Exhibit 99
FIRST NIAGARA BANK
401(k) PLAN
Financial Statements and Schedule
December 31, 2000 and 1999
(With Independent Auditors' Report Thereon)
FIRST NIAGARA BANK
401(k) PLAN
Index
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits
as of December 31, 2000 and 1999 2
Statements of Changes in Net Assets Available for Plan
Benefits for the years ended December 31, 2000 and 1999 3
Notes to Financial Statements 4
Schedule
1 Schedule of Assets Held for Investment Purposes
as of December 31, 2000 8
Independent Auditors' Report
The Compensation Committee of
First Niagara Bank:
We have audited the accompanying statements of net assets available for plan
benefits of First Niagara Bank 401(k) Plan as of December 31, 2000 and 1999, and
the related statements of changes in net assets available for plan 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 present fairly, in
all material respects, the net assets available for plan benefits of First
Niagara Bank 401(k) Plan as of December 31, 2000 and 1999, and the changes in
net assets available for plan benefits 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 1 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. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits 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 5, 2001
FIRST NIAGARA BANK
401(k) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2000 and 1999
2000 1999
---------- ---------
Investments:
Group annuity contract with insurance company $6,866,331 5,902,054
First Niagara Financial Group, Inc. common stock 2,501,140 2,277,855
---------- ---------
Total investments 9,367,471 8,179,909
Contribution receivable - employer 78 --
---------- ---------
Net assets available for plan benefits $9,367,549 8,179,909
========== =========
See accompanying notes to financial statements.
2
FIRST NIAGARA BANK
401(k) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2000 and 1999
2000 1999
----------- ----------
Contributions:
Employer $ 337,879 282,543
Employee 1,009,321 970,239
----------- ----------
1,347,200 1,252,782
----------- ----------
Investment income:
Interest and dividends 130,333 79,593
Net appreciation (depreciation) in fair value of investments,
including realized gains and losses on sales (147,937) 354,060
----------- ----------
(17,604) 433,653
----------- ----------
Total contributions and investment income 1,329,596 1,686,435
Transfer in from Albion Federal Savings and Loan Association
401(k) Plan (note 1) 897,034 --
Distributions to participants (1,017,691) (253,345)
Administrative expenses (21,299) (21,395)
----------- ----------
Net increase 1,187,640 1,411,695
Net assets available for plan benefits:
Beginning of year 8,179,909 6,768,214
----------- ----------
End of year $ 9,367,549 8,179,909
=========== ==========
See accompanying notes to financial statements.
3
FIRST NIAGARA BANK
401(k) PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(1) Description of Plan
The following description of the First Niagara Bank 401(k) Plan is provided
for general information purposes only. Participants should refer to the
Plan document for more complete information.
(a) General
The Plan is a defined contribution plan covering all employees of
First Niagara Bank (the Bank), a wholly-owned subsidiary of First
Niagara Financial Group, Inc. (FNFG), except employees of
Warren-Hoffman & Associates Inc. and NOVA Healthcare Administrators,
Inc. (subsidiaries of the Bank) who are covered by a separate plan. On
March 24, 2000 FNFG acquired Albion Bank Corp., Inc. On April 20, 2000
the assets of the Albion Federal Savings and Loan Association 401(k)
Plan were transferred into the Plan. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
(b) Eligibility
Employees are eligible to participate in the Plan when they reach age
21 and have completed one year of service during which they worked at
least 1,000 hours.
(c) Contributions
Participants may make contributions to the Plan in the form of salary
reductions of up to 15% of their total compensation. The Bank makes
matching contributions of 50% of employee contributions, up to a
maximum of 6% of the employee's total compensation. Participant
contributions are limited by the maximum allowable contribution under
the Internal Revenue Code.
(d) Participants' Accounts
Each participant's account is credited with contributions and a pro
rata share of investment income.
(e) Vesting
Participant and employer matching contributions immediately vest 100%
to the participant.
(f) Distributions
Participants or their beneficiaries are entitled to their entire
account balance upon death, retirement or termination of employment,
payable in a single sum or in an annuity.
4 (Continued)
FIRST NIAGARA BANK
401(k) PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(g) Administrative Expenses
Costs of administering the Plan, except recordkeeping expenses, are
borne by the Bank.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis of accounting.
(b) Investments
The Guaranteed Interest Account is carried at fair value, which
approximates contract value (original investment plus accrued
interest). Investments in the pooled separate accounts of the
Principal Mutual Life Insurance Company (Principal) are carried at
fair value based on the fair values of the underlying assets.
Investments in common stock are valued based on quoted market prices.
Investment income includes unrealized appreciation or depreciation in
the value of the investments. Investment transactions are recorded on
the trade date.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the use of estimates and assumptions that affect the reported amounts
of net assets available for plan benefits and changes therein. Actual
results could differ from those estimates.
