First Niagara Financial Group raised to $1.1 billion the amount of the goodwill impairment charge it recorded in the third quarter, as the Buffalo, N.Y., company cuts the value of assets acquired since 2009.
The $38 billion-asset company last month estimated that it would record an $800 million goodwill impairment charge in the third quarter. At the time, First Niagara stressed that the figure could change, and it disclosed the new figure in its 10-Q on Monday.
First Niagara blamed its declining stock price and broad macroeconomic factors, including prolonged low interest rates, as reasons for the writedown.
"We concluded it was more likely than not that the fair value of our [bank] unit was less than its carrying value including goodwill," First Niagara said in the 10-Q.
Some analysts have said First Niagara tried to grow too fast in recent years, and specifically pointed out its 2012 deal to acquire branches from HSBC. First Niagara's former chief executive, John Koelmel, was ousted in March 2013. His successor, Gary Crosby, was promoted from interim to permanent CEO in December.
First Niagara raised the amount of the goodwill charge by $300 million to $1.1 billion because of additional declines in its stock price.
First Niagara shares have fallen 12% from $8.44 on Oct. 23, the last trading day before it released earnings on Oct. 24, to $7.44 at the close of trading on Nov. 7. The shares fell 8% over the one-month period between Oct. 10 and Nov. 10, and have fallen 30% year to date.
First Niagara warned in the regulatory filing that if its shares fall further, it may need to increase the size of the goodwill impairment charge. A 5% decline in its shares would equate to an additional $175 million writedown in the fair value of its banking unit.
In calculating the size of the goodwill impairment charge, First Niagara also used a 35% control premium to assess the value of its outstanding preferred stock. If the control premium fell 5 percentage points to 30%, that would reduce the fair value of its banking unit by about $130 million.
Meanwhile, First Niagara provided some additional details on the factors behind the $45 million reserve expense it recorded in the third quarter to address a "process issue related to certain customer deposit accounts."
The process issue dates back to the spring of 2012, and the amount is the estimate needed for First Niagara's customer-redress plan and for other resolution costs, First Niagara said in the 10-Q. In addition to the $45 million reserve, the process issue lowered First Niagara's third-quarter noninterest income by about $4 million.
The process issue does not relate to the company's recent acquisitions, and it is not related to "information security or data breaches," the company said in the filing. The $45 million figure could change, depending on what the company's internal research finds and after discussions with regulators.
Editor's Note: An earlier version of this story understated the drop in First Niagara's stock price since late October, and slightly overstated the decline over the past month. The figures have been corrected.