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Financial Institutions, Inc. Reports Record Year

WARSAW, N.Y., Jan. 28, 2015 (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, 2014. The financial results for the fourth quarter and full year of 2014 include the contributions from the acquisition of Scott Danahy Naylon Co., Inc. ("SDN") insurance agency completed in August 2014. With the acquisition of SDN, the Company's offerings have expanded to include for the first time a broad range of insurance services to both personal and business clients.

Net income for the fourth quarter 2014 was $7.9 million, compared to $7.2 million for the third quarter 2014, and $6.4 million for the fourth quarter 2013. After preferred dividends, fourth quarter 2014 net income available to common shareholders was $7.6 million or $0.54 per diluted share, compared with $6.8 million or $0.49 per share for third quarter 2014, and $6.0 million or $0.43 per share for fourth quarter 2013.

For the full year of 2014, the Company earned net income of $29.4 million, compared to $25.5 million for the full year of 2013. Net income available to common shareholders was $27.9 million or $2.00 per diluted share for the full year of 2014. This compares to net income available to common shareholders of $24.1 million or $1.75 per diluted share for the full year of 2013.

Financial Institutions, Inc.'s President and Chief Executive Officer Martin K. Birmingham stated, "We delivered another year of solid performance, with increased net income and earnings per share despite the headwinds experienced during the year throughout the industry. We posted record highs for net interest income, total loans and shareholders' equity, all while maintaining excellent asset quality. In addition, we continued to integrate our acquired insurance agency into our operations."

"We continue to demonstrate consistent growth in key metrics for our business. Importantly, we ended 2014 with total assets of $3.1 billion, an increase of over 5%. This marks the fifth year in a row that we have set a new record for total assets at year-end. This solid asset growth produced record-setting annual net income of $29.4 million," added Birmingham. "We have grown and will seek continued growth in both our legacy markets and in the larger markets that we are now more actively targeting, namely Rochester and Buffalo. Growth will be achieved through the offering of traditional banking services, as well as from newer products such as insurance, which collectively provide us with a very comprehensive suite of services to meet the evolving needs of our customer base. As we look toward 2015 and beyond, we will continue to follow our proven business model of organic growth and strategic acquisitions."

Fourth Quarter 2014 highlights:

  • Net income available to common shareholders was $7.6 million or $0.54 per diluted share, compared to $6.8 million or $0.49 per share in the prior quarter, and $6.0 million or $0.43 per share in the fourth quarter 2013
  • Increased net interest income for the quarter to $24.1 million, the highest in Company history
  • Return on average common equity of 11.25% and return on average tangible common equity of 15.16% demonstrate strong quarterly performance
  • Common and tangible common book value per share increased to $18.57 and $13.71, respectively, at December 31, 2014
  • Increased quarterly cash dividend to $0.20 per outstanding common share, representing a 5% increase from the most recent quarterly cash dividend
  • Announced plans to build a "Made for You" concept branch in Rochester, N.Y. at CityGate pending regulatory approval; unprecedented customer service experience to be offered in under-penetrated region for Five Star Bank

Full Year 2014 highlights:

  • Completed the acquisition of Scott Danahy Naylon Co., Inc. ("SDN"), a full service insurance agency
  • Initiated the implementation of a Company-wide Enterprise Risk Management Model
  • Grew total loans $78.4 million or 4% over the prior year
  • Increased total deposits by $130.5 million or 6% from the end of the prior year
  • Reached the Company's highest level of year-end total assets of $3.1 billion
  • Increased net interest income to $93.8 million, driven by a 7% increase in average interest-earning assets
  • The effective tax rate was 24.7% for 2014, a decrease from 32.7% for 2013 largely related to the tax advantages of a historic tax credit investment and the formation of a real estate investment trust during 2014

Kevin B. Klotzbach, the Company's Executive Vice President and Chief Financial Officer commented, "We are pleased with the progress we made in 2014 relative to lowering our effective tax rate. The formation of the REIT and the historic tax credit investment both contributed to the lower tax provision and ultimately resulted in higher earnings for the Company in 2014."

