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First Niagara Reports Fourth Quarter and Full Year 2014 Results

Fourth Quarter and 2014 Highlights:

  • Fourth quarter operating earnings of $61.7 million or $0.17 per diluted share
    • Full Year 2014 operating earnings of $0.71 per diluted share
  • Fourth quarter GAAP earnings of $0.20 per diluted share
    • Full Year 2014 reported GAAP loss of $2.12 per share reflecting third quarter non-cash goodwill impairment charge
  • Loan growth continued to outperform the industry, with average loans up 7% annualized QOQ
    • Average commercial business and real estate loans increased 6% QOQ
    • Average consumer loans increased 10% led by Indirect Auto and Home Equity balances
  • Noninterest-bearing checking deposit balances increased 17% annualized QOQ
    • Strong customer response to July 2014 launch of Simple Checking product
    • Transactional deposits averaged 38% of deposits, up from 36% a year-ago
  • Strong credit quality maintained
    • NCOs averaged 0.23% of originated loans, four basis points lower QOQ
    • Nonperforming originated loans declined to 85 basis points of originated loans, down 6 basis points QOQ
  • Tier 1 Common Ratio increased 35 basis points from 2013

BUFFALO, N.Y., Jan. 23, 2015 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today reported GAAP net income available to common shareholders of $70.0 million or $0.20 per diluted share for the fourth quarter of 2014, compared to $70.1 million, or $0.20 per diluted share, for the quarter ended December 31, 2013. Excluding certain non-recurring items incurred during the fourth quarter of 2014, operating net income available to common shareholders was $61.7 million, or $0.17 per diluted share.

"During the fourth quarter, our core business fundamentals remained strong as evidenced by our 7% annualized loan growth, 18% transactional deposit growth, and outstanding credit metrics," said Gary M. Crosby, President and Chief Executive Officer. "We also just completed a comprehensive top-to-bottom re-design of our organization structure in order to streamline our company, be even more responsive to our customers and ultimately deliver a truly differentiated customer experience. This simplification of our organization structure reduced the number of management positions we will need going forward and together with other expense savings, we expect to limit our year-over-year increase in operating expenses to less than 1% in 2015. We have redeployed a portion of these savings to pay for other investments in our business. I'm also pleased with the progress we have made in implementing our Strategic Investment Plan, which will better enable us to better serve customers. As 2015 begins, our Strategic Investment Plan continues to be on track, on budget and we are already beginning to see some of the benefits from those investments."

Mr. Crosby also noted, "We have made significant progress related to our previously disclosed process issue. We have submitted a remediation plan to our regulators. Based on our remediation plan, we have lowered the reserve recorded in the third quarter by $23 million which benefitted fourth quarter reported earnings."

"Our fourth quarter financial results were highlighted by strong credit performance partially offset by the continued impact of low interest rates on net interest margin," said Gregory W. Norwood, Chief Financial Officer. "Our credit metrics improved further from low third quarter levels as net charge-offs, non-accruals, classified and criticized levels all declined from the prior quarter. Our 2014 operating expenses of $980 million were in line with our full year expectations communicated a year ago."

Fourth Quarter Results Summary

In the fourth quarter of 2014, First Niagara reported GAAP net income available to common shareholders of $70.0 million, or $0.20 per diluted share, compared to net income of $70.1 million, or $0.20 per diluted share in the fourth quarter of 2013. Results for the fourth quarter 2014 include the benefit of a pre-tax $23 million reversal of reserves related to a previously disclosed process issue on certain customer deposit accounts as well as the expense impact of $9 million in pre-tax non-recurring restructuring charges primarily associated with the completion of an Organizational Simplification initiative. Excluding these items, operating net income available to common shareholders was $61.7 million, or $0.17 per diluted share.

By comparison, in the third quarter of 2014, First Niagara reported GAAP net loss of $931 million, or $(2.66) per share, that included a $1.1 billion non-cash goodwill impairment charge and a pre-tax $45 million reserve to address the process issue related to certain customer deposit accounts. Excluding these non-recurring charges, operating net income available to common shareholders was $63.3 million, or $0.18 per diluted share.

Balance sheet growth remained strong as average loans increased 7% 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 10% 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 18% over the prior quarter and currently represent 38% of the company's deposit balances, up from 36% a year ago.

Excluding historic tax credit amortization of $11 million, operating revenues were $358 million, and increased modestly from the prior quarter. Net interest income decreased 1% in the fourth quarter compared to the prior quarter primarily driven by lower one-time income accretion from prepayments of certain collateralized loan obligations (CLOs) which reduced net interest margin by 6 basis points. Normalized net interest margin was 3.09%, compared to 3.16% in the prior quarter. Excluding the impact of historic tax credit amortization, noninterest income increased $5 million or 6% from the prior quarter. In the fourth quarter, non-GAAP operating expenses were $248 million and declined modestly from the prior quarter.

The provision for loan losses on originated loans totaled $20 million in the fourth quarter of 2014, consistent with the prior quarter. Net charge-offs equaled 0.23% of average originated loans, a decrease of four basis points from 0.27% in the third quarter. At December 31, 2014, nonperforming originated loans declined 4% to $164 million, or 0.85% of originated loans, compared to 0.91% at the end of the prior quarter.

Operating Results (Non-GAAP) Q4 2014 Q3 2014 Q4 2013
Net interest income $ 269.8 $ 273.3 $ 280.3
Provision for credit losses 22.9 21.2 32.0
Noninterest income 77.2 75.4 89.3
Noninterest expense 248.2 249.5 227.1
Operating net income 69.2 70.9 77.7
Preferred stock dividend 7.5 7.5 7.5
Operating net income available to common shareholders $ 61.7 $ 63.3 $ 70.1
Weighted average diluted shares outstanding 352.2 351.9 350.7
Operating earnings per diluted share $ 0.17 $ 0.18 $ 0.20

Reported Results (GAAP)
Operating net income before non-operating items $ 69.2 $ 70.9 $ 77.7
Non-operating items (a) (8.4) 994.1 --
Net Income / (loss) 77.6 (923.2) 77.7
Preferred stock dividend 7.5 7.5 7.5
Net income / (loss) available to common shareholders $ 70.0 $ (930.7) $ 70.1
Weighted average diluted shares outstanding 352.2 350.4 350.7
Earnings per diluted share $ 0.20 $ (2.66) $ 0.20
All amounts in millions except earnings per diluted share.
(a) Q4 2014: Benefit from reversal of process issue reserve related to certain customer deposit accounts less severance and other restructuring charges related to Organizational Simplification initiative, net of taxes.
Q3 2014: $1.1 billion non-cash goodwill impairment charge, reserves related to a process issue, and restructuring charges primarily related to branch realignment, net of taxes.

