Financial Institutions, Inc. (‘FII’) operates as a financial holding company for Five Star Bank (‘FSB’ or ‘the bank’).
The bank provides a full range of banking services to consumer, commercial, and municipal customers in Western and Central New York, and commercial loans in the Mid-Atlantic region, through a loan production office in Ellicott City, Maryland (a suburb of Baltimore, Maryland), and the Central New York region, through an office in Syracuse, New York; and Courier Capital LLC, refe...
Financial Institutions, Inc. (‘FII’) operates as a financial holding company for Five Star Bank (‘FSB’ or ‘the bank’).
The bank provides a full range of banking services to consumer, commercial, and municipal customers in Western and Central New York, and commercial loans in the Mid-Atlantic region, through a loan production office in Ellicott City, Maryland (a suburb of Baltimore, Maryland), and the Central New York region, through an office in Syracuse, New York; and Courier Capital LLC, referred to as ‘Courier Capital,’ which provides customized investment management, investment consulting, and retirement plan services to individuals, businesses, institutions, foundations, and retirement plans.
Prior to April 1, 2024, the company also owned SDN Insurance Agency, LLC, referred to as ‘SDN,’ which sold various premium-based insurance policies on a commission basis to commercial and consumer customers. On April 1, 2024, the company announced and closed the sale of the assets of SDN to NFP Property & Casualty Services, Inc., a subsidiary of NFP Corp.
Five Star Bank
The bank is a New York-chartered bank that has its headquarters at 55 North Main Street, Warsaw, NY, with various full-service banking offices in the New York State counties of Allegany, Cattaraugus, Cayuga, Chemung, Erie, Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Steuben, Wyoming, and Yates, as well as commercial loan production offices in Baltimore, Maryland, and Syracuse, New York, serving the Mid-Atlantic and Central New York regions, respectively.
The bank offers deposit products, which include checking and NOW accounts, savings accounts, and certificates of deposit, as its principal source of funding. The bank’s deposits are insured up to the maximum permitted by the Deposit Insurance Fund (the ‘DIF’) of the Federal Deposit Insurance Corporation (‘FDIC’). The bank offers a variety of loan products to its customers, including commercial and consumer loans.
Courier Capital, LLC
Courier Capital is an SEC-registered investment advisory and wealth management company founded in 1967 and headquartered in Western New York, with offices in Buffalo, Rochester, and Jamestown, New York, and Pittsburgh, Pennsylvania. As of December 31, 2024, Courier Capital offered customized investment advice, wealth management, investment consulting, and retirement plan services to individuals, businesses, and institutions.
Five Star REIT, Inc.
Five Star REIT, Inc. (‘Five Star REIT’), a wholly-owned subsidiary of the bank, operates as a real estate investment trust that primarily holds residential mortgages and commercial real estate loans. Five Star REIT provides additional flexibility and planning opportunities for the business of the bank.
Business Strategy
The company’s business strategy has been to maintain a community bank philosophy, which consists of focusing on and understanding the individualized banking and other financial services needs of individuals, municipalities, and businesses of the communities surrounding its primary service area. The company leverages the retail branch network and customer contact center to build trust and credibility, provide personal financial education and advice, offer convenience, and bridge digital and physical channels. The company has evolved to meet changing customer needs by offering complementary physical, digital, and virtual channels. The company focuses on technology to provide solutions that fit its customer preferences for transacting business with it.
The company will continue to explore market expansion opportunities that complement current market areas as opportunities arise. The company’s primary focus will be on increasing the bank’s market share within existing markets, while taking advantage of potential growth opportunities within its non-interest income line of business by acquiring businesses that can be incorporated into existing operations. Consequently, the company continues to explore acquisition opportunities in these activities.
Lending Activities
The company offers a broad range of loans, including commercial business and revolving lines of credit, commercial mortgages, equipment loans, residential mortgage loans, home equity loans and lines of credit, automobile loans, and personal loans. Newly originated and refinanced fixed-rate residential mortgage loans are either retained in its portfolio or sold to the secondary market with servicing rights retained.
Commercial Lending
The company primarily originates commercial business loans and lines of credit in its market areas and underwrites them based on the borrower’s ability to service the loan from operating income. The company offers a broad range of commercial lending products, including term loans and lines of credit. Short- and medium-term commercial loans, primarily collateralized, are made available to businesses for working capital (including inventory and receivables), business expansion (including acquisition of real estate, expansion, and improvements), and the purchase of equipment. As a general practice, where possible, a first position collateral lien is placed on any available real estate, equipment, or other assets owned by the borrower, and a personal guarantee of the owner is obtained.
