FINANCIAL INSTITUTIONS, INC. ANNOUNCES FIRST QUARTER 2017 RESULTS
WARSAW, N.Y., April 25, 2017– Financial Institutions, Inc. (Nasdaq: FISI), today reported financial results for the first quarter ended March 31, 2017. Financial Institutions, Inc. (the “Company”) is the parent company of Five Star Bank (the “Bank”), Scott Danahy Naylon Insurance, LLC (“Scott Danahy Naylon” or “SDN”) and Courier Capital, LLC (“Courier Capital”).
Net income for the quarter was $7.9 million compared to $8.7 million for the fourth quarter of 2016 and $7.6 million for the first quarter of 2016. After preferred dividends, net income available to common shareholders was $7.6 million, or $0.52 per diluted share, compared to $8.3 million, or $0.57 per diluted share, for the fourth quarter of 2016 and $7.3 million, or $0.50 per diluted share, for the first quarter of 2016.
President and Chief Executive Officer Martin K. Birmingham stated, “We are off to a very good start in 2017 with first quarter earnings in-line with our expectations and ongoing execution of our strategic plan.
“In mid-February, we furthered our expansion in Buffalo with the opening of a new financial solution center in a prime downtown location. We look forward to serving the needs of downtown residents, businesses and workers, and we believe this branch opening will serve as an excellent foundation for continued growth in Buffalo and all of Western New York.
“We continued to invest in talent during the quarter with the addition of two Community Development Officers, one based in Buffalo and the other in Rochester. These new Five Star Bank associates are playing critical roles in the execution of our Community Reinvestment Act program to increase access to affordable loan and deposit services for low and moderate income customers. This is just one of our many efforts to support our communities, enhancing the quality of life and future outlook for those in need.”
First Quarter 2017 Highlights:
Diluted earnings per share (“EPS”) of $0.52 was $0.02 higher than the first quarter of 2016
Net interest income of $27.0 million increased $2.3 million, or 9.2%, as compared to the first quarter of 2016
Noninterest income of $7.8 million was $1.4 million, or 15.0%, lower than the first quarter of 2016
Excluding the net gain on investment securities from both periods and $911 thousand of death benefit proceeds from company owned life insurance in the first quarter of 2016, noninterest income was $7.6 million in the quarter as compared to $7.7 million in the first quarter of 2016
Return on average common equity was 10.02%
Return on average tangible common equity was 13.30% (computation of this non-GAAP measure provided in Appendix A)
Total assets, interest-earning assets, loans and deposits all reached record-high levels at quarter-end:
Total assets increased $149.5 million during the quarter, to $3.86 billion
Total interest-earning assets increased $95.1 million during the quarter, to $3.52 billion
Total loans increased $62.5 million during the quarter, to $2.40 billion
Total deposits increased $174.4 million during the quarter, to $3.17 billion
The quarterly cash dividend of $0.21 per common share represented a 2.58% dividend yield as of March 31, 2017, and a return of 40% of first quarter net income to common shareholders
Total risk-based capital was 12.75% at quarter-end, representing a strong capital position to support future growth
Credit quality remains strong with total non-performing loans to total loans of 0.33% at quarter-end
Chief Financial Officer Kevin B. Klotzbach added, “We generated solid loan and deposit growth, controlled expenses and maintained a stable net interest margin in the quarter. Our total loan portfolio increased 2.7% from year-end and 13.6% from March 31, 2016. This growth was funded primarily by deposits. Noninterest expense was up 1.1% from the fourth quarter of 2016, primarily due to higher occupancy and equipment expenses related to branch openings, and was down 1.3% from the year earlier period. The net interest margin was 3.23% for the quarter, up one basis point from the previous quarter.
“It is also important to note that results include a lower level of nonrecurring items, reflecting the higher overall quality of first quarter earnings.”
Net Interest Income and Net Interest Margin
Net interest income was $27.0 million for the first quarter of 2017, $273 thousand higher than the fourth quarter of 2016 and $2.3 million higher than the first quarter of 2016.
