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First Niagara Reports Fourth Quarter and Full Year 2012 Results

Fourth Quarter Highlights:

  • Non-GAAP Operating Income of $0.19 per Share, Consistent with the Prior Quarter
  • GAAP EPS of $0.15 including CMO premium adjustment ($0.03) and restructuring charges ($0.01)
  • Business Trends Continue to be Very Strong
  • 12th consecutive quarter of double digit commercial loan growth
  • Interest-bearing checking balances up 32%
  • Mortgage originations increase 12% to an all-time high
  • Wealth Management fees increase 8%
  • Capital Markets revenue up 11%
  • Net Interest Income Stable, Excluding Impacts of Additional CMO Premium Amortization
  • 13% increase in average interest earning assets
  • Loan yields decline 8 basis points; deposit rates down 3 basis points

BUFFALO, N.Y., Jan. 23, 2013 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today announced fourth-quarter and full-year 2012 results that reflect strong core business fundamentals and core customer acquisition across the company's regional banking footprint. Solid operating performance continues to be driven by sustained market share gains through new customer acquisition as well as deepening relationships with existing customers.

"We finished 2012 with our team and franchise in a very solid and stable position – and most importantly, focused on optimizing our performance and results in 2013," said John R. Koelmel, First Niagara President and Chief Executive Officer. "The fundamentals of our business continue to improve as we more fully leverage the expanded capacities and competencies we now have, which has created very positive momentum as we start the new year. And while the impact of our CMO portfolio on fourth quarter results is disappointing, it doesn't at all diminish the consistent core operating performance we have again produced.

"As we look ahead to the next twelve months, our focus is to (1) better position our balance sheet by continuing the strong growth performance of our commercial and consumer lending teams; (2) ensure we do that while maintaining best in class credit outcomes; (3) deepen relationships across all business lines to improve the performance of our fee based businesses and services; and, (4) be more operationally effective and efficient by controlling costs and doing more with what we have already invested," continued Mr. Koelmel. "As I have consistently stated, running our business a little bit better each and every day is what we are about in 2013."

"Throughout 2012, First Niagara has delivered solid fundamental operating performance across all geographies enabled by strong traction with our new products and services," said Gregory W. Norwood, Chief Financial Officer. "Given the impact of a prolonged low interest rate environment, we will continue to sharpen our focus to maximize returns by optimizing the franchise and a commitment to manage expenses aggressively and create positive operating leverage."

Fourth Quarter Operating Results

In the fourth quarter of 2012, First Niagara reported non-GAAP operating net income available to common shareholders of $67.8 million, or $0.19 per diluted share, compared to $66.5 million, or $0.19 per diluted share, in the third quarter of 2012 and $72.1 million, or $0.24 per diluted share in the fourth quarter of 2011.

Those results exclude the impacts of the previously disclosed pre-tax adjustment of $16 million to accelerate premium amortization on its Collateralized Mortgage Obligations (CMO) portfolio and $3.7 million in restructuring charges.

Net interest income in the fourth quarter was essentially flat to the prior quarter. Excluding the impact of a quarter-over-quarter increase in premium amortization expense, net interest margin declined 8 basis points to 3.46%, driven by the continued downward re-pricing of loans and securities. However, those impacts on net interest income were offset by the benefits of a 13% increase in average interest-earning assets.

Non-interest revenues in the fourth quarter of 2012 decreased $5.0 million from the prior quarter as a result of seasonal declines in insurance commissions and lower mortgage banking revenues.

Average commercial loans increased 11% annualized over the prior quarter, the 12th consecutive quarter of double-digit growth as strong commercial business and commercial real estate loan demand continues across the company's footprint. Average transactional deposits, which include interest-bearing checking and non-interest bearing deposit balances, increased 16% annualized from the prior quarter driven by increases in balances held by customers.

The provision for loan losses on originated loans totaled $21.3 million in the fourth quarter of 2012, including $13.7 million to support loan growth and $7.6 million to cover net charge-offs during the quarter. Net charge-offs equaled 24 basis points of average originated loans, a six basis point decrease from the prior quarter.

Operating expenses in the fourth quarter of 2012 were $235.1 million, decreasing $2 million, or 1%, compared to the third quarter. Salaries and benefits expense declined $4.5 million, or 4%, driven by the company's workforce optimization initiative in the third quarter.

GAAP Results

On a GAAP basis, First Niagara reported fourth quarter net income to common shareholders of $53.5 million, or $0.15 per diluted share, compared to income of $50.8 million, or $0.14 per diluted share, in the third quarter of 2012. Reported GAAP results for the fourth quarter of 2012 included $3.7 million of restructuring charges as well as the impact of the $16 million accelerated premium amortization adjustment.

Operating Results (Non-GAAP) Q4 2012 Q3 2012 Q4 2011
Net interest income $ 268.6 $ 269.6 $ 242.5
Provision for credit losses 22.0 22.2 13.4
Noninterest income 91.8 96.9 63.7
Noninterest expense 235.1 237.1 182.5
Operating net income 75.4 74.0 72.1
Preferred stock dividend 7.5 7.5 --
Operating net income available to common shareholders 67.8 66.5 72.1
Weighted average diluted shares outstanding 349.7 349.4 304.3
Operating earnings per diluted share $ 0.19 $ 0.19 $ 0.24
Reported Results (GAAP)
Operating net income before non-operating items $ 75.4 $ 74.0 $ 72.1
CMO premium amortization adjustment (a) 11.6 -- --
Gain on securities portfolio repositioning (b) -- 3.5 --
Non-operating expenses (c) 2.6 19.1 13.6
Net income 61.1 58.4 58.5
Preferred stock dividend 7.5 7.5 --
Net income available to common shareholders 53.5 50.8 58.5
Weighted average diluted shares outstanding 349.7 349.4 304.3
Earnings per diluted share $ 0.15 $ 0.14 $ 0.19
All amounts in millions except earnings per diluted share. The Non-GAAP/Operating Results table above summarizes the company's operating results excluding certain non-operating items. For a detailed reconciliation of non-GAAP measures, refer to the attached tables.
(a) Amount is shown net of tax and represents the retroactive adjustment to accelerate premium amortization on the CMO portfolio.
(b) Amount is shown net of tax and represents the gains recorded on the sale of $3.1 billion of mortgage-backed securities in the third quarter of 2012.
(c) Amounts are shown net of tax and represent expenses related to acquisition, integration, and restructuring.

