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First Niagara Reports Second Quarter 2016 Results

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

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

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

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

Second Quarter Results

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

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

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

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

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


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



(a) Q2 2016: Non-operating charges comprised of merger related costs including employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts, professional services and legal fees incurred to support merger integration efforts, and loss on the sale of high-yield energy bond exposure, net of taxes.
Q1 2016: Non-operating charges comprised of merger related costs including employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts as well as costs related to securing shareholder approval for the merger, net of taxes.
Q4 2015: Non-operating charges primarily comprised of merger related costs including investment banker and other professional services fees, employee retention expenses, classification of compensation of certain personnel dedicated to merger integration efforts as well as third-party professional fees incurred in connection with the overstatement of allowance resulting from mid-level employee misconduct, net of taxes.

Loans

Average loans increased 2% annualized from the prior quarter to $24.2 billion, driven primarily by increases in the company’s commercial real estate (CRE), commercial business (C&I), and indirect auto portfolios. On an end-of-period basis, total loans increased 3% annualized from the prior quarter driven by a 12% annualized increase in indirect auto loans and 5% increase in commercial real estate loans.

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

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

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

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

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

Credit Quality

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

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

Originated loans

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

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

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

Acquired loans

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

Deposits

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

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

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

Net Interest Income

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

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

Net Interest Income (Tax Equivalent)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Quarter as Reported$ 267.4 $ 272.8 $ 271.7 $ 268.5 $ 268.0
Less: CLO pay-off discount recognition - - - (1.2) (2.3)
Add: CMO Retroactive premium amortization - - - - 1.1
Add: CRE prepayment penalties - - (0.5) - -
Less: Early loan payoffs - - - - (1.7)
Less: Other miscellaneous items 1.4 (0.6) (0.5) - -
Sub-Total 1.4 (0.6) (1.0) (1.2) (2.9)
Normalized Net Interest Income$ 268.8 $ 272.2 $ 270.7 $ 267.3 $ 265.1
All amounts in millions.


Net Interest Margin (Tax Equivalent)Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015
Quarter as Reported 2.92% 3.00% 2.98% 2.98% 3.02%
Less: CLO pay-off discount recognition - - - (0.01)% (0.03)%
Add: CMO Retroactive premium amortization - - - - 0.01%
Add: CRE prepayment penalties - - (0.01)% - -
Less: Early loan payoffs - - - - (0.02%)
Less: Other miscellaneous items 0.02% (0.01)% (0.01)% - -
Sub-Total 0.02% (0.01)% (0.02)% (0.01)% (0.03)%
Normalized Net Interest Margin 2.94% 2.99% 2.96% 2.97% 2.99%

Noninterest Income

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

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

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

Noninterest Expense

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

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

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

In the second quarter of 2016, the operating efficiency ratio was 68.2%, compared to 69.8% in the prior quarter.

Capital

Beginning in the first quarter of 2015, all regulatory capital ratios and amounts were calculated under the Basel III standardized transitional approach. At June 30, 2016, the company’s consolidated Total Risk Based capital and Common Equity Tier 1 capital ratios were 12.2% and 8.7%, respectively, up from 12.1% and 8.6% at March 31, 2016. The company remains well above current regulatory guidelines for well-capitalized institutions.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 390 branches, $40 billion in assets, $29 billion in deposits, and approximately 5,300 employees providing financial services to individuals, families and businesses across New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.

