Community Bank System, Inc. (NYSE: CBU) reported first quarter 2021 net income of $52.9 million, or $0.97 per fully-diluted share. This compares to $40.1 million of net income, or $0.76 per share for the first quarter of 2020. The $0.21, or 27.6%, increase in earnings per share was primarily attributable to an increase in net interest income, a significant decrease in the provision for credit losses and lower operating expenses, offset in part by a decrease in noninterest revenues, and increases in income taxes and fully-diluted shares outstanding. Comparatively, the Company recorded $0.86 in fully-diluted earnings per share for the linked fourth quarter of 2020. Operating earnings per share, which excludes acquisition expenses and gain on debt extinguishment, were $0.97 for the first quarter of 2021, as compared to $0.77 in the first quarter of 2020 and $0.85 in the fourth quarter of 2020.

First Quarter 2021 Performance Highlights:

• GAAP EPS
  • $0.97 per share, up $0.21 per share from the first quarter of 2020
• Operating EPS (non-GAAP)
  • $0.97 per share, up $0.20 per share from the first quarter of 2020
• Adjusted Pre-Tax, Pre-Provision Net Revenue Per Share (non-GAAP)
  • $1.09 per share, up $0.04 per share from first quarter of 2020
• Return on Assets
  • 1.51%
• Return on Equity
  • 10.4%
• Total Deposit Funding Costs
  • 0.11%
• Annualized Loan Net Charge-Offs
  • 0.02%

“The Company generated solid quarterly earnings results in the first quarter of 2021 driven by improving economic conditions, lower credit-related costs, higher revenues and lower operating expenses,” said Mark E. Tryniski, President & CEO. “Our 2020 results were challenged by net interest margin headwinds and higher credit-related costs. As we move into 2021, we are encouraged by an improving interest rate environment and better economic conditions. The Company’s financial services businesses continued to perform well during the quarter as the Company recorded higher revenues in all three lines of business - employee benefit services, insurance services and wealth management versus one year earlier. Furthermore, the Company’s cost containment initiatives and other factors, resulted in a decrease in operating expenses as compared to the same quarter in 2020 despite acquiring Steuben Trust Corporation (“Steuben”) in the second quarter of 2020. The Company’s earnings per share of $0.97 were up $0.21, or 27.6%, over the first quarter of 2020. Net interest income increased $3.9 million, or 4.3%, over the first quarter of 2020 despite a 62 basis point decrease in net interest margin, driven by continued growth in earning assets, lower funding costs and recognition of Paycheck Protection Program (“PPP”) deferred loan fees. In addition, the Company booked a $5.7 million net benefit in the provision for credit losses during the first quarter of 2021, as compared to a $5.6 million provision for credit losses in the first quarter of 2020, primarily reflective of improvements in the economic outlook. Financial services business revenues were also $2.3 million, or 5.7%, higher than the first quarter of 2020, while total operating expenses decreased $0.4 million, or 0.4%. These improvements were offset, in part, by a $2.5 million, or 13.7%, decrease in banking-related noninterest revenues, a $2.8 million, or 30.4%, increase in income taxes and a 3.4% increase in fully-diluted average shares outstanding. On the credit front, the Company continued to experience low-levels of net charge-offs. More specifically, the Company recorded net charge-offs of $0.4 million, or 0.02% annualized during the first quarter of 2021, which compares favorably to the first quarter 2020 net charge-offs of $1.6 million, or 0.09% annualized.”