(3) Investments
Contributions to the Plan are invested under a group annuity contract with
Principal. Plan participants may allocate their funds among one or more of
the following investment accounts under the contract:
o Guaranteed Interest - A general investment account comprised of
guaranteed interest contracts maturing at various dates through
December 31, 2002.
o Money Market - A pooled separate account which is comprised of
commercial paper, U.S. government and agency securities and other
short-term interest-bearing securities.
5 (Continued)
FIRST NIAGARA BANK
401(k) PLAN
Notes to Financial Statements
December 31, 2000 and 1999
o Bond and Mortgage - A pooled separate account which is comprised
of intermediate-term commercial mortgages and mortgage-backed
securities.
o Large Cap Stock Index - A pooled separate account which is
comprised of the stocks included in the Standard & Poor's 500
Stock Index.
o Large Company Blend - A pooled separate account which is
comprised of equity securities of large capitalized domestic
companies.
o Small Company Blend - A pooled separate account which is
comprised of equity securities of small to medium capitalized
domestic companies.
In addition, Plan participants may also allocate their contributions to the
purchase of FNFG common stock.
Net appreciation (depreciation) in fair value of investments for the years
ended December 31, 2000 and 1999 are as follows:
2000 1999
--------- --------
Group annuity contract with Insurance
Company $(269,593) 414,691
FNFG common stock 121,656 (60,631)
--------- --------
Total $(147,937) 354,060
========= ========
Individual investments that comprise 5% or more of the Plan's net assets
available for plan benefits at December 31, 2000 and 1999 are as follows:
2000 1999
---------- ---------
Principal Mutual Life Insurance Company:
Guaranteed Interest Account $1,325,091 1,163,720
U.S. Stock Account -- 2,055,846
Large Cap Stock Index Account 2,014,029 1,921,782
Large Company Blend 2,082,227 --
Small Company Blend 738,423 --
FNFG common stock 2,501,140 2,277,855
========== =========
6 (Continued)
FIRST NIAGARA BANK
401(k) PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(4) Federal Income Taxes
The Plan has received a favorable determination letter as to its tax-exempt
qualified status from the Internal Revenue Service dated July 24, 1998
covering the Plan as amended through January 27, 1998. The Plan was
restated effective January 1, 2000. The Plan Sponsor does not believe that
the restatement will adversely affect the tax status of the Plan. The
Plan's management has represented that the Plan has been operated in
accordance with its terms. Accordingly, there is no provision for income
taxes in these financial statements due to the applicable exemptions under
Sections 401 and 501 of the Internal Revenue Code.
(5) Plan Termination
Although it has not expressed any intent to do so, the Bank has the right
to discontinue its matching contribution at any time or to terminate the
Plan subject to the provisions of ERISA. In the event of a termination of
the Plan, participants will be entitled to the entire amount of their
account at the date of such termination.
(6) Subsequent Events
The Plan was amended effective January 1, 2001 to change its name to the
First Niagara Financial Group 401(k) Plan and to revise the Plan features
and benefits as outlined below. With this amendment, FNFG adopted the Plan
and became the sponsor, certain subsidiaries commenced participation in the
Plan, and the Plan's investment options were expanded.
Significant revisions to Plan features and benefits included the following:
Eligibility - All full-time and part-time employees are eligible to
participate in the Plan when they reach age 21 and have completed
three months of employment, rather than 1000 hours.
Employer Contributions - The Plan sponsor's matching contributions
increased from 50% to 75% of employee contributions, up to a maximum
of 6%.
Vesting - Participants become vested in employer contributions based
on a percentage that increases each year over a period of six years
when the vesting percentage is 100%.
Participant Loans - Participants may generally borrow a portion of
their account balance from a minimum of $1,000. Loans are limited to
one per employee at a time.
7
Schedule 1
FIRST NIAGARA BANK
401(k) PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2000
Current
Identity of issue Description Value
- ------------------------------------------- -------------------------------------- -----------
Group annuity contract with Principal
Mutual Life Insurance Company:*
Guaranteed Interest Account Guaranteed interest contracts
maturing at various dates through
December 31, 2002 $ 1,325,091
Money Market Account Pooled separate account investing
in money market instruments 299,254
Bond and Mortgage Account Pooled separate account investing
in fixed income securities 407,307
Large Cap Stock Index Account Pooled separate account investing
in corporate stocks 2,014,029
Large Company Blend Pooled separate account investing
in corporate stocks of large
capitalized companies 2,082,227
Small Company Blend Account Pooled separate account investing
in corporate stocks of small to
medium capitalized companies 738,423
First Niagara Financial Group, Inc.* Common stock (231,319 shares) 2,501,140
-----------
$ 9,367,471
===========
*Person named is a party-in-interest.
8