Financial Institutions, Inc. Announces Third Quarter 2023 Results
- Financial Institutions, Inc. reports net income of $14.0 million for Q3 2023, reflecting stability compared to previous quarters.
- Total deposits increase by 5.6% to $5.32 billion, indicating strong deposit growth.
- Total loans increase by 0.8% to $4.43 billion, showing modest loan growth.
- Credit quality metrics remain strong, with net charge-offs at 0.14% and non-performing loans at 0.21%.
- The Company has over $1.2 billion in available liquidity and expects $1 billion in cash flow over the next twelve months, indicating a favorable financial position.
- Net interest income decreases by 1.6% to $41.7 million, reflecting higher funding costs.
- Noninterest income decreases by 8.5% to $10.5 million, mainly due to non-recurring factors.
- Loan growth is softer in Q3 2023, with commercial mortgage demand slowing.
- The rising interest rate environment has driven higher funding costs, impacting net interest margin.
WARSAW, N.Y., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (NASDAQ: FISI) (the “Company,” “we” or “us”), parent company of Five Star Bank (the “Bank”), SDN Insurance Agency, LLC (“SDN”) and Courier Capital, LLC (“Courier Capital”), today reported financial and operational results for the third quarter ended September 30, 2023.
Net income was
Third Quarter 2023 Key Results:
- Total deposits were
$5.32 billion at September 30, 2023, up$281.1 million , or5.6% , from June 30, 2023 and up$410.8 million , or8.4% , from one year prior. - Total loans were
$4.43 billion at September 30, 2023, reflecting an increase of$33.4 million , or0.8% , from June 30, 2023 and an increase of$564.3 million , or14.6% , from September 30, 2022. - Net interest income of
$41.7 million decreased$660 thousand , or1.6% , and$1.4 million , or3.2% , from the linked and year-ago quarters, respectively, amid the current rising interest rate environment that has driven higher funding costs. - Noninterest income was
$10.5 million , down$980 thousand , or8.5% , from the second quarter of 2023 and down$2.2 million , or17.1% , from the third quarter of 2022. The variance from the year-ago period was largely driven by the non-recurring nature of a$2.0 million enhancement recorded in the third quarter of 2022 for company owned life insurance. - The Company continues to report strong credit quality metrics, including annualized net charge-offs to average loans for the current quarter of
0.14% , as well as non-performing loans to total loans of0.21% and non-performing assets to total assets of0.16% as of September 30, 2023.
“Our continued focus on deposit gathering resulted in strong growth during third quarter of
Chief Financial Officer and Treasurer W. Jack Plants II added, "While funding costs continued to pressure net interest margin in the third quarter, the pace of compression continues to moderate and our successful deposit gathering provided the capacity to reduce short term borrowings by
Net Interest Income and Net Interest Margin
Net interest income was
Average interest-earning assets for the current quarter were
Average interest-bearing liabilities for the current quarter were
Net interest margin was
Noninterest Income
Noninterest income was
- Service charges on deposits of
$1.2 million were flat as compared with the linked second quarter of 2023 and reflected a$390 thousand decrease from the year-ago period, due to a reduction in nonsufficient funds fees as a result of January 2023 changes in the Bank’s consumer overdraft program that align with trends in community banking. - Investment advisory income of
$2.5 million was$275 thousand lower than the second quarter of 2023 and$178 thousand lower than the third quarter of 2022, primarily due to lower transaction-based fees on retail accounts in the most recent period. - Insurance income of
$1.7 million was$350 thousand higher than the second quarter of 2023 and$107 thousand higher than the third quarter of 2022, with the linked quarter change largely due to timing of commercial renewals. - Company owned life insurance of
$1.0 million was relatively flat as compared with the second quarter of 2023 and$1.9 million lower than the third quarter of 2022, when the Company recorded a$2.0 million nonrecurring enhancement related to its previously disclosed surrender and redeploy strategy executed in the year-ago period. - Income from investments in limited partnerships of
$391 thousand was$78 thousand lower than the second quarter of 2023 and$326 thousand higher than the third quarter of 2022. 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
$219 thousand in the current quarter,$484 thousand lower than the second quarter of 2023 and$120 thousand higher than in the third quarter of 2022. Income from derivative instruments, net is based on the number and value of interest rate swap transactions executed during the quarter combined with the impact of changes in the fair value of borrower-facing trades. - Net gain on sale of loans held for sale was
$115 thousand in the current quarter compared to$122 thousand in the second quarter of 2023 and$308 thousand in the third quarter of 2022. - A net loss on tax credit investments of
$333 thousand was recognized in the current quarter related to tax credit investments placed in service in the current and prior quarters. The decrease from the second quarter of 2023 was due to an investment placed in service in the second quarter that included a refundable New York investment tax credit, as the net loss (gain) includes the amortization of tax credit investments, offset by New York investment tax credits that are refundable and recorded in noninterest income.
