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].

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Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $20.1 million, or $0.99 per diluted share for Q3 2025, reflecting strong financial results [4] - Return on average assets (ROAA) was 132 basis points and return on average equity (ROAE) was 13.31%, both significantly up from previous periods [5] - Full-year 2025 guidance for ROAA has been revised to exceed 115 basis points, up from 110 basis points, and ROAE is now expected to be greater than 12%, up from 11.25% [5] Business Line Data and Key Metrics Changes - Loan growth was 1.2%, driven by commercial lending, while total deposits increased by 3.9% [4] - Total commercial loans reached approximately $3 billion, reflecting a 1.6% increase from the previous quarter and an 8.3% increase year-over-year [6] - Consumer indirect balances increased by 0.6% from the previous quarter but were down 4.1% year-over-year [8] Market Data and Key Metrics Changes - The company experienced strong commercial growth in upstate New York, particularly in the Syracuse region due to Micron Technologies' investment [8] - Residential lending showed modest growth, with mortgage and home equity applications up 12% and 11% year-over-year, respectively [9] Company Strategy and Development Direction - The company aims for profitable organic growth and anticipates raising profitability targets for 2026 [21] - The focus remains on maintaining a strong balance sheet and enhancing capital ratios, with tangible common equity (TCE) improving to 8.74% [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining momentum into 2026, driven by pent-up demand for credit and favorable economic conditions [8][21] - The company is tightening its expected range for full-year net interest margin to between 350 and 355 basis points, anticipating temporary margin pressure in Q4 [15] Other Important Information - Non-interest income was $12.1 million, up 13.6% from the previous quarter, with investment advisory revenue increasing [16] - Non-interest expense was $35.9 million, slightly up from the linked quarter, primarily due to higher claims activity in the self-funded medical plan [18] Q&A Session Summary Question: Outlook on margin and potential rate cuts - Management indicated that margin may see a modest impact from rate cuts but expects a recovery in 2026, with a starting point around 360 basis points [24][25] Question: Thoughts on share buyback - Management expressed satisfaction with the board's approval of the buyback, viewing it as a means to support shares and invest in the company [26] Question: Loan growth expectations for 2026 - Management is optimistic about achieving mid-single-digit growth rates in loans, based on recent performance and planning for 2026 [27]

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $20.1 million, or $0.99 per diluted share for Q3 2025, reflecting strong financial results [4] - Return on average assets (ROAA) and return on average equity (ROAE) improved to 132 basis points and 13.31% respectively, both up notably from previous periods [5] - Full-year 2025 guidance for ROAA was revised to exceed 115 basis points, up from 110 basis points, and ROAE to greater than 12%, up from 11.25% [5] Business Line Data and Key Metrics Changes - Loan growth was reported at 1.2%, driven by commercial lending, while total deposits increased by 3.9% [4] - Total commercial loans reached approximately $3 billion, reflecting a 1.6% increase from the previous quarter and an 8.3% increase year-over-year [6] - Consumer indirect loan balances increased by 0.6% from the previous quarter but were down 4.1% year-over-year [8] Market Data and Key Metrics Changes - The company experienced strong commercial growth in upstate New York, particularly in the Syracuse region due to Micron Technologies' investment [8] - Residential lending showed modest growth, with mortgage and home equity applications up 12% and 11% year-over-year respectively [9] Company Strategy and Development Direction - The company aims for profitable organic growth and anticipates raising profitability targets for 2026 [21] - A focus on maintaining a strong balance sheet and managing funding costs is evident, with expectations for incremental margin improvement in 2026 [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities ahead, citing strong performance and a healthy pipeline for future growth [21] - The company is preparing for potential rate cuts and expects to manage margins effectively in 2026 [24] Other Important Information - Non-interest income was reported at $12.1 million, up 13.6% from the previous quarter, driven by various revenue streams [16] - The efficiency ratio for the year-to-date was about 58%, indicating strong revenue growth relative to expenses [19] Q&A Session Summary Question: Outlook on margin and potential rate cuts - Management indicated that while margins may see a modest decline in Q4, they expect a recovery in 2026 as new loan production and cost management take effect [24][25] Question: Thoughts on share buyback activity - Management expressed satisfaction with the board's approval of the buyback, viewing it as a means to support share value [26] Question: Loan growth expectations for 2026 - Management conveyed optimism about achieving mid-single-digit growth rates in loans as they build their financial plan for 2026 [27]

