SCHEDULE 14-A 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:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Niagara Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
John J. Gorman, Luse Lehman Gorman Pomerenk and Shick
(202) 274-2000
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),14a-6(i)(1),or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
.......................................................................
[ ] 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: Niagara Bancorp, Inc.
4) Date Filed: March 17, 2000
<PAGE>
Niagara Bancorp, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
March 27, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Niagara Bancorp, Inc. (the "Company"). The Annual Meeting will
be held at the Pendleton House, 6886 South Transit Road, Pendleton, New York, on
Tuesday, May 2, 2000 at 10:00 a.m., Eastern Standard Time.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted. During the Annual Meeting we will also report
on the operations of the Company and First Niagara Bank (formerly Lockport
Savings Bank) (the "Bank"), the Company's wholly-owned subsidiary. Directors and
officers of the Company will be present to respond to questions that
stockholders may have. Also enclosed for your review is our Annual Report and
Form 10-K to Stockholders, 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 four directors, the approval of an amendment to the Company's
certificate of incorporation to change our name to First Niagara Financial
Group, Inc., and the ratification of the appointment of independent auditors for
the year ending December 31, 2000. In addition, a shareholder proposal has been
submitted for consideration by stockholders. For the reasons set forth in the
Proxy Statement, the Board of Directors of the Company has determined that the
matters to be considered at the Annual Meeting are in the best interest of the
Company and its stockholders, and the Board of Directors unanimously recommends
a vote "FOR" the election of directors, "FOR" the amendment to the Company's
Certificate of Incorporation, and "FOR" the ratification of the appointment of
KPMG LLP as the Company's Auditors. The Board of Directors recommends a vote
"AGAINST" the stockholder proposal.
On behalf of the Board of Directors, we urge you to sign, date and
return the enclosed proxy card as soon as possible, 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 if you are unable to attend the
meeting. Your vote is important, regardless of the number of shares that you
own.
Sincerely,
William E. Swan
President and Chief Executive Officer
<PAGE>
Niagara Bancorp, 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 2, 2000
Notice is hereby given that the Annual Meeting of Niagara Bancorp, Inc.
(the "Company" or "Niagara Bancorp") will be held at the Pendleton House, 6886
South Transit Road, Pendleton, New York, on May 2, 2000 at 10:00 a.m., Eastern
Standard Time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of four directors;
2. The approval of an amendment to the Company's Certificate of
Incorporation to change the name of the Company to First
Niagara Financial Group, Inc.;
3. The ratification of the appointment of KPMG LLP as auditors
for the Company for the year ending December 31, 2000;
4. A stockholder proposal to take necessary steps to achieve a
sale or merger of the Company; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on date or dates to which the Annual
Meeting may be adjourned. Stockholders of record at the close of business on
March 22, 2000, are the stockholders entitled to vote at the Annual Meeting, and
any adjournments thereof. A list of stockholders entitled to vote at the Annual
Meeting 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 meeting itself.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
March 23, 2000 Robert N. Murphy
Lockport, New York Corporate Secretary
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
Niagara Bancorp, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
ANNUAL MEETING OF STOCKHOLDERS
May 2, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Niagara Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"), which will be held at the Pendleton House, 6886 South Transit
Road, Pendleton, New York, on May 2, 2000, at 10:00 a.m., Eastern Standard Time,
and all adjournments of the Annual Meeting. The accompanying Notice of Annual
Meeting of Stockholders and this Proxy Statement are first being mailed to
stockholders on or about March 30, 2000.
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REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
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 of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, validly executed proxies will be voted "FOR"
Proposal 1, Proposal 2 and Proposal 3 and "AGAINST" Proposal 4 set forth in this
proxy statement for consideration at the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
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 record holder to vote personally at the
Annual Meeting.
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VOTING SECURITIES
- --------------------------------------------------------------------------------
Holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock") as of the close of business on March 22, 2000 (the
"Record Date") are entitled to one vote for each share then held, except as
described below. As of the Record Date, the Company had 26,298,900 shares of
Common Stock issued and outstanding (exclusive of Treasury shares). The
presence, in person or by proxy, of at least a majority of the total number of
shares of Common Stock outstanding and 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
1
<PAGE>
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 Company's Certificate of
Incorporation, 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 of Directors (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. This Limit does not apply to shares of Common Stock held by
Niagara Bancorp, MHC.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
- --------------------------------------------------------------------------------
As to the election of Directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote FOR the election of the four
nominees proposed by the Board, or to 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.
As to the approval of the amendment to the Company's Certificate of
Incorporation, by checking the appropriate box, a stockholder may: (i) vote FOR
the item; (ii) vote AGAINST the item; or (iii) ABSTAIN from voting on such item.
Under the Company's Certificate of Incorporation and Bylaws, the approval of
this matter shall be determined by a majority of votes cast, without regard to
broker non-votes or proxies marked "ABSTAIN."
As to the ratification of KPMG LLP as independent auditors of the
Company, by checking the appropriate box, a stockholder may: (i) vote FOR the
item; (ii) vote AGAINST the item; or (iii) 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."
As to the approval of the Shareholder proposal, by checking the
appropriate box, a stockholder may: (i) vote FOR the item; (ii) vote AGAINST the
item; or (iii) 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 the Company, and will be
tabulated by inspectors of election designated by the Board.
2
<PAGE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- --------------------------------------------------------------------------------
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 the March 22, 2000, the shares of Common Stock beneficially
owned by persons who beneficially own more than five percent of the Company's
outstanding shares of Common Stock, including shares owned by Niagara Bancorp,
MHC and its directors and executive officers.