Mr. Tryniski continued, “The Company’s adjusted pre-tax, pre-provision net revenue per share, which excludes income taxes, the provision for credit losses, acquisition expenses, unrealized (gain) loss on equity securities and gain on debt extinguishment, increased $0.04 per share, from $1.05 during the first quarter of 2020 to $1.09 during the first quarter of 2021. For comparative purposes, the adjusted pre-tax, pre-provision net revenue per share in the linked fourth quarter of 2020 was $1.03 per share. Ending loans decreased $47.6 million, or 0.6%, during the quarter from $7.42 billion at December 31, 2020 to $7.37 billion at March 31, 2021. During the first quarter, the Company recorded a $251.3 million net decrease in the principal balance on first draw PPP loans and booked $191.5 million of second draw PPP loans. Exclusive of PPP loans, net of deferred fees, the Company’s ending loans increased $14.9 million, or 0.2%, during the first quarter. Although the Company’s average cash equivalents remained elevated throughout the first quarter, the Company purchased approximately $546.7 million of investment securities at a weighted-average yield of 1.44% during the quarter in an effort to stabilize net interest margin going forward, which declined throughout 2020 as the interest rate environment deteriorated. The Company’s deposit balances increased $2.90 billion, or 31.2%, between March 31, 2020 and March 31, 2021 and $979.3 million, or 8.7%, since December 31, 2020, due primarily to continued inflows of Federal stimulus and PPP funding.”

The Company recorded total revenues of $152.5 million in the first quarter of 2021, an increase of $3.8 million, or 2.6%, over the prior year’s first quarter. The increase in total revenues between the periods was driven by a $3.9 million, or 4.3%, increase in net interest income, a $1.2 million, or 4.6% increase in employee benefit services revenues, and a $1.2 million, or 7.6%, increase in wealth management and insurance services revenues, offset, in part, by a $2.3 million, or 13.1%, decrease in deposit service and other banking fees and a $0.2 million decrease in mortgage banking income. Comparatively, total revenues were up $1.8 million, or 1.2%, over linked fourth quarter 2020 results, driven by a $0.5 million, or 0.6%, increase in net interest income and a $1.3 million, or 2.3%, increase in noninterest revenues.

The Company recorded net interest income of $94.0 million in the first quarter of 2021. This compares to $90.1 million of net interest income recorded in the first quarter of 2020. Between comparable periods, a large increase in average earning assets was largely offset by a 62 basis point decrease in the net interest margin. Average earning assets increased $2.65 billion, or 26.4%, between comparable quarters due to large net inflows of funds from government stimulus programs, PPP loan originations and the acquisition of Steuben in the second quarter of 2020, while the tax equivalent net interest margin decreased from 3.65% in the first quarter of 2020 to 3.03% in the first quarter of 2021. In addition, the composition of earning assets changed significantly, as the large net inflows of customer deposits were largely deployed into cash equivalents and investment securities at lower rates of interest between the comparable periods, resulting in a significant decrease in the Company’s earning asset yields. The tax equivalent average yield on earning assets in the first quarter of 2021 of 3.15% was 78 basis point lower than the tax equivalent average yield on earning assets of 3.93% in the first quarter of 2020. Comparatively, the Company recorded net interest income of $93.4 million during the fourth quarter of 2020, $0.6 million lower than first quarter 2021 results, while the tax equivalent net interest margin was 3.05%.

Interest income and fees on loans increased $1.1 million, or 1.5%, from $78.6 million in the first quarter of 2020 to $79.7 million in the first quarter of 2021. Between the comparable periods, average total loans outstanding increased $482.1 million, or 7.0%, driven by PPP lending and the Steuben acquisition, while the average tax equivalent yield on loans decreased 21 basis points, from 4.61% in the first quarter of 2020 to 4.40% in the first quarter of 2021. During the first quarter, the Company recorded $6.9 million of PPP-related interest income due primarily to the recognition of $5.9 million of deferred loan fees. During the quarter, 2,543 borrowers representing $251.3 million in PPP loan balances were granted forgiveness on their loan by the Small Business Administration, resulting in accelerated recognition of deferred loan fees. Comparatively, the Company recorded $77.8 million of interest income and fees on loans during the linked fourth quarter of 2020, including $3.5 million of PPP-related interest income, while the average tax equivalent yield on loans was 4.17%.

