First Niagara Reports Second Quarter 2015 Results

Second Quarter 2015 Highlights:

  • Second quarter GAAP earnings of $0.15 per diluted share
  • Revenues, excluding the impact of tax credit amortization, of $353 million increased 2% QOQ
    • Noninterest income increased 9% driven by customer activity and favorable seasonal trends
    • Net interest income stable QOQ
  • Period-end commercial business loans increased 9% QOQ
    • Average consumer loan growth increased 2% QOQ driven by Indirect Auto and Home Equity balances
    • Strong commercial loan pipeline at the end of the second quarter
  • Average transactional deposit balances increased 5% QOQ and averaged 37% of deposits
    • Average consumer checking balances increased 12% annualized QOQ and 5% YOY
    • Strong customer response to Simple Checking and Companion Savings deposit products
  • Strong credit quality maintained
    • NCOs averaged 0.31% of originated loans, unchanged QOQ
    • Nonperforming loans declined 9% QOQ; Total criticized loans decreased 5% QOQ

BUFFALO, N.Y., July 24, 2015 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (NASDAQ:FNFG) today reported GAAP net income available to common shareholders of $53.5 million, or $0.15 per diluted share for the second quarter of 2015, compared to $43.8 million, or $0.12 per diluted share, for the quarter ended March 31, 2015.

"We had solid execution in the second quarter reflecting adherence to our prudent credit underwriting practices and progress in implementing our strategic investment plan, which remains on-time and on-budget," said Gary M. Crosby, President and Chief Executive Officer. "Our team is focused on providing a faster, easier, simpler and more secure banking experience, and our customers are responding well. I'm especially proud of our recent recognition by the Reputation Institute as the number four most-reputable bank based on customer feedback. In particular, we received high scores for innovation, citizenship and product quality. Customer-centricity is the heart of our strategy and culture. Every decision we make and every action we take are with our customers, and ultimately our shareholders, top-of-mind and we're gratified to see those efforts recognized by the people we serve."

"Compared to the prior quarter, revenues increased as most noninterest income categories benefited from strong customer activity as well as seasonal strength," said Gregory W. Norwood, Chief Financial Officer. "In our commercial lending business, we ended the quarter on a strong note with period-end commercial business (C&I) balances increasing 9% annualized from the prior quarter benefitting from strong activity in June. Importantly, our loan pipeline at the end of the quarter also was robust. Sequentially, average consumer deposit balances increased 5% annualized driven by interest-checking and money market deposit balances. Net interest margin of 3.02% was in line with our expectations."

Second Quarter Results

On a GAAP basis, in the second quarter of 2015, First Niagara reported net income available to common shareholders of $53.5 million, or $0.15 per diluted share, compared to $43.8 million, or $0.12 per diluted share in the first quarter of 2015, and $68.3 million, or $0.19 per diluted share, for the quarter ended June 30, 2014.

Compared to the first quarter of 2015, the increase in net income available to common shareholders was primarily driven by a 5% increase in noninterest income as well as the impact of $11 million in after-tax restructuring charges or $0.03 per share that were incurred in the first quarter of 2015 primarily in connection with previously announced branch consolidations and the company's Organization Simplification initiative. These were partially offset by an increase in provision for credit losses from very low first quarter levels. Compared to the year-ago period, the decline in GAAP earnings was driven by a higher effective tax rate and net interest margin compression.

In the second quarter of 2015, average loans increased 1% annualized from the linked quarter. Average commercial business and real estate loans increased 1% annualized over the prior quarter, driven by increases in commercial business loan balances; period-end commercial business loan balances increased 9% annualized. Average consumer loans increased 2% annualized, driven by increases in indirect auto and home equity balances. Average interest-bearing deposit balances increased 8% annualized, led by sequential increases across all categories. Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking account balances, increased 5% annualized and currently represent 37% of the company's deposit balances.

Revenues, excluding the impact of $3 million in amortization related to the company's investments in tax credits, increased 2% from the prior quarter primarily driven by an increase in noninterest income. Net interest income was unchanged from prior quarter levels as the benefits of earning asset growth and one extra day in the quarter were offset by the continued impact of reinvestments and re-pricing of assets in the current low interest rate and competitive pricing environment. Net interest margin was 3.02%, down 5 basis points from the prior quarter. Noninterest income, excluding tax credit amortization, increased 9% from the prior quarter driven by strong customer activity and favorable seasonal trends that benefited certain noninterest income categories. Excluding the impact of restructuring charges incurred in the prior quarter, noninterest expenses of $248 million increased 2% sequentially, reflecting business and volume related expenses as well as vendor and other costs associated with the company's strategic initiatives and other corporate activities.

The provision for loan losses on originated loans totaled $20 million and covered net charge-offs of $15.5 million, or 0.31% of average originated loans. At June 30, 2015, total criticized loans decreased 5% from the prior quarter. At June 30, 2015, nonperforming originated loans were $181 million, or 8% lower than at March 31, 2015.

Operating Results (Non-GAAP) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014
Net interest income $ 263.1 $ 262.9 $ 269.8 $ 273.3 $ 271.8
Provision for credit losses 20.8 12.8 35.7 16.7 19.8
Noninterest income 86.6 82.2 77.2 75.4 80.9
Noninterest expense 247.9 243.5 248.2 249.5 244.1
Operating net income 61.0 62.2 60.7 74.0 75.9
Preferred stock dividend 7.5 7.5 7.5 7.5 7.5
Operating net income available to common $ 53.5 $ 54.7 $ 53.2 $ 66.5 $ 68.3
Weighted average diluted shares outstanding 352.8 352.6 352.2 351.9 351.5
Operating earnings per diluted share $ 0.15 $ 0.15 $ 0.15 $ 0.19 $ 0.19
Reported Results (GAAP) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014
Operating net income before non-op. items $ 61.0 $ 62.2 $ 60.7 $ 74.0 $ 75.9
Non-operating items (a) -- 10.9 (8.4) 994.1 --
Net Income / (loss) 61.0 51.4 69.1 (920.0) 75.9
Preferred stock dividend 7.5 7.5 7.5 7.5 7.5
Net income / (loss) available to common $ 53.5 $ 43.8 $ 61.5 $ (927.6) $ 68.3
Weighted average diluted shares outstanding 352.8 352.6 352.2 350.4 351.5
Earnings per diluted share $ 0.15 $ 0.12 $ 0.17 $ (2.65) $ 0.19
All amounts in millions except earnings per diluted share.
(a) Q1 2015: Restructuring charges primarily related to staffing realignment, branch consolidations and third-party professional fees incurred in connection with the overstatement of allowance resulting from mid-level employee misconduct, net of taxes.
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.

Loans

On an end-of-period basis, total loans increased 4% from the prior quarter driven by a 9% increase in commercial business (C&I) loans.

