FINANCIAL INSTITUTIONS, INC. ANNOUNCES FIRST QUARTER 2016 RESULTS
WARSAW, N.Y., April 26, 2016– Financial Institutions, Inc. (Nasdaq: FISI), today reported financial results for the first quarter ended March 31, 2016. Financial Institutions, Inc. (the “Company”) is the parent company of Five Star Bank, Scott Danahy Naylon Insurance, LLC (“Scott Danahy Naylon”) and Courier Capital, LLC (“Courier Capital”). The Company’s financial results since January 5, 2016 include the results of operations of Courier Capital, our wealth management subsidiary whose business we acquired from Courier Capital Corporation in January 2016.
First Quarter 2016 Highlights:
Increased net interest income to a record $24.7 million in the first quarter
Increased noninterest income to $9.2 million in the first quarter
Strong performance resulted in return on average tangible common equity of 13.54% for the quarter
Growth strategy drives increase in fee-based services income and market share, leading to record level of earnings assets and deposits
Total assets increased to over $3.5 billion, up $319.5 million or 10% from a year ago
Grew total loans $192.1 million or 10% from a year ago
Increased total deposits by $255.5 million or 9% from a year ago
Quarterly cash dividend of $0.20 per common share represented a 2.77% dividend yield as of March 31, 2016 and a return of 40% of first quarter net income to common shareholders
Common and tangible common book value per share increased to $20.46 and $15.18, respectively, at March 31, 2016
Total risk-based capital increased to 13.39%, strengthening the Company’s capital position to support future growth
Completed the acquisition of Courier Capital, a prominent SEC-registered investment advisory and wealth management firm with offices in Buffalo and Jamestown
Opened our second “Made For You” financial solution center in Rochester; a unique customer service experience offered in one of the Company’s targeted growth markets
Net income for the first quarter 2016 was $7.6 million, compared to $6.6 million for the fourth quarter 2015, and $6.8 million for the first quarter 2015. After preferred dividends, first quarter 2016 net income available to common shareholders was $7.3 million or $0.50 per diluted share, compared with $6.3 million or $0.44 per diluted share for the fourth quarter 2015, and $6.4 million or $0.46 per diluted share for the first quarter 2015.
The Company’s President and Chief Executive Officer Martin K. Birmingham stated, “Continued strength in banking operations, successful implementation of our revenue diversification strategy and diligent management of operating expenses were key drivers of our core earnings growth this quarter. Consolidated revenues of $33.9 million in the first quarter of 2016 reached the highest level in the Company’s history. We remain focused on expense control and implemented several initiatives designed to reduce operating expenses late in the first quarter of 2016. We expect those savings to be reflected beginning in the second quarter.
“We continue to deliver balanced growth in our banking operations. Deposits increased 8% from the fourth quarter of 2015 of this year, which we believe partially reflects the retrenchment of larger competitors operating in the regions in which we operate. In particular, the progress of our two new bank branches in Rochester, one of the largest metro areas in our operating region, is very encouraging. Our first branch office in Rochester, the CityGate Financial Solution Center, opened in November and ended the first quarter with $32 million in total deposits. We are optimistic about further market share gains given the opening of our Brighton office in late March 2016.
“The January 2016 acquisition of Courier Capital, our wealth management platform, coupled with 4% growth in insurance revenues through our Scott Danahy Naylon insurance subsidiary, contributed to the growth in our noninterest income. Noninterest income comprised 34% of total revenues in the quarter, up from 31% in the first quarter of 2015. These new business lines combined with our core community bank which has a 200 year tradition, positions us as a leading western New York diversified financial services provider. We believe this platform and our independence as a community bank to respond to market needs in our region are key to our continued growth.”
Kevin B. Klotzbach, the Company’s Chief Financial Officer added, “We continue to deploy capital in a strategic manner that is delivering results, while only beginning to benefit from the leverage in our expanding platform. We ended the quarter with record levels in a number of key business areas, including interest income, noninterest income, total loans, total assets and total deposits. Interest-earning assets reached a record at $3.2 billion, as loan growth remained robust with demand from both consumer and business customers, while rates on loan production and net interest margin have held up well. We have also been able to effectively control our cost of funds which has stabilized our margin. Net interest margin has now increased for two consecutive quarters. Meanwhile, our credit quality remained steady in the first quarter and we have ample liquidity and a strong balance sheet to further execute our growth strategies.
