DEFA14A 1 d136191ddefa14a.htm DEFA14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

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Financial Institutions, Inc.

(Name of Registrant as Specified in Its Charter)

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Craig S. Wittlin, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, NY 14604-2711 (585) 231-1260 |  | Keith E. Gottfried, Esq. Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, N.W. Washington, DC 20004-2541 (202) 739-5947

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Financial Institutions, Inc., a New York corporation (“FISI” or the “Company”), is filing materials contained in this Schedule 14A with the U.S. Securities and Exchange Commission (“SEC”) in connection with the solicitation of proxies from its shareholders in connection with its 2016 Annual Meeting of Shareholders to be held on Friday, June 3, 2016, at 10:00 a.m., local time, at FISI’s corporate headquarters in Warsaw, New York and at any and all adjournments or postponements thereof (the “2016 Annual Meeting”). On April 19, 2016, FISI filed with the SEC its definitive proxy statement and accompanying definitive BLUE proxy card in connection with its solicitation of proxies from its shareholders to be used at the 2016 Annual Meeting.

Investor Presentation First Used on May 16, 2016

Attached hereto is an investor presentation that FISI is first using on May 16, 2016 in presentations to shareholders and proxy advisory firms. This investor presentation is being filed herewith because it may be deemed to be solicitation material in connection with FISI’s solicitation of proxies from its shareholders to be used at the 2016 Annual Meeting. As previously announced, Clover Partners, L.P. and affiliates thereof, including MHC Mutual Conversion Fund, L.P. and Johnny Guerry, have publicly disclosed that they intend to pursue a proxy contest in an attempt to elect their two proposed director nominees, including Mr. Guerry, to the FISI Board of Directors at the 2016 Annual Meeting.

Important Additional Information And Where To Find It

Financial Institutions, Inc. (“FISI”) its directors and certain of its executive officers are deemed to be participants in the solicitation of proxies from FISI’s shareholders in connection with the matters to be considered at FISI’s 2016 Annual Meeting of Shareholders. On April 19, 2016, FISI filed a definitive proxy statement and accompanying definitive BLUE proxy card with the Securities and Exchange Commission (“SEC”) in connection with the solicitation of proxies from FISI’s shareholders in connection with the matters to be considered at FISI’s 2016 Annual Meeting of Shareholders. Information regarding the names of FISI’s directors and executive officers and their respective interests in FISI by security holdings or otherwise can be found in such definitive proxy statement, including the schedules and appendices thereto. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND THE ACCOMPANYING BLUE PROXY CARD AND OTHER DOCUMENTS FILED BY FINANCIAL INSTITUTIONS WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain the definitive proxy statement, any amendments or supplements to the proxy statement, the accompanying BLUE proxy card, and other documents filed by FISI with the SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Investor Relations section of FISI’s corporate website at www.fiiwarsaw.com, by writing to FISI’s Corporate Secretary at Financial Institutions, Inc., 220 Liberty Street, Warsaw, New York 14569, or by calling FISI’s Corporate Secretary at (585) 786-1100.

NASDAQ: FISI Investor Presentation May 2016

Safe Harbor for Forward-Looking Statements 2 This presentation may contain forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created by such laws. These forward-looking statements can generally be identified as such by the context of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “would,” “intend,” “estimate,” “guidance” and other similar expressions, whether in the negative or affirmative. Similarly, statements that describe the objectives, plans or goals of Financial Institutions, Inc. (“FISI”) are forward-looking. Such forward-looking statements include, but are not limited to, statements regarding the anticipated proxy contest by Clover Partners, L.P. and the other participants in its solicitation, FISI’s ability to continue to execute on and implement its strategic growth plan, FISI’s opportunities for continued growth, FISI’s initiatives to improve its financial and operational performance and increase its growth and profitability, FISI’s future stock price and dividend growth, FISI’s future returns to shareholders, FISI’s ability to continue to strengthen its balance sheet and grow its core business, FISI’s ability to continue to strengthen its regulatory compliance procedures, FISI’s ability to continue to profitably grow its commercial lending business, FISI’s ability to enhance its competitive position through diversified income streams, FISI’s ability to leverage its client base to offer its clients additional fee-based products, FISI’s future returns from its existing fee-based platforms and the effect of those platforms on overall shareholder value, FISI’s ability to continue to maintain expense discipline, FISI’s plans to continue to return cash to its shareholders through cash dividends and future increases that may be made thereto, FISI’s actions taken or contemplated to enhance its long-term prospects and create and return value for its shareholders, FISI’s future operational and financial performance, FISI’s future growth and profitability, the effect that the election of FISI’s nominees to the FISI Board will have on FISI’s execution of its long-term plan and long-term shareholder value, and the future effect of FISI’s strategic growth plan on FISI’s growth, profitability and total shareholder returns. Such forward-looking statements are not guarantees of future operational or financial performance and are based on current expectations, estimates, forecasts and projections and management’s current beliefs and assumptions, all of which involve a number of significant risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in FISI’s forward-looking statements. There are a number of important risks and uncertainties that could cause FISI’s actual events or results to differ materially from those indicated or implied by such forward-looking statements, including, but not limited to: FISI’s ability to implement its strategic plan, FISI’s ability to redeploy investment assets into loan assets, whether FISI experiences greater credit losses than expected, whether FISI experiences breaches of its, or third party, information systems, the attitudes and preferences of FISI’s customers, FISI’s ability to successfully integrate and profitably operate SDN and Courier Capital, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and FISI’s compliance with regulatory requirements, changes in interest rates, general economic and credit market conditions nationally and regionally, and the actions of activist investors, including the amount of related costs incurred by FISI and the disruption caused to FISI’s business activities by these actions. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in FISI’s Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Except as required by law, FISI undertakes no obligation to revise these statements, whether to reflect new information or the occurrence of unanticipated events or otherwise, following the date of this presentation.

Table of Contents 3 I. Overview of Financial Institutions, Inc. (Pg. 4) II. Our Strategic Plan is Generating Profitable Growth and Superior Shareholder Returns (Pg. 10) III. Diversification of Revenue Sources Leads to Greater and More Balanced Growth (Pg. 18) IV. Now is Not the Time to Sell (Pg. 25) V. Our Refreshed and Experienced Board is Committed to Strong Corporate Governance (Pg. 30) VI. Clover’s Proxy Contest (Pg. 37) Appendix (Pg. 43)

4 I. Overview of Financial Institutions, Inc.

5 Strong, growing bank headquartered in Western New York Change in management in 2013 – since year end 2012 assets grew 27%, net income up 30% and dividends increased 40% Total shareholder return of +66% over last 3 years, significantly outperforming S&P 500 and U.S. bank indices Excellent deposit franchise growing at an average rate of 7% over last 3 years, with 51 banking offices, average cost of funds of 0.27% and significant opportunity for growth from competitor mergers/dislocations Assets: $3.5bn Loans: $2.1bn Deposits: $3.0bn Market Capitalization (1) : $421mm Overview of Financial Institutions, Inc. Market Footprint Market Footprint Corporate Overview and Key Statistics Corporate Overview and Key Statistics Source: SNL Financial. Note: Financial data as of 3/31/16. (1) Market data as of 3/31/16.

