FINANCIAL INSTITUTIONS, INC. POSTS 88% INCREASE IN FIRST HALF EARNINGS
WARSAW, N.Y., July 26, 2010 — Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), the parent company of Five Star Bank, today announced financial results for the second quarter ended June 30, 2010. Net income for the Company was $5.2 million or $0.39 per diluted share for the second quarter of 2010, compared with $2.6 million or $0.16 per diluted share for the second quarter of 2009. For the first six months of 2010 net income was $10.5 million or $0.80 per diluted share, compared with $5.6 million or $0.35 per diluted share for the same period last year.
Key points for the second quarter of 2010 were as follows:
•
Net interest income increased $2.0 million or 12% compared to the second quarter of 2009
•
A $1.6 million reduction in noninterest expense, 10% less than the same quarter last year
•
Total loans were up $23.4 million over first quarter 2010
•
Non-performing loans increased $4.7 million over first quarter 2010, but our ratio of non-performing loans to total loans of 0.88% remained significantly better than our peers.
•
Net loan charge-offs were $866 thousand or an annualized 0.27% of average loans for the second quarter
•
Allowance for loan losses increased to 1.69% of loans with $2.1 million provision for loan losses, exceeding net charge-offs by $1.2 million
•
Capital remains well above regulatory minimums
“The strong second quarter earnings reflect our ongoing efforts to unlock our full potential. We have sustained the positive earnings momentum of the previous two quarters. We continue to execute on our plan and our performance is indicative of the strength of our franchise and results-focused culture. Our disciplined approach to meeting the financial needs of the communities we serve, through one of the most challenging periods in recent banking history, has rewarded us during the first half of 2010 with solid balance sheet growth, considerable decreases in noninterest expense and net charge-offs, and of course, the resulting 88% increase in earnings compared to the first half of 2009,” said Peter G. Humphrey, President and Chief Executive Officer. “Our communities and shareholders will continue to benefit from our strong capital, liquidity and asset quality.”
Net Interest Income and Net Interest Margin
Net interest income for the second quarter of 2010 was $19.7 million, an increase of $424 thousand or 2% compared with the first quarter of 2010 and up $2.0 million or 12% over the second quarter of 2009. The increase in net interest income from the first quarter of 2010 was primarily due to an increase in average interest-earning assets. The increase from the second quarter of 2009 was primarily due to decreased rates paid on deposits and growth in loans and leases.
Net interest margin for the second quarter of 2010 was 4.09%, compared with 4.12% in the first quarter of 2010 and 4.01% in the second quarter of 2009. The decrease in net interest margin from the first quarter of 2010 was largely related to changes in earning asset mix. The increase in net interest margin from the second quarter of 2009 was primarily due to a lower cost of deposits.
Noninterest Income
Noninterest income was $5.0 million for the second quarter of 2010, up $883 thousand or 22% from the first quarter of 2010 and up $451 thousand or 10% from the second quarter of 2009. Adjusted for securities transactions, noninterest income was $4.9 million for the second quarter of 2010, up $300 thousand or 7% from the first quarter of 2010 and down $192 thousand or 4% from the second quarter of 2009.
Service charges on deposit accounts totaled $2.5 million in each of the 2010 and 2009 second quarters, compared with $2.2 million in the first quarter of 2010.
ATM and debit card income was up $120 thousand or 13% from the first quarter of 2010 and up $146 thousand or 16% from the second quarter of 2009. The increases from both periods were primarily the result of an increase in the number of cardholders and an increase in customer transactions.
Broker-dealer fees and commissions were $359 thousand for the second quarter of 2010, up $125 thousand or 53% from the second quarter of 2009. Broker-dealer fees and commissions fluctuate mainly due to sales volume, which is up significantly in 2010 compared to the prior year.
Loan servicing income was down $140 thousand or 50% from the first quarter of 2010 and down $330 thousand or 70% from the second quarter of 2009. Loan servicing income declined in each of the periods, partly resulting from a decrease in the sold and serviced residential real estate portfolio, coupled with an increase in valuation write-downs on capitalized mortgage servicing assets.
During the second quarter of 2010 the Company recognized net gains from the sale of investment securities of $63 thousand. There were no other-than-temporary impairment (“OTTI”) charges on investment securities during the second quarter of 2010. The Company recognized net gains from the sale of investment securities totaling $6 thousand during the first quarter of 2010 and $1.2 million during the second quarter of 2009. Other-than-temporary impairment charges included in noninterest income amounted to $526 thousand in the first quarter of 2010 and $1.7 million in the second quarter of 2009.
