Financial Institutions, Inc. · NASDAQ:FISI
Financial Institutions — Q2 2024 Earnings Presentation
37 slides from Financial Institutions's earnings presentation, Jul 26, 2024
Slide 1: Investor Presentation Second Quarter 2024
Investor Presentation Financial Institutions, Inc. (NASDAQ: FISI) Second Quarter 2024 Earnings Presentation July 25, 2024
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. $299M Market cap NASDAQ: FISI • Innovative financial holding company headquartered in $6.13B Total assets Western New York offering banking and wealth management services through its subsidiaries, Five Star Bank and Courier Capital, LLC • Pos
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 10 bps ◦ Serving financially stable Upstate New York markets and well-positioned for growth in metros of Buffalo and Rochester annualized Q2 ’24
Slide 5: Banking-as-a-Service (BaaS)
Company Overview With BaaS, we are leveraging our digital and infrastructure investments to deliver value to select fintechs serving SMBs, affinity groups and niche markets • Enabling fintechs to offer banking products and services to their end users, leading primarily to deposit growth as well as c
Slide 6: FISI sees BaaS as complementary to the existing franchise
Company Overview FISI sees BaaS as complementary 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 facilitate growth and scale Business-to-Business Help B2B fintechs
Slide 7: Second Quarter 2024 Key Results
Financial Highlights • Net income available to common shareholders was $25.3M, or $1.62 per diluted share, compared to $1.7M, or $0.11 per diluted share, in 1Q ’24 and $14.0M, or $0.91 per diluted share, in 2Q ’23. 2Q ’24 results were positively impacted by the previously disclosed sale of the asset
Slide 8: Insurance Subsidiary Transaction Supports Earnings and Capital Positions
Financial Highlights Insurance Subsidiary Transaction Supports Earnings and Capital Positions Compelling price of $27.0M took advantage of strong valuations for insurance brokerage businesses • As previously disclosed, on April 1, 2024, the Company announced and closed the sale of the assets of its
Slide 9: 2024 Guidance Update
Financial Highlights 2024 Guidance Update Focused on executing strategic initiatives that will improve profitability and operating leverage over time; outside of effective tax rate expectations, guidance unchanged from April 2024 update 285-295 bps 1-3% full year loan growth 1-3% full year deposit g
Slide 10: Recent Earnings Performance
Financial Highlights Recent Earnings Performance Last five quarters Earnings Summary(1) 2Q ’23 3Q ’23 4Q ’23 1Q ’24 2Q ’24 Average interest-earning assets $5,691.9 $5,704.1 $5,726.6 $5,804.9 $5,765.9 Net interest margin (tax equivalent basis) 2.99% 2.91% 2.78% 2.78% 2.87% Net interest income 42.3 41
Slide 11: Organic Loan Growth
High Quality Lending Total loans increased $63.7M, or 1.4%, from June 30, 2023, driven by commercial loan growth Total Loans $5.00 6.0% CAGR Billions Organic Loan $4.50 $4.05 $4.46 $0.73 $4.46 $0.72 Growth $4.00 $3.50 $3.60 $3.68 $0.67 $0.66 $0.95 $0.89 $0.69 $4.46B of total loans at June 30, 2024 a
Slide 12: Commercial Lending
High Quality Lending Total Commercial Loans Commercial Lending 8.5% CAGR $2.80 $2.74 Outstanding balance of $2.80B at June 30, 2024 Billions $2.5 $2.34 $0.71 $0.73 • Commercial loans increased $47.2M, or 1.7%, during the second quarter of 2024 $2.05 $2.05 and $118.2M, or 4.4%, year-over-year >$0.01
Slide 13: Commercial Lending Exposure Mix
High Quality Lending Overall Commercial Portfolio Exposure Mix Commercial Lending Committed credit exposure of $3.59B at June 30, 2024 3%2%2% 3% 4% 4% • Commercial business operates across the Bank’s core Upstate New York markets and in the Mid-Atlantic region, following its successful expansion the
Slide 14: 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 15: Commercial Real Estate (CRE)
High Quality Lending Commercial Real Estate (CRE) Outstanding balances of $1.82B and committed credit exposure of $2.14B as of June 30, 2024 41% • Well diversified, with ~750 loan facilities consolidated into ~270 separate lending relationships, with ~$2.8M average loan size ◦ 82% of CRE clients hav
Slide 16: Office and Multifamily CRE
High Quality Lending Office and Multifamily CRE Office and multifamily CRE outstanding balances of $357M and $732M, respectively, as of June 30, 2024 70% of FISI’s office exposure, or 12% of CRE exposure, relates to • Office CRE committed credit exposure of $377M at June 30, 2024 Class B or Medical
Slide 17: Residential Real Estate
High Quality Lending Residential Lending Held Portfolio Residential Real Estate 1.3% CAGR $727.2 $723.2 $723.2M held portfolio and $273.5M serviced for others Millions $700 $689.6 portfolio at June 30, 2024 $655.8 $667.6 $77.4 $75.5 $89.8 $77.7 • Residential held portfolio was relatively flat on a l
Slide 18: Indirect Auto Remains Core Competency
High Quality Lending Indirect Auto Remains Core Consumer Indirect Portfolio Competency 1.8% CAGR $894.6M portfolio at June 30, 2024 Millions $1,023.6 $1,000 $958.0 $948.8 $894.6 • Effective January 1, 2024, the Company exited the Pennsylvania auto market as $840.4 it focuses on its core Upstate New
Slide 19: Solid Asset Quality
