BUFFALO, N.Y., Jan. 23, 2013 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today announced fourth-quarter and full-year 2012 results that reflect strong core business fundamentals and core customer acquisition across the company's regional banking footprint. Solid operating performance continues to be driven by sustained market share gains through new customer acquisition as well as deepening relationships with existing customers.
"We finished 2012 with our team and franchise in a very solid and stable position – and most importantly, focused on optimizing our performance and results in 2013," said John R. Koelmel, First Niagara President and Chief Executive Officer. "The fundamentals of our business continue to improve as we more fully leverage the expanded capacities and competencies we now have, which has created very positive momentum as we start the new year. And while the impact of our CMO portfolio on fourth quarter results is disappointing, it doesn't at all diminish the consistent core operating performance we have again produced.
"As we look ahead to the next twelve months, our focus is to (1) better position our balance sheet by continuing the strong growth performance of our commercial and consumer lending teams; (2) ensure we do that while maintaining best in class credit outcomes; (3) deepen relationships across all business lines to improve the performance of our fee based businesses and services; and, (4) be more operationally effective and efficient by controlling costs and doing more with what we have already invested," continued Mr. Koelmel. "As I have consistently stated, running our business a little bit better each and every day is what we are about in 2013."
"Throughout 2012, First Niagara has delivered solid fundamental operating performance across all geographies enabled by strong traction with our new products and services," said Gregory W. Norwood, Chief Financial Officer. "Given the impact of a prolonged low interest rate environment, we will continue to sharpen our focus to maximize returns by optimizing the franchise and a commitment to manage expenses aggressively and create positive operating leverage."
Fourth Quarter Operating Results
In the fourth quarter of 2012, First Niagara reported non-GAAP operating net income available to common shareholders of $67.8 million, or $0.19 per diluted share, compared to $66.5 million, or $0.19 per diluted share, in the third quarter of 2012 and $72.1 million, or $0.24 per diluted share in the fourth quarter of 2011.
Those results exclude the impacts of the previously disclosed pre-tax adjustment of $16 million to accelerate premium amortization on its Collateralized Mortgage Obligations (CMO) portfolio and $3.7 million in restructuring charges.
Net interest income in the fourth quarter was essentially flat to the prior quarter. Excluding the impact of a quarter-over-quarter increase in premium amortization expense, net interest margin declined 8 basis points to 3.46%, driven by the continued downward re-pricing of loans and securities. However, those impacts on net interest income were offset by the benefits of a 13% increase in average interest-earning assets.
Non-interest revenues in the fourth quarter of 2012 decreased $5.0 million from the prior quarter as a result of seasonal declines in insurance commissions and lower mortgage banking revenues.
Average commercial loans increased 11% annualized over the prior quarter, the 12th consecutive quarter of double-digit growth as strong commercial business and commercial real estate loan demand continues across the company's footprint. Average transactional deposits, which include interest-bearing checking and non-interest bearing deposit balances, increased 16% annualized from the prior quarter driven by increases in balances held by customers.
The provision for loan losses on originated loans totaled $21.3 million in the fourth quarter of 2012, including $13.7 million to support loan growth and $7.6 million to cover net charge-offs during the quarter. Net charge-offs equaled 24 basis points of average originated loans, a six basis point decrease from the prior quarter.
Operating expenses in the fourth quarter of 2012 were $235.1 million, decreasing $2 million, or 1%, compared to the third quarter. Salaries and benefits expense declined $4.5 million, or 4%, driven by the company's workforce optimization initiative in the third quarter.
GAAP Results
On a GAAP basis, First Niagara reported fourth quarter net income to common shareholders of $53.5 million, or $0.15 per diluted share, compared to income of $50.8 million, or $0.14 per diluted share, in the third quarter of 2012. Reported GAAP results for the fourth quarter of 2012 included $3.7 million of restructuring charges as well as the impact of the $16 million accelerated premium amortization adjustment.
Operating Results (Non-GAAP)
Q4 2012
Q3 2012
Q4 2011
Net interest income
$ 268.6
$ 269.6
$ 242.5
Provision for credit losses
22.0
22.2
13.4
Noninterest income
91.8
96.9
63.7
Noninterest expense
235.1
237.1
182.5
Operating net income
75.4
74.0
72.1
Preferred stock dividend
7.5
7.5
--
Operating net income available to common shareholders
67.8
66.5
72.1
Weighted average diluted shares outstanding
349.7
349.4
304.3
Operating earnings per diluted share
$ 0.19
$ 0.19
$ 0.24
Reported Results (GAAP)
Operating net income before non-operating items
$ 75.4
$ 74.0
$ 72.1
CMO premium amortization adjustment (a)
11.6
--
--
Gain on securities portfolio repositioning (b)
--
3.5
--
Non-operating expenses (c)
2.6
19.1
13.6
Net income
61.1
58.4
58.5
Preferred stock dividend
7.5
7.5
--
Net income available to common shareholders
53.5
50.8
58.5
Weighted average diluted shares outstanding
349.7
349.4
304.3
Earnings per diluted share
$ 0.15
$ 0.14
$ 0.19
All amounts in millions except earnings per diluted share. The Non-GAAP/Operating Results table above summarizes the company's operating results excluding certain non-operating items. For a detailed reconciliation of non-GAAP measures, refer to the attached tables.
(a) Amount is shown net of tax and represents the retroactive adjustment to accelerate premium amortization on the CMO portfolio.
(b) Amount is shown net of tax and represents the gains recorded on the sale of $3.1 billion of mortgage-backed securities in the third quarter of 2012.
(c) Amounts are shown net of tax and represent expenses related to acquisition, integration, and restructuring.
Full Year Results
For the full year ended December 31, 2012, the company posted non-GAAP operating earnings of $263.9 million, or $0.75 per diluted share, compared to $266.7 million, or $0.98 per diluted share, in 2011. The principal reasons for the decline were foregone interest income on $3.1 billion of mortgage-backed securities sold in the second quarter of 2012, continued pressures on asset pricing from the low interest rate environment, and the impacts of common and preferred shares issued in December 2011 to fund, in advance, the May 18, 2012 purchase of deposits and loans in the HSBC branch transaction.
For the full year 2012, the company posted GAAP net income of $140.7 million, or $0.40 per diluted share compared to $173.9 million, or $0.64 per diluted share, in 2011. Included in the calculation of GAAP net income are $184.0 million in pre-tax acquisition and restructuring related expenses, $24.6 million in accelerated premium amortization adjustments, and $21.2 million in gains related to the sale of $3.1 billion of mortgage-backed securities in the second quarter of 2012. In 2011, merger and restructuring related expenses totaled $140.7 million.
Operating Results (Non-GAAP)
2012
2011
Net interest income
$ 1,047.9
$ 881.2
Provision for credit losses
92.3
58.1
Noninterest income
338.3
245.3
Noninterest expense
867.2
665.6
Net operating income before non-operating items
291.6
266.7
Preferred stock dividend
27.8
--
Operating net income available to common shareholders
263.9
266.7
Weighted average diluted shares outstanding
349.4
271.6
Operating earnings per diluted share
$ 0.75
$ 0.98
Reported Results (GAAP)
Net operating income before non-operating items
$ 291.6
$ 266.7
CMO premium amortization adjustment (a)
17.2
--
Gain on securities portfolio repositioning (b)
13.8
--
Non-operating expenses (c)
119.8
92.8
Net income
168.4
173.9
Preferred stock dividend
27.8
--
Net income available to common shareholders
140.7
173.9
Weighted average diluted shares outstanding
349.4
271.6
Earnings per diluted share
$ 0.40
$ 0.64
All amounts in millions except earnings per diluted share. The Non-GAAP/Operating Results table above summarizes the company's operating results excluding certain non-operating items. For a detailed reconciliation of non-GAAP measures, refer to the attached tables.
(a) Amount is shown net of tax and represents the retroactive adjustment to accelerate premium amortization on the CMO portfolio.
(b) Amount is shown net of tax and represents the gains recorded on the sale of $3.1 billion of mortgage-backed securities in 2012.
(c) Amounts are shown net of tax and represent expenses related to acquisition, integration, and restructuring.