Net Interest Income and Net Interest Margin

Net interest income was $24.1 million in the fourth quarter 2014 compared to $23.3 million in the third quarter 2014 and $23.4 million in the fourth quarter 2013. Our net interest margin increased by 10 basis points from 3.46% for the third quarter 2014 to 3.56% for the fourth quarter 2014, primarily due to non-recurring loan prepayment income received in the fourth quarter.

Net interest income for the fourth quarter 2014 increased $758 thousand compared to the fourth quarter 2013. The increase was primarily related to an increase in average interest-earning assets of $128.7 million, driven by organic loan growth during 2014. The increase was partially offset by a lower net interest margin, which decreased 5 basis points from the fourth quarter 2013 to the fourth quarter 2014.

For the year ended December 31, 2014, net interest income rose 2% to $93.8 million from $91.6 million in 2013 as a result of a $174.3 million or 7% increase in average interest-earning assets. These increases were partially offset by a 14 basis point narrowing of the net interest margin to 3.50% in 2014 from 3.64% in 2013.

Noninterest Income

Noninterest income was $5.2 million for the fourth quarter 2014 compared to $7.3 million in the third quarter 2014 and $5.7 million in the fourth quarter 2013. The quarter-over-quarter change was driven primarily by $2.3 million of amortization of a historic tax investment in a community-based project that was recorded in the 2014 fourth quarter. These types of investments are amortized in the first year the project is placed in service and the Company has recognized the amortization as contra-income, included in noninterest income, with an offsetting tax benefit that reduced income tax expense. Insurance income of $1.4 million was up $498 thousand from the third quarter 2014, reflecting a full quarter of contributions from the SDN acquisition.

Compared to the fourth quarter 2013, noninterest income in the fourth quarter 2014 decreased by $580 thousand. The decrease was primarily related to the amortization of the historic tax credit, described above, partially offset by the increased insurance income attributable to the SDN acquisition.

"We remain focused on generating alternative sources of noninterest income and continue to be excited about the prospects of further developing our insurance line of business," said Klotzbach.

Noninterest income totaled $25.4 million for the full year 2014, an increase of $517 thousand when compared to $24.8 million in the prior year. Included in noninterest income are gains realized from the sale of investment securities of $2.0 million and $1.2 million for the years ended December 31, 2014 and 2013, respectively. Exclusive of those gains and the tax credit investment amortization described above, noninterest income increased $2.0 million to $25.6 million for 2014 compared to $23.6 million for 2013. Insurance income increased by $2.1 million, primarily as a result of the SDN acquisition. Service charges on deposits decreased by $1.0 million, due primarily to lower overdraft fees.

Noninterest Expense

Noninterest expense was $19.4 million for the fourth quarter 2014 compared to $18.0 million in the third quarter 2014 and $17.4 million in the fourth quarter 2013. Salaries and employee benefits expense, the largest noninterest expense item, was up $826 thousand from the third quarter 2014, and reflects additional personnel as a result of the acquisition of SDN and the hiring of additional loan officers and personnel associated with the Company's expansion initiatives. Noninterest expense also included increases of $452 thousand in professional service fees and $193 thousand in occupancy and equipment expense when comparing the fourth quarter 2014 to the third quarter 2014.

Compared to the fourth quarter 2013, noninterest expense in the fourth quarter 2014 increased by $2.0 million. The increase in expense was primarily related to the higher salaries and employee benefits expense attributable to the SDN acquisition and higher professional service fees.

Noninterest expense for the full year 2014 totaled $72.4 million compared to $69.4 million in the prior year. The increase reflects higher salaries and employee benefits of $767 thousand due to the addition of new employees from SDN and as part of the Company's expansion initiatives. Also contributing to the increase were higher occupancy and equipment expense, professional service fees, computer and data processing expense and other noninterest expense. Those increases were partially offset by lower supplies and postage expense due to an increase in customers opting to receive statements electronically and reduced advertising and promotional expenses.

