DEF 14A

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

DEF 14A 1 d235107ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ☒ Filed by a party other than the Registrant ☐

Check the appropriate box:

☐	Preliminary Proxy Statement

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒	Definitive Proxy Statement

☐	Definitive Additional Materials

☐	Soliciting Material Pursuant to §240.14a-12

FINANCIAL INSTITUTIONS, INC.

(Name of Registrant as Specified in its Charter)

Not applicable.

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):



☒		No fee required.

☐		Fee paid previously with preliminary materials.

☐		Fee computed on table in exhibit required by Item 25 (b) per Exchange Act Rules 14a-6 (i) (1) and D-11.

LOGO

FROM OUR CHAIR

LOGO

DEAR FELLOW SHAREHOLDERS:

I am very pleased to have been named Chair of the Board in June of 2021. I believe that my past service and leadership of key committees prepared me well to lead the Board and partner with management to prudently and effectively advance our company’s goals and priorities.

I sincerely thank my predecessor, former Chair Bob Latella, for his dedicated service, leadership and mentorship. We are fortunate that he remains on our Board so we may continue to benefit from his experience and expertise.

Your Board remains focused on several initiatives and priorities and I’d like to share highlights of a few 2021 and early 2022 accomplishments.

●

We continued to refresh our Board with the election of two new directors in 2021. Half of our independent directors have served for less than six years.

●

Our Board is composed of and led by directors with diverse perspectives. Half of the independent directors reflect gender and ethnic diversity, and our Board and four of its six committees are led by women and an ethnically diverse director.

●

In further recognition of their commitment to the company and alignment with shareholders, director stock ownership requirements were increased.

●

We’ve made substantial progress in our ESG initiatives and are pleased to share some of our achievements in the ESG and Corporate Responsibility section of the following proxy statement.

●

The Board completed a comprehensive review and update of the company’s long-term strategic plan and developed goals that will be tracked and monitored.

–

A sixth strategic outcome was added: exceptional digital experiences enabled by complementary fintech and digital partnerships. The company and Board remain focused on the successful delivery of our banking, insurance and investment lines of business as we embrace innovation and technology.

–

The key focus area of corporate development, or mergers and acquisitions, was added to the plan.

●

Our human capital strategy was updated to ensure we have the right people, or access to the right people, who are supported by an organizational framework that nurtures a strong and healthy culture.

●

Consistent engagement with shareholders was and continues to be a priority.

On behalf of my fellow directors, thank you for investing in Financial Institutions, Inc.

Sincerely,

LOGO

Susan R. Holliday

Chair of the Board

April 27, 2022

Financial Institutions, Inc.

FROM OUR CEO

LOGO

FELLOW SHAREHOLDERS:

2021 was another strong year for our company and all business lines provided positive contributions. As you will read in the business performance highlights section of the Compensation Discussion & Analysis section within the following proxy statement, we reported record-high net income and grew loans, deposits and common book value per share. We opened new branches, completed two bolt-on insurance acquisitions and increased our dividend. Our stock buyback strategy allowed us to efficiently deploy capital.

Throughout this period of great uncertainty, we provided continuous essential support and services to our customers by delivering critical banking, wealth management and insurance services. We never lost sight of our critical mission to support our customers and communities.

We cordially invite you to our 2022 Annual Meeting of Shareholders on Tuesday, June 14, 2022, at 10:00 am, Eastern Time. The meeting will be held in virtual format through a live webcast to support the health, convenience and accessibility of our stockholders, associates and directors. The webcast will be provided at www.virtualshareholdermeeting.com/FISI2022. Information on how to attend, vote and submit questions during the meeting are provided in the attached notice of annual meeting.

You will be asked to vote on several items including the election of directors, compensation of our named executive officers (the say-on-pay vote) and the ratification of the appointment of RSM US LLP to serve as our independent registered public accounting firm for 2022.

Your vote is important. Whether or not you plan to attend the meeting, we encourage you to read the proxy statement and vote your shares as promptly as possible. Information on how to vote by Internet, phone, mail or during the meeting is provided in the meeting notice.