Interest income on investments including cash equivalents decreased $0.5 million, or 2.6%, between the first quarter of 2020 and the first quarter of 2021. A $0.7 million decrease in interest income on the investment securities portfolio was partially offset by a $0.2 million increase in interest income on cash equivalents. The tax-equivalent average yield on investments, including cash equivalents, decreased from 2.45% in the first quarter of 2020 to 1.42% in the first quarter of 2021, reflective of lower market interest rates and a significant change in the composition of investment securities and cash equivalents. The average book value of the investments securities portfolio increased $620.7 million, or 20.4%, between the periods, while the average balance of cash equivalents increased $1.55 billion from $114.7 million in the first quarter of 2020 to $1.67 billion in the first quarter of 2021. The average tax equivalent yield on the investment securities portfolio decreased 49 basis points from 2.51% in the first quarter of 2020 to 2.02%, while the average yield on cash equivalents decreased 80 basis points from 0.90% during the first quarter of 2020 to 0.10% during the first quarter of 2021.

Interest expense decreased $3.2 million, or 46.5%, from $6.9 million in the first quarter of 2020 to $3.7 million in the first quarter of 2021. Although average interest-bearing liabilities increased $1.48 billion, or 21.3%, between the periods, the precipitous drop in market interest rates between the periods resulted in a net decrease in interest expense. The Company’s average cost of deposits was 0.11% in the first quarter of 2021. This compares to 0.25% during the first quarter of 2020.

During the first quarter of 2021, the Company recorded a net benefit in the provision for credit losses of $5.7 million and loan net charge-offs of $0.4 million, or 0.02%, annualized. Comparatively, the Company recorded $5.6 million in the provision for credit losses during the first quarter of 2020 and loan net charge-offs of $1.6 million, or 0.09% annualized. During the first quarter of 2020, economic forecasts distinctly and profoundly changed from stable at the beginning of the quarter to severely adverse at the end of the quarter due to the onset of the COVID-19 pandemic, resulting in a significant increase in expected life of loan losses. Conversely, during the first quarter of 2021, economic forecasts improved substantially and that drove expected life of loan losses down, resulting in the recording of a net benefit in the provision for credit losses. In addition, the Company recorded net charge-offs of only 0.07% of average loans in 2020, which lowered average annual historic losses and, in turn, future loan loss projections. Based on current economic forecasts, the Company does not currently anticipate recording similarly large net benefits in the provision for credit losses in the remainder of 2021.

Employee benefit services revenues for the first quarter of 2021 were $26.5 million. This represents a $1.2 million, or 4.6%, increase over first quarter 2020 revenues. The improvement in revenues was driven by increases in employee benefit trust and custodial fees. Wealth management revenues for the first quarter of 2021 were $8.2 million. This compares to wealth management revenues of $7.1 million in the first quarter of 2020. The $1.1 million, or 14.9% increase in wealth management revenues was primarily driven by increases in investment management and trust services revenues. Insurance services revenues of $8.2 million were $0.1 million, or 1.2%, higher than the same quarter in the prior year. Banking noninterest revenues decreased $2.5 million, or 13.7%, from $18.1 million in the first quarter of 2020 to $15.6 million in the first quarter of 2021. This was driven by a $2.3 million, or 13.1%, decrease in deposit service and other banking fees due to lower overdraft and other deposit revenues and a $0.2 million decrease in mortgage banking income. Comparatively, the Company recorded $26.7 million of employee benefit service revenues, $7.5 million of wealth management revenues and $7.6 million of insurance service revenues during the linked fourth quarter of 2020. Fourth quarter 2020 banking noninterest revenues were $14.9 million, $0.7 million, or 4.6%, lower than first quarter 2021 banking noninterest revenues.

