EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
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[LOGO] FINGER LAKES BANCORP
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Annual Report, December 31, 2000
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Table of Contents
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Page
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President's Message
Selected Consolidated Financial Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Independent Auditors' Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Common Stock Information
Directors and Officers
Corporate Information
Dear Shareholder:
The year just concluded was one of mixed results. On the positive side, we
successfully completed our stock conversion, expanded our market area into
Auburn, grew both deposits and loans while maintaining outstanding loan quality,
and moved our service functions to an efficient new operations center. On the
negative side, our earnings were a disappointment.
Although we believe we accomplished much in 2000 to position ourselves for
future progress, our earnings did not meet our expectations. Net income after
tax for 2000 totaled $802,000, or $.24 per share. This compares to $1,305,000,
or $.38 per share for the previous year.
[The following information was represented as a bar chart in the original text.]
Assets
200.4 247.7 282.4 301.2 329.2
'96 '97 '98 '99 '00
Earnings were adversely impacted by a number of factors. First, the rise in
interest rates through the latter part of 1999 and most of 2000, increased our
cost of funds more rapidly than the yields on loans and investments could
increase. As a result, our margins during the year compressed. Second, we
continued to incur expense on a foreclosed property that required environmental
remediation. A total of $240,000 of remediation expense was incurred in 2000.
The good news is that remediation, under the Department of Environmental
Conservation supervision, has been completed. And, although ongoing monitoring
is required, the site can now be sold.
Other factors impacted our 2000 financial results. Early in the year we
determined to change the direction of our efforts to sell investment products
and, accordingly, we established a relationship with a new partner. As a result
of start-up time and expense, fees earned on the sale of investment products was
minimal in 2000 compared to the previous year. In the higher interest rate
environment during 2000 our residential mortgage production was substantially
less compared to the previous year. Lower loan production reduced fees from the
origination and sale of mortgage loans.
The most significant activity of the year, of course, was the successful stock
conversion completed in the fourth quarter. Through the conversion we raised $14
million of new capital and obtained the additional benefits of enhanced
liquidity in our stock, broadening our shareholder base and positioning
ourselves to deliver shareholder value in the years ahead.
[The following information was represented as a bar chart in the original text.]
Deposits
153.8 186.5 202.4 208.1 228.5
'96 '97 '98 '99 '00
In April 2000, we opened a full service banking office in Auburn. By year-end,
deposits in the branch totaled $13 million, an excellent result. In addition to
gaining good deposit growth, we are actively developing a portfolio of
commercial loans in that market.
Deposit growth in 2000 was good in a year when many banking companies saw a
decline. At year-end, deposits totaled $228.5 million, up $20.3 million or 9.8%.
In addition, our focus on building checking accounts continues. In 2000, the
number of checking accounts grew by 9.1% and balances grew by $2.7 million or
11.1%.
[The following information was represented as a bar chart in the original text.]
Loans
89.8 119.6 148.3 160.2 172.4
'96 '97 '98 '99 '00
Similarly 2000 was a good year for our lending operations. Total loans increased
by $12.2 million to $172.4 million, a gain of 7.6%. Asset quality is important
to us and we achieved outstanding results. At year-end, non-performing loans
totaled $229,000 or 0.13% of total loans, down from $587,000 or 0.37% of total
loans one year ago. Reserves to total loans at year-end were .85% and reserves
to non-performing loans provided coverage of 6.4 times. We will continue to work
hard to maintain asset quality.
In November we moved our service operations from the basement of our Main Office
building to nearby leased space and in doing so have provided a proper work
environment for these important areas of our banking operation.
Ralph Springstead retired from our Board of Directors in June 2000 after 42
years of service as a Director. Ralph served as President and Chief Executive
Officer of the Bank for 30 years prior to his retirement in 1995. We thank Ralph
for his wonderful service as a Director for so many years.
At the beginning of this year, Richard J. Harrison resigned his position as a
Director of the Bank to join our Management Team as Executive Vice President,
Chief Credit Officer. Rick has 30 years of high level experience in large
financial companies and brings considerable strength to our Executive Officer
team.
With our footprint now clearly established throughout the Finger Lakes region,
the staff, officers and directors of our company are committed to build upon the
solid foundation established these past few years.
Sincerely,
/s/ G. Thomas Bowers
G. Thomas Bowers
President & Chief Executive Officer
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF FINGER LAKES BANCORP, INC. AND SUBSIDIARY
The following tables set forth selected consolidated historical financial
and other data of Finger Lakes Bancorp, Inc. and the Savings Bank of the Finger
Lakes for the periods and at the dates indicated. The information is derived in
part from, and should be read together with, the Consolidated Financial
Statements and Notes thereto of Finger Lakes Bancorp contained elsewhere in this
Annual Report.
At December 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(In Thousands)
Selected Financial Condition Data:
Total assets .............................. $329,196 $301,120 $282,376 $247,708 $200,429
Cash and cash equivalents ................. 4,496 6,095 4,375 4,394 6,366
Securities available for sale ............. 131,322 118,750 115,333 99,880 83,830
Securities held to maturity ............... 1,563 1,593 4,640 14,096 13,347
Loans, net ................................ 170,907 158,854 145,136 118,439 88,682
Deposits .................................. 228,462 208,132 202,434 186,534 153,832
Advances from Federal Home Loan Bank ...... 60,243 69,960 54,815 36,721 23,800
Stockholders' equity ...................... 36,571 19,379 21,964 21,679 20,350
Year Ended December 31,
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2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(In Thousands, except per share amounts)
Selected Operating Data:
Total interest income ..................... $ 22,445 $ 20,317 $ 18,645 $ 15,840 $ 13,560
Total interest expense .................... 13,749 12,021 11,201 9,197 7,370
-------- -------- -------- -------- --------
Net interest income ...................... 8,696 8,296 7,444 6,643 6,190
Provision for loan losses ................. 260 200 240 120 483
-------- -------- -------- -------- --------
Net interest income after provision for
loan losses .............................. 8,436 8,096 7,204 6,523 5,707
Noninterest income ........................ 1,141 1,328 1,202 721 1,093
Noninterest expense ....................... 8,285 7,259 7,213 5,835 6,741
-------- -------- -------- -------- --------
Income before income tax
expense .................................. 1,292 2,165 1,193 1,409 59
Income tax expense ........................ 490 860 469 562 23
-------- -------- -------- -------- --------
Net income ................................ $ 802 $ 1,305 $ 724 $ 847 $ 36
======== ======== ======== ======== ========
Net income per share- basic(1) ............ $ .24 $ .38 $ .21 $ .24 $ .01
======== ======== ======== ======== ========
Net income per share - diluted (1) ........ $ .24 $ .38 $ .21 $ .24 $ .01
======== ======== ======== ======== ========
Dividends per share ....................... $ .24 $ .24 $ .23 $ .20 $ .20
======== ======== ======== ======== ========
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(1) All per share items retroactively adjusted to reflect the exchange of
existing shares of Finger Lakes Financial Corp for shares of Finger Lakes
Bancorp. The exchange ratio was .9643.
At or For the Year Ended December 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Selected Ratios:
Performance Ratios:
Return on assets (ratio of net income to
average total assets) ......................... 0.26% 0.44% 0.27% 0.40% 0.02%
Return on stockholders' equity (ratio of net
income to average equity) ..................... 3.76 6.19 3.29 4.05 0.18
Interest rate spread information (1):
Average during period ......................... 2.65 2.74 2.71 2.82 3.17
End of period ................................. 2.52 2.77 2.73 2.84 2.79
Net interest margin
(net interest income divided by
average interest-earning assets) ............. 2.91 2.93 2.96 3.14 3.48
Noninterest expenses to average total
assets ....................................... 2.68 2.47 2.74 2.66 3.60
Average interest-earning assets to
average interest-bearing liabilities .......... 105.60 104.65 105.39 107.29 106.68
Dividend payout ratio(2) ....................... 100 63 110 83 2000
Asset Quality Ratios:
Non-performing assets to total assets(3) ....... 0.09% 0.32% 0.43% 0.50% 0.93%
Allowance for loan losses to
non-performing loans(3) ....................... 641.05% 229.81% 115.75% 203.72% 118.52%
Allowance for loan losses to
loans, net .................................... 0.85% 0.84% 0.80% 0.96% 1.21%
Capital Ratios:
Stockholders' equity to total assets
at end of period .............................. 11.11% 6.43% 7.78% 8.75% 10.15%
Average stockholders' equity to
average assets ................................ 6.91% 7.17% 8.36% 9.54% 10.85%
Other Data:
Number of full service customer facilities
at end of period .............................. 7 6 6 5 4
- ----------
(1) Interest rate spread represents the difference between the weighted
average yield on average interest-earning assets and the weighted average
cost of average interest-bearing liabilities.
(2) Ratio does not reflect the waiver of dividends by Finger Lakes Financial
Corp., M.H.C. on all of its shares.
(3) Nonperforming loans consist of non-accrual loans and non-performing assets
consist of non-performing loans, troubled debt restructurings and real
estate owned.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis reflects Finger Lakes Bancorp's consolidated
financial statements and other relevant statistical data and is intended to
enhance your understanding of our financial condition and results of operations.
You should read the information in this section in conjunction with Finger Lakes
Bancorp's consolidated financial statements and their notes and the other
statistical data provided in this Annual Report. This Annual Report contains
certain "forward-looking statements" which may be identified by the use of such
words as "believe," "expect," "anticipate," "should," "planned," "estimated" and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to our financial condition, results of operations and
business that are subject to various factors which could cause actual results to
differ materially from these estimates and most other statements that are not
historical in nature. These factors include, but are not limited to, general and
local economic conditions, changes in interest rates, deposit flows, demand for
mortgage and other loans, real estate values, and competition; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting our operations, pricing, products and services.
General
Our results of operations depend primarily upon the results of operations
of our wholly-owned subsidiary, Savings Bank of the Finger Lakes, which depend
primarily on net interest income. Net interest income is the difference between
the interest income we earn on our interest-earning assets, consisting primarily
of loans and investment and mortgage-backed securities, and the interest we pay
on our interest-bearing liabilities, primarily savings accounts, time deposits
and borrowings. Our results of operations are also affected by our provision for
loan losses, other income and other expense. Other expense consists of
non-interest expenses, including salaries and employee benefits, occupancy,
professional fees, data processing fees, deposit insurance premiums, advertising
and other expenses. Other income consists of non-interest income, including
service charges and fees, gain on sale of loans and securities and other income.
Our results of operations may also be affected significantly by general and
local economic and competitive conditions, particularly those with respect to
changes in market interest rates, government policies and actions of regulatory
authorities.
On November 11, 2000 we completed the "second-step" conversion and
reorganization of Finger Lakes Financial Corp., M.H.C., from a mutual holding
company into a full stock holding company, which resulted in Finger Lakes
Bancorp, Inc. succeeding as the stock holding company of Saving Bank of the
Finger Lakes. As part of this transaction, we sold 2,307,325 shares of common
stock for $7.00 per share in a public stock offering held in connection with the
reorganization. In addition, 1,180,052 minority shares were exchanged at a ratio
of .9643 resulting in total new shares outstanding of 3,445,110. The
accompanying consolidated financial statements include the accounts of Finger
Lakes Bancorp, Inc. (after the offering), Finger Lakes Financial Corp. (prior to
the offering) and the Savings Bank of the Finger Lakes.
Business Strategy
We have several strategies designed to improve our profitability and
enhance our franchise in our market area which comprises the Finger Lakes region
of New York state. We seek to implement these strategies in a manner that is
consistent with safety and soundness. These strategies are discussed below. You
should be aware that we are subject to intense competition, and there can be no
assurances that we will successfully implement these strategies:
Controlled growth while expanding our market area. We have sought to
increase our presence in the Finger Lakes region in New York by expanding our
branch network and by emphasizing a variety of loan products in addition to
traditional one- to four-family mortgage loans. As a result, our assets have
increased to $329.2 million at December 31, 2000, from $200.4 million at
December 31, 1996, an increase of 64.3%. During this period, we have increased
our total full-service offices from four to seven. Our growth has been targeted
to include those areas of the Finger Lakes region that have shown relative
economic strength. Management's goal is to continue to develop an increased
market presence in the Finger Lakes region.
Complementing our traditional mortgage lending by increasing multi-family
and commercial real estate lending as well as non-mortgage lending, particularly
commercial business lending. To complement our traditional emphasis on one- to
four-family mortgage lending, we have sought to increase our multi-family and
commercial real estate lending as well as our non-mortgage lending, particularly
commercial business lending. At December 31, 2000, our multi-family and
commercial real estate loans totaled $35.7 million, or 20.75% of total loans. At
December 31, 2000, non-mortgage loans, consisting of commercial business,
consumer, mobile home and home equity loans totaled $49.2 million, or 28.58% of
total loans. Management has determined to emphasize its commercial business
lending activities, and in this regard, has added to its staff persons who are
charged with originating and servicing our commercial business loan portfolio.
Because the yields on these types of loans are generally higher than the yields
on one- to four-family mortgage loans, our goal over the next several years is
to increase the origination of these loans consistent with safety and soundness
considerations. Although these loans offer higher yields than one- to
four-family mortgage loans, they also involve greater risk.
Maintaining asset quality. Our high asset quality is a result of our
underwriting standards, the diligence of our loan collection department in
contacting delinquent borrowers and the stability of the local economy. We also
invest in mortgage-backed securities issued by Freddie Mac, Fannie Mae and
Ginnie Mae and other investment securities, primarily U.S. government and agency
obligations. We will only purchase investment securities rated "A" or higher by
Moodys Investment Rating Service. At December 31, 2000, our ratio of
non-performing assets to total assets was 0.09%, and our ratio of non-performing
loans to total loans was 0.13%.
Increasing fee and servicing income. We have sought to increase and
diversify our sources of fee income. We receive fee income from the servicing of
loans sold in the secondary market and from fees on our deposit accounts. In
recent periods we have sold fixed rate mortgages into the secondary market
without recourse and on a servicing retained basis. At December 31, 2000
residential mortgage loans serviced for others totaled $40.7 million. Our fee
and servicing income has increased as a result of fees received from certain
deposit accounts. During the year ended December 31, 2000 service charges on
deposit accounts totaled $741,000 as compared to $653,000 and $453,000 during
the years ended December 31, 1999 and 1998, respectively. We also offer our
customers mutual funds, financial planning services and insurance and annuity
products through our wholly owned subsidiary SBFL Agency Inc, which is an
additional source of fee income.
