10-Q 1 l95381ae10vq.txt FINGER LAKES BANCORP, INC. 10-Q/QTR END 6-30-02 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------------- FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |X| SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 ------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ COMMISSION FILE NUMBER 000-31821 -------------------------------- FINGER LAKES BANCORP, INC. -------------------------- (Exact name of registrant as specified in its charter) DELAWARE 16-1594819 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer (Incorporation or organization) Identification Number) 470 EXCHANGE STREET, GENEVA, NEW YORK 14456 --------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (315) 789-3838 --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No __ Number of shares of common stock outstanding as of August 12, 2002 COMMON STOCK, $.01 PAR VALUE 3,173,807 ---------------------------- --------- Class Outstanding -1- FINGER LAKES BANCORP, INC. Form 10-Q INDEX Page PART I - FINANCIAL INFORMATION Item 1 - Financial Statements (unaudited): Consolidated Statements of Financial Condition at June 30, 2002 and December 31, 2001 3 Consolidated Statements of Income for the three and six month periods ended June 30, 2002 and June 30, 2001 4 Consolidated Statements of Cash Flows for the six month periods ended June 30, 2002 and June 30, 2001 5, 6 Consolidated Statements of Changes in Stockholders' Equity for the six month period ended June 30, 2002 7 Notes to Consolidated Financial Statements 8, 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 14 Item 3 - Quantitative & Qualitative Disclosure about Market Risk 14, 15 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 16 Item 2 - Changes in Securities and Use of Proceeds 16 Item 3 - Defaults Upon Senior Securities 16 Item 4 - Submission of Matters to a Vote of Security Holders 16 Item 5 - Other Information 17 Item 6 - Exhibits and Reports on Form 8-K 17 Signatures 18

-2- Item 1 - Financial Statements FINGER LAKES BANCORP, INC. -------------------------- Consolidated Statements of Financial Condition (dollars in thousands, except per share data) (unaudited)

See accompanying notes to consolidated financial statements -3- FINGER LAKES BANCORP, INC. -------------------------- Consolidated Statements of Income (in thousands, except per share data) (unaudited)

See accompanying notes to consolidated financial statements -4- FINGER LAKES BANCORP, INC. -------------------------- Consolidated Statements of Cash Flows (in thousands) (unaudited)

(continued) -5- FINGER LAKES BANCORP, INC. -------------------------- Consolidated Statements of Cash Flows, continued (in thousands) (unaudited)

See accompanying notes to consolidated financial statements. -6- FINGER LAKES BANCORP, INC. Consolidated Statement of Changes in Stockholders' Equity Six months ended June 30, 2002 (dollars in thousands, except per share data) (unaudited)

See accompanying notes to consolidated financial statements. -7- FINGER LAKES BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) ORGANIZATION Finger Lakes Bancorp, Inc. (the Bancorp), through its wholly-owned subsidiary Savings Bank of the Finger Lakes, FSB (the Bank), provides financial services to individuals and businesses primarily in the Finger Lakes region of Upstate New York. The Bancorp and Bank, which are subject to regulation by certain federal agencies including the Office of Thrift Supervision (OTS), are referred to herein as the Company. On July 21, 2002, the Bancorp signed a definitive merger agreement with First Niagara Financial Group, Inc., under which First Niagara Financial Group, Inc. will, subject to regulatory and shareholder approval as well as other conditions set forth in the agreement, acquire all of the outstanding shares of the Company for $20.00 per share and the Bancorp will be merged into First Niagara Financial Group, Inc. As a result of the merger, Savings Bank of the Finger Lakes will also be merged into First Niagara Financial Group, Inc. The transaction is expected to be completed during the first quarter of 2003. (2) BASIS OF PRESENTATION The accompanying unaudited financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments consisting of only normal recurring adjustments or accruals which are necessary for a fair presentation of the financial statements have been made at and for the three and six months ended June 30, 2002 and 2001. The results of operations for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results which may be expected for an entire fiscal year or other interim periods. The unaudited consolidated financial statements should be read in conjunction with the Company's 2001 Annual Report on Form 10-K. Amounts in the prior period's consolidated