For More Information: Ronald A. Miller Senior Vice President and Chief Financial Officer Phone: 585-786-1102
FOR IMMEDIATE RELEASE
Financial Institutions, Inc. Reports 2004 Fourth Quarter
and Year-end Results
WARSAW, N.Y., January 27, 2005 — Financial Institutions, Inc. (NASDAQ:FISI), a holding company of community banks serving Central and Western New York, today reported net income for the fourth quarter of 2004 of $2.9 million compared with $5.1 million in net income for the third quarter of 2004 and $2.2 million in the fourth quarter of 2003. The drop in net income from the third quarter of 2004 primarily relates to a $1.9 million increase in the provision for loan losses to $4.0 million in the fourth quarter from $2.1 million in the third quarter and additional costs associated with asset quality and compliance issues. Fourth quarter 2004 net income represents a $.7 million increase over fourth quarter 2003 net income of $2.2 million. The fourth quarter 2004 provision for loan losses is $4.3 million lower than the $8.3 million provision for loan losses in the fourth quarter of 2003 and partially offset an increase of $2.3 million in noninterest expense. Diluted earnings per share for the fourth quarter of 2004 were $.22, an increase of 29% over $.17 per share for the comparable quarter last year.
For the year ended December 31, 2004, net income was $16.2 million, an increase of $2.0 million, or 14%, over 2003 net income of $14.2 million. Diluted earnings per share for 2004 were $1.31, an increase of $.18 per share over $1.13 per share for 2003. The provision for loan losses in 2004 was $13.5 million, down $9.0 million from the prior year, and was partially offset by a $3.2 million increase in salaries and benefits and a $1.6 million increase in other operating expenses.
Peter G. Humphrey, Chairman, President & CEO of Financial Institutions, Inc (FII) stated, “Our fourth quarter results continue to be impacted by the credit quality issues at several of our subsidiary banks. We have been diligently working to repair loan quality issues and believe we have made progress through the addition of new personnel and greater oversight of our subsidiary bank loan portfolio activities by the Company’s management. It will take time before these changes positively impact the entire commercial loan portfolios of our subsidiary banks. We continue to implement higher credit standards, detailed inspections of loan records, and increased centralized credit administration.”
Return on average common equity for the quarter (annualized) and the full year 2004 was 5.81% and 8.76% compared with 4.44% and 7.65% for the same periods in 2003, respectively. The improvement in return ratios was primarily a result of a reduction in the provision for loan losses in 2004 compared with the prior year. Return on average assets for the 2004 fourth quarter and the full year also improved to .52% and .74% compared with .41% and .66% for the same periods in 2003, respectively.
Asset Quality
Nonperforming assets at December 31, 2004 were $52.5 million, up $2.7 million from September 30, 2004 and up $.4 million from December 31, 2003. The ratio of nonperforming assets to total loans and other real estate was 4.18% at the end of 2004 compared with 3.87% at the end of 2003. Net loan charge-offs in the fourth quarter of 2004 were $2.2 million, up $.3 million from the third quarter of 2004 and down $6.1 million compared to the prior year’s fourth quarter. Net loan charge-offs for the full year 2004 were $9.6 million compared with $15.1 million in 2003.
Revenue
For the fourth quarter 2004, net interest income remained relatively flat with the 2003 fourth quarter at $19.0 million. Interest income from securities offset the decline in interest earned on a lower loan base. The net interest margin for the fourth quarter of 2004 was 3.90% compared with 3.96% in the prior year. Net interest income of $75.4 million for 2004 was relatively unchanged from the prior year. Net interest margin for the year 2004 declined 6 basis points to 3.89% from 3.95% in 2003.
Noninterest income for the fourth quarter of 2004 declined $.9 million, or 13%, from the same quarter in 2003. The decline is largely attributed to a drop of $.6 million in mortgage banking income, a result of lower volumes of mortgage originations and corresponding sales of mortgages in the secondary market. For the year, noninterest income was down $.7 million, or 3%, as increased fees on deposit accounts and the gain on sale of credit card loans helped to offset the lower residential mortgage banking activities and gain on the sales of securities in comparison with the prior year.
Noninterest expense
Noninterest expense for the fourth quarter of 2004 was $17.7 million, an increase of $2.3 million over the same quarter a year ago, and for the full year 2004 was $65.6 million, an increase of $4.8 million over 2003. The higher expenses reflect the increase in staff for the centralized credit administration function, the building of the loan administration team, and fees for professional services. Included in the fees for professional services are costs associated with asset quality and regulatory issues, as well as costs incurred for the implementation of the Section 404 internal control provisions of the Sarbanes-Oxley Act. The higher expenses, combined with flat revenue, resulted in an efficiency ratio of 67.03% for the 2004 fourth quarter and 62.12% for the year. This compares with 55.33% and 55.73% for the 2003 fourth quarter and full year, respectively.