<TABLE>
<CAPTION>
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership Outstanding
<S> <C> <C>
Niagara Bancorp, MHC %
6950 S. Transit Road
Lockport, New York 14094
Niagara Bancorp, MHC %
and all Directors and Executive Officers
as a Group (19 persons)(1)
</TABLE>
- -----------------
(1) The Company's executive officers and directors (except Barton G. Smith) are
also executive officers and directors of the Mutual Holding Company.
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PROPOSAL I - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors is currently composed of eleven
members. The Company's Bylaws provide that approximately one-third of the
Directors are to be elected annually. Directors of the Company are generally
elected to serve for a three-year period or until their respective successors
shall have been elected and shall qualify. Each of the Directors of the Company
also serves on the board of directors of the Bank. Four Directors will be
elected at the Company's Annual Meeting of Stockholders to serve for a
three-year period and until their respective successors shall have been elected
and shall qualify. The Board of Directors has nominated Ms. Caldwell and Messrs.
Fitch, Judge and Miklinski for election as Directors.
The following table sets forth certain information, as of March 22,
2000, regarding members of the Company's Board of Directors, including the terms
of office of Board members. It is intended that the proxies solicited on behalf
of the Board of Directors (other than proxies in which the vote is withheld as
to the nominees) will be voted at the Meeting for the election of the nominees
identified below. 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
of Directors may recommend. At this time, the Board of Directors knows of no
reason why the nominees might be unable to serve, if elected.
3
<PAGE>
Except as indicated herein, there are no arrangements or understandings between
the nominees and any other person pursuant to which such nominees were selected.
<TABLE>
<CAPTION>
Shares
Position(s) Held With Director Expiration BeneficiallyPercent of
Name the Company Age Since(1) ofTerm Owned(2) Class
- ---------------------- ---------------------- ----------- ----------- ----------- ----------- -----------
NOMINEES
<S> <C> <C> <C> <C> <C>
Christa R. Caldwell Director 65 1986 2003 *
Gary B. Fitch Director 64 1981 2003 *
Daniel W. Judge Director 57 1992 2003 *
James Miklinski Director 56 1996 2003 *
DIRECTORS CONTINUING IN OFFICE
Gordon P. Assad Director 51 1995 2001 *
Barton G. Smith Director 69 1986 2001(3) *
William E. Swan President, Chief Executive 52 1996 2001 *
Officer and Director
James W. Currie Director 58 1987 2002 *
David W. Heinrich Chairman 63 1969 2002 *
B. Thomas Mancuso Director 44 1990 2002 *
Robert G. Weber Director 62 1996 2002
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Paul J. Kolkmeyer Executive Vice President 47 N/A N/A *
and Chief Financial Officer
Kathleen P. Monti Senior Vice President 51 N/A N/A *
G. Gary Berner Senior Vice President 52 N/A N/A *
Diane Allegro Senior Vice President 44 N/A N/A *
All directors and executive
officers as a group (19 persons) - - - - %
</TABLE>
- ----------------------------------
* Less than 1%
(1) Reflects initial appointment to the Board of Directors of First Niagara Bank
or its predecessors.
(2) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported. (3)
Includes 20,000 shares in which Mr. Smith's spouse exercises sole voting and
dispositive power.
The business experience for the past five years for each of the
Company's directors and executive officers is as follows:
Gordon P. Assad is the President and Chief Executive Officer of Erie &
Niagara Insurance Association and has served in that position since 1972.
Christa R. Caldwell is retired and was the director of the Lockport
Public Library from 1967 to 1996.
James W. Currie is the President of Ag Pak, Inc., a manufacturer of
produce packaging machines, and has served in that position since 1974.
4
<PAGE>
Gary B. Fitch is the Owner-Manager of Ontario Orchards, Inc., and has
served in that position since 1976. Mr. Fitch also serves as the Executive
Secretary of Agricultural Affiliates, Inc. and has served in that position since
1991.
David W. Heinrich retired in 1998 as the President of Heinrich Chevrolet
Corp.
Daniel W. Judge is the President and Chief Executive Officer of I.D. ONE,
Inc., a purchasing and marketing cooperative of independent industrial
distributors, and has served in that position since 1996. Mr. Judge served as
the Executive Director of I.D. ONE, Inc. from 1993 to 1996.
B. Thomas Mancuso is the President of Joseph L. Mancuso & Sons, Inc., a
real estate development company.
James Miklinski is the General Manager of Niagara Milk Cooperative, and has
served in that position since 1990.
Barton G. Smith is retired from Paul Garrick, Inc., an insurance agency.
William E. Swan is the President and Chief Executive Officer of the Bank,
and has served in that position since 1989.
Robert G. Weber is a retired Buffalo Office Managing Partner of KPMG LLP
where he served from 1959 to 1995.
Executive Officers of the Bank Who Are Not Directors
Paul J. Kolkmeyer has served as Executive Vice President and Chief
Financial Officer of the Bank since 1995. From 1990 to 1995, Mr. Kolkmeyer
served as Senior Vice President and Chief Financial Officer of the Bank.
Kathleen P. Monti has served as Executive Vice President of Human
Resources and Administration of the Bank since 1995. From 1993 to 1995 Ms. Monti
served as Vice President of Human Resources of the Bank.
G. Gary Berner has served as Senior Vice President and Chief Lending
Officer of the Bank since 1992.
Diane Allegro has been Senior Vice President of Retail Banking since
October 1997. From 1994 to October 1997, she was Vice President-Retail Sales &
Delivery Systems at Rochester Community Savings Bank.
5
<PAGE>
Meetings of the Board and Committees of the Board
The Board of Directors of Niagara Bancorp meets quarterly, or more
often as may be necessary. The Board of Directors of the Company has an audit
committee, an executive committee and a compensation committee. The Bank
maintains a loan committee, audit committee, finance and investment committee
and compensation committee.
