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FISI

Financial Institutions NasdaqGS:FISI Stock Report

Last Price

US$25.16

Market Cap

US$385.8m

7D

3.4%

1Y

-19.3%

Updated

05 Oct, 2022

Data

Company Financials +
FISI fundamental analysis
Snowflake Score
Valuation6/6
Future Growth0/6
Past Performance2/6
Financial Health6/6
Dividends5/6

FISI Stock Overview

Financial Institutions, Inc. operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York.

Financial Institutions, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Financial Institutions
Historical stock prices
Current Share PriceUS$25.16
52 Week HighUS$34.43
52 Week LowUS$23.69
Beta0.99
1 Month Change-2.14%
3 Month Change-2.90%
1 Year Change-19.28%
3 Year Change-13.84%
5 Year Change-15.71%
Change since IPO67.73%

Recent News & Updates

Sep 23

Financial Institutions Is Very Cheap, But Now Is Not The Right Time To Buy

Summary The margin will suffer from the rising rate environment as liability repricing will outpace asset repricing in the short term. New York State’s strong job markets, excluding New York City, will keep loan growth at a decent level. The December 2022 target price suggests a high upside from the current market price. Further, FISI is offering a good dividend yield. Earnings of Financial Institutions, Inc. (FISI) will most probably plunge this year on the back of higher provisioning. On the other hand, moderate loan growth will likely support the bottom line. Meanwhile, the margin will likely face pressure from the rising rate environment. Overall, I'm expecting Financial Institutions, Inc. to report earnings of $3.65 per share for 2022, down 24% year-over-year. For 2023, I'm expecting earnings to remain almost unchanged at $3.64 per share. The year-end target price suggests a high upside from the current market price. Nevertheless, I'm adopting a hold rating on Financial Institutions, Inc. because of the existing unfavorable operating environment. Conflicting Economic Factors to Keep Loan Growth at a Moderate Level Financial Institutions' loan portfolio grew by 2.2% in the first half of 2022, or 4% annualized, which is not bad considering the company's history. The management mentioned in the conference call that it expects mid-to-high-single-digit growth for 2022, with commercial and consumer indirect categories driving this growth. In my opinion, this target is a bit ambitious and the company's actual loan growth for the year will probably be at the lower end of the management's guidance. This is because high borrowing costs are bound to reduce the credit demand, especially for consumer indirect loans and residential loans which make up 45% of total loans. On the other hand, strong regional job markets will sustain loan growth. Financial Institutions, Inc. mostly operates in Western and Central New York State, with some presence in Maryland as well. As shown below, New York's unemployment rate (excluding New York City) is currently very low, which bodes well for credit demand, especially for consumer indirect loans and residential loans. Data by YCharts Considering these factors, I'm expecting the loan portfolio to grow by 1% every quarter till the end of 2023. Margin to Take a Hit from Rising Rates According to the projections released this week, the Federal Reserve expects a further 125-150 basis points hike in the fed funds rate till the end of 2023 from the current level of 3.25%. Financial Institutions' borrowing costs will reprice quicker than assets in the short term; therefore, the margin will suffer for most of the monetary tightening cycle. Interest-bearing demand, savings, and money market deposits made up 56.5% of total deposits at the end of June 2022. These deposits will reprice immediately after rate hikes. On the other hand, the large balance of securities will weigh down the average earning-asset yield as most securities have fixed rates. Securities made up a quarter of total earning assets at the end of June 2022. The results of the management's interest rate sensitivity analysis given in the 10-Q filing show that a 200-basis points hike in interest rate can DECREASE the interest income by 1.46% over twelve months. 2Q 2022 10-Q Filing On the other hand, the anticipated loan growth discussed above will help lift the margin. Overall, I'm expecting the net interest margin to remain mostly unchanged through the end of 2023 from 3.19% in the second quarter of the year. Earnings to Fall by 24% The anticipated loan growth will likely be one of the biggest drivers of earnings in the next year and a half. Further, Financial Institutions, Inc. is currently focusing on its Banking as a Service ("BaaS") initiative for growth. Through BaaS, the company will partner with fintech companies and non-bank financials to offer banking products and services to their end customers. Financial Institutions, Inc. will earn fees from the model; therefore, the company's non-interest income will likely grow at a high rate through 2023. Meanwhile, the provisioning for expected loan losses will likely remain near the historical mean. Allowances were at a high level at the end of June 2022 relative to non-performing loans. Allowances were 648% of non-performing loans at the end of June 2022, as mentioned in the 10-Q filing, as opposed to 699% of non-performing loans at the same point in time last year. Therefore, I'm expecting provisioning requirements from the existing portfolio to be low and new loans to be the chief driver of provisioning. Overall, I'm expecting provisioning to remain at a normal level through the end of 2023. I'm expecting the net provision expense to make up 0.32% of total loans (annualized) in every quarter till the end of 2023, which is the same as the average for the last five years. Overall, I'm expecting Financial Institutions, Inc. to report earnings of $3.65 per share for 2022, down 24% year-over-year. For 2023, I'm expecting earnings to remain flattish at around $3.64 per share. The following table shows my income statement estimates. FY18 FY19 FY20 FY21 FY22E FY23E Income Statement Net interest income 123 130 139 155 165 172 Provision for loan losses 9 8 27 (8) 9 13 Non-interest income 36 40 43 47 46 51 Non-interest expense 101 103 109 113 130 138 Net income - Common Sh. 38 47 37 76 57 56 EPS - Diluted ($) 2.39 2.96 2.30 4.78 3.65 3.64 Source: SEC Filings, Earnings Releases, Author's Estimates (In USD million unless otherwise specified) Actual earnings may differ materially from estimates because of the risks and uncertainties related to inflation, and consequently the timing and magnitude of interest rate hikes. Further, a stronger or longer-than-anticipated recession can increase the provisioning for expected loan losses beyond my estimates. Large Securities Portfolio to Create Problems in the Current Monetary Environment Financial Institutions, Inc. has a very large available-for-sale securities portfolio, which will cause problems in a rising rate environment. AFS securities made up 21% of total earning assets at the end of June 2022. As interest rates increase, the market value of the securities will fall leading to unrealized losses. These losses will flow directly into the equity account, leaving the income statement intact, as per relevant accounting standards. Due to a large buildup of unrealized losses, the book value has already dropped from $28.1 per share at the end of March 2022 to $26.6 per share at the end of June 2022, as mentioned in the earnings release. The book value will face further pressure as the monetary tightening cycle is far from over. As mentioned above, the Federal Reserve expects around 125-150 basis points hike by the end of 2023. The following table shows my balance sheet estimates.

