FINANCIAL INSTITUTIONS INC
For the period ended May 28, 2025. Filed Apr 14, 2025.
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May 28, 2025 · Filed Apr 14, 2025
Contents
Program Elements and Pay Decisions
Base Salary
We review the base salaries of our NEOs regularly and whenever there is a change in NEOs. In considering base salary adjustments for 2024, the MD&C Committee reviewed the individual performance of our NEOs, their contributions to Company performance, and changes in level of responsibility, and also considered updated competitive market data provided by the MD&C Committee’s independent compensation consultant to understand the relationship of our NEO compensation package to those of similarly-positioned executives in the market, as described in our compensation philosophy.
Base salary for all employees, including NEOs, is reviewed annually to align with performance evaluations and incentive awards and to reinforce our pay-for-performance philosophy. In 2024, base salaries for all NEOs were increased as a result of individual performance and to ensure total compensation remained within the competitive range indicated in the competitive market assessment.
We approved the following base salary adjustments in 2024:
| Name | 12/31/2023Annual Salary | 12/31/2024Annual Salary(1) | Total % Change |
|---|---|---|---|
| Martin K. Birmingham | $717,077 | $738,589 | 3.0% |
| W. Jack Plants II | $350,700 | $361,221 | 3.0% |
| Kevin B. Quinn | $309,000 | $318,270 | 3.0% |
| Samuel J. Burruano, Jr. | $288,000 | $296,640 | 3.0% |
| Laurie R. Collins | $267,000 | $275,010 | 3.0% |
(1)
A base pay adjustment of 3% was awarded to all NEOs on March 4, 2024 based on 2023 individual performance and the general increase of the cost of labor.
Executive Incentive Plan
The EIP is a performance-based cash plan designed to reward eligible executives, including our participating NEOs, for the achievement of corporate financial goals and demonstrated successful individual performance. The primary objective of the EIP is to provide participating NEOs with a direct link between their compensation and attainment of pre-established annual performance goals. We believe that the performance measures under the EIP contribute to our attaining and surpassing our annual business plan and achieving long-term strategic goals.
The 2024 EIP utilized the same metrics used to calculate the funding of the award pool as last year with the exception of deposit growth. The definition for the deposit growth metric was updated to reflect Non-Public Deposit Growth, which replaced Core Deposit Growth at the same 20% weighting. Non-Public Deposit Growth considers core deposits, coupled with time deposits. In lower interest rate environments, time deposits are often viewed as a non-core funding source. However, when the yield curve is inverted, like 2024, alternative funding sources and deposit acquisition are highly competitive, so time deposits present opportunities to acquire customers and provide cross-sell opportunities. Therefore the performance metric was updated from core deposit growth to non-public deposit growth.
The MD&C Committee has the ability to adjust the final calculated award pool based on performance levels of the executive team as measured on their Executive Performance Scorecards in order to reward individual and team performance. Executive performance scorecards are developed jointly on an annual basis between the CEO, NEOs and the MD&C Committee with a 50/50 weighting of individual executive and executive team goals directly aligned to our strategic plan.
Incentive Opportunity
We set target incentive opportunities and the total award pool under the EIP based on a percentage of base salary that reflects a market-level target compensation opportunity for each participating executive. The threshold and maximum percentages reflect both our review of market practices and judgment of the level of award opportunity appropriate for the performance goals established. The differences in opportunity also reflect each executive’s relative influence on achieving our performance goals based on his or her position. The actual amount of an executive’s award is based on our business results, subject to adjustment based on the executive’s individual performance within a total award pool.
40 Financial Institutions, Inc.
| 2024 EIP Award Opportunity as a Percent of Salary(Interpolated between performance levels) | |||
|---|---|---|---|
| Name | Threshold | Target | Maximum |
| Martin K. Birmingham | 25.0% | 50% | 75.0% |
| W. Jack Plants II | 20.0% | 40% | 60.0% |
| Kevin B. Quinn | 20.0% | 40% | 60.0% |
| Samuel J Burruano, Jr. | 17.5% | 35% | 52.5% |
| Laurie R. Collins | 17.5% | 35% | 52.5% |
Gateway Performance Criteria
Our EIP for 2024 required the following gateway performance criteria to be achieved for executives to receive payment of an award under the plan:
The Bank must achieve a Tier 1 Capital Ratio determined by the MD&C Committee following the US Basel III capital framework. (The gateway performance requirement was set at 8.5% and the actual ratio as of December 31, 2024 was 11.2%.)
