8-K
Financial Institutions Inc (FISI)
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): July 29, 2020
Financial Institutions, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| New York | 0-26481 | 16-0816610 |
|---|---|---|
| (State or Other Jurisdiction<br><br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br><br>Identification No.) |
| 220 Liberty Street<br><br><br>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 July 29, 2020, Financial Institutions, Inc. (the “Company”) issued a press release to report financial results for the second quarter ended June 30, 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 second quarter ended June 30, 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<br><br><br>Number | Description | Location |
|---|---|---|
| 99.1 | Press Release issued by Financial Institutions, Inc. on July 29, 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: July 29, 2020 | By: | /s/ Justin K. Bigham |
| Executive Vice President, Chief Financial Officer |
fisi-ex991_6.htm
Exhibit 99.1
| NEWS RELEASE |
|---|
| For Immediate Release |
FINANCIAL INSTITUTIONS, INC. ANNOUNCES SECOND QUARTER RESULTS
WARSAW, N.Y., July 29, 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 second quarter ended June 30, 2020.
Net income for the quarter was $11.1 million compared to $11.4 million for the second quarter of 2019. After preferred dividends, net income available to common shareholders was $10.8 million for the quarter, or $0.67 per diluted share, compared to $11.0 million, or $0.69 per diluted share, for the second quarter of 2019.
Pre-tax pre-provision income^(1)^ was $17.3 million for the quarter compared to $16.7 million for the second quarter of 2019.
President and Chief Executive Officer Martin K. Birmingham stated, “In our new normal of working together yet apart, we have delivered uninterrupted critical banking services to our customers. We implemented an array of actions for consumers and businesses, helping 1,700 small businesses and 18,000 small business employees through the Small Business Administration Payroll Protection Program (“PPP”) and thousands of consumers through our COVID-19 CARES relief efforts. This was accomplished with 65 percent of our associates working from home or at remote sites.
“We could not have accomplished this without a dedicated workforce. I thank all our associates for their continued commitment to our company, our customers, our communities and each other. They have worked diligently to deliver quality care to our customers in a challenging environment — adapting to new working environments and demonstrating our organization’s ability to efficiently operate in a fast-changing world.
“To provide enhanced digital capabilities during a time when many customers are hesitant or unable to visit a branch, we moved forward with the launch of our new digital banking platform. Now more than ever, consumers and businesses need the ability to do their banking anywhere and anytime and have access to a comprehensive overview of their finances in one convenient location. Five Star Bank Digital Banking represents a major upgrade from the previous platform, leveraging the latest technology to provide new features and financial tools that significantly enhance the digital banking experience for businesses and individuals. This platform was successfully rolled out during the second quarter.
“We also developed a re-entry plan. Our approach will be unique to each of our offices to keep customers and associates safe, the Bank resilient, support the community and remain responsive to direction from New York State and the Centers for Disease Control. We have proven during the pandemic that we are flexible, can work remotely and have the resiliency and redundancy to maintain services, and we will continue all of this as we move forward. We fully expect and are committed to maintaining remote access for the foreseeable future, and that will result in a less dense workplace and flexibility should the situation turn negative again. We were thoughtful going in at the start of this pandemic and are being thoughtful as we proceed.
“I am pleased that we were able to deliver strong net income and pre-tax pre-provision income in the quarter, despite headwinds. Our diversified revenue contributed to this outcome, as well as our efforts in helping existing and new customers obtain nearly $270 million of PPP loans in the quarter. The stability of our markets is also a strength for us in these challenging times.
“We believe our loan loss reserves, combined with strong levels of capital and liquidity, position us well to continue to deliver services to our customers in these unprecedented times. However, much uncertainty remains because of COVID-19 and the future impact it may have on the economy. We will pay close attention to conditions across our markets, the United States and the global economy to address any deterioration promptly.”
Digital Banking
During the second quarter of 2020, Five Star Bank completed the multi-phase launch of a new online and mobile platform — Five Star Bank Digital Banking. The new platform provides a single dashboard to make payments and deposits, transfer and send money, create budgets, set financial goals and easily integrate external investment, loan and other transactional accounts. Consumers can access a comprehensive financial tool to do all their banking from home, and business owners and employees who may be working remotely can also access powerful financial tools to assist with daily finances.
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Enterprise Standardization Program
The Company’s enterprise standardization program is focused on improving operational efficiency and enhancing future profitability. On July 17, 2020, in connection with the program, Five Star Bank announced changes to adapt to a full-service branch model to streamline retail branches to better align with shifting customer needs and preferences. The transformation will result in six branch closures and a reduction in staffing.
The announcement was the result of a nine-month comprehensive assessment of all lines of business and functional areas, conducted in partnership with a leading process improvement organization. The data-driven analysis identified, among other things, overlapping service areas, automation opportunities and streamlining of processes and operations that would enhance customer experiences and facilitate the long-term sustainability of current and future branches.
The announced consolidations represent about ten percent of the branch network and impact approximately six percent of the total workforce. Where possible, those impacted were offered alternative roles or the opportunity to apply for open positions in other areas of the company. Separated associates will receive a comprehensive severance package based on tenure.
The enterprise standardization program has only partially concluded as we continue to evaluate activities and functions across the organization, focusing on ways to improve operational efficiency while enhancing the employee and customer experience.