Balance Sheet Trends
Average deposits grew 3% for the fourth quarter and full year 2004. The deposit growth reflects the addition of new products in the Company’s service area and the development of the customer base at new branches that have been added over the last 2 years.
Total loans declined 7% to $1.26 billion as of December 31, 2004 compared with $1.35 billion at the end of the prior year. Loan origination has slowed as the Company has implemented more stringent underwriting requirements, implemented training on the new credit processes and focused resources on the existing loan portfolio.
Mr. Humphrey noted, “During 2004, the Company has increased the staff and resources available to its Chief Risk Officer and the centralized credit administration function that reports to him. Corporate commercial risk officers with credit administration oversight responsibility have been added at the Company level to support our bank subsidiaries. The position of Chief of Community Banking has been created and filled, to provide greater consistency and oversight of the commercial-related loan administration function at all four bank subsidiaries. New Board members have been added at our National Bank of Geneva (“NBG”) and Bath National Bank (“BNB”) subsidiaries, and the Board-level compliance committees have been reorganized, with access to an outside consultant experienced in regulatory compliance matters. Centralized control has been implemented for all risk-rating reviews and Corporate Credit Administration has completed a comprehensive special review of our commercial-related loan portfolio.”
Mr. Humphrey went on to say, “We continue to work diligently with our regulators to address the remaining outstanding issues contained in NBG and BNB’s formal agreements with the Office of the Comptroller of the Currency (“OCC”). While we still face challenges, we are encouraged by our progress and will work hard to continue it.”
About Financial Institutions, Inc.
FII is the bank holding company parent of Wyoming County Bank, The National Bank of Geneva, Bath National Bank, and First Tier Bank and Trust with $2.2 billion in assets. Its four banks provide a wide range of consumer and commercial banking services to individuals, municipalities, and businesses through a network of 49 offices and 71 ATMs in Western and Central New York State. FII’s Financial Services Group also provides diversified financial services to its customers and clients, including brokerage, trust, insurance and employee benefits and compensation consulting. More information on FII and its subsidiaries is available through the Company web site atwww.fiiwarsaw.com.
Safe Harbor Statement
This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company’s forward-looking statements which include the ability of the Company to implement the necessary changes to be in compliance with the formal agreements with the OCC, the effectiveness of the changes the Company is making, quality of collateral associated with nonperforming loans, the ability of customers to continue to make payments on criticized or substandard loans, the speed or cost of resolving bad loans, the ability to hire and train personnel, the economic conditions in the area the Company operates, customer preferences, the competition and other factors discussed in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise these statements following the date of this press release.
TABLES FOLLOW.
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Other Data
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
December 31,
2004
2003
$ Change
% Change
Interest income
$
26,814
$
26,849
$
(35
)
0
%
Interest expense
7,789
7,922
(133
)
(2
)%
Net interest income
19,025
18,927
98
1
%
Provision for loan losses
4,017
8,327
(4,310
)
(52
)%
Net interest income after provision for loan losses
15,008
10,600
4,408
42
%
Noninterest income:
Service charges on deposits
3,014
3,062
(48
)
(2
)%
Financial services group fees and commissions
1,345
1,582
(237
)
(15
)%
Mortgage banking activities
606
1,187
(581
)
(49
)%
Gain on sale and call of securities
160
18
142
789
%
Other
769
902
(133
)
(15
)%
Total noninterest income
5,894
6,751
(857
)
(13
)%
Noninterest expense:
Salaries and employee benefits
9,569
8,417
1,152
14
%
Other
8,091
6,987
1,104
16
%
Total noninterest expense
17,660
15,404
2,256
15
%
Income before income taxes
3,242
1,947
1,295
67
%
Income taxes
350
(299
)
649
217
%
Net income
2,892
2,246
646
29
%
Preferred stock dividends
373
373
-
0
%
-
Net income available to common shareholders
$
2,519
$
1,873
$
646
34
%
Taxable-equivalent net interest income
$
20,141
$
20,032
$
109
1
%
Per common share data:
Net income — basic
$
0.22
$
0.17
$
0.05
29
%
Net income — diluted
$
0.22
$
0.17
$
0.05
29
%
Cash dividends declared
$
0.16
$
0.16
$
0.00
0
%
Book value
$
15.14
$
14.81
$
0.33
2
%
Common shares outstanding:
