Financial Institutions, Inc. Announces a $3 million First Quarter Profit
WARSAW, N.Y., April 22, 2009 — Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), the parent company of Five Star Bank, today announced net income of $3.0 million or $0.19 per diluted share for the first quarter of 2009.
Highlights:
•
Net interest income for the first quarter of 2009 was $17.3 million, an increase of $2.2 million or 15% over the first quarter of 2008. The increase is reflective of the growth in loans and higher net interest margin.
•
Total loans were $1.158 billion at March 31, 2009, a $185.5 million increase or 19% from March 31, 2008.
•
Commercial loans were $483.2 million at March 31, 2009, an increase of $48.9 million or 11% from one year ago.
•
Consumer loans were $674.7 million at March 31, 2009, an increase of $136.6 million or 25% from one year ago.
•
Net interest margin at 4.09% for the first quarter of 2009 increased 2 basis points from the fourth quarter of 2008 and increased 36 basis points from the same quarter last year.
•
Remains “well capitalized” with total equity capital of $191.7 million, a leverage capital ratio of 7.96% and a total risk-based capital ratio of 12.49%.
•
Provision for loan losses of $1.9 million for the first quarter 2009 exceeded net charge-offs of $1.0 million resulting in a $908 thousand increase in the allowance for loan losses to $19.7 million or 1.70% of total loans.
“We are pleased to be starting 2009 with a solid first quarter,” said Peter G. Humphrey, President and Chief Executive Officer of the Company. “Our results are particularly gratifying in light of the recent financial market difficulties. Our 2008 business development success continued as commercial loans outstanding were $483.2 million, an increase of $17.7 million or 4% from year-end and consumer loans increased $19.1 million or 3% in the first quarter. As loans and deposits increased over the prior quarter, our capital, liquidity and asset quality remained strong. These factors, along with higher revenues and our discipline in cost containment have resulted in the continued improvement of our core operations.”
Net Interest Income
Net interest income was $17.3 million for the first quarter of 2009, relatively level with the fourth quarter of 2008 and up $2.2 million or 15% compared with the first quarter of 2008. Net interest margin improved to 4.09% in the first quarter of 2009, compared with 4.07% in the fourth quarter of 2008 and 3.73% in the first quarter of 2008. An improved mix of earning assets, primarily driven by growth in the loan portfolio, coupled with a significant decline in funding costs were the primary factors driving the increase in net interest income.
Noninterest Income
Noninterest income for the first quarter of 2009 was $4.7 million, compared with a noninterest loss of $(25.1) million and noninterest income of $4.7 million in the fourth and the first quarters of 2008, respectively. Absent a $29.9 million other-than-temporary impairment charge, noninterest income in the fourth quarter of 2008 would have been $4.8 million. Service charges on deposits, including nonsufficient fund fees, were down in the first quarter of 2009 as compared to the prior quarter and the same quarter a year ago, a trend that is being seen on a national level in the banking industry.
Noninterest Expense
Noninterest expense for the first quarter of 2009 was $16.1 million, an increase of $684 thousand from the fourth quarter of 2008 and an increase of $1.8 million from the first quarter of 2008. The most significant cause for the increase was higher FDIC assessments, a result of changes in FDIC deposit insurance coverage and changes in premiums mandated by the FDIC to replenish deposit insurance reserves. Also impacting first quarter of 2009 were increases in salaries and benefits due to higher incentive compensation and pension benefit costs, increases in occupancy and equipment costs associated with the opening of two new branches in the suburban Rochester area during 2008, and increases in professional services expense.
Balance Sheet
Total assets at March 31, 2009 were $2.030 billion, up $113.5 million from $1.917 billion at December 31, 2008. Total loans were $1.158 billion at March 31, 2009, an increase of $36.9 million from $1.121 billion at December 31, 2008. Total deposits increased $104.0 million to $1.737 billion at March 31, 2009, versus $1.633 billion at December 31, 2008. The increase in deposits in the first quarter of 2009 was principally attributed to an increase in public fund deposits.
Asset Quality and Capital Ratios
Net-charge-offs decreased by $259 thousand from the fourth quarter to $998 thousand, or 0.35% of average loans and non-performing loans increased by $931 thousand over the previous quarter to $9.1 million, or 0.79% of total loans. The provision for loan losses was $1.9 million for the quarter, compared to $2.6 million last quarter and $716 thousand a year ago. The allowance for loan losses was $19.7 million at March 31, 2009, compared with $18.7 million at December 31, 2008. At March 31, 2009 non-performing assets included $3.4 million in non-performing pooled trust preferred securities on which interest payments are being deferred. At March 31, 2009 the allowance for loan losses represented 1.70% of total loans and 215% of non-performing loans.
