WARSAW, N.Y., April 24, 2008 (PRIME NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI), the parent company of Five Star Bank, today announced financial results for the first quarter ended March 31, 2008. Net income for Financial Institutions, Inc. ("FII" or "Company") was $3.8 million, or $0.31 per diluted share, for the first quarter of 2008, compared with $3.6 million, or $0.29 per diluted share, for the first quarter of 2007.
Highlights for the first quarter of 2008 include:
* Net interest income of $15.1 million, an increase of $1.1 million, or 8%, from the first quarter of 2007, which reflects an improved net interest margin and earning asset mix. * Net interest margin increased 34 basis points, to 3.73%, compared with 3.39% for the first quarter of 2007. The improved net interest margin resulted principally from lower funding costs, an improved yield from investment securities and the benefits associated with a higher percentage of earning assets being deployed in higher yielding loan assets. * Loans increased $8.2 million to $972.4 million at March 31, 2008, compared with $964.2 million at December 31, 2007 and increased $43.2 million, or 5%, from March 31, 2007. The increase reflects execution of the Company's business plan to rebuild, in a disciplined manner, the commercial loan portfolio and grow consumer indirect auto loans. * Nonperforming assets decreased $886 thousand from December 31, 2007 to $8.6 million at March 31, 2008. Since March 31, 2007, nonperforming assets have declined $8.4 million, or 49%. The ratio of the allowance for loan losses to nonperforming loans improved to 211% at March 31, 2008 versus 192% at December 31, 2007 and 107% at March 31, 2007. * Continued strong capital position with Total Equity Capital of $197.4 million, a Leverage Capital Ratio of 9.38% and a Total Risk Based Capital Ratio of 16.59% at March 31, 2008.
Peter G. Humphrey, President and CEO of FII, commented, "We experienced solid financial performance in the first quarter of 2008, with increased revenues that are reflective of our disciplined approach to growing our loan portfolio. Net interest income improved year-over-year and our net interest margin increased due to a lower interest rate environment and our management of deposit pricing, coupled with growth in our loan portfolio. Asset quality showed continued improvement with a meaningful reduction in our nonperforming assets. The current interest rate environment and economic conditions will most likely pose challenges for the financial services industry for the remainder of 2008, however we feel we are well-positioned to meet the challenges of this economic environment. In addition, we look forward to implementing our strategic initiatives to expand our business, most notably the expansion of our presence in the greater Rochester area in the second half of this year."
Net Interest Income
Net interest income was $15.1 million for the first quarter of 2008, up $1.1 million compared with the first quarter of 2007. For the first quarter of 2008, average interest-earning assets decreased by $29.8 million compared with the same quarter a year ago. This decrease resulted principally from a decrease in average total investment assets, including Federal funds sold, of $72.8 million, partially offset by a $43.0 million increase in average total loans. The overall decline in average interest-earnings assets was more than offset by a reduction in average interest-bearing liabilities of $48.1 million. Net interest margin improved 34 basis points to 3.73% for the first quarter of 2008, compared with 3.39% for the first quarter of 2007. Earnings asset yields decreased by 2 basis points from the prior year's first quarter, with increased yields on investments assets offsetting a decline in loan yields, while the average cost of funds declined 36 basis points from the first quarter of 2007, a direct result of the Company's responses to the reduction in market interest rates that has occurred over the past several months.
Noninterest Income
Noninterest income for the first quarter of 2008 was $4.7 million, relatively flat in comparison to the same quarter a year ago. Increases in ATM and debit card income, broker-dealer fees and commissions, and net gain on sale of securities were largely offset by a decrease in other noninterest income. The decline in other noninterest income results principally from lower income from Small Business Investment Company (SBIC) limited partnership investments when compared with the first quarter of 2007.
Noninterest Expense
Noninterest expense for the first quarter of 2008 was $14.3 million, an increase of $345 thousand from the first quarter of 2007. The principal expense items that contributed to the increase were: salaries and benefits increased $82 thousand primarily due to stock compensation related expenses, occupancy and equipment costs, which increased $132 thousand due to higher service contract related costs on buildings, equipment and software, and computer and data processing expenses which increased $124 thousand.
Balance Sheet
Total assets were $1.913 billion at March 31, 2008 compared with $1.858 billion at December 31, 2007. Total deposits were $1.628 billion at March 31, 2008, an increase of $52.0 million from $1.576 billion at December 31, 2007. Public deposits were $384.6 million at March 31, 2008, an increase of $66.5 million from year-end as a result of the seasonality associated with public deposits. Offsetting the increase in public deposits was a $14.5 million decline in nonpublic deposits, also a seasonal trend, to $1.237 billion at March 31, 2008 from $1.251 billion at December 31, 2007. Total borrowings, including junior subordinated debentures, were $70.3 million at March 31, 2008, up modestly from $68.2 million at December 31, 2007.
