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First Niagara Financial Group


on Thursday reported operating earnings of $71.2 million, or 25 cents a share, beating the consensus estimate among analysts polled by Thomson Reuters by a penny.

The results compared to operating earnings of $49.8 million, or 24 cents a share, in the first quarter, and $44.9 million, or 22 cents a share, in the second quarter of 2010.

First Niagara Financial Group CEO John R. Koelmel

On a GAAP basis, including taxes and nonrecurring merger expenses mainly from the company's acquisition of NewAlliance, First Niagara's second-quarter net income was $13.6 million, or 5 cents a share, compared to $44.9 million, or 22 cents, the previous quarter and $20 million, or 10 cents a share, a year earlier.

Following the NewAlliance deal, First Niagara had $30.9 billion in total assets as of June 30, growing its balance sheet 44% during the second quarter, and expanding in Connecticut and Massachusetts.

CEO John Koelmel was enthusiastic about the company's results and prospects, saying that "even as we expect economic and regulatory headwinds to continue to buffet the industry at large, we are confident in continuing to deliver strong results by executing effectively and with discipline."

First Niagara reported that irrespective of the NewAlliance acquisition, commercial loans grew at an annualized 17% pace during the second quarter, while core deposits grew at an annualized pace of 22%.

Credit quality remained very strong, with net charge-offs of $7.5 million, for an annualized ratio of net charge-offs to average loans of just 0.20%, excluding loans acquired from NewAlliance, which were written-down to fair value. If those loans were included, the net charge-off ratio would have been 0.38%.

Total loans were $38.5 billion as of June 30, increasing 4% from June 2010. Key growth areas were commercial and industrial loans, which totaled $13.4 billion and increased 9% year-over-year, and automobile loans, which were up 28% to $qualit6 billion. Residential mortgage loans were flat year-over-year, at $4.6 billion, and commercial real estate loans declined 15% to $6.2 billion.

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The company's ratio of nonperforming loans to total loans was also low, at 0.51% of total loans as of June 30. If acquired loans written down to fair value were included, the nonperforming loan ratio would have been 0.93%.

First Niagara's Tier 1 common risk-based capital ratio was a strong 11.36% as of Jun 30. The company repurchased 8.7 million shares during the second quarter, for roughly $121 million, and is authorized to buy back another 12.3 million shares.

The shares are down 4% year-to-date, through Wednesday's closing price of $13.17. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 4.86%.


Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.