Loans
For the twelfth consecutive quarter, average commercial loans increased at a double-digit pace organically, up $302 million, or 11% annualized over the prior quarter. Commercial business loans averaged $4.8 billion, representing a 15% annualized increase over the prior quarter. Commercial real estate loans increased 8% annualized to $6.9 billion. Strength in specialty lending business lines such as equipment finance, healthcare lending, and capital markets augmented a robust pace of growth in the company's traditional middle market and commercial real estate businesses. Commercial loans in the company's Western and Eastern Pennsylvania and New England markets delivered double-digit annualized growth rates of 12%, 28%, and 10%, respectively, while balances in the New York market increased 6% following a strong third quarter.
Average indirect auto loan balances increased $214 million to $515 million. During the fourth quarter, new originations yielded 3.43%. The company continues to target and engage new car dealers within its contiguous footprint to lend and finance primarily used car purchases for high credit quality customers.
Average residential real estate loans declined by $143 million, or 14% annualized, from the third quarter reflecting higher prepayments. Average credit card and other consumer loan balances were unchanged.
Deposits
The company's strategic focus on core customer acquisition continued to allow it to successfully re-position its account mix and increase low cost deposits. Average transactional accounts, which include interest-bearing checking and noninterest-bearing balances, increased to $8.8 billion, up 16% annualized compared to the prior quarter, with double-digit increases across each market. These low-cost deposits now represent 32% of the company's deposit base, compared to 26% a year ago.
Average noninterest-bearing deposits increased 2% annualized while interest-bearing checking deposits increased 32% annualized over the prior quarter driven by strong customer engagement that resulted in higher account balances. These increases were offset by the company's pricing initiatives to reduce higher-cost money market balances. Average total core deposits, excluding time deposits, increased to $23.5 billion, or 2% annualized, compared to the third quarter.
Net Interest Income
Non-GAAP net interest income of $268.6 million was essentially flat to the prior quarter. The benefits of a 13% annualized increase in average earning assets were offset by the impacts of continued downward re-pricing pressure on earning asset yields. On a GAAP basis, net interest income of $252.3 million included the $16.3 million accelerated premium amortization adjustment related to the CMO portfolio.
Total premium amortization on the CMO portfolio increased to $30.8 million in the fourth quarter from $11.1 million in the prior quarter, driven by the $16.3 million in accelerated CMO premium amortization adjustment. Excluding the impacts of that increase, net interest margin in the fourth quarter was 3.46%, an eight basis point decline from the third quarter of 2012. Continued compression of loan yields from prepayments and lower spreads was partially offset by a three basis point decline in cost of interest bearing deposits.
"After our thorough evaluation of the CMO portfolio, including the substantial level of prepayments received in recent months as well as those expected to continue for the foreseeable future, we recorded an adjustment of $16 million to accelerate the premium amortization," said Mr. Norwood. "With this adjustment, the remaining premium has been reduced to $74 million, or 1.6% of par at December 31, 2012, significantly reducing potential future volatility in our CMO yields."
Credit Quality
At December 31, 2012, the allowance for loan losses was $162.5 million, compared to $149.9 million at September 30, 2012. Information for both the originated and acquired portfolios follows.
Q4 2012
Q3 2012
$ in millions
Originated
Acquired
Total
Originated
Acquired
Total
Provision for loan losses*
$ 21.3
$ 0.2
$ 21.5
$ 21.4
$ 0.4
$ 21.8
Net charge-offs
7.6
1.3
8.9
9.1
1.0
10.1
NCOs/ Avg Loans
0.24%
0.08%
0.18%
0.30%
0.06%
0.21%
Total loans**
$ 13,372
$ 6,514
$ 19,710
$ 12,233
$ 7,086
$ 19,106
(*) Excludes provision for unfunded commitments of $0.5 million and $0.4 million in 4Q12 and 3Q12, respectively
(**) Acquired loans before associated credit discount; see accompanying tables for further information
Originated loans
The provision for loan losses on originated loans totaled $21.3 million, unchanged from the prior quarter. This provision included $13.7 million to support sequential originated loan growth of $1.1 billion and $7.6 million to cover net charge-offs. Net charge-offs equaled 24 basis points of average originated loans in the fourth quarter of 2012, a six basis points improvement from the prior quarter.
At the end of the fourth quarter, nonperforming assets to total assets were 0.50%, and increased eight basis points from the prior quarter. Nonperforming originated loans as a percentage of originated loans increased to 1.07% at December 31, 2012 from 0.93% at September 30, 2012. Approximately a third of the $29 million sequential increase in nonperforming originated loans related to guidance issued by the Office of the Comptroller of the Currency (OCC) to place consumer loans discharged in bankruptcy on nonaccrual status. The remaining increase in commercial nonaccruals was driven primarily by one large commercial credit in the company's Eastern Pennsylvania market.
At December 31, 2012, the allowance for loan losses on originated loans totaled $160.9 million or 1.20% of such loans, compared to $147.2 million or 1.20% of loans at September 30, 2012.
Acquired loans
The provision for losses on acquired loans totaled $0.2 million, compared to $0.4 million in the prior quarter. Net charge-offs on those portfolios totaled $1.3 million during the quarter, compared to $1.0 million in the prior period. At December 31, 2012, the allowance for loan losses on acquired loans totaled $1.6 million, compared to $2.7 million at September 30, 2012. Acquired nonperforming loans totaled $29.6 million, compared to $28.2 million at the end of the prior quarter. At December 31, 2012, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $176 million.
Fee Income
Fourth quarter 2012 non-GAAP operating noninterest income of $91.8 million decreased 5% or $5.0 million compared to the prior quarter.
Continued strength in derivative swap activity and increased assets under management in the company's wealth management platform contributed to 11% and 8% sequential increases in capital markets and wealth management fees, respectively.
These increases were offset by lower mortgage banking revenues as well as typical fourth quarter declines in insurance fees. Mortgage banking revenues decreased $2.9 million from the prior quarter driven by lower application volumes and gain-on-sale margins. However, closed mortgage origination volumes increased 12% from the prior quarter to an all-time high. During the quarter, the company opened a third mortgage processing center to expediently meet and exceed the needs of its customers.
On a GAAP basis, noninterest income of $91.8 million declined $10.4 million from the prior quarter. Prior quarter results included a $5.3 million gain recognized on the sale of $3.1 billion in CMOs in the second quarter.
Noninterest Expense
Fourth quarter non-GAAP operating noninterest expenses were $235.1 million, decreasing $2.0 million, or 1%, compared to the third quarter, driven by the initial impact of the company's workforce optimization initiative in the third quarter. The benefit of the resulting $4.5 million decrease in salaries and benefits was minimized by seasonal increases in occupancy expenses. Excluding the additional $3.4 million in additional premium amortization recognized in the fourth quarter, the efficiency ratio of 64.6% was comparable to 64.7% in the prior quarter.
On a GAAP basis, noninterest expense for the fourth quarter was $238.8 million, including $3.7 million in restructuring charges.
Capital
At December 31, 2012, the company's estimated consolidated Total Risk Based capital and Tier 1 Common Risk Based capital ratios were 11.2% and 7.5% respectively. The company remains well above current regulatory guidelines for well-capitalized institutions.
About First Niagara
First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 430 branches, approximately $37 billion in assets, $28 billion in deposits, and approximately 6,000 employees providing financial services to individuals, families and businesses across Upstate New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.
Investor Call
A conference call will be held at 8:30 a.m. Eastern Time on Wednesday, January 23, 2013 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-888-324-9650 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and is available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until February 6, 2013 by dialing 1-888-566-0438, passcode: 15645.
Non-GAAP Measures - This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the company, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, the company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the company's results and to assess performance in relation to the company's ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document.
Forward-Looking Statements - This press release contains forward-looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real estate and business loans and non-performing loans.
First Niagara Financial Group, Inc.
