Exhibit 99.1 Financial Institutions, Inc. Reports Second Quarter Earnings WARSAW, N.Y., July 20 /PRNewswire-FirstCall/ -- Financial Institutions, Inc. (Nasdaq: FISI) today reported second quarter 2004 net income of $5.6 million, an increase of $1.9 million over second quarter 2003 net income of $3.7 million and an increase of $3.0 million over the $2.6 million earned in the first quarter of 2004. Diluted earnings per share for the second quarter of 2004 were $0.46, compared to $0.29 per share for the second quarter of 2003 and $0.20 for the first quarter of 2004. Net income for the first six months of 2004 was $8.2 million or $0.66 per share compared to $7.9 million or $0.64 per share for the same period in 2003. The improved earnings for the second quarter of 2004 were largely the result of a decrease in the provision for loan losses, which was $2.5 million for the second quarter of 2004 compared to $5.3 million for the second quarter of 2003 and $4.8 million for the first quarter of 2004. The Company also recorded a gain in the second quarter of 2004 of $1.2 million from the sale of its credit card portfolio. Peter G. Humphrey, President and CEO of Financial Institutions, Inc. (FII) stated: "The Company has focused considerable resources on managing credit risk and resolving credit quality issues. Our improved earnings are reflective of those efforts. Our overall level of nonperforming assets remains relatively high, but progress on resolution of our asset quality issues has gained momentum. Earnings have increased, our capital position is strong and we continue to penetrate markets we have recently entered." Nonperforming assets declined to $49.978 million at June 30, 2004, compared to $52.103 million at December 31, 2003 and $50.676 million at June 30, 2003. Net loan charge-offs for the second quarter of 2004 were $1.6 million, or 0.48% of average loans, down from $2.2 million, or 0.66% of average loans in the same period last year. The ratio of the allowance for loan losses to nonperforming loans was 63% at June 30, 2004, compared to 56% at December 31, 2003 and 53% at June 30, 2003. The ratio of the allowance for loan losses to total loans increased to 2.38% at June 30, 2004, compared to 2.16% at December 31, 2003, and 1.93% at June 30, 2003. In the second quarter of 2004, net interest income decreased 3% to $18.7 million, compared to $19.2 million in the second quarter of 2003. Net interest margin was 3.82% for the second quarter of 2004, a drop of 16 basis points from 3.98% for the same period last year and a decline of 4 basis points from the first quarter of 2004. The decline in net interest income and net interest margin results from the low interest rate environment coupled with decreased loan production. Total loans at June 30, 2004 were $1.302 billion, a decline of $43 million from December 31, 2003 and down $69 million from one year ago. The Company has been actively working to reduce credit risk in the loan portfolio. Noninterest income increased 18% in the second quarter of 2004 to $7.3 million compared to $6.2 million for the same period last year. The most significant item impacting noninterest income during the recent quarter was the $1.2 million gain from the sale of the credit card portfolio. This gain was partially offset by a decrease in mortgage banking income from $951,000 in the second quarter of 2003 to $601,000 in the current quarter, a direct result of the decline in the volume of residential mortgage loans sold relative to the record refinancing activity of 2003. Noninterest expense for the second quarter of 2004 totaled $15.7 million compared with $14.9 million for the second quarter of 2003. The increase in noninterest expense is attributable to higher credit collection costs and costs for additional lending and credit administration staff. The additional noninterest expenses, coupled with a slowing of revenue growth, are the principal factors in the increase in the Company's efficiency ratio to 59.51% for the three months ended June 30, 2004, compared to 53.41% for the same period a year ago. At June 30, 2004 the Company had total assets of $2.179 billion, a 1% decrease from $2.194 billion at June 30, 2003. Total deposits were $1.849 billion at the end of second quarter 2004, compared with $1.826 billion a year earlier. Total shareholders' equity at June 30, 2004 was $177 million compared to $186 million a year earlier. The decrease in shareholders' equity reflects a $16 million year-over-year decline in the fair value of securities available for sale, net of taxes. Book value per common share at June 30, 2004 was $14.20, a decrease of 6% from $15.11 at June 30, 2003. Common stock dividends of $0.16 per share were declared in the second quarter of 2004 and 2003. FII is the bank holding company parent of Wyoming County Bank, The National Bank of Geneva, Bath National Bank, and First Tier Bank and Trust. The four banks provide a wide range of consumer and commercial banking services