Full Year Results

For the full year ended December 31, 2012, the company posted non-GAAP operating earnings of $263.9 million, or $0.75 per diluted share, compared to $266.7 million, or $0.98 per diluted share, in 2011. The principal reasons for the decline were foregone interest income on $3.1 billion of mortgage-backed securities sold in the second quarter of 2012, continued pressures on asset pricing from the low interest rate environment, and the impacts of common and preferred shares issued in December 2011 to fund, in advance, the May 18, 2012 purchase of deposits and loans in the HSBC branch transaction.

For the full year 2012, the company posted GAAP net income of $140.7 million, or $0.40 per diluted share compared to $173.9 million, or $0.64 per diluted share, in 2011. Included in the calculation of GAAP net income are $184.0 million in pre-tax acquisition and restructuring related expenses, $24.6 million in accelerated premium amortization adjustments, and $21.2 million in gains related to the sale of $3.1 billion of mortgage-backed securities in the second quarter of 2012. In 2011, merger and restructuring related expenses totaled $140.7 million.

Operating Results (Non-GAAP) 2012 2011
Net interest income $ 1,047.9 $ 881.2
Provision for credit losses 92.3 58.1
Noninterest income 338.3 245.3
Noninterest expense 867.2 665.6
Net operating income before non-operating items 291.6 266.7
Preferred stock dividend 27.8 --
Operating net income available to common shareholders 263.9 266.7
Weighted average diluted shares outstanding 349.4 271.6
Operating earnings per diluted share $ 0.75 $ 0.98
Reported Results (GAAP)
Net operating income before non-operating items $ 291.6 $ 266.7
CMO premium amortization adjustment (a) 17.2 --
Gain on securities portfolio repositioning (b) 13.8 --
Non-operating expenses (c) 119.8 92.8
Net income 168.4 173.9
Preferred stock dividend 27.8 --
Net income available to common shareholders 140.7 173.9
Weighted average diluted shares outstanding 349.4 271.6
Earnings per diluted share $ 0.40 $ 0.64
All amounts in millions except earnings per diluted share. The Non-GAAP/Operating Results table above summarizes the company's operating results excluding certain non-operating items. For a detailed reconciliation of non-GAAP measures, refer to the attached tables.
(a) Amount is shown net of tax and represents the retroactive adjustment to accelerate premium amortization on the CMO portfolio.
(b) Amount is shown net of tax and represents the gains recorded on the sale of $3.1 billion of mortgage-backed securities in 2012.
(c) Amounts are shown net of tax and represent expenses related to acquisition, integration, and restructuring.

Loans

For the twelfth consecutive quarter, average commercial loans increased at a double-digit pace organically, up $302 million, or 11% annualized over the prior quarter. Commercial business loans averaged $4.8 billion, representing a 15% annualized increase over the prior quarter. Commercial real estate loans increased 8% annualized to $6.9 billion. Strength in specialty lending business lines such as equipment finance, healthcare lending, and capital markets augmented a robust pace of growth in the company's traditional middle market and commercial real estate businesses. Commercial loans in the company's Western and Eastern Pennsylvania and New England markets delivered double-digit annualized growth rates of 12%, 28%, and 10%, respectively, while balances in the New York market increased 6% following a strong third quarter.

Average indirect auto loan balances increased $214 million to $515 million. During the fourth quarter, new originations yielded 3.43%. The company continues to target and engage new car dealers within its contiguous footprint to lend and finance primarily used car purchases for high credit quality customers.

Average residential real estate loans declined by $143 million, or 14% annualized, from the third quarter reflecting higher prepayments. Average credit card and other consumer loan balances were unchanged.

Deposits

The company's strategic focus on core customer acquisition continued to allow it to successfully re-position its account mix and increase low cost deposits. Average transactional accounts, which include interest-bearing checking and noninterest-bearing balances, increased to $8.8 billion, up 16% annualized compared to the prior quarter, with double-digit increases across each market. These low-cost deposits now represent 32% of the company's deposit base, compared to 26% a year ago.

Average noninterest-bearing deposits increased 2% annualized while interest-bearing checking deposits increased 32% annualized over the prior quarter driven by strong customer engagement that resulted in higher account balances. These increases were offset by the company's pricing initiatives to reduce higher-cost money market balances. Average total core deposits, excluding time deposits, increased to $23.5 billion, or 2% annualized, compared to the third quarter.

Net Interest Income

Non-GAAP net interest income of $268.6 million was essentially flat to the prior quarter. The benefits of a 13% annualized increase in average earning assets were offset by the impacts of continued downward re-pricing pressure on earning asset yields. On a GAAP basis, net interest income of $252.3 million included the $16.3 million accelerated premium amortization adjustment related to the CMO portfolio.

Total premium amortization on the CMO portfolio increased to $30.8 million in the fourth quarter from $11.1 million in the prior quarter, driven by the $16.3 million in accelerated CMO premium amortization adjustment. Excluding the impacts of that increase, net interest margin in the fourth quarter was 3.46%, an eight basis point decline from the third quarter of 2012. Continued compression of loan yields from prepayments and lower spreads was partially offset by a three basis point decline in cost of interest bearing deposits.

"After our thorough evaluation of the CMO portfolio, including the substantial level of prepayments received in recent months as well as those expected to continue for the foreseeable future, we recorded an adjustment of $16 million to accelerate the premium amortization," said Mr. Norwood. "With this adjustment, the remaining premium has been reduced to $74 million, or 1.6% of par at December 31, 2012, significantly reducing potential future volatility in our CMO yields."

Credit Quality

At December 31, 2012, the allowance for loan losses was $162.5 million, compared to $149.9 million at September 30, 2012. Information for both the originated and acquired portfolios follows.

Q4 2012 Q3 2012
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 21.3 $ 0.2 $ 21.5 $ 21.4 $ 0.4 $ 21.8
Net charge-offs 7.6 1.3 8.9 9.1 1.0 10.1
NCOs/ Avg Loans 0.24% 0.08% 0.18% 0.30% 0.06% 0.21%
Total loans** $ 13,372 $ 6,514 $ 19,710 $ 12,233 $ 7,086 $ 19,106
(*) Excludes provision for unfunded commitments of $0.5 million and $0.4 million in 4Q12 and 3Q12, respectively
(**) Acquired loans before associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $21.3 million, unchanged from the prior quarter. This provision included $13.7 million to support sequential originated loan growth of $1.1 billion and $7.6 million to cover net charge-offs. Net charge-offs equaled 24 basis points of average originated loans in the fourth quarter of 2012, a six basis points improvement from the prior quarter.

At the end of the fourth quarter, nonperforming assets to total assets were 0.50%, and increased eight basis points from the prior quarter. Nonperforming originated loans as a percentage of originated loans increased to 1.07% at December 31, 2012 from 0.93% at September 30, 2012. Approximately a third of the $29 million sequential increase in nonperforming originated loans related to guidance issued by the Office of the Comptroller of the Currency (OCC) to place consumer loans discharged in bankruptcy on nonaccrual status. The remaining increase in commercial nonaccruals was driven primarily by one large commercial credit in the company's Eastern Pennsylvania market.

