Financial Institutions(FISI)

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Financial Institutions, Inc. Announces 2024 Annual Meeting Date
Newsfilter· 2024-03-14 20:14
WARSAW, N.Y., March 14, 2024 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (NASDAQ:FISI) (the "Company"), the parent company of Five Star Bank (the "Bank"), SDN Insurance Agency, LLC and Courier Capital, LLC, today announced that Wednesday, June 5, has been established as the date of its 2024 Annual Meeting of Shareholders. The meeting will be held in a virtual format only, via live webcast, beginning at 10:00 am Eastern Time. The record date for voting at the Annual Meeting will be April 10, 2024. Furth ...
Financial Institutions(FISI) - 2023 Q4 - Annual Report
2024-03-12 16:00
- 24 - Table of Contents The value of our goodwill and other intangible assets may decline in the future. - 26 - We may be unable to successfully implement our growth strategies, including the integration and successful management of newly-acquired businesses. Our current growth strategy is multi-faceted. We seek to expand our branch network into nearby areas, continue to invest in our digital banking strategy, develop new sustainable revenue streams through BaaS, make strategic acquisitions of loans, portf ...
Financial Institutions' Net Income Drops 43.9% Amid FDIC's Special Assessment
PYMNTS· 2024-03-08 02:13
Financial institutions’ net income dropped 43.9% in the fourth quarter of 2023.The net income of commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. (FDIC) totaled $38.4 billion in the fourth quarter of 2023, down $30 billion from the previous quarter, the FDIC said in a Thursday (March 7) press release.Their net income for the full year was down 2.3%, or $6 billion, compared to 2022, according to the release.The quarter-to-quarter drop was driven by nonrecurring, nonint ...
Financial Institutions(FISI) - 2023 Q3 - Quarterly Report
2023-11-05 16:00
Supplemental cash flow information is summarized as follows for the nine months ended September 30, 2023 and 2022 (in thousands): | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------------|-------|--------|-------|--------| | | | | | | | Supplemental information: | | | | | | Cash paid for interest | $ | 95,913 | $ | 15,613 | | Cash paid for income taxes | | 6,298 | | 1,128 | | Noncash investing and financing activities: | | | | | | Real estate and other ...
Financial Institutions(FISI) - 2023 Q2 - Quarterly Report
2023-08-06 16:00
FINANCIAL INSTITUTIONS, INC. Form 10-Q For the Quarterly Period Ended June 30, 2023 Table of Contents FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (Unaudited) See accompanying notes to the consolidated financial statements. Table of Contents 5 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------------------------------------------------------------|--------------------------------|-------|------------- ...
Financial Institutions(FISI) - 2023 Q2 - Earnings Call Transcript
2023-07-28 17:48
Financial Data and Key Metrics Changes - Second quarter net income available to common shareholders was $14 million or $0.91 per diluted share, up from $11.7 million or $0.76 per share in the first quarter of 2023, but down from $15.3 million or $0.99 per share in the prior year period [4] - Net interest income of $42.3 million was up $522,000 from the first quarter of 2023, with an overall cost of funds in the quarter at 203 basis points, up 41 basis points from the late first quarter [10][11] - The tangible common equity (TCE) ratio at June 30, 2023, was 5.53%, with a tangible common book value per share of $21.79 [13] Business Line Data and Key Metrics Changes - Total loans were $4.4 billion at June 30, reflecting an increase of $154.5 million or 3.6% from March 31, led by commercial lending, which was up 5.7% during the second quarter [22] - Investment advisory income of $2.8 million was 104,000 lower than the previous quarter, primarily due to lower transaction-based fees [39] - The commercial pipeline, which includes commitments secured but not yet funded, is down considerably from previous quarters, with the overall commercial pipeline at June 30, 2023, less than half of what it was at year-end 2022 [6][30] Market Data and Key Metrics Changes - Public deposits decreased by $106.4 million or 2.1% from March 31, primarily due to normal seasonal outflows [119] - Non-public deposits increased from the linked quarter, indicating a shift from lower-cost demand and savings deposits into higher-cost time deposit accounts [5] - The average portfolio FICO score of the indirect portfolio continues to exceed 700, with new production during the quarter coming on a weighted average coupon of 9.31% [104] Company Strategy and Development Direction - The company is focused on deposit gathering and expanding its reach, launching a new marketing campaign for money market accounts [101] - The merger of two investment managers aims to create more focus on high-net-worth managed accounts and reduce reliance on retail broker-dealer relationships [56] - The company expects full-year loan growth to be concentrated in the first half of the year, adjusting its outlook to low double-digit growth from previous high single-digit expectations [109] Management's Comments on Operating Environment and Future Outlook - Management noted that competition for deposits is strong, similar to the rest of the country, and emphasized the importance of defending the deposit base [101] - The company remains confident in the overall performance and health of its loan portfolio despite a challenging economic environment [9] - Management expects annualized return on assets (ROA) to fall in a range of 85 to 95 basis points for 2023, reflecting margin pressures from higher funding costs [110] Other Important Information - The provision for credit losses on loans was $3.2 million in the second quarter, supporting an allowance for credit losses to total loans ratio of 113 basis points [9] - The company reported a net gain of $489,000 on tax credit investments placed in service during the quarter, contributing to lower income tax expenses [28][29] - The accumulated other comprehensive loss stood at $134.5 million at June 30, 2023, impacting the TCE ratio and tangible common book value per share [13] Q&A Session Summary Question: What is driving the smaller pipeline for loan growth? - Management indicated that the smaller pipeline is a combination of slowing demand from borrowers and a more selective approach to credit quality [16][113] Question: Can you provide insight on the margin outlook and asset repricing? - Management discussed the asset side of the balance sheet and indicated that they expect to see benefits from increases in Fed funds rates, with a focus on managing cash flows [17][114] Question: What is the duration of the securities portfolio and comfort level with AOCI recovery? - The modified duration of the securities portfolio was reported at 5.9%, with management expressing comfort in waiting for recovery while optimizing the balance sheet [73] Question: How are BaaS deposits performing and what are the costs associated? - Management confirmed that they are still expecting $150 million in BaaS deposits by year-end, viewing them as an attractive alternative to high-cost wholesale funding [67][75] Question: What is the contribution of the tax credit business to EPS this quarter? - The benefit from tax credit investments was about $0.08 per share for the quarter, with a focus on community development activities [77]
Financial Institutions(FISI) - 2023 Q2 - Earnings Call Presentation
2023-07-28 15:26
Financial Highlights 7 Expense Management & Operating Leverage 23 Management Team 28 Statements contained in this presentation which are not historical facts and which pertain to future operating results of Financial Institutions, Inc. (the "Company") and its subsidiaries constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Similarly, statements that describe the objectives, plans or goals of the Company are forward-looking. These forward-lookin ...