Financial Condition
Our total assets as of December 31, 2000 were $329.2 million, a net
increase of $28.1 million, or 9.3% from December 31, 1999. The increase was due
primarily to a $12.1 million or 7.6% increase in our loan portfolio. Our loan
growth is a result of competitive expansion into other markets within the Finger
Lakes region in New York attracting new commercial and personal lending
customers. With management's continued emphasis on lending activities, mortgage
loans increased by $1.5 million, home equity loans increased by $2.8 million,
mobile home loans increased by $3.9 million and commercial business loans
increased by $4.1 million. Securities classified as available for sale at
December 31, 2000 were $131.3 million, an increase of $12.6 million from
December 31, 1999, while securities classified as held to maturity at December
31, 2000 were $1.6 million, unchanged from December 31, 1999. In the fourth
quarter of 2000, we invested in $5.0 million of bank owned life insurance, as a
tax advantaged means of financing employee benefits. Other assets totaled $5.1
million at December 31, 2000, a decrease of $886,000 from 1999. This decrease is
primarily due to a reduction in our deferred tax position at year end.
The growth in assets during 2000 was funded by a combination of a $20.3
million increase in total deposits and an increase in stockholders' equity of
$17.2 million, partially offset by a $9.7 million decrease in borrowed funds.
Certificates of deposit increased by $21.8 million and all other deposits
decreased by $1.4 million in 2000. Total deposit growth of $24.2 million in our
Auburn, Ithaca and Canandaigua markets is reflective of our expansion into those
markets and aggressively pricing deposits, particularly certificates of deposit.
Stockholders' equity totaled $36.6 million as of December 31, 2000, an
increase of $17.2 million from December 31, 1999. The increase in stockholders'
equity resulted primarily from the successful completion of our stock offering
on November 13, 2000, which raised approximately $14.0 million in new capital.
Changes in the fair value of securities available for sale, net of related
deferred income taxes, increased equity by $2.6 million, and net income of
$802,000 ($519,000 after dividends) contributed to the increase in stockholders'
equity as well.
Average Balances, Net Interest Income and Yields Earned and Rates Paid
The following table presents for the periods indicated the total dollar
amount of interest from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. No
tax-equivalent adjustments have been made and all average balances are daily
average balances. Non-accruing loans have been included in the yield
calculations in this table and dividends received are included as interest
income. Balance and yield/rate information as of December 31, 2000 is also
provided in the table.
At December 31, 2000 Year Ended December 31, 2000
---------------------- ------------------------------------
Yield/ Average Yield/
Balance Rate Balance Interest Rate
------- ---- ------- -------- ----
(Dollars In Thousands)
Interest-earning assets:
Loans(1) ................................... $172,375 8.43% $166,072 $ 13,637 8.21%
Securities (2) ............................. 137,904 6.66 132,125 8,756 6.63
Money market investments ................... -- -- 760 52 6.84
---- -------- --------- ------
Total interest-earning assets ................ 310,279 7.64 298,957 22,445 7.51
---- --------- ------
Non-interest-earning assets ................ 18,917 9,977
-------- --------
Total assets ................................. $329,196 $308,934
======== ========
Interest-bearing liabilities:
Deposits(3) .................................. $228,462 4.84 219,748 $ 9,873 4.49
Borrowed funds ............................... 60,243 6.20 63,345 3,876 6.12
-------- ---- -------- --------- ------
Total interest-bearing liabilities ......... 288,705 5.12 283,093 13,749 4.86
---- --------- ------
Non-interest-bearing liabilities ............. 3,920 4,491
-------- --------
Total liabilities .......................... 292,625 287,584
Stockholders' equity ....................... 36,571 21,350
-------- --------
Total liabilities and stockholders' equity ... $329,196 $308,934
======== ========
Net interest income .......................... $ 8,696
=========
Interest rate spread(4) ...................... 2.52% 2.65%
==== ======
Net interest margin(5) ....................... 2.91%
======
Average interest-earning assets to
average interest-bearing liabilities ......... 105.60%
======
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------------- ------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Dollars In Thousands)
Interest-earning assets:
Loans(1) ................................... $153,783 $ 12,137 7.89% $132,324 $ 10,821 8.18%
Securities (2) ............................. 128,761 8,173 6.35 119,256 7,810 6.55
Money market investments ................... 114 6 5.26 293 14 4.78
-------- --------- ------ --------- ------
Total interest-earning assets ................ 282,658 20,316 7.19 251,873 18,645 7.40
--------- ------ --------- ------
Non-interest-earning assets ................ 11,101 11,519
-------- --------
Total assets ................................. $293,759 $263,392
======== ========
Interest-bearing liabilities:
Deposits(3) .................................. $208,166 $ 8,660 4.16 $193,227 $ 8,678 4.49
Borrowed funds ............................... 61,923 3,360 5.43 45,771 2,523 5.51
-------- --------- ------ --------- ------
Total interest-bearing liabilities ......... 270,089 12,020 4.45 238,998 11,201 4.69
--------- ------ --------- ------
Non-interest-bearing liabilities ............. 2,601 2,369
-------- --------
Total liabilities .......................... 272,690 241,367
Stockholders' equity ....................... 21,069 22,025
-------- --------
Total liabilities and stockholders' equity ... $293,759 $263,392
======== ========
Net interest income .......................... $ 8,296 $ 7,444
========= =========
Interest rate spread(4) ...................... 2.74% 2.71%
====== ======
Net interest margin(5) ....................... 2.93% 2.96%
====== ======
Average interest-earning assets to
average interest-bearing liabilities ......... 104.65% 105.39%
====== ======
- ----------
(1) Includes premiums, net of deferred fees.
(2) Includes securities available for sale and held to maturity at amortized
cost and Federal Home Loan Bank stock at cost.
(3) Includes noninterest-bearing deposits.
(4) Represents the difference between the weighted average yield on
interest-earning assets and the weighted average costs of average
interest-bearing liabilities.
(5) Net interest income divided by interest-earning assets.
Rate/Volume Analysis
The following table describes the extent to which changes in interest
rates and changes in volume of interest-related assets and liabilities have
affected interest income and expense during the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (change
in volume multiplied by prior year rate), (ii) changes in rate (change in rate
multiplied by prior year volume), and (iii) total change in rate and volume. The
combined effect of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.
Year Ended December 31,
-----------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
Increase/(Decrease) Increase/(Decrease)
Due to Due to
------ Total Increase/ ------ Total Increase/
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---- ------ ----------
(In Thousands)
Interest-earning assets:
Loans ........................................ $ 530 $ 970 $1,500 $(394) $ 1,710 $ 1,316
Securities ................................... 369 214 583 (244) 607 363
Money market investments ..................... 12 34 46 1 (9) (8)
------- ------ ------ ----- ------- -------
Total interest-earning assets ............. 911 1,218 2,129 (637) 2,308 1,671
------- ------ ------ ----- ------- -------
Interest-bearing liabilities:
Deposits ..................................... 731 482 1,213 (663) 645 (18)
Borrowed funds ............................... 439 77 516 (37) 874 837
------- ------ ------ ----- ------- -------
Total interest-bearing liabilities ....... 1,170 559 1,729 (700) 1,519 819
------- ------ ------ ----- ------- -------
Increase (decrease) in net interest income ... $ (259) $ 659 $ 400 $ 63 $ 789 $ 852
======= ====== ====== ===== ======= =======
Results of Operations
Comparison of the years ended December 31, 2000 and 1999
Net Interest Income. Our net interest income is determined by the interest
rate spread (i.e., the difference between yields earned on interest-earning
assets and rates paid on interest-bearing liabilities) and the relative amounts
of interest-earning assets and interest-bearing liabilities. Net interest income
amounted to $8.7 million in 2000, an increase of $400,000 from 1999. The
increase resulted from a $16.3 million increase in the total average
interest-earning assets, primarily from loan growth, offset by a $13.0 million
increase in average interest-bearing liabilities, the net of which contributed
to a $659,000 increase in net interest income. The average interest rate spread
in 2000 was 2.65% versus 2.74% in 1999. The average yield on interest-earning
assets increased 32 basis points, while the average cost of funds increased 41
basis points from 1999 to 2000, contributing to a $259,000 decrease in net
interest income in 2000. The increase in the average yield on interest earning
assets was attributable to a rising rate environment throughout 2000. The cost
of funds, correspondingly, increased as a result of the rate environment, as
well as deposit pricing strategies responding to increased competitive
pressures.
Our net interest income was also impacted by the $14.0 million, net of
expenses, raised in our public stock offering during the fourth quarter of 2000.
We were able to pay down short term borrowings, and invest the remainder in
interest bearing assets, resulting in additional net interest income earned of
approximately $140,000.
Interest Income. Total interest income in 2000 amounted to $22.4 million,
an increase of $2.1 million from 1999. Interest income on loans increased to
$13.6 million in 2000, an increase of $1.5 million from 1999. This improvement
was primarily attributable to loan growth as the average total outstanding loan
balance increased by $12.3 million to $166.1 million for 2000. In addition, the
average yield on loans grew to 8.21% in 2000 compared to 7.89% in 1999. Our
strategy is to emphasize the origination of commercial real estate loans and
commercial business loans, which typically yield higher interest rates. Interest
income on securities amounted to $8.8 million, an increase of $583,000 from the
prior year. This increase was attributed to growth in the portfolio as the
average outstanding securities balance increased by $3.4 million to $132.1
million for 2000, as well as an increase in the yield to 6.63%, from 6.35% in
1999.
Interest Expense. Total interest expense in 2000 was $13.7 million, an
increase of $1.7 millions from 1999. In 2000, interest expense on deposits
amounted to $9.9 million while interest expense on borrowed funds amounted to
$3.8 million. Interest expense on deposits increased due to both growth in the
average outstanding deposit base of $11.6 million, as well as an increase in the
average cost of 33 basis points to 4.49%. Interest expense on borrowings
increased $516,000, from $3.4 million in 1999, due to a $1.4 million increase in
average outstanding borrowings, as well as an increase in the average cost of
borrowed funds of 69 basis points to 6.12% for the year ended December 31, 2000.
Provision for Loan Losses. Our provision for loan losses amounted to
$260,000 in 2000, an increase of $60,000 from the prior year. Our allowance for
loan losses amounted to $1.5 million as of December 31, 2000, or 0.85% of total
loans outstanding, as compared to $1.3 million or 0.84% at December 31, 1999.
The increase in the provision reflects the increase in the total average
outstanding loan portfolio, as well as greater emphasis on building our
commercial real estate and commercial business portfolios, which typically have
greater credit risk. Net charge-offs in 2000 were $142,000 versus $26,000 in
1999, representing 0.09% and 0.02%, respectively, of total average loans
outstanding. The increase in net charge-offs was primarily a result of a
significant 1999 recovery for $90,000 of a previously charged-off commercial
business loan, bringing total recoveries to $186,000 in 1999 as compared to
$47,000 in 2000. Also, gross loan charge-offs declined by $23,000 to $189,000 in
2000 from $212,000 in 1999 as we devoted greater resources to monitoring of
problem loans and collection efforts. The increase in the allowance for loan
losses in 2000 also reflects management's consideration of qualitative factors
including, but not limited to, the substantial growth in multi-family and
commercial business loans and entry into new markets. Management reviews the
adequacy of the allowance for loan losses quarterly through an asset
classification and review process and an analysis of the level of loan
delinquencies and general market and economic conditions.
Noninterest Income. Noninterest income, consisting primarily of service
charges on deposit accounts, loan servicing fees, income from the sale of
annuities and mutual funds, and gains on loans and securities sold, was $1.1
million in 2000, a decrease of $187,000 or 14.1% compared to 1999. Service
charges and other fee income was $988,000 in 2000, a decrease of $38,000
compared to 1999. The decrease was due to a decision, through our wholly owned
subsidiary SBFL Agency, to change our broker/dealer relationship, in order to
provide a wider range of products for our customers. This decision resulted in a
reduction of $130,000 in fee income from our sales of annuities and mutual
funds. Net gains on sales of securities in 2000 were $50,000, as compared to
$77,000 in 1999. Net gains on sales of loans were $99,000 in 2000, as compared
to $224,000 in 1999. During 2000, we originated $5.2 million of loans held for
sale, versus $15.3 million in 1999, resulting in fewer sales, and reduced gains.
Noninterest Expense. Noninterest expense amounted to $8.3 million in 2000,
compared to $7.3 million in 1999, an increase of 14.1%. This increase reflects
our investment in the future with increased staff, branch expansion, and
upgrading technological capabilities for data processing. Relating to a new
branch office in Auburn, New York were increases of $145,000 in salaries and
employee benefits expense and $87,000 in office occupancy and equipment expense.
Data processing expense amounted to $197,000, an increase of $38,000 or 24.0%.
This increase is primarily the result of additional processing costs associated
with the new branch office, and data communications upgraded throughout our
operating network. We recorded provisions for environmental remediation of real
estate owned of $180,000 during 2000, as compared to $90,000 in 1999. This
increase is primarily the result of management's determination of the provision
required each year to ensure that the accrual established for environmental
remediation as of December 31 is appropriate. See note 13 of the "Consolidated
Financial Statements." Professional fees of $417,000 in 2000, which includes
legal, consulting and accounting services, increased $70,000 or 20.1%, due to a
decision to outsource a portion of our technological requirements, such as
network and telecommunication management. Deposit insurance premiums, which
totaled $43,000 for 2000, decreased $77,000, reflecting a change in federal
deposit insurance rates that took effect January 1, 2000 for thrift
institutions. Marketing and advertising expense increased $72,000 to $320,000 in
2000, reflecting larger media expenditures in 2000 relating to the new branch
office in Auburn. Real estate owned expenses decreased $29,000 or 40.5% to
$43,000 in 2000 as compared to $72,000 in 1999, reflecting lower levels of
foreclosures in 2000. Other noninterest expense of $1.7 million in 2000 and $1.2
million in 1999 is comprised of expenses such as postage, office supplies,
telephone charges, loan servicing expenses, director's fees, insurance, and
third party check processing. The increase in other noninterest expense is
primarily due to the purchase of a Cleanup Cost Cap insurance policy relating to
the environmental remediation matter (see note 13 of the "Consolidated Financial
Statements), as well as increased costs life insurance policies.
