Financial Institutions Inc. Files Q1 2024 10-Q Report

TL;DR

<b>Financial Institutions Inc. has filed its Q1 2024 10-Q report.</b>

AI Summary

FINANCIAL INSTITUTIONS INC (FIISP) filed a Quarterly Report (10-Q) with the SEC on May 6, 2024. Filing is a 10-Q for the period ending March 31, 2024. Company is FINANCIAL INSTITUTIONS INC, SIC code 6021 (National Commercial Banks). Incorporated in NY, fiscal year ends December 31. Business and mailing address: 220 Liberty Street, Warsaw, NY 14569. Phone number: 5857861100.

Why It Matters

For investors and stakeholders tracking FINANCIAL INSTITUTIONS INC, this filing contains several important signals. This filing provides an update on the company's financial performance and position for the first quarter of 2024. Investors and analysts can use this report to assess the company's health, identify trends, and make informed investment decisions.

Risk Assessment

Risk Level: low — FINANCIAL INSTITUTIONS INC shows low risk based on this filing. The filing is a standard quarterly report (10-Q) and does not contain immediate, significant new risks or disclosures beyond routine financial reporting.

Analyst Insight

Review the detailed financial statements and risk factors within the 10-Q to understand the company's current operational and financial standing.

Key Numbers

• 2024-03-31 — Report Period End Date (Conformed Period of Report)
• 2024-05-06 — Filing Date (Filed as of Date)
• 2024-03-31 — Financial Asset Past Due Date (us-gaap:FinancialAssetPastDueMember)
• 2023-12-31 — Financial Asset Past Due Date (us-gaap:FinancialAssetPastDueMember)
• 2024-03-31 — Residential Mortgage Date (us-gaap:ResidentialMortgageMember)
• 2023-12-31 — Residential Mortgage Date (us-gaap:ResidentialMortgageMember)
• 2024-03-31 — Derivative Financial Instruments Assets Date (us-gaap:DerivativeFinancialInstrumentsAssetsMember)
• 2023-12-31 — Derivative Financial Instruments Assets Date (us-gaap:DerivativeFinancialInstrumentsAssetsMember)

Key Players & Entities

• FINANCIAL INSTITUTIONS INC (company) — Filer name
• 0000862831 (company) — Central Index Key
• 6021 (company) — Standard Industrial Classification
• NY (company) — State of Incorporation
• 220 Liberty Street (company) — Business Address Street 1
• WARSAW (company) — Business Address City
• 14569 (company) — Business Address ZIP
• 5857861100 (company) — Business Phone

FAQ

Industry Context

Financial Institutions Inc. operates within the National Commercial Banks sector (SIC 6021).

Regulatory Implications

As a financial institution, the company is subject to regulations from the SEC and other financial authorities.

What Investors Should Do

1. Analyze the company's balance sheet and income statement for Q1 2024.
2. Examine any disclosed risk factors or management's discussion and analysis.
3. Compare Q1 2024 performance to previous periods and industry benchmarks.

Key Dates

• 2024-03-31: Quarterly Report Period End — End of the first quarter of 2024.
• 2024-05-06: Filing Date — Date the 10-Q report was officially filed with the SEC.

Year-Over-Year Comparison

This is the Q1 2024 10-Q filing, providing an update from the previous fiscal year-end report.

Key Financial Figures

• $0.01 — ch registered Common stock, par value $0.01 per share FISI Nasdaq Global Select

Filing Documents

• fisi-20240331.htm (10-Q) — 5688KB
• fisi-ex10_1.htm (EX-10.1) — 131KB
• fisi-ex10_2.htm (EX-10.2) — 105KB
• fisi-ex10_3.htm (EX-10.3) — 54KB
• fisi-ex10_4.htm (EX-10.4) — 101KB
• fisi-ex31_1.htm (EX-31.1) — 14KB
• fisi-ex31_2.htm (EX-31.2) — 14KB
• fisi-ex32.htm (EX-32) — 17KB
• img227012907_0.jpg (GRAPHIC) — 3KB
• img227936428_0.jpg (GRAPHIC) — 3KB
• img228859949_0.jpg (GRAPHIC) — 6KB
• img229783470_0.jpg (GRAPHIC) — 6KB
• img229783470_1.jpg (GRAPHIC) — 2KB
• 0000950170-24-053540.txt (&nbsp;) — 25146KB
• fisi-20240331.xsd (EX-101.SCH) — 1999KB
• fisi-20240331_htm.xml (XML) — 7067KB

Financial Statements

Financial Statements Consolidated Statements of Financial Condition (Unaudited) – at March 31, 2024 and December 31, 2023 3 Consolidated Statements of Income (Unaudited) – Three months ended March 31, 2024 and 2023 4 Consolidated Statements of Comprehensive (Loss) Income (Unaudited) – Three months ended March 31, 2024 and 2023 5 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) – Three months ended March 31, 2024 and 2023 6 Consolidated Statements of Cash Flows (Unaudited) – Three months ended March 31, 2024 and 2023 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 8 ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 39 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 59 ITEM 4.

