Investor
Presentation
Financial Institutions, Inc. (NASDAQ: FISI)
Investor Presentation
June 18, 2024
Important Information
Safe Harbor Statement
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 the Company are forward-looking. These forward-looking statements can generally be identified as such by the context of
the statements, including words such as “believe,” “continues,” “expect,” “anticipate,” “preliminary,” “plan,” “may,” “will,” “should,” “would,” “intend,” “estimate,”
“guidance” and other similar expressions, whether in the negative or affirmative. These forward-looking statements involve significant risks and uncertainties and
are subject to change. All forward-looking statements made herein are qualified by the cautionary language in the Company’s Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and other documents filed with the Securities and Exchange Commission. These documents contain and identify important factors
that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Except as required by law, the Company
assumes no obligation to update any information presented herein. This presentation includes certain non-GAAP financial measures intended to supplement, not
substitute for, comparable GAAP measures. Reconciliations of those non-GAAP financial measures to GAAP financial measures are provided in the Appendix to
this presentation.
Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals presented.
Table of Contents
2
Company Overview 3 Revenue 25 Appendix 33
Quarterly Results 7 Expense Management & Operating Leverage 29 Leadership Team 34
High Quality Lending 12 Capital Management & Investment Considerations 30 Strategy Map 35
Securities and Deposits 22 Non-GAAP Reconciliations 36
Overview of Financial Institutions, Inc.
3
Company Overview
NASDAQ: FISI
• Innovative financial holding company headquartered in
Western New York offering banking and wealth management
services through its subsidiaries, Five Star Bank and Courier
Capital, LLC
• Positioned for growth through key initiatives, including
Banking-as-a-Service (BaaS)
• Financially stable geography, with 49 banking locations
1
in 14
contiguous Upstate New York counties, as well as commercial
loan production offices serving the Mid-Atlantic and Central New
York regions
• Experienced management team with extensive market
knowledge and industry experience
• Generating consistent, strong operating results
1
48 branches and 1 motor branch in Olean, NY
Note: Information on this slide is as of March 31, 2024 unless noted otherwise
$291M
Market cap
$4.44B
Total loans
$5.40B
Total deposits
$6.30B
Total assets
Why FISI
4
Company Overview
Strategic focus designed to deliver long-term value
4.7%
Total loan growth
year-over-year
5.0%
Total deposit growth
year-over-year
• Results-driven community bank with strong retail and commercial franchises
◦ Serving financially stable Upstate New York markets and well-positioned for growth in metros of Buffalo and Rochester
◦ Launched commercial lending platforms in Baltimore, MD serving the Mid-Atlantic region in 2022 and in Syracuse, NY
serving the Central New York region in 2023
• Disciplined credit culture with strong credit quality
◦ From 2008 through 2023, year-end non-performing assets (NPAs)
1
ranged from 0.17% to 0.58% of total assets, while
annual net charge-offs (NCOs) to average loans ranged from 0.14% to 0.54%
◦ Indirect auto lending is a core competency with attractive risk-adjusted return profile and consistent results though several
economic cycles
• Fee-generating business line revenue complements core banking franchise
◦ Well-regarded investment advisory firm supports noninterest income and has been enhanced by bolt-on acquisitions in
recent years
◦ BaaS presents additional fee-based revenue opportunities
• Complementary fintech and digital partnerships driving exceptional digital experiences
◦ BaaS enables financial technology firms (fintechs) to offer banking products and services to their end users
◦ Presenting new fee-based revenue opportunities through service, interchange and other fees
1
Non-performing assets, or NPAs, include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets
Note: Information on this slide is as of March 31, 2024 unless noted otherwise
2
1 1
2 2
10
11
7
2 2
2
1
2
2
2
1 1
2
2
2
1
1 1
4
4
4
4
5
1
2
4
5 5
7
8
18
19
14
Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24
Closed/Won Integration/Onboarding Testing/Pilot Live/General Availability Offboarding
Banking-as-a-
Service (BaaS)
5
Company Overview
Creating new revenue opportunities
and market differentiation
With BaaS, we are leveraging our digital and infrastructure investments to deliver
value to select fintechs serving SMBs, affinity groups and niche markets
• Enabling fintechs to offer banking products and services to their end users, leading
primarily to deposit growth as well as creating fee generation opportunities for FISI
• Focused on BaaS client partnerships within meaningful and defensible market
opportunities: B2B, select affinity groups, wealth management and niche areas
BaaS Client Partnerships
Value-driven, disciplined approach to cultivating partnerships
with select fintechs aligned with our values and risk appetite
6
Company Overview
FISI sees BaaS as complementary
to the existing franchise
Fee-based line of business with potential to generate
lower-cost deposits
Services offered to BaaS clients:
◦ Program sponsorship
◦ Open API banking
◦ Risk and compliance management
◦ Financial transactions clearing
◦ Industry expertise and advisory services
◦ Digital banking and wealth management platform
◦ Card-as-a-Service (CaaS)
◦ Center of Excellence, e.g., loan servicing and contact center
BaaS has potential to expand revenue sources to help improve earnings,
including though:
◦ Service, interchange, advisory and servicing fees
◦ Other revenue sharing
Primarily focused on five key
BaaS client types where we see
strong opportunity
Business-to-Business
Help B2B fintechs innovate solutions for enduring issues
while creating new market opportunities and efficiencies
Affinity Groups
Empower traditionally under-banked communities with
expanded financial services access
Sustainable Finance
Meet consumer-led environmental demands by partnering
with early movers in the green banking space
Cannabis-Related Businesses
Tap into the multi-billion-dollar cannabis market by
leveraging regulatory experience for sustained operations
Wealth Management
Enable wealth managers to meet accelerating client demand
for banking services
• Total deposits were $5.40B, up $183.8M, or 3.5%, from December 31, 2023, and up $255.5M, or 5.0%,
from one year prior.