The Company recorded $93.2 million in total operating expenses in the first quarter of 2021 versus $93.7 million of total operating expenses during the first quarter of 2020. The $0.4 million, or 0.4%, decrease in operating expenses was attributable to a $0.6 million, or 1.1%, decrease in salaries and employee benefits, a $1.7 million, or 16.4%, decrease in other expenses, a $0.3 million, or 8.6%, decrease in the amortization of intangible assets and a $0.3 million decrease in acquisition-related expenses. The decreases in these expenses were partially offset by a $2.0 million, or 19.1%, increase in data processing and communications expenses and a $0.6 million, or 5.2% increase in occupancy expense. The decrease in salaries and benefits expense was driven by a decrease in severance costs, offset, in part by increases in merit-related employee wages and payroll taxes. Other expenses were down due to the general decrease in the level of business activities as a result of the COVID-19 pandemic, including travel and entertainment and marketing and business development expenses. The increase in data processing and communications expenses was due to the second quarter 2020 Steuben acquisition and the Company’s implementation of new customer-facing digital technologies and back office systems during 2020. The increase in occupancy costs was driven by the Steuben acquisition.

In comparison, the Company recorded $95.0 million of total operating expenses in the linked fourth quarter of 2020. The $1.8 million, or 1.8%, decrease in total operating expenses between the first quarter of 2021 and the linked fourth quarter of 2020 was attributable to a $0.5 million, or 0.9%, decrease in salaries and employee benefits, a $1.9 million, or 18.1%, decrease in other expenses, a $0.2 million, or 4.9%, decrease in the amortization of intangible assets and a $0.4 million decrease in acquisition-related expenses. The decreases in these expenses were partially offset a $1.2 million, or 11.8%, increase in occupancy expense due primarily to seasonal factors.

The effective tax rate for the first quarter of 2021 was 18.6%, down from 18.8% in the first quarter of 2020. The Company had a higher level of benefit related to stock-based compensation activity in the first quarter of 2021 as compared to the first quarter of 2020, which drove down the effective tax rate. Exclusive of stock-based compensation tax benefits, the Company’s effective tax rate was 21.4% in the first quarter of 2021.

The Company also provides supplemental reporting of its results on an “operating,” “adjusted” or “tangible” basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, acquisition-related provision for credit losses, litigation accrual expenses, the unrealized gain (loss) on equity securities and gain on debt extinguishment. In addition, the Company provides supplemental reporting for “adjusted pre-tax, pre-provision net revenues,” which subtracts the provision for credit losses, acquisition expenses, litigation accrual expenses, unrealized gain (loss) on equity securities and gain on debt extinguishment from income before income taxes. The amounts for such items are presented in the tables that accompany this release. Although these items are non-GAAP measures, the Company’s management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results. Diluted adjusted net earnings per share were $1.00 in the first quarter of 2021, as compared to $0.80 in the first quarter of 2020 and $0.89 in the linked fourth quarter of 2020. Adjusted pre-tax, pre-provision net revenue per share was $1.09 in the first quarter of 2021, as compared to $1.05 in the first quarter of 2020 and $1.03 in the linked fourth quarter of 2020.

Financial Position

The Company’s total assets increased to $14.62 billion at March 31, 2021, which represents a $2.81 billion, or 23.8% increase from one year ago and a $689.1 million, or 4.9%, increase over the prior quarter end. The substantial increase in the Company’s total assets during the prior twelve-month period was primarily due to large inflows of government stimulus-related deposit funding and the Steuben acquisition in the second quarter of 2020. Similarly, average earning assets increased substantially over the prior twelve-month period, from $10.04 billion in the first quarter of 2020 to $12.69 billion in the first quarter of 2021, a $2.65 billion, or 26.4% increase. This included a $482.1 million, or 7.0%, increase in average total loans outstanding, a $620.7 billion, or 20.4%, increase in average book value of investment securities and a $1.55 billion increase in average cash equivalent balances. Average deposit balances increased $2.50 billion, or 27.6%, between the first quarter of 2020 and the first quarter of 2021.

