FINANCIAL INSTITUTIONS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2016 RESULTS
WARSAW, N.Y., January 24, 2017– Financial Institutions, Inc. (NASDAQ: FISI), today reported financial results for the fourth quarter and year ended December 31, 2016. Financial Institutions, Inc. (the “Company”) is the parent company of Five Star Bank (the “Bank”), Scott Danahy Naylon, LLC (“Scott Danahy Naylon” or “SDN”) and Courier Capital, LLC (“Courier Capital”). The Company’s financial results since January 5, 2016, include the results of operations of Courier Capital, a wealth management subsidiary acquired on that date.
Net income for the quarter was $8.7 million compared to $8.5 million for the third quarter of 2016 and $6.6 million for the fourth quarter of 2015. After preferred dividends, net income available to common shareholders was $8.3 million, or $0.57 per diluted share, compared to $8.1 million, or $0.56 per diluted share, for the third quarter of 2016 and $6.3 million, or $0.44 per diluted share, for the fourth quarter of 2015.
Net income for the full year 2016 was $31.9 million compared to $28.3 million for 2015. Net income available to common shareholders was $30.5 million, or $2.10 per diluted share, compared to $26.9 million, or $1.90 per diluted share, for the full year 2015.
The Company’s President and Chief Executive Officer Martin K. Birmingham stated, “2016 was an eventful year for our Company and I am pleased with our performance, as we delivered double digit growth in net income for the full year.
“We also made great progress in our efforts to increase market share in Rochester and Buffalo. In December, we opened our third financial solution center and 52nd branch in downtown Rochester in the recently renamed Five Star Bank Plaza, and over the course of the next two months we will be relocating our regional administrative center and approximately 150 employees to this building. As part of this relocation, we successfully obtained naming and signage rights for the building, resulting in valuable branding for Five Star Bank. Our fourth financial solution center will open in mid-February in the City of Buffalo. We look forward to bringing our style of banking and lending to downtown Buffalo so that we may serve the needs of nearby residents and businesses.
“We invested in talent across all business segments in 2016, fueling organic growth which we believe will drive future revenue. Recent hires have strengthened our commercial lending and mortgage banking business, as well as our regulatory compliance and enterprise risk management areas. During the fourth quarter of 2016, we welcomed Craig Burton as Senior Vice President, Commercial Real Estate Executive for the Bank. Craig’s knowledge and experience in commercial real estate across Upstate New York, from Buffalo to Albany, position him to successfully lead our commercial real estate platform.
“Our positive momentum is expected to continue into 2017 and we remain focused on our long-term strategic plan to drive strong shareholder returns.”
Fourth Quarter and Full Year 2016 Highlights:
Diluted earnings per share (“EPS”) for the quarter of $0.57 was $0.13 higher than the fourth quarter of 2015
Diluted earnings per share (“EPS”) for the year of $2.10 was $0.20 higher than 2015
Net interest income for the quarter of $26.7 million increased $2.1 million, or 8.5%, as compared to the fourth quarter of 2015
Net interest income for the year of $102.7 million increased $7.4 million, or 7.7%, as compared to 2015
Noninterest income for the quarter of $9.1 million was $508 thousand, or 5.9%, higher than the fourth quarter of 2015
Noninterest income for the year of $35.8 million was $5.4 million, or 17.9%, higher than 2015
Return on average common equity was 10.81% for the quarter and 10.10% for the year
Return on average tangible common equity was 14.37% for the quarter and 13.51% for the year (computation of this non-GAAP measure provided in Appendix A)
Net interest margin was 3.22% for the quarter and 3.24% for the year
Total interest-earning assets, assets, loans and deposits reached record-high year-end levels:
Total interest-earning assets increased $314.0 million in 2016 to $3.4 billion
Total assets increased $329.3 million in 2016 to $3.7 billion
Total loans increased $256.4 million in 2016 to $2.3 billion
Total deposits increased $264.7 million in 2016 to $3.0 billion
Quarterly cash dividend of $0.21 per common share represented a 2.44% dividend yield as of December 31, 2016, and a return of 36% of fourth quarter net income to common shareholders
The Company’s credit quality remains strong with total non-performing loans to total loans of 0.27% at year-end, compared to 0.41% at year-end 2015.