• Total loans were $4.44B, reflecting a decrease of $20.1M, or 0.5%, from December 31, 2023 and an
increase of $198.7M, or 4.7%, from March 31, 2023.
• Net income available to common shareholders was $1.7M, or $0.11 per diluted share, compared to
$9.4M, or $0.61 per diluted share, in 4Q ’23 and $11.7M, or $0.76 per diluted share, in 1Q ’23.
◦ Current quarter results were negatively impacted by the Company’s previously disclosed deposit-
related fraud event, which was the primary driver of noninterest expense variances from the linked and
year-ago periods. Excluding the impact of this fraud event, the Company’s adjusted net income
available to common shareholders was $17.7M, or $1.12 per diluted share.
1
• The company recorded a benefit for credit losses of $5.5M in 1Q ‘24, compared to a provision of $5.3M
in the linked quarter and a provision of $4.2M in 1Q ’23.
• Net interest income of $40.1M increased $0.2M, or 0.5%, from 4Q ’23 and decreased $1.7M, or 4.1%,
from 1Q ‘23, amid the higher interest rate environment that has driven funding costs higher.
• Noninterest income was $10.9M, down $4.5M, or 29.1%, from 4Q ’23, when the Company recorded
$9.1M of company owned life insurance revenue, of which ~$8M related to the investment of premium
into a separate account product during that period from our surrender and redeploy strategy. Noninterest
income was flat with 1Q ’23.
• Noninterest expense was $54.0M in the current quarter and included ~$19.0M in expenses related to
the previously disclosed fraud matter. Noninterest expense was $35.0M in 1Q ‘24 and $33.5M in 1Q ’23.
• Maintained strong credit quality metrics, including annualized NCOs to average loans of 0.28% and
NPAs to total assets of 0.43% at March 31, 2024.
First Quarter
2024 Key Results
7
As of March 31, 2024
1
Please see Appendix for reconciliation of non-GAAP Financial measures for the computation of these non-GAAP measures.
Financial Highlights
Second Quarter Progress
8
Financial Highlights
Modest margin expansion and strong and stable asset quality metrics through May 31, 2024
• Margin trends experienced through May 31
st
align with the full year guidance
◦ Building on stability achieved in linked first quarter
• Continued asset quality strength and stability through May 31
st
, with net charge-offs to average loans through first two months of the second quarter
showing improvement from the end of the linked first quarter
◦ Commercial net charge-offs negligible through May 31, 2024
◦ Indirect auto net charge-offs through May 31, 2024 showing improvement from March 31, 2024, as expected, given first quarter 2024 reduction in consumer
indirect delinquencies relative to year-end 2023
• Successful divestiture of insurance subsidiary early in second quarter bolsters capital position in an efficient and non-dilutive manner, while
supporting future earnings potential
◦ Compelling price of $27.0M takes advantage of strong valuations for insurance brokerage businesses
• Continuing to actively pursue all legal recourse available to recover additional funds from previously-disclosed deposit-related fraud event
◦ Recorded full exposure of $18.4M deposit-related charge-off in the first quarter and factored anticipated legal expenses into forward guidance
◦ Any further recoveries would be recorded as a benefit in future periods
Insurance Subsidiary Transaction
Supports Earnings and Capital Positions
9
Financial Highlights
Compelling price of $27.0M takes advantage of strong valuations for
insurance brokerage businesses
$27.0M
cash proceeds from
transaction
$11.3M
of goodwill and other
intangibles eliminated
• As previously disclosed, on April 1, 2024, the Company announced and closed the sale of the assets of its wholly-
owned subsidiary, SDN Insurance, LLC, to NFP Property & Casualty Services, Inc., a privately-held property and
casualty broker and benefits consultant
• Sale price represents approximately 4.0x 2023 insurance revenue
• Generates significant after-tax gain of $11.2M before selling costs
• Eliminates $11.3M of goodwill and other intangibles
• Meaningful capital impact
◦ More than 40 basis point positive impact to common equity tier 1 (“CET1”) ratio
1
• Supports earning potential and focus on core banking business
◦ Expect to deploy some of the proceeds into our core banking business through high-quality, credit-disciplined
loan origination to build higher-yielding earning assets
1
Pro forma capital ratio are prior to potential deployment of proceeds, as published in first quarter 2024 investor presentation on April 25, 2024
2024 Guidance Update
1
10
Financial Highlights
