Financial Institutions, Inc. Announces Completion of $80.0 Million Private Placement of Subordinated Notes

Rhea-AI Summary

Financial Institutions, Inc. (Nasdaq: FISI) completed a private placement of $80.0 million in fixed-to-floating subordinated notes due December 15, 2035. The Notes pay 6.50% semi-annually until December 15, 2030, then reset quarterly to 3-month SOFR + 312 bps. The company plans to use net proceeds to redeem $65.0 million of outstanding higher-cost debt (carrying ~8.11%–8.17%) and for general corporate purposes. Kroll assigned a BBB- rating and Stable outlook. Management expects the company’s Total Risk-Based Capital ratio to be temporarily elevated by approximately 150 basis points at year-end due to the new issuance.

Positive

• Issued $80.0 million subordinated notes due 2035
• Fixed coupon of 6.50% through December 15, 2030
• Intends to redeem $65.0 million of >8.10% debt
• Kroll rating BBB- with Stable outlook
• Expected Total Risk-Based Capital +150 bps at year-end

Negative

• Interest rate resets to 3-month SOFR + 312 bps after 2030
• Temporary net subordinated debt increase of $15.0 million until redemption

Key Figures

Private placement size $80.0 million Aggregate principal amount of subordinated notes due 2035

Initial coupon 6.50% per annum Interest rate on Notes until December 15, 2030

Debt to be redeemed $65.0 million Outstanding debt from 2015 and 2020 to be called

Existing debt rate 8.17% interest $35.0 million tranche repricing quarterly since October 15, 2025

Existing debt rate 8.11% interest $30.0 million tranche repricing quarterly since April 15, 2025

Spread over SOFR 312 basis points Reset spread over three-month SOFR from December 15, 2030

Capital ratio impact 150 basis points Expected temporary increase in Total Risk-Based Capital ratio at year-end

Maturity date December 15, 2035 Final maturity of the subordinated notes

Market Reality Check

$32.61 Last Close

Volume Volume 96,914 is modestly below the 20-day average of 109,182. normal

Technical Shares at $32.61 trade above the 200-day MA of $26.61 and sit 0.15% below the 52-week high of $32.66.

Peers on Argus

FISI gained 3.61% while peers were mixed: BHB +0.8%, PFIS +1.34%, SHBI +1.24%, SUPV +4%, and GNTY -1.46%, suggesting a largely stock-specific move tied to the capital transaction.

Historical Context

Date	Event	Sentiment	Move	Catalyst
Nov 17	Dividend declaration	Positive	-0.7%	Board approved quarterly cash dividends on common and preferred shares.
Oct 23	Earnings results	Positive	-0.6%	Q3 2025 results showed record net interest income and loan growth.
Oct 01	Earnings call setup	Neutral	-0.3%	Scheduled Q3 2025 earnings release and conference call logistics.
Sep 22	Buyback program	Positive	+1.7%	Announced new share repurchase program for up to 1,006,379 shares.
Aug 25	Dividend declaration	Positive	+1.4%	Declared quarterly common and preferred dividend payments.

Pattern Detected

Recent positive corporate actions (earnings beats, dividends, buyback) have produced mixed short-term price reactions, with both aligned and divergent moves.

Recent Company History

This announcement adds another capital-focused step to FISI’s recent activity. In August–November 2025, the company maintained a $0.31 quarterly common dividend and preferred dividends while reporting strong Q3 2025 results, including higher net interest income and loan growth. A new repurchase program for up to 1,006,379 shares highlighted capital return. Today’s subordinated notes placement and planned redemption of $65.0 million in higher-cost debt continues that balance sheet optimization theme.

Market Pulse Summary

This announcement details an $80.0 million subordinated notes placement aimed at redeeming $65.0 million of higher-cost debt with rates above 8%, while initially paying 6.50%. The transaction also lifts the Total Risk-Based Capital ratio by about 150 basis points at year-end. Investors may watch execution of the planned redemptions, future SOFR-based reset levels, and how the stronger capital position supports growth or further capital returns.

