[LOGO OF FIRST NIAGARA FINANCIAL GROUP, INC.]
FIRST NIAGARA FINANCIAL GROUP REPORTS NET INCOME OF $24.2 MILLION
FOR THE THIRD QUARTER OF 2005, UP 81%
Lockport, N.Y. - October 14, 2005 - First Niagara Financial Group, Inc. (NASDAQ:
FNFG), today announced that net income for the third quarter of 2005 increased
to $24.2 million, or $0.22 per diluted share from $13.3 million, or $0.17 per
diluted share for the same period of 2004. This represents an 81% increase in
net income and a 29% increase in diluted earnings per share over the prior year
third quarter. Net income and earnings per share were consistent with the linked
quarter.
"Another quarter of solid performance," stated President and CEO Paul J.
Kolkmeyer "was driven by our ongoing focus on meeting the financial needs of our
customers, which again resulted in strong loan and deposit growth. We also
continue to benefit from a diversified financial services business model, which
contributes to earnings growth by minimizing the impact of narrowing net
interest margins. We remain confident this strategy will enable us to grow and
expand our customer relationships and further drive our business expansion for
the remainder of the year and into 2006."
Net interest income of $63.5 million was consistent with the linked quarter, as
the benefits of 6% net earning asset growth was offset by additional tightening
of the Company's net interest margin to 3.69%. The margin continues to be
impacted by a combination of the flat yield curve, market pressures on loan
spreads and the change in deposit funding mix towards higher cost certificates.
During the quarter, total loans increased $95.5 million, including a 7%
annualized increase in commercial real estate and business loans and an 8%
increase in home equity loans. Also during the quarter, the Company's
residential real estate loans increased 4% on an annualized basis primarily in
short-term fixed and variable rate loans, which are the products the Company
holds in portfolio.
During the third quarter the Company continued to benefit from a favorable
credit environment. As a result, $1.6 million, or 0.13% of average loans, was
provided for credit losses during the three month period. Non-performing assets
were 0.29% of total assets at month-end, compared to 0.25% at the end of the
prior quarter. The ratio of the allowance for credit losses to total loans and
non-performing loans was 1.40% and 323%, respectively at September 30, 2005. Net
charge-offs amounted to 0.17% of average total loans during the quarter and
0.13% year to date, below the levels seen over the last several years.
Deposits increased $99.2 million from June 30, 2005, which is equivalent to a 7%
annualized growth rate. This expansion continues to be driven by relationship
based products as well as deposit acquisition and retention initiatives pursuant
to the Company's strategic plan.
For the quarter, noninterest income totaled $25.6 million, including $3.3
million of revenues from the Hatch Leonard Naples and Burke Group acquisitions
and a $1.4 million gain from the sale of the Company's ownership interest in a
real estate joint venture. Additionally, ongoing efforts to more fully implement
the Company's financial services business model throughout its branch network
resulted in a 7% increase in banking services revenue and a 9% increase in
lending and leasing income. As a result, noninterest income represented 28% of
total net revenues (the sum of net interest income and non interest income),
excluding the joint venture gain, versus 24% for the linked quarter.
Noninterest expense for the third quarter increased to $47.8 million, including
$3.2 million of operating expenses, primarily salaries and benefits,
attributable to Hatch Leonard Naples and the Burke Group. However, as a result
of the Company's continuing focus on increasing its operating leverage by
growing revenues, the efficiency ratio improved to 54.5%, excluding the joint
venture gain, compared to 55.0% for the linked quarter.
The effective tax rate for the current quarter was 39.1% compared to 34.7% for
the linked quarter. The increase was the result of a $1.4 million tax charge
relating to the surrender of $40 million of acquired bank owned life insurance.
Excluding this one-time charge, the effective tax rate was 35.5%.
For the three months ended September 30, 2005, the Company repurchased an
additional 1.0 million shares of its common stock, which brings the total shares
purchased in 2005 to 5.3 million. As of quarter-end, 4.1 million shares remain
available for repurchase under the current 5.8 million authorization. The extent
to which shares are repurchased will continue to depend on a number of factors
including market trends and prices as well as alternative uses for capital.