Income Taxes

Income tax expense was $84 thousand in the fourth quarter 2014 compared to $3.4 million in the third quarter 2014, and $3.0 million in the fourth quarter 2013. The differences are driven by the favorable impact of $3.0 million in Federal and New York State historic tax credits realized in the fourth quarter 2014, as discussed above. As a result of the historic tax credits, the current quarter effective tax rate was 1.0%, compared with an effective tax rate of 31.9% in the third quarter 2014 and 31.7% in the fourth quarter 2013.

Income tax expense for the year was $9.6 million, representing an effective tax rate of 24.7% compared with an effective tax rate of 32.7% in 2013. The lower effective tax rate in 2014 reflects the historic tax credit benefit described above combined with New York State tax savings generated by the Company's real estate investment trust, which became effective during February 2014.

Balance Sheet and Capital Management

Total assets were $3.09 billion at December 31, 2014, up $34.2 million from $3.06 billion at September 30, 2014 and up $160.9 million from $2.93 billion at December 31, 2013. The increases were attributable to loan growth and higher investment security balances.

Total loans were $1.91 billion at December 31, 2014, up $4.2 million from September 30, 2014 and up $78.4 million from December 31, 2013. The increase in loans from the prior year was attributable to organic growth, primarily in home equity and consumer indirect loans. Total investment securities were $916.9 million at December 31, 2014, up $45.5 million or 5% from the end of the prior quarter and up $57.7 million or 7% compared with the end of 2013.

Total deposits were $2.45 billion at December 31, 2014, down $88.3 million from $2.54 billion at September 30, 2014 and up $130.5 million from $2.32 billion at December 31, 2013. The decrease during the fourth quarter 2014 was mainly due to seasonal outflows of municipal deposits, while the year-over-year increase is largely attributable to successful business development efforts. Public deposit balances represented 25% of total deposits at December 31, 2014, compared to 28% at September 30, 2014 and 23% at December 31, 2013.

Short-term borrowings were $334.8 million at December 31, 2014, up $118.8 million from September 30, 2014 and down $2.2 million from December 31, 2013. Short-term borrowings are often utilized to manage the seasonal outflows of municipal deposits.

Shareholders' equity was $279.5 million at December 31, 2014, compared with $277.8 million at September 30, 2014 and $254.8 million at December 31, 2013. Common book value per share was $18.57 at December 31, 2014, an increase of $0.09 from $18.48 at September 30, 2014 and $1.40 from $17.17 at December 31, 2013. Tangible common book value per share was $13.71 at December 31, 2014, compared to $13.59 at September 30, 2014 and $13.56 at December 31, 2013.

During the fourth quarter 2014, the Company increased its quarterly common stock dividend by 5%, or $0.01 per share, to $0.20 per common share. The fourth quarter 2014 dividend returned 37% of fourth quarter net income to common shareholders.

The Company's leverage ratio was 7.35% at December 31, 2014, compared to 7.34% at September 30, 2014 and 7.63% at December 31, 2013. Goodwill and intangible assets recorded during the third quarter 2014 in conjunction with the addition of SDN resulted in a reduction in capital ratios upon acquisition. Such goodwill and intangible assets are excluded from regulatory capital under regulatory accounting practices.

Credit Quality

Nonperforming loans at December 31, 2014 increased $2.0 million compared with September 30, 2014. Increases of $1.0 million in commercial business non-performing loans, $560 thousand in commercial mortgage non-performing loans and $538 thousand in residential real estate non-performing loans were partially offset by a decrease of $131 thousand in consumer indirect non-performing loans. Non-performing loans declined $6.5 million from December 31, 2013 due to improvements in the commercial mortgage portfolio. Nonperforming loans to total loans were 0.53% at December 31, 2014 compared with 0.43% at September 30, 2014 and 0.91% at December 31, 2013.

The provision for loans losses for the fourth quarter 2014 was $1.9 million, a decline of $105 thousand from the prior quarter and $497 thousand from the fourth quarter 2013. Net charge-offs were $1.5 million during the current quarter, a $420 thousand decrease compared to the prior quarter. Compared to the fourth quarter 2013, net charge-offs also declined $839 thousand, primarily driven by the commercial business and commercial mortgage loan portfolios. The ratio of annualized net charge-offs to total average loans was 0.32% during the current quarter, compared to 0.40% during the prior quarter and 0.52% during the fourth quarter 2013.

