First Niagara profits rise 25 percent in third quarter

PHOTOGRAPHER: The Associated Press

First Niagara Financial Group Inc. said today that its profit rose 25 percent in the third quarter as loan quality continued to improve, its commercial lending business picked up and deposits grew.

The Buffalo, N.Y.-based bank posted net income of $57 million, or 19 cents per share, for the three months ended Sept. 30 compared with $45.6 million, or 22 cents per share, a year ago.

The results included one-time costs for a branch closure and other merger related expenses.

Excluding the one-time costs, the company said it earned $73.6 million, or 25 cents per share, up from $46.9 million, or 23 cents per share, a year ago.

That was a penny per share shy of analysts’ expectations for earnings of 26 cents per share, according to a FactSet poll.

“It is clear that the economy in general and banking in particular will be challenged for an extended period of time,” said CEO John R. Koelmel.

Banks are struggling with the extremely low interest rates, which makes profitability more challenging because the interest they earn on loans and other assets isn’t much more than what they pay customers for deposits.

Its shares fell 41 cents, or 4.3 percent, to $9.20 in morning trading. They’ve traded between $8.29 and $15.10 in the past 52 weeks.

Interest income rose 43 percent to $287.1 million while interest expenses grew 31 percent to $51.7 million. The amount set aside to cover bad loans rose to $14.5 million from $11 million.

Income from fees and other banking services rose to $68.7 million from $49.5 million, driven in part by increased home refinancing business. Non-interest expenses grew to $203.9 million from $132.6 million.

The bank said net loan charge-offs grew to $8.1 million from $6.9 million a year ago.

Assets past due fell to $91.3 million from $102.8 million.

Total assets grew to $31.21 billion from $20.87 billion a year ago.

First Niagara announced in July it was acquiring 195 retail bank branches from HSBC Holdings in a deal worth about $1 billion.

The sale is part of HSBC’s strategy, presented to investors in May, to shift focus away from retail banking to commercial and corporate banking, and to target investment in high-growth economies.

HSBC, which is still dealing with the legacy of bad loans in the U.S. from the 2003 acquisition of consumer lender Household International Inc., said in May that it intended to trim its costs by up to $3.5 billion within three years.

The companies expect the all-cash transaction to be completed early next year.