EX-99.1 2 d728651dex991.htm EX-99.1

Delivering On Our Promise NASDAQ: FISI May 21, 2014 Exhibit 99.1

Forward Looking Statements 2 Statements contained in this presentation which are not historical facts and which pertain to future operating results of Financial Institutions, Inc. and its subsidiaries constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve significant risks and uncertainties. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company’s last filed Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward looking statements. The Company assumes no obligation to update any information presented herein.

Key Investment Considerations 3 Experienced leadership Attractive footprint in Upstate NY, uniquely positioned to seize market opportunities …and Delivering on our Promise to All Stakeholders Low cost and streamlined Sustainable, scalable business model Effective enterprise risk management Solid capital structure Investments in people and infrastructure Consistent, strong operating results and favorable trends Positioned to Achieve Long-Term Growth… operating emphasis

Martin K. Birmingham President & Chief Executive Officer Kevin B. Klotzbach Executive Vice President, Chief Financial Officer & Treasurer

Who We Are 5 Regional community bank headquartered in Warsaw, NY with $3.0 billion in assets 10,000 square-mile operating footprint with 50 banking locations in 15 contiguous counties concentrated in Upstate NY Top 20 bank of those headquartered in NY based on asset size Experienced management team with extensive market knowledge Franchise is a diversified mix of consumer and business customers, products and revenue sources; generating consistent, strong operating results Corporate Overview Key Corporate Statistics Assets: $3.02 billion Loans: $1.85 billion Deposits: $2.53 billion 2013 Revenue: $116 million FTEs: ~ 600 Shareholders’ Equity: $263 million Market Capitalization: $321 million Common Book Value: $17.72 share Tangible Common Book Value: $14.12 share Annualized Dividend: $0.76 Dividend Yield: 3.28% NASDAQ: FISI # Analyst Coverage: 3 Note: Financials as of March 31, 2014. Market data as of April 30, 2014.

Management Team 6 Average Years: 12 27 Name Title Years with FISI Years in Banking Martin K. Birmingham President & CEO 9 24 Richard J. Harrison EVP, Chief Operating Officer 10 44 Jeffrey P. Kenefick EVP, Commercial Banking 8 24 Kevin B. Klotzbach EVP, Chief Financial Officer 12 30 Kenneth V. Winn EVP, Chief Risk Officer 9 31 David G. Case SVP, Chief Commercial Credit Officer 8 29 Paula D. Dolan SVP, Human Resources <1 30 Sonia M. Dumbleton SVP, Controller 29 29 Michael D. Grover SVP, Chief Accounting Officer 14 14 Charles J. Guarino SVP, Marketing 19 19

Sound Risk Management Our Strategy and Approach 7 Balance between volume and risk; maintain our credit discipline Diversified loan portfolio through retail and commercial exposures Effective risk management committee structures Uphold rigorous expense management practices Principled, growth oriented approach guided by our commitment to enhance: Shareholder value Customer experience Employee experience Productivity measures per FTE Smart Growth Maintain our Culture Focus on Value Continue to capitalize on banking dislocation in our region; uniquely positioned to seize market opportunities and achieve scale in growth markets Invest in people, product development and infrastructure, especially potential growth segments Key lending hires in Buffalo and Rochester, new e-banking services (mobile banking, web apps) and product offerings Continue non-interest income growth Five Star Investment Services Agreement with Welch ATM/Rite Aid for Free ATM access Attract, retain and cultivate top talent Promote from within, create career opportunities Focus on the Five Star Bank Experience; dictates how we: Hire Evaluate Reward Comprehensive incentive compensation structure supports cross-functional focus Satisfied employees = satisfied customers

Our Strategic Initiatives have Driven Growth and Performance 8 Optimization and consolidation of branches offices Investment in asset classes which offer excellent risk adjusted returns and duration Continuous reinvestment in people, processes and infrastructure Positioning ourselves for market expansion through key group hires and branch purchases Keen focus on expense control, efficiency improvements and risk management Consistent, strong operating results Meaningful organic loan growth Increased positive operating leverage Pristine asset quality Attractive market position Strong 5-year total shareholder return Record earnings per share Initiatives Outcomes