Kevin B. Klotzbach, the Company’s Chief Financial Officer added, “Our strategy is to grow loans and deposits and operate with expense discipline and a strong credit culture. We successfully executed this strategy in 2016 as illustrated by loan portfolio growth of 12.3%, total deposit growth of 9.7%, an efficiency ratio of 60.92% for the year, and improvement in portfolio credit quality with non-performing assets to total assets of 0.17% at year-end compared to 0.25% in the prior year.
“We continue to have ample liquidity to execute our growth strategies and take advantage of the current disruption in our markets. This growth will occur through thoughtful, disciplined decisions as we continue to manage capital effectively for the benefit of our shareholders.”
Net Interest Income and Net Interest Margin
Net interest income was $26.7 million for the fourth quarter of 2016, $672 thousand higher than the third quarter of 2016 and $2.1 million higher than the fourth quarter of 2015.
Average interest-earning assets for the quarter were $3.4 billion, $90.4 million higher than the third quarter of 2016 and $309.7 million higher than the fourth quarter of 2015.
The primary driver of the increase was loans, which were $66.3 million higher in the fourth quarter of 2016 than the third quarter of 2016 and $265.9 million higher than the fourth quarter of 2015.
Fourth quarter 2016 net interest margin was 3.22%, one basis point lower than the third quarter of 2016 and five basis points lower than the fourth quarter of 2015.
Net interest income was $102.7 million for the year 2016, $7.4 million higher than 2015, primarily as a result of a $270.6 million, or 9.0%, increase in average interest-earning assets. These increases were partially offset by a four-basis-point narrowing of the net interest margin, to 3.24% in 2016 from 3.28% in 2015.
Noninterest Income
Noninterest income was $9.1 million for the fourth quarter of 2016 as compared to $8.5 million in the third quarter of 2016 and $8.6 million in the fourth quarter of 2015.
Excluding the net gain on investment securities from all periods, noninterest income was $8.8 million in the fourth quarter of 2016, $706 thousand higher than $8.1 million in the third quarter of 2016, and $879 thousand higher than $7.9 million in the fourth quarter of 2015.
For the fourth quarter of 2016 as compared to the third quarter of 2016, the increase was primarily the result of a $1.2 million non-cash fair value adjustment of the contingent consideration liability related to the SDN acquisition.
Higher noninterest income in the fourth quarter of 2016 as compared to the fourth quarter of 2015 was primarily the result of a $632 thousand increase in investment advisory income, reflecting the contribution from Courier Capital ($1.33 billion in assets under management at December 31, 2016).
Noninterest income was $35.8 million for the year 2016 as compared to $30.3 million in 2015.
Excluding the net gain on investment securities from both periods, noninterest income was $33.0 million in 2016, $4.7 million higher than $28.3 million in 2015.
The increase was primarily the result of a $3.0 million increase in investment advisory income, reflecting the contribution from Courier Capital, as well as $911 thousand of death benefit proceeds from company owned life insurance and a $603 thousand increase in ATM and debit card income.
Noninterest Expense
Noninterest expense was $20.7 million for the fourth quarter of 2016 as compared to $20.6 million in the third quarter of 2016 and $21.8 million in the fourth quarter of 2015.
Lower noninterest expense in the fourth quarter of 2016 as compared to the fourth quarter of 2015 was primarily the result of $751 thousand of goodwill impairment related to the SDN acquisition and $540 thousand of professional service fees attributable to the acquisition of Courier Capital, both of which were recognized in 2015.
Noninterest expense was $84.7 million for the year, a $5.3 million increase from $79.4 million in 2015.
Salaries and employee benefits increased $2.8 million year-over-year, reflecting the impact of the addition of Courier Capital employees and increased staffing associated with the Company’s growth initiatives.
Professional services increased $1.7 million year-over-year, primarily in connection with the Company’s 2016 proxy contest.
Also contributing to the increase were higher occupancy and equipment expense, computer and data processing expense, and advertising and promotions expense, partially offset by the previously mentioned goodwill impairment charge in 2015.
