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Section 1: 8-K (8-K)

fisi-8k_20200331.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 30, 2020

 

Financial Institutions, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

New York

0-26481

16-0816610

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

220 Liberty Street

Warsaw, New York

 

14569

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (585) 786-1100

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

FISI

Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On April 30, 2020, Financial Institutions, Inc. (the “Company”) issued a press release to report financial results for the first quarter ended March 31, 2020.  The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 7.01 Regulation FD Disclosure.

The Company published an investor presentation with data for the first quarter ended March 31, 2020.  The presentation is available on the Company’s website at www.fiiwarsaw.com under “News & Events/Presentations”.  Investors should note that the Company announces material information in SEC filings and press releases.  Based on guidance from the Securities and Exchange Commission, the Company may also use the Investor Relations section of its corporate website, www.fiiwarsaw.com, to communicate with investors about the Company.  It is possible that the information posted there could be deemed to be material information.  The information on the Company’s website is not incorporated by reference into this Current Report on Form 8-K.

This information is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, of the Exchange Act, whether made before or after the date of this report, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

 

Description

 

Location

99.1

 

Press Release issued by Financial Institutions, Inc. on April 30, 2020

 

Filed herewith

 

 

 

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Financial Institutions, Inc.

 

 

 

 

Date:  April 30, 2020

 

By:

/s/ Justin K. Bigham

 

 

 

Executive Vice President, Chief Financial Officer

 

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

fisi-ex991_6.htm

Exhibit 99.1

Financial Institutions, Inc.

 

 

 

 

 

NEWS RELEASE

 

 

For Immediate Release

 

 

FINANCIAL INSTITUTIONS, INC. ANNOUNCES FIRST QUARTER RESULTS

WARSAW, N.Y., April 30, 2020 – Financial Institutions, Inc. (Nasdaq:FISI) (the “Company” “we” or “us”), parent company of Five Star Bank (the “Bank”), SDN Insurance Agency, LLC (“SDN”), Courier Capital, LLC (“Courier Capital”) and HNP Capital, LLC (“HNP Capital”), today reported financial and operational results for the first quarter ended March 31, 2020.

Net income for the quarter was $1.1 million compared to $11.5 million for the first quarter of 2019. After preferred dividends, net income available to common shareholders was $762 thousand for the quarter, or $0.05 per diluted share, compared to $11.2 million, or $0.70 per diluted share, for the first quarter of 2019.

First quarter results were negatively impacted by a significantly higher provision for credit losses of $13.9 million, as compared to $1.2 million in the first quarter of 2019. The after-tax impact of the higher provision as compared to first quarter of 2019 was $0.59 per diluted share. The higher provision was driven by the adoption of the current expected credit loss (“CECL”) standard and the impact of COVID-19 on the economic environment.  

Pre-tax pre-provision income(1) was $15.4 million for the quarter compared to $15.7 million for the first quarter of 2019.

President and Chief Executive Officer Martin K. Birmingham stated, “The COVID-19 crisis has impacted the global economy and our thoughts remain with the individuals and communities who have been impacted. We have been working diligently since early March to enact measures to operate safely and effectively while offering all of the comprehensive banking, investment and insurance services our customers have come to depend on. It is now more critical than ever that individuals and businesses continue to have access to their financial institution and the ability to work with their trusted financial advisors.

“We believe we are well-positioned to provide customers the support they need during these challenging times based on our diversified business model, strong levels of capital and liquidity, historically strong asset quality metrics and a disciplined risk management and underwriting process.

“Five Star Bank and our wealth management and insurance subsidiaries continue to remain accessible to customers during this temporary shift to a new normal. Nearly all our bank branches remain open with heightened safety measures and most transactions are taking place through drive-through operations. Customers can access the Bank through our web and mobile apps or call center and they can access cash through any of our ATMs, as well as multiple alternative locations.

