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Financial Institutions, Inc. Reports First Quarter 2013 Net Income of $6.1 Million

WARSAW, N.Y., April 24, 2013 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI) (the "Company"), the parent company of Five Star Bank, today reported financial results for the first quarter ended March 31, 2013.

Summary of Performance

"Our first quarter results provide a solid start to 2013," said Martin K. Birmingham, the Company's President and Chief Executive Officer. "We delivered consistent earnings despite the pressure we experienced, like most of the banking industry, on our net interest margin."

Net income available to common shareholders was $5.8 million or $0.42 per diluted share in the quarter ended March 31, 2013, representing a $182 thousand, or $0.01 per diluted share, decrease from fourth quarter 2012. Net income of $6.1 million in the first quarter 2013 was $183 thousand, or 3% lower than the fourth quarter 2012 as a $270 thousand increase in noninterest income was offset by a $201 thousand decrease in net interest income and $189 thousand increase in the provision for loan losses. The Company's return on average assets and return on average common equity were 0.90% and 9.83%, respectively, during the first quarter 2013, compared to 0.95% and 9.95%, respectively, in the fourth quarter 2012.

Mr. Birmingham concluded, "We are committed to enhancing shareholder value by utilizing our earnings both for growth and returning a portion of earnings to shareholders as a cash dividend. This is evidenced by our recent announcement of a 12.5% increase in the quarterly cash dividend from $0.16 per share to $0.18 per share, which returned 43% percent of first quarter net income to shareholders."

Net Interest Income and Net Interest Margin

Net interest income of $22.9 million in the first quarter 2013 was $201 thousand lower than the fourth quarter 2012, partly a result of the fewer number of days in the first quarter versus the fourth quarter. The net interest margin (on a tax-equivalent basis) was 3.73% in the first quarter 2013 compared to 3.92% in fourth quarter 2012. The Company's yield on interest-earning assets decreased 22 basis points in the first quarter 2013 compared with the fourth quarter 2012, partly a result of cash flows being reinvested in the current low interest rate environment, coupled with the impact of a $100 million leverage strategy that utilized proceeds from FHLB advances to acquire high-quality investment securities. The underlying leverage strategy increased net interest income by approximately $270 thousand in the first quarter 2013.

Noninterest Income

Total noninterest income for the first quarter 2013 was $6.6 million compared to $6.3 million in the fourth quarter 2012. Noninterest income in the first quarter 2013 included gains totaling $892 thousand from the sale of three trust preferred securities that were written down in prior periods and included in non-performing assets. Net securities gains totaled $487 thousand in the fourth quarter 2012. During the fourth quarter 2012, the Company recognized a loss of $302 thousand from the disposal of other assets, primarily related to the consolidation of branches as part of the 2012 branch acquisitions. Excluding the net securities gains and gains/losses from the disposal of other assets, noninterest income in the first quarter 2013 was $438 thousand lower than the fourth quarter 2012, as a $225 thousand increase in broker-dealer revenue resulting from favorable market conditions and new business opportunities was more than offset by decreases of $385 thousand in service charges on deposits, reflecting typical seasonality, $99 thousand in ATM and debit card income and $139 thousand in mortgage banking revenue (defined as loan servicing income and net gains on the sale of loans held for sale).

Noninterest Expense

Total noninterest expense of $17.6 million for the first quarter 2013 increased by less than 1% from $17.5 million in the fourth quarter. Advertising and promotions expense decreased $216 thousand, largely attributable to the timing of promotional spending, while lower real estate owned expense drove a $111 thousand decrease in other noninterest expense when comparing the first quarter 2013 to the fourth quarter 2012. These decreases were offset by higher salaries and employee benefits and occupancy and equipment expense. Salaries and employee benefits increased $147 thousand as the Company typically experiences a higher level of payroll taxes in the first quarter. Occupancy and equipment expense increased $150 thousand due to an increase in service contract expense when comparing the first quarter 2013 to the fourth quarter 2012. In addition, the last three quarters include non-recurring professional service fees associated with the executive management transitions that began in 2012 with the retirement of the Company's former CEO.