Financial Institutions(FISI) - 2023 Q1 - Quarterly Report
2023-05-07 16:00
PART I. FINANCIAL INFORMATION Presents the unaudited consolidated financial statements and related notes for the quarter ended March 31, 2023, along with management's discussion and analysis [ITEM 1. Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) Presents the unaudited consolidated financial statements for Q1 2023, including condition, income, comprehensive income, equity changes, cash flows, and detailed notes [Consolidated Statements of Financial Condition (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20%28Unaudited%29) Total assets increased to **$5.97 billion** at March 31, 2023, driven by loan and deposit growth, while short-term borrowings decreased | Metric | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------- | :--------------------------- | :------------------------------ | | Total Assets | 5,966,992 | 5,797,272 | | Total Liabilities | 5,544,169 | 5,391,667 | | Total Shareholders' Equity | 422,823 | 405,605 | | Loans (net) | 4,195,804 | 4,005,036 | | Total Deposits | 5,141,307 | 4,929,424 | | Short-term Borrowings | 116,000 | 205,000 | | Long-term Borrowings | 124,299 | 74,222 | - Total assets increased by **$169.7 million (2.9%)** from December 31, 2022, to March 31, 2023[12](index=12&type=chunk) - Loans (net) increased by **$190.8 million (4.8%)** from December 31, 2022, to March 31, 2023[12](index=12&type=chunk) [Consolidated Statements of Income (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%28Unaudited%29) Net income decreased to **$12.1 million** in Q1 2023, primarily due to a significant increase in interest expense and higher provision for credit losses | Metric | Three months ended March 31, 2023 ($ thousands) | Three months ended March 31, 2022 ($ thousands) | | :------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Total Interest Income | 63,771 | 42,351 | | Total Interest Expense | 21,956 | 2,793 | | Net Interest Income | 41,815 | 39,558 | | Provision for Credit Losses | 4,214 | 2,319 | | Total Noninterest Income | 10,924 | 11,322 | | Total Noninterest Expense | 33,661 | 30,135 | | Net Income | 12,089 | 14,983 | | Basic EPS | 0.76 | 0.94 | | Diluted EPS | 0.76 | 0.93 | - Net income decreased by **$2.9 million (19.3%)** year-over-year[18](index=18&type=chunk) - Total interest expense surged by **$19.2 million (687.4%)** year-over-year, largely driven by increased deposit costs[18](index=18&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) Comprehensive income significantly improved to **$22.2 million** in Q1 2023, primarily due to a substantial increase in other comprehensive income from available-for-sale securities | Metric | Three months ended March 31, 2023 ($ thousands) | Three months ended March 31, 2022 ($ thousands) | | :----------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net Income | 12,089 | 14,983 | | Other Comprehensive Income (Loss), net of tax: | | | | Securities available for sale | 10,634 | (55,773) | | Hedging derivative instruments | (663) | 1,838 | | Pension and post-retirement obligations | 144 | 48 | | Total Other Comprehensive Income (Loss) | 10,115 | (53,887) | | Comprehensive Income (Loss) | 22,204 | (38,904) | - Total other comprehensive income (loss), net of tax, swung from a loss of **$53.9 million** in Q1 2022 to a gain of **$10.1 million** in Q1 2023, largely driven by a positive change in available-for-sale securities[21](index=21&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%28Unaudited%29) Shareholders' equity increased to **$422.8 million** at March 31, 2023, driven by net income and other comprehensive income, partially offset by dividends and stock repurchases | Metric | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :--------------------------- | :------------------------------ | | Total Shareholders' Equity (End of Period) | 422,823 | 405,605 | | Net Income | 12,089 | N/A | | Other Comprehensive Income, net of tax | 10,115 | N/A | | Cash Dividends Declared (Common) | (4,611) | N/A | | Purchases of Common Stock for Treasury | (561) | N/A | - Shareholders' equity increased by **$17.2 million (4.2%)** during the three months ended March 31, 2023[24](index=24&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) Net cash from operating activities significantly decreased to **$6.6 million** in Q1 2023, while investing activities used more cash due to higher net loan originations | Metric | Three months ended March 31, 2023 ($ thousands) | Three months ended March 31, 2022 ($ thousands) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net Cash Provided by Operating Activities | 6,562 | 44,194 | | Net Cash Used in Investing Activities | (164,565) | (79,094) | | Net Cash Provided by Financing Activities | 167,511 | 126,192 | | Net Increase in Cash and Cash Equivalents | 9,508 | 91,292 | | Cash and Cash Equivalents, End of Period | 139,974 | 170,404 | - Net cash provided by operating activities decreased by **$37.6 million (85.1%)** year-over-year[29](index=29&type=chunk) - Net loan originations resulted in a cash outflow of **$195.0 million** in Q1 2023, compared to **$55.0 million** in Q1 2022, significantly impacting investing activities[29](index=29&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Provides detailed disclosures on accounting policies, financial instruments, loan portfolio, leases, goodwill, derivatives, equity, and other financial statement components [(1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=%281.%29%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the Company's diversified financial services, consolidated financial statement basis, use of estimates, and recent accounting pronouncements - Financial Institutions, Inc. provides diversified financial services through Five Star Bank, SDN Insurance Agency, Courier Capital, and HNP Capital (merged into Courier Capital on May 1, 2023)[31](index=31&type=chunk) - The Company adopted ASU 2022-02 (Troubled Debt Restructuring and Vintage Disclosures) and ASU 2022-01 (Fair Value Hedging – Portfolio Layer Method) effective January 1, 2023, with no material impact on consolidated financial statements[39](index=39&type=chunk) Supplemental Cash Flow Information | Supplemental Cash Flow Information ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :----------------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash paid for interest | 28,666 | 4,623 | | Cash paid (refunded) for income taxes | 1,134 | (441) | [(2.) RESTRUCTURING CHARGES](index=10&type=section&id=%282.%29%20RESTRUCTURING%20CHARGES) The Company incurred no restructuring charges in Q1 2023, with the restructuring reserve slightly decreasing due to cash payments - No restructuring charges were incurred for the three months ended March 31, 2023[41](index=41&type=chunk) Restructuring Reserve | Restructuring Reserve ($ thousands) | March 31, 2023 | March 31, 2022 | | :---------------------------------- | :------------- | :------------- | | Balance at beginning of period | 302 | 445 | | Cash payments | (14) | (22) | | Balance at end of period | 288 | 423 | [(3.) EARNINGS PER COMMON SHARE ("EPS")](index=11&type=section&id=%283.%29%20EARNINGS%20PER%20COMMON%20SHARE%20%28%22EPS%22%29) Basic and diluted EPS decreased to **$0.76** in Q1 2023, reflecting lower net income available to common shareholders EPS Metric | EPS Metric ($) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income available to common shareholders | 11,724 | 14,618 | | Basic EPS | 0.76 | 0.94 | | Diluted EPS | 0.76 | 0.93 | - Basic and diluted EPS decreased by **$0.18 (19.1%)** and **$0.17 (18.3%)** respectively, year-over-year[46](index=46&type=chunk) [(4.) INVESTMENT SECURITIES](index=12&type=section&id=%284.