6 Upstate NY Bank Consolidation Creates Opportunity to Grow Our Business; Deposits Up 31% with New Management Deposit Market Share – Counties of Operation (15) Key Highlights 10,000 square-mile operating footprint (size of Maryland) Top 3 market share in 11 of the 15 counties of operation 4 largest bank in counties of operation (1) Source: SNL Financial. Note: Deposit market share data as of 6/30/2015. (1) Pro forma for acquisition of FNFG and divestiture of 18 branches in the Buffalo area purchased by Northwest Bancshares Inc. Loan & Deposit Composition (1Q’16) $2,115mm $2,960mm Key Opportunities Deposit Market Share – Rochester & Buffalo MSAs Significant opportunity to gain deposit market share in our key expansion markets – Combined Rochester and Buffalo MSAs represent deposit market of ~$56bn – Current FISI market share of ~2% – Regional consolidation creates opportunities (i.e. KeyCorp’s acquisition of First Niagara) Wealth management and insurance cross-sell opportunities exist across entire operating footprint (1) Rank Institution Active Branches 2015 Deposits in Market ($MM) Market Share (%) 1 M&T Bank Corp. 108 $24,587 40.2% 2 KeyCorp 130 13,888 22.7% 3 Citizens Financial Group Inc. 68 3,058 5.0% 4 Financial Institutions Inc. 51 2,673 4.4% 5 Bank of America Corp. 38 2,503 4.1% 6 Northwest Bancshares Inc. 30 2,180 3.6% 7 JPMorgan Chase & Co. 26 2,150 3.5% 8 Community Bank System Inc. 68 2,059 3.4% 9 Canandaigua National Corp. 24 1,822 3.0% 10 Tompkins Financial Corp. 20 1,166 1.9% Rank Institution Active Branches 2015 Deposits in Market ($MM) Market Share (%) 1 M&T Bank Corp. 87 $24,285 43.1% 2 KeyCorp 132 14,194 25.2% 3 Citizens Financial Group Inc. 75 3,283 5.8% 4 Bank of America Corp. 42 2,776 4.9% 8 Financial Institutions Inc. 24 1,093 1.9% Total Buffalo + Rochester MSAs 539 56,365 100.0% Commercial 38.4% Small Business 4.5% Consumer Indirect 32.2% Residential Real Estate 24.1% Other Consumer 0.9% Noninterest - bearing demand 20.9% Int. bearing demand 21.0% Savings & money market 35.2% Certificates of deposit 22.9% th

7 Source: FactSet and public filings. Indexed price includes reinvested dividends. (1) 3 year TSR based on December 31, 2015 end date. The Board’s Strategic Steps Have Created Value for Shareholders Since the Management Change in 2013 Dec. 16, 2015: Clover Partners files its 13D at FISI Aug. 1, 2014: FISI closes on its acquisition of SDN Apr. 5, 2016: Clover Partners discloses its intent to nominate for two board seats Jan. 6, 2016: FISI closes on its acquisition of Courier Capital TSR before mgt change, over 13 yrs: 66.4% (4% annualized return) Same TSR under new mgt, but in just 3 yrs: 66.4% (1) (18% annualized return) Mar. 1, 2013: Marty Birmingham appointed as CEO Aug. 28, 2012: Peter Humphrey steps down as CEO and Chairman Jack Benjamin takes over as interim CEO 1-Jul-10 13-Dec-11 27-May-13 7-Nov-14 22-Apr-16 60 80 100 120 140 160 180 200 220 Financial Institutions, Inc.

8 Total Shareholder Returns from December 31, 2005 to December 31, 2015 93.4% 8.7% For the last two years in our public filings we have benchmarked our TSR to both the SNL Bank $1B-$5B Index and SNL Small Cap US Bank and Thrift Index. In both 2014 and 2015, FISI significantly beat both indices FISI total shareholder returns have exceeded the SNL Bank $1B-$5B Index by 85% over the past ten years We believe it is misleading for Clover Partners to focus solely on a holding period that penalizes FISI for recovering from the financial crisis more robustly than many of the SNL Bank $1B-$5B Index constituents (1) We have delivered 10x the returns of the index and have outperformed the index for two years running – how would a so-called “expert in the banking sector” say we “significantly underperformed the index”? (1) FISI Recovered More Robustly From the Crisis Than Many Peers and Continues to Outperform Under Its Current Strategy and Management Clover’s comparison date Financial Crisis Source: SNL Financial. (1) Clover Partners, L.P.’s SEC filings. -100% -75% -50% -25% 0% 25% 50% 75% 100% 12/30/05 12/30/06 12/30/07 12/30/08 12/30/09 12/30/10 12/30/11 12/30/12 12/30/13 12/30/14 12/30/15 FISI SNL Bank $1 - $5 bn

Our Current Strategy is Generating Greater Returns for Shareholders in Three Distinct Markets Annualized shareholder return of 7% from IPO in 1999 through 2005 Primarily retail & small business Trusted financial advisor led to opportunities for multiple services/fees Strong brand built over last 200 years Stable core deposit franchise to fund growth Privately owned until IPO in 1999 Annualized shareholder return of 2% from 2006 through 2012 Contiguous expansion in smaller cities Growing market share 8 branch acquisitions (2012) 4 from HSBC and 4 from First Niagara Raised TARP capital of $37.5mm in 2008 and redeemed through retained earnings and common stock offering by 2011 Expanded indirect consumer lending business Annualized shareholder return of 18% or total return +66% over last three years Strengthened management in 2012/2013 Delivered on a three year strategic plan to grow the business and provide outstanding service to customers in competitive and disrupted markets who were disenfranchised by larger banks involved in mergers A rolling three year strategic plan was approved by the Board in 2015 prioritizing the following: Continue expansion into larger cities including Buffalo and Rochester Continue to deliver commercial & SBA loan growth Leverage existing insurance (SDN) and advisory/wealth management platforms (Courier) to enhance fee- based revenue diversification 9 Early 1800s – 2005 (Small towns in Western, NY) 2006 – 2012 (Small cities in Western, NY) 2013 – Future (Buffalo & Rochester)

10 II. Our Strategic Plan is Generating Profitable Growth and Superior Shareholder Returns

$23.4 $25.5 $29.4 $28.3 $30.5 2012 2013 2014 2015 1Q 2016 $2,040 $2,094 $2,206 $2,432 $2,625 $222 $226 $245 $299 $335 $2,262 $2,320 $2,451 $2,731 $2,960 2012 2013 2014 2015 1Q 2016 Transactional deposits Time deposits > $100k $672 $735 $743 $880 $908 $1,034 $1,099 $1,169 $1,204 $1,207 $1,706 $1,834 $1,912 $2,084 $2,115 2012 2013 2014 2015 1Q 2016 Commercial Loans Consumer Loans Our Strategic Plan is Generating Profitable Growth 11 Total Loans Total Loans Total Deposits Total Deposits ($ in millions) ($ in millions) Net Income Net Income Dividend Yield Dividend Yield Balancing volume and risk for a diversified portfolio while adhering to FISI’s prudent credit culture Source: SNL Financial. (1) Reflects 1Q’16 annualized. (2) Excludes time deposits greater than or equal to $100,000. (2) ($ in millions) (1) ($ in millions) (1) (1) (1) $7.8 $10.2 $10.7 $11.3 $13.0 $0.57 $0.74 $0.77 $0.80 $0.80 2012 2013 2014 2015 1Q 2016 Dividends Declared Dividends per share

