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1. Company Snapshot

1.a. Company Description

Financial Institutions, Inc.operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York.The company offers checking and savings account programs, including money market accounts, certificates of deposit, sweep investments, and individual retirement and other qualified plan accounts.


Its loan products include term loans and lines of credit; short and medium-term commercial loans for working capital, business expansion, and purchase of equipment; commercial business loans to the agricultural industry; commercial mortgage loans; one-to-four family residential mortgage loans, home improvement loans, closed-end home equity loans, and home equity lines of credit; and consumer loans, such as automobile, secured installment, and personal loans.The company also provides personal insurance products, including automobile, homeowners, boat, recreational vehicle, landlord, and umbrella coverage; commercial insurance comprising property, liability, automobile, inland marine, workers compensation, bonds, crop, and umbrella insurance products; and financial services comprising life and disability insurance, medicare supplements, long-term care, annuities, mutual funds, and retirement programs.In addition, it offers customized investment advisory, wealth management, investment consulting, and retirement plan services, as well as operates a real estate investment trust that holds residential mortgages and commercial real estate loans.


The company operates a network of 48 banking offices in Allegany, Cattaraugus, Cayuga, Chautauqua, Chemung, Erie, Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Schuyler, Steuben, Wayne, Wyoming, and Yates counties, New York.Financial Institutions, Inc.was founded in 1817 and is headquartered in Warsaw, New York.

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1.b. Last Insights on FISI

The recent performance of Financial Institutions, Inc. was negatively impacted by the settlement of auto lending litigation, which may have resulted in significant costs and potential reputational damage. Additionally, the company's appointment of Angela J. Panzarella to its Board of Directors in January 2025 may have been overshadowed by the subsequent acquisition of voting rights by Barclays PLC, which could potentially influence the company's direction.

1.c. Company Highlights

2. Financial Institutions, Inc. (FISI) Posts Strong 2025 Results with Robust Guidance for 2026

Financial Institutions, Inc. (FISI) reported a strong 2025, with net income available to common shareholders of $19.6 million or $0.96 per diluted share for the fourth quarter and $73.4 million or $3.61 per diluted share for the full year. The company's return on average assets was 120 basis points for the year, while return on average equity was 12.38%, both exceeding annual guides. Net interest income grew to $200 million, and noninterest income was $45 million. The efficiency ratio for the year was 58%. The actual EPS of $0.96 beat estimates of $0.95, indicating a positive surprise.

Publication Date: Feb -14

📋 Highlights
  • Strong Full-Year Performance:: Net income reached $73.4M ($3.61/share) in 2025, with ROA of 1.20% and ROE of 12.38%, outperforming guidance.
  • Efficiency and Revenue Growth:: Efficiency ratio improved to 58%, net interest income hit $200M, and noninterest income totaled $45M.
  • Capital Allocation:: $11M share buybacks (1.7% repurchase) and $80M sub-debt offering at 6.5% fixed rate executed in Q4 2025.
  • 2026 Guidance:: Targets ROA ≥122 bps, ROE >11.9%, 5% loan growth, and mid-3.6% net interest margin, with CRE/C&I as key drivers.
  • Capital Flexibility:: CET1 ratio at 11.1% allows further buybacks, with $15M liquidity from sub-debt offering supporting growth and capital returns.

Loan Growth and Capital Management

Loans increased 1.5% in the fourth quarter and 4% year over year to $4.66 billion, driven by strong commercial lending in Upstate New York markets. The company repurchased 1.7% of outstanding shares, totaling nearly $11 million, and completed an $80 million sub-debt offering with a 6.5% five-year fixed rate. The common equity Tier 1 (CET1) ratio stood at 11.1%, with a projected increase of 40-50 basis points, indicating capacity for further buybacks.

2026 Guidance and Outlook

The company provided 2026 guidance, targeting a return on average assets of at least 122 basis points, return on average equity exceeding 11.9%, and an efficiency ratio below 58%. They expect margin expansion, with a full-year net interest margin target in the mid-three sixties. Loan growth is expected to be around 5%, driven by commercial growth, and deposits are expected to grow in low single digits. Analysts estimate next year's revenue growth at 4.7%, aligning with the company's guidance.

Valuation and Dividend Yield

With a Price-to-Tangible Book Value (P/TBV) ratio of approximately 0.59x, and a Dividend Yield of 3.6%, FISI presents an attractive valuation profile. The dividend yield is particularly noteworthy, as it suggests a relatively stable return for shareholders. The company's management team expressed confidence in their ability to execute on their strategic plan, focusing on organic credit discipline growth, prudent expense management, and building a strong capital position to deliver long-term value to shareholders.