%29%20INVESTMENT%20SECURITIES) The fair value of available-for-sale securities decreased to **$945.4 million**, with significant unrealized losses primarily due to rising market interest rates Investment Securities | Investment Securities ($ thousands) | March 31, 2023 (Fair Value) | December 31, 2022 (Fair Value) | | :---------------------------------- | :-------------------------- | :----------------------------- | | Securities available for sale | 945,442 | 954,371 | | Securities held to maturity | 167,812 | 174,188 | | Total Investment Securities | 1,113,254 | 1,128,559 | - Total available-for-sale securities decreased by **$8.9 million (0.9%)** from December 31, 2022, to March 31, 2023[49](index=49&type=chunk) - Unrealized losses on available-for-sale securities totaled **$158.8 million** at March 31, 2023, primarily due to market interest rate increases, with no credit losses recognized[58](index=58&type=chunk)[62](index=62&type=chunk) [Unrealized Losses on Investment Securities](index=14&type=section&id=Unrealized%20Losses%20on%20Investment%20Securities) Unrealized losses on available-for-sale securities totaled **$158.8 million** at March 31, 2023, primarily due to rising market interest rates, with no credit impairment AFS Securities with Unrealized Losses | AFS Securities with Unrealized Losses ($ thousands) | March 31, 2023 (Total Unrealized Losses) | December 31, 2022 (Total Unrealized Losses) | | :-------------------------------------------------- | :--------------------------------------- | :------------------------------------------ | | U.S. Government agencies and government sponsored enterprises | 2,877 | 3,420 | | Mortgage-backed securities | 155,875 | 169,604 | | Total AFS debt securities with unrealized losses | 158,752 | 173,024 | - The total unrealized losses on AFS debt securities decreased by **$4.3 million (2.5%)** from December 31, 2022, to March 31, 2023[60](index=60&type=chunk) - Management believes unrealized losses are due to market interest rate increases, not credit quality, and does not intend to sell these securities before cost recovery[58](index=58&type=chunk) [Securities Available for Sale](index=15&type=section&id=Securities%20Available%20for%20Sale) The fair value of available-for-sale securities decreased to **$945.4 million** at March 31, 2023, with no sales occurring during the quarter AFS Securities | AFS Securities ($ thousands) | March 31, 2023 (Fair Value) | December 31, 2022 (Fair Value) | | :--------------------------- | :-------------------------- | :----------------------------- | | U.S. Government agency and government sponsored enterprises | 21,658 | 21,115 | | Mortgage-backed securities | 923,784 | 933,256 | | Total available for sale securities | 945,442 | 954,371 | - No sales of securities available for sale occurred during the three months ended March 31, 2023 and 2022[52](index=52&type=chunk) [Securities Held to Maturity](index=15&type=section&id=Securities%20Held%20to%20Maturity) Held-to-maturity securities totaled **$180.1 million** (amortized cost) at March 31, 2023, maintaining high credit quality with no past due or nonaccrual status HTM Securities | HTM Securities ($ thousands) | March 31, 2023 (Amortized Cost) | December 31, 2022 (Amortized Cost) | | :--------------------------- | :------------------------------ | :--------------------------------- | | U.S. Government agency and government sponsored enterprises | 16,400 | 16,363 | | State and political subdivisions | 93,678 | 97,583 | | Mortgage-backed securities | 69,979 | 75,034 | | Total held to maturity securities | 180,057 | 188,980 | - As of March 31, 2023, **$87.3 million** of municipal bonds were rated A/AA/AAA equivalent, with no bonds rated below investment grade[64](index=64&type=chunk) - There were no past due or nonaccrual held-to-maturity investment securities at March 31, 2023, or December 31, 2022[64](index=64&type=chunk) [(5.) LOANS](index=16&type=section&id=%285.%29%20LOANS) The gross loan portfolio increased to **$4.24 billion** at March 31, 2023, driven by commercial loan growth, with the allowance for credit losses increasing to **$47.5 million** Loan Category | Loan Category ($ thousands) | March 31, 2023 (Total) | December 31, 2022 (Total) | | :-------------------------- | :--------------------- | :------------------------ | | Commercial business | 695,110 | 664,249 | | Commercial mortgage | 1,841,481 | 1,679,840 | | Residential real estate loans | 591,846 | 589,960 | | Residential real estate lines | 76,086 | 77,670 | | Consumer indirect | 1,022,202 | 1,023,620 | | Other consumer | 16,607 | 15,110 | | Total Loans, Gross | 4,243,332 | 4,050,449 | | Allowance for credit losses – loans | (47,528) | (45,413) | | Total Loans, Net | 4,195,804 | 4,005,036 | - Total gross loans increased by **$192.9 million (4.8%)** from December 31, 2022, to March 31, 2023[68](index=68&type=chunk) - The allowance for credit losses – loans increased by **$2.1 million (4.7%)** to **$47.5 million** at March 31, 2023, driven by higher loan growth and net charge-offs[221](index=221&type=chunk)[368](index=368&type=chunk) [Past Due Loans Aging](index=17&type=section&id=Past%20Due%20Loans%20Aging) Total past due loans (30+ days) decreased to **$9.2 million** at March 31, 2023, with nonaccrual loans also decreasing over the period Past Due Loans | Past Due Loans ($ thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | 30-59 Days Past Due | 7,838 | 14,494 | | 60-89 Days Past Due | 1,325 | 2,214 | | Greater Than 90 Days Past Due | 4 | 1 | | Total Past Due | 9,167 | 16,709 | | Nonaccrual Loans | 8,797 | 10,197 | - Total past due loans decreased by **$7.5 million (45.1%)** from December 31, 2022, to March 31, 2023[71](index=71&type=chunk) [Loan Modifications for Borrower Experiencing Financial Difficulty](index=17&type=section&id=Loan%20Modifications%20for%20Borrower%20Experiencing%20Financial%20Difficulty) Only **$158 thousand** in residential real estate loans were modified in Q1 2023, primarily through term extensions, all remaining current Loan Type (Modified) | Loan Type (Modified) | Amortized Cost Basis ($ thousands) | % of Total Loans | | :-------------------------- | :--------------------------------- | :--------------- | | Residential real estate loans | 158 | 0.03 % | | Total | 158 | 0.00 % | - The modifications primarily involved term extensions, adding a weighted average of **10.0 years** to the loan life, reducing monthly payments[76](index=76&type=chunk) - All **$158 thousand** of modified residential real estate loans were current in payment status as of March 31, 2023[76](index=76&type=chunk) [Collateral Dependent Loans](index=19&type=section&id=Collateral%20Dependent%20Loans) Collateral dependent loans decreased to **$21.9 million** at March 31, 2023, while the specific reserve for these loans increased to **$1.9 million** Collateral Dependent Loans | Collateral Dependent Loans ($ thousands) | March 31, 2023 (Total) | December 31, 2022 (Total) | | :--------------------------------------- | :--------------------- | :------------------------ | | Commercial business | 3,385 | 1,140 | | Commercial mortgage | 18,546 | 21,592 | | Total | 21,931 | 22,732 | | Specific Reserve | 1,872 | 1,278 | - Total collateral dependent loans decreased by **$0.8 million (3.5%)** from December 31, 2022, to March 31, 2023[77](index=77&type=chunk) - The specific reserve for collateral dependent loans increased by **$0.6 million (46.5%)** from December 31, 2022, to March 31, 2023[77](index=77&type=chunk) [Credit Quality Indicators (Commercial Loans)](index=20&type=section&id=Credit%20Quality%20Indicators%20%28Commercial%20Loans%29) Commercial loans are categorized by risk, with **$29.8 million** in commercial business and **$42.0 million** in commercial mortgage loans classified as Special Mention or Substandard at March 31, 2023 Commercial Business Loans | Commercial Business Loans ($ thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------------- | :------------- | :---------------- | | Uncriticized | 665,342 | 648,281 | | Special mention | 25,091 | 13,146 | | Substandard | 4,677 | 2,822 | | Doubtful | — | — | | Total Commercial Business loans | 695,110 | 664,249 | Commercial Mortgage Loans | Commercial Mortgage Loans ($ thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------------- | :------------- | :---------------- | | Uncriticized | 1,799,475 | 1,642,923 | | Special mention | 22,151 | 14,239 | | Substandard | 19,855 | 22,678 | | Doubtful | — | — | | Total Commercial Mortgage loans | 1,841,481 | 1,679,840 | - Special mention commercial business loans increased by **$11.9 million (91.0%)** from December 31, 2022, to March 31, 2023[85](index=85&type=chunk)[87](index=87&type=chunk) [Allowance for Credit Losses – Loans](index=23&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Loans) The allowance for credit losses increased to **$47.5 million** at March 31, 2023, driven by higher loan growth and increased net charge-offs Allowance for Credit Losses – Loans | Allowance for Credit Losses – Loans ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Beginning balance | 45,413 | 39,676 | | Charge-offs | (5,108) | (2,913) | | Recoveries | 3,019 | 2,126 | | Provision | 4,204 | 2,077 | | Ending balance | 47,528 | 40,966 | - Net charge-offs increased to **$2.1 million** in Q1 2023 from **$0.8 million** in Q1 2022, representing **0.21%** of average loans (annualized)[368](index=368&type=chunk)[343](index=343&type=chunk) - The ratio of allowance for credit losses – loans to nonaccrual loans was **540%** at March 31, 2023, up from **514%** at March 31, 2022[343](index=343&type=chunk) [(6.) LEASES](index=25&type=section&id=%286.%29%20LEASES) The Company holds non-cancellable operating lease agreements with a weighted average remaining term of **21.9 years**, reporting **$30.95 million** in right-of-use assets - Weighted average remaining lease term for operating leases was **21.9 years** at March 31, 2023[203](index=203&type=chunk) Lease Information | Lease Information ($ thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Operating Lease Right of Use Assets (Net) | 30,950 | 31,120 | | Operating Lease Liabilities | 33,148 | 33,229 | Lease Costs | Lease Costs ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease costs | 776 | 668 | | Net lease costs | 869 | 769 | [(7.) GOODWILL AND OTHER INTANGIBLE ASSETS](index=27&type=section&id=%287.%29%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill remained at **$67.1 million** with no impairment, and other intangible assets had a net book value of **$6.1 million** with **$234 thousand** in amortization expense - Goodwill carrying amount remained **$67.1 million** at March 31, 2023, with no impairment recognized after a qualitative assessment[228](index=228&type=chunk)[229](index=229&type=chunk) Other Intangible Assets | Other Intangible Assets ($ thousands) | March 31, 2023 (Net Book Value) | December 31, 2022 (Net Book Value) | | :------------------------------------ | :------------------------------ | :--------------------------------- | | Core deposit intangibles | — | — | | Other intangibles | 6,109 | 6,343 | - Amortization expense for other intangible assets was **$234 thousand** for the three months ended March 31, 2023, compared to **$254 thousand** in the prior year[230](index=230&type=chunk) [(8.) OTHER ASSETS AND OTHER LIABILITIES](index=28&type=section&id=%288.%29%20OTHER%20ASSETS%20AND%20OTHER%20LIABILITIES) Total other assets decreased to **$249.8 million** and other liabilities decreased to **$162.6 million**, primarily due to changes in derivative instruments and deferred tax assets Category | Category ($ thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Total Other Assets | 249,761 | 262,992 | | Operating lease right of use assets | 30,950 | 31,120 | | Tax credit investments | 57,137 | 55,568 | | Derivative instruments (assets) | 42,849 | 54,557 | | Net deferred tax asset | 49,528 | 53,427 | | Total Other Liabilities | 162,563 | 183,021 | | Operating lease right of use obligations | 33,148 | 33,229 | | Derivative instruments (liabilities) | 36,809 | 47,751 | | Collateral on derivative instruments | 43,580 | 54,300 | | Accrued interest expense | 12,693 | 5,983 | - Other assets decreased by **$13.2 million (5.0%)** and other liabilities decreased by **$20.5 million (11.2%)** from December 31, 2022, to March 31, 2023[232](index=232&type=chunk) [(9.) DERIVATIVE INSTRUMENT AND HEDGING ACTIVITIES](index=29&type=section&id=%289.%29%20DERIVATIVE%20INSTRUMENT%20AND%20HEDGING%20ACTIVITIES) The Company uses derivatives to manage interest rate risk, with **$80.0 million** in notional hedging instruments and **$1.14 billion** in undesignated derivatives at March 31, 2023 - The Company uses interest rate caps and interest rate swaps to manage exposure to interest rate movements and add stability to interest expense[218](index=218&type=chunk) Derivative Instruments | Derivative Instruments ($ thousands) | March 31, 2023 (Gross Notional Amount) | December 31, 2022 (Gross Notional Amount) | | :----------------------------------- | :------------------------------------- | :---------------------------------------- | | Cash flow hedges | 80,000 | 50,000 | | Interest rate swaps (undesignated) | 1,040,437 | 1,006,386 | | Credit contracts (undesignated) | 84,529 | 104,497 | | Mortgage banking (undesignated) | 11,027 | 7,884 | Effect on Income Statement | Effect on Income Statement ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Income from derivative instruments, net (undesignated) | 496 | 519 | [(10.) SHAREHOLDERS' EQUITY](index=31&type=section&id=%2810.%29%20SHAREHOLDERS%27%20EQUITY) Total common shares issued remained constant, with **22,710 shares** repurchased for treasury and **766,447 shares** remaining under the 2022 repurchase program Common Stock Activity | Common Stock Activity (Shares) | December 31, 2022 | March 31, 2023 | | :----------------------------- | :---------------- | :------------- | | Outstanding | 15,340,001 | 15,375,479 | | Treasury | 759,555 | 724,077 | | Issued | 16,099,556 | 16,099,556 | - The Company repurchased **22,710 shares** of common stock for treasury during the three months ended March 31, 2023[257](index=257&type=chunk) - As of March 31, 2023, **766,447 shares** remained for repurchase under the 2022 Share Repurchase Program[240](index=240&type=chunk) [(11.) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=32&type=section&id=%2811.