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First Niagara Reports Third Quarter 2012 Operating Net Income Per Share Of $0.19

Net Interest Income

Net interest income of $269.6 million increased 4% from the prior quarter reflecting the favorable impacts of debt repayments using low-cost deposits acquired through the HSBC branch transaction as well as lower premium amortization expense on mortgage backed securities. Those benefits were partially offset by net interest income foregone on the sale of $3.1 billion of mortgage backed securities at the end of June. Tax equivalent net interest margin in the third quarter of 2012 was 3.54%, a 28 basis points increase over the prior quarter.

Average earning assets decreased 22% annualized compared to the prior quarter given the sale of the mortgage backed securities. Investment securities averaged $11.2 billion, a $2.8 billion decrease from the prior period. This decrease was offset by the $1.3 billion increase in average loans.

Credit Quality

At September 30, 2012, the allowance for loan losses was $149.9 million compared to $138.5 million at June 30, 2012.  Information for both the originated and acquired portfolios follows. 
  Q3 2012 Q2 2012
$ in millions Originated Acquired Total Originated Acquired Total
Provision for loan losses* $ 21.4 $ 0.4 $ 21.8 $ 25.4 $ 2.4 $ 27.8
Net charge-offs 9.1 1.0 10.1 15.1 0.7 15.8
NCOs/ Avg Loans 0.30% 0.06% 0.21% 0.55% 0.04% 0.36%
Total loans** $ 12,232 $ 7,086 $ 19,318 $ 11,392 $ 7,600 $ 18,992
(*) Excludes provision for unfunded commitments of $0.4 million and $0.3 million in 3Q12 and 2Q12, respectively
(**) Acquired loans before associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $21.4 million, down $4 million from the prior quarter. The company provided $12.3 million in excess of net charge-offs to support the ongoing momentum in originated loans. Net charge-offs decreased significantly to $9.1 million or 30 basis points of average originated loans from $15.1 million or 55 basis points in the prior quarter.

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