Exhibit 99.1
FIRST NIAGARA FINANCIAL GROUP, INC. REPORTS A 23% INCREASE IN DILUTED EARNINGS
PER SHARE FOR THE 2ND QUARTER OF 2004
Lockport, N.Y. - July 19, 2004 - First Niagara Financial Group, Inc. (NASDAQ:
FNFG), today announced that net income for the quarter ended June 30, 2004
increased to $13.0 million, or $0.16 per diluted share from $9.1 million, or
$0.13 per diluted share for the same period of 2003. This represents a 43%
increase in net income and a 23% increase in diluted earnings per share over the
prior year second quarter. On a linked quarter basis, net income increased 9%
and diluted earnings per share increased 7% from $11.9 million or $0.15 per
diluted share.
First Niagara President and CEO Paul J. Kolkmeyer stated, "Second quarter
results were very good, reflecting the benefits of our acquisition of Troy
Financial Corporation in January of this year, as well as the continuing
expansion of our commercial loan portfolio and core deposit base. These core
businesses continue to be an area of focus for us and will be key to driving our
financial performance in the future. I am also pleased to report that during the
quarter, overall credit quality remained strong and we experienced improved
results from our wealth and risk management businesses, as we continue to offer
our customers relationship based solutions to meet their financial needs."
Net interest income increased 6% to $38.9 million for the second quarter of 2004
from $36.6 million for the first quarter of 2004, driven primarily by a
combination of commercial loan and core deposit growth. On an annualized basis,
commercial real-estate and commercial business loans increased 27% and 15%,
respectively, during the quarter, which reflects improving customer demand,
increased line usage, as well as the Company's continuing efforts to be the
lender of choice for the small and middle market businesses in its service
areas. During the quarter, the Company continued to shift its funding mix from
higher rate certificates of deposit to lower cost core deposits. This strategy
resulted in an annualized increase of 18% in core deposits and was primarily
accomplished through a combination of increased marketing and sales efforts
throughout the Company's banking center network and commercial business growth.
Additionally, deposits benefited from the continued implementation of the
Company's de novo expansion strategy, which included the opening of new banking
centers in both Erie and Monroe Counties. For the quarter, the Company's net
interest rate spread and margin improved slightly over the first quarter of 2004
to 3.30% and 3.57%, respectively.
Overall credit quality remained strong as nonperforming loans decreased 18% to
$13.3 million or 0.42% of total loans at June 30, 2004 compared to $16.3 million
or 0.53% of total loans at March 31, 2004. Although net loan charge-offs
increased to $2.4 million for the second quarter of 2004 or 0.32% of average
total loans, this increase is attributable to losses related to an indirect
automobile leasing relationship. At June 30, 2004, the remaining outstanding
loans associated with that relationship totaled $17.9 million and are secured by
performing auto leases. Going forward, the Company anticipates that any
additional charge-offs in connection with this relationship will be comparable
to historical loss rates for those types of loans. Excluding these auto leases,
charge-offs during the quarter were consistent with the 2004 first quarter level
of 0.14% of average total loans. Year-to-date annualized net loan charge-offs as
a percentage of average total loans amounted to 0.23%, which is consistent with
the 0.24% for each of the last two years. To compensate for the higher level of
charge-offs during the quarter, as well as to provide for the continuing growth
in commercial loans, the Company increased its provision for credit losses to
$3.1 million compared to $1.8 million for the linked quarter.
For the second quarter of 2004, the Company had $13.4 million of noninterest
income, which includes the benefits of the former Troy Financial Corporation and
the Company's efforts to further its financial services business model
throughout its banking center network. These factors resulted in a 17% increase
in both banking and wealth management services income. Additionally, risk
management revenue for the quarter was consistent with the first quarter of 2004
as the expected impact of lower contingent profit sharing commissions, the
majority of which was received during the first quarter of the year, was offset
by improved agency commissions. Noninterest income for the quarter also reflects
$310 thousand of benefit proceeds received from bank owned life insurance.
Noninterest expense for the three months ended June 30, 2004 was $29.8 million
versus $28.6 million for the three months ended March 31, 2004. This increase is
primarily attributable to having a full quarter of expenses from the former Troy
operations and additional marketing expenses related to core deposit and risk
management promotions. Additionally, second quarter results include fees and
costs incurred related to the Company's strategic planning initiative to enhance
financial performance, as well as the Company's annual shareholders meeting and
year-end reporting. During the second quarter of 2004, Troy merger and
integration expenses were $131 thousand versus $1.3 million of such expenses in
the first quarter of 2004.