Focused on executing strategic initiatives that will improve profitability and operating leverage over time
1-3% full year loan growth
driven by commercial loans
1-3% full year deposit growth
driven by non-public deposits
285-295 bps
Full-year NIM of 2.85-2.95%
using a spot-rate forecast as
of quarter-end
Noninterest income of
$36.5-$38M
for full year 2024
1
Noninterest expense of
$135M-$136M
for full year 2024,
excluding the previously
disclosed fraud event
2024 effective tax rate of 13-15%
including the impact of the previously
disclosed fraud event, insurance
transaction and the amortization of
tax credit investments placed in
service in recent years
30-40 bps
Annual net charge-offs to full year
average assets
reflective of credit-disciplined lending
and strong fundamental
underwriting processes
1
As published in first quarter 2024 investor presentation on April 25, 2024
2
Noninterest income excludes gains/losses on securities, impairment of investment tax credits, limited partnership income, and gains/losses on assets, including the 2Q ’24 insurance transaction
Recent Earnings Performance
11
Financial Highlights
Last five quarters
Earnings Summary
(1)
1Q ’23
2Q ’23
3Q ’23
4Q ’23
1Q ’24
Average interest
-earning assets
$5,486.0
$5,691.9
$5,704.1
$5,726.6
$5,804.9
Net interest margin (tax equivalent basis)
3.09%
2.99%
2.91%
2.78%
2.78%
Net interest income
41.8
42.3
41.7
39.9
40.1
Noninterest income
10.9
11.5
10.5
15.4
10.9
Total revenue
$52.7
$53.8
$52.2
$55.3
$51.0
Noninterest expense
(33.7)
(33.8)
(34.7)
(35.0)
(54.0)
Benefit (provision) for credit losses
(4.2)
(3.2)
(1.0)
(5.3)
5.5
Income before income taxes
14.9
16.8
16.5
14.9
2.4
Income tax expense
(2.8)
(2.4)
(2.4)
(5.2)
(0.4)
Net income
$12.1
$14.4
$14.0
$9.8
$2.1
Preferred stock dividends
(0.4)
(0.4)
(0.4)
(0.4)
(0.4)
Net income available to common shareholders
$11.7
$14.0
$13.7
$9.4
$1.7
Earnings per share
– diluted
$0.76
$0.91
$0.88
$0.61
$0.11
Weighted average common shares outstanding
– diluted
15.4
15.4
15.5
15.5
15.5
1
Amounts in millions, except percentages and per share amounts.
Organic Loan
Growth
12
High Quality Lending
$4.44B of total loans at March 31, 2024
and average yield of 6.33% in the first
quarter 2024
Total loans increased $198.7M, or 4.7%, from March
31, 2023, driven by commercial loan growth
6.3% CAGR
Total Loans
$2.05
$2.05
$2.34
$2.74
$2.75
$0.02
$0.01
$0.02
$0.05
$0.05
$0.84
$0.96
$1.02
$0.95
$0.92
$0.69
$0.66
$0.67
$0.73
$0.72
$3.60
$3.68
$4.05
$4.46
$4.44
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Billions
Commercial Loans Other Consumer Loans Consumer Indirect Loans Residential Loans & Lines
13
High Quality Lending
Commercial Lending
Outstanding balance of $2.75B at March 31, 2024
• Commercial loans increased $11.6M, or 0.4%, during the first quarter of 2024 and
$216.0M, or 8.5%, year-over-year
• Commercial loans made up 62% of total loan portfolio at March 31, 2024 and are
comprised of Commercial & Industrial (C&I), Commercial Real Estate (CRE) and
Business Banking Unit (BBU)
1
◦ CRE makes up 66% of commercial loans and 41% of total loans
◦ C&I makes up 30% of commercial loans and 18% of total loans
◦ BBU makes up 4% of commercial loans and 3% of total loans
• The vast majority of the commercial loan portfolio is within the Bank's footprint,
which operates in Upstate New York and the Mid-Atlantic region
• Disciplined approach to credit and risk management supports strong asset quality
metrics
8.7% CAGR
Total Commercial Loans
1
Business Banking Unit refers to small business lending through commercial franchise
>$0.01
>$0.01
>$0.01
$1.25
$1.41
$1.68
$2.01
$2.05
$0.25
$0.06
$0.55
$0.58
$0.66
$0.73
$0.71
$2.05
$2.05
$2.34
$2.74
$2.75
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Billions
Commercial Mortgage Loans PPP Loans Commercial Business Loans (ex. PPP)
14
High Quality Lending
Commercial Lending
Committed credit exposure of $3.56B at March 31, 2024
• Commercial business operates across the Bank’s core Upstate New York
markets and in the Mid-Atlantic region, following its successful expansion there
in 2022
• Suburban Baltimore, MD commercial loan production office (“LPO”) provides
important geographic and client diversification, leveraging decades of in-market
and industry experience and deep relationships of CRE lending team there
• Similarly, 2023 opening of LPO in Syracuse, NY builds on Five Star’s Upstate
New York market and houses team of C&I lenders, led by market president with
more than 25 years of local commercial banking experience who joined the Bank
in 2018
Overall Commercial Portfolio Exposure Mix
58%
11%
9%
5%
4%
4%
2%
2%
2%
2%
1%
Real Estate and Rental / Leasing Construction
Manufacturing Other
