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| 8-K - FORM 8-K - FINANCIAL INSTITUTIONS INC | d728651d8k.htm |
| EX-99.2 - EX-99.2 - FINANCIAL INSTITUTIONS INC | d728651dex992.htm |
 Delivering
On Our
Promise
NASDAQ: FISI
May 21, 2014
Exhibit 99.1 |
 Forward Looking Statements
2
Statements contained in this presentation which are not historical
facts and which pertain to future operating results of Financial
Institutions, Inc. and its subsidiaries constitute “forward
looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward looking
statements involve significant risks and uncertainties. We refer
you to the documents the Company files from time to time with
the Securities and Exchange Commission, specifically the Company’s last
filed Form 10-K and Form 10-Q. These documents contain and
identify important factors that could cause actual results to
differ materially from those contained in our projections or
forward looking statements. The Company assumes no obligation to
update any information presented herein. |
 Key Investment Considerations
3
Experienced leadership
Attractive footprint in Upstate NY, uniquely positioned to seize
market opportunities
…and Delivering on our Promise to All Stakeholders
Low cost and streamlined
Sustainable, scalable business model
Effective enterprise risk management
Solid capital structure
Investments in people and infrastructure
Consistent, strong operating results
and favorable trends
Positioned to Achieve Long-Term Growth…
operating emphasis |
 Martin K. Birmingham
President & Chief Executive Officer
Kevin B. Klotzbach
Executive Vice President, Chief Financial
Officer & Treasurer |
 Who We Are
5
Regional community bank headquartered in
Warsaw, NY with $3.0 billion in assets
10,000 square-mile operating footprint with 50
banking locations in 15 contiguous counties
concentrated in Upstate NY
Top 20 bank of those headquartered in NY based
on asset size
Experienced management team with extensive
market knowledge
Franchise is a diversified mix of consumer and
business customers, products and revenue
sources; generating consistent, strong operating
results
Corporate Overview
Key Corporate Statistics
Assets:
$3.02 billion
Loans:
$1.85 billion
Deposits:
$2.53 billion
2013 Revenue:
$116 million
FTEs:
~ 600
Shareholders’
Equity:
$263 million
Market Capitalization:
$321 million
Common Book Value:
$17.72 share
Tangible Common Book Value:
$14.12 share
Annualized Dividend:
$0.76
Dividend Yield:
3.28%
NASDAQ:
FISI
# Analyst Coverage:
3
Note: Financials as of March 31, 2014. Market data as of
April 30, 2014. |
 Management Team
6
Average Years:
12
27
Name
Title
Years with
FISI
Years in
Banking
Martin K. Birmingham
President & CEO
9
24
Richard J. Harrison
EVP, Chief Operating Officer
10
44
Jeffrey P. Kenefick
EVP, Commercial Banking
8
24
Kevin B. Klotzbach
EVP, Chief Financial Officer
12
30
Kenneth V. Winn
EVP, Chief Risk Officer
9
31
David G. Case
SVP, Chief Commercial Credit Officer
8
29
Paula D. Dolan
SVP, Human Resources
<1
30
Sonia M. Dumbleton
SVP, Controller
29
29
Michael D. Grover
SVP, Chief Accounting Officer
14
14
Charles J. Guarino
SVP, Marketing
19
19 |
 Sound Risk
Management
Our Strategy and Approach
7
Balance between volume
and risk; maintain our
credit discipline
Diversified loan portfolio
through retail and
commercial exposures
Effective risk
management committee
structures
Uphold rigorous expense
management practices
Principled, growth oriented
approach guided by our
commitment to enhance:
Shareholder value
Customer experience
Employee experience
Productivity measures per
FTE
Smart Growth
Maintain our
Culture
Focus on Value
Continue to capitalize on
banking dislocation in our
region; uniquely positioned
to seize market
opportunities and achieve
scale in growth markets
Invest in people, product
development and
infrastructure, especially
potential growth segments
Key lending hires in
Buffalo and Rochester, new
e-banking services (mobile
banking, web apps) and
product offerings
Continue non-interest
income growth
Five Star Investment
Services
Agreement with Welch
ATM/Rite Aid for Free
ATM access
Attract, retain and cultivate
top talent
Promote from within,
create career
opportunities
Focus on the Five Star
Bank Experience;
dictates how we:
Hire
Evaluate
Reward
Comprehensive incentive
compensation structure
supports
cross-functional
focus
Satisfied employees =
satisfied customers |
 Our Strategic Initiatives have Driven Growth
and Performance
8
Optimization and consolidation of
branches offices
Investment in asset classes which offer
excellent risk adjusted returns and
duration
Continuous reinvestment in people,
processes and infrastructure
Positioning ourselves for market
expansion through key group hires and
branch purchases
Keen focus on expense control, efficiency
improvements and risk management
Consistent, strong operating results
Meaningful organic loan growth
Increased positive operating leverage
Pristine asset quality
Attractive market position
Strong 5-year total shareholder return
Record earnings per share
Initiatives
Outcomes |
 A Dominant, Established Franchise…
9
Deposit Market Share: Counties of Operation
10,000 square-mile operating
footprint
50 banking offices in 15 contiguous
counties concentrated in Upstate NY
Top 3 market share in 11 counties
Top 5 bank in counties of operation
Significant opportunities exist to
gain market share
Key Highlights
Source: SNL Financial. Deposits by County as of June 30, 2013 for
comparative purposes Rank
Institution
Branches
2013
Deposits
in Market
($MM)
Share (%)
1
Manufacturers and Traders Trust Co.