At March 31, 2009, all of the Company’s regulatory capital ratios exceeded the guidelines required to be considered a “well capitalized institution” as established by the Company’s primary banking regulators. Well capitalized levels are considered to be at least 5.00% for the leverage ratio and 10.00% for the total risk-based capital ratio. At March 31, 2009, the Company’s leverage ratio was 7.96% and the total risk-based capital ratio was 12.49%.
About Financial Institutions, Inc.
With over $2.0 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. 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 70 ATMs in Western and Central New York State. Five Star Investment Services provides brokerage and insurance products and services within the same New York State markets. The consolidated entity includes approximately 670 employees. The Company’s stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at the Company’s website:www.fiiwarsaw.com.
Safe Harbor Statement
This press release may contain 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 its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, the attitudes and preferences of its customers, the competitive environment, fluctuations in the fair value of securities in the investment portfolio, and general economic and credit market conditions nationally and regionally, The Company undertakes no obligation to revise these statements following the date of this press release.
*****
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
2009
2008
March 31,
December 31,
September 30,
June 30,
March 31,
SELECTED BALANCE SHEET DATA
(Amounts in thousands)
Cash and cash equivalents:
Cash and due from banks
$
48,073
34,528
54,105
60,640
49,460
Federal funds sold and interest-bearing deposits
74,616
20,659
22,599
2,409
53,539
Total cash and cash equivalents
122,689
55,187
76,704
63,049
102,999
Investment securities:
Available for sale
553,710
547,506
607,357
669,752
688,504
Held-to-maturity
60,675
58,532
64,434
56,508
57,631
Total investment securities
614,385
606,038
671,791
726,260
746,135
Loans held for sale
2,290
1,013
1,008
926
1,099
Loans:
Commercial
174,505
158,543
156,809
140,745
144,976
Commercial real estate
266,176
262,234
248,267
250,872
245,148
Agriculture
42,524
44,706
46,490
45,231
44,162
Residential real estate
170,834
177,683
173,893
172,396
168,738
Consumer indirect
283,465
255,054
227,971
177,967
142,565
Consumer direct and home equity
220,440
222,859
224,693
223,538
226,855
Total loans
1,157,944
1,121,079
1,078,123
1,010,749
972,444
Allowance for loan losses
19,657
18,749
17,420
16,038
15,549
Total loans, net
1,138,287
1,102,330
1,060,703
994,711
956,895
Total interest-earning assets
1,843,522
1,743,141
1,789,499
1,749,808
1,771,676
Goodwill
37,369
37,369
37,369
37,369
37,369
Total assets
2,030,429
1,916,919
1,945,819
1,895,448
1,912,652
Deposits:
Noninterest-bearing demand
279,284
292,586
293,027
288,258
268,419
Interest-bearing demand
392,353
344,616
376,098
338,290
356,758
Savings and money market
396,644
348,594
383,456
372,317
380,167
Certificates of deposit
668,999
647,467
607,833
596,890
622,628
Total deposits
1,737,280
1,633,263
1,660,414
1,595,755
1,627,972
Borrowings
78,761
70,820
114,684
89,465
70,336
Total interest-bearing liabilities
1,536,757
1,411,497
1,482,071
1,396,962
1,429,889
Shareholders’ equity
191,676
190,300
152,770
188,998
197,364
Common shareholders’ equity (1)
138,519
137,226
135,195
171,417
179,783
Tangible common shareholders’ equity (2)
100,946
99,577
97,468
133,614
141,903
Securities available for sale – fair value adjustment
included in shareholders’ equity, net of tax
$
3,503
3,463
(9,797
)
(5,803
)
944
Common shares outstanding
10,805
10,798
10,806
10,913
10,992
Treasury shares
543
550
542
435
356
CAPITAL RATIOS
Leverage ratio
7.96
%
8.05
7.37
9.17
9.38
Tier 1 risk-based capital
11.23
%
11.83
11.10
14.58
15.34
Total risk based capital