At December 31, 2012, the allowance for loan losses on originated loans totaled $160.9 million or 1.20% of such loans, compared to $147.2 million or 1.20% of loans at September 30, 2012.

Acquired loans

The provision for losses on acquired loans totaled $0.2 million, compared to $0.4 million in the prior quarter. Net charge-offs on those portfolios totaled $1.3 million during the quarter, compared to $1.0 million in the prior period. At December 31, 2012, the allowance for loan losses on acquired loans totaled $1.6 million, compared to $2.7 million at September 30, 2012. Acquired nonperforming loans totaled $29.6 million, compared to $28.2 million at the end of the prior quarter. At December 31, 2012, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $176 million.

Fee Income

Fourth quarter 2012 non-GAAP operating noninterest income of $91.8 million decreased 5% or $5.0 million compared to the prior quarter.

Continued strength in derivative swap activity and increased assets under management in the company's wealth management platform contributed to 11% and 8% sequential increases in capital markets and wealth management fees, respectively.

These increases were offset by lower mortgage banking revenues as well as typical fourth quarter declines in insurance fees. Mortgage banking revenues decreased $2.9 million from the prior quarter driven by lower application volumes and gain-on-sale margins. However, closed mortgage origination volumes increased 12% from the prior quarter to an all-time high. During the quarter, the company opened a third mortgage processing center to expediently meet and exceed the needs of its customers.

On a GAAP basis, noninterest income of $91.8 million declined $10.4 million from the prior quarter. Prior quarter results included a $5.3 million gain recognized on the sale of $3.1 billion in CMOs in the second quarter.

Noninterest Expense

Fourth quarter non-GAAP operating noninterest expenses were $235.1 million, decreasing $2.0 million, or 1%, compared to the third quarter, driven by the initial impact of the company's workforce optimization initiative in the third quarter. The benefit of the resulting $4.5 million decrease in salaries and benefits was minimized by seasonal increases in occupancy expenses. Excluding the additional $3.4 million in additional premium amortization recognized in the fourth quarter, the efficiency ratio of 64.6% was comparable to 64.7% in the prior quarter.

On a GAAP basis, noninterest expense for the fourth quarter was $238.8 million, including $3.7 million in restructuring charges.

Capital

At December 31, 2012, the company's estimated consolidated Total Risk Based capital and Tier 1 Common Risk Based capital ratios were 11.2% and 7.5% respectively. The company remains well above current regulatory guidelines for well-capitalized institutions.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 430 branches, approximately $37 billion in assets, $28 billion in deposits, and approximately 6,000 employees providing financial services to individuals, families and businesses across Upstate 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 Wednesday, January 23, 2013 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-888-324-9650 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and is available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until February 6, 2013 by dialing 1-888-566-0438, passcode: 15645.

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

Forward-Looking Statements - This press release contains forward-looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real estate and business loans and non-performing loans.

