organic expansion and strategic acquisitions, resulting in an annual growth rate ranging between 17% and 18% over the past two years. The 2015 merger with Community Bank System, Inc. was critical to broadening our reach, deepening our expertise across New York State and beyond. STRATEGIC FOCUS AND EXPANSION Our dedication to specialization has been the cornerstone of our success. We not only focus on building scale and expertise in our core businesses of commercial lines, employee benefi ts, and personal lines insurance, but have consistently deepened our expertise in various industry segments to off er unparalleled value and service. Our clients want us to understand and support their businesses. 15 The 2021 acquisition of Boston insurance firm, TGA, has been a cornerstone of our success. It is a great example of adding new deep expertise in the Food and Life Science industries, expanding our geographic presence into New England, and enriching our culture of collaboration. This merger has been instrumental in our ability to compete with industry giants and set new benchmarks for success. LEVERAGING SYNERGIES AND CLIENT ENGAGEMENT At the heart of our business philosophy is the strategic leverage of Community Bank and its subsidiaries. Together we offer a full complement of financial services and business expertise. Our model is simple, as a client of any one of our businesses we provide access to all our knowledge. We work together to bring that knowledge to our clients when needed. This collaboration has been instrumental in enhancing value for our clients, offering them comprehensive access to our expertise. INNOVATION AND CLIENT FOCUS We are excited about the prospects of further integrating cutting edge technology into our operations. We continue to invest in technical and human resource platforms to streamline processes, improve efficiency, and enhance the client experience. The exploration of artificial intelligence and data analytics within a controlled environment creates the potential to revolutionize our business, through automation of more basic tasks and freeing our team to further focus efforts on the client experience. Our vision extends beyond traditional insurance boundaries, with initiatives like our investment in Medicare Advantage Insurance highlighting our commitment to addressing the complex needs of our clients throughout their lives. By creating a holistic approach, OneGroup aims to provide coverage that meets all our clients’ business needs. This strategy not only positions us as a leader in the industry but also as a strategic advisor capable of safeguarding the diverse interests of our clients through a single, unified platform. 75th AMONG THE TOP 100 U.S. INSURANCE AGENCIES 11 acquisitions in the past 3 years 13.3% 3-year CAGR (2020-2023) Offices in NY, PA, MA, SC and FL LOOKING FORWARD We are dedicated to leveraging advanced technology, enhancing client experiences, and embracing innovation to set new standards in client service and operational efficiency. Our focus will continue to be on strategic growth, innovation, and service excellence. Our unique expertise and the partnership between all of Community Bank System, Inc.’s businesses to bring real value to our clients sets us apart in the market. Thank you for your continued support as we embark on this exciting journey. Together, we are not just navigating change; we are shaping the future of insurance. Pierre Morrisseau | President and CEO OneGroup 16 EXECUTIVE FEATURE | COMMUNITY BANK WEALTH MANAGEMENT Wealth Management “ In a year of challenges, our Wealth Management division turned obstacles into opportunities, leveraging