FINANCIAL INSTITUTIONS, INC. REPORTS THIRD QUARTER 2013 NET INCOME OF $6.2 MILLION
WARSAW, N.Y., October 23, 2013– Financial Institutions, Inc. (the “Company”) (Nasdaq: FISI), the parent company of Five Star Bank, today reported financial results for the third quarter ended September 30, 2013. Net income for the third quarter 2013 was $6.2 million, compared to $6.9 million for the second quarter 2013. After preferred dividends, third quarter 2013 net income available to common shareholders was $5.8 million or $0.42 per diluted share compared with $6.5 million or $0.47 per share for the second quarter of 2013.
Highlights for the third quarter 2013 include:
•
Increased quarterly cash dividend to $0.19 per outstanding common share, the fourth such increase since the beginning of 2012.
•
Continued strong quarterly performance with a return on average common equity of 10.05% and return on average tangible common equity of 12.88%
•
Total third quarter loans grew $36.3 million from the second quarter or 8.3% on an annualized basis driven by organic loan origination
•
Third quarter 2013 noninterest expenses decreased by 2.6% from the second quarter 2013
•
Common and tangible book value per share increased to $16.69 and $13.06, respectively, at September 30, 2013
•
Capital ratios remain strong with total risk-based capital of 12.19%
Net income of $6.2 million in the third quarter 2013 was $686 thousand lower than the second quarter 2013 as a result of a $1.6 million increase in the provision for loan losses and a $207 thousand decrease in noninterest income, which were partially offset by a $279 thousand increase in net interest income, a $453 thousand decrease in noninterest expense and a $366 thousand decrease in income tax expense. The Company’s return on average assets and return on average common equity were 0.88% and 10.05%, respectively, during the third quarter 2013, compared to 0.99% and 10.86%, respectively, in the second quarter 2013.
“We are very pleased with our exceptional loan growth, margin stability, and the relatively low-risk profile of our balance sheet,” said Martin K. Birmingham, the Company’s President and Chief Executive Officer. “Consistent with our strategy, we will continue to focus on all aspects of our customer-centric approach in the markets we serve while maintaining prudent expense management policies. A key focal point has been the implementation of initiatives to enhance customer satisfaction. We believe that successful execution of our strategy was demonstrated in the third quarter by our consistent ability to deliver strong organic loan growth. At the same time, our noninterest expense declined for the second consecutive quarter.”
“We’re also seeing the initial returns from our move to streamlined retail checking products, which have enjoyed widespread customer acceptance and satisfaction. Our approach — emphasizing clearly-stated benefits without hidden fees — is proving to be another successful element in our strategy for long-term customer relationship development and retention,” added Mr. Birmingham.
“Based on our solid third quarter performance and the confidence we have in our future growth and operating performance, we made the decision to increase our quarterly cash dividend to $0.19 per outstanding common share. The higher dividend represents a 45% percent return of third quarter net income to shareholders and a 6% increase when compared with last quarter’s dividend,” concluded Mr. Birmingham.
Net Interest Income and Net Interest Margin
Net interest income was $22.8 million in the third quarter 2013, an increase of $279 thousand from the second quarter 2013. The net interest margin (on a tax-equivalent basis) was steady at 3.62% in the third quarter 2013 compared to 3.63% in the second quarter 2013.
Noninterest Income
Total noninterest income for the third quarter 2013 was $6.2 million compared to $6.4 million in the second quarter 2013. Noninterest income in the second quarter of 2013 included gains totaling $332 thousand from the sale of trust preferred securities. There were no securities sold during the third quarter 2013.
Excluding the second quarter gains from investment securities, noninterest income in the third quarter 2013 was $125 thousand or 2% higher than the second quarter 2013. This increase in noninterest income was the result of increases in service charges on deposits and other noninterest income, partially offset by decreases in mortgage banking revenue (defined as loan servicing income and net gains on the sale of loans held for sale), ATM and debit card income, broker-dealer fees and commissions and gains on the sale of other assets.