financial statements are reclassified when necessary to conform to the current period's presentation. All intercompany accounts and transactions have been eliminated in consolidation. (3) NET INCOME PER SHARE Basic net income per common share for the three-month and six-month periods ended June 30, 2002 and 2001 was computed by dividing net income by the weighted average number of total common shares outstanding during the period, excluding unallocated ESOP shares and deferred stock compensation shares. Diluted net income per common share reflects the effects of incremental common shares (computed using the treasury stock method) that would be issuable upon exercise of dilutive stock options and unearned stock compensation. -8- The following is a summary of the net income per share calculations (in thousands, except net income per share):

(4) DIVIDENDS The Company declared a regular cash dividend of $.06 per share for the quarter ended June 30, 2002 on July 15, 2002, payable August 12, 2002 to stockholders of record July 29, 2002. (5) RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires acquired intangible assets (other than goodwill) to be amortized over their useful economic life, while goodwill and any acquired intangible assets with an indefinite useful economic life would not be amortized, but would be reviewed for impairment on an annual basis based on guidelines specified in SFAS No. 142. The adoption of SFAS Nos. 141 and 142 did not materially affect the Company's financial condition and results of operations. The Company adopted SFAS No. 141 on July 1, 2001 and SFAS No. 142 on January 1, 2002. -9- Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2002 AND DECEMBER 31, 2001 Total assets as of June 30, 2002 were $387.8 million, an increase of $44.5 million or 12.9% from December 31, 2001. The increase was due primarily to a $20.9 million or 11.6% increase in net loans, an increase of $3.1 million or 2.2% in securities available for sale, and an increase of $19.6 million in securities held to maturity. Commercial real estate and business loans increased by $20.4 million. In addition, home equity loans increased by $4.1 million and other consumer loans increased by $2.0 million, while residential mortgage loans decreased by $5.6 million. The increase in securities available for sale is a result of purchases of $72.3 million, partially offset by amortizations and prepayments of $17.4 million and sales of $53.5 million. The increase of $19.6 million in securities held to maturity represents securities purchased in connection with a leverage strategy implemented to enhance net interest income. The growth in assets during the first six months of 2002 was funded in part by a $33.3 million or 14.4% increase in total deposits. Savings deposits increased by $3.6 million or 6.0%, demand deposits increased $5.3 million or 18.5%, and certificate of deposits increased $14.4 million or 10.1%. In addition, the Company originated $10.0 million in brokered certificates of deposit during the second quarter of 2002. Advances from the Federal Home Loan Bank of New York ("FHLB") increased by $10.9 million or 15.5% during the first six months of 2002, as funding needs exceeded retail deposit growth. Stockholders' equity totaled $37.1 million as of June 30, 2002, an increase of $376,000 from December 31, 2001. The increase within stockholders' equity resulted from net income of $1.3 million, and an increase of $976,000 in the market value of securities available for sale, net of related deferred income taxes, partially offset by dividend distributions of $368,000, and treasury shares purchased in the amount of $1.9 million at an average cost of $10.91. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001 GENERAL Net income for the quarter ended June 30, 2002 amounted to $707,000 or $0.23 per diluted share, compared to net income of $423,000, or $0.13 per diluted share for the quarter ended June 30, 2001. The increase in net income is primarily attributable to an increase of $634,000 in net interest income, as well as an increase in noninterest income of $11,000. This was partially offset by an increase of $115,000 in noninterest expenses, an increase in provision for loan losses of $125,000 and an increase of $121,000 in income tax expense. NET INTEREST INCOME Net interest income is determined by our interest rate spread (i.e., the difference between yields earned on our interest-earning assets and rates paid on our interest-bearing liabilities) and the relative amounts of our interest-earning assets and interest-bearing liabilities. Net interest income amounted to $2.9 million for the three month period ended June 30, 2002, an increase of $634,000 from the same period last year. The average interest rate