Average interest-earning assets for the quarter were $3.48 billion, $70.7 million higher than the fourth quarter of 2016 and $346.9 million higher than the first quarter of 2016. The primary driver of the increase was loans, which in turn were funded by increased deposits.
First quarter 2017 net interest margin was 3.23%, one basis point higher than the fourth quarter of 2016 and four basis points lower than the first quarter of 2016. First quarter 2017 net interest margin benefitted from approximately $100 thousand of mortgage-backed security pre-payment fees.
Noninterest Income
Noninterest income was $7.8 million for the first quarter of 2017 as compared to $9.1 million in the fourth quarter of 2016 and $9.2 million in the first quarter of 2016.
Excluding the net gain on investment securities from all periods, noninterest income was $7.6 million in the first quarter of 2017, $1.2 million lower than $8.8 million in the fourth quarter of 2016, and $1.0 million lower than $8.6 million in the first quarter of 2016.
The decrease from the fourth quarter of 2016 was primarily the result of a $1.2 million non-cash fair value adjustment of the contingent consideration liability related to the SDN acquisition recognized in the fourth quarter of 2016.
The decrease from the first quarter of 2016 was primarily the result of $911 thousand of death benefit proceeds from company owned life insurance, a nonrecurring event, received in the first quarter of 2016 and lower insurance income in the first quarter of 2017 due to the loss of legacy SDN accounts, partially offset by higher investment advisory income in the first quarter of 2017 associated with favorable market conditions and successful business development efforts.
Noninterest Expense
Noninterest expense was $20.9 million for the first quarter of 2017 as compared to $20.7 million in the fourth quarter of 2016 and $21.2 million in the first quarter of 2016.
The increase in noninterest expense as compared to the fourth quarter of 2016 was primarily the result of higher occupancy and equipment expenses from our organic growth initiatives.
The decrease in noninterest expense as compared to the first quarter of 2016 was primarily the result of lower professional services. Professional services in the first quarter of 2016 included approximately $360 thousand of expense associated with responding to the demands of an activist shareholder.
Income Taxes
Income tax expense was $3.2 million for the first quarter of 2017 as compared to $3.0 million in the fourth quarter of 2016 and $2.7 million in the first quarter of 2016. The effective tax rate was 28.5% for the first quarter of 2017, 25.9% in the fourth quarter of 2016, and 26.4% in the first quarter of 2016. 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, a non-taxable item. The lower effective tax rate in the first quarter of 2016 was the result of the $911 thousand of death benefit proceeds from company owned life insurance, also a non-taxable item.
Balance Sheet and Capital Management
Total assets were $3.86 billion at March 31, 2017, up $149.5 million from $3.71 billion at December 31, 2016, and up $343.3 million from $3.52 billion at March 31, 2016. The increases were largely the result of loan growth funded by deposit growth.
Total loans were $2.40 billion at March 31, 2017, up $62.5 million, or 2.7%, from December 31, 2016, and up $287.6 million, or 13.6%, from March 31, 2016.
Commercial business loans totaled $375.5 million, up $26.0 million, or 7.4%, from December 31, 2016, and up $57.7 million, or 18.2%, from March 31, 2016.
Commercial mortgage loans totaled $675.0 million, up $4.9 million, or 0.7%, from December 31, 2016, and up $84.7 million, or 14.3%, from March 31, 2016.
Residential real estate loans totaled $428.2 million, up $234 thousand, or 0.1%, from December 31, 2016, and up $45.7 million, or 11.9%, from March 31, 2016.
Consumer indirect loans totaled $786.1 million, up $33.7 million, or 4.5%, from December 31, 2016, and up $106.3 million, or 15.6%, from March 31, 2016.