The Company's return on equity for the quarter improved 31 basis points over the
first quarter of 2004 as strong operating results were supplemented with common
stock repurchases. During the quarter, the Company repurchased 705 thousand of
its shares and as of June 30, 2004, had repurchased 1.3 million of the 2.1
million shares authorized under its current buy-back program. The Company
anticipates completing this program early in the fourth quarter of this year.
Outlook - "Based upon the results of the first two quarters, as well as the
current interest rate environment, we remain comfortable with the current range
of analyst estimates of $0.63 to $0.65 per diluted share for 2004," stated Mr.
Kolkmeyer. "We now expect our net interest margin will be at the high end of our
previously provided 3.50% to 3.60% range for the last two quarters of the year
assuming interest rates continue to rise. Additionally, we are on track to
exceed our 15% organic commercial loan growth target for 2004. For the remainder
of the year, we will focus on preparing for the integration of Hudson River,
finalizing our strategic planning blueprint for the future, as well as
furthering our capital management strategies. We are confident that these
efforts will result in improved financial performance for First Niagara and
provide long-term value for our shareholders."
Profile - First Niagara Financial Group, Inc., through its wholly owned
subsidiary First Niagara Bank, has assets of $5.0 billion and deposits of $3.3
billion. First Niagara Bank is a full-service, community-oriented bank that
provides financial services to individuals, families and businesses through 70
banking centers, a loan production office, several financial services
subsidiaries, and 94 ATMs across New York State. On April 2, 2004 the Company
announced its intentions to acquire Hudson River Bancorp, Inc., a $2.6 billion
asset bank headquartered in Hudson, New York.
Conference Call - A conference call will be held at 11:00 a.m. Eastern Time on
Monday July 19, 2004 to discuss these second 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 July 26, 2004 by
dialing 1-877-660-6853, account number 6340, conference number 109784.
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
2004 2003
---------------------------- ---------------------------------------------
June 30, March 31, December 31, September 30, June 30,
----------- ----------- ------------ ------------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 5,025,940 4,979,890 3,589,507 3,533,430 3,561,646
Total interest-earning assets $ 4,384,094 4,335,885 3,261,953 3,195,743 3,250,449
Fed funds and other short-term investments $ 3,230 32,373 124,255 134,482 159,675
Securities, at amortized cost $ 1,214,248 1,232,352 846,450 753,193 806,552
Loans:
Real estate:
Residential $ 1,162,544 1,154,084 948,877 965,486 987,426
Home equity $ 227,544 221,486 179,282 176,269 168,725
Commercial and multi-family $ 1,014,178 970,516 653,976 631,041 589,122
Commercial construction $ 135,359 107,323 86,154 102,625 111,492
----------- ----------- ----------- ----------- -----------
Total real estate loans $ 2,539,625 2,453,409 1,868,289 1,875,421 1,856,765
----------- ----------- ----------- ----------- -----------
Commercial business $ 417,027 402,261 215,000 225,561 221,316
Consumer $ 193,608 207,834 202,630 201,092 197,364
Net deferred costs and discounts $ 9,761 10,394 8,704 8,688 9,082
----------- ----------- ----------- ----------- -----------
Total loans $ 3,160,021 3,073,898 2,294,623 2,310,762 2,284,527
Allowance for credit losses $ 41,434 40,766 25,420 25,219 24,781
----------- ----------- ----------- ----------- -----------
Loans, net $ 3,118,587 3,033,132 2,269,203 2,285,543 2,259,746
Goodwill and other intangibles $ 347,936 348,980 114,698 115,084 107,803
Total interest-bearing liabilities $ 3,741,917 3,711,906 2,642,798 2,586,081 2,624,447
Deposits:
Interest-bearing:
Savings $ 1,063,799 1,049,151 654,320 646,284 666,003
Checking $ 908,309 869,556 538,967 540,999 540,274
Certificates of deposit $ 1,055,993 1,131,373 991,545 973,070 982,903
Noninterest-bearing $ 290,926 248,970 170,384 158,915 166,059
----------- ----------- ----------- ----------- -----------
Total deposits $ 3,319,027 3,299,050 2,355,216 2,319,268 2,355,239
Short-term borrowings $ 196,006 154,383 87,148 85,020 67,564
Long-term borrowings $ 517,810 507,443 370,818 340,708 367,703