Net Interest Income and Net Interest Margin
Net interest income was $34.2 million for the quarter, an increase of $1.1 million from the first quarter of 2020 and $1.7 million higher than the second quarter of 2019.
| • | Average interest-earning assets for the quarter were $4.27 billion, $219.5 million higher than the first quarter of 2020 and $265.5 million higher than the second quarter of 2019. The increase was the result of loan growth, driven by PPP loans which had an average balance of $176.7 million for the quarter. |
|---|---|
| • | Net interest margin was 3.23%, eight basis points lower than the first quarter of 2020 and five basis points lower than the second quarter of 2019. The decline was primarily the result of lower yields on PPP loans, which negatively impacted the earning-assets yield by approximately six basis points. |
| --- | --- |
Noninterest Income
Noninterest income was $9.8 million for the quarter compared to $10.0 million in the first quarter of 2020 and $9.2 million in the second quarter of 2019.
| • | Service charges on deposits of $480 thousand was $1.1 million lower than the first quarter of 2020 and $1.3 million lower than the second quarter of 2019. The decreases are the result of the Company’s COVID-19 relief initiatives of waiving or eliminating fees, implemented on March 23, 2020. |
|---|---|
| • | Insurance income of $819 thousand was $530 thousand lower than the first quarter of 2020, primarily due to contingent revenue received in the first quarter each year. Insurance income was $53 thousand lower than the second quarter of 2019. |
| --- | --- |
| • | Investment advisory fees of $2.3 million was $5 thousand higher than the first quarter of 2020 and $76 thousand lower than the second quarter of 2019. The decrease from the second quarter of 2019 was primarily the result of market volatility. |
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| • | Investments in limited partnerships generated a loss of $244 thousand in the quarter compared to income of $213 thousand in the first quarter of 2020 and income of $144 thousand in the second 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 $1.9 million compared to $746 thousand in the first quarter of 2020 and a loss of $45 thousand in the second quarter of 2019. The increase as compared to both periods 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 $674 thousand was recognized in the quarter compared to a net gain of $221 thousand in the first quarter of 2020 and a net gain of $166 thousand in the second quarter of 2019. The net gain in the current quarter is attributable to the management of premium risk, largely achieved through the sale of $25.9 million of fixed rate mortgage backed securities with higher expected prepayment speeds. Proceeds were reinvested in current coupon bonds, with lower anticipated prepayment behavior. |
| --- | --- |
Noninterest Expense
Noninterest expense was $26.7 million in the quarter compared to $27.7 million in the first quarter of 2020 and $25.0 million in the second quarter of 2019.
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| • | Salaries and employee benefits expense of $15.1 million was relatively unchanged from the first quarter of 2020 and $1.8 million higher than the second quarter of 2019. The increase from the prior year period is primarily the result of incentive compensation including producer incentives and commissions (approximately $530 thousand); a full quarter impact of annual merit increases (approximately $400 thousand); COVID-related incremental pay to front-line retail associates (approximately $310 thousand); expenses related to the departure of a senior officer (approximately $325 thousand) and higher medical expenses (approximately $200 thousand). |
|---|---|
| • | Professional services expense of $1.6 million was $572 thousand lower than the first quarter of 2020 and $648 thousand higher than the second quarter of 2019 primarily due to the timing of audit fees and fees for consulting and advisory projects, including fees related to the Bank’s derivative instruments program. Expenses related to the Company’s improvement initiatives totaled $353 thousand in the second quarter of 2020, $599 thousand in the first quarter of 2020 and $130 thousand in the second quarter of 2019. |
| --- | --- |
| • | FDIC assessments were $539 thousand in the quarter compared to $372 in the first quarter of 2020 and $486 thousand in the second quarter of 2019. In 2018, the FDIC minimum reserve ratio was exceeded, resulting in credits. A credit of $70 thousand was used in the first quarter of 2020. |
| --- | --- |
| • | Advertising and promotions expense of $545 thousand was relatively unchanged from the first quarter of 2020 and $541 thousand lower than the second quarter of 2019. Advertising activity was reduced in March 2020 when the COVID-19 pandemic impacted operations in Western New York. |
| --- | --- |
| • | Other expense of $2.1 million was $288 lower than the first quarter of 2020 and $695 thousand lower than the second quarter of 2019 primarily because of lower education, travel and business development expenses as a result of stay-at-home orders, combined with lower expenses incurred in connection with indirect consumer lending activity, which was significantly lower in the second quarter of 2020. |
| --- | --- |
Income Taxes
Income tax expense was $2.4 million for the quarter compared to $322 thousand for the first quarter of 2020 and $2.9 million for the second quarter of 2019. The effective tax rate was 18.0% for the quarter compared to 22.2% for the first quarter of 2020 and 20.5% for the second quarter of 2019. The Company’s effective tax rates differ from statutory rates because of interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments.
Balance Sheet and Capital Management
Total assets were $4.68 billion at June 30, 2020, up $209.2 million from March 31, 2020, and up $367.0 million from June 30, 2019.
Investment securities were $779.3 million at June 30, 2020, down $11.8 million from March 31, 2020, and down $25.8 million from June 30, 2019. The Company’s 2020 investment strategy has been to reinvest cash flow from the portfolio; however, the Bank experienced notable municipal maturities and a slight increase in prepayment behavior during the quarter which limited full reinvestment, resulting in a decline in total investment securities during the quarter. The remaining decrease from June 30, 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 $3.49 billion at June 30, 2020, up $248.6 million, or 7.7%, from March 31, 2020, and up $334.1 million, or 10.6%, from June 30, 2019. Second quarter closings of PPP loans totaled $268.5 million. The loans carry a 1% interest rate and the Company recorded net PPP loan origination fees of approximately $7.7 million which are being amortized over a 24-month period.
