8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 15, 2017

(Exact name of Registrant as specified in its charter)

New York	0-26481	16-0816610
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

220 Liberty Street, Warsaw, New York	14569
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (585) 786-1100

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 8.01 Other Events.

On May 15, 2017, Financial Institutions, Inc. (the “Company”) issued a press release announcing the commencement of an underwritten public offering of $40.0 million of its common stock (the “Offering”). Sandler O’Neill + Partners, L.P. is serving as book-running manager for the Offering, and Hovde Group, LLC and Piper Jaffray & Co. are co-managers.

A copy of the Company’s press release is attached hereto as Exhibit 99.1. A copy of the investor presentation for the Offering, which is also being filed with the SEC as an issuer free writing prospectus, is attached hereto as Exhibit 99.2.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press Release of the Company, dated May 15, 2017.
99.2	Investor Presentation, dated May 15, 2017.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FINANCIAL INSTITUTIONS, INC.
Date: May 15, 2017	By:	/s/ Kevin B. Klotzbach
	Name:	Kevin B. Klotzbach
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Financial Institutions, Inc. Announces Commencement of Common Stock Offering

WARSAW, N.Y. – May 15, 2017 – Financial Institutions, Inc. (NASDAQ:FISI) (the “Company”), the parent company of Five Star Bank, Scott Danahy Naylon, LLC and Courier Capital, LLC, today announced that it has commenced an underwritten public offering of $40.0 million of its common stock. The Company also expects to grant the underwriters a 30-day option to purchase up to an additional 15% of the shares sold in the offering.

Sandler O’Neill + Partners, L.P. is serving as the book-running manager and Hovde Group, LLC and Piper Jaffray & Co. are serving as co-managers for the offering. The shares will be issued pursuant to a prospectus supplement and prospectus filed as part of an effective shelf registration statement filed with the Securities and Exchange Commission (the “SEC”) on Form S-3 (File No. 333-202791).

The Company expects to use the net proceeds of this offering to support organic growth and other general corporate purposes, including contributing capital to its banking subsidiary, Five Star Bank.

Additional Information Regarding the Offering

This press release is for informational purposes only and is not an offer to sell or the solicitation of an offer to buy any securities of the Company, which is made only by means of a prospectus supplement and related base prospectus, nor will there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The Company has filed a registration statement (including a prospectus and prospectus supplement) with the SEC for the offering to which this communication relates. Prospective investors, including current shareholders interested in participating in the offering, should read the prospectus in that registration statement, the preliminary prospectus supplement and other documents that the Company has filed with the SEC for more complete information about the Company and the offering. Investors may obtain copies of the preliminary prospectus supplement and accompanying base prospectus relating to the offering without charge by visiting the SEC’s website at www.SEC.gov; from Sandler O’Neill + Partners, L.P., 1251 Avenue of the Americas, 6^th Floor, New York, New York 10020, Attn: Syndicate Operations, or by phone at 1-866-805-4128; from Hovde Group, LLC, 120 W. Madison St., Suite 1200, Chicago, IL 60602, Attn: Syndicate Department, or by phone at 1-866-971-0961; or from Piper Jaffray & Co., Attention: Prospectus Department, 800 Nicollet Mall, J12S03, Minneapolis, MN 55402, or by phone at 1-800-747-3924 or by email to: prospectus@pjc.com.

About Financial Institutions, Inc.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries Five Star Bank, Scott Danahy Naylon, LLC (“SDN”) and Courier Capital, LLC (“Courier 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 more than 50 offices and 60 ATMs throughout Western and Central New York State. SDN provides a broad range of insurance services to personal and business clients across 45 states. Courier Capital provides 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 650 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.

Forward-Looking Statements

Statements contained in this press release which are not historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Similarly, statements that describe the objectives, plans or goals of the Company are forward-looking. These forward-looking statements can generally be identified as such by the context of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “would,” “targeting,” “intend,” “outlook,” “estimate,” “guidance” and other similar expressions, whether in the negative or affirmative. These forward-looking statements involve significant risks and uncertainties. All forward-looking statements made herein are qualified by the cautionary language in the Company’s Annual Report on Form 10-K and other documents filed with the SEC. These documents contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Except as required by law, the Company assumes no obligation to update any information presented herein.

