FINANCIAL INSTITUTIONS, INC. REPORTS RECORD YEAR Net Income Increases by 15%, Reaching New Record High
WARSAW, N.Y., January 28, 2015– Financial Institutions, Inc. (the “Company”) (Nasdaq: FISI), the parent company of Five Star Bank, today reported financial results for the fourth quarter and year ended December 31, 2014. The financial results for the fourth quarter and full year of 2014 include the contributions from the acquisition of Scott Danahy Naylon Co., Inc. (“SDN”) insurance agency completed in August 2014. With the acquisition of SDN, the Company’s offerings have expanded to include for the first time a broad range of insurance services to both personal and business clients.
Net income for the fourth quarter 2014 was $7.9 million, compared to $7.2 million for the third quarter 2014, and $6.4 million for the fourth quarter 2013. After preferred dividends, fourth quarter 2014 net income available to common shareholders was $7.6 million or $0.54 per diluted share, compared with $6.8 million or $0.49 per share for third quarter 2014, and $6.0 million or $0.43 per share for fourth quarter 2013.
For the full year of 2014, the Company earned net income of $29.4 million, compared to $25.5 million for the full year of 2013. Net income available to common shareholders was $27.9 million or $2.00 per diluted share for the full year of 2014. This compares to net income available to common shareholders of $24.1 million or $1.75 per diluted share for the full year of 2013.
Financial Institutions, Inc.’s President and Chief Executive Officer Martin K. Birmingham stated, “We delivered another year of solid performance, with increased net income and earnings per share despite the headwinds experienced during the year throughout the industry. We posted record highs for net interest income, total loans and shareholders’ equity, all while maintaining excellent asset quality. In addition, we continued to integrate our acquired insurance agency into our operations.”
“We continue to demonstrate consistent growth in key metrics for our business. Importantly, we ended 2014 with total assets of $3.1 billion, an increase of over 5%. This marks the fifth year in a row that we have set a new record for total assets at year-end. This solid asset growth produced record-setting annual net income of $29.4 million,” added Birmingham. “We have grown and will seek continued growth in both our legacy markets and in the larger markets that we are now more actively targeting, namely Rochester and Buffalo. Growth will be achieved through the offering of traditional banking services, as well as from newer products such as insurance, which collectively provide us with a very comprehensive suite of services to meet the evolving needs of our customer base. As we look toward 2015 and beyond, we will continue to follow our proven business model of organic growth and strategic acquisitions.”
Fourth Quarter 2014 highlights:
•
Net income available to common shareholders was $7.6 million or $0.54 per diluted share, compared to $6.8 million or $0.49 per share in the prior quarter, and $6.0 million or $0.43 per share in the fourth quarter 2013
•
Increased net interest income for the quarter to $24.1 million, the highest in Company history
•
Return on average common equity of 11.25% and return on average tangible common equity of 15.16% demonstrate strong quarterly performance
•
Common and tangible common book value per share increased to $18.57 and $13.71, respectively, at December 31, 2014
•
Increased quarterly cash dividend to $0.20 per outstanding common share, representing a 5% increase from the most recent quarterly cash dividend
•
Announced plans to build a “Made for You” concept branch in Rochester, N.Y. at CityGate pending regulatory approval; unprecedented customer service experience to be offered in under-penetrated region for Five Star Bank
Full Year 2014 highlights:
•
Completed the acquisition of Scott Danahy Naylon Co., Inc. (“SDN”), a full service insurance agency
•
Initiated the implementation of a Company-wide Enterprise Risk Management Model
•
Grew total loans $78.4 million or 4% over the prior year
•
Increased total deposits by $130.5 million or 6% from the end of the prior year
•
Reached the Company’s highest level of year-end total assets of $3.1 billion
•
Increased net interest income to $93.8 million, driven by a 7% increase in average interest-earning assets
•
The effective tax rate was 24.7% for 2014, a decrease from 32.7% for 2013 largely related to the tax advantages of a historic tax credit investment and the formation of a real estate investment trust during 2014
Kevin B. Klotzbach, the Company’s Executive Vice President and Chief Financial Officer commented, “We are pleased with the progress we made in 2014 relative to lowering our effective tax rate. The formation of the REIT and the historic tax credit investment both contributed to the lower tax provision and ultimately resulted in higher earnings for the Company in 2014.”
