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First Niagara
Financial Group, Inc.
FIRST NIAGARA FINANCIAL GROUP, INC. REPORTS AN 85% INCREASE IN NET INCOME
OVER THE PRIOR YEAR SECOND QUARTER
Lockport, N.Y. - July 15, 2005 - First Niagara Financial Group, Inc. (NASDAQ:
FNFG), today announced that net income for second quarter of 2005 increased to
$24.1 million, or $0.22 per diluted share from $13.0 million, or $0.16 per
diluted share for the same period of 2004. This represents an 85% increase in
net income and a 38% increase in diluted earnings per share over the prior year
second quarter. Compared to the first quarter of 2005, net income increased 14%.
First Niagara President and CEO Paul J. Kolkmeyer stated, "Second quarter
results were very good, reflecting the benefits of the continuing expansion of
our commercial loan portfolio and deposit base, the ongoing integration of
Hudson River Bancorp, acquired in January of this year, and the initial
implementation of our Strategic Blueprint. The growth of our core businesses,
combined with exceptional credit quality, were key contributors to our strong
financial performance. During the quarter we continued to make significant
enhancements to our infrastructure in order to support our strategy of providing
relationship based solutions to meet our customers' financial needs, which in
turn will drive future performance improvements."
As anticipated, the Company's net interest rate margin began to tighten during
the quarter to 3.72% compared to 3.76% for the linked quarter. Net interest
income increased 6% to $63.6 million, primarily due to a combination of strong
commercial real estate and business loan growth, as well as the net earning
assets acquired from Hudson River. Total loans increased $83.8 million during
the second quarter, including 13% annualized growth in commercial real estate
and business loans and 12% annualized growth in home equity loans. During the
quarter, credit quality trends further improved as annualized net charge-offs
fell to 0.07% of average total loans, their lowest level in nearly five years
and almost half the 0.13% for the linked quarter. In addition, non-performing
assets improved to 0.25% of total assets from 0.27% at the end of March. As a
result, a $900 thousand provision for credit losses was recorded compared to
$2.3 million for the first quarter of 2005. The ratio of the allowance for
credit losses to total loans and non-performing loans was 1.43% and 382%,
respectively at June 30, 2005.
Deposits increased $73.3 million from March 31, 2005, which is equivalent to a
6% annualized growth rate. This growth continues to be driven by relationship
based products and deposit gathering and retention initiatives introduced as
part of the Company's Strategic Blueprint. The Company anticipates that opening
these new accounts will drive future deposit and revenue growth as they mature.
Also noteworthy during the quarter is that retail deposits at the former Hudson
River branches now exceed acquired levels.
For the second quarter of 2005, the Company had $20.4 million of noninterest
income, which includes the benefits of the Hudson River integration and the
Company's efforts to fully implement its financial services business model
throughout its branch network. This resulted in an 18% increase in banking
services income and, combined with the two insurance agency acquisitions since
the beginning of the year, led to a 5% increase in risk management income.
Wealth management revenue for the quarter was consistent with the first quarter
of 2005 as the benefit of Hudson River was offset by reduced demand for annuity
products due to the challenging interest rate environment.
Noninterest expense for the second quarter was $46.2 million versus $43.9
million for the linked quarter. This increase is primarily attributable to
having a full quarter of expenses from the former Hudson River operations and
employee contract termination payments. Additionally, marketing expenses
increased from first quarter levels as a result of the Company's spring home
equity and business banking promotions. Nonetheless, the Company's efficiency
ratio improved to 55% during the current quarter versus 56% for the linked
quarter.
During the three months ended June 30, 2005, the Company repurchased an
additional 2.5 million shares of its common stock compared to 1.8 million shares
during the first quarter. As of quarter-end, 5.1 million shares remain available
for repurchase under the 5.8 million authorization approved in May. The extent
to which shares are repurchased will continue to depend on a number of factors
including market trends and prices and alternative uses for capital.
Outlook - "Given the results of the first two quarters, we believe that 2005
GAAP earnings per diluted share will be between $0.83 and $0.84 per share, which
includes $0.01 per share of Hudson River merger expenses," stated Executive Vice
President and Chief Financial Officer, John R. Koelmel. "Our current estimate
takes into consideration our expectation that the yield curve will continue to
flatten, net charge-offs will begin to move towards more normalized levels and
the recently announced acquisition of the Hatch Leonard Naples, Inc. insurance
agency will be neutral to earnings for the remainder of 2005. While our net
interest margin will continue to tighten in the second half of the year, we
remain comfortable with our previous guidance for a margin of approximately
3.70% for the full year. We are confident that the on-going implementation of
our Strategic Blueprint provides the foundation for achieving these results and
will continue to drive earnings growth into 2006."
