SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
First Niagara Financial Group, Inc.
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
March 29, 2006
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of First Niagara Financial Group, Inc. (the "Company" or
"FNFG"). Our Annual Meeting will be held at Banchetti Banquet Facility, 550
North French Road, Amherst, New York, on May 16, 2006 at 11:00 a.m. Eastern
Daylight Saving Time.
The enclosed Notice of Annual Meeting of Stockholders and Proxy Statement
describe the formal business to be transacted at the Annual Meeting, which
includes a report on the operations of the Company. Directors and officers of
the Company will be present to answer any questions that you and other
stockholders may have. Also enclosed for your review is our Annual Report on
Form 10-K, which contains detailed information concerning the activities and
operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
five directors and the ratification of the appointment of KPMG LLP ("KPMG") as
independent registered public accountants ("Independent Accountants") for the
year ending December 31, 2006. The Board of Directors of the Company (the
"Board") unanimously recommends a vote "FOR" the election of directors and "FOR"
the ratification of the appointment of KPMG as the Company's Independent
Accountants.
On behalf of the Board, please indicate your vote by using the enclosed proxy
card or by voting by telephone or Internet, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted. Your vote is important.
Sincerely,
/s/ Paul J. Kolkmeyer
Paul J. Kolkmeyer
President and Chief Executive Officer
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 16, 2006
Notice is hereby given that the Annual Meeting of the Stockholders of the
Company will be held at Banchetti Banquet Facility, 550 North French Road,
Amherst, New York, on May 16, 2006 at 11:00 a.m. Eastern Daylight Saving Time.
A proxy statement and proxy card for the Annual Meeting are enclosed. The Annual
Meeting is for the purpose of considering and acting upon:
1. the election of five directors; and
2. the ratification of the appointment of KPMG LLP as Independent Accountants
for the year ending December 31, 2006; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board is not aware of any other such business.
Any action may be taken on the foregoing proposals at the Annual Meeting,
including all adjournments thereof. Stockholders of record at the close of
business on March 20, 2006 are the stockholders entitled to vote at the Annual
Meeting. A list of stockholders entitled to vote will be available at 6950 South
Transit Road, Lockport, New York for a period of ten days prior to the Annual
Meeting and will also be available for inspection at the Annual Meeting.
It is important that your shares be represented and voted at the Annual Meeting.
Stockholders whose shares are held in registered form have a choice of voting by
proxy card, telephone or the Internet, as described on your proxy card.
Stockholders whose shares are held in the name of a broker, bank or other holder
of record must vote in the manner sent by the nominee. Check your proxy card or
the information forwarded by your broker, bank or other holder of record to see
which options are available to you. Any stockholder present at the Annual
Meeting may withdraw his or her proxy and vote personally on any matter properly
brought before the Annual Meeting.
/s/ Robert N. Murphy
Lockport, New York Robert N. Murphy
March 29, 2006 Corporate Secretary
TABLE OF CONTENTS
PAGE
NUMBER
REVOCATION OF PROXIES 1
STOCKHOLDERS ENTITLED TO VOTE 1
VOTING PROCEDURES AND METHOD OF COUNTING VOTES 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 2
SECURITIES OWNED BY DIRECTORS AND MANAGEMENT 3
Stock Ownership of Directors and Executive Officers 3
Section 16(a) Beneficial Ownership Reporting Compliance 4
PROPOSAL I - ELECTION OF DIRECTORS 4
Directors and Executive Officers 4
Nominees for Director 4
Continuing Directors 5
Named Executive Officers Who are Not Directors 6
BOARD OF DIRECTORS 6
Board Independence 6
Board Meetings and Committees 6
Committee Membership 7
Compensation of Directors 8
Board Nominations 9
Procedures for the Consideration of Board Candidates Submitted by Stockholders 10
Stockholder Communications with the Board 10
Code of Ethics 11
Transactions with Certain Related Persons 11
THE AUDIT COMMITTEE REPORT 11
THE COMPENSATION COMMITTEE REPORT 12
Overview 12
Compensation Philosophy 12
Compensation Components 13
Long-Term Incentive Plan 13
CEO Compensation 14
COMPENSATION OF NAMED EXECUTIVE OFFICERS 15
Employment Agreements 16
Other Compensation 17
PERFORMANCE COMPARISON 20
Stock Performance Graph 20
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS 21
Fees Paid to KPMG 21
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent 21
Accountants
Required Vote and Recommendation of the Board 22
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING 22
Advance Notice of Business to be Conducted at an Annual Meeting 22
OTHER MATTERS 22
MISCELLANEOUS 22
PROXY STATEMENT
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
ANNUAL MEETING OF STOCKHOLDERS
May 16, 2006
This proxy statement is furnished in connection with the solicitation of proxies
on behalf of the Board to be used at the Annual Meeting, which will be held at
Banchetti Banquet Facility, 550 North French Road, Amherst, New York, on May 16,
2006, at 11:00 a.m. Eastern Daylight Saving Time, and all adjournments of the
Annual Meeting. The accompanying Notice of Annual Meeting of Stockholders and
this proxy statement are being mailed to stockholders on or about April 7, 2006.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain the right
to revoke them in the manner described below. Unless so revoked, the shares
represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board will be voted in
accordance with the directions given on the Proxy. Where no instructions are
indicated, validly executed proxies will be voted "FOR" each of the proposals as
set forth in this proxy statement.
A proxy may be revoked at any time prior to its exercise by 1) sending a written
notice of revocation to Robert N. Murphy, Corporate Secretary, at the address
set forth above; 2) delivering to the Company a duly executed proxy bearing a
later date; or 3) attending the Annual Meeting and voting in person. However, if
you are a stockholder whose shares are not registered in your own name, you will
need appropriate documentation from your broker or record holder to vote in
person at the Annual Meeting.
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STOCKHOLDERS ENTITLED TO VOTE
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Holders of record of the Company's common stock, par value $0.01 per share (the
"Common Stock") as of the close of business on March 20, 2006 (the "Record
Date") are entitled to one vote for each share held, except as described below.
As of the Record Date, the Company had 111,739,321 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at least a majority of
the total number of issued and outstanding shares of Common Stock entitled to
vote is necessary to constitute a quorum at this Annual Meeting. In the event
there are not sufficient votes for a quorum, or to approve or ratify any matter
being presented at the time of this Annual Meeting, the Annual Meeting may be
adjourned in order to permit the further solicitation of proxies.
In accordance with the provisions of the Certificate of Incorporation of the
Company, record holders of Common Stock who beneficially own in excess of 10% of
the outstanding shares of Common Stock (the "Limit") are not entitled to any
vote with respect to the shares held in excess of the Limit. The Company's
Certificate of Incorporation authorizes the Board (i) to make all determinations
necessary to implement and apply the Limit, including determining whether
persons or entities are acting in concert, and (ii) to demand that any person
who is reasonably believed to beneficially own stock in excess of the Limit
supply information to the Company to enable the Board to implement and apply the
Limit.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
- --------------------------------------------------------------------------------
As to the election of directors, a stockholder may vote "FOR" the election of
the five nominees proposed by the Board, or "WITHHOLD AUTHORITY" to vote for the
nominees being proposed. Under Delaware law and the Company's Certificate of
Incorporation and Bylaws, directors are elected by a plurality of votes cast,
without regard to either broker non-votes, or proxies as to which authority to
vote for the nominees being proposed is withheld.
1
As to the ratification of KPMG as Independent Accountants of the Company, a
stockholder may vote "FOR" the item, vote "AGAINST" the item, or "ABSTAIN" from
voting on such item. Under the Company's Certificate of Incorporation and
Bylaws, the ratification of this matter shall be determined by a majority of the
votes cast, without regard to broker non-votes or proxies marked "ABSTAIN."
Proxies solicited hereby will be returned to and tabulated by Mellon Investor
Services, LLC, the inspector of election designated by the Board.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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Persons and groups who beneficially own in excess of five percent of the Common
Stock are required to file certain reports with the Securities and Exchange
Commission (the "SEC") regarding such ownership. The following table sets forth,
as of December 31, 2005, certain information regarding persons who beneficially
owned more than five percent of the Company's issued and outstanding shares of
Common Stock:
Amount of Shares
Name and Address Owned and Nature of Percent of Shares of
of Beneficial Owners Beneficial Ownership Common Stock Outstanding
- -------------------------------- ------------------------ ----------------------------
Private Capital Management
8889 Pelican Bay Boulevard
Naples, FL 34108 9,931,126(1) 8.8% (1)
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(1) Based on a Schedule 13G filed by Private Capital Management with the SEC on
February 14, 2006.
