FINANCIAL INSTITUTIONS, INC. ANNOUNCES FIRST QUARTER 2018 RESULTS
WARSAW, N.Y., April 26, 2018– Financial Institutions, Inc. (Nasdaq: FISI), today reported financial and operational results for the first quarter ended March 31, 2018. 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 in the quarter was $9.3 million, 17% higher than $7.9 million in the first quarter of 2017. After preferred dividends, net income available to common shareholders was $8.9 million, or $0.56 per diluted share, compared to $7.6 million, or $0.52 per diluted share, in the first quarter of 2017.
President and Chief Executive Officer Martin K. Birmingham stated, “I am pleased with our first quarter results. We continued to make progress against our fundamental long-term strategic goals, generating loan and deposit growth in-line with our plan while maintaining a strong credit culture. Our wealth management and insurance businesses also performed well in the quarter and we are seeing improved synergies across our community financial services platform.
“In February, we launched our new brand campaign designed to increase customer knowledge surrounding the services we offer in community banking, wealth management and insurance and to increase awareness of our brand in key urban growth markets. Our campaign tag line Today is tomorrow in progress reinforces our goal of providing solutions today that lead to financial well-being in the future. The campaign has been very well-received and early statistics indicate terrific growth in customer awareness and satisfaction.”
First Quarter 2018 Highlights:
Diluted earnings per share of $0.56 was $0.04, or 7.7%, higher than the first quarter of 2017
Net interest income of $29.6 million was $2.6 million, or 9.8%, higher than the first quarter of 2017
Noninterest income of $9.0 million was $1.1 million, or 14.7%, higher than the first quarter of 2017
Return on average common equity was 9.95%
Return on average tangible common equity was 12.52% (1)
Total assets, interest-earning assets, loans and deposits all reached record-high levels at quarter-end:
Total assets increased $47.2 million during the quarter, to $4.15 billion
Total interest-earning assets increased $36.2 million during the quarter, to $3.82 billion
Total loans increased $58.2 million during the quarter, to $2.79 billion
Total deposits increased $169.8 million during the quarter, to $3.38 billion
The Company declared a quarterly cash dividend of $0.24 per common share, a 9.1% increase from the most recent dividend. The first quarter dividend represented a 3.29% annualized yield as of March 31, 2018, and a return of 43% of first quarter net income to common shareholders
Chief Financial Officer Kevin B. Klotzbach added, “Loan growth was 2.1% in the quarter and relatively balanced across all loan categories with commercial business loans 3.1% higher, residential real estate loans 2.7% higher, consumer indirect loans 2.5% higher and commercial mortgage loans 1.5% higher than at December 31, 2017. Our credit quality remains strong with total non-performing loans to total loans at 0.38% at quarter-end. Our investment securities portfolio decreased by $29.3 million during the quarter as we continued to convert a portion of our marketable securities into loans.”
Net Interest Income and Net Interest Margin
Net interest income was $29.6 million in the first quarter of 2018, $132 thousand lower than the fourth quarter of 2017 and $2.6 million higher than the first quarter of 2017.
Average interest-earning assets for the quarter were $3.80 billion, $59.8 million higher than the fourth quarter of 2017 and $320.7 million higher than the first quarter of 2017. The primary driver of the increase was organic loan growth.
Net interest margin for the first quarter of 2018 was 3.19%, six basis points lower than the fourth quarter of 2017 and four basis points lower than the first quarter of 2017. The tax-equivalent yield on municipal securities was lower in the quarter because of the reduction in federal income tax rate to 21% in 2018 from 35% in 2017, negatively impacting net interest margin compared to the prior year. Fourth quarter of 2017 net interest margin was positively impacted by approximately $300 thousand of fee income comprised of yield maintenance fees relating to prepayment of mortgage-backed securities and payment deferral program fees. First quarter of 2017 net interest margin benefitted from approximately $100 thousand of yield maintenance fees relating to prepayment of mortgage-backed securities. No such fees were recognized in the first quarter of 2018.
