0001564590-19-030085.txt : 20190807 0001564590-19-030085.hdr.sgml : 20190807 20190807161747 ACCESSION NUMBER: 0001564590-19-030085 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 101 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190807 DATE AS OF CHANGE: 20190807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINANCIAL INSTITUTIONS INC CENTRAL INDEX KEY: 0000862831 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 160816610 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26481 FILM NUMBER: 191005721 BUSINESS ADDRESS: STREET 1: 220 LIBERTY STREET CITY: WARSAW STATE: NY ZIP: 14569 BUSINESS PHONE: 5857861100 MAIL ADDRESS: STREET 1: 220 LIBERTY STREET CITY: WARSAW STATE: NY ZIP: 14569 10-Q 1 fisi-10q_20190630.htm 10-Q fisi-10q_20190630.htm

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended              June 30, 2019            

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number:     000-26481     

 

 

(Exact name of registrant as specified in its charter)

 

 

NEW YORK

  

16-0816610

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

 

220 LIBERTY STREET, WARSAW, NEW YORK

  

14569

(Address of principal executive offices)

  

(Zip Code)

 

(585) 786-1100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

FISI

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No      

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

    

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No   

The registrant had 15,994,697 shares of Common Stock, $0.01 par value, outstanding as of July 31, 2019.

 

 


Table of Contents

 

FINANCIAL INSTITUTIONS, INC.

Form 10-Q

For the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS

 

 

 

PAGE

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition (Unaudited) - at June 30, 2019 and December 31, 2018

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) - Three and six months ended June 30, 2019 and 2018

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) - Three and six months ended June 30, 2019 and 2018

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - Three and six months ended June 30, 2019 and 2018

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2019 and 2018

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

9

 

 

 

 

 

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

39

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

57

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

 

58

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

 

59

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

 

 

 

 

 

ITEM 6.

 

Exhibits

 

59

 

 

 

 

 

 

 

Signatures

 

60

 

 

 

- 2 -


Table of Contents

 

PART I. FINANCIAL INFORMATION

ITEM 1.      Financial Statements

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Unaudited)

 

(Dollars in thousands, except share and per share data)

 

June 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

108,988

 

 

$

102,755

 

Securities available for sale, at fair value

 

 

406,509

 

 

 

445,677

 

Securities held to maturity, at amortized cost (fair value of $401,405 and $439,581, respectively)

 

 

398,610

 

 

 

446,581

 

Loans held for sale

 

 

2,045

 

 

 

2,868

 

Loans (net of allowance for loan losses of $34,434 and $33,914, respectively)

 

 

3,117,250

 

 

 

3,052,684

 

Company owned life insurance

 

 

67,974

 

 

 

67,116

 

Premises and equipment, net

 

 

41,957

 

 

 

42,839

 

Goodwill and other intangible assets, net

 

 

75,534

 

 

 

76,173

 

Other assets

 

 

95,078

 

 

 

75,005

 

Total assets

 

$

4,313,945

 

 

$

4,311,698

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

719,150

 

 

$

755,460

 

Interest-bearing demand

 

 

677,846

 

 

 

622,482

 

Savings and money market

 

 

966,509

 

 

 

968,897

 

Time deposits

 

 

1,108,484

 

 

 

1,020,068

 

Total deposits

 

 

3,471,989

 

 

 

3,366,907

 

Short-term borrowings

 

 

308,500

 

 

 

469,500

 

Long-term borrowings, net of issuance costs of $763 and $798, respectively

 

 

39,237

 

 

 

39,202

 

Other liabilities

 

 

71,865

 

 

 

39,796

 

Total liabilities

 

 

3,891,591

 

 

 

3,915,405

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Series A 3% preferred stock, $100 par value; 1,533 shares authorized;

   1,435 shares issued

 

 

143

 

 

 

143

 

Series B-1 8.48% preferred stock, $100 par value; 200,000 shares authorized;

   171,847 shares issued

 

 

17,185

 

 

 

17,185

 

Total preferred equity

 

 

17,328

 

 

 

17,328

 

Common stock, $0.01 par value; 50,000,000 shares authorized; 16,099,556

   and 16,056,178 shares issued, respectively

 

 

161

 

 

 

161

 

Additional paid-in capital

 

 

123,980

 

 

 

122,704

 

Retained earnings

 

 

296,151

 

 

 

279,867

 

Accumulated other comprehensive loss

 

 

(13,160

)

 

 

(21,281

)

Treasury stock, at cost – 104,859 and 127,580 shares, respectively

 

 

(2,106

)

 

 

(2,486

)

Total shareholders’ equity

 

 

422,354

 

 

 

396,293

 

Total liabilities and shareholders’ equity

 

$

4,313,945

 

 

$

4,311,698

 

 

See accompanying notes to the consolidated financial statements.