2
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SECURITIES OWNED BY DIRECTORS AND MANAGEMENT
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The following table sets forth as of March 20, 2006 information concerning the
beneficial ownership of First Niagara common stock by each director, the persons
named in the Summary Compensation Table on page 15, and all directors and
executive officers as a group. In general, beneficial ownership includes those
shares that a director or executive officer has the power to vote or transfer,
including shares which may be acquired under stock options that are currently
exercisable or become exercisable within 60 days.
Stock Ownership of Directors and Executive Officers
Unvested
Shares Options Awards
Owned Exercisable included in
Position(s) held in Directly and within 60 Beneficial Percent of Beneficial
Names the Company Indirectly(1) days Ownership(2) Class Ownership (2)
- --------------------- -------------------- ------------- ----------- ------------ --------- -------------
NOMINEES
Paul J. Kolkmeyer President and Chief 276,272 462,047 738,319 * 40,314
Executive Officer
Daniel J. Hogarty, Jr. Vice Chairman 290,619 9,850 300,469 * 11,139
James Miklinski Director 115,395 119,611 235,006 * 9,434
Sharon D. Randaccio Director 28,520 30,368 58,888 * 13,573
David M. Zebro Director 37,020 30,368 67,388 * 13,573
DIRECTORS CONTINUING IN OFFICE
Gordon P. Assad Director 68,117 119,611 187,728 * 9,434
John J. Bisgrove, Jr. Director 49,924 42,784 92,708 * 12,020
Daniel W. Judge Director 80,100 69,611 149,711 * 9,434
Richard P. Koskey Director 162,449 6,370 168,819 * 10,024
Louise Woerner Director 52,921 7,967 60,888 * 13,573
G. Thomas Bowers Director 75,324 18,375 93,699 * 12,120
James W. Currie Director 145,188 79,611 224,799 * 9,434
William H. (Tony) Jones Vice Chairman 178,848 6,370 185,218 * 10,024
B. Thomas Mancuso Director 60,834 91,390 152,224 * 9,434
Robert G. Weber Chairman 111,757 119,611 231,368 * 9,434
NAMED EXECUTIVES WHO ARE NOT DIRECTORS
John R. Koelmel Executive Vice 55,816 33,584 89,400 * 18,640
President and Chief
Financial Officer
G. Gary Berner Executive Vice 135,365 203,285 338,650 * 11,064
President
Carl Florio Executive Vice 1,367,823 15,634 1,383,457 1.22% 37,500
President
Michael Giaquinto Executive Vice 22,292 18,834 41,126 * 10,400
President
All directors and executive officers as a group (27 persons) 5,419,261(3) 4.78% 324,461
- -----------------------
* Less than 1%
(1) Unless otherwise indicated, each person effectively exercises sole, or
shared with spouse, voting and dispositive power as to the shares reported.
(2) Shares granted under the First Niagara Financial Group, Inc. 1999
Recognition and Retention Plan, which are subject to future vesting, but as
to which voting may currently be directed.
(3) Includes 31,848 shares of Common Stock allocated to the accounts of
executive officers under the First Niagara Financial Group, Inc. Employee
Stock Ownership Plan ("ESOP") and excludes the remaining 4,625,556 shares
of Common Stock owned by the ESOP for the benefit of the employees. Under
the terms of the ESOP, shares of Common Stock allocated to the account of
employees are voted in accordance with the instructions of the respective
employees. Unallocated shares are voted by the ESOP Trustee in the same
proportion as the vote obtained from participants on allocated shares.
3
The Board believes Directors and Executive Management should have a financial
investment in the Company. Each Director is expected to own at least 25,000
shares within four years of being elected to the Board (excluding stock
options). Ownership guidelines for Executive Officers within four years of being
appointed to the position are as follows:
o Chief Executive Officer 250,000 shares
o Executive Vice Presidents 75,000 shares
o Senior Vice Presidents 50,000 shares
Section 16(a) Beneficial Ownership Reporting Compliance
The Common Stock is registered with the SEC pursuant to Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act"). The officers and directors
of the Company and beneficial owners of greater than 10% of the Common Stock are
required to file reports on Forms 3, 4 and 5 with the SEC disclosing beneficial
ownership and changes in beneficial ownership of the Common Stock. SEC rules
require disclosure in the Company's Proxy Statement or Annual Report on Form
10-K of the failure of an officer, director or 10% beneficial owner of the
Common Stock to file a Form 3, 4, or 5 on a timely basis. Based on the Company's
review of ownership reports, no officer or director failed to file ownership
reports on a timely basis for the year ended December 31, 2005.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Company's Board currently consists of fifteen (15) members. The Company's
Certificate of Incorporation and Bylaws provide that approximately one-third of
the directors are to be elected annually. Five directors will be elected at the
Annual Meeting to serve for a three-year period and until their respective
successors shall have been elected and shall qualify. The Board has nominated
Paul J. Kolkmeyer, Daniel J. Hogarty, James Miklinski, Sharon D. Randaccio and
David M. Zebro for election as directors, each of whom has agreed to serve if so
elected. Please refer to the sections entitled "Directors and Executive
Officers" and "Stock Ownership of Directors and Executive Officers" for
additional information regarding the nominees.
It is intended that the proxies solicited on behalf of the Board (other than
proxies in which the vote is withheld as to the nominees) will be voted at the
Annual Meeting for the election of the nominees. If the nominees are unable to
serve, the shares represented by all such proxies will be voted for the election
of such substitute as the Board may recommend. At this time, the Board knows of
no reason why the nominees would be unable to serve, if elected. Except as
indicated herein, there are no arrangements or understandings between the
nominees and any other person pursuant to which such nominees were selected.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES LISTED IN THIS PROXY STATEMENT
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Directors and Executive Officers
Following is the business experience for the past five years of each of the
Company's directors and executive officers. The term of directors includes the
initial appointment to the Board of Directors of First Niagara Bank, formerly
Lockport Savings Bank.
Nominees for Director
Paul J. Kolkmeyer, 53, has been a director since 2003. He was elected President
and Chief Executive Officer and Director in December 2003. From June 2002 to
December 2003, he served as Executive Vice President and Chief Operating
Officer/Chief Financial Officer. He joined the Company in 1990 and has held a
variety of senior management positions since that time.
4
Daniel J. Hogarty, Jr., 66, has been a director since 2004. He was elected
Vice-Chairman of the Board in January 2004 upon completion of the merger between
the Company and Troy Financial Corporation where he had been Chairman, President
and Chief Executive Officer.
James Miklinski, 62, has been a director since 1996. He is the General Manager
of Niagara Milk Cooperative, Inc., which processes and packages fluid milk
products.
Sharon D. Randaccio, 51, has been a director since 2002. She is the President of
Performance Management Partners, Inc., a provider of human resource services.
David M. Zebro, 55, has been a director since 2002. He is a Principal of
Strategic Investments & Holdings, Inc., a holding company that purchases and
manages operating companies.
Continuing Directors
Term to Expire 2007
Gordon P. Assad, 57, has been a director since 1995. He is the President and
Chief Executive Officer of Erie and Niagara Insurance Association, a provider of
property and casualty insurance.
John J. Bisgrove, Jr., 66, has been a director since 2000. He is the retired
Chairman of Red Star Express Lines and was elected to the Board upon completion
of the merger between the Company and Iroquois Bancorp, Inc. in November 2000
where he had been a director.
Daniel W. Judge, 63, has been a director since 1992. He is the President of
NetPlus Alliance Inc., a business management services firm.
Richard P. Koskey, 66, has been a director since 2005. He is the managing
principal of Pattison, Koskey, Howe & Bucci, CPAs, P.C., a regional accounting
firm. He was elected to the Board upon completion of the merger between the
Company and Hudson River Bancorp, Inc. in January 2005 where he had been a
director.
Louise Woerner, 63, has been a director since 2002. She is the Chairman and
Chief Executive Officer of Home Care of Rochester, a home healthcare agency and
health research and consulting firm.
Term to Expire 2008
G. Thomas Bowers, 62, has been a director since 2003. He was elected to the
Board in January 2003 upon completion of the merger between the Company and
Finger Lakes Bancorp, Inc. where he had been Chairman, President and Chief
Executive Officer.
James W. Currie, 64, has been a director since 1987. He is the President of Ag
Pak, Inc., a manufacturer of produce packaging machines.
William H. (Tony) Jones, 63, has been a director since 2005. He is the President
of Roe Jan Independent Publishing Co., Inc., a consultant for community
newspapers and similar publications. He was elected Vice-Chairman of the Board
in January 2005 upon completion of the merger between the Company and Hudson
River Bancorp, Inc. where he had been Chairman.
B. Thomas Mancuso, 50, has been a director since 1990. He is the President of
Mancuso Business Development Group, a real estate and business development
company.
Robert G. Weber, 68, has been a director since 1996. He has been Chairman of the
Board since August 2003. He is a retired Managing Partner of the Buffalo Office
of KPMG LLP.
