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Financial Institutions, Inc. Announces First Quarter Earnings

WARSAW, N.Y., April 22, 2015 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (the "Company") (Nasdaq:FISI), the parent company of Five Star Bank, today reported financial results for the quarter ended March 31, 2015. The Company's financial results for the first quarter of 2015 include the results of operations from the acquisition of Scott Danahy Naylon ("SDN"), an insurance agency the Company acquired in August 2014.

Net income for the first quarter 2015 was $6.8 million, compared to $7.9 million for the fourth quarter 2014, and $7.2 million for the first quarter 2014. After preferred dividends, first quarter 2015 net income available to common shareholders was $6.4 million or $0.46 per diluted share, compared with $7.6 million or $0.54 per share for the fourth quarter 2014, and $6.9 million or $0.50 per share for the first quarter 2014.

The Company's President and Chief Executive Officer Martin K. Birmingham stated, "We are very pleased that our strategy for revenue growth and diversification to enhance long term profitability has been making meaningful progress. The 30% increase in quarterly noninterest income as compared with the prior year's first quarter, a primary objective of our growth strategy, has among other benefits had an offsetting effect on the net interest margin pressures that have impacted the industry for some time. We are encouraged by the loan opportunities that developed as the quarter progressed, which ultimately led to the majority of our loan growth and a strong pipeline."

"In the first quarter, we grew our loans and deposits at or above the levels achieved in 2014. This growth suggests successful initial execution of our organic growth initiatives, which includes developing the opportunity rich markets of Rochester and Buffalo. Average earnings assets in the first quarter increased by 1% from the fourth quarter of 2014 and 3% from the first quarter of 2014. Among other achievements in the quarter, total deposits reached the highest level in Company history, growing by 10% to $2.7 billion at the end of the first quarter from $2.5 billion at December 31, 2014."

First Quarter 2015 Highlights and Recent Developments:

  • Growth strategy drives increase in fee-based services income and market penetration, leading to record level of earnings assets and deposits
  • Noninterest income in first quarter 2015 increased by 30% from prior year
  • Grew total loans $74.1 million or 4% from a year ago
  • Increased total deposits by $171.3 million or 7% from a year ago
  • Total assets increased $181.5 million or 6% from a year ago
  • Provision for loan losses increased due to the recognition of a commercial downgrade
  • Strengthened financial position through recently completed $40 million subordinated notes offering
  • Quarterly cash dividend of $0.20 per common share represented a 3.54% dividend yield as of March 31, 2015 and a return of 43% of first quarter net income to common shareholders
  • Common and tangible common book value per share increased to $19.01 and $14.18, respectively, at March 31, 2015

On April 15, 2015, the Company successfully completed the sale of $40 million in aggregate principal amount of its 6.00% fixed to floating rate subordinated notes due 2030 (the "Notes"). The Company intends to treat the Notes as Tier 2 regulatory capital and use the net proceeds of the offering for general corporate purposes, including but not limited to, contributing capital to Five Star Bank, its wholly-owned subsidiary, organic growth initiatives, and potential acquisitions to expand its banking and other complementary non-banking businesses should accretive opportunities arise.

Kevin B. Klotzbach, the Company's Executive Vice President and Chief Financial Officer commented, "We are gratified that the progress made last year to position Financial Institutions for growth in its top line and the continued execution of our plan in the first quarter resulted in the strong demand for our recently completed Notes offering. Due to institutional investor interest in the Company, we increased the aggregate offering amount of the Notes to $40 million from the initially intended amount of $35 million. We have further bolstered our capital position, which provided a measure of financial flexibility to capitalize on potential growth opportunities."

Net Interest Income and Net Interest Margin

Net interest income was $23.1 million in the first quarter 2015 compared to $24.1 million in the fourth quarter 2014 and $23.3 million in the first quarter 2014. When comparing the first quarter 2015 to the fourth quarter 2014, average earning assets increased $36.6 million, including increases of $5.5 million and $30.9 million in loans and investment securities, respectively. Average earning assets were up $69.1 million, led by a $65.9 million increase in loans in the first quarter of 2015 compared to the same quarter in 2014. The growth in earning assets was offset by decreases in net interest margin. First quarter 2015 net interest margin was 3.43%, a decrease of 13 basis points from 3.56% for the fourth quarter of 2014 and a 9 basis point decrease from 3.52% for the first quarter of 2014. The receipt of non-recurring loan prepayment income resulted in higher net interest income and a larger net interest margin during the fourth quarter of 2014.