High Profitability Drives Balance Sheet Growth, Dividend Increases and Diversification of Revenues 12 Note: ISS and Proxy Peers detail available in Appendix. (1) This is a non-GAAP measure that we believe is useful in understanding our financial performance and condition. Refer to the “Non-GAAP Reconciliation” in the Appendix for further information. Return on Average Assets Return on Average Assets Return on Average Tangible Common Equity (1) Return on Average Tangible Common Equity (1) Our strategy over the past few years has resulted in a consistent return on assets in-line or better than peers and a superior return on tangible common equity, despite the difficult operating environment for the U.S. banking industry (i.e. low yield environment, higher regulatory compliance costs) Our strong returns on equity and tangible common equity have allowed us to increase our dividends and dividend payout ratio, while also funding balance sheet growth 0.91% 0.98% 0.87% 0.90% 0.90% 0.92% 0.93% 0.92% 0.92% 0.97% 0.96% 0.94% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers 13.0% 14.1% 13.2% 13.5% 11.4% 10.9% 10.6% 11.1% 11.7% 11.6% 11.7% 11.6% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers

13 Total Shareholder Returns Since January 1, 2013 Total Shareholder Returns Since January 1, 2013 Source: SNL Financial. Note: Market data as of 12/31/2015. (1) Reflects peer group median respectively. Peers listed in detail in appendix. Our Strategic Plan has Provided Superior Total Returns Over 1, 3 and 5 Year Periods .4% .4% .0% 01/01/13 07/02/13 12/31/13 07/02/14 12/31/14 07/01/15 12/31/15 0% 10% 20% 30% 40% 50% 60% 70% 80% FISI ISS Peers Proxy Peers

FISI Trades at a Premium Valuation to Peers 14 Source: SNL Financial. Note: Market data as of 12/31/2015. Historical One-Year Price / Tangible Book Value Comparison Historical One-Year Price / Tangible Book Value Comparison Our strategic plan is resulting in sustained growth and in turn, positive recognition from investors 1.89x 1.66x 1.25x 1.50x 1.75x 2.00x 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 FISI Proxy Peers

$475 $566 $590 2014 2015 1Q 2016 Executing on Strategic Plan – Focus on Commercial Banking is Working 15 Commercial Mortgage Loans Commercial Mortgage Loans Commercial & Industrial Loans Commercial & Industrial Loans Commentary Commentary Investment in additional lenders and improvement of commercial delivery platform resulted in strong year over year growth in all categories Established specialized Small Business lending team that increased small business loans by 31% SBA fiscal year end 2015, #2 SBA lender in Rochester and #3 in Buffalo; through first 3 months of 2016 SBA fiscal year, #1 in Rochester and #3 in Buffalo (2) Robust pipeline to support sustained loan production Significant opportunities to capitalize on disruption within the marketplace due to industry consolidation Momentum toward community banks as lender of choice; capacity for full spectrum credit solutions, agile to respond to changing customer needs (i.e. improved cash management products) Source: Company filings and SNL Financial. (1) Reflects 1Q’16 data annualized. (2) SBA Rankings based on units. ($ in millions) ($ in millions) $267 $314 $318 2014 2015 1Q 2016 (1) (1)

156.5% 267.1% 314.8% 314.9% 75.3% 90.6% 88.6% 91.2% 83.1% 95.1% 96.8% 96.5% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers 0.58% 0.33% 0.25% 0.25% 1.16% 0.96% 0.83% 0.80% 1.02% 0.86% 0.71% 0.78% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers Executing on Strategic Plan – Superior Credit Quality 16 NPAs / Assets NPAs / Assets Reserves / NPAs (1) Reserves / NPAs (1) Management has created a disciplined credit culture in every lending category Nonperforming loans and assets are well below peers Loan loss reserves as a ratio of nonperforming assets (1) are significantly higher than peers, demonstrating FISI’s conservative underwriting culture and reserve coverage Superior credit quality is reflective of our knowledge of our community banking market and customer base Source: SNL Financial. Note: ISS and Proxy Peers detail available in Appendix. (1) Includes loans that are 90+ days past due.

58.5% 58.6% 61.6% 62.9% 62.8% 62.5% 61.1% 61.4% 62.2% 61.7% 61.3% 60.8% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers 1.65% 1.65% 1.53% 1.56% 1.66% 1.62% 1.54% 1.52% 1.63% 1.65% 1.62% 1.55% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers Executing on Strategic Plan – Greater Focus on Expense Discipline 17 Source: SNL Financial. Note: ISS and Proxy Peers detail available in Appendix. (1) Reflects efficiency ratio data as reported. Our expense discipline has contributed to our above average profitability While our acquisitions of an insurance brokerage (2014) and wealth manager (2016) caused a slight increase in our efficiency ratio, our net operating expense to average assets ratio has declined and remains in line or below our peers We are investing in our future and remain focused on pursuing a course of action that will generate value for our shareholders Net Operating Expense / Average Assets Net Operating Expense / Average Assets Efficiency Ratio (1) Efficiency Ratio (1)

18 III. Diversification of Revenue Sources Leads to Greater and More Balanced Growth

Persistent Low Interest Rates in the Banking Industry Put Banks Without Diversified Fee Income at a Disadvantage 19 Source: SNL Financial. Note: ISS and Proxy Peers detail available in Appendix. (1) Reflects median net interest margin for regulated depositories with total assets between $1bn and $500bn. Loans / Deposits Loans / Deposits Historical Banking Industry Net Interest Margin (1) Historical Banking Industry Net Interest Margin (1) Cyclical and potentially secular decline in interest rates has caused an industry-wide decrease in net interest margins Fee-based business however provides more stable growth through higher margins, diversified revenue not directly tied to interest rates, and cross-selling opportunities Our SDN and Courier acquisitions are expected to improve our top and bottom line earnings and to mitigate the negative effects of this difficult bank operating environment The two platforms provide us access to a new customer base that is primarily in our targeted expansion markets of Rochester and Buffalo, offering opportunities to further increase revenues by cross-selling our banking products Our low loan to deposit ratio allows us exploit these expansion opportunities given our ample capacity for loan growth Metrics such as TBV may not be the most relevant yardsticks for these transactions – e.g., we expect Courier to be an EPS accretive transaction with an IRR of 15% 79.0% 78.0% 76.3% 71.4% 87.1% 91.7% 92.2% 91.2% 93.2% 87.9% 91.0% 92.5% 2013 2014 2015 1Q'16 FISI ISS Peers Proxy Peers 3.84% 3.74% 3.58% 3.55% 3.51% 3.64% 3.66% 3.56% 3.45% 3.45% 3.40% 3.38% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q'16