Noninterest Expense
Noninterest expense was $14.9 million for the second quarter of 2010, up $132 thousand or 1% from the first quarter of 2010 and down $1.6 million or 10% from the second quarter of 2009.
Salaries and employee benefits were $8.0 million for the second quarter of 2010, down $203 thousand or 2% from the first quarter of 2010 and down $393 thousand or 5% from the second quarter of 2009. The most significant cause for the decrease in salaries and employee benefits expense from the second quarter of 2009 was lower incentive compensation and pension benefit costs.
FDIC assessments were $634 thousand for the second quarter of 2010, up $32 thousand or 5% from the first quarter of 2010 and down $959 thousand or 60% from the second quarter of 2009. The decrease from the second quarter of 2009 was primarily due to a one-time special assessment of $923 thousand incurred during the second quarter of 2009, a result of changes in FDIC deposit insurance coverage and changes in premiums mandated by the FDIC to replenish deposit insurance reserves.
Balance Sheet
Total loans were $1.292 billion at June 30, 2010, up $23.4 million or 2% from March 31, 2010 and up $27.2 million or 2% from December 31, 2009. Total investment securities were $678.9 million at June 30, 2010, down $4.3 million from March 31, 2010 and up $58.9 million from December 31, 2009.
Deposits were $1.822 billion at June 30, 2010, which was $27.9 million less than the end of the first quarter, but were up $79.0 million compared with the end of 2009. Public deposit balances decreased $79.5 million during the last quarter due largely to the seasonality of municipal cash flows. The Company’s deposit mix remains favorably weighted in lower cost demand, savings and money market accounts, which comprised 60.3% of total deposits at the end of the second quarter.
Shareholders’ equity was $211.7 million at June 30, 2010, compared with $203.6 million at the end of the first quarter. Net income for the quarter increased shareholders’ equity by $5.2 million and was partially offset by common and preferred stock dividends declared of $1.9 million. Accumulated other comprehensive income included in shareholders’ equity increased $4.3 million during the second quarter due primarily to higher net unrealized gains on securities available-for-sale.
The Company’s leverage ratio improved to 8.45% and its total risk-based capital ratio improved to 13.99% at the end of the second quarter, compared to 7.96% and 13.21% at year-end, all of which comfortably exceeded the regulatory thresholds required to be classified as a “well capitalized” institution as established by the Company’s primary banking regulators.
Asset Quality and Provision for Loan Losses
The Company’s loan portfolio continues to benefit from responsible underwriting and lending practices. Non-performing assets were $12.5 million or 0.58% of total assets at June 30, 2010, up from $8.1 million at March 31, 2010, but down from $13.7 million at this time last year. The ratio of non-performing loans to total loans was 0.88% at June 30, 2010 versus 0.53% at March 31, 2010, and 0.78% at June 30, 2009. This continues to compare favorably to the average of our peer group which was 3.67% of total loans at March 31, 2010, the most recent period for which information is available (Source: Federal Financial Institutions Examination Council — Bank Holding Company Performance Report as of March 31, 2010 — Top-tier bank holding companies having consolidated assets between $1 billion and $3 billion). The increase in non-performing loans at June 30, 2010 compared with the last quarter was largely attributable to the addition of a $5.0 million participation interest in one commercial loan. Despite being current with respect to principal and interest at June 30, 2010, the creditor is experiencing significant financial difficulty and may not be able to repay its outstanding debt. A $2.5 million specific reserve has been allocated to this credit in the second quarter of 2010.
The provision for loan losses was $2.1 million for the second quarter, compared to $418 thousand for the first quarter of 2010 and $2.1 million in the second quarter of 2009. The increase from the first quarter of 2010 is primarily due to an increase in non-performing loans, as mentioned above. Net charge-offs were $866 thousand, or 0.27% annualized, of average loans, up from $573 thousand, or 0.18% annualized, of average loans in the first quarter of 2010 and down from $1.1 million, or 0.38% annualized, of average loans in the second quarter of 2009.
The allowance for loan losses was $21.8 million at June 30, 2010, compared with $20.6 million at March 31, 2010 and $20.6 million at June 30, 2009. The ratio of the allowance for loan losses to total loans was 1.69% at June 30, 2010, compared with 1.62% at March 31, 2010 and 1.69% at June 30, 2009. The ratio of allowance for loan losses to non-performing loans was 192% at June 30, 2010, compared with 308% at March 31, 2010 and 217% at June 30, 2009.