On a linked quarter basis, average earning assets increased $377.6 million, or 3.1%, due to continued net inflows of deposits. The average book value of investment securities decreased $118.3 million, or 3.1%, due to the maturity of $666.1 million of investment securities during the fourth quarter, a significant portion of which occurred late in the quarter, offset, in part, by investment security purchases during the first quarter of 2021 totaling $546.8 million. Average cash equivalents increased $587.5 million, or 54.4%, due to the continued growth of deposit liabilities during the quarter, a decrease in loans outstanding and investment maturities in late fourth quarter of 2020, offset, in part, by the aforementioned purchase of investment securities during the current quarter. Average loan balances decreased $91.7 million, or 1.2%, due primarily to PPP forgiveness and seasonal factors. Average deposit balances increased $343.2 million, or 3.1%, on a linked quarter basis driven by continued inflows of government stimulus funds and seasonal fluctuations related to the timing of tax inflows to the Company’s municipal depositors.

Ending loans at March 31, 2021 were $7.37 billion, $47.6 million, or 0.6%, lower than the linked fourth quarter ending loans of $7.42 billion, but up $502.2 million, or 7.3% from one year prior. The growth in ending loans year-over-year was driven by the acquisition of $339.7 million of Steuben loans in the second quarter of 2020 and the $399.2 million net increase in PPP loans between the periods. The decrease in loans outstanding on a linked quarter basis was driven by a $48.3 million decrease in business lending, due to a decline in PPP loans, a $10.2 million decrease in direct consumer loan balances and a $4.4 million decrease in home equity loans outstanding, offset, in part, by a $7.4 million increase in indirect consumer loans and a $7.9 million increase in residential mortgage loans outstanding.

The Company participated in both rounds of the 2020 Coronavirus Aid, Relief, and Security Act’s (“CARES Act”) PPP, a specialized low-interest loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration (“SBA”), now known as first draw loans. In addition, the Company participated in the 2021 Consolidated Appropriations Act’s (“CAA”) PPP loan program, now known as second draw loans. As of March 31, 2021, the Company’s business lending portfolio included 874 first draw PPP loans with a total balance of $219.4 million and 1,819 second draw PPP loans with a total balance of $191.5 million. This compares to 3,417 first draw PPP loans with a total balance of $470.7 million at the end of the fourth quarter of 2020. Under the PPP, the SBA may forgive all or a portion of the loan amount if the borrower meets certain conditions. The Company expects to recognize the majority of its remaining first draw net deferred PPP fees totaling $3.4 million through interest income during the second quarter 2021 and the majority of its second draw net deferred PPP fees totaling $8.3 million in the third and fourth quarters of 2021.

The Company’s liquidity position remains strong. The Company’s banking subsidiary, Community Bank, N.A. (the “Bank”), maintains a funding base largely comprised of core noninterest-bearing demand deposit accounts and low cost interest-bearing interest checking, savings and money market deposit accounts with customers that operate, reside or work within its branch footprint. At March 31, 2021, the Company’s readily available sources of liquidity totaled $5.67 billion, including cash and cash equivalents balances, net of float, of $2.09 billion. The Company also maintains an available-for-sale investment securities portfolio, comprised primarily of highly-liquid U.S. Treasury securities, highly-rated municipal securities and U.S. agency mortgage-backed securities, which totaled $3.77 billion at March 31, 2021, $1.68 billion of which was unpledged as collateral. The Bank’s unused borrowing capacity at the Federal Home Loan Bank of New York at March 31, 2021 was $1.66 billion and it maintained $247.9 million of funding availability at the Federal Reserve Bank’s discount window.

