Local banks cautiously optimistic heading into 2026

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As 2026 unrolls, local banking leaders say the industry is entering the year with a mix of caution and confidence. While challenges remain, executives across the region point to adaptability, strong relationships, and long-term strategy as reasons for optimism.

Canandaigua National Bank

“The outlook for banks heading into 2026 is stable,” said Vincent K. Yacuzzo, executive vice president and CFO of Canandaigua National Bank. “The interest rate environment has normalized. Central banks have lowered interest rates in nearly every country, and only a modest level of additional changes are expected during 2026.”

Yacuzzo said banks have been throwing retirement parties throughout the past year for the dreaded inverted yield curve that through curve balls into their net interest margins and overall earnings levels in recent years.

“A normal-shaped, upward sloping, yield curve (where medium- and longer-term interest rates are higher than short-term ones) is a great opportunity that we no longer take for granted!” he said.

Signs of both softening labor markets and persistent and ongoing inflation are two of the challenges Yacuzzo is keeping an eye on, but he adds that neither of these appears, at the moment at least, ready to rupture in a significant way.

“It continues to be a very challenging housing market in our region,” said Yacuzzo, pointing out another concern. “The average age of first-time homebuyers continues to climb, and homeownership is becoming increasingly out of reach for many. There is a shortage of housing supply that will take years to rectify.”

He also notes that affordability and the ability to make ends meet, even on median household income levels, are also a concern.

“Rips in social safety nets and decreased funding for not-for-profit organizations supporting our most vulnerable community members are a challenge,” he said. “I’m proud of our local banks that demonstrated corporate responsibility through joining forces and providing the largest challenge grant ever for the United Way of Greater Rochester and the Finger Lakes 2025 campaign.”

He is also optimistic that momentum will continue to build toward Canandaigua National Bank’s expansion into the Syracuse area. The bank plans to open its first Community Office location (branch) this month in downtown Syracuse, while three other new branches in the surrounding suburbs are currently under construction and will open later in the year.

“The connections and commonalities between the Rochester and Syracuse MSAs [Metropolitan Statistical Area] are strong,” he said. “There is a lot to be optimistic about in this region, and we’re eager to help support economic activity and growth across our new, larger market.”

Genesee Regional Bank

“The environment for banks improved in 2025 and will continue into 2026 as short-term interest rates decline, and the yield curve steepens, particularly between overnight rates and the two-year treasury, where most of banks’ funding lies,” said Philip Pecora, president and CEO of Genesee Regional Bank.

Additionally, Pecora says that many of the assets with low interest rates, both loans and investments, that banks booked during the COVID years are maturing and being replaced with higher-yielding assets, which is positive for banks.

When it comes to challenges ahead, Pecora says fraud and cybercrime are increasing threats to all businesses, and banks are no exception.

“Banks need to be extremely vigilant in protecting not only our own systems and networks, but we also need to be concerned for and educate our clients about the threat,” he said. “Banks’ spending on risk mitigation has grown exponentially over recent years, and this trend undoubtedly will continue into 2026 and beyond.”

A point of optimism for the local banking industry that he identifies is the continuation of low housing inventory in western and central NY, which makes for a very competitive residential mortgage landscape.

“That said, our team at GRB has been successful in meeting the needs of local home buyers in this challenging market through our dynamic product offerings and responsiveness,” Pecora said. “Despite the challenging housing market, GRB’s mortgage originations have increased steadily over the past three years since falling off in 2022 when interest rates spiked – we see further gains in 2026.”

He adds that for the most part, credit quality has remained strong, and thus far, there has not been any type of hangover from the massive amount of government stimulus that was pumped into the economy earlier this decade.

“We see our business clients’ financial performance normalize now that the stimulus has worked its way through the economy,” Pecora said. “Inflation is still slightly elevated, however is settling to a more reasonable level. With the job market cooling, I suspect inflation will not be much of a threat in 2026.”

Five Star Bank

“These are interesting times, and the economic data is signaling that the economy will continue in a positive vein,” said Martin Birmingham, president and CEO of Five Star Bank. “We’re in kind of a Goldilocks ‘just right’ situation in terms of dealing with inflation, with the opportunity for an outlook for reduced rates. I think that bodes well for a positive bias on the economy.”

Still, Birmingham says the industry needs to be prepared and begin the New Year with eyes wide open for volatility and geopolitical risk that could translate economically.

In terms of optimism within his own organization, Birmingham says he and his team have taken steps over the course of the last twelve to fifteen months to position Five Star for future success related to core operations.

“Strategically, we have de-risked our strategy and have emphasized core community banking,” he said. “In the markets we serve here in upstate New York, we have plenty of organic growth opportunities across all our business activities. With that in mind, at the end of last year, we sourced equity and anticipation of supporting that growth, and we repositioned our balance sheet in a way that has really propelled our performance, compared to the industry.”