resilience and synergy to enrich our client experience. As we advance, our unifi ed approach promises a future of strategic growth and comprehensive service. – Michael Cerminaro | President and CEO Community Bank Wealth Management 17 ” COMMUNITY BANK WEALTH MANAGEMENT INVESTMENT & INSURANCE SERVICES RETIREMENT PLAN CONSULTING TRUST SERVICES FINANCIAL PLANNING ASSET MANAGEMENT OUTSOURCED PARTNER SOLUTIONS MESSAGE FROM PRESIDENT AND CEO OF COMMUNITY BANK WEALTH MANAGEMENT: In a year that presented a myriad of challenges and opportunities, our Wealth Management division demonstrated remarkable resilience and strategic importance. The volatility of 2023, while presenting hurdles, also reaffirmed the importance of delivering holistic and comprehensive solutions to our clients. Heading into 2024, our focus encompasses two critical areas: enriching the client experience through platform expansion and fueling growth by deepening our client relationships across Community Bank System, Inc. With a broad client base spanning commercial, retail banking, insurance services and benefit plans, the opportunity to add value is significant. Our goal is to provide an unrivaled, holistic experience by meeting the demands of our client’s most important financial objectives. PERFORMANCE HIGHLIGHTS Our division has seen encouraging financial performance over the past year. Total revenues reached $31.9 million for the full year, marking an increase of $0.3 million, or 0.9%, from the prior year end. This growth is attributable to more favorable investment market conditions, which have positively impacted our assets under management and revenue stability. The development and enhancement of our wealth management capabilities remain central to our mission. We are committed to building a premier, full-service offering, delivered by highly skilled financial professionals. Our offering includes, investment and insurance services, trust services, asset management, retirement plan consulting, financial planning and outsourced partner services. While our primary emphasis is on organic growth, we are positioned to pursue strategic moves such as acquisitions and partnerships in markets that promise growth and align with our cultural and business priorities. With the highest priority being the integration of our wealth management services for the benefit of Community Bank System, Inc. family of businesses and clients. Looking ahead we are clear on our strategic focus and ultimate dedication to our client’s financial well-being. This focus and dedication prepares us to face future challenges and opportunities with purpose and confidence. Michael Cerminaro | President and CEO Community Bank Wealth Management 18 Investment Profile Above average returns with below average risk Committed to successful operating strategy focused on intelligent low-risk acquisitions, organic growth, and prudent capital management Focused on long-term return to shareholders and long-standing dividend growth Strong fundamentals with consistent and strong asset quality and high quality, durable revenues Long-term responsible growth focus Ownership Summary AS OF DECEMBER 31, 2023 53.3M Shares Outstanding 39.7M Shares Held by Institutions Approximately 75% of Outstanding Shares Held by Institutions 312 Institutional Holders Approximately 12.9M Retail Shares Approximately 24% of Outstanding Shares are Retail Shares 19 Executive Management From left to right: Michael Abdo, Maureen Gillan-Myer, Dimitar Karaivanov, Jeffrey Levy, and Joseph Sutaris Dimitar A. Karaivanov PRESIDENT AND CHIEF EXECUTIVE OFFICER Joined CBU in 2021 and has previously served as