×

Financial Institutions, Inc. Announces Fourth Quarter and Full Year 2015 Results

WARSAW, N.Y., Jan. 26, 2016 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI), today reported financial results for the fourth quarter and year ended December 31, 2015. Financial Institutions, Inc. (the “Company”) is the parent company of Five Star Bank, Scott Danahy Naylon Insurance and Courier Capital. The Company’s financial results since August 1, 2014 include the results of operations of Scott Danahy Naylon (“SDN”), an insurance agency the Company acquired in August 2014.

Fourth Quarter and Full Year 2015 Highlights:

  • Increased net interest income to a record $24.6 million in the fourth quarter
  • Increased noninterest income to $8.6 million in the fourth quarter
  • Grew total loans $171.8 million or 9% over the prior year
  • Increased total deposits by $280.0 million or 11% from the end of the prior year
  • Increased total assets by $291.5 million, to reach $3.38 billion, the Company’s highest level of year-end total assets
  • Increased net interest income to $95.3 million in 2015, driven by a 9% increase in average interest-earning assets
  • Strong performance resulted in return on average common equity of 9.87% for the year
  • Focus on commercial lending resulted in 17% growth in commercial business loans and 19% growth in commercial mortgages
  • Total risk-based capital increased to 13.35% from 11.72%, strengthening the Company’s capital position to support future growth
  • Opened one and announced plans for a second “Made For You” financial solution center in the Rochester area; unique customer service experience to be offered in one of the Company’s targeted growth markets
  • Furthered the diversification of our financial services business lines through the January 2016 acquisition of Courier Capital as a wealth management platform

Net income for the fourth quarter 2015 was $6.6 million, compared to $8.3 million for the third quarter 2015, and $7.9 million for the fourth quarter 2014. After preferred dividends, fourth quarter 2015 net income available to common shareholders was $6.3 million or $0.44 per diluted share, compared with $8.0 million or $0.56 per share for third quarter 2015, and $7.6 million or $0.54 per share for fourth quarter 2014.

For the full year of 2015, the Company earned net income of $28.3 million, compared to $29.4 million for the full year of 2014. Net income available to common shareholders was $26.9 million or $1.90 per diluted share for the full year of 2015. This compares to net income available to common shareholders of $27.9 million or $2.00 per diluted share for the full year of 2014.

The Company’s President and Chief Executive Officer Martin K. Birmingham stated, “In 2015 we maintained the momentum of the last three years. We continued to execute on our growth and diversification strategy. We saw progress in our core banking franchise with robust growth in both loans and deposits. We also continued to integrate the SDN insurance platform into our sales process and, during the fourth quarter, we announced our agreement to purchase Courier Capital as our wealth management platform, which closed at the beginning of 2016.

“Our market presence increased in the City of Rochester with the opening of our first branch office in November. Our CityGate Financial Solution Center has received an outstanding reception. By year-end the office had already exceeded $10 million in deposits.

“We also advanced our leading position as a small business lender. Through the first three months of the current SBA fiscal year, we rank #1 in the number of SBA loans in the Rochester region and #3 in the Buffalo region.* This confirms the success of our business banking initiatives as we become the small business lender of choice in Upstate New York,” continued Mr. Birmingham.

Kevin B. Klotzbach, the Company’s Chief Financial Officer added, “Total deposits increased 11% from 2014 and we ended the year with a record level of loans, increasing 9% from 2014. This growth has allowed us to successfully offset the margin pressure facing the entire industry.”

During the fourth quarter of 2015, the Company recognized a non-cash goodwill impairment charge of $751 thousand and a non-cash fair value adjustment of the contingent consideration liability that resulted in noninterest income of $1.1 million related to the SDN acquisition. The fair value of the consideration was recorded at the time of the SDN acquisition and was included in goodwill as a component of the purchase price.

“While our fourth quarter 2014 results were positively impacted by an investment in $3.0 million of historic tax credits, our fourth quarter 2015 results were adversely impacted by approximately $300 thousand in acquisition expenses, an increase in provision for loan losses associated with a significant volume of loans closed at the end of the quarter and staffing expenses related to new branch expansion. Even with these fourth quarter items, we are pleased with our overall 2015 results, especially considering the investments we have made in compliance, personnel and infrastructure throughout 2015,” continued Mr. Klotzbach.