Income Taxes
Income tax expense was $3.0 million for the fourth quarter of 2016 as compared to $3.5 million in the third quarter of 2016 and $2.2 million in the fourth quarter of 2015. The effective tax rate was 25.9% for the fourth quarter of 2016, 29.5% in the third quarter of 2016, and 24.5% in the fourth quarter of 2015. The lower effective tax rate in the fourth quarter of 2016 was a result of the $1.2 million non-cash fair value adjustment of the contingent consideration liability related to the SDN acquisition which was a non-taxable adjustment.
Income tax expense for 2016 was $12.2 million, representing an effective tax rate of 27.7% which is comparable to the effective tax rate of 27.1% in 2015. Effective tax rates are impacted by items of income and expense that are not subject to federal or state taxation. Our effective tax rates differ from the statutory rates primarily due to the effect of interest income from tax-exempt securities, earnings on company owned life insurance and the non-cash fair value adjustment of the contingent consideration liability associated with the SDN acquisition.
Balance Sheet and Capital Management
Total assets were $3.7 billion at December 31, 2016, up $23.0 million from $3.7 billion at September 30, 2016, and up $329.3 million from $3.4 billion at December 31, 2015. The increases were largely the result of loan growth funded by deposit growth.
Total loans were $2.3 billion at December 31, 2016, up $56.2 million, or 2.5%, from September 30, 2016, and up $256.4 million, or 12.3%, from December 31, 2015.
Commercial mortgage loans totaled $670.1 million, up $33.7 million, or 5.3%, from September 30, 2016, and up $104.0 million, or 18.4%, from December 31, 2015.
Commercial business loans totaled $349.5 million, down $1.0 million, or 0.3%, from September 30, 2016, and up $35.8 million, or 11.4%, from December 31, 2015.
Residential real estate loans totaled $427.9 million, up $2.1 million, or 0.5%, from September 30, 2016, and up $46.9 million, or 12.3%, from December 31, 2015.
Consumer indirect loans totaled $752.4 million, up $22.8 million, or 3.1%, from September 30, 2016, and up $75.5 million, or 11.2%, from December 31, 2015.
Total deposits were $3.0 billion at December 31, 2016, a decrease of $68.1 million from September 30, 2016, and an increase of $264.7 million from December 31, 2015. The decrease from September 30, 2016, was primarily due to public deposit seasonality. The increase from December 31, 2015, was primarily the result of successful business development efforts in both municipal and retail banking. Public deposit balances represented 27% of total deposits at December 31, 2016, compared to 29% at September 30, 2016 and 25% at December 30, 2015.
Short-term borrowings were $331.5 million at December 31, 2016, up $101.3 million from September 30, 2016, and up $38.4 million from December 31, 2015. Short-term borrowings are typically utilized to manage the seasonality of public deposits.
Shareholders’ equity was $320.1 million at December 31, 2016, compared to $326.3 million at September 30, 2016, and $293.8 million at December 31, 2015. Common book value per share was $20.82 at December 31, 2016, a decrease of $0.44 or 2.1% from $21.26 at September 30, 2016, and an increase of $1.33 or 6.8% from $19.49 at December 31, 2015. The increases in shareholders’ equity and common book value per share as compared to December 31, 2015, are attributable to net income and stock issued for the acquisition of Courier Capital, with a partial offset by net unrealized losses on securities available for sale, a component of accumulated other comprehensive loss.
During the fourth quarter 2016, the Company declared a common stock dividend of $0.21 per common share. The fourth quarter 2016 dividend returned 36% of fourth quarter net income to common shareholders.
Regulatory capital ratios at December 31, 2016, remained steady with slight downward pressure in comparison to prior year as a result of strong loan growth and higher asset levels:
Leverage Ratio was 7.36%, compared to 7.39% and 7.41% at September 30, 2016, and December 31, 2015, respectively.
Common Equity Tier 1 Ratio was 9.59%, compared to 9.58% and 9.77% at September 30, 2016, and December 31, 2015, respectively.
Tier 1 Risk-Based Capital was 10.26%, compared to 10.27% and 10.50% at September 30, 2016, and December 31, 2015, respectively.