spread for the three-month period ended June 30, 2002 was 3.11% versus 2.42% during the same period in 2001. The average yield on interest-earning assets decreased 65 basis points from 7.30% to 6.65%, while the average cost of interest-bearing liabilities decreased 134 basis points from 4.88% to 3.54%. -10- INTEREST INCOME Total interest income for the three-month period ended June 30, 2002 amounted to $5.8 million, a decrease of $156,000 from the same period in 2001. The average yield on earning assets decreased to 6.65% during the three months ended June 30, 2002 compared to 7.30% in the same period of 2001. Interest income on loans for the three months ended June 30, 2002 amounted to $3.5 million, relatively unchanged from the same period in 2001. Total loans increased by $13.4 million to an average outstanding loan balance of $192.3 million for the three months ended June 30, 2002, offset by a decrease in the average yield to 7.36% from 8.05% during the same period last year. Interest income on securities for the three months ended June 30, 2002 amounted to $2.2 million, a decrease of $95,000 from the same period last year. Changes in interest income on securities consisted of an increase in the average outstanding securities balance (at amortized cost) of $9.2 million to $155.5 million, offset by a decrease in the yield on the portfolio, as the average yield decreased 62 basis points to 5.76%. INTEREST EXPENSE Total interest expense for the three months ended June 30, 2002 was $2.9 million, a decrease of $790,000 from the same period in 2001. During the second quarter of 2002, interest expense on deposits amounted to $2.0 million while interest expense on borrowed funds amounted to $950,000. Interest expense on deposits decreased $742,000 or 27.5% as average deposits increased $18.5 million to $254.1 million and the average cost of deposits decreased 151 basis points to 3.09%. The average cost of borrowings decreased 79 basis points to 5.07% from 5.86% a year ago, while the average outstanding borrowings increased $6.9 million to $75.2 million. PROVISION FOR LOAN LOSSES The provision for loan losses amounted to $200,000 for the three months ended June 30, 2002, an increase of $125,000 from the same period last year. This increase reflects management's consideration of qualitative factors, including, but not limited to, the substantial growth in commercial real estate and business loans. Management reviews the adequacy of the allowance for loan losses quarterly through an asset classification and review process and an analysis of the level of loan delinquencies and general market and economic conditions. The allowance for loan losses amounted to $1.7 million as of June 30, 2002 or 0.86% of total loans outstanding and 657% of non-performing loans. Non-performing loans decreased from $362,000 as of December 31, 2001 to $261,000 as of June 30, 2002. The decrease in non-performing loans primarily relates to a charge off of $76,000 on one commercial relationship. The ratio of non-performing assets to total assets was 0.10% at June 30, 2002 as compared to 0.20% at December 31, 2001. Net charge-offs during the second quarter of 2002 were $126,000, as compared to $33,000 for the same period last year. NONINTEREST INCOME Noninterest income, consisting primarily of service charges on deposit accounts, loan servicing fees, increases in the value of bank owned life insurance, and gains and losses on loans and securities sold, was $705,000 for the three months ended June 30, 2002, an increase of $11,000 or 1.6% compared to the second quarter of 2001. Service charges and other fee income was $426,000 for the three months ended June 30, 2002, an increase of $106,000 over the same period in 2001. This improvement is primarily attributable to an increase of $93,000 in service charges on deposit accounts and $15,000 in loan prepayment penalties. Net gains on the sale of securities were $110,000, a decrease of $93,000 from the same period last year. This decrease resulted primarily from higher levels of activity during 2001 as we restructured a portion of the securities portfolio in a lower interest rate environment. NONINTEREST EXPENSE Noninterest expense amounted to $2.3 million for the three months ended June 30, 2002, an increase of $115,000 or 5.2% from the same period last year. An increase of $269,000 in salaries and employee benefits expense was primarily the result of annual salary increases and the cost of stock-based benefit -11- plans. Office occupancy and equipment expense remained unchanged from the prior year. Professional fees decreased $28,000 or 16.6% from the same period last year, primarily due to the decision to discontinue outsourcing certain information technology functions. In the second