We are pleased to once again provide proxy materials to our shareholders over the Internet, expediting shareholders’ receipt of proxy materials, lowering expenses and reducing the environmental impact of our meeting.

On behalf of the senior leadership team at Financial Institutions, Inc., we want to thank you for your support and investment in our company.

Cordially,

LOGO

Martin K. Birmingham

President and Chief Executive Officer

April 27, 2022

Financial Institutions, Inc.

TABLE OF CONTENTS


Notice of the Annual Meeting of Shareholders			2

ESG and Corporate Responsibility			4

Corporate Governance and Board Matters			10

Separate Chair and Chief Executive Officer			10

Board of Directors Role in Risk Oversight			10

Succession Planning			10

Shareholder Engagement			10

Director Resignation Policy			11

Director and Executive Stock Ownership Policies			11

Stock Ownership Requirements			11

Clawback Provision			12

Derivatives, Pledging and Hedging Policy			12

Code of Ethics			12

Certain Relationships and Related Party Transactions			12

Corporate Strategy and Enterprise Risk Management			13

Board Composition and Director Nominees			13

Director Independence and Qualifications			13

Board Refreshment			14

Board Self-Assessment			14

Shareholder Nominees			14

Communication with Our Board			14

Proposal 1. Election of Directors			15

Business Experience and Qualification of Directors			16

Director Nominees			16

Directors Continuing in Office			18

Board of Director Skills Matrix			22

Board Diversity Matrix			24

Diversity and Tenure of Our Directors			25

Board Meetings and Committees			26

Committees of the Board			26

Director Compensation			30

Annual Meeting Attendance			31

Proposal 2. Advisory Vote to Approve the Compensation of Our Named Executive Officers			32

Executive Compensation			33

Compensation Discussion and Analysis (CD&A)			33



Introduction			33

Executive Summary			33

Shareholder Input and Outreach			41

Compensation Philosophy and Best Practices			41

Program Elements and Pay Decisions			42

Compensation Process			49

Other Factors Affecting Executive Compensation			52

Management Development & Compensation Committee Report			54

Executive Compensation Tables			55

Summary Compensation Table			55

All Other Compensation			56

2021 Grants of Plan-Based Awards			57

Outstanding Equity Awards at December 31, 2021			58

Restricted Stock Vested in 2021			59

Pension Benefits			59

Potential Payments Upon Termination of Employment or Change in Control			60

Management Development & Compensation Committee Interlocks and Insider Participation			63

CEO Pay Ratio			63

Proposal 3. Ratification of Appointment of Independent Registered Public Accounting Firm			64

Audit Committee Report			65

Our Executive Officers			66

Stock Information			68

Security Ownership of Certain Beneficial Owners and Management			68

Delinquent Section 16(a) Reports			69

Future Shareholder Proposals			69

Information About the Meeting			71

General Information			71

Voting Matters			71

Other Matters			72

Appendix A — Reconciliations of GAAP to Non-GAAP Financial Measures			A-1

Financial Institutions, Inc.


		CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future results or events and include, among others:

•

statements with respect to the beliefs, plans, objectives, and expectations regarding the environmental, social, and governance initiatives and goals of Financial Institutions, Inc. and its subsidiaries; and

•

statements preceded by, followed by or that include the words “aim,” “believe,” “commit,” “goal,” “intend,” “plan,” “potential,” “strive,” or similar expressions.

These forward-looking statements are based on management’s current expectations and beliefs and are not guarantees of future results, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this Proxy Statement. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, please see the risks and other factors detailed from time to time in the company’s most recent periodic reports on Form 10-K and Form 10-Q and other filings with the Securities and Exchange Commission.

We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Except as required by law, we do not undertake, and specifically disclaim any obligation to publicly release any revisions to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

2022 Proxy Statement


NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

2022 ANNUAL MEETING INFORMATION

For additional information about our Annual Meeting, see “Information About the Meeting” on page 71.

Meeting Date:

June 14, 2022

Virtual Meeting Place:

www.virtualshareholdermeeting.com/FISI2022

Meeting Time:

10:00 a.m. (Eastern)

Record Date:

April 19, 2022

To attend, vote and submit questions during the Annual Meeting visit www.virtualshareholdermeeting.com/FISI2022 and enter the control number included in your Notice of Internet Availability of Proxy Materials, voting instruction form or proxy card. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting.