Weighted average shares — basic
11,214,777
11,165,806
Weighted average shares — diluted
11,290,331
11,249,122
Period end actual
11,249,075
11,168,310
1
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Additional Data
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
December 31,
2004
2003
Performance ratios, annualized
Return on average assets
0.52
%
0.41
%
Return on average common equity
5.81
%
4.44
%
Common dividend payout ratio
72.73
%
94.12
%
Net interest margin (tax-equivalent)
3.90
%
3.96
%
Efficiency ratio
67.03
%
55.33
%
Asset quality data:
Past due over 90 days and accruing
$
2,018
$
1,709
Restructured loans
—
3,069
Nonaccrual loans
49,264
46,672
Other real estate owned (ORE)
1,196
653
Total nonperforming assets
$
52,478
$
52,103
Net loan charge-offs
$
2,199
$
8,316
Asset quality ratios:
Nonperforming loans to total loans
4.09
%
3.82
%
Nonperforming assets to total loans and ORE
4.18
%
3.87
%
Allowance for loan losses to total loans
2.63
%
2.16
%
Allowance for loan losses to nonperforming loans
64
%
56
%
Net loan charge-offs to average loans (annualized)
0.70
%
2.44
%
Capital ratios:
Average common equity to average total assets
7.85
%
7.78
%
Leverage ratio
7.30
%
7.04
%
Tier 1 risk-based capital ratio
11.50
%
10.20
%
Risk-based capital ratio
12.76
%
11.44
%
2
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statements of Income and Other Data (Dollars in thousands, except per share amounts) (Unaudited)
Twelve months ended
December 31,
2004
2003
$ Change
% Change
Interest income
$
106,175
$
111,450
$
(5,275
)
(5
)%
Interest expense
30,770
35,949
(5,179
)
(14
)%
Net interest income
75,405
75,501
(96
)
0
%
Provision for loan losses
13,476
22,526
(9,050
)
(40
)%
Net interest income after provision for loan losses
61,929
52,975
8,954
17
%
Noninterest income:
Service charges on deposits
11,987
11,461
526
5
%
Financial services group fees and commissions
5,733
5,692
41
1
%
Mortgage banking activities
2,147
4,036
(1,889
)
(47
)%
Gain on sale and call of securities
248
1,041
(793
)
(76
)%
Gain on sale of credit card loans
1,177
-
1,177
N/A
Other
4,079
3,842
237
6
%
Total noninterest income
25,371
26,072
(701
)
(3
)%
Noninterest expense:
Salaries and employee benefits
37,009
33,825
3,184
9
%
Other
28,582
26,998
1,584
6
%
Total noninterest expense
65,591
60,823
4,768
8
%
Income before income taxes
21,709
18,224
3,485
19
%
Income taxes
5,493
3,977
1,516
38
%
Net income
16,216
14,247
1,969
14
%
Preferred stock dividends
1,495
1,495
-
0
%
-
Net income available to common shareholders
$
14,721
$
12,752
$
1,969
15
%
Taxable-equivalent net interest income
$
79,886
$
79,979
$
(93
)
0
%
Per common share data:
Net income — basic
$
1.32
$
1.14
$
0.18
16
%
Net income — diluted
$
1.31
$
1.13
$
0.18
16
%
Cash dividends declared
$
0.64
$
0.64
$
0.00
0
%
Common shares outstanding:
Weighted average shares — actual
11,191,475
11,148,042
Weighted average shares — diluted
11,258,900
11,245,939
Period end
11,249,075
11,168,310
Performance ratios:
Return on average assets
0.74
%
0.66
%
Return on average common equity
8.76
%
7.65
%
Common dividend payout ratio
48.48
%
56.14
%
Net interest margin (tax-equivalent)
3.89
%
3.95
%
Efficiency ratio
62.12
%
55.73
%
Asset quality data and ratio:
Net loan charge-offs
$
9,554
$
15,121
Net loan charge-offs to average loans
0.74
%
1.11
%
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
(Unaudited)
December 31,
2004
2003
$ Change
% Change
ASSETS
Cash, due from banks and interest-bearing deposits
$
45,279
$
45,635
$
(356
)
(1
)%
Federal funds sold
806
40,006
(39,200
)
(98
)%
Investment securities
766,515
652,095
114,420
18
%
Loans
1,255,053
1,345,317
(90,264
)
(7
)%
Less: Allowance for loan losses
32,986
29,064
3,922
13
%
Loans, net
1,222,067
1,316,253
(94,186
)
(7
)%
Goodwill
41,371
40,621
750
2
%
Other assets
84,019
79,122
4,897
6
%
Total assets
$
2,160,057
$
2,173,732
$
(13,675
)
(1
)%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand
$
289,582
$
264,990
$
24,592
9
%
Savings, money market, and interest-bearing checking
789,550
784,219
5,331
1
%
Certificates of deposit
739,817
769,682
(29,865
)
(4
)%
Total deposits
1,818,949
1,818,891
58
0
%
Short-term borrowings
35,554
50,025
(14,471
)
(29
)%
Long-term borrowings
80,380
87,520
(7,140
)
(8
)%
Junior subordinated debentures issued to unconsolidated subsidiary trust
16,702
16,702
-
0
%
Other liabilities
20,462
17,491
2,971
17
%
Total liabilities
1,972,047
1,990,629
(18,582
)
(1
)%
Shareholders’ equity:
Preferred equity
17,722
17,735
(13
)
0
%
Common equity
170,288
165,368
4,920
3
%
Total shareholders' equity (1)
188,010
183,103
4,907
3
%
Total liabilities and shareholders' equity
$
2,160,057
$
2,173,732
$
(13,675
)
(1
)%
(1) Includes the after-tax impact of net unrealized gains on investment securities classified as available for sale of $3,884 and $8,197 at December 31, 2004 and 2003, respectively.