Noninterest Income

Noninterest income was $8.3 million for the first quarter 2015 compared to $5.2 million for the fourth quarter 2014 and $6.4 million in the first quarter 2014. Included in these totals are gains realized from the sale of investment securities. Exclusive of those gains, noninterest income was $7.2 million in the first quarter 2015, $4.9 million in the fourth quarter 2014 and $6.0 million in the first quarter 2014. The fourth quarter 2014 reflects $2.3 million of amortization of an historic tax credit investment in a community-based project. These types of investments are amortized in the first year the project is placed in service and the Company recognized the amortization as contra-income, included in noninterest income, with an offsetting tax benefit that reduced income tax expense. The higher noninterest income in the first quarter 2015 compared to the first quarter 2014 is primarily a result of a $1.6 million increase in insurance income, reflecting the contributions from SDN, which was acquired during the third quarter 2014 as part of the Company's strategy to diversify its business lines and increase noninterest income through additional fee-based services.

Noninterest Expense

Noninterest expense was $19.0 million for the first quarter 2015 compared to $19.4 million for the fourth quarter 2014 and $17.2 million in the first quarter 2014. Salaries and employee benefits expense increased $967 thousand from the first quarter 2014, reflecting higher pension costs, additional personnel as a result of the SDN acquisition and the hiring of additional personnel associated with the Company's expansion initiatives. Other noninterest expense for the first quarter 2015 included an increase of $153 thousand in intangible asset amortization attributable to the SDN acquisition.

Income Tax Expense

Income tax expense was $2.9 million in the first quarter 2015, compared to $84 thousand in the fourth quarter 2014 and $3.1 million in the first quarter 2014. Lower income tax expense during the fourth quarter 2014 was primarily 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 fourth quarter 2014 effective tax rate was 1.0%, compared with an effective tax rate of 29.8% for the first quarter 2015 and 30.0% in the first quarter 2014.

Balance Sheet and Capital Management

Total assets were $3.20 billion at March 31, 2015, up $107.6 million from $3.09 billion at December 31, 2014 and up $181.5 million from $3.02 billion at March 31, 2014.

Cash and cash equivalents were $136.0 million at March 31, 2015, up $77.8 million from December 31, 2014 and up $63.6 million from March 31, 2014. The higher cash and cash equivalents balance resulted from strong public deposit inflows at the end of the first quarter of 2015.

Total loans were $1.92 billion at March 31, 2015, up $11.0 million from December 31, 2014 and up $74.1 million from March 31, 2014. The year-to-date increase in loans is primarily attributable to organic commercial loan growth. The increase in loans from the prior year is primarily attributable to growth in commercial, home equity and consumer indirect loans. Total investment securities were $945.5 million at March 31, 2015, up $28.6 million or 3% from the end of the prior quarter and up $17.3 million or 2% compared with the March 31, 2014.

Total deposits were $2.70 billion at March 31, 2015, an increase of $254.2 million from December 31, 2014 and an increase of $171.3 million from March 31, 2014. The increase during the first quarter of 2015 was mainly due to seasonal inflows of municipal deposits, while the year-over-year increase was due to higher municipal deposits as well as successful business development efforts. Public deposit balances represented 30% of total deposits at March 31, 2015, compared to 25% at December 31, 2014 and 28% at March 31, 2014.

Short-term borrowings were $175.6 million at March 31, 2015, down $159.2 million from December 31, 2014 and down $21.2 million from March 31, 2014. Short-term borrowings are often utilized to manage the seasonal outflows of municipal deposits.