14.5x 15.0x 13.4x 12.0x 22.4% 30.9% 25.7% 21.0% FISI Top Quartile Median Bottom Quartile P / 16 EPS Fee ratio Market Rewards Banks with Diversified Revenue Streams with Higher Multiples 20 Source: SNL Financial. Market data as of 5/12/16. Note: Proxy Peers detail available in Appendix. (1) Proxy Peers exclude EBTC due to lack of current market data available. Noninterest Income / Revenue vs. P/E Multiples Noninterest Income / Revenue vs. P/E Multiples Noninterest Income / Revenue vs. P/TBV Multiples Noninterest Income / Revenue vs. P/TBV Multiples Proxy Peers (1) Proxy Peers (1) The charts below compare price/earnings and price/tangible book value multiples for peers based on their respective levels of noninterest income Banks with the highest fee income ratios, as demonstrated by “Top Quartile” bars below, trade at ~25% higher tangible book value and EPS multiples relative to “Bottom Quartile” 1.83x 1.72x 1.56x 1.42x 22.4% 30.9% 25.7% 21.0% FISI Top Quartile Median Bottom Quartile P / TBV Fee ratio

$25.4 $30.3 $33.2 $36.9 2014Y 2015Y 1Q'15 1Q'16 As a Result of Our Diversification We Are Increasing Noninterest Income 21 FISI management has made noninterest income growth a top priority, which led to the 2014 acquisition of the SDN insurance platform and subsequent Courier Capital acquisition in 2016 Ability to cross-sell has enhanced noninterest income Increased insurance revenue reduced reliance on deposit service fees As noted in recent broker research (2) Northeast banks have historically been weak fee generators when compared to other regions General re-focus on stable noninterest income initiatives has occurred among some of the highest- performing banks and likely reflects: Uncertain interest rate outlook Generates offset to deposit service charge pressure Reduces impact of volatile mortgage banking results Noninterest Income Noninterest Income Noninterest Income Composition (1Q’16) Noninterest Income Composition (1Q’16) Commentary Commentary ($ in millions) Source: FactSet. Note: ISS and Proxy Peers detail available in Appendix. (1) Reflects 1Q’15 and 1Q’16 annualized. (2) Per KBW research report: “Fee Focused” Banks Could Weather Interest Rate Uncertainty. Published on 6/15/15. $9.2mm (1) (1) Deposit Service 18.7% Card Interchange 14.4% Insurance Revenue 18.1% Investment Services 13.5% BOLI 14.8% Other 20.5%

Strategic Priorities for Executing Our Plan Going Forward 22 Target of mid-to-high single digit or 7-9% loan growth Grew loans for last 9 consecutive years; 2015 average growth 9% overall Emphasis on commercial lending resulted in 17% growth in commercial & industrial loans and 19% growth in commercial mortgage loans in 2015 Shift to increased C&I lending to build broader relationships Increased net interest income to $95.3mm in 2015, driven by 9% increase in average interest-earning assets Loan Growth Deposit Growth Profitability and Shareholder Returns Opportunity exists in attractive $56 billion deposit markets of Rochester and Buffalo Emphasis on growing core deposits consistent with our loan growth target; 8 consecutive years of total deposit growth 11% growth in 2015 demonstrates value of community banking sales model Differentiated positive customer experience Plenty of excess deposits to fund continued loan growth Targeting ROAA ratio north of 1.0% Expected above average revenue growth and return on tangible equity should drive growth in tangible book value Dividend growth to drive shareholder returns – dividend increased 7 times in 4 years Profitable organic growth

23 Maintain balance between volume and risk to support our credit discipline NPAs / assets of 0.25% as of December 31, 2015 Reserves / loans of 1.30% and Reserves / NPLs of 321% as of December 31, 2015 Asset quality remains a top priority and metrics continue to outperform peer levels Strong Credit Culture Maximize Market Dislocation Opportunities Increase Revenue Through Existing Platforms Targeting noninterest income at 25%-30% of total revenues over time Targeted focus on realizing the benefits of existing insurance (SDN) and wealth management (Courier Capital) fee income platforms through customer sharing and attracting incremental producers Going forward, FISI plans to supplement recent platform acquisitions with smaller bolt-on opportunities but has no plans to acquire any new fee-based platforms in the near future 19.7% increase in noninterest income for 2015 vs. 2014 to reduce reliance on net interest income Synergies developing between bank and subsidiaries through implementation of cross-sales programs Continue to capitalize on market disruption in our region Leveraging 200 years of rural NY banking to enter opportunity rich markets in Rochester and Buffalo Uniquely positioned to seize market opportunities and achieve scale in growth markets Expense Discipline Targeting an efficiency ratio in top third of comparable peers Expect to return to top third efficiency ratio through continuation of expense management discipline Operating leverage and expense management for profitable growth Technology investments for retail growth and cyber security attention Compensation structure aligned with achieving results Strategic Priorities for Executing Our Plan Going Forward

SDN provides a scalable platform to support future growth in insurance sales. This means that future enhancements to fee income could include bolt on insurance agencies, which generally provide earnings impact without significant investment… we do think the deal will be immediately accretive to earnings. We highlight certain banks that are differentiated fee generators and could be poised to outperform should the consensus interest rate environment not materialize…we have seen certain banks re-focus on diversifying revenue streams to better insulate profitability…“Fee Focus" banks generated a median operating ROE level [that] is ~40% higher…partially the result of fee businesses requiring minimal assets and capital versus core bank businesses. This group of banks also carries a multiple premium with a [higher] median price/tangible book outlook. We estimate that ~60% of the multiple premium is related to higher profitability...the remainder is a qualitative premium tied to the value of revenue diversity, and the higher standalone value of various fee lines. Analyst and Shareholder Reactions Have Been Supportive of Our Current Strategy 24 Source: FactSet. Broker research. Analyst and Shareholder Commentary Analyst and Shareholder Commentary We have seen certain banks re-focus on diversifying revenue streams to better insulate profitability in the context of an uncertain interest rate outlook. “ ” ” “ Keefe Bruyette & Woods, June 15, 2015 Since ascending to their positions in 2013, CEO Marty Birmingham and CFO Kevin Klotzbach have consistently touted the importance of diversifying FISI's revenue mix. This strategy was put into practice first with the 2014 acquisition of the SDN insurance agency and will be supplemented by this wealth management acquisition. Fee business acquisitions tend to be relatively costly in terms of tangible book dilution, but bring valuable revenue diversity, and open up new growth opportunities for the bank. Keefe Bruyette & Woods, November 30, 2015 “ ” In our view FISI has an attractive deposit ($2.8 billion) and branch franchise (50 branches) scattered throughout Western New York. The bank is profitable with a respectable last 12 months return on asset ratio of 0.87%. We believe the franchise is attractively positioned to take advantage of continued disruption in Upstate NY stemming from the KEY/FNFG transaction, which will probably provide opportunities to not only attract deposits and grow loans in Buffalo, but also attract talented lending teams and potentially acquire deposits through divestitures. Piper Jaffray, December 21, 2015 “ ” Sandler O’Neill, May 29, 2014 ” “ This letter follows our recent conversations and is intended to reiterate our support for Financial Institutions, Inc. to continue its current strategy, which we believe has delivered great value for both shareholders and the community…We have been impressed by the progress that has been made during the last three years on improving the operational performance of the bank which has led to increased value for shareholders through both stock price and increased dividends. Richard Humphrey, March 22, 2016 Mr. Humphrey represents the views of 6% of the ownership of FISI ” “

