Financial Institutions, Inc. · NASDAQ:FISI
Financial Institutions — Q2 2023 Earnings Presentation
31 slides from Financial Institutions's earnings presentation, Jul 28, 2023
Slide 1: Second Quarter 2023 Earnings Presentation
Investor Presentation Financial Institutions, Inc. (NASDAQ: FISI) Second Quarter 2023 Earnings Presentation July 27, 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. $242M 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 16.8% ◦ Launched commercial lending p
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: Second Quarter 2023 Results
Financial Highlights • Net income available to common shareholders was $14.0 million, or $0.91 per diluted share, compared to $11.7 million, or $0.76 per diluted share, in the 1Q ‘23, and $15.3 million, or $0.99 per diluted share, in the 2Q ’22. Provision for credit losses was $3.2 million, compared
Slide 8: Recent Earnings Performance
Financial Highlights Recent Earnings Performance Last five quarters EARNINGS SUMMARY(1) 2Q ’22 3Q ’22 4Q ’22 1Q ’23 2Q ’23 Average interest-earning assets $5,246.6 $5,230.8 $5,330.2 $5,486.0 $5,691.9 Net interest margin 3.19% 3.28% 3.23% 3.09% 2.99% Net interest income 41.6 43.1 43.1 41.8 42.3 Nonin
Slide 9: Organic Loan Growth
High Quality Lending Total loans have increased $347.4M, or 8.6%, from year-end 2022 Total Loans $5.00 8.5% CAGR Billions Organic Loan $4.50 $4.05 $4.40 Growth $4.00 $3.50 $3.60 $3.68 $0.67 $0.69 $3.22 $0.66 $4.4B of total loans at $0.69 $1.00 $3.00 June 30, 2023 and average yield of $0.68 $1.02 $0.
Slide 10: Commercial Lending
High Quality Lending Total Commercial Loans Commercial Lending 12.5% CAGR $2.68 Outstanding balance of $2.68B at June 30, 2023 Billions $2.5 $2.34 $0.72 • Commercial loans increased $337.5M, or 14.4%, from December 31, 2022 and $2.05 $2.05 $622.3M, or 30.2%, from June 30, 2022 $2.0 $0.66 >$0.01 • Co
Slide 11: Overall Commercial Portfolio Exposure Mix
High Quality Lending Overall Commercial Portfolio Exposure Mix Commercial Lending 1%1% Committed credit exposure of $3.60B at June 30, 2023 2% 2% 2% 4% • The vast majority of the commercial loan portfolio is within the Bank's footprint, 4% which now 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 $1.73B and committed credit exposure of $2.21B as of June 30, 2023 41% 69% of FISI’s office exposure, or • Well diversified, with more than 700 loan facilities consolidated into 12% of total loans, relates to ~300 separate lending r
Slide 14: Residential Lending Portfolio
High Quality Lending Residential Lending Portfolio Residential Real Estate 0.4% CAGR $687.2M portfolio at June 30, 2023 Millions $700 $676.5 $689.6 $687.2 $655.8 $667.6 $89.8 $76.0 • Residential portfolio increased $19.5M, or 2.9%, from December 31, 2022 and $104.1 $78.5 $77.7 $600 $36.3M, or 5.6%,
Slide 15: Consumer Indirect Portfolio
High Quality Lending Consumer Indirect Portfolio Indirect Auto Remains Core Competency 4.6% CAGR Millions $1,024 $1.00B portfolio at June 30, 2023 $1,001 $1,000 $958 • Consumer indirect portfolio was down $22.6M, or 2.2%, from December 31, $850 $840 2022, and down $38.3M, or 3.7%, from June 30, 2022
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% Solid Ass
Slide 17: Securities Portfolio
Securities and Deposits 8.8% CAGR $1,384 Millions $1,400 $206 $1,143 Securities Portfolio $1,200 $1,000 $900 $189 $1,072 $160 $777 $1.07B at June 30, 2023 $800 $272 $600 $359 $1,178 $954 $912 $400 $628 • Primarily comprised of agency wrapped mortgage-backed securities with $200 $418 intermediate dur
Slide 18: Deposit Growth
Securities and Deposits Deposit Growth Low-cost deposits from rural markets fund higher 318 2.20% 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 14% ~87% collateral support a robust liquidity position of total deposits Loan to deposit are uninsured retail ratio • 2Q ’23 available committed liquidity remains strong, as supported through deposits unencumbered
Slide 20: Net Interest Income & Margin
Revenue Net Interest Income & Margin 2Q ’23 NII of $42.3M and NIM of 2.99% • YTD NII of $84.2M increased $3.0M, or 3.7%, over the prior year period ◦ 2Q ’23 of $42.3M is up $0.7M, or 1.8%, $180 $170 8.00% Millions $167 from the year-ago quarter $160 $155 7.00% • Net interest margin (NIM) of 3.04% fo
Slide 21: Diverse Noninterest Income
Revenue Diverse Noninterest Income • Insurance services provided through SDN Insurance Agency, LLC 21% 6 of TTM revenue financial services ◦ Acquired initial business in 2014 and further enhanced capabilities and reach from non-interest acquisitions since through two bolt-on acquisitions in 2021 inc
Slide 22: Wealth Management Business Positioned for Growth
Revenue Wealth Management Business Positioned for Growth Assets under management of $2.75B as of June 30, 2023 • 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, FISI’s wholly-owned SEC-register
Slide 23: Strategic Investments Drive Operating Leverage
Expense Management & Operating Leverage Strategic Investments Expected to Total Noninterest Expenses Drive Operating Leverage $140 $133.8 Millions $129.4 $120 $112.8 $109.3 $102.8 $100 • YTD noninterest expense of $67.4M is up $4.4M, or 7.0%, from the prior year period ◦ 2Q ’23 expenses of $33.8M wa
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% 11.77% 12% 10.80% 10.63% 10.68% Well-
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 June 30, 2023 Closing Price $15.74 Disciplined credit 52-week Hig
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 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Pre-tax pre-provision income: Net income $15,648 $13,854 $12,088 $12,089 $14,373 Add: Income tax expense 3,859 4,725 2,370 2,775 2,418 Add: Provision (benefit) for credit
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