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First Niagara's first-quarter profits rise 22% on higher loan, fee revenues

First Niagara Financial Group, which is buying HSBC Bank USA's upstate New York branches, said Thursday that first-quarter profits for common shareholders rose 22 percent from a year ago, as sharply higher loan and fee revenues outpaced higher expenses from an acquisition in Connecticut.

The Buffalo-based parent of First Niagara Bank reported net income available to common shareholders of $54.8 million, up from $44.9 million.

However, per-share earnings fell 27 percent to 16 cents from 22 cents because the bank has more than 140 million additional shares outstanding after issuing stock twice in the past year.

Compared to the fourth quarter, meanwhile, profits for shareholders were down 6.3 percent from $58.5 million, or 19 cents per share.

Results for the recent quarter include a $5.1 million preferred stock dividend the bank had to pay during the quarter, as the cost of financing its pending $1 billion branch purchase. First Niagara in December issued $250 million in preferred stock, along with $450 million in common stock and $300 million in debt.

Not counting that, bottom-line profits were $59.9 million in the current quarter, up 33 percent from a year ago, and up 2.4 percent from the fourth quarter.

Without including $15.7 million in one-time merger-related costs and other accounting issues, net operating profits for common shareholders soared 30.3 percent from a year ago, to $64.9 million, or 19 cents per share, from $49.8 million, or 24 cents a share. However, operating profits fell 10 percent from $72.1 million in the fourth quarter, also 24 cents per share.

"It's always great to start the new year in a really, really positive way," said First Niagara President and CEO John R. Koelmel. Results matched Wall Street expectations.

First Niagara has been on a growth tear for the past few years, buying 140 branches in a pair of acquisitions in western and then eastern Pennsylvania, and then acquiring New Haven, Conn.-based NewAlliance Bancshares, with 88 branches in Connecticut and Massachusetts, last year.

It's also been adding not only staff, but also selling new products and services -- such as credit cards, indirect auto lending, equipment financing, derivatives and syndicated loans -- while it goes after more and larger customers and compensates for lost fee revenues because of new regulations.

"We sharpen our focus on running the business and what we can control," said Chief Financial Officer Gregory Norwood.

That's paid off, including in the recent quarter. The bank said it posted its ninth straight quarter of double-digit annualized percentage growth in commercial loans, while increasing new checking account openings by 11 percent annualized and 36 percent from a year ago. Personal checking accounts alone grew 15 percent annualized. Annualized means one quarter's pace multiplied by four.

For the quarter, net revenues rose 39 percent from a year ago and 2 percent from the fourth quarter, to $312.3 million. Net interest income from taking deposits and making loans rose 40 percent to $242.4 million, but was flat from the fourth quarter, as a narrower profit margin undercut a 14 percent annualized increase in average business and commercial real estate loans to $10.2 billion.

Total loans and leases averaged $16.6 billion during the quarter, up 5 percent annualized from the fourth quarter, as a 28 percent annualized growth in business loans to $3.9 billion was offset by a 14 percent annualized drop in mortgages, also to $3.9 billion. Home equity loans fell 2 percent to $2.2 billion.

Fee and other income rose 34 percent from a year ago, and 9.7 percent from the fourth quarter, to $69.9 million.