The provision for loans losses for the full year 2014 was $7.8 million, down from $9.1 million in 2013. Net charge-offs were $6.9 million during the current year, a $170 thousand decrease compared to the prior year. The ratio of annualized net charge-offs to total average loans was 0.37% during 2014 compared to 0.40% during the prior year.

The allowance for loans losses to total loans was 1.45% at December 31, 2014, compared with 1.43% at September 30, 2014 and 1.46% at December 31, 2013. The allowance to non-performing loans was 272% at December 31, 2014, compared with 333% at September 30, 2014, and 161% at December 31, 2013.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Scott Danahy Naylon. 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. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. Financial Institutions, Inc. and its subsidiaries employ approximately 650 individuals. The Company's stock is listed on the Nasdaq Global Select Market under the symbol FISI 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, breaches of its third party information systems, the attitudes and preferences of its customers, its ability to successfully integrate and profitably operate acquired businesses, 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)
2014 2013
December 31, September 30, June 30, March 31, December 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents $58,151 87,582 64,832 72,401 59,692
Investment securities:
Available for sale 622,494 585,479 601,903 674,650 609,400
Held-to-maturity 294,438 285,967 262,057 253,576 249,785
Total investment securities 916,932 871,446 863,960 928,226 859,185
Loans held for sale 755 1,029 201 900 3,381
Loans:
Commercial business 267,409 275,107 277,685 268,352 265,766
Commercial mortgage 475,092 469,485 469,055 468,763 469,284
Residential mortgage 100,101 103,044 106,206 110,164 113,045
Home equity 386,615 382,703 369,578 332,348 326,086
Consumer indirect 661,673 656,215 652,748 647,546 636,368
Other consumer 21,112 21,291 21,392 21,667 23,070
Total loans 1,912,002 1,907,845 1,896,664 1,848,840 1,833,619
Allowance for loan losses 27,637 27,244 27,166 27,152 26,736
Total loans, net 1,884,365 1,880,601 1,869,498 1,821,688 1,806,883
Total interest-earning assets (1)(2) 2,826,488 2,780,940 2,758,779 2,780,489 2,705,045
Goodwill and other intangible assets, net 68,639 68,887 49,826 49,913 50,002
Total assets 3,089,521 3,055,304 2,993,264 3,015,619 2,928,636
Deposits:
Noninterest-bearing demand 571,260 571,549 551,229 532,914 535,472
Interest-bearing demand 490,190 530,783 507,083 541,660 470,733
Savings and money market 795,835 805,522 766,594 812,734 717,928
Certificates of deposit 593,242 630,970 625,172 646,112 595,923
Total deposits 2,450,527 2,538,824 2,450,078 2,533,420 2,320,056
Borrowings 334,804 215,967 254,683 196,746 337,042
Total interest-bearing liabilities 2,214,071 2,183,242 2,153,532 2,197,252 2,121,626
Shareholders' equity 279,532 277,758 269,827 262,865 254,839
Common shareholders' equity (3) 262,192 260,418 252,487 245,523 237,497
Tangible common equity (4) 193,553 191,531 202,661 195,610 187,495
Unrealized gain (loss) on investment securities, net of tax $1,933 (374) 1,292 (1,467) (5,293)
Common shares outstanding 14,118 14,094 13,863 13,853 13,829
Treasury shares 280 304 299 309 333
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio 7.35% 7.34 7.64 7.51 7.63
Tier 1 risk-based capital 10.47% 10.44 10.95 10.89 10.82
