Exhibit 99.1

FINANCIAL INSTITUTIONS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2020 RESULTS

WARSAW, N.Y., January 28, 2021 – Financial Institutions, Inc. (NASDAQ:FISI) (the “Company” “we” or “us”), parent company of Five Star Bank (the “Bank”), SDN Insurance Agency, LLC (“SDN”), Courier Capital, LLC (“Courier Capital”) and HNP Capital, LLC (“HNP Capital”), today reported financial and operational results for the fourth quarter and year ended December 31, 2020.

Results for the Quarter

Results for the Year

“Our Company reported strong fourth quarter results in a challenging environment,” said President and Chief Executive Officer Martin K. Birmingham. “Record net interest income, noninterest income bolstered by our diversified revenue stream and continued expense discipline all contributed to record-high net income, earnings per share and pre-tax pre-provision income, as well as an efficiency ratio below 56%.”

“I am proud of the many accomplishments of our organization in 2020. We have delivered uninterrupted critical banking services to our customers throughout the pandemic and continue to modify operations to keep our customers and associates safe. We rolled out a series of solutions to support our customers that included the temporary waiving or elimination of fees and offered the opportunity for loan payment relief or deferrals. We also helped existing and new customers take advantage of Paycheck Protection Program (“PPP”) loans

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to source needed funds to cover operating expenses. Last year, we helped approximately 1,700 small businesses obtain approximately $270 million of PPP loans, preserving an estimated 18,000 jobs in our markets.

“Progress was achieved on fundamental strategic objectives. We grew loans and core deposits and increased liquidity. To deliver enhanced digital capabilities to our customers during a time when at-home access was critical, we successfully completed the launch of our new online and mobile platform, Five Star Bank Digital Banking. Our enterprise standardization program resulted in a streamlining of processes and operations to enhance customer experiences while driving our efficiency ratio lower.

“During 2020, we witnessed the dramatic effects of the health crisis on the economy and our Company’s operations. Notwithstanding these challenges, we ended the year stronger than before the crisis started and are well-positioned to take care of our customers and communities. I would like to thank my Five Star associates for their continued commitment and dedication to our customers, our communities and each other. They quickly adapted to new working environments due to the pandemic, all while delivering strong results for our shareholders.”

Chief Financial Officer Justin K. Bigham added, “Despite severe economic conditions brought about by the COVID-19 pandemic, including the near-zero interest rate environment, we generated year-over-year positive operating leverage and delivered pre-tax pre-provision growth over 8% for the full year.  

“We finished the year with a fourth quarter that demonstrates continued across-the-board improvement in our fundamentals, delivering record-high net income and pre-tax pre-provision income and an efficiency ratio below 56%.

“During the fourth quarter, we completed a $35 million subordinated debt offering to provide capital for use in serving our customers, taking advantage of growth opportunities and strengthening the Bank’s capital ratios. We also put a stock repurchase program in place for up to approximately 5% of the Company’s outstanding common shares. We believe that these actions provide important flexibility in managing our balance sheet.”  

Enterprise Standardization Program

The Company’s enterprise standardization program is focused on improving operational efficiency and enhancing future profitability. On July 17, 2020, in connection with the program, Five Star Bank announced changes to adapt to a full-service branch model to streamline retail branches to better align with shifting customer needs and preferences. The announcement was the result of a nine-month comprehensive assessment of all lines of business and functional areas, conducted in partnership with a leading process improvement organization. The data-driven analysis identified, among other things, overlapping service areas, automation opportunities and streamlining of processes and operations.

The July announcement included the consolidation of eleven branches into five, resulting in six branch closings and a reduction in staffing. An additional branch closure was announced in October. These actions resulted in one-time expenses related to severance and real estate related charges of approximately $1.6 million in the third quarter of 2020 and approximately $148 thousand in the fourth quarter. Expense savings of $2.7 million are anticipated on an annualized basis.

The enterprise standardization program is not yet complete as we continue to evaluate activities and functions across the organization, focusing on ways to improve operational efficiency while enhancing the employee and customer experience.

Subordinated Note Issuance

On October 7, 2020, the Company completed a private placement of $35 million of fixed-to-floating rate subordinated notes due 2030 (the “Notes”) to qualified institutional buyers and accredited institutional investors. The Notes have a maturity date of October 15, 2030, and bear interest, payable semi-annually, at the rate of 4.375% per annum, until October 15, 2025. Commencing on that date, the interest rate will reset quarterly to an interest rate per annum equal to the then-current three-month secured overnight financing rate (“SOFR”) plus 426.5 basis points, payable quarterly until maturity.

The Company is entitled to redeem the Notes, in whole or in part, on any interest payment date on or after October 15, 2025, and in whole at any time upon certain other specified events. The proceeds are intended to be used for general corporate purposes and organic growth, while a portion has been contributed to Five Star Bank to support regulatory capital ratios.

In connection with the issuance and sale of the Notes, the Company executed a registered exchange offer effective December 22, 2020, to provide for the exchange of the Notes for subordinated notes that are registered under the Securities Act of 1933, as amended, with substantially the same terms as the Notes. The exchange offer expired on January 27, 2021.

