FINANCIAL INSTITUTIONS, INC. ANNOUNCES THIRD QUARTER 2017 RESULTS
—Surpassed $4 Billion in Total Assets
WARSAW, N.Y., October 24, 2017– Financial Institutions, Inc. (NASDAQ: FISI), today reported financial and operational results for the third quarter ended September 30, 2017. 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”).
Net income for the quarter was $8.3 million, compared to $6.2 million for the second quarter of 2017 and $8.5 million for the third quarter of 2016. After preferred dividends, net income available to common shareholders was $7.9 million, or $0.52 per diluted share (“EPS”), compared to $5.9 million, or $0.40 per diluted share, for the second quarter of 2017 and $8.1 million, or $0.56 per diluted share, for the third quarter of 2016.
President and Chief Executive Officer Martin K. Birmingham stated, “It was a good quarter for our Company and we made significant progress on key initiatives. We sold nearly 500,000 shares of common stock under our ongoing at-the-market equity offering (“ATM Offering”), generating approximately $13.0 million of net proceeds. The capital raised through the offering positions us to continue to take advantage of growth opportunities in our geographic footprint. In late August, we acquired the assets of a Buffalo-area wealth management firm, furthering our strategy to increase fee-based noninterest income and diversify revenues. This bolt-on acquisition increases Courier Capital’s total assets under management to approximately $1.6 billion and expands its client base in Western New York.
“We are also pleased to announce that we have achieved the important milestone of surpassing $4 billion in total assets. This accomplishment was achieved through the collective performance of our team and the successful execution of our strategic plan.”
Chief Financial Officer Kevin B. Klotzbach added, “We continued to generate loan growth in the third quarter of 2017 — total loans were 3.9% higher than the prior quarter, including 4.7% growth in commercial mortgage loans, 5.3% growth in commercial business loans and 3.7% growth in consumer indirect loans. In a challenging interest rate environment, we maintained a stable net interest margin. Our margin of 3.17% in the third quarter was one basis point lower than the prior quarter, primarily as a result of the higher cost of short-term borrowings.
“We are pleased with the progress made to date on our ATM offering. The issuance of common stock has positively impacted our tangible common equity to tangible assets ratio; however, it also negatively impacted EPS by approximately two cents in the quarter.”
Third Quarter 2017 Highlights:
Net interest income of $28.4 million increased $2.4 million, or 9.2%, as compared to the third quarter of 2016
Noninterest income of $8.6 million was $35 thousand, or 0.4%, higher than the third quarter of 2016
Excluding the net gain on investment securities from both periods, noninterest income was $8.4 million, 3.4% higher than the third quarter of 2016
Total interest-earning assets, assets, loans and deposits all reached record-high levels at quarter-end:
Total interest-earning assets increased $115.3 million during the quarter, to $3.71 billion
Total assets increased $130.1 million during the quarter, to $4.02 billion
Total loans increased $99.4 million during the quarter, to $2.62 billion
Total deposits increased $149.0 million during the quarter, to $3.28 billion
The Company declared a quarterly cash dividend of $0.21 per common share, which represented a 2.89% annualized dividend yield as of September 30, 2017, and a return of 40% of third quarter net income to common shareholders
The Company made significant progress on its priority to grow Five Star Bank’s residential mortgage lending business
The Company continued its ATM Offering and sold 498,038 common shares, generating $13.5 million of gross proceeds ($13.0 million of net proceeds)
Courier Capital acquired the assets of Robshaw & Julian Associates, a Western New York investment advisory firm
“At-The-Market” Offering of Common Stock
On May 30, 2017, the Company announced an ATM Offering program under which it may sell up to $40 million of its common stock. The Company expects to use the net proceeds of this offering to support organic growth and other general corporate purposes, including contributing capital to its banking subsidiary, Five Star Bank. To date, the Company has sold 1,069,635 shares of its common stock under this program at a weighted average price of $29.01, representing gross proceeds of $31.0 million. Net proceeds received were $29.7 million.
Acquisition of Robshaw & Julian Associates
On August 31, 2017, Courier Capital acquired the assets of Robshaw & Julian Associates, Inc., an investment advisor based in Williamsville, New York. The firm’s assets under management (“AUM”) totaled approximately $175 million, increasing Courier Capital’s AUM after closing to approximately $1.6 billion. The prior owners of the firm have been named officers of Courier Capital, where they are expected to continue to manage their portfolios.
