Financial Institutions, Inc. (Nasdaq:FISI), today reported
financial results for the second quarter ended June 30, 2016.
Financial Institutions, Inc. (the “Company”) is the parent company
of Five Star Bank, Scott Danahy Naylon Insurance, LLC (“Scott
Danahy Naylon”) and Courier Capital, LLC (“Courier Capital”).
The Company’s financial results since January 5, 2016 include the
results of operations of Courier Capital, our wealth management
subsidiary whose business we acquired from Courier Capital
Corporation on that date.
Second Quarter 2016
Highlights:
- Successful proxy contest defense against Clover Partners, L.P.;
Financial Institutions’ director nominees elected with overwhelming
shareholder support
- Proxy contest expenses of $1.7 million recorded in second
quarter
- Diluted earnings per share (EPS) of $0.47 in second quarter, up
7% from EPS of $0.44 in prior year
- Increased net interest income to a record $25.2 million in the
second quarter
- Increased noninterest income to $8.9 million in the second
quarter, up 38% from $6.5 million in the prior year period
- Driven by the acquisition of Courier Capital to expand the
Company’s investment advisory services
- Also includes a 12% year-over-year increase in insurance income
and investment securities gains
- Strong contributions from all three business platforms resulted
in return on average tangible common equity of 12.22% (1) for the
quarter
- Total earning assets reach new record of $3.3 billion, up 6%
from a year ago
- Total assets increased to $3.6 billion, up $226.1 million or 7%
from a year ago
- Grew total loans $202.6 million or 10% from a year ago to a
record of $2.2 billion
- Increased total deposits by $202 million or nearly 8% from a
year ago
- Quarterly cash dividend of $0.20 per common share represented a
3.09% dividend yield as of June 30, 2016 and a return of 43% of
second quarter net income to common shareholders
- Shareholders’ equity reached a new record of $322.2 million at
June 30, 2016
- Common book value per share increased to $20.98 at June 30,
2016
- Total risk-based capital remained above 13%, enabling a strong
capital position to support future growth
- Credit quality remains solid with total non-performing loans to
total loans reducing to .30% in the second quarter from .53% last
year
Net income for the second quarter 2016 was $7.2
million, compared to $7.6 million for the first quarter 2016, and
$6.6 million for the second quarter 2015. After preferred
dividends, second quarter 2016 net income available to common
shareholders was $6.8 million or $0.47 per diluted share, compared
with $7.3 million or $0.50 per diluted share for the first quarter
2016, and $6.2 million or $0.44 per diluted share for the second
quarter 2015.
(1) See Appendix A – Reconciliation to
Non-GAAP Financial Measures for the computation of this Non-GAAP
measure.
The Company’s President and Chief Executive
Officer Martin K. Birmingham stated, “We are committed to
continuing to deliver results for our customers and shareholders,
and in the second quarter of 2016, we did just that.
Financial Institutions delivered very solid results in the quarter,
with all of our major businesses performing well, despite the
distraction and expense of the successfully concluded proxy contest
defense. Organic loan production initiatives resulted in
strong commercial and residential real estate portfolio growth in
the second quarter, with commercial loans and residential real
estate loans increasing by 16% and 12% from the second quarter last
year, respectively. New records were set for total assets,
total earning assets and total loans.
“We feel strongly that our strategic plan is
delivering its intended results. Beyond the progress and
improvements achieved to date, we continue to have robust
opportunities in our markets to further expand as a diversified
financial services provider. Our branch expansion initiatives
are moving forward with the opening of another Rochester branch
later in the year and we continue to assess opportunities in
Rochester and Buffalo, resulting from local market
disruption. We believe Financial Institutions is primed for
continued growth with the right plan, marketplace, people, service
and products.”
Kevin B. Klotzbach, the Company’s Chief
Financial Officer noted that, “We implemented several initiatives
designed to reduce operating expenses late in the first quarter of
2016 and the savings were reflected in the second quarter, although
those savings were more than offset by the proxy contest
expenses.
“We have adeptly been managing our results
despite the current interest rate environment. Our strong
loan growth has had an offsetting effect on margin
compression. Along with our growing loan portfolio, it is
important to observe the Company’s strategic imperative to maintain
strong credit quality. In the second quarter we continued to
hold up to this high standard. Total loans grew to a record
$2.2 billion as we reported a 6% increase from year-end.
Since year-end, total non-performing assets have declined to $6.8
million, the allowance for loan losses to non-performing loans has
increased to 435% and year-to-date net charge-offs are down from
prior year at 0.27%.”
Net Interest Income and Net Interest
Margin
Net interest income was $25.2 million in the
second quarter 2016 compared to $24.7 million in the first quarter
2016 and $23.4 million in the second quarter 2015. Average
earning assets were up $98.7 million, led by a $50.8 million
increase in loans in the second quarter of 2016 compared to the
first quarter of 2016. When comparing the second quarter 2016
to the same quarter in 2015, average earning assets increased
$236.9 million, including increases of $191.1 million and $45.6
million in loans and investment securities, respectively.
Second quarter 2016 net interest margin was 3.23%, down 4 basis
points from 3.27% for the first quarter of 2016 and down slightly
from 3.24% for the second quarter of 2015.
