Financial Institutions Stock Earnings Reports

Fourth Quarter and Year-End 2024 Earnings Call for Investors

Performance Overview:

• Equity Offering: Successful equity raise, oversubscribed at more than 4x, generating net proceeds of $108.5 million. This capital will support future investments and potentially call a portion of subordinated debt.
• Securities Portfolio Restructuring: Sold $653.5 million of low-yield securities, reinvesting into higher-yield agency wrap securities. Resulting pretax loss from restructuring was $100.2 million, leading to a net loss of $66.1 million for Q4 2024.

Financial Metrics:

• Net Interest Margin (NIM): Margin expanded to 2.91% in Q4 from 2.89% in Q3 2024, with a full-year NIM of 2.86%, slightly below guidance.
• Return Expectations for 2025: Targeting return on average assets of at least 1.10% and return on average equity of at least 11.25%. Efficiency ratio aimed to be below 60%.
• Loan Growth: Expecting low single-digit growth (1%-3%) in loans for 2025, mainly as commercial lending is anticipated to drive mid-single-digit growth.

Asset Quality:

• Stable asset quality metrics with annual net charge-offs to average loans remaining at 20 basis points.
• Increased provision for credit losses of $6.5 million in Q4 attributed to higher loan growth and increased charge-offs, with an allowance for credit losses to total loans ratio at 1.07%.
• Confidence in credit quality, particularly in commercial portfolios.

Deposits and Strategy:

• Total deposits stood at $5.1 billion at year-end 2024, down $202 million mainly due to seasonal factors.
• Focused on core deposit gathering and winding down the Banking as a Service (BaaS) offering.

Expense Management:

• Projected noninterest income of $9.5-$10 million per quarter in 2025, with total noninterest expenses expected at approximately $35 million per quarter.
• Core operating expenses projected to grow by 5% compared to 2024.

Market Position and Growth Opportunities:

• Active in regional economic development, particularly in New York, and is well-positioned to take advantage of upcoming investments in semiconductor manufacturing.
• New director Angela Panzarella appointed to the board, bringing valuable leadership experience.

Investment Outlook:

• Investors should be aware of the company’s strategy for capital deployment aimed at sustainable and profitable growth, especially in addressing the competitive lending market and maintaining cost control.
• Commitment to improving profitability over merely chasing growth—with a strong focus on expense management and revenue generation.

In conclusion, while investors should note the challenges faced in the past year, the strategic restructuring and capital raise position Financial Institutions, Inc. for potential growth and improved financial performance in 2025.