Aug 22

Financial Institutions declares $0.29 dividend

Financial Institutions (NASDAQ:FISI) declares $0.29/share quarterly dividend, in line with previous. Forward yield 4.27% Payable Oct. 3; for shareholders of record Sept. 16; ex-div Sept. 15. See FISI Dividend Scorecard, Yield Chart, & Dividend Growth.

Shareholder Returns

FISIUS BanksUS Market
7D3.4%6.3%4.4%
1Y-19.3%-21.8%-18.2%

Return vs Industry: FISI exceeded the US Banks industry which returned -21.8% over the past year.

Return vs Market: FISI underperformed the US Market which returned -18.2% over the past year.

Price Volatility

Is FISI's price volatile compared to industry and market?
FISI volatility
FISI Average Weekly Movement3.1%
Banks Industry Average Movement3.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: FISI is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: FISI's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1817625Marty Birminghamhttps://www.fiiwarsaw.com

Financial Institutions, Inc. operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York. The company offers checking and savings account programs, including money market accounts, certificates of deposit, sweep investments, and individual retirement and other qualified plan accounts. Its loan products include term loans and lines of credit; short and medium-term commercial loans for working capital, business expansion, and purchase of equipment; commercial business loans to the agricultural industry; commercial mortgage loans; one-to-four family residential mortgage loans, home improvement loans, closed-end home equity loans, and home equity lines of credit; and consumer loans, such as automobile, secured installment, and personal loans.

Financial Institutions, Inc. Fundamentals Summary

How do Financial Institutions's earnings and revenue compare to its market cap?
FISI fundamental statistics
Market CapUS$385.81m
Earnings (TTM)US$65.96m
Revenue (TTM)US$205.59m

5.8x

P/E Ratio

0.9x

P/B Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
FISI income statement (TTM)
RevenueUS$205.59m
Cost of RevenueUS$0
Gross ProfitUS$205.59m
Other ExpensesUS$139.63m
EarningsUS$65.96m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 27, 2022

Earnings per share (EPS)4.30
Gross Margin100.00%
Net Profit Margin32.08%
Debt/Equity Ratio50.8%

How did FISI perform over the long term?

See historical performance and comparison

Dividends

4.6%

Current Dividend Yield

27%

Payout Ratio