Noninterest Expense
Noninterest expense was
- Salaries and employee benefits expense of
$18.2 million was$406 thousand higher than the second quarter of 2023 and$210 thousand higher than the third quarter of 2022. The linked quarter change was due to a variety of factors, including lower stock-based compensation expense in the second quarter this year driven by forfeitures and an increase in health insurance benefits due to higher medical claims, partially offset by a decrease in bonus expense. The increase from the prior year quarter was primarily due to annual merit increases and higher retirement expense, partially offset by a decrease in bonus expense. - Occupancy and equipment expenses of
$3.8 million were up$253 thousand from the linked second quarter of 2023 and flat as compared with the year-ago period. The linked quarter change was primarily due to timing of equipment purchases. - Professional services expenses of
$1.1 million were$197 thousand lower than the second quarter of 2023 and$171 thousand lower than the third quarter of 2022. The linked quarter decrease was due in part to the lower level of interest rate swap transactions executed during the most recent quarter and the timing of legal fees. The year-over-year decline was primarily due to lower other professional and consulting fees. - Computer and data processing expense of
$5.1 million was$357 thousand higher than the second quarter of 2023 and$700 thousand higher than the third quarter of 2022 due in part to the Company's investments in data efficiency and marketing technology. - FDIC assessments expense of
$1.2 million was flat as compared with the linked quarter and up$581 thousand from the year-ago quarter, due in part to the impact of an increase in base deposit insurance assessment rate schedules by two basis points. - Other expense of
$4.0 million was relatively flat as compared with the second quarter of 2023 and$556 thousand higher than the third quarter of 2022. The year-over-year increase was driven in part by interest charges related to collateral held for derivative transactions.
Income Taxes
Income tax expense was
The effective tax rate was
Balance Sheet and Capital Management
Total assets were
Investment securities were
Total loans were
- Commercial business loans totaled
$711.5 million , down$8.8 million , or1.2% , from June 30, 2023, and up$77.6 million , or12.2% , from September 30, 2022. - Commercial mortgage loans totaled
$1.99 billion , up$24.1 million , or1.2% , from June 30, 2023, and up$420.7 million , or26.9% , from September 30, 2022. - Residential real estate loans totaled
$635.2 million , up$24.0 million , or3.9% , from June 30, 2023, and up$57.4 million , or9.9% , from September 30, 2022. - Consumer indirect loans totaled
$982.1 million , down$18.8 million , or1.9% , from June 30, 2023, and down$15.3 million , or1.5% , from September 30, 2022.
Total deposits were
Short-term borrowings were
Shareholders’ equity was
Common book value per share was
During the third quarter of 2023, the Company declared a common stock dividend of
The Company’s regulatory capital ratios at September 30, 2023 continued to exceed all regulatory capital requirements to be considered well capitalized.
- Leverage Ratio was
8.20% compared to8.08% and8.35% at June 30, 2023, and September 30, 2022, respectively. - Common Equity Tier 1 Capital Ratio was
9.26% compared to9.10% and9.75% at June 30, 2023, and September 30, 2022, respectively. - Tier 1 Capital Ratio was
9.58% compared to9.43% and10.12% at June 30, 2023, and September 30, 2022, respectively. - Total Risk-Based Capital Ratio was
11.91% compared to11.77% and12.53% at June 30, 2023, and September 30, 2022, respectively.
Credit Quality
Non-performing loans were
At September 30, 2023, the allowance for credit losses on loans to total loans ratio was
Provision for credit losses was
The Company has remained strategically focused on the importance of credit discipline, allocating what it believes are the necessary resources to credit and risk management functions as the loan portfolio has grown. The ratio of allowance for credit losses on loans to non-performing loans was
Subsequent Events
The Company is required, under generally accepted accounting principles, to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended September 30, 2023, on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2023, and will adjust amounts preliminarily reported, if necessary.
Conference Call
The Company will host an earnings conference call and audio webcast on October 27, 2023 at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and W. Jack Plants II, Chief Financial Officer and Treasurer. The live webcast will be available in listen-only mode on the Company’s website at www.FISI-investors.com. Within the United States, listeners may also access the call by dialing 1-833-470-1428 and providing the access code 057589. The webcast replay will be available on the Company’s website for at least 30 days.
About Financial Institutions, Inc.
Financial Institutions, Inc. (NASDAQ: FISI) is an innovative financial holding company with approximately
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 “believe,” "continue," “estimate,” “expect,” “forecast,” “intend,” “plan,” “preliminary,” “should,” or “will.” 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: changes in interest rates; inflation; changes in deposit flows and the cost and availability of funds; the Company’s ability to implement its strategic plan, including by expanding its commercial lending footprint and integrating its acquisitions; 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; legal and regulatory proceedings and related matters, including any action described in our reports filed with the SEC, could adversely affect us and the banking industry in general; 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; and general economic and credit market conditions nationally and regionally; and the macroeconomic volatility related to the impact of the COVID-19 pandemic or global political unrest. 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 financial measure.