Average loans increased 1% annualized from the prior quarter to $23.2 billion, driven primarily by increases in the company's indirect auto, home equity and C&I loan portfolios.

Average commercial loans, which include C&I and commercial real estate (CRE) loans, increased 1% annualized to $14.1 billion, driven by growth primarily in the company's Eastern Pennsylvania and Tri-State markets. Average commercial loan growth in the second quarter was impacted by the timing of new business volumes, commercial real estate pay-downs early in the quarter as well as the company's continued focus on balancing volume growth with prudent credit underwriting.

Average C&I loans increased 2% annualized to $5.8 billion, driven primarily by increases in the middle market and healthcare segments. CRE loans averaged $8.3 billion and were relatively flat compared to the prior quarter due to higher principal pay-downs driven primarily by customers' sale of the properties.

Average indirect auto loan balances increased 9% annualized or by $51 million to $2.2 billion, as strong new origination activity was partially offset by increased pay-downs. Indirect auto originations during the quarter totaled $273 million. New originations in the second quarter yielded 3.38%, net of dealer reserve, an increase of 13 basis points compared to the prior quarter originations.

Average residential real estate loans decreased 1% annualized, driven by prepayment of adjustable rate mortgages and the company's limited appetite for longer-duration mortgage assets. Home equity balances increased for the ninth consecutive quarter to $3.0 billion, or 3% annualized from the prior quarter reflecting higher customer draws and the benefits of promotional and cross-sell campaigns.

Deposits

Average deposits increased 6% annualized from the prior quarter to $28.2 billion. Average consumer deposit balances increased 5% annualized to $18.1 billion, driven by higher customer balances, new account acquisitions, and successful money market deposit promotional campaigns primarily in the company's New York State footprint. Average consumer interest-bearing and noninterest-bearing checking account balances increased 12% annualized to $5.4 billion, driven by higher balances held by customers as well as new customer acquisitions. Average savings balances increased 7% annualized driven by new Companion Savings accounts as well as higher average customer balances.

Money market deposit balances increased 5% annualized, reflecting promotional marketing campaigns. Time deposits increased 15% annualized to $3.9 billion, as increases in brokered certificate of deposit balances were partially offset by lower consumer and municipal certificate of deposit balances. Non-interest checking deposit balances averaged $5.4 billion, and were unchanged from the prior quarter but increased 7% from the year-ago period driven by higher business deposit balances.

Net Interest Income

Second quarter 2015 GAAP net interest income of $263 million was consistent with the prior quarter as the benefit of a 2% annualized increase in average earning assets was offset by a 5 basis point decline in the net interest margin. The decrease in net interest margin reflects continued compression of earning asset yields in the current low interest rate and competitive pricing environment as well as the impact of deposit pricing promotional campaigns.

Yields on loans decreased 2 basis points to 3.73%, driven primarily by elevated refinance activity in the company's residential real estate portfolio. Yields on investment securities declined 3 basis points due primarily to higher premium amortization on the residential mortgage-backed securities portfolio as well as purchases of new securities at yields lower than the overall portfolio.

The average cost of interest-bearing deposits increased 1 basis point to 0.29% from the prior quarter, reflecting a modest shift in deposit mix and the impact of promotional pricing on money market deposit accounts.

Credit Quality

At June 30, 2015, the allowance for loan losses was $236 million, compared to $231 million at March 31, 2015. Nonperforming assets decreased to $225 million and comprised 0.58% of total assets, compared to $247 million or 0.63% of total assets at March 31, 2015. Total criticized loans decreased 5% from the prior quarter.

Information for both the originated and acquired portfolios follows.

Q2 2015 Q1 2015
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 19.5 $ 0.9 $ 20.5 $ 11.1 $ 3.0 $ 14.2
Net charge-offs 15.5 0.5 16.0 15.0 2.3 17.3
NCOs/ Avg Loans 0.31 % 0.06 % 0.28 % 0.31 % 0.25 % 0.30 %
Total loans** $ 19,930 $ 3,438 $ 23,368 $ 19,529 $ 3,590 $ 23,118
(*) Excludes provision for unfunded commitments of $0.3 million and $(1.4) million in 2Q15 and 1Q15, respectively
(**) Acquired loans net of associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $20 million, compared to $11 million in the first quarter of 2015. This increase was in large part driven by provisioning associated with the $0.4 billion increase in period-end originated loans from the prior quarter. Net charge-offs in the second quarter equaled $15 million or 31 basis points of average originated loans, and were consistent with the prior quarter.

At June 30, 2015, nonperforming originated loans decreased $17 million or 8% from March 31, 2015, and comprised 0.91% of originated loans, compared to 1.01% at March 31, 2015. This decrease was driven by principal pay-downs as well as loan charge-offs.

At June 30, 2015, the allowance for loan losses on originated loans totaled $228 million or 1.15% of such loans, compared to $224 million or 1.15% of such loans at March 31, 2015.

Acquired loans

The provision for losses on acquired loans totaled $0.9 million, compared to $3 million in the prior quarter. Net charge-offs on the acquired portfolio totaled $0.5 million during the quarter, compared to $2.3 million of net charge-offs in the prior quarter. At June 30, 2015, the allowance for loan losses on acquired loans totaled $7 million, relatively unchanged from March 31, 2015. Acquired nonperforming loans totaled $27 million, a 12% decrease from the prior quarter. Acquired classified and criticized loans decreased 8% and 13%, respectively from March 31, 2015. At June 30, 2015, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $79 million.

Noninterest Income

Excluding the impact of $3 million in amortization of tax credit investments, second quarter 2015 noninterest income of $90 million increased 9% or $7 million compared to the prior quarter. This sequential increase was across most noninterest income categories reflecting strong customer activity as well as typical seasonal patterns.

Deposit service charges increased 9% from the prior quarter reflecting typical seasonal trends. Insurance commissions also increased $1 million or 9% driven primarily by higher revenues from the health and welfare business line as well as contingent commissions. Merchant and card fees increased $1 million or 12% and was driven by higher debit and credit card purchase volumes. Wealth management services increased $1 million or 7%, reflecting strong annuity sales and 1% increase in assets under management during the quarter. Capital markets income, which primarily includes income from derivatives and syndications, increased $1 million. Mortgage banking increased $1 million or 18%, driven by an increase in gain-on-sale margins as well as a 5% increase in new locked volumes.

Offsetting these benefits, other noninterest income declined $3 million from the prior quarter reflecting amortization related to the company's tax credit investments.

