Focused on
Profitable Growth.

Since our April 1998 initial public offering (IPO), First Niagara has evolved as a public company in both size and scope. Through a combination of acquisitions and internal growth, First Niagara's assets have grown from $1.2 billion to $2.9 billion, a 142% increase in the company's asset size over the last four years. Our three banking acquisitions have extended First Niagara's market reach from Western to Central New York. First Niagara's expansion also extends well beyond the growth in our community bank franchise and the geographic markets we serve. Our business growth since our IPO has firmly established First Niagara as a full service provider of financial services in business banking and wealth and risk management. As First Niagara has significantly grown our business, we have done so profitably by making accretive acquisitions and pursing internal growth in a measured and conservative way.

Commercial lending growth

First Niagara has developed a solid niche as a commercial lender in Western and Central New York by focusing on the small-to-middle market and by providing a level of personal service, attention and flexibility consistent with our community banking philosophy. First Niagara's commercial loan portfolio (real estate & business loans) increased by 29% to $584.9 million in 2001, and commercial loans as a percent of the loan portfolio increased from 25% to 31%. In 2001, our second year as a dedicated Small Business Administration (SBA) lender, First Niagara ranked fifth in volume in Western New York among a field of 30 SBA lenders. We also received certified lender status from the SBA in 2001, which reflects our ability to adopt the SBA's processing and underwriting requirements enabling us to provide our SBA borrowers with faster approvals. Overall, the higher yields and shorter terms associated with commercial lending enhance our net interest margin and ability to manage interest-rate risk.

Core market focus

In our banking business, First Niagara has adopted a core market strategy where our marketing and acquisition efforts will primarily be focused on the Western and Central New York banking markets where the aggregate deposit market provides significant scale to grow our banking franchise. This approach will enable us to optimize our investments in our banking distribution channels and marketing where there is the greatest opportunity and where we are best positioned for new growth. In Niagara, Cayuga and Cortland counties, we are already a market leader with respective deposit market shares ¹ of 25%, 46% and 40% and are focused there on incremental share growth. The greatest potential for meaningful share growth is currently in Erie County (the Buffalo market), Monroe County (the Rochester market) and Oneida County (the Rome-Utica market), which respectively are $16.0 billion, $11.1 billion and $2.9 billion deposit markets.  ¹ Of these three markets, we see the greatest near-term potential in Erie and Oneida Counties where we have a stronger presence and greater name recognition than in Monroe County. Monroe County is an attractive opportunity based on the size of this market, its proximity to our Western New York headquarters and the lack of a significant locally headquartered bank there. Our interest in this market is reinforced by the success of our Rochester loan production office which has closed over $100 million in loans since its opening in 1999. In late 2001, we began a de novo branch expansion initiative, which in the next few years will significantly increase our presence in both Erie and Monroe Counties, the state's two largest deposit markets outside New York City.

¹ Source: FDIC