Balance Sheet and Capital Management

Total assets were $2.828 billion at March 31, 2013, up $63.8 million from $2.764 billion at December 31, 2012. The increase in total assets is attributable to a $24.4 million increase in cash and cash equivalents, a $29.5 million increase in investment securities and a $11.6 million increase in loans.

Total loans were $1.717 billion at March 31, 2013, up $11.6 million or 1% compared to $1.706 billion at December 31, 2012. The increase in loans was attributable to organic growth, primarily in the commercial, home equity and consumer indirect loan categories. The average yield on the loan portfolio was 4.83% in the first quarter 2013, compared to 4.98% in the fourth quarter 2012.

Total investment securities were $871.2 million at March 31, 2013, up $29.5 million compared to $841.7 million at December 31, 2012. The average yield on the investment securities portfolio was 2.39% in the first quarter 2013 compared to 2.56% in the fourth quarter 2012.

Total deposits were $2.409 billion at March 31, 2013, up $147.7 million from $2.262 billion at December 31, 2012. Public deposit balances increased $178.6 million during the first quarter of 2013 due to the seasonality of municipal cash flows, coupled with successful business development efforts in our newly acquired branches. The repricing of matured certificates of deposit and the decrease in interest rates on various interest-bearing deposit accounts to reflect lower market interest rates resulted in our average cost of interest-bearing liabilities declining to 0.37% in the first quarter 2013 from 0.42% in the fourth quarter 2012.

Shareholders' equity was $254.9 million at March 31, 2013, up $1.0 million compared with $253.9 million at December 31, 2012. At March 31, 2013, the tangible common equity to tangible assets ratio and leverage ratio were 6.74% and 7.46%, respectively, compared to 6.86% and 7.71%, respectively, at December 31, 2012. The decrease in the Company's equity ratios was attributable to growth in our average assets.

At March 31, 2013, the Company's common book value and tangible common book value was $17.21 per share and $13.56 per share, respectively, compared to $17.15 per share and $13.49 per share, respectively, at December 31, 2012.

Credit Quality

Non-performing loans were $11.8 million or 0.69% of total loans at March 31, 2013, compared with $9.1 million or 0.53% of total loans at December 31, 2012. The Company's ratio of non-performing loans to total loans continues to compare favorably to its peer group average, which was 2.19% of total loans at December 31, 2012, the most recent period for which information is available (Source: Federal Financial Institutions Examination Council — Bank Holding Company Performance Report as of December 31, 2012 — Top-tier bank holding companies having consolidated assets between $1 billion and $3 billion).

The increase in non-performing loans during the first quarter 2013 was due to the addition of one credit relationship consisting of commercial business and commercial mortgage loans with unpaid principal balances totaling $3.4 million. The Company had internally downgraded the relationship to substandard status from special mention during the fourth quarter 2012. The further downgrade necessitated a specific allocation that increased our allowance for losses by approximately $570 thousand in the quarter.

Net loan charge-offs improved to $1.6 million in the first quarter 2013 from $2.1 million in the fourth quarter 2012. The provision for loan losses was $2.7 million in the first quarter 2013, compared to $2.5 million in the fourth quarter.

The allowance for loan losses was $25.8 million at March 31, 2013, compared with $24.7 million at December 31, 2012. The ratio of the allowance for loan losses to total loans was 1.50% at March 31, 2013, compared with 1.45% at December 31, 2012. The ratio of the allowance for loan losses for originated loans to total originated loans was 1.56% at March 31, 2013, compared with 1.51% at December 31, 2012. The ratio of allowance for loan losses to non-performing loans was 220% at March 31, 2013, compared with 271% at December 31, 2012.

About Financial Institutions, Inc.

With over $2.8 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of over 50 offices and more than 60 ATMs throughout Western and Central New York State. Five Star Investment Services provides investment advice, brokerage and insurance products and services within the same New York State markets. Financial Institutions, Inc. and its subsidiaries employ over 600 individuals. The Company's stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at the Company's website: www.fiiwarsaw.com.