Net Interest Income and Net Interest Margin
Net interest income was $28.4 million for the third quarter of 2017, $1.0 million higher than the second quarter of 2017 and $2.4 million higher than the third quarter of 2016.
Average interest-earning assets for the quarter were $3.67 billion, $111.7 million higher than the second quarter of 2017 and $351.4 million higher than the third quarter of 2016. The primary driver of the increase was organic loan growth.
Third quarter 2017 net interest margin was 3.17%, one basis point lower than the second quarter of 2017 and six basis points lower than the third quarter of 2016. Net interest margin has been negatively impacted by a flattening of the yield curve and higher short-term borrowing costs.
Noninterest Income
Noninterest income was $8.6 million for the third quarter of 2017 as compared to $9.3 million in the second quarter of 2017 and $8.5 million in the third quarter of 2016.
Excluding the net gain on investment securities from all periods, noninterest income was $8.4 million in the third quarter of 2017, $733 thousand lower than $9.1 million in the second quarter of 2017, and $277 thousand higher than $8.1 million in the third quarter of 2016.
Lower noninterest income in the third quarter of 2017 as compared to the second quarter of 2017 was primarily the result of a second quarter non-recurring $1.2 million non-cash fair value adjustment of contingent consideration liability relating to SDN. Partially offsetting this decrease was a $355 thousand increase in insurance income due to the timing of customer renewals.
Higher noninterest income in the third quarter of 2017 as compared to the third quarter of 2016 was primarily the result of a $171 thousand increase in investment advisory income and the recognition of a $127 thousand fair value adjustment to our derivative financial instruments.
Noninterest Expense
Noninterest expense was $22.5 million for the third quarter of 2017 as compared to $23.9 million in the second quarter of 2017 and $20.6 million in the third quarter of 2016.
Noninterest expense decreased from the second quarter of 2017 primarily as a result of a second quarter non-recurring $1.6 million non-cash goodwill impairment charge relating to SDN.
The increase in noninterest expense as compared to the third quarter of 2016 was primarily the result of higher salaries and employee benefits, occupancy and equipment expenses, and computer and data processing expenses related to our organic growth initiatives.
1
Income Taxes
Income tax expense was $3.5 million for the third quarter of 2017 as compared to $2.7 million in the second quarter of 2017 and $3.5 million in the third quarter of 2016. The effective tax rate was 29.5% for the third quarter of 2017, 30.5% in the second quarter of 2017, and 29.5% in the third quarter of 2016. The higher effective tax rate in the second quarter of 2017 was a result of the $1.6 million non-cash goodwill impairment charge, partially offset by the $1.2 million non-cash fair value adjustment of contingent consideration liability, both of which were non-taxable adjustments related to our 2014 acquisition of SDN.
Balance Sheet and Capital Management
Total assets were $4.02 billion at September 30, 2017, up $130.1 million from $3.89 billion at June 30, 2017, and up $311.3 million from $3.71 billion at December 31, 2016. The increases were primarily the result of loan growth funded by deposit growth.
Total loans were $2.62 billion at September 30, 2017, up $99.4 million, or 3.9%, from June 30, 2017, and up $276.1 million, or 11.8%, from December 31, 2016.
Commercial business loans totaled $419.4 million, up $21.1 million, or 5.3%, from June 30, 2017, and up $69.9 million, or 20.0%, from December 31, 2016.
Commercial mortgage loans totaled $758.0 million, up $33.9 million, or 4.7%, from June 30, 2017, and up $87.9 million, or 13.1%, from December 31, 2016.
Residential real estate loans totaled $446.0 million, up $14.0 million, or 3.2%, from June 30, 2017, and up $18.1 million, or 4.2%, from December 31, 2016.
Consumer indirect loans totaled $857.5 million, up $30.8 million, or 3.7%, from June 30, 2017, and up $105.1 million, or 14.0%, from December 31, 2016.
Total deposits were $3.28 billion at September 30, 2017, an increase of $149.0 million from June 30, 2017, and an increase of $286.3 million from December 31, 2016. The increase from June 30, 2017, was primarily due to public deposit seasonality. The increase from December 31, 2016, was primarily the result of successful business development efforts in both municipal and retail banking. Public deposit balances represented 28% of total deposits at September 30, 2017, compared to 27% at June 30, 2017, and 27% at December 31, 2016. Nonpublic deposits increased 2.7% from June 30, 2017, and 7.5% from December 31, 2016.
