This research examines at the effect of corporate social responsibility (CSR) expenditure in two state commercial banks and few other financial institutions that are listed on the CSE in Sri Lanka. The independent variable in this analysis is CSR expenditure, whereas the dependent variable is financial performance. Market- and accounting-based performance metrics (ROA, ROE and EPS) are used to assess the financial performance of the financial institutions. The study's control variables were firm age, firm size, and GDP growth rate. For a duration of Eight years, the researchers gathered secondary data on the financial institutions from 2015 to 2022 by using audited annual reports, which included 13 financial institutions as a sample. The study findings reveal that CSR has a statistically significant impact on financial performance. The correlation analysis demonstrated a statistically significant relationship between CSR expenditure and ROA, ROE, and EPS. The correlation coefficient showed that all of the suggested hypotheses were significant and acceptable. The findings from the regression analysis revealed that CSR expenditure has an impact on the financial institution's ROA, ROE, and EPS. The results and implications can assist Sri Lankan financial institutions in designing their CSR projects to maximize value for the organization, resulting in a win-win situation. In addition, investing in CSR as a non-profit endeavor might help financial institutions meet their social responsibility obligations while also enhancing future intangible revenues and preparing them for market competitiveness. In contrast, CSR investments may improve community development, diversity promotion, and quality of life while treating social challenges including poverty, healthcare, education, and environmental sustainability.