Stockholders' equity $ 925,750 938,023 728,174 723,047 718,390
Tangible equity (1) $ 577,814 589,043 613,476 607,963 610,587
Fair value adjustment included in
stockholders' equity $ (9,298) 4,011 (341) 1,397 3,558
Common shares outstanding (2) 79,332 79,712 66,326 66,370 66,228
Total loans serviced for others $ 331,927 347,291 246,078 250,082 271,401
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------
Tier 1 risk based capital 16.66% 16.94% 17.94% 18.59% 18.70%
Total risk based capital 17.91% 18.19% 19.04% 19.70% 19.80%
Tier 1 (core) capital 11.37% 11.53% 11.92% 12.48% 12.40%
Tangible capital 11.37% 11.53% 11.87% 12.42% 12.34%
Equity to assets 18.42% 18.84% 20.29% 20.46% 20.17%
Book value per share (2) $ 11.67 11.77 10.98 10.89 10.85
Tangible book value per share (1) $ 7.28 7.39 9.25 9.16 9.22
- ------------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY DATA
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------------------
Non-performing loans:
Residential $ 4,685 4,410 3,905 3,605 3,395
Home equity $ 484 440 401 310 467
Commercial real-estate and multi-family $ 4,612 7,057 3,878 2,889 1,614
Consumer $ 830 594 538 679 1,040
Commercial business $ 2,712 3,771 3,583 4,204 3,537
----------- ----------- ----------- ----------- -----------
Total non-performing loans $ 13,323 16,272 12,305 11,687 10,053
Other non-performing assets $ 400 563 543 1,196 1,375
----------- ----------- ----------- ----------- -----------
Total non-performing assets $ 13,723 16,835 12,848 12,883 11,428
Provision for credit losses $ 3,104 1,750 2,007 1,757 2,208
Net loan charge-offs $ 2,436 1,054 1,806 1,319 1,340
Net charge-offs to average loans (annualized) 0.32% 0.14% 0.31% 0.23% 0.24%
Provision for credit losses as a
percentage of net loan charge-offs 127.42% 166.03% 111.13% 133.21% 164.78%
Total non-performing loans to total loans 0.42% 0.53% 0.54% 0.51% 0.44%
Total non-performing assets as a
percentage of total assets 0.27% 0.34% 0.36% 0.36% 0.32%
Allowance for credit losses to total loans 1.31% 1.33% 1.11% 1.09% 1.08%
Allowance for credit losses
to non-performing loans 311.00% 250.53% 206.58% 215.79% 246.50%
- ------------------------------------------------------------------------------------------------------------------------------
Personnel FTE 1,196 1,177 944 915 891
Number of banking centers 70 68 47 46 46
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2004 2003
------------------------------------ -----------------------
Year-to Date Second First Year Ended Fourth
June 30, Quarter Quarter December 31, Quarter
------------ -------- -------- ------------ --------
- -------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATIONS DATA
(Amounts in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
Interest income $108,806 55,750 53,056 169,959 42,450
Interest expense $ 33,268 16,815 16,453 62,544 14,197
-------- -------- -------- -------- --------
Net interest income $ 75,538 38,935 36,603 107,415 28,253
Provision for credit losses $ 4,854 3,104 1,750 7,929 2,007
-------- -------- -------- -------- --------
Net interest income after provision for credit losses $ 70,684 35,831 34,853 99,486 26,246
Noninterest income:
Banking services $ 9,144 4,934 4,210 16,445 4,110
Risk management services $ 8,890 4,442 4,448 14,765 4,007
Wealth management services $ 2,335 1,261 1,074 3,525 726
Lending and leasing $ 1,852 929 923 3,617 906
Bank-owned life insurance $ 2,075 1,208 867 3,502 809
Net realized gains (losses) on securities available for sale $ 60 -- 60 9 51
Other $ 882 613 269 1,516 544
-------- -------- -------- -------- --------
Total noninterest income $ 25,238 13,387 11,851 43,379 11,153
Noninterest expense:
Salaries and benefits $ 31,798 15,915 15,883 50,377 12,743
Occupancy and equipment $ 6,476 3,120 3,356 9,315 2,331
Technology and communications $ 5,338 2,772 2,566 9,647 2,397
Marketing and advertising $ 2,337 1,381 956 3,205 541
Professional services $ 1,768 987 781 2,210 977
Amortization of intangibles $ 2,205 1,164 1,041 1,384 378
Other $ 8,506 4,510 3,996 12,139 3,371
-------- -------- -------- -------- --------
Total noninterest expense $ 58,428 29,849 28,579 88,277 22,738
Income from continuing operations before income taxes $ 37,494 19,369 18,125 54,588 14,661
Income taxes from continuing operations $ 12,566 6,356 6,210 18,646 4,551
-------- -------- -------- -------- --------