Short-term borrowings were $310.8 million at September 30, 2017, down $36.7 million from June 30, 2017, and down $20.7 million from December 31, 2016. Short-term borrowings are typically utilized to manage the seasonality of public deposits.
Shareholders’ equity was $366.0 million at September 30, 2017, compared to $347.6 million at June 30, 2017, and $320.1 million at December 31, 2016. Common book value per share was $22.31 at September 30, 2017, an increase of $0.47 or 2.2% from $21.84 at June 30, 2017, and an increase of $1.49 or 7.2% from $20.82 at December 31, 2016. The increases in shareholders’ equity and common book value per share are attributable to common stock issued through our ATM Offering plus net income less dividends paid, net of the change in unrealized gain (loss) on investment securities.
During the third quarter 2017, the Company declared a common stock dividend of $0.21 per common share. The third quarter 2017 dividend returned 40% of third quarter net income to common shareholders.
Regulatory capital ratios at September 30, 2017, were higher than the prior quarter and prior year due to increased capital as a result of the recent ATM Offering:
Leverage Ratio was 7.91%, compared to 7.70% and 7.36% at June 30, 2017, and December 31, 2016, respectively.
Common Equity Tier 1 Ratio was 10.09%, compared to 9.86% and 9.59% at June 30, 2017, and December 31, 2016, respectively.
Tier 1 Risk-Based Capital was 10.69%, compared to 10.48% and 10.26% at June 30, 2017, and December 31, 2016, respectively.
Total Risk-Based Capital was 13.24%, compared to 13.09% and 12.97% at June 30, 2017, and December 31, 2016, respectively.
Credit Quality
Non-performing loans were $12.6 million at September 30, and June 30, 2017, and $6.3 million at December 31, 2016. The increase from December 31, 2016, was primarily the result of the second quarter of 2017 internal downgrade of two commercial credit relationships with unpaid principal balances totaling $5.6 million.
The provision for loan losses for the quarter was $2.8 million, a decrease of $1.0 million from the second quarter of 2017 and an increase of $841 thousand from the third quarter of 2016. The higher provision in the second quarter of 2017 was primarily attributable to the downgrade of one commercial credit relationship. The downgrade necessitated a provision and increase in allowance for loan losses of approximately $925 thousand. The increase in provision from the third quarter of 2016 is primarily attributable to growth in the total loan portfolio.
The ratio of annualized net charge-offs to total average loans was 0.25% in the current quarter, compared to 0.29% in the prior quarter and 0.20% in the third quarter of 2016.
The ratio of non-performing loans to total loans was 0.48% at September 30, 2017, compared to 0.50% at June 30, 2017, and 0.27% at December 31, 2016.
The ratio of allowance for loans losses to total loans was 1.31% at September 30, 2017, 1.32% at June 30, 2017, and 1.32% at December 31, 2016.