Noninterest Income
Noninterest income was $9.0 million in the first quarter of 2018, relatively unchanged as compared to the fourth quarter of 2017 and $1.1 million higher than the first quarter of 2017.
Excluding the net gain on investment securities from all periods, noninterest income was $9.0 million in the first quarter of 2018, $657 thousand higher than $8.3 million in the fourth quarter of 2017, and $1.4 million higher than $7.6 million in the first quarter of 2017.
The Company has made investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from investments in limited partnerships was $568 thousand in the first quarter of 2018 as compared to $19 thousand in the fourth quarter of 2017 and a loss of $30 thousand in the first quarter of 2017. Income from these investments fluctuates based on the maturity and performance of the underlying investments.
Investment advisory income was $1.8 million in the first quarter of 2018, $31 thousand higher than the fourth quarter of 2017 and $347 thousand higher than the first quarter of 2017. The increase over the prior year period was primarily driven by the third quarter of 2017 acquisition of the assets of a Buffalo-area wealth management firm.
Noninterest Expense
Noninterest expense was $24.1 million in the first quarter of 2018 as compared to $23.2 million in the fourth quarter of 2017 and $20.9 million in the first quarter of 2017.
Salaries and employee benefits expense of $13.4 million was $457 thousand higher than the fourth quarter of 2017 and $2.1 million higher than the first quarter of 2017 as a result of our organic growth initiatives and approximately $1.0 million of non-recurring expenses in the first quarter of 2018 related to senior management retirements at our insurance subsidiary, higher contingent incentive compensation related to our wealth management subsidiary as a result of expected earnout payment, and the payment of one-time awards to employees not covered by certain incentive programs.
Occupancy and equipment expense of $4.4 million was $349 thousand higher than the fourth quarter of 2017 and $443 thousand higher than the first quarter of 2017. The increase from the fourth quarter of 2017 was largely due to higher snow removal expense. The increase as compared to the first quarter of 2017 was primarily the result of the relocation of the Five Star Bank Rochester regional administration center in the first quarter of 2017 and the impact of a branch opening in February 2017.
Advertising and promotions expense of $977 thousand was $257 thousand higher than the fourth quarter of 2017 and $515 thousand higher than the first quarter of 2017 as a result of the new Five Star Bank brand campaign launched in February 2018. Advertising and promotions expense in 2017 was lower than historical experience in anticipation of the new campaign.
1
Income Taxes
Income tax expense was $2.3 million in the first quarter of 2018 as compared to $580 thousand in the fourth quarter of 2017 and $3.2 million in the first quarter of 2017.
The effective tax rate was 19.6% in the first quarter of 2018 as compared to 28.5% in the first quarter of 2017, reflecting lower federal corporate tax rates because of the Tax Cuts and Jobs Act (the “TCJ Act”).
The effective tax rate of 5.0% in the fourth quarter of 2017 was the result of a $2.9 million reduction in income tax expense due to the TCJ Act, primarily driven by a revaluation adjustment to the net deferred tax liability.
Balance Sheet and Capital Management
Total assets were $4.15 billion at March 31, 2018, up $47.2 million from $4.11 billion at December 31, 2017, and up $292.6 million from $3.86 billion at March 31, 2017. The increases were largely the result of loan growth funded by deposit growth and net proceeds from a 2017 common equity offering. Between May and November of 2017, the Company sold 1.4 million shares of common stock through an at-the-market offering (“2017 Equity Offering”) generating approximately $40.0 million of gross proceeds and $38.3 million of net proceeds.
Total loans were $2.79 billion at March 31, 2018, up $58.2 million, or 2.1%, from December 31, 2017, and up $390.6 million, or 16.3%, from March 31, 2017.
