FISI - Earnings call transcript Q1 2024 | Financial Institutions, Inc.

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Operator

Hello, everyone, and welcome to the Financial Institutions, Inc.

First Quarter 2024 Earnings Call. My name is Harry, and I'll be your operator. [Operator Instructions] I will now hand over to Kate Croft to begin. Please go ahead.

Kate Croft

us call. joining for you for today's Thank Providing Birmingham; and will be CEO, Marty President and CFO, prepared comments Jack Plants. He question-and-answer additional leadership will numbers of the by be company's during session. a joined financial

IR harbor will yesterday's Today's prepared differ from investor Reconciliations may in CEO, measures were earnings Form factors. risks, now also filings, call SEC website release Relations statements well are to forward-looking We forward-looking and of on Actual call to variety our discussion financial and Please measures results earnings and our GAAP the historical materially X-K Relations the a of XXXX. Investor I'll to note these turn an not on accurate to www.fisi-investors.com. safe non-GAAP supplement include date, as Investor due XX, or factors GAAP for intended Birmingham. a this and uncertainties comments today's measures may statements. and exhibit provided President be to of refer of only presentation Q&A available and filed over that website, April which available description other detailed discuss substitute release with you for that a Marty the our relating as information to in presentation financial risk forward-looking certain to includes measures. as statements. We'll comparable

Martin Birmingham

you company positioning performance strategic today. recall for reorganization Kate. our you'll balance In operating potential us of for future. us and fourth into to persist. thank you, of we in everyone, optimize took the the a joining the earnings incremental and we the knew completed challenging to would configuration steps Thank sustained enhance the while the sheet environment Good morning, XXXX, Heading that quarter,

event have last challenges experienced, managed the the of and have Given imagined faced the several could we we weeks. intensity never we vigorously fraud the in

the in-market by charge in activity million March. lower business first in This than reflecting Star modestly originally XXXX, our potential $XX.X broken deposit early in we quarter. million Bank we in expenses. The exposure funds in conducted disclosed, from discovered customer March previously been that charge-off other is only has As $XX.X fraudulent estimated, statements resulted recouped Five the income deposit-related out late

consulting actively financial legal are $XX us fraud significant all to event million. certainly additional this loss solid to approximately This customer We from results legal recover and associated pursuing the the impact available totaling recourse with pretax otherwise and quarter and expenses on loss. XXXX a first had our funds minimize elevated

annualized quarter, compared XX fourth this We of we an loss and to $X.X the $X.XX the As approximately late of per per XXX%. or shareholders in the quarter points $X.X to diluted or first first recognize quarter common reported per $X.XX share share share on in or and net assets was efficiency million XXXX. an basis average income $XX.X available in million $X.XX return of ratio million

efficiency Excluding $X.XX share, this ratio of X.XX% company of earnings related of the of fraud an the impact XX%. per diluted event, reported and would expenses ROA approximately to have

Even of broker a sale leading as Property closed actions insurance and the Insurance subsidiary, capital focused assets benefits we our April NFP this to to SDN earnings. On consultant. remain Services, Casualty strategic liquidity, and & we we and matter, casualty announced property the X, on of navigated Agency enhance and

a and believe eliminating income, a XXXX other $XX time generating premium overall contribution having after-tax sale a on net generating this what insurance approximately million basis, opportune all-cash peak of to represents also the at costs, us revenue business, we to assets. capture allowed meaningful value million in was to and addition an selling this an transaction intangible margin. The prior EBITDA business of $XX.X while was approximately XXx to earnings. of Xx This line goodwill gain transaction In strong million when occurred $XX.X

at our evaluated capital allowed pleased least into provide the of basis time and to have reflected serving we a enhanced years Buffalo insurance agency when in to expand helped and results. Western bolt-on capital New collaboration by the be transaction acquired points efficient it We both such in which we clients customers, the supported since continued with the needed opportunity SDN's were revenue will financially and points, Bank markets in insurance of to is shareholder-friendly Star Importantly, at our ratio business. and the leading grow its Five terms diversification in through compelling source subsidiary second former for a NFP's for XX capabilities than this buyers and incremental impacts an future the services basis and we our Rochester manner. In potential nationally. We and York acquisitions it provides team. more offer and regulatory XX XX SDN was our vision and that us TCE quarter positively