The ratio of allowance for loan losses to non-performing loans was 273% at September 30, 2017, 263% at June 30, 2017, and 489% at December 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 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
September 30,
June 30,
March 31,
December 31,
September 30,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
97,838
$
84,537
$
149,699
$71,277
$110,721
Investment securities:
Available for sale
551,491
540,575
540,406
539,926
559,495
Held-to-maturity
538,332
533,471
545,381
543,338
528,708
Total investment securities
1,089,823
1,074,046
1,085,787
1,083,264
1,088,203
Loans held for sale
2,407
1,864
2,097
1,050
844
Loans:
Commercial business
419,415
398,343
375,518
349,547
350,588
Commercial mortgage
757,987
724,064
675,007
670,058
636,338
Residential real estate loans
446,044
432,053
428,171
427,937
425,882
Residential real estate lines
117,621
118,611
120,874
122,555
123,663
Consumer indirect
857,528
826,708
786,120
752,421
729,644
Other consumer
17,640
17,093
16,937
17,643
17,879
Total loans
2,616,235
2,516,872
2,402,627
2,340,161
2,283,994
Allowance for loan losses
34,347
33,159
31,081
30,934
29,350
Total loans, net
2,581,888
2,483,713
2,371,546
2,309,227
2,254,644
Total interest-earning assets
3,708,385
3,593,106
3,523,613
3,428,541
3,357,609
Goodwill and other intangible assets, net
74,997
73,477
75,343
75,640
75,943
Total assets
4,021,591
3,891,538
3,859,865
3,710,340
3,687,365
Deposits:
Noninterest-bearing demand
710,865
677,124
666,332
677,076
657,624
Interest-bearing demand
656,703
631,451
698,962
581,436
629,413
Savings and money market
1,050,487
999,125
1,069,901
1,034,194
1,052,224
Time deposits
863,453
824,786
734,464
702,516
724,096
Total deposits
3,281,508
3,132,486
3,169,659
2,995,222
3,063,357
Short-term borrowings
310,800
347,500
303,300
331,500
230,200
Long-term borrowings, net
39,114
39,096
39,078
39,061
39,043
Total interest-bearing liabilities
2,920,557
2,841,958
2,845,705
2,688,707
2,674,976
Shareholders’ equity
366,002
347,641
325,688
320,054
326,271
Common shareholders’ equity
348,668
330,301
308,348
302,714
308,931
Tangible common equity (1)
273,671
256,824
233,005
227,074
232,988
Unrealized gain (loss) on investment securities,
net of tax
$
17
$
(232
)
$
(1,938
)
$(2,530)
$
9,444
Common shares outstanding
15,626
15,127
14,536
14,538
14,528
Treasury shares
136
137
156
154
164
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
7.91
%
7.70
%
7.30
%
7.36
%
7.39
%
Common equity Tier 1 ratio
10.09
%
9.86
%
9.46
%
9.59
%
9.58
%
Tier 1 risk-based capital
10.69
%
10.48
%
10.11
%
10.26
%
10.27
%
Total risk-based capital
13.24
%
13.09
%
12.75
%
12.97
%
12.98
%
Common equity to assets
8.67
%
8.49
%
7.99
%
8.16
%
8.38
%
Tangible common equity to tangible assets (1)
6.93
%
6.73
%
6.16
%
6.25
%
6.45
%
Common book value per share
$
22.31
$
21.84
$
21.21
$
20.82
$
21.26
Tangible common book value per share (1)
$
17.51
$
16.98
$
16.03
$
15.62
$
16.04
Stock price (Nasdaq: FISI):
High
$
31.15
$
35.35
$
35.40
$
34.55
$
27.63
Low
$
25.65
$
29.09
$
30.50
$
25.98
$
25.16
Close
$
28.80
$
29.80
$
32.95
$
34.20
$
27.11
(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)
Nine months ended
2017
2016
September 30,
Third
Second
First
Fourth
Third
2017
2016
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
95,343
$
85,241
$
33,396
$
31,409
$
30,538
$
29,990
$
29,360
