WARSAW, N.Y., Jan. 31, 2008 (PRIME NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI), the parent company of Five Star Bank, today announced financial results for the fourth quarter and year ended December 31, 2007. Net income for Financial Institutions, Inc. ("FII") was $4.1 million, or $0.34 per diluted share, for the fourth quarter of 2007, compared with $3.0 million, or $0.23 per diluted share, for the fourth quarter of 2006. For the year ended December 31, 2007, net income was $16.4 million, or $1.33 per diluted share, compared with $17.4 million, or $1.40 per diluted share for the prior year.
Highlights for the fourth quarter and 2007 include:
* Loans increased $14.5 million to $964.2 million at December 31, 2007, compared with $949.7 million at September 30, 2007 and increased $37.7 million over December 31, 2006. The increase reflects execution of the Company's business plan to rebuild, in a disciplined manner, the commercial loan portfolio and grow consumer indirect auto loans. * Net interest margin increased 12 basis points, to 3.75%, for the fourth quarter of 2007 compared with 3.63% for the third quarter of 2007 and was 31 basis points higher versus the same quarter last year. The improved net interest margin during the second half of 2007 resulted principally from reducing funding costs, an improved investment security portfolio yield, and the benefits associated with a higher percentage of earning assets being deployed in higher yielding loan assets. * Net interest income was $15.2 million for the fourth quarter of 2007, an increase of $344 thousand, or 2%, from the third quarter of 2007, which reflects the increased net interest margin and improved earning asset mix. Net interest income increased each quarter in 2007 and the fourth quarter of 2007 was $912 thousand, or 6%, higher than the fourth quarter of 2006. * Nonperforming assets decreased $422 thousand from the prior quarter-end to $9.5 million at December 31, 2007. Since December 31, 2006, nonperforming assets have declined $7.5 million, or 44%. Net loan charge-offs were $441 thousand, or 0.18% (annualized) of average loans, for the fourth quarter of 2007 and $1.6 million, or 0.18% of average loans, for the year ended December 31, 2007. For the year ended December 31, 2007, a provision for loan losses of $116 thousand was recorded, an increase of $2.0 million versus the $1.842 million credit for loan losses in the prior year. For the fourth quarter of 2007, the provision for loan losses was $351 thousand compared with zero in the same quarter last year. * Noninterest expense was $14.5 million for the fourth quarter of 2007, compared with $14.6 million for the third quarter of 2007. For the year ended December 31, 2007, noninterest expense was $57.4 million, a decrease of $2.2 million, or 4%, from the prior year. The lower expense levels for 2007, compared to last year, reflect operational efficiencies gained from the consolidation of administrative and operational functions, reduced costs due to improved asset quality and lower advertising and professional services expenses.
Peter G. Humphrey, President and CEO of FII, commented, "We experienced solid financial performance in 2007 with good revenue growth that is reflective of our disciplined approach to growing our loan portfolio. Net interest income improved each quarter in 2007 and our net interest margin increased due to the growth in our loans and our management of deposit pricing. Assets quality showed strong improvement with a significant reduction in our nonperforming assets. Our 2007 performance has enabled us to begin to implement other strategic initiatives to expand our business, most notably our decision to expand our presence in the greater Rochester area."
Net Interest Income
Net interest income was $15.2 million for the fourth quarter of 2007, up $344 thousand versus the third quarter of 2007. For the fourth quarter of 2007, average earning assets decreased by $10.3 million compared with the third quarter of 2007. This decrease resulted principally from a $19.2 million decrease in average borrowings, offset by a $9.1 million increase in average deposits for the fourth quarter of 2007 compared with the third quarter of 2007. The decline in average earnings assets was more than offset by the net interest margin improvement of 12 basis points to 3.75% for the fourth quarter of 2007, compared with 3.63% for the third quarter of 2007. Earnings asset yields increased by 3 basis points from the third quarter, with increased yields on investments assets offsetting a decline in loan yields, while the average cost of funds declined 9 basis points from the third quarter.
