Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $19.6 million or $0.96 per diluted share for Q4 2025, and $73.4 million or $3.61 per diluted share for the full year [4] - Return on average assets was 120 basis points for the year, while return on average equity was 12.38%, both exceeding annual guidance [4] - The efficiency ratio for the year was 58% [4] Business Line Data and Key Metrics Changes - Total loans increased by 1.5% in Q4 and 4% year-over-year to $4.66 billion, driven by strong demand in commercial lending [6] - Commercial business loans were down modestly on a linked-quarter basis but up 11% year-over-year, while commercial mortgage loans increased by 4% from the previous quarter and 6.5% year-over-year [6] - Residential lending grew modestly, up 1% during both the 3 and 12 months ended December 31, 2025 [7] - Consumer indirect loans decreased by 3.7% in Q4 and 4.5% for the year to $807 million [8] Market Data and Key Metrics Changes - Year-end total deposits were $5.21 billion, down 2.8% from September 30, driven by seasonal public deposit outflows [9] - Deposits were up 2% year-over-year despite the ongoing wind down of the banking-as-a-service line of business [9] Company Strategy and Development Direction - The company is focused on organic credit discipline growth, prudent expense management, and building a strong capital position to deliver long-term value to shareholders [22] - The company aims to drive sustainable growth through its community bank and wealth management firm, leveraging its size and market position as competitive advantages [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of Upstate New York markets, particularly with the recent $100 billion investment by Micron Technology [7] - The company anticipates higher performance for full year 2026, targeting a return on average assets of at least 122 basis points and an efficiency ratio below 58% [12] - Management expects to maintain a focus on profitable spreads and favorable credit mix, with a targeted annual loan growth of about 5% driven by commercial lending [14] Other Important Information - The company completed an $80 million subordinated debt offering with a fixed rate of 6.5%, which is favorable compared to previous issuances [5] - The company reported a BBB- rating from Kroll with a stable outlook, reflecting improved profitability and capital position [6] Q&A Session Summary Question: Margin outlook and expected cadence - Management indicated that margins were impacted by the sub debt raise and expect margins to expand incrementally throughout the year [26] Question: Loan growth and indirect auto portfolio management - Management confirmed intentional management of the indirect auto portfolio and expressed confidence in commercial lending growth opportunities [30] Question: Share buyback strategy - Management noted that share buybacks remain an attractive capital allocation option, with a focus on maintaining Common Equity Tier 1 above 11% [34] Question: ROA improvement potential - Management highlighted that accelerated asset originations could positively impact ROA, but profitability remains a priority over growth [40] Question: Deposit targets and initiatives - Management emphasized a focus on core deposit acquisition and successful treasury management offerings to drive deposit growth [43]

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $19.6 million or $0.96 per diluted share for Q4 2025, and $73.4 million or $3.61 per diluted share for the full year [4] - Return on average assets was 120 basis points for the year, while return on average equity was 12.38%, both exceeding annual guidance [4] - The efficiency ratio for the year was 58% [4] Business Line Data and Key Metrics Changes - Total loans increased by 1.5% in Q4 and 4% year-over-year to $4.66 billion, driven by strong demand in commercial lending [6] - Commercial business loans were down modestly on a linked-quarter basis but up 11% year-over-year [7] - Residential lending grew modestly, up 1% during both the 3 and 12 months ended December 31, 2025 [8] - Consumer indirect loans decreased by 3.7% in Q4 and 4.5% for the year to $807 million [9] Market Data and Key Metrics Changes - Year-end total deposits were $5.21 billion, down 2.8% from September 30, driven by seasonal public deposit outflows [10] - Deposits were up 2% year-over-year despite the ongoing wind down of the banking-as-a-service line of business [10] - The company expects low single-digit deposit growth year-over-year amid a highly competitive landscape [17] Company Strategy and Development Direction - The company is focused on organic growth, credit discipline, and maintaining a strong capital position to deliver long-term value to shareholders [24] - The strategic plan emphasizes deep relationships, prudent expense management, and balancing investments in people and technology [24] - The company aims to drive sustainable growth through its community bank and wealth management firm [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability and growth potential of Upstate New York markets, particularly with the recent investment by Micron Technology [8] - The company anticipates stronger residential production in 2026, supported by new producers building their clientele [9] - Management expects a targeted return on average assets of at least 122 basis points and return on average equity exceeding 11.9% for 2026 [13] Other Important Information - The company approved a more than 3% increase to its quarterly dividend and a new share repurchase plan in 2025 [5] - The company completed an $80 million subordinated debt offering with a favorable fixed rate of 6.5% [5] - The company reported a BBB- rating from Kroll with a stable outlook, reflecting improved profitability and capital position [6] Q&A Session Summary Question: Margin outlook and expected cadence - Management indicated that margins were impacted by the sub debt raise and expect incremental expansion throughout the year [28] Question: Loan growth outlook and indirect auto portfolio - Management confirmed intentional management of the indirect auto portfolio and expressed confidence in commercial loan growth opportunities [32] Question: Share buyback strategy - Management stated that share buybacks remain an attractive capital allocation option, with a focus on maintaining Common Equity Tier 1 above 11% [36] Question: ROA improvement potential - Management noted that accelerated asset originations could impact ROA, but they prioritize profitability over growth [41] Question: Deposit growth initiatives - Management emphasized a focus on core deposit acquisition and the success of treasury management offerings in driving commercial deposit growth [44]

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $19.6 million or $0.96 per diluted share for Q4 2025, and $73.4 million or $3.61 per diluted share for the full year [4] - Return on average assets was 120 basis points for the year, while return on average equity was 12.38%, both exceeding annual guidance [4] - The efficiency ratio for the year was 58% [4] Business Line Data and Key Metrics Changes - Total loans increased by 1.5% in Q4 and 4% year-over-year to $4.66 billion, driven by strong demand in commercial lending [6] - Commercial business loans were down modestly on a linked-quarter basis but up 11% year-over-year [6] - Residential lending grew 1% during both the 3 and 12 months ended December 31, 2025 [8] - Consumer indirect loans decreased by 3.7% in Q4 and 4.5% for the year to $807 million [9] Market Data and Key Metrics Changes - Year-end total deposits were $5.21 billion, down 2.8% from September 30, driven by seasonal public deposit outflows [10] - Deposits were up 2% year-over-year despite the wind down of the banking-as-a-service line of business [10] - The company expects low single-digit deposit growth year-over-year amid a competitive landscape [17] Company Strategy and Development Direction - The company is focused on organic credit discipline growth, prudent expense management, and building a strong capital position to deliver long-term value to shareholders [25] - The company aims to drive sustainable growth through its community bank and wealth management firm, leveraging its size and market position [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of Upstate New York markets, particularly with the recent investment by Micron Technology [7] - The company anticipates higher performance for full year 2026, targeting a return on average assets of at least 122 basis points and an efficiency ratio below 58% [13][22] Other Important Information - The company completed an $80 million subordinated debt offering with a fixed rate of 6.5% [5] - The company reported a BBB- rating from Kroll with a stable outlook, reflecting improved profitability and capital position [6] Q&A Session Summary Question: Margin expectations for the year - Management indicated that margins were impacted by the sub debt raise and expect incremental expansion throughout the year [29] Question: Loan growth outlook - Management confirmed intentional management of the indirect auto portfolio and expressed confidence in both C&I and CRE growth prospects [33][34] Question: Share buyback plans - Management noted that share buybacks remain an attractive capital allocation option, with a focus on maintaining Common Equity Tier 1 above 11% [37] Question: Deposit growth initiatives - Management emphasized the focus on core deposit acquisition and the success of treasury management offerings in driving commercial deposit growth [46][48]

Investor Presentation Nasdaq: FISI Fourth Quarter 2025 January 29, 2026 Important Information Safe Harbor Statement & Other Information Statements contained in this presentation which are not historical facts and which pertain to future operating results of Financial Institutions, Inc. (the "Company") and its subsidiaries constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Similarly, statements that describe the objectives, plans or goals of th ...