Safe Harbor Statement

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

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


First Niagara Financial Group, Inc.
Income Statement Highlights - Reported Basis
(in thousands, except per share amounts)
2016 2015 Six months ended
Second First Fourth Third Second First June 30, June 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2016 2015
Interest income:
Loans and leases $ 219,767 $ 219,050 $ 214,945 $ 211,407 $ 211,899 $ 210,371 $ 438,817 $ 422,270
Investment securities and other 86,381 89,759 88,825 87,914 86,356 86,280 176,140 172,636
Total interest income 306,148 308,809 303,770 299,321 298,255 296,651 614,957 594,906
Interest expense:
Deposits 19,970 18,640 17,147 17,040 16,568 15,344 38,610 31,912
Borrowings 24,067 22,578 20,074 18,790 18,577 18,363 46,645 36,940
Total interest expense 44,037 41,218 37,221 35,830 35,145 33,707 85,255 68,852
Net interest income 262,111 267,591 266,549 263,491 263,110 262,944 529,702 526,054
Provision for credit losses 11,868 22,519 22,900 19,768 20,756 12,765 34,387 33,521
Net interest income after provision 250,243 245,072 243,649 243,723 242,354 250,179 495,315 492,533
Noninterest income:
Deposit service charges 21,824 21,507 22,919 22,944 22,208 20,389 43,331 42,597
Insurance commissions 15,735 14,562 14,920 18,252 17,060 15,714 30,297 32,774
Merchant and card fees 13,222 12,329 13,318 13,423 13,317 11,907 25,551 25,224
Wealth management services 13,048 13,610 14,567 14,572 15,718 14,650 26,658 30,368
Mortgage banking 5,532 3,950 4,894 5,070 5,783 4,887 9,482 10,670
Capital markets income 4,342 2,323 6,580 2,608 5,284 4,152 6,665 9,436
Lending and leasing 4,230 4,051 4,248 4,487 3,998 4,353 8,281 8,351
Bank owned life insurance 3,174 3,540 3,259 2,819 3,160 3,592 6,714 6,752
Loss on sale of high yield securities (11,001) - - - - - (11,001) -
Other income (1,484) 3,196 4,696 (732) 79 2,600 1,712 2,679
Total noninterest income 68,622 79,068 89,401 83,443 86,607 82,244 147,690 168,851
Noninterest expense:
Salaries and employee benefits 112,142 115,007 113,063 113,794 113,561 111,973 227,149 225,534
Occupancy and equipment 25,338 26,466 25,961 25,538 26,021 27,332 51,804 53,353
Technology and communications 36,276 35,419 38,232 38,301 36,486 35,061 71,695 71,547
Marketing and advertising 7,099 8,821 9,719 8,445 10,297 9,863 15,920 20,160
Professional services 9,858 12,401 15,361 18,052 16,321 13,070 22,259 29,391
Amortization of intangibles 3,235 3,860 3,972 4,001 5,092 6,205 7,095 11,297
Federal deposit insurance premiums 11,281 10,460 10,383 10,026 11,750 11,158 21,741 22,908
Merger and acquisition integration expenses 24,772 13,473 14,198 - - - 38,245 -
Restructuring charges - - 3,378 - - 17,517 - 17,517
Other expense 27,752 29,445 30,728 27,276 28,371 28,859 57,197 57,230
Total noninterest expense 257,753 255,352 264,995 245,433 247,899 261,038 513,105 508,937
Income before income tax 61,112 68,788 68,055 81,733 81,062 71,385 129,900 152,447
Income tax expense 14,680 20,481 17,255 21,251 20,052 20,000 35,161 40,052
Net income 46,432 48,307 50,800 60,482 61,010 51,385 94,739 112,395
Preferred stock dividend 7,547 7,547 7,547 7,547 7,547 7,547 15,094 15,094
Net income available to common stockholders $ 38,885 $ 40,760 $ 43,253 $ 52,935 $ 53,463 $ 43,838 $ 79,645 $ 97,301
Financial Ratios:
Earnings per basic share $ 0.11 $ 0.11 $ 0.12 $ 0.15 $ 0.15 0.12 $ 0.22 0.27
Earnings per diluted share $ 0.11 $ 0.11 $ 0.12 $ 0.15 $ 0.15 0.12 $ 0.22 0.27
Weighted average shares outstanding - basic(1) 352,134 351,372 351,306 351,293 351,126 350,741 351,753 350,935
Weighted average shares outstanding - diluted(1) 353,844 353,965 353,797 353,248 352,791 352,621 353,853 352,683
Net revenue(2) $ 330,733 $346,659 $ 355,950 $ 346,934 $ 349,717 $ 345,188 $677,392 $694,905
Noninterest income as a percentage of net revenue(2) 20.75% 22.81% 25.12% 24.05% 24.76% 23.83% 21.80% 24.30%
Pre-tax, pre-provision income(3) $72,980 $91,307 $90,955 $101,501 $ 101,818 $84,150 $164,287 $185,968
Pre-tax, pre-provision income per diluted share(3) $ 0.21 $ 0.26 $ 0.26 $ 0.29 $ 0.29 $ 0.24 $ 0.46 $ 0.53
Pre-tax, pre-provision return on average assets(3) 0.73% 0.92% 0.91% 1.03% 1.05% 0.88% 0.82% 0.97%
Net interest margin(4) 2.92% 3.00% 2.98% 2.98% 3.02% 3.07% 2.96% 3.04%
Interest yield on average loans(4) 3.72% 3.73% 3.65% 3.64% 3.73% 3.75% 3.73% 3.74%
Rate paid on interest-bearing liabilities 0.60% 0.56% 0.51% 0.50% 0.49% 0.48% 0.58% 0.49%
Efficiency ratio 77.9% 73.7% 74.4% 70.7% 70.9% 75.6% 75.7% 73.2%
Expenses as a percentage of average loans and deposits 1.9% 1.9% 2.0% 1.9% 1.9% 2.1% 1.9% 2.0%
Effective tax rate 24.0% 29.8% 25.4% 26.0% 24.7% 28.0% 27.10% 26.30%
Return on average assets(5) 0.46% 0.49% 0.51% 0.61% 0.63% 0.54% 0.48% 0.58%
Return on average equity(5) 4.47% 4.68% 4.85% 5.78% 5.90% 5.05% 4.57% 5.48%
Return on average tangible equity(3)(5) 6.70% 7.04% 7.32% 8.73% 8.94% 7.68% 6.87% 8.32%
Return on average common equity 4.07% 4.30% 4.50% 5.51% 5.63% 4.69% 4.18% 5.17%
Return on average tangible common equity(3) 6.39% 6.77% 7.10% 8.72% 8.94% 7.48% 6.58% 8.22%
(1)Share count excludes unvested restricted stock shares.
(2)Net revenue is comprised of net interest income and noninterest income.
(3)The tables in this earnings release present the computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(4)Yields and rates calculated on a tax equivalent basis.
(5)Return used to calculate ratio excludes preferred stock dividend.