Noninterest Income
Noninterest income was $8.9 million for the
second quarter 2016 compared to $9.2 million for the first quarter
2016 and $6.5 million in the second quarter 2015. Included in
noninterest income for the first quarter 2016 is $911 thousand of
death benefit proceeds from company owned life insurance. Net
gain on sale of investment securities totaled $613 thousand and
$1.4 million in the first and second quarters of 2016,
respectively. Exclusive of these items, noninterest income
was $7.5 million in the second quarter 2016 compared to $7.7
million in the first quarter 2016 and $6.5 million in the second
quarter 2015. The main factor contributing to the lower
noninterest income in the second quarter 2016 compared to the first
quarter 2016, other than the decrease in death benefit proceeds
from corporate owned life insurance, was a decrease in insurance
income. Compared to first quarter 2016, the lower second
quarter 2016 insurance income was due in part to contingent
commission revenue that is generally received during the first
quarter of each year, coupled with the variable nature of the
annual renewals of our customers’ insurance policies which causes
our quarterly revenue to fluctuate. The higher noninterest
income in the second quarter 2016 compared to the second quarter
2015 was primarily the result of an $824 thousand increase in
investment advisory income, reflecting the contribution from
Courier Capital as part of our strategy to diversify our business
lines and increase noninterest income through additional fee-based
services.
Noninterest Expense
Noninterest expense was $22.1 million for the
second quarter 2016 compared to $21.2 million for the first quarter
2016 and $19.2 million for the second quarter 2015. The
increase in noninterest expense in second quarter 2016 compared to
first quarter 2016 was primarily a result of professional services
associated with responding to the proxy contest with Clover
Partners, L.P. The professional services incurred in
connection with the proxy contest totaled $360 thousand and $1.7
million in the first and second quarters of 2016,
respectively. The higher professional fees in the second
quarter 2016 were partly offset by lower salaries and employee
benefits as a result of cost reduction initiatives implemented late
in the first quarter of 2016. The increase in noninterest
expense during the second quarter 2016 compared to the second
quarter 2015 was largely due to the higher professional services
expense incurred in connection with the proxy contest coupled with
higher salaries and employee benefits and occupancy and equipment
expenses. The higher year-over-year operating expenses are
primarily a result of the Courier Capital acquisition and organic
growth initiatives, partly offset by the cost reduction strategies
implemented late in the first quarter of 2016.
Income Taxes
Income tax expense was $2.9 million in the
second quarter 2016, compared to $2.7 million in the first quarter
2016 and $2.8 million in the second quarter 2015. The
effective tax rate was 28.8% for the second quarter 2016, compared
with 26.4% for the first quarter of 2016 and 29.5% in the second
quarter 2015. The lower effective tax rate in the first
quarter of 2016 is a result of the non-taxable death benefit
proceeds on corporate owned life insurance received in that
quarter.
Balance Sheet and Capital
Management
Total assets were $3.59 billion at June 30,
2016, up $69.0 million from $3.52 billion at March 31, 2016 and up
$226.1 million from $3.36 billion at June 30, 2015. The
increases were attributable to loan growth and higher investment
security balances that were funded by deposit growth.
Total loans were $2.21 billion at June 30, 2016,
up $96.8 million or 5% from March 31, 2016 and up $202.6 million or
10% from June 30, 2015. The increase in loans is primarily
attributable to organic commercial and residential real estate loan
growth. Commercial loans totaled $963.6 million as of June
30, 2016, an increase of $55.5 million or 6% from March 31, 2016
and an increase of $134.2 million or 16% from June 30, 2015.
Residential real estate loans increased $25.9 million or 7% from
March 31, 2016 and $43.2 million or 12% from June 30,
2015.
Total deposits were $2.86 billion at June 30,
2016, a decrease of $102.2 million from March 31, 2016 and an
increase of $201.8 million from June 30, 2015. The decrease
during the second quarter of 2016 was mainly due to seasonal
outflows of municipal deposits, while the year-over-year increase
was due to higher municipal deposits and successful business
development efforts in both municipal and retail banking.
Public deposit balances represented 27% of total deposits at June
30, 2016, compared to 30% at March 31, 2016 and 26% at June 30,
2015.
Short-term borrowings were $338.3 million at
June 30, 2016, up $159.1 million from March 31, 2016 and down $12.3
million from June 30, 2015. Short-term borrowings are
typically utilized to manage the seasonality of municipal
deposits.
Shareholders’ equity was $322.2 million at June
30, 2016, compared with $314.0 million at March 31, 2016 and $284.4
million at June 30, 2015. Common book value per share was
$20.98 at June 30, 2016, an increase of $0.52 or 3% from $20.46 at
March 31, 2016 and $2.15 or 11% from $18.83 at June 30, 2015.
The increases in shareholders’ equity and the common book value per
share are attributable to net income, stock issued for the
acquisition of Courier Capital and higher net unrealized gains on
securities available for sale, a component of accumulated other
comprehensive income.
During the second quarter 2016, the Company
declared a common stock dividend of $0.20 per common share.
The second quarter 2016 dividend returned 43% of second quarter net
income to common shareholders.
The Company’s leverage ratio was 7.39% at June
30, 2016, compared to 7.46% at March 31, 2016 and 7.31% at June 30,
2015. The decrease in the leverage ratio from March 31, 2016
was primarily due to an increase in average quarterly assets.
The increase in the leverage ratio from June 30, 2015 was due to
higher regulatory capital, which excludes changes in accumulated
other comprehensive income.