Total Risk-Based Capital was 12.97%, compared to 12.98% and 13.35% at September 30, 2016, and December 31, 2015, respectively.
Credit Quality
Non-performing loans were $6.3 million at December 31, 2016, compared to $6.1 million at September 30, 2016, and $8.4 million at December 31, 2015. The $2.1 million decrease from December 31, 2015, was due to lower commercial non-performing loans resulting from pay-downs on two relationships totaling $1.8 million during the second quarter of 2016, as well as improvements in the non-performing residential real estate loan portfolio.
The ratio of non-performing loans to total loans was 0.27% at December 31, 2016, compared to 0.27% at September 30, 2016, and 0.41% at December 31, 2015.
The provision for loan losses for the fourth quarter of 2016 was $3.4 million, an increase of $1.4 million from the third quarter of 2016 and an increase of $759 thousand from the fourth quarter of 2015. During the fourth quarter 2016, the Company internally downgraded to substandard status one commercial business credit relationship with unpaid principal balances totaling $3.5 million. The downgrade necessitated a provision and increase in our allowance for losses of approximately $1.1 million. These loans were current with respect to principal and interest payments as of December 31, 2016; however, we continue to monitor this relationship closely.
Net charge-offs were $1.8 million during the fourth quarter of 2016, a $637 thousand increase compared to the prior quarter and a $195 thousand decrease from the fourth quarter of 2015.
The ratio of annualized net charge-offs to total average loans was 0.30% in the current quarter, compared to 0.20% in the prior quarter and 0.38% in the fourth quarter of 2015.
The ratio of allowance for loan losses to total loans was 1.32% at December 31, 2016, 1.29% at September 30, 2016, and 1.30% at December 31, 2015.
The ratio of allowance for loan losses to non-performing loans was 489% at December 31, 2016, 481% at September 30, 2016, and 321% at December 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 and lending services to individuals, municipalities and businesses through a network of more than 50 offices and 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. Additional information is available atwww.fiiwarsaw.com.
Non-GAAP Financial Information
This news release contains disclosure regarding tangible common equity, tangible common equity to tangible assets, tangible common book value per share, average tangible common equity and return on average tangible common equity, which are determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non-GAAP measures are useful to our investors as measures of the strength of the Company’s capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide supplemental information that may help investors to analyze our capital position without regard to the effects of intangible assets. Non-GAAP financial measures have inherent limitations and are not uniformly applied by issuers. Therefore, these non-GAAP financial measures should not be considered in isolation, or as a substitute for comparable measures prepared in accordance with GAAP. The comparable GAAP financial measures and reconciliation to the comparable GAAP financial measures 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. 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 on Form 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