“The Company’s tangible common equity also ended the quarter at a record level. Our return on tangible common equity of 13.54% increased by 15% compared to last quarter due to earnings growth. Contributing to our returns are the benefits from Company owned life insurance policies which added $1.4 million to noninterest income in the quarter. With over 60 policies remaining in force, we expect continued contributions for many years, although the timing and amounts will vary.
“Our strong first quarter performance led to tangible common book value reaching $15.18 per share, an increase of nearly 3% since the beginning of the year and up 7% in the last 12 months. For the three months ended March 31, 2016, total shareholder return of 4.6% far outpaced our peer group and the broader bank indexes, many of which have experienced negative returns. We are gratified that our operating strategies and financial results achieved have enabled us to contribute to the communities we serve while delivering value for our shareholders.”
Net Interest Income and Net Interest Margin
Net interest income was $24.7 million in the first quarter 2016 compared to $24.6 million in the fourth quarter 2015 and $23.1 million in the first quarter 2015. Average earning assets were up $33.4 million, led by a $55.0 million increase in loans in the first quarter of 2016 compared to the fourth quarter of 2015. When comparing the first quarter 2016 to the same quarter in 2015, average earning assets increased $313.1 million, including increases of $119.7 million and $193.4 million in investment securities and loans, respectively. First quarter 2016 net interest margin was 3.27%, up slightly from 3.26% for the fourth quarter of 2015 and down 16 basis points from 3.43% for the first quarter of 2015.
Noninterest Income
Noninterest income was $9.2 million for the first quarter 2016 compared to $8.6 million for the fourth quarter 2015 and $8.3 million in the first quarter 2015. Included in company owned life insurance income for the first quarter 2016 is $911 thousand of death benefit proceeds. Included in fourth quarter 2015 other noninterest income is $1.1 million related to the reduction in the Company’s estimate of the fair value of the contingent consideration liability recorded for Scott Danahy Naylon. Exclusive of those items and gains realized from the sale of investment securities, noninterest income was $7.7 million in the first quarter 2016, $6.8 million in the fourth quarter 2015 and $7.2 million in the first quarter 2015. The main factors contributing to the higher noninterest income during the first quarter 2016 compared to the fourth quarter 2015 were increases in insurance income and investment advisory income. Insurance income increased $436 thousand and investment advisory income increased $601 thousand, reflecting the contribution from Courier Capital which was acquired during the first quarter 2016 as part of our strategy to diversify our business lines and increase noninterest income through additional fee-based services. The increase in insurance income was largely due to contingent commission revenue from Scott Danahy Naylon. Such commissions are seasonal in nature and are generally received during the first quarter of each year. The higher noninterest income in the first quarter 2016 compared to the first quarter 2015 was primarily the result of a $756 thousand increase in investment advisory income, reflecting the contribution from Courier Capital, which was partially offset by a $418 thousand decrease in limited partnership income. Income from the Company’s equity method investments in limited partnerships, which are primarily small business investment companies, fluctuates based on the performance of the underlying investments.
Noninterest Expense
Noninterest expense was $21.2 million for the first quarter 2016 compared to $21.8 million for the fourth quarter 2015 and $19.0 million for the first quarter 2015. The decrease in noninterest expense in first quarter 2016 compared to fourth quarter 2015 was primarily due to the $751 thousand of goodwill impairment recognized in the fourth quarter 2015.
The increase in noninterest expense during the first quarter 2016 compared to the first quarter 2015 was largely due to higher salaries and employee benefits coupled with an increase in professional services expense. Salaries and employee benefits expense increased $1.4 million from the first quarter 2015, reflecting the addition of Courier Capital and a combination of additional personnel to support organic growth as part of the Company’s expansion initiatives and higher medical expense as the level of medical claims in the first quarter of 2015 were unusually low. Professional services increased $479 thousand when comparing the first quarter of 2016 to the same period in 2015. The first quarter 2016 professional services expense included approximately $360 thousand of professional services associated with responding to the demands of an activist shareholder.