116
19,562
32.1%
2
First Niagara Bank NA
75
9,726
16.0%
3
KeyBank NA
85
4,362
7.2%
4
RBS Citizens NA
71
2,891
4.7%
5
Five Star Bank
50
2,332
3.8%
6
JPMorgan Chase Bank NA
27
2,026
3.3%
7
Community Bank NA
68
2,000
3.3%
8
Bank of America NA
46
1,791
2.9%
9
Canandaigua National Bank and Trust Co.
25
1,696
2.8%
10
Bank of Castile
18
885
1.5%
11
Evans Bank NA
14
698
1.1%
12
Northwest Savings Bank
18
625
1.0%
13
Chemung Canal Trust Co.
10
569
0.9%
14
Lake Shore Savings Bank (MHC)
11
396
0.7%
15
Steuben Trust Co.
13
349
0.6%
Market |
 …Uniquely Positioned For Future Growth
10
Capitalizing on banking dislocation due to larger
institutions divesting in our markets
Acquired 4 former First Niagara Offices in June 2012
$129.6 million in deposits
Entered Orleans County
Strengthened presence in Genesee and Seneca
Counties
Acquired 4 former HSBC Offices in August 2012
$157.2 Million in deposits
Gained Significant Market Share in Chemung
County
Consolidated 4 of the 8 acquired branches into
existing FISI offices
Rochester MSA
Buffalo MSA
Over 50 NY banks (non-MHC) under $1 billion in
assets located in non-NYC Metro area
Market Footprint
Source: SNL Mapping
Erie County
Deposit Market:
$30.5 Bln
Monroe County
Deposit Market:
$11.4 Bln
Chemung County
Deposit Market:
$1.0 Bln
Source: SNL Financial
Opportunity to fuel organic growth exists in attractive
markets where we have less than 2% of collective market
share
At $3.02 billion in assets, we believe we have the capacity to
consolidate smaller banks in our footprint
|
 Balance Sheet Growth
11
$1,264
$1,346
$1,485
$1,706
$1,834
$1,717
$1,849
$1,743
$1,883
$1,932
$2,262
$2,320
$2,409
$2,533
$2,062
$2,214
$2,336
$2,764
$2,929
$2,828
$3,016
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2009
2010
2011
2012
2013
2013Q1
2014Q1
Loans
Deposits
Assets
Balance Sheet Growth |
 Loan Growth
12
Emphasis on driving quality loan growth by
balancing between volume and risk along with
maintaining a diversified portfolio
Our largest concentration, indirect auto at 35% of
total loans, is an excellent asset class as it offers
low duration (approx. 2.4 years), good credit risk
(average FICO 720) and relatively high risk-
adjusted yields
Balancing organic and acquisition loan growth
initiatives
C&I and Home Equity have become key areas of
focus for growth
C&I effort to be targeted at Buffalo and
Rochester
Recently hired local talent away from
competitors to gain traction
Home Equity growth strategy positioned as
alternative
to
mortgages
-
most
are
in
first
lien
position, but are more attractive from interest
rate risk prospective
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
Consumer
Indirect
Home Equity
Residential Mtg
CRE
C&I
6.5%
9.1%
12.9%
15.9%
Loan Portfolio Composition
Lending Strategy |
 Large and fragmented market
Favorable competitive conditions and risk-
adjusted returns
Natural risk dispersion that comes with retail
loans
Relatively short duration loans
Necessary expertise available
Underwriting Manager
25 years of experience
Credit Administration
35 years of experience
Sales Manager
25 years of experience
Collections Manager
30 years of experience
Underwriting Supervisor
15 years of experience
Loan Processing Supervisor
20 years of experience
Market Dynamics
Our Team
Indirect Lending as a Core Business
13
Our Portfolio
Indirect
Net
Charge-Off
%
Originating prime loans –
average credit score is
720
Originate through approximately 420 franchised
automobile dealerships
No independent used car dealerships
