10-Q 1 fisi-20220331.htm 10-Q 10-Q
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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 March 31, 2022

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

 

 

Financial Institutions, Inc.

(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 15,299,077 shares of Common Stock, $0.01 par value, outstanding as of April 29, 2022.

 

Table of Contents

 

FINANCIAL INSTITUTIONS, INC.

Form 10-Q

For the Quarterly Period Ended March 31, 2022

TABLE OF CONTENTS

 

 

 

PAGE

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition (Unaudited) - at March 31, 2022 and December 31, 2021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) - Three months ended March 31, 2022 and 2021

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) - Three months ended March 31, 2022 and 2021

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - Three months ended March 31, 2022 and 2021

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2022 and 2021

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

9

 

 

 

 

 

ITEM 2.

 

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

 

43

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

64

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

 

65

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

 

66

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

66

 

 

 

 

 

ITEM 6.

 

Exhibits

 

67

 

 

 

 

 

 

 

Signatures

 

68

 

 

 

 

 

 

 

 

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)

 

March 31,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

170,404

 

 

$

79,112

 

Securities available for sale, at fair value

 

 

1,119,362

 

 

 

1,178,515

 

Securities held to maturity, at amortized cost (net of allowance for credit losses of $6 and $5, respectively) (fair value of $206,367 and $209,820, respectively)

 

 

211,173

 

 

 

205,581

 

Loans held for sale

 

 

5,544

 

 

 

6,202

 

Loans (net of allowance for credit losses of $40,966 and $39,676, respectively)

 

 

3,692,682

 

 

 

3,639,760

 

Company owned life insurance

 

 

124,742

 

 

 

123,898

 

Premises and equipment, net

 

 

40,115

 

 

 

40,111

 

Goodwill and other intangible assets, net

 

 

74,146

 

 

 

74,400

 

Other assets

 

 

192,330

 

 

 

173,200

 

Total assets

 

$

5,630,498

 

 

$

5,520,779

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing demand

 

$

1,079,949

 

 

$

1,107,561

 

Interest-bearing demand

 

 

990,404

 

 

 

864,528

 

Savings and money market

 

 

2,015,384

 

 

 

1,933,047

 

Time deposits

 

 

917,195

 

 

 

921,954

 

Total deposits

 

 

5,002,932

 

 

 

4,827,090

 

Short-term borrowings

 

 

—

 

 

 

30,000

 

Long-term borrowings, net of issuance costs of $1,011 and $1,089, respectively

 

 

73,989

 

 

 

73,911

 

Other liabilities

 

 

106,731

 

 

 

84,636

 

Total liabilities

 

 

5,183,652

 

 

 

5,015,637

 

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;
 171,486 shares issued

 

 

17,149

 

 

 

17,149

 

Total preferred equity

 

 

17,292

 

 

 

17,292

 

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

 

 

161

 

 

 

161

 

Additional paid-in capital

 

 

125,881

 

 

 

126,105

 

Retained earnings

 

 

394,181

 

 

 

384,007

 

Accumulated other comprehensive loss

 

 

(67,094

)

 

 

(13,207

)

Treasury stock, at cost – 800,479 and 354,103 shares, respectively

 

 

(23,575

)

 

 

(9,216

)

Total shareholders’ equity

 

 

446,846

 

 

 

505,142

 

Total liabilities and shareholders’ equity

 

$

5,630,498

 

 

$

5,520,779

 

 

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
March 31,

 

 

 

2022

 

 

2021

 

Interest income:

 

 

 

 

 

 

Interest and fees on loans

 

$

36,298

 

 

$

37,059

 

Interest and dividends on investment securities

 

 

6,036

 

 

 

4,187

 

Other interest income

 

 

17

 

 

 

27

 

Total interest income

 

 

42,351

 

 

 

41,273

 

Interest expense:

 

 

 

 

 

 

Deposits

 

 

1,705

 

 

 

2,235

 

Short-term borrowings

 

 

28

 

 

 

119

 

Long-term borrowings

 

 

1,060

 

 

 

1,062

 

Total interest expense

 

 

2,793

 

 

 

3,416

 

Net interest income

 

 

39,558

 

 

 

37,857

 

Provision (benefit) for credit losses

 

 

2,319

 

 

 

(1,981

)

Net interest income after provision (benefit) for credit losses

 

 

37,239

 

 

 

39,838

 

Noninterest income:

 

