UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
|X| ANNUAL REPORT PURSUANT TO
SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2002
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26481
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
FINANCIAL INSTITUTIONS, INC. 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
FINANCIAL INSTITUTIONS, INC.
220 Liberty Street
Warsaw, NY 14569
REQUIRED INFORMATION
A. Financial Statements and Schedule Page
Independent Auditors' Report 1
Financial Statements:
Statement of Net Assets Available for Benefits
at December 31, 2002 and 2001 2
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 2002 and 2001 3
Notes to Financial Statements 4
Supplemental Schedule:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 8
Exhibits
23 Consent of Independent Auditors
99.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
FINANCIAL INSTITUTIONS, INC. 401(k) PLAN
Date: June 30, 2003 /s/ Peter G. Humphrey
---------------------
Peter G. Humphrey
President and Chief Executive Officer
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Financial Statements and Schedule
December 31, 2002 and 2001
(With Independent Auditors' Report Thereon)
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Index
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits at December 31, 2002
and 2001 2
Statements of Changes in Net Assets Available for Benefits for the years
ended December 31, 2002 and 2001 3
Notes to Financial Statements 4
Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 8
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Independent Auditors' Report
The Participants and Plan Administrator
Financial Institutions, Inc. 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of Financial Institutions, Inc. 401(k) Plan as of December 31, 2002 and 2001,
and the related statements of changes in net assets available for benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements, referred to above, of Financial
Institutions, Inc. 401(k) Plan as of December 31, 2002 and 2001, and for the
years then ended present fairly, in all material respects, the financial status
of Financial Institutions, Inc. 401(k) Plan as of December 31, 2002 and 2001 and
changes in its financial status for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. Supplemental Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
June 20, 2003
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
------------ -----------
Assets:
Investments, at fair value:
Mutual funds $14,257,058 --
Financial Institutions, Inc. common stock 598,239 --
Investments in pooled separate accounts (note 3) -- 14,770,897
Participants loans 316,081 238,598
----------- -----------
Total investments 15,171,378 15,009,495
Receivables:
Employer contribution 14,795 5,292
Participant contributions 46,123 26,860
Dividends 20,407 --
----------- -----------
Total receivables 81,325 32,152
----------- -----------
Net assets available for benefits $15,252,703 15,041,647
=========== ===========
See accompanying notes to financial statements.
2
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2002 and 2001
2002 2001
------------- ------------
Additions:
Additions to net assets attributed to:
Investment income (loss):
Net depreciation in fair value of investments $ (1,786,259) (1,303,929)
Interest from participant loans 27,299 23,072
------------ ------------
Total investment loss (1,758,960) (1,280,857)
------------ ------------
Contributions and transfers:
Transfers in from other plans 618,609 4,023,612
Participant 1,711,559 1,224,328
Employer 730,363 550,176
------------ ------------
Total contributions and transfers 3,060,531 5,798,116
------------ ------------
Total additions 1,301,571 4,517,259
Deductions:
Deductions from net assets attributed to:
Benefits paid to participants 1,090,515 1,288,348
------------ ------------
Net increase 211,056 3,228,911
Net assets available for benefits:
Beginning of year 15,041,647 11,812,736
------------ ------------
End of year $ 15,252,703 15,041,647
============ ============
See accompanying notes to financial statements.
3
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(1) Description of the Plan
The following description of the Financial Institutions, Inc. 401(k) Plan
(the Plan) provides only general information. Participants should refer to
the Plan agreement for a complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan sponsored and administered
by Financial Institutions, Inc. (the Company). All employees of the
Company and its subsidiaries are eligible to participate in the Plan
on the first of the month following the date of their employment and
upon the attainment of age 20-1/2. Participants become eligible to
receive the employer match following completion of one year of
service, based on hire date anniversary. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
During 2002, $551,689 in assets were transferred into the Plan from
the Burke Group and $66,920 from the Avaca acquisition. During 2001,
the Bath National Bank Defined Contribution Plan and the Bath
National Bank 401(k) Retirement Plan were merged into the Plan.
