[LOGO] First Niagara
Financial Group, Inc.
FIRST NIAGARA FINANCIAL GROUP REPORTS FIRST QUARTER RESULTS
Lockport, N.Y. - April 13, 2006 - First Niagara Financial Group, Inc. (NASDAQ:
FNFG), today announced that net income for the first quarter of 2006 increased
to $22.6 million, or $0.21 per diluted share from $21.1 million, or $0.19 per
diluted share for the same period of 2005. This represents a 7% increase in net
income and an 11% increase in diluted earnings per share from a year ago. These
results compare to net income and diluted earnings per share of $23.5 million
and $0.21, respectively, for the fourth quarter of 2005.
The results for the quarter reflect the flatter than expected yield curve, which
continues to put pressure on the Company's net interest rate margin. However,
mitigating the impact of the margin decline were the benefits of solid loan
growth, favorable credit trends and strong results in our financial services
businesses. Given the constraints on revenue growth, the Company has refocused
its efforts on the implementation of process improvement and efficiency
initiatives which, combined with the continued execution of its relationship
based strategy, will best position the Company for future earnings growth.
For the first quarter, the taxable equivalent net interest rate margin was
3.68%, 2 basis points below the linked quarter (3.60% excluding taxable
equivalent adjustments, which compares to 3.63% for the linked quarter). The
benefit of 9% annualized loan growth helped minimize further spread compression
resulting from the continuing shift in funding towards higher cost deposits as
well as the further flattening of the yield curve. Total loans increased $117.7
million, including a 27% annualized increase in commercial business loans and a
15% annualized increase in relationship-based home equity loans. Also, the
commercial and residential real estate portfolios increased 7% and 5% on an
annualized basis, respectively. These increases, along with the continued
repricing of variable rate assets, resulted in a 16 basis point improvement in
the taxable equivalent yield on interest-earnings assets to 5.89% during the
quarter.
At March 31, 2006, deposits totaled $5.53 billion, an increase of 3% on an
annualized basis over year-end. Although the growth continues to be in
higher-rate certificate and money market accounts, the Company's relationship
based strategy gained further momentum as the number of deposit accounts
increased 4% on an annualized basis and the ratio of opened to closed accounts
improved to 1.35 versus the linked quarter of 1.12. However, as a result of the
continuing shift in deposit mix, as well as the increase in short-term rates
during the period, the yield on interest-bearing liabilities increased 21 basis
points over the linked quarter to 2.58%.
Credit quality continues to be favorable. Annualized net charge-offs to average
loans and non-performing loans to total loans for the first quarter of 0.17% and
0.38%, respectively, improved from the 0.19% and 0.41%, respectively, in the
linked quarter. Accordingly, a provision for loan losses of $2.3 million was set
aside during the period. At March 31, 2006, the allowance for credit losses was
1.34% of total loans and 351% of non-performing loans.
Noninterest income was $25.9 million for the first quarter of 2006 compared to
$26.2 million for the linked quarter. This decrease was primarily the result of
a $724 thousand decline in consumer banking fees due to seasonal fluctuations as
well as lower overall activity levels. However, reflecting the Company's
continuing focus on its financial services businesses, wealth management revenue
increased 45% during the quarter and risk management revenue remained strong at
$10.8 million. Noninterest income represented 29% of total net revenues for the
first quarter of 2006 and continues to be a priority during this challenging
interest rate environment.
The continued growth in the Company's financial services businesses and ongoing
expansion of its branch network, as well as continuing investments in customer
centric Blueprint initiatives, increased noninterest expense to $51.9 million
compared to $50.4 million for the linked quarter. The increase in salaries and
benefits also includes $375 thousand related to the expensing of stock options,
effective January 1, 2006. The consolidated efficiency ratio for the first three
months of 2006 was 59%, compared to the linked quarter of 57%.
During the quarter, the Company repurchased an additional 1.1 million shares of
its common stock. As of March 31, 2006, 7.4 million shares remain available for
repurchase, which includes the 5.6 million share authorization announced near
the end of the first quarter.