Shelly J. Doran
Chief Financial Officer & Treasurer
Director Investor & External Relations
Phone: 585.786.1130
Phone: 585.627.1362
Email: KBKlotzbach@five-starbank.com
Email: SJDoran@five-starbank.com
1
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2016
2015
December 31,
September 30,
June 30,
March 31,
December 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
71,277
$
110,721
$
67,624
$110,944
$
60,121
Investment securities:
Available for sale
539,926
559,495
619,719
610,013
544,395
Held-to-maturity
543,338
528,708
478,549
476,283
485,717
Total investment securities
1,083,264
1,088,203
1,098,268
1,086,296
1,030,112
Loans held for sale
1,050
844
209
609
1,430
Loans:
Commercial business
349,547
350,588
349,432
317,776
313,758
Commercial mortgage
670,058
636,338
614,141
590,316
566,101
Residential real estate loans
427,937
425,882
408,367
382,504
381,074
Residential real estate lines
122,555
123,663
125,054
126,526
127,347
Consumer indirect
752,421
729,644
696,908
679,846
676,940
Other consumer
17,643
17,879
17,929
18,066
18,542
Total loans
2,340,161
2,283,994
2,211,831
2,115,034
2,083,762
Allowance for loan losses
30,934
29,350
28,525
27,568
27,085
Total loans, net
2,309,227
2,254,644
2,183,306
2,087,466
2,056,677
Total interest-earning assets
3,428,541
3,357,609
3,292,528
3,189,582
3,114,530
Goodwill and other intangible assets, net
75,640
75,943
76,252
76,567
66,946
Total assets
3,710,340
3,687,365
3,585,589
3,516,572
3,381,024
Deposits:
Noninterest-bearing demand
677,076
657,624
626,240
617,394
641,972
Interest-bearing demand
581,436
629,413
560,284
622,443
523,366
Savings and money market
1,034,194
1,052,224
960,325
1,042,910
928,175
Time deposits
702,516
724,096
711,156
677,430
637,018
Total deposits
2,995,222
3,063,357
2,858,005
2,960,177
2,730,531
Short-term borrowings
331,500
230,200
338,300
179,200
293,100
Long-term borrowings, net
39,061
39,043
39,025
39,008
38,990
Total interest-bearing liabilities
2,688,707
2,674,976
2,609,090
2,560,991
2,420,649
Shareholders’ equity
320,054
326,271
322,176
313,953
293,844
Common shareholders’ equity
302,714
308,931
304,836
296,613
276,504
Tangible common equity (1)
227,074
232,988
228,584
220,046
209,558
Unrealized (loss) gain on investment securities,
net of tax
$
(2,530
)
$
9,444
$
10,886
$7,555
$
443
Common shares outstanding
14,538
14,528
14,528
14,495
14,191
Treasury shares
154
164
164
197
207
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.36
%
7.39
%
7.39
%
7.46
%
7.41
%
Common equity Tier 1 ratio
9.59
%
9.58
%
9.63
%
9.83
%
9.77
%
Tier 1 risk-based capital
10.26
%
10.27
%
10.33
%
10.56
%
10.50
%
Total risk-based capital
12.97
%
12.98
%
13.08
%
13.39
%
13.35
%
Common equity to assets
8.16
%
8.38
%
8.50
%
8.43
%
8.18
%
Tangible common equity to tangible assets (1)
6.25
%
6.45
%
6.51
%
6.40
%
6.32
%
Common book value per share
$
20.82
$
21.26
$
20.98
$
20.46
$
19.49
Tangible common book value per share (1)
$
15.62
$
16.04
$
15.73
$
15.18
$
14.77
Stock price (Nasdaq: FISI):
High
$
34.55
$
27.63
$
29.49
$
29.53
$
29.04
Low
$
25.98
$
25.16
$
24.56
$
25.38
$
24.05
Close
$
34.20
$
27.11
$
26.07
$
29.07
$
28.00
(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)
Years ended
2016
2015
December 31,
Fourth
Third
Second
First
Fourth
2016
2015
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
115,231
$
105,450
$
29,990
$
29,360
$
28,246
$
27,635
$
27,487
Interest expense
12,541
10,137
3,268
3,310
3,047
2,916
2,856
Net interest income