The Board of Directors of the Company met nine times and the Board of
Directors of the Bank met twelve times during 1999. 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 1999.
The executive committee consists of Directors Heinrich, Swan, Assad,
Judge and Weber. The executive committee meets as necessary when the Board is
not in session to exercise general control and supervision in all matters
pertaining to the interests of Niagara Bancorp, subject at all times to the
direction of the Board of Directors. The executive committee met ten times in
1999.
The nominating committee consists of Directors Miklinski, Caldwell,
Fitch, Heinrich and Smith. The nominating committee meets for the purpose of
identifying, evaluating and recommending potential candidates for election to
the Board. While the committee will consider nominees recommended by
stockholders, it has not actively solicited recommendations from stockholders.
Nominations by stockholders must comply with certain procedural and
informational requirements set forth in the Company's Bylaws. See "Advance
Notice of Business to be Conducted at an Annual Meeting." The nominating
committee met two times in 1999.
The audit committee consists of Directors Weber, Currie, Mancuso,
Miklinski and Heinrich. The audit committee meets at least quarterly to examine
and approve the audit report prepared by the independent auditors of the Bank,
to review and recommend the independent auditors to be engaged by Niagara
Bancorp, to review the internal audit function and internal accounting controls
of Niagara Bancorp, and to review and approve audit policies. The audit
committee met four times in 1999.
The compensation committee consists of Directors Heinrich, Assad, Judge
and Weber. This committee reviews and administers compensation, officer
promotions, benefits and other matters of personnel policy and practice. The
compensation committee met eleven times during fiscal 1999.
Compensation of Directors
Fees. Directors of the Bank receive a retainer fee of $12,000 ($17,000
for the Chairman), plus a fee of $700 per board meeting attended and $400 per
meeting for attendance at committee meetings. Directors who are also employees
of the Bank are not eligible to receive board fees. Directors of the Company
receive an annual retainer fee of $5,000 and a fee of $400 per meeting for
attendance at board and committee meetings.
6
<PAGE>
Deferred Fees Plan. The Directors' Deferred Fees Plan ("Deferred Fee
Plan") is a non-qualified deferred compensation plan into which a director can
defer up to 100% of his or her board retainer and fees earned during the
calendar year. All amounts deferred by a Director are fully vested at all times.
Amounts credited to a deferred fee account are invested in equity securities,
fixed income securities, money market accounts, and cash, at the sole discretion
of the Bank. Upon cessation of a Director's service with the Bank, the Bank 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 the Director dies before all payments have been made, the remaining
payments will be made to the Director's designated beneficiary. In the event of
the Director's death prior to commencement of benefits, the Bank shall pay the
director's beneficiary the amounts credited to the benefit of the Director under
the Deferred Fee 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 which
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.
Stock Option Plan and Recognition and Retention Plan. The Stock Option
Plan and Recognition and Retention Plan ("RRP") was adopted by the Board of
Directors of the Company and subsequently approved by the Company's shareholders
at the adjourned annual meeting held on May 18, 1999 (the "1999 Annual
Meeting"). On May 20, 1999, the effective date of the Option Plan, each Outside
Director of the Company and the Bank was granted a non-qualified stock option to
purchase 27, 300 shares of Common Stock. These options are scheduled to vest at
the rate of 20% per year over a five-year period and will become immediately
exercisable upon the director's death or disability. Similarly, on May 20, 1999,
the effective date of the RRP, restricted stock awards were granted to each
director with respect to 6,700 shares of Common Stock. These awards are also
scheduled to vest in 20% increments over a five-year period beginning on May 20,
2000, except that the awards for Mr. Smith and Mrs. Calwell will vest 100% at
his or her age 70, respectively, with accelerated vesting to occur in the event
of the director's death or disability.
Executive Compensation
The following table sets forth for the three years ended December 31,
1999, 1998 and 1997, certain information as to the total remuneration paid by
the Bank to the Chief Executive Officer as well as the four most highly
compensated executive officers other than the Chief Executive Officer who
received total annual compensation in excess of $100,000 (the "Named Executive
Officers").
7
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Year Annual Restricted Options/ All Other
Name and Ended Compensation Stock SARS LTIP Compensation
Principal Position 12/31 Salary Bonus(1) (2) Awards$ (#) Payouts (4)
- ---------------------- ------- ----------- --------- --------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Swan 1999 $ 329,002 $133,575 -- $483,750(3) 182,000 -- $87,167
President and Chief 1998 317,001 87,452 -- -- -- -- 82,242
Executive Officer 1997 287,332 98,696 -- -- -- -- 79,994
Paul J. Kolkmeyer 1999 165,369 55,961 -- 241,875(3) 91,000 -- 44,613
Executive Vice President 1998 157,963 68,167 -- -- -- -- 41,811
and Chief Financial Officer1997 144,966 41,381 -- -- -- -- 39,974
Kathleen P. Monti 1999 125,674 34,438 -- 172,000(3) 65,000 -- 36,506
Executive Vice President 1998 115,753 27,404 -- -- -- -- 34,904
1997 95,001 29,287 -- -- -- -- 32,879
G. Gary Berner 1999 144,809 39,678 -- 161,250(3) 61,750 -- 44,256
Senior Vice President 1998 138,750 33,148 -- -- -- -- 42,275
1997 119,025 36,151 -- -- -- -- 40,113
Diane Allegro 1999 111,877 30,654 -- 150,500(3) 55,250 -- 5,478
Senior Vice President 1998 106,859 32,527 -- -- -- -- 1,865
</TABLE>
- ------------------
(1) Includes payments under the Bank's Management Incentive Program and other
discretionary payments.
(2) The Bank also provides certain members of senior management with the use of
an automobile, club membership dues, and certain other personal benefits.