 

 

 

 

 

Service charges on deposits

 

 

1,369

 

 

 

1,292

 

Insurance income

 

 

2,097

 

 

 

1,396

 

Card interchange income

 

 

1,952

 

 

 

1,958

 

Investment advisory

 

 

3,041

 

 

 

2,772

 

Company owned life insurance

 

 

833

 

 

 

657

 

Investments in limited partnerships

 

 

795

 

 

 

855

 

Loan servicing

 

 

109

 

 

 

97

 

Income from derivative instruments, net

 

 

519

 

 

 

1,875

 

Net (loss) gain on sale of loans held for sale

 

 

(91

)

 

 

1,078

 

Net gain on investment securities

 

 

—

 

 

 

74

 

Net loss on other assets

 

 

—

 

 

 

(5

)

Net loss on tax credit investments

 

 

(227

)

 

 

(85

)

Other

 

 

925

 

 

 

995

 

Total noninterest income

 

 

11,322

 

 

 

12,959

 

Noninterest expense:

 

 

 

 

 

 

Salaries and employee benefits

 

 

16,616

 

 

 

14,465

 

Occupancy and equipment

 

 

3,756

 

 

 

3,382

 

Professional services

 

 

1,656

 

 

 

1,895

 

Computer and data processing

 

 

3,979

 

 

 

3,121

 

Supplies and postage

 

 

541

 

 

 

484

 

FDIC assessments

 

 

513

 

 

 

765

 

Advertising and promotions

 

 

380

 

 

 

324

 

Amortization of intangibles

 

 

254

 

 

 

271

 

Other

 

 

2,440

 

 

 

2,033

 

Total noninterest expense

 

 

30,135

 

 

 

26,740

 

Income before income taxes

 

 

18,426

 

 

 

26,057

 

Income tax expense

 

 

3,443

 

 

 

5,347

 

Net income

 

$

14,983

 

 

$

20,710

 

Preferred stock dividends

 

 

365

 

 

 

365

 

Net income available to common shareholders

 

$

14,618

 

 

$

20,345

 

Earnings per common share (Note 4):

 

 

 

 

 

 

Basic

 

$

0.94

 

 

$

1.28

 

Diluted

 

$

0.93

 

 

$

1.27

 

Cash dividends declared per common share

 

$

0.29

 

 

$

0.27

 

 

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
March 31,

 

 

 

2022

 

 

2021

 

Net income

 

$

14,983

 

 

$

20,710

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Securities available for sale and transferred securities

 

 

(55,773

)

 

 

(14,402

)

Hedging derivative instruments

 

 

1,838

 

 

 

1,564

 

Pension and post-retirement obligations

 

 

48

 

 

 

138

 

Total other comprehensive loss, net of tax

 

 

(53,887

)

 

 

(12,700

)

Comprehensive (loss) income

 

$

(38,904

)

 

$

8,010

 

 

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 months ended March 31, 2022 and 2021

 

(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, 2021

 

$

17,292

 

 

$

161

 

 

$

126,105

 

 

$

384,007

 

 

$

(13,207

)

 

$

(9,216

)

 

$

505,142

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,983

 

 

 

—

 

 

 

—

 

 

 

14,983

 

Other comprehensive loss, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(53,887

)

 

 

—

 

 

 

(53,887

)

Purchases of common stock for treasury

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,026

)

 

 

(15,026

)

Share-based compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

443

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

443

 

Restricted stock units released

 

 

—

 

 

 

—

 

 

 

(667

)

 

 

—

 

 

 

—

 

 

 

667

 

 

 

—

 

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-$0.29 per share

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,444

)

 

 

—

 

 

 

—

 

 

 

(4,444

)

Balance at March 31, 2022

 

$

17,292

 

 

$

161

 

 

$

125,881

 

 

$

394,181

 

 

$

(67,094

)

 

$

(23,575

)

 

$

446,846

 

 

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 months ended March 31, 2022 and 2021

 

(Dollars in thousands, except per share data)

 

Preferred
Equity

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Treasury
Stock

 

 

Total
Shareholders’
Equity

 

Balance at December 31, 2020

 

$

17,328

 

 

$

161

 

 

$

125,118

 

 

$

324,850

 

 

$

2,128

 

 

$

(1,222

)

 

$

468,363

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,710

 

 

 

—

 

 

 

—

 

 

 

20,710

 

Other comprehensive loss, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(