All dealers are within Upstate New York and
Pennsylvania
Most key personnel have auto finance experience
from Charter One Auto Finance (originated over $2
Bln /year in 21 states and had a serviced portfolio in
excess of $6.5 Bln)
0.83%
0.83%
0.60%
0.72%
0.82%
0.85%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
2009
2010
2011
2012
2013
2014Q1 |
 Deposit Portfolio
Deposit Strategy
Cost of Total Deposits
Deposit Composition
18%
43%
29%
10%
14
Consistent emphasis on growing core (non-
time) deposits, which equated to 75% of the
total deposit portfolio at March 31, 2014
Strong growth in our non-interest bearing
deposits, currently at 21% of our deposit
base or $533 million (growth in excess 80%
since 2008)
Overall cost of deposits at 0.26% as of
March 31, 2014
30%
10%
42%
18%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
NIB Demand
IB Demand
Savings & Money Market
CDs <$100
CDs >$100
18.1%
6.7%
13.4%
1.82%
0.26%
0.00%
0.50%
1.00%
1.50%
2.00%
2008
2009
2010
2011
2012
2013
2014Q1 |
 Revenue Growth
15
Net Interest Income and Noninterest Income
Note: All periods exclude OTTI & Securities Gains
$72.3
$78.8
$81.9
$88.5
$91.6
$22.9
$23.3
$20.0
$19.9
$20.9
$22.2
$23.6
$5.7
$6.0
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
2009
2010
2011
2012
2013
2013Q1
2014Q1
Net Interest Income
Noninterest Income |
 Operating Leverage by Successful Growth Strategies
and Effective Expense Management
16
Growing Net Interest Income
Increasing Fee Income
Improving Efficiency
12/31/13
YTD $23.6 Million
12/31/12
YTD $21.2 Million
Noninterest Income
Revenue and Expenses
Revenue grew by 25% between 2009 and 2013 while expenses
increased by only 11%
Source: SNL Financial
Net Interest Income
Continues to Grow…
…despite margin
compression headwinds
(1)
(1)
* Peers
include
all
US
Banks
and
Thrifts
in
the
Mid-Atlantic
region
from
$1
Bln
-
$5
Bln in assets. Peer data reflects median values for the component
companies within the group.
3.25%
3.50%
3.75%
4.00%
4.25%
$20.0
$21.0
$22.0
$23.0
$24.0
Net Interest Income
Net Interest Margin
57.0%
56%
58%
60%
62%
64%
66%
2009
2010
2011
2012
2013
2014Q1
Efficiency Ratio
FISI
Peer *
39%
21%
9%
8%
23%
Service Charges on Deposits
ATM & Debit Card Revenue
Broker-Dealer Fees & Commissions
Company Owned Life Insurance
Other
42%
22%
10%
7%
19%
$0
$20
$40
$60
$80
$100
$120
$140
2009
2010
2011
2012
2013
2013Q1
2014Q1
Total Revenue
Total Expenses
(1)
(2)
(1)
All periods exclude OTTI & Securities Gains
(2)
2012 excludes acquisition and CEO transition expenses
(1) |
 Asset Quality Overview
17
Non-performing Assets (“NPAs”) Trends
Asset quality remains a top priority
Disciplined oversight of risk in lending
portfolio
Asset quality metrics continue to
outperform peer levels
Key Highlights
Source: SNL Financial
0%
50%
100%
150%
200%
250%
300%
2009
2010
2011
2012
2013
2014Q1
Reserves / NPAs
FISI
Mid-Atl. Peer Median
$8.7
$7.6
$7.1
$9.1
$16.6
$16.3
$0.5
$0.5
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
2009
2010
2011
2012
2013
2014Q1
Nonperforming Loans
OREO & Nonperforming securities
0.0%
0.5%
1.0%
1.5%
2.0%
2009
2010
2011
2012
2013
2014Q1
FISI
Mid-Atl. Peer Median
$1.3
Note:
Peers
include
all
US
Banks
and
Thrifts
in
the
Mid-Atlantic
region
from
$1
Bln
-
$5
Bln
in
assets.
Peer data reflects median values for the component companies within the
group $2.1
$1.8
$0.9
NPAs / Assets |
 Investment Portfolio
18
Low risk security portfolio
High percentage of the portfolio consists
of securities backed by the U.S.
