First Niagara Reports Third Quarter 2015 Results

  • Third quarter GAAP earnings of $0.15 per diluted share
  • Average loans increased 5% annualized QOQ
    • Average C&I loans increased 10% annualized QOQ
    • Indirect Auto and Home Equity drove 4% annualized increase in average consumer loans QOQ
  • Average transactional deposit balances increased 10% annualized QOQ and 7% YOY
    • Average business noninterest-bearing deposit balances increased 26% annualized QOQ and 9% YOY
    • Average noninterest-bearing deposit balances increased 17% annualized QOQ and 8% YOY
  • Strong credit quality maintained
    • Originated net charge-offs averaged 0.31% of total originated loans, unchanged QOQ
    • Criticized loans decreased 9% QOQ

BUFFALO, N.Y., Oct. 23, 2015 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (NASDAQ:FNFG) today reported GAAP net income available to common shareholders of $52.9 million, or $0.15 per diluted share for the third quarter of 2015, compared to $53.5 million, or $0.15 per diluted share, for the quarter ended June 30, 2015.

"In the third quarter of 2015, our business fundamentals were strong, as evidenced by a 10% annualized increase in average transactional deposits and 10% increase in commercial business loans. We also continued to make great progress in implementing our strategic investments, which remain on-time, on-budget and are focused on delivering enhanced products and services, based on customer preferences," said Gary M. Crosby, President and Chief Executive Officer. "As we roll-out these enhancements, I also am very pleased with the customer experience that our team is delivering and the positive brand recognition that it is creating for First Niagara across the markets we serve. In a recent J.D. Power Survey, 92% of our branch customers said that they would be 'likely advocates' of First Niagara as a banking partner to their friends and family – a number that puts us among top financial institutions with best-in-class customer experience."

"Overall third quarter financial results were in line with our expectations and were characterized by stable net interest income, lower operating expenses, strong balance sheet growth and positive credit metrics," said Gregory W. Norwood, Chief Financial Officer. "Through the first nine months of 2015, average loans increased 6% YOY driven by both commercial and consumer balance growth, while average noninterest bearing deposits increased 9% YOY reflecting our increased focus on core deposit acquisitions in our consumer and commercial lines of business."

Third Quarter Results

On a GAAP basis, in the third quarter of 2015, First Niagara reported net income available to common shareholders of $52.9 million, or $0.15 per diluted share, compared to $53.5 million, or $0.15 per diluted share in the second quarter of 2015. The company reported a loss of $927.6 million, or ($2.65) per share, for the quarter ended September 30, 2014.

Compared to the second quarter of 2015, net income available to common shareholders was primarily driven by:

  • A 4% decrease in noninterest income, driven by volatility in capital markets income and wealth management revenues.
  • A $1 million decrease in provision for credit losses driven by favorable asset quality trends and offset by provisioning to support a $0.7 billion increase in originated loan balances.
  • A 1% decrease in noninterest expenses driven by lower marketing spend, lower levels of intangible amortization, and lower FDIC premiums.

Compared to the third quarter of 2014, net income available to common shareholders was primarily driven by:

  • A $1.1 billion non-cash goodwill impairment charge and a $45 million reserve to address a process issue related to certain customer deposit accounts both incurred in the year-ago quarter.
  • 11% increase in noninterest income in the third quarter of 2015 driven by higher deposit service charges, mortgage banking revenues, and lower historic tax credit amortization compared to the year-ago period.
  • $4 million, or 2%, decrease in operating noninterest expense due to lower salaries and benefits from lower headcount and lower occupancy expense as a result of branch consolidations completed in 2015, lower amortization of core deposit intangibles, and lower restructuring expenses.
  • 4% decline in net interest income attributable to lower benefits from discount accretion income on prepayments of certain Collateralized Loan Obligations (CLOs), and
  • A higher effective tax rate of 26% in 2015.

Operating Results (Non-GAAP) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Net interest income $ 263.5 $ 263.1 $ 262.9 $ 269.8 $ 273.3
Provision for credit losses 19.8 20.8 12.8 35.7 16.7
Noninterest income 83.4 86.6 82.2 77.2 75.4
Noninterest expense 245.4 247.9 243.5 248.2 249.5
Operating net income 60.5 61.0 62.2 60.7 74.0
Preferred stock dividend 7.5 7.5 7.5 7.5 7.5
Operating net income available to common $ 52.9 $ 53.5 $ 54.7 $ 53.2 $ 66.5
Weighted average diluted shares outstanding 353.2 352.8 352.6 352.2 351.9
Operating earnings per diluted share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.19
Reported Results (GAAP) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Operating net income before non-op. items $ 60.5 $ 61.0 $ 62.2 $ 60.7 $ 74.0
Non-operating items (a) -- -- 10.9 (8.4) 994.1
Net Income / (loss) 60.5 61.0 51.4 69.1 (920.0)
Preferred stock dividend 7.5 7.5 7.5 7.5 7.5
Net income / (loss) available to common $ 52.9 $ 53.5 $ 43.8 $ 61.5 $ (927.6)
Weighted average diluted shares outstanding 353.2 352.8 352.6 352.2 350.4
Earnings (loss) per diluted share $ 0.15 $ 0.15 $ 0.12 $ 0.17 $ (2.65)
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

Average loans increased 5% annualized from the prior quarter to $23.4 billion, driven primarily by increases in the company's commercial business (C&I), indirect auto and home equity loan portfolios. On an end-of-period basis, total loans increased 5% annualized from the prior quarter driven by a 7% annualized increase in C&I loans.

Average commercial loans, which include C&I and commercial real estate (CRE) loans, increased 5% annualized from prior quarter to $14.2 billion, driven by growth primarily in the company's New York, New England, and Tri-State markets.

  • Average C&I loans increased 10% annualized to $6.0 billion, driven primarily by increases in the middle market and asset-based lending segments.
  • CRE loans averaged $8.3 billion and increased 1% annualized from the prior quarter driven by construction lending offset by borrower prepayments.

Average consumer loans increased 4% annualized from prior quarter to $9.2 billion.

  • Average indirect auto loan balances increased 10% annualized or by $55 million to $2.3 billion, as strong new origination activity was partially offset by increased pay-downs. Indirect auto originations during the quarter totaled $300 million. New originations in the third quarter yielded 3.42%, net of dealer reserve, an increase of 58 basis points compared to originations in the year-ago quarter.
  • Average residential real estate loans increased 1% annualized, driven by greater cross-sales to the Private Client Services Group clients.
  • Home equity balances increased for the tenth consecutive quarter to $3.0 billion, or 5% annualized from the prior quarter reflecting higher customer draws as well as the benefits of promotional and cross-sell campaigns.