102,690
95,313
26,722
26,050
25,199
24,719
24,631
Provision for loan losses
9,638
7,381
3,357
1,961
1,952
2,368
2,598
Net interest income after provision
for loan losses
93,052
87,932
23,365
24,089
23,247
22,351
22,033
Noninterest income:
Service charges on deposits
7,280
7,742
1,888
1,913
1,755
1,724
1,862
Insurance income
5,396
5,166
1,134
1,407
1,183
1,672
1,236
ATM and debit card
5,687
5,084
1,500
1,441
1,421
1,325
1,311
Investment advisory
5,208
2,193
1,274
1,326
1,365
1,243
642
Company owned life insurance
2,808
1,962
468
486
486
1,368
514
Investments in limited partnerships
300
895
47
161
36
56
30
Loan servicing
436
503
104
104
112
116
87
Net gain on sale of loans held for sale
240
249
38
46
78
78
88
Net gain on investment securities
2,695
1,988
269
426
1,387
613
640
Net gain on other assets
313
27
28
199
82
4
7
Amortization of tax credit investment
—
(390
)
—
—
—
—
—
Contingent consideration liability adjustment
1,170
1,093
1,170
—
—
—
1,093
Other
4,227
3,825
1,168
1,030
1,011
1,018
1,070
Total noninterest income
35,760
30,337
9,088
8,539
8,916
9,217
8,580
Noninterest expense:
Salaries and employee benefits
45,215
42,439
11,458
11,325
10,818
11,614
11,332
Occupancy and equipment
14,529
13,856
3,623
3,617
3,664
3,625
3,365
Professional services
6,184
4,502
948
956
2,833
1,447
1,604
Computer and data processing
3,402
3,186
853
832
913
804
895
Supplies and postage
2,047
2,155
499
490
464
594
544
FDIC assessments
1,735
1,719
452
406
441
436
442
Advertising and promotions
1,695
1,165
436
302
530
427
358
Goodwill impairment charge
—
751
—
—
—
—
751
Other
9,864
9,620
2,446
2,690
2,457
2,271
2,537
Total noninterest expense
84,671
79,393
20,715
20,618
22,120
21,218
21,828
Income before income taxes
44,141
38,876
11,738
12,010
10,043
10,350
8,785
Income tax expense
12,210
10,539
3,045
3,541
2,892
2,732
2,150
Net income
31,931
28,337
8,693
8,469
7,151
7,618
6,635
Preferred stock dividends
1,462
1,462
365
366
366
365
365
Net income available to common shareholders
$
30,469
$
26,875
$
8,328
$
8,103
$
6,785
$
7,253
$
6,270
FINANCIAL DATA AND RATIOS:
Earnings per share – basic
$
2.11
$
1.91
$
0.58
$
0.56
$
0.47
$
0.50
$
0.44
Earnings per share – diluted
$
2.10
$
1.90
$
0.57
$
0.56
$
0.47
$
0.50
$
0.44
Cash dividends declared on common stock
$
0.81
$
0.80
$
0.21
$
0.20
$
0.20
$
0.20
$
0.20
Common dividend payout ratio
38.39
%
41.88
%
36.21
%
35.71
%
42.55
%
40.00
%
45.45
%
Dividend yield (annualized)
2.37
%
2.86
%
2.44
%
2.93
%
3.09
%
2.77
%
2.83
%
Return on average assets
0.90
%
0.87
%
0.94
%
0.94
%
0.82
%
0.90
%
0.78
%
Return on average equity
10.01
%
9.78
%
10.68
%
10.34
%
9.07
%
9.91
%
8.86
%
Return on average common equity
10.10
%
9.87
%
10.81
%
10.45
%
9.10
%
10.00
%
8.89
%
Return on average tangible common equity (1)
13.51
%
13.16
%
14.37
%
13.87
%
12.22
%
13.54
%
11.73
%
Efficiency ratio (2)
60.92
%
61.58
%
58.00
%
58.05
%
65.03
%
62.90
%
64.55
%
Effective tax rate
27.7
%
27.1
%
25.9
%
29.5
%
28.8
%
26.4
%
24.5
%
(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)
Years ended
2016
2015
December 31,
Fourth
Third
Second
First
Fourth
2016
2015
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
3,116
$
37
$
12,011
$
1
$
316
$
70
$
—
Investment securities (1)
1,063,221
1,014,171
1,080,941
1,068,866
1,075,220
1,027,602
1,049,217
Loans:
Commercial business
336,633
286,019
347,496
352,696
329,901
316,143
297,033
Commercial mortgage
618,436
522,328
659,713
625,003
606,360
582,142
554,327
