EXHIBIT 99.1
For More Information: For Immediate Release:
Ronald A. Miller July 22, 2003
Senior Vice President and Chief Financial Officer
585-786-1102
Financial Institutions, Inc. Reports Second Quarter Earnings
WARSAW, N.Y. -- Financial Institutions, Inc. (NASDAQ:FISI) today reported that
second quarter 2003 net income was $3,650,000 compared to $6,644,000 for the
same quarter last year. Diluted earnings per share were $0.29 for the second
quarter of 2003 compared to $0.56 for the 2002 period. The most significant item
impacting second quarter 2003 results was a provision for loan losses of
$5,311,000, which represents an increase of $4,130,000 over the $1,181,000
provision for loan losses for the second quarter of 2002. The three-month period
ending June 30, 2003 also included a $538,000 write-down of a parcel of other
real estate owned.
Peter G. Humphrey, President and CEO of Financial Institutions, Inc. (FII),
said: "Second quarter 2003 results were adversely affected by further declines
in credit quality. The overall weak economic environment has contributed to an
increase in nonperforming assets. As indicated in previous quarters, the Company
has committed additional resources toward management of the Company's
nonperforming assets and strengthening the credit administration function. The
Company's net interest income and noninterest income levels are strong and we
remain focused on the execution of our strategic plan and long-term growth
strategy."
At June 30, 2003 nonperforming assets were $50.7 million compared to $38.4
million at December 31, 2002 and $12.3 million at June 30, 2002. The increase in
nonperforming loans since year-end includes an increase of $5.7 million in
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commercial loans, $2.2 million in commercial mortgage loans, and $4.6 million in
agricultural loans. Mr. Humphrey stated, "The extended weak economy continues to
adversely impact the cash flows of some of our commercial borrowers, most
notably at the National Bank of Geneva, as well as the valuation of collateral
supporting their loans. In addition, an extended period of low milk prices has
placed stress on several of our dairy industry borrowers and has resulted in an
increase in nonperforming agricultural loans, primarily at Wyoming County Bank.
Recently there has been favorable movement in the trend of milk prices. We have
made significant strides towards strengthening the Company's credit
administration function during the first half of 2003 and put in place workout
plans on our problem loans."
For the second quarter of 2003 net loan charge-offs were $2,227,000 or 0.66% of
average loans compared to $718,000, or 0.24% of average loans, in the same
period last year. The ratio of nonperforming assets to total loans and other
real estate was 3.70% at June 30, 2003 compared to 2.90% at December 31, 2002
and 0.99% a year ago. The provision for loan losses increased $4,130,000 over
the same period from a year ago reflective of the increased level of charge-offs
and nonperforming loans. The ratio of the allowance for loan losses to
nonperforming loans was 53% at June 30, 2003, compared to 58% at December 31,
2002 and 187% at June 30, 2002. The ratio of the allowance for loan losses to
total loans increased to 1.93% at June 30, 2003 compared to 1.64% at year end
2002 and 1.62% at June 30, 2002.
In the second quarter of 2003, net interest income increased 1.0% to $19,193,000
compared to $18,986,000 in the second quarter of 2002. Net interest margin was
3.98% for the second quarter of 2003, a drop of 41 basis points from the 4.39%
level for the same period last year.
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Growth in average earning assets of $211 million, or 11%, offset the fall in net
interest margin and produced the increased revenue. The growth in average
earning assets reflects average increases of $65 million in the Company's
investment portfolio and $148 million in loans. Net interest margin has declined
over the past year, as interest rates have declined to historically low levels.
The increase in nonaccrual loans has also contributed to the decline in net
interest margin in recent quarters.
Noninterest income increased 19% in the second quarter of 2003 to $6,160,000
from $5,157,000 for the second quarter of 2002. Mortgage banking activities,
which include gains and losses from the sale of residential mortgage loans,
mortgage servicing income and the amortization of mortgage servicing rights,
increased $677,000 to $951,000 in the second quarter 2003 from $274,000 for the
same period last year. The increase in mortgage banking revenues corresponds
with the increase in residential mortgage refinance activity resulting from the
historically low interest rate environment. The Company sells most newly
originated and refinanced mortgage loans in the secondary market. Growth in
deposits and related activity resulted in service charges on deposits increasing
$164,000 to $2,771,000 for the three months ending June 30, 2003 compared to
$2,607,000 for the same period a year ago.