First Niagara Financial Group, Inc.
Income Statement Highlights -- Reported Basis
(in thousands, except per share amounts)
2012 2011 For year ending
Fourth Third Second First Fourth December 31, December 31,
Quarter Quarter Quarter Quarter Quarter 2012 2011
Interest income:
Loans and leases $ 212,035 $ 211,767 $ 200,725 $ 189,385 $ 195,434 $ 813,912 $ 704,664
Investment securities and other 71,564 90,101 99,116 101,395 96,472 362,176 360,643
Total interest income 283,599 301,868 299,841 290,780 291,906 1,176,088 1,065,307
Interest expense:
Deposits 16,902 18,358 16,391 14,998 21,521 66,649 83,237
Borrowings 14,411 13,905 24,437 33,411 27,872 86,164 100,823
Total interest expense 31,313 32,263 40,828 48,409 49,393 152,813 184,060
Net interest income 252,286 269,605 259,013 242,371 242,513 1,023,275 881,247
Provision for credit losses 22,000 22,200 28,100 20,000 13,400 92,300 58,107
Net interest income after provision 230,286 247,405 230,913 222,371 229,113 930,975 823,140
Noninterest income:
Deposit service charges 26,345 26,422 21,433 17,037 18,049 91,237 66,144
Insurance commissions 15,497 18,764 17,072 16,833 15,440 68,166 65,125
Merchant and card fees 11,945 12,014 9,271 5,528 5,044 38,758 29,253
Wealth management services 12,000 11,069 9,207 9,039 8,179 41,315 30,729
Mortgage banking 8,060 10,974 7,174 5,649 5,279 31,857 15,182
Capital markets income 7,098 6,381 6,831 6,539 2,746 26,849 8,349
Lending and leasing 3,739 3,730 4,245 3,123 3,103 14,837 11,425
Bank owned life insurance 3,021 3,449 3,848 3,387 3,302 13,705 11,129
Other income 4,116 9,400 16,517 2,773 2,543 32,806 7,973
Total noninterest income 91,821 102,203 95,598 69,908 63,685 359,530 245,309
Noninterest expense:
Salaries and benefits 111,026 115,484 104,507 96,477 88,796 427,494 341,895
Occupancy and equipment 27,609 25,694 24,089 22,017 22,580 99,409 78,163
Technology and communications 28,257 28,110 24,434 19,713 18,942 100,514 62,376
Marketing and advertising 9,292 8,954 6,676 6,763 7,724 31,685 21,850
Professional services 11,163 11,193 9,263 8,895 11,669 40,514 36,017
Amortization of intangibles 14,224 14,506 9,839 6,466 6,586 45,035 25,544
FDIC premiums 9,158 8,850 10,552 6,133 6,097 34,693 28,860
Merger and acquisition integration expenses 3,678 29,404 131,460 12,970 6,149 177,512 98,161
Restructuring charges -- -- 3,750 2,703 13,496 6,453 42,534
Other expense 24,377 24,347 21,069 18,041 20,132 87,834 70,933
Total noninterest expense 238,784 266,542 345,639 200,178 202,171 1,051,143 806,333
Income (loss) before income tax 83,323 83,066 (19,128) 92,101 90,627 239,362 262,116
Income tax expense (benefit) 22,226 24,682 (8,204) 32,236 32,166 70,940 88,206
Net income (loss) 61,097 58,384 (10,924) 59,865 58,461 168,422 173,910
Preferred stock dividend 7,547 7,547 7,547 5,115 -- 27,756 --
Net income (loss) available to common stockholders $ 53,550 $ 50,837 $ (18,471) $ 54,750 $ 58,461 $ 140,666 $ 173,910
Financial Ratios:
Earnings (loss) per basic share $ 0.15 $ 0.15 $ (0.05) $ 0.16 $ 0.19 $ 0.40 $ 0.64
Earnings (loss) per diluted share 0.15 0.14 (0.05) 0.16 0.19 0.40 0.64
Weighted average shares outstanding - basic(1) 349,071 349,001 348,941 348,823 304,065 348,960 271,301
Weighted average shares outstanding - diluted(1) 349,663 349,371 348,941 349,069 304,341 349,368 271,612
Net revenue(2) $ 344,107 $ 371,808 $ 354,611 $ 312,279 $ 306,198 $ 1,382,805 $ 1,126,556
Noninterest income as a percentage of net revenue(2) 26.68% 27.49% 26.96% 22.39% 20.80% 26.00% 21.78%
Pre-tax, pre-provision income(3) $ 105,323 $ 105,266 $ 8,972 $ 112,101 $ 104,027 $ 331,662 $ 320,223
Pre-tax, pre-provision income per diluted share(3) $ 0.30 $ 0.30 $ 0.03 $ 0.32 $ 0.34 $ 0.95 $ 1.18
Pre-tax, pre-provision return on average assets(3) 1.15% 1.19% 0.10% 1.36% 1.30% 0.94% 1.13%
Net interest margin(4) 3.22% 3.54% 3.26% 3.34% 3.48% 3.42% 3.58%
Interest yield on average loans(4) 4.39% 4.47% 4.59% 4.62% 4.76% 4.51% 4.87%
Rate paid on interest-bearing liabilities(4) 0.48% 0.51% 0.61% 0.79% 0.82% 0.59% 0.85%
Efficiency ratio 69.39% 71.69% 97.47% 64.10% 66.03% 76.02% 71.58%
Effective tax rate 26.7% 29.7% 42.9% 35.0% 35.5% 29.6% 33.7%
Return on average assets(5) 0.67% 0.66% (0.12)% 0.73% 0.73% 0.48% 0.62%
Return on average equity(5) 4.92% 4.77% (0.90)% 4.96% 5.54% 3.45% 4.68%
Return on average tangible equity(3)(5) 10.45% 10.34% (1.64)% 7.90% 9.75% 6.55% 8.33%
Return on average common equity 4.62% 4.46% (1.64)% 4.88% 5.63% 3.09% 4.71%
Return on average tangible common equity(3) 10.72% 10.60% (3.18)% 8.12% 10.03% 6.30% 8.33%
(1) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
(2) Net revenue is comprised of net interest income and noninterest income.
(3) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(4) Yields and rates calculated on a tax equivalent basis.
(5) Return used to calculate ratio excludes preferred stock dividend.
First Niagara Financial Group, Inc.
Period End Balance Sheet
(in thousands)
2012 2011
December 31, September 30, June 30, March 31, December 31,
Cash and cash equivalents $ 430,862 $ 447,087 $ 488,227 $ 370,380 $ 836,555
Investment securities:
Available for sale 10,996,102 10,579,970 9,937,271 12,248,058 9,348,296
Held to maturity 1,299,806 1,387,763 1,463,872 2,503,156 2,669,630
FHLB and FRB common stock 420,277 373,311 329,555 499,328 358,159
Total investment securities 12,716,185 12,341,044 11,730,698 15,250,542 12,376,085
Loans held for sale 154,745 117,375 101,596 102,513 94,484
Loans and leases:
Commercial:
Real estate 7,093,193 6,835,971 6,710,009 6,369,098 6,244,381
Business 4,953,323 4,682,154 4,514,537 4,108,363 3,771,649
Total commercial loans 12,046,516 11,518,125 11,224,546 10,477,461 10,016,030
Consumer:
Residential real estate 3,761,567 3,870,756 4,037,045 3,881,003 4,012,267
Home equity 2,651,891 2,661,429 2,683,236 2,149,135 2,165,988
Indirect auto 601,456 419,258 185,774 -- --
Credit cards 314,973 308,387 304,368 -- --
Other consumer 333,609 328,571 328,547 283,320 278,298
Total consumer loans 7,663,496 7,588,401 7,538,970 6,313,458 6,456,553
Total loans and leases 19,710,012 19,106,526 18,763,516 16,790,919 16,472,583
Allowance for loan losses 162,522 149,933 138,516 126,746 120,100
Loans and leases, net 19,547,490 18,956,593 18,625,000 16,664,173 16,352,483
Bank owned life insurance 404,321 401,211 397,739 395,944 392,468
Goodwill and other intangibles 2,617,809 2,626,625 2,631,605 1,796,394 1,803,240
Other assets 937,317 983,999 1,130,891 937,859 955,300
Total assets $ 36,808,729 $ 35,873,934 $ 35,105,756 $ 35,517,805 $ 32,810,615
Deposits:
Savings accounts $ 3,887,587 $ 3,941,528 $ 4,103,773 $ 2,554,720 $ 2,621,016
Interest-bearing checking 4,450,970 4,090,322 3,887,568 2,431,672 2,259,576
Money market deposits 10,581,137 10,801,280 10,919,766 7,100,646 7,220,902
Noninterest-bearing deposits 4,643,580 4,658,374 4,774,764 3,200,824 3,335,356
Certificates of deposit 4,113,257 4,206,192 4,211,116 3,741,525 3,968,265
Total deposits 27,676,531 27,697,696 27,896,987 19,029,387 19,405,115
Short-term borrowings 2,983,718 1,995,610 958,044 6,353,189 2,208,845
Long-term borrowings 732,425 732,339 732,263 4,688,251 5,918,276
Other liabilities 487,958 532,868 700,249 571,532 480,201
Total liabilities 31,880,632 30,958,513 30,287,543 30,642,359 28,012,437
Preferred stockholders' equity 338,002 338,002 338,002 338,002 338,002
Common stockholders' equity 4,590,095 4,577,419 4,480,211 4,537,444 4,460,176
Total stockholders' equity 4,928,097 4,915,421 4,818,213 4,875,446 4,798,178
Total liabilities and stockholders' equity $ 36,808,729 $ 35,873,934 $ 35,105,756 $ 35,517,805 $ 32,810,615
Selected balance sheet information:
Total interest-earning assets(1) $ 32,321,964 $ 31,316,470 $ 30,403,035 $ 31,959,556 $ 29,284,139
Total interest-bearing liabilities 26,749,094 25,767,271 24,812,530 26,870,002 24,196,880
Net interest-earning assets $ 5,572,870 $ 5,549,199 $ 5,590,505 $ 5,089,554 $ 5,087,259
Tangible common equity(2) $ 1,972,286 $ 1,950,794 $ 1,848,606 $ 2,741,050 $ 2,656,936
Unrealized gain on securities, net of tax 208,271 204,347 133,430 152,408 105,276
Total core deposits $ 23,563,274 $ 23,491,504 $ 23,685,871 $ 15,287,862 $ 15,436,850
Originated loans(3) $ 13,372,357 $ 12,232,568 $ 11,392,158 $ 10,517,021 $ 9,876,005
Acquired loans(4) 6,513,636 7,085,839 7,600,213 6,459,798 6,801,689
Credit related discount on acquired loans(5) (175,981) (211,881) (228,855) (185,900) (205,111)
Total Loans $ 19,710,012 $ 19,106,526 $ 18,763,516 $ 16,790,919 $ 16,472,583
(1) Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) Originated loans represent total loans excluding acquired loans.
(4) Represents the carrying value of acquired loans plus the principal not expected to be collected.
(5) Represent principal on acquired loans not expected to be collected.
First Niagara Financial Group, Inc.
Average Balance Sheet and Related Tax Equivalent Yields & Rates
(in millions)
For the three months ended For year ending
December 31, 2012 September 30, 2012 December 31, 2011 December 31, 2012 December 31, 2011

