WARSAW, N.Y., April 26, 2007 (PRIME NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI), the parent company of Five Star Bank, today announced financial results for the first quarter ended March 31, 2007. Net income for Financial Institutions, Inc. ("FII") was $3.6 million, or $0.29 per diluted share, compared with $3.7 million, or $0.30 per diluted share, for the first quarter of 2006 and $3.0 million, or $0.23 per diluted share, for the fourth quarter of 2006.
Highlights of the first quarter include:
* An increase of $2.8 million in loans to $929.3 million at March 31, 2007 compared to $926.5 million at December 31, 2006. Commercial loans increased $12.1 million over December 31, 2006, as our commercial business development programs over the past year began to deliver results. * Asset quality continues to improve. Net loan charge-offs were $134 thousand for the first quarter of 2007 or 6 basis points of average loans (annualized) and although nonperforming assets at $17.0 million were unchanged from December 31, 2006 the overall level of criticized and classified loans continues to decline. * A reduction of $1.4 million, or 9%, in noninterest expense in the first quarter of 2007 to $13.9 million compared with $15.3 million for the first quarter of 2006. The lower expense levels reflect operational efficiencies gained from the consolidation of administrative and operational functions, improved asset quality and lower advertising costs. * Net interest margin declined 26 basis points, to 3.38%, for the first quarter of 2007 compared with the same period last year, and declined 6 basis points versus the fourth quarter of 2006. The flat-to-inverted interest rate yield curve that prevailed throughout much of 2006 and continues into 2007 has had a negative effect on net interest margin, as have changes in our deposit mix that have increased the cost of funds.
Peter G. Humphrey, President and CEO of FII, commented, "We are beginning to see results from several of the initiatives we implemented over the past twelve months; however, improvement has been slow. We are dealing with an increasingly difficult interest rate environment, intense competition, a soft regional economy, and a slowdown in the residential real estate market. These factors are also impacting the performance of our industry peers as well. Nevertheless, we are pleased to see recent signs of growth in our commercial portfolio, as well as in our loan pipeline. Operating expenses are declining from cost-saves across the board, including staffing levels. We are working hard to improve the profitability of our organization while we look for quality growth opportunities in our market place."
Net Interest Income
Net interest income was $14.0 million for the first quarter of 2007, down $0.3 million versus the fourth quarter of 2006 and down $1.5 million from the first quarter of 2006. The combination of a $6.5 million decline in the level of average earning assets from the fourth quarter of 2006 and a 6 basis point drop in net interest margin primarily due to adverse cost changes in the mix of funding sources led to the decline in net interest income of $0.3 million. The combination of a $53.3 million decline in the level of average earning assets from the first quarter of 2006 together with a 26 basis point drop in net interest margin primarily due to adverse cost changes in the mix of funding sources led to the decline in net interest income of $1.5 million. The reduction in average earning assets reflects lower deposit levels as a result of managing overall liquidity needs consistent with spread opportunities and the overall cost of funding. Mr. Humphrey stated, "We believe our commercial business development efforts have begun to gain traction. Together with initiatives in our retail lending program, particularly our indirect auto loan program, this should lead to higher revenues as we increase spreads by redeploying our investment assets. As we grow the loan portfolio we will continue to maintain a disciplined approach to both underwriting and pricing in a challenging marketplace."
Noninterest Income
Noninterest income for the first quarter of 2007 was $4.7 million compared with $4.8 million for the fourth quarter of 2006 and $5.0 million for the first quarter of 2006. The Company sold its trust relationships in the third quarter of 2006 and included in the first quarter of 2006 was $0.2 million in trust income. Service charges on deposits, which represented over half of the Company's noninterest income, totaled $2.6 million for the first quarter of 2007, down $0.3 million from the fourth quarter of 2006 and down $0.1 million from the first quarter of 2006. The decline from the fourth quarter of 2006 reflects slower retail economic activity and a seasonal pattern of lower overall deposit levels in the first quarter. Mortgage banking income of $254 thousand for the first quarter of 2007 was down $54 thousand from the first quarter of 2006 and down $42 thousand from the fourth quarter of 2006, reflecting both seasonal patterns and an overall slowing in residential real estate activity.