Net Interest Income and Net Interest Margin
Net interest income was $24.1 million in the fourth quarter 2014 compared to $23.3 million in the third quarter 2014 and $23.4 million in the fourth quarter 2013. Our net interest margin increased by 10 basis points from 3.46% for the third quarter 2014 to 3.56% for the fourth quarter 2014, primarily due to non-recurring loan prepayment income received in the fourth quarter.
Net interest income for the fourth quarter 2014 increased $758 thousand compared to the fourth quarter 2013. The increase was primarily related to an increase in average interest-earning assets of $128.7 million, driven by organic loan growth during 2014. The increase was partially offset by a lower net interest margin, which decreased 5 basis points from the fourth quarter 2013 to the fourth quarter 2014.
For the year ended December 31, 2014, net interest income rose 2% to $93.8 million from $91.6 million in 2013 as a result of a $174.3 million or 7% increase in average interest-earning assets. These increases were partially offset by a 14 basis point narrowing of the net interest margin to 3.50% in 2014 from 3.64% in 2013.
Noninterest Income
Noninterest income was $5.2 million for the fourth quarter 2014 compared to $7.3 million in the third quarter 2014 and $5.7 million in the fourth quarter 2013. The quarter-over-quarter change was driven primarily by $2.3 million of amortization of a historic tax investment in a community-based project that was recorded in the 2014 fourth quarter. These types of investments are amortized in the first year the project is placed in service and the Company has recognized the amortization as contra-income, included in noninterest income, with an offsetting tax benefit that reduced income tax expense. Insurance income of $1.4 million was up $498 thousand from the third quarter 2014, reflecting a full quarter of contributions from the SDN acquisition.
Compared to the fourth quarter 2013, noninterest income in the fourth quarter 2014 decreased by $580 thousand. The decrease was primarily related to the amortization of the historic tax credit, described above, partially offset by the increased insurance income attributable to the SDN acquisition.
“We remain focused on generating alternative sources of noninterest income and continue to be excited about the prospects of further developing our insurance line of business,” said Klotzbach.
Noninterest income totaled $25.4 million for the full year 2014, an increase of $517 thousand when compared to $24.8 million in the prior year. Included in noninterest income are gains realized from the sale of investment securities of $2.0 million and $1.2 million for the years ended December 31, 2014 and 2013, respectively. Exclusive of those gains and the tax credit investment amortization described above, noninterest income increased $2.0 million to $25.6 million for 2014 compared to $23.6 million for 2013. Insurance income increased by $2.1 million, primarily as a result of the SDN acquisition. Service charges on deposits decreased by $1.0 million, due primarily to lower overdraft fees.
Noninterest Expense
Noninterest expense was $19.4 million for the fourth quarter 2014 compared to $18.0 million in the third quarter 2014 and $17.4 million in the fourth quarter 2013. Salaries and employee benefits expense, the largest noninterest expense item, was up $826 thousand from the third quarter 2014, and reflects additional personnel as a result of the acquisition of SDN and the hiring of additional loan officers and personnel associated with the Company’s expansion initiatives. Noninterest expense also included increases of $452 thousand in professional service fees and $193 thousand in occupancy and equipment expense when comparing the fourth quarter 2014 to the third quarter 2014.
Compared to the fourth quarter 2013, noninterest expense in the fourth quarter 2014 increased by $2.0 million. The increase in expense was primarily related to the higher salaries and employee benefits expense attributable to the SDN acquisition and higher professional service fees.
Noninterest expense for the full year 2014 totaled $72.4 million compared to $69.4 million in the prior year. The increase reflects higher salaries and employee benefits of $767 thousand due to the addition of new employees from SDN and as part of the Company’s expansion initiatives. Also contributing to the increase were higher occupancy and equipment expense, professional service fees, computer and data processing expense and other noninterest expense. Those increases were partially offset by lower supplies and postage expense due to an increase in customers opting to receive statements electronically and reduced advertising and promotional expenses.