Income Taxes. Our recorded income tax expense was $490,000 for the year
ended December 31, 2000 on income before taxes for the year of $1.3 million,
reflecting an effective tax rate of 37.9%. In 1999, the effective rate was
39.7%.
Comparison of the years ended December 31, 1999 and 1998
Net Interest Income Net interest income amounted to $8.3 million in 1999,
an increase of $852,000 from 1998. The increase resulted from a $30.8 million
increase in the total average interest-earning assets, primarily from loan
growth, offset by a $31.1 million increase in average interest-bearing
liabilities, the net of which contributed to an $807,000 increase in net
interest income. The average interest rate spread in 1999 was 2.74% versus 2.71%
in 1998. The average yield on interest-earning assets decreased 21 basis points,
while the average cost of funds decreased 24 basis points from 1998 to 1999, the
benefits of which contributed to a $45,000 increase in net interest income in
1999. The decline in the average yield on interest earning assets was
attributable to a declining rate environment through the second quarter of 1999
and increased competitive pressures. The cost of funds, correspondingly,
declined as a result of the rate environment, as well as deposit pricing
strategies designed to lower the overall cost of deposits.
Interest Income. Total interest income in 1999 amounted to $20.3 million,
an increase of $1.7 million from 1998. Although the average yield on earning
assets declined to 7.19% in 1999 compared to 7.40% in 1998, interest income on
loans increased to $12.1 million in 1999, an increase of $1.3 million from 1998.
This improvement was attributable to loan growth as the average total
outstanding loan balance increased by $21.5 million to $153.8 million for 1999.
Interest income on securities amounted to $8.2 million, an increase of $363,000
from the prior year. This increase was attributed to growth in the portfolio as
the average outstanding securities balance increased by $9.5 million to $128.8
million for 1999.
Interest Expense. Total interest expense in 1999 was $12.0 million, an
increase of $819,000 from 1998. In 1999, interest expense on deposits amounted
to $8.7 million while interest expense on borrowed funds amounted to $3.4
million. Interest expense on deposits remained essentially flat year over year,
as an increase of $671,000 attributed to the growth in the average outstanding
deposit base was offset by a decrease of $689,000 attributed to the decline of
33 basis points in the average cost of deposits to 4.16%. However, interest
expense on borrowings increased $837,000, from $2.5 million in 1998, due to a
$16.1 million increase in average outstanding borrowings. The average cost of
borrowed funds decreased 8 basis points to 5.43% for the year ended December 31,
1999.
Provision for Loan Losses. Our provision for loan losses amounted to
$200,000 in 1999, a decrease of $40,000 from the prior year. Our allowance for
loan losses amounted to $1.3 million as of December 31, 1999, or 0.84% of total
loans outstanding, as compared to $1.2 million or 0.80% at December 31, 1998.
The reduction in the provision reflects an improvement in the credit quality of
the portfolio in 1999 as non-performing loans decreased $429,000 to $587,000 at
December 31, 1999 from $1.0 million at December 31, 1998. Net charge-offs in
1999 were $27,000 versus $213,000 in 1998, representing 0.02% and 0.16%,
respectively, of total average loans outstanding. The decrease in net
charge-offs was primarily a result of a significant 1999 recovery for $90,000 of
a previously charged-off commercial business loan bringing total recoveries to
$186,000 in 1999 as compared to $80,000 in 1998. Also, gross loan charge-offs
declined by $81,000 to $212,000 in 1999 from $293,000 in 1998 as we devoted
greater resources to monitoring of problem loans and collection efforts. The
slight 4 basis point increase in the allowance for loan losses as a percentage
of total loans outstanding is a result of qualitative factors including, but not
limited to, the substantial growth in multi-family and commercial business loans
and entry into new markets. Management reviews the adequacy of the allowance for
loan losses quarterly through an asset classification and review process and an
analysis of the level of loan delinquencies and general market and economic
conditions.
Noninterest Income. Noninterest income, consisting primarily of service
charges on deposit accounts, loan servicing fees, income from the sale of
annuities and mutual funds, and gains and losses on loans and securities sold,
was $1.3 million in 1999, an increase of $126,000 or 10.5% compared to 1998.
Service charges and other fee income were $1.0 million in 1999, an increase of
$224,000 over 1998. Net gains on sales of securities in 1999 were $77,000, as
compared to $106,000 in 1998. Net gains on sales of loans were $224,000 in 1999,
as compared to $277,000 in 1998.
Noninterest Expense. Noninterest expense amounted to $7.3 million in 1999,
comparable to 1998. However, excluding provisions for environmental remediation,
expenses increased $576,000 or 8.7%. This increase reflects our investment in
the future with increased staff, branch expansion, and upgrading technological
capabilities for data processing. Increases of $269,000 in salaries and employee
benefits expense and $177,000 in office occupancy and equipment expense were
primarily the result of a full year of expenses including depreciation expense
relating to a new branch office in Canandaigua, New York. Data processing
expense amounted to $159,000, an increase of $40,000 or 33.6%. This increase is
primarily the result of additional processing costs associated with the new
branch office, and data communications upgraded at two branches in Ithaca, New
York. We recorded provisions for environmental remediation of real estate owned
of $90,000 during 1999, as compared to $620,000 in 1998. This decrease is
primarily the result of management's determination of the provision required
each year to ensure that the accrual established for environmental remediation
as of December 31 is appropriate. See note 13 of the "Consolidated Financial
Statements." Professional fees of $347,000 in 1999, which includes legal,
consulting and accounting services, remained consistent in 1999 as compared to
1998 as did deposit insurance premiums, which totaled $120,000 for 1999.
Marketing and advertising expense decreased $16,000 to $248,000 in 1999,
reflecting larger media expenditures in 1998 relating to the new branch office
in Canandaigua. Real estate owned expenses increased $63,000 to $72,000 in 1999
as compared to $9,000 in 1998, reflecting higher levels of foreclosure in 1999,
as well as fewer gains on sale of real estate owned. Other noninterest expense
of $1.2 million in 1999 is comprised of expenses such as postage, office
supplies, telephone charges, loan servicing expenses, directors fees, and third
party check processing charges and remains consistent with the prior year.
Income Taxes. Our recorded income tax expense was $860,000 for the year
ended December 31, 1999 on income before taxes for the year of $2.2 million,
reflecting an effective tax rate of 39.7%. In 1998, the effective rate was
39.3%.
Quantitative and Qualitative Disclosures About Market Risk
The following table presents the difference between our interest-earning
assets and interest-bearing liabilities within specified maturities at December
31, 2000. This table does not necessarily indicate the impact that general
interest rate movements would have on our net interest income because the
repricing of certain assets and liabilities is subject to competitive pressure
and certain limitations. As a result, certain assets and liabilities indicated
as maturing or otherwise repricing within a stated period may in fact mature or
reprice at different times and at different volumes.
More than 1 More Than 3
Within 3 4 to 12 Year to Years to Over
Months Months 3 Years 5 Years Five Years Total
-------- ------- ----------- ----------- ---------- --------
(Dollars In Thousands)
Interest-earning assets:(1)
Mortgage loans(2) ............................. $10,092 $ 26,478 $ 53,452 $ 28,588 $ 4,203 $122,813
Other loans(2) ................................ 18,484 4,714 12,121 6,662 7,165 49,146
Securities available for sale(3) ............. 22,488 18,737 19,318 20,953 49,826 131,322
Securities held to maturity(3) ................ -- 32 71 78 1,382 1,563
Federal Home Loan Bank Stock .................. -- -- -- -- 3,523 3,523
------- --------- -------- -------- ------- --------
Total interest-earning assets .............. 51,064 49,961 84,962 56,281 66,099 308,367
------- --------- -------- -------- ------- --------
Interest-bearing liabilities:
Deposits:(4)
NOW accounts ............................... 530 1,591 2,969 1,188 792 7,070
Savings accounts ........................... 2,910 8,731 16,298 6,519 4,346 38,804
Money market accounts ...................... 611 1,832 3,420 1,368 912 8,143
Certificates of deposit .................... 29,257 87,769 23,586 13,531 171 154,314
Borrowings(5) .............................. 5,400 5,000 7,843 25,000 17,000 60,243
------- --------- -------- -------- ------- --------
Total interest-bearing liabilities ....... 38,708 104,923 54,116 47,606 23,221 268,574
------- --------- -------- -------- ------- --------
Excess (deficiency) of interest- earning
assets over interest-bearing liabilities ... $12,356 $ (54,962) $ 30,846 $ 8,675 $42,878 $ 39,793
======= ========= ======== ======== ======= ========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities ............... $12,356 $ (42,606) $(11,760) $ (3,085) $39,793
======= ========= ======== ======== =======
Cumulative excess (deficiency)
of interest-earning liabilities as a
percentage of total assets ................. 3.75% (12.94)% (3.57)% (0.94)% 12.09%
======= ========= ======== ======== =======
- ----------
(1) Adjustable- and floating-rate assets are included in the period in which
interest rates are next scheduled to adjust rather than in the period in
which they are due, and fixed-rate assets are included in the periods in
which they are scheduled to be repaid based on scheduled amortization, in
each case adjusted to take into account estimated prepayments. For
fixed-rate mortgages and mortgage-backed securities, annual prepayment
rates ranging from 5% to 25.5%, based on the type of loan or mortgage
security and the coupon rate, were used.
(2) Balances have been reduced for non-performing loans, which amounted to
$229,000 at December 31, 2000.
(3) Amounts shown are at carrying amounts.
(4) Our negotiable order of withdrawal ("NOW") accounts, passbook savings
accounts and money market deposit accounts are generally subject to
immediate withdrawal. However, management considers a certain portion of
these accounts to be core deposits having significantly longer effective
maturities based on our retention of such deposits in changing interest
rate environments. NOW accounts, passbook savings accounts and money
market deposit accounts are assumed to be withdrawn at annual rates of 30%
of the declining balance of such accounts during the period shown.
Management believes these rates are indicative of expected withdrawal
rates in a rising interest rate environment. If all of our NOW accounts,
passbook savings account and money market accounts had been assumed to be
subject to repricing within one year, the cumulative one-year deficiency
of interest-earning assets to interest-bearing liabilities would have been
$80.4 million or 24.4% of total assets.
(5) Advances of $37 million are callable at the discretion of the FHLB in or
after 2001. Such advances have a weighted average interest rate of 6.11%
and mature from 2004 to 2010, if not called earlier.
Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, certain assets, such as adjustable-rate mortgage
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Finally, the ability
of many borrowers to service their debt may decrease in the event of an interest
rate increase.
The OTS requires the Savings Bank of the Finger Lakes to measure interest rate
risk by computing estimated changes in the net portfolio value ("NPV") of cash
flows from assets, liabilities and off-balance sheet items in the event of a
range of assumed changes in market interest rates. These computations estimate
the effect on NPV of sudden and sustained 1% to 3% increases and decreases in
market interest rates. The Savings Bank of the Finger Lakes' Board of Directors
has adopted an interest rate risk policy which establishes maximum decreases in
estimated NPV in the event of 1%, 2% and 3% increases and decreases in market
interest rates, respectively. The following tables set forth those limits and
certain calculations, based on information provided to the Savings Bank of the
Finger Lakes by the OTS, with respect to the sensitivity of NPV to changes in
market interest rates at December 31, 2000.
Basis Point Estimated Net Portfolio Value NPV as % of PV of Assets
Change ------------------------
in Rates
-------- ---------------------------------------
$ Amount $ Change % Change NPV Ratio BP Change
-------- -------- -------- --------- ---------
+300 $ 25,243 $ (9,894) (28)% 8.06% (246) bp
+200 28,904 (6,233) (18) 9.03 (149) bp
+100 32,298 (2,839) (8) 9.87 (65) bp
NC 35,137 10.52
-100 34,361 (776) (2) 10.19 (33) bp
-200 32,380 (2,757) (8) 9.54 (98) bp
-300 31,154 (3,983) (11) 9.09 (143) bp
The table suggests that in the event of a 200 basis point change in
interest rates we would experience a decrease in NPV as a percentage of assets
to 9.03% from 10.52% in a rising interest rate environment and a decrease in NPV
as a percentage of assets to 9.54% from 10.52% in a decreasing interest rate
environment.
The Board of Directors is responsible for reviewing asset liability
management policies. On at least a quarterly basis, the Board reviews interest
rate risk and trends, as well as liquidity and capital ratios and requirements.
Management is responsible for administering the policies and determinations of
the Board of Directors with respect to our asset and liability goals and
strategies.
Liquidity and Capital Resources
Our liquidity management objective is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for expansion. Liquidity management addresses the ability to meet
deposit withdrawals on demand or at contractual maturity, to repay borrowings as
they mature, and to fund new loans and investments as opportunities arise. Our
primary sources of internally generated funds are principal and interest
payments on loans receivable, cash flows generated from operations, and cash
flows generated by investments. External sources of funds include increases in
deposits and advances from the FHLB.
Savings Bank of the Finger Lakes is required under applicable federal
regulations to maintain specified levels of "liquid" investments in qualifying
types of United States Government, federal agency and other investments having
maturities of five years of less. OTS regulations at December 31, 2000 require
that a savings association maintain liquid assets of not less than 4% of its
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. Monetary penalties may be imposed for failure to
meet applicable liquidity requirements. At December 31, 2000, Savings Bank of
the Finger Lakes' liquidity, as measured for regulatory purposes, was in excess
of the minimum OTS requirement. Savings Bank of the Finger Lakes received
approximately $11 million of the net proceeds from the stock offering. The
effects of the stock offering on liquidity are likely to decrease over time as
the offering proceeds are deployed into other investments and activities, such
as establishing or acquiring additional branch offices, funding new loans, and
funding the recognition and retention plan or for general corporate purposes.
At December 31, 2000, we had loan commitments of $3.7 million and unused
lines of credit of $12.3 million extended to borrowers. We believe that we have
adequate resources to fund loan commitments as they arise. If we require funds
beyond our internal funding capabilities, additional advances from the FHLB are
available including a line of credit agreement with a maximum available limit of
$30.4 million. At December 31, 2000, approximately $117.0 million of time
deposits were scheduled to mature within a year, and we expect that a
substantial portion of these time deposits will be renewed upon maturity.