and forward, the Looking bank's insurance customers of to ensuring have partner counsel, will choice exceptional our services. products access insurance continued be NFP

expansion proceeds the in the growth disciplined high-quality support year. of earning our origination We yielding credit through deploy into form to loan and sale from drive asset to the expect business net interest core higher banking margin

this portfolio enhance we auto of Mid-Atlantic and growth commercial the across and Western the line that be declines We our spending lending by this cash loan offset segment driven York growth In our while first continue benefiting will it indirect our full New year group, Central expect in was business, to from flow in our quarter, region. which the continue operates as of profitability anticipated by to provides.

to in improvement have down in the points, points quarter, far average XX several nonperforming we million March strong relatively loans XXXX, to solid first charge-offs remained closed have pipelines While commercial of points current were loans balances net of or the total deals XX, were XX basis XXXX, and $XX at basis XX XX second the end quality XXXX. quarter total so loans XX, of basis and December notable Credit an the fourth flat basis points from Annualized stable quarter. quarter. with and loan to XX in the

While we indirect first quarters, trends delinquencies the our have last the indirect the of in into saw portfolio higher in trend charge-off overall few quarter. XXXX, the positive during rates quarter that we in continued seen

year-end in confident balances health performance a up remain metrics. Deposit our loan with associated portfolio an first asset X.XX% total from we or million we of delinquencies, was December by X.XX% of As Overall, essentially quarter XXXX. $XX months for million half $XXX.X during example, including our March nonaccruals the X growth quality declined to and first XX, at the the highlight more saw XX, XXXX. the year than of at X.X%

remain well. seasonality as this of end of were While XXXX and a accounts. the fluctuation presents, deposits space we have experienced normal We modestly of or million BaaS-related this energized was the to this growth about Service, the the public opportunity within deposits user while of nonpublic deposits from in experienced. end main as in reciprocal down driver Banking approximately business mindful of line $XXX reflecting challenges others increase,

have and stated small organizational with to the our we aligned and on statement has niche partners measured, focused appetite been affinity midsized deliberately serving BaaS As approach groups risk businesses, our select and markets. in past,

currently in to this them in a guidance. partners, cultivating our a control partnership. of Our this our in of with pipeline. We approach my deem are call platform risk-adjusted onto details and my reduction pleasure to lasting, additional prudent, and for on and process comments. and coupled to results introductory line the focused XXXX transitioning our partnership Jack It's concludes evaluating for on strong This turn now sustainable resulted over details modest has BaaS business growth but

Jack Plants

Thank yields has curve with points, reported you, morning, everyone. cost line environment, of the and increased linked Net increased the current basis XX Margin basis competition basis we interest fully XXXX. Marty. strong for for in a first incrementally funds, of stabilized, the monthly points with markets. Margin million $XXX,XXX quarter. on rate and basis was yield overall asset quarters. the interest in income the for quarter of of equivalent in the up of continued of on taxable reflective Interest-earning first XXX high the a quarter fourth impact Good $XX.X NIM both our inward

ample Given looking our experienced FOMC relative rate funds XXXX, XX%. at redeploy we we increases in of beta our magnitude in XXXX that occurred to have the $X.X a flow have portfolio to billion of higher-yielding assets. And anticipated earning XXXX, deposit and total into cash cycle-to-date opportunity in

Excluding the of cost of beta had time deposits, the non-maturity a deposit portfolio XX%.

of $XX.X million FOMC Given life This or betas by largely linked-quarter first variance current modeling, slow COLI quarter, million XXXX. Noninterest on in in expectations expect the and totaled a to income insurance, the company-owned lower income down the we in $X.X basis. driven internal quarter. trajectory was deposit

approximately period. $X rate investment related premium separate reported income we recall, into in fourth a the quarter which the COLI higher million on As of you'll product of account to $X.X the during that of a crediting million

between partially with worth COLI and associated serving undervalue $XX,XXX along we income reported institutional plan incremental the fourth mass which, RIA has income related a As Capital, to and securities million Courier net with in the income, linked offset to component largely we quarter the and stable results. linked stabilized was also is about $X.X XXX(k) insurance on repositioning quarter, affluent the of first October, periods. Investment individuals quarter, our in income reflected expected, quarter. by and XXXX variance our from driven families, high and loss higher value clients investment the seasonally subsidiary sponsors down those advisory completed cash In policies in