Shareholders' equity was $286.7 million at March 31, 2015, compared with $279.5 million at December 31, 2014 and $262.9 million at March 31, 2014. Common book value per share was $19.01 at March 31, 2015, an increase of $0.44 from $18.57 at December 31, 2014 and $1.29 from $17.72 at March 31, 2014. Tangible common book value per share was $14.18 at March 31, 2015, compared to $13.71 at December 31, 2014 and $14.12 at March 31, 2014.

During the first quarter of 2015, the Company declared a common stock dividend of $0.20 per common share, consistent with the prior quarter and up by 5%, or $0.01 per share, from the first quarter of 2014. The first quarter 2015 dividend returned 43% of the quarter's net income to common shareholders.

The Company's leverage ratio was 7.53% at March 31, 2015, compared to 7.35% at December 31, 2014 and 7.51% at March 31, 2014. 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

Non-performing loans at March 31, 2015 increased $919 thousand compared with December 31, 2014, primarily due to a $690 thousand increase in non-performing commercial loans. Included in non-performing loans at March 31, 2015 is one $2.6 million commercial credit relationship which we placed on nonaccrual status during the first quarter 2015. This downgrade resulted in an increase in our provision and allowance for losses of approximately $800 thousand. The loans comprising this credit relationship are performing in accordance with their contractual terms as of March 31, 2015 and the Company continues to monitor this relationship closely. The ratio of non-performing loans to total loans was 0.58% at March 31, 2015 compared with 0.53% at December 31, 2014 and 0.88% at March 31, 2014.

The provision for loans losses for the first quarter 2015 was $2.7 million, an increase of $831 thousand from the prior quarter and $635 thousand from the first quarter 2014. The increase in the provision for loan losses in the first quarter 2015 was primarily related to the credit relationship placed on nonaccrual status referenced above. Net charge-offs were $3.2 million during the first quarter 2015, a $1.7 million increase compared to the prior quarter and $1.5 million from the first quarter 2014. The increase in net charge-offs was primarily driven by the first quarter 2015 charge-off of two commercial loan relationships totaling $1.7 million that had been previously reserved by the Company. The ratio of annualized net charge-offs to total average loans was 0.68% during the current quarter, compared to 0.32% during the prior quarter and 0.37% during the first quarter 2014.

The ratio of allowance for loans losses to total loans was 1.41% at March 31, 2015, compared with 1.45% at December 31, 2014 and 1.47% at March 31, 2014. The ratio of allowance for loans losses to non-performing loans was 246% at March 31, 2015, compared with 272% at December 31, 2014 and 167% at March 31, 2014.

