Financial Institutions, Inc. · NASDAQ:FISI
Financial Institutions — Q3 2023 Earnings Presentation
31 slides from Financial Institutions's earnings presentation, Oct 27, 2023
Slide 1: Third Quarter 2023 Earnings Presentation
Investor Presentation Financial Institutions, Inc. (NASDAQ: FISI) Third Quarter 2023 Earnings Presentation October 26, 2023
Slide 2: Important Information
Important Information Safe Harbor Statement Statements contained in this presentation which are not historical facts and which pertain to future operating results of Financial Institutions, Inc. (the “Company”) and its subsidiaries constitute “forward-looking statements” within the meaning of the Pr
Slide 3: Overview of Financial Institutions, Inc.
Company Overview Overview of Financial Institutions, Inc. $259M Market cap NASDAQ: FISI • Innovative financial holding company headquartered in Western New York offering banking, insurance and wealth $6.1B Total assets management services through a network of subsidiaries ◦ Five Star Bank ◦ SDN Insu
Slide 4: Why FISI
Company Overview Why FISI Strategic focus designed to deliver long-term value Results-driven community bank with strong retail and commercial franchises ◦ Serving financially stable Upstate New York markets and well-positioned for growth in Buffalo and Rochester 8.4% ◦ Launched commercial lending pl
Slide 5: Banking-as-a-Service (BaaS)
Company Overview With BaaS, we are leveraging our digital and infrastructure investments to deliver value to financial technology firms (fintechs), select affinity groups and niche markets that we are well positioned to serve ◦ Enabling fintechs and non-bank financials to offer banking products and
Slide 6: FISI sees BaaS as complimentary to the existing franchise
Company Overview FISI sees BaaS as complimentary Primarily focused on five key to the existing franchise BaaS client types where we see Fee-based line of business with potential to generate strong opportunity lower-cost deposits and enhance loan diversification Business-to-Business Help B2B fintechs
Slide 7: Third Quarter 2023 Results
Financial Highlights • Net income available to common shareholders was $13.7 million, or $0.88 per diluted share, compared to $14.0 million, or $0.91 per diluted share, in 2Q ‘23, and $13.5 million, or $0.88 per diluted share, in 3Q ’22. Provision for credit losses was $966 thousand, compared to $3.
Slide 8: Recent Earnings Performance
Financial Highlights Recent Earnings Performance Last five quarters EARNINGS SUMMARY(1) 3Q ’22 4Q ’22 1Q ’23 2Q ’23 3Q ’23 Average interest-earning assets $5,230.8 $5,330.2 $5,486.0 $5,691.9 $5,704.1 Net interest margin 3.28% 3.23% 3.09% 2.99% 2.91% Net interest income 43.1 43.1 41.8 42.3 41.7 Nonin
Slide 9: Organic Loan Growth
High Quality Lending Total loans have increased $380.7M, or 9.4%, from year-end 2022 Total Loans 8.2% CAGR $5.00 Billions Organic Loan $4.50 $4.05 $4.43 Growth $4.00 $3.50 $3.60 $3.68 $0.67 $0.71 $3.22 $0.66 $4.4B of total loans at $3.00 $0.69 $0.98 September 30, 2023 and average $0.68 $1.02 $0.04 $
Slide 10: Commercial Lending
High Quality Lending Total Commercial Loans Commercial Lending $2.70 11.9% CAGR Billions Outstanding balance of $2.70B at September 30, 2023 $2.5 $2.34 $0.71 • Commercial loans increased $352.7M, or 15.0%, from December 31, 2022 and $2.05 $2.05 $2.0 $0.66 >$0.01 $498.4M, or 22.7%, from September 30,
Slide 11: Overall Commercial Portfolio Exposure Mix
High Quality Lending Overall Commercial Portfolio Exposure Mix Commercial Lending 1%1% Committed credit exposure of $3.61B at 2%2% 2% September 30, 2023 4% 4% • The vast majority of the commercial loan portfolio is within the Bank's footprint, which includes the Mid-Atlantic region following the Com
Slide 12: Strong Mid-Atlantic Performance & Opportunity
High Quality Lending Strong Mid-Atlantic Performance & Opportunity Leveraging technology to seamlessly collaborate with Mid-Atlantic team and onboard new customers despite geographic divide • Commercial loan production office opened in Baltimore suburb of Ellicott City in 1Q ’22 serving the Mid-Atla
Slide 13: Commercial Real Estate
High Quality Lending Commercial Real Estate Outstanding balances of $1.78B and committed credit exposure of $2.23B as of September 30, 2023 71% of FISI’s office exposure, or • Well diversified, with more than 700 loan facilities consolidated into 43% 12% of total loans, relates to ~275 separate lend
Slide 14: Residential Lending Portfolio
High Quality Lending Residential Lending Portfolio Residential Real Estate 1.4% CAGR $711.9M portfolio at September 30, 2023 $711.9 Millions $700 $676.5 $689.6 $655.8 $667.6 $76.7 $89.8 • Residential portfolio increased $44.3M, or 6.6%, from December 31, 2022 and $104.1 $78.5 $77.7 $600 $56.8M, or 8
Slide 15: Consumer Indirect Portfolio
High Quality Lending Consumer Indirect Portfolio Indirect Auto Remains Core Competency 3.8% CAGR Millions $1,024 $982M portfolio at September 30, 2023 $1,000 $958 $982 • Consumer indirect portfolio was down $41.5M, or 4.1%, from December 31, $850 $840 2022, and down $15.3M, or 1.5%, from September 3
Slide 16: Solid Asset Quality