“On March 23rd, recognizing the impact of economic stress caused by the crisis, we rolled out a series of solutions to support our customers and allow them to focus on their health and safety. These actions included the waiving or elimination of several types of fees, offering the opportunity for loan payment relief or deferrals and offering unsecured personal loans at a low interest rate.

“Small businesses are critically important to our local economies and we are focused on providing small business customers timely solutions, including those specific to Small Business Administration (“SBA”) relief programs and other relief programs. Leveraging our strong historic commitment to small businesses and status as a Preferred SBA lender, we have been helping customers take advantage of the Payroll Protection Program to source needed funds to cover operating expenses. To date, we have helped more than 600 customers obtain more than $200 million in loans through this program. The Payroll Protection Program recently received another round of funding and we continue to support our communities by helping existing and new customers obtain these loans.

“I want to thank all of our associates for facing the many new challenges associated with COVID-19 with grace and fortitude. They have efficiently transitioned from business as usual operations to our new standard of working together from multiple locations helping teammates meet deadlines, keeping important projects moving forward, generating new business and taking great care of our customers. They continue to work every day, no matter the obstacle, to serve our customers and improve our communities.”

2020 Initiatives

The Company continued to advance the major transformational and technology initiatives announced last quarter. The Five Star Bank Digital Banking platform will completely replace the existing digital platform for consumer and commercial customers and we expect it to significantly improve the user experience across all devices. It is now more important than ever that we enhance our customers’ capabilities to interact with us digitally. A multiple-phase launch of Five Star Digital Banking is planned for the second quarter of 2020.

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An enterprise standardization program, focused on improving operational efficiency and enhancing future profitability, continues to move forward as well. The Company is evaluating activities and functions across the organization, focusing on ways to improve operational efficiency and automate low-value, repetitive activities using robotic process automation while also enhancing the employee and customer experience.

Net Interest Income and Net Interest Margin

Net interest income was $33.1 million for the quarter, relatively unchanged as compared to the fourth quarter of 2019 and $1.3 million higher than the first quarter of 2019.

 

Average interest-earning assets for the quarter were $4.05 billion, $60.4 million higher than the fourth quarter of 2019 and $57.7 million higher than the first quarter of 2019, primarily as a result of organic loan growth.

 

Net interest margin was 3.31%, two basis points lower than the fourth quarter of 2019 and seven basis points higher than the first quarter of 2019. The decline from the linked quarter was the result of lower interest rates in the first quarter of 2020 and the year-over-year improvement was primarily the result of a change in the interest-earning asset mix as loans became a larger percentage of the portfolio.

Noninterest Income

Noninterest income was $10.0 million for the quarter compared to $9.7 million in the fourth quarter of 2019 and $9.1 million in the first quarter of 2019.

 

Service charges on deposits of $1.6 million was $293 thousand lower than the fourth quarter of 2019 and $93 thousand lower than the first quarter of 2019. Historically, first quarter service charges are lower than the preceding quarter due to lower levels of consumer activity. The remaining decrease is the result of the Company’s COVID-19 relief initiatives of waiving or eliminating fees, implemented on March 23, 2020.

 

Insurance income of $1.3 million was $468 thousand higher than the fourth quarter of 2019, primarily due to contingent revenue received in the first quarter each year. Insurance income was $29 thousand lower than the first quarter of 2019.  

 

Investment advisory fees of $2.2 million was $129 thousand lower than the fourth quarter of 2019 due to domestic and international market volatility related to COVID-19 and the corresponding impact on assets under management. Fees were $30 thousand higher than the first quarter of 2019.

 

Income from investments in limited partnerships of $213 thousand was $353 thousand higher than the $140 thousand loss recognized in the fourth quarter of 2019 and $19 thousand lower than income of $232 thousand in the first quarter of 2019. The Company has made several investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from these investments fluctuates based on the maturity and performance of the underlying investments.

 

Income from derivative instruments, net was $746 thousand compared to $1.3 million in the fourth quarter of 2019 and $168 thousand in the first quarter of 2019. The decrease from the fourth quarter of 2019 was primarily the result of a credit valuation adjustment associated with our interest rate swap portfolio, driven by the decline in interest rates. The increase from the first quarter of 2019 was primarily the result of an increase in the number and value of interest rate swap transactions executed.

