Market Overview

First Niagara Reports Second Quarter 2016 Results

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  • Second quarter operating earnings of $0.18 per diluted share
    • Second quarter GAAP earnings of $0.11 per diluted share, including merger-related integration expenses and loss associated with de-risking high-yield energy bond exposure
  • Average loans increased 4% YOY
    • Average commercial loans (CRE and commercial business) up 5% YOY
    • Average consumer loans increased 4% YOY
  • Average transactional deposit balances increased 6% YOY
    • Average interest-bearing checking deposit balances increased 6% YOY
    • Average noninterest-bearing deposit balances increased 5% YOY
  • Originated net charge-offs averaged 0.27% of originated loans, down 4 basis points YOY

BUFFALO, N.Y., July 29, 2016 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (NASDAQ: FNFG) today reported GAAP net income available to common shareholders of $38.9 million, or $0.11 per diluted share for the second quarter of 2016, compared to $40.8 million, or $0.11 per diluted share, for the quarter ended March 31, 2016. Excluding the impact of $7 million in after-tax losses on the sale of the company's entire high-yield energy bond exposure as well as $17 million in after-tax merger-related costs incurred during the second quarter of 2016, operating net income available to common shareholders was $62.7 million, or $0.18 per diluted share.

"Our second quarter performance is more evidence of the strength of our lending and deposit franchises," said Gary M. Crosby, President and Chief Executive Officer. "During the second quarter, our core businesses continued to demonstrate positive momentum, with 5% year-over-year growth in average commercial loans and 6% growth in average transactional deposit balances.  Consistent with our time-tested policy of prudent and disciplined credit underwriting, our commercial and consumer loan portfolios continue to perform well as evidenced by our stable credit metrics. The First Niagara team delivered this solid performance while at the same time staying very focused on preparing for the completion of our merger with KeyCorp."

"Given an expected prolonged uncertain economic environment, in early June we significantly de-risked our investment securities portfolio by exiting positions in high-yield energy bonds resulting in an after-tax loss of $7 million," said Gregory W. Norwood, Chief Financial Officer.  "Noninterest income, excluding this loss, increased 1% from the first quarter driven by higher insurance commissions, increased derivative and syndication volumes and higher mortgage banking income."

Second Quarter Results

In the second quarter of 2016, First Niagara reported GAAP net income available to common shareholders of $38.9 million, or $0.11 per diluted share, compared to $40.8 million, or $0.11 per diluted share in the first quarter of 2016. Second quarter 2016 results were impacted by $17 million in after-tax merger integration related and restructuring costs as well as $7 million in after-tax losses on the sale of the company's entire high-yield energy bond exposure. In the first quarter of 2016, after-tax merger integration related and restructuring costs totaled $9 million. Excluding these items, operating net income available to common shareholders was $62.7 million, or $0.18 per diluted share in the second quarter of 2016, compared to $49.9 million, or $0.14 per diluted share in the first quarter of 2016.

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

  • A $5 million or 2% decrease in net interest income driven primarily by the impact of lower reinvestment rates on cashflows from the investment securities portfolio, and continued mix shift towards non-credit investment securities.
  • An $11 million decrease in provision for credit losses from elevated first quarter levels that included a reserve build towards the company's exposure to scrap metal companies and demolition companies whose profitability is partially dependent on the sale of scrap metal.
  • A $1 million or 1% increase in operating noninterest income driven by higher capital markets income due to higher syndication and derivative volumes, higher insurance commissions, and greater mortgage banking revenues.
  • A $9 million or 4% decrease in operating noninterest expenses primarily driven by lower employee count and the associated impact on compensation and other benefits expenses, lower professional services and marketing spend, lower building maintenance costs and lower OREO expenses.
  • A lower effective tax rate attributable primarily to benefits from certain tax-advantaged investments.

In the second quarter of 2015, First Niagara reported GAAP net income available to common shareholders of $53.5 million, or $0.15 per diluted share. Compared to the second quarter of 2015, the change in operating net income available to common shareholders was primarily driven by:

  • A modest decline of $1 million in net interest income from the year-ago quarter that included $3 million of benefits from discount accretion on payoffs of certain Collateralized Loan Obligations (CLOs) and acquired loans, offset by a 4% increase in average earning asset balances.
  • A $9 million decrease in provision for loan losses driven primarily by lower net charge-offs.
  • An 8% decrease in noninterest income, driven by lower wealth management income, insurance commissions, investment gains and capital markets income.
  • A 6% or $15 million decline in noninterest expense driven primarily by lower third party professional services expenses, lower marketing spend, lower amortization of intangibles and lower compensation and benefits expenses.


Operating Results (Non-GAAP)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Net interest income$  262.1 $  267.6 $  266.5 $  263.5 $  263.1 
Provision for credit losses 11.9  22.5  22.9  19.8  20.8 
Noninterest income 79.6  79.1  89.4  83.4  86.6 
Noninterest expense 233.0  241.9  247.4  245.4  247.9 
Operating net income 70.3  57.4  62.8  60.5  61.0 
Preferred stock dividend 7.5  7.5  7.5  7.5  7.5 
Operating net income available to common$  62.7 $  49.9 $  55.3 $  52.9 $  53.5 
Weighted average diluted shares outstanding 353.8  354.0  353.8  353.2  352.8 
Operating earnings per diluted share$  0.18 $  0.14 $  0.15 $  0.15 $  0.15 
      
Reported Results (GAAP)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Operating net income before non-op. items$  70.3 $  57.4 $  62.8 $  60.5 $  61.0 
Non-operating items (a) 23.9  9.1  12.0  -  - 
Net Income 46.4  48.3  50.8  60.5  61.0 
Preferred stock dividend 7.5  7.5  7.5  7.5  7.5 
Net income available to common$  38.9 $  40.8 $  43.3 $  52.9 $  53.5 
Weighted average diluted shares outstanding 353.8  354.0  353.8  353.2  352.8 
Earnings per diluted share$  0.11 $  0.11 $  0.12 $  0.15 $  0.15 
All amounts in millions except earnings per diluted share.



(a) Q2 2016: Non-operating charges comprised of merger related costs including employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts, professional services and legal fees incurred to support merger integration efforts, and loss on the sale of high-yield energy bond exposure, net of taxes.
 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.
  

Loans

Average loans increased 2% annualized from the prior quarter to $24.2 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 3% annualized from the prior quarter driven by a 12% annualized increase in indirect auto loans and 5% increase in commercial real estate loans.

Average commercial loans, which include commercial business (C&I) and commercial real estate (CRE) loans, increased 2% annualized from prior quarter to $14.8 billion, primarily driven by growth in the company's New York, New England, and Western Pennsylvania regions.

  • Average CRE loans increased 2% annualized from the prior quarter to $8.7 billion driven by new commercial mortgage term financing as well as construction lending volumes.
  • Average C&I loans increased 3% annualized QOQ to $6.1 billion reflecting middle market origination activity across the company's footprint, partially offset by pay-downs in the capital markets loan portfolio.

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

  • Average indirect auto loan balances increased 13% annualized or by $80 million to $2.5 billion, as strong new origination activity was partially offset by increased pay-downs. Indirect auto originations during the quarter totaled $328 million. New originations in the second quarter yielded 3.50%, net of dealer reserve, compared to 3.41% on originations in the prior quarter.
  • Average residential real estate and home equity loan balances were down modestly from the prior quarter reflecting higher customer refinancing activity given low mortgage interest rates. 
  • Credit card balances were down $9 million, or 12% annualized due to seasonal factors.