Total assets transferred as a result of the mergers were $4,023,612.
Administration of the Plan is the responsibility of the executive
committee (the Trustee) of the Company. Fidelity Investments
Institutional Brokerage Group (the Custodian or Fidelity) holds the
assets of the Plan and invests, controls, and disburses the funds of
the Plan in accordance with the Plan agreement. In addition, during
2002 the Plan changed recordkeepers to the Burke Group
(party-in-interest).
(b) Contributions
Each year, participants may contribute up to 50% (15% in 2001) of
pretax annual compensation, as defined in the Plan. Participants may
also contribute amounts representing distributions from other
qualified defined benefit or defined contribution plans.
Participants direct the investment of their contributions and the
Company's matching contributions into various investment options
offered by the Plan. During 2002, the Plan changed custodians from
the Aetna Life Insurance and Annuity Company to Fidelity.
Concurrently with the change in custodians the Plan investment
options changed from pooled separate accounts managed by Aetna to
various mutual funds managed by Fidelity. In addition, effective May
1, 2002 Plan participants were able to select the Company's common
stock as an investment option for up to 25% of their total account
balance. The Company matches 25% of a participant's contributions up
to the first 8% of compensation. The Company may also make
additional discretionary contributions ($453,676 in 2002 and
$340,396 in 2001). Contributions are subject to certain limitations.
(c) Participant Accounts
Each participant's account is credited with the participant's
contributions, the Company's matching contributions, and all
earnings thereon.
4
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(d) Vesting
Company and participant contributions, and all earnings thereon, are
fully vested at the time of contribution.
(e) Payment of Benefits
The participant's account balance will be distributed upon
termination of employment due to separation from service,
retirement, disability, or death, or upon financial hardship as
defined in the Internal Revenue Code (IRC).
When a participant terminates employment, the participant may elect
to receive benefits in a lump-sum distribution or a deferred
annuity. If the participant's account attributable to Company
contributions is $5,000 or less, the form of the distribution is at
the discretion of the administrator.
Withdrawal of an active employee's before-tax contributions prior to
a participant reaching age 59-1/2 may only be made on account of
financial hardship as determined by the Company.
(f) Participant Loans
Participants may borrow from their accounts up to a maximum amount
equal to the lesser of $50,000 or 50% of their account balances.
Loan terms must have a definite repayment period not to exceed five
years unless the loan is used for the purchase of a principal
residence, in which case the repayment period may not exceed 15
years. The loans are secured by the participant's account and bear
interest at 2% points above the prime rate published in the Wall
Street Journal. Principal and interest are paid ratably through
after-tax payroll deductions.
(g) Plan Expenses
Substantially all expenses related to the administration and
investment activity of the Plan are borne by the Company and are
therefore not reflected in the accompanying financial statements.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
The financial statements have been prepared on the accrual basis in
conformity with accounting principles generally accepted in the
United States of America. In preparing these financial statements,
the plan administrator has made a number of estimates and
assumptions relating to the reporting of net assets available for
benefits and changes therein. Actual results may differ from those
estimates.
(b) Investments
All contributions made to the Plan may be invested in one or more
investment options. The investments are carried at fair value.
Transactions are accounted for on a trade date basis. Investment
income includes interest, dividends and realized and unrealized
gains and losses applicable to the plan shares in the funds. 5
5
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
The investments are exposed to various risks, such as interest rate,
market and credit risk. Due to the level of risk associated with
certain investments and the level of uncertainty related to changes
in the value of investments, it is at least reasonably possible that
changes in the near term would materially effect participants'
account balances and the amounts reported in the statement of net
assets available for benefits and the statement of changes in net
assets available for benefits.
