 WARSAW, N.Y., July 29, 2020 GLOBE NEWSWIRE -- Financial Institutions, Inc. Nasdaq:FISI the Company we or us, parent company of Five Star Bank the Bank, SDN Insurance Agency, LLC SDN, Courier Capital, LLC Courier Capital and HNP Capital, LLC HNP Capital, today reported financial and operational results for the second quarter ended June 30, 2020.Net income for the quarter was 11.1 million compared to 11.4 million for the second quarter of 2019. After preferred dividends, net income available to common shareholders was 10.8 million for the quarter, or 0.67 per diluted share, compared to 11.0 million, or 0.69 per diluted share, for the second quarter of 2019.Pre-tax pre-provision income1 was 17.3 million for the quarter compared to 16.7 million for the second quarter of 2019.President and Chief Executive Officer Martin K. Birmingham stated, In our new normal of working together yet apart, we have delivered uninterrupted critical banking services to our customers. We implemented an array of actions for consumers and businesses, helping 1,700 small businesses and 18,000 small business employees through the Small Business Administration Payroll Protection Program PPP and thousands of consumers through our COVID-19 CARES relief efforts. This was accomplished with 65 percent of our associates working from home or at remote sites.We could not have accomplished this without a dedicated workforce. I thank all our associates for their continued commitment to our company, our customers, our communities and each other. They have worked diligently to deliver quality care to our customers in a challenging environment adapting to new working environments and demonstrating our organizations ability to efficiently operate in a fast-changing world.To provide enhanced digital capabilities during a time when many customers are hesitant or unable to visit a branch, we moved forward with the launch of our new digital banking platform. Now more than ever, consumers and businesses need the ability to do their banking anywhere and anytime and have access to a comprehensive overview of their finances in one convenient location. Five Star Bank Digital Banking represents a major upgrade from the previous platform, leveraging the latest technology to provide new features and financial tools that significantly enhance the digital banking experience for businesses and individuals. This platform was successfully rolled out during the second quarter.We also developed a re-entry plan. Our approach will be unique to each of our offices to keep customers and associates safe, the Bank resilient, support the community and remain responsive to direction from New York State and the Centers for Disease Control. We have proven during the pandemic that we are flexible, can work remotely and have the resiliency and redundancy to maintain services, and we will continue all of this as we move forward. We fully expect and are committed to maintaining remote access for the foreseeable future, and that will result in a less dense workplace and flexibility should the situation turn negative again. We were thoughtful going in at the start of this pandemic and are being thoughtful as we proceed.I am pleased that we were able to deliver strong net income and pre-tax pre-provision income in the quarter, despite headwinds. Our diversified revenue contributed to this outcome, as well as our efforts in helping existing and new customers obtain nearly 270 million of PPP loans in the quarter. The stability of our markets is also a strength for us in these challenging times.We believe our loan loss reserves, combined with strong levels of capital and liquidity, position us well to continue to deliver services to our customers in these unprecedented times. However, much uncertainty remains because of COVID-19 and the future impact it may have on the economy. We will pay close attention to conditions across our markets, the United States and the global economy to address any deterioration promptly.Digital BankingDuring the second quarter of 2020, Five Star Bank completed the multi-phase launch of a new online and mobile platform Five Star Bank Digital Banking. The new platform provides a single dashboard to make payments and deposits, transfer and send money, create budgets, set financial goals and easily integrate external investment, loan and other transactional accounts. Consumers can access a comprehensive financial tool to do all their banking from home, and business owners and employees who may be working remotely can also access powerful financial tools to assist with daily finances.Enterprise Standardization ProgramThe Companys enterprise standardization program is focused on improving operational efficiency and enhancing future profitability. On July 17, 2020, in connection with the program, Five Star Bank announced changes to adapt to a full-service branch model to streamline retail branches to better align with shifting customer needs and preferences. The transformation will result in six branch closures and a reduction in staffing.The announcement was the result of a nine-month comprehensive assessment of all lines of business and functional areas, conducted in partnership with a leading process improvement organization. The data-driven analysis identified, among other things, overlapping service areas, automation opportunities and streamlining of processes and operations that would enhance customer experiences and facilitate the long-term sustainability of current and future branches.The announced consolidations represent about ten percent of the branch network and impact approximately six percent of the total workforce. Where possible, those impacted were offered alternative roles or the opportunity to apply for open positions in other areas of the company. Separated associates will receive a comprehensive severance package based on tenure.The enterprise standardization program has only partially concluded as we continue to evaluate activities and functions across the organization, focusing on ways to improve operational efficiency while enhancing the employee and customer experience.Net Interest Income and Net Interest MarginNet interest income was 34.2 million for the quarter, an increase of 1.1 million from the first quarter of 2020 and 1.7 million higher than the second quarter of 2019. Average interest-earning assets for the quarter were 4.27 billion, 219.5 million higher than the first quarter of 2020 and 265.5 million higher than the second quarter of 2019. The increase was the result of loan growth, driven by PPP loans which had an average balance of 176.7 million for the quarter. Net interest margin was 3.23, eight basis points lower than the first quarter of 2020 and five basis points lower than the second quarter of 2019. The decline was primarily the result of lower yields on PPP loans, which negatively impacted the earning-assets yield by approximately six basis points.Noninterest IncomeNoninterest income was 9.8 million for the quarter compared to 10.0 million in the first quarter of 2020 and 9.2 million in the second quarter of 2019. Service charges on deposits of 480 thousand was 1.1 million lower than the first quarter of 2020 and 1.3 million lower than the second quarter of 2019. The decreases are the result of the Companys COVID-19 relief initiatives of waiving or eliminating fees, implemented on March 23, 2020. Insurance income of 819 thousand was 530 thousand lower than the first quarter of 2020, primarily due to contingent revenue received in the first quarter each year. Insurance income was 53 thousand lower than the second quarter of 2019. Investment advisory fees of 2.3 million was 5 thousand higher than the first quarter of 2020 and 76 thousand lower than the second quarter of 2019. The decrease from the second quarter of 2019 was primarily the result of market volatility. Investments in limited partnerships generated a loss of 244 thousand in the quarter compared to income of 213 thousand in the first quarter of 2020 and income of 144 thousand in the second quarter of 2019. The Company has made several investments in limited partnerships, primarily small business investment companies, and accounts for these investments under the equity method. Income from these investments fluctuates based on the maturity and performance of the underlying investments. Income from derivative instruments, net was 1.9 million compared to 746 thousand in the first quarter of 2020 and a loss of 45 thousand in the second quarter of 2019. The increase as compared to both periods was primarily the result of an increase in the number and value of interest rate swap transactions executed. A net gain on investment securities of 674 thousand was recognized in the quarter compared to a net gain of 221 thousand in the first quarter of 2020 and a net gain of 166 thousand in the second quarter of 2019. The net gain in the current quarter is attributable to the management of premium risk, largely achieved through the sale of 25.9 million of fixed rate mortgage backed securities with higher expected prepayment speeds. Proceeds were reinvested in current coupon bonds, with lower anticipated prepayment behavior.Noninterest ExpenseNoninterest expense was 26.7 million in the quarter compared to 27.7 million in the first quarter of 2020 and 25.0 million in the second quarter of 2019. Salaries and employee benefits expense of 15.1 million was relatively unchanged from the first quarter of 2020 and 1.8 million higher than the second quarter of 2019. 