WARSAW, N.Y., April 24, 2008 (PRIME NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq:FISI), the parent company of Five Star Bank, today announced financial results for the first quarter ended March 31, 2008. Net income for Financial Institutions, Inc. ("FII" or "Company") was $3.8 million, or $0.31 per diluted share, for the first quarter of 2008, compared with $3.6 million, or $0.29 per diluted share, for the first quarter of 2007.
Highlights for the first quarter of 2008 include:
* Net interest income of $15.1 million, an increase of $1.1 million, or 8%, from the first quarter of 2007, which reflects an improved net interest margin and earning asset mix. * Net interest margin increased 34 basis points, to 3.73%, compared with 3.39% for the first quarter of 2007. The improved net interest margin resulted principally from lower funding costs, an improved yield from investment securities and the benefits associated with a higher percentage of earning assets being deployed in higher yielding loan assets. * Loans increased $8.2 million to $972.4 million at March 31, 2008, compared with $964.2 million at December 31, 2007 and increased $43.2 million, or 5%, from March 31, 2007. The increase reflects execution of the Company's business plan to rebuild, in a disciplined manner, the commercial loan portfolio and grow consumer indirect auto loans. * Nonperforming assets decreased $886 thousand from December 31, 2007 to $8.6 million at March 31, 2008. Since March 31, 2007, nonperforming assets have declined $8.4 million, or 49%. The ratio of the allowance for loan losses to nonperforming loans improved to 211% at March 31, 2008 versus 192% at December 31, 2007 and 107% at March 31, 2007. * Continued strong capital position with Total Equity Capital of $197.4 million, a Leverage Capital Ratio of 9.38% and a Total Risk Based Capital Ratio of 16.59% at March 31, 2008.
Peter G. Humphrey, President and CEO of FII, commented, "We experienced solid financial performance in the first quarter of 2008, with increased revenues that are reflective of our disciplined approach to growing our loan portfolio. Net interest income improved year-over-year and our net interest margin increased due to a lower interest rate environment and our management of deposit pricing, coupled with growth in our loan portfolio. Asset quality showed continued improvement with a meaningful reduction in our nonperforming assets. The current interest rate environment and economic conditions will most likely pose challenges for the financial services industry for the remainder of 2008, however we feel we are well-positioned to meet the challenges of this economic environment. In addition, we look forward to implementing our strategic initiatives to expand our business, most notably the expansion of our presence in the greater Rochester area in the second half of this year."
Net Interest Income
Net interest income was $15.1 million for the first quarter of 2008, up $1.1 million compared with the first quarter of 2007. For the first quarter of 2008, average interest-earning assets decreased by $29.8 million compared with the same quarter a year ago. This decrease resulted principally from a decrease in average total investment assets, including Federal funds sold, of $72.8 million, partially offset by a $43.0 million increase in average total loans. The overall decline in average interest-earnings assets was more than offset by a reduction in average interest-bearing liabilities of $48.1 million. Net interest margin improved 34 basis points to 3.73% for the first quarter of 2008, compared with 3.39% for the first quarter of 2007. Earnings asset yields decreased by 2 basis points from the prior year's first quarter, with increased yields on investments assets offsetting a decline in loan yields, while the average cost of funds declined 36 basis points from the first quarter of 2007, a direct result of the Company's responses to the reduction in market interest rates that has occurred over the past several months.
Noninterest Income
Noninterest income for the first quarter of 2008 was $4.7 million, relatively flat in comparison to the same quarter a year ago. Increases in ATM and debit card income, broker-dealer fees and commissions, and net gain on sale of securities were largely offset by a decrease in other noninterest income. The decline in other noninterest income results principally from lower income from Small Business Investment Company (SBIC) limited partnership investments when compared with the first quarter of 2007.
Noninterest Expense
Noninterest expense for the first quarter of 2008 was $14.3 million, an increase of $345 thousand from the first quarter of 2007. The principal expense items that contributed to the increase were: salaries and benefits increased $82 thousand primarily due to stock compensation related expenses, occupancy and equipment costs, which increased $132 thousand due to higher service contract related costs on buildings, equipment and software, and computer and data processing expenses which increased $124 thousand.
Balance Sheet
Total assets were $1.913 billion at March 31, 2008 compared with $1.858 billion at December 31, 2007. Total deposits were $1.628 billion at March 31, 2008, an increase of $52.0 million from $1.576 billion at December 31, 2007. Public deposits were $384.6 million at March 31, 2008, an increase of $66.5 million from year-end as a result of the seasonality associated with public deposits. Offsetting the increase in public deposits was a $14.5 million decline in nonpublic deposits, also a seasonal trend, to $1.237 billion at March 31, 2008 from $1.251 billion at December 31, 2007. Total borrowings, including junior subordinated debentures, were $70.3 million at March 31, 2008, up modestly from $68.2 million at December 31, 2007.
Asset Quality
Mr. Humphrey commented, "We continued to make significant progress in reducing our nonperforming assets during the first quarter of 2008. Our net loan charge-offs increased in relation to the first quarter of last year, and at 0.29% (annualized) of average loans are within acceptable parameters. We have not engaged in sub-prime lending as a line of business and we are pleased with the overall improvement in the risk profile of our loan portfolio."
The Company recorded a provision for loan losses of $716 thousand for the first quarter of 2008 compared to no provision for loan losses in the first quarter of 2007. Net charge-offs of $687 thousand for the first quarter of 2008 represented 29 basis points (annualized) of average loans. Net charge-offs of $134 thousand for the first quarter of 2007 represented 6 basis points (annualized) of average loans. The increase in net charge-offs in 2008 principally results from higher commercial mortgage and indirect loan charge-offs.
The allowance for loan losses was $15.5 million at March 31, 2008 and December 31, 2007. Nonperforming loans were $7.4 million at March 31, 2008, compared with $8.1 million at December 31, 2007. The ratio of allowance for loans losses to nonperforming loans improved to 211% at March 31, 2008 versus 192% at December 31, 2007 and 107% at March 31, 2007.
Capital Management
On July 25, 2007, the Company approved a one-year $5.0 million stock repurchase program. During the first quarter of 2008, under this program, the Company repurchased $1.304 million of common stock, or a total of 70,202 shares, at an average price per share of $18.57. In total, 206,722 shares for $3.824 million have been repurchased under the program at an average price of $18.50.
In addition, in the first quarter of 2008, the Company increased the quarterly common stock dividend to $0.14 per share. This represents a 40% increase in the quarterly common stock dividend compared with the $0.10 per share dividend in the first quarter of 2007.
Erland E.