Outlook - For the reminder of the year, the flatter than expected yield curve as
well as very competitive loan and deposit pricing will continue to put pressure
on the Company's net interest rate margin. We expect our taxable equivalent
margin for the year will range from 3.60% to 3.70%. The keys remain to improve
balance sheet mix, including commercial loan and noninterest bearing deposit
growth, as well as profitable revenue diversification through the expansion of
our financial services businesses. The Company is also very focused on
efficiently managing all aspects of the business while driving better execution
of strategic initiatives. While current market conditions could compromise the
Company's ability to achieve its double digit organic earnings per share growth
goal, management remains focused on improving earnings while continuing to
position First Niagara for even more profitable growth as market conditions
improve.
Profile - First Niagara Financial Group, Inc., through its wholly owned
subsidiary First Niagara Bank, has assets of $8.1 billion and deposits of $5.5
billion. First Niagara Bank is a full-service, community-oriented bank that
provides financial services to individuals, families and businesses through 120
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
Thursday April 13, 2006 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 April 28, 2006 by
dialing 1-877-660-6853, account number 240, conference number 197409.
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
2006 2005
----------- --------------------------------------------------------------
March 31, December 31, September 30, June 30, March 31,
----------- ------------ ------------- ----------- -----------
==================================================================================================================================
SELECTED FINANCIAL DATA
(Amounts in thousands)
==================================================================================================================================
Securities available for sale $ 1,489,402 1,604,888 1,663,178 1,726,822 1,741,486
Loans and leases:
Commercial:
Real estate $ 1,904,305 1,870,483 1,818,217 1,773,773 1,721,393
Business $ 504,935 473,571 479,473 482,855 462,549
----------- ----------- ----------- ----------- -----------
Total commercial loans $ 2,409,240 2,344,054 2,297,690 2,256,628 2,183,942
Residential real estate $ 2,209,518 2,182,907 2,136,961 2,117,609 2,114,420
Home equity $ 418,719 403,340 383,350 355,030 344,589
Other consumer $ 182,367 178,732 181,488 178,681 186,413
Specialized lending $ 164,552 159,759 159,935 158,361 154,380
Net deferred costs and discounts $ 21,927 19,847 16,153 13,798 12,573
----------- ----------- ----------- ----------- -----------
Total loans and leases $ 5,406,323 5,288,639 5,175,577 5,080,107 4,996,317
Allowance for credit losses $ 72,441 72,340 72,290 72,869 72,868
----------- ----------- ----------- ----------- -----------
Loans and leases, net $ 5,333,882 5,216,299 5,103,287 5,007,238 4,923,449
Goodwill and other intangibles $ 757,738 760,707 763,250 735,514 738,191
Total assets $ 8,079,957 8,064,832 8,039,284 7,982,290 7,907,976
Total interest-earning assets $ 6,982,778 6,958,015 6,928,114 6,857,411 6,801,056
Deposits:
Core:
Savings $ 1,604,326 1,619,187 1,652,552 1,664,203 1,705,258
Interest-bearing checking $ 1,167,361 1,182,995 1,130,264 1,170,013 1,241,760
Noninterest-bearing $ 584,820 592,076 569,308 567,134 524,219
----------- ----------- ----------- ----------- -----------
Total core deposits $ 3,356,507 3,394,258 3,352,124 3,401,350 3,471,237
Certificates $ 2,169,838 2,085,154 1,996,097 1,847,696 1,704,498
----------- ----------- ----------- ----------- -----------
Total deposits $ 5,526,345 5,479,412 5,348,221 5,249,046 5,175,735