Profile - First Niagara Financial Group, Inc., through its wholly owned
subsidiary First Niagara Bank, has assets of $8.0 billion and deposits of $5.2
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
Friday July 15, 2005 to discuss these first 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 21, 2005 by
dialing 1-877-660-6853, account number 240, conference number 159044.
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
---------------------------- ----------------------------------------------
June 30, March 31, December 31, September 30, June 30,
----------- ----------- ------------ ------------- -----------
===================================================================================================================================
SELECTED FINANCIAL DATA
(Amounts in thousands)
===================================================================================================================================
Securities available for sale $ 1,726,822 1,741,486 1,170,129 1,171,011 1,198,777
Loans and leases:
Commercial:
Real estate $ 1,773,773 1,721,393 1,268,858 1,212,545 1,149,537
Business $ 482,855 462,549 345,520 342,382 335,491
----------- ----------- ----------- ----------- -----------
Total commercial loans $ 2,256,628 2,183,942 1,614,378 1,554,927 1,485,028
Residential real estate $ 2,117,609 2,114,420 1,132,471 1,150,032 1,162,544
Home equity $ 355,030 344,589 247,190 236,357 227,544
Other consumer $ 178,681 186,413 174,309 185,518 193,608
Specialized lending $ 158,361 154,380 79,358 80,264 81,520
Net deferred costs and discounts $ 13,798 12,573 8,971 9,123 9,777
----------- ----------- ----------- ----------- -----------
Total loans and leases $ 5,080,107 4,996,317 3,256,677 3,216,221 3,160,021
Allowance for credit losses $ 72,869 72,868 41,422 41,273 41,434
----------- ----------- ----------- ----------- -----------
Loans and leases, net $ 5,007,238 4,923,449 3,215,255 3,174,948 3,118,587
Goodwill and other intangibles $ 735,514 738,191 345,660 347,865 347,936
Total assets $ 7,982,290 7,907,976 5,078,374 5,065,135 5,025,940
Total interest-earning assets $ 6,838,326 6,780,978 4,445,724 4,410,707 4,384,094
Deposits:
Core:
Savings $ 1,664,203 1,705,258 1,086,769 1,066,321 1,063,799
Interest-bearing checking $ 1,170,013 1,241,760 912,598 919,378 908,309
Noninterest-bearing $ 567,134 524,219 291,491 285,322 290,926
----------- ----------- ----------- ----------- -----------
Total core deposits $ 3,401,350 3,471,237 2,290,858 2,271,021 2,263,034
Certificates $ 1,847,696 1,704,498 1,046,824 1,045,604 1,055,993
----------- ----------- ----------- ----------- -----------
Total deposits $ 5,249,046 5,175,735 3,337,682 3,316,625 3,319,027
Short-term borrowings $ 454,361 384,399 209,236 192,282 196,006
Long-term borrowings $ 790,967 851,461 541,450 532,996 517,810
Total interest-bearing liabilities $ 5,927,240 5,887,376 3,796,877 3,756,581 3,741,917
Stockholders' equity $ 1,381,168 1,390,713 928,162 937,307 925,750
Tangible equity (1) $ 645,654 652,522 582,502 589,442 577,814
Fair value adjustment included in
stockholders' equity $ (8,080) (15,247) (5,106) (3,625) (9,298)
Net earning assets $ 911,086 893,602 648,847 654,126 642,177
Common shares outstanding (2) 110,162 112,460 78,277 79,246 79,332
Treasury shares 5,680 3,327 1,781 747 613
Total loans serviced for others $ 368,436 372,461 325,125 326,936 331,927
===================================================================================================================================
CAPITAL
===================================================================================================================================
Tier 1 risk based capital 12.01% 12.52% 16.40% 16.43% 16.66%
Total risk based capital 13.26% 13.77% 17.65% 17.68% 17.91%
Tier 1 (core) capital 8.10% 8.44% 11.40% 11.31% 11.37%
Tangible capital 8.10% 8.44% 11.40% 11.31% 11.37%
Equity to assets 17.30% 17.59% 18.28% 18.51% 18.42%
Tangible equity to tangible assets (2) 8.91% 9.10% 12.31% 12.50% 12.35%
Book value per share (2) $ 12.54 12.37 11.86 11.83 11.67
Tangible book value per share (1)(2) $ 5.86 5.80 7.44 7.44 7.28
===================================================================================================================================
ASSET QUALITY DATA
(Amounts in thousands)
===================================================================================================================================
Non-performing loans:
Commercial real estate $ 4,339 4,513 3,416 5,414 4,612