12.49
%
13.08
12.35
15.83
16.59
Common equity to assets
6.82
%
7.16
6.95
9.04
9.40
Tangible common equity to tangible assets (2)
5.07
%
5.30
5.11
7.19
7.57
Common book value per share
$
12.82
12.71
12.51
15.71
16.36
Tangible common book value per share (2)
$
9.34
9.22
9.02
12.24
12.91
1
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
2009
2008
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA
(Dollar amounts in thousands)
Interest income
$
23,093
98,948
24,582
24,558
24,536
25,272
Interest expense
5,766
33,617
7,269
7,812
8,349
10,187
Net interest income
17,327
65,331
17,313
16,746
16,187
15,085
Provision for loan losses
1,906
6,551
2,586
1,891
1,358
716
Net interest income after provision
for loan losses
15,421
58,780
14,727
14,855
14,829
14,369
Noninterest income (loss):
Service charges on deposits
2,320
10,497
2,685
2,794
2,518
2,500
ATM and debit card
811
3,313
853
852
856
752
Broker-dealer fees and commissions
269
1,458
235
363
401
459
Loan servicing
257
664
134
112
232
186
Company owned life insurance
260
563
294
223
27
19
Net gain on sale of loans held for sale
170
339
35
48
92
164
Net gain on sale of other assets
158
305
51
102
115
37
Net gain on investment securities
54
288
56
12
47
173
Impairment charge on investment securities
(50
)
(68,215
)
(29,870
)
(34,554
)
(3,791
)
—
Other
442
2,010
421
700
435
454
Total noninterest income (loss)
4,691
(48,778
)
(25,106
)
(29,348
)
932
4,744
Noninterest expense:
Salaries and employee benefits
8,731
31,437
7,811
7,021
8,169
8,436
Occupancy and equipment
2,876
10,502
2,713
2,642
2,567
2,580
Professional services
849
2,141
637
467
480
557
FDIC assessments
680
674
305
236
88
45
Computer and data processing
617
2,433
669
603
580
581
Supplies and postage
465
1,800
447
475
437
441
Advertising and promotions
174
1,453
548
472
283
150
Other
1,686
7,021
2,264
1,493
1,781
1,483
Total noninterest expense
16,078
57,461
15,394
13,409
14,385
14,273
Income (loss) before income taxes
4,034
(47,459
)
(25,773
)
(27,902
)
1,376
4,840
Income tax expense (benefit)
1,067
(21,301
)
(22,631
)
524
(255
)
1,061
Net income (loss)
$
2,967
(26,158
)
(3,142
)
(28,426
)
1,631
3,779
Preferred stock dividends
918
1,538
426
371
370
371
Net income (loss) applicable to
common shareholders
$
2,049
(27,696
)
(3,568
)
(28,797
)
1,261
3,408
STOCK AND RELATED PER SHARE DATA
Net income (loss) per share – basic
$
0.19
(2.56
)
(0.33
)
(2.68
)
0.12
0.31
Net income (loss) per share – diluted
$
0.19
(2.56
)
(0.33
)
(2.68
)
0.12
0.31
Cash dividends declared on common stock
$
0.10
0.54
0.10
0.15
0.15
0.14
Common dividend payout ratio (3)
52.63
%
NA
NA
NA
125.00
45.16
Dividend yield (annualized)
5.32
%
3.76
2.77
2.98
3.76
2.97
Stock price (Nasdaq: FISI):
High
$
14.95
22.50
20.27
22.50
20.00
20.78
Low
$
3.27
10.06
10.06
14.82
15.25
15.10
Close
$
7.62
14.35
14.35
20.01
16.06
18.95
2
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
2009
2008
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES
��
(Amounts in thousands)
Federal funds sold and interest-bearing deposits
$
43,618
26,568
17,089
12,897
35,733
40,807
Investment securities (4)
601,199
721,551
666,917
721,419
744,648
753,823
Loans (5):
Commercial
165,688
149,927
158,517
150,373
150,380
140,340
Commercial real estate
268,749
247,475
253,179
246,746
244,688
245,232
Agriculture
42,690
45,035
44,299
45,965
44,504
45,373
Residential real estate
174,659
171,262
175,200
173,175
169,925
166,682
Consumer indirect
267,360
185,197
244,891
200,586
156,728
137,756
Consumer direct and home equity
221,024
224,343
222,235
222,241
223,906
229,035
Total loans
1,140,170
1,023,239
1,098,321
1,039,086
990,131
964,418
Total interest-earning assets
1,787,470
1,772,179
1,782,938
1,774,201
1,771,801
1,759,635
Goodwill
37,369
37,369
37,369
37,369
37,369
37,369
Total assets
1,963,764
1,905,345
1,924,174
1,908,577
1,897,514
1,890,874
Interest-bearing liabilities:
Interest-bearing demand