Noninterest Expense

Noninterest expenses totaled $248 million in the second quarter of 2015, or $13 million lower than the first quarter of 2015 which included $18 million in restructuring charges primarily related to severance and other expenses from previously announced branch consolidations and the completion of the company's Organizational Simplification initiative. Excluding the impact of restructuring expenses, the quarter-over-quarter increase was primarily driven by variable expenses tied to business volume and revenue growth as well as higher professional services fees.

Salaries and benefits expenses increased $2 million or 1% compared to the prior quarter, and was driven primarily by higher commissions expense tied to revenue growth. Occupancy and equipment expense decreased $1 million or 5%, due primarily to lower building maintenance expenses. Technology and communications expenses increased $1 million or 4%, due primarily to higher debit transaction volumes. Professional services fees increased $3 million in large part due to vendor and other costs associated with the company's strategic initiatives and other corporate activities in the second quarter of 2015.

In the second quarter of 2015, the operating efficiency ratio was 70.9%, consistent with 70.5% in the prior quarter.

Effective Tax Rate

The effective tax rate, on a GAAP basis, was 25%, compared to 28% in the prior quarter, primarily reflecting the benefits related to the company's tax credit investments.

Capital

Beginning in the first quarter of 2015, all regulatory capital ratios and amounts were calculated under the Basel III standardized transitional approach. At June 30, 2015, the company's estimated consolidated Total Risk Based capital and Common Equity Tier 1 capital ratios were 12.0% and 8.5% respectively, unchanged from March 31, 2015, respectively.

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

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 390 branches, $39 billion in assets, $28 billion in deposits, and approximately 5,400 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, July 24, 2015 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-800-732-6870 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 September 1, 2015 by dialing 1-800-633-8284, passcode: 21771915.