 

A net gain on investment securities of $221 thousand was recognized in the quarter compared to a net loss of $44 thousand in the fourth quarter of 2019 and a net loss of $53 thousand in the first quarter of 2019.

 

A net loss on tax credit investments of $40 thousand was recognized in the quarter compared to a net loss of $528 thousand in the fourth quarter of 2019. This includes the amortization of tax credit investments, partially offset by New York investment tax credits that are refundable and recorded in noninterest income. Two tax credit investments were placed into service in the first quarter of 2020 and five were placed into service in the fourth quarter of 2019.

Noninterest Expense

Noninterest expense was $27.7 million in the quarter compared to $26.8 million in the fourth quarter of 2019 and $25.2 million in the first quarter of 2019.

 

Salaries and employee benefits expense of $15.0 million was $345 thousand higher than the fourth quarter of 2019 and $1.0 million higher than the first quarter of 2019. The increases are primarily the result of investments in personnel and the timing of merit increases, effective in early March each year.

 

Professional services expense of $2.2 million was $346 thousand higher than the fourth quarter of 2019 and $994 thousand higher than the first quarter of 2019. The increases were primarily due to the timing of audit fees and fees for consulting and advisory projects. Expenses related to the Company’s improvement initiatives totaled $599 thousand in the first quarter of 2020, $510 thousand in the fourth quarter of 2019 and $83 thousand in the first quarter of 2019.


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FDIC assessments were $372 thousand in the quarter compared to $0 in the fourth quarter of 2019 and $512 thousand in the first quarter of 2019. In 2018, the FDIC minimum reserve ratio was exceeded, resulting in credits. The Bank received credits against its regular assessment of $482 thousand in the fourth quarter of 2019. A remaining credit of $70 thousand was used in the first quarter of 2020. The remaining decrease compared to the first quarter of 2019 was the result of a lower FDIC rate in the first quarter of 2020.

 

Advertising and promotions expense of $555 thousand was $671 thousand lower than the fourth quarter of 2019 and $35 thousand higher than the first quarter of 2019. Advertising and promotions expense is historically lightest in the first quarter. In addition, advertising activity was reduced in March 2020 when the COVID-19 pandemic impacted operations in Western New York.

Income Taxes

Income tax expense was $322 thousand for the quarter compared to $312 thousand for the fourth quarter of 2019 and $3.0 million for the first quarter of 2019. The Company recognized federal and state tax benefits related to tax credit investments placed in service, resulting in an income tax expense reduction of $197 thousand in the first quarter of 2020 and $2.7 million in the fourth quarter of 2019.  

The effective tax rate was 22.2% for the quarter compared to 2.3% for the fourth quarter of 2019 and 20.8% for the first quarter of 2019. In addition to the impact of tax credit investments described above, the Company’s effective tax rates differ from statutory rates because of interest income from tax-exempt securities and earnings on company owned life insurance. 

Balance Sheet and Capital Management

Total assets were $4.47 billion at March 31, 2020, up $87.6 million from December 31, 2019, and up $169.2 million from March 31, 2019.

Investment securities were $791.1 million at March 31, 2020, up $14.2 million from December 31, 2019, and down $75.4 million from March 31, 2019. The decrease from March 31, 2019 was primarily the result of the redeployment of assets from investment securities into loans to improve the interest-earning asset mix.

Total loans were $3.24 billion at March 31, 2020, up $16.2 million from December 31, 2019, and up $128.0 million or 4.1% from March 31, 2019.

 

Commercial business loans totaled $588.9 million, up $16.8 million from December 31, 2019, and up $35.1 million, or 6.3%, from March 31, 2019.

 

Commercial mortgage loans totaled $1.11 billion, relatively unchanged from December 31, 2019, and up $114.1 million, or 11.5%, from March 31, 2019.

