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Five Star parent's profits up 6%

The parent of Five Star Bank said Wednesday that profits for the first quarter rose 6 percent, as both loans and lending income increased.

Warsaw-based Financial Institutions reported net income of $6.2 million, or 42 cents per common share, up from $5.8 million, or 33 cents per share, a year ago.

Shares rose 35 cents Wednesday, closing at $16.92. The stock, which has fluctuated wildly between $14 and $18 per share in the past 12 months, is up 3.6 percent over that period. The bank released earnings after the market closed.

"While many expect 2012 to remain a challenging year for most businesses, we followed up a great close to 2011 with an even better start to 2012," said Peter G. Humphrey, the bank's president and CEO.

With $2.4 billion in assets, the company has 50 branches in 14 counties and is buying eight branches from First Niagara Financial Group, with $376 million in deposits and $94 million in loans. That includes four from First Niagara and four from HSBC Bank USA, as part of First Niagara's larger purchase of 195 HSBC branches statewide.

Net interest income from taking deposits and making loans rose 6 percent from a year ago to $20.9 million, driven by lower funding costs. Average earning assets rose 5 percent, as average total loans rose $150.8 million, or 11 percent, led by an 18 percent gain in the consumer indirect portfolio. Total loans at the end of the quarter rose 2 percent to $1.52 billion, while deposits were up 7 percent to $2.07 billion.

The profit margin on lending was flat, as the yield on assets fell by less than the cost of deposits and borrowings.

The bank set aside $1.4 million for loan losses, up from $810,000 a year ago, while it wrote off $882,000 as uncollectible, down from $1.2 million a year ago. Total bad debts on its books were $8.2 million, up from $7.3 million a year ago.

Fee and other income rose 6 percent to $5.5 million, including a 52 percent rise in brokerage fees and commissions because of higher volume, higher company owned life insurance revenues, gains on loan sales because of increased originations, and a $331,000 pretax gain from selling a bad investment. That was partially offset by drops in deposit service charges, particularly overdraft fees, and lower loan servicing fees because of payoffs.

Operating expenses rose 2 percent to $15.7 million.