For additional information contact:
Kate Croft
Director of Investor and External Relations
(716) 817-5159
klcroft@five-starbank.com
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)
2023 | 2022 | ||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
SELECTED BALANCE SHEET DATA: | |||||||||||||||||||
Cash and cash equivalents | $ | 192,111 | $ | 180,248 | $ | 139,974 | $ | 130,466 | $ | 118,581 | |||||||||
Investment securities: | |||||||||||||||||||
Available for sale | 854,215 | 912,122 | 945,442 | 954,371 | 965,531 | ||||||||||||||
Held-to-maturity, net | 154,204 | 159,893 | 180,052 | 188,975 | 197,538 | ||||||||||||||
Total investment securities | 1,008,419 | 1,072,015 | 1,125,494 | 1,143,346 | 1,163,069 | ||||||||||||||
Loans held for sale | 1,873 | 805 | 682 | 550 | 2,074 | ||||||||||||||
Loans: | |||||||||||||||||||
Commercial business | 711,538 | 720,372 | 695,110 | 664,249 | 633,894 | ||||||||||||||
Commercial mortgage | 1,985,279 | 1,961,220 | 1,841,481 | 1,679,840 | 1,564,545 | ||||||||||||||
Residential real estate loans | 635,209 | 611,199 | 591,846 | 589,960 | 577,821 | ||||||||||||||
Residential real estate lines | 76,722 | 75,971 | 76,086 | 77,670 | 77,336 | ||||||||||||||
Consumer indirect | 982,137 | 1,000,982 | 1,022,202 | 1,023,620 | 997,423 | ||||||||||||||
Other consumer | 40,281 | 28,065 | 16,607 | 15,110 | 15,832 | ||||||||||||||
Total loans | 4,431,166 | 4,397,809 | 4,243,332 | 4,050,449 | 3,866,851 | ||||||||||||||
Allowance for credit losses - loans | 49,630 | 49,836 | 47,528 | 45,413 | 44,106 | ||||||||||||||
Total loans, net | 4,381,536 | 4,347,973 | 4,195,804 | 4,005,036 | 3,822,745 | ||||||||||||||
Total interest-earning assets | 5,747,191 | 5,749,015 | 5,600,786 | 5,428,533 | 5,073,983 | ||||||||||||||
Goodwill and other intangible assets, net | 72,725 | 72,950 | 73,180 | 73,414 | 73,653 | ||||||||||||||
Total assets | 6,140,149 | 6,141,298 | 5,966,992 | 5,797,272 | 5,624,482 | ||||||||||||||
Deposits: | |||||||||||||||||||
Noninterest-bearing demand | 1,035,350 | 1,022,788 | 1,067,011 | 1,139,214 | 1,135,125 | ||||||||||||||
Interest-bearing demand | 827,842 | 823,983 | 901,251 | 863,822 | 946,431 | ||||||||||||||
Savings and money market | 1,943,794 | 1,641,014 | 1,701,663 | 1,643,516 | 1,800,321 | ||||||||||||||
Time deposits | 1,508,987 | 1,547,076 | 1,471,382 | 1,282,872 | 1,023,277 | ||||||||||||||
Total deposits | 5,315,973 | 5,034,861 | 5,141,307 | 4,929,424 | 4,905,154 | ||||||||||||||
Short-term borrowings | 70,000 | 374,000 | 116,000 | 205,000 | 69,000 | ||||||||||||||
Long-term borrowings, net | 124,454 | 124,377 | 124,299 | 74,222 | 74,144 | ||||||||||||||
Total interest-bearing liabilities | 4,475,077 | 4,510,450 | 4,314,595 | 4,069,432 | 3,913,173 | ||||||||||||||
Shareholders’ equity | 408,716 | 425,873 | 422,823 | 405,605 | 394,048 | ||||||||||||||
Common shareholders’ equity | 391,424 | 408,581 | 405,531 | 388,313 | 376,756 | ||||||||||||||
Tangible common equity(1) | 318,699 | 335,631 | 332,351 | 314,899 | 303,103 | ||||||||||||||
Accumulated other comprehensive loss | $ | (161,389 | ) | $ | (134,472 | ) | $ | (127,372 | ) | $ | (137,487 | ) | $ | (141,183 | ) | ||||
Common shares outstanding | 15,402 | 15,402 | 15,375 | 15,340 | 15,334 | ||||||||||||||
Treasury shares | 698 | 698 | 724 | 760 | 765 | ||||||||||||||
CAPITAL RATIOS AND PER SHARE DATA: | |||||||||||||||||||
Leverage ratio | 8.20 | % | 8.08 | % | 8.19 | % | 8.33 | % | 8.35 | % | |||||||||
Common equity Tier 1 capital ratio | 9.26 | % | 9.10 | % | 9.21 | % | 9.42 | % | 9.75 | % | |||||||||
Tier 1 capital ratio | 9.58 | % | 9.43 | % | 9.55 | % | 9.78 | % | 10.12 | % | |||||||||
Total risk-based capital ratio | 11.91 | % | 11.77 | % | 11.93 | % | 12.13 | % | 12.53 | % | |||||||||