Average LoansQ2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Commercial real estate$  8,664 $  8,625 $  8,476 $  8,277 $  8,257 
Commercial business 6,112  6,062  5,971  5,972  5,830 
Total commercial 14,776  14,687  14,447  14,249  14,087 
Residential real estate 3,338  3,346  3,346  3,338  3,326 
Home equity 3,055  3,066  3,052  3,001  2,963 
Indirect auto 2,500  2,420  2,369  2,293  2,238 
Credit cards 288  297  305  306  304 
Other consumer 233  242  250  255  260 
Total consumer 9,414  9,371  9,322  9,193  9,091 
Total loans$  24,190 $  24,058 $  23,769 $  23,442 $  23,178 
All amounts in millions.
 

Credit Quality

At June 30, 2016, the allowance for loan losses was $253 million, unchanged from March 31, 2016.  In the second quarter, provision for loan losses totaled $12.4 million, compared to $22.5 million in the prior quarter. Nonperforming assets comprised 0.60% of total assets, essentially flat compared to March 31, 2016.  Information for both the originated and acquired portfolios follows.

 Q2 2016 Q1 2016
$ in millionsOriginatedAcquiredTotal OriginatedAcquiredTotal
Provision for loan losses*$  14.1 $  (1.8)$  12.4  $  22.5 $  0.0 $  22.5 
Net charge-offs 14.2  (1.9) 12.3   11.4  0.4  11.8 
NCOs/ Avg Loans 0.27% (0.28)% 0.20%  0.22% 0.05% 0.20%
Total loans**$  21,678 $  2,655 $  24,333  $  21,362 $  2,817 $  24,178 
Allowance$  247.7 $  5.1 $  252.8  $  247.8 $  5.0 $  252.8 
Allowance/Loans 1.14% 0.19% 1.04%  1.16% 0.18% 1.05%
Nonperforming Loans$  198.3 $  24.7 $  223.0  $  196.7 $  24.9 $  221.5 
NPLs/ Loans 0.91% 0.93% 0.92%  0.92% 0.88% 0.92%
Criticized$  803.7 $  154.5 $  958.2  $  775.9 $  178.5 $  954.5 
Criticized as % of Loans 3.71% 5.82% 3.94%  3.63% 6.34% 3.95%
Classified$  512.6 $ 123.2 $  635.8  $  462.9 $  138.6 $  601.5 
Classified as % of Loans 2.36% 4.64% 2.61%  2.17% 4.92% 2.49%
(*) Excludes provision for unfunded commitment of $(0.5) million in 2Q16 and zero in 1Q16
(**) Acquired loans net of associated credit discount; see accompanying tables for further information
 

Originated loans

The second quarter 2016 provision for loan losses on originated loans totaled $14 million, compared to $23 million in the first quarter of 2016. The decrease in provision expense from the linked quarter was driven by a $7 million reserve release attributable specifically to favorable resolutions and pay-downs in the company's exposure to scrap metal and demolition companies and borrowers that serve the energy sector, and offset by higher net charge-offs. At June 30, 2016, the allowance for loan losses on originated loans totaled $248 million or 1.14% of such loans, compared to $248 million or 1.16% of such loans at March 31, 2016. The decrease in allowance coverage ratio primarily reflects the aforementioned draw-down of reserves previously built toward the company's exposure to borrowers serving the energy sector as well as scrap metal and demolition companies.

Originated net charge-offs in the first quarter equaled $14 million or 27 basis points of average originated loans, compared to 22 basis points in the first quarter of 2016. The sequential increase in net charge-offs was driven in large part by lower commercial recoveries from elevated first quarter levels.

At June 30, 2016, nonperforming originated loans totaled $198 million, or 0.91% of originated loans, largely unchanged from March 31, 2016.

Acquired loans

In the second quarter of 2016, the provision for loan losses related to the acquired loan portfolio was a negative $2 million, compared to zero provision in the prior quarter. The negative provision was consistent with a $2 million net recovery on loans previously charged-off. At June 30, 2016, the allowance for loan losses on acquired loans totaled $5 million, unchanged from March 31, 2016. Acquired nonperforming loans totaled $25 million, also unchanged from the prior quarter.  At June 30, 2016, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $54 million.

Deposits

Average deposits increased 5% annualized from the prior quarter to $29.2 billion.

  • Average non-interest checking deposit balances increased 3% annualized from the prior quarter to $5.7 billion, driven by retail and business deposit balances, particularly in the company's Tri-state markets.
  • Time deposits increased 24% annualized to $3.9 billion, driven primarily by a $182 million increase in retail certificate of deposit (CD) balances across the company's footprint.
  • Money market deposit balances were down 3% annualized from the prior quarter driven by decreases in municipal and business deposit balances.
  • Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking account balances, increased 6% from the year-ago period and 5% annualized from the prior quarter. These balances currently represent 38% of the company's deposit balances, unchanged from the prior quarter.
  • The 7% annualized increase in interest-checking deposit balances was driven by a $102 million increase in retail interest checking balances, primarily in the company's New York and Western Pennsylvania markets.
  • Average savings balances increased 9% annualized from the prior quarter driven by higher retail balances across the company's footprint.

Average DepositsQ2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Noninterest-bearing deposits$    5,705 $    5,666 $    5,868 $    5,661 $  5,427 
Savings accounts 3,448  3,371  3,364  3,427  3,494 
Interest-bearing checking 5,455  5,362  5,333  5,165  5,131 
Money market deposits 10,632  10,725  10,719  10,403  10,251 
Certificates of deposit 3,948  3,726  3,515  3,962  3,917 
Total deposits$  29,188 $  28,850 $  28,799 $  28,618 $  28,220 
All amounts in millions.
 

Net Interest Income

Second quarter 2016 GAAP net interest income of $262 million decreased $5 million from the prior quarter, driven primarily by the impact of lower reinvestment rates on cashflows from the investment securities portfolio, continued mix shift towards lower yielding non-credit investment securities, and to a lesser extent, higher borrowing costs attributable to higher short-term interest rates. Normalized net interest margin of 2.94% was down 5 basis points from the prior quarter.

  • Yields on loans decreased 1 basis point to 3.72% primarily reflecting a mix shift within loan categories as well as greater mortgage prepayment and refinancing activity.
  • Yields on investment securities decreased 15 basis points to 2.77% reflecting reinvestment of cashflows from residential mortgage-backed securities at lower interest rates and a mix shift toward lower yielding non-credit investment securities, and to a lesser extent, the impact of the sale of high-yield energy bonds.
  • The average cost of interest-bearing deposits increased 2 basis points from the prior quarter to 0.34%.

Net Interest Income (Tax Equivalent)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Quarter as Reported$    267.4  $    272.8  $   271.7  $  268.5  $  268.0  
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 1.4  (0.6) (0.5) -  - 
Sub-Total 1.4  (0.6) (1.0) (1.2) (2.9)
Normalized Net Interest Income$  268.8 $  272.2 $  270.7 $  267.3 $  265.1 
All amounts in millions.


Net Interest Margin (Tax Equivalent)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Quarter as Reported 2.92% 3.00% 2.98% 2.98% 3.02%
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 0.02% (0.01)% (0.01)% -  - 
Sub-Total 0.02% (0.01)% (0.02)% (0.01)% (0.03)%
Normalized Net Interest Margin 2.94% 2.99% 2.96% 2.97% 2.99%
                

Noninterest Income

On a reported basis, second quarter 2016 noninterest income was $69 million and reflected $11 million in pre-tax losses incurred on the sale of the company's entire high-yield energy bond exposure following recent recovery in their prices. Excluding this loss, operating fee income was $80 million, and increased $1 million or 1% from the prior quarter.