Credit Quality
Non-performing loans were $6.6 million at June
30, 2016, compared to $8.6 million at March 31, 2016 and $10.7
million at June 30, 2015. The $4.1 million decrease from the
second quarter 2015 was due to lower commercial non-performing
loans resulting from the payoff of one $2.5 million relationship
during the third quarter of 2015 and pay-downs on two relationships
totaling $1.8 million during the second quarter of 2016. The
ratio of non-performing loans to total loans was 0.30% at June 30,
2016 compared with 0.41% at March 31, 2016, and 0.53% at June 30,
2015.
The provision for loans losses for the second
quarter 2016 was $2.0 million, a decrease of $416 thousand from the
prior quarter and an increase of $664 thousand from the second
quarter 2015. Net charge-offs were $1.0 million during the
second quarter 2016, an $890 thousand decrease compared to the
prior quarter and a $16 thousand increase from the second quarter
2015. The ratio of annualized net charge-offs to total
average loans was 0.19% in the current quarter, compared to 0.36%
in the prior quarter and 0.20% in the second quarter 2015.
The ratio of allowance for loans losses to total
loans was 1.29% at June 30, 2016, compared with 1.30% at March 31,
2016, and 1.37% at June 30, 2015. The ratio of allowance for
loans losses to non-performing loans was 435% at June 30, 2016,
compared with 322% in the prior quarter and 257% at June 30,
2015.
About Financial Institutions,
Inc.
Financial Institutions, Inc. provides
diversified financial services through its subsidiaries, Five Star
Bank, Scott Danahy Naylon and Courier Capital. Five Star Bank
provides a wide range of consumer and commercial banking services
to individuals, municipalities and businesses through a network of
over 50 offices and more than 60 ATMs throughout Western and
Central New York State. Scott Danahy Naylon provides a broad
range of insurance services to personal and business clients across
44 states. Courier Capital provides 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 and
is a member of the NASDAQ OMX ABA Community Bank Index.
Additional information is available at the Company’s website:
www.fiiwarsaw.com.
Non-GAAP Financial
Information
This news release contains financial
information, such as tangible common equity, determined by methods
other than in accordance with U.S. generally accepted accounting
principles ("GAAP"). The Company believes that non-GAAP
financial measures provide a meaningful comparison of the
underlying operational performance of the Company, and facilitate
investors' assessments of its business and performance trends.
These disclosures should not be viewed as a substitute for
financial measures determined in accordance with GAAP, nor are they
necessarily comparable to non-GAAP financial measures that may be
presented by other companies. Where non-GAAP disclosures are used
in this news release, the comparable GAAP financial measure, as
well as the reconciliation to the comparable GAAP financial
measure, can be found in Appendix A to this document.
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. Statements herein are based on certain assumptions
and analyses by the Company and are 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 Scott Danahy Naylon and Courier Capital, 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.
FINANCIAL INSTITUTIONS, INC.Selected
Financial Information (Unaudited)(Amounts in thousands,
except per share amounts)
|
2016 |
|
2015 |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
SELECTED
BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
67,624 |
|
|
110,944 |
|
60,121 |
|
51,334 |
|
|
52,554 |
|
Investment
securities: |
|
|
|
|
|
|
|
|
|
Available for
sale |
|
619,719 |
|
|
610,013 |
|
544,395 |
|
577,509 |
|
|
772,639 |
|
Held-to-maturity |
|
478,549 |
|
|
476,283 |
|
485,717 |
|
490,638 |
|
|
320,820 |
|
Total
investment securities |
|
1,098,268 |
|
|
1,086,296 |
|
1,030,112 |
|
1,068,147 |
|
|
1,093,459 |
|
Loans held for
sale |
|
209 |
|
|
609 |
|
1,430 |
|
1,568 |
|
|
448 |
|
Loans: |
|
|
|
|
|
|
|
|
|
Commercial
business |
|
349,432 |
|
|
317,776 |
|
313,758 |
|
297,876 |
|
|
292,791 |
|
Commercial
mortgage |
|
614,141 |
|
|
590,316 |
|
566,101 |
|
548,529 |
|
|
536,590 |
|
Residential real
estate loans |
|
408,367 |
|
|