Noninterest Expense
Total noninterest expense declined by 2.6% to $17.0 million for the third quarter 2013 compared to $17.5 million in the second quarter 2013. The decrease in noninterest expense was primarily the result of lower professional service fees and computer and data processing expense. In addition, occupancy and equipment expense, supplies and postage, advertising and promotions and other noninterest expense combined for a total decrease of $301 thousand when comparing the third quarter 2013 to the second quarter 2013. Professional service fees decreased $279 thousand, due in part to executive management transitions and other corporate governance initiatives that resulted in higher expense in the second quarter of 2013. The timing of the annual update of a core software application resulted in a $123 thousand decrease in computer and data processing expense. These decreases were partially offset by higher salaries and employee benefits expense when comparing the third quarter 2013 to the second quarter 2013. The increase in salaries and employee benefits expense was primarily attributable to higher expenses for medical insurance, severance and employee stock based compensation. Medical insurance is generally higher in the first and third quarter each year due to the timing of the Company’s contributions to employee health savings accounts.
Balance Sheet and Capital Management
Total assets were $2.87 billion at September 30, 2013, up $103.7 million from $2.76 billion at December 31, 2012. The increase in total assets is primarily attributable to a $73.9 million increase in total loans and a $38.9 million increase in cash and cash equivalents, partially offset by a $12.4 million decrease in investment securities.
Total loans were $1.78 billion at September 30, 2013, up $73.9 million or 4% compared to $1.71 billion at December 31, 2012. The increase in loans was attributable to organic growth, primarily in the commercial, home equity and consumer indirect loan categories. The average yield on the loan portfolio was 4.59% in the third quarter 2013, compared to 4.65% in the second quarter 2013.
Total investment securities were $829.3 million at September 30, 2013, down $12.4 million compared to $841.7 million at December 31, 2012. The decrease in investment securities occurred based on the combination of scheduled principal paydowns on amortizing securities and a change in the net unrealized gain/loss on the available-for-sale (“AFS”) investment securities portfolio. The AFS portfolio had net unrealized losses totaling $1.9 million at September 30, 2013 compared to net unrealized gains of $26.6 million at December 31, 2012. The unrealized loss on the AFS portfolio was predominantly caused by changes in market interest rates. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change. Approximately $227.3 million in available for sale securities were transferred at fair value to held to maturity during the third quarter 2013 as a means of mitigating the fair value fluctuations in the AFS portfolio and reducing the volatility of tangible common equity. The average yield on the investment securities portfolio was 2.42% in the third quarter 2013 compared to 2.38% in the second quarter 2013.
Total deposits were $2.41 billion at September 30, 2013, up $152.4 million from $2.26 billion at December 31, 2012. Public deposit balances increased $139.2 million during the first nine months of 2013 due to the seasonality of municipal cash flows, coupled with successful business development efforts for the Company’s newly acquired branches. The average cost of interest-bearing deposits in the third quarter 2013 was 0.36%, unchanged from the second quarter 2013.
Shareholders’ equity was $247.8 million at September 30, 2013, down $6.1 million compared with $253.9 million at December 31, 2012. Net income for the nine months ended September 30, 2013 increased shareholders’ equity by $19.2 million, which was partially offset by common and preferred stock dividends of $8.7 million. Accumulated other comprehensive loss included in shareholders’ equity decreased $16.6 million during the first nine months of 2013 due to the previously mentioned change in unrealized gain/loss on AFS securities. At September 30, 2013, the tangible common equity to tangible assets ratio and leverage ratio were 6.40% and 7.68%, respectively, compared to 6.86% and 7.71%, respectively, at December 31, 2012. The decrease in the Company’s equity ratios was attributable to the decrease in shareholder’s equity combined with a growth in our average assets.
At September 30, 2013, the Company’s common book value and tangible common book value was $16.69 per share and $13.06 per share, respectively, compared to $17.15 per share and $13.49 per share, respectively, at December 31, 2012.
