Financial Institutions, Inc. Reports Net Income and Earnings Per Share for 2013 at Highest Level in Over a Decade

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| Source: Financial Institutions, Inc.

WARSAW, N.Y., Jan. 29, 2014 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (the "Company") (Nasdaq:FISI), the parent company of Five Star Bank, today reported financial results for the fourth quarter and year ended December 31, 2013.

Net income for the fourth quarter 2013 was $6.4 million, compared to $6.2 million for the third quarter 2013. After preferred dividends, fourth quarter 2013 net income available to common shareholders was $6.0 million or $0.43 per diluted share compared with $5.8 million or $0.42 per share for third quarter 2013.

For the full year of 2013, the Company earned net income of $25.5 million, compared to $23.4 million for the full year of 2012. Net income available to common shareholders was $24.1 million or $1.75 per diluted share for the full year of 2013. This compares to net income available to common shareholders of $22.0 million or $1.60 per diluted share for the full year of 2012.

Fourth Quarter 2013 highlights:

  • Net income available to common shareholders was $6.0 million, or $0.43 per diluted share, compared to $5.8 million, or $0.42 per diluted share, in the third quarter
  • Net interest income increased 3% relative to the third quarter as average loans grew $45.1 million or 3%
  • Common and tangible book value per share increased to $17.17 and $13.56, respectively, at December 31, 2013
  • Continued strong quarterly performance with a return on average common equity of 10.15% and return on average tangible common equity of 12.90%
  • Capital ratios remain strong with total risk-based capital of 12.08%
  • Declared a quarterly cash dividend of $0.19 per outstanding common share, representing a 3.0% dividend yield as of December 31, 2013 and a return of 43% of fourth quarter net income to common shareholders

Full Year 2013 highlights:

  • Grew total loans $129.8 million or 8% in 2013 over the prior year
  • Total deposits in 2013 increased $58.3 million or 3% from the end of the prior year
  • Reached the Company's highest level of year end interest-earning assets of $2.7 billion
  • Increased net interest income by $3.1 million or 3%, reflecting a 10% increase in average total loans and 8% increase in average interest-bearing deposits
  • Increased quarterly cash dividend twice during 2013, resulting in a 30% increase in dividends declared in 2013 over the prior year

"We are pleased with the quality of our performance in 2013, especially in light of the challenging interest-rate environment," said Martin K. Birmingham, the Company's President and Chief Executive Officer. "We maintained solid returns despite industry-wide declines in net interest margin that continued to be impacted by historically low interest rates. Our results exhibit another year of meaningful loan and deposit growth, with annual organic loan and deposit growth rates of 9% and 5%, respectively, in 2013 after increases of 11% and 4%, respectively, in 2012."

Birmingham concluded, "Our 2013 performance reflects the continued benefits from strategic investments in people, products and services, as well as the advantages gained from the expanded geographic footprint developed over the past several years. We remain committed to delivering shareholder value by leveraging opportunities within existing markets, including strengthening our positions in Buffalo and Rochester."

Net Interest Income and Net Interest Margin

Net interest income was $23.4 million in the fourth quarter 2013, compared to $22.8 million in the third quarter 2013. The increase resulted from a $72.5 million increase in average earning assets during the fourth quarter 2013, partially offset by a decrease in the net interest margin to 3.61% in the fourth quarter 2013 from 3.62% in the third quarter 2013.

For the year ended December 31, 2013, net interest income rose 3% to $91.6 million from $88.5 million in 2012 as a result of a $288.7 million or 13% increase in average earning assets, largely offset by a 31 basis point narrowing of the net interest margin to 3.64% in 2013 from 3.95% in 2012.

Noninterest Income

Noninterest income was $5.7 million for the fourth quarter 2013 compared to $6.2 million in the third quarter 2013. The decrease in noninterest income was the result of a $142 thousand loss from the disposal of other assets combined with decreases of $217 thousand in service charges on deposit accounts and $140 thousand in broker-dealer fees and commissions, partially offset by a $113 thousand increase in other noninterest income.