Average Loans Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Commercial real estate $ 8,277 $ 8,257 $ 8,263 $ 8,087 $ 7,985
Commercial business 5,972 5,830 5,797 5,791 5,694
Total commercial 14,249 14,087 14,060 13,878 13,679
Residential real estate 3,338 3,326 3,338 3,364 3,351
Home equity 3,001 2,963 2,939 2,912 2,857
Indirect auto 2,293 2,238 2,187 2,132 1,978
Credit cards 306 304 311 314 313
Other consumer 255 260 275 283 287
Total consumer 9,193 9,091 9,050 9,005 8,786
Total loans $ 23,442 $ 23,178 $ 23,110 $ 22,883 $ 22,465
All amounts in millions.

Credit Quality

At September 30, 2015, the allowance for loan losses was $239 million, compared to $236 million at June 30, 2015. In the third quarter, provision for credit losses totaled $19.8 million, a $1 million decrease from $20.8 million in the prior quarter. Nonperforming assets comprised 0.58% of total assets, unchanged from June 30, 2015. At September 30, 2015, total criticized loans decreased 9% from the prior quarter.

Information for both the originated and acquired portfolios follows.

Q3 2015 Q2 2015
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 20.7 $ (1.4) $ 19.3 $ 19.5 $ 0.9 $ 20.5
Net charge-offs 15.5 0.6 16.2 15.5 0.5 16.0
NCOs/ Avg Loans 0.31% 0.08% 0.28% 0.31% 0.06% 0.28%
Total loans** $ 20,592 $ 3,075 $ 23,666 $ 19,930 $ 3,438 $ 23,368
(*) Excludes provision for unfunded commitments of $0.5 million and $0.3 million in 3Q15 and 2Q15, 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 $21 million, an increase of $1 million from the second quarter of 2015. This increase was in large part driven by provisioning associated with the $0.7 billion increase in period-end originated loans from the prior quarter. Originated net charge-offs in the third quarter equaled $16 million or 31 basis points of average originated loans, and were consistent with the prior quarter.

At September 30, 2015, nonperforming originated loans totaled $186 million, or 0.90% of originated loans, compared to 0.91% at June 30, 2015. At September 30, 2015, the allowance for loan losses on originated loans totaled $233 million or 1.13% of such loans, compared to $228 million or 1.15% of such loans at June 30, 2015, and reflects continued improvements in underlying asset quality metrics.

Acquired loans

The provision for losses on acquired loans totaled a negative $1 million in the third quarter of 2015, driven by pay-downs in acquired loan balances, compared to provision expense of $1 million in the prior quarter. Net charge-offs on the acquired portfolio totaled $0.6 million during the quarter, compared to $0.5 million of net charge-offs in the prior quarter. At September 30, 2015, the allowance for loan losses on acquired loans totaled $5 million, compared to $7 million at June 30, 2015. Acquired nonperforming loans totaled $25 million, a 4% decrease from the prior quarter. Acquired criticized loans decreased 14% from June 30, 2015. At September 30, 2015, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $64 million.

Deposits

Average deposits increased 6% annualized from the prior quarter to $28.6 billion.

  • Non-interest checking deposit balances averaged $5.7 billion, up 17% annualized from the prior quarter and 8% from the year-ago period driven by higher business deposit balances.
  • Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking account balances, increased 10% annualized and currently represent 38% of the company's deposit balances.
  • Money market deposit balances increased 6% annualized, reflecting the benefits of promotional marketing campaigns partially offset by seasonally lower municipal money market balances.
  • Average savings balances decreased 8% annualized from the prior quarter driven by lower consumer balances.
  • Time deposits increased 5% annualized to $4.0 billion, as increases in brokered certificate of deposit balances were partially offset by lower consumer and municipal certificate of deposit balances.

Average Deposits Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Noninterest-bearing deposits $ 5,661 $ 5,427 $ 5,430 $ 5,485 $ 5,259
Savings accounts 3,427 3,494 3,432 3,447 3,552
Interest-bearing checking 5,165 5,131 5,001 5,049 4,821
Money market deposits 10,403 10,251 10,132 10,037 9,882
Certificates of deposit 3,962 3,917 3,778 3,888 3,970
Total deposits $ 28,618 $ 28,220 $ 27,773 $ 27,906 $ 27,484
All amounts in millions.

Net Interest Income

Third quarter 2015 GAAP net interest income of $263 million was consistent with the prior quarter, as the benefits of a 2% annualized increase in average earning assets and an extra day in the quarter were offset by an expected four basis point decline in the reported net interest margin. The decrease in net interest margin to 2.98% reflects continued compression of earning asset yields in the current low interest rate and competitive pricing environment, lower discount accretion income on prepayment of CLOs and lower benefits from purchase accounting accretion on acquired loans.

  • Yields on loans decreased 9 basis points to 3.64% reflecting continued pressure on loan yields due to low interest rates and competitive pressures, as well as lower benefits from purchase accounting accretion.
  • Yields on investment securities increased 7 basis points to 2.92% due primarily to lower premium amortization on the residential mortgage-backed securities portfolio.
  • The average cost of interest-bearing deposits remained flat to prior quarter at 0.29%.

Noninterest Income

Third quarter 2015 noninterest income of $83 million decreased 4% or $3 million compared to the prior quarter.

  • Deposit service charges increased 3% from the prior quarter reflecting typical seasonal trends.
  • Insurance commissions increased $1 million or 7% driven primarily by seasonally higher renewal volumes during the third quarter.
  • Merchant and card fees increased 1% driven by higher debit card interchange revenue.
  • Wealth management services decreased $1 million or 7%, reflecting lower levels of variable annuity sales as a result of market volatility during the quarter.
  • Capital markets income, which primarily includes income from derivatives and syndications, decreased $3 million due to market volatility.
  • Mortgage banking revenues were lower from the prior quarter reflecting lower locked volumes partially offset by a modest increase in gain-on-sale margins.
  • Other noninterest income declined $1 million from the prior quarter primarily reflecting lower investment gains.

Noninterest Income Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Deposit service charges $ 22.9 $ 22.2 $ 20.4 $ 22.6 $ 20.4
Insurance commissions 18.3 17.1 15.7 14.8 18.4
Merchant and card fees 13.4 13.3 11.9 13.0 13.0
Wealth management services 14.6 15.7 14.7 14.4 15.4
Mortgage banking 5.1 5.8 4.9 4.6 4.4
Capital markets income 2.6 5.3 4.2 8.3 3.5
Lending and leasing 4.5 4.0 4.4 4.6 3.9
Bank owned life insurance 2.8 3.2 3.6 3.2 3.1
Other income (0.7) 0.1 2.6 (8.3) (6.6)
Total noninterest income $ 83.4 $ 86.6 $ 82.2 $ 77.2 $ 75.4
All amounts in millions.

