Financial Institutions (FISI) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices. The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the system. ...

WARSAW, N.Y., Oct. 01, 2024 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (NASDAQ: FISI) (the "Company"), the parent company of Five Star Bank and Courier Capital, LLC, will release results for the third quarter ending September 30, 2024 after the market closes on October 24, 2024. Management will host an earnings conference call and audio webcast on October 25, 2024 at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and W. Jack Plants II, C ...

Core Viewpoint - Financial Institutions (FISI) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the importance of changing earnings estimates in determining near-term stock price movements, making it a valuable tool for investors [2][4]. - The correlation between earnings estimate revisions and stock price movements is strong, with institutional investors using these estimates to assess fair value, leading to buying or selling actions that affect stock prices [4]. Financial Institutions' Earnings Outlook - The upgrade reflects a positive outlook for Financial Institutions' earnings, suggesting potential buying pressure and an increase in stock price [3][5]. - Financial Institutions is projected to earn $3.02 per share for the fiscal year ending December 2024, indicating a year-over-year change of -4.1%, although analysts have raised their estimates by 8.6% over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Financial Institutions to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Core Viewpoint - Financial Institutions Inc. has shown significant growth in shareholder value, with shares increasing by 49.9% since the last analysis, outperforming the S&P 500's 21.5% rise during the same period. Despite this growth, the company maintains a 'buy' rating due to continued improvements in its financial metrics [1]. Financial Performance - The company reported deposits of $5.13 billion at the end of the most recent quarter, a decline from $5.21 billion at the end of 2023, attributed to seasonality and a reduction in brokered CDs [2]. - Loan values increased to $4.41 billion, up from $4.38 billion in the previous year, indicating a positive trend in lending activities [4]. - Securities decreased from $1.04 billion in 2023 to $99.9 million, while cash and cash equivalents rose from $124.4 million to $146.3 million [4]. - Debt levels increased from $194.5 million in Q3 2023 to $326.7 million, reflecting some financial strain [4][5]. Income Metrics - Net interest income for the first half of 2024 was $84.7 million, an increase from $76.7 million the previous year, although this was influenced by a $3.4 million benefit from credit losses compared to a $7.4 million hit the prior year [6]. - Non-interest income surged to $22.4 million, boosted by a $13.5 million gain from the sale of SDN Insurance, but would have decreased without this one-time gain [8]. - Net income for the first half of 2024 rose slightly from $25.7 million to $27 million, despite rising non-interest costs and a significant charge-off related to a deposit fraud incident [8]. Valuation Metrics - The company reported net profits of $55.1 million in 2023, resulting in a price-to-earnings (P/E) multiple of 7.2, making it the cheapest among comparable banks [10]. - On a price-to-book basis, Financial Institutions trades at 0.87, while on a tangible book basis, it is close to its peers, indicating a discount relative to book value [10]. - The return on assets stands at 0.90%, which is competitive compared to three of five comparable firms, while the return on equity is at 10.50% [12][14]. Overall Assessment - Despite some challenges, including declining deposits and income volatility, Financial Institutions remains an attractive investment due to its low valuation metrics and decent asset quality, justifying a 'soft buy' recommendation [15].

