First Niagara Financial Group's (NASDAQ: FNFG) fourth-quarter earnings of $0.19 per share pushed the stock down as much as 2.7% in early trading this morning. But that earnings tally is in the past. What's really important about First Niagara's release was what it says about the future, and I think savvy investors are now looking at three reasons First Niagara is now an even better buy than before.
1. Loan growth
Despite a decrease in revenue from the previous year, there were other bright spots in the company's earnings release. Originated loans grew by 9% during the quarter , aided greatly by an 11% increase in commercial loans during the quarter, the 12th consecutive quarter of double-digit commercial loan growth. Perhaps more impressive, the company's commercial loan growth was strongest outside its New York base , with loans in Western and Eastern Pennsylvania and New England growing 12%, 28%, and 10% respectively.
This helps reinforce the company's decision to acquire nearly 200 branches from HSBC during 2012, effectively expanded the footprint of First Niagara outside of upstate New York. With a wider operations base, First Niagara is no longer as dependent on a limited area for future revenue growth. This should be a boon for investors going forward.
2. Earnings consistency
One interesting quirk that jumped out to me in First Niagara's earnings was that it had non-GAAP earnings of $0.19 per share in each quarter of this year. While this may have simply been a fluke this year, it can also show some potential sustainability in the ability to continue paying its above-average dividend. Currently, the bank pays $0.08 in dividends per quarter, or around 42% of its earnings every quarter. This gives the bank some room to grow its dividend should it desire, but investors also shouldn't worry about a cut anytime soon.
3. Still trading at a discount
As with any decline in share price, certain valuation metrics improve, making the bank seem more attractive to potential investors. This is no different for First Niagara after this morning's decline. The bank is currently trading for around 62% of its book value, and a respectable 142% of its tangible book value. A lower price also pushes up its dividend yield a bit to 3.9%, rewarding investors further that may buy in at its currently discounted price.
Foolish bottom line
While I think it is important to pay attention to earnings releases, sometimes the market's reaction to them can create new opportunities in a stock that could still have some positive qualities. That's why it is important to look beyond the top- and bottom-line numbers to see if there is something you might be missing.