Total deposits were $3.17 billion at March 31, 2017, an increase of $174.4 million from December 31, 2016, and an increase of $209.5 million from March 31, 2016. The increase from December 31, 2016, was primarily due to public deposit seasonality. The increase from March 31, 2016, was primarily the result of successful business development efforts in both municipal and retail banking. Public deposit balances represented 31% of total deposits at March 31, 2017, compared to 27% at December 31, 2016 and 30% at March 31, 2016.
Short-term borrowings were $303.3 million at March 31, 2017, down $28.2 million from December 31, 2016, and up $124.1 million from March 31, 2016. Short-term borrowings are typically utilized to manage the seasonality of public deposits.
Shareholders’ equity was $325.7 million at March 31, 2017, compared to $320.1 million at December 30, 2016, and $314.0 million at March 31, 2016. Common book value per share was $21.21 at March 31, 2017, an increase of $0.39 or 1.9% from $20.82 at December 31, 2016, and an increase of $0.75 or 3.7% from $20.46 at March 31, 2016. The increases in shareholders’ equity and common book value per share are attributable to net income, less dividends paid, with a partial offset from net unrealized losses on securities available for sale, which is a component of accumulated other comprehensive loss.
During the first quarter 2017, the Company declared a common stock dividend of $0.21 per common share. The first quarter 2017 dividend returned 40% of first quarter net income to common shareholders.
Regulatory capital ratios at March 31, 2017, remained steady with slight downward pressure in comparison to the prior year as a result of strong loan growth and higher asset levels:
Leverage Ratio was 7.30%, compared to 7.36% and 7.46% at December 31, 2016, and March 31, 2016, respectively.
Common Equity Tier 1 Ratio was 9.46%, compared to 9.59% and 9.83% at December 31, 2016, and March 31, 2016, respectively.
Tier 1 Risk-Based Capital was 10.11%, compared to 10.26% and 10.56% at December 31, 2016, and March 31, 2016, respectively.
Total Risk-Based Capital was 12.75%, compared to 12.97% and 13.39% at December 31, 2016, and March 31, 2016, respectively.
1
Credit Quality
Non-performing loans were $8.0 million at March 31, 2017, compared to $6.3 million at December 31, 2016, and $8.6 million at March 31, 2016. The $1.7 million increase from December 31, 2016, was primarily due to higher commercial and residential real estate non-performing loans, partially offset by improvements in the consumer indirect loan portfolio.
The ratio of non-performing loans to total loans was 0.33% at March 31, 2017, compared to 0.27% at December 31, 2016, and 0.41% at March 31, 2016.
The provision for loan losses for the first quarter of 2017 was $2.8 million, a decrease of $576 thousand from the fourth quarter of 2016 and an increase of $413 thousand from the first quarter of 2016. 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 March 31, 2017; however, we continue to monitor this relationship closely.
Net charge-offs were $2.6 million during the first quarter of 2017, an $861 thousand increase compared to the prior quarter and a $749 thousand increase from the first quarter of 2016.
The ratio of annualized net charge-offs to total average loans was 0.45% in the current quarter, compared to 0.30% in the prior quarter and 0.36% in the first quarter of 2016.
The ratio of allowance for loan losses to total loans was 1.29% at March 31, 2017, 1.32% at December 31, 2016, and 1.30% at March 31, 2016.
The ratio of allowance for loan losses to non-performing loans was 388% at March 31, 2017, 489% at December 31, 2016, and 322% at March 31, 2016.
