FINANCIAL INSTITUTIONS, INC. REPORTS 2012 FIRST QUARTER
EARNINGS OF $6.2 MILLION; ASSET GROWTH TO RECORD SIZE

WARSAW, N.Y., April 25, 2012 — Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), the parent company of Five Star Bank, today reported net income for the quarter ended March 31, 2012 of $6.2 million, an increase of 6% compared to net income of $5.8 million for the same period last year. After preferred dividends, first quarter earnings per diluted share was $0.42 compared with $0.33 per share for the first quarter of 2011.

Highlights for the first quarter of 2012 were as follows:

“While many expect 2012 to remain a challenging year for most businesses, we followed up a great close to 2011 with an even better start to 2012” commented Peter G. Humphrey, President and Chief Executive Officer. “While one quarter does not make a year, we’re encouraged by not only our asset growth, but by the level of earnings considering the prolonged low interest rate environment.”

Mr. Humphrey continued, “We look forward to the remainder of 2012 and building on our first quarter success. We remain energized by the previously announced branch acquisition and the fact that it will help fund our strong earning asset growth. The Five Star team has been actively working towards a smooth integration of the acquired branches both culturally and operationally.”

Net Interest Income and Net Interest Margin

Net interest income totaled $20.9 million for the three months ended March 31, 2012, an increase of $1.1 million or 6% over the first quarter of 2011, primarily from lower funding costs. Average earning assets increased $93.9 million or 5% in the first quarter of 2012 compared with the first quarter last year, due to growth in the loan portfolio. Average total loans were up $150.8 million or 11% during the first quarter of 2012 compared to the first quarter of 2011, led by an 18% increase in the average consumer indirect portfolio.

The net interest margin on a tax-equivalent basis was 4.05% in both the first quarter of 2012 and 2011. The Company’s yield on earning-assets decreased 27 basis points in the first quarter of 2012 compared with the same quarter last year, a result of cash flows being reinvested in the current low interest rate environment. The cost of interest-bearing liabilities decreased 35 basis points compared with the first quarter of 2011, primarily a result of the redemption of the Company’s 10.20% junior subordinated debentures during the third quarter of 2011 as well as the continued re-pricing of the Company’s certificates of deposit.

Noninterest Income

Total noninterest income for the first quarter of 2012 was $5.5 million, an increase of 6% from $5.1 million for the first quarter of 2011. Noninterest income for the first quarter of 2012 compared to the same quarter last year includes increases in broker-dealer fees and commissions, company owned life insurance, net gains on sale of loans held for sale and net gain on investment securities. These increases were partially offset by declines in service charges on deposit accounts and loan servicing income. Broker-dealer fees and commissions were up $201 thousand or 52% mainly due to increased sales volume. An additional $18.0 million investment in company owned life insurance during the third quarter of 2011 was largely responsible for the $160 thousand increase in income. Gains from the sale of loans held for sale were $109 thousand higher than in the first quarter of 2011 due to increased origination volume. The Company recognized a $331 thousand pre-tax gain from the sale of a pooled trust-preferred security that had been written down in prior periods and included in non-performing assets. Service charges on deposit accounts were down $270 thousand in the first quarter primarily due to lower overdraft fee income. Loan servicing income decreased by $255 thousand as a result of more rapid amortization of servicing rights due to loans paying off, lower fees collected due to a decrease in the sold and serviced portfolio and write-downs on capitalized mortgage servicing assets.

Noninterest Expense

Total noninterest expense for the first quarter of 2012 was $15.7 million, an increase of $307 thousand from $15.4 million for the first quarter of 2011. When comparing the first quarter of 2012 to the same quarter last year, noninterest expense for 2012 includes increases in salaries and employee benefits and other noninterest expense of $530 thousand and $192 thousand, respectively, partially offset by a $310 thousand decrease in FDIC assessments. Higher salaries and employee benefits expense reflects increases in pension expense and in estimated incentive compensation, which was previously limited under the TARP Capital Purchase Program. Changes made by the FDIC pertaining to the method of calculating assessment rates resulted in the lower FDIC assessments. Other noninterest expense for the first quarter included $125 thousand of severance expense associated with workforce realignment in a continued effort to reduce future costs.

Balance Sheet

Total loans were $1.521 billion at March 31, 2012, up $36.3 million or 2% from December 31, 2011. Total investment securities were $723.7 million at March 31, 2012, up $72.9 million or 11% from December 31, 2011.

Deposits were $2.067 billion at March 31, 2012, an increase of $135.0 million or 7% from December 31, 2011. Public deposit balances increased $143.1 million during the first quarter of 2012 due largely to the seasonality of municipal cash flows. The Company’s deposit mix remains favorably weighted in lower cost demand, savings and money market accounts, which comprised 66.3% of total deposits at the end of the first quarter.

Shareholders’ equity was $240.0 million at March 31, 2012, compared with $237.2 million at December 31, 2011. Net income for the quarter increased shareholders’ equity by $6.2 million, which was partially offset by common and preferred stock dividends of $2.1 million. Accumulated other comprehensive income included in shareholders’ equity decreased $1.1 million during the first quarter due primarily to lower net unrealized gains on securities available for sale.

The Company’s leverage ratio and total risk-based capital ratio increased to 8.80% and 13.47%, respectively, at March 31, 2012, compared to 8.63% and 13.45%, respectively, at December 31, 2011, all of which exceeded the regulatory thresholds required to be classified as a “well capitalized” institution as established by the Company’s primary banking regulators.

Credit Quality

Non-performing loans at March 31, 2012 were $8.2 million or 0.54% of total loans as compared to $7.1 million or 0.48% of total loans at December 31, 2011. The average of our peer group was 2.95% of total loans at December 31, 2011, the most recent period for which information is available (Source: Federal Financial Institutions Examination Council — Bank Holding Company Performance Report as of December 31, 2011 — Top-tier bank holding companies having consolidated assets between $1 billion and $3 billion). Net charge-offs of $882 thousand in the first quarter of 2012 represented 0.24% of average loans on an annualized basis compared to $1.2 million or 0.35% in the first quarter of 2011. The provision for loan losses totaled $1.4 million in the first quarter, exceeding charge-offs by $503 thousand, as we continue to maintain the allowance for loan losses consistent with the growth in our loan portfolio and trends in asset quality. The allowance equaled 289% of non-performing loans and 1.56% of total loans.

About Financial Institutions, Inc.

With over $2.4 billion in assets, Financial Institutions, Inc. provides diversified financial services through its subsidiaries, Five Star Bank and Five Star Investment Services, Inc. Five Star Bank provides a wide range of consumer and commercial banking services to individuals, municipalities and businesses through a network of over 50 offices and more than 70 ATMs in Western and Central New York State. Five Star Investment Services provides investment advice, brokerage and insurance products and services within the same New York State markets. Financial Institutions, Inc. and its subsidiaries employ over 600 individuals. The Company’s stock is listed on the Nasdaq Global Select Market under the symbol FISI. Additional information is available at the Company’s website: www.fiiwarsaw.com.

Safe Harbor Statement

This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. There are a number of important factors that could affect the Company’s forward-looking statements which include its ability to implement its strategic plan, its ability to redeploy investment assets into loan assets, whether it experiences greater credit losses than expected, the attitudes and preferences of its customers, the competitive environment, fluctuations in the fair value of securities in its investment portfolio, changes in the regulatory environment and general economic and credit market conditions nationally and regionally. For more information about these factors and other factors that could affect the Company’s forward-looking statements, please see the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

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