EX-99.1

Financial Institutions, Inc. Announces Third Quarter 2005 Results
Value received for loan sale results in net gain of $9.2 million

WARSAW, N.Y., October 21, 2005 — Financial Institutions, Inc. (NASDAQ: FISI) (“FI”), announced today results for the third quarter and nine-month period ended September 30, 2005. Diluted earnings per share for the 2005 third quarter were $0.76, up $0.34 per share, or 81%, compared with $0.42 for the same period last year. Net income for the third quarter was $9.0 million compared with $5.1 million in the third quarter 2004. The increase in earnings for the third quarter was primarily due to the results of the Company’s previously announced decision to sell certain commercial related loans. For the nine-month periods, net loss was $(0.7) million in 2005 while net income was $13.3 million in 2004. Diluted earnings (loss) per share for the first nine months were $(0.16) and $1.08 for 2005 and 2004, respectively. The loss in the first nine months of 2005 reflects the higher provision for loan losses recorded during the second quarter as a result of the write-downs associated with transferring loans to held for sale at their estimated fair value less costs to sell.

Peter G. Humphrey, Chairman, President and CEO, commented, “As a result of our loan sale process, we have measurably improved our asset quality. We have reduced the ratio of nonperforming loans to total loans to 1.6% at the end of this year’s third quarter from 3.8% at the same time last year. Total nonperforming assets are reduced by over $30 million compared with last year, and our allowance for loan loss coverage of nonperforming loans improved to 128% from 65% at the same time last year.”

At June 30, 2005, FI had identified $167.3 million in loans that were transferred to held for sale at an estimated fair value of $131.0 million. During the third quarter of 2005, an additional $1.7 million in loans with an estimated fair value less costs to sell of $1.3 million were transferred to held for sale and $0.5 million of previously identified loans to be sold were returned to the loan portfolio. During the third quarter of 2005, FI realized a net gain of $9.2 million on the ultimate sale or settlement of these commercial related loans held for sale, with the exception of $1.7 million which remains in the held for sale category at September 30, 2005.

Net interest income in the third quarter of 2005 was $16.3 million, down $3.0 million from the same period last year and for the first nine months of 2005 was $51.5 million, down $4.9 million from the same period last year. Net interest margin was 3.59% for the three months ended September 30, 2005 compared with 3.98% for the same period last year. For the first nine months of 2005, net interest margin was 3.68% compared with 3.90% for the first nine months of 2004. The Company has experienced a significant change in the mix of earning assets, with increases in investment securities and federal funds sold and a decrease in loans. Loan assets generally earn higher yields than investment assets. For the third quarter of 2005, average investment securities and federal funds sold compared with the third quarter average of 2004 increased $83.8 million, while average loans decreased $256.6 million and average loans held for sale increased $63.3 million. Nearly all of the average increase in loans held for sale were nonaccruing, commercial related loans identified for sale in the second quarter of 2005 and, therefore, did not contribute to interest income in the third quarter of 2005. In addition to the lower loan base resulting from the Company’s decision to sell $169 million in commercial related loans, new loan originations have slowed causing an additional drop in total loans.

FI’s average cost of funds for the third quarter of 2005 was 2.28%, an increase of 54 basis points over the same period in 2004. The increase in the average cost of funds was primarily a result of higher deposit interest costs associated with increases in general market interest rates. Improved asset yields associated with higher general market rates have been mitigated by the shift in the mix of earning assets. The average yield on total earning assets for the third quarter of 2005 increased 6 basis points from the same period last year to 5.49%.

Noninterest income in the 2005 third quarter included the net gain on sale of commercial related loans of $9.2 million. All other categories of noninterest income for the third quarter of 2005 were relatively flat compared with the same period in 2004.

Asset Quality
At September 30, 2005, FI had nonperforming loans (excluding loans held for sale) and other real estate owned of $17.4 million which represents 1.71% of total loans and other real estate owned compared with $49.7 million and 3.92% at September 30, 2004, respectively. The provision for loan losses for the third quarter of 2005 was $1.5 million compared with $2.1 million in the same period last year. For the first nine months of 2005, the provision for loan losses was $27.1 million compared with $9.5 million last year. The reduction in nonperforming loans and increase in provision for loan losses year to date relates to the reductions in problem loans from the loan sale. The allowance for loan losses was $20.8 million at September 30, 2005, representing 2.05% of total loans and 128% of nonperforming loans. This compares with an allowance for loan losses of $39.2 million representing 2.46% of total loans and 65% of nonperforming loans at the same time last year.