COO. Prior to then, Mr. Karaivanov served as Managing Director in Lazard’s Financial Institutions Group. Joseph E. Sutaris EVP, CHIEF FINANCIAL OFFICER Joined CBU in 2011 following the Company’s acquisition of The Wilber Corporation, where he held several roles, including CFO. Michael N. Abdo EVP, GENERAL COUNSEL Prior to joining CBU in 2013, he served as an associate with Cadwalader Wickersham & Taft in its New York City Office, with a focus on commercial and financial litigation. Maureen Gillan-Myer EVP, CHIEF HUMAN RESOURCES OFFICER Prior to joining Community Bank System in October 2021, Ms. Gillan- Myer served as Senior Executive Vice President and Chief Human Resources Officer of HSBC, USA. Jeffrey M. Levy SVP, CHIEF BANKING OFFICER Mr. Levy joined CBU in 2018 as a Regional Executive. In January 2022, he was promoted to Senior Vice President (SVP), President of Commercial Banking, before advancing to his current position as Chief Banking Officer. Prior to CBU, he held positions at NBT Bank and M&T Bank. 20 Board of Directors Eric E. Stickels CHAIRPERSON OF THE BOARD RETIRED PRESIDENT, COO and SECRETARY ONEIDA FINANCIAL CORP. DIRECTOR SINCE 2015 Brian R. Ace RETIRED OWNER LACEYVILLE HARDWARE COMMITTEES Governance; Compensation DIRECTOR SINCE 2003 Mark J. Bolus PRESIDENT and CEO BOLUS MOTOR LINES, INC. COMMITTEES Compensation, Chair; Strategic/Executive; Trust DIRECTOR SINCE 2010 Jeff ery J. Knauss FORMER CEO and CO-FOUNDER DIGITAL HYVE COMMITTEES Governance; Audit DIRECTOR SINCE 2021 John Parente CEO CP MEDIA, LLC COMMITTEES Trust, Chair; Strategic/Executive; Governance DIRECTOR SINCE 2010 Susan E. Skerritt RETIRED CHAIRWOMAN, CEO and PRESIDENT DEUTSCHE BANK TRUST COMPANY AMERICAS COMMITTEES Audit; Compensation DIRECTOR SINCE 2020 Michele Sullivan RETIRED PARTNER CROWE LLP COMMITTEES Audit DIRECTOR SINCE 2024 Neil E. Fesette OWNER, PRESIDENT and CEO FESETTE REALTY, LLC and FESETTE PROPERTY MANAGEMENT COMMITTEES Strategic/Executive, Chair; Compensation; Governance DIRECTOR SINCE 2010 Kerrie D. MacPherson RETIRED SENIOR PARTNER ERNST & YOUNG, LLP COMMITTEES Audit, Chair; Trust DIRECTOR SINCE 2019 Raymond C. Pecor, III PRESIDENT LAKE CHAMPLAIN TRANSPORTATION COMPANY COMMITTEES Risk, Chair; Governance DIRECTOR SINCE 2017 Sally A. Steele LEAD DIRECTOR ATTORNEY AT LAW COMMITTEES Strategic/Executive; Compensation DIRECTOR SINCE 2003 Mark E. Tryniski RETIRED PRESIDENT and CEO COMMUNITY BANK SYSTEM, INC. DIRECTOR SINCE 2006 John F. Whipple, Jr. CEO BUFFAMANTE WHIPPLE BUTTAFARO, P.C. COMMITTEES Audit; Governance; Chair DIRECTOR SINCE 2010 Dimitar A. Karaivanov PRESIDENT and CEO COMMUNITY BANK SYSTEM, INC. DIRECTOR SINCE 2024 NOTE All bank board members participate in the Risk Committee 21 Administration EXECUTIVE Dimitar A. Karaivanov, President and Chief Executive Officer Joseph E. Sutaris, EVP, Chief Financial Officer Maureen Gillan-Myer, EVP, Chief Human Resources Officer Michael N. Abdo, EVP, General Counsel Jeffrey M. Levy, SVP, Chief Banking Officer INFORMATION TECHNOLOGY & OPERATIONS Aaron Friot, SVP, Chief Technology and Operations Officer RISK MANAGEMENT Daniel L. Bailey, SVP, Chief Risk Officer BANKING Hal Wentworth, SVP, Retail Banking and Marketing Scott Boser, SVP, Director of Consumer and Mortgage Lending Barbara Maculloch, Regional President Pennsylvania Matthew Durkee, Regional President New England & President of Commercial Banking EMPLOYEE BENEFIT SERVICES Paul M. Neveu, Chief Executive Officer INSURANCE Pierre Morrisseau, Chief Executive Officer WEALTH MANAGEMENT Michael Cerminaro, President & Chief Executive Officer C O M M U N I T Y B A N K , N . A . PENNSYLVANIA REGIONAL ADVISORY