Financial Institutions, Inc. Announces First Quarter Results

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WARSAW, N.Y., April 30, 2019 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. FISI (the "Company"), parent company of Five Star Bank (the "Bank"), SDN Insurance Agency, LLC ("SDN"), Courier Capital, LLC ("Courier Capital") and HNP Capital, LLC ("HNP Capital"),  today reported financial and operational results for the quarter ended March 31, 2019.

Net income for the quarter grew to $11.5 million compared to $9.3 million for the first quarter of 2018. After preferred dividends, net income available to common shareholders was $11.2 million for the quarter, or $0.70 per diluted share, up from $8.9 million, or $0.56 per diluted share, for the first quarter of 2018.

First Quarter 2019 Highlights:

  • Net income of $11.5 million was the second highest in the Company's history and $2.2 million, or 24%, higher than the first quarter of 2018

  • Diluted earnings per share of $0.70 was $0.14, or 25.0%, higher than the first quarter of 2018

  • Pre-tax pre-provision income of $15.7 million (1) was the highest in the Company's history, $1.2 million, or 8.5%, higher than the first quarter of 2018

  • Net interest income of $31.8 million was $2.1 million, or 7.0%, higher than the first quarter of 2018

  • Net interest margin expanded to 3.24% from 3.18% in the first quarter of 2018

  • Return on average assets was 1.09%, up from 0.92% in the first quarter of 2018

  • Non-performing loans declined to $5.8 million at quarter-end, down $4.9 million from March 31, 2018

  • As previously announced, the Company declared a quarterly cash dividend of $0.25 per common share, a 4.2% increase from the most recent dividend.

President and Chief Executive Officer Martin K. Birmingham stated, "We delivered another strong quarter as we continue to execute our long-term strategy to achieve sustainable earnings growth. We are seeing meaningful results from our efforts to strengthen and transform our Company, as evidenced by this quarter's growth in net income, pre-tax pre-provision income and deposits, as well as continued strong asset quality. Our capital ratios improved in the quarter with 30 basis point increases in common equity to assets and tangible common equity to tangible assets (1), or the TCE ratio."

Chief Financial Officer Justin K. Bigham added, "Our first quarter performance once again demonstrates that we are leveraging the investments we've made to deliver year-over-year top-line growth while exercising disciplined expense management to enhance profitability. We also made additional progress on our strategies to optimize the balance sheet by focusing on growth in our relationship-based commercial and residential mortgage businesses and redeploying assets from investment securities into higher-yielding loans."

Net Interest Income and Net Interest Margin

Net interest income was $31.8 million for the quarter, $237 thousand lower than the fourth quarter of 2018 and $2.1 million higher than the first quarter of 2018.

  • Average interest-earning assets for the quarter were $4.00 billion, relatively unchanged as compared to the fourth quarter of 2018 and $176.1 million higher than the first quarter of 2018. The primary driver of the increase from the prior year was organic loan growth.

  • First quarter 2019 net interest margin was 3.24%, three basis points higher than the fourth quarter of 2018 and six basis points higher than the first quarter of 2018. Net interest margin has been positively impacted by the continued repositioning of the Company's balance sheet, as a growing proportion of interest-earning assets are deployed into loans.

Noninterest Income

Noninterest income was $9.1 million for the quarter, compared to $9.3 million in the fourth quarter of 2018 and $8.9 million in the first quarter of 2018.

  • Investment advisory fees were $2.2 million in the first quarter of 2019 and the fourth quarter of 2018, compared to $1.8 million in the first quarter of 2018. The increase was primarily the result of the June 1, 2018 acquisition of HNP Capital.

  • Insurance income was $1.4 million in the first quarter of 2019, compared to $1.0 million in the fourth quarter of 2018 and $1.4 million in the first quarter of 2018. The increase compared to the fourth quarter of 2018 was the result of seasonality in this line of business.

  • Income from investments in limited partnerships was $232 thousand in the first quarter of 2019, compared to $184 thousand in the fourth quarter of 2018 and $568 thousand in the first quarter of 2018. The Company has made several investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from these investments fluctuates based on the maturity and performance of the underlying investments.