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $20.1 million or $0.99 per diluted share for Q3 2025, reflecting strong financial results [4] - Return on average assets (ROAA) and return on average equity (ROAE) improved to 132 basis points and 13.31% respectively, both up notably from previous periods [5] - Full year 2025 guidance for ROAA is now expected to exceed 115 basis points, up from 110 basis points, and ROAE is expected to be greater than 12%, up from 11.25% [5] Business Line Data and Key Metrics Changes - Loan growth was 1.2%, driven by commercial lending, while total deposits increased by 3.9% [4] - Total commercial loans reached approximately $3 billion, reflecting a 1.6% increase from the previous quarter and an 8.3% increase year over year [6] - Consumer indirect balances increased by 0.6% from the previous quarter but were down 4.1% year over year [9] Market Data and Key Metrics Changes - The company experienced strong commercial growth in Upstate New York, particularly in the Syracuse region, supported by significant investments in the area [7] - The housing market remains tight in Rochester and Buffalo, with home prices continuing to rise, although new listings and inventory have increased year over year [10] Company Strategy and Development Direction - The company aims for profitable organic growth and anticipates a strong finish to 2025, with incremental performance expected in 2026 [25] - The opening of a satellite office in Sarasota, Florida, is part of the strategy to better serve clients and tap into new markets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining momentum heading into 2026, anticipating that pent-up demand for credit will be released with future rate cuts [8] - The company is focused on expense management to maintain positive operating leverage and a favorable efficiency ratio [22] Other Important Information - The company expects total deposits at year-end 2025 to be generally flat compared to the previous year [14] - Noninterest income for the year is expected to exceed the original guidance of up to $42 million [21] Q&A Session Summary Question: Margin outlook with potential rate cuts - Management indicated that while margins may decline modestly in the fourth quarter, they expect a recovery in 2026 as new loan production and cost management continue [27][30] Question: Buyback activity - Management expressed satisfaction with the board's approval of the buyback plan, indicating it as an option to support shares [31] Question: Loan growth expectations - Management is optimistic about achieving mid-single-digit growth rates as they build out their financial plan for 2026 [32][33]

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $20.1 million, or $0.99 per diluted share for Q3 2025, reflecting strong financial results [4] - Return on average assets (ROAA) and return on average equity (ROAE) improved to 132 basis points and 13.31% respectively, both up notably from previous periods [5] - Full-year 2025 guidance for ROAA is now expected to exceed 115 basis points, up from 110 basis points, and ROAE is expected to be greater than 12%, up from 11.25% [5] Business Line Data and Key Metrics Changes - Loan growth was 1.2%, driven by commercial lending, while total deposits increased by 3.9% [4] - Total commercial loans reached approximately $3 billion, reflecting a 1.6% increase from the previous quarter and an 8.3% increase year-over-year [6] - Consumer indirect loan balances increased by 0.6% from the previous quarter but were down 4.1% year-over-year [8] Market Data and Key Metrics Changes - The company experienced strong commercial growth in upstate New York, particularly in the Syracuse region due to Micron Technologies' investment [7] - Residential lending showed modest growth, with mortgage and home equity applications up 12% and 11% year-over-year respectively [9] Company Strategy and Development Direction - The company aims for profitable organic growth and anticipates raising profitability targets for 2026 [21] - The focus remains on maintaining a strong balance sheet and enhancing capital ratios, with tangible common equity (TCE) improving to 8.74% [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining momentum into 2026, anticipating pent-up demand for credit to be released with future rate cuts [7] - The overall health of both consumer and commercial portfolios remains solid, with a focus on credit discipline and strong underwriting processes [11] Other Important Information - Non-interest income was $12.1 million, up 13.6% from the linked quarter, driven by various revenue streams [16] - The efficiency ratio for the year-to-date is about 58%, below the targeted 60% threshold [19] Q&A Session Summary Question: Outlook on margin and potential rate cuts - Management indicated that a modest impact from rate cuts is expected, with a potential recovery in margins in 2026 [24] Question: Buyback activity and capital levels - Management confirmed that the board approved a buyback plan to support shares and invest in the company [26] Question: Loan growth expectations for 2026 - Management expressed optimism about achieving mid-single-digit growth rates in loan production as they build their financial plan for 2026 [27]

Financial Performance & Guidance - The company reported strong Q3 2025 financial results, with a net income available to common shareholders of $20.1 million[13] - Diluted earnings per common share increased by 16.5% from $0.85 in 2Q25 to $0.99 in 3Q25[14] - The company's full-year NIM is expected to be between 3.50% and 3.55%, and noninterest income is expected to exceed $42 million in 2025[9] - The efficiency ratio is expected to be below 59% for the year, and the effective tax rate is projected to be between 18% and 19%[9] - The company anticipates approximately 3% annual loan growth, driven by commercial loans[9] Balance Sheet & Portfolio - Total deposits were $5.36 billion, up 3.9% from the linked quarter and 1.0% from the previous year[14, 16] - Total loans reached $4.59 billion, a 1.2% increase during the quarter[14] - The securities portfolio stood at $1.01 billion as of 9/30/25[43] - Commercial loans totaled $2.99 billion with committed credit exposure of $3.97 billion at 9/30/25[23] Asset Quality - NCOs to average loans decreased to 18 bps, down from 36 bps in the linked quarter[14] - Allowance for credit losses to total loans was 1.03% at 9/30/25[74]