Income Taxes
Income tax expense was $84 thousand in the fourth quarter 2014 compared to $3.4 million in the third quarter 2014, and $3.0 million in the fourth quarter 2013. The differences are driven by the favorable impact of $3.0 million in Federal and New York State historic tax credits realized in the fourth quarter 2014, as discussed above. As a result of the historic tax credits, the current quarter effective tax rate was 1.0%, compared with an effective tax rate of 31.9% in the third quarter 2014 and 31.7% in the fourth quarter 2013.
Income tax expense for the year was $9.6 million, representing an effective tax rate of 24.7% compared with an effective tax rate of 32.7% in 2013. The lower effective tax rate in 2014 reflects the historic tax credit benefit described above combined with New York State tax savings generated by the Company’s real estate investment trust, which became effective during February 2014.
Balance Sheet and Capital Management
Total assets were $3.09 billion at December 31, 2014, up $34.2 million from $3.06 billion at September 30, 2014 and up $160.9 million from $2.93 billion at December 31, 2013. The increases were attributable to loan growth and higher investment security balances.
Total loans were $1.91 billion at December 31, 2014, up $4.2 million from September 30, 2014 and up $78.4 million from December 31, 2013. The increase in loans from the prior year was attributable to organic growth, primarily in home equity and consumer indirect loans. Total investment securities were $916.9 million at December 31, 2014, up $45.5 million or 5% from the end of the prior quarter and up $57.7 million or 7% compared with the end of 2013.
Total deposits were $2.45 billion at December 31, 2014, down $88.3 million from $2.54 billion at September 30, 2014 and up $130.5 million from $2.32 billion at December 31, 2013. The decrease during the fourth quarter 2014 was mainly due to seasonal outflows of municipal deposits, while the year-over-year increase is largely attributable to successful business development efforts. Public deposit balances represented 25% of total deposits at December 31, 2014, compared to 28% at September 30, 2014 and 23% at December 31, 2013.
Short-term borrowings were $334.8 million at December 31, 2014, up $118.8 million from September 30, 2014 and down $2.2 million from December 31, 2013. Short-term borrowings are often utilized to manage the seasonal outflows of municipal deposits.
Shareholders’ equity was $279.5 million at December 31, 2014, compared with $277.8 million at September 30, 2014 and $254.8 million at December 31, 2013. Common book value per share was $18.57 at December 31, 2014, an increase of $0.09 from $18.48 at September 30, 2014 and $1.40 from $17.17 at December 31, 2013. Tangible common book value per share was $13.71 at December 31, 2014, compared to $13.59 at September 30, 2014 and $13.56 at December 31, 2013.
During the fourth quarter 2014, the Company increased its quarterly common stock dividend by 5%, or $0.01 per share, to $0.20 per common share. The fourth quarter 2014 dividend returned 37% of fourth quarter net income to common shareholders.
The Company’s leverage ratio was 7.35% at December 31, 2014, compared to 7.34% at September 30, 2014 and 7.63% at December 31, 2013. Goodwill and intangible assets recorded during the third quarter 2014 in conjunction with the addition of SDN resulted in a reduction in capital ratios upon acquisition. Such goodwill and intangible assets are excluded from regulatory capital under regulatory accounting practices.
Credit Quality
Nonperforming loans at December 31, 2014 increased $2.0 million compared with September 30, 2014. Increases of $1.0 million in commercial business non-performing loans, $560 thousand in commercial mortgage non-performing loans and $538 thousand in residential real estate non-performing loans were partially offset by a decrease of $131 thousand in consumer indirect non-performing loans. Non-performing loans declined $6.5 million from December 31, 2013 due to improvements in the commercial mortgage portfolio. Nonperforming loans to total loans were 0.53% at December 31, 2014 compared with 0.43% at September 30, 2014 and 0.91% at December 31, 2013.