Interest expense
12,488
9,273
4,958
3,987
3,543
3,268
3,310
Net interest income
82,855
75,968
28,438
27,422
26,995
26,722
26,050
Provision for loan losses
9,415
6,281
2,802
3,832
2,781
3,357
1,961
Net interest income after provision
for loan losses
73,440
69,687
25,636
23,590
24,214
23,365
24,089
Noninterest income:
Service charges on deposits
5,486
5,392
1,901
1,840
1,745
1,888
1,913
Insurance income
4,052
4,262
1,488
1,133
1,431
1,134
1,407
ATM and debit card
4,230
4,187
1,445
1,456
1,329
1,500
1,441
Investment advisory
4,357
3,934
1,497
1,429
1,431
1,274
1,326
Company owned life insurance
1,367
2,340
449
473
445
468
486
Investments in limited partnerships
91
253
(14
)
135
(30
)
47
161
Loan servicing
348
332
105
123
120
104
104
Net gain on sale of loans held for sale
270
202
150
72
48
38
46
Net gain on investment securities
600
2,426
184
210
206
269
426
Net gain (loss) on other assets
25
285
21
6
(2
)
28
199
Contingent consideration liability adjustment
1,200
—
—
1,200
—
1,170
—
Other
3,717
3,059
1,348
1,256
1,113
1,168
1,030
Total noninterest income
25,743
26,672
8,574
9,333
7,836
9,088
8,539
Noninterest expense:
Salaries and employee benefits
35,703
33,757
12,348
11,986
11,369
11,458
11,325
Occupancy and equipment
12,235
10,906
4,087
4,184
3,964
3,623
3,617
Professional services
3,741
5,236
1,313
1,229
1,199
948
956
Computer and data processing
3,691
3,335
1,208
1,312
1,171
1,116
1,089
Supplies and postage
1,496
1,548
492
467
537
499
490
FDIC assessments
1,366
1,283
440
469
457
452
406
Advertising and promotions
939
1,259
188
473
278
436
302
Amortization of intangibles
876
946
288
291
297
303
309
Goodwill impairment
1,575
—
—
1,575
—
—
—
Other
5,728
5,686
2,103
1,955
1,670
1,880
2,124
Total noninterest expense
67,350
63,956
22,467
23,941
20,942
20,715
20,618
Income before income taxes
31,833
32,403
11,743
8,982
11,108
11,738
12,010
Income tax expense
9,365
9,165
3,464
2,736
3,165
3,045
3,541
Net income
22,468
23,238
8,279
6,246
7,943
8,693
8,469
Preferred stock dividends
1,097
1,097
366
366
365
365
366
Net income available to common shareholders
$
21,371
$
22,141
$
7,913
$
5,880
$
7,578
$
8,328
$
8,103
FINANCIAL RATIOS:
Earnings per share – basic
$
1.44
$
1.53
$
0.52
$
0.40
$
0.52
$
0.58
$
0.56
Earnings per share – diluted
$
1.44
$
1.53
$
0.52
$
0.40
$
0.52
$
0.57
$
0.56
Cash dividends declared on common stock
$
0.63
$
0.60
$
0.21
$
0.21
$
0.21
$
0.21
$
0.20
Common dividend payout ratio
43.75
%
39.22
%
40.38
%
52.50
%
40.38
%
36.21
%
35.71
%
Dividend yield (annualized)
2.92
%
2.96
%
2.89
%
2.83
%
2.58
%
2.44
%
2.93
%
Return on average assets
0.78
%
0.89
%
0.83
%
0.65
%
0.86
%
0.94
%
0.94
%
Return on average equity
8.84
%
9.78
%
9.17
%
7.44
%
9.94
%
10.68
%
10.34
%
Return on average common equity
8.86
%
9.86
%
9.21
%
7.38
%
10.02
%
10.81
%
10.45
%
Return on average tangible common equity (1)
11.54
%
13.21
%
11.76
%
9.65
%
13.30
%
14.37
%
13.87
%
Efficiency ratio (2)
61.01
%
62.35
%
59.75
%
64.10
%
59.09
%
56.99
%
58.99
%
Effective tax rate
29.4
%
28.3
%
29.5
%
30.5
%
28.5
%
25.9
%
29.5
%
(1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.
(2) The efficiency ratio is calculated by dividing noninterest expense by net revenue, i.e., the sum of net interest income (fully taxable equivalent) and noninterest income before net gains on investment securities. This is a banking industry measure not required by GAAP.
