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FIRST NIAGARA
FINANCIAL GROUP, INC.
FIRST NIAGARA FINANCIAL GROUP, INC. REPORTS A 34% INCREASE IN NET INCOME OVER
THE PRIOR YEAR 4TH QUARTER
Lockport, N.Y. - January 19, 2005 - First Niagara Financial Group, Inc. (NASDAQ:
FNFG), today announced that net income for the quarter ended December 31, 2004
was $13.6 million, or $0.17 per diluted share compared to $10.1 million, or
$0.15 per diluted share for the same period of 2003. This represents a 34%
increase in net income and a 13% increase in diluted earnings per share over the
prior year fourth quarter. In comparison to the third quarter of 2004, net
income increased from $13.3 million or $0.17 per diluted share. For the year,
net income was $51.8 million, or $0.65 per diluted share compared to 2003
earnings of $36.1 million, or $0.53 per diluted share. That represents a 44%
increase in net income and a 23% increase on a per share basis for the year.
"We are very pleased with our 2004 results, which is the sixth consecutive year
we have achieved double digit earnings per share growth," stated President and
CEO, Paul J. Kolkmeyer. "These financial results are even more gratifying given
all that we accomplished throughout the year. During 2004 our commercial
mortgage and business loan portfolio increased by 18%, while credit quality
remained strong. We also furthered our de novo branching strategy, which
contributed to an 11% growth in core deposits. This growth, combined with our
balance sheet management initiatives resulted in modest margin expansion during
a challenging rate environment. Most importantly, we successfully refined our
strategic and business plans for the future. All of this was achieved while
closing and integrating the Troy Financial acquisition and preparing for the
acquisition of Hudson River. Regarding this acquisition, I am pleased to report
that through the hard work and dedication of many First Niagara and Hudson River
team members, we successfully completed the transaction on January 14th and that
all major systems and branch conversions occurred over this past weekend with no
significant problems to report."
Net interest income increased to $40.9 million during the fourth quarter of 2004
driven by a combination of commercial mortgage and home equity loan growth and a
higher level of commercial real estate prepayment fees. Even with these
additional prepayments, total commercial loans increased at an annualized rate
of 14% from the linked quarter, including a 19% annualized increase in
commercial real estate loans. These increases continue to be driven by the
Company deepening relationships and being responsive to the financial needs of
its customers. The growth in home equity lending reflects the continuing focus
on this relationship building product, which increased $10.8 million or 18% on
an annualized basis from the third quarter. As of December 31, 2004,
non-performing loans decreased to 0.37% of total loans, the Company's lowest
level in eight quarters. The allowance for credit losses was 1.27% of total
loans and 344% of non-performing loans at December 31, 2004.
Total deposits of $3.3 billion at the end of the quarter were up modestly from
the September 30, 2004 amount, which reflects the challenge of gathering lower
cost core deposits in a low growth market. Core deposits increased $19.8
million, or 4% on an annualized basis, while time deposit balances remained
consistent with linked quarter amounts. Our targeted marketing and sales efforts
and commercial business development activities that generated the increase in
the core account will be continued given the importance of consistently growing
lower-cost deposits. The Company's net interest rate spread and margin for the
quarter was 3.40% and 3.69%, respectively. However, excluding the benefit of the
additional commercial mortgage prepayment fees earned in the fourth quarter, the
net interest rate spread and margin were more consistent with the linked quarter
amounts of 3.32% and 3.60%, respectively.
Noninterest income increased to $13.5 million for the fourth quarter. Increases
in core banking fees were supplemented by additional income from the leasing
company acquired in September 2004. Noninterest income continues to be a strong
source of diversified revenue, amounting to 25% of net revenues for the fourth
quarter of 2004.
Noninterest expense for the three months ended December 31, 2004 was $32.0
million versus $30.4 million for the three months ended September 30, 2004.
