Financial Institutions(FISI) - 2024 Q4 - Annual Report

Financial Position - As of December 31, 2024, the Company had consolidated total assets of $6.12 billion, deposits of$ 5.10 billion, and shareholders' equity of $569.0 million[21]. - The Bank reported total assets of$ 6.08 billion, net loans of $4.43 billion, and deposits of$ 5.15 billion as of December 31, 2024[23]. - Courier Capital managed $3.09 billion in assets and generated total revenue of$ 10.3 million for the year ended December 31, 2024[24]. - As of December 31, 2024, the bank's portfolio of commercial business and commercial mortgage loans totaled $1.25 billion, representing 28% of total loans[145]. - Non-performing assets were$ 41.5 million, or 0.68% of total assets, as of December 31, 2024[146]. - At December 31, 2024, the bank had $3.56 billion in deposit liabilities with no fixed term, accounting for 70% of total deposits[151]. - Municipal deposits amounted to$ 1.07 billion, or 21% of total deposits, as of December 31, 2024[153]. - The company has $58.1 million in goodwill and$ 2.6 million in other intangible assets as of December 31, 2024[181]. Revenue and Income - The Company aims to increase market share within existing markets while exploring growth opportunities in non-interest income through acquisitions[31]. - The Company is committed to maintaining a diversified revenue stream and exploring strategic partnerships that align with its core competencies[32]. - The company declared dividends of $21.0 million in 2024 and$ 14.0 million in 2023[101]. - The company generates a significant portion of its revenue from dividends from its Bank subsidiary, which are subject to regulatory limitations[190]. - Investment advisory revenue may decrease due to poor investment performance, impacting overall revenues and net income[175]. - The company’s investment advisory business relies heavily on assets under management, which are influenced by market conditions and competition[176]. Loan Portfolio - The commercial business loan portfolio totaled $665.3 million, representing 15% of the total loan portfolio, with 21% at fixed interest rates and 79% at variable interest rates as of December 31, 2024[53]. - The commercial mortgage loan portfolio amounted to$ 2.20 billion, accounting for 49.1% of the total loan portfolio, with 34% at fixed interest rates and 66% at variable interest rates as of December 31, 2024[54]. - The residential real estate loan portfolio reached $650.2 million, or 15% of the total loan portfolio, with 74% at fixed interest rates as of December 31, 2024[58]. - The consumer indirect loan portfolio totaled$ 845.8 million, representing 19% of the total loan portfolio, primarily concentrated in indirect automobile loans as of December 31, 2024[60]. - The company exited the Pennsylvania automobile market effective January 1, 2024, to focus on its core Upstate New York market[61]. Regulatory Environment - The company is subject to extensive regulation under federal and state laws, primarily for the protection of depositors and the banking system[80]. - The company must comply with capital adequacy standards established by the Federal Reserve, based on Basel III[87]. - The company is required to maintain a leverage ratio of at least 4.0%[93]. - The company must notify the FRB prior to declaring and paying cash dividends if net earnings are insufficient to fund the dividend[100]. - The FDIC issued a special assessment in 2023 for banks with uninsured deposits exceeding $5 billion[106]. - The company did not opt into using the Community Bank Leverage Ratio and determined to comply with the Basel III Rules instead[92]. - The company is subject to a minimum capital conservation buffer of 2.5%[89]. - The most recent CRA evaluation resulted in an overall rating of "Satisfactory" for the company[109]. Risk Management - The Company is subject to various risks, including credit losses, regulatory changes, and market volatility, which could impact financial performance[19]. - The allowance for credit losses is established through charges to earnings, reflecting management's estimate of probable credit losses in the portfolio[68]. - The company has identified nine portfolio segments of loans for estimating the allowance for credit losses, including Commercial Loans/Lines and Residential Real Estate Loans[69]. - The company faces risks related to interest rate fluctuations, which can impact net interest income, loan demand, and defaults[192]. - The Federal Reserve's monetary policies have led to increased interest rates, affecting the company's financial conditions and operations[193]. - The company’s risk management framework must effectively identify and mitigate risks to avoid unexpected losses[191]. Employee and Workplace Culture - The Company prioritizes talent attraction and retention by fostering an inclusive and healthy workplace[34]. - The company was certified by Great Place To Work® for the second time in 2024, indicating a strong employee satisfaction culture[42]. - As of December 31, 2024, the company had 598 employees, a decrease of 26 employees or 4% from the previous year, primarily due to the sale of its insurance subsidiary[35]. Strategic Initiatives - The Company plans to leverage digital channels to enhance customer engagement and expand its reach into new geographies[29]. - The company aims to expand its branch network and invest in digital banking, but failure to implement these growth strategies could negatively affect loan portfolio quality and profitability[183]. - The company plans to pursue a growth strategy by expanding its branch network and considering acquisitions of various financial services firms, although competition for suitable targets may increase costs and limit options[186]. - The company has implemented a program to provide financial products and services to legal cannabis-related businesses, although exposure is expected to be tempered by the exit from the BaaS line of business[115]. Cybersecurity and Technology - The company relies heavily on information technology and internet services to process a large volume of daily transactions, increasing vulnerability to cyber-attacks and system failures[205]. - The company may need to allocate significant additional resources to enhance systems and address vulnerabilities due to evolving cyber threats[206]. - Compliance with evolving cybersecurity regulations is critical, as failure to do so could result in regulatory sanctions and reputational damage[207]. - Emerging technologies, including AI and cloud computing, present both opportunities and risks for the company, particularly regarding data security and operational efficiency[201][202]. Legal and Compliance Issues - Legal and regulatory proceedings could result in substantial costs and adversely affect the bank's financial condition and operating results[158]. - Non-compliance with the USA PATRIOT Act and Bank Secrecy Act could lead to fines and sanctions, affecting business operations[165]. - The company has adopted policies to comply with the requirements of the AMLA and related regulations, ensuring effective risk assessment processes[120]. - Regulatory authorities have increased scrutiny of the Bank Secrecy Act (BSA) and anti-money laundering programs, with potential legal and reputational consequences for non-compliance[119]. Capital and Funding - The company completed a public offering of 4,600,000 shares of common stock at$ 25.00 per share, resulting in net proceeds of $108.6 million[77]. - The company may need to raise additional capital in the future, which could be challenging if market conditions are unfavorable[200]. - Future capital resources may be increased through debt or equity securities, which could dilute current shareholders and affect common stock value[209]. - Provisions in the company's certificate of incorporation and bylaws may create anti-takeover effects, making acquisitions more difficult[210].