Income Taxes
Income tax expense was $2.7 million in the first quarter 2016, compared to $2.2 million in the fourth quarter 2015 and $2.9 million in the first quarter 2015. Higher income tax expense during the first quarter 2016 compared to the fourth quarter 2015 was primarily driven by higher pre-tax income. The effective tax rate was 26.4% for the first quarter 2016, compared with an effective tax rate of 24.5% for the fourth quarter of 2015 and 29.8% in the first quarter 2015. The lower effective tax rate in 2016 compared to the same quarter a year ago is a result of the non-taxable life insurance proceeds received in 2016.
Balance Sheet and Capital Management
Total assets were $3.52 billion at March 31, 2016, up $135.5 million from $3.38 billion at December 31, 2015 and up $319.5 million from $3.20 billion at March 31, 2015. The increases were attributable to loan growth and higher investment security balances funded by deposit growth.
Total loans were $2.12 billion at March 31, 2016, up $31.5 million from December 31, 2015 and up $192.4 million from March 31, 2015. The increases in loans are primarily attributable to organic commercial loan growth. Commercial loans totaled $908.1 million as of March 31, 2016, an increase of $28.2 million or 3% from December 31, 2015 and an increase of $151.4 million or 20% from March 31, 2015. Total investment securities were $1.09 billion at March 31, 2016, up $56.2 million or 5% from the end of the prior quarter and up $140.8 million or 15% from March 31, 2015.
Total deposits were $2.96 billion at March 31, 2016, an increase of $229.6 million from December 31, 2015 and an increase of $255.5 million from March 31, 2015. The increase during the first quarter of 2016 was mainly due to seasonal inflows of municipal deposits, while the year-over-year increase was due to higher municipal deposits and successful business development efforts in retail banking. Public deposit balances represented 30% of total deposits at March 31, 2016 and 2015, compared to 25% at December 31, 2015.
Short-term borrowings were $179.2 million at March 31, 2016, down $113.9 million from December 31, 2015 and up $3.6 million from March 31, 2015. Short-term borrowings are typically utilized to manage the seasonality of municipal deposits.
Shareholders’ equity was $314.0 million at March 31, 2016, compared with $293.8 million at December 31, 2015 and $286.7 million at March 31, 2015. Common book value per share was $20.46 at March 31, 2016, an increase of $0.97 or 5% from $19.49 at December 31, 2015 and $1.45 or 8% from $19.01 at March 31, 2015. Tangible common book value per share was $15.18 at March 31, 2016, compared to $14.77 at December 31, 2015 and $14.18 at March 31, 2015. The increases in shareholders’ equity and the book value per share amounts are attributable to net income, stock issued for the acquisition of Courier Capital and to higher net unrealized gains on securities available for sale, a component of accumulated other comprehensive income.
During the first quarter 2016, the Company declared a common stock dividend of $0.20 per common share. The first quarter 2016 dividend returned 40% of first quarter net income to common shareholders.
The Company’s leverage ratio was 7.46% at March 31, 2016, compared to 7.41% at December 31, 2015 and 7.53% at March 31, 2015. The increase in the leverage ratio from December 31, 2015 was due to higher regulatory capital, which excludes changes in accumulated other comprehensive income. The decrease in the leverage ratio from March 31, 2015 was primarily due to an increase in average quarterly assets.
Credit Quality
Non-performing loans were $8.6 million at March 31, 2016, compared to $8.4 million at December 31, 2015 and $11.1 million at March 31, 2015. The $2.5 million decrease from the first quarter 2015 was due to across the board improvement in each of the loan portfolios. The ratio of non-performing loans to total loans was 0.41% at March 31, 2016 and December 31, 2015, and 0.58% at March 31, 2015.