5
Named Executive Officers Who are Not Directors
G. Gary Berner, 58, has been Executive Vice President and Chief Lending Officer
since February 2001. From January 1992 to February 2001, he served as Senior
Vice President and Chief Lending Officer.
Carl A. Florio, 57, has been Eastern New York Regional President since the
completion of the merger between the Company and Hudson River Bancorp, Inc. in
January 2005. He was the President and Chief Executive Officer of Hudson River
Bancorp, Inc. since 1996.
Michael R. Giaquinto, 41, has been Executive Vice President of Consumer Banking
since May 2004. Prior to joining the Company, he was the Senior Vice President
and Director of Retail Sales for HSBC Bank (USA) a position he held since 1998.
John R. Koelmel, 53, has been Executive Vice President and Chief Financial
Officer since January 2004. Prior to joining the Company, he served for two
years as the Chief Administrative Officer of Financial Institutions, Inc., after
retiring in 2000 as Managing Partner of the Buffalo office of KPMG LLP.
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BOARD OF DIRECTORS
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Board Independence
The Board has determined that, except as to Mr. Kolkmeyer, each member of the
Board is an "independent director" within the meaning of the NASDAQ corporate
governance listing standards and the Company's corporate governance policies.
Mr. Kolkmeyer is not considered independent because he is an executive officer
of the Company.
Board Meetings and Committees
The Board has an annual schedule of meetings and met 10 times during 2005. No
director attended fewer than 75% in the aggregate of the total number of Board
meetings held and the total number of committee meetings on which he or she
served during 2005, including board and committee meetings of First Niagara
Bank. Executive sessions of the independent directors are held during each
regularly scheduled Board meeting. Attendance at the Annual Meeting is
encouraged and all directors attended the Annual Meeting of Stockholders held on
May 3, 2005.
The Company and First Niagara Bank have six standing committees of directors:
Executive Committee; Governance/Nominating Committee; Audit Committee;
Compensation Committee; Finance and Trust Committee; and Loan Committee.
Executive Committee. The Executive Committee generally has the power and
authority to act on behalf of the Board while it is not in session, except as
otherwise provided by law and subject at all times to the Bylaws and direction
of the Board.
Governance/Nominating Committee. The Governance/Nominating Committee is
responsible for recommending the following to the Board: director nominees,
director committee structure and membership, and corporate governance
guidelines. The Governance/Nominating Committee is also responsible for the
determination of director independence as defined by NASDAQ corporate governance
listing standards and administration of the Board's peer review evaluation. Each
member of the Governance/Nominating Committee is considered "independent" as
defined in the NASDAQ corporate governance listing standards. The Board has
adopted a written charter for the Governance/Nominating Committee, which is
available on the Company's website at www.fnfg.com.
Audit Committee. The Audit Committee is responsible for overseeing the financial
reporting, internal control and internal and external audit processes. This
responsibility includes reviewing reports filed with the SEC, the internal audit
function, the audit plan and performance of the internal auditor, as well as
appointing, overseeing and evaluating the Independent Accountants. Each member
of the Audit Committee is considered "independent" as
6
defined in the NASDAQ corporate governance listing standards and under SEC Rule
10A-3 and the Board believes that Mr. Weber qualifies as an "audit committee
financial expert" as that term is used in the rules and regulations of the SEC.
The Board has adopted a written charter for the Audit Committee, which is
available on the Company's website at www.fnfg.com. The report of the Audit
Committee is included elsewhere in this proxy statement.
Compensation Committee. The Compensation Committee is responsible for
recommending to the Board the compensation of the Chief Executive Officer and
executive management, reviewing and administering overall compensation policy,
reviewing performance measures and goals, administering stock-based compensation
plans, approving benefit programs, establishing compensation of directors and
other matters of personnel policy and practice. Each member of the Compensation
Committee is considered "independent" as defined in the NASDAQ corporate
governance listing standards. The Board has adopted a written charter for the
Compensation Committee, which is available at the Company's website at
www.fnfg.com. The report of the Compensation Committee is included elsewhere in
this proxy statement.
Finance and Trust Committee. The Finance and Trust Committee is responsible for
assisting the Board with overseeing the Company's performance with respect to
financial, investment, capital management and other related objectives. The
Finance and Trust Committee is also responsible for oversight of the Trust
Department. The Board has adopted a written charter for the Finance and Trust
Committee, which is available at the Company's website at www.fnfg.com.
Loan Committee. The Loan Committee is responsible for assisting the Board with
overseeing the loan portfolio of the Company, which includes approving loans
above a preset threshold, monitoring credit quality and loan concentrations,
approving loan policy and overseeing regulatory compliance, including Community
Reinvestment Act legislation. The Board has adopted a written charter for the
Loan Committee, which is available at the Company's website at www.fnfg.com.
Committee Membership
The following chart provides information about Board committee membership and
the number of meetings that each committee held in 2005.
Governance/ Finance and
Executive Nominating Audit Compensation Trust Loan
Names Committee Committee Committee Committee Committee Committee
- ---------------------------------------------------------------------------------------------------------------------
Chairman of the Board
Robert G. Weber Chair X X X X X
Director
Gordon P. Assad X X
John J. Bisgrove, Jr. X X
G. Thomas Bowers X X
James W. Currie X X
Daniel J. Hogarty, Jr. X X
William H. (Tony) Jones X X
Daniel W. Judge Vice Chair Chair
Richard P. Koskey X X
B. Thomas Mancuso X X
James Miklinski X Chair
Sharon D. Randaccio X Chair
Louise Woerner Chair X
David M. Zebro X Chair
Executive Officer
Paul J. Kolkmeyer X X X
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Number of meetings in 2005 5 4 5 10 11 16
7
Compensation of Directors
All retainer and meeting fees are paid in cash and are eligible for deferral
under the Directors' Deferred Fees Plan, as defined herein. Directors who are
also employees are not eligible to receive board fees.
2005 2006
-------- ------
Annual Retainer Fee
Company:
Chair $ 25,000 35,000
Director 15,000 15,000
First Niagara Bank:
Chair 13,000 13,000
Director 11,000 11,000
Board Meeting Fees 1,000 1,200
Committees
Audit and Compensation:
Chair 1,500 1,800
Member 1,000 1,200
Executive and Governance/Nominating:
Chair 750 1,050
Member 500 700
Finance and Trust and Loan:
Chair 750 900
Member 500 600
No additional fees are paid for First Niagara Bank Board meetings or First
Niagara Bank Committee meetings.
Stock Benefit Plans. Directors are eligible to participate in the stock benefit
plans of the Company and have received awards of stock options and restricted
stock. The number of stock options and restricted stock awards granted to
directors was based on the market value of the Company's stock at the time of
the grants. All stock options will vest ratably over a four-year period and the
restricted stock will vest ratably over a five-year period. The stock options
and restricted stock become immediately exercisable upon the director's normal
retirement, death or disability or upon change in control of the Company.
2005 Total Director Fees. The following table sets forth the total fees received
by the non-management directors during fiscal year 2005.
Board Committee Total Total Cash Restricted Total
FNFG FNB Total Meeting Meeting Meeting Compen- Stock Compen-
Names Retainer Retainer Retainer Fees Fees Fees sation Awards Options sation
- --------------------- -------- -------- -------- ------- --------- ----- ---------- ---------- -------- -------
Gordon P. Assad $ 15,000 $ 11,000 $ 26,000 $ 9,000 $ 6,000 $ 15,000 $ 41,000 $ 51,640(1) $ -- $ 91,640
John J. Bisgrove, Jr. 15,000 11,000 26,000 8,000 13,500 21,500 47,500 51,640(1) -- 99,140
G. Thomas Bowers 15,000 11,000 26,000 10,000 11,167 21,167 47,167 51,640(1) -- 98,807
James W. Currie 15,000 11,000 26,000 10,000 12,000 22,000 48,000 51,640(1) -- 99,640
Daniel J. Hogarty, Jr. 15,000 11,000 26,000 10,000 13,667 23,667 49,667 51,640(1) -- 101,307
Williams H. (Tony) Jones 15,000 11,000 26,000 10,000 8,668 18,668 44,668 99,998(2) 99,744(2) 244,410(2)
Daniel W. Judge 15,000 11,000 26,000 10,000 19,000 29,000 55,000 51,640(1) -- 106,640
Richard P. Koskey 15,000 11,000 26,000 10,000 13,500 23,500 49,500 99,998(2) 99,744(2) 249,242(2)
B. Thomas Mancuso 15,000 11,000 26,000 9,000 14,000 23,000 49,000 51,640(1) -- 100,640
James Miklinski 15,000 11,000 26,000 10,000 7,000 17,000 43,000 51,640(1) -- 94,640
Sharon D. Randaccio 15,000 11,000 26,000 10,000 19,750 29,750 55,750 51,640(1) -- 107,390
Robert G. Weber 25,000 13,000 38,000 10,000 35,750 45,750 83,750 51,640(1) -- 135,390
Louise Woerner 15,000 11,000 26,000 9,333 18,000 27,333 53,333 51,640(1) -- 104,973
David M. Zebro 15,000 11,000 26,000 8,000 18,000 26,000 52,000 51,640(1) -- 103,640
- -----------------
(1) On May 3, 2005, each outside director except Messrs. Jones and Koskey were
granted 4,000 restricted stock awards.