Borrowings $ 1,082,410 1,096,427 1,163,327 1,245,328 1,235,860
Total interest-bearing liabilities $ 6,023,935 5,983,763 5,942,240 5,927,240 5,887,376
Net interest-earning assets $ 958,843 974,252 985,874 930,171 913,680
Stockholders' equity $ 1,367,385 1,374,423 1,380,970 1,381,168 1,390,713
Tangible equity (1) $ 609,647 613,716 617,720 645,654 652,522
Securities available for sale fair value
adjustment included in stockholders' equity $ (22,562) (18,083) (15,005) (8,080) (15,247)
Common shares outstanding (2) 107,721 108,656 109,755 110,162 112,460
Treasury shares 8,276 7,280 6,117 5,680 3,327
Total loans serviced for others $ 378,665 378,253 372,341 368,436 372,461
==================================================================================================================================
CAPITAL
==================================================================================================================================
Tier 1 risk based capital 11.23% 11.01% 11.95% 12.01% 12.52%
Total risk based capital 12.48% 12.26% 13.20% 13.26% 13.77%
Tier 1 (core) capital 7.57% 7.56% 8.11% 8.10% 8.44%
Tangible capital 7.57% 7.56% 8.11% 8.10% 8.44%
Equity to assets 16.92% 17.04% 17.18% 17.30% 17.59%
Tangible equity to tangible assets(1) 8.33% 8.40% 8.49% 8.91% 9.10%
Book value per share (2) $ 12.69 12.65 12.58 12.54 12.37
Tangible book value per share (1)(2) $ 5.66 5.65 5.63 5.86 5.80
==================================================================================================================================
ASSET QUALITY DATA
(Amounts in thousands)
==================================================================================================================================
Non-performing loans:
Commercial real estate $ 8,122 6,755 8,791 4,339 4,513
Commercial business $ 3,074 3,171 2,541 3,864 2,005
Residential real estate $ 4,905 5,911 5,389 5,472 7,694
Home equity $ 678 567 621 685 803
Other consumer $ 742 953 1,060 667 915
Specialized lending $ 3,089 4,573 3,945 4,058 4,148
----------- ----------- ----------- ----------- -----------
Total non-performing loans $ 20,610 21,930 22,347 19,085 20,078
Real estate owned $ 986 843 1,097 977 1,111
----------- ----------- ----------- ----------- -----------
Total non-performing assets $ 21,596 22,773 23,444 20,062 21,189
Net loan charge-offs $ 2,199 2,450 2,226 899 1,539
Net charge-offs to average loans (annualized) 0.17% 0.19% 0.17% 0.07% 0.13%
Provision for credit losses $ 2,300 2,500 1,647 900 2,301
Provision for credit losses as a
percentage of average loans (annualized) 0.18% 0.19% 0.13% 0.07% 0.19%
Total non-performing loans to total loans 0.38% 0.41% 0.43% 0.38% 0.40%
Total non-performing assets as a
percentage of total assets 0.27% 0.28% 0.29% 0.25% 0.27%
Allowance for credit losses to total loans 1.34% 1.37% 1.40% 1.43% 1.46%
Allowance for credit losses
to non-performing loans 351.5% 329.9% 323.5% 381.8% 362.9%
- ----------------------------------------------------------------------------------------------------------------------------------
Personnel FTE 1,958 1,984 1,922 1,777 1,720
Number of branches 120 118 117 116 115
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2006 2005
-------- -------------------------------------------------------------
First Year Ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
-------- ------------ -------- -------- -------- --------
===================================================================================================================================
SELECTED OPERATIONS DATA
(Amounts in thousands)
===================================================================================================================================
Interest income $100,630 375,217 98,475 96,297 93,930 86,515
Interest expense $ 38,077 125,067 35,613 32,801 30,368 26,285