Mr. Humphrey added, “The increase in non-performing loans was driven by one larger commercial credit that was placed on nonaccrual during the quarter, while our loan portfolio as a whole continued to perform extremely well. While we recognize that, the longer this period of economic weakness persists, troubled borrowers could find it increasingly difficult to comply with repayment terms, we are confident that our process to identify credit problems early will enable us to keep those problems manageable. All of our loans were originated within our markets and our conservative lending and credit policies are designed to minimize the risk of loss.”
About Financial Institutions, Inc.
With over $2.1 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 employs over 600 individuals. 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. For more information about these factors please see the Company’s Annual Report onForm 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. 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)
2010
2009
June 30,
March 31,
December 31,
September 30,
June 30,
SELECTED BALANCE SHEET DATA
(Amounts in thousands)
Cash and cash equivalents:
Cash and due from banks
$
43,326
38,081
42,874
48,721
41,405
Federal funds sold and interest-earning deposits
93
33,793
85
11,385
39,910
Total cash and cash equivalents
43,419
71,874
42,959
60,106
81,315
Investment securities:
Available for sale
651,533
648,667
580,501
625,744
498,561
Held-to-maturity
27,404
34,556
39,573
45,056
47,465
Total investment securities
678,937
683,223
620,074
670,800
546,026
Loans:
Commercial
208,618
208,976
206,383
218,793
219,145
Commercial mortgage
334,043
331,870
330,748
317,804
304,508
Residential mortgage
139,112
142,406
144,636
148,479
152,931
Home equity
200,929
200,287
200,684
198,538
194,007
Consumer indirect
381,464
356,873
352,611
345,448
319,735
Other consumer
27,417
27,769
29,365
31,332
31,251
Total loans
1,291,583
1,268,181
1,264,427
1,260,394
1,221,577
Allowance for loan losses
21,825
20,586
20,741
20,782
20,614
Total loans, net
1,269,758
1,247,595
1,243,686
1,239,612
1,200,693
Total interest-earning assets (1) (2)
1,958,411
1,979,875
1,881,887
1,934,786
1,802,489
Goodwill
37,369
37,369
37,369
37,369
37,369
Total assets
2,142,931
2,156,055
2,062,389
2,138,205
1,996,724
Deposits:
Noninterest-bearing demand
328,937
308,822
324,303
298,972
292,825
Interest-bearing demand
370,584
409,094
363,698
383,982
357,443
Savings and money market
399,972
426,330
368,603
402,042
366,373
Certificates of deposit
722,452
705,628
686,351
712,182
683,619
Total deposits
1,821,945
1,849,874
1,742,955
1,797,178
1,700,260
Borrowings
93,654
83,454
106,390
120,113
79,977
Total interest-bearing liabilities
1,586,662
1,624,506
1,525,042
1,618,319
1,487,412
Shareholders’ equity
211,699
203,603
198,294
195,935
192,455
Common shareholders’ equity (3)
158,100
150,095
144,876
142,605
139,213
Tangible common shareholders’ equity (4)
120,731
112,726
107,507
105,176
101,712
Securities available for sale – fair value adjustment
included in shareholders’ equity, net of tax
$
7,481
3,263
1,655
4,778
3,081
Common shares outstanding
10,942
10,920
10,820
10,818
10,821
Treasury shares
406
428
528
530
527
CAPITAL RATIOS
Leverage ratio
8.45
%
8.32
7.96
7.89
7.84
Tier 1 risk-based capital
12.73
%
12.37
11.95
10.73
10.69
Total risk based capital
13.99
%
13.63
13.21
11.98
11.94
Common equity to assets
7.38
%
6.96
7.02
6.67
6.97
Tangible common equity to tangible assets (4)
5.73
%
5.32
5.31
5.01
5.19
Common book value per share
$
14.45
13.74
13.39
13.18
12.86
Tangible common book value per share (4)
$
11.03
10.32
9.94
9.72
9.40
1
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
Quarterly Trends
Six months ended
2010
2009
June 30,
