Financial Institutions, Inc. Q2 2025: Unpacking Contradictions in Loan Growth, Provisions, and Expense Management

Loan growth expectations, provision for loan losses, expense management and guidance, loan growth projections are the key contradictions discussed in Financial Institutions, Inc.'s latest 2025Q2 earnings call.



Net Income and Earnings Growth:
- Financial Institutions, Inc. reported a 4% increase in net income to $17.2 million in Q2 2025, resulting in a 5% increase in diluted earnings per share compared to the previous quarter.
- This growth was supported by a 14 basis point increase in net interest margin and approximately 5% and 19% growth in net interest income.

Loan Portfolio Dynamics:
- Total loans at the end of Q2 2025 were $4.54 billion, with average loans up 1% from the first quarter, driven by commercial business and commercial mortgage loans.
- Commercial business loans experienced a 2.4% increase during the quarter, while commercial mortgage loans grew 6% year-over-year, primarily due to expansion in upstate New York markets.

Deposit Trends:
- Period-end total deposits in Q2 2025 were approximately 4% lower than in Q1 2025, with an average deposit level similar to both the linked and year-ago quarters.
- The decrease was primarily due to seasonal public deposit portfolio fluctuations and continued outflows of Banking-as-a-Service (BaaS) deposits.

Nonperforming Assets and Charge-offs:
- Nonperforming commercial loans decreased by $7 million, but there were $2.5 million in commercial net charge-offs in the quarter.
- The increase in charge-offs was due to a specific CRE sponsor relationship with a multibank group foreclosure, reducing the related assets in nonperforming loans.