Excluding the effect of the CMO adjustment, First Niagara said that its net interest margin (NIM) -- the spread between the average yield on loans and deposits and the average cost for deposits and borrowings -- narrowed by eight basis points during the fourth quarter to 3.46%, "driven by the continued downward re-pricing of loans and securities."

Despite the narrowing margin, the company's fourth-quarter net interest income of $268.6 million was down only slightly from $269.6 million in the third quarter, as the company's average loans grew 1.9% sequentially, while commercial loans grew by 2.7%.

First Niagara said in its 2013 guidance that it expected the net interest margin to narrow by another five to eight basis points in the first quarter.

Deutsche Bank analyst Dave Rochester rates First Niagara a "Buy," with a price target of $9.50, and said after the earnings announcement that "while we expect investors to assign a discount to the shares versus peers given a relatively weaker capital position and the potential for future M&A, we continue to expect the valuation differential between FNFG shares and the mid cap banks to shrink over time as earnings visibility and investor sentiment improve with continued execution on the organic growth strategy, but we note this could take time to develop, and is largely predicated on management's ability to consistently deliver."

First Niagara reported a Dec. 31 Tier 1 common equity ratio of 7.45%, declining from 7.59% the previous quarter.

The shares trade for 1.4 times their reported Dec. 31 tangible book value of $5.65, and for 10.6 times the consensus 2013 EPS estimate of 76 cents. The consensus 2014 EPS estimate is 82 cents.

Interested in more on First Niagara Financial Group? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

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 TheStreet.com 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.

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