First Niagara Financial Group Inc.

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First Niagara Reports Fourth Quarter and Full Year 2012 Results

Fourth Quarter Highlights:

  • Non-GAAP Operating Income of $0.19 per Share, Consistent with the Prior Quarter
  • GAAP EPS of $0.15 including CMO premium adjustment ($0.03) and restructuring charges ($0.01)
  • Business Trends Continue to be Very Strong
  • 12th consecutive quarter of double digit commercial loan growth
  • Interest-bearing checking balances up 32%
  • Mortgage originations increase 12% to an all-time high
  • Wealth Management fees increase 8%
  • Capital Markets revenue up 11%
  • Net Interest Income Stable, Excluding Impacts of Additional CMO Premium Amortization
  • 13% increase in average interest earning assets
  • Loan yields decline 8 basis points; deposit rates down 3 basis points

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) 1.15% 1.19% 0.10% 1.36% 1.30% 0.94% 1.13%
Net interest margin(4) 3.22% 3.54% 3.26% 3.34% 3.48% 3.42% 3.58%
Interest yield on average loans(4) 4.39% 4.47% 4.59% 4.62% 4.76% 4.51% 4.87%
Rate paid on interest-bearing liabilities(4) 0.48% 0.51% 0.61% 0.79% 0.82% 0.59% 0.85%
Efficiency ratio 69.39% 71.69% 97.47% 64.10% 66.03% 76.02% 71.58%
Effective tax rate 26.7% 29.7% 42.9% 35.0% 35.5% 29.6% 33.7%
Return on average assets(5)  0.67%  0.66%  (0.12)% 0.73% 0.73% 0.48% 0.62%
Return on average equity(5)  4.92%  4.77%  (0.90)% 4.96% 5.54% 3.45% 4.68%
Return on average tangible equity(3)(5)  10.45%  10.34%  (1.64)% 7.90% 9.75% 6.55% 8.33%
Return on average common equity  4.62%  4.46%  (1.64)% 4.88% 5.63% 3.09% 4.71%
Return on average tangible common equity(3)  10.72%  10.60%  (3.18)% 8.12% 10.03% 6.30% 8.33%
               
(1) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
(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.
(3) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
 
 
First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation
(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
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.
(2) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
(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.
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.com
Source: First Niagara Financial Group, Inc.
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