Noninterest Expense

Noninterest expenses totaled $245 million in the third quarter of 2015, or 1% below second quarter 2015 levels. The quarter-over-quarter decrease was primarily driven by lower marketing spend, lower intangible amortization and lower FDIC premiums.

  • Salaries and benefits expense of $114 million was consistent with prior quarter.
  • Occupancy and equipment expense decreased 2%, due primarily to lower rent and depreciation.
  • Technology and communications expenses increased $2 million or 5%, due primarily to higher software and depreciation expenses.
  • Professional services fees increased $2 million due to vendor and other consulting costs.
  • FDIC expenses decreased $2 million reflecting the expiration of the impact of goodwill impairment.

Operating Noninterest Expense (Non-GAAP)* Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Salaries and employee benefits $ 113.8 $ 113.6 $ 112.0 $ 111.0 $ 116.2
Occupancy and equipment 25.5 26.0 27.3 28.4 27.5
Technology and communications 38.3 36.5 35.1 33.9 31.5
Marketing and advertising 8.4 10.3 9.9 11.6 7.7
Professional services 18.1 16.3 13.1 16.6 14.0
Amortization of intangibles 4.0 5.1 6.2 6.4 6.5
Federal deposit insurance premiums 10.0 11.8 11.2 11.9 9.6
Other expense 27.3 28.4 28.9 28.4 36.5
Total operating noninterest expense $ 245.4 $ 247.9 $ 243.5 $ 248.2 $ 249.5
*All amounts in millions. See appendix for reconciliation of GAAP to Non-GAAP amounts

In the third quarter of 2015, the efficiency ratio was 70.7%, compared to 70.9% in the prior quarter.

Capital

Beginning in the first quarter of 2015, all regulatory capital ratios and amounts were calculated under the Basel III standardized transitional approach. At September 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 June 30, 2015. The company remains well above current regulatory guidelines for well-capitalized institutions.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 390 branches, $39 billion in assets, $29 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, October 23, 2015 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-877-983-9285 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and are available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until December 8, 2015 by dialing 1-800-633-8284, passcode: 21779543.

Non-GAAP Measures - This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). The company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the company, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, the company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the company's results and to assess performance in relation to the company's ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document.

Forward-Looking Statements - This press release contains forward-looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; and (6) execution risk associated with the announced investment plan.