Controls and Procedures

Controls and Procedures 60 PART II. OTHER INFORMATION ITEM 1.

Legal Proceedings

Legal Proceedings 61 ITEM 1A.

Risk Factors

Risk Factors 61 ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 62 ITEM 5. Other Information 62 ITEM 6. Exhibits 63

Signatures

Signatures 64 2 Table of Contents

FINANC IAL INFORMATION

PART I. FINANC IAL INFORMATION

Fina ncial Statements

ITEM 1. Fina ncial Statements FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statements of Fin ancial Condition (Unaudited) (Dollars in thousands, except share and per share data) March 31, 2024 December 31, 2023 ASSETS Cash and due from banks $ 237,038 $ 124,442 Securities available for sale, at fair value (amortized cost of $ 1,083,669 and $ 1,037,990 , respectively) 923,761 887,730 Securities held to maturity, at amortized cost (net of allowance for credit losses of $ 3 and $ 4 , respectively) (fair value of $ 131,269 and $ 137,030 , respectively) 143,714 148,156 Loans held for sale 504 1,370 Loans (net of allowance for credit losses of $ 43,075 and $ 51,082 , respectively) 4,398,971 4,411,057 Company owned life insurance 162,685 161,363 Premises and equipment, net 39,798 39,902 Goodwill and other intangible assets, net 72,287 72,504 Other assets 319,840 314,357 Total assets $ 6,298,598 $ 6,160,881 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 972,801 $ 1,010,614 Interest-bearing demand 798,831 713,158 Savings and money market 2,064,539 2,084,444 Time deposits 1,560,586 1,404,696 Total deposits 5,396,757 5,212,912 Short-term borrowings 133,000 185,000 Long-term borrowings, net of issuance costs of $ 390 and $ 468 , respectively 124,610 124,532 Other liabilities 198,497 183,641 Total liabilities 5,852,864 5,706,085 Shareholders' equity: Series A 3 % preferred stock, $ 100 par value; 1,533 shares authorized; 1,435 shares issued 143 143 Series B-1 8.48 % preferred stock, $ 100 par value; 200,000 shares authorized; 171,486 shares issued 17,149 17,149 Total preferred equity 17,292 17,292 Common stock, $ 0.01 par value; 50,000,000 shares authorized; 16,099,556 shares issued 161 161 Additional paid-in capital 124,627 125,841 Retained earnings 448,772

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Financial Institutions, Inc. (the "Company") is a financial holding company organized in 1931 under the laws of New York State ("New York"). The Company provides diversified financial services through its subsidiaries, Five Star Bank (the "Bank") and Courier Capital, LLC ("Courier Capital"). The Company offers a broad array of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its wholly owned New York chartered banking subsidiary, the Bank. The Bank also has commercial loan production offices in Ellicott City (Baltimore), Maryland and Syracuse, New York, and indirect lending network relationships with franchised automobile dealers in the Capital District of New York. Effective January 1, 2024, the Company exited the Pennsylvania automobile market to align our focus more fully around its core Upstate New York market. The Company's Banking-as-a-Service ("BaaS") business offers banking capabilities to non-bank financial service providers and other financial technology firms ("FinTechs"), allowing them to provide banking services to their end users. These BaaS partnerships allow the Bank to offer banking services and products beyond our traditional footprint. As of March 31, 2024, the Company's fee-based subsidiaries included SDN Insurance Agency, LLC ("SDN"), which provided a broad range of insurance services to personal and business clients, and C ourier Capital, which provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. On April 1, 2024, the Company announced and closed the sale of the assets of SDN to NFP Property & Casualty Services, Inc., a subsidiary of NFP Corp. Basis of Presentation The consolidated financi

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fraudulent Activity In early March 2024, the Company discovered fraudulent activity associated with deposit transactions conducted over the course of several business days by an in-market business customer of the Bank, which resulted in an $ 18.4 million pre-tax loss. T he Bank is working with the appropriate law enforcement authorities in connection with this matter and is pursuing all legal recourse available to recover additional funds and minimize the loss. However, there can be no assurance that the Company will be able to recover any further offset to the deposit loss. The ultimate financial impact could be lower and will depend, in part, on the Bank's success in its efforts to recover the funds. The fraud exposure arose from non-contractual, external fraud, and was treated as an operational loss, recorded in deposit-related charged-off items, in noninterest expense for the first quarter of 2024 . Recent Accounting Pronouncements In March 2023, the FASB issued ASU No. 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The ASU allows for entities to consistently account for tax credit equity investments utilizing the proportional amortization method across all types of tax credits when certain requirements are met. The election of proportional amortization method must be made on a programmatic basis rather than an individual investment basis. For previously held tax credit investments, the amendments will be applied either on a modified retrospective basis or a retrospective basis. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance did not have a material impa

