First Niagara: Financial Winner
The KBW Bank Index (I:BKX) was down slightly to close at 53.83, with all but seven of the 24 index components seeing declines for the session.
Following Wednesday's report from the Commerce Department that economic expansion in the United States came to a halt during the fourth quarter, with Hurricane Sandy getting the blame, Thursday's economic news was mixed.
The Department of Labor said that initial unemployment claims for the week ended Jan. 26 increased to 368,000 from the previous week's unrevised figure of 330,000. The four-week moving average for jobless claims rose slightly to 352,000. Continuing unemployment claims for the week ended Jan. 19 totaled 3.197 million, increasing by 22,000 from the previous week.
Meanwhile, the Institute for Supply Management said that its Chicago Business Barometer rose to a seasonally adjusted 55.6 during January from 50.0 in December. The purchasing managers index was it its highest level since April. A reading above 50 indicates expansion.
Shares of First Niagara Financial Group of Buffalo, N.Y., are now down 1% year-to-date, following a 5% decline during 2012. Last year's decline was quite significant, when compared to a 30% return for the KBW Bank Index.
The shares trade for 1.4 times their reported Dec. 31 tangible book value of $5.65, and for 9.8 times the consensus 2014 earnings estimate of 80 cents a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is 74 cents.
Based on an 8-cent quarterly payout, the shares have a dividend yield of 4.08%.
2012 was a year of major transition for the First Niagara, which added 96 branches year-over-year, after purchasing nearly 195 branches and either selling or consolidating over half of the acquired offices.
The company on Jan. 23 reported fourth-quarter operating net income of available to common shareholders of $67.8 million, or 19 cents a share, increasing from $66.5 million, or 19 cents a share, in the third quarter, but declining from $72.1 million, or 24 cents a share, during the fourth quarter of 2011.
First Niagara said that the operating results excluded a pre-tax adjustment of $16 million "to accelerate premium amortization on its Collateralized Mortgage Obligations (CMO) portfolio," as well as $3.7 million in restructuring charges.
Excluding the effect of the CMO adjustment, First Niagara said that its net interest margin (NIM) narrowed by eight basis points during the fourth quarter to 3.46%, "driven by the continued downward re-pricing of loans and securities."
But net interest income only declined slightly to $268.6 million in the fourth quarter from $269.6 million in the third quarter, as average loans grew 1.9% sequentially.