First Niagara Financial Group, Inc.
Income Statement Highlights -- Reported Basis
(in thousands, except per share amounts)
2015 2014 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2015 2014
Interest income:
Loans and leases $ 211,407 $ 211,899 $ 210,371 $ 214,609 $ 212,452 $ 210,218 $ 633,677 $ 632,314
Investment securities and other 87,914 86,356 86,280 86,919 91,668 91,566 260,550 273,655
Total interest income 299,321 298,255 296,651 301,528 304,120 301,784 894,227 905,969
Interest expense:
Deposits 17,040 16,568 15,344 14,295 13,590 13,183 48,952 39,009
Borrowings 18,790 18,577 18,363 17,450 17,251 16,789 55,730 51,122
Total interest expense 35,830 35,145 33,707 31,745 30,841 29,972 104,682 90,131
Net interest income 263,491 263,110 262,944 269,783 273,279 271,812 789,545 815,838
Provision for credit losses 19,768 20,756 12,765 35,706 16,700 19,800 53,289 60,200
Net interest income after provision 243,723 242,354 250,179 234,077 256,579 252,012 736,256 755,638
Noninterest income:
Deposit service charges 22,944 22,208 20,389 22,611 20,373 23,733 65,541 67,462
Insurance commissions 18,252 17,060 15,714 14,764 18,352 17,343 51,026 51,386
Merchant and card fees 13,423 13,317 11,907 13,043 12,991 12,834 38,647 37,329
Wealth management services 14,572 15,718 14,650 14,404 15,367 15,949 44,940 46,903
Mortgage banking 5,070 5,783 4,887 4,600 4,358 5,241 15,740 12,995
Capital markets income 2,608 5,284 4,152 8,312 3,509 2,917 12,044 10,049
Lending and leasing 4,487 3,998 4,353 4,567 3,914 4,680 12,838 13,326
Bank owned life insurance 2,819 3,160 3,592 3,187 3,080 3,145 9,571 11,630
Other income (732) 79 2,600 (8,311) (6,552) (4,985) 1,947 (18,107)
Total noninterest income 83,443 86,607 82,244 77,177 75,392 80,857 252,294 232,973
Noninterest expense:
Salaries and employee benefits 113,794 113,561 111,973 110,985 116,245 117,728 339,328 351,913
Occupancy and equipment 25,538 26,021 27,332 28,379 27,450 28,553 78,891 83,879
Technology and communications 38,301 36,486 35,061 33,940 31,465 31,140 109,848 92,950
Marketing and advertising 8,445 10,297 9,863 11,584 7,746 8,439 28,605 23,549
Professional services 18,052 16,321 13,070 16,644 13,988 13,029 47,443 38,940
Amortization of intangibles 4,001 5,092 6,205 6,432 6,521 6,790 15,298 20,820
Federal deposit insurance premiums 10,026 11,750 11,158 11,911 9,579 9,756 32,934 28,190
Restructuring charges -- -- 17,517 9,066 2,364 -- 17,517 12,720
Goodwill impairment -- -- -- -- 1,100,000 -- -- 1,100,000
Deposit account remediation -- -- -- (23,000) 45,000 -- -- 45,000
Other expense 27,276 28,371 28,859 28,371 36,467 28,680 84,506 91,715
Total noninterest expense 245,433 247,899 261,038 234,312 1,396,825 244,115 754,370 1,889,676
Income (loss) before income tax 81,733 81,062 71,385 76,942 (1,064,854) 88,754 234,180 (901,065)
Income tax expense (benefit) 21,251 20,052 20,000 7,875 (144,808) 12,879 61,303 (117,104)
Net income (loss) 60,482 61,010 51,385 69,067 (920,046) 75,875 172,877 (783,961)
Preferred stock dividend 7,547 7,547 7,547 7,547 7,547 7,547 22,641 22,641
Net income (loss) available to
common stockholders
$ 52,935 $ 53,463 $ 43,838 $ 61,520 $ (927,593) $ 68,328 $ 150,236 $ (806,602)
Financial Ratios:
Earnings (loss) per basic share $ 0.15 $ 0.15 $ 0.12 $ 0.17 $ (2.65) $ 0.19 $ 0.42 $ (2.31)
Earnings (loss) per diluted share $ 0.15 $ 0.15 $ 0.12 $ 0.17 $ (2.65) $ 0.19 $ 0.42 (2.31)
Weighted average shares outstanding - basic(1) 351,293 351,126 350,741 350,444 350,381 350,229 351,055 350,174
Weighted average shares outstanding - diluted(1) 353,248 352,791 352,621 352,152 350,381 351,541 352,847 350,174
Net revenue(2) $ 346,934 $ 349,717 $ 345,188 $ 346,960 $ 348,671 $ 352,669 $ 1,041,839 $ 1,048,811
Noninterest income as a percentage of net revenue(2) 24.05% 24.76% 23.83% 22.24% 21.62% 22.93% 24.22% 22.21%
Pre-tax, pre-provision income (loss)(3) $ 101,501 $ 101,818 $ 84,150 $ 112,648 $ (1,048,154) $ 108,554 $ 287,469 $ (840,865)
Pre-tax, pre-provision income per diluted share(3) $ 0.29 $ 0.29 $ 0.24 $ 0.32 $ (2.99) $ 0.31 $ 0.81 $ (2.40)
Pre-tax, pre-provision return on average assets(3) 1.03% 1.05% 0.88% 1.17 % (10.8)% 1.14% 0.99 % (2.94)%
Net interest margin(4) 2.98% 3.02% 3.07% 3.11% 3.21% 3.26% 3.02% 3.27%
Interest yield on average loans(4) 3.64% 3.73% 3.75% 3.78% 3.80% 3.89% 3.70% 3.89%
Rate paid on interest-bearing liabilities 0.50% 0.49% 0.48% 0.45% 0.44% 0.44% 0.49% 0.44%
Efficiency ratio 70.7% 70.9% 75.6% 67.5% 400.6% 69.2% 72.4% 180.2%
Expenses as a percentage of average loans and deposits 1.89% 1.93% 2.05% 1.85% 11.19% 1.97% 1.96% 5.13%
Effective tax rate (benefit) 26.0% 24.7% 28.0% 10.2 % (13.6)% 14.5% 26.2 % (13.0)%
Return on average assets(5) 0.61 % 0.63 % 0.54 % 0.72 % (9.46)% 0.80 % 0.59 % (2.74)%
Return on average equity(5) 5.78 % 5.90 % 5.05 % 6.62 % (71.57)% 6.01 % 5.58 % (20.69)%
Return on average tangible equity(3)(5) 8.73 % 8.94 % 7.68 % 10.07 % (141.16)% 12.01 % 8.46 % (41.29)%
Return on average common equity 5.51 % 5.63 % 4.69 % 6.42 % (77.27)% 5.80 % 5.28 % (22.80)%
Return on average tangible common equity(3) 8.72 % 8.94 % 7.48 % 10.24 % (163.71)% 12.48 % 8.39 % (49.00)%
(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
September 30, June 30, March 31, December 31, September 30, June 30,
Cash and cash equivalents $ 420,289 $ 527,323 $ 387,676 $ 420,033 $ 451,313 $ 557,423
Investment securities:
Available for sale 5,725,608 5,750,860 5,911,419 5,915,338 6,198,140 6,683,914
