• Financial Institutions, Inc. Announces Third Quarter 2024 Financial Results

    ソース: Nasdaq GlobeNewswire / 24 10 2024 16:05:01   America/New_York

    WARSAW, N.Y., Oct. 24, 2024 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (NASDAQ: FISI) (the "Company," "we" or "us"), parent company of Five Star Bank (the "Bank") and Courier Capital, LLC ("Courier Capital"), today reported financial and operational results for the third quarter ended September 30, 2024.

    Net income was $13.5 million in the third quarter of 2024, compared to $25.6 million in the second quarter of 2024 and $14.0 million in the third quarter of 2023. After preferred dividends, net income available to common shareholders was $13.1 million, or $0.84 per diluted share, in the third quarter of 2024, compared to $25.3 million, or $1.62 per diluted share, in the second quarter of 2024, and $13.7 million, or $0.88 per diluted share, in the third quarter of 2023. Third quarter 2024 results included $384 thousand of professional services expenses attributed to the deposit-related fraud event disclosed in March 2024 that occurred in the first quarter of 2024. The Company's second quarter 2024 financial results benefited from a $13.5 million pre-tax gain associated with its previously disclosed insurance subsidiary asset sale, and also included $371 thousand of professional services expenses related to the fraud event that were partially offset by a recovery of $143 thousand. The Company recorded a provision for credit losses of $3.1 million in the current quarter, compared to a provision of $2.0 million in the linked quarter and a provision of $1.0 million in the prior year quarter.

    Third Quarter 2024 Key Results:

    • Net interest margin was 2.89% for the third quarter of 2024, up two basis points compared to the second quarter of 2024, while net interest income of $40.7 million decreased by $512 thousand, or 1.2%, from the linked quarter.
    • Noninterest income was $9.4 million for the current quarter, compared to $24.0 million in the linked quarter, when results benefited from a $13.5 million pre-tax gain associated with the Company's insurance subsidiary asset sale.
    • Total deposits were $5.31 billion at September 30, 2024, up $173.3 million, or 3.4%, from June 30, 2024, driven by seasonality and new business in our public deposit portfolio and non-public deposit growth. Deposits were relatively flat with September 30, 2023, as a $313.3 million reduction in brokered deposits largely offset year-over-year growth in non-public and public deposits.
    • Total loans were $4.40 billion at September 30, 2024, reflecting a decrease of $58.5 million, or 1.3%, from June 30, 2024 and a decrease of $28.2 million, or 0.6%, from September 30, 2023.
    • Noninterest expense of $32.5 million for the current quarter was down $551 thousand, or 1.7%, from the second quarter of 2024 and down $2.3 million, or 6.5%, from the third quarter of 2023.
    • Regulatory and tangible capital ratios continued to expand on a linked quarter and year-over-year basis.
    • The Company maintained solid credit quality metrics, as measured by annualized net charge-offs to average loans of 0.15% for the current quarter, compared to 0.10% in the linked quarter and 0.14%, in the third quarter of 2023.

    "Our third quarter results were highlighted by strong deposit growth, incremental net interest margin expansion, solid expense management, and continued build in our regulatory and tangible capital ratios. We remain very focused on driving sustainable growth across each of our retail banking, commercial banking and wealth management business lines. Supporting that focus is our strategic decision to begin to wind-down our Banking-as-a-Service, or BaaS, offerings, announced in September," said President and Chief Executive Officer Martin K. Birmingham.

    "While total loans were down during the quarter, as growth in commercial mortgage and stability in residential loans and lines were offset by declines in commercial business and consumer indirect loans, we continue to see excellent opportunity in our geographic markets to drive credit-disciplined loan growth. Our regulatory and tangible capital positions further improved during the quarter, including a common equity tier 1 ratio of 10.28%, up 25 basis points from June 30, 2024 and up 102 basis points from September 30, 2023. Tangible common book value per share(1) grew by 8% and 32% from the end of the linked and year-ago quarters, respectively," Mr. Birmingham added.

    Chief Financial Officer and Treasurer W. Jack Plants II commented, "We saw further margin expansion on a linked quarter basis and our ability to drive solid deposit growth provided us with capacity to further reduce short-term borrowings during the quarter. From a credit perspective, we did move one commercial relationship to non-performing status during the third quarter, which drove the increase in non-performing assets as compared to June 30, 2024. We remain very confident in the overall health of our loan portfolio and we are comfortable with our reserve levels, as our allowance for credit losses on loans to total loans ratio expanded two basis points during the third quarter to 1.01%. As of September 30, 2024, we have approximately $1.4 billion in available liquidity and more than $1.1 billion in cash flow anticipated in the next 12 months."

    Orderly Wind Down of BaaS Offerings

    On September 16, 2024, the Company announced its intent to begin an orderly wind down of its BaaS offerings, following a careful review by the Company’s executive management and the Board of Directors undertaken in conjunction with its annual strategic planning process. As of September 30, 2024, deposits and loans related to the Bank's BaaS offerings totaled $103 million and $29 million, respectively. The Company continues to preliminarily target completion of the wind down sometime in 2025.