Accommodation and Food Services Wholesale Trade
Health Care Retail
Scientific and Technical Services Finance & Insurance
Agriculture
Strong Mid-Atlantic Performance &
Opportunity
15
High Quality Lending
Leveraging technology to seamlessly collaborate with Mid-Atlantic team and
onboard new customers despite geographic divide
$307M
in outstandings
~48%
low average LTV
1
• Commercial loan production office opened in Baltimore suburb of Ellicott City in 1Q ’22 serving the Mid-Atlantic
region
◦ Consolidation in the market allowed us to add a four-person team and capitalize on opportunities where a
community banking approach provides a competitive advantage
Note: Information on this slide is as of March 31, 2024 unless noted otherwise
1
Original appraised value used for loan-to-value ratio
• This Mid-Atlantic team has strong relationships with very high-
quality sponsors and serves customers headquartered in and
around Baltimore and the Greater Washington, D.C. area
◦ Mid-Atlantic portfolio consists of a mix of stabilized projects, construction projects and
residential acquisition and development (AD&C) projects
◦ About 27% of committed exposure in this portfolio relates to suburban office space
located around Baltimore, MD and Washington, D.C., with a large concentration located
near hospitals with medical related tenants and high return to office metric
42%
17%
8%
7%
7%
7%
4%
3%
4%
1%
1%
Multifamily Office Retail Hospitality
Home Builder Industrial Other Mixed Use
Land Developer LOC Unsecured
Commercial Real Estate (CRE)
16
High Quality Lending
Outstanding balances of $1.82B and committed credit exposure of $2.15B as of March 31, 2024
• Well diversified, with ~750 loan facilities consolidated into ~270 separate lending relationships, with
~$2.8M average loan size
◦ 82% of CRE clients have loan relationships <$10M
• Growth achieved without compromising strong credit culture
◦ Portfolio factors in loan rollover risk, with 17% of exposure scheduled to mature within next 12 months
and another 22% within 24 months
◦ More than 90% of CRE loans have full or limited personal or corporate recourse, providing comfort with
loan rollover risk
1
◦ Average LTV of 59% for overall CRE portfolio
1
◦ Internal stress testing conducted on a quarterly basis to analyze performance data of several of our
largest CRE asset classes, including multifamily, office, hospitality, retail, mixed-use and industrial; variety
of scenarios stressing loans with NOI downside and higher interest rates still result in the large majority
continuing to have coverage ratios at or greater than 1:1 coverage
CRE Exposure
by Property
Type
1
Recourse and loan-to-value (“LTV”) ratio calculated as of March 31, 2024; original appraised value used for LTV ratio
2
Central Business District
Office and Multifamily CRE
17
High Quality Lending
Office and multifamily CRE outstanding balances of $353M and $742M, respectively, as of March 31, 2024
• Office CRE committed credit exposure of $373M at March 31, 2024
◦ <$40M of office exposure in central business districts, or CBDs, represents ~10% of office and <2% of total CRE exposure
◦ Average loan size of $3.2M and average LTV 55%
1
◦ >70% have full or limited personal or corporate recourse; those without have average LTV of ~60%
1
and DSCR of ~1.4X
◦ ~$13M, or <4% of asset class, within criticized/classified
◦ ~52% of office CRE loans are fixed and ~48% are variable rate
2
• Multifamily CRE committed credit exposure of $909M at March 31, 2024
◦ Expansion into Mid-Atlantic providing geographic and customer diversification
◦ Average loan size of $3.5M and average LTV 60%
1
◦ >90% have full or limited personal or corporate recourse; those without have average LTV of ~56%
1
and DSCR of >1.6X
◦ ~$29M, or ~3% of asset class, within criticized/classified
◦ 40% of multifamily CRE loans are fixed and 60% are variable rate
2
Office
Property by
Class
3
1
Recourse and loan-to-value(“LTV”) ratio calculated as of March 31, 2024; original appraised value used for LTV ratio
2
Loans with overlaying interest rate swaps are considered variable
3
Chart displays property mix as of March 31, 2024. Please note that first quarter 2024 investor presentation published April 24, 2024 erroneously displayed December 31, 2023 percentages
70% of FISI’s office exposure, or
12% of CRE exposure, relates to
Class B or Medical space
18
High Quality Lending
Residential Real Estate
$723.8M portfolio at March 31, 2024
• Residential portfolio was down a modest $3.4M, or 0.5%, from year-end 2023
and up $55.9M, or 8.4%, from March 31, 2023
• High quality portfolio in stable Upstate New York market
◦ As of quarter-end, our residential real estate loans had a weighted average
