EX-99.1

FINANCIAL INSTITUTIONS, INC. REPORTS SECOND QUARTER 2015 FINANCIAL RESULTS
Average earning assets up $240.8 million from 1^st quarter

WARSAW, N.Y., July 22, 2015 – Financial Institutions, Inc. (the “Company”) (Nasdaq: FISI), the parent company of Five Star Bank (the “Bank”), today reported financial results for the quarter ended June 30, 2015. The Company’s financial results for the first and second quarters of 2015 include the results of operations from the acquisition of Scott Danahy Naylon (“SDN”), an insurance agency the Company acquired in August 2014.

Net income for the second quarter 2015 was $6.6 million, compared to $6.8 million for the first quarter 2015, and $7.0 million for the second quarter 2014. Earnings per diluted common share for the second quarter 2015 was $0.44, compared with $0.46 per share for the first quarter 2015 and $0.48 per share for the second quarter 2014.

The Company’s President and Chief Executive Officer Martin K. Birmingham stated, “The momentum that began toward the end of the first quarter as a result of the implementation of our growth initiatives has carried over into the second quarter. We are very encouraged by the progress achieved in the second quarter of 2015 that resulted in the Company’s earning assets exceeding $3 billion and total loans growing beyond $2 billion for the first time. We are benefiting from the confluence of an economic recovery in Western New York and our allocation of increased resources to grow our presence in Rochester and Buffalo, two opportunity rich markets that represent the largest metropolitan areas within our region.”

•

Total deposits of $2.66 billion increased by 8% from a year ago but down by 2% from March 31, 2015 due to seasonal outflows of municipal deposits

•

Provision for loan losses for the second quarter of 2015 decreased by 53% from the first quarter and nearly 27% lower than the same period of 2014

•

$40 million subordinated notes offering completed during the second quarter bolsters regulatory capital

•

Growth in commercial sector and indirect lending are the primary drivers for interest income reaching a quarterly record of $26.0 million, an increase of 4% from the prior year

•

Net interest income grew to $23.4 million despite continued net interest margin pressure

•

Noninterest income less net gain on investment securities increased by 15% to $6.5 million from $5.6 million in the prior year period due primarily to the inclusion of insurance income from the SDN acquisition

•

Expenses of $19.2 million in second quarter 2015 increased by $1.4 million from the prior year primarily due to expense attributable to SDN and the hiring of additional personnel associated with the Company’s expansion initiatives

•

Net income available to common shareholders was $6.2 million or $0.44 per diluted share, compared to $6.7 million or $0.48 per share in the same period last year

•

Quarterly cash dividend of $0.20 per common share represented a 3.23% dividend yield as of June 30, 2015 and a return of 45% of second quarter net income to common shareholders

Mr. Birmingham continued, “We have made solid progress in our efforts to increase interest income. Growth in the commercial sector is the primary driver for interest income reaching a quarterly record of nearly $26 million, an increase of over 4% from the prior year. Although we are not immune to the industry-wide pressure on net interest margin, net interest income exceeded $23 million this quarter. While interest expense resulting from the issuance of $40 million in subordinated notes in April resulted in additional margin compression, the sale of the notes enabled us to bolster regulatory capital levels and continue to grow our banking operations.

“Our strategic growth plan involves investments to increase and diversify our revenue streams, which in turn partially mitigates exposure to net interest margin pressures, and broadening of services offered to our customers. Investments have been made in support of this plan that include the acquisition of a platform insurance agency toward the end of last year and the addition of new loan officers, cross-training of personnel and deployment of new technologies. Our insurance offerings are now a core business. Insurance income has increased from a nominal level in the second quarter of last year to approximately 20% of noninterest income on a seasonally adjusted basis. Noninterest income less net gains on investment securities in the second quarter increased by 15% from a year ago, primarily due to the inclusion of insurance income.