Common equity to assets | 6.37 | % | 6.65 | % | 6.80 | % | 6.70 | % | 6.70 | % | |||||||||
Tangible common equity to tangible assets(1) | 5.25 | % | 5.53 | % | 5.64 | % | 5.50 | % | 5.46 | % | |||||||||
Common book value per share | $ | 25.41 | $ | 26.53 | $ | 26.38 | $ | 25.31 | $ | 24.57 | |||||||||
Tangible common book value per share(1) | $ | 20.69 | $ | 21.79 | $ | 21.62 | $ | 20.53 | $ | 19.77 | |||||||||
(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)
Nine Months Ended | 2023 | 2022 | |||||||||||||||||||||||||
September 30, | Third | Second | First | Fourth | Third | ||||||||||||||||||||||
2023 | 2022 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||
SELECTED INCOME STATEMENT DATA: | |||||||||||||||||||||||||||
Interest income | $ | 209,586 | $ | 138,302 | $ | 74,700 | $ | 71,115 | $ | 63,771 | $ | 57,805 | $ | 50,675 | |||||||||||||
Interest expense | 83,757 | 14,079 | 33,023 | 28,778 | 21,956 | 14,656 | 7,607 | ||||||||||||||||||||
Net interest income | 125,829 | 124,223 | 41,677 | 42,337 | 41,815 | 43,149 | 43,068 | ||||||||||||||||||||
Provision for credit losses | 8,410 | 7,196 | 966 | 3,230 | 4,214 | 6,115 | 4,314 | ||||||||||||||||||||
Net interest income after provision for credit losses | 117,419 | 117,027 | 40,711 | 39,107 | 37,601 | 37,034 | 38,754 | ||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||||||
Service charges on deposits | 3,457 | 4,403 | 1,207 | 1,223 | 1,027 | 1,486 | 1,597 | ||||||||||||||||||||
Insurance income | 5,093 | 4,902 | 1,678 | 1,328 | 2,087 | 1,462 | 1,571 | ||||||||||||||||||||
Card interchange income | 6,140 | 6,131 | 2,094 | 2,107 | 1,939 | 2,074 | 2,076 | ||||||||||||||||||||
Investment advisory | 8,286 | 8,669 | 2,544 | 2,819 | 2,923 | 2,824 | 2,722 | ||||||||||||||||||||
Company owned life insurance | 2,974 | 4,667 | 1,027 | 953 | 994 | 875 | 2,965 | ||||||||||||||||||||
Investments in limited partnerships | 1,111 | 1,102 | 391 | 469 | 251 | 191 | 65 | ||||||||||||||||||||
Loan servicing | 395 | 383 | 135 | 114 | 146 | 124 | 139 | ||||||||||||||||||||
Income from derivative instruments, net | 1,418 | 1,263 | 219 | 703 | 496 | 656 | 99 | ||||||||||||||||||||
Net gain on sale of loans held for sale | 349 | 1,045 | 115 | 122 | 112 | 182 | 308 | ||||||||||||||||||||
Net loss on investment securities | - | (15 | ) | - | - | - | - | - | |||||||||||||||||||
Net gain (loss) on other assets | 31 | (15 | ) | (1 | ) | (7 | ) | 39 | (1 | ) | (22 | ) | |||||||||||||||
Net (loss) gain on tax credit investments | (45 | ) | (704 | ) | (333 | ) | 489 | (201 | ) | (111 | ) | (385 | ) | ||||||||||||||
Other | 3,667 | 3,503 | 1,410 | 1,146 | 1,111 | 1,175 | 1,517 | ||||||||||||||||||||
Total noninterest income | 32,876 | 35,334 | 10,486 | 11,466 | 10,924 | 10,937 | 12,652 | ||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||||||
Salaries and employee benefits | 54,047 | 51,532 | 18,160 | 17,754 | 18,133 | 18,101 | 17,950 | ||||||||||||||||||||
Occupancy and equipment | 11,059 | 11,564 | 3,791 | 3,538 | 3,730 | 3,539 | 3,793 | ||||||||||||||||||||
Professional services | 3,844 | 4,172 | 1,076 | 1,273 | 1,495 | 1,420 | 1,247 | ||||||||||||||||||||
Computer and data processing | 14,548 | 12,959 | 5,107 | 4,750 | 4,691 | 4,679 | 4,407 | ||||||||||||||||||||
Supplies and postage | 1,418 | 1,450 | 455 | 473 | 490 | 493 | 440 | ||||||||||||||||||||
FDIC assessments | 3,586 | 1,785 | 1,232 | 1,239 | 1,115 | 655 | 651 | ||||||||||||||||||||
Advertising and promotions | 1,556 | 1,437 | 744 | 498 | 314 | 576 | 651 | ||||||||||||||||||||
Amortization of intangibles | 689 | 747 | 225 | 230 | 234 | 239 | 244 | ||||||||||||||||||||
Restructuring (recoveries) charges | (74 | ) | 1,269 | (55 | ) | (19 | ) | - | 350 | - | |||||||||||||||||