Commercial business $ 3,864 2,005 1,564 1,745 1,362
Residential real estate $ 5,472 7,694 4,276 4,536 4,685
Home equity $ 685 803 519 390 484
Other consumer $ 667 915 801 677 830
Specialized lending $ 4,058 4,148 1,452 2,177 1,350
----------- ----------- ----------- ----------- -----------
Total non-performing loans $ 19,085 20,078 12,028 14,939 13,323
Real estate owned $ 977 1,111 740 691 400
----------- ----------- ----------- ----------- -----------
Total non-performing assets $ 20,062 21,189 12,768 15,630 13,723
Provision for credit losses $ 900 2,301 1,846 1,742 3,104
Net loan charge-offs $ 899 1,539 1,697 1,903 2,436
Net charge-offs to average loans (annualized) 0.07% 0.13% 0.21% 0.24% 0.32%
Provision for credit losses as a
percentage of net loan charge-offs 100.1% 149.5% 108.8% 91.5% 127.4%
Total non-performing loans to total loans 0.38% 0.40% 0.37% 0.46% 0.42%
Total non-performing assets as a
percentage of total assets 0.25% 0.27% 0.25% 0.31% 0.27%
Allowance for credit losses to total loans 1.43% 1.46% 1.27% 1.28% 1.31%
Allowance for credit losses
to non-performing loans 381.8% 362.9% 344.4% 276.3% 311.0%
===================================================================================================================================
Personnel FTE 1,777 1,720 1,200 1,207 1,196
Number of branches 116 115 71 71 70
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2005 2004
--------------------------------------- ----------------------------------------------------
Year-to-Date Second First Year Ended Fourth Third Second
June 30, Quarter Quarter December 31, Quarter Quarter Quarter
------------ ----------- ----------- ------------ ----------- ----------- -----------
===================================================================================================================================
SELECTED OPERATIONS DATA
(Amounts in thousands)
===================================================================================================================================
Interest income $ 180,445 93,930 86,515 224,578 58,954 56,818 55,750
Interest expense $ 56,653 30,368 26,285 68,476 18,028 17,180 16,815
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net interest income $ 123,792 63,562 60,230 156,102 40,926 39,638 38,935
Provision for credit losses $ 3,201 900 2,301 8,442 1,846 1,742 3,104
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net interest income after
provision for credit losses $ 120,591 62,662 57,929 147,660 39,080 37,896 35,831
Noninterest income:
Banking services $ 17,437 9,448 7,989 19,818 5,378 5,296 4,934
Risk management services $ 12,031 6,162 5,869 17,391 4,193 4,308 4,442
Wealth management services $ 2,892 1,451 1,441 4,764 1,172 1,257 1,261
Lending and leasing $ 3,346 1,770 1,576 4,676 1,359 1,117 1,127
Bank-owned life insurance $ 2,128 1,072 1,056 3,761 860 826 1,208
Net realized gains on securities
available for sale $ 5 - 5 60 - - -
Other $ 973 498 475 1,396 559 303 415
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest income $ 38,812 20,401 18,411 51,866 13,521 13,107 13,387
Noninterest expense:
Salaries and benefits $ 45,886 23,677 22,209 65,264 16,676 16,790 15,915
Occupancy and equipment $ 9,154 4,677 4,477 12,513 2,958 3,079 3,120
Technology and communications $ 8,891 4,827 4,064 11,499 3,163 2,883 2,845
Marketing and advertising $ 3,854 2,143 1,711 4,738 1,403 998 1,381
Professional services $ 4,346 1,802 2,544 5,117 1,889 1,460 987
Amortization of intangibles $ 5,362 2,854 2,508 4,605 1,218 1,182 1,164
Other $ 12,521 6,181 6,340 17,114 4,737 3,986 4,437
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest expense $ 90,014 46,161 43,853 120,850 32,044 30,378 29,849
Income before income taxes $ 69,389 36,902 32,487 78,676 20,557 20,625 19,369
Income taxes $ 24,203 12,811 11,392 26,859 6,998 7,295 6,356
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net income $ 45,186 24,091 21,095 51,817 13,559 13,330 13,013
============ =========== =========== =========== =========== =========== ===========
===================================================================================================================================
STOCK AND RELATED PER SHARE DATA
===================================================================================================================================
Net income per share:
Basic $ 0.41 0.22 0.19 0.66 0.17 0.17 0.16
Diluted $ 0.41 0.22 0.19 0.65 0.17 0.17 0.16
Cash dividends $ 0.18 0.09 0.09 0.30 0.08 0.08 0.07