    Net Interest Income and Net Interest Margin

    Net interest income was $40.7 million for the third quarter of 2024, a decrease of $512 thousand from the second quarter of 2024, of which $439 thousand was attributable to the impact of the increase in non-performing loans, partially offset by lower funding costs as a result of the Company's reduction of short term borrowings and brokered deposits, and a decrease of $1.0 million from the third quarter of 2023 due primarily to higher funding costs on a year-over-year basis.

    Average interest-earning assets for the current quarter were $5.61 billion, a decrease of $154.2 million from the second quarter of 2024 due to an $84.6 million decrease in the average balance of Federal Reserve interest-earning cash, a $47.8 million decrease in the average balance of investment securities and a $21.8 million decrease in average loans. Average interest-earning assets for the current quarter were $92.4 million lower than the third quarter of 2023 due to an $83.5 million decrease in the average balance of investment securities and a $13.2 million decrease in the average balance of Federal Reserve interest-earning cash, partially offset by a $4.3 million increase in average loans.

    Average interest-bearing liabilities for the current quarter were $4.40 billion, a decrease of $148.3 million from the second quarter of 2024, primarily due to a $97.8 million decrease in average savings and money market deposits, a $49.6 million decrease in average interest-bearing demand deposits, and an $11.0 million decrease in average short-term borrowings, partially offset by a $10.1 million increase in average time deposits. Average interest-bearing liabilities for the third quarter of 2024 were $27.2 million lower than the year-ago quarter primarily due to a $93.4 million decrease in average short-term borrowings, a $75.2 million decrease in average interest-bearing demand deposits, and a $48.3 million decrease in average time deposits, partially offset by a $189.7 million increase in average savings and money market account deposits.

    Net interest margin was 2.89% in the current quarter, 2.87% in the second quarter of 2024, and 2.91% in the third quarter of 2023. The linked quarter expansion was due to an increase in the average yield on interest-earning assets, which was partially offset by an increase in the overall cost of funds. The year-over-year decline primarily was a result of higher funding costs amid the current high interest rate environment, partially offset by an increase in the average yield on interest-earning assets.

    Noninterest Income

    Noninterest income was $9.4 million for the third quarter of 2024, a decrease of $14.6 million from the second quarter of 2024 and a decrease of $1.0 million from the third quarter of 2023.

    • The Company's sale of the assets of its insurance subsidiary generated a net gain of $13.5 million in the second quarter of 2024 and an additional gain on sale adjustment of $138 thousand in the third quarter of 2024. Given the April 1, 2024 transaction close, insurance income in the third quarter of 2024 was $3 thousand, compared to $4 thousand and $1.7 million in the linked and year-ago periods, respectively.
    • Investment advisory income of $2.8 million was relatively flat with the second quarter of 2024 and up $253 thousand, or 9.9%, from the third quarter of 2023. The variance from the prior year period was largely due to a market-driven increase in assets under management in addition to business development.
    • Income from company owned life insurance of $1.4 million was $44 thousand higher than the second quarter of 2024 and $377 thousand higher than the third quarter of 2023. The year-over-year increase was due to a higher crediting rate on proceeds deployed during the previously disclosed surrender and redeploy strategy executed in the fourth quarter of 2023.
    • Income from investments in limited partnerships of $400 thousand was $403 thousand lower than the second quarter of 2024 and flat with the third quarter of 2023. The Company previously made several investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from these investments fluctuates based on the maturity and performance of the underlying investments.
    • Income from derivative instruments, net was $212 thousand in the current quarter, $377 thousand in the second quarter of 2024 and $219 thousand in the third quarter of 2023. Income from derivative instruments, net is based on the number and value of interest rate swap transactions executed during the quarter combined with the impact of changes in the fair value of borrower-facing trades.
    • A net loss on tax credit investments of $170 thousand was recognized in the current quarter related to tax credit investments placed in service in the current and prior quarters. This compares to a net gain of $406 thousand and a net loss of $333 thousand in the second quarter of 2024 and third quarter of 2023, respectively.

    Noninterest Expense

    Noninterest expense was $32.5 million in the third quarter of 2024 compared to $33.0 million in the second quarter of 2024 and $34.7 million in the third quarter of 2023.

    • Salaries and employee benefits expense of $15.9 million was $131 thousand higher than the second quarter of 2024 and $2.3 million lower than the third quarter of 2023. The decrease from the third quarter of 2023 was due to a combination of the previously mentioned insurance agency asset sale and the Company's previously disclosed fourth quarter 2023 leadership and organizational changes, which reduced salaries and wages between periods.
    • Occupancy and equipment expenses of $3.4 million were $78 thousand and $421 thousand lower than the linked and year-ago quarter, respectively. The year-over-year variance was due in part to the timing of equipment purchases.
    • Professional services expenses of $2.0 million were $171 thousand higher than the second quarter of 2024 and $889 thousand higher than the third quarter of 2023. Both the linked quarter and year-over-year variances were primarily attributable to legal expenses incurred in the second and third quarters of 2024 related to the Company's previously disclosed fraud event.
    • Computer and data processing expense of $5.4 million was relatively flat with the second quarter of 2024 and $246 thousand higher than the third quarter of 2023, with the year-over-year variance due in part to an increase in digital banking expenses attributable to increased usage along with the Company’s investments in data efficiency and marketing technology.