Stock Repurchase Program

On November 4, 2020, the Company announced a stock repurchase program for up to 801,879 shares of common stock, or approximately 5% of the Company’s outstanding common shares. Shares may be repurchased in open market transactions and pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The repurchase program does not obligate the Company to purchase any shares and it may be extended, modified or discontinued at any time.

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No shares were repurchased in 2020 under this program. In 2021, through January 27th, the Company repurchased 127,460 shares for an average repurchase price of $24.12 per share, inclusive of transaction costs.

Insurance Subsidiary Acquisition

On December 7, 2020, the Company announced a definitive agreement for the acquisition of the assets of Landmark Group (“Landmark”) by the Company’s insurance subsidiary SDN. A staple of the Rochester community since 1984, Landmark is an independent insurance brokerage firm delivering insurance, surety and risk management solutions across many business sectors including construction, manufacturing, real estate and technology, as well as individual personal insurance. Landmark Founder and Chairman Kelly M. Shea and President Christopher K. Shea will remain with SDN after the transaction closes to lead SDN’s Rochester operations and continue their long-term relationship with current clients. The transaction is subject to typical conditions to closing and is expected to be completed in the first quarter of 2021.

Net Interest Income and Net Interest Margin

Net interest income was $36.2 million for the quarter, an increase of $682 thousand from the third quarter of 2020 and $3.0 million higher than the fourth quarter of 2019.

Net interest income was $139.0 million for the year, $9.1 million higher than 2019. The increase was the result of a $356.0 million, or 8.9%, increase in average interest-earnings assets for the year, partially offset by a six-basis point decrease in net interest margin, to 3.22% from 3.28%.

Noninterest Income

Noninterest income was $11.3 million for the quarter compared to $12.2 million in the third quarter of 2020 and $9.7 million in the fourth quarter of 2019.

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Noninterest income was $43.2 million for the year, $2.8 million higher than 2019.

Noninterest Expense

Noninterest expense was $26.5 million in the quarter compared to $28.5 million in the third quarter of 2020 and $26.8 million in the fourth quarter of 2019.

Noninterest expense was $109.3 million for the year, $6.4 million higher than 2019.

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Income Taxes

Income tax expense was $1.7 million for the quarter compared to $2.9 million for the third quarter of 2020 and $312 thousand for the fourth quarter of 2019. The Company recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the fourth quarter of 2020, third quarter of 2020 and fourth quarter of 2019, resulting in income tax expense reductions of approximately $915 thousand, $213 thousand and $2.7 million, respectively

The effective tax rate was 10.9% for the quarter compared to 19.3% for the third quarter of 2020 and 2.3% for the fourth quarter of 2019. The Company’s effective tax rates 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.

Income tax expense was $7.4 million for the year, $3.2 million lower than 2019. The effective tax rate for 2020 was 16.2% compared to 17.8% for 2019.

Balance Sheet and Capital Management

Total assets were $4.91 billion at December 31, 2020, down $46.9 million from September 30, 2020, and up $528.1 million from December 31, 2019.

Investment securities were $900.0 million at December 31, 2020, up $93.1 million from September 30, 2020, and up $123.1 million from December 31, 2019. The Company’s 2020 investment strategy was to reinvest cash flow from the portfolio, coupled with deploying excess liquidity into cash flowing agency mortgage backed securities. Increased purchase activity in the fourth quarter of 2020 resulted from the execution of a strategy to reallocate excess Federal Reserve cash balances into higher yielding, collateral eligible agency mortgage backed securities.

Total loans were $3.60 billion at December 31, 2020, up $26.6 million, or 0.7%, from September 30, 2020, and up $374.2 million, or 11.6%, from December 31, 2019. 2020 loan growth includes approximately $271 million of PPP loans that carry a 1% interest rate. The Company recorded net PPP loan origination fees of approximately $8.0 million that are amortized over a 24-month period.

Total deposits were $4.28 billion at December 31, 2020, $86.6 million lower than September 30, 2020, and $722.7 million higher than December 31, 2019. The decrease from September 30, 2020, was primarily the result of a seasonal decrease in public deposits partially offset by growth in the non-public and reciprocal deposit portfolios. The Company utilized lower cost brokered deposit balances to pay off a maturing Federal Home Loan Bank term advance of $100 million during the third quarter. The increase from December 31, 2019, was primarily due to growth in non-public demand and reciprocal deposits. Public deposit balances represented 20% of total deposits at December 31, 2020, compared to 23% of total deposits at September 30, 2020, and 24% at December 31, 2019.

Short-term borrowings were $5.3 million at December 31, 2020, unchanged from September 30, 2020, and a decrease of $270.2 million from December 31, 2019. The lower level of short-term borrowings in 2020 is attributable to growth in brokered deposits, which were utilized as a cost-effective alternative to Federal Home Loan Bank borrowings. Short-term borrowings and brokered deposits have historically been utilized to manage the seasonality of public deposits. In February 2020, the Company entered a long-term brokered sweep arrangement as a stable alternative borrowing source to diversify the wholesale funding base.