Noninterest income totaled $24.8 million for the full year 2013 and 2012, as increases in service charges on deposits, ATM and debit card income, broker-dealer fees and commissions, other noninterest income and a decrease in losses from the disposal of other assets were partially offset by lower income from net securities transactions, company owned life insurance income and mortgage banking revenue. Income from sales of investment securities, net of other-than-temporary impairment charges, totaled $1.2 million in 2013 compared to $2.6 million in 2012.

Noninterest Expense

Noninterest expense was $17.4 million for the fourth quarter 2013 compared to $17.0 million in the third quarter 2013. The increase in noninterest expense was primarily the result of a $178 thousand increase in professional service fees and a $244 thousand increase in occupancy and equipment expense.

Noninterest expense for the full year 2013 totaled $69.4 million compared to $71.4 million in the prior year.  The full year 2012 included $3.0 million of noninterest expense related to the branch acquisitions and $2.6 million incurred in association with the retirement of the Company's former CEO. There were no material expenses related to these transactions during the fourth quarter of 2012.

Balance Sheet and Capital Management

Total assets were $2.93 billion at December 31, 2013, up $61.1 million from $2.87 billion at September 30, 2013 and up $164.8 million from $2.76 billion at December 31, 2012. The increase in total assets is primarily attributable to increases in total loans and investment securities resulting from organic growth activities, including the Company's successful "Made For You" customer-centric marketing initiatives.

Total loans were $1.84 billion at December 31, 2013, up $54.5 million or 3% from September 30, 2013 and up $129.8 million or 8% from December 31, 2012. The increase in loans was attributable to organic growth, primarily in the commercial, home equity and consumer indirect loan categories. Total investment securities were $859.2 million at December 31, 2013, up $29.9 million or 4% from the end of the prior quarter and up $17.5 million or 2% compared with the end of 2012.

Total deposits were $2.32 billion at December 31, 2013, a decrease of $94.1 million from the end of the prior quarter and an increase of $58.3 million compared with the end of 2012. The decrease from the prior quarter is mainly due to seasonal outflows of municipal deposits, while the year over year increase is largely attributable to successful business development efforts, particularly for branch offices acquired in 2012. Public deposit balances represented 23% of total deposits at December 31, 2013, compared to 25% at September 30, 2013 and 20% at December 31, 2012.

Short-term borrowings were $337.0 million at December 31, 2013, up $148.9 million from September 30, 2013 and up $157.2 million from December 31, 2012. The increase in short-term borrowings was primarily due to increases in short-term FHLB advances, which were used to supplement deposits in funding loan growth.

Shareholders' equity was $254.8 million at December 31, 2013, compared with $247.8 million at September 30, 2013 and $253.9 million at December 31, 2012. Accumulated other comprehensive loss included in shareholders' equity decreased $3.1 million during the fourth quarter 2013 due primarily to a decrease in the amounts reported in accumulated other comprehensive loss related to the Company's pension and post-retirement benefit plans.

During the fourth quarter 2013, the Company declared a common stock dividend of $0.19 per common share, consistent with the prior quarter and up $0.03 per share from the fourth quarter 2012. The fourth quarter 2013 dividend returned 43% of fourth quarter net income to common shareholders. 

The Company's leverage ratio was 7.63% at December 31, 2013, compared to 7.68% and 7.71% at September 30, 2013 and December 31, 2012, respectively.  The capital ratios decreased slightly from the prior quarter and the fourth quarter of 2012 due to asset growth offsetting an increase in retained earnings. Common book value and tangible common book value were $17.17 per share and $13.56 per share, respectively, at year end compared to $16.69 per share and $13.06 per share, respectively, at September 30, 2013 and $17.15 per share and $13.49 per share, respectively, at December 31, 2012.

Credit Quality

Non-performing loans were $16.6 million or 0.91% of total loans at December 31, 2013, as compared with $10.3 million or 0.58% of total loans at September 30, 2013, and $9.1 million or 0.53% of total loans at December 31, 2012.

The increase in non-performing loans was primarily due to a single commercial mortgage loan with a principal balance of $6.9 million at December 31, 2013. This loan was modified as a troubled debt restructuring and placed on nonaccrual status during the fourth quarter 2013. The Company had internally downgraded the loan to substandard status from special mention during the third quarter 2013. The loan, which is secured by income property and guaranteed by owners, was current per the terms of the restructured loan agreement as of December 31, 2013.