First Niagara Financial Group, Inc.
Period End Balance Sheet
(in thousands)
2016 2015
June 30,March 31, December 31, September 30,June 30,March 31,
Cash and cash equivalents $ 420,884 $ 382,539 $ 672,243 $ 420,289 $ 527,323 $ 387,676
Investment securities:
Available for sale 5,518,025 5,439,220 5,471,291 5,725,608 5,750,860 5,911,419
Held to maturity 6,315,222 6,720,817 6,387,689 6,280,049 6,169,838 6,214,561
FHLB and FRB common stock 402,214 375,960 410,452 373,066 379,135 375,090
Total investment securities 12,235,461 12,535,997 12,269,432 12,378,723 12,299,833 12,501,070
Loans held for sale 51,731 26,592 46,096 51,056 59,816 48,755
Loans and leases:
Commercial:
Real estate 8,730,148 8,625,965 8,652,255 8,365,808 8,312,332 8,287,108
Business 6,132,536 6,174,753 6,013,217 6,031,358 5,923,524 5,790,980
Total commercial loans 14,862,684 14,800,718 14,665,472 14,397,166 14,235,856 14,078,088
Consumer:
Residential real estate 3,358,205 3,330,533 3,354,639 3,345,701 3,329,799 3,330,216
Home equity 3,058,824 3,057,154 3,068,962 3,032,618 2,984,872 2,943,844
Indirect auto 2,537,259 2,464,318 2,393,105 2,330,826 2,256,004 2,200,913
Credit cards 287,139 288,747 310,813 305,779 304,682 301,228
Other consumer 229,084 236,911 244,935 254,109 257,204 263,985
Total consumer loans 9,470,511 9,377,663 9,372,454 9,269,033 9,132,561 9,040,186
Total loans and leases 24,333,195 24,178,381 24,037,926 23,666,199 23,368,417 23,118,274
Allowance for loan losses 252,843 252,800 242,036 238,700 235,600 231,138
Loans and leases, net 24,080,352 23,925,581 23,795,890 23,427,499 23,132,817 22,887,136
Bank owned life insurance 441,772 439,084 436,709 434,263 431,335 428,454
Goodwill and other intangibles 1,389,132 1,392,367 1,396,227 1,400,199 1,404,201 1,410,800
Other assets 1,372,049 1,370,275 1,301,789 1,301,152 1,208,218 1,243,588
Total assets $ 39,991,381 $ 40,072,435 $ 39,918,386 $ 39,413,181 $ 39,063,543 $ 38,907,479
Deposits:
Savings accounts $ 3,448,312 $ 3,428,924 $ 3,389,728 $ 3,359,320 $ 3,483,777 $ 3,488,441
Interest-bearing checking 5,364,128 5,553,928 5,478,947 5,285,987 5,088,856 5,158,264
Money market deposits 10,398,719 10,884,350 10,653,792 10,483,721 10,303,873 10,368,358
Noninterest-bearing deposits 5,800,565 5,739,509 5,834,534 5,813,571 5,549,944 5,500,484
Certificates of deposit 3,947,762 3,954,033 3,343,878 3,873,521 4,020,367 3,734,226
Total deposits 28,959,486 29,560,744 28,700,879 28,816,120 28,446,817 28,249,773
Short-term borrowings 4,631,269 3,255,890 4,348,586 4,086,415 4,275,886 4,739,264
Long-term borrowings 1,732,919 2,608,014 2,308,101 1,783,402 1,683,476 1,233,550
Other liabilities 467,915 498,084 434,492 587,867 536,239 559,646
Total liabilities 35,791,589 35,922,732 35,792,058 35,273,804 34,942,418 34,782,233
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 3,861,790 3,811,701 3,788,326 3,801,375 3,783,123 3,787,244
Total stockholders' equity 4,199,792 4,149,703 4,126,328 4,139,377 4,121,125 4,125,246
Total liabilities and stockholders' equity $ 39,991,381 $ 40,072,435 $ 39,918,386 $ 39,413,181 $ 39,063,543 $ 38,907,479
Selected balance sheet information:
Total interest-earning assets(1) $ 36,627,110 $ 36,789,339 $ 36,677,134 $ 36,099,580 $ 35,813,498 $ 35,594,208
Total interest-bearing liabilities 29,523,109 29,685,139 29,523,032 28,872,365 28,856,235 28,722,103
Net interest-earning assets $ 7,104,001 $ 7,104,200 $ 7,154,102 $ 7,227,215 $ 6,957,263 $ 6,872,105
Tangible common equity(1)(2) $ 2,472,658 $ 2,419,334 $ 2,392,099 $ 2,401,176 $ 2,378,922 $ 2,376,444
Unrealized gain (loss) on available for sale securities, net of tax(3) 37,380 1,246 (9,577) 29,877 37,464 68,194
Total core deposits $ 25,011,724 $ 25,606,711 $ 25,357,001 $ 24,942,599 $ 24,426,450 $ 24,515,547
Originated loans(4) $ 21,678,047 $ 21,361,753 $ 21,101,040 $ 20,591,532 $ 19,929,719 $ 19,528,609
Acquired loans(5) 2,709,039 2,873,372 2,998,530 3,138,568 3,517,525 3,681,354
Credit related discount on acquired loans(6) (53,891) (56,744) (61,644) (63,901) (78,827) (91,689)
Total Loans $ 24,333,195 $ 24,178,381 $ 24,037,926 $ 23,666,199 $ 23,368,417 $ 23,118,274
(1)Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
(2)The tables in this earnings release present the computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3)Excludes unamortized unrealized gains recorded in accumulated other comprehensive income related to available for sale securities transferred to held to maturity.
(4)Originated loans represent total loans excluding acquired loans.
(5)Carrying value of acquired loans plus the principal not expected to be collected.
(6)Principal on acquired loans not expected to be collected.

