Financial Institutions Inc. Files Q3 2024 10-Q

TL;DR

FINANCIAL INSTITUTIONS INC. FILED ITS Q3 10-Q. CHECK THE NUMBERS.

AI Summary

Financial Institutions Inc. filed its 10-Q for the period ending September 30, 2024. The company, headquartered at 220 Liberty Street, Warsaw, NY, operates in the National Commercial Banks sector. Key financial data and disclosures for the third quarter of 2024 are presented in this filing.

Why It Matters

This filing provides investors and analysts with the latest financial performance and operational details of Financial Institutions Inc., crucial for assessing its current health and future prospects.

Risk Assessment

Risk Level: low — This is a routine quarterly filing providing standard financial disclosures, not indicating any immediate or unusual risks.

Key Players & Entities

• FINANCIAL INSTITUTIONS INC. (company) — Filer of the 10-Q
• 220 LIBERTY STREET, WARSAW, NY 14569 (location) — Company's business and mailing address
• 0000862831 (company) — Central Index Key for FINANCIAL INSTITUTIONS INC.
• 20240930 (date) — Conformed period of report

FAQ

Key Financial Figures

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

Filing Documents

• fisi-20240930.htm (10-Q) — 8278KB
• fisi-ex31_1.htm (EX-31.1) — 14KB
• fisi-ex31_2.htm (EX-31.2) — 14KB
• fisi-ex32.htm (EX-32) — 17KB
• img39863322_0.jpg (GRAPHIC) — 316KB
• 0000950170-24-120679.txt ( ) — 33587KB
• fisi-20240930.xsd (EX-101.SCH) — 1959KB
• fisi-20240930_htm.xml (XML) — 10005KB

Financial Statements

Financial Statements Consolidated Statements of Financial Condition (Unaudited) – at September 30, 2024 and December 31, 2023 3 Consolidated Statements of Income (Unaudited) – Three and nine months ended September 30, 2024 and 2023 4 Consolidated Statements of Comprehensive Income (Unaudited) – Three and nine months ended September 30, 2024 and 2023 5 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) – Three and nine months ended September 30, 2024 and 2023 6 Consolidated Statements of Cash Flows (Unaudited) – Nine months ended September 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 47 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 72 ITEM 4.

Controls and Procedures

Controls and Procedures 73 PART II. OTHER INFORMATION ITEM 1.

Legal Proceedings

Legal Proceedings 74 ITEM 1A.

Risk Factors

Risk Factors 74 ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 75 ITEM 5. Other Information 75 ITEM 6. Exhibits 76

Signatures

Signatures 77 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) September 30, 2024 December 31, 2023 ASSETS Cash and due from banks $ 249,569 $ 124,442 Securities available for sale, at fair value (amortized cost of $ 1,011,849 and $ 1,037,990 , respectively) 886,816 887,730 Securities held to maturity, at amortized cost (net of allowance for credit losses of $ 3 and $ 4 , respectively) (fair value of $ 112,613 and $ 137,030 , respectively) 121,279 148,156 Loans held for sale 2,495 1,370 Loans (net of allowance for credit losses of $ 44,678 and $ 51,082 , respectively) 4,358,311 4,411,057 Company owned life insurance 165,424 161,363 Premises and equipment, net 40,788 39,902 Goodwill and other intangible assets, net 60,867 72,504 Other assets 270,768 314,357 Total assets $ 6,156,317 $ 6,160,881 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 978,660 $ 1,010,614 Interest-bearing demand 793,996 713,158 Savings and money market 2,027,181 2,084,444 Time deposits 1,506,764 1,404,696 Total deposits 5,306,601 5,212,912 Short-term borrowings 55,000 185,000 Long-term borrowings, net of issuance costs of $ 235 and $ 468 , respectively 124,765 124,532 Other liabilities 169,609 183,641 Total liabilities 5,655,975 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 125,112 125,841 Retained earnings 477

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. Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. The Company's Banking-as-a-Service ("BaaS") business has offered banking capabilities to non-bank financial service providers and other financial technology firms, or FinTechs, allowing them to provide banking services to their end users. On September 16, 2024, the Company issued a press release announcing its intent to begin an orderly wind down of its BaaS offerings, following a careful review by the Company's executive management and Board of Directors undertaken in conjunction with its annual strategic planning process. 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 client

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 experienced charge-offs associated with fraudulent activity pertaining to 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 nine months ended September 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 be ing 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 be

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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Net income available to common shareholders $ 13,101 $ 13,657 $ 40,071 $ 39,390 Weighted average common shares outstanding: Total shares issued 16,100 16,100 16,100 16,100 Unvested restricted stock awards ( 10 ) ( 11 ) ( 10 ) ( 8 ) Treasury shares ( 626 ) ( 698 ) ( 653 ) ( 721 ) Total basic weighted average common shares outstanding 15,464 15,391 15,437 15,371 Incremental shares from assumed: Vesting of restricted stock awards 172 71 145 72 Total diluted weighted average common shares outstanding 15,636 15,462 15,582 15,443 Basic earnings per common share $ 0.85 $ 0.89 $ 2.60 $ 2.56 Diluted earnings per common share $ 0.84 $ 0.88 $ 2.57 $ 2.55 For the three and nine months ended September 30, 2024 and 2023 , no average shares were excluded from the computation of diluted EPS because the effect would be antidilutive. 11 Table of Contents FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) (3.) INVE

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