ANNUAL MEETING BUSINESS

The Annual Meeting of Shareholders of Financial Institutions, Inc. will be held for the following purposes:

To elect three directors nominated by the Board of Directors (the “Board”) to serve until the 2025 Annual Meeting

To approve, on an advisory basis, the compensation of our named executive officers

To ratify the appointment of RSM US LLP as our independent registered public accounting firm for 2022

To transact such other business as may properly come before the Annual Meeting.

Owners of Financial Institutions, Inc. common stock at the close of business on the meeting record date of April 19, 2022, or their legal proxy holders, are entitled to vote at our Annual Meeting.

YOUR VOTE IS IMPORTANT – HOW TO VOTE:

For more information on how to vote your shares, please refer to “Voting Matters” on page 71.

Please note that we are furnishing proxy materials and access to our Proxy Statement to our shareholders via the Internet instead of mailing printed copies to each of our shareholders. By doing so, we save costs and reduce our impact on the environment.

Beginning on April 27, 2022, we will mail or otherwise make available to each of our shareholders a Notice of Internet Availability of Proxy Materials, which contains instructions on how to access our proxy materials and vote online. If you attend the Annual Meeting virtually, you may withdraw your proxy and vote online during the Annual Meeting if you so choose.

Financial Institutions, Inc.


		NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

Your vote is important, and we encourage you to vote promptly, whether or not you plan to attend the Annual Meeting.

By Order of the Board of Directors,

LOGO

Samuel J. Burruano Jr.

Chief Legal Officer and Corporate Secretary

Warsaw, New York

April 27, 2022

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on Tuesday, June 14, 2022: this proxy statement and the 2021 Annual Report, which includes our Annual Report on Form 10-K for the year ended December 31, 2021, are available at www.proxydocs.com/FISI and on our website www.fiiwarsaw.com.

2022 Proxy Statement


ESG AND CORPORATE RESPONSIBILITY

ESG AND CORPORATE RESPONSIBILITY

Financial Institutions, Inc. is the parent company for Five Star Bank, SDN Insurance Agency, LLC, Courier Capital, LLC, HNP Capital, LLC and Corn Hill Innovations Labs, LLC, which we collectively refer to in the proxy statement as the “company,” “we,” “our” or “us.” Throughout the proxy statement, we refer to Five Star Bank as the “Bank.” We refer to our combined workforce as Five Star.

Our stakeholders are at the heart of our organization. Our dedicated Five Star team of more than 600 employees work together in an environment of trust, integrity and mutual respect. We take great pride in being a part of the communities we serve and are committed to giving back through a variety of non-profit organizations and neighborhood charities. We take the time to get to know our customers—their needs today and plans for the future—because we understand that today is tomorrow in progress.^®

We care deeply about promoting sustainable business practices that deliver long-term shareholder value and help to ensure that the communities we serve thrive. Grounded in the legacy of our community-oriented banking traditions established while representing rural Western New York State for more than 200 years, Environmental-Social-Governance (“ESG”) is a fundamental pillar of our strategic plan.

This includes our steadfast commitment to being socially responsible and environmentally conscious. We believe that a successful future for our business and the customers and communities we serve is dependent on the sustainability of our environment. Through our dynamic strategic planning and robust risk and governance frameworks, we strive to seize upon prudent new business opportunities that promote sustainable business practices. We believe that our approach to ESG has the potential to create long-term value for all stakeholders in multiple ways: increased revenue, reduced cost, improved efficiency, reduced risk, strengthening of our communities and maintaining our reputation as a responsible community leader.

COMMITMENT TO AND OVERSIGHT OF ESG

Our commitment to corporate citizenship and ESG starts at the top with Board-documented sustainable business practices serving as a core pillar of our strategic plan. The Board and Executive Committee regularly oversee the status and progress of ESG-related initiatives and objectives through the review of the execution of our three-year strategic plan.