Credit Quality
Non-performing loans were $10.3 million or 0.58% of total loans at September 30, 2013, compared with $9.1 million or 0.53% of total loans at December 31, 2012. The increase in non-performing loans during the first nine months of 2013 was primarily due to the first quarter addition of one credit relationship consisting of commercial business and commercial mortgage loans with unpaid principal balances totaling $2.4 million as of September 30, 2013.
During the third quarter 2013, the Company internally downgraded to substandard status from special mention one credit relationship consisting of a single commercial mortgage loan with an unpaid principal balance totaling $8.4 million. The downgrade necessitated a provision and increase in our allowance for losses of approximately $960 thousand.
Net loan charge-offs increased to $1.7 million in the third quarter 2013 from $1.4 million in the second quarter 2013. The provision for loan losses was $2.8 million in the third quarter 2013, compared to $1.2 million in the second quarter 2013. The increase in the provision in the third quarter 2013 was primarily related to the one commercial mortgage loan referenced above.
The allowance for loan losses was $26.7 million at September 30, 2013, compared with $24.7 million at December 31, 2012. The ratio of the allowance for loan losses to total loans was 1.50% at September 30, 2013, compared with 1.45% at December 31, 2012. The ratio of allowance for loan losses to non-performing loans was 258% at September 30, 2013, compared with 271% at December 31, 2012.
About Financial Institutions, Inc.
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 60 ATMs throughout Western and Central New York State. Five Star Investment Services, Inc. provides investment advice, brokerage and insurance products and services within the same New York State markets. Financial Institutions, Inc. and its subsidiaries employ 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.
Non-GAAP Financial Information
This news release contains financial information 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 in comparison to others in the financial services industry. In addition, the Company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the Company’s results and to assess performance in relation to the company’s ongoing operations. 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 performance 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 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, whether it experiences greater credit losses than expected, the impact of the current management transition, the attitudes and preferences of its customers, its ability to successfully integrate recently acquired bank branches and profitably operate newly opened bank branches, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and general economic and credit market conditions nationally and regionally. For more information about these factors and other factors that could affect the Company’s forward-looking statements, please see the Company’s Annual Report onForm 10-K and its Quarterly Reports onForm 10-Q 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. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.
*****
For additional information contact:
Kevin B. Klotzbach
Chief Financial Officer & Treasurer
Phone: 585.786.1130
Email: KBKlotzbach@five-starbank.com
or
Jordan M. Darrow
Darrow Associates, Inc.
Phone: 631.367.1866
Email: jdarrow@darrowir.com
1
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2013