###

For additional information contact:

Shelly J. Doran

(585) 627-1362

sjdoran@five-starbank.com

EX-99.2

NASDAQ: FISI

Investor Presentation

May 15, 2017

Exhibit 99.2

This presentation has been prepared by Financial Institutions, Inc. (“FISI” or the “Company”) solely for informational purposes based on its own information, as

well as information from public sources. This presentation has been prepared to assist interested parties in making their own

evaluation of FISI and does not

purport to contain all of the information that may be relevant. In all cases, interested parties should conduct their own investigation and analysis of FISI and the

data set forth in this presentation and other information provided by or on behalf of FISI.

This presentation does not constitute an offer to sell, nor a solicitation of an offer to buy, any securities of FISI by any person in any jurisdiction in which it is

unlawful for such person to make such an offering or solicitation.

Neither the Securities and Exchange Commission (“SEC”) nor any other regulatory body has approved or disapproved of the securities of FISI or passed upon the

accuracy or adequacy of this presentation. Any representation to the contrary is a criminal offense.

Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any

implication that there has been no change in the affairs of the Company after the date hereof.

Certain of the information contained herein may be derived from information provided by industry sources. The Company believes that such information is

accurate and that the sources from which it has been obtained are reliable. FISI cannot guarantee the accuracy of such information, however, and has not

independently verified such information.

Statements contained in this presentation which are not historical facts and which pertain to future operating results of Financial Institutions, Inc. and its

subsidiaries constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Similarly, statements that

describe the objectives, plans or goals of the Company are forward-looking.

These forward-looking statements can generally be identified as such by the context

of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “would,” “targeting,” “intend,” “outlook,” “estimate,” “guidance”

and other similar expressions, whether in the negative or affirmative. Additionally, statements made in connection with our long-term strategy are forward-

looking as well. These forward-looking statements involve significant risks and uncertainties. All forward-looking statements made herein are qualified by the

cautionary language in the Company’s Annual Report on Form 10-K, its Prospectus Supplement and other documents filed with the SEC. These documents

contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

Except as required by law, the Company assumes no obligation to update any information presented herein. This presentation includes certain non-GAAP

financial measures intended to supplement, not substitute for, comparable GAAP measure.  Reconciliations of those non-GAAP financial measures to GAAP

financial measures are provided in the Appendix to this presentation.

FISI has filed a registration statement (including a prospectus) and a prospectus supplement which is preliminary and subject to completion, with the SEC for the

offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the preliminary prospectus

supplement and the other documents that FISI has filed with the SEC for more complete information about the Company and the offering. You may get these

documents for free by visiting the SEC website at www.sec.gov. Alternatively, the Company, any underwriter or any dealer participating in the offering will

arrange to send you the prospectus if you request it by contacting: Sandler O’Neill & Partners, L.P. at toll-free 1-866-805-4128, Hovde

Group, LLC at toll-free 1-

866-971-0961 or Piper Jaffray

& Co. at toll-free 1-800-747-3924.

Offering Disclosure and Safe Harbor Statement

2

(1)

Based on May 12, 2017 stock price of $32.95/share and 14,542,215 common shares outstanding

Source: SNL Financial, Company documents

Offering Summary

3

Issuer:

Financial Institutions, Inc.

Offering:

Follow-on

offering of common stock

Gross Amount Offered:

$40 million (100% primary)

Over-Allotment Option:

15% (100%

primary)

Exchange

/ Symbol:

NASDAQ

Global Select

/ FISI

Market Capitalization

(1)

:

$479 million

Current Quarterly

Dividend:

$0.21

Dividend

Yield

(1)

:

2.5%

Use of Proceeds:

For general corporate purposes, including supporting

organic growth

Lock-Up:

90 days

Book-Running Manager:

Sandler O’Neill + Partners, L.P

Co-Managers:

Hovde

Group, LLC

Piper Jaffray

& Co.

