Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated statement of
condition at December 31, 2004 and unaudited pro forma condensed consolidated
statement of income for the year ended December 31, 2004 give effect to the
merger of Hudson River Bancorp, Inc. ("Hudson River") and First Niagara
Financial Group, Inc. ("First Niagara") completed on January 14, 2005 (the
"Merger"). The unaudited pro forma condensed consolidated financial statements
are based on the audited consolidated financial statements of First Niagara for
the year ended December 31, 2004 and the unaudited consolidated financial
statements of Hudson River for the twelve months ended September 30, 2004.
The unaudited pro forma condensed consolidated financial statements give
effect to the Merger using the purchase method of accounting under U.S.
generally accepted accounting principles. Indirect merger and integration
expenses, as well as cost savings and revenue enhancement opportunities that
have been or are expected to be incurred/realized by First Niagara are not
included in the pro forma statements.
The unaudited pro forma condensed consolidated financial statements are
provided for informational purposes only and are not indicative of the actual
results that would have occurred had the Merger been consummated on the date or
at the beginning of the period presented, and are not indicative of future
results. The unaudited pro forma financial information should be read in
conjunction with the audited consolidated financial statements and the notes
thereto of First Niagara and Hudson River.
The unaudited pro forma stockholders' equity and net income are qualified
by the statements set forth under this caption and should not be considered
indicative of the market value of First Niagara's common stock or the actual or
future results of operations of First Niagara for any period. Actual results may
be materially different from the pro forma information presented.
First Niagara Financial Group, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Condition
December 31, 2004
(In thousands)
First Niagara Hudson River Pro Forma
Financial Group Bancorp Acquisition Combined
Historical(1) Historical(1) Adjustments Pro Forma(1)
--------------- ------------- ----------- ------------
Assets:
Cash and cash equivalents $ 67,642 $ 46,048 $ -- $ 113,690
Securities available for sale 1,170,129 645,278 (57,795) (2) 1,757,612
Loans and leases, net 3,215,255 1,673,873 6,905 (3) 4,896,033
Goodwill 323,782 65,304 310,664 (2)(3) 699,750
Core deposit and other intangibles, net 21,878 4,534 31,487 (3) 57,899
Other assets 279,688 104,231 (6,220) (3) 377,699
----------- ----------- --------- -----------
Total assets $ 5,078,374 $ 2,539,268 $ 285,041 $ 7,902,683
=========== =========== ========= ===========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits $ 3,337,682 $ 1,816,074 $ 3,166 (3) $ 5,156,922
Borrowed funds 750,686 399,938 92,335 (2)(3) 1,242,959
Other liabilities 61,844 28,345 -- 90,189
----------- ----------- --------- -----------
Total liabilities 4,150,212 2,244,357 95,501 6,490,070
Stockholders' equity:
Common stock 843 357 -- (2)(4) 1,200
Additional paid-in capital 751,175 178,989 305,105 (2)(4) 1,235,269
Retained earnings 238,048 157,600 (157,600) (4) 238,048
Accumulated other comprehensive loss (5,437) (361) 361 (4) (5,437)
Common stock held by ESOP (29,275) (9,763) 9,763 (4) (29,275)
Unearned compensation - recognition and
retention plan (3,173) (2,803) 2,803 (4) (3,173)
Treasury stock (24,019) (29,108) 29,108 (4) (24,019)
----------- ----------- --------- -----------
Total stockholders' equity 928,162 294,911 189,540 1,412,613
----------- ----------- --------- -----------
Total liabilities and stockholders' equity $ 5,078,374 $ 2,539,268 $ 285,041 $ 7,902,683
=========== =========== ========= ===========
1. Assumes the Merger was completed on December 31, 2004 utilizing the
purchase method of accounting. Historical amounts for First Niagara and
Hudson River are as of December 31, 2004 and September 30, 2004,
respectively, which are the most recently reported amounts.
2. Assumes an aggregate Hudson River purchase price of $632.7 million
(including the payment for Hudson River outstanding shares, ESOP shares
and stock options) paid in stock (35.7 million shares valued at $13.552
(average closing price of First Niagara's common stock two days before and
after transaction announcement)) and cash ($126.8 million), funded by
securities available for sale and $80.0 million of borrowings, along with
direct costs of the merger of $21.4 million, primarily severance and
professional fees.
3. Represents adjustments to record the assets and liabilities of Hudson
River at fair value utilizing market rates as of the effective date of the
Merger (January 14, 2005), and include an increase in loans ($6.9
million), deposits ($3.2 million) and borrowings ($12.3 million) and a
decrease in value of other assets ($6.2 million) related to the deferred
income taxes on fair value adjustments and transaction costs. In addition,
estimated core deposit and other intangible assets ($36.0 million) were
recorded. The excess of consideration paid over the fair value of net
assets acquired was recorded as goodwill ($376.0 million) and can be
summarized as follows (In thousands):
First Niagara stock issued $ 484,451
Cash paid to Hudson River stockholders' 126,844
Direct transaction costs 21,426
---------
Total consideration paid $ 632,721
=========
Carrying value of Hudson River net assets
at September 30, 2004 $ 294,911
Less Hudson River goodwill
and other intangibles (69,838)
Repayment of Hudson River ESOP loan 10,475
Fair value adjustments (Dr./(Cr.))