(2) Upon election to the Board on January 14, 2005, Messrs. Jones and Koskey
were granted 7,530 restricted stock awards and 25,480 non-qualified stock
options.
8
Deferred Fees Plan. The Directors' Deferred Fees Plan (the "Deferred Fees Plan")
is a non-qualified compensation plan, under which a director can defer up to
100% of his or her annual cash retainer and meeting fees earned during a
calendar year. All amounts deferred by a director are fully vested at all times.
Amounts credited to a deferred fee account may be invested in equity securities,
fixed income securities, money market accounts, or cash, at the sole discretion
of the Company. Upon cessation of a director's service, the Company will pay the
director the amounts credited to his or her account. The amounts will be paid in
a number of substantially equal annual installments, as selected by the director
at the time the deferral is made.
If a director dies before all payments have been made, the remaining payments
will be made to the director's designated beneficiary. In the event of a
director's death prior to the commencement of benefits, the Company will pay the
director's beneficiary the amounts credited to the benefit of the director under
the Deferred Fees Plan, in a single lump sum payment or in a number of
substantially equal annual installments as elected by the director at the time
the election to defer was made. In the event of an unforeseeable emergency that
will result in a severe financial hardship, the director may request a
distribution of all or part of his or her benefits or may request an
acceleration of benefits that are being paid, as applicable.
Board Nominations
The Governance/Nominating Committee identifies nominees by evaluating the
current members of the Board willing to continue in service. Current members of
the Board with skills and experience that are relevant to the Company's business
and who are willing to continue in service are first considered for
re-nomination, balancing the value of continuity of service by existing members
of the Board with that of obtaining a new perspective. If any member of the
Board does not wish to continue in service, or if the Governance/Nominating
Committee or the Board decides not to re-nominate a member for re-election, or
if the size of the Board is increased, the Governance/Nominating Committee would
solicit suggestions for director candidates from all Board members and would
consider candidates submitted by stockholders. In addition, the
Governance/Nominating Committee is authorized by its charter, subject to prior
approval from the Board, to engage a third party to assist in the identification
of director nominees. The Governance/Nominating Committee would seek to identify
a candidate who at a minimum satisfies the following criteria:
o has the highest personal and professional ethics and integrity and
whose values are compatible with those of the Company;
o has experiences and achievements that have given him/her the ability
to exercise and develop good business judgment;
o is willing to devote the necessary time to the work of the Board and
its committees, which includes being available for Board and committee
meetings;
o is familiar with the communities in which the Company operates and/or
is actively engaged in community activities;
o is involved in other activities or interests that do not create a
conflict with his/her responsibilities to the Company and its
stockholders; and
o has the capacity and desire to represent the balanced, best interests
of the stockholders of the Company as a group, and not primarily a
special interest group or constituency.
The Governance/Nominating Committee will also take into account whether a
candidate satisfies the criteria for "independence" as defined in the NASDAQ
Corporate Governance Listing Standards, and, if a candidate with financial and
accounting expertise is sought for service on the Audit Committee, whether the
individual qualifies as an Audit Committee financial expert.
9
Procedures for the Consideration of Board Candidates Submitted by Stockholders
The Governance/Nominating Committee has adopted procedures for the
consideration of Board candidates submitted by stockholders. Stockholders can
submit the names of candidates for director by writing to the Chair of the
Governance/Nominating Committee, at First Niagara Financial Group, Inc., 6950
South Transit Road, P.O. Box 514, Lockport, New York 14095-0514. The Chair of
the Governance/Nominating Committee must receive a submission prior to December
28, 2006 in order for a candidate to be considered for next year's Annual
Meeting. The submission must include the following information:
o a statement that the writer is a stockholder and is proposing a
candidate for consideration by the Governance/Nominating Committee;
o the qualifications of the candidate and why this candidate is being
proposed;
o the name and address of the nominating stockholder as he/she appears
on the Company's books, and number of shares of the Company's common
stock that are owned beneficially by such stockholder (if the
stockholder is not a holder of record, appropriate evidence of the
stockholder's ownership will be required);
o the name, address and contact information for the nominated candidate,
and the number of shares of common stock of the Company that are owned
by the candidate (if the candidate is not a holder of record,
appropriate evidence of the stockholder's ownership should be
provided);
o a statement of the candidate's business and educational experience;
o such other information regarding the candidate as would be required to
be included in the proxy statement pursuant to SEC Regulation 14A;
o a statement detailing any relationship between the candidate and the
Company and between the candidate and any customer, supplier or
competitor of the Company;
o detailed information about any relationship or understanding between
the proposing stockholder and the candidate; and
o a statement that the candidate is willing to be considered and willing
to serve as a director if nominated and elected.
A nomination submitted by a stockholder for presentation by the stockholder at
an Annual Meeting of stockholders must comply with the procedural and
informational requirements described in "Advance Notice Of Business To Be
Conducted at an Annual Meeting." No submission for Board nominees were received
by the Company for the Annual Meeting.
Stockholder Communications with the Board
A stockholder of the Company who wants to communicate with the Board or with any
individual director can write to the Chair of the Governance/Nominating
Committee at First Niagara Financial Group, Inc., 6950 South Transit Road, P.O.
Box 514, Lockport, New York, 14095-0514. The letter should indicate that the
author is a stockholder and if shares are not held of record, should include
appropriate evidence of stock ownership. Depending on the subject matter, the
Chair will:
o forward the communication to the director(s) to whom it is addressed;
o handle the inquiry directly, for example where it is a request for
information about the Company or it is a stock-related matter; or
10
o not forward the communication if it is primarily commercial in nature,
relates to an improper or irrelevant topic, or is unduly hostile,
threatening, illegal or otherwise inappropriate.
At each Board meeting, the Chair of the Governance/Nominating Committee shall
present a summary of all communications received since the last meeting and make
those communications available to the directors upon request.
Code of Ethics
The Company has adopted a general Code of Ethics that sets forth standards of
ethical business conduct for all directors, officers and employees of the
Company. Additionally, the Company has adopted a Code of Ethics for Senior
Financial Officers, that is in conformity with the requirements of the
Sarbanes-Oxley Act of 2002 and NASDAQ listing standards. Both of these documents
are available on the Company's website at www.fnfg.com. Amendments to and
waivers from the Code of Ethics will also be disclosed on the Company's website.
There were no such amendments or waivers in 2005.
Transactions with Certain Related Persons
Federal law and regulation generally require that all loans or extensions of
credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public and must not involve
more than the normal risk of repayment or present other unfavorable features.
However, regulations also permit executive officers and directors to receive the
same terms through loan programs that are widely available to other employees,
as long as the director or executive officer is not given preferential treatment
compared to the other participating employees. Pursuant to such a program, loans
have been extended to directors and executive officers, which loans are on
substantially the same terms as those prevailing at the time for comparable
transactions with the general public, except as to the interest rate charged,
which rate is the same as available to all employees. These loans do not involve
more than the normal risk of repayment or present other unfavorable features.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer
from: (1) extending or maintaining credit; (2) arranging for the extension of
credit; or (3) renewing an extension of credit in the form of a personal loan
for an officer or director. There are several exceptions to this general
prohibition, one of which is applicable to First Niagara Bank. Sarbanes-Oxley
does not apply to loans made by a depository institution that is insured by the
FDIC and is subject to the insider lending restrictions of the Federal Reserve
Act. All loans to the Company's directors and officers are made in conformity
with the Federal Reserve Act and Regulation O.
- --------------------------------------------------------------------------------
THE AUDIT COMMITTEE REPORT
- --------------------------------------------------------------------------------
Management has the primary responsibility for the Company's internal controls
and financial reporting process. The Independent Accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board and to issue an opinion thereon. In addition, the Independent
Accountants are responsible for issuing an opinion on the Independent
Accountants' and management's assessment of the Company's internal controls
based on the criteria issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Audit Committee's responsibility is to monitor and
oversee these processes. As part of its ongoing activities, the Audit Committee
has:
o reviewed and discussed with management and the Independent Accountants
the Company's audited consolidated financial statements for the year
ended December 31, 2005 and management's assessment of the
effectiveness of internal controls over financial reporting as of
December 31, 2005;
o met with the Company's CEO, CFO, internal auditors and the Independent
Accountants, both together and in separate executive sessions, to
discuss the scope and the results of the audits and the overall
quality of the Company's financial reporting and internal controls;
11
o discussed with the Independent Accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications
with Audit Committees, as amended;
o received the written disclosures from the Independent Accountants
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and discussed with the Independent
Accountants its independence from the Company; and
o pre-approved all audit, audit related and other services to be
provided by the Independent Accountants.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board that the audited consolidated financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2005 and be filed with the SEC. In addition, the Audit Committee appointed
KPMG as the Company's Independent Accountants for the year ending December 31,
2006, subject to the ratification of this appointment by the stockholders.