Dividend payout ratio 43.90% 40.91% 47.37% 45.45% 47.06% 47.06% 43.75%
Dividend yield (annualized) 2.49% 2.48% 2.76% 2.15% 2.28% 2.38% 2.35%
Market price (NASDAQ: FNFG):
High $ 14.65 14.65 14.16 15.78 14.85 14.00 14.13
Low $ 12.05 12.05 12.80 11.49 13.18 11.84 11.49
Close $ 14.58 14.58 13.21 13.95 13.95 13.38 12.00
===================================================================================================================================
SELECTED RATIOS
(Annualized)
===================================================================================================================================
Net income:
Return on average assets 1.18% 1.22% 1.15% 1.05% 1.06% 1.05% 1.05%
Return on average equity 6.68% 6.95% 6.40% 5.59% 5.76% 5.67% 5.60%
Return on average tangible
equity (1) 13.85% 14.81% 12.89% 8.75% 9.16% 9.04% 8.93%
As a percentage of average assets:
Noninterest income 1.02% 1.03% 1.00% 1.05% 1.06% 1.04% 1.08%
Noninterest expense 2.36% 2.33% 2.39% 2.44% 2.51% 2.40% 2.41%
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net overhead 1.34% 1.30% 1.39% 1.39% 1.45% 1.36% 1.33%
Efficiency ratio 55.4% 55.0% 55.8% 58.1% 58.9% 57.6% 57.0%
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2005 2004
---------------------------------------- -------------------------------------------------------
Year-to-Date Second First Year Ended Fourth Third Second
June 30, Quarter Quarter December 31, Quarter Quarter Quarter
------------ ----------- ----------- ------------ ----------- ----------- -----------
===================================================================================================================================
SELECTED AVERAGE BALANCES
(Amounts in thousands)
===================================================================================================================================
Securities, at amortized cost $ 1,709,008 1,750,517 1,667,038 1,177,203 1,175,149 1,191,767 1,221,772
Loans (3) $ 4,856,738 5,014,075 4,697,778 3,109,335 3,230,411 3,177,191 3,099,987
Total interest-earning assets $ 6,620,090 6,826,189 6,411,701 4,332,665 4,439,570 4,408,057 4,361,984
Goodwill and other
intangibles $ 705,081 737,231 672,573 335,796 347,376 347,715 348,534
Total assets $ 7,695,130 7,934,615 7,452,984 4,949,717 5,075,322 5,033,077 4,986,412
Interest-bearing liabilities:
Savings accounts $ 1,638,918 1,675,953 1,601,471 1,033,983 1,075,082 1,074,032 1,056,289
Checking $ 1,188,542 1,187,863 1,189,229 889,372 918,571 928,300 893,854
Certificates of deposit $ 1,685,878 1,800,333 1,570,152 1,081,034 1,043,603 1,039,097 1,095,011
Borrowed funds $ 1,210,831 1,239,808 1,181,532 677,784 741,044 686,437 672,731
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing
liabilities $ 5,724,169 5,903,957 5,542,384 3,682,173 3,778,300 3,727,866 3,717,885
Noninterest-bearing deposits $ 515,050 547,366 482,375 275,227 292,066 303,244 271,090
Total liabilities $ 6,332,018 6,544,716 6,116,957 4,021,960 4,138,949 4,098,522 4,051,643
Stockholders' equity $ 1,363,112 1,389,899 1,336,026 927,757 936,373 934,555 934,769
----------- ----------- ----------- ----------- ----------- ----------- -----------
Tangible equity (1) $ 658,031 652,668 663,453 591,961 588,997 586,840 586,235
Net earning assets $ 895,921 922,232 869,317 650,492 661,270 680,191 644,099
Common shares
outstanding (2):
Basic 109,673 111,128 108,200 78,750 78,735 79,257 79,595
Diluted 110,654 112,033 109,246 79,970 79,882 80,312 80,731
===================================================================================================================================
SELECTED AVERAGE YIELDS/RATES
===================================================================================================================================
Securities, at amortized cost 3.38% 3.42% 3.35% 2.86% 2.97% 2.91% 2.77%
Loans 6.24% 6.26% 6.21% 6.14% 6.21% 6.05% 6.12%
Total interest-earning assets 5.47% 5.51% 5.43% 5.18% 5.30% 5.15% 5.12%
Savings accounts 0.99% 1.01% 0.98% 0.94% 1.01% 0.95% 0.93%
Interest-bearing checking 1.18% 1.27% 1.00% 0.93% 1.02% 0.94% 0.89%
Certificates of deposit 2.48% 2.61% 2.32% 2.21% 2.24% 2.17% 2.14%
Borrowed funds 3.63% 3.64% 3.62% 3.91% 3.80% 3.90% 3.92%
Total interest-bearing
liabilities 2.00% 2.06% 1.92% 1.86% 1.90% 1.83% 1.82%
Net interest rate spread 3.47% 3.45% 3.51% 3.32% 3.40% 3.32% 3.30%
Net interest rate margin 3.74% 3.72% 3.76% 3.60% 3.69% 3.60% 3.57%
- ----------
(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.