Noninterest expense for the third quarter of 2005 increased 6%, or $0.9 million, to $16.3 million when compared with $15.4 million in last year’s third quarter. Salaries and employee benefits increased 3%, or $0.2 million, for the third quarter 2005 in comparison with the same quarter last year. Professional fees and services associated with consolidation activities and regulatory matters increased $0.4 million in comparison with the same quarter last year.

Mr. Humphrey noted, “We have heavily relied on outside expertise to assist in addressing regulatory matters, centralization activities, and the efforts involved with the merging of our four subsidiary banks. We anticipate that some of these costs will continue over the next six months, but should then begin to taper off. In addition, we have been staffed to address our problem loan portfolio and centralize our credit administration. Our objective is to measurably reduce costs in order to improve our efficiency ratio which was 70.2% for the most recent quarter.“

In June 2005, the Company decided to sell the stock of its Burke Group Inc. (BGI) subsidiary. As a result, in the second quarter, the Company had recorded a provision for estimated loss on the sale of BGI of $1.2 million and income tax expense on the anticipated disposition of $1.1 million. During the third quarter, FI subsequently sold and finalized the sale of BGI and realized a gain that approximated the subsidiary’s loss from operations during the third quarter.

Net loans, which were $992 million at the end of the third quarter, were down 20% and 18% from the end of the 2004 third quarter and the end of 2004, respectively. The sale of loans and the slowing of loan origination, have impacted earning assets.

Total deposits, the Company’s primary source of funds, remained relatively flat at $1.8 billion compared with $1.9 billion and $1.8 billion at the end of last year’s third quarter and the end of 2004, respectively.

Shareholders’ equity at September 30, 2005, was $173.6 million, down 6% from $184.3 million at the end of last year and down 8% from $188.0 million at the same time last year. The decline reflects the decision to transfer a significant amount of problem loans to held for sale status and ultimately complete their disposition as previously discussed.

Outlook
The Company has filed applications with the NYS Banking Department and the Board of Governors of the Federal Reserve System to request approval to merge its subsidiary banks into the state-chartered First Tier Bank, which would then be renamed.

“Over the last year, we have significantly improved our asset quality, dramatically improved our credit administration process, made great strides in our efforts to reduce our risk profile and strengthen our management team. The greatest amount of change needed to grow our business profitably should be behind us. With our team focused on customer service, generating quality loans, and providing differentiated service while reducing costs, we believe we can achieve quality, sustained earnings growth for our shareholders,” Mr. Humphrey concluded.

ABOUT FINANCIAL INSTITUTIONS, INC.
With total assets of $2.1 billion, Financial Institutions, Inc. is the parent company of Wyoming County Bank, National Bank of Geneva, Bath National Bank and First Tier Bank & Trust. The four banks, which FI plans to merge into one bank upon receipt of regulatory approval, provide a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of 50 offices and 72 ATM’s in Western and Central New York State. FI also provides brokerage, trust, and insurance services throughout its operating region. More information on FI and its subsidiaries is available through the Company web site at www.fiiwarsaw.com.

Safe Harbor Statement
This press release contains 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 the effectiveness of its strategy, its ability to reduce operating expenses, the attitudes and preferences of customers, the competitive environment and other factors discussed in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise these statements following the date of this press release.

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Other Data
(Dollars in thousands, except per share amounts)
(Unaudited)


	Three months ended
	September 30,
	2005			2004			$ Change			% Change
Interest and dividend income	$	25,495		$	26,630		$	(1,135	)		(4	)%
Interest expense		9,238			7,403			1,835			25	%

Net interest income		16,257			19,227			(2,970	)		(15	)%
Provision for loan losses		1,529			2,147			(618	)		(29	)%

Net interest income (loss) after provision for loan losses		14,728			17,080			(2,352	)		(14	)%

Noninterest income:
Service charges on deposits		3,076			3,108			(32	)		(1	)%
Financial services group fees and commissions		678			599			79			13	%
Mortgage banking activities		384			417			(33	)		(8	)%
Gain on sale and call of securities		-			14			(14	)		(100	)%
Net gain on sale of commercial related loans		9,212			-			9,212			-	%
Other		1,399			1,398			1			-	%