With appropriate discretion in the case of separation or retirement, executives must be employed at the time of payment.
The Tier 1 Capital Ratio gateway metric was met.
Company Performance Goals and Results
Performance in the EIP for 2024 was measured based on four financial metrics that the MD&C Committee chose to reward our NEOs for generating profits, growing outstanding balances for both total loans and non-public deposits, and maintaining strong credit quality: PPNI, Total Loan Growth, Total Non-Public Deposit Growth and Net Charge-offs. The MD&C Committee set the goals for each performance measure based on our performance expectations in the long-term strategic plan and the 2024 operating plan in early 2024. Achievement of each performance measure is weighted to calculate the overall performance measurement relative to target. In the first quarter of 2024, the MD&C Committee established weighting, threshold, target, and maximum levels for each performance measure after analyzing the performance required and the potential shareholder value created at each award level, and consulting with its independent compensation consultant.
Our 2024 performance goals and results:
| Weighting of · 2024 EIP Performance Goals · 2024 | ||||||
|---|---|---|---|---|---|---|
| Performance · Actual · Weighted | ||||||
| Performance Measure | Measure | Threshold | Target | Maximum | Results | Performance |
| PPNI(1) ($MM) | 40% | $44.87 | $59.83 | $68.80 | $54.47 | 32.8% |
| Total Loan Growth | 20% | 0.94% | 1.45% | 1.81% | 0.41% | — |
| Non-Public Deposit Growth | 20% | 4.22% | 6.49% | 8.11% | 3.92% | — |
| Net Charge-Off Ratio | 20% | 0.43% | 0.34% | 0.26% | 0.20% | 30.0% |
(1)
PPNI is a non-GAAP measure that management and the MD&C Committee believe is useful in understanding our financial performance and condition. The actual performance of this metric was adjusted by the MD&C Committee to remove the after-tax impact of the loss on the fourth quarter 2024 sale of investment securities and the after-tax impact of the fourth quarter 2024 provision for litigation settlement. Refer to the GAAP to Non-GAAP Reconciliations in Appendix A.
2025 Proxy Statement 41
We Consider Individual Performance
We believe that the individual performance of our NEOs is relevant in all compensation decisions. We formally consider individual performance in determining annual merit base salary changes and in contemplating discretionary adjustments to NEO EIP payouts within the total award pool.
We measure individual performance for our NEOs using an annual goal-setting process set forth on each executive’s performance scorecard that aligns individual goals with our annual business plan, our strategic plan, and other key strategic initiatives. Individual performance is assessed after completion of the year.
Individual performance adjustments reflect the level of achievement for our NEOs against annual individual and enterprise performance goals. Individual performance for all employees, including our NEOs, is assessed using an annual performance management process that is overseen by the MD&C. Goals are established at the beginning of the year and performance is assessed throughout the year with MD&C oversight. Performance goals align our annual business plans and long-term strategic plans, and include metrics focused on financial and operating results, business development, governance and risk management, people and organizational development, and customer experience. At the end of the year, employee performance is assessed against these goals and a performance rating is assigned.