Asset Quality
Mr. Humphrey commented, "We continued to make significant progress in reducing our nonperforming assets during the first quarter of 2008. Our net loan charge-offs increased in relation to the first quarter of last year, and at 0.29% (annualized) of average loans are within acceptable parameters. We have not engaged in sub-prime lending as a line of business and we are pleased with the overall improvement in the risk profile of our loan portfolio."
The Company recorded a provision for loan losses of $716 thousand for the first quarter of 2008 compared to no provision for loan losses in the first quarter of 2007. Net charge-offs of $687 thousand for the first quarter of 2008 represented 29 basis points (annualized) of average loans. Net charge-offs of $134 thousand for the first quarter of 2007 represented 6 basis points (annualized) of average loans. The increase in net charge-offs in 2008 principally results from higher commercial mortgage and indirect loan charge-offs.
The allowance for loan losses was $15.5 million at March 31, 2008 and December 31, 2007. Nonperforming loans were $7.4 million at March 31, 2008, compared with $8.1 million at December 31, 2007. The ratio of allowance for loans losses to nonperforming loans improved to 211% at March 31, 2008 versus 192% at December 31, 2007 and 107% at March 31, 2007.
Capital Management
On July 25, 2007, the Company approved a one-year $5.0 million stock repurchase program. During the first quarter of 2008, under this program, the Company repurchased $1.304 million of common stock, or a total of 70,202 shares, at an average price per share of $18.57. In total, 206,722 shares for $3.824 million have been repurchased under the program at an average price of $18.50.
In addition, in the first quarter of 2008, the Company increased the quarterly common stock dividend to $0.14 per share. This represents a 40% increase in the quarterly common stock dividend compared with the $0.10 per share dividend in the first quarter of 2007.
Erland E. "Erkie" Kailbourne, Chairman of the Board, commented, "The Company's improved financial performance and available capital have given us the opportunity to increase our common stock dividend and actively repurchase our common stock. Both of these measures, we believe, will enhance shareholder value."
Total shareholders' equity at March 31, 2008 was $197.4 million compared with $195.3 million at December 31, 2007. The Company's leverage ratio was 9.38% and total risk-based capital ratio was 16.59% at March 31, 2008.
About Financial Institutions, Inc.
With $1.9 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of 50 offices and 70 ATMs in Western and Central New York State. Five Star Investment Services provides brokerage and insurance products and services within the same New York State markets. The consolidated entity includes approximately 670 employees. The Company's stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at the Company's website: www.fiiwarsaw.com.
Safe Harbor Statement
This press release may contain 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 beliefs or projections. There are a number of important factors that could affect the Company's forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, the attitudes and preferences of its customers, the competitive environment, general economic conditions nationally and regionally and other factors discussed in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise these statements following the date of this press release.
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
---------------------------------------------------------------------
(Dollars in thousands, March 31, December 31, March 31,
except share data) 2008 2007 2007
----------- ----------- -----------
ASSETS
Cash and due from banks $ 49,460 $ 45,165 $ 40,647
Federal funds sold and
interest-bearing deposits
in other banks 53,539 1,508 92,432
Securities available for sale,
at fair value 688,504 695,241 761,252
Securities held to maturity,
at amortized cost 57,631 59,479 44,848
Loans held for sale 1,099 906 1,078
Loans:
Commercial 144,976 136,780 115,211