Income from continuing operations $ 24,928 13,013 11,915 35,942 10,110
Income (loss) from discontinued operations, net of tax (3) $ -- -- -- 164 (22)
-------- -------- -------- -------- --------
Net income $ 24,928 13,013 11,915 36,106 10,088
======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------------
STOCK AND RELATED PER SHARE DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net income per share:
Basic $ 0.32 0.16 0.15 0.55 0.15
Diluted $ 0.31 0.16 0.15 0.53 0.15
Cash dividends $ 0.14 0.07 0.07 0.22 0.06
Dividend payout ratio 43.75% 43.75% 46.67% 40.00% 40.00%
Dividend yield (annualized) 2.35% 2.35% 2.06% 1.47% 1.59%
Market price (NASDAQ: FNFG):
High $ 15.78 14.13 15.78 16.55 15.64
Low $ 11.49 11.49 13.32 10.11 13.85
Close $ 12.00 12.00 13.64 14.97 14.97
- -------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
(Annualized)
- -------------------------------------------------------------------------------------------------------------------------------
Net income:
Return on average assets 1.03% 1.05% 1.02% 1.02% 1.13%
Return on average equity 5.45% 5.60% 5.29% 5.19% 5.50%
Return on average tangible equity (1) 8.41% 8.93% 7.91% 6.15% 6.53%
As a percentage of average assets:
Noninterest income 1.05% 1.08% 1.01% 1.23% 1.25%
Noninterest expense 2.43% 2.41% 2.44% 2.50% 2.54%
-------- -------- -------- -------- --------
Net overhead 1.38% 1.33% 1.43% 1.27% 1.29%
Efficiency ratio 57.98% 57.05% 58.98% 58.54% 57.70%
2003
----------------------
Third Second
Quarter Quarter
-------- --------
- -----------------------------------------------------------------------------------------
SELECTED OPERATIONS DATA
(Amounts in thousands)
- -----------------------------------------------------------------------------------------
Interest income 41,984 42,602
Interest expense 14,836 15,976
-------- --------
Net interest income 27,148 26,626
Provision for credit losses 1,757 2,208
-------- --------
Net interest income after provision for credit losses 25,391 24,418
Noninterest income:
Banking services 4,289 4,246
Risk management services 3,818 3,631
Wealth management services 775 1,052
Lending and leasing 853 959
Bank-owned life insurance 1,141 799
Net realized gains (losses) on securities available for sale (24) (2)
Other 523 119
-------- --------
Total noninterest income 11,375 10,804
Noninterest expense:
Salaries and benefits 13,037 12,025
Occupancy and equipment 2,284 2,259
Technology and communications 2,553 2,337
Marketing and advertising 810 786
Professional services 461 410
Amortization of intangibles 398 290
Other 2,877 2,965
-------- --------
Total noninterest expense 22,420 21,072
Income from continuing operations before income taxes 14,346 14,150
Income taxes from continuing operations 5,042 5,073
-------- --------
Income from continuing operations 9,304 9,077
Income (loss) from discontinued operations, net of tax (3) -- 23
-------- --------
Net income 9,304 9,100
======== ========
- -----------------------------------------------------------------------------------------
STOCK AND RELATED PER SHARE DATA
- -----------------------------------------------------------------------------------------
Net income per share:
Basic 0.14 0.14
Diluted 0.14 0.13
Cash dividends 0.06 0.05
Dividend payout ratio 42.86% 35.71%
Dividend yield (annualized) 1.58% 1.44%
Market price (NASDAQ: FNFG):
High 16.55 14.20
Low 13.70 11.40
Close 15.09 13.92
- -----------------------------------------------------------------------------------------
SELECTED RATIOS
(Annualized)
- -----------------------------------------------------------------------------------------
Net income:
Return on average assets 1.04% 1.02%
Return on average equity 5.13% 5.09%
Return on average tangible equity (1) 6.08% 5.99%
As a percentage of average assets:
Noninterest income 1.27% 1.21%
Noninterest expense 2.51% 2.36%
-------- --------
Net overhead 1.24% 1.15%
Efficiency ratio 58.20% 56.30%
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2004 2003
-------------------------------------------- ----------------------------
Year-to Date Second First Year Ended Fourth
June 30, Quarter Quarter December 31, Quarter
------------ ----------- ----------- ------------ -----------
- --------------------------------------------------------------------------------------------------------------------------
SELECTED AVERAGE BALANCES
(Amounts in thousands)