Other | 11,505 | 8,934 | 4,000 | 4,046 | 3,459 | 3,461 | 3,444 | ||||||||||||||||||||
Total noninterest expense | 102,178 | 95,849 | 34,735 | 33,782 | 33,661 | 33,513 | 32,827 | ||||||||||||||||||||
Income before income taxes | 48,117 | 56,512 | 16,462 | 16,791 | 14,864 | 14,458 | 18,579 | ||||||||||||||||||||
Income tax expense | 7,633 | 12,027 | 2,440 | 2,418 | 2,775 | 2,370 | 4,725 | ||||||||||||||||||||
Net income | 40,484 | 44,485 | 14,022 | 14,373 | 12,089 | 12,088 | 13,854 | ||||||||||||||||||||
Preferred stock dividends | 1,094 | 1,095 | 365 | 364 | 365 | 364 | 365 | ||||||||||||||||||||
Net income available to common shareholders | $ | 39,390 | $ | 43,390 | $ | 13,657 | $ | 14,009 | $ | 11,724 | $ | 11,724 | $ | 13,489 | |||||||||||||
FINANCIAL RATIOS: | |||||||||||||||||||||||||||
Earnings per share – basic | $ | 2.56 | $ | 2.82 | $ | 0.89 | $ | 0.91 | $ | 0.76 | $ | 0.76 | $ | 0.88 | |||||||||||||
Earnings per share – diluted | $ | 2.55 | $ | 2.80 | $ | 0.88 | $ | 0.91 | $ | 0.76 | $ | 0.76 | $ | 0.88 | |||||||||||||
Cash dividends declared on common stock | $ | 0.90 | $ | 0.87 | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.29 | $ | 0.29 | |||||||||||||
Common dividend payout ratio | 35.16 | % | 30.85 | % | 33.71 | % | 32.97 | % | 39.47 | % | 38.16 | % | 32.95 | % | |||||||||||||
Dividend yield (annualized) | 7.15 | % | 4.83 | % | 7.07 | % | 7.64 | % | 6.31 | % | 4.72 | % | 4.78 | % | |||||||||||||
Return on average assets (annualized) | 0.90 | % | 1.06 | % | 0.92 | % | 0.95 | % | 0.84 | % | 0.85 | % | 0.98 | % | |||||||||||||
Return on average equity (annualized) | 12.72 | % | 13.07 | % | 12.96 | % | 13.43 | % | 11.73 | % | 11.92 | % | 12.55 | % | |||||||||||||
Return on average common equity (annualized) | 12.90 | % | 13.25 | % | 13.15 | % | 13.64 | % | 11.87 | % | 12.08 | % | 12.72 | % | |||||||||||||
Return on average tangible common equity (annualized)(1) | 15.72 | % | 15.95 | % | 15.98 | % | 16.58 | % | 14.53 | % | 14.94 | % | 15.43 | % | |||||||||||||
Efficiency ratio(2) | 64.25 | % | 59.91 | % | 66.47 | % | 62.66 | % | 63.68 | % | 61.82 | % | 58.78 | % | |||||||||||||
Effective tax rate | 15.9 | % | 21.3 | % | 14.8 | % | 14.4 | % | 18.7 | % | 16.4 | % | 25.4 | % | |||||||||||||
(1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.
(2) 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.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
Nine Months Ended | 2023 | 2022 | |||||||||||||||||||||||||
September 30, | Third | Second | First | Fourth | Third | ||||||||||||||||||||||
2023 | 2022 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||
SELECTED AVERAGE BALANCES: | |||||||||||||||||||||||||||
Federal funds sold and interest-earning deposits | $ | 72,977 | $ | 49,048 | $ | 62,673 | $ | 92,954 | $ | 63,311 | $ | 49,073 | $ | 42,183 | |||||||||||||
Investment securities(1) | 1,266,832 | 1,401,540 | 1,230,590 | 1,269,181 | 1,301,506 | 1,332,776 | 1,369,166 | ||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||
Commercial business | 697,728 | 626,121 | 712,224 | 710,145 | 670,354 | 636,470 | 623,916 | ||||||||||||||||||||
Commercial mortgage | 1,879,077 | 1,458,961 | 1,977,978 | 1,911,729 | 1,744,963 | 1,633,298 | 1,514,138 | ||||||||||||||||||||
Residential real estate loans | 603,268 | 578,354 | 621,074 | 598,638 | 589,747 | 582,352 | 577,094 | ||||||||||||||||||||
Residential real estate lines | 76,219 | 77,062 | 75,847 | 76,191 | 76,627 | 77,342 | 76,853 | ||||||||||||||||||||
Consumer indirect | 1,008,311 | 1,009,475 | 989,614 | 1,011,338 | 1,024,362 | 1,003,728 | 1,012,787 | ||||||||||||||||||||
Other consumer | 23,712 | 14,454 | 34,086 | 21,686 | 15,156 | 15,175 | 14,648 | ||||||||||||||||||||
Total loans | 4,288,315 | 3,764,427 | 4,410,823 | 4,329,727 | 4,121,209 | 3,948,365 | 3,819,436 | ||||||||||||||||||||