Residential real estate loans
404,456
366,032
425,687
417,854
391,826
382,077
379,189
Residential real estate lines
124,635
128,525
122,734
123,312
125,212
127,317
127,688
Consumer indirect
703,975
665,454
741,598
711,948
683,722
678,133
671,888
Other consumer
17,620
18,969
17,448
17,548
17,562
17,926
18,626
Total loans
2,205,755
1,987,327
2,314,676
2,248,361
2,154,583
2,103,738
2,048,751
Total interest-earning assets
3,272,092
3,001,535
3,407,628
3,317,228
3,230,119
3,131,410
3,097,968
Goodwill and other intangible assets, net
76,170
68,138
75,807
76,116
76,437
76,324
67,692
Total assets
3,547,105
3,269,890
3,679,569
3,593,672
3,507,760
3,405,451
3,353,702
Interest-bearing liabilities:
Interest-bearing demand
576,046
543,690
604,717
547,545
579,497
572,424
545,602
Savings and money market
1,010,510
908,614
1,076,884
981,207
1,017,911
965,629
960,768
Time deposits
697,654
616,747
711,061
722,098
698,505
658,537
628,944
Short-term borrowings
248,938
262,494
244,796
315,122
213,826
221,326
241,957
Long-term borrowings, net
39,023
27,886
39,050
39,032
39,015
38,997
38,979
Total interest-bearing liabilities
2,572,171
2,359,431
2,676,508
2,605,004
2,548,754
2,456,913
2,416,250
Noninterest-bearing demand deposits
633,416
599,334
655,445
638,417
621,912
617,590
619,423
Total deposits
2,917,626
2,668,385
3,048,107
2,889,267
2,917,825
2,814,180
2,754,737
Total liabilities
3,228,099
2,980,183
3,355,894
3,267,808
3,190,589
3,096,263
3,056,541
Shareholders’ equity
319,006
289,707
323,675
325,864
317,171
309,188
297,161
Common equity
301,666
272,367
306,335
308,524
299,831
291,848
279,821
Tangible common equity (2)
$
225,496
$
204,229
$
230,528
$232,408
$223,394
$
215,524
$212,129
Common shares outstanding:
Basic
14,436
14,081
14,459
14,456
14,434
14,395
14,095
Diluted
14,491
14,135
14,511
14,500
14,489
14,465
14,163
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Investment securities
2.45
%
2.46
%
2.41
%
2.44
%
2.48
%
2.48
%
2.47
%
Loans
4.18
%
4.21
%
4.17
%
4.18
%
4.17
%
4.21
%
4.22
%
Total interest-earning assets
3.62
%
3.62
%
3.60
%
3.62
%
3.61
%
3.64
%
3.63
%
Interest-bearing demand
0.14
%
0.14
%
0.14
%
0.15
%
0.14
%
0.14
%
0.15
%
Savings and money market
0.13
%
0.13
%
0.13
%
0.14
%
0.13
%
0.13
%
0.14
%
Time deposits
0.90
%
0.87
%
0.93
%
0.91
%
0.89
%
0.88
%
0.88
%
Short-term borrowings
0.65
%
0.41
%
0.70
%
0.63
%
0.65
%
0.62
%
0.49
%
Long-term borrowings, net
6.33
%
6.28
%
6.33
%
6.33
%
6.33
%
6.34
%
6.34
%
Total interest-bearing liabilities
0.49
%
0.43
%
0.49
%
0.51
%
0.48
%
0.48
%
0.47
%
Net interest rate spread
3.13
%
3.19
%
3.11
%
3.11
%
3.13
%
3.16
%
3.16
%
Net interest rate margin
3.24
%
3.28
%
3.22
%
3.23
%
3.23
%
3.27
%
3.27
%
(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.
2
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
Years ended
2016
2015
December 31,
Fourth
Third
Second
First
Fourth
2016
2015
Quarter
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
27,085
$27,637
$29,350
$
28,525
$27,568
$
27,085
$
26,455
Net loan charge-offs (recoveries):
Commercial business
496
1,221
52
(31
)
(27
)
502
133
Commercial mortgage
340
749
212
127
2
(1
)
23
Residential real estate loans
115
283
(1
)
61
34
21
110
Residential real estate lines
89
168
41
4
44
—
24
Consumer indirect
4,489
4,956
1,361
896
904
1,328
1,519
Other consumer
260
556
108
79
38
35
159
Total net charge-offs
5,789
7,933
1,773
1,136
995
1,885
1,968
Provision for loan losses
9,638
7,381
3,357
1,961
1,952
2,368
2,598
Ending balance
$
