Financial Institutions Posts Record Net Interest Income
Loans grew 2.7% from the first quarter to $4.75 billion, led by commercial lending.
Financial Institutions Inc. (FISI), the banking company, reported record quarterly net interest income as lower funding costs widened its margin in the second quarter.
Net income rose 20.8% from a year earlier to $21.2 million and edged up 0.9% sequentially. Diluted earnings increased to $1.04 a share from 85 cents a year earlier and were unchanged from the first quarter. Return on average assets and return on average equity improved from a year earlier, though both eased slightly on a sequential basis.
Net interest income increased 8.6% from a year earlier and 2.6% from the first quarter to $53.4 million. The net interest margin expanded 21 basis points year over year and three basis points sequentially to 3.70%.
Cheaper funding drove the margin gain. The yield on interest-earning assets held at 5.76% from the first quarter and declined from a year earlier, while the cost of interest-bearing liabilities fell four basis points sequentially and 39 basis points year over year to 2.61%.
Commercial business and commercial mortgage loans grew 4.3% sequentially and 9.1% from a year earlier to $3.21 billion. Consumer indirect and other consumer loans declined 7.8% year over year, extending the shift in the portfolio toward commercial lending.
Noninterest income rose 3.2% from a year earlier to $11.0 million, supported by investment-advisory revenue as Courier Capital’s assets under management surpassed $4.0 billion. Expenses were nearly flat at $35.6 million, and the efficiency ratio improved to 55.33% from 59.68% a year earlier.
Credit costs presented a mixed picture. Annualized net charge-offs declined to 0.11% of average loans, while the provision for credit losses rose to $3.1 million, partly reflecting loan growth. Nonperforming loans increased 20.3% from a year earlier to $39.0 million, largely because of one well-collateralized commercial loan placed on nonaccrual in the first quarter.
Deposit balances slipped 0.7% sequentially as public deposits fell seasonally, prompting short-term borrowings to climb to $182 million as loans expanded. Available on-balance-sheet liquidity declined to $1.15 billion, while the common-equity Tier 1 ratio strengthened to 11.44%, leaving capital higher as funding demands increased.