FICO score of 741 at origination and an average balance of ~$96,000, while our
home equity lines of credit, or HELOCs, had an average score of 767 and
average balance of $22,000
• Full product menu featuring competitive portfolio and saleable products including
government loan programs
• In-market originations through mortgage loan originators and Five Star Bank
branch network
1.5% CAGR
Residential Lending Portfolio
$599.8
$577.3
$589.9
$649.8
$648.2
$89.8
$78.5
$77.7
$77.4
$75.7
$689.6
$655.8
$667.6
$727.2
$723.8
$0
$100
$200
$300
$400
$500
$600
$700
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Millions
Residential Real Estate Loans Residential Real Estate Lines
Consumer Indirect Portfolio
19
High Quality Lending
Indirect Auto Remains Core
Competency
$920.4M portfolio at March 31, 2024
• Effective January 1, 2024, the Company exited the Pennsylvania auto market as
it focuses on its core Upstate New York service area, which includes a strong
network of ~375 new auto dealers
• Consumer indirect portfolio was down $28.4M, or 3.0%, from year-end 2023 and
down $101.8M, or 10.0%, from March 31, 2023
• Prime lending operation with average portfolio FICO score of 714
• Relatively short duration averaging ~3.3 years and natural risk dispersion due to
small loan size, with an average loan balance of $20,000
• Demonstrated track record of consistent performance through economic
expansions, recessions and stagnation
◦ Annual charge-offs ranged 0.45% to 0.87% for 2008 through 2023, excluding
the exceptionally low 0.14% reported in 2021
◦ NCO levels normalized in 2022 and remain within our historical range
◦ Consumer indirect charge-off ratio was 128 bps in 1Q ’24 and 130 bps in 4Q ’23
2.8% CAGR
$840.4
$958.0
$1,023.6
$948.8
$920.4
$0
$200
$400
$600
$800
$1,000
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Millions
Consumer Indirect Loans
Solid Asset Quality
20
High Quality Lending
Disciplined credit culture supports consistently strong asset quality metrics
• Thorough credit review exercise undertaken at the outset of COVID-19 pandemic reinforced confidence in health of loan portfolio
◦ During 2Q ’22, COVID-19 at-risk pool was eliminated, and all credits now monitored as part of standard loan monitoring process
1
Non-performing assets, or NPAs, include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets
Select Asset Quality Metrics
0.39%
0.43%
0.48%
0.60%
0.36%
0.28%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1Q '24
NPAs /Total Assets NPLs/Total Loans NCOs (Recoveries)/Average Loans
Allowance for
Credit Losses
21
High Quality Lending
1Q ’24 reserve release driven by
improvement in consumer indirect
delinquencies and an improvement in
forecasted losses
• 1Q ’24 benefit for credit losses of $5.5M was primarily driven by ~$8M reserve release
along with a $0.6M credit to the allowance for unfunded commitments, partially offset by
$3.2M of net charge-offs during the period
• Reserve release driven primarily by positive trends in qualitative factors, including a
reduction in consumer indirect loan delinquencies during the period, and improved
forecasted losses, which are based in part on the national unemployment forecast
Allowance for Credit Losses – Loans
22
Securities and Deposits
Securities Portfolio
$1.07B at March 31, 2024
• Primarily comprised of agency wrapped mortgage-backed securities with
intermediate durations, which provide ongoing cash flow, coupled with investment
grade municipal bonds that are classified as held-to-maturity
• In 4Q ‘23, the Company repositioned a segment of our securities portfolio, selling
~$54M of agency mortgage-backed securities at an after-tax loss of $2.8M and
reinvesting the proceeds into higher yielding bonds
◦ Associated $1.4M of annual income equates to two year earn-back
• Average yield on a tax equivalent basis was 2.09% for 1Q ’24, up from 2.03% in
linked quarter, reflective of a full quarter of repositioning
• Cash flow from the securities portfolio allows for reinvestment into loans or
additional investment securities
◦ Principal cash flow of ~$211M expected over next 12 months
Note: Shown as a percentage of amortized cost basis
5.1% CAGR
6%
3%
14%
72%
5%
Municipal
Agency Debt
Agency CMOs
Agency MBS
US Treasury
$628
$1,178
$954
$888
$924
$272
$206
$189
$148
$144
$900
$1,384
$1,143
$1,036
$1,067
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Millions
Securities Available for Sale Securities Held to Maturity, net
$2.55
$2.70
$2.77
$3.12
$3.13
$0.28
$0.25
$0.35
$0.26
$0.18
$0.83
$1.10
$1.12
$1.02
$1.21
$0.62
$0.77
$0.70
$0.82
$0.87
$4.28
$4.83
$4.93
$5.21
$5.40