382,504 |
|
381,074 |
|
376,552 |
|
|
365,172 |
|
Residential real
estate lines |
|
125,054 |
|
|
126,526 |
|
127,347 |
|
128,361 |
|
|
128,844 |
|
Consumer
indirect |
|
696,908 |
|
|
679,846 |
|
676,940 |
|
665,714 |
|
|
666,550 |
|
Other
consumer |
|
17,929 |
|
|
18,066 |
|
18,542 |
|
19,204 |
|
|
19,326 |
|
Total
loans |
|
2,211,831 |
|
|
2,115,034 |
|
2,083,762 |
|
2,036,236 |
|
|
2,009,273 |
|
Allowance for
loan losses |
|
28,525 |
|
|
27,568 |
|
27,085 |
|
26,455 |
|
|
27,500 |
|
Total
loans, net |
|
2,183,306 |
|
|
2,087,466 |
|
2,056,677 |
|
2,009,781 |
|
|
1,981,773 |
|
Total interest-earning
assets |
|
3,292,528 |
|
|
3,189,582 |
|
3,114,530 |
|
3,097,315 |
|
|
3,104,631 |
|
Goodwill and other
intangible assets, net |
|
76,252 |
|
|
76,567 |
|
66,946 |
|
67,925 |
|
|
68,158 |
|
Total assets |
|
3,585,589 |
|
|
3,516,572 |
|
3,381,024 |
|
3,357,608 |
|
|
3,359,459 |
|
Deposits: |
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
|
626,240 |
|
|
617,394 |
|
641,972 |
|
623,296 |
|
|
602,143 |
|
Interest-bearing
demand |
|
560,284 |
|
|
622,443 |
|
523,366 |
|
563,731 |
|
|
530,861 |
|
Savings and
money market |
|
960,325 |
|
|
1,042,910 |
|
928,175 |
|
942,673 |
|
|
910,215 |
|
Certificates of
deposit |
|
711,156 |
|
|
677,430 |
|
637,018 |
|
623,800 |
|
|
613,019 |
|
Total
deposits |
|
2,858,005 |
|
|
2,960,177 |
|
2,730,531 |
|
2,753,500 |
|
|
2,656,238 |
|
Short-term
borrowings |
|
338,300 |
|
|
179,200 |
|
293,100 |
|
241,400 |
|
|
350,600 |
|
Long-term borrowings,
net |
|
39,025 |
|
|
39,008 |
|
38,990 |
|
38,972 |
|
|
38,955 |
|
Total interest-bearing
liabilities |
|
2,609,090 |
|
|
2,560,991 |
|
2,420,649 |
|
2,410,576 |
|
|
2,443,650 |
|
Shareholders’
equity |
|
322,176 |
|
|
313,953 |
|
293,844 |
|
295,434 |
|
|
284,435 |
|
Common shareholders’
equity |
|
304,836 |
|
|
296,613 |
|
276,504 |
|
278,094 |
|
|
267,095 |
|
Tangible common equity
(1) |
|
228,584 |
|
|
220,046 |
|
209,558 |
|
210,169 |
|
|
198,937 |
|
Unrealized gain (loss)
on investment securities, net of tax |
$ |
10,886 |
|
|
7,555 |
|
443 |
|
5,270 |
|
|
(924 |
) |
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding |
|
14,528 |
|
|
14,495 |
|
14,191 |
|
14,189 |
|
|
14,184 |
|
Treasury shares |
|
164 |
|
|
197 |
|
207 |
|
209 |
|
|
214 |
|
CAPITAL RATIOS
AND PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
Leverage ratio |
|
7.39 |
% |
|
7.46 |
|
7.41 |
|
7.29 |
|
|
7.31 |
|
Common equity Tier 1
ratio |
|
9.63 |
% |
|
9.83 |
|
9.77 |
|
9.74 |
|
|
9.50 |
|
Tier 1 risk-based
capital |
|
10.33 |
% |
|
10.56 |
|
10.50 |
|
10.49 |
|
|
10.25 |
|
Total risk-based
capital |
|
13.08 |
% |
|
13.39 |
|
13.35 |
|
13.37 |
|
|
13.17 |
|
Common equity to
assets |
|
8.50 |
% |
|
8.43 |
|
8.18 |
|
8.28 |
|
|
7.95 |
|
Tangible common equity
to tangible assets (1) |
|
6.51 |
% |
|
6.40 |
|
6.32 |
|
6.39 |
|
|
6.04 |
|
|
|
|
|
|
|
|
|
|
|
Common book value per
share |
$ |
20.98 |
|
|
20.46 |
|
19.49 |
|
19.60 |
|
|
18.83 |
|
Tangible common book
value per share (1) |
$ |
15.73 |
|
|
15.18 |
|
14.77 |
|
14.81 |
|
|
14.03 |
|
Stock price
(Nasdaq:FISI): |
|
|
|
|
|
|
|
|
|
High |
$ |
29.49 |
|
|
29.53 |
|
29.04 |
|
25.21 |
|
|
25.50 |
|
Low |
$ |
24.56 |
|
|
25.38 |
|
24.05 |
|
23.54 |
|
|
22.50 |
|
Close |
$ |
26.07 |
|
|
29.07 |
|
28.00 |
|
24.78 |
|
|
24.84 |
|
________(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)
|
Six months ended |
|
2016 |
|
2015 |
|
June 30, |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
|
2016 |
|
|
2015 |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
SELECTED INCOME
STATEMENT DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
$ |
55,881 |
|
|
50,956 |
|
28,246 |
|
27,635 |
|
27,487 |
|
|
27,007 |
|
|
25,959 |
Interest expense |
|
5,963 |
|
|
4,405 |
|
3,047 |
|
2,916 |
|
2,856 |
|
|
2,876 |
|
|
2,555 |
Net interest
income |
|
49,918 |
|
|
46,551 |
|
25,199 |
|
24,719 |
|
24,631 |
|
|
24,131 |
|
|
23,404 |
Provision for loan
losses |
|
4,320 |
|
|
4,029 |
|
1,952 |
|
2,368 |
|
2,598 |
|
|
754 |
|
|
1,288 |
Net interest
income after provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
for loan
losses |
|
45,598 |
|
|
42,522 |
|
23,247 |
|
22,351 |
|
22,033 |
|
|
23,377 |
|
|
22,116 |
Noninterest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges
on deposits |
|
3,479 |
|
|
3,843 |
|
1,755 |
|
1,724 |
|
1,862 |