For the year ended December 31, 2007, net interest income was $58.1 million, a decline of $1.4 million from the year ended December 31, 2006. Average earning assets declined $28.0 million to $1.781 billion as of December 31, 2007 compared to $1.809 billion for the same period last year and, together with a 2 basis point decline in net interest margin, resulted in the $1.4 million drop in net interest income. The decline in average earning assets was affected by average borrowings declining $29.3 million due to the repayment and maturity of borrowings. The drop in net interest margin resulted from the average cost of funds increasing 23 basis points while average earning asset yield increased only 21 basis points.
Noninterest Income
Noninterest income for the fourth quarter of 2007 was $5.0 million compared with $4.8 million for the fourth quarter of 2006. For the year ended December 31, 2007 noninterest income was $20.7 million compared with $21.9 million for the same period in 2006. Included in noninterest income in 2007 was $1.1 million in proceeds from corporate owned life insurance, $478 thousand in gains from the sale of student loans and $207 thousand in net security gains. Included in 2006 noninterest income was $419 thousand in proceeds from corporate owned life insurance, $670 thousand in gains from the sale of student loans, $1.4 million from the sale of trust relationships, and $379 thousand in trust fees earned prior to the sale.
Noninterest Expense
Noninterest expense for the fourth quarter of 2007 was $14.5 million, a decrease of $66 thousand, from the third quarter of 2007. For the year ended December 31, 2007, noninterest expense was $57.4 million a decrease of $2.2 million, or 4%, from the same period in 2006. The principal expense items that contributed to the year over year decline are: salaries and benefits decreased $388 thousand, advertising and promotional costs were $572 thousand lower and professional fees and services declined $757 thousand.
Balance Sheet
Total assets were $1.858 billion at December 31, 2007 compared with $1.908 billion at December 31, 2006. Total deposits were $1.576 billion at December 31, 2007 a decrease of $41.7 million from $1.618 billion at December 31, 2006. Public deposits were $318.1 million at December 31, 2007 a decline of $34.8 million from the prior year. Also contributing to the decline in total deposits was a $9.9 million drop in brokered certificates of deposit. Total borrowings including junior subordinated debentures were $68.2 million at December 31, 2007 compared with $87.2 million at December 31, 2006.
Asset Quality
Mr. Humphrey commented, "We made significant progress in reducing our nonperforming assets in 2007. Our net loan charge-offs for 2007 were helped by some meaningful recoveries on previously charged-off loans. We have not engaged in sub-prime lending as a line of business. We are pleased with the improved risk profile of our loan portfolio and believe we are well positioned to meet the challenges of any adverse changes in the current economic environment."
The Company recorded a provision for loan losses of $351 thousand for the fourth quarter of 2007 and $116 thousand for the year ended December 31, 2007, compared with a credit for loan losses of $1.8 million for the prior year and zero provision for loan losses in the fourth quarter of 2006. Net charge-offs of $441 thousand for the fourth quarter represented 18 basis points (annualized) of average loans. For the year ended December 31, 2007 net charge-offs were $1.6 million or 18 basis points compared with $1.3 million or 14 basis points for the same period last year. The allowance for loan losses was $15.5 million at December 31, 2007 or 1.61% of loans, compared with $17.0 million or 1.84% of loans at December 31, 2006. Nonperforming loans were $8.1 million at December 31, 2007 compared with $15.8 million at December 31, 2006. The ratio of the allowance for loan losses to nonperforming loans, or coverage ratio, was 192% at year end 2007 compared with 108% at year end 2006.
Capital Management
On July 25, 2007, the Company approved a one-year $5.0 million stock repurchase program. During the fourth quarter of 2007, under this program, the Company repurchased $1.357 million of common stock, or a total of 73,376 shares, at an average price per share of $18.49. Under the current and prior stock repurchase programs, the Company repurchased $7.203 million of common stock, or a total of 368,815 shares, at an average price per share of $19.53 in 2007. In addition, in the fourth quarter of 2007 the Company increased the quarterly common stock dividend to $0.13 per share. This represents a 44% increase in the quarterly common stock dividend compared with the $0.09 per share dividend in the fourth quarter of 2006.
Erland E. "Erkie" Kailbourne, Chairman of the Board, commented, "The Company's improved financial performance and available capital have given us the opportunity to increase our common stock dividend and actively repurchase our common stock. Both of these measures, we believe, will enhance shareholder value."