    Income Taxes

    Income tax expense was $1.1 million for the third quarter of 2024 compared to $4.5 million in the second quarter of 2024, and $2.4 million in the third quarter of 2023. The higher level of income tax expense incurred during the second quarter of 2024 was due to a higher level of pre-tax income, reflecting the previously mentioned gain related to our insurance subsidiary asset sale. The Company also recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized which resulted in income tax expense reductions of $1.3 million in both the third and second quarters of 2024, and $731 thousand in the third quarter of 2023.

    The effective tax rate was 7.4% for the third quarter of 2024, 15.0% for the second quarter of 2024, and 14.8% for the third quarter of 2023. The effective tax rate fluctuates on a quarterly basis primarily due to the level of pre-tax earnings and may differ from statutory rates because of interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments.

    Balance Sheet and Capital Management

    Total assets were $6.16 billion at September 30, 2024, up $24.5 million from June 30, 2024, and up $16.2 million from September 30, 2023.

    Investment securities were $1.01 billion at September 30, 2024, up $8.2 million from June 30, 2024, and down $324 thousand from September 30, 2023.

    Total loans were $4.40 billion at September 30, 2024, a decrease of $58.5 million, or 1.3%, from June 30, 2024, and a decrease of $28.2 million, or 0.6%, from September 30, 2023.

    • Commercial business loans totaled $654.5 million at September 30, 2024, down $59.4 million, or 8.3%, from June 30, 2024, and down $57.0 million, or 8.0%, from September 30, 2023.
    • Commercial mortgage loans totaled $2.11 billion at September 30, 2024, up $19.8 million, or 0.9%, from June 30, 2024, and up $120.4 million, or 6.1%, from September 30, 2023.
    • Residential real estate loans totaled $648.2 million at September 30, 2024, up $566 thousand, or 0.1%, from June 30, 2024, and up $13.0 million, or 2.1%, from September 30, 2023.
    • Consumer indirect loans totaled $874.7 million at September 30, 2024, down $19.9 million, or 2.2%, from June 30, 2024, and down $107.5 million, or 10.9%, from September 30, 2023.

    Total deposits were $5.31 billion at September 30, 2024, up $173.3 million, or 3.4%, from June 30, 2024, and down $9.4 million, or 0.2%, from September 30, 2023. The increase from June 30, 2024 was due to an increase in public deposits, which was partly driven by seasonality, as well as an increase in nonpublic deposits, partly offset by a decline in reciprocal deposits. Public deposit balances represented 22% of total deposits at September 30, 2024, 20% at June 30, 2024 and 20% at September 30, 2023.

    Short-term borrowings were $55.0 million at September 30, 2024, compared to $202.0 million at June 30, 2024 and $70.0 million at September 30, 2023, as linked quarter deposit growth enabled the Company to pay down short-term borrowings, which have historically been utilized along with brokered deposits to manage the seasonality of public deposits.

    Shareholders' equity was $500.3 million at September 30, 2024, compared to $467.7 million at June 30, 2024, and $408.7 million at September 30, 2023. The increase in shareholders' equity compared to the linked and year-ago period ends was primarily due to a reduction in accumulated other comprehensive loss, with net income through the first nine months of 2024 also contributing to the year-over-year increase. Shareholders' equity has been negatively impacted since 2022 by an increase in accumulated other comprehensive loss associated with unrealized losses in the available for sale securities portfolio. Management believes the unrealized losses are temporary in nature, as they are associated with the current high interest rate environment. The securities portfolio continues to generate cash flow and, given the high credit quality of the agency mortgage-backed securities portfolio, management expects the bonds to ultimately mature at a terminal value equivalent to par.

    Common book value per share was $31.22 at September 30, 2024, an increase of $2.11, or 7.2%, from $29.11 at June 30, 2024, and an increase of $5.81, or 22.9%, from $25.41 at September 30, 2023. Tangible common book value per share(1) was $27.28 at September 30, 2024, an increase of $2.11, or 8.4%, from $25.17 at June 30, 2024, and an increase of $6.59, or 31.9%, from $20.69 at September 30, 2023. The common equity to assets ratio was 7.85% at September 30, 2024, compared to 7.34% at June 30, 2024, and 6.37% at September 30, 2023. Tangible common equity to tangible assets(1), or the TCE ratio, was 6.93%, 6.41% and 5.25% at September 30, 2024, June 30, 2024, and September 30, 2023, respectively. The primary driver of variations in all four measures for the comparable linked and year-ago period ends was the previously described changes in accumulated other comprehensive loss.

    During the third quarter of 2024, the Company declared a common stock dividend of $0.30 per common share, consistent with the linked and year-ago quarters.

    The Company's regulatory capital ratios at September 30, 2024 continued to exceed all regulatory capital requirements to be considered well capitalized.