Total risk-based capital 11.72% 11.69 12.20 12.14 12.08
Common equity to assets 8.49% 8.52 8.44 8.14 8.11
Tangible common equity to tangible assets (4) 6.41% 6.41 6.89 6.60 6.51
Common book value per share $18.57 18.48 18.21 17.72 17.17
Tangible common book value per share (4) 13.71 13.59 14.62 14.12 13.56
(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 2014 2013
December 31, Fourth Third Second First Fourth
2014 2013 Quarter Quarter Quarter Quarter Quarter
SELECTED INCOME STATEMENT DATA:
Interest income $101,055 98,931 25,984 25,129 24,883 25,059 25,218
Interest expense 7,281 7,337 1,846 1,871 1,780 1,784 1,838
Net interest income 93,774 91,594 24,138 23,258 23,103 23,275 23,380
Provision for loan losses 7,789 9,079 1,910 2,015 1,758 2,106 2,407
Net interest income after provision for loan losses 85,985 82,515 22,228 21,243 21,345 21,169 20,973
Noninterest income:
Service charges on deposits 8,954 9,948 2,186 2,277 2,241 2,250 2,511
ATM and debit card 4,963 5,098 1,269 1,263 1,257 1,174 1,249
Insurance income 2,399 262 1,420 922 16 41 73
Investment advisory 2,138 2,345 491 524 561 562 428
Company owned life insurance 1,753 1,706 504 421 425 403 431
Investments in limited partnerships 1,103 857 209 187 81 626 319
Loan servicing 568 570 118 120 176 154 118
Net gain (loss) on sale of loans held for sale 313 117 82 76 50 105 (17)
Net gain on investment securities 2,041 1,226 264 515 949 313 2
Net gain (loss) on sale of other assets 69 (103) 8 72 24 (35) (142)
Amortization of tax credit investment (2,323) -- (2,323) -- -- -- --
Other 3,372 2,807 927 884 797 764 763
Total noninterest income 25,350 24,833 5,155 7,261 6,577 6,357 5,735
Noninterest expense:
Salaries and employee benefits 38,595 37,828 10,551 9,725 9,063 9,256 9,420
Occupancy and equipment 12,829 12,366 3,324 3,131 3,139 3,235 3,203
Professional services 4,760 3,836 1,428 976 1,384 972 992
Computer and data processing 3,016 2,848 791 725 777 723 643
Supplies and postage 2,053 2,342 499 507 535 512 536
FDIC assessments 1,592 1,464 392 390 388 422 372
Advertising and promotions 805 896 196 216 214 179 220
Other 8,705 7,861 2,198 2,285 2,308 1,914 2,000
Total noninterest expense 72,355 69,441 19,379 17,955 17,808 17,213 17,386
Income before income taxes 38,980 37,907 8,004 10,549 10,114 10,313 9,322
Income tax expense 9,625 12,377 84 3,365 3,082 3,094 2,955
Net income 29,355 25,530 7,920 7,184 7,032 7,219 6,367
Preferred stock dividends 1,462 1,466 365 366 365 366 366
Net income available to common shareholders $27,893 24,064 7,555 6,818 6,667 6,853 6,001
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic $2.01 1.75 0.54 0.49 0.48 0.50 0.44
Earnings per share – diluted $2.00 1.75 0.54 0.49 0.48 0.50 0.43
Cash dividends declared on common stock $0.77 0.74 0.20 0.19 0.19 0.19 0.19
Common dividend payout ratio (1) 38.31% 42.29 37.04 38.78 39.58 38.00 43.18
Dividend yield (annualized) 3.06% 2.99 3.15 3.35 3.25 3.35 3.05
Return on average assets 0.98% 0.91 1.03 0.95 0.95 0.99 0.88
Return on average equity 10.80% 10.10 11.07 10.41 10.52 11.19 10.03
Return on average common equity (2) 10.96% 10.23 11.25 10.55 10.66 11.38 10.15
Return on average tangible common equity (3) 14.12% 13.00 15.16 13.73 13.31 14.30 12.90
Efficiency ratio (4) 58.59% 58.48 59.58 57.65 60.15 56.96 57.76
Stock price (Nasdaq: FISI):
High $27.02 26.59 27.02 24.94 24.88 25.69 26.59
Low $19.72 17.92 22.45 21.71 22.17 19.72 20.14
Close $25.15 24.71 25.15 22.48 23.42 23.02 24.71