The Audit Committee
Louise Woerner (Chair)
James W. Currie Richard P. Koskey
Robert G. Weber David M. Zebro
- --------------------------------------------------------------------------------
THE COMPENSATION COMMITTEE REPORT
- --------------------------------------------------------------------------------
Overview
The Compensation Committee is composed entirely of outside non-employee
directors whose primary responsibility is the determination of CEO and Board of
Directors compensation. Additionally, the Committee reviews and approves
executive compensation and provides oversight for all other Company compensation
and benefit plans.
The Compensation Committee engaged a nationally recognized compensation
consulting firm, AON, to conduct an independent review of the total compensation
of the executive group. For 2005, compensation levels were compared to a peer
group of banks and thrifts with assets between $5 and $12 billion, 1-4 family
loans between 25%-50% of total loans, commercial loans greater than 10% of total
loans and borrowings as a percentage of assets less than 30%. The review
determined that base salaries, annual incentives and long-term incentives were
generally comparable to these similarly situated banking and financial services
companies.
Compensation Philosophy
The Committee's philosophy is to provide competitive, performance-based
compensation opportunities which attract, motivate and retain executive talent,
deliver rewards for superior performance; and, align the interest of the
Company's executives with those of our stockholders.
The executive compensation program is composed of three components with a
relationship to each other that reflects the nature and maturity of the
Company's business as well as its overall objectives. The three primary
components are base salary, annual incentive, and long-term incentives.
A significant portion of executive compensation is tied to the Company's
achievement of financial objectives and the executive's contributions to the
overall performance. Based on position, experience and overall contributions, an
executive's compensation will generally be targeted between a range of 80% and
120% of the following targets: base salary - 90% of peer group median; base
salary and annual incentive - 100% of peer group median; and total of base
salary, annual incentive and long-term incentives - 110% of peer group median.
12
Compensation Components
Base Salaries. Base salaries are a fixed amount of compensation executives
receive in exchange for sustained performance of responsibilities. Base salary
and changes to base salary reflect a variety of factors including the results of
the independent review of the competitiveness of the total compensation program,
the Company's performance, the executive's individual performance, and
contribution to the long-term goals of the Company. In 2006 the Named Executive
Officers, as defined herein, received base salary adjustments ranging between 5%
and 22% for 2005 performance and other previously noted factors.
Annual Incentive. Annual cash incentives are earned based on the executive's
performance measured over the year. The annual incentive plan is goal driven
with "target" awards expressed as percentage of base salary. Target awards for
Named Executives Officers in 2005 ranged from 55% to 75% of base salary.
Performance above or below the pre-established objectives is appropriately
considered and awards in excess of the target are attainable for performance
that exceeds the objectives. The annual incentive plan is the primary method for
adjusting pay on an annual basis to reflect performance. Funding of the annual
incentive plan is a function of the Company's financial performance (Net Income
and Earnings Per Share Growth) and individual payouts are a function of the
performance of the individual executive (Profit Plan and Strategic Plan
Objectives). The Compensation Committee believes that this funding and payment
strategy provides a direct link between the Company's financial performance and
actual executive compensation. The Compensation Committee continually reviews
the Company's annual incentive plan to ensure it provides a strong linkage among
the Company's financial and operational performance, the performance of the
individual executive and the rewards earned. In 2005 the Company achieved over
98% of the Net Income goal and 100% of the Earnings Per Share Growth goal. The
Named Executive Officers received cash-based annual incentive awards ranging
from 34% to 71% of base salary.
Long-Term Incentives. The Compensation Committee believes that long-term
incentives are the most effective way of aligning executive compensation with
the creation of value for the stockholders through stock appreciation.
Executives earn long-term incentives through the Long-Term Incentive Plan
("LTIP"). During 2005, stock options and restricted stock awards were allocated
by the Compensation Committee and had an economic value initially ranging from
20% to 31% of base salary with the ability to earn an additional 16% - 46% upon
achievement of long-term performance objectives.
Long-Term Incentive Plan
Type of Plan and Awards. The LTIP is a multi-vehicle, three-year performance
plan, with incentive award opportunities defined as a percentage of the
participants' base salary, which incorporates the following primary Long-Term
Incentive ("LTI") vehicles: stock options (50% of target LTI) and share grants
(50% of target LTI).
Payment of Awards. A portion of the LTI award is earned at the beginning of the
Performance Period, as defined herein, while the balance of the award may be
earned at the end of the performance period based on attainment of established
performance goals. The award at the beginning of the performance period is
comprised of the entire stock option award and one third of the restricted share
grant. Based on attainment of established performance goals, the award at the
end of the performance period consists of share grants of up to an additional
two thirds of the total share grant.
Performance Period. The plan is a three-year performance plan ("Performance
Period"). Each year a new three-year plan cycle will commence. The initial plan
cycle is from January 1, 2005 through December 31, 2007.
Incentive Award Opportunity. Each year, the CEO recommends total LTI award
opportunities for each eligible participant within a range established by the
Compensation Committee. These ranges are based on the Company's compensation
philosophy. The Compensation Committee has discretion to adopt, or amend and
adopt, the recommendations of the CEO or otherwise set the LTI award
opportunities.
Performance Measures. The CEO recommends to the Compensation Committee and Board
for approval at least two performance measures for each Performance Period,
which are key strategic measures tied to the long-term performance of the
Company.
13
Performance Targets. Performance targets for each performance measure will be
recommended by the CEO for approval by the Compensation Committee and the Board
on an annual basis in conjunction with the profit and strategic planning
process.
Award for Outstanding Company Performance Relative to Peer Group Performance. In
addition to the LTI award available through the plan, participants have the
opportunity to receive an additional cash award based on outstanding performance
relative to a defined Company peer group. Outstanding performance represents
Company achievement of between the 60th and 75th percentile of peer group at the
end of each three-year performance period. Outstanding performance will result
in a cash payment of up to 30% of a participant's target total direct
compensation level. Total direct compensation equals the sum of base salary,
annual incentive and economic value of long-term incentives.
CEO Compensation
In evaluating Mr. Kolkmeyer's compensation, the Compensation Committee
considered the terms of the employment agreement between Mr. Kolkmeyer and the
Company. Mr. Kolkmeyer's 2005 base salary was $410,000. He was provided with a
cash incentive of $289,000 and was granted 84,100 stock options and 7,600 stock
grants under the LTIP. Consistent with the Company's compensation philosophy,
the Compensation Committee determined these awards based on its evaluation of
Mr. Kolkmeyer's contribution to the Company's performance and other factors,
including a study of peer group institutions. The Compensation Committee took
these actions to recognize his accomplishments in successfully building an
institution and management team and his ability to lead and strategically
position the future direction of the Company.
The Compensation Committee
Daniel W. Judge (Chair)
John J. Bisgrove, Jr. Sharon D. Randaccio
Robert G. Weber Louise Woerner
14
- --------------------------------------------------------------------------------
COMPENSATION OF NAMED EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth certain information as to the total remuneration
paid to the CEO, CFO and the three other highly compensated executive officers,
or Named Executive Officers.
Annual Compensation Long-Term Compensation
----------------------------- ------------------------------------------------------
Awards Payouts
Other --------------------------------- -------------------
Annual Restricted All
Year Compen- Stock No. Options/ LTIP Other
Name and Principal Ended Total Bonus sation Awards Options/ SARS Fair Payouts Compen
Position 12/31 Compensation Salary (2) (3) (4) SARS Value (5) -sation (7)
- ----------------------- ----- ------------ -------- --------- ------- ---------- -------- --------- ------- -----------
Paul J. Kolkmeyer 2005 $ 1,113,746 $406,154 $ 289,886 $ -- $ -- 84,100 $287,227 $98,116 $32,363
President and 2004 852,128 360,000 192,000 -- 35,135 33,700 134,544 -- 30,449
Chief Executive 2003 1,536,183 287,800 123,705 -- 525,864 119,300 567,954 -- 30,860
Officer
John R. Koelmel (1) 2005 $ 549,506 $223,077 $ 145,827 $ -- $ -- 35,200 $120,219 $41,312 $19,071
Executive Vice 2004 857,127 192,300 91,000 -- 354,341 43,700 207,090 -- 12,396
President and Chief
Financial Officer
G. Gary Berner 2005 $ 487,600 $211,308 $ 106,486 $ -- $ -- 30,100 $102,801 $34,857 $32,148
Executive Vice 2004 350,937 202,400 75,000 -- 55,341 14,000 55,894 -- 29,802
President 2003 404,121 200,500 67,196 -- 53,120 12,400 53,252 -- 30,053
Carl A. Florio (1) 2005 $ 1,477,646 $216,731 $ 374,534(6) $ -- $ 597,600(6) 66,900(6) $253,449 $19,365 $15,967
Executive Vice
President
Michael R. Giaquinto (1)
Executive Vice 2005 $ 428,632 $189,231 $ 99,540 $ -- $ -- 26,500 $ 90,505 $30,984 $18,372
President 2004 384,217 110,769 71,000 -- 120,900 20,000 74,668 -- 6,880
- ---------------
(1) The following executives joined the Company as indicated: Mr. Koelmel -
January 2004, Mr. Florio - January 2005 and Mr. Giaquinto - May 2004.