  • Service charges on deposits were $186 thousand lower and ATM and debit card charges were $200 thousand lower than the fourth quarter of 2018. These declines from the linked quarter reflect lower levels of consumer activity, consistent with seasonal trends.
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Noninterest Expense

Noninterest expense was $25.2 million in the first quarter of 2019, compared to $27.8 million in the fourth quarter of 2018 and $24.1 million in the first quarter of 2018.

  • Salaries and employee benefits expense totaled $14.0 million in the first quarter of 2019, $14.4 million in the fourth quarter of 2018 and $13.4 million in the first quarter of 2018. The decrease compared to the fourth quarter of 2018 was primarily due to $667 thousand of non-recurring expense incurred in connection with employee retirements and severance recognized in the fourth quarter. The increase compared to the first quarter of 2018 was primarily the result of investments in bank personnel and the 2018 acquisition of HNP Capital. The number of full-time equivalent employees was 687 at March 31, 2019, 702 at December 31, 2018, and 638 at March 31, 2018.

  • Advertising and promotions expense of $520 thousand was $415 thousand lower than the fourth quarter of 2018 and $457 thousand lower than the first quarter of 2018 as a result of the timing of expenses related to the Five Star Bank branding campaign.

  • Professional services expense of $1.2 million was $378 thousand higher than the fourth quarter of 2018 and $275 thousand higher than the first quarter of 2018. The increase was primarily related to the timing of fees for consulting and advisory projects.

  • Fourth quarter 2018 noninterest expense included a previously-disclosed $2.4 million non-cash goodwill impairment charge.

Income Taxes

Income tax expense was $3.0 million for the quarter compared to $2.2 million for the fourth quarter of 2018 and $2.3 million for the first quarter of 2018. The effective tax rate was 20.8% for the quarter compared to 22.7% for the fourth quarter of 2018 and 19.6% for the first quarter of 2018.

Effective tax rates are impacted by items of income and expense not subject to federal or state taxation. The Company's effective tax rates differ from statutory rates primarily because of interest income from tax-exempt securities, earnings on company owned life insurance and the fourth quarter 2018 non-cash goodwill impairment charge, a non-tax-deductible expense.

Balance Sheet and Capital Management

Total assets were $4.30 billion at March 31, 2019, down $9.2 million from $4.31 billion at December 31, 2018, and up $150.1 million from $4.15 billion at March 31, 2018.

Investment securities were $866.5 million at March 31, 2019, down $25.7 million from $892.3 million at December 31, 2018. During the quarter, the Company recorded $7.2 million of unrealized gains and used net proceeds of $33.0 million from investment securities to fund loan growth and pay down short-term borrowings. Investment securities were $145.6 million lower than $1.01 billion at March 31, 2018 as a result of $9.3 million of unrealized gains and the use of $154.9 million of net proceeds to primarily fund loan growth.

Total loans were $3.11 billion at March 31, 2019, up $22.6 million, or 0.7%, from December 31, 2018, and up $315.9 million, or 11.3%, from March 31, 2018.

  • Commercial mortgage loans totaled $993.3 million, up $35.1 million, or 3.7%, from December 31, 2018, and up $172.2 million, or 21.0%, from March 31, 2018.

  • Commercial business loans totaled $553.7 million, down $4.1 million, or 0.7%, from December 31, 2018, and up $89.6 million, or 19.3%, from March 31, 2018.

  • Residential real estate loans totaled $534.7 million, up $10.5 million, or 2.0%, from December 31, 2018, and up $56.8 million, or 11.9%, from March 31, 2018.

  • Consumer indirect loans totaled $902.8 million, down $17.2 million, or 1.9%, from December 31, 2018, and up $4.7 million, or 0.5%, from March 31, 2018.

Total deposits were $3.51 billion at March 31, 2019, $141.9 million or 4.2% higher than December 31, 2018, and $128.8 million or 3.8% higher than March 31, 2018. The increase from December 31, 2018, was primarily due to public deposit seasonality while the increase from March 31, 2018, was primarily the result of successful business development efforts. Public deposit balances represented 28% of total deposits at March 31, 2019, compared to 25% of total deposits at December 31, 2018, and 29% at March 31, 2018.

Short-term borrowings were $287.3 million at March 31, 2019, a decrease of $182.2 million from December 31, 2018, and a decrease of $40.3 million from March 31, 2018. Short-term borrowings are typically utilized to manage the seasonality of public deposits.