Key Terms

secured overnight financing rate financial

"equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 312 basis points"

A secured overnight financing rate (SOFR) is a daily benchmark interest rate that reflects the cost of borrowing cash overnight using U.S. Treasury securities as collateral. Think of it as the market price to “rent” cash for a day with a very safe pledge, similar to paying a short-term rental fee for money backed by government bonds. Investors track SOFR because it underpins pricing for loans, bonds and derivatives, so movements change borrowing costs, interest income and the valuation of interest-rate–linked positions.

sofr financial

"three-month Secured Overnight Financing Rate (“SOFR”) plus 312 basis points"

The Secured Overnight Financing Rate (SOFR) is a market benchmark that measures the cost of borrowing cash overnight using U.S. Treasury securities as collateral. Investors watch SOFR because it acts like a speedometer for short-term interest costs—affecting loan rates, bond yields and the pricing of interest-rate contracts—so movements change borrowing expenses, cash returns and the value of interest-sensitive investments.

basis points financial

"three-month Secured Overnight Financing Rate (“SOFR”) plus 312 basis points"

Basis points are a way to measure small changes in interest rates or percentages, where one basis point equals 0.01%. For example, if a loan's interest rate increases by 50 basis points, it's gone up by 0.50%. They help people understand tiny differences in rates that can add up over time, making financial comparisons clearer.

registration rights agreements regulatory

"the Company entered into registration rights agreements with the purchasers of the Notes"

A registration rights agreement is a contract that gives certain shareholders the legal ability to require a company to register their shares with securities regulators so those shares can be sold publicly. Think of it like a guaranteed ticket to sell stock at a public marketplace: it creates a path to liquidity for investors, can affect when large shareholders can sell, and may influence stock supply and price expectations for other investors.

AI-generated analysis. Not financial advice.

The 2025 notes bear interest of 6.50% for the first five years and the net proceeds allow the Company to redeem $65.0 million of outstanding debt currently bearing interest above 8.00%

WARSAW, N.Y., Dec. 11, 2025 (GLOBE NEWSWIRE) -- Financial Institutions, Inc. (Nasdaq: FISI) (the “Company”), parent company of Five Star Bank and Courier Capital, LLC, today announced completion of a private placement of $80.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2035 (the “Notes”) to qualified institutional buyers and accredited institutional investors.

The Notes have a maturity date of December 15, 2035 and bear interest, payable semi-annually, at the rate of 6.50% per annum, until December 15, 2030. Commencing on that date, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 312 basis points, payable quarterly until maturity. The Company is entitled to prepay the Notes, in whole or in part, at any time on or after December 15, 2030, and to prepay the Notes in whole or in part at any time upon certain other specified events. The Notes received a BBB- rating from Kroll Bond Rating Agency, which recently revised the Company’s long-term outlook to Stable, reflecting sustained improvement in its profitability and enhanced capital position.

The Company intends to use the net proceeds to redeem the $65.0 million in outstanding debt issuances from 2015 and 2020, as well as for general corporate purposes. The $65.0 million in outstanding debt includes $35.0 million that began repricing quarterly on October 15, 2025, and which currently bears interest of approximately 8.17%, in addition to $30.0 million that began repricing quarterly on April 15, 2025, and which currently bears interest of approximately 8.11%.

“We are pleased with the successful completion of this subordinated debt offering, which allows us to refinance existing issuances at more attractive rates, while providing additional capital for thoughtful deployment as we remain focused on creating long-term value for our shareholders,” said Martin K. Birmingham, President and Chief Executive Officer. “Given the additional $80.0 million of capital that will be on our balance sheet at year-end and our intent to call the outstanding $65.0 million in the first quarter, we do expect the Company’s Total Risk-Based Capital ratio to be temporarily elevated by approximately 150 basis points at year-end.”