The provision for loans losses for the fourth quarter 2014 was $1.9 million, a decline of $105 thousand from the prior quarter and $497 thousand from the fourth quarter 2013. Net charge-offs were $1.5 million during the current quarter, a $420 thousand decrease compared to the prior quarter. Compared to the fourth quarter 2013, net charge-offs also declined $839 thousand, primarily driven by the commercial business and commercial mortgage loan portfolios. The ratio of annualized net charge-offs to total average loans was 0.32% during the current quarter, compared to 0.40% during the prior quarter and 0.52% during the fourth quarter 2013.
The provision for loans losses for the full year 2014 was $7.8 million, down from $9.1 million in 2013. Net charge-offs were $6.9 million during the current year, a $170 thousand decrease compared to the prior year. The ratio of annualized net charge-offs to total average loans was 0.37% during 2014 compared to 0.40% during the prior year.
The allowance for loans losses to total loans was 1.45% at December 31, 2014, compared with 1.43% at September 30, 2014 and 1.46% at December 31, 2013. The allowance to non-performing loans was 272% at December 31, 2014, compared with 333% at September 30, 2014, and 161% at December 31, 2013.
About Financial Institutions, Inc.
Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Scott Danahy Naylon. 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. Financial Institutions, Inc. and its subsidiaries employ approximately 650 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 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, breaches of its third party information systems, the attitudes and preferences of its customers, its ability to successfully integrate and profitably operate acquired businesses, 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
1
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2014
2013
December 31,
September 30,
June 30,
March 31,
December 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
58,151
87,582
64,832
72,401
59,692
Investment securities:
Available for sale
622,494
585,479
601,903
674,650
609,400
Held-to-maturity
294,438
285,967
262,057
253,576
249,785
Total investment securities
916,932
871,446
863,960
928,226
859,185
Loans held for sale
755
1,029
201
900
3,381
Loans:
Commercial business
267,409
275,107
277,685
268,352
265,766
Commercial mortgage
475,092
469,485
469,055
468,763
469,284
Residential mortgage
100,101
103,044
106,206
110,164
113,045
Home equity
386,615
382,703
369,578
332,348
326,086
Consumer indirect
661,673
656,215
652,748
647,546
636,368
Other consumer
21,112
21,291
21,392
21,667
23,070
Total loans
1,912,002
1,907,845
1,896,664
1,848,840
1,833,619
Allowance for loan losses
27,637
27,244
27,166
27,152
26,736
Total loans, net
1,884,365
1,880,601
1,869,498
1,821,688
1,806,883
Total interest-earning assets (1)(2)
2,826,488
2,780,940
2,758,779
2,780,489
2,705,045
Goodwill and other intangible assets, net
68,639
68,887
49,826
49,913
50,002
Total assets
3,089,521
3,055,304
2,993,264
3,015,619
2,928,636
Deposits:
Noninterest-bearing demand
571,260
571,549
551,229
532,914
535,472
Interest-bearing demand
490,190
530,783
507,083
541,660
470,733
Savings and money market
795,835
805,522
766,594
812,734
717,928
Certificates of deposit
593,242
630,970
625,172
646,112
595,923
Total deposits
2,450,527
2,538,824
2,450,078
2,533,420
2,320,056
Borrowings
334,804
215,967
254,683
196,746
337,042
Total interest-bearing liabilities
2,214,071
2,183,242
2,153,532
2,197,252
2,121,626
Shareholders’ equity
279,532
277,758
269,827
262,865
254,839
Common shareholders’ equity (3)
262,192
260,418
252,487
245,523
237,497
Tangible common equity (4)
193,553
191,531
202,661
195,610
187,495
Unrealized gain (loss) on investment securities, net of tax