Impact of Inflation and Changing Prices
The consolidated financial statements and related notes of Finger Lakes
Bancorp have been prepared in accordance with generally accepted accounting
principles ("GAAP"). GAAP generally requires the measurement of financial
position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time
due to inflation. The impact of inflation is reflected in the increased cost of
our operations. Unlike industrial companies, our assets and liabilities are
primarily monetary in nature. As a result, changes in market interest rates have
a greater impact on performance than the effects of inflation.
New Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, requires that all derivatives be recognized as either
assets or liabilities in the statement of financial condition and that those
instruments be measured at fair value. The accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use of
the derivative and the resulting designations. The Company's adoption on January
1, 2001 did not have a significant effect on the Company's financial position or
results of operations.
MARKET FOR THE COMMON STOCK
There is an established market for Finger Lakes Bancorp common stock which
is currently listed on the Nasdaq National Market under the symbol, "FLBC." At
December 31, 2000 Finger Lakes Bancorp had 12 market makers.
The following table sets forth the high and low bid quotes for common
stock of Finger Lakes Bancorp and its predecessor prior to November 14, 2000,
Finger Lakes Financial Corp (SBFL) and the adjusted cash dividends per share
declared for the periods indicated. These quotations represent prices between
dealers and do not include retail markups, markdowns, or commissions and do not
reflect actual transactions. This information has been obtained from monthly
statistical summaries provided by the Nasdaq Stock Market. As of December 31,
2000 there were 3,445,110 shares of Finger Lakes Bancorp common stock
outstanding which were held by approximately 303 holders of record.
Cash Dividend
High Bid Low Bid Declared
-------- ------- --------
Fiscal 2000
Quarter Ended December 31, 2000 $ 7.5625 $ 6.500 $ 0.06
Quarter Ended September 30, 2000 $ 7.0625 $ 6.250 $ 0.06
Quarter Ended June 30, 2000 $ 8.3125 $ 5.500 $ 0.06
Quarter Ended March 31, 2000 $ 8.1875 $ 5.750 $ 0.06
Fiscal 1999
Quarter Ended December 31, 1999 $ 9.750 $ 7.000 $ 0.06
Quarter Ended September 30, 1999 $ 11.000 $ 8.125 $ 0.06
Quarter Ended June 30, 1999 $ 11.750 $ 10.500 $ 0.06
Quarter Ended March 31, 1999 $ 15.750 $ 11.375 $ 0.06
- ----------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Finger Lakes Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial condition
of Finger Lakes Bancorp, Inc. and subsidiary as of December 31, 2000 and 1999,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Finger Lakes
Bancorp, Inc. and subsidiary at December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
/s/KPMG LLP
----------------------------------------
Syracuse, New York
January 26, 2001
FINGER LAKES BANCORP, INC.
Consolidated Statements of Financial Condition
December 31, 2000 and 1999
Assets 2000 1999
---- ----
Cash and cash equivalents $ 4,495,699 6,094,962
Securities available for sale, at fair value 131,321,731 118,750,207
Securities held to maturity, fair value of $1,563,333
in 2000 and $1,567,273 in 1999 1,562,783 1,592,795
Loans 172,374,860 160,203,637
Less allowance for loan losses 1,467,524 1,349,477
------------- -----------
Net loans 170,907,336 158,854,160
Accrued interest receivable 2,479,077 2,180,211
Federal Home Loan Bank stock, at cost 3,523,000 3,523,000
Premises and equipment, net 4,813,729 4,149,400
Bank owned life insurance 5,003,333 --
Other assets 5,088,937 5,975,410
------------- -----------
Total assets $ 329,195,625 301,120,145
============= ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 228,462,401 208,132,284
Advances from Federal Home Loan Bank 60,242,677 69,959,730
Other liabilities 3,919,686 3,649,231
------------- -----------
Total liabilities 292,624,764 281,741,245
------------- -----------
Commitments and contingencies (notes 12 and 13)
Stockholders' equity:
Preferred stock, $0.01 par value;1,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $0.01 par value; 5,000,000 shares
authorized; 3,445,110 and 3,570,000 issued
and outstanding at December 31, 2000
and 1999, respectively 34,451 35,700
Additional paid-in capital 20,068,434 4,786,957
Retained earnings 18,780,317 18,261,689
Accumulated other comprehensive loss (897,815) (3,524,843)
Unallocated shares of ESOP (1,414,526) (180,603)
------------- -----------
Total stockholders' equity 36,570,861 19,378,900
------------- -----------
Total liabilities and stockholders' equity $ 329,195,625 301,120,145
============= ===========
See accompanying notes to consolidated financial statements.
FINGER LAKES BANCORP, INC.
Consolidated Statements of Income
For the Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Interest income:
Loans $13,636,565 12,137,138 10,821,304
Securities 8,756,166 8,173,120 7,810,063
Federal funds sold and other
short-term investments 51,965 6,187 14,085
----------- ---------- ----------
Total interest income 22,444,696 20,316,445 18,645,452
----------- ---------- ----------
Interest expense:
Deposits 9,872,931 8,660,307 8,678,198
----------- ---------- ----------
Borrowings 3,876,430 3,360,357 2,523,136
----------- ---------- ----------
Total interest expense 13,749,361 12,020,664 11,201,334
----------- ---------- ----------
Net interest income 8,695,335 8,295,781 7,444,118
Provision for loan losses 260,000 200,000 240,000
----------- ---------- ----------
Net interest income after
provision for loan losses 8,435,335 8,095,781 7,204,118
----------- ---------- ----------
Noninterest income:
Service charges and other fee income 988,406 1,026,636 803,134
Net gain on sales of loans 98,941 224,351 276,612
Net gain on sales of securities available for sale 50,383 77,137 106,231
Other 3,524 -- 15,722
----------- ---------- ----------
Total noninterest income 1,141,254 1,328,124 1,201,699
----------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits 3,820,318 3,591,839 3,322,895
Office occupancy and equipment 1,575,984 1,387,261 1,209,563
Provision for environmental remediation
of real estate owned 180,000 90,000 620,000
Deposit insurance premiums 43,388 119,947 112,400
Professional fees 416,790 347,007 342,144
Marketing and advertising 320,184 247,907 264,185
Data processing 197,134 158,934 119,188
Real estate owned 42,944 72,150 8,650
Other 1,688,025 1,243,493 1,214,198
----------- ---------- ----------
Total noninterest expense 8,284,767 7,258,538 7,213,223
----------- ---------- ----------
Income before income tax
expense 1,291,822 2,165,367 1,192,594
Income tax expense 489,980 860,426 468,565
----------- ---------- ----------
Net income $ 801,842 1,304,941 724,029
=========== ========== ==========
Net income per common share:
Basic $ 0.24 0.38 0.21
=========== ========== ==========
Diluted $ 0.24 0.38 0.21
=========== ========== ==========
See accompanying notes to consolidated financial statements.
FINGER LAKES BANCORP, INC.
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2000, 1999 and 1998
Unallo-
Accumulated cated
Additional other shares
Common paid-in Retained comprehensive of
stock capital earnings income(loss) ESOP Total
----- ------- -------- ------------ ---- -----
Balance, December 31, 1997 $ 35,700 4,675,886 16,787,342 433,012 (252,844) 21,679,096
Comprehensive income:
Net income -- -- 724,029 -- -- 724,029
Unrealized loss on securities
available for sale, net of taxes -- -- -- (277,607) -- (277,607)
----------
Total comprehensive income 446,422
Allocation of shares under ESOP -- 73,370 -- -- 36,120 109,490
Cash dividends declared,
$0.23 per share -- -- (271,412) -- -- (271,412)
----------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 35,700 4,749,256 17,239,959 155,405 (216,724) 21,963,596
Comprehensive loss:
Net income -- -- 1,304,941 -- -- 1,304,941
Unrealized loss on securities
available for sale, net of taxes -- -- -- (3,680,248) -- (3,680,248)
----------
Total comprehensive loss (2,375,307)
----------
Allocation of shares under ESOP -- 37,701 -- -- 36,121 73,822
Cash dividends declared,
$0.24 per share -- -- (283,211) -- -- (283,211)
----------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 35,700 4,786,957 18,261,689 (3,524,843) (180,603) 19,378,900
Comprehensive income:
Net income -- -- 801,842 -- -- 801,842
Unrealized gain on securities
available for sale, net of taxes -- -- -- 2,627,028 -- 2,627,028
----------
Total comprehensive income 3,428,870
----------
Issuance of 2,307,325 shares (1,249) 15,265,146 -- -- -- 15,263,897
Purchase of 184,586 shares by ESOP -- -- -- -- (1,292,102) (1,292,102)
Allocation of shares under ESOP -- 16,331 -- -- 58,179 74,510
Cash dividends declared,
$0.24 per share -- -- (283,214) -- -- (283,214)
----------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2000 $ 34,451 20,068,434 18,780,317 (897,815) (1,414,526) 36,570,861
=========== ========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
FINGER LAKES BANCORP
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income $ 801,842 1,304,941 724,029
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 739,869 668,929 597,548
Amortization of loan fees and other, net 106,441 (171,724) 283,635
Provision for loan losses 260,000 200,000 240,000
Provision for environmental remediation 180,000 90,000 620,000
Proceeds from sales of loans 5,305,432 14,224,557 21,411,559
Loans originated for sale (5,188,487) (15,262,000) (15,221,497)
Net gain on sales of loans (98,941) (224,351) (276,612)
Net gain on sales of securities available
for sale (50,383) (77,137) (106,231)
Net loss (gain) on sales of real
estate owned 23,097 15,311 (33,333)
Allocation of ESOP 74,510 73,822 109,490
Deferred income taxes (1,872) (65,993) (199,081)
Increase in accrued interest
receivable (298,866) (272,509) (101,550)
Decrease (increase) in other assets (943,313) 25,257 113,906
Increase in other liabilities 90,455 517,056 13,070
----------- ----------- ------------
Net cash provided by
operating activities 999,784 1,046,159 8,174,933
----------- ----------- ------------
Cash flows from investing activities:
Proceeds from maturities of and principal
collected on securities available for sale 9,845,925 25,395,980 35,669,146
Proceeds from maturities of and principal
collected on securities held to maturity 30,000 4,021,823 10,100,000
Proceeds from sales of securities
available for sale 5,162,044 18,413,431 51,605,954
Purchases of securities available for sale (23,155,407) (53,261,255) (103,170,611)
Purchases of securities held to maturity -- (969,395) (640,000)
Loans originated and purchased (36,527,007) (45,427,221) (59,177,514)
Principal collected on loans 23,864,315 32,528,962 26,044,180
Purchase of bank owned life insurance (5,000,000) -- --
Proceeds from sales of real estate owned 283,636 256,788 277,784
Purchases of FHLB stock -- (582,200) (869,700)
Purchases of premises and equipment, net (1,404,198) (262,415) (1,503,334)
----------- ----------- ------------
Net cash used in
investing activities (26,900,692) (19,885,502) (41,664,095)
----------- ----------- ------------
(Continued)
FINGER LAKES BANCORP, INC.
Consolidated Statements of Cash Flows, Continued
2000 1999 1998
---- ---- ----
Cash flows from financing activities:
Net increase (decrease) in savings,
demand and money market accounts $ (1,439,464) 1,005,839 749,899
Net increase in time deposits 21,769,581 4,692,474 15,149,726
Net increase (decrease) in short term
FHLB advances (18,700,000) 3,100,000 (16,008,000)
Long term advances from FHLB 10,000,000 23,000,000 35,000,000
Repayments of long term advances
from FHLB (1,017,053) (10,955,531) (897,730)
Principal payments on ESOP debt -- -- (252,844)
Net proceeds from stock offering 13,971,795 -- --
Common stock dividends paid (283,214) (283,211) (271,412)
------------ ----------- -----------
Net cash provided by
financing activities 24,301,645 20,559,571 33,469,639
------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents (1,599,263) 1,720,228 (19,523)
Cash and cash equivalents at beginning
of year 6,094,962 4,374,734 4,394,257
------------ ----------- -----------
Cash and cash equivalents at end of year $ 4,495,699 6,094,962 4,374,734
============ =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 13,933,874 11,843,376 10,994,155
============ =========== ===========
Income taxes $ 540,000 545,000 582,011
============ =========== ===========
Non-cash investing activities:
Transfer of loans to real estate
owned $ 330,325 289,786 233,448
============ =========== ===========
See accompanying notes to consolidated financial statements.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(1) Summary of Significant Accounting Policies
Organization
Finger Lakes Bancorp, Inc. (the Bancorp), through its wholly-owned
subsidiary Savings Bank of the Finger Lakes, FSB (the Bank), provides
financial services to individuals and businesses primarily in the Finger
Lakes region of Upstate New York. The Bancorp and Bank, which are subject
to regulation by certain federal agencies including the Office of Thrift
Supervision (OTS), are referred to herein as the Company.
Reorganization and Second Step Conversion
On January 31, 2000, Finger Lakes Financial Corporation, M.H.C. (the
Mutual Holding Company) adopted a Plan of Conversion and Reorganization to
convert from a federally chartered mutual holding company to a state
chartered capital stock holding company known as Finger Lakes Bancorp,
Inc.
The conversion to a full stock holding company was completed on November
13, 2000. This resulted in Finger Lakes Bancorp, Inc. succeeding Finger
Lakes Financial Corp. (the Financial Corp.) (a federally chartered stock
holding company formed in August 1998 to hold all outstanding shares of
the Bank's common stock) as the stock holding company of Savings Bank of
the Finger Lakes. Finger Lakes Bancorp, Inc. sold 2,307,325 shares of
Company stock for $7.00 per share in a public stock offering to its
depositors. In addition, 1,180,052 minority shares of Finger Lakes
Financial Corp. were exchanged into new shares of Finger Lakes Bancorp,
Inc. at a ratio of .9643 resulting in total new shares outstanding of
3,445,110.