Except in 1996 as to Ms. Monti, the aggregate value of such personal
benefits did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each officer.
(3) Amounts reported in this column represent the fair value of the restricted
stock awards at the date fo the award. All shares are unvested a December
31, 1999. Awards granted in 1999 vest over five years. Dividends paid with
respect to all shares awarded are paid to the recipient of the award.
(4) Includes the following: the Bank's contributions pursuant to the 401(k)
Plan of $4,800, $4,800, $4,800, $4,464 and $4,011 with respect to Messrs.
Swan, Kolkmeyer and Berner, Ms. Monti and Allegro, respectively; $38,414,
$16,183, $15,884, and $11,957 credited to the account of Messrs. Swan,
Kolkmeyer and Berner and Ms. Monti, respectively, pursuant to the
non-qualified deferred compensation plan; split dollar life insurance
premiums paid by the Bank of $39,750, $19,875, $19,875, and $19,875 with
respect to Messrs. Swan, Kolkmeyer and Berner and Ms. Monti; income imputed
on group term life insurance in excess of $50,000 per employee of $843,
$395, $346, $300 and $267 with respect to Messrs. Swan, Kolkmeyer and
Berner, Ms. Monti and Allegro; and $3,360, $3,360, $3,360 and $1,200 for
Messrs. Swan, Kolkmeyer and Berner and Ms Allegro, respectively, relating
to medical insurance premiums.
Report of the Compensation Committee on Executive Compensation
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to its Chief Executive Officer and other executive officers. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation decisions
affecting those individuals. The Chief Executive Officer and other executive
officers have not received compensation from the Company. Consequently, the
compensation discussed in the Compensation Committee Report relates to that
provided by the Bank.
The Compensation Committee annually reviews and recommends changes to
the compensation levels of the executive officers to the Board of Directors.
Since the Company's
8
<PAGE>
conversion to a stock company, the Compensation Committee has begun a process to
revise the compensation program to better reflect the Company's public status.
It is intended that the new executive compensation program will enable the
Company and the Bank to attract, develop and retain strong executive officers
who are capable of maximizing the Company's performance for the benefit of the
shareholders. The Committee has adopted a compensation strategy that seeks to
provide competitive compensation that is strongly aligned with the financial and
stock performance of the institution. The compensation program has three key
elements: base salary, annual incentives and long-term incentives.
In 1999, an independent review of the competitiveness of the total
compensation of the executive group was conducted by a nationally recognized
compensation consulting firm. Compensation levels were compared to other
comparably sized national and regional community banks. The review determined
that base salaries and combined base salaries and the combination of base
salaries and cash incentives approximated median levels provided by similarly
situated community banking companies.
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, contribution to the long-term goals of the Company,
and recent results. Each of the named executive officers is a party to an
employment agreement with the Bank providing for a minimum base salary, which
may be increased, but not decreased. Payouts under the annual incentive plan
(the management incentive plan, or "MIP") are determined by return on equity
performance relative to other similarly situated companies. Individual payouts
are a function of the Company's financial performance and the performance of the
individual executive. The Committee believes that this funding formula provides
a direct link between financial performance and actual compensation. The range
in incentive opportunities under the MIP for executives and all other officers
reflect opportunities slightly below the median of those provided for similar
positions by similarly situated community banks.
On May 18, 1999, the Company's shareholders adopted the 1999 Option
Plan and 1999 Recognition and Retention Plan for outside directors, executives
and other employees. Awards of stock options and restricted stock were made to
the executive officers at that time. The options are exercisable and the shares
vest at the rate of 20% per year over a five-year period. The Committee believes
that long-term incentives are the most effective way of aligning executive
rewards with the creation of value for the shareholders through stock
appreciation. Future awards will be dependent on the Company and individual
performance, as well as competitive market conditions.
In making determinations as to Mr. Swan's compensation, the Committee
is operating under the terms of the previously disclosed employment agreement
between Mr. Swan and the Company. Mr. Swan's base salary was increased to
$330,000 in 1999 and he was provided a cash bonus of $133,575. Mr. Swan's bonus
was provided under the terms of the MIP. During fiscal 1999, and as identified
in the Summary Compensation Table, Mr. Swan was granted 182,000 stock options
and 45,000 restricted shares under the Recognition and Retention Plan. The
Compensation Committee determined these awards based on: a study of other
comparable institutions, its philosophy on the
9
<PAGE>
importance of emphasizing equity participation, and its evaluation of the CEO's
long-term contribution to the Company's performance. The Committee took these
actions to recognize the CEO's accomplishments in successfully building an
institution and management team capable of becoming a public company and his
ability to manage the ongoing transition and future direction of the Company.
<TABLE>
<CAPTION>
The Compensation Committee
<S> <C>
Gordon P. Assad David W. Heinrich
Daniel W. Judge Robert G. Weber
</TABLE>
Stock Performance Graph
Set forth hereunder is a stock performance graph comparing (a) the
cumulative total return on the Common Stock for the period beginning with the
last trade of the Company's stock on April 20, 1998, as reported by the Nasdaq
National Market, through December 31, 1999, (b) the cumulative total return on
stocks included in the Nasdaq Composite Index over such period, and (c) the
cumulative total return of publicly traded thrifts or thrift holding companies
in the mutual holding company structure over such period. Cumulative return
assumes the reinvestment of dividends, and is expressed in dollars based on an
assumed investment of $100.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4/20/98 6/30/98 12/31/98 6/30/99 12/31/99
<S> <C> <C> <C> <C> <C>
Niagara Bancorp, Inc. 100.00 90.42 63.20 66.03 64.07
NASDAQ - Total US 100.00 93.41 79.32 80.85 68.22
MHC Thrifts 100.00 87.43 62.56 63.63 55.64
</TABLE>
Employment Agreements
The Bank has entered into employment agreements with each of the Named
Executive Officers. The employment agreements have terms ranging from
twenty-four to thirty-six months. On each anniversary date, an employment
agreement may be extended for an additional twelve months, so that the remaining
term shall be from twelve to thirty-six months. If the agreement is not renewed,
the agreement will expire at the end of its term. Under the employment
agreements, the 2000 Base Salary for Messrs. Swan, Kolkmeyer, Berner and for Ms.
