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First Niagara profit dips in Q4

Rochester Business Journal
January 23, 2013

First Niagara Financial Group Inc. on Wednesday reported an 8.5 percent drop in net income for the fourth quarter.

The Buffalo-based bank earned $53.5 million, or 15 cents a share, compared with $58.5 million and 19 cents in the fourth quarter of 2011. Analysts projected earnings of 18 cents a share.

Excluding a previously announced pre-tax adjustment of $16 million, or 3 cents a share, to accelerate premium amortization on the bank’s collateral mortgage obligations portfolio, and $3.7 million in restructuring charges, operating net income available to shareholders totaled $67.8 million, or 19 cents a share.

That compares with operating income of $72.1 million, or 24 cents per share, a year ago. Wall Street analysts typically do not include one-time charges in their projections.

The impact of the CMO portfolio on fourth-quarter results is disappointing, President and CEO John Koelmel said in a statement, but does not diminish the bank’s core operating performance.

“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,” Koelmel said.

“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.”

Average commercial loans increased 11 percent annualized over the third quarter of 2012, the 12th consecutive quarter of loan growth of at least 10 percent, the bank reported.

First Niagara set aside $21.3 million as insurance against bad loans, up from $13.4 million in the fourth quarter of 2011 but down slightly from $22.2 million in the third quarter of 2012.

The latest provisions include $13.7 million for loan growth and $7.6 million to cover net charge-offs, the bank reported.

For the full year, First Niagara earned $140.7 million, or 40 cents a share. Net income in 2011 totaled $173.9 million and 64 cents.

Those totals, calculated using generally accepted accounting principles, included pre-tax acquisition and restructuring expenses of $184 million, accelerated premium amortization adjustments of $24.6 million, and gains of $21.2 million with the sale of $3.1 billion of mortgage backed securities in the second quarter.

Operating net income attributable to shareholders for the year was $263.9 million, or 75 cents per share, down from $266.7 million and 98 cents a share in 2011.

The decline was the result of foregone interest income on the $3.1 billion in securities sold and continued pressures on asset pricing from the low-interest rate environment. It also included the impacts from the issuance of common and preferred shares in December 2011 to fund the May 18, 2012, purchase of deposits and loans involved in the acquisition of HSBC Bank USA N.A. branches, the bank said.

First Niagara Bank N.A. ranks fifth in the Rochester market with local deposits of $1.5 billion, data from the Federal Deposit Insurance Corp. shows.

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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