Community Bank (CBU)

Regional banking company Community Financial System (NYSE:CBU) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 9.9% year on year to $215.5 million. Its non-GAAP profit of $1.12 per share was in line with analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1866 in upstate New York, Community Financial System (NYSE:CBU) is a financial holding company that provides banking, employee benefits, wealth management, and insurance services to retail, commercial, and municipal customers.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Community Financial System competes with regional banks like M&T Bank (NYSE:MTB), KeyBank (NYSE:KEY), and NBT Bancorp (NASDAQ:NBTB) in its banking operations. In its employee benefits and wealth management segments, it faces competition from national providers like Fidelity, Vanguard, and specialized regional firms.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, Community Bank grew its revenue at a tepid 6.5% compounded annual growth rate. This fell short of our benchmark for the banking sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Community Bank’s annualized revenue growth of 7.7% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Community Bank reported year-on-year revenue growth of 9.9%, and its $215.5 million of revenue exceeded Wall Street’s estimates by 1.5%.

Net interest income made up 61.3% of the company’s total revenue during the last five years, meaning lending operations are Community Bank’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Community Bank’s efficiency ratio has increased by 2.9 percentage points, going from 60.1% to 62.1%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q4, Community Bank’s efficiency ratio was 64.3%, falling short of analysts’ expectations by 325.2 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Community Bank to rein in some of its expenses as it anticipates an efficiency ratio of 60.2%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Community Bank’s weak 5% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Although it wasn’t great, Community Bank’s two-year annual EPS growth of 11% topped its 7.7% two-year revenue growth.

Diving into the nuances of Community Bank’s earnings can give us a better understanding of its performance. A two-year view shows that Community Bank has repurchased its stock, shrinking its share count by 2.3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q4, Community Bank reported adjusted EPS of $1.12, up from $0.94 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Community Bank’s full-year EPS of $4.13 to grow 16.9%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Community Bank’s TBVPS declined at a 2.2% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 18.4% annually over the last two years from $15.00 to $21.02 per share.

Over the next 12 months, Consensus estimates call for Community Bank’s TBVPS to grow by 17.7% to $24.74, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Community Bank has averaged a Tier 1 capital ratio of 13.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Community Bank has averaged an ROE of 10.1%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

It was encouraging to see Community Bank beat analysts’ revenue expectations this quarter. On the other hand, its EPS was in line. Overall, this quarter could have been better. The stock traded down 2.1% to $60.50 immediately after reporting.

Updated: January 27, 2026 at 10:14 AM EST

Are you wondering whether to buy Community Bank or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Community Bank isn’t a terrible business, but it doesn’t pass our quality test. First off, its revenue growth was uninspiring over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its TBVPS has declined over the last five years. On top of that, its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Community Bank’s P/B ratio based on the next 12 months is 1.5x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $66.60 on the company (compared to the current share price of $60.50).