Fourth quarter expenses include approximately $800 thousand incurred in
preparation for the Hudson River integration, as well as costs associated with
the on-going development and implementation of the Company's strategic plan,
growth of our lending and leasing businesses and expansion of our branch
network. While the integration of the Hudson River franchise and the investment
in our strategic initiatives will continue to impact operating expenses in 2005,
the current year efficiency ratio of 58% is expected to improve as a result of
revenue growth, cost control and the synergies obtained from the acquisition of
Hudson River.
During the quarter ended December 31, 2004, the Company completed its 2.1
million share repurchase program announced in the third quarter of 2003 and made
additional buybacks under its 4.2 million share repurchase program, announced
earlier this year. In total, the Company repurchased 1.1 million of its shares
during the fourth quarter.
Outlook - "Our initiatives for 2005 will be guided by our strategic plan for the
future, which will enhance the Company's performance by providing our customers
with a higher level of relationship based customer service," stated Executive
Vice President and CFO, John R. Koelmel. "While effectively integrating Hudson
River, we will continue to focus our growth efforts on our commercial and home
equity loan portfolios and core deposits. In addition, our 2005 plan calls for
the continuation of our de novo and financial services expansion strategies.
With these initiatives in mind, and considering the impact of an estimated $3.0
million of pre-tax Hudson integration expenses which will be incurred during the
first two quarters, we are comfortable with the current analyst consensus
estimate of $0.82 per diluted share for 2005. That would equate to 26%
annualized growth and assumes double digit core growth as well as at least 13%
accretion for Hudson River."
Profile - As a result of the Hudson River Bancorp acquisition, which closed on
January 14, 2005, First Niagara Financial Group, Inc., through its wholly owned
subsidiary First Niagara Bank, now has assets of $7.8 billion and deposits of
$5.1 billion. First Niagara Bank is a full-service, community-oriented bank that
provides financial services to individuals, families and businesses through 116
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
Wednesday January 19, 2005 to discuss these fourth 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 January 25, 2005 by
dialing 1-877-660-6853, account number 6340, conference number 130201.
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
-------------------------------------------------------------- ------------
December 31, September 30, June 30, March 31, December 31,
------------ ------------- ----------- ----------- ------------
===============================================================================================================================
SELECTED FINANCIAL DATA
(Amounts in thousands)
===============================================================================================================================
Total assets $ 5,078,374 5,065,135 5,025,940 4,979,890 3,589,507
Total interest-earning assets $ 4,444,934 4,410,707 4,384,094 4,335,885 3,261,953
Money market investments $ 3,300 12,862 3,230 32,373 124,255
Securities, at amortized cost $ 1,177,835 1,177,043 1,214,248 1,232,352 846,450
Loans:
Real estate:
Residential $ 1,132,471 1,150,032 1,162,544 1,154,084 948,877
Home equity $ 247,190 236,357 227,544 221,486 179,282
Commercial and multi-family $ 1,081,709 1,052,875 1,014,178 970,516 653,976
Commercial construction $ 187,149 159,670 135,359 107,323 86,154
----------- ----------- ----------- ----------- -----------
Total real estate loans $ 2,648,519 2,598,934 2,539,625 2,453,409 1,868,289
----------- ----------- ----------- ----------- -----------
Commercial business $ 424,878 422,656 417,027 402,261 215,000