 

Residential real estate loans totaled $579.8 million, up $7.5 million from December 31, 2019, and up $45.1 million, or 8.4%, from March 31, 2019.

 

Consumer indirect loans totaled $843.7 million, down $6.4 million from December 31, 2019, and down $59.1 million, or 6.5% from March 31, 2019.

Total deposits were $3.79 billion at March 31, 2020, $231.5 million higher than December 31, 2019, and $278.3 million higher than March 31, 2019. The increase from December 31, 2019, was primarily due to public deposit seasonality and growth in the reciprocal deposit portfolio. Deposit growth from March 31, 2019, was primarily driven by increases in the non-public (excluding certificates of deposits), public and brokered deposit portfolios. Public deposit balances represented 27% of total deposits at March 31, 2020, compared to 24% of total deposits at December 31, 2019, and 28% at March 31, 2019.

Short-term borrowings were $109.5 million at March 31, 2020, a decrease of $166.0 million from December 31, 2019, and a decrease of $177.8 million from March 31, 2019. Short-term borrowings and brokered deposits have historically been utilized to manage the seasonality of public deposits, which reached a seasonal high point during the first quarter. In February 2020, the Company entered a long-term brokered sweep arrangement as a stable alternative borrowing source to diversify the wholesale borrowing base.

Shareholders’ equity was $439.4 million at March 31, 2020, compared to $438.9 million at December 31, 2019, and $408.3 million at March 31, 2019. Common book value per share was $26.35 at March 31, 2020, unchanged from December 31, 2019, and an increase of $1.83 or 7.5% from $24.52 at March 31, 2019. Tangible common book value per share(1) was $21.69 at March 31, 2020, an increase of $0.03 from $21.66 at December 31, 2019, and an increase of $1.92 or 9.7% from $19.77 at March 31, 2019.

During the first quarter of 2020, the Company declared a common stock dividend of $0.26 per common share, an increase of 4.0% over the previous dividend.

The Company’s regulatory capital ratios at March 31, 2020, compared to the prior quarter and prior year:

 

Leverage Ratio was 8.78%, compared to 9.00% and 8.36% at December 31, 2019, and March 31, 2019, respectively.

 

Common Equity Tier 1 Capital Ratio was 10.05%, compared to 10.31% and 9.87% at December 31, 2019, and March 31, 2019, respectively.

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Tier 1 Capital Ratio was 10.53%, compared to 10.80% and 10.37% at December 31, 2019, and March 31, 2019, respectively.

 

Total Risk-Based Capital Ratio was 12.54%, compared to 12.77% and 12.50% at December 31, 2019, and March 31, 2019, respectively.

Credit Quality

Non-performing loans were $12.4 million at March 31, 2020, compared to $8.6 million at December 31, 2019, and $5.8 million at March 31, 2019. The increase is primarily attributable to one commercial credit that was downgraded and partially charged-off during the first quarter of 2020. The borrower’s business was related to the hospitality industry and the downgrade and charge-off were precipitated by the impact of COVID-19.

Net charge-offs were $10.1 million in the quarter, $6.3 million higher than the fourth quarter of 2019 and $8.4 million higher than the first quarter of 2019. The increase is primarily attributable to the commercial credit noted above. The ratio of annualized net charge-offs to total average loans was 1.27% in the quarter, 0.48% in the fourth quarter of 2019 and 0.23% in the first quarter of 2019.

The Company adopted CECL effective January 1, 2020, which resulted in an increase to the allowance for credit losses - loans of $9.6 million and established a reserve for unfunded commitments of $2.1 million, for a total pre-tax cumulative effect adjustment of $11.7 million. At March 31, 2020, the allowance for credit losses - loans to total loans ratio was 1.34% as compared to 0.95% at December 31, 2019, and 1.07% at March 31, 2019. The provision for credit losses was $13.9 million in the quarter compared to $2.7 million in the fourth quarter of 2019 and $1.2 million in the first quarter of 2019. The increase in first quarter provision reflects higher charge-offs and deterioration in the economic environment as a result of the impact of COVID-19, which adversely impacted our unemployment forecast, the designated loss driver for our CECL model.

