Financial Institutions, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net income available to common shareholders was $19.6 million ($0.99 diluted EPS), down 2.4% year-over-year and 5.7% quarter-over-quarter.
• Net interest income reached a record $54.3 million, up 4.8% year-over-year and 1.7% quarter-over-quarter.
• Net interest margin was 3.70%, stable quarter-over-quarter and up 5 basis points year-over-year.
• Noninterest income was $10.5 million, down 13.3% year-over-year and 4.5% quarter-over-quarter, driven by lower derivative income and losses in limited partnerships.
• Noninterest expense was $36.8 million, up 2.6% year-over-year and 3.4% quarter-over-quarter, primarily due to increased salaries and benefits.
• The efficiency ratio was 56.84%, up 6 basis points year-over-year and 151 basis points quarter-over-quarter.
• Return on average assets was 1.26%, down 6 basis points year-over-year.
• Return on average tangible common equity was 13.75%, down 123 basis points year-over-year.
• Total loans ended at $4.86 billion, up 5.8% year-over-year and 2.2% quarter-over-quarter.
• Total deposits ended at $5.47 billion, up 2.2% year-over-year and 3.3% quarter-over-quarter.
• Provision for credit losses was $3.9 million, up 42.0% year-over-year.
• Net charge-offs to average loans (annualized) were 0.33%, up 15 basis points year-over-year.

Business Segments and Product Lines:

• Commercial lending was the primary driver of loan growth, with strong activity in Western and Central New York markets.
• Investment advisory income, the leading noninterest income contributor, increased 10.6% year-over-year to $3.3 million.
• Income from derivative instruments, net, decreased 87.5% year-over-year to $106 thousand.
• Losses on investments in limited partnerships were $274 thousand, compared to a gain of $223 thousand in the prior year quarter.
• Public deposits represented 22% of total deposits at quarter-end.

Market and Competitive Landscape:

• The Company operates in Western and Central New York with a commercial loan production office in the Mid-Atlantic region.
• Loan growth was driven by robust commercial lending activity in the Company's core markets.

Risks and Challenges:

• The quarterly net charge-off ratio increased from lower-than-typical levels in the prior quarter and year-ago quarter, though it remains within full-year guidance.
• Non-performing loans increased 13.5% year-over-year to $38.5 million, primarily due to one well-collateralized commercial business loan moving to nonaccrual status.
• Shareholders' equity declined 3.8% quarter-over-quarter, largely due to accumulated other comprehensive loss from unrealized losses in the available-for-sale securities portfolio driven by interest rate increases.

Management Commentary and Tone:

• CEO Martin K. Birmingham stated results underscore the strength of the relationship-driven business model and commitment to disciplined execution.
• CFO W. Jack Plants II highlighted the balance sheet as a source of strength, citing a tangible common equity ratio of 8.40% and a common equity Tier 1 ratio of 11.36%.
• Management emphasized a focus on credit-disciplined loan production in core Upstate New York markets.

Other Key Points:

• The Company repurchased 185,833 shares of common stock at an average price of $40.92 per share during the quarter.
• As of September 30, 2026, 320,480 shares remained available under the repurchase program approved in September 2025.
• The Company declared a common stock dividend of $0.32 per share, consistent with the prior quarter and up 3.2% year-over-year.
• The dividend represented 32% of third quarter net income available to common shareholders.
• Total on-balance sheet liquidity was $1.17 billion, excluding brokered deposit capacity.
• The Company's regulatory capital ratios exceeded all requirements to be considered well capitalized.