Net loan charge-offs increased to $2.4 million in the fourth quarter 2013 from $1.7 million in the third quarter 2013. The increase in net loan charge-offs in the fourth quarter 2013 was primarily related to the single commercial mortgage loan referenced above. The provision for loan losses was $2.4 million in the fourth quarter 2013, compared to $2.8 million in the third quarter 2013.

Net charge-offs of $7.1 million for the full year 2013 represented 0.40% of average loans on an annualized basis compared to $5.7 million or 0.36% for the full year 2012. The provision for loan losses for the full year 2013 increased $2.0 million from the prior year and exceeded net charge-offs by $2.0 million as the Company continues to maintain the allowance for loan losses consistent with the growth in its loan portfolio and trends in asset quality.

The allowance for loan losses was $26.7 million at December 31, 2013 and September 30, 2013, compared with $24.7 million at December 31, 2012. The ratio of the allowance for loan losses to total loans was 1.46% at December 31, 2013, compared with 1.50% at September 30, 2013 and 1.45% at December 31, 2012.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiary, Five Star Bank. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of over 50 offices and more than 60 ATMs throughout Western and Central New York State. Financial Institutions, Inc. and its subsidiary employs over 600 individuals. The Company's stock is listed on the Nasdaq Global Select Market under the symbol FISI and is a member of the NASDAQ OMX ABA Community Bank Index.  Additional information is available at the Company's website: www.fiiwarsaw.com.

Non-GAAP Financial Information

This news release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the Company, and facilitate investors' assessments of its business and performance trends in comparison to others in the financial services industry. In addition, the Company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the Company's results and to assess performance in relation to the company's ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in Appendix A to this document.

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, whether it experiences greater credit losses than expected, the impact of the current management transition, the attitudes and preferences of its customers, its ability to successfully integrate recently acquired bank branches and profitably operate newly opened bank branches, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and general economic and credit market conditions nationally and regionally. For more information about these factors and other factors that could affect the Company's forward-looking statements, please see the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

FINANCIAL INSTITUTIONS, INC.          
Selected Financial Information (Unaudited)          
(Amounts in thousands, except per share amounts)          
  2013 2012
  December 31, September 30, June 30, March 31, December 31,
SELECTED BALANCE SHEET DATA:          
Cash and cash equivalents $ 59,692 99,384 50,927 84,791 60,436
Investment securities:          
Available for sale 609,400 583,551 810,549 853,437 823,796
Held-to-maturity 249,785 245,708 17,348 17,747 17,905
Total investment securities 859,185 829,259 827,897 871,184 841,701
Loans held for sale 3,381 2,810 3,423 2,142 1,518
Loans:          
Commercial business 265,766 253,925 257,732 259,062 258,675
Commercial mortgage 469,284 449,565 437,515 424,635 413,324
Residential mortgage 113,045 117,624 118,117 126,228 133,520
Home equity 326,086 316,626 306,215 292,225 286,649
Consumer indirect 636,368 618,088 599,586 590,440 586,794
Other consumer 23,070 23,844 24,249 24,700 26,764
Total loans 1,833,619 1,779,672 1,743,414 1,717,290 1,705,726
Allowance for loan losses 26,736 26,685 25,590 25,827 24,714
Total loans, net 1,806,883 1,752,987 1,717,824 1,691,463 1,681,012
           
Total interest-earning assets (1) (2) 2,705,045 2,613,746 2,576,028 2,567,948 2,522,444
Goodwill and other intangible assets, net 50,002 50,095 50,190 50,288 50,389
Total assets 2,928,636 2,867,517 2,782,303 2,827,658 2,763,865
           
Deposits:          
Noninterest-bearing demand 535,472 542,517 511,802 494,362 501,514
Interest-bearing demand 470,733 519,283 475,448 529,115 449,744
Savings and money market 717,928 757,454 713,459 748,482 655,598
Certificates of deposit 595,923 594,931 623,527 637,538 654,938
Total deposits 2,320,056 2,414,185 2,324,236 2,409,497 2,261,794
Borrowings 337,042 188,146 193,413 139,620 179,806
Total interest-bearing liabilities 2,121,626 2,059,814 2,005,847 2,054,755 1,940,086
Shareholders' equity 254,839 247,845 244,888 254,930 253,897
Common shareholders' equity (3) 237,497 230,503 227,494 237,511 236,426
Tangible common equity (4) 187,495 180,408 177,304 187,223 186,037
Unrealized (loss) gain on investment securities, net of tax $ (5,293) (1,154) (725) 13,745 16,060
           