| • | Commercial business loans totaled $818.7 million, up $229.8 million, or 39.0%, from March 31, 2020, and up $223.8 million, or 37.6%, from June 30, 2019. Increases were driven by PPP loans; at June 30, 2020, the PPP loan balance was $261.5 million, net of deferred fees. The increase from March 31, 2020 was partially offset by a decrease in commercial lines of credit that experienced draws late in the first quarter, at the onset of the U.S. COVID-19 pandemic. |
|---|---|
| • | Commercial mortgage loans totaled $1.14 billion, up $33.0 million, or 3.0%, from March 31, 2020, and up $130.3 million, or 12.9%, from June 30, 2019. |
| --- | --- |
| • | Residential real estate loans totaled $585.0 million, up $5.2 million, or 0.9%, from March 31, 2020, and up $39.0 million, or 7.1%, from June 30, 2019. |
| --- | --- |
| • | Consumer indirect loans totaled $828.1 million, down $15.6 million, or 1.8%, from March 31, 2020 and down $48.0 million, or 5.5%, from June 30, 2019. |
| --- | --- |
Total deposits were $3.99 billion at June 30, 2020, $206.8 million higher than March 31, 2020, and $522.0 million higher than June 30, 2019. The increase from March 31, 2020, was driven by growth in non-public demand and savings, partially offset by a decrease in public deposits due to the seasonality of municipal deposits. Growth in non-public deposits was in part attributable to PPP loan proceeds received by customers. The increase from June 30, 2019 was driven by growth in non-public deposits and the reciprocal deposit portfolio. Public deposit balances represented 23% of total deposits at June 30, 2020, compared to 27% of total deposits at March 31, 2020, and 26% at June 30, 2019.
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Short-term borrowings were $105.3 million at June 30, 2020, a decrease of $4.2 million from March 31, 2020 and a decrease of $203.2 million from June 30, 2019. The lower level of short-term borrowings at June 30, 2020, is attributable to growth in non-public deposits, reducing the need to utilize short-term borrowings as a funding source. Short-term borrowings and brokered deposits have historically been utilized to manage the seasonality of public deposits, which reached a seasonal low point during the second 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 $448.0 million at June 30, 2020, compared to $439.4 million at March 31, 2020, and $422.4 million at June 30, 2019. Common book value per share was $26.86 at June 30, 2020, an increase of $0.51 or 1.9% from $26.35 at March 31, 2020, and an increase of $1.54 or 6.1% from $25.32 at June 30, 2019. Tangible common book value per share^(1)^ was $22.22 at June 30, 2020, an increase of $0.53 or 2.4% from $21.69 at March 31, 2020, and an increase of $1.62 or 7.9% from $20.60 at June 30, 2019.
During the second quarter of 2020, the Company declared a common stock dividend of $0.26 per common share. The dividend returned 39% of second quarter net income to common shareholders.
The Company’s regulatory capital ratios at June 30, 2020, compared to the prior quarter and prior year:
| • | Leverage Ratio was 8.49%, compared to 8.78% and 8.55% at March 31, 2020, and June 30, 2019, respectively. |
|---|---|
| • | Common Equity Tier 1 Capital Ratio was 10.27%, compared to 10.05% and 9.95% at March 31, 2020, and June 30, 2019, respectively. |
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| • | Tier 1 Capital Ratio was 10.76%, compared to 10.53% and 10.45% at March 31, 2020, and June 30, 2019, respectively. |
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| • | Total Risk-Based Capital Ratio was 12.83%, compared to 12.54% and 12.57% at March 31, 2020, and June 30, 2019, respectively. |
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Credit Quality
Non-performing loans were $13.2 million at June 30, 2020, compared to $12.4 million at March 31, 2020, and $11.5 million at June 30, 2019. Net charge-offs were $786 thousand in the quarter, $9.4 million lower than the first quarter of 2020 and $461 thousand lower than the second quarter of 2019. The decrease from the first quarter of 2020 is primarily attributable to one commercial credit that was partially charged-off during the first quarter of 2020. The borrower’s business was related to the hospitality industry and the charge-off was precipitated by the impact of COVID-19. The ratio of annualized net charge-offs to total average loans was 0.09% in the quarter, 1.27% in the first quarter of 2020 and 0.16% in the second 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 June 30, 2020, the allowance for credit losses - loans to total loans ratio was 1.33% compared to 1.34% at March 31, 2020, and 1.09% at June 30, 2019. The PPP loans are fully guaranteed by the Small Business Administration. Excluding PPP loans, the allowance for credit losses – loans to total loans ratio was 1.44% at June 30, 2020. The provision for credit losses was $3.7 million in the quarter compared to $13.9 million in the first quarter of 2020 and $2.4 million in the second quarter of 2019. Higher provisioning in 2020 reflects higher charge-offs in the first quarter of 2020 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 June 30, 2020, unchanged from March 31, 2020, and two basis points higher than 0.36% at June 30, 2019. The ratio of allowance for credit losses on loans to non-performing loans was 351% at June 30, 2020, compared to 350% at March 31, 2020, and 300% at June 30, 2019.
Conference Call
The Company will host an earnings conference call and audio webcast on July 30, 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.
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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 650 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.
