The CEO said that after "evaluating the realities and unintended outcomes of that strategy during this year's increasingly volatile environment," First Niagara's management "obviously concluded that it wasn't beneficial to continue to carry the increasingly uncontrollable and very unpredictable risk associated with the portion of the MBS book we sold, that while still additive financially to our results and outcomes, those risks had become value dilutive to the increasingly positive results and outcomes from our core business that's performing better today than ever."
While giving up some "short-term earnings for the next couple of years," the balance sheet restructuring has removed "the additional downside exposure that we believe would have materialized had we retained the entire portfolio," while also positioning the bank to take advantage of the eventual rise in interest rates, with the "now-improved asset sensitivity of the balance sheet," Koelmel said.
Speaking about the HSBC branch transition, Koelmel said that "net deposit attrition on balances acquired continues to track very favorably to both our expectations as well as our historic experience, and to date is less than 2%," and that "customer activity in the acquired branches is running about 25% ahead of legacy new account activity levels."
Koelmel also sought to soothe investors by emphasizing First Niagara's "M&A timeout," with the bank focused "completely on running the business we have even better than we're already doing so today."First Niagara's shares closed at $7.94 Wednesday, down 6% year-to-date, following a 35% decline during 2011.