Additionally, as reflected in Board committee charters available on our investor website, four of our Board committees—each composed entirely of independent directors—are specifically charged with relevant ESG oversight.

•

The Nominating & Governance (“NG”) Committee ensures effective and sound corporate governance over ESG matters.

•

The Risk Oversight Committee oversees risks impacting our company, including the management of material ESG related risks.

•

The Management Development & Compensation (“MD&C”) Committee oversees the development and implementation of the company’s diversity, social responsibility and human rights-related strategies and initiatives, including relevant ESG strategies.

•

The Audit Committee oversees financial disclosure to ensure appropriate, accurate, and reliable public reporting of ESG matters.

In 2021, we continued to build upon and improve our ESG oversight framework and further evolve our strategy. Because ESG spans across our enterprise, we established an internal cross-functional working group of senior leaders that is tasked with driving additional progress on initiatives that promote sustainability and further transparency. This group is led by our Chief Legal Officer and Corporate Secretary, who reports to our Chief Executive Officer (“CEO”).

Financial Institutions, Inc.


		ESG AND CORPORATE RESPONSIBILITY

We believe in focusing our efforts on where we can have the most impact and that our attention to key ESG priorities can help drive business practices that are crucial to our long-term growth. Against this backdrop, our areas of focus include:



Associates	Community	Environmental Responsibility	Governance

LOGO

ASSOCIATES

Our Five Star Promise is the shared commitment by the company and all associates to building a culture of teamwork, excellence and integrity. We are committed to continually building an environment where everyone feels welcome, valued, respected and appreciated. We empower our associates to live the Promise and be an active part of evolving our culture. Some examples include:

•

Inviting associates to participate in annual and periodic engagement surveys that measure employee satisfaction and provide valuable feedback to leadership.

•

Supporting associate-led Diversity and Inclusion Advisory Council (“D&I Council”) that recommends strategies for sustainable and impactful change.

•

Establishing a CARE Team (Community Action for a Responsible Environment) that enables associates to volunteer in the community and put forth ideas for further involvement.

•

Using our peer-to-peer recognition platform, The Five Star Experience, to celebrate each other’s successes, team efforts, and both personal and professional milestones.

•

Sharing ideas, diverse perspectives and personal stories to promote an inclusive and accepting workplace on our Culture Center internal webpage.

We have begun to transform and modernize our culture and talent management practices by implementing Human Capital Management reporting and practices. This strategy establishes a foundation that enables leaders to better manage teams and hire talent, further advancing an inclusive culture and building a more diverse workforce. We are also taking steps to comprehensively review and update standards for setting goals, performance evaluations, succession planning, and learning and development.

Company policy memorializes our commitment to fair and equitable compensation. We regularly review our compensation programs to ensure fair and inclusive pay practices across our business. To help our associates and communities thrive, we adopted a $15.00 per hour starting minimum wage for all company associates in 2022, a full $3.75 per hour above the federal minimum wage and $1.80 per hour more than the New York State minimum wage. We continue our commitment to equal employment opportunity through a robust affirmative action plan which includes annual compensation analyses and ongoing reviews of our selection and hiring practices alongside a continued focus on building and maintaining a diverse workforce. Each year, the MD&C Committee reviews performance of our affirmative action plan.

2022 Proxy Statement


ESG AND CORPORATE RESPONSIBILITY

The health and wellbeing of our colleagues is a top priority and in recognition of this, we aim to provide a robust health and wellness package. We continually evolve our benefits plans to remain competitive and meet the needs of our workforce. Our benefits package includes:

•

Health and welfare benefits with competitive employer contributions

•

Company paid short-term disability and life insurance benefits

•

401(k) savings program with Vanguard Investment Services

•

Defined benefit pension plan for all associates

•

Paid time off and paid sick leave

•

Tuition and training reimbursement programs

We support the wellness of all colleagues through various programs including health seminars and education programs with our expert employee benefits partners.