The Reorganization was accounted for as a change in corporate form with no
resulting change in the historical basis of the Company's assets,
liabilities and equity. All references in the consolidated financial
statements and notes thereto to share data (including number of shares,
per-share amounts, stock option and stock grant data, and fair value of
the Company's common stock) have been restated giving retroactive
recognition to the exchange ratio.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Bancorp (after the offering), the Financial Corp. (prior to the
offering) and the Bank (for all periods presented). All intercompany
accounts and transactions have been eliminated in consolidation.
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expense, and the
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, due from banks, federal
funds sold and other short-term investments with maturities of less than
90 days.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
Summary of Significant Accounting Policies, Continued
Securities
The Company classifies its debt securities as either available for sale or
held to maturity. Held to maturity securities are those securities that
the Company has the intent and the ability to hold until maturity. All
other securities are classified as available for sale.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at amortized cost. Unrealized holding gains and
losses, net of the related tax effect, on available for sale securities
are excluded from earnings and are reported as accumulated other
comprehensive income or loss in stockholders' equity until realized.
Realized gains or losses on securities sold are recognized on the trade
date using the specific identification method.
A decline in the fair value of any available for sale or held to maturity
security below cost that is deemed other than temporary is charged to
earnings, resulting in the establishment of a new cost basis for the
security.
Interest income includes the amortization of premiums and accretion of
discounts as an adjustment to yield using the interest method.
Loans
Loans are reported at the principal amount outstanding, net of unearned
discount and net deferred fees or costs. Loan origination and commitment
fees and certain direct origination costs are deferred and amortized over
the contractual life of the related loans using the interest method.
Mortgage loans held for sale are reported at the lower of aggregate cost
or market value as determined by outstanding commitments from investors
or, in the absence of such commitments, the current investor yield
requirements. The Company generally retains the servicing rights to loans
sold.
Generally, the Company places all loans 90 days or more past due on
non-accrual status. In addition, the Company places any loan on
non-accrual status if any part of it is classified as doubtful or loss or
if any part has been charged off. When a loan is placed on non-accrual
status, any accrued interest is reversed. Subsequent payments are either
applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the
loan.
Allowance for Loan Losses
The allowance for loan losses is increased by loan loss provisions charged
to operations based upon management's evaluation of the loan portfolio,
historical loan loss experience, current economic conditions and such
other factors as management considers appropriate to estimate loan losses.
Management believes that the allowance for loan losses is adequate. Losses
on loans (including impaired loans) are charged to the allowance when all
or a portion of a loan is deemed to be uncollectible. Recoveries of loans
previously charged off are credited to the allowance when realized. While
management uses available information to identify losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Company's allowance
for loan losses. Such agencies may require the Company to recognize
additions to the allowance at the time of their examination.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Allowance for Loan Losses, Continued
Management considers a loan impaired when, based on current information
and events, it is probable that the Company will be unable to collect all
principal and interest due under the original terms of the loan agreement.
Accordingly, the Company measures certain impaired commercial loans at the
present value of future cash flows discounted using the loan's effective
interest rate; or at the loan's observable market price; or at the fair
value of the collateral, if the loan is collateral dependent. Impairment
losses are included in the allowance for loan losses. In considering loans
for evaluation of impairment, management generally excludes large groups
of smaller balance, homogeneous loans, such as residential mortgage loans,
home equity loans and consumer loans. These loans are collectively
evaluated for impairment. When a loan is impaired and the future repayment
of the recorded balance is doubtful, interest payments received are
applied to principal and no interest income is recognized. If the recorded
loan balance is expected to be paid, interest income is recognized on a
cash basis.
Mortgage Servicing Rights
The Company recognizes, as separate assets, the rights to service mortgage
loans sold when those rights are retained by the Company. Servicing assets
are amortized in proportion to and over the estimated period of net
servicing income.
The Company stratifies its servicing assets by underlying loan type,
primarily 15 and 30 year amortizing loans. The estimated fair value of
each stratum is determined through a discounted cash flow analysis of
future cash flows, incorporating numerous assumptions, including servicing
income, servicing costs, market discount rates, and prepayment speeds.
The Company assesses impairment of servicing assets based on the fair
value of the related servicing rights on a stratum-by-stratum basis, with
any impairment recognized in earnings through a valuation allowance for
each impaired stratum. The valuation allowance is then adjusted in
subsequent periods to reflect changes in the measurement of impairment.
There was no allowance for impairment of servicing assets at December 31,
2000 and 1999.
Real Estate Owned
Real estate owned consists of property acquired through, or by deed in
lieu of, foreclosure and is recorded at the lower of cost or fair value.
Write-downs to fair value which are required at the time of foreclosure
are charged to the allowance for loan losses. After transfer, the property
is carried at the lower of cost or fair value, less estimated selling
expenses. Adjustments to the carrying value of such properties that result
from subsequent declines in value are charged to operations in the period
in which the declines occur.
Provisions for environmental remediation costs related to real estate
owned are recorded when it is probable that remedial efforts will be
required and the costs can be reasonably estimated.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Premises and Equipment
Land is carried at cost and buildings, furniture, fixtures and equipment
are carried at cost less accumulated depreciation. Depreciation is
calculated on a straight-line basis over estimated useful lives of assets
ranging from three to forty years.
Bank Owned Life Insurance
The bank owned life insurance ("BOLI") was purchased as a financing tool
for employee benefits. The value of life insurance financing is the tax
preferred status of increases in life insurance cash values and death
benefits and the cash flow generated at the death of the insured. The
purchase of BOLI results in an interest sensitive asset on the Company's
consolidated statements of financial condition that provides monthly
tax-fee income to the Company. The largest risk to the BOLI program is
credit risk of the insurance carriers. To mitigate this risk, annual
financial condition reviews are completed on all carriers. BOLI is carried
as an asset on the Company's consolidated statements of financial
condition at current cash surrender value. Increases in cash surrender
value are reported as other noninterest income in the Company's
consolidated income statements.
Federal Home Loan Bank (FHLB) Stock
As a member of the FHLB system, the Company is required to maintain an
investment in FHLB stock equal to the greater of 1% of the aggregate
outstanding mortgage loans held by the Company, or 5% of total outstanding
advances. FHLB stock is a non-marketable security and, accordingly, is
carried at cost.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income tax expense in the period that includes
the enactment date.
Pension Plan
The Company has a defined benefit pension plan covering substantially all
employees. The plan provides pension benefits that are based on each
employee's years of service and average compensation prior to retirement.
The Company's funding policy is to contribute annually at least the
minimum amount required by law. The Retirement System for Savings
Institutions serves as Plan Trustee and Administrator.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Stock Option and Management Recognition Plans
The Company has a stock option plan and a management recognition plan for
officers and key employees. The Company has elected to continue to apply
the provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations and
provide pro forma net income and pro forma earnings per share disclosures
for employee stock option grants as if the fair-value-based method defined
in Statement of Financial Accounting Standards (SFAS) No. 123 had been
applied. Accordingly, no compensation expense has been recorded for the
stock option plan and compensation expense for the management recognition
plan is recognized on a straight-line method over the vesting period.
Net Income Per Common Share
Basic net income per common share is computed by dividing net income by
the weighted average number of total common shares outstanding during the
period. Diluted net income per common share reflects the effects of
incremental common shares (computed using the treasury stock method) that
would be issuable upon exercise of dilutive stock options.
Financial Instruments With Off-Balance Sheet Risk
The Company does not engage in the use of derivative financial
instruments. The Company's only financial instruments with off-balance
sheet risk are commercial letters of credit and mortgage and commercial
loan commitments. These off-balance sheet items are shown in the Company's
consolidated statement of financial condition upon funding.
Business Segments
The Company engages in the traditional operations of a community banking
enterprise, principally the delivery of loan and deposit products and
other financial services. Management makes operating decisions and
assesses performance based on an ongoing review of the Company's community
banking operations, which constitute the Company's only operating segment
for financial reporting purposes.
Reclassifications
Certain items in the prior year financial statements have been
reclassified in order to be consistent with the current year's
presentation.
New Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, requires that all derivatives be recognized as
either assets or liabilities in the statement of financial condition and
that those instruments be measured at fair value. The accounting for
changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting
designations. The Company's adoption on January 1, 2001 did not have a
significant effect on the Company's financial position or results of
operations.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(2) Securities
The aggregate amortized cost and fair value of securities are as follows:
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
December 31, 2000
Securities Available for Sale
Debt securities:
U.S. Government and
agency bonds $ 45,447,864 -- 852,833 44,595,031
Mortgage-backed securities:
Collateralized mortgage
obligations 49,611,476 113,297 492,918 49,231,855
FNMA 11,614,485 21,379 158,750 11,477,114
FHLMC 3,906,309 13,588 25,307 3,894,590
GNMA 8,518,572 41,675 2,746 8,557,501
Corporate bonds 6,460,540 39,139 39,579 6,460,100
Asset-backed securities 5,652,240 14,285 1,236 5,665,289
------------ ------- --------- -----------
Total debt
securities 131,211,486 243,363 1,573,369 129,881,480
Equity securities 1,606,602 86 166,437 1,440,251
------------ ------- --------- -----------
Total securities
available for sale $132,818,088 243,449 1,739,806 131,321,731
============ ======= ========= ===========
Securities Held to Maturity
Municipal bonds $ 1,562,783 1,491 941 1,563,333
============ ======= ========= ===========
December 31, 1999
Securities Available for Sale
Debt securities:
U.S. Government and
agency bonds $ 45,400,944 -- 2,854,708 42,546,236
Mortgage-backed securities:
Collateralized mortgage
obligations 51,996,360 1,658 1,856,404 50,141,614
FNMA 12,307,199 -- 488,636 11,818,563
FHLMC 4,585,345 1,728 92,363 4,494,710
GNMA 3,949,078 -- 138,987 3,810,091
Corporate bonds 4,729,416 -- 170,461 4,558,955
------------ ------- --------- -----------
Total debt
securities 122,968,342 3,386 5,601,559 117,370,169
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(2) Securities, Continued
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
December 31, 1999, Continued
Equity securities 1,656,602 61 276,625 1,380,038
------------ ----- --------- -----------
Total securities
available for sale $124,624,944 3,447 5,878,184 118,750,207
============ ===== ========= ===========
Securities Held to Maturity
Municipal bonds $ 1,592,795 -- 25,522 1,567,273
============ ===== ========= ===========
Proceeds from the sale of securities available for sale for the years ended
December 31, 2000,1999, and 1998 were $5,162,044, $18,413,431, and $51,605,954,
respectively. Gross gains and losses realized on those sales follow:
2000 1999 1998
---- ---- ----
Gross realized gains $50,383 81,423 313,068
Gross realized losses -- (4,286) (206,837)
------- ------ --------
Net gains realized $50,383 77,137 106,231
======= ====== ========
The contractual maturities of debt securities at December 31, 2000 are as
follows:
Available for Sale Held to Maturity
------------------ ----------------
Amortized Amortized
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
One year or less $ 221,258 220,815 31,666 31,666
After one year through
five years 14,651,534 14,596,790 150,000 150,000
After five years through
ten years 45,159,859 44,353,953 1,206,116 1,206,666
After ten years 71,178,835 70,709,922 175,001 175,001
------------ ----------- --------- ---------
Total $131,211,486 129,881,480 1,562,783 1,563,333
============ =========== ========= =========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(2) Securities, Continued
Expected maturities will differ from contractual maturities because
issuers may have the right to call or prepay the obligation with or
without prepayment penalties.
At December 31, 2000 and 1999, securities carried at $42,132,832 and
$46,119,705, respectively, were pledged to secure advances from the FHLB
of New York.
At December 31, 2000, approximately 39% of the Company's collateralized
mortgage obligation (CMO) portfolio was invested in private issues versus
approximately 61% invested in government agency issues. Private issue
CMO's have greater risk associated with them; however those issues in
which the Company has invested have the highest Standard & Poor's rating
of AAA.
(3) Loans
Loans consist of the following at December 31, 2000 and 1999:
2000 1999
---- ----
Mortgage loans:
One to four family $ 84,489,638 $ 90,705,678
Multi-family and commercial 35,723,197 28,041,856
Construction 2,754,775 2,695,125
------------- -------------
Total mortgage loans 122,967,610 121,442,658
Commercial business 13,987,167 9,895,868
Home equity and property improvement loans 21,042,842 18,234,697
Mobile home loans 8,429,048 4,500,533
Consumer loans 5,761,535 5,966,557
------------- -------------
Total loans 172,188,202 160,040,313
Premiums, net of deferred fees 186,658 163,324
Allowance for loan losses (1,467,524) (1,349,477)
------------- -------------
Net loans $ 170,907,336 $ 158,854,160
============= =============
The following table summarizes activity in the allowance for loan losses:
2000 1999 1998
---- ---- ----
Balance, beginning of year $ 1,349,477 1,175,758 1,148,786
Provision for loan losses 260,000 200,000 240,000
Loans charged-off (188,579) (211,984) (293,134)
Recoveries 46,626 185,703 80,106
----------- --------- ---------
Balance, end of year $ 1,467,524 1,349,477 1,175,758
=========== ========= =========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
Substantially all of the Company's loan portfolio is located in New York
State, with the greatest concentration in Ontario, Seneca and Tompkins
Counties. Accordingly, the ultimate collectibility of a substantial
portion of the Company's loan portfolio is susceptible to changes in
market conditions in these areas.
The principal balance of all loans not accruing interest amounted to
approximately $229,200 and $586,700 at December 31, 2000 and 1999,
respectively. The interest income forgone for non-accruing loans was
$33,207, $64,744 and $78,166 for the years ended December 31, 2000, 1999,
and 1998, respectively. At December 31, 2000 and 1999, the recorded
investment in loans that are considered impaired was $133,339 and
$169,924, respectively. The Company has provided an allowance for loan
losses of $55,381 and $50,977 at December 31, 2000 and 1999, respectively,
for these loans. The average recorded investment in such impaired loans
was approximately $126,292 in 2000, $206,500 in 1999 and $331,700 in 1998.
No interest income was recognized on impaired loans (while such loans were
considered impaired) in 2000 and 1999 compared to $12,912 in 1998.