25 IV. Now is Not the Time to Sell

We Believe Our Strategic Plan Will Create More Value Than a Sale in the Current Market Environment 26 In line with the FISI Board’s commitment to create value for its shareholders, which remains the highest priority for FISI, the FISI Board regularly evaluates a broad range of strategies to enhance value for all FISI shareholders. However, we do not believe that an immediate sale of FISI is in the best interest of shareholders Clover’s strategy to pursue an immediate sale is risky to our business for the following reasons: Deprives shareholders from realizing FISI’s potential long-term value Disrupts the ongoing successful execution of our current strategic plan, including: • Employee retention and recruitment • Customer retention and acquisition Current market M&A conditions are not conducive to a significant premium to current trading price Value actually received by selling shareholders may collapse due to substantial sell-off of acquirer stock post deal announcement – as underscored by the recent sale of Clover activist target Chicopee Bancorp (see next page) FISI is also benefiting from being in the highest valued segment of the industry, below $10 billion in assets Banks greater than $10 billion (1) in assets trade on average lower P/EPS and P/TBV vs. banks with total assets less than $10 billion (1) due to higher regulatory costs, regulation curtailing certain revenues and perception of being acquirors rather than sellers Source: FactSet. Market data as of 5/12/16. (1) Includes nationwide publicly traded banks with available earnings estimates in the respective asset range as of 12/31/15. 14.5x 12.1x 1.67x 1.59x P / ’17 EPS P / TBV Banks < $10bn in assets Banks > $10bn in assets Our Board and management team are confident they are pursuing the right strategy focused on growing FISI’s core business and building long-term shareholder value Our Board and management team are confident they are pursuing the right strategy focused on growing FISI’s core business and building long-term shareholder value

Recent Poor Performance by Bank Acquiror Stocks Make This a Bad Time To Be a Seller 27 High execution risk and limited buyer universe, especially for highly valued banks like FISI, underscore that this not the right time for a sale of a well-managed bank with strong growth prospects Current market environment has penalized buyers that have recently announced M&A transactions, leading to substantial sell-off of their stock post-announcement Poor buyer stock performance post-announcement can substantially reduce or erase the premium received by selling shareholders For example at Chicopee Bancorp, Clover’s latest activist target to sell, the premium agreed pre-announcement was above 15%; however, after announcement, the decrease in the buyer’s stock price reduced the premium to below 3% Source: Company filings, SNL Financial, FactSet. Includes most recent nationwide whole bank acquisitions announced since 12/01/15 with disclosed deal value between $100 million and $1 billion where the buyer was a public company. (1) Based on target/acquirer closing prices just prior to deal announcement. (2) Represents the premium of the implied value of the merger consideration over the target’s unaffected share price, based on the acquiror’s share price 30 days after the deal announcement. (3) Assumes shareholders opt for full cash allocation provision; 40% of aggregate deal consideration. Clover’s latest activist target to sell (2) (1) (3) (3) General Information 30-Day 30-Day Stock Buyer Buyer Unaffected Post Ann. Announce Consid. Stock Price P/TBV Premium Premium Buyer Seller ST Date (%) Perform. (x) (%) (%) Westfield Financial, Inc. Chicopee Bancorp, Inc. MA 04/04/16 100% (10.7%) 0.96x 15.0% 2.7% Guaranty Bancorp Home State Bancorp CO 03/16/16 74 6.9% 1.62 NA NA Hampton Roads Bankshares, Inc. Xenith Bankshares, Inc. VA 02/10/16 100 (2.2%) 1.47 15.3 12.7 Pinnacle Financial Partners, Inc. Avenue Financial Holdings, Inc. TN 01/28/16 90 (8.0%) 2.71 49.3 38.5 Old National Bancorp Anchor BanCorp Wisconsin Inc. WI 01/12/16 58 (11.5%) 1.45 8.3 1.1 OceanFirst Financial Corp. Cape Bancorp, Inc. NJ 01/05/16 85 (16.2%) 1.22 20.8 4.1 TowneBank Monarch Financial Holdings, Inc. VA 12/17/15 100 (5.2%) 1.63 52.7 44.7 BOK Financial Corporation MBT Bancshares, Inc. MO 12/08/15 – (12.8%) 1.29 NA NA Univest Corporation of Pennsylvania Fox Chase Bancorp, Inc. PA 12/08/15 58 2.7% 1.66 8.3 10.0 First Busey Corporation Pulaski Financial Corp. MO 12/03/15 100 (5.5%) 1.75 1.3 (4.2) Median: 88% (6.7%) 1.55x 15.2% 7.1%

FISI Does Not Fit Clover’s Typical Activist Target Profile 28 Clover’s typical activist targets are low growth companies with high efficiency ratios that underperform both on a total shareholder return and profitability basis Low P/TBV multiples coupled with high operating expenses (as demonstrated by efficiency ratios), allow acquirors to pay meaningful premiums for a typical Clover activist target given the high potential cost savings Source: SNL Financial, FactSet, company filings. Transaction multiples reflect data at announcement date, respectively. (1) Period prior to initial activism action. Campaign Status: Live Live Sold Sold Sold ($ in millions) Company overview (1) Headquarters Warsaw, NY Milwaukee, WI Harrisburg, PA Chicopee, MA Springfield, MA Date of initial activism action 12/16/2015 1/22/2016 3/24/2014 6/29/2012 8/22/2012 Activist (% ownership) Clover Partners (5.2%) Clover Partners (4.1%) PL Capital (8.8%), Basswood Capital (9.6%), Clover Partners (2.2%) Clover Partners (9.4%) Clover Partners (9.3%) Market cap $352 $192 $354 $305 $79 $77 Total assets $3,358 $1,541 $2,467 $2,781 $608 $616 P / NTM earnings 14.2x 22.9x 22.9x 16.3x NA 26.5x P / TBV 1.89x 1.06x 1.24x 1.26x 0.89x 0.89x 1-year shareholder return 17.1% 8.8% 11.2% 19.1% (2.5%) 6.4% 3-year shareholder return 75.3% 43.1% 64.0% 68.2% 4.6% 22.3% Operating performance (1) LTM Efficiency ratio 62.2% 76.8% 77.2% 72.7% 82.4% 76.5% LTM ROAA 0.93% 0.55% 0.59% 0.62% 0.31% 0.52% LTM ROATCE 14.3% 4.2% 5.1% 7.4% 2.1% 3.4%

Source: FactSet and public filings. Indexed price includes reinvested dividends. Clover’s Historical Trading in FISI’s Stock Demonstrates Its Status as an Opportunistic, Short-Term Investor Not Interested in Creating Long-Term Shareholder Value Dec. 16, 2015: Clover files its 13D (FISI drops 1.3% against the index on announcement) 2-Jan-14 31-Dec-15 2-Jan-15 1-Jul-15 1-Jul-14 Q1 2014: Clover buys 102,499 FISI shares Q2 2014: Clover sells its entire position Aug. 11 – Oct. 27: Clover buys 606,361 FISI shares Oct. 28 – Nov. 10: Clover sells 103,073 FISI shares Nov. 13 – Jan. 27: Clover buys 292,511 FISI shares Clover holds 0 shares for 13+ months Oct. 27, 2015: FISI beats Q3 EPS estimates, after which Clover begins selling. From this date until Clover’s 13D filing, FISI’s stock price rises 10% vs the KBW index 29 Aug. 1, 2014: FISI closes on its acquisition of SDN Clover has traded in and out of our stock since Q1 2014, often selling well below our current price, reflecting its short-term view and failure to grasp, and capitalize on, the value of our long-term plan 80 90 100 110 120 130 Financial Institutions, Inc. KBW Nasdaq Regional Banking Index (TR)