 

- 3 -


Table of Contents

 

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

 

(In thousands, except per share amounts)

 

Three months ended

June 30,

 

 

Six months ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

37,807

 

 

$

31,343

 

 

$

74,273

 

 

$

61,101

 

Interest and dividends on investment securities

 

 

4,752

 

 

 

5,525

 

 

 

9,698

 

 

 

11,166

 

Other interest income

 

 

89

 

 

 

145

 

 

 

191

 

 

 

223

 

Total interest income

 

 

42,648

 

 

 

37,013

 

 

 

84,162

 

 

 

72,490

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

7,378

 

 

 

4,253

 

 

 

14,177

 

 

 

7,709

 

Short-term borrowings

 

 

2,189

 

 

 

1,912

 

 

 

4,494

 

 

 

3,613

 

Long-term borrowings

 

 

617

 

 

 

618

 

 

 

1,235

 

 

 

1,236

 

Total interest expense

 

 

10,184

 

 

 

6,783

 

 

 

19,906

 

 

 

12,558

 

Net interest income

 

 

32,464

 

 

 

30,230

 

 

 

64,256

 

 

 

59,932

 

Provision for loan losses

 

 

2,354

 

 

 

40

 

 

 

3,547

 

 

 

2,989

 

Net interest income after provision for loan losses

 

 

30,110

 

 

 

30,190

 

 

 

60,709

 

 

 

56,943

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

1,756

 

 

 

1,703

 

 

 

3,436

 

 

 

3,441

 

Insurance income

 

 

872

 

 

 

1,018

 

 

 

2,250

 

 

 

2,417

 

ATM and debit card

 

 

1,739

 

 

 

1,531

 

 

 

3,182

 

 

 

2,952

 

Investment advisory

 

 

2,327

 

 

 

1,911

 

 

 

4,543

 

 

 

3,689

 

Company owned life insurance

 

 

424

 

 

 

443

 

 

 

834

 

 

 

893

 

Investments in limited partnerships

 

 

144

 

 

 

123

 

 

 

376

 

 

 

691

 

Loan servicing

 

 

104

 

 

 

108

 

 

 

214

 

 

 

223

 

Income (loss) from derivative instruments, net

 

 

(45

)

 

 

176

 

 

 

123

 

 

 

347

 

Net gain on sale of loans held for sale

 

 

407

 

 

 

131

 

 

 

589

 

 

 

227

 

Net gain on investment securities

 

 

166

 

 

 

7

 

 

 

113

 

 

 

7

 

Net gain on other assets

 

 

9

 

 

 

9

 

 

 

58

 

 

 

12

 

Other

 

 

1,330

 

 

 

1,247

 

 

 

2,635

 

 

 

2,415

 

Total noninterest income

 

 

9,233

 

 

 

8,407

 

 

 

18,353

 

 

 

17,314

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

13,249

 

 

 

12,871

 

 

 

27,250

 

 

 

26,300

 

Occupancy and equipment

 

 

4,326

 

 

 

4,167

 

 

 

8,912

 

 

 

8,574

 

Professional services

 

 

932

 

 

 

896

 

 

 

2,090

 

 

 

1,779

 

Computer and data processing

 

 

1,350

 

 

 

1,358

 

 

 

2,573

 

 

 

2,593

 

Supplies and postage

 

 

498

 

 

 

548

 

 

 

1,032

 

 

 

1,060

 

FDIC assessments

 

 

486

 

 

 

480

 

 

 

998

 

 

 

988

 

Advertising and promotions

 

 

1,086

 

 

 

721

 

 

 

1,606

 

 

 

1,698

 

Amortization of intangibles

 

 

316

 

 

 

305

 

 

 

639

 

 

 

593

 

Other

 

 

2,760

 

 

 

2,102

 

 

 

5,074

 

 

 

3,967

 

Total noninterest expense

 

 

25,003

 

 

 

23,448

 

 

 

50,174

 

 

 

47,552

 

Income before income taxes

 

 

14,340

 

 

 

15,149

 

 

 

28,888

 

 

 

26,705

 

Income tax expense

 

 

2,939

 

 

 

2,979

 

 

 

5,966

 

 

 

5,247

 

Net income

 

$

11,401

 

 

$

12,170

 

 

$

22,922

 

 

$

21,458

 

Preferred stock dividends

 

 

366

 

 

 

366

 

 

 

731

 

 

 

731

 

Net income available to common shareholders

 

$

11,035

 

 

$

11,804

 

 

$

22,191

 

 

$

20,727

 

Earnings per common share (Note 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.69

 

 

$

0.74

 

 

$

1.39

 

 

$

1.30

 

Diluted

 

$

0.69

 

 

$

0.74

 

 

$

1.39

 

 

$

1.30

 

Cash dividends declared per common share

 

$

0.25

 

 

$

0.24

 

 

$

0.50

 

 

$

0.48

 

 

See accompanying notes to the consolidated financial statements.