Total shareholders' equity at December 31, 2007 was $195.3 million compared with $182.4 million at December 31, 2006. The Company's leverage ratio was 9.35% and total risk-based capital ratio was 16.99% at December 31, 2007.
About Financial Institutions, Inc.
With $1.9 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of 50 offices and 70 ATMs in Western and Central New York State, and employs 679 people. Five Star Investment Services provides brokerage and insurance products and services within 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.
Safe Harbor Statement
This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company's forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, the attitudes and preferences of its customers, the competitive environment, general economic conditions nationally and regionally and other factors discussed in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise these statements following the date of this press release.
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
---------------------------------------------------------------------
December 31, December 31,
(Dollars in thousands, except share data) 2007 2006
----------- -----------
ASSETS
Cash and due from banks $ 45,165 $ 47,166
Federal funds sold and interest-bearing
deposits in other banks 1,508 62,606
Securities available for sale, at fair
value 695,241 735,148
Securities held to maturity, at amortized
cost 59,479 40,388
Loans held for sale 906 992
Loans:
Commercial 136,780 105,806
Commercial real estate 245,797 243,966
Agricultural 47,367 56,808
Residential real estate 166,863 163,243
Consumer indirect 134,977 106,443
Consumer direct and home equity 232,389 250,216
----------- -----------
Total loans 964,173 926,482
Allowance for loan losses (15,521) (17,048)
----------- -----------
Loans, net 948,652 909,434
Premises and equipment, net 34,157 34,562
Goodwill 37,369 37,369
Other assets 35,399 39,887
----------- -----------
Total assets $ 1,857,876 $ 1,907,552
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 286,362 $ 273,783
Interest-bearing demand, savings and money
market 681,953 674,224
Certificates of deposit 607,656 669,688
----------- -----------
Total deposits 1,575,971 1,617,695
Short-term borrowings 25,643 32,310
Long-term borrowings 25,865 38,187
Junior subordinated debentures issued to
unconsolidated subsidiary trust 16,702 16,702
Other liabilities 18,373 20,270
----------- -----------
Total liabilities 1,662,554 1,725,164
Shareholders' Equity
Preferred stock 17,581 17,623
Common stock, $0.01 par value, 50,000,000
shares authorized; 11,348,122 shares
issued at December 31, 2007 and
December 31, 2006 113 113
Additional paid-in capital 24,778 24,222
Retained earnings 158,744 148,947
Accumulated other comprehensive income
(loss) 667 (8,404)
Treasury stock, at cost; 336,971 shares
at December 31, 2007 and 5,351 shares
at December 31, 2006 (6,561) (113)
----------- -----------
Total shareholders' equity 195,322 182,388
----------- -----------
Total liabilities and shareholders'
equity $ 1,857,876 $ 1,907,552
=========== ===========
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
---------------------------------------------------------------------
(Dollars in thousands, except share and per share data)
Quarter-to-Date Year-to-Date
---------------------------------- ----------------------
Dec. 31, Sept. 30, Dec. 31, December 31,
2007 2007 2006 2007 2006
---------------------------------- ----------------------
Interest
income:
Interest
and fees
on loans $ 17,431 $ 17,571 $ 17,060 $ 68,560 $ 68,004
