EXHIBIT 99.1
For More Information: For Immediate Release:
Ronald A. Miller October 16, 2003
Senior Vice President and Chief Financial Officer
585-786-1102
Financial Institutions, Inc. Reports Third Quarter Earnings
WARSAW, N.Y. -- Financial Institutions, Inc. (NASDAQ:FISI) today reported that
third quarter 2003 net income was $4,055,000 compared to $6,884,000 for the same
quarter last year. Diluted earnings per share were $0.33 for the third quarter
of 2003 compared to $0.58 for the 2002 period. The most significant item
impacting third quarter 2003 results was a provision for loan losses of
$5,590,000, which represents an increase of $4,138,000 over the $1,452,000
provision for loan losses for the third quarter of 2002.
Peter G. Humphrey, President and CEO of Financial Institutions, Inc. (FII),
said: "Third quarter 2003 results were adversely affected by additional loan
loss provisions associated with the Company's nonperforming loans. Deterioration
of the financial condition of borrowers with loans in nonaccrual status
contributed to the higher loan loss provision. 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 September 30, 2003 nonperforming assets were $51.9 million compared to $50.7
million at June 30, 2003 and $15.9 million at September 30, 2002. Mr. Humphrey
stated, "Our nonperforming assets have leveled off and our loan workout team has
continued to make progress on strategies to
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exit and improve those troubled credits. The continuing weak economy impacts the
alternatives associated with those strategies. We have made significant strides
in our overall credit administration process and addressing our problem loans."
For the third quarter of 2003 net loan charge-offs were $3,054,000, or 0.89% of
average loans, compared to $1,098,000, or 0.35% of average loans, in the same
period last year. The ratio of nonperforming assets to total loans and other
real estate was 3.78% at September 30, 2003 compared to 2.90% at December 31,
2002 and 1.24% a year ago. The provision for loan losses increased $4,138,000
over the same period from a year ago, reflecting the increased level of
charge-offs and nonperforming loans. The ratio of the allowance for loan losses
to nonperforming loans was 57% at September 30, 2003 compared to 58% at December
31, 2002 and 142% at September 30, 2002. The ratio of the allowance for loan
losses to total loans increased to 2.12% at September 30, 2003 compared to 1.64%
at year end 2002 and 1.60% at September 30, 2002.
In the third quarter of 2003, net interest income decreased 5.0% to $18,540,000
compared to $19,533,000 in the third quarter of 2002. Net interest margin was
3.86% for the third quarter of 2003, a drop of 53 basis points from the 4.39%
level for the same period last year. Growth in average earning assets of $147
million, or 8%, partially offsets the fall in net interest margin. The growth in
average earning assets reflects an average increase of $119 million in the
Company's loan portfolio. Net interest margin has declined over the past year,
as interest rates have declined to historically low levels. The lost interest on
nonaccrual loans has also contributed to the decline in net interest margin in
recent quarters.
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Noninterest income increased 24% in the third quarter of 2003 to $7,059,000 from
$5,687,000 for the third quarter of 2002. Income from mortgage banking
activities, which includes gains and losses from the sale of residential
mortgage loans, mortgage servicing income and the amortization of mortgage
servicing rights, increased $674,000 to $1,113,000 in the third quarter 2003
from $439,000 for the same period last year. The increase in mortgage banking
revenues corresponds with the increase in residential mortgage refinancing
activity resulting from the historically low interest rate environment. The
Company sells most fixed rate newly originated and refinanced mortgage loans in
the secondary market. Gains on sale of securities increased to $581,000 for the
three months ending September 30, 2003 compared to $139,000 for the same period
a year ago.
Noninterest expense for the third quarter of 2003 totaled $14,896,000 compared
with $13,418,000 for the third quarter of 2002. Salaries and benefits increased
$1,090,000 in the third quarter of 2003 compared to the same quarter a year ago
as a result of additional staffing associated with the Company's new branch
offices and the expansion of the credit administration function. The additional
noninterest expenses, coupled with a slowing of revenue growth, are the
principal factors in an increase in the Company's efficiency ratio to 55.30%,
compared to 49.44% for the same period a year ago.
At September 30, 2003 the Company had total assets of $2.186 billion, an
increase of 8% from $2.034 billion at September 30, 2002. Total loans at quarter
end were $1.373 billion, an increase of $94 million, or 7%, over the same period
last year. Total deposits were $1.828 billion at September 30, 2003, compared
with $1.650 billion a year earlier. Total shareholders' equity increased 5% to
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$183 million at September 30, 2003 from $173 million a year earlier. Book value
per common share at September 30, 2003 was $14.78, an increase of 5% from $14.03
at September 30, 2002.