- --------------------------------------------------------------------------------------------------------------------------
Total assets $ 4,844,087 4,986,412 4,701,761 3,531,697 3,545,301
Total interest-earning assets $ 4,240,514 4,361,984 4,117,336 3,226,208 3,228,756
Fed funds and other short-term investments $ 41,648 24,166 59,130 220,330 137,175
Securities, at amortized cost $ 1,170,879 1,221,772 1,119,987 737,703 774,734
Loans (4) $ 3,013,831 3,099,987 2,927,675 2,255,703 2,308,146
Goodwill and other intangibles $ 323,917 348,534 299,300 109,207 114,876
Interest-bearing liabilities:
Savings accounts $ 992,964 1,056,289 929,639 670,785 646,954
Checking $ 854,935 893,854 816,016 525,346 537,431
Certificates of deposit $ 1,121,153 1,095,011 1,147,295 998,428 992,314
Other borrowed funds $ 641,432 672,731 610,134 431,299 426,005
----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities $ 3,610,484 3,717,885 3,503,084 2,625,858 2,602,704
Interest-bearing deposits $ 2,969,052 3,045,154 2,892,950 2,194,559 2,176,699
Noninterest-bearing deposits $ 252,553 271,090 234,016 155,546 163,960
----------- ----------- ----------- ----------- -----------
Total deposits $ 3,221,605 3,316,244 3,126,966 2,350,105 2,340,659
Stockholders' equity $ 919,965 934,769 905,161 695,914 727,413
Tangible equity (1) $ 596,048 586,235 605,861 586,707 612,537
Common shares outstanding (2):
Basic 78,501 79,595 77,407 66,111 66,289
Diluted 79,826 80,731 78,917 67,754 67,941
- --------------------------------------------------------------------------------------------------------------------------
SELECTED AVERAGE YIELDS/RATES
- --------------------------------------------------------------------------------------------------------------------------
Investment securities 2.77% 2.77% 2.78% 2.35% 2.76%
Loans 6.16% 6.12% 6.20% 6.64% 6.37%
Total interest-earning assets 5.14% 5.12% 5.16% 5.27% 5.24%
Savings accounts 0.91% 0.93% 0.88% 1.01% 0.75%
Interest-bearing checking 0.87% 0.89% 0.86% 0.91% 0.83%
Certificates of deposit 2.22% 2.14% 2.29% 2.93% 2.61%
Other borrowed funds 3.99% 3.92% 4.07% 5.04% 4.95%
Total interest-bearing liabilities 1.85% 1.82% 1.89% 2.38% 2.16%
Net interest rate spread 3.29% 3.30% 3.27% 2.89% 3.08%
Net interest rate margin 3.56% 3.57% 3.56% 3.33% 3.50%
2003
---------------------------
Third Second
Quarter Quarter
----------- -----------
- -------------------------------------------------------------------------
SELECTED AVERAGE BALANCES
(Amounts in thousands)
- -------------------------------------------------------------------------
Total assets 3,540,403 3,579,903
Total interest-earning assets 3,230,971 3,280,842
Fed funds and other short-term investments 167,878 282,842
Securities, at amortized cost 759,271 734,489
Loans (4) 2,294,650 2,250,864
Goodwill and other intangibles 112,446 107,631
Interest-bearing liabilities:
Savings accounts 654,076 676,024
Checking 550,020 527,440
Certificates of deposit 966,017 1,021,369
Other borrowed funds 425,166 436,178
----------- -----------
Total interest-bearing liabilities 2,595,279 2,661,011
Interest-bearing deposits 2,170,113 2,224,833
Noninterest-bearing deposits 167,862 149,727
----------- -----------
Total deposits 2,337,975 2,374,560
Stockholders' equity 719,606 716,980
Tangible equity (1) 607,160 609,349
Common shares outstanding (2):
Basic 66,276 66,126
Diluted 68,002 67,722
- -------------------------------------------------------------------------
SELECTED AVERAGE YIELDS/RATES
- -------------------------------------------------------------------------
Investment securities 2.12% 1.82%
Loans 6.50% 6.80%
Total interest-earning assets 5.18% 5.20%
Savings accounts 0.84% 0.96%
Interest-bearing checking 0.85% 0.85%
Certificates of deposit 2.83% 3.03%
Other borrowed funds 5.03% 5.07%
Total interest-bearing liabilities 2.27% 2.41%
Net interest rate spread 2.91% 2.79%
Net interest rate margin 3.36% 3.25%
- ----------
(1) Excludes goodwill and other intangible assets.
(2) Excludes unallocated ESOP shares and unvested restricted stock shares.
(3) Effective February 19, 2003, First Niagara Bank sold NOVA Healthcare
Administrators, Inc., its wholly- owned third-party benefit plan
administrator subsidiary. For the periods presented, the Company has
reported the results of operations from NOVA as "Discontinued Operations."
First quarter 2003 amounts include the net gain realized on the sale of
$208,000.
(4) Net of deferred costs and unearned discounts.