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 45 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 650 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
2
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
2017
2016
March 31,
December 31,
September 30,
June 30,
March 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
149,699
$
71,277
$
110,721
$
67,624
$
110,944
Investment securities:
Available for sale
540,406
539,926
559,495
619,719
610,013
Held-to-maturity
545,381
543,338
528,708
478,549
476,283
Total investment securities
1,085,787
1,083,264
1,088,203
1,098,268
1,086,296
Loans held for sale
2,097
1,050
844
209
609
Loans:
Commercial business
375,518
349,547
350,588
349,432
317,776
Commercial mortgage
675,007
670,058
636,338
614,141
590,316
Residential real estate loans
428,171
427,937
425,882
408,367
382,504
Residential real estate lines
120,874
122,555
123,663
125,054
126,526
Consumer indirect
786,120
752,421
729,644
696,908
679,846
Other consumer
16,937
17,643
17,879
17,929
18,066
Total loans
2,402,627
2,340,161
2,283,994
2,211,831
2,115,034
Allowance for loan losses
31,081
30,934
29,350
28,525
27,568
Total loans, net
2,371,546
2,309,227
2,254,644
2,183,306
2,087,466
Total interest-earning assets
3,523,613
3,428,541
3,357,609
3,292,528
3,189,582
Goodwill and other intangible assets, net
75,343
75,640
75,943
76,252
76,567
Total assets
3,859,865
3,710,340
3,687,365
3,585,589
3,516,572
Deposits:
Noninterest-bearing demand
666,332
677,076
657,624
626,240
617,394
Interest-bearing demand
698,962
581,436
629,413
560,284
622,443
Savings and money market
1,069,901
1,034,194
1,052,224
960,325
1,042,910
Time deposits
734,464
702,516
724,096
711,156
677,430
Total deposits
3,169,659
2,995,222
3,063,357
2,858,005
2,960,177
Short-term borrowings
303,300
331,500
230,200
338,300
179,200
Long-term borrowings, net
39,078
39,061
39,043
39,025
39,008
Total interest-bearing liabilities
2,845,705
2,688,707
2,674,976
2,609,090
2,560,991
Shareholders’ equity
325,688
320,054
326,271
322,176
313,953
Common shareholders’ equity
308,348
302,714
308,931
304,836
296,613
Tangible common equity (1)
233,005
227,074
232,988
228,584
220,046
Unrealized gain (loss) on investment securities, net of tax
$
(1,938
)
$
(2,530
)
$
9,444
$
10,886
$
7,555
Common shares outstanding
14,536
14,538
14,528
14,528
14,495
Treasury shares
156
154
164
164
197
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.30
%
7.36
%
7.39
%
7.39
%
7.46
%
Common equity Tier 1 ratio
9.46
%
9.59
%
9.58
%
9.63
%
9.83
%
Tier 1 risk-based capital
10.11
%
10.26
%
10.27
%
10.33
%
10.56
%
Total risk-based capital
12.75
%
12.97
%
12.98
%
13.08
%
13.39
%
Common equity to assets
7.99
%
8.16
%
8.38
%
8.50
%
8.43
%
Tangible common equity to tangible assets (1)
6.16
%
6.25
%
6.45
%
6.51
%
6.40
%
Common book value per share
$
21.21
$
20.82
$
21.26
$
20.98
$
20.46
Tangible common book value per share (1)
$
16.03
$
15.62
$
16.04
$
15.73
$
15.18
Stock price (Nasdaq: FISI):
High
$
35.40
$
34.55
$
27.63
$
29.49
$
29.53
Low
$
