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First Niagara lowers fourth-quarter net income due to ‘loan loss events’

First Niagara Financial Group has restated its fourth-quarter net income, lowering it to $69 million from the initially reported $77.6 million.

The new figures were included in First Niagara’s annual report. The Buffalo-based bank said it had identified two “loan loss events” based on information obtained after releasing its fourth-quarter results in late January but before filing the annual report this week.

One of the instances was an $11 million provision expense to cover a $10 million charge-off and $1 million additional reserve “related to a single borrower in the oil and gas industry.” The write-off was based on newly obtained information about the borrower’s ability to repay, the bank said. The other was a $5 million provision for credit losses “related to impairment on a commercial loan.”

Separately, First Niagara had disclosed in late February that it had overstated its allowance for loan and lease losses due to “misconduct of a mid-level employee,” who was terminated. The bank said it worked with an independent, third-party expert and “found no evidence that the employee misconduct involved others.” First Niagara did not specify when the employee was fired.

“First Niagara’s board of directors and senior management team recognize the importance of the company’s internal controls and remain internally focused on continuous improvement and appropriate oversight of the company,” the bank said in a statement.

In its annual report, First Niagara said it had determined its loan loss allowance was overstated for the second, third and fourth quarters of 2013, and the first three quarters of 2014. “They go through a very thorough process in analyzing the data,” said David Lanzillo, a bank spokesman.

The bank said the cumulative impact of the corrections reduced its amount set aside for bad loans as of last Dec. 31 by $7 million to $234 million.

While correcting the overstatement of the allowance was positive for First Niagara’s earnings, the benefit was offset by the two other items disclosed in the annual report.

email: mglynn@buffnews.com