Commercial business loans totaled $464.1 million, up $13.8 million, or 3.1%, from December 31, 2017, and up $88.6 million, or 23.6%, from March 31, 2017.
Commercial mortgage loans totaled $821.1 million, up $12.2 million, or 1.5%, from December 31, 2017, and up $146.1 million, or 21.6%, from March 31, 2017.
Residential real estate loans totaled $477.9 million, up $12.7 million, or 2.7%, from December 31, 2017, and up $49.8 million, or 11.6%, from March 31, 2017.
Consumer indirect loans totaled $898.1 million, up $21.5 million, or 2.5%, from December 31, 2017, and up $112.0 million, or 14.2%, from March 31, 2017.
Total deposits were $3.38 billion at March 31, 2018, an increase of $169.8 million from December 31, 2017, and an increase of $210.4 million from March 31, 2017. The increase from December 31, 2017, was primarily due to public deposit seasonality. The increase from March 31, 2017, was primarily the result of successful business development efforts in both municipal and retail banking. Public deposit balances represented 29% of total deposits at March 31, 2018, compared to 26% at December 31, 2017 and 31% at March 31, 2017.
Shareholders’ equity was $380.3 million at March 31, 2018, compared to $381.2 million at December 31, 2017, and $325.7 million at March 31, 2017. Common book value per share was $22.83 at March 31, 2018, $22.85 at December 31, 2017, and $21.21 at March 31, 2017. Changes in shareholders’ equity and common book value per share are attributable to net income less dividends paid plus proceeds from the 2017 Equity Offering, net of the change in unrealized gain (loss) on investment securities.
During the first quarter of 2018, the Company declared a common stock dividend of $0.24 per common share, a 9.1% increase from the most recent dividend. The dividend returned 43% of first quarter net income to common shareholders.
Regulatory capital ratios at March 31, 2018, were slightly lower than December 31, 2017 ratios, primarily as a result of loan growth and higher asset levels. March 31, 2018 ratios were higher than March 31, 2017 ratios as a result of the 2017 Equity Offering:
Leverage Ratio was 8.11%, compared to 8.13% and 7.30% at December 31, 2017, and March 31, 2017, respectively.
Common Equity Tier 1 Capital Ratio was 10.09%, compared to 10.16% and 9.46% at December 31, 2017, and March 31, 2017, respectively.
Tier 1 Capital Ratio was 10.65%, compared to 10.74% and 10.11% at December 31, 2017, and March 31, 2017, respectively.
Total Risk-Based Capital Ratio was 13.09%, compared to 13.19% and 12.75% at December 31, 2017, and March 31, 2017, respectively.
Credit Quality
Non-performing loans were $10.7 million at March 31, 2018, compared to $12.5 million at December 31, 2017, and $8.0 million at March 31, 2017. The ratio of non-performing loans to total loans was 0.38% at March 31, 2018; 0.46% at December 31, 2017; and 0.33% at March 31, 2017.
Provision for loan losses was $2.9 million for the first quarter, a decrease of $1.0 million from the fourth quarter of 2017 and an increase of $168 thousand from the first quarter of 2017.
Net charge-offs were $2.0 million during the quarter, $1.6 million lower than the fourth quarter of 2017 and $607 thousand lower than the first quarter of 2017. The ratio of annualized net charge-offs to total average loans was 0.30% in the quarter; 0.54% in the fourth quarter of 2017; and 0.45% in the first quarter of 2017.
The ratio of allowance for loan losses to total loans was 1.27% at March 31, 2018, 1.27% at December 31, 2017, and 1.29% at March 31, 2017.
Conference Call
The Company will host an earnings conference call and audio webcast on April 27, 2018 at 9:00 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and Kevin B. Klotzbach, Chief Financial Officer. The live webcast will be available in listen-only mode on the Company’s website at www.fiiwarsaw.com. Within the United States, listeners may also access the call by dialing 1-888-317-6016 and requesting the Financial Institutions, Inc. (FISI) call. The webcast replay will be available on the Company’s website for at least 30 days.