Diversified financial services holding company

headquartered in Western New York

Subsidiaries include:

–

Five Star Bank (regional community bank)

–

Scott Danahy Naylon, LLC (full-service insurance

agency)

–

Courier Capital, LLC (investment advisory and

wealth management firm)

53 banking locations in 15 contiguous counties in

Western and Central New York

Experienced management team with extensive

market knowledge and industry experience

Franchise is a diversified mix of consumer, business

and municipal customers, products and revenue

sources

Generating consistent, strong operating results

Positioned for growth through key initiatives and

M&A-driven market disruption

Corporate Overview

Key Corporate Statistics as of March 31, 2017

(1)

NPAs include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets

(2)

Refer to “Non-GAAP Reconciliation” in Appendix

(3)

Based on May 12, 2017 stock price of $32.95/share and 14,542,215 common shares outstanding

(4)

Per SNL Financial

Assets:

$3.86 billion

Loans:

$2.40 billion

Deposits:

$3.17 billion

Shareholders’ Equity:

$325.7 million

NPAs

(1)

/Total Assets:

0.21%

Employees:

~ 650

ROACE (TTM):

10.09%

ROATCE

(2)

(TTM):

13.43%

ROAA (TTM):

0.89%

Annualized Dividend Per Share:

$0.84

Market and Valuation Data as of May 12, 2017

Market Capitalization

(3)

:

$479 million

Dividend Yield:

2.5%

Price/Tangible Common Book Value

(2)

:

206%

Price/2017 Consensus EPS

(4)

:

15.5x

Overview of Financial Institutions, Inc.

4

5

Dividends & Tangible Common Book Value

Dividends & Tangible Common Book Value

(1)

Refer to “Non-GAAP Reconciliation” in Appendix

(2)

As of May 12, 2017; per SNL Financial

Reasons to Invest

(1)

Market Disruption Creating Growth

Opportunities

Addition of Talent is Fueling Activity and

Driving Growth

History of Strong Operating Results and

Positive Balance Sheet Trends

Superior Credit Quality and Solid Capital

Position

Experienced Leadership

Reasonable Valuation Relative to Peers

Relative Valuation

(2)

Relative Valuation

(2)

Price/Tangible

Common Book Value

(1)

Price/2017

Consensus EPS

FISI

206%

15.5x

AROW

209%

15.7x

CBU

380%

23.0x

NBTB

249%

19.0x

STBA

218%

15.5x

TMP

266%

18.6x

$13.56

$13.71

$14.77

$15.62

$0.74

$0.77

$0.80

$0.81

2013

2014

2015

2016

Tangible Common Book Value (per share)

Cash Dividends Declared (per share)

Successfully Executing Long-Term Strategy

Maximize Market Disruption Opportunities

–

Continue to capitalize on market disruption in Western New York banking

–

Leverage brand to expand in the larger markets of Buffalo and Rochester

–

Continue to strengthen bench through strategic hires

Generate Above-Peer-Average Growth / Results

–

Targeting mid-to-high single digit loan growth across all loan classes

–

Sustain disciplined credit culture

–

Deposit growth sufficient to fund loan growth

–

Continued improvement in ROAA and ROAE

–

Targeting efficiency ratio in the top one-third of peers

–

Dividend growth

Increase Fee-Based Revenue

–

Targeting noninterest income at 25%-30% of total revenue

–

Maximize synergies between bank, insurance and wealth management platforms

6

Name

Title

Years

with FISI

Years in

Banking

Martin K. Birmingham

President and Chief

Executive Officer

12

27

Kevin B. Klotzbach

EVP,

Chief Financial Officer and Treasurer

15

33

William L. Kreienberg

EVP, Chief Corporate Development Executive and General Counsel

2

(1)

2

(1)

Michael D. Burneal

SVP, Chief Risk

and Enterprise Administration Officer

12

30

Craig

J. Burton

SVP, Commercial Real

Estate Executive

New Hire

30

Vito Caraccio

SVP,

Commercial

Market

Executive

and

Director

of

Business

Banking

Sales

New Hire

23

David

G. Case

SVP,

Chief Commercial Credit Officer

12

32

Paula

D. Dolan

SVP,

Director

of

Human

Resources

and

Enterprise

Planning

3

19

Joseph

L. Dugan

SVP,

Retail

Growth

and

Profitability

Executive

New Hire

25

Sonia M. Dumbleton

SVP, Controller and Corporate Secretary

32

32

Michael D. Grover

SVP, Chief Accounting Officer, Financial Reporting and Tax Manager

17

17

Charles

J. Guarino

SVP,

Chief

Retail

Lending

Executive

22

22

Jeffrey

P. Kenefick

EVP, Chief Community, Commercial and Strategic Development Officer

11

27

Edward “Ted” Oexle

SVP, C&I Lending Executive and Buffalo

Regional President

New Hire

25

Deep Bench with Significant Experience Working in Rochester, Buffalo and all of Western NY