First Niagara Financial Group, Inc.
Average Balance Sheet and Related Tax Equivalent Yields & Rates
(in millions)
For the three months ended Six months ended
June 30, 2016March 31, 2016June 30, 2015 June 30, 2016June 30, 2015
Average Interest(1) Yields Average Interest(1) Yields Average Interest(1) Yields Average Interest(1) Yields Average Interest(1) Yields
Balances
and
Rates(1)
Balances
and
Rates(1)
Balances
and
Rates(1)
Balances
and
Rates(1)
Balances
and
Rates(1)
Interest-earning assets:
Loans and leases(2)
Commercial:
Real estate $ 8,664 $ 80 3.63%$ 8,625 $ 79 3.61%$ 8,257 $ 75 3.61% $ 8,644 $ 158 3.62%$ 8,260 $ 150 3.60%
Business 6,112 53 3.43 6,062 52 3.42 5,830 52 3.48 6,088 106 3.43 5,813 101 3.46
Total commercial loans 14,776 133 3.55 14,687 131 3.53 14,087 127 3.56 14,732 264 3.54 14,073 251 3.54
Consumer:
Residential real estate 3,338 30 3.57 3,346 31 3.65 3,326 31 3.68 3,342 60 3.61 3,332 62 3.73
Home equity 3,055 30 3.95 3,066 30 3.93 2,963 28 3.86 3,060 60 3.94 2,951 57 3.89
Indirect auto 2,500 18 2.93 2,420 18 2.91 2,238 15 2.74 2,460 36 2.92 2,213 30 2.77
Credit cards 288 8 11.52 297 9 11.80 304 9 11.40 293 17 11.66 307 18 11.57
Other consumer 233 5 8.64 242 4 8.57 260 5 8.49 237 10 8.61 267 11 8.49
Total consumer loans 9,414 91 3.90 9,371 92 3.94 9,091 88 3.91 9,392 183 3.92 9,070 178 3.96
Total loans and leases 24,190 224 3.72 24,058 223 3.73 23,178 215 3.73 24,124 447 3.73 23,143 429 3.74
Residential MBS 8,361 48 2.32 7,864 48 2.43 7,381 43 2.30 8,112 96 2.37 7,281 87 2.39
Commercial MBS 870 11 5.11 997 12 4.68 1,311 11 3.42 933 23 4.88 1,357 23 3.34
Other investment securities (3) 3,328 27 3.28 3,513 30 3.53 3,604 34 3.75 3,421 58 3.41 3,580 65 3.63
Total securities, at amortized cost 12,559 86 2.77 12,374 90 2.92 12,296 88 2.85 12,466 177 2.85 12,218 175 2.86
Money market and other investments 90 1 2.58 205 1 1.37 100 - 1.56 148 1 1.74 129 1 1.22
Total interest-earning assets 36,839 $ 311 3.40% 36,637 $ 314 3.45% 35,574 $ 303 3.42% 36,738 $ 625 3.42% 35,490 $ 605 3.44%
Goodwill and other intangibles 1,391 1,394 1,408 1,392 1,411
Other noninterest-earning assets 2,019 1,929 1,931 1,974 1,909
Total assets $ 40,249 $ 39,960 $ 38,913 $ 40,104 $ 38,810
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,448 $ 1 0.10%$ 3,371 $ 1 0.09%$ 3,494 $ 1 0.09% $ 3,410 $ 2 0.10%$ 3,463 $ 1 0.09%
Interest-bearing checking 5,455 - 0.03 5,362 - 0.03 5,131 - 0.03 5,408 1 0.03 5,067 1 0.03
Money market deposits 10,632 9 0.33 10,725 9 0.32 10,251 8 0.29 10,678 17 0.32 10,192 14 0.27
Certificates of deposit 3,948 10 1.02 3,726 9 0.97 3,917 8 0.82 3,837 19 0.99 3,848 16 0.83
Total interest bearing deposits 23,483 20 0.34% 23,184 19 0.32% 22,793 17 0.29% 23,333 39 0.33% 22,570 32 0.29%
Borrowings
Short-term borrowings 3,984 8 0.81% 3,815 7 0.72% 4,522 5 0.48% 3,900 15 0.76% 4,821 11 0.47%
Long-term borrowings 2,209 16 2.93 2,416 15 2.62 1,359 13 3.90 2,312 31 2.77 1,194 26 4.36
Total borrowings 6,193 24 1.56 6,231 22 1.46 5,881 18 1.27 6,212 46 1.51 6,015 37 1.24
Total interest-bearing liabilities 29,676 $ 44 0.60% 29,415 $ 41 0.56% 28,674 $ 35 0.49% 29,545 $ 85 0.58% 28,585 $ 69 0.49%
Noninterest-bearing deposits 5,705 5,666 5,427 5,686 5,428
Other noninterest-bearing liabilities 691 725 667 707 660
Total liabilities 36,072 35,806 34,768 35,938 34,673
Total stockholders' equity 4,177 4,154 4,145 4,166 4,137
Total liabilities and stockholders' equity $ 40,249 $ 39,960 $ 38,913 $ 40,104 $ 38,810
Net interest income (FTE) $ 267 $ 273 $ 268 $ 540 $ 536
Taxable Equivalent Adjustment(1) 5 5 5 10 10
Total core deposits $ 25,240 $ 10 0.16%$ 25,124 $ 10 0.15%$ 24,303 $ 9 0.14% $ 25,182 $ 20 0.16%$ 24,150 $ 16 0.13%
Total transactional deposits 11,160 - 0.02% 11,028 - 0.02% 10,558 - 0.01% 11,094 1 0.02% 10,495 1 0.01%
Total deposits 29,188 20 0.28% 28,850 19 0.26% 28,220 17 0.24% 29,019 39 0.27% 27,998 32 0.23%
Tax equivalent net interest rate spread 2.80% 2.89% 2.93% 2.84% 2.95%
Tax equivalent net interest rate margin 2.92% 3.00% 3.02% 2.96% 3.04%
(1)Tax equivalent interest income is calculated using a 35% tax rate.
(2)Includes nonaccrual loans.
(3)Includes debt securities, collateralized loan obligations, asset-backed securities, FHLB and FRB common stock, and other investment securities.