government (“USG”) and agencies
Approximately $930 million in total
securities and the majority are utilized
for various pledging purposes
Data as of March 31,2014
Low Risk Security Portfolio
Other
Securities
0.2%
USG Agencies
CMO’s
22.8%
USG Agencies
& GSE
20.5%
HTM Municipal
Debt
27.4%
USG Agencies
Mortgage-
backed Pass-
Throughs
29.1% |
 Capital Management
19
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
2014Q1
Tangible Common Equity / Tangible Assets
7.93%
7.64%
7.20%
7.05%
6.86%
6.74%
6.49%
6.40%
6.51%
6.60%
Tier 1 Risk
-
Based Capital Ratio
12.20%
12.22%
11.39%
10.91%
10.73%
10.84%
10.96%
10.94%
10.82%
10.89%
Total Risk Based Capital
13.45%
13.47%
12.64%
12.16%
11.98%
12.09%
12.21%
12.19%
12.08%
12.14%
Tier 1 Leverage
8.63%
8.80%
8.27%
7.67%
7.71%
7.46%
7.59%
7.68%
7.63%
7.51%
%
7.93%
6.60%
12.20%
10.89%
13.45%
12.14%
8.63
7.51%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
Capital Ratios |
 Planning and Investing For the Future
20
We are constantly investing and adapting our scalable infrastructure to
strengthen our competitive position
Our
infrastructure’s
strength
is
in
state
of
the
art
technology
and
motivated
human
resources
Smart investments in technology have enabled us to be competitive with
even the largest banking institutions. Investments
include: Mobile banking
•
102% increase in Mobile banking users since January 2013
Enhanced Web Presence (online account opening, updated online banking,
emphasis on e-statements) •
200% increase in e-statement penetration since January 2013
New product offerings allow us to remain nimble vs. competition
Enhanced Retail Checking Products (debit card rewards)
•
5% increase in debit card transaction since January 2013
Expanded Indirect Lending |
 How Do We Compare?
21
Note: FISI market data as of March 31, 2014. Peer data as
of December 31, 2013 and reflects median
values
for
the
component
companies
within
each
respective
index.
16.0x
14.0x
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
16.0x
14.0x
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
12.7x
16.0x
15.7x
FISI
Mid-Atl. Peers $1B -
$5B
SNL Banks $1 -
$5B
Index
11.5x
15.8x
16.1x
FISI
Mid-Atl. Peers $1B -
$5B
SNL Banks $1 -
$5B
Index
3.35%
1.93%
1.49%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
FISI
Mid-Atl. Peers $1B -
$5B
SNL Banks $1 -
$5B
Index
Price/ TTM EPS
Dividend Yield
Price/ MRQ EPS |
 Total Shareholder Return
22
Note: Market data as of April 30, 2014. Peer data reflects median
values for the component companies within each respective
index 5-Year Total Shareholder Return
82%
68%
71%
25%
22%
23%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
FISI
Mid-Atl. Banks $1-$5B
SNL US Banks $1-$5B
5 Year Return
1 Year Return |
 23
Source: SNL Financial. Market data as of March 31, 2014
Diversified Shareholder Base
#
Holder
Position
Market
Value
($000)
Shares
Out (%)
1
Wellington Management Co. LLP
1,016,643
23,403
7.34
2
BlackRock Fund Advisors
827,548
19,050
5.97
3
Dimensional Fund Advisors LP
613,864
14,131
4.43
4
Canandaigua National Bank and Trust Co.
603,369
13,890
4.36
5
Columbia Management Investment Advisers LLC
473,930
10,910
3.42
6
Commonwealth Equity Services, Inc.
473,452
10,899
3.42
7
Bryn Mawr Capital Management Inc
434,181
9,995
3.13
8
Vanguard Group Inc.
393,229
9,052
2.84
9
Putnam Investment Management LLC
327,997
7,550
2.37
10
Kennedy Capital Management Inc.
298,696
6,876
2.16
11
LSV Asset Management
291,938
6,720
2.11
12
Investment Counselors of Maryland LLC
287,200
6,611
2.07
13
Northern Trust Global Investments Ltd.
249,563
5,745
1.80
14
DePrince Race & Zollo Inc.
226,100
5,205
1.63
15
SSgA Funds Management Inc.
226,016
5,203
1.63
16
JP Morgan Asset Management
221,829
5,107
1.60
17
AlphaOne Investment Services LLC
201,674
4,643
1.46
18
Castine Capital Management LLC
117,252
2,699
0.85
19
Clover Partners LP
102,499
2,360
0.74
20
Aberdeen Asset Management Inc.
101,988
2,348
0.74
63%
7%
30%
Institutional
FISI Board / Management
Other / Retail
Shareholder Composition
Top 20 Institutional Investors |
 Key Investment Considerations
24
Experienced leadership
Positioned to Achieve Long-Term Growth…
Attractive footprint in Upstate NY, uniquely positioned to seize
market opportunities
…and Delivering on our Promise to All Stakeholders
Low cost and streamlined
Sustainable, scalable business model
Effective enterprise risk management
Solid capital structure
Investments in people and infrastructure
Consistent, strong operating results
and favorable trends
operating emphasis |
 Delivering
On Our
Promise
NASDAQ: FISI
May 21, 2014 |