Full Year 2014 Results Summary

For the full year ended December 31, 2014, the company reported GAAP net loss of $743 million, or $(2.12) per diluted share, compared to net income available to common shareholders of $265.1 million, or $0.75 per diluted share, in 2013. GAAP net income for 2014 was impacted by a pre-tax $1.1 billion non-cash goodwill impairment charge, $22 million in non-recurring restructuring expenses and $22 million in reserves to address the process issue related to certain customer deposit accounts. Excluding these charges, non-GAAP operating net income available to common shareholders in 2014 was $0.71 per diluted share, compared to $0.75 per diluted share in 2013.

Loans

Average total loans increased 7% 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 $13.9 billion, or a 6% annualized increase from the prior quarter, driven primarily by growth in the company's Upstate New York, Western Pennsylvania, and Tri-State markets. C&I loans averaged $5.8 billion, or a 7% annualized increase over the prior quarter. Average CRE loans increased 5% annualized to $8.1 billion.

Average indirect auto loan balances increased $154 million to $2.1 billion. Indirect auto originations during the quarter totaled $284 million at an average customer FICO score of 763 and yielded 3.1%, net of dealer reserve, an increase of 25 basis points compared to the prior quarter originations. Average residential real estate loans increased $13 million, or 2% annualized. Home equity balances increased for the seventh consecutive quarter to $2.9 billion, or 8% annualized from the prior quarter reflecting higher customer draws and the benefits of promotional and cross-sell campaigns.

Deposits

Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking accounts, increased an annualized 18% over the prior quarter and currently represent 38% of the company's deposit balances, up from 36% a year ago.

Average noninterest-bearing checking deposit balances increased 17% annualized compared to the prior quarter, driven by business checking account acquisitions and seasonality. Interest-bearing checking balances averaged $5.0 billion, a 19% annualized increase from the prior quarter primarily driven by an increase in municipal deposits.

Money market deposit balances increased 6% annualized reflecting normal seasonal trends in municipal deposit balances. Time deposits declined 8% annualized to $3.9 billion driven primarily by a decrease in brokered deposits.

The average cost of interest-bearing deposits increased one basis point to 0.25% from the prior quarter.

Net Interest Income

Fourth quarter 2014 GAAP net interest income decreased $3 million or 1% from the prior quarter to $270 million. This decrease was primarily driven by a $4.7 million sequential decline in income accretion from prepayments of certain CLOs. Average earning assets increased 8% annualized from the prior quarter, driven primarily by strong loan growth.

Normalized net interest margin declined 7 basis points to 3.09%, reflecting continued compression of commercial and consumer loan yields in the current low interest rate environment. Average C&I and consumer loan yields declined 8 and 5 basis points, respectively, from the prior quarter.

Credit Quality

At December 31, 2014, the allowance for loan losses was $241 million, compared to $231 million at September 30, 2014. Nonperforming assets decreased 2% from the prior quarter and comprised 0.56% of total assets.

Information for both the originated and acquired portfolios follows.

Q4 2014 Q3 2014
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 19.9 $ 2.6 $ 22.5 $ 19.6 $ 1.2 $ 20.8
Net charge-offs 10.8 1.7 12.4 12.5 0.5 13.0
NCOs/ Avg Loans 0.23% 0.17% 0.22% 0.27% 0.05% 0.23%
Total loans** $ 19,306 $ 3,835 $ 23,048 $ 18,842 $ 4,028 $ 22,770
(*) Excludes provision for unfunded commitments of $0.4 million each in 4Q14 and 3Q14
(**) 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, unchanged from the prior quarter. Provision for loan losses exceeded net charge-offs as the company continues to provision for loan growth. In the fourth quarter, the company also recognized an additional $5 million in provision expense to appropriately cover exposure to borrowers servicing the energy sector following the recent fall in oil prices.

Net charge-offs equaled $11 million or 23 basis points of average originated loans in the fourth quarter of 2014, compared to $13 million or 27 basis points in the prior quarter. For the full year 2014, net charge-offs on originated loans averaged 29 basis points, a 5 basis point improvement from 2013.

At December 31, 2014, nonperforming originated loans comprised 0.85% of originated loans, compared to 0.91% at September 30, 2014.

At December 31, 2014, the allowance for loan losses on originated loans totaled $236 million or 1.22% of such loans, compared to $227 million or 1.20% of such loans at September 30, 2014.

Acquired loans

The provision for losses on acquired loans totaled $3 million, compared to $1 million in the prior quarter. Net charge-offs on those portfolios totaled $2 million during the quarter, compared to $0.5 million in the prior period. At December 31, 2014, the allowance for loan losses on acquired loans totaled $6 million, compared to $5 million at September 30, 2014. Acquired nonperforming loans totaled $30 million, compared to $29 million at the end of the prior quarter. At December 31, 2014, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $93 million.

Noninterest Income

Reported fourth quarter 2014 noninterest income of $77 million increased 2% or $2 million compared to the prior quarter. Amortization of the company's investments in historic tax credits increased to $11 million from $8 million in the third quarter, reflecting additional investments in the fourth quarter. Excluding these amounts, noninterest income increased $5 million or 6% from the prior quarter driven by higher capital markets income and deposit service charges.

Capital markets income increased $5 million or 137% to $8 million reflecting strong derivative sales and syndication activity in the quarter. Deposit service charges increased $2 million or 11% from the prior quarter and was driven by lower actual impact of the previously disclosed process issue related to certain deposit accounts. Mortgage banking revenues increased modestly from the prior quarter, driven by higher gain-on-sale revenues.

Insurance commissions declined $4 million or 20% from the prior quarter, primarily driven by seasonal trends. Wealth management services income declined $1 million from the prior quarter as lower interest rates resulted in lower demand for annuity products. Other fee income decreased $2 million from the prior quarter and was driven by higher historic tax credit amortization.

Noninterest Expense

Reported fourth quarter expenses of $234 million included a benefit of $23 million related to reversal of reserves recognized to address a previously disclosed process issue related to certain customer deposit accounts as well as $9 million in restructuring charges. Third quarter expenses totaled $1.4 billion and included a $1.1 billion non-cash goodwill impairment charge, $45 million in reserves to address the process issue and other restructuring charges. Excluding these non-operating items in both quarters, expenses totaled $248 million, slightly below $249 million incurred in the third quarter of 2014.