Diversity & Inclusion

We are committed to providing equal employment opportunities for training, compensation, transfer, promotion and other aspects of employment for all qualified applicants and employees without regard to race, religion, color, national origin, citizenship, sex, sexual orientation, gender identify, age, veteran status, disability, genetic information, or any other protected characteristic. A diverse and inclusive workplace aligns with our core values. Our goal is to attract, retain and develop a workforce that is diverse in background, knowledge, skill and experience. As of December 31, 2021, women represented approximately 65% and self-identified racial and/or ethnic minorities represented approximately 9% of the company’s workforce. Currently, 60% of the company’s Operating Committee, a management committee comprised of key senior and emerging company leaders, reflects gender or racial diversity.

LOGO

We strive toward having a diverse and inclusive team of employees, knowing that we are better together with our combined wisdom and intellect. With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting and valuing the differences between people. To further advance our inclusion and diversity goals, we formed the D&I Council to foster an environment that values, welcomes and facilitates the exchange of diverse perspectives and life experiences. Our D&I Council informs our Chief Human Resources Officer on employment-related initiatives and is charged with supporting sustainable and impactful diversity and inclusion practices, including:

•

Promoting a continuous focus on and commitment to diversity, equity and inclusion (“DEI”).

•

Identifying opportunities and developing proposals to address the unique needs and challenges of our organization.

•

Championing DEI by engaging and learning from associates throughout the organization.

•

Monitoring and communicating progress.

Financial Institutions, Inc.


		ESG AND CORPORATE RESPONSIBILITY

The D&I Council reports directly to our Executive Management Committee (the “EMC”) and met regularly throughout 2021 to provide feedback and ideas that guide our strategy. To encourage productive conversations within our organization, we held monthly meetings in 2021 to provide opportunities for participants to engage in discussions on DEI education and initiatives. Additional accomplishments of the D&I Council include conducting a baseline survey to help inform future initiatives and implementing an internal blog for our associates to share diverse perspectives. The company also facilitated DEI awareness through periodic updates delivered by the D&I Council on all-company calls and through several reports from our CEO throughout the year.

We have adopted Board-approved anti-discrimination, anti-harassment, whistleblower and anti-retaliation policies that are updated and reviewed annually. We also make available to our associates an HR hotline where associates can make confidential and anonymous reports of misconduct. In 2021, we conducted intentional, strategic hiring to supplement the organization with new skill sets and perspectives. Our talent acquisition team uses internal and external resources to recruit highly-skilled and talented workers and we incent employee referrals for open positions.

We also commenced a series of diversity-focused trainings to raise awareness of unconscious bias and equip leaders to build inclusive teams. We encouraged each of our team members to engage in collaborative efforts to facilitate the formation of deeper relationships with those around them based on mutual respect and understanding. We conduct regular associate surveys to stay in tune with the concerns of our associates and to discover what we are doing well and what we need to improve upon. Last year, more than two-thirds of our workforce actively participated in engagement surveys.

LOGO

COMMUNITY

Our company has a long and proud history in Western New York State that goes back to 1817. Five Star’s predecessor banks operated in rural areas and played important roles in helping to meet the deposit and credit needs of traditionally underserved markets. We continue that mission today all across our entire operating footprint. We are focused on supporting various organizations through fundraising efforts, educational sponsorships, community development efforts, food drives and partnerships with local universities.

Company volunteerism is another area in which we take great pride. Our associates give freely of their time, talent and financial resources, and many participate as volunteers, trustees and committee members of charitable organizations. In 2021, we:

•

Provided nearly $49 million in funding for low income/affordable housing projects representing $39 million in financing and $10 million in Low-Income Housing Tax Credit investments.

•

Donated $725 thousand to charity, of which $512 thousand was Community Reinvestment Act eligible.

•

Continued to make significant investments in products and people to ensure the availability and accessibility of safe, transparent and fair financial products, including a suite of products tailored to meet the needs of unbanked, underbanked and low-to-moderate income individuals in the communities we serve.

•

Through our S.T.A.R. Volunteers Program, our employees have the option to work one day per year, fully paid, volunteering in the community of their home or branch. Organizations, events and initiatives our employees have supported include Habitat for Humanity, The Salvation Army, Toys for Tots and the United Way Day of Caring.