Shareholders' equity was $408.3 million at March 31, 2019, compared to $396.3 million at December 31, 2018, and $380.3 million at March 31, 2018. Tangible common book value per share was $19.77 (1) at March 31, 2019, an increase of $0.76 or 4.00% from $19.01 at December 31, 2018, and an increase of $1.62 or 8.9% from $18.15 at March 31, 2018.

During the first quarter of 2019, the Company declared a common stock dividend of $0.25 per common share, an increase of 4.2% over the previous dividend. The dividend returned 36% of first quarter net income to common shareholders.

The Company's regulatory capital ratios at March 31, 2019, compared to the prior quarter and prior year:

  • Leverage Ratio was 8.36%, compared to 8.16% and 8.11% at December 31, 2018, and March 31, 2018, respectively.

  • Common Equity Tier 1 Capital Ratio was 9.87%, compared to 9.70% and 10.09% at December 31, 2018, and March 31, 2018, respectively.

  • Tier 1 Capital Ratio was 10.37%, compared to 10.21% and 10.65% at December 31, 2018, and March 31, 2018, respectively.

  • Total Risk-Based Capital Ratio was 12.50%, compared to 12.38% and 13.09% at December 31, 2018, and March 31, 2018, respectively.

Credit Quality

Non-performing loans declined to $5.8 million at March 31, 2019, compared to $7.1 million at December 31, 2018, and $10.7 million at March 31, 2018. The first quarter 2019 provision for loan losses was $1.2 million, reflecting lower levels of charge-offs and loan growth in the first three months of the year. Provision was $3.9 million in the fourth quarter of 2018 and $2.9 million in the first quarter of 2018.

Net charge-offs were $1.8 million in the quarter, $2.1 million lower than the fourth quarter of 2018 and $247 thousand lower than the first quarter of 2018. The ratio of annualized net charge-offs to total average loans was 0.23% in the quarter, 0.51% in the fourth quarter of 2018 and 0.30% in the first quarter of 2018.

The Company has remained strategically focused on the importance of credit discipline, allocating what we believe are the necessary resources to credit and risk management functions as the loan portfolio has grown. Asset quality ratios continued to improve as the total non-performing loans to total loans ratio decreased to 0.19% at March 31, 2019, from 0.38% one year ago and the ratio of allowance for loan losses to non-performing loans increased to 574% at quarter-end from 322% at March 31, 2018.

Justin Bigham Named CFO

On April 1, 2019, Justin K. Bigham was named Executive Vice President, Chief Financial Officer and Treasurer. Kevin B. Klotzbach, former Chief Financial Officer and Treasurer for the Company, was named Executive Vice President, Senior Financial Advisor. Mr. Klotzbach will remain with the Company through December 31, 2019, to ensure a successful transition.

This announcement represented the culmination of a successful CFO succession plan. In March of last year, the Company communicated Mr. Klotzbach's intent to retire in 2019. Following a national search, Mr. Bigham joined the Company in October as Executive Vice President and Deputy CFO. 

Conference Call

The Company will host an earnings conference call and audio webcast today, April 30, 2019, at 2:00 p.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and Justin K. Bigham, Chief Financial Officer. The live webcast will be available in listen-only mode on the Company's website at www.fiiwarsaw.com. Within the United States, listeners may also access the call by dialing 1-888-346-9290 and requesting the Financial Institutions, Inc. call. The webcast replay will be available on the Company's website for at least 30 days.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries Five Star Bank, SDN, Courier Capital and HNP Capital. Five Star Bank provides a wide range of consumer and commercial banking and lending services to individuals, municipalities and businesses through a network of more than 50 offices throughout Western and Central New York State. SDN provides a broad range of insurance services to personal and business clients. Courier Capital and HNP Capital provide customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. Financial Institutions, Inc. and its subsidiaries employ approximately 700 individuals. The Company's stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at www.fiiwarsaw.com.

Non-GAAP Financial Information

In addition to results presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP measures is included in Appendix A to this document.

