FISI Financial Institutions Inc

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 fourth quarter and year ended December 31, 2024.

These results reflect the Company's previously disclosed balance sheet restructuring plan, which was executed in December following its successful and oversubscribed underwritten public common stock offering. As part of the restructuring, the Bank sold $653.5 million of available-for-sale ("AFS") investment securities, which resulted in a pre-tax loss on the sale of securities of $100.2 million in the fourth quarter. The after-tax impact of the loss of approximately $75 million was entirely funded by a portion of the capital raised through the Company's equity offering that was downstreamed to the Bank. The net proceeds from the pre-tax sale of the securities were reinvested into higher yielding, agency wrapped investment securities.

The Company reported a net loss of $65.7 million in the fourth quarter of 2024, compared to net income of $13.5 million in the third quarter of 2024 and net income of $9.8 million in the fourth quarter of 2023. After preferred dividends, net loss available to common shareholders was $66.1 million, or ($4.02) per diluted share, in the fourth quarter of 2024, compared to net income of $13.1 million, or $0.84 per diluted share, in the third quarter of 2024, and net income of $9.4 million, or $0.61 per diluted share, in the fourth quarter of 2023. The Company recorded a provision for credit losses of $6.5 million in the current quarter, compared to $3.1 million in the linked quarter and $5.3 million in the prior year quarter.

The Company reported a full year 2024 net loss of $24.5 million, compared to net income of $50.3 million in 2023. After preferred dividends, net loss available to common shareholders was $26.0 million, or ($1.66) per diluted share, for 2024 compared to net income available to common shareholders of $48.8 million, or $3.15 per diluted share, in 2023. Provision for credit losses was $6.2 million in 2024 and $13.7 million in 2023.

Fourth Quarter and Full Year 2024 Key Results:

• Net interest margin was up to 2.91% for the fourth quarter, up two basis points from the linked quarter and up 13 basis points from the year-ago quarter. Full year net interest margin of 2.86% compares to 2.94% in 2023.
• Net interest income of $41.6 million in the fourth quarter of 2024 increased $952 thousand, or 2.3%, and $1.7 million, or 4.4%, from the linked and year-ago quarters, respectively. Full year net interest income of $163.6 million was down $2.1 million, or 1.3%, from 2023.
• Total loans were $4.48 billion at December 31, 2024, reflecting an increase of $76.2 million, or 1.7%, during the quarter and an increase of $17.1 million, or 0.4%, during the year. Commercial loans totaled $2.86 billion at December 31, 2024, reflecting an increase of $104.8 million, or 3.8%, during the quarter and an increase of $123.9 million, or 4.5%, during the year.
• Total deposits were $5.10 billion at December 31, 2024, down $201.9 million, or 3.8%, from September 30, 2024, primarily due to seasonal public deposit outflows, and down $108.2 million, or 2.1%, from the prior year end, driven by a reduction in brokered deposits.
• Provision for credit losses of $6.5 million in the current quarter was driven by a combination of factors, including the impact of loan growth during the period, an increase in net charge-offs relative to the linked quarter, and higher qualitative factors overall.
• Allowance for credit losses on loans to total loans was 1.07% at year-end 2024, compared to 1.01% at September 30, 2024 and 1.14% one year prior.
• The Company reported stable credit quality metrics, as measured by annual net charge-offs to average loans of 0.20% for both 2024 and 2023.

"Our Company navigated an incredibly dynamic 2024, rising above challenges to execute strategic initiatives that position us well not only heading into 2025, but for years to come. Our successful equity offering in the fourth quarter enabled us to undertake a balance sheet restructuring that is expected to contribute meaningfully to earnings, net interest margin, efficiency ratio, return on average assets and the quality of capital moving forward,” said President and Chief Executive Officer Martin K. Birmingham. “We believe these measures will allow us to accelerate operating performance with minimal downside risk, supporting our plans for continued organic growth.”

"While loan growth was modest in 2024, in part reflecting the intentional reduction of our consumer indirect balances that partially offset commercial growth of 4.5% during the year, we remain enthused about organic growth opportunities in our core markets, as we finished 2024 with a strong fourth quarter from a commercial loan production standpoint, and we remain keenly focused on driving credit-disciplined loan growth to ensure the continued strength and stability of our asset quality metrics."

Chief Financial Officer and Treasurer W. Jack Plants II added, "As a result of our strategic actions through the course of the year, from the sale of our insurance subsidiary in April, to our successful and oversubscribed equity offering in December, our regulatory and tangible capital positions improved meaningfully and core operations have strong momentum to start 2025. We reported a common equity tier 1 ratio of 10.88%, up 145 basis points, and a tangible common equity ratio of 8.40%, up 240 basis points, both from year-end 2023. The upsizing of our equity offering provides us ample dry powder that we are committed to deploying thoughtfully, in a way that supports our long-term value creation objectives."

Capital Raise and Subsequent Balance Sheet Restructuring

As previously disclosed, the Company completed an underwritten common stock offering on December 13, 2024. Through the public offering, the Company sold 4,600,000 shares of common stock, 600,000 shares of which were sold pursuant to the exercise of the underwriters' overallotment option. Net proceeds from the capital raise were approximately $108.5 million.