-------- -------- -------- -------- -------- --------
Net interest income $ 62,553 250,150 62,862 63,496 63,562 60,230
Provision for credit losses $ 2,300 7,348 2,500 1,647 900 2,301
-------- -------- -------- -------- -------- --------
Net interest income after provision
for credit losses $ 60,253 242,802 60,362 61,849 62,662 57,929
Noninterest income:
Banking services $ 9,051 37,327 9,775 10,115 9,448 7,989
Risk management services $ 10,820 29,838 10,183 8,213 5,837 5,605
Employee benefits administration $ 895 1,588 1,226 362 -- --
Wealth management services $ 2,273 6,753 1,572 1,700 1,776 1,705
Lending and leasing $ 1,747 7,204 1,935 1,923 1,770 1,576
Bank-owned life insurance $ 747 3,837 744 965 1,072 1,056
Other $ 378 4,116 776 2,362 498 480
-------- -------- -------- -------- -------- --------
Total noninterest income $ 25,911 90,663 26,211 25,640 20,401 18,411
Noninterest expense:
Salaries and benefits $ 29,602 99,522 27,630 26,006 23,677 22,209
Occupancy and equipment $ 5,673 18,823 4,904 4,765 4,677 4,477
Technology and communications $ 4,994 19,555 5,573 5,091 4,827 4,064
Marketing and advertising $ 1,787 6,994 1,455 1,685 2,143 1,711
Professional services $ 863 7,784 1,720 1,718 1,802 2,544
Amortization of intangibles $ 3,080 12,083 3,467 3,254 2,854 2,508
Other $ 5,910 23,445 5,635 5,289 6,181 6,340
-------- -------- -------- -------- -------- --------
Total noninterest expense $ 51,909 188,206 50,384 47,808 46,161 43,853
Income before income taxes $ 34,255 145,259 36,189 39,681 36,902 32,487
Income taxes $ 11,647 52,400 12,689 15,508 12,811 11,392
-------- -------- -------- -------- -------- --------
Net income $ 22,608 92,859 23,500 24,173 24,091 21,095
======== ======== ======== ======== ======== ========
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STOCK AND RELATED PER SHARE DATA
===================================================================================================================================
Net income per share:
Basic $ 0.21 0.85 0.22 0.22 0.22 0.19
Diluted $ 0.21 0.84 0.21 0.22 0.22 0.19
Cash dividends $ 0.11 0.38 0.10 0.10 0.09 0.09
Dividend payout ratio 52.38% 44.71% 45.45% 45.45% 40.91% 47.37%
Dividend yield (annualized) 3.04% 2.63% 2.74% 2.75% 2.48% 2.76%
Market price (NASDAQ: FNFG):
High $ 15.16 15.16 15.15 15.16 14.65 14.16
Low $ 13.38 12.05 13.35 13.78 12.05 12.80
Close $ 14.66 14.47 14.47 14.44 14.58 13.21
===================================================================================================================================
SELECTED RATIOS
===================================================================================================================================
Net income (annualized):
Return on average assets 1.14% 1.18% 1.16% 1.20% 1.22% 1.15%
Return on average equity 6.67% 6.76% 6.76% 6.89% 6.95% 6.40%
Return on average tangible equity (1) 14.88% 14.41% 15.12% 14.84% 14.81% 12.89%
Noninterest income as a percentage of net revenue 29.29% 26.60% 29.43% 28.77% 24.30% 23.41%
Efficiency ratio - Consolidated 58.7% 55.2% 56.6% 53.6% 55.0% 55.8%
- Banking segment (3) 54.2% 51.0% 50.1% 49.1% 52.1% 53.0%
First Niagara Financial Group, Inc.
Summary of Quarterly Financial Data (Cont'd)
2006 2005
---------- -----------------------------------------------------------------------
First Year Ended Fourth Third Second First
Quarter December 31, Quarter Quarter Quarter Quarter
---------- ------------ ---------- ---------- ---------- ----------
===================================================================================================================================
SELECTED AVERAGE BALANCES
(Amounts in thousands)
===================================================================================================================================
Securities, at amortized cost $1,592,764 1,688,250 1,650,915 1,684,748 1,750,517 1,667,038