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Billions
Total Nonpublic Deposits Total Brokered Deposits
Total Public Deposits Total Reciprocal Deposits
23
Securities and Deposits
Deposit Growth
$5.40B at March 31, 2024
329
municipal
customers as of
MRQ-end
3.23%
6.9% CAGR
• Total deposits were $5.40B, up $183.8M, or 3.5%, from December 31, 2023, and
up $255.5M, or 5.0%, from one year prior
◦ The linked quarter increase is reflective of seasonal public deposit inflows, while
the improvement over the prior year was driven by nonpublic deposit growth
• Granularity of community banking franchise benefits deposit portfolio
◦ Average deposit balances per branch of approximately $85.5M, excluding
reciprocal and brokered deposits
◦ Lower-cost deposits from rural markets fund higher growth in metro markets
• Offering a variety of public (municipal) deposit products to the towns, villages,
counties and school districts providing seasonal, lower-cost funding source
◦ Public deposit balances represented 22% of total deposits at March 31, 2024,
20% at December 31, 2023, and 23% at March 31, 2023
• Current interest rate environment has led to disintermediation from core
transaction type accounts to time deposits
◦ Time deposits made up 29% of total deposits at March 31, 2024
1Q ‘24 cost of
average interest-
bearing deposits
$550
$613
$574
$809
$906
$226
$445
$158
$175
$30
$224
$202
$156
$291
$365
$33
$27
$57
$40
$184
$1,033
$1,287
$945
$1,314
$1,484
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Millions
FRB Discount Window Unencumbered Securities FHLBNY FRB Excess Cash
24
Securities and Deposits
Liquidity
Diverse deposit gathering capabilities and eligible
collateral support a robust liquidity position
• 1Q ’24 available committed liquidity remains strong, as supported through
unencumbered collateral in the securities portfolio, borrowing capacity at the
FHLB, and tertiary liquidity via the FRB discount window, which totaled more than
$1.48B at quarter-end
• The decrease in unencumbered securities is due to the inflow of municipal
deposits, which require collateralization
• Further, uninsured nonpublic deposits make up approximately 14.2% of our total
deposits, when considering the secured nature of our public and reciprocal
portfolios, which typically have larger balances
~14.2%
of total deposits
are uninsured
nonpublic deposits
~82%
Loan to deposit
ratio
Net Interest Income & Margin
25
Revenue
1Q ’24 net interest income of $40.1M and net interest margin of 2.78%
• Net interest income of $40.1M increased
$0.2M, or 0.5%, from the linked fourth
quarter and decreased $1.7M, or 4.1%,
from the year-ago quarter
• Net interest margin was 2.78% for the
current quarter, consistent with the linked
quarter and 31 bps lower than the year-
ago quarter
◦ Margin has been impacted by the current
higher interest rate environment that has
driven higher funding costs
1Q '24
$40
$139
$155
$167
$166
$164
3.22%
3.14%
3.20%
2.94%
2.87%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
2020 2021 2022 2023 TTM 1Q '24
Millions
Net interest income Net interest margin
Select Interest Earning
Assets
2023
Yield
1Q ‘24
Yield
1Q ‘24
Roll Off
Yield
Balance at
3/31/2024
Average
NTM
Monthly
Cash Flow
1
Investment Securities
1.92%
2.09%
2.45%
$1,067, 478
$19,654
Commercial Real Estate
Loans
6.83%
7.10%
7.39%
$1,816,916
$35,096
Commercial & Industrial
Loans
6.43%
6.80%
6.20%
$818,571
$14,429
Small Business Loans
2
6.65%
6.99%
8.40%
$116,266
$1,344
Residential Real Estate Loans
3.71%
3.99%
4.26%
$648,160
$6,041
Consumer Indirect Loans
5.36%
5.90%
6.16%
$920,428
$26,829
Balance Sheet
Providing Ample
Cash Flow
26
Revenue
Combined ~$1.1B in anticipated cash flow
over the next 12 months from investment
securities and loan portfolios
Ample cash flow allows for redeployment of funds in
higher interest earning assets, supporting incremental
margin expansion
1
NTM = next twelve months. Average monthly loan cash flow projections based on contractual loan terms and historical
prepayment assumptions that are based on a 12-month historical average.
2
Small business represents small business loans generated through retail network and commercial Business Banking Unit
27
Revenue
Noninterest Income
Noninterest income was $10.9M in 1Q ‘24
• Noninterest income was $10.9M, down $4.5, or 29.1%, from 4Q ’23 and flat with
the year-ago quarter.
◦ The linked quarter variance was primarily driven by higher company owned life
insurance revenue in Q4 ’23 of $9.1M, of which approximately $8M related to
the investment of premium into a separate account product during that period
from our surrender and redeploy strategy. Noninterest income was flat with the
1Q ’23.