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)
2015 2014 Six months ended
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
June 30,
2015
June 30,
2014
Interest income:
Loans and leases $ 211,899 $ 210,371 $ 214,609 $ 212,452 $ 210,218 $ 209,644 $ 422,270 $ 419,862
Investment securities and other 86,356 86,280 86,919 91,668 91,566 90,421 172,636 181,987
Total interest income 298,255 296,651 301,528 304,120 301,784 300,065 594,906 601,849
Interest expense:
Deposits 16,568 15,344 14,295 13,590 13,183 12,236 31,912 25,419
Borrowings 18,577 18,363 17,450 17,251 16,789 17,082 36,940 33,871
Total interest expense 35,145 33,707 31,745 30,841 29,972 29,318 68,852 59,290
Net interest income 263,110 262,944 269,783 273,279 271,812 270,747 526,054 542,559
Provision for credit losses 20,756 12,765 35,706 16,700 19,800 23,700 33,521 43,500
Net interest income after provision 242,354 250,179 234,077 256,579 252,012 247,047 492,533 499,059
Noninterest income:
Deposit service charges 22,208 20,389 22,611 20,373 23,733 23,356 42,597 47,089
Insurance commissions 17,060 15,714 14,764 18,352 17,343 15,691 32,774 33,034
Merchant and card fees 13,317 11,907 13,043 12,991 12,834 11,504 25,224 24,338
Wealth management services 15,718 14,650 14,404 15,367 15,949 15,587 30,368 31,536
Mortgage banking 5,783 4,887 4,600 4,358 5,241 3,396 10,670 8,637
Capital markets income 5,284 4,152 8,312 3,509 2,917 3,623 9,436 6,540
Lending and leasing 3,998 4,353 4,567 3,914 4,680 4,732 8,351 9,412
Bank owned life insurance 3,160 3,592 3,187 3,080 3,145 5,405 6,752 8,550
Other income 79 2,600 (8,311) (6,552) (4,985) (6,570) 2,679 (11,555)
Total noninterest income 86,607 82,244 77,177 75,392 80,857 76,724 168,851 157,581
Noninterest expense:
Salaries and employee benefits 113,561 111,973 110,985 116,245 117,728 117,940 225,534 235,668
Occupancy and equipment 26,021 27,332 28,379 27,450 28,553 27,876 53,353 56,429
Technology and communications 36,486 35,061 33,940 31,465 31,140 30,345 71,547 61,485
Marketing and advertising 10,297 9,863 11,584 7,746 8,439 7,364 20,160 15,803
Professional services 16,321 13,070 16,644 13,988 13,029 11,923 29,391 24,952
Amortization of intangibles 5,092 6,205 6,432 6,521 6,790 7,509 11,297 14,299
Federal deposit insurance premiums 11,750 11,158 11,911 9,579 9,756 8,855 22,908 18,611
Restructuring charges -- 17,517 9,066 2,364 -- 10,356 17,517 10,356
Goodwill impairment -- -- -- 1,100,000 -- -- -- --
Deposit account remediation -- -- (23,000) 45,000 -- -- -- --
Other expense 28,371 28,859 28,371 36,467 28,680 26,568 57,230 55,248
Total noninterest expense 247,899 261,038 234,312 1,396,825 244,115 248,736 508,937 492,851
Income (loss) before income tax 81,062 71,385 76,942 (1,064,854) 88,754 75,035 152,447 163,789
Income tax expense (benefit) 20,052 20,000 7,875 (144,808) 12,879 14,825 40,052 27,704
Net income (loss) 61,010 51,385 69,067 (920,046) 75,875 60,210 112,395 136,085
Preferred stock dividend 7,547 7,547 7,547 7,547 7,547 7,547 15,094 15,094
Net income (loss) available to common stockholders $ 53,463 $ 43,838 $ 61,520 $ (927,593) $ 68,328 $ 52,663 $ 97,301 $ 120,991
Financial Ratios:
Earnings (loss) per basic share $ 0.15 $ 0.12 $ 0.17 $ (2.65) $ 0.19 $ 0.15 $ 0.27 $ 0.34
Earnings (loss) per diluted share $ 0.15 $ 0.12 $ 0.17 $ (2.65) $ 0.19 0.15 $ 0.27 0.34
Weighted average shares outstanding - basic(1) 351,126 350,741 350,444 350,381 350,229 349,906 350,935 350,068
Weighted average shares outstanding - diluted(1) 352,791 352,621 352,152 350,381 351,541 351,408 352,683 351,448
Net revenue(2) $ 349,717 $ 345,188 $ 346,960 $ 348,671 $ 352,669 $ 347,471 $ 694,905 $ 700,140
Noninterest income as a percentage of net revenue(2) 24.76% 23.83% 22.24% 21.62% 22.93% 22.08% 24.30% 22.51%
Pre-tax, pre-provision income (loss)(3) $ 101,818 $ 84,150 $ 112,648 $ (1,048,154) $ 108,554 $ 98,735 $ 185,968 $ 207,289
Pre-tax, pre-provision income per diluted share(3) $ 0.29 $ 0.24 $ 0.32 $ (2.99) $ 0.31 $ 0.28 $ 0.53 $ 0.59
Pre-tax, pre-provision return on average assets(3) 1.05% 0.88% 1.17 % (10.8)% 1.14% 1.06% 0.97 % 1.10%
Net interest margin(4) 3.02% 3.07% 3.11% 3.21% 3.26% 3.33% 3.04% 3.30%
Interest yield on average loans(4) 3.73% 3.75% 3.78% 3.80% 3.89% 3.98% 3.74% 3.94%
Rate paid on interest-bearing liabilities 0.49% 0.48% 0.45% 0.44% 0.44% 0.44% 0.49% 0.44%
Efficiency ratio 70.9% 75.6% 67.5% 400.6% 69.2% 71.6% 73.2% 70.4%
Expenses as a percentage of average loans and deposits 1.93% 2.05% 1.85% 11.19% 1.97% 2.06% 2.01% 2.03%
Effective tax rate (benefit) 24.7% 28.0% 10.2 % (13.6)% 14.5% 19.8% 26.3 % 16.9%
Return on average assets(5) 0.63 % 0.54 % 0.72 % (9.46)% 0.80 % 0.65% 0.58 % 0.72%
Return on average equity(5) 5.90 % 5.05 % 6.62 % (71.57)% 6.01 % 4.85% 5.48 % 5.43%
Return on average tangible equity(3)(5) 8.94 % 7.68 % 10.07 % (141.16)% 12.01 % 9.79% 8.32 % 10.91%
Return on average common equity 5.63 % 4.69 % 6.42 % (77.27)% 5.80 % 4.55% 5.17 % 5.18%
Return on average tangible common equity(3) 8.94 % 7.48 % 10.24 % (163.71)% 12.48 % 9.90% 8.22 % 11.21%
(1) Share count excludes unallocated ESOP shares prior to January 1, 2015 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 the computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(4) Yields and rates calculated on a tax equivalent basis.
(5) Return used to calculate ratio excludes preferred stock dividend.
First Niagara Financial Group, Inc.
Period End Balance Sheet
(in thousands)
2015 2014
June 30, March 31, December 31, September 30, June 30, March 31,
Cash and cash equivalents $ 527,323 $ 387,676 $ 420,033 $ 451,313 $ 557,423 $ 503,070
Investment securities:
Available for sale 5,750,860 5,911,419 5,915,338 6,198,140 6,683,914 7,060,237
Held to maturity 6,169,838 6,214,561 5,941,621 5,351,977 4,834,279 4,467,213
FHLB and FRB common stock 379,135 375,090 411,857 389,870 434,322 437,550
Total investment securities 12,299,833 12,501,070 12,268,816 11,939,987 11,952,515 11,965,000
