FIRST NIAGARA FINANCIAL GROUP, INC. TO CONDUCT SECOND STEP
CONVERSION OFFERING AND ACQUIRE FINGER LAKES BANCORP, INC.
Lockport, New York- (July 22, 2002) The Board of Directors of First Niagara
Financial Group, Inc. (the "Company") (Nasdaq: FNFG) announced that the Board of
Directors of First Niagara Financial Group, MHC (the "MHC") has adopted a Plan
of Conversion (the "Plan") to convert the MHC to a capital stock corporation
(the "Conversion"). The MHC, headquartered in Lockport, New York, owns
approximately 62% of the outstanding common stock of the Company. Public
stockholders own the remaining shares. The Company owns 100% of the outstanding
capital stock of First Niagara Bank, Cayuga Bank and Cortland Savings Bank.
Pursuant to the Plan, the Company will conduct a subscription offering of common
stock to eligible current and past depositors. Shares not subscribed for in the
subscription offering are expected to be available for sale in a community
offering to the general public. The number and price of shares to be issued in
the Conversion offering (the "Offering") will be based on an independent
appraisal that has yet to be performed.
The Company also announced that a definitive merger agreement (the "Agreement")
has jointly been signed by First Niagara Financial Group, Inc. and Finger Lakes
Bancorp, Inc., pursuant to which the Company will acquire all of the outstanding
shares of Finger Lakes Bancorp, Inc. (Nasdaq:FLBC) (the "Acquisition"). Finger
Lakes Bancorp, Inc. is the holding company of Savings Bank of the Finger Lakes.
The Conversion, Offering and Acquisition are expected to be completed in the
first quarter of 2003 and will be consummated simultaneously. Upon consummation
of the Conversion, the MHC will cease to exist and its shares of Company stock
will be cancelled. Existing shares of the Company's common stock held by its
public stockholders will be exchanged for new shares of the Company, pursuant to
an exchange ratio based on the minority ownership percentage of the independent
appraisal described above.
The Company will pay $20 per share for each outstanding share of Finger Lakes
Bancorp. The purchase price represents 171% of Finger Lakes book value as of
June 30, 2002, 21.7 times second quarter 2002 annualized earnings and 11.4 times
second quarter 2002 annualized earnings including anticipated after tax expense
savings. 50% of the consideration will be in First Niagara Conversion Stock, and
50% will be in cash. It is expected that the aggregate purchase price of the
transaction will be approximately $67 million.
"We have successfully put to work the capital raised in our 1998 initial public
offering and we are now poised for further strategic growth," William E. Swan,
Chairman, President & CEO of First Niagara Financial Group, Inc. and First
Niagara Bank said. "We have chosen to undergo a stock conversion and to make
what we believe is a very favorable acquisition which will connect our western
and central New York markets. The additional capital we raise in the stock
offering will help support future growth internally and through acquisitions."
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Conversion & Acquisition
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As a result of the Acquisition, Savings Bank of the Finger Lakes will be merged
into First Niagara Bank. Chairman, President and CEO of Finger Lakes Bancorp,
Inc., G. Thomas Bowers, will join First Niagara Financial Group, Inc.'s Board of
Directors and provide continued leadership. Commenting on the agreement, Bowers
said, "The New York banking industry is consolidating, and the Board of
Directors believes this agreement is in the best interests of our shareholders.
This is an opportunity to join forces with an outstanding banking company that,
like Finger Lakes, has long provided superior community banking products while
valuing their employees and community."
Cost efficiencies have been identified within this acquisition and some
management, support and administrative positions held by Finger Lakes Bancorp,
Inc. staff will be eliminated. Those displaced will be offered severance,
opportunities to post for positions within First Niagara Financial Group and its
subsidiaries for which they are qualified, and outplacement assistance.
The Merger, exclusive of the "second step" offering, is anticipated to be
accretive to First Niagara Financial Group's estimated earnings per share by
6.7% based on conservative, achievable, anticipated cost savings of
approximately $4.25 million pre-tax. Finger Lakes gives First Niagara market
share in 3 adjacent counties that it does not currently operate in, Ontario,
13.29%; Seneca, 7.43%; and Tompkins, 5.01%. The transaction also gives First
Niagara the number 3 market share rank in Ontario County, and further
strengthens its number 1 market share in Cayuga County.
The Acquisition is subject to the approval of Finger Lakes Bancorp, Inc.'s
stockholders. The Conversion with the Acquisition are subject to the approval of
First Niagara Bank's depositors and First Niagara Financial Group Inc.'s public
stockholders. The transactions are also subject to the approval of bank
regulatory authorities, as well as other customary conditions. The Agreement
provides for breakup fees if the Agreement is terminated under certain
circumstances.
A conference call concerning the Conversion and Acquisition announcement will be
held at 2:00 p.m. Eastern Standard Time on Monday, July 22, 2002. Interested
shareholders, investors and analysts should call (888) 694-4767 to participate.
A copy of an investor handout will be available on our website at
www.firstniagarafinancial.com.
