Financial Institutions, Inc.

Good day and welcome to Financial Institutions, Inc. Third Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star one on your touch-tone phone. To withdraw a question, press two, star, then two. Please note this event is being recorded. I would now like to turn the conference over to Shelly Duran, Director of Investor Relations. Please go ahead.

Thank you for joining us for today's call. Providing prepared comments will be President and CEO Marty Birmingham and CFO Justin Bigham. Director of Financial Planning and Analysis Mike Grover will join us for Q&A. Today's prepared comments and Q&A will include forward-looking statements. Actual results may differ materially from forward-looking statements due to a variety of risks, uncertainties, and other factors. We refer you to yesterday's earnings release and our historical SEC filings available on our investor relations website for a safe harbor description and a detailed discussion of the risk factors relating to forward-looking statements. We will also discuss certain non-GAAP financial measures used to supplement and not substitute for comparable GAAP measures. Reconciliations of these measures to GAAP financial measures were provided in the earnings release, which was filed as an exhibit to a Form 8-K. Please note that this call includes information that is accurate only as of today's date, October 30, 2020. I'll now turn the call over to Marty.

Thank you, Shelly. Good morning, everyone, and welcome to our third quarter earnings call. As I stated in yesterday's release, the past seven months have tested us. We have weathered many challenges, yet we've continuously delivered essential products and services to our customers. helped preserve thousands of jobs through the PPP program, provided community support, learned new ways to work together while being apart, and continue to execute on our strategic initiatives, including the launch of a new digital banking platform to improve the customer experience. We continue to lend prudently and are working closely with our customers to help them through these turbulent times. Despite all the challenges, generated net income of $12.3 million for the quarter, or $0.74 per diluted share, as compared to $11.1 million, or $0.67 per share, in the second quarter of 2020, and $12.8 million, or $0.78 per share, in the third quarter of 2019. Pre-tax, pre-provision income for the third quarter was the highest in company history at $19.2 million, a $1.9 million increase from the second quarter of 2020 and a $283,000 increase from the third quarter of 2019. These strong results were made possible by the dedication and adaptability of our associates. Approximately $1.6 million of restructuring charges were included in the third quarter results in connection with six branch closures and staffing reductions announced in July as part of our enterprise standardization program. Excluding these non-recurring expenses, our efficiency ratio is just below 57% for the quarter. As I've shared previously, the Enterprise Standardization Program is focused on improving operational efficiency and future profitability while enhancing associate and customer experiences. Opportunities identified by the program have resulted in the implementation of robotic automation and the streamlining of processes and operations throughout the organization, as well as the branch transformation announced in July and an additional branch closure announced in October. The program is not yet complete and we continue to identify operational improvements. Back in January, when we announced the launch of this initiative, we indicated that we expected to generate annualized expense savings once implemented within a range of $5 to $7 million. While COVID did delay the implementation of certain components of the program, we continue to expect annualized savings in this range. We anticipate that some of these savings will be reinvested in our two new branch openings scheduled in the city of Buffalo in the first half of next year. After quarter end, we completed an initiative to raise capital in the form of subordinated debt, seizing upon opportunities created by historically low interest rates and Ready Access to the Capital Markets. While we were confident that we already had appropriate capital levels to effectively run our business, we determined that it would be prudent to access the debt markets at favorable rates to add capital for use in serving our customers, taking advantage of organic and strategic growth opportunities and strengthening the bank's capital ratios. We also deemed it was wise to add capital as we continue to operate in COVID-19 environments were the long-term impacts of the pandemic on the economy remain uncertain. In October, we sold $35 million of 10-year fixed to floating rate subordinated notes to institutional investors. The interest rate is fixed at 4.375% for the first five years, and thereafter, it becomes floating rate debt, redeemable at our discretion. This structure provides important flexibility if interest rates are significantly higher in five years or we determined that this is no longer an attractive source of capital. Our subordinated debt offering was very well received, demonstrating the financial strength and viability of our company. Investor demand exceeded the amount of notes offered and the interest rate obtained was lower than we anticipated. The execution of the facility resulted in a fixed rate well below similar offerings conducted by Upstate New York peers in the past several months. Our enterprise standardization program, digital platform upgrade and conversion, and the successful completion of our notes offering are the most recent examples of the many ways we are working to strengthen our institution and support its long-term sustainability and performance. We continue to deliver tangible results of the hard work that is transforming our company. Now, my pleasure to turn the call over to Justin for a discussion of results for the quarter.