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited)
(Amounts in thousands)
Nine months ended
2017
2016
September 30,
Third
Second
First
Fourth
Third
2017
2016
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
8,869
$
129
$
-
$16,639
$10,078
$
12,011
$
1
Investment securities (1)
1,090,725
1,057,272
1,096,374
1,085,670
1,090,063
1,080,941
1,068,866
Loans:
Commercial business
385,025
332,985
405,308
385,938
363,367
347,496
352,696
Commercial mortgage
710,690
604,577
752,634
700,010
678,613
659,713
625,003
Residential real estate loans
432,838
397,327
438,436
430,237
429,746
425,687
417,854
Residential real estate lines
119,493
125,273
117,597
119,333
121,594
122,734
123,312
Consumer indirect
804,051
691,343
841,081
802,379
767,887
741,598
711,948
Other consumer
16,941
17,678
17,184
16,680
16,956
17,448
17,548
Total loans
2,469,038
2,169,183
2,572,240
2,454,577
2,378,163
2,314,676
2,248,361
Total interest-earning assets
3,568,632
3,226,584
3,668,614
3,556,886
3,478,304
3,407,628
3,317,228
Goodwill and other intangible assets, net
74,802
76,291
73,960
74,954
75,508
75,807
76,116
Total assets
3,851,590
3,502,628
3,951,002
3,847,137
3,754,470
3,679,569
3,593,672
Interest-bearing liabilities:
Interest-bearing demand
632,596
566,419
612,401
651,485
634,141
604,717
547,545
Savings and money market
1,027,927
988,224
998,769
1,054,997
1,030,363
1,076,884
981,207
Time deposits
780,374
693,153
855,371
762,874
721,404
711,061
722,098
Short-term borrowings
345,637
250,329
385,512
323,562
327,195
244,796
315,122
Long-term borrowings, net
39,085
39,015
39,103
39,085
39,067
39,050
39,032
Total interest-bearing liabilities
2,825,619
2,537,140
2,891,156
2,832,003
2,752,170
2,676,508
2,605,004
Noninterest-bearing demand deposits
665,221
626,018
679,303
658,926
657,190
655,445
638,417
Total deposits
3,106,118
2,873,814
3,145,844
3,128,282
3,043,098
3,048,107
2,889,267
Total liabilities
3,511,794
3,185,190
3,592,685
3,510,410
3,430,504
3,355,894
3,267,808
Shareholders’ equity
339,796
317,438
358,317
336,727
323,966
323,675
325,864
Common equity
322,457
300,098
340,981
319,387
306,626
306,335
308,524
Tangible common equity (2)
$
247,655
$
223,807
$
267,021
$244,433
$231,118
$
230,528
$232,408
Common shares outstanding:
Basic
14,806
14,429
15,268
14,664
14,479
14,459
14,456
Diluted
14,847
14,485
15,302
14,702
14,528
14,511
14,500
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Investment securities
2.46
%
2.47
%
2.45
%
2.47
%
2.46
%
2.41
%
2.44
%
Loans
4.20
%
4.19
%
4.24
%
4.16
%
4.19
%
4.17
%
4.18
%
Total interest-earning assets
3.66
%
3.62
%
3.71
%
3.63
%
3.64
%
3.60
%
3.62
%
Interest-bearing demand
0.14
%
0.15
%
0.14
%
0.14
%
0.14
%
0.14
%
0.15
%
Savings and money market
0.14
%
0.13
%
0.15
%
0.14
%
0.13
%
0.13
%
0.14
%
Time deposits
1.04
%
0.89
%
1.15
%
1.01
%
0.95
%
0.93
%
0.91
%
Short-term borrowings
1.09
%
0.63
%
1.29
%
1.08
%
0.86
%
0.70
%
0.63
%
Long-term borrowings, net
6.32
%
6.33
%
6.32
%
6.32
%
6.32
%
6.33
%
6.33
%
Total interest-bearing liabilities
0.59
%
0.49
%
0.68
%
0.56
%
0.52
%
0.49
%
0.51
%
Net interest spread
3.07
%
3.13
%
3.03
%
3.07
%
3.12
%
3.11
%
3.11
%
Net interest margin
3.19
%
3.24
%
3.17
%
3.18
%
3.23
%
3.22
%
3.23
%
(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)
Nine months ended
2017
2016
September 30,
Third
Second
First
Fourth
Third
2017
2016
Quarter
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
30,934
$
27,085
$
33,159
$
31,081
$
30,934
$
29,350
$
28,525
Net loan charge-offs (recoveries):
Commercial business
1,576
444
44
568
964
52
(31
)
Commercial mortgage
(247
)
128
(5
)
(38
)
(204
)
212
127
Residential real estate loans
213
116
161
78
(26
)
(1
)
61
Residential real estate lines
6
48
19
(46
)
33
41
4
Consumer indirect