The provision for loans losses for the first quarter 2016 was $2.4 million, a decrease of $230 thousand from the prior quarter and $373 thousand from the first quarter 2015. Net charge-offs were $1.9 million during the first quarter 2016, an $83 thousand decrease compared to the prior quarter and $1.3 million decrease from the first quarter 2015. The ratio of annualized net charge-offs to total average loans was 0.36% during the current quarter, compared to 0.38% during the prior quarter and 0.68% during the first quarter 2015.
The ratio of allowance for loans losses to total loans was 1.30% at March 31, 2016 and December 31, 2015, and 1.41% at March 31, 2015. The ratio of allowance for loans losses to non-performing loans was 322% at March 31, 2016, compared with 321% at December 31, 2015 and 246% at March 31, 2015.
About Financial Institutions, Inc.
Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon and Courier Capital. 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. Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. Financial Institutions, Inc. and its subsidiaries employ approximately 700 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, such as tangible common equity, 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 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 financial 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 Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: the Company’s ability to implement its strategic plan, the Company’s ability to redeploy investment assets into loan assets, whether the Company experiences greater credit losses than expected, whether the Company experiences breaches of its, or third party, information systems, the attitudes and preferences of the Company’s customers, the Company’s ability to successfully integrate and profitably operate Scott Danahy Naylon and Courier Capital, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and the Company’s compliance with regulatory requirements, changes in interest rates, general economic and credit market conditions nationally and regionally, and costs associated with responding to the current proxy contest. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company’s Annual Report onForm 10-K, its Quarterly Reports onForm 10-Q and other documents filed with the SEC. 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
Jordan Darrow
Chief Financial Officer & Treasurer
Darrow Associates
Phone: 585.786.1130
Phone: 512.551.9296
Email: KBKlotzbach@five-starbank.com
Email: jdarrow@darrowir.com
1
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2016
2015
March 31,
December 31,
September 30,
June 30,
March 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
110,944
60,121
51,334
52,554
135,972
Investment securities:
Available for sale
610,013
544,395
577,509
772,639
639,275
Held-to-maturity
476,283
485,717
490,638
320,820
306,255
Total investment securities
1,086,296
1,030,112
1,068,147
1,093,459
945,530
Loans held for sale
609
1,430
1,568
448
656
Loans:
Commercial business
317,776
313,758
297,876
292,791
277,464
Commercial mortgage
590,316
566,101
548,529
536,590
479,226
Residential real estate loans
382,504
381,074
376,552
365,172
355,495
Residential real estate lines
126,526
127,347
128,361
128,844
129,183
Consumer indirect
679,846
676,940
665,714
666,550
662,213
Other consumer
18,066
18,542
19,204
19,326
19,373
Total loans
2,115,034
2,083,762
2,036,236
2,009,273
1,922,954
Allowance for loan losses
27,568
27,085
26,455
27,500
27,191
Total loans, net
2,087,466
2,056,677
2,009,781
1,981,773
1,895,763
Total interest-earning assets
3,189,582
3,114,530
3,097,315
3,104,631
2,860,605
Goodwill and other intangible assets, net
76,567
66,946
67,925
68,158
68,396
