For More Information:
Ronald A. Miller
Executive Vice President and Chief Financial Officer
Phone: 585-786-1102
FOR IMMEDIATE RELEASE
Financial Institutions, Inc. Reports 2005 First Quarter Results
WARSAW, N.Y., April 28, 2005 — Financial Institutions, Inc. (NASDAQ:FISI), a holding company of community banks serving Central and Western New York, today reported net income of $2.3 million for the first quarter of 2005 down $0.3 million compared with $2.6 million for the first quarter of 2004. The lower net income is primarily a result of a $1.5 million increase in noninterest expense, offset by a $1.1 million decrease in the provision for loan losses. On a diluted per share basis, earnings for the first quarter of 2005 were $0.17, a decrease of 15% from $0.20 per share for the comparable quarter last year.
Peter G. Humphrey, Chairman, President & CEO of Financial Institutions, Inc (FII) stated, “Our financial results reflect our ongoing efforts to address the weaknesses in our loan portfolio. Increases in our noninterest expense largely represent additional legal, professional and personnel costs related to our credit and regulatory issues. The level of provision for loan losses primarily reflects our high level of problem loans. As previously indicated, we are evaluating the possibility of a sale of a substantial portion of our problem loans and have engaged an investment banking firm as an advisor to provide a review and assessment of those loans.”
Return on average common equity (annualized) for the first quarter of 2005 was 4.67% down 0.75% compared with the same quarter last year. Return on average assets (annualized) also declined for the 2005 first quarter to 0.43% compared with 0.49% for the same quarter in 2004.
Revenue
For the first quarter 2005 net interest income totaled $18.4 million, down $0.1 million in
comparison with the 2004 first quarter. Interest income from securities offset the decline in
interest earned on a lower loan base. The net interest margin for the first quarter of 2005 was
3.90% compared with 3.89% in the prior year. Noninterest income for the first quarter of 2005
declined $0.2 million to $5.7 million from $5.9 million in the first quarter of 2004, largely the
result of a $0.2 million decline in service charges on deposits.
Noninterest expense
Noninterest expense increased $1.5 million for the first quarter of 2005 to $17.4 million.
Professional services fees increased $0.5 million due to higher costs associated with credit and
regulatory issues. The $0.3 million increase in salaries and benefits expense reflects the
addition of staff to the centralized credit administration function and the enhancement of the loan
administration team, while $0.5 million of the increase in other expense relates to separation
costs recorded during the most recent quarter. The higher noninterest expense, combined with flat
revenue, resulted in an efficiency ratio of 67.62% for the 2005 first quarter compared to 61.15%
for the first quarter of 2004.
Asset Quality
Nonperforming assets at March 31, 2005 were $63.6 million, up $8.4 million from December 31, 2004
and up $13.1 million from March 31, 2004. During the quarter, an $8.8 million substandard but
accruing credit to one borrowing relationship was downgraded to nonaccrual status based on
deterioration in the business. The ratio of nonperforming assets to total loans and other real
estate was 5.18% at March 31, 2005 compared with 4.39% and 3.84% at December 31, 2004 and March 31,
2004, respectively. Net loan charge-offs in the first quarter of 2005 were $2.9 million, down $0.9
million from the prior year’s first quarter. Net loan charge-offs to average loans (annualized)
for the first quarter 2005 was 0.93% compared with 1.15% in the same quarter last year.
Balance Sheet Trends
Total loans declined 7% to $1.23 billion as of March 31, 2005 compared with $1.31 billion at March
31, 2004. Loan origination has slowed as the Company has implemented more stringent underwriting
requirements and focused resources on the existing loan portfolio. Offsetting the decline in loans
was an 8% increase in investment securities to $768 million at March 31, 2005 compared with $712
million a year ago. Average deposits were relatively flat at $1.82 billion for the first quarters
of 2005 and 2004. Total assets were $2.20 billion at March 31, 2005 down slightly in comparison to
$2.22 billion at March 31, 2004.
About Financial Institutions, Inc.
FII is the bank holding company parent of Wyoming County Bank, The National Bank of Geneva, Bath
National Bank, and First Tier Bank & Trust with $2.2 billion in assets. Its four banks provide a
wide range of consumer and commercial banking services to individuals, municipalities, and
businesses through a network of 50 offices and 72 ATMs in Western and Central New York State.