Net Interest Income and Net Interest Margin

Net interest income was $24.6 million in the fourth quarter 2015 compared to $24.1 million in the third quarter 2015 and $24.1 million in the fourth quarter 2014. The Company’s net interest margin increased by 6 basis points from 3.20% for the third quarter 2015 to 3.26% for the fourth quarter 2015, primarily due to a corresponding increase in the yield on average loans.

Net interest income for the fourth quarter 2015 increased $493 thousand compared to the fourth quarter 2014. The increase was primarily related to an increase in average interest-earning assets of $316.3 million, led by a $172.3 million increase in investment securities and a $144.0 million increase in loans. The increase was partially offset by a lower net interest margin, which decreased 30 basis points from the fourth quarter 2014 to the fourth quarter 2015.

For the year ended December 31, 2015, net interest income rose 2% to $95.3 million from $93.8 million in 2014 as a result of a $241.4 million or 9% increase in average interest-earning assets. These increases were partially offset by a 22 basis point narrowing of the net interest margin to 3.28% in 2015 from 3.50% in 2014.

Noninterest Income

Noninterest income was $8.6 million for the fourth quarter 2015 compared to $7.0 million in the third quarter 2015 and $5.2 million in the fourth quarter 2014. The quarter-over-quarter change was driven primarily by a $1.1 million gain due to the reduction in the Company’s estimate of the fair value of the contingent consideration liability recorded for SDN. Compared to the fourth quarter 2014, noninterest income in the fourth quarter 2015 increased by $3.4 million. The increase was primarily related to the amortization of a historic tax investment in a community-based project totaling $2.3 million that was recorded in the fourth quarter of 2014. 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.

Noninterest income totaled $30.3 million for the full year 2015, an increase of $5.0 million when compared to $25.3 million in the prior year. Insurance income increased by $2.8 million to $5.2 million during the current year as 2015 reflects the benefit of a full year of revenue associated with the 2014 SDN acquisition. 2015 noninterest income reflects the $1.1 million gain due to the reduction in the estimate of the fair value of the contingent consideration liability recorded for SDN as previously mentioned. Also included in noninterest income is the tax credit investment amortization described above of $390 thousand and $2.3 million for the years ended December 31, 2015 and 2014, respectively. Offsetting those increases was a $1.2 million decline in service charges on deposits, due primarily to lower overdraft fees.

Noninterest Expense

Noninterest expense was $21.8 million for the fourth quarter 2015 compared to $19.3 million in the third quarter 2015 and $19.4 million in the fourth quarter 2014. Salaries and employee benefits expense, the largest noninterest expense item, was up $1.1 million from the third quarter 2015, and reflects a combination of additional personnel to support organic growth as part of the Company’s expansion initiatives and year-end medical expense. Noninterest expense also included $751 thousand of goodwill impairment in the fourth quarter of 2015 related to the SDN acquisition, an increase of $540 thousand in professional service fees attributable to the acquisition of Courier Capital, and additional marketing services related to branding and the new branch opening at CityGate.

Noninterest expense for the full year 2015 totaled $79.4 million, a $7.0 million increase compared to $72.4 million in the prior year. Salaries and benefits expense increased $3.8 million year-over-year, reflecting the full year impact of the addition of employees from SDN and increased staffing associated with the Company’s expansion initiatives. Also contributing to the increase were higher occupancy and equipment expense, computer and data processing expense, the previously mentioned goodwill impairment charge and other noninterest expense.

Income Taxes

Income tax expense was $2.2 million in the fourth quarter 2015 compared to $2.8 million in the third quarter 2015, and $84 thousand in the fourth quarter 2014. When comparing the fourth quarter 2015 to the same quarter last year, the difference was 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 effective tax rate for the fourth quarter 2014 was 1.0%, compared with an effective tax rate of 24.5% in the current quarter and 24.8% in the third quarter 2015.