    • Leverage Ratio was 8.98% compared to 8.61% and 8.20% at June 30, 2024, and September 30, 2023, respectively.
    • Common Equity Tier 1 Capital Ratio was 10.28% compared to 10.03% and 9.26% at June 30, 2024, and September 30, 2023, respectively.
    • Tier 1 Capital Ratio was 10.62% compared to 10.36% and 9.58% at June 30, 2024, and September 30, 2023, respectively.
    • Total Risk-Based Capital Ratio was 12.95% compared to 12.65% and 11.91% at June 30, 2024, and September 30, 2023, respectively.

    Credit Quality

    Non-performing loans were $40.7 million, or 0.93% of total loans, at September 30, 2024, as compared to $25.2 million, or 0.57% of total loans, at June 30, 2024 and $9.5 million, or 0.21% of total loans, at September 30, 2023. Non-performing loans at September 30, 2024 largely related to two separate commercial loan relationships, one of which was placed on nonaccrual during the third quarter of 2024 and the other in the fourth quarter of 2023. Net charge-offs were $1.7 million, representing 0.15% of average loans on an annualized basis, for the current quarter, as compared to $1.1 million, or an annualized 0.10% of average loans, in the second quarter of 2024 and $1.6 million, or an annualized 0.14%, in the third quarter of 2023.

    At September 30, 2024, the allowance for credit losses on loans to total loans ratio was 1.01%, compared to 0.99% at June 30, 2024 and 1.12% at September 30, 2023.

    Provision for credit losses was $3.1 million in the current quarter, compared to $2.0 million in the linked quarter and $1.0 million in the prior year third quarter. Provision for credit losses on loans was $2.4 million in the current quarter, compared to $2.0 million in the second quarter of 2024 and $1.4 million in the third quarter of 2023. The allowance for unfunded commitments, also included in provision for credit losses as required by the current expected credit loss standard ("CECL"), totaled a provision of $713 thousand in the third quarter of 2024, $43 thousand in the second quarter of 2024, and $426 thousand in the third quarter of 2023. The provision for credit losses for the third quarter of 2024 was driven by a combination of factors, including a slight increase in the national unemployment forecast and higher qualitative factors overall, partially offset by lower loan balances.

    The Company has remained strategically focused on the importance of credit discipline, allocating resources to credit and risk management functions as the loan portfolio has grown. The ratio of allowance for credit losses on loans to non-performing loans was 110% at September 30, 2024, 174% at June 30, 2024, and 521% at September 30, 2023.

    Subsequent Events

    The Company is required, under U.S. generally accepted accounting principles ("GAAP"), to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended September 30, 2024, on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2024, and will adjust amounts preliminarily reported, if necessary.

    Conference Call

    The Company will host an earnings conference call and audio webcast on October 25, 2024 at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and W. Jack Plants II, Chief Financial Officer and Treasurer. The live webcast will be available in listen-only mode on the Company's website at www.FISI-Investors.com. Within the United States, listeners may also access the call by dialing 1-833-470-1428 and providing the access code 514361. The webcast replay will be available on the Company's website for at least 30 days.

    About Financial Institutions, Inc.

    Financial Institutions, Inc. (NASDAQ: FISI) is an innovative financial holding company with approximately $6.2 billion in assets offering banking and wealth management products and services. Its Five Star Bank subsidiary provides consumer and commercial banking and lending services to individuals, municipalities and businesses through banking locations spanning Western and Central New York and a commercial loan production office serving the Mid-Atlantic region. Courier Capital, LLC offers customized investment management, financial planning and consulting services to individuals and families, businesses, institutions, non-profits and retirement plans. Learn more at Five-StarBank.com and FISI-Investors.com.

    Non-GAAP Financial Information

    In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP measures is included in Appendix A to this document.

    The Company believes that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, performance trends and financial position. Our management uses these measures for internal planning and forecasting purposes and we believe that our presentation and discussion, together with the accompanying reconciliations, allows investors, security analysts and other interested parties to view our performance and the factors and trends affecting our business in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP measures, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure to evaluate the Company. Non-GAAP financial measures have inherent limitations, are not uniformly applied and are not audited. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

    Safe Harbor Statement

    This press release may contain forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "believe," "anticipate," "continue," "estimate," "expect," "focus," "forecast," "intend," "may," "plan," "preliminary," "should," "target" or "will." Statements herein are based on certain assumptions and analyses by the Company and factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: additional information regarding the deposit fraudulent activity; changes in interest rates; inflation; changes in deposit flows and the cost and availability of funds; the Company’s ability to implement its strategic plan, including by expanding its commercial lending footprint and integrating its acquisitions; whether the Company experiences greater credit losses than expected; whether the Company experiences breaches of its, or third party, information systems; the attitudes and preferences of the Company's customers; legal and regulatory proceedings and related matters, including any action described in our reports filed with the SEC, could adversely affect us and the banking industry in general; the competitive environment; fluctuations in the fair value of securities in its investment portfolio; changes in the regulatory environment and the Company's compliance with regulatory requirements; and general economic and credit market conditions nationally and regionally; and the macroeconomic volatility related to the impact of a pandemic or global political unrest. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language and risk factors included in the Company's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

    (1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.