Second
First
Fourth
Third
Second
2010
2009
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA
(Dollar amounts in thousands)
Interest income
$
48,026
46,395
24,202
23,824
24,390
23,697
23,302
Interest expense
9,098
11,423
4,526
4,572
5,175
5,619
5,657
Net interest income
38,928
34,972
19,676
19,252
19,215
18,078
17,645
Provision for loan losses
2,523
3,994
2,105
418
1,088
2,620
2,088
Net interest income after provision
for loan losses
36,405
30,978
17,571
18,834
18,127
15,458
15,557
Noninterest income:
Service charges on deposits
4,732
4,837
2,502
2,230
2,585
2,643
2,517
ATM and debit card
1,988
1,719
1,054
934
971
920
908
Broker-dealer fees and commissions
739
503
359
380
281
238
234
Company owned life insurance
551
535
282
269
290
271
275
Loan servicing
420
727
140
280
277
304
470
Net gain on sale of loans held for sale
177
416
115
62
154
129
246
Net gain on investment securities
69
1,207
63
6
501
1,721
1,153
Impairment charge on investment securities
(526
)
(1,783
)
—
(526
)
(565
)
(2,318
)
(1,733
)
Net gain on sale of other assets
2
158
—
2
3
19
—
Other
897
887
451
446
686
479
445
Total noninterest income
9,049
9,206
4,966
4,083
5,183
4,406
4,515
Noninterest expense:
Salaries and employee benefits
16,291
17,168
8,044
8,247
8,213
8,253
8,437
Occupancy and equipment
5,441
5,559
2,670
2,771
2,773
2,730
2,683
FDIC assessments
1,236
2,273
634
602
625
753
1,593
Computer and data processing
1,186
1,179
615
571
583
578
562
Professional services
1,084
1,440
478
606
552
532
591
Supplies and postage
876
941
431
445
432
473
476
Advertising and promotions
539
423
352
187
299
227
249
Other
2,955
3,535
1,646
1,309
1,640
1,596
1,849
Total noninterest expense
29,608
32,518
14,870
14,738
15,117
15,142
16,440
Income before income taxes
15,846
7,666
7,667
8,179
8,193
4,722
3,632
Income tax expense
5,320
2,071
2,469
2,851
2,756
1,313
1,004
Net income
$
10,526
5,595
5,198
5,328
5,437
3,409
2,628
Preferred stock dividends
1,860
1,843
931
929
927
927
925
Net income applicable to
common shareholders
$
8,666
3,752
4,267
4,399
4,510
2,482
1,703
STOCK AND RELATED PER SHARE DATA
Net income per share – basic
$
0.80
0.35
0.39
0.41
0.42
0.23
0.16
Net income per share – diluted
$
0.80
0.35
0.39
0.40
0.42
0.23
0.16
Cash dividends declared on common stock
$
0.20
0.20
0.10
0.10
0.10
0.10
0.10
Common dividend payout ratio (5)
25.00
%
57.14
25.64
24.39
23.81
43.48
62.50
Dividend yield (annualized)
2.27
%
2.95
2.26
2.77
3.37
3.98
2.94
Stock price (Nasdaq: FISI):
High
$
19.48
15.99
19.48
15.40
12.25
15.00
15.99
Low
$
10.91
3.27
14.07
10.91
9.71
9.90
6.98
Close
$
17.76
13.66
17.76
14.62
11.78
9.97
13.66
2
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
Quarterly Trends
Six months ended
2010
2009
June 30,
Second
First
Fourth
Third
Second
2010
2009
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES
(Amounts in thousands)
Federal funds sold and interest-earning deposits
$
9,395
46,376
4,479
14,366
16,457
39,945
49,105
Investment securities (1)
675,265
597,449
692,162
658,181
657,299
585,830
593,740
Loans (2):
Commercial
206,626
194,379
208,327
204,905
211,626
216,235
203,286
Commercial mortgage
333,918
294,940
334,253
333,579
326,313
310,476
298,090
Residential mortgage
142,355
173,986
140,946
143,780
146,853
149,815
170,865
Home equity
199,884
190,315
199,865
199,903
199,367
195,601
191,291
Consumer indirect
358,823
284,329
364,801
352,778
349,231
334,123
301,112
Other consumer
27,599
31,261
27,060
28,145
29,903
30,754
30,831
Total loans
1,269,205
1,169,210
1,275,252
1,263,090
1,263,293
1,237,004
1,195,475
Total interest-earning assets
1,953,865
1,813,035
1,971,893
1,935,637
1,937,049
1,862,779
1,838,320
Goodwill
37,369
37,369
37,369
37,369
37,369
37,369
37,369
Total assets
2,135,681
1,988,185
2,158,912
2,112,192