In connection with the issuance and sale of the Notes, the Company entered into registration rights agreements with the purchasers of the Notes pursuant to which the Company has agreed to take certain actions to provide for the exchange of the Notes for subordinated notes that are registered under the Securities Act of 1933, as amended (the “Securities Act”), with substantially the same terms as the Notes.

Piper Sandler & Co. served as sole placement agent for the offering. Luse Gorman, PC served as legal counsel to Financial Institutions, Inc. and Hogan Lovells US LLP served as legal counsel to Piper Sandler & Co.

About Financial Institutions, Inc.
Financial Institutions, Inc. (Nasdaq: FISI) is a financial holding company with approximately $6.3 billion in assets as of September 30, 2025, offering banking and wealth management products and services. Its Five Star Bank subsidiary provides consumer and commercial banking and lending services to individuals, municipalities and businesses through banking locations spanning Western and Central New York and a commercial loan production office serving the Mid-Atlantic region. Courier Capital, LLC offers customized investment management, financial planning and consulting services to individuals and families, businesses, institutions, non-profits and retirement plans. Learn more at Five-StarBank.com and FISI-Investors.com.

No Offer or Solicitation
This press release shall not constitute an offer to sell, a solicitation of an offer to sell, or the solicitation or an offer to buy any securities. There will be no sale of securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The indebtedness evidenced by the Notes is not a deposit and is not insured by the Federal Deposit Insurance Corporation or any other government agency or fund.

Safe Harbor Statement
This press release contains forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "anticipate," "believe," "continue," "estimate," "expect," "focus," "forecast," "intend," "may," "plan," "preliminary," "should," "target" or "will." Statements herein are based on certain assumptions and analyses by the Company and factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; inflation; tariffs; changes in deposit flows and the cost and availability of funds; fraudulent deposit activity; the Company’s ability to implement its strategic plan, including by expanding its commercial lending footprint; the effects of mergers and acquisitions activities, including the Company’s ability to successfully complete and integrate acquisitions and realize expected benefits; the Company's reliance on dividends from its subsidiaries; effects of changes in accounting principles and guidance; whether the Company experiences greater credit losses than expected; whether the Company experiences breaches of its, or third party, information systems; the attitudes and preferences of the Company's customers; legal and regulatory proceedings, including any action described in our reports filed with the SEC, could adversely affect us and the banking industry in general; the competitive environment; fluctuations in the fair value of securities in its investment portfolio; changes in laws, regulations and the regulatory environment and the Company's compliance with regulatory requirements; general economic and credit market conditions nationally and regionally; and macroeconomic volatility related to global political unrest. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language and risk factors included in the Company's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other documents filed with the SEC. Investors should not place undue reliance on forward-looking statements. Except as required by law, the Company undertakes no obligation to revise these statements following the date of this press release.

For additional information contact:
Kate Croft
Director of Investor Relations and Corporate Communications
(716) 817-5159
FISI-Investors@Five-StarBank.com

FAQ

What did FISI announce on December 11, 2025 regarding subordinated notes?

FISI completed a private placement of $80.0 million in subordinated notes due December 15, 2035.

What interest rate do the FISI notes (FISI) pay before December 15, 2030?

The notes pay a fixed 6.50% per annum, payable semi-annually, until December 15, 2030.

How will FISI use proceeds from the $80.0 million note offering (FISI)?

The company intends to redeem $65.0 million of existing higher-rate debt and use remaining proceeds for general corporate purposes.

What happens to the FISI notes' interest rate after December 15, 2030?

Interest will reset quarterly to 3-month SOFR + 312 basis points, payable quarterly until maturity.

How will the $80.0 million issuance affect FISI’s capital ratios at year-end?

Management expects Total Risk-Based Capital to be temporarily elevated by about 150 basis points at year-end.

What rating did Kroll assign to FISI’s new subordinated notes?

Kroll Bond Rating Agency assigned a BBB- rating and revised the company’s long-term outlook to Stable.

Will FISI immediately reduce interest expense by issuing the new notes?

The company plans to redeem $65.0 million of debt currently bearing ~8.11%–8.17%, which should lower interest expense after redemption.