Held to maturity 6,280,049 6,169,838 6,214,561 5,941,621 5,351,977 4,834,279
FHLB and FRB common stock 373,066 379,135 375,090 411,857 389,870 434,322
Total investment securities 12,378,723 12,299,833 12,501,070 12,268,816 11,939,987 11,952,515
Loans held for sale 51,056 59,816 48,755 39,825 31,245 45,446
Loans and leases:
Commercial:
Real estate 8,365,808 8,312,332 8,287,108 8,204,027 8,013,622 7,940,977
Business 6,031,358 5,923,524 5,790,980 5,775,413 5,836,235 5,741,684
Total commercial loans 14,397,166 14,235,856 14,078,088 13,979,440 13,849,857 13,682,661
Consumer:
Residential real estate 3,345,701 3,329,799 3,330,216 3,353,081 3,360,805 3,358,347
Home equity 3,032,618 2,984,872 2,943,844 2,936,123 2,886,655 2,835,421
Indirect auto 2,330,826 2,256,004 2,200,913 2,166,320 2,073,843 1,871,688
Credit cards 305,779 304,682 301,228 324,113 312,549 311,640
Other consumer 254,109 257,204 263,985 278,305 286,140 286,062
Total consumer loans 9,269,033 9,132,561 9,040,186 9,057,942 8,919,992 8,663,158
Total loans and leases 23,666,199 23,368,417 23,118,274 23,037,382 22,769,849 22,345,819
Allowance for loan losses 238,700 235,600 231,138 234,251 222,753 219,426
Loans and leases, net 23,427,499 23,132,817 22,887,136 22,803,131 22,547,096 22,126,393
Bank owned life insurance 434,263 431,335 428,454 426,192 423,376 420,230
Goodwill and other intangibles 1,400,199 1,404,201 1,410,800 1,417,005 1,423,437 2,528,481
Other assets 1,301,152 1,208,218 1,243,588 1,176,036 1,155,588 997,120
Total assets $ 39,413,181 $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608
Deposits:
Savings accounts $ 3,359,320 $ 3,483,777 $ 3,488,441 $ 3,451,616 $ 3,458,661 $ 3,626,750
Interest-bearing checking 5,285,987 5,088,856 5,158,264 5,084,456 5,055,458 4,743,684
Money market deposits 10,483,721 10,303,873 10,368,358 9,962,220 9,894,346 9,834,344
Noninterest-bearing deposits 5,813,571 5,549,944 5,500,484 5,407,382 5,308,736 5,284,037
Certificates of deposit 3,873,521 4,020,367 3,734,226 3,875,563 3,952,879 3,955,754
Total deposits 28,816,120 28,446,817 28,249,773 27,781,237 27,670,080 27,444,569
Short-term borrowings 4,086,415 4,275,886 4,739,264 5,471,974 4,928,762 4,890,343
Long-term borrowings 1,783,402 1,683,476 1,233,550 733,620 733,684 733,337
Other liabilities 587,867 536,239 559,646 471,449 543,813 477,685
Total liabilities 35,273,804 34,942,418 34,782,233 34,458,280 33,876,339 33,545,934
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 3,801,375 3,783,123 3,787,244 3,754,756 3,757,701 4,743,672
Total stockholders' equity 4,139,377 4,121,125 4,125,246 4,092,758 4,095,703 5,081,674
Total liabilities and stockholders' equity $ 39,413,181 $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608
Selected balance sheet information:
Total interest-earning assets(1) $ 36,099,580 $ 35,813,498 $ 35,594,208 $ 35,310,447 $ 34,720,650 $ 34,305,451
Total interest-bearing liabilities 28,872,365 28,856,235 28,722,103 28,579,449 28,023,790 27,784,211
Net interest-earning assets $ 7,227,215 $ 6,957,263 $ 6,872,105 $ 6,730,998 $ 6,696,860 $ 6,521,240
Tangible common equity(1)(2) $ 2,401,176 $ 2,378,922 $ 2,376,444 $ 2,337,751 $ 2,334,263 $ 2,215,191
Unrealized gain on available for sale securities, net of tax(3) 29,877 37,464 68,194 52,244 55,052 86,244
Total core deposits $ 24,942,599 $ 24,426,450 $ 24,515,547 $ 23,905,674 $ 23,717,201 $ 23,488,815
Originated loans(4) $ 20,591,532 $ 19,929,719 $ 19,528,609 $ 19,295,553 $ 18,841,896 $ 18,196,302
Acquired loans(5) 3,138,568 3,517,525 3,681,354 3,834,931 4,028,091 4,254,750
Credit related discount on acquired loans(6) (63,901) (78,827) (91,689) (93,102) (100,138) (105,233)
Total Loans $ 23,666,199 $ 23,368,417 $ 23,118,274 $ 23,037,382 $ 22,769,849 $ 22,345,819
(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 Nine months ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Yields Yields Yields Yields Yields
Average
Balances
Interest(1) and
Rates(1)
Average
Balances
Interest(1) and
Rates(1)
Average
Balances
Interest(1) and
Rates(1)
Average
Balances
Interest(1) and
Rates(1)
Average
Balances
Interest(1) and
Rates(1)
Interest-earning assets:
Loans and leases(2)
Commercial:
Real estate $ 8,277 $ 74 3.52% $ 8,257 $ 75 3.61% $ 7,985 $ 74 3.65% $ 8,266 $ 224 3.58% $ 7,896 $ 226 3.77%
Business 5,972 50 3.26 5,830 52 3.48 5,694 51 3.51 5,867 151 3.39 5,558 149 3.54
Total commercial loans 14,249 124 3.41 14,087 127 3.56 13,679 126 3.59 14,133 375 3.50 13,454 375 3.68
Consumer:
Residential real estate 3,338 31 3.70 3,326 31 3.68 3,351 32 3.77 3,334 93 3.72 3,376 97 3.82
Home equity 3,001 29 3.82 2,963 28 3.86 2,857 29 4.01 2,968 86 3.86 2,805 85 4.07
Indirect auto 2,293 17 2.86 2,238 15 2.74 1,978 14 2.84 2,240 47 2.80 1,782 38 2.87
Credit cards 306 9 11.44 304 9 11.40 313 9 11.44 307 26 11.53 312 27 11.50
Other consumer 255 5 8.57 260 5 8.49 287 6 8.54 263 17 8.52 292 19 8.57
Total consumer loans 9,193 91 3.91 9,091 88 3.91 8,786 90 4.06 9,112 269 3.95 8,567 266 4.15
Total loans and leases 23,442 215 3.64 23,178 215 3.73 22,465 215 3.80 23,245 644 3.70 22,021 641 3.89
Residential MBS 7,478 45 2.40 7,381 43 2.30 6,406 41 2.56 7,347 132 2.40 6,067 121 2.65
Commercial MBS 1,212 12 3.88 1,311 11 3.42 1,564 13 3.32 1,308 34 3.51 1,623 41 3.35
Other investment securities (3) 3,518 32 3.68 3,604 34 3.75 3,854 39 4.06 3,559 98 3.65 4,131 117 3.76
Total securities, at amortized cost 12,208 89 2.92 12,296 88 2.85 11,824 93 3.15 12,214 264 2.88 11,821 278 3.14