Monti and Ms. Allegro is $330,000, $182,000, $153,000, $138,000, and $120,000,
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 the Base Salary and bonus, the employment
agreements provide for, among other things, participation in retirement plans
and other employee and fringe benefits applicable to executive personnel. The
agreements provide for termination by the Bank for cause at any time. In the
event the Bank involuntarily terminates the executive's employment for reasons
other than for cause, the executive, or in the event of death, his or her
beneficiary would be entitled to severance pay in an amount equal to three times
Base Salary (in the case of Messrs. Swan and Kolkmeyer), two times Base Salary
(in the case of Mr. Berner, Ms. Monti and Ms. Allegro). For these purposes,
involuntary termination includes a constructive termination where the Bank (i)
fails to appoint or reappoint the executive to his or her present position, (ii)
materially changes the executive's functions, duties or responsibilities, which
change would cause the executive's position to become one of lesser
responsibility, importance or scope, (iii) relocates the executive's place of
employment by more than 100 miles, (iv) liquidates or dissolves other than in
connection with a Reorganization that does not affect the executive's status, or
(v) a breach of the employment agreement. The Bank will also continue the
executive's health coverage through the remaining term of the employment
agreement. In the event the payments to the executive would include an "excess
parachute payment" as defined by Code Section 280G (relating to payments made in
connection with a change in control), the payments would be reduced in order to
avoid having an excess parachute payment.
In the event of an executive's death while employed during the term of
an employment agreement, the Bank will pay the executive's estate the
executive's salary through the end of the calendar month in which the executive
dies. If the executive becomes disabled (as defined in the Bank's disability
plan), the employment agreement will remain in effect through the term of the
agreement, except that the executive's salary payments will be reduced by any
disability insurance payments made to the executive.
Deferred Compensation Plan
The Bank has adopted the First Niagara Bank Deferred Compensation Plan
("Non-qualified Plan") for the benefit of certain senior executives of the Bank
that it has designated to participate in the plan. Under the Non-qualified Plan,
the Bank annually credits an executive's deferred compensation account with an
amount determined in the sole discretion of the Board. The amounts
10
<PAGE>
credited to the executive's deferred compensation account are annually credited
with earnings, at a rate determined in the sole discretion of the Board. An
executive will vest in amounts credited to his account at the rate of 20% per
year, beginning in the sixth year of participation in the Nonqualified Plan
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 Bank measured from the date that an
executive becomes a participant under the Plan. Notwithstanding the above, an
executive shall be fully vested in his deferred compensation account upon
attaining age 60 with five years of participation or in the event of a change in
control of the Bank. 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 Bank 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 Bank 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 Non-qualified Plan. In the event of an unforeseeable
emergency which will result in a severe financial hardship, the executive may
request a distribution of all or part of his benefits or may request an
acceleration of benefits that are being paid to him, as applicable.
Messrs. Swan, Kolkmeyer, and Berner and Ms. Monti are participants in the
Non-qualified Plan. For the year ended December 31, 1999, Messrs. Swan,
Kolkmeyer, and Berner, and Ms. Monti, had $38,414, $16,813, $15,884 and $11,957,
respectively, credited to their deferred compensation accounts.
Defined Benefit Pension Plan
The Bank maintains the Retirement Plan of First Niagara Bank in RSI
Retirement Trust ("Retirement Plan") which is a qualified, tax-exempt defined
benefit plan. Employees age 21 or older who have worked at the Bank for a period
of one year and have been credited with 1,000 or more hours of service with the
Bank during the year are eligible to accrue benefits under the Retirement Plan,
provided, however that leased employees, employees paid on a contract basis, and
employees employed off-site in connection with the operation or maintenance of
properties acquired through foreclosure or deed are not eligible to participate.
The Bank contributes each year, if necessary, an amount to the Retirement Plan
to satisfy the actuarially determined minimum funding requirements in accordance
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
For the plan year ended September 30, 1999, no contribution was required to be
made by the Bank to the Retirement Plan. At September 30, 1999, the market value
of the Retirement Plan trust fund equaled approximately $10.3 million.
In the event of retirement at normal retirement age (i.e., the later of
age 65 or the 5th anniversary of participation in the Retirement Plan), the plan
is designed to provide a single life
11
<PAGE>
annuity. For a married participant, the normal form of benefit is an actuarially
reduced joint and survivor annuity where, upon the participant's death, the
participant's spouse is entitled to receive a benefit equal to 50% of that paid
during the participant's lifetime. Alternatively, a participant may elect (with
proper spousal consent, if necessary) a joint and 100% survivor annuity, or an
annuity payable for a period certain and life. All forms in which a
participant's benefit may be paid will be actuarially equivalent to the single
life annuity. The retirement benefit provided is an amount equal to (a) 2% of a
participant's average annual earnings multiplied by credited service prior to
April 1, 1998 plus (b) 1.25% of a participant's average annual earnings
multiplied by the participant's years of credited service thereafter, up to a
maximum of 30 years. Retirement benefits are also payable upon retirement due to
early and late retirement or death. A reduced benefit is payable upon early
retirement at age 60, at or after age 55 and the completion of 20 years of
vested service with the Bank, or after completion of 30 years of vested service.