Salaries and benefits expenses declined $5 million or 5% from the prior quarter due primarily to lower headcount and lower incentive compensation. Occupancy and equipment expense increased $1 million due to seasonally higher building maintenance expenses. Marketing and advertising expenses increased $4 million or 50% driven by the company's increased focus on customer and deposit acquisitions. Professional services fees increased $3 million and were driven by legal costs and other professional fees for other corporate activities. Technology and communications expense increased $2 million or 8% due to higher hardware and software expenses and to a lesser extent higher depreciation expense related to completed technology projects. Other expenses decreased $8 million or 22% from elevated third quarter levels which had included higher ORE write-downs related to a single commercial property, expenses related to Home Depot card breach, and state franchise tax reserve adjustment.

In the fourth quarter of 2014, the operating efficiency ratio was unchanged from the prior quarter.

Capital

At December 31, 2014, the company's estimated consolidated Total Risk Based capital and Tier 1 Common Risk Based capital ratios were 11.8% and 8.2% respectively, and were unchanged from September 30, 2014, and up 25 basis points and 35 basis points from 11.5% and 7.9% at December 31, 2013, respectively.

The company remains well above current regulatory guidelines for well-capitalized institutions.

Effective Tax Rate

The effective tax rate was 14% in the fourth quarter, primarily reflecting the benefits of previously disclosed tax strategies and the benefit of historic tax credit investments.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 410 branches, $39 billion in assets, $28 billion in deposits, and approximately 5,600 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 8:30 a.m. Eastern Time on Friday, January 23, 2015 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-888-456-0351 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 March 1, 2015 by dialing 1-866-400-9648, passcode: 4249.