Common shares outstanding 13,829 13,810 13,809 13,804 13,788
Treasury shares 333 352 353 358 374
           
CAPITAL RATIOS AND PER SHARE DATA:          
           
Leverage ratio 7.63% 7.68 7.59 7.46 7.71
Tier 1 risk-based capital 10.82% 10.94 10.96 10.84 10.73
Total risk-based capital 12.08% 12.19 12.21 12.09 11.98
Common equity to assets 8.11% 8.04 8.18 8.40 8.55
Tangible common equity to tangible assets (4) 6.51% 6.40 6.49 6.74 6.86
           
Common book value per share $ 17.17 16.69 16.47 17.21 17.15
Tangible common book value per share (4) 13.56 13.06 12.84 13.56 13.49
________          
(1)  Includes investment securities at adjusted amortized cost and non-performing investment securities.        
(2)  Includes nonaccrual loans.          
(3)  Excludes preferred shareholders' equity.          
(4)  See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.        
               
FINANCIAL INSTITUTIONS, INC.              
Selected Financial Information (Unaudited)              
(Amounts in thousands, except per share amounts)              
      Quarterly Trends
  Years ended 2013 2012
  December 31, Fourth Third Second First Fourth
  2013 2012 Quarter Quarter Quarter Quarter Quarter
SELECTED INCOME STATEMENT DATA:              
Interest income $ 98,931 97,567 25,218 24,623 24,342 24,748 25,087
Interest expense 7,337 9,051 1,838 1,820 1,818 1,861 1,999
Net interest income 91,594 88,516 23,380 22,803 22,524 22,887 23,088
Provision for loan losses 9,079 7,128 2,407 2,770 1,193 2,709 2,520
Net interest income after provision for loan losses 82,515 81,388 20,973 20,033 21,331 20,178 20,568
Noninterest income:              
Service charges on deposits 9,948 8,627 2,511 2,728 2,568 2,141 2,526
ATM and debit card 5,098 4,716 1,249 1,283 1,317 1,249 1,348
Broker-dealer fees and commissions 2,345 2,104 428 568 650 699 474
Company owned life insurance 1,706 1,751 431 422 438 415 451
Loan servicing 570 617 118 227 152 73 (28)
Net gain (loss) on sale of loans held for sale 117 1,421 (17) (101) 35 200 440
Net gain on investment securities 1,226 2,651 2 -- 332 892 487
Impairment charge on investment securities -- (91) -- -- -- -- --
Net (loss) gain on sale of other assets (103) (381) (142) -- 38 1 (302)
Other 3,926 3,362 1,155 1,042 846 883 887
Total noninterest income 24,833 24,777 5,735 6,169 6,376 6,553 6,283
Noninterest expense:              
Salaries and employee benefits 37,828 40,127 9,420 9,473 9,226 9,709 9,562
Occupancy and equipment 12,366 11,419 3,203 2,959 3,035 3,169 3,019
Professional services 3,836 4,133 992 814 1,093 937 890
Computer and data processing 2,848 3,271 643 689 812 704 809
Supplies and postage 2,342 2,497 536 518 608 680 567
FDIC assessments 1,464 1,300 372 367 364 361 343
Advertising and promotions 896 929 220 209 253 214 430
Other 7,861 7,721 2,000 1,980 2,071 1,810 1,921
Total noninterest expense 69,441 71,397 17,386 17,009 17,462 17,584 17,541
Income before income taxes 37,907 34,768 9,322 9,193 10,245 9,147 9,310
Income tax expense 12,377 11,319 2,955 3,029 3,395 2,998 2,978
Net income 25,530 23,449 6,367 6,164 6,850 6,149 6,332
Preferred stock dividends 1,466 1,474 366 365 367 368 369
Net income available to common shareholders $ 24,064 21,975 6,001 5,799 6,483 5,781 5,963
               