Total noninterest income		14,749			5,536			9,213			166	%

Noninterest expense:
Salaries and employee benefits		8,808			8,570			238			3	%
Other		7,504			6,857			647			9	%

Total noninterest expense		16,312			15,427			885			6	%
Income from continuing operations before income taxes		13,165			7,189			5,976			83	%
Income taxes from continuing operations		4,205			1,992			2,213			111	%

Income from continuing operations		8,960			5,197			3,763			72	%

Discontinued operations:
Loss from operations of discontinued subsidiary		(84	)		(108	)		24			22	%
Gain on disposal of discontinued subsidiary		88			-			88			-	%
Income taxes		(7	)		(28	)		21			75	%

Income (loss) on discontinued operations, net of taxes		11			(80	)		91			114	%
Net income	$	8,971		$	5,117		$	3,854			75	%

Preferred stock dividends	$	372		$	374		$	(2	)		(1	)%

Taxable-equivalent net interest income	$	17,418		$	20,334		$	(2,916	)		(14	)%


Per common share data:

Basic:
Income from continuing operations	$	0.76		$	0.43		$	0.33			77	%
Net income	$	0.76		$	0.42		$	0.34			81	%

Diluted:
Income from continuing operations	$	0.76		$	0.43		$	0.33			77	%
Net income	$	0.76		$	0.42		$	0.34			81	%
Cash dividends declared	$	0.08		$	0.16		$	(0.08	)		(50	)%

Common shares outstanding:
Weighted average shares – basic		11,333,374			11,196,646
Weighted average shares – diluted		11,353,367			11,253,282

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Additional Data
(Dollars in thousands, except per share amounts)
(Unaudited)


	Three months ended
	September 30,
	2005			2004
Performance ratios, annualized
Return (loss) on average assets		1.71	%		0.94	%
Return (loss) on average common equity		22.43	%		11.36	%
Common dividend payout ratio		10.53	%		38.10	%
Net interest margin (tax-equivalent)		3.59	%		3.98	%
Efficiency ratio (1)		70.24	%		59.25	%
Asset quality data:
Past due over 90 days and accruing	$	36		$	1,179
Restructured loans		—			—
Nonaccrual loans		16,140			46,471

Total nonperforming loans		16,176			47,650
Other real estate owned (ORE)		1,197			2,089

Total nonperforming loans and ORE		17,373			49,739
Nonaccrual loans held for sale		1,681			—

Total nonperforming assets	$	19,054		$	49,739

Net loan charge-offs	$	1,824		$	1,940
Asset quality ratios:
Nonperforming loans to total loans (2)		1.60	%		3.76	%
Nonperforming loans and ORE to total loans and ORE (2)		1.71	%		3.92	%
Nonperforming assets to total assets		0.91	%		2.25	%
Allowance for loan losses to total loans (2)		2.05	%		2.46	%
Allowance for loan losses to nonperforming loans (2)		128	%		65	%
Net loan charge-offs to average loans (annualized)		0.71	%		0.60	%
Capital ratios:
Average common equity to average total assets		7.30	%		7.64	%
Leverage ratio		7.52	%		7.30	%
Tier 1 risk-based capital ratio		13.17	%		11.21	%
Risk-based capital ratio		14.42	%		12.47	%

(2)

Ratios exclude nonaccruing loans held for sale from nonperforming loans and exclude loans held for sale from total loans.

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Other Data
(Dollars in thousands, except per share amounts)
(Unaudited)


	Nine months ended
	September 30,
	2005			2004			$ Change			% Change
Interest and dividend income	$	77.733		$	79,361		$	(1,628	)		(2	)%
Interest expense		26,249			22,979			3,270			14	%

Net interest income		51,484			56,382			(4,898	)		(9	)%
Provision for loan losses		27,110			9,459			17,651			187	%

Net interest income after provision for loan losses		24,374			46,923			(22,549	)		(48	)%

Noninterest income:
Service charges on deposits		8,605			8,973			(368	)		(4	)%
Financial services group fees and commissions		2,059			1,943			116			6	%
Mortgage banking activities		1,248			1,541			(293	)		(19	)%
Gain on sale and call of securities		14			88			(74	)		(84	)%
Gain on sale of credit card portfolio		-			1,177			(1,177	)		(100	)%
Net gain on sale of commercial related loans		9,212			-			9,212			-	%
Other		3,309			3,310			(1	)		-	%