(1) Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.
(2) Annualized 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 on investment securities and amortization of tax credit investment.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
Quarterly Trends
Years ended 2014 2013
December 31, Fourth Third Second First Fourth
2014 2013 Quarter Quarter Quarter Quarter Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits $114 191 -- 51 94 316 94
Investment securities (1) 877,673 834,213 876,932 854,030 875,855 904,437 849,069
Loans (2):
Commercial business 269,877 256,236 265,979 273,239 275,105 265,137 253,458
Commercial mortgage 473,372 438,821 473,694 473,168 473,883 472,733 460,722
Residential mortgage 107,254 123,277 101,982 105,255 108,535 113,390 118,113
Home equity 359,511 304,868 384,138 377,360 346,911 328,833 320,872
Consumer indirect 651,279 604,148 658,337 653,192 651,150 642,241 627,557
Other consumer 21,094 24,089 20,630 20,847 20,855 22,062 23,132
Total loans 1,882,387 1,751,439 1,904,760 1,903,061 1,876,439 1,844,396 1,803,854
Total interest-earning assets 2,760,174 2,585,843 2,781,692 2,757,142 2,752,388 2,749,149 2,653,017
Goodwill and other intangible assets, net 57,039 50,201 68,771 59,306 49,879 49,968 50,058
Total assets 2,994,604 2,803,825 3,052,499 2,985,920 2,973,735 2,965,400 2,860,733
Interest-bearing liabilities:
Interest-bearing demand 504,584 488,047 511,749 486,311 509,398 511,073 501,753
Savings and money market 783,784 727,737 824,661 758,306 789,956 761,799 757,868
Certificates of deposit 624,299 621,455 614,654 634,400 629,945 618,126 599,971
Borrowings 247,956 190,310 232,935 259,995 224,801 274,414 208,338
Total interest-bearing liabilities 2,160,623 2,027,549 2,183,999 2,139,012 2,154,100 2,165,412 2,067,930
Noninterest-bearing demand deposits 545,904 509,383 564,336 556,485 537,895 524,346 526,146
Total deposits 2,458,571 2,346,622 2,515,400 2,435,502 2,467,194 2,415,344 2,385,738
Total liabilities 2,722,730 2,551,139 2,768,693 2,712,274 2,705,578 2,703,777 2,608,815
Shareholders' equity 271,874 252,686 283,806 273,646 268,157 261,623 251,918
Common equity (3) 254,533 235,290 266,466 256,306 250,815 244,281 234,576
Tangible common equity (4) $197,494 185,089 197,695 197,000 200,936 194,313 184,518
Common shares outstanding:
Basic 13,893 13,739 14,049 13,953 13,791 13,773 13,754
Diluted 13,946 13,784 14,112 14,007 13,838 13,824 13,817
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits 0.14% 0.19 -- 0.28 0.07 0.08 0.16
Investment securities 2.44% 2.41 2.48 2.43 2.45 2.43 2.46
Loans 4.38% 4.65 4.44 4.31 4.32 4.45 4.55
Total interest-earning assets 3.76% 3.93 3.82 3.73 3.73 3.79 3.88
Interest-bearing demand 0.12% 0.15 0.11 0.12 0.12 0.13 0.16
Savings and money market 0.12% 0.13 0.11 0.12 0.12 0.13 0.14
Certificates of deposit 0.78% 0.79 0.82 0.78 0.76 0.74 0.77
Borrowings 0.37% 0.39 0.36 0.37 0.36 0.38 0.38
Total interest-bearing liabilities 0.34% 0.36 0.34 0.35 0.33 0.33 0.35
Net interest rate spread 3.42% 3.57 3.48 3.38 3.40 3.46 3.53
Net interest rate margin 3.50% 3.64 3.56 3.46 3.47 3.52 3.61
(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)
2014 2013
December 31, September 30, June 30, March 31, December 31,
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance $27,244 27,166 27,152 26,736 26,685
Net loan charge-offs (recoveries):
Commercial business (15) 44 (65) 39 328
Commercial mortgage (57) 66 159 (7) 369
