FINANCIAL INSTITUTIONS INC

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 2025, the MD&C Committee reviewed the individual performance of our NEOs, their contributions to Company performance, experience, and levels of responsibility, and also considered updated competitive peer 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 2025, base salaries for all NEOs were increased as a result of individual performance, experience and levels of responsibility to ensure total compensation remained within the competitive range indicated in the competitive market assessment.

We approved the following base salary adjustments in 2025:

(1)

On January 6, 2025 a base pay adjustment was awarded to Mr. Plants of 14.1% and Mr. Burruano of 21.4%; and on March 3, 2025 a base pay adjustment of 10% was awarded to Mr. Birmingham to appropriately align their compensation to the Company’s peer group based on each executive’s performance. On March 3, 2025 a base pay adjustment of 3% was awarded to Mr. Quinn and Ms. Collins based on 2024 individual performance.

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.

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The 2025 EIP utilized the same metrics used to calculate the funding of the award pool as last year with the exception of the deposit growth metric which was updated to exclude all BaaS-related deposits, given the Company’s 2024 decision to wind-down that line of business.

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 successful execution on 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.

(1)

Target EIP % for Mr. Quinn and Ms. Collins increased from 35% in 2024 to 40% in 2025 in alignment with benchmarking executive compensation versus the peer group.

Gateway Performance Criteria

Our EIP for 2025 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, 2025 was 11.43%.)

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 2025 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 growing non-public deposits, and maintaining strong credit quality: PPNI, Total Loan Growth, Total Non-Public Deposit Growth excluding BaaS 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 2025 operating plan in early 2025. Achievement of each performance measure is weighted to calculate the overall performance measurement relative to target. In the first quarter of 2025, 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.

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Our 2025 performance goals and results are as follows:

(1)

These are non-GAAP financial measures. Refer to Appendix A for a description of these financial measures and reconciliations to their most directly comparable GAAP financial measures.

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:

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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 amounts earned by participants 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 2025, there were eight participants in the EIP (our five NEOs and three 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.

Awards for 2025 Performance

Company performance goal achievement for 2025 was as follows: between Target and Maximum for PPNI, above Maximum for Loan Growth, below Threshold for Total Non-Public Deposit Growth and between Target and Maximum for Net Charge-offs, yielding a calculated Award Percentage Achievement of 104.4% of the target award.

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2025 EIP awards are summarized below:

(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 104.4%.

(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 through the Amended and Restated 2015 Long-Tern Incentive Plan 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.

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.

•

2025 RSUs had a grant date of March 6, 2025 and cliff vest subject to continuous employment through February 25, 2028.

•

2025 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, 2025 was 11.43%.)

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.

•

2025 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 1/1/2025 – 12/31/2027 performance period, compared to the BANK – NASDAQ Bank Index peer group.

o

50% of the PSUs are based on average absolute ROAA for the 1/1/2025 – 12/31/2027 performance period.

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Performance levels required for vesting of PSU awards are reflected in the following chart:

(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 2025 RSUs and PSUs awards is based on a percentage of base salary as shown below.

The units awarded for the annual RSU and PSU grants on March 6, 2025 as described above were as follows:

(1)

Performance for PSUs will be determined after the end of the performance period on December 31, 2027. 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, 2025 table on page 56.

As discussed in the above “2025 Executive Compensation Program Highlights” section, a Supplemental RSU was awarded to NEOs with a grant date of March 6, 2025 and a vest date of February 25, 2028. Additional information on this award can be found in the “2025 Grants of Plan-Based Awards” table on page 55.

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 Company common 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.

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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, Burruano, and Quinn and Ms. Collins in 2025, 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 2025, 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.

In 2025, the MD&C Committee approved and we introduced an executive physical program for all EMC members. Under the program, eligible executives are offered a Company-paid, one-day comprehensive medical evaluation at the Cleveland Clinic. The program is designed to support the health and well-being of our leadership team by proactively identifying health risks and promoting long-term wellness, which the Board believes ultimately benefits the Company and its shareholders.

The amounts attributable to each NEO’s vehicle stipend, membership reimbursements and executive physical are included in the “All Other Compensation” column in the Summary Compensation Table.

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