|
|
2,037 |
|
|
1,964 |
Insurance
income |
|
2,855 |
|
|
2,665 |
|
1,183 |
|
1,672 |
|
1,236 |
|
|
1,265 |
|
|
1,057 |
ATM and debit
card |
|
2,746 |
|
|
2,476 |
|
1,421 |
|
1,325 |
|
1,311 |
|
|
1,297 |
|
|
1,283 |
Investment
advisory |
|
2,608 |
|
|
1,028 |
|
1,365 |
|
1,243 |
|
642 |
|
|
523 |
|
|
541 |
Company owned
life insurance |
|
1,854 |
|
|
960 |
|
486 |
|
1,368 |
|
514 |
|
|
488 |
|
|
493 |
Investments in
limited partnerships |
|
92 |
|
|
529 |
|
36 |
|
56 |
|
30 |
|
|
336 |
|
|
55 |
Loan
servicing |
|
228 |
|
|
263 |
|
112 |
|
116 |
|
87 |
|
|
153 |
|
|
96 |
Net gain on sale
of loans held for sale |
|
156 |
|
|
108 |
|
78 |
|
78 |
|
88 |
|
|
53 |
|
|
39 |
Net gain on
investment securities |
|
2,000 |
|
|
1,062 |
|
1,387 |
|
613 |
|
640 |
|
|
286 |
|
|
- |
Net gain on sale
of other assets |
|
86 |
|
|
20 |
|
82 |
|
4 |
|
7 |
|
|
- |
|
|
16 |
Amortization of
tax credit investment |
|
- |
|
|
- |
|
- |
|
- |
|
- |
|
|
(390 |
) |
|
- |
Other |
|
2,029 |
|
|
1,798 |
|
1,011 |
|
1,018 |
|
2,163 |
|
|
957 |
|
|
911 |
Total
noninterest income |
|
18,133 |
|
|
14,752 |
|
8,916 |
|
9,217 |
|
8,580 |
|
|
7,005 |
|
|
6,455 |
Noninterest
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
employee benefits |
|
22,432 |
|
|
20,829 |
|
10,818 |
|
11,614 |
|
11,332 |
|
|
10,278 |
|
|
10,606 |
Occupancy and
equipment |
|
7,289 |
|
|
7,074 |
|
3,664 |
|
3,625 |
|
3,365 |
|
|
3,417 |
|
|
3,375 |
Professional
services |
|
4,280 |
|
|
1,834 |
|
2,833 |
|
1,447 |
|
1,604 |
|
|
1,064 |
|
|
866 |
Computer and
data processing |
|
1,717 |
|
|
1,512 |
|
913 |
|
804 |
|
895 |
|
|
779 |
|
|
810 |
Supplies and
postage |
|
1,058 |
|
|
1,071 |
|
464 |
|
594 |
|
544 |
|
|
540 |
|
|
508 |
FDIC
assessments |
|
877 |
|
|
833 |
|
441 |
|
436 |
|
442 |
|
|
444 |
|
|
415 |
Advertising and
promotions |
|
724 |
|
|
477 |
|
347 |
|
377 |
|
331 |
|
|
312 |
|
|
238 |
Goodwill
impairment charge |
|
- |
|
|
- |
|
- |
|
- |
|
751 |
|
|
- |
|
|
- |
Other |
|
4,961 |
|
|
4,617 |
|
2,640 |
|
2,321 |
|
2,564 |
|
|
2,484 |
|
|
2,418 |
Total
noninterest expense |
|
43,338 |
|
|
38,247 |
|
22,120 |
|
21,218 |
|
21,828 |
|
|
19,318 |
|
|
19,236 |
Income
before income taxes |
|
20,393 |
|
|
19,027 |
|
10,043 |
|
10,350 |
|
8,785 |
|
|
11,064 |
|
|
9,335 |
Income tax expense |
|
5,624 |
|
|
5,641 |
|
2,892 |
|
2,732 |
|
2,150 |
|
|
2,748 |
|
|
2,750 |
Net
income |
|
14,769 |
|
|
13,386 |
|
7,151 |
|
7,618 |
|
6,635 |
|
|
8,316 |
|
|
6,585 |
Preferred stock
dividends |
|
731 |
|
|
731 |
|
366 |
|
365 |
|
365 |
|
|
366 |
|
|
366 |
Net income available to
common shareholders |
$ |
14,038 |
|
|
12,655 |
|
6,785 |
|
7,253 |
|
6,270 |
|
|
7,950 |
|
|
6,219 |
FINANCIAL
RATIOS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share –
basic |
$ |
0.97 |
|
|
0.90 |
|
0.47 |
|
0.50 |
|
0.44 |
|
|
0.56 |
|
|
0.44 |
Earnings per share –
diluted |
$ |
0.97 |
|
|
0.90 |
|
0.47 |
|
0.50 |
|
0.44 |
|
|
0.56 |
|
|
0.44 |
Cash dividends declared
on common stock |
$ |
0.40 |
|
|
0.40 |
|
0.20 |
|
0.20 |
|
0.20 |
|
|
0.20 |
|
|
0.20 |
Common dividend payout
ratio |
|
41.24 |
% |
|
44.44 |
|
42.55 |
|
40.00 |
|
45.45 |
|
|
35.71 |
|
|
45.45 |
Dividend yield
(annualized) |
|
3.09 |
% |
|
3.25 |
|
3.09 |
|
2.77 |
|
2.83 |
|
|
3.20 |
|
|
3.23 |
Return on average
assets |
|
0.86 |
% |
|
0.85 |
|
0.82 |
|
0.90 |
|
0.78 |
|
|
0.99 |
|
|
0.81 |
Return on average
equity |
|
9.48 |
% |
|
9.43 |
|
9.07 |
|
9.91 |
|
8.86 |
|
|
11.41 |
|
|
9.19 |
Return on average
common equity |
|
9.54 |
% |
|
9.49 |
|
9.10 |
|
10.00 |
|
8.89 |
|
|
11.60 |
|
|
9.24 |
Return on average
tangible common equity (1) |
|
12.86 |
% |
|
12.73 |
|
12.22 |
|
13.54 |
|
11.73 |
|
|
15.47 |
|
|
12.37 |
Efficiency ratio
(2) |
|
63.97 |
% |
|
61.13 |
|
65.03 |
|
62.90 |
|
64.55 |
|
|
59.46 |
|
|
62.00 |
________(1)
See Appendix A – Reconciliation to Non-GAAP Financial Measures for
the computation of this Non-GAAP
measure.(2) Efficiency ratio
equals noninterest expense less other real estate expense and
amortization and impairment of goodwill and other intangible assets
as a percentage of net revenue, defined as the sum of
tax-equivalent net interest income and noninterest income before
net gains on investment securities, proceeds from company owned
life insurance, adjustments to contingent liabilities and
amortizations of tax credit investment.