30.50
$
25.98
$
25.16
$
24.56
$
25.38
Close
$
32.95
$
34.20
$
27.11
$
26.07
$
29.07
(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)
2017
2016
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
30,538
$
115,231
$
29,990
$
29,360
$
28,246
$
27,635
Interest expense
3,543
12,541
3,268
3,310
3,047
2,916
Net interest income
26,995
102,690
26,722
26,050
25,199
24,719
Provision for loan losses
2,781
9,638
3,357
1,961
1,952
2,368
Net interest income after provision
for loan losses
24,214
93,052
23,365
24,089
23,247
22,351
Noninterest income:
Service charges on deposits
1,745
7,280
1,888
1,913
1,755
1,724
Insurance income
1,431
5,396
1,134
1,407
1,183
1,672
ATM and debit card
1,329
5,687
1,500
1,441
1,421
1,325
Investment advisory
1,431
5,208
1,274
1,326
1,365
1,243
Company owned life insurance
445
2,808
468
486
486
1,368
Investments in limited partnerships
(30
)
300
47
161
36
56
Loan servicing
120
436
104
104
112
116
Net gain on sale of loans held for sale
48
240
38
46
78
78
Net gain on investment securities
206
2,695
269
426
1,387
613
Net (loss) gain on other assets
(2
)
313
28
199
82
4
Contingent consideration liability adjustment
—
1,170
1,170
—
—
—
Other
1,113
4,227
1,168
1,030
1,011
1,018
Total noninterest income
7,836
35,760
9,088
8,539
8,916
9,217
Noninterest expense:
Salaries and employee benefits
11,369
45,215
11,458
11,325
10,818
11,614
Occupancy and equipment
3,964
14,529
3,623
3,617
3,664
3,625
Professional services
1,199
6,184
948
956
2,833
1,447
Computer and data processing
1,171
4,451
1,116
1,089
1,159
1,087
Supplies and postage
537
2,047
499
490
464
594
FDIC assessments
457
1,735
452
406
441
436
Advertising and promotions
278
1,695
436
302
530
427
Amortization of intangibles
297
1,249
303
309
315
322
Other
1,670
7,566
1,880
2,124
1,896
1,666
Total noninterest expense
20,942
84,671
20,715
20,618
22,120
21,218
Income before income taxes
11,108
44,141
11,738
12,010
10,043
10,350
Income tax expense
3,165
12,210
3,045
3,541
2,892
2,732
Net income
7,943
31,931
8,693
8,469
7,151
7,618
Preferred stock dividends
365
1,462
365
366
366
365
Net income available to common shareholders
$
7,578
$
30,469
$
8,328
$
8,103
$
6,785
$
7,253
FINANCIAL RATIOS:
Earnings per share – basic
$
0.52
$
2.11
$
0.58
$
0.56
$
0.47
$
0.50
Earnings per share – diluted
$
0.52
$
2.10
$
0.57
$
0.56
$
0.47
$
0.50
Cash dividends declared on common stock
$
0.21
$
0.81
$
0.21
$
0.20
$
0.20
$
0.20
Common dividend payout ratio
40.38
%
38.39
%
36.21
%
35.71
%
42.55
%
40.00
%
Dividend yield (annualized)
2.58
%
2.37
%
2.44
%
2.93
%
3.09
%
2.77
%
Return on average assets
0.86
%
0.90
%
0.94
%
0.94
%
0.82
%
0.90
%
Return on average equity
9.94
%
10.01
%
10.68
%
10.34
%
9.07
%
9.91
%
Return on average common equity
10.02
%
10.10
%
10.81
%
10.45
%
9.10
%
10.00
%
Return on average tangible common equity (1)
13.30
%
13.51
%
14.37
%
13.87
%
12.22
%
13.54
%
Efficiency ratio (2)
59.09
%
60.95
%
56.99
%
58.99
%
66.00
%
62.19
%
Effective tax rate
28.5
%
27.7
%
25.9
%
29.5
%
28.8
%
26.4
%