Upon termination of employment other than as specified above, a participant who
has five years of vested service after age 18 is eligible to receive his or her
accrued benefit commencing, generally, on such participant's normal retirement
date.
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in calendar year
1999, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
<TABLE>
<CAPTION>
Final
Average Years of Service and Benefit Payable at Retirement
Compensation 15 20 25 30
<S> <C> <C> <C> <C>
$50,000 $ 14,344 $ 19,344 $ 24,344 $ 29,344
$75,000 $ 21,516 $ 29,016 $ 36,516 $ 44,016
$100,000 $ 28,688 $ 38,688 $ 48,688 $ 58,688
$125,000 $ 35,859 $ 48,359 $ 60,859 $ 73,359
$160,000 and above $ 45,900 $ 61,900 $ 77,900 $ 93,900
$170,000 and above $ 48,769 $ 65,769 $ 82,769 $ 99,769
</TABLE>
As of December 31, 1999, Messrs. Swan, Kolkmeyer and Berner, and Ms. Monti
and Allegro, had 12, 9, 8, 6 and 2 years of credited service (i.e., benefit
service) under the Retirement Plan, respectively.
Stock Option Plan. The Board of Directors of the Company has adopted the
Niagara Bancorp, Inc. 1999 Stock Option Plan for outside directors, offices and
employees which was approved by shareholders at the 1999 Annual Meeting.
Recognition and Retention Plan. The Board of Directors of the Company has
adopted the Niagara Bancorp, Inc. 1999 Recognition and Retention Plan for
outside directors, officers and employees which was approved by shareholders at
the 1999 Annual Meeting.
12
<PAGE>
Set forth in the table that follows is information relating to options
granted under the stock option plan to the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
=============================================================================================================================
Individual Grants
Percent of Total
Options Granted Grant Date Present
to Employees in Exercise or Expiration Value (1)
Name Options Granted FY 1999 Base Price Date
<S> <C> <C> <C> <C> <C>
William E. Swan 182,000 35.2% $10.75 5/20/09 $
Paul J. Kolkmeyer 91,000 17.6% $10.75 5/20/09 $
Kathleen P. Monti 65,000 12.6% $10.75 5/20/09 $
G. Gary Berner 61,750 11.9% $10.75 5/20/09 $
Diane Allegro 55,250 10.7% $10.75 5/20/09 $
=========================== ================= =================== ============= ============== ========================
</TABLE>
- -----------------------------------
(1) The grant date present value was derived using the Black-Scholes option
pricing model with the following assumptions: volatility of _____%;
risk free rate of return of _____%; dividend yield of _____%; and a
______ year option life.
Set forth below is certain information concerning options outstanding
to the Named Executive Officers at December 31, 1999, and the options exercised
by the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
=========================================================================================================================
Number of Unexercised Value of Unexercised In-
Options at The-Money Options at
Shares Acquired Value Year-End Year-End (1)
Name Upon Exercise Realized
Exercisable/Unexercisable Exercisable/Unexercisable
(#) ($)
<S> <C> <C> <C> <C>
William E. Swan............ 0 $-- 0/182,000 $0/$1,865,500
Paul J. Kolkmeyer.......... 0 $-- 0/91,000 $0/$932,750
Kathleen P. Monti.......... 0 $-- 0/65,000 $0/$666,250
G. Gary Berner............. 0 $-- 0/61,750 $0/$632,938
Diane Allegro.............. 0 $-- 0/55,250 $0/$566,313
=========================== ================= ================= ========================== ==========================
</TABLE>
- ------------------------------------
(1) Equals the difference between the aggregate exercise price of such
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, 1999, at which date the last trade price of
the Common Stock as quoted on the Nasdaq National Market was $10.25.
13
<PAGE>
Ownership Reports by Officers and Directors
The Common Stock of the Company 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 Company's 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 Company's Common Stock to file a Form 3, 4, or 5
on a timely basis. All of the Company's officers and Directors filed these
reports on a timely basis.
Transactions With Certain Related Persons
Federal law and regulation generally requires 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, recent regulations now permit executive officers
and directors to receive the same terms through benefit or compensation plans
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, the Bank has extended loans
to Directors Judge, Mancuso, Weber and President Swan, Executive Vice President
Kolkmeyer and Executive Vice President Monti.
Set forth below is certain information as to loans made by the Bank to
certain of its directors and executive officers, or their affiliates, whose
aggregate indebtedness to the Bank exceeded $60,000 at any time since January 1,
1999. Unless otherwise indicated, all of the loans are secured loans and all
loans designated as residential loans are first mortgage loans secured by the
borrower's principal place of residence. [Update]
<TABLE>
<CAPTION>
Highest
Original Balance Balance as of Interest Rate on
Date Loan During December 31, December 31,
Name of Individual Loan Type Originated Amount 1999 1999 1999
------------------- --------- ---------- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
David W. Heinrich Residential 7/99 $127,500 $127,500 125,442 5.50%
Chairman
Daniel W. Judge Residential 6/98 $120,000 $117,956 $113,514 5.875%
Director
B. Thomas Mancuso Residential 5/98 $150,000 $147,445 $141,893 5.875%
Director
Robert G. Weber Residential 12/98 $100,000 $100,000 $100,000 5.625%
Director
Home Equity Line of 12/98 $ 60,000 $ 50,036 $ - 8.50%
Credit
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
William E. Swan
President and Chief Residential 12/98 $450,000 $ 450,000 $439,434 5.625%
Executive Officer
Paul J. Kolkmeyer Residential 5/93 $185,000 $133,658 $120,824 6.125%
Executive Vice President
and Chief Financial Home Equity Line of 12/98 $ 50,000 $ 15,415 $ 9,779 9.50%
Officer Credit
Kathleen P. Monti Residential 4/98 $163,000 $159,110 $151,173 5.75%
Executive Vice
President, Human Home Equity Line of 5/99 5,000 - - 14.25%
Resources and Credit
Administration
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL II - APPROVAL OF THE
AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF NIAGARA BANCORP
TO CHANGE THE NAME TO FIRST NIAGARA FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------
Effective February __, 2000, the Company's wholly-owned savings bank
subsidiary changed its name from Lockport Savings Bank to First Niagara Bank.