Loans held for sale 59,816 48,755 39,825 31,245 45,446 34,465
Loans and leases:
Commercial:
Real estate 8,312,332 8,287,108 8,204,027 8,013,622 7,940,977 7,867,724
Business 5,923,524 5,790,980 5,775,413 5,836,235 5,741,684 5,470,177
Total commercial loans 14,235,856 14,078,088 13,979,440 13,849,857 13,682,661 13,337,901
Consumer:
Residential real estate 3,329,799 3,330,216 3,353,081 3,360,805 3,358,347 3,389,071
Home equity 2,984,872 2,943,844 2,936,123 2,886,655 2,835,421 2,767,024
Indirect auto 2,256,004 2,200,913 2,166,320 2,073,843 1,871,688 1,655,489
Credit cards 304,682 301,228 324,113 312,549 311,640 305,663
Other consumer 257,204 263,985 278,305 286,140 286,062 295,692
Total consumer loans 9,132,561 9,040,186 9,057,942 8,919,992 8,663,158 8,412,939
Total loans and leases 23,368,417 23,118,274 23,037,382 22,769,849 22,345,819 21,750,840
Allowance for loan losses 235,600 231,138 234,251 222,753 219,426 213,937
Loans and leases, net 23,132,817 22,887,136 22,803,131 22,547,096 22,126,393 21,536,903
Bank owned life insurance 431,335 428,454 426,192 423,376 420,230 417,031
Goodwill and other intangibles 1,404,201 1,410,800 1,417,005 1,423,437 2,528,481 2,535,271
Other assets 1,208,218 1,243,588 1,176,036 1,155,588 997,120 999,469
Total assets $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608 $ 37,991,209
Deposits:
Savings accounts $ 3,483,777 $ 3,488,441 $ 3,451,616 $ 3,458,661 $ 3,626,750 $ 3,664,765
Interest-bearing checking 5,088,856 5,158,264 5,084,456 5,055,458 4,743,684 4,929,302
Money market deposits 10,303,873 10,368,358 9,962,220 9,894,346 9,834,344 10,106,569
Noninterest-bearing deposits 5,549,944 5,500,484 5,407,382 5,308,736 5,284,037 5,101,681
Certificates of deposit 4,020,367 3,734,226 3,875,563 3,952,879 3,955,754 3,795,438
Total deposits 28,446,817 28,249,773 27,781,237 27,670,080 27,444,569 27,597,755
Short-term borrowings 4,275,886 4,739,264 5,471,974 4,928,762 4,890,343 4,137,496
Long-term borrowings 1,683,476 1,233,550 733,620 733,684 733,337 733,384
Other liabilities 536,239 559,646 471,449 543,813 477,685 495,589
Total liabilities 34,942,418 34,782,233 34,458,280 33,876,339 33,545,934 32,964,224
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 3,783,123 3,787,244 3,754,756 3,757,701 4,743,672 4,688,983
Total stockholders' equity 4,121,125 4,125,246 4,092,758 4,095,703 5,081,674 5,026,985
Total liabilities and stockholders' equity $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608 $ 37,991,209
Selected balance sheet information:
Total interest-earning assets(1) $ 35,813,498 $ 35,594,208 $ 35,310,447 $ 34,720,650 $ 34,305,451 $ 33,684,828
Total interest-bearing liabilities 28,856,235 28,722,103 28,579,449 28,023,790 27,784,211 27,366,955
Net interest-earning assets $ 6,957,263 $ 6,872,105 $ 6,730,998 $ 6,696,860 $ 6,521,240 $ 6,317,873
Tangible common equity(1)(2) $ 2,378,922 $ 2,376,444 $ 2,337,751 $ 2,334,263 $ 2,215,191 $ 2,153,712
Unrealized gain on available for sale securities, net of tax(3) 37,464 68,194 52,244 55,052 86,244 72,579
Total core deposits $ 24,426,450 $ 24,515,547 $ 23,905,674 $ 23,717,201 $ 23,488,815 $ 23,802,317
Originated loans(4) $ 19,929,719 $ 19,528,609 $ 19,295,553 $ 18,841,896 $ 18,196,302 $ 17,388,542
Acquired loans(5) 3,517,525 3,681,354 3,834,931 4,028,091 4,254,750 4,475,593
Credit related discount on acquired loans(6) (78,827) (91,689) (93,102) (100,138) (105,233) (113,295)
Total Loans $ 23,368,417 $ 23,118,274 $ 23,037,382 $ 22,769,849 $ 22,345,819 $ 21,750,840
(1) Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
(2) The tables in this earnings release present the computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) Excludes unamortized unrealized gains recorded in accumulated other comprehensive income related to available for sale securities transferred to held to maturity.
(4) Originated loans represent total loans excluding acquired loans.
(5) Carrying value of acquired loans plus the principal not expected to be collected.
(6) Principal on acquired loans not expected to be collected.
First Niagara Financial Group, Inc.
Average Balance Sheet and Related Tax Equivalent Yields & Rates
(in millions)
For the three months ended Six months ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
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 $ 8,257 $ 75 3.61% $ 8,263 $ 74 3.60% $ 7,899 $ 75 3.77% $ 8,260 $ 150 3.60% $ 7,850 $ 151 3.83%
Business 5,830 52 3.48 5,797 50 3.43 5,564 50 3.56 5,813 101 3.46 5,489 98 3.56
Total commercial loans 14,087 127 3.56 14,060 124 3.53 13,463 125 3.68 14,073 251 3.54 13,339 249 3.72
Consumer:
Residential real estate 3,326 31 3.68 3,338 32 3.78 3,361 32 3.80 3,332 62 3.73 3,389 65 3.84
Home equity 2,963 28 3.86 2,939 28 3.91 2,800 28 4.06 2,951 57 3.89 2,778 56 4.09
Indirect auto 2,238 15 2.74 2,187 15 2.79 1,750 12 2.85 2,213 30 2.77 1,682 24 2.89
Credit cards 304 9 11.40 311 9 11.74 308 9 11.44 307 18 11.57 311 18 11.54
Other consumer 260 5 8.49 275 6 8.49 291 6 8.53 267 11 8.49 295 13 8.59
Total consumer loans 9,091 88 3.91 9,050 90 4.02 8,510 88 4.13 9,070 178 3.96 8,455 176 4.20
Total loans and leases 23,178 215 3.73 23,110 214 3.75 21,973 213 3.89 23,143 429 3.74 21,794 425 3.94
Residential MBS 7,381 43 2.30 7,180 45 2.49 6,097 41 2.67 7,281 87 2.39 5,895 80 2.71
Commercial MBS 1,311 11 3.42 1,404 11 3.26 1,608 14 3.45 1,357 23 3.34 1,652 28 3.36
Other investment securities (3) 3,604 34 3.75 3,554 31 3.52 4,159 38 3.69 3,580 65 3.63 4,272 77 3.62
Total securities, at amortized cost 12,296 88 2.85 12,138 87 2.88 11,864 93 3.13 12,218 175 2.86 11,819 185 3.13
Money market and other investments 100 -- 1.56 158 -- 1.01 165 1 1.27 129 1 1.22 145 1 1.43
Total interest-earning assets 35,574 $ 303 3.42% 35,406 $ 302 3.45% 34,002 $ 307 3.62% 35,490 $ 605 3.44% 33,758 $ 611 3.65%
Goodwill and other intangibles 1,408 1,414 2,532 1,411 2,535
Other noninterest-earning assets 1,931 1,887 1,679 1,909 1,689
