Financial Institutions, Inc. Announces Fourth Quarter and Full Year 2024 Results

WARSAW, N.Y., Jan. 30, 2025 (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 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.

Financial Institutions, Inc. Announces Fourth Quarter and Full Year 2024 Results

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