Financial Performance - Net income available to common shareholders for Q4 2025 was $19.6 million, or $0.96 per diluted share, compared to a net loss of $83.2 million in Q4 2024[2]. - For the full year 2025, net income was $73.4 million, or $3.61 per diluted share, a significant recovery from a net loss of $43.1 million in 2024[3]. - Noninterest income for Q4 2025 was $11.9 million, compared to a net loss of $91.0 million in Q4 2024, and total noninterest income for 2025 was $45.0 million, recovering from a net loss of $46.7 million in 2024[15][16]. - Earnings per share (diluted) for 2025 was $3.61, a turnaround from a loss of $2.75 in 2024[45]. - The return on average equity (annualized) increased to 12.38% in 2025, compared to a negative 8.74% in 2024[45]. - The effective tax rate improved to 18.0% in 2025 from a negative 38.9% in 2024, reflecting better tax management[45]. Loan and Deposit Growth - Total loans increased to $4.66 billion at year-end 2025, reflecting a growth of $178.7 million, or 4.0%, from December 31, 2024[5]. - Total deposits were $5.21 billion at year-end 2025, up $101.6 million, or 2.0%, from December 31, 2024, despite a seasonal decline from the previous quarter[5]. - Total loans increased to $4.66 billion at December 31, 2025, an increase of $67.4 million, or 1.5%, from September 30, 2025, and an increase of $178.7 million, or 4.0%, from December 31, 2024[23]. - Total deposits were $5.21 billion at December 31, 2025, down $151.5 million, or 2.8%, from September 30, 2025, but up $101.6 million, or 2.0%, from December 31, 2024[24]. Asset Management - Total assets were $6.27 billion at December 31, 2025, down $13.9 million from September 30, 2025, and up $157.1 million from December 31, 2024[23]. - Total assets as of December 31, 2025, were $6,274,140, a slight decrease from $6,288,052 on September 30, 2024[44]. - Average assets for 2025 were $6,214,610, compared to $6,129,430 in 2024, indicating an increase of 1.39%[50]. Capital and Equity - The Company completed a private placement of $80.0 million in subordinated notes in December 2025, enhancing its capital position and receiving a BBB- rating[5][7]. - Shareholders' equity increased to $628.9 million at December 31, 2025, compared to $621.7 million at September 30, 2025, and $569.0 million at December 31, 2024[26]. - Common book value per share was $30.89 at December 31, 2025, an increase of $0.86, or 2.9%, from September 30, 2025, and an increase of $3.41, or 12.4%, from December 31, 2024[27]. - The Total Risk-Based Capital Ratio was 14.90% at December 31, 2025, impacted by an additional $80.0 million of capital on the balance sheet[38]. Credit Quality - The allowance for credit losses on loans was 1.02% at year-end 2025, a slight decrease from 1.07% a year prior, indicating stable credit quality[5]. - Non-performing loans were $35.8 million, or 0.77% of total loans, at December 31, 2025, compared to $34.0 million, or 0.74%, at September 30, 2025[32]. - The provision for credit losses was $3.4 million in the current quarter, compared to $2.7 million in the linked quarter and $6.5 million in the prior year quarter[34]. - The allowance for credit losses to non-performing loans ratio increased to 133%, up from 116% in the previous year, indicating stronger coverage[49]. Operational Efficiency - The efficiency ratio improved to 58.13% in 2025 from 82.35% in 2024, indicating enhanced operational efficiency[46]. - The net interest margin improved to 3.53% in 2025 from 2.86% in 2024, an increase of 23.4%[47]. - The net interest rate spread improved to 2.92% in 2025 from 2.16% in 2024, an increase of 35.1%[47]. Shareholder Returns - The Company declared a common stock dividend of $0.31 per common share, reflecting an increase of $0.01, or 3.3%, over the year-ago quarter[29]. - The company declared a common dividend payout ratio of 33.97% in 2025, up from a negative 43.64% in 2024[45].

Core Viewpoint - The financial performance of Financial Institutions, Inc. for the fourth quarter and full year 2025 demonstrates strong organic growth across its commercial banking, consumer banking, and wealth management sectors, with significant improvements in net income and operational efficiency [1][5]. Financial Performance - The Company reported a net income of $20.0 million for Q4 2025, a slight decrease from $20.5 million in Q3 2025, and a significant recovery from a net loss of $82.8 million in Q4 2024. Net income available to common shareholders was $19.6 million, or $0.96 per diluted share [2]. - For the full year 2025, net income reached $74.9 million, compared to a net loss of $41.6 million in 2024. Net income available to common shareholders was $73.4 million, or $3.61 per diluted share [3]. Key Highlights - The Company achieved a return on average assets of 1.20% and a return on average equity of 12.38% for 2025, with an efficiency ratio of 58% [5]. - Loan growth for the year was 4%, with a notable 6% annualized growth in Q4 2025, driven by strong demand from commercial borrowers [5]. - Total loans amounted to $4.66 billion at year-end 2025, reflecting a 1.5% increase from Q3 2025 and a 4.0% increase from Q4 2024 [6][22]. Income and Expenses - Net interest income reached record levels of $52.2 million for Q4 2025 and $200.0 million for the full year, with a net interest margin of 3.53% for 2025, up 67 basis points year-over-year [6][14]. - Noninterest income for Q4 2025 was $11.9 million, compared to $12.1 million in Q3 2025, and $45.0 million for the full year, recovering from a net loss of $46.7 million in 2024 [15][16]. - Noninterest expenses were $36.7 million for Q4 2025, up from $35.9 million in Q3 2025, but down from $59.4 million in Q4 2024, with full-year expenses totaling $142.0 million, a decrease from $178.9 million in 2024 [17][18]. Capital Management - The Company completed a private placement of $80.0 million in subordinated notes in December 2025, enhancing its capital position and receiving a BBB- rating from Kroll Bond Rating Agency [6][7]. - Shareholders' equity increased to $628.9 million at year-end 2025, up from $621.7 million in Q3 2025 and $569.0 million in Q4 2024, primarily due to retained earnings and a reduction in accumulated other comprehensive loss [25]. Credit Quality - Non-performing loans were $35.8 million, or 0.77% of total loans, at year-end 2025, a decrease from 0.92% a year earlier [30]. - The allowance for credit losses on loans to total loans ratio was 1.02% at year-end 2025, down from 1.07% a year prior, reflecting improved credit quality [31]. Shareholder Returns - The Company declared a common stock dividend of $0.31 per share for Q4 2025, consistent with the previous quarter and representing a 3.3% increase from the prior year [28]. - A total of 336,869 common shares were repurchased at an average price of $31.98 per share during Q4 2025, with additional shares remaining available for repurchase under the plan [29].