Total assets
3,516,572
3,381,024
3,357,608
3,359,459
3,197,077
Deposits:
Noninterest-bearing demand
617,394
641,972
623,296
602,143
559,646
Interest-bearing demand
622,443
523,366
563,731
530,861
611,104
Savings and money market
1,042,910
928,175
942,673
910,215
922,093
Certificates of deposit
677,430
637,018
623,800
613,019
611,852
Total deposits
2,960,177
2,730,531
2,753,500
2,656,238
2,704,695
Short-term borrowings
179,200
293,100
241,400
350,600
175,573
Long-term borrowings, net
39,008
38,990
38,972
38,955
—
Total interest-bearing liabilities
2,560,991
2,420,649
2,410,576
2,443,650
2,320,622
Shareholders’ equity
313,953
293,844
295,434
284,435
286,689
Common shareholders’ equity
296,613
276,504
278,094
267,095
269,349
Tangible common equity (1)
220,046
209,558
210,169
198,937
200,953
Unrealized gain (loss) on investment securities, net of tax
$
7,555
443
5,270
(924
)
5,241
Common shares outstanding
14,495
14,191
14,189
14,184
14,167
Treasury shares
197
207
209
214
231
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.46
%
7.41
7.29
7.31
7.53
Common equity Tier 1 ratio
9.83
%
9.77
9.74
9.50
9.66
Tier 1 risk-based capital
10.56
%
10.50
10.49
10.25
10.45
Total risk-based capital
13.39
%
13.35
13.37
13.17
11.69
Common equity to assets
8.43
%
8.18
8.28
7.95
8.42
Tangible common equity to tangible assets (1)
6.40
%
6.32
6.39
6.04
6.42
Common book value per share
$
20.46
19.49
19.60
18.83
19.01
Tangible common book value per share (1)
$
15.18
14.77
14.81
14.03
14.18
Stock price (Nasdaq: FISI):
High
$
29.53
29.04
25.21
25.50
25.38
Low
$
25.38
24.05
23.54
22.50
21.67
Close
$
29.07
28.00
24.78
24.84
22.93
(1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2016
2015
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
27,635
105,450
27,487
27,007
25,959
24,997
Interest expense
2,916
10,137
2,856
2,876
2,555
1,850
Net interest income
24,719
95,313
24,631
24,131
23,404
23,147
Provision for loan losses
2,368
7,381
2,598
754
1,288
2,741
Net interest income after provision
for loan losses
22,351
87,932
22,033
23,377
22,116
20,406
Noninterest income:
Service charges on deposits
1,724
7,742
1,862
2,037
1,964
1,879
Insurance income
1,672
5,166
1,236
1,265
1,057
1,608
ATM and debit card
1,325
5,084
1,311
1,297
1,283
1,193
Investment advisory
1,243
2,193
642
523
541
487
Company owned life insurance
1,368
1,962
514
488
493
467
Investments in limited partnerships
56
895
30
336
55
474
Loan servicing
116
503
87
153
96
167
Net gain on sale of loans held for sale
78
249
88
53
39
69
Net gain on investment securities
613
1,988
640
286
—
1,062
Net gain on sale of other assets
4
27
7
—
16
4
Amortization of tax credit investment
—
(390
)
—
(390
)
—
—
Other
1,018
4,918
2,163
957
911
887
Total noninterest income
9,217
30,337
8,580
7,005
6,455
8,297
Noninterest expense:
Salaries and employee benefits
11,614
42,439
11,332
10,278
10,606
10,223
Occupancy and equipment
3,625
13,856
3,365
3,417
3,375
3,699
Professional services
1,447
4,502
1,604
1,064
866
968
Computer and data processing
804
3,186
895
779
810
702
Supplies and postage
594
2,155
544
540
508
563
FDIC assessments
436
1,719
442
444
415
418
Advertising and promotions
377
1,120
331
312
238
239
Goodwill impairment charge
—
751
751
—
—
—
Other
2,321
9,665
2,564
2,484
2,418
2,199
Total noninterest expense
21,218
79,393
21,828
19,318
19,236
19,011
Income before income taxes
10,350
38,876
8,785
11,064
9,335
9,692
Income tax expense
2,732
10,539
2,150
2,748
2,750
2,891
Net income
7,618
28,337
6,635
8,316
6,585
6,801
Preferred stock dividends
365
1,462
365
366
366
365
Net income available to common shareholders
$
7,253
26,875
6,270
7,950
6,219
6,436
FINANCIAL RATIOS:
Earnings per share – basic
$
0.50
1.91
0.44
0.56
0.44
0.46
Earnings per share – diluted
$
0.50