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 assets, tangible common equity, tangible common equity to tangible assets, tangible common book value per share, average tangible assets, 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.
2
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. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “estimate,” “forecast,” “target,” “preliminary,” or “range.” Statements herein are based on certain assumptions and analyses by the Company and 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, Courier Capital and other acquisitions, 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 on Form 10-K, its Quarterly Reports onForm 10-Q and other documents filed with the SEC. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.
*****
For additional information contact:
Kevin B. Klotzbach
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) 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, except per share amounts)
2018
2017
March 31,
December 31,
September 30,
June 30,
March 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
122,914
$
99,195
$
97,838
$
84,537
$
149,699
Investment securities:
Available for sale
510,197
524,973
551,491
540,575
540,406
Held-to-maturity
501,905
516,466
538,332
533,471
545,381
Total investment securities
1,012,102
1,041,439
1,089,823
1,074,046
1,085,787
Loans held for sale
1,523
2,718
2,407
1,864
2,097
Loans:
Commercial business
464,139
450,326
419,415
398,343
375,518
Commercial mortgage
821,091
808,908
757,987
724,064
675,007
Residential real estate loans
477,935
465,283
446,044
432,053
428,171
Residential real estate lines
115,346
116,309
117,621
118,611
120,874
Consumer indirect
898,099
876,570
857,528
826,708
786,120
Other consumer
16,654
17,621
17,640
17,093
16,937
Total loans
2,793,264
2,735,017
2,616,235
2,516,872
2,402,627
Allowance for loan losses
35,594
34,672
34,347
33,159
31,081
Total loans, net
2,757,670
2,700,345
2,581,888
2,483,713
2,371,546
Total interest-earning assets
3,818,839
3,782,659
3,708,385
3,593,106
3,523,613
Goodwill and other intangible assets, net
74,415
74,703
74,997
73,477
75,343
Total assets
4,152,432
4,105,210
4,021,591
3,891,538
3,859,865
Deposits:
Noninterest-bearing demand
702,900
718,498
710,865
677,124
666,332
Interest-bearing demand
717,567
634,203
656,703
631,451
698,962
Savings and money market
1,052,270
1,005,317
1,050,487
999,125
1,069,901
Time deposits
907,272
852,156
863,453
824,786
734,464
Total deposits
3,380,009
3,210,174
3,281,508
3,132,486
3,169,659
Short-term borrowings
327,600
446,200
310,800
347,500
303,300
Long-term borrowings, net
39,149
39,131
39,114
39,096
39,078
Total interest-bearing liabilities
3,043,858
2,977,007
2,920,557
2,841,958
2,845,705
Shareholders’ equity
380,302
381,177
366,002
347,641
325,688
Common shareholders’ equity
362,973
363,848
348,668
330,301
308,348
Tangible common equity (1)
288,558
289,145
273,671
256,824
233,005
Unrealized gain (loss) on investment securities,
net of tax
$
(8,503
)
$
(2,173
)
$
17
$
(232
)
$
(1,938
)