Core Viewpoint - Financial Institutions, Inc. is set to release its fourth quarter and full year results for 2025 on January 29, 2026, after market close [1] Group 1: Earnings Release Information - The earnings conference call will take place on January 30, 2026, at 8:30 a.m. Eastern Time, hosted by the President and CEO, Martin K. Birmingham, and CFO, W. Jack Plants II [2] - Participants in the U.S. can join the call by dialing 1-833-470-1428 and using access code 441553, with a live webcast available on the company's website [2] Group 2: Company Overview - Financial Institutions, Inc. is a financial holding company with approximately $6.3 billion in assets as of September 30, 2025 [3] - The company offers banking and wealth management products and services through its subsidiary, Five Star Bank, which serves individuals, municipalities, and businesses in Western and Central New York [3] - Courier Capital, LLC, another subsidiary, provides customized investment management, financial planning, and consulting services to a diverse clientele including individuals, families, businesses, institutions, non-profits, and retirement plans [3]

Core Viewpoint - Financial Institutions, Inc. successfully completed a private placement of $80.0 million in fixed-to-floating rate subordinated notes, which will be used to refinance existing higher-interest debt and support general corporate purposes [1][3][4]. Group 1: Notes Details - The subordinated notes have a maturity date of December 15, 2035, and bear an interest rate of 6.50% for the first five years, after which the rate will reset quarterly based on the three-month Secured Overnight Financing Rate (SOFR) plus 312 basis points [2]. - The notes received a BBB- rating from Kroll Bond Rating Agency, which has revised the company's long-term outlook to Stable due to improved profitability and capital position [2]. Group 2: Use of Proceeds - The net proceeds from the notes will be used to redeem $65.0 million of outstanding debt, which includes $35.0 million with an interest rate of approximately 8.17% and $30.0 million with an interest rate of approximately 8.11% [3]. - The company expects the Total Risk-Based Capital ratio to be temporarily elevated by approximately 150 basis points at year-end due to the additional capital from the notes [4]. Group 3: Company Overview - Financial Institutions, Inc. is a financial holding company with approximately $6.3 billion in assets as of September 30, 2025, offering banking and wealth management products and services [6]. - Its subsidiary, Five Star Bank, provides consumer and commercial banking services across Western and Central New York, while Courier Capital, LLC offers investment management and financial planning services [6].

