The parent of Five Star Bank said Wednesday that third-quarter earnings fell 22 percent because of costs related to the sudden retirement of its longtime CEO and merger-related expenses from its purchase of eight branches from HSBC Bank USA and First Niagara Financial Group.
Warsaw-based Financial Institutions reported net income of $4.27 million, down from $5.5 million a year ago. Including preferred stock dividends of $368,000 in both years, the bank earned $3.9 million for common shareholders, or 28 cents per share, down 24 percent from $5.13 million, or 37 cents per share, in the same quarter a year ago.
Those results included $1.9 million in pretax merger and conversion costs, or 9 cents per share after taxes, related to the bank’s purchase of four First Niagara and four HSBC offices in June and August, respectively. Those purchases, the second of which closed and converted on Aug. 17, added $157.2 million in deposits and $17.9 million in loans. The deals followed First Niagara’s purchase of 195 HSBC branches across the state.
In addition, the bank in late August announced the resignation of its longtime president and CEO, Peter G. Humphrey, the fourth generation of the Humphrey family to run the bank. That cost it $2.6 million before taxes, or about 12 cents per share after taxes, for payments to him.
Chairman John Benjamin was named interim CEO, while Richard Harrison was promoted to chief operating officer and Martin Birmingham was appointed president and chief of community banking. The company noted that the two executives were “instrumental in the structuring, negotiating and integrating of the branch office acquisitions.” A search for a permanent CEO is under way.
Not including those special costs, net operating income for common shareholders rose 17 percent to $6.8 million, or 50 cents per share, from $5.8 million, or 43 cents per share, a year ago. Wall Street had expected 45 cents per share. The results were released after the market closed Wednesday, but shares rose 44 cents, or 2.4 percent, to $18.56 on Thursday.
“We are making steady progress in the implementation of our strategy for increasing our regional presence and strengthening the company’s financial position,” Benjamin said in a release. “We have made meaningful strides in improving operations and the quality of our portfolio, while maintaining a strong capital position and continuing to increase shareholder value.”
Wall Street analyst Alexander Twerdahl of Sandler O’Neill & Partners LP called the results “very strong” and said they “put to rest any concerns that investors may have had” after Humphrey’s departure, noting that “both capital levels and credit ended the quarter better than we had anticipated.”