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
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FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
| 2020 | 2019 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| SELECTED BALANCE SHEET DATA: | |||||||||||||||
| Cash and cash equivalents | $ | 119,610 | $ | 152,168 | $ | 112,947 | $ | 136,815 | $ | 108,988 | |||||
| Investment securities: | |||||||||||||||
| Available for sale | 469,413 | 444,845 | 417,917 | 395,441 | 406,509 | ||||||||||
| Held-to-maturity, net | 309,872 | 346,239 | 359,000 | 386,305 | 398,610 | ||||||||||
| Total investment securities | 779,285 | 791,084 | 776,917 | 781,746 | 805,119 | ||||||||||
| Loans held for sale | 6,654 | 3,822 | 4,224 | 6,398 | 2,045 | ||||||||||
| Loans: | |||||||||||||||
| Commercial business | 818,691 | 588,868 | 572,040 | 574,455 | 594,923 | ||||||||||
| Commercial mortgage | 1,140,326 | 1,107,376 | 1,106,283 | 1,035,450 | 1,010,071 | ||||||||||
| Residential real estate loans | 585,035 | 579,800 | 572,350 | 558,656 | 546,031 | ||||||||||
| Residential real estate lines | 97,427 | 102,113 | 104,118 | 107,615 | 108,006 | ||||||||||
| Consumer indirect | 828,105 | 843,668 | 850,052 | 863,614 | 876,116 | ||||||||||
| Other consumer | 16,237 | 15,402 | 16,144 | 16,630 | 16,537 | ||||||||||
| Total loans | 3,485,821 | 3,237,227 | 3,220,987 | 3,156,420 | 3,151,684 | ||||||||||
| Allowance for credit losses - loans | 46,316 | 43,356 | 30,482 | 31,668 | 34,434 | ||||||||||
| Total loans, net | 3,439,505 | 3,193,871 | 3,190,505 | 3,124,752 | 3,117,250 | ||||||||||
| Total interest-earning assets | 4,314,490 | 4,116,688 | 4,058,107 | 3,979,493 | 4,007,797 | ||||||||||
| Goodwill and other intangible assets, net | 74,342 | 74,629 | 74,923 | 75,225 | 75,534 | ||||||||||
| Total assets | 4,680,930 | 4,471,768 | 4,384,178 | 4,332,737 | 4,313,945 | ||||||||||
| Deposits: | |||||||||||||||
| Noninterest-bearing demand | 1,008,958 | 732,917 | 707,752 | 755,296 | 719,150 | ||||||||||
| Interest-bearing demand | 727,676 | 724,670 | 627,842 | 707,153 | 677,846 | ||||||||||
| Savings and money market | 1,368,805 | 1,270,253 | 1,039,892 | 1,011,873 | 966,509 | ||||||||||
| Time deposits | 888,569 | 1,059,345 | 1,180,189 | 1,111,892 | 1,108,484 | ||||||||||
| Total deposits | 3,994,008 | 3,787,185 | 3,555,675 | 3,586,214 | 3,471,989 | ||||||||||
| Short-term borrowings | 105,300 | 109,500 | 275,500 | 211,400 | 308,500 | ||||||||||
| Long-term borrowings, net | 39,308 | 39,291 | 39,273 | 39,255 | 39,237 | ||||||||||
| Total interest-bearing liabilities | 3,129,658 | 3,203,059 | 3,162,696 | 3,081,573 | 3,100,576 | ||||||||||
| Shareholders’ equity | 448,045 | 439,393 | 438,947 | 432,617 | 422,354 | ||||||||||
| Common shareholders’ equity | 430,717 | 422,065 | 421,619 | 415,289 | 405,026 | ||||||||||
| Tangible common equity ^(1)^ | 356,375 | 347,436 | 346,696 | 340,064 | 329,492 | ||||||||||
| Accumulated other comprehensive loss | $ | (496 | ) | $ | (2,082 | ) | $ | (14,513 | ) | $ | (11,734 | ) | $ | (13,160 | ) |
| Common shares outstanding | 16,038 | 16,020 | 16,003 | 15,997 | 15,995 | ||||||||||
| Treasury shares | 62 | 80 | 97 | 103 | 105 | ||||||||||
| CAPITAL RATIOS AND PER SHARE DATA: | |||||||||||||||
| Leverage ratio | 8.49 | % | 8.78 | % | 9.00 | % | 8.86 | % | 8.55 | % | |||||
| Common equity Tier 1 capital ratio | 10.27 | % | 10.05 | % | 10.31 | % | 10.06 | % | 9.95 | % | |||||
| Tier 1 capital ratio | 10.76 | % | 10.53 | % | 10.80 | % | 10.55 | % | 10.45 | % | |||||
| Total risk-based capital ratio | 12.83 | % | 12.54 | % | 12.77 | % | 12.57 | % | 12.57 | % | |||||
| Common equity to assets | 9.20 | % | 9.44 | % | 9.62 | % | 9.58 | % | 9.39 | % | |||||
| Tangible common equity to tangible assets ^(1)^ | 7.74 | % | 7.90 | % | 8.05 | % | 7.99 | % | 7.77 | % | |||||
| Common book value per share | $ | 26.86 | $ | 26.35 | $ | 26.35 | $ | 25.96 | $ | 25.32 | |||||
| Tangible common book value per share ^(1)^ | $ | 22.22 | $ | 21.69 | $ | 21.66 | $ | 21.26 | $ | 20.60 |
^(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)
| Six Months Ended | 2020 | 2019 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | Second | First | Fourth | Third | Second | ||||||||||||||||
| 2020 | 2019 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||
| SELECTED INCOME STATEMENT | |||||||||||||||||||||
| DATA: | |||||||||||||||||||||