FII’s Financial Services Group also provides diversified financial services to its customers and
clients, including brokerage, trust, insurance and employee benefits and compensation consulting.
More information on FII and its subsidiaries is available through the Company web site at
www.fiiwarsaw.com.
Safe Harbor Statement
This press release contains 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 the ability of the Company to implement the necessary
changes to be in compliance with the formal agreements with the OCC, the effectiveness of the
changes the Company is making, quality of collateral associated with nonperforming loans, the
ability of customers to continue to make payments on criticized or substandard loans, the impact of
rising interest rates on customer cash flows, the speed or cost of resolving bad loans, the ability
to hire and train personnel, the economic conditions in the area the Company operates, customer
preferences, the competition and other factors discussed in the Company’s filings with the
Securities and Exchange Commission. The Company undertakes no obligation to revise these
statements following the date of this press release.
TABLES FOLLOW.
| FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
| Consolidated Statements of Income and Other Data | ||||||||||||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three months ended | ||||||||||||||||||||||||
| March 31, | ||||||||||||||||||||||||
| 2005 | 2004 | $ Change | % Change | |||||||||||||||||||||
| Interest income |
$ | 26,420 | $ | 26,317 | $ | 103 | - | % | ||||||||||||||||
| Interest expense |
8,052 | 7,860 | 192 | (2 | )% | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Net interest income |
18,368 | 18,457 | (89 | ) | - | % | ||||||||||||||||||
| Provision for loan losses |
3,692 | 4,796 | (1,104 | ) | (23 | )% | ||||||||||||||||||
| |
||||||||||||||||||||||||
| Net interest income after provision for loan losses |
14,676 | 13,661 | 1,015 | 7 | % | |||||||||||||||||||
| Noninterest income: |
||||||||||||||||||||||||
| Service charges on deposits |
2,595 | 2,818 | (223 | ) | (8 | )% | ||||||||||||||||||
| Financial services group fees and commissions |
1,537 | 1,420 | 117 | 8 | % | |||||||||||||||||||
| Mortgage banking activities |
477 | 523 | (46 | ) | (9 | )% | ||||||||||||||||||
| Gain on sale and call of securities |
- | 50 | (50 | ) | (100 | )% | ||||||||||||||||||
| Other |
1,100 | 1,042 | 58 | 6 | % | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Total noninterest income |
5,709 | 5,853 | (144 | ) | (2 | )% | ||||||||||||||||||
| Noninterest expense: |
||||||||||||||||||||||||
| Salaries and employee benefits |
9,434 | 9,152 | 282 | 3 | % | |||||||||||||||||||
| Other |
7,917 | 6,756 | 1,161 | 17 | % | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Total noninterest expense |
17,351 | 15,908 | 1,443 | 9 | % | |||||||||||||||||||
| Income before income taxes |
3,034 | 3,606 | (572 | ) | (16 | )% | ||||||||||||||||||
| Income taxes |
745 | 959 | (214 | ) | (22 | )% | ||||||||||||||||||
| |
||||||||||||||||||||||||
| Net income |
2,289 | 2,647 | (358 | ) | (14 | )% | ||||||||||||||||||
| Preferred stock dividends |
372 | 374 | (2 | ) | (1 | )% | ||||||||||||||||||
| |
||||||||||||||||||||||||
| Net income available to common shareholders |
$ | 1,917 | $ | 2,273 | $ | (356 | ) | (16 | )% | |||||||||||||||
| |
||||||||||||||||||||||||
| Taxable-equivalent net interest income |
$ | 19,493 | $ | 19,582 | $ | (89 | ) | - | % | |||||||||||||||
| |
||||||||||||||||||||||||
| Per common share data: |
||||||||||||||||||||||||
| Net income — basic |
