Exhibit 99.1

FINANCIAL INSTITUTIONS, INC. ANNOUNCES THIRD QUARTER 2024 FINANCIAL RESULTS

WARSAW, N.Y., October 24, 2024 – Financial Institutions, Inc. (NASDAQ: FISI) (the "Company," "we" or "us"), parent company of Five Star Bank (the "Bank") and Courier Capital, LLC ("Courier Capital"), today reported financial and operational results for the third quarter ended September 30, 2024.

Net income was $13.5 million in the third quarter of 2024, compared to $25.6 million in the second quarter of 2024 and $14.0 million in the third quarter of 2023. After preferred dividends, net income available to common shareholders was $13.1 million, or $0.84 per diluted share, in the third quarter of 2024, compared to $25.3 million, or $1.62 per diluted share, in the second quarter of 2024, and $13.7 million, or $0.88 per diluted share, in the third quarter of 2023. Third quarter 2024 results included $384 thousand of professional services expenses attributed to the deposit-related fraud event disclosed in March 2024 that occurred in the first quarter of 2024. The Company's second quarter 2024 financial results benefited from a $13.5 million pre-tax gain associated with its previously disclosed insurance subsidiary asset sale, and also included $371 thousand of professional services expenses related to the fraud event that were partially offset by a recovery of $143 thousand. The Company recorded a provision for credit losses of $3.1 million in the current quarter, compared to a provision of $2.0 million in the linked quarter and a provision of $1.0 million in the prior year quarter.

Third Quarter 2024 Key Results:

"Our third quarter results were highlighted by strong deposit growth, incremental net interest margin expansion, solid expense management, and continued build in our regulatory and tangible capital ratios. We remain very focused on driving sustainable growth across each of our retail banking, commercial banking and wealth management business lines. Supporting that focus is our strategic decision to begin to wind-down our Banking-as-a-Service, or BaaS, offerings, announced in September," said President and Chief Executive Officer Martin K. Birmingham.

"While total loans were down during the quarter, as growth in commercial mortgage and stability in residential loans and lines were offset by declines in commercial business and consumer indirect loans, we continue to see excellent opportunity in our geographic markets to drive credit-disciplined loan growth. Our regulatory and tangible capital positions further improved during the quarter, including a common equity tier 1 ratio of 10.28%, up 25 basis points from June 30, 2024 and up 102 basis points from September 30, 2023.

Tangible common book value per share(1) grew by 8% and 32% from the end of the linked and year-ago quarters, respectively," Mr. Birmingham added.

Chief Financial Officer and Treasurer W. Jack Plants II commented, "We saw further margin expansion on a linked quarter basis and our ability to drive solid deposit growth provided us with capacity to further reduce short-term borrowings during the quarter. From a credit perspective, we did move one commercial relationship to non-performing status during the third quarter, which drove the increase in non-performing assets as compared to June 30, 2024. We remain very confident in the overall health of our loan portfolio and we are comfortable with our reserve levels, as our allowance for credit losses on loans to total loans ratio expanded two basis points during the third quarter to 1.01%. As of September 30, 2024, we have approximately $1.4 billion in available liquidity and more than $1.1 billion in cash flow anticipated in the next 12 months."

Orderly Wind Down of BaaS Offerings

On September 16, 2024, the Company announced its intent to begin an orderly wind down of its BaaS offerings, following a careful review by the Company’s executive management and the Board of Directors undertaken in conjunction with its annual strategic planning process. As of September 30, 2024, deposits and loans related to the Bank's BaaS offerings totaled $103 million and $29 million, respectively. The Company continues to preliminarily target completion of the wind down sometime in 2025.

Net Interest Income and Net Interest Margin

Net interest income was $40.7 million for the third quarter of 2024, a decrease of $512 thousand from the second quarter of 2024, of which $439 thousand was attributable to the impact of the increase in non-performing loans, partially offset by lower funding costs as a result of the Company's reduction of short term borrowings and brokered deposits, and a decrease of $1.0 million from the third quarter of 2023 due primarily to higher funding costs on a year-over-year basis.

Average interest-earning assets for the current quarter were $5.61 billion, a decrease of $154.2 million from the second quarter of 2024 due to an $84.6 million decrease in the average balance of Federal Reserve interest-earning cash, a $47.8 million decrease in the average balance of investment securities and a $21.8 million decrease in average loans. Average interest-earning assets for the current quarter were $92.4 million lower than the third quarter of 2023 due to an $83.5 million decrease in the average balance of investment securities and a $13.2 million decrease in the average balance of Federal Reserve interest-earning cash, partially offset by a $4.3 million increase in average loans.