%29%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Accumulated other comprehensive loss improved to **$(127.4) million** at March 31, 2023, primarily due to a **$10.6 million** increase from available-for-sale securities AOCI Components | AOCI Components ($ thousands) | March 31, 2023 | December 31, 2022 | | :---------------------------- | :------------- | :---------------- | | Hedging Derivative Instruments | 4,072 | 4,735 | | Securities Available for Sale and Transferred Securities | (118,000) | (128,634) | | Pension and Postretirement Obligations | (13,444) | (13,588) | | Total AOCI | (127,372) | (137,487) | - The change in unrealized gain/loss on available-for-sale securities contributed **$14.3 million** (pre-tax) to other comprehensive income in Q1 2023, compared to a **$(75.0) million** change in Q1 2022[260](index=260&type=chunk) [(12.) SHARE-BASED COMPENSATION PLANS](index=35&type=section&id=%2812.%29%20SHARE-BASED%20COMPENSATION%20PLANS) The Company granted RSUs and PSUs in Q1 2023, with total share-based compensation expense of **$551 thousand** for the quarter - RSUs and PSUs were granted in Q1 2023, with vesting periods of three years, contingent on continuous service and ROAE/ROAA performance targets[279](index=279&type=chunk) Share-Based Compensation Expense | Share-Based Compensation Expense ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | | Salaries and employee benefits | 510 | 406 | | Other noninterest expense | 41 | 37 | | Total share-based compensation expense | 551 | 443 | - Unrecognized compensation expense related to unvested awards totaled **$6.0 million**, expected to be recognized over a weighted average period of **2.35 years**[94](index=94&type=chunk) [(13.) EMPLOYEE BENEFIT PLANS](index=36&type=section&id=%2813.%29%20EMPLOYEE%20BENEFIT%20PLANS) Net periodic benefit expense for pension and post-retirement obligations increased to **$619 thousand** in Q1 2023, with no minimum required contribution for the fiscal year Net Periodic Benefit Expense | Net Periodic Benefit Expense ($ thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net periodic benefit expense | 619 | 443 | - The net periodic benefit expense increased by **$176 thousand (39.7%)** year-over-year[246](index=246&type=chunk) - The Company has no minimum required contribution for the 2023 fiscal year for its pension and post-retirement obligations[280](index=280&type=chunk) [(14.) COMMITMENTS AND CONTINGENCIES](index=36&type=section&id=%2814.%29%20COMMITMENTS%20AND%20CONTINGENCIES) Off-balance sheet commitments decreased to **$1.34 billion** at March 31, 2023, and the Company is involved in a class action lawsuit with no accrued contingent liability Off-Balance Sheet Commitments | Off-Balance Sheet Commitments ($ thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------------------ | :------------- | :---------------- | | Commitments to extend credit | 1,326,003 | 1,435,323 | | Standby letters of credit | 15,576 | 17,181 | - Credit loss expense for unfunded commitments decreased to **$11 thousand** in Q1 2023 from **$241 thousand** in Q1 2022[282](index=282&type=chunk) - The Company has not accrued a contingent liability for the class action lawsuit as it is unable to conclude whether a liability is probable or reasonably estimate the potential loss[98](index=98&type=chunk) [(15.) FAIR VALUE MEASUREMENTS](index=38&type=section&id=%2815.%29%20FAIR%20VALUE%20MEASUREMENTS) Assets and liabilities are measured at fair value using a three-level hierarchy, with recurring measurements primarily using Level 2 and nonrecurring measurements utilizing Level 3 inputs - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[287](index=287&type=chunk) Assets Measured at Fair Value (Recurring) | Assets Measured at Fair Value (Recurring) ($ thousands) | March 31, 2023 (Total) | December 31, 2022 (Total) | | :------------------------------------------------------ | :--------------------- | :------------------------ | | Securities available for sale | 951,414 | 961,096 | | Hedging derivative instruments | 5,972 | 6,725 | | Derivative instruments – interest rate swaps | 36,784 | 47,736 | | Derivative instruments – mortgage banking | 93 | 96 | Assets Measured at Fair Value (Nonrecurring) | Assets Measured at Fair Value (Nonrecurring) ($ thousands) | March 31, 2023 (Total) | December 31, 2022 (Total) | | :--------------------------------------------------------- | :--------------------- | :------------------------ | | Loans held for sale | 682 | 550 | | Collateral dependent loans | 20,059 | 21,454 | | Long-lived assets held for sale | 1,509 | 1,509 | | Loan servicing rights | 1,453 | 1,470 | | Other real estate owned | 101 | 19 | [(16.) SEGMENT REPORTING](index=43&type=section&id=%2816.%29%20SEGMENT%20REPORTING) The Company operates with a primary Banking segment, reporting **$12.6 million** in net income for Q1 2023, while 'All Other' segments reported a net loss of **$544 thousand** - The Company has one reportable segment: Banking, which includes all retail and commercial banking operations[294](index=294&type=chunk) - 'All Other' segments include SDN Insurance Agency, Courier Capital, HNP Capital, and Holding Company amounts[294](index=294&type=chunk) Segment Performance | Segment Performance ($ thousands) | Three months ended March 31, 2023 (Banking) | Three months ended March 31, 2023 (All Other) | Three months ended March 31, 2023 (Consolidated Totals) | | :-------------------------------- | :------------------------------------------ | :-------------------------------------------- | :------------------------------------------------------ | | Net interest income (expense) | 42,875 | (1,060) | 41,815 | | Noninterest income | 6,375 | 4,549 | 10,924 | | Noninterest expense | (29,773) | (3,888) | (33,661) | | Net income (loss) | 12,633 | (544) | 12,089 | [(17.) SUBSEQUENT EVENT](index=43&type=section&id=%2817.%29%20SUBSEQUENT%20EVENT) HNP Capital LLC merged with Courier Capital LLC on May 1, 2023, accounted for as an exchange of assets under common control - On May 1, 2023, HNP Capital LLC merged with and into Courier Capital LLC[108](index=108&type=chunk) - The merger was accounted for under ASC-805-50-15 as an exchange of assets between entities under common control[108](index=108&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on Q1 2023 financial performance, condition, liquidity, and capital, including forward-looking statements and risk factors [GENERAL](index=46&type=section&id=GENERAL) Financial Institutions, Inc. is a diversified financial holding company focused on community banking, expanding digital offerings and commercial loan production - The Company provides diversified financial services through Five Star Bank, SDN Insurance Agency, Courier Capital, and HNP Capital (merged into Courier Capital in May 2023)[297](index=297&type=chunk) - Primary revenue sources are net interest income and noninterest income from insurance, investment advisory, and financial services[297](index=297&type=chunk) - The business strategy emphasizes a community bank philosophy, personalized service, and expansion of digital banking and commercial loan production offices[125](index=125&type=chunk) [FORWARD LOOKING INFORMATION](index=45&type=section&id=FORWARD%20LOOKING%20INFORMATION) Highlights significant risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including interest rate and market conditions - Forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties[277](index=277&type=chunk) - Key risks include interest rate risk, soundness of other financial institutions, general economic conditions, recent bank failures, federal debt ceiling issues, credit losses, and regulatory changes[277](index=277&type=chunk) - The