Interest
and
dividends
on
securities 8,798 8,814 8,181 34,990 32,778
Other
interest
income 168 168 981 1,662 2,288
---------- ---------- ---------- ---------- ----------
Total
interest
income 26,397 26,553 26,222 105,212 103,070
---------- ---------- ---------- ---------- ----------
Interest
expense:
Deposits 10,186 10,428 10,612 42,714 37,445
Short-term
borrowings 182 360 167 864 571
Long-term
borrowings 392 472 718 1,833 3,860
Junior
subordinated
debentures 432 432 432 1,728 1,728
---------- ---------- ---------- ---------- ----------
Total
interest
expense 11,192 11,692 11,929 47,139 43,604
---------- ---------- ---------- ---------- ----------
Net
interest
income 15,205 14,861 14,293 58,073 59,466
Provision
(credit)
for loan
losses 351 (82) -- 116 (1,842)
---------- ---------- ---------- ---------- ----------
Net
interest
income
after
provision
(credit)
for loan
losses 14,854 14,943 14,293 57,957 61,308
Noninterest
income:
Service
charges on
deposits 2,818 2,778 2,945 10,932 11,504
ATM and
debit card
income 805 735 588 2,883 2,233
Broker-
dealer
fees and
commissions 343 323 329 1,396 1,511
Trust fees -- -- 2 -- 379
Loan
servicing
income 221 259 223 928 892
Income from
corporate
owned life
insurance 116 1,090 55 1,255 521
Net gain on
sale of
securities 88 67 30 207 30
Net gain on
sale of
loans held
for sale 190 313 139 779 1,054
Net gain
(loss) on
sale and
disposal
of other
assets (58) 59 22 89 87
Net gain on
sale of
trust
relationships -- -- 21 13 1,386
Other 479 710 441 2,198 2,314
---------- ---------- ---------- ---------- ----------
Total
noninterest
income 5,002 6,334 4,795 20,680 21,911
Noninterest
expense:
Salaries
and
employee
benefits 8,240 8,574 8,269 33,175 33,563
Occupancy
and
equipment 2,582 2,422 2,382 9,903 9,465
Supplies
and
postage 379 443 493 1,662 1,945
Amortization
of other
intangibles 77 77 97 307 420
Computer
and data
processing 533 547 592 2,126 1,903
Professional
fees and
services 533 476 591 2,080 2,837
Advertising
and
promotions 396 322 488 1,402 1,974
Other 1,803 1,748 2,251 6,773 7,505
---------- ---------- ---------- ---------- ----------
Total
noninterest
expense 14,543 14,609 15,163 57,428 59,612
---------- ---------- ---------- ---------- ----------
Income
before
income
taxes 5,313 6,668 3,925 21,209 23,607
Income
taxes 1,215 1,414 921 4,800 6,245
---------- ---------- ---------- ---------- ----------
Net
income $ 4,098 $ 5,254 $ 3,004 $ 16,409 $ 17,362
========== ========== ========== ========== ==========
Net Income
Per Common
Share:
Basic $ 0.34 $ 0.44 $ 0.23 $ 1.34 $ 1.40
Diluted $ 0.34 $ 0.44 $ 0.23 $ 1.33 $ 1.40
Weighted
Average
Common
Shares
Outstanding:
Basic 11,021,902 11,090,519 11,332,634 11,153,535 11,328,033
Diluted 11,043,473 11,113,553 11,384,326 11,183,992 11,363,865
Performance
Ratios:
Return on
average
assets 0.86% 1.10% 0.62% 0.86% 0.90%
Return on
average
common
equity 8.56% 11.60% 6.29% 8.89% 10.02%
Net
interest
margin
(fully tax-
equivalent) 3.76% 3.63% 3.44% 3.53% 3.55%
Efficiency
ratio 66.84% 67.07% 73.52% 68.77% 69.78%
FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
---------------------------------------------------------------------
(Dollars in thousands, except per share data)
2007 2007 2007 2007 2006
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
---------- ---------- ---------- ---------- ----------
EARNINGS
Net
interest
income $15,205 $14,861 $14,052 $13,956 $14,293
Net
interest
income
(fully tax-
equivalent) $16,491 $16,051 $15,193 $15,105 $15,462
Provision
(credit)
for loan
losses $351 $(82) $(153) $-- $--
Noninterest