Average interest-bearing liabilities for the current quarter were $4.40 billion, a decrease of $148.3 million from the second quarter of 2024, primarily due to a $97.8 million decrease in average savings and money market deposits, a $49.6 million decrease in average interest-bearing demand deposits, and an $11.0 million decrease in average short-term borrowings, partially offset by a $10.1 million increase in average time deposits. Average interest-bearing liabilities for the third quarter of 2024 were $27.2 million lower than the year-ago quarter primarily due to a $93.4 million decrease in average short-term borrowings, a $75.2 million decrease in average interest-bearing demand deposits, and a $48.3 million decrease in average time deposits, partially offset by a $189.7 million increase in average savings and money market account deposits.

Net interest margin was 2.89% in the current quarter, 2.87% in the second quarter of 2024, and 2.91% in the third quarter of 2023. The linked quarter expansion was due to an increase in the average yield on interest-earning assets, which was partially offset by an increase in the overall cost of funds. The year-over-year decline primarily was a result of higher funding costs amid the current high interest rate environment, partially offset by an increase in the average yield on interest-earning assets.

Noninterest Income

Noninterest income was $9.4 million for the third quarter of 2024, a decrease of $14.6 million from the second quarter of 2024 and a decrease of $1.0 million from the third quarter of 2023.

Noninterest Expense

Noninterest expense was $32.5 million in the third quarter of 2024 compared to $33.0 million in the second quarter of 2024 and $34.7 million in the third quarter of 2023.

Income Taxes

Income tax expense was $1.1 million for the third quarter of 2024 compared to $4.5 million in the second quarter of 2024, and $2.4 million in the third quarter of 2023. The higher level of income tax expense incurred during the second quarter of 2024 was due to a higher level of pre-tax income, reflecting the previously mentioned gain related to our insurance subsidiary asset sale. The Company also recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized which resulted in income tax expense reductions of $1.3 million in both the third and second quarters of 2024, and $731 thousand in the third quarter of 2023.

The effective tax rate was 7.4% for the third quarter of 2024, 15.0% for the second quarter of 2024, and 14.8% for the third quarter of 2023. The effective tax rate fluctuates on a quarterly basis primarily due to the level of pre-tax earnings and may differ from statutory rates because of interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments.

Balance Sheet and Capital Management

Total assets were $6.16 billion at September 30, 2024, up $24.5 million from June 30, 2024, and up $16.2 million from September 30, 2023.

Investment securities were $1.01 billion at September 30, 2024, up $8.2 million from June 30, 2024, and down $324 thousand from September 30, 2023.

Total loans were $4.40 billion at September 30, 2024, a decrease of $58.5 million, or 1.3%, from June 30, 2024, and a decrease of $28.2 million, or 0.6%, from September 30, 2023.

Total deposits were $5.31 billion at September 30, 2024, up $173.3 million, or 3.4%, from June 30, 2024, and down $9.4 million, or 0.2%, from September 30, 2023. The increase from June 30, 2024 was due to an increase in public deposits, which was partly driven by seasonality, as well as an increase in nonpublic deposits, partly offset by a decline in reciprocal deposits. Public deposit balances represented 22% of total deposits at September 30, 2024, 20% at June 30, 2024 and 20% at September 30, 2023.

Short-term borrowings were $55.0 million at September 30, 2024, compared to $202.0 million at June 30, 2024 and $70.0 million at September 30, 2023, as linked quarter deposit growth enabled the Company to pay down short-term borrowings, which have historically been utilized along with brokered deposits to manage the seasonality of public deposits.

Shareholders' equity was $500.3 million at September 30, 2024, compared to $467.7 million at June 30, 2024, and $408.7 million at September 30, 2023. The increase in shareholders' equity compared to the linked and year-ago period ends was primarily due to a reduction in accumulated other comprehensive loss, with net income through the first nine months of 2024 also contributing to the year-over-year increase. Shareholders' equity has been negatively impacted since 2022 by an increase in accumulated other comprehensive loss associated with unrealized losses in the available for sale securities portfolio. Management believes the unrealized losses are temporary in nature, as they are associated with the current high interest rate environment. The securities portfolio continues to generate cash flow and, given the high credit quality of the agency mortgage-backed securities portfolio, management expects the bonds to ultimately mature at a terminal value equivalent to par.

Common book value per share was $31.22 at September 30, 2024, an increase of $2.11, or 7.2%, from $29.11 at June 30, 2024, and an increase of $5.81, or 22.9%, from $25.41 at September 30, 2023. Tangible common book value per share(1) was $27.28 at September 30, 2024, an increase of $2.11, or 8.4%, from $25.17 at June 30, 2024, and an increase of $6.59, or 31.9%, from $20.69 at September 30, 2023. The common equity to assets ratio was 7.85% at September 30, 2024, compared to 7.34% at June 30, 2024, and 6.37% at September 30, 2023. Tangible common equity to tangible assets(1), or the TCE ratio, was 6.93%, 6.41% and 5.25% at September 30, 2024, June 30, 2024, and September 30, 2023, respectively. The primary driver of variations in all four measures for the comparable linked and year-ago period ends was the previously described changes in accumulated other comprehensive loss.