A Dominant, Established Franchise… 9 Deposit Market Share: Counties of Operation 10,000 square-mile operating footprint 50 banking offices in 15 contiguous counties concentrated in Upstate NY Top 3 market share in 11 counties Top 5 bank in counties of operation Significant opportunities exist to gain market share Key Highlights Source: SNL Financial. Deposits by County as of June 30, 2013 for comparative purposes Rank Institution Branches 2013 Deposits in Market ($MM) Share (%) 1 Manufacturers and Traders Trust Co. 116 19,562 32.1% 2 First Niagara Bank NA 75 9,726 16.0% 3 KeyBank NA 85 4,362 7.2% 4 RBS Citizens NA 71 2,891 4.7% 5 Five Star Bank 50 2,332 3.8% 6 JPMorgan Chase Bank NA 27 2,026 3.3% 7 Community Bank NA 68 2,000 3.3% 8 Bank of America NA 46 1,791 2.9% 9 Canandaigua National Bank and Trust Co. 25 1,696 2.8% 10 Bank of Castile 18 885 1.5% 11 Evans Bank NA 14 698 1.1% 12 Northwest Savings Bank 18 625 1.0% 13 Chemung Canal Trust Co. 10 569 0.9% 14 Lake Shore Savings Bank (MHC) 11 396 0.7% 15 Steuben Trust Co. 13 349 0.6% Market

…Uniquely Positioned For Future Growth 10 Capitalizing on banking dislocation due to larger institutions divesting in our markets Acquired 4 former First Niagara Offices in June 2012 $129.6 million in deposits Entered Orleans County Strengthened presence in Genesee and Seneca Counties Acquired 4 former HSBC Offices in August 2012 $157.2 Million in deposits Gained Significant Market Share in Chemung County Consolidated 4 of the 8 acquired branches into existing FISI offices Rochester MSA Buffalo MSA Over 50 NY banks (non-MHC) under $1 billion in assets located in non-NYC Metro area Market Footprint Source: SNL Mapping Erie County Deposit Market: $30.5 Bln Monroe County Deposit Market: $11.4 Bln Chemung County Deposit Market: $1.0 Bln Source: SNL Financial Opportunity to fuel organic growth exists in attractive markets where we have less than 2% of collective market share At $3.02 billion in assets, we believe we have the capacity to consolidate smaller banks in our footprint

Balance Sheet Growth 11 $1,264 $1,346 $1,485 $1,706 $1,834 $1,717 $1,849 $1,743 $1,883 $1,932 $2,262 $2,320 $2,409 $2,533 $2,062 $2,214 $2,336 $2,764 $2,929 $2,828 $3,016 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2009 2010 2011 2012 2013 2013Q1 2014Q1 Loans Deposits Assets Balance Sheet Growth

Loan Growth 12 Emphasis on driving quality loan growth by balancing between volume and risk along with maintaining a diversified portfolio Our largest concentration, indirect auto at 35% of total loans, is an excellent asset class as it offers low duration (approx. 2.4 years), good credit risk (average FICO 720) and relatively high risk- adjusted yields Balancing organic and acquisition loan growth initiatives C&I and Home Equity have become key areas of focus for growth C&I effort to be targeted at Buffalo and Rochester Recently hired local talent away from competitors to gain traction Home Equity growth strategy positioned as alternative to mortgages - most are in first lien position, but are more attractive from interest rate risk prospective $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Consumer Indirect Home Equity Residential Mtg CRE C&I 6.5% 9.1% 12.9% 15.9% Loan Portfolio Composition Lending Strategy

Large and fragmented market Favorable competitive conditions and risk- adjusted returns Natural risk dispersion that comes with retail loans Relatively short duration loans Necessary expertise available Underwriting Manager 25 years of experience Credit Administration 35 years of experience Sales Manager 25 years of experience Collections Manager 30 years of experience Underwriting Supervisor 15 years of experience Loan Processing Supervisor 20 years of experience Market Dynamics Our Team Indirect Lending as a Core Business 13 Our Portfolio Indirect Net Charge-Off % Originating prime loans – average credit score is 720 Originate through approximately 420 franchised automobile dealerships No independent used car dealerships All dealers are within Upstate New York and Pennsylvania Most key personnel have auto finance experience from Charter One Auto Finance (originated over $2 Bln /year in 21 states and had a serviced portfolio in excess of $6.5 Bln) 0.83% 0.83% 0.60% 0.72% 0.82% 0.85% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 2009 2010 2011 2012 2013 2014Q1