• Investment advisory income, which totaled $2.6M in Q1 ’24, is primarily derived
from the Company’s wealth management subsidiary Courier Capital, LLC
22.7%
of TTM net
revenue from non-
interest income
$2.99B
in assets managed
by Courier Capital
at quarter-end
Annual Noninterest Income
Note: Information on this slide is as of March 31, 2024 unless noted otherwise
$29.2
$29.5
$28.4
$30.6
$30.9
$9.5
$11.7
$11.5
$11.0
$10.6
$4.4
$5.8
$6.4
$6.7
$6.8
$0.0
$46.9
$46.3
$48.2
$48.2
$0
$10
$20
$30
$40
$50
$60
2020 2021 2022 2023 TTM 1Q '24
Millions
All Other Noninterest Income Investment Advisory Income Insurance Income
Wealth Management Business Positioned for Growth
28
Revenue
Providing customized investment management, retirement planning, and consulting services for mass affluent
and high-net-worth individuals and families, businesses, institutions, and foundations
• Since entering the investment advisory space in 2016 with the acquisition of Courier Capital, the Company has completed two additional wealth
management acquisitions in 2017 and 2018
• Combination of FISI’s subsidiary wealth management firms enhanced size and scale as next natural step in evolution of this business line
◦ On May 1, 2023, FISI’s wholly-owned SEC-registered investment advisory firm subsidiaries completed a merger, under which HNP Capital merged with and into
Courier Capital
◦ One of the largest registered investment advisory firms in Western New York
• Merger streamlines ability to provide innovative financial products and services to current and prospective clients and unites Western New York
service footprint
◦ One brand streamlines business development efforts, including cross-selling opportunities
◦ Courier Capital is headquartered in downtown Buffalo, NY and the majority of the former HNP Capital team is based in the Rochester, NY market, with additional
offices located in Jamestown, NY and Pittsburgh, PA
• In October 2023, the Company announced a leadership succession at Courier Capital
◦ Promoted internal candidate with two decades of experience in private banking with several large U.S. banks to President
◦ New leadership structure allows the firm to continue serving its wealth management, retirement plan and institutional services clients at the highest level, while
positioning the firm for continued growth moving forward
$35.0
$19.0
$33.7
$33.8
$34.7
$35.0
$54.0
$0
$10
$20
$30
$40
$50
$60
$70
1Q '23 2Q '23 3Q '23 4Q '23 1Q '24
Millions
Noninterest expense March 2024 fraud event
$138.5
$19.0
$109.3
$112.8
$129.4
$137.2
$157.6
$0
$20
$40
$60
$80
$100
$120
$140
$160
2020 2021 2022 2023 TTM 1Q '24
Millions
Noninterest expense March 2024 fraud event
29
Expense Management & Operating Leverage
Noninterest Expense
1Q ’24 expense of $54.0M included ~$19M of noninterest
expense related to previously disclosed fraud event
• 1Q ’24 expense of $54.0M is up $19.0M, or 54.1%, from the linked quarter and
up $20.4M, or 60.5%, from the prior year period
◦ Expenses were impacted by approximately $18.4M in deposit-related charge-
offs and $0.7M of legal and consulting expenses related to the Company’s
previously disclosed fraud matter.
• In 4Q ’23, the Company announced leadership changes and improvements to its
organizational structure to strengthen its ability to execute its long-term strategy
while also reflecting proactive measures to manage noninterest expenses
heading into 2024
• 2022 expenses included investments in strategic initiatives that we believe will
support improved operating leverage over the coming years, including related to
enhanced customer relationship management solution, digital banking and BaaS
• 1Q ‘24 efficiency ratio of 106%, or 69% when excluding expenses related to the
fraud event
1
Quarterly Noninterest Expense
Annual Noninterest Expense
1
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. Please see Appendix for
additional details on this non-GAAP measure.
Well-Capitalized
30
Capital Management & Investment Considerations
Exceeding well-capitalized regulatory thresholds and well-positioned to support future growth
Capital Ratio
As of March 31, 2024 Well-Capitalized Threshold
Leverage
8.03%
5.00%
CET1 capital
9.43%
6.50%
Tier 1 capital
9.76%
8.00%
Total RBC
12.04%
10.00%
8.25%
8.23%
8.33%
8.18%
8.03%
10.18%
10.28%
9.42%
9.43% 9.43%
10.63%
10.68%
9.78%
9.76% 9.76%
13.61%
13.12%
12.13% 12.13%
12.04%
0%
2%
4%
6%
8%
10%
12%
14%
16%
12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024
Leverage Ratio Common Equity Tier 1 Capital Ratio Tier 1 Capital Ratio Total Risk-Based Capital Ratio
31
Capital Management & Investment Considerations
AOCI Impact on TCE & TCBV
1
Unrealized losses believed to be temporary in nature
• AOCI losses are believed to be temporary in nature, as they are associated with
the increase in interest rates which has resulted in an increase in the unrealized
loss position of the available for sale securities portfolio
• We expect these metrics to return to more normalized levels over time given the
high credit quality of our investment portfolio
• Excluding the AOCI impact, TCE ratio and tangible common book value per share
would have been 7.53% and $30.37, respectively.
FISI believes a stock buyback
program is an important part of the
capital markets tool kit and
announced a new stock repurchase
program in June 2022 for up to ~5%
of then outstanding common shares
1
AOCI= Accumulated other comprehensive income (loss). TCE = Tangible common equity to tangible assets. TCBV = Tangible common book
value per share. Please see Appendix for reconciliation of non-GAAP Financial measures for the computation of these non-GAAP measures.
Change in TCE
Change in TCBV
FISI Presents a Compelling Valuation
32
Capital Management & Investment Considerations
Longstanding commitment to rewarding shareholders through meaningful
dividend yield and 29-year cash dividend history
Results-driven
community bank with
strong retail and
commercial franchises
Disciplined credit
culture with strong
credit quality
Investment Profile
As of March 31, 2024
Closing Price
$18.82
52
-week High
$23.11
52
-week Low
$17.70
Common Shares Outstanding
15.4M
Market Capitalization
$290.7M
Price/LTM EPS
7.5x
Price/NTM Consensus EPS
6.5x
Price/Common Book Value Per Share
0.68
Float
97.2%
Average Daily Volume (3 mos.)