Income tax expense for the year was $10.5 million, representing an effective tax rate of 27.1% compared with an effective tax rate of 24.7% in 2014. The lower effective tax rate in 2014 reflects the historic tax credit benefit described above.

Balance Sheet and Capital Management

Total assets were $3.38 billion at December 31, 2015, up $23.4 million from $3.36 billion at September 30, 2015 and up $291.5 million from $3.09 billion at December 31, 2014. The increases were attributable to loan growth and higher investment security balances.

Total loans were $2.08 billion at December 31, 2015, up $47.5 million from September 30, 2015 and up $171.8 million from December 31, 2014. The increase in loans from the prior year was primarily attributable to organic growth in the commercial portfolio. Total investment securities were $1.03 billion at December 31, 2015, down $38.0 million or 4% from the end of the prior quarter and up $113.2 million or 12% compared with the end of 2014.

Total deposits were $2.73 billion at December 31, 2015, down $23.0 million from $2.75 billion at September 30, 2015 and up $280.0 million from $2.45 billion at December 31, 2014. The decrease during the fourth quarter 2015 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, 2015 and 2014, compared to 27% at September 30, 2015.

Short-term borrowings were $293.1 million at December 31, 2015, up $51.7 million from September 30, 2015 and down $41.7 million from December 31, 2014. Short-term borrowings are typically utilized to manage the seasonality of municipal deposits.

Long-term borrowings, net of issuance costs, were $39.0 million at December 31, 2015 and September 30, 2015. There were no long-term borrowings outstanding at December 31, 2014. On April 15, 2015, the Company completed the sale of $40 million in aggregate principal amount of 6.00% fixed to floating rate subordinated notes due 2030 (the “Subordinated Notes”). The Subordinated Notes qualify as Tier 2 capital for regulatory purposes. The net proceeds from this offering were intended for general corporate purposes, including but not limited to, contribution of capital to Five Star Bank to support organic growth as well as opportunistic acquisitions.

Shareholders’ equity was $293.8 million at December 31, 2015, compared with $295.4 million at September 30, 2015 and $279.5 million at December 31, 2014. Common book value per share was $19.49 at December 31, 2015, a decrease of $0.11 from $19.60 at September 30, 2015 and an increase of $0.92 from $18.57 at December 31, 2014. Tangible common book value per share was $14.77 at December 31, 2015, compared to $14.81 at September 30, 2015 and $13.71 at December 31, 2014. When comparing the fourth quarter 2015 to the third quarter 2015, the decreases in shareholders’ equity and the book value per share amounts were primarily due to lower net unrealized gains on securities available for sale, a component of accumulated other comprehensive income.

During the fourth quarter 2015, the Company declared a common stock dividend of $0.20 per common share. The fourth quarter 2015 dividend returned 45% of fourth quarter net income to common shareholders.

The Company’s leverage ratio was 7.41% at December 31, 2015, compared to 7.29% at September 30, 2015 and 7.35% at December 31, 2014. The increases in the leverage ratio were due to higher regulatory capital, which excludes changes in accumulated other comprehensive income. During the second quarter of 2015, the Company contributed $34.0 million of net proceeds from the Subordinated Notes offering to the Bank as additional paid-in capital. The Bank’s leverage ratio and total risk-based capital ratio were 8.09% and 12.66%, respectively, at December 31, 2015.

Credit Quality

Non-performing loans were $8.4 million at December 31, 2015, compared to $8.5 million at September 30, 2015 and $10.2 million at December 31, 2014. The $1.7 million decrease from the prior year end was due to due to improvements in the commercial portfolios, partially offset by increases in non-performing residential real estate, home equity and indirect consumer loans on a larger consolidated base in the 2015 period. The ratio of non-performing loans to total loans was 0.41% at December 31, 2015 compared with 0.42% at September 30, 2015 and 0.53% at December 31, 2014.

The provision for loans losses for the fourth quarter 2015 was $2.6 million, an increase of $1.8 million from the prior quarter and $688 thousand from the fourth quarter 2014. The increase in the provision for loans losses during the fourth quarter 2015 was primarily due to loan growth. Net charge-offs were $2.0 million during the current quarter, a $169 thousand increase compared to the prior quarter and a $451 thousand increase from the fourth quarter 2014. The ratio of annualized net charge-offs to total average loans was 0.38% during the current quarter, compared to 0.35% during the prior quarter and 0.32% during the fourth quarter 2014.