Income Statement Highlights -- Reported Basis
(in thousands, except per share amounts)
2012
2011
For year ending
Fourth
Third
Second
First
Fourth
December 31,
December 31,
Quarter
Quarter
Quarter
Quarter
Quarter
2012
2011
Interest income:
Loans and leases
$ 212,035
$ 211,767
$ 200,725
$ 189,385
$ 195,434
$ 813,912
$ 704,664
Investment securities and other
71,564
90,101
99,116
101,395
96,472
362,176
360,643
Total interest income
283,599
301,868
299,841
290,780
291,906
1,176,088
1,065,307
Interest expense:
Deposits
16,902
18,358
16,391
14,998
21,521
66,649
83,237
Borrowings
14,411
13,905
24,437
33,411
27,872
86,164
100,823
Total interest expense
31,313
32,263
40,828
48,409
49,393
152,813
184,060
Net interest income
252,286
269,605
259,013
242,371
242,513
1,023,275
881,247
Provision for credit losses
22,000
22,200
28,100
20,000
13,400
92,300
58,107
Net interest income after provision
230,286
247,405
230,913
222,371
229,113
930,975
823,140
Noninterest income:
Deposit service charges
26,345
26,422
21,433
17,037
18,049
91,237
66,144
Insurance commissions
15,497
18,764
17,072
16,833
15,440
68,166
65,125
Merchant and card fees
11,945
12,014
9,271
5,528
5,044
38,758
29,253
Wealth management services
12,000
11,069
9,207
9,039
8,179
41,315
30,729
Mortgage banking
8,060
10,974
7,174
5,649
5,279
31,857
15,182
Capital markets income
7,098
6,381
6,831
6,539
2,746
26,849
8,349
Lending and leasing
3,739
3,730
4,245
3,123
3,103
14,837
11,425
Bank owned life insurance
3,021
3,449
3,848
3,387
3,302
13,705
11,129
Other income
4,116
9,400
16,517
2,773
2,543
32,806
7,973
Total noninterest income
91,821
102,203
95,598
69,908
63,685
359,530
245,309
Noninterest expense:
Salaries and benefits
111,026
115,484
104,507
96,477
88,796
427,494
341,895
Occupancy and equipment
27,609
25,694
24,089
22,017
22,580
99,409
78,163
Technology and communications
28,257
28,110
24,434
19,713
18,942
100,514
62,376
Marketing and advertising
9,292
8,954
6,676
6,763
7,724
31,685
21,850
Professional services
11,163
11,193
9,263
8,895
11,669
40,514
36,017
Amortization of intangibles
14,224
14,506
9,839
6,466
6,586
45,035
25,544
FDIC premiums
9,158
8,850
10,552
6,133
6,097
34,693
28,860
Merger and acquisition integration expenses
3,678
29,404
131,460
12,970
6,149
177,512
98,161
Restructuring charges
--
--
3,750
2,703
13,496
6,453
42,534
Other expense
24,377
24,347
21,069
18,041
20,132
87,834
70,933
Total noninterest expense
238,784
266,542
345,639
200,178
202,171
1,051,143
806,333
Income (loss) before income tax
83,323
83,066
(19,128)
92,101
90,627
239,362
262,116
Income tax expense (benefit)
22,226
24,682
(8,204)
32,236
32,166
70,940
88,206
Net income (loss)
61,097
58,384
(10,924)
59,865
58,461
168,422
173,910
Preferred stock dividend
7,547
7,547
7,547
5,115
--
27,756
--
Net income (loss) available to common stockholders
$ 53,550
$ 50,837
$ (18,471)
$ 54,750
$ 58,461
$ 140,666
$ 173,910
Financial Ratios:
Earnings (loss) per basic share
$ 0.15
$ 0.15
$ (0.05)
$ 0.16
$ 0.19
$ 0.40
$ 0.64
Earnings (loss) per diluted share
0.15
0.14
(0.05)
0.16
0.19
0.40
0.64
Weighted average shares outstanding - basic(1)
349,071
349,001
348,941
348,823
304,065
348,960
271,301
Weighted average shares outstanding - diluted(1)
349,663
349,371
348,941
349,069
304,341
349,368
271,612
Net revenue(2)
$ 344,107
$ 371,808
$ 354,611
$ 312,279
$ 306,198
$ 1,382,805
$ 1,126,556
Noninterest income as a percentage of net revenue(2)
26.68%
27.49%
26.96%
22.39%
20.80%
26.00%
21.78%
Pre-tax, pre-provision income(3)
$ 105,323
$ 105,266
$ 8,972
$ 112,101
$ 104,027
$ 331,662
$ 320,223
Pre-tax, pre-provision income per diluted share(3)
$ 0.30
$ 0.30
$ 0.03
$ 0.32
$ 0.34
$ 0.95
$ 1.18
Pre-tax, pre-provision return on average assets(3)
(2) Net revenue is comprised of net interest income and noninterest income.
(3) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(4) Yields and rates calculated on a tax equivalent basis.
(5) Return used to calculate ratio excludes preferred stock dividend.
First Niagara Financial Group, Inc.
Period End Balance Sheet
(in thousands)
2012
2011
December 31,
September 30,
June 30,
March 31,
December 31,
Cash and cash equivalents
$ 430,862
$ 447,087
$ 488,227
$ 370,380
$ 836,555
Investment securities:
Available for sale
10,996,102
10,579,970
9,937,271
12,248,058
9,348,296
Held to maturity
1,299,806
1,387,763
1,463,872
2,503,156
2,669,630
FHLB and FRB common stock
420,277
373,311
329,555
499,328
358,159
Total investment securities
12,716,185
12,341,044
11,730,698
15,250,542
12,376,085
Loans held for sale
154,745
117,375
101,596
102,513
94,484
Loans and leases:
Commercial:
Real estate
7,093,193
6,835,971
6,710,009
6,369,098
6,244,381
Business
4,953,323
4,682,154
4,514,537
4,108,363
3,771,649
Total commercial loans
12,046,516
11,518,125
11,224,546
10,477,461
10,016,030
Consumer:
Residential real estate
3,761,567
3,870,756
4,037,045
3,881,003
4,012,267
Home equity
2,651,891
2,661,429
2,683,236
2,149,135
2,165,988
Indirect auto
601,456
419,258
185,774
--
--
Credit cards
314,973
308,387
304,368
--
--
Other consumer
333,609
328,571
328,547
283,320
278,298
Total consumer loans
7,663,496
7,588,401
7,538,970
6,313,458
6,456,553
Total loans and leases
19,710,012
19,106,526
18,763,516
16,790,919
16,472,583
Allowance for loan losses
162,522
149,933
138,516
126,746
120,100
Loans and leases, net
19,547,490
18,956,593
18,625,000
16,664,173
16,352,483
Bank owned life insurance
404,321
401,211
397,739
395,944
392,468
Goodwill and other intangibles
2,617,809
2,626,625
2,631,605
1,796,394
1,803,240
Other assets
937,317
983,999
1,130,891
937,859
955,300
Total assets
$ 36,808,729
$ 35,873,934
$ 35,105,756
$ 35,517,805
$ 32,810,615
Deposits:
Savings accounts
$ 3,887,587
$ 3,941,528
$ 4,103,773
$ 2,554,720
$ 2,621,016
Interest-bearing checking
4,450,970
4,090,322
3,887,568
2,431,672
2,259,576
Money market deposits
10,581,137
10,801,280
10,919,766
7,100,646
7,220,902
Noninterest-bearing deposits
4,643,580
4,658,374
4,774,764
3,200,824
3,335,356
Certificates of deposit
4,113,257
4,206,192
4,211,116
3,741,525
3,968,265
Total deposits
27,676,531
27,697,696
27,896,987
19,029,387
19,405,115
Short-term borrowings
2,983,718
1,995,610
958,044
6,353,189
2,208,845
Long-term borrowings
732,425
732,339
732,263
4,688,251
5,918,276
Other liabilities
487,958
532,868
700,249
571,532
480,201
Total liabilities
31,880,632
30,958,513
30,287,543
30,642,359
28,012,437
Preferred stockholders' equity
338,002
338,002
338,002
338,002
338,002
Common stockholders' equity
4,590,095
4,577,419
4,480,211
4,537,444
4,460,176
Total stockholders' equity
4,928,097
4,915,421
4,818,213
4,875,446
4,798,178
Total liabilities and stockholders' equity
$ 36,808,729
$ 35,873,934
$ 35,105,756
$ 35,517,805
$ 32,810,615
Selected balance sheet information:
Total interest-earning assets(1)
$ 32,321,964
$ 31,316,470
$ 30,403,035
$ 31,959,556
$ 29,284,139
Total interest-bearing liabilities
26,749,094
25,767,271
24,812,530
26,870,002
24,196,880
Net interest-earning assets
$ 5,572,870
$ 5,549,199
$ 5,590,505
$ 5,089,554
$ 5,087,259
Tangible common equity(2)
$ 1,972,286
$ 1,950,794
$ 1,848,606
$ 2,741,050
$ 2,656,936
Unrealized gain on securities, net of tax
208,271
204,347
133,430
152,408
105,276
Total core deposits
$ 23,563,274
$ 23,491,504
$ 23,685,871
$ 15,287,862
$ 15,436,850
Originated loans(3)
$ 13,372,357
$ 12,232,568
$ 11,392,158
$ 10,517,021
$ 9,876,005
Acquired loans(4)
6,513,636
7,085,839
7,600,213
6,459,798
6,801,689
Credit related discount on acquired loans(5)
(175,981)
(211,881)
(228,855)
(185,900)
(205,111)
Total Loans
$ 19,710,012
$ 19,106,526
$ 18,763,516
$ 16,790,919
$ 16,472,583
(1) Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) Originated loans represent total loans excluding acquired loans.