“Overall, we delivered solid results in key metrics supporting our business line expansion and credit quality while managing our expense levels in a new era of growth for Financial Institutions. Our expenses are running at an ideal level and we look forward to continued growth in our revenue streams and benefiting from the leverage in our business to enhance our profitability.”

Kevin B. Klotzbach, the Company’s Executive Vice President and Chief Financial Officer, commented, “The broadening of our financial services and accompanying increased spending has resulted in a shift in our efficiency ratio as a measure of productivity. In the past, our efficiency ratio as a community bank was consistently among the best as compared to our publicly traded peers. Now, as we drive forward with our strategy as a provider of more diversified financial services, our efficiency ratio is expected to be in the low 60% range. This approach will decrease our sensitivity to traditional banking revenues which are subject to interest rate changes.

“We are making up for some of the net interest margin compression through volume improvements. Commercial loan production has increased and our loan mix is moving in a positive trajectory. All major loan portfolios are growing, with commercial lending leading the way. Reflecting our larger base of loan officers, commercial real estate and traditional commercial and industrial lending combined for increases of $72.7 million and $82.6 million in loans from the first quarter 2015 and second quarter 2014, respectively. With this growth, we have been vigilant in exercising stringent credit controls necessary to maintain our asset quality. Significant improvements in the second quarter were realized in the reduction of net charge-offs and the provision for loan losses. This credit quality improvement is complemented by the regulatory capital infusion from our successfully completed subordinated debt offering in the second quarter.”

On April 15, 2015, the Company completed the sale of $40 million in aggregate principal amount of 6.00% fixed to floating rate subordinated notes due 2030 (the “Subordinated Notes”). The Subordinated Notes qualify as Tier 2 capital for regulatory purposes. The net proceeds from this offering were intended for general corporate purposes, including but not limited to, contribution of capital to the Bank to support both organic growth as well as opportunistic acquisitions. During the second quarter, the Company contributed $34.0 million of net proceeds from this offering to the Bank as additional paid-in capital.

Net interest income was $23.4 million in the second quarter 2015, compared to $23.1 million in the first quarter 2015 and second quarter 2014. When comparing the second quarter 2015 to the first quarter 2015, average earning assets increased $174.9 million, including increases of $53.2 million and $121.8 million in loans and investment securities, respectively. Average earning assets were up $240.8 million, led by a $153.8 million increase in investment securities and a $87.1 million increase in loans in the second quarter 2015 compared to the same quarter in 2014. The growth in earning assets was offset by decreases in net interest margin. Second quarter 2015 net interest margin was 3.24%, a decrease of 19 basis points from 3.43% reported in the first quarter 2015 and a 23 basis point decrease from 3.47% reported in the second quarter 2014. The issuance of the Subordinated Notes decreased second quarter 2015 net interest margin by approximately 8 basis points.

Noninterest income was $6.5 million for the second quarter 2015 compared to $8.3 million for the first quarter 2015 and $6.6 million in the second quarter 2014. Included in the prior period totals are gains realized from the sale of investment securities. Exclusive of those gains, noninterest income was $7.2 million in the first quarter 2015 and $5.6 million in the second quarter 2014. The main factors contributing to the lower noninterest income during the second quarter of 2015 compared to the first quarter 2015 were decreases in insurance income and investments in limited partnerships. Insurance income decreased $551 thousand during the second quarter 2015, largely due to lower contingent commissions. Contingent commissions are commissions SDN receives from various property and casualty insurance carriers based on the overall profit and/or overall volume of business placed with the insurance carrier during a calendar year and is determined after the contract period. Such commissions are seasonal in nature and are generally received during the first quarter of each year. In addition, agency and direct bill commissions declined during the second quarter due to the timing of policy renewals. Income from the Company’s investments in limited partnerships, which are primarily small business investment companies, decreased $419 thousand during the second quarter 2015. The income from these equity method investments fluctuates based on the performance of the underlying investments. The higher noninterest income in the second quarter 2015 compared to the second quarter 2014 is primarily a result of a $1.0 million increase in insurance income, reflecting the contributions from SDN, which was acquired during the third quarter 2014 as part of the Company’s strategy to diversify its business lines and increase noninterest income through additional fee-based services.