Commercial real estate 245,148 245,797 249,179
Agricultural 44,162 47,367 54,273
Residential real estate 168,738 166,863 162,846
Consumer indirect 142,565 134,977 107,776
Consumer direct and home equity 226,855 232,389 239,965
----------- ----------- -----------
Total loans 972,444 964,173 929,250
Allowance for loan losses (15,549) (15,521) (16,914)
----------- ----------- -----------
Loans, net 956,895 948,652 912,336
Premises and equipment, net 33,611 34,157 34,341
Goodwill 37,369 37,369 37,369
Other assets 34,544 35,399 38,445
----------- ----------- -----------
Total assets $1,912,652 $1,857,876 $1,962,748
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 268,419 $ 286,362 $ 260,068
Interest-bearing demand,
savings and money market 736,925 681,953 723,343
Certificates of deposit 622,628 607,656 688,351
----------- ----------- -----------
Total deposits 1,627,972 1,575,971 1,671,762
Short-term borrowings 27,835 25,643 24,860
Long-term borrowings 25,799 25,865 38,173
Junior subordinated debentures
issued to unconsolidated
subsidiary trust 16,702 16,702 16,702
Other liabilities 16,980 18,373 26,721
----------- ----------- -----------
Total liabilities 1,715,288 1,662,554 1,778,218
Shareholders' Equity
Preferred stock 17,581 17,581 17,623
Common stock, $0.01 par value,
50,000,000 shares authorized;
11,348,122 shares issued at
March 31, 2008,
December 31, 2007 and
March 31, 2007 113 113 113
Additional paid-in capital 24,105 24,778 24,362
Retained earnings 160,328 158,744 151,057
Accumulated other comprehensive
income (loss) 2,104 667 (7,026)
Treasury stock, at cost;
355,673, 336,971 and 76,446
shares at March 31, 2008,
December 31, 2007 and
March 31, 2007, respectively (6,867) (6,561) (1,599)
----------- ----------- -----------
Total shareholders' equity 197,364 195,322 184,530
----------- ----------- -----------
Total liabilities and
shareholders' equity $1,912,652 $1,857,876 $1,962,748
=========== =========== ===========
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Quarter-to-Date
-------------------------
(Dollars in thousands, except share March 31, March 31,
and per share data) 2008 2007
------------ ------------
Interest income:
Interest and fees on loans $ 16,728 $ 16,627
Interest and dividends on securities 8,234 8,427
Other interest income 310 752
------------ ------------
Total interest income 25,272 25,806
------------ ------------
Interest expense:
Deposits 9,236 10,763
Short-term borrowings 152 169
Long-term borrowings 367 486
Junior subordinated debentures 432 432
------------ ------------
Total interest expense 10,187 11,850
------------ ------------
Net interest income 15,085 13,956
Provision for loan losses 716 --
------------ ------------
Net interest income after provision
for loan losses 14,369 13,956
Noninterest income:
Service charges on deposits 2,500 2,569
ATM and debit card income 752 620
Broker-dealer fees and commissions 459 383
Loan servicing income 186 205
Income from corporate owned life insurance 19 20
Net gain on sale of securities 173 --
Net gain on sale of loans held for sale 164 161
Net gain on sale and disposal
of other assets 37 57
Net gain on sale of trust relationships -- 13
Other 454 710
------------ ------------
Total noninterest income 4,744 4,738
Noninterest expense:
Salaries and employee benefits 8,436 8,354
Occupancy and equipment 2,580 2,448
Supplies and postage 441 438
Amortization of other intangibles 77 77
Computer and data processing 581 457
Professional fees and services 557 495
Advertising and promotions 150 220
Other 1,451 1,439
------------ ------------
Total noninterest expense 14,273 13,928
------------ ------------
Income before income taxes 4,840 4,766
------------ ------------
Income taxes 1,061 1,151
------------ ------------
Net income $ 3,779 $ 3,615
============ ============
Net Income Per Common Share:
Basic $ 0.31 $ 0.29
Diluted $ 0.31 $ 0.29
Weighted Average Common Shares Outstanding:
Basic 10,938,275 11,316,811
Diluted 10,974,674 11,360,202
Performance Ratios:
Return on average assets (annualized) 0.80% 0.77%
Return on average common equity (annualized) 7.61% 7.96%