~52,000
Dividend Per Share (annualized MRQ)
$1.20
Dividend Yield (annualized MRQ)
6.41%
Common Dividend Payout Ratio
273%
Fee-based business
diversifies revenue
and complements core
banking franchise
Complementary
fintech and digital
partnerships driving
exceptional digital
experiences
Appendix
33
Thank you for your
interest in
Financial Institutions, Inc.
NASDAQ: FISI
Investor Relations Contacts
Kate Croft
Director of Investor and
External Relations
Jack Plants
Chief Financial Officer &
Corporate Treasurer
FISI-Investors@five-starbank.com
Learn more at
www.FISI-Investors.com
Strong Executive Leadership Team Positioned to Drive
Growth and Operational Excellence
34
Appendix
Martin K. Birmingham
President & Chief Executive Officer
Reid A. Whiting
SVP, Chief Banking Officer
overseeing retail and digital banking,
consumer lending, residential
mortgage and BaaS
Samuel J. Burruano Jr.
EVP, Chief Legal Officer & Corporate
Secretary
overseeing legal, corporate governance,
ESG and internal audit
W. Jack Plants II
EVP, CFO & Treasurer
overseeing financial planning and analysis,
accounting, tax, investor and external
relations, treasury, operations and
technology
Laurie R. Collins
SVP, Chief Human Resources Officer
overseeing talent recruitment and
development, training and incentives,
and DEI
Gary A. Pacos
SVP, Chief Risk Officer
overseeing enterprise risk, BSA/AML,
fraud, compliance, information security and
credit administration
Kevin B. Quinn
SVP, Chief Commercial Banking Officer
overseeing CRE and C&I lending, treasury
management, merchant services and
community development
Blake G. Jones
SVP, Chief Marketing Officer
overseeing marketing, brand
strategy and enterprise sales
Strategy Map
35
Appendix
Optimal capital
& funding
Robust, usable
data &
technology
Scalable &
efficient
operating model
Sound risk &
compliant
environment
Recognized &
trusted brand
Talented &
empowered
employees
Value
-added
products &
services
Complementary
fintech & digital
partnerships
Exceptional CX
& engagement
Grow & sustain
deposits
Foundation of Human Capital Supported by Organizational Framework
Culture | Leadership | Teamwork | Alignment
Exceptional
digital
experiences
Credit
disciplined loan
growth
Sustainable
business
practice
Diversify
revenues
Maintain
expense
discipline
Attractive long-term
returns for
shareholders
Meaningful
customer experiences
& relationships
Effective engagement
& communications
with regulators
Positive
contributions to our
communities
Engaged &
motivated
associates
FISI’s vision is to be an independent, high-performing community bank offering
best-in-class financial services to all of the communities we serve
Non-GAAP Reconciliations
36
Appendix
In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this presentation contains certain non-GAAP financial
measures. 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.
Amounts in thousands, except per share data and percentages
12/31/2021 3/31/2024
Computation of ending tangible common equity:
Common shareholders' equity
$ 487,850 $ 448,442
Less: Goodwill and other intangible assets, net
74,400 72,287
Tangible common equity
413,450 356,155
Computation of ending tangible assets:
Total assets
$ 5,520,779 $ 6,225,760
Less: Goodwill and other intangible assets, net
74,400 72,409
Tangible assets
5,446,379 6,153,351
Tangible common equity to tangible assets
1
7.59% 6.80%
Common shares outstanding
15,745 15,447
Tangible common book value per share
2
$ 26.26 $ 23.06
1
Tangible common equity divided by tangible assets.
2
Tangible common equity divided by common shares outstanding.
Source: Company filings
Non-GAAP Reconciliations Continued
37
Appendix
Amounts in thousands, except per share data and percentages
As of and for the quarter ended March 31, 2024
Adjusted Net Income and Adjusted Earnings Per Share (EPS):
Income before
income taxes
Provision for
income taxes
Net income
Preferred stock
dividends
Diluted EPS
As reported
$ 2,426 $ 356 $ 2,070 $ 365 $ 0.11
Add back:
March 2024 fraud event related expenses 19,035 4,877 14,158 - 0.91
Impact of full year effective tax rate – interim period adjustment - (1,471) 1,471 - 0.10
As adjusted
$ 21,461 $ 3,762 $ 17,699 $ 365 $ 1.12
Adjusted Return on Average Assets (ROAA):
As reported Adjustments As adjusted
Average total assets
$ 6,225,760 - $ 6,225,760
Net income
2,070 15,629 17,699
Net income (annualized)
8,280 62,516 70,796
Return on average assets
0.13% 1.00% 1.14%
Adjusted Efficiency Ratio:
As reported Adjustments As adjusted
Non
-interest expenses $ 54,013 $ 19,035 $ 34,978
Net interest income
40,082 - 40,082
Non
-interest income 10,901 - 10,901
Efficiency ratio
106% -37% 69%
Source: Company filings