FINANCIAL RATIOS AND STOCK DATA:              
               
Earnings per share – basic $ 1.75 1.60 0.44 0.42 0.47 0.42 0.44
Earnings per share – diluted $ 1.75 1.60 0.43 0.42 0.47 0.42 0.43
Cash dividends declared on common stock  $0.74 0.57 0.19 0.19 0.18 0.18 0.16
Common dividend payout ratio (1) 42.29% 35.63 43.18 45.24 38.30 42.86 36.36
Dividend yield (annualized) 2.99% 3.06 3.05 3.68 3.92 3.66 3.42
Return on average assets 0.91% 0.93 0.88 0.88 0.99 0.90 0.95
Return on average equity 10.10% 9.46 10.03 9.93 10.70 9.75 9.85
Return on average common equity (2) 10.23% 9.53 10.15 10.05 10.86 9.83 9.95
Return on average tangible common equity (3) 13.00% 11.74 12.90 12.88 13.74 12.47 12.66
Efficiency ratio (4) 58.48% 62.87 57.76 56.95 59.38 59.87 58.88
Stock price (Nasdaq: FISI):              
High $ 26.59 19.52 26.59 21.99 20.66 20.83 19.39
Low $ 17.92 15.22 20.14 18.39 17.92 18.51 17.61
Close $ 24.71 18.63 24.71 20.46 18.41 19.96 18.63
________              
(1)  Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.        
(2)  Net income available to common shareholders divided by average common equity.              
(3)  See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.            
(4)  Efficiency ratio equals noninterest expense less other real estate expense and amortization of intangible assets as a percentage of net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains and impairment charges on investment securities.
               
FINANCIAL INSTITUTIONS, INC.              
Selected Financial Information (Unaudited)              
(Amounts in thousands)              
      Quarterly Trends
  Years ended 2013 2012
  December 31, Fourth Third Second First Fourth
  2013 2012 Quarter Quarter Quarter Quarter Quarter
SELECTED AVERAGE BALANCES:              
Federal funds sold and interest-earning deposits $ 191 113 94 126 226 320 94
Investment securities (1) 834,213 703,643 849,069 821,561 829,953 836,270 727,735
Loans (2):              
Commercial business 256,236 242,100 253,458 256,256 256,332 258,958 250,384
Commercial mortgage 438,821 407,737 460,722 442,178 433,631 418,248 407,168
Residential mortgage 123,277 127,363 118,113 121,462 123,263 130,425 137,586
Home equity 304,868 257,537 320,872 309,970 299,230 288,993 282,831
Consumer indirect 604,148 533,589 627,557 605,286 595,235 588,068 576,519
Other consumer 24,089 25,058 23,132 23,641 24,080 25,535 27,043
Total loans 1,751,439 1,593,384 1,803,854 1,758,793 1,731,771 1,710,227 1,681,531
Total interest-earning assets 2,585,843 2,297,140 2,653,017 2,580,480 2,561,950 2,546,817 2,409,360
Goodwill and other intangible assets, net 50,201 43,399 50,058 50,153 50,249 50,350 50,879
Total assets 2,803,825 2,519,258 2,860,733 2,784,580 2,789,104 2,780,209 2,650,502
               
Interest-bearing liabilities:              
Interest-bearing demand 488,047 423,096 501,753 466,889 489,047 494,654 464,094
Savings and money market 727,737 586,329 757,868 719,452 739,328 693,684 671,295
Certificates of deposit 621,455 693,353 599,971 603,434 635,583 647,551 685,318
Borrowings 190,310 121,735 208,338 207,491 153,626 191,412 69,335
Total interest-bearing liabilities 2,027,549 1,824,513 2,067,930 1,997,266 2,017,584 2,027,301 1,890,042
               