First Niagara Financial Group, Inc.
Allowance for Loans and Lease Losses & Asset Quality
(in thousands)
2016 2015 Six months ended
Second First Fourth Third Second First June 30, June 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2016 2015
Beginning balance $ 252,800 $ 242,036 $ 238,700 $ 235,600 $ 231,138 $ 234,251 $ 242,036 $ 234,251
Net loan (charge-offs) recoveries:
Commercial real estate $ 1,612 $ (254) $ (1,476)$ (2,686)$ (5,525)$ (5,825) $ 1,358 $ (11,350)
Commercial business (5,620) (3,903) (10,441) (6,286) (3,513) (4,178) (9,523) (7,691)
Residential real estate (287) (135) (94) (230) (197) (266) (422) (463)
Home equity (1,484) (995) (723) (1,056) (1,367) (1,526) (2,479) (2,893)
Indirect auto (2,043) (2,030) (2,122) (1,743) (1,342) (1,226) (4,073) (2,568)
Credit cards (2,439) (2,654) (2,450) (2,215) (2,522) (2,450) (5,093) (4,972)
Other consumer (2,064) (1,784) (1,758) (1,952) (1,528) (1,807) (3,848) (3,335)
Total net loan charge-offs $ (12,325)$ (11,755) $ (19,064)$ (16,168)$ (15,994)$ (17,278) $ (24,080)$ (33,272)
Provision for loan losses 12,368 22,519 22,400 19,268 20,456 14,165 34,887 34,621
Ending balance $ 252,843 $ 252,800 $ 242,036 $ 238,700 $ 235,600 $ 231,138 $ 252,843 $ 235,600
Supplemental information
Allowance to loans 1.04% 1.05% 1.01% 1.01% 1.01% 1.00% 1.04% 1.01%
Allowance for originated loans to originated loans(1) 1.14% 1.16% 1.12% 1.13% 1.15% 1.15% 1.14% 1.15%
Net charge-offs (recoveries) to average loans (annualized)
Commercial real estate (0.07)% 0.01% 0.07% 0.13% 0.27% 0.29% (0.03)% 0.27%
Commercial business 0.37% 0.26% 0.70% 0.42% 0.24% 0.29% 0.31% 0.26%
Total commercial loans 0.11% 0.11% 0.33% 0.25% 0.26% 0.28% 0.11% 0.27%
Residential real estate 0.03% 0.02% 0.01% 0.03% 0.02% 0.03% 0.03% 0.03%
Home equity 0.19% 0.13% 0.09% 0.14% 0.18% 0.21% 0.16% 0.20%
Indirect auto 0.33% 0.34% 0.36% 0.30% 0.24% 0.22% 0.33% 0.23%
Credit cards 3.39% 3.57% 3.21% 2.90% 3.32% 3.16% 3.48% 3.24%
Other consumer 3.55% 2.95% 2.81% 3.06% 2.35% 2.63% 3.25% 2.49%
Total consumer loans 0.36% 0.33% 0.31% 0.32% 0.31% 0.33% 0.34% 0.31%
Total loans 0.20% 0.20% 0.32% 0.28% 0.28% 0.30% 0.20% 0.29%
Net charge-offs (recoveries) of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.03% 0.00% 0.08% 0.14% 0.31% 0.24% 0.01% 0.28%
Commercial business 0.38% 0.26% 0.72% 0.44% 0.25% 0.31% 0.32% 0.28%
Total commercial loans 0.18% 0.11% 0.36% 0.27% 0.28% 0.27% 0.15% 0.28%
Residential real estate 0.05% 0.02% 0.02% 0.04% 0.04% 0.05% 0.04% 0.04%
Home equity 0.23% 0.16% 0.14% 0.14% 0.17% 0.16% 0.20% 0.16%
Indirect auto 0.33% 0.34% 0.36% 0.30% 0.24% 0.22% 0.33% 0.23%
Credit cards 3.39% 3.57% 3.21% 2.90% 3.32% 3.16% 3.48% 3.24%
Other consumer 3.55% 2.95% 2.81% 3.06% 2.35% 2.63% 3.25% 2.49%
Total consumer loans 0.42% 0.40% 0.39% 0.38% 0.37% 0.38% 0.41% 0.38%
Total loans 0.27% 0.22% 0.37% 0.31% 0.31% 0.31% 0.24% 0.31%
Nonperforming loans:
Originated(1):
Commercial real estate $ 47,464 $ 37,087 $ 44,438 $ 54,699 $ 60,021 $ 65,655 $ 47,464 $ 60,021
Commercial business 64,681 71,999 56,382 45,389 42,979 54,506 64,681 42,979
Residential real estate 28,122 30,234 31,513 32,455 32,877 32,791 28,122 32,877
Home equity 35,323 35,701 35,561 34,191 27,092 26,163 35,323 27,092
Indirect auto 17,582 16,536 15,131 13,795 13,066 13,399 17,582 13,066
Other consumer 5,111 5,093 5,201 5,047 4,917 5,065 5,111 4,917
Total originated nonperforming loans 198,283 196,650 188,226 185,576 180,952 197,579 198,283 180,952
Total acquired nonperforming loans(2) 24,672 24,874 25,335 25,365 26,553 30,236 24,672 26,553
Total nonperforming loans 222,955 221,524 213,561 210,941 207,505 227,815 222,955 207,505
Real estate owned 18,735 16,457 16,063 18,359 17,397 19,128 18,735 17,397
Total nonperforming assets(3) $ 241,690 $ 237,981 $ 229,624 $ 229,300 $ 224,902 $ 246,943 $ 241,690 $ 224,902
Accruing troubled debt restructurings (TDR) $ 72,175 $ 63,659 $ 62,630 $ 60,941 $ 64,643 $ 64,401 $ 72,175 $ 64,643
Loans 90 days past due still accruing(4) 52,136 57,259 67,718 69,879 78,279 87,213 52,136 78,279
Total classified loans(5) 635,807 601,539 602,912 591,771 592,148 615,518 635,807 592,148
Total criticized loans(6) $ 958,231 $ 954,480 $ 944,779 $ 858,243 $ 938,951 $ 990,656 $ 958,231 $ 938,951
Total nonperforming loans to loans 0.92% 0.92% 0.89% 0.89% 0.89% 0.99% 0.92% 0.89%
Total nonperforming originated loans to originated loans(1) 0.91% 0.92% 0.89% 0.90% 0.91% 1.01% 0.91% 0.91%
Total nonperforming assets to loans and real estate owned 0.99% 0.98% 0.95% 0.97% 0.96% 1.07% 0.99% 0.96%
Total nonperforming assets to assets 0.60% 0.59% 0.58% 0.58% 0.58% 0.63% 0.60% 0.58%
Allowance to nonperforming loans 113.4% 114.1% 113.3% 113.2% 113.5% 101.5% 113.4% 113.5%
Originated loans(1) $21,678,047 $21,361,753 $ 21,101,040 $ 20,591,532 $ 19,929,719 $ 19,528,609 $21,678,047 $19,929,719
Acquired loans(7) 2,709,039 2,873,372 2,998,530 3,138,568 3,517,525 3,681,354 2,709,039 3,517,525
Credit related discount on acquired loans(8) (53,891) (56,744) (61,644) (63,901) (78,827) (91,689) (53,891) (78,827)
Total Loans $24,333,195 $24,178,381 $24,037,926 $ 23,666,199 $ 23,368,417 $ 23,118,274 $24,333,195 $23,368,417
(1)Originated loans represent total loans excluding acquired loans.
(2)Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.
(3)Does not include a $5.5 million nonperforming loan that was classified as held for sale at March 31, 2015, which was sold and for which we received the proceeds on April 2, 2015.
(4)Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
(5)Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business", under the heading "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2015.
(6)Criticized loans includes consumer loans when they are 90 days or more past due. Criticized loans include special mention, substandard, doubtful, and loss.
(7)Represents the carrying value of acquired loans plus the principal not expected to be collected.
(8)Represent principal on acquired loans not expected to be collected.