Proceeds from the sale of residential and commercial mortgage loans to
FNMA and others were $5,305,432 in 2000, $14,224,557 in 1999 and
$21,411,559 in 1998. The net gain on sale of such loans was $98,941,
$224,351 and $276,612 for the years ended December 31, 2000, 1999, and
1998 respectively. Loans serviced for others, amounting to $41,713,848 and
$39,081,954 at December 31, 2000 and 1999, respectively, are not included
in the consolidated financial statements. Originated mortgage servicing
rights of $264,469 and $253,785 are included in other assets at December
31, 2000 and 1999, respectively. The net carrying value of these servicing
rights approximated fair value. Residential mortgage loans held for sale
were $271,199 and $454,700 at December 31, 2000 and 1999, respectively.
(4) Premises and Equipment
Premises and equipment consist of the following:
2000 1999
---- ----
Land $ 113,000 113,000
Building 4,026,208 3,328,317
Furniture, fixtures and equipment 3,628,562 2,958,367
---------- ---------
7,767,770 6,399,684
Less accumulated depreciation and
amortization 2,954,041 2,250,284
---------- ---------
Premises and equipment, net $4,813,729 4,149,400
========== =========
Depreciation and amortization expense for the years ended December 31, 2000,
1999, and 1998 was $739,869, $668,929 and $597,548, respectively.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(5) Deposits
Deposits and the applicable weighted average interest rates at December
31, 2000 and 1999 are summarized as follows:
2000 1999
---- ----
Weighted Weighted
Average Average
Amount Interest Rate Amount Interest Rate
------ ------------- ------ -------------
Demand deposits and NOW
accounts $ 27,201,736 1.05% 24,474,602 1.17%
------------ ---- ----------- ----
Savings accounts 38,804,433 2.44% 46,093,326 2.40%
Money market accounts 8,142,522 4.13% 5,020,227 3.07%
------------ ---- ----------- ----
46,946,955 2.73% 51,113,553 2.46%
------------ ---- ----------- ----
Certificates of deposit maturing:
12 months or less 117,025,990 98,308,695
13-24 months 18,358,133 24,778,136
25-36 months 5,227,714 3,742,491
37-48 months 1,314,876 4,007,255
49-60 months 12,215,703 1,634,750
61 months or longer 171,294 72,802
------------ -----------
154,313,710 6.16% 132,544,129 5.34%
------------ ---- ----------- ----
$228,462,401 4.85% 208,132,284 4.15%
============ ==== =========== ====
Certificates of deposit equal to or greater than $100,000 amounted to
$26,725,418 and $24,599,864 at December 31, 2000 and 1999, respectively.
Deposit balances up to $100,000 are FDIC insured.
Interest on deposits is summarized as follows:
2000 1999 1998
---- ---- ----
NOW accounts $ 289,135 279,365 394,664
Savings accounts 1,115,551 1,280,547 1,365,558
Money market accounts 265,079 106,266 38,124
Certificates of deposit 8,203,166 6,994,129 6,879,852
---------- --------- ---------
$9,872,931 8,660,307 8,678,198
========== ========= =========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(6) Advances from Federal Home Loan Bank
The Company utilizes advance programs offered by the FHLB of New York
including a variable rate line of credit agreement with a maximum
available limit of $30,406,500. The agreement, which expires October 13,
2001, is renewable on an annual basis. Advances are collateralized by the
Company's investment in FHLB stock, a blanket lien on the Bank's 1-4
family mortgage loans and investment securities.
Total outstanding advances from the FHLB at December 31, 2000 and 1999 are
as follows:
2000 1999
-------------------------- --------------------------
Weighted Weighted
Average Average
Amount Interest Rate Amount Interest Rate
------ ------------- ------ -------------
Overnight line of credit $ 5,400,000 6.35% 2,100,000 5.10%
Due in:
2000 -- -- 17,000,000 5.79%
2001 5,000,000 5.88% 5,000,000 5.88%
2002 2,842,677 6.39% 3,859,730 6.36%
2003 5,000,000 5.78% 20,000,000 5.52%
2004 10,000,000 6.01% 10,000,000 6.01%
2005 15,000,000 6.95% -- --
2007 2,000,000 5.65% 2,000,000 5.65%
2009 -- -- 10,000,000 5.01%
2010 15,000,000 5.81% -- --
----------- ---- ---------- ----
$60,242,677 6.20% 69,959,730 5.64%
=========== ==== ========== ====
Advances of $37,000,000 at December 31, 2000 are callable at the
discretion of the FHLB in or after 2001. Such advances have a weighted
average interest rate of 6.11% and mature from 2004 to 2010, if not called
earlier.
During 2000 and 1999, advances from the FHLB had an average outstanding
balance of approximately $63,294,000 and $61,923,000, respectively, with
the maximum amount outstanding at any month end of $69,811,385 in 2000 and
$69,959,730 in 1999. Such borrowings had a weighted-average borrowing rate
of 6.12% for 2000 and 5.43% for 1999.
(7) Income Taxes
Total income taxes for the years ended December 31, 2000, 1999 and 1998
were allocated as follows:
2000 1999 1998
---- ---- ----
Income from operations $ 489,980 860,426 468,565
Stockholders' equity, for
unrealized gain/(loss) on
securities available for sale 1,751,352 (2,453,498) (185,264)
---------- ---------- -------
Total income taxes $2,241,332 (1,593,072) 283,301
========== ========== =======
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, Continued
The components of income tax expense (benefit) attributable to income from
operations follow:
Current Deferred Total
------- -------- -----
Year ended December 31, 2000:
Federal 418,594 (34,379) 384,215
State 73,258 32,507 105,765
--------- -------- -------
491,852 (1,872) 489,980
========= ======= =======
Year ended December 31, 1999:
Federal $ 782,650 (114,246) 668,404
State 143,769 48,253 192,022
--------- -------- -------
$ 926,419 (65,993) 860,426
========= ======= =======
Year ended December 31, 1998:
Federal $ 492,296 (128,696) 363,600
State 175,350 (70,385) 104,965
--------- -------- -------
$ 667,646 (199,081) 468,565
========= ======== =======
The actual tax expense differs from the "expected" tax expense computed by
applying the U.S. Federal corporate income tax rate of 34% to income
before income taxes as follows:
Years Ended December 31,
2000 1999 1998
---- ---- ----
Computed "expected" tax
expense $ 439,219 736,225 405,482
Increase (decrease) in taxes resulting from:
State income tax expense,
net of federal
income tax benefit 69,805 125,005 69,277
Other, net (19,044) (804) (6,194)
--------- ------- -------
$ 489,980 860,426 468,565
========= ======= =======
Effective tax rate: 37.9% 39.7% 39.3%
==== ==== ====
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2000 and 1999 are presented below:
2000 1999
---- ----
Deferred tax assets:
Excess of allowance for loan losses
over tax bad-debt reserves $ 469,644 428,547
Net unrealized loss on securities
available for sale 598,542 2,349,894
Supplemental retirement benefits 75,565 76,480
Postretirement benefits 134,258 133,910
Deferred compensation 89,005 65,562
Accrued environmental remediation costs 191,452 266,373
New York State tax credits 71,921 77,762
Other -- 25,463
---------- ---------
Total deferred tax assets 1,630,387 3,423,991
---------- ---------
Deferred tax liabilities:
Premises and equipment, principally due to
differences in depreciation 106,260 155,777
Mortgage servicing rights 103,011 98,849
Other 1,231 --
---------- ---------
Total deferred tax liabilities 210,502 254,626
---------- ---------
Net deferred tax assets included
in other assets $1,419,885 3,169,365
========== =========
As a thrift institution, the Bank is subject to special provisions in the
Federal and New York State tax laws regarding its allowable tax bad debt
deductions and related tax bad debt reserves. The Bank currently
calculates its Federal reserve using a loss experience method and its New
York State reserve using a percentage of taxable income method. These
reserves consist of a defined base-year amount, plus additional amounts
("excess reserves") accumulated after the base year, in each case as
defined for Federal and New York State tax purposes. SFAS No. 109 requires
recognition of deferred tax liabilities with respect to such excess
reserves, as well as any portion of the base-year amount which is expected
to become taxable (or "recaptured") in the foreseeable future. For New
York State purposes, recognition of deferred tax liabilities is not
required on excess reserves resulting from use of the percentage of
taxable income method unless all or a portion is expected to become
taxable in the foreseeable future.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, Continued
In accordance with SFAS No. 109, deferred tax liabilities have not been
recognized with respect to the Federal base-year reserve of approximately
$3,025,000, and the state base-year reserve of approximately $3,240,000 at
December 31, 2000, since the Bank does not expect that these amounts will
become taxable in the foreseeable future. Under Federal and New York State
tax law, as amended, events that would result in taxation of these
reserves include redemption of the Bank's stock, payment of dividends or
distributions in excess of earnings and profits, or failure by the
institution to qualify as a bank for Federal income tax purposes. The
unrecognized deferred tax liability at December 31, 2000 with respect to
the Federal base-year reserve was $1,030,000. The unrecognized deferred
tax liability at December 31, 2000 with respect to the state base-year
reserve and the excess reserve resulting from use of the percentage of
taxable income method was $160,000 (net of Federal benefit).
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income within
a loss carryback period. A valuation allowance is recognized when it is
more likely than not that some portion of the deferred tax assets will not
be realized. In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the
level of historical taxable income and projected future taxable income
over the periods in which the temporary differences comprising the
deferred tax assets will be deductible. Based on its assessment,
management determined that no valuation allowance is necessary at December
31, 2000 and 1999.
(8) Retirement Plans
The following table sets forth the defined benefit pension and other
postretirement plan benefit obligations, fair value of plan assets and
funded status, as of and for the years ended December 31, 2000 and 1999,
using the most recent actuarial data measured at October 1, 2000 and 1999:
Pension Benefits Postretirement Benefits
---------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,235,295 2,338,585 352,482 666,771
Service cost 110,723 101,828 -- 33,123
Interest cost 170,413 150,864 26,624 42,815
Curtailment -- -- -- (232,831)
Actuarial (gain)/loss (35,775) (211,701) 46,791 (141,240)
Benefits paid (155,821) (144,281) (37,719) (16,156)
----------- --------- ------- -------
Benefit obligation at end of year 2,324,835 2,235,295 388,178 352,482
----------- --------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning
of year 3,213,016 2,851,610 -- --
Actual return on plan assets 547,317 505,687 -- --
Employer contribution -- -- 37,719 16,156
Benefits paid (155,821) (144,281) (37,719) (16,156)
----------- --------- ------- -------
Fair value of plan assets at end
of year 3,604,512 3,213,016 -- --
----------- --------- ------- -------
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(8) Retirement Plans, Continued
Pension Benefits Postretirement Benefits
---------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
Funded status 1,279,677 977,721 (388,178) (352,482)
Unamortized net obligation at
transition -- -- 8,104 8,683
Unrecognized net (gain) loss subsequent
to transition (1,092,078) (794,630) 46,791 --
----------- ------- -------- --------
Prepaid (accrued) benefit cost at
year-end $ 187,599 183,091 (333,283) (343,799)
=========== ======= ======== ========
Pension Plan
Pension plan expense (benefit) consists of the following in 2000, 1999 and
1998:
2000 1999 1998
---- ---- ----
Service cost $ 110,723 101,828 69,996
Interest on projected benefit obligation 170,413 150,864 143,289
Expected return on plan assets (251,242) (222,442) (233,416)
Amortization of net transition asset -- (19,826) (22,283)
Amortization of unrecognized gain (34,402) -- (32,979)
Amortization of unrecognized
prior service cost -- 485 590
Termination benefits charge -- -- 64,561
--------- -------- --------
Net periodic pension expense (benefit) $ (4,508) 10,909 (10,242)
========= ======== ========
Weighted average discount rate 7.75% 7.75% 6.50%
==== ==== ====
Expected long-term rate of return 8.00% 8.00% 8.00%
==== ==== ====
The projected benefit obligation for the pension plan assumed a long-term
rate of increase in future compensation levels of 5.5%, 5.5% and 4.5% for
2000, 1999 and 1998, respectively.
Postretirement Plan
Net periodic postretirement benefit cost included the following in 2000,
1999 and 1998:
2000 1999 1998
---- ---- ----
Service cost $ -- 33,123 25,051
Interest cost 26,624 42,815 37,889
Net curtailment charge -- 26,672 --
Net amortization and deferral 579 21,381 17,033
------- ------- ------
Net periodic postretirement
benefit cost $27,203 123,991 79,973
======= ======= ======
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(8) Retirement Plans, Continued
For measurement purposes, an annual rate of increase in the per capita
cost of average health care benefits for retirees of 6.5% was assumed at
December 31, 2000 and 1999. The rate is assumed to decrease gradually to
5.0% over the next five years and remain at that level thereafter. The
health care cost trend assumption affects the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by 1% in
each year would increase the accumulated postretirement benefit obligation
at December 31, 2000 by $22,300, and the net periodic postretirement
benefit cost by $1,454 for the year then ended.
The weighted average discount rate used in determining the accumulated
postretirement obligation was 8.00%, 7.75% and 6.50% for 2000, 1999 and
1998, respectively.
During 1999, the Company curtailed the postretirement plan by
discontinuing to offer postretirement benefits to employees. As a result,
the Company incurred a $26,672 net curtailment charge which represented
the accelerated amortization of substantially all of the transition
obligation less the reduction in the projected benefit obligation.
401(k) Plan
The Company has a 401(k) plan covering substantially all employees. The
Company currently does not match employee contributions to the 401(k)
plan. Participants vest immediately in their own contributions and over a
period of six years in any Company contributions. Expense for this plan
was $10,200, $7,900 and $7,300 for the years ended December 31, 2000, 1999
and 1998, respectively.