Financial Data and Key Metrics Changes - The common equity Tier 1 ratio surpassed 10%, increasing by 60 basis points from March 31, 2024, and by 93 basis points from June 30, 2023 [1] - Tangible common book value per share grew by 9% and 16% from the end of the linked and year-ago quarters respectively [1] - Record GAAP net income available to common shareholders was $25.3 million or $1.62 per diluted share in the second quarter, compared to $1.7 million or $0.11 per diluted share in the linked first quarter [8] - Year-to-date return on average assets was 90 basis points and efficiency ratio was 75% [8] - Normalized year-to-date return on average assets was 1.07% with an efficiency ratio of 66% when excluding certain expenses [9] Business Line Data and Key Metrics Changes - Revenue from Courier Capital, the wealth management firm, totaled $2.8 million in the second quarter, up 7.6% from the first quarter [3] - Noninterest expense decreased to $33 million in the second quarter from $54 million in the linked period, primarily due to lower salaries and employee benefits [4] - Income from limited partnerships increased by $461,000, driven by favorable performance of underlying investments [2] Market Data and Key Metrics Changes - Total loans dropped modestly during the quarter, with commercial growth offset by runoff in the indirect portfolio [13] - Total deposits decreased by 4.9%, reflecting seasonality in the public deposit portfolio [13] - The indirect portfolio totaled $894.6 million, down 2.8% from March 31, 2024, with a notable improvement in the indirect net charge-off ratio [19] Company Strategy and Development Direction - The sale of the insurance subsidiary, SDN Insurance Agency, was a strategic transaction that capitalized on strong valuations and generated a pretax gain of $13.5 million [11] - The company aims to build on the positive momentum of its core business to deliver sustained incremental improvement in operating performance [51] - The focus remains on liquidity, capital, and earnings to capitalize on future opportunities [1] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of the loan portfolio and associated asset quality metrics, despite a challenging operating environment [48] - The company expects to provide updates on the fraud event and its legal proceedings in future earnings disclosures [47] - The trajectory of cost of funds is expected to continue to flow throughout 2024, with a focus on managing credit performance [26] Other Important Information - The effective tax rate for 2024 is expected to fall within a range of 11% to 13% [32] - Noninterest income guidance remains unchanged, with recurring quarterly noninterest income expected between $8.5 million to $9 million [33] - The company is reviewing its capital stack strategically, considering potential reissuance or replacement of capital ahead of reset dates [83] Q&A Session Summary Question: Margin response to potential Fed cuts - Management indicated that the first couple of cuts by the Fed would be neutral, but more aggressive cuts in 2025 could benefit margins [62] Question: Loan growth split between C&I and CRE - Management is canvassing all commercial activities, with both C&I and CRE being considered for growth despite a cautious approach in the higher rate environment [56] Question: Fee income guidance and run rate - Management provided insights on fee income, indicating that the current quarter's run rate could be a decent proxy for the rest of the year [70] Question: Provisioning expectations - Management acknowledged fluctuations in provisioning driven by delinquency trends, with expectations for charge-offs to stabilize [72] Question: Plans for upcoming sub debt reset - Management is evaluating the potential to reissue or replace alternative forms of capital as two facilities are set to reprice next year [83]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) The company achieved strong Q2 2024 results, driven by a significant gain from the insurance subsidiary sale, improved net interest margin, and strengthened capital ratios [Second Quarter 2024 Highlights](index=1&type=section&id=Second%20Quarter%202024%20Highlights) The company reported a significant increase in net income to $25.6 million ($1.62 per diluted share) for Q2 2024, largely driven by a $13.5 million pre-tax gain from the sale of its insurance subsidiary. This contrasts with Q1 2024, which was impacted by a major fraud event. Key operational successes include a 9 basis point linked-quarter expansion in net interest margin to 2.87% and a significant reduction in noninterest expenses Q2 2024 Financial Results vs. Prior Periods | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Income | $25.6 million | $2.1 million | $14.4 million | | Net Income Available to Common Shareholders | $25.3 million | $1.7 million | $14.0 million | | Diluted EPS | $1.62 | $0.11 | $0.91 | - Financial results for Q2 2024 were significantly boosted by a **$13.5 million** pre-tax gain