Experienced Leadership Team

7

(1)

Served as FISI’s outside general counsel

for previous four years

Market Footprint

Market Footprint

Growth Opportunities

Growth Opportunities

Buffalo and Rochester

Current market share of 3.6%

(1)

in attractive $32

billion combined local deposit markets

–

Five Star Bank presence and brand awareness

growing

•

Four financial solution centers opened

since November 2015

–

Market disruption creates opportunity for our

style of community banking

•

Personal service with local-leadership and

decision-making power

•

Agile in responding to customer needs

–

FISI balance sheet capacity far exceeds many

other community banks in marketplace

Core Rural Markets

Role as trusted banker creates opportunity for

fee-based services

Rely on stable core deposits

53 branches and 650 employees

Top 3 market share in 11 of 15 counties of operation

4

largest bank in counties of operation

Low market share in Buffalo and Rochester

(1)

Buffalo and Rochester MSAs represent total deposit market of $60 billion (FISI share = 1.9%); excluding impact

of estimated national account relationship deposits of $28 billion, combined MSAs represent $32 billion in

local deposits (FISI share = 3.6%)

8

Buffalo

Rochester

Warsaw

th

Buffalo and Rochester Economic Environment

Financially stable with positive outlook

Key employer transition from manufacturing to small business, technology and professional services

Significant college and university presence, including academic medical centers with robust research

and development activities

Strong collaboration between public and private sectors

–

New York Regional Economic Development Council (REDC) Awards

–

Buffalo Billion and Buffalo Billion II

Buffalo and Rochester downtown redevelopments underway

2017 WalletHub

List of Best Large Cities to Start a Business: Rochester was 31st and Buffalo 34th

9

Buffalo, New York

NY State’s 2

Largest City

Population:  259,000

MSA Population:  1.13 million

Rochester, New York

NY State’s 3

Largest City

Population:  211,000

MSA Population:  1.08 million

Note: Population data based upon U.S. Census estimates

nd

rd

Taking advantage of market disruption to upgrade talent across all segments of our business

–

Hiring experienced professionals from competing institutions

–

Choosing community banking environment vs. big bank experience

–

Bringing market experience, knowledge and relationships

Experienced Western New York bankers hired to lead recently segregated C&I, CRE and Small

Business

Lending

Teams:

Ted

Oexle,

Craig

Burton

and

Vito

Caraccio

Adding lenders in all categories

Impact to headcount and overhead expense tempered by retirements and departures

Addition of Talent

10

Commercial

Lending

Commercial

Credit

Community

Development

Officers

Key

Infrastructure

&

Support

Mortgage

Lending

Retail

Growth

& Profitability

Executive

10

5

3

8

10

1

Our Team Build Outs and Talent Upgrades

Include

the Following New Hires (2016 and 2017):

Evolving to Meet Changing Customer Needs

Financial solution center concept

illustrates how we are evolving to

meet the needs of our customers

High level of personalized banking

Staffed by Certified Personal Bankers

(CPBs) —

experts trained to meet a

broad array of customer needs

Smaller footprint than traditional

branch

Four financial solution centers open

and operating in Rochester and

Buffalo

Transitioning staff in traditional

branches from teller and platform

roles to CPBs

Adding technology, such as instant

issue debit cards, in traditional

branches

11

Strong Operating Results and Positive Balance Sheet Trends

Total Loans

Total Deposits

Net Interest Income & Noninterest Income

(1)

Increase reflects public deposit seasonality

($ in millions)

Net Income

12

($ in millions)

($ in millions)

($ in millions)

$25.5

$29.4

$28.3

$31.9

$7.9

2013

2014

2015

2016

1Q '17

$91.6

$93.8

$95.3

$102.7

$27.0

$24.8

$25.4

$30.3

$35.8

$7.8

21.3%

21.3%

24.1%

25.8%

2013

2014

2015

2016

1Q '17

Net Interest Inc.

Noninterest Inc.

% of Nonint. Inc. to Total Revenue

$735

$743

$880

$1,020

$1,051

$1,099

$1,169

$1,204

$1,320

$1,352

$1,834

$1,912

$2,084

$2,340

$2,403

2013

2014

2015

2016

1Q '17

Commercial Loans

Consumer Loans

$1,724

$1,858

$2,094

$2,293

$2,435

$596

$593

$637

$702

$735

$2,320

$2,451

$2,731

$2,995

$3,170

2013

2014

2015

2016

1Q '17

Transactional deposits

Time deposits

(1)

Bank Fees/Income

–

Various initiatives underway to increase credit

card revenues

–

New purchasing card program

–

Increased focus on sale of cash management

services

–

Anticipate increase in mortgage-related fees

with build-out of residential mortgage

production capabilities

Scott Danahy Naylon (August 2014) and Courier

Capital (January 2016) acquisitions are integrated

and performing in-line with expectations

Noninterest Income

Commentary

13

($ in millions)

Net Interest Income & Noninterest Income

($ in millions)

$24.8

$25.4

$30.3

$35.8

$7.8

2013

2014

2015

2016

1Q '17

$91.6

$93.8

$95.3

$102.7

$27.0

$24.8

$25.4

$30.3

$35.8

$7.8

21.3%

21.3%

24.1%

25.8%

2013

2014

2015

2016

1Q '17

Net Interest Inc.

Noninterest Inc.

% of Nonint. Inc. to Total Revenue

Loan and Deposit Composition

$2.40bn

4.19% Avg. Yield

(1)

Total Loans at March 31, 2017

Total Deposits at March 31, 2017

Total loans increased 13.6% from March 31, 2016

–

Commercial, residential real estate and indirect portfolios increased 15.7%, 7.9% and 15.6%, respectively

Total deposits increased 7.1% from March 31, 2016, driven by organic growth

–

Municipal business continues to grow; dedicated sales force and approximately 310 customers

14

(1)

1Q’17 average

Commercial

43.7%

Consumer

Indirect

32.7%

Residential

Real Estate

22.9%

Other

Consumer

0.7%

Nonint.

Bearing

Demand

21.0%

Int. Bearing

Demand

22.0%

Savings &

Money

Market

33.8%

Time

Deposits

23.2%

$3.17bn

0.30% Avg. Cost

(1)

Nonperforming Assets

Net Charge-Offs

($ in millions)

($ in millions)

Nonperforming assets

(1)

to total assets are well below peers

Loan loss reserves as a ratio of nonperforming assets are significantly higher than peers, demonstrating

FISI’s conservative underwriting culture and reserve coverage

Credit quality reflects our knowledge of our community banking market and customer base

Superior Credit Quality

(1)

NPAs include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets

15

$17.1

$10.3

$8.6

$6.4

$8.1

0.58%

0.33%

0.25%

0.17%

0.21%

$-

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

2013

2014

2015

2016

1Q'17

NPAs

NPAs/Total Assets

$7.1

$6.9

$7.9

$5.8

$2.6

0.40%

0.37%

0.40%

0.26%

0.45%

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

2013

2014

2015

2016

1Q'17

Net Charge-offs

Net Charge-offs / Average Loans

Entire portfolio 0% or 20% risk weighted

Portfolio comprised of New York State

municipals and government agency issued

MBS, CMO and debentures

Modified portfolio duration of 4.45 years

28% of Total Assets

–

Higher than peers as a result of public

deposits (public/municipal deposits

comprised 31% of total deposits)

–

Size of securities portfolio has

remained relatively constant for the

past eight quarters while loans

increased nearly 20%

16

Conservative Securities

Portfolio

(1)

1Q’17 average on tax equivalent basis

MBS

35.9%

NYS

Municipals

28.4%

CMO

18.2%

Debentures

17.5%

Total Investment Securities

at March 31, 2017

$1.09bn

2.46% Avg. Yield

(1)

Consolidated Capital Ratios

Consolidated Capital Ratios

Historical Capital Position

17

March 31, 2017

Tangible Common Equity / Tangible Assets

(1)

6.16%

Tier 1 Leverage Ratio

7.30%

Tier 1 Risk-Based Capital Ratio

10.11%

Total Risk-Based Capital Ratio

12.75%

(1)

Refer to “Non-GAAP Reconciliation” in Appendix

(1)