$
1,933
(374
)
1,292
(1,467
)
(5,293
)
Common shares outstanding
14,118
14,094
13,863
13,853
13,829
Treasury shares
280
304
299
309
333
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.35
%
7.34
7.64
7.51
7.63
Tier 1 risk-based capital
10.47
%
10.44
10.95
10.89
10.82
Total risk-based capital
11.72
%
11.69
12.20
12.14
12.08
Common equity to assets
8.49
%
8.52
8.44
8.14
8.11
Tangible common equity to tangible assets (4)
6.41
%
6.41
6.89
6.60
6.51
Common book value per share
$
18.57
18.48
18.21
17.72
17.17
Tangible common book value per share (4)
13.71
13.59
14.62
14.12
13.56
(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
Years ended
2014
2013
December 31,
Fourth
Third
Second
First
Fourth
2014
2013
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
101,055
98,931
25,984
25,129
24,883
25,059
25,218
Interest expense
7,281
7,337
1,846
1,871
1,780
1,784
1,838
Net interest income
93,774
91,594
24,138
23,258
23,103
23,275
23,380
Provision for loan losses
7,789
9,079
1,910
2,015
1,758
2,106
2,407
Net interest income after provision
for loan losses
85,985
82,515
22,228
21,243
21,345
21,169
20,973
Noninterest income:
Service charges on deposits
8,954
9,948
2,186
2,277
2,241
2,250
2,511
ATM and debit card
4,963
5,098
1,269
1,263
1,257
1,174
1,249
Insurance income
2,399
262
1,420
922
16
41
73
Investment advisory
2,138
2,345
491
524
561
562
428
Company owned life insurance
1,753
1,706
504
421
425
403
431
Investments in limited partnerships
1,103
857
209
187
81
626
319
Loan servicing
568
570
118
120
176
154
118
Net gain (loss) on sale of loans held for sale
313
117
82
76
50
105
(17
)
Net gain on investment securities
2,041
1,226
264
515
949
313
2
Net gain (loss) on sale of other assets
69
(103
)
8
72
24
(35
)
(142
)
Amortization of tax credit investment
(2,323
)
—
(2,323
)
—
—
—
—
Other
3,372
2,807
927
884
797
764
763
Total noninterest income
25,350
24,833
5,155
7,261
6,577
6,357
5,735
Noninterest expense:
Salaries and employee benefits
38,595
37,828
10,551
9,725
9,063
9,256
9,420
Occupancy and equipment
12,829
12,366
3,324
3,131
3,139
3,235
3,203
Professional services
4,760
3,836
1,428
976
1,384
972
992
Computer and data processing
3,016
2,848
791
725
777
723
643
Supplies and postage
2,053
2,342
499
507
535
512
536
FDIC assessments
1,592
1,464
392
390
388
422
372
Advertising and promotions
805
896
196
216
214
179
220
Other
8,705
7,861
2,198
2,285
2,308
1,914
2,000
Total noninterest expense
72,355
69,441
19,379
17,955
17,808
17,213
17,386
Income before income taxes
38,980
37,907
8,004
10,549
10,114
10,313
9,322
Income tax expense
9,625
12,377
84
3,365
3,082
3,094
2,955
Net income
29,355
25,530
7,920
7,184
7,032
7,219
6,367
Preferred stock dividends
1,462
1,466
365
366
365
366
366
Net income available to common shareholders
$
27,893
24,064
7,555
6,818
6,667
6,853
6,001
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic
$
2.01
1.75
0.54
0.49
0.48
0.50
0.44
Earnings per share – diluted
$
2.00
1.75
0.54
0.49
0.48
0.50
0.43
Cash dividends declared on common stock
$
0.77
0.74
0.20
0.19
0.19
0.19
0.19
Common dividend payout ratio (1)
38.31
%
42.29
37.04
38.78
39.58
38.00
43.18
Dividend yield (annualized)
3.06
%
2.99
3.15
3.35
3.25
3.35
3.05
Return on average assets
0.98
%
0.91
1.03
0.95
0.95
0.99
0.88
Return on average equity
10.80
%
10.10
11.07
10.41
10.52
11.19
10.03
Return on average common equity (2)
10.96
%
10.23
11.25
10.55
10.66
11.38
10.15
Return on average tangible common equity (3)
14.12
%
13.00
15.16
13.73
13.31
14.30
12.90
Efficiency ratio (4)
58.59
%
58.48
59.58
57.65
60.15
56.96
57.76
Stock price (Nasdaq: FISI):
High
$
27.02
26.59
27.02
24.94
24.88
25.69
26.59
Low
$
19.72
17.92
22.45
21.71
22.17
19.72
20.14
Close
$
25.15
24.71
25.15
22.48
23.42
23.02
24.71
(1)Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.