As expected, a portion of the proceeds was used to fund losses associated with a strategic investment securities restructuring. In late December, the Company completed its previously disclosed balance sheet restructuring plan, through which the Bank sold $653.5 million of AFS securities with a weighted average book yield of 1.74% for a pre-tax loss of $100.2 million. The after-tax impact of the loss was approximately $75 million. The Bank utilized net proceeds from the sale of securities to purchase higher-yielding agency wrapped investment securities with a face value of $566.2 million and a weighted average book yield of 5.16%, coupled with an additional $76.4 million of agency wrapped securities with a weighted average yield of 5.45%. Following the transactions, the AFS portfolio has an average duration of approximately 6.2 years and a tax equivalent yield of 4.25%. The cumulative tangible book value earnback from the restructuring is expected to be approximately 3.75 years.

Net Interest Income and Net Interest Margin

Net interest income was $41.6 million for the fourth quarter of 2024, an increase of $1.0 million from the third quarter of 2024 and an increase of $1.7 million from the fourth quarter of 2023.

Average interest-earning assets for the current quarter were $5.72 billion, an increase of $104.1 million from the third quarter of 2024 due to a $72.1 million increase in the average balance of Federal Reserve interest-earning cash, a $19.2 million increase in average loans and a $12.8 million increase in the average balance of investment securities. Average interest-earning assets for the current quarter were $10.9 million lower than the fourth quarter of 2023 due to a $39.9 million decrease in the average balance of investment securities, partially offset by a $19.0 million increase in the average balance of Federal Reserve interest-earning cash and a $10.0 million increase in average loans.

Average interest-bearing liabilities for the current quarter were $4.48 billion, an increase of $76.0 million from the third quarter of 2024, primarily due to a $65.8 million increase in average interest-bearing demand deposits, a $53.4 million increase in average savings and money market deposits, and a $29.3 million increase in average time deposits, partially offset by a $72.6 million decrease in average short-term borrowings. Average interest-bearing liabilities for the fourth quarter of 2024 were $18.3 million lower than the year-ago quarter, due to a $56.5 million decrease in average savings and money market deposits, a $27.8 million decrease in average borrowings, and a $23.3 million decrease in average interest-bearing demand deposits, partially offset by a $89.2 million increase in average time deposits.

Net interest margin was 2.91% in the current quarter as compared to 2.89% in the third quarter of 2024 and 2.78% in the fourth quarter of 2023. The linked quarter expansion was primarily due to a reduction in funding costs that outpaced a reduction in the average yield on interest-earning assets, reflecting the Federal Reserve interest rate cuts in the latter part of 2024 and the repricing of both loans and deposits, along with a reduction in both the average balance and average rate on short-term borrowings. Expansion from the prior year quarter was due to an increase in the average yield on interest-earning assets, as the overall cost of funds remained flat.

Net interest income was $163.6 million for the full year 2024, down $2.1 million from 2023. Net interest margin was 2.86% for the full year 2024, compared to 2.94% for 2023.

Noninterest (Loss) Income

The Company reported a loss for noninterest income of $91.0 million for the fourth quarter of 2024, compared to noninterest income of $9.4 million in the third quarter of 2024 and $15.4 million in the fourth quarter of 2023.

• A net loss on investment securities of $100.1 million was recognized in the fourth quarter of 2024 compared to a net loss of $3.6 million in the fourth quarter of 2023, due to previously disclosed securities portfolio restructurings in both periods. 
• Investment advisory income of $2.6 million was $242 thousand lower than the third quarter of 2024 and $114 thousand lower than the fourth quarter of 2023.
• Given the previously disclosed insurance subsidiary asset sale on April 1, 2024, the Company recorded insurance income of $3 thousand in both the current and linked quarters, and $1.6 million in the year-ago quarter.
• Income from company owned life insurance of $1.4 million was flat with the third quarter of 2024 and $7.7 million lower than the fourth quarter of 2023, due to a normalized crediting rate associated with the separate account policies purchased in the fourth quarter of 2023.
• Income from investments in limited partnerships of $837 thousand was $437 thousand higher than the third quarter of 2024 and $165 thousand higher than the fourth quarter of 2023. The Company has 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.

The Company recorded a loss for noninterest income of $46.7 million for the full year 2024, compared to income of $48.2 million in 2023.

• A net loss on investment securities of $100.1 million was recognized in 2024, compared to a net loss of $3.6 million in 2023, due to the previously disclosed securities portfolio restructurings in both years.
• The Company's sale of the assets of its insurance subsidiary generated a $13.7 million gain in 2024. The $4.6 million decline in insurance income year-over-year was also attributable to the transaction.
• Income from company owned life insurance of $5.5 million was $6.6 million lower than in 2023 due to a normalized crediting rate associated with the separate account policies purchased in the fourth quarter of 2023.