First Niagara Financial Group, Inc.
Key Statistics
(Risk weighted assets in millions; share counts in thousands)
2016 2015
June 30,March 31, December 31,September 30,June 30,March 31,
First Niagara Financial Group, Inc. capital ratios:
Tier 1 risk based capital 10.24% 10.12% 10.08% 10.05% 10.03% 10.02%
Total risk based capital 12.22% 12.09% 12.01% 11.97% 11.96% 11.95%
Common equity tier 1 capital 8.69% 8.58% 8.55% 8.52% 8.50% 8.48%
Leverage 7.54% 7.55% 7.62% 7.66% 7.60% 7.56%
Equity to assets 10.50% 10.36% 10.34% 10.50% 10.55% 10.60%
Tangible common equity to tangible assets(1) 6.41% 6.25% 6.21% 6.32% 6.32% 6.34%
Total risk weighted assets $ 28,660 $ 28,809 $ 28,881 $ 28,716 $ 28,445 $ 28,152
First Niagara Bank, N.A. capital ratios:
Tier 1 risk based capital 10.86% 10.73% 10.65% 10.67% 10.66% 10.65%
Total risk based capital 11.80% 11.67% 11.55% 11.56% 11.54% 11.53%
Common equity tier 1 capital 10.86% 10.73% 10.65% 10.67% 10.66% 10.65%
Leverage 8.00% 8.00% 8.05% 8.12% 8.07% 8.03%
Total risk weighted assets $ 28,591 $ 28,742 $ 28,813 $ 28,632 $ 28,359 $ 28,068
Number of branches 392 392 392 394 394 394
Full time equivalent employees 5,255 5,322 5,428 5,397 5,364 5,322
Share information and per share metrics:
Common shares outstanding 356,056 354,977 354,762 354,788 354,890 353,717
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000 14,000
Treasury shares 9,946 11,025 11,240 11,214 11,112 12,285
Market price (NASDAQ: FNFG): $ 9.74 $ 9.68 $ 10.85 $ 10.21 $ 9.44 $ 8.84
Book value per common share(2) 10.95 10.84 10.78 10.82 10.77 10.80
Tangible book value per common share(1)(2) 7.01 6.88 6.81 6.84 6.77 6.78
Price/Book 88.95% 89.30% 100.65% 94.36% 87.65% 81.85%
Price/Tangible book 138.94% 140.70% 159.32% 149.27% 139.44% 130.38%
Common stock dividends $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
Preferred stock dividends 0.54 0.54 0.54 0.54 0.54 0.54
Dividend payout ratio 72.73% 72.73% 66.67% 53.33% 53.33% 66.67%
Dividend yield (annualized) 3.30% 3.32% 2.93% 3.11% 3.40% 3.67%
(1)The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(2)Share count excludes unvested restricted stock shares.