(2)Annualized 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 on investment securities and amortization of tax credit investment.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited)
(Amounts in thousands)
Quarterly Trends
Years ended
2014
2013
December 31,
Fourth
Third
Second
First
Fourth
2014
2013
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
114
191
—
51
94
316
94
Investment securities (1)
877,673
834,213
876,932
854,030
875,855
904,437
849,069
Loans (2):
Commercial business
269,877
256,236
265,979
273,239
275,105
265,137
253,458
Commercial mortgage
473,372
438,821
473,694
473,168
473,883
472,733
460,722
Residential mortgage
107,254
123,277
101,982
105,255
108,535
113,390
118,113
Home equity
359,511
304,868
384,138
377,360
346,911
328,833
320,872
Consumer indirect
651,279
604,148
658,337
653,192
651,150
642,241
627,557
Other consumer
21,094
24,089
20,630
20,847
20,855
22,062
23,132
Total loans
1,882,387
1,751,439
1,904,760
1,903,061
1,876,439
1,844,396
1,803,854
Total interest-earning assets
2,760,174
2,585,843
2,781,692
2,757,142
2,752,388
2,749,149
2,653,017
Goodwill and other intangible assets, net
57,039
50,201
68,771
59,306
49,879
49,968
50,058
Total assets
2,994,604
2,803,825
3,052,499
2,985,920
2,973,735
2,965,400
2,860,733
Interest-bearing liabilities:
Interest-bearing demand
504,584
488,047
511,749
486,311
509,398
511,073
501,753
Savings and money market
783,784
727,737
824,661
758,306
789,956
761,799
757,868
Certificates of deposit
624,299
621,455
614,654
634,400
629,945
618,126
599,971
Borrowings
247,956
190,310
232,935
259,995
224,801
274,414
208,338
Total interest-bearing liabilities
2,160,623
2,027,549
2,183,999
2,139,012
2,154,100
2,165,412
2,067,930
Noninterest-bearing demand deposits
545,904
509,383
564,336
556,485
537,895
524,346
526,146
Total deposits
2,458,571
2,346,622
2,515,400
2,435,502
2,467,194
2,415,344
2,385,738
Total liabilities
2,722,730
2,551,139
2,768,693
2,712,274
2,705,578
2,703,777
2,608,815
Shareholders’ equity
271,874
252,686
283,806
273,646
268,157
261,623
251,918
Common equity (3)
254,533
235,290
266,466
256,306
250,815
244,281
234,576
Tangible common equity (4)
$
197,494
185,089
197,695
197,000
200,936
194,313
184,518
Common shares outstanding:
Basic
13,893
13,739
14,049
13,953
13,791
13,773
13,754
Diluted
13,946
13,784
14,112
14,007
13,838
13,824
13,817
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits
0.14
%
0.19
—
0.28
0.07
0.08
0.16
Investment securities
2.44
%
2.41
2.48
2.43
2.45
2.43
2.46
Loans
4.38
%
4.65
4.44
4.31
4.32
4.45
4.55
Total interest-earning assets
3.76
%
3.93
3.82
3.73
3.73
3.79
3.88
Interest-bearing demand
0.12
%
0.15
0.11
0.12
0.12
0.13
0.16
Savings and money market
0.12
%
0.13
0.11
0.12
0.12
0.13
0.14
Certificates of deposit
0.78
%
0.79
0.82
0.78
0.76
0.74
0.77
Borrowings
0.37
%
0.39
0.36
0.37
0.36
0.38
0.38
Total interest-bearing liabilities
0.34
%
0.36
0.34
0.35
0.33
0.33
0.35
Net interest rate spread
3.42
%
3.57
3.48
3.38
3.40
3.46
3.53
Net interest rate margin
3.50
%
3.64
3.56
3.46
3.47
3.52
3.61
(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)
2014
2013
December 31,
September 30,
June 30,
March 31,
December 31,
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
27,244
27,166
27,152
26,736
26,685
Net loan charge-offs (recoveries):
Commercial business
(15
)
44
(65
)
39
328
Commercial mortgage
(57
)