Net interest margin (fully tax-equivalent) 3.73% 3.39%
Efficiency ratio 67.63% 69.40%
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
--------------------------------------------------------------------
(Dollars in
thousands,
except per 2008 2007 2007 2007 2007
share data) 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
----------- ---------- ---------- ---------- ----------
EARNINGS
Net interest
income $15,085 $15,205 $14,861 $14,052 $13,956
Net interest
income
(fully tax-
equivalent) $16,361 $16,491 $16,051 $15,193 $15,105
Provision
(credit)
for loan
losses $716 $351 $(82) $(153) $--
Noninterest
income $4,744 $5,002 $6,334 $4,606 $4,738
Noninterest
expense $14,273 $14,543 $14,609 $14,348 $13,928
Net income $3,779 $4,098 $5,254 $3,443 $3,615
Preferred
dividends $371 $370 $371 $371 $371
Net income
available
to common $3,408 $3,728 $4,883 $3,072 $3,244
Basic
earnings
per share $0.31 $0.34 $0.44 $0.27 $0.29
Diluted
earnings
per share $0.31 $0.34 $0.44 $0.27 $0.29
Average
shares
outstanding 10,938,275 11,021,902 11,090,519 11,188,840 11,316,811
Average
diluted
shares
outstanding 10,974,674 11,043,473 11,113,553 11,222,994 11,360,202
PERFORMANCE
Return on
average
assets
(annualized) 0.80% 0.86% 1.10% 0.71% 0.77%
Return on
average
common
equity
(annualized) 7.61% 8.56% 11.60% 7.40% 7.96%
Return on
average
tangible
common
equity
(annualized) 9.65% 10.97% 15.03% 9.60% 10.35%
Common
dividend
payout
ratio 45.16% 38.24% 27.27% 40.74% 34.48%
Net interest
margin
(fully tax-
equivalent) 3.73% 3.75% 3.63% 3.35% 3.39%
Efficiency
ratio 67.63% 66.84% 67.07% 72.04% 69.40%
Full-time
equivalent
employees 620 621 636 636 634
CAPITAL
Period end
common
equity to
total
assets 9.40% 9.57% 8.97% 8.70% 8.50%
Period end
tangible
common
equity to
tangible
total
assets 7.57% 7.68% 7.12% 6.83% 6.69%
Leverage
ratio 9.38% 9.35% 9.23% 8.89% 8.99%
Tier 1 risk-
based
capital
ratio 15.34% 15.74% 15.71% 15.86% 15.58%
Total risk-
based
capital
ratio 16.59% 16.99% 16.96% 17.12% 16.83%
Cash
dividends
declared
per share $0.14 $0.13 $0.12 $0.11 $0.10
Book value
per share $16.36 $16.14 $15.41 $14.80 $14.81
Tangible
book value
per share $12.91 $12.69 $11.98 $11.38 $11.42
ASSET QUALITY
Gross loan
charge-offs $1,458 $923 $1,310 $970 $692
Net loan
charge-offs $687 $441 $829 $239 $134
Net loan
charge-offs
to average
loans
(annualized) 0.29% 0.18% 0.35% 0.10% 0.06%
Loans past
due over
90 days $2 $2 $-- $4 $7
Nonaccrual
loans 7,353 8,075 8,295 10,402 15,778
----------- ---------- ---------- ---------- ----------
Total
nonper-
forming
loans 7,355 8,077 8,295 10,406 15,785
Other real
estate (ORE)
and
repossessed
assets
(repos) 1,257 1,421 1,625 1,352 1,216
----------- ---------- ---------- ---------- ----------
Total
nonper-
forming
assets $8,612 $9,498 $9,920 $11,758 $17,001
Nonper-
forming
loans to
total loans 0.76% 0.84% 0.87% 1.11% 1.70%
Nonper-
forming
assets to
total loans,
ORE and
repos 0.88% 0.98% 1.04% 1.25% 1.83%
Nonper-
forming
assets to
total
assets 0.45% 0.51% 0.52% 0.62% 0.87%
Allowance
for loan
losses $15,549 $15,521 $15,611 $16,522 $16,914
Allowance
for loan
losses to
total loans 1.60% 1.61% 1.64% 1.76% 1.82%
Allowance
for loan
losses to
nonper-
forming
loans 211% 192% 188% 159% 107%
PERIOD END
BALANCES
Total loans $972,444 $964,173 $949,671 $940,870 $929,250
Total assets $1,912,652 $1,857,876 $1,902,985 $1,898,092 $1,962,748
Total
deposits $1,627,972 $1,575,971 $1,616,262 $1,617,049 $1,671,762
Total common
equity $179,783 $177,741 $170,743 $165,185 $166,907
Total share-
holders'
equity $197,364 $195,322 $188,324 $182,766 $184,530
Common
shares
outstanding 10,992,449 11,011,151 11,081,625 11,161,835 11,271,676
AVERAGE
BALANCES
Total loans $964,418 $954,373 $942,394 $932,637 $921,481
Total
interest-
earning
assets $1,759,635 $1,756,169 $1,766,511 $1,814,299 $1,789,426
Total assets $1,890,874 $1,884,712 $1,890,669 $1,938,685 $1,914,593
Total
deposits $1,607,448 $1,607,737 $1,598,643 $1,657,975 $1,627,875
Total
interest
bearing
liabilities $1,409,461 $1,402,294 $1,413,727 $1,476,534 $1,457,532
Total common
equity $179,993 $172,833 $166,977 $166,526 $165,330
Total share-
holders'
equity $197,574 $190,414 $184,558 $184,108 $182,953