Supplemental Employee Retirement Plan (SERP)
The Company maintains a nonqualified SERP for key executives. The
following table sets forth the changes the SERP's benefit obligation and
plan assets for 2000 and 1999, using the most recent actuarial data
measured at December 31, 2000 and 1999:
2000 1999
---- ----
Change in benefit obligation:
Benefit obligation at beginning of year $ 415,542 418,453
Interest cost 30,647 26,032
Actuarial loss 2,194 16,076
Benefits paid (43,893) (45,019)
--------- --------
Benefit obligation at end of year 404,490 415,542
--------- --------
Change in plan assets:
Fair value of plan assets at beginning of year -- --
Employer contributions 43,893 45,019
Benefits paid (43,893) (45,019)
--------- --------
Fair value of plan assets at end of year -- --
--------- --------
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(8) Retirement Plans, Continued
Supplemental Employee Retirement Plan (SERP), Continued
2000 1999
---- ----
Funded status (404,490) (415,542)
Unamortized net obligation at transition 284,250 303,200
Unrecognized net loss subsequent to transition 16,315 14,121
Unrecognized prior service cost (89,807) (98,271)
--------- --------
Accrued benefit cost at year end $(193,362) (196,492)
========= ========
Annual expense related to the SERP consists of the following in 2000, 1999
and 1998:
2000 1999 1998
---- ---- ----
Interest cost $ 30,647 26,032 27,452
Amortization of net transition obligation 18,950 18,950 18,950
Unrecognized prior service cost (8,464) (8,464) (8,464)
-------- ------ ------
Net periodic pension expense $ 41,133 36,518 37,938
======== ====== ======
Weighted average discount rate 8.00% 7.75% 6.50%
======== ====== ======
(9) Employee Stock Ownership Plan
The Company has a noncontributory employee stock ownership plan (ESOP)
covering substantially all employees. The Company reports compensation
expense equal to the current market price of the shares released to
participants each year. In 1995, the ESOP borrowed $471,980 to purchase
91,026 shares of the Company's common stock. The loan currently bears
interest at 7.75% and is payable in quarterly installments of $9,030. In
2000, the ESOP borrowed an additional $1,292,102 to purchase 184,586
shares of the Company's common stock. This loan currently bears interest
at 9.50% and is payable in quarterly installments of $21,535. At December
31, 2000, 71,155 shares had been released or were committed to be released
to employees with the remaining 204,457 unallocated shares held in trust.
The fair value of the unallocated shares on December 31, 2000 was
$1,533,000. Compensation expense amounted to $74,510, $73,822 and $109,490
for the years ended December 31, 2000, 1999 and 1998, respectively.
(10) Stock Option and Management Recognition Plans
In accordance with the 1996 Stock Option Plan (the "SOP"), the Company's
Board of Directors may grant stock options to officers and key employees
to purchase up to 113,787 shares of authorized but unissued common stock.
Options are granted with an exercise price equal to the fair market value
at the date of grant. All stock options granted prior to 2000 have
ten-year terms and vest and become fully exercisable after five years from
the date of grant. Options granted in 2000 have ten-year terms and become
fully vested in six months.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(10) Stock Option and Management Recognition Plans, continued
The following table shows the per share weighted average fair value of
stock options granted, with their underlying assumptions, using the Black
Scholes option-pricing model:
2000 1999 1998
---- ---- ----
Per share weighted average
fair value of options granted during the year $ 0.99 $ 1.86 $ 3.64
Expected dividend yield 3.20% 2.89% 2.01%
Risk free interest rate 5.50% 6.50% 5.25%
Assumed volatility 34.64% 37.02% 38.24%
Expected life 10 years 10 years 10 years
The Company applies APB Opinion No. 25 in accounting for its SOP and
accordingly, no compensation cost has been recognized for stock options in
the financial statements. Had the Company recognized compensation cost
based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated below:
2000 1999 1998
---- ---- ----
Net income As reported $ 801,842 1,304,941 724,029
Pro forma 787,844 1,285,456 701,684
Net income per common share - basic As reported $ 0.24 0.38 0.21
Pro forma 0.23 0.38 0.21
Net income per common share - dilted As reported $ 0.24 0.38 0.21
Pro forma 0.23 0.38 0.20
Because the Company's stock options have characteristics significantly
different from those of traded options for which the Black-Scholes model
was developed, and because changes in the subjective input assumptions can
materially affect the fair value estimate, the existing models, in
management's opinion, do not necessarily provide a reliable single measure
of the fair value of its stock options.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(10) Stock Option and Management Recognition Plans, continued
Stock option activity for the years ended December 31, 2000, 1999 and 1998
follows:
Weighted-
Number of average
shares exercise price
------ --------------
Balance at December 31, 1997 105,397 $ 9.22
Granted 8,389 17.85
Forfeited (1,928) (8.30)
------- ------
Balance at December 31, 1998 111,858 $ 9.88
Granted 964 9.33
Forfeited (1,928) (20.62)
Cancelled (5,785) (18.65)
------- ------
Balance at December 31, 1999 105,109 $ 9.20
Granted 30,856 $ 6.97
Forfeited (8,678) (9.45)
Cancelled (13,500) (15.04)
------- ------
Balance at December 31, 2000 113,787 $ 7.88
======= ======
The range of exercise prices and weighted-average remaining contractual
life of outstanding options was $6.94 - $11.93 and seven years at December
31, 2000 and $7.00 - $15.04 and six years at December 31, 1999,
respectively. At December 31, 2000 and 1999, the number of options
exercisable was 63,800 and 56,300 respectively.
The Company also has a Management Recognition Plan (MRP) pursuant to which
the Company's Board of Directors may award shares of common stock to
officers and key employees. In 1996, the Company contributed funds to an
irrevocable trust held by an independent third party, which purchased
45,515 issued and outstanding shares for $8.75 per share. As of December
31, 2000, all shares had been granted to employees with original vesting
periods of three to five years. Compensation expense in the amount of the
fair market value of the common stock at the date of the grant to the
officer or employee is recognized prorata over the vesting period. MRP
expense included in salaries and employee benefits in the consolidated
statement of income was $106,000 in 2000, 1999 and 1998.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(11) Net Income Per Common Share
The following is a summary of the net income per share calculation for the
years ended December 31, 2000, 1999 and 1998:
2000 1999
---- ----
Weighted Weighted
Average Per-Share Average Per-Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Net income per share - basic
Weighted average shares 3,390,047 3,405,689
--------- ---------
Income available
to common
shareholders $ 801,842 3,390,047 $0.24 $1,304,941 3,405,689 $0.38
---------- --------- ===== ---------- --------- =====
Effect of dilutive securities:
Common stock options 157 17,762
--------- ---------
Net income per share - diluted $ 801,842 3,390,204 $0.24 $1,304,941 3,423,451 $0.38
========== ========= ===== ========== ========= =====
1998
----
Weighted
Average Per-Share
Income Shares Amount
------ ------ ------
Net income per share - basic
Weighted average shares 3,398,137
---------
Income available
to common
shareholders $ 724,029 3,398,137 $0.21
---------- --------- =====
Effect of dilutive securities:
Common stock options 42,412
---------
Net Income per share - diluted $ 724,029 3,440,549 $0.21
========== ========= =====
(12) Commitments and Contingencies
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments are primarily commitments to extend
credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk and at December 31, 2000 and 1999 are not reflected
in the consolidated statements of financial condition.
The following is a summary of the maximum credit exposure of each class of
lending related off-balance sheet financial instruments outstanding at
December 31:
2000 1999
---- ----
Commitments to originate loans:
Fixed rate mortgage loans $ 48,000 1,108,450
Adjustable rate mortgage loans 40,000 144,000
Fixed rate commercial real estate loans 324,000 --
Adjustable rate commercial real estate loans 2,890,000 1,223,000
Commercial loans 100,000 300,000
Consumer home equity loans 255,500 324,100
---------- ---------
$3,657,500 3,099,550
========== =========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(12) Commitments and Contingencies - continued
2000 1999
Unused lines of credit:
Construction loans $ 219,475 994,955
Commercial lines of credit 4,145,441 5,355,963
Home equity lines of credit 7,331,503 7,859,186
Other 557,567 503,219
----------- ----------
$12,253,986 14,713,323
=========== ==========
Outstanding letters of credit $ 10,000 90,000
=========== ==========
Commitments to sell loans:
Fixed rate mortgage loans $ 104,200 666,720
=========== ==========
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since certain commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. Commitments to
originate fixed rate mortgage loans at December 31, 2000 have rates of
7.75%.
The Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management's credit
evaluation of the customer. Substantially all commitments to extend
credit, if funded, will represent loans secured by real estate. At
December 31, 2000, the Company had no significant concentrations of credit
risk in the loan portfolio outside the natural geographic concentration
pertaining to the communities that the Company serves.
The Company enters into forward contracts for future delivery of
residential mortgage loans at a specified yield to reduce the interest
rate risk associated with fixed rate residential mortgages held for sale
and commitments to fund residential mortgages. Credit risk arises from the
possible inability of the other parties to comply with the contract terms.
Substantially all of the Company's contracts are with FNMA, a U.S.
government-sponsored agency.
At December 31, 2000, the Company occupied branch facilities under
noncancelable operating leases. Office occupancy and equipment expense
includes rental expense of $306,449, $272,251 and $243,420 for the years
ended December 31, 2000, 1999 and 1998, respectively. The approximate
future minimum annual rental payments under the existing terms of such
leases at December 31, 2000 are as follows: $288,204, $284,250, $296,360
and $308,480 for the years ending December 31, 2001, 2002, 2003, and 2004,
respectively, and $2,378,798 in later years.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(13) Environmental Matter
In April 1989, the Company foreclosed on property that had been a dry
cleaning and laundry facility. Environmental investigations revealed
groundwater and soil contamination and the Company incurred in excess of
$500,000 in remediation costs through 1992. During the period from 1993 to
1998 the Company had discussions with the Department of Environmental
Commission (DEC) and performed periodic soil testing to determine if the
property could be sold. In October 1998, further testing revealed a new
and more volatile contaminant in the soil. As a result, the Company
recorded a provision of $620,000 in December 1998 and $90,000 in 1999. The
Company received approval from the DEC of a Design Report and Construction
Plan in May 2000, and subsequently executed a contract on July 21, 2000
for Remedial Construction, which began in August 2000. As a result of the
discussions with the DEC, the Company recorded an additional provision of
$180,000 in 2000. The remediation work has now been completed.
At December 31, 2000, the Company had a $492,000 accrual in other
liabilities for the estimated billings associated with the final
remediation efforts. Management for the Company believes that the recorded
liability should be adequate to cover reasonably anticipated liabilities
in connection with this matter. However, it is possible that the Company's
liability exposure for the site will exceed the amounts reserved and
insured.
(14) Stockholders' Equity and Regulatory Capital Requirements
Other Comprehensive Income
The components of other comprehensive income (loss) for 2000, 1999 and
1998 are as follows:
2000 1999 1998
---- ---- ----
Unrealized holding gains (losses) arising
during year (pre-tax unrealized holding
gain (loss) was $4,428,763 in 2000, ($6,056,610)
in 1999, and ($356,447) in 1998) $2,657,258 (3,633,966) (213,868)
Less: reclassification adjustment for net realized gains
included in net income (pre-tax of $50,383 in 2000,
$77,137 in 1999, and $106,231 in 1998) 30,230 46,282 63,739
---------- ---------- --------
Change in unrealized gains on securities,
available for sale, net of taxes $2,627,028 (3,680,248) (277,607)
========== ========== ========
Dividends
The Mutual Holding Company, which prior to the stock offering owned
2,389,948 shares of stock in the Financial Corp., waived receipt of its
dividend, thereby reducing the actual dividend payments. The amount of
dividends waived by the Mutual Holding Company was $573,600 in 2000 and
1999, and $550,000 in 1998. The Company's ability to pay dividends is
primarily dependent upon the ability of its subsidiary bank to pay
dividends to the Company. The payment of dividends by the Bank is subject
to continued compliance with minimum regulatory capital requirements. In
addition, regulatory approval is generally required prior to the Bank
declaring dividends in an amount in excess of net income for that year
plus net income retained in the preceding two years.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Stockholders' Equity and Regulatory Capital Requirements, Continued
Liquidation Account
In order to grant priority in the Conversion to the eligible depositors,
the Bank established a liquidation account at the time of conversion in an
amount equal to its total retained earnings at November 10, 1994. In the
event of a future liquidation of the converted bank (and only in such
event), eligible account holders who continue to maintain accounts shall
be entitled to receive a distribution from the liquidation account. The
total amount of the liquidation account will be decreased (as balances of
eligible accounts are reduced) on annual determination dates. No cash
dividends may be paid to the stockholders and no shares may be repurchased
by the Company if such actions would reduce the Bank's stockholders'
equity below the amount required for the liquidation account. At December
31, 2000, the amount remaining in this liquidation account was
approximately $17.1 million.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory-and possibly
additional discretionary-actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors. Under the OTS capital regulations in effect
at December 31, 2000, the Bank was required to maintain a minimum ratio of
tangible capital to tangible assets of 1.5%; a minimum leverage ratio of
core (Tier 1) capital to total adjusted tangible assets of 4.0%; and a
minimum ratio of total capital (core capital and supplementary capital) to
risk-weighted assets of 8.0%, of which 4.0% must be core (Tier 1) capital.
The regulations establish a framework for the classification of savings
institutions into five categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized. Generally, an institution is considered well
capitalized if it has a core (Tier 1) capital ratio of at least 5.0%; a
core (Tier 1) risk-based capital ratio of at least 6.0%; and a total
risk-based capital ratio of at least 10.0%.
Management believes that, as of December 31, 2000 and 1999, the Bank meets
all capital adequacy requirements to which it is subject. Further, the
most recent OTS notification categorized the Bank as a well-capitalized
institution under the prompt corrective action regulations. There have
been no conditions or events since that notification that management
believes have changed the Bank's capital classification.
The following is a summary of the Bank's actual regulatory capital amounts
and ratios as of December 31, 2000 and 1999, compared to the OTS
requirements for minimum capital adequacy and for classification as a
well-capitalized institution. OTS capital regulations apply at only the
Bank level as the OTS does not impose capital requirements at the holding
company level.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Stockholders' Equity and Regulatory Capital Requirements, Continued
Regulatory Capital Requirements, Continued
Minimum
Actual Requirement Well Capitalized
------ ----------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
December 31, 2000
Total capital (to risk
weighted assets) $34,764,000 20.68% 13,446,720 8.00% 16,808,400 10.00%
Tier 1 capital (to risk
weighted assets) 34,308,000 20.41% 6,723,360 4.00% 10,085,040 6.00%
Tier 1 capital (to
average assets) 34,308,000 10.34% 13,277,800 4.00% 16,597,250 5.00%
Tangible capital 34,308,000 10.34% 4,979,175 1.50% -- --
2000 Adjusted Tangible Assets were $331,945,000. 2000 Risk Weighted Assets
were $168,084,000.