Common shares outstanding
15,901
15,925
15,626
15,127
14,536
Treasury shares
155
131
136
137
156
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio
8.11
%
8.13
%
7.91
%
7.70
%
7.30
%
Common equity Tier 1 capital ratio
10.09
%
10.16
%
10.09
%
9.86
%
9.46
%
Tier 1 capital ratio
10.65
%
10.74
%
10.69
%
10.48
%
10.11
%
Total risk-based capital ratio
13.09
%
13.19
%
13.24
%
13.09
%
12.75
%
Common equity to assets
8.74
%
8.86
%
8.67
%
8.49
%
7.99
%
Tangible common equity to tangible assets (1)
7.08
%
7.17
%
6.93
%
6.73
%
6.16
%
Common book value per share
$
22.83
$
22.85
$
22.31
$
21.84
$
21.21
Tangible common book value per share (1)
$
18.15
$
18.16
$
17.51
$
16.98
$
16.03
Stock price (Nasdaq: FISI):
High
$
33.00
$
34.10
$
31.15
$
35.35
$
35.40
Low
$
29.50
$
28.70
$
25.65
$
29.09
$
30.50
Close
$
29.60
$
31.10
$
28.80
$
29.80
$
32.95
(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)
2018
2017
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED INCOME STATEMENT DATA:
Interest income
$
35,403
$34,767
$
33,396
$31,409
$
30,538
Interest expense
5,775
5,007
4,958
3,987
3,543
Net interest income
29,628
29,760
28,438
27,422
26,995
Provision for loan losses
2,949
3,946
2,802
3,832
2,781
Net interest income after provision
for loan losses
26,679
25,814
25,636
23,590
24,214
Noninterest income:
Service charges on deposits
1,738
1,905
1,901
1,840
1,745
Insurance income
1,399
1,214
1,488
1,133
1,431
ATM and debit card
1,421
1,491
1,445
1,456
1,329
Investment advisory
1,778
1,747
1,497
1,429
1,431
Company owned life insurance
450
414
449
473
445
Investments in limited partnerships
568
19
(14
)
135
(30
)
Loan servicing
115
91
105
123
120
Net gain on sale of loans held for sale
96
106
150
72
48
Net gain on investment securities
—
660
184
210
206
Net (loss) gain on other assets
3
12
21
6
(2
)
Contingent consideration liability adjustment
—
—
—
1,200
—
Other
1,416
1,328
1,348
1,256
1,113
Total noninterest income
8,984
8,987
8,574
9,333
7,836
Noninterest expense:
Salaries and employee benefits
13,429
12,972
12,348
11,986
11,369
Occupancy and equipment
4,407
4,058
4,087
4,184
3,964
Professional services
883
854
1,157
1,057
1,015
Computer and data processing
1,235
1,244
1,208
1,312
1,171
Supplies and postage
512
507
492
467
537
FDIC assessments
508
451
440
469
457
Advertising and promotions
977
720
344
645
462
Amortization of intangibles
288
294
288
291
297
Goodwill impairment
—
—
—
1,575
—
Other
1,868
2,063
2,103
1,955
1,670
Total noninterest expense
24,107
23,163
22,467
23,941
20,942
Income before income taxes
11,556
11,638
11,743
8,982
11,108
Income tax expense
2,268
580
3,464
2,736
3,165
��
Net income
9,288
11,058
8,279
6,246
7,943
Preferred stock dividends
365
365
366
366
365
Net income available to common shareholders
$
8,923
$10,693
$
7,913
$
5,880
$
7,578
FINANCIAL RATIOS:
Earnings per share – basic
$
0.56
$0.68
$
0.52
$
0.40
$
0.52
Earnings per share – diluted
$
0.56
$0.68
$
0.52
$
0.40
$
0.52
Cash dividends declared on common stock
$
0.24
$0.22
$
0.21
$
0.21
$
0.21
Common dividend payout ratio
42.86
%