Average
Balances

Interest(1)
Yields
and
Rates(1)(2)

Average
Balances

Interest(1)
Yields
and
Rates(1)

Average
Balances

Interest(1)
Yields
and
Rates(1)(2)

Average
Balances

Interest(1)
Yields
and
Rates(1)(2)

Average
Balances

Interest(1)
Yields
and
Rates(1)
Interest-earning assets:
Loans and leases(3)
Commercial:
Real estate $ 6,911 $ 79 4.45% $ 6,783 $ 80 4.60% $ 6,199 $ 82 5.19% $ 6,625 $ 318 4.72% $ 5,651 $ 305 5.33%
Business 4,783 47 3.89 4,609 45 3.81 3,663 40 4.24 4,402 176 3.94 3,209 138 4.23
Total commercial loans 11,694 126 4.22 11,392 125 4.28 9,862 122 4.84 11,027 494 4.41 8,860 443 4.93
Consumer:
Residential real estate 3,819 39 4.05 3,962 40 4.03 4,085 45 4.41 3,922 161 4.11 3,475 158 4.54
Home equity 2,659 29 4.31 2,672 30 4.42 2,166 24 4.48 2,476 109 4.39 1,973 90 4.54
Indirect auto 515 5 3.50 301 3 3.64 -- -- -- 228 8 3.65 -- -- --
Credit cards 310 8 10.19 308 9 11.31 -- -- -- 202 22 10.88 -- -- --
Other consumer 328 7 8.73 329 7 8.80 279 5 7.12 296 24 8.25 274 19 6.98
Total consumer loans 7,631 87 4.54 7,572 88 4.64 6,530 75 4.53 7,124 324 4.55 5,721 267 4.66
Total loans and leases 19,325 213 4.39 18,964 213 4.47 16,392 196 4.76 18,151 818 4.51 14,582 710 4.87
Residential MBS(2) 5,746 36 2.50 5,677 40 2.81 8,429 68 3.21 7,230 202 2.79 8,191 284 3.47
Commercial MBS 1,953 18 3.79 1,895 19 3.93 1,262 13 4.19 1,855 73 3.91 626 25 4.03
Other investment securities (4) 4,474 35 3.16 4,002 33 3.35 1,926 19 4.04 3,705 123 3.32 1,680 68 3.97
Total securities, at cost(2) 12,173 90 2.95 11,574 92 3.18 11,617 100 3.45 12,790 397 3.11 10,497 377 3.59
Money market and other investments 207 1 1.54 201 1 1.41 299 1 0.86 257 3 1.13 132 2 1.33
Total interest-earning assets(2) 31,705 $ 304 3.81% 30,739 $ 306 3.96% 28,308 $ 297 4.17% 31,198 $ 1,219 3.91% 25,211 $ 1,089 4.31%
Goodwill and other intangibles 2,619 2,627 1,810 2,315 1,625
Other noninterest-earning assets 2,005 1,938 1,578 1,804 1,424
Total assets $ 36,329 $ 35,304 $ 31,696 $ 35,317 $ 28,260
Interest-bearing liabilities:
Deposits
Savings accounts $ 3,898 $ 2 0.18% $ 4,026 $ 2 0.20% $ 2,622 $ 1 0.12% $ 3,451 $ 5 0.15% $ 2,287 $ 5 0.20%
Interest-bearing checking 4,181 1 0.07 3,871 1 0.06 2,101 1 0.12 3,347 2 0.07 1,958 2 0.12
Money market deposits 10,810 7 0.25 10,899 8 0.29 7,414 10 0.52 9,506 27 0.28 6,504 36 0.56
Certificates of deposit 4,259 8 0.71 4,083 8 0.75 4,162 10 0.99 4,048 33 0.81 4,057 40 0.98
Total interest bearing deposits 23,148 17 0.29% 22,879 19 0.32% 16,299 22 0.52% 20,352 67 0.33% 14,806 83 0.56%
Borrowings
Short-term borrowings 2,331 2 0.38% 1,666 1 0.36% 1,899 2 0.49% 3,163 17 0.53% 1,638 6 0.40%
Long-term borrowings 732 12 6.63 732 12 6.74 5,797 26 1.75 2,299 69 3.02 5,124 95 1.84
Total borrowings 3,063 14 1.87 2,398 13 2.31 7,696 28 1.44 5,462 86 1.58 6,762 101 1.49
Total interest-bearing liabilities 26,211 $ 31 0.48% 25,277 $ 32 0.51% 23,995 $ 49 0.82% 25,814 $ 153 0.59% 21,568 $ 184 0.85%
Noninterest-bearing deposits 4,645 4,618 3,077 4,041 2,595
Other noninterest-bearing liabilities 528 536 435 575 384
Total liabilities 31,384 30,431 27,507 30,430 24,547
Total stockholders' equity 4,945 4,873 4,189 4,887 3,713
Total liabilities and stockholders' equity $ 36,329 $ 35,304 $ 31,696 $ 35,317 $ 28,260
Net interest income (FTE) $ 273 $ 274 $ 248 $ 1,066 $ 904
Taxable Equivalent Adjustment(1) 4 4 5 18 23
Total core deposits $ 23,534 $ 10 0.16% $ 23,414 $ 11 0.18% $ 15,214 $ 12 0.29% $ 20,345 $ 34 0.17% $ 13,344 $ 43 0.33%
Total deposits 27,793 17 0.24% 27,497 19 0.27% 19,376 22 0.44% 24,393 67 0.27% 17,401 83 0.48%
Tax equivalent net interest rate spread(2) 3.33% 3.45% 3.35% 3.32% 3.46%
Tax equivalent net interest rate margin(2) 3.42% 3.54% 3.48% 3.42% 3.58%
(1) Tax equivalent interest income is calculated based upon a 35% effective tax rate.
(2) Amounts for the three months and year ended December 31, 2012 exclude accelerated CMO adjustments of $16 million and $25 million, respectively. The yields, including these adjustments, are:
Three months ended December 31, 2012 Year ended December 31, 2012
Residential MBS 1.37% 2.45%
Total securities, at cost 2.41% 2.91%
Total interest earning assets 3.61% 3.83%
Tax equivalent net interest rate spread 3.13% 3.24%
Tax equivalent net interest rate margin 3.22% 3.34%
(3) Includes nonaccrual loans.
(4) 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)
2012 2011 For year ending
Fourth Third Second First Fourth December 31, December 31,
Quarter Quarter Quarter Quarter Quarter 2012 2011
Beginning balance $ 149,933 $ 138,516 $ 126,746 $ 120,100 $ 112,749 $ 120,100 $ 95,354
Net loan (charge-offs) recoveries:
Commercial real estate $ (1,935) $ (1,791) $ (2,384) $ (5,994) $ 212 $ (12,104) $ (10,161)
Commercial business (3,385) (6,077) (10,958) (4,143) (4,665) (24,563) (14,618)
Residential real estate (658) (396) (155) (1,120) (318) (2,329) (986)