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 For year ending
Fourth Third Second First Fourth Third December 31, December 31,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Interest income:
Loans and leases $ 214,609 $ 212,452 $ 210,218 $ 209,644 $ 213,778 $ 214,746 $ 846,923 $ 845,134
Investment securities and other 86,919 91,668 91,566 90,421 96,020 91,996 360,574 365,087
Total interest income 301,528 304,120 301,784 300,065 309,798 306,742 1,207,497 1,210,221
Interest expense:
Deposits 14,295 13,590 13,183 12,236 12,941 12,931 53,304 53,116
Borrowings 17,450 17,251 16,789 17,082 16,579 16,271 68,572 63,714
Total interest expense 31,745 30,841 29,972 29,318 29,520 29,202 121,876 116,830
Net interest income 269,783 273,279 271,812 270,747 280,278 277,540 1,085,621 1,093,391
Provision for credit losses 22,900 21,200 22,800 24,800 32,000 27,600 91,700 105,000
Net interest income after provision 246,883 252,079 249,012 245,947 248,278 249,940 993,921 988,391
Noninterest income:
Deposit service charges 22,611 20,373 23,733 23,356 25,726 27,115 90,073 104,123
Insurance commissions 14,764 18,352 17,343 15,691 15,431 17,854 66,150 67,332
Merchant and card fees 13,043 12,991 12,834 11,504 12,567 12,464 50,372 48,709
Wealth management services 14,404 15,367 15,949 15,587 15,441 15,189 61,307 58,420
Mortgage banking 4,600 4,358 5,241 3,396 2,754 2,268 17,595 18,328
Capital markets income 8,312 3,509 2,917 3,623 6,310 5,058 18,361 22,401
Lending and leasing 4,567 3,914 4,680 4,732 4,140 4,886 17,893 17,466
Bank owned life insurance 3,187 3,080 3,145 5,405 6,027 3,725 14,817 16,540
Other income (8,311) (6,552) (4,985) (6,570) 916 2,863 (26,418) 12,273
Total noninterest income 77,177 75,392 80,857 76,724 89,312 91,422 310,150 365,592
Noninterest expense:
Salaries and employee benefits 110,985 116,245 117,728 117,940 113,754 115,034 462,898 460,883
Occupancy and equipment 28,379 27,450 28,553 27,876 27,420 26,582 112,258 110,553
Technology and communications 33,940 31,465 31,140 30,345 29,483 28,999 126,890 115,198
Marketing and advertising 11,584 7,746 8,439 7,364 4,879 5,822 35,133 20,497
Professional services 16,644 13,988 13,029 11,923 9,314 9,820 55,584 38,519
Amortization of intangibles 6,432 6,521 6,790 7,509 7,562 7,702 27,252 40,233
Federal deposit insurance premiums 11,911 9,579 9,756 8,855 7,431 9,351 40,101 35,031
Restructuring charges 9,066 2,364 -- 10,356 -- -- 21,786 --
Goodwill impairment -- 1,100,000 -- -- -- -- 1,100,000 --
Deposit account remediation (23,000) 45,000 -- -- -- -- 22,000 --
Other expense 28,371 36,467 28,680 26,568 27,305 27,883 120,086 110,263
Total noninterest expense 234,312 1,396,825 244,115 248,736 227,148 231,193 2,123,988 931,177
Income (loss) before income tax 89,748 (1,069,354) 85,754 73,935 110,442 110,169 (819,917) 422,806
Income tax expense (benefit) 12,180 (146,173) 11,969 14,491 32,752 31,026 (107,533) 127,554
Net income (loss) 77,568 (923,181) 73,785 59,444 77,690 79,143 (712,384) 295,252
Preferred stock dividend 7,547 7,547 7,547 7,547 7,547 7,547 30,188 30,188
Net income (loss) available to
common stockholders
$ 70,021 $ (930,728) $ 66,238 $ 51,897 $ 70,143 $ 71,596 $ (742,572) $ 265,064
Financial Ratios:
Earnings (loss) per basic share $ 0.20 $ (2.66) $ 0.19 $ 0.15 $ 0.20 $ 0.20 $ (2.12) $ 0.75
Earnings (loss) per diluted share 0.20 (2.66) 0.19 0.15 0.20 0.20 (2.12) 0.75
Weighted average shares outstanding - basic(1) 350,444 350,381 350,229 349,906 349,718 349,653 350,237 349,549
Weighted average shares outstanding - diluted(1) 352,152 350,381 351,541 351,408 350,699 350,896 350,237 350,381
Net revenue(2) $ 346,960 $ 348,671 $ 352,669 $ 347,471 $ 369,590 $ 368,962 $ 1,395,771 $ 1,458,983
Noninterest income as a percentage of net revenue(2) 22.24% 21.62% 22.93% 22.08% 24.17% 24.78% 22.22% 25.06%
Pre-tax, pre-provision income (loss)(3) $ 112,648 $ (1,048,154) $ 108,554 $ 98,735 $ 142,442 $ 137,769 $ (728,217) $ 527,806
Pre-tax, pre-provision income per diluted share(3) $ 0.32 $ (2.99) $ 0.31 $ 0.28 $ 0.41 $ 0.39 $ (2.08) $ 1.51
Pre-tax, pre-provision return on average assets(3) 1.17% (10.78)% 1.14% 1.06% 1.51% 1.47% (1.91)% 1.42%
Net interest margin(4) 3.11% 3.21% 3.26% 3.33% 3.41% 3.40% 3.23% 3.39%
Interest yield on average loans(4) 3.78% 3.80% 3.89% 3.98% 4.04% 4.14% 3.86% 4.15%
Rate paid on interest-bearing liabilities 0.45% 0.44% 0.44% 0.44% 0.43% 0.43% 0.44% 0.44%
Efficiency ratio 67.53% 400.61% 69.22% 71.58% 61.46% 62.66% 152.17% 63.82%
Expenses as a percentage of average loans and deposits 1.85% 11.19% 1.97% 2.06% 1.89% 1.94% 4.28% 1.96%
Effective tax rate (benefit) 13.6% (13.7)% 14.0% 19.6% 29.7% 28.2% (13.1)% 30.2%
Return on average assets(5) 0.80 % (9.49)% 0.77 % 0.64 % 0.82% 0.85% (1.86)% 0.80%
Return on average equity(5) 7.44 % (71.85)% 5.84 % 4.79 % 6.18% 6.37% (14.75)% 5.95%
Return on average tangible equity(3)(5) 11.33 % (141.80)% 11.68 % 9.66 % 12.64% 13.20% (27.59)% 12.31%
Return on average common equity 7.32 % (77.58)% 5.62 % 4.48 % 5.99% 6.18% (16.53)% 5.73%
Return on average tangible common equity(3) 11.69 % (164.48)% 12.10 % 9.76 % 13.25% 13.92% (33.09)% 12.86%
(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
December 31, September 30, June 30, March 31, December 31, September 30,
Cash and cash equivalents $ 420,033 $ 451,313 $ 557,423 $ 503,070 $ 462,927 $ 558,086
Investment securities:
Available for sale 5,915,338 6,198,140 6,683,914 7,060,237 7,423,162 7,609,676
Held to maturity 5,941,621 5,351,977 4,834,279 4,467,213 4,042,481 3,841,700
FHLB and FRB common stock 411,857 389,870 434,322 437,550 469,217 437,534
