Oct. 29, 2009 (PR Newswire) -- BUFFALO, N.Y., Oct. 29 /PRNewswire-FirstCall/ --
-- Operating earnings increase 15% vs. prior year, 7% above linked quarter
-- Robust commercial loan and core deposit growth in Upstate New York
markets
-- Strong capital position further enhanced by $460 million equity offering
-- Credit quality continues to compare well with industry peers
-- National City acquisition successfully completed - franchise now totals
$14 billion in assets and 170 branches
First Niagara Financial Group, Inc. (Nasdaq: FNFG) third quarter 2009 results show the bank continues to leverage its strategic business model and superior capital position to fuel profitable growth and further boost lending in its markets, which have now been expanded with the completion of last month's acquisition of 57 National City Bank branch locations in Western Pennsylvania. During the quarter, the Company also completed its third successful equity offering over the past twelve months, raising nearly $1 billion in new capital during last year.
For the third quarter ended September 30, 2009, the Company posted operating (Non-GAAP) net income of $27.3 million or $0.19 per diluted share. Reported (GAAP) net income was $10.9 million or $0.07 per diluted share, including $16.4 million in nonrecurring expenses, net of tax, primarily related to the National City branch transaction and First Niagara's pending acquisition of Harleysville National Bank in Eastern Pennsylvania.
"Our performance once again reflects our position of strength in this tough recessionary environment," President and CEO John R. Koelmel said. "We continue to increase profitability by efficiently executing our relationship-based strategy with both existing and new customers as demonstrated by our solid loan and core-deposit growth. Initial trends from our recent entry into Western Pennsylvania also indicate that we will realize similar results in those new markets. Our latest equity offering evidences continued investor confidence and enables us to further leverage our new 'super-capitalized' position by providing us the firepower to confidently pursue disciplined and opportunistic growth in all of our markets."
"We have coupled dramatic and opportunistic growth over the last 12 months with strict adherence to our underwriting and capital-management disciplines, enabling us to distinguish ourselves in terms of performance and execution, "Chief Financial Officer Michael W. Harrington said. "The opportunities to employ our added capital at superior returns are quite compelling and will quickly offset the short-term dilutive effect of the incremental shares issued. Our growing loan portfolio continues to perform as we expected under current market conditions, with a credit-quality profile that compares very favorably to our peers."
Operating Results (Non-GAAP) Q3 2009 Q2 2009 Q3 2008
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Net interest income $ 98.9 $ 79.9 $ 70.2
Provision for credit losses 15.0 8.9 6.5
Noninterest income 30.7 28.8 29.2
Noninterest expense 70.9 60.3 56.8
Net income $ 27.3 $ 25.5 $ 23.7
Weighted average diluted
shares outstanding 147.2 140.2 106.8
Earnings per diluted share $ 0.19 $ 0.18 $ 0.22
Reported Results (GAAP)
---------------------------
Nonrecurring(a) $16.4 $4.7 $-
Net income 10.9 20.8 23.7
TARP(b) - 9.4 -
Net income available to common
shareholders 10.9 11.4 23.7
Earnings per diluted share $0.07 $0.08 $0.22
All amounts in millions except earnings per diluted share. The Non-GAAP/Operating Results table above summarized the Company's operating results excluding certain non-recurring items.
(a) Q3 2009: After-tax noninterest income: Gain on the sale of the merchant services' customer list of $1.5 million. After-tax noninterest expense: Expenses of $14.9 million, primarily related to the NatCity branch acquisition and anticipated merger with Harleysville National Corporation. Also includes a $3.0 million contribution to the First Niagara Bank Foundation in support of charitable giving purposes in Western Pennsylvania. Q2 2009: After-tax noninterest expense: FDIC's special assessment charge of $3.3 million based on each insured depository institution's assets less Tier 1 Capital. Also includes expenses related to the NatCity branch acquisition of $1.4 million.
(b) Q2 2009: Accelerated discount accretion of $7.7 million resulting from the redemption of preferred stock purchased by the U.S. Treasury Department under the Troubled Asset Relief Program and $1.7 million of accrued dividends and preferred stock discount accretion through the redemption date.
Loans
Excluding the loans acquired with the National City branches, average commercial loan balances rose by $98 million or 10% annualized over the linked quarter. This strong growth reflects a 27% increase in loan originations for the current quarter as the Company continues to capitalize on the ongoing competitive dislocation in its markets. Similarly, home equity average balances increased by $13 million or 8% annualized. Residential loan originations totaled $139 million in the third quarter while average balances declined by $97 million due to the Company's long-standing balance sheet management practice of selling the majority of its long-term fixed rate originations into the secondary market.