    For additional information contact:
    Kate Croft
    Director of Investor and External Relations
    (716) 817-5159
    klcroft@five-starbank.com


    FINANCIAL INSTITUTIONS, INC.
    Selected Financial Information (Unaudited)
    (Amounts in thousands, except per share amounts)

     2024  2023 
    SELECTED BALANCE SHEET DATA:September 30,  June 30,  March 31,  December 31,  September 30, 
    Cash and cash equivalents$249,569  $146,347  $237,038  $124,442  $192,111 
    Investment securities:              
    Available for sale 886,816   871,635   923,761   887,730   854,215 
    Held-to-maturity, net 121,279   128,271   143,714   148,156   154,204 
    Total investment securities 1,008,095   999,906   1,067,475   1,035,886   1,008,419 
    Loans held for sale 2,495   2,099   504   1,370   1,873 
    Loans:              
    Commercial business 654,519   713,947   707,564   735,700   711,538 
    Commercial mortgage 2,105,641   2,085,870   2,045,056   2,005,319   1,985,279 
    Residential real estate loans 648,241   647,675   648,160   649,822   635,209 
    Residential real estate lines 76,203   75,510   75,668   77,367   76,722 
    Consumer indirect 874,651   894,596   920,428   948,831   982,137 
    Other consumer 43,734   43,870   45,170   45,100   40,281 
    Total loans 4,402,989   4,461,468   4,442,046   4,462,139   4,431,166 
    Allowance for credit losses – loans 44,678   43,952   43,075   51,082   49,630 
    Total loans, net 4,358,311   4,417,516   4,398,971   4,411,057   4,381,536 
    Total interest-earning assets 5,666,972   5,709,148   5,857,616   5,702,904   5,747,191 
    Goodwill and other intangible assets, net 60,867   60,979   72,287   72,504   72,725 
    Total assets 6,156,317   6,131,772   6,298,598   6,160,881   6,140,149 
    Deposits:              
    Noninterest-bearing demand 978,660   939,346   972,801   1,010,614   1,035,350 
    Interest-bearing demand 793,996   711,580   798,831   713,158   827,842 
    Savings and money market 2,027,181   2,007,256   2,064,539   2,084,444   1,943,794 
    Time deposits 1,506,764   1,475,139   1,560,586   1,404,696   1,508,987 
    Total deposits 5,306,601   5,133,321   5,396,757   5,212,912   5,315,973 
    Short-term borrowings 55,000   202,000   133,000   185,000   70,000 
    Long-term borrowings, net 124,765   124,687   124,610   124,532   124,454 
    Total interest-bearing liabilities 4,507,706   4,520,662   4,681,566   4,511,830   4,475,077 
    Shareholders’ equity 500,342   467,667   445,734   454,796   408,716 
    Common shareholders’ equity 483,050   450,375   428,442   437,504   391,424 
    Tangible common equity(1) 422,183   389,396   356,155   365,000   318,699 
    Accumulated other comprehensive loss$(102,029) $(125,774) $(126,264) $(119,941) $(161,389)
                   
    Common shares outstanding 15,474   15,472   15,447   15,407   15,402 
    Treasury shares 625   627   653   692   698 
    CAPITAL RATIOS AND PER SHARE DATA:              
    Leverage ratio 8.98%  8.61%  8.03%  8.18%  8.20%
    Common equity Tier 1 capital ratio 10.28%  10.03%  9.43%  9.43%  9.26%
    Tier 1 capital ratio 10.62%  10.36%  9.76%  9.76%  9.58%
    Total risk-based capital ratio 12.95%  12.65%  12.04%  12.13%  11.91%
    Common equity to assets 7.85%  7.34%  6.80%  7.10%  6.37%
    Tangible common equity to tangible assets(1) 6.93%  6.41%  5.72%  6.00%  5.25%
                   
    Common book value per share$31.22  $29.11  $27.74  $28.40  $25.41 
    Tangible common book value per share(1)$27.28  $25.17  $23.06  $23.69  $20.69 

    (1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.



    FINANCIAL INSTITUTIONS, INC.
    Selected Financial Information (Unaudited)
    (Amounts in thousands, except per share amounts)