(1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
(2) Efficiency ratio equals noninterest expense 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.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited)
(Amounts in thousands)
2017
2016
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
10,078
$
3,116
$12,011
$
1
$
316
$
70
Investment securities (1)
1,090,063
1,063,221
1,080,941
1,068,866
1,075,220
1,027,602
Loans:
Commercial business
363,367
336,633
347,496
352,696
329,901
316,143
Commercial mortgage
678,613
618,436
659,713
625,003
606,360
582,142
Residential real estate loans
429,746
404,456
425,687
417,854
391,826
382,077
Residential real estate lines
121,594
124,635
122,734
123,312
125,212
127,317
Consumer indirect
767,887
703,975
741,598
711,948
683,722
678,133
Other consumer
16,956
17,620
17,448
17,548
17,562
17,926
Total loans
2,378,163
2,205,755
2,314,676
2,248,361
2,154,583
2,103,738
Total interest-earning assets
3,478,304
3,272,092
3,407,628
3,317,228
3,230,119
3,131,410
Goodwill and other intangible assets, net
75,508
76,170
75,807
76,116
76,437
76,324
Total assets
3,754,470
3,547,105
3,679,569
3,593,672
3,507,760
3,405,451
Interest-bearing liabilities:
Interest-bearing demand
634,141
576,046
604,717
547,545
579,497
572,424
Savings and money market
1,030,363
1,010,510
1,076,884
981,207
1,017,911
965,629
Time deposits
721,404
697,654
711,061
722,098
698,505
658,537
Short-term borrowings
327,195
248,938
244,796
315,122
213,826
221,326
Long-term borrowings, net
39,067
39,023
39,050
39,032
39,015
38,997
Total interest-bearing liabilities
2,752,170
2,572,171
2,676,508
2,605,004
2,548,754
2,456,913
Noninterest-bearing demand deposits
657,190
633,416
655,445
638,417
621,912
617,590
Total deposits
3,043,098
2,917,626
3,048,107
2,889,267
2,917,825
2,814,180
Total liabilities
3,430,504
3,228,099
3,355,894
3,267,808
3,190,589
3,096,263
Shareholders’ equity
323,966
319,006
323,675
325,864
317,171
309,188
Common equity
306,626
301,666
306,335
308,524
299,831
291,848
Tangible common equity (2)
$
231,118
$
225,496
$230,528
$232,408
$
223,394
$
215,524
Common shares outstanding:
Basic
14,479
14,436
14,459
14,456
14,434
14,395
Diluted
14,528
14,491
14,511
14,500
14,489
14,465
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Investment securities
2.46
%
2.45
%
2.41
%
2.44
%
2.48
%
2.48
%
Loans
4.19
%
4.18
%
4.17
%
4.18
%
4.17
%
4.21
%
Total interest-earning assets
3.64
%
3.62
%
3.60
%
3.62
%
3.61
%
3.64
%
Interest-bearing demand
0.14
%
0.14
%
0.14
%
0.15
%
0.14
%
0.14
%
Savings and money market
0.13
%
0.13
%
0.13
%
0.14
%
0.13
%
0.13
%
Time deposits
0.95
%
0.90
%
0.93
%
0.91
%
0.89
%
0.88
%
Short-term borrowings
0.86
%
0.65
%
0.70
%
0.63
%
0.65
%
0.62
%
Long-term borrowings, net
6.32
%
6.33
%
6.33
%
6.33
%
6.33
%
6.34
%
Total interest-bearing liabilities
0.52
%
0.49
%
0.49
%
0.51
%
0.48
%
0.48
%
Net interest rate spread
3.12
%
3.13
%
3.11
%
3.11
%
3.13
%
3.16
%
Net interest rate margin
3.23
%
3.24
%
3.22
%
3.23
%
3.23
%
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.