(2) Includes payments under the Company's Annual Incentive Plan and other
discretionary payments.
(3) The Company also provides certain members of executive management with the
use of an automobile, club membership dues, and certain other personal
benefits. The aggregate value of such benefits did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for each
executive.
(4) Amounts reported in this column represent the fair value of the restricted
stock awards at the date of the grant. Dividends paid with respect to all
shares awarded are paid to the recipient of the award. At December 31,
2005, an aggregate of 100,518 shares of unvested restricted stock were held
by the Named Executive Officers, with an aggregate market value of
$1,454,495.
(5) Amounts reported represent the fair value of the restricted stock awards at
the date of the grant pursuant to the 2005 Long Term Performance Plan.
Awards have a 3 year cliff vest. At December 31, 2005, an aggregate of
17,400 shares of unvested restricted stock were held by the Named Executive
Officers, with an aggregate market value of $251,778.
(6) Includes the following which were paid/granted in connection with the
acquisition of Hudson River Bancorp in January 2005: $300,000 signing
bonus, 45,000 restricted stock awards at a fair market value of $13.28 per
share and 50,000 non-qualified stock options.
(7) The following table sets forth the details of "All Other Compensation".
Year Medical Total All
Ended Insurance Deferred (3) Other
Name 12/31 401(k) (1) GTL(2) Premiums Compensation Compensation
- --------------------- -------- ----------- ------- --------- ------------ ------------
Paul J. Kolkmeyer 2005 $ 10,500 $ 680 $ 7,478 $ 13,705 $ 32,363
2004 10,250 321 5,797 13,781 30,449
2003 10,000 554 5,255 15,051 30,860
John R. Koelmel 2005 $ 10,500 $ 1,093 $ 7,478 $ -- $ 19,071
2004 6,750 817 4,829 -- 12,396
G. Gary Berner 2005 $ 10,242 $ 698 $ 7,478 $13,730 $ 32,148
2004 9,553 642 5,797 13,810 29,802
2003 9,277 597 5,255 14,924 30,053
Carl A. Florio 2005 $ 9,559 $ 1,953 $ 4,455 $ -- $ 15,967
Michael R. Giaquinto 2005 $ 10,500 $ 394 $ 7,478 $ -- $ 18,372
2004 3,115 200 3,565 -- 6,880
- ------------------
(1) Contributions pursuant to 401(k) Plan.
(2) Income imputed on Group Term Life Insurance in excess of $50,000 per
employee.
(3) Deferred Compensation Plan (see page 17).
15
Employment Agreements
The Company has entered into employment agreements with each of Messrs.
Kolkmeyer, Koelmel, Berner and Giaquinto. The employment agreements have terms
ranging from twelve to thirty-six months (36 months for Mr. Kolkmeyer; 24 months
for Messrs. Koelmel and Berner, 12 months for Mr. Giaquinto). On each
anniversary date, an employment agreement may be extended for an additional
twelve months, so that the remaining term will be from twelve to thirty-six
months. If the agreement is not renewed, the agreement will expire at the end of
its term. In January 2005, the Company also entered into an employment agreement
with Carl Florio, for the period through December 31, 2007, and does not provide
for extensions. Under the employment agreements, the 2006 base salary for
Messrs. Kolkmeyer, Koelmel, Berner, Florio, and Giaquinto is $475,000, $275,000,
$235,000, $235,000, and $205,000, respectively. The base salary may be increased
but not decreased. The employment agreements also provide that the executive is
entitled to participate in an equitable manner with other executive officers in
discretionary bonuses declared by the Board. In addition to base salary and
bonus, each of the employment agreements provide for, among other things,
participation in health and medical benefit plans, retirement plans and other
employee and fringe benefits applicable to executive personnel. The agreements
provide for termination by the Company for cause at any time and termination for
any reason upon a 30-day notice. The executive may terminate his employment for
good reason or absent good reason by providing a 30-day notice to the Company.
Good reason includes (i) a significant reduction in the scope of the executive's
duties, (ii) removal or failure to re-elect the executive to his present
position, (iii) a requirement that, in the executive's judgment, would
necessitate a relocation of his residence outside of 100 miles of the Lockport,
New York area (Hudson, New York for Mr. Florio), or (iv) a material breach of
the employment agreement that cannot be cured within 30 days of the executive's
notice of the breach to the Company.
In the event of the executive's termination of employment for good reason or the
Company's termination of the executive's employment for any reason other than
cause, Mr. Kolkmeyer will receive salary, health and medical benefits for a
period of 36 months (24 months for Messrs. Koelmel and Berner and 12 months for
Mr. Giaquinto), and Mr. Florio through December 31, 2007. Messrs. Kolkmeyer,
Koelmel, Berner and Giaquinto will also be entitled to payment of a cash bonus
equal to the prior three-year average annual bonus divided by 12, payable for 36
months to Mr. Kolkmeyer (24 months for Messrs. Koelmel and Berner and 12 months
for Mr. Giaquinto), and payment of accrued but unused vacation, and Mr. Florio
through December 31, 2007. If the executive dies after termination, the
remaining payments will be made to the executive's spouse, if surviving, or his
estate. The executive will be entitled to the same benefits, payable in a lump
sum, in the event he is terminated without cause within 12 months following a
change in control or terminates employment for good reason within 12 months
following a change in control.
Upon termination of employment by the executive absent good reason or
termination by the Company for cause, Messrs. Kolkmeyer, Koelmel, Berner,
Giaquinto and Florio will receive his salary and fringe benefits, but no bonus,
through their termination date, and payment of his accrued but unused vacation.
In the event of disability, Messrs. Kolkmeyer, Koelmel, Berner and Giaquinto
will be entitled to their salary for the greater of the remaining term of the
agreement or 6 months, reduced by any disability insurance payments, and Mr.
Florio through December 31, 2007, and a pro-rata bonus for the year in which the
disability begins, fringe benefits, and payment of accrued but unused vacation.
If the executive dies, Messrs. Kolkmeyer, Koelmel, Berner and Giaquinto's
spouse, if surviving, or if not, the executive's estate will be entitled to
payment of the executive's salary through the end of the calendar month in which
the executive died, and for Mr. Florio through December 31, 2007, payment of a
pro-rata bonus for the year in which the executive died and payment of his
accrued but unused vacation.
In addition to the terms and conditions referenced above, Mr. Florio received a
bonus of $300,000 upon signing his agreement. He is also guaranteed a bonus for
the full term of his contract if he is terminated prior to December 31, 2007.
The contract provides for a two year non-compete agreement with annual payments
of $150,000.
The Company has also entered into employment agreements with other senior
officers of the Company. The contracts typically have one-year terms and
provisions that are generally similar to the employment agreements described
above.
16
Stock Benefit Plans. Set forth below is certain information regarding stock
options granted to the Named Executive Officers during 2005, in accordance with
the Company's stock benefit plans.
=======================================================================================================================
STOCK OPTION GRANTS IN 2005
=======================================================================================================================
Individual Grants
-----------------------------------------------------------------------------------------------------------------------
Name Options Granted Percent of Total Exercise Expiration Date Grant Date Present
Options Granted to
Employees in 2005 Price Value
-----------------------------------------------------------------------------------------------------------------------
Paul J. Kolkmeyer 84,100 6.2% $12.91 5/3/15 $287,227 (1)
John R. Koelmel 35,200 2.6 12.91 5/3/15 120,219 (1)
G. Gary Berner 30,100 2.2 12.91 5/3/15 102,801 (1)
Carl A. Florio 50,000 3.7 13.28 1/17/15 195,730 (2)
Carl A. Florio 16,900 1.2 12.91 5/3/15 57,719 (1)
Michael R. Giaquinto 26,500 2.0 12.91 5/3/15 90,505 (1)
=======================================================================================================================
- -------------------
(1) The grant date present value was derived using the Black-Scholes option
pricing model with the following assumptions: volatility of 29.07%; risk
free rate of return of 4.05%; dividend yield of 2.79%; and a 6.5 year
option life.