Outlook - "Given the results of the first three quarters, we are comfortable
with the current consensus estimate of $0.85 per diluted share for 2005," stated
Executive Vice President and Chief Financial Officer, John R. Koelmel. "Our
current forecast takes into consideration the expectation that the yield curve
will remain flat, and that our net interest margin will tighten somewhat further
for the remainder of the year. However, we anticipate that the impact of the
margin compression will be minimized by the benefits of our continuing loan and
deposit growth, strong credit quality, and expansion of our diversified
financial services businesses."
Profile - First Niagara Financial Group, Inc., through its wholly owned
subsidiary First Niagara Bank, has assets of $8.0 billion and deposits of $5.3
billion. First Niagara Bank is a full-service, community-oriented bank that
provides financial services to individuals, families and businesses through 117
branches and several financial services subsidiaries across New York State.
Conference Call - A conference call will be held at 11:00 a.m. Eastern Time on
Friday October 14, 2005 to discuss these third quarter results, as well as the
Company's strategy and future outlook. Those wishing to participate may dial
1-877-709-8150. A replay of the call will be available until October 28, 2005 by
dialing 1-877-660-6853, account number 240, conference number 170070.
Forward-Looking Statements - This press release contains forward-looking
statements with respect to the financial condition and results of operations of
First Niagara Financial Group, Inc. including, without limitations, statements
relating to the earnings outlook of the Company. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements, include among others, the following possibilities:
(1) changes in the interest rate environment; (2) competitive pressure among
financial services companies; (3) general economic conditions including an
increase in non-performing loans that could result from an economic downturn;
(4) changes in legislation or regulatory requirements; (5) difficulties in
continuing to improve operating efficiencies; (6) difficulties in the
integration of acquired businesses; and (7) increased risk associated with an
increase in commercial real-estate and business loans and non-performing loans.
Officer Contacts
- ----------------
Paul J. Kolkmeyer........ President and CEO
John R. Koelmel.......... Chief Financial Officer
Christopher J. Thome..... Reporting and Investor Relations Manager
(716) 625-7645
chris.thome@fnfg.com
Leslie G. Garrity........ Public Relations and Corporate Communications Manager
(716) 625-7528
leslie.garrity@fnfg.com
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data
2005 2004
----------------------------------------------- ------------------------------
September 30, June 30, March 31, December 31, September 30,
------------- --------- --------- ------------ -------------
=================================================================================================================================
SELECTED FINANCIAL DATA
(Amounts in thousands)
=================================================================================================================================
Securities available for sale $ 1,663,178 1,726,822 1,741,486 1,170,129 1,171,011
Loans and leases:
Commercial:
Real estate $ 1,818,217 1,773,773 1,721,393 1,268,858 1,212,545
Business $ 479,473 482,855 462,549 345,520 342,382
----------- --------- --------- --------- ---------
Total commercial loans $ 2,297,690 2,256,628 2,183,942 1,614,378 1,554,927
Residential real estate $ 2,136,961 2,117,609 2,114,420 1,132,471 1,150,032
Home equity $ 383,350 355,030 344,589 247,190 236,357
Other consumer $ 181,488 178,681 186,413 174,309 185,518
Specialized lending $ 159,935 158,361 154,380 79,358 80,264