from the April 1, 2024 sale of the assets of SDN Insurance Agency, LLC[16](index=16&type=chunk)[17](index=17&type=chunk) - The linked first quarter (Q1 2024) results were negatively impacted by a deposit-related fraud event, which resulted in an **$18.4 million** pre-tax loss[16](index=16&type=chunk) Q2 2024 Key Operational Metrics | Metric | Q2 2024 | Change from Q1 2024 | | :--- | :--- | :--- | | Net Interest Margin | 2.87% | Up 9 basis points | | Net Interest Income | $41.2 million | Up $1.1 million (2.8%) | | Noninterest Expense | $33.0 million | Down $21.0 million (38.9%) | | Total Loans | $4.46 billion | Up $19.4 million (0.4%) | | Total Deposits | $5.13 billion | Down $263.4 million (4.9%) | [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Martin K. Birmingham highlighted strong Q2 results, record net income driven by the successful insurance subsidiary sale, and core business performance including margin expansion and capital ratio improvement. CFO W. Jack Plants II emphasized building on margin stability, redeploying cash flows into higher-yielding assets, and maintaining a strong liquidity position of $1.3 billion - The CEO stated that the quarter's strong outcomes were driven by a focus on liquidity, capital, and earnings, highlighted by the successful sale of the insurance subsidiary which generated a significant pre-tax gain of **$13.5 million**[17](index=17&type=chunk) - Management noted meaningful improvement in capital ratios, with the common equity tier 1 (CET1) ratio surpassing **10%**, up **60 basis points** from March 31, 2024[17](index=17&type=chunk)[3](index=3&type=chunk) - The CFO highlighted the company's strong liquidity, with **$1.3 billion** in available liquidity as of June 30, 2024, and over **$1.0 billion** in anticipated cash flow in the next 12 months[3](index=3&type=chunk) [Sale of Insurance Subsidiary Assets](index=3&type=section&id=Sale%20of%20Insurance%20Subsidiary%20Assets) On April 1, 2024, the company closed the sale of its wholly-owned subsidiary, SDN Insurance Agency, LLC, to NFP Property & Casualty Services, Inc. The transaction generated approximately $27.0 million in proceeds and a pre-tax gain of about $13.5 million - The company announced and closed the sale of the assets of its subsidiary SDN Insurance Agency, LLC to NFP Property & Casualty Services, Inc. on April 1, 2024[3](index=3&type=chunk) Financial Impact of SDN Sale | Metric | Amount | | :--- | :--- | | Proceeds | ~$27.0 million | | Pre-tax Gain on Sale | ~$13.5 million | [Detailed Financial Analysis](index=3&type=section&id=Detailed%20Financial%20Analysis) This section provides a detailed breakdown of the company's financial performance, including net interest income, noninterest income, noninterest expense, and income taxes, highlighting key drivers and period-over-period changes [Net Interest Income and Net Interest Margin](index=3&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income (NII) for Q2 2024 was $41.2 million, an increase of $1.1 million from Q1 2024 but a decrease of $1.1 million from Q2 2023. The net interest margin (NIM) expanded by 9 basis points sequentially to 2.87%, driven by lower funding costs. However, the NIM declined from 2.99% year-over-year due to higher funding costs in the current rate environment NII and NIM Performance | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $41.2 million | $40.1 million | $42.3 million | | Net Interest Margin | 2.87% | 2.78% | 2.99% | - The linked-quarter increase in NII and NIM was attributed to lower funding costs, resulting from a reduction in short-term borrowings and brokered deposits late in the first quarter[4](index=4&type=chunk) - The year-over-year decrease was primarily caused by higher funding costs amid the high interest rate environment, which was partially offset by an increase in the average yield on interest-earning assets[4](index=4&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Noninterest income surged to $24.0 million in Q2 2024, a significant increase from both the linked quarter ($13.1 million increase) and the prior-year quarter ($12.5 million increase). The primary driver was the $13.5 million net gain from the sale of the insurance subsidiary. Other areas like investment advisory and company-owned life insurance income also showed positive contributions Noninterest Income Comparison | Period | Amount | | :--- | :--- | | Q2 2024 | $24.0 million | | Q1 2024 | $10.9 million | | Q2 2023 | $11.5 million | - The primary driver for the substantial increase was a **$13.5 million** net gain from the sale of the company's insurance subsidiary assets[5](index=5&type=chunk) - Investment advisory income increased by **$197 thousand** from the linked quarter due to market-driven growth in assets under management[5](index=5&type=chunk) - Income from company-owned life insurance rose by **$407 thousand** year-over-year due to a surrender and redeploy strategy executed in late 2023[5](index=5&type=chunk) [Noninterest