quarter of 2002, we reversed $166,000 of accruals for environmental remediation relating to a foreclosed dry cleaning and laundry facility, as the final project costs were less than the budgeted estimates. The remediation work is completed and we are currently negotiating a contract to continue monitoring of the property. We have determined that the recorded liability is currently adequate to cover the anticipated costs of the monitoring for the new contract period. Other noninterest expense, which in part includes postage, office supplies, telephone charges, director's fees, insurance, and third party check processing, increased $49,000 or 10.9% from the same period last year. This is primarily due to increased costs on life insurance policies. INCOME TAXES Income tax expense for the three months ended June 30, 2002 was $305,000 on income before tax of $1.0 million, reflecting an effective tax rate of 30.1%. For the same period in 2001, the effective rate was 30.3%. Our effective tax rate is the result of our purchase of bank owned life insurance, which is a tax-advantaged means of financing employee benefits, as well as our investment in municipal bonds, which totaled $2.4 million at June 30, 2002. COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 GENERAL Net income for the six months ended June 30, 2002 amounted to $1.3 million or $0.44 per diluted share, compared to net income of $766,000, or $0.24 per diluted share for the six months ended June 30, 2001. The increase in net income is primarily attributable to an increase of $1.2 million in net interest income and an increase of $164,000 in noninterest income. This was partially offset by an increase of $381,000 in noninterest expenses, an increase of $205,000 in loan loss provisions, and an increase of $235,000 in income tax expense. NET INTEREST INCOME Net interest income is determined by our interest rate spread (i.e., the difference between yields earned on our interest-earning assets and rates paid on our interest-bearing liabilities) and the relative amounts of our interest-earning assets and interest-bearing liabilities. Net interest income amounted to $5.6 million for the six-month period ended June 30, 2002, an increase of $1.2 million from the same period last year. The average interest rate spread for the six-month period ended June 30, 2002 was 3.15% versus 2.41% during the same period in 2001. Based on the maturity and repricing characteristics of the Company's balance sheet, during the first half of the year 2002 when interest rates were falling, liabilities repriced at a faster rate than assets. The average yield on interest-earning assets decreased 58 basis points from 7.41% to 6.83%, while the average cost of interest-bearing liabilities decreased 133 basis points from 5.01% to 3.68%. INTEREST INCOME Total interest income for the six-month period ended June 30, 2002 amounted to $11.5 million, a decrease of $385,000 from the same period in 2001. The average yield on earning assets decreased to 6.83% during the six months ended June 30, 2002 compared to 7.41% in the same period of 2001. Interest income on loans for the six months ended June 30, 2002 amounted to $7.1 million, relatively unchanged from the same period in 2001. Total loans increased to an average outstanding loan balance of $187.5 million for the six months ended June 30, 2002, offset by a decrease in the average yield to 7.59% from 8.14% during the same period last year. Interest income on securities for the six months ended June 30, 2002 amounted to $4.4 million, a decrease of $299,000 from the same period last year. This decrease was attributed to an increase in the average outstanding securities balance (at amortized cost), which -12- increased by $5.6 million to $150.6 million, offset by a decrease in the yield on the portfolio, as the average yield decreased 64 basis points to 5.89%. INTEREST EXPENSE Total interest expense for the six months ended June 30, 2002 was $5.8 million, a decrease of $1.6 million from the same period in 2001. For the first six months of 2002, interest expense on deposits amounted to $3.9 million while interest expense on borrowed funds amounted to $1.9 million. Interest expense on deposits decreased $1.6 million as average deposits increased $12.3 million to $245.4 million while the average cost of deposits decreased 155 basis points to 3.19%. Interest expense on borrowings decreased $15,000 from the same period last year. The average cost of borrowings decreased 66 basis points to 5.30% from 5.96% a year ago, while the average outstanding borrowings increased $7.7 million to $74.0 million. PROVISION FOR LOAN LOSSES The provision for loan losses amounted to $340,000 for the six months ended June 30, 2002, an increase of $205,000 from