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, such as tangible common equity, 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 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)
2015 2014
March 31, December 31, September 30, June 30, March 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents $135,972 58,151 87,582 64,832 72,401
Investment securities:
Available for sale 639,275 622,494 585,479 601,903 674,650
Held-to-maturity 306,255 294,438 285,967 262,057 253,576
Total investment securities 945,530 916,932 871,446 863,960 928,226
Loans held for sale 656 755 1,029 201 900
Loans:
Commercial business 277,464 267,409 275,107 277,685 268,352
Commercial mortgage 479,226 475,092 469,485 469,055 468,763
Residential mortgage 97,717 100,101 103,044 106,206 110,164
Home equity 386,961 386,615 382,703 369,578 332,348
Consumer indirect 662,213 661,673 656,215 652,748 647,546
Other consumer 19,373 21,112 21,291 21,392 21,667
Total loans 1,922,954 1,912,002 1,907,845 1,896,664 1,848,840
Allowance for loan losses 27,191 27,637 27,244 27,166 27,152
Total loans, net 1,895,763 1,884,365 1,880,601 1,869,498 1,821,688
Total interest-earning assets (1) (2) 2,860,605 2,826,488 2,780,940 2,758,779 2,780,489
Goodwill and other intangible assets, net 68,396 68,639 68,887 49,826 49,913
Total assets 3,197,077 3,089,521 3,055,304 2,993,264 3,015,619
Deposits:
Noninterest-bearing demand 559,646 571,260 571,549 551,229 532,914
Interest-bearing demand 611,104 490,190 530,783 507,083 541,660
Savings and money market 922,093 795,835 805,522 766,594 812,734
Certificates of deposit 611,852 593,242 630,970 625,172 646,112
Total deposits 2,704,695 2,450,527 2,538,824 2,450,078 2,533,420
Borrowings 175,573 334,804 215,967 254,683 196,746
Total interest-bearing liabilities 2,320,622 2,214,071 2,183,242 2,153,532 2,197,252
Shareholders' equity 286,689 279,532 277,758 269,827 262,865
Common shareholders' equity (3) 269,349 262,192 260,418 252,487 245,523
Tangible common equity (5) 200,953 193,553 191,531 202,661 195,610
Unrealized gain (loss) on investment securities, net of tax $5,241 1,933 (374) 1,292 (1,467)
Common shares outstanding 14,167 14,118 14,094 13,863 13,853
Treasury shares 231 280 304 299 309
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio (4) 7.53% 7.35 7.34 7.64 7.51
Common equity Tier 1 ratio (4) 9.66% n/a n/a n/a n/a
Tier 1 risk-based capital (4) 10.45% 10.47 10.44 10.95 10.89
Total risk-based capital (4) 11.69% 11.72 11.69 12.2 12.14
Common equity to assets 8.42% 8.49 8.52 8.44 8.14
Tangible common equity to tangible assets (5) 6.42% 6.41 6.41 6.89 6.60
Common book value per share $19.01 18.57 18.48 18.21 17.72
Tangible common book value per share (5) 14.18 13.71 13.59 14.62 14.12
________
(1) Includes investment securities at adjusted amortized cost and non-performing investment securities.
(2) Includes nonaccrual loans.
(3) Excludes preferred shareholders' equity.
(4) March 31, 2015 calculated under Basel III rules, which became effective January 1, 2015.
(5) 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)
2015 2014
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
SELECTED INCOME STATEMENT DATA:
Interest income $24,997 101,055 25,984 25,129 24,883 25,059
Interest expense 1,850 7,281 1,846 1,871 1,780 1,784
Net interest income 23,147 93,774 24,138 23,258 23,103 23,275
Provision for loan losses 2,741 7,789 1,910 2,015 1,758 2,106
Net interest income after provision for loan losses 20,406 85,985 22,228 21,243 21,345 21,169
Noninterest income:
Service charges on deposits 1,879 8,954 2,186 2,277 2,241 2,250
Insurance income 1,608 2,399 1,420 922 16 41
ATM and debit card 1,193 4,963 1,269 1,263 1,257 1,174
Investment advisory 487 2,138 491 524 561 562
Investments in limited partnerships 474 1,103 209 187 81 626
Company owned life insurance 467 1,753 504 421 425 403
Loan servicing 167 568 118 120 176 154