The company also offers commercial mortgage loans to finance the purchase or renovation of real property, which generally consists of loans to businesses or developers seeking to construct or renovate commercial properties, commercial mortgages for the purpose of purchasing or renovating existing residential multifamily properties, and commercial owner-occupied properties, in which the borrowing entity occupies at least 50% of the property, or other non-owner occupied commercial properties. Commercial construction loans typically have a 3-year term or less, while other commercial mortgages generally have a term of up to 10 years. The majority of the company’s commercial mortgage loans are secured by first liens on the real estate and are typically amortized over a 15- to 30-year period. The underwriting analysis includes credit verification, appraisals, and a review of the borrower’s financial condition and repayment capacity.
The company utilizes government loan guarantee programs when available and appropriate.
Government Guarantee Programs
The company participates in government loan guarantee programs offered by the SBA, the U.S. Department of Agriculture, Rural Economic and Community Development, and Farm Service Agency, among others. As of December 31, 2024, the company had loans with an aggregate principal balance of $23.3 million that were covered by guarantees under these programs.
Residential Real Estate Lending
The company originates fixed and variable rate one-to-four family residential mortgage loans and lines collateralized by owner-occupied properties located in its market areas. The company offers a variety of real estate loan products, including home improvement loans, closed-end home equity loans, and home equity lines of credit, which are generally amortized over periods of up to 30 years. Loans collateralized by one-to-four family residential real estate generally have been originated in amounts of no more than 80% of appraised value or have mortgage insurance. Mortgage title insurance and hazard insurance are normally required. The residential real estate lines portfolio primarily consists of variable rate lines. Approximately 92% of the loans and lines in its residential real estate portfolios were in first lien positions as of December 31, 2024.
The company sells certain one-to-four family residential mortgages to the secondary mortgage market and typically retains the right to service the mortgages. The company typically follows the underwriting and appraisal guidelines of the secondary market, including the Federal Home Loan Mortgage Corporation (‘FHLMC’) and the Federal Housing Administration, and services the loans in a manner that satisfies the secondary market agreements.
Consumer Lending
The company offers a variety of loan products to its consumer customers, including automobile loans, secured installment loans, and other types of secured and unsecured personal loans. The company originates indirect consumer loans for a mix of new and used vehicles, predominantly through franchised new car dealers. The consumer indirect loan portfolio primarily consists of loans with terms that typically range from 36–84 months. The company has developed relationships with franchised new car dealers in Western, Central, and the Capital District of New York. The consumer indirect loan portfolio primarily consists of fixed-rate loans with relatively short durations. Effective January 1, 2024, the company exited the Pennsylvania automobile market in order to align its focus more fully around its core Upstate New York market.
The company also originates other consumer automobile loans, recreational vehicle loans, boat loans, personal loans (collateralized and uncollateralized), and deposit account collateralized loans. The terms of these loans typically range from 12–60 months and vary based upon the nature of the collateral and the size of the loan. A portion of the consumer lending program is underwritten on a secured basis using the customer’s financed automobile, mobile home, boat, or recreational vehicle as collateral.
Through the company’s BaaS line of business, the company originated secured consumer residential solar loans. The terms of these loans typically ranged from 7–25 years.
Deposits
The company maintains a full range of deposit products and accounts to meet the needs of the residents and businesses in the company’s primary service area. Products include an array of checking and savings account programs for individuals, municipalities, and businesses, including money market accounts, certificates of deposit, sweep investment capabilities, as well as Individual Retirement Accounts and other qualified plan accounts. The company relies primarily on competitive pricing of its deposit products, customer service, and long-standing relationships with customers to attract and retain these deposits, and seeks to make its services convenient to the community by offering a choice of several delivery systems and channels, including telephone, mail, online, automated teller machines (‘ATMs’), debit cards, point-of-sale transactions, automated clearing house transactions (‘ACH’), ITMs, remote deposit, and mobile banking via telephone or wireless devices. The company also takes advantage of the use of technology by offering business customers banking access via the Internet and various advanced cash management systems.
The company also participates in reciprocal deposit programs, which enable depositors to receive FDIC insurance coverage for deposits exceeding the maximum insurable amount. Through these programs, deposits in excess of the maximum insurable amount are placed with multiple participating financial institutions.