Although there remains some uncertainty around the duration of the economic impact of the COVID-19 pandemic, the Company’s management believes that its financial position will allow it to successfully endure any remaining negative economic impacts of the crisis. The Company’s capital planning and management activities, coupled with its historically strong earnings performance, diversified streams of revenue and prudent dividend practices, have allowed it to build and maintain strong capital reserves. Shareholders’ equity of $1.97 billion at March 31, 2021 was $5.2 million, or 0.3%, lower than one year prior and $132.7 million, or 6.3%, lower than the end of the linked fourth quarter. The decrease in shareholders’ equity during the first quarter was primarily driven by a $172.0 million decrease in accumulated other comprehensive income/loss due primarily to a decrease in the market value adjustment on the Company’s available-for-sale investment securities portfolio as market interest rates increased between the periods, offset, in part, by a $30.3 million increase in retained earnings.

During the first quarter, the Company redeemed $75.0 million of floating rate junior subordinated debt and $2.3 million of associated capital securities, which was initially issued by the Company’s wholly-owned unconsolidated trust entity Community Capital Trust IV (“CCT IV”) in 2006. The interest rate on the floating rate junior subordinated debt was reset quarterly at three month LIBOR plus 1.65%.

At March 31, 2021, all of the Company’s regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company’s tier 1 leverage ratio, a common measure to evaluate a financial institutions capital strength, was 9.63% at March 31, 2021, which represents almost two times the regulatory well-capitalized standard of 5.0%. The Company’s net tangible equity to net tangible assets ratio was 8.48% at March 31, 2021, down from 10.78% a year earlier and 9.92% from the end of the fourth quarter of 2020. The decrease in the net tangible equity to net tangible assets ratio from one year prior was driven by the stimulus-aided asset growth as noted previously, the decrease in accumulated other comprehensive income and an increase in intangible assets.

As previously announced, the Company’s Board of Directors approved in December 2020 a stock repurchase program authorizing the repurchase of up to 2.68 million shares of the Company’s common stock during a twelve-month period starting January 1, 2021. 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 no shares repurchased pursuant to the 2021 stock repurchase program in the first quarter of 2021.

Allowance for Credit Losses and Asset Quality

At March 31, 2021, the Company’s Allowance for Credit Losses totaled $55.1 million, or 0.75% of total loans outstanding. This compares to $60.9 million, or 0.82%, at the end of the linked fourth quarter of 2020 and $55.7 million, or 0.81%, at March 31, 2020. Reflective of an improving economic outlook, low levels of net charge-offs and a decrease in delinquent loans, the Company recorded a $5.7 million net benefit in the provision for credit losses during the first quarter of 2021, resulting in a $5.4 million decrease in the allowance for credit losses and a $0.3 million decrease in the reserve for unfunded commitments.

At March 31, 2021, nonperforming (90 or more days past due and non-accruing) loans were $75.5 million, or 1.02%, of total loans outstanding. This compares to $76.9 million, or 1.04%, of total loans outstanding at the end of the fourth quarter of 2020 and $31.8 million, or 0.46%, of total loans outstanding one year earlier. The increase in nonperforming loans over the prior year’s first quarter was driven by the Company’s decision to reclassify loans under extended pandemic-related forbearance to nonperforming status. More specifically, during the fourth quarter of 2020, several commercial borrowers, which primarily operate in the hospitality, travel and entertainment industries, requested extended loan repayment forbearance due to the continued pandemic-related financial hardship they were experiencing. Although the Company’s management granted these forbearance requests, it also reclassified the majority of these loan relationships from accruing to nonaccrual status, unless the borrower clearly demonstrated current repayment capacity or sufficient cash reserves to service their pre-forbearance payment obligations. The allowance for credit losses at March 31, 2021 included $3.6 million of specific reserves for nonperforming loans. The Company may continue to receive similar requests during the remainder of 2021 and will continue to work with its borrowers to establish fair and reasonable forbearance agreements in light of each borrower’s specific circumstances, with an objective to minimize potential ultimate losses to the Company.