The Company believes that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, performance trends and financial position. Our management uses these measures for internal planning and forecasting purposes and we believe that our presentation and discussion, together with the accompanying reconciliations, allows investors, security analysts and other interested parties to view our performance and the factors and trends affecting our business in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP measures and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure to evaluate the Company. Non-GAAP financial measures have inherent limitations, are not uniformly applied and are not audited. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Safe Harbor Statement

This press release may contain forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Statements herein are based on certain assumptions and analyses by the Company and factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: the Company's ability to implement its strategic plan, the Company's ability to redeploy investment assets into loan assets, whether the Company experiences greater credit losses than expected, whether the Company experiences breaches of its, or third party, information systems, the attitudes and preferences of the Company's customers, the Company's ability to successfully integrate and profitably operate SDN, Courier Capital, HNP Capital and other acquisitions, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and the Company's compliance with regulatory requirements, changes in interest rates, general economic and credit market conditions nationally and regionally. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.

*****

For additional information contact:

Shelly J. Doran
Director of Investor and External Relations
585-627-1362
sjdoran@five-starbank.com


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands, except per share amounts)

  2019  2018 
  March 31,  December 31,  September 30,  June 30,  March 31, 
SELECTED BALANCE SHEET DATA:                    
Cash and cash equivalents $79,786  $102,755  $117,331  $89,094  $122,914 
Investment securities:                    
Available for sale  427,545   445,677   458,310   492,228   510,197 
Held-to-maturity  438,984   446,581   459,623   474,803   501,905 
Total investment securities  866,529   892,258   917,933   967,031   1,012,102 
Loans held for sale  2,069   2,868   3,166   2,014   1,523 
Loans:                    
Commercial business  553,745   557,861   537,942   507,021   464,139 
Commercial mortgage  993,259   958,194   905,011   867,049   821,091 
Residential real estate loans  534,691   524,155   507,598   489,940   477,935 
Residential real estate lines  108,623   109,718   111,204   113,287   115,346 
Consumer indirect  902,762   919,917   909,434   906,237   898,099 
Other consumer  16,099   16,753   17,142   16,678   16,654 
Total loans  3,109,179   3,086,598   2,988,331   2,900,212   2,793,264 
Allowance for loan losses  33,327   33,914   33,955   33,955   35,594 
Total loans, net  3,075,852   3,052,684   2,954,376   2,866,257   2,757,670 
Total interest-earning assets  4,009,496   4,031,151   3,927,238   3,884,628   3,818,839 
Goodwill and other intangible assets, net  75,850   76,173   78,853   79,188   74,415 
Total assets  4,302,541   4,311,698   4,258,385   4,191,315   4,152,432 
Deposits:                    
Noninterest-bearing demand  732,631   755,460   748,167   719,084   702,900 
Interest-bearing demand  707,430   622,482   711,321   658,107   717,567 
Savings and money market  1,016,666   968,897   988,486   1,012,972   1,052,270 
Time deposits  1,052,110   1,020,068   1,037,755   872,004   907,272 
Total deposits  3,508,837   3,366,907   3,485,729   3,262,167   3,380,009 
Short-term borrowings  287,300   469,500   308,200   472,800   327,600 
Long-term borrowings, net  39,220   39,202   39,184   39,167   39,149 
Total interest-bearing liabilities  3,102,726   3,120,149   3,084,946   3,055,050   3,043,858 
Shareholders' equity  408,253   396,293   392,154   386,937   380,302 
Common shareholders' equity  390,925   378,965   374,825   369,608   362,973 
Tangible common equity (1)  315,075   302,792   295,972   290,420   288,558 
Accumulated other comprehensive loss $(18,554) $(21,281) $(21,820) $(20,296) $(18,163)
                     
Common shares outstanding  15,941   15,929   15,925   15,924   15,901 
Treasury shares  115   127   131   132   155 
CAPITAL RATIOS AND PER SHARE DATA:                    
Leverage ratio  8.36%  8.16%  8.18%  8.10%  8.11%
Common equity Tier 1 capital ratio  9.87%  9.70%  9.81%  9.82%  10.09%
Tier 1 capital ratio  10.37%  10.21%  10.34%  10.37%  10.65%
Total risk-based capital ratio  12.50%  12.38%  12.58%  12.66%  13.09%
Common equity to assets  9.09%  8.79%  8.80%  8.82%  8.74%
Tangible common equity to tangible assets (1)  7.45%  7.15%  7.08%  7.06%  7.08%
                     