Minimum
Actual Requirement Well Capitalized
------ ----------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
December 31, 1999
Total capital (to risk
weighted assets) $23,034,000 16.66% 11,058,800 8.00% 13,823,500 10.00%
Tier 1 capital (to risk
weighted assets) 22,597,000 16.35% 5,529,400 4.00% 8,294,100 6.00%
Tier 1 capital (to
average assets) 22,597,000 7.41% 12,202,480 4.00% 15,253,100 5.00%
Tangible capital 22,597,000 7.41% 4,575,930 1.50% -- --
1999 Adjusted Tangible Assets were $305,062,000. 1999 Risk Weighted Assets
were $138,235,000.
Regulatory capital ratios of the Company at December 31, computed on a
consolidated basis are summarized below:
2000 1999
---- ----
Total capital (to risk weighted assets) 22.78% 16.81%
Tier 1 capital (to risk weighted assets) 22.51% 16.50%
Tier 1 capital (to average assets) 11.33% 7.46%
Tangible capital 11.33% 7.46%
(15) Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosure for financial instruments:
Securities
Fair values for securities are based on quoted market prices. Where quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments.
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(15) Fair Value of Financial Instruments, Continued
Loans
The fair values of variable rate loans that reprice frequently and have no
significant credit risk, approximate carrying amounts. Fair values of
fixed rate residential mortgage loans are based on quoted market prices of
similar loans sold in the secondary market, adjusted for differences in
loan characteristics. The fair values of other loans are estimated through
discounted cash flow analyses using interest rates currently being offered
for loans with similar terms and credit quality.
Delinquent loans are valued using the discounted cash flow methods
described above. While credit risk is a component of the discount rate
used to value loans, delinquent loans are presumed to possess additional
risk. Therefore, the calculated fair values of loans delinquent more than
30 days are reduced by an allocated amount of the general allowance for
loan losses.
Deposits
The fair values of demand deposits, savings accounts and money market
accounts are, by definition, equal to the amounts payable on demand at the
reporting date (e.g., their carrying amounts). The fair value of fixed
maturity time deposits is estimated using a discounted cash flow approach
that applies interest rates currently being offered on certificates of
deposits to a schedule of weighted average expected monthly maturities.
Advances from FHLB
The fair value of advances from the FHLB is estimated using a discounted
cash flow approach that applies interest rates currently being offered for
advances with similar terms.
The estimated fair value of the Company's financial assets and liabilities
are as follows:
December 31, 2000 December 31, 1999
----------------- -----------------
Carrying Carrying
amounts Fair value amounts Fair value
------- ---------- ------- ----------
Financial assets:
Securities $132,884,514 132,885,064 120,343,002 120,317,480
Loans 170,907,336 170,079,990 158,854,160 158,867,205
Financial liabilities:
Deposits:
Demand deposit accounts,
savings and money
market accounts 74,148,691 74,148,691 75,588,155 75,588,155
Certificates of deposit 154,313,710 154,409,907 132,544,129 132,598,680
Advances from FHLB 60,242,677 60,571,463 69,595,730 70,897,337
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(15) Fair Value of Financial Instruments, Continued
Other Financial Instruments
Based on the characteristics of cash, cash equivalents, accrued interest
receivable, and FHLB stock, the carrying amounts approximate the fair
values. The fair values of commitments to extend credit are equal to the
deferred fees outstanding, as the contractual rates and fees approximate
those currently charged to originate similar commitments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly
affect the estimates.
(16) Condensed Parent Company Only Financial Information
The following condensed statements of financial condition of Finger Lakes
Bancorp as of December 31, 2000 and 1999 and the condensed statements of
income and condensed statements of cash flows for 2000, 1999 and 1998
should be read in conjunction with the consolidated financial statements
and related notes.
December 31,
------------
2000 1999
---- ----
Condensed Statements of Financial Condition
Assets:
Cash $ 3,242,590 $ 210,690
Notes receivable from
subsidiary 1,415,049 180,603
Other assets 10,211 49,746
Investment in subsidiary 33,495,654 19,237,662
----------- -----------
$38,163,504 $19,678,701
=========== ===========
Liabilities and stockholders' equity:
Note payable to subsidiary$ 1,592,643 $ 299,801
Stockholders' equity 36,570,861 19,378,900
----------- -----------
$38,163,504 $19,678,701
=========== ===========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(16) Condensed Parent Company Only Financial Information, Continued
Condensed Statements of Income
December 31,
------------------------------
2000 1999 1998
---- ---- ----
Income $ 29,638 $ 15,958 $ 3,596
Expense 47,261 22,340 4,553
--------- ----------- ---------
Loss before income taxes and
equity in undistributed earnings
of subsidiary (17,623) (6,382) (957)
Income tax benefit 7,620 2,591 --
--------- ----------- ---------
Loss before equity in undistributed
earnings of subsidiary (10,003) (3,791) (957)
Equity in undistributed earnings
of subsidiary 811,845 1,308,732 724,986
--------- ----------- ---------
Net income $ 801,842 $ 1,304,941 $ 724,029
========= =========== =========
Condensed Statements of Cash Flows
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income $ 801,842 $ 1,304,941 $ 724,029
Adjustments to reconcile net income
to net cash provided by/(used in)
operating activities:
Equity in undistributed earnings
of subsidiary (811,845) (1,308,732) (724,985)
Other, net 37,902 9,598 (59,345)
--------- ----------- ---------
Net cash provided by
(used in) operating
activities 27,899 5,807 (60,301)
--------- ----------- ---------
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
(16) Condensed Parent Company Only Financial Information, Continued
Condensed Statements of Cash Flows, Continued
2000 1999 1998
---- ---- ----
Cash flows from investing activities:
Capitalization of Bank (10,742,976) -- --
Note receivable issued to subsidiary (1,292,102) -- (225,754)
Principal collected on note receivable 57,656 36,121 9,030
------------ --------- ---------
Net cash provided by (used in)
investing activities (11,977,422) 36,121 (216,724)
------------ --------- ---------
Cash flows from financing activities:
Increase in note payable to subsidiary 1,292,842 10,150 289,651
Capitalization of Company -- -- 500,000
Net proceeds from stock offering 13,971,795 -- --
Cash dividends paid (283,214) (283,211) (70,803)
------------ --------- ---------
Net cash (used in) provided by
financing activities 14,981,423 (273,061) 718,848
------------ --------- ---------
Net (decrease) increase in cash and
cash equivalents 3,031,900 (231,133) 441,823
Cash and cash equivalents at beginning
of period 210,690 441,823 --
------------ --------- ---------
Cash and cash equivalents at end
of period $ 3,242,590 $ 210,690 $ 441,823
============ ========= =========
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
Quarterly Summarized Financial Information (Unaudited)
Selected quarterly financial data for fiscal 2000 and 1999 follows (in
thousands, except per share data):
2000
----
By Quarter 1 2 3 4 Year
- - - - ----
Interest income $5,335 5,486 5,717 5,907 22,445
Interest expense 3,175 3,330 3,568 3,676 13,749
------ ----- ----- ----- ------
Net interest income 2,160 2,156 2,149 2,231 8,696
Provision for loan
losses 60 30 60 110 260
Noninterest income 250 261 263 367 1,141
Noninterest expense 2,083 2,046 1,963 2,193 8,285
------ ----- ----- ----- ------
Income before income
tax expense 267 341 389 295 1,292
Income tax expense 103 127 149 111 490
------ ----- ----- ----- ------
Net income $ 164 214 240 184 802
====== ===== ===== ===== ======
Net income per common share:
Basic $ 0.05 0.06 0.07 0.06 0.24
Diluted $ 0.05 0.06 0.07 0.06 0.24
====== ===== ===== ===== ======
1999
----
By Quarter 1 2 3 4 Year
- - - - ----
Interest income $4,871 4,987 5,208 5,251 20,317
Interest expense 2,910 2,950 3,050 3,111 12,021
------ ----- ----- ----- ------
Net interest income 1,961 2,037 2,158 2,140 8,296
Provision for loan
losses 75 50 35 40 200
Noninterest income 303 363 307 355 1,328
Noninterest expense 1,734 1,850 1,797 1,878 7,259
------ ----- ----- ----- ------
Income before income
tax expense 455 500 633 577 2,165
Income taxes 182 200 260 218 860
------ ----- ----- ----- ------
Net income $ 273 300 373 359 1,305
====== ===== ===== ===== ======
Net incomeper common
share:
Basic $ 0.08 0.08 0.11 0.11 0.38
Diluted $ 0.08 0.08 0.11 0.11 0.38
====== ===== ===== ===== ======
FINGER LAKES BANCORP, INC.
Notes to Consolidated Financial Statements, Continued
Quarterly Summarized Financial Information (Unaudited) - Continued
1998
----
By Quarter 1 2 3 4 Year
- - - - ----
Interest income $4,443 4,551 4,693 4,959 18,646
Interest expense 2,617 2,730 2,885 2,969 11,201
------ ----- ----- ----- ------
Net interest income 1,826 1,821 1,808 1,990 7,445
Provision for loan
losses 60 60 60 60 240
Noninterest income 238 322 285 356 1,201
Noninterest expense 1,562 1,623 1,661 2,367 7,213
------ ----- ----- ----- ------
Income/(loss) before income
tax expense 442 460 372 (81) 1,193
Income tax expense 176 184 142 (33) 469
------ ----- ----- ----- ------
Net income/(loss) $ 266 276 230 (48) 724
====== ===== ===== ===== ======
Net income/(loss) per common
share:
Basic $ 0.07 0.08 0.07 (0.01) 0.21
Diluted $ 0.07 0.08 0.07 (0.01) 0.21
====== ===== ===== ===== ======
CORPORATE INFORMATION
Finger Lakes Bancorp, Inc.
Directors
G. Thomas Bowers James E. Hunter Arthur W. Pearce
Chairman, President & Director, NYS Agricultural Experiment Retired Senior Vice President
Chief Executive Officer Station M & T Bank
Michael J. Hanna Ronald C. Long Joan C. Rogers
Director of Athletics President, Long Milk Hauling & Trucking Retired Vice President
Hobart & William Smith Colleges Owner, R. C. Long Construction BJR Broadcasting
Chris M. Hansen Bernard G. Lynch
Retired Owner Retired President
C. M. Hansen Farms, Inc. Lynch Furniture Stores
Officers
G. Thomas Bowers Terry L. Hammond Richard J. Harrison
Chairman, President & Executive Vice President & Executive Vice President &
Chief Executive Officer Chief Financial Officer Chief Credit Officer
Thomas A. Mayfield Leslie J. Zornow
Senior Vice President & Senior Loan Officer Senior Vice President, Retail Banking
Savings Bank of the Finger Lakes
Officers
G. Thomas Bowers Diana R. Johnson Assistant Vice Presidents
Chairman, President & Vice President & Controller
Chief Executive Officer David R. Caster, Asset Management
Kathleen M. Fay, Loan Servicing
Terry L. Hammond Richard R. Sisson Susan M. Hibbard, Branch Manager
Executive Vice President & Vice President, Community Lending Kelly J. Mittiga, Branch Manager
Chief Financial Officer R. David Patz, Commercial Lending
Beth M. Putnam, Branch Manager
Nancee K. Scott, Branch Manager
Richard J. Harrison Dale E. Sollenberger
Executive Vice President & Vice President, Information Technology
Chief Credit Officer Bank Officers
Thomas A. Mayfield Nancy L. Baker Tyna L. Borrelli
Senior Vice President & Senior Loan Officer Vice President, Project Management Margaret R. Bouchey
Kerth M. Friel
Leslie J. Zornow Peter W. Hin Molly Mahoney
Senior Vice President, Retail Banking Vice President, Commercial Lending Mary H. Raeman
Thomas J. Short
Robert F. Eberle Timothy J. McLoughlin Pennie L. Smith
Vice President, Operations Vice President, Commercial Lending Jane C. Spano
CORPORATE INFORMATION
Tompkins County Advisory Board
Stanley Goldberg Robert Lama William Zikakis
Bishop's Hardware Home Center The Lama Agency Buttermilk Development
Bruce Kane Libby Long
Certified Public Accountant David Long Appraisal
Executive Offices NASDAQ Trading Symbol Transfer Agent
470 Exchange Street "FLBC" - Finger Lakes Bancorp, Inc. American Stock Transfer & Trust
Geneva, New York 14456 40 Wall Street
(315) 789-3838 New York, New York 10005
Banking Offices
Stockholder Relations
Main Office South Meadow Branch Office
470 Exchange Street 702 South Meadow Street Terry L. Hammond
Geneva, New York 14456 Ithaca, New York 14850 Executive Vice President &
(315) 789-3838 (607) 272-2211 Chief Financial Officer
Nancee Scott, Manager Beth Putnam, Manager Savings Bank of the Finger Lakes
470 Exchange Street
Pyramid Branch Office Canandaigua Branch Office Geneva, New York 14456
Rts. 5 & 20 659 South Main Street (315) 789-3838
Geneva, New York 14456 Canandaigua, New York 14424 thammond@sbfl.com
(315) 789-6004 (716) 393-0660
Kelly Mittiga, Manager Susan Hibbard, Manager Auditors
Seaway Branch Office Auburn Branch Office KPMG LLP
Rts. 5 & 20 108 Genesee Street 113 South Salina Street
Waterloo, New York 13165 Auburn, New York 13021 Syracuse, New York 13104
(315) 539-0200 (315) 253-3355
Molly Mahoney, Manager Pennie Smith, Manager Counsel
Ithaca Commons Branch Office 10K Availability Luse Lehman Gorman Pomerenk & Schick
301 East State Street 5335 Wisconsin Avenue, N.W.
Ithaca, New York 14850 Copies of the Finger Lakes Suite 400
(607) 272-1111 Bancorp, Inc. Form 10-K for the Washington, D.C. 20015
Jane Spano, Manager year ended December 31, 2000 are
available free of charge to Market Makers
stockholders upon written request
to: Friedman, Billings, Ramsey & Co.
Sandler O'Neill & Partners, LP
Savings Bank of the Finger Lakes Tucker Anthony, Inc.
470 Exchange Street
Geneva, New York 14456
Attn: Terry L. Hammond