V. Our Refreshed and Experienced Board is Committed to Strong Corporate Governance 30

FISI’s Board Has Demonstrated its Commitment to Strong Corporate Governance Practices Although FISI’s directors serve staggered terms in accordance with New York law, FISI shareholders are allowed to replace the FULL Board at any time, a right that makes FISI’s directors extremely accountable to shareholders. Consider the following: Shareholders can act by written consent Shareholders can call a special meeting Directors may be removed with or without cause by only a simple majority vote of shareholders Vacancies on the Board as a result of removal of Directors by shareholders are filled by shareholders, not the remaining Directors Strong Shareholder Rights That Ensure FISI’s Directors Are Accountable to Shareholders Compensation Tied to Performance and Aligned with Strategy Executive compensation structure further refined in 2014 and 2015 to be more closely aligned with our strategic plan and long-term shareholder value creation CEO compensation has been below the peer median, while our TSR has been consistently at or above the peer median Independent Board Leadership and Oversight Aligned with the Interests of Long-Term Shareholders Separate Chairman & CEO Highly-qualified, experienced and independent Chairman of the Board (Robert N. Latella) Board and management collectively own approximately 5.5% of FISI equity 10 of 11 Directors are independent All Board committees composed entirely of Independent Directors Independent Directors meet without management 31

Highly Qualified and Experienced Board Overseeing Strategic Growth Plan and Value Creation Seek to find balance of continuity and institutional knowledge on the one hand, and additive skills and fresh perspectives and insights on the other Three new independent directors – Kim VanGelder, Andrew Dorn, Jr. and Robert Glaser – have been nominated to the Board over the last two years, underscoring FISI’s efforts to refresh its Board with talented, experienced and diverse professionals Broad and diverse set of skills and experiences represented on the FISI Board Refreshed and Experienced Board Management and Leadership Experience Industry Knowledge and Community Ties Directors include current and former senior management and Directors of other public companies 5 of 11 Directors have been CEOs or senior executives 4 Independent Directors have served on other public company Boards in addition to FISI 5 of 11 Directors have significant experience in community banking 7 of 11 Directors have experience in related financial services like investment management, insurance and leasing Our Directors have ties to, and knowledge of, the communities that FISI operates in and serves Business and Finance Expertise 6 of 11 Directors qualify as an audit committee financial expert as defined by the SEC 9 of 11 Directors have operations experience, including at community banks 5 of 11 Directors have small business/entrepreneurship experience Note: Assumes addition of Kim VanGelder to the FISI Board. 32

1-year TSR CEO compensation $ millions $ millions $ millions Source: ISS, FactSet, and company filings. Note: 1-year TSR was calculated using fiscal year. FCBC is excluded from 2013 compensation because CEO was appointed in August and did not receive full-year compensation. METR and NBBC are excluded from the 2015 charts because they announced transactions to be acquired in 2015. Compensation Below Peers, While Returns Consistently at or Above the Peer Median 2013 vs. 1-year TSR CEO compensation 2014 vs. 1-year TSR CEO compensation 2015 vs. Peer median: $0.9 Peer median: 31.8% Peer median: $1.1 Peer median: 8.2% Peer median: $1.3 Peer median: 7.2% 33

Source: FactSet, company filings and ISS Note: Excludes companies in our proxy Regional Peer Group that have been acquired: Metro Bancorp and NewBridge Bancorp Our Redesigned Compensation Structure Further Aligns Management with Shareholders to Yield Superior Returns FISI Proxy peer median 2015 CEO total comp $961k $1,275k Performance comp % of total 42.7% 38.5% 2015 TSR 15.0% 7.2% In 2014 and 2015, we changed our compensation structure to be more closely tied to our performance relative to peers, and better aligned with our strategic plan and long-term shareholder value creation, including: Increasing the weighting of 3-year TSR in our Long-Term Equity-Based Incentive Plan Increasing the Long-Term Equity-Based Incentive Plan portion of CEO and CFO compensation and decreasing the cash annual incentive portion Adding ROAA and ROAE as relative performance measures in our annual incentive plan As a result, our compensation practices are more competitive versus our peers Disciplined approach to compensation vs peers Alignment with shareholders Returns over 2x the peer median 34

Director Expertise Chief Information Officer and Senior Vice President of Eastman Kodak Company since 2004, joined the company in 1984 30 years’ business and technology experience, including cyber security Has served as a member and Director of many professional and community organizations in Western New York Kim E. VanGelder Nominated for election at the 2016 AGM New nominee to the Board IT professional with relevant cyber security expertise Chairman of Freed Maxick CPA’s from 2011 to 2015, joined the firm in 1994 CPA with 40 years’ experience in public accounting, including corporate acquisitions Has served on Erie County Salary Review Commission (Chairman), Erie County Fiscal Stability Authority (Chairman) and Erie County Private Industry Council (Vice-Chairman) Co-managing director of Energy Solutions Consortium since prior venture sold in 2015 Formed Great Lakes Bancorp in 1997 and served as CEO until its sale in 2008, previously formed Jamestown Savings Bank in 1994 and served as its CEO until 1997 Very active in the Western New York business and cultural community, including serving on a number of for-profit and non-profit Boards CEO of Financial Institutions since March 2013, joined the company in March 2005 Over 27 years’ banking experience, including operational, financial and executive roles Proven leadership, deep knowledge of the Upstate New York market, extensive business contacts in FISI’s footprint and active community involvement Robert M. Glaser Director since May 2014 Accounting and finance expert Strategic and transactional expertise Andrew W. Dorn Director since May 2014 Investment manager Business and finance expert Successfully formed and sold several businesses Martin K. Birmingham Director since July 2013 Extensive bank experience Proven leader at FISI Significant stockholder Recent Nominees to our Board Have Provided Additional Investor Perspective and Expertise in Banking, Finance and Technology 35

Kim VanGelder brings extensive cyber security and risk management expertise to our board Our Board Has the Right Mix of Necessary Skills and Experience to Continue Driving Value for All Shareholders Note: Assumes addition of Kim VanGelder to the FISI Board as of the 2016 AGM. Skills and experiences represented on the FISI Board include banking, strategic planning, finance, legal, corporate governance, accounting, capital allocation, investment management and M&A, among others Skills and experiences represented on the FISI Board include banking, strategic planning, finance, legal, corporate governance, accounting, capital allocation, investment management and M&A, among others 36 Public company Functional expertise Industry expertise Name Title Tenure Age % O/S Board experience Senior mgt experience Strategy and M&A Operations Community bank Financial services Community ties Robert N. Latella Chairman 11 73 0.1% X X X X X X Martin K. Birmingham President & CEO, Director 3 49 0.7% X X X X X X X James H. Wyckoff Director 31 64 2.9% X X Andrew W. Dorn, Jr. Director 2 65 0.1% X X X X X X X Karl V. Anderson, Jr. Director 10 69 0.1% X X X X John E. Benjamin Director 14 74 0.2% X X X X X Robert M. Glaser Director 2 69 0.1% X X X X Samuel M. Gullo Director 16 67 0.1% X X X Susan R. Holliday Director 14 60 0.2% X X X X X Erland E. Kailbourne Director 10 74 0.3% X X X X X X X Kim E. VanGelder Director 0 51 NA X X X Median 10 67

