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First Niagara Reports Fourth Quarter And Full Year 2012 Results

Average indirect auto loan balances increased $214 million to $515 million. During the fourth quarter, new originations yielded 3.43%. The company continues to target and engage new car dealers within its contiguous footprint to lend and finance primarily used car purchases for high credit quality customers.

Average residential real estate loans declined by $143 million, or 14% annualized, from the third quarter reflecting higher prepayments. Average credit card and other consumer loan balances were unchanged.


The company's strategic focus on core customer acquisition continued to allow it to successfully re-position its account mix and increase low cost deposits.  Average transactional accounts, which include interest-bearing checking and noninterest-bearing balances, increased to $8.8 billion, up 16% annualized compared to the prior quarter, with double-digit increases across each market. These low-cost deposits now represent 32% of the company's deposit base, compared to 26% a year ago.

Average noninterest-bearing deposits increased 2% annualized while interest-bearing checking deposits increased 32% annualized over the prior quarter driven by strong customer engagement that resulted in higher account balances. These increases were offset by the company's pricing initiatives to reduce higher-cost money market balances. Average total core deposits, excluding time deposits, increased to $23.5 billion, or 2% annualized, compared to the third quarter.

Net Interest Income

Non-GAAP net interest income of $268.6 million was essentially flat to the prior quarter.  The benefits of a 13% annualized increase in average earning assets were offset by the impacts of continued downward re-pricing pressure on earning asset yields. On a GAAP basis, net interest income of $252.3 million included the $16.3 million accelerated premium amortization adjustment related to the CMO portfolio.

Total premium amortization on the CMO portfolio increased to $30.8 million in the fourth quarter from $11.1 million in the prior quarter, driven by the $16.3 million in accelerated CMO premium amortization adjustment. Excluding the impacts of that increase, net interest margin in the fourth quarter was 3.46%, an eight basis point decline from the third quarter of 2012. Continued compression of loan yields from prepayments and lower spreads was partially offset by a three basis point decline in cost of interest bearing deposits.

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