Courier billion. of had management As of approximately Capital March XX, assets under $X XXXX,

we expenses. March $XXX,XXX XXXX, legal noninterest expense and event million related As noted, charge-off, increased primarily Marty in fraud attributable the consulting including experienced in to fraud $XX.X was approximately deposit-related

model here. of on the level indirect of delinquencies a these for in on decrease corresponds losses the fourth and with resulted in in of to a and credit Slide a couple the in I'd XXXX. This forecasted over benefit primary an loans trends qualitative contributing like We've range a details as improved consumer release. the but period the a XX in the items, The factors, delinquencies quantitative year-end delinquencies loan qualitative nature a to to in lower of coupled is the have our quarter. We recorded touch noninterest losses relative and provided XXXX. decrease flat factor qualitative look-back would factor in expense with driver factors since Excluding linked for reserve been investor improvement presentation, of additional purely this quarter direct portfolio in our was consumer X

commercial We effective tax delinquencies trends observed also credit in $XXX,XXX favorable an commercial our administration functions. Income rate representing quarter tax and and XX.X%. of the review saw was in improved expense

other at ratio book March reported TCE to million XX at XX, December per XX, a X.XX% share of Our value loss March $XX.XX. tangible We comprehensive million at was of XXXX, common $XXX.X compared $XXX.X accumulated and XXXX.

per value X.XX% book would common tangible and respectively. have $XX.XX ratio TCE been share the impact, AOCI the Excluding and

continue an would our time to like return XXXX the these more credit expect to levels to investment quality and normalized cash update now nature of to metrics provide areas. portfolio. I We over high the given our remainder on key outlook for in of flow

income insurance the noninterest tax million credits, excludes million guidance Following income million and quarter transaction, related and our now limited partnerships, full SDN investment $XX between the April we recurring on and losses $X.X to assets, million gains investment year. This expect $XX.X X, XXXX, including or $X for securities sale. or per to

to the of to of We quarter range to effective the the impact including SDN $XXX the in projecting noninterest the the rate to $XX tax quarter. quarter of credit full tax remainder sale again, of now XX% excluding year the fraud expense quarter, $XX to are in We of the the in the in reflecting noninterest related first service recognized million translates recent of second years. the expect million the sale event million fraud event million, SDN. This for investments million $XX XX%, placed XXXX expense of first to the expense of in and amortization per $XXX now in fall XXXX,

rate. would to on evaluate We positive opportunities credit effective our investments these of tax will have tax impact continue and the

a points XXX between basis guidance net deposit position. growth previous annual strong to of XXX X%, basis financial between points Our to in and within historical to charge-offs interest our margin remain full loan of our company year net unchanged. Overall, to XX of on range X% remains XX

the the We be equity X.XX% of consistent capitalized X Tier year-end of we to during a level ratio common challenges quarter maintain capital well reporting continue faced, despite steady XXXX. with a regulatory first to

guidance. seen, I'll a my we've Marty. communities. That continues our approaching position liquidity updated customers concludes and the to flow strongest Our back is $X and and among XX-month now cash call prepared remarks continue billion, strong putting to to exceed to billion us $X.X turn position our support anticipated in the

Martin Birmingham

Thank you, Jack.

very allowing longer-term for As focus our our of to I'm team first our running delivering of us objectives not challenging business, the initiatives. from on adversity the and distract on as was, proud executing quarter

off The supporting insurance our with is divestiture our capital second potential. subsidiary, a quarter earnings start and to ratios a successful strong of

pipelines the focused customer strong has Our core banking questions. call deposit on retail, and prepared grow a we to Operator, in associates. That risk and be and sustain loan relationships delivery our fundamental our to are continues our order growth business credit for healthy, commercial, on remain nurturing and remarks. disciplined and open please focus base. Credit of our concludes been

Operator

Our from the first question Instructions] [Operator DelMonte KBW. line is Damon of today of

