First Niagara expands reach

CNY Business Journal (1996+), Jul 26, 2002 by Dickinson, Casey J

GENEVA - First Niagara Financial Group will eliminate its mutual holding company at the same time that it acquires Finger Lakes Bancorp. First Niagara Financial Group, Inc. plans a fall offering to sell the 62 percent of its stock currently held by its mutual holding company, and simultaneously acquire Finger Lakes Bancorp in a $67 million half-stock, half-cash deal.

Lockport-based First Niagara will pay $20 per share for Finger Lakes Bancorp, 170 percent of its book value at the time the transaction was announced. Under the Savings Bank of the Finger Lakes name, Finger Lakes Bancorp operates seven branches and nine ATMs in Geneva, Seneca Falls, Ithaca, Canandaigua, and Auburn. The acquisition will help fill the gap between the Western New York and Mohawk Valley branches of First Niagara's banks. The transaction is scheduled to close early next year.

"We're confident the Office of Thrift Supervision will look favorably on the transaction," said G. Thomas Bowers, chairman, president, and CEO of Finger Lakes Bancorp. Bowers and First Niagara officials answered questions about the deal during a July 22 conference call.

First Niagara will become a fully publicly traded company, says William E. Swan, chairman, president, and CEO of First Niagara Financial Group, Inc.

Funds from the sale of the 62 percent ownership of First Niagara held by the mutual holding company will provide capital to finance further acquisitions, he adds. First Niagara has a market capitalization of approximately $710 million. A 1998 stock sale raised $135 million for First Niagara. NASDAQ recently added First Niagara to its Financial 100 index of financial-services stocks.

Further acquisitions, says Swan could be within the bank's current footprint or in other areas such as Pennsylvania.

"We will continue to be acquisition minded," he adds.

The former Lockport Savings Bank acquired Cortland Savings Bank and Cayuga Bank two years ago. The service area from the Niagara Frontier to the Mohawk Valley - has several gaps in branch coverage, including Elmira and Syracuse. The Finger Lakes acquisition will give First Niagara a branch in the Ithaca market, as well as close gaps in Ontario and Seneca counties. First Niagara will build some new branches in areas where acquisitions are not feasible. The bank has opened six new branches since 1999.

All three acquired banks will change to the First Niagara name later this year, pending regulatory and shareholder approval. First Niagara has also put its brand on its five nonbanking subsidiaries. First Niagara has insurance, insurance adjusting, equipment leasing, investment advisory, and benefitadministration subsidiaries.

The transaction will result in the closure of one Finger Lakes branch in Auburn, says Swan. First Niagara will offer that branch's workers other employment within the company. The company plans to make further job cuts to eliminate some support and administrative positions at Finger Lakes while retaining customer-service personnel. First Niagara estimates it will cut $4.25 million in expenses in the two years after the transaction closes. The bank will take $6.2 million in after-tax charges related to merger costs.

First Niagara Financial Group operates 39 branches and 75 ATMs from Oneida County to Erie County. As of June 30, the group had assets of $2.9 billion and 100 employees. Finger Lakes Bancorp has assets of $387.8 million and employs 100.