(4) Represents the carrying value of acquired loans plus the principal not expected to be collected.
(5) Represent principal on acquired loans not expected to be collected.
First Niagara Financial Group, Inc.
Average Balance Sheet and Related Tax Equivalent Yields & Rates
(in millions)
For the three months ended
For year ending
December 31, 2012
September 30, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Average
Balances
Interest(1)
Yields
and
Rates(1)(2)
Average
Balances
Interest(1)
Yields
and
Rates(1)
Average
Balances
Interest(1)
Yields
and
Rates(1)(2)
Average
Balances
Interest(1)
Yields
and
Rates(1)(2)
Average
Balances
Interest(1)
Yields
and
Rates(1)
Interest-earning assets:
Loans and leases(3)
Commercial:
Real estate
$ 6,911
$ 79
4.45%
$ 6,783
$ 80
4.60%
$ 6,199
$ 82
5.19%
$ 6,625
$ 318
4.72%
$ 5,651
$ 305
5.33%
Business
4,783
47
3.89
4,609
45
3.81
3,663
40
4.24
4,402
176
3.94
3,209
138
4.23
Total commercial loans
11,694
126
4.22
11,392
125
4.28
9,862
122
4.84
11,027
494
4.41
8,860
443
4.93
Consumer:
Residential real estate
3,819
39
4.05
3,962
40
4.03
4,085
45
4.41
3,922
161
4.11
3,475
158
4.54
Home equity
2,659
29
4.31
2,672
30
4.42
2,166
24
4.48
2,476
109
4.39
1,973
90
4.54
Indirect auto
515
5
3.50
301
3
3.64
--
--
--
228
8
3.65
--
--
--
Credit cards
310
8
10.19
308
9
11.31
--
--
--
202
22
10.88
--
--
--
Other consumer
328
7
8.73
329
7
8.80
279
5
7.12
296
24
8.25
274
19
6.98
Total consumer loans
7,631
87
4.54
7,572
88
4.64
6,530
75
4.53
7,124
324
4.55
5,721
267
4.66
Total loans and leases
19,325
213
4.39
18,964
213
4.47
16,392
196
4.76
18,151
818
4.51
14,582
710
4.87
Residential MBS(2)
5,746
36
2.50
5,677
40
2.81
8,429
68
3.21
7,230
202
2.79
8,191
284
3.47
Commercial MBS
1,953
18
3.79
1,895
19
3.93
1,262
13
4.19
1,855
73
3.91
626
25
4.03
Other investment securities (4)
4,474
35
3.16
4,002
33
3.35
1,926
19
4.04
3,705
123
3.32
1,680
68
3.97
Total securities, at cost(2)
12,173
90
2.95
11,574
92
3.18
11,617
100
3.45
12,790
397
3.11
10,497
377
3.59
Money market and other investments
207
1
1.54
201
1
1.41
299
1
0.86
257
3
1.13
132
2
1.33
Total interest-earning assets(2)
31,705
$ 304
3.81%
30,739
$ 306
3.96%
28,308
$ 297
4.17%
31,198
$ 1,219
3.91%
25,211
$ 1,089
4.31%
Goodwill and other intangibles
2,619
2,627
1,810
2,315
1,625
Other noninterest-earning assets
2,005
1,938
1,578
1,804
1,424
Total assets
$ 36,329
$ 35,304
$ 31,696
$ 35,317
$ 28,260
Interest-bearing liabilities:
Deposits
Savings accounts
$ 3,898
$ 2
0.18%
$ 4,026
$ 2
0.20%
$ 2,622
$ 1
0.12%
$ 3,451
$ 5
0.15%
$ 2,287
$ 5
0.20%
Interest-bearing checking
4,181
1
0.07
3,871
1
0.06
2,101
1
0.12
3,347
2
0.07
1,958
2
0.12
Money market deposits
10,810
7
0.25
10,899
8
0.29
7,414
10
0.52
9,506
27
0.28
6,504
36
0.56
Certificates of deposit
4,259
8
0.71
4,083
8
0.75
4,162
10
0.99
4,048
33
0.81
4,057
40
0.98
Total interest bearing deposits
23,148
17
0.29%
22,879
19
0.32%
16,299
22
0.52%
20,352
67
0.33%
14,806
83
0.56%
Borrowings
Short-term borrowings
2,331
2
0.38%
1,666
1
0.36%
1,899
2
0.49%
3,163
17
0.53%
1,638
6
0.40%
Long-term borrowings
732
12
6.63
732
12
6.74
5,797
26
1.75
2,299
69
3.02
5,124
95
1.84
Total borrowings
3,063
14
1.87
2,398
13
2.31
7,696
28
1.44
5,462
86
1.58
6,762
101
1.49
Total interest-bearing liabilities
26,211
$ 31
0.48%
25,277
$ 32
0.51%
23,995
$ 49
0.82%
25,814
$ 153
0.59%
21,568
$ 184
0.85%
Noninterest-bearing deposits
4,645
4,618
3,077
4,041
2,595
Other noninterest-bearing liabilities
528
536
435
575
384
Total liabilities
31,384
30,431
27,507
30,430
24,547
Total stockholders' equity
4,945
4,873
4,189
4,887
3,713
Total liabilities and stockholders' equity
$ 36,329
$ 35,304
$ 31,696
$ 35,317
$ 28,260
Net interest income (FTE)
$ 273
$ 274
$ 248
$ 1,066
$ 904
Taxable Equivalent Adjustment(1)
4
4
5
18
23
Total core deposits
$ 23,534
$ 10
0.16%
$ 23,414
$ 11
0.18%
$ 15,214
$ 12
0.29%
$ 20,345
$ 34
0.17%
$ 13,344
$ 43
0.33%
Total deposits
27,793
17
0.24%
27,497
19
0.27%
19,376
22
0.44%
24,393
67
0.27%
17,401
83
0.48%
Tax equivalent net interest rate spread(2)
3.33%
3.45%
3.35%
3.32%
3.46%
Tax equivalent net interest rate margin(2)
3.42%
3.54%
3.48%
3.42%
3.58%
(1) Tax equivalent interest income is calculated based upon a 35% effective tax rate.
(2) Amounts for the three months and year ended December 31, 2012 exclude accelerated CMO adjustments of $16 million and $25 million, respectively. The yields, including these adjustments, are:
Three months ended December 31, 2012
Year ended December 31, 2012
Residential MBS
1.37%
2.45%
Total securities, at cost
2.41%
2.91%
Total interest earning assets
3.61%
3.83%
Tax equivalent net interest rate spread
3.13%
3.24%
Tax equivalent net interest rate margin
3.22%
3.34%
(3) Includes nonaccrual loans.