Net deferred costs and discounts $ 16,153 13,798 12,573 8,971 9,123
----------- --------- --------- --------- ---------
Total loans and leases $ 5,175,577 5,080,107 4,996,317 3,256,677 3,216,221
Allowance for credit losses $ 72,290 72,869 72,868 41,422 41,273
----------- --------- --------- --------- ---------
Loans and leases, net $ 5,103,287 5,007,238 4,923,449 3,215,255 3,174,948
Goodwill and other intangibles $ 763,250 735,514 738,191 345,660 347,865
Total assets $ 8,039,284 7,982,290 7,907,976 5,078,374 5,065,135
Total interest-earning assets $ 6,905,767 6,838,326 6,780,978 4,445,724 4,410,707
Deposits:
Core:
Savings $ 1,652,552 1,664,203 1,705,258 1,086,769 1,066,321
Interest-bearing checking $ 1,130,264 1,170,013 1,241,760 912,598 919,378
Noninterest-bearing $ 569,308 567,134 524,219 291,491 285,322
----------- --------- --------- --------- ---------
Total core deposits $ 3,352,124 3,401,350 3,471,237 2,290,858 2,271,021
Certificates $ 1,996,097 1,847,696 1,704,498 1,046,824 1,045,604
----------- --------- --------- --------- ---------
Total deposits $ 5,348,221 5,249,046 5,175,735 3,337,682 3,316,625
Short-term borrowings $ 436,348 454,361 384,399 209,236 192,282
Long-term borrowings $ 726,979 790,967 851,461 541,450 532,996
Total interest-bearing liabilities $ 5,942,240 5,927,240 5,887,376 3,796,877 3,756,581
Stockholders' equity $ 1,380,970 1,381,168 1,390,713 928,162 937,307
Tangible equity (1) $ 617,720 645,654 652,522 582,502 589,442
Fair value adjustment included in
stockholders' equity $ (15,005) (8,080) (15,247) (5,106) (3,625)
Net earning assets $ 963,527 911,086 893,602 648,847 654,126
Common shares outstanding (2) 109,755 110,162 112,460 78,277 79,246
Treasury shares 6,075 5,680 3,327 1,781 747
Total loans serviced for others $ 372,341 368,436 372,461 325,125 326,936
=================================================================================================================================
CAPITAL
=================================================================================================================================
Tier 1 risk based capital 11.95% 12.01% 12.52% 16.40% 16.43%
Total risk based capital 13.20% 13.26% 13.77% 17.65% 17.68%
Tier 1 (core) capital 8.11% 8.10% 8.44% 11.40% 11.31%
Tangible capital 8.11% 8.10% 8.44% 11.40% 11.31%
Equity to assets 17.18% 17.30% 17.59% 18.28% 18.51%
Tangible equity to tangible assets(1) 8.49% 8.91% 9.10% 12.31% 12.50%
Book value per share (2) $ 12.58 12.54 12.37 11.86 11.83
Tangible book value per share (1)(2) $ 5.63 5.86 5.80 7.44 7.44
=================================================================================================================================
ASSET QUALITY DATA
(Amounts in thousands)
=================================================================================================================================
Non-performing loans:
Commercial real estate $ 8,791 4,339 4,513 3,416 5,414
Commercial business $ 2,541 3,864 2,005 1,564 1,745
Residential real estate $ 5,389 5,472 7,694 4,276 4,536
Home equity $ 621 685 803 519 390
Other consumer $ 1,060 667 915 801 677
Specialized lending $ 3,945 4,058 4,148 1,452 2,177
----------- --------- --------- --------- ---------
Total non-performing loans $ 22,347 19,085 20,078 12,028 14,939
Real estate owned $ 1,097 977 1,111 740 691
----------- --------- --------- --------- ---------
Total non-performing assets $ 23,444 20,062 21,189 12,768 15,630
Provision for credit losses $ 1,647 900 2,301 1,846 1,742
Net loan charge-offs $ 2,226 899 1,539 1,697 1,903
Net charge-offs to average loans (annualized) 0.17% 0.07% 0.13% 0.21% 0.24%
Provision for credit losses as a
percentage of average loans (annualized) 0.13% 0.07% 0.19% 0.23% 0.22%
Total non-performing loans to total loans 0.43% 0.38% 0.40% 0.37% 0.46%
Total non-performing assets as a