1.90
0.44
0.56
0.44
0.46
Cash dividends declared on common stock
$
0.20
0.80
0.20
0.20
0.20
0.20
Common dividend payout ratio
40.00
%
41.88
45.45
35.71
45.45
43.48
Dividend yield (annualized)
2.77
%
2.86
2.83
3.20
3.23
3.54
Return on average assets
0.90
%
0.87
0.78
0.99
0.81
0.89
Return on average tangible assets (1)
0.88
%
0.84
0.76
0.96
0.78
0.86
Return on average equity
9.91
%
9.78
8.86
11.41
9.19
9.68
Return on average common equity
10.00
%
9.87
8.89
11.60
9.24
9.75
Return on average tangible common equity (1)
13.54
%
13.16
11.73
15.47
12.37
13.11
Efficiency ratio (2)
62.90
%
61.58
64.55
59.46
62.00
60.27
(1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
(2) Efficiency ratio equals noninterest expense less other real estate expense and amortization and impairment of goodwill and other 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, proceeds from company owned life insurance, adjustments to contingent liabilities and amortizations of tax credit investment.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited)
(Amounts in thousands)
2016
2015
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
70
37
—
—
26
124
Investment securities (1)
1,027,602
1,014,171
1,049,217
1,067,815
1,029,640
907,871
Loans:
Commercial business
316,143
286,019
297,033
297,216
284,535
264,814
Commercial mortgage
582,142
522,328
554,327
545,875
509,317
478,705
Residential real estate loans
382,077
366,032
379,189
371,318
357,442
355,866
Residential real estate lines
127,317
128,525
127,688
127,826
129,167
129,444
Consumer indirect
678,133
665,454
671,888
663,884
664,222
661,727
Other consumer
17,926
18,969
18,626
18,680
18,848
19,736
Total loans
2,103,738
1,987,327
2,048,751
2,024,799
1,963,531
1,910,292
Total interest-earning assets
3,131,410
3,001,535
3,097,968
3,092,614
2,993,197
2,818,287
Goodwill and other intangible assets, net
76,324
68,138
67,692
68,050
68,294
68,527
Total assets
3,405,451
3,269,890
3,353,702
3,343,802
3,263,111
3,115,516
Interest-bearing liabilities:
Interest-bearing demand
572,424
543,690
545,602
516,448
561,570
551,503
Savings and money market
965,629
908,614
960,768
903,491
929,701
839,218
Certificates of deposit
658,537
616,747
628,944
619,459
616,145
602,115
Short-term borrowings
221,326
262,494
241,957
329,050
226,577
251,768
Long-term borrowings, net
38,997
27,886
38,979
38,962
33,053
-
Total interest-bearing liabilities
2,456,913
2,359,431
2,416,250
2,407,410
2,367,046
2,244,604
Noninterest-bearing demand deposits
617,590
599,334
619,423
625,131
587,396
564,500
Total deposits
2,814,180
2,668,385
2,754,737
2,664,529
2,694,812
2,557,336
Total liabilities
3,096,263
2,980,183
3,056,541
3,054,573
2,975,762
2,830,557
Shareholders’ equity
309,188
289,707
297,161
289,229
287,349
284,959
Common equity
291,848
272,367
279,821
271,889
270,009
267,619
Tangible common equity (2)
$
215,524
204,229
212,129
203,839
201,715
199,092
Common shares outstanding:
Basic
14,395
14,081
14,095
14,087
14,078
14,063
Diluted
14,465
14,135
14,163
14,139
14,121
14,113
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Investment securities
2.48
%
2.46
2.47
2.46
2.44
2.47
Loans
4.21
%
4.21
4.22
4.16
4.18
4.27
Total interest-earning assets
3.64
%
3.62
3.63
3.57
3.58
3.69
Interest-bearing demand
0.14
%
0.14
0.15
0.15
0.14
0.11
Savings and money market
0.13
%
0.13
0.14
0.14
0.12
0.10
Certificates of deposit
0.88
%
0.87
0.88
0.89
0.87
0.84
Short-term borrowings
0.62
%
0.41
0.49
0.41
0.38
0.37
Long-term borrowings, net
6.34
%
6.28
6.34
6.34
6.23
—
Total interest-bearing liabilities
0.48
%
0.43
0.47
0.47
0.43
0.33
Net interest rate spread
3.16
%
3.19
3.16
3.10
3.15
3.36
Net interest rate margin
3.27
%
3.28
3.26
3.20
3.24
3.43
(1) Includes investment securities at adjusted amortized cost.