Residential mortgage 22 11 61 57 118
Home equity (4) 66 127 95 8
Consumer indirect 1,420 1,577 1,336 1,350 1,416
Other consumer 151 173 126 156 117
Total net charge-offs 1,517 1,937 1,744 1,690 2,356
Provision for loan losses 1,910 2,015 1,758 2,106 2,407
Ending balance $27,637 27,244 27,166 27,152 26,736
Supplemental information
Period end loans:
Originated loans $1,873,148 1,866,671 1,853,728 1,803,209 1,785,599
Acquired loans 38,854 41,174 42,936 45,631 48,020
Total loans $1,912,002 1,907,845 1,896,664 1,848,840 1,833,619
Allowance for loan losses to total loans 1.45% 1.43 1.43 1.47 1.46
Allowance for loan losses for originated loans to originated loans 1.48% 1.46 1.47 1.51 1.50
Net charge-offs (recoveries) to average loans (annualized):
Commercial business -0.02% 0.06 -0.09 0.06 0.51
Commercial mortgage -0.05% 0.06 0.13 -0.01 0.32
Residential mortgage 0.09% 0.04 0.23 0.21 0.41
Home equity 0.00% 0.07 0.15 0.12 0.01
Consumer indirect 0.86% 0.96 0.82 0.85 0.90
Other consumer 2.90% 3.29 2.42 2.87 2.01
Total loans 0.32% 0.40 0.37 0.37 0.52
Non-performing loans:
Commercial business $4,288 3,258 3,589 3,706 3,474
Commercial mortgage 3,020 2,460 2,734 9,545 9,663
Residential mortgage 1,194 656 758 760 1,078
Home equity 463 464 371 826 925
Consumer indirect 1,169 1,300 1,427 1,387 1,471
Other consumer 19 46 12 46 11
Total non-performing loans 10,153 8,184 8,891 16,270 16,622
Foreclosed assets 194 509 554 412 333
Non-performing investment securities -- -- -- 113 128
Total non-performing assets $10,347 8,693 9,445 16,795 17,083
Total non-performing loans to total loans 0.53% 0.43 0.47 0.88 0.91
Total non-performing loans to originated loans 0.54% 0.44 0.48 0.90 0.93
Total non-performing assets to total assets 0.33% 0.28 0.32 0.56 0.58
Allowance for loan losses to non-performing loans 272% 333 306 167 161
FINANCIAL INSTITUTIONS, INC.
Appendix A - Non-GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share amounts)
Quarterly Trends
Years ended 2014 2013
December 31, Fourth Third Second First Fourth
2014 2013 Quarter Quarter Quarter Quarter Quarter
Ending tangible assets:
Total assets $3,089,521 3,055,304 2,993,264 3,015,619 2,928,636
Less: Goodwill and other intangible assets, net 68,639 68,887 49,826 49,913 50,002
Tangible assets (non-GAAP) $3,020,882 2,986,417 2,943,438 2,965,706 2,878,634
Ending tangible common equity:
Common shareholders' equity $262,192 260,418 252,487 245,523 237,497
Less: Goodwill and other intangible assets, net 68,639 68,887 49,826 49,913 50,002
Tangible common equity (non-GAAP) $193,553 191,531 202,661 195,610 187,495
Tangible common equity to tangible assets (non-GAAP) (1) 6.41% 6.41 6.89 6.60 6.51
Common shares outstanding 14,118 14,094 13,863 13,853 13,829
Tangible common book value per share (non-GAAP) (2) $13.71 13.59 14.62 14.12 13.56
Average tangible common equity:
Average common equity $254,533 235,290 266,466 256,306 250,815 244,281 234,576
Average goodwill and other intangible assets, net 57,039 50,201 68,771 59,306 49,879 49,968 50,058
Average tangible common equity (non-GAAP) $197,494 185,089 197,695 197,000 200,936 194,313 184,518
Return on average tangible common equity (3) 14.12% 13.00% 15.16 13.73 13.31 14.30 12.90
(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.

CONTACT: For additional information contact: Kevin B. Klotzbach Chief Financial Officer & Treasurer Phone: 585.786.1130 Email: KBKlotzbach@five-starbank.com

Source:Financial Institutions, Inc.