EX-99.1

WARSAW, N.Y., April 26, 2018 – Financial Institutions, Inc. (Nasdaq: FISI), today reported financial and operational results for the first quarter ended March 31, 2018. Financial Institutions, Inc. (the “Company”) is the parent company of Five Star Bank (the “Bank”), Scott Danahy Naylon, LLC (“Scott Danahy Naylon” or “SDN”) and Courier Capital, LLC (“Courier Capital”).

Net income in the quarter was $9.3 million, 17% higher than $7.9 million in the first quarter of 2017. After preferred dividends, net income available to common shareholders was $8.9 million, or $0.56 per diluted share, compared to $7.6 million, or $0.52 per diluted share, in the first quarter of 2017.

President and Chief Executive Officer Martin K. Birmingham stated, “I am pleased with our first quarter results. We continued to make progress against our fundamental long-term strategic goals, generating loan and deposit growth in-line with our plan while maintaining a strong credit culture. Our wealth management and insurance businesses also performed well in the quarter and we are seeing improved synergies across our community financial services platform.

“In February, we launched our new brand campaign designed to increase customer knowledge surrounding the services we offer in community banking, wealth management and insurance and to increase awareness of our brand in key urban growth markets. Our campaign tag line Today is tomorrow in progress reinforces our goal of providing solutions today that lead to financial well-being in the future. The campaign has been very well-received and early statistics indicate terrific growth in customer awareness and satisfaction.”

Diluted earnings per share of $0.56 was $0.04, or 7.7%, higher than the first quarter of 2017

Net interest income of $29.6 million was $2.6 million, or 9.8%, higher than the first quarter of 2017

Noninterest income of $9.0 million was $1.1 million, or 14.7%, higher than the first quarter of 2017

Total assets, interest-earning assets, loans and deposits all reached record-high levels at quarter-end:

Total interest-earning assets increased $36.2 million during the quarter, to $3.82 billion

The Company declared a quarterly cash dividend of $0.24 per common share, a 9.1% increase from the most recent dividend. The first quarter dividend represented a 3.29% annualized yield as of March 31, 2018, and a return of 43% of first quarter net income to common shareholders

Chief Financial Officer Kevin B. Klotzbach added, “Loan growth was 2.1% in the quarter and relatively balanced across all loan categories with commercial business loans 3.1% higher, residential real estate loans 2.7% higher, consumer indirect loans 2.5% higher and commercial mortgage loans 1.5% higher than at December 31, 2017. Our credit quality remains strong with total non-performing loans to total loans at 0.38% at quarter-end. Our investment securities portfolio decreased by $29.3 million during the quarter as we continued to convert a portion of our marketable securities into loans.”

Net interest income was $29.6 million in the first quarter of 2018, $132 thousand lower than the fourth quarter of 2017 and $2.6 million higher than the first quarter of 2017.

Average interest-earning assets for the quarter were $3.80 billion, $59.8 million higher than the fourth quarter of 2017 and $320.7 million higher than the first quarter of 2017. The primary driver of the increase was organic loan growth.

Net interest margin for the first quarter of 2018 was 3.19%, six basis points lower than the fourth quarter of 2017 and four basis points lower than the first quarter of 2017. The tax-equivalent yield on municipal securities was lower in the quarter because of the reduction in federal income tax rate to 21% in 2018 from 35% in 2017, negatively impacting net interest margin compared to the prior year. Fourth quarter of 2017 net interest margin was positively impacted by approximately $300 thousand of fee income comprised of yield maintenance fees relating to prepayment of mortgage-backed securities and payment deferral program fees. First quarter of 2017 net interest margin benefitted from approximately $100 thousand of yield maintenance fees relating to prepayment of mortgage-backed securities. No such fees were recognized in the first quarter of 2018.

Noninterest income was $9.0 million in the first quarter of 2018, relatively unchanged as compared to the fourth quarter of 2017 and $1.1 million higher than the first quarter of 2017.

Excluding the net gain on investment securities from all periods, noninterest income was $9.0 million in the first quarter of 2018, $657 thousand higher than $8.3 million in the fourth quarter of 2017, and $1.4 million higher than $7.6 million in the first quarter of 2017.

The Company has made investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from investments in limited partnerships was $568 thousand in the first quarter of 2018 as compared to $19 thousand in the fourth quarter of 2017 and a loss of $30 thousand in the first quarter of 2017. Income from these investments fluctuates based on the maturity and performance of the underlying investments.

Investment advisory income was $1.8 million in the first quarter of 2018, $31 thousand higher than the fourth quarter of 2017 and $347 thousand higher than the first quarter of 2017. The increase over the prior year period was primarily driven by the third quarter of 2017 acquisition of the assets of a Buffalo-area wealth management firm.

Noninterest expense was $24.1 million in the first quarter of 2018 as compared to $23.2 million in the fourth quarter of 2017 and $20.9 million in the first quarter of 2017.

Salaries and employee benefits expense of $13.4 million was $457 thousand higher than the fourth quarter of 2017 and $2.1 million higher than the first quarter of 2017 as a result of our organic growth initiatives and approximately $1.0 million of non-recurring expenses in the first quarter of 2018 related to senior management retirements at our insurance subsidiary, higher contingent incentive compensation related to our wealth management subsidiary as a result of expected earnout payment, and the payment of one-time awards to employees not covered by certain incentive programs.

Occupancy and equipment expense of $4.4 million was $349 thousand higher than the fourth quarter of 2017 and $443 thousand higher than the first quarter of 2017. The increase from the fourth quarter of 2017 was largely due to higher snow removal expense. The increase as compared to the first quarter of 2017 was primarily the result of the relocation of the Five Star Bank Rochester regional administration center in the first quarter of 2017 and the impact of a branch opening in February 2017.

Advertising and promotions expense of $977 thousand was $257 thousand higher than the fourth quarter of 2017 and $515 thousand higher than the first quarter of 2017 as a result of the new Five Star Bank brand campaign launched in February 2018. Advertising and promotions expense in 2017 was lower than historical experience in anticipation of the new campaign.

Income tax expense was $2.3 million in the first quarter of 2018 as compared to $580 thousand in the fourth quarter of 2017 and $3.2 million in the first quarter of 2017.

The effective tax rate was 19.6% in the first quarter of 2018 as compared to 28.5% in the first quarter of 2017, reflecting lower federal corporate tax rates because of the Tax Cuts and Jobs Act (the “TCJ Act”).

The effective tax rate of 5.0% in the fourth quarter of 2017 was the result of a $2.9 million reduction in income tax expense due to the TCJ Act, primarily driven by a revaluation adjustment to the net deferred tax liability.

Total assets were $4.15 billion at March 31, 2018, up $47.2 million from $4.11 billion at December 31, 2017, and up $292.6 million from $3.86 billion at March 31, 2017. The increases were largely the result of loan growth funded by deposit growth and net proceeds from a 2017 common equity offering. Between May and November of 2017, the Company sold 1.4 million shares of common stock through an at-the-market offering (“2017 Equity Offering”) generating approximately $40.0 million of gross proceeds and $38.3 million of net proceeds.

Total loans were $2.79 billion at March 31, 2018, up $58.2 million, or 2.1%, from December 31, 2017, and up $390.6 million, or 16.3%, from March 31, 2017.

Commercial business loans totaled $464.1 million, up $13.8 million, or 3.1%, from December 31, 2017, and up $88.6 million, or 23.6%, from March 31, 2017.

Commercial mortgage loans totaled $821.1 million, up $12.2 million, or 1.5%, from December 31, 2017, and up $146.1 million, or 21.6%, from March 31, 2017.

Residential real estate loans totaled $477.9 million, up $12.7 million, or 2.7%, from December 31, 2017, and up $49.8 million, or 11.6%, from March 31, 2017.

Consumer indirect loans totaled $898.1 million, up $21.5 million, or 2.5%, from December 31, 2017, and up $112.0 million, or 14.2%, from March 31, 2017.

Total deposits were $3.38 billion at March 31, 2018, an increase of $169.8 million from December 31, 2017, and an increase of $210.4 million from March 31, 2017. The increase from December 31, 2017, was primarily due to public deposit seasonality. The increase from March 31, 2017, was primarily the result of successful business development efforts in both municipal and retail banking. Public deposit balances represented 29% of total deposits at March 31, 2018, compared to 26% at December 31, 2017 and 31% at March 31, 2017.

Shareholders’ equity was $380.3 million at March 31, 2018, compared to $381.2 million at December 31, 2017, and $325.7 million at March 31, 2017. Common book value per share was $22.83 at March 31, 2018, $22.85 at December 31, 2017, and $21.21 at March 31, 2017. Changes in shareholders’ equity and common book value per share are attributable to net income less dividends paid plus proceeds from the 2017 Equity Offering, net of the change in unrealized gain (loss) on investment securities.

During the first quarter of 2018, the Company declared a common stock dividend of $0.24 per common share, a 9.1% increase from the most recent dividend. The dividend returned 43% of first quarter net income to common shareholders.

Regulatory capital ratios at March 31, 2018, were slightly lower than December 31, 2017 ratios, primarily as a result of loan growth and higher asset levels. March 31, 2018 ratios were higher than March 31, 2017 ratios as a result of the 2017 Equity Offering:

Leverage Ratio was 8.11%, compared to 8.13% and 7.30% at December 31, 2017, and March 31, 2017, respectively.

Common Equity Tier 1 Capital Ratio was 10.09%, compared to 10.16% and 9.46% at December 31, 2017, and March 31, 2017, respectively.

Tier 1 Capital Ratio was 10.65%, compared to 10.74% and 10.11% at December 31, 2017, and March 31, 2017, respectively.

Total Risk-Based Capital Ratio was 13.09%, compared to 13.19% and 12.75% at December 31, 2017, and March 31, 2017, respectively.

Non-performing loans were $10.7 million at March 31, 2018, compared to $12.5 million at December 31, 2017, and $8.0 million at March 31, 2017. The ratio of non-performing loans to total loans was 0.38% at March 31, 2018; 0.46% at December 31, 2017; and 0.33% at March 31, 2017.

Provision for loan losses was $2.9 million for the first quarter, a decrease of $1.0 million from the fourth quarter of 2017 and an increase of $168 thousand from the first quarter of 2017.

Net charge-offs were $2.0 million during the quarter, $1.6 million lower than the fourth quarter of 2017 and $607 thousand lower than the first quarter of 2017. The ratio of annualized net charge-offs to total average loans was 0.30% in the quarter; 0.54% in the fourth quarter of 2017; and 0.45% in the first quarter of 2017.

The ratio of allowance for loan losses to total loans was 1.27% at March 31, 2018, 1.27% at December 31, 2017, and 1.29% at March 31, 2017.

The Company will host an earnings conference call and audio webcast on April 27, 2018 at 9:00 a.m. Eastern Time. The call will be hosted by Martin K. Birmingham, President and Chief Executive Officer, and Kevin B. Klotzbach, 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 1-888-317-6016 and requesting the Financial Institutions, Inc. (FISI) call. The webcast replay will be available on the Company’s website for at least 30 days.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries Five Star Bank, Scott Danahy Naylon and 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 throughout Western and Central New York State. Scott Danahy Naylon 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.

This news release contains disclosure regarding tangible assets, tangible common equity, tangible common equity to tangible assets, tangible common book value per share, average tangible assets, average tangible common equity, 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 can be found in Appendix A to this document.

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 Company’s ability to implement its strategic plan, the Company’s ability to redeploy investment assets into loan assets, 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 successfully integrate and profitably operate Scott Danahy Naylon, Courier Capital 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, 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.

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


	2018			2017
	March 31,			December 31,			September 30,			June 30,			March 31,

SELECTED BALANCE SHEET DATA:
Cash and cash equivalents	$	122,914		$	99,195		$	97,838		$	84,537		$	149,699
Investment securities:
Available for sale		510,197			524,973			551,491			540,575			540,406
Held-to-maturity		501,905			516,466			538,332			533,471			545,381

Total investment securities		1,012,102			1,041,439			1,089,823			1,074,046			1,085,787
Loans held for sale		1,523			2,718			2,407			1,864			2,097
Loans:
Commercial business		464,139			450,326			419,415			398,343			375,518
Commercial mortgage		821,091			808,908			757,987			724,064			675,007
Residential real estate loans		477,935			465,283			446,044			432,053			428,171
Residential real estate lines		115,346			116,309			117,621			118,611			120,874
Consumer indirect		898,099			876,570			857,528			826,708			786,120
Other consumer		16,654			17,621			17,640			17,093			16,937

Total loans		2,793,264			2,735,017			2,616,235			2,516,872			2,402,627
Allowance for loan losses		35,594			34,672			34,347			33,159			31,081

Total loans, net		2,757,670			2,700,345			2,581,888			2,483,713			2,371,546
Total interest-earning assets		3,818,839			3,782,659			3,708,385			3,593,106			3,523,613
Goodwill and other intangible assets, net		74,415			74,703			74,997			73,477			75,343
Total assets		4,152,432			4,105,210			4,021,591			3,891,538			3,859,865
Deposits:
Noninterest-bearing demand		702,900			718,498			710,865			677,124			666,332
Interest-bearing demand		717,567			634,203			656,703			631,451			698,962
Savings and money market		1,052,270			1,005,317			1,050,487			999,125			1,069,901
Time deposits		907,272			852,156			863,453			824,786			734,464

Total deposits		3,380,009			3,210,174			3,281,508			3,132,486			3,169,659
Short-term borrowings		327,600			446,200			310,800			347,500			303,300
Long-term borrowings, net		39,149			39,131			39,114			39,096			39,078
Total interest-bearing liabilities		3,043,858			2,977,007			2,920,557			2,841,958			2,845,705
Shareholders’ equity		380,302			381,177			366,002			347,641			325,688
Common shareholders’ equity		362,973			363,848			348,668			330,301			308,348
Tangible common equity ⁽¹⁾		288,558			289,145			273,671			256,824			233,005
Unrealized gain (loss) on investment securities,
net of tax	$	(8,503	)	$	(2,173	)	$	17		$	(232	)	$	(1,938	)
Common shares outstanding		15,901			15,925			15,626			15,127			14,536
Treasury shares		155			131			136			137			156
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio		8.11	%		8.13	%		7.91	%		7.70	%		7.30	%
Common equity Tier 1 capital ratio		10.09	%		10.16	%		10.09	%		9.86	%		9.46	%
Tier 1 capital ratio		10.65	%		10.74	%		10.69	%		10.48	%		10.11	%
Total risk-based capital ratio		13.09	%		13.19	%		13.24	%		13.09	%		12.75	%
Common equity to assets		8.74	%		8.86	%		8.67	%		8.49	%		7.99	%
Tangible common equity to tangible assets ⁽¹⁾		7.08	%		7.17	%		6.93	%		6.73	%		6.16	%
Common book value per share	$	22.83		$	22.85		$	22.31		$	21.84		$	21.21
Tangible common book value per share ⁽¹⁾	$	18.15		$	18.16		$	17.51		$	16.98		$	16.03
Stock price (Nasdaq: FISI):
High	$	33.00		$	34.10		$	31.15		$	35.35		$	35.40
Low	$	29.50		$	28.70		$	25.65		$	29.09		$	30.50
Close	$	29.60		$	31.10		$	28.80		$	29.80		$	32.95

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

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


	2018				2017
	First			Fourth				Third			Second				First
	Quarter			Quarter				Quarter			Quarter				Quarter

SELECTED INCOME STATEMENT DATA:
Interest income	$	35,403		$34,767				$	33,396		$31,409				$	30,538
Interest expense		5,775		5,007					4,958				3,987			3,543

Net interest income		29,628		29,760					28,438				27,422			26,995
Provision for loan losses		2,949		3,946					2,802				3,832			2,781

Net interest income after provision
for loan losses		26,679		25,814					25,636				23,590			24,214

Noninterest income:
Service charges on deposits		1,738		1,905					1,901				1,840			1,745
Insurance income		1,399		1,214					1,488				1,133			1,431
ATM and debit card		1,421		1,491					1,445				1,456			1,329
Investment advisory		1,778		1,747					1,497				1,429			1,431
Company owned life insurance		450				414			449				473			445
Investments in limited partnerships		568				19			(14	)			135			(30	)
Loan servicing		115				91			105				123			120
Net gain on sale of loans held for sale		96				106			150				72			48
Net gain on investment securities		—				660			184				210			206
Net (loss) gain on other assets		3				12			21				6			(2	)
Contingent consideration liability adjustment		—				—			—				1,200			—
Other		1,416		1,328					1,348				1,256			1,113

Total noninterest income		8,984		8,987					8,574				9,333			7,836

Noninterest expense:
Salaries and employee benefits		13,429		12,972					12,348				11,986			11,369
Occupancy and equipment		4,407		4,058					4,087				4,184			3,964
Professional services		883				854			1,157				1,057			1,015
Computer and data processing		1,235		1,244					1,208				1,312			1,171
Supplies and postage		512				507			492				467			537
FDIC assessments		508				451			440				469			457
Advertising and promotions		977				720			344				645			462
Amortization of intangibles		288				294			288				291			297
Goodwill impairment		—				—			—				1,575			—
Other		1,868		2,063					2,103				1,955			1,670

Total noninterest expense		24,107		23,163					22,467				23,941			20,942

Income before income taxes		11,556		11,638					11,743				8,982			11,108
Income tax expense		2,268				580			3,464				2,736			3,165

Net income		9,288		11,058					8,279				6,246			7,943

Preferred stock dividends		365				365			366				366			365

Net income available to common shareholders	$	8,923		$10,693				$	7,913			$	5,880		$	7,578

FINANCIAL RATIOS:
Earnings per share – basic	$	0.56		$0.68				$	0.52			$	0.40		$	0.52
Earnings per share – diluted	$	0.56		$0.68				$	0.52			$	0.40		$	0.52
Cash dividends declared on common stock	$	0.24		$0.22				$	0.21			$	0.21		$	0.21
Common dividend payout ratio		42.86	%	32.35%					40.38	%			52.50	%		40.38	%
Dividend yield (annualized)		3.29	%	2.81%					2.89	%			2.83	%		2.58	%
Return on average assets		0.92	%	1.09%					0.83	%			0.65	%		0.86	%
Return on average equity		9.89	%	11.72%					9.17	%			7.44	%		9.94	%
Return on average common equity		9.95	%	11.88%					9.21	%			7.38	%		10.02	%
Return on average tangible common equity ⁽¹⁾		12.52	%	15.03%					11.76	%			9.65	%		13.30	%
Efficiency ratio ⁽²⁾		61.85	%	59.62%					59.75	%			64.10	%		59.09	%
Effective tax rate		19.6	%			5.0	%		29.5	%			30.5	%		28.5	%

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

⁽²⁾ The efficiency ratio is calculated by dividing noninterest expense by net revenue, i.e., the sum of net interest income (fully taxable equivalent) and noninterest income before net gains on investment securities. This is a banking industry measure not required by GAAP.


	2018			2017
	First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits	$	667		$	1,693		$	—		$	16,639		$	10,078
Investment securities ⁽¹⁾		1,034,830			1,073,170			1,096,374			1,085,670			1,090,063
Loans:
Commercial business		453,250			429,831			405,308			385,938			363,367
Commercial mortgage		821,311			778,765			752,634			700,010			678,613
Residential real estate loans		470,612			455,641			438,436			430,237			429,746
Residential real estate lines		115,614			116,731			117,597			119,333			121,594
Consumer indirect		885,723			865,735			841,081			802,379			767,887
Other consumer		16,978			17,618			17,184			16,680			16,956

Total loans		2,763,488			2,664,321			2,572,240			2,454,577			2,378,163
Total interest-earning assets		3,798,985			3,739,184			3,668,614			3,556,886			3,478,304
Goodwill and other intangible assets, net		74,577			74,866			73,960			74,954			75,508
Total assets		4,086,633			4,028,063			3,951,002			3,847,137			3,754,470
Interest-bearing liabilities:
Interest-bearing demand		671,991			655,207			612,401			651,485			634,141
Savings and money market		1,012,574			1,051,367			998,769			1,054,997			1,030,363
Time deposits		857,184			863,770			855,371			762,874			721,404
Short-term borrowings		411,760			316,894			385,512			323,562			327,195
Long-term borrowings, net		39,138			39,121			39,103			39,085			39,067

Total interest-bearing liabilities		2,992,647			2,926,359			2,891,156			2,832,003			2,752,170
Noninterest-bearing demand deposits		688,123			703,560			679,303			658,926			657,190
Total deposits		3,229,872			3,273,904			3,145,844			3,128,282			3,043,098
Total liabilities		3,705,782			3,653,655			3,592,685			3,510,410			3,430,504
Shareholders’ equity		380,851			374,408			358,317			336,727			323,966
Common equity		363,523			357,079			340,981			319,387			306,626
Tangible common equity⁽²⁾	$	288,946		$	282,213		$	267,021		$	244,433		$	231,118
Common shares outstanding:
Basic		15,890			15,749			15,268			14,664			14,479
Diluted		15,941			15,793			15,302			14,702			14,528
SELECTED AVERAGE YIELDS:
*(Tax equivalent basis)*
Investment securities		2.32	%		2.53	%		2.45	%		2.47	%		2.46	%
Loans		4.36	%		4.29	%		4.24	%		4.16	%		4.19	%
Total interest-earning assets		3.80	%		3.78	%		3.71	%		3.63	%		3.64	%
Interest-bearing demand		0.12	%		0.14	%		0.14	%		0.14	%		0.14	%
Savings and money market		0.18	%		0.16	%		0.15	%		0.14	%		0.13	%
Time deposits		1.33	%		1.21	%		1.15	%		1.01	%		0.95	%
Short-term borrowings		1.68	%		1.40	%		1.29	%		1.08	%		0.86	%
Long-term borrowings, net		6.31	%		6.32	%		6.32	%		6.32	%		6.32	%
Total interest-bearing liabilities		0.78	%		0.68	%		0.68	%		0.56	%		0.52	%
Net interest rate spread		3.02	%		3.10	%		3.03	%		3.07	%		3.12	%
Net interest rate margin		3.19	%		3.25	%		3.17	%		3.18	%		3.23	%

⁽²⁾ See Appendix A – Reconciliation to Non-GAAP Financial Measures for the computation of this Non-GAAP measure.

FINANCIAL INSTITUTIONS, INC.
Selected Financial Information (Unaudited)
(Amounts in thousands)


	2018						2017
	First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter

ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance	$	34,672		$	34,347		$	33,159		$	31,081		$	30,934
Net loan charge-offs (recoveries):
Commercial business		(15	)		1,622			44			568			964
Commercial mortgage		(3	)		(5	)		(5	)		(38	)		(204	)
Residential real estate loans		(50	)		88			161			78			(26	)
Residential real estate lines		91			40			19			(46	)		33
Consumer indirect		1,664			1,636			1,244			1,082			1,758
Other consumer		340			240			151			110			109

Total net charge-offs		2,027			3,621			1,614			1,754			2,634
Provision for loan losses		2,949			3,946			2,802			3,832			2,781

Ending balance	$	35,594		$	34,672		$	34,347		$	33,159		$	31,081

Net charge-offs (recoveries)
to average loans (annualized):
Commercial business		-0.01	%		1.50	%		0.04	%		0.59	%		1.08	%
Commercial mortgage		-0.00	%		-0.00	%		-0.00	%		-0.02	%		-0.12	%
Residential real estate loans		-0.04	%		0.08	%		0.15	%		0.07	%		-0.02	%
Residential real estate lines		0.32	%		0.14	%		0.06	%		-0.15	%		0.11	%
Consumer indirect		0.76	%		0.75	%		0.59	%		0.54	%		0.93	%
Other consumer		8.12	%		5.40	%		3.49	%		2.65	%		2.61	%
Total loans		0.30	%		0.54	%		0.25	%		0.29	%		0.45	%
Supplemental information ⁽¹⁾
Non-performing loans:
Commercial business	$	4,312		$	5,344		$	7,182		$	7,312		$	3,753
Commercial mortgage		2,310			2,623			2,539			2,189			1,267
Residential real estate loans		2,224			2,252			1,263			1,579			1,601
Residential real estate lines		372			404			325			379			336
Consumer indirect		1,467			1,895			1,250			1,149			1,040
Other consumer		32			13			26			22			23

Total non-performing loans		10,717			12,531			12,585			12,630			8,020
Foreclosed assets		480			148			281			154			58

Total non-performing assets	$	11,197		$	12,679		$	12,866		$	12,784		$	8,078

Total non-performing loans to total loans		0.38	%		0.46	%		0.48	%		0.50	%		0.33	%
Total non-performing assets to total assets		0.27	%		0.31	%		0.32	%		0.33	%		0.21	%
Allowance for loan losses to total loans		1.27	%		1.27	%		1.31	%		1.32	%		1.29	%
Allowance for loan losses to non-performing loans		332	%		277	%		273	%		263	%		388	%

FINANCIAL INSTITUTIONS, INC.
Appendix A — Reconciliation to Non-GAAP Financial Measures (Unaudited)
(In thousands, except per share amounts)


	2018			2017
	First				Fourth			Third			Second			First
	Quarter				Quarter			Quarter			Quarter			Quarter

Ending tangible assets:
Total assets	$	4,152,432			$	4,105,210		$	4,021,591		$	3,891,538		$	3,859,865
Less: Goodwill and other intangible assets, net		74,415				74,703			74,997			73,477			75,343

Tangible assets	$	4,078,017			$	4,030,507		$	3,946,594		$	3,818,061		$	3,784,522

Ending tangible common equity:
Common shareholders’ equity	$	362,973			$	363,848		$	348,668		$	330,301		$	308,348
Less: Goodwill and other intangible assets, net		74,415				74,703			74,997			73,477			75,343

Tangible common equity	$	288,558			$	289,145		$	273,671		$	256,824		$	233,005

Tangible common equity to tangible assets⁽¹⁾		7.08	%			7.17	%		6.93	%		6.73	%		6.16	%
Common shares outstanding		15,901				15,925			15,626			15,127			14,536
Tangible common book value per share ⁽²⁾	$	18.15			$	18.16		$	17.51		$	16.98		$	16.03
Average tangible assets:
Average assets	$	4,086,633			$	4,028,063		$	3,951,002		$	3,847,137		$	3,754,470
Less: Average goodwill and other intangible
assets, net		74,577				74,866			73,960			74,954			75,508

Average tangible assets	$	4,012,056			$	3,953,197		$	3,877,042		$	3,772,183		$	3,678,962

Average tangible common equity:
Average common equity	$	363,523			$	357,079		$	340,981		$	319,387		$	306,626
Less: Average goodwill and other intangible
assets, net		74,577				74,866			73,960			74,954			75,508

Average tangible common equity	$	288,946			$	282,213		$	267,021		$	244,433		$	231,118

Net income available to common shareholders	$	8,923			$	10,693		$	7,913		$	5,880		$	7,578
Return on average tangible common equity ⁽³⁾		12.52	%			15.03	%		11.76	%		9.65	%		13.30	%

⁽³⁾ Net income available to common shareholders (annualized) divided by average tangible common equity.


NEWS RELEASE		220 Liberty Street
*For Immediate Release*		Warsaw, NY 14569


For additional information contact:
Kevin B. Klotzbach		Shelly J. Doran
Chief Financial Officer & Treasurer		Director Investor & External Relations
Phone: 585.786.1130		Phone: 585.627.1362
Email: KBKlotzbach@five-starbank.com		Email: SJDoran@five-starbank.com