Deposit Portfolio Deposit Strategy Cost of Total Deposits Deposit Composition 18% 43% 29% 10% 14 Consistent emphasis on growing core (non- time) deposits, which equated to 75% of the total deposit portfolio at March 31, 2014 Strong growth in our non-interest bearing deposits, currently at 21% of our deposit base or $533 million (growth in excess 80% since 2008) Overall cost of deposits at 0.26% as of March 31, 2014 30% 10% 42% 18% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 NIB Demand IB Demand Savings & Money Market CDs <$100 CDs >$100 18.1% 6.7% 13.4% 1.82% 0.26% 0.00% 0.50% 1.00% 1.50% 2.00% 2008 2009 2010 2011 2012 2013 2014Q1

Revenue Growth 15 Net Interest Income and Noninterest Income Note: All periods exclude OTTI & Securities Gains $72.3 $78.8 $81.9 $88.5 $91.6 $22.9 $23.3 $20.0 $19.9 $20.9 $22.2 $23.6 $5.7 $6.0 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 2009 2010 2011 2012 2013 2013Q1 2014Q1 Net Interest Income Noninterest Income

Operating Leverage by Successful Growth Strategies and Effective Expense Management 16 Growing Net Interest Income Increasing Fee Income Improving Efficiency 12/31/13 YTD $23.6 Million 12/31/12 YTD $21.2 Million Noninterest Income Revenue and Expenses Revenue grew by 25% between 2009 and 2013 while expenses increased by only 11% Source: SNL Financial Net Interest Income Continues to Grow… …despite margin compression headwinds (1) (1) * Peers include all US Banks and Thrifts in the Mid-Atlantic region from $1 Bln - $5 Bln in assets. Peer data reflects median values for the component companies within the group. 3.25% 3.50% 3.75% 4.00% 4.25% $20.0 $21.0 $22.0 $23.0 $24.0 Net Interest Income Net Interest Margin 57.0% 56% 58% 60% 62% 64% 66% 2009 2010 2011 2012 2013 2014Q1 Efficiency Ratio FISI Peer * 39% 21% 9% 8% 23% Service Charges on Deposits ATM & Debit Card Revenue Broker-Dealer Fees & Commissions Company Owned Life Insurance Other 42% 22% 10% 7% 19% $0 $20 $40 $60 $80 $100 $120 $140 2009 2010 2011 2012 2013 2013Q1 2014Q1 Total Revenue Total Expenses (1) (2) (1) All periods exclude OTTI & Securities Gains (2) 2012 excludes acquisition and CEO transition expenses (1)

Asset Quality Overview 17 Non-performing Assets (“NPAs”) Trends Asset quality remains a top priority Disciplined oversight of risk in lending portfolio Asset quality metrics continue to outperform peer levels Key Highlights Source: SNL Financial 0% 50% 100% 150% 200% 250% 300% 2009 2010 2011 2012 2013 2014Q1 Reserves / NPAs FISI Mid-Atl. Peer Median $8.7 $7.6 $7.1 $9.1 $16.6 $16.3 $0.5 $0.5 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 2009 2010 2011 2012 2013 2014Q1 Nonperforming Loans OREO & Nonperforming securities 0.0% 0.5% 1.0% 1.5% 2.0% 2009 2010 2011 2012 2013 2014Q1 FISI Mid-Atl. Peer Median $1.3 Note: Peers include all US Banks and Thrifts in the Mid-Atlantic region from $1 Bln - $5 Bln in assets. Peer data reflects median values for the component companies within the group $2.1 $1.8 $0.9 NPAs / Assets

Investment Portfolio 18 Low risk security portfolio High percentage of the portfolio consists of securities backed by the U.S. government (“USG”) and agencies Approximately $930 million in total securities and the majority are utilized for various pledging purposes Data as of March 31,2014 Low Risk Security Portfolio Other Securities 0.2% USG Agencies CMO’s 22.8% USG Agencies & GSE 20.5% HTM Municipal Debt 27.4% USG Agencies Mortgage- backed Pass- Throughs 29.1%