The provision for loans losses for the full year 2015 was $7.4 million, down from $7.8 million in 2014. Net charge-offs were $7.9 million during the current year, a $1.0 million increase compared to the prior year. The ratio of annualized net charge-offs to total average loans was 0.40% during 2015 compared to 0.37% during the prior year.

The allowance for loans losses to total loans ratio was 1.30% at December 31, 2015 and September 30, 2015, compared with 1.45% at December 31, 2014. The allowance to non-performing loans ratio was 321% at December 31, 2015, compared with 311% at September 30, 2015, and 272% at December 31, 2014.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon and Courier Capital. 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. Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. Financial Institutions, Inc. and its subsidiaries employ approximately 700 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 Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: the Company’s ability to implement its strategic plan, the Company’s ability to redeploy investment assets into loan assets, whether the Company experiences greater credit losses than expected, whether the Company experiences breaches of its, or third party, information systems, the attitudes and preferences of the Company’s customers, the Company’s ability to successfully integrate and profitably operate SDN and Courier Capital, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and the Company’s compliance with regulatory requirements, changes in interest rates and general economic and credit market conditions nationally and regionally. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company’s Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

* U.S. Small Business Administration, Buffalo District Office, SBA Bank Reports Newsletter FYE15 (September 30, 2015)

FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)
2015 2014
December 31, September 30, June 30, March 31, December 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents$ 60,121 51,334 52,554 135,972 58,151
Investment securities:
Available for sale 544,395 577,509 772,639 639,275 622,494
Held-to-maturity 485,717 490,638 320,820 306,255 294,438
Total investment securities 1,030,112 1,068,147 1,093,459 945,530 916,932
Loans held for sale 1,430 1,568 448 656 755
Loans:
Commercial business 313,758 297,876 292,791 277,464 267,409
Commercial mortgage 566,101 548,529 536,590 479,226 475,092
Residential mortgage 98,309 96,279 95,162 97,717 100,101
Home equity 410,112 408,634 398,854 386,961 386,615
Consumer indirect 676,940 665,714 666,550 662,213 661,673
Other consumer 18,542 19,204 19,326 19,373 21,112
Total loans 2,083,762 2,036,236 2,009,273 1,922,954 1,912,002
Allowance for loan losses 27,085 26,455 27,500 27,191 27,637
Total loans, net 2,056,677 2,009,781 1,981,773 1,895,763 1,884,365
Total interest-earning assets (1) (2) 3,114,530 3,097,315 3,104,631 2,860,605 2,826,488
Goodwill and other intangible assets, net 66,946 67,925 68,158 68,396 68,639
Total assets 3,381,024 3,357,608 3,359,459 3,197,077 3,089,521
Deposits:
Noninterest-bearing demand 641,972 623,296 602,143 559,646 571,260
Interest-bearing demand 523,366 563,731 530,861 611,104 490,190
Savings and money market 928,175 942,673 910,215 922,093 795,835
Certificates of deposit 637,018 623,800 613,019 611,852 593,242
Total deposits 2,730,531 2,753,500 2,656,238 2,704,695 2,450,527
Short-term borrowings 293,100 241,400 350,600 175,573 334,804
Long-term borrowings, net 38,990 38,972 38,955 - -
Total interest-bearing liabilities 2,420,649 2,410,576 2,443,650 2,320,622 2,214,071
Shareholders’ equity 293,844 295,434 284,435 286,689 279,532
Common shareholders’ equity (3) 276,504 278,094 267,095 269,349 262,192
Tangible common equity (4) 209,558 210,169 198,937 200,953 193,553
Unrealized gain (loss) on investment securities, net of tax$ 443 5,270 (924) 5,241 1,933
Common shares outstanding 14,191 14,189 14,184 14,167 14,118
Treasury shares 207 209 214 231 280
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio (5) 7.41% 7.29 7.31 7.53 7.35
Common equity Tier 1 ratio (5) 9.77% 9.74 9.50 9.66 n/a
Tier 1 risk-based capital (5) 10.50% 10.49 10.25 10.45 10.47
Total risk-based capital (5) 13.35% 13.37 13.17 11.69 11.72
Common equity to assets 8.18% 8.28 7.95 8.42 8.49
Tangible common equity to tangible assets (4) 6.32% 6.39 6.04 6.42 6.41
Common book value per share$ 19.49 19.60 18.83 19.01 18.57
Tangible common book value per share (4) 14.77 14.81 14.03 14.18 13.71