| Interest income | $ | 81,412 | $ | 84,162 | $ | 39,759 | $ | 41,653 | $ | 42,179 | $ | 42,459 | $ | 42,648 | |||||||
| Interest expense | 14,107 | 19,906 | 5,578 | 8,529 | 9,006 | 9,976 | 10,184 | ||||||||||||||
| Net interest income | 67,305 | 64,256 | 34,181 | 33,124 | 33,173 | 32,483 | 32,464 | ||||||||||||||
| Provision for credit losses | 17,661 | 3,547 | 3,746 | 13,915 | 2,653 | 1,844 | 2,354 | ||||||||||||||
| Net interest income after provision<br><br><br>for credit losses | 49,644 | 60,709 | 30,435 | 19,209 | 30,520 | 30,639 | 30,110 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||||
| Service charges on deposits | 2,067 | 3,436 | 480 | 1,587 | 1,880 | 1,925 | 1,756 | ||||||||||||||
| Insurance income | 2,168 | 2,250 | 819 | 1,349 | 881 | 1,439 | 872 | ||||||||||||||
| ATM and debit card | 3,378 | 3,182 | 1,776 | 1,602 | 1,796 | 1,801 | 1,739 | ||||||||||||||
| Investment advisory | 4,497 | 4,543 | 2,251 | 2,246 | 2,375 | 2,269 | 2,327 | ||||||||||||||
| Company owned life insurance | 927 | 834 | 462 | 465 | 465 | 459 | 424 | ||||||||||||||
| Investments in limited partnerships | (31 | ) | 376 | (244 | ) | 213 | (140 | ) | 116 | 144 | |||||||||||
| Loan servicing | 57 | 214 | 50 | 7 | 116 | 102 | 104 | ||||||||||||||
| Income (loss) from derivative | |||||||||||||||||||||
| instruments, net | 2,686 | 123 | 1,940 | 746 | 1,261 | 890 | (45 | ) | |||||||||||||
| Net gain on sale of loans held for sale | 1,035 | 589 | 731 | 304 | 324 | 439 | 407 | ||||||||||||||
| Net gain (loss) on investment securities | 895 | 113 | 674 | 221 | (44 | ) | 1,608 | 166 | |||||||||||||
| Net gain (loss) on other assets | 63 | 58 | (1 | ) | 64 | (27 | ) | (2 | ) | 9 | |||||||||||
| Net loss on tax credit investments | (80 | ) | - | (40 | ) | (40 | ) | (528 | ) | - | - | ||||||||||
| Other | 2,132 | 2,635 | 934 | 1,198 | 1,308 | 1,315 | 1,330 | ||||||||||||||
| Total noninterest income | 19,794 | 18,353 | 9,832 | 9,962 | 9,667 | 12,361 | 9,233 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||||
| Salaries and employee benefits | 30,088 | 27,250 | 15,074 | 15,014 | 14,669 | 14,411 | 13,249 | ||||||||||||||
| Occupancy and equipment ^(1)^ | 7,144 | 6,725 | 3,388 | 3,756 | 3,446 | 3,381 | 3,252 | ||||||||||||||
| Professional services | 3,732 | 2,090 | 1,580 | 2,152 | 1,806 | 1,528 | 932 | ||||||||||||||
| Computer and data processing ^(1)^ | 5,372 | 4,760 | 2,699 | 2,673 | 2,576 | 2,647 | 2,424 | ||||||||||||||
| Supplies and postage | 1,070 | 1,032 | 517 | 553 | 482 | 522 | 498 | ||||||||||||||
| FDIC assessments | 911 | 998 | 539 | 372 | - | 7 | 486 | ||||||||||||||
| Advertising and promotions | 1,100 | 1,606 | 545 | 555 | 1,226 | 745 | 1,086 | ||||||||||||||
| Amortization of intangibles | 581 | 639 | 287 | 294 | 302 | 309 | 316 | ||||||||||||||
| Other | 4,418 | 5,074 | 2,065 | 2,353 | 2,261 | 2,336 | 2,760 | ||||||||||||||
| Total noninterest expense | 54,416 | 50,174 | 26,694 | 27,722 | 26,768 | 25,886 | 25,003 | ||||||||||||||
| Income before income taxes | 15,022 | 28,888 | 13,573 | 1,449 | 13,419 | 17,114 | 14,340 | ||||||||||||||
| Income tax expense | 2,763 | 5,966 | 2,441 | 322 | 312 | 4,281 | 2,939 | ||||||||||||||
| Net income | 12,259 | 22,922 | 11,132 | 1,127 | 13,107 | 12,833 | 11,401 | ||||||||||||||
| Preferred stock dividends | 731 | 731 | 366 | 365 | 365 | 365 | 366 | ||||||||||||||
| Net income available to common | |||||||||||||||||||||
| shareholders | $ | 11,528 | $ | 22,191 | $ | 10,766 | $ | 762 | $ | 12,742 | $ | 12,468 | $ | 11,035 | |||||||
| FINANCIAL RATIOS: | |||||||||||||||||||||
| Earnings per share – basic | $ | 0.72 | $ | 1.39 | $ | 0.67 | $ | 0.05 | $ | 0.80 | $ | 0.78 | $ | 0.69 | |||||||
| Earnings per share – diluted | $ | 0.72 | $ | 1.39 | $ | 0.67 | $ | 0.05 | $ | 0.79 | $ | 0.78 | $ | 0.69 | |||||||
| Cash dividends declared on common stock | $ | 0.52 | $ | 0.50 | $ | 0.26 | $ | 0.26 | $ | 0.25 | $ | 0.25 | $ | 0.25 | |||||||
| Common dividend payout ratio | 72.22 | % | 35.97 | % | 38.81 | % | 520.00 | % | 31.25 | % | 32.05 | % | 36.23 | % | |||||||
| Dividend yield (annualized) | 5.62 | % | 3.46 | % | 5.60 | % | 5.76 | % | 3.09 | % | 3.29 | % | 3.44 | % | |||||||
| Return on average assets | 0.55 | % | 1.08 | % | 0.97 | % | 0.10 | % | 1.21 | % | 1.19 | % | 1.06 | % | |||||||
| Return on average equity | 5.56 | % | 11.32 | % | 10.05 | % | 1.03 | % | 11.88 | % | 11.86 | % | 11.01 | % | |||||||
