First Niagara’s “inflated” reserves result in employee termination

Feb 27, 2015

Earlier this week, news broke that First Niagara Financial Group Inc., a $38 billion institution in Buffalo, NY, fired a mid-level employee for having overstated allowance figures, dating back to the middle of 2013.


Overstatement on the ALLL


While overstating the ALLL is arguably less severe than understating, this overstatement still poses an issue for First Niagara, in regards to future examinations and updated reporting.

First Niagara will also have to backtrack and remediate its ALLL calculation, revising retained earnings and coverage ratios. If the overstatement resulted in material differences, the institution may have to overhaul its financial statements, a costly undertaking from a time and resource perspective. As a result, the bank announced it expects to file its annual report late.

The bank attributed the blunder to “misconduct of a mid-level employee,” who had overstated the allowance figure for at least five quarters, according to American Banker.

The overstatement could result in increased scrutiny from regulators upon the bank’s next examination. On Tuesday, February 24th, a local business journal mentioned that the bank could not say, in dollars, how much the allowance was overstated or when it found out about the problem.