First Niagara Financial Group, which is buying HSBC Bank USA's entire upstate branch network, said fourth-quarter profits rose 27 percent from a year ago, on the strength of commercial loan and core deposit growth and its expansion into New England last spring.

The Buffalo-based banking company reported net income of $58.5 million, or 19 cents per share, compared with $45.9 million, or 22 cents per share, in the same quarter a year ago.

Per-share earnings were down because the bank issued additional shares for its acquisition of NewAlliance Bancshares in Connecticut last year, as well as for its capital-raising effort in December to support its pending purchase of the HSBC branches. In all, outstanding shares are up by about 35 percent.

The quarter's results include restructuring costs, such as $3.5 million in employee severance to realign staff, $13.5 million for branch closures and $6.1 million in merger integration costs.

Without those, operating profits soared 45 percent to $72.1 million, or 24 cents per share, from $49.7 million, or 24 cents per share. That matched Wall Street estimates.

For the full year, net income rose 24 percent to $173.9 million, or 64 cents per share, from $140.4 million, or 70 cents per share, in 2010. Net operating income rose 53.2 percent to $266.7 million, or 98 cents per share, from $174.1 million, or 87 cents per share. That beat consensus estimates on Wall Street of 97 cents.

The company's stock rose 25 cents, or 2.65 percent, to $9.68 Thursday.

President and CEO John R. Koelmel said he was "very, very pleased" with the results, especially given the "extremely challenging circumstances and on top of navigating our HSBC transaction."

"For us, it's just the latest in a continuing string of steady and strong and solid performances," Koelmel said.

The earnings report comes as First Niagara is realigning its branch staffing across its entire franchise of 346 branches to focus more on customer sales and service, particularly for small business and wealth management services.

The company, which provided more details about the changes Thursday, is eliminating the assistant branch manager position in about 200 of its branches, but is redeploying about half of those employees into other front-line or back-office roles, leaving about 100 who may still be affected by cuts. Meanwhile, the bank is adding 100 new positions in small-business banking and wealth management within the branches, so the net change will be "incremental," Koelmel said.

"This is merely better aligning our team, our resources," he said in an interview.

Koelmel said the bank will now "hit the pause button" on mergers for the next 18 to 24 months to ensure it has its "legs fully under us as we continue to build out the franchise." In the meantime, he said, the focus will be on capturing more market share and delivering on the promise of performance.

First Niagara has been on a nearly nonstop tear for the past couple of years, growing its assets fivefold while repeatedly raising capital to support its expansion. The bank's acquisition of NewAlliance in April 2011 added 88 branches, $8.8 billion in assets, $5.1 billion in loans and $5.3 billion in deposits in Connecticut and Massachusetts. That was the bank's third major acquisition in the past two years, after two prior purchases in western and eastern Pennsylvania.

It also agreed in late July to buy 195 HSBC branches throughout upstate New York and southwestern Connecticut, with $15 billion in deposits, nearly doubling its branch network upstate and giving it the No. 1 market share across the primary upstate cities. That deal is slated to close in April.

As part of that deal, it is selling 64 branches, with $3.8 billion in deposits and $713 million in loans to KeyCorp, Community Bank System and Financial Institutions. Those deals are expected to close in the third quarter.

The bank also raised more than $1.1 billion in new capital in December through a combination of stock and debt offerings to fund the HSBC purchase and sustain its capital levels. But it also slashed its dividend in half to conserve capital.

At the same time, it has continued adding loans and deposits in its existing markets, especially with business customers. Average core deposits rose by $485 million since Sept. 30, or 13 percent annualized, to $15.2 billion, because of promotional campaigns. Commercial loans grew by $295 million, or 28 percent annualized, in the fourth quarter to $9.9 billion, including a 28 percent growth in nonreal estate business loans, while commercial real estate and home mortgage balances fell because of prepayments. AnnuBranchalized means one quarter's pace multiplied by four.

The bank originated $2.7 billion in loans in the quarter, up 27 percent annualized from the third quarter, led by growth in upstate New York and eastern Pennsylvania, as well as in capital markets.

Compared with a year ago, net interest income rose 45 percent to $242.5 million. The bank set aside $13.4 million for loan losses, nearly flat with $13.5 million a year ago, but down from $14.5 million in the third quarter. And it wrote off $5.8 million as uncollectable, down from $8.1 million in the third quarter.

Fees and other revenues rose 17.7 percent to $63.7 million,but were down 7.3 percent from the third quarter. Expenses were up 37 percent from a year ago to $182.5 million, and were up 2.2 percent from the third quarter.

Branch network expansion continues "organically," with plans for eight to nine new offices later this year.

jepstein@buffnews.comnull