High Quality Lending Solid Asset Quality Disciplined credit culture supports consistently strong asset quality metrics • 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 eliminat
Slide 20: Allowance for Credit Losses
High Quality Lending • 2Q ’24 provision for credit losses of $2.0M, compared to benefit of $5.5M in 1Q ‘24 ◦ Provision for credit losses for 2Q ’24 driven by a combination of factors, including a modest increase in consumer indirect delinquencies during the period, which increased the qualitative fa
Slide 21: Securities Portfolio
Securities and Deposits 3.0% CAGR $1,384 Millions $1,400 $206 $1,143 Securities Portfolio $1,200 $1,000 $900 $189 $1,036 $148 $1,000 $128 $1.00B at June 30, 2024 $800 $272 $600 $1,178 $954 $888 $872 $400 $628 • Primarily comprised of agency wrapped mortgage-backed securities with $200 intermediate d
Slide 22: Deposit Growth
Securities and Deposits Deposit Growth $5.13B at June 30, 2024 320 3.29% municipal 2Q ‘24 cost of customers as of average interest- • Total deposits were $5.13B, down $263.4M, or 4.9%, from March 31, 2024, and up MRQ-end bearing deposits $98.5M, or 2.0%, from one year prior ◦ Linked quarter decrease
Slide 23: Liquidity
Securities and Deposits Liquidity Diverse deposit gathering capabilities and eligible ~16.4% ~87% collateral support a robust liquidity position of total deposits Loan to deposit are uninsured ratio • 2Q ’24 available committed liquidity remains strong, as supported through nonpublic deposits unencu
Slide 24: Net Interest Income & Margin
Revenue Net Interest Income & Margin 2Q ’24 net interest income of $41.1M and net interest margin of 2.87% • Net interest income of $41.1M increased $1.1M, or 2.8%, from the linked quarter $180 7.00% and decreased $1.1M, or 2.7%, from the Millions $167 $166 $163 $155 year-ago quarter $160 6.00% • Ne
Slide 25: Balance Sheet Providing Ample Cash Flow
Revenue Ample cash flow allows for redeployment of funds in higher interest earning assets, supporting incremental margin expansion Balance Sheet Average 2Q ‘24 Providing Ample Select Interest Earning 2023 2Q ‘24 Roll Off Balance at NTM Monthly Assets Yield Yield Yield 6/30/2024 Cash Flow1 Cash Flow
Slide 26: Noninterest Income
Revenue Noninterest Income Noninterest income was $24.0M in 2Q ‘24 27.2% $2.99B of TTM net in assets managed revenue from non- by Courier Capital • Noninterest income was $24.0M, up $13.1, or 120.3%, from 1Q ’24 and up interest income at quarter-end $12.5M, or 109.4%, from the year-ago quarter. ◦ Th
Slide 27: Wealth Management Business Positioned for Growth
Revenue Wealth Management Business Positioned for Growth Providing customized investment management, retirement planning, and consulting services for mass affluent and high-net-worth individuals and families, businesses, institutions, and foundations • Since entering the investment advisory space in
Slide 28: Expense Management & Operating Leverage
Expense Management & Operating Leverage $80 Millions $70 Quarterly Noninterest Expense $60 $54.0 Noninterest Expense $50 $19.0 2Q ’24 expense of $33.0M $40 $33.8 $34.7 $35.0 $33.0 $30 $0.2 $20 $35.0 • 2Q ’24 expense of $33.0M was down $21.0M, or 38.9%, from the linked $10 quarter and down $0.8M, or
Slide 29: Well-Capitalized
Capital Management & Investment Considerations Well-Capitalized Exceeding well-capitalized regulatory thresholds and well-positioned to support future growth 14% 13.61% 13.12% 12.65% 12.13% 12.13% 12% 10.63% 10.68% 10.18% 10.28% 10.36% 9.78% 10.03% 9.76% 10% 9.42% 9.43% 8.61% 8.25% 8.23% 8.33% 8.18%
Slide 30: 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 31: FISI Presents a Compelling Valuation
Capital Management & Investment Considerations FISI Presents a Compelling Valuation Results-driven Longstanding commitment to rewarding shareholders through meaningful community bank with dividend yield and 29-year cash dividend history strong retail and commercial franchises Investment Profile As o
Slide 32: Appendix: Thank you for your interest
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 FISI-Investors@five-starbank.com Learn more at www.FISI-Investors.com 32
Slide 33: Strong Executive Leadership Team Positioned to Drive Growth
Appendix Strong Executive Leadership Team Positioned to Drive Growth and Operational Excellence Martin K. Birmingham Samuel J. Burruano Jr. W. Jack Plants II Laurie R. Collins President & Chief Executive Officer EVP, Chief Legal Officer & Corporate EVP, CFO & Treasurer SVP, Chief Human Resources Off
Slide 34: 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 35: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations 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 wit
Slide 36: Non-GAAP Reconciliations Continued
Appendix Non-GAAP Reconciliations Continued Net Income Adjusted Net Income and Adjusted Earnings Per Share (EPS): Income before Provision for Preferred stock Available to Net income Diluted EPS Amounts in thousands, except per share data and percentages income taxes income taxes dividends Common Sha
Slide 37: Non-GAAP Reconciliations Continued
Appendix Non-GAAP Reconciliations Continued Please refer to slide 36 for additional detail on adjustments Amounts in thousands, except As of and for the three months ended As of and for the three months ended As of and for the six months ended percentages March 31, 2024 June 30, 2024 June 30, 2024 A
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