32.35%
40.38
%
52.50
%
40.38
%
Dividend yield (annualized)
3.29
%
2.81%
2.89
%
2.83
%
2.58
%
Return on average assets
0.92
%
1.09%
0.83
%
0.65
%
0.86
%
Return on average equity
9.89
%
11.72%
9.17
%
7.44
%
9.94
%
Return on average common equity
9.95
%
11.88%
9.21
%
7.38
%
10.02
%
Return on average tangible common equity (1)
12.52
%
15.03%
11.76
%
9.65
%
13.30
%
Efficiency ratio (2)
61.85
%
59.62%
59.75
%
64.10
%
59.09
%
Effective tax rate
19.6
%
5.0
%
29.5
%
30.5
%
28.5
%
(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)
2018
2017
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits
$
667
$
1,693
$
—
$
16,639
$
10,078
Investment securities (1)
1,034,830
1,073,170
1,096,374
1,085,670
1,090,063
Loans:
Commercial business
453,250
429,831
405,308
385,938
363,367
Commercial mortgage
821,311
778,765
752,634
700,010
678,613
Residential real estate loans
470,612
455,641
438,436
430,237
429,746
Residential real estate lines
115,614
116,731
117,597
119,333
121,594
Consumer indirect
885,723
865,735
841,081
802,379
767,887
Other consumer
16,978
17,618
17,184
16,680
16,956
Total loans
2,763,488
2,664,321
2,572,240
2,454,577
2,378,163
Total interest-earning assets
3,798,985
3,739,184
3,668,614
3,556,886
3,478,304
Goodwill and other intangible assets, net
74,577
74,866
73,960
74,954
75,508
Total assets
4,086,633
4,028,063
3,951,002
3,847,137
3,754,470
Interest-bearing liabilities:
Interest-bearing demand
671,991
655,207
612,401
651,485
634,141
Savings and money market
1,012,574
1,051,367
998,769
1,054,997
1,030,363
Time deposits
857,184
863,770
855,371
762,874
721,404
Short-term borrowings
411,760
316,894
385,512
323,562
327,195
Long-term borrowings, net
39,138
39,121
39,103
39,085
39,067
Total interest-bearing liabilities
2,992,647
2,926,359
2,891,156
2,832,003
2,752,170
Noninterest-bearing demand deposits
688,123
703,560
679,303
658,926
657,190
Total deposits
3,229,872
3,273,904
3,145,844
3,128,282
3,043,098
Total liabilities
3,705,782
3,653,655
3,592,685
3,510,410
3,430,504
Shareholders’ equity
380,851
374,408
358,317
336,727
323,966
Common equity
363,523
357,079
340,981
319,387
306,626
Tangible common equity (2)
$
288,946
$
282,213
$
267,021
$
244,433
$
231,118
Common shares outstanding:
Basic
15,890
15,749
15,268
14,664
14,479
Diluted
15,941
15,793
15,302
14,702
14,528
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Investment securities
2.32
%
2.53
%
2.45
%
2.47
%
2.46
%
Loans
4.36
%
4.29
%
4.24
%
4.16
%
4.19
%
Total interest-earning assets
3.80
%
3.78
%
3.71
%
3.63
%
3.64
%
Interest-bearing demand
0.12
%
0.14
%
0.14
%
0.14
%
0.14
%
Savings and money market
0.18
%
0.16
%
0.15
%
0.14
%
0.13
%
Time deposits
1.33
%
1.21
%
1.15
%
1.01
%
0.95
%
Short-term borrowings
1.68
%
1.40
%
1.29
%
1.08
%
0.86
%
Long-term borrowings, net
6.31
%
6.32
%
6.32
%
6.32
%
6.32
%
Total interest-bearing liabilities
0.78
%
0.68
%
0.68
%
0.56
%
0.52
%
Net interest rate spread
3.02
%
3.10
%
3.03
%
3.07
%
3.12
%
Net interest rate margin
3.19
%
3.25
%
3.17
%
3.18
%
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.
