Here are a couple of analogies for Financial Institutions (FISI):

• A community bank, like a localized version of JPMorgan Chase, primarily serving towns and cities in New York State.

• Imagine Bank of America, but on a much smaller scale and exclusively focused on local banking services within New York.

• Deposit Accounts: Provide various checking, savings, money market, and certificate of deposit accounts for consumer and business clients.
• Lending Services: Offer a comprehensive suite of loan products, including consumer, commercial & industrial, commercial real estate, and residential mortgage loans.
• Wealth Management: Deliver financial planning, investment advisory, and trust services to assist clients in managing and growing their financial assets.
• Treasury Management: Supply businesses with cash flow solutions, such as remote deposit capture, ACH services, and account reconciliation.
• Insurance Services: Offer a range of property, casualty, life, and health insurance products through its insurance subsidiary.

• Individuals/Consumers: This category includes retail customers who utilize a wide range of banking services such as checking and savings accounts, mortgage loans, personal loans, auto loans, and wealth management services provided through subsidiaries like Courier Capital LLC and HNP Capital LLC.
• Businesses: Five Star Bank provides comprehensive commercial banking services to small and medium-sized businesses. This includes commercial loans, lines of credit, treasury management solutions, and various business deposit accounts.
• Municipalities: The company offers banking and financial services specifically tailored to local government entities and public sector organizations within its service areas.

• Fidelity National Information Services, Inc. (FIS)
• Fiserv, Inc. (FI)
• Jack Henry & Associates, Inc. (JKHY)

Martin K. Birmingham President and Chief Executive Officer

Martin K. Birmingham has served as President and Chief Executive Officer of Financial Institutions, Inc. and Five Star Bank since 2013. He joined Five Star Bank in 2005. Birmingham began his more than 35-year banking career in 1989 with Fleet Financial Group, where he held several progressive corporate banking roles until its acquisition by Bank of America. At Bank of America, he was named President of the Rochester Market. He also served as President and CEO of National Bank of Geneva, a wholly owned subsidiary of the company, in 2005.

W. Jack Plants II Executive Vice President, Chief Financial Officer and Treasurer

W. Jack Plants II was named Chief Financial Officer and Treasurer of Financial Institutions, Inc. and Five Star Bank in 2021, and was promoted to Executive Vice President in 2022. He joined Five Star Bank in December 2019 as Senior Vice President, Corporate Treasurer. Prior to joining Five Star, he served as Senior Vice President and Treasurer of United Bank, where he progressed from Treasury Manager to Treasurer during his seven-year tenure. Earlier in his career, Plants held various treasury and credit roles at GE Capital, GE Commercial Finance, and Five Star Bank.

Samuel J. Burruano, Jr. Executive Vice President, Chief Legal Officer and Corporate Secretary

Samuel J. Burruano, Jr. serves as Executive Vice President, Chief Legal Officer and Corporate Secretary for Financial Institutions, Inc. He previously held various legal and compliance positions at First Niagara Bank, N.A., including Assistant General Counsel, Retail Services, and Assistant Corporate Secretary, starting in March 2011. Burruano has practiced law since 1993 and was an attorney at Hiscock & Barclay, LLP, from 1993 to 2011, where he ascended from associate counsel to partner.

Kevin B. Quinn Senior Vice President, Chief Commercial Banking Officer

Kevin B. Quinn has been Chief Commercial Banking Officer of Five Star Bank since 2021, having joined the Bank in 2020 as Senior Vice President, Commercial Banking Executive. Before joining Five Star, Quinn spent 15 years in leadership roles with HSBC Bank USA, NA, including as Managing Director and Regional Head of Corporate Banking. He began his career as an attorney with Jones Day in Cleveland, Ohio, and subsequently spent 10 years in commercial banking at M&T Bank.

Eric W. Marks Senior Vice President, Chief Consumer Banking Officer

Eric W. Marks was named Senior Vice President, Chief Consumer Banking Officer of Five Star Bank in March 2025. He joined the company from M&T Bank, where he had most recently served as its Retail Segment Chief Financial Officer. During his 19-year tenure at M&T, Mr. Marks held roles of increasing responsibility in several enterprise functions and lines of business, including corporate and consumer strategy, mortgage, branch distribution planning, consumer deposit pricing and portfolio management, and consumer indirect lending.