First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation
(in thousands, except per share amounts)
2016 2015 Six months ended
Second First Fourth Third Second First June 30, June 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2016 2015
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.18 $ 0.14 $ 0.16 $ 0.15 $ 0.15 $ 0.15 $ 0.32 $ 0.31
Earnings per diluted share $ 0.18 $ 0.14 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.32 $ 0.30
Weighted average shares outstanding - basic(2) 352,134 351,372 351,306 351,293 351,126 350,741 351,753 350,935
Weighted average shares outstanding - diluted(2) 353,844 353,965 353,797 353,248 352,791 352,621 353,853 352,683
Noninterest income as a percentage of net revenue(3) 23.30% 22.81% 25.12% 24.05% 24.76% 23.83% 23.05% 24.30%
Pre-tax, pre-provision income 108,753 104,780 108,531 101,501 101,818 101,667 213,533 203,485
Pre-tax, pre-provision income per diluted share $ 0.31 $ 0.30 $ 0.31 $ 0.29 $ 0.29 $ 0.29 $ 0.60 $ 0.58
Pre-tax, pre-provision return on average assets 1.09% 1.05% 1.09% 1.03% 1.05% 1.07% 1.07% 1.06%
Net interest margin(4) 2.92% 3.00% 2.98% 2.98% 3.02% 3.07% 2.96% 3.04%
Interest yield on average loans(4) 3.72% 3.73% 3.65% 3.64% 3.73% 3.75% 3.73% 3.74%
Rate paid on interest-bearing liabilities 0.60% 0.56% 0.51% 0.50% 0.49% 0.48% 0.58% 0.49%
Efficiency ratio 68.2% 69.8% 69.5% 70.7% 70.9% 70.5% 69.0% 70.7%
Effective tax rate 27.4% 30.2% 26.6% 26.0% 24.7% 30.0% 28.7% 27.5%
Return on average assets 0.70% 0.58% 0.63% 0.61% 0.63% 0.65% 0.64% 0.64%
Return on average equity 6.77% 5.56% 6.00% 5.78% 5.90% 6.12% 6.17% 6.01%
Return on average tangible equity(5) 10.15% 8.37% 9.05% 8.73% 8.94% 9.30% 9.26% 9.12%
Return on average common equity 6.57% 5.26% 5.75% 5.51% 5.63% 5.85% 5.92% 5.74%
Return on average tangible common equity(6) 10.31% 8.29% 9.07% 8.72% 8.94% 9.34% 9.30% 9.13%
Reconciliation of noninterest income on operating basis to reported noninterest income(1):
Total noninterest income on operating basis (Non-GAAP) $ 79,623 $ 79,068 $ 89,401 $ 83,443 $ 86,607 $ 82,244 $ 158,691 $168,851
Loss on sale of high yield securities (11,001) - - - - - (11,001) -
Total reported noninterest income (GAAP) 68,622 79,068 89,401 83,443 86,607 82,244 $ 147,690 $168,851
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 232,981 $241,879 $247,419 $245,433 $ 247,899 $243,521 $ 474,860 $491,420
Merger and acquisition integration expenses 24,772 13,473 14,198 - - - 38,245 -
Restructuring charges - - 3,378 - - 17,517 - 17,517
Total reported noninterest expense (GAAP) $ 257,753 $255,352 $264,995 $245,433 $ 247,899 $261,038 $ 513,105 $508,937
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 70,296 $ 57,448 $ 62,813 $ 60,482 $ 61,010 $ 62,246 $ 127,744 $123,256
Nonoperating income and expenses, net of tax:
Loss on sale of high yield securities 6,820 - - - - - 6,820 -
Merger and acquisition integration expenses 17,044 9,141 9,919 - - - 26,185 -
Restructuring charges - - 2,094 - - 10,861 - 10,861
Total nonoperating income and expenses, net of tax 23,864 9,141 12,013 - - 10,861 33,005 10,861
Net income (GAAP) $ 46,432 $ 48,307 $ 50,800 $ 60,482 $ 61,010 $ 51,385 $ 94,739 $112,395
Reconciliation of net operating income available to common stockholders to net income available to common stockholders(1):
Net operating income available to common stockholders (Non-GAAP) $ 62,749 $ 49,901 $ 55,266 $ 52,935 $ 53,463 $ 54,699 $ 112,650 $ 108,162
Nonoperating income and expenses, net of tax:
Loss on sale of high yield securities 6,820 - - - - - 6,820 -
Merger and acquisition integration expenses 17,044 9,141 9,919 - - - 26,185 -
Restructuring charges - - 2,094 - - 10,861 - 10,861
Total nonoperating income and expenses, net of tax 23,864 9,141 12,013 - - 10,861 33,005 10,861
Net income available to common stockholders (GAAP) $ 38,885 $ 40,760 $ 43,253 $ 52,935 $ 53,463 $ 43,838 $ 79,645 $ 97,301
Computation of pre-tax, pre-provision income:
Net interest income $ 262,111 $267,591 $266,549 $263,491 $ 263,110 $262,944 $ 529,702 $526,054
Noninterest income 68,622 79,068 89,401 83,443 86,607 82,244 147,690 168,851
Noninterest expense (257,753) (255,352) (264,995) (245,433) (247,899) (261,038) (513,105) (508,937)
Pre-tax, pre-provision income (GAAP) 72,980 91,307 90,955 101,501 101,818 84,150 164,287 185,968
Add back: non-operating loss on sale of high yield securities 11,001 - - - - - 11,001 -
Add back: non-operating noninterest expenses (1) 24,772 13,473 17,576 - - 17,517 38,245 17,517
Pre-tax, pre-provision income (Non-GAAP)(1) $108,753 $104,780 $108,531 $101,501 $101,818 $101,667 $213,533 $203,485
(1)Noninterest income and noninterest expense on an operating basis, net operating income, and pre-tax, pre-provision income on an operating basis are non-GAAP measures that we believe provide meaningful comparisons of our underlying operational performance and facilitates investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, we believe exclusion of these nonoperating items enables management to perform a more effective evaluation and comparison of our results and to assess performance in relation to our ongoing operations.
(2)Share count excludes unvested restricted stock shares.
(3)Net revenue is comprised of net interest income and noninterest income.
(4)Yields and rates calculated on a tax equivalent basis.
(5)Tangible equity is a non-GAAP measure and excludes goodwill and other intangibles.
(6)Tangible common equity is a non-GAAP measure and excludes goodwill and other intangibles as well as preferred stock.