Common book value per share $24.52  $23.79  $23.54  $23.21  $22.83 
Tangible common book value per share (1) $19.77  $19.01  $18.59  $18.24  $18.15 
Stock price FISI:                    
High $30.72  $31.55  $33.70  $34.35  $33.00 
Low $25.50  $24.49  $30.12  $28.95  $29.50 
Close $27.18  $25.70  $31.40  $32.90  $29.60 

                

(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)

  2019  2018 
  First  Fourth  Third  Second  First 
  Quarter  Quarter  Quarter  Quarter  Quarter 
SELECTED INCOME STATEMENT DATA:                    
Interest income $41,514  $41,125  $39,117  $37,013  $35,477 
Interest expense  9,722   9,096   8,214   6,783   5,775 
Net interest income  31,792   32,029   30,903   30,230   29,702 
Provision for loan losses  1,193   3,884   2,061   40   2,949 
Net interest income after provision
  for loan losses
  30,599   28,145   28,842   30,190   26,753 
Noninterest income:                    
Service charges on deposits  1,680   1,866   1,813   1,703   1,738 
Insurance income  1,378   1,012   1,501   1,018   1,399 
ATM and debit card  1,443   1,643   1,557   1,531   1,421 
Investment advisory  2,216   2,189   2,245   1,911   1,778 
Company owned life insurance  410   460   440   443   450 
Investments in limited partnerships  232   184   328   123   568 
Loan servicing  110   122   96   108   115 
Income from derivative instruments, net  168   289   336   176   171 
Net gain on sale of loans held for sale  182   266   303   131   96 
Net (loss) gain on investment securities  (53)  (39)  (95)  7   - 
Net gain on other assets  49   1   37   9   3 
Other  1,305   1,355   1,255   1,247   1,168 
Total noninterest income  9,120   9,348   9,816   8,407   8,907 
Noninterest expense:                    
Salaries and employee benefits  14,001   14,373   13,970   12,871   13,429 
Occupancy and equipment  4,586   4,427   4,337   4,167   4,407 
Professional services  1,158   780   1,353   896   883 
Computer and data processing  1,223   1,238   1,291   1,358   1,235 
Supplies and postage  534   487   485   548   512 
FDIC assessments  512   489   498   480   508 
Advertising and promotions  520   935   949   721   977 
Amortization of intangibles  323   330   334   305   288 
Goodwill impairment  -   2,350   -   -   - 
Other  2,314   2,394   2,304   2,102   1,865 
Total noninterest expense  25,171   27,803   25,521   23,448   24,104 
Income before income taxes  14,548   9,690   13,137   15,149   11,556 
Income tax expense  3,027   2,199   2,560   2,979   2,268 
Net income  11,521   7,491   10,577   12,170   9,288 
Preferred stock dividends  365   365   365   366   365 
Net income available to common shareholders $11,156  $7,126  $10,212  $11,804  $8,923 
FINANCIAL RATIOS:                    
Earnings per share – basic $0.70  $0.45  $0.64  $0.74  $0.56 
Earnings per share – diluted $0.70  $0.45  $0.64  $0.74  $0.56 
Cash dividends declared on common stock $0.25  $0.24  $0.24  $0.24  $0.24 
Common dividend payout ratio  35.71%  53.33%  37.50%  32.43%  42.86%
Dividend yield (annualized)  3.73%  3.70%  3.03%  2.93%  3.29%
Return on average assets  1.09%  0.70%  1.00%  1.18%  0.92%
Return on average equity  11.65%  7.50%  10.71%  12.70%  9.89%
Return on average common equity  11.79%  7.46%  10.82%  12.90%  9.95%
Return on average tangible common equity (1)  14.71%  9.40%  13.71%  16.27%  12.52%
Efficiency ratio (2)  60.99%  66.64%  62.04%  60.14%  61.85%
Effective tax rate  20.8%  22.7%  19.5%  19.7%  19.6%

                

      (1)       See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
      (2)       The efficiency ratio is calculated by dividing noninterest expense by net revenue, i.e., the sum of net interest income (fully taxable equivalent) and noninterest income before net gains on investment securities. This is a banking industry measure not required by GAAP.


