EX-99.1

Financial Institutions, Inc. Announces Fourth Quarter and Year-End Results;
Reports Non-Cash OTTI Charge;
Retains “Well-Capitalized” Position

WARSAW, N.Y., January 28, 2009 — Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), the parent company of Five Star Bank, today reported a net loss of $3.1 million (or $0.33 loss per share) for the quarter ended December 31, 2008, compared to net income of $4.1 million (or $0.34 earnings per diluted share) for the 2007 fourth quarter. For the year ended December 31, 2008, the Company’s net loss totaled $26.2 million (or $2.56 loss per share), compared to net income of $16.4 million (or $1.33 diluted earnings per share) in 2007.

•

Core business operations absent the other-than-temporary impairment (“OTTI”) charge continued to improve, driven by net interest income of $17.3 million for the fourth quarter, which increased $567 thousand from the third quarter of 2008 and $2.1 million from the fourth quarter of last year. On a year-to-date basis net interest income increased to $65.3 million in 2008, a $7.3 million or 12% increase compared to 2007. The increases reflect improved net interest margin and growth of the loan portfolio.

•

Incurred a pre-tax non-cash charge of $29.9 million during the fourth quarter and $68.2 million for the year ended December 31, 2008 for OTTI on certain investment securities.

•

Retained a “well-capitalized” equity position with total equity capital of $190.3 million, which includes $37.5 million in preferred equity issued in December 2008 under the U.S. Treasury Department’s Capital Purchase Program. As of December, 31, 2008, the leverage capital ratio was 8.05% and total risk-based capital ratio was 13.08%.

•

During the fourth quarter, loans increased $43.0 million to $1.121 billion at December 31, 2008 compared with $1.078 billion at September 30, 2008. Consumer indirect auto loans accounted for $27.1 million and commercial-related loans accounted for $13.9 million of the fourth quarter increase in loans. Total loans increased $156.9 million or 16% for the one year period ending December 31, 2008. Indirect auto loans increased $120.1 million or 89%, and commercial-related increased $35.5 million or 8% during that same one year period.

•

Net interest margin increased 9 basis points, to 4.07% for the fourth quarter of 2008, compared with 3.98% for the third quarter of 2008. For the year ended December 31, 2008, net interest margin improved to 3.93%, 40 basis points higher than the comparable prior year period. The improved net interest margin resulted principally from lower funding costs and the benefits associated with a higher percentage of earning assets being deployed in higher yielding loan assets.

•

The provision for loan losses for the fourth quarter was $2.6 million, or $1.3 million more than fourth quarter net charge offs of $1.3 million, which represented 0.46% (annualized) of average loans. For the year ended December 31, 2008, the provision for loan losses was $6.6 million and net charge offs were $3.3 million or 0.32% of average loans. The allowance for loan losses at December 31, 2008 was $18.7 million or 1.67% of total loans, as compared to 1.61% of total loans at December 31, 2007.

Peter G. Humphrey, President and CEO of FII, commented, “Our fourth quarter results are reflective of the challenges presented by the disruption in the financial and capital markets. The other-than-temporary impairment charge reflects our recognition of the deterioration of specific securities in our investment portfolio. We are obviously disappointed in our annual results, but remain confident in the strength of our community banking franchise and our opportunities that lie ahead. Our core operations continue to perform well, driven by an expanding net interest margin, solid loan portfolio quality and effective cost controls. We are well positioned to weather this difficult period due to our core banking franchise and core earnings capacity that is built on a foundation of diversified and prudent lending, stable core deposits, and a strong capital position. The Company remains “well capitalized,” and has utilized the U.S. Treasury Department’s Capital Purchase Program as an attractive source of capital to support our marketplace opportunities.”

Included in the fourth quarter 2008 results is a pre-tax non-cash OTTI charge on certain investment securities of $29.9 million, comprised principally of pooled trust preferred securities, and to a lesser extent, privately issued whole loan collateralized mortgage obligations and charges on auction rate preferred equity securities collateralized by preferred stock of Fannie Mae and Freddie Mac. For the year ended December 31, 2008, OTTI charges totaled $68.2 million.

In the third quarter, a tax benefit recognized on the OTTI charge was based on the treatment of a substantial portion of the charge being classified as a capital loss for tax purposes, which significantly limited the tax benefit. Subsequently, on October 3, 2008, the Emergency Economic Stabilization Act was enacted, which included a provision permitting banks, under certain circumstances, to recognize losses relating to Fannie Mae and Freddie Mac preferred stock as an ordinary loss, therefore the fourth quarter results reflect the recognition of a $12.0 million tax benefit associated with the third quarter OTTI charge.

Net interest income was $17.3 million for the fourth quarter of 2008, up $567 thousand or 3% from the third quarter of 2008 and $2.1 million or 14% compared with the fourth quarter of 2007. Net interest margin improved to 4.07% in the fourth quarter of 2008, compared with 3.98% in the third quarter of 2008 and 3.75% in the fourth quarter of 2007. For the year ended 2008, net interest income was $65.3 million, compared with $58.1 million for the same period in 2007. Net interest margin improved to 3.93% versus 3.53% on a year to date comparative basis. The improved net interest income and net interest margin resulted principally from lower funding costs and the benefits associated with a higher percentage of earning assets being deployed in higher yielding loan assets.

Noninterest income (loss) for the fourth quarter of 2008 was $(25.1) million, compared with $(29.3) million and $5.0 million in the third quarter of 2008 and the fourth quarter of 2007, respectively. For the year ended December 31, 2008, noninterest income (loss) was $(48.8) million, compared with $20.7 million for the same period in 2007. The 2008 periods reflect OTTI charges on investment securities totaling $29.9 million for the fourth quarter and $68.2 million for the year ended December 31, 2008. Absent the OTTI charges in 2008, noninterest income would have been $4.8 million in the fourth quarter versus $5.2 million in the third quarter of 2008 and $5.0 million in the fourth quarter of 2007. The decrease, exclusive of OTTI charges, is primarily the result of lower service charges on deposits and broker-dealer fees and commissions offset by higher income from company owned life insurance due to a $20.0 million purchase of company owned life insurance made during the third quarter of 2008. For the full year 2008 noninterest income exclusive of OTTI charges was $19.4 million, compared with $20.7 million for full year 2007. The decrease is attributable to lower service charges on deposit accounts and 2007 including proceeds from corporate owned life insurance.

Noninterest expense for the fourth quarter of 2008 was $15.4 million, compared with $14.5 million in the fourth quarter of 2007, respectively. The fourth quarter of 2008 results include a $557 thousand prepayment charge on the early repayment of borrowed funds and also a $259 thousand increase in FDIC insurance expense compared with the fourth quarter of last year. For the year ended December 31, 2008, noninterest expense was $57.5 million compared with $57.4 million for the same period in 2007. Total salaries and benefits cost declined $1.7 million for the full year 2008 compared with 2007, and was offset by a $599 thousand increase in occupancy and equipment expense, a $385 thousand increase in FDIC insurance cost, and the $557 thousand prepayment charge on borrowed finds.

Total assets at December 31, 2008 were $1.917 billion, up $59.0 million from $1.858 billion at December 31, 2007. Total loans were $1.121 billion at December 31, 2008, an increase of $156.9 million from $964.2 million at December 31, 2007, principally from a $120.1 million increase in indirect auto loans. Total deposits increased $57.3 million to $1.633 billion at December 31, 2008, versus $1.576 billion at December 31, 2007. Total borrowings, including junior subordinated debentures, increased $2.6 million to $70.8 million at December 31, 2008, up from $68.2 million at December 31, 2007. Total shareholders’ equity at December 31, 2008 was $190.3 million, compared with $195.3 million at December 31, 2007. The Company’s leverage ratio was 8.05% and total risk-based capital ratio was 13.08% at December 31, 2008, which is within the regulatory standard to be deemed a well-capitalized institution.

The Company recorded a provision for loan losses of $2.6 million for the fourth quarter of 2008, compared with $351 thousand in the fourth quarter of 2007. The increase in the provision for loan losses is primarily due to growth in the loan portfolio and the changing mix of the loan portfolio together with higher net charge offs. Net charge offs of $1.3 million for the fourth quarter of 2008 represented 46 basis points (annualized) of average loans. For the year ended December 31, 2008, net charge-offs were $3.3 million, or 32 basis points of average loans, compared with $1.6 million, or 18 basis points of average loans, for the year ended December 31, 2007. The increase in net charge-offs in 2008 related principally to the commercial mortgage and consumer indirect loan portfolios.

The allowance for loan losses was $18.7 million at December 31, 2008, compared with $15.5 million at December 31, 2007. Non-performing loans were $8.2 million at December 31, 2008, compared with $7.6 million and $8.1 million at September 30, 2008 and December 31, 2007, respectively. The ratio of allowance for loan losses to non-performing loans improved to 229% at December 31, 2008 versus 192% at December 31, 2007.

With $1.9 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of over 50 offices and more than 70 ATMs in Western and Central New York State. Five Star Investment Services provides brokerage and insurance products and services within the same New York State markets. The consolidated entity includes approximately 670 employees. The Company’s stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at the Company’s website: www.fiiwarsaw.com.

This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company’s forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, the attitudes and preferences of its customers, the competitive environment, fluctuations in the fair value of securities in the investment portfolio, and general economic and credit market conditions nationally and regionally. The Company undertakes no obligation to revise these statements following the date of this press release.

FINANCIAL INSTITUTIONS, INC.
Summary of Quarterly Financial Data (Unaudited)


	2008											2007
	December 31,			September 30,			June 30,			March 31,		December 31,
SELECTED BALANCE SHEET DATA
*(Amounts in thousands)*
Cash and cash equivalents	$	55,187			76,704			63,049			102,999		46,673
Investment securities:
Available for sale		547,506			607,357			669,752			688,504		695,241
Held-to-maturity		58,532			64,434			56,508			57,631		59,479

Total investment securities		606,038			671,791			726,260			746,135		754,720
Loans held for sale		1,013			1,008			926			1,099		906
Loans:
Commercial		158,543			156,809			140,745			144,976		136,780
Commercial real estate		262,234			248,267			250,872			245,148		245,797
Agriculture		44,706			46,490			45,231			44,162		47,367
Residential real estate		177,683			173,893			172,396			168,738		166,863
Consumer indirect		255,054			227,971			177,967			142,565		134,977
Consumer direct and home equity		222,859			224,693			223,538			226,855		232,389

Total loans		1,121,079			1,078,123			1,010,749			972,444		964,173
Allowance for loan losses		18,749			17,420			16,038			15,549		15,521

Total loans, net		1,102,330			1,060,703			994,711			956,895		948,652
Total assets		1,916,919			1,945,819			1,895,448			1,912,652		1,857,876
Total interest-earning assets		1,743,141			1,789,499			1,749,808			1,771,676		1,722,122
Deposits:
Noninterest-bearing demand		292,586			293,027			288,258			268,419		286,362
Interest-bearing demand		344,616			376,098			338,290			356,758		335,314
Savings and money market		348,594			383,456			372,317			380,167		346,639
Certificates of deposit		647,467			607,833			596,890			622,628		607,656

Total deposits		1,633,263			1,660,414			1,595,755			1,627,972		1,575,971
Borrowings		70,820			114,684			89,465			70,336		68,210
Total interest-bearing liabilities		1,411,497			1,482,071			1,396,962			1,429,889		1,357,819
Net interest-earning assets		331,644			307,428			352,846			341,787		364,303
Shareholders’ equity		190,300			152,770			188,998			197,364		195,322
Common shareholders’ equity ⁽¹⁾		137,226			135,195			171,417			179,783		177,741
Tangible common shareholders’ equity ⁽²⁾		99,577			97,468			133,614			141,903		139,786
Securities available for sale – fair value adjustment
included in shareholders’ equity, net of tax	$	3,463			(9,797	)		(5,803	)		944		(500	)
Common shares outstanding		10,798			10,806			10,913			10,992		11,011
Treasury shares		550			542			435			356		337
CAPITAL RATIOS
Leverage ratio		8.05	%		7.37			9.17			9.38		9.35
Tier 1 risk-based capital		11.83	%		11.10			14.58			15.34		15.74
Total risk based capital		13.08	%		12.35			15.83			16.59		16.99
Common equity to assets		7.16	%		6.95			9.04			9.40		9.57
Tangible common equity to tangible assets ⁽²⁾		5.30	%		5.11			7.19			7.57		7.68
Common book value per share	$	12.71			12.51			15.71			16.36		16.14
Tangible common book value per share ⁽²⁾	$	9.22			9.02			12.24			12.91		12.69

FINANCIAL INSTITUTIONS, INC.
Summary of Quarterly Financial Data (Unaudited)


							Quarterly Trends
	Years ended						2008											2007
	December 31,						Fourth			Third			Second			First		Fourth
	2008				2007		Quarter			Quarter			Quarter			Quarter		Quarter
SELECTED INCOME STATEMENT DATA
*(Dollar amounts in thousands)*
Interest income	$		98,948			105,212		24,582			24,558			24,536			25,272		26,397
Interest expense			33,617			47,139		7,269			7,812			8,349			10,187		11,192

Net interest income			65,331			58,073		17,313			16,746			16,187			15,085		15,205
Provision for loan losses			6,551			116		2,586			1,891			1,358			716		351

Net interest income after provision
for loan losses			58,780			57,957		14,727			14,855			14,829			14,369		14,854

Noninterest income (loss):
Service charges on deposits			10,497			10,932		2,685			2,794			2,518			2,500		2,818
ATM and debit card			3,313			2,883		853			852			856			752		805
Broker-dealer fees and commissions			1,458			1,396		235			363			401			459		343
Loan servicing			664			928		134			112			232			186		221
Company owned life insurance			563			1,255		294			223			27			19		116
Net gain on sale of loans held for sale			339			779		35			48			92			164		190
Net gain (loss) on sale of other assets			305			102		51			102			115			37		(58	)
Net gain on investment securities			288			207		56			12			47			173		88
Impairment charge on investment securities	(68,215)					-		(29,870	)		(34,554	)		(3,791	)		-		-
Other			2,010			2,198		421			700			435			454		479

Total noninterest income (loss)	(48,778)					20,680		(25,106	)		(29,348	)		932			4,744		5,002

Noninterest expense:
Salaries and employee benefits			31,437			33,175		7,811			7,021			8,169			8,436		8,240
Occupancy and equipment			10,502			9,903		2,713			2,642			2,567			2,580		2,582
Computer and data processing			2,433			2,126		669			603			580			581		533
Professional services			2,141			2,080		637			467			480			557		533
Supplies and postage			1,800			1,662		447			475			437			441		379
Advertising and promotions			1,453			1,402		548			472			283			150		396
Other			7,695			7,080		2,569			1,729			1,869			1,528		1,880

Total noninterest expense			57,461			57,428		15,394			13,409			14,385			14,273		14,543

(Loss) income before income taxes	(47,459)					21,209		(25,773	)		(27,902	)		1,376			4,840		5,313
Income tax expense (benefit)	(21,301)					4,800		(22,631	)		524			(255	)		1,061		1,215

Net (loss) income	$(26,158)					16,409		(3,142	)		(28,426	)		1,631			3,779		4,098

Preferred stock dividends			1,538			1,483		426			371			370			371		370
Net (loss) income applicable to
common shareholders	$(27,696)					14,926		(3,568	)		(28,797	)		1,261			3,408		3,728

STOCK AND RELATED PER SHARE DATA
Net (loss) income per share – basic	$(2.56)					1.34		(0.33	)		(2.68	)		0.12			0.31		0.34
Net (loss) income per share – diluted	$(2.56)					1.33		(0.33	)		(2.68	)		0.12			0.31		0.34
Cash dividends declared		$	0.54			0.46		0.10			0.15			0.15			0.14		0.13
Common dividend payout ratio ⁽³⁾		NA%				34.33	NA			NA				125.00			45.16		38.24
Dividend yield (annualized)			3.76	%		2.58		2.77			2.98			3.76			2.97		2.89
Stock price (Nasdaq: FISI):
High		$	22.50			23.71		20.27			22.50			20.00			20.78		19.80
Low		$	10.06			16.18		10.06			14.82			15.25			15.10		16.42
Close		$	14.35			17.82		14.35			20.01			16.06			18.95		17.82

FINANCIAL INSTITUTIONS, INC.
Summary of Quarterly Financial Data (Unaudited)


						Quarterly Trends
	Years ended					2008								2007
	December 31,					Fourth		Third		Second		First		Fourth
	2008			2007		Quarter		Quarter		Quarter		Quarter		Quarter
SELECTED AVERAGE BALANCES
*(Amounts in thousands)*
Investment securities ⁽⁴⁾	$	721,551			811,118		666,917		721,419		744,648		753,823		786,343
Loans ⁽⁵⁾:
Commercial		149,927			119,823		158,517		150,373		150,380		140,340		129,438
Commercial real estate		247,475			244,357		253,179		246,746		244,688		245,232		242,336
Agriculture		45,035			53,356		44,299		45,965		44,504		45,373		50,448
Residential real estate		171,262			165,226		175,200		173,175		169,925		166,682		167,551
Consumer indirect		185,197			118,152		244,891		200,586		156,728		137,756		132,372
Consumer direct and home equity		224,343			236,910		222,235		222,241		223,906		229,035		232,228

Total loans		1,023,239			937,824		1,098,321		1,039,086		990,131		964,418		954,373
Total interest-earning assets		1,772,179			1,781,468		1,782,938		1,774,201		1,771,801		1,759,635		1,756,169
Total assets		1,905,345			1,907,037		1,924,174		1,908,577		1,897,514		1,890,874		1,884,712
Interest-bearing liabilities:
Interest-bearing demand		347,702			338,326		360,970		342,188		342,463		345,102		337,179
Savings and money market		369,926			346,131		373,034		366,449		378,799		361,425		358,198
Certificates of deposit		617,381			672,239		629,111		591,025		615,950		633,599		635,825
Borrowings		91,715			80,609		105,164		118,023		73,902		69,335		71,092

Total interest-bearing liabilities		1,426,724			1,437,305		1,468,279		1,417,685		1,411,114		1,409,461		1,402,294
Noninterest-bearing demand deposits		280,467			266,239		284,643		294,136		275,570		267,322		276,535
Total deposits		1,615,476			1,622,935		1,647,758		1,593,798		1,612,782		1,607,448		1,607,737
Total liabilities		1,722,440			1,721,510		1,766,239		1,727,473		1,702,211		1,693,300		1,694,297
Net earning assets		345,455			344,163		314,659		356,516		360,687		350,174		353,875
Shareholders’ equity		182,905			185,527		157,935		181,104		195,303		197,574		190,415
Common equity ⁽¹⁾		164,454			167,935		136,887		163,527		177,722		179,993		172,834
Tangible common equity⁽²⁾	$	126,643			129,818		99,191		125,754		139,872		142,067		134,832
Common shares outstanding:
Basic		10,818			11,154		10,717		10,738		10,879		10,938		11,022
Diluted		10,818			11,184		10,717		10,738		10,928		10,975		11,043
SELECTED AVERAGE YIELDS/
RATES AND RATIOS
*(Tax equivalent basis)*
Investment securities		4.84	%		4.90		4.72		4.66		4.92		5.05		5.13
Loans		6.61	%		7.30		6.35		6.52		6.65		6.97		7.25
Total interest-earning assets		5.83	%		6.17		5.69		5.73		5.83		6.05		6.28
Interest-bearing demand		0.93	%		1.70		0.69		0.86		0.89		1.30		1.61
Savings and money market		1.02	%		1.69		0.68		0.93		1.02		1.47		1.70
Certificates of deposit		3.62	%		4.63		3.09		3.33		3.72		4.31		4.54
Borrowings		4.65	%		5.49		4.23		4.30		5.05		5.51		5.63
Total interest-bearing liabilities		2.36	%		3.28		1.97		2.19		2.38		2.91		3.17
Net interest rate spread		3.47	%		2.89		3.72		3.54		3.45		3.14		3.11
Net interest rate margin		3.93	%		3.53		4.07		3.98		3.94		3.73		3.75
Net (loss) income (annualized returns on):
Average assets		-1.37	%		0.86		-0.65		-5.93		0.35		0.80		0.86
Average equity		-14.30	%		8.84		-7.91		-62.44		3.36		7.69		8.54
Average common equity ⁽⁶⁾		-16.84	%		8.89		-10.37		-70.06		2.85		7.62		8.56
Average tangible common equity ⁽⁷⁾		-21.87	%		11.50		-14.31		-91.10		3.63		9.65		10.97
Efficiency ratio ⁽⁸⁾		64.07	%		71.57		66.65		58.10		64.21		67.64		66.84
Equity to assets		9.60	%		9.73		8.21		9.49		10.29		10.45		10.10
Common equity to assets ⁽⁶⁾		8.63	%		8.81		7.11		8.57		9.37		9.52		9.17
Tangible common equity to tangible assets ⁽⁷⁾		6.78	%		6.95		5.26		6.72		7.52		7.67		7.30

FINANCIAL INSTITUTIONS, INC.
Summary of Quarterly Financial Data (Unaudited)


						Quarterly Trends
	Years ended					2008								2007
	December 31,					Fourth		Third		Second		First		Fourth
	2008			2007		Quarter		Quarter		Quarter		Quarter		Quarter
ASSET QUALITY DATA
*(Dollar amounts in thousands)*
Nonaccrual loans	$	8,189			8,075		8,189		7,609		6,254		7,353		8,075
Accruing loans past due 90 days or more		7			2		7		32		1		2		2

Total non-performing loans		8,196			8,077		8,196		7,641		6,255		7,355		8,077
Foreclosed assets		1,007			1,421		1,007		1,009		1,235		1,257		1,421
Non-performing investment securities		49			—		49		—		—		—		—

Total non-performing assets		9,252			9,498		9,252		8,650		7,490		8,612		9,498

Net loan charge-offs	$	3,323			1,643		1,257		509		869		687		441
Net charge-offs to average loans (annualized)		0.32	%		0.18		0.46		0.20		0.35		0.29		0.18
Total non-performing loans to total loans		0.73	%		0.84		0.73		0.71		0.62		0.76		0.84
Total non-performing assets to total assets		0.48	%		0.51		0.48		0.44		0.40		0.45		0.51
Allowance for loan losses to total loans		1.67	%		1.61		1.67		1.62		1.59		1.60		1.61
Allowance for loan losses to
non-performing loans		229	%		192		229		228		256		211		192

⁽²⁾ Excludes preferred shareholders’ equity, goodwill and other intangible assets.

⁽³⁾ Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period. There is no ratio shown for periods where the Company both declares a dividend and incurs a loss during the period because the ratio would result in a negative payout since the dividend declared (paid out) will always be greater than 100% of earnings.

⁽⁶⁾ Net income available to common shareholders divided by average common equity.

⁽⁷⁾ Net income available to common shareholders divided by average tangible equity.

⁽⁸⁾ Efficiency ratio equals noninterest expense less other real estate expense and amortization of intangible assets as a percentage of net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains and impairment charges on investment securities, proceeds from company owned life insurance included in income and net gain on sale of trust relationships.


NEWS RELEASE				220 Liberty Street Warsaw, NY 14569