During the third quarter of 2024, the Company declared a common stock dividend of $0.30 per common share, consistent with the linked and year-ago quarters.

The Company's regulatory capital ratios at September 30, 2024 continued to exceed all regulatory capital requirements to be considered well capitalized.

Credit Quality

Non-performing loans were $40.7 million, or 0.93% of total loans, at September 30, 2024, as compared to $25.2 million, or 0.57% of total loans, at June 30, 2024 and $9.5 million, or 0.21% of total loans, at September 30, 2023. Non-performing loans at September 30, 2024 largely related to two separate commercial loan relationships, one of which was placed on nonaccrual during the third quarter of 2024 and the other in the fourth quarter of 2023. Net charge-offs were $1.7 million, representing 0.15% of average loans on an annualized basis, for the current quarter, as compared to $1.1 million, or an annualized 0.10% of average loans, in the second quarter of 2024 and $1.6 million, or an annualized 0.14%, in the third quarter of 2023.

At September 30, 2024, the allowance for credit losses on loans to total loans ratio was 1.01%, compared to 0.99% at June 30, 2024 and 1.12% at September 30, 2023.

Provision for credit losses was $3.1 million in the current quarter, compared to $2.0 million in the linked quarter and $1.0 million in the prior year third quarter. Provision for credit losses on loans was $2.4 million in the current quarter, compared to $2.0 million in the second quarter of 2024 and $1.4 million in the third quarter of 2023. The allowance for unfunded commitments, also included in provision for credit losses as required by the current expected credit loss standard ("CECL"), totaled a provision of $713 thousand in the third quarter of 2024, $43 thousand in the second quarter of 2024, and $426 thousand in the third quarter of 2023. The provision for credit losses for the third quarter of 2024 was driven by a combination of factors, including a slight increase in the national unemployment forecast and higher qualitative factors overall, partially offset by lower loan balances.

The Company has remained strategically focused on the importance of credit discipline, allocating resources to credit and risk management functions as the loan portfolio has grown. The ratio of allowance for credit losses on loans to non-performing loans was 110% at September 30, 2024, 174% at June 30, 2024, and 521% at September 30, 2023.

Subsequent Events

The Company is required, under U.S. generally accepted accounting principles ("GAAP"), to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended September 30, 2024, on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2024, and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will host an earnings conference call and audio webcast on October 25, 2024 at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and W. Jack Plants II, Chief Financial Officer and Treasurer. The live webcast will be available in listen-only mode on the Company's website at www.FISI-Investors.com. Within the United States, listeners may also access the call by dialing 1-833-470-1428 and providing the access code 514361. The webcast replay will be available on the Company's website for at least 30 days.

About Financial Institutions, Inc.

Financial Institutions, Inc. (NASDAQ: FISI) is an innovative financial holding company with approximately $6.2 billion in assets offering banking and wealth management products and services. Its Five Star Bank subsidiary provides consumer and commercial banking and lending services to individuals, municipalities and businesses through banking locations spanning Western and Central New York and a commercial loan production office serving the Mid-Atlantic region. Courier Capital, LLC offers customized investment management, financial planning and consulting services to individuals and families, businesses, institutions, non-profits and retirement plans. Learn more at Five-StarBank.com and FISI-Investors.com.

Non-GAAP Financial Information

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP measures is included in Appendix A to this document.

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.

Safe Harbor Statement

This press release may contain forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "believe," "anticipate," "continue," "estimate," "expect," "focus," "forecast," "intend," "may," "plan," "preliminary," "should," "target" or "will." Statements herein are based on certain assumptions and analyses by the Company and factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: additional information regarding the deposit fraudulent activity; changes in interest rates; inflation; changes in deposit flows and the cost and availability of funds; the Company’s ability to implement its strategic plan, including by expanding its commercial lending footprint and integrating its acquisitions; whether the Company experiences greater credit losses than expected; whether the Company experiences breaches of its, or third party, information systems; the attitudes and preferences of the Company's customers; legal and regulatory proceedings and related matters, including any action described in our reports filed with the SEC, could adversely affect us and the banking industry in general; the competitive environment; fluctuations in the fair value of securities in its investment portfolio; changes in the regulatory environment and the Company's compliance with regulatory requirements; and general economic and credit market conditions nationally and regionally; and the macroeconomic volatility related to the impact of a pandemic or global political unrest. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language and risk factors included in the Company's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

(1) See Appendix A — Reconciliation to Non-GAAP Financial Measures for the computation of this non-GAAP financial measure.

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For additional information contact:

Kate Croft

Director of Investor and External Relations

(716) 817-5159

klcroft@five-starbank.com
 

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