 


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands)

  2019  2018 
  First  Fourth  Third  Second  First 
  Quarter  Quarter  Quarter  Quarter  Quarter 
SELECTED AVERAGE BALANCES:                    
Federal funds sold and interest-
    earning deposits
 $17,955  $25,411  $17,955  $34,357  $21,941 
Investment securities (1)  886,878   937,907   954,027   1,012,846   1,034,831 
Loans:                    
Commercial business  547,182   539,622   519,114   481,045   453,250 
Commercial mortgage  977,818   944,476   896,159   842,422   821,311 
Residential real estate loans  529,522   515,539   498,371   483,577   470,612 
Residential real estate lines  109,529   110,236   111,762   113,948   115,614 
Consumer indirect  911,252   914,636   904,480   899,069   885,723 
Other consumer  16,226   16,671   16,633   16,449   16,978 
Total loans  3,091,529   3,041,180   2,946,519   2,836,510   2,763,488 
Total interest-earning assets  3,996,362   4,004,498   3,918,501   3,883,713   3,820,260 
Goodwill and other intangible
    assets, net
  76,033   78,314   79,047   75,957   74,577 
Total assets  4,282,991   4,268,809   4,187,538   4,142,735   4,086,633 
Interest-bearing liabilities:                    
Interest-bearing demand  668,448   669,491   642,234   677,582   671,991 
Savings and money market  965,829   1,011,427   978,578   1,032,425   1,012,574 
Time deposits  1,076,687   1,032,632   946,499   906,271   857,184 
Short-term borrowings  346,546   355,439   430,697   381,043   411,760 
Long-term borrowings, net  39,209   39,191   39,174   39,156   39,138 
Total interest-bearing liabilities  3,096,719   3,108,180   3,037,182   3,036,477   2,992,647 
Noninterest-bearing demand deposits  727,321   733,717   730,960   699,112   688,123 
Total deposits  3,438,285   3,447,267   3,298,271   3,315,390   3,229,872 
Total liabilities  3,882,033   3,872,545   3,795,727   3,758,465   3,705,782 
Shareholders' equity  400,958   396,264   391,811   384,270   380,851 
Common equity  383,630   378,936   374,482   366,942   363,523 
Tangible common equity (2) $307,597  $300,622  $295,435  $290,985  $288,946 
Common shares outstanding:                    
Basic  15,930   15,922   15,921   15,906   15,890 
Diluted  15,978   15,971   15,964   15,948   15,941 
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
                    
Investment securities  2.37%  2.33%  2.35%  2.32%  2.32%
Loans  4.77%  4.68%  4.55%  4.43%  4.36%
Total interest-earning assets  4.23%  4.11%  4.00%  3.86%  3.79%
Interest-bearing demand  0.20%  0.20%  0.19%  0.13%  0.12%
Savings and money market  0.41%  0.38%  0.33%  0.26%  0.18%
Time deposits  2.06%  1.88%  1.69%  1.49%  1.33%
Short-term borrowings  2.70%  2.56%  2.24%  2.01%  1.68%
Long-term borrowings, net  6.30%  6.30%  6.31%  6.31%  6.31%
Total interest-bearing liabilities  1.27%  1.16%  1.07%  0.90%  0.78%
Net interest rate spread  2.96%  2.95%  2.93%  2.96%  3.01%
Net interest rate margin  3.24%  3.21%  3.17%  3.16%  3.18%

                

    (1)     Includes investment securities at adjusted amortized cost.
    (2)     See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands)

  2019  2018 
  First  Fourth  Third  Second  First 
  Quarter  Quarter  Quarter  Quarter  Quarter 
ASSET QUALITY DATA:                    
Allowance for Loan Losses                    
Beginning balance $33,914  $33,955  $33,955  $35,594  $34,672 
Net loan charge-offs (recoveries):                    
Commercial business  27   1,135   431   259   (15)
Commercial mortgage  (17)  901   110   (1)  (3)
Residential real estate loans  25   23   16   (53)  (50)
Residential real estate lines  (2)  15   21   (5)  91 
Consumer indirect  1,558   1,599   1,246   1,317   1,664 
Other consumer  189   252   237   162   340 
Total net charge-offs  1,780   3,925   2,061   1,679   2,027 
Provision for loan losses  1,193   3,884   2,061   40   2,949 
Ending balance $33,327  $33,914  $33,955  $33,955  $35,594 
                     
Net charge-offs (recoveries)
  to average loans (annualized):
                    