Noninterest-bearing demand deposits 509,383 430,240 526,146 527,438 501,354 481,909 487,434
Total deposits 2,346,622 2,133,018 2,385,738 2,317,213 2,365,312 2,317,798 2,308,141
Total liabilities 2,551,139 2,271,259 2,608,815 2,538,377 2,532,197 2,524,377 2,394,687
Shareholders' equity 252,686 247,999 251,918 246,203 256,907 255,832 255,815
Common equity (3) 235,290 230,527 234,576 228,827 239,500 238,373 238,344
Tangible common equity (4) $ 185,089 187,128 184,518 178,674 189,251 188,023 187,465
Common shares outstanding:              
Basic 13,739 13,696 13,754 13,745 13,739 13,717 13,707
Diluted 13,784 13,751 13,817 13,787 13,767 13,767 13,761
SELECTED AVERAGE YIELDS:              
(Tax equivalent basis)              
Federal funds sold and interest-earning deposits 0.19% 0.29 0.16 0.15 0.19 0.21 0.60
Investment securities 2.41% 2.66 2.46 2.42 2.38 2.39 2.56
Loans 4.65% 5.09 4.55 4.59 4.65 4.83 4.98
Total interest-earning assets 3.93% 4.35 3.88 3.90 3.91 4.03 4.25
Interest-bearing demand 0.15% 0.14 0.16 0.18 0.14 0.11 0.13
Savings and money market 0.13% 0.17 0.14 0.14 0.13 0.13 0.14
Certificates of deposit 0.79% 0.99 0.77 0.77 0.79 0.82 0.86
Borrowings 0.39% 0.48 0.38 0.38 0.40 0.40 0.76
Total interest-bearing liabilities 0.36% 0.50 0.35 0.36 0.36 0.37 0.42
Net interest rate spread 3.57% 3.85 3.53 3.54 3.55 3.66 3.83
Net interest rate margin 3.64% 3.95 3.61 3.62 3.63 3.73 3.92
               
________              
(1)  Includes investment securities at adjusted amortized cost and non-performing investment securities.              
(2)  Includes nonaccrual loans.              
(3)  Excludes preferred shareholders' equity.              
(4)  See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.              
           
FINANCIAL INSTITUTIONS, INC.          
Selected Financial Information (Unaudited)          
(Amounts in thousands)          
  2013 2012
  December 31, September 30, June 30, March 31, December 31,
ASSET QUALITY DATA:          
Allowance for Loan Losses          
Beginning balance $ 26,685 25,590 25,827 24,714 24,301
Net loan charge-offs (recoveries):          
Commercial business 328 104 87 202 139
Commercial mortgage 369 (87) (37) (11) 277
Residential mortgage 118 22 72 145 22
Home equity  8 14 (20) 232 119
Consumer indirect 1,416 1,465 1,170 913 1,367
Other consumer 117 157 158 115 183
Total net charge-offs 2,356 1,675 1,430 1,596 2,107
Provision for loan losses 2,407 2,770 1,193 2,709 2,520
Ending balance $ 26,736 26,685 25,590 25,827 24,714
           
Supplemental information          
Period end loans:          
Originated loans $1,785,599 1,728,453 1,688,392 1,657,431 1,641,197
Acquired loans 48,020 51,219 55,022 59,859 64,529
Total loans $1,833,619 1,779,672 1,743,414 1,717,290 1,705,726
           
Allowance for loan losses to total loans 1.46% 1.50 1.47 1.50 1.45
Allowance for loan losses for originated loans to originated loans 1.50% 1.54 1.52 1.56 1.51
           
Net charge-offs (recoveries) to average loans (annualized):          
Commercial business 0.51% 0.16 0.14 0.32 0.22
Commercial mortgage 0.32% -0.08 -0.03 -0.01 0.27
Residential mortgage 0.41% 0.07 0.24 0.45 0.06
Home equity  0.01% 0.02 -0.03 0.33 0.17
Consumer indirect 0.90% 0.96 0.79 0.63 0.94
Other consumer 2.01% 2.63 2.63 1.83 2.68
Total loans 0.52% 0.38 0.33 0.38 0.50
           
Non-performing loans:          
Commercial business $ 3,474 4,078 5,043 5,616 3,413
Commercial mortgage 9,663 2,835 3,073 2,767 1,799
Residential mortgage 1,078 1,337 1,423 1,759 2,040
Home equity  925 911 699 598 939
Consumer indirect 1,471 1,161 1,035 1,007 891
Other consumer 11 16 22 19 43
Total non-performing loans 16,622 10,338 11,295 11,766 9,125
Foreclosed assets 333 424 415 371 184
Non-performing investment securities 128 128 207 343 753
Total non-performing assets $ 17,083 10,890 11,917 12,480 10,062
           