Noninterest Expense
Noninterest expense for the first quarter of 2007 was $13.9 million, a decrease of $1.4 million from the first quarter of 2006. Salaries and benefits expense represented $0.4 million of the decline, as consolidation activities resulted in a reduction of 27 full-time equivalent employees from a year ago. Advertising costs were $0.4 million lower in the first quarter of 2007 principally due to the absence of expenditures associated with a first quarter 2006 branding campaign. Lower legal and commercial loan expenses also favorably impacted the first quarter of 2007 by $0.3 million compared with the first quarter of 2006.
Balance Sheet
Total assets were $1.963 billion at March 31, 2007, an increase of $55 million over December 31, 2006 and a decrease of $18 million from March 31, 2006. Total deposits were $1.672 billion at March 31, 2007, an increase of $54 million from December 31, 2006 and a decrease of $6 million from March 31, 2006. The increase in deposits from year-end resulted primarily from the seasonal increase in public deposits of $64 million. Total loans at March 31, 2007 were $929 million, an increase of $3 million over the previous year-end and $36 million less than a year ago.
Asset Quality
Mr. Humphrey continued, "Asset quality has improved over the past year, with a $2.5 million reduction in nonperforming assets; however, at $17.0 million, nonperforming assets still remain too high. Overall asset quality continues to improve, as our criticized and classified loans decreased during the first quarter of 2007 and are down $32.6 million from the first quarter of 2006. The disposition of our nonperforming assets is a lengthy process that is proceeding in an orderly manner."
The Company's provision for loan losses for the first quarter of 2007 was zero, which was identical to the fourth quarter of 2006 and compares with $250 thousand for the first quarter of 2006. Net charge-offs of $134 thousand for the first quarter represented 6 basis points of average loans (annualized) and compares with $190 thousand and 8 basis points for the first quarter of 2006. The allowance for loan losses was $16.9 million at March 31, 2007 or 1.82% of loans and compares with $17.0 million or 1.84% at December 31, 2006, and $20.3 million or 2.10% at March 31, 2006.
Capital Management
Total shareholders' equity at March 31, 2007 was $184.5 million compared with $182.4 million at December 31, 2006 and $171.0 million at March 31, 2006. Regulatory capital ratios remain strong with the Company's leverage ratio at 8.99% and total risk-based capital ratio at 16.83% at March 31, 2007. During the first quarter of 2007, the Company repurchased 77,595 shares for $1.625 million under its $5.0 million stock repurchase program.
Chairman of the Board Erkie Kailbourne commented, "We increased our quarterly common dividend from $.09 per share to $.10 per share in the first quarter of 2007 and remain committed to our previously announced stock buyback program. Both of these actions should bode well for future shareholder value."
Webcast and Conference Call
A company-hosted teleconference will be held at 10:00 a.m. eastern time on Friday, April 27, 2007. During the teleconference, Peter G. Humphrey, President and CEO, and Ronald A. Miller, Executive Vice President and CFO, will provide an overview of first quarter performance and business highlights. A question-and-answer session will follow.
The webcast can be accessed live via the company's website, www.fiiwarsaw.com. Participants should go to the website 10-15 minutes prior to the scheduled conference in order to download any necessary software.
The teleconference can be accessed by dialing 877-407-8035 approximately 5-10 minutes prior to the call.
The event will be archived on the FII website (www.fiiwarsaw.com) for 60 days. A telephonic replay can be accessed by dialing 877-660-6853, and entering Account #: 286 and Conference ID #: 238685. The replay will be available until May 4, 2007 at 11:59 p.m. ET.
About Financial Institutions, Inc.
With $2.0 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of 50 offices and 70 ATMs in Western and Central New York State, and employs over 700 people. Five Star Investment Services provides brokerage and insurance products and services with the same New York State markets. The Company's stock is listed on the Nasdaq Global Market under the symbol FISI. Additional information is available at the Company's website: www.fiiwarsaw.com.
The Financial Institutions, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3589
Safe Harbor Statement
This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company's forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, the attitudes and preferences of its customers, the competitive environment, and other factors discussed in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise these statements following the date of this press release.
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
---------------------------------------------------------------------
(Dollars in thousands, March 31, December 31, March 31,
except share data) 2007 2006 2006
----------- ----------- -----------
ASSETS
Cash and due from banks $ 40,647 $ 47,166 $ 44,209
Federal funds sold and
interest-bearing deposits
in other banks 92,432 62,606 28,541
Commercial paper due in
less than 90 days -- -- 19,962
Securities available for
sale, at fair value 761,252 735,148 772,193
Securities held to maturity,
at amortized cost 44,848 40,388 43,036
Loans held for sale 1,078 992 835
Loans:
Commercial 418,663 406,580 438,338
Consumer direct and home
equity 240,012 250,268 274,375
Consumer indirect 107,729 106,391 88,320
Residential mortgages 162,846 163,243 164,536
----------- ----------- -----------
Total loans 929,250 926,482 965,569
Allowance for loan losses (16,914) (17,048) (20,291)
----------- ----------- -----------
Loans, net 912,336 909,434 945,278
Premises and equipment, net 34,341 34,562 35,884
Goodwill 37,369 37,369 37,369
Other assets 38,445 39,887 53,524
----------- ----------- -----------
Total assets $ 1,962,748 $ 1,907,552 $ 1,980,831
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 260,068 $ 273,783 $ 257,611
Interest-bearing demand,
savings and money market 723,343 674,224 751,631
Certificates of deposit 688,351 669,688 668,916
----------- ----------- -----------
Total deposits 1,671,762 1,617,695 1,678,158
Short-term borrowings 24,860 32,310 22,236
Long-term borrowings 38,173 38,187 75,375
Junior subordinated
debentures issued to
unconsolidated subsidiary
trust 16,702 16,702 16,702
Accrued expenses and other
liabilities 26,721 20,270 17,366
----------- ----------- -----------
Total liabilities 1,778,218 1,725,164 1,809,837
Shareholders' Equity
Preferred stock 17,623 17,623 17,630
Common stock, $0.01 par
value, 50,000,000 shares
authorized; 11,348,122,
11,348,122 and 11,334,874
shares issued at March 31,
2007, December 31, 2006
and March 31, 2006,
respectively 113 113 113
Additional paid-in
capital 24,554 24,439 23,459
Accumulated retained
earnings 150,865 148,730 139,386
Accumulated other
comprehensive loss (7,026) (8,404) (9,374)
Treasury stock, at cost
- 76,446, 5,351, 14,874
shares at March 31, 2007,
December 31, 2006 and
March 31, 2006,
respectively (1,599) (113) (220)
----------- ----------- -----------
Total shareholders' equity 184,530 182,388 170,994
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 1,962,748 $ 1,907,552 $ 1,980,831
=========== =========== ===========
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
--------------------------------------------------------------------
Three Months Ended
-------------------------------------
(Dollars in thousands,
except share and per March 31, December 31, March 31,
share data) 2007 2006 2006
-------------------------------------
Interest income:
Interest and fees on loans $ 16,627 $ 17,060 $ 16,632
Interest and dividends on
securities 8,427 8,181 8,352
Other interest income 752 981 291
----------- ----------- -----------
Total interest income 25,806 26,222 25,275
----------- ----------- -----------
Interest expense:
Deposits 10,763 10,612 8,221
Short-term borrowings 169 167 112
Long-term borrowings 486 718 1,031
Junior subordinated debentures 432 432 432
----------- ----------- -----------
Total interest expense 11,850 11,929 9,796
----------- ----------- -----------
Net interest income 13,956 14,293 15,479
Provision for loan losses -- -- 250
----------- ----------- -----------
Net interest income after
provision for loan losses 13,956 14,293 15,229
Noninterest income:
Service charges on deposits 2,569 2,945 2,672
ATM and debit card income 620 588 534
Broker-dealer fees and
commissions 383 329 431
Trust fees -- 2 194
Mortgage banking income 254 296 308
Income from corporate owned life
insurance 20 55 20
Net gain on sale of securities -- 30 --
Net gain on sale of student
loans held for sale 112 66 147
Net gain on commercial-related
loans held for sale -- -- 82
Net gain (loss) on sale of
premises and equipment 8 (5) 11
Net gain on sale of OREO and
repossessed assets 49 27 87
Net gain on sale of trust
relationships 13 21 --
Other 710 441 470
----------- ----------- -----------
Total noninterest income 4,738 4,795 4,956
Noninterest expense:
Salaries and employee benefits 8,354 8,269 8,758
Occupancy and equipment 2,448 2,382 2,362
Supplies and postage 438 493 559
Amortization of other
intangibles 77 97 108
Computer and data processing 457 591 405
Professional fees and services 495 747 673
Other 1,659 2,584 2,410
----------- ----------- -----------
Total noninterest expense 13,928 15,163 15,275
----------- ----------- -----------
Income before income taxes 4,766 3,925 4,910
Income taxes 1,151 921 1,171
----------- ----------- -----------
Net Income $ 3,615 $ 3,004 $ 3,739
=========== =========== ===========
Net Income Per Common Share:
Basic $ 0.29 $ 0.23 $ 0.30
Diluted $ 0.29 $ 0.23 $ 0.30
Weighted Average Common Shares
Outstanding:
Basic 11,316,811 11,332,634 11,328,404
Diluted 11,360,202 11,384,326 11,372,253
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
--------------------------------------------------------------------
(Dollars
in thousands,
except per
share 2007 2006 2006 2006 2006
data) 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
----------- ----------- ----------- ----------- -----------
EARNINGS
Net
interest
income $ 13,956 $ 14,293 $ 14,682 $ 15,012 $ 15,479
Net
interest
income
(fully
tax-
equiv-
alent) $ 15,070 $ 15,458 $ 15,853 $ 16,242 $ 16,696
(Credit)
provision
for loan
losses $ -- $ -- $ (491)$ (1,601)$ 250
Noninterest
income $ 4,738 $ 4,795 $ 6,979 $ 5,181 $ 4,956
Noninterest
ex-
pense $ 13,928 $ 15,163 $ 14,593 $ 14,581 $ 15,275
Net
income $ 3,615 $ 3,004 $ 5,245 $ 5,374 $ 3,739
Preferred
divi-
dends $ 371 $ 371 $ 371 $ 372 $ 372
Net income
available
to
common $ 3,244 $ 2,633 $ 4,874 $ 5,002 $ 3,367
Basic
earnings
per
share $ 0.29 $ 0.23 $ 0.43 $ 0.44 $ 0.30
Diluted
earnings
per
share $ 0.29 $ 0.23 $ 0.43 $ 0.44 $ 0.30
Average
shares
outstand-
ing 11,316,811 11,332,634 11,327,362 11,323,691 11,328,404
Average
diluted
shares
outstand-
ing 11,360,202 11,384,326 11,371,963 11,366,183 11,372,253
PERFORMANCE
Return on
average
assets 0.77% 0.62% 1.09% 1.11% 0.77%
Return on
average
common
equity 7.96% 6.29% 12.17% 13.03% 8.82%
Return on
average
tangible
common
equity 10.35% 8.18% 16.04% 17.37% 11.75%
Common
dividend
payout
ratio 34.48% 39.13% 20.93% 18.18% 26.67%
Net interest
margin
(fully tax-
equiv-
alent) 3.38% 3.44% 3.56% 3.57% 3.64%
Efficiency
ratio 69.53% 73.53% 67.21% 67.29% 69.99%
Full-time
equivalent
employees 634 640 640 657 661
CAPITAL
Period end
common
equity to
total
assets 8.50% 8.64% 8.42% 8.06% 7.74%
Period end
tangible
common
equity
to tangible
total
assets 6.69% 6.77% 6.58% 6.18% 5.91%
Leverage
ratio 8.99% 8.91% 8.87% 8.39% 8.11%
Tier 1
risk-
based
capital
ratio 15.58% 15.85% 15.33% 14.66% 14.07%
Total risk-
based capital
ratio 16.83% 17.10% 16.58% 15.92% 15.32%
Cash
dividends
declared
per
share $ 0.10 $ 0.09 $ 0.09 $ 0.08 $ 0.08
Book value
per
share $ 14.81 $ 14.53 $ 14.49 $ 13.69 $ 13.55
Tangible
book
value
per
share $ 11.42 $ 11.15 $ 11.11 $ 10.29 $ 10.14
ASSET QUALITY
Gross loan
charge-
offs $ 692 $ 1,060 $ 949 $ 886 $ 1,304
Net loan
charge-
offs $ 134 $ 633 $ 418 $ 100 $ 190
Net loan
charge-offs
to average
loans
(annual-
ized) 0.06% 0.27% 0.18% 0.04% 0.08%
Loans past
due
over 90
days $ 7 $ 3 $ -- $ 1 $ 35
Nonaccrual
loans 15,778 15,837 12,804 15,361 18,561
----------- ----------- ----------- ----------- -----------
Total
non-
performing
loans 15,785 15,840 12,804 15,362 18,596
Other real
estate
(ORE) and
repossessed
assets
(repos) 1,216 1,203 1,551 933 879
----------- ----------- ----------- ----------- -----------
Total
nonperforming
assets $ 17,001 $ 17,043 $ 14,355 $ 16,295 $ 19,475
Nonperforming
loans
to
total
loans 1.70% 1.71% 1.36% 1.61% 1.93%
Nonperforming
assets to
total
loans,
ORE and
repos 1.83% 1.84% 1.52% 1.71% 2.02%
Nonperforming
assets to
total
assets 0.87% 0.89% 0.74% 0.85% 0.98%
Allowance
for
loan
losses $ 16,914 $ 17,048 $ 17,681 $ 18,590 $ 20,291
Allowance
for
loan
losses
to total
loans 1.82% 1.84% 1.88% 1.95% 2.10%
Allowance for
loan losses
to
nonperforming
loans 107% 108% 138% 121% 109%
PERIOD END
BALANCES
Total
loans $ 929,250 $ 926,482 $ 941,011 $ 953,489 $ 965,569
Total
assets $ 1,962,748 $ 1,907,552 $ 1,952,129 $ 1,923,819 $ 1,980,831
Total
depos-
its $ 1,671,762 $ 1,617,695 $ 1,639,619 $ 1,617,057 $ 1,678,158
Total
common
equity $ 166,907 $ 164,765 $ 164,375 $ 155,053 $ 153,364
Total
share-
holders'
equity $ 184,530 $ 182,388 $ 181,998 $ 172,676 $ 170,994
Common
shares
outstand-
ing 11,271,676 11,342,771 11,347,375 11,325,693 11,320,000
AVERAGE
BALANCES
Total
loans $ 921,627 $ 932,963 $ 944,751 $ 958,012 $ 975,566
Total
earning
assets $ 1,789,426 $ 1,795,958 $ 1,777,519 $ 1,822,369 $ 1,842,704
Total
assets $ 1,914,593 $ 1,926,470 $ 1,902,110 $ 1,950,638 $ 1,977,833
Total
depos-
its $ 1,627,875 $ 1,631,020 $ 1,593,273 $ 1,645,196 $ 1,672,881
Total
common
equity $ 165,330 $ 166,052 $ 158,950 $ 154,034 $ 154,892
Total
share-
holders'
equity $ 182,953 $ 183,675 $ 176,573 $ 171,657 $ 172,523