percentage of total assets 0.29% 0.25% 0.27% 0.25% 0.31%
Allowance for credit losses to total loans 1.40% 1.43% 1.46% 1.27% 1.28%
Allowance for credit losses
to non-performing loans 323.5% 381.8% 362.9% 344.4% 276.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Personnel FTE 1,922 1,777 1,720 1,200 1,207
Number of branches 117 116 115 71 71
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2005 2004
------------------------------------------------------ ---------------------------------------
Year-to-Date Third Second First Year Ended Fourth Third
September 30, Quarter Quarter Quarter December 31, Quarter Quarter
------------- ---------- ---------- ---------- ------------ ---------- ----------
===================================================================================================================================
SELECTED OPERATIONS DATA
(Amounts in thousands)
===================================================================================================================================
Interest income $ 276,742 96,297 93,930 86,515 224,578 58,954 56,818
Interest expense $ 89,454 32,801 30,368 26,285 68,476 18,028 17,180
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income $ 187,288 63,496 63,562 60,230 156,102 40,926 39,638
Provision for credit losses $ 4,848 1,647 900 2,301 8,442 1,846 1,742
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for credit losses $ 182,440 61,849 62,662 57,929 147,660 39,080 37,896
Noninterest income:
Banking services $ 27,552 10,115 9,448 7,989 19,818 5,378 5,296
Risk management services $ 20,871 8,840 6,162 5,869 17,391 4,193 4,308
Wealth management services $ 4,327 1,435 1,451 1,441 4,764 1,172 1,257
Lending and leasing $ 5,269 1,923 1,770 1,576 4,676 1,359 1,117
Bank-owned life insurance $ 3,093 965 1,072 1,056 3,761 860 826
Other $ 3,340 2,362 498 480 1,456 559 303
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest income $ 64,452 25,640 20,401 18,411 51,866 13,521 13,107
Noninterest expense:
Salaries and benefits $ 71,892 26,006 23,677 22,209 65,264 16,676 16,790
Occupancy and equipment $ 13,919 4,765 4,677 4,477 12,513 2,958 3,079
Technology and communications $ 13,982 5,091 4,827 4,064 11,499 3,163 2,883
Marketing and advertising $ 5,539 1,685 2,143 1,711 4,738 1,403 998
Professional services $ 6,064 1,718 1,802 2,544 5,117 1,889 1,460
Amortization of intangibles $ 8,616 3,254 2,854 2,508 4,605 1,218 1,182
Other $ 17,810 5,289 6,181 6,340 17,114 4,737 3,986
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest expense $ 137,822 47,808 46,161 43,853 120,850 32,044 30,378
Income before income taxes $ 109,070 39,681 36,902 32,487 78,676 20,557 20,625
Income taxes $ 39,711 15,508 12,811 11,392 26,859 6,998 7,295
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 69,359 24,173 24,091 21,095 51,817 13,559 13,330
========== ========== ========== ========== ========== ========== ==========
===================================================================================================================================
STOCK AND RELATED PER SHARE DATA
===================================================================================================================================
Net income per share:
Basic $ 0.63 0.22 0.22 0.19 0.66 0.17 0.17
Diluted $ 0.63 0.22 0.22 0.19 0.65 0.17 0.17
Cash dividends $ 0.28 0.10 0.09 0.09 0.30 0.08 0.08
Dividend payout ratio 44.44% 45.45% 40.91% 47.37% 45.45% 47.06% 47.06%
Dividend yield (annualized) 2.59% 2.75% 2.48% 2.76% 2.15% 2.28% 2.38%
Market price (NASDAQ: FNFG):
High $ 15.16 15.16 14.65 14.16 15.78 14.85 14.00
Low $ 12.05 13.78 12.05 12.80 11.49 13.18 11.84
Close $ 14.44 14.44 14.58 13.21 13.95 13.95 13.38
===================================================================================================================================
SELECTED RATIOS