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (2.) EARNINGS PER COMMON SHARE ("EPS") The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS (in thousands, except per share amounts). Three months ended March 31, 2024 2023 Net income available to common shareholders $ 1,705 $ 11,724 Weighted average common shares outstanding: Total shares issued 16,100 16,100 Unvested restricted stock awards ( 10 ) ( 6 ) Treasury shares ( 687 ) ( 746 ) Total basic weighted average common shares outstanding 15,403 15,348 Incremental shares from assumed: Vesting of restricted stock awards 140 87 Total diluted weighted average common shares outstanding 15,543 15,435 Basic earnings per common share $ 0.11 $ 0.76 Diluted earnings per common share $ 0.11 $ 0.76 For each of the periods presented, average shares subject to the following instruments were excluded from the computation of diluted EPS because the effect would be antidilutive (in thousands): Three months ended March 31, 2024 2023 Restricted stock awards — 3 10 Table of Contents FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (3.) INVESTMENT SECURITIES The amortized cost and fair value of investment securities are summarized below (in thousands): Amortized Unrealized Unrealized Fair Cost Gains Losses Value March 31, 2024 Securities available for sale: U.S. Government agency and government sponsored enterprises $ 24,535 $ — $ 2,783 $ 21,752 U.S. Treasury Bills 64,698 — 1 64,697 Mortgage-backed securities: Federal National Mortgage Association 440,860 — 65,445 375,415 Federal Home Loan Mortgage Corporation 393,249 292 64,018 329,523 Government National Mortgage Association 125,796 107 22,057 103,846 Collateralized mortgage obligations: Federal National Mortgage Association 10,649 — 2,313 8,336 Federal Home Loan Mortgage Corporation 19,413 — 4,229 15,184 Government National Mortgage Association 4,469 142 — 4,611 Privately issued — 397 — 397 Total mortgage-backed securities 994,436 938 158,062 837,312 Total available for sale securities $ 1,083,669 $ 938 $ 160,846 $ 923,761 Securities held to maturity: U.S. Government agency and government sponsored enterprises $ 16,551 $ — $ 674 $ 15,877 66,405 33 5,638 60,800 Mortgage-backed securities: Federal National Mortgage Association 5,683 — 572 5,111 Federal Home Loan Mortgage Corporation 7,603 — 1,387 6,216 Government National Mortgage Association 19,736 — 2,071 17,665 Collateralized mortgage obligations: Federal National Mortgage Association 10,851 — 876 9,975 Federal Home Loan Mortgage Corporation 13,450 — 980 12,470 Government National Mortgage Association 3,438 — 283 3,155 Total mortgage-backed securities 60,761 — 6,169 54,592 Total held to maturity securities 143,717 $ 33 $ 12,481 $ 131,

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (3.) INVESTMENT SECURITIES (Continued) Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2023 (continued) Securities held to maturity: U.S. Government agencies and government sponsored enterprises $ 16,513 $ — $ 530 $ 15,983 68,854 34 5,106 63,782 Mortgage-backed securities: Federal National Mortgage Association 5,729 — 467 5,262 Federal Home Loan Mortgage Corporation 7,648 — 1,269 6,379 Government National Mortgage Association 20,223 — 1,703 18,520 Collateralized mortgage obligations: Federal National Mortgage Association 11,432 — 851 10,581 Federal Home Loan Mortgage Corporation 14,196 — 968 13,228 Government National Mortgage Association 3,565 — 270 3,295 Total mortgage-backed securities 62,793 — 5,528 57,265 Total held to maturity securities 148,160 $ 34 $ 11,164 $ 137,030 Allowance for credit losses – securities ( 4 ) Total held to maturity securities, net $ 148,156 The Company elected to exclude accrued interest receivable ("AIR") from the amortized cost basis of debt securities disclosed throughout this footnote. For available for sale ("AFS") debt securities, AIR totaled $ 2.0 million and $ 2.1 million as of March 31, 2024 and December 31, 2023, respectively. For held to maturity ("HTM") debt securities, AIR totaled $ 783 thousand and $ 571 thousand as of March 31, 2024 and December 31, 2023, respectively. AIR is included in other assets on the Company's consolidated statements of financial condition. For the three months ended March 31, 2024 and 2023 , provision for credit loss for HTM investment securities was less than $ 1 thousand in each period. Investment securities with a total fair value of $ 1.02 billion and $ 845.2 million at March 31, 2024 and December 31, 2023, respectively, were p

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