Consumer $ 174,309 185,518 193,608 207,834 202,630
Net deferred costs and discounts $ 8,971 9,113 9,761 10,394 8,704
----------- ----------- ----------- ----------- -----------
Total loans $ 3,256,677 3,216,221 3,160,021 3,073,898 2,294,623
Allowance for credit losses $ 41,422 41,273 41,434 40,766 25,420
----------- ----------- ----------- ----------- -----------
Loans, net $ 3,215,255 3,174,948 3,118,587 3,033,132 2,269,203
Goodwill and other intangibles $ 345,660 347,865 347,936 348,980 114,698
Total interest-bearing liabilities $ 3,796,877 3,756,581 3,741,917 3,711,906 2,642,798
Deposits:
Interest-bearing:
Savings $ 1,086,769 1,066,321 1,063,799 1,049,151 654,320
Checking $ 912,598 919,378 908,309 869,556 538,967
Certificates of deposit $ 1,046,824 1,045,604 1,055,993 1,131,373 991,545
Noninterest-bearing $ 291,491 285,322 290,926 248,970 170,384
----------- ----------- ----------- ----------- -----------
Total deposits $ 3,337,682 3,316,625 3,319,027 3,299,050 2,355,216
Short-term borrowings $ 209,236 192,282 196,006 154,383 87,148
Long-term borrowings $ 541,450 532,996 517,810 507,443 370,818
Stockholders' equity $ 928,162 937,307 925,750 938,023 728,174
Tangible equity (1) $ 582,502 589,442 577,814 589,043 613,476
Fair value adjustment included in
stockholders' equity $ (5,106) (3,625) (9,298) 4,011 (341)
Common shares outstanding (2) 78,277 79,246 79,332 79,712 66,326
Total loans serviced for others $ 325,125 326,936 331,927 347,291 246,078
===============================================================================================================================
CAPITAL
===============================================================================================================================
Tier 1 risk based capital 16.40% 16.43% 16.66% 16.94% 17.94%
Total risk based capital 17.65% 17.68% 17.91% 18.19% 19.04%
Tier 1 (core) capital 11.40% 11.31% 11.37% 11.53% 11.92%
Tangible capital 11.40% 11.31% 11.37% 11.53% 11.87%
Equity to assets 18.28% 18.51% 18.42% 18.84% 20.29%
Book value per share (2) $ 11.86 11.83 11.67 11.77 10.98
Tangible book value per share (1)(2) $ 7.44 7.44 7.28 7.39 9.25
===============================================================================================================================
ASSET QUALITY DATA
(Amounts in thousands)
===============================================================================================================================
Non-performing loans:
Residential $ 4,276 4,536 4,685 4,410 3,905
Home equity $ 519 390 484 440 401
Commercial real-estate and multi-family $ 3,416 5,414 4,612 7,057 3,878
Consumer $ 801 677 830 594 538
Commercial business $ 3,016 3,922 2,712 3,771 3,583
----------- ----------- ----------- ----------- -----------
Total non-performing loans $ 12,028 14,939 13,323 16,272 12,305
Other non-performing assets $ 740 691 400 563 543
----------- ----------- ----------- ----------- -----------
Total non-performing assets $ 12,768 15,630 13,723 16,835 12,848
Provision for credit losses $ 1,846 1,742 3,104 1,750 2,007
Net loan charge-offs $ 1,696 1,903 2,436 1,054 1,806
Net charge-offs to average loans (annualized) 0.21% 0.24% 0.32% 0.14% 0.31%
Provision for credit losses as a
percentage of net loan charge-offs 108.84% 91.54% 127.42% 166.03% 111.13%
Total non-performing loans to total loans 0.37% 0.46% 0.42% 0.53% 0.54%
Total non-performing assets as a
percentage of total assets 0.25% 0.31% 0.27% 0.34% 0.36%
Allowance for credit losses to total loans 1.27% 1.28% 1.31% 1.33% 1.11%
Allowance for credit losses
to non-performing loans 344.38% 276.28% 311.00% 250.53% 206.58%
- -------------------------------------------------------------------------------------------------------------------------------
Personnel FTE 1,200 1,207 1,196 1,177 944
Number of banking centers 71 71 70 68 47
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2004 2003