Our NEOs’ individual goals and performance considerations included:
| NEO | Individual Goal and Performance Considerations |
|---|---|
| Martin K. Birmingham | •Guided refinement and execution of the Company’s long-term strategic plan in support of its vision of being a high-performing community bank offering a simple, connected, and trusted experience in its markets, including by simplifying the Company’s business lines through the wind-down of the Company’s BaaS offering•Led a successful and oversubscribed public common stock offering that generated net proceeds of more than $100 million, allowing for the execution of a strategic restructuring of the balance sheet and supporting a significant increase to tangible common equity•Successfully executed the sale of the Company’s insurance brokerage to a global firm, generating outstanding financial outcomes to the Company•Maintained strong internal and external relations regarding the first quarter 2024 fraud loss•Delivered quality core earnings results, as well as meaningful growth in stock price through year-end 2024, delivering positive returns to shareholders•Invested in the human capital bench and process, including through strategic hires and continued internal leadership development •Led continued strong community engagement across the Bank’s footprint |
| W. Jack Plants II | •Assumed executive leadership responsibility over Technology, Operations, Indirect Lending and BaaS, drove forward-progress on key initiatives, and led thorough evaluation of BaaS line of business, supporting management’s and the Board’s decision to wind down the platform•Oversaw, together with the CEO, the Company’s public common stock offering, resulting in net proceeds of more than $100 million and engagement with many new and existing investors, and led execution of the subsequent balance sheet restructuring•Co-managed the insurance subsidiary asset sale, together with the Chief Legal Officer, resulting in outstanding financial outcomes and meaningful tangible equity accretion •Implemented a capital stress testing framework to link loss absorbing capital to CECL modeling assumptions for industry specific risks, coupled with the implementation of a formal Capital & Dividend Policy that includes credit concentration limits relative to regulatory capital•Established a process for repricing the money market product resulting in significant retention of deposits brought in through the initial campaign in 2023 |
| Kevin B. Quinn | •Continued to support commercial growth, including within Mid-Atlantic and Central New York regions, where the Company established loan production offices in recent years•Integral in the development of updated policies and processes that strengthen controls and risk mitigation while also improving customer experience•Continued to execute on established roadmap for growth within Treasury Management products and services•Further strengthened business development relationships within key markets for growth |
42 Financial Institutions, Inc.
| NEO | Individual Goal and Performance Considerations |
|---|---|
| Samuel J. Burruano, Jr. | •Leadership of the Company’s legal response to its first quarter 2024 deposit-related fraud event•Provided legal and governance support on significant projects and initiatives, including the successful execution of the public common stock offering that generated net proceeds of more than $100 million, the announced plan to wind down the BaaS line of business in a timely and orderly manner, and the transition of branch-delivered retail wealth offerings to a new partner, while also continuing to advise on other corporate matters and strategic initiatives•Co-managed the insurance subsidiary asset sale, together with CFO, resulting in outstanding financial outcomes and meaningful tangible equity accretion |
| Laurie R. Collins | •Made improvements to the talent processes in support of nurturing a performance culture and strengthening the talent bench•Oversaw significant enhancements to the training and capability programs including in the areas of retail, operations, corporate responsibility and escalation•Drove increased employee engagement in the community, resulting in establishing a number of key partnerships within footprint, expansion of the Company’s annual Work of Heart volunteerism event, and over 6,000 recorded community service hours in 2024•Led efforts around employee engagement via surveys, communications, and recognition programs, resulting in Great Place to Work Certification two years in a row |
Calculation of EIP Awards
The EIP award pool is the aggregate funding percentage for the performance period as determined by four financial metrics, multiplied by the aggregate sum of the target amount of each EIP participant who was employed on the last day of the performance period or who is entitled to a pro rata award for the performance period, and further multiplied by the individual performance factor.
The MD&C Committee, in consultation with the CEO and the Chief Human Resource Officer (for awards other than their own), determines and approves the amount of each EIP participant’s award, if any, considering the participant’s target amount and the participant’s absolute and relative individual performance against their executive scorecard during the plan year. The aggregate total of all participants’ earned amounts for the plan year may not exceed the actual award pool as determined by four financial metrics and any adjustments to the pool that were approved to reward individual and team performance, unless the MD&C Committee determined otherwise.
In 2024, there were seven participants in the EIP (our five NEOs and two other EMC participants). Discretionary adjustments for individual and executive team performance were applied to the financially-driven formulaic payout as shown in the table below.
2025 Proxy Statement 43
Awards for 2024 Performance
Company performance goal achievement for 2024 was as follows: between Threshold and Target for PPNI, below Threshold for Loan Growth, below Threshold for Total Non-Public Deposit Growth and above Maximum for Net Charge-offs, yielding a calculated Award Percentage Achievement of 62.8% of the target award.