Non-GAAP Financial Information

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

Safe Harbor Statement

This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company's forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, whether it experiences greater credit losses than expected, the impact of the current management transition, the attitudes and preferences of its customers, its ability to successfully integrate recently acquired bank branches and profitably operate newly opened bank branches, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and general economic and credit market conditions nationally and regionally. For more information about these factors and other factors that could affect the Company's forward-looking statements, please see the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)
2013 2012
March 31, December 31, September 30, June 30, March 31,
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents $ 84,791 60,436 77,045 61,813 77,025
Investment securities:
Available for sale 853,437 823,796 748,618 765,216 699,497
Held-to-maturity 17,747 17,905 19,564 22,016 24,196
Total investment securities 871,184 841,701 768,182 787,232 723,693
Loans held for sale 2,142 1,518 1,411 1,682 2,053
Loans:
Commercial business 259,062 258,675 245,307 245,437 233,764
Commercial mortgage 424,635 413,324 403,120 413,983 406,521
Residential mortgage 126,228 133,520 139,984 142,900 112,148
Home equity 292,225 286,649 279,211 264,911 237,019
Consumer indirect 590,440 586,794 563,676 531,645 508,085
Other consumer 24,700 26,764 27,687 25,278 23,491
Total loans 1,717,290 1,705,726 1,658,985 1,624,154 1,521,028
Allowance for loan losses 25,827 24,714 24,301 24,120 23,763
Total loans, net 1,691,463 1,681,012 1,634,684 1,600,034 1,497,265
Total interest-earning assets (1) (2) 2,567,948 2,522,444 2,400,225 2,389,171 2,226,472
Goodwill and other intangible assets, net 50,288 50,389 50,924 43,858 37,369
Total assets 2,827,658 2,763,865 2,653,319 2,622,751 2,460,820
Deposits:
Noninterest-bearing demand 494,362 501,514 490,706 422,165 404,186
Interest-bearing demand 529,115 449,744 472,023 420,386 435,701
Savings and money market 748,482 655,598 673,883 584,278 530,754
Certificates of deposit 637,538 654,938 695,107 708,442 695,928
Total deposits 2,409,497 2,261,794 2,331,719 2,135,271 2,066,569
Borrowings 139,620 179,806 38,282 200,824 117,347
Total interest-bearing liabilities 2,054,755 1,940,086 1,879,295 1,913,930 1,779,730
Shareholders' equity 254,930 253,897 251,842 246,946 239,962
Common shareholders' equity (3) 237,511 236,426 234,371 229,473 222,489
Tangible common equity (4) 187,223 186,037 183,447 185,615 185,120
Unrealized gain on investment securities, net of tax $ 13,745 16,060 17,178 14,487 12,316
Common shares outstanding 13,804 13,788 13,786 13,812 13,812
Treasury shares 358 374 376 350 350
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio 7.46% 7.71 7.67 8.27 8.80
Tier 1 risk-based capital 10.84% 10.73 10.91 11.39 12.22
Total risk-based capital 12.09% 11.98 12.16 12.64 13.47
Common equity to assets 8.40% 8.55 8.83 8.75 9.04
Tangible common equity to tangible assets (4) 6.74% 6.86 7.05 7.20 7.64
Common book value per share $ 17.21 17.15 17.00 16.61 16.11
Tangible common book value per share (4) 13.56 13.49 13.31 13.44 13.40
(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)
2013 2012
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
SELECTED INCOME STATEMENT DATA:
Interest income $ 24,748 97,567 25,087 25,299 23,731 23,450
Interest expense 1,861 9,051 1,999 2,200 2,343 2,509