3
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
2017
2016
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
30,934
$27,085
$
29,350
$
28,525
$
27,568
$
27,085
Net loan charge-offs (recoveries):
Commercial business
964
496
52
(31
)
(27
)
502
Commercial mortgage
(204
)
340
212
127
2
(1
)
Residential real estate loans
(26
)
115
(1
)
61
34
21
Residential real estate lines
33
89
41
4
44
—
Consumer indirect
1,758
4,489
1,361
896
904
1,328
Other consumer
109
260
108
79
38
35
Total net charge-offs
2,634
5,789
1,773
1,136
995
1,885
Provision for loan losses
2,781
9,638
3,357
1,961
1,952
2,368
Ending balance
$
31,081
$30,934
$
30,934
$
29,350
$
28,525
$
27,568
Net charge-offs (recoveries)
to average loans (annualized):
Commercial business
1.08
%
0.15
%
0.06
%
-0.03
%
-0.03
%
0.64
%
Commercial mortgage
-0.12
%
0.05
%
0.13
%
0.08
%
0.00
%
-0.00
%
Residential real estate loans
-0.02
%
0.03
%
-0.00
%
0.06
%
0.03
%
0.02
%
Residential real estate lines
0.11
%
0.07
%
0.13
%
0.01
%
0.14
%
0.00
%
Consumer indirect
0.93
%
0.64
%
0.73
%
0.50
%
0.53
%
0.79
%
Other consumer
2.61
%
1.48
%
2.46
%
1.79
%
0.87
%
0.79
%
Total loans
0.45
%
0.26
%
0.30
%
0.20
%
0.19
%
0.36
%
Supplemental information(1)
Non-performing loans:
Commercial business
$
3,753
$
2,151
$
2,151
$
2,157
$
2,312
$
4,056
Commercial mortgage
1,267
1,025
1,025
1,345
1,547
1,781
Residential real estate loans
1,601
1,236
1,236
1,239
1,485
1,601
Residential real estate lines
336
372
372
274
182
165
Consumer indirect
1,040
1,526
1,526
1,077
1,015
943
Other consumer
23
16
16
9
15
21
Total non-performing loans
8,020
6,326
6,326
6,101
6,556
8,567
Foreclosed assets
58
107
107
294
281
187
Total non-performing assets
$
8,078
$
6,433
$
6,433
$
6,395
$
6,837
$
8,754
Total non-performing loans to total loans
0.33
%
0.27
%
0.27
%
0.27
%
0.30
%
0.41
%
Total non-performing assets to total assets
0.21
%
0.17
%
0.17
%
0.17
%
0.19
%
0.25
%
Allowance for loan losses to total loans
1.29
%
1.32
%
1.32
%
1.29
%
1.29
%
1.30
%
Allowance for loan losses to non-performing loans
388
%
489
%
489
%
481
%
435
%
322
%
(1) At period end.
4
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
2017
2016
First
Year ended
Fourth
Third
Second
First
Quarter
December 31,
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
3,859,865
$
3,710,340
$
3,687,365
$
3,585,589
$
3,516,572
Less: Goodwill and other intangible assets, net
75,343
75,640
75,943
76,252
76,567
Tangible assets
$
3,784,522
$
3,634,700
$
3,611,422
$
3,509,337
$
3,440,005
Ending tangible common equity:
Common shareholders’ equity
$
308,348
$
302,714
$
308,931
$
304,836
$
296,613
Less: Goodwill and other intangible assets, net
75,343
75,640
75,943
76,252
76,567
Tangible common equity
$
233,005
$
227,074
$
232,988
$
228,584
$
220,046
Tangible common equity to tangible assets (1)
6.16
%
6.25
%
6.45
%
6.51
%
6.40
%
Common shares outstanding
14,536
14,538
14,528
14,528
14,495
Tangible common book value per share (2)
$
16.03
$
15.62
$
16.04
$
15.73
$
15.18
Average tangible assets:
Average assets
$
3,754,470
$
3,547,105
$
3,679,569
$
3,593,672
$
3,507,760
$
3,405,451
Less: Average goodwill and other intangible
assets, net
75,508
76,170
75,807
76,116
76,437
76,324
Average tangible assets
$
3,678,962
$
3,470,935
$
3,603,762
$
3,517,556
$
3,431,323
$
3,329,127
Average tangible common equity:
Average common equity
$
306,626
$
301,666
$
306,335
$
308,524
$
299,831
$
291,848
Less: Average goodwill and other intangible
assets, net
75,508
76,170
75,807
76,116
76,437
76,324
Average tangible common equity
$
231,118
$
225,496
$
230,528
$
232,408
$
223,394
$
215,524
Net income available to common shareholders
$
7,578
$
30,469
$
8,328
$
8,103
$
6,785
$
7,253
Return on average tangible common equity (3)
13.30
%
13.51
%
14.37
%
13.87
%
12.22
%
13.54
%
(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.
5
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