2024 EIP awards are summarized below:
| NEO | Base Salary | Target Award | AwardPercentageAchievement (1) | CalculatedAward | IndividualPerformanceAdjustment (2) | TotalIncentive |
|---|---|---|---|---|---|---|
| Martin K. Birmingham | $738,589 | 50.0% | 62.8% | $232,047 | $56,003 | $288,050 |
| W. Jack Plants II | $361,221 | 40.0% | 62.8% | $90,790 | $21,911 | $112,701 |
| Kevin B. Quinn | $318,270 | 40.0% | 62.8% | $79,994 | $6,575 | $86,569 |
| Samuel J. Burruano, Jr. | $296,640 | 35.0% | 62.8% | $65,238 | $15,745 | $80,983 |
| Laurie R. Collins | $275,010 | 35.0% | 62.8% | $60,481 | $14,597 | $75,078 |
(1)
This represents the calculated funding of the award pool based on normalized performance against the four financial metrics measured in the EIP which resulted in a calculated funding of the pool at 62.8%.
(2)
The individual performance modifier was applied based on individual and team performance of the NEOs and the executive team. Performance was measured against executive scorecards and approved by the Company’s MD&C Committee.
Long-Term Equity-Based Incentive Plan
We award long-term incentives in the form of performance-vesting PSUs and time-vesting RSUs to reward executives for long-term growth in profitability and shareholder value through the successful execution of our strategic plan. We, in consultation with and based on market intelligence provided by the MD&C Committee’s independent compensation consultant, annually review our long-term incentives to ensure the design and grant-date value fall within a competitive range of long-term incentives relative to peer group companies.
A change to the amount of annual RSU and PSU award grants was approved by the MD&C for 2024 after careful consideration of the 2024 peer group executive compensation benchmarking report provided by the MD&C Committee’s independent compensation consultant. The prior year grants of 17.5% RSU and 17.5% Target PSUs were increased to 20% RSUs and 20% Target PSUs to ensure alignment of total compensation of our NEOs with the peer group.
Structure of Awards
Awards are granted in the form of RSUs and PSUs. RSUs and PSUs are grants valued in terms of Company stock, but Company stock is not issued at the time of grant. As a result, there are no dividends or dividend equivalents paid on RSUs and PSUs, and RSUs and PSUs do not have voting rights. Upon vesting, RSUs and PSUs are settled in shares of Company common stock.
2024 RSUs cliff vest subject to continuous employment through the third anniversary of the grant date.
2024 PSUs are subject to the following gateway performance requirements:
o
The Bank must achieve a Tier 1 Capital Ratio determined by the MD&C Committee following the US Basel III capital framework. (The gateway performance requirement was set at 8.5% and the actual ratio as of December 31, 2024 was 11.21%.)
o
The NEOs must receive a minimum individual performance evaluation rating on their individual executive performance scorecard of satisfactory or better for the performance period.
2024 PSUs are earned based on achievement of two performance metrics at the end of the three-year period:
o
50% of PSUs are based on a Relative ROAE measure for the 1/1/2024 – 12/31/2026 performance period, compared to the BANK – NASDAQ Bank Index peer group.
o
50% of the PSUs are based on average absolute ROAA for the 1/1/2024 – 12/31/2026 performance period.
44 Financial Institutions, Inc.
o
Performance levels required for vesting of PSU awards are reflected in the following chart:
| Performance Measures & | 2024 Performance Goals | ||
|---|---|---|---|
| Measurement Periods(1) | Threshold | Target | Maximum |
| 3-Year Relative ROAE Ranking (2)(01/01/2024 – 12/31/2026) | 30thPercentile | 50thPercentile | 80thPercentile |
| ROAA(01/01/2024 – 12/31/2026) | 0.849% | 0.884% | 0.920% |
(1)
PSUs are granted at the target level and results are interpolated for performance between Threshold and Target, and between Target and Maximum.
(2)
If our absolute ROAE is less than 0% for the performance period and our performance relative to the peer group is greater than the 50th percentile, the number of shares earned will not exceed Target.