Noninterest Expense

Noninterest expense was $36.4 million in the fourth quarter of 2024, compared to $32.5 million in the third quarter of 2024 and $35.0 million in the fourth quarter of 2023, with the increases over both the linked and prior year periods primarily driven by nonrecurring expenses.

• Salaries and employee benefits expense of $17.2 million was $1.3 million higher than the third quarter of 2024 and $683 thousand lower than the fourth quarter of 2023. The increase from the linked quarter was primarily due to a $1.3 million nonrecurring settlement accounting adjustment in the Company's pension plan. The year-over-year decrease was primarily due to the timing of the insurance subsidiary asset sale and the Company's previously disclosed fourth quarter 2023 organizational changes.
• Computer and data processing expense of $6.6 million was $1.3 million higher than the third quarter of 2024 and $1.0 million higher than the fourth quarter of 2023, due to nonrecurring project related expenses.
• FDIC assessments expense of $1.6 million was $459 thousand higher than the linked quarter and $235 thousand higher than the year-ago quarter, primarily due to an increase in the FDIC assessment rate due to the securities loss recognized in the fourth quarter of 2024.
• Other expense of $4.2 million was up $837 thousand and $519 thousand from the linked and year-ago quarters, respectively. The increases from both the linked and year-ago periods were due in part to New York State capital base tax, while the timing of charitable contributions also contributed to the linked quarter variance.

Noninterest expense was $155.9 million for the full year 2024, $18.7 million higher than 2023, driven by the Company's previously disclosed deposit-related fraud event.

• Salaries and employee benefits expense of $66.1 million decreased $5.8 million from the prior year, reflective of both the timing of the insurance subsidiary asset sale and previously disclosed fourth quarter 2023 organizational changes.
• Computer and data processing expense of $22.7 million was $2.6 million higher than 2023, primarily due to the Company’s investments in data efficiency and marketing technology.
• Professional services expense of $7.7 million was $2.4 million higher than 2023, primarily attributable to legal expenses associated with the Company's previously disclosed fraud event.
• Deposit-related charged off items totaled $20.3 million in 2024, up $19.1 million from the prior year, as a result of the previously disclosed fraud matter.
• Other expense of $15.3 million was up $1.0 million from 2023, primarily due to the previously mentioned New York State capital base tax.

Income Taxes

Income tax benefit was $26.6 million for the fourth quarter of 2024, reflective of the net loss reported for the period, compared to expense of $1.1 million in the third quarter of 2024, and expense of $5.2 million in the fourth quarter of 2023. During the fourth quarter of 2023, the Company incurred additional taxes of approximately $5.4 million associated with the capital gains of the previously mentioned company owned life insurance surrender coupled with a 10% modified endowment contract penalty that is typical of general account surrenders. The Company also recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the fourth quarter of 2024, third quarter of 2024, and fourth quarter of 2023, resulting in income tax expense reductions of $1.2 million, $1.3 million, and $901 thousand, respectively.

The effective tax rate was -28.8% for the fourth quarter of 2024, 7.4% for the third quarter of 2024, and 34.5% for the fourth quarter of 2023. The effective tax rate fluctuates on a quarterly basis primarily due to the level of pre-tax (loss) 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. The effective tax rate for full year 2024 was -45.7%, reflecting the impact of the previously mentioned securities transaction loss, compared to 20.3% in 2023.

Balance Sheet and Capital Management

Total assets were $6.11 billion at December 31, 2024, down $45.1 million from September 30, 2024, and down $49.7 million from December 31, 2023.

Investment securities were $1.03 billion at December 31, 2024, up $19.0 million from September 30, 2024, and down $8.8 million from December 31, 2023.

Total loans were $4.48 billion at December 31, 2024, an increase of $76.2 million, or 1.7%, from September 30, 2024, and an increase of $17.1 million, or 0.4%, from December 31, 2023.

• Commercial business loans totaled $665.3 million, up $10.8 million, or 1.7%, from September 30, 2024, and down $70.4 million, or 9.6%, from December 31, 2023.
• Commercial mortgage loans totaled $2.20 billion, up $94.0 million, or 4.5%, from September 30, 2024, and up $194.3 million, or 9.7%, from December 31, 2023.
• Residential real estate loans totaled $650.2 million, up $2.0 million, or 0.3%, from September 30, 2024, and up $384 thousand, or 0.1%, from December 31, 2023.
• Consumer indirect loans totaled $845.8 million, down $28.9 million, or 3.3%, from September 30, 2024, and down $103.1 million, or 10.9%, from December 31, 2023.

Total deposits were $5.10 billion at December 31, 2024, down $201.9 million, or 3.8%, from September 30, 2024, and down $108.2 million, or 2.1%, from December 31, 2023. The decrease from September 30, 2024 was primarily the result of a reduction in brokered deposits between periods as well as seasonal outflows of public and reciprocal deposits. The decrease from December 31, 2023 was driven by a reduction in brokered deposits. Public deposit balances represented 21% of total deposits at December 31, 2024, 22% at September 30, 2024 and 20% at December 31, 2023.

