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First Niagara Financial Group is giving its customers a chance to stuff some holiday stockings with its stock.

The Pendleton-based financial services company is having a secondary stock offering that is open first to First Niagara Bank customers. Whether or not a customer buys the bank's stock has no impact on their bank accounts.

"The conversion will not affect the terms and conditions of any loans held by borrowers of First Niagara Bank, nor will it affect the balances, interest rates, maturities or insurance coverage of deposit accounts," the bank said in a statement.

The federal Office of Thrift Supervision recently approved the mutual holding company's plan to sell the remaining 61 percent of stock not already owned by the public.

Selling the additional stock will give First Niagara extra capital to add more offices or new products, but it also dramatically changes the company's corporate structure. First Niagara will be a fully public company, which could ultimately make it an acquisition target for larger banks.

First Niagara will offer between 34.8 million and 47.1 million shares of common stock at $10 a share, meaning the company expects to raise between $348 million and $471 million.

Customers who had at least $50 on deposit at a First Niagara branch on June 30, 2001 get the first opportunity to buy shares.

Second preference in the offer goes to First Niagara Financial Group's tax qualified plans, including the company's Employee Stock Ownership Plan and 401(k) plan.

After those stock orders are filled, customers with $50 or more on deposit as of Sept. 30, 2002 are next in line, followed by depositors as of Nov. 10, 2002.

Any stock remaining will be available to the general public. A toll free stock information line will open Dec. 2 at (866) 293-3776.

The offering closes on Dec.23.

Current First Niagara investors will receive a stock split based on the final results of the secondary offering. The split is anticipated to be between 2.2 and 2.97 shares for each outstanding share of common stock.

Stockholders who have owned First Niagara since its first stock sale in 1998 have made a tidy return on their investments. The initial $10 shares now trade at almost $31 a share.

The price appreciation amounts to an average annual return of more than 30 percent a year during a difficult four-year period for Wall Street.

First Niagara stock, which trades on the Nasdaq under the ticker symbol FNFG, started this year at $16.65 a share and its shares have increased by about 84 percent. The company's plan for a secondary stock offering helped drive up the price.

The former Lockport Savings Bank has grown aggressively in recent years by acquiring Cortland Savings Bank, Cayuga Bank and other companies. The central New York banks were operating as separate subsidiaries, but the company changed its strategy this year and merged them into First Niagara Bank.

Customers of Cortland Savings Bank and Cayuga Bank who were depositors prior to the November 2002 merger of these banks into First Niagara Bank will be treated, during the stock offering, based on the dates their accounts were originally opened at Cortland Savings Bank and Cayuga Bank.

First Niagara now has 38 branches in upstate New York and several subsidiaries offering insurance and other fee-based services.


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