(c) Participant Loans - Payment of Benefits
Any unpaid loan balance at the time a participant withdraws from the
Plan is presented as a benefit payment on the statement of changes
in net assets available for benefits. All other benefits are
recorded when paid.
(3) Investments
The following presents investments that represent 5% or more of the Plan's
net assets as of December 31, 2002 and 2001:
2002
Federated Capital Preservation Institutional Fund $4,321,859
Fidelity Equity Income Fund 1,274,566
Franklin Capital Growth Class A Fund 1,649,272
Gabelli Westwood Balanced Retail C1 Fund 944,535
Pimco Total Return Administrative Shares Fund 1,064,719
W&R Accumulative Class Y Fund 1,111,224
2001
Aetna Money Market VP $ 926,486
Aetna Balanced VP 977,182
Aetna Fixed Account 4,312,607
Aetna Growth and Income VP 1,676,655
PPI MFS Emerging Equities Portfolio 876,010
Fidelity VIP Equity-Income Portfolio 1,561,219
Fidelity VIP Growth Portfolio 1,240,521
PPI T. Rowe Price Growth Equity Portfolio 998,848
Net appreciation (depreciation) in fair value of investments for the years
ended December 31, 2002 and 2001 are as follows:
2002 2001
----------- -----------
Mutual funds $(1,771,272) --
Financial Institutions Inc., common stock (14,987) --
Investments in pooled separate accounts -- (1,303,929)
----------- -----------
$(1,786,259) (1,303,929)
=========== ===========
6
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(4) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will receive their account balances.
(5) Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated March 28, 1999, that the Plan is designed in accordance with
applicable sections of the IRC. Although the Plan has been amended since
receiving the determination letter, the plan administrator believes that
the Plan is designed and is currently being operated in compliance with
the applicable requirement of the IRC.
(6) Related-Party Transactions
Certain plan investments are mutual managed by Fidelity. Fidelity is the
custodian as defined by the Plan and, therefore, these transactions
qualify as party-in-interest transactions. The Burke Group, a subsidiary
company is the plan record-keeper (party-in-interest).
7
Schedule 1
FINANCIAL INSTITUTIONS, INC.
401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of
Year) December 31, 2002
(c) Description of investment,
(b) Identity of issuer, including maturity date,
borrower, lessor, rate of interest, collateral, and (d) Current
(a) or similar party par, or maturity value value
------ --------------------------------------------- ------------------------------------------------ -----------------
Federated Capital Preservation
Institutional Fund Mutual fund $ 4,321,859
* Fidelity Contrafund Mutual fund 320,683
* Fidelity Equity Income Fund Mutual fund 1,274,566
Franklin Capital Growth Class A Fund Mutual fund 1,649,272
Gabelli Westwood Balanced Retail
C1 Fund Mutual fund 944,535
Janus Mercury Fund Mutual fund 570,683
Nations International Value
Investor A Fund Mutual fund 289,726
Oppenheimer Capital Appreciation
Class A Fund Mutual fund 57,576
Oppenheimer Global Class A Fund Mutual fund 596,667
Pimco Total Return Administrative
Shares Fund Mutual fund 1,064,719
Spartan 500 Index Fund Mutual fund 185,532
Spartan Extended Market Index Fund Mutual fund 54,042
Spartan Money Market Fund Mutual fund 738,841
Van Kampen Comstock Class A Fund Mutual fund 175,386
Van Kampen Equity and Income
Class A Fund Mutual fund 167,620
W&R Accumulative Class Y Fund Mutual fund 1,111,224
Wasatch Small Cap Growth Fund Mutual fund 726,973
* Fidelity Cash Reserves Mutual fund 7,154
* Financial Institutions, Inc. Common stock 598,239
Participant loans 6.25% - 11.5%, fully secured by vested
benefits, due 2003 through 2016 316,081
-------------
$ 15,171,378
=============
* Party-in-interest transaction.
See accompanying independent auditors'
report.
8