Damon Del Monte

kind cycle at But the combination to credit the trends factors would curious trip there's been just like this provided was the just the loss round the we I looks that reversal. of loan reserve, to higher effectively what wondering in X basis harm kind in points, have supports with understand day a a of that regards now of were reversal reserve, especially So where maintain with CECL provision today. It the level. I the is quarter. are XX release

a So have the keep harm be the of just been kind little curious reserve bit higher a to to conservative. what little bit would more as and

Martin Birmingham

financial cetera. We Damon, to important interest X at basis. to right the now. and for to to all on could an Fed and economy -- what releases. et for increases. built Marty. happen the Obviously, were basis about models of a industry topic, rates exist. credit, XX rate point, didn't we think, felt the Thanks when funds XX events time they question. your other challenges think I were last a these the obviously not the impact industry There's -- It's the relative some for to interest reserve dissidence the in CECL these we've the relative points credit of And it's been We've in of that talking months, press velocity the

we acceptable So early model of that. that we are that statistical exploring you versus adopted about other started and are the in that built 'XX to think late would in times the was But terms future attribution and predicting it today Jack, 'XX have factors thinking the and and credit losses. and when about in

Jack Plants

Sure.

of that's quarter of of reserves, to When the in given the start driven, the in was me I'm XX increase. And that the qualitative first by which third points. fourth saying year. fourth portfolio, started to with 'XX, in our our coverage model we we a delinquency drivers of comfortable by indirect saw of year portfolio. So back quarter I and net it CECL a Damon, basis the ratio again, that result, one and the let credit the portfolio indirect our higher charge-offs and when look performance last building of were as this that's driven quarter quantitatively on

we is saw were leading quarter, quarter charge-offs fourth at in the portfolio. of which during the of what last the that they delinquencies of future However, year, first during indicator basically XX%

and So given our factor reserve of the the release performance drove with portfolio, there. of the around obviously it, comfortable our that And that performance with that current quantitative coverage ratio. underlying majority

Damon Del Monte

it. Got

could portfolio concern that the there's And there's there's higher on for consumer that, no that weakness? stress experience indirect Okay. like and stay more if longer -- rates some

Jack Plants

the programs. were liquidity in the this fourth was when year. working through saw and net from had originated by first a slug the pandemic We that portfolio government been loans flush We're that. driven charge-offs That of weakness with through of consumers stimulus in quarter during

line on improved performance expect of some the delinquencies to business. see current portfolio, the that I in Given

Damon Del Monte

Great. margin. then one this on Okay. month other It for in the here to question Do quarter. came you the March? happen XXX was just margin have at the And of what

Martin Birmingham

basis XXX was it Yes, points.

Operator

[Operator Sandler. the from of next Piper Bader is Instructions] line Hijleh Our question of

Bader Hijleh

Just filling today. to wanted in Alex for guidance. about NIM the Just I ask

year. the to the versa the have vice the us XXX XXX of hit for XXX to range, the would throughout of to You top right XXX guys end what it to go you and year. guided just walk for drivers Could through to

Jack Plants

Sure.

So a to coming X% cash of growth with what's lot X% portfolio tempered really range. that flow in the off is loan driving that

roll-on the the which or is coming exceeding higher, book seeing the that's on yields our we're X% portfolio. cash flows So in commercial come off

expansion we're the of driving that's So rate deposit given modest that the modest also forecasting. We're the amount including beta in book increased just higher environment.

as to which level we first quarter last that, call in of than month experienced had us at what at the gets during year. However, a level, range indicated projected for that's year. script, improvement that the what we much full saw And lower a we the modest think margin we each guided we

Bader Hijleh

And it NIM? the NIM Got be then that for NIM. the just I quarter? fair just was XXX. a we next about should fair the you the March it. assume And Is to an assume expect follow-up also it inflection would mean, for gave bottom Is -- to XQ

Jack Plants

the That's expectation.

Operator

you. Thank

at We the this questions have further queue time. no in

So any I hand like Martin Birmingham to would for remarks. to back closing

Martin Birmingham

everyone's interest forward July. look continuing results in this conversation We quarter Appreciate you updating and this on the and for in morning company. second the participation to our

Operator

Thank This call. concludes all joining. today's for you

now may lines. your You disconnect

Financial Institutions (FISI) 26 Apr 242024 Q1 Earnings call transcript