| Return on average common equity | 5.44 | % | 11.45 | % | 10.11 | % | 0.72 | % | 12.02 | % | 12.00 | % | 11.12 | % | |||||||
| Return on average tangible common | |||||||||||||||||||||
| equity ^(2)^ | 6.60 | % | 14.21 | % | 12.25 | % | 0.88 | % | 14.64 | % | 14.69 | % | 13.73 | % | |||||||
| Efficiency ratio ^(3)^ | 62.78 | % | 60.39 | % | 61.26 | % | 64.31 | % | 62.05 | % | 59.52 | % | 59.79 | % | |||||||
| Effective tax rate | 18.4 | % | 20.7 | % | 18.0 | % | 22.2 | % | 2.3 | % | 25.0 | % | 20.5 | % | |||||||
| ^(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)
| Six Months Ended | 2020 | 2019 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | Second | First | Fourth | Third | Second | ||||||||||||||||
| 2020 | 2019 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||
| SELECTED AVERAGE BALANCES: | |||||||||||||||||||||
| Federal funds sold and interest-<br><br><br>earning deposits | $ | 75,761 | $ | 18,050 | $ | 92,214 | $ | 59,309 | $ | 32,494 | $ | 19,370 | $ | 18,145 | |||||||
| Investment securities ^(1)^ | 773,265 | 866,138 | 766,636 | 779,894 | 774,520 | 785,595 | 845,624 | ||||||||||||||
| Loans: | |||||||||||||||||||||
| Commercial business | 664,237 | 562,618 | 757,588 | 570,886 | 567,998 | 586,293 | 577,884 | ||||||||||||||
| Commercial mortgage | 1,117,247 | 994,271 | 1,133,832 | 1,100,660 | 1,073,527 | 1,021,931 | 1,010,544 | ||||||||||||||
| Residential real estate loans | 580,029 | 534,986 | 581,651 | 578,407 | 566,256 | 553,382 | 540,390 | ||||||||||||||
| Residential real estate lines | 101,111 | 108,673 | 99,543 | 102,680 | 106,011 | 107,290 | 107,826 | ||||||||||||||
| Consumer indirect | 836,915 | 901,556 | 827,030 | 846,800 | 856,823 | 868,927 | 891,967 | ||||||||||||||
| Other consumer | 15,310 | 15,972 | 15,155 | 15,466 | 16,100 | 16,141 | 15,721 | ||||||||||||||
| Total loans | 3,314,849 | 3,118,076 | 3,414,799 | 3,214,899 | 3,186,715 | 3,153,964 | 3,144,332 | ||||||||||||||
| Total interest-earning assets | 4,163,875 | 4,002,264 | 4,273,649 | 4,054,102 | 3,993,729 | 3,958,929 | 4,008,101 | ||||||||||||||
| Goodwill and other intangible<br><br><br>assets, net | 74,651 | 75,871 | 74,504 | 74,797 | 75,093 | 75,401 | 75,711 | ||||||||||||||
| Total assets | 4,500,243 | 4,291,670 | 4,624,360 | 4,376,125 | 4,299,342 | 4,260,810 | 4,300,254 | ||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing demand | 689,917 | 664,577 | 712,300 | 667,533 | 660,738 | 632,540 | 660,747 | ||||||||||||||
| Savings and money market | 1,236,630 | 981,439 | 1,329,632 | 1,143,628 | 1,014,434 | 956,410 | 996,878 | ||||||||||||||
| Time deposits | 1,050,784 | 1,086,670 | 984,832 | 1,116,736 | 1,120,823 | 1,099,212 | 1,096,544 | ||||||||||||||
| Short-term borrowings | 140,049 | 334,939 | 110,272 | 169,827 | 241,557 | 328,952 | 323,461 | ||||||||||||||
| Long-term borrowings, net | 39,288 | 39,218 | 39,297 | 39,279 | 39,262 | 39,244 | 39,227 | ||||||||||||||
| Total interest-bearing liabilities | 3,156,668 | 3,106,843 | 3,176,333 | 3,137,003 | 3,076,814 | 3,056,358 | 3,116,857 | ||||||||||||||
| Noninterest-bearing demand deposits | 817,106 | 720,727 | 912,238 | 721,975 | 725,590 | 717,473 | 714,205 | ||||||||||||||
| Total deposits | 3,794,437 | 3,453,413 | 3,939,002 | 3,649,872 | 3,521,585 | 3,405,635 | 3,468,374 | ||||||||||||||
| Total liabilities | 4,056,915 | 3,883,446 | 4,178,921 | 3,934,909 | 3,861,542 | 3,831,409 | 3,884,843 | ||||||||||||||
| Shareholders’ equity | 443,328 | 408,224 | 445,439 | 441,216 | 437,800 | 429,401 | 415,411 | ||||||||||||||
| Common equity | 426,000 | 390,896 | 428,111 | 423,888 | 420,472 | 412,073 | 398,083 | ||||||||||||||
| Tangible common equity ^(2)^ | $ | 351,349 | $ | 315,025 | $ | 353,607 | $ | 349,091 | $ | 345,379 | $ | 336,672 | $ | 322,372 | |||||||
| Common shares outstanding: | |||||||||||||||||||||
| Basic | 16,012 | 15,950 | 16,018 | 16,006 | 15,995 | 15,991 | 15,970 | ||||||||||||||
| Diluted | 16,058 | 15,997 | 16,047 | 16,069 | 16,072 | 16,056 | 16,015 | ||||||||||||||
| SELECTED AVERAGE YIELDS:<br><br><br>(Tax equivalent basis) | |||||||||||||||||||||
| Investment securities | 2.48 | % | 2.38 | % | 2.49 | % | 2.48 | % | 2.40 | % | 2.40 | % | 2.38 | % | |||||||
| Loans | 4.37 | % | 4.80 | % | 4.14 | % | 4.61 | % | 4.70 | % | 4.77 | % | 4.82 | % | |||||||
| Total interest-earning assets | 3.95 | % | 4.26 | % | 3.76 | % | 4.15 | % | 4.22 | % | 4.29 | % | 4.29 | % | |||||||