First Niagara Financial Group, Inc. is the parent of three community banks and
operates a total of 39 branches, 75 ATMs, a telephone service center and two
loan production offices in the western and central portions of New York State.
As of June 30, 2002, First Niagara Financial Group, Inc. had assets of $2.9
billion, deposits of $2.1 billion and equity of $272.3 million. Finger Lakes
Bancorp, Inc. is the stock holding company of the Savings Bank of the Finger
Lakes, a federal savings bank headquartered in Geneva, New York. The Savings
Bank of the Finger Lakes operates seven branch offices and nine ATMs in Geneva,
Seneca Falls, Ithaca, Canandaigua and Auburn. As of June 30, 2002, Finger Lakes
Bancorp, Inc. had assets of $387.8 million, deposits of $265.1 million and
equity of $37.1 million.
In June, First Niagara Financial Group, Inc. announced its decision to combine
its banking subsidiaries. First Niagara Bank, Auburn-based Cayuga Bank and
Cortland-based Cortland Savings Bank, currently operate as separate entities,
will become one bank branded under the First Niagara Bank name. Subject to
regulatory approval, these changes are expected to become effective in the
fourth quarter of this year, prior to consummation of the Conversion and
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Acquisition. The Company also announced its plans to convert the state charters
of First Niagara Financial Group, Inc., First Niagara Financial Group, MHC and
the unified First Niagara Bank, to a federal charter regulated by the Office of
Thrift Supervision, pending shareholder and regulatory approval.
This news release contains certain forward-looking statements about the proposed
Conversion and the merger of First Niagara Financial Group, Inc. and Finger
Lakes Bancorp, Inc. These include statements regarding the anticipated
consummation date of the transactions, anticipated cost savings and anticipated
future results.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words like
"believe," "expect," "anticipate," "estimate" and "intend" or future or
conditional verbs such as "will," "would," "should," "could" or "may." Certain
factors that could cause actual results to differ materially from expected
results include delays in completing the merger, difficulties in achieving cost
savings or in achieving such savings within the expected time frame,
difficulties in integrating First Niagara Financial Group, Inc. and Finger Lakes
Bancorp, Inc., increased competitive pressures, changes in the interest rate
environment, changes in general economic conditions, legislative and regulatory
changes that adversely affect the businesses in which First Niagara Financial
Group, Inc. and Finger Lakes Bancorp, Inc. are engaged and changes in the
securities markets.
The proposed transaction will be submitted to Finger Lakes Bancorp's
stockholders for their consideration. First Niagara Financial Group and Finger
Lakes Bancorp will file a registration statement, a joint proxy
statement/prospectus and other relevant documents concerning the proposed
transaction with the SEC. Stockholders are urged to read the registration
statement and the joint proxy statement/prospectus when it becomes available and
any other relevant documents filed with the SEC, as well as any amendments or
supplements to those documents, because they will contain important information.
You will be able to obtain a free copy of the joint proxy statement/prospectus,
as well as other filings containing information about First Niagara Financial
Group and Finger Lakes Bancorp, at the SEC's Internet site (http://www.sec.gov).
Copies of the joint proxy statement/prospectus and the SEC filings that will be
incorporated by reference in the joint proxy statement/prospectus can be
obtained, without charge, by directing a request to First Niagara Financial
Group, Investor Relations, Christopher J. Thome, P.O. Box 514, Lockport, NY
14095-0514. (716)625-7645 or to Finger Lakes Bancorp, Investor Relations, Terry
L. Hammond, 470 Exchange Street, Geneva, NY 14456, (800)861-0120 ext.2122.
Finger Lakes Bancorp and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the stockholders of Finger
Lakes Bancorp in connection with the merger. Information about the directors and
executive officers of Finger Lakes Bancorp and their ownership of Finger Lakes
Bancorp common stock is set forth in the proxy statement, dated March 15, 2002,
for Finger Lakes Bancorp's 2002 annual meeting of stockholders, as filed with
the SEC on a Schedule 14A. Additional information regarding the interests of
these participants may be obtained by reading the joint proxy
statement/prospectus regarding the proposed transaction when it becomes
available.
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Corporate Information
First Niagara Financial Group, Inc. Transfer Agent and Registrar
6950 South Transit Road Mellon Investor Services, LLC
P.O. Box 514 P.O. Box 3315
Lockport, New York 14095-0514 South Hackensack, NJ 07606
Telephone (800) 201-6621 Telephone (877) 785-9670
www.firstniagarafinancial.com www.melloninvestor.com
Press releases are being distributed by PR Newswire and can be found on the
Internet, as well as appropriate trade media and financial disclosure circuits.
News, analyst presentations and other information about the Corporation are
available on the Internet at the Corporation's website,
www.firstniagarafinancial.com. For additional information about First Niagara
Financial Group, Inc. please contact:
Investor Relations: Media Relations:
Christopher J. Thome Leslie G. Garrity
Assistant Vice President, Assistant Vice President
Reporting and Investor Relations Manager Public Relations and Corporate
(716) 625-7645 Communications
chris.thome@firstniagarabank.com (716) 625-7528
leslie.garrity@firstniagarabank.com
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