Short-term borrowings were $99.0 million at December 31, 2024, compared to $55.0 million at September 30, 2024 and $185.0 million at December 31, 2023. Short-term borrowings and brokered deposits have historically been utilized to manage the seasonality of public deposits.

Shareholders' equity was $586.1 million at December 31, 2024, compared to $500.3 million at September 30, 2024, and $454.8 million at December 31, 2023. Both the linked quarter and year-over-year increases were primarily driven by additional paid-in-capital resulting from the common stock capital raise executed in the fourth quarter of 2024 and decreases in accumulated other comprehensive loss between periods following the investment securities restructuring.

Common book value per share was $28.33 at December 31, 2024, a decrease of $2.89, or 9.3%, from $31.22 at September 30, 2024, and a decrease of $0.07, or 0.2%, from $28.40 at December 31, 2023. Tangible common book value per share(1) was $25.31 at December 31, 2024, a decrease of $1.97, or 7.2%, from $27.28 at September 30, 2024, and an increase of $1.62, or 6.8%, from $23.69 at December 31, 2023. Per share data variances were attributable to the higher number of shares outstanding at year-end 2024 as a result of the equity offering. The common equity to assets ratio was 9.31% at December 31, 2024, compared to 7.85% at September 30, 2024, and 7.10% at December 31, 2023. Tangible common equity to tangible assets(1), or the TCE ratio, was 8.40%, 6.93% and 6.00% at December 31, 2024, September 30, 2024, and December 31, 2023, respectively. The increases in both ratios from the comparable dates were attributable to the aforementioned additional capital and the decrease in accumulated other comprehensive loss.

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

The Company's regulatory capital ratios at December 31, 2024 improved in comparison to the prior quarter and prior year due in part to the fourth quarter capital raise. All ratios continued to exceed all regulatory capital requirements to be considered well capitalized.

• Leverage Ratio was 9.43% compared to 8.98% and 8.18% at September 30, 2024, and December 31, 2023, respectively.
• Common Equity Tier 1 Capital Ratio was 10.88% compared to 10.28% and 9.43% at September 30, 2024, and December 31, 2023, respectively.
• Tier 1 Capital Ratio was 11.21% compared to 10.62% and 9.76% at September 30, 2024, and December 31, 2023, respectively.
• Total Risk-Based Capital Ratio was 13.60% compared to 12.95% and 12.13% at September 30, 2024, and December 31, 2023, respectively.

Credit Quality

Non-performing loans were $41.4 million, or 0.92% of total loans, at December 31, 2024, as compared to $40.7 million, or 0.93% of total loans, at September 30, 2024, and $26.7 million, or 0.60% of total loans, at December 31, 2023. The increase in non-performing loans from December 31, 2023 was primarily driven by one commercial loan relationship that was placed on nonaccrual during the third quarter of 2024. Net charge-offs were $2.8 million, representing 0.25% of average loans on an annualized basis, for the current quarter, as compared to net charge-offs of $1.7 million, or an annualized 0.15% of average loans, in the third quarter of 2024 and net charge-offs of $4.2 million, or an annualized 0.38%, in the fourth quarter of 2023.

At December 31, 2024, the allowance for credit losses on loans to total loans ratio was 1.07%, compared to 1.01% at September 30, 2024 and 1.14% at December 31, 2023.

Provision for credit losses was $6.5 million in the current quarter, compared to $3.1 million in the linked quarter and $5.3 million in the prior year quarter. Provision for credit losses on loans was $6.1 million in the current quarter, compared to $2.4 million in the third quarter of 2024 and $5.7 million in the fourth 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 $321 thousand in the fourth quarter of 2024, a provision of $713 thousand in the third quarter of 2024, and a credit of $403 thousand in the fourth quarter of 2023. The provision for credit losses for the fourth quarter of 2024 was driven by a combination of factors, including the impact of loan growth during the quarter, an increase in net charge-offs as compared to the third quarter, and higher qualitative factors overall.

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 116% at December 31, 2024, 110% at September 30, 2024, and 192% at December 31, 2023, with the year-over-year decrease reflective of the higher level of nonperforming loans reported at year-end.

Subsequent Events

The Company is required, under generally accepted accounting principles, to evaluate subsequent events through the filing of its consolidated financial statements for the year ended December 31, 2024, in its Annual Report on Form 10-K. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2024, and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will host an earnings conference call and audio webcast on January 31, 2025 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 393817. 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 a financial holding company with approximately $6.1 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, consulting and retirement plan services to individuals, businesses, institutions, foundations 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 U.S. generally accepted accounting principles ("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 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 CroftDirector of Investor and External Relations(716) 817-5159klcroft@five-starbank.com

FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands, except per share amounts)
		2024																2023
SELECTED BALANCE SHEET DATA:		December 31,				September 30,				June 30,				March 31,				December 31,
Cash and cash equivalents		$	87,321			$	249,569			$	146,347			$	237,038			$	124,442
Investment securities:
Available for sale			911,105				886,816				871,635				923,761				887,730
Held-to-maturity, net			116,001				121,279				128,271				143,714				148,156
Total investment securities			1,027,106				1,008,095				999,906				1,067,475				1,035,886
Loans held for sale			2,280				2,495				2,099				504				1,370
Loans:
Commercial business			665,321				654,519				713,947				707,564				735,700
Commercial mortgage–construction			582,619				533,506				518,013				528,694				493,003
Commercial mortgage–multifamily			470,954				467,527				463,171				453,027				452,155
Commercial mortgage–non-owner occupied			857,987				814,392				814,953				798,637				788,515
Commercial mortgage–owner occupied			288,036				290,216				289,733				264,698				271,646
Residential real estate loans			650,206				648,241				647,675				648,160				649,822
Residential real estate lines			75,552				76,203				75,510				75,668				77,367
Consumer indirect			845,772				874,651				894,596				920,428				948,831
Other consumer			42,757				43,734				43,870				45,170				45,100
Total loans			4,479,204				4,402,989				4,461,468				4,442,046				4,462,139
Allowance for credit losses–loans			48,041				44,678				43,952				43,075				51,082
Total loans, net			4,431,163				4,358,311				4,417,516				4,398,971				4,411,057
Total interest-earning assets			5,602,570				5,666,972				5,709,148				5,857,616				5,702,904
Goodwill and other intangible assets, net			60,758				60,867				60,979				72,287				72,504
Total assets			6,111,187				6,156,317				6,131,772				6,298,598				6,160,881
Deposits:
Noninterest-bearing demand			950,351				978,660				939,346				972,801				1,010,614
Interest-bearing demand			705,195				793,996				711,580				798,831				713,158
Savings and money market			1,904,013				2,027,181				2,007,256				2,064,539				2,084,444
Time deposits			1,545,172				1,506,764				1,475,139				1,560,586				1,404,696
Total deposits			5,104,731				5,306,601				5,133,321				5,396,757				5,212,912
Short-term borrowings			99,000				55,000				202,000				133,000				185,000
Long-term borrowings, net			124,842				124,765				124,687				124,610				124,532
Total interest-bearing liabilities			4,405,912				4,507,706				4,520,662				4,681,566				4,511,830
Shareholders’ equity			586,108				500,342				467,667				445,734				454,796
Common shareholders’ equity			568,823				483,050				450,375				428,442				437,504
Tangible common equity (1)			508,065				422,183				389,396				356,155				365,000
Accumulated other comprehensive loss		$	(52,604	)		$	(102,029	)		$	(125,774	)		$	(126,264	)		$	(119,941	)
Common shares outstanding			20,077				15,474				15,472				15,447				15,407
Treasury shares			623				625				627				653				692
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio			9.43	%			8.98	%			8.61	%			8.03	%			8.18	%
Common equity Tier 1 capital ratio			10.88	%			10.28	%			10.03	%			9.43	%			9.43	%
Tier 1 capital ratio			11.21	%			10.62	%			10.36	%			9.76	%			9.76	%
Total risk-based capital ratio			13.60	%			12.95	%			12.65	%			12.04	%			12.13	%
Common equity to assets			9.31	%			7.85	%			7.34	%			6.80	%			7.10	%
Tangible common equity to tangible assets (1)			8.40	%			6.93	%			6.41	%			5.72	%			6.00	%
Common book value per share		$	28.33			$	31.22			$	29.11			$	27.74			$	28.40
Tangible common book value per share (1)		$	25.31			$	27.28			$	25.17			$	23.06			$	23.69
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)
		Year Ended								2024																2023
		December 31,								Fourth				Third				Second				First				Fourth
SELECTED INCOME STATEMENT DATA:		2024				2023				Quarter				Quarter				Quarter				Quarter				Quarter
Interest income		$	313,231			$	286,133			$	78,119			$	77,911			$	78,788			$	78,413			$	76,547
Interest expense			149,642				120,418				36,486				37,230				37,595				38,331				36,661
Net interest income			163,589				165,715				41,633				40,681				41,193				40,082				39,886
Provision (benefit) for credit losses			6,150				13,681				6,461				3,104				2,041				(5,456	)			5,271
Net interest income after provision (benefit) for credit losses			157,439				152,034				35,172				37,577				39,152				45,538				34,615
Noninterest (loss) income:
Service charges on deposits			4,233				4,625				1,074				1,103				979				1,077				1,168
Insurance income			2,144				6,708				3				3				4				2,134				1,615
Card interchange income			7,855				8,220				2,045				1,900				2,008				1,902				2,080
Investment advisory			10,713				10,955				2,555				2,797				2,779				2,582				2,669
Company owned life insurance			5,487				12,106				1,425				1,404				1,360				1,298				9,132
Investments in limited partnerships			2,382				1,783				837				400				803				342				672
Loan servicing			716				479				295				88				158				175				84
Income (loss) from derivative instruments, net			726				1,350				(37	)			212				377				174				(68	)
Net gain on sale of loans held for sale			618				566				186				220				124				88				217
Net loss on investment securities			(100,055	)			(3,576	)			(100,055	)			-				-				-				(3,576	)
Net gain (loss) on other assets			13,614				(6	)			(19	)			138				13,508				(13	)			(37	)
Net (loss) gain on tax credit investments			(775	)			(252	)			(636	)			(170	)			406				(375	)			(207	)
Other			5,661				5,286				1,291				1,345				1,508				1,517				1,619
Total noninterest (loss) income			(46,681	)			48,244				(91,036	)			9,440				24,014				10,901				15,368
Noninterest expense:
Salaries and employee benefits			66,126				71,889				17,159				15,879				15,748				17,340				17,842
Occupancy and equipment			14,361				14,798				3,791				3,370				3,448				3,752				3,739
Professional services			7,702				5,259				1,571				1,965				1,794				2,372				1,415
Computer and data processing			22,689				20,110				6,608				5,353				5,342				5,386				5,562
Supplies and postage			1,935				1,873				504				519				437				475				455
FDIC assessments			5,284				4,902				1,551				1,092				1,346				1,295				1,316
Advertising and promotions			1,573				1,926				465				371				440				297				370
Amortization of intangibles			552				910				109				112				114				217				221
Deposit-related charged-off items			20,341				1,201				354				410				398				19,179				223