BOARD John Basalyga William Ruark Colleen Doyle, Esq. Lissa Bryan-Smith John Graham James Shoemaker, Esq. Gerard O’Donnell Tara Mugford Wilson 22 Waterbury White River Junction Drive-thru Only Williston (Cottonwood Dr) Wilmington Winooski PENNSYLVANIA REGION Back Mountain Carbondale Drive-thru Only Clarks Summit Daleville Edwardsville Drive-thru Only Freeland Hazleton (Airport Rd) Hazleton (South Church St) Jermyn Kingston Laceyville Lansford Lehighton Meshoppen Montrose Olyphant Pittston Scranton (Keyser Ave) Scranton (Minooka) Scranton (North Washington Ave) Scranton (Wyoming Ave) Tunkhannock Wilkes Barre (Liberty Plaza) Wilkes Barre (South Main St) Wyalusing COMMUNITY BANK N.A. Branch and Drive-Thru Locations ALBANY REGION OF NEW YORK Albany Amsterdam Ausable Forks Boiceville Canajoharie Champlain Chateaugay Chatham Delmar East Greenbush Greenport Indian Lake Johnstown Lake Placid Latham Long Lake Malone (Elm St) Drive-thru Only Malone (West Main St) North Creek Plattsburgh (Margaret St) Plattsburgh (Route 3) Saranac Lake (Broadway) Saranac Lake (Lake Flower) Drive-thru Only St. Regis Falls Ticonderoga Tupper Lake Valatie Whitehall BINGHAMTON REGION OF NEW YORK Cobleskill Cooperstown (Otsego) Delhi Ithaca (East Buffalo St) Ithaca (South Meadow St) Ithaca (Triphammer) Ithaca (West State St) Johnson City Nichols Norwich Town Oneonta (Chestnut St) Oneonta (Main St) Oneonta (Southside) Sidney Walton BUFFALO REGION OF NEW YORK Alfred Allegany Belfast Belmont Bolivar Clymer Cuba Dunkirk (Central Ave) Dunkirk (Vineyard Dr) Falconer Fillmore Franklinville Gowanda Jamestown (Brooklyn Square) Lakewood North Collins Olean (Delaware Park) Drive-thru Only Olean (North Union St) Orchard Park Randolph Salamanca Sherman Silver Creek Springville (South Cascade Dr) Warsaw Wellsville (North Highland Ave) Wellsville (North Main St) Westfield Yorkshire ROCHESTER REGION OF NEW YORK Addison Avon Bath Canandaigua Clifton Springs Plaza Corning (West Market St) Dansville Elmira (Big Flats) Elmira (East Water St.) Elmira (Southport) Elmira (West Water St.) Geneseo Geneva Hammondsport Henrietta Hornell (Steuben Square) Horseheads (Grand Central Ave) Livonia Naples Newark Plaza Ovid Palmyra Penn Yan (Lake St) Drive-thru Only Penn Yan (Main St) Phelps Seneca Falls Waterloo Watkins Glen SYRACUSE REGION OF NEW YORK Adams Alexandria Bay Black River Boonville (Headwaters Plaza) Drive-thru Only Boonville (Main St.) Camden Canastota Canton (Court St) Drive-thru Only Canton (Main St) Cato Cazenovia Chittenango Cicero Clayton Dewitt Fulton Gouverneur Hamilton Hannibal Lowville (State St) Lowville (Turin Rd) Drive-thru Only Lyons Falls Madrid Massena Moravia Ogdensburg (State St) Old Forge Oneida (182 Main St) Oneida (585 Main St) Oswego Potsdam (Market St) Pulaski Rome (Griffiss Park) Skaneateles Star Lake Vernon Watertown (Arsenal St) Watertown (Washington St) West Carthage Westmoreland NEW ENGLAND REGION Vermont and Massachusetts Barre Bennington Bradford Brattleboro Bristol Burlington (College St) Burlington (North Ave) Enosburg Essex Junction Fair Haven Hardwick Hinesburg Jericho Johnson Manchester Rutland (Green Mountain Plaza) Rutland (Woodstock Ave) Drive-thru Only South Burlington (Shelburne Rd) South Burlington (Williston Rd) South Hero Springfield, MA Springfield, VT St. Albans St. Johnsbury Vergennes 23 Growth Profile Stock Performance AT 12/31/23 CLOSING PRICE PRICE/EARNINGS (TTM) AVERAGE 3-MONTH DAILY VOLUME 52 WEEK HIGH STOCK PRICE 52 WEEK LOW STOCK PRICE (ANNUALIZED) $52.11 21.3 283,000 $64.86 $35.38 Total Shareholder Returns 1 YEAR 5 YEARS 10 YEARS 15 YEARS CBU (14.2%) 0.5% 5.7% 8.6% S&P 600 Commercial Banks Index (1.7%) 5.4% 6.2% 6.6% KBW Regional Bank Index (0.4%) 7.5% 6.2% 6.8% Through December 31, 2023 or most recent available, including reinvestment of dividends Source: Bloomberg Most Recent Banking Acquisitions TRANSACTION TYPE NET BRANCHES ASSETS IN MILLIONS 2022 - ELMIRA SAVINGS BANK 2020 - STEUBEN TRUST CORPORATION 2019 - KINDERHOOK BANKCORP. 