Market Overview

First Niagara Reports First Quarter 2016 Results

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  • First quarter operating earnings of $0.14 per diluted share
    • First quarter GAAP earnings of $0.11 per diluted share, including merger-related integration expenses
  • Average loans increased 5% annualized QOQ
    • Average commercial loans (CRE and commercial business) up 7% annualized QOQ
    • Average consumer loans increased 2% annualized QOQ driven by indirect auto loan growth
  • Average deposit balances increased 1% annualized QOQ and 4% YOY
    • Average retail deposit balances increased 8% annualized QOQ and 3% YOY
    • Average retail noninterest-bearing deposit balances increased 18% annualized QOQ and 4% YOY
  • Originated net charge-offs decreased 15 basis points QOQ to 0.22% of average originated loans


BUFFALO, N.Y., April 29, 2016 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (NASDAQ: FNFG) today reported GAAP net income available to common shareholders of $40.8 million, or $0.11 per diluted share for the first quarter of 2016, compared to $43.3 million, or $0.12 per diluted share, for the quarter ended December 31, 2015. Excluding merger-related costs incurred during the first quarter of 2016, operating net income available to common shareholders was $49.9 million, or $0.14 per diluted share.

"The First Niagara team remains fully committed to keeping our customers at the center of all we do and their efforts are reflected in our first-quarter performance, which is highlighted by continued strong core business fundamentals, particularly loan and deposit growth. Compared to the year-ago quarter, we grew average commercial loans by 5%, delivered 7% growth in average checking account deposit balances, and reported improved credit metrics," said Gary M. Crosby, President and Chief Executive Officer.  "We're maintaining a strong competitive position while we move forward on our planned merger with KeyCorp."

"In the first quarter, we delivered on the strong commercial loan pipeline at year-end which translated to an 11% annualized increase in period-end C&I loan balances and 5% QOQ increase on an average basis," said Gregory W. Norwood, Chief Financial Officer. "Revenue and expenses were largely consistent with typical first quarter seasonal trends. Our originated net charge-offs of just 22 basis points in the first quarter also reflects continued stable asset quality as well as the recovery on an energy credit that was previously charged-off."

First Quarter Results

In the first quarter of 2016, First Niagara reported GAAP net income available to common shareholders of $40.8 million, or $0.11 per diluted share, compared to $43.3 million, or $0.12 per diluted share in the fourth quarter of 2015. Reported results in the first quarter of 2016 and fourth quarter of 2015 reflect pre-tax merger related and restructuring costs of $13 million and $18 million, respectively. Excluding these items, operating net income available to common shareholders was $49.9 million, or $0.14 per diluted share, compared to $55.3 million, or $0.15 per diluted share in the fourth quarter of 2015.

Compared to the fourth quarter of 2015, the change in operating net income available to common shareholders was primarily driven by:

  • A $1 million increase in net interest income driven by a 5% annualized increase in average earning assets and two basis point expansion in net interest margin in part driven by higher short-term interest rates, and partially offset by lower net interest income from one less day in the first quarter.
  • A $10 million or 12% decrease in noninterest income driven by moderation in capital markets income from strong fourth quarter levels which included a favorable credit valuation adjustment, seasonal declines in deposit service charges and merchant and card fees, lower wealth management income due to lower producer levels and equity market volatility, and lower mortgage banking revenues due to a $1 million repurchase reserve reversal taken in the fourth quarter of 2015.
  • A $6 million or 2% decrease in operating noninterest expenses primarily driven by lower technology and professional services spend, partially offset by typical first quarter increases in payroll taxes and other benefits expenses.
  • A higher effective tax rate attributable to the expiration of benefits from certain tax credit investments.

In the first quarter of 2015, First Niagara reported GAAP net income available to common shareholders of $43.8 million, or $0.12 per diluted share. Results in the first quarter of 2015 included $18 million of pre-tax restructuring charges. Excluding these nonrecurring items, first quarter 2015 net income available to common shareholders was $54.7 million, or $0.15 per diluted share.

Compared to the first quarter of 2015, the change in operating net income available to common shareholders in the first quarter of 2016 was primarily driven by:

  • A 2% increase in net interest income driven by a 3% annualized increase in average earning assets, offset by a seven basis point compression in the net interest margin driven by increases in cost of deposits and borrowings.
  • A $10 million increase in provision for loan losses driven by greater reserve build.
  • A 4% decrease in noninterest income, driven by lower capital markets, lower commercial lines insurance revenues, and lower wealth management income attributable to market volatility in the first quarter of 2016.
  • Modestly lower noninterest expense as an increase in incentive compensation expenses was offset by declines in amortization of intangibles, marketing spend, FDIC assessments and third party professional services expenses.

Operating Results (Non-GAAP)Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Net interest income$  267.6 $  266.5 $  263.5 $  263.1 $  262.9 
Provision for credit losses 22.5  22.9  19.8  20.8  12.8 
Noninterest income 79.1  89.4  83.4  86.6  82.2 
Noninterest expense 241.9  247.4  245.4  247.9  243.5 
Operating net income 57.4  62.8  60.5  61.0  62.2 
Preferred stock dividend 7.5  7.5  7.5  7.5  7.5 
Operating net income available to common$  49.9 $  55.3 $  52.9 $  53.5 $  54.7 
Weighted average diluted shares outstanding 354.0  353.8  353.2  352.8  352.6 
Operating earnings per diluted share$  0.14 $  0.15 $ 0.15 $  0.15 $  0.15 
      

Reported Results (GAAP)
Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Operating net income before non-op. items$  57.4 $  62.8 $  60.5 $  61.0 $  62.2 
Non-operating items (a) 9.1  12.0  -  -  10.9 
Net Income 48.3  50.8  60.5  61.0  51.4 
Preferred stock dividend 7.5  7.5  7.5  7.5  7.5 
Net income available to common$  40.8 $  43.3 $  52.9 $  53.5 $  43.8 
Weighted average diluted shares outstanding 354.0  353.8  353.2  352.8  352.6 
Earnings per diluted share$  0.11 $  0.12 $  0.15 $  0.15 $  0.12 

All amounts in millions except earnings per diluted share.

(a) Q1 2016: Non-operating charges comprised of merger related costs including employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts as well as costs related to securing shareholder approval for the merger, net of taxes.

    Q4 2015: Non-operating charges primarily comprised of merger related costs including investment banker and other professional services fees, employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts as well as third-party professional fees incurred in connection with the overstatement of allowance resulting from mid-level employee misconduct, net of taxes.

    Q1 2015: Non-operating charges primarily related to staffing realignment, branch consolidations and third-party professional fees incurred in connection with the overstatement of allowance resulting from mid-level employee misconduct, net of taxes.

Loans

Average loans increased 5% annualized from the prior quarter to $24.1 billion, driven primarily by increases in the company's commercial real estate (CRE), commercial business (C&I), and indirect auto portfolios. On an end-of-period basis, total loans increased 2% annualized from the prior quarter driven by an 11% annualized increase in C&I loans and 12% increase in indirect auto loans.

Average commercial loans, which include commercial business (C&I) and commercial real estate (CRE) loans, increased 7% annualized from prior quarter to $14.7 billion, primarily driven by growth in the company's New England, Western Pennsylvania, and Tri-State regions.

  • Average CRE loans increased 7% annualized from the prior quarter to $8.6 billion driven by new commercial mortgage and construction lending volumes.
  • Average C&I loans increased 6% annualized QOQ to $6.1 billion reflecting strong origination activity across the company's footprint.

Average consumer loans increased 2% annualized from prior quarter to $9.4 billion.

  • Average indirect auto loan balances increased 9% annualized or by $51 million to $2.4 billion, as strong new origination activity was partially offset by increased pay-downs. Indirect auto originations during the quarter totaled $314 million. New originations in the first quarter yielded 3.41%, net of dealer reserve, compared to 3.30% on originations in the prior quarter.
  • Average residential real estate loans were flat to the prior quarter. 
  • Home equity balances increased for the twelfth consecutive quarter to $3.1 billion, or 2% annualized from the prior quarter as new volumes were offset by pay-downs driven by higher customer refinancing activity given low mortgage rates.
  • Credit card balances were down $8 million, or 11% annualized due to typical seasonality.

Average LoansQ1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Commercial real estate$  8,625 $  8,476 $  8,277 $  8,257 $  8,263 
Commercial business 6,062  5,971  5,972  5,830  5,797 
Total commercial 14,687  14,447  14,249  14,087  14,060 
Residential real estate 3,346  3,346  3,338  3,326  3,338 
Home equity 3,066  3,052  3,001  2,963  2,939 
Indirect auto 2,420  2,369  2,293  2,238  2,187 
Credit cards 297  305  306  304  311 
Other consumer 242  250  255  260  275 
Total consumer 9,371  9,322  9,193  9,091  9,050 
Total loans$  24,058 $   23,769 $  23,442 $  23,178 $  23,110 

All amounts in millions.

Credit Quality

At March 31, 2016, the allowance for loan losses was $253 million, compared to $242 million at December 31, 2015.  In the first quarter, provision for loan losses totaled $22.5 million, compared to $22.4 million in the prior quarter. Nonperforming assets comprised 0.59% of total assets, essentially flat compared to December 31, 2015.  Information for both the originated and acquired portfolios follows.

 Q1 2016 Q4 2015
$ in millionsOriginatedAcquiredTotal OriginatedAcquiredTotal
Provision for loan losses*$  22 .5 $  0.0 $  22.5  $  22.4 $  0.0 $  22.4 
Net charge-offs 11.4  0.4  11.8   19.1  0.0  19.1 
NCOs/ Avg Loans 0.22% 0.05% 0.20%  0.37% 0.00% 0.32%
Total loans**$  21,362 $  2,817 $  24,178  $  21,101 $  2,937 $  24,038 
Allowance$  247.8 $  5.0 $  252.8  $  236.7 $  5.3 $  242.0 
Allowance/Loans 1.16% 0.18% 1.05%  1.12% 0.18% 1.01%
Nonperforming Loans$  196.7 $  24.9 $  221.5  $  188.2 $  25.3 $  213.6 
NPLs/ Loans 0.92% 0.88% 0.92%  0.89% 0.86% 0.89%
Criticized$  775.9 $  178.5 $  954.5  $  761.6 $  183.2 $  944.8 
Criticized as % of Loans 3.63% 6.34% 3.95%  3.61% 6.24% 3.93%
Classified$  462.9 $  138.6 $  601.5  $  450.7 $  152.2 $  602.9 
Classified as % of Loans 2.17% 4.92% 2.49%  2.14% 5.18% 2.51%

(*) Excludes provision for unfunded commitment of $0.5 million in 4Q15; none in 1Q16
(**) Acquired loans net of associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $23 million, compared to $22 million in the fourth quarter of 2015. The current quarter provision included $11 million to cover net charge-offs on originated loans and $11 million to support both $261 million in originated loan growth and reserve  build toward the company's exposure to scrap metal companies and demolition companies whose profitability is partially dependent on the sale of scrap metal. Originated net charge-offs in the first quarter equaled $11 million or 22 basis points of average originated loans, down from 37 basis points in the fourth quarter of 2015. The decrease in net charge-offs were driven by a recovery on a previously charged-off energy credit as well as moderation from elevated fourth quarter levels which included losses related to two commercial credits.

At March 31, 2016, nonperforming originated loans totaled $197 million, or 0.92% of originated loans, compared to 0.89% at December 31, 2015. The increase was primarily driven by new inflows of a few energy-related commercial credits, as well as a demolition contractor whose profitability is partially dependent on the sale of scrap metal, and offset by pay-downs, charge-offs and resolutions. At March 31, 2016, the allowance for loan losses on originated loans totaled $248 million or 1.16% of such loans, compared to $237 million or 1.12% of such loans at December 31, 2015. The increase in allowance coverage ratio reflects reserve build toward the company's modest metals exposure.

Acquired loans

There was no provision for losses on acquired loans in both the first quarter of 2016 and the fourth quarter of 2015.  Net charge-offs on the acquired portfolio were $0.4 million, compared to zero in the prior quarter.  At March 31, 2016, the allowance for loan losses on acquired loans totaled $5 million, unchanged from December 31, 2015. Acquired nonperforming loans totaled $25 million, also unchanged from the prior quarter.  At March 31, 2016, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $57 million.

Deposits

Average deposits increased 1% annualized from the prior quarter to $28.9 billion.

  • Non-interest checking deposit balances averaged $5.7 billion, decreased 14% annualized from the prior quarter driven by business and municipal deposit balances but were up 4% from the year-ago period.
  • Time deposits increased 24% annualized to $3.7 billion, driven by a $144 million increase in brokered certificate of deposit (CD) balances and an $86 million increase in Retail CDs.
  • Money market deposit balances were flat from the prior quarter as a $135 million, or 8%, increase in retail money market balances was offset by seasonal declines in municipal money market deposit balances.
  • Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking account balances, increased 6% from the year-ago period and decreased 6% annualized from the prior quarter and currently represents 38% of the company's deposit balances.
  • The 2% sequential increase in interest-checking deposit balances was driven by a $74 million increase in retail interest checking balances.
  • Average savings balances increased 1% annualized from the prior quarter driven by modestly higher retail balances.

Average DepositsQ1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Noninterest-bearing deposits$    5,666 $    5,868 $    5,661 $  5,427 $  5,430 
Savings accounts 3,371  3,364  3,427  3,494  3,432 
Interest-bearing checking 5,362  5,333  5,165  5,131  5,001 
Money market deposits 10,725  10,719  10,403  10,251  10,132 
Certificates of deposit 3,726  3,515  3,962  3,917  3,778 
Total deposits$  28,850 $  28,799 $  28,618 $  28,220 $  27,773 

All amounts in millions.

Net Interest Income

First quarter 2016 GAAP net interest income of $268 million increased $1 million from the prior quarter, driven in part by earning asset growth and modest benefit from an increase in short-term interest rates and offset by one less day in the quarter. Reported net interest margin of 3.00% was up 2 basis points from the prior quarter.

  • Yields on loans increased 8 basis points to 3.73% primarily reflecting benefit from the recent increase in short-term interest rates.
  • Yields on investment securities increased 2 basis points to 2.92%.
  • The average cost of interest-bearing deposits increased 2 basis points from the prior quarter to 0.32%.

Net Interest Income (Tax Equivalent)Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Quarter as Reported   $    272.8     $   271.7   $  268.5  $  268.0   $  267.8  
Less: CLO pay-off discount recognition -  -  (1.2) (2.3) - 
Add: CMO Retroactive premium amortization -  -  -  1.1  - 
Add: CRE prepayment penalties -  (0.5) -  -  - 
Less: Early loan payoffs -  -  -  (1.7) - 
Less: Other miscellaneous items (0.6) (0.5) -  -  - 
Sub-Total (0.6) (1.0) (1.2) (2.9) - 
Normalized Net Interest Income$  272.2 $  270.7 $  267.3 $  265.1 $  267.8 

All amounts in millions.

Net Interest Margin (Tax Equivalent)Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Quarter as Reported       3.00%     2.98%   2.98% 3.02%     3.07%
Less: CLO pay-off discount recognition -  -  (0.01)% (0.03)% - 
Add: CMO Retroactive premium amortization -  -  -  0.01% - 
Add: CRE prepayment penalties -  (0.01)% -  -  - 
Less: Early loan payoffs -  -  -  (0.02%) - 
Less: Other miscellaneous items (0.01)% (0.01)% -  -  - 
Sub-Total (0.01)% (0.02)% (0.01)% (0.03)% - 
Normalized Net Interest Margin 2.99% 2.96% 2.97% 2.99% 3.07%


Noninterest Income

First quarter 2016 noninterest income of $79 million decreased 12% or $10 million compared to the prior quarter.

  • Deposit service charges decreased $1 million or 6% due to typical first quarter seasonality.
  • Merchant and card fees decreased $1 million driven by seasonally lower interchange revenues consistent with lower card transaction volumes.
  • Wealth management revenue decreased $1 million from prior quarter driven in part by equity market volatility.
  • Capital markets income, which includes income from derivatives and syndications, decreased $4 million, primarily driven by an unfavorable quarter-over-quarter change in credit valuation adjustments.
  • Mortgage banking revenues were $1 million lower than the prior quarter reflecting a $1 million repurchase reserve reversal recognized in the fourth quarter of 2015. Locked volumes increased QOQ, while gain-on-sale margin remained relatively flat.
  • Other noninterest income decreased $2 million from the prior quarter due to lower equity and investment gains as well as a one-time gain from the sale of a low-income housing property recognized in the prior quarter.

Noninterest IncomeQ1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Deposit service charges$    21.5 $    22.9 $    22.9 $    22.2 $  20.4 
Insurance commissions   14.6    14.9    18.3    17.1    15.7 
Merchant and card fees   12.3    13.3    13.4    13.3    11.9 
Wealth management services   13.6    14.6    14.6    15.7    14.7 
Mortgage banking   4.0    4.9    5.1    5.8    4.9 
Capital markets income   2.3    6.6    2.6    5.3    4.2 
Lending and leasing   4.1    4.2    4.5    4.0    4.4 
Bank owned life insurance   3.5    3.3    2.8    3.2    3.6 
Other income 3.2  4.7  (0.7)   0.1    2.6 
Total noninterest income$  79.1 $  89.4 $  83.4 $  86.6 $  82.2 

All amounts in millions.

Noninterest Expense

Operating noninterest expenses totaled $242 million in the first quarter of 2016, or 2% lower than fourth quarter 2015 levels. The quarter-over-quarter decrease was primarily driven by lower technology and professional services expenses.

  • Salaries and benefits expense of $115 million increased modestly compared to the prior quarter as typical resetting of payroll taxes and other seasonal benefits more than offset lower salaries from lower headcount.
  • Occupancy and equipment expense increased 2%, due primarily to lower rental income associated with a property that was sold.
  • Technology and communications decreased $3 million, or 7% from prior quarter on lower infrastructure costs and depreciation expense.
  • Marketing and advertising spend were $1 million lower compared to fourth quarter levels and consistent with seasonal patterns.
  • Professional services fees decreased $3 million from fourth quarter levels driven by pause of certain projects and the associated decline in third party services expenses.
  • Other expenses decreased $1 million sequentially driven in part by lower other real estate (ORE) valuation write-downs and other corporate expenses.

Operating Noninterest Expense (Non-GAAP)*Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015
Salaries and employee benefits$  115.0 $  113.1 $  113.8 $  113.6 $  112.0 
Occupancy and equipment   26.5    26.0    25.5    26.0    27.3 
Technology and communications   35.4    38.2    38.3    36.5    35.1 
Marketing and advertising   8.8    9.7    8.4    10.3    9.9 
Professional services   12.4    15.4    18.1    16.3    13.1 
Amortization of intangibles   3.9    4.0    4.0    5.1    6.2 
Federal deposit insurance premiums   10.5    10.4    10.0    11.8    11.2 
Other expense   29.4    30.7    27.3    28.4    28.9 
Total operating noninterest expense$  241.9  $  247.4  $  245.4  $  247.9  $  243.5  

*All amounts in millions. See appendix for reconciliation of GAAP to Non-GAAP amounts
           
In the first quarter of 2016, the operating efficiency ratio was 69.8%, compared to 69.5% in the prior quarter.

Capital

Beginning in the first quarter of 2015, all regulatory capital ratios and amounts were calculated under the Basel III standardized transitional approach. At March 31, 2016, the company's consolidated Total Risk Based capital and Common Equity Tier 1 capital ratios were 12.1% and 8.6%, respectively, relatively unchanged from December 31, 2015. 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 390 branches, $40 billion in assets, $30 billion in deposits, and approximately 5,300 employees providing financial services to individuals, families and businesses across New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.

Safe Harbor Statement

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) impact of the pending merger agreement on customers and employees; and (7) ability to consummate the merger transaction with KeyCorp on a timely basis or at all.

           
First Niagara Financial Group, Inc.          
Income Statement Highlights - Reported Basis          
(in thousands, except per share amounts)          
              
      2016   2015   2014  
      First   Fourth  Third  Second  First   Fourth  
      Quarter   Quarter  Quarter  Quarter  Quarter   Quarter  
              
Interest income:          
 Loans and leases $  219,050  $  214,945 $  211,407 $  211,899 $  210,371  $  214,609  
 Investment securities and other     89,759     88,825    87,914    86,356    86,280     86,919  
  Total interest income     308,809     303,770    299,321    298,255    296,651     301,528  
                          
Interest expense:                      
 Deposits     18,640     17,147    17,040    16,568    15,344     14,295  
 Borrowings     22,578     20,074    18,790    18,577    18,363     17,450  
  Total interest expense     41,218     37,221    35,830    35,145    33,707     31,745  
                          
   Net interest income    267,591     266,549    263,491    263,110    262,944     269,783  
Provision for credit losses    22,519     22,900    19,768    20,756    12,765     35,706  
   Net interest income after provision    245,072     243,649    243,723    242,354    250,179     234,077  
                          
Noninterest income:                      
 Deposit service charges    21,507     22,919    22,944    22,208    20,389     22,611  
 Insurance commissions    14,562     14,920    18,252    17,060    15,714     14,764  
 Merchant and card fees    12,329     13,318    13,423    13,317    11,907     13,043  
 Wealth management services    13,610     14,567    14,572    15,718    14,650     14,404  
 Mortgage banking    3,950     4,894    5,070    5,783    4,887     4,600  
 Capital markets income    2,323     6,580    2,608    5,284    4,152     8,312  
 Lending and leasing     4,051     4,248    4,487    3,998    4,353     4,567  
 Bank owned life insurance     3,540     3,259    2,819    3,160    3,592     3,187  
 Other income    3,196     4,696    (732)   79    2,600     (8,311) 
  Total noninterest income    79,068     89,401    83,443    86,607    82,244     77,177  
                          
Noninterest expense:                      
 Salaries and employee benefits    115,007     113,063    113,794    113,561    111,973     110,985  
 Occupancy and equipment    26,466     25,961    25,538    26,021    27,332     28,379  
 Technology and communications    35,419     38,232    38,301    36,486    35,061     33,940  
 Marketing and advertising    8,821     9,719    8,445    10,297    9,863     11,584  
 Professional services    12,401     15,361    18,052    16,321    13,070     16,644  
 Amortization of intangibles    3,860     3,972    4,001    5,092    6,205     6,432  
 Federal deposit insurance premiums    10,460     10,383    10,026    11,750    11,158     11,911  
 Merger and acquisition integration expenses    13,473     14,198    -     -     -      -   
 Restructuring charges    -      3,378    -     -     17,517     9,066  
 Deposit account remediation    -      -     -     -     -      (23,000) 
 Other expense    29,445     30,728    27,276    28,371    28,859     28,371  
  Total noninterest expense    255,352     264,995    245,433    247,899    261,038     234,312  
                          
  Income before income tax    68,788     68,055    81,733    81,062    71,385     76,942  
Income tax expense    20,481     17,255    21,251    20,052    20,000     7,875  
  Net income    48,307     50,800    60,482    61,010    51,385     69,067  
Preferred stock dividend    7,547     7,547    7,547    7,547    7,547     7,547  
  Net income available to common stockholders $  40,760  $  43,253 $  52,935 $  53,463 $  43,838  $  61,520  
                          
Financial Ratios:                      
Earnings per basic share $  0.11  $  0.12 $  0.15 $  0.15    0.12     0.17  
Earnings per diluted share $  0.11  $  0.12 $  0.15 $  0.15    0.12     0.17  
Weighted average shares outstanding - basic(1)    351,372     351,306    351,293    351,126    350,741     350,444  
Weighted average shares outstanding - diluted(1)    353,965     353,797    353,248    352,791    352,621     352,152  
Net revenue(2) $  346,659  $  355,950 $  346,934 $  349,717 $  345,188  $  346,960  
Noninterest income as a percentage of net revenue(2) 22.81%  25.12% 24.05% 24.76% 23.83%  22.24% 
Pre-tax, pre-provision income(3) $  91,307  $  90,955 $  101,501 $  101,818 $  84,150  $  112,648  
Pre-tax, pre-provision income per diluted share(3) $  0.26  $  0.26 $  0.29 $  0.29 $  0.24  $  0.32  
Pre-tax, pre-provision return on average assets(3)  0.92%    0.91%   1.03% 1.05% 0.88%  1.17% 
Net interest margin(4)  3.00%  2.98% 2.98% 3.02% 3.07%  3.11% 
Interest yield on average loans(4)  3.73%  3.65% 3.64% 3.73% 3.75%  3.78% 
Rate paid on interest-bearing liabilities  0.56%  0.51% 0.50% 0.49% 0.48%  0.45% 
Efficiency ratio  73.7%  74.4% 70.7% 70.9% 75.6%  67.5% 
Expenses as a percentage of average loans and deposits 1.9%    2.0%   1.9% 1.9% 2.1%  1.8% 
Effective tax rate    29.8%    25.4%   26.0%   24.7%   28.0%    10.2% 
Return on average assets(5)    0.49%    0.51%   0.61%   0.63% 0.54%  0.72% 
Return on average equity(5)    4.68%    4.85%   5.78%   5.90% 5.05%  6.62% 
Return on average tangible equity(3)(5)    7.04%    7.32%   8.73%   8.94% 7.68%  10.07% 
Return on average common equity    4.30%    4.50%   5.51%   5.63% 4.69%  6.42% 
Return on average tangible common equity(3)    6.77%    7.10%   8.72%   8.94% 7.48%  10.24% 
              
 (1) Share count excludes unallocated ESOP shares prior to January 1, 2015 and unvested restricted stock shares.    
 (2Net revenue is comprised of net interest income and noninterest income.
 (3The tables in this earnings release present the 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. 
 (4Yields and rates calculated on a tax equivalent basis.
 (5Return used to calculate ratio excludes preferred stock dividend.

 

First Niagara Financial Group, Inc.         
Period End Balance Sheet      3    
(in thousands)         
             
      2016   2015   2014 
     March 31,  December 31, September 30,June 30,March 31, December 31, 
             
Cash and cash equivalents $  382,539  $  672,243 $  420,289 $  527,323 $  387,676  $  420,033 
Investment securities:         
 Available for sale    5,439,220     5,471,291    5,725,608    5,750,860    5,911,419     5,915,338 
 Held to maturity    6,720,817     6,387,689    6,280,049    6,169,838    6,214,561     5,941,621 
 FHLB and FRB common stock    375,960     410,452    373,066    379,135    375,090     411,857 
  Total investment securities    12,535,997     12,269,432    12,378,723    12,299,833    12,501,070     12,268,816 
Loans held for sale    26,592     46,096    51,056    59,816    48,755     39,825 
Loans and leases:          
 Commercial:         
  Real estate    8,625,965     8,652,255    8,365,808    8,312,332    8,287,108     8,204,027 
  Business    6,174,753     6,013,217    6,031,358    5,923,524    5,790,980     5,775,413 
   Total commercial loans    14,800,718     14,665,472    14,397,166    14,235,856    14,078,088     13,979,440 
 Consumer:         
  Residential real estate    3,330,533     3,354,639    3,345,701    3,329,799    3,330,216     3,353,081 
  Home equity    3,057,154     3,068,962    3,032,618    2,984,872    2,943,844     2,936,123 
  Indirect auto    2,464,318     2,393,105    2,330,826    2,256,004    2,200,913     2,166,320 
  Credit cards    288,747     310,813    305,779    304,682    301,228     324,113 
  Other consumer    236,911     244,935    254,109    257,204    263,985     278,305 
   Total consumer loans    9,377,663     9,372,454    9,269,033    9,132,561    9,040,186     9,057,942 
  Total loans and leases    24,178,381     24,037,926    23,666,199    23,368,417    23,118,274     23,037,382 
 Allowance for loan losses    252,800     242,036    238,700    235,600    231,138     234,251 
   Loans and leases, net    23,925,581     23,795,890    23,427,499    23,132,817    22,887,136     22,803,131 
Bank owned life insurance    439,084     436,709    434,263    431,335    428,454     426,192 
Goodwill and other intangibles    1,392,367     1,396,227    1,400,199    1,404,201    1,410,800     1,417,005 
Other assets    1,370,275     1,301,789    1,301,152    1,208,218    1,243,588     1,176,036 
Total assets $  40,072,435  $  39,918,386 $  39,413,181 $  39,063,543 $  38,907,479  $  38,551,038 
          
Deposits:          
 Savings accounts $  3,428,924  $  3,389,728 $  3,359,320 $  3,483,777 $  3,488,441  $  3,451,616 
 Interest-bearing checking    5,553,928     5,478,947    5,285,987    5,088,856    5,158,264     5,084,456 
 Money market deposits    10,884,350     10,653,792    10,483,721    10,303,873    10,368,358     9,962,220 
 Noninterest-bearing deposits    5,739,509     5,834,534    5,813,571    5,549,944    5,500,484     5,407,382 
 Certificates of deposit    3,954,033     3,343,878    3,873,521    4,020,367    3,734,226     3,875,563 
   Total deposits    29,560,744     28,700,879    28,816,120    28,446,817    28,249,773     27,781,237 
             
Short-term borrowings    3,255,890     4,348,586    4,086,415    4,275,886    4,739,264     5,471,974 
Long-term borrowings    2,608,014     2,308,101    1,783,402    1,683,476    1,233,550     733,620 
Other liabilities    498,084     434,492    587,867    536,239    559,646     471,449 
 Total liabilities    35,922,732     35,792,058    35,273,804    34,942,418    34,782,233     34,458,280 
Preferred stockholders' equity    338,002     338,002    338,002    338,002    338,002     338,002 
Common stockholders' equity    3,811,701     3,788,326    3,801,375    3,783,123    3,787,244     3,754,756 
 Total stockholders' equity    4,149,703     4,126,328    4,139,377    4,121,125    4,125,246     4,092,758 
Total liabilities and stockholders' equity $  40,072,435  $  39,918,386 $  39,413,181 $  39,063,543 $  38,907,479  $  38,551,038 
             
Selected balance sheet information:         
Total interest-earning assets(1) $  36,789,339  $  36,677,134 $  36,099,580 $  35,813,498 $  35,594,208  $  35,310,447 
Total interest-bearing liabilities    29,685,139     29,523,032    28,872,365    28,856,235    28,722,103     28,579,449 
Net interest-earning assets $  7,104,200  $  7,154,102 $  7,227,215 $  6,957,263 $  6,872,105  $  6,730,998 
             
Tangible common equity(1)(2) $  2,419,334  $  2,392,099 $  2,401,176 $  2,378,922 $  2,376,444  $  2,337,751 
Unrealized gain (loss) on available for sale securities, net of tax(3)   1,246     (9,577)   29,877    37,464    68,194     52,244 
             
Total core deposits $  25,606,711  $  25,357,001 $  24,942,599 $  24,426,450 $  24,515,547  $  23,905,674 
             
Originated loans(4) $  21,361,753  $  21,101,040 $  20,591,532 $  19,929,719 $  19,528,609  $  19,295,553 
Acquired loans(5)    2,873,372     2,998,530    3,138,568    3,517,525    3,681,354     3,834,931 
Credit related discount on acquired loans(6)    (56,744)    (61,644)   (63,901)   (78,827)   (91,689)    (93,102)
 Total Loans $  24,178,381  $  24,037,926 $  23,666,199 $  23,368,417 $  23,118,274  $  23,037,382 
         
 (1Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
 (2The tables in this earnings release present the 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.
 (3Excludes unamortized unrealized gains recorded in accumulated other comprehensive income related to available for sale securities transferred to held to maturity.
 (4Originated loans represent total loans excluding acquired loans. 
 (5Carrying value of acquired loans plus the principal not expected to be collected. 
 (6Principal 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   
   March 31, 2016December 31, 2015March 31, 2015   
    Average Interest(1) Yields  Average Interest(1) Yields  Average Interest(1) Yields    
    Balances
 
 and
Rates(1)
 Balances
 
 and
Rates(1)
 Balances
 
 and
Rates(1)
   
               
Interest-earning assets:             
Loans and leases(2)             
Commercial:             
Real estate $  8,625 $  79  3.61%$  8,476 $  77  3.57%$  8,263 $  74  3.60%   
Business    6,062    52    3.42     5,971    50    3.28     5,797    50    3.43     
Total commercial loans    14,687    131    3.53     14,447    127    3.45     14,060    124    3.53     
Consumer:             
Residential real estate    3,346    31    3.65     3,346    31    3.65     3,338    32    3.78     
Home equity    3,066    30    3.93     3,052    29    3.80     2,939    28    3.91     
Indirect auto    2,420    18    2.91     2,369    17    2.90     2,187    15    2.79     
Credit cards    297    9    11.80     305    9    11.45     311    9    11.74     
Other consumer    242    4    8.57     250    5    8.50     275    6    8.49     
Total consumer loans    9,371    92    3.94     9,322    91    3.88     9,050    90    4.02     
 Total loans and leases    24,058    223    3.73     23,769    218    3.65     23,110    214    3.75     
Residential MBS    7,864    48    2.43     7,705    47    2.44     7,180    45    2.49     
Commercial MBS    997    12    4.68     1,126    12    4.31     1,404    11    3.26     
Other investment securities (3)    3,513    30    3.53     3,540    31    3.47     3,554    31    3.52     
 Total securities, at amortized cost    12,374    90    2.92     12,371    90    2.90     12,138    87    2.88     
Money market and other investments    205    1    1.37     88    1    2.29     158    -     1.01     
Total interest-earning assets    36,637 $  314  3.45%   36,228 $  309  3.38%   35,406 $  302  3.45%   
Goodwill and other intangibles    1,394      1,398      1,414      
Other noninterest-earning assets    1,929      1,951      1,887      
               
Total assets $  39,960   $  39,577   $  38,707      
               
Interest-bearing liabilities:              
Deposits             
Savings accounts $  3,371 $  1  0.09%$  3,364 $  1  0.09%$  3,432 $  -   0.08%   
Interest-bearing checking    5,362    -     0.03     5,333    -     0.03     5,001    -     0.03     
Money market deposits     10,725    9    0.32     10,719    8    0.30     10,132    7    0.26     
Certificates of deposit     3,726    9    0.97     3,515    8    0.89     3,778    8    0.84     
Total interest bearing deposits    23,184    19  0.32%   22,931    17  0.30%   22,343    15  0.28%   
Borrowings             
Short-term borrowings    3,815    7  0.72%   4,014    6  0.56%   5,125    6  0.46%   
Long-term borrowings    2,416    15    2.62     1,971    14    2.89     1,027    13    4.98     
Total borrowings     6,231    22    1.46     5,985    20    1.33     6,152    19    1.21     
Total interest-bearing liabilities     29,415 $  41  0.56%   28,916 $  37  0.51%   28,495 $  34  0.48%   
Noninterest-bearing deposits     5,666      5,868      5,430      
Other noninterest-bearing liabilities     725      640      654      
Total liabilities     35,806      35,424      34,579      
Total stockholders' equity    4,154      4,153      4,128      
Total liabilities and stockholders' equity $  39,960   $  39,577   $  38,707      
               
Net interest income (FTE)  $  273   $  272   $  268     
Taxable Equivalent Adjustment(1)     5      5      5     
               
 Total core deposits  $  25,124 $  10  0.15%$  25,284 $  9  0.15%$  23,995 $  7  0.13%   
 Total transactional deposits     11,028    -   0.02%   11,201    -   0.02%   10,431    -   0.01%   
 Total deposits     28,850    19  0.26%   28,799    17  0.24%   27,773    15  0.22%   
               
Tax equivalent net interest rate spread    2.89%   2.87%   2.97%   
Tax equivalent net interest rate margin    3.00%   2.98%   3.07%   
               
(1Tax equivalent interest income is calculated using a 35% tax rate.    
(2)Includes nonaccrual loans.    
(3Includes 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)          
       2016   2015   2014  
       First   Fourth  Third  Second  First   Fourth  
       Quarter   Quarter  Quarter  Quarter  Quarter   Quarter  
               
Beginning balance $  242,036  $  238,700 $  235,600 $  231,138 $  234,251  $  222,753  
Net loan (charge-offs) recoveries:          
 Commercial real estate $  (254) $  (1,476)$  (2,686)$  (5,525)$  (5,825) $  (2,008) 
 Commercial business    (3,903)    (10,441)   (6,286)   (3,513)   (4,178)    (12,650) 
 Residential real estate    (135)    (94)   (230)   (197)   (266)    (476) 
 Home equity    (995)    (723)   (1,056)   (1,367)   (1,526)    (1,406) 
 Indirect auto    (2,030)    (2,122)   (1,743)   (1,342)   (1,226)    (2,241) 
 Credit cards    (2,654)    (2,450)   (2,215)   (2,522)   (2,450)    (2,464) 
 Other consumer    (1,784)    (1,758)   (1,952)   (1,528)   (1,807)    (1,457) 
    Total net loan charge-offs $  (11,755) $  (19,064)$  (16,168)$  (15,994)$  (17,278) $  (22,702) 
Provision for loan losses    22,519     22,400    19,268    20,456    14,165     34,200  
  Ending balance $  252,800  $  242,036 $  238,700 $  235,600 $  231,138  $  234,251  
               
Supplemental information          
Allowance to loans  1.05%  1.01% 1.01%   1.01%   1.00%    1.02% 
Allowance for originated loans to originated loans(1)  1.16%  1.12% 1.13%   1.15%   1.15%    1.18% 
               
Net charge-offs (recoveries) to average loans (annualized)         
 Commercial real estate    0.01%    0.07% 0.13%   0.27%   0.29%    0.10% 
 Commercial business    0.26%    0.70% 0.42%   0.24%   0.29%    0.87% 
  Total commercial loans    0.11%    0.33% 0.25%   0.26%   0.28%    0.42% 
 Residential real estate    0.02%    0.01% 0.03%   0.02%   0.03%    0.06% 
 Home equity    0.13%    0.09% 0.14%   0.18%   0.21%    0.19% 
 Indirect auto    0.34%    0.36% 0.30%   0.24%   0.22%    0.42% 
 Credit cards    3.57%    3.21% 2.90%   3.32%   3.16%    3.13% 
 Other consumer    2.95%    2.81% 3.06%   2.35%   2.63%    2.06% 
  Total consumer loans    0.33%    0.31% 0.32%   0.31%   0.33%    0.36% 
 Total loans    0.20%    0.32% 0.28%   0.28%   0.30%    0.40% 
               
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)      
 Commercial real estate    0.00%    0.08% 0.14%   0.31%   0.24%    0.06% 
 Commercial business    0.26%    0.72% 0.44%   0.25%   0.31%    0.93% 
  Total commercial loans    0.11%    0.36% 0.27%   0.28%   0.27%    0.44% 
 Residential real estate    0.02%    0.02% 0.04%   0.04%   0.05%    0.09% 
 Home equity    0.16%    0.14% 0.14%   0.17%   0.16%    0.15% 
 Indirect auto    0.34%    0.36% 0.30%   0.24%   0.22%    0.42% 
 Credit cards    3.57%    3.21% 2.90%   3.32%   3.16%    3.13% 
 Other consumer    2.95%    2.81% 3.06%   2.35%   2.63%    2.06% 
  Total consumer loans    0.40%    0.39% 0.38%   0.37%   0.38%    0.44% 
 Total loans    0.22%    0.37% 0.31%   0.31%   0.31%    0.44% 
               
Nonperforming loans:          
 Originated(1):          
 Commercial real estate $  37,087  $  44,438 $  54,699 $  60,021 $  65,655  $  53,164  
 Commercial business    71,999     56,382    45,389    42,979    54,506     45,201  
 Residential real estate    30,234     31,513    32,455    32,877    32,791     33,652  
 Home equity    35,701     35,561    34,191    27,092    26,163     23,749  
 Indirect auto    16,536     15,131    13,795    13,066    13,399     12,616  
 Other consumer    5,093     5,201    5,047    4,917    5,065     5,140  
  Total originated nonperforming loans    196,650     188,226    185,576    180,952    197,579     173,522  
  Total acquired nonperforming loans(2)    24,874     25,335    25,365    26,553    30,236     30,223  
   Total nonperforming loans    221,524     213,561    210,941    207,505    227,815     203,745  
 Real estate owned    16,457     16,063    18,359    17,397    19,128     20,541  
  Total nonperforming assets(3) $  237,981  $  229,624 $  229,300 $  224,902 $  246,943  $  224,286  
               
Accruing troubled debt restructurings (TDR) $  63,659  $  62,630 $  60,941 $  64,643 $  64,401  $  67,102  
Loans 90 days past due still accruing(4)    57,259     67,718    69,879    78,279    87,213     93,903  
Total classified loans(5)    601,539     602,912    591,771    592,148    615,518     609,316  
Total criticized loans(6) $  954,480  $  944,779 $  858,243 $  938,951 $  990,656  $  1,041,050  
               
Total nonperforming loans to loans  0.92%  0.89% 0.89%   0.89%   0.99%    0.88% 
Total nonperforming originated loans to originated loans(1) 0.92%  0.89% 0.90%   0.91%   1.01%    0.90% 
Total nonperforming assets to loans and real estate owned 0.98%  0.95% 0.97%   0.96%   1.07%    0.97% 
Total nonperforming assets to assets  0.59%  0.58% 0.58%   0.58%   0.63%    0.58% 
Allowance to nonperforming loans  114.1%  113.3% 113.2%   113.5%   101.5%    115.0% 
               
Originated loans(1) $  21,361,753  $  21,101,040 $  20,591,532 $  19,929,719 $  19,528,609  $  19,295,553  
Acquired loans(7)    2,873,372     2,998,530    3,138,568    3,517,525    3,681,354     3,834,931  
Credit related discount on acquired loans(8)    (56,744)    (61,644)   (63,901)   (78,827)   (91,689)    (93,102) 
 Total Loans $  24,178,381  $  24,037,926 $  23,666,199 $  23,368,417 $  23,118,274  $  23,037,382  
               
 (1Originated loans represent total loans excluding acquired loans.  
 (2Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.  
 (3Does not include a $5.5 million nonperforming loan that was classified as held for sale at March 31, 2015, which was sold and for which we received the proceeds on April 2, 2015. 
 (4Includes 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. 
 (5Includes 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 "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2015. 
 (6Criticized loans includes consumer loans when they are 90 days or more past due.  Criticized loans include special mention, substandard, doubtful, and loss. 
 (7Represents the carrying value of acquired loans plus the principal not expected to be collected.  
 (8Represent principal on acquired loans not expected to be collected.  

 

First Niagara Financial Group, Inc.         
Key Statistics         
(Risk weighted assets in millions; share counts in thousands)       
            
     2016   2015   2014 
    March 31, December 31,September 30,June 30,March 31, December 31,
            
First Niagara Financial Group, Inc. capital ratios(1)(2):         
 Tier 1 risk based capital  10.12%  10.08% 10.05% 10.03% 10.02%  9.81%
 Total risk based capital  12.09%  12.01% 11.97% 11.96% 11.95%  11.75%
 Common equity tier 1 capital  8.58%  8.55% 8.52% 8.50% 8.48%  N/A 
 Tier 1 common capital(3)  N/A   N/A  N/A  N/A  N/A   8.20%
 Leverage  7.55%  7.62% 7.66% 7.60% 7.56%  7.50%
 Equity to assets  10.36%  10.34% 10.50% 10.55% 10.60%  10.62%
 Tangible common equity to tangible assets(3)  6.25%  6.21% 6.32% 6.32% 6.34%  6.30%
 Total risk weighted assets $  28,809  $  28,881 $  28,716 $  28,445 $  28,152  $  28,186 
            
First Niagara Bank, N.A capital ratios(1)(2):         
 Tier 1 risk based capital  10.73%  10.65% 10.67% 10.66% 10.65%  10.48%
 Total risk based capital  11.67%  11.55% 11.56% 11.54% 11.53%  11.37%
 Common equity tier 1 capital  10.73%  10.65% 10.67% 10.66% 10.65%  N/A 
 Leverage  8.00%  8.05% 8.12% 8.07% 8.03%  8.01%
 Total risk weighted assets $  28,742  $  28,813 $  28,632 $  28,359 $  28,068  $  28,146 
            
Number of branches    392     392    394    394    394     411 
Full time equivalent employees    5,322     5,428    5,397    5,364    5,322     5,572 
            
Share information and per share metrics:         
 Common shares outstanding    354,977     354,762    354,788    354,890    353,717     353,388 
 Preferred shares outstanding    14,000     14,000    14,000    14,000    14,000     14,000 
 Treasury shares    11,025     11,240    11,214    11,112    12,285     12,614 
 Market price (NASDAQ: FNFG): $  9.68  $  10.85 $  10.21 $  9.44 $  8.84  $  8.43 
 Book value per common share(4)    10.84     10.78    10.82    10.77    10.80     10.71 
 Tangible book value per common share(3)(4)    6.88     6.81    6.84    6.77    6.78     6.67 
 Price/Book  89.30%  100.65% 94.36% 87.65% 81.85%  78.71%
 Price/Tangible book(1)  140.70%  159.32% 149.27% 139.44% 130.38%  126.39%
 Common stock dividends $  0.08  $  0.08 $  0.08 $  0.08 $  0.08  $  0.08 
 Preferred stock dividends    0.54     0.54    0.54    0.54    0.54     0.54 
 Dividend payout ratio  72.73%  66.67% 53.33% 53.33% 66.67%  47.06%
 Dividend yield (annualized)  3.32%  2.93% 3.11% 3.40% 3.67%  3.77%
            
(1Represents an estimate as of March 31, 2016.  All preceding quarters represent actual amounts.
(2Basel III Transitional rules became effective for us on January 1, 2015.  Ratios and amounts presented prior to March 31, 2015 are calculated under Basel I rules.  As of March 31, 2015, the ratios presented are calculated under the Basel III Standardized Transitional Approach.  Common equity tier 1 capital under Basel III replaced Tier 1 common capital under Basel I.  Prior to Basel III becoming effective on January 1, 2015, tier 1 common capital under Basel I was a non-GAAP financial measure.
(3The 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.
(4Share count excludes unallocated ESOP shares prior to January 1, 2015 and unvested restricted stock shares.

 

First Niagara Financial Group, Inc.          
Appendix A - Non-GAAP Reconciliation          
(in thousands, except per share amounts)          
              
      2016   2015   2014  
      First   Fourth  Third  Second  First   Fourth  
      Quarter   Quarter  Quarter  Quarter  Quarter   Quarter  
Financial ratios computed on an operating basis(1):          
Earnings per basic share $  0.14  $  0.16 $  0.15 $  0.15 $  0.15  $  0.15  
Earnings per diluted share $  0.14  $  0.15 $  0.15 $  0.15 $  0.15  $  0.15  
Weighted average shares outstanding - basic(2)    351,372     351,306    351,293    351,126    350,741     350,444  
Weighted average shares outstanding - diluted(2)    353,965     353,797    353,248    352,791    352,621     352,152  
Noninterest income as a percentage of net revenue(3)  22.81%  25.12% 24.05% 24.76% 23.83%  22.24% 
Pre-tax, pre-provision income    104,780     108,531    101,501    101,818    101,667     98,714  
Pre-tax, pre-provision income per diluted share $  0.30  $  0.31 $  0.29 $  0.29 $  0.29  $  0.28  
Pre-tax, pre-provision return on average assets  1.05%  1.09% 1.03% 1.05% 1.07%  1.02% 
Net interest margin(4)  3.00%  2.98% 2.98% 3.02% 3.07%  3.11% 
Interest yield on average loans(4)  3.73%  3.65% 3.64% 3.73% 3.75%  3.78% 
Rate paid on interest-bearing liabilities  0.56%  0.51% 0.50% 0.49% 0.48%  0.45% 
Efficiency ratio  69.8%  69.5% 70.7% 70.9% 70.5%  71.5% 
Effective tax rate  30.2%  26.6% 26.0% 24.7% 30.0%  3.7% 
Return on average assets  0.58%  0.63% 0.61% 0.63% 0.65%  0.63% 
Return on average equity  5.56%  6.00% 5.78% 5.90% 6.12%  5.82% 
Return on average tangible equity(5)  8.37%  9.05% 8.73% 8.94% 9.30%  8.85% 
Return on average common equity  5.26%  5.75% 5.51% 5.63% 5.85%  5.54% 
Return on average tangible common equity(6)  8.29%  9.07% 8.72% 8.94% 9.34%  8.85% 
              
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):          
 Total noninterest expense on operating basis (Non-GAAP) $  241,879  $  247,419 $  245,433 $  247,899 $  243,521  $  248,246  
  Merger and acquisition integration expenses    13,473     14,198    -     -     -      -   
  Restructuring charges    -      3,378    -     -     17,517     9,066  
  Deposit account remediation    -      -     -     -     -     (23,000) 
 Total reported noninterest expense (GAAP) $  255,352  $  264,995 $  245,433 $  247,899 $  261,038  $  234,312  
              
Reconciliation of net operating income to net income(1):          
 Net operating income (Non-GAAP) $  57,448  $  62,813 $  60,482 $  61,010 $  62,246  $  60,697  
 Nonoperating income and expenses, net of tax:          
  Merger and acquisition integration expenses    9,141     9,919    -     -     -      -   
  Restructuring charges    -      2,094    -     -     10,861     6,364  
  Deposit account remediation    -      -     -     -     -     (14,734) 
   Total nonoperating expenses, net of tax    9,141     12,013    -     -     10,861     (8,370) 
 Net income (GAAP) $  48,307  $  50,800 $  60,482 $  61,010 $  51,385  $  69,067  
              
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) $  49,901  $  55,266 $  52,935 $  53,463 $  54,699  $  53,150  
 Nonoperating income and expenses, net of tax:          
  Merger and acquisition integration expenses    9,141     9,919    -     -     -     -   
  Restructuring charges    -      2,094    -     -     10,861     6,364  
  Deposit account remediation    -      -     -     -     -     (14,734) 
   Total nonoperating income and expenses, net of tax    9,141     12,013    -     -     10,861     (8,370) 
 Net income available to common stockholders (GAAP) $  40,760  $  43,253 $  52,935 $  53,463 $  43,838  $  61,520  
              
Computation of pre-tax,pre-provision income:          
 Net interest income $  267,591  $  266,549 $  263,491 $  263,110 $  262,944  $  269,783  
 Noninterest income    79,068      89,401     83,443     86,607     82,244      77,177   
 Noninterest expense    (255,352)    (264,995)   (245,433)   (247,899)   (261,038)    (234,312) 
 Pre-tax, pre-provision income (GAAP)    91,307     90,955    101,501    101,818    84,150     112,648  
 Add back: non-operating noninterest expenses (1)    -      17,576    -     -     17,517     (13,934) 
 Pre-tax, pre-provision income (Non-GAAP)(1) $  91,307  $  108,531 $  101,501 $  101,818 $  101,667  $  98,714  
              
(1Noninterest 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. 
(2Share count excludes unallocated ESOP shares and unvested restricted stock shares.
(3Net revenue is comprised of net interest income and noninterest income.
(4Yields and rates calculated on a tax equivalent basis.
(5Tangible equity is a non-GAAP measure and excludes goodwill and other intangibles.
(6Tangible 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)          
              
      2016   2015   2014  
      First   Fourth  Third  Second  First   Fourth  
      Quarter  Quarter Quarter  Quarter  Quarter   Quarter  
Computation of Ending Tangible Assets:          
 Total assets $  40,072,435  $  39,918,386 $  39,413,181 $  39,063,543 $  38,907,479  $  38,551,038  
 Less: Goodwill and other intangibles    (1,392,367)    (1,396,227)   (1,400,199)   (1,404,201)   (1,410,800)    (1,417,005) 
 Tangible assets $  38,680,068  $  38,522,159 $  38,012,982 $  37,659,342 $  37,496,679  $  37,134,033  
              
Computation of Average Tangible Assets:          
 Total assets $  39,959,615  $  39,576,697 $  39,051,359 $  38,913,219 $  38,706,545  $  38,317,930  
 Less: Goodwill and other intangibles    (1,394,178)    (1,398,122)   (1,402,138)   (1,407,946)   (1,413,765)    (1,420,119) 
 Tangible assets $  38,565,437  $  38,178,575 $  37,649,221 $  37,505,273 $  37,292,780  $  36,897,811  
              
Computation of Ending Tangible Equity:          
 Total stockholders' equity $  4,149,703  $  4,126,328 $  4,139,377 $  4,121,125 $  4,125,246  $  4,092,758  
 Less: Goodwill and other intangibles    (1,392,367)    (1,396,227)   (1,400,199)   (1,404,201)   (1,410,800)    (1,417,005) 
 Tangible equity $  2,757,336  $  2,730,101 $  2,739,178 $  2,716,924 $  2,714,446  $  2,675,753  
              
Computation of Ending Tangible Common Equity:          
 Total stockholders' equity $  4,149,703  $  4,126,328 $  4,139,377 $  4,121,125 $  4,125,246  $  4,092,758  
 Less: Goodwill and other intangibles    (1,392,367)    (1,396,227)   (1,400,199)   (1,404,201)   (1,410,800)    (1,417,005) 
 Less: Preferred stockholders' equity    (338,002)    (338,002)   (338,002)   (338,002)   (338,002)    (338,002) 
 Tangible common equity $  2,419,334  $  2,392,099 $  2,401,176 $  2,378,922 $  2,376,444  $  2,337,751  
              
Computation of Average Tangible Equity:          
 Total stockholders' equity $  4,154,033  $  4,152,977 $  4,149,635 $  4,145,334 $  4,127,743  $  4,141,141  
 Less: Goodwill and other intangibles    (1,394,178)    (1,398,122)   (1,402,138)   (1,407,946)   (1,413,765)    (1,420,119) 
 Tangible equity $  2,759,855  $  2,754,855 $  2,747,497 $  2,737,388 $  2,713,978  $  2,721,022  
              
Computation of Average Tangible Common Equity:          
 Total stockholders' equity $  4,154,033  $  4,152,977 $  4,149,635 $  4,145,334 $  4,127,743  $  4,141,141  
 Less: Goodwill and other intangibles    (1,394,178)    (1,398,122)   (1,402,138)   (1,407,946)   (1,413,765)    (1,420,119) 
 Less: Preferred stockholders' equity    (338,002)    (338,002)   (338,002)   (338,002)   (338,002)    (338,002) 
 Tangible common equity $  2,421,853  $  2,416,853 $  2,409,495 $  2,399,386 $  2,375,976  $  2,383,020  
              
Computation of Tier 1 Common Capital:          
 Tier 1 capital  N/A   N/A  N/A  N/A  N/A  $  2,764,117  
 Less: Qualifying restricted core capital elements  N/A   N/A  N/A  N/A  N/A     (113,785) 
 Less: Perpetual non-cumulative preferred stock  N/A   N/A  N/A  N/A  N/A     (338,002) 
 Tier 1 common capital (Non-GAAP)  N/A   N/A  N/A  N/A  N/A  $  2,312,330  
              
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

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