Total investment securities 12,268,816 11,939,987 11,952,515 11,965,000 11,934,860 11,888,910
Loans held for sale 39,825 31,245 45,446 34,465 50,137 80,468
Loans and leases:
Commercial:
Real estate 8,204,027 8,013,622 7,940,977 7,867,724 7,777,903 7,697,407
Business 5,785,672 5,836,235 5,741,684 5,470,177 5,290,392 5,204,672
Total commercial loans 13,989,699 13,849,857 13,682,661 13,337,901 13,068,295 12,902,079
Consumer:
Residential real estate 3,353,081 3,360,805 3,358,347 3,389,071 3,447,997 3,519,233
Home equity 2,936,123 2,886,655 2,835,421 2,767,024 2,752,229 2,706,603
Indirect auto 2,166,320 2,073,843 1,871,688 1,655,489 1,543,983 1,339,449
Credit cards 324,113 312,549 311,640 305,663 325,140 311,600
Other consumer 278,305 286,140 286,062 295,692 302,009 310,107
Total consumer loans 9,057,942 8,919,992 8,663,158 8,412,939 8,371,358 8,186,992
Total loans and leases 23,047,641 22,769,849 22,345,819 21,750,840 21,439,653 21,089,071
Allowance for loan losses 241,411 231,353 223,526 215,037 209,274 197,953
Loans and leases, net 22,806,230 22,538,496 22,122,293 21,535,803 21,230,379 20,891,118
Bank owned life insurance 426,192 423,376 420,230 417,031 415,205 413,555
Goodwill and other intangibles 1,417,005 1,423,437 2,528,481 2,535,271 2,542,783 2,549,931
Other assets 1,174,341 1,158,197 998,364 999,804 992,071 958,473
Total assets $ 38,552,442 $ 37,966,051 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541
Deposits:
Savings accounts $ 3,451,616 $ 3,458,661 $ 3,626,750 $ 3,664,765 $ 3,666,759 $ 3,695,221
Interest-bearing checking 5,084,456 5,055,458 4,743,684 4,929,302 4,743,829 4,637,807
Money market deposits 9,962,220 9,894,346 9,834,344 10,106,569 9,739,539 9,905,341
Noninterest-bearing deposits 5,407,382 5,308,736 5,284,037 5,101,681 4,865,873 4,968,501
Certificates of deposit 3,875,563 3,952,879 3,955,754 3,795,438 3,649,257 3,762,132
Total deposits 27,781,237 27,670,080 27,444,569 27,597,755 26,665,257 26,969,002
Short-term borrowings 5,471,974 4,928,762 4,890,343 4,137,496 4,822,222 4,169,416
Long-term borrowings 733,620 733,684 733,337 733,384 733,883 732,547
Other liabilities 470,342 543,813 477,685 495,590 413,647 531,379
Total liabilities 34,457,173 33,876,339 33,545,934 32,964,225 32,635,009 32,402,344
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 3,757,267 3,751,710 4,740,816 4,688,217 4,655,351 4,600,195
Total stockholders' equity 4,095,269 4,089,712 5,078,818 5,026,219 4,993,353 4,938,197
Total liabilities and stockholders' equity $ 38,552,442 $ 37,966,051 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541
Selected balance sheet information:
Total interest-earning assets(1) $ 35,320,706 $ 34,720,650 $ 34,305,451 $ 33,684,828 $ 33,396,058 $ 33,039,023
Total interest-bearing liabilities 28,579,449 28,023,790 27,784,211 27,366,955 27,355,489 26,902,465
Net interest-earning assets $ 6,741,257 $ 6,696,860 $ 6,521,240 $ 6,317,873 $ 6,040,569 $ 6,136,558
Tangible common equity(1)(2) $ 2,340,262 $ 2,328,273 $ 2,212,335 $ 2,152,946 $ 2,112,568 $ 2,050,264
Unrealized gain on available for sale securities, net of tax(3) 52,244 55,052 86,244 72,579 63,930 76,686
Total core deposits $ 23,905,674 $ 23,717,201 $ 23,488,815 $ 23,802,317 $ 23,016,000 $ 23,206,870
Originated loans(4) $ 19,305,812 $ 18,841,896 $ 18,196,302 $ 17,388,542 $ 16,922,161 $ 16,211,505
Acquired loans(5) 3,834,931 4,028,091 4,254,750 4,475,593 4,642,775 5,006,753
Credit related discount on acquired loans(6) (93,102) (100,138) (105,233) (113,295) (125,283) (129,187)
Total Loans $ 23,047,641 $ 22,769,849 $ 22,345,819 $ 21,750,840 $ 21,439,653 $ 21,089,071
(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 For year ending
December 31, 2014 September 30, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Average
Balances
Interest(1) Yields
and
Rates(1)
Average
Balances
Interest(1) Yields
and
Rates(1)
Average
Balances
Interest(1) Yields
and
Rates(1)
Average
Balances
Interest(1) Yields
and
Rates(1)
Average
Balances
Interest(1) Yields
and
Rates(1)
Interest-earning assets:
Loans and leases(2)
Commercial:
Real estate $ 8,087 $ 76 3.68% $ 7,985 $ 74 3.65% $ 7,673 $ 79 4.02% $ 7,944 $ 302 3.75% $ 7,446 $ 314 4.16%
Business 5,791 51 3.43 5,694 51 3.51 5,257 48 3.60 5,617 200 3.51 5,134 190 3.66
Total commercial loans 13,878 127 3.58 13,679 126 3.59 12,930 127 3.85 13,561 502 3.65 12,580 504 3.95
Consumer:
Residential real estate 3,364 32 3.79 3,351 32 3.77 3,479 34 3.89 3,373 129 3.81 3,569 141 3.94
Home equity 2,912 29 3.94 2,857 29 4.01 2,732 29 4.15 2,832 114 4.03 2,681 113 4.21
Indirect auto 2,132 15 2.82 1,978 14 2.84 1,453 11 3.03 1,870 53 2.86 1,077 34 3.12
Credit cards 315 9 11.47 313 9 11.44 313 9 11.38 312 36 11.50 307 34 11.20
Other consumer 283 6 8.47 287 6 8.54 307 7 8.66 290 25 8.55 315 27 8.43
Total consumer loans 9,005 91 4.01 8,786 90 4.06 8,284 89 4.27 8,677 357 4.11 7,949 348 4.38
Total loans and leases 22,883 218 3.78 22,465 215 3.80 21,214 216 4.04 22,239 859 3.86 20,529 853 4.15
Residential MBS 6,892 43 2.51 6,406 41 2.56 5,502 42 3.07 6,275 164 2.61 5,500 146 2.66
Commercial MBS 1,512 13 3.37 1,564 13 3.32 1,772 17 3.84 1,595 53 3.35 1,844 68 3.69
Other investment securities (3) 3,585 32 3.59 3,854 39 4.06 4,505 38 3.40 3,994 149 3.72 4,694 158 3.36
Total securities, at amortized cost 11,989 88 2.94 11,824 93 3.15 11,779 98 3.31 11,863 366 3.09 12,038 372 3.09
Money market and other investments 161 -- 1.21 86 1 2.76 189 1 1.38 134 2 1.58 189 3 1.65
Total interest-earning assets 35,033 $ 307 3.47% 34,375 $ 309 3.57% 33,182 $ 314 3.76% 34,236 $ 1,227 3.58% 32,756 $ 1,228 3.75%