Noninterest expense was $19.2 million for the second quarter 2015 compared to $19.0 million for the first quarter 2015 and $17.8 million in the second quarter 2014. Salaries and employee benefits expense increased $1.5 million from the second quarter 2014, primarily reflecting additional personnel as a result of the SDN acquisition and the hiring of additional personnel associated with the Company’s expansion initiatives. Professional services decreased $518 thousand when comparing the second quarter of 2015 to the same period in 2014. The second quarter 2014 professional services expense included professional services associated with the acquisition of SDN. Other noninterest expense for the second quarter 2015 included an increase of $151 thousand in intangible asset amortization attributable to the SDN acquisition.

Income tax expense was $2.8 million in the second quarter 2015, compared to $2.9 million in the first quarter 2015 and $3.1 million in the second quarter 2014. The effective tax rate was 29.5% for the second quarter of 2015, compared with an effective tax rate of 29.8% for the first quarter 2015 and 30.5% in the second quarter 2014.

Total assets were $3.36 billion at June 30, 2015, up $162.4 million from $3.20 billion at March 31, 2015 and up $366.2 million from $2.99 billion at June 30, 2014.

Cash and cash equivalents were $52.6 million at June 30, 2015, down $83.4 million from March 31, 2015 and down $12.3 million from June 30, 2014. Cash and cash equivalents at March 31, 2015 were elevated due to the timing of public deposit inflows at the end of the quarter.

Total loans were $2.01 billion at June 30, 2015, up $86.3 million from March 31, 2015 and up $112.6 million from June 30, 2014. The increase in loans was attributable to organic growth in commercial, home equity and consumer indirect loans. Commercial loans increased to $829.4 million at June 30, 2015, up $72.7 million from March 31, 2015 and up $82.6 million from June 30, 2014. Total investment securities were $1.09 billion at June 30, 2015, up $147.9 million from the end of the prior quarter and up $229.5 million compared with the June 30, 2014.

Total deposits were $2.66 billion at June 30, 2015, a decrease of $48.5 million from March 31, 2015 and an increase of $206.2 million from June 30, 2014. The decrease during the second quarter of 2015 was mainly due to seasonal outflows of municipal deposits, while the year-over-year increase was due to higher municipal deposits as well as successful business development efforts. Public deposit balances represented 26% of total deposits at June 30, 2015, compared to 30% at March 31, 2015 and 25% at June 30, 2014.

Short-term borrowings were $350.6 million at June 30, 2015, up $175.0 million from March 31, 2015 and up $95.9 million from June 30, 2014. Short-term borrowings are often utilized to manage the seasonal outflows of municipal deposits.

Long-term borrowings were $39.0 million at June 30, 2015. There were no long-term borrowings outstanding at March 31, 2015 or June 30, 2014. As described above, during the second quarter 2015 the Company issued $40 million of subordinated notes. Long-term borrowings are shown net of issuance costs, which are capitalized and amortized as a component of interest expense over a period of 15 years.

Shareholders’ equity was $284.4 million at June 30, 2015, compared with $286.7 million at March 31, 2015 and $269.8 million at June 30, 2014. Common book value per share was $18.83 at June 30, 2015, a decrease of $0.18 from $19.01 at March 31, 2015 and an increase of $0.62 from $18.21 at June 30, 2014. Tangible common book value per share, a non-GAAP measure, was $14.03 at June 30, 2015, compared to $14.18 at March 31, 2015 and $14.62 at June 30, 2014.

During the second quarter 2015, the Company declared a common stock dividend of $0.20 per common share, consistent with the prior quarter and up by 5%, or $0.01 per share, from the second quarter of 2014. The second quarter 2015 dividend returned 45% of the quarter’s net income to common shareholders.