Expense](index=4&type=section&id=Noninterest%20Expense) Noninterest expense was $33.0 million in Q2 2024, a sharp decrease of $21.0 million (38.9%) from Q1 2024 and a modest decrease of $762 thousand (2.3%) from Q2 2023. The substantial linked-quarter decline was primarily due to the absence of the $18.4 million pre-tax loss from the fraud event recorded in Q1. Lower salaries and benefits from the insurance asset sale also contributed to the reduction Noninterest Expense Comparison | Period | Amount | | :--- | :--- | | Q2 2024 | $33.0 million | | Q1 2024 | $54.0 million | | Q2 2023 | $33.8 million | - The significant linked-quarter decrease was primarily driven by the absence of the Q1 2024 fraud event, which included an **$18.4 million** pre-tax loss recorded under 'Deposit-related charged-off items'[21](index=21&type=chunk) - Salaries and employee benefits decreased by **$1.6 million** from Q1 2024 and **$2.0 million** from Q2 2023, due to the insurance asset sale and prior organizational changes[21](index=21&type=chunk) [Income Taxes](index=4&type=section&id=Income%20Taxes) Income tax expense was $4.5 million in Q2 2024, with an effective tax rate of 15.0%. This is higher than the $356 thousand expense in Q1 2024, which had lower pre-tax income due to the fraud event. The effective tax rate remains relatively stable and is influenced by tax-exempt income and tax credit investments Income Tax Analysis | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Income Tax Expense | $4.5 million | $356 thousand | $2.4 million | | Effective Tax Rate | 15.0% | 14.7% | 14.4% | - The lower tax expense in Q1 2024 was a direct result of lower pre-tax income caused by the previously disclosed fraud event[22](index=22&type=chunk) - The effective tax rate fluctuates quarterly primarily due to the level of pre-tax earnings and the impact of tax-exempt income and tax credit investments[22](index=22&type=chunk) [Balance Sheet and Credit Quality](index=4&type=section&id=Balance%20Sheet%20and%20Credit%20Quality) This section reviews the company's balance sheet composition, capital adequacy, and credit quality metrics, highlighting improvements in capital ratios and stable asset quality [Balance Sheet Analysis](index=4&type=section&id=Balance%20Sheet%20Analysis) As of June 30, 2024, total assets stood at $6.13 billion. Total loans increased slightly to $4.46 billion from the prior quarter, driven by growth in commercial mortgages. Total deposits decreased by 4.9% to $5.13 billion from March 31, 2024, primarily due to seasonal outflows of public deposits and a reduction in brokered CDs Key Balance Sheet Items (as of June 30, 2024) | Item | Amount | Change from Mar 31, 2024 | Change from Jun 30, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $6.13 billion | -$166.8 million | -$9.5 million | | Total Loans | $4.46 billion | +$19.4 million | +$63.7 million | | Total Deposits | $5.13 billion | -$263.4 million | +$98.5 million | - The linked-quarter decrease in deposits was primarily attributed to the seasonality of public deposits, combined with a reduction in brokered CDs[23](index=23&type=chunk) - Loan growth was driven by a **$40.8 million** (2.0%) increase in commercial mortgage loans from the linked quarter, while consumer indirect loans decreased by **$25.8 million** (2.8%)[23](index=23&type=chunk) [Capital Management](index=5&type=section&id=Capital%20Management) The company significantly strengthened its capital position in Q2 2024, driven by strong net income and the gain from the insurance asset sale. All regulatory capital ratios improved and continued to exceed "well capitalized" requirements, with the Common Equity Tier 1 ratio reaching 10.03%. Tangible common book value per share grew by 9.2% from the linked quarter to $25.17 Regulatory Capital Ratios | Ratio | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 10.03% | 9.43% | 9.10% | | Tier 1 Capital | 10.36% | 9.76% | 9.43% | | Total Risk-Based Capital | 12.65% | 12.04% | 11.77% | | Leverage Ratio | 8.61% | 8.03% | 8.08% | Per Share Capital Metrics | Metric | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :--- | :--- | :--- | :--- | | Common Book Value | $29.11 | $27.74 | $26.53 | | Tangible Common Book Value | $25.17 | $23.06 | $21.79 | - The improvement in regulatory capital ratios during the quarter was primarily driven by the impact of the insurance asset sale that closed on April 1, 2024[23](index=23&type=chunk) - The company declared a common stock dividend of **$0.30** per common share, consistent with the linked and year-ago quarters[23](index=23&type=chunk) [Credit Quality](index=5&type=section&id=Credit%20Quality) Credit quality metrics remained strong in Q2 2024. Non-performing loans as a percentage of total loans improved to 0.57% from 0.60% in the prior quarter. Annualized net charge-offs were low at 0.10% of average loans. The company recorded a provision for credit losses of $2.0 million, reflecting a modest increase in consumer indirect delinquencies Key Credit Quality