360,470
347,702
360,970
342,188
342,463
345,102
Savings and money market
371,738
369,926
373,034
366,449
378,799
361,425
Certificates of deposit
668,041
617,381
629,111
591,025
615,950
633,599
Borrowings
71,363
91,715
105,164
118,023
73,902
69,335
Total interest-bearing liabilities
1,471,612
1,426,724
1,468,279
1,417,685
1,411,114
1,409,461
Noninterest-bearing demand deposits
281,690
280,467
284,643
294,136
275,570
267,322
Total deposits
1,681,939
1,615,476
1,647,758
1,593,798
1,612,782
1,607,448
Total liabilities
1,772,377
1,722,440
1,766,239
1,727,473
1,702,211
1,693,300
Shareholders’ equity
191,387
182,905
157,935
181,104
195,303
197,574
Common equity (1)
138,281
164,454
136,887
163,527
177,722
179,993
Tangible common equity (2)
$
100,660
126,643
99,191
125,754
139,872
142,067
Common shares outstanding:
Basic
10,716
10,818
10,717
10,738
10,879
10,938
Diluted
10,747
10,818
10,717
10,738
10,928
10,975
SELECTED AVERAGE YIELDS/
RATES AND RATIOS
(Tax equivalent basis)
Federal funds sold and interest-bearing deposits
0.25
%
2.33
1.09
2.10
2.18
3.06
Investment securities
4.54
%
4.84
4.72
4.66
4.92
5.05
Loans
6.04
%
6.61
6.35
6.52
6.65
6.97
Total interest-earning assets
5.39
%
5.83
5.69
5.73
5.83
6.05
Interest-bearing demand
0.25
%
0.93
0.69
0.86
0.89
1.30
Savings and money market
0.27
%
1.02
0.68
0.93
1.02
1.47
Certificates of deposit
2.76
%
3.62
3.09
3.33
3.72
4.31
Borrowings
4.21
%
4.65
4.23
4.30
5.05
5.51
Total interest-bearing liabilities
1.59
%
2.36
1.97
2.19
2.38
2.91
Net interest rate spread
3.80
%
3.47
3.72
3.54
3.45
3.14
Net interest rate margin
4.09
%
3.93
4.07
3.98
3.94
3.73
Net income (loss) (annualized returns on):
Average assets
0.61
%
(1.37
)
(0.65
)
(5.93
)
0.35
0.80
Average equity
6.29
%
(14.30
)
(7.91
)
(62.44
)
3.36
7.69
Average common equity (6)
6.01
%
(16.84
)
(10.37
)
(70.06
)
2.85
7.62
Average tangible common equity (7)
8.25
%
(21.87
)
(14.31
)
(91.10
)
3.63
9.65
Efficiency ratio (8)
69.72
%
64.07
66.65
58.10
64.21
67.64
3
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
2009
2008
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA
(Dollar amounts in thousands)
Nonaccrual loans
$
8,826
8,189
8,189
7,609
6,254
7,353
Accruing loans past due 90 days or more
301
7
7
32
1
2
Total non-performing loans
9,127
8,196
8,196
7,641
6,255
7,355
Foreclosed assets
877
1,007
1,007
1,009
1,235
1,257
Non-performing investment securities
3,396
49
49
—
—
—
Total non-performing assets
$
13,400
9,252
9,252
8,650
7,490
8,612
Net loan charge-offs
$
998
3,323
1,257
509
869
687
Net charge-offs to average loans (annualized)
0.35
%
0.32
0.46
0.20
0.35
0.29
Total non-performing loans to total loans
0.79
%
0.73
0.73
0.71
0.62
0.76
Total non-performing assets to total assets
0.66
%
0.48
0.48
0.44
0.40
0.45
Allowance for loan losses to total loans
1.70
%
1.67
1.67
1.62
1.59
1.60
Allowance for loan losses to
non-performing loans
215
%
229
229
228
256
211
(1) Excludes preferred shareholders’ equity. (2) Excludes preferred shareholders’ equity, goodwill and other intangible assets.
(3) Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period. There is no ratio shown for periods where the Company both declares a dividend and incurs a loss during the period because the ratio would result in a negative payout since the dividend declared (paid out) will always be greater than 100% of earnings.
(4) Average investment securities shown at adjusted amortized cost.
(5) Includes nonaccrual loans.
(6) Net income available to common shareholders divided by average common equity.
(7) Net income available to common shareholders divided by average tangible equity.
(8) Efficiency ratio equals noninterest expense less other real estate expense and amortization of intangible assets as a percentage of net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains and impairment charges on investment securities.
4
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