Company cautions readers not to place undue reliance on forward-looking statements and refers to Item 1A, Risk Factors, in the Form 10-K for further information[123](index=123&type=chunk) [EXECUTIVE OVERVIEW](index=48&type=section&id=EXECUTIVE%20OVERVIEW) Net income decreased to **$12.1 million** in Q1 2023 due to higher credit loss provisions and increased noninterest expense, with a slight decline in net interest margin Metric | Metric | Q1 2023 ($ millions) | Q1 2022 ($ millions) | | :------------------------- | :------------------- | :------------------- | | Net Income | 12.1 | 15.0 | | Net Income Available to Common Shareholders | 11.7 | 14.6 | | Diluted EPS | 0.76 | 0.93 | | Net Interest Income | 41.8 | 39.6 | | Provision for Credit Losses | 4.2 | 2.3 | | Noninterest Income | 10.9 | 11.3 | | Noninterest Expense | 33.7 | 30.1 | - Net income decreased by **$2.9 million (19.3%)** year-over-year, mainly due to a **$1.9 million** increase in provision for credit losses and a **$3.5 million** increase in noninterest expense[126](index=126&type=chunk) - Net interest margin was **3.09%** in Q1 2023, a **2-basis point** decrease from **3.11%** in Q1 2022, attributed to a shift to higher-cost time deposits[126](index=126&type=chunk) [RESULTS OF OPERATIONS](index=50&type=section&id=RESULTS%20OF%20OPERATIONS) Q1 2023 results show increased net interest income offset by higher interest expense, increased credit loss provision, and rising noninterest expenses, leading to decreased net income [Net Interest Income and Net Interest Margin](index=50&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income increased to **$41.9 million** in Q1 2023, driven by higher rates and loan growth, though net interest margin slightly decreased to **3.09%** Metric (Taxable Equivalent) | Metric (Taxable Equivalent) ($ thousands) | Q1 2023 | Q1 2022 | | :---------------------------------------- | :------ | :------ | | Interest Income | 63,892 | 42,497 | | Interest Expense | 21,956 | 2,793 | | Net Interest Income | 41,936 | 39,704 | | Net Interest Margin | 3.09% | 3.11% | - Average interest-earning assets increased by **$319.1 million (6%)** to **$5.49 billion**, primarily due to a **$418.8 million** increase in average loans, partially offset by a **$118.4 million** decrease in average investment securities[304](index=304&type=chunk) - The average cost of interest-bearing liabilities increased by **183 basis points** to **2.12%** in Q1 2023, reflecting the rising interest rate environment[304](index=304&type=chunk) [Provision for Credit Losses](index=54&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased to **$4.2 million** in Q1 2023, driven by higher loan growth, increased net charge-offs, and economic uncertainty Metric | Metric ($ thousands) | Q1 2023 | Q1 2022 | | :-------------------------- | :------ | :------ | | Provision for Credit Losses | 4,214 | 2,319 | - The provision for credit losses increased by **$1.9 million (82.6%)** year-over-year[135](index=135&type=chunk) - The increase was attributed to higher loan growth, increased net charge-offs, and the impact of an increased national unemployment forecast and qualitative factors reflecting economic uncertainty[135](index=135&type=chunk) [Noninterest Income](index=55&type=section&id=Noninterest%20Income) Total noninterest income slightly decreased to **$10.9 million** in Q1 2023, primarily due to lower income from limited partnerships and service charges Noninterest Income Category | Noninterest Income Category ($ thousands) | Q1 2023 | Q1 2022 | | :---------------------------------------- | :------ | :------ | | Service charges on deposits | 1,027 | 1,369 | | Investments in limited partnerships | 251 | 795 | | Net gain (loss) on sale of loans held for sale | 112 | (91) | | Total Noninterest Income | 10,924 | 11,322 | - Noninterest income decreased by **$0.4 million (3.5%)** year-over-year[310](index=310&type=chunk) - Income from investments in limited partnerships decreased by **$544 thousand (68.4%)** year-over-year[137](index=137&type=chunk) [Noninterest Expense](index=55&type=section&id=Noninterest%20Expense) Total noninterest expense increased to **$33.7 million** in Q1 2023, driven by higher salaries, data processing, and FDIC assessments, worsening the efficiency ratio to **63.68%** Noninterest Expense Category | Noninterest Expense Category ($ thousands) | Q1 2023 | Q1 2022 | | :----------------------------------------- | :------ | :------ | | Salaries and employee benefits | 18,133 | 16,616 | | Computer and data processing | 4,691 | 3,979 | | FDIC assessments | 1,115 | 513 | | Other | 3,459 | 2,440 | | Total Noninterest Expense | 33,661 | 30,135 | - Total noninterest expense increased by **$3.5 million (11.7%)** year-over-year[311](index=311&type=chunk) - The efficiency ratio increased to **63.68%** in Q1 2023 from **59.06%** in Q1 2022, indicating a less efficient allocation of resources[111](index=111&type=chunk) [Income Taxes](index=57&type=section&id=Income%20Taxes) Income tax expense decreased to **$2.8 million** in Q1 2023, with a consistent effective tax rate of **18.7%**, influenced by tax credit investments Income Tax Metric | Income Tax Metric ($ thousands) | Q1 2023 | Q1 2022 | | :------------------------------ | :------ | :------ | | Income Tax Expense | 2,775 | 3,443 | | Effective Tax Rate | 18.7% | 18.7% | - Income tax expense decreased by **$0.7 million (19.4%)** year-over-year[140](index=140&type=chunk) - Federal and state tax benefits from tax credit investments reduced income tax expense by **$584 thousand** in Q1 2023[140](index=140&type=chunk) [ANALYSIS OF FINANCIAL CONDITION](index=57&type=section&id=ANALYSIS%20OF%20FINANCIAL%20CONDITION) Examines changes in investment securities, significant loan portfolio growth, increased allowance for credit losses, and a decrease in non-performing assets [Investment Securities](index=57&type=section&id=Investment%20Securities) The available-for-sale investment securities portfolio decreased to **$945.4 million** at March 31, 2023, with a net unrealized loss of **$158.4 million** Investment Securities | Investment Securities ($ thousands) | March 31, 2023 (Fair Value) | December 31, 2022 (Fair Value) | | :---------------------------------- | :-------------------------- | :----------------------------- | | Securities available for sale | 945,442 | 954,371 | | Securities held to maturity | 167,812 | 174,188 | | Total Investment Securities | 1,113,254 | 1,128,559 | - The AFS portfolio decreased by **$23.2 million** from December 31, 2022, to March 31, 2023[313](index=313&type=chunk) - The AFS portfolio had a net unrealized loss of **$158.4 million** at March 31, 2023[313](index=313&type=chunk) [LENDING ACTIVITIES](index=59&type=section&id=LENDING%20ACTIVITIES) Total loans increased to **$4.24 billion** at March 31, 2023, driven by organic commercial loan growth, which now constitutes **59.8%** of the portfolio Loan Portfolio Composition | Loan Portfolio Composition ($ thousands) | March 31, 2023 (Amount) | March 31, 2023 (% of Total) | December 31, 2022 (Amount) | December 31, 2022 (% of Total) | | :--------------------------------------- | :---------------------- | :-------------------------- | :------------------------- | :----------------------------- | | Commercial business | 695,110 | 16.4% | 664,249 | 16.4% | | Commercial mortgage | 1,841,481 | 43.4% | 1,679,840 | 41.5% | | Total commercial | 2,536,591 | 59.8% | 2,344,089 | 57.9% | | Total