2,117,775
2,040,030
2,012,337
Interest-bearing liabilities:
Interest-bearing demand
389,783
363,745
386,703
392,896
374,787
361,147
366,985
Savings and money market
411,088
382,104
420,774
401,294
400,966
369,562
392,355
Certificates of deposit
702,297
672,153
715,168
689,284
697,292
699,011
676,221
Borrowings
92,268
75,084
89,753
94,811
114,721
94,642
78,763
Total interest-bearing liabilities
1,595,436
1,493,086
1,612,398
1,578,285
1,587,766
1,524,362
1,514,324
Noninterest-bearing demand deposits
319,040
283,935
324,790
313,227
308,491
298,723
286,155
Total deposits
1,822,208
1,701,937
1,847,435
1,796,701
1,781,536
1,728,443
1,721,716
Total liabilities
1,930,566
1,796,266
1,951,241
1,909,662
1,919,352
1,845,010
1,819,891
Shareholders’ equity
205,115
191,919
207,671
202,530
198,423
195,020
192,446
Common equity (3)
151,609
138,769
154,122
149,066
145,055
141,741
139,253
Tangible common equity (4)
$
114,240
101,187
116,753
111,697
107,654
104,269
101,709
Common shares outstanding:
Basic
10,754
10,720
10,761
10,746
10,742
10,738
10,723
Diluted
10,800
10,756
10,846
10,801
10,785
10,779
10,765
SELECTED AVERAGE YIELDS/
RATES AND RATIOS
(Tax equivalent basis)
Federal funds sold and interest-earning deposits
0.20
%
0.23
0.20
0.21
0.22
0.20
0.21
Investment securities
3.45
%
4.35
3.44
3.47
3.55
3.79
4.16
Loans
5.93
%
6.02
5.88
5.97
6.00
6.01
5.99
Total interest-earning assets
5.04
%
5.32
5.01
5.08
5.12
5.19
5.24
Interest-bearing demand
0.19
%
0.23
0.19
0.20
0.20
0.19
0.20
Savings and money market
0.28
%
0.27
0.28
0.28
0.30
0.29
0.27
Certificates of deposit
1.89
%
2.69
1.83
1.95
2.20
2.49
2.63
Borrowings
3.45
%
4.05
3.55
3.34
2.84
3.35
3.91
Total interest-bearing liabilities
1.15
%
1.54
1.13
1.17
1.29
1.46
1.50
Net interest rate spread
3.89
%
3.78
3.88
3.91
3.83
3.73
3.74
Net interest rate margin
4.11
%
4.05
4.09
4.12
4.06
3.99
4.01
Net income (annualized returns on):
Average assets
0.99
%
0.57
0.97
1.02
1.02
0.66
0.52
Average equity
10.35
%
5.88
10.04
10.67
10.87
6.93
5.48
Average common equity (6)
11.53
%
5.45
11.11
11.97
12.33
6.95
4.91
Average tangible common equity (7)
15.30
%
7.48
14.66
15.97
16.62
9.45
6.72
Efficiency ratio (8)
59.73
%
69.60
59.16
60.31
59.93
63.43
69.49
3
FINANCIAL INSTITUTIONS, INC. Summary of Quarterly Financial Data (Unaudited)
Quarterly Trends
Six months ended
2010
2009
June 30,
Second
First
Fourth
Third
Second
2010
2009
Quarter
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA
(Dollar amounts in thousands)
Nonaccrual loans
$
11,304
9,496
11,304
6,685
6,822
5,816
9,496
Accruing loans past due 90 days or more
61
2
61
2
1,859
1
2
��
Total non-performing loans
11,365
9,498
11,365
6,687
8,681
5,817
9,498
Foreclosed assets
500
1,046
500
771
746
696
1,046
Non-performing investment securities
646
3,175
646
661
1,015
1,431
3,175
Total non-performing assets
$
12,511
13,719
12,511
8,119
10,442
7,944
13,719
Net loan charge-offs
$
1,439
2,129
866
573
1,129
2,452
1,131
Net charge-offs to average loans (annualized)
0.23
%
0.37
0.27
0.18
0.35
0.79
0.38
Total non-performing loans to total loans
0.88
%
0.78
0.88
0.53
0.69
0.46
0.78
Total non-performing assets to total assets
0.58
%
0.69
0.58
0.38
0.51
0.37
0.69
Allowance for loan losses to total loans
1.69
%
1.69
1.69
1.62
1.64
1.65
1.69
Allowance for loan losses to
non-performing loans
192
%
217
192
308
239
357
217
(1) Includes investment securities at adjusted amortized cost and non-performing investment securities.
(2) Includes nonaccrual loans.
(3) Excludes preferred shareholders’ equity.
(4) Excludes preferred shareholders’ equity, goodwill and other intangible assets.
(5) Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.
(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
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.