The Company’s leverage ratio was 7.31% at June 30, 2015, compared to 7.53% at March 31, 2015 and 7.64% at June 30, 2014. The decrease in the leverage ratio was primarily due to an increase in average quarterly assets. Changes in the Company’s capital ratios from the prior periods were also impacted by goodwill and intangible assets recorded during the third quarter 2014 in conjunction with the acquisition of SDN. Such goodwill and intangible assets are excluded from regulatory capital under regulatory accounting practices.

As previously discussed, the Company contributed $34.0 million of net proceeds from the Subordinated Notes offering to the Bank as additional paid-in capital. The Bank’s leverage ratio and total risk-based capital ratio increased to 8.06% and 12.54%, respectively, at June 30, 2015, compared to 7.22% and 11.27%, respectively, at March 31, 2015, all of which exceeded the regulatory thresholds required to be classified as a “well capitalized” institution as established by the Bank’s primary banking regulators.

Non-performing loans at June 30, 2015 decreased $364 thousand compared to March 31, 2015, primarily due to improvements in the commercial mortgage and indirect portfolios, partially offset by increases in non-performing commercial business and residential real estate loans. The ratio of non-performing loans to total loans was 0.53% at June 30, 2015 compared with 0.58% at March 31, 2015 and 0.47% at June 30, 2014.

The provision for loans losses for the second quarter 2015 was $1.3 million, a decrease of $1.5 million from the prior quarter and $470 thousand from the second quarter 2014. The decrease in the provision for loan losses reflects a decrease in net charge-offs during the second quarter of 2015 compared to the prior periods. Net charge-offs were $979 thousand during the second quarter 2015, a $2.2 million decrease compared to the prior quarter and $765 thousand from the second quarter 2014. The first quarter 2015 net charge-offs included two commercial loan relationships totaling $1.7 million that had been previously reserved by the Company. The ratio of annualized net charge-offs to total average loans was 0.20% during the current quarter, compared to 0.68% during the prior quarter and 0.37% during the second quarter 2014.

The ratio of allowance for loans losses to total loans was 1.37% at June 30, 2015, compared with 1.41% at March 31, 2015 and 1.43% at June 30, 2014. The ratio of the allowance for loan losses to total loans declined in both comparisons, reflecting overall improvement in credit quality. The ratio of allowance for loans losses to non-performing loans was 257% at June 30, 2015, compared with 246% at March 31, 2015 and 306% at June 30, 2014.

Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Scott Danahy Naylon. 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 60 ATMs throughout Western and Central New York State. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. 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 and is a member of the NASDAQ OMX ABA Community Bank Index. Additional information is available at the Company’s website: www.fiiwarsaw.com.

This news release contains financial information, such as tangible common equity, determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the Company, and facilitate investors’ assessments of its business and performance trends. In addition, the Company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the Company’s results and to assess performance in relation to the company’s ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in Appendix A to this document.

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, whether it experiences greater credit losses than expected, breaches of its third party information systems, the attitudes and preferences of its customers, its ability to successfully integrate and profitably operate acquired businesses such as the acquisition of SDN, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and general economic and credit market conditions nationally and regionally. For more information about these factors and other factors that could affect the Company’s forward-looking statements, please see the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

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


	2015					2014
	June 30,			March 31,		December 31,		September 30,			June 30,

SELECTED BALANCE SHEET DATA:
Cash and cash equivalents	$	52,554			135,972		58,151		87,582			64,832
Investment securities:
Available for sale		772,639			639,275		622,494		585,479			601,903
Held-to-maturity		320,820			306,255		294,438		285,967			262,057

Total investment securities		1,093,459			945,530		916,932		871,446			863,960
Loans held for sale		448			656		755		1,029			201
Loans:
Commercial business		292,791			277,464		267,409		275,107			277,685
Commercial mortgage		536,590			479,226		475,092		469,485			469,055
Residential mortgage		95,162			97,717		100,101		103,044			106,206
Home equity		398,854			386,961		386,615		382,703			369,578
Consumer indirect		666,550			662,213		661,673		656,215			652,748
Other consumer		19,326			19,373		21,112		21,291			21,392