Money market and other investments 109 1 1.92 100 -- 1.56 86 1 2.76 122 1 1.43 125 2 1.74
Total interest-earning assets 35,759 $ 305 3.38% 35,574 $ 303 3.42% 34,375 $ 309 3.57% 35,581 $ 909 3.42% 33,967 $ 920 3.62%
Goodwill and other intangibles 1,402 1,408 2,515 1,408 2,528
Other noninterest-earning assets 1,890 1,931 1,701 1,903 1,692
Total assets $ 39,051 $ 38,913 $ 38,591 $ 38,892 $ 38,187
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,427 $ 1 0.10% $ 3,494 $ 1 0.09% $ 3,552 $ 1 0.09% $ 3,451 $ 2 0.09% $ 3,612 $ 2 0.09%
Interest-bearing checking 5,165 -- 0.03 5,131 -- 0.03 4,821 -- 0.03 5,100 1 0.03 4,792 1 0.03
Money market deposits 10,403 8 0.29 10,251 8 0.29 9,882 6 0.23 10,263 22 0.28 9,913 16 0.22
Certificates of deposit 3,962 8 0.81 3,917 8 0.82 3,970 7 0.67 3,886 24 0.82 3,864 20 0.68
Total interest bearing deposits 22,957 17 0.29% 22,793 17 0.29% 22,225 14 0.24% 22,700 49 0.29% 22,181 39 0.24%
Borrowings
Short-term borrowings 3,953 5 0.50% 4,522 5 0.48% 4,737 5 0.43% 4,529 16 0.48% 4,597 15 0.43%
Long-term borrowings 1,693 14 3.24 1,359 13 3.90 733 12 6.56 1,362 40 3.89 733 36 6.62
Total borrowings 5,646 19 1.32 5,881 18 1.27 5,470 17 1.25 5,891 56 1.26 5,330 51 1.28
Total interest-bearing liabilities 28,603 $ 36 0.50% 28,674 $ 35 0.49% 27,695 $ 31 0.44% 28,591 $ 105 0.49% 27,511 $ 90 0.44%
Noninterest-bearing deposits 5,661 5,427 5,259 5,507 5,068
Other noninterest-bearing liabilities 637 667 536 653 541
Total liabilities 34,901 34,768 33,490 34,751 33,120
Total stockholders' equity 4,150 4,145 5,100 4,141 5,067
Total liabilities and stockholders' equity $ 39,051 $ 38,913 $ 38,591 $ 38,892 $ 38,187
Net interest income (FTE) $ 269 $ 268 $ 278 $ 804 $ 830
Taxable Equivalent Adjustment(1) 6 5 5 14 14
Total core deposits $ 24,656 $ 9 0.14% $ 24,303 $ 9 0.14% $ 23,514 $ 7 0.12% $ 24,321 $ 25 0.14% $ 23,385 $ 19 0.11%
Total transactional deposits 10,826 -- 0.01% 10,558 -- 0.01% 10,080 -- 0.01% 10,607 1 0.01% 9,860 1 0.02%
Total deposits 28,618 17 0.24% 28,220 17 0.24% 27,484 14 0.20% 28,207 49 0.23% 27,249 39 0.19%
Tax equivalent net interest rate spread 2.88% 2.93% 3.13% 2.93% 3.18%
Tax equivalent net interest rate margin 2.98% 3.02% 3.21% 3.02% 3.27%
(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 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2015 2014
Beginning balance $ 235,600 $ 231,138 $ 234,251 $ 222,753 $ 219,426 $ 213,937 $ 234,251 $ 209,274
Net loan (charge-offs) recoveries:
Commercial real estate $ (2,686) $ (5,525) $ (5,825) $ (2,008) $ (2,259) $ (4,885) $ (14,036) $ (6,239)
Commercial business (6,286) (3,513) (4,178) (12,650) (3,148) (1,795) (13,977) (14,081)
Residential real estate (230) (197) (266) (476) (102) (352) (693) (628)
Home equity (1,056) (1,367) (1,526) (1,406) (1,131) (1,294) (3,949) (5,470)
Indirect auto (1,743) (1,342) (1,226) (2,241) (1,621) (1,455) (4,311) (5,162)
Credit cards (2,215) (2,522) (2,450) (2,464) (2,726) (2,930) (7,187) (8,700)
Other consumer (1,952) (1,528) (1,807) (1,457) (1,986) (1,200) (5,287) (5,241)
Total net loan charge-offs $ (16,168) $ (15,994) $ (17,278) $ (22,702) $ (12,973) $ (13,911) $ (49,440) $ (45,521)
Provision for loan losses 19,268 20,456 14,165 34,200 16,300 19,400 53,889 59,000
Ending balance $ 238,700 $ 235,600 $ 231,138 $ 234,251 $ 222,753 $ 219,426 $ 238,700 $ 222,753
Supplemental information
Allowance to loans 1.01% 1.01% 1.00% 1.02% 0.98% 0.98 % 1.01% 0.98%
Allowance for originated loans to originated loans(1) 1.13% 1.15% 1.15% 1.18% 1.16% 1.18 % 1.13% 1.16%
Net charge-offs (recoveries) to average loans (annualized)
Commercial real estate 0.13 % 0.27 % 0.29 % 0.10 % 0.11% 0.25 % 0.23 % 0.11%
Commercial business 0.42 % 0.24 % 0.29 % 0.87 % 0.22% 0.13 % 0.32 % 0.34%
Total commercial loans 0.25 % 0.26 % 0.28 % 0.42 % 0.16% 0.20 % 0.26 % 0.20%
Residential real estate 0.03 % 0.02 % 0.03 % 0.06 % 0.01% 0.04 % 0.03 % 0.02%
Home equity 0.14 % 0.18 % 0.21 % 0.19 % 0.16% 0.18 % 0.18 % 0.26%
Indirect auto 0.30 % 0.24 % 0.22 % 0.42 % 0.33% 0.33 % 0.26 % 0.39%
Credit cards 2.90 % 3.32 % 3.16 % 3.13 % 3.49% 3.80 % 3.12 % 3.72%
Other consumer 3.06 % 2.35 % 2.63 % 2.06 % 2.77% 1.65 % 2.68 % 2.39%
Total consumer loans 0.32 % 0.31 % 0.33 % 0.36 % 0.35% 0.34 % 0.31 % 0.39%
Total loans 0.28 % 0.28 % 0.30 % 0.40 % 0.23% 0.25 % 0.28 % 0.28%
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.14 % 0.31 % 0.24 % 0.06 % 0.13% 0.29 % 0.23 % 0.11%
Commercial business 0.44 % 0.25 % 0.31 % 0.93 % 0.24% 0.14 % 0.33 % 0.36%
Total commercial loans 0.27 % 0.28 % 0.27 % 0.44 % 0.18% 0.22 % 0.27 % 0.22%
Residential real estate 0.04 % 0.04 % 0.05 % 0.09 % 0.02% 0.07 % 0.04 % 0.04%
Home equity 0.14 % 0.17 % 0.16 % 0.15 % 0.17% 0.16 % 0.15 % 0.18%
Indirect auto 0.30 % 0.24 % 0.22 % 0.42 % 0.33% 0.33 % 0.26 % 0.39%
Credit cards 2.90 % 3.32 % 3.16 % 3.13 % 3.49% 3.80 % 3.12 % 3.72%
Other consumer 3.06 % 2.35 % 2.63 % 2.06 % 2.77% 1.65 % 2.68 % 2.39%
Total consumer loans 0.38 % 0.37 % 0.38 % 0.44 % 0.45% 0.45 % 0.38 % 0.49%
Total loans 0.31 % 0.31 % 0.31 % 0.44 % 0.27% 0.30 % 0.31 % 0.31%
Nonperforming loans:
Originated(1):
Commercial real estate $ 54,699 $ 60,021 $ 65,655 $ 53,164 $ 57,340 $ 55,945 $ 54,699 $ 57,340
Commercial business 45,389 42,979 54,506 45,201 36,939 32,861 45,389 36,939
Residential real estate 32,455 32,877 32,791 33,652 36,113 33,870 32,455 36,113
Home equity 34,191 27,092 26,163 23,749 23,392 19,429 34,191 23,392
Indirect auto 13,795 13,066 13,399 12,616 11,890 9,821 13,795 11,890