Loans $ 6,905
Core deposit and other intangibles 36,021
Deposits (3,166)
Borrowings (12,335)
Deferred tax effect of adjustments
and transaction costs (40%) (6,220)
--------
Total fair value adjustments, net 21,205
---------
Fair value of net assets acquired
at September 30, 2004 $ 256,753
=========
Goodwill $ 375,968
=========
The above amounts are subject to adjustment but are not expected to be
materially different than those shown.
4. Adjustments represent the reversal of Hudson River stockholders' equity.
First Niagara Financial Group, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2004
(In thousands, except per share amounts)
First Niagara Hudson River Pro Forma
Financial Group Bancorp Acquisition Combined
Historical(1) Historical (1) Adjustments Pro Forma (1)
--------------- -------------- ----------- -------------
Interest income:
Loans and leases $ 190,100 $ 109,735 $ (2,762) (2) $ 297,073
Securities available for sale 33,621 22,371 1,391 (2)(3) 57,383
Other 857 1,323 -- 2,180
--------- --------- --------- ---------
Total interest income 224,578 133,429 (1,371) 356,636
Interest expense:
Deposits 41,950 21,859 (1,650) (2) 62,159
Borrowings 26,526 18,297 (1,028) (2)(4) 43,795
--------- --------- --------- ---------
Total interest expense 68,476 40,156 (2,678) 105,954
--------- --------- --------- ---------
Net interest income 156,102 93,273 1,307 250,682
Provision for credit losses 8,442 4,200 - 12,642
--------- --------- --------- ---------
Net interest income after provision for credit
losses 147,660 89,073 1,307 238,040
Noninterest income:
Banking services 19,818 8,509 -- (5) 28,327
Risk management services 17,391 4,335 -- (5) 21,726
Wealth management services 4,764 1,295 -- (5) 6,059
Lending and leasing 3,918 3,802 -- (5) 7,720
Other 5,975 2,543 -- (5) 8,518
--------- --------- --------- ---------
Total noninterest income 51,866 20,484 - 72,350
--------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits 65,264 32,440 -- (6) 97,704
Occupancy and equipment 12,513 9,194 -- (6) 21,707
Amortization of core deposit and other
intangibles 4,605 945 6,431 (2)(6) 11,981
Other 38,468 15,381 - (6) 53,849
--------- --------- --------- ---------
Total noninterest expense 120,850 (7) 57,960 (7) 6,431 185,241
--------- --------- --------- ---------
Income before income taxes 78,676 51,597 (5,124) 125,149
Income taxes 26,859 18,816 (2,050) (8) 43,625
--------- --------- --------- ---------
Net income $ 51,817 $ 32,781 $ (3,074) $ 81,524
========= ========= ========= =========
Earnings per share:
Basic $ 0.66 $ 0.71
Diluted 0.65 0.70
Weighted average common shares outstanding:
Basic 78,750 35,748 (9) 114,498
Diluted 79,970 35,748 (9) 115,718
1. Assumes the Merger was completed on January 1, 2004. Historical amounts
for First Niagara and Hudson River are for the twelve-month period ended
December 31, 2004 and September 30, 2004, respectively, which are the most
recently reported amounts.
2. Purchase accounting adjustments, representing market valuation premiums
and discounts attributable to the Merger, for loans and securities
available for sale are amortized using the double declining balance method
over their estimated lives while those related to deposits and borrowings
are amortized based upon their expected cash flows. The core deposit and
other intangible assets acquired are generally being amortized using the
double declining balance method over their useful-life of approximately 11
years. The estimated increase(decrease) on pre-tax income of these
purchase accounting adjustments for the five years succeeding the Merger
are as follows (in thousands):
Year 1 Year 2 Year 3 Year 4 Year 5 Total
-------- -------- -------- -------- -------- --------
Loans $ (2,762) $ (1,657) $ (994) $ (597) $ (895) $ (6,905)
Securities available for
sale 3,044 1,015 507 -- -- 4,566
Core deposit & other
intangibles (6,431) (5,330) (4,379) (3,597) (2,954) (22,691)
Deposits 1,650 1,021 495 -- -- 3,166
Borrowings 3,900 2,472 2,428 1,702 825 11,327
-------- -------- -------- -------- -------- --------
Total $ (599) $ (2,479) $ (1,943) $ (2,492) $ (3,024) $(10,537)
======== ======== ======== ======== ======== ========
3. Reflects the $1.7 million reduction in interest income resulting from the
decrease in earning assets due to the cash portion of the Merger purchase
price ($46.8 million) and the direct costs of the Merger ($21.4 million),
partially offset by the repayment of Hudson River's ESOP loan ($10.5
million). These funds were assumed to have a pre-tax rate of 2.86% for the
year ended December 31, 2004, which represents the actual yield earned on
First Niagara's investment securities during that period.
4. Reflects the $2.9 million increase in interest expense relating to the
$80.0 million of additional borrowings used to fund a portion of the
Merger purchase price. These funds were assumed to have a pre-tax rate of
3.59% for the year ended December 31, 2004, which represents the actual
yield on those borrowings.
5. Noninterest income does not reflect revenue enhancement opportunities.
6. Noninterest expense does not reflect anticipated cost savings.
7. Includes actual pre-tax merger and integration costs totaling $3.2 million
incurred by First Niagara and Hudson River in connection with the Merger.
8. Reflects the tax effect of the pro forma adjustments using First Niagara's
statutory tax rate of 40%.
9. Reflects the additional 35.7 million shares issued in connection with the
Merger.