FINANCIAL INSTITUTIONS, INC.Selected
Financial Information
(Unaudited) (Amounts in
thousands)
|
Six months ended |
|
2016 |
|
2015 |
|
|
June 30, |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
|
|
2016 |
|
|
2015 |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
SELECTED
AVERAGE BALANCES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and
interest-earning deposits |
$ |
193 |
|
|
75 |
|
316 |
|
70 |
|
- |
|
- |
|
26 |
|
Investment securities
(1) |
|
1,051,411 |
|
|
969,091 |
|
1,075,220 |
|
1,027,602 |
|
1,049,217 |
|
1,067,815 |
|
1,029,640 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business |
|
323,022 |
|
|
274,729 |
|
329,901 |
|
316,143 |
|
297,033 |
|
297,216 |
|
284,535 |
|
Commercial
mortgage |
|
594,251 |
|
|
494,095 |
|
606,360 |
|
582,142 |
|
554,327 |
|
545,875 |
|
509,317 |
|
Residential real
estate loans |
|
386,952 |
|
|
356,658 |
|
391,826 |
|
382,077 |
|
379,189 |
|
371,318 |
|
357,442 |
|
Residential real
estate lines |
|
126,264 |
|
|
129,305 |
|
125,212 |
|
127,317 |
|
127,688 |
|
127,826 |
|
129,167 |
|
Consumer
indirect |
|
680,927 |
|
|
662,982 |
|
683,722 |
|
678,133 |
|
671,888 |
|
663,884 |
|
664,222 |
|
Other
consumer |
|
17,744 |
|
|
19,290 |
|
17,562 |
|
17,926 |
|
18,626 |
|
18,680 |
|
18,848 |
|
Total
loans |
|
2,129,160 |
|
|
1,937,059 |
|
2,154,583 |
|
2,103,738 |
|
2,048,751 |
|
2,024,799 |
|
1,963,531 |
|
Total interest-earning
assets |
|
3,180,764 |
|
|
2,906,225 |
|
3,230,119 |
|
3,131,410 |
|
3,097,968 |
|
3,092,614 |
|
2,993,197 |
|
Goodwill and other
intangible assets, net |
|
76,380 |
|
|
68,410 |
|
76,437 |
|
76,324 |
|
67,692 |
|
68,050 |
|
68,294 |
|
Total assets |
|
3,456,605 |
|
|
3,189,721 |
|
3,507,760 |
|
3,405,451 |
|
3,353,702 |
|
3,343,802 |
|
3,263,111 |
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand |
|
575,960 |
|
|
556,564 |
|
579,497 |
|
572,424 |
|
545,602 |
|
516,448 |
|
561,570 |
|
Savings and
money market |
|
991,770 |
|
|
884,709 |
|
1,017,911 |
|
965,629 |
|
960,768 |
|
903,491 |
|
929,701 |
|
Certificates of
deposit |
|
678,521 |
|
|
609,169 |
|
698,505 |
|
658,537 |
|
628,944 |
|
619,459 |
|
616,145 |
|
Short-term
borrowings |
|
217,576 |
|
|
239,103 |
|
213,826 |
|
221,326 |
|
241,957 |
|
329,050 |
|
226,577 |
|
Long-term
borrowings, net |
|
39,006 |
|
|
16,618 |
|
39,015 |
|
38,997 |
|
38,979 |
|
38,962 |
|
33,053 |
|
Total
interest-bearing liabilities |
|
2,502,833 |
|
|
2,306,163 |
|
2,548,754 |
|
2,456,913 |
|
2,416,250 |
|
2,407,410 |
|
2,367,046 |
|
Noninterest-bearing
demand deposits |
|
619,751 |
|
|
576,011 |
|
621,912 |
|
617,590 |
|
619,423 |
|
625,131 |
|
587,396 |
|
Total deposits |
|
2,866,002 |
|
|
2,626,453 |
|
2,917,825 |
|
2,814,180 |
|
2,754,737 |
|
2,664,529 |
|
2,694,812 |
|
Total liabilities |
|
3,143,426 |
|
|
2,903,560 |
|
3,190,589 |
|
3,096,263 |
|
3,056,541 |
|
3,054,573 |
|
2,975,762 |
|
Shareholders’
equity |
|
313,179 |
|
|
286,161 |
|
317,171 |
|
309,188 |
|
297,161 |
|
289,229 |
|
287,349 |
|
Common equity |
|
295,839 |
|
|
268,821 |
|
299,831 |
|
291,848 |
|
279,821 |
|
271,889 |
|
270,009 |
|
Tangible common equity
(2) |
$ |
219,459 |
|
|
200,411 |
|
223,394 |
|
215,524 |
|
212,129 |
|
203,839 |
|
201,715 |
|
Common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
14,415 |
|
|
14,071 |
|
14,434 |
|
14,395 |
|
14,095 |
|
14,087 |
|
14,078 |
|
Diluted |
|
14,477 |
|
|
14,118 |
|
14,489 |
|
14,465 |
|
14,163 |
|
14,139 |
|
14,121 |
|
SELECTED
AVERAGE YIELDS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Tax equivalent
basis) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities |
