[Management View]
Community Financial System (CBU) achieved record operating earnings per share and operating pre-provision net revenue per share, with total operating revenues reaching an all-time high of $199.3 million. Management emphasized the strategic importance of the upcoming Santander branch acquisition, which is expected to enhance market presence without equity dilution. The company highlighted its diversified funding sources and strong liquidity position, covering 246% of estimated uninsured deposits.

[Outlook]
Management expressed confidence in future balance sheet expansion, citing ongoing deposit and loan growth. The outlook for net interest margin expansion is narrowing, with expectations of three to five basis points of quarterly expansion due to market competition and rate movements. The company reaffirmed its target of mid-single-digit loan growth, supported by a strong pipeline and business lending execution. Planned branch expansion remains on track, with 19 De Novo branches expected by early 2026.

[Financial Performance]
- GAAP earnings per share: $0.97, up 6.6% YoY and 4.3% QoQ.
- Operating earnings per share: $1.04, a record for the company, compared to $0.95 one year prior and $0.98 in the linked first quarter.
- Total operating revenues: $199.3 million, up 8.8% YoY and 1.7% QoQ.
- Net interest income: $124.7 million, up 14% YoY and 3.8% QoQ.
- Net interest margin: Increased six basis points to 3.3%.

[Q&A Highlights]
1. Question: Can you speak to the competitive landscape in lending and current loan pricing?
Answer: The competitive landscape is more intense, with competitors trying to make up for past constraints. Loan pricing is under pressure, with yields reflecting a 30 basis point decrease in treasury rates and additional competition. Originations are in the six and three-quarters range, trending lower.

2. Question: How do you feel about the two to seven basis points of quarterly NIM expansion?
Answer: The range is closer to three to five basis points, supported by market progress and a strong pipeline.

3. Question: Will the $600 million of acquired deposits boost liquidity or be invested over time?
Answer: The deposits will support loan growth over the next few years, initially staying in short-term instruments before being deployed.

4. Question: Could you discuss OpEx trends and the impact of restructuring on costs?
Answer: Restructuring is part of branch consolidation and platform evolution. OpEx is expected to remain flat, with investments focused on business growth.

5. Question: How is the branch acquisition progressing, and how does it fit with De Novo extensions?
Answer: The acquisition is on track, complementing the organic strategy with three De Novo branches in the Lehigh Valley, aiming for a top-five market share.

6. Question: Can you elaborate on the pipeline and financial targets?
Answer: The pipeline is robust, supporting mid-single-digit growth across portfolios. The company targets 4%-5% loan growth this year, with strong performance in C&I and consumer lending.

7. Question: What is the composition and cost of acquired deposits, and thoughts on retention?
Answer: Deposits are granular, with an average account size below $20,000 and a 65/35 split between transaction accounts and CDs. The blended cost of funds is just below 2%.

8. Question: Where are you in the De Novo branch build-out, and what about branch closures?
Answer: Seven of 19 planned branches are open, with 17 closures submitted to maintain net-neutral branch count.

9. Question: Any updates on loan yields and the CHIPS Act impact?
Answer: Loan yields are expanding at a steady pace, with no atypical factors. The CHIPS Act is on track, with Micron expected to break ground in Q4.

10. Question: What are the expectations for fee income growth?
Answer: Fee income is expected to grow in high single digits to low double digits, with a strong pipeline and seasonal factors influencing quarterly performance.

[Sentiment Analysis]
Analysts and management maintained a positive tone, with confidence in strategic initiatives and future growth. Management's responses were detailed and optimistic, reflecting a strong outlook for the company's performance.

[Quarterly Comparison]
| Key Metrics | Q2 2025 | Q1 2025 | Q2 2024 |
|----------------------------|---------|---------|---------|
| GAAP EPS | $0.97 | $0.93 | $0.91 |
| Operating EPS | $1.04 | $0.98 | $0.95 |
| Total Operating Revenues | $199.3M | $196.0M | $183.2M |
| Net Interest Income | $124.7M | $120.2M | $109.4M |
| Net Interest Margin | 3.3% | 3.24% | 3.18% |

[Risks and Concerns]
- Competitive pressures in lending and rate movements may impact net interest margin expansion.
- Seasonal outflows and restructuring costs could affect short-term financial performance.
- Execution risks associated with branch acquisitions and expansions.

[Final Takeaway]
Community Financial System demonstrated strong financial performance in Q2 2025, achieving record operating revenues and earnings per share. The strategic acquisition of Santander branches is expected to enhance market presence and support future growth without equity dilution. Management remains confident in achieving mid-single-digit loan growth, supported by a robust pipeline and strategic initiatives. While competitive pressures and market conditions pose challenges, the company's diversified revenue profile and strong liquidity position provide a solid foundation for continued success.