Commercial business  0.02%  0.83%  0.33%  0.22%  -0.01%
Commercial mortgage  -0.01%  0.38%  0.05%  0.00%  0.00%
Residential real estate loans  0.02%  0.02%  0.01%  -0.04%  -0.04%
Residential real estate lines  -0.01%  0.05%  0.08%  -0.02%  0.32%
Consumer indirect  0.69%  0.69%  0.55%  0.59%  0.76%
Other consumer  4.73%  6.00%  5.66%  3.95%  8.12%
Total loans  0.23%  0.51%  0.28%  0.24%  0.30%
                     
Supplemental information (1)                    
Non-performing loans:                    
Commercial business $594  $912  $2,203  $4,026  $4,312 
Commercial mortgage  909   1,586   1,900   2,151   2,310 
Residential real estate loans  2,225   2,391   2,057   2,138   2,224 
Residential real estate lines  252   255   297   288   372 
Consumer indirect  1,822   1,989   1,385   1,124   1,467 
Other consumer  2   8   8   4   32 
Total non-performing loans  5,804   7,141   7,850   9,731   10,717 
Foreclosed assets  41   230   290   299   480 
Total non-performing assets $5,845  $7,371  $8,140  $10,030  $11,197 
                     
Total non-performing loans
  to total loans
  0.19%  0.23%  0.26%  0.34%  0.38%
Total non-performing assets
  to total assets
  0.14%  0.17%  0.19%  0.24%  0.27%
Allowance for loan losses
  to total loans
  1.07%  1.10%  1.14%  1.17%  1.27%
Allowance for loan losses
  to non-performing loans
  574%  475%  433%  349%  322%

                

    (1)     At period end.


FINANCIAL INSTITUTIONS, INC.
Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited)
(In thousands, except per share amounts)

  2019  2018 
  First  Fourth  Third  Second  First 
  Quarter  Quarter  Quarter  Quarter  Quarter 
Ending tangible assets:                    
Total assets $4,302,541  $4,311,698  $4,258,385  $4,191,315  $4,152,432 
Less: Goodwill and other intangible
    assets, net
  75,850   76,173   78,853   79,188   74,415 
Tangible assets $4,226,691  $4,235,525  $4,179,532  $4,112,127  $4,078,017 
                     
Ending tangible common equity:                    
Common shareholders' equity $390,925  $378,965  $374,825  $369,608  $362,973 
Less: Goodwill and other intangible
    assets, net
  75,850   76,173   78,853   79,188   74,415 
Tangible common equity $315,075  $302,792  $295,972  $290,420  $288,558 
                     
Tangible common equity to tangible
    assets (1)
  7.45%  7.15%  7.08%  7.06%  7.08%
                     
Common shares outstanding  15,941   15,929   15,925   15,924   15,901 
Tangible common book value per
    share (2)
 $19.77  $19.01  $18.59  $18.24  $18.15 
                     
Average tangible assets:                    
Average assets $4,282,991  $4,268,809  $4,187,538  $4,142,735  $4,086,633 
Less: Average goodwill and other
    intangible assets, net
  76,033   78,314   79,047   75,957   74,577 
Average tangible assets $4,206,958  $4,190,495  $4,108,491  $4,066,778  $4,012,056 
                     
Average tangible common equity:                    
Average common equity $383,630  $378,936  $374,482  $366,942  $363,523 
Less: Average goodwill and other
    intangible assets, net
  76,033   78,314   79,047   75,957   74,577 
Average tangible common equity $307,597  $300,622  $295,435  $290,985  $288,946 
                     
Net income available to
    common shareholders
 $11,156  $7,126  $10,212  $11,804  $8,923 
Return on average tangible common
    equity (3)
  14.71%  9.40%  13.71%  16.27%  12.52%
                     
Pre-tax pre-provision income:                    
Net income $11,521  $7,491  $10,577  $12,170  $9,288 
Add: Income tax expense  3,027   2,199   2,560   2,979   2,268 
Add: Provision for loan losses  1,193   3,884   2,061   40   2,949 
Pre-tax pre-provision income $15,741  $13,574  $15,198  $15,189  $14,505 

                
     (1)       Tangible common equity divided by tangible assets.
     (2)       Tangible common equity divided by common shares outstanding.
     (3)       Net income available to common shareholders (annualized) divided by average tangible common equity.

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