2012
September 30,
June 30,
March 31,
December 31,
September 30,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
99,384
50,927
84,791
60,436
77,045
Investment securities:
Available for sale
583,551
810,549
853,437
823,796
748,618
Held-to-maturity
245,708
17,348
17,747
17,905
19,564
Total investment securities
829,259
827,897
871,184
841,701
768,182
Loans held for sale
2,810
3,423
2,142
1,518
1,411
Loans:
Commercial business
253,925
257,732
259,062
258,675
245,307
Commercial mortgage
449,565
437,515
424,635
413,324
403,120
Residential mortgage
117,624
118,117
126,228
133,520
139,984
Home equity
316,626
306,215
292,225
286,649
279,211
Consumer indirect
618,088
599,586
590,440
586,794
563,676
Other consumer
23,844
24,249
24,700
26,764
27,687
Total loans
1,779,672
1,743,414
1,717,290
1,705,726
1,658,985
Allowance for loan losses
26,685
25,590
25,827
24,714
24,301
Total loans, net
1,752,987
1,717,824
1,691,463
1,681,012
1,634,684
Total interest-earning assets (1) (2)
2,613,746
2,576,028
2,567,948
2,522,444
2,400,225
Goodwill and other intangible assets, net
50,095
50,190
50,288
50,389
50,924
Total assets
2,867,517
2,782,303
2,827,658
2,763,865
2,653,319
Deposits:
Noninterest-bearing demand
542,517
511,802
494,362
501,514
490,706
Interest-bearing demand
519,283
475,448
529,115
449,744
472,023
Savings and money market
757,454
713,459
748,482
655,598
673,883
Certificates of deposit
594,931
623,527
637,538
654,938
695,107
Total deposits
2,414,185
2,324,236
2,409,497
2,261,794
2,331,719
Borrowings
188,146
193,413
139,620
179,806
38,282
Total interest-bearing liabilities
2,059,814
2,005,847
2,054,755
1,940,086
1,879,295
Shareholders’ equity
247,845
244,888
254,930
253,897
251,842
Common shareholders’ equity (3)
230,503
227,494
237,511
236,426
234,371
Tangible common equity (4)
180,408
177,304
187,223
186,037
183,447
Unrealized (loss) gain on investment securities, net of tax
$
(1,154
)
(725
)
13,745
16,060
17,178
Common shares outstanding
13,810
13,809
13,804
13,788
13,786
Treasury shares
352
353
358
374
376
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.68
%
7.59
7.46
7.71
7.67
Tier 1 risk-based capital
10.94
%
10.96
10.84
10.73
10.91
Total risk-based capital
12.19
%
12.21
12.09
11.98
12.16
Common equity to assets
8.04
%
8.18
8.40
8.55
8.83
Tangible common equity to tangible assets (4)
6.40
%
6.49
6.74
6.86
7.05
Common book value per share
$
16.69
16.47
17.21
17.15
17.00
Tangible common book value per share (4)
13.06
12.84
13.56
13.49
13.31
(1)Includes investment securities at adjusted amortized cost and non-performing investment securities.
(2)Includes nonaccrual loans.
(3)Excludes preferred shareholders’ equity.
(4)See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
Quarterly Trends
Nine months ended
2013
2012
September 30,
Third
Second
First
Fourth
Third
2013
2012
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
73,713
72,480
24,623
24,342
24,748
25,087
25,299
Interest expense
5,499
7,052
1,820
1,818
1,861
1,999
2,200
Net interest income
68,214
65,428
22,803
22,524
22,887
23,088
23,099
Provision for loan losses
6,672
4,608
2,770
1,193
2,709
2,520
1,764
Net interest income after provision
for loan losses
61,542
60,820
20,033
21,331
20,178
20,568
21,335
Noninterest income:
Service charges on deposits
7,437
6,101
2,728
2,568
2,141
2,526
2,292
ATM and debit card
3,849
3,368
1,283
1,317
1,249
1,348
1,219
Broker-dealer fees and commissions
1,917
1,630
568
650
699
474
609
Company owned life insurance
1,275
1,300
422
438
415
451
433