The Company has remained strategically focused on the importance of credit discipline, allocating what we believe are the necessary resources to credit and risk management functions as the loan portfolio has grown. The total non-performing loans to total loans ratio was 0.38% at March 31, 2020, compared to 0.27% at December 31, 2019, and 0.19% at March 31, 2019. The ratio of allowance for credit losses - loans to non-performing loans was 350% at March 31, 2020, compared to 353% at December 31, 2019, and 574% at March 31, 2019.

Conference Call

The Company will host an earnings conference call and audio webcast on May 1, 2020, at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and Justin K. Bigham, 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 1-888-346-9290 and requesting the Financial Institutions, Inc. 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, SDN, Courier Capital and HNP 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. SDN provides a broad range of insurance services to personal and business clients. Courier Capital and HNP Capital provide 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 700 individuals. The Company’s stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at www.fiiwarsaw.com.

Non-GAAP Financial Information

In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP measures is included in Appendix A to this document.

The Company believes that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, performance trends and financial position. Our management uses these measures for internal planning and forecasting purposes and we believe that our presentation and discussion, together with the accompanying reconciliations, allows investors, security analysts and other interested parties to view our performance and the factors and trends affecting our business in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP measures and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure to evaluate the Company. Non-GAAP financial measures have inherent limitations, are not uniformly applied and are not audited. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.


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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 impact of the COVID-19 pandemic on the Company’s customers, business, and results of operations as well as the economy in Western New York and the United States, the Company’s ability to implement its strategic plan, 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 SDN, Courier Capital, HNP 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, and 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 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.

 

 

(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.

*****

 

For additional information contact:

Shelly J. Doran

Director of Investor and External Relations

585-627-1362

[email protected]

 

 

 

 

 

 

 

 


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FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

2020

 

 

2019

 

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

SELECTED BALANCE SHEET DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

152,168

 

 

$

112,947

 

 

$

136,815

 

 

$

108,988

 

 

$

79,786

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

444,845

 

 

 

417,917

 

 

 

395,441

 

 

 

406,509

 

 

 

427,545

 

Held-to-maturity, net

 

 

346,239

 

 

 

359,000

 

 

 

386,305

 

 

 

398,610

 

 

 

438,984

 

Total investment securities

 

 

791,084

 

 

 

776,917

 

 

 

781,746

 

 

 

805,119

 

 

 

866,529

 

Loans held for sale

 

 

3,822

 

 

 

4,224

 

 

 

6,398

 

 

 

2,045

 

 

 

2,069

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

588,868

 

 

 

572,040

 

 

 

574,455

 

 

 

594,923

 

 

 

553,745

 

Commercial mortgage

 

 

1,107,376

 

 

 

1,106,283

 

 

 

1,035,450

 

 

 

1,010,071

 

 

 

993,259

 

Residential real estate loans

 

 

579,800

 

 

 

572,350

 

 

 

558,656

 

 

 

546,031

 

 

 

534,691

 

Residential real estate lines

 

 

102,113

 

 

 

104,118

 

 

 

107,615

 

 

 

108,006

 

 

 

108,623

 

Consumer indirect

 

 

843,668

 

 

 

850,052

 

 

 

863,614

 

 

 

876,116

 

 

 

902,762

 

Other consumer

 

 

15,402

 

 

 

16,144

 

 

 

16,630

 

 

 

16,537

 

 

 

16,099

 

Total loans

 

 

3,237,227

 

 

 

3,220,987

 

 

 

3,156,420

 

 

 

3,151,684

 

 

 

3,109,179

 

Allowance for credit losses - loans

 

 

43,356

 

 

 

30,482

 

 

 

31,668

 

 

 

34,434

 

 

 

33,327

 

Total loans, net

 

 

3,193,871

 

 

 

3,190,505

 

 