(4) Includes debt securities, collateralized loan obligations, asset-backed securities, FHLB and FRB common stock, and other investment securities.
First Niagara Financial Group, Inc.
Allowance for Loans and Lease Losses & Asset Quality
(in thousands)
2012
2011
For year ending
Fourth
Third
Second
First
Fourth
December 31,
December 31,
Quarter
Quarter
Quarter
Quarter
Quarter
2012
2011
Beginning balance
$ 149,933
$ 138,516
$ 126,746
$ 120,100
$ 112,749
$ 120,100
$ 95,354
Net loan (charge-offs) recoveries:
Commercial real estate
$ (1,935)
$ (1,791)
$ (2,384)
$ (5,994)
$ 212
$ (12,104)
$ (10,161)
Commercial business
(3,385)
(6,077)
(10,958)
(4,143)
(4,665)
(24,563)
(14,618)
Residential real estate
(658)
(396)
(155)
(1,120)
(318)
(2,329)
(986)
Home equity
(673)
(401)
(1,536)
(1,161)
(268)
(3,771)
(2,101)
Other consumer
(2,285)
(1,406)
(805)
(836)
(796)
(5,332)
(1,759)
Total net loan charge-offs
$ (8,936)
$ (10,071)
$ (15,838)
$ (13,254)
$ (5,835)
$ (48,099)
$ (29,625)
Provision for loan losses
21,525
21,800
27,803
19,900
13,186
91,028
54,371
Allowance related to loans sold
--
(312)
(195)
--
--
(507)
--
Ending balance
$ 162,522
$ 149,933
$ 138,516
$ 126,746
$ 120,100
$ 162,522
$ 120,100
Supplemental information
Allowance to loans
0.82%
0.78%
0.74%
0.75%
0.73%
0.82%
0.73%
Allowance for originated loans to originated loans(1)
1.20%
1.20%
1.19%
1.19%
1.20%
1.20%
1.20%
Net charge-offs to average loans (annualized)
Commercial real estate
0.11%
0.11%
0.15%
0.38%
-0.01%
0.18%
0.18%
Commercial business
0.28%
0.53%
1.02%
0.42%
0.51%
0.56%
0.46%
Total commercial loans
0.18%
0.28%
0.49%
0.40%
0.18%
0.33%
0.28%
Residential real estate
0.07%
0.04%
0.02%
0.11%
0.03%
0.06%
0.03%
Home equity
0.10%
0.06%
0.25%
0.22%
0.05%
0.15%
0.11%
Other consumer
0.79%
0.60%
0.61%
1.20%
1.14%
0.73%
0.64%
Total consumer loans
0.19%
0.12%
0.15%
0.20%
0.08%
0.16%
0.08%
Total loans
0.18%
0.21%
0.36%
0.32%
0.14%
0.26%
0.20%
Net charge-offs of originated loans to average originated loans (annualized)(1)
Commercial real estate
0.07%
0.12%
0.18%
0.16%
-0.05%
0.13%
0.26%
Commercial business
0.33%
0.64%
1.25%
0.54%
0.67%
0.68%
0.59%
Total commercial loans
0.19%
0.36%
0.66%
0.32%
0.25%
0.38%
0.39%
Residential real estate
0.15%
0.09%
0.04%
0.27%
0.08%
0.14%
0.06%
Home equity
0.21%
0.13%
0.51%
0.40%
0.10%
0.31%
0.21%
Other consumer
0.94%
0.59%
0.81%
1.25%
1.51%
0.84%
1.02%
Total consumer loans
0.35%
0.18%
0.28%
0.38%
0.17%
0.30%
0.17%
Total loans
0.24%
0.30%
0.55%
0.34%
0.22%
0.35%
0.32%
Nonperforming loans:
Originated:
Commercial real estate
$ 50,848
$ 46,413
$ 46,881
$ 44,749
$ 43,119
$ 50,848
$ 43,119
Commercial business
47,076
37,375
30,714
39,682
20,173
47,076
20,173
Residential real estate
27,192
21,377
23,058
22,021
18,668
27,192
18,668
Home equity
14,233
8,084
8,119
7,071
6,790
14,233
6,790
Other consumer
3,737
938
926
697
1,048
3,737
1,048
Total originated nonperforming loans
143,086
114,187
109,698
114,220
89,798
143,086
89,798
Total acquired nonperforming loans(2)
29,638
28,193
19,374
19,041
--
29,638
--
Total nonperforming loans
172,724
142,380
129,072
133,261
89,798
172,724
89,798
Real estate owned
10,114
9,669
10,632
7,202
4,482
10,114
4,482
Total nonperforming assets
$ 182,838
$ 152,049
$ 139,704
$ 140,463
$ 94,280
$ 182,838
$ 94,280
Accruing troubled debt restructurings (TDR)
$ 46,280
$ 55,732
$ 42,140
$ 42,358
$ 43,888
$ 46,280
$ 43,888
Loans 90 days past due still accruing(3)
171,548
145,323
125,668
116,810
143,237
171,548
143,237
Total classified loans(4)
708,468
693,006
732,762
753,536
748,375
708,468
748,375
Total criticized loans
$ 1,002,659
$ 990,670
$ 1,030,471
$ 1,044,731
$ 1,144,222
$ 1,002,659
$ 1,144,222
Total nonperforming loans to loans
0.88%
0.75%
0.69%
0.79%
0.55%
0.88%
0.55%
Total nonperforming originated loans to originated loans(1)
1.07%
0.93%
0.96%
1.09%
0.91%
1.07%
0.91%
Total nonperforming assets to loans and real estate owned
0.93%
0.80%
0.74%
0.84%
0.57%
0.93%
0.57%
Total nonperforming assets to assets
0.50%
0.42%
0.40%
0.40%
0.29%
0.50%
0.29%
Allowance to nonperforming loans
94.1%
105.3%
107.3%
95.1%
133.7%
94.1%
133.7%
Texas ratio(5)
16.60%
14.16%
13.35%
8.97%
8.55%
16.60%
8.55%
(1) Originated loans represent total loans excluding acquired loans.
(2) Nonperforming acquired loans include certain lines of credit that are considered nonaccruing. The remaining credit discount, recorded at acquisition, is adequate to cover losses on these balances.
(3) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
(4) Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business", under the heading "Classification of Assets" in our Annual Report on 10-K for the year ended December 31, 2011.
(5) Represents ratio computed using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
First Niagara Financial Group, Inc.
Key Statistics
(Share counts in thousands)
2012
2011
December 31,
September 30,
June 30,
March 31,
December 31,
First Niagara Financial Group, Inc capital ratios:
Tier 1 risk based capital
9.29%
9.51%
9.40%
14.66%
(1)
15.60%
(1)
Tier 1 common capital(2)
7.45%
7.59%
7.41%
12.47%
(1)
13.23%
(1)
Total risk based capital
11.23%
11.48%
11.37%
16.75%
(1)
17.84%
(1)
Leverage
6.75%
6.83%
6.32%
9.67%
(1)
9.97%
(1)
Equity to assets
13.39%
13.70%
13.72%
13.73%
(1)
14.62%
(1)
Tangible common equity to tangible assets(2)
5.77%
5.87%
5.69%
8.13%
(1)
8.57%
(1)
First Niagara Bank, N.A capital ratios:
Tier 1 risk based capital
9.94%
10.19%
9.63%
14.69%
(1)
14.66%
(1)
Total risk based capital
10.66%
10.88%
10.57%
15.66%
(1)
16.47%
(1)
Leverage
7.23%
7.32%
6.48%
9.69%
(1)
9.38%
(1)
Number of branches
430
432
452
334
333
Full time equivalent employees
5,927
6,036
6,103
4,753
4,827
Share information and per share metrics:
Common shares outstanding
352,621
352,632
352,665
351,936
351,834
Preferred shares outstanding
14,000
14,000
14,000
14,000
14,000
Treasury shares
13,381
13,370
13,337
14,066
14,168
Market price (NASDAQ: FNFG):
$ 7.93
$ 8.07
$ 7.65
$ 9.84
$ 8.63
Book value per share(3)
13.15
13.11
12.84
13.00
12.79
Tangible book value per share(2)(3)
5.65
5.59
5.30
7.86
7.62
Price/Book
60.30%
61.56%
59.58%
75.69%
67.47%
Price/Tangible book(2)
140.35%
144.36%
144.34%
125.19%
113.25%
Common stock dividends
$ 0.08
$ 0.08
$ 0.08
$ 0.08
$ 0.16
Preferred stock dividends
0.54
0.54
0.54
0.37
--
Dividend payout ratio
53.33%
53.33%
N/M
50.00%
84.21%
Dividend yield (annualized)
4.01%
3.94%
4.21%
3.27%
7.36%
N/M Not meaningful
(1) Ratios reflect the impact of our capital raise completed in December 2011, the proceeds of which were used to consummate the acquisition of branches from HSBC Bank-USA, National Association in May 2012.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
Financial ratios computed on an operating basis(1):
Earnings per basic share
$ 0.19
$ 0.19
$ 0.19
$ 0.19
$ 0.24
$ 0.75
$ 0.98
Earnings per diluted share
0.19
0.19
0.19
0.19
0.24
0.75
0.98
Weighted average shares outstanding - basic(2)
349,071
349,001
348,941
348,823
304,065
348,960
271,301
Weighted average shares outstanding - diluted(2)
349,663
349,371
348,941
349,069
304,341
349,368
271,612
Noninterest income as a percentage of net revenue(4)
25.48%
26.43%
22.96%
22.39%
20.80%
24.40%
21.78%
Pre-tax, pre-provision income
125,281
129,333
136,645
127,774
123,672
519,033
460,918
Pre-tax, pre-provision income per diluted share
0.36
0.37
0.39
0.37
0.41
1.49
1.70
Pre-tax, pre-provision return on average assets
1.37%
1.46%
1.51%
1.55%
1.55%
1.47%
1.63%
Net interest margin(3)
3.42%
3.54%
3.37%
3.34%
3.48%
3.42%
3.58%
Interest yield on average loans(3)
4.39%
4.47%
4.59%
4.62%
4.76%
4.51%
4.87%
Rate paid on interest-bearing liabilities(3)
0.48%
0.51%
0.61%
0.79%
0.82%
0.59%
0.85%
Efficiency ratio
65.24%
64.71%
60.63%
59.08%
59.61%
62.56%
59.09%
Effective tax rate
27.0%
30.9%
33.5%
35.0%
34.7%
31.7%
33.8%
Return on average assets
0.83%
0.83%
0.80%
0.85%
0.90%
0.83%
0.94%
Return on average equity
6.06%
6.04%
5.95%
5.81%
6.82%
5.97%
7.18%
Return on average tangible equity(5)
12.89%
13.11%
10.86%
9.24%
12.02%
11.34%
12.77%
Return on average common equity
5.86%
5.83%
5.72%
5.79%
6.93%
5.80%
7.22%
Return on average tangible common equity(6)
13.57%
13.86%
11.13%
9.63%
12.36%
11.81%
12.88%
Reconciliation of net interest income on operating basis to reported net interest income(1):
Total net interest income on operating basis (Non-GAAP)
$ 268,566
$ 269,605
$ 267,371
$ 242,371
$ 242,513
$ 1,047,913
$ 881,247
Additional premium amortization on securities portfolio
(16,280)
--
(8,358)
--
--
(24,638)
--
Total reported net interest income (GAAP)
252,286
269,605
259,013
242,371
242,513
1,023,275
881,247
Reconciliation of noninterest income on operating basis to reported noninterest income(1):
Total noninterest income on operating basis (Non-GAAP)
$ 91,821
$ 96,866
$ 79,703
$ 69,908
$ 63,685
$ 338,298
$ 245,309
Gain on securities portfolio repositioning
--
5,337
15,895
--
--
21,232
--
Total reported noninterest income (GAAP)
91,821
102,203
95,598
69,908
63,685
359,530
245,309
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP)
$ 235,106
$ 237,138
$ 210,429
$ 184,505
$ 182,526
$ 867,178
$ 665,638
Merger and acquisition integration expenses
3,678
29,404
131,460
12,970
6,149
177,512
98,161
Restructuring charges
--
--
3,750
2,703
13,496
6,453
42,534
Total reported noninterest expense (GAAP)
$ 238,784
$ 266,542
$ 345,639
$ 200,178
$ 202,171
$ 1,051,143
$ 806,333
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP)
$ 75,358
$ 74,027
$ 72,188
$ 70,053
$ 72,057
$ 291,626
$ 266,718
Nonoperating income and expenses, net of tax:
Additional premium amortization on securities portfolio
11,633
--
5,558
--
--
17,191
--
Gain on securities portfolio repositioning
--
(3,469)
(10,331)
--
--
(13,800)
--
Merger and acquisition integration expenses
2,628
19,112
85,448
8,431
4,256
115,619
64,420
Restructuring charges
--
--
2,437
1,757
9,340
4,194
28,388
Total nonoperating expenses, net of tax
14,261
15,643
83,112
10,188
13,596
123,204
92,808
Net income (GAAP)
$ 61,097
$ 58,384
$ (10,924)
$ 59,865
$ 58,461
$ 168,422
$ 173,910
Reconciliation of net operating income available to common stockholders to net income available to common stockholders(1):
Net operating income available to common stockholders (Non-GAAP)
$ 67,811
$ 66,480
$ 64,641
$ 64,938
$ 72,057
$ 263,870
$ 266,718
Nonoperating income and expenses, net of tax:
Additional premium amortization on securities portfolio
11,633
--
5,558
--
--
17,191
--
Gain on securities portfolio repositioning
--
(3,469)
(10,331)
--
--
(13,800)
--
Merger and acquisition integration expenses
2,628
19,112
85,448
8,431
4,256
115,619
64,420
Restructuring charges
--
--
2,437
1,757
9,340
4,194
28,388
Total nonoperating income and expenses, net of tax
14,261
15,643
83,112
10,188
13,596
123,204
92,808
Net income available to common stockholders (GAAP)
$ 53,550
$ 50,837
$ (18,471)
$ 54,750
$ 58,461
$ 140,666
$ 173,910
Computation of pre-tax,pre-provision income:
Net interest income
$ 252,286
$ 269,605
$ 259,013
$ 242,371
$ 242,513
$ 1,023,275
$ 881,247
Noninterest income
91,821
102,203
95,598
69,908
63,685
359,530
245,309
Noninterest expense
(238,784)
(266,542)
(345,639)
(200,178)
(202,171)
(1,051,143)
(806,333)
Pre-tax, pre-provision income (GAAP)
105,323
105,266
8,972
112,101
104,027
331,662
320,223
Add back: non-operating premium amortization
16,280
--
8,358
--
--
24,638
--
Less: non-operating noninterest income (1)
--
(5,337)
(15,895)
--
--
(21,232)
--
Add back: non-operating noninterest expenses (1)
3,678
29,404
135,210
15,673
19,645
183,965
140,695
Pre-tax, pre-provision income (Non-GAAP)(1)
$ 125,281
$ 129,333
$ 136,645
$ 127,774
$ 123,672
$ 519,033
$ 460,918
(1) Net interest income, noninterest income and expense on an operating basis, net operating income, and pre-tax, pre-provision income on an operating basis are non-GAAP measures that we believe provide meaningful comparisons of our underlying operational performance and facilitates investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, we believe exclusion of these nonoperating items enables management to perform a more effective evaluation and comparison of our results and to assess performance in relation to our ongoing operations.
(3) Yields and rates calculated on a tax equivalent basis.
(4) Net revenue is comprised of net interest income and noninterest income.
(5) Tangible equity is a non-GAAP measure and excludes goodwill and other intangibles.
(6) Tangible common equity is a non-GAAP measure and excludes goodwill and other intangibles as well as preferred stock.
First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation (Cont.)
(in thousands, except per share amounts)
2012
2011
For year ending
Fourth
Third
Second
First
Fourth
December 31,
December 31,
Quarter
Quarter
Quarter
Quarter
Quarter
2012
2011
Computation of Ending Tangible Common Equity:
Total stockholders' equity
$ 4,928,097
$ 4,915,421
$ 4,818,213
$ 4,875,446
$ 4,798,178
$ 4,928,097
$ 4,798,178
Less: Goodwill and other intangibles
(2,617,809)
(2,626,625)
(2,631,605)
(1,796,394)
(1,803,240)
(2,617,809)
(1,803,240)
Less: Preferred stockholders' equity
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
Tangible common equity
$ 1,972,286
$ 1,950,794
$ 1,848,606
$ 2,741,050
$ 2,656,936
$ 1,972,286
$ 2,656,936
Computation of Average Tangible Equity:
Total stockholders' equity
$ 4,945,132
$ 4,872,605
$ 4,879,791
$ 4,850,276
$ 4,188,800
$ 4,887,071
$ 3,712,927
Less: Goodwill and other intangibles
(2,619,322)
(2,626,666)
(2,206,682)
(1,800,613)
(1,809,690)
(2,315,013)
(1,624,671)
Tangible equity
$ 2,325,810
$ 2,245,939
$ 2,673,109
$ 3,049,663
$ 2,379,110
$ 2,572,058
$ 2,088,256
Computation of Average Tangible Common Equity:
Total stockholders' equity
$ 4,945,132
$ 4,872,605
$ 4,879,791
$ 4,850,276
$ 4,188,800
$ 4,887,071
$ 3,712,927
Less: Goodwill and other intangibles
(2,619,322)
(2,626,666)
(2,206,682)
(1,800,613)
(1,809,690)
(2,315,013)
(1,624,671)
Less: Preferred stockholders' equity
(338,002)
(338,002)
(338,002)
(338,002)
(66,226)
(338,002)
(16,693)
Tangible common equity
$ 1,987,808
$ 1,907,937
$ 2,335,107
$ 2,711,661
$ 2,312,884
$ 2,234,056
$ 2,071,563
Computation of Texas Ratio:
Nonperforming Assets
$ 182,838
$ 152,049
$ 139,704
$ 140,463
$ 94,280
$ 182,838
$ 94,280
Loans 90 days past due still accruing(1)
171,548
145,323
125,668
116,810
143,237
171,548
143,237
Sum of nonperforming assets and loans 90 days past due still accruing
$ 354,386
$ 297,372
$ 265,372
$ 257,273
$ 237,517
$ 354,386
$ 237,517
Tangible common equity
$ 1,972,286
$ 1,950,794
$ 1,848,606
$ 2,741,050
$ 2,656,936
$ 1,972,286
$ 2,656,936
Allowance for loan loss
162,522
149,933
138,516
126,746
120,100
162,522
120,100
Sum of tangible common equity and allowance for loan loss
$ 2,134,808
$ 2,100,727
$ 1,987,122
$ 2,867,796
$ 2,777,036
$ 2,134,808
$ 2,777,036
Sum of nonperforming assets and acquired loans 90 days past due still accruing/Sum of tangible common equity and allowance for loan loss
16.60%
14.16%
13.35%
8.97%
8.55%
16.60%
8.55%
Computation of Tier 1 Common Capital:
Tier 1 capital
$ 2,264,679
$ 2,225,121
$ 2,128,702
$ 3,009,727
$ 2,962,031
$ 2,264,679
$ 2,962,031
Less: Qualifying restricted core capital elements
(112,025)
(111,820)
(111,630)
(111,453)
(111,284)
(112,025)
(111,284)
Less: Perpetual non-cumulative preferred stock
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
(338,002)
Tier 1 common capital (Non-GAAP)
$ 1,814,652
$ 1,775,299
$ 1,679,070
$ 2,560,272
$ 2,512,745
$ 1,814,652
$ 2,512,745
(1) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
Press Release $FNFG First Niagara Financial Group Inc.
Fourth Quarter Highlights:
BUFFALO, N.Y., Jan. 23, 2013 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today announced fourth-quarter and full-year 2012 results that reflect strong core business fundamentals and core customer acquisition across the company's regional banking footprint. Solid operating performance continues to be driven by sustained market share gains through new customer acquisition as well as deepening relationships with existing customers.
"We finished 2012 with our team and franchise in a very solid and stable position – and most importantly, focused on optimizing our performance and results in 2013," said John R. Koelmel, First Niagara President and Chief Executive Officer. "The fundamentals of our business continue to improve as we more fully leverage the expanded capacities and competencies we now have, which has created very positive momentum as we start the new year. And while the impact of our CMO portfolio on fourth quarter results is disappointing, it doesn't at all diminish the consistent core operating performance we have again produced.
"As we look ahead to the next twelve months, our focus is to (1) better position our balance sheet by continuing the strong growth performance of our commercial and consumer lending teams; (2) ensure we do that while maintaining best in class credit outcomes; (3) deepen relationships across all business lines to improve the performance of our fee based businesses and services; and, (4) be more operationally effective and efficient by controlling costs and doing more with what we have already invested," continued Mr. Koelmel. "As I have consistently stated, running our business a little bit better each and every day is what we are about in 2013."
"Throughout 2012, First Niagara has delivered solid fundamental operating performance across all geographies enabled by strong traction with our new products and services," said Gregory W. Norwood, Chief Financial Officer. "Given the impact of a prolonged low interest rate environment, we will continue to sharpen our focus to maximize returns by optimizing the franchise and a commitment to manage expenses aggressively and create positive operating leverage."
Fourth Quarter Operating Results
In the fourth quarter of 2012, First Niagara reported non-GAAP operating net income available to common shareholders of $67.8 million, or $0.19 per diluted share, compared to $66.5 million, or $0.19 per diluted share, in the third quarter of 2012 and $72.1 million, or $0.24 per diluted share in the fourth quarter of 2011.
Those results exclude the impacts of the previously disclosed pre-tax adjustment of $16 million to accelerate premium amortization on its Collateralized Mortgage Obligations (CMO) portfolio and $3.7 million in restructuring charges.
Net interest income in the fourth quarter was essentially flat to the prior quarter. Excluding the impact of a quarter-over-quarter increase in premium amortization expense, net interest margin declined 8 basis points to 3.46%, driven by the continued downward re-pricing of loans and securities. However, those impacts on net interest income were offset by the benefits of a 13% increase in average interest-earning assets.
Non-interest revenues in the fourth quarter of 2012 decreased $5.0 million from the prior quarter as a result of seasonal declines in insurance commissions and lower mortgage banking revenues.
Average commercial loans increased 11% annualized over the prior quarter, the 12th consecutive quarter of double-digit growth as strong commercial business and commercial real estate loan demand continues across the company's footprint. Average transactional deposits, which include interest-bearing checking and non-interest bearing deposit balances, increased 16% annualized from the prior quarter driven by increases in balances held by customers.
The provision for loan losses on originated loans totaled $21.3 million in the fourth quarter of 2012, including $13.7 million to support loan growth and $7.6 million to cover net charge-offs during the quarter. Net charge-offs equaled 24 basis points of average originated loans, a six basis point decrease from the prior quarter.
Operating expenses in the fourth quarter of 2012 were $235.1 million, decreasing $2 million, or 1%, compared to the third quarter. Salaries and benefits expense declined $4.5 million, or 4%, driven by the company's workforce optimization initiative in the third quarter.
GAAP Results
On a GAAP basis, First Niagara reported fourth quarter net income to common shareholders of $53.5 million, or $0.15 per diluted share, compared to income of $50.8 million, or $0.14 per diluted share, in the third quarter of 2012. Reported GAAP results for the fourth quarter of 2012 included $3.7 million of restructuring charges as well as the impact of the $16 million accelerated premium amortization adjustment.
Full Year Results
For the full year ended December 31, 2012, the company posted non-GAAP operating earnings of $263.9 million, or $0.75 per diluted share, compared to $266.7 million, or $0.98 per diluted share, in 2011. The principal reasons for the decline were foregone interest income on $3.1 billion of mortgage-backed securities sold in the second quarter of 2012, continued pressures on asset pricing from the low interest rate environment, and the impacts of common and preferred shares issued in December 2011 to fund, in advance, the May 18, 2012 purchase of deposits and loans in the HSBC branch transaction.
For the full year 2012, the company posted GAAP net income of $140.7 million, or $0.40 per diluted share compared to $173.9 million, or $0.64 per diluted share, in 2011. Included in the calculation of GAAP net income are $184.0 million in pre-tax acquisition and restructuring related expenses, $24.6 million in accelerated premium amortization adjustments, and $21.2 million in gains related to the sale of $3.1 billion of mortgage-backed securities in the second quarter of 2012. In 2011, merger and restructuring related expenses totaled $140.7 million.
Loans
For the twelfth consecutive quarter, average commercial loans increased at a double-digit pace organically, up $302 million, or 11% annualized over the prior quarter. Commercial business loans averaged $4.8 billion, representing a 15% annualized increase over the prior quarter. Commercial real estate loans increased 8% annualized to $6.9 billion. Strength in specialty lending business lines such as equipment finance, healthcare lending, and capital markets augmented a robust pace of growth in the company's traditional middle market and commercial real estate businesses. Commercial loans in the company's Western and Eastern Pennsylvania and New England markets delivered double-digit annualized growth rates of 12%, 28%, and 10%, respectively, while balances in the New York market increased 6% following a strong third quarter.
Average indirect auto loan balances increased $214 million to $515 million. During the fourth quarter, new originations yielded 3.43%. The company continues to target and engage new car dealers within its contiguous footprint to lend and finance primarily used car purchases for high credit quality customers.
Average residential real estate loans declined by $143 million, or 14% annualized, from the third quarter reflecting higher prepayments. Average credit card and other consumer loan balances were unchanged.
Deposits
The company's strategic focus on core customer acquisition continued to allow it to successfully re-position its account mix and increase low cost deposits. Average transactional accounts, which include interest-bearing checking and noninterest-bearing balances, increased to $8.8 billion, up 16% annualized compared to the prior quarter, with double-digit increases across each market. These low-cost deposits now represent 32% of the company's deposit base, compared to 26% a year ago.
Average noninterest-bearing deposits increased 2% annualized while interest-bearing checking deposits increased 32% annualized over the prior quarter driven by strong customer engagement that resulted in higher account balances. These increases were offset by the company's pricing initiatives to reduce higher-cost money market balances. Average total core deposits, excluding time deposits, increased to $23.5 billion, or 2% annualized, compared to the third quarter.
Net Interest Income
Non-GAAP net interest income of $268.6 million was essentially flat to the prior quarter. The benefits of a 13% annualized increase in average earning assets were offset by the impacts of continued downward re-pricing pressure on earning asset yields. On a GAAP basis, net interest income of $252.3 million included the $16.3 million accelerated premium amortization adjustment related to the CMO portfolio.
Total premium amortization on the CMO portfolio increased to $30.8 million in the fourth quarter from $11.1 million in the prior quarter, driven by the $16.3 million in accelerated CMO premium amortization adjustment. Excluding the impacts of that increase, net interest margin in the fourth quarter was 3.46%, an eight basis point decline from the third quarter of 2012. Continued compression of loan yields from prepayments and lower spreads was partially offset by a three basis point decline in cost of interest bearing deposits.
"After our thorough evaluation of the CMO portfolio, including the substantial level of prepayments received in recent months as well as those expected to continue for the foreseeable future, we recorded an adjustment of $16 million to accelerate the premium amortization," said Mr. Norwood. "With this adjustment, the remaining premium has been reduced to $74 million, or 1.6% of par at December 31, 2012, significantly reducing potential future volatility in our CMO yields."
Credit Quality
At December 31, 2012, the allowance for loan losses was $162.5 million, compared to $149.9 million at September 30, 2012. Information for both the originated and acquired portfolios follows.
Originated loans
The provision for loan losses on originated loans totaled $21.3 million, unchanged from the prior quarter. This provision included $13.7 million to support sequential originated loan growth of $1.1 billion and $7.6 million to cover net charge-offs. Net charge-offs equaled 24 basis points of average originated loans in the fourth quarter of 2012, a six basis points improvement from the prior quarter.
At the end of the fourth quarter, nonperforming assets to total assets were 0.50%, and increased eight basis points from the prior quarter. Nonperforming originated loans as a percentage of originated loans increased to 1.07% at December 31, 2012 from 0.93% at September 30, 2012. Approximately a third of the $29 million sequential increase in nonperforming originated loans related to guidance issued by the Office of the Comptroller of the Currency (OCC) to place consumer loans discharged in bankruptcy on nonaccrual status. The remaining increase in commercial nonaccruals was driven primarily by one large commercial credit in the company's Eastern Pennsylvania market.
At December 31, 2012, the allowance for loan losses on originated loans totaled $160.9 million or 1.20% of such loans, compared to $147.2 million or 1.20% of loans at September 30, 2012.
Acquired loans
The provision for losses on acquired loans totaled $0.2 million, compared to $0.4 million in the prior quarter. Net charge-offs on those portfolios totaled $1.3 million during the quarter, compared to $1.0 million in the prior period. At December 31, 2012, the allowance for loan losses on acquired loans totaled $1.6 million, compared to $2.7 million at September 30, 2012. Acquired nonperforming loans totaled $29.6 million, compared to $28.2 million at the end of the prior quarter. At December 31, 2012, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $176 million.
Fee Income
Fourth quarter 2012 non-GAAP operating noninterest income of $91.8 million decreased 5% or $5.0 million compared to the prior quarter.
Continued strength in derivative swap activity and increased assets under management in the company's wealth management platform contributed to 11% and 8% sequential increases in capital markets and wealth management fees, respectively.
These increases were offset by lower mortgage banking revenues as well as typical fourth quarter declines in insurance fees. Mortgage banking revenues decreased $2.9 million from the prior quarter driven by lower application volumes and gain-on-sale margins. However, closed mortgage origination volumes increased 12% from the prior quarter to an all-time high. During the quarter, the company opened a third mortgage processing center to expediently meet and exceed the needs of its customers.
On a GAAP basis, noninterest income of $91.8 million declined $10.4 million from the prior quarter. Prior quarter results included a $5.3 million gain recognized on the sale of $3.1 billion in CMOs in the second quarter.
Noninterest Expense
Fourth quarter non-GAAP operating noninterest expenses were $235.1 million, decreasing $2.0 million, or 1%, compared to the third quarter, driven by the initial impact of the company's workforce optimization initiative in the third quarter. The benefit of the resulting $4.5 million decrease in salaries and benefits was minimized by seasonal increases in occupancy expenses. Excluding the additional $3.4 million in additional premium amortization recognized in the fourth quarter, the efficiency ratio of 64.6% was comparable to 64.7% in the prior quarter.
On a GAAP basis, noninterest expense for the fourth quarter was $238.8 million, including $3.7 million in restructuring charges.
Capital
At December 31, 2012, the company's estimated consolidated Total Risk Based capital and Tier 1 Common Risk Based capital ratios were 11.2% and 7.5% respectively. The company remains well above current regulatory guidelines for well-capitalized institutions.
About First Niagara
First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 430 branches, approximately $37 billion in assets, $28 billion in deposits, and approximately 6,000 employees providing financial services to individuals, families and businesses across Upstate New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.
Investor Call
A conference call will be held at 8:30 a.m. Eastern Time on Wednesday, January 23, 2013 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-888-324-9650 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and is available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until February 6, 2013 by dialing 1-888-566-0438, passcode: 15645.
Non-GAAP Measures - This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the company, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, the company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the company's results and to assess performance in relation to the company's ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document.
Forward-Looking Statements - This press release contains forward-looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real estate and business loans and non-performing loans.
Average
Balances
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Rates(1)(2)
Average
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Interest(1)
and
Rates(1)
Average
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Interest(1)
and
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Average
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Interest(1)
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Interest(1)
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CONTACT: First Niagara Contacts Investors: Ram Shankar Senior Vice President, Investor Relations (716) 270-8623 ram.shankar@fnfg.com News Media: David Lanzillo Senior Vice President, Corporate Communications (716) 819-5780 david.lanzillo@fnfg.comSource: First Niagara Financial Group, Inc.