Credit Quality
Nonperforming loans increased to $66.8 million or 0.93% of total loans at September 30, 2009 from $52.3 million or 0.81% at June 30, 2009, while net charge-offs in the third quarter amounted to $14.5 million or an annualized 0.87% of average loans compared to $6.0 million or 0.37% in the linked quarter. The entire increase in the level of nonperforming loans and net chargeoffs in the third quarter was attributable to two in-market commercial loans within the Company's $118 million shared national credit portfolio. The provision for credit losses was $15.0 million for the quarter, compared to $8.9 million in the second quarter and $6.5 million a year ago. The allowance for credit losses at September 30, 2009 was 1.15% of total loans and 124% of nonperforming loans. Excluding loans obtained in the NatCity branch acquisition, which were recorded at fair-market value as of the acquisition date, the allowance for credit losses was 1.28% of total loans, consistent with the linked quarter.
Deposits
The Company continued to generate robust core deposit growth as a result of its strong focus on building lower cost, relationship based deposit customers. Excluding the deposits associated with the acquired branches, average core deposits grew by $272 million or 25% annualized over the linked quarter. This increase, supported by ongoing promotional campaigns, was marked by new money market and business checking account activity. Core deposits now comprise 75% of total deposits as higher cost CD balances declined by $288 million from the prior quarter.
Additionally, the Company's liquidity position was significantly strengthened by this acquisition which brought the loans-to-deposits ratio to 72% at September 30, 2009.
Net Interest Income
Net interest income increased by 24% from the linked quarter to $98.9 million and was accompanied by significantly lower funding costs in the third quarter. The reduced cost of funds was attributable to the strong growth in core deposits and the runoff of higher rate CD's. In addition, the use of advantaged wholesale borrowings to fund the purchase of targeted earning assets in anticipation of the sizable cash liquidity provided by the branch acquisition was a key driver of the increase in net interest income. The low cost, short-term borrowings used to fund these purchases were subsequently repaid upon the completion of the branch acquisition. Despite the lower spreads related to these securities positions, the tax equivalent net interest margin improved by 3 basis points over the linked quarter to 3.66% owing to the strong growth in our loans and core deposits.
Noninterest Income
Operating (Non-GAAP) noninterest income grew to $30.7 million in the third quarter from $28.8 million in the second quarter. Added deposit activity revenues from the acquired branch locations along with higher mortgage-related income more than offset seasonal declines in insurance and benefits consulting fees. Reported (GAAP) noninterest income includes a $2.5 million gain on the sale of the merchant services' customer list.
Noninterest Expense
Operating (Non-GAAP) noninterest expense for the third quarter increased to $70.9 million from $60.3 million in the second quarter. Operating costs attributable to the acquired branches within the quarter primarily contributed to increases in each major expense category, including associated FDIC premiums. Nonetheless the Company's efficiency ratio (Non-GAAP) improved further to 54.7%. Reported (GAAP) noninterest expense included $23.4 million in integration expenses related to the branch acquisition.
Capital Management
The tangible common equity ratio of 11.0% at September 30, 2009 compares to 10.5% in the linked quarter and was substantially above the 7.8% a year ago. The higher ratio reflects the benefit of the $460 million of capital raised through the September equity offering, the third successful equity offering since the fourth quarter of last year and a period in which the Company raised $955 million in new capital.
On October 27, 2009, the Board of Directors declared a quarterly dividend of fourteen cents ($0.14) per share on outstanding FNFG common stock, consistent with the prior quarter and prior year levels. The dividend is payable on November 24, 2009 to stockholders of record on November 10, 2009.
First Niagara Financial Group, Inc., through its wholly owned subsidiary First Niagara Bank, had assets of $14.1 billion and deposits of $9.9 billion at September 30, 2009. First Niagara Bank is a community-oriented bank providing financial services to individuals, families and businesses through 170 branches and five Regional Market Centers across Upstate New York and Western Pennsylvania. In July 2009, First Niagara announced its plans to acquire Harleysville National Corporation and its $5.6 billion in assets and 83 branches in the Philadelphia area, subject to regulatory and Harleysville shareholder approval. For more information, visit www.fnfg.com.
Conference Call - A conference call will be held at 11 a.m. Eastern Time on Thursday, October 29, 2009 to discuss the Company's financial results and business strategy. Those wishing to participate in the call may dial toll-free 1-877-709-8150. A replay of the call will be available until November 12, 2009 by dialing 1-877-660-6853, account #240, ID # 335041.
Non-GAAP Measures - 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 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. The non-GAAP financial measures of tangible book value and tangible equity exclude intangible assets from total equity.
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.
Summary of Quarterly Financial Data
2009
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Sept.