FII is the bank 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 through a network of 48 offices and 68 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. 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
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
Interest income $27,310 $30,343 $(3,033) (10)%
Interest expense 8,770 10,810 (2,040) (19)%
------- ------- ------- ----
Net interest income 18,540 19,533 (993) (5)%
Provision for loan losses 5,590 1,452 4,138 285%
------- ------- ------- ----
Net interest income after provision for loan losses 12,950 18,081 (5,131) (28)%
Noninterest income:
Service charges on deposits 2,973 2,803 170 6%
Financial services group fees and commissions 1,408 1,453 (45) (3)%
Mortgage banking activities 1,113 439 674 154%
Gain on sale and call of securities 581 139 442 318%
Other 984 853 131 15%
------- ------- ------- ----
Total noninterest income 7,059 5,687 1,372 24%
Noninterest expense:
Salaries and employee benefits 8,491 7,401 1,090 15%
Other 6,405 6,017 388 6%
------- ------- ------- ----
Total noninterest expense 14,896 13,418 1,478 11%
Income before income taxes 5,113 10,350 (5,237) (51)%
Income taxes 1,058 3,466 (2,408) (69)%
------- ------- ------- ----
Net income 4,055 6,884 (2,829) (41)%
------- ------- ------- ----
Preferred stock dividends 374 374 -- --%
------- ------- ------- ----
Net income available to common shareholders $ 3,681 $ 6,510 $(2,829) (43)%
======= ======= ======= ====
Taxable-equivalent net interest income $19,636 $20,675 $(1,039) (5)%
======= ======= ======= ====
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At or for the three months ended
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
Per common share data:
Net income - basic $0.33 $0.59 $(0.26) (44)%
Net income - diluted $0.33 $0.58 $(0.25) (43)%
Cash dividends declared $0.16 $0.15 $0.01 7%
Book value $14.78 $14.03 $0.75 5%
Common shares outstanding:
Weighted average shares - actual 11,159,433 11,091,398
Weighted average shares - diluted 11,265,904 11,217,971
Period end actual 11,162,209 11,091,581
Performance ratios, annualized
Return on average assets 0.75% 1.36%
Return on average common equity 8.70% 17.05%
Common dividend payout ratio 48.48% 25.42%
Net interest margin (tax-equivalent) 3.86% 4.39%
Efficiency ratio 55.30% 49.44%
Asset quality data:
Loans past due over 90 days and still accruing $ 1,723 $ 2,512
Restructured loans 3,098 --
Nonaccrual loans 46,352 11,883
Other real estate owned 756 1,532
-------------- --------------
Total nonperforming assets $ 51,929 $ 15,927
============== ==============
Asset quality ratios:
Nonperforming loans to total loans 3.73% 1.13%
Nonperforming assets to total loans and ORE 3.78% 1.24%
Net loan charge-offs to average loans (annualized) 0.89% 0.35%
Allowance for loan losses to total loans 2.12% 1.60%
Allowance for loan losses to nonperforming loans 57% 142%
Capital ratios:
Average common equity to average total assets 7.78% 7.57%
Leverage ratio 7.00% 7.19%
Tier 1 risk-based capital ratio 9.99% 10.32%
Risk-based capital ratio 11.25% 11.57%
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except per share amounts)
For the nine months ended
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
Interest income $84,601 $88,830 $ (4,229) (5)%
Interest expense 28,027 32,234 (4,207) (13)%
------- ------- -------- ------
Net interest income 56,574 56,596 (22) --%
Provision for loan losses 14,199 3,640 10,559 290%
------- ------- -------- ------
Net interest income after provision for loan losses 42,375 52,956 (10,581) (20)%
Noninterest income:
Service charges on deposits 8,399 7,737 662 9%
Financial services group fees and commissions 4,110 4,083 27 1%
Mortgage banking activities 2,849 1,656 1,193 72%
Gain (loss) on sale and call of securities 1,023 39 984 2,523%
Other 2,940 2,266 674 30%
------- ------- -------- ------
Total noninterest income 19,321 15,781 3,540 22%
Noninterest expense:
Salaries and employee benefits 25,408 21,829 3,579 16%
Other 20,011 16,782 3,229 19%
------- ------- -------- ------
Total noninterest expense 45,419 38,611 6,808 18%
Income before income taxes 16,277 30,126 (13,849) (46)%
Income taxes 4,276 9,941 (5,665) (57)%
------- ------- -------- ------
Net income 12,001 20,185 (8,184) (41)%
Preferred stock dividends 1,122 1,122 -- --%
------- ------- -------- ------
Net income available to common shareholders $10,879 $19,063 $ (8,184) (43)%
======= ======= ======== ======
Taxable-equivalent net interest income $59,946 $60,042 $ (96) --%
======= ======= ======== ======
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At or for the nine months ended
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
Per common share data:
Net income - basic $0.98 $1.72 $(0.74) (43)%
Net income - diluted $0.97 $1.70 $(0.73) (43)%
Cash dividends declared $0.48 $0.42 $0.06 14%
Common shares outstanding:
Weighted average shares - actual 11,142,055 11,057,731
Weighted average shares - diluted 11,244,866 11,219,501
Period end actual 11,162,209 11,091,581
Performance ratios, annualized
Return on average assets 0.74% 1.40%