3
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
(Unaudited)
Three months ended
December 31,
2004
2003
$ Change
% Change
ASSETS
Cash, due from banks and interest-bearing deposits
$
43,851
$
47,924
$
(4,073
)
(8
)%
Federal funds sold
37,109
41,617
(4,508
)
(11
)%
Investment securities
768,179
611,429
156,750
26
%
Loans
1,259,101
1,361,932
(102,831
)
(8
)%
Less: Allowance for loan losses
31,450
28,300
3,150
11
%
Loans, net
1,227,651
1,333,632
(105,981
)
(8
)%
Goodwill
40,950
40,621
329
1
%
Other assets
80,837
78,085
2,752
4
%
Total assets
$
2,198,577
$
2,153,308
$
45,269
2
%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand
$
279,590
$
263,060
$
16,530
6
%
Savings, money market, and interest-bearing checking
837,608
811,031
26,577
3
%
Certificates of deposit
740,956
730,950
10,006
1
%
Total deposits
1,858,154
1,805,041
53,113
3
%
Short-term borrowings
36,068
57,399
(21,331
)
(37
)%
Long-term borrowings
80,815
71,813
9,002
13
%
Junior subordinated debentures issued to unconsolidated subsidiary trust
16,702
16,200
502
3
%
Other liabilities
16,607
17,601
(994
)
(6
)%
Total liabilities
2,008,346
1,968,054
40,292
2
%
Shareholders’ equity:
Preferred equity
17,729
17,735
(6
)
0
%
Common equity
172,502
167,519
4,983
3
%
Total shareholders' equity
190,231
185,254
4,977
3
%
Total liabilities and shareholders' equity
$
2,198,577
$
2,153,308
$
45,269
2
%
4
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
(Unaudited)
Twelve months ended
December 31,
2004
2003
$ Change
% Change
ASSETS
Cash, due from banks and interest-bearing deposits
$
44,182
$
44,249
$
(67
)
0
%
Federal funds sold
35,170
45,286
(10,116
)
(22
)%
Investment securities
725,500
19,328
106,172
17
%
Loans
1,295,332
1,357,629
(62,297
)
(5
)%
Less: Allowance for loan losses
30,583
25,135
5,448
22
%
Loans, net
1,264,749
,332,494
(67,745
)
(5
)%
Goodwill
40,816
40,616
200
0
%
Other assets
80,163
73,764
6,399
9
%
Total assets
$
2,190,580
$
2,155,737
$
34,843
2
%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand
$
267,721
$
45,234
$
22,487
9
%
Savings, money market, and interest-bearing checking
820,571
800,854
19,717
2
%
Certificates of deposit
760,453
744,022
16,431
2
%
Total deposits
1,848,745
1,790,110
58,635
3
%
Short-term borrowings
40,156
61,954
(21,798
)
(35
)%
Long-term borrowings
83,550
81,795
1,755
2
%
Junior subordinated debentures issued to unconsolidated subsidiary trust
16,702
16,200
502
3
%
Other liabilities
15,670
21,165
(5,495
)
(26
)%
Total liabilities
2,004,823
1,971,224
33,599
2
%
Shareholders’ equity:
Preferred equity
17,733
17,738
(5
)
0
%
Common equity
168,024
166,775
1,249
1
%
Total shareholders' equity
185,757
184,513
1,244
1
%
Total liabilities and shareholders' equity
$
2,190,580
$
2,155,737
$
34,843
2
%
5
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