Metrics | Metric | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :--- | :--- | :--- | :--- | | Non-performing loans / Total loans | 0.57% | 0.60% | 0.23% | | Net charge-offs (annualized) / Avg loans | 0.10% | 0.28% | 0.06% | | Allowance for credit losses / Total loans | 0.99% | 0.97% | 1.13% | - The provision for credit losses was **$2.0 million** in Q2 2024, compared to a benefit of **$5.5 million** in Q1 2024 and a provision of **$3.2 million** in Q2 2023[24](index=24&type=chunk) - The year-over-year increase in non-performing loans was primarily driven by a single commercial loan relationship that was placed on nonaccrual status during the fourth quarter of 2023[35](index=35&type=chunk) [Other Information](index=7&type=section&id=Other%20Information) This section provides details on subsequent events, the upcoming earnings conference call, and important disclosures regarding non-GAAP financial measures and forward-looking statements [Subsequent Events & Conference Call](index=7&type=section&id=Subsequent%20Events%20%26%20Conference%20Call) The company will continue to evaluate subsequent events until its Form 10-Q is filed. An earnings conference call to discuss the Q2 2024 results is scheduled for July 26, 2024, at 8:30 a.m. Eastern Time - The company is required to evaluate subsequent events through the filing of its Form 10-Q and will adjust preliminary reported amounts if necessary[36](index=36&type=chunk) - An earnings conference call and webcast will be hosted on July 26, 2024, at 8:30 a.m. Eastern Time to discuss the financial results[10](index=10&type=chunk) [Non-GAAP Financial Information and Safe Harbor](index=7&type=section&id=Non-GAAP%20Financial%20Information%20and%20Safe%20Harbor) This report includes non-GAAP financial measures, which management believes are useful for understanding the company's performance. A reconciliation to GAAP measures is provided in an appendix. The report also contains a safe harbor statement, cautioning that forward-looking statements are subject to various risks and uncertainties - The press release contains certain non-GAAP financial measures. A reconciliation of these measures to GAAP is included in Appendix A of the document[38](index=38&type=chunk) - The report includes a Safe Harbor Statement, noting that forward-looking statements involve significant risks and uncertainties and are based on certain assumptions that could differ materially from actual results[39](index=39&type=chunk)

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today. Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often ...

Group 1 - Financial Institutions, Inc. will release its second quarter results for the period ending June 30, 2024, after market close on July 25, 2024 [1] - An earnings conference call and audio webcast will be hosted on July 26, 2024, at 8:30 a.m. Eastern Time, led by the President and CEO, Martin K. Birmingham, and CFO, W. Jack Plants II [3] - The company has approximately $6.3 billion in assets and offers banking and wealth management products and services [4] Group 2 - Five Star Bank, a subsidiary of Financial Institutions, Inc., provides consumer and commercial banking and lending services across Western and Central New York [4] - Courier Capital, LLC, another subsidiary, offers customized investment management, financial planning, and consulting services to a diverse clientele [4]

Core Viewpoint - Financial Institutions, Inc. has announced a quarterly cash dividend of $0.30 per common share, along with preferred stock dividends, reflecting the company's commitment to returning value to shareholders [1][2]. Group 1: Dividend Announcements - The company declared a quarterly cash dividend of $0.30 per outstanding common share [1]. - Dividends of $0.75 per share on Series A 3% preferred stock and $2.12 per share on Series B-1 8.48% preferred stock were also announced [1]. - All dividends are payable on July 2, 2024, to shareholders of record on June 14, 2024 [2]. Group 2: Company Overview - Financial Institutions, Inc. is a financial holding company with approximately $6.3 billion in assets [3]. - The company offers banking and wealth management products and services through its subsidiary, Five Star Bank, which serves individuals, municipalities, and businesses in Western and Central New York [3]. - Courier Capital, LLC, another subsidiary, provides customized investment management, financial planning, and consulting services to a diverse clientele [3].

Pgiam Earnings of Financial Institutions, Inc. (NASDAQ:FISI) will likely be lower this year because of the hit from fraudulent activity reported in the first quarter. Financial Institutions' subsidiary bank, Five Star Bank, (not to be confused with the subsidiary of Five Star Bancorp, Five Star Bank, which operates in Northern California) was the victim of a deposit-account related incident earlier this year. Further, earnings will suffer because the average margin will be lower this year compared to last y ...