$ | 0.17 | $ | 0.20 | $ | (0.03 | ) | (15 | )% | |||||||||||||||
| Net income — diluted |
$ | 0.17 | $ | 0.20 | $ | (0.03 | ) | (15 | )% | |||||||||||||||
| Cash dividends declared |
$ | 0.16 | $ | 0.16 | $ | - | - | % | ||||||||||||||||
| Book value |
$ | 14.29 | $ | 15.10 | $ | (0.81 | ) | (5 | )% | |||||||||||||||
| Common shares outstanding: |
||||||||||||||||||||||||
| Weighted average shares — basic |
11,249,474 | 11,170,972 | ||||||||||||||||||||||
| Weighted average shares — diluted |
11,298,967 | 11,246,200 | ||||||||||||||||||||||
| Period end actual |
11,249,676 | 11,172,673 | ||||||||||||||||||||||
| FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES | ||||||||||||
| Additional Data | ||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2005 | 2004 | |||||||||||
| Performance ratios, annualized |
||||||||||||
| Return on average assets |
0.43 | % | 0.49 | % | ||||||||
| Return on average common equity |
4.67 | % | 5.42 | % | ||||||||
| Common dividend payout ratio |
94.12 | % | 80.00 | % | ||||||||
| Net interest margin (tax-equivalent) |
3.90 | % | 3.89 | % | ||||||||
| Efficiency ratio |
67.62 | % | 61.15 | % | ||||||||
Asset quality data: |
||||||||||||
| Past due over 90 days and accruing |
$ | 12 | $ | 2,199 | ||||||||
| Restructured loans |
— | 3,081 | ||||||||||
| Nonaccrual loans |
62,580 | 44,324 | ||||||||||
| Other real estate owned (ORE) |
981 | 850 | ||||||||||
| Total nonperforming assets |
$ | 63,573 | $ | 50,454 | ||||||||
| Net loan charge-offs |
$ | 2,870 | $ | 3,837 | ||||||||
Asset quality ratios: |
||||||||||||
| Nonperforming loans to total loans |
5.11 | % | 3.78 | % | ||||||||
| Nonperforming assets to total loans and ORE |
5.18 | % | 3.84 | % | ||||||||
| Allowance for loan losses to total loans |
3.27 | % | 2.29 | % | ||||||||
| Allowance for loan losses to nonperforming loans |
64 | % | 61 | % | ||||||||
| Net loan charge-offs to average loans (annualized) |
0.93 | % | 1.15 | % | ||||||||
Capital ratios: |
||||||||||||
| Average common equity to average total assets |
7.75 | % | 7.78 | % | ||||||||
| Leverage ratio |
7.30 | % | 7.02 | % | ||||||||
| Tier 1 risk-based capital ratio |
11.40 | % | 10.35 | % | ||||||||
| Risk-based capital ratio |
12.67 | % | 11.61 | % | ||||||||
| FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
| Consolidated Statements of Financial Condition | ||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| March 31, | ||||||||||||||||||||||||
| 2005 | 2004 | $ Change | % Change | |||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
| Cash, due from banks and interest-bearing deposits |
$ | 49,231 | $ | 43,594 | $ | 5,637 | 13 | % | ||||||||||||||||
Federal funds sold |
62,359 | 67,810 | (5,451 | ) | (8 | )% | ||||||||||||||||||
Investment securities |
767,692 | 711,801 | 55,891 | 8 | % | |||||||||||||||||||
Loans |
1,225,222 | 1,311,639 | (86,417 | ) | (7 | )% | ||||||||||||||||||
| Less: Allowance for loan losses |
40,008 | 30,023 | 9,985 | 33 | % | |||||||||||||||||||
| Loans, net |
1,185,214 | 1,281,616 | (96,402 | ) | (8 | )% | ||||||||||||||||||
Goodwill |
41,371 | 40,621 | 750 | 2 | % | |||||||||||||||||||
Other assets |
90,409 | 77,919 | 12,490 | 16 | % | |||||||||||||||||||
| Total assets |
$ | 2,196,276 | $ | 2,223,361 | $ | (27,085 | ) | (1 | )% | |||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
| Demand |
$ | 259,314 | $ | 251,035 | $ | 8,279 | 3 | % | ||||||||||||||||
| Savings, money market, and interest-bearing checking |
846,617 | 831,557 | 15,060 | 2 | % | |||||||||||||||||||
| Certificates of deposit |
763,978 | 789,625 | (25,647 | ) | (3 | )% | ||||||||||||||||||
| Total deposits |