Loans (4)
Commercial:
Real estate $1,869,891 1,748,839 1,837,831 1,791,748 1,737,247 1,625,727
Business $ 478,253 462,355 469,860 471,258 468,471 439,397
---------- ---------- ---------- ---------- ---------- ----------
Total commercial loans $2,348,144 2,211,194 2,307,691 2,263,006 2,205,718 2,065,124
Residential $2,209,575 2,095,963 2,171,723 2,127,127 2,117,358 1,965,030
Home equity $ 410,952 360,519 397,192 366,467 347,997 329,611
Other consumer $ 186,486 186,368 185,191 182,406 186,551 191,436
Specialized lending $ 165,175 159,645 164,174 162,846 160,580 150,800
---------- ---------- ---------- ---------- ---------- ----------
Total loans $5,320,332 5,013,689 5,225,971 5,101,852 5,018,204 4,702,001
Total interest-earning assets $6,976,304 6,778,663 6,942,574 6,886,717 6,845,424 6,433,151
Goodwill and other intangibles $ 759,284 729,816 761,802 746,494 737,231 672,573
Total assets $8,035,848 7,852,588 8,012,375 8,002,582 7,934,615 7,452,984
Interest-bearing liabilities:
Savings accounts $1,601,868 1,643,757 1,627,571 1,669,466 1,675,953 1,601,471
Checking $1,148,515 1,174,366 1,169,508 1,151,334 1,187,863 1,189,229
Certificates of deposit $2,107,851 1,831,418 2,043,388 1,905,781 1,800,333 1,570,152
Borrowed funds $1,127,879 1,176,711 1,102,370 1,183,924 1,239,808 1,181,532
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities $5,986,113 5,826,252 5,942,837 5,910,505 5,903,957 5,542,384
Noninterest-bearing deposits $ 556,840 547,599 574,364 584,871 547,366 482,375
Total deposits $5,415,074 5,197,140 5,414,831 5,311,452 5,211,515 4,843,227
Total liabilities $6,660,514 6,478,174 6,634,128 6,609,765 6,544,716 6,116,957
Net interest-earning assets $ 990,191 952,411 999,737 976,212 941,467 890,767
Stockholders' equity $1,375,334 1,374,414 1,378,246 1,392,817 1,389,899 1,336,026
Tangible equity (1) $ 616,050 644,598 616,444 646,323 652,668 663,453
Common shares outstanding (2):
Basic 108,042 109,646 109,011 110,227 111,128 108,200
Diluted 109,026 110,658 110,032 111,239 112,033 109,246
===================================================================================================================================
SELECTED AVERAGE YIELDS/RATES
(Tax equivalent basis)
===================================================================================================================================
Securities, at amortized cost 3.99% 3.67% 3.86% 3.71% 3.60% 3.50%
Loans
Commercial:
Real estate 6.90% 6.68% 6.76% 6.71% 6.64% 6.59%
Business 7.12% 6.46% 6.83% 6.50% 6.41% 6.08%
---------- ---------- ---------- ---------- ---------- ----------
Total commercial loans 6.95% 6.63% 6.78% 6.67% 6.59% 6.48%
Residential 5.56% 5.54% 5.49% 5.53% 5.55% 5.61%
Home equity 6.67% 6.13% 6.32% 6.23% 6.06% 5.86%
Other consumer 7.33% 6.71% 6.77% 7.03% 6.55% 6.48%
Specialized lending 10.51% 10.67% 10.66% 10.67% 11.03% 10.33%
Total loans 6.47% 6.27% 6.33% 6.30% 6.25% 6.20%
Total interest-earning assets 5.89% 5.60% 5.73% 5.64% 5.55% 5.46%
Savings accounts 1.36% 1.09% 1.26% 1.13% 1.01% 0.98%
Interest-bearing checking 1.51% 1.15% 1.37% 1.14% 1.08% 1.00%
Certificates of deposit 3.43% 2.77% 3.16% 2.86% 2.61% 2.32%
Borrowed funds 3.79% 3.62% 3.61% 3.68% 3.61% 3.59%
Total interest-bearing liabilities 2.58% 2.14% 2.37% 2.20% 2.06% 1.92%
Tax equivalent net interest rate spread 3.31% 3.46% 3.36% 3.44% 3.49% 3.54%
Tax equivalent net interest rate margin 3.68% 3.75% 3.70% 3.75% 3.77% 3.80%
Net interest rate spread 3.24% 3.40% 3.29% 3.39% 3.45% 3.51%
Net interest rate margin 3.60% 3.70% 3.63% 3.69% 3.72% 3.76%
- ----------
(1) Excludes goodwill and other intangible assets.
(2) Excludes unallocated ESOP shares and unvested restricted stock shares.
(3) Includes operating results for the banking activities segment as defined
in the Company's quarterly and annual reports.
(4) Includes nonaccrual loans