to individuals, municipalities, and businesses through a network of 49 offices and 70 ATMs in Western and Central New York State. FII's Financial Services Group also provides diversified financial services to its customers and clients, including brokerage, trust, insurance and employee benefits and compensation consulting. More information on FII and its subsidiaries is available through the Company web site at http://www.fiiwarsaw.com. This press release may contain forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current beliefs or projections. Please refer to the Company's filings with the Securities and Exchange Commission for a summary of important factors that could affect the Company's forward-looking statements. The Company undertakes no obligation to revise these statements following the date of this press release. FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statement of Income (Dollars in thousands, except per share amounts) For the three months ended June 30, 2004 2003 $ % Change Change Interest income $26,414 $28,764 $(2,350) (8)% Interest expense 7,718 9,571 (1,853) (19)% Net interest income 18,696 19,193 (497) (3)% Provision for loan losses 2,516 5,311 (2,795) (53)% Net interest income after provision for loan losses 16,180 13,882 2,298 17% Noninterest income: Service charges on deposits 3,047 2,771 276 10% Financial services group fees and commissions 1,545 1,328 217 16% Mortgage banking activities 601 951 (350) (37)% Gain on sale and call of securities 24 151 (127) (84)% Gain on sale of credit card portfolio 1,177 - 1,177 N/A Other 870 959 (89) (9)% Total noninterest income 7,264 6,160 1,104 18% Noninterest expense: Salaries and employee benefits 9,068 8,036 1,032 13% Other 6,596 6,911 (315) (5)% Total noninterest expense 15,664 14,947 717 5% Income before income taxes 7,780 5,095 2,685 53% Income taxes 2,220 1,445 775 54% Net income 5,560 3,650 1,910 52% Preferred stock dividends 374 374 - -% Net income available to common shareholders $5,186 $3,276 $1,910 58% Memo: Taxable-equivalent net interest income $19,829 $20,332 $(503) (2)% Per common share data: Net income - basic $0.46 $0.29 $0.17 59% Net income - diluted $0.46 $0.29 $0.17 59% Cash dividends declared $0.16 $0.16 $- -% Book value $14.20 $15.11 $(0.91) (6)% Common shares outstanding: Weighted average shares - actual 11,183,193 11,159,140 Weighted average shares - diluted 11,245,386 11,255,623 Period end actual 11,195,535 11,156,017 Performance ratios, annualized: Return on average assets 1.01% 0.67% Return on average common equity 12.66% 7.82% Common dividend payout ratio 34.78% 55.17% Net interest margin (tax-equivalent) 3.82% 3.98% Efficiency ratio 59.51% 53.41% Asset quality data: Loans past due over 90 days and still accruing $1,685 $1,195 Restructured loans - 3,076 Nonaccrual loans 47,333 45,765 Other real estate owned 960 640 Total nonperforming assets $49,978 $50,676 Net loan charge-offs $1,578 $2,227 Asset quality ratios: Nonperforming loans to total loans 3.77% 3.65% Nonperforming assets to total loans and ORE 3.84% 3.70% Allowance for loan losses to total loans 2.38% 1.93% Allowance for loan losses to nonperforming loans 63% 53% Net loan charge-offs to average loans (annualized) 0.48% 0.66% Capital ratios: Average common equity to average total assets 7.43% 7.71% Leverage ratio 7.03% 6.83% Tier 1 risk-based capital ratio 10.75% 9.77% Risk-based capital ratio 12.01% 11.03% FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statement of Income (Dollars in thousands, except per share amounts) For the six months ended June 30, 2004 2003 $ % Change Change Interest income $52,731 $57,291 $(4,560) (8)% Interest expense 15,578 19,257 (3,679) (19)% Net interest income 37,153 38,034 (881) (2)% Provision for loan losses 7,312 8,609 (1,297) (15)% Net interest income after provision for loan losses 29,841 29,425 416 1% Noninterest income: Service charges on deposits 5,865 5,426 439 8% Financial services group fees and commissions 2,965 2,702 263 10% Mortgage banking activities 1,124 1,736 (612) (35)% Gain on sale and call of securities 74 442 (368) (83)% Gain on sale of credit card portfolio 1,177 - 1,177 N/A Other 1,912 1,956 (44) (2)% Total noninterest income 13,117 12,262 855 7% Noninterest expense: Salaries and employee benefits 18,220 16,917 1,303 8% Other 13,352 13,606 (254) (2)% Total noninterest expense 31,572 30,523 1,049 3% Income before income taxes 11,386 11,164 222 2% Income taxes 3,179 3,218 (39) (1)% Net income 8,207 7,946 261 3% Preferred stock dividends 748 748 - -% Net income available to common shareholders $7,459 $7,198 $261 4% Memo: Taxable-equivalent net interest income $39,411 $40,311 $(900) (2)% Per common share data: Net income - basic $0.67 $0.65 $0.02 3% Net income - diluted $0.66 $0.64 $0.02 3% Cash dividends declared $0.32 $0.32 $- -% Common shares outstanding: Weighted average shares - actual 11,177,082 11,133,222 Weighted average shares - diluted 11,245,792 11,234,187 Period end actual 