 

3,124,752

 

 

 

3,117,250

 

 

 

3,075,852

 

Total interest-earning assets

 

 

4,116,688

 

 

 

4,058,107

 

 

 

3,979,493

 

 

 

4,007,797

 

 

 

4,009,496

 

Goodwill and other intangible assets, net

 

 

74,629

 

 

 

74,923

 

 

 

75,225

 

 

 

75,534

 

 

 

75,850

 

Total assets

 

 

4,471,768

 

 

 

4,384,178

 

 

 

4,332,737

 

 

 

4,313,945

 

 

 

4,302,541

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

 

732,917

 

 

 

707,752

 

 

 

755,296

 

 

 

719,150

 

 

 

732,631

 

Interest-bearing demand

 

 

724,670

 

 

 

627,842

 

 

 

707,153

 

 

 

677,846

 

 

 

707,430

 

Savings and money market

 

 

1,270,253

 

 

 

1,039,892

 

 

 

1,011,873

 

 

 

966,509

 

 

 

1,016,666

 

Time deposits

 

 

1,059,345

 

 

 

1,180,189

 

 

 

1,111,892

 

 

 

1,108,484

 

 

 

1,052,110

 

Total deposits

 

 

3,787,185

 

 

 

3,555,675

 

 

 

3,586,214

 

 

 

3,471,989

 

 

 

3,508,837

 

Short-term borrowings

 

 

109,500

 

 

 

275,500

 

 

 

211,400

 

 

 

308,500

 

 

 

287,300

 

Long-term borrowings, net

 

 

39,291

 

 

 

39,273

 

 

 

39,255

 

 

 

39,237

 

 

 

39,220

 

Total interest-bearing liabilities

 

 

3,203,059

 

 

 

3,162,696

 

 

 

3,081,573

 

 

 

3,100,576

 

 

 

3,102,726

 

Shareholders’ equity

 

 

439,393

 

 

 

438,947

 

 

 

432,617

 

 

 

422,354

 

 

 

408,253

 

Common shareholders’ equity

 

 

422,065

 

 

 

421,619

 

 

 

415,289

 

 

 

405,026

 

 

 

390,925

 

Tangible common equity (1)

 

 

347,436

 

 

 

346,696

 

 

 

340,064

 

 

 

329,492

 

 

 

315,075

 

Accumulated other comprehensive loss

 

$

(2,082

)

 

$

(14,513

)

 

$

(11,734

)

 

$

(13,160

)

 

$

(18,554

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

 

16,020

 

 

 

16,003

 

 

 

15,997

 

 

 

15,995

 

 

 

15,941

 

Treasury shares

 

 

80

 

 

 

97

 

 

 

103

 

 

 

105

 

 

 

115

 

CAPITAL RATIOS AND PER SHARE DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratio

 

 

8.78

%

 

 

9.00

%

 

 

8.86

%

 

 

8.55

%

 

 

8.36

%

Common equity Tier 1 capital ratio

 

 

10.05

%

 

 

10.31

%

 

 

10.06

%

 

 

9.95

%

 

 

9.87

%

Tier 1 capital ratio

 

 

10.53

%

 

 

10.80

%

 

 

10.55

%

 

 

10.45

%

 

 

10.37

%

Total risk-based capital ratio

 

 

12.54

%

 

 

12.77

%

 

 

12.57

%

 

 

12.57

%

 

 

12.50

%

Common equity to assets

 

 

9.44

%

 

 

9.62

%

 

 

9.58

%

 

 

9.39

%

 

 

9.09

%

Tangible common equity to tangible assets (1)

 

 

7.90

%

 

 

8.05

%

 

 

7.99

%

 

 

7.77

%

 

 

7.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common book value per share

 

$

26.35

 

 

$

26.35

 

 

$

25.96

 

 

$

25.32

 

 

$

24.52

 

Tangible common book value per share (1)

 

$

21.69

 

 

$

21.66

 

 

$

21.26

 

 

$

20.60

 

 

$

19.77

 

 

                

 

(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.