Noninterest expense for the second quarter of 2003 totaled $14,947,000 compared
with $13,093,000 for the second quarter of 2002. As previously indicated,
$538,000 of the increase relates to the write-down of a parcel of other real
estate owned. Salaries and benefits have increased $529,000 primarily as a
result of additional staffing associated with the Company's new branch offices
and the expansion of the credit administration department. Occupancy and
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equipment costs have increased $373,000 due to the additional offices and
expansion of the Company's technology platform. These additional costs, coupled
with a slowing of revenue growth, are the principal factors in an increase in
the Company's efficiency ratio to 53.41%, compared to 51.05% for the same period
a year ago. Mr. Humphrey said, "Our strategic plan has identified opportunities
for expansion into markets where we believe our brand of banking will allow us
to achieve significant market share. During 2002 we opened offices in six new
locations. During the first half of 2003 we opened one additional branch and are
moving forward with plans to open two more during the second half of 2003. As we
invest in the future, the costs associated with expansion and the related
support structure have contributed to an increase in our efficiency ratio. We
expect that our operating measures will improve as these new offices come on
line and our credit-related costs decline as we work through our problem loans."
At June 30, 2003 the Company had total assets of $2.194 billion, an increase of
11% from $1.979 billion at June 30, 2002. Total loans at quarter end were $1.371
billion, an increase of $129 million, or 10%, over the same period last year.
Total deposits were $1.826 billion at the recent quarter-end, compared with
$1.608 billion a year earlier. Total shareholders' equity increased 13% to $186
million at June 30, 2003 from $164 million a year earlier. Book value per common
share at June 30, 2003 was $15.17, an increase of 15% from $13.23 at June 30,
2002.
FII is the financial holding company parent of Wyoming County Bank, National
Bank of Geneva, Bath National Bank, and First Tier Bank & Trust. The four banks
provide a wide range of consumer and commercial banking services to individuals,
municipalities, and businesses
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through a network of 47 offices and 67 ATMs in Western and Central New York
State. FII's Financial Services Group also provides diversified financial
services to its customers and clients, including brokerage, trust, insurance and
employee benefits and compensation consulting. More information on FII and its
subsidiaries is available through the Company web site at www.fiiwarsaw.com.
This press release contains forward-looking statements as defined by federal
securities laws, including those using the words "We expect". These statements
may address issues that involve significant risks, uncertainties, estimates and
assumptions made by management. Actual results could differ materially from
current projections. Please refer to the Company's filings with the Securities
and Exchange Commission for a summary of important factors that could affect the
Company's forward-looking statements. The Company undertakes no obligation to
revise these statements following the date of this press release.
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except per share amounts)
For the three months
ended
June 30, $ %
2003 2002 Change Change
---- ---- ------ ------
Interest income $28,764 $29,927 $(1,163) (4)%
Interest expense 9,571 10,941 (1,370) (13)%
------- ------- ------- ---
Net interest income 19,193 18,986 207 1%
Provision for loan losses 5,311 1,181 4,130 350%
------- ------- ------- ---
Net interest income after provision for loan losses 13,882 17,805 (3,923) (22)%
Noninterest income:
Service charges on deposits 2,771 2,607 164 6%
Financial services group fees and commissions 1,328 1,325 3 --%
Mortgage banking activities 951 274 677 247%
Gain on sale and call of securities 151 96 55 57%
Other 959 855 104 12%
------- ------- ------- ---
Total noninterest income 6,160 5,157 1,003 19%
Noninterest expense:
Salaries and employee benefits 8,036 7,507 529 7%
Other 6,911 5,586 1,325 24%
------- ------- ------- ---
Total noninterest expense 14,947 13,093 1,854 14%
Income before income taxes 5,095 9,869 (4,774) (48)%
Income taxes 1,445 3,225 (1,780) (55)%
------- ------- ------- ---
Net income 3,650 6,644 (2,994) (45)%
Preferred stock dividends 374 374 -- --%
------- ------- ------- ---
Net income available to common shareholders $ 3,276 $ 6,270 $(2,994) (48)%
======= ======= ======= ===
Taxable-equivalent net interest income $20,333 $20,138 $ 195 1%
======= ======= ======= ===
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Per common share data:
Net income - basic $ 0.29 $ 0.57 $ (0.28) (49)%
Net income - diluted $ 0.29 $ 0.56 $ (0.27) (48)%
Cash dividends declared $ 0.16 $ 0.14 $ 0.02 14%