------------------------------------------------------------------ ------------------------
Year Ended Fourth Third Second First Year Ended Fourth
December 31, Quarter Quarter Quarter Quarter December 31, Quarter
------------ -------- -------- -------- -------- ------------ --------
===================================================================================================================================
SELECTED OPERATIONS DATA
(Amounts in thousands)
===================================================================================================================================
Interest income $224,578 58,954 56,818 55,750 53,056 169,959 42,450
Interest expense $ 68,476 18,028 17,180 16,815 16,453 62,544 14,197
-------- -------- -------- -------- -------- -------- --------
Net interest income $156,102 40,926 39,638 38,935 36,603 107,415 28,253
Provision for credit losses $ 8,442 1,846 1,742 3,104 1,750 7,929 2,007
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for credit losses $147,660 39,080 37,896 35,831 34,853 99,486 26,246
Noninterest income:
Banking services $ 19,818 5,378 5,296 4,934 4,210 16,445 4,110
Risk management services $ 17,391 4,193 4,308 4,442 4,448 14,765 4,007
Wealth management services $ 4,764 1,172 1,257 1,261 1,074 3,525 726
Lending and leasing $ 3,918 1,123 943 929 923 3,617 906
Bank-owned life insurance $ 3,761 860 826 1,208 867 3,502 809
Net realized gains on
securities available for sale $ 60 -- -- -- 60 9 51
Other $ 2,154 795 477 613 269 1,516 544
-------- -------- -------- -------- -------- -------- --------
Total noninterest income $ 51,866 13,521 13,107 13,387 11,851 43,379 11,153
Noninterest expense:
Salaries and benefits $ 65,264 16,676 16,790 15,915 15,883 50,377 12,743
Occupancy and equipment $ 12,513 2,958 3,079 3,120 3,356 9,315 2,331
Technology and communications $ 11,230 3,064 2,828 2,772 2,566 9,647 2,397
Marketing and advertising $ 4,738 1,403 998 1,381 956 3,205 541
Professional services $ 5,117 1,889 1,460 987 781 2,210 977
Amortization of intangibles $ 4,605 1,218 1,182 1,164 1,041 1,384 378
Other $ 17,383 4,836 4,041 4,510 3,996 12,139 3,371
-------- -------- -------- -------- -------- -------- --------
Total noninterest expense $120,850 32,044 30,378 29,849 28,579 88,277 22,738
Income from continuing
operations before income
taxes $ 78,676 20,557 20,625 19,369 18,125 54,588 14,661
Income taxes from continuing
operations $ 26,859 6,998 7,295 6,356 6,210 18,646 4,551
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations $ 51,817 13,559 13,330 13,013 11,915 35,942 10,110
Income (loss) from discontinued
operations, net of tax (3) $ -- -- -- -- -- 164 (22)
-------- -------- -------- -------- -------- -------- --------
Net income $ 51,817 13,559 13,330 13,013 11,915 36,106 10,088
======== ======== ======== ======== ======== ======== ========
===================================================================================================================================
STOCK AND RELATED PER SHARE DATA
===================================================================================================================================
Net income per share:
Basic $ 0.66 0.17 0.17 0.16 0.15 0.55 0.15
Diluted $ 0.65 0.17 0.17 0.16 0.15 0.53 0.15
Cash dividends $ 0.30 0.08 0.08 0.07 0.07 0.22 0.06
Dividend payout ratio 45.45% 47.06% 47.06% 43.75% 46.67% 40.00% 40.00%
Dividend yield (annualized) 2.15% 2.28% 2.38% 2.35% 2.06% 1.47% 1.59%
Market price (NASDAQ: FNFG):
High $ 15.78 14.85 14.00 14.13 15.78 16.55 15.64
Low $ 11.49 13.18 11.84 11.49 13.32 10.11 13.85
Close $ 13.95 13.95 13.38 12.00 13.64 14.97 14.97
===================================================================================================================================
SELECTED RATIOS
(Annualized)
===================================================================================================================================
Net income:
Return on average assets 1.05% 1.06% 1.05% 1.05% 1.02% 1.02% 1.13%