For NEOs, the grant date value of the annual 2024 RSUs and PSUs awards is based on a percentage of base salary as shown below.
| 2024 Grant Date Value of RSUs and PSUsas a % of Base Salary | ||||
|---|---|---|---|---|
| Time-Based · Performance-Based PSUs | ||||
| Name | RSUs | Threshold | Target | Maximum |
| Martin K. Birmingham | 30.00% | 15.00% | 30.00% | 45.00% |
| W. Jack Plants II | 20.00% | 10.00% | 20.00% | 30.00% |
| Kevin B. Quinn | 20.00% | 10.00% | 20.00% | 30.00% |
| Samuel J. Burruano, Jr. | 20.00% | 10.00% | 20.00% | 30.00% |
| Laurie R. Collins | 20.00% | 10.00% | 20.00% | 30.00% |
The units awarded for the annual RSU and PSU grants on March 7, 2024 as described above were as follows:
| Time-Based RSUs · Performance-Based PSUs (1) | ||||
|---|---|---|---|---|
| Name · Threshold · Target · Maximum | ||||
| Martin K. Birmingham | 11,614 | 5,807 | 11,614 | 17,421 |
| W. Jack Plants II | 3,788 | 1,894 | 3,788 | 5,682 |
| Kevin B. Quinn | 3,338 | 1,669 | 3,338 | 5,007 |
| Samuel J. Burruano, Jr. | 3,110 | 1,555 | 3,110 | 4,665 |
| Laurie R. Collins | 2,884 | 1,442 | 2,884 | 4,326 |
(1)
Performance for PSUs will be determined after the end of the performance period on 12/31/2026. PSUs are granted at the Target level and results are interpolated for performance between Threshold and Target and between Target and Maximum.
More information on the status of existing equity grants is included in the Outstanding Equity Awards at December 31, 2024 table on page 56.
Additional Elements of Compensation
401(k) Retirement Savings Plan
We maintain a 401(k) Retirement Savings Plan (the “401(k) Plan”) which is available to all eligible employees including our NEOs. Participants may elect up to 25% of their account balance to be invested in FII stock under the 401(k) Plan. In addition, the 401(k) Plan provides for catch-up contributions for eligible employees. All NEOs participate in the 401(k) Plan.
2025 Proxy Statement 45
Pension Plan
We maintain a defined benefit pension plan (the “DB Plan”) in which our NEOs participate. The DB Plan has two tiers of participation. Tier 1, which Mr. Birmingham accrued benefits under through January 31, 2023, provided for an age- and service-based traditional pension benefit. The accrued benefits of Tier 1 participants earned under the Tier 1 benefit formula as of January 31, 2023 have been frozen as a result of a past plan amendment. This means Mr. Birmingham does not accrue additional benefits under the Tier 1 benefit formula after January 31, 2023. Benefits for Mr. Birmingham, accrued on or after February 1, 2023, are now determined using the Tier 2 cash balance formula. Tier 2, which also included Messrs. Plants, Quinn, and Burruano and Ms. Collins in 2024, provides a cash balance-type benefit that is valued based on a hypothetical account balance based on pay and interest credits.
Information regarding the pension benefits of our NEOs can be found in the Pension Benefits table on page 57.
Other Benefits
Eligible employees, including our NEOs, may participate in our health and welfare benefit programs, including medical, dental, vision coverage, disability, and life insurance. These benefits are offered to all employees as a part of our competitive total compensation program.
Perquisites and Other Personal Benefits
We provide our NEOs with perquisites that we believe are reasonable and consistent with our overall compensation program and peer group practices and allow our NEOs to more effectively discharge their responsibilities to the Company. In 2024, we provided our NEOs (other than our CEO) a $750 monthly vehicle stipend and our CEO a $1,000 monthly vehicle stipend. We have approximately 50 retail and commercial banking offices located in a 10,000-square mile footprint throughout Western and Central New York. We believe the regular presence of our NEOs in the markets we serve is best accomplished by providing them compensation for use of their personal vehicles.
We also reimbursed some NEOs for membership costs for various clubs and organizations. We believe such memberships provide important opportunities for business development activities and demonstrate our philosophy of community involvement in the markets in which we do business. The amounts attributable to each NEO’s vehicle stipend and membership reimbursements are included in the “All Other Compensation” column in the Summary Compensation Table.
46 Financial Institutions, Inc.
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