Net gain on sale of loans held for sale 69 313 82 76 50 105
Net gain on investment securities 1,062 2,041 264 515 949 313
Net gain (loss) on sale of other assets 4 69 8 72 24 (35)
Amortization of tax credit investment -- (2,323) (2,323) -- -- --
Other 887 3,372 927 884 797 764
Total noninterest income 8,297 25,350 5,155 7,261 6,577 6,357
Noninterest expense:
Salaries and employee benefits 10,223 38,595 10,551 9,725 9,063 9,256
Occupancy and equipment 3,699 12,829 3,324 3,131 3,139 3,235
Professional services 968 4,760 1,428 976 1,384 972
Computer and data processing 702 3,016 791 725 777 723
Supplies and postage 563 2,053 499 507 535 512
FDIC assessments 418 1,592 392 390 388 422
Advertising and promotions 239 805 196 216 214 179
Other 2,199 8,705 2,198 2,285 2,308 1,914
Total noninterest expense 19,011 72,355 19,379 17,955 17,808 17,213
Income before income taxes 9,692 38,980 8,004 10,549 10,114 10,313
Income tax expense 2,891 9,625 84 3,365 3,082 3,094
Net income 6,801 29,355 7,920 7,184 7,032 7,219
Preferred stock dividends 365 1,462 365 366 365 366
Net income available to common shareholders $6,436 27,893 7,555 6,818 6,667 6,853
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic $0.46 2.01 0.54 0.49 0.48 0.50
Earnings per share – diluted $0.46 2.00 0.54 0.49 0.48 0.50
Cash dividends declared on common stock $0.20 0.77 0.20 0.19 0.19 0.19
Common dividend payout ratio (1) 43.48% 38.31 37.04 38.78 39.58 38.00
Dividend yield (annualized) 3.54% 3.06 3.15 3.35 3.25 3.35
Return on average assets 0.89% 0.98 1.03 0.95 0.95 0.99
Return on average equity 9.68% 10.80 11.07 10.41 10.52 11.19
Return on average common equity (2) 9.75% 10.96 11.25 10.55 10.66 11.38
Efficiency ratio (3) 60.27% 58.59 59.58 57.65 60.15 56.96
Stock price (Nasdaq: FISI):
High $25.38 27.02 27.02 24.94 24.88 25.69
Low $21.67 19.72 22.45 21.71 22.17 19.72
Close $22.93 25.15 25.15 22.48 23.42 23.02
________
(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) 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)
2015 2014
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits $124 114 -- 51 94 316
Investment securities (1) 907,871 877,673 876,932 854,030 875,855 904,437
Loans (2):
Commercial business 264,814 269,877 265,979 273,239 275,105 265,137
Commercial mortgage 478,705 473,372 473,694 473,168 473,883 472,733
Residential mortgage 99,264 107,254 101,982 105,255 108,535 113,390
Home equity 386,046 359,511 384,138 377,360 346,911 328,833
Consumer indirect 661,727 651,279 658,337 653,192 651,150 642,241
Other consumer 19,736 21,094 20,630 20,847 20,855 22,062
Total loans 1,910,292 1,882,387 1,904,760 1,903,061 1,876,439 1,844,396
Total interest-earning assets 2,818,287 2,760,174 2,781,692 2,757,142 2,752,388 2,749,149
Goodwill and other intangible assets, net 68,527 57,039 68,771 59,306 49,879 49,968
Total assets 3,115,516 2,994,604 3,052,499 2,985,920 2,973,735 2,965,400
Interest-bearing liabilities:
Interest-bearing demand 551,503 504,584 511,749 486,311 509,398 511,073
Savings and money market 839,218 783,784 824,661 758,306 789,956 761,799
Certificates of deposit 602,115 624,299 614,654 634,400 629,945 618,126
Borrowings 251,768 247,956 232,935 259,995 224,801 274,414
Total interest-bearing liabilities 2,244,604 2,160,623 2,183,999 2,139,012 2,154,100 2,165,412
Noninterest-bearing demand deposits 564,500 545,904 564,336 556,485 537,895 524,346
Total deposits 2,557,336 2,458,571 2,515,400 2,435,502 2,467,194 2,415,344
Total liabilities 2,830,557 2,722,730 2,768,693 2,712,274 2,705,578 2,703,777
Shareholders' equity 284,959 271,874 283,806 273,646 268,157 261,623
Common equity (3) 267,619 254,533 266,466 256,306 250,815 244,281
Tangible common equity (4) $199,092 197,494 197,695 197,000 200,936 194,313
Common shares outstanding:
Basic 14,063 13,893 14,049 13,953 13,791 13,773
Diluted 14,113 13,946 14,112 14,007 13,838 13,824
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits 0.19% 0.14 -- 0.28 0.07 0.08