________
(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.
(5) 2015 ratios calculated under Basel III rules, which became effective January 1, 2015.

FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)
Years ended 2015 2014
December 31, Fourth Third Second First Fourth
2015 2014 Quarter Quarter Quarter Quarter Quarter
SELECTED INCOME STATEMENT DATA:
Interest income$ 105,450 101,055 27,487 27,007 25,959 24,997 25,984
Interest expense 10,137 7,281 2,856 2,876 2,555 1,850 1,846
Net interest income 95,313 93,774 24,631 24,131 23,404 23,147 24,138
Provision for loan losses 7,381 7,789 2,598 754 1,288 2,741 1,910
Net interest income after provision
for loan losses 87,932 85,985 22,033 23,377 22,116 20,406 22,228
Noninterest income:
Service charges on deposits 7,742 8,954 1,862 2,037 1,964 1,879 2,186
Insurance income 5,166 2,399 1,236 1,265 1,057 1,608 1,420
ATM and debit card 5,084 4,963 1,311 1,297 1,283 1,193 1,269
Investment advisory 2,193 2,138 642 523 541 487 491
Company owned life insurance 1,962 1,753 514 488 493 467 504
Investments in limited partnerships 895 1,103 30 336 55 474 209
Loan servicing 503 568 87 153 96 167 118
Net gain on sale of loans held for sale 249 313 88 53 39 69 82
Net gain on investment securities 1,988 2,041 640 286 - 1,062 264
Net gain on sale of other assets 27 69 7 - 16 4 8
Amortization of tax credit investment (390) (2,323) - (390) - - (2,323)
Other 4,918 3,372 2,163 957 911 887 927
Total noninterest income 30,337 25,350 8,580 7,005 6,455 8,297 5,155
Noninterest expense:
Salaries and employee benefits 42,439 38,595 11,332 10,278 10,606 10,223 10,551
Occupancy and equipment 13,856 12,829 3,365 3,417 3,375 3,699 3,324
Professional services 4,502 4,760 1,604 1,064 866 968 1,428
Computer and data processing 3,186 3,016 895 779 810 702 791
Supplies and postage 2,155 2,053 544 540 508 563 499
FDIC assessments 1,719 1,592 442 444 415 418 392
Advertising and promotions 1,120 805 331 312 238 239 196
Goodwill impairment charge 751 - 751 - - - -
Other 9,665 8,705 2,564 2,484 2,418 2,199 2,198
Total noninterest expense 79,393 72,355 21,828 19,318 19,236 19,011 19,379
Income before income taxes 38,876 38,980 8,785 11,064 9,335 9,692 8,004
Income tax expense 10,539 9,625 2,150 2,748 2,750 2,891 84
Net income 28,337 29,355 6,635 8,316 6,585 6,801 7,920
Preferred stock dividends 1,462 1,462 365 366 366 365 365
Net income available to common shareholders$ 26,875 27,893 6,270 7,950 6,219 6,436 7,555
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic$ 1.91 2.01 0.44 0.56 0.44 0.46 0.54
Earnings per share – diluted$ 1.90 2.00 0.44 0.56 0.44 0.46 0.54
Cash dividends declared on common stock$ 0.80 0.77 0.20 0.20 0.20 0.20 0.20
Common dividend payout ratio (1) 41.88% 38.31 45.45 35.71 45.45 43.48 37.04
Dividend yield (annualized) 2.86% 3.06 2.83 3.20 3.23 3.54 3.15
Return on average assets 0.87% 0.98 0.78 0.99 0.81 0.89 1.03
Return on average equity 9.78% 10.80 8.86 11.41 9.19 9.68 11.07
Return on average common equity (2) 9.87% 10.96 8.89 11.60 9.24 9.75 11.25
Efficiency ratio (3) 61.58% 58.59 64.55 59.46 62.00 60.27 59.58
Stock price (Nasdaq:FISI):
High$ 29.04 27.02 29.04 25.21 25.50 25.38 27.02
Low$ 21.67 19.72 24.05 23.54 22.50 21.67 22.45
Close$ 28.00 25.15 28.00 24.78 24.84 22.93 25.15

