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REGULATORY MATTERS | 12 Months Ended
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Dec. 31, 2023
REGULATORY MATTERS |
REGULATORY MATTERS | NOTE O: REGULATORY MATTERS The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to the Company. In addition to the capital requirements discussed below, the circumstances under which the Bank may pay dividends are limited by federal statutes, regulations, and policies. For example, as a national bank, the Bank must obtain the approval of the OCC for payments of dividends if the total of all dividends declared in any calendar year would exceed the total of the Bank’s net profits, as defined by applicable regulations, for that year, combined with its retained net profits for the preceding two years. Furthermore, the Bank may not pay a dividend in an amount greater than its undivided profits then on hand after deducting its losses and bad debts, as defined by applicable regulations. At December 31, 2023, the Bank had approximately $156.9 million in undivided profits legally available for the payment of dividends. In addition, the Board of Governors of the FRB and the OCC are authorized to determine under certain circumstances that the payment of dividends would be an unsafe or unsound practice and to prohibit payment of such dividends. The FRB has indicated that banking organizations should generally pay dividends only out of current operating earnings. The OCC may take enforcement actions for a variety of supervisory concerns, including violations of laws, rules or regulations and unsafe and unsound practices. As a result, the OCC could also establish individual minimum capital ratios (“IMCR”) for the Bank that are higher than the regulatory minimums. This would impair the Bank’s ability to pay dividends to the Company. There are also statutory limits on the transfer of funds to the Company by its banking subsidiary, whether in the form of loans or other extensions of credit, investments or assets purchases. Such transfer by the Bank to the Company generally is limited in amount to 10% of the Bank’s capital and surplus, or 20% in the aggregate. Furthermore, such loans and extensions of credit are required to be collateralized in specific amounts. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes, as of December 31, 2023, that the Company and Bank meet all applicable capital adequacy requirements. The Company and the Bank are required to maintain a “capital conservation buffer,” composed entirely of common equity Tier 1 capital, in addition to minimum risk-based capital ratios. The required capital conservation buffer is 2.50% for both 2023 and 2022. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer in 2023 and 2022, the Company and the Bank must maintain: (i) Common equity Tier 1 capital to total risk-weighted assets of at least 7.0%, (ii) Tier 1 capital to total risk-weighted assets of at least 8.5%, and (iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets of at least 10.5%. As of December 31, 2023 and 2022, the amounts, ratios and requirements for the Company are presented below. As of December 31, 2023, the OCC categorized the Company and Bank as “well capitalized” under the regulatory framework for prompt corrective action. ​
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | For capital adequacy | ​ | To be well-capitalized |
​ | ​ | ​ | ​ | ​ | ​ | ​ | For capital adequacy | ​ | purposes plus Capital | ​ | under prompt |
​ | ​ | Actual | ​ | purposes | ​ | Conservation Buffer | ​ | corrective action |
(000’s omitted) |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |
Community Bank System, Inc.: |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  | ​
2023 |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  | ​
Tier 1 Leverage ratio | ​ | $ | 1,402,188 |  | 9.34 | % | $ | 600,442 |  | 4.00 | % | ​ | ​ | ​ | ​ | ​ | $ | 750,553 |  | 5.00 | %
Common equity tier 1 capital | ​ |  | 1,402,042 |  | 14.75 | % |  | 427,618 |  | 4.50 | % | $ | 665,184 | ​ | 7.00 | % | ​ | 617,671 |  | 6.50 | %
Tier 1 risk-based capital | ​ |  | 1,402,188 |  | 14.76 | % |  | 570,158 |  | 6.00 | % | ​ | 807,723 | ​ | 8.50 | % | ​ | 760,210 |  | 8.00 | %
Total risk-based capital | ​ |  | 1,468,920 |  | 15.46 | % |  | 760,210 |  | 8.00 | % |  | 997,776 | ​ | 10.50 | % | ​ | 950,263 |  | 10.00 | %
2022 | ​ |  | ​ |  | ​ | ​ |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ | ​ |  |  | ​
Tier 1 Leverage ratio | ​ | $ | 1,381,598 |  | 8.79 | % | $ | 628,485 |  | 4.00 | % | ​ | ​ | ​ | ​ | ​ | $ | 785,606 |  | 5.00 | %
Common equity tier 1 capital | ​ |  | 1,381,439 |  | 15.71 | % |  | 395,771 |  | 4.50 | % | $ | 615,644 | ​ | 7.00 | % | ​ | 571,669 |  | 6.50 | %
Tier 1 risk-based capital | ​ |  | 1,381,598 |  | 15.71 | % |  | 527,695 |  | 6.00 | % | ​ | 747,568 | ​ | 8.50 | % | ​ | 703,593 |  | 8.00 | %
Total risk-based capital | ​ |  | 1,442,529 |  | 16.40 | % |  | 703,593 |  | 8.00 | % |  | 923,466 | ​ | 10.50 | % | ​ | 879,491 |  | 10.00 | %
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Community Bank, N.A.: | ​ |  | ​ |  | ​ | ​ |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ | ​ |  |  | ​
2023 | ​ |  | ​ |  | ​ | ​ |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ | ​ |  |  | ​
Tier 1 Leverage ratio | ​ | $ | 1,139,569 |  | 7.70 | % | $ | 591,877 |  | 4.00 | % | ​ | ​ | ​ | ​ | ​ | $ | 739,846 |  | 5.00 | %
Common equity tier 1 capital | ​ |  | 1,139,423 |  | 12.11 | % |  | 423,442 |  | 4.50 | % | $ | 658,688 | ​ | 7.00 | % | ​ | 611,639 |  | 6.50 | %
Tier 1 risk-based capital | ​ |  | 1,139,569 |  | 12.11 | % |  | 564,590 |  | 6.00 | % | ​ | 799,835 | ​ | 8.50 | % | ​ | 752,786 |  | 8.00 | %
Total risk-based capital | ​ |  | 1,206,301 |  | 12.82 | % |  | 752,786 |  | 8.00 | % |  | 988,032 | ​ | 10.50 | % | ​ | 940,983 |  | 10.00 | %
2022 | ​ |  | ​ |  | ​ | ​ |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ | ​ |  |  | ​
Tier 1 Leverage ratio | ​ | $ | 1,122,639 |  | 7.26 | % | $ | 618,874 |  | 4.00 | % | ​ | ​ | ​ | ​ | ​ | $ | 773,593 |  | 5.00 | %
Common equity tier 1 capital | ​ |  | 1,122,480 |  | 12.86 | % |  | 392,800 |  | 4.50 | % | $ | 611,022 | ​ | 7.00 | % | ​ | 567,378 |  | 6.50 | %
Tier 1 risk-based capital | ​ |  | 1,122,639 |  | 12.86 | % |  | 523,733 |  | 6.00 | % | ​ | 741,955 | ​ | 8.50 | % | ​ | 698,311 |  | 8.00 | %
Total risk-based capital | ​ |  | 1,183,570 |  | 13.56 | % |  | 698,311 |  | 8.00 | % |  | 916,533 | ​ | 10.50 | % | ​ | 872,889 |  | 10.00 | %
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