Investment securities 2.47% 2.44 2.48 2.43 2.45 2.43
Loans 4.27% 4.38 4.44 4.31 4.32 4.45
Total interest-earning assets 3.69% 3.76 3.82 3.73 3.73 3.79
Interest-bearing demand 0.11% 0.12 0.11 0.12 0.12 0.13
Savings and money market 0.10% 0.12 0.11 0.12 0.12 0.13
Certificates of deposit 0.84% 0.78 0.82 0.78 0.76 0.74
Borrowings 0.37% 0.37 0.36 0.37 0.36 0.38
Total interest-bearing liabilities 0.33% 0.34 0.34 0.35 0.33 0.33
Net interest rate spread 3.36% 3.42 3.48 3.38 3.40 3.46
Net interest rate margin 3.43% 3.50 3.56 3.46 3.47 3.52
________
(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)
2015 2014
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance $27,637 27,244 27,166 27,152 26,736
Net loan charge-offs (recoveries):
Commercial business 1,093 (15) 44 (65) 39
Commercial mortgage 520 (57) 66 159 (7)
Residential mortgage 22 22 11 61 57
Home equity 74 (4) 66 127 95
Consumer indirect 1,317 1,420 1,577 1,336 1,350
Other consumer 161 151 173 126 156
Total net charge-offs 3,187 1,517 1,937 1,744 1,690
Provision for loan losses 2,741 1,910 2,015 1,758 2,106
Ending balance $27,191 27,637 27,244 27,166 27,152
Net charge-offs (recoveries) to average loans (annualized):
Commercial business 1.67% (0.02) 0.06 (0.09) 0.06
Commercial mortgage 0.44% (0.05) 0.06 0.13 (0.01)
Residential mortgage 0.09% 0.09 0.04 0.23 0.21
Home equity 0.08% 0.00 0.07 0.15 0.12
Consumer indirect 0.81% 0.86 0.96 0.82 0.85
Other consumer 3.31% 2.90 3.29 2.42 2.87
Total loans 0.68% 0.32 0.40 0.37 0.37
Supplemental information (1)
Non-performing loans:
Commercial business $4,587 4,288 3,258 3,589 3,706
Commercial mortgage 3,411 3,020 2,460 2,734 9,545
Residential mortgage 1,361 1,194 656 758 760
Home equity 672 463 464 371 826
Consumer indirect 994 1,169 1,300 1,427 1,387
Other consumer 47 19 46 12 46
Total non-performing loans 11,072 10,153 8,184 8,891 16,270
Foreclosed assets 139 194 509 554 412
Non-performing investment securities -- -- -- -- 113
Total non-performing assets $11,211 10,347 8,693 9,445 16,795
Total non-performing loans to total loans 0.58% 0.53 0.43 0.47 0.88
Total non-performing assets to total assets 0.35% 0.33 0.28 0.32 0.56
Allowance for loan losses to total loans 1.41% 1.45 1.43 1.43 1.47
Allowance for loan losses to non-performing loans 246% 272 333 306 167
________
(1) At period end.
FINANCIAL INSTITUTIONS, INC.
Appendix A - Non-GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share amounts)
2015 2014
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
Ending tangible assets:
Total assets $3,197,077 3,089,521 3,055,304 2,993,264 3,015,619
Less: Goodwill and other intangible assets, net 68,396 68,639 68,887 49,826 49,913
Tangible assets (non-GAAP) $3,128,681 3,020,882 2,986,417 2,943,438 2,965,706
Ending tangible common equity:
Common shareholders' equity $269,349 262,192 260,418 252,487 245,523
Less: Goodwill and other intangible assets, net 68,396 68,639 68,887 49,826 49,913
Tangible common equity (non-GAAP) $200,953 193,553 191,531 202,661 195,610
Tangible common equity to tangible assets (non-GAAP) (1) 6.42% 6.41 6.41 6.89 6.60
Common shares outstanding 14,167 14,118 14,094 13,863 13,853
Tangible common book value per share (non-GAAP) (2) $14.18 13.71 13.59 14.62 14.12
Average tangible common equity:
Average common equity $267,619 254,533 266,466 256,306 250,815 244,281
Average goodwill and other intangible assets, net 68,527 57,039 68,771 59,306 49,879 49,968
Average tangible common equity (non-GAAP) $199,092 197,494 197,695 197,000 200,936 194,313
________
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by common shares outstanding.

CONTACT: For additional information contact: Kevin B. Klotzbach Chief Financial Officer & Treasurer Phone: 585.786.1130 Email: KBKlotzbach@five-starbank.com Jordan Darrow Darrow Associates Phone: 631.367.1866 Email: jdarrow@darrowir.com

Source:Financial Institutions, Inc.