Total delinquent loans, which includes nonperforming loans and loans 30 or more days delinquent, to total loans outstanding were 1.29% at the end of the first quarter of 2021. This compares to 1.11% at the end of the first quarter of 2020 and 1.50% at the end of the fourth quarter of 2020. Loans 30 to 89 days delinquent (categorized by the Company as delinquent but performing) were 0.27% of total loans outstanding at March 31, 2021, down from 0.47% at the end of the linked quarter fourth quarter and 0.64% one year earlier. The Company recorded net charge-offs of $0.4 million, or 0.02% of average loans annualized, in the first quarter of 2021. This compares to net charge-offs of $1.6 million, or 0.09% annualized, in the first quarter of 2020 and $1.3 million, or 0.07%, in the linked fourth quarter of 2020. The Company believes the decrease in 30 to 89 day delinquent loans and the very low amount of net charge-offs recorded in the first quarter was supported by the extraordinary Federal and State Government financial assistance provided to consumers throughout the pandemic.

From a credit risk and lending perspective, the Company continues to take actions to assess and monitor its COVID-19 related credit exposures. No specific credit impairment has been identified within the Company’s investment securities portfolio, including the Company’s municipal securities portfolio, since the onset of the pandemic. With respect to the Company’s lending activities, the Company continues to utilize a customer forbearance program to assist borrowers that may be experiencing financial hardship due to COVID-19 related challenges, but such requests diminished significantly in the first quarter of 2021. As of March 31, 2021, the Company had 47 borrowers in forbearance due to COVID-19 related financial hardship, representing $75.6 million in outstanding loan balances, or 1.0% of total loans outstanding. This compares to 74 borrowers and $66.5 million in loans outstanding in forbearance at December 31, 2020.

Dividend Increase

During the first quarter of 2021, the Company declared a quarterly cash dividend of $0.42 per share on its common stock, up 2.4% from the $0.41 dividend declared in the first quarter of 2020, representing an annualized yield of 2.14% based upon the $78.57 closing price of the Company’s stock on April 23, 2021. The one cent increase declared in the third quarter of 2020 marked the 28^th consecutive year of dividend increases for the Company.

Conference Call Scheduled

Company management will conduct an investor call at 11:00 a.m. (ET) today, April 26, 2021, to discuss first quarter 2021 results. The conference call can be accessed at 877-317-6789 (1-412-317-6789 if outside United States and Canada). Investors may also listen live via the Internet at: https://www.webcaster4.com/Webcast/Page/995/40485.

This earnings release, including supporting financial tables and presentation slides, is available within the press releases section of the Company's investor relations website at: https://ir.communitybanksystem.com. An archived webcast of the earnings call will be available on this site for one full year.

About Us

Community Bank System, Inc. operates more than 225 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $14.6 billion, the DeWitt, N.Y. headquartered company is among the country’s 125 largest banking institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its Community Bank Wealth Management Group and OneGroup NY, Inc. operating units. 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. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company's stock trades under the symbol CBU. For more information about Community Bank visit www.cbna.com or https://ir.communitybanksystem.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of CBU’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause the actual results of CBU’s operations to differ materially from its expectations: the macroeconomic and other challenges and uncertainties related to the COVID-19 pandemic, including the negative impacts and disruptions on public health, corporate and consumer customers, the communities CBU serves, and the domestic and global economy, including various actions taken in response by governments, central banks and others, which may have an adverse effect on CBU’s business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve Board; the effect of changes in the level of checking or savings account deposits on CBU’s funding costs and net interest margin; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; the effect of a fall in stock market prices on CBU’s fee income businesses, including its employee benefit services, wealth management, and insurance businesses; the successful integration of operations of its acquisitions; competition; changes in legislation or regulatory requirements; and the timing for receiving regulatory approvals and completing pending transactions. For more information about factors that could cause actual results to differ materially from CBU’s expectations, refer to its reports filed with the Securities and Exchange Commission (“SEC”), including the discussion under “Risk Factors” as filed with the SEC and available on CBU’s website at https://ir.communitybanksystem.com and on the SEC’s website at www.sec.gov. Further, any forward-looking statement speaks only as of the date on which it is made, and CBU undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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