Total noninterest income		24,447			17,032			7,415			44	%

Noninterest expense:
Salaries and employee benefits		26,881			25,547			1,334			5	%
Other		22,441			19,627			2,814			14	%

Total noninterest expense		49,322			45,174			4,148			9	%
Income (loss) from continuing operations before income taxes		(501	)		18,781			(19,282	)		(103	)%
Income taxes from continuing operations		(2,278	)		5,198			(7,476	)		(144	)%

Income (loss) from continuing operations		1,777			13,583			(11,806	)		(87	)%

Discontinued operations:
Loss from operations of discontinued subsidiary		(340	)		(314	)		(26	)		(8	)%
Loss on disposal of discontinued subsidiary		(1,112	)		-			(1,112	)		-	%
Income taxes		1,030			(55	)		1,085			1,973	%

Loss on discontinued operations, net of taxes		(2,482	)		(259	)		(2,223	)		(858	)%
Net income (loss)	$	(705	)	$	13,324		$	(14,029	)		(105	)%

Preferred stock dividends	$	1,116		$	1,122		$	(6	)		(1	)%

Taxable-equivalent net interest income	$	54,916		$	59,747		$	(4,831	)		(8	)%


Per common share data:

Basic:
Income (loss) from continuing operations	$	0.06		$	1.11		$	(1.05	)		(95	)%
Net income (loss)	$	(0.16	)	$	1.09		$	(1.25	)		(115	)%

Diluted:
Income (loss) from continuing operations	$	0.06		$	1.11		$	(1.05	)		(95	)%
Net income (loss)	$	(0.16	)	$	1.08		$	(1.24	)		(115	)%
Cash dividends declared	$	0.32		$	0.48		$	(0.16	)		(33	)%
Book value	$	13.77		$	15.21		$	(1.44	)		(9	)%

Common shares outstanding:
Weighted average shares – basic		11,292,824			11,183,651
Weighted average shares – diluted		11,325,115			11,248,307
Period end actual		11,333,318			11,197,075

Additional Data
(Dollars in thousands, except per share amounts)
(Unaudited)


	Nine months ended
	September 30,
	2005			2004
Performance ratios, annualized:
Return on average assets		(0.04	)%		0.81	%
Return on average common equity		(1.51	)%		9.79	%
Common dividend payout ratio		(200.00	)%		44.04	%
Net interest margin (tax-equivalent)		3.68	%		3.90	%
Efficiency ratio (1)		69.47	%		58.90	%
Asset quality data and ratio:
Net loan charge-offs	$	45,512		$	7,355
Net loan charge-offs to average loans (annualized)		5.28	%		0.75	%

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
(Unaudited)


	September 30,		December 31,
	2005		2004		$ Change			% Change
ASSETS
Cash, due from banks and interest-bearing deposits	$	51,290	$	45,249	$	6,041			13	%
Federal funds sold		61,115		806		60,309			7,483	%
Investment securities		859,305		766,515		92,790			12	%
Loans held for sale		3,031		2,648		383			14	%
Loans		1,012,803		1,252,405		(239,602	)		(19	)%
Less: Allowance for loan losses		20,785		39,186		(18,401	)		(47	)%

Loans, net		992,018		1,213,219		(221,201	)		(18	)%
Goodwill		37,369		37,369		—			—	%
Other assets		90,843		90,523		320			—	%

Total assets	$	2,094,971	$	2,156,329	$	(61,358	)		(3	)%

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:
Demand	$	281,017	$	289,582	$	(8,565	)		(3	)%
Savings, money market, and interest-bearing checking		775,901		789,550		(13,649	)		(2	)%
Certificates of deposit		724,147		739,817		(15,670	)		(2	)%

Total deposits		1,781,065		1,818,949		(37,884	)		(2	)%
Short-term borrowings		36,487		35,554		933			3	%
Long-term borrowings		67,408		80,358		(12,950	)		(16	)%
Junior subordinated debentures issued to unconsolidated
subsidiary trust		16,702		16,702		—			—	%
Other liabilities		19,664		20,479		(815	)		(4	)%

Total liabilities		1,921,326		1,972,042		(50,716	)		(3	)%

Shareholders’ equity:
Preferred equity		17,636		17,722		(86	)		—	%
Common equity and accumulated other
comprehensive income (loss)		156,009		166,565		(10,556	)		(6	)%

Total shareholders’ equity		173,645		184,287		(10,642	)		(6	)%

Total liabilities and shareholders’ equity	$	2,094,971	$	2,156,329	$	(61,358	)		(3	)%