 

Page 6

 


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

2020

 

 

2019

 

 

 

First

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

SELECTED INCOME STATEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

41,653

 

 

$

42,179

 

 

$

42,459

 

 

$

42,648

 

 

$

41,514

 

Interest expense

 

 

8,529

 

 

 

9,006

 

 

 

9,976

 

 

 

10,184

 

 

 

9,722

 

Net interest income

 

 

33,124

 

 

 

33,173

 

 

 

32,483

 

 

 

32,464

 

 

 

31,792

 

Provision for credit losses

 

 

13,915

 

 

 

2,653

 

 

 

1,844

 

 

 

2,354

 

 

 

1,193

 

Net interest income after provision

    for credit losses

 

 

19,209

 

 

 

30,520

 

 

 

30,639

 

 

 

30,110

 

 

 

30,599

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

1,587

 

 

 

1,880

 

 

 

1,925

 

 

 

1,756

 

 

 

1,680

 

Insurance income

 

 

1,349

 

 

 

881

 

 

 

1,439

 

 

 

872

 

 

 

1,378

 

ATM and debit card

 

 

1,602

 

 

 

1,796

 

 

 

1,801

 

 

 

1,739

 

 

 

1,443

 

Investment advisory

 

 

2,246

 

 

 

2,375

 

 

 

2,269

 

 

 

2,327

 

 

 

2,216

 

Company owned life insurance

 

 

465

 

 

 

465

 

 

 

459

 

 

 

424

 

 

 

410

 

Investments in limited partnerships

 

 

213

 

 

 

(140

)

 

 

116

 

 

 

144

 

 

 

232

 

Loan servicing

 

 

7

 

 

 

116

 

 

 

102

 

 

 

104

 

 

 

110

 

Income (loss) from derivative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

instruments, net

 

 

746

 

 

 

1,261

 

 

 

890

 

 

 

(45

)

 

 

168

 

Net gain on sale of loans held for sale

 

 

304

 

 

 

324

 

 

 

439

 

 

 

407

 

 

 

182

 

Net gain (loss) on investment securities

 

 

221

 

 

 

(44

)

 

 

1,608

 

 

 

166

 

 

 

(53

)

Net gain (loss) on other assets

 

 

64

 

 

 

(27

)

 

 

(2

)

 

 

9

 

 

 

49

 

Net loss on tax credit investments

 

 

(40

)

 

 

(528

)

 

 

-

 

 

 

-

 

 

 

-

 

Other

 

 

1,198

 

 

 

1,308

 

 

 

1,315

 

 

 

1,330

 

 

 

1,305

 

Total noninterest income

 

 

9,962

 

 

 

9,667

 

 

 

12,361

 

 

 

9,233

 

 

 

9,120

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

15,014

 

 

 

14,669

 

 

 

14,411

 

 

 

13,249

 

 

 

14,001

 

Occupancy and equipment (1)

 

 

3,756

 

 

 

3,446

 

 

 

3,381

 

 

 

3,252

 

 

 

3,473

 

Professional services

 

 

2,152

 

 

 

1,806

 

 

 

1,528

 

 

 

932

 

 

 

1,158

 

Computer and data processing (1)

 

 

2,673

 

 

 

2,576

 

 

 

2,647

 

 

 

2,424

 

 

 

2,336

 

Supplies and postage

 

 

553

 

 

 

482

 

 

 

522

 

 

 

498

 

 

 

534

 

FDIC assessments

 

 

372

 

 

 

-

 

 

 

7

 

 

 

486

 

 

 

512

 

Advertising and promotions

 

 

555

 

 

 

1,226

 

 

 

745

 

 

 

1,086

 

 

 

520

 

Amortization of intangibles

 

 

294

 

 

 

302

 

 

 

309

 

 

 

316

 

 

 

323

 

Other

 

 

2,353

 

 

 

2,261

 

 

 

2,336

 

 

 

2,760

 

 

 