Total non-performing loans to total loans 0.91% 0.58 0.65 0.69 0.53
Total non-performing loans to originated loans 0.93% 0.60 0.67 0.71 0.56
Total non-performing assets to total assets 0.58% 0.38 0.43 0.44 0.36
Allowance for loan losses to non-performing loans 161% 258 227 220 271
               
FINANCIAL INSTITUTIONS, INC.              
Appendix A - Non-GAAP to GAAP Reconciliation (Unaudited)              
(In thousands, except per share amounts)              
  Years ended 2013 2012       
  December 31, Fourth Third Second First Fourth
  2013 2012 Quarter Quarter Quarter Quarter Quarter
Ending tangible assets:              
Total assets     $ 2,928,636 2,867,517 2,782,303 2,827,658 2,763,865
Less: Goodwill and other intangible assets, net     50,002 50,095 50,190 50,288 50,389
Tangible assets (non-GAAP)     $ 2,878,634 2,817,422 2,732,113 2,777,370 2,713,476
               
Ending tangible common equity:              
Common shareholders' equity     $ 237,497 230,503 227,494 237,511 236,426
Less: Goodwill and other intangible assets, net     50,002 50,095 50,190 50,288 50,389
Tangible common equity (non-GAAP)     $ 187,495 180,408 177,304 187,223 186,037
               
Tangible common equity to tangible assets (non-GAAP) (1)     6.51% 6.40 6.49 6.74 6.86
               
Common shares outstanding     13,829 13,810 13,809 13,804 13,788
Tangible common book value per share (non-GAAP) (2)     $ 13.56 13.06 12.84 13.56 13.49
               
Average tangible common equity:              
Average common equity $ 235,290 230,527 234,576 228,827 239,500 238,373 238,344
Average goodwill and other intangible assets, net 50,201 43,399 50,058 50,153 50,249 50,350 50,879
Average tangible common equity (non-GAAP) $ 185,089 187,128 184,518 178,674 189,251 188,023 187,465
               
Return on average tangible common equity (3) 13.00% 11.74 12.90 12.88 13.74 12.47 12.66
               
Net operating income:              
Net income $ 25,530 23,449 6,367 6,164 6,850 6,149 6,332
Branch acquisition expenses, net of tax (4) -- 1,966 -- -- -- -- --
CEO retirement expenses, net of tax (4) -- 1,670 -- -- -- -- --
Net operating income (non-GAAP) $ 25,530 27,085 6,367 6,164 6,850 6,149 6,332
               
Net operating income available to common shareholders:              
Net income available to common shareholders $ 24,064 21,975 6,001 5,799 6,483 5,781 5,963
Branch acquisition expenses, net of tax (4) -- 1,966 -- -- -- -- --
CEO retirement expenses, net of tax (4) -- 1,670 -- -- -- -- --
Net operating income available to common shareholders (non-GAAP) $ 24,064 25,611 6,001 5,799 6,483 5,781 5,963
               
Financial ratios computed on an operating basis (Non-GAAP):              
Earnings per share – basic $ 1.75 1.87 0.44 0.42 0.47 0.42 0.44
Earnings per share – diluted $ 1.75 1.86 0.43 0.42 0.47 0.42 0.43
Return on average assets 0.91% 1.08 0.88 0.88 0.99 0.90 0.95
Return on average equity 10.10% 10.92 10.03 9.93 10.70 9.75 9.85
Return on average common equity 10.23% 11.11 10.15 10.05 10.86 9.83 9.95
Return on average tangible common equity 13.00% 13.69 12.90 12.88 13.74 12.47 12.66
________              
(1)  Tangible common equity divided by tangible assets.              
(2)  Tangible common equity divided by common shares outstanding.              
(3)  Annualized net income divided by average tangible common equity.              
(4)  Tax effect is calculated assuming a 35% effective tax rate.              
For additional information contact:
Kevin B. Klotzbach
Chief Financial Officer & Treasurer
Phone:  585.786.1130
Email:  

or

Jordan M. Darrow
Darrow Associates, Inc.
Phone: 631.367.1866
Email: