EX-99.1

Financial Institutions, Inc. Earns $14.4 Million in 2009;
A Strong $5.4 Million Fourth Quarter

WARSAW, N.Y., January 28, 2010 — Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), the parent company of Five Star Bank, today announced financial results for the fourth quarter and year ended December 31, 2009. For the fourth quarter of 2009, the Company’s net income was $5.4 million or $0.42 per diluted share, compared with net income of $3.4 million or $0.23 per diluted share for the third quarter of 2009 and a net loss of $3.1 million or ($0.33) per diluted share for the fourth quarter of 2008. For the twelve months of 2009, net income was $14.4 million or $0.99 per diluted share, compared with a loss of $26.2 million or ($2.54) per diluted share for the twelve months of 2008.

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Net interest income for the fourth quarter of 2009 was $19.2 million, an increase of $1.9 million or 11% over the fourth quarter of 2008. For 2009, net interest income was $72.3 million, an increase of $6.9 million or 11% over 2008. The year-over-year increase is reflective of lower deposit costs as well as a solid 13% growth in the loan portfolio.

•

Net interest margin increased 11 basis points to 4.04% for the twelve months of 2009 in comparison to the same period a year ago.

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Maintained our “well capitalized” regulatory capital position, increasing our total risk-based capital ratio to 13.21% and achieving a leverage capital ratio of 7.96% at December 31, 2009, far exceeding regulatory minimums.

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Total deposits were $1.743 billion at December 31, 2009, an increase of $109.7 million or 7% from December 31, 2008, the majority of which was attributable to an increase in core deposits.

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Total loans were $1.264 billion at December 31, 2009, an increase of $142.9 million or 13% from December 31, 2008, with increases in commercial, consumer and indirect loan categories.

•

As of December 31, 2009, non-performing loans were $8.7 million compared to $8.2 million in the previous year, representing only 0.69% of total loans compared to 0.73% the previous year.

•

Provision for loan losses and net charge-offs for the fourth quarter of 2009 were each $1.1 million. Provision for loan losses of $7.7 million for 2009 exceeded net charge-offs of $5.7 million resulting in a $2.0 million increase in the allowance for loan losses to $20.7 million or 1.64% of total loans.

•

2009 results include FDIC assessments totaling $3.7 million, a $3.0 million increase from 2008 due to higher premiums mandated by the FDIC to replenish deposit insurance reserves.

“Our community banking model has continued to gain momentum this year. Our balance sheet has shown solid year over year growth in deposits and loans. We have maintained our disciplined underwriting standards, as demonstrated in our measures of asset quality,” said Peter G. Humphrey, President and Chief Executive Officer of the Company. “In 2009, we restructured our investment portfolio with a focus on reducing credit risk and improving capital. Through a series of security sales and write-downs, we have significantly reduced our “at-risk” positions with impairment exposure. Our commitment to quality is demonstrated not just in our measures of asset quality or the solutions we provide our customers, but also in the way we treat our customers. At Five Star, we continually strive to make banking easier and more enjoyable for our customers by offering a broad spectrum of products and services, delivered through an experienced and knowledgeable workforce.”

Net interest income for the fourth quarter of 2009 was $19.2 million, an increase of $1.9 million or 11% over the fourth quarter of 2008. For the year, net interest income was $72.3 million, an increase of $6.9 million or 11% over 2008. Net interest margin was 4.06% for the fourth quarter of 2009, a decrease of 1 basis point from the fourth quarter of 2008. For the year ended December 31, 2009, net interest margin was 4.04%, an increase of 11 basis points from last year. An improved mix of earning assets, primarily driven by growth in the loan portfolio, coupled with a significant decline in funding costs were the primary factors driving the performance of net interest income and margin.

Noninterest income for the quarter and year ended December 31, 2009 was $5.2 million and $18.8 million, respectively, compared with noninterest losses of $25.1 million and $48.8 million for respective period in 2008. Other-than-temporary impairment charges (“OTTI”) on investment securities included in noninterest income amounted to $565 thousand during the fourth quarter of 2009. The fourth quarter charge brought total OTTI to $4.7 million for the year, down substantially from the $68.2 million charged to earnings during 2008. Absent the OTTI charges and net gains from security sales, noninterest income increased 11% and 5% for the quarterly and annual periods ended December 31, 2009, respectively, from the same periods in 2008.

Noninterest expense for the fourth quarter of 2009 was $15.1 million, a decrease of $277 thousand from the fourth quarter of 2008. For the year, 2009 noninterest expense was $62.8 million, an increase of $5.3 million over 2008. The most significant cause for the increase was higher FDIC assessments, which included a $923 thousand special assessment incurred during the second quarter of 2009, coupled with increases in FDIC deposit insurance coverage and premiums mandated by the FDIC to replenish deposit insurance reserves. Noninterest expense for 2009 also reflects higher incentive compensation and pension benefit costs, increases in occupancy and equipment costs associated with the opening of two new branches in the suburban Rochester area during the latter part of 2008, and an increase in professional services expense.

Total assets at December 31, 2009 were $2.062 billion, up $145.5 million from $1.917 billion at December 31, 2008. Total loans were $1.264 billion and represented 61% of total assets at December 31, 2009, compared to $1.121 billion and 58% of total assets at December 31, 2008. Total deposits increased $109.7 million to $1.743 billion at December 31, 2009, versus $1.633 billion at December 31, 2008. The majority of the increase in deposits was attributable to an increase in core deposits. Total investment securities were $620.1 million at December 31, 2009, up $14.1 million from $606.0 million at December 31, 2008.

Net charge-offs decreased by $128 thousand from the fourth quarter of 2008 to $1.1 million, or 0.35% of average loans. For the year ended December 31, 2009 net charge-offs increased in comparison to last year by $2.4 million to $5.7 million, or 0.47% of average loans, primarily due to charge-offs totaling $1.8 million for one commercial loan relationship during the second and third quarters. The provision for loan losses was $1.1 million for the quarter, compared with $2.6 million in the same quarter a year ago. For the year ended December 31, 2009 the provision for loan losses totaled $7.7 million, compared with $6.6 million in the same period last year. At December 31, 2009, non-performing loans totaled $8.7 million, or 0.69% of total loans, an increase of $2.9 million from the third quarter. Included in non-performing loans at December 31, 2009 is one commercial relationship totaling $1.9 million which is past due in excess of 90 days but continues to accrue interest. The Company received a payment of principal and interest of approximately $1.7 million during January 2010 and expects to receive the remaining principal and interest before the end of the first quarter of 2010. At December 31, 2009 non-performing assets totaled $10.4 million, which included $1.0 million in non-performing investment securities on which interest payments are no longer being accrued and any payments received are being applied to principal.

At December 31, 2009, all of the Company’s regulatory capital ratios exceeded the guidelines required to be considered a “well capitalized” institution as established by the Company’s primary banking regulators. Well capitalized levels are considered to be at least 5.00% for the leverage ratio and 10.00% for the total risk-based capital ratio. At December 31, 2009, the Company’s leverage ratio was 7.96% and the total risk-based capital ratio was 13.21%.

With approximately $2.0 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 employs over 600 individuals. 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)


	2009									2008
	December 31,			September 30,		June 30,		March 31,		December 31,
SELECTED BALANCE SHEET DATA
*(Amounts in thousands)*
Cash and cash equivalents:
Cash and due from banks	$	42,874			48,721		41,405		48,073		34,528
Federal funds sold and interest-bearing deposits		85			11,385		39,910		74,616		20,659

Total cash and cash equivalents		42,959			60,106		81,315		122,689		55,187
Investment securities:
Available for sale		580,501			625,744		498,561		553,710		547,506
Held-to-maturity		39,573			45,056		47,465		60,675		58,532

Total investment securities		620,074			670,800		546,026		614,385		606,038
Loans held for sale		421			1,032		3,005		2,290		1,013
Loans:
Commercial		186,386			197,404		198,608		174,505		158,543
Commercial real estate		308,873			296,648		282,048		266,176		262,234
Agriculture		41,872			42,545		42,997		42,524		44,706
Residential real estate		144,215			147,447		149,926		170,834		177,683
Consumer indirect		352,611			345,448		319,735		283,465		255,054
Consumer direct and home equity		230,049			229,870		225,258		220,440		222,859

Total loans		1,264,006			1,259,362		1,218,572		1,157,944		1,121,079
Allowance for loan losses		20,741			20,782		20,614		19,657		18,749

Total loans, net		1,243,265			1,238,580		1,197,958		1,138,287		1,102,330
Total interest-earning assets ^{(1) (2)}		1,881,887			1,934,786		1,802,489		1,843,522		1,743,141
Goodwill		37,369			37,369		37,369		37,369		37,369
Total assets		2,062,389			2,138,205		1,996,724		2,030,429		1,916,919
Deposits:
Noninterest-bearing demand		324,303			298,972		292,825		279,284		292,586
Interest-bearing demand		363,698			383,982		357,443		392,353		344,616
Savings and money market		368,603			402,042		366,373		396,644		348,594
Certificates of deposit		686,351			712,182		683,619		668,999		647,467

Total deposits		1,742,955			1,797,178		1,700,260		1,737,280		1,633,263
Borrowings		106,390			120,113		79,977		78,761		70,820
Total interest-bearing liabilities		1,525,042			1,618,319		1,487,412		1,536,757		1,411,497
Shareholders’ equity		198,294			195,935		192,455		191,676		190,300
Common shareholders’ equity ⁽³⁾		144,876			142,605		139,213		138,519		137,226
Tangible common shareholders’ equity ⁽⁴⁾		107,507			105,176		101,712		100,946		99,577
Securities available for sale – fair value adjustment
included in shareholders’ equity, net of tax	$	1,655			4,778		3,081		3,503		3,463
Common shares outstanding		10,820			10,818		10,821		10,805		10,798
Treasury shares		528			530		527		543		550
CAPITAL RATIOS
Leverage ratio		7.96	%		7.89		7.84		7.96		8.05
Tier 1 risk-based capital		11.95	%		10.73		10.69		11.23		11.83
Total risk based capital		13.21	%		11.98		11.94		12.49		13.08
Common equity to assets		7.02	%		6.67		6.97		6.82		7.16
Tangible common equity to tangible assets ⁽⁴⁾		5.31	%		5.01		5.19		5.07		5.30
Common book value per share	$	13.39			13.18		12.86		12.82		12.71
Tangible common book value per share ⁽⁴⁾	$	9.94			9.72		9.40		9.34		9.22

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


							Quarterly Trends
	Years ended						2009												2008
	December 31,						Fourth			Third			Second			First			Fourth
	2009			2008			Quarter			Quarter			Quarter			Quarter			Quarter
SELECTED INCOME STATEMENT DATA
*(Dollar amounts in thousands)*
Interest income	$	94,482			98,948			24,390			23,697			23,302			23,093			24,582
Interest expense		22,217			33,617			5,175			5,619			5,657			5,766			7,269

Net interest income		72,265			65,331			19,215			18,078			17,645			17,327			17,313
Provision for loan losses		7,702			6,551			1,088			2,620			2,088			1,906			2,586

Net interest income after provision
for loan losses		64,563			58,780			18,127			15,458			15,557			15,421			14,727

Noninterest income (loss):
Service charges on deposits		10,065			10,497			2,585			2,643			2,517			2,320			2,685
ATM and debit card		3,610			3,313			971			920			908			811			853
Loan servicing		1,308			664			277			304			470			257			134
Company owned life insurance		1,096			563			290			271			275			260			294
Broker-dealer fees and commissions		1,022			1,458			281			238			234			269			235
Net gain on sale of loans held for sale		699			339			154			129			246			170			35
Net gain on investment securities		3,429			288			501			1,721			1,153			54			56
Impairment charge on investment securities		(4,666	)		(68,215	)		(565	)		(2,318	)		(1,733	)		(50	)		(29,870	)
Net gain on sale of other assets		180			305			3			19			—			158			51
Other		2,052			2,010			686			479			445			442			421

Total noninterest income (loss)		18,795			(48,778	)		5,183			4,406			4,515			4,691			(25,106	)

Noninterest expense:
Salaries and employee benefits		33,634			31,437			8,213			8,253			8,437			8,731			7,811
Occupancy and equipment		11,062			10,502			2,773			2,730			2,683			2,876			2,713
FDIC assessments		3,651			674			625			753			1,593			680			305
Professional services		2,524			2,141			552			532			591			849			637
Computer and data processing		2,340			2,433			583			578			562			617			669
Supplies and postage		1,846			1,800			432			473			476			465			447
Advertising and promotions		949			1,453			299			227			249			174			548
Other		6,771			7,021			1,640			1,596			1,849			1,686			2,264

Total noninterest expense		62,777			57,461			15,117			15,142			16,440			16,078			15,394

Income (loss) before income taxes		20,581			(47,459	)		8,193			4,722			3,632			4,034			(25,773	)
Income tax expense (benefit)		6,140			(21,301	)		2,756			1,313			1,004			1,067			(22,631	)

Net income (loss)	$	14,441			(26,158	)		5,437			3,409			2,628			2,967			(3,142	)

Preferred stock dividends		3,697			1,538			927			927			925			918			426
Net income (loss) applicable to
common shareholders	$	10,744			(27,696	)		4,510			2,482			1,703			2,049			(3,568	)

STOCK AND RELATED PER SHARE DATA
Net income (loss) per share – basic	$	0.99			(2.54	)		0.42			0.23			0.16			0.19			(0.33	)
Net income (loss) per share – diluted	$	0.99			(2.54	)		0.42			0.23			0.16			0.19			(0.33	)
Cash dividends declared on common stock	$	0.40			0.54			0.10			0.10			0.10			0.10			0.10
Common dividend payout ratio ⁽⁵⁾		40.40	%	NA				23.81			43.48			62.50			52.63		NA
Dividend yield (annualized)		3.40	%		3.76			3.37			3.98			2.94			5.32			2.77
Stock price (Nasdaq: FISI):
High	$	15.99			22.50			12.25			15.00			15.99			14.95			20.27
Low	$	3.27			10.06			9.71			9.90			6.98			3.27			10.06
Close	$	11.78			14.35			11.78			9.97			13.66			7.62			14.35

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


							Quarterly Trends
	Years ended						2009								2008
	December 31,						Fourth		Third		Second		First		Fourth
	2009			2008			Quarter		Quarter		Quarter		Quarter		Quarter
SELECTED AVERAGE BALANCES
*(Amounts in thousands)*
Federal funds sold and interest-bearing deposits	$	37,214			26,568			16,457		39,945		49,105		43,618		17,089
Investment securities ⁽¹⁾		609,606			721,551			657,299		585,830		593,740		601,199		666,917
Loans ⁽²⁾:
Commercial		184,269			147,015			192,442		194,803		183,733		165,688		155,814
Commercial real estate		284,603			250,387			305,287		288,658		275,275		268,749		255,882
Agriculture		42,126			45,035			40,210		43,250		42,368		42,690		44,299
Residential real estate		159,156			171,262			145,776		148,325		168,300		174,659		175,200
Consumer indirect		313,239			185,197			349,231		334,123		301,112		267,360		244,891
Consumer direct and home equity		224,720			224,343			229,270		226,355		222,122		221,024		222,235

Total loans		1,208,113			1,023,239			1,262,216		1,235,514		1,192,910		1,140,170		1,098,321
Total interest-earning assets		1,856,832			1,772,179			1,937,049		1,862,779		1,838,320		1,787,470		1,782,938
Goodwill		37,369			37,369			37,369		37,369		37,369		37,369		37,369
Total assets		2,033,916			1,905,345			2,117,775		2,040,030		2,012,337		1,963,764		1,924,174
Interest-bearing liabilities:
Interest-bearing demand		365,873			347,702			374,787		361,147		366,985		360,470		360,970
Savings and money market		383,697			369,926			400,966		369,562		392,355		371,738		373,034
Certificates of deposit		685,259			617,381			697,292		699,011		676,221		668,041		629,111
Borrowings		90,005			91,715			114,721		94,642		78,763		71,363		105,164

Total interest-bearing liabilities		1,524,834			1,426,724			1,587,766		1,524,362		1,514,324		1,471,612		1,468,279
Noninterest-bearing demand deposits		293,852			280,467			308,491		298,723		286,155		281,690		284,643
Total deposits		1,728,681			1,615,476			1,781,536		1,728,443		1,721,716		1,681,939		1,647,758
Total liabilities		1,839,576			1,722,440			1,919,352		1,845,010		1,819,891		1,772,377		1,766,239
Shareholders’ equity		194,340			182,905			198,423		195,020		192,446		191,387		157,935
Common equity ⁽³⁾		141,102			164,454			145,055		141,741		139,253		138,281		136,887
Tangible common equity⁽⁴⁾	$	103,593			126,643			107,654		104,269		101,709		100,660		99,191
Common shares outstanding:
Basic		10,730			10,818			10,742		10,738		10,723		10,716		10,717
Diluted		10,769			10,818			10,785		10,779		10,765		10,747		10,717
SELECTED AVERAGE YIELDS/
RATES AND RATIOS
*(Tax equivalent basis)*
Federal funds sold and interest-bearing deposits		0.22	%		2.33			0.22		0.20		0.21		0.25		1.09
Investment securities		4.00	%		4.84			3.55		3.79		4.16		4.54		4.72
Loans		6.01	%		6.61			6.00		6.01		5.99		6.04		6.35
Total interest-earning assets		5.23	%		5.83			5.12		5.19		5.24		5.39		5.69
Interest-bearing demand		0.21	%		0.93			0.20		0.19		0.20		0.25		0.69
Savings and money market		0.28	%		1.02			0.30		0.29		0.27		0.27		0.68
Certificates of deposit		2.51	%		3.62			2.20		2.49		2.63		2.76		3.09
Borrowings		3.47	%		4.65			2.84		3.35		3.91		4.21		4.23
Total interest-bearing liabilities		1.46	%		2.36			1.29		1.46		1.50		1.59		1.97
Net interest rate spread		3.77	%		3.47			3.83		3.73		3.74		3.80		3.72
Net interest rate margin		4.04	%		3.93			4.06		3.99		4.01		4.09		4.07
Net income (loss) (annualized returns on):
Average assets		0.71	%		(1.37	)		1.02		0.66		0.52		0.61		(0.65	)
Average equity		7.43	%		(14.30	)		10.87		6.93		5.48		6.29		(7.91	)
Average common equity ⁽⁶⁾		7.61	%		(16.84	)		12.33		6.95		4.91		6.01		(10.37	)
Average tangible common equity ⁽⁷⁾		10.37	%		(21.87	)		16.62		9.45		6.72		8.25		(14.31	)
Efficiency ratio ⁽⁸⁾		65.52	%		64.07			59.93		63.43		69.49		69.72		66.65

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


						Quarterly Trends
	Years ended					2009								2008
	December 31,					Fourth		Third		Second		First		Fourth
	2009			2008		Quarter		Quarter		Quarter		Quarter		Quarter
ASSET QUALITY DATA
*(Dollar amounts in thousands)*
Nonaccrual loans	$	6,822			8,189		6,822		5,816		9,496		8,826		8,189
Accruing loans past due 90 days or more		1,859			7		1,859		1		2		301		7

Total non-performing loans		8,681			8,196		8,681		5,817		9,498		9,127		8,196
Foreclosed assets		746			1,007		746		696		1,046		877		1,007
Non-performing investment securities		1,015			49		1,015		1,431		3,175		3,396		49

Total non-performing assets	$	10,442			9,252		10,442		7,944		13,719		13,400		9,252

Net loan charge-offs	$	5,710			3,323		1,129		2,452		1,131		998		1,257
Net charge-offs to average loans (annualized)		0.47	%		0.32		0.35		0.79		0.38		0.35		0.46
Total non-performing loans to total loans		0.69	%		0.73		0.69		0.46		0.78		0.79		0.73
Total non-performing assets to total assets		0.51	%		0.48		0.51		0.37		0.69		0.66		0.48
Allowance for loan losses to total loans		1.64	%		1.67		1.64		1.65		1.69		1.70		1.67
Allowance for loan losses to
non-performing loans		239	%		229		239		357		217		215		229

⁽¹⁾ Includes investment securities at adjusted amortized cost and non-performing investment securities.

⁽³⁾ Excludes preferred shareholders’ equity.
⁽⁴⁾ Excludes preferred shareholders’ equity, goodwill and other intangible assets.

⁽⁵⁾ 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.


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