2,314

 

Total noninterest expense

 

 

27,722

 

 

 

26,768

 

 

 

25,886

 

 

 

25,003

 

 

 

25,171

 

Income before income taxes

 

 

1,449

 

 

 

13,419

 

 

 

17,114

 

 

 

14,340

 

 

 

14,548

 

Income tax expense

 

 

322

 

 

 

312

 

 

 

4,281

 

 

 

2,939

 

 

 

3,027

 

Net income

 

 

1,127

 

 

 

13,107

 

 

 

12,833

 

 

 

11,401

 

 

 

11,521

 

Preferred stock dividends

 

 

365

 

 

 

365

 

 

 

365

 

 

 

366

 

 

 

365

 

Net income available to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shareholders

 

$

762

 

 

$

12,742

 

 

$

12,468

 

 

$

11,035

 

 

$

11,156

 

FINANCIAL RATIOS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic

 

$

0.05

 

 

$

0.80

 

 

$

0.78

 

 

$

0.69

 

 

$

0.70

 

Earnings per share – diluted

 

$

0.05

 

 

$

0.79

 

 

$

0.78

 

 

$

0.69

 

 

$

0.70

 

Cash dividends declared on common stock

 

$

0.26

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

Common dividend payout ratio

 

 

520.00

%

 

 

31.25

%

 

 

32.05

%

 

 

36.23

%

 

 

35.71

%

Dividend yield (annualized)

 

 

5.76

%

 

 

3.09

%

 

 

3.29

%

 

 

3.44

%

 

 

3.73

%

Return on average assets

 

 

0.10

%

 

 

1.21

%

 

 

1.19

%

 

 

1.06

%

 

 

1.09

%

Return on average equity

 

 

1.03

%

 

 

11.88

%

 

 

11.86

%

 

 

11.01

%

 

 

11.65

%

Return on average common equity

 

 

0.72

%

 

 

12.02

%

 

 

12.00

%

 

 

11.12

%

 

 

11.79

%

Return on average tangible common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

equity (2)

 

 

0.88

%

 

 

14.64

%

 

 

14.69

%

 

 

13.73

%

 

 

14.71

%

Efficiency ratio (3)

 

 

64.31

%

 

 

62.05

%

 

 

59.52

%

 

 

59.79

%

 

 

60.99

%

Effective tax rate

 

 

22.2

%

 

 

2.3

%

 

 

25.0

%

 

 

20.5

%

 

 

20.8

%

                

 

(1)

Beginning in the first quarter of 2020, software service contracts and software amortization are classified as computer and data processing expense. Previously, they were included in occupancy and equipment expense. Prior periods have been reclassified to conform to the current presentation.

 

(2)

See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.

 

(3)

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.

Page 7

 


FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands)

 

 

2020

 

 

2019

 

 

 

First

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

SELECTED AVERAGE BALANCES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds sold and interest-

    earning deposits

 

$

59,309

 

 

$

32,494

 

 

$

19,370

 

 

$

18,145

 

 

$

17,955

 

Investment securities (1)

 

 

779,894

 

 

 

774,520

 

 

 

785,595

 

 

 

845,624

 

 

 

886,878

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

570,886

 

 

 

567,998

 

 

 

586,293

 

 

 

577,884

 

 

 

547,182

 

Commercial mortgage

 

 

1,100,660

 

 

 

1,073,527

 

 

 

1,021,931

 

 

 

1,010,544

 

 

 

977,818

 

Residential real estate loans

 

 

578,407

 

 

 

566,256

 

 

 

553,382

 

 

 

540,390

 

 

 

529,522

 

Residential real estate lines

 

 

102,680

 

 

 

106,011

 

 

 

107,290

 

 

 

107,826

 

 

 

109,529

 

Consumer indirect

 

 

846,800

 

 

 

856,823

 

 

 

868,927

 

 

 

891,967

 

 

 

911,252

 

Other consumer

 

 

15,466

 

 

 

16,100

 

 

 

16,141