Total interest-earning assets | 5,628,125 | 5,215,015 | 5,704,086 | 5,691,862 | 5,486,026 | 5,330,214 | 5,230,785 | ||||||||||||||||||||
Goodwill and other intangible assets, net | 73,079 | 74,036 | 72,851 | 73,079 | 73,312 | 73,547 | 73,791 | ||||||||||||||||||||
Total assets | 5,991,075 | 5,586,311 | 6,073,653 | 6,053,258 | 5,843,786 | 5,667,331 | 5,599,964 | ||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||
Interest-bearing demand | 831,345 | 905,224 | 766,637 | 848,552 | 880,093 | 923,374 | 854,015 | ||||||||||||||||||||
Savings and money market | 1,691,783 | 1,882,342 | 1,749,202 | 1,660,148 | 1,665,075 | 1,764,230 | 1,817,413 | ||||||||||||||||||||
Time deposits | 1,484,919 | 971,681 | 1,564,035 | 1,506,592 | 1,382,131 | 1,116,135 | 1,031,162 | ||||||||||||||||||||
Short-term borrowings | 221,392 | 85,585 | 222,871 | 294,923 | 145,533 | 87,783 | 136,610 | ||||||||||||||||||||
Long-term borrowings, net | 121,033 | 74,020 | 124,407 | 124,329 | 114,251 | 74,175 | 74,096 | ||||||||||||||||||||
Total interest-bearing liabilities | 4,350,472 | 3,918,852 | 4,427,152 | 4,434,544 | 4,187,083 | 3,965,697 | 3,913,296 | ||||||||||||||||||||
Noninterest-bearing demand deposits | 1,038,798 | 1,099,234 | 1,022,423 | 1,029,681 | 1,064,754 | 1,123,223 | 1,115,759 | ||||||||||||||||||||
Total deposits | 5,046,845 | 4,858,481 | 5,102,296 | 5,044,973 | 4,992,053 | 4,926,962 | 4,818,349 | ||||||||||||||||||||
Total liabilities | 5,565,583 | 5,131,281 | 5,644,488 | 5,624,006 | 5,425,851 | 5,265,134 | 5,162,057 | ||||||||||||||||||||
Shareholders’ equity | 425,492 | 455,030 | 429,165 | 429,252 | 417,935 | 402,197 | 437,907 | ||||||||||||||||||||
Common equity | 408,200 | 437,738 | 411,873 | 411,960 | 400,643 | 384,905 | 420,615 | ||||||||||||||||||||
Tangible common equity(2) | 335,121 | 363,702 | 339,022 | 338,881 | 327,331 | 311,358 | 346,824 | ||||||||||||||||||||
Common shares outstanding: | |||||||||||||||||||||||||||
Basic | 15,371 | 15,403 | 15,391 | 15,372 | 15,348 | 15,330 | 15,329 | ||||||||||||||||||||
Diluted | 15,443 | 15,484 | 15,462 | 15,413 | 15,435 | 15,413 | 15,393 | ||||||||||||||||||||
SELECTED AVERAGE YIELDS: (Tax equivalent basis) | |||||||||||||||||||||||||||
Investment securities | 1.89 | % | 1.79 | % | 1.88 | % | 1.89 | % | 1.90 | % | 1.88 | % | 1.81 | % | |||||||||||||
Loans | 5.90 | % | 4.25 | % | 6.15 | % | 5.93 | % | 5.61 | % | 5.15 | % | 4.62 | % | |||||||||||||
Total interest-earning assets | 4.98 | % | 3.55 | % | 5.21 | % | 5.02 | % | 4.71 | % | 4.32 | % | 3.86 | % | |||||||||||||
Interest-bearing demand | 0.75 | % | 0.14 | % | 0.83 | % | 0.77 | % | 0.64 | % | 0.52 | % | 0.18 | % | |||||||||||||
Savings and money market | 2.05 | % | 0.32 | % | 2.51 | % | 2.00 | % | 1.60 | % | 1.20 | % | 0.56 | % | |||||||||||||
Time deposits | 3.78 | % | 0.62 | % | 4.20 | % | 3.76 | % | 3.33 | % | 2.31 | % | 1.12 | % | |||||||||||||
Short-term borrowings | 3.98 | % | 1.49 | % | 3.98 | % | 4.30 | % | 3.35 | % | 2.48 | % | 1.95 | % | |||||||||||||
Long-term borrowings, net | 5.08 | % | 5.73 | % | 5.05 | % | 5.04 | % | 5.11 | % | 5.72 | % | 5.72 | % | |||||||||||||
Total interest-bearing liabilities | 2.57 | % | 0.48 | % | 2.96 | % | 2.60 | % | 2.12 | % | 1.47 | % | 0.77 | % | |||||||||||||
Net interest rate spread | 2.41 | % | 3.07 | % | 2.25 | % | 2.42 | % | 2.59 | % | 2.85 | % | 3.09 | % | |||||||||||||
Net interest margin | 2.99 | % | 3.19 | % | 2.91 | % | 2.99 | % | 3.09 | % | 3.23 | % | 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 financial measure.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
Nine Months Ended | 2023 | 2022 | |||||||||||||||||||||||||
September 30, | Third | Second | First | Fourth | Third | ||||||||||||||||||||||
2023 | 2022 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||
ASSET QUALITY DATA: | |||||||||||||||||||||||||||
Allowance for Credit Losses - Loans | |||||||||||||||||||||||||||
Beginning balance | $ | 45,413 | $ | 39,676 | $ | 49,836 | $ | 47,528 | $ | 45,413 | $ | 44,106 | $ | 42,452 | |||||||||||||
Net loan charge-offs (recoveries): | |||||||||||||||||||||||||||
Commercial business | (59 | ) | (43 | ) | 32 | 33 | (124 | ) | (21 | ) | (96 | ) | |||||||||||||||
Commercial mortgage | (958 | ) | (2,020 | ) | (972 | ) | 16 | (2 | ) | 1,167 | (1 | ) | |||||||||||||||
Residential real estate loans | 67 | 37 | (4 | ) | 13 | 58 | 242 | (4 | ) | ||||||||||||||||||
Residential real estate lines | 41 | 18 | - | 25 | 16 | (19 | ) | 35 | |||||||||||||||||||
Consumer indirect | 4,421 | 3,087 | 2,283 | 300 | 1,838 | 1,451 | 1,890 | ||||||||||||||||||||
Other consumer | 811 | 821 | 259 | 249 | 303 | 518 | 329 | ||||||||||||||||||||
Total net charge-offs (recoveries) | 4,323 | 1,900 | 1,598 | 636 | 2,089 | 3,338 | 2,153 | ||||||||||||||||||||
Provision for credit losses - loans | 8,540 | 6,330 | 1,392 | 2,944 | 4,204 | 4,645 | 3,807 | ||||||||||||||||||||
Ending balance | $ | 49,630 | $ | 44,106 | $ | 49,630 | $ | 49,836 | $ | 47,528 | $ | 45,413 | $ | 44,106 | |||||||||||||
Net charge-offs (recoveries) to average loans (annualized): | |||||||||||||||||||||||||||
Commercial business | -0.01 | % | -0.01 | % | 0.02 | % | 0.02 | % | -0.08 | % | -0.01 | % | -0.06 | % | |||||||||||||
Commercial mortgage | -0.07 | % | -0.19 | % | -0.19 | % | 0.00 | % | 0.00 | % | 0.28 | % | 0.00 | % | |||||||||||||
Residential real estate loans | 0.01 | % | 0.01 | % | 0.00 | % | 0.01 | % | 0.04 | % | 0.16 | % | 0.00 | % | |||||||||||||
Residential real estate lines | 0.07 | % | 0.03 | % | 0.00 | % | 0.13 | % | 0.09 | % | -0.10 | % | 0.18 | % | |||||||||||||
Consumer indirect | 0.59 | % | 0.41 | % | 0.92 | % | 0.12 | % | 0.73 | % | 0.57 | % | 0.74 | % | |||||||||||||
Other consumer | 4.57 | % | 7.59 | % | 3.00 | % | 4.62 | % | 8.10 | % | 13.57 | % | 8.90 | % | |||||||||||||
Total loans | 0.13 | % | 0.07 | % | 0.14 | % | 0.06 | % | 0.21 | % | 0.34 | % | 0.22 | % | |||||||||||||
Supplemental information(1) | |||||||||||||||||||||||||||
Non-performing loans: | |||||||||||||||||||||||||||
Commercial business | $ | 254 | $ | 1,358 | $ | 254 | $ | 415 | $ | 334 | $ | 340 | $ | 1,358 | |||||||||||||
Commercial mortgage | 686 | 843 | 686 | 2,477 | 2,550 | 2,564 | 843 | ||||||||||||||||||||
Residential real estate loans | 4,992 | 3,550 | 4,992 | 3,820 | 3,267 | 4,071 | 3,550 | ||||||||||||||||||||
Residential real estate lines | 201 | 119 | 201 | 208 | 159 | 142 | 119 | ||||||||||||||||||||
Consumer indirect | 3,382 | 2,666 | 3,382 | 2,982 | 2,487 | 3,079 | 2,666 | ||||||||||||||||||||
Other consumer | 6 | - | 6 | 5 | 4 | 2 | - | ||||||||||||||||||||
Total non-performing loans | 9,521 | 8,536 | 9,521 | 9,907 | 8,801 | 10,198 | 8,536 | ||||||||||||||||||||
Foreclosed assets | 162 | - | 162 | 163 | 101 | 19 | - | ||||||||||||||||||||
Total non-performing assets | $ | 9,683 | $ | 8,536 | $ | 9,683 | $ | 10,070 | $ | 8,902 | $ | 10,217 | $ | 8,536 | |||||||||||||
Total non-performing loans to total loans | 0.21 | % | 0.22 | % | 0.21 | % | 0.23 | % | 0.21 | % | 0.25 | % | 0.22 | % | |||||||||||||
Total non-performing assets to total assets | 0.16 | % | 0.15 | % | 0.16 | % | 0.16 | % | 0.15 | % | 0.18 | % | 0.15 | % | |||||||||||||
Allowance for credit losses - loans to total loans | 1.12 | % | 1.14 | % | 1.12 | % | 1.13 | % | 1.12 | % | 1.12 | % | 1.14 | % | |||||||||||||
Allowance for credit losses - loans to non-performing loans | 521 | % | 517 | % | 521 | % | 503 | % | 540 | % | 445 | % | 517 | % | |||||||||||||
(1) At period end.
FINANCIAL INSTITUTIONS, INC.
Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited)
(In thousands, except per share amounts)
Nine Months Ended | 2023 | 2022 | |||||||||||||||||||||||||
September 30, | Third | Second | First | Fourth | Third | ||||||||||||||||||||||
2023 | 2022 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||
Ending tangible assets: | |||||||||||||||||||||||||||
Total assets | $ | 6,140,149 | $ | 6,141,298 | $ | 5,966,992 | $ | 5,797,272 | $ | 5,624,482 | |||||||||||||||||
Less: Goodwill and other intangible assets, net | 72,725 | 72,950 | 73,180 | 73,414 | 73,653 | ||||||||||||||||||||||
Tangible assets | $ | 6,067,424 | $ | 6,068,348 | $ | 5,893,812 | $ | 5,723,858 | $ | 5,550,829 | |||||||||||||||||
Ending tangible common equity: | |||||||||||||||||||||||||||
Common shareholders’ equity | $ | 391,424 | $ | 408,581 | $ | 405,531 | $ | 388,313 | $ | 376,756 | |||||||||||||||||
Less: Goodwill and other intangible assets, net | 72,725 | 72,950 | 73,180 | 73,414 | 73,653 | ||||||||||||||||||||||
Tangible common equity | $ | 318,699 | $ | 335,631 | $ | 332,351 | $ | 314,899 | $ | 303,103 | |||||||||||||||||
Tangible common equity to tangible assets(1) | 5.25 | % | 5.53 | % | 5.64 | % | 5.50 | % | 5.46 | % | |||||||||||||||||
Common shares outstanding | 15,402 | 15,402 | 15,375 | 15,340 | 15,334 | ||||||||||||||||||||||
Tangible common book value per share(2) | $ | 20.69 | $ | 21.79 | $ | 21.62 | $ | 20.53 | $ | 19.77 | |||||||||||||||||
Average tangible assets: | |||||||||||||||||||||||||||
Average assets | $ | 5,991,075 | $ | 5,586,311 | $ | 6,073,653 | $ | 6,053,258 | $ | 5,843,786 | $ | 5,667,331 | $ | 5,599,964 | |||||||||||||
Less: Average goodwill and other intangible assets, net | 73,079 | 74,036 | 72,851 | 73,079 | 73,312 | 73,547 | 73,791 | ||||||||||||||||||||
Average tangible assets | $ | 5,917,996 | $ | 5,512,275 | $ | 6,000,802 | $ | 5,980,179 | $ | 5,770,474 | $ | 5,593,784 | $ | 5,526,173 | |||||||||||||
Average tangible common equity: | |||||||||||||||||||||||||||
Average common equity | $ | 408,200 | $ | 437,738 | $ | 411,873 | $ | 411,960 | $ | 400,643 | $ | 384,905 | $ | 420,615 | |||||||||||||
Less: Average goodwill and other intangible assets, net | 73,079 | 74,036 | 72,851 | 73,079 | 73,312 | 73,547 | 73,791 | ||||||||||||||||||||
Average tangible common equity | $ | 335,121 | $ | 363,702 | $ | 339,022 | $ | 338,881 | $ | 327,331 | $ | 311,358 | $ | 346,824 | |||||||||||||
Net income available to common shareholders | $ | 39,390 | $ | 43,390 | $ | 13,657 | $ | 14,009 | $ | 11,724 | $ | 11,724 | $ | 13,489 | |||||||||||||
Return on average tangible common equity(3) | 15.72 | % | 15.95 | % | 15.98 | % | 16.58 | % | 14.53 | % | 14.94 | % | 15.43 | % | |||||||||||||
Pre-tax pre-provision income: | |||||||||||||||||||||||||||
Net income | $ | 40,484 | $ | 44,485 | $ | 14,022 | $ | 14,373 | $ | 12,089 | $ | 12,088 | $ | 13,854 | |||||||||||||
Add: Income tax expense | 7,633 | 12,027 | 2,440 | 2,418 | 2,775 | 2,370 | 4,725 | ||||||||||||||||||||
Add: Provision for credit losses | 8,410 | 7,196 | 966 | 3,230 | 4,214 | 6,115 | 4,314 | ||||||||||||||||||||
Pre-tax pre-provision income | $ | 56,527 | $ | 63,708 | $ | 17,428 | $ | 20,021 | $ | 19,078 | $ | 20,573 | $ | 22,893 | |||||||||||||
Adjustments: | |||||||||||||||||||||||||||
Restructuring (recoveries) charges | (74 | ) | 1,269 | (55 | ) | (19 | ) | - | 350 | - | |||||||||||||||||
Enhancement from COLI surrender and redeployment | - | (1,997 | ) | - | - | - | - | (1,997 | ) | ||||||||||||||||||
Adjusted pre-tax pre-provision income | $ | 56,453 | $ | 62,980 | $ | 17,373 | $ | 20,002 | $ | 19,078 | $ | 20,923 | $ | 20,896 | |||||||||||||
Less: Paycheck Protection Program "PPP" accretion interest income and fees | (23 | ) | (2,193 | ) | (7 | ) | (8 | ) | (8 | ) | (78 | ) | (312 | ) | |||||||||||||
Pre-PPP adjusted pre-tax pre-provision income | $ | 56,430 | $ | 60,787 | $ | 17,366 | $ | 19,994 | $ | 19,070 | $ | 20,845 | $ | 20,584 | |||||||||||||
Total loans excluding PPP loans: | |||||||||||||||||||||||||||
Total loans | $ | 4,431,166 | $ | 4,397,809 | $ | 4,243,332 | $ | 4,050,449 | $ | 3,866,851 | |||||||||||||||||
Less: Total PPP loans | 972 | 1,032 | 1,094 | 1,161 | 2,783 | ||||||||||||||||||||||
Total loans excluding PPP loans | $ | 4,430,194 | $ | 4,396,777 | $ | 4,242,238 | $ | 4,049,288 | $ | 3,864,068 | |||||||||||||||||
Allowance for credit losses - loans | $ | 49,630 | $ | 49,836 | $ | 47,528 | $ | 45,413 | $ | 44,106 | |||||||||||||||||
Allowance for credit losses - loans to total loans excluding PPP loans(4) | 1.12 | % | 1.13 | % | 1.12 | % | 1.12 | % | 1.14 | % | |||||||||||||||||
(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.
(4) Allowance for credit losses – loans divided by total loans excluding PPP loans.
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