During the past eighteen months, the Bank has expanded into the insurance,
leasing and third party benefits administration through several acquisitions.
The Company has announced two acquisitions of savings institutions, the most
recent of which, Cortland Savings Bank, will be operated as a separate
subsidiary of the Company. The change in the Bank's name was intended to reflect
its repositioning from a consumer savings bank to a full-service financial
services organization serving regional and national markets. The purpose of
changing the Company's name is to link the entire organization under a common
brand focused on providing a unique financial services experience. The vote of a
majority of the shares outstanding and entitled to vote is necessary to approve
the amendment to the certificate of incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Company's independent auditors for the year ended December 31, 1999
were KPMG LLP. The Board of Directors of the Company has approved the engagement
of KPMG LLP to be the Company's auditors for the year ending December 31, 2000,
subject to the ratification of the engagement by the Company's stockholders at
this Annual Meeting. A representative of KPMG LLP is expected to attend the
Meeting to respond to appropriate questions and to make a statement if he so
desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF KPMG LLP AS AUDITORS FOR THE COMPANY FOR THE
YEAR ENDING DECEMBER 31, 2000.
15
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL IV - STOCKHOLDER PROPOSAL
- --------------------------------------------------------------------------------
Jewelcor Management, Inc. is the record owner of 250 shares of Common Stock
and is the beneficial owner of 26,350 shares of Common Stock, and its address is
100 North Wilkes- Barre Boulevard, Wilkes-Barre, Pennsylvania 18702. Jewelcor
Management Inc. has submitted the following proposal:
RESOLVED, it is recommended that the Board of Directors of Niagara
Bancorp, Inc. (the "Company") take the necessary steps to achieve a sale or
merger of the Company on terms that will maximize shareholder value.
Supporting Statement
Based on the analysis below, Jewelcor Management, Inc. ("JMI") believe
that the Company could potentially achieve an acquisition price of $17.13 to
$17.85 per share if the Board of Directors took the necessary steps to achieve a
sale or merger. In JMI's opinion, the following acquisition valuations provide a
reasonable basis for estimating a potential acquisition price of the Company
well in excess of the current stock price.1
Analysis
JMI compared the Company's book value and earnings per share ("EPS")
with the acquisition ratios for three of the Company's relevant peer groups: (1)
"Regional Peer Group" , (2) "Asset-Size Peer Group" and (3) "National Industry
Peer Group".2 Based upon summary statistics for mergers announced in 1999, JMI
derived the Average Announced Price/Book Ratio ("Price/Book") and the Median
Announced Price/Last Twelve Months EPS Ratio ("Price/EPS") for each of the three
peer groups. JMI then derived an average of the three peer groups' respective
Price/Book ("Peer Group Average Price/Book") and Price/EPS ("Peer Group Average
Price/EPS") and multiplied the applicable Peer Group Average ratios times the
Company's (a) book value and (b) last twelve months diluted EPS ("Company
EPS").3
<TABLE>
<CAPTION>
Book Value Approach
<S> <C> <C>
Company Stock Price (11/17/99) $ 10.75
Company Book Value (9/30/99) 9.08
Company Price/Book 118.39%
Peer Group Average Price/Book 196.59%
COMPANY'S POTENTIAL ACQUISITION PRICE $ 17.85
Earnings Approach
Company EPS(9/30/99) $ 0.65
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Company's Price/EPS 16.54X
Peer Group Average Price/EPS 26.35X
COMPANY'S POTENTIAL ACQUISITION PRICE $ 17.13
</TABLE>
- ----------------------
1. JMI's analyses are not the only ways to predict the Company's potential
acquisition price. Morever, they do not reflect the unrecognized
expenses and cost savings associated with a potential transaction,
since expenses and cost savings depend, in part, on the overlap in
markets and subsidiaries present in a particular transaction.
2. "Regional Peer Group": All thrifts in D.C., DE, MD, NJ, NY, PA and PR
with mergers announced in 1999. "Asset-Size Peer Group": All thrifts
with an asset range of $1 billion to $10 billion with mergers announced
in 1999. "National Industry Peer Group": All publicly-traded thrifts
with mergers announced in 1999.
Source: SNL Securities LC.
3. Although the Company could possibly achieve any of the individual
acquisition ratios achieved by the peer groups, JMI believes that he
most reliable method for determining potential acquisition values is to
compare the average ratios across peer groups.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" PROPOSAL 4 FOR THE FOLLOW REASONS:
A majority of the issued and outstanding shares of your Company are
owned by Niagara Bancorp, MHC. As we stated in the Prospectus (dated February
17, 1998) relating to our initial public offering (IPO), New York law requires
that the Mutual Holding Company at all times own at least 51% of the Company's
voting shares outstanding. Accordingly, the sale or merger of the Company that
is requested by the resolution cannot be accomplished unless the Mutual Holding
Company converts to stock form. Under applicable banking law and regulations, a
sale/merger could not take place for a period of one year thereafter. The
conversion of the Mutual Holding Company to the stock form is not anticipated in
the near future.