Loan servicing
452
645
227
152
73
(28
)
142
Net gain (loss) on sale of loans held for sale
134
981
(101
)
35
200
440
323
Net gain on investment securities
1,224
2,164
—
332
892
487
596
Impairment charge on investment securities
—
(91
)
—
—
—
—
—
Net gain (loss) on sale of other assets
39
(79
)
—
38
1
(302
)
(114
)
Other
2,771
2,475
1,042
846
883
887
853
Total noninterest income
19,098
18,494
6,169
6,376
6,553
6,283
6,353
Noninterest expense:
Salaries and employee benefits
28,408
30,565
9,473
9,226
9,709
9,562
12,438
Occupancy and equipment
9,163
8,400
2,959
3,035
3,169
3,019
2,915
Professional services
2,844
3,243
814
1,093
937
890
1,452
Computer and data processing
2,205
2,462
689
812
704
809
976
Supplies and postage
1,806
1,930
518
608
680
567
899
FDIC assessments
1,092
957
367
364
361
343
356
Advertising and promotions
676
499
209
253
214
430
261
Other
5,861
5,800
1,980
2,071
1,810
1,921
2,321
Total noninterest expense
52,055
53,856
17,009
17,462
17,584
17,541
21,618
Income before income taxes
28,585
25,458
9,193
10,245
9,147
9,310
6,070
Income tax expense
9,422
8,341
3,029
3,395
2,998
2,978
1,805
Net income
$
19,163
17,117
6,164
6,850
6,149
6,332
4,265
Preferred stock dividends
1,100
1,105
365
367
368
369
368
Net income available to common shareholders
$
18,063
16,012
5,799
6,483
5,781
5,963
3,897
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic
$
1.32
1.17
0.42
0.47
0.42
0.44
0.28
Earnings per share – diluted
$
1.31
1.16
0.42
0.47
0.42
0.43
0.28
Cash dividends declared on common stock
$
0.55
0.41
0.19
0.18
0.18
0.16
0.14
Common dividend payout ratio (1)
41.67
%
35.04
45.24
38.30
42.86
36.36
50.00
Dividend yield (annualized)
3.59
%
2.94
3.68
3.92
3.66
3.42
2.99
Return on average assets
0.92
%
0.92
0.88
0.99
0.90
0.95
0.65
Return on average equity
10.13
%
9.32
9.93
10.70
9.75
9.85
6.77
Return on average common equity (2)
10.25
%
9.38
10.05
10.86
9.83
9.95
6.65
Return on average tangible common equity (3)
13.03
%
11.44
12.88
13.74
12.47
12.66
8.33
Efficiency ratio (4)
58.72
%
64.29
56.95
59.38
59.87
58.88
73.04
Stock price (Nasdaq: FISI):
High
$
21.99
19.52
21.99
20.66
20.83
19.39
19.52
Low
$
17.92
15.22
18.39
17.92
18.51
17.61
16.50
Close
$
20.46
18.64
20.46
18.41
19.96
18.63
18.64
(1)Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.
(2)Net income available to common shareholders divided by average common equity.
(3)See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.
(4)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.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited)
(Amounts in thousands)
Quarterly Trends
Nine months ended
2013
2012
September 30,
Third
Second
First
Fourth
Third
2013
2012
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
223
119
126
226
320
94
168
Investment securities (1)
829,207
695,554
821,561
829,953
836,270
727,735
745,796
Loans (2):
Commercial business
257,172
239,319
256,256
256,332
258,958
250,384
248,060
Commercial mortgage
431,440
407,928
442,178
433,631
418,248
407,168
409,884
Residential mortgage
125,017
123,930
121,462
123,263
130,425
137,586
141,808
Home equity
299,474
249,044
309,970
299,230
288,993
282,831
271,131
Consumer indirect
596,260
519,175
605,286
595,235
588,068
576,519
544,527
Other consumer
24,412
24,391
23,641
24,080
25,535
27,043
26,179
Total loans
1,733,775
1,563,787
1,758,793
1,731,771
1,710,227
1,681,531
1,641,589
Total interest-earning assets
2,563,205
2,259,460
2,580,480
2,561,950
2,546,817
2,409,360
2,387,553
Goodwill and other intangible assets, net
50,249
40,886
50,153
50,249
50,350