Total loans		2,009,273			1,922,954		1,912,002		1,907,845			1,896,664
Allowance for loan losses		27,500			27,191		27,637		27,244			27,166

Total loans, net		1,981,773			1,895,763		1,884,365		1,880,601			1,869,498
Total interest-earning assets ^{(1) (2)}		3,104,631			2,860,605		2,826,488		2,780,940			2,758,779
Goodwill and other intangible assets, net		68,158			68,396		68,639		68,887			49,826
Total assets		3,359,459			3,197,077		3,089,521		3,055,304			2,993,264
Deposits:
Noninterest-bearing demand		602,143			559,646		571,260		571,549			551,229
Interest-bearing demand		530,861			611,104		490,190		530,783			507,083
Savings and money market		910,215			922,093		795,835		805,522			766,594
Certificates of deposit		613,019			611,852		593,242		630,970			625,172

Total deposits		2,656,238			2,704,695		2,450,527		2,538,824			2,450,078
Short-term borrowings		350,600			175,573		334,804		215,967			254,683
Long-term borrowings, net		38,955			—		—		—			—
Total interest-bearing liabilities		2,443,650			2,320,622		2,214,071		2,183,242			2,153,532
Shareholders’ equity		284,435			286,689		279,532		277,758			269,827
Common shareholders’ equity ⁽³⁾		267,095			269,349		262,192		260,418			252,487
Tangible common equity ⁽⁵⁾		198,937			200,953		193,553		191,531			202,661
Unrealized (loss) gain on investment securities, net of tax	$	(924	)		5,241		1,933		(374	)		1,292
Common shares outstanding		14,184			14,167		14,118		14,094			13,863
Treasury shares		214			231		280		304			299
CAPITAL RATIOS AND PER SHARE DATA:
Leverage ratio ⁽⁴⁾		7.31	%		7.53		7.35		7.34			7.64
Common equity Tier 1 ratio ⁽⁴⁾		9.50	%		9.66		n/a		n/a			n/a
Tier 1 risk-based capital ⁽⁴⁾		10.25	%		10.45		10.47		10.44			10.95
Total risk-based capital ⁽⁴⁾		13.17	%		11.69		11.72		11.69			12.20
Common equity to assets		7.95	%		8.42		8.49		8.52			8.44
Tangible common equity to tangible assets ⁽⁵⁾		6.04	%		6.42		6.41		6.41			6.89
Common book value per share	$	18.83			19.01		18.57		18.48			18.21
Tangible common book value per share ⁽⁵⁾		14.03			14.18		13.71		13.59			14.62

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

⁽⁴⁾ 2015 ratios calculated under Basel III rules, which became effective January 1, 2015.

⁽⁵⁾ See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.

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


	Six months ended						2015							2014
	June 30,						Second		First		Fourth			Third		Second
	2015			2014			Quarter		Quarter		Quarter			Quarter		Quarter
SELECTED INCOME STATEMENT DATA:
Interest income	$	50,956			49,942			25,959		24,997		25,984			25,129		24,883
Interest expense		4,405			3,564			2,555		1,850		1,846			1,871		1,780

Net interest income		46,551			46,378			23,404		23,147		24,138			23,258		23,103
Provision for loan losses		4,029			3,864			1,288		2,741		1,910			2,015		1,758

Net interest income after provision
for loan losses		42,522			42,514			22,116		20,406		22,228			21,243		21,345