  • Deposit service charges increased 2% from the seasonally low levels in the first quarter.
  • Insurance commissions increased $1 million or 8% sequentially, driven in large part by both commercial and personal lines.
  • Merchant and card fees increased $1 million or 7% driven by higher purchase 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, increased $2 million, primarily driven by robust derivatives and syndication volumes in the quarter.
  • Mortgage banking revenues were $2 million higher than the prior quarter reflecting strong locked volumes driven by low mortgage rates. Locked volumes and gain-on-sale margin increased QOQ.
  • Other noninterest income decreased $5 million from the prior quarter driven by lower investment gains as well as higher amortization of historic tax credit investments.

Operating Noninterest Income (Non-GAAP)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Deposit service charges$    21.8 $    21.5 $    22.9 $    22.9 $    22.2 
Insurance commissions   15.7    14.6    14.9    18.3    17.1 
Merchant and card fees   13.2    12.3    13.3    13.4    13.3 
Wealth management services   13.0    13.6    14.6    14.6    15.7 
Mortgage banking   5.5    4.0    4.9    5.1    5.8 
Capital markets income   4.3    2.3    6.6    2.6    5.3 
Lending and leasing   4.2    4.1    4.2    4.5    4.0 
Bank owned life insurance   3.2    3.5    3.3    2.8    3.2 
Other income (1.5) 3.2  4.7  (0.7)   0.1 
Total noninterest income$  79.6 $  79.1 $  89.4 $  83.4 $  86.6 
All amounts in millions.
 

Noninterest Expense

Excluding $25 million in merger integration related costs, operating noninterest expenses totaled $233 million in the second quarter of 2016, or 4% lower than first quarter 2016 levels. The quarter-over-quarter decrease was primarily driven by lower employee-related expenses, marketing and professional services expenses and other volume-related costs.

  • Salaries and benefits expense of $112 million declined 2% or $3 million from the prior quarter driven by lower employee count and the associated impact on compensation and other benefits expenses.
  • Occupancy and equipment expenses decreased 4%, due primarily to lower building maintenance expenses.
  • Technology and communications increased 2% from prior quarter due to higher technology outsourcing expenses.
  • Marketing and advertising expenses were $2 million lower compared to first quarter levels, reflecting lower promotional campaigns in the second quarter.
  • Professional services fees decreased $3 million or 21% from first quarter levels and continued to be driven by pause of certain projects and the associated decline in third party services expenses.
  • Other expenses decreased $2 million sequentially driven in part by lower other real estate (ORE) valuation write-downs and other volume-related corporate expenses.

Operating Noninterest Expense (Non-GAAP)*Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Salaries and employee benefits$  112.1 $  115.0 $  113.1 $  113.8 $  113.6 
Occupancy and equipment   25.3    26.5    26.0    25.5    26.0 
Technology and communications   36.3    35.4    38.2    38.3    36.5 
Marketing and advertising   7.1    8.8    9.7    8.4    10.3 
Professional services   9.9    12.4    15.4    18.1    16.3 
Amortization of intangibles   3.2    3.9    4.0    4.0    5.1 
Federal deposit insurance premiums   11.3    10.5    10.4    10.0    11.8 
Other expense   27.8    29.4    30.7    27.3    28.4 
Total operating noninterest expense$  233.0  $  241.9  $  247.4  $  245.4  $  247.9  
*All amounts in millions. See appendix for reconciliation of GAAP to Non-GAAP amounts
 

In the second quarter of 2016, the operating efficiency ratio was 68.2%, compared to 69.8% 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 June 30, 2016, the company's consolidated Total Risk Based capital and Common Equity Tier 1 capital ratios were 12.2% and 8.7%, respectively, up from 12.1% and 8.6% at March 31, 2016. 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, $29 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; and (6) impact of the pending merger agreement on customers and employees.

 

First Niagara Financial Group, Inc.            
Income Statement Highlights - Reported Basis            
(in thousands, except per share amounts)            
                
      2016   2015  Six months ended 
      Second  First   Fourth  Third  Second  First   June 30,  June 30,  
      Quarter  Quarter   Quarter  Quarter  Quarter  Quarter   2016  2015  
                
Interest income:            
 Loans and leases $  219,767 $  219,050  $  214,945 $  211,407 $  211,899 $  210,371  $  438,817 $  422,270  
 Investment securities and other     86,381    89,759     88,825    87,914    86,356    86,280     176,140    172,636  
  Total interest income     306,148    308,809     303,770    299,321    298,255    296,651     614,957    594,906  
                
Interest expense:            
 Deposits     19,970    18,640     17,147    17,040    16,568    15,344     38,610    31,912  
 Borrowings     24,067    22,578     20,074    18,790    18,577    18,363     46,645    36,940  
  Total interest expense     44,037    41,218     37,221    35,830    35,145    33,707     85,255    68,852  
                
   Net interest income    262,111    267,591     266,549    263,491    263,110    262,944     529,702    526,054  
Provision for credit losses    11,868    22,519     22,900    19,768    20,756    12,765     34,387    33,521  
   Net interest income after provision    250,243    245,072     243,649    243,723    242,354    250,179     495,315    492,533  
                
Noninterest income:            
 Deposit service charges    21,824    21,507     22,919    22,944    22,208    20,389     43,331    42,597  
 Insurance commissions    15,735    14,562     14,920    18,252    17,060    15,714     30,297    32,774  
 Merchant and card fees    13,222    12,329     13,318    13,423    13,317    11,907     25,551    25,224  
 Wealth management services    13,048    13,610     14,567    14,572    15,718    14,650     26,658    30,368  
 Mortgage banking    5,532    3,950     4,894    5,070    5,783    4,887     9,482    10,670  
 Capital markets income    4,342    2,323     6,580    2,608    5,284    4,152     6,665    9,436  
 Lending and leasing     4,230    4,051     4,248    4,487    3,998    4,353     8,281    8,351  
 Bank owned life insurance     3,174    3,540     3,259    2,819    3,160    3,592     6,714    6,752  
 Loss on sale of high yield securities    (11,001)   -     -    -    -    -     (11,001)   -  
 Other income    (1,484)   3,196     4,696    (732)   79    2,600     1,712    2,679  
  Total noninterest income    68,622    79,068     89,401    83,443    86,607    82,244     147,690    168,851  
                
Noninterest expense:            
 Salaries and employee benefits    112,142    115,007     113,063    113,794    113,561    111,973     227,149    225,534  
 Occupancy and equipment    25,338    26,466     25,961    25,538    26,021    27,332     51,804    53,353  
 Technology and communications    36,276    35,419     38,232    38,301    36,486    35,061     71,695    71,547  
 Marketing and advertising    7,099    8,821     9,719    8,445    10,297    9,863     15,920    20,160  
 Professional services    9,858    12,401     15,361    18,052    16,321    13,070     22,259    29,391  
 Amortization of intangibles    3,235    3,860     3,972    4,001    5,092    6,205     7,095    11,297  
 Federal deposit insurance premiums    11,281    10,460     10,383    10,026    11,750    11,158     21,741    22,908  
 Merger and acquisition integration expenses    24,772    13,473     14,198    -     -     -      38,245    -  
 Restructuring charges    -     -      3,378    -     -     17,517     -    17,517  
 Other expense    27,752    29,445     30,728    27,276    28,371    28,859     57,197    57,230  
  Total noninterest expense    257,753    255,352     264,995    245,433    247,899    261,038     513,105    508,937  
                
  Income before income tax    61,112    68,788     68,055    81,733    81,062    71,385     129,900    152,447  
Income tax expense    14,680    20,481     17,255    21,251    20,052    20,000     35,161    40,052  
  Net income    46,432    48,307     50,800    60,482    61,010    51,385     94,739    112,395  
Preferred stock dividend    7,547    7,547     7,547    7,547    7,547    7,547     15,094    15,094  
  Net income available to common stockholders $  38,885 $  40,760  $  43,253 $  52,935 $  53,463 $  43,838  $  79,645 $  97,301  
                
Financial Ratios:            
Earnings per basic share $  0.11 $  0.11  $  0.12 $  0.15 $  0.15    0.12  $  0.22    0.27  
Earnings per diluted share $  0.11 $  0.11  $  0.12 $  0.15 $  0.15    0.12  $  0.22    0.27  
Weighted average shares outstanding - basic(1)    352,134    351,372     351,306    351,293    351,126    350,741   351,753  350,935  
Weighted average shares outstanding - diluted(1)  353,844    353,965     353,797    353,248    352,791    352,621   353,853  352,683  
Net revenue(2) $  330,733 $346,659  $  355,950 $  346,934 $  349,717 $  345,188  $677,392 $694,905  
Noninterest income as a percentage of net revenue(2) 20.75% 22.81%  25.12% 24.05% 24.76% 23.83%  21.80% 24.30% 
Pre-tax, pre-provision income(3) $72,980 $91,307  $90,955 $101,501 $  101,818 $84,150  $164,287 $185,968  
Pre-tax, pre-provision income per diluted share(3) $  0.21 $  0.26  $  0.26 $  0.29 $  0.29 $  0.24  $  0.46 $  0.53  
Pre-tax, pre-provision return on average assets(3)  0.73% 0.92%    0.91%   1.03% 1.05% 0.88%    0.82%   0.97% 
Net interest margin(4)  2.92% 3.00%  2.98% 2.98% 3.02% 3.07%  2.96% 3.04% 
Interest yield on average loans(4)  3.72% 3.73%  3.65% 3.64% 3.73% 3.75%  3.73% 3.74% 
Rate paid on interest-bearing liabilities  0.60% 0.56%  0.51% 0.50% 0.49% 0.48%  0.58% 0.49% 
Efficiency ratio  77.9% 73.7%  74.4% 70.7% 70.9% 75.6%  75.7% 73.2% 
Expenses as a percentage of average loans and deposits 1.9% 1.9%    2.0%   1.9% 1.9% 2.1%    1.9%   2.0% 
Effective tax rate    24.0%   29.8%    25.4%   26.0%   24.7%   28.0%    27.10%   26.30% 
Return on average assets(5)    0.46%   0.49%    0.51%   0.61%   0.63% 0.54%    0.48%   0.58% 
Return on average equity(5)    4.47%   4.68%    4.85%   5.78%   5.90% 5.05%    4.57%   5.48% 
Return on average tangible equity(3)(5)    6.70%   7.04%    7.32%   8.73%   8.94% 7.68%    6.87%   8.32% 
Return on average common equity    4.07%   4.30%    4.50%   5.51%   5.63% 4.69%    4.18%   5.17% 
Return on average tangible common equity(3)    6.39%   6.77%    7.10%   8.72%   8.94% 7.48%    6.58%   8.22% 
                
 (1)Share count excludes unvested restricted stock shares.          
 (2)Net revenue is comprised of net interest income and noninterest income. 
 (3)The 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.   
 (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)          
              
      2016   2015   
     June 30,March 31,  December 31, September 30,June 30,March 31,  
              
Cash and cash equivalents $  420,884 $  382,539  $  672,243 $  420,289 $  527,323 $  387,676   
Investment securities:          
 Available for sale    5,518,025    5,439,220     5,471,291    5,725,608    5,750,860    5,911,419   
 Held to maturity    6,315,222    6,720,817     6,387,689    6,280,049    6,169,838    6,214,561   
 FHLB and FRB common stock    402,214    375,960     410,452    373,066    379,135    375,090   
  Total investment securities    12,235,461    12,535,997     12,269,432    12,378,723    12,299,833    12,501,070   
Loans held for sale    51,731    26,592     46,096    51,056    59,816    48,755   
Loans and leases:           
 Commercial:          
  Real estate    8,730,148    8,625,965     8,652,255    8,365,808    8,312,332    8,287,108   
  Business    6,132,536    6,174,753     6,013,217    6,031,358    5,923,524    5,790,980   
   Total commercial loans    14,862,684    14,800,718     14,665,472    14,397,166    14,235,856    14,078,088   
 Consumer:          
  Residential real estate    3,358,205    3,330,533     3,354,639    3,345,701    3,329,799    3,330,216   
  Home equity    3,058,824    3,057,154     3,068,962    3,032,618    2,984,872    2,943,844   
  Indirect auto    2,537,259    2,464,318     2,393,105    2,330,826    2,256,004    2,200,913   
  Credit cards    287,139    288,747     310,813    305,779    304,682    301,228   
  Other consumer    229,084    236,911     244,935    254,109    257,204    263,985   
   Total consumer loans    9,470,511    9,377,663     9,372,454    9,269,033    9,132,561    9,040,186   
  Total loans and leases    24,333,195    24,178,381     24,037,926    23,666,199    23,368,417    23,118,274   
 Allowance for loan losses    252,843    252,800     242,036    238,700    235,600    231,138   
   Loans and leases, net    24,080,352    23,925,581     23,795,890    23,427,499    23,132,817    22,887,136   
Bank owned life insurance    441,772    439,084     436,709    434,263    431,335    428,454   
Goodwill and other intangibles    1,389,132    1,392,367     1,396,227    1,400,199    1,404,201    1,410,800   
Other assets    1,372,049    1,370,275     1,301,789    1,301,152    1,208,218    1,243,588   
Total assets $  39,991,381 $  40,072,435  $  39,918,386 $  39,413,181 $  39,063,543 $  38,907,479   
              
Deposits:           
 Savings accounts $  3,448,312 $  3,428,924  $  3,389,728 $  3,359,320 $  3,483,777 $  3,488,441   
 Interest-bearing checking    5,364,128    5,553,928     5,478,947    5,285,987    5,088,856    5,158,264   
 Money market deposits    10,398,719    10,884,350     10,653,792    10,483,721    10,303,873    10,368,358   
 Noninterest-bearing deposits    5,800,565    5,739,509     5,834,534    5,813,571    5,549,944    5,500,484   
 Certificates of deposit    3,947,762    3,954,033     3,343,878    3,873,521    4,020,367    3,734,226   
   Total deposits    28,959,486    29,560,744     28,700,879    28,816,120    28,446,817    28,249,773   
              
Short-term borrowings    4,631,269    3,255,890     4,348,586    4,086,415    4,275,886    4,739,264   
Long-term borrowings    1,732,919    2,608,014     2,308,101    1,783,402    1,683,476    1,233,550   
Other liabilities    467,915    498,084     434,492    587,867    536,239    559,646   
 Total liabilities    35,791,589    35,922,732     35,792,058    35,273,804    34,942,418    34,782,233   
Preferred stockholders' equity    338,002    338,002     338,002    338,002    338,002    338,002   
Common stockholders' equity    3,861,790    3,811,701     3,788,326    3,801,375    3,783,123    3,787,244   
 Total stockholders' equity    4,199,792    4,149,703     4,126,328    4,139,377    4,121,125    4,125,246   
Total liabilities and stockholders' equity $  39,991,381 $  40,072,435  $  39,918,386 $  39,413,181 $  39,063,543 $  38,907,479   
              
Selected balance sheet information:          
Total interest-earning assets(1) $  36,627,110 $  36,789,339  $  36,677,134 $  36,099,580 $  35,813,498 $  35,594,208   
Total interest-bearing liabilities    29,523,109    29,685,139     29,523,032    28,872,365    28,856,235    28,722,103   
Net interest-earning assets $  7,104,001 $  7,104,200  $  7,154,102 $  7,227,215 $  6,957,263 $  6,872,105   
              
Tangible common equity(1)(2) $  2,472,658 $  2,419,334  $  2,392,099 $  2,401,176 $  2,378,922 $  2,376,444   
Unrealized gain (loss) on available for sale securities, net of tax(3)   37,380    1,246     (9,577)   29,877    37,464    68,194   
              
Total core deposits $  25,011,724 $  25,606,711  $  25,357,001 $  24,942,599 $  24,426,450 $  24,515,547   
              
Originated loans(4) $  21,678,047 $  21,361,753  $  21,101,040 $  20,591,532 $  19,929,719 $  19,528,609   
Acquired loans(5)    2,709,039    2,873,372     2,998,530    3,138,568    3,517,525    3,681,354   
Credit related discount on acquired loans(6)    (53,891)   (56,744)    (61,644)   (63,901)   (78,827)   (91,689)  
 Total Loans $  24,333,195 $  24,178,381  $  24,037,926 $  23,666,199 $  23,368,417 $  23,118,274   
          
 (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 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. 
 (3)Excludes unamortized unrealized gains recorded in accumulated other comprehensive income related to available for sale securities transferred to held to maturity. 
 (4)Originated loans represent total loans excluding acquired loans.     
 (5)Carrying value of acquired loans plus the principal not expected to be collected.    
 (6)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 Six months ended 
   June 30, 2016March 31, 2016June 30, 2015 June 30, 2016June 30, 2015 
    Average Interest(1) Yields  Average Interest(1) Yields  Average Interest(1) Yields   Average Interest(1) Yields  Average Interest(1) Yields  
    Balances
 
 and
Rates(1)
 Balances
 
 and
Rates(1)
 Balances
 
 and
Rates(1)
  Balances
 
 and
Rates(1)
 Balances
 
 and
Rates(1)
 
                    
Interest-earning assets:                  
Loans and leases(2)                  
Commercial:                  
Real estate $  8,664 $  80  3.63%$  8,625 $  79  3.61%$  8,257 $  75  3.61% $  8,644 $  158  3.62%$  8,260 $  150  3.60% 
Business    6,112    53    3.43     6,062    52    3.42     5,830    52    3.48      6,088    106    3.43     5,813    101    3.46   
Total commercial loans    14,776    133    3.55     14,687    131    3.53     14,087    127    3.56      14,732    264    3.54     14,073    251    3.54   
Consumer:                  
Residential real estate    3,338    30    3.57     3,346    31    3.65     3,326    31    3.68      3,342    60    3.61     3,332    62    3.73   
Home equity    3,055    30    3.95     3,066    30    3.93     2,963    28    3.86      3,060    60    3.94     2,951    57    3.89   
Indirect auto    2,500    18    2.93     2,420    18    2.91     2,238    15    2.74      2,460    36    2.92     2,213    30    2.77   
Credit cards    288    8    11.52     297    9    11.80     304    9    11.40      293    17    11.66     307    18    11.57   
Other consumer    233    5    8.64     242    4    8.57     260    5    8.49      237    10    8.61     267    11    8.49   
Total consumer loans    9,414    91    3.90     9,371    92    3.94     9,091    88    3.91      9,392    183    3.92     9,070    178    3.96   
 Total loans and leases    24,190    224    3.72     24,058    223    3.73     23,178    215    3.73      24,124    447    3.73     23,143    429    3.74   
Residential MBS    8,361    48    2.32     7,864    48    2.43     7,381    43    2.30      8,112    96    2.37     7,281    87    2.39   
Commercial MBS    870    11    5.11     997    12    4.68     1,311    11    3.42      933    23    4.88     1,357    23    3.34   
Other investment securities (3)    3,328    27    3.28     3,513    30    3.53     3,604    34    3.75      3,421    58    3.41     3,580    65    3.63   
 Total securities, at amortized cost    12,559    86    2.77     12,374    90    2.92     12,296    88    2.85      12,466    177    2.85     12,218    175    2.86   
Money market and other investments    90    1    2.58     205    1    1.37     100    -     1.56      148    1    1.74     129    1    1.22   
Total interest-earning assets    36,839 $  311  3.40%   36,637 $  314  3.45%   35,574 $  303  3.42%    36,738 $  625  3.42%   35,490 $  605  3.44% 
Goodwill and other intangibles    1,391      1,394      1,408       1,392      1,411    
Other noninterest-earning assets    2,019      1,929      1,931       1,974      1,909    
                    
Total assets $  40,249   $  39,960   $  38,913    $  40,104   $  38,810    
                    
Interest-bearing liabilities:                   
Deposits                  
Savings accounts $  3,448 $  1  0.10%$  3,371 $  1  0.09%$  3,494 $  1  0.09% $  3,410 $  2  0.10%$  3,463 $  1  0.09% 
Interest-bearing checking    5,455    -     0.03     5,362    -     0.03     5,131    -     0.03      5,408    1    0.03     5,067    1    0.03   
Money market deposits     10,632    9    0.33     10,725    9    0.32     10,251    8    0.29      10,678    17    0.32     10,192    14    0.27   
Certificates of deposit     3,948    10    1.02     3,726    9    0.97     3,917    8    0.82      3,837    19    0.99     3,848    16    0.83   
Total interest bearing deposits    23,483    20  0.34%   23,184    19  0.32%   22,793    17  0.29%    23,333    39  0.33%   22,570    32  0.29% 
Borrowings                  
Short-term borrowings    3,984    8  0.81%   3,815    7  0.72%   4,522    5  0.48%    3,900    15  0.76%   4,821    11  0.47% 
Long-term borrowings    2,209    16    2.93     2,416    15    2.62     1,359    13    3.90      2,312    31    2.77     1,194    26    4.36   
Total borrowings     6,193    24    1.56     6,231    22    1.46     5,881    18    1.27      6,212    46    1.51     6,015    37    1.24   
Total interest-bearing liabilities     29,676 $  44  0.60%   29,415 $  41  0.56%   28,674 $  35  0.49%    29,545 $  85  0.58%   28,585 $  69  0.49% 
Noninterest-bearing deposits     5,705      5,666      5,427       5,686      5,428    
Other noninterest-bearing liabilities     691      725      667       707      660    
Total liabilities     36,072      35,806      34,768       35,938      34,673    
Total stockholders' equity    4,177      4,154      4,145       4,166      4,137    
Total liabilities and stockholders' equity $  40,249   $  39,960   $  38,913    $  40,104   $  38,810    
                    
Net interest income (FTE)  $  267   $  273   $  268    $  540   $  536   
Taxable Equivalent Adjustment(1)     5      5      5       10      10   
                    
 Total core deposits  $  25,240 $  10  0.16%$  25,124 $  10  0.15%$  24,303 $  9  0.14% $  25,182 $  20  0.16%$  24,150 $  16  0.13% 
 Total transactional deposits     11,160    -   0.02%   11,028    -   0.02%   10,558    -   0.01%    11,094    1  0.02%   10,495    1  0.01% 
 Total deposits     29,188    20  0.28%   28,850    19  0.26%   28,220    17  0.24%    29,019    39  0.27%   27,998    32  0.23% 
                    
Tax equivalent net interest rate spread    2.80%   2.89%   2.93%    2.84%   2.95% 
Tax equivalent net interest rate margin    2.92%   3.00%   3.02%    2.96%   3.04% 
                    
 (1)Tax equivalent interest income is calculated using a 35% tax rate.  
 (2)Includes nonaccrual loans.  
 (3)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)            
       2016   2015  Six months ended 
       Second  First   Fourth  Third  Second  First   June 30,  June 30,  
       Quarter  Quarter   Quarter  Quarter  Quarter  Quarter   2016  2015  
                 
Beginning balance $  252,800 $  242,036  $  238,700 $  235,600 $  231,138 $  234,251  $  242,036 $  234,251  
Net loan (charge-offs) recoveries:            
 Commercial real estate $  1,612 $  (254) $  (1,476)$  (2,686)$  (5,525)$  (5,825) $  1,358 $  (11,350) 
 Commercial business    (5,620)   (3,903)    (10,441)   (6,286)   (3,513)   (4,178)    (9,523)   (7,691) 
 Residential real estate    (287)   (135)    (94)   (230)   (197)   (266)    (422)   (463) 
 Home equity    (1,484)   (995)    (723)   (1,056)   (1,367)   (1,526)    (2,479)   (2,893) 
 Indirect auto    (2,043)   (2,030)    (2,122)   (1,743)   (1,342)   (1,226)    (4,073)   (2,568) 
 Credit cards    (2,439)   (2,654)    (2,450)   (2,215)   (2,522)   (2,450)    (5,093)   (4,972) 
 Other consumer    (2,064)   (1,784)    (1,758)   (1,952)   (1,528)   (1,807)    (3,848)   (3,335) 
    Total net loan charge-offs $  (12,325)$  (11,755) $  (19,064)$  (16,168)$  (15,994)$  (17,278) $  (24,080)$  (33,272) 
Provision for loan losses    12,368    22,519     22,400    19,268    20,456    14,165     34,887    34,621  
  Ending balance $  252,843 $  252,800  $  242,036 $  238,700 $  235,600 $  231,138  $  252,843 $  235,600  
                 
Supplemental information            
Allowance to loans  1.04% 1.05%  1.01% 1.01%   1.01%   1.00%  1.04% 1.01% 
Allowance for originated loans to originated loans(1)  1.14% 1.16%  1.12% 1.13%   1.15%   1.15%  1.14% 1.15% 
                 
Net charge-offs (recoveries) to average loans (annualized)           
 Commercial real estate    (0.07)%   0.01%    0.07% 0.13%   0.27%   0.29%    (0.03)% 0.27% 
 Commercial business    0.37%   0.26%    0.70% 0.42%   0.24%   0.29%    0.31% 0.26% 
  Total commercial loans    0.11%   0.11%    0.33% 0.25%   0.26%   0.28%    0.11% 0.27% 
 Residential real estate    0.03%   0.02%    0.01% 0.03%   0.02%   0.03%    0.03% 0.03% 
 Home equity    0.19%   0.13%    0.09% 0.14%   0.18%   0.21%    0.16% 0.20% 
 Indirect auto    0.33%   0.34%    0.36% 0.30%   0.24%   0.22%    0.33% 0.23% 
 Credit cards    3.39%   3.57%    3.21% 2.90%   3.32%   3.16%    3.48% 3.24% 
 Other consumer    3.55%   2.95%    2.81% 3.06%   2.35%   2.63%    3.25% 2.49% 
  Total consumer loans    0.36%   0.33%    0.31% 0.32%   0.31%   0.33%    0.34% 0.31% 
 Total loans    0.20%   0.20%    0.32% 0.28%   0.28%   0.30%    0.20% 0.29% 
                 
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)         
 Commercial real estate    0.03%   0.00%    0.08% 0.14%   0.31%   0.24%    0.01% 0.28% 
 Commercial business    0.38%   0.26%    0.72% 0.44%   0.25%   0.31%    0.32% 0.28% 
  Total commercial loans    0.18%   0.11%    0.36% 0.27%   0.28%   0.27%    0.15% 0.28% 
 Residential real estate    0.05%   0.02%    0.02% 0.04%   0.04%   0.05%    0.04% 0.04% 
 Home equity    0.23%   0.16%    0.14% 0.14%   0.17%   0.16%    0.20% 0.16% 
 Indirect auto    0.33%   0.34%    0.36% 0.30%   0.24%   0.22%    0.33% 0.23% 
 Credit cards    3.39%   3.57%    3.21% 2.90%   3.32%   3.16%    3.48% 3.24% 
 Other consumer    3.55%   2.95%    2.81% 3.06%   2.35%   2.63%    3.25% 2.49% 
  Total consumer loans    0.42%   0.40%    0.39% 0.38%   0.37%   0.38%    0.41% 0.38% 
 Total loans    0.27%   0.22%    0.37% 0.31%   0.31%   0.31%    0.24% 0.31% 
                 
Nonperforming loans:            
 Originated(1):            
 Commercial real estate $  47,464 $  37,087  $  44,438 $  54,699 $  60,021 $  65,655  $  47,464 $  60,021  
 Commercial business    64,681    71,999     56,382    45,389    42,979    54,506     64,681    42,979  
 Residential real estate    28,122    30,234     31,513    32,455    32,877    32,791     28,122    32,877  
 Home equity    35,323    35,701     35,561    34,191    27,092    26,163     35,323    27,092  
 Indirect auto    17,582    16,536     15,131    13,795    13,066    13,399     17,582    13,066  
 Other consumer    5,111    5,093     5,201    5,047    4,917    5,065     5,111    4,917  
  Total originated nonperforming loans    198,283    196,650     188,226    185,576    180,952    197,579     198,283    180,952  
  Total acquired nonperforming loans(2)    24,672    24,874     25,335    25,365    26,553    30,236     24,672    26,553  
   Total nonperforming loans    222,955    221,524     213,561    210,941    207,505    227,815     222,955    207,505  
 Real estate owned    18,735    16,457     16,063    18,359    17,397    19,128     18,735    17,397  
  Total nonperforming assets(3) $  241,690 $  237,981  $  229,624 $  229,300 $  224,902 $  246,943  $  241,690 $  224,902  
                 
Accruing troubled debt restructurings (TDR) $  72,175 $  63,659  $  62,630 $  60,941 $  64,643 $  64,401  $  72,175 $  64,643  
Loans 90 days past due still accruing(4)    52,136    57,259     67,718    69,879    78,279    87,213     52,136    78,279  
Total classified loans(5)    635,807    601,539     602,912    591,771    592,148    615,518     635,807    592,148  
Total criticized loans(6) $  958,231 $  954,480  $  944,779 $  858,243 $  938,951 $  990,656  $  958,231 $  938,951  
                 
Total nonperforming loans to loans  0.92% 0.92%  0.89% 0.89%   0.89%   0.99%  0.92% 0.89% 
Total nonperforming originated loans to originated loans(1) 0.91% 0.92%  0.89% 0.90%   0.91%   1.01%  0.91% 0.91% 
Total nonperforming assets to loans and real estate owned 0.99% 0.98%  0.95% 0.97%   0.96%   1.07%  0.99% 0.96% 
Total nonperforming assets to assets  0.60% 0.59%  0.58% 0.58%   0.58%   0.63%  0.60% 0.58% 
Allowance to nonperforming loans  113.4% 114.1%  113.3% 113.2%   113.5%   101.5%  113.4% 113.5% 
                 
Originated loans(1) $21,678,047 $21,361,753  $  21,101,040 $  20,591,532 $  19,929,719 $  19,528,609  $21,678,047 $19,929,719  
Acquired loans(7)    2,709,039    2,873,372     2,998,530    3,138,568    3,517,525    3,681,354   2,709,039  3,517,525  
Credit related discount on acquired loans(8)    (53,891)   (56,744)    (61,644)   (63,901)   (78,827)   (91,689)    (53,891)   (78,827) 
 Total Loans $24,333,195 $24,178,381  $24,037,926 $  23,666,199 $  23,368,417 $  23,118,274  $24,333,195 $23,368,417  
                 
 (1)Originated loans represent total loans excluding acquired loans.           
 (2)Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.    
 (3)Does 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.   
 (4)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.   
 (5)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 "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2015.   
 (6)Criticized loans includes consumer loans when they are 90 days or more past due.  Criticized loans include special mention, substandard, doubtful, and loss.   
 (7)Represents the carrying value of acquired loans plus the principal not expected to be collected.       
 (8)Represent 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  
    June 30,March 31, December 31,September 30,June 30,March 31, 
            
First Niagara Financial Group, Inc. capital ratios:         
 Tier 1 risk based capital  10.24% 10.12%  10.08% 10.05% 10.03% 10.02% 
 Total risk based capital  12.22% 12.09%  12.01% 11.97% 11.96% 11.95% 
 Common equity tier 1 capital  8.69% 8.58%  8.55% 8.52% 8.50% 8.48% 
 Leverage  7.54% 7.55%  7.62% 7.66% 7.60% 7.56% 
 Equity to assets  10.50% 10.36%  10.34% 10.50% 10.55% 10.60% 
 Tangible common equity to tangible assets(1)  6.41% 6.25%  6.21% 6.32% 6.32% 6.34% 
 Total risk weighted assets $  28,660 $  28,809  $  28,881 $  28,716 $  28,445 $  28,152  
            
First Niagara Bank, N.A. capital ratios:         
 Tier 1 risk based capital  10.86% 10.73%  10.65% 10.67% 10.66% 10.65% 
 Total risk based capital  11.80% 11.67%  11.55% 11.56% 11.54% 11.53% 
 Common equity tier 1 capital  10.86% 10.73%  10.65% 10.67% 10.66% 10.65% 
 Leverage  8.00% 8.00%  8.05% 8.12% 8.07% 8.03% 
 Total risk weighted assets $  28,591 $  28,742  $  28,813 $  28,632 $  28,359 $  28,068  
            
Number of branches    392    392     392    394    394    394  
Full time equivalent employees    5,255    5,322     5,428    5,397    5,364    5,322  
            
Share information and per share metrics:         
 Common shares outstanding    356,056    354,977     354,762    354,788    354,890    353,717  
 Preferred shares outstanding    14,000    14,000     14,000    14,000    14,000    14,000  
 Treasury shares    9,946    11,025     11,240    11,214    11,112    12,285  
 Market price (NASDAQ: FNFG): $  9.74 $  9.68  $  10.85 $  10.21 $  9.44 $  8.84  
 Book value per common share(2)    10.95    10.84     10.78    10.82    10.77    10.80  
 Tangible book value per common share(1)(2)    7.01    6.88     6.81    6.84    6.77    6.78  
 Price/Book  88.95% 89.30%  100.65% 94.36% 87.65% 81.85% 
 Price/Tangible book  138.94% 140.70%  159.32% 149.27% 139.44% 130.38% 
 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% 72.73%  66.67% 53.33% 53.33% 66.67% 
 Dividend yield (annualized)  3.30% 3.32%  2.93% 3.11% 3.40% 3.67% 
            
 (1)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. 
 (2)Share count excludes unvested restricted stock shares. 

 

First Niagara Financial Group, Inc.            
Appendix A - Non-GAAP Reconciliation            
(in thousands, except per share amounts)            
                
      2016   2015  Six months ended 
      Second  First   Fourth  Third  Second  First   June 30,  June 30,  
      Quarter  Quarter   Quarter  Quarter  Quarter  Quarter   2016  2015  
Financial ratios computed on an operating basis(1):            
Earnings per basic share $  0.18 $  0.14  $  0.16 $  0.15 $  0.15 $  0.15  $  0.32 $  0.31  
Earnings per diluted share $  0.18 $  0.14  $  0.15 $  0.15 $  0.15 $  0.15  $  0.32 $  0.30  
Weighted average shares outstanding - basic(2)    352,134  351,372   351,306  351,293    351,126  350,741     351,753  350,935  
Weighted average shares outstanding - diluted(2)    353,844  353,965   353,797  353,248    352,791  352,621     353,853  352,683  
Noninterest income as a percentage of net revenue(3)  23.30% 22.81%  25.12% 24.05% 24.76% 23.83%  23.05% 24.30% 
Pre-tax, pre-provision income    108,753  104,780   108,531  101,501    101,818  101,667     213,533  203,485  
Pre-tax, pre-provision income per diluted share $  0.31 $  0.30  $  0.31 $  0.29 $  0.29 $  0.29  $  0.60 $  0.58  
Pre-tax, pre-provision return on average assets  1.09% 1.05%  1.09% 1.03% 1.05% 1.07%  1.07% 1.06% 
Net interest margin(4)  2.92% 3.00%  2.98% 2.98% 3.02% 3.07%  2.96% 3.04% 
Interest yield on average loans(4)  3.72% 3.73%  3.65% 3.64% 3.73% 3.75%  3.73% 3.74% 
Rate paid on interest-bearing liabilities  0.60% 0.56%  0.51% 0.50% 0.49% 0.48%  0.58% 0.49% 
Efficiency ratio  68.2% 69.8%  69.5% 70.7% 70.9% 70.5%  69.0% 70.7% 
Effective tax rate  27.4% 30.2%  26.6% 26.0% 24.7% 30.0%  28.7% 27.5% 
Return on average assets  0.70% 0.58%  0.63% 0.61% 0.63% 0.65%  0.64% 0.64% 
Return on average equity  6.77% 5.56%  6.00% 5.78% 5.90% 6.12%  6.17% 6.01% 
Return on average tangible equity(5)  10.15% 8.37%  9.05% 8.73% 8.94% 9.30%  9.26% 9.12% 
Return on average common equity  6.57% 5.26%  5.75% 5.51% 5.63% 5.85%  5.92% 5.74% 
Return on average tangible common equity(6)  10.31% 8.29%  9.07% 8.72% 8.94% 9.34%  9.30% 9.13% 
                
Reconciliation of noninterest income on operating basis to reported noninterest income(1):            
 Total noninterest income on operating basis (Non-GAAP) $  79,623 $  79,068  $  89,401 $  83,443 $  86,607 $  82,244  $  158,691 $168,851  
  Loss on sale of high yield securities    (11,001)   -      -     -     -     -      (11,001)   -   
 Total reported noninterest income (GAAP)    68,622  79,068     89,401  83,443    86,607    82,244  $  147,690 $168,851  
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):            
 Total noninterest expense on operating basis (Non-GAAP) $  232,981 $241,879  $247,419 $245,433 $  247,899 $243,521  $  474,860 $491,420  
  Merger and acquisition integration expenses    24,772    13,473     14,198    -     -     -      38,245    -   
  Restructuring charges    -     -      3,378    -     -     17,517     -     17,517  
 Total reported noninterest expense (GAAP) $  257,753 $255,352  $264,995 $245,433 $  247,899 $261,038  $  513,105 $508,937  
                
Reconciliation of net operating income to net income(1):            
 Net operating income (Non-GAAP) $  70,296 $  57,448  $  62,813 $  60,482 $  61,010 $  62,246  $  127,744 $123,256  
 Nonoperating income and expenses, net of tax:            
  Loss on sale of high yield securities    6,820    -      -     -     -     -     6,820    -   
  Merger and acquisition integration expenses    17,044    9,141     9,919    -     -     -      26,185    -   
  Restructuring charges    -     -      2,094    -     -     10,861     -     10,861  
   Total nonoperating income and expenses, net of tax    23,864    9,141     12,013    -     -     10,861     33,005    10,861  
 Net income (GAAP) $  46,432 $  48,307  $  50,800 $  60,482 $  61,010 $  51,385  $  94,739 $112,395  
                
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) $  62,749 $  49,901  $  55,266 $  52,935 $  53,463 $  54,699  $  112,650 $  108,162  
 Nonoperating income and expenses, net of tax:            
  Loss on sale of high yield securities    6,820    -      -     -     -     -     6,820    -  
  Merger and acquisition integration expenses    17,044    9,141     9,919    -     -     -     26,185    -   
  Restructuring charges    -     -      2,094    -     -     10,861     -     10,861  
   Total nonoperating income and expenses, net of tax    23,864    9,141     12,013    -     -     10,861     33,005    10,861  
 Net income available to common stockholders (GAAP) $  38,885 $  40,760  $  43,253 $  52,935 $  53,463 $  43,838  $  79,645 $  97,301  
                
Computation of pre-tax, pre-provision income:            
 Net interest income $  262,111 $267,591  $266,549 $263,491 $  263,110 $262,944  $  529,702 $526,054  
 Noninterest income    68,622   79,068    89,401   83,443     86,607   82,244    147,690   168,851   
 Noninterest expense   (257,753) (255,352)  (264,995) (245,433)  (247,899) (261,038)   (513,105) (508,937) 
 Pre-tax, pre-provision income (GAAP)    72,980    91,307     90,955  101,501  101,818    84,150   164,287  185,968  
 Add back: non-operating loss on sale of high yield securities    11,001    -      -     -     -     -      11,001    -   
 Add back: non-operating noninterest expenses (1)    24,772    13,473     17,576    -     -     17,517     38,245    17,517  
 Pre-tax, pre-provision income (Non-GAAP)(1) $108,753 $104,780  $108,531 $101,501 $101,818 $101,667  $213,533 $203,485  
                
 (1)Noninterest income and noninterest 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 unvested restricted stock shares. 
 (3)Net revenue is comprised of net interest income and noninterest income. 
 (4)Yields and rates calculated on a tax equivalent basis. 
 (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)            
                
      2016   2015  Six months ended 
      Second  First   Fourth  Third  Second  First   June 30,  June 30,  
      Quarter  Quarter  Quarter Quarter  Quarter  Quarter   2016  2015  
Computation of Ending Tangible Assets:            
 Total assets $ 39,991,381 $40,072,435  $39,918,386 $39,413,181 $39,063,543 $38,907,479  $  39,991,381 $  39,063,543  
 Less: Goodwill and other intangibles  (1,389,132) (1,392,367)  (1,396,227) (1,400,199) (1,404,201) (1,410,800)    (1,389,132)   (1,404,201) 
 Tangible assets $38,602,249 $38,680,068  $ 38,522,159 $38,012,982 $37,659,342 $37,496,679  $  38,602,249 $  37,659,342  
                
Computation of Average Tangible Assets:            
 Total assets $40,248,615 $39,959,615  $39,576,697 $39,051,359 $38,913,219 $38,706,545  $  40,104,115 $  38,810,454  
 Less: Goodwill and other intangibles  (1,390,654) (1,394,178)  (1,398,122) (1,402,138) (1,407,946) (1,413,765)  (1,392,416) (1,410,840) 
 Tangible assets $  38,857,961 $  38,565,437  $  38,178,575 $  37,649,221 $  37,505,273 $37,292,780  $  38,711,699 $  37,399,614  
                
Computation of Ending Tangible Equity:            
 Total stockholders' equity $  4,199,792 $  4,149,703  $  4,126,328 $  4,139,377 $  4,121,125 $  4,125,246  $  4,199,792 $  4,121,125  
 Less: Goodwill and other intangibles  (1,389,132) (1,392,367)  (1,396,227) (1,400,199) (1,404,201) (1,410,800)  (1,389,132) (1,404,201) 
 Tangible equity $  2,810,660 $  2,757,336  $  2,730,101 $  2,739,178 $  2,716,924 $  2,714,446  $  2,810,660 $  2,716,924  
                
Computation of Ending Tangible Common Equity:            
 Total stockholders' equity $  4,199,792 $  4,149,703  $  4,126,328 $  4,139,377 $  4,121,125 $  4,125,246  $  4,199,792 $  4,121,125  
 Less: Goodwill and other intangibles  (1,389,132) (1,392,367)  (1,396,227) (1,400,199) (1,404,201) (1,410,800)  (1,389,132) (1,404,201) 
 Less: Preferred stockholders' equity    (338,002)   (338,002)    (338,002)   (338,002)   (338,002)   (338,002)    (338,002)   (338,002) 
 Tangible common equity $  2,472,658 $  2,419,334  $  2,392,099 $  2,401,176 $  2,378,922 $  2,376,444  $  2,472,658 $  2,378,922  
                
Computation of Average Tangible Equity:            
 Total stockholders' equity $  4,177,087 $  4,154,033  $  4,152,977 $  4,149,635 $  4,145,334 $  4,127,743  $  4,165,560 $  4,136,587  
 Less: Goodwill and other intangibles  (1,390,654) (1,394,178)  (1,398,122) (1,402,138) (1,407,946) (1,413,765)  (1,392,416) (1,410,840) 
 Tangible equity $  2,786,433 $  2,759,855  $  2,754,855 $  2,747,497 $  2,737,388 $  2,713,978  $  2,773,144 $  2,725,747  
                
Computation of Average Tangible Common Equity:            
 Total stockholders' equity $  4,177,087 $  4,154,033  $  4,152,977 $  4,149,635 $  4,145,334 $  4,127,743  $  4,165,560 $  4,136,587  
 Less: Goodwill and other intangibles  (1,390,654) (1,394,178)  (1,398,122) (1,402,138) (1,407,946) (1,413,765)  (1,392,416) (1,410,840) 
 Less: Preferred stockholders' equity    (338,002)   (338,002)    (338,002)   (338,002)   (338,002)   (338,002)    (338,002)   (338,002) 
 Tangible common equity $  2,448,431 $  2,421,853  $  2,416,853 $  2,409,495 $  2,399,386 $  2,375,976  $  2,435,142 $  2,387,745  


First Niagara Contacts Investors: Brandon Kraatz Vice President, Investor Relations (716) 819-5669 brandon.kraatz@fnfg.com News Media: David Lanzillo Senior Vice President, Corporate Communications (716) 819-5780 david.lanzillo@fnfg.com

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