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
(Unaudited)


	Three months ended
	September 30,
	2005		2004		$ Change			% Change
ASSETS
Cash, due from banks and interest-bearing deposits	$	43,381	$	44,789	$	(1,408	)		(3	)%
Federal funds sold		43,395		14,245		29,150			205	%
Investment securities		796,666		741,971		54,695			7	%
Loans held for sale		64,822		1,530		63,292			4,137	%
Loans		1,026,636		1,283,216		(256,580	)		(20	)%
Less: Allowance for loan losses		21,054		31,290		(10,236	)		(33	)%

Loans, net		1,005,582		1,251,926		(246,344	)		(20	)%
Goodwill		39,501		40,946		(1,445	)		(4	)%
Other assets		90,167		80,501		9,666			12	%

Total assets	$	2,083,514	$	2,175,908	$	(92,394	)		(4	)%

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:
Demand	$	281,023	$	277,192	$	3,831			1	%
Savings, money market, and interest-bearing checking		755,213		807,102		(51,889	)		(6	)%
Certificates of deposit		731,067		748,916		(17,849	)		(2	)%

Total deposits		1,767,303		1,833,210		(65,907	)		(4	)%
Short-term borrowings		33,348		43,182		(9,834	)		(23	)%
Long-term borrowings		72,095		81,970		(9,875	)		(12	)%
Junior subordinated debentures issued to unconsolidated
subsidiary trust		16,702		16,702		—			—	%
Other liabilities		24,360		16,971		7,389			44	%

Total liabilities		1,913,808		1,992,035		(78,227	)		(4	)%

Shareholders’ equity:
Preferred equity		17,636		17,734		(98	)		(1	)%
Common equity and accumulated other
comprehensive income (loss)		152,070		166,139		(14,069	)		(8	)%

Total shareholders’ equity		169,706		183,873		(14,167	)		(8	)%

Total liabilities and shareholders’ equity	$	2,086,514	$	2,175,908	$	(92,394	)		(4	)%

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES
Consolidated Average Statements of Financial Condition
(Dollars in thousands)
(Unaudited)


	Nine months ended
	September 30,
	2005		2004		$ Change			% Change
ASSETS
Cash, due from banks and interest-bearing deposits	$	43,071	$	44,294	$	(1,223	)		(3	)%
Federal funds sold		34,092		34,518		(426	)		(1	)%
Investment securities		775,990		711,170		64,820			9	%
Loans held for sale		31,818		3,272		28,546			872	%
Loans		1,148,716		1,304,225		(155,509	)		(12	)%
Less: Allowance for loan losses		31,988		30,292		1,696			6	%

Loans, net		1,116,728		1,273,933		(157,205	)		(12	)%
Goodwill		40,736		40,771		(35	)		—	%
Other assets		87,768		79,937		7,831			10	%

Total assets	$	2,130,203	$	2,187,895	$	(57,692	)		(3	)%

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:
Demand	$	274,596	$	263,736	$	10,860			4	%
Savings, money market, and interest-bearing checking		788,255		814,851		(26,596	)		(3	)%
Certificates of deposit		743,690		766,999		(23,309	)		(3	)%

Total deposits		1,806,541		1,845,586		(39,045	)		(2	)%
Short-term borrowings		32,674		41,528		(8,854	)		(21	)%
Long-term borrowings		76,047		84,469		(8,422	)		(10	)%
Junior subordinated debentures issued to
unconsolidated subsidiary trust		16,702		16,702		—			—	%
Other liabilities		19,605		15,355		4,250			28	%

Total liabilities		1,951,569		2,003,640		(52,071	)		(3	)%

Shareholders’ equity:
Preferred equity		17,666		17,734		(68	)		—	%
Common equity and accumulated other
comprehensive income (loss)		160,968		166,521		(5,553	)		(3	)%

Total shareholders’ equity		178,634		184,255		(5,621	)		(3	)%

Total liabilities and shareholders’ equity	$	2,130,203	$	2,187,895	$	(57,692	)		(3	)%


For More Information:		- OR -
Ronald A. Miller		Kei Advisors LLC
Executive Vice President and Chief		Deborah K. Pawlowski
Financial Officer		Phone: 716.843.3908
Phone: 585.786.1102		Email:dpawlowski@keiadvisors.com
Email: invest@fiiwarsaw.com