11,195,535 11,156,017 Performance ratios, annualized: Return on average assets 0.75% 0.74% Return on average common equity 9.00% 8.75% Common dividend payout ratio 47.76% 49.23% Net interest margin (tax-equivalent) 3.84% 4.00% Efficiency ratio 60.32% 56.15% Net loan charge-offs to average loans (annualized) 0.82% 0.56% FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (Dollars in thousands) June 30 2004 2003 $ % Change Change ASSETS Cash, due from banks and interest-bearing deposits $49,953 $64,491 $(14,538) (23)% Federal funds sold 1,685 77,333 (75,648) (98)% Investment securities 727,958 594,583 133,375 22% Loans 1,301,878 1,370,653 (68,775) (5)% Allowance for loan losses (30,961) (26,518) (4,443) 17% Loans, net 1,270,917 1,344,135 (73,218) (5)% Goodwill 40,946 40,621 325 1% Other assets 87,319 73,160 14,159 19% Total assets $2,178,778 $2,194,323 $(15,545) (1)% LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand $273,033 $251,994 $21,039 8% Savings, money market, and int-bearing checking 808,870 799,572 9,298 1% Certificates of deposit 767,472 774,667 (7,195) (1)% Total deposits 1,849,375 1,826,233 23,142 1% Short-term borrowings 32,969 68,985 (36,016) (52)% Long-term borrowings 83,451 73,216 10,235 14% Junior subordinated debentures 16,702 - 16,702 N/A Trust preferred securities - 16,200 (16,200) (100)% Other liabilities 19,518 23,429 (3,911) (17)% Total liabilities 2,002,015 2,008,063 (6,048) -% Shareholders' equity: Preferred equity 17,734 17,735 (1) -% Common equity 159,029 168,525 (9,496) (6)% Total shareholders' equity (1) 176,763 186,260 (9,497) (5)% Total liabilities and shareholders' equity $2,178,778 $2,194,323 $(15,545) (1)% (1) Includes the after-tax impact of net unrealized gains (losses) on investment securities classified as available for sale of $(2,601) and $13,604 at June 30, 2004 and 2003, respectively. FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Average Statements of Financial Condition (Dollars in thousands) For the three months ended June 30, 2004 2003 $ % Change Change ASSETS Cash, due from banks and interest-bearing deposits $43,147 $42,814 $333 1% Federal funds sold 37,387 40,512 (3,125) (8)% Investment securities 735,835 647,383 88,452 14% Loans 1,308,863 1,359,311 (50,448) (4)% Allowance for loan losses (30,493) (23,818) (6,675) 28% Loans, net 1,278,370 1,335,493 (57,123) (4)% Goodwill 40,746 40,621 125 -% Other assets 81,135 72,188 8,947 12% Total assets $2,216,620 $2,179,011 $37,609 2% LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand $261,293 $236,221 $25,072 11% Savings, money market, and int-bearing checking 840,419 804,196 36,223 5% Certificates of deposit 778,605 766,729 11,876 2% Total deposits 1,880,317 1,807,146 73,171 4% Short-term borrowings 36,984 64,568 (27,584) (43)% Long-term borrowings 85,395 82,443 2,952 4% Junior subordinated debentures 16,702 - 16,702 N/A Trust preferred securities - 16,200 (16,200) (100)% Other liabilities 14,763 22,940 (8,177) (36)% Total liabilities 2,034,161 1,993,297 40,864 2% Shareholders' equity: Preferred equity 17,734 17,737 (3) -% Common equity 164,725 167,977 (3,252) (2)% Total shareholders' equity 182,459 185,714 (3,255) (2)% Total liabilities and shareholders' equity $2,216,620 $2,179,011 $37,609 2% FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES Consolidated Average Statements of Financial Condition (Dollars in thousands) For the six months ended June 30, 2004 2003 $ % Change Change ASSETS Cash, due from banks and interest-bearing deposits $44,043 $42,890 $1,153 3% Federal funds sold 44,766 36,802 7,964 22% Investment securities 695,600 643,798 51,802 8% Loans 1,318,997 1,344,732 (25,735) (2)% Allowance for loan losses (29,787) (22,896) (6,891) 30% Loans, net 1,289,210 1,321,836 (32,626) (2)% Goodwill 40,683 40,612 71 -% Other assets 79,647 71,122 8,525 12% Total assets $2,193,949 $2,157,060 $36,889 2% LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand $256,937 $232,379 $24,558 11% Savings, money market, and int-bearing checking 818,768 801,667 17,101 2% Certificates of deposit 776,140 745,664 30,476 4% Total deposits 1,851,845 1,779,710 72,135 4% Short-term borrowings 40,692 62,551 (21,859) (35)% Long-term borrowings 85,732 92,286 (6,554) (7)% Junior subordinated debentures 16,702 - 16,702 N/A Trust preferred securities - 16,200 (16,200) (100)% Other liabilities 14,530 22,714 (8,184) (36)% Total liabilities 2,009,501 1,973,461 36,040 2% Shareholders' equity: Preferred equity 17,734 17,740 (6) -% Common equity 166,714 165,859 855 1% Total shareholders' equity 184,448 183,599 849 -% Total liabilities and shareholders' equity $2,193,949 $2,157,060 $36,889 2% SOURCE Financial Institutions, Inc. -0- 07/20/2004 /CONTACT: Ronald A. Miller, Senior Vice President and Chief Financial Officer of Financial Institutions, +1-585-786-1102/ /Photo: http://www.newscom.com/cgi-bin/prnh/20030114/FISILOGO / /Web site: http://www.fiiwarsaw.com / (FISI) CO: Financial Institutions, Inc. ST: New York IN: FIN SU: ERN