We further stated in the IPO Prospectus that one of the purposes of the
mutual holding company structure was to enable the Company to raise additional
capital for the expansion and diversification of our business, without the loss
of control through a sale that often accompanies a complete conversion to stock
form. The mutual holding company structure thus was intended to enable the
Company and its subsidiary bank, First Niagara Bank, to remain an independent,
community-oriented provider of financial services and products in our Western
New York State markets. In fact, the strategic goal of the Company is to become
the premier community bank in Western New York State.
The Company has taken numerous steps since the IPO to enhance our
franchise value and thereby enhance the value of your investment. In this
regard, we have made several bank and non-bank, financial services related
acquisitions that strengthen our competitive position, improve our current and
future earnings and create non-interest income for the Company. They include:
* Diversification and Enhancing Sources of Non-Interest Income -
since the IPO, the Company has been actively pursuing
financial services organizations to diversify our sources of
income. We acquired two insurance agencies and a third-party
administrator in 1999 and in 2000, we closed on the
acquisition of a leasing
17
<PAGE>
company and announced an acquisition of an investment advisory
firm. These acquisitions are decreasing our dependency on net
interest income and the uncertainty involved with interest
rate changes.
* Expansion of Banking Franchise - the Company has also been
active in expanding its core banking franchise through the
acquisition of Albion Bancorp and soon-to-close CNY Financial
in Central New York State. The Bank, the largest subsidiary of
the Company, is also expanding through its continued de novo
banking strategy, including the recently opened branch in the
Rochester market and the implementation of its PC internet
banking and bill paying product.
* Performance - the Company's financial performance continues to
improve especially in comparison to other mutual holding
company organizations and other thrifts. In 1999, the
Company's return on assets improved to 1.13% form 1.07% in
1998, excluding the charitable foundation contribution. In
addition, in light of the growth and diversification taking
place, the Company's return on equity improved to 7.52% in
1999 from 6.43% in 1998 as we continue to put the capital
raised in the IPO to good use.
As significant owners in your Company, your Board of Directors and
management of course is disappointed in the decline of the trading price of
Niagara Bancorp common stock. Although it does not diminish our resolve and to
continue to take those steps that will enhance the strategic and operational
value of your Company, we would note that the trading price of the stocks of our
peer group, and of community banks, in general, have also significantly
declined. We are steadfast in our belief that we are creating long-term value
for all of our shareholders. As owners of shares having a current market value
in excess of $5 million, the interests of your Board of Directors and management
are closely aligned with those of you, the stockholders.
In conclusion, we do not believe that any valid purpose will be served by
voting for this stockholder proposal. Your management and Board of Directors
have demonstrated as a commitment to building franchise value and enhancing
long-term value for stockholders. For the foregoing reasons, YOUR BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" THE STOCKHOLDER PROPOSAL.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
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
_____________, 2000. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Exchange Act.
18
<PAGE>
- --------------------------------------------------------------------------------
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 of Directors, 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 Secretary of the Company not less than ninety (90)
days before the date fixed for such meeting; provided, however, that in the
event that less than one hundred (100) days notice or prior public disclosure of
the date of the 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 by the stockholder, describe briefly
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 which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
The date on which next year's annual meeting of stockholders is
expected to be held is May 1, 2001. Accordingly, advance written notice for
certain business, or nominations to the Board of Directors, to be brought before
the next Annual Meeting must be given to the Company by __________, 2001. If
notice is received after __________, 2001, it will be considered untimely, and
the Company will not be required to present the matter at the stockholders
meeting.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment.
- --------------------------------------------------------------------------------
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 Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional
19
<PAGE>
compensation. The Company has retained Georgeson Shareholder Communications,
Inc., a proxy solicitation firm, to assist the Company in the solicitation of
proxies for the Annual Meeting, for a fee of $4,500, plus out-of-pocket
expenses.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO ANN M. SEGARRA, VICE PRESIDENT
- - FINANCE AND INVESTOR RELATIONS, 6950 SOUTH TRANSIT ROAD, P.O. BOX 514,
LOCKPORT, NEW YORK, 14095-0514 OR CALL (716) 625-7509.
BY ORDER OF THE BOARD OF DIRECTORS
Robert N. Murphy
Corporate Secretary
Lockport, New York
March 23, 2000
20
<PAGE>
REVOCABLE PROXY
NIAGARA BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 2, 2000
The undersigned hereby appoints the official proxy committee consisting
of the Board of Directors of Niagara Bancorp, Inc. (the "Company") who is not
named as a nominee below, 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 2000 Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Pendleton House, 6886 South
Transit Road, Pendleton, New York on May 2, 2000, at 10:00 a.m. Eastern standard
time. The official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
FOR WITHHELD
1. The election as a director of the nominees ----- --------
listed below (except as marked
to the contrary below) for a three-year term: [ ] [ ]
Christa R. Caldwell Gary B. Fitch
Daniel W. Judge James Miklinski
INSTRUCTION: To withhold your vote for
any individual nominee, write that
nominee's name on the space provided.
________________________________________
FOR AGAINST ABSTAIN
--- ------- -------
2. The approval of amendment to the Company's [ ] [ ] [ ]
Certificate of Incorporation to change its
name to First Niagara Financial Group, Inc.
3. The ratification of the appointment of
KPMG LLP as auditors for the year
ending December 31, 2000.
The Board of Directors recommends a vote
"FOR" Proposals 1, 2, and 3.
4. A shareholder proposal to take steps to [ ] [ ] [ ]
achieve a sale or merger of the Company.
The Board of Directors recommends a vote "Against" Proposal 4.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE MAJORITY
OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the 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
statement prior to a vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting, and of a Proxy Statement,
dated _______, 2000.
Dated: _________________, 2000 |_| Check Box if You Plan to Attend Meeting
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
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.
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Please complete and date this proxy and return it
promptly in the enclosed postage-prepaid
envelope.
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