Capital Management 19 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 Tangible Common Equity / Tangible Assets 7.93% 7.64% 7.20% 7.05% 6.86% 6.74% 6.49% 6.40% 6.51% 6.60% Tier 1 Risk - Based Capital Ratio 12.20% 12.22% 11.39% 10.91% 10.73% 10.84% 10.96% 10.94% 10.82% 10.89% Total Risk Based Capital 13.45% 13.47% 12.64% 12.16% 11.98% 12.09% 12.21% 12.19% 12.08% 12.14% Tier 1 Leverage 8.63% 8.80% 8.27% 7.67% 7.71% 7.46% 7.59% 7.68% 7.63% 7.51% % 7.93% 6.60% 12.20% 10.89% 13.45% 12.14% 8.63 7.51% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% Capital Ratios

Planning and Investing For the Future 20 We are constantly investing and adapting our scalable infrastructure to strengthen our competitive position Our infrastructure’s strength is in state of the art technology and motivated human resources Smart investments in technology have enabled us to be competitive with even the largest banking institutions. Investments include: Mobile banking • 102% increase in Mobile banking users since January 2013 Enhanced Web Presence (online account opening, updated online banking, emphasis on e-statements) • 200% increase in e-statement penetration since January 2013 New product offerings allow us to remain nimble vs. competition Enhanced Retail Checking Products (debit card rewards) • 5% increase in debit card transaction since January 2013 Expanded Indirect Lending

How Do We Compare? 21 Note: FISI market data as of March 31, 2014. Peer data as of December 31, 2013 and reflects median values for the component companies within each respective index. 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 12.7x 16.0x 15.7x FISI Mid-Atl. Peers $1B - $5B SNL Banks $1 - $5B Index 11.5x 15.8x 16.1x FISI Mid-Atl. Peers $1B - $5B SNL Banks $1 - $5B Index 3.35% 1.93% 1.49% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% FISI Mid-Atl. Peers $1B - $5B SNL Banks $1 - $5B Index Price/ TTM EPS Dividend Yield Price/ MRQ EPS

Total Shareholder Return 22 Note: Market data as of April 30, 2014. Peer data reflects median values for the component companies within each respective index 5-Year Total Shareholder Return 82% 68% 71% 25% 22% 23% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% FISI Mid-Atl. Banks $1-$5B SNL US Banks $1-$5B 5 Year Return 1 Year Return

23 Source: SNL Financial. Market data as of March 31, 2014 Diversified Shareholder Base # Holder Position Market Value ($000) Shares Out (%) 1 Wellington Management Co. LLP 1,016,643 23,403 7.34 2 BlackRock Fund Advisors 827,548 19,050 5.97 3 Dimensional Fund Advisors LP 613,864 14,131 4.43 4 Canandaigua National Bank and Trust Co. 603,369 13,890 4.36 5 Columbia Management Investment Advisers LLC 473,930 10,910 3.42 6 Commonwealth Equity Services, Inc. 473,452 10,899 3.42 7 Bryn Mawr Capital Management Inc 434,181 9,995 3.13 8 Vanguard Group Inc. 393,229 9,052 2.84 9 Putnam Investment Management LLC 327,997 7,550 2.37 10 Kennedy Capital Management Inc. 298,696 6,876 2.16 11 LSV Asset Management 291,938 6,720 2.11 12 Investment Counselors of Maryland LLC 287,200 6,611 2.07 13 Northern Trust Global Investments Ltd. 249,563 5,745 1.80 14 DePrince Race & Zollo Inc. 226,100 5,205 1.63 15 SSgA Funds Management Inc. 226,016 5,203 1.63 16 JP Morgan Asset Management 221,829 5,107 1.60 17 AlphaOne Investment Services LLC 201,674 4,643 1.46 18 Castine Capital Management LLC 117,252 2,699 0.85 19 Clover Partners LP 102,499 2,360 0.74 20 Aberdeen Asset Management Inc. 101,988 2,348 0.74 63% 7% 30% Institutional FISI Board / Management Other / Retail Shareholder Composition Top 20 Institutional Investors

Key Investment Considerations 24 Experienced leadership Positioned to Achieve Long-Term Growth… Attractive footprint in Upstate NY, uniquely positioned to seize market opportunities …and Delivering on our Promise to All Stakeholders Low cost and streamlined Sustainable, scalable business model Effective enterprise risk management Solid capital structure Investments in people and infrastructure Consistent, strong operating results and favorable trends operating emphasis

Delivering On Our Promise NASDAQ: FISI May 21, 2014