Noninterest income:
Service charges on deposits		3,843			4,491			1,964		1,879		2,186			2,277		2,241
Insurance income		2,665			57			1,057		1,608		1,420			922		16
ATM and debit card		2,476			2,431			1,283		1,193		1,269			1,263		1,257
Investment advisory		1,028			1,123			541		487		491			524		561
Investments in limited partnerships		529			707			55		474		209			187		81
Company owned life insurance		960			828			493		467		504			421		425
Loan servicing		263			330			96		167		118			120		176
Net gain on sale of loans held for sale		108			155			39		69		82			76		50
Net gain on investment securities		1,062			1,262			—		1,062		264			515		949
Net gain (loss) on sale of other assets		20			(11	)		16		4		8			72		24
Amortization of tax credit investment		—			—			—		—		(2,323	)		—		—
Other		1,798			1,561			911		887		927			884		797

Total noninterest income		14,752			12,934			6,455		8,297		5,155			7,261		6,577

Noninterest expense:
Salaries and employee benefits		20,829			18,319			10,606		10,223		10,551			9,725		9,063
Occupancy and equipment		7,074			6,374			3,375		3,699		3,324			3,131		3,139
Professional services		1,834			2,356			866		968		1,428			976		1,384
Computer and data processing		1,512			1,500			810		702		791			725		777
Supplies and postage		1,071			1,047			508		563		499			507		535
FDIC assessments		833			810			415		418		392			390		388
Advertising and promotions		477			393			238		239		196			216		214
Other		4,617			4,222			2,418		2,199		2,198			2,285		2,308

Total noninterest expense		38,247			35,021			19,236		19,011		19,379			17,955		17,808

Income before income taxes		19,027			20,427			9,335		9,692		8,004			10,549		10,114
Income tax expense		5,641			6,176			2,750		2,891		84			3,365		3,082

Net income		13,386			14,251			6,585		6,801		7,920			7,184		7,032

Preferred stock dividends		731			731			366		365		365			366		365

Net income available to common shareholders	$	12,655			13,520			6,219		6,436		7,555			6,818		6,667

FINANCIAL RATIOS AND STOCK DATA:
Earnings per share – basic	$	0.90			0.98			0.44		0.46		0.54			0.49		0.48
Earnings per share – diluted	$	0.90			0.98			0.44		0.46		0.54			0.49		0.48
Cash dividends declared on common stock	$	0.40			0.38			0.20		0.20		0.20			0.19		0.19
Common dividend payout ratio ⁽¹⁾		44.44	%		38.78			45.45		43.48		37.04			38.78		39.58
Dividend yield (annualized)		3.25	%		3.27			3.23		3.54		3.15			3.35		3.25
Return on average assets		0.85	%		0.97			0.81		0.89		1.03			0.95		0.95
Return on average equity		9.43	%		10.85			9.19		9.68		11.07			10.41		10.52
Return on average common equity ⁽²⁾		9.49	%		11.01			9.24		9.75		11.25			10.55		10.66
Efficiency ratio ⁽³⁾		61.13	%		58.54			62.00		60.27		59.58			57.65		60.15
Stock price (Nasdaq: FISI):
High	$	25.50			25.69			25.50		25.38		27.02			24.94		24.88
Low	$	21.67			19.72			22.50		21.67		22.45			21.71		22.17
Close	$	24.84			23.42			24.84		22.93		25.15			22.48		23.42

⁽¹⁾ Common dividend payout ratio equals dividends declared during the period divided by earnings per share for the equivalent period.

⁽²⁾ Annualized net income available to common shareholders divided by average common equity.

⁽³⁾ 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 on investment securities and amortization of tax credit investment.


	Six months ended					2015				2014
	June 30,					Second		First		Fourth		Third		Second
	2015			2014		Quarter		Quarter		Quarter		Quarter		Quarter
SELECTED AVERAGE BALANCES:
Federal funds sold and interest-earning deposits	$	75			204		26		124		—		51		94
Investment securities ⁽¹⁾		969,091			890,068		1,029,640	907,871		876,932		854,030			875,855
Loans ⁽²⁾:
Commercial business		274,729			270,148		284,535	264,814		265,979		273,239			275,105
Commercial mortgage		494,095			473,312		509,317	478,705		473,694		473,168			473,883
Residential mortgage		97,861			110,949		96,474	99,264		101,982		105,255			108,535
Home equity		388,102			337,922		390,135	386,046		384,138		377,360			346,911
Consumer indirect		662,982			646,720		664,222	661,727		658,337		653,192			651,150
Other consumer		19,290			21,455		18,848	19,736		20,630		20,847			20,855