     Nine Months Ended  2024  2023 
     September 30,  Third  Second  First  Fourth  Third 
    SELECTED INCOME STATEMENT DATA:2024  2023  Quarter  Quarter  Quarter  Quarter  Quarter 
    Interest income$235,112  $209,586  $77,911  $78,788  $78,413  $76,547  $74,700 
    Interest expense 113,156   83,757   37,230   37,595   38,331   36,661   33,023 
    Net interest income 121,956   125,829   40,681   41,193   40,082   39,886   41,677 
    (Benefit) provision for credit losses (311)  8,410   3,104   2,041   (5,456)  5,271   966 
    Net interest income after (benefit) provision for credit losses 122,267   117,419   37,577   39,152   45,538   34,615   40,711 
    Noninterest income:                    
    Service charges on deposits 3,159   3,457   1,103   979   1,077   1,168   1,207 
    Insurance income 2,141   5,093   3   4   2,134   1,615   1,678 
    Card interchange income 5,810   6,140   1,900   2,008   1,902   2,080   2,094 
    Investment advisory 8,158   8,286   2,797   2,779   2,582   2,669   2,544 
    Company owned life insurance 4,062   2,974   1,404   1,360   1,298   9,132   1,027 
    Investments in limited partnerships 1,545   1,111   400   803   342   672   391 
    Loan servicing 421   395   88   158   175   84   135 
    Income (loss) from derivative instruments, net 763   1,418   212   377   174   (68)  219 
    Net gain on sale of loans held for sale 432   349   220   124   88   217   115 
    Net loss on investment securities -   -   -   -   -   (3,576)  - 
    Net gain (loss) on other assets 13,633   31   138   13,508   (13)  (37)  (1)
    Net (loss) gain on tax credit investments (139)  (45)  (170)  406   (375)  (207)  (333)
    Other 4,370   3,667   1,345   1,508   1,517   1,619   1,410 
    Total noninterest income 44,355   32,876   9,440   24,014   10,901   15,368   10,486 
    Noninterest expense:                    
    Salaries and employee benefits 48,967   54,047   15,879   15,748   17,340   17,842   18,160 
    Occupancy and equipment 10,570   11,059   3,370   3,448   3,752   3,739   3,791 
    Professional services 6,131   3,844   1,965   1,794   2,372   1,415   1,076 
    Computer and data processing 16,081   14,548   5,353   5,342   5,386   5,562   5,107 
    Supplies and postage 1,431   1,418   519   437   475   455   455 
    FDIC assessments 3,733   3,586   1,092   1,346   1,295   1,316   1,232 
    Advertising and promotions 1,108   1,556   371   440   297   370   744 
    Amortization of intangibles 443   689   112   114   217   221   225 
    Restructuring (recoveries) charges -   (74)  -   -   -   188   (55)
    Deposit-related charged-off items 19,987   978   410   398   19,179   223   188 
    Other 11,051   10,527   3,398   3,953   3,700   3,716   3,812 
    Total noninterest expense 119,502   102,178   32,469   33,020   54,013   35,047   34,735 
    Income before income taxes 47,120   48,117   14,548   30,146   2,426   14,936   16,462 
    Income tax expense 5,955   7,633   1,082   4,517   356   5,156   2,440 
    Net income 41,165   40,484   13,466   25,629   2,070   9,780   14,022 
    Preferred stock dividends 1,094   1,094   365   364   365   365   365 
    Net income available to common shareholders$40,071  $39,390  $13,101  $25,265  $1,705  $9,415  $13,657 
    FINANCIAL RATIOS:                    
    Earnings per share – basic$2.60  $2.56  $0.85  $1.64  $0.11  $0.61  $0.89 
    Earnings per share – diluted$2.57  $2.55  $0.84  $1.62  $0.11  $0.61  $0.88 
    Cash dividends declared on common stock$0.90  $0.90  $0.30  $0.30  $0.30  $0.30  $0.30 
    Common dividend payout ratio 34.62%  35.16%  35.29%  18.29%  272.73%  49.18%  33.71%
    Dividend yield (annualized) 4.72%  7.15%  4.69%  6.25%  6.41%  5.59%  7.07%
    Return on average assets (annualized) 0.90%  0.90%  0.89%  1.68%  0.13%  0.63%  0.92%
    Return on average equity (annualized) 11.88%  12.72%  11.08%  22.93%  1.83%  9.28%  12.96%
    Return on average common equity (annualized) 12.02%  12.90%  11.18%  23.51%  1.57%  9.31%  13.15%
    Return on average tangible common equity (annualized)(1) 14.09%  15.72%  12.87%  27.51%  1.88%  11.37%  15.98%
    Efficiency ratio(2) 71.75%  64.25%  64.70%  50.58%  105.77%  59.48%  66.47%
    Effective tax rate 12.6%  15.9%  7.4%  15.0%  14.7%  34.5%  14.8%

    (1) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.
    (2) The efficiency ratio is calculated by dividing noninterest expense by net revenue, i.e., the sum of net interest income (fully taxable equivalent) and noninterest income before net gains on investment securities. This is a banking industry measure not required by GAAP.



    FINANCIAL INSTITUTIONS, INC.
    Selected Financial Information (Unaudited)
    (Amounts in thousands)