Financial Performance - Net income available to common shareholders for Q3 2025 was $20.1 million, or $0.99 per diluted share, compared to $17.2 million, or $0.85 per diluted share in Q2 2025, and $13.1 million, or $0.84 per diluted share in Q3 2024[2]. - Noninterest income was $12.1 million, up $1.4 million, or 13.6%, from Q2 2025, and up $2.6 million, or 27.7%, from Q3 2024[11]. - The efficiency ratio improved to below 57%, with return on average assets at 1.32% and return on average equity at 13.31%[4]. - The Company declared a common stock dividend of $0.31 per share, reflecting an increase of $0.01 or 3.3% over the year-ago quarter, returning 31% of third quarter net income to common shareholders[22]. - Net income for the nine months ended September 30, 2024, was $41,165,000, compared to $54,887,000 in 2025, showing a decline of about 25%[38]. Loan and Deposit Growth - Total loans increased by $54.4 million, or 1.2%, from June 30, 2025, and $187.4 million, or 4.3%, from September 30, 2024, reaching $4.59 billion[5]. - Total deposits were $5.36 billion, up $201.8 million, or 3.9%, from June 30, 2025, and up $51.2 million, or 1.0%, from September 30, 2024[16]. - Total loans reached $4,590,423 thousand, up from $4,536,002 thousand in the previous quarter, representing an increase of 1.2%[37]. - Total deposits rose to $5,357,809 thousand, compared to $5,156,014 thousand in the prior quarter, marking a growth of 3.9%[37]. Interest Income and Margin - Net interest income reached a record high of $51.8 million, an increase of $2.7 million, or 5.4%, from Q2 2025, and $11.1 million, or 27.3%, from Q3 2024[5]. - The net interest margin expanded to 3.65%, an increase of 16 basis points from Q2 2025 and 76 basis points from Q3 2024[10]. - Net interest margin improved to 3.50% in Q3 2025, compared to 2.85% in Q3 2024, indicating a significant increase of 22.81%[40]. Credit Quality - Credit quality metrics remained solid, with annualized net charge-offs to average loans at 0.18%, down from 0.36% in the linked quarter[5]. - Non-performing loans were $34.0 million, or 0.74% of total loans, at September 30, 2025, stable compared to $32.4 million or 0.72% at June 30, 2025, and down from $40.7 million or 0.93% at September 30, 2024[24]. - The allowance for credit losses on loans to total loans ratio was 1.03% at September 30, 2025, compared to 1.04% at June 30, 2025[25]. - The provision for credit losses was $2.7 million in the current quarter, compared to $2.6 million in the linked quarter and $3.1 million in the prior year quarter[26]. - The total non-performing assets amounted to $34,093 thousand, down from $40,851 thousand, reflecting a decrease of about 16%[42]. Capital and Equity - Shareholders' equity increased to $621.7 million at September 30, 2025, compared to $601.7 million at June 30, 2025, and $500.3 million at September 30, 2024[20]. - Common book value per share increased to $30.03 at September 30, 2025, up $1.00 or 3.4% from June 30, 2025, but down $1.19 or 3.8% from September 30, 2024[21]. - Common equity Tier 1 Capital Ratio was 11.15% at September 30, 2025, compared to 10.84% at June 30, 2025[26]. - The tangible common equity reached $543.99 million, up from $523.82 million in the prior quarter, reflecting a growth trend[43]. Asset Management - Total assets increased to $6,288,052 thousand as of September 30, 2025, compared to $6,143,766 thousand in June 30, 2025, reflecting a growth of 2.35%[37]. - Total interest-earning assets grew to $5,739,699 thousand, compared to $5,614,008 thousand in the prior quarter, indicating effective asset management strategies[37]. - Cash and cash equivalents stood at $185,945 thousand, significantly higher than $93,034 thousand in the previous quarter, indicating improved liquidity[37]. Future Outlook - The Company will host an earnings conference call on October 24, 2025, at 8:30 a.m. Eastern Time[30]. - Financial Institutions, Inc. has approximately $6.3 billion in assets, offering banking and wealth management products and services[31].