Total loans		1,937,059			1,860,506		1,963,531	1,910,292		1,904,760		1,903,061			1,876,439
Total interest-earning assets		2,906,225			2,750,778		2,993,197	2,818,287		2,781,692		2,757,142			2,752,388
Goodwill and other intangible assets, net		68,410			49,923		68,294	68,527		68,771		59,306			49,879
Total assets		3,189,721			2,969,591		3,263,111	3,115,516		3,052,499		2,985,920			2,973,735
Interest-bearing liabilities:
Interest-bearing demand		556,564			510,231		561,570	551,503		511,749		486,311			509,398
Savings and money market		884,709			775,956		929,701	839,218		824,661		758,306			789,956
Certificates of deposit		609,169			624,068		616,145	602,115		614,654		634,400			629,945
Short-term borrowings		239,103			249,470		226,577	251,768		232,935		259,995			224,801
Long-term borrowings, net		16,618			—		33,053		—		—		—		—

Total interest-bearing liabilities		2,306,163			2,159,725		2,367,046	2,244,604		2,183,999		2,139,012			2,154,100
Noninterest-bearing demand deposits		576,011			531,158		587,396	564,500		564,336		556,485			537,895
Total deposits		2,626,453			2,441,413		2,694,812	2,557,336		2,515,400		2,435,502			2,467,194
Total liabilities		2,903,560			2,704,683		2,975,762	2,830,557		2,768,693		2,712,274			2,705,578
Shareholders’ equity		286,161			264,908		287,349	284,959		283,806		273,646			268,157
Common equity ⁽³⁾		268,821			247,566		270,009	267,619		266,466		256,306			250,815
Tangible common equity⁽⁴⁾	$	200,411			197,643		201,715	199,092		197,695		197,000			200,936
Common shares outstanding:
Basic		14,071			13,782		14,078	14,063		14,049		13,953			13,791
Diluted		14,118			13,831		14,121	14,113		14,112		14,007			13,838
SELECTED AVERAGE YIELDS:
*(Tax equivalent basis)*
Federal funds sold and interest-earning deposits		0.23	%		0.08		0.39		0.19		—		0.28		0.07
Investment securities		2.46	%		2.44		2.44		2.47		2.48		2.43		2.45
Loans		4.22	%		4.39		4.18		4.27		4.44		4.31		4.32
Total interest-earning assets		3.63	%		3.76		3.58		3.69		3.82		3.73		3.73
Interest-bearing demand		0.13	%		0.12		0.14		0.11		0.11		0.12		0.12
Savings and money market		0.12	%		0.12		0.12		0.10		0.11		0.12		0.12
Certificates of deposit		0.86	%		0.75		0.87		0.84		0.82		0.78		0.76
Short-term borrowings		0.37	%		0.37		0.38		0.37		0.36		0.37		0.36
Long-term borrowings, net		6.20	%		—		6.23		—		—		—		—
Total interest-bearing liabilities		0.38	%		0.33		0.43		0.33		0.34		0.35		0.33
Net interest rate spread		3.25	%		3.43		3.15		3.36		3.48		3.38		3.40
Net interest rate margin		3.33	%		3.49		3.24		3.43		3.56		3.46		3.47

⁽⁴⁾ See Appendix A – Non-GAAP to GAAP Reconciliation for the computation of this Non-GAAP measure.