Shareholders’ equity was $468.4 million at December 31, 2020, compared to $456.4 million at September 30, 2020, and $438.9 million at December 31, 2019. Common book value per share was $28.12 at December 31, 2020, an increase of $0.74 or 2.7% from $27.38 at September 30, 2020, and an increase of $1.77 or 6.7% from $26.35 at December 31, 2019. Tangible common book value per share⁽¹⁾ was $23.52 at December 31, 2020, an increase of $0.76 or 3.3% from $22.76 at September 30, 2020, and an increase of $1.86 or 8.6% from $21.66 at December 31, 2019.

During the fourth quarter of 2020, the Company declared a common stock dividend of $0.26 per common share. The dividend returned 31% of fourth quarter net income to common shareholders.

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The Company’s regulatory capital ratios at December 31, 2020, compared to the prior quarter and prior year:

Credit Quality

Non-performing loans were $9.5 million at December 31, 2020, compared to $10.9 million at September 30, 2020, and $8.6 million at December 31, 2019. Net charge-offs were $2.4 million in the quarter, $1.9 million higher than the third quarter of 2020 and $1.4 million lower than the fourth quarter of 2019. The ratio of annualized net charge-offs to total average loans was 0.27% in the current quarter, 0.06% in the third quarter of 2020 and 0.48% in the fourth quarter of 2019.

Foreclosed assets at December 31, 2020, were $3.0 million, relatively unchanged from September 30, 2020, and an increase of $2.5 million from December 31, 2019. The increase as compared to year-end 2019 is attributable to one commercial credit that was partially charged off during the first quarter of 2020 and foreclosure occurred in the third quarter.

The Company adopted CECL effective January 1, 2020, which resulted in an increase to the allowance for credit losses - loans of $9.6 million and established a reserve for unfunded commitments of $2.1 million, for a total pre-tax cumulative effect adjustment of $11.7 million.

At December 31, 2020, the allowance for credit losses - loans to total loans ratio was 1.46% compared to 1.38% at September 30, 2020, and 0.95% at December 31, 2019. PPP loans are fully guaranteed by the Small Business Administration. Excluding PPP loans, the December 31, 2020, allowance for credit losses - loans to total loans ratio was 1.57%⁽¹⁾, an increase of eight basis points from 1.49%⁽¹⁾ at September 30, 2020. Increases in the allowance ratio in 2020 reflect the impact of COVID-19 and the corresponding impact on the economic environment.

The provision for credit losses - loans was $5.4 million in the quarter compared to $3.6 million in the third quarter of 2020 and $2.7 million in the fourth quarter of 2019. Provision for credit losses also includes increases in the allowance for unfunded commitments of $73 thousand and $461 thousand in the fourth and third quarters of 2020, respectively.

The Company has remained strategically focused on the importance of credit discipline, allocating what we believe are the necessary resources to credit and risk management functions as the loan portfolio has grown. The total non-performing loans to total loans ratio was 0.26% at December 31, 2020, 0.31% at September 30, 2020, and 0.27% at December 31, 2019. The ratio of allowance for credit losses - loans to non-performing loans was 551% at December 31, 2020, compared to 453% at September 30, 2020, and 353% at December 31, 2019.

Subsequent Events

The Company is required, under generally accepted accounting principles, to evaluate subsequent events through the filing of its consolidated financial statements for the year ended December 31, 2020, on Form 10-K. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2020, and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will host an earnings conference call and audio webcast on January 29, 2021, at 8:30 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and Justin K. Bigham, Chief Financial Officer. The live webcast will be available in listen-only mode on the Company’s website at www.fiiwarsaw.com. Within the United States, listeners may also access the call by dialing 1-888-346-9290 and requesting the Financial Institutions, Inc. call. The webcast replay will be available on the Company’s website for at least 30 days.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries Five Star Bank, SDN, Courier Capital and HNP Capital. Five Star Bank provides a wide range of consumer and commercial banking and lending services to individuals, municipalities and businesses through a network of approximately 45 offices throughout Western and Central New York State. SDN provides a broad range of insurance services to personal and business clients. Courier Capital and HNP Capital provide customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. Financial Institutions, Inc. and its subsidiaries employ approximately 600 individuals. The Company’s stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at www.fiiwarsaw.com.

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Non-GAAP Financial Information

In addition to results presented in accordance with U.S. generally accepted accounting principles (“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 “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “estimate,” “forecast,” “target,” “preliminary,” or “range.” 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: the impact of the COVID-19 pandemic on the Company’s customers, business, and results of operations as well as the economy in Western New York and the United States, the Company’s ability to implement its strategic plan, 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, the Company’s ability to complete the acquisition of Landmark Group’s assets, the Company’s ability to successfully integrate and profitably operate Landmark Group and other acquisitions, 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, changes in interest rates, and general economic and credit market conditions nationally and regionally. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language 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 measure.

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For additional information contact:

Shelly J. Doran

Director of Investor and External Relations

585-627-1362

sjdoran@five-starbank.com

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FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)

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

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FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share amounts)

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FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)

(Amounts in thousands)