1,869,909 | 1,872,217 | (2,308 | ) | — | % | ||||||||||||||||||
Short-term borrowings |
34,985 | 46,436 | (11,451 | ) | (25 | )% | ||||||||||||||||||
Long-term borrowings |
77,344 | 85,485 | (8,141 | ) | (10 | )% | ||||||||||||||||||
| Junior subordinated debentures issued to unconsolidated subsidiary trust |
16,702 | 16,702 | - | - | % | |||||||||||||||||||
Other liabilities |
18,961 | 16,028 | 2,933 | 18 | % | |||||||||||||||||||
| Total liabilities |
2,017,901 | 2,036,868 | (18,967 | ) | (1 | )% | ||||||||||||||||||
Shareholders’ equity: |
||||||||||||||||||||||||
| Preferred equity |
17,661 | 17,734 | (73 | ) | — | % | ||||||||||||||||||
| Common equity and accumulated other |
||||||||||||||||||||||||
| comprehensive income (loss) |
160,714 | 168,759 | (8,045 | ) | (5 | )% | ||||||||||||||||||
| Total shareholders' equity |
178,375 | 186,493 | (8,118 | ) | (4 | )% | ||||||||||||||||||
| Total liabilities and shareholders' equity |
$ | 2,196,276 | $ | 2,223,361 | $ | (27,085 | ) | (1 | )% | |||||||||||||||
| FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
| Consolidated Average Statements of Financial Condition | ||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three months ended | ||||||||||||||||||||||||
| March 31, | ||||||||||||||||||||||||
| 2005 | 2004 | $ Change | % Change | |||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||
| Cash, due from banks and interest-bearing deposits |
$ | 43,241 | $ | 42,702 | $ | 539 | 1 | % | ||||||||||||||||
| Federal funds sold |
16,657 | 52,146 | (35,489 | ) | (68 | )% | ||||||||||||||||||
| Investment securities |
761,729 | 655,366 | 106,363 | 16 | % | |||||||||||||||||||
| Loans |
1,239,324 | 1,329,130 | (89,806 | ) | (7 | )% | ||||||||||||||||||
| Less: Allowance for loan losses |
39,674 | 29,081 | 10,593 | 36 | % | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Loans, net |
1,199,650 | 1,300,049 | (100,399 | ) | (8 | )% | ||||||||||||||||||
| Goodwill |
41,371 | 40,621 | 750 | 2 | % | |||||||||||||||||||
| Other assets |
86,591 | 78,158 | 8,433 | 11 | % | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Total assets |
$ | 2,149,239 | $ | 2,169,042 | $ | (19,803 | ) | (1 | )% | |||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||
| Demand |
$ | 271,322 | $ | 250,345 | $ | 20,977 | 8 | % | ||||||||||||||||
| Savings, money market, and interest-bearing checking |
797,109 | 797,117 | (8 | ) | - | % | ||||||||||||||||||
| Certificates of deposit |
750,503 | 773,675 | (23,172 | ) | (3 | )% | ||||||||||||||||||
| |
||||||||||||||||||||||||
| Total deposits |
1,818,934 | 1,821,137 | (2,203 | ) | — | % | ||||||||||||||||||
| Short-term borrowings |
32,051 | 44,400 | (12,349 | ) | (28 | )% | ||||||||||||||||||
| Long-term borrowings |
79,477 | 86,068 | (6,591 | ) | (8 | )% | ||||||||||||||||||
| Junior subordinated debentures issued to unconsolidated subsidiary trust |
16,702 | 16,702 | - | - | % | |||||||||||||||||||
| Other liabilities |
17,826 | 14,298 | 3,528 | 25 | % | |||||||||||||||||||
| |
||||||||||||||||||||||||
| Total liabilities |
1,964,990 | 1,982,605 | (17,615 | ) | (1 | )% | ||||||||||||||||||
| Shareholders’ equity: |
||||||||||||||||||||||||
| Preferred equity |
17,703 | 17,734 | (31 | ) | - | % | ||||||||||||||||||
| Common equity and accumulated other |
||||||||||||||||||||||||
| comprehensive income (loss) |
166,546 | 168,703 | (2,157 | ) | (1 | )% | ||||||||||||||||||
| |
||||||||||||||||||||||||
| Total shareholders' equity |
184,249 | 186,437 | (2,188 | ) | (1 | )% | ||||||||||||||||||
| Total liabilities and shareholders' equity |
$ | 2,149,239 | $ | 2,169,042 | $ | (19,803 | ) | (1 | )% | |||||||||||||||