2017 - MERCHANTS BANCSHARES, INC. 2015 - ONEIDA FINANCIALCORP. 2013 - BANK OF AMERICA, N.A. 2012 - HSBC/FIRST NIAGARA 2011 - WILBER CORPORATION WHOLE WHOLE WHOLE WHOLE WHOLE BRANCH BRANCH WHOLE 8 11 11 32 12 6 12 22 $584 $608 $643 $1,999 $769 $303 $797 $848 24 Investor Information Investor and shareholder information regarding Community Bank System, Inc., including all filings with the Securities and Exchange Commission, is available through the company’s website: cbna.com Copies may also be obtained without charge upon written request to: Marguerite Geiss Investor Relations Department Community Bank System, Inc. 5790 Widewaters Parkway DeWitt, NY 13214-1883 315.445.7313 marguerite.geiss@cbna.com SA FE HA RB OR STAT EMENT The Community Bank System, Inc. Annual Report contains forward-looking statements, within the provisions of the Private Security Litigation Reform Act of 1995, that are based on current expectations, estimates, and projections about the industry, markets and economic environment in which the company operates. Such statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed in these statements. These risks are detailed in the company’s periodic reports filed with the Securities and Exchange Commission. Corporate and Shareholder Information CORPORATE HEADQUARTERS Community Bank System, Inc. 5790 Widewaters Parkway DeWitt, NY 13214-1883 PHONE 315.445.2282 or 800.724.2262 cbna.com Annual Meeting Wednesday, May 15, 2024 12:00pm EST Marriott Syracuse Downtown Persian Terrace 100 E Onondaga St, Syracuse, NY 13202 STOCK LISTING CBU The common stock symbol of Community Bank System, Inc. listing on the New York Stock Exchange (NYSE) CmntyBkSys Newspaper listing for common stock TRANSFER AGENT AND REGISTRANT OF STOCK Shareholders requiring a change of name, address or ownership of stock, or information about shareholder records, lost or stolen certificates, and dividend checks, direct deposit and reinvestment should contact: Equintiti Operations Center 6201 15th Avenue Brooklyn, NY 11219 equiniti.com General questions: 877.253.6847 INDEPENDENT AUDITORS The Board of Directors appointed PricewaterhouseCoopers, LLP as auditor for the company for the year ended December 31, 2023. ANALYST COVERAGE The following analysts published research about Community Bank System in 2023: American Capital Partners Anthony Polini / 908.625.1931 apolini@acpweb.com D.A. Davidson & Co. Manuel Navas / 212.223.5405 mnavas@dadco.com Hovde Group LLC Nicholas Cucharale / 347.689.7782 ncucharale@hovdegroup.com Janney Montgomery Scott LLC Jake Civiello / 207.536.2171 jciviello@janney.com Keefe, Bruyette & Woods, Inc. Christopher O’Connell / 212.887.4725 oconnellch@kbw.com Piper Sandler Alexander Twerdahl / 212.466.7916 alex.twerdahl@psc.com Raymond James Financial Inc. Steve Moss / 202.872.5931 steve.moss@raymondjames.com Stephens, Inc. Matthew M. Breese / 401.658.1114 matt.breese@stephens.com INVESTOR’S CHOICE PROGRAM CBU offers convenient, low-cost options for investors wishing to steadily buy shares. For information, contact: Equiniti Operations Center 6201 15th Avenue Brooklyn, NY 11219 equiniti.com General questions: 877.253.6847 25 COMMUNITY BANK SYSTEM, INC. 5790 Widewaters Parkway DeWitt, NY 13214-1883 800.724.2262 cbna.com 

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