the same period last year. This increase reflects management's consideration of qualitative factors, including, but not limited to, the substantial growth in commercial real estate and business loans. Management reviews the adequacy of the allowance for loan losses quarterly through an asset classification and review process and an analysis of the level of loan delinquencies and general market and economic conditions. The allowance for loan losses amounted to $1.7 million as of June 30, 2002 or 0.86% of total loans outstanding and 657% of non-performing loans. Non-performing loans decreased from $362,000 as of December 31, 2001 to $261,000 as of June 30, 2002. The decrease in non-performing loans is primarily the result of a charge off of one commercial relationship. The ratio of non-performing assets to total assets was 0.10% at June 30, 2002 as compared to 0.20% at December 31, 2001. Net charge-offs during the first six months of 2002 were $159,000, as compared to $51,000 for the same period last year. NONINTEREST INCOME Noninterest income, consisting primarily of service charges on deposit accounts, loan servicing fees, income from the sale of annuities and mutual funds, increases in the value of bank owned life insurance, and gains and losses on loans and securities sold, was $1.4 million for the six months ended June 30, 2002, an increase of $164,000 or 13.3% compared to the same period in 2001. Service charges and other fee income was $848,000 for the six months ended June 30, 2002, an increase of $195,000 or 29.9% over the same period in 2001. This improvement is primarily attributable to an increase of $152,000 or 33.2% in service charges on deposit accounts, as well as $65,000 in loan prepayment penalties. Gains on sale of securities decreased $113,000 during the six-month period ended June 30, 2002 as compared to the same period last year as a result of a restructuring of the portfolio during 2001. The increase of $48,000 in net gains from the sale of loans reflects higher levels of loan sales during 2002. The increase in the cash value of bank owned life insurance in the amount of $35,000 can be attributed to the purchase of additional insurance in March 2001. NONINTEREST EXPENSE Noninterest expense amounted to $4.8 million for the six months ended June 30, 2002, an increase of $381,000 or 8.7% from the same period last year. An increase of $447,000 in salaries and employee benefits expense was primarily the result of annual salary increases and the cost of stock-based benefit plans. A decrease of $27,000 in office occupancy and equipment expense was in part the result of lower depreciation expense, due to a fully depreciated branch and related equipment in our Ithaca market. In addition, lower utility costs this year contributed $14,000 to the reduction in office occupancy expense. Professional fees remained relatively flat from the same period last year. Marketing expenses increased $44,000 or 23.2% primarily due to expenses relating to a certificate of deposit promotion targeted at longer term maturities, as well as a renewed home equity loan campaign. In the second quarter of 2002, we reversed $166,000 of accruals for environmental remediation relating to a foreclosed dry cleaning and laundry facility, as the final project costs were less than the budgeted estimates. The remediation work is -13- completed and we are currently negotiating a contract to continue monitoring of the property. We have determined that the recorded liability is currently adequate to cover the anticipated costs of the monitoring for the new contract period. Other noninterest expense, which in part includes postage, office supplies, telephone charges, director's fees, insurance, and third party check processing, increased $86,000 or 9.8% from the same period last year. This is primarily due to increased costs on life insurance policies. INCOME TAXES Income tax expense for the six months ended June 30, 2002 was $582,000 on income before tax of $1.9 million, reflecting an effective tax rate of 30.2%. For the same period in 2001, the effective rate was 31.2%. The decrease in our effective tax rate is the result of our purchase of bank owned life insurance, which is a tax-advantaged means of financing employee benefits, as well as our investment in municipal bonds, which totaled $2.4 million at June 30, 2002. ITEM 3 - QUANTITATIVE & QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the risk of loss from adverse changes in market prices and interest rates. The Company's market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. Although the Company manages other risks, as in credit and liquidity risk, in the normal course of its business, management considers interest rate risk to be its most significant market