income $5,002 $6,334 $4,606 $4,738 $4,795
Noninterest
expense $14,543 $14,609 $14,348 $13,928 $15,163
Net income $4,098 $5,254 $3,443 $3,615 $3,004
Preferred
dividends $370 $371 $371 $371 $371
Net income
available
to common $3,728 $4,883 $3,072 $3,244 $2,633
Basic
earnings
per share $0.34 $0.44 $0.27 $0.29 $0.23
Diluted
earnings
per share $0.34 $0.44 $0.27 $0.29 $0.23
Average
shares
outstan-
ding 11,021,902 11,090,519 11,188,840 11,316,811 11,332,634
Average
diluted
shares
outstan-
ding 11,043,473 11,113,553 11,222,994 11,360,202 11,384,326
PERFORMANCE
Return on
average
assets
(annualized) 0.86% 1.10% 0.71% 0.77% 0.62%
Return on
average
common
equity
(annualized) 8.56% 11.60% 7.40% 7.96% 6.29%
Return on
average
tangible
common
equity
(annualized) 10.97% 15.03% 9.60% 10.35% 8.18%
Common
dividend
payout
ratio 38.24% 27.27% 40.74% 34.48% 39.13%
Net
interest
margin
(fully tax-
equivalent) 3.75% 3.63% 3.35% 3.39% 3.44%
Efficiency
ratio 66.84% 67.07% 72.04% 69.40% 73.52%
Full-time
equivalent
employees 621 636 636 634 640
CAPITAL
Period end
common
equity to
total
assets 9.57% 8.97% 8.70% 8.50% 8.64%
Period end
tangible
common
equity to
tangible
total
assets 7.68% 7.12% 6.83% 6.69% 6.77%
Leverage
ratio 9.35% 9.23% 8.89% 8.99% 8.91%
Tier 1
risk-based
capital
ratio 15.74% 15.71% 15.86% 15.58% 15.85%
Total
risk-based
capital
ratio 16.99% 16.96% 17.12% 16.83% 17.10%
Cash
dividends
declared
per share $0.13 $0.12 $0.11 $0.10 $0.09
Book value
per share $16.14 $15.41 $14.80 $14.81 $14.53
Tangible
book
value per
share $12.69 $11.98 $11.38 $11.42 $11.15
ASSET
QUALITY
Gross loan
charge-
offs $923 $1,310 $970 $692 $1,060
Net loan
charge-
offs $441 $829 $239 $134 $633
Net loan
charge-
offs to
average
loans
(annualized) 0.18% 0.35% 0.10% 0.06% 0.27%
Loans past
due over
90 days $2 $-- $4 $7 $3
Nonaccrual
loans 8,075 8,295 10,402 15,778 15,837
---------- ---------- ---------- ---------- ----------
Total
nonperfor-
ming
loans 8,077 8,295 10,406 15,785 15,840
Other real
estate
(ORE) and
repossessed
assets
(repos) 1,421 1,625 1,352 1,216 1,203
---------- ---------- ---------- ---------- ----------
Total
nonperfor-
ming
assets $9,498 $9,920 $11,758 $17,001 $17,043
Nonperfor-
ming
loans to
total
loans 0.84% 0.87% 1.11% 1.70% 1.71%
Nonperfor-
ming
assets to
total
loans,
ORE and
repos 0.98% 1.04% 1.25% 1.83% 1.84%
Nonperfor-
ming
assets to
total
assets 0.51% 0.52% 0.62% 0.87% 0.89%
Allowance
for loan
losses $15,521 $15,611 $16,522 $16,914 $17,048
Allowance
for loan
losses to
total
loans 1.61% 1.64% 1.76% 1.82% 1.84%
Allowance
for loan
losses to
nonperfor-
ming
loans 192% 188% 159% 107% 108%
PERIOD END
BALANCES
Total
loans $964,173 $949,671 $940,870 $929,250 $926,482
Total
assets $1,857,876 $1,902,985 $1,898,092 $1,962,748 $1,907,552
Total
deposits $1,575,971 $1,616,262 $1,617,049 $1,671,762 $1,617,695
Total
common
equity $177,741 $170,743 $165,185 $166,907 $164,765
Total
share-
holders'
equity $195,322 $188,324 $182,766 $184,530 $182,388
Common
shares
outstan-
ding 11,011,151 11,081,625 11,161,835 11,271,676 11,342,771
AVERAGE
BALANCES
Total
loans $954,373 $942,394 $932,637 $921,481 $932,739
Total
interest-
earning
assets $1,756,169 $1,766,511 $1,814,299 $1,789,426 $1,795,958
Total
assets $1,884,712 $1,890,669 $1,938,685 $1,914,593 $1,926,470
Total
deposits $1,607,737 $1,598,643 $1,657,975 $1,627,875 $1,631,020
Total
interest
bearing
liabili-
ties $1,402,294 $1,413,727 $1,476,534 $1,457,532 $1,465,135
Total
common
equity $172,833 $166,977 $166,526 $165,330 $166,052
Total
share-
holders'
equity $190,414 $184,558 $184,108 $182,953 $183,675