Financial Institutions Q2 2025 presentation: margin expansion drives earnings growth

Financial Institutions , Inc. (NASDAQ:FISI) released its second quarter 2025 investor presentation on July 24, 2025, highlighting continued improvement in net interest margin and earnings growth despite seasonal deposit outflows. The $6.14 billion-asset financial holding company of Five Star Bank and Courier Capital reported diluted earnings per share of $0.85, up 4.9% from $0.81 in the first quarter.

Quarterly Performance Highlights

Financial Institutions reported net income available to common shareholders of $17.2 million for Q2 2025, with return on average assets (ROAA) of 1.13%, up 3 basis points from the linked quarter. The company’s net interest margin expanded to 3.49%, an increase of 14 basis points from Q1 2025 and 62 basis points from the year-ago quarter.

"Our second quarter results demonstrate continued margin expansion and growth in net income," noted the company’s President & CEO in the presentation.

As shown in the following quarterly financial results summary:

Net interest income reached $49.1 million, up $2.3 million or 4.8% from the first quarter and $7.9 million or 19.2% from the year-ago quarter. This growth was supported by the strategic investment securities restructuring completed in late Q4 2024.

The company’s five-quarter earnings trend shows consistent improvement in key metrics:

Detailed Financial Analysis

Total (EPA:TTEF) deposits stood at $5.16 billion as of June 30, 2025, down $216.9 million or 4.0% from the linked quarter, primarily due to seasonal public deposit outflows and the continued wind-down of Banking-as-a-Service (BaaS) offerings. BaaS deposits have decreased significantly from approximately $108 million a year ago to just $7 million at quarter-end.

The company maintains a robust liquidity position with $1.25 billion in available committed liquidity as of June 30, 2025, as illustrated in the following chart:

On the lending side, Financial Institutions reported total loans of $4.54 billion, down slightly from $4.55 billion in the first quarter. The loan portfolio remains well-diversified, with commercial loans comprising 65% of the total:

Commercial loans totaled $2.94 billion, flat compared to the linked quarter but up $141.6 million or 5.1% year-over-year. The commercial real estate portfolio, which accounts for a significant portion of commercial loans, is diversified across property types with multifamily representing the largest segment at 45% of CRE exposure.

Strategic Initiatives & Outlook

Financial Institutions reaffirmed its full-year 2025 guidance, projecting a net interest margin of 3.45% to 3.55%, annual loan growth of 1% to 3% driven by commercial loans, and flat deposit balances as non-public deposit growth is expected to offset the outflow of BaaS-related deposits.

The company’s forward-looking projections include:

Noninterest income, which represented 18% of quarterly revenue at $10.6 million in Q2, is expected to reach $40-42 million for the full year 2025. This diversified revenue stream includes investment advisory income from Courier Capital, which manages $3.38 billion in assets as of June 30, 2025.

Net interest income and margin trends show consistent improvement over recent quarters, positioning the company well for continued performance:

Capital Management & Investment Considerations

Financial Institutions maintains strong capital ratios, with a Common Equity Tier 1 (CET1) ratio of 10.84% as of June 30, 2025, well above regulatory requirements. This capital position supports the company’s ability to pursue organic growth opportunities.

The company’s solid asset quality metrics reflect its disciplined credit culture, with non-performing loans to total loans at 0.72% as of June 30, 2025, a reduction from the previous quarter. The allowance for credit losses stood at 1.04% of total loans.

Financial Institutions presents a compelling investment case based on its consistent operating results, disciplined credit culture, and diversified business model:

Following the Q1 2025 earnings report in April, FISI stock rose 0.84% in after-hours trading. According to the fundamentals data provided, the stock closed at $27.18 on July 24, 2025, with a 52-week range of $20.97 to $29.79. The stock has experienced a 3.16% decline on the day of the presentation.

The company’s continued margin expansion and earnings growth, coupled with its strong capital position and credit quality, position Financial Institutions to navigate the current economic environment while pursuing strategic growth opportunities in its core markets of Upstate New York and the Mid-Atlantic region.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.