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First Niagara Reports Fourth Quarter And Full Year 2012 Results

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.

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