Restructuring charges			35				114				35				-				-				-				188
Other			15,286				14,243				4,235				3,398				3,953				3,700				3,716
Total noninterest expense			155,884				137,225				36,382				32,469				33,020				54,013				35,047
(Loss) income before income taxes			(45,126	)			63,053				(92,246	)			14,548				30,146				2,426				14,936
Income tax (benefit) expense			(20,604	)			12,789				(26,559	)			1,082				4,517				356				5,156
Net (loss) income			(24,522	)			50,264				(65,687	)			13,466				25,629				2,070				9,780
Preferred stock dividends			1,459				1,459				365				365				364				365				365
Net (loss) income available to common shareholders		$	(25,981	)		$	48,805			$	(66,052	)		$	13,101			$	25,265			$	1,705			$	9,415
FINANCIAL RATIOS:
Earnings (loss) per share–basic		$	(1.66	)		$	3.17			$	(4.02	)		$	0.85			$	1.64			$	0.11			$	0.61
Earnings (loss) per share–diluted		$	(1.66	)		$	3.15			$	(4.02	)		$	0.84			$	1.62			$	0.11			$	0.61
Cash dividends declared on common stock		$	1.20			$	1.20			$	0.30			$	0.30			$	0.30			$	0.30			$	0.30
Common dividend payout ratio			-72.29	%			37.85	%			-7.46	%			35.29	%			18.29	%			272.73	%			49.18	%
Dividend yield (annualized)			4.40	%			5.63	%			4.37	%			4.69	%			6.25	%			6.41	%			5.59	%
Return on average assets (annualized)			-0.40	%			0.83	%			-4.27	%			0.89	%			1.68	%			0.13	%			0.63	%
Return on average equity (annualized)			-5.15	%			11.86	%			-50.51	%			11.08	%			22.93	%			1.83	%			9.28	%
Return on average common equity (annualized)			-5.66	%			12.01	%			-52.54	%			11.18	%			23.51	%			1.57	%			9.31	%
Return on average tangible common equity (annualized) (1)			-6.58	%			14.64	%			-59.82	%			12.87	%			27.51	%			1.88	%			11.37	%
Efficiency ratio (2)			71.75	%			62.96	%			71.74	%			64.70	%			50.58	%			105.77	%			59.48	%
Effective tax rate			-45.7	%			20.3	%			-28.8	%			7.4	%			15.0	%			18.7	%			34.5	%
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)
		Year Ended								2024																2023
		December 31,								Fourth				Third				Second				First				Fourth
SELECTED AVERAGE BALANCES:		2024				2023				Quarter				Quarter				Quarter				Quarter				Quarter
Federal funds sold and interest-earning deposits		$	115,635			$	80,415			$	121,530			$	49,476			$	134,123			$	158,075			$	102,487
Investment securities (1)			1,171,083				1,249,928				1,159,863				1,147,052				1,194,808				1,182,993				1,199,766
Loans:
Commercial business			689,585				698,861				658,038				673,830				704,272				722,720				702,222
Commercial mortgage–construction			509,461				364,967				558,200				513,768				495,177				470,115				438,768
Commercial mortgage–multifamily			465,244				461,954				458,691				467,801				466,501				468,028				467,226
Commercial mortgage–non-owner occupied			837,495				837,860				843,034				826,275				837,209				843,526				840,226
Commercial mortgage–owner occupied			270,646				243,574				288,502				285,061				260,495				248,172				249,013
Residential real estate loans			648,604				612,767				649,549				647,844				648,099				648,921				640,955
Residential real estate lines			75,951				76,350				76,164				75,671				75,575				76,396				76,741
Consumer indirect			894,720				997,538				858,854				881,133				905,056				934,380				965,571
Other consumer			45,790				28,741				43,333				43,789				44,552				51,535				43,664
Total loans			4,437,496				4,322,612				4,434,365				4,415,172				4,436,936				4,463,793				4,424,386
Total interest-earning assets			5,724,214				5,652,955				5,715,758				5,611,700				5,765,867				5,804,861				5,726,639
Goodwill and other intangible assets, net			64,247				72,965				60,824				60,936				62,893				72,409				72,628
Total assets			6,129,414				6,025,383				6,121,385				6,018,390				6,153,429				6,225,760				6,127,190
Interest-bearing liabilities:
Interest-bearing demand			734,731				818,541				757,221				691,412				741,006				749,512				780,546
Savings and money market			2,012,215				1,781,776				1,992,360				1,938,935				2,036,772				2,081,815				2,048,822
Time deposits			1,511,507				1,477,596				1,545,071				1,515,745				1,505,665				1,479,133				1,455,867
Short-term borrowings			126,192				186,910				56,513				129,130				140,110				179,747				84,587
Long-term borrowings, net			124,679				121,903				124,795				124,717				124,640				124,562				124,484
Total interest-bearing liabilities			4,509,324				4,386,726				4,475,960				4,399,939				4,548,193				4,614,769				4,494,306
Noninterest-bearing demand deposits			953,341				1,030,648				947,127				952,970				950,819				962,522				1,006,465
Total deposits			5,211,794				5,108,561				5,241,779				5,099,062				5,234,262				5,272,982				5,291,700
Total liabilities			5,652,983				5,601,697				5,603,999				5,535,112				5,703,929				5,770,725				5,708,861
Shareholders’ equity			476,431				423,686				517,386				483,278				449,500				455,035				418,329
Common equity			459,139				406,394				500,096				465,986				432,208				437,743				401,037
Tangible common equity (2)			394,892				333,429				439,272				405,050				369,315				365,334				328,409
Common shares outstanding:
Basic			15,683				15,376				16,415				15,464				15,444				15,403				15,393
Diluted			15,683				15,475				16,415				15,636				15,556				15,543				15,511
SELECTED AVERAGE YIELDS: (Tax equivalent basis)
Investment securities (3)			2.20	%			1.92	%			2.38	%			2.14	%			2.17	%			2.09	%			2.03	%
Loans			6.36	%			5.98	%			6.28	%			6.42	%			6.40	%			6.33	%			6.21	%
Total interest-earning assets			5.48	%			5.07	%			5.45	%			5.53	%			5.50	%			5.43	%			5.32	%
Interest-bearing demand			1.18	%			0.87	%			1.34	%			1.05	%			1.18	%			1.11	%			1.26	%
Savings and money market			3.03	%			2.32	%			2.94	%			3.07	%			3.01	%			3.08	%			3.01	%
Time deposits			4.66	%			3.98	%			4.53	%			4.72	%			4.72	%			4.68	%			4.57	%
Short-term borrowings			2.67	%			3.69	%			0.15	%			2.64	%			2.75	%			3.42	%			1.38	%
Long-term borrowings, net			5.03	%			5.06	%			5.03	%			5.03	%			5.02	%			5.02	%			5.05	%
Total interest-bearing liabilities			3.32	%			2.75	%			3.24	%			3.37	%			3.32	%			3.34	%			3.24	%
Net interest rate spread			2.16	%			2.32	%			2.21	%			2.16	%			2.18	%			2.09	%			2.08	%
Net interest margin			2.86	%			2.94	%			2.91	%			2.89	%			2.87	%			2.78	%			2.78	%
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.3.      The interest on tax-exempt securities is calculated on a tax-equivalent basis assuming a Federal income tax rate of 21%.