50,879
47,200
Total assets
2,784,647
2,475,190
2,784,580
2,789,104
2,780,209
2,650,502
2,607,497
Interest-bearing liabilities:
Interest-bearing demand
483,428
409,331
466,889
489,047
494,654
464,094
425,739
Savings and money market
717,583
557,800
719,452
739,328
693,684
671,295
611,564
Certificates of deposit
628,694
696,051
603,434
635,583
647,551
685,318
695,682
Borrowings
184,236
139,330
207,491
153,626
191,412
69,335
157,973
Total interest-bearing liabilities
2,013,941
1,802,512
1,997,266
2,017,584
2,027,301
1,890,042
1,890,958
Noninterest-bearing demand deposits
503,734
411,036
527,438
501,354
481,909
487,434
447,204
Total deposits
2,333,439
2,074,218
2,317,213
2,365,312
2,317,798
2,308,141
2,180,189
Total liabilities
2,531,702
2,229,816
2,538,377
2,532,197
2,524,377
2,394,687
2,356,787
Shareholders’ equity
252,945
245,374
246,203
256,907
255,832
255,815
250,710
Common equity (3)
235,531
227,901
228,827
239,500
238,373
238,344
233,238
Tangible common equity (4)
$
185,282
187,015
178,674
189,251
188,023
187,465
186,038
Common shares outstanding:
Basic
13,734
13,692
13,745
13,739
13,717
13,707
13,703
Diluted
13,774
13,748
13,787
13,767
13,767
13,761
13,759
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits
0.19
%
0.21
0.15
0.19
0.21
0.60
0.16
Investment securities
2.40
%
2.70
2.42
2.38
2.39
2.56
2.60
Loans
4.69
%
5.13
4.59
4.65
4.83
4.98
5.10
Total interest-earning assets
3.94
%
4.38
3.90
3.91
4.03
4.25
4.32
Interest-bearing demand
0.15
%
0.14
0.18
0.14
0.11
0.13
0.14
Savings and money market
0.13
%
0.18
0.14
0.13
0.13
0.14
0.15
Certificates of deposit
0.79
%
1.03
0.77
0.79
0.82
0.86
0.94
Borrowings
0.39
%
0.44
0.38
0.40
0.40
0.76
0.43
Total interest-bearing liabilities
0.37
%
0.52
0.36
0.36
0.37
0.42
0.46
Net interest rate spread
3.57
%
3.86
3.54
3.55
3.66
3.83
3.86
Net interest rate margin
3.66
%
3.97
3.62
3.63
3.73
3.92
3.96
(1)Includes investment securities at adjusted amortized cost and non-performing investment securities.
(2)Includes nonaccrual loans.
(3)Excludes preferred shareholders’ equity.
(4)See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
2013
2012
September 30,
June 30,
March 31,
December 31,
September 30,
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
25,590
25,827
24,714
24,301
24,120
Net loan charge-offs (recoveries):
Commercial business
104
87
202
139
287
Commercial mortgage
(87
)
(37
)
(11
)
277
(64
)
Residential mortgage
22
72
145
22
39
Home equity
14
(20
)
232
119
65
Consumer indirect
1,465
1,170
913
1,367
1,124
Other consumer
157
158
115
183
132
Total net charge-offs
1,675
1,430
1,596
2,107
1,583
Provision for loan losses
2,770
1,193
2,709
2,520
1,764
Ending balance
$
26,685
25,590
25,827
24,714
24,301
Supplemental information
Period end loans:
Originated loans
$
1,728,453
1,688,392
1,657,431
1,641,197
1,588,614
Acquired loans
51,219
55,022
59,859
64,529
70,371
Total loans
$
1,779,672
1,743,414
1,717,290
1,705,726
1,658,985
Allowance for loan losses to total loans
1.50
%
1.47
1.50
1.45
1.46
Allowance for loan losses for originated
loans to originated loans
1.54
%
1.52
1.56
1.51
1.53
Net charge-offs (recoveries) to average loans (annualized):
Commercial business
0.16
%
0.14
0.32
0.22
0.46
Commercial mortgage
-0.08
%
-0.03
-0.01
0.27
-0.06
Residential mortgage
0.07
%
0.24
0.45
0.06
0.11
Home equity
0.02
%
-0.03
0.33
0.17
0.10
Consumer indirect
0.96
%
0.79
0.63
0.94
0.82
Other consumer
2.63
%
2.63
1.83
2.68
2.00
Total loans
0.38
%
0.33
0.38
0.50
0.38
Non-performing loans:
Commercial business
$
4,078
5,043
5,616
3,413
3,621