________
(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 and impairment of goodwill and other 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, adjustments to contingent liabilities and amortizations of tax credit investment.

FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
Years ended 2015 2014
December 31, Fourth Third Second First Fourth
2015 2014 Quarter Quarter Quarter Quarter Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits$ 37 114 - - 26 124 -
Investment securities (1) 1,014,171 877,673 1,049,217 1,067,815 1,029,640 907,871 876,932
Loans (2):
Commercial business 286,019 269,877 297,033 297,216 284,535 264,814 265,979
Commercial mortgage 522,328 473,372 554,327 545,875 509,317 478,705 473,694
Residential mortgage 97,651 107,254 98,111 96,776 96,474 99,264 101,982
Home equity 396,906 359,511 408,766 402,368 390,135 386,046 384,138
Consumer indirect 665,454 651,279 671,888 663,884 664,222 661,727 658,337
Other consumer 18,969 21,094 18,626 18,680 18,848 19,736 20,630
Total loans 1,987,327 1,882,387 2,048,751 2,024,799 1,963,531 1,910,292 1,904,760
Total interest-earning assets 3,001,535 2,760,174 3,097,968 3,092,614 2,993,197 2,818,287 2,781,692
Goodwill and other intangible assets, net 68,138 57,039 67,692 68,050 68,294 68,527 68,771
Total assets 3,269,890 2,994,604 3,353,702 3,343,802 3,263,111 3,115,516 3,052,499
Interest-bearing liabilities:
Interest-bearing demand 543,690 504,584 545,602 516,448 561,570 551,503 511,749
Savings and money market 908,614 783,784 960,768 903,491 929,701 839,218 824,661
Certificates of deposit 616,747 624,299 628,944 619,459 616,145 602,115 614,654
Short-term borrowings 262,494 247,956 241,957 329,050 226,577 251,768 232,935
Long-term borrowings, net 27,886 - 38,979 38,962 33,053 - -
Total interest-bearing liabilities 2,359,431 2,160,623 2,416,250 2,407,410 2,367,046 2,244,604 2,183,999
Noninterest-bearing demand deposits 599,334 545,904 619,423 625,131 587,396 564,500 564,336
Total deposits 2,668,385 2,458,571 2,754,737 2,664,529 2,694,812 2,557,336 2,515,400
Total liabilities 2,980,183 2,722,730 3,056,541 3,054,573 2,975,762 2,830,557 2,768,693
Shareholders’ equity 289,707 271,874 297,161 289,229 287,349 284,959 283,806
Common equity (3) 272,367 254,533 279,821 271,889 270,009 267,619 266,466
Tangible common equity (4)$204,229 197,494 212,129 203,839 201,715 199,092 197,695
Common shares outstanding:
Basic 14,081 13,893 14,095 14,087 14,078 14,063 14,049
Diluted 14,135 13,946 14,163 14,139 14,121 14,113 14,112
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits 0.40% 0.14 - - 0.39 0.19 -
Investment securities 2.46% 2.44 2.47 2.46 2.44 2.47 2.48
Loans 4.21% 4.38 4.22 4.16 4.18 4.27 4.44
Total interest-earning assets 3.62% 3.76 3.63 3.57 3.58 3.69 3.82
Interest-bearing demand 0.14% 0.12 0.15 0.15 0.14 0.11 0.11
Savings and money market 0.13% 0.12 0.14 0.14 0.12 0.10 0.11
Certificates of deposit 0.87% 0.78 0.88 0.89 0.87 0.84 0.82
Short-term borrowings 0.41% 0.37 0.49 0.41 0.38 0.37 0.36
Long-term borrowings, net 6.28% - 6.34 6.34 6.23 - -
Total interest-bearing liabilities 0.43% 0.34 0.47 0.47 0.43 0.33 0.34
Net interest rate spread 3.19% 3.42 3.16 3.10 3.15 3.36 3.48
Net interest rate margin 3.28% 3.50 3.26 3.20 3.24 3.43 3.56