     Nine Months Ended  2024  2023 
     September 30,  Third  Second  First  Fourth  Third 
    SELECTED AVERAGE BALANCES:2024  2023  Quarter  Quarter  Quarter  Quarter  Quarter 
    Federal funds sold and interest-earning deposits$113,656  $72,977  $49,476  $134,123  $158,075  $102,487  $62,673 
    Investment securities(1) 1,174,850   1,266,832   1,147,052   1,194,808   1,182,993   1,199,766   1,230,590 
    Loans:                    
    Commercial business 700,178   697,728   673,830   704,272   722,720   702,222   712,224 
    Commercial mortgage 2,060,827   1,879,077   2,092,905   2,059,382   2,029,841   1,995,233   1,977,978 
    Residential real estate loans 648,286   603,268   647,844   648,099   648,921   640,955   621,074 
    Residential real estate lines 75,880   76,219   75,671   75,575   76,396   76,741   75,847 
    Consumer indirect 906,762   1,008,311   881,133   905,056   934,380   965,571   989,614 
    Other consumer 46,615   23,712   43,789   44,552   51,535   43,664   34,086 
    Total loans 4,438,548   4,288,315   4,415,172   4,436,936   4,463,793   4,424,386   4,410,823 
    Total interest-earning assets 5,727,054   5,628,124   5,611,700   5,765,867   5,804,861   5,726,639   5,704,086 
    Goodwill and other intangible assets, net 65,397   73,079   60,936   62,893   72,409   72,628   72,851 
    Total assets 6,132,110   5,991,075   6,018,390   6,153,429   6,225,760   6,127,171   6,073,653 
    Interest-bearing liabilities:                    
    Interest-bearing demand 727,179   831,345   691,412   741,006   749,512   780,546   766,636 
    Savings and money market 2,018,881   1,691,783   1,938,935   2,036,772   2,081,815   2,048,822   1,749,202 
    Time deposits 1,500,238   1,484,919   1,515,745   1,505,665   1,479,133   1,455,867   1,564,035 
    Short-term borrowings 149,588   221,392   129,130   140,110   179,747   84,587   222,871 
    Long-term borrowings, net 124,640   121,033   124,717   124,640   124,562   124,484   124,407 
    Total interest-bearing liabilities 4,520,526   4,350,472   4,399,939   4,548,193   4,614,769   4,494,306   4,427,151 
    Noninterest-bearing demand deposits 955,428   1,038,798   952,970   950,819   962,522   1,006,465   1,022,423 
    Total deposits 5,201,726   5,046,845   5,099,062   5,234,262   5,272,982   5,291,700   5,102,296 
    Total liabilities 5,669,430   5,565,583   5,535,112   5,703,929   5,770,725   5,708,842   5,644,488 
    Shareholders’ equity 462,680   425,492   483,278   449,500   455,035   418,329   429,165 
    Common equity 445,388   408,200   465,986   432,208   437,743   401,037   411,873 
    Tangible common equity(2) 379,991   335,121   405,050   369,315   365,334   328,409   339,022 
    Common shares outstanding:                    
    Basic 15,437   15,371   15,464   15,444   15,403   15,393   15,391 
    Diluted 15,582   15,443   15,636   15,556   15,543   15,511   15,462 
    SELECTED AVERAGE YIELDS:
    (Tax equivalent basis)    		                    
    Investment securities 2.14%  1.89%  2.14%  2.17%  2.09%  2.03%  1.88%
    Loans 6.39%  5.90%  6.42%  6.40%  6.33%  6.21%  6.15%
    Total interest-earning assets 5.49%  4.98%  5.53%  5.50%  5.43%  5.32%  5.21%
    Interest-bearing demand 1.12%  0.75%  1.05%  1.18%  1.11%  1.26%  0.83%
    Savings and money market 3.05%  2.05%  3.07%  3.01%  3.08%  3.01%  2.51%
    Time deposits 4.71%  3.78%  4.72%  4.72%  4.68%  4.57%  4.20%
    Short-term borrowings 2.99%  3.98%  2.64%  2.75%  3.42%  1.38%  3.98%
    Long-term borrowings, net 5.02%  5.06%  5.03%  5.02%  5.02%  5.05%  5.05%
    Total interest-bearing liabilities 3.34%  2.57%  3.37%  3.32%  3.34%  3.24%  2.96%
    Net interest rate spread 2.15%  2.41%  2.16%  2.18%  2.09%  2.08%  2.25%
    Net interest margin 2.85%  2.99%  2.89%  2.87%  2.78%  2.78%  2.91%

    (1) Includes investment securities at adjusted amortized cost.
    (2) See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.



    FINANCIAL INSTITUTIONS, INC.
    Selected Financial Information (Unaudited)
    (Amounts in thousands)

     Nine Months Ended  2024  2023 
     September 30,  Third  Second  First  Fourth  Third 
    ASSET QUALITY DATA:2024  2023  Quarter  Quarter  Quarter  Quarter  Quarter 
    Allowance for Credit Losses – Loans                    
    Beginning balance$51,082  $45,413  $43,952  $43,075  $51,082  $49,630  $49,836 
    Net loan charge-offs (recoveries):                    
    Commercial business (33)  (59)  (3)  7   (37)  (50)  32 
    Commercial mortgage 6   (958)  10   (3)  (1)  993   (972)
    Residential real estate loans 99   67   (1)  96   4   22   (4)
    Residential real estate lines -   41   -   -   -   -   - 
    Consumer indirect 5,370   4,421   1,553   844   2,973   3,174   2,283 
    Other consumer 466   811   106   178   182   82   259 
    Total net charge-offs (recoveries) 5,908   4,323   1,665   1,122   3,121   4,221   1,598 
    (Benefit) provision for credit losses – loans (496)  8,540   2,391   1,999   (4,886)  5,673   1,392 
    Ending balance$44,678  $49,630  $44,678  $43,952  $43,075  $51,082  $49,630 
                         