Key Risks to Financial Institutions (FISI)

Financial Institutions, Inc. (FISI) faces several key risks inherent to the banking sector and specific operational challenges.

The most significant risks include:

1. Fraud Risks: The company has recently experienced a material pre-tax loss of $18.2 million due to a significant fraud event, which notably increased noninterest expenses. Despite implementing enhanced risk mitigation measures, there is no guarantee that similar incidents will be prevented in the future.
2. Credit Risks: As a financial institution, FISI is inherently exposed to the risk of loan defaults. Greater-than-anticipated credit losses could negatively impact earnings, and any decline in the quality of its loan portfolio may necessitate increased allowances for credit losses.
3. Regulatory Risks: FISI operates in a highly regulated environment, making it susceptible to extensive regulatory oversight. Adverse regulatory actions could lead to increased costs, loss of business opportunities, and reputational damage. Additionally, changes in Federal Reserve policies, such as those affecting interest rates, can significantly impact earnings. The company also faces unique regulatory challenges by providing services to the cannabis industry, given the conflicts between state and federal laws.

The accelerating adoption and expansion of digital-first financial technology (fintech) companies and non-bank providers offering core banking services.

This constitutes an emerging threat to Financial Institutions, Inc. (FISI) due to several factors:

• Customer Migration: Fintech companies such as neobanks (e.g., Chime, Varo) and online-only banks (e.g., Ally Bank), alongside expanded financial offerings from major payment platforms (e.g., PayPal, Cash App), provide banking services with highly competitive digital user experiences, often lower fees, and sometimes higher interest rates on deposits. These offerings directly compete with the core deposit and lending services provided by FISI's Five Star Bank.
• Erosion of Traditional Value Proposition: FISI, as a regional bank with a branch-based model, faces challenges as customers increasingly prioritize digital convenience, speed, and mobile-first interactions. These alternative providers can attract away segments of FISI's potential and existing customer base, particularly younger demographics and tech-savvy individuals who may find the digital-native experience more appealing than traditional banking.
• Reduced Friction and Cost: Digital-only financial models often operate with significantly lower overheads compared to traditional banks that maintain physical branch networks. This allows them to offer more aggressive pricing, innovative features, or higher returns, making them formidable competitors for basic banking needs and potentially eroding FISI's market share for everyday financial transactions.
• Evidence: The continued robust growth in user acquisition and funding for neobanks globally and within the US, the expansion of payment platforms like PayPal and Block's Cash App into traditional banking territories (e.g., offering high-yield savings accounts, debit cards, and direct deposit capabilities), and the increasing market share of online-only banks for deposits and consumer loans demonstrate a clear and ongoing shift in consumer banking behavior that directly impacts the competitive landscape for regional banks like FISI.

Financial Institutions, Inc. (FISI) operates primarily in community banking, wealth management, and insurance solutions. The addressable market sizes for these services, focused on the U.S. region, are substantial:

Community Banking (Consumer and Commercial Banking and Lending Services)

• The U.S. community banking market was valued at approximately USD 6.35 billion in 2024, with a projected compound annual growth rate (CAGR) of 3.8%. Other estimates suggest the community banking market in the U.S. was valued at USD 16.76 billion in 2024 and is projected to grow to USD 30.46 billion by 2035, exhibiting a CAGR of 5.58% from 2025.
• For U.S. retail banking, a significant component of community banking, the market was valued at USD 1,105 billion in 2024 and is projected to reach USD 1,850 billion by 2032, growing at a CAGR of 6.7%. Another report indicates the U.S. retail banking market is valued at USD 0.87 trillion (870 billion) in 2025 and is forecasted to reach USD 1.08 trillion by 2030.
• In the U.S. commercial banking market, which includes commercial lending, the size is USD 732.5 billion in 2025 and is forecasted to reach USD 915.45 billion by 2030, with commercial lending accounting for 44.34% of the market share in 2024. Commercial and industrial loans to the private sector in the United States were reported at 2,694.81 billion USD in September 2025.

Wealth Management

• In the Americas, the wealth management market's Assets Under Management (AUM) are predicted to reach an impressive USD 67.75 trillion by 2024. This market is expected to expand to USD 91.16 trillion by 2028, growing at an annual rate of 7.70% from 2024. The United States specifically holds 54.2% of the total global AUM in 2025, with global assets under management reaching USD 162 trillion in 2025. Wealth managers project AUM growth of approximately 17.6% in the U.S. for 2025.