Net interest income 22,887 88,516 23,088 23,099 21,388 20,941
Provision for loan losses 2,709 7,128 2,520 1,764 1,459 1,385
Net interest income after provision for loan losses 20,178 81,388 20,568 21,335 19,929 19,556
Noninterest income:
Service charges on deposits 2,141 8,627 2,526 2,292 1,974 1,835
ATM and debit card 1,249 4,716 1,348 1,219 1,072 1,077
Broker-dealer fees and commissions 699 2,104 474 609 434 587
Company owned life insurance 415 1,751 451 433 441 426
Loan servicing 73 617 (28) 142 409 94
Net gain on sale of loans held for sale 200 1,421 440 323 325 333
Net gain on investment securities 892 2,651 487 596 1,237 331
Impairment charge on investment securities -- (91) -- -- -- (91)
Net gain (loss) on sale of other assets 1 (381) (302) (114) 29 6
Other 883 3,362 887 853 769 853
Total noninterest income 6,553 24,777 6,283 6,353 6,690 5,451
Noninterest expense:
Salaries and employee benefits 9,709 40,127 9,562 12,438 9,071 9,056
Occupancy and equipment 3,169 11,419 3,019 2,915 2,715 2,770
Professional services 937 4,133 890 1,452 1,080 711
Computer and data processing 704 3,271 809 976 886 600
Supplies and postage 680 2,497 567 899 573 458
FDIC assessments 361 1,300 343 356 304 297
Advertising and promotions 214 929 430 261 137 101
Loss on extinguishment of debt -- -- -- -- -- --
Other 1,810 7,721 1,921 2,321 1,815 1,664
Total noninterest expense 17,584 71,397 17,541 21,618 16,581 15,657
Income before income taxes 9,147 34,768 9,310 6,070 10,038 9,350
Income tax expense 2,998 11,319 2,978 1,805 3,382 3,154
Net income $ 6,149 23,449 6,332 4,265 6,656 6,196
Preferred stock dividends 368 1,474 369 368 368 369
Net income available to common shareholders $ 5,781 21,975 5,963 3,897 6,288 5,827
FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic $ 0.42 1.60 0.44 0.28 0.46 0.43
Earnings per share – diluted $ 0.42 1.60 0.43 0.28 0.46 0.42
Cash dividends declared on common stock $ 0.18 0.57 0.16 0.14 0.14 0.13
Common dividend payout ratio (1) 42.86% 35.63 36.36 50.00 30.43 30.23
Dividend yield (annualized) 3.66% 3.06 3.42 2.99 3.34 3.23
Return on average assets 0.90% 0.93 0.95 0.65 1.08 1.06
Return on average equity 9.75% 9.46 9.85 6.77 10.94 10.36
Return on average common equity (2) 9.83% 9.53 9.95 6.65 11.12 10.51
Return on average tangible common equity (3) 12.47% 11.74 12.66 8.33 13.36 12.62
Efficiency ratio (4) 59.87% 62.87 58.88 73.04 60.41 58.59
Stock price (Nasdaq: FISI):
High $ 20.83 19.52 19.39 19.52 17.66 17.99
Low $ 18.51 15.22 17.61 16.50 15.51 15.22
Close $ 19.96 18.63 18.63 18.64 16.88 16.17
(1) Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.
(2) Net income available to common shareholders divided by average common equity.
(3) See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.
(4) Efficiency ratio equals noninterest expense less other real estate expense and amortization of intangible assets as a percentage of net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains and impairment charges on investment securities.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
2013 2012
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits $ 320 113 94 168 94 94
Investment securities (1) 836,270 703,643 727,735 745,796 715,431 624,883
Loans (2):
Commercial business 258,958 242,100 250,384 248,060 237,936 231,865
Commercial mortgage 418,248 407,737 407,168 409,884 411,871 402,007
Residential mortgage 130,425 127,363 137,586 141,808 115,621 114,166
Home equity 288,993 257,537 282,831 271,131 242,208 233,550
Consumer indirect 588,068 533,589 576,519 544,527 517,859 494,861
Other consumer 25,535 25,058 27,043 26,179 23,420 23,554