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Financial Performance - Net interest income for the three months ended September 30, 2025, was $11.1 million, a decrease of $4.6 million compared to the same period in 2024[238]. - Total noninterest income for the three months ended September 30, 2025, was $12.1 million, an increase of $2.6 million from $9.4 million in the same period in 2024[242]. - Total noninterest expense for the three months ended September 30, 2025, was $35.9 million, an increase of $3.4 million from $32.5 million in the same period in 2024[248]. - Income from company-owned life insurance increased by $1.4 million to $2.8 million for the third quarter of 2025, compared to $1.4 million in the same period in 2024[243]. - The efficiency ratio for Q3 2025 was 56.78%, down from 64.70% in Q3 2024, primarily due to increased interest income from investment securities[253]. - Income tax expense for Q3 2025 was $4.8 million, compared to $1.1 million for Q3 2024, reflecting a higher pre-tax income[257]. - The effective tax rate for Q3 2025 was 18.9%, compared to 7.4% for Q3 2024[258]. Loan and Credit Quality - Provision for credit losses for loans was $2.1 million for the third quarter of 2025, compared to $2.4 million for the same period in 2024[239]. - Total loans increased to $4.59 billion as of September 30, 2025, up $111.2 million from $4.48 billion at December 31, 2024[272]. - Total commercial loans reached $2.99 billion, representing 65% of total loans, compared to $2.86 billion or 64% as of December 31, 2024[274]. - Total consumer loans decreased to $1.60 billion, accounting for 35% of total loans, down $13.6 million from December 31, 2024[275]. - Net charge-offs for the third quarter of 2025 were $2.1 million, representing 0.18% of average loans, compared to $1.7 million or 0.15% for the same period in 2024[281]. - The allowance for credit losses on loans was $47.3 million at September 30, 2025, compared to $44.7 million at the same date in 2024[281]. - Non-performing loans decreased by $7.5 million to $34.0 million at September 30, 2025, from $41.4 million at the same date in 2024[281]. - Non-performing loans represented 0.74% of total loans as of September 30, 2025, compared to 0.92% at December 31, 2024[288]. - The company identified $27.3 million in loans classified as substandard as of September 30, 2025, down from $33.7 million at December 31, 2024[291]. Investment Securities - Total investment securities interest income for the nine months ended September 30, 2025, was $16.1 million, an increase from $1.9 million in the same period in 2024[238]. - The available for sale investment securities portfolio increased by $12.5 million from December 31, 2024, to September 30, 2025[260]. - As of September 30, 2025, the total investment securities amounted to $1,050.1 million, compared to $1,088.7 million as of December 31, 2024[259]. - The AFS portfolio had a net unrealized loss of $38.9 million at September 30, 2025, down from $61.6 million at December 31, 2024[260]. - The company sold $22.3 million of mortgage-backed securities in September 2025, reinvesting the proceeds into investment grade corporate bonds[266]. Deposits and Borrowings - Total deposits increased by $253.1 million, or 5%, to $5.36 billion as of September 30, 2025, compared to $5.10 billion at December 31, 2024[299]. - Non-public deposits decreased to $3.15 billion, representing 59% of total deposits as of September 30, 2025, down from 63% at December 31, 2024[300]. - Public deposits rose to $1.23 billion, accounting for 23% of total deposits as of September 30, 2025, compared to 21% at December 31, 2024[301]. - Total borrowings decreased to $170.0 million as of September 30, 2025, down from $223.8 million at December 31, 2024[304]. - Cash and cash equivalents increased to $185.9 million as of September 30, 2025, up from $87.3 million at December 31, 2024[318]. Capital and Shareholder Equity - Shareholders' equity increased to $621.7 million as of September 30, 2025, up by $52.7 million from $569.0 million at December 31, 2024, primarily due to net income and a decrease in accumulated other comprehensive loss[323]. - Common Equity Tier 1 (CET1) Capital was $583.5 million, representing an increase from $548.3 million at December 31, 2024, with a CET1 ratio of 11.15% compared to 10.54%[326]. - Total regulatory capital reached $711.7 million as of September 30, 2025, up from $689.7 million at December 31, 2024, with a total risk-based capital ratio of 13.60%[330]. - The Company maintained a Tier 1 leverage ratio of 9.77% as of September 30, 2025, compared to 9.15% at December 31, 2024[330]. Economic Value of Equity - Estimated Economic Value of Equity (EVE) for September 30, 2025 is $851,144,000, a decrease from $903,789,000 on December 31, 2024[340]. - Under a -300 basis points rate shock scenario, EVE increases to $915,882,000, reflecting a change of $64,738,000 or 7.61%[340]. - The decrease in EVE from December 31, 2024 to September 30, 2025 is attributed to increased borrowings and a shift in deposit mix[340]. - Sensitivity to EVE in down rate shock scenarios becomes more positive at September 30, 2025 compared to December 31, 2024[340]. - Continued increases in commercial loan valuation contribute to the positive sensitivity in EVE[340]. Regulatory and Compliance - The Company is characterized as "well-capitalized" under Basel III Capital Rules, meeting all minimum capital ratios required[328]. - Dividend payments are subject to regulatory approval if they would cause the Bank's regulatory capital to fall below specified minimum levels[331]. - The regulatory capital impact of the Current Expected Credit Losses (CECL) accounting standard is being phased in at 25% per year since January 1, 2022[327].