30,934
$27,085
$30,934
$
29,350
$28,525
$
27,568
$
27,085
Net charge-offs (recoveries)
to average loans (annualized):
Commercial business
0.15
%
0.43%
0.06
%
-0.03
%
-0.03%
0.64
%
0.18
%
Commercial mortgage
0.05
%
0.14%
0.13
%
0.08
%
0.00
%
-0.00
%
0.02
%
Residential real estate loans
0.03
%
0.08%
-0.00%
0.06
%
0.03
%
0.02
%
0.12
%
Residential real estate lines
0.07
%
0.13%
0.13
%
0.01
%
0.14
%
0.00
%
0.07
%
Consumer indirect
0.64
%
0.74%
0.73
%
0.50
%
0.53
%
0.79
%
0.90
%
Other consumer
1.48
%
2.93%
2.46
%
1.79
%
0.87
%
0.79
%
3.39
%
Total loans
0.26
%
0.40%
0.30
%
0.20
%
0.19
%
0.36
%
0.38
%
Supplemental information (1)
Non-performing loans:
Commercial business
$
2,151
$3,922
$2,151
$
2,157
$2,312
$
4,056
$
3,922
Commercial mortgage
1,025
947
1,025
1,345
1,547
1,781
947
Residential real estate loans
1,236
1,848
1,236
1,239
1,485
1,601
1,848
Residential real estate lines
372
235
372
274
182
165
235
Consumer indirect
1,526
1,467
1,526
1,077
1,015
943
1,467
Other consumer
16
21
16
9
15
21
21
Total non-performing loans
6,326
8,440
6,326
6,101
6,556
8,567
8,440
Foreclosed assets
107
163
107
294
281
187
163
Total non-performing assets
$
6,433
$8,603
$6,433
$
6,395
$6,837
$
8,754
$
8,603
Total non-performing loans to total loans
0.27
%
0.41%
0.27
%
0.27
%
0.30
%
0.41
%
0.41
%
Total non-performing assets to total assets
0.17
%
0.25%
0.17
%
0.17
%
0.19
%
0.25
%
0.25
%
Allowance for loan losses to total loans
1.32
%
1.30%
1.32
%
1.29
%
1.29
%
1.30
%
1.30
%
Allowance for loan losses
to non-performing loans
489
%
321
%
489
%
481
%
435
%
322
%
321
%
(1) At period end.
3
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
Years ended
2016
2015
December 31,
Fourth
Third
Second
First
Fourth
2016
2015
Quarter
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
3,710,340
$
3,687,365
$
3,585,589
$
3,516,572
$
3,381,024
Less: Goodwill and other intangible assets, net
75,640
75,943
76,252
76,567
66,946
Tangible assets
$
3,634,700
$
3,611,422
$
3,509,337
$
3,440,005
$
3,314,078
Ending tangible common
equity:
Common shareholders’ equity
$
302,714
$
308,931
$
304,836
$
296,613
$
276,504
Less: Goodwill and other intangible assets, net
75,640
75,943
76,252
76,567
66,946
Tangible common equity
$
227,074
$
232,988
$
228,584
$
220,046
$
209,558
Tangible common equity to tangible assets (1)
6.25
%
6.45
%
6.51
%
6.40
%
6.32
%
Common shares outstanding
14,538
14,528
14,528
14,495
14,191
Tangible common book value per
share (2)
$
15.62
$
16.04
$
15.73
$
15.18
$
14.77
Average tangible assets:
Average assets
$
3,547,105
$
3,269,890
$
3,679,569
$
3,593,672
$
3,507,760
$
3,405,451
$
3,353,702
Less: Average goodwill and other intangible assets, net
76,170
68,138
75,807
76,116
76,437
76,324
67,692
Average tangible assets
$
3,470,935
$
3,201,752
$
3,603,762
$
3,517,556
$
3,431,323
$
3,329,127
$
3,286,010
Average tangible common
equity:
Average common equity
$
301,666
$
272,367
$
306,335
$
308,524
$
299,831
$
291,848
$
279,821
Less: Average goodwill and other intangible assets, net
76,170
68,138
75,807
76,116
76,437
76,324
67,692
Average tangible common equity
$
225,496
$
204,229
$
230,528
$
232,408
$
223,394
$
215,524
$
212,129
Net income available to common shareholders
$
30,469
$
26,875
$
8,328
$
8,103
$
6,785
$
7,253
$
6,270
Return on average tangible common equity (3)
13.51
%
13.16
%
14.37
%
13.87
%
12.22
%
13.54
%
11.73
%
(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
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