High Quality Lending • Thorough credit review exercise undertaken at the outset of COVID-19 pandemic reinforced confidence in health of loan portfolio ◦ During 2Q ’22, COVID-19 at-risk pool was eliminated, and all credits now monitored as part of standard loan monitoring process 1.00% 600% 521% Soli
Slide 17: Securities Portfolio
Securities and Deposits 6.7% CAGR $1,384 Millions $1,400 $206 Securities Portfolio $1,200 $1,000 $900 $1,143 $189 $1,008 $777 $154 $1.01B at September 30, 2023 $800 $272 $600 $359 $1,178 $954 $854 $400 • Primarily comprised of agency wrapped mortgage-backed securities with $628 $200 $418 intermediat
Slide 18: Deposit Growth
Securities and Deposits Deposit Growth Low-cost deposits from rural markets fund higher 319 2.42% growth in metro markets municipal YTD cost of total customers as of interest-bearing MRQ-end deposits • Granularity of community banking franchise benefits deposit portfolio ◦ Average deposit balances p
Slide 19: Liquidity
Securities and Deposits Liquidity Diverse deposit gathering capabilities and eligible 15% ~83% collateral support a robust liquidity position of total deposits are Loan to deposit uninsured nonpublic ratio • 3Q ’23 available committed liquidity remains strong, as supported through deposits unencumbe
Slide 20: Net Interest Income & Margin
Revenue Net Interest Income & Margin 3Q ’23 NII of $41.7M and NIM of 2.91% • YTD NII of $125.8M increased $1.6M, or 1.3%, over the prior year period $180 8.00% ◦ 3Q ’23 NII of $41.7M, down $1.4M, or $169 Millions $167 3.2%, from the year-ago quarter $160 $155 7.00% • Net interest margin (NIM) of 2.9
Slide 21: Diverse Noninterest Income
Revenue Diverse Noninterest Income • Wealth management provided by Courier Capital, LLC 21% 6 of TTM revenue financial services ◦ Since entering the investment advisory space in 2016 with the acquisition of from non-interest acquisitions since Courier Capital, completed two additional wealth managem
Slide 22: Wealth Management Business Positioned for Growth
Revenue Wealth Management Business Positioned for Growth AUM of $2.69B as of September 30, 2023 and 3Q ’23 investment advisory income of $2.5M • Combination of FISI’s subsidiary wealth management firms enhances size and scale as next natural step in evolution of this business line ◦ On May 1, 2023,
Slide 23: Strategic Investments Expected to Drive Operating Leverage
Expense Management & Operating Leverage Strategic Investments Expected to Total Noninterest Expenses Drive Operating Leverage $140 $135.7 Millions $129.4 $120 $112.8 $109.3 $102.8 • YTD noninterest expense of $102.2M is up $6.3M, or 6.6%, from the prior year $100 period ◦ 3Q ’23 expense of $34.7M is
Slide 24: Well-Capitalized
Capital Management & Investment Considerations Longstanding commitment to rewarding shareholders through meaningful dividend yield 29-year history of cash dividend, with annual increases in each of last 13 years Capital Ratios 16% 13.61% 14% 13.12% 12.77% 12.13% 11.91% 12% 10.80% 10.63% 10.68% 10.31
Slide 25: AOCI Impact on TCE & TCBV
Capital Management & Investment Considerations Change in TCE AOCI Impact on TCE & TCBV1 Unrealized losses believed to be temporary in nature • AOCI losses are believed to be temporary in nature, as they are associated with the increase in interest rates which has resulted in an increase in the unrea
Slide 26: FISI Presents a Compelling Valuation
Capital Management & Investment Considerations Results-driven community bank with FISI Presents a Compelling Valuation strong retail and commercial franchises Focused on executing our long-term growth strategy Investment Profile As of September 30, 2023 Closing Price $16.83 Disciplined credit cultur
Slide 27: Appendix
Thank you for your interest in Financial Institutions, Inc. NASDAQ: FISI Investor Relations Contacts Kate Croft Director of Investor and External Relations Jack Plants Appendix Chief Financial Officer & Corporate Treasurer Management Team 28 FISI-Investors@five-starbank.com Strategy Map 29 Non-GAAP
Slide 28: Management Team
Appendix Management Team Experienced management team with extensive market knowledge and industry experience Optimized leadership & organizational structure Martin K. Birmingham Samuel J. Burruano Jr. Core functional areas of Justin K. Bigham W. Jack Plants II President & Chief EVP, Chief Community
Slide 29: Strategy Map
Appendix Strategy Map FISI’s vision is to be an independent, high-performing community bank offering best-in-class financial services to all of the communities we serve Attractive long-term Meaningful Engaged & Positive Effective engagement returns for customer experiences motivated contributions to
Slide 30: Non-GAAP Reconciliation
Appendix Non-GAAP Reconciliation In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this presentation contains certain non-GAAP financial measures. The Company believes that providing certain non-GAAP financial measures provides investors with
Slide 31: Non-GAAP Reconciliation Continued
Appendix Non-GAAP Reconciliation Continued Quarter ended Amounts in thousands 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Pre-tax pre-provision income: Net income $13,854 $12,088 $12,089 $14,373 $14,022 Add: Income tax expense 4,725 2,370 2,775 2,418 2,440 Add: Provision for credit losses 4,3
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