(2) The grant date (date of hire) present value was derived using the
Black-Scholes option pricing model with the following assumptions:
volatility of 31.39%; risk free rate of return of 3.96%; dividend yield of
2.41%; and a 6.5 year option life.
Set forth below is certain information concerning options exercised by and
outstanding to the Named Executive Officers at and for the year ended December
31, 2005.
===========================================================================================================================
AGGREGATED OPTION EXERCISES IN 2005 AND
OPTION VALUES AT DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------
Number of Value of
Shares Options at In-The-Money Options
Acquired Year-End at Year-End(1)
Upon Value ------------------------------------------------------------------------
Name Exercise Realized Exercisable # Unexercisable # Exercisable ($) Unexercisable ($)
- ---------------------------------------------------------------------------------------------------------------------------
Paul J. Kolkmeyer -- $ -- 462,047 102,741 $3,405,305 $120,165
John Koelmel -- $ -- 33,584 45,316 $ 29,265 $47,567
G. Gary Berner -- $ -- 251,000 30,166 $2,283,861 $46,192
Carl A. Florio -- $ -- 15,634 51,266 $ 20,689 $65,175
Michael R. Giaquinto -- $ -- 18,834 27,666 $ 37,581 $51,359
============================================================================================================================
- ----------------------
(1) Equals the difference between the aggregate exercise price of the options
and the aggregate fair market value of the shares of Common Stock that
would be received upon exercise, assuming such exercise occurred on
December 31, 2005, at which date the last trade price of the Common Stock
as quoted on the NASDAQ National Market was $14.47.
Other Compensation
Deferred Compensation Plan. The Company has a deferred compensation plan for the
benefit of certain executive officers that it has designated to participate.
Under the deferred compensation plan, the Company annually credits an
executive's deferred compensation account with an amount determined in the sole
discretion of the Board. An executive will vest in earnings credited to his
account at the rate of 20% per year, beginning in the sixth year of
participation until the executive is fully vested after 10 years of
participation. For these purposes, an executive's years of participation will be
equal to the executive's number of whole years of employment with the Company
measured from the date that an executive becomes a participant under the
deferred compensation plan. Notwithstanding the above, an executive shall be
fully vested in his or her deferred compensation account upon attaining age 60
with five years of participation or in the event of a change in control of the
Company. Benefits are payable to the executive in fifteen substantially equal
annual payments commencing (i) 30 days after the executive has attained age 60,
or (ii) 30 days after the executive terminates employment, if after age 60, or
due to disability. In the event of the executive's death after benefits
commence, the Company will pay the remaining benefits to the executive's
beneficiary over the remainder of the payment term. In the event of the
executive's death after termination of employment but prior to commencement of
benefit payments, the Company will pay the executive's benefit to the
executive's beneficiary in fifteen substantially equal annual payments
commencing within 30 days of the executive's death. In the event of the
executive's death prior to termination of employment, the executive will forfeit
all benefits under the deferred compensation plan. In the event of an
unforeseeable emergency which will
17
result in a severe financial hardship, the executive may request a distribution
of all or part of his or her benefits or may request an acceleration of benefits
that are being paid to him, as applicable.
Messrs. Kolkmeyer and Berner are participants in the non-qualified plan. For the
year ended December 31, 2005, Messrs. Kolkmeyer and Berner had $13,705 and
$13,730 respectively, credited to their deferred compensation accounts.
Defined Benefit Pension Plan. The Company maintains the First Niagara Financial
Group, Inc. Retirement Plan (the "Retirement Plan"), a tax-qualified defined
benefit pension plan, which was frozen February 1, 2002 and restated effective
January 1, 2005. The purpose of the restatement was to incorporate the
provisions of the following defined benefit pension plans and consolidate such
plans with the Retirement Plan:
o Retirement Plan of the Troy Savings Bank In RSI Retirement Trust, which was
frozen December 31, 2003.
o Retirement Plan of Savings Bank of the Finger Lakes, FSB in RSI Retirement
Trust, which was frozen December 31, 2002.
All benefits set forth in each of the prior plan documents as protected benefits
are preserved in the consolidated and restated plan document. Accordingly, each
of the separate plans' benefit formulas is preserved in the consolidated plan.
No employee who is not already participanting in one of the plans prior to
consolidation is permitted to commence or recommence participating in the
Retirement Plan; no further benefits will accrue to any current participant in
the Retirement Plan; and, future compensation will not be considered in
determining benefits on or after the date that any individual plan, prior to the
consolidation, was frozen. However, a participant who was not fully vested in
his or her accrued benefit under any one of the plans will continue to earn
vesting credit in his or her accrued benefit under the Retirement Plan following
the restatement.
Effective September 30, 2005, the Retirement Plan of the Hudson River Bank and
Trust Company ("Hudson River Plan") was merged into the Retirement Plan. The
former Hudson River Plan was frozen as of December 31, 2004.
The Company contributes each year, an amount to the Retirement Plan necessary to
satisfy the actuarially determined minimum funding requirements in accordance
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
For the Retirement Plan year ended September 30, 2005, a $6.2 million
contribution was made. At September 30, 2005, the market value of the Retirement
Plan assets equaled approximately $72.2 million.
Three of the five named executive officers of First Niagara Financial Group,
Inc. are entitled to a benefit following retirement based on their participation
in either the Retirement Plan or the Hudson River Plan prior to the date that
such plan was frozen. The following tables indicate the annual retirement
benefit that would be payable from the Retirement Plan under the applicable
benefit formula upon retirement at age 65 in calendar year 2005, expressed in
the form of a single life annuity for the average annual earnings and years of
credited service specified below.
18
Retirement Plan
=====================================================================================================================
Years of Credited Service and Benefits Payable at Retirement
Final Average -----------------------------------------------------------------------------------------
Annual Earnings 15 20 25 30
=====================================================================================================================
$50,000 $9,000 $12,000 $15,000 $15,000
$75,000 $13,500 $18,000 $22,500 $22,500
$100,000 $18,000 $24,000 $30,000 $30,000
$125,000 $22,500 $30,000 $37,500 $37,500
$150,000 $27,000 $36,000 $45,000 $45,000
$200,000 & Above $36,000 $48,000 $60,000 $60,000
=====================================================================================================================
Hudson River Plan
=====================================================================================================================
Years of Credited Service and Benefits Payable at Retirement
Final Average -----------------------------------------------------------------------------------------
Annual Earnings 15 20 25 30
=====================================================================================================================
$50,000 $14,635 $19,513 $24,391 $24,391
$75,000 $22,135 $29,513 $26,891 $36,891
$100,000 $29,635 $39,513 $49,391 $49,391
$125,000 $37,135 $49,513 $61,891 $61,891
$150,000 $44,635 $59,513 $74,391 $74,391
$200,000 & Above $59,635 $79,513 $99,391 $99,391
=====================================================================================================================
As of February 1, 2002, when credited service was frozen in the Retirement Plan,
Messrs. Kolkmeyer and Berner had 11.6 and 10.1 years of credited service,
respectively. As of December 31, 2004, when credited service was frozen in the
Hudson River Plan, Mr. Florio had 11.6 years of credited service. Messrs.
Koelmel and Giaquinto are not eligible for participation in the Retirement Plan
since the plan was frozen prior to their respective dates of hire.
19
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Stock Performance Graph
Set forth hereunder is a stock performance graph comparing (a) the cumulative
total return on the Company's Common Stock for the period beginning December 31,
2000 as reported by the NASDAQ National Market, through December 31, 2005, (b)
the cumulative total return on stocks included in the NASDAQ Composite Index
over such period, (c) the cumulative total return of publicly traded thrifts
over such period, and, (d) the cumulative total return of all publicly traded
banks and thrifts over such period. Cumulative return assumes the reinvestment
of dividends, and is expressed in dollars based on an assumed investment of
$100.
- --------------------------------------------------------------------------------
FIRST NIAGARA FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------
[THE DATA IS A REPRESENTATION OF A LINE CHART IN THE PRINTED MATERIAL]
Total Return Performance
Period Ending
--------------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- --------------------------------------------------------------------------------------------------------------
First Niagara Financial Group, Inc. 100.00 159.69 252.35 380.41 362.61 386.61
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
SNL All Bank & Thrift Index 100.00 101.48 95.35 129.27 144.76 147.03
SNL Thrift Index 100.00 106.88 127.50 180.50 201.12 208.21
20
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Company's Independent Accountants for the year ended December 31, 2005 were
KPMG LLP ("KPMG"). The Audit Committee of the Board has approved the engagement
of KPMG to be the Company's independent accountants for the year ending December
31, 2006, subject to the ratification of the engagement by the Company's
stockholders at the Annual Meeting. Representatives of KPMG are expected to
attend the Annual Meeting, will have an opportunity to make a statement if they
so desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG is not required by the
Company's Bylaws or otherwise. However, the Board is submitting the selection of
the Independent Accountants to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection of
KPMG, the Audit Committee will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee may, at its discretion,
direct the appointment of a different independent accounting firm at any time
during the year if it determines that such change is in the best interests of
the Company and its stockholders.