FINANCIAL INSTITUTIONS, INC. Selected Financial Information (Unaudited) (Amounts in thousands)
		Year Ended								2024																2023
		December 31,								Fourth				Third				Second				First				Fourth
ASSET QUALITY DATA:		2024				2023				Quarter				Quarter				Quarter				Quarter				Quarter
Allowance for Credit Losses – Loans
Beginning balance		$	51,082			$	45,413			$	44,678			$	43,952			$	43,075			$	51,082			$	49,630
Net loan charge-offs (recoveries):
Commercial business			98				(109	)			131				(3	)			7				(37	)			(50	)
Commercial mortgage–construction			-				980				-				-				-				-				980
Commercial mortgage–multifamily			12				-				-				13				-				-				-
Commercial mortgage–non-owner occupied			(8	)			(875	)			(5	)			(1	)			(1	)			(1	)			13
Commercial mortgage–owner occupied			(4	)			(70	)			(1	)			(2	)			(2	)			-				-
Residential real estate loans			95				89				(4	)			(1	)			96				4				22
Residential real estate lines			-				41				-				-				-				-				-
Consumer indirect			7,927				7,595				2,557				1,553				844				2,973				3,174
Other consumer			566				893				100				106				178				182				82
Total net charge-offs (recoveries)			8,686				8,544				2,778				1,665				1,122				3,121				4,221
Provision for credit losses – loans			5,645				14,213				6,141				2,391				1,999				(4,886	)			5,673
Ending balance		$	48,041			$	51,082			$	48,041			$	44,678			$	43,952			$	43,075			$	51,082
Net charge-offs (recoveries) to average loans (annualized):
Commercial business			0.01	%			-0.02	%			0.80	%			0.00	%			0.00	%			-0.02	%			-0.03	%
Commercial mortgage–construction			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.20	%
Commercial mortgage–multifamily			0.00	%			0.00	%			0.00	%			0.01	%			0.00	%			0.00	%			0.00	%
Commercial mortgage–non-owner occupied			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Commercial mortgage–owner occupied			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Residential real estate loans			0.01	%			0.01	%			0.00	%			0.00	%			0.06	%			0.00	%			0.01	%
Residential real estate lines			0.00	%			0.05	%			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Consumer indirect			0.89	%			0.76	%			1.18	%			0.70	%			0.38	%			1.28	%			1.30	%
Other consumer			1.23	%			3.11	%			0.91	%			0.95	%			1.62	%			1.41	%			0.75	%
Total loans			0.20	%			0.20	%			0.25	%			0.15	%			0.10	%			0.28	%			0.38	%
Supplemental information (1)
Non-performing loans:
Commercial business		$	5,609			$	5,664			$	5,609			$	5,752			$	5,680			$	5,956			$	5,664
Commercial mortgage–construction			20,280				5,320				20,280				20,280				4,970				5,320				5,320
Commercial mortgage–multifamily			-				189				-				71				183				185				189
Commercial mortgage–non-owner occupied			4,773				4,651				4,773				4,903				4,919				4,929				4,651
Commercial mortgage–owner occupied			354				403				354				366				380				392				403
Residential real estate loans			6,918				6,364				6,918				5,790				5,961				6,797				6,364
Residential real estate lines			253				221				253				232				183				235				221
Consumer indirect			3,157				3,814				3,157				3,291				2,897				2,880				3,814
Other consumer			62				34				62				57				36				36				34
Total non-performing loans			41,406				26,660				41,406				40,742				25,209				26,730				26,660
Foreclosed assets			60				142				60				109				63				140				142
Total non-performing assets		$	41,466			$	26,802			$	41,466			$	40,851			$	25,272			$	26,870			$	26,802
Total non-performing loans to total loans			0.92	%			0.60	%			0.92	%			0.93	%			0.57	%			0.60	%			0.60	%
Total non-performing assets to total assets			0.68	%			0.44	%			0.68	%			0.66	%			0.41	%			0.43	%			0.44	%
Allowance for credit losses–loans to total loans			1.07	%			1.14	%			1.07	%			1.01	%			0.99	%			0.97	%			1.14	%
Allowance for credit losses–loans to non-performing loans			116	%			192	%			116	%			110	%			174	%			161	%			192	%
1.      At period end.