4,084
3,128
1,244
1,082
1,758
1,361
896
Other consumer
370
152
151
110
109
108
79
Total net charge-offs
6,002
4,016
1,614
1,754
2,634
1,773
1,136
Provision for loan losses
9,415
6,281
2,802
3,832
2,781
3,357
1,961
Ending balance
$
34,347
$
29,350
$
34,347
$
33,159
$
31,081
$
30,934
$
29,350
Net charge-offs (recoveries)
to average loans (annualized):
Commercial business
0.55
%
0.18
%
0.04
%
0.59
%
1.08
%
0.06
%
-0.03
%
Commercial mortgage
-0.05
%
0.03
%
-0.00
%
-0.02
%
-0.12
%
0.13
%
0.08
%
Residential real estate loans
0.07
%
0.04
%
0.15
%
0.07
%
-0.02
%
-0.00
%
0.06
%
Residential real estate lines
0.01
%
0.05
%
0.06
%
-0.15
%
0.11
%
0.13
%
0.01
%
Consumer indirect
0.68
%
0.60
%
0.59
%
0.54
%
0.93
%
0.73
%
0.50
%
Other consumer
2.92
%
1.15
%
3.49
%
2.65
%
2.61
%
2.46
%
1.79
%
Total loans
0.33
%
0.25
%
0.25
%
0.29
%
0.45
%
0.30
%
0.20
%
Supplemental information (1)
Non-performing loans:
Commercial business
$
7,182
$
2,157
$
7,182
$
7,312
$
3,753
$
2,151
$
2,157
Commercial mortgage
2,539
1,345
2,539
2,189
1,267
1,025
1,345
Residential real estate loans
1,263
1,239
1,263
1,579
1,601
1,236
1,239
Residential real estate lines
325
274
325
379
336
372
274
Consumer indirect
1,250
1,077
1,250
1,149
1,040
1,526
1,077
Other consumer
26
9
26
22
23
16
9
Total non-performing loans
12,585
6,101
12,585
12,630
8,020
6,326
6,101
Foreclosed assets
281
294
281
154
58
107
294
Total non-performing assets
$
12,866
$
6,395
$
12,866
$
12,784
$
8,078
$
6,433
$
6,395
Total non-performing loans to total loans
0.48
%
0.27
%
0.48
%
0.50
%
0.33
%
0.27
%
0.27
%
Total non-performing assets to total assets
0.32
%
0.17
%
0.32
%
0.33
%
0.21
%
0.17
%
0.17
%
Allowance for loan losses to total loans
1.31
%
1.29
%
1.31
%
1.32
%
1.29
%
1.32
%
1.29
%
Allowance for loan losses
to non-performing loans
273
%
481
%
273
%
263
%
388
%
489
%
481
%
(1) At period end.
3
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
Nine months ended
2017
2016
September 30,
Third
Second
First
Fourth
Third
2017
2016
Quarter
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
4,021,591
$
3,891,538
$
3,859,865
$3,710,340
$
3,687,365
Less: Goodwill and other intangible
assets, net
74,997
73,477
75,343
75,640
75,943
Tangible assets
$
3,946,594
$
3,818,061
$
3,784,522
$3,634,700
$
3,611,422
Ending tangible common
equity:
Common shareholders’ equity
$
348,668
$
330,301
$
308,348
$302,714
$
308,931
Less: Goodwill and other intangible
assets, net
74,997
73,477
75,343
75,640
75,943
Tangible common equity
$
273,671
$
256,824
$
233,005
$227,074
$
232,988
Tangible common equity to tangible assets (1)
6.93
%
6.73
%
6.16
%
6.25
%
6.45
%
Common shares outstanding
15,626
15,127
14,536
14,538
14,528
Tangible common book value per
share (2)
$
17.51
$
16.98
$
16.03
$15.62
$
16.04
Average tangible assets:
Average assets
$
3,851,590
$
3,502,628
$
3,951,002
$
3,847,137
$
3,754,470
$3,679,569
$
3,593,672
Less: Average goodwill and other
intangible assets, net
74,802
76,291
73,960
74,954
75,508
75,807
76,116
Average tangible assets
$
3,776,788
$
3,426,337
$
3,877,042
$
3,772,183
$
3,678,962
$3,603,762
$
3,517,556
Average tangible common
equity:
Average common equity
$
322,457
$
300,098
$
340,981
$
319,387
$
306,626
$306,335
$
308,524
Less: Average goodwill and other
intangible assets, net
74,802
76,291
73,960
74,954
75,508
75,807
76,116
Average tangible common equity
$
247,655
$
223,807
$
267,021
$
244,433
$
231,118
$230,528
$
232,408
Net income available to
common shareholders
$
21,371
$
22,141
$
7,913
$
5,880
$
7,578
$8,328
$
8,103
Return on average tangible
common equity (3)
11.54
%
13.21
%
11.76
%
9.65
%
13.30
%
14.37%
13.87
%
(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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