Return on average common equity 8.73% 17.87%
Common dividend payout ratio 48.98% 24.42%
Net interest margin (tax-equivalent) 3.95% 4.43%
Efficiency ratio 55.87% 49.68%
Net loan charge-offs to average loans 0.67% 0.26%
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 66,653 $ 46,423 $ 20,230 44%
Federal funds sold 53,228 26,877 26,351 98%
Investment securities 603,795 597,233 6,562 1%
Loans 1,373,455 1,279,025 94,430 7%
Allowance for loan losses (29,052) (20,474) (8,578) 42%
----------- ----------- --------- ---
Loans, net 1,344,403 1,258,551 85,852 7%
9%
Goodwill 40,621 37,293 3,328
Other assets 77,650 67,278 10,372 15%
----------- ----------- --------- ---
Total assets $ 2,186,350 $ 2,033,655 $ 152,695 8%
=========== =========== ========= ===
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 263,433 229,331 34,102 15%
Savings, money market, and int-bearing checking 826,114 748,424 77,690 10%
Certificates of deposit 738,379 672,233 66,146 10%
----------- ----------- --------- ---
Total deposits 1,827,926 1,649,988 177,938 11%
Short-term borrowings 70,392 67,674 2,718 4%
Long-term borrowings 68,606 105,187 (36,581) (35)%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 20,489 21,272 (783) 4%
----------- ----------- --------- ---
Total liabilities 2,003,613 1,860,321 143,292 8%
Shareholders' equity:
Preferred equity 17,735 17,752 (17) --%
Common equity 165,002 155,582 9,420 6%
----------- ----------- --------- ---
Total shareholders' equity (1) 182,737 173,334 9,403 5%
----------- ----------- --------- ---
Total liabilities and shareholders' equity $ 2,186,350 $ 2,033,655 $ 152,695 8%
=========== =========== ========= ===
(1) Includes the after-tax impact of net unrealized gains on investment
securities classified as available for sale of $8,098 and $9,835 at
September 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
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 45,077 $ 41,097 $ 3,980 10%
Federal funds sold 65,648 14,999 50,649 338%
Investment securities 579,085 601,958 (22,873) (4)%
Loans 1,378,713 1,259,358 119,355 9%
Allowance for loan losses (26,375) (20,331) (6,044) 30%
----------- ----------- --------- ----
Loans, net 1,352,338 1,239,027 113,311 9%
Goodwill 40,621 37,349 3,272 9%
Other assets 74,639 66,847 7,792 12%
----------- ----------- --------- ----
Total assets $ 2,157,408 $ 2,001,277 $ 156,131 8%
=========== =========== ========= ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 254,528 222,854 31,674 14%
Savings, money market, and int-bearing checking 789,078 727,625 61,453 8%
Certificates of deposit 753,866 675,435 78,431 12%
----------- ----------- --------- ----
Total deposits 1,797,472 1,625,914 171,558 11%
Short-term borrowings 65,336 76,490 (11,154) (15)%
Long-term borrowings 71,151 94,233 (23,082) (24)%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 21,677 19,233 2,444 13%
----------- ----------- --------- ----
Total liabilities 1,971,836 1,832,070 139,766 8%
Shareholders' equity:
Preferred equity 17,735 17,752 (17) --%
Common equity 167,837 151,455 16,382 11%
----------- ----------- --------- ----
Total shareholders' equity 185,572 169,207 16,365 10%
----------- ----------- --------- ----
Total liabilities and shareholders' equity $ 2,157,408 $ 2,001,277 $ 156,131 8%
=========== =========== ========= ====
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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
For the nine months ended
September 30,
-------------
$ %
2003 2002 Change Change
---- ---- ------ ------
ASSETS
Cash, due from banks and interest-bearing deposits $ 43,627 $ 40,557 $ 3,070 8%
Federal funds sold 46,523 28,239 18,284 65%
Investment securities 621,990 564,559 57,431 10%
Loans 1,356,183 1,214,484 141,699 12%
Allowance for loan losses (24,068) (19,836) (4,232) 21%
----------- ----------- --------- ---
Loans, net 1,332,115 1,194,648 137,467 12%
Goodwill 40,615 36,965 3,650 10%
Other assets 72,307 67,905 4,402 6%
----------- ----------- --------- ---
Total assets $ 2,157,177 $ 1,932,873 $ 224,304 12%
=========== =========== ========= ===
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand 239,843 214,761 25,082 12%
Savings, money market, and int-bearing checking 797,424 700,510 96,914 14%
Certificates of deposit 748,428 649,023 99,405 15%
----------- ----------- --------- ---
Total deposits 1,785,695 1,564,294 221,401 14%
Short-term borrowings 63,490 87,943 (24,453) (28)%
Long-term borrowings 85,164 84,328 836 1%
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debentures 16,200 16,200 -- --%
Other liabilities 22,365 19,694 2,671 14%
----------- ----------- --------- ---
Total liabilities 1,972,914 1,772,459 200,455 11%
Shareholders' equity:
Preferred equity 17,738 17,752 (14) --%
Common equity 166,525 142,662 23,863 17%
----------- ----------- --------- ---
Total shareholders' equity 184,263 160,414 23,849 15%
----------- ----------- --------- ---
Total liabilities and shareholders' equity $ 2,157,177 $ 1,932,873 $ 224,304 12%
=========== =========== ========= ===
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