7.71%

7.63%

7.35%

7.41%

7.36%

7.30%

10.73%

10.82%

10.47%

10.50%

10.26%

10.11%

11.98%

12.08%

11.72%

13.35%

12.97%

12.75%

6.86%

6.51%

6.41%

6.32%

6.25%

6.16%

5.50%

5.70%

5.90%

6.10%

6.30%

6.50%

6.70%

6.90%

7.10%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%

13.00%

14.00%

2012

2013

2014

2015

2016

Q1 2017

Tier 1 Leverage Ratio

Tier 1 Risk-Based Capital Ratio

Total Risk-Based Capital Ratio

Tangible Common Equity / Tangible Assets

Business Line Details: Commercial Banking

Commercial Banking –

Quarterly

Commercial Banking –

Annual

Commentary

Strong year-over-year growth in both Commercial

Mortgage (CRE and owner occupied) and

Commercial Business (C&I) lending

Includes growth in less price sensitive Small

Business Commercial lending driven by addition of

talent

#2 SBA lender in Rochester/Buffalo combined and

#32 SBA lender in U.S. for the 2016 SBA year

ended September 30, 2016

(1)

Taking advantage of significant opportunities to

capitalize on disruption within the marketplace

–

Made important acquisitions of talent in 2016

and year-to-date in 2017

Community banks are gaining momentum in

becoming financial partners of choice

–

Provide a wide spectrum of products:  credit,

deposit, insurance, wealth advisory and

treasury

–

Responsive to changing customer needs

($ in millions)

($ in millions)

LTM Growth 15.7%

CAGR 11.6%

18

(1)

SBA Rankings based on Units

$590

$614

$636

$670

$675

$318

$349

$351

$350

$376

0.22%

(0.01%)

0.04%

0.10%

0.30%

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

1Q'16

2Q'16

3Q'16

4Q'16

1Q'17

Commercial Mortgage

Commercial Business

NCOs/Avg Loans

$469

$475

$566

$670

$675

$266

$267

$314

$350

$376

0.14%

0.02%

0.24%

0.09%

0.30%

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

2013

2014

2015

2016

1Q'17

Commercial Mortgage

Commercial Business

NCOs/Avg Loans

Business Line Details: Consumer Indirect

Consumer Indirect - Quarterly

Consumer Indirect - Annual

Commentary

Consumer indirect is a unique core competency

–

Experienced management team with average

industry experience of 25+ years

Loans originate through approximately 480

franchised automobile dealerships in Upstate New

York and Pennsylvania (no independent auto

dealers)

Large unit volume and smaller loans provide

natural risk dispersion

Model not easily duplicated

Relatively short duration allows for rapid re-

pricing of new assets

High percentage of originations are prime credits,

resulting in favorable portfolio performance

Ongoing focus to maintain yield and credit quality

standards

LTM Growth 15.6%

CAGR 6.7%

19

($ in millions)

($ in millions)

$680

$697

$730

$752

$786

0.79%

0.53%

0.50%

0.73%

0.93%

$630

$650

$670

$690

$710

$730

$750

$770

$790

1Q'16

2Q'16

3Q'16

4Q'16

1Q'17

Consumer Indirect

NCOs/Avg Loans

$636

$662

$677

$752

$786

0.82%

0.87%

0.74%

0.64%

0.93%

$500

$550

$600

$650

$700

$750

$800

2013

2014

2015

2016

1Q'17

Consumer Indirect

NCOs/Avg Loans

Business Line Details: Residential Real Estate Loans and Lines

Commentary

In-market originations through mortgage loan

originators and Five Star Bank branch network

include term loans and lines

Product builds relationships and captures market

share

Continuing the build out of residential mortgage

production capabilities to capitalize on market

disruption in Buffalo and Rochester

–

Balance sheet capacity

–

Community bank delivery model

Increased mortgage lending is expected to result

in positive balance sheet impact as well as fee

generation

Strategic hires in 2016 and 2017 are expected to

result in significant increase in traditional

mortgage banking

–

Senior Residential Lending Administrator and

Mortgage Operations Manager in 4Q 2016

–

Two Community Development Loan Officers in

February 2017

–

Buffalo-based team started in late March 2017

LTM Growth 7.9%

CAGR 7.1%

20

($ in millions)

($ in millions)

$509

$533

$550

$550

$549

0.02%

0.06%

0.05%

0.03%

0.01%

$450

$470

$490

$510

$530

$550

$570

1Q'16

2Q'16

3Q'16

4Q'16

1Q'17

Residential Real Estate

NCOs/Avg Loans

$439

$487

$508

$550

$549

0.14%

0.09%

0.09%

0.04%

0.01%

$300

$350

$400

$450

$500

$550

$600

2013

2014

2015

2016

1Q'17

Residential Real Estate

NCOs/Avg Loans

21

Dividends & Tangible Common Book Value

Dividends & Tangible Common Book Value

Relative Valuation

(2)