Home equity (673) (401) (1,536) (1,161) (268) (3,771) (2,101)
Other consumer (2,285) (1,406) (805) (836) (796) (5,332) (1,759)
Total net loan charge-offs $ (8,936) $ (10,071) $ (15,838) $ (13,254) $ (5,835) $ (48,099) $ (29,625)
Provision for loan losses 21,525 21,800 27,803 19,900 13,186 91,028 54,371
Allowance related to loans sold -- (312) (195) -- -- (507) --
Ending balance $ 162,522 $ 149,933 $ 138,516 $ 126,746 $ 120,100 $ 162,522 $ 120,100
Supplemental information
Allowance to loans 0.82% 0.78% 0.74% 0.75% 0.73% 0.82% 0.73%
Allowance for originated loans to originated loans(1) 1.20% 1.20% 1.19% 1.19% 1.20% 1.20% 1.20%
Net charge-offs to average loans (annualized)
Commercial real estate 0.11% 0.11% 0.15% 0.38% -0.01% 0.18% 0.18%
Commercial business 0.28% 0.53% 1.02% 0.42% 0.51% 0.56% 0.46%
Total commercial loans 0.18% 0.28% 0.49% 0.40% 0.18% 0.33% 0.28%
Residential real estate 0.07% 0.04% 0.02% 0.11% 0.03% 0.06% 0.03%
Home equity 0.10% 0.06% 0.25% 0.22% 0.05% 0.15% 0.11%
Other consumer 0.79% 0.60% 0.61% 1.20% 1.14% 0.73% 0.64%
Total consumer loans 0.19% 0.12% 0.15% 0.20% 0.08% 0.16% 0.08%
Total loans 0.18% 0.21% 0.36% 0.32% 0.14% 0.26% 0.20%
Net charge-offs of originated loans to average originated loans (annualized)(1)
Commercial real estate 0.07% 0.12% 0.18% 0.16% -0.05% 0.13% 0.26%
Commercial business 0.33% 0.64% 1.25% 0.54% 0.67% 0.68% 0.59%
Total commercial loans 0.19% 0.36% 0.66% 0.32% 0.25% 0.38% 0.39%
Residential real estate 0.15% 0.09% 0.04% 0.27% 0.08% 0.14% 0.06%
Home equity 0.21% 0.13% 0.51% 0.40% 0.10% 0.31% 0.21%
Other consumer 0.94% 0.59% 0.81% 1.25% 1.51% 0.84% 1.02%
Total consumer loans 0.35% 0.18% 0.28% 0.38% 0.17% 0.30% 0.17%
Total loans 0.24% 0.30% 0.55% 0.34% 0.22% 0.35% 0.32%
Nonperforming loans:
Originated:
Commercial real estate $ 50,848 $ 46,413 $ 46,881 $ 44,749 $ 43,119 $ 50,848 $ 43,119
Commercial business 47,076 37,375 30,714 39,682 20,173 47,076 20,173
Residential real estate 27,192 21,377 23,058 22,021 18,668 27,192 18,668
Home equity 14,233 8,084 8,119 7,071 6,790 14,233 6,790
Other consumer 3,737 938 926 697 1,048 3,737 1,048
Total originated nonperforming loans 143,086 114,187 109,698 114,220 89,798 143,086 89,798
Total acquired nonperforming loans(2) 29,638 28,193 19,374 19,041 -- 29,638 --
Total nonperforming loans 172,724 142,380 129,072 133,261 89,798 172,724 89,798
Real estate owned 10,114 9,669 10,632 7,202 4,482 10,114 4,482
Total nonperforming assets $ 182,838 $ 152,049 $ 139,704 $ 140,463 $ 94,280 $ 182,838 $ 94,280
Accruing troubled debt restructurings (TDR) $ 46,280 $ 55,732 $ 42,140 $ 42,358 $ 43,888 $ 46,280 $ 43,888
Loans 90 days past due still accruing(3) 171,548 145,323 125,668 116,810 143,237 171,548 143,237
Total classified loans(4) 708,468 693,006 732,762 753,536 748,375 708,468 748,375
Total criticized loans $ 1,002,659 $ 990,670 $ 1,030,471 $ 1,044,731 $ 1,144,222 $ 1,002,659 $ 1,144,222
Total nonperforming loans to loans 0.88% 0.75% 0.69% 0.79% 0.55% 0.88% 0.55%
Total nonperforming originated loans to originated loans(1) 1.07% 0.93% 0.96% 1.09% 0.91% 1.07% 0.91%
Total nonperforming assets to loans and real estate owned 0.93% 0.80% 0.74% 0.84% 0.57% 0.93% 0.57%
Total nonperforming assets to assets 0.50% 0.42% 0.40% 0.40% 0.29% 0.50% 0.29%
Allowance to nonperforming loans 94.1% 105.3% 107.3% 95.1% 133.7% 94.1% 133.7%
Texas ratio(5) 16.60% 14.16% 13.35% 8.97% 8.55% 16.60% 8.55%
(1) Originated loans represent total loans excluding acquired loans.
(2) Nonperforming acquired loans include certain lines of credit that are considered nonaccruing. The remaining credit discount, recorded at acquisition, is adequate to cover losses on these balances.
(3) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.
(4) Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business", under the heading "Classification of Assets" in our Annual Report on 10-K for the year ended December 31, 2011.
(5) Represents ratio computed 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.
First Niagara Financial Group, Inc.
Key Statistics
(Share counts in thousands)
2012 2011
December 31, September 30, June 30, March 31, December 31,
First Niagara Financial Group, Inc capital ratios:
Tier 1 risk based capital 9.29% 9.51% 9.40% 14.66% (1) 15.60% (1)
Tier 1 common capital(2) 7.45% 7.59% 7.41% 12.47% (1) 13.23% (1)
Total risk based capital 11.23% 11.48% 11.37% 16.75% (1) 17.84% (1)
Leverage 6.75% 6.83% 6.32% 9.67% (1) 9.97% (1)
Equity to assets 13.39% 13.70% 13.72% 13.73% (1) 14.62% (1)
Tangible common equity to tangible assets(2) 5.77% 5.87% 5.69% 8.13% (1) 8.57% (1)
First Niagara Bank, N.A capital ratios:
Tier 1 risk based capital 9.94% 10.19% 9.63% 14.69% (1) 14.66% (1)
Total risk based capital 10.66% 10.88% 10.57% 15.66% (1) 16.47% (1)
Leverage 7.23% 7.32% 6.48% 9.69% (1) 9.38% (1)