Our Community Development Officer and community development loan officers build relationships and partnerships with community groups and civic and governmental leaders. Together, they identify and work to meet the community’s needs for banking services. Another key focus of their work is delivering guidance on the path to homeownership, providing

2022 Proxy Statement


ESG AND CORPORATE RESPONSIBILITY

vital home buyer education and financial literacy training. Our commercial lending team pursues opportunities throughout our footprint for financing affordable housing with debt and equity financing, as well as historic tax credit community development investments. Our goal is to advance housing opportunities and local community development by subsidizing projects for low and moderate-income families.

These initiatives and many more are described in the Five Star Bank 2021 Community Report, available on our website under News & Events.

LOGO

ENVIRONMENTAL RESPONSIBILITY

Grounded in the legacy of our community-oriented traditions representing rural Western New York State for more than 200 years, we are committed to environmentally conscious activity. We believe that a successful future for our business and the customers and communities that we serve is dependent on the sustainability of our environment. Environmental challenges, in general, and climate change, in particular, present significant threats to the stability of the financial markets we participate in, and a corresponding societal impact on the communities that we serve. We believe that doing our part to address them is not only the right thing to do but also our corporate responsibility.

We remain committed to minimizing the impact of our operations on the environment and demonstrating leadership by incorporating environmental considerations into our business practices. Through our dynamic strategic planning and robust risk and governance frameworks, we strive to seize upon prudent new business opportunities arising from the transition to a low carbon society and address environmental risks to manage them appropriately.

We also believe that we can make a positive contribution by following prudent business practices that protect and conserve our natural resources. We embed the principles of advancing a circular economy into our practices through green investments and long-term implementation of new technologies and look for these commitments in the clients and businesses we serve.

We have undertaken a number of initiatives designed to reduce our impact on the environment and promote environmentally friendly projects and practices. With a view to increasing efficiency and reducing waste, we are continuing to digitize manual back office and financial center functions. Furthermore, in 2021, we:

•

Sourced 100% of our printer paper from the Sustainable Forestry Initiative.

•

Increased the use of e-records and e-signing technology resulting in reduced paper waste and carbon emissions.

•

Encouraged ecofriendly workplace practices by supporting recycling and separation of waste.

•

Continued the use of green and energy-efficient materials in new office construction projects.

We are mindful of the importance of exercising environmental sensitivity in our lending and business relationships. We continue to look for opportunities to support organizations that advance sustainability initiatives in our local communities.

We have invested in technological advancements focused on increasing efficiencies, lowering operating costs, optimizing capital expenditures and adding value for our customers. We are continuously researching innovative ways to boost efficiency, such as utilizing high-efficiency electrical equipment including LED and motion-activated lighting, solar panels, and high-efficiency HVAC units. We encourage environmentally friendly practices at our office locations to reduce water waste and the use of paper and plastics. We believe that our focus on environmental sustainability, with the objective of reducing costs and improving sustainability of our operations, provides a strategic benefit to the company.

Financial Institutions, Inc.


		ESG AND CORPORATE RESPONSIBILITY

LOGO

GOVERNANCE

As a publicly-traded community financial institution we are mindful of the importance of maintaining a governance framework that provides appropriate oversight, transparency, and accountability of our operations. We are committed to achieving excellence in our sustainability governance practices and establishing a strong foundation for the long-term success of the company. We routinely engage with our shareholders to better understand their ESG views, carefully considering the feedback we receive and acting when appropriate.

We intend to conduct our business in a manner that is fair, ethical and responsible to earn and maintain the trust of our customers, employees, investors, partners and regulators.

Our Code of Business Conduct and Ethics requires that our directors, officers and colleagues comply with all applicable rules and regulations. Our Board of Directors, consisting of 10 independent directors plus our CEO, is responsible for oversight of the management of the company and its business for the long-term benefit of our shareholders. Our corporate governance policies and practices include evaluations of the Board and its committees and continuing director education. Our Environmental Responsibility Policy, Human Rights Policy, Third-Party Vendor Code of Conduct and Enterprise Risk Management Program (“ERM”) further support our stated ESG goals within our governance structure.

Our governance framework deploys cross-functional management-level committees that have requisite subject matter expertise and control to regularly oversee important matters like risk management, financial disclosure and internal control, projects, new or modified products and services, management of the assets and liabilities of the Bank, and governance. Each management committee reports to a Board Committee.