|
2.48 |
% |
|
2.46 |
|
2.48 |
|
2.48 |
|
2.47 |
|
2.46 |
|
2.44 |
Loans |
|
4.19 |
% |
|
4.22 |
|
4.17 |
|
4.21 |
|
4.22 |
|
4.16 |
|
4.18 |
Total interest-earning
assets |
|
3.63 |
% |
|
3.63 |
|
3.61 |
|
3.64 |
|
3.63 |
|
3.57 |
|
3.58 |
Interest-bearing
demand |
|
0.14 |
% |
|
0.13 |
|
0.14 |
|
0.14 |
|
0.15 |
|
0.15 |
|
0.14 |
Savings and money
market |
|
0.13 |
% |
|
0.12 |
|
0.13 |
|
0.13 |
|
0.14 |
|
0.14 |
|
0.12 |
Certificates of
deposit |
|
0.88 |
% |
|
0.86 |
|
0.89 |
|
0.88 |
|
0.88 |
|
0.89 |
|
0.87 |
Short-term
borrowings |
|
0.63 |
% |
|
0.37 |
|
0.65 |
|
0.62 |
|
0.49 |
|
0.41 |
|
0.38 |
Long-term borrowings,
net |
|
6.33 |
% |
|
6.20 |
|
6.33 |
|
6.34 |
|
6.34 |
|
6.34 |
|
6.23 |
Total interest-bearing
liabilities |
|
0.48 |
% |
|
0.38 |
|
0.48 |
|
0.48 |
|
0.47 |
|
0.47 |
|
0.43 |
Net interest rate
spread |
|
3.15 |
% |
|
3.25 |
|
3.13 |
|
3.16 |
|
3.16 |
|
3.10 |
|
3.15 |
Net interest rate
margin |
|
3.25 |
% |
|
3.33 |
|
3.23 |
|
3.27 |
|
3.26 |
|
3.20 |
|
3.24 |
________(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)
|
|
2016 |
|
|
2015 |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
ASSET QUALITY
DATA: |
|
|
|
|
|
|
|
|
|
Allowance for
Loan Losses |
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
27,568 |
|
|
|
27,085 |
|
|
26,455 |
|
27,500 |
|
|
27,191 |
|
Net loan charge-offs
(recoveries): |
|
|
|
|
|
|
|
|
|
Commercial
business |
|
(27 |
) |
|
|
502 |
|
|
133 |
|
68 |
|
|
(73 |
) |
Commercial
mortgage |
|
2 |
|
|
|
(1 |
) |
|
23 |
|
12 |
|
|
194 |
|
Residential real estate loans |
|
34 |
|
|
|
21 |
|
|
110 |
|
37 |
|
|
38 |
|
Residential real estate lines |
|
44 |
|
|
|
- |
|
|
24 |
|
30 |
|
|
116 |
|
Consumer
indirect |
|
904 |
|
|
|
1,328 |
|
|
1,519 |
|
1,475 |
|
|
645 |
|
Other
consumer |
|
38 |
|
|
|
35 |
|
|
159 |
|
177 |
|
|
59 |
|
Total net
charge-offs |
|
995 |
|
|
|
1,885 |
|
|
1,968 |
|
1,799 |
|
|
979 |
|
Provision for loan
losses |
|
1,952 |
|
|
|
2,368 |
|
|
2,598 |
|
754 |
|
|
1,288 |
|
Ending balance |
$ |
28,525 |
|
|
|
27,568 |
|
|
27,085 |
|
26,455 |
|
|
27,500 |
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
(recoveries) to average loans (annualized): |
|
|
|
|
|
|
|
|
|
Commercial
business |
|
-0.03 |
% |
|
|
0.64 |
|
|
0.18 |
|
0.09 |
|
|
-0.10 |
|
Commercial
mortgage |
|
0.00 |
% |
|
|
0.00 |
|
|
0.02 |
|
0.01 |
|
|
0.15 |
|
Residential real estate loans |
|
0.03 |
% |
|
|
0.02 |
|
|
0.12 |
|
0.04 |
|
|
0.04 |
|
Residential real estate lines |
|
0.14 |
% |
|
|
0.00 |
|
|
0.07 |
|
0.09 |
|
|
0.36 |
|
Consumer
indirect |
|
0.53 |
% |
|
|
0.79 |
|
|
0.90 |
|
0.88 |
|
|
0.39 |
|
Other
consumer |
|
0.87 |
% |
|
|
0.79 |
|
|
3.39 |
|
3.76 |
|
|
1.26 |
|
Total
loans |
|
0.19 |
% |
|
|
0.36 |
|
|
0.38 |
|
0.35 |
|
|
0.20 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information (1) |
|
|
|
|
|
|
|
|
|
Non-performing
loans: |
|
|
|
|
|
|
|
|
|
Commercial
business |
$ |
2,312 |
|
|
|
4,056 |
|
|
3,922 |
|
3,064 |
|
|
4,643 |
|
Commercial
mortgage |
|
1,547 |
|
|
|
1,781 |
|
|
947 |
|
1,802 |
|
|
3,070 |
|
Residential real estate loans |
|
1,485 |
|
|
|
1,601 |
|
|
1,848 |
|
2,092 |
|
|
2,028 |
|
Residential real estate lines |
|
182 |
|
|
|
165 |
|
|
235 |
|
223 |
|
|
219 |
|
Consumer
indirect |
|
1,015 |
|
|
|
943 |
|
|
1,467 |
|
1,292 |
|
|
728 |
|
Other
consumer |
|
15 |
|
|
|
21 |
|
|
21 |
|
20 |
|
|
20 |
|
Total
non-performing loans |
|
6,556 |
|
|
|
8,567 |
|
|
8,440 |
|
8,493 |
|
|
10,708 |
|
Foreclosed assets |
|
281 |
|
|
|
187 |
|
|
163 |
|
286 |
|
|
165 |
|
Total
non-performing assets |
$ |
6,837 |
|
|
|
8,754 |
|
|
8,603 |
|