- 4 -


Table of Contents

 

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

(Dollars in thousands)

 

Three months ended

June 30,

 

 

Six months ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

11,401

 

 

$

12,170

 

 

$

22,922

 

 

$

21,458

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale and transferred securities

 

 

5,239

 

 

 

(2,487

)

 

 

10,742

 

 

 

(8,757

)

Hedging derivative instruments

 

 

(106

)

 

 

227

 

 

 

(360

)

 

 

123

 

Pension and post-retirement obligations

 

 

261

 

 

 

127

 

 

 

522

 

 

 

254

 

Total other comprehensive income (loss), net of tax

 

 

5,394

 

 

 

(2,133

)

 

 

10,904

 

 

 

(8,380

)

Comprehensive income

 

$

16,795

 

 

$

10,037

 

 

$

33,826

 

 

$

13,078

 

 

See accompanying notes to the consolidated financial statements.

- 5 -


Table of Contents

 

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

Three and six months ended June 30, 2019 and 2018

 

(Dollars in thousands, except per share data)

 

Preferred

Equity

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

Shareholders’

Equity

 

Balance at December 31, 2018

 

$

17,328

 

 

$

161

 

 

$

122,704

 

 

$

279,867

 

 

$

(21,281

)

 

$

(2,486

)

 

$

396,293

 

Cumulative-effect adjustment

 

 

 

 

 

 

 

 

 

 

 

(710

)

 

 

 

 

 

 

 

 

(710

)

Balance at January 1, 2019

 

$

17,328

 

 

$

161

 

 

$

122,704

 

 

$

279,157

 

 

$

(21,281

)

 

$

(2,486

)

 

$

395,583

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11,521

 

 

 

 

 

 

 

 

 

11,521

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,510

 

 

 

 

 

 

5,510

 

Reclassification of income tax effects

 

 

 

 

 

 

 

 

 

 

 

2,783

 

 

 

(2,783

)

 

 

 

 

 

 

Purchases of common stock for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

(193

)

Share-based compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

182

 

 

 

 

 

 

 

 

 

 

 

 

182

 

Restricted stock units released

 

 

 

 

 

 

 

 

(362

)

 

 

 

 

 

 

 

 

362

 

 

 

 

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A 3% Preferred-$0.75 per share

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Series B-1 8.48% Preferred-$2.12 per

   share

 

 

 

 

 

 

 

 

 

 

 

(364

)

 

 

 

 

 

 

 

 

(364

)

Common-$0.25 per share

 

 

 

 

 

 

 

 

 

 

 

(3,985

)

 

 

 

 

 

 

 

 

(3,985

)

Balance at March 31, 2019

 

$

17,328

 

 

$

161

 

 

$

122,524

 

 

$

289,111

 

 

$

(18,554

)

 

$

(2,317

)

 

$

408,253

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11,401

 

 

 

 

 

 

 

 

 

11,401

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,394

 

 

 

 

 

 

5,394

 

Common stock issued

 

 

 

 

 

 

 

 

1,151

 

 

 

 

 

 

 

 

 

 

 

 

1,151

 

Share-based compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

453

 

 

 

 

 

 

 

 

 

 

 

 

453

 

Restricted stock awards issued

 

 

 

 

 

 

 

 

(165

)

 

 

 

 

 

 

 

 

165

 

 

 

 

Stock awards

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

46

 

 

 

63

 

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A 3% Preferred-$0.75 per share

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Series B-1 8.48% Preferred-$2.12 per

   share

 

 

 

 

 

 

 

 

 

 

 

(365

)

 

 

 

 

 

 

 

 

(365

)

Common-$0.25 per share

 

 

 

 

 

 

 

 

 

 

 

(3,995

)

 

 

 

 

 

 

 

 

(3,995

)

Balance at June 30, 2019

 

$

17,328

 

 

$

161

 

 

$

123,980

 

 

$

296,151

 

 

$

(13,160

)

 

$

(2,106

)

 

$

422,354

 

 

Continued on next page

 

See accompanying notes to the consolidated financial statements.

- 6 -


Table of Contents

 

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) (Continued)

Three and six months ended June 30, 2019 and 2018

 

(Dollars in thousands, except per share data)

 

Preferred

Equity

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

Shareholders’

Equity

 

Balance at December 31, 2017

 

$

17,329

 

 

$

161

 

 

$

121,058

 

 

$

257,078

 

 

$

(11,916

)

 

$

(2,533

)

 

$

381,177

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

9,288

 

 

 

 

 

 

 

 

 

9,288

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,247

)

 

 

 

 

 

(6,247

)

Purchases of common stock for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(113

)

 

 

(113

)

Share-based compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

302

 

 

 

 

 

 

 

 

 

 

 

 

302

 

Stock options exercised

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

77

 

 

 

76

 

Restricted stock awards forfeited

 

 

 

 

 

 

 

 

446

 

 

 

 

 

 

 

 

 

(446

)

 

 

 

Cash dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A 3% Preferred-$0.75 per share

 

 

 

 

 

 

 

 

 

 

 

(1

)