Core governance documentation—Board and management-level committee charters, Corporate Governance Guidelines and other company policies—are reviewed and updated at least annually to ensure that they remain current and are reflective of internal and external factors impacting our operations.

Our internal risk management teams oversee compliance with applicable laws and regulations and coordinate with subject matter experts throughout the business to identify, monitor and mitigate risk including, among other things: information security, cyber security, credit, liquidity, market and strategic risks. These teams maintain rigorous testing programs and regularly provide updates to the Risk Oversight Committee as well as the Board. Further, as a component of our risk management teams, the compliance department conducts annual training in the areas of Bank Secrecy Act and Anti-Money Laundering (“BSA-AML”), Fair Lending, Privacy, and Unfair, Deceptive or Abusive Acts and Practices (“UDAAP”), among others.

We have a robust information security and cyber defense program that incorporates multiple layers of physical, logical and written controls. We leverage the latest encryption configurations and technologies on our systems, devices and third-party connections and further vet third-party vendors’ encryption, as required, through our vendor management process. Our information security department maintains a risk assessment that is approved by the Board on an annual basis. Information security and cyber security training are conducted annually, and all employees are subject to simulated phishing attempts on an ongoing basis with results reported to the Risk Oversight Committee.

Our Board believes that director refreshment is an important component of good corporate governance. At our 2021 Annual Meeting, shareholders elected two new directors to our Board.

Several of our governance practices, including the Board’s role in risk oversight, stock ownership policies, corporate strategy and ERM, board composition and director nominees are summarized in the Corporate Governance and Board Matters section that follows.

2022 Proxy Statement


CORPORATE GOVERNANCE AND BOARD MATTERS

CORPORATE GOVERNANCE AND BOARD MATTERS

Our Corporate Governance Guidelines and other key governance policies and documents, including the charters for each of our standing Board committees, stock ownership requirements and our codes of conduct and ethics, are available on our website at www.fiiwarsaw.com by clicking on “Governance,” then on “Governance Documents.” Information available on our website is not a part of, and is not incorporated into, this proxy statement.

SEPARATE CHAIR AND CHIEF EXECUTIVE OFFICER

The Board believes that effective corporate governance is best accomplished if the roles of Chair of the Board and CEO are separated. The Board believes that separating these two positions allows each person to focus on their individual responsibilities, essential in the current business and economic environment. Under this structure, our CEO can focus attention on the day-to-day operations and performance of the company and work to implement our long-term strategic plan. At the same time, our non-executive Chair of the Board can focus attention on long-term strategic issues, setting the agenda for and presiding at Board meetings, working collaboratively with other Board members and providing insight and guidance to our CEO through regular interaction.

BOARD OF DIRECTORS ROLE IN RISK OVERSIGHT

The Board is actively engaged in the oversight and appropriate management of risk and ensures strategic objectives are aligned with our risk appetite. The Board approves our risk appetite statement, ERM Program, BSA-AML Policy and Program, Codes of Conduct and Ethics, Compliance Management Program and Policy, Information Security Program and Framework, and Risk Management Policy and reviews and updates each annually to ensure that our risk framework remains relevant and current to address evolving risk. Our Board committees conduct primary oversight of certain risks that may affect us, including ESG-related risks as detailed above in “ESG and Corporate Responsibility—Commitment to and Oversight of ESG.” The Risk Oversight Committee has oversight of our credit, capital, liquidity and funding, operational, compliance, legal, ESG, cybersecurity and electronic data processing risks, among others. The Audit Committee focuses on oversight of financial risks, including those that could arise from our accounting and financial reporting processes. The MD&C Committee oversees risks arising from our compensation policies and programs.

SUCCESSION PLANNING

The MD&C Committee actively participates in an ongoing review of our management succession plan, including discussion regarding the company’s leadership team with a focus on key positions at the senior and executive officer levels. This planning reflects our strong commitment to recruiting, developing, and retaining highly qualified executives, and our support for employee development and internal succession opportunities. Succession planning provides our organization alternatives in the event of both planned and unplanned succession needs.