Return on average equity 5.59% 5.76% 5.67% 5.60% 5.29% 5.19% 5.50%
Return on average tangible
equity (1) 8.75% 9.16% 9.04% 8.93% 7.91% 6.15% 6.53%
As a percentage of average assets:
Noninterest income 1.05% 1.06% 1.04% 1.08% 1.01% 1.23% 1.25%
Noninterest expense 2.44% 2.51% 2.40% 2.41% 2.44% 2.50% 2.54%
-------- -------- -------- -------- -------- -------- --------
Net overhead 1.39% 1.45% 1.36% 1.33% 1.43% 1.27% 1.29%
Efficiency ratio 58.11% 58.85% 57.59% 57.05% 58.98% 58.54% 57.70%
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2004 2003
-------------------------------------------------------------------- --------------------------
Year Ended Fourth Third Second First Year Ended Fourth
December 31, Quarter Quarter Quarter Quarter December 31, Quarter
------------ ---------- ---------- ---------- ---------- ------------ ----------
===================================================================================================================================
SELECTED AVERAGE BALANCES
(Amounts in thousands)
===================================================================================================================================
Total assets $4,949,717 5,075,322 5,033,077 4,986,412 4,701,761 3,531,697 3,545,301
Total interest-earning assets $4,332,665 4,439,570 4,408,057 4,361,984 4,117,336 3,226,208 3,228,756
Money market investments $ 28,664 11,519 20,125 24,166 59,130 220,330 137,175
Securities, at amortized cost $1,177,203 1,175,149 1,191,767 1,221,772 1,119,987 737,703 774,734
Loans (4) $3,109,335 3,230,411 3,177,191 3,099,987 2,927,675 2,255,703 2,308,146
Goodwill and other intangibles $ 335,796 347,376 347,715 348,534 299,300 109,207 114,876
Interest-bearing liabilities:
Savings accounts $1,033,983 1,075,082 1,074,032 1,056,289 929,639 670,785 646,954
Checking $ 889,372 918,571 928,300 893,854 816,016 525,346 537,431
Certificates of deposit $1,081,034 1,043,603 1,039,097 1,095,011 1,147,295 998,428 992,314
Other borrowed funds $ 677,784 741,044 686,437 672,731 610,134 431,299 426,005
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing
liabilities $3,682,173 3,778,300 3,727,866 3,717,885 3,503,084 2,625,858 2,602,704
Interest-bearing deposits $3,004,389 3,037,256 3,041,429 3,045,154 2,892,950 2,194,559 2,176,699
Noninterest-bearing deposits $ 275,227 292,066 303,244 271,090 234,016 155,546 163,960
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total deposits $3,279,616 3,329,322 3,344,673 3,316,244 3,126,966 2,350,105 2,340,659
Stockholders' equity $ 927,757 936,373 934,555 934,769 905,161 695,914 727,413
Tangible equity (1) $ 591,961 588,997 586,840 586,235 605,861 586,707 612,537
Common shares outstanding (2):
Basic 78,750 78,735 79,257 79,595 77,407 66,111 66,289
Diluted 79,970 79,882 80,312 80,731 78,917 67,754 67,941
===================================================================================================================================
SELECTED AVERAGE YIELDS/RATES
===================================================================================================================================
Investment securities 2.86% 2.97% 2.91% 2.77% 2.78% 2.35% 2.76%
Loans 6.14% 6.21% 6.05% 6.12% 6.20% 6.64% 6.37%
Total interest-earning
assets 5.18% 5.30% 5.15% 5.12% 5.16% 5.27% 5.24%
Savings accounts 0.94% 1.01% 0.95% 0.93% 0.88% 1.01% 0.75%
Interest-bearing checking 0.93% 1.02% 0.94% 0.89% 0.86% 0.91% 0.83%
Certificates of deposit 2.21% 2.24% 2.17% 2.14% 2.29% 2.93% 2.61%
Other borrowed funds 3.91% 3.80% 3.90% 3.92% 4.07% 5.04% 4.95%
Total interest-bearing
liabilities 1.86% 1.90% 1.83% 1.82% 1.89% 2.38% 2.16%
Net interest rate spread 3.32% 3.40% 3.32% 3.30% 3.27% 2.89% 3.08%
Net interest rate margin 3.60% 3.69% 3.60% 3.57% 3.56% 3.33% 3.50%
- ----------
(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."
2003 Year-End amounts include the net gain realized on the sale of
$208,000.
(4) Net of deferred costs and unearned discounts.