________
(1) Includes investment securities at adjusted amortized cost.
(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
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance$ 26,455 27,500 27,191 27,637 27,244
Net loan charge-offs (recoveries):
Commercial business 133 68 (73) 1,093 (15)
Commercial mortgage 23 12 194 520 (57)
Residential mortgage 59 3 9 22 22
Home equity 75 64 145 74 (4)
Consumer indirect 1,519 1,475 645 1,317 1,420
Other consumer 159 177 59 161 151
Total net charge-offs 1,968 1,799 979 3,187 1,517
Provision for loan losses 2,598 754 1,288 2,741 1,910
Ending balance$ 27,085 26,455 27,500 27,191 27,637
Net charge-offs (recoveries) to average lons (annualized):
Commercial business 0.18% 0.09 -0.10 1.67 -0.02
Commercial mortgage 0.02% 0.01 0.15 0.44 -0.05
Residential mortgage 0.24% 0.01 0.04 0.09 0.09
Home equity 0.07% 0.06 0.15 0.08 0.00
Consumer indirect 0.90% 0.88 0.39 0.81 0.86
Other consumer 3.39% 3.76 1.26 3.31 2.90
Total loans 0.38% 0.35 0.20 0.68 0.32
Supplemental information (1)
Non-performing loans:
Commercial business$ 3,922 3,064 4,643 4,587 4,288
Commercial mortgage 947 1,802 3,070 3,411 3,020
Residential mortgage 1,325 1,523 1,628 1,361 1,194
Home equity 758 792 619 672 463
Consumer indirect 1,467 1,292 728 994 1,169
Other consumer 21 20 20 47 19
Total non-performing loans 8,440 8,493 10,708 11,072 10,153
Foreclosed assets 163 286 165 139 194
Total non-performing assets$ 8,603 8,779 10,873 11,211 10,347
Total non-performing loans to total loans 0.41% 0.42 0.53 0.58 0.53
Total non-performing assets to total assets 0.25% 0.26 0.32 0.35 0.33
Allowance for loan losses to total loans 1.30% 1.30 1.37 1.41 1.45
Allowance for loan losses to non-performing loans 321% 311 257 246 272

________
(1) At period end.

FINANCIAL INSTITUTIONS, INC.
Appendix A - Non-GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share amounts)
Years ended 2015 2014
December 31, Fourth Third Second First Fourth
2015 2014 Quarter Quarter Quarter Quarter Quarter
Ending tangible assets:
Total assets $3,381,024 3,357,608 3,359,459 3,197,077 3,089,521
Less: Goodwill and other intangible assets, net 66,946 67,925 68,158 68,396 68,639
Tangible assets (non-GAAP) $3,314,078 3,289,683 3,291,301 3,128,681 3,020,882
Ending tangible common equity:
Common shareholders’ equity $ 276,504 278,094 267,095 269,349 262,192
Less: Goodwill and other intangible assets, net 66,946 67,925 68,158 68,396 68,639
Tangible common equity (non-GAAP) $ 209,558 210,169 198,937 200,953 193,553
Tangible common equity to tangible assets (non-GAAP) (1) 6.32% 6.39 6.04 6.42 6.41
Common shares outstanding 14,191 14,189 14,184 14,167 14,118
Tangible common book value per share (non-GAAP) (2) $ 14.77 14.81 14.03 14.18 13.71
Average tangible common equity:
Average common equity$272,367 254,533 279,821 271,889 270,009 267,619 266,466
Average goodwill and other intangible assets, net 68,138 57,039 67,692 68,050 68,294 68,527 68,771
Average tangible common equity (non-GAAP)$204,229 197,494 212,129 203,839 201,715 199,092 197,695

________
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by common shares outstanding.


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.