Fees Paid to KPMG
Set forth below is certain information concerning aggregate fees for
professional services rendered by KPMG during 2005 and 2004:
Audit Fees. The aggregate fees billed to the Company by KPMG for professional
services rendered for the audit of the Company's annual consolidated financial
statements and management's assessment of the effectiveness of internal controls
over financial reporting, review of the consolidated financial statements
included in the Company's quarterly reports on Form 10-Q and services that are
normally provided by KPMG in connection with statutory and regulatory filings
and engagements were $365,000 and $355,500 during 2005 and 2004, respectively.
Audit Related Fees. The aggregate fees billed to the Company by KPMG for
assurance and related services rendered that are reasonably related to the
performance of the audit of and review of the consolidated financial statements
and that are not already reported in "Audit Fees" above, were $112,700 and
$100,650 during 2005 and 2004, respectively. These services were primarily
related to the audit of the Company's employee benefit plans and accounting
research. All audit related fees billed by KPMG during 2005 were pre-approved by
the Audit Committee.
Tax Fees. The aggregate fees billed to the Company by KPMG for professional
services rendered for tax compliance were $60,800 and $161,975 during 2005 and
2004, respectively. The aggregate fees billed by KPMG for tax advice and tax
planning were $66,573 and $85,675 during 2005 and 2004, respectively. These
services primarily included the review of tax returns and quarterly tax
provisions and due diligence related to the Company's acquisitions in 2005 and
2004. All tax fees billed by KPMG during 2005 were pre-approved by the Audit
Committee.
All Other Fees. There were no "Other Fees" for 2005. The aggregate fees billed
to the Company by KPMG in 2004 that are not described above were $25,000 and
related to management advisory services. The fees billed by KPMG during 2004
were pre-approved by the Audit Committee.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Accountants
The Audit Committee's policy is to pre-approve all audit and non-audit services
provided by the Independent Accountants. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is provided for up to one year and any pre-approval is detailed as to particular
service or category of services and is subject to a specific budget. The Audit
Committee has delegated pre-approval authority to its Chair when necessary, with
subsequent reporting to the Audit Committee. The Independent Accountants and
management are required to report to the Audit Committee quarterly regarding the
extent of services provided by the Independent Accountants in accordance with
this pre-approval policy, and the fees for the services performed to date.
21
Required Vote and Recommendation of the Board
In order to ratify the appointment of KPMG as Independent Accountants for 2006,
the proposal must receive the affirmative vote of at least a majority of the
votes cast at the Annual Meeting, either in person or by proxy.
THE BOARD RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF KPMG AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next year's
Annual Meeting of Stockholders, any stockholder proposal to take action at such
meeting must be received at the Company's Executive Office, 6950 South Transit
Road, P.O. Box 514, Lockport, New York 14095-0514, no later than November 28,
2006. Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
Advance Notice of Business to be Conducted at an Annual Meeting
The Bylaws of the Company provide an advance notice procedure for certain
business or nominations to the Board to be brought before an annual meeting. In
order for a stockholder to properly bring business before an annual meeting or
to propose a nominee to the Board, the stockholder must give written notice to
the Corporate Secretary not less than ninety days before the date fixed for such
meeting; provided, however, that in the event that less than one hundred days
notice or prior public disclosure of the date of the annual meeting is given or
made, notice by the stockholder to be timely must be received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. The
notice must include the stockholder's name, record address, and number of shares
owned, a brief description of the proposed business, the reasons for bringing
the business before the annual meeting, and any material interest of the
stockholder in the proposed business. In the case of nominations to the Board,
certain information regarding the nominee must be provided. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to an annual meeting any stockholder proposal that
does not meet all of the requirements for inclusion established by the SEC which
are in effect at the time such proposal is received.
The date of next year's Annual Meeting of Stockholders is expected to be May 15,
2007. Accordingly, advance written notice for certain business or nominations to
the Board to be brought before that meeting must be given to the Company by
February 13, 2007. If notice is received after February 13, 2007, it will be
considered untimely, and the Company will not be required to present the matter
at the meeting.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board is not aware of any business to come before the Annual Meeting other
than the matters described above in this proxy statement. However, if any
matters should properly come before the Annual Meeting, it is intended that
holders of the proxies will act in accordance with their best judgment.
The Audit Committee Report, the Report of the Compensation Committee and the
stock performance graph included in this proxy statement shall not be deemed
incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference.
The Audit Committee Report shall not otherwise be deemed filed under such Acts.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of the Common Stock. In addition to solicitations by mail,
directors, officers and other
22
employees of the Company may solicit proxies personally or by telephone without
additional compensation. The Company has retained Georgeson Shareholder
Communications, Inc., a proxy solicitation firm, to assist in the solicitation
of proxies for the Annual Meeting, for a fee of $7,500, plus out-of-pocket
expenses.
An additional copy of the Company's annual report on Form 10-K for the year
ended December 31, 2005, will be furnished without charge upon written or
telephonic request to Christopher J. Thome, Vice President, Reporting and
Investor Relations Manager, 6950 South Transit Road, P.O. Box 514, Lockport, New
York, 14095-0514 or call (716) 625-7645.
/s/ Robert N. Murphy
Robert N. Murphy
Corporate Secretary
Lockport, New York
March 29, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS Please
Please complete and date this proxy and return it promptly in the enclosed postage-paid envelope. Mark Here
for Address | |
Change or
Comments
SEE REVERSE SIDE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
FOR AGAINST ABSTAIN
1. The election as a director of the nominees 2. The ratification of the appointment of
listed below (except as marked to the KPMG LLP as independent accountants | | | | | |
contrary below) for a three-year term: for the year ending December 31, 2006.
Nominees: FOR WITHHELD Check Box if You Plan to Attend the Annual Meeting | |
--------
01 Paul J. Kolkmeyer | | | |
02 Daniel J. Hogarty, Jr.
03 James Miklinski
04 Sharon D. Randaccio
05 David M. Zebro
(INSTRUCTION: To withhold your vote for any individual nominee, write
that nominee's name on the space provided below.)
_____________________________________________________________________ Should the undersigned be present and elect to vote
at the Annual Meeting or at any adjournment thereof
and after notification to the Secretary of the
Company at the meeting of the stockholder's decision
to terminate this proxy, then the power of said
------| attorneys and proxies shall be deemed terminated and
| of no further force and effect. This proxy may also
| be revoked by sending written notice to the
| Secretary of the Company at the address set forth on
| the Notice of Annual Meeting of Stockholders, or by
the filing of a later dated proxy prior to a vote
being taken on a particular proposal at the Annual
Meeting.
The undersigned acknowledges receipt from the
Company prior to the execution of this proxy of a
Notice of the Annual Meeting of Stockholders and of
a Proxy Statement, dated March 29, 2006.
Signature ____________________________________ Signature _________________________________________ Date ____________________________
Please sign exactly as your name appears on this card. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should sign.
- ------------------------------------------------------------------------------------------------------------------------------------
/ \ FOLD AND DETACH HERE / \
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59
PM Eastern Time the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
- ------------------------------------ -------------------------------- -------------------
Internet Telephone (Toll-free) Mail
http://www.proxyvoting.com/fnfg 1-866-540-5760 Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy OR and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
- ------------------------------------ -------------------------------- -------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
FIRST NIAGARA FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2006
The undersigned hereby appoints the official proxy committee of the Board
of Directors of First Niagara Financial Group, Inc. (the "Company"), with full
powers of substitution, to act as attorneys and proxies for the undersigned to
vote all shares of common stock of the Company that the undersigned is entitled
to vote at the Annual Meeting of Stockholders ("Annual Meeting") to be held at
Banchetti Banquet Facility, 550 North French Road, Amherst, New York on May 16,
2006, at 11:00 a.m. The official proxy committee is authorized to cast all votes
to which the undersigned is entitled as follows:
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2. IF
ANY OTHER BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED
BY THE PROXY COMMITTEE IN ITS DISCRETION. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
(Continued, and to be signed, on the other side)
- --------------------------------------------------------------------------------
Address Change/Comments (Mark the corresponding box on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ \ FOLD AND DETACH HERE / \
You can now access your First Niagara Financial Group, Inc. account online.
Access your First Niagara Financial Group, Inc. stockholder account online via
Investor ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for First Niagara Financial Group,
Inc., now makes it easy and convenient to get current information on your
stockholder account.
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time