The National Credit Union Administration (NCUA) has proposed new rules that deal with how credit unions handle members’ troubled loans.

The new regulations, which have yet to be adopted, stem largely from the economic downturn of recent years, says Michael Carter, director of compliance at the Credit Union Association of New York. During the recession, more credit-union members were seeking adjustments to loans because of financial troubles.

Credit unions often have procedures around such adjustments, but the new NCUA proposal will mandate formal, written policies governing how they work, Carter says. Current policies are sometimes more informal.

“It’s something everyone just knows,” Carter says. “We all know that if a member comes in, we’ll work with them. But there is not something in place to say this is how far we’ll go. This is what we’ll do.”

Reaction to the proposal from credit unions has been generally positive, he adds. Some have sought a bit more clarity on some details, but the rules should aid institutions in the long run.

“This is going to be good for credit unions overall,” Carter says. “It is going to give them a standard and it will be something they can work from.”

While the economy has certainly improved from its lowest point, there are still credit-union members seeking loan modifications, Carter says. And if a major crisis does occur again in the future, the new rules will mean credit unions will be better prepared to deal with some of the challenges that come with it.

The proposed rules also change how credit unions will report on troubled loans to the NCUA, says Neil Smith, an attorney with Syracuse–based law firm Mackenzie Hughes, LLP. Current rules require that credit unions report a modified loan under its original terms until a borrower has made six payments under the new terms, Smith explains.

The new rules would allow credit unions to report the loans under the new, modified terms immediately. The move will ease some accounting issues for institutions, Smith notes, since they won’t have to account for loans in multiple ways.

Although the rules haven’t been formally adopted yet, it’s not too early for credit unions to start looking at their policies on troubled-loan arrangements, Smith says. If they don’t have a policy in place yet, they can certainly start formulating one now.

Some items to consider would include how many loan modifications a credit union is willing to take on and what level of risk is involved in adjusting a loan to meet a member’s needs, Smith says.

The NCUA doesn’t have a firm timeline for adopting the new rules, Smith adds. When they go into effect will depend on whether the administration makes any changes to the proposal after reviewing public comments on the plan.

Carter notes that the NCUA has said it will provide for a lengthy implementation period whenever the final rule is issued.

Some new business areas should help drive continued growth at First Niagara Financial Group, Inc. (NASDAQ: FNFG), executives said recently.

The Buffalo–based banking company recently added indirect auto lending to its suite of services and hired 40 new small-business bankers. First Niagara is seeing some growth in loan demand as business leaders are expecting better times ahead, CFO Gregory Norwood said during an April 19 conference call to discuss the company’s first-quarter results with analysts and investors.

However, according to a recent survey from First Niagara, only one-third of business leaders expect to use a financial institution for financing their needs, Norwood noted.

“While there is some growth in the economy, from a lending perspective, the total pie will not be getting much bigger,” he said.

Adding the auto business brings First Niagara the only consumer lending area that is showing growth, he added. The bank was also able to add two experienced, successful teams for the business that know First Niagara’s markets.

The bank is working with a base of 500 dealers currently. That total should grow to 1,500 by 2014, Norwood said. By the end of 2012, First Niagara’s auto-lending business should generate $500 million in loan balances.

The new push on small-business lending should help the bank by providing low-cost deposit growth and through cross selling of other products and services, Norwood said. First Niagara is on target for business-checking account growth of 5 percent and expects to double its small-business lending this year, he added.

Niches in health-care lending and equipment financing will bolster loan growth as well, Norwood said.

Average commercial loans rose $353 million for the first quarter, a 14 percent annualized increase from the previous period. First Niagara’s loans and leases at the end of the first quarter totaled nearly $16.8 billion, up from $16.5 billion in the fourth quarter of 2011 and $10.7 billion a year earlier.

 For the first quarter, net income available to common shareholders totaled $54.8 million, up from $44.9 million a year earlier. The banking company earned 16 cents a share for the period, down from 22 cents a share a year earlier. Operating income, which excludes acquisition costs and restructuring charges, totaled $70.1 million, up from $49.8 million.

First Niagara remains on track for a May closing of its planned acquisition of 195 HSBC Bank branches in upstate New York, Westchester County, and Connecticut, President and CEO John Koelmel said. The deal will make First Niagara a major force in the Syracuse, Utica, and Binghamton markets.

When the deal is complete, First Niagara will have nearly 430 branches, $30 billion in deposits, $38 billion in assets, and more than 6,000 employees in New York, Pennsylvania, Connecticut, and Massachusetts.

The acquisition will virtually double First Niagara’s New York branch network to more than 200 locations and add more than 1,200 employees to its work force.

“It deepens the upstate New York footprint that’s been the foundation of our success,” Koelmel said of the HSBC deal.

First Niagara’s net interest income totaled $242.4 million for the first quarter, down slightly from $242.5 million in the previous quarter and up from $172.9 million a year earlier. Noninterest income was $69.9 million, up from $63.7 million in the fourth quarter of 2011 and $52.1 million in the first quarter last year.

Noninterest expenses fell slightly to $200.2 million from $202.2 million in the previous quarter. Noninterest expenses totaled $145.2 million in the first quarter of 2011.

Deposits at the end of the quarter totaled about $19 billion, down from $19.4 billion at the end of December. Deposits at the end of the first quarter in 2011 totaled $13.5 billion.

First Niagara reported its profit results before the open of trading on April 19. The company’s stock price fell from $9.21 to $9.19 to $9.07 to $8.83, or 4.1 percent total, in the first three trading days after the earnings announcement. 

Net income from continuing operations attributable to common shareholders at KeyCorp (NYSE: KEY) totaled $199 million, or 21 cents per share, in the first quarter.