consumer | 1,706,741 | 40.2% | 1,706,360 | 42.1% | | Total loans | 4,243,332 | 100.0% | 4,050,449 | 100.0% | - Total loans increased by **$192.9 million (4.8%)** from December 31, 2022, to March 31, 2023[317](index=317&type=chunk) - Commercial loans increased by **$192.5 million** during Q1 2023, representing **59.8%** of total loans[317](index=317&type=chunk) [Allowance for Credit Losses – Loans](index=60&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Loans) The allowance for credit losses increased to **$47.5 million** at March 31, 2023, reflecting higher loan growth and increased net charge-offs, with a **540%** coverage ratio to non-performing loans Allowance for Credit Losses – Loans | Allowance for Credit Losses – Loans ($ thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------------------------ | :------------- | :---------------- | | Beginning balance | 45,413 | N/A | | Net charge-offs | 2,089 | 787 | | Provision for credit losses – loans | 4,204 | 2,077 | | Ending balance | 47,528 | 45,413 | - Net charge-offs increased by **$1.3 million (165.1%)** year-over-year[343](index=343&type=chunk) - The ratio of allowance for credit losses – loans to non-performing loans was **540%** at March 31, 2023, up from **426%** at March 31, 2022[343](index=343&type=chunk) [Non-Performing Assets and Potential Problem Loans](index=61&type=section&id=Non-Performing%20Assets%20and%20Potential%20Problem%20Loans) Total non-performing assets decreased to **$8.9 million** at March 31, 2023, while potential problem loans (substandard, accruing interest) increased to **$25.8 million** Non-Performing Assets | Non-Performing Assets ($ thousands) | March 31, 2023 | December 31, 2022 | | :---------------------------------- | :------------- | :---------------- | | Nonaccrual loans | 8,797 | 10,197 | | Accruing loans 90+ days delinquent | 4 | 1 | | Total non-performing loans | 8,801 | 10,198 | | Foreclosed assets | 101 | 19 | | Total non-performing assets | 8,902 | 10,217 | - Total non-performing assets decreased by **$1.3 million (12.9%)** from December 31, 2022, to March 31, 2023[347](index=347&type=chunk) - Potential problem loans (substandard, accruing interest) increased to **$25.8 million** at March 31, 2023, from **$22.7 million** at December 31, 2022[349](index=349&type=chunk) [FUNDING ACTIVITIES](index=63&type=section&id=FUNDING%20ACTIVITIES) Total deposits increased to **$5.14 billion** at March 31, 2023, driven by public and reciprocal deposits, while short-term borrowings decreased and long-term borrowings increased [Deposits](index=63&type=section&id=Deposits) Total deposits increased to **$5.14 billion** at March 31, 2023, primarily due to public and reciprocal deposit growth, with time deposits increasing to **28.6%** of the total Deposit Composition | Deposit Composition ($ thousands) | March 31, 2023 (Amount) | March 31, 2023 (% of Total) | December 31, 2022 (Amount) | December 31, 2022 (% of Total) | | :-------------------------------- | :---------------------- | :-------------------------- | :------------------------- | :----------------------------- | | Noninterest-bearing demand | 1,067,011 | 20.8% | 1,139,214 | 23.1% | | Interest-bearing demand | 901,251 | 17.5% | 863,822 | 17.5% | | Savings and money market | 1,701,663 | 33.1% | 1,643,516 | 33.4% | | Time deposits | 1,471,382 | 28.6% | 1,282,872 | 26.0% | | Total deposits | 5,141,307 | 100.0% | 4,929,424 | 100.0% | - Total deposits increased by **$211.9 million (4.3%)** from December 31, 2022, to March 31, 2023[144](index=144&type=chunk) - Uninsured deposits totaled **$2.17 billion** at March 31, 2023, up from **$2.05 billion** at December 31, 2022[144](index=144&type=chunk) [Borrowings](index=65&type=section&id=Borrowings) Total borrowings decreased to **$240.3 million** at March 31, 2023, mainly due to reduced short-term FHLB borrowings, partially offset by a new long-term FHLB advance Borrowings | Borrowings ($ thousands) | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Short-term borrowings – FHLB | 116,000 | 205,000 | | Long-term borrowings – FHLB | 50,000 | — | | Long-term borrowings – Subordinated notes, net | 74,299 | 74,222 | | Total borrowings | 240,299 | 279,222 | - Short-term FHLB borrowings decreased by **$89.0 million (43.4%)** from December 31, 2022, to March 31, 2023[145](index=145&type=chunk) - A new **$50.0 million** long-term FHLB advance was obtained, maturing January 20, 2026, at a fixed rate of **4.05%**[377](index=377&type=chunk) [LIQUIDITY AND CAPITAL MANAGEMENT](index=66&type=section&id=LIQUIDITY%20AND%20CAPITAL%20MANAGEMENT) The Company maintains strong liquidity through diverse funding sources and robust capital ratios, exceeding regulatory 'well-capitalized' thresholds [Liquidity](index=66&type=section&id=Liquidity) The Company maintains adequate liquidity with **$990.5 million** in additional collateralized borrowing capacity and **$215.6 million** in unencumbered liquid securities at March 31, 2023 - The Company had approximately **$990.5 million** of additional collateralized wholesale borrowing capacity at March 31, 2023[165](index=165&type=chunk) - Unencumbered liquid securities available for pledging totaled approximately **$215.6 million** at March 31, 2023[376](index=376&type=chunk) - Cash and cash equivalents increased by **$9.5 million** to **$140.0 million** at March 31, 2023[166](index=166&type=chunk) [Capital Management](index=67&type=section&id=Capital%20Management) Shareholders' equity increased to **$422.8 million** at March 31, 2023, and the Company remained 'well-capitalized' with all regulatory capital ratios exceeding minimum requirements - Shareholders' equity increased by **$17.2 million** to **$422.8 million** at March 31, 2023[149](index=149&type=chunk) - Accumulated other comprehensive loss decreased by **$10.1 million** during Q1 2023, primarily due to a decrease in net unrealized losses on available-for-sale securities[149](index=149&type=chunk) Regulatory Capital Ratios (Company) | Regulatory Capital Ratios (Company) | March 31, 2023 (Actual Ratio) | December 31, 2022 (Actual Ratio) | | :---------------------------------- | :---------------------------- | :------------------------------- | | Tier 1 Leverage | 8.19% | 8.33% | | CET1 Capital | 9.21% | 9.42% | | Tier 1 Capital | 9.55% | 9.78% | | Total Risk-Based Capital | 11.93% | 12.13% | [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the Company's management of interest rate risk through rate shock simulations, estimating impacts on net interest income and Economic Value of Equity - Market risk management uses rate shock simulations to estimate the impact of interest rate changes on net interest income and Economic Value of Equity (EVE)[381](index=381&type=chunk)[382](index=382&type=chunk) Estimated Change in Net Interest Income (12-month period ending March 31, 2024) | Estimated Change in Net Interest Income (12-month period ending March 31, 2024) ($ thousands) | -100 bp | +100 bp | +200 bp | +300 bp | | :-------------------------------------------------------------------------------------------- | :------ | :------ | :------ | :------ | | Estimated change | (822) | (812) | (1,622) | (2,435) | | % Change | -0.50% | -0.50% | -1.00% | -1.49% | Economic Value of Equity (EVE) | Economic Value of Equity (EVE) ($ thousands) | March 31, 2023 (Pre-Shock) | March 31, 2023 (Change) | March 31, 2023 (Percentage