Board of Director succession planning is overseen by the NG Committee and is further described on page 28.

SHAREHOLDER ENGAGEMENT

We believe that strong corporate governance includes consistent engagement with our shareholders. We engage with shareholders on a variety of topics throughout the year to ensure that we are addressing questions and concerns and to seek input on policies and practices. Our management team, including our CEO, Chief Financial Officer and Treasurer (“CFO”) and Chief Community Banking Officer, regularly engage in meaningful dialogue with our shareholders through quarterly earnings calls, industry conferences and other channels of communication.

In addition, we conduct an annual outreach to our largest shareholders and have conversations with corporate governance teams regarding executive compensation, corporate governance, performance and other topics of interest to our shareholders. Our most recent outreach effort, completed in early 2022, included 25 of our largest shareholders representing 53% of our outstanding shares. Shareholder feedback is regularly reviewed and considered by the Board and its committees and is reflected in adjustments to our policies and practices.

Financial Institutions, Inc.


		CORPORATE GOVERNANCE AND BOARD MATTERS

DIRECTOR RESIGNATION POLICY

Our Board has adopted a director resignation policy for director nominees who receive a majority of WITHHELD votes. The policy is incorporated into our Corporate Governance Guidelines. If the election is uncontested (the number of director nominees does not exceed the number of Board seats up for election and proxies are not being solicited by anyone other than us), once the vote has been tabulated and certified and it is established that a director nominee received more WITHHELD votes than FOR votes (with abstentions and broker non-votes not counted as either), the director must immediately submit his or her resignation to the Board.

On receipt of the resignation, the NG Committee will evaluate what is in the best interests of the company and its shareholders and will make a recommendation to the independent directors of the Board. The recommendation may include accepting or rejecting the resignation or taking other appropriate action, which may include addressing the perceived cause of the WITHHELD votes or determining that the director should not stand for re-nomination in the future. Within 90 days of the Annual Meeting, the independent directors will determine the action to be taken and a public announcement will be promptly made. Directors do not participate in deliberations or determinations relating to matters in which they have an interest.

DIRECTOR AND EXECUTIVE STOCK OWNERSHIP POLICIES

Stock Ownership Requirements

To demonstrate strong commitment to our company and sound corporate governance, our Board and EMC (members identified by footnote 1 to Executive Officers listing on page 66) must comply with the Director and Executive Stock Ownership Requirements (“Stock Requirements”) approved by our Board. Annually, the NG and MDC Committees review the Stock Requirements for participant compliance and make recommended changes to the Board to ensure they remain current and reflective of industry practices and investor expectations. Stock Requirements were increased in 2021 for the EMC and in 2022 for the Board. Current Stock Requirements are set forth below:


Position		Required Ownership

President and CEO		3x Annual Base Salary

Executive Vice Presidents		1.5x Annual Base Salary

Other Members of the Executive Management Committee		1x Annual Base Salary

Non-employee Directors		3x Annual Cash Retainer

Directors and EMC members are required to achieve the Stock Requirements within five years from their election as director or, in the case of an executive, from the date they were named a member of the EMC. Those subject to the Stock Requirements must retain at least 75% of shares we issued to them until they fulfill the ownership requirements above. Once these individuals achieve the required ownership levels, they must maintain that ownership for as long as they serve as directors or members of the EMC.

Pursuant to the Stock Requirements, directors and EMC members are deemed the owner of: shares they own outright, shares owned by immediate family members residing in the same household, shares of our stock held in the company stock fund of our 401(k) plan, shares acquired upon stock option exercises, shares held in trust for the benefit of the person and unvested time-based restricted shares or units.

In 2021, all directors and EMC members met the Stock Requirements or are within their five-year window to achieve compliance.


				2022 Proxy Statement

By Internet

During the Meeting

Vote 24/7

www.proxyvote.com

Dial toll-free 24/7

1-800-690-6903

Cast your ballot, sign your proxy

card and send by pre-paid mail

You will need the control number that appears on your proxy card or notice to vote during the virtual meeting.

SEC Form DEF 14A filed by Financial Institutions Inc.