Goodwill and other intangibles 1,420 2,515 2,546 2,249 2,567
Other noninterest-earning assets 1,859 1,698 1,651 1,733 1,744
Total assets $ 38,312 $ 38,588 $ 37,379 $ 38,218 $ 37,067
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,447 $ 1 0.09% $ 3,552 $ 1 0.09% $ 3,670 $ 1 0.09% $ 3,571 $ 3 0.09% $ 3,813 $ 4 0.10%
Interest-bearing checking 5,049 -- 0.03 4,821 -- 0.03 4,725 -- 0.04 4,857 2 0.03 4,524 2 0.04
Money market deposits 10,037 6 0.24 9,882 6 0.23 9,900 5 0.20 9,944 22 0.22 10,167 21 0.21
Certificates of deposit 3,888 7 0.72 3,970 7 0.67 3,698 7 0.71 3,870 27 0.69 3,875 26 0.68
Total interest bearing deposits 22,421 14 0.25% 22,225 14 0.24% 21,993 13 0.23% 22,241 53 0.24% 22,379 53 0.24%
Borrowings
Short-term borrowings 4,917 5 0.43% 4,737 5 0.43% 4,259 4 0.42% 4,678 20 0.43% 3,744 15 0.41%
Long-term borrowings 734 12 6.56 733 12 6.56 732 12 6.56 733 48 6.61 732 48 6.61
Total borrowings 5,651 17 1.23 5,470 17 1.25 4,991 17 1.32 5,411 69 1.27 4,476 64 1.42
Total interest-bearing liabilities 28,072 $ 32 0.45% 27,695 $ 31 0.44% 26,984 $ 30 0.43% 27,653 $ 122 0.44% 26,855 $ 117 0.44%
Noninterest-bearing deposits 5,485 5,259 4,878 5,173 4,712
Other noninterest-bearing liabilities 620 536 533 561 534
Total liabilities 34,177 33,490 32,395 33,386 32,101
Total stockholders' equity 4,135 5,098 4,984 4,831 4,966
Total liabilities and stockholders' equity $ 38,312 $ 38,588 $ 37,379 $ 38,218 $ 37,067
Net interest income (FTE) $ 275 $ 278 $ 285 $ 1,105 $ 1,111
Taxable Equivalent Adjustment(1) 5 5 5 19 18
Total core deposits $ 24,018 $ 7 0.12% $ 23,514 $ 7 0.12% $ 23,173 $ 6 0.11% $ 23,545 $ 27 0.11% $ 23,216 $ 27 0.12%
Total transactional deposits 10,534 -- 0.02% 10,080 -- 0.01% 9,603 -- 0.02% 10,030 2 0.02% 9,236 2 0.02%
Total deposits 27,906 14 0.20% 27,484 14 0.20% 26,871 13 0.19% 27,414 53 0.19% 27,091 53 0.20%
Tax equivalent net interest rate spread 3.02% 3.13% 3.33% 3.14% 3.31%
Tax equivalent net interest rate margin(4) 3.11% 3.21% 3.41% 3.23% 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.
(4) Includes certain adjustments for the following periods which impacted our tax equivalent net interest margin as follows:
Three months ended
December 31, 2014 September 30, 2014
Tax equivalent net interest rate margin as reported (GAAP) 3.11% 3.21%
CLO payoff discount recognition -0.01% -0.06%
CMBS prepayment normalization -0.01% 0.00%
CMO amortization and retroactive adjustment 0.01% 0.01%
CRE prepayment penalties -0.01% 0.01%
Acquired loans early payoffs 0.00% -0.01%
Other adjustments 0.00% 0.00%
Tax equivalent net interest rate margin normalized (non-GAAP) 3.09% 3.16%
First Niagara Financial Group, Inc.
Allowance for Loans and Lease Losses & Asset Quality
(in thousands)
2014 2013 For year ending
Fourth Third Second First Fourth Third December 31, December 31,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Beginning balance $ 231,353 $ 223,526 $ 215,037 $ 209,274 $ 197,953 $ 183,708 $ 209,274 $ 162,522
Net loan (charge-offs) recoveries:
Commercial real estate $ (2,008) $ (2,259) $ (4,885) $ 905 $ (5,764) $ 1,013 $ (8,247) $ (9,689)
Commercial business (2,391) (3,148) (1,795) (9,138) (6,382) (9,694) (16,472) (28,153)
Residential real estate (476) (102) (352) (174) (168) (137) (1,104) (1,023)
Home equity (1,406) (1,131) (1,294) (3,045) (1,528) (322) (6,876) (3,368)
Indirect auto (2,241) (1,621) (1,455) (2,086) (1,215) (692) (7,403) (2,711)
Credit cards (2,464) (2,726) (2,930) (3,044) (3,082) (1,300) (11,164) (4,780)
Other consumer (1,457) (1,986) (1,200) (2,055) (2,140) (1,823) (6,698) (6,924)
Total net loan charge-offs $ (12,443) $ (12,973) $ (13,911) $ (18,637) $ (20,279) $ (12,955) $ (57,964) $ (56,648)
Provision for loan losses 22,500 20,800 22,400 24,400 31,600 27,200 90,100 103,400
Ending balance $ 241,411 $ 231,353 $ 223,526 $ 215,037 $ 209,274 $ 197,953 $ 241,411 $ 209,274
Supplemental information
Allowance to loans 1.05% 1.02% 1.00% 0.99 % 0.98 % 0.94 % 1.05% 0.98%
Allowance for originated loans to originated loans(1) 1.22% 1.20% 1.21% 1.21 % 1.21 % 1.20 % 1.22% 1.21%
Net charge-offs (recoveries) to average loans (annualized)
Commercial real estate 0.10 % 0.11 % 0.25% (0.05)% 0.30 % (0.05)% 0.10% 0.13%
Commercial business 0.17 % 0.22 % 0.13% 0.68 % 0.49 % 0.75 % 0.29% 0.55%
Total commercial loans 0.13 % 0.16 % 0.20% 0.25 % 0.38 % 0.27 % 0.18% 0.30%
Residential real estate 0.06 % 0.01 % 0.04% 0.02 % 0.02 % 0.02 % 0.03% 0.03%
Home equity 0.19 % 0.16 % 0.18% 0.44 % 0.22 % 0.05 % 0.24% 0.13%
Indirect auto 0.42 % 0.33 % 0.33% 0.52 % 0.33 % 0.23 % 0.40% 0.25%
Credit cards 3.13 % 3.49 % 3.80% 3.88 % 3.93 % 1.68 % 3.57% 1.56%
Other consumer 2.06 % 2.77 % 1.65% 2.74 % 2.79 % 2.01 % 2.31% 2.20%
Total consumer loans 0.36 % 0.35 % 0.34% 0.50 % 0.40 % 0.22 % 0.38% 0.24%
Total loans 0.22 % 0.23 % 0.25% 0.34 % 0.38 % 0.25 % 0.26% 0.28%
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.06 % 0.13 % 0.29% (0.11)% 0.24 % (0.07)% 0.10% 0.10%
Commercial business 0.17 % 0.24 % 0.14% 0.73 % 0.53 % 0.83 % 0.31% 0.61%
Total commercial loans 0.11 % 0.18 % 0.22% 0.26 % 0.37 % 0.33 % 0.19% 0.33%
Residential real estate 0.09 % 0.02 % 0.07% 0.04 % 0.04 % 0.03 % 0.06% 0.06%
Home equity 0.15 % 0.17 % 0.16% 0.21 % 0.29 % 0.09 % 0.17% 0.21%
Indirect auto 0.42 % 0.33 % 0.33% 0.52 % 0.33 % 0.23 % 0.40% 0.25%
Credit cards 3.13 % 3.49 % 3.80% 3.88 % 3.93 % 1.68 % 3.57% 1.56%
Other consumer 2.06 % 2.77 % 1.65% 2.74 % 2.80 % 2.59 % 2.31% 2.65%
Total consumer loans 0.44 % 0.45 % 0.45% 0.57 % 0.56 % 0.33 % 0.48% 0.37%
Total loans 0.23 % 0.27 % 0.30% 0.36 % 0.43 % 0.33 % 0.29% 0.34%
Nonperforming loans:
Originated(1):
