Financial Institutions Inc. Files Q2 2024 10-Q Report

TL;DR

FINANCIAL INSTITUTIONS INC. FILED Q2 2024 10-Q. CHECK FINANCIALS.

AI Summary

Financial Institutions Inc. reported its Q2 2024 results on August 5, 2024. The company, headquartered at 220 Liberty Street, Warsaw, NY, operates within the National Commercial Banks sector. Key financial details and performance metrics for the quarter ending June 30, 2024, are presented in this 10-Q filing.

Why It Matters

This filing provides investors and analysts with the latest financial performance data for Financial Institutions Inc., crucial for understanding the company's current health and future prospects.

Risk Assessment

Risk Level: low — This is a routine quarterly filing providing standard financial information.

Key Players & Entities

• FINANCIAL INSTITUTIONS INC (company) — Filer
• 220 LIBERTY STREET, WARSAW, NY 14569 (company) — Business and Mail Address
• 0000862831 (company) — Central Index Key
• 6021 (company) — Standard Industrial Classification (National Commercial Banks)
• NY (company) — State of Incorporation
• 1231 (company) — Fiscal Year End
• 20240630 (date) — Conformed Period of Report
• 20240805 (date) — Filed as of Date

FAQ

Key Financial Figures

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

Filing Documents

• fisi-20240630.htm (10-Q) — 7089KB
• fisi-ex31_1.htm (EX-31.1) — 14KB
• fisi-ex31_2.htm (EX-31.2) — 14KB
• fisi-ex32.htm (EX-32) — 17KB
• img39860439_0.jpg (GRAPHIC) — 6KB
• 0000950170-24-090729.txt ( ) — 28367KB
• fisi-20240630.xsd (EX-101.SCH) — 1945KB
• fisi-20240630_htm.xml (XML) — 8280KB

Financial Statements

Financial Statements Consolidated Statements of Financial Condition (Unaudited) – at June 30, 2024 and December 31, 2023 3 Consolidated Statements of Income (Unaudited) – Three and six months ended June 30, 2024 and 2023 4 Consolidated Statements of Comprehensive Income (Unaudited) – Three and six months ended June 30, 2024 and 2023 5 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) – Three and six months ended June 30, 2024 and 2023 6 Consolidated Statements of Cash Flows (Unaudited) – Six months ended June 30, 2024 and 2023 8

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 9 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 45 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 69 ITEM 4.

Controls and Procedures

Controls and Procedures 70 PART II. OTHER INFORMATION ITEM 1.

Legal Proceedings

Legal Proceedings 71 ITEM 1A.

Risk Factors

Risk Factors 71 ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 72 ITEM 5. Other Information 72 ITEM 6. Exhibits 73

Signatures

Signatures 74 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) June 30, 2024 December 31, 2023 ASSETS Cash and due from banks $ 146,347 $ 124,442 Securities available for sale, at fair value (amortized cost of $ 1,030,844 and $ 1,037,990 , respectively) 871,635 887,730 Securities held to maturity, at amortized cost (net of allowance for credit losses of $ 3 and $ 4 , respectively) (fair value of $ 115,849 and $ 137,030 , respectively) 128,271 148,156 Loans held for sale 2,099 1,370 Loans (net of allowance for credit losses of $ 43,952 and $ 51,082 , respectively) 4,417,516 4,411,057 Company owned life insurance 164,033 161,363 Premises and equipment, net 39,520 39,902 Goodwill and other intangible assets, net 60,979 72,504 Other assets 301,372 314,357 Total assets $ 6,131,772 $ 6,160,881 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 939,346 $ 1,010,614 Interest-bearing demand 711,580 713,158 Savings and money market 2,007,256 2,084,444 Time deposits 1,475,139 1,404,696 Total deposits 5,133,321 5,212,912 Short-term borrowings 202,000 185,000 Long-term borrowings, net of issuance costs of $ 313 and $ 468 , respectively 124,687 124,532 Other liabilities 204,097 183,641 Total liabilities 5,664,105 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 124,704 125,841 Retained earnings 469,399

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. Courier Capital 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 its former subsidiary SDN Insurance Agency, LLC ("SDN"), which provided a broad range of insurance services to personal and business clients, to NFP Property & Casualty Services, Inc., a subsidiary of NFP Corp. The sale generated $ 27 million in proceeds, or a pre-tax gain of $ 13.5 million, after selling costs, which was

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 resulte d in an $ 18.2 million pre-tax loss for the six months ended June 30, 2024. 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, with a small recovery of $ 143 thousand being recorded for the second quarter of 2024. The Bank is working with the appropriate law enforcement authorities in connection with this matter and is aggressively 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. 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, in

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 June 30, Six months ended June 30, 2024 2023 2024 2023 Net income available to common shareholders $ 25,265 $ 14,009 $ 26,970 $ 25,733 Weighted average common shares outstanding: Total shares issued 16,100 16,100 16,100 16,100 Unvested restricted stock awards ( 10 ) ( 7 ) ( 10 ) ( 10 ) Treasury shares ( 646 ) ( 721 ) ( 666 ) ( 734 ) Total basic weighted average common shares outstanding 15,444 15,372 15,424 15,356 Incremental shares from assumed: Vesting of restricted stock awards 112 41 127 71 Total diluted weighted average common shares outstanding 15,556 15,413 15,551 15,427 Basic earnings per common share $ 1.64 $ 0.91 $ 1.75 $ 1.68 Diluted earnings per common share $ 1.62 $ 0.91 $ 1.73 $ 1.67 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 June 30, Six months ended June 30, 2024 2023 2024 2023 Restricted stock awards — 5 — — 11 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 June 30, 2024 Securities available for sale: U.S. Government agency and government sponsored enterprises $ 24,535 $ — $ 2,743 $ 21,792 Mortgage-backed securities: Federal National Mortgage Association 431,188 — 64,624 366,564 Federal Home Loan Mortgage Corporation 383,882 151 63,585 320,448 Government National Mortgage Association 123,508 109 22,689 100,928 Collateralized mortgage obligations: Federal National Mortgage Association 10,385 — 2,295 8,090 Federal Home Loan Mortgage Corporation 38,505 64 4,228 34,341 Government National Mortgage Association 16,841 234 — 17,075 Privately issued — 384 — 384 Total mortgage-backed securities 1,004,309 942 157,421 847,830 Other debt securities 2,000 13 — 2,013 Total available for sale securities $ 1,030,844 $ 955 $ 160,164 $ 871,635 Securities held to maturity: U.S. Government agency and government sponsored enterprises $ 16,588 $ — $ 639 $ 15,949 52,811 23 5,531 47,303 Mortgage-backed securities: Federal National Mortgage Association 5,637 — 630 5,007 Federal Home Loan Mortgage Corporation 7,533 — 1,398 6,135 Government National Mortgage Association 19,335 — 2,216 17,119 Collateralized mortgage obligations: Federal National Mortgage Association 10,354 — 829 9,525 Federal Home Loan Mortgage Corporation 12,718 — 928 11,790 Government National Mortgage Association 3,298

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