| Interest-bearing demand | 0.17 | % | 0.21 | % | 0.14 | % | 0.21 | % | 0.21 | % | 0.22 | % | 0.21 | % | |||||||
| Savings and money market | 0.43 | % | 0.43 | % | 0.31 | % | 0.56 | % | 0.48 | % | 0.44 | % | 0.44 | % | |||||||
| Time deposits | 1.62 | % | 2.12 | % | 1.39 | % | 1.83 | % | 1.94 | % | 2.12 | % | 2.17 | % | |||||||
| Short-term borrowings | 1.69 | % | 2.71 | % | 1.03 | % | 2.11 | % | 2.21 | % | 2.51 | % | 2.71 | % | |||||||
| Long-term borrowings, net | 6.29 | % | 6.30 | % | 6.29 | % | 6.29 | % | 6.29 | % | 6.30 | % | 6.30 | % | |||||||
| Total interest-bearing liabilities | 0.90 | % | 1.29 | % | 0.71 | % | 1.09 | % | 1.16 | % | 1.30 | % | 1.31 | % | |||||||
| Net interest rate spread | 3.05 | % | 2.97 | % | 3.05 | % | 3.06 | % | 3.06 | % | 2.99 | % | 2.98 | % | |||||||
| Net interest margin | 3.27 | % | 3.26 | % | 3.23 | % | 3.31 | % | 3.33 | % | 3.29 | % | 3.28 | % | |||||||
| (1) | Includes investment securities at adjusted amortized cost. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure. | ||||||||||||||||||||
| --- | --- |
Page 8
FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
| Six Months Ended | 2020 | 2019 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | Second | First | Fourth | Third | Second | ||||||||||||||||
| 2020 | 2019 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||
| ASSET QUALITY DATA: | |||||||||||||||||||||
| Allowance for Credit Losses - Loans | |||||||||||||||||||||
| Beginning balance, prior to adoption of CECL | $ | 30,482 | $ | 33,914 | $ | 43,356 | $ | 30,482 | $ | 31,668 | $ | 34,434 | $ | 33,327 | |||||||
| Impact of adopting CECL | 9,594 | - | - | 9,594 | - | - | - | ||||||||||||||
| Beginning balance, after adoption of CECL | 40,076 | 33,914 | 43,356 | 40,076 | 31,668 | 34,434 | 33,327 | ||||||||||||||
| Net loan charge-offs (recoveries): | |||||||||||||||||||||
| Commercial business | 6,725 | 37 | (1,458 | ) | 8,183 | 1,942 | 10 | 10 | |||||||||||||
| Commercial mortgage | 1,072 | (14 | ) | 1,072 | - | - | 2,994 | 3 | |||||||||||||
| Residential real estate loans | 82 | 101 | (6 | ) | 88 | 156 | 40 | 76 | |||||||||||||
| Residential real estate lines | (3 | ) | (3 | ) | - | (3 | ) | 3 | 7 | (1 | ) | ||||||||||
| Consumer indirect | 2,931 | 2,580 | 1,175 | 1,756 | 1,523 | 1,317 | 1,022 | ||||||||||||||
| Other consumer | 122 | 326 | 3 | 119 | 215 | 242 | 137 | ||||||||||||||
| Total net charge-offs | 10,929 | 3,027 | 786 | 10,143 | 3,839 | 4,610 | 1,247 | ||||||||||||||
| Provision for credit losses - loans | 17,169 | 3,547 | 3,746 | 13,423 | 2,653 | 1,844 | 2,354 | ||||||||||||||
| Ending balance | $ | 46,316 | $ | 34,434 | $ | 46,316 | $ | 43,356 | $ | 30,482 | $ | 31,668 | $ | 34,434 | |||||||
| Net charge-offs (recoveries)<br><br><br>to average loans (annualized): | |||||||||||||||||||||
| Commercial business | 2.04 | % | 0.01 | % | -0.77 | % | 5.77 | % | 1.36 | % | 0.01 | % | 0.01 | % | |||||||
| Commercial mortgage | 0.19 | % | 0.00 | % | 0.38 | % | 0.00 | % | 0.00 | % | 1.16 | % | 0.00 | % | |||||||
| Residential real estate loans | 0.03 | % | 0.04 | % | 0.00 | % | 0.06 | % | 0.11 | % | 0.03 | % | 0.06 | % | |||||||
| Residential real estate lines | -0.01 | % | -0.01 | % | 0.00 | % | -0.01 | % | 0.01 | % | 0.03 | % | -0.01 | % | |||||||
| Consumer indirect | 0.70 | % | 0.58 | % | 0.57 | % | 0.83 | % | 0.71 | % | 0.60 | % | 0.46 | % | |||||||
| Other consumer | 1.60 | % | 4.12 | % | 0.08 | % | 3.09 | % | 5.30 | % | 5.93 | % | 3.51 | % | |||||||
| Total loans | 0.66 | % | 0.20 | % | 0.09 | % | 1.27 | % | 0.48 | % | 0.58 | % | 0.16 | % | |||||||
| Supplemental information ^(1)^ | |||||||||||||||||||||
| Non-performing loans: | |||||||||||||||||||||
| Commercial business | $ | 4,918 | $ | 638 | $ | 4,918 | $ | 5,507 | $ | 1,177 | $ | 2,884 | $ | 638 | |||||||
| Commercial mortgage | 4,140 | 6,836 | 4,140 | 2,984 | 3,146 | 2,867 | 6,836 | ||||||||||||||
| Residential real estate loans | 2,992 | 2,283 | 2,992 | 1,971 | 2,484 | 2,526 | 2,283 | ||||||||||||||
| Residential real estate lines | 177 | 282 | 177 | 143 | 102 | 182 | 282 | ||||||||||||||
| Consumer indirect | 868 | 1,399 | 868 | 1,777 | 1,725 | 1,326 | 1,399 | ||||||||||||||
| Other consumer | 87 | 25 | 87 | 2 | 6 | 3 | 25 | ||||||||||||||
| Total non-performing loans | 13,182 | 11,463 | 13,182 | 12,384 | 8,640 | 9,788 | 11,463 | ||||||||||||||
| Foreclosed assets | 679 | 37 | 679 | 749 | 468 | 91 | 37 | ||||||||||||||