Change) | | :------------------------------------------- | :------------------------- | :---------------------- | :--------------------------------- | | Pre-Shock Scenario | 812,173 | N/A | N/A | | -100 Basis Points | 809,189 | (2,984) | -0.37% | | +100 Basis Points | 803,678 | (8,495) | -1.05% | [ITEM 4. Controls and Procedures](index=72&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of March 31, 2023[157](index=157&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2023[158](index=158&type=chunk) PART II. OTHER INFORMATION Presents legal proceedings, risk factors, equity security sales, and a list of exhibits for the quarter ended March 31, 2023 [ITEM 1. Legal Proceedings](index=73&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in a class action lawsuit regarding repossessed vehicle notices, with no contingent liability accrued due to ongoing defenses - The Company is defending a class action lawsuit alleging non-compliance with UCC notices for repossessed vehicles[177](index=177&type=chunk) - Four classes were certified, comprising approximately **5,200 members** in New York and **300** in Pennsylvania[177](index=177&type=chunk) - No contingent liability has been accrued as the Company disputes the claims and cannot reasonably estimate potential loss[177](index=177&type=chunk) [ITEM 1A. Risk Factors](index=74&type=section&id=ITEM%201A.%20Risk%20Factors) Highlights significant risks from recent bank failures, rising interest rates, and potential federal debt ceiling issues, impacting liquidity, margins, and stock price - Recent bank failures have decreased confidence in banks, leading to potential liquidity pressures, reduced net interest margins, and increased credit losses[160](index=160&type=chunk) - The market price and volatility of the Company's common stock could be adversely impacted by these events[160](index=160&type=chunk) - Lawmakers' failure to address the federal debt ceiling could affect the stability, valuation, and liquidity of government-backed securities and increase future borrowing costs[179](index=179&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the repurchase of **22,710 shares** of common stock in March 2023 for tax withholding, with **766,447 shares** remaining for repurchase Issuer Purchases of Equity Securities Period | Issuer Purchases of Equity Securities Period | Total Number of Shares Purchased | Average Price Per Share ($) | | :------------------------------------------- | :------------------------------- | :-------------------------- | | March 1, 2023 - March 31, 2023 | 22,710 | 24.71 | - The repurchased shares were deemed surrendered to satisfy tax withholding obligations for vesting restricted stock units[190](index=190&type=chunk) - As of March 31, 2023, **766,447 shares** remained available for repurchase under the June 2022 share repurchase program[161](index=161&type=chunk)[182](index=182&type=chunk) [ITEM 6. Exhibits](index=76&type=section&id=ITEM%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including organizational documents, certifications, and Inline XBRL taxonomy documents - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Section 302 and 906 Certifications, and Inline XBRL documents[191](index=191&type=chunk) SIGNATURES Confirms the official signing of the report by the Company's President and CEO, EVP and CFO, and SVP and Controller as of May 8, 2023 - The report was signed by Martin K. Birmingham (President and CEO), W. Jack Plants II (EVP and CFO), and Sonia M. Dumbleton (SVP and Controller) on May 8, 2023[192](index=192&type=chunk)
Financial Institutions(FISI) - 2023 Q1 - Earnings Call Transcript
2023-04-29 18:46
Financial Data and Key Metrics Changes - First quarter net income available to common shareholders was $11.7 million or $0.76 per diluted share, consistent with the linked quarter but down from $14.6 million or $0.93 per diluted share in the prior year period, primarily due to higher provision for credit losses and increased expenses [5][39] - Net interest income for the first quarter was $41.8 million, down $1.3 million from the fourth quarter of 2022, reflecting fewer days in the quarter and higher cost of funds [29] - The overall cost of funds increased to 162 basis points, up 53 basis points from the linked fourth quarter [29] Business Line Data and Key Metrics Changes - Organic loan growth increased by 4.8% from December 31, 2022, supported by a strong pipeline and large commitments [11] - The commercial real estate (CRE) portfolio consists of assets with outstanding balances of $1.6 billion and committed credit exposure of $2.1 billion at March 31 [11] - The residential loan portfolio remained flat, while the consumer indirect loan portfolio was also flat at $1 million [14] Market Data and Key Metrics Changes - Deposits totaled $5.1 billion at March 31, up 4.3% from December 31, driven by seasonal inflows from tax payments and state funding [7] - Uninsured retail deposits made up approximately 14% of total deposits, with available committed liquidity remaining strong at approximately $1.2 billion [10] Company Strategy and Development Direction - The company announced a strategic expansion into the Central New York market to enhance its commercial and industrial lending focus [39] - The Banking-as-a-Service (BaaS) initiatives are expected to generate approximately $150 million of deposits in the last three quarters of 2023, contributing to non-public deposit growth goals [37] - The company aims to protect its margin, manage expenses effectively, and introduce its relationship-based approach to banking and wealth management to new customers [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2023 despite a challenging operating environment, highlighting strong loan growth and stable asset quality metrics [39] - The company expects mid-to-high single-digit growth in its total loan portfolio for the full year 2023, driven by commercial loan categories [36] - Management noted that the pipeline remains stable, but potential recessionary impacts could lead customers to postpone projects and investments [50] Other Important Information - The effective tax rate for 2023 is expected to fall within a range of 18% to 19% [22] - The company recorded a higher level of FDIC insurance expense due to regulatory changes and balance sheet growth [32] Q&A Session Summary Question: Loan growth expectations and market conditions - Management indicated that loan growth is expected to moderate in the second half of the year due to market conditions and potential recession impacts [48][50] Question: Changes to deposit service charges - The company eliminated the return to item fee and increased the de minimis overdraft amount, with expectations for lower NSF fees in the first quarter [51] Question: Update on Banking-as-a-Service initiatives - Management confirmed that onboarding clients is in process, with significant deposits expected to come over in the next 90 to 120 days [67]
Financial Institutions(FISI) - 2022 Q4 - Annual Report
2023-03-08 16:00
Table of Contents Risks Related to Non-Banking Activities services industry and market volatility. Table of Contents The value of our goodwill and other intangible assets may decline in the future. Identifiable intangible assets other than goodwill consist of core deposit intangibles and other intangible assets (primarily customer relationships). Adverse events or circumstances could impact the recoverability of these intangible assets including loss of core deposits, significant losses of customer accounts ...