Relative Valuation

(2)

(1)

Refer to “Non-GAAP Reconciliation” in Appendix

(2)

As of May 12, 2017; per SNL Financial

Reasons to Invest

(1)

Price/Tangible

Common Book Value

(1)

Price/2017

Consensus EPS

FISI

206%

15.5x

AROW

209%

15.7x

CBU

380%

23.0x

NBTB

249%

19.0x

STBA

218%

15.5x

TMP

266%

18.6x

Market Disruption Creating Growth

Opportunities

Addition of Talent is Fueling Activity and

Driving Growth

History of Strong Operating Results and

Positive Balance Sheet Trends

Superior Credit Quality and Solid Capital

Position

Experienced Leadership

Reasonable Valuation Relative to Peers

$13.56

$13.71

$14.77

$15.62

$0.74

$0.77

$0.80

$0.81

2013

2014

2015

2016

Tangible Common Book Value (per share)

Cash Dividends Declared (per share)

Appendix

22

(1)

Tangible common equity divided by tangible assets

(2)

Tangible common equity divided by common shares outstanding

(3)

Net income available to common shareholders (annualized) divided by average tangible common equity

Source: Company filings

Non-GAAP Financial Information

This presentation contains disclosure regarding tangible common book value per share and return on average tangible common equity, which are determined by methods other than in

accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non-GAAP measures are useful to our investors as measures of the strength of the

Company’s capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide supplemental information that may help

investors to analyze our capital position without regard to the effects of intangible assets. Non-GAAP financial measures have inherent limitations and are not uniformly applied by issuers.

Therefore, these non-GAAP financial measures should not be considered in isolation, or as a substitute for comparable measures prepared in accordance with GAAP. The comparable GAAP

financial measures and reconciliation to the comparable GAAP financial measures are provided below.

Non-GAAP Reconciliation

23

GAAP to Non-GAAP Reconciliation

TTM Ended

($ in thousands, except per share data)

2012

2013

2014

2015

2016

3/31/2017

Computation of ending tangible common equity:

Common shareholders' equity

236,426

$         

237,497

$         

262,192

$         

276,504

$         

302,714

$         

308,348

$               

Less: Goodwill and other intangible assets, net

50,389

50,002

68,639

66,946

75,640

75,343

Tangible common equity

186,037

187,495

193,553

209,558

227,074

233,005

Computation of ending tangible assets:

Total assets

2,763,865

$     

2,928,636

$     

3,089,521

$     

3,381,024

$     

3,710,340

$     

3,859,865

$           

Less: Goodwill and other intangible assets, net

50,389

50,002

68,639

66,946

75,640

75,343

Tangible assets

2,713,476

2,878,634

3,020,882

3,314,078

3,634,700

3,784,522

Tangible common equity to tangible assets

6.86%

6.51%

6.41%

6.32%

6.25%

6.16%

Common shares outstanding

13,788

13,829

14,118

14,191

14,538

14,536

Tangible common book value per share

13.49

$             

13.56

$             

13.71

$             

14.77

$             

15.62

$             

16.03

$                   

Computation of average tangible common equity:

Average common equity

230,527

$         

235,290

$         

254,533

$         

272,367

$         

301,666

$         

305,337

$               

Less: Average goodwill and other intangible assets, net

43,399

50,201

57,039

68,138

76,170

75,968

Average tangible common equity

187,128

185,089

197,494

204,229

225,496

229,369

Computation of average tangible assets:

Average assets

2,519,258

$     

2,803,825

$     

2,994,604

$     

3,269,890

$     

3,547,105

$     

3,633,553

$           

Less: Average goodwill and other intangible assets, net

43,399

50,201

57,039

68,138

76,170

75,968

Average tangible assets

2,475,859

2,753,624

2,937,565

3,201,752

3,470,935

3,557,585

Net income available to common shareholders

21,975

24,064

27,893

26,875

30,469

30,794

Return on average tangible common equity

11.74%

13.00%

14.12%

13.16%

13.51%

13.43%

Year Ended

(1)

(2)

(3)