Financial Institutions, Inc. · NASDAQ:FISI
Financial Institutions — Q4 2023 Earnings Presentation
34 slides from Financial Institutions's earnings presentation, Jan 26, 2024
Slide 1: Fourth Quarter 2023 Earnings Presentation
Investor Presentation Financial Institutions, Inc. (NASDAQ: FISI) Fourth Quarter 2023 Earnings Presentation January 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. $328M Market cap NASDAQ: FISI • Innovative financial holding company headquartered in Western New York offering banking, insurance and wealth $6.2B 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 10.2% ◦ Serving financially stable Upstate New York markets and well-positioned for growth in metros of Buffalo and Rochester Total loan growth ◦
Slide 5: Banking-as-a-Service (BaaS)
Company Overview With BaaS, we are leveraging our digital and infrastructure investments to deliver value to 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 services to their end custome
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 enhance loan diversification Business-to-Business Help B2B fintechs
Slide 7: Fourth Quarter 2023 Key Results
Financial Highlights • Net income available to common shareholders was $9.4M, or $0.61 per diluted share, compared to $13.7M, or $0.88 per diluted share, in 3Q ‘23 and $11.7M, or $0.76 per diluted share, in 4Q ’22 • Provision for credit losses was $5.3M, compared to $1.0M in the linked quarter and $
Slide 8: Proactive Measures in Support of Forward Earnings Potential
Financial Highlights Proactive Measures in Support of Forward Earnings Potential 4Q ’23 actions included leadership changes and organizational realignment, as well as active balance sheet management measures On December 8, 2023, the Company announced leadership changes and improvements to its organi
Slide 9: 2024 Guidance
Financial Highlights 2024 Guidance Focused on executing strategic initiatives that will improve profitability and operating leverage over time 285-295 bps 1-3% full year loan growth 1-3% full year deposit growth Full-year NIM of 2.85-2.95% Relatively flat driven by commercial loans driven by non-pub
Slide 10: Recent Earnings Performance
Financial Highlights Recent Earnings Performance Last five quarters Earnings Summary(1) 4Q ’22 1Q ’23 2Q ’23 3Q ’23 4Q ’23 Average interest-earning assets $5,330.2 $5,486.0 $5,691.9 $5,704.1 $5,726.6 Net interest margin (tax equivalent basis) 3.23% 3.09% 2.99% 2.91% 2.78% Net interest income 43.1 41
Slide 11: Organic Loan Growth
High Quality Lending Total loans increased $411.7, or 10.2%, from year-end 2022, driven by strong commercial loan growth in first half of 2023 $5.00 Total Loans Billions 7.8% CAGR $4.46 Organic Loan $4.50 $4.00 $4.05 $0.73 $3.68 Growth $3.50 $3.22 $3.60 $0.66 $0.67 $0.95 $0.69 $4.46B of total loans
Slide 12: Commercial Lending
High Quality Lending Total Commercial Loans $2.74 Commercial Lending Billions 11.5% CAGR $2.5 Outstanding balance of $2.74B at December 31, 2023 $2.34 $0.73 $2.05 $2.05 • Commercial loans increased $396.9M, or 16.9%, from December 31, 2022, with $2.0 $0.66 >$0.01 growth concentrated in the first hal
Slide 13: Commercial Lending Portfolio Exposure Mix
High Quality Lending Overall Commercial Portfolio Exposure Mix Commercial Lending Committed credit exposure of $3.60B at 2%1% 2%2% 2% December 31, 2023 4% • The vast majority of the commercial loan portfolio is within the Bank's footprint, 4% which includes the Mid-Atlantic region following the Comp
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
High Quality Lending Commercial Real Estate Outstanding balances of $1.78B and committed credit exposure of $2.18B as of December 31, 2023 71% of FISI’s office exposure, or 12% of CRE exposure, relates to • Well diversified, with more than 700 loan facilities consolidated into 42% Class B or Medical
Slide 16: Residential Lending Portfolio
High Quality Lending Residential Lending Portfolio Residential Real Estate 1.8% CAGR $727.2 $727.2M portfolio at December 31, 2023 Millions $700 $676.5 $689.6 $655.8 $667.6 $77.4 $89.8 $104.1 $78.5 $77.7 • Residential portfolio increased $59.6M, or 8.9%, from December 31, 2022 $600 • High quality po
Slide 17: Consumer Indirect Portfolio