Total assets $ 38,913 $ 38,707 $ 38,213 $ 38,810 $ 37,982
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,494 $ 1 0.09% $ 3,432 $ -- 0.08% $ 3,654 $ 1 0.09% $ 3,463 $ 1 0.09% $ 3,643 $ 2 0.08%
Interest-bearing checking 5,131 -- 0.03 5,001 -- 0.03 4,820 -- 0.03 5,067 1 0.03 4,778 1 0.03
Money market deposits 10,251 8 0.29 10,132 7 0.26 9,971 5 0.22 10,192 14 0.27 9,929 10 0.21
Certificates of deposit 3,917 8 0.82 3,778 8 0.84 3,971 7 0.66 3,848 16 0.83 3,810 13 0.68
Total interest bearing deposits 22,793 17 0.29% 22,343 15 0.28% 22,416 13 0.24% 22,570 32 0.29% 22,160 25 0.23%
Borrowings
Short-term borrowings 4,522 5 0.48% 5,125 6 0.46% 4,410 5 0.43% 4,821 11 0.47% 4,525 10 0.43%
Long-term borrowings 1,359 13 3.90 1,027 13 4.98 733 12 6.62 1,194 26 4.36 733 24 6.65
Total borrowings 5,881 18 1.27 6,152 19 1.21 5,143 17 1.31 6,015 37 1.24 5,258 34 1.30
Total interest-bearing liabilities 28,674 $ 35 0.49% 28,495 $ 34 0.48% 27,559 $ 30 0.44% 28,585 $ 69 0.49% 27,418 $ 59 0.44%
Noninterest-bearing deposits 5,427 5,430 5,077 5,428 4,971
Other noninterest-bearing liabilities 667 654 511 660 543
Total liabilities 34,768 34,579 33,147 34,673 32,932
Total stockholders' equity 4,145 4,128 5,066 4,137 5,050
Total liabilities and stockholders' equity $ 38,913 $ 38,707 $ 38,213 $ 38,810 $ 37,982
Net interest income (FTE) $ 268 $ 268 $ 277 $ 536 $ 552
Taxable Equivalent Adjustment(1) 5 5 5 10 9
Total core deposits $ 24,303 $ 9 0.14% $ 23,995 $ 7 0.13% $ 23,522 $ 6 0.11% $ 24,150 $ 16 0.13% $ 23,321 $ 13 0.11%
Total transactional deposits 10,558 -- 0.01% 10,431 -- 0.01% 9,897 -- 0.01% 10,495 1 0.01% 9,749 1 0.02%
Total deposits 28,220 17 0.24% 27,773 15 0.22% 27,493 13 0.19% 27,998 32 0.23% 27,131 25 0.19%
Tax equivalent net interest rate spread 2.93% 2.97% 3.18% 2.95% 3.21%
Tax equivalent net interest rate margin 3.02% 3.07% 3.26% 3.04% 3.30%
(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)
2015 2014 Six months ended
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
June 30,
2015
June 30,
2014
Beginning balance $ 231,138 $ 234,251 $ 222,753 $ 219,426 $ 213,937 $ 209,274 $ 234,251 $ 209,274
Net loan (charge-offs) recoveries:
Commercial real estate $ (5,525) $ (5,825) $ (2,008) $ (2,259) $ (4,885) $ 905 $ (11,350) $ (3,980)
Commercial business (3,513) (4,178) (12,650) (3,148) (1,795) (9,138) (7,691) (10,933)
Residential real estate (197) (266) (476) (102) (352) (174) (463) (526)
Home equity (1,367) (1,526) (1,406) (1,131) (1,294) (3,045) (2,893) (4,339)
Indirect auto (1,342) (1,226) (2,241) (1,621) (1,455) (2,086) (2,568) (3,541)
Credit cards (2,522) (2,450) (2,464) (2,726) (2,930) (3,044) (4,972) (5,974)
Other consumer (1,528) (1,807) (1,457) (1,986) (1,200) (2,055) (3,335) (3,255)
Total net loan charge-offs $ (15,994) $ (17,278) $ (22,702) $ (12,973) $ (13,911) $ (18,637) $ (33,272) $ (32,548)
Provision for loan losses 20,456 14,165 34,200 16,300 19,400 23,300 34,621 42,700
Ending balance $ 235,600 $ 231,138 $ 234,251 $ 222,753 $ 219,426 $ 213,937 $ 235,600 $ 219,426
Supplemental information
Allowance to loans 1.01% 1.00% 1.02% 0.98% 0.98 % 0.98 % 1.01% 0.98%
Allowance for originated loans to originated loans(1) 1.15% 1.15% 1.18% 1.16% 1.18 % 1.21 % 1.15% 1.18%
Net charge-offs (recoveries) to average loans (annualized)
Commercial real estate 0.27 % 0.29 % 0.10 % 0.11% 0.25 % (0.05)% 0.27 % 0.10%
Commercial business 0.24 % 0.29 % 0.87 % 0.22% 0.13 % 0.68 % 0.26 % 0.40%
Total commercial loans 0.26 % 0.28 % 0.42 % 0.16% 0.20 % 0.25 % 0.27 % 0.22%
Residential real estate 0.02 % 0.03 % 0.06 % 0.01% 0.04 % 0.02 % 0.03 % 0.03%
Home equity 0.18 % 0.21 % 0.19 % 0.16% 0.18 % 0.44 % 0.20 % 0.31%
Indirect auto 0.24 % 0.22 % 0.42 % 0.33% 0.33 % 0.52 % 0.23 % 0.42%
Credit cards 3.32 % 3.16 % 3.13 % 3.49% 3.80 % 3.88 % 3.24 % 3.84%
Other consumer 2.35 % 2.63 % 2.06 % 2.77% 1.65 % 2.74 % 2.49 % 2.20%
Total consumer loans 0.31 % 0.33 % 0.36 % 0.35% 0.34 % 0.50 % 0.31 % 0.42%
Total loans 0.28 % 0.30 % 0.40 % 0.23% 0.25 % 0.34 % 0.29 % 0.30%
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.31 % 0.24 % 0.06 % 0.13% 0.29 % (0.11)% 0.28 % 0.09%
Commercial business 0.25 % 0.31 % 0.93 % 0.24% 0.14 % 0.73 % 0.28 % 0.43%
Total commercial loans 0.28 % 0.27 % 0.44 % 0.18% 0.22 % 0.26 % 0.28 % 0.24%
Residential real estate 0.04 % 0.05 % 0.09 % 0.02% 0.07 % 0.04 % 0.04 % 0.05%
Home equity 0.17 % 0.16 % 0.15 % 0.17% 0.16 % 0.21 % 0.16 % 0.19%
Indirect auto 0.24 % 0.22 % 0.42 % 0.33% 0.33 % 0.52 % 0.23 % 0.42%
Credit cards 3.32 % 3.16 % 3.13 % 3.49% 3.80 % 3.88 % 3.24 % 3.84%
Other consumer 2.35 % 2.63 % 2.06 % 2.77% 1.65 % 2.74 % 2.49 % 2.20%
Total consumer loans 0.37 % 0.38 % 0.44 % 0.45% 0.45 % 0.57 % 0.38 % 0.51%
Total loans 0.31 % 0.31 % 0.44 % 0.27% 0.30 % 0.36 % 0.31 % 0.33%
Nonperforming loans:
Originated(1):
Commercial real estate $ 60,021 $ 65,655 $ 53,164 $ 57,340 $ 55,945 $ 41,296 $ 60,021 $ 55,945
Commercial business 42,979 54,506 45,201 36,939 32,861 35,335 42,979 32,861
Residential real estate 32,877 32,791 33,652 36,113 33,870 32,736 32,877 33,870
Home equity 27,092 26,163 23,749 23,392 19,429 19,516 27,092 19,429
Indirect auto 13,066 13,399 12,616 11,890 9,821 7,943 13,066 9,821
Other consumer 4,917 5,065 5,140 5,134 5,037 5,216 4,917 5,037
Total originated nonperforming loans 180,952 197,579 173,522 170,808 156,963 142,042 180,952 156,963
Total acquired nonperforming loans(2) 26,553 30,236 30,223 28,611 32,488 30,617 26,553 32,488
Total nonperforming loans 207,505 227,815 203,745 199,419 189,451 172,659 207,505 189,451
Real estate owned 17,397 19,128 20,541 20,261 24,270 25,466 17,397 24,270
Total nonperforming assets(3) $ 224,902 $ 246,943 $ 224,286 $ 219,680 $ 213,721 $ 198,125 $ 224,902 $ 213,721
Accruing troubled debt restructurings (TDR) $ 64,643 $ 64,401 $ 67,102 $ 69,199 $ 80,214 $ 56,038 $ 64,643 $ 80,214
Loans 90 days past due still accruing(4) 78,279 87,213 93,903 108,615 112,718 119,134 78,279 112,718