Other consumer 5,047 4,917 5,065 5,140 5,134 5,037 5,047 5,134
Total originated nonperforming loans 185,576 180,952 197,579 173,522 170,808 156,963 185,576 170,808
Total acquired nonperforming loans(2) 25,365 26,553 30,236 30,223 28,611 32,488 25,365 28,611
Total nonperforming loans 210,941 207,505 227,815 203,745 199,419 189,451 210,941 199,419
Real estate owned 18,359 17,397 19,128 20,541 20,261 24,270 18,359 20,261
Total nonperforming assets(3) $ 229,300 $ 224,902 $ 246,943 $ 224,286 $ 219,680 $ 213,721 $ 229,300 $ 219,680
Accruing troubled debt restructurings (TDR) $ 60,941 $ 64,643 $ 64,401 $ 67,102 $ 69,199 $ 80,214 $ 60,941 $ 69,199
Loans 90 days past due still accruing(4) 69,879 78,279 87,213 93,903 108,615 112,718 69,879 108,615
Total classified loans(5) 591,771 592,148 615,518 609,316 649,320 661,699 591,771 649,320
Total criticized loans(6) $ 858,243 $ 938,951 $ 990,656 $ 1,041,050 $ 1,089,851 $ 1,072,133 $ 858,243 $ 1,089,851
Total nonperforming loans to loans 0.89% 0.89% 0.99% 0.88% 0.88% 0.85 % 0.89% 0.88%
Total nonperforming originated loans to originated loans(1) 0.90% 0.91% 1.01% 0.90% 0.91% 0.86 % 0.90% 0.91%
Total nonperforming assets to loans and real estate owned 0.97% 0.96% 1.07% 0.97% 0.96% 0.96 % 0.97% 0.96%
Total nonperforming assets to assets 0.58% 0.58% 0.63% 0.58% 0.58% 0.55 % 0.58% 0.58%
Allowance to nonperforming loans 113.2% 113.5% 101.5% 115.0% 111.7% 115.8 % 113.2% 111.7%
Originated loans(1) $ 20,591,532 $ 19,929,719 $ 19,528,609 $ 19,295,553 $ 18,841,896 $ 18,196,302 $ 20,591,532 $ 18,841,896
Acquired loans(7) 3,138,568 3,517,525 3,681,354 3,834,931 4,028,091 4,254,750 3,138,568 4,028,091
Credit related discount on acquired loans(8) (63,901) (78,827) (91,689) (93,102) (100,138) (105,233) (63,901) (100,138)
Total Loans $ 23,666,199 $ 23,368,417 $ 23,118,274 $ 23,037,382 $ 22,769,849 $ 22,345,819 $ 23,666,199 $ 22,769,849
(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
September 30, June 30, March 31, December 31, September 30, June 30,
First Niagara Financial Group, Inc. capital ratios(1)(2):
Tier 1 risk based capital 10.05% 10.03% 10.02% 9.81% 9.82% 9.58%
Total risk based capital 11.97% 11.96% 11.95% 11.75% 11.75% 11.53%
Common equity tier 1 capital 8.52% 8.50% 8.48% N/A N/A N/A
Tier 1 common capital(3) N/A N/A N/A 8.20% 8.19% 7.93%
Leverage 7.66% 7.60% 7.56% 7.50% 7.34% 7.34%
Equity to assets 10.50% 10.55% 10.60% 10.62% 10.79% 13.16%
Tangible common equity to tangible assets(3) 6.32% 6.32% 6.34% 6.30% 6.39% 6.14%
Total risk weighted assets $ 28,717 $ 28,445 $ 28,152 $ 28,186 $ 27,729 $ 27,313
First Niagara Bank, N.A capital ratios(1)(2):
Tier 1 risk based capital 10.67% 10.66% 10.65% 10.48% 10.41% 10.19%
Total risk based capital 11.56% 11.54% 11.53% 11.37% 11.27% 11.05%
Common equity tier 1 capital 10.67% 10.66% 10.65% N/A N/A N/A
Leverage 8.12% 8.07% 8.03% 8.01% 7.78% 7.80%
Total risk weighted assets $ 28,633 $ 28,359 $ 28,068 $ 28,146 $ 27,686 $ 27,272
Number of branches 394 394 394 411 411 411
Full time equivalent employees 5,397 5,364 5,322 5,572 5,768 5,874
Share information and per share metrics:
Common shares outstanding 354,788 354,890 353,717 353,388 355,423 355,483
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000 14,000
Treasury shares 11,214 11,112 12,285 12,614 10,579 10,519
Market price (NASDAQ: FNFG): $ 10.21 $ 9.44 $ 8.84 $ 8.43 $ 8.33 $ 8.74
Book value per common share(4) 10.82 10.77 10.80 10.71 10.72 13.54
Tangible book value per common share(3)(4) 6.84 6.77 6.78 6.67 6.66 6.32
Price/Book 94.36% 87.65% 81.85% 78.71% 77.71% 64.55%
Price/Tangible book(1) 149.27% 139.44% 130.38% 126.39% 125.08% 138.29%
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% 53.33% 66.67% 47.06% N/M 42.11%
Dividend yield (annualized) 3.11% 3.40% 3.67% 3.77% 3.81% 3.67%
N/M Not meaningful.
(1) Represents an estimate as of September 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 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2015 2014
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.19 $ 0.19 $ 0.45 $ 0.55
Earnings per diluted share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.19 $ 0.19 $ 0.45 $ 0.55
Weighted average shares outstanding - basic(2) 351,293 351,126 350,741 350,444 350,381 350,229 351,055 350,174
Weighted average shares outstanding - diluted(2) 353,248 352,791 352,621 352,152 351,898 351,541 352,847 351,570
Noninterest income as a percentage of net revenue(3) 24.05% 24.76% 23.83% 22.24% 21.62% 22.93% 24.22% 22.21%
Pre-tax, pre-provision income 101,501 101,818 101,667 98,714 99,210 108,554 304,986 316,855
Pre-tax, pre-provision income per diluted share $ 0.29 $ 0.29 $ 0.29 $ 0.28 $ 0.28 $ 0.31 $ 0.86 $ 0.90
Pre-tax, pre-provision return on average assets 1.03% 1.05% 1.07% 1.02% 1.02% 1.14% 1.05% 1.11%
Net interest margin(4) 2.98% 3.02% 3.07% 3.11% 3.21% 3.26% 3.02% 3.27%
Interest yield on average loans(4) 3.64% 3.73% 3.75% 3.78% 3.80% 3.89% 3.70% 3.89%
Rate paid on interest-bearing liabilities 0.50% 0.49% 0.48% 0.45% 0.44% 0.44% 0.49% 0.44%
Efficiency ratio 70.7% 70.9% 70.5% 71.5% 71.5% 69.2% 70.7% 69.8%
Effective tax rate 26.0% 24.7% 30.0% 3.7% 10.3% 14.5% 27.0% 14.9%
Return on average assets 0.61% 0.63% 0.65% 0.63% 0.76% 0.80% 0.63% 0.76%
Return on average equity 5.78% 5.90% 6.12% 5.82% 5.76% 6.01% 5.93% 5.76%
Return on average tangible equity(5) 8.73% 8.94% 9.30% 8.85% 11.35% 12.01% 8.99% 11.50%
Return on average common equity 5.51% 5.63% 5.85% 5.54% 5.54% 5.80% 5.66% 5.54%