Commercial mortgage
2,835
3,073
2,767
1,799
3,388
Residential mortgage
1,337
1,423
1,759
2,040
1,597
Home equity
911
699
598
939
929
Consumer indirect
1,161
1,035
1,007
891
876
Other consumer
16
22
19
43
23
Total non-performing loans
10,338
11,295
11,766
9,125
10,434
Foreclosed assets
424
415
371
184
303
Non-performing investment securities
128
207
343
753
766
Total non-performing assets
$
10,890
11,917
12,480
10,062
11,503
Total non-performing loans to total loans
0.58
%
0.65
0.69
0.53
0.63
Total non-performing loans to originated loans
0.60
%
0.67
0.71
0.56
0.66
Total non-performing assets to total assets
0.38
%
0.43
0.44
0.36
0.43
Allowance for loan losses to non-performing loans
258
%
227
220
271
233
2
FINANCIAL INSTITUTIONS, INC. Appendix A — Non-GAAP to GAAP Reconciliation (Unaudited) (In thousands, except per share amounts)
Nine months ended
2013
2012
September 30,
Third
Second
First
Fourth
Third
2013
2012
Quarter
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
2,867,517
2,782,303
2,827,658
2,763,865
2,653,319
Less: Goodwill and other intangible assets, net
50,095
50,190
50,288
50,389
50,924
Tangible assets (non-GAAP)
$
2,817,422
2,732,113
2,777,370
2,713,476
2,602,395
Ending tangible common equity:
Common shareholders’ equity
$
230,503
227,494
237,511
236,426
234,371
Less: Goodwill and other intangible assets, net
50,095
50,190
50,288
50,389
50,924
Tangible common equity (non-GAAP)
$
180,408
177,304
187,223
186,037
183,447
Tangible common equity to tangible assets (non-GAAP) (1)
6.40
%
6.49
6.74
6.86
7.05
Common shares outstanding
13,810
13,809
13,804
13,788
13,786
Tangible common book value per share (non-GAAP) (2)
$
13.06
12.84
13.56
13.49
13.31
Average tangible common equity:
Average common equity
$
235,531
227,901
228,827
239,500
238,373
238,344
233,238
Average goodwill and other intangible assets, net
50,249
40,886
50,153
50,249
50,350
50,879
47,200
Average tangible common equity (non-GAAP)
$
185,282
187,015
178,674
189,251
188,023
187,465
186,038
Return on average tangible common equity (3)
13.03
%
11.44
12.88
13.74
12.47
12.66
8.33
Net operating income:
Net income
$
19,163
17,117
6,164
6,850
6,149
6,332
4,265
Branch acquisition expenses, net of tax (4)
—
1,966
—
—
—
—
1,262
CEO retirement expenses, net of tax (4)
—
1,670
—
—
—
—
1,670
Net operating income (non-GAAP)
$
19,163
20,753
6,164
6,850
6,149
6,332
7,197
Net operating income available to common shareholders:
Net income available to common shareholders
$
18,063
16,012
5,799
6,483
5,781
5,963
3,897
Branch acquisition expenses, net of tax (4)
—
1,966
—
—
—
—
1,262
CEO retirement expenses, net of tax (4)
—
1,670
—
—
—
—
1,670
Net operating income available to common
shareholders (non-GAAP)
$
18,063
19,648
5,799
6,483
5,781
5,963
6,829
Financial ratios computed on an operating basis (Non-GAAP):
Earnings per share – basic
$
1.32
1.43
0.42
0.47
0.42
0.44
0.50
Earnings per share – diluted
$
1.31
1.43
0.42
0.47
0.42
0.43
0.50
Return on average assets
0.92
%
1.12
0.88
0.99
0.90
0.95
1.10
Return on average equity
10.13
%
11.30
9.93
10.70
9.75
9.85
11.42
Return on average common equity
10.25
%
11.52
10.05
10.86
9.83
9.95
11.65
Return on average tangible common equity
13.03
%
14.03
12.88
13.74
12.47
12.66
14.60
(1)Tangible common equity divided by tangible assets.
(2)Tangible common equity divided by common shares outstanding.
(3)Annualized net income divided by average tangible common equity.
(4)Tax effect is calculated assuming a 35% effective tax rate.
3
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