    Net charge-offs (recoveries) to average loans (annualized):                    
    Commercial business -0.01%  -0.01%  0.00%  0.00%  -0.02%  -0.03%  0.02%
    Commercial mortgage 0.00%  -0.07%  0.00%  0.00%  0.00%  0.20%  -0.19%
    Residential real estate loans 0.02%  0.01%  0.00%  0.06%  0.00%  0.01%  0.00%
    Residential real estate lines 0.00%  0.07%  0.00%  0.00%  0.00%  0.00%  0.00%
    Consumer indirect 0.79%  0.59%  0.70%  0.38%  1.28%  1.30%  0.92%
    Other consumer 1.33%  4.57%  0.95%  1.62%  1.41%  0.75%  3.00%
    Total loans 0.18%  0.13%  0.15%  0.10%  0.28%  0.38%  0.14%
                         
    Supplemental information(1)                    
    Non-performing loans:                    
    Commercial business$5,752  $254  $5,752  $5,680  $5,956  $5,664  $254 
    Commercial mortgage 25,620   686   25,620   10,452   10,826   10,563   686 
    Residential real estate loans 5,790   4,992   5,790   5,961   6,797   6,364   4,992 
    Residential real estate lines 232   201   232   183   235   221   201 
    Consumer indirect 3,291   3,382   3,291   2,897   2,880   3,814   3,382 
    Other consumer 57   6   57   36   36   34   6 
    Total non-performing loans 40,742   9,521   40,742   25,209   26,730   26,660   9,521 
    Foreclosed assets 109   162   109   63   140   142   162 
    Total non-performing assets$40,851  $9,683  $40,851  $25,272  $26,870  $26,802  $9,683 
                         
    Total non-performing loans to total loans 0.93%  0.21%  0.93%  0.57%  0.60%  0.60%  0.21%
    Total non-performing assets to total assets 0.66%  0.16%  0.66%  0.41%  0.43%  0.44%  0.16%
    Allowance for credit losses – loans to total loans 1.01%  1.12%  1.01%  0.99%  0.97%  1.14%  1.12%
    Allowance for credit losses – loans to non-performing loans 110%  521%  110%  174%  161%  192%  521%

    (1) At period end.



    FINANCIAL INSTITUTIONS, INC.
    Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited)
    (In thousands, except per share amounts)

     Nine Months Ended  2024  2023 
     September 30,  Third  Second  First  Fourth  Third 
     2024  2023  Quarter  Quarter  Quarter  Quarter  Quarter 
    Ending tangible assets:                    
    Total assets      $6,156,317  $6,131,772  $6,298,598  $6,160,881  $6,140,149 
    Less: Goodwill and other intangible assets, net       60,867   60,979   72,287   72,504   72,725 
    Tangible assets      $6,095,450  $6,070,793  $6,226,311  $6,088,377  $6,067,424 
                         
    Ending tangible common equity:                    
    Common shareholders’ equity      $483,050  $450,375  $428,442  $437,504  $391,424 
    Less: Goodwill and other intangible assets, net       60,867   60,979   72,287   72,504   72,725 
    Tangible common equity      $422,183  $389,396  $356,155  $365,000  $318,699 
                         
    Tangible common equity to tangible assets(1)       6.93%  6.41%  5.72%  6.00%  5.25%
                         
    Common shares outstanding       15,474   15,472   15,447   15,407   15,402 
    Tangible common book value per share(2)      $27.28  $25.17  $23.06  $23.69  $20.69 
                         
    Average tangible assets:                    
    Average assets$6,132,110  $5,991,075  $6,018,390  $6,153,429  $6,225,760  $6,127,171  $6,073,653 
    Less: Average goodwill and other intangible assets, net 65,397   73,079   60,936   62,893   72,409   72,628   72,851 
    Average tangible assets$6,066,713  $5,917,996  $5,957,454  $6,090,536  $6,153,351  $6,054,543  $6,000,802 
                         
    Average tangible common equity:                    
    Average common equity$445,388  $408,200  $465,986  $432,208  $437,743  $401,037  $411,873 
    Less: Average goodwill and other intangible assets, net 65,397   73,079   60,936   62,893   72,409   72,628   72,851 
    Average tangible common equity$379,991  $335,121  $405,050  $369,315  $365,334  $328,409  $339,022 
                         
    Net income available to common shareholders$40,071  $39,390  $13,101  $25,265  $1,705  $9,415  $13,657 
    Return on average tangible common equity(3) 14.09%  15.72%  12.87%  27.51%  1.88%  11.37%  15.98%
                         
    Pre-tax pre-provision income:                    
    Net income$41,165  $40,484  $13,466  $25,629  $2,070  $9,780  $14,022 
    Add: Income tax expense 5,955   7,633   1,082   4,517   356   5,156   2,440 
    Add: (Benefit) provision for credit losses (311)  8,410   3,104   2,041   (5,456)  5,271   966 
    Pre-tax pre-provision (loss) income$46,809  $56,527  $17,652  $32,187  $(3,030) $20,207  $17,428 

    (1) Tangible common equity divided by tangible assets.
    (2) Tangible common equity divided by common shares outstanding.
    (3) Net income available to common shareholders (annualized) divided by average tangible common equity.


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