Management's Confidence and Future Plans

The company is confident in its borrowers across all types and sizes, with Commercial and Industrial (C&I) and Commercial Real Estate (CRE) driving growth. The timing of loan production is expected to be "a little bit lumpy" and materialize towards the back half of the year. With a focus on core deposit acquisitions to support loan growth and NIM expansion, FISI is poised for continued growth and profitability.

3. NewsRoom

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Financial Institutions, Inc.: Back On Track After A Challenging Year

Feb -20

Source: seekingalpha.com

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3 Bank Stocks With Recent Dividend Hikes to Keep on Your Radar

Feb -16

Source: zacks.com

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Financial Institutions, Inc. (NASDAQ:FISI) Given Average Recommendation of “Hold” by Brokerages

Feb -08

Source: defenseworld.net

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Financial Institutions Q4 Earnings Call Highlights

Feb -01

Source: defenseworld.net

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Financial Institutions, Inc. (FISI) Q4 2025 Earnings Call Transcript

Jan -30

Source: seekingalpha.com

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Verist Inc. Strengthens Platform With Expanded Umbrella and Excess Liability Insurance Solutions Across Real Estate, Hospitality and Leisure, Financial Institutions, Professional Services, and Life Sciences

Jan -20

Source: globenewswire.com

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Financial Institutions, Inc. $FISI Shares Sold by Courier Capital LLC

Jan -19

Source: defenseworld.net

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Head to Head Contrast: Hawthorn Bancshares (NASDAQ:HWBK) & Financial Institutions (NASDAQ:FISI)

Jan -18

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.44%)

6. Segments

Banking

Expected Growth: 2.5%

The 2.5% growth in Banking from Financial Institutions, Inc. is driven by increasing demand for digital banking services, expansion into new markets, and strategic partnerships. Additionally, improving economic conditions, low interest rates, and government initiatives to promote financial inclusion also contribute to this growth.

All Other

Expected Growth: 1.5%

The 1.5% growth in All Other from Financial Institutions, Inc. is driven by increasing demand for diversified financial services, expansion into new markets, and strategic partnerships. Additionally, investments in digital transformation and cost-saving initiatives have improved operational efficiency, contributing to the segment's growth.

7. Detailed Products

Checking Accounts

A type of deposit account that allows customers to deposit and withdraw money, write checks, and use debit cards.

Savings Accounts

A type of deposit account that earns interest and allows limited transactions.

Credit Cards

A type of loan that allows customers to borrow money to make purchases and pay back with interest.

Personal Loans

A type of loan that provides a lump sum of money for personal expenses.

Mortgages

A type of loan that allows customers to purchase a home.

Investment Services

A type of service that allows customers to invest in stocks, bonds, and other investment products.

Insurance Services

A type of service that provides protection against unexpected events such as accidents, illnesses, or natural disasters.

Retirement Accounts

A type of savings account that allows customers to save for retirement.

Business Loans

A type of loan that provides financing for businesses to grow and expand.

Commercial Banking Services

A type of service that provides cash management, trade finance, and other services for businesses.

8. Financial Institutions, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Financial Institutions, Inc. is moderate due to the presence of alternative financial services and products.

Bargaining Power Of Customers

The bargaining power of customers is high due to the availability of multiple financial institutions and the ease of switching between them.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the limited number of suppliers and the high demand for their services.

Threat Of New Entrants

The threat of new entrants is moderate due to the regulatory barriers and high capital requirements to enter the financial services industry.

Intensity Of Rivalry

The intensity of rivalry is high due to the large number of financial institutions competing for market share and the high level of competition in the industry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.73%
Debt Cost 4.77%
Equity Weight 59.27%
Equity Cost 8.44%
WACC 6.95%
Leverage 68.72%

11. Quality Control: Financial Institutions, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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First Business Financial Services

A-Score: 6.5/10

Value: 7.5

Growth: 7.8

Quality: 5.9

Yield: 4.0

Momentum: 6.0

Volatility: 7.7

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Financial Institutions

A-Score: 6.3/10

Value: 6.9

Growth: 3.6

Quality: 4.7

Yield: 8.0

Momentum: 7.0

Volatility: 7.3

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Value: 7.4

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Quality: 7.2

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TowneBank

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Value: 6.1

Growth: 5.0

Quality: 7.0

Yield: 6.0

Momentum: 4.0

Volatility: 8.7

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Veritex Holdings

A-Score: 6.1/10

Value: 5.8

Growth: 6.4

Quality: 6.4

Yield: 6.0

Momentum: 6.0

Volatility: 6.0

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Amalgamated Financial

A-Score: 6.0/10

Value: 7.5

Growth: 7.2

Quality: 8.1

Yield: 4.0

Momentum: 2.5

Volatility: 6.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

33.74$

Current Price

33.74$

Potential

-0.00%

Expected Cash-Flows