That’s up from $184 million, or 21 cents per share, in the first quarter of 2011.

Key, based in Cleveland, has more than 1,000 branches in 14 states and assets of more than $87 billion.

KeyBank is number two in the Syracuse–area deposit market with 28 branch offices, more than $1.7 billion in deposits, and a market share of more than 16 percent. In the Utica–Rome area, Key has two branches, more than $64.4 million in deposits, and a deposit market share of more than 1.7 percent, according to the latest statistics from the Federal Deposit Insurance Corp.

The bank was encouraged during the quarter to see growth in its portfolio of commercial, financial, and agricultural loans, Chairwoman and CEO Beth Mooney said during a conference call April 19 on the company’s first-quarter results. Average balances in that category rose to $19.6 billion from $18.3 billion in the fourth quarter and $16.3 billion in the first quarter last year.

Key originated about $8.3 billion in new or renewed loans to consumers and businesses during the first quarter, up from 

$6.9 billion a year earlier. Average total loans increased to $49.4 billion, up from $48.7 billion in the fourth quarter and 

$49.3 billion in the first quarter of 2011.

Some specific industry segments including health care, industrial lending, and energy will drive continued growth, said Christopher Gorman, president of Key Corporate Bank. In the first quarter, Key was a lead participant in deals for wind and solar projects that raised more than $1 billion.

On the community-banking side, the lending pipeline remains strong in the Northeast and Great Lakes regions, said William Koehler, president of Key Community Bank. Manufacturing and health care are strong categories in the community bank as well, he added.

Key remains on track to close on an acquisition of 37 HSBC branches in the Buffalo and Rochester markets later this year, Mooney said.

The locations are among those involved in First Niagara Bank’s planned acquisition of HSBC’s upstate New York branch network. First Niagara agreed to sell 26 of the branches located in Erie, Niagara, and Orleans counties as part of an agreement with the Justice Department in November.

The remaining 11 offices are located in Monroe County.

The new branches will give Key $2.4 billion in new deposits and loans of about $400 million. Key is paying a deposit premium of 4.6 percent. First Niagara sold additional branches to Community Bank System and Five Star Bank as well.

Also during the first quarter, Key’s board approved a common-stock-repurchase program of up to $344 million. The board plans to explore an increase of Key’s dividend at its meeting in May, Mooney said.

Key’s net interest income for the first quarter was $559 million, down from $604 million a year earlier. Noninterest income rose to $472 million from $457 million in last year’s first quarter.

Deposits at the end of the period totaled $61.5 billion, up from $60.8 billion at the end of the first quarter in 2011.

Noninterest expenses totaled $703 million in the first quarter, up slightly from $701 million in the same period last year.

DeWITT — Profit at Community Bank System, Inc. (NYSE: CBU) rose 16.5 percent in the first quarter to $18.8 million, or 48 cents per share.

Earnings per share would have been 2 cents higher, but the company completed a common stock offering in January that netted $54.9 million. The offering was in support of Community Bank’s planned acquisition of 19 branches from HSBC and First Niagara.

The deal will bring $218 million in loans and $955 million in deposits for a deposit premium of 3.22 percent.

DeWitt–based Community Bank has $6.9 billion in assets and more than 170 branches in upstate New York and Pennsylvania. The banking company also operates subsidiaries in employee benefits, insurance, investment management and advising, and wealth management.

The HSBC locations in the deal are among those involved in First Niagara Bank’s planned acquisition of HSBC’s upstate New York branch network. First Niagara, based in Buffalo, announced plans in July to acquire 195 HSBC locations in upstate New York, Westchester County, and Connecticut. That deal is expected to close in May.

First Niagara leaders said at the time they would ultimately divest some branches in the acquisition.

The offices Community Bank is acquiring include 16 current HSBC locations in  Gowanda, Springville, Westfield, Palmyra, Newark, Geneseo, Watkins Glen, Avon, Watertown, Plattsburgh, Oswego, Fulton, Lowville, Adams, and Alexandria Bay, and three current First Niagara locations in Geneva and Canandaigua.

“Our pending acquisition of 19 bank branches across our core upstate New York markets will strengthen and extend our existing presence within these areas,” Community Bank President and CEO Mark Tryniski said in an April 24 news release. “We remain pleased with the successful integration of the Wilber National Bank which we acquired last April, and now operate as our Central New York Region.”

The deal for Oneonta–based Wilber brought Community 22 branches in Otsego, Delaware, Schoharie, Ulster, Chenango, Onondaga, Saratoga, and Broome counties, along with a loan-production office located in Saratoga County.

Net interest income in the first quarter rose 18.4 percent from a year earlier to $53.9 million. A $967 million increase in average interest-earning assets drove the jump in net interest income, according to Community.

Noninterest income rose 12.6 percent to $23.5 million. Community’s employee benefits administration wealth management both posted revenue increases that contributed to the rise in noninterest income.

Total loans increased to $3.5 billion at the end of the first quarter from about $3 billion a year earlier. Organic growth in consumer mortgages during the period was balanced by weak, but improved demand for business loans, the bank said.

Total net loans declined $10.3 million from the end of December. Organic growth of $9.1 million was offset by $19.4 million in net contractual and other principal reductions in the portfolio from Wilber, according to Community.

Deposits increased to $4.95 billion at the end of the first quarter from $4.02 billion a year earlier.

Operating expenses for the quarter rose 14.1 percent from a year earlier to $49.4 million. The jump resulted from the Wilber acquisition and the acquisition last year of CAI Benefits, which has offices in New York City and New Jersey.

Community Bank’s stock price has increased 3 percent year-to-date through April 24.