Commercial real estate $ 51,940 $ 57,340 $ 55,945 $ 41,296 $ 53,395 $ 51,302 $ 51,940 $ 53,395
Commercial business 37,332 36,939 32,861 35,335 42,013 35,854 37,332 42,013
Residential real estate 33,652 36,113 33,870 32,736 31,478 31,312 33,652 31,478
Home equity 23,749 23,392 19,429 19,516 18,426 15,709 23,749 18,426
Indirect auto 12,616 11,890 9,821 7,943 6,274 5,129 12,615 6,274
Other consumer 5,140 5,134 5,037 5,216 5,838 5,538 5,140 5,838
Total originated nonperforming loans 164,429 170,808 156,963 142,042 157,424 144,844 164,428 157,424
Total acquired nonperforming loans(2) 30,223 28,611 32,488 30,617 30,088 30,388 30,222 30,088
Total nonperforming loans 194,652 199,419 189,451 172,659 187,512 175,232 194,650 187,512
Real estate owned 20,541 20,261 24,270 25,466 24,788 24,262 20,541 24,788
Total nonperforming assets $ 215,193 $ 219,680 $ 213,721 $ 198,125 $ 212,300 $ 199,494 $ 215,191 $ 212,300
Accruing troubled debt restructurings (TDR) $ 63,667 $ 69,199 $ 80,214 $ 56,038 $ 52,263 $ 69,877 $ 63,667 $ 52,263
Loans 90 days past due still accruing(3) 93,903 108,615 112,718 119,134 113,212 136,248 93,903 113,212
Total classified loans(4) 599,194 649,320 661,699 667,327 663,700 648,235 599,194 663,700
Total criticized loans(5) $ 1,030,929 $ 1,089,851 $ 1,072,133 $ 1,075,523 $ 985,019 $ 977,798 $ 1,030,929 $ 985,019
Total nonperforming loans to loans 0.84% 0.88% 0.85% 0.79 % 0.87 % 0.83 % 0.84% 0.87%
Total nonperforming originated loans to originated loans(1) 0.85% 0.91% 0.86% 0.82 % 0.93 % 0.89 % 0.85% 0.93%
Total nonperforming assets to loans and real estate owned 0.93% 0.96% 0.96% 0.91 % 0.99 % 0.94 % 0.93% 0.99%
Total nonperforming assets to assets 0.56% 0.58% 0.55% 0.52 % 0.56 % 0.53 % 0.56% 0.56%
Allowance to nonperforming loans 124.0% 116.0% 118.0% 124.5 % 111.6 % 113.0 % 124.0% 111.6%
Originated loans(1) $ 19,305,812 $ 18,841,896 $ 18,196,302 $ 17,388,542 $ 16,922,161 $ 16,211,505 $ 19,305,812 $ 16,922,161
Acquired loans(6) 3,834,931 4,028,091 4,254,750 4,475,593 4,642,775 5,006,753 3,834,931 4,642,775
Credit related discount on acquired loans(7) (93,102) (100,138) (105,233) (113,295) (125,283) (129,187) (93,102) (125,283)
Total Loans $ 23,047,641 $ 22,769,849 $ 22,345,819 $ 21,750,840 $ 21,439,653 $ 21,089,071 $ 23,047,641 $ 21,439,653
(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
December 31, September 30, June 30, March 31, December 31, September 30,
First Niagara Financial Group, Inc. capital ratios(1):
Tier 1 risk based capital 9.81% 9.80% 9.57% 9.62% 9.56% 9.45%
Tier 1 common capital(2) 8.21% 8.17% 7.92% 7.92% 7.86% 7.72%
Total risk based capital 11.78% 11.76% 11.53% 11.60% 11.53% 11.40%
Leverage 7.50% 7.32% 7.33% 7.28% 7.26% 7.14%
Equity to assets 10.62% 10.77% 13.15% 13.23% 13.27% 13.22%
Tangible common equity to tangible assets(2) 6.30% 6.37% 6.13% 6.07% 6.02% 5.89%
Total risk weighted assets $ 28,197 $ 27,731 $ 27,314 $ 26,639 $ 26,412 $ 26,078
First Niagara Bank, N.A capital ratios(1):
Tier 1 risk based capital 10.48% 10.39% 10.18% 10.22% 10.15% 10.08%
Total risk based capital 11.39% 11.28% 11.05% 11.08% 10.99% 10.89%
Leverage 8.01% 7.76% 7.79% 7.74% 7.70% 7.61%
Total risk weighted assets $ 28,157 $ 27,689 $ 27,273 $ 26,597 $ 26,365 $ 26,037
Number of branches 411 411 411 411 421 422
Full time equivalent employees 5,572 5,768 5,874 5,750 5,807 5,788
Share information and per share metrics:
Common shares outstanding 353,388 355,423 355,483 354,127 353,941 353,973
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000 14,000
Treasury shares 12,614 10,579 10,519 11,875 12,061 12,029
Market price (NASDAQ: FNFG): $ 8.43 $ 8.33 $ 8.74 $ 9.45 $ 10.62 $ 10.37
Book value per common share(3) 10.71 10.71 13.53 13.40 13.31 13.15
Tangible book value per common share(2)(3) 6.67 6.64 6.31 6.15 6.04 5.86
Price/Book 78.71% 77.78% 64.60% 70.52% 79.79% 78.86%
Price/Tangible book(1) 126.39% 125.45% 138.51% 153.66% 175.83% 176.96%
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 40.00% N/M 42.11% 53.33% 40.00% 40.00%
Dividend yield (annualized) 3.77% 3.81% 3.67% 3.43% 2.99% 3.06%
N/M Not meaningful.
(1) Represents an estimate as of December 31, 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 For year ending
Fourth Third Second First Fourth Third December 31, December 31,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.17 $ 0.18 $ 0.19 $ 0.17 $ 0.20 $ 0.20 $ 0.71 $ 0.75
Earnings per diluted share 0.17 0.18 0.19 0.17 0.20 0.20 0.71 0.75
Weighted average shares outstanding - basic(2) 350,444 350,381 350,229 349,906 349,718 349,653 350,237 349,549
Weighted average shares outstanding - diluted(2) 352,152 351,898 351,541 351,408 350,699 350,896 351,750 350,381
Noninterest income as a percentage of net revenue(3) 22.24% 21.62% 22.93% 22.08% 24.17% 24.78% 22.22% 25.06%
Pre-tax, pre-provision income 98,714 99,210 108,554 109,091 142,442 137,769 415,569 527,806
Pre-tax, pre-provision income per diluted share 0.28 0.28 0.31 0.31 0.41 0.39 1.18 1.51
Pre-tax, pre-provision return on average assets 1.02% 1.02% 1.14% 1.17% 1.51% 1.47% 1.09% 1.42%
Net interest margin(4) 3.11% 3.21% 3.26% 3.33% 3.41% 3.40% 3.23% 3.39%
Interest yield on average loans(4) 3.78% 3.80% 3.89% 3.98% 4.04% 4.14% 3.86% 4.15%
Rate paid on interest-bearing liabilities 0.45% 0.44% 0.44% 0.44% 0.43% 0.43% 0.44% 0.44%
Efficiency ratio 71.55% 71.55% 69.22% 68.60% 61.46% 62.66% 70.23% 63.82%
Effective tax rate 8.7% 9.1% 14.0% 19.6% 29.7% 28.2% 13.0% 30.2%
Return on average assets 0.72% 0.73% 0.77% 0.73% 0.82% 0.85% 0.74% 0.80%
Return on average equity 6.64% 5.52% 5.84% 5.46% 6.18% 6.37% 5.83% 5.95%
Return on average tangible equity(5) 10.11% 10.89% 11.68% 11.02% 12.64% 13.20% 10.91% 12.31%
Return on average common equity 6.44% 5.28% 5.62% 5.20% 5.99% 6.18% 5.60% 5.73%
Return on average tangible common equity(6) 10.29% 11.19% 12.10% 11.33% 13.25% 13.92% 11.20% 12.86%
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 248,246 $ 249,461 $ 244,115 $ 238,380 $ 227,148 $ 231,193 $ 980,202 $ 931,177
Restructuring charges 9,066 2,364 -- 10,356 -- -- 21,786 --
Goodwill impairment -- 1,100,000 -- -- -- -- 1,100,000 --
Deposit account remediation (23,000) 45,000 -- -- -- -- 22,000 --
Total reported noninterest expense (GAAP) $ 234,312 $ 1,396,825 $ 244,115 $ 248,736 $ 227,148 $ 231,193 $ 2,123,988 $ 931,177
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 69,197 $ 70,874 $ 73,785 $ 67,789 $ 77,690 $ 79,143 $ 281,645 $ 295,252
Nonoperating income and expenses, net of tax:
Restructuring charges 6,363 1,555 -- 8,345 -- -- 16,263 --
Goodwill impairment -- 963,267 -- -- -- -- 963,267 --
Deposit account remediation (14,734) 29,233 -- -- -- -- 14,499 --
Total nonoperating expenses, net of tax (8,371) 994,055 -- 8,345 -- -- 994,029 --
Net income (loss) (GAAP) $ 77,568 $ (923,181) $ 73,785 $ 59,444 $ 77,690 $ 79,143 $ (712,384) $ 295,252
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) $ 61,650 $ 63,327 $ 66,238 $ 60,242 $ 70,143 $ 71,596 $ 251,457 $ 265,064
Nonoperating income and expenses, net of tax:
Restructuring charges 6,363 1,555 -- 8,345 -- -- 16,263 --
Goodwill impairment -- 963,267 -- -- -- -- 963,267 --
Deposit account remediation (14,734) 29,233 -- -- -- -- 14,499 --
Total nonoperating income and expenses, net of tax (8,371) 994,055 -- 8,345 -- -- 994,029 --
Net income (loss) available to common stockholders (GAAP) $ 70,021 $ (930,728) $ 66,238 $ 51,897 $ 70,143 $ 71,596 $ (742,572) $ 265,064
Computation of pre-tax, pre-provision income:
Net interest income $ 269,783 $ 273,279 $ 271,812 $ 270,747 $ 280,278 $ 277,540 $ 1,085,621 $ 1,093,391
Noninterest income 77,177 75,392 80,857 76,724 89,312 91,422 310,150 365,592
Noninterest expense (234,312) (1,396,825) (244,115) (248,736) (227,148) (231,193) (2,123,988) (931,177)
Pre-tax, pre-provision income (loss) (GAAP) 112,648 (1,048,154) 108,554 98,735 142,442 137,769 (728,217) 527,806
Add back: non-operating noninterest expenses (1) (13,934) 1,147,364 -- 10,356 -- -- 1,143,786 --
Pre-tax, pre-provision income (Non-GAAP)(1) $ 98,714 $ 99,210 $ 108,554 $ 109,091 $ 142,442 $ 137,769 $ 415,569 $ 527,806
(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 For year ending
Fourth Third Second First Fourth Third December 31, December 31,
Quarter Quarter Quarter Quarter Quarter Quarter 2014 2013
Computation of Ending Tangible Assets:
Total assets $ 38,552,442 $ 37,966,051 $ 38,624,752 $ 37,990,444 $ 37,628,362 $ 37,340,541 $ 38,552,442 $ 37,628,362
Less: Goodwill and other intangibles (1,417,005) (1,423,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (1,417,005) (2,542,783)
Tangible assets $ 37,135,437 $ 36,542,614 $ 36,096,271 $ 35,455,173 $ 35,085,579 $ 34,790,610 $ 37,135,437 $ 35,085,579
Computation of Average Tangible Assets:
Total assets $ 38,312,021 $ 38,588,226 $ 38,211,808 $ 37,747,869 $ 37,378,780 $ 37,093,236 $ 38,217,550 $ 37,067,126
Less: Goodwill and other intangibles (1,420,119) (2,514,581) (2,531,612) (2,538,891) (2,546,031) (2,553,647) (2,248,958) (2,567,436)
Tangible assets $ 36,891,902 $ 36,073,645 $ 35,680,196 $ 35,208,978 $ 34,832,749 $ 34,539,589 $ 35,968,592 $ 34,499,690
Computation of Ending Tangible Equity:
Total stockholders' equity $ 4,095,269 $ 4,089,712 $ 5,078,818 $ 5,026,219 $ 4,993,353 $ 4,938,197 $ 4,095,269 $ 4,993,353
Less: Goodwill and other intangibles (1,417,005) (1,423,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (1,417,005) (2,542,783)
Tangible equity $ 2,678,264 $ 2,666,275 $ 2,550,337 $ 2,490,948 $ 2,450,570 $ 2,388,266 $ 2,678,264 $ 2,450,570
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,095,269 $ 4,089,712 $ 5,078,818 $ 5,026,219 $ 4,993,353 $ 4,938,197 $ 4,095,269 $ 4,993,353
Less: Goodwill and other intangibles (1,417,005) (1,423,437) (2,528,481) (2,535,271) (2,542,783) (2,549,931) (1,417,005) (2,542,783)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,340,262 $ 2,328,273 $ 2,212,335 $ 2,152,946 $ 2,112,568 $ 2,050,264 $ 2,340,262 $ 2,112,568
Computation of Average Tangible Equity:
Total stockholders' equity $ 4,135,243 $ 5,097,604 $ 5,065,008 $ 5,034,093 $ 4,984,003 $ 4,932,949 $ 4,831,249 $ 4,960,026
Less: Goodwill and other intangibles (1,420,119) (2,514,581) (2,531,612) (2,538,891) (2,546,031) (2,553,647) (2,248,958) (2,574,650)
Tangible equity $ 2,715,124 $ 2,583,023 $ 2,533,396 $ 2,495,202 $ 2,437,972 $ 2,379,302 $ 2,582,291 $ 2,385,376
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 4,135,243 $ 5,097,604 $ 5,065,008 $ 5,034,093 $ 4,984,003 $ 4,932,949 $ 4,831,249 $ 4,960,026
Less: Goodwill and other intangibles (1,420,119) (2,514,581) (2,531,612) (2,538,891) (2,546,031) (2,553,647) (2,248,958) (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 $ 2,377,122 $ 2,245,021 $ 2,195,394 $ 2,157,200 $ 2,099,970 $ 2,041,300 $ 2,244,289 $ 2,047,374
Computation of Tier 1 Common Capital:
Tier 1 capital $ 2,766,628 $ 2,716,439 $ 2,613,584 $ 2,562,261 $ 2,525,656 $ 2,464,801 $ 2,766,628 $ 2,525,656
Less: Qualifying restricted core capital elements (113,785) (113,556) (113,330) (113,107) (112,886) (112,667) (113,785) (112,886)
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) $ 2,314,841 $ 2,264,881 $ 2,162,252 $ 2,111,152 $ 2,074,768 $ 2,014,132 $ 2,314,841 $ 2,074,768

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.