4
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
2018
2017
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance
$
34,672
$
34,347
$
33,159
$
31,081
$
30,934
Net loan charge-offs (recoveries):
Commercial business
(15
)
1,622
44
568
964
Commercial mortgage
(3
)
(5
)
(5
)
(38
)
(204
)
Residential real estate loans
(50
)
88
161
78
(26
)
Residential real estate lines
91
40
19
(46
)
33
Consumer indirect
1,664
1,636
1,244
1,082
1,758
Other consumer
340
240
151
110
109
Total net charge-offs
2,027
3,621
1,614
1,754
2,634
Provision for loan losses
2,949
3,946
2,802
3,832
2,781
Ending balance
$
35,594
$
34,672
$
34,347
$
33,159
$
31,081
Net charge-offs (recoveries)
to average loans (annualized):
Commercial business
-0.01
%
1.50
%
0.04
%
0.59
%
1.08
%
Commercial mortgage
-0.00
%
-0.00
%
-0.00
%
-0.02
%
-0.12
%
Residential real estate loans
-0.04
%
0.08
%
0.15
%
0.07
%
-0.02
%
Residential real estate lines
0.32
%
0.14
%
0.06
%
-0.15
%
0.11
%
Consumer indirect
0.76
%
0.75
%
0.59
%
0.54
%
0.93
%
Other consumer
8.12
%
5.40
%
3.49
%
2.65
%
2.61
%
Total loans
0.30
%
0.54
%
0.25
%
0.29
%
0.45
%
Supplemental information(1)
Non-performing loans:
Commercial business
$
4,312
$
5,344
$
7,182
$
7,312
$
3,753
Commercial mortgage
2,310
2,623
2,539
2,189
1,267
Residential real estate loans
2,224
2,252
1,263
1,579
1,601
Residential real estate lines
372
404
325
379
336
Consumer indirect
1,467
1,895
1,250
1,149
1,040
Other consumer
32
13
26
22
23
Total non-performing loans
10,717
12,531
12,585
12,630
8,020
Foreclosed assets
480
148
281
154
58
Total non-performing assets
$
11,197
$
12,679
$
12,866
$
12,784
$
8,078
Total non-performing loans to total loans
0.38
%
0.46
%
0.48
%
0.50
%
0.33
%
Total non-performing assets to total assets
0.27
%
0.31
%
0.32
%
0.33
%
0.21
%
Allowance for loan losses to total loans
1.27
%
1.27
%
1.31
%
1.32
%
1.29
%
Allowance for loan losses to non-performing loans
332
%
277
%
273
%
263
%
388
%
(1) At period end.
5
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
2018
2017
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
Ending tangible assets:
Total assets
$
4,152,432
$
4,105,210
$
4,021,591
$
3,891,538
$
3,859,865
Less: Goodwill and other intangible assets, net
74,415
74,703
74,997
73,477
75,343
Tangible assets
$
4,078,017
$
4,030,507
$
3,946,594
$
3,818,061
$
3,784,522
Ending tangible common equity:
Common shareholders’ equity
$
362,973
$
363,848
$
348,668
$
330,301
$
308,348
Less: Goodwill and other intangible assets, net
74,415
74,703
74,997
73,477
75,343
Tangible common equity
$
288,558
$
289,145
$
273,671
$
256,824
$
233,005
Tangible common equity to tangible assets (1)
7.08
%
7.17
%
6.93
%
6.73
%
6.16
%
Common shares outstanding
15,901
15,925
15,626
15,127
14,536
Tangible common book value per share (2)
$
18.15
$
18.16
$
17.51
$
16.98
$
16.03
Average tangible assets:
Average assets
$
4,086,633
$
4,028,063
$
3,951,002
$
3,847,137
$
3,754,470
Less: Average goodwill and other intangible
assets, net
74,577
74,866
73,960
74,954
75,508
Average tangible assets
$
4,012,056
$
3,953,197
$
3,877,042
$
3,772,183
$
3,678,962
Average tangible common equity:
Average common equity
$
363,523
$
357,079
$
340,981
$
319,387
$
306,626
Less: Average goodwill and other intangible
assets, net
74,577
74,866
73,960
74,954
75,508
Average tangible common equity
$
288,946
$
282,213
$
267,021
$
244,433
$
231,118
Net income available to common shareholders
$
8,923
$
10,693
$
7,913
$
5,880
$
7,578
Return on average tangible common equity (3)
12.52
%
15.03
%
11.76
%
9.65
%
13.30
%
(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.
6
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