| Total non-performing assets | $ | 13,861 | $ | 11,500 | $ | 13,861 | $ | 13,133 | $ | 9,108 | $ | 9,879 | $ | 11,500 | |||||||
| Total non-performing loans<br><br><br>to total loans | 0.38 | % | 0.36 | % | 0.38 | % | 0.38 | % | 0.27 | % | 0.31 | % | 0.36 | % | |||||||
| Total non-performing assets<br><br><br>to total assets | 0.30 | % | 0.27 | % | 0.30 | % | 0.29 | % | 0.21 | % | 0.23 | % | 0.27 | % | |||||||
| Allowance for credit losses - loans<br><br><br>to total loans | 1.33 | % | 1.09 | % | 1.33 | % | 1.34 | % | 0.95 | % | 1.00 | % | 1.09 | % | |||||||
| Allowance for credit losses - loans<br><br><br>to non-performing loans | 351 | % | 300 | % | 351 | % | 350 | % | 353 | % | 324 | % | 300 | % | |||||||
| (1) | At period end. | ||||||||||||||||||||
| --- | --- |
Page 9
FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
| Six Months Ended | 2020 | 2019 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | Second | First | Fourth | Third | Second | ||||||||||||||||
| 2020 | 2019 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||
| Ending tangible assets: | |||||||||||||||||||||
| Total assets | $ | 4,680,930 | $ | 4,471,768 | $ | 4,384,178 | $ | 4,332,737 | $ | 4,313,945 | |||||||||||
| Less: Goodwill and other intangible<br><br><br>assets, net | 74,342 | 74,629 | 74,923 | 75,225 | 75,534 | ||||||||||||||||
| Tangible assets | $ | 4,606,588 | $ | 4,397,139 | $ | 4,309,255 | $ | 4,257,512 | $ | 4,238,411 | |||||||||||
| Ending tangible common equity: | |||||||||||||||||||||
| Common shareholders’ equity | $ | 430,717 | $ | 422,065 | $ | 421,619 | $ | 415,289 | $ | 405,026 | |||||||||||
| Less: Goodwill and other intangible<br><br><br>assets, net | 74,342 | 74,629 | 74,923 | 75,225 | 75,534 | ||||||||||||||||
| Tangible common equity | $ | 356,375 | $ | 347,436 | $ | 346,696 | $ | 340,064 | $ | 329,492 | |||||||||||
| Tangible common equity to tangible<br><br><br>assets ^(1)^ | 7.74 | % | 7.90 | % | 8.05 | % | 7.99 | % | 7.77 | % | |||||||||||
| Common shares outstanding | 16,038 | 16,020 | 16,003 | 15,997 | 15,995 | ||||||||||||||||
| Tangible common book value per<br><br><br>share ^(2)^ | $ | 22.22 | $ | 21.69 | $ | 21.66 | $ | 21.26 | $ | 20.60 | |||||||||||
| Average tangible assets: | |||||||||||||||||||||
| Average assets | $ | 4,500,243 | $ | 4,291,670 | $ | 4,624,360 | $ | 4,376,125 | $ | 4,299,342 | $ | 4,260,810 | $ | 4,300,254 | |||||||
| Less: Average goodwill and other<br><br><br>intangible assets, net | 74,651 | 75,871 | 74,504 | 74,797 | 75,093 | 75,401 | 75,711 | ||||||||||||||
| Average tangible assets | $ | 4,425,592 | $ | 4,215,799 | $ | 4,549,856 | $ | 4,301,328 | $ | 4,224,249 | $ | 4,185,409 | $ | 4,224,543 | |||||||
| Average tangible common equity: | |||||||||||||||||||||
| Average common equity | $ | 426,000 | $ | 390,896 | $ | 428,111 | $ | 423,888 | $ | 420,472 | $ | 412,073 | $ | 398,083 | |||||||
| Less: Average goodwill and other<br><br><br>intangible assets, net | 74,651 | 75,871 | 74,504 | 74,797 | 75,093 | 75,401 | 75,711 | ||||||||||||||
| Average tangible common equity | $ | 351,349 | $ | 315,025 | $ | 353,607 | $ | 349,091 | $ | 345,379 | $ | 336,672 | $ | 322,372 | |||||||
| Net income available to<br><br><br>common shareholders | $ | 11,528 | $ | 22,191 | $ | 10,766 | $ | 762 | $ | 12,742 | $ | 12,468 | $ | 11,035 | |||||||
| Return on average tangible common<br><br><br>equity ^(3)^ | 6.60 | % | 14.21 | % | 12.25 | % | 0.88 | % | 14.64 | % | 14.69 | % | 13.73 | % | |||||||
| Pre-tax pre-provision income: | |||||||||||||||||||||
| Net income | $ | 12,259 | $ | 22,922 | $ | 11,132 | $ | 1,127 | $ | 13,107 | $ | 12,833 | $ | 11,401 | |||||||
| Add: Income tax expense | 2,763 | 5,966 | 2,441 | 322 | 312 | 4,281 | 2,939 | ||||||||||||||
| Add: Provision for credit losses | 17,661 | 3,547 | 3,746 | 13,915 | 2,653 | 1,844 | 2,354 | ||||||||||||||
| Pre-tax pre-provision income | $ | 32,683 | $ | 32,435 | $ | 17,319 | $ | 15,364 | $ | 16,072 | $ | 18,958 | $ | 16,694 | |||||||
| ^(1)^ | Tangible common equity divided by tangible assets. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| ^(2)^ | Tangible common equity divided by common shares outstanding. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| ^(3)^ | Net income available to common shareholders (annualized) divided by average tangible common equity. | ||||||||||||||||||||
| --- | --- |
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