Financial Institutions, Inc. (FISI) completed a private placement of $80 million in fixed‑to‑floating rate subordinated notes due 2035 on December 11, 2025. The notes carry a 6.50 % coupon through December 15, 2030, after which they reset quarterly to SOFR plus 312 basis points. Proceeds will be used to redeem $65 million of higher‑cost debt issued in 2015 and 2020, which carried rates above 8 % and were scheduled to reprice in 2025.
The refinancing is expected to lower FISI’s interest expense and lift its Total Risk‑Based Capital Ratio by roughly 150 basis points at year‑end. The company’s Q3 2025 results showed a 13.60 % capital ratio as of September 30, 2025, so the new notes will raise the ratio to an estimated 15.10 % and provide a stronger buffer against potential deposit repricing pressures in the Upstate New York markets.
CEO Martin K. Birmingham said the transaction “provides a more favorable cost of capital and enhances our ability to fund growth initiatives.” He added that the temporary lift in the Tier 1 ratio reflects the immediate impact of the new notes and that the company remains focused on maintaining a robust capital base while pursuing selective acquisitions and balance‑sheet optimization.
Analysts noted the BBB‑rating and the stable outlook from Kroll as key drivers of the positive market reaction. The improved capital position and lower interest cost were highlighted as evidence of strong financial management, while the ability to refinance debt at a lower rate was seen as a strategic advantage in a tightening credit environment.
The transaction positions FISI to support future strategic initiatives, including potential acquisitions and further balance‑sheet optimization. By replacing higher‑cost debt with a lower‑rate instrument, the bank is better equipped to manage margin expansion and navigate the current economic environment, reinforcing its long‑term growth strategy.
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