Book value $15.17 $13.23 $ 1.94 15%
Common shares outstanding:
Weighted average shares - actual 11,159,140 11,067,393
Weighted average shares - diluted 11,255,623 11,223,097
Period end actual 11,109,664 11,090,881
Performance ratios, annualized
Return on average assets 0.67% 1.36%
Return on average common equity 7.82% 17.83%
Common dividend payout ratio 55.17% 24.56%
Net interest margin (tax-equivalent) 3.98% 4.39%
Efficiency ratio 53.41% 51.05%
Asset quality data:
Loans past due over 90 days and still accruing $ 1,195 $ 943
Restructured loans 3,076 --
Nonaccrual loans 45,765 9,830
Other real estate owned 640 1,539
---------- ----------
Total nonperforming assets $ 50,676 $ 12,312
========== ==========
Asset quality ratios:
Nonperforming loans to total loans 3.65% 0.87%
Nonperforming assets to total loans and ORE 3.70% 0.99%
Net loan charge-offs to average loans (annualized) 0.66% 0.24%
Allowance for loan losses to total loans 1.93% 1.62%
Allowance for loan losses to nonperforming loans 53% 187%
Capital ratios:
Average common equity to average total assets 7.71% 7.18%
Leverage ratio 6.83% 7.05%
Tier 1 risk-based capital ratio 9.77% 10.16%
Risk-based capital ratio 11.03% 11.42%
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except per share amounts)
For the six months ended
June 30, $ %
2003 2002 Change Change
---- ---- ------ ------
Interest income $57,291 $ 58,487 $(1,196) (2)%
Interest expense 19,257 21,424 (2,167) (10)%
------- -------- ------- ---
Net interest income 38,034 37,063 971 3%
Provision for loan losses 8,609 2,188 6,421 293%
------- -------- ------- ---
Net interest income after provision for loan losses 29,425 34,875 (5,450) (16)%
Noninterest income:
Service charges on deposits 5,426 4,934 492 10%
Financial services group fees and commissions 2,702 2,630 72 3%
Mortgage banking activities 1,736 1,217 519 43%
Gain (loss) on sale and call of securities 442 (100) 542 542%
Other 1,956 1,413 543 38%
------- -------- ------- ---
Total noninterest income 12,262 10,094 2,168 21%
Noninterest expense:
Salaries and employee benefits 16,917 14,428 2,489 17%
Other 13,606 10,765 2,841 26%
------- -------- ------- ---
Total noninterest expense 30,523 25,193 5,330 21%
Income before income taxes 11,164 19,776 (8,612) (44)%
Income taxes 3,218 6,475 (3,257) (50)%
------- -------- ------- ---
Net income 7,946 13,301 (5,355) (40)%
Preferred stock dividends 748 748 -- --%
------- -------- ------- ---
Net income available to common shareholders $ 7,198 $ 12,553 $(5,355) (43)%
======= ======== ======= ===
Taxable-equivalent net interest income $40,311 $ 39,367 $ 944 2%
======= ======== ======= ===
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Per common share data:
Net income - basic $0.65 $1.14 $(0.49) (43)%
Net income - diluted $0.64 $1.12 $(0.48) (43)%
Cash dividends declared $0.32 $0.27 $0.05 19%
Common shares outstanding:
Weighted average shares - actual 11,133,222 11,040,619
Weighted average shares - diluted 11,234,187 11,220,279
Period end actual 11,109,664 11,090,881
Performance ratios, annualized
Return on average assets 0.74% 1.41%
Return on average common equity 8.75% 18.32%
Common dividend payout ratio 49.23% 23.68%
Net interest margin (tax-equivalent) 4.00% 4.46%
Efficiency ratio 56.15% 49.89%
Net loan charge-offs to average loans 0.56% 0.22%
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
June 30, $ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 64,491 $ 44,052 $ 20,439 46%
Federal funds sold 77,333 1,008 76,325 7,572%
Investment securities 594,583 607,093 (12,510) (2)%
Loans 1,370,653 1,241,940 128,713 10%
Allowance for loan losses (26,518) (20,121) (6,397) 32%
----------- ----------- --------- --
Loans, net 1,344,135 1,221,819 122,316 10%
Goodwill 40,621 37,310 3,311 9%
Other assets 73,160 68,139 5,021 7%
----------- ----------- --------- --
Total assets $ 2,194,323 $ 1,979,421 $ 214,902 11%
=========== =========== ========= ==
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 251,994 216,469 35,525 16%
Savings, money market, and int-bearing checking 799,572 730,690 68,882 9%
Certificates of deposit 774,667 660,629 114,038 17%
----------- ----------- --------- --
Total deposits 1,826,233 1,607,788 218,445 14%
Short-term borrowings 68,985 83,442 (14,457) (17)%
Long-term borrowings 73,216 87,284 (14,068) (16)%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 23,429 20,272 3,157 16%
----------- ----------- --------- --
Total liabilities 2,008,063 1,814,986 193,077 11%
Shareholders' equity:
Preferred equity 17,735 17,752 (17) --%
Common equity 168,525 146,683 21,842 15%
----------- ----------- --------- --
Total shareholders' equity (1) 186,260 164,435 21,825 13%
----------- ----------- --------- --
Total liabilities and shareholders' equity $ 2,194,323 $ 1,979,421 $ 214,902 11%
=========== =========== ========= ==
(1) Includes the after-tax impact of net unrealized gains on investment
securities classified as available for sale of $13,604 and $5,797 at June
30, 2003 and 2002, respectively.