66
159
(7
)
369
Residential mortgage
22
11
61
57
118
Home equity
(4
)
66
127
95
8
Consumer indirect
1,420
1,577
1,336
1,350
1,416
Other consumer
151
173
126
156
117
Total net charge-offs
1,517
1,937
1,744
1,690
2,356
Provision for loan losses
1,910
2,015
1,758
2,106
2,407
Ending balance
$
27,637
27,244
27,166
27,152
26,736
Supplemental information
Period end loans:
Originated loans
$
1,873,148
1,866,671
1,853,728
1,803,209
1,785,599
Acquired loans
38,854
41,174
42,936
45,631
48,020
Total loans
$
1,912,002
1,907,845
1,896,664
1,848,840
1,833,619
Allowance for loan losses to total loans
1.45
%
1.43
1.43
1.47
1.46
Allowance for loan losses for originated
loans to originated loans
1.48
%
1.46
1.47
1.51
1.50
Net charge-offs (recoveries) to average loans (annualized):
Commercial business
-0.02
%
0.06
-0.09
0.06
0.51
Commercial mortgage
-0.05
%
0.06
0.13
-0.01
0.32
Residential mortgage
0.09
%
0.04
0.23
0.21
0.41
Home equity
0.00
%
0.07
0.15
0.12
0.01
Consumer indirect
0.86
%
0.96
0.82
0.85
0.90
Other consumer
2.90
%
3.29
2.42
2.87
2.01
Total loans
0.32
%
0.40
0.37
0.37
0.52
Non-performing loans:
Commercial business
$
4,288
3,258
3,589
3,706
3,474
Commercial mortgage
3,020
2,460
2,734
9,545
9,663
Residential mortgage
1,194
656
758
760
1,078
Home equity
463
464
371
826
925
Consumer indirect
1,169
1,300
1,427
1,387
1,471
Other consumer
19
46
12
46
11
Total non-performing loans
10,153
8,184
8,891
16,270
16,622
Foreclosed assets
194
509
554
412
333
Non-performing investment securities
—
—
—
113
128
Total non-performing assets
$
10,347
8,693
9,445
16,795
17,083
Total non-performing loans to total loans
0.53
%
0.43
0.47
0.88
0.91
Total non-performing loans to originated loans
0.54
%
0.44
0.48
0.90
0.93
Total non-performing assets to total assets
0.33
%
0.28
0.32
0.56
0.58
Allowance for loan losses to non-performing loans
272
%
333
306
167
161
2
FINANCIAL INSTITUTIONS, INC. Appendix A — Non-GAAP to GAAP Reconciliation (Unaudited) (In thousands, except per share amounts)
Quarterly Trends
Years ended
2014
2013
December 31,
Fourth
Third
Second
First
Fourth
2014
2013
Quarter
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
3,089,521
3,055,304
2,993,264
3,015,619
2,928,636
Less: Goodwill and other intangible assets, net
68,639
68,887
49,826
49,913
50,002
Tangible assets (non-GAAP)
$
3,020,882
2,986,417
2,943,438
2,965,706
2,878,634
Ending tangible common equity:
Common shareholders’ equity
$
262,192
260,418
252,487
245,523
237,497
Less: Goodwill and other intangible assets, net
68,639
68,887
49,826
49,913
50,002
Tangible common equity (non-GAAP)
$
193,553
191,531
202,661
195,610
187,495
Tangible common equity to tangible assets (non-GAAP) (1)
6.41
%
6.41
6.89
6.60
6.51
Common shares outstanding
14,118
14,094
13,863
13,853
13,829
Tangible common book value per share (non-GAAP) (2)
$
13.71
13.59
14.62
14.12
13.56
Average tangible common equity:
Average common equity
$
254,533
235,290
266,466
256,306
250,815
244,281
234,576
Average goodwill and other intangible assets, net
57,039
50,201
68,771
59,306
49,879
49,968
50,058
Average tangible common equity (non-GAAP)
$
197,494
185,089
197,695
197,000
200,936
194,313
184,518
Return on average tangible common equity (3)
14.12
%
13.00
%
15.16
13.73
13.31
14.30
12.90
(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.
3
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