First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation (Cont.)
(in thousands, except per share amounts)
2016 2015 Six months ended
Second First Fourth Third Second First June 30, June 30,
Quarter Quarter Quarter Quarter Quarter Quarter 2016 2015
Computation of Ending Tangible Assets:
Total assets $ 39,991,381 $40,072,435 $39,918,386 $39,413,181 $39,063,543 $38,907,479 $ 39,991,381 $ 39,063,543
Less: Goodwill and other intangibles (1,389,132) (1,392,367) (1,396,227) (1,400,199) (1,404,201) (1,410,800) (1,389,132) (1,404,201)
Tangible assets $38,602,249 $38,680,068 $ 38,522,159 $38,012,982 $37,659,342 $37,496,679 $ 38,602,249 $ 37,659,342
Computation of Average Tangible Assets:
Total assets $40,248,615 $39,959,615 $39,576,697 $39,051,359 $38,913,219 $38,706,545 $ 40,104,115 $ 38,810,454
Less: Goodwill and other intangibles (1,390,654) (1,394,178) (1,398,122) (1,402,138) (1,407,946) (1,413,765) (1,392,416) (1,410,840)
Tangible assets $ 38,857,961 $ 38,565,437 $ 38,178,575 $ 37,649,221 $ 37,505,273 $37,292,780 $ 38,711,699 $ 37,399,614
Computation of Ending Tangible Equity:
Total stockholders' equity $ 4,199,792 $ 4,149,703 $ 4,126,328 $ 4,139,377 $ 4,121,125 $ 4,125,246 $ 4,199,792 $ 4,121,125
Less: Goodwill and other intangibles (1,389,132) (1,392,367) (1,396,227) (1,400,199) (1,404,201) (1,410,800) (1,389,132) (1,404,201)
Tangible equity $ 2,810,660 $ 2,757,336 $ 2,730,101 $ 2,739,178 $ 2,716,924 $ 2,714,446 $ 2,810,660 $ 2,716,924
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,199,792 $ 4,149,703 $ 4,126,328 $ 4,139,377 $ 4,121,125 $ 4,125,246 $ 4,199,792 $ 4,121,125
Less: Goodwill and other intangibles (1,389,132) (1,392,367) (1,396,227) (1,400,199) (1,404,201) (1,410,800) (1,389,132) (1,404,201)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,472,658 $ 2,419,334 $ 2,392,099 $ 2,401,176 $ 2,378,922 $ 2,376,444 $ 2,472,658 $ 2,378,922
Computation of Average Tangible Equity:
Total stockholders' equity $ 4,177,087 $ 4,154,033 $ 4,152,977 $ 4,149,635 $ 4,145,334 $ 4,127,743 $ 4,165,560 $ 4,136,587
Less: Goodwill and other intangibles (1,390,654) (1,394,178) (1,398,122) (1,402,138) (1,407,946) (1,413,765) (1,392,416) (1,410,840)
Tangible equity $ 2,786,433 $ 2,759,855 $ 2,754,855 $ 2,747,497 $ 2,737,388 $ 2,713,978 $ 2,773,144 $ 2,725,747
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 4,177,087 $ 4,154,033 $ 4,152,977 $ 4,149,635 $ 4,145,334 $ 4,127,743 $ 4,165,560 $ 4,136,587
Less: Goodwill and other intangibles (1,390,654) (1,394,178) (1,398,122) (1,402,138) (1,407,946) (1,413,765) (1,392,416) (1,410,840)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 2,448,431 $ 2,421,853 $ 2,416,853 $ 2,409,495 $ 2,399,386 $ 2,375,976 $ 2,435,142 $ 2,387,745


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

Source: First Niagara Financial Group, Inc.