Total loans 1,710,227 1,593,384 1,681,531 1,641,589 1,548,915 1,500,003
Total interest-earning assets 2,546,817 2,297,140 2,409,360 2,387,553 2,264,440 2,124,980
Goodwill and other intangible assets, net 50,350 43,398 50,879 47,200 38,020 37,369
Total assets 2,780,209 2,519,257 2,650,502 2,607,497 2,473,888 2,342,730
Interest-bearing liabilities:
Interest-bearing demand 494,654 423,096 464,094 425,739 409,720 392,353
Savings and money market 693,684 586,329 671,295 611,564 553,701 507,543
Certificates of deposit 647,551 693,353 685,318 695,682 689,103 703,372
Borrowings 191,412 121,735 69,335 157,973 162,718 97,093
Total interest-bearing liabilities 2,027,301 1,824,513 1,890,042 1,890,958 1,815,242 1,700,361
Noninterest-bearing demand deposits 481,909 430,240 487,434 447,204 398,353 387,153
Total deposits 2,317,798 2,133,018 2,308,141 2,180,189 2,050,877 1,990,421
Total liabilities 2,524,377 2,271,258 2,394,687 2,356,787 2,229,046 2,102,217
Shareholders' equity 255,832 247,999 255,815 250,710 244,842 240,513
Common equity (3) 238,373 230,527 238,344 233,238 227,369 223,040
Tangible common equity (4) $ 188,023 187,129 187,465 186,038 189,349 185,671
Common shares outstanding:
Basic 13,717 13,696 13,707 13,703 13,697 13,675
Diluted 13,767 13,751 13,761 13,759 13,750 13,733
SELECTED AVERAGE YIELDS:
(Tax equivalent basis)
Federal funds sold and interest-earning deposits 0.21% 0.29 0.60 0.16 0.21 0.29
Investment securities 2.39% 2.66 2.56 2.60 2.68 2.83
Loans 4.83% 5.09 4.98 5.10 5.06 5.24
Total interest-earning assets 4.03% 4.35 4.25 4.32 4.31 4.53
Interest-bearing demand 0.11% 0.14 0.13 0.14 0.14 0.15
Savings and money market 0.13% 0.17 0.14 0.15 0.18 0.22
Certificates of deposit 0.82% 0.99 0.86 0.94 1.03 1.13
Borrowings 0.40% 0.48 0.76 0.43 0.43 0.46
Total interest-bearing liabilities 0.37% 0.50 0.42 0.46 0.52 0.59
Net interest rate spread 3.66% 3.85 3.83 3.86 3.79 3.94
Net interest rate margin 3.73% 3.95 3.92 3.96 3.89 4.05
(1) Includes investment securities at adjusted amortized cost and non-performing investment securities.
(2) Includes nonaccrual loans.
(3) Excludes preferred shareholders' equity.
(4) See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.
FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)
2013 2012
March 31, December 31, September 30, June 30, March 31,
ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance $ 24,714 24,301 24,120 23,763 23,260
Net loan charge-offs (recoveries):
Commercial business 202 139 287 (11) (22)
Commercial mortgage (11) 277 (64) 166 105
Residential mortgage 145 22 39 99 36
Home equity 232 119 65 82 (5)
Consumer indirect 913 1,367 1,124 661 668
Other consumer 115 183 132 105 100
Total net charge-offs 1,596 2,107 1,583 1,102 882
Provision for loan losses 2,709 2,520 1,764 1,459 1,385
Ending balance $ 25,827 24,714 24,301 24,120 23,763
Supplemental information
Period end loans:
Originated loans $ 1,657,431 1,641,197 1,588,614 1,566,025 1,521,028
Acquired loans 59,859 64,529 70,371 58,129 --
Total loans $ 1,717,290 1,705,726 1,658,985 1,624,154 1,521,028
Allowance for loan losses to total loans 1.50% 1.45 1.46 1.49 1.56
Allowance for loan losses for originated loans to originated loans 1.56% 1.51 1.53 1.54 1.56
Net charge-offs (recoveries) to average loans (annualized):
Commercial business 0.32% 0.22 0.46 -0.02 -0.04
Commercial mortgage -0.01% 0.27 -0.06 0.16 0.10
Residential mortgage 0.45% 0.06 0.11 0.34 0.13
Home equity 0.33% 0.17 0.10 0.14 -0.01
Consumer indirect 0.63% 0.94 0.82 0.51 0.54
Other consumer 1.83% 2.68 2.00 1.80 1.70
Total loans 0.38% 0.50 0.38 0.29 0.24
Non-performing loans:
Commercial business $ 5,616 3,413 3,621 4,150 1,863
Commercial mortgage 2,767 1,799 3,388 3,598 3,040
Residential mortgage 1,759 2,040 1,597 1,918 1,929
Home equity 598 939 929 973 934
Consumer indirect 1,007 891 876 695 444
Other consumer 19 43 23 4 12
Total non-performing loans 11,766 9,125 10,434 11,338 8,222
Foreclosed assets 371 184 303 270 258
Non-performing investment securities 343 753 766 1,145 1,505
Total non-performing assets $ 12,480 10,062 11,503 12,753 9,985
Total non-performing loans to total loans 0.69% 0.53 0.63 0.70 0.54
Total non-performing loans to originated loans 0.71% 0.56 0.66 0.72 0.54
Total non-performing assets to total assets 0.44% 0.36 0.43 0.49 0.41
Allowance for loan losses to non-performing loans 220% 271 233 213 289
FINANCIAL INSTITUTIONS, INC.
Appendix A - Non-GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share amounts)
2013 2012
First Year ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
Ending tangible assets:
Total assets $ 2,827,658 2,763,865 2,653,319 2,622,751 2,460,820
Less: Goodwill and other intangible assets, net 50,288 50,389 50,924 43,858 37,369
Tangible assets (non-GAAP) $ 2,777,370 2,713,476 2,602,395 2,578,893 2,423,451
Ending tangible common equity:
Common shareholders' equity $ 237,511 236,426 234,371 229,473 222,489
Less: Goodwill and other intangible assets, net 50,288 50,389 50,924 43,858 37,369
Tangible common equity (non-GAAP) $ 187,223 186,037 183,447 185,615 185,120
Tangible common equity to tangible assets (non-GAAP) (1) 6.74% 6.86 7.05 7.20 7.64
Common shares outstanding 13,804 13,788 13,786 13,812 13,812
Tangible common book value per share (non-GAAP) (2) $ 13.56 13.49 13.31 13.44 13.40
Average tangible common equity:
Average common equity $ 238,373 230,527 238,344 233,238 227,369 223,040
Average goodwill and other intangible assets, net 50,350 43,398 50,879 47,200 38,020 37,369
Average tangible common equity (non-GAAP) $ 188,023 187,129 187,465 186,038 189,349 185,671
Return on average tangible common equity (3) 12.47% 11.74 12.66 8.33 13.36 12.62
Net operating income:
Net income $ 6,149 23,449 6,332 4,265 6,656 6,196
Branch acquisition expenses, net of tax (4) -- 1,966 -- 1,262 646 58
CEO retirement expenses, net of tax (4) -- 1,670 -- 1,670 -- --
Net operating income (non-GAAP) $ 6,149 27,085 6,332 7,197 7,302 6,254
Net operating income available to common shareholders:
Net income available to common shareholders $ 5,781 21,975 5,963 3,897 6,288 5,827
Branch acquisition expenses, net of tax (4) -- 1,966 -- 1,262 646 58
CEO retirement expenses, net of tax (4) -- 1,670 -- 1,670 -- --
Net operating income available to common shareholders (non-GAAP) $ 5,781 25,611 5,963 6,829 6,934 5,885
Financial ratios computed on an operating basis (Non-GAAP):
Earnings per share – basic $ 0.42 1.87 0.44 0.50 0.51 0.43
Earnings per share – diluted $ 0.42 1.86 0.43 0.50 0.50 0.43
Return on average assets 0.90% 1.08 0.95 1.10 1.19 1.07
Return on average equity 9.75% 10.92 9.85 11.42 11.99 10.46
Return on average common equity 9.83% 11.11 9.95 11.65 12.27 10.61
Return on average tangible common equity 12.47% 13.69 12.66 14.60 14.73 12.75
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by common shares outstanding.
(3) Annualized net income divided by average tangible common equity.
(4) Tax effect is calculated assuming a 35% effective tax rate.

CONTACT: Kevin B. Klotzbach Executive VP & Chief Financial Officer Phone: 585.786.1130 Email: KBKlotzbach@five-starbank.com or Jordan M. Darrow Darrow Associates, Inc. Phone: 631.367.1866 Email: jdarrow@darrowir.comSource:Financial Institutions, Inc.