Total classified loans(5) 592,148 615,518 609,316 649,320 661,699 667,327 592,148 661,699
Total criticized loans(6) $ 938,951 $ 990,656 $ 1,041,050 $ 1,089,851 $ 1,072,133 $ 1,075,523 $ 915,160 $ 1,072,133
Total nonperforming loans to loans 0.89% 0.99% 0.88% 0.88% 0.85 % 0.79 % 0.89% 0.85%
Total nonperforming originated loans to originated
loans(1)
0.91% 1.01% 0.90% 0.91% 0.86 % 0.82 % 0.91% 0.86%
Total nonperforming assets to loans and real estate owned 0.96% 1.07% 0.97% 0.96% 0.96 % 0.91 % 0.96% 0.96%
Total nonperforming assets to assets 0.58% 0.63% 0.58% 0.58% 0.55 % 0.52 % 0.58% 0.55%
Allowance to nonperforming loans 113.5% 101.5% 115.0% 111.7% 115.8 % 123.9 % 113.5% 115.8%
Originated loans(1) $ 19,929,719 $ 19,528,609 $ 19,295,553 $ 18,841,896 $ 18,196,302 $ 17,388,542 $ 19,929,719 $ 18,196,302
Acquired loans(7) 3,517,525 3,681,354 3,834,931 4,028,091 4,254,750 4,475,593 3,517,525 4,254,750
Credit related discount on acquired loans(8) (78,827) (91,689) (93,102) (100,138) (105,233) (113,295) (78,827) (105,233)
Total Loans $ 23,368,417 $ 23,118,274 $ 23,037,382 $ 22,769,849 $ 22,345,819 $ 21,750,840 $ 23,368,417 $ 22,345,819
(1) Originated loans represent total loans excluding acquired loans.
(2) Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.
(3) Does not include a $5.5 million nonperforming loan that was classified as held for sale at March 31, 2015, which was sold and for which we received the proceeds on April 2, 2015.
(4) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
(5) Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business", under the heading "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2014.
(6) Criticized loans includes consumer loans when they are 90 days or more past due. Criticized loans include special mention, substandard, doubtful, and loss.
(7) Represents the carrying value of acquired loans plus the principal not expected to be collected.
(8) Represent principal on acquired loans not expected to be collected.
First Niagara Financial Group, Inc.
Key Statistics
(Risk weighted assets in millions; share counts in thousands)
2015 2014
June 30, March 31, December 31, September 30, June 30, March 31,
First Niagara Financial Group, Inc. capital ratios(1)(2):
Tier 1 risk based capital 10.03% 10.02% 9.81% 9.82% 9.58% 9.62%
Total risk based capital 11.96% 11.95% 11.75% 11.75% 11.53% 11.60%
Common equity tier 1 capital 8.50% 8.48% N/A N/A N/A N/A
Tier 1 common capital(3) N/A N/A 8.20% 8.19% 7.93% 7.93%
Leverage 7.60% 7.56% 7.50% 7.34% 7.34% 7.28%
Equity to assets 10.55% 10.60% 10.62% 10.79% 13.16% 13.23%
Tangible common equity to tangible assets(3) 6.32% 6.34% 6.30% 6.39% 6.14% 6.07%
Total risk weighted assets $ 28,445 $ 28,153 $ 28,186 $ 27,729 $ 27,313 $ 26,638
First Niagara Bank, N.A capital ratios(1)(2):
Tier 1 risk based capital 10.66% 10.65% 10.48% 10.41% 10.19% 10.23%
Total risk based capital 11.54% 11.53% 11.37% 11.27% 11.05% 11.08%
Common equity tier 1 capital 10.66% 10.65% N/A N/A N/A N/A
Leverage 8.07% 8.03% 8.01% 7.78% 7.80% 7.74%
Total risk weighted assets $ 28,359 $ 28,068 $ 28,146 $ 27,686 $ 27,272 $ 26,595
Number of branches 394 394 411 411 411 411
Full time equivalent employees 5,364 5,322 5,572 5,768 5,874 5,750
Share information and per share metrics:
Common shares outstanding 354,890 353,717 353,388 355,423 355,483 354,127
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000 14,000
Treasury shares 11,112 12,285 12,614 10,579 10,519 11,875
Market price (NASDAQ: FNFG): $ 9.44 $ 8.84 $ 8.43 $ 8.33 $ 8.74 $ 9.45
Book value per common share(4) 10.77 10.80 10.71 10.72 13.54 13.40
Tangible book value per common share(3)(4) 6.77 6.78 6.67 6.66 6.32 6.15
Price/Book 87.65% 81.85% 78.71% 77.71% 64.55% 70.52%
Price/Tangible book(1) 139.44% 130.38% 126.39% 125.08% 138.29% 153.66%
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 53.33% 66.67% 47.06% N/M 42.11% 53.33%
Dividend yield (annualized) 3.40% 3.67% 3.77% 3.81% 3.67% 3.43%
N/M Not meaningful.
(1) Represents an estimate as of June 30, 2015. All preceding quarters represent actual amounts.
(2) Basel III Transitional rules became effective for us on January 1, 2015. Ratios and amounts presented prior to March 31, 2015 are calculated under Basel I rules. As of March 31, 2015, the ratios presented are calculated under the Basel III Standardized Transitional Approach. Common equity tier 1 capital under Basel III replaced Tier 1 common capital under Basel I. Prior to Basel III becoming effective on January 1, 2015, tier 1 common capital under Basel I was a non-GAAP financial measure.
(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) Share count excludes unallocated ESOP shares prior to January 1, 2015 and unvested restricted stock shares.
First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation
(in thousands, except per share amounts)
2015 2014 Six months ended
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
June 30,
2015
June 30,
2014
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.15 $ 0.15 $ 0.15 $ 0.19 $ 0.19 $ 0.17 $ 0.31 $ 0.37
Earnings per diluted share $ 0.15 $ 0.15 $ 0.15 $ 0.19 $ 0.19 $ 0.17 $ 0.30 $ 0.37
Weighted average shares outstanding - basic(2) 351,126 350,741 350,444 350,381 350,229 349,906 350,935 350,068
Weighted average shares outstanding - diluted(2) 352,791 352,621 352,152 351,898 351,541 351,408 352,683 351,448
Noninterest income as a percentage of net revenue(3) 24.76% 23.83% 22.24% 21.62% 22.93% 22.08% 24.30% 22.51%
Pre-tax, pre-provision income 101,818 101,667 98,714 99,210 108,554 109,091 203,485 217,645
Pre-tax, pre-provision income per diluted share $ 0.29 $ 0.29 $ 0.28 $ 0.28 $ 0.31 $ 0.31 $ 0.58 $ 0.62
Pre-tax, pre-provision return on average assets 1.05% 1.07% 1.02% 1.02% 1.14% 1.17% 1.06% 1.16%
Net interest margin(4) 3.02% 3.07% 3.11% 3.21% 3.26% 3.33% 3.04% 3.30%
Interest yield on average loans(4) 3.73% 3.75% 3.78% 3.80% 3.89% 3.98% 3.74% 3.94%
Rate paid on interest-bearing liabilities 0.49% 0.48% 0.45% 0.44% 0.44% 0.44% 0.49% 0.44%
Efficiency ratio 70.9% 70.5% 71.5% 71.5% 69.2% 68.6% 70.7% 68.9%
Effective tax rate 24.7% 30.0% 3.7% 10.3% 14.5% 19.7% 27.5% 17.1%
Return on average assets 0.63% 0.65% 0.63% 0.76% 0.80% 0.74% 0.64% 0.77%
Return on average equity 5.90% 6.12% 5.82% 5.76% 6.01% 5.52% 6.01% 5.77%
Return on average tangible equity(5) 8.94% 9.30% 8.85% 11.35% 12.01% 11.14% 9.12% 11.58%
Return on average common equity 5.63% 5.85% 5.54% 5.54% 5.80% 5.27% 5.74% 5.54%
Return on average tangible common equity(6) 8.94% 9.34% 8.85% 11.73% 12.48% 11.47% 9.13% 11.98%
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 247,899 $ 243,521 $ 248,246 $ 249,461 $ 244,115 $ 238,380 $ 491,420 $ 482,495
Restructuring charges -- 17,517 9,066 2,364 -- 10,356 17,517 10,356
Goodwill impairment -- -- -- 1,100,000 -- -- -- --
Deposit account remediation -- -- (23,000) 45,000 -- -- -- --
Total reported noninterest expense (GAAP) $ 247,899 $ 261,038 $ 234,312 $ 1,396,825 $ 244,115 $ 248,736 $ 508,937 $ 492,851
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 61,010 $ 62,246 $ 60,697 $ 74,009 $ 75,875 $ 68,555 $ 123,256 $ 144,430
Nonoperating income and expenses, net of tax:
Restructuring charges -- 10,861 6,364 1,555 -- 8,345 10,861 8,345
Goodwill impairment -- -- -- 963,267 -- -- -- --
Deposit account remediation -- -- (14,734) 29,233 -- -- -- --
Total nonoperating expenses, net of tax -- 10,861 (8,370) 994,055 -- 8,345 10,861 8,345
Net income (loss) (GAAP) $ 61,010 $ 51,385 $ 69,067 $ (920,046) $ 75,875 $ 60,210 $ 112,395 $ 136,085
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)
$ 53,463 $ 54,699 $ 53,150 $ 66,462 $ 68,328 $ 61,008 $ 108,162 $ 129,336
Nonoperating income and expenses, net of tax:
Restructuring charges -- 10,861 6,364 1,555 -- 8,345 10,861 8,345
Goodwill impairment -- -- -- 963,267 -- -- -- --
Deposit account remediation -- -- (14,734) 29,233 -- -- -- --
Total nonoperating income and expenses, net of tax -- 10,861 (8,370) 994,055 -- 8,345 10,861 8,345
Net income (loss) available to common stockholders (GAAP) $ 53,463 $ 43,838 $ 61,520 $ (927,593) $ 68,328 $ 52,663 $ 97,301 $ 120,991
Computation of pre-tax,pre-provision income:
Net interest income $ 263,110 $ 262,944 $ 269,783 $ 273,279 $ 271,812 $ 270,747 $ 526,054 $ 542,559
Noninterest income 86,607 82,244 77,177 75,392 80,857 76,724 168,851 157,581
Noninterest expense (247,899) (261,038) (234,312) (1,396,825) (244,115) (248,736) (508,937) (492,851)
Pre-tax, pre-provision income (loss) (GAAP) 101,818 84,150 112,648 (1,048,154) 108,554 98,735 185,968 207,289
Add back: non-operating noninterest expenses (1) -- 17,517 (13,934) 1,147,364 -- 10,356 17,517 10,356
Pre-tax, pre-provision income (Non-GAAP)(1) $ 101,818 $ 101,667 $ 98,714 $ 99,210 $ 108,554 $ 109,091 $ 203,485 $ 217,645
(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)
2015 2014 Six months ended
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
June 30,
2015
June 30,
2014
Computation of Ending Tangible Assets:
Total assets $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608 $ 37,991,209 $ 39,063,543 $ 38,627,608
Less: Goodwill and other intangibles (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (2,535,271) (1,404,201) (2,528,481)
Tangible assets $ 37,659,342 $ 37,496,679 $ 37,134,033 $ 36,548,605 $ 36,099,127 $ 35,455,938 $ 37,659,342 $ 36,099,127
Computation of Average Tangible Assets:
Total assets $ 38,913,219 $ 38,706,545 $ 38,317,930 $ 38,591,115 $ 38,212,597 $ 37,378,587 $ 38,810,454 $ 37,981,521
Less: Goodwill and other intangibles (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (2,546,031) (1,410,840) (2,535,232)
Tangible assets $ 37,505,273 $ 37,292,780 $ 36,897,811 $ 36,076,534 $ 35,680,985 $ 34,832,556 $ 37,399,614 $ 35,446,289
Computation of Ending Tangible Equity:
Total stockholders' equity $ 4,121,125 $ 4,125,246 $ 4,092,758 $ 4,095,702 $ 5,081,674 $ 5,026,985 $ 4,121,125 $ 5,081,674
Less: Goodwill and other intangibles (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (2,535,271) (1,404,201) (2,528,481)
Tangible equity $ 2,716,924 $ 2,714,446 $ 2,675,753 $ 2,672,265 $ 2,553,193 $ 2,491,714 $ 2,716,924 $ 2,553,193
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,121,125 $ 4,125,246 $ 4,092,758 $ 4,095,702 $ 5,081,674 $ 5,026,985 $ 4,121,125 $ 5,081,674
Less: Goodwill and other intangibles (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (2,535,271) (1,404,201) (2,528,481)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,378,922 $ 2,376,444 $ 2,337,751 $ 2,334,263 $ 2,215,191 $ 2,153,712 $ 2,378,922 $ 2,215,191
Computation of Average Tangible Equity:
Total stockholders' equity $ 4,145,334 $ 4,127,743 $ 4,141,141 $ 5,100,494 $ 5,065,797 $ 5,034,093 $ 4,136,587 $ 5,050,037
Less: Goodwill and other intangibles (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (2,538,891) (1,410,840) (2,535,232)
Tangible equity $ 2,737,388 $ 2,713,978 $ 2,721,022 $ 2,585,913 $ 2,534,185 $ 2,495,202 $ 2,725,747 $ 2,514,805
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 4,145,334 $ 4,127,743 $ 4,141,141 $ 5,100,494 $ 5,065,797 $ 5,034,093 $ 4,136,587 $ 5,050,037
Less: Goodwill and other intangibles (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (2,538,891) (1,410,840) (2,535,232)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,399,386 $ 2,375,976 $ 2,383,020 $ 2,247,911 $ 2,196,183 $ 2,157,200 $ 2,387,745 $ 2,176,803
Computation of Tier 1 Common Capital:
Tier 1 capital N/A N/A $ 2,764,117 $ 2,722,685 $ 2,613,584 $ 2,562,261 N/A $ 2,613,584
Less: Qualifying restricted core capital elements N/A N/A (113,785) (113,556) (113,330) (113,107) N/A (113,330)
Less: Perpetual non-cumulative preferred stock N/A N/A (338,002) (338,002) (338,002) (338,002) N/A (338,002)
Tier 1 common capital (Non-GAAP) N/A N/A $ 2,312,330 $ 2,271,127 $ 2,162,252 $ 2,111,152 N/A $ 2,162,252

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.