risk and could potentially have the largest material effect on the Company's financial condition and results of operations. The Company does not currently have a trading portfolio nor does it use derivatives to manage market and interest rate risk. The Company's interest rate risk management is the responsibility of the Asset/Liability Management Committee (ALCO), which reports to the Board of Directors. The committee, comprised of senior management, has developed policies to measure, manage, and monitor interest rate risk. Interest rate risk arises from a variety of factors, including differences in the timing between the contractual maturity or repricing of the Company's assets and liabilities. For example, the Company's net interest income is affected by changes in the level of market interest rates as the repricing characteristics of its loans and other assets do not necessarily match those of its deposits, borrowings and capital. The OTS requires the Company to measure interest rate risk by computing estimated changes in the net portfolio value ("NPV") of cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. These computations estimate the effect on NPV of sudden and sustained 100 to 300 basis point increases and decreases in market interest rates. The Company's board of directors has adopted an interest rate risk policy which establishes minimum NPV ratios (i.e. the ratio of NPV to the present value of assets) in the event of 100, 200 and 300 basis point increases and decreases in market interest rates. The following table sets forth certain calculations, based on information provided to the Company by the OTS, with respect to the sensitivity of NPV to changes in market interest rates at March 31, 2002 (date of latest available data):

-14- As shown by the table, increases in interest rates are estimated to significantly decrease our NPV, while decreases in interest rates are estimated to result in much smaller net changes in our NPV. The table suggests that in the event of a 200 basis point increase in interest rates, we would experience a decrease in NPV as a percentage of assets to 7.53% from 10.57%. Net portfolio values in a falling rate environment of 200 and 300 basis points or more have not been shown, due to the current interest rate environment of historically low rates. The Board of Directors is responsible for reviewing asset liability management policies. On at least a quarterly basis, the Board reviews interest rate risk and trends, as well as liquidity and capital ratios and requirements. Management is responsible for administering the policies and determinations of the Board of Directors with respect to our asset and liability goals and strategies. -15- PART II: OTHER INFORMATION Item 1 LEGAL PROCEEDINGS None Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS None Item 3 DEFAULTS UPON SENIOR SECURITIES None Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) An annual meeting of shareholders of the Company was held on April 23, 2002 ("Annual Meeting") (b) Directors elected at the meeting: G. Thomas Bowers Chris M. Hansen Joan C. Rogers In addition, the following directors are continuing in office: Michael J. Hanna Bernard G. Lynch James E. Hunter Arthur W. Pearce Ronald C. Long (c) There were 2,937,458 shares of common stock of the company represented either in person or by proxy at the annual meeting which constituted a quorum. There were 3,173,807 shares of common stock eligible to be voted on each of the proposals. (1) Election of directors for a three-year term FOR WITHHELD --- -------- G. Thomas Bowers 2,934,574 2,884 Chris M. Hansen 2,935,399 2,059 Joan C. Rogers 2,933,471 3,987 (2) Proposal to amend and restate the Company's 2001 Stock Option Plan FOR AGAINST ABSTAIN --- ------- ------- 1,762,258 147,584 24,479 (3) Proposal to amend and restate the Company's 2001 Recognition and Retention Plan FOR AGAINST ABSTAIN --- ------- ------- 2,746,605 171,362 19,491 -16- (4) Proposal to ratify the appointment of KPMG LLP as the Company's independent auditors for the year ending December 31, 2002 FOR AGAINST ABSTAIN --- ------- ------- 2,890,431 45,277 1,750 (d) None Item 5 OTHER INFORMATION None Item 6 EXHIBITS AND REPORTS ON FORM 8-K (a) See Index to Exhibits (b) Reports on Form 8-K None -17- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 12, 2002 By: /s/G. Thomas Bowers ------------------- G. Thomas Bowers Chairman, President and Chief Executive Officer Date: August 12, 2002 By: /s/Terry L. Hammond ------------------- Terry L. Hammond Executive Vice President and Chief Financial Officer -18- INDEX TO EXHIBITS (99) ADDITIONAL EXHIBITS Exhibits Filed with this Report (1) Exhibit is certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -19-

FINGER LAKES BANCORP INC 10-Q