8,779 |
|
|
10,873 |
|
|
|
|
|
|
|
|
|
|
|
Total non-performing
loans to total loans |
|
0.30 |
% |
|
|
0.41 |
|
|
0.41 |
|
0.42 |
|
|
0.53 |
|
Total non-performing
assets to total assets |
|
0.19 |
% |
|
|
0.25 |
|
|
0.25 |
|
0.26 |
|
|
0.32 |
|
Allowance for loan
losses to total loans |
|
1.29 |
% |
|
|
1.30 |
|
|
1.30 |
|
1.30 |
|
|
1.37 |
|
Allowance for loan
losses to non-performing loans |
|
435 |
% |
|
|
322 |
|
|
321 |
|
311 |
|
|
257 |
|
________(1)
At period end.
FINANCIAL INSTITUTIONS, INC.Appendix A
- Reconciliation to Non-GAAP Financial Measures
(Unaudited)(In thousands, except per share amounts)
|
Six months ended |
|
2016 |
|
2015 |
|
June 30, |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
|
2016 |
|
|
2015 |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
Ending tangible
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
3,585,589 |
|
|
3,516,572 |
|
|
3,381,024 |
|
|
3,357,608 |
|
3,359,459 |
Less: Goodwill and
other intangible assets, net |
|
|
|
|
|
76,252 |
|
|
76,567 |
|
|
66,946 |
|
|
67,925 |
|
68,158 |
Tangible assets |
|
|
|
|
|
3,509,337 |
|
|
3,440,005 |
|
|
3,314,078 |
|
|
3,289,683 |
|
3,291,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending tangible
common equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders’
equity |
|
|
|
|
|
304,836 |
|
|
296,613 |
|
|
276,504 |
|
|
278,094 |
|
267,095 |
Less: Goodwill and
other intangible assets, net |
|
|
|
|
|
76,252 |
|
|
76,567 |
|
|
66,946 |
|
|
67,925 |
|
68,158 |
Tangible common
equity |
|
|
|
|
|
228,584 |
|
|
220,046 |
|
$ |
209,558 |
|
|
210,169 |
|
198,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity
to tangible assets (1) |
|
|
|
|
|
6.51 |
% |
|
6.40 |
|
|
6.32 |
|
|
6.39 |
|
6.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding |
|
|
|
|
|
14,528 |
|
|
14,495 |
|
|
14,191 |
|
|
14,189 |
|
14,184 |
Tangible common book
value per share (2) |
|
|
|
|
|
15.73 |
|
|
15.18 |
|
|
14.77 |
|
|
14.81 |
|
14.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
tangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
$ |
3,456,605 |
|
|
3,189,721 |
|
|
3,507,760 |
|
|
3,405,451 |
|
|
3,353,702 |
|
|
3,343,802 |
|
3,263,111 |
Less: Average goodwill
and other intangible assets |
|
76,380 |
|
|
68,410 |
|
|
76,437 |
|
|
76,324 |
|
|
67,692 |
|
|
68,050 |
|
68,294 |
Average tangible
assets |
$ |
3,380,225 |
|
|
3,121,311 |
|
|
3,431,323 |
|
|
3,329,127 |
|
|
3,286,010 |
|
|
3,275,752 |
|
3,194,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
tangible common equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common
equity |
$ |
295,839 |
|
|
268,821 |
|
|
299,831 |
|
|
291,848 |
|
|
279,821 |
|
|
271,889 |
|
270,009 |
Less: Average goodwill
and other intangible assets |
|
76,380 |
|
|
68,410 |
|
|
76,437 |
|
|
76,324 |
|
|
67,692 |
|
|
68,050 |
|
68,294 |
Average tangible common
equity |
$ |
219,459 |
|
|
200,411 |
|
|
223,394 |
|
|
215,524 |
|
|
212,129 |
|
|
203,839 |
|
201,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to
common shareholders |
$ |
14,038 |
|
|
12,655 |
|
|
6,785 |
|
|
7,253 |
|
|
6,270 |
|
|
7,950 |
|
6,219 |
Return on average
tangible common equity (3) |
|
12.86 |
% |
|
12.73 |
|
|
12.22 |
|
|
13.54 |
|
|
11.73 |
|
|
15.47 |
|
12.37 |
________(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.
For additional information contact:
Kevin B. Klotzbach
Chief Financial Officer & Treasurer
Phone: 585.786.1130
Email: KBKlotzbach@five-starbank.com
Jordan Darrow
Darrow Associates
Phone: 512.551.9296
Email: jdarrow@darrowir.com
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