FINANCIAL INSTITUTIONS, INC. Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited) (In thousands, except per share amounts)
		Year Ended								2024																2023
		December 31,								Fourth				Third				Second				First				Fourth
		2024				2023				Quarter				Quarter				Quarter				Quarter				Quarter
Ending tangible assets:
Total assets										$	6,111,187			$	6,156,317			$	6,131,772			$	6,298,598			$	6,160,881
Less: Goodwill and other intangible assets, net											60,758				60,867				60,979				72,287				72,504
Tangible assets										$	6,050,429			$	6,095,450			$	6,070,793			$	6,226,311			$	6,088,377
Ending tangible common equity:
Common shareholders’ equity										$	568,823			$	483,050			$	450,375			$	428,442			$	437,504
Less: Goodwill and other intangible assets, net											60,758				60,867				60,979				72,287				72,504
Tangible common equity										$	508,065			$	422,183			$	389,396			$	356,155			$	365,000
Tangible common equity to tangible assets (1)											8.40	%			6.93	%			6.41	%			5.72	%			6.00	%
Common shares outstanding											20,077				15,474				15,472				15,447				15,407
Tangible common book value per share (2)										$	25.31			$	27.28			$	25.17			$	23.06			$	23.69
Average tangible assets:
Average assets		$	6,129,414			$	6,025,383			$	6,121,385			$	6,018,390			$	6,153,429			$	6,225,760			$	6,127,190
Less: Average goodwill and other intangible assets, net			64,247				72,965				60,824				60,936				62,893				72,409				72,628
Average tangible assets		$	6,065,167			$	5,952,418			$	6,060,561			$	5,957,454			$	6,090,536			$	6,153,351			$	6,054,562
Average tangible common equity:
Average common equity		$	459,139			$	406,394			$	500,096			$	465,986			$	432,208			$	437,743			$	401,037
Less: Average goodwill and other intangible assets, net			64,247				72,965				60,824				60,936				62,893				72,409				72,628
Average tangible common equity		$	394,892			$	333,429			$	439,272			$	405,050			$	369,315			$	365,334			$	328,409
Net (loss) income available to common shareholders		$	(25,981	)		$	48,805			$	(66,052	)		$	13,101			$	25,265			$	1,705			$	9,415
Return on average tangible common equity (3)			-6.58	%			14.64	%			-59.82	%			12.87	%			27.51	%			1.88	%			11.37	%
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.