Number of branches 430 432 452 334 333
Full time equivalent employees 5,927 6,036 6,103 4,753 4,827
Share information and per share metrics:
Common shares outstanding 352,621 352,632 352,665 351,936 351,834
Preferred shares outstanding 14,000 14,000 14,000 14,000 14,000
Treasury shares 13,381 13,370 13,337 14,066 14,168
Market price (NASDAQ: FNFG): $ 7.93 $ 8.07 $ 7.65 $ 9.84 $ 8.63
Book value per share(3) 13.15 13.11 12.84 13.00 12.79
Tangible book value per share(2)(3) 5.65 5.59 5.30 7.86 7.62
Price/Book 60.30% 61.56% 59.58% 75.69% 67.47%
Price/Tangible book(2) 140.35% 144.36% 144.34% 125.19% 113.25%
Common stock dividends $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.16
Preferred stock dividends 0.54 0.54 0.54 0.37 --
Dividend payout ratio 53.33% 53.33% N/M 50.00% 84.21%
Dividend yield (annualized) 4.01% 3.94% 4.21% 3.27% 7.36%
N/M Not meaningful
(1) Ratios reflect the impact of our capital raise completed in December 2011, the proceeds of which were used to consummate the acquisition of branches from HSBC Bank-USA, National Association in May 2012.
(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.
(3) Share count excludes unallocated ESOP shares and unvested restricted stock shares.
First Niagara Financial Group, Inc.
Appendix A - Non-GAAP Reconciliation
(in thousands, except per share amounts)
2012 2011 For year ending
Fourth Third Second First Fourth December 31, December 31,
Quarter Quarter Quarter Quarter Quarter 2012 2011
Financial ratios computed on an operating basis(1):
Earnings per basic share $ 0.19 $ 0.19 $ 0.19 $ 0.19 $ 0.24 $ 0.75 $ 0.98
Earnings per diluted share 0.19 0.19 0.19 0.19 0.24 0.75 0.98
Weighted average shares outstanding - basic(2) 349,071 349,001 348,941 348,823 304,065 348,960 271,301
Weighted average shares outstanding - diluted(2) 349,663 349,371 348,941 349,069 304,341 349,368 271,612
Noninterest income as a percentage of net revenue(4) 25.48% 26.43% 22.96% 22.39% 20.80% 24.40% 21.78%
Pre-tax, pre-provision income 125,281 129,333 136,645 127,774 123,672 519,033 460,918
Pre-tax, pre-provision income per diluted share 0.36 0.37 0.39 0.37 0.41 1.49 1.70
Pre-tax, pre-provision return on average assets 1.37% 1.46% 1.51% 1.55% 1.55% 1.47% 1.63%
Net interest margin(3) 3.42% 3.54% 3.37% 3.34% 3.48% 3.42% 3.58%
Interest yield on average loans(3) 4.39% 4.47% 4.59% 4.62% 4.76% 4.51% 4.87%
Rate paid on interest-bearing liabilities(3) 0.48% 0.51% 0.61% 0.79% 0.82% 0.59% 0.85%
Efficiency ratio 65.24% 64.71% 60.63% 59.08% 59.61% 62.56% 59.09%
Effective tax rate 27.0% 30.9% 33.5% 35.0% 34.7% 31.7% 33.8%
Return on average assets 0.83% 0.83% 0.80% 0.85% 0.90% 0.83% 0.94%
Return on average equity 6.06% 6.04% 5.95% 5.81% 6.82% 5.97% 7.18%
Return on average tangible equity(5) 12.89% 13.11% 10.86% 9.24% 12.02% 11.34% 12.77%
Return on average common equity 5.86% 5.83% 5.72% 5.79% 6.93% 5.80% 7.22%
Return on average tangible common equity(6) 13.57% 13.86% 11.13% 9.63% 12.36% 11.81% 12.88%
Reconciliation of net interest income on operating basis to reported net interest income(1):
Total net interest income on operating basis (Non-GAAP) $ 268,566 $ 269,605 $ 267,371 $ 242,371 $ 242,513 $ 1,047,913 $ 881,247
Additional premium amortization on securities portfolio (16,280) -- (8,358) -- -- (24,638) --
Total reported net interest income (GAAP) 252,286 269,605 259,013 242,371 242,513 1,023,275 881,247
Reconciliation of noninterest income on operating basis to reported noninterest income(1):
Total noninterest income on operating basis (Non-GAAP) $ 91,821 $ 96,866 $ 79,703 $ 69,908 $ 63,685 $ 338,298 $ 245,309
Gain on securities portfolio repositioning -- 5,337 15,895 -- -- 21,232 --
Total reported noninterest income (GAAP) 91,821 102,203 95,598 69,908 63,685 359,530 245,309
Reconciliation of noninterest expense on operating basis to reported noninterest expense(1):
Total noninterest expense on operating basis (Non-GAAP) $ 235,106 $ 237,138 $ 210,429 $ 184,505 $ 182,526 $ 867,178 $ 665,638
Merger and acquisition integration expenses 3,678 29,404 131,460 12,970 6,149 177,512 98,161
Restructuring charges -- -- 3,750 2,703 13,496 6,453 42,534
Total reported noninterest expense (GAAP) $ 238,784 $ 266,542 $ 345,639 $ 200,178 $ 202,171 $ 1,051,143 $ 806,333
Reconciliation of net operating income to net income(1):
Net operating income (Non-GAAP) $ 75,358 $ 74,027 $ 72,188 $ 70,053 $ 72,057 $ 291,626 $ 266,718
Nonoperating income and expenses, net of tax:
Additional premium amortization on securities portfolio 11,633 -- 5,558 -- -- 17,191 --
Gain on securities portfolio repositioning -- (3,469) (10,331) -- -- (13,800) --
Merger and acquisition integration expenses 2,628 19,112 85,448 8,431 4,256 115,619 64,420
Restructuring charges -- -- 2,437 1,757 9,340 4,194 28,388
Total nonoperating expenses, net of tax 14,261 15,643 83,112 10,188 13,596 123,204 92,808