(2) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
2016
2015
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
27,085
26,455
27,500
27,191
27,637
Net loan charge-offs (recoveries):
Commercial business
502
133
68
(73
)
1,093
Commercial mortgage
(1
)
23
12
194
520
Residential real estate loans
21
110
37
38
98
Residential real estate lines
—
24
30
116
(2
)
Consumer indirect
1,328
1,519
1,475
645
1,317
Other consumer
35
159
177
59
161
Total net charge-offs
1,885
1,968
1,799
979
3,187
Provision for loan losses
2,368
2,598
754
1,288
2,741
Ending balance
$
27,568
27,085
26,455
27,500
27,191
Net charge-offs (recoveries) to average loans (annualized):
Commercial business
0.64
%
0.18
0.09
-0.10
1.67
Commercial mortgage
0.00
%
0.02
0.01
0.15
0.44
Residential real estate loans
0.02
%
0.12
0.04
0.04
0.11
Residential real estate lines
0.00
%
0.07
0.09
0.36
-0.01
Consumer indirect
0.79
%
0.90
0.88
0.39
0.81
Other consumer
0.79
%
3.39
3.76
1.26
3.31
Total loans
0.36
%
0.38
0.35
0.20
0.68
Supplemental information(1)
Non-performing loans:
Commercial business
$
4,056
3,922
3,064
4,643
4,587
Commercial mortgage
1,781
947
1,802
3,070
3,411
Residential real estate loans
1,601
1,848
2,092
2,028
1,829
Residential real estate lines
165
235
223
219
204
Consumer indirect
943
1,467
1,292
728
994
Other consumer
21
21
20
20
47
Total non-performing loans
8,567
8,440
8,493
10,708
11,072
Foreclosed assets
187
163
286
165
139
Total non-performing assets
$
8,754
8,603
8,779
10,873
11,211
Total non-performing loans to total loans
0.41
%
0.41
0.42
0.53
0.58
Total non-performing assets to total assets
0.25
%
0.25
0.26
0.32
0.35
Allowance for loan losses to total loans
1.30
%
1.30
1.30
1.37
1.41
Allowance for loan losses to non-performing loans
322
%
321
311
257
246
(1) At period end.
2
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
2016
2015
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
3,516,572
3,381,024
3,357,608
3,359,459
3,197,077
Less: Goodwill and other intangible assets, net
76,567
66,946
67,925
68,158
68,396
Tangible assets
$
3,440,005
3,314,078
3,289,683
3,291,301
3,128,681
Ending tangible common equity:
Common shareholders’ equity
$
296,613
276,504
278,094
267,095
269,349
Less: Goodwill and other intangible assets, net
76,567
66,946
67,925
68,158
68,396
Tangible common equity
$
220,046
$
209,558
210,169
198,937
200,953
Tangible common equity to tangible assets (1)
6.40
%
6.32
6.39
6.04
6.42
Common shares outstanding
14,495
14,191
14,189
14,184
14,167
Tangible common book value per share (2)
$
15.18
14.77
14.81
14.03
14.18
Average tangible assets:
Average assets
$
3,405,451
3,269,890
3,353,702
3,343,802
3,263,111
3,115,516
Less: Average goodwill and other intangible assets
76,324
68,138
67,692
68,050
68,294
68,527
Average tangible assets
$
3,329,127
3,210,752
3,286,010
3,275,752
3,194,817
3,046,989
Average tangible common equity:
Average common equity
$
291,848
272,367
279,821
271,889
270,009
267,619
Less: Average goodwill and other intangible assets
76,324
68,138
67,692
68,050
68,294
68,527
Average tangible common equity
$
215,524
204,229
212,129
203,839
201,715
199,092
Net income available to common shareholders
$
7,253
26,875
6,270
7,950
6,219
6,436
Return on average tangible common equity (3)
13.54
%
13.16
11.73
15.47
12.37
13.11
Return on average tangible assets (4)
0.88
%
0.84
0.76
0.96
0.78
0.86
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by common shares outstanding.
(3) Net income available to common shareholders (annualized) divided by average tangible common equity.
(4) Net income available to common shareholders (annualized) divided by average tangible assets.
3
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