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
For the three months ended
June 30, $ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 42,814 $ 40,295 $ 2,519 6%
Federal funds sold 40,512 42,424 (1,912) (5)%
Investment securities 647,383 582,287 65,096 11%
Loans 1,359,311 1,211,482 147,829 12%
Allowance for loan losses (23,818) (19,879) (3,939) 20%
----------- ----------- --------- --
Loans, net 1,335,493 1,191,603 143,890 12%
Goodwill 40,621 36,825 3,796 10%
Other assets 72,188 70,447 1,741 2%
----------- ----------- --------- --
Total assets $ 2,179,011 $ 1,963,881 $ 215,130 11%
=========== =========== ========= ==
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 236,221 212,738 23,483 11%
Savings, money market, and int-bearing checking 804,196 730,856 73,340 10%
Certificates of deposit 766,729 647,363 119,366 18%
----------- ----------- --------- --
Total deposits 1,807,146 1,590,957 216,189 14%
Short-term borrowings 64,568 97,884 (33,316) (34)%
Long-term borrowings 82,443 81,889 554 1%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 22,940 18,177 4,763 26%
----------- ----------- --------- --
Total liabilities 1,993,297 1,805,107 188,190 10%
Shareholders' equity:
Preferred equity 17,737 17,752 (15) - %
Common equity 167,977 141,022 26,955 19%
----------- ----------- --------- --
Total shareholders' equity 185,714 158,774 26,940 17%
----------- ----------- --------- --
Total liabilities and shareholders' equity $ 2,179,011 $ 1,963,881 $ 215,130 11%
=========== =========== ========= ==
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
For the six months ended
June 30, $ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 42,890 $ 40,283 $ 2,607 6%
Federal funds sold 36,802 34,969 1,833 5%
Investment securities 643,798 545,549 98,249 18%
Loans 1,344,732 1,191,675 153,057 13%
Allowance for loan losses (22,896) (19,584) (3,312) 17%
----------- ----------- --------- --
Loans, net 1,321,836 1,172,091 149,745 13%
Goodwill 40,612 38,969 3,843 10%
Other assets 71,122 66,244 2,678 4%
----------- ----------- --------- --
Total assets $ 2,157,060 $ 1,898,105 $ 258,955 14%
=========== =========== ========= ==
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 232,379 210,647 21,732 10%
Savings, money market, and int-bearing checking 801,667 686,728 114,939 17%
Certificates of deposit 745,664 635,598 110,066 17%
----------- ----------- --------- --
Total deposits 1,779,710 1,532,973 246,737 16%
Short-term borrowings 62,551 93,765 (31,214) (33)%
Long-term borrowings 92,286 79,293 12,993 16%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 22,714 19,930 2,784 14%
----------- ----------- --------- --
Total liabilities 1,973,461 1,742,161 231,300 13%
Shareholders' equity:
Preferred equity 17,740 17,752 (12) --%
Common equity 165,859 138,192 27,667 20%
----------- ----------- --------- --
Total shareholders' equity 183,599 155,944 27,655 18%
----------- ----------- --------- --
Total liabilities and shareholders' equity $ 2,157,060 $ 1,898,105 $ 258,955 14%
=========== =========== ========= ==
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