Net income (GAAP) $ 61,097 $ 58,384 $ (10,924) $ 59,865 $ 58,461 $ 168,422 $ 173,910
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) $ 67,811 $ 66,480 $ 64,641 $ 64,938 $ 72,057 $ 263,870 $ 266,718
Nonoperating income and expenses, net of tax:
Additional premium amortization on securities portfolio 11,633 -- 5,558 -- -- 17,191 --
Gain on securities portfolio repositioning -- (3,469) (10,331) -- -- (13,800) --
Merger and acquisition integration expenses 2,628 19,112 85,448 8,431 4,256 115,619 64,420
Restructuring charges -- -- 2,437 1,757 9,340 4,194 28,388
Total nonoperating income and expenses, net of tax 14,261 15,643 83,112 10,188 13,596 123,204 92,808
Net income available to common stockholders (GAAP) $ 53,550 $ 50,837 $ (18,471) $ 54,750 $ 58,461 $ 140,666 $ 173,910
Computation of pre-tax,pre-provision income:
Net interest income $ 252,286 $ 269,605 $ 259,013 $ 242,371 $ 242,513 $ 1,023,275 $ 881,247
Noninterest income 91,821 102,203 95,598 69,908 63,685 359,530 245,309
Noninterest expense (238,784) (266,542) (345,639) (200,178) (202,171) (1,051,143) (806,333)
Pre-tax, pre-provision income (GAAP) 105,323 105,266 8,972 112,101 104,027 331,662 320,223
Add back: non-operating premium amortization 16,280 -- 8,358 -- -- 24,638 --
Less: non-operating noninterest income (1) -- (5,337) (15,895) -- -- (21,232) --
Add back: non-operating noninterest expenses (1) 3,678 29,404 135,210 15,673 19,645 183,965 140,695
Pre-tax, pre-provision income (Non-GAAP)(1) $ 125,281 $ 129,333 $ 136,645 $ 127,774 $ 123,672 $ 519,033 $ 460,918
(1) Net interest income, noninterest income and 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) Yields and rates calculated on a tax equivalent basis.
(4) Net revenue is comprised of net interest income and noninterest income.
(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)
2012 2011 For year ending
Fourth Third Second First Fourth December 31, December 31,
Quarter Quarter Quarter Quarter Quarter 2012 2011
Computation of Ending Tangible Common Equity:
Total stockholders' equity $ 4,928,097 $ 4,915,421 $ 4,818,213 $ 4,875,446 $ 4,798,178 $ 4,928,097 $ 4,798,178
Less: Goodwill and other intangibles (2,617,809) (2,626,625) (2,631,605) (1,796,394) (1,803,240) (2,617,809) (1,803,240)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tangible common equity $ 1,972,286 $ 1,950,794 $ 1,848,606 $ 2,741,050 $ 2,656,936 $ 1,972,286 $ 2,656,936
Computation of Average Tangible Equity:
Total stockholders' equity $ 4,945,132 $ 4,872,605 $ 4,879,791 $ 4,850,276 $ 4,188,800 $ 4,887,071 $ 3,712,927
Less: Goodwill and other intangibles (2,619,322) (2,626,666) (2,206,682) (1,800,613) (1,809,690) (2,315,013) (1,624,671)
Tangible equity $ 2,325,810 $ 2,245,939 $ 2,673,109 $ 3,049,663 $ 2,379,110 $ 2,572,058 $ 2,088,256
Computation of Average Tangible Common Equity:
Total stockholders' equity $ 4,945,132 $ 4,872,605 $ 4,879,791 $ 4,850,276 $ 4,188,800 $ 4,887,071 $ 3,712,927
Less: Goodwill and other intangibles (2,619,322) (2,626,666) (2,206,682) (1,800,613) (1,809,690) (2,315,013) (1,624,671)
Less: Preferred stockholders' equity (338,002) (338,002) (338,002) (338,002) (66,226) (338,002) (16,693)
Tangible common equity $ 1,987,808 $ 1,907,937 $ 2,335,107 $ 2,711,661 $ 2,312,884 $ 2,234,056 $ 2,071,563
Computation of Texas Ratio:
Nonperforming Assets $ 182,838 $ 152,049 $ 139,704 $ 140,463 $ 94,280 $ 182,838 $ 94,280
Loans 90 days past due still accruing(1) 171,548 145,323 125,668 116,810 143,237 171,548 143,237
Sum of nonperforming assets and loans 90 days past due still accruing $ 354,386 $ 297,372 $ 265,372 $ 257,273 $ 237,517 $ 354,386 $ 237,517
Tangible common equity $ 1,972,286 $ 1,950,794 $ 1,848,606 $ 2,741,050 $ 2,656,936 $ 1,972,286 $ 2,656,936
Allowance for loan loss 162,522 149,933 138,516 126,746 120,100 162,522 120,100
Sum of tangible common equity and allowance for loan loss $ 2,134,808 $ 2,100,727 $ 1,987,122 $ 2,867,796 $ 2,777,036 $ 2,134,808 $ 2,777,036
Sum of nonperforming assets and acquired loans 90 days past due still accruing/Sum of tangible common equity and allowance for loan loss 16.60% 14.16% 13.35% 8.97% 8.55% 16.60% 8.55%
Computation of Tier 1 Common Capital:
Tier 1 capital $ 2,264,679 $ 2,225,121 $ 2,128,702 $ 3,009,727 $ 2,962,031 $ 2,264,679 $ 2,962,031
Less: Qualifying restricted core capital elements (112,025) (111,820) (111,630) (111,453) (111,284) (112,025) (111,284)
Less: Perpetual non-cumulative preferred stock (338,002) (338,002) (338,002) (338,002) (338,002) (338,002) (338,002)
Tier 1 common capital (Non-GAAP) $ 1,814,652 $ 1,775,299 $ 1,679,070 $ 2,560,272 $ 2,512,745 $ 1,814,652 $ 2,512,745
(1) 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.

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.comSource:First Niagara Financial Group, Inc.