In the year ahead, Birmingham says  he is most looking forward to continuing to take care of the bank’s customers – being a safe harbor in whatever the market brings – and continuing to be a good corporate citizen in the areas Five Star serves.

Community Bank

Chris Humphrey, Community Bank’s Regional President in WNY, believes technology will be both the biggest challenge and opportunity facing banks in the year ahead.

“The big question as an industry and as a bank that we’re very focused on – and that I think we’re making a lot of progress on – is ‘How do you continue to marry technology with a really good customer experience?” he said.

Humphrey says Community Bank continues to invest heavily in technology and that it’s something they’re squarely focused on as an organization, both internally and externally.

“I think the other biggest challenge, slash, opportunity is people,” he said. “We’re continuing to upskill our people and continuing to attract new talent in the marketplace. We’re providing an employee experience that is attractive to high-performing individuals in this market and across our entire footprint.”

Stability as an organization is what gives Humphrey the most optimism about Community Bank in the year ahead.

“We’re very well balanced, and that’s really important to have as you’re growing in key markets like Rochester,” he said. “Growth does not always necessarily mean good. Growth has to be done the right way, and I think we’re lucky that our organization has a really good foundation that we’re growing from.”

Key Bank

“We are continuing to see an uptick in M&A activity in the economy, providing lending opportunities for banks across almost every line of business,” said Vince Lecce, Rochester market president and key private bank market leader at KeyBank, about one of the greatest opportunities he sees for banks in the region in the year ahead.

Lecce explains that as these mergers and acquisitions accelerate, banks are positioned to support clients through tailored financing solutions, advisory services, and strategic guidance.

“This environment not only facilitates growth for business owners seeking to capitalize on liquidity events but also strengthens the bank’s ability to diversify its offerings, foster long-term client relationships, and drive innovation across its divisions,” he said. “By staying agile and responsive to the evolving needs brought on by increased M&A activity, banks can establish themselves as trusted partners in helping clients achieve their financial objectives as 2026 unfolds.”

Lecce says KeyBank is exceptionally well capitalized and strategically positioned to drive growth and seize opportunities emerging from today’s economic environment.

“We are particularly enthusiastic about Rochester’s involvement as part of the NY SMART I-Corridor Tech Hub, which is going to catalyze a multi-decade economic expansion across the greater Rochester region and beyond,” he says. “This development represents a transformative moment for the area, and we are confident that both our team and the bank are uniquely equipped to leverage this momentum.”

He adds that much of the anticipated growth being fueled by federal tech hub designations is attracting talent, innovation, and investment—creating a dynamic ecosystem where KeyBank can play a pivotal role in supporting Rochester businesses and communities as they thrive in this new era of technological advancement.

One of the macro-industry challenges on Lecce’s radar for 2026 is the rapid pace of digital transformation and the growing demand for specialized skills that have made it increasingly challenging for banks to acquire and retain top-quality professionals.

“As organizations focus on enhancing their technological capabilities and delivering personalized customer experiences, the pressure to attract people with expertise in areas such as fintech, cybersecurity, data analytics, and relationship management has never been greater,” he said.

ESL Federal Credit Union

Tom Rogers, executive vice president and CEO-elect of ESL Federal Credit Union, believes the banking experience and the banking industry itself are in a time of transition.

“The steep pace of technology change impacts many facets of our business; however, we have already started preparing by optimizing our digital architecture,” Rogers said. “Our services and resources are designed to help our members in all aspects of their financial journey, from budgeting and spending to building their savings, managing their credit, protecting their assets, and investing in their future.”

As our technology evolves, Rogers explains that so too will ESL’s solutions to meet members’ needs and provide them with the best possible experience. And while digital tools may enhance convenience, trusted relationships and personal guidance remain central.

“As a financial institution committed to the growth of the Greater Rochester and Finger Lakes region, we’re always looking for opportunities to assist our members with their financial needs,” Rogers said. “We routinely connect with members to discuss their specific situation and potential financial solutions that can help them manage through times of uncertainty.”

The greatest opportunity ESL has in this area, Rogers said, is to provide high-quality service where and when members need it.

“That is why we are maintaining our investment in our branch network and increasing our investment in our online and mobile channels,” he said. “This balanced approach ensures our members have the flexibility to engage with us in the way that best fits their needs.”

He notes the Rochester community has a strong, skilled workforce and that, as 2026 begins, it will be important for ESL to tap into this talent, paired with an evolving digital environment, to provide continued positive experiences for members.

“We’ve invested heavily in our technology platforms and operations, and we’re excited to see the beneficial impact this growth has on our members,” he said. “The investments we’ve made in transforming how our business uses data and systems to automate routine work will better equip us to provide our members with the resources and tools they need to thrive. When you match up this improved technology platform with our talented front-line and back-office teams, we have a great deal of optimism for our future.

Caurie Putnam is a Rochester-area freelance writer.