37 VI. Clover’s Proxy Contest

Johnny Guerry Terry Philen Clover’s Nominees Lack Relevant Experience To Help Us Continue Creating Long-Term Shareholder Value Hedge fund manager based in Dallas, Texas NO bank management experience NO operating experience at a bank or other relevant business NO understanding of the community banking market in Western New York NO ties to Western New York – Mr. Guerry is based in Texas NO strategic view provided for how to create shareholder value at FISI outside of an immediate sale of FISI EXTREMELY LIMITED public company board experience – Served on only one public company board, Hampden Bancorp – Elected to the board of Hamden Bancorp as a result of a proxy contest at a shareholders meeting held the day after the company agreed to be sold to Berkshire Hills Bancorp – Public company board service tenure was less than six months NO recent or relevant banking experience – worked for a small, privately-held Texas bank over 20 years ago NO strategic view provided for how to create shareholder value at FISI outside of an immediate sale of FISI NO ties to Western New York – Mr. Philen, like Mr. Guerry, is based in Texas EXTREMELY LIMITED public company board experience – Served for less than two years on the board of a hotel and entertainment company 38

We Believe it Is Clear Which Slate Provides the Best Qualifications to Continue Delivering Superior Returns to Shareholders Public Company Board or Management Experience Community Bank Experience Significant FISI Shareholders Ties to / Knowledge of Local Market Less than 2 years’ combined board experience (Guerry less than 6 months) Clover holds a 5% stake in FISI (Philen holds no shares) No ties to Western NY (based in Dallas, Texas) No relevant experience Decades of combined relevant experience, including in the banking industry FISI management and Board hold a combined 6% stake in FISI Our nominees know our markets, have important business contacts and are leaders in the communities we serve Martin Birmingham has over 27 years’ experience in the banking industry, including operational, financial and executive roles M. Birmingham S. Gullo K. VanGelder J. Wyckoff J. Guerry T. Philen Financial Institutions’ slate Clover Partners’ slate Strategic Vision for FISI Pursue an immediate sale; no other value creation proposition A proven strategic plan with track record of delivering sustained growth and superior shareholder returns 39

Clover Has One Narrowly Focused Agenda for Every Situation at Every Company: an Immediate Sale or Else “in [all] cases in which Clover Partners took an activist approach, the banks ended up being sold, [Guerry] said” (Milwaukee Wisconsin Journal Sentinel, Jan 2016) “in [all] cases in which Clover Partners took an activist approach, the banks ended up being sold, [Guerry] said” (Milwaukee Wisconsin Journal Sentinel, Jan 2016) Clover’s criticism Clover’s demands Acquisition of fee-based businesses Low tangible common equity to tangible assets ratio “sell the bank to a larger competitor” “[Or] we will pursue board representation via a proxy contest” Excessive compensation Poor operational performance “retain an investment bank to explore strategic alternatives” “we are preparing a slate for the 2013 annual meeting” Costs of increasing branches Poor profitability metrics Poor net interest income outlook “seek a strategic partner” Excessive compensation Unfriendly corporate governance practices Anemic loan growth “sell the bank to a strategic buyer.” “[Or] we will likely seek board representation” Source: Clover Partners’ public filings, press releases. 40

We Have Attempted To Constructively Engage With Clover To Avoid A Costly And Distracting Proxy Contest 41 FISI strives to maintain constructive, ongoing communications with all of its shareholders and welcomes their views and opinions with the goal of enhancing value for all shareholders We have met with representatives of Clover, including Mr. Guerry, on multiple occasions and their singular focus has been that we should pursue an immediate sale of FISI We have evaluated Mr. Guerry as a director candidate under FISI’s standard process for evaluating director candidates, including conducting an in-person interview of Mr. Guerry After a thorough review, we determined that Mr. Guerry would not add any complementary skills, experiences and perspectives to our Board – only a singular focus on pursuing short-term gains that deprive our shareholders of FISI’s long-term value On April 6, 2016, we indicated to Clover that we remained receptive to a settlement and proposed the addition to the Board of one mutually agreeable director candidate who has no prior relationship with the Company or Clover Clover rejected our settlement proposal and has made it abundantly clear that it is not receptive to any settlement that does not contemplate the addition to the Board of their employee, Mr. Guerry

Conclusion: FISI Has the Right Team and Strategy in Place to Continue Delivering Superior Long-Term Returns 42 FISI has delivered investors a total return of over 66% since the change in management that occurred 3 years ago and has outperformed any relevant benchmark over that period FISI has an effective, proven growth strategy - now is the time to capitalize on our strong position and achieve what FISI has been successfully building under our current strategic plan to grow in key markets and capitalize on market disruption in our region We believe that an immediate sale of FISI is not in the best interest of all shareholders given current market conditions and the potential value we believe our shareholders will realize as we continue to execute on our strategic growth plan We believe that Clover Partners is focused only on possible short-term gains at the expense of FISI’s proven and successful strategic plan, and their interests are not aligned with our long-term shareholders FISI continues to strengthen its Board with new independent, highly qualified Directors with relevant and complementary skills and competencies that further our ability to execute on our proven plan for growth and shareholder value creation We believe that Clover Partners’ candidates would not add relevant perspectives, skills or experience not already represented on the Board We ask you to vote your shares in support of ALL FOUR of your Board’s nominees on the BLUE proxy card We ask you to vote your shares in support of ALL FOUR of your Board’s nominees on the BLUE proxy card

43 Appendix

First Quarter 2016 Results 44 Revenue Revenue (1) Noninterest income/operating income excluding securities gains/losses. (2) Noninterest expense before foreclosed property expense, amortization of intangibles, and goodwill impairments as a percent of net interest income and noninterest revenues, excluding gains from securities transactions and nonrecurring items. Net Income & EPS Net Income & EPS Results Summary – Quarterly Comparison Results Summary – Quarterly Comparison 1Q’16 Earnings Commentary 1Q’16 Earnings Commentary Focus on commercial lending resulted in growth of $4.0 million and $24.2 million in C&I and commercial mortgages since 4Q’15 Increased net interest income to a record $24.7 million in the first quarter of 2016 Growth strategy drives increase in fee-based services income and market share, leading to record level of earnings assets and deposits Noninterest income increased by 11% to $9.2 million from 1Q’15 Grew total loans $192.1 million or 10% from a year ago Tangible book value per share increased to $15.18, an increase of ~3% since beginning of the year and 7% in the last 12 months $23.1 $23.4 $24.1 $24.6 $24.7 $8.3 $6.5 $7.0 $8.6 $9.2 $31.4 $29.9 $31.1 $33.2 $33.9 – $10.0 $20.0 $30.0 $40.0 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 Net interest income Noninterest Income ($ in millions) ($ in millions excl. per share amounts) Profitability Summary: 1Q'15 4Q'15 1Q'16 ROAA 0.89% 0.78% 0.90% ROAE 9.68% 8.86% 9.91% Net Interest Margin 3.43% 3.26% 3.27% Noninterest income/operating revenue (1) 23.8% 24.4% 25.8% Efficiency Ratio (2) 60.2% 64.6% 62.9% Dividends Per Share (Yield) $0.20 (3.5%) $0.20 (2.8%) $0.20 (2.8%) $6.4 $6.2 $7.9 $6.2 $7.2 $0.4 $0.4 $0.4 $0.4 $0.4 $6.8 $6.6 $8.3 $6.6 $7.6 $0.46 $0.44 $0.56 $0.44 $0.50 – $3.0 $6.0 $9.0 $12.0 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 Net income to common Pref. stock dividend EPS diluted

FISI Regional Peers 45 FISI performance benchmarking was done versus both the ISS Peer Group and the Company’s 2015 Proxy Peer Group for illustrative purposes. See below for the detailed lists: ISS Peer Group 2016 Proxy Peer Group Denotes Banks that are in both lists 1st Source Corporation Arrow Financial Corporation Berkshire Hills Bancorp, Inc. Brookline Bancorp, Inc. Camden National Corporation Chemung Financial Corporation City Holding Company CNB Financial Corporation Enterprise Bancorp, Inc. First Busey Corporation First Commonwealth Financial Corp. First Community Bancshares, Inc. First Financial Corporation First Merchants Corporation First Mid-Illinois Bancshares, Inc. Horizon Bancorp Lakeland Bancorp, Inc. MainSource Financial Group, Inc. Merchants Bancshares, Inc. Meridian Bancorp, Inc. MidWestOne Financial Group, Inc. NBT Bancorp Inc. Peoples Bancorp Inc. Pinnacle Financial Partners, Inc. S&T Bancorp, Inc. Tompkins Financial Corporation TowneBank Washington Trust Bancorp, Inc. Arrow Financial Corporation Camden National Corporation Community Bank System, Inc. CNB Financial Corporation Cardinal Financial Corporation City Holding Company Chemung Financial Corporation Citizens & Northern Corporation Enterprise Bancorp, Inc. First Connecticut Bancorp, Inc. First Commonwealth Financial Corporation First of Long Island Corporation Independent Bank Corp. Lakeland Bancorp, Inc. Merchants Bancshares, Inc. Sandy Spring Bancorp, Inc. Suffolk Bancorp Sun Bancorp, Inc. S&T Bancorp, Inc. Sterling Bancorp Tompkins Financial Corporation Univest Corporation of Pennsylvania Washington Trust Bancorp, Inc.

46 Name Title Years with FISI Years in Banking Martin K. Birmingham President & CEO 11 26 Jeffrey P. Kenefick EVP, Commercial Banking 10 26 Kevin B. Klotzbach EVP, Chief Financial Officer 14 32 William L. Kreienberg EVP, General Counsel and Chief Risk Officer 1 * 1 * Michael D. Burneal SVP, Chief Information Officer 11 29 David G. Case SVP, Chief Commercial Credit Officer 11 31 Paula D. Dolan SVP, Human Resources 2 18 Sonia M. Dumbleton SVP, Controller 31 31 Michael D. Grover SVP, Chief Accounting Officer 16 16 Charles J. Guarino SVP, Retail Banking 21 21 Average Years: 13 25 * Served as FISI’s outside general counsel for the four previous years Deep Bench with Significant Experience Working in Rochester, Buffalo and all of Western NY Leadership Team

47 Non-GAAP Reconciliation Source: Company filings. (1) Tangible common shareholders’ equity divided by tangible assets. (2) Tangible common shareholders’ equity divided by common shares outstanding. (3) Net income available to common shareholders divided by average tangible common equity. (4) Net income available to common shareholders divided by average tangible assets. Non-GAAP Financial Information This presentation 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. For non-GAAP disclosures that are used in this presentation, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, is provided below. GAAP to Non-GAAP Reconciliation At or for the year ended December 31, Quarter ended, ($ in millions, except per share data) 2013 2014 2015 3/31/2016 Computation of ending tangible common equity: Common shareholders' equity $237.5 $262.2 $276.5 $296.6 Less: Goodwill and other intangible assets, net 50.0 68.6 66.9 76.6 Tangible common shareholders' equity 187.5 193.6 209.6 220.0 Computation of ending tangible assets: Total assets $2,928.6 $3,089.5 $3,381.0 $3,516.6 Less: Goodwill and other intangible assets, net 50.0 68.6 66.9 76.6 Tangible assets 2,878.6 3,020.9 3,314.1 3,440.0 Tangible common equity to tangible assets 6.51% 6.41% 6.32% 6.40% Common shares outstanding 13,829 14,118 14,191 14,495 Tangible common book value per share $13.56 $13.71 $14.77 $15.18 Computation of average tangible common equity: Average common equity 235.3 254.5 272.4 291.8 Average goodwill and other intangible assets, net 50.2 57.0 68.1 76.3 Average tangible common equity 185.1 197.5 204.2 215.5 Computation of average tangible common equity: Average assets 2,803.8 2,994.6 3,269.9 3,405.5 Average goodwill and other intangible assets, net 50.2 57.0 68.1 76.3 Average tangible assets 2,753.6 2,937.6 3,210.8 3,329.1 Net income available to common shareholders 24.1 27.9 26.9 7.3 Return on average tangible common equity 13.00% 14.12% 13.16% 13.54% Return on average tangible assets 0.87% 0.95% 0.84% 0.88% (1) (2) (3) (4)

Important Additional Information and Where To Find It 48 Financial Institutions, Inc. (“FISI”) its directors and certain of its executive officers are deemed to be participants in the solicitation of proxies from FISI’s shareholders in connection with the matters to be considered at FISI’s 2016 Annual Meeting of Shareholders. On April 19, 2016, FISI filed a definitive proxy statement and accompanying definitive BLUE proxy card with the Securities and Exchange Commission (“SEC”) in connection with the solicitation of proxies from FISI’s shareholders in connection with the matters to be considered at FISI’s 2016 Annual Meeting of Shareholders. Information regarding the names of FISI’s directors and executive officers and their respective interests in FISI by security holdings or otherwise can be found in such definitive proxy statement, including the schedules and appendices thereto. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND THE ACCOMPANYING BLUE PROXY CARD AND OTHER DOCUMENTS FILED BY FINANCIAL INSTITUTIONS WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain the definitive proxy statement, any amendments or supplements to the proxy statement, the accompanying BLUE proxy card, and other documents filed by FISI with the SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Investor Relations section of FISI’s corporate website at www.fiiwarsaw.com, by writing to FISI’s Corporate Secretary at Financial Institutions, Inc., 220 Liberty Street, Warsaw, New York 14569, or by calling FISI’s Corporate Secretary at (585) 786-1100. Disclaimer Financial Institutions, Inc. has neither sought nor obtained the consent from any third party to use any statements or information contained in this presentation that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.