Return on average tangible common equity(6) 8.72% 8.94% 9.34% 8.85% 11.73% 12.48% 8.99% 11.89%
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 245,433 $ 247,899 $ 243,521 $ 248,246 $ 249,461 $ 244,115 $ 736,853 $ 731,956
Restructuring charges -- -- 17,517 9,066 2,364 -- 17,517 12,720
Goodwill impairment -- -- -- -- 1,100,000 -- -- 1,100,000
Deposit account remediation -- -- -- (23,000) 45,000 -- -- 45,000
Total reported noninterest expense (GAAP) $ 245,433 $ 247,899 $ 261,038 $ 234,312 $ 1,396,825 $ 244,115 $ 754,370 $ 1,889,676
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 60,482 $ 61,010 $ 62,246 $ 60,697 $ 74,009 $ 75,875 $ 183,738 $ 218,439
Nonoperating income and expenses, net of tax:
Restructuring charges -- -- 10,861 6,364 1,555 -- 10,861 9,900
Goodwill impairment -- -- -- -- 963,267 -- -- 963,267
Deposit account remediation -- -- -- (14,734) 29,233 -- -- 29,233
Total nonoperating expenses, net of tax -- -- 10,861 (8,370) 994,055 -- 10,861 1,002,400
Net income (loss) (GAAP) $ 60,482 $ 61,010 $ 51,385 $ 69,067 $ (920,046) $ 75,875 $ 172,877 $ (783,961)
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) $ 52,935 $ 53,463 $ 54,699 $ 53,150 $ 66,462 $ 68,328 $ 161,097 $ 195,798
Nonoperating income and expenses, net of tax:
Restructuring charges -- -- 10,861 6,364 1,555 -- 10,861 9,900
Goodwill impairment -- -- -- -- 963,267 -- -- 963,267
Deposit account remediation -- -- -- (14,734) 29,233 -- -- 29,233
Total nonoperating income and expenses, net of tax -- -- 10,861 (8,370) 994,055 -- 10,861 1,002,400
Net income (loss) available to common stockholders (GAAP) $ 52,935 $ 53,463 $ 43,838 $ 61,520 $ (927,593) $ 68,328 $ 150,236 $ (806,602)
Computation of pre-tax,pre-provision income:
Net interest income $ 263,491 $ 263,110 $ 262,944 $ 269,783 $ 273,279 $ 271,812 $ 789,545 $ 815,838
Noninterest income 83,443 86,607 82,244 77,177 75,392 80,857 252,294 232,973
Noninterest expense (245,433) (247,899) (261,038) (234,312) (1,396,825) (244,115) (754,370) (1,889,676)
Pre-tax, pre-provision income (loss) (GAAP) 101,501 101,818 84,150 112,648 (1,048,154) 108,554 287,469 (840,865)
Add back: non-operating noninterest expenses (1) -- -- 17,517 (13,934) 1,147,364 -- 17,517 1,157,720
Pre-tax, pre-provision income (Non-GAAP)(1) $ 101,501 $ 101,818 $ 101,667 $ 98,714 $ 99,210 $ 108,554 $ 304,986 $ 316,855
(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 Nine months ended
Third Second First Fourth Third Second September 30, September 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2015 2014
Computation of Ending Tangible Assets:
Total assets $ 39,413,181 $ 39,063,543 $ 38,907,479 $ 38,551,038 $ 37,972,042 $ 38,627,608 $ 39,413,181 $ 37,972,042
Less: Goodwill and other intangibles (1,400,199) (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (1,400,199) (1,423,437)
Tangible assets $ 38,012,982 $ 37,659,342 $ 37,496,679 $ 37,134,033 $ 36,548,605 $ 36,099,127 $ 38,012,982 $ 36,548,605
Computation of Average Tangible Assets:
Total assets $ 39,051,359 $ 38,913,219 $ 38,706,545 $ 38,317,930 $ 38,591,115 $ 38,212,597 $ 38,891,638 $ 38,186,952
Less: Goodwill and other intangibles (1,402,138) (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (1,407,907) (2,528,272)
Tangible assets $ 37,649,221 $ 37,505,273 $ 37,292,780 $ 36,897,811 $ 36,076,534 $ 35,680,985 $ 37,483,731 $ 35,658,680
Computation of Ending Tangible Equity:
Total stockholders' equity $ 4,139,377 $ 4,121,125 $ 4,125,246 $ 4,092,758 $ 4,095,703 $ 5,081,674 $ 4,139,377 $ 4,095,703
Less: Goodwill and other intangibles (1,400,199) (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (1,400,199) (1,423,437)
Tangible equity $ 2,739,178 $ 2,716,924 $ 2,714,446 $ 2,675,753 $ 2,672,266 $ 2,553,193 $ 2,739,178 $ 2,672,266
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,139,377 $ 4,121,125 $ 4,125,246 $ 4,092,758 $ 4,095,703 $ 5,081,674 $ 4,139,377 $ 4,095,703
Less: Goodwill and other intangibles (1,400,199) (1,404,201) (1,410,800) (1,417,005) (1,423,437) (2,528,481) (1,400,199) (1,423,437)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,401,176 $ 2,378,922 $ 2,376,444 $ 2,337,751 $ 2,334,264 $ 2,215,191 $ 2,401,176 $ 2,334,264
Computation of Average Tangible Equity:
Total stockholders' equity $ 4,149,635 $ 4,145,334 $ 4,127,743 $ 4,141,141 $ 5,100,494 $ 5,065,797 $ 4,140,984 $ 5,067,041
Less: Goodwill and other intangibles (1,402,138) (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (1,407,907) (2,528,272)
Tangible equity $ 2,747,497 $ 2,737,388 $ 2,713,978 $ 2,721,022 $ 2,585,913 $ 2,534,185 $ 2,733,077 $ 2,538,769
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 4,149,635 $ 4,145,334 $ 4,127,743 $ 4,141,141 $ 5,100,494 $ 5,065,797 $ 4,140,984 $ 5,067,041
Less: Goodwill and other intangibles (1,402,138) (1,407,946) (1,413,765) (1,420,119) (2,514,581) (2,531,612) (1,407,907) (2,528,272)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,409,495 $ 2,399,386 $ 2,375,976 $ 2,383,020 $ 2,247,911 $ 2,196,183 $ 2,395,075 $ 2,200,767
Computation of Tier 1 Common Capital:
Tier 1 capital N/A N/A N/A $ 2,764,117 $ 2,722,685 $ 2,613,584 N/A $ 2,722,685
Less: Qualifying restricted core capital elements N/A N/A N/A (113,785) (113,556) (113,330) N/A (113,556)
Less: Perpetual non-cumulative preferred stock N/A N/A N/A (338,002) (338,002) (338,002) N/A (338,002)
Tier 1 common capital (Non-GAAP) N/A N/A N/A $ 2,312,330 $ 2,271,127 $ 2,162,252 N/A $ 2,271,127

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.