Investment Portfolio
As of December 31, 2024, the company’s investment portfolio included U.S. government agency and government-sponsored enterprise (GSE) securities, mortgage-backed securities, such as agency and non-agency mortgage-backed securities, and other debt securities.
Customer
The company’s core customers are primarily small- to medium-sized businesses, individuals, and community organizations who prefer to build banking, insurance, and wealth management relationships with a community bank that offers high-quality, competitively-priced products and services with personalized service.
Supervision And Regulation
The company is subject to comprehensive regulation by the Board of Governors of the Federal Reserve System, frequently referred to as the Federal Reserve Board (‘FRB’ or ‘Federal Reserve’), under the Bank Holding Company Act (the ‘BHC Act’), as amended by, among other laws, the Gramm-Leach-Bliley Act of 1999 (the ‘GLBA’) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘Dodd-Frank Act’).
The company is registered with the Federal Reserve as a financial holding company (‘FHC’). The company must file reports with the FRB and submit such additional information as the FRB may require, and the company’s holding company and non-banking affiliates are subject to examination by the FRB. Under federal regulation and FRB policy, an FHC must serve as a source of strength for its subsidiary banks.
The bank is organized under the laws of the state of New York. It is a member of the Federal Reserve System, and its deposits are insured under the Deposit Insurance Fund (‘DIF’) of the FDIC up to applicable legal limits. The lending, investment, deposit-taking, and other business authority of the bank is governed primarily by state and federal law and regulations, and the bank is prohibited from engaging in any operations not authorized by such laws and regulations. The bank is subject to extensive regulation, supervision, and examination by, and the enforcement authority of, the New York State Department of Financial Services (the ‘NY DFS’) and the FRB, and to a lesser extent by the FDIC, as its deposit insurer.
The bank is organized under the laws of the state of New York. It is a member of the Federal Reserve System, and its deposits are insured under the Deposit Insurance Fund (‘DIF’) of the FDIC up to applicable legal limits.
The company and the bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve. The current risk-based capital standards applicable to the company and the bank are based on the final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision.
The bank is a member of the FDIC and pays an insurance premium to the FDIC to fund the DIF based upon the bank’s assessable assets on a quarterly basis. Deposits are insured up to applicable limits by the FDIC, and such insurance is backed by the full faith and credit of the U.S. Government.
In addition to the laws and regulations discussed herein, the bank is also subject to certain federal and state laws and regulations that are designed to protect consumers in transactions with banks. Many of these laws are implemented through regulations issued by the Consumer Financial Protection Bureau (the ‘CFPB’), though, for institutions of the bank’s asset size, compliance with those regulations is subject to supervision and examination by the federal banking regulator, i.e., the FRB in the bank’s case. While the list set forth herein is not exhaustive, these laws include, among others, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, and these laws’ respective state-law counterparts, as well as state usury laws and federal and state laws regarding unfair, deceptive, and abusive acts and practices.
Pursuant to the federal Community Reinvestment Act (the ‘CRA’), and its New York state analogue, the bank is obligated, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The Federal Reserve Bank of New York and NY DFS periodically assess the bank’s record of performance under the CRA and the New York state analogue, respectively, and issue one of the following ratings: ‘Outstanding,’ ‘Satisfactory,’ ‘Needs to Improve,’ or ‘Substantial Noncompliance.’
The most recently completed evaluation of the bank’s performance under the CRA was conducted by the Federal Reserve Bank of New York in April 2022 and resulted in an overall rating of ‘Satisfactory.’
The last CRA evaluation completed by NY DFS of New York’s analogue was in March 2022, and this performance evaluation resulted in an overall rating by the NY DFS of ‘Satisfactory.’
The company is subject to ongoing compliance and reporting requirements of the NY DFS.
Courier Capital is a provider of investment consulting and financial planning services and, as such, is considered an ‘investment adviser’ under the U.S. Investment Advisers Act of 1940, as amended (the ‘Advisers Act’).
Courier Capital is subject to each of these obligations and, as applicable, restrictions, and is also subject to examination by the SEC’s Office of Compliance, Investigations, and Examinations to assess its overall compliance with the Advisers Act and the effectiveness of its internal controls.
History
Financial Institutions, Inc. was founded in 1817. The company was incorporated in 1931 under the laws of New York State.
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