Financial Institutions(US:FISI)2023-04-29 18:46Financial 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]