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


	2015								2014
	Second			First		Fourth			Third		Second
	Quarter			Quarter		Quarter			Quarter		Quarter

ASSET QUALITY DATA:
Allowance for Loan Losses
Beginning balance	$	27,191			27,637		27,244			27,166		27,152
Net loan charge-offs (recoveries):
Commercial business		(73	)		1,093		(15	)		44		(65	)
Commercial mortgage		194			520		(57	)		66		159
Residential mortgage		9			22		22			11		61
Home equity		145			74		(4	)		66		127
Consumer indirect		645			1,317		1,420			1,577		1,336
Other consumer		59			161		151			173		126

Total net charge-offs		979			3,187		1,517			1,937		1,744
Provision for loan losses		1,288			2,741		1,910			2,015		1,758

Ending balance	$	27,500			27,191		27,637			27,244		27,166

Net charge-offs (recoveries) to average loans (annualized):
Commercial business		-0.10	%		1.67		-0.02			0.06		-0.09
Commercial mortgage		0.15	%		0.44		-0.05			0.06		0.13
Residential mortgage		0.04	%		0.09		0.09			0.04		0.23
Home equity		0.15	%		0.08		0.00			0.07		0.15
Consumer indirect		0.39	%		0.81		0.86			0.96		0.82
Other consumer		1.26	%		3.31		2.90			3.29		2.42
Total loans		0.20	%		0.68		0.32			0.40		0.37
Supplemental information ⁽¹⁾
Non-performing loans:
Commercial business	$	4,643			4,587		4,288			3,258		3,589
Commercial mortgage		3,070			3,411		3,020			2,460		2,734
Residential mortgage		1,628			1,361		1,194			656		758
Home equity		619			672		463			464		371
Consumer indirect		728			994		1,169			1,300		1,427
Other consumer		20			47		19			46		12

Total non-performing loans		10,708			11,072		10,153			8,184		8,891
Foreclosed assets		165			139		194			509		554
Total non-performing assets	$	10,873			11,211		10,347			8,693		9,445

Total non-performing loans to total loans		0.53	%		0.58		0.53			0.43		0.47
Total non-performing assets to total assets		0.32	%		0.35		0.33			0.28		0.32
Allowance for loan losses to total loans		1.37	%		1.41		1.45			1.43		1.43
Allowance for loan losses to non-performing loans		257	%		246		272			333		306

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


	Six months ended					2015							2014
	June 30,					Second			First		Fourth		Third		Second
	2015			2014		Quarter			Quarter		Quarter		Quarter		Quarter
Ending tangible assets:
Total assets						$	3,359,459			3,197,077		3,089,521		3,055,304		2,993,264
Less: Goodwill and other intangible assets, net							68,158			68,396		68,639		68,887		49,826

Tangible assets (non-GAAP)						$	3,291,301			3,128,681		3,020,882		2,986,417		2,943,438

Ending tangible common equity:
Common shareholders’ equity						$	267,095			269,349		262,192		260,418		252,487
Less: Goodwill and other intangible assets, net							68,158			68,396		68,639		68,887		49,826

Tangible common equity (non-GAAP)						$	198,937			200,953		193,553		191,531		202,661

Tangible common equity to tangible assets (non-GAAP)⁽¹⁾							6.04	%		6.42		6.41		6.41		6.89
Common shares outstanding							14,184			14,167		14,118		14,094		13,863
Tangible common book value per share (non-GAAP)⁽²⁾						$	14.03			14.18		13.71		13.59		14.62
Average tangible common equity:
Average common equity		$	268,821		247,566		270,009			267,619		266,466		256,306		250,815
Average goodwill and other intangible assets, net			68,410		49,923		68,294			68,527		68,771		59,306		49,879

Average tangible common equity (non-GAAP)		$	200,411		197,643		201,715			199,092		197,695		197,000		200,936


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


For additional information contact:
Kevin B. Klotzbach		Jordan Darrow
Chief Financial Officer & Treasurer		Darrow Associates
Phone: 585.786.1130		Phone: 631.367.1866
Email: KBKlotzbach@five-starbank.com		Email: jdarrow@darrowir.com


Second Quarter 2015 Highlights: