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First Niagara Reports Third Quarter 2014 Results

Third Quarter Highlights:

  • GAAP net loss available to common shareholders per share of $1.90.
  • Operating earnings of $63.3 million or $0.18 per diluted share before the impact of two items:
    • Non-cash pre-tax goodwill impairment charge of $800 million
    • Non-cash goodwill impairment is an accounting loss and does not impact future profitability
    • $45 million reserves to address a process issue related to certain customer deposit accounts
  • Average loans increased 9% annualized QOQ, driven by both commercial and consumer loan categories
    • Average commercial business (C&I) loans increased 9% QOQ
    • Average consumer loans increased 13% QOQ led by indirect auto and home equity balances
  • Transactional deposit balances increased 7% QOQ driven by higher customer balances
    • Noninterest-bearing deposits increased 14% QOQ driven by commercial deposits
    • Transactional deposit balances averaged 37% of deposits, up from 35% a year-ago
  • Strong credit quality maintained
    • NCOs decreased three basis points QOQ to 0.27% of average originated loans

BUFFALO, N.Y., Oct. 24, 2014 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today reported a third quarter net loss available to common shareholders of $665 million, equal to $1.90 per share. Results included a non-cash goodwill impairment charge of $800 million, as well as a pretax $45 million reserve to address a process issue related to certain customer deposit accounts. Excluding these charges, operating net income available to common shareholders was $63.3 million, or $0.18 per diluted share, compared to net income available to common shareholders of $71.6 million, or $0.20 per diluted share in the third quarter of 2013.

"In the third quarter, despite the continued uncertainty in the macro-economic environment, we delivered very strong 9% average loan growth and remain on target as we continue to make good progress with the execution of our strategic investment plan," said Gary M. Crosby, President and Chief Executive Officer. "However, I am disappointed that two items that impacted our reported results distracted from such solid business fundamentals in the third quarter. In the third quarter, we recorded a non-cash goodwill impairment charge that drove the net loss in the quarter. It is important for customers and our shareholders to note that this is a non-cash accounting charge and has no impact on our daily operations, our ability to continue to serve customers, or our future profitability, and does not negatively impact key regulatory and tangible equity ratios. Based on current market-driven assumptions, we concluded that the goodwill was impaired and recognized an $800 million charge."

Mr. Crosby continued, "Additionally, we recently identified a process issue related to certain customer deposit accounts. First Niagara is conducting an internal review to determine the potential impact on our customers. Customers should be confident that their account balance information accurately reflects the funds on deposit with us. Based on the results of the review, we will develop a comprehensive corrective action plan, including customer remediation where appropriate. In accordance with applicable accounting guidance, we established a reserve of $45 million in the third quarter for this matter."

"In the third quarter of 2014, our already strong credit quality improved further with the net charge-off ratio declining to 27 basis points, down 3 basis points from the low levels in the prior quarter," said Gregory W. Norwood, Chief Financial Officer. "Higher-than-normal expenses, which are not expected to continue, included a valuation write-down of a real estate property, costs incurred to protect our customers following the Home Depot data security breach, and higher state franchise taxes and totaled approximately $7 million. These higher than expected expenses were offset by a lower than expected tax rate in the third quarter."

Third Quarter Results

In the third quarter of 2014, First Niagara reported GAAP net loss available to common shareholders of $665 million, equal to $1.90 per share. Results for the quarter included a non-cash pre-tax charge of $800 million to record the non-cash impairment of goodwill, a $45 million pre-tax reserve to address a process issue related to certain customer deposit accounts, and $2 million in pre-tax restructuring expenses incurred primarily in connection with a previously announced branch staffing realignment.

Excluding these charges, operating net income available to common shareholders was $63.3 million, or $0.18 per diluted share. In the second quarter of 2014, First Niagara reported net income available to common shareholders of $66.2 million, or $0.19 per diluted share. For the third quarter of 2013, net income available to common shareholders was $71.6 million, or $0.20 per diluted share. There were no restructuring expenses in the prior comparable periods.

Balance sheet growth remained strong as average loans increased 9% annualized compared to the prior quarter. Average commercial business and real estate loans increased 6% annualized over the prior quarter, while average consumer loans increased 13% annualized driven by continued increases in indirect auto and home equity balances. Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking accounts, increased 7% over the prior year quarter and currently represent 37% of the company's deposit balances, up from 35% a year ago.

Operating revenues of $349 million decreased 1% from the prior quarter. Net interest income increased $1 million in the third quarter compared to the prior quarter as the benefits of a 4% annualized increase in average earning assets, the impact of an additional day in the quarter, and income accretion from prepayments of certain collateralized loan obligations (CLOs) were partially offset by a decrease in net interest margin. Net interest margin was 3.21%, as compared to 3.26% in the prior quarter. Noninterest income decreased $5 million or 7% from the prior quarter.

The provision for loan losses on originated loans totaled $20 million in the third quarter of 2014, and reflected $7 million of additions to the loan loss reserve to support organic loan growth and $13 million to cover net charge-offs during the quarter. Net charge-offs equaled 0.27% of average originated loans, a decrease of three basis points from 0.30% in the second quarter. At September 30, 2014, nonperforming originated loans comprised 0.91% of originated loans, compared to 0.86% at the end of the prior quarter.

In the third quarter, operating expenses excluding the non-cash goodwill impairment charge, the reserve to address a process issue related to certain customer deposit accounts, and other restructuring expenses were $249 million, an increase of $5 million from the prior quarter. The increase was driven by $7 million of elevated charges related to the valuation write-down of a real estate property, state franchise taxes, and expenses incurred to protect First Niagara customers in response to the widely publicized Home Depot data security breach that impacted debit and credit card holders and banks across North America. These increases were partially offset by lower compensation expense as well as lower leasehold depreciation costs from elevated second quarter levels.

Operating Results (Non-GAAP) Q3 2014 Q2 2014 Q3 2013
Net interest income $ 273.3 $ 271.8 $ 277.5
Provision for credit losses 21.2 22.8 27.6
Noninterest income 75.4 80.9 91.4
Noninterest expense 249.5 244.1 231.2
Operating net income 70.9 73.8 79.1
Preferred stock dividend 7.5 7.5 7.5
Operating net income available to common shareholders $ 63.3 $ 66.2 71.6
Weighted average diluted shares outstanding 351.9 351.5 350.9
Operating earnings per diluted share $ 0.18 $ 0.19 $ 0.20
Reported Results (GAAP)
Operating net income before non-operating items $ 70.9 $ 73.8 $ 79.1
Non-operating expenses (a) 728.1 -- --
Net Income / (loss) (657.2) 73.8 79.1
Preferred stock dividend 7.5 7.5 7.5
Net income / (loss) available to common shareholders $ (664.8) $ 66.2 $ 71.6
Weighted average diluted shares outstanding 350.4 351.5 350.9
Earnings per diluted share $ (1.90) $ 0.19 $ 0.20
All amounts in millions except earnings per diluted share.
(a) $800 million non-cash goodwill impairment charge, reserves related to a process issue, and restructuring charges primarily related to branch realignment, net of taxes.

Loans

Average total loans increased 9% annualized from the prior quarter, driven by continued growth in the company's commercial lending, indirect auto and home equity portfolios.

Average commercial loans, which include commercial business (C&I) and commercial real estate (CRE) loans, increased to $13.7 billion, or a 6% annualized increase from the prior quarter. C&I loans averaged $5.7 billion, or a 9% annualized increase over the prior quarter. Average CRE loans increased 4% annualized to $8.0 billion. Compared to the second quarter of 2014, the company's New York and Tri-State markets contributed 80% of the increase in average commercial loans.

Average indirect auto loan balances increased $228 million to $2.0 billion. During the third quarter, indirect auto originations totaled $376 million at an average customer FICO score of 768 and yielded 2.84%, net of dealer reserve. Average residential real estate loans declined by $10 million, or 1% annualized. Home equity balances increased 8% annualized from the prior quarter reflecting higher customer draws and the benefits of promotional and cross-sell campaigns.

Deposits

The company's focus remains on efforts to grow its core deposit customer base, re-position its account mix and introduce new products and services that further enhance its value proposition to customers. Recent investments in mobile banking and remote deposit capture have further enhanced customers' ability to transact in the delivery channel of their choice while at the same time lowering the company's cost to acquire and serve such customers. Current and anticipated investments as part of the company's strategic investment plan in new digital features and improved functionalities such as online account opening will further enhance customers' ability to do business with First Niagara across all of the bank's delivery channels.

Average transactional deposit balances, which include interest-bearing and noninterest bearing checking accounts, increased an annualized 7% over the prior quarter and currently represent 37% of the company's deposit balances, up from 35% a year ago. The average cost of interest-bearing deposits of 0.24% was unchanged from the prior quarter.

Average noninterest-bearing checking deposit balances increased 14% annualized compared to the prior quarter, driven by seasonal increases in commercial deposits. Interest-bearing checking balances averaged $4.8 billion and were essentially flat to the prior quarter.

Money market deposit balances decreased 4% reflecting normal seasonal trends in municipal deposit balances. Time deposits averaged $4.0 billion and were unchanged from the prior quarter.

Net Interest Income

Third quarter 2014 net interest income increased $1 million from the prior quarter to $273 million. The benefits of a 4% annualized increase in average earning assets, an additional day in the quarter and income accretion from CLO prepayments were partially offset by a 5-basis point decline in the net interest margin. Growth in average earning assets reflected continued strong loan growth, particularly commercial, indirect auto and home equity categories. Average investment securities decreased modestly from the prior quarter.

The 5-basis point decrease in net interest margin in the third quarter of 2014 reflected continued compression of commercial and consumer loan yields in the current low interest rate environment and to a lesser extent, the impact of one additional day in the quarter. Average commercial and consumer loan yields declined 9 and 7 basis points, respectively, from the prior quarter.

Credit Quality

At September 30, 2014, the allowance for loan losses was $231 million, compared to $224 million at June 30, 2014. Nonperforming assets to total assets were 0.57%, compared to 0.55% at the end of the prior quarter.

Information for both the originated and acquired portfolios follows.

Q3 2014 Q2 2014
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 19.6 $ 1.2 $ 20.8 $ 22.1 $ 0.3 $ 22.4
Net charge-offs 12.5 0.5 13.0 13.2 0.7 13.9
NCOs/ Avg Loans 0.27% 0.05% 0.23% 0.30% 0.06% 0.25%
Total loans** $ 18,842 $ 4,028 $ 22,770 $ 18,196 $ 4,255 $ 22,346
(*) Excludes provision for unfunded commitments of $0.4 million each in 3Q14 and 2Q14
(**) Acquired loans before associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $20 million, compared to $22 million in the prior quarter. This provision included $7 million of additions to the loan loss reserve to support organic loan growth during the quarter compared to $9 million in the prior quarter. Net charge-offs equaled $13 million or 27 basis points of average originated loans in the third quarter of 2014, compared to $13 million or 30 basis points in the prior quarter.

At September 30, 2014, nonperforming originated loans comprised 0.91% of originated loans, compared to 0.86% at June 30, 2014 driven primarily by increases in consumer nonperforming loans. The increase in consumer nonperforming loans primarily related to the continuing impact of last year's regulatory guidance related to consumer bankruptcies as well as normal seasoning of the indirect auto loan portfolio.

At September 30, 2014, the allowance for loan losses on originated loans totaled $227 million or 1.20% of such loans, compared to $220 million or 1.21% of such loans at June 30, 2014.

Acquired loans

The provision for losses on acquired loans totaled $1 million, compared to $0.3 million in the prior quarter. Net charge-offs on those portfolios totaled $0.5 million during the quarter, compared to $0.7 million in the prior period. At September 30, 2014, the allowance for loan losses on acquired loans totaled $5 million, compared to $4 million at June 30, 2014. Acquired nonperforming loans totaled $29 million, compared to $32 million at the end of the prior quarter. At September 30, 2014, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $100 million.

Fee Income

Third quarter 2014 noninterest income of $75 million decreased 7% or $5 million compared to the prior quarter driven by reductions across most fee income categories and partially offset by increases in insurance commissions and capital markets income.

Insurance commissions increased $1 million or 6% reflecting income recognized on higher renewal activity during the quarter. Higher syndication fee income drove the $1 million increase in capital markets income in the third quarter.

Deposit service charges decreased $3 million or 14% from the prior quarter. Mortgage banking revenues declined $1 million from the second quarter of 2014, driven by lower gain-on-sale revenues. Lending and leasing fees declined $1 million in the third quarter due in part to lower gain on SBA loan sales. Wealth management services income declined $1 million from the prior quarter as lower interest rates and increased supply of attractively priced longer-tenure certificate of deposit products resulted in lower demand and margins on annuity products. Other fee income decreased $2 million from the prior quarter and was driven by lower investment income.

Noninterest Expense

Including the $800 million non-cash goodwill impairment charge, third quarter noninterest expenses were $1.1 billion. Third quarter expenses also included a $45 million reserve to address a process issue related to certain customer deposit accounts, and $2 million in restructuring and severance expenses incurred primarily in connection with a previously announced branch staffing realignment. Excluding these items, adjusted operating expenses of $249 million increased $5 million or 2% sequentially.

This sequential increase included approximately $7 million of elevated other expenses, including:

  • $3 million in valuation write-down on a single other real estate owned (OREO) property,
  • $2 million related to higher state franchise taxes, and
  • $2 million in losses and expenses incurred in protecting First Niagara customers in response to the widely publicized Home Depot data security breach that impacted debit and credit card holders across North America

Salaries and benefits expenses declined $1 million from the prior quarter in large part due to lower payroll taxes and incentive compensation expense. Occupancy and equipment expense decreased $1 million and was driven by a moderation in depreciation costs following an accelerated write-off of certain leasehold improvements recognized in the prior quarter.

In the third quarter of 2014, the operating efficiency ratio was 71.6% compared to 69.2% in the prior quarter.

Capital

At September 30, 2014, the company's estimated consolidated Total Risk Based capital and Tier 1 Common Risk Based capital ratios were 11.5% and 7.9% respectively, and were unchanged from June 30, 2014. The company remains well above current regulatory guidelines for well-capitalized institutions.

Effective Tax Rate

The provision for income taxes in the third quarter of 2014 was a benefit of $112 million, resulting in an effective tax rate benefit of 15%. The effective tax rate was 14% in the prior quarter, resulting in income tax expense of $12 million. The third quarter's effective tax rate benefit reflects the impact of the goodwill impairment charge, of which only a portion was tax deductible. On an operating basis, the effective tax rate for the third quarter of 2014 was 9%, reflecting the benefit of previously disclosed tax strategies and other items.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with 411 branches, $38 billion in assets, $28 billion in deposits, and approximately 5,800 employees providing financial services to individuals, families and businesses across New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.

Investor Call

A conference call will be held at 8:00 a.m. Eastern Time on Friday, October 24, 2014 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-800-857-5166 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and are available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until December 1, 2014 by dialing 1-800-925-4513, passcode: 1024.

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) execution risk associated with the announced investment plan; (7) regulatory approval to continue payment of common and preferred dividends.

First Niagara Financial Group, Inc.
Income Statement Highlights - Reported Basis
(in thousands, except per share amounts)
2014 2013 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Interest income:
Loans and leases $ 212,452 $ 210,218 $ 209,644 $ 213,778 $ 214,746 $ 209,970 $ 632,314 $ 631,356
Investment securities and other 91,668 91,566 90,421 96,020 91,996 88,110 273,655 269,067
Total interest income 304,120 301,784 300,065 309,798 306,742 298,080 905,969 900,423
Interest expense:
Deposits 13,590 13,183 12,236 12,941 12,931 12,967 39,009 40,175
Borrowings 17,251 16,789 17,082 16,579 16,271 15,670 51,122 47,135
Total interest expense 30,841 29,972 29,318 29,520 29,202 28,637 90,131 87,310
Net interest income 273,279 271,812 270,747 280,278 277,540 269,443 815,838 813,113
Provision for credit losses 21,200 22,800 24,800 32,000 27,600 25,200 68,800 73,000
Net interest income after provision 252,079 249,012 245,947 248,278 249,940 244,243 747,038 740,113
Noninterest income:
Deposit service charges 20,373 23,733 23,356 25,726 27,115 26,482 67,462 78,397
Insurance commissions 18,352 17,343 15,691 15,431 17,854 17,692 51,386 51,901
Merchant and card fees 12,991 12,834 11,504 12,567 12,464 12,380 37,329 36,142
Wealth management services 15,367 15,949 15,587 15,441 15,189 14,945 46,903 42,979
Mortgage banking 4,358 5,241 3,396 2,754 2,268 6,882 12,995 15,574
Capital markets income 3,509 2,917 3,623 6,310 5,058 5,002 10,049 16,091
Lending and leasing 3,914 4,680 4,732 4,140 4,886 4,534 13,326 13,326
Bank owned life insurance 3,080 3,145 5,405 6,027 3,725 3,321 11,630 10,513
Other income (6,552) (4,985) (6,570) 916 2,863 4,308 (18,107) 11,357
Total noninterest income 75,392 80,857 76,724 89,312 91,422 95,546 232,973 276,280
Noninterest expense:
Salaries and employee benefits 116,245 117,728 117,940 113,754 115,034 116,305 351,913 347,129
Occupancy and equipment 27,450 28,553 27,876 27,420 26,582 28,506 83,879 83,133
Technology and communications 31,465 31,140 30,345 29,483 28,999 29,603 92,950 85,715
Marketing and advertising 7,746 8,439 7,364 4,879 5,822 5,450 23,549 15,618
Professional services 13,988 13,029 11,923 9,314 9,820 9,782 38,940 29,205
Amortization of intangibles 6,521 6,790 7,509 7,562 7,702 10,850 20,820 32,671
Federal deposit insurance premiums 9,579 9,756 8,855 7,431 9,351 9,348 28,190 27,600
Restructuring charges 2,364 -- 10,356 -- -- -- 12,720 --
Goodwill impairment 800,000 -- -- -- -- -- 800,000 --
Deposit account remediation 45,000 -- -- -- -- -- 45,000 --
Other expense 36,467 28,680 26,568 27,305 27,883 25,326 91,715 82,958
Total noninterest expense 1,096,825 244,115 248,736 227,148 231,193 235,170 1,589,676 704,029
Income (loss) before income tax (769,354) 85,754 73,935 110,442 110,169 104,619 (609,665) 312,364
Income tax expense (benefit) (112,120) 11,969 14,491 32,752 31,026 33,485 (85,660) 94,802
Net income (loss) (657,234) 73,785 59,444 77,690 79,143 71,134 (524,005) 217,562
Preferred stock dividend 7,547 7,547 7,547 7,547 7,547 7,547 22,641 22,641
Net income (loss) available to common stockholders $ (664,781) $ 66,238 $ 51,897 $ 70,143 $ 71,596 $ 63,587 $ (546,646) $ 194,921
Financial Ratios:
Earnings (loss) per basic share $ (1.90) $ 0.19 $ 0.15 $ 0.20 $ 0.20 $ 0.18 $ (1.56) $ 0.55
Earnings (loss) per diluted share (1.90) 0.19 0.15 0.20 0.20 0.18 (1.56) 0.55
Weighted average shares outstanding - basic(1) 350,381 350,229 349,906 349,718 349,653 349,542 350,174 349,492
Weighted average shares outstanding - diluted(1) 350,381 351,541 351,408 350,699 350,896 350,384 350,174 350,368
Net revenue(2) $ 348,671 $ 352,669 $ 347,471 $ 369,590 $ 368,962 $ 364,989 $ 1,048,811 $ 1,089,393
Noninterest income as a percentage of net revenue(2) 21.62% 22.93% 22.08% 24.17% 24.78% 26.18% 22.21% 25.36%
Pre-tax, pre-provision income (loss)(3) $ (748,154) $ 108,554 $ 98,735 $ 142,442 $ 137,769 $ 129,819 $ (540,865) $ 385,364
Pre-tax, pre-provision income per diluted share(3) $ (2.14) $ 0.31 $ 0.28 $ 0.41 $ 0.39 $ 0.37 $ (1.54) $ 1.10
Pre-tax, pre-provision return on average assets(3) (7.69)% 1.14% 1.06% 1.51% 1.47% 1.41% (1.89)% 1.39%
Net interest margin(4) 3.21% 3.26% 3.33% 3.41% 3.40% 3.36% 3.27% 3.39%
Interest yield on average loans(4) 3.80% 3.89% 3.98% 4.04% 4.14% 4.19% 3.89% 4.19%
Rate paid on interest-bearing liabilities 0.44% 0.44% 0.44% 0.43% 0.43% 0.43% 0.44% 0.44%
Efficiency ratio 314.57% 69.22% 71.58% 61.46% 62.66% 64.43% 151.57% 64.63%
Expenses as a percentage of average loans and deposits 8.78% 1.97% 2.06% 1.89% 1.94% 1.98% 4.31% 1.98%
Effective tax rate (benefit) (14.6)% 14.0% 19.6% 29.7% 28.2% 32.0% (14.1)% 30.3%
Return on average assets(5) (6.76)% 0.77 % 0.64 % 0.82% 0.85% 0.77 % (1.83)% 0.79%
Return on average equity(5) (51.12)% 5.84 % 4.79 % 6.18% 6.37% 5.72 % (13.83)% 5.86%
Return on average tangible equity(3)(5) (100.96)% 11.68 % 9.66 % 12.64% 13.20% 11.75 % (27.61)% 12.19%
Return on average common equity (55.38)% 5.62 % 4.48 % 5.99% 6.18% 5.48 % (15.46)% 5.64%
Return on average tangible common equity(3) (117.50)% 12.10 % 9.76 % 13.25% 13.92% 12.21 % (33.23)% 12.73%
(1) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
(2) Net revenue is comprised of net interest income and noninterest income.
(3) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(4) Yields and rates calculated on a tax equivalent basis.
(5) Return used to calculate ratio excludes preferred stock dividend.
First Niagara Financial Group, Inc.
Period End Balance Sheet
(in thousands)
2014 2013
September 30, June 30, March 31, December 31, September 30, June 30,
Cash and cash equivalents $ 451,313 $ 557,423 $ 503,070 $ 462,927 $ 558,086 $ 552,210
Investment securities:
Available for sale 6,198,140 6,683,914 7,060,237 7,423,162 7,609,676 7,916,353
Held to maturity 5,351,977 4,834,279 4,467,213 4,042,481 3,841,700 3,856,960
FHLB and FRB common stock 389,870 434,322 437,550 469,217 437,534 429,740
Total investment securities 11,939,987 11,952,515 11,965,000 11,934,860 11,888,910 12,203,053
Loans held for sale 31,245 45,446 34,465 50,137 80,468 118,104
Loans and leases:
Commercial:
Real estate 8,013,622 7,940,977 7,867,724 7,777,903 7,697,407 7,482,375
Business 5,836,235 5,741,684 5,470,177 5,290,392 5,204,672 5,165,606
Total commercial loans 13,849,857 13,682,661 13,337,901 13,068,295 12,902,079 12,647,981
Consumer:
Residential real estate 3,360,805 3,358,347 3,389,071 3,447,997 3,519,233 3,558,274
Home equity 2,886,655 2,835,421 2,767,024 2,752,229 2,706,603 2,670,672
Indirect auto 2,073,843 1,871,688 1,655,489 1,543,983 1,339,449 1,049,763
Credit cards 312,549 311,640 305,663 325,140 311,600 303,455
Other consumer 286,140 286,062 295,692 302,009 310,107 313,037
Total consumer loans 8,919,991 8,663,158 8,412,939 8,371,358 8,186,992 7,895,201
Total loans and leases 22,769,849 22,345,819 21,750,840 21,439,653 21,089,071 20,543,182
Allowance for loan losses 231,353 223,526 215,037 209,274 197,953 183,708
Loans and leases, net 22,538,496 22,122,293 21,535,803 21,230,379 20,891,118 20,359,474
Bank owned life insurance 423,376 420,230 417,031 415,205 413,555 410,182
Goodwill and other intangibles 1,723,437 2,528,481 2,535,271 2,542,783 2,549,931 2,557,560
Other assets 1,124,145 998,364 999,804 992,071 958,473 949,144
Total assets $ 38,231,999 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541 $ 37,149,727
Deposits:
Savings accounts $ 3,458,661 $ 3,626,750 $ 3,664,765 $ 3,666,759 $ 3,695,221 $ 3,878,053
Interest-bearing checking 5,055,458 4,743,684 4,929,302 4,743,829 4,637,807 4,499,963
Money market deposits 9,894,346 9,834,344 10,106,569 9,739,539 9,905,341 10,013,996
Noninterest-bearing deposits 5,308,736 5,284,037 5,101,681 4,865,873 4,968,501 4,845,835
Certificates of deposit 3,952,879 3,955,754 3,795,438 3,649,257 3,762,132 3,911,989
Total deposits 27,670,080 27,444,569 27,597,755 26,665,257 26,969,002 27,149,836
Short-term borrowings 4,928,762 4,890,343 4,137,496 4,822,222 4,169,416 3,698,279
Long-term borrowings 733,684 733,337 733,384 733,883 732,547 732,598
Other liabilities 543,813 477,685 495,590 413,647 531,379 666,270
Total liabilities 33,876,339 33,545,934 32,964,225 32,635,009 32,402,344 32,246,983
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 4,017,658 4,740,816 4,688,217 4,655,351 4,600,195 4,564,742
Total stockholders' equity 4,355,660 5,078,818 5,026,219 4,993,353 4,938,197 4,902,744
Total liabilities and stockholders' equity $ 38,231,999 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541 $ 37,149,727
Selected balance sheet information:
Total interest-earning assets(1) $ 34,720,650 $ 34,305,451 $ 33,684,828 $ 33,396,058 $ 33,039,023 $ 32,906,363
Total interest-bearing liabilities 28,023,790 27,784,211 27,366,955 27,355,489 26,902,465 26,734,878
Net interest-earning assets $ 6,696,860 $ 6,521,240 $ 6,317,873 $ 6,040,569 $ 6,136,558 $ 6,171,485
Tangible common equity(2) $ 2,294,221 $ 2,212,335 $ 2,152,946 $ 2,112,568 $ 2,050,264 $ 2,007,182
Unrealized gain on available for sale securities, net of tax(3) 56,142 86,244 72,579 63,930 76,686 83,898
Total core deposits $ 23,717,201 $ 23,488,815 $ 23,802,317 $ 23,016,000 $ 23,206,870 $ 23,237,847
Originated loans(4) $ 18,841,896 $ 18,196,302 $ 17,388,542 $ 16,922,161 $ 16,211,505 $ 15,102,336
Acquired loans(5) 4,028,091 4,254,750 4,475,593 4,642,775 5,006,753 5,581,651
Credit related discount on acquired loans(6) (100,138) (105,233) (113,295) (125,283) (129,187) (140,805)
Total Loans $ 22,769,849 $ 22,345,819 $ 21,750,840 $ 21,439,653 $ 21,089,071 $ 20,543,182
(1) Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) 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) Represents the carrying value of acquired loans plus the principal not expected to be collected.
(6) Represent principal on acquired loans not expected to be collected.
First Niagara Financial Group, Inc.
Average Balance Sheet and Related Tax Equivalent Yields & Rates
(in millions)
For the three months ended Nine months ended
September 30, 2014 June 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
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)(2)
Interest-earning assets:
Loans and leases(2)
Commercial:
Real estate $ 7,985 $ 74 3.65% $ 7,899 $ 75 3.77% $ 7,551 $ 80 4.16% $ 7,896 $ 226 3.77% $ 7,370 $ 235 4.21%
Business 5,694 51 3.51 5,564 50 3.56 5,163 48 3.64 5,558 149 3.54 5,092 142 3.68
Total commercial loans 13,679 126 3.59 13,463 125 3.68 12,714 128 3.95 13,454 375 3.68 12,462 377 3.99
Consumer:
Residential real estate 3,351 32 3.77 3,361 32 3.80 3,538 35 3.91 3,376 97 3.82 3,599 107 3.95
Home equity 2,857 29 4.01 2,800 28 4.06 2,683 28 4.17 2,805 85 4.07 2,664 84 4.24
Indirect auto 1,978 14 2.84 1,750 12 2.85 1,207 9 3.09 1,782 38 2.87 950 23 3.17
Credit cards 313 9 11.44 308 9 11.44 309 9 12.02 312 27 11.50 305 25 11.14
Other consumer 287 6 8.54 291 6 8.53 313 7 8.48 292 19 8.57 318 20 8.36
Total consumer loans 8,786 90 4.06 8,510 88 4.13 8,050 88 4.35 8,567 266 4.15 7,836 259 4.42
Total loans and leases 22,465 215 3.80 21,973 213 3.89 20,764 216 4.14 22,020 641 3.89 20,298 636 4.19
Residential MBS 6,405 41 2.56 6,097 41 2.67 5,515 37 2.68 6,067 121 2.65 5,500 104 2.53
Commercial MBS 1,564 13 3.32 1,608 14 3.45 1,810 17 3.68 1,623 41 3.35 1,868 51 3.63
Other investment securities (3) 3,854 39 4.06 4,159 38 3.69 4,620 40 3.47 4,131 117 3.76 4,758 119 3.34
Total securities, at amortized cost 11,824 93 3.15 11,864 93 3.13 11,945 94 3.14 11,821 278 3.14 12,126 274 3.02
Money market and other investments 86 1 2.76 165 1 1.27 157 1 2.27 125 2 1.74 189 2 1.74
Total interest-earning assets 34,375 $ 309 3.57% 34,002 $ 307 3.62% 32,866 $ 311 3.75% 33,966 $ 920 3.62% 32,613 $ 913 3.74%
Goodwill and other intangibles 2,518 2,532 2,554 2,529 2,575
Other noninterest-earning assets 1,698 1,678 1,673 1,691 1,774
Total assets $ 38,591 $ 38,212 $ 37,093 $ 38,187 $ 36,962
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,552 $ 1 0.09% $ 3,654 $ 1 0.09% $ 3,793 $ 1 0.09% $ 3,612 $ 2 0.09% $ 3,861 $ 3 0.10%
Interest-bearing checking 4,821 -- 0.03 4,820 -- 0.03 4,483 -- 0.04 4,792 1 0.03 4,456 1 0.04
Money market deposits 9,882 6 0.23 9,971 5 0.22 9,959 5 0.20 9,913 16 0.22 10,257 16 0.21
Certificates of deposit 3,969 7 0.67 3,971 7 0.66 3,824 7 0.69 3,864 20 0.68 3,935 20 0.67
Total interest bearing deposits 22,225 14 0.24% 22,416 13 0.24% 22,059 13 0.23% 22,182 39 0.24% 22,509 40 0.24%
Borrowings
Short-term borrowings 4,737 5 0.43% 4,410 5 0.43% 4,014 4 0.41% 4,596 15 0.43% 3,570 11 0.41%
Long-term borrowings 733 12 6.56 733 12 6.62 733 12 6.55 733 36 6.62 732 36 6.63
Total borrowings 5,470 17 1.25 5,143 17 1.31 4,747 16 1.36 5,330 51 1.28 4,302 47 1.46
Total interest-bearing liabilities 27,695 $ 31 0.44% 27,559 $ 30 0.44% 26,806 $ 29 0.43% 27,511 $ 90 0.44% 26,811 $ 87 0.44%
Noninterest-bearing deposits 5,260 5,077 4,787 5,068 4,657
Other noninterest-bearing liabilities 536 511 567 540 534
Total liabilities 33,491 33,147 32,160 33,120 32,002
Total stockholders' equity 5,100 5,065 4,933 5,067 4,960
Total liabilities and stockholders' equity $ 38,591 $ 38,212 $ 37,093 $ 38,187 $ 36,962
Net interest income (FTE) $ 278 $ 277 $ 282 $ 830 $ 826
Taxable Equivalent Adjustment(1) 5 5 4 14 13
Total core deposits $ 23,515 $ 7 0.12% $ 23,522 $ 6 0.11% $ 23,022 $ 6 0.11% $ 23,386 $ 19 0.11% $ 23,231 $ 20 0.12%
Total transactional deposits 10,081 -- 0.01% 9,897 -- 0.01% 9,270 -- 0.02% 9,860 1 0.02% 9,113 1 0.02%
Total deposits 27,484 14 0.20% 27,493 13 0.19% 26,846 13 0.19% 27,250 39 0.19% 27,166 40 0.20%
Tax equivalent net interest rate spread(2) 3.13% 3.18% 3.32% 3.18% 3.30%
Tax equivalent net interest rate margin(2) 3.21% 3.26% 3.40% 3.27% 3.39%
(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)
2014 2013 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Beginning balance $ 223,526 $ 215,037 $ 209,274 $ 197,953 $ 183,708 $ 172,002 $ 209,274 $ 162,522
Net loan (charge-offs) recoveries:
Commercial real estate $ (2,259) $ (4,885) $ 905 $ (5,764) $ 1,013 $ (2,817) $ (6,239) $ (3,925)
Commercial business (3,148) (1,795) (9,138) (6,382) (9,694) (7,175) (14,081) (21,771)
Residential real estate (102) (352) (174) (168) (137) (291) (628) (855)
Home equity (1,131) (1,294) (3,045) (1,528) (322) (905) (5,470) (1,840)
Indirect auto (1,621) (1,455) (2,086) (1,215) (692) (552) (5,162) (1,496)
Credit cards (2,726) (2,930) (3,044) (3,082) (1,300) (194) (8,700) (1,698)
Other consumer (1,986) (1,200) (2,055) (2,140) (1,823) (1,160) (5,241) (4,784)
Total net loan charge-offs $ (12,973) $ (13,911) $ (18,637) $ (20,279) $ (12,955) $ (13,094) $ (45,521) $ (36,369)
Provision for loan losses 20,800 22,400 24,400 31,600 27,200 24,800 67,600 71,800
Ending balance $ 231,353 $ 223,526 $ 215,037 $ 209,274 $ 197,953 $ 183,708 $ 231,353 $ 197,953
Supplemental information
Allowance to loans 1.02% 1.00% 0.99 % 0.98 % 0.94 % 0.89 % 1.02% 0.94%
Allowance for originated loans to originated loans(1) 1.20% 1.21% 1.21 % 1.21 % 1.20 % 1.21 % 1.20% 1.20%
Net charge-offs (recoveries) to average loans (annualized)
Commercial real estate 0.11 % 0.25% (0.05)% 0.30 % (0.05)% 0.15 % 0.11% 0.07%
Commercial business 0.22 % 0.13% 0.68 % 0.49 % 0.75 % 0.56 % 0.34% 0.57%
Total commercial loans 0.16 % 0.20% 0.25 % 0.38 % 0.27 % 0.32 % 0.20% 0.27%
Residential real estate 0.01 % 0.04% 0.02 % 0.02 % 0.02 % 0.03 % 0.02% 0.03%
Home equity 0.16 % 0.18% 0.44 % 0.22 % 0.05 % 0.14 % 0.26% 0.09%
Indirect auto 0.33 % 0.33% 0.52 % 0.33 % 0.23 % 0.23 % 0.39% 0.21%
Credit cards 3.49 % 3.80% 3.88 % 3.93 % 1.68 % 0.26 % 3.72% 0.74%
Other consumer 2.77 % 1.65% 2.74 % 2.79 % 2.01 % 0.88 % 2.39% 2.01%
Total consumer loans 0.35 % 0.34% 0.50 % 0.40 % 0.22 % 0.16 % 0.39% 0.18%
Total loans 0.23 % 0.25% 0.34 % 0.38 % 0.25 % 0.26 % 0.28% 0.24%
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.13 % 0.29% (0.11)% 0.24 % (0.07)% 0.14 % 0.11% 0.05%
Commercial business 0.24 % 0.14% 0.73 % 0.53 % 0.83 % 0.64 % 0.36% 0.64%
Total commercial loans 0.18 % 0.22% 0.26 % 0.37 % 0.33 % 0.36 % 0.22% 0.32%
Residential real estate 0.02 % 0.07% 0.04 % 0.04 % 0.03 % 0.07 % 0.04% 0.06%
Home equity 0.17 % 0.16% 0.21 % 0.29 % 0.09 % 0.26 % 0.18% 0.18%
Indirect auto 0.33 % 0.33% 0.52 % 0.33 % 0.23 % 0.23 % 0.39% 0.21%
Credit cards 3.49 % 3.80% 3.88 % 3.93 % 1.68 % 0.26 % 3.72% 0.81%
Other consumer 2.77 % 1.65% 2.74 % 2.80 % 2.59 % 1.91 % 2.39% 2.33%
Total consumer loans 0.45 % 0.45% 0.57 % 0.56 % 0.33 % 0.27 % 0.49% 0.29%
Total loans 0.27 % 0.30% 0.36 % 0.43 % 0.33 % 0.33 % 0.31% 0.31%
Nonperforming loans:
Originated(1):  
Commercial real estate $ 57,340 $ 55,945 $ 41,296 $ 53,395 $ 51,302 $ 59,624 $ 57,340 $ 51,302
Commercial business 36,939 32,861 35,335 42,013 35,854 44,658 36,938 35,854
Residential real estate 36,113 33,870 32,736 31,478 31,312 29,667 36,113 31,312
Home equity 23,392 19,429 19,516 18,426 15,709 14,601 23,392 15,709
Indirect auto 11,890 9,821 7,943 6,274 5,129 3,276 11,890 5,129
Other consumer 5,134 5,037 5,216 5,838 5,538 2,818 5,134 5,538
Total originated nonperforming loans 170,808 156,963 142,042 157,424 144,844 154,644 170,807 144,844
Total acquired nonperforming loans(2) 28,611 32,488 30,617 30,088 30,388 27,556 28,611 30,388
Total nonperforming loans 199,419 189,451 172,659 187,512 175,232 182,200 199,418 175,232
Real estate owned 20,261 24,270 25,466 24,788 24,262 8,144 20,261 24,262
Total nonperforming assets $ 219,680 $ 213,721 $ 198,125 $ 212,300 $ 199,494 $ 190,344 $ 219,679 $ 199,494
Accruing troubled debt restructurings (TDR) $ 69,199 $ 80,214 $ 56,038 $ 52,263 $ 69,877 $ 69,892 $ 69,199 $ 69,877
Loans 90 days past due still accruing(3) 108,615 112,718 119,134 113,212 136,248 167,560 108,615 136,248
Total classified loans(4) 649,320 661,699 667,327 663,700 648,235 701,104 649,320 648,235
Total criticized loans(5) $ 1,089,851 $ 1,072,133 $ 1,075,523 $ 985,019 $ 977,798 $ 1,012,305 $ 1,089,851 $ 977,798
Total nonperforming loans to loans 0.88% 0.85% 0.79 % 0.87 % 0.83 % 0.89 % 0.88% 0.83%
Total nonperforming originated loans to originated loans(1) 0.91% 0.86% 0.82 % 0.93 % 0.89 % 1.02 % 0.91% 0.89%
Total nonperforming assets to loans and real estate owned 0.96% 0.96% 0.91 % 0.99 % 0.94 % 0.93 % 0.96% 0.94%
Total nonperforming assets to assets 0.57% 0.55% 0.52 % 0.56 % 0.53 % 0.51 % 0.57% 0.53%
Allowance to nonperforming loans 116.0% 118.0% 124.5 % 111.6 % 113.0 % 100.8 % 116.0% 113.0%
Originated loans(1) $ 18,841,896 $ 18,196,302 $ 17,388,542 $ 16,922,161 $ 16,211,505 $ 15,102,336 $ 18,841,896 $ 16,211,505
Acquired loans(6) 4,028,091 4,254,750 4,475,593 4,642,775 5,006,753 5,581,651 4,028,091 5,006,753
Credit related discount on acquired loans(7) (100,138) (105,233) (113,295) (125,283) (129,187) (140,805) (100,138) (129,187)
Total Loans $ 22,769,849 $ 22,345,819 $ 21,750,840 $ 21,439,653 $ 21,089,071 $ 20,543,182 $ 22,769,849 $ 21,089,071
(1) Originated loans represent total loans excluding acquired loans.
(2) Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.
(3) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
(4) Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business", under the heading "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2013.
(5) Criticized loans includes consumer loans when they are 90 days or more past due. Criticized loans include special mention, substandard, doubtful, and loss.
(6) Represents the carrying value of acquired loans plus the principal not expected to be collected.
(7) 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)
2014 2013
September 30, June 30, March 31, December 31, September 30, June 30,
First Niagara Financial Group, Inc. capital ratios(1):
Tier 1 risk based capital 9.52% 9.57% 9.62% 9.56% 9.45% 9.41%
Tier 1 common capital(2) 7.89% 7.92% 7.92% 7.86% 7.72% 7.65%
Total risk based capital 11.49% 11.53% 11.60% 11.53% 11.40% 11.35%
Leverage 7.16% 7.33% 7.28% 7.26% 7.14% 7.01%
Equity to assets 11.39% 13.15% 13.23% 13.27% 13.22% 13.20%
Tangible common equity to tangible assets(2) 6.28% 6.13% 6.07% 6.02% 5.89% 5.80%
Total risk weighted assets $ 27,647 $ 27,314 $ 26,639 $ 26,412 $ 26,078 $ 25,564
First Niagara Bank, N.A capital ratios(1):
Tier 1 risk based capital 10.12% 10.18% 10.22% 10.15% 10.08% 10.08%
Total risk based capital 11.01% 11.05% 11.08% 10.99% 10.89% 10.85%
Leverage 7.61% 7.79% 7.74% 7.70% 7.61% 7.50%
Total risk weighted assets $ 27,605 $ 27,273 $ 26,597 $ 26,365 $ 26,037 $ 25,520
Number of branches 411 411 411 421 422 422
Full time equivalent employees 5,768 5,874 5,750 5,807 5,788 5,779
Share information and per share metrics:
Common shares outstanding 355,423 355,483 354,127 353,941 353,973 353,932
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000 14,000
Treasury shares 10,579 10,519 11,875 12,061 12,029 12,070
Market price (NASDAQ: FNFG): $ 8.33 $ 8.74 $ 9.45 $ 10.62 $ 10.37 $ 10.07
Book value per common share(3) 11.46 13.53 13.40 13.31 13.15 13.06
Tangible book value per common share(2)(3) 6.55 6.31 6.15 6.04 5.86 5.74
Price/Book 72.69% 64.60% 70.52% 79.79% 78.86% 77.11%
Price/Tangible book(2) 127.18% 138.51% 153.66% 175.83% 176.96% 175.44%
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 N/M 42.11% 53.33% 40.00% 40.00% 44.44%
Dividend yield (annualized) 3.81% 3.67% 3.43% 2.99% 3.06% 3.19%
N/M Not meaningful
(1) Represents an estimate as of September 30, 2014. All preceding quarters represent actual amounts.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation
(in thousands, except per share amounts)
2014 2013 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.18 $ 0.19 $ 0.17 $ 0.20 $ 0.20 $ 0.18 $ 0.54 $ 0.55
Earnings per diluted share 0.18 0.19 0.17 0.20 0.20 0.18 0.54 0.55
Weighted average shares outstanding - basic(2) 350,381 350,229 349,906 349,718 349,653 349,542 350,174 349,492
Weighted average shares outstanding - diluted(2) 351,898 351,541 351,408 350,699 350,896 350,384 351,570 350,368
Noninterest income as a percentage of net revenue(3) 21.62% 22.93% 22.08% 24.17% 24.78% 26.18% 22.21% 25.36%
Pre-tax, pre-provision income 99,210 108,554 109,091 142,442 137,769 129,819 316,855 385,364
Pre-tax, pre-provision income per diluted share 0.28 0.31 0.31 0.41 0.39 0.37 0.90 1.10
Pre-tax, pre-provision return on average assets 1.02% 1.14% 1.17% 1.51% 1.47% 1.41% 1.11% 1.39%
Net interest margin(4) 3.21% 3.26% 3.33% 3.41% 3.40% 3.36% 3.27% 3.39%
Interest yield on average loans(4) 3.80% 3.89% 3.98% 4.04% 4.14% 4.19% 3.89% 4.19%
Rate paid on interest-bearing liabilities 0.44% 0.44% 0.44% 0.43% 0.43% 0.43% 0.44% 0.44%
Efficiency ratio 71.55% 69.22% 68.60% 61.46% 62.66% 64.43% 69.79% 64.63%
Effective tax rate 9.1% 14.0% 19.6% 29.7% 28.2% 32.0% 14.4% 30.3%
Return on average assets 0.73% 0.77% 0.73% 0.82% 0.85% 0.77% 0.74% 0.79%
Return on average equity 5.51% 5.84% 5.46% 6.18% 6.37% 5.72% 5.61% 5.86%
Return on average tangible equity(5) 10.89% 11.68% 11.02% 12.64% 13.20% 11.75% 11.19% 12.19%
Return on average common equity 5.28% 5.62% 5.20% 5.99% 6.18% 5.48% 5.37% 5.64%
Return on average tangible common equity(6) 11.19% 12.10% 11.33% 13.25% 13.92% 12.21% 11.54% 12.73%
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 249,461 $ 244,115 $ 238,380 $ 227,148 $ 231,193 $ 235,170 $ 731,956 $ 704,029
Restructuring charges 2,364 -- 10,356 -- -- -- 12,720 --
Goodwill impairment 800,000 -- -- -- -- -- 800,000 --
Deposit account remediation 45,000 -- -- -- -- -- 45,000 --
Total reported noninterest expense (GAAP) $ 1,096,825 $ 244,115 $ 248,736 $ 227,148 $ 231,193 $ 235,170 $ 1,589,676 $ 704,029
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 70,875 $ 73,785 $ 67,789 $ 77,690 $ 79,143 $ 71,134 $ 212,449 $ 217,562
Nonoperating income and expenses, net of tax:
Restructuring charges 1,557 -- 8,345 -- -- -- 9,902 --
Goodwill impairment 697,319 -- -- -- -- -- 697,319 --
Deposit account remediation 29,233 -- -- -- -- -- 29,233 --
Total nonoperating expenses, net of tax 728,109 -- 8,345 -- -- -- 736,454 --
Net income (loss) (GAAP) $ (657,234) $ 73,785 $ 59,444 $ 77,690 $ 79,143 $ 71,134 $ (524,005) $ 217,562
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) $ 63,328 $ 66,238 $ 60,242 $ 70,143 $ 71,596 $ 63,587 $ 189,808 $ 194,921
Nonoperating income and expenses, net of tax:
Restructuring charges 1,557 -- 8,345 -- -- -- 9,902 --
Goodwill impairment 697,319 -- -- -- -- -- 697,319 --
Deposit account remediation 29,233 -- -- -- -- -- 29,233 --
Total nonoperating income and expenses, net of tax 728,109 -- 8,345 -- -- -- 736,454 --
Net income (loss) available to common stockholders (GAAP) $ (664,781) $ 66,238 $ 51,897 $ 70,143 $ 71,596 $ 63,587 $ (546,646) $ 194,921
Computation of pre-tax,pre-provision income:
Net interest income $ 273,279 $ 271,812 $ 270,747 $ 280,278 $ 277,540 $ 269,443 $ 815,838 $ 813,113
Noninterest income 75,392 80,857 76,724 89,312 91,422 95,546 232,973 276,280
Noninterest expense (1,096,825) (244,115) (248,736) (227,148) (231,193) (235,170) (1,589,676) (704,029)
Pre-tax, pre-provision income (loss) (GAAP) (748,154) 108,554 98,735 142,442 137,769 129,819 (540,865) 385,364
Add back: non-operating noninterest expenses (1) 847,364 -- 10,356 -- -- -- 857,720 --
Pre-tax, pre-provision income (Non-GAAP)(1) $ 99,210 $ 108,554 $ 109,091 $ 142,442 $ 137,769 $ 129,819 $ 316,855 $ 385,364
(1) 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 unallocated ESOP shares and 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)
2014 2013 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Computation of Ending Tangible Assets:
Total assets $ 38,231,999 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541 $ 37,149,727 $ 38,231,999 $ 37,340,541
Less: Goodwill and other intangibles (1,723,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (2,557,560) (1,723,437) (2,549,931)
Tangible assets $ 36,508,562 $ 36,096,271 $ 35,455,173 $ 35,085,579 $ 34,790,610 $ 34,592,167 $ 36,508,562 $ 34,790,610
Computation of Average Tangible Assets:
Total assets $ 38,591,116 $ 38,211,808 $ 38,211,808 $ 37,378,780 $ 37,093,236 $ 36,982,893 $ 38,186,687 $ 36,962,164
Less: Goodwill and other intangibles (2,517,841) (2,531,612) (2,531,612) (2,546,031) (2,553,647) (2,561,507) (2,529,371) (2,574,650)
Tangible assets $ 36,073,275 $ 35,680,196 $ 35,680,196 $ 34,832,749 $ 34,539,589 $ 34,421,386 $ 35,657,316 $ 34,387,514
Computation of Ending Tangible Equity:
Total stockholders' equity $ 4,355,660 $ 5,078,818 $ 5,026,219 $ 4,993,353 $ 4,938,197 $ 4,902,744 $ 4,355,660 $ 4,938,197
Less: Goodwill and other intangibles (1,723,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (2,557,560) (1,723,437) (2,549,931)
Tangible equity $ 2,632,223 $ 2,550,337 $ 2,490,948 $ 2,450,570 $ 2,388,266 $ 2,345,184 $ 2,632,223 $ 2,388,266
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,355,660 $ 5,078,818 $ 5,026,219 $ 4,993,353 $ 4,938,197 $ 4,902,744 $ 4,355,660 $ 4,938,197
Less: Goodwill and other intangibles (1,723,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (2,557,560) (1,723,437) (2,549,931)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,294,221 $ 2,212,335 $ 2,152,946 $ 2,112,568 $ 2,050,264 $ 2,007,182 $ 2,294,221 $ 2,050,264
Computation of Average Tangible Equity:
Total stockholders' equity $ 5,100,494 $ 5,065,008 $ 5,034,093 $ 4,984,003 $ 4,932,949 $ 4,989,006 $ 5,066,774 $ 4,960,026
Less: Goodwill and other intangibles (2,517,841) (2,531,612) (2,538,891) (2,546,031) (2,553,647) (2,561,507) (2,529,371) (2,574,650)
Tangible equity $ 2,582,653 $ 2,533,396 $ 2,495,202 $ 2,437,972 $ 2,379,302 $ 2,427,499 $ 2,537,403 $ 2,385,376
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 5,100,494 $ 5,065,008 $ 5,034,093 $ 4,984,003 $ 4,932,949 $ 4,989,006 $ 5,066,774 $ 4,960,026
Less: Goodwill and other intangibles (2,517,841) (2,531,612) (2,538,891) (2,546,031) (2,553,647) (2,561,507) (2,529,371) (2,574,650)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,244,651 $ 2,195,394 $ 2,157,200 $ 2,099,970 $ 2,041,300 $ 2,089,497 $ 2,199,401 $ 2,047,374
Computation of Tier 1 Common Capital:
Tier 1 capital $ 2,632,177 $ 2,613,584 $ 2,562,261 $ 2,525,656 $ 2,464,801 $ 2,406,473 $ 2,632,177 $ 2,464,801
Less: Qualifying restricted core capital elements (113,556) (113,330) (113,107) (112,886) (112,667) (112,449) (113,556) (112,667)
Less: Perpetual non-cumulative preferred stock (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tier 1 common capital (Non-GAAP) $ 2,180,619 $ 2,162,252 $ 2,111,152 $ 2,074,768 $ 2,014,132 $ 1,956,022 $ 2,180,619 $ 2,014,132

CONTACT: First Niagara Contacts Investors: Ram Shankar Senior Vice President, Investor Relations (716) 270-8623 ram.shankar@fnfg.com News Media: David Lanzillo Senior Vice President, Corporate Communications (716) 819-5780 david.lanzillo@fnfg.com

Source:First Niagara Financial Group, Inc.