Insurance Solutions

• The U.S. insurance market was valued at USD 1.48 trillion in 2023 and is predicted to reach USD 2.39 trillion by 2030, with a CAGR of 6.6% from 2024 to 2030. Other data shows U.S. insurance industry net premiums written totaled USD 1.7 trillion in 2024. The U.S. life and non-life insurance market size reached USD 3.239 trillion in 2025 and is forecast to reach USD 3.851 trillion by 2030.

Financial Institutions, Inc. (FISI) is expected to drive future revenue growth over the next 2-3 years through several key strategies:

1. Expansion of Commercial Lending: The company is focused on expanding its commercial lending operations, particularly in upstate New York. This is evidenced by a 1.2% loan growth in Q3 2025, primarily driven by commercial lending in this market. Commercial business loans increased by 2% and commercial mortgage loans were up 1.5% during Q3 2025. Financial Institutions, Inc. anticipates overall loan growth at the higher end of the 1-3% range for 2025 and mid-single-digit growth in 2026, with the commercial franchise as a key contributor.
2. Net Interest Margin (NIM) Expansion and Active Funding Cost Management: Financial Institutions, Inc. reported an expanded net interest margin of 3.65% in Q3 2025. The company projects its net interest margin to be between 350-355 basis points for the full year 2025, with incremental improvements expected in 2026. Proactive management of funding costs is considered a significant factor in enhancing net interest margins, thereby contributing to increased net interest income.
3. Growth in Non-Interest Income, particularly Wealth Management: The company is seeing significant growth in non-interest income, which increased by 13.6% to $12.1 million in Q3 2025 from the previous quarter. This growth is attributed to various revenue streams, notably investment advisory income, which rose by 4.8% on a linked-quarter basis, topping $3 million. The opening of a new wealth management office in Sarasota, Florida, and the growth of assets under management (AUM) to $3.34 billion in Q2 2025 further support this driver.
4. Strategic Shift Towards Traditional Community Banking: Analysts note that FISI's pivot away from its Banking-as-a-Service (BaaS) offering and a renewed focus on redeploying investments into traditional community banking is expected to bolster stronger net margins. By emphasizing higher-margin traditional banking activities, the company aims to achieve sustainable earnings growth. The ongoing wind-down of the BaaS offering supports this strategic repositioning.
5. Deposit Growth: Total deposits for Financial Institutions, Inc. increased by 3.9% to $5.36 billion in Q3 2025. This growth was driven by seasonal public deposit inflows and an increase in nonpublic deposits within the commercial and consumer business lines. Consistent deposit growth is crucial for managing funding costs effectively and providing a stable base to support overall loan expansion.

Share Repurchases

• A new share repurchase program was authorized on September 18, 2025, allowing for the buyback of up to 1,006,379 shares, representing approximately 5% of outstanding common shares.
• This new program replaces a prior authorization from June 2022, which permitted the repurchase of up to 766,447 shares.
• The decision to authorize the new program reflects confidence in the company's financial performance and follows a successful public equity offering in Q4 2024.

Share Issuance

• In December 2024, Financial Institutions, Inc. completed a public offering of 4,600,000 shares of common stock at $25.00 per share, generating net proceeds of $108.6 million.
• A portion of these proceeds was utilized to fund losses associated with a strategic investment securities restructuring.
• Shares outstanding are projected to increase by 3.06% per year, which may result in some dilution for existing shareholders.

Inbound Investments

• No significant inbound investments by third-parties were disclosed in the available information.

Outbound Investments

• The company executed a strategic investment securities restructuring in December 2024, selling $653.5 million of available-for-sale securities and reinvesting the proceeds, along with an additional $76.4 million, into higher-yielding agency wrapped investment securities.
• In April 2024, Financial Institutions, Inc. completed the sale of the assets of its insurance subsidiary, SDN Insurance Agency, LLC, which generated $27 million in proceeds.
• The company announced an orderly wind-down of its Banking-as-a-Service offerings to allow for a sharper focus on core operations.

Capital Expenditures

• Capital expenditures for the fiscal years ending December 2020 to 2024 averaged $6 million.
• Capital expenditures peaked at $9.403 million in December 2021 and reached a 5-year low of $2.992 million in December 2023.
• In 2024, capital expenditures increased to $4.974 million, a 66.2% rise from the previous year, with a focus on enhancing technology, operations, and risk functions.