Financial Institutions, Inc.

Revenue details cited on the call included net interest income of $53.4 million and non-interest income of $11 million. Net income available to common shareholders was $20.8 million, up 1% from Q1 and 21% year over year, and diluted EPS was $1.04 versus $1.04 in Q1 and $0.85 a year ago. Net interest margin expanded 3 bps sequentially and 21 bps year over year; tangible book value per share was $28.72, up 2% sequentially and more than 10% year over year. Loans increased 2.7% from Q1 and 4.8% year over year, deposits were $5.3 billion, and AUM reached $4 billion. Guidance: full-year 2026 loan growth remains 5%, deposit growth remains low single digits, full-year NIM is now expected to be approximately 370 bps, full-year efficiency ratio is expected below 57%, and management raised full-year ROA guidance to at least 1.3% and ROE guidance to at least 12.5%.

Marty Birmingham said the quarter reflected strong execution across the franchise, with commercial lending momentum, stable credit quality, flat expenses, and improving profitability. He highlighted added commercial lending hires, growth in the Syracuse market tied to Micron-related activity, and improving residential mortgage activity in a tight housing market. His tone was upbeat but measured, emphasizing disciplined growth, capital strength, and continued investment in talent and technology.

Jack Plants focused on margin, fee income, expenses, and credit metrics. He said net interest income rose to $53.4 million, NIM expanded 3 bps linked-quarter, and the company raised full-year NIM guidance to about 370 bps; he also noted deposit rates may have reached a low point and that the margin should be more stable going forward. Non-interest income was $11 million, AUM-linked advisory revenue was $3.3 million, quarterly non-interest expense was $35.6 million, net charge-offs were 11 bps of average loans, and the ACL increased to 1.0% of total loans. He also said the company now expects at least $11 million of company-owned life insurance revenue for the full year, up from $10.5 million, and reiterated that buybacks remain an efficient use of capital.

Analysts pressed on why full-year loan growth remains at 5% despite 8% first-half growth. Management said commercial lending pipelines are improving as six new commercial lenders ramp, but runoff in indirect auto lending is higher than modeled because the company is staying disciplined on spread and credit quality. Questions also focused on margin sensitivity to a possible 25 bps rate hike, ROA upside beyond 1.3%, and capital returns; management said the balance sheet is fairly insensitive to a 25 bps move, 1.3% ROA is achievable based on year-to-date performance, and buybacks are still viewed as an efficient use of capital, though none were done this quarter.