===================================================================================================================================
Net income (annualized):
Return on average assets 1.19% 1.20% 1.22% 1.15% 1.05% 1.06% 1.05%
Return on average equity 6.75% 6.89% 6.95% 6.40% 5.59% 5.76% 5.67%
Return on average tangible
equity (1) 14.18% 14.84% 14.81% 12.89% 8.75% 9.16% 9.04%
Noninterest income as a percentage
of net revenue 25.60% 28.77% 24.30% 23.41% 24.94% 24.83% 24.85%
Efficiency ratio 54.7% 53.6% 55.0% 55.8% 58.1% 58.9% 57.6%
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2005 2004
------------------------------------------------------ ---------------------------------------
Year-to-Date Third Second First Year Ended Fourth Third
September 30, Quarter Quarter Quarter December 31, Quarter Quarter
------------- --------- --------- --------- ------------ --------- ---------
===================================================================================================================================
SELECTED AVERAGE BALANCES
(Amounts in thousands)
===================================================================================================================================
Securities, at amortized cost $1,700,832 1,684,748 1,750,517 1,667,038 1,177,203 1,175,149 1,191,767
Loans (3) $4,938,003 5,097,883 5,014,075 4,697,778 3,109,335 3,230,411 3,177,191
Total interest-earning assets $6,703,027 6,866,195 6,826,189 6,411,701 4,332,665 4,439,570 4,408,057
Goodwill and other intangibles $ 719,037 746,494 737,231 672,573 335,796 347,376 347,715
Total assets $7,798,740 8,002,582 7,934,615 7,452,984 4,949,717 5,075,322 5,033,077
Interest-bearing liabilities:
Savings accounts $1,649,212 1,669,466 1,675,953 1,601,471 1,033,983 1,075,082 1,074,032
Checking $1,176,003 1,151,334 1,187,863 1,189,229 889,372 918,571 928,300
Certificates of deposit $1,759,985 1,905,781 1,800,333 1,570,152 1,081,034 1,043,603 1,039,097
Borrowed funds $1,201,764 1,183,924 1,239,808 1,181,532 677,784 741,044 686,437
---------- --------- --------- --------- --------- --------- ---------
Total interest-bearing
liabilities $5,786,964 5,910,505 5,903,957 5,542,384 3,682,173 3,778,300 3,727,866
Noninterest-bearing deposits $ 538,579 584,871 547,366 482,375 275,227 292,066 303,244
Total liabilities $6,425,618 6,609,765 6,544,716 6,116,957 4,021,960 4,138,949 4,098,522
Stockholders' equity $1,373,122 1,392,817 1,389,899 1,336,026 927,757 936,373 934,555
Tangible equity (1) $ 654,085 646,323 652,668 663,453 591,961 588,997 586,840
Net earning assets $ 916,063 955,690 922,232 869,317 650,492 661,270 680,191
Common shares outstanding (2):
Basic 109,859 110,227 111,128 108,200 78,750 78,735 79,257
Diluted 110,858 111,239 112,033 109,246 79,970 79,882 80,312
===================================================================================================================================
SELECTED AVERAGE YIELDS/RATES
===================================================================================================================================
Securities, at amortized cost 3.42% 3.49% 3.42% 3.35% 2.86% 2.97% 2.91%
Loans 6.26% 6.31% 6.26% 6.21% 6.14% 6.21% 6.05%
Total interest-earning assets 5.51% 5.59% 5.51% 5.43% 5.18% 5.30% 5.15%
Savings accounts 1.04% 1.13% 1.01% 0.98% 0.94% 1.01% 0.95%
Interest-bearing checking 1.07% 1.14% 1.08% 1.00% 0.93% 1.02% 0.94%
Certificates of deposit 2.62% 2.86% 2.61% 2.32% 2.21% 2.24% 2.17%
Borrowed funds 3.65% 3.70% 3.64% 3.62% 3.91% 3.80% 3.90%
Total interest-bearing
liabilities 2.07% 2.20% 2.06% 1.92% 1.86% 1.90% 1.83%
Net interest rate spread 3.44% 3.39% 3.45% 3.51% 3.32% 3.40% 3.32%
Net interest rate margin 3.72% 3.69% 3.72% 3.76% 3.60% 3.69% 3.60%
- ----------
(1) Excludes goodwill and other intangible assets.
(2) Excludes unallocated ESOP shares and unvested restricted stock shares.
(3) Net of deferred costs and unearned discounts.