High Quality Lending Consumer Indirect Portfolio Indirect Auto Remains Core Competency 2.7% CAGR Millions $1,024 $948.8M portfolio at December 31, 2023 $1,000 $958 $949 • Effective January 1, 2024, the Company exited the Pennsylvania auto market as $850 $840 it focuses on its core Upstate New York s
Slide 18: 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 19: Securities Portfolio
Securities and Deposits 10.0% CAGR $1,384 Millions $1,400 $206 $1,143 $1,200 Securities Portfolio $1,000 $777 $900 $189 $1,036 $148 $800 $1.04B at December 31, 2023 $272 $600 $359 $1,178 $954 $888 $400 $628 • Primarily comprised of agency wrapped mortgage-backed securities with $200 $418 intermediat
Slide 20: Deposit Growth
Securities and Deposits Deposit Growth $5.21B at December 31, 2023 320 2.63% municipal 2023 cost of total customers as of interest-bearing • Granularity of community banking franchise benefits deposit portfolio MRQ-end deposits ◦ Average deposit balances per branch of ~$84M, excluding reciprocal and
Slide 21: Liquidity
Securities and Deposits Liquidity Diverse deposit gathering capabilities and eligible 16.5% ~86% collateral support a robust liquidity position of total deposits are Loan to deposit uninsured nonpublic ratio • 4Q ’23 available committed liquidity remains strong, as supported through deposits unencum
Slide 22: Net Interest Income & Margin
Revenue Net Interest Income & Margin 4Q ’23 net interest income of $39.9M and net interest margin of 2.78% • Full year net interest income (NII) of $165.7M decreased $1.7M, or 4.3%, over the prior year $180 8.00% ◦ 4Q ’23 NII of $39.9M was down $3.3M, Millions $167 $166 $160 $155 7.00% or 7.6%, from
Slide 23: Balance Sheet Providing Ample Cash Flow
Revenue New yields coming on between 60 and 300 basis points higher than recent roll off yields, which in 4Q ’23 were impacted by floating rate nature of some loans Balance Sheet 4Q ‘23 Average Providing Ample Select Interest Earning Assets 2023 Yield 4Q ‘23 Yield Roll Off Yield Balance at 12/30/202
Slide 24: Diverse Noninterest Income
Revenue Diverse Noninterest Income • Wealth management provided by Courier Capital, LLC 22% 6 of 2023 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 manage
Slide 25: Wealth Management Business Positioned for Growth
Revenue Wealth Management Business Positioned for Growth AUM of $2.88B as of December 31, 2023 and 4Q ’23 investment advisory income of $2.7M • Combination of FISI’s subsidiary wealth management firms enhanced size and scale as next natural step in evolution of this business line ◦ On May 1, 2023, F
Slide 26: Strategic Investments Expected to Drive Operating Leverage
Expense Management & Operating Leverage Strategic Investments Expected to Total Noninterest Expenses $140 $137.2 Drive Operating Leverage Millions $129.4 4Q ’23 expense of $35.0M, up 0.9% from linked quarter $120 $112.8 $109.3 $102.8 $100 • Completed organizational realignment in December 2023, impa
Slide 27: 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% 12.77% 12.13% 12.02% 12% 10.80% 10.63% 10.68% 10.31% 10.18% 10.28% 9.78% 10% 9.00% 9.42% 9.34% 9.67% 8.25% 8.23% 8.33% 8.18%
Slide 28: 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 29: FISI Presents a Compelling Valuation
Capital Management & Investment Considerations Results-driven community bank with FISI Presents a Compelling Valuation strong retail and commercial franchises Longstanding commitment to rewarding shareholders through meaningful dividend yield and 29-year cash dividend history Investment Profile As o
Slide 30: 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 Leadership Team 31 FISI-Investors@five-starbank.com Strategy Map 32 Non-GAAP
Slide 31: 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 32: 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 33: 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 34: Non-GAAP Reconciliations Continued
Appendix Non-GAAP Reconciliations Continued Quarter ended Amounts in thousands 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Pre-tax pre-provision income: Net income $12,088 $12,089 $14,373 $14,022 $9,780 Add: Income tax expense 2,370 2,775 2,418 2,440 5,156 Add: Provision for credit losses 6,
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