Financial Institutions, Inc. Reports Significant Increase in Q1 2025 Net Income to $16.9 Million

Financial Institutions, Inc. reported a significant increase in its financial performance for the first quarter of 2025, with net income rising to $16.9 million, compared to $2.1 million in the same period last year. This translates to earnings of $0.81 per diluted share, a substantial increase from $0.11 per diluted share in the first quarter of 2024. The company's return on average common equity was 11.82%, while return on average assets stood at 1.10%, reflecting a marked improvement from the previous year's figures of 1.83% and 0.13%, respectively. The increase in net income was primarily attributed to a recovery from a prior deposit-related fraud event that had negatively impacted earnings in 2024.

Total interest income for the quarter reached $81.1 million, up from $78.4 million a year earlier, driven by a net interest income of $46.9 million, which increased by $6.8 million year-over-year. The net interest margin improved to 3.35%, up from 2.78% in the prior year, largely due to a rise in the average yield on investment securities following a restructuring of the available-for-sale securities portfolio in December 2024. The provision for credit losses was $2.9 million, a reversal from a benefit of $5.5 million in the previous year, reflecting loan growth and an increase in specific reserves.

Operationally, the company saw total loans increase to $4.55 billion, a rise of $74.1 million from the end of 2024, with commercial loans making up 65% of the total loan portfolio. The company also reported a total deposit increase of $268.2 million, reaching $5.37 billion, driven by growth in public, brokered, and reciprocal deposits. The total number of deposits reflects a strategic focus on maintaining a strong base of core customer funds while managing funding costs effectively.

In terms of strategic developments, Financial Institutions, Inc. completed the sale of its insurance subsidiary, SDN Insurance Agency, in April 2024, generating $27 million in proceeds. This sale allowed the company to refocus on its core banking operations and resulted in a significant reduction in noninterest expenses for the first quarter of 2025. The company also announced plans to wind down its Banking-as-a-Service (BaaS) offerings, which are expected to conclude by mid-2025, as part of a strategic review aimed at enhancing operational efficiency.

Looking ahead, Financial Institutions, Inc. remains committed to exploring growth opportunities, including potential acquisitions that